Republic
of the
SUPREME
COURT
FIRST DIVISION
|
STEEL
CORPORATION OF THE
Petitioner, -
versus - EQUITABLE PCI BANK, INC., (now known as BDO UNIBANK, INC.), Respondent. x-------------------------------------------x DEG
– DEUTSCHE INVESTITIONS-UND ENTWICKLUNGSGESELLSCHAFT MBH,
Petitioner, -
versus - EQUITABLE
PCI BANK, INC., (now known as BDO UNIBANK, INC.) and STEEL CORPORATION OF THE
Respondents. |
|
G.R. No. 190462 Present: VELASCO,
JR., LEONARDO-DE
CASTRO, PERALTA,* and PEREZ,
JJ. G.R. No. 190538 Promulgated: November
17, 2010 |
x-----------------------------------------------------------------------------------------x
D E C I S I O N
VELASCO, JR., J.:
Before us are two
Petitions for Review on Certiorari under
Rule 45, docketed as G.R. Nos. 190462 and 190538, assailing the July 3, 2008 Decision[1] and
December 3, 2009 Resolution[2] of
the Court of Appeals (CA) in CA-G.R. SP
No. 101881, entitled Equitable PCI
Bank, Inc. (now known as Banco de Oro-EPCI, Inc.) v. Steel Corporation of the
Philippines. The CA set aside the Decision[3] dated
December 3, 2007 of the Regional Trial Court (RTC) acting as a
We
consolidated G.R. No. 190462 with G.R. No. 190538 as they involve
identical parties, arose from the same facts, and assail the same CA Decision
dated July 3, 2008.[4]
The Facts
SCP
is a domestic corporation incorporated and registered with the Securities and
Exchange Commission on October 3, 1994. It is engaged in the manufacturing and
distribution of cold-rolled and galvanized steel sheets and coils.
During
its operations, SCP encountered and suffered from financial difficulties and
temporary illiquidity, aggravated by the 1997 Asian Financial Crisis. And shortage
in working capital and reduced operating capacity compounded its problem. As a
result, SCP was unable to service its principal payments for its liabilities.
In
its Interim Financial Statement as of December 31, 2005, SCP’s total assets
amounted to PhP 10,996,551,123, while its liabilities amounted to PhP
8,365,079,864.
Accordingly,
on September 11, 2006, Equitable PCI Bank, Inc., now known as Banco de
Oro-EPCI, Inc. (BDO-EPCIB), which accounted for 27.45% of the total liabilities
of SCP, filed a creditor-initiated petition––to place the SCP under corporate
rehabilitation pursuant to the provisions of Section 1, Rule 4 of the Interim
Rules of Procedure on Corporate Rehabilitation––entitled In the Matter of the Petition to have Steel Corporation of the
Philippines Placed under Corporate Rehabilitation with Prayer for the Approval
of the Proposed Rehabilitation Plan. BDO-EPCIB included its proposed
rehabilitation plan in the said petition.
Finding
the petition to be sufficient in form and substance, the Rehabilitation Court
issued an Order dated September 12, 2006, directing, among others, the stay of
enforcement of all claims, whether for money or otherwise and whether such
enforcement is by court action or otherwise, against SCP, its guarantors, and
sureties not solidarily liable with it. The
SCP
did not oppose the petition but instead filed its own counter rehabilitation
plan and submitted it for the consideration of the
On
November 23, 2006, the Rehabilitation Court issued an Order, giving due course
to the petition and directing Atty. Gabionza to evaluate the rehabilitation
plan proposed by BDO-EPCIB and the proposals of the other participating creditors,
and to submit his recommendations. The
In
a Compliance dated March 6, 2007, Atty. Gabionza submitted his recommended
rehabilitation plan. The said plan contained the salient features of the
rehabilitation plans separately submitted by SCP and BDO-EPCIB, as well as his
own comments. The plan was summarized by the
Thus, after considering the comments of the other participating
creditors and evaluating the proposals of SCP and the petitioner, Atty.
