Title
Megan Sugar Corp. vs. Regional Trial Court of Iloilo, Branch 68
Case
G.R. No. 170352
Decision Date
Jun 1, 2011
NFSC's loan default led to foreclosure; CIMICO intervened, transferring rights to MEGAN. MEGAN challenged RTC jurisdiction but was estopped due to active participation, upheld by SC.
dispute
operation and management
sugar factory

Case Summary (G.R. No. 170352)

Factual Background

On July 23, 1993, New Frontier Sugar Corporation obtained a loan from Equitable PCI Bank secured by a real estate mortgage over ninety-two hectares in Passi City, Iloilo, and by a chattel mortgage over the sugar mill. Because of indebtedness, CIMICO and NFSC executed a Memorandum of Agreement dated November 17, 2000, under which CIMICO took over operation of NFSC’s raw sugar factory for crop years 2000 to 2003. NFSC filed a complaint for specific performance and collection April 19, 2002, and CIMICO filed Civil Case No. 02-243 before the RTC of Dumangas. After EPCIB foreclosed NFSC’s property and purchased the foreclosed assets at public auction May 10, 2002, EPCIB engaged PISA to secure the property. CIMICO amended its complaint September 16, 2002 and obtained a restraining order September 25, 2002 preventing EPCIB and PISA from taking possession, which allowed CIMICO to remain in possession.

Transition of Possession and Initial Disputes

By MOA dated October 3, 2002, Megan Sugar Corporation assumed CIMICO’s rights and obligations and commenced operation of the mill on November 18, 2002. Passi Iloilo Sugar Central, Inc. filed a motion to intervene November 22, 2002 claiming to be vendee under a Contract to Sell with EPCIB. At the November 29, 2002 hearing on that motion, Atty. Reuben Mikhail Sabig appeared and entered his appearance as counsel for Megan, and stated that he had been furnished a copy of the motion and that he was in the process of taking over the case but was appearing to protect Megan’s interest at that hearing.

Orders Issued by the RTC

Between December 2002 and February 2003 several motions were filed regarding deposit of miller’s shares and quedans. The RTC issued an order January 16, 2003 granting motions to place the miller’s share in escrow and expressly ordered Megan Sugar Corporation or its director-officer Mr. Joey Concha to deposit the sugar quedans representing the miller’s share within five days and thereafter every Friday pursuant to the MOA. The RTC denied an omnibus motion for reconsideration February 19, 2003 and granted EPCIB’s ex parte motion for execution in an order dated February 28, 2003. Subsequent ex parte motions and orders followed, including motions of March 27, 2003 and April 2, 2003 seeking release of certain quedans from the SRA and arrangements for depositing a percentage of their value.

Proceedings in the Court of Appeals and Supreme Court

Aggrieved, Megan Sugar Corporation filed a petition for certiorari with the Court of Appeals dated March 5, 2003, principally contending that the RTC lacked jurisdiction over Megan and that Megan was not subrogated to CIMICO’s obligations. The Court of Appeals rendered a Decision dated August 23, 2004 dismissing the petition for lack of merit and denied reconsideration in its October 12, 2005 Resolution. The present petition for review under Rule 45 sought to set aside those rulings. The Supreme Court, Second Division, issued its decision on June 1, 2011.

Issues Presented

The petition framed two issues for resolution: first, whether Megan Sugar Corporation was estopped from questioning the assailed RTC orders because of the acts of Atty. Reuben Mikhail Sabig; and second, whether the Regional Trial Court had jurisdiction to issue the orders dated January 16, 2003, February 19, 2003 and February 28, 2003.

Parties’ Contentions

Megan asserted that its board of directors never authorized Atty. Sabig to represent the corporation and that he was an unauthorized agent whose actions should not bind the corporation. Megan further pointed to statements by Atty. Sabig in court that he was appearing only for the hearing on Passi Sugar’s motion for intervention and not for the case generally. EPCIB and NFSC countered that Megan was estopped from denying Sabig’s authority because he actively participated in the proceedings, filed motions seeking affirmative relief, was accompanied by Jose Concha of Megan at hearings, and because pleadings and court orders were sent to Megan’s premises and forwarded to Atty. Sabig, yet Megan never repudiated his authority.

Ruling of the Court

The Supreme Court denied the petition and affirmed the Court of Appeals Decision of August 23, 2004 and Resolution of October 12, 2005. The Court held that Megan Sugar Corporation was estopped from assailing both the authority of Atty. Reuben Mikhail Sabig and the jurisdiction of the Regional Trial Court. Justices Carpio (Chairperson), Nachura, Abad, and Mendoza concurred.

Legal Basis and Reasoning

The Court applied the doctrine of estoppel, grounded in public policy, fair dealing, good faith and justice, which precludes a party from speaking against its own acts or representations to the prejudice of another who reasonably relied thereon, citing Philippine National Bank v. Court of Appeals, 183 Phil. 54 (1979). The Court found that Atty. Sabig’s appearance, his explicit statements in open court that his statements would bind Megan, and his subsequent affirmative filings clothed him with apparent authority. The Court noted that Sabig and his law firm had previously represented Megan in other litigations involving CIMICO and EPCIB, and that Jose Concha, a director and general manager of Megan, accompanied Sabig at hearings and sent a letter to the RTC concerning the case. The Court observed that all motions, pleadings and notices were addressed to the sugar central operated by Megan and were forwarded to Atty. Sabig, which allowed reasonable persons to believe Sabig’s authority. The Court relied on the doctrine of apparent authority or ostensible agency, and cited precedents including Rural Bank of Milaor (Camarines Sur) v. Ocfemia, 381 Phil. 911 (2000), and Professional Services, Inc. v. Agana, G.R. Nos. 126297, 126467 and 127590, January 31, 2007, 513 SCRA 478, to emphasize that a principal who cloaks an agent with indicia of authority is estopped from denying such authority. The Court further stressed Megan’s failure to repudiate Sabig’s authority within a reasonable time after an adv

...continue reading

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster, building context before diving into full texts. AI-powered analysis, always verify critical details.

About Privacy Terms