MAPFRE vs. Gulapa

A rehabilitation court has jurisdiction to compel a debtor's insurers to submit to arbitration where the insurance claim is sanctioned by the approved rehabilitation plan and is incidental to the rehabilitation proceedings, pursuant to Section 26 of RA 10142, which authorizes the rehabilitation court to refer any dispute relating to the rehabilitation plan to arbitration if it determines that such mode will resolve the dispute more quickly, fairly, and efficiently.

Philippine Phosphate Fertilizer Corporation (PhilPhos) is a corporate debtor that insured its buildings, machinery, and equipment (BME) for a total insured value of PHP 17,572,571,300.00 with twelve insurers, including petitioner MAPFRE Insular Insurance Corporation, under Insurance Policy Number FI-SRR-EO-0000120. PhilPhos subsequently became a financially distressed enterprise and initiated voluntary rehabilitation proceedings under Republic Act No. 10142, the Financial Rehabilitation and Insolvency Act of 2010 (FRIA), before Branch 8 of the Regional Trial Court of Tacloban City, which sat as the rehabilitation court and appointed Atty. Aris L. Gulapa as rehabilitation receiver. The insurance policy contained an arbitration clause (Item No. 22 of the Policy Conditions) providing that all differences as to the amount of any loss or damage covered by the policy shall be referred to the decision of an arbitrator.

Philippine Phosphate Fertilizer Corporation (PhilPhos) insured its buildings, machinery, and equipment (BME) for a total insured value of PHP 17,572,571,300.00 with twelve insurers, including MAPFRE Insular Insurance Corporation, under Insurance Policy Number FI-SRR-EO-0000120. On November 8, 2013, Typhoon Yolanda struck and caused extensive damage to PhilPhos's BME. PhilPhos thereafter lodged insurance claims against all its insurers for total damages amounting to PHP 7,293,174,817.00, of which PHP 734,910,000.00 had already been paid by the insurers, leaving a balance of PHP 6,558,264,817.00.

On December 22, 2015, PhilPhos sent a Formal Demand Letter to the insurers asking them to pay the remaining balance as indemnity. The insurers refused to settle. Their appointed loss adjuster, Crawford & Company Philippines, Inc., appraised the total indemnity owing to PhilPhos at only PHP 1,150,000,000.00. In a letter dated May 15, 2017, Crawford stated that the issue on the fair market value of PhilPhos's two sulfuric acid plants needed to be settled and requested further negotiations, but PhilPhos rejected this proposal. On May 4, 2017, PhilPhos sought to refer the matter to arbitration through a Request for Arbitration.

Meanwhile, on September 17, 2015, PhilPhos had initiated rehabilitation proceedings through a Petition for Voluntary Rehabilitation, which was assigned to Branch 8 of the Regional Trial Court of Tacloban City as the rehabilitation court. Atty. Aris L. Gulapa was appointed as the court-appointed rehabilitation receiver. The insurers' continued refusal to settle PhilPhos's claim prompted Atty. Gulapa to file a Motion to Compel Petitioner's Insurers to Submit to Arbitration, invoking his duty as rehabilitation receiver to preserve and maximize the value of PhilPhos's assets. He argued that Section 26 of RA 10142 vests the rehabilitation court with authority to refer disputes relating to rehabilitation proceedings to arbitration, that Item No. 22 of the Insurance Policy Conditions provides for arbitration of differences as to the amount of loss or damage, and that the appraisal of the BME and valuation of indemnity require technical expertise best handled by a specialized tribunal.

MAPFRE received a copy of the Motion on September 4, 2017 and filed its Opposition Ad Cautelam on September 18, 2017, arguing that the RTC, as a court of limited jurisdiction sitting as a rehabilitation court, lacked jurisdiction over the insurers and the subject matter of the insurance claim. However, on September 12, 2017 — before the Opposition was filed — the RTC granted the Motion and ordered MAPFRE and the other insurers to submit to arbitration with PhilPhos, directing the parties to immediately constitute the arbitration panel and proceed in accordance with the arbitration clause of the insurance policy. The RTC reasoned that the matter would be resolved expeditiously and efficiently in arbitration given the technical expertise required, and gave due deference to Item No. 22 of the Insurance Policy Conditions. MAPFRE and the other insurers then filed a Petition for Certiorari and Prohibition under Rule 65 before the Court of Appeals, which dismissed it for failure to file a motion for reconsideration and later denied the motion for reconsideration of that dismissal. The Revised Rehabilitation Plan of PhilPhos, approved by the RTC on April 16, 2018, included a framework for the "Use of Insurance Proceeds," providing that recovery of insurance proceeds would reduce the period of creditor repayment by approximately one year per PHP 1.0 billion recovered.

