Philippine Airlines v.

Spouses Kurangking (2002) – Suspended jurisdiction (COLOQUIO)

Movement of case: RTC Marawi (denied order to suspend case) – MR with RTC denied – CA (denied
appeal because of failure to serve a copy of the petition on respondents) – MR with CA denied – went
back to RTC and filed a motion for leave to file a second MR (denied again) – tried to file a motion for
leave to file a second MR again with RTC (denied again) – SC (Rule 45; ruled in favor of PAL and
ordered suspension of case)

FACTS

 In 1997, Spouses Kurangking and Spouses Dianalan returned to Manila from Saudi Arabia, on board
a PAL flight. They claimed that they were unable to retrieve their checked-in luggages therefore in
1998, they filed a case before RTC Marawi, claiming damages from PAL for breach of contract.
o PAL answered at first and invoked the limitations under the Warsaw Convention – but then it
eventually claimed that is suffers from serous business losses due to the Asian economic
crisis and a massive strike by its employees.
 PAL filed a petition for the approval of a rehabilitation plan and the appointment of a receiver before
SEC, because of its financial problem – which was then granted by the SEC.
o SEC, pursuant to PD 902 declared the suspension of all actions for money claims against
PAL pending before any court/ tribunal.
 PAL invoked the order of SEC suspending all actions against it, before RTC Marawi to suspend the
case filed by Spouses Kurangking and Dianalan. This was however denied by RTC Marawi.
o The denial was appealed by PAL to CA via a petition for certiorari but it was also denied
because of the failure of PAL to serve a copy of the petition on respondents. The MR that it
filed before the CA was denied as well. PAL then filed before RTC Marawi a motion for leave
to file a second MR, but such was denied. It tried to file the same motion again but it was still
denied.
 On the ground that there was no other plain, speedy and adequate remedy available to it, PAL filed a
petition for review on certiorari (Rule 45) before the SC – arguing that the case filed by the 2 spouses
should have been suspended by RTC Marawi pursuant to the order of the SEC.

Did RTC Marawi err in not suspending the case filed against PAL? — YES, YES, a thousand times
YES.

 Firstly, a petition for review on certiorari under Rule 45 would ordinarily be inappropriate to assail an
interlocutory order, but the SC ignored this technical flaw and proceeded to treat the petition as a
special civil action for certiorari, there being no other plain, speedy and adequate remedy.
 The respondent-spouses stated that PAL was actually already operation, and if ever, it is the SEC
and not the RTC which has the prerogative to determine the necessity of suspending the
proceedings. The SC found this argument untenable however.
o The SC invoked A.M No. 00-8-10-SC, which was an adoption of the Interim Rules of
Procedure on Corporate Rehabilitation and directed to be transferred from the SEC to RTC,
all petitions for rehabilitation. The rules require trial courts to issue a stay order in the
enforcement of all claims against corporations under rehabilitation, which shall be effective
until the dismissal of the petition or the termination of its rehabilitation.
 Since the case filed by the respondent-spouses against PAL is a money claim for damages because
of the missing luggages the law requires such to be suspended pending the rehabilitation
proceedings – also following the ruling in BF Homes v. CA.
o This is to enable the rehabilitation receiver to effectively exercise his/its powers free from any
judicial or extra-judicial interference that might hinder the rescue of the debtor company.