Gabionza recommended the following terms and conditions for rehabilitation
plan, to wit:
1. Fresh equity infusion of P3.5 Billion, out of which P3
Billion shall be used for debt reduction, and the balance of P500 Million as
additional working capital.
2. The P3 Billion allocated for debt repayment shall
first service the secured credits and excess thereafter will be applied to
clean creditors and suppliers.
3. The remaining short term and long term debt balances
after debt reduction will be restructured over a period of 12 years inclusive
of a 2 year grace period on principal payments. There shall be 20 equal
semi-annual payments of principal to commence at the end of the grace period.
4. Interest rates for the restructure debt shall be 8%
per annum fixed for the duration of the loan and shall be payable quarterly in
arrears. No grace period on interest payments.
5. To protect existing clean creditors, SCP may not
secure additional secured credits which will utilize the excess assets values
after the P3.0 Billion debt reduction.
6. Any excess cash after the annual (normal) CAPEX and
debt service requirements shall be distributed as follows: 70% debt repayment
and 30% to be retained by the Company.
7. All existing suppliers credits (subject to final
validation) shall have 2 options:
a. To be paid quarterly over a period of 5 years without
interest, or
b. To continuously supply the company on the pay-re-avail
(Deliver same amount paid) basis.
8. All loans, supplier’s credit and other SCP liabilities
are subject to final verification once the recommended rehabilitation plan is
approved.
The rehabilitation plan recommended by Atty. Gabionza has three (3)
phases in the implementation of the proposed P3.5 Billion fresh equity
infusion, thus:
Phase 1
SCP’s
articles of incorporation and by laws shall be amended to accommodate the
additional equity of P3.5 Billion. The present stockholders of SCP shall be
given sixty (60) days from approval of the plan to keep their stockholdings SCP
by raising/sourcing the P3.5 Billion fresh equity required.
Phase 2
In the
event the present stockholders fail to raise the P3.5 Billion fresh equity
needed to keep their stockholdings and save their company, Atty. Gabionza shall
offer to acceptable investors, through negotiated sale or bidding, 67% of SCP
for the P3.5 Billion fresh equity required.
Phase 3
Should
Phase 1 and 2 fail, there shall be a debt to equity conversion in the required
amount of P3.5 Billion.[5]
Although
not required by the rules, several consultative meetings were thereafter
conducted by the
In
compliance with the directives of the
Phase 1 of the Recommended Rehabilitation Plan is retained under the
Modified Rehabilitation Plan. Phase 2, however, is amended to the effect that in
the event the present stockholders fail to raise the P3.5 Billion fresh equity
needed to keep their stockholdings and save their company, the same existing
stockholders of SCP shall be afforded a period of 60 days from the expiration
of the period provided in Phase 1 to offer for sale to an acceptable investor
at least 67% stockholdings in SCP for an amount not less than P3.5 Billion.
Under Phase 3 thereof, there shall be a debt to equity conversion in
the required amount of P3.5 Billion should Phase 1 and 2 fail. The adjusted
book value of SCP under its 2005 Audited Financial Statements is pegged at
P1.129 Billion. Accordingly, P1.1.29 Billion of the existing debt will
initially be converted into common shares achieving an ownership structure
where both existing stockholders and the bank creditors will equally own SCP at
50% each. The balance of P2.371 Billion will then be converted into
non-interest bearing convertible notes.[6]
On
June 21, 2007, BDO-EPCIB, joined by creditors DEG, Planters Development Bank,
China Banking Corporation, Asiatrust Development Bank and GE Money Bank, Inc., altogether
holding more than 50% of SCP’s total liabilities, filed their Joint
Manifestation and Motion declaring their conformity with and support to Atty.
Gabionza’s Recommended Rehabilitation Plan.
