G.R. No. 37986 - Mercado vs. Municipality President of Macabebe, Pampanga

Steel Corporation of the Philippines (SCP), a domestic corporation engaged in manufacturing and distributing steel products, obtained loans from various creditors and secured these loans by mortgaging its assets. The creditors appointed Bank of the Philippine Islands (BPI) as trustee under a Mortgage Trust Indenture (MTI) dated 17 December 1997.
Under the MTI, SCP was required to insure all its assets and make the insurance proceeds payable to BPI until the loans were fully paid.
SCP suffered financial difficulties, prompting one creditor, Equitable PCI Bank, Inc. (now Banco de Oro-EPCI, Inc.), to file a petition for corporate rehabilitation with the Regional Trial Court (RTC) in Batangas City on 11 September 2006.
The RTC issued a stay order on 12 September 2006 and appointed a rehabilitation receiver. On 3 December 2007, the RTC approved a modified rehabilitation plan for SCP.

SCP insured its assets under Collective Master Policy from 19 August 2007 to 19 August 2008.
On 8 June 2008, a fire damaged SCP’s plant machinery. BPI demanded and received $450,000 in insurance proceeds based on the MTI.
SCP filed a motion with the RTC on 13 October 2009, seeking to compel BPI to release the insurance proceeds for repairs.
On 5 January 2010, the RTC ordered BPI to release the proceeds directly to contractors and suppliers for repairs. BPI contested this order in the Court of Appeals, which initially affirmed the RTC’s order, but later reversed itself in an amended decision. The Supreme Court denied SCP’s petition for review on this matter in 2013.

SCP insured its assets again under Industrial All Risks Insurance Policy No. F-369430 from 19 August 2009 to 19 August 2010 with several insurer respondents (Mapfre Insular Insurance Corporation, New India Assurance Company Limited, Philippine Charter Insurance Corporation, Malayan Insurance Co., Inc., and Asia Insurance Phil. Corp.).
On 7 December 2009, a second fire damaged SCP’s cold rolling mill and machinery.
On 17 December 2010, SCP filed a motion with the RTC seeking an order for the insurers to pay $28,000,000 for property damage and $8,000,000 for business interruption.
Respondent insurers questioned the RTC’s jurisdiction, denied liability citing non-compliance with policy terms, alleged fraud, over-insurance indicating arson, failure to commence repairs within 12 months, negligence causing the fire, and non-compensability of claims.
The RTC, in its 1 June 2011 Order, granted SCP’s motion, ordering insurers to pay $33,882,393 for property damage plus $8,000,000 for business interruption, or in lieu, replace or reinstate SCP’s damaged cold rolling mill.
This RTC order was challenged by respondent insurers through a petition for certiorari before the Court of Appeals.

The Court of Appeals, in an 8 February 2012 Decision, declared the RTC’s 1 June 2011 Order null and void for lack of jurisdiction over the insurance claim and over the insurers.
The Court found that the RTC as rehabilitation court has jurisdiction only over claims or demands against the debtor, SCP, not claims by SCP against third parties such as insurers.
The Court also reasoned that the insurance claim was a collection suit that required separate ordinary court proceedings with payment of docket fees.
The Court of Appeals denied SCP’s motion for reconsideration on 27 March 2012, leading to the present petition before the Supreme Court.

Whether the Court of Appeals erred in entertaining respondent insurers’ petition for certiorari under Rule 65 challenging the RTC’s jurisdiction over SCP’s insurance claim.
Whether the RTC, acting as rehabilitation court, had jurisdiction to entertain SCP’s motion directing respondent insurers to pay insurance proceeds or replace damaged assets under the corporate rehabilitation proceedings.
Whether the petitioners (respondent insurers) followed the proper remedy in assailing the RTC’s 1 June 2011 Order.
Whether the Mortgage Trust Indenture (MTI) affects the release and disposition of insurance proceeds during rehabilitation.