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

Case Summary (G.R. No. 184950)

Factual Background

The Department of Agrarian Reform awarded NGEI Multi-Purpose Cooperative Inc. 3,996.6940 hectares for palm oil plantations in Agusan del Sur on December 2, 1988. NGEI Coop entered into a lease with Filipinas Palmoil Plantation, Inc. on March 7, 1990, under which FPPI paid an annual fixed rental of P635.00 per hectare plus variable components tied to net sales. The parties executed an Addendum on January 29, 1998 extending the lease for twenty-five years from January 1, 2008 to December 31, 2032 and amending the economic benefits schedule per hectare for successive five-year periods. The Addendum was signed by Antonio Dayday as Chairman of NGEI Coop and by Dennis Villareal as President of FPPI, and was witnessed by a DAR Undersecretary.

Administrative Complaint and Regional Adjudicator Proceedings

On June 20, 2002, NGEI Coop and Hernancito Ronquillo filed a complaint before the DARAB Regional Adjudicator seeking nullification of the Addendum on grounds that Dayday lacked authority to execute it, that the Addendum was not approved by the farm worker-beneficiaries nor by the PARC Executive Committee as required by A.O. No. 5, Series of 1997, that the rental and benefits were onerous, and that the extended term contravened the intent of R.A. No. 6657, as amended by R.A. No. 7905. The Regional Adjudicator first declared the Addendum null and void in a February 3, 2004 Decision but, upon FPPI's motion for reconsideration, reversed that finding in an Order dated March 22, 2004, dismissing the complaint on grounds of prescription, lack of cause of action, and waiver by petitioners after having enjoyed benefits for more than four years.

DARAB Central Office Decision and Course to the Court of Appeals

The DARAB Central Office, on appeal, affirmed the Regional Adjudicator in its October 9, 2006 Decision, finding no reversible error in the Order of March 22, 2004 and denying the appeal for lack of merit. The DARAB emphasized that various resolutions had authorized the Chairman to enter into the Addendum or, in the alternative, that the parties had observed and performed the Addendum's terms for several years thereby implying ratification and precluding unilateral annulment, and that the petitioners’ cause of action was barred by prescription under Section 38, R.A. No. 3844.

Court of Appeals Determination

The petitioners filed a petition for review under Rule 43 with the Court of Appeals. In its May 9, 2008 Decision, the CA upheld the validity and binding effect of the Addendum and affirmed the DARAB findings. The CA grounded its ruling on the civil law principle of mutuality of contracts, on the conclusiveness of agrarian tribunals’ factual findings supported by substantial evidence, and on jurisprudence holding that the appellate court could not reweigh the evidence of the DARAB. The CA denied the petitioners’ motion for reconsideration by Resolution dated October 3, 2008.

Issues Presented to the Supreme Court

The petitioners raised four principal grounds in the Rule 45 petition: that the CA erred in not holding the Addendum void ab initio due to lack of authority of Dayday and absence of ratification by the cooperative; that the Addendum was contrary to law, morals, good customs, and public policy; that the CA acted with grave abuse of discretion in finding the DARAB decision supported by substantial evidence; and whether the petitioners' cause of action had prescribed.

Parties' Contentions Before the Supreme Court

The petitioners contended that the Addendum was void for want of authority and required approvals under A.O. No. 5, Series of 1997, that the rental stipulated was unconscionable and below prescribed minimums under A.O. No. 5 and R.A. No. 3844, and that acceptance of benefits did not operate as waiver given their consistent contestation. The respondents urged that the petition presented factual questions not proper for Rule 45 review, that the DARAB and the CA had substantial evidence to sustain the Addendum's validity, and that the contract was binding and not contrary to public policy.

Supreme Court Disposition

The Supreme Court denied the petition and affirmed the Court of Appeals decision. The Court held that the petitioners raised predominantly factual issues which were not examinable in a Rule 45 petition and found no reversible error in the DARAB and CA findings that the Addendum was valid, that petitioners had ratified or waived procedural defects by enjoying benefits, and that the cause of action was barred by prescription under Section 38, R.A. No. 3844.