• Lack of Jurisdiction: MAPFRE maintained that the RTC, acting as a rehabilitation court of limited jurisdiction, had no jurisdiction over the insurers or the subject matter of PhilPhos's insurance claim, rendering the assailed Order void. MAPFRE invoked the Court's ruling in Steel Corporation of the Philippines vs. MAPFRE, where the rehabilitation court was held to have no jurisdiction over the debtor's insurance claim against its insurers, arguing that PhilPhos's Motion was calculated to set the stage for collection of insurance indemnity under the rehabilitation proceedings and that Steel Corporation of the Philippines thus applies.
• Denial of Due Process: MAPFRE argued that it was deprived of due process because the RTC issued the assailed Order on September 12, 2017 without hearing, before MAPFRE filed its Opposition on September 18, 2017, thus violating the notice and hearing requirements under Rule 15, Sections 4 and 5 of the Rules of Court.
• Dispensation with Motion for Reconsideration: MAPFRE contended that the non-filing of a motion for reconsideration should not be fatal to its Petition for Certiorari, claiming the case fell under recognized exceptions — including that the assailed Order was a patent nullity for lack of jurisdiction, that a motion for reconsideration would be useless, that petitioner was deprived of due process with extreme urgency, and that the issue raised was purely of law.

• Statutory Authority to Refer to Arbitration: Respondent Atty. Gulapa argued that Section 26 of RA 10142 vests the RTC, sitting as rehabilitation court, with the authority to refer any dispute relating to the rehabilitation proceedings pending before it to arbitration, and that the insurance claim relates to the rehabilitation proceedings.
• Contractual Basis for Arbitration: Respondent invoked Item No. 22 of the Insurance Policy Conditions, which provides that all differences as to the amount of any loss or damage covered by the policy shall be referred to the decision of an arbitrator.
• Need for Technical Expertise: Respondent argued that the appraisal of the BME and the corresponding valuation of indemnity require special attention and technical expertise, and should therefore be heard by a specialized tribunal through arbitration.

• Jurisdiction of Rehabilitation Court: Whether the RTC, sitting as a rehabilitation court, has jurisdiction to compel MAPFRE to submit to arbitration with PhilPhos.
• Due Process: Whether the RTC's issuance of the assailed Order without hearing, before MAPFRE filed its Opposition, constituted a denial of due process.
• Procedural Propriety: Whether the Court of Appeals correctly dismissed the Petition for Certiorari for MAPFRE's failure to file a motion for reconsideration before the RTC.

• Jurisdiction of Rehabilitation Court: Yes. The RTC, as rehabilitation court, had jurisdiction to compel MAPFRE to submit to arbitration, because the insurance claim was sanctioned by PhilPhos's Revised Rehabilitation Plan and was thus a dispute relating to the rehabilitation plan within the meaning of Section 26 of RA 10142.
• Due Process: No violation. MAPFRE received the Motion on September 4, 2017 and filed its Opposition on September 18, 2017; the RTC's order of September 12, 2017 was issued within that window, providing sufficient notice. Any opposition to the valuation is best ventilated before the arbitration panel pursuant to the arbitration clause in the insurance policy.
• Procedural Propriety: Yes. The CA correctly dismissed the Petition for Certiorari, as the filing of a motion for reconsideration is a condition sine qua non, and none of the recognized exceptions were established by MAPFRE.

