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649 Phil. 692


[ G.R. No. 190462, November 17, 2010 ]


[G.R. No. 190538]




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 Rehabilitation Court, and, in effect, the CA (1) set aside the Rehabilitation Court's Decision approving the Rehabilitation Plan; and (2) terminated the corporate rehabilitation of Steel Corporation of the Philippines (SCP).

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 Rehabilitation Court likewise appointed Atty. Santiago T. Gabionza, Jr. as the Rehabilitation Receiver for SCP.

SCP did not oppose the petition but instead filed its own counter rehabilitation plan and submitted it for the consideration of the Rehabilitation Court. Other creditors filed their respective comments on the petition.

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 Rehabilitation Court also directed Atty. Gabionza to consider SCP's counter rehabilitation plan in drafting his recommended rehabilitation plan.

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 Rehabilitation Court as follows:

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:

    1. To be paid quarterly over a period of 5 years without interest, or
    2. 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 Rehabilitation Court between and among the parties to discuss a viable rehabilitation plan for SCP that is acceptable to all.

In compliance with the directives of the Rehabilitation Court to consider all the inputs and observations made by the parties during the consultative meetings and to make the necessary modification in his recommendations on the submitted rehabilitation plans, Atty. Gabionza submitted a Modified Rehabilitation Plan as incorporated in his compliance dated June 27, 2007. The modifications made were:

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 Rehabilitation Court to study the financial statements and to submit a report on their effects on the Modified Rehabilitation Plan.

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 Rehabilitation Court.

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.


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.


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:


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.


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.


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:


The [CA] had no jurisdiction or authority to terminate the rehabilitation proceedings.


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 Rehabilitation Court. As such, it became imperative upon the CA to consolidate the cases. Even though consolidation of actions is addressed to the sound discretion of the court and normally, its action in consolidating will not be disturbed in the absence of manifest abuse of discretion,[17] in this instance, we find that the CA gravely erred in failing to order the consolidation of the cases.

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.


Corona, (Chairperson), Leonardo-De Castro, Peralta,* and Perez, JJ., concur.

* 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] Id. at 84-99.

[3] Id. at 111-139.

[4] Id. at 410.

[5] Id. at 115-116.

[6] Id. at 117.

[7] Id. at 139.

[8] Id. at 1079, Resolution dated May 8, 2008.

[9] Id. at 82.

[10] Id. at 30.

[11] Id.

[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 ยง 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. Santiago, G.R. No. 140338, August 7, 2007, 529 SCRA 232, 241.

[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.

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