Standard of Review and Substantial Evidence Analysis

The Court reiterated that under Rule 45, Rules of Court the Supreme Court’s review on certiorari was generally confined to questions of law and did not extend to reexamination or weighing of factual evidence. The Court applied the doctrine that findings of fact by agrarian tribunals are conclusive where supported by substantial evidence and noted that neither the DARAB findings nor the CA affirmance fell within established exceptions permitting disturbance of administrative factfinding, such as grave abuse of discretion, speculation, manifest mistake in inference, conflicting findings, or oversight of undisputed material facts.

Contractual Validity, Mutuality and Public Policy

The Court affirmed the principle that a contract is the law between parties and that obligations arising from contracts bind parties unless stipulations contravene law, morals, good customs, public order, or public policy. The Court agreed with the CA that the Addendum’s terms, having been freely and solemnly executed and performed to the mutual benefit of the parties, were binding and not subject to unilateral cancellation by petitioners on grounds of having entered into an unwise contract.

Prescription and Applicability of Civil Code Provision

The Court applied Section 38, R.A. No. 3844 to find that the petitioners’ action to nullify the Addendum had prescribed because the complaint was filed more than thre

Case Syllabus (G.R. No. 184950)

Parties and Procedural Posture

NGEI Multi-Purpose Cooperative Inc. and Hernancito Ronquillo filed a petition for review on certiorari under Rule 45 assailing the Court of Appeals' May 9, 2008 Decision and October 3, 2008 Resolution in CA-G.R. SP No. 99552.
Filipinas Palmoil Plantation, Inc. and Dennis Villareal were the respondents in the petition.
The underlying administrative action was docketed as DARAB Case No. XIII (03)176 before the Department of Agrarian Reform Adjudication Board Regional Adjudicator.
The petition contested the DARAB and Court of Appeals rulings that sustained the validity and binding effect of an addendum to a lease agreement.
The Supreme Court denied the petition and affirmed the Court of Appeals decision in the appealed case.

Key Factual Allegations

The Department of Agrarian Reform awarded NGEI Coop 3,996.6940 hectares for palm oil plantations on December 2, 1988.
NGEI Coop entered into a lease with FPPI commencing September 27, 1988 and terminating December 31, 2007 with a yearly fixed rental of P635.00 per hectare plus a variable component tied to net sales.
The parties executed an Addendum to the Lease Agreement on January 29, 1998 extending the lease for twenty-five years from January 1, 2008 to December 31, 2032.
The Addendum was signed by Antonio Dayday as Chairman of NGEI Coop and by Dennis Villareal as President of FPPI, and was witnessed by DAR Undersecretary Artemio Adasa.
The Addendum retained the annual lease rental at P635.00 per hectare and amended the package of economic benefits with staged increases in per-hectare amounts from 1998 through 2032.
NGEI Coop and Ronquillo filed a complaint on June 20, 2002 seeking nullification of the lease and the Addendum on grounds including lack of authority of Dayday, absence of PARC Executive Committee approval under A.O. No. 5, Series of 1997, alleged unconscionable rental and benefits, and alleged infringement of rights under R.A. No. 6657, as amended by R.A. No. 7905.

Issues

Whether the Court of Appeals committed reversible error in affirming the DARAB order upholding the Addendum.
Whether the Addendum was void ab initio for lack of authority and for absence of ratification by NGEI Coop membership.
Whether the Addendum is contrary to law, morals, good customs, or public policy.
Whether the DARAB findings were supported by substantial evidence.
Whether the petitioners' cause of action was barred by prescription under Section 38, R.A. No. 3844.

Contentions of Petitioners

The Addendum is void ab initio because Antonio Dayday lacked authority to execute it on behalf of NGEI Coop and because it was not ratified by the cooperative's general membership.
The Addendum did not receive required approval from the PARC Executive Committee as mandated by A.O. No. 5, Series of 1997.
The stipulated yearly rental of P635.00 per hectare and the economic benefits package were unconscionable and violative of R.A. No. 3844 and public policy promoting agrarian reform beneficiaries.
Receipt of benefits under the Addendum did not constitute waiver of the right to assail the Addendum bec