• Jurisdiction of Rehabilitation Court: Section 26 of RA 10142 expressly authorizes the rehabilitation court to refer any dispute relating to the rehabilitation plan or rehabilitation proceedings to arbitration if it determines that such mode will resolve the dispute more quickly, fairly, and efficiently. MAPFRE relied on Steel Corporation of the Philippines vs. MAPFRE, where the Court held that the rehabilitation court's jurisdiction is over claims against the debtor, not claims by the debtor against third parties, and where the insurance claim was not included in the rehabilitation plan. However, the Court distinguished that case and followed City Government of Taguig vs. Shoppers Paradise, which held that the interpretation of "claim" under RA 10142 does not preclude claims by the debtor that are incidental to the rehabilitation plan and proceedings. In that case, an offsetting scheme sanctioned by the rehabilitation plan was upheld as within the rehabilitation court's jurisdiction. Here, PhilPhos's Revised Rehabilitation Plan, approved by the RTC on April 16, 2018, expressly included a framework for the "Use of Insurance Proceeds," providing that recovery of insurance proceeds would reduce the repayment period by approximately one year per PHP 1.0 billion. Because the insurance claim was sanctioned by and inextricably related to the rehabilitation plan — affecting the viability of the plan and the resource pool from which creditors may be paid — the rehabilitation court had jurisdiction to refer the dispute to arbitration. The final determination of the value of PhilPhos's insurance claim in arbitration can increase the resource pool of PhilPhos, furthering the effort to restore it to solvency.

• Due Process: MAPFRE received the Motion on September 4, 2017 and filed its Opposition on September 18, 2017. The RTC issued the assailed Order on September 12, 2017, within that interval. The Court found that MAPFRE was given sufficient notice regarding PhilPhos's demand to compel arbitration. Moreover, the crux of MAPFRE's contention lies in the determination of the value of PhilPhos's claim for insurance indemnity, and whatever opposition MAPFRE has against the questioned valuation may best be ventilated before the arbitration panel pursuant to the arbitration clause in the insurance policy that MAPFRE itself executed with PhilPhos.

• Procedural Propriety: The filing of a motion for reconsideration is a condition sine qua non for the filing of a petition for certiorari, to grant the lower court an opportunity to correct any actual or perceived error. While this rule is subject to recognized exceptions — including patent nullity, uselessness of a motion for reconsideration, deprivation of due process with extreme urgency, ex parte proceedings, and purely legal questions of public interest — none were established by MAPFRE. The CA correctly found that the assailed Order was not a patent nullity, and the RTC was not required to set the Motion for hearing before acting upon it, as the Motion could be acted upon without prejudicing the rights of the adverse party.

• Jurisdiction of Rehabilitation Courts Over Incidental Claims — Under RA 10142, the rehabilitation court's jurisdiction is not limited to claims against the debtor but extends to claims by the debtor that are incidental to and sanctioned by the rehabilitation plan. Where the debtor's claim against a third party is included in or sanctioned by the approved rehabilitation plan and affects the viability of that plan, the rehabilitation court has jurisdiction to resolve or refer the dispute, including to arbitration under Section 26. This principle was applied to hold that PhilPhos's insurance claim against MAPFRE, being expressly contemplated in the Revised Rehabilitation Plan's framework for "Use of Insurance Proceeds," fell within the rehabilitation court's jurisdiction.

• Motion for Reconsideration as Condition Sine Qua Non for Certiorari — The filing of a motion for reconsideration is a mandatory prerequisite before resort to a petition for certiorari under Rule 65, to afford the lower court the opportunity to correct itself. This rule is excused only in recognized exceptional circumstances, none of which were established by MAPFRE. The CA's dismissal for failure to comply with this requirement was upheld.

• Distinction Between Claims Within and Outside the Rehabilitation Plan — A debtor's claim against a third party falls outside the rehabilitation court's jurisdiction when it is not in any manner included in the rehabilitation plan (as in Steel Corporation of the Philippines vs. MAPFRE), but falls within jurisdiction when it is sanctioned by the rehabilitation plan and is necessary to rehabilitate the debtor (as in City Government of Taguig vs. Shoppers Paradise and the present case).