On
July 30, 2007, SCP submitted its 2006 Audited Financial Statements in a
Compliance with Motion. Atty. Gabionza was ordered by the
The
parties then submitted their respective comments on the Modified Rehabilitation
Plan and Atty. Gabionza’s report on the effects of the 2006 Audited Financial
Statements. Likewise, SCP submitted its Updated Counter Rehabilitation Plan,
attached to its Ad Abundante Cautelam Motion to Admit Debtor SCP’s Updated
Counter Rehabilitation Plan, which was subsequently admitted by the
On
December 3, 2007, the RTC promulgated a Decision approving the Modified
Rehabilitation Plan. The dispositive
portion reads:
WHEREFORE, premises considered, the
present petition is given due course. The parties are mandated to comply
strictly with the provisions of the approved rehabilitation plan.
The Rehabilitation Receiver is hereby
directed to provide this Court with periodic reports on the implementation of
the approved Rehabilitation Plan.
The provisions of the approved Rehabilitation
Plan shall be binding on all persons and parties affected by it, whether or not
such persons or parties have participated in the present proceedings.
The concerned parties are further directed to
submit to this Court their respective nominees for the Management Committee not
later than 60 days before the expiration of the period for the application of
Phases 1 and 2 of the foregoing rehabilitation plan. In case no nominee is
submitted by any party, this Court shall directly designate the corresponding
members thereof.
SO ORDERED.[7]
Therefrom,
several creditors went to the CA via separate Petitions for Review on Certiorari,
to wit: (1) SCP’s petition dated January 9, 2008, docketed as CA-G.R. SP No.
101732 and entitled Steel Corporation of
the Philippines v. Equitable PCI Bank, Inc.; (2) DEG’s petition dated
January 6, 2008, docketed as CA-G.R. SP No. 101880 and entitled DEG – Deutsche Investitions-und
Entwicklungsgesselschaft mbH v. Steel Corporation of the Philippines; (3) BDO-EPCIB’s petition dated January 8,
2008, docketed as CA-G.R. SP No. 101881 and entitled Equitable PCI Bank, Inc. v. Steel Corporation of the Philippines;
and (4) Investments 2234 Philippines Fund I, Inc.’s (IPFI’s) petition dated
January 10, 2008, docketed as CA-G.R. SP No. 101913 and entitled Investments 2234 Philippines Fund I
(SPV-AMC), Inc. v. Equitable PCI Bank, Inc.
The
petitions of SCP and IPFI were eventually consolidated under CA-G.R. SP No.
101732. However, the CA denied BDO-EPCIB’s motion to consolidate with CA-G.R.
SP No. 101732.[8] As to
CA-G.R. SP No. 101881, the Court takes judicial notice of the fact that it has
also been consolidated with CA-G.R. SP No. 101732 in a Resolution issued by the
CA dated March 22, 2010.
On July 3,
2008, the CA issued the assailed decision in CA-G.R. SP No. 101881, ordering
the termination of the rehabilitation proceedings. The dispositive portion
reads:
WHEREFORE, premises considered, the
Decision dated December 3, 2007 of the RTC, Branch II, Batangas City, in SP No.
06-7993 is hereby SET ASIDE, and
another one is hereby entered declaring the rehabilitation proceedings TERMINATED, pursuant to Section 27, Rule 4 of the Interim Rules of
Procedure on Corporate Rehabilitation.
SO ORDERED.[9]
SCP then
filed a Supplemental Petition for Review dated July 21, 2008 in CA-G.R. SP No.
101732, praying, among others, for the approval of its Revised Updated Counter
Rehabilitation Plan.
From the
July 3, 2008 CA Decision, DEG, SCP, Landmark Glory Limited, and Liquigaz
Philippines Corporation interposed separate motions for reconsideration.
However, on December 3, 2009, the CA denied all motions for reconsiderations.
Hence, these separate recourses are before us.
The
Issues
In
G.R. No. 190462, SCP raised the following arguments in support of its
amended petition:
I.
The [CA] erred – when it did, it
denied the petitioner its rights to both procedural and substantive due process
– when –
(a)
It did not follow its own internal rules
of procedure and thereafter justified its error on the bases of misleading and
false statements;
(b)
It granted a relief which none of the
parties sought for, nor were heard, nor given the opportunity to be heard,
thereon, and
(c)
It substituted its judgment for that of
the rehabilitation court, usurping in the process the exclusive authority
reposed in the said court.
