G.R. No. 184950 - NGEI Multi-Purpose Cooperative, Inc. vs. Filipinas Palmoil Plantation, Inc.

Case Digest (G.R. No. 184950)
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Facts:

Award and Lease Agreement

On December 2, 1988, NGEI Multi-Purpose Cooperative Inc. (NGEI Coop), a duly-registered agrarian reform workers’ cooperative, was awarded 3,996.6940 hectares of agricultural land in Rosario and San Francisco, Agusan del Sur by the Department of Agrarian Reform (DAR) for palm oil plantations.
On March 7, 1990, NGEI Coop entered into a lease agreement with Filipinas Palmoil Plantation, Inc. (FPPI), formerly known as NDC Gutrie Plantation, Inc.

a. The lease agreement commenced on September 27, 1988, and terminated on December 31, 2007.
b. It provided for a fixed annual rental of ₱635.00 per hectare plus a variable component:

1% of net sales from 1988 to 1996.
12% from 1997 to 2007.

Execution of the Addendum to the Lease Agreement

On January 29, 1998, the parties executed an Addendum to extend the lease for another 25 years, from January 1, 2008 to December 2032.
Key details of the Addendum:

a. Signed by Antonio Dayday, Chairman of NGEI Coop, and Dennis Villareal, President of FPPI.
b. Witnessed by DAR Undersecretary Artemio Adasa.
c. The annual lease rental remained at ₱635.00 per hectare.
d. The package of economic benefits for NGEI Coop’s bona fide members was amended with a schedule that increased benefits gradually from ₱1,865.00 per hectare (1998-2002) up to ₱5,365.00 per hectare (2032).

Filing of the Complaint and Subsequent Proceedings

On June 20, 2002, NGEI Coop and Hernancito Ronquillo filed a complaint before the DAR Adjudication Board (DARAB) Regional Adjudicator seeking nullification of both the original Lease Agreement and its Addendum.

a. The complaint alleged that:

Antonio Dayday lacked authority to execute the Addendum.
The Addendum was approved neither by the farm worker-beneficiaries nor by the Presidential Agrarian Reform Council (PARC) Executive Committee per DAR Administrative Order (A.O.) No. 5, Series of 1997.
The economic terms (annual rental and benefits) were onerous and unjust.
The agreement unjustly deprived them of their right to till their land, contrary to Republic Act (R.A.) No. 6657 as amended by R.A. No. 7905.

The Regional Adjudicator’s Decisions:

a. February 3, 2004: Declared the Addendum null and void for being executed without proper authority and in violation of procedural rules under A.O. No. 5.
b. March 22, 2004: Upon FPPI’s motion for reconsideration, reversed his earlier decision based on:

Prescription of the petitioners’ cause of action.
Lack of cause of action.
The established fact that the Addendum was valid and binding as its benefits had been enjoyed for over four years.

c. April 28, 2004: Motion for reconsideration of the reversal was denied.

Subsequent Appeals and Judicial Rulings:

a. October 9, 2006: DARAB Central Office affirmed the Regional Adjudicator’s Order.
b. May 9, 2008: Court of Appeals (CA) upheld the validity and binding nature of the Addendum, noting:

The free and voluntary execution of the Addendum.
The principle of mutuality of contracts.
Findings of substantial evidence supporting the validity.

c. October 3, 2008: CA denied the petitioners’ motion for reconsideration of its decision.
d. Petitioners then elevated the case via a petition for review on certiorari before the Supreme Court under Rule 45.

Grounds Raised by the Petitioners

Petitioners argued that:

a. The CA erred in not holding the Addendum void ab initio due to:

Lack of authority given to Antonio Dayday.
Non-ratification by the general membership of NGEI Coop.

b. The Addendum was contrary to law, morals, good customs, and public policy.
c. The CA abused its discretion by affirming the DARAB’s decision, which they contended was not supported by substantial evidence.
d. Prescription of their cause of action had occurred.

Respondents contended that:

a. Petitioners improperly raised factual issues, which are not subject to review under Rule 45.
b. The findings of fact by the Regional Adjudicator and DARAB were supported by substantial evidence and binding.

Findings and Concluding Determinations by the Court

The Supreme Court held that:

a. The CA did not commit reversible error by affirming the decisions of the lower tribunals.
b. All factual disputes (including authority to sign, ratification by the cooperative, and alleged unconscionability of lease terms) are issues for the lower tribunals, not for judicial review under Rule 45.

The Court further emphasized:

a. The principle that a contract is binding and the law between the parties.
b. That the petitioners’ cause of action for nullification complained was prescribed, as more than four years had elapsed.
c. The necessity to honor the substantial evidence supporting the factual findings of the DARAB and Regional Adjudicator.

Issues:

Whether the Court of Appeals committed reversible error for:

Upholding the validity and binding effect of the Addendum, which the petitioners allege was entered into without proper authority and non-ratification.
Relying on the factual findings of the DARAB and the Regional Adjudicator despite the petitioners’ arguments regarding conflicting evidence.
Ignoring the alleged unconscionability of the lease rental and economic benefits stipulated in the Addendum.
Allowing the petitioners’ cause of action to be barred by the prescription period under Section 38 of R.A. No. 3844.

Ruling:

(Subscriber-Only)

Ratio:

(Subscriber-Only)

Doctrine:

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