• "the interpretation of the term 'claim' under RA 10142 does not in any way preclude claims by the debtor which are incidental to the rehabilitation plan and proceedings. As such, the rehabilitation court is empowered to issue orders necessary to carry out the rehabilitation of the insolvent debtor." — This passage, quoting City Government of Taguig vs. Shoppers Paradise, articulates the doctrinal basis for expanding the rehabilitation court's jurisdiction beyond claims against the debtor to include the debtor's own incidental claims, and is the ratio decidendi for the Court's ruling on jurisdiction.

• "Section 26 of RA 10142 clearly provides that the rehabilitation court has the authority to refer any dispute relating to the rehabilitation plan to arbitration upon finding that such mode will resolve the dispute more quickly, fairly, and efficiently than the rehabilitation court." — This states the statutory foundation for the Court's holding, anchoring the rehabilitation court's power to compel arbitration in the express language of FRIA.

• "the Motion, in this case, is inextricably related to the rehabilitation plan as it affects the viability of the plan." — This formulation captures the test for determining whether a debtor's claim falls within the rehabilitation court's jurisdiction: the claim must be inextricably related to and affect the viability of the approved rehabilitation plan.

• Bureau of Internal Revenue vs. Lepanto Ceramics, Inc., 809 Phil. 278 (2017) — Cited for the definition of rehabilitation as the restoration of the debtor to successful operation and solvency, and the purpose of minimizing expense during the rehabilitation period. Followed as supportive authority.

• Steel Corporation of the Philippines vs. MAPFRE, 719 Phil. 683 (2013) — Cited by MAPFRE for the proposition that the rehabilitation court has no jurisdiction over the debtor's insurance claim against insurers. Distinguished: in that case, the insurance claim was not included in the rehabilitation plan, unlike in the present case where the Revised Rehabilitation Plan expressly contemplated the use of insurance proceeds.

• City Government of Taguig vs. Shoppers Paradise Realty and Development Corporation, 908 Phil. 320 (2021) — Cited as controlling authority for the principle that the rehabilitation court may take cognizance of claims by the debtor that are incidental to and sanctioned by the rehabilitation plan. Followed and applied to the present facts.

• BPI Family Savings Bank, Inc. vs. St. Michael Medical Center, Inc., 757 Phil. 251 (2015) — Cited in support of the proposition that the final determination of the value of the insurance claim can increase the resource pool of the debtor from which creditors may be paid, furthering rehabilitation.

• Republic vs. Bayao, 710 Phil. 279 (2013) — Cited for the rule that filing a motion for reconsideration is a condition sine qua non for a petition for certiorari.

• Seagull Shipmanagement and Transport, Inc. vs. NLRC, 388 Phil. 906 (2000) — Cited for the recognized exceptions to the motion for reconsideration requirement before filing a petition for certiorari.

• Section 26, Republic Act No. 10142 (Financial Rehabilitation and Insolvency Act of 2010) — Provides that after a rehabilitation petition is given due course, the rehabilitation court may refer any dispute relating to the rehabilitation plan or rehabilitation proceedings to arbitration or other modes of dispute resolution under RA 9285, if it determines that such mode will resolve the dispute more quickly, fairly, and efficiently. Applied as the statutory basis for the rehabilitation court's authority to compel MAPFRE to submit to arbitration.

• Section 4, Republic Act No. 10142 — Defines "rehabilitation" as the restoration of the debtor to a condition of successful operation and solvency. Cited to frame the purpose of rehabilitation proceedings.

• Item No. 22, Insurance Policy Conditions (MAPFRE Insurance Policy Number FI-SRR-EO-0000120) — Provides that all differences as to the amount of any loss or damage covered by the policy shall be referred to the decision of an arbitrator, with an award being a condition precedent to any right of action against the company. Applied as the contractual basis for compelling arbitration.

• Rule 15, Sections 4 and 5, Rules of Court — Cited by MAPFRE regarding notice and hearing requirements for motions. The Court found these were satisfied given the timeline of receipt and filing.

• Rule 65, Rules of Court — Governs petitions for certiorari. Applied in affirming the CA's dismissal for failure to file a motion for reconsideration, as none of the recognized exceptions were established.

Leonen, SAJ. (Chairperson), Lazaro-Javier, J. Lopez, and Villanueva, JJ., concurred.