II.
The [CA] erred – and when it did,
it acted in a manner at war with orderly procedure – when it declared the
termination of the proceedings without passing upon nor giving the petitioner a
chance to be heard on the updated alternative rehabilitation plan submitted by
it.
III.
The [CA] erred – and when it did,
it failed to perform its duties and obligations as a court – when it found, and
thereafter declared termination of the rehabilitation proceedings because the
case had become litigious and did not try to allow the parties to adjust their
differences so that rehabilitation of the petitioner could go on.[10]
In G.R. No. 190538, DEG submits as follows:
I.
The [CA] had no jurisdiction or
authority to terminate the rehabilitation proceedings.
II.
Assuming, arguendo, that the [CA] had the authority to terminate the
rehabilitation proceedings, such termination was premature.[11]
The
issues raised before the Court can be summarized into two:
(1)
Whether or not the CA erred in refusing to consolidate the cases pending before
it; and
(2)
Whether or not the CA erred in granting a relief that was not prayed for by the
parties, i.e., the termination of the rehabilitation proceedings.
Consolidation of
Cases Is Proper
Petitioner
SCP argues that the CA deviated from its own Internal Rules when it failed to
consolidate the four (4) appeals arising from the same decision of the
rehabilitation court. In fact, it points out to the fact that CA-G.R. SP No.
101913 had already been consolidated with its own appeal in CA-G.R. SP No.
101732. However, SCP says that the failure by the CA to consolidate the remaining
two appeals, namely CA-G.R. SP Nos. 101880 and 101881, with its own appeal
indicates not only a deviation from the rules but also a disobedience to their
plain language and obvious intent.
On
the other hand, BDO-EPCIB refutes SCP’s arguments by saying that the
consolidation of cases is only discretionary, not mandatory, upon the court.
The
Court agrees with SCP.
Consolidation
of actions is expressly authorized under Sec. 1, Rule 31 of the Rules of Court:
Section 1. Consolidation. – When actions involving a common
question of law or fact are pending before the court, it may order a joint
hearing or trial of any or all the matters in issue in the actions; it may order
all the actions consolidated; and it may make such orders concerning
proceedings therein as may tend to avoid unnecessary costs or delay.
Likewise,
Rule 3, Sec. 3 of the 2002 Internal Rules of the CA[12]
adopts the same rule:
Sec. 3. Consolidation
of Cases. – When related cases
are assigned to different Justices, they may be consolidated and assigned to
one Justice.
(a) At the instance of a party
with notice to the other party; or at the instance of the Justice to whom the
case is assigned, and with the conformity of the Justice to whom the cases
shall be consolidated, upon notice to the parties, consolidation may be allowed
when the cases involve the same parties and/or related questions of fact and/or
law.
(b) Consolidated
cases shall pertain to the Justice –
(1) To
whom the case with the lowest docket number is assigned, if they are of the
same kind;
(2) To
whom the criminal case with the lowest number is assigned, if two or more of
the cases are criminal and the others are civil or special;
(3) To
whom the criminal case is assigned and the other are civil or special; and
(4) To
whom the civil case is assigned, or to whom the civil case with the lowest
docket number is assigned, if the cases involved are civil and special.
(c) Notice
of the consolidation and replacement shall be given to the Raffle Staff and the
Judicial Records Division.
It
is a time-honored principle that when two or more cases involve the same
parties and affect closely related subject matters, they must be consolidated
and jointly tried, in order to serve the best interests of the parties and to
settle expeditiously the issues involved.[13]
In other words, consolidation is proper wherever the subject matter involved
and relief demanded in the different suits make it expedient for the court to
determine all of the issues involved and adjudicate the rights of the parties
by hearing the suits together.[14]
The
purpose of this rule is to avoid multiplicity of suits, guard against
oppression and abuse, prevent delays, clear congested dockets, and simplify the
work of the trial court. In short, consolidation aims to attain justice with the
least expense and vexation to the parties-litigants.[15]
It contributes to the swift dispensation of justice, and is in accord with the
aim of affording the parties a just, speedy, and inexpensive determination of
their cases before the courts. Further, it results in the avoidance of the
possibility of conflicting decisions being rendered by the courts in two or
more cases, which would otherwise require a single judgment.[16]
In
the instant case, all four (4) cases involve identical parties, subject matter,
and issues. In fact, all four (4) arose from the same decision rendered by the
By
refusing to consolidate the cases, the CA, in effect, dispensed a form of
piecemeal judgment that has veritably resulted in the multiplicity of suits. Such
action is not regarded with favor, because consolidation should always be
ordered whenever it is possible.
