G.R. No. 150592 , January 20, 2009
Philippine Airlines, Inc., Petitioner, vs. Court of Appeals and Sabine Koschinger, Respondents.

FACTS

Respondent Sabine Koschinger filed a complaint for design infringement and damages against petitioner Philippine Airlines, Inc. (PAL) before the Regional Trial Court (RTC) of Makati City, claiming PAL used table linens and placemats bearing designs substantially identical to her patented designs in its commercial flights without her consent. The RTC rendered a decision in favor of Koschinger on July 15, 1998, and PAL appealed to the Court of Appeals (CA). Meanwhile, on June 23, 1998, the Securities and Exchange Commission (SEC) gave due course to PAL’s petition for the appointment of a rehabilitation receiver due to its being a distressed company. On July 1, 1998, the SEC directed that all claims for payment against PAL are deemed suspended. PAL filed a Motion for Suspension of Proceedings before the RTC on August 3, 1998, and later filed a Reiteration of Motion to Suspend Proceedings before the CA on May 29, 2000. On September 4, 2001, the CA issued a Resolution denying the motion, ruling that the proceedings before the RTC could no longer be stopped because they had terminated, and that the appeal before it could not be suspended because the issue was not yet a claim. PAL filed the instant Petition for Certiorari to nullify the CA Resolution.

ISSUE

Whether the Court of Appeals committed grave abuse of discretion in denying PAL’s Motion to Suspend Proceedings despite the SEC’s stay order suspending all claims against PAL due to its corporate rehabilitation.

RULING

Yes, the Court of Appeals committed grave abuse of discretion. The Supreme Court granted the petition. The CA’s ruling that the proceedings before the RTC could no longer be suspended because they had terminated was incorrect, as execution is the final stage of litigation, and the proceedings were not terminated by the filing of the appeal; they could not be executed until the appeal was decided with finality. The CA’s ruling that the appeal could not be suspended because the issue was not yet a claim was also incorrect. The complaint was for design infringement and damages, praying for actual, exemplary, and attorney’s fees, which constitutes a “claim” under the Interim Rules of Procedure on Corporate Rehabilitation, encompassing all claims or demands of whatever nature against a debtor. Prior jurisprudence also holds that all actions for claims against a corporation shall be suspended upon the appointment of a rehabilitation receiver. The reason for the suspension is to enable the rehabilitation receiver to effectively exercise its powers free from judicial interference that might hinder the rescue of the debtor company. The continuation of the appeal proceedings would have unduly hindered the rehabilitation. However, the Court noted that PAL had manifested that the SEC approved its exit from corporate rehabilitation on September 28, 2007, thus removing the bar to the continuation of the appeal. The Court ordered the CA to forthwith resolve the appeal with dispatch.