Facts:

The case involves two consolidated petitions: G.R. No. 163156 filed by Negros Navigation Co., Inc. (NNC) and G.R. No. 166845 filed by Tsuneishi Heavy Industries (Cebu), Inc. (THI). NNC is a shipping company engaged in transporting passengers and cargo across various ports in the Philippines, while THI specializes in shipbuilding and repair. On February 9, 2004, THI initiated a case against NNC for a sum of money and damages due to unpaid repair services, seeking a writ of attachment from the Regional Trial Court (RTC) of Cebu, which was granted on March 5, 2004. The Cebu RTC found that NNC had committed fraud in incurring the obligation, thus justifying the issuance of a preliminary attachment against NNC's properties, including the vessel M/V St. Peter the Apostle.

Subsequently, on March 29, 2004, NNC filed a petition for corporate rehabilitation with the RTC of Manila, citing financial difficulties stemming from the Asian Currency Crisis. The Manila RTC granted the pe...

Facts:

Parties Involved

• Negros Navigation Co., Inc. (NNC): A domestic shipping company engaged in transporting passengers and cargo through shipping vessels.
• Tsuneishi Heavy Industries (Cebu), Inc. (THI): A company engaged in shipbuilding and repair services.

Contractual Relationship and Dispute

• NNC engaged THI for the repair of its vessels.
• THI claimed unpaid services for the repairs and filed a case for sum of money and damages with a prayer for a writ of attachment against NNC before the Regional Trial Court (RTC) of Cebu.

Legal Proceedings

1. Cebu RTC Orders

   • On March 5, 2004, the Cebu RTC granted THI’s application for a writ of preliminary attachment against NNC’s properties.
   • On March 12, 2004, the sheriff levied on NNC’s vessel, M/V St. Peter the Apostle, pursuant to the writ of attachment.

2. Petition for Corporate Rehabilitation

   • On March 29, 2004, NNC filed a Petition for Corporate Rehabilitation with the RTC of Manila, which granted the petition and issued a Stay Order on April 1, 2004.
   • The Stay Order suspended all claims against NNC, including THI's claims, and appointed a rehabilitation receiver.

3. Amended Complaint and Vessel Arrest

   • On April 5, 2004, THI filed an amended complaint to include NNC’s vessels as co-defendants and prayed for their arrest.
   • On April 6, 2004, the Cebu RTC issued an order for the arrest of NNC’s vessels.

4. Manila RTC Clarification

   • On April 12, 2004, the Manila RTC clarified that the Stay Order applied to all claims, whether in rem or in personam.

5. Court of Appeals (CA) Intervention

   • On April 29, 2004, the CA issued a Resolution temporarily restraining the implementation of the Manila RTC’s Stay Order.
   • On October 6, 2004, the CA denied THI’s petition to annul the Manila RTC’s Orders.

Issue:

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Ruling:

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Ratio:

1. Purpose of Rehabilitation Proceedings: Rehabilitation aims to restore a financially distressed corporation to solvency, benefiting creditors, employees, and the public. The suspension of claims, including maritime liens, is necessary to allow the corporation a “breathing spell” to reorganize and pay its debts.
2. No Conflict Between PD 1521 and PD 902-A: While THI’s maritime liens are valid under the Ship Mortgage Decree (PD 1521), the rehabilitation proceedings under PD 902-A mandate the suspension of all claims, including those in rem, to ensure equitable treatment of creditors.
3. Equality Among Creditors: The Stay Order ensures that all creditors, whether secured or unsecured, are treated equally during rehabilitation. THI’s preferred status as a creditor is not diminished; enforcement is merely deferred until the rehabilitation proceedings conclude.
4. Temporary Suspension, Not Divestment: The Manila RTC’s Stay Order temporarily suspended the enforcement of THI’s claims but did not divest the Cebu RTC of its jurisdiction over the maritime case. THI’s rights can still be enforced after the rehabilitation process.
5. Judicial Efficiency: Allowing the rehabilitation to proceed unhindered ensures that the distressed corporation’s resources are directed towards restructuring rather than defending multiple claims, thereby promoting judicial efficiency and fairness.