Relief
Is Limited Only to Issues Raised
SCP
further contends that the CA denied it its right to procedural and substantive
due process, because it granted a relief entirely different from those sought
for by the parties and on which they were neither heard nor given the
opportunity to be heard.
Respondent
BDO-EPCIB, on the other hand, maintains that the CA has the power to grant such
other appropriate relief as may be consistent with the allegations and proofs
when a prayer for general relief is added to the demand of specific relief.[18]
SCP’s
contention deserves merit.
Sec.
8, Rule 51 of the 1997 Rules of Civil Procedure expressly provides:
SEC. 8. Questions
that may be decided. – No error which does not affect the jurisdiction over
the subject matter or the validity of the judgment appealed from or the
proceedings therein will be considered unless stated in the assignment of
errors, or closely related to or dependent on an assigned error and properly
argued in the brief, save as the court pass upon plain errors and clerical
errors.
Essentially,
the general rule provides that an assignment of error is essential to appellate
review and only those assigned will be considered,[19]
save for the following exceptions: (1) grounds not assigned as errors but
affecting jurisdiction over the subject matter; (2) matters not assigned as
errors on appeal but are evidently plain or clerical errors within the
contemplation of the law; (3) matters not assigned as errors on appeal but
consideration of which is necessary in arriving at a just decision and complete
resolution of the case or to serve the interest of justice or to avoid
dispensing piecemeal justice; (4) matters not specifically assigned as errors
on appeal but raised in the trial court and are matters of record having some
bearing on the issue submitted which the parties failed to raise or which the
lower court ignored; (5) matters not assigned as errors on appeal but closely
related to an error assigned; and (6) matters not assigned as errors on appeal
but which the determination of a question properly assigned is dependent.[20]
None of these exceptions exists in this case.
Notably,
the prayer portion of the BDO-EPCIB petition in CA-G.R. SP No. 101881 only
sought for the following reliefs:
WHEREFORE, it is respectfully prayed of the
Honorable Court that the Decision dated 03 December 2007 of the Court a quo, or the approved Rehabilitation
Plan, be MODIFIED accordingly, thus:
1. Under its Phase 1, the
articles of incorporation and by laws of SCP be accordingly amended to
accommodate the additional equity of Php3.0 Billion.
2. Under Phase 2, the present
stockholders and/or the Rehabilitation Receiver shall offer for sale to
acceptable investors SCP’s stocks, through negotiated sale or bidding for an
amount not less than Php3.0 Billion, which is equivalent to approximately 64%
of SCP; and
3. Under Phase 3, there shall
be an immediate conversion of debt to common shares in the required amount of
Php3.0 Billion, which is equivalent to approximately 64% of SCP, pursuant to
the terms and conditions of the Recommended Rehabilitation Plan.
Other reliefs, just and equitable under the
premises, are likewise prayed for.[21]
It
is very plain in the language of the prayers of BDO-EPCIB that it only
requested the CA to modify the
existing rehabilitation plan. It never sought the termination of the
rehabilitation proceedings. Thus,
given the factual backdrop of the case, it was inappropriate for the CA, motu proprio, to terminate the
proceedings. The appellate court should have proceeded to resolve BDO-EPCIB’s
appeal on its merits instead of terminating the proceedings, a result that has
no ground in its pleadings in the CA.
