Steel Corporation of the Philippines v. Equitable PCI Bank, Inc.
REITERATIONFacts
The Antecedents: Steel Corporation of the Philippines (SCP) encountered financial difficulties, leading to temporary illiquidity and inability to service its principal payments. Equitable PCI Bank, Inc. (now BDO-EPCIB), holding 27.45% of SCP's liabilities, filed a creditor-initiated petition for SCP's corporate rehabilitation. The Rehabilitation Court appointed a Receiver and directed the stay of enforcement of claims against SCP. SCP filed its own counter-rehabilitation plan. Procedural History: The Rehabilitation Court directed the Receiver to evaluate the proposed rehabilitation plans. After consultative meetings and modifications, the Receiver submitted a Modified Rehabilitation Plan. Several creditors, including BDO-EPCIB, filed a Joint Manifestation and Motion conforming to the Recommended Rehabilitation Plan. SCP submitted its 2006 Audited Financial Statements, and the Receiver reported on their effects. The Rehabilitation Court, on December 3, 2007, approved the Modified Rehabilitation Plan, mandating strict compliance and directing periodic reports. Subsequently, several creditors filed Petitions for Review with the Court of Appeals (CA). On July 3, 2008, the CA set aside the RTC's Decision and terminated the rehabilitation proceedings. The CA denied motions for reconsideration on December 3, 2009. The Petition: Steel Corporation of the Philippines (SCP) and DEG – Deutsche Investitions-und Entwicklungsgesellschaft mbH (DEG) filed separate Petitions for Review on Certiorari before the Supreme Court, assailing the CA's Decision and Resolution.
Issue(s)
Whether or not the Court of Appeals erred in refusing to consolidate the cases pending before it. Whether or not the Court of Appeals erred in granting a relief that was not prayed for by the parties, i.e., the termination of the rehabilitation proceedings.
Ruling
The Supreme Court granted the petition in G.R. No. 190462 (SCP) and G.R. No. 190538 (DEG). The July 3, 2008 Decision and December 3, 2009 Resolution of the Court of Appeals in CA-G.R. SP No. 101881 were reversed and set aside. The cases were remanded to the Court of Appeals for consolidation with CA-G.R. SP No. 101732, and CA-G.R. SP No. 101880 was also ordered to be consolidated with CA-G.R. SP No. 101732.
Ratio Decidendi
On the issue of consolidation of cases: The Supreme Court agreed with SCP that the Court of Appeals (CA) erred in failing to consolidate the four appeals arising from the same decision of the rehabilitation court. The Court cited Section 1, Rule 31 of the Rules of Court and Rule 3, Sec. 3 of the 2002 Internal Rules of the CA, which authorize consolidation when actions involve a common question of law or fact, or the same parties and related questions of fact and/or law. The purpose of consolidation is to avoid multiplicity of suits, prevent delays, and attain justice with the least expense and vexation. In this case, all four appeals involved identical parties, subject matter, and issues, making consolidation imperative. The CA's refusal to consolidate resulted in piecemeal judgment and multiplicity of suits, which is not favored. The Court found that the CA gravely erred in failing to order the consolidation of the cases. On the issue of granting a relief not prayed for: The Supreme Court found SCP's contention meritorious, stating that the CA denied SCP its right to procedural and substantive due process by granting a relief entirely different from those sought by the parties, on which they were neither heard nor given an opportunity to be heard. The Court noted that the prayer in the BDO-EPCIB petition before the CA only sought modification of the rehabilitation plan, not its termination. Therefore, it was inappropriate for the CA to terminate the proceedings motu proprio. The appellate court should have resolved the appeal on its merits instead of terminating the proceedings, a result not supported by the pleadings. The Court reiterated the principle that a judgment must conform to the pleadings and evidence, and it is improper to enter an order exceeding the scope of relief sought by the pleadings without notice and opportunity to be heard.
Main Doctrine
The Court of Appeals erred in terminating corporate rehabilitation proceedings when such relief was not prayed for by the parties and without affording them an opportunity to be heard. Consolidation of related cases pending before the appellate court is mandatory when they involve identical parties, subject matter, and issues to avoid multiplicity of suits and ensure speedy disposition of justice.