SECOND DIVISION Carpio (Chair), Nachura, Peralta, Abad, Mendoza

G.R. No. 170352 June 1, 2011 Ponente: Peralta

Petitioner: Megan Sugar Corp.

Respondents: RTC-68 Dumangas, Iloilo & New Frontier Sugar Corp. & Equitable PCI Bank
Nature: Petition for Review on Certiorari (Rule 45)

Summary: 1. Megan is ordered its obligations to pay New Frontier, Equitable and Passi Sugar.
2. Megan got these obligations from CIMICO who operated a sugar mill previously a) owned by
New Frontier, b) foreclosed to Equitable and c) sold to Passi Sugar.
3. Megan’s obligations were officialized when Atty. Sabig a) introduced himself as Megan’s
counsel to the Court, and b) announced the turnover to them of CIMICO’s rights to the mill.
4. When New Frontier, Equitable and Passi demanded their shares from the mill’s operations,
Megan claimed that they had no obligations since Atty. Sabig who declared the obligations was
unauthorized to be Megan’s counsel but they were barred by estoppel.

Cour of Appeals CA-G.R. SP No. 75789

July 23, 1993 - New Frontier Sugar Corp. obtained a loan from Equitable by a real estate mortgage of 92 hectares of
land in Passi City, Iloilo and a chattel mortgage over New Frontier’s sugar mill.

Novermber 17, 2000 - New Frontier and Central Iloilo Mining Corp. (CIMICO) entered into a MOA.
1. Because New Frontier had problems on liquidity and indebtedness to Equitable
2. CIMICO takes over the NFSC raw sugar factory from 2000-2003.

April 29, 2002 - New Frontier files against CIMICO (Complaint for Specific Performance and Collection against for
failing to pay its obligations under the MOA)

RTC-68 Dumangas, Iloilo Civil Case No. 02-243

Early May 2002 – CIMICO files against New Frontier (Sum of Money and/or Breach of Contract)

May 10, 2002 – Equitable proceeds against New Fronter (Extra-Judicial Foreclose proceeds for failure to pay debt)
1. Equitable bought all New Frontier’s land and sugar mill because they were the sole bidder in the public
auction.
2. Equitable consolidated the titles in its name and employed the services of the Philippine Industrial Security
Agency (PISA) to help secure both land and mill.

September 16, 2002 – CIMICO files against Equitable and PISA (Amended Complaint)

September 25, 2002 – RTC issues Restraining Order (directing Equitable and PISA to desist from taking possession
over the properties)
** CIMICO continues possession over the properties.

October 3, 2002 – CIMICO and Megan Sugar Corp. entered into a MOA (Megan assumed CIMICO’s rights and
obligations over the properties).

November 18, 2002 – Megan started operations on the mill.

November 22, 2002 – Passi Iloilo Sugar Central Inc. (Passi Sugar) filed a Motion for Intervention before the RTC.
1. Passi Sugar claimed to be the vendee of Equitable
2. Passi Sugar bought the subject properties with Contract to Sell after the subject New Frontier properties
were foreclosed.

November 29, 2002 – Atty. Reuben Sabig went to the RTC

1. Atty. Sabig claimed to be the counsel of Megan (not yet involved in the cases at this time).
 2. Atty. Sabig explained that Megan is party to the proceedings because of the purchase of CIMICO’s
interests.
3. Atty. Sabig manifested that his statements would bind Megan.

December 10, 2002 – Equitable filed a Motion for Delivery/Deposit of Mill Shares/Rentals.

December 11, 2002 – Passi Sugar and New Frontier filed motions alike with Equitable.
1. Passi Sugar filed a Motion to Order Deposit of Mill Share Production of Megan / CIMICO.
2. New Frontier filed a Motion to Order Deposit of Miller’s Share (37%) or the Lease Consideration under its
MOA with CIMICO.

December 27, 2002 – New Frontier filed another Motion to Hold in Escrow Sugar Quedans or Proceeds of Sugar
Sales Equivalent to Miller’s Shares.

January 16, 2003 – RTC granted Equitable’s “motions to place the mills share in escrow to the court”
1. Megan Sugar Corporation or its director-officer, Mr. Joey Concha, who is General Manager of Megan,
2. is ordered to deposit in escrow within five (5) days upon receipt of this order,
3. the sugar quedans representing the millers share to the Court starting from December 19, 2002 and
thereafter,
4. in every Friday of the week pursuant to the Memorandum of Agreement executed by plaintiff CIMICO and
defendant NFSC.

January 29, 2003 – Atty. Sabig (for Megan) filed an Omnibus Motion for Reconsideration and Clarification.

February 19, 2003 – RTC denied Atty. Sabig’s Motion

February 27, 2003 – Equitable filed an Urgent Ex-Parte Motion for Execution

February 28, 2003 – RTC granted Equitable’s Motion

Court of Appeals

March 5, 2003 – Megan (not Atty. Sabig) filed a Petition for Certiorari before the CA with the following arguments:
1. Megan had no responsibility to pay for CIMICO’s obligations.
2. RTC had no jurisdiction over Megan.