In Abedes
v. Court of Appeals, this Court emphasized the difference of appeals in
criminal cases and in civil cases by saying, “Issues not raised in the pleadings, as opposed to ordinary appeal
of criminal cases where the whole case is opened for review, are deemed waived or abandoned.”[22] Essentially,
to warrant consideration on appeal, there must be discussion of the error
assigned, else, the error will be deemed abandoned or waived.[23]
This Court even went further in Development Bank of the Philippines v.
Teston, in which it held that it is improper to enter an order which
exceeds the scope of the relief sought by the pleadings, to wit:
The Court of Appeals erred in ordering DBP to
return to respondent “the P1,000,000.00” alleged down payment, a matter not
raised in respondent’s Petition for Review before it. In Jose Clavano, Inc. v. Housing and Land Use Regulatory Board, this
Court held:
“x x x It
is elementary that a judgment must conform to, and be supported by, both the
pleadings and the evidence, and must be in accordance with the theory of the
action on which the pleadings are framed and the case was tried. The judgment
must be secundum allegata et probate.”
(Italics in original.)
Due process considerations justify this
requirement. It is improper to enter an
order which exceeds the scope of relief sought by the pleadings, absent notice
which affords the opportunity to be heard with respect to the proposed relief.
The fundamental purpose of the requirement that allegations of a complaint must
provide the measure of recovery is to prevent surprise to the defendant.[24]
(Emphasis supplied.)
Thus,
this Court cannot sustain the ruling of the CA insofar as it granted a relief
not prayed for by the BDO-EPCIB.
WHEREFORE,
the petition in G.R. No. 190462 is PARTIALLY GRANTED and the petition in
G.R. No. 190538 is GRANTED. The July 3, 2008 Decision and December 3,
2009 Resolution of the CA in CA-G.R. SP No. 101881 are REVERSED and SET ASIDE.
Further,
the Court hereby REMANDS these cases
to the CA for consolidation with CA-G.R. SP No. 101732. Likewise, CA-G.R. SP
No. 101880 is also ordered to be consolidated with CA-G.R. SP No. 101732.
No costs.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
Chairperson
TERESITA J. LEONARDO-DE CASTRO DIOSDADO M. PERALTA
Associate
Justice Associate
Justice
JOSE
Associate
Justice
C E R
T I F I C A T I O N
Pursuant to Section
13, Article VIII of the Constitution, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
RENATO C. CORONA
Chief Justice
* Additional member per Special Order No. 913 dated November 2, 2010.
[1] Rollo (G.R. No. 190538), pp. 49-82. Penned by Associate Justice Juan Q. Enriquez, Jr. and concurred in by Associate Justices Isaias P. Dicdican and Ramon R. Garcia.
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12] A.M. No. 02-6-13-CA, August 22, 2002.
[13] Zulueta v. Asia Brewery, Inc., G.R. No. 138137, March 8, 2001, 354 SCRA 100, 111.
[14] 1A C.J.S. Actions § 259.
[15] Canos v. Peralta, No. L-38352, August 19, 1982, 115 SCRA 843, 846.
[16] Yu, Sr. v. Basilio G. Magno Construction and Development Enterprises, Inc., G.R. Nos. 138701-02, October 17, 2006, 504 SCRA 618, 633.
[17] Canos v. Peralta, supra note 15, at 847.
[18] Rollo (G.R. No. 190538), p. 1084.
[19] Republic Telecommunications Holdings, Inc.
v.
[20] Vidad, Sr. v. Tayamen, G.R. No. 160554, August 24, 2007, 531 SCRA 147, 153-154.
[21] Rollo (G.R. No. 190538), pp. 178-179.
[22] G.R. No. 174373, October 15, 2007, 536 SCRA 268, 288. See also MCC Industrial Sales Corporation v. Ssangyong Corporation, G.R. No. 170633, October 17, 2007, 536 SCRA 408, 464.
[23] Norton v. Sam’s Club, 145 F.3d 114, 40 Fed. R. Serv. 3d 1185 (2d Cir. 1998).
[24] G.R. No. 174966, February 14, 2008, 545 SCRA 422, 429.