August 23, 2004 – CA dismisses Megan’s petition.

1. Argument #1 is unmentioned
- perhaps due to Megan having MOA with CIMICO showing that it acquires all CIMICO’s rights and
obligations)
2. Argument #2 RTC has jurisdiction, because Megan’s counsel Atty. Sabig already participated in court as
binding Megan in his statements. – Megan is thus estopped from assailing the RTC’s jurisdiction.

More or Less September 2005 – Megan filed a Motion for Reconsideration

October 12, 2005 – CA denies Megan’s MR

Supreme Court

1. On the following issues Megan raised:

a. Is Megan really estopped from assailing the RTC’s jurisdiction because Atty. Sabig’s acts and active
participation as its counsel? YES
b. Does the RTC have jurisdiction to issue the orders it issued? YES
2. On Megan and Atty. Sabig’s complicated relationship:
a. Megan’s denials:
i. Megan says their Board of Directors never issued a resolution authorizing Atty. Sabig to
represent Megan.
ii. Since Atty. Sabig was not an authorized agent, his acts (of presenting Megan as a party and
disclosing Megan’s MOA with CIMICO) should not bind the corporation.
iii. The counsels of the other parties to the case all know that Atty. Sabig was unauthorized
because Atty. Sabig himself declared that he is still “in the process” of taking over the case
and he was there just to listen.
b. Refutes by Equitable and New Frontier (who are demanding shares from Megan since Megan
already assumed the obligations of CIMICO, who originally operated the land for New Frontier,
who originally owned the land and the mill before they were sold to Passi Sugar, who also demanded
shares from Megan)
i. Megan should be estopped from assailing Atty. Sabig’s authority.
ii. Atty. Sabig actively participated in Court and had even filed a number of motions for
Megan.
iii. Atty. Sabig was even accompanied in the hearing by no less than a Megan Director, Jose
Concha.
iv. All correspondences concerning the proceedings (motions, pleadings, court orders) were
all sent to Megan’s office.
v. Before the demands came, never did Megan repudiate the authority of Atty. Sabig.

3. The doctrine of estoppel:

a. Is based upon the grounds of public policy / fair dealing / good faith / justice
b. Has the purpose of forbidding one to speak against his own acts / representations / commitments to
the injury of one to whom they were directed and who reasonably relied thereon.
c. Springs from equitable principles and the equities in the case.
d. Is designed to aid the law to prevent injustice.

4. The Court adds:

a. While it is true that Atty. Sabig said in court that he was only appearing for the hearing of Passi
Sugars motion for intervention and not for the case itself, his subsequent acts plus Megan’s inaction
and negligence to repudiate his authority, effectively estops Megan.
b. Atty. Sabig is not a stranger to Megan as manifested his law firm has already represented Megan in
other cases also against CIMICO and Equitable.
 c. Even without a Board Resolution, Megan has clothed Atty. Sabig with apparent authority to act for
them.
i. Megan Director and General Manager Jose Concha attended many court hearings
ii. Concha also wrote to the RTC asking the status of the case.
d. A corporation may be held in estoppel from denying as against innocent third persons the authority
of its officers or agents who have been clothed by it with ostensible or apparent authority.
e. Megan never repudiated the authority of Atty. Sabig when Megan’s office received court
correspondences and even forwarded them to Atty. Sabig.
f. It is also improbable that MEGAN would just wait idly by for the final resolution of the case and
not send a lawyer to protect its interest.
g. Megan is a family corporation and Concha is the son-in-law of the President and the other directors
are also relatives. Thus, given the nature and structure of Megan’s board, it is unimaginable that all
directors were unaware of the January 16, 2003 RTC Order. Atty. Sabig even filed a
Manifestation that Megan will deposit the quedans, as directed by the RTC, every Friday of the
week.
h. It is not right for a party who has affirmed and invoked the jurisdiction of a court in a particular
matter to secure an affirmative relief to afterwards deny that same jurisdiction to escape a penalty.
i. Estoppel bars unfair conduct not because the judgment or order of the court is valid but because
such a practice cannot be tolerated for reasons of public policy.
j. Court holds that Megan’s challenge to Atty. Sabig’s authority and the RTCs jurisdiction was a mere
afterthought after having received an unfavorable decision from the RTC, and granting it is unfair.

5. The Doctrine of Ostensible Agency is:

a. Apparent Authority / Holding Out Theory
b. Imposes liability, not as a result of a real contract, but by the actions of a principal / employer
that somehow misleads the public into believing that the authority / relationship exists

6. The outcome:

Previous Cases Content SC Ruling Outcome

Megan’s Petition Contesting the RTC Denied Megan is to pay.
Jurisdiction
CA’s Ruling Denied Megan’s MR Affirmed
RTC’s Ruling Ordered the Shares to be Affirmed
Escrowed