G.R. No. 170352 ; June 1, 2011
Megan Sugar Corporation, Petitioner, vs. Regional Trial Court of Iloilo, Branch 68, Dumangas, Iloilo; New Frontier Sugar Corporation and Equitable PCI Bank, Respondents.

FACTS

On July 23, 1993, respondent New Frontier Sugar Corporation (NFSC) obtained a loan from respondent Equitable PCI Bank (EPCIB), secured by a real estate mortgage over land and a chattel mortgage over a sugar mill. Due to liquidity problems, NFSC entered into a Memorandum of Agreement (MOA) on November 17, 2000, with Central Iloilo Milling Corporation (CIMICO), for CIMICO to take over the operation and management of the sugar factory from 2000 to 2003. On April 19, 2002, NFSC filed a complaint against CIMICO for failure to pay obligations under the MOA. CIMICO filed a case against NFSC for sum of money/breach of contract (Civil Case No. 02-243). On May 10, 2002, due to NFSC’s loan default, EPCIB extra-judicially foreclosed the mortgaged properties, bought them at auction, and consolidated the titles. EPCIB engaged Philippine Industrial Security Agency (PISA) to secure the property. On September 16, 2002, CIMICO filed an Amended Complaint impleading PISA and EPCIB, and on September 25, 2002, the RTC issued a restraining order directing EPCIB and PISA to desist from taking possession, allowing CIMICO to remain in possession. On October 3, 2002, CIMICO and petitioner Megan Sugar Corporation (MEGAN) entered into a MOA whereby MEGAN assumed CIMICO’s rights, interests, and obligations over the property, and MEGAN began operating the sugar mill on November 18, 2002. On November 22, 2002, Passi Iloilo Sugar Central, Inc. (Passi Sugar) filed a Motion for Intervention, claiming to be the vendee of EPCIB. During the November 29, 2002 hearing on the motion, Atty. Reuben Mikhail Sabig appeared as counsel for MEGAN, explaining MEGAN had purchased CIMICO’s interest and that his statements would bind MEGAN, despite objections that MEGAN was not a party. Subsequently, EPCIB, Passi Sugar, and NFSC filed various motions seeking to have the miller’s share of sugar production deposited in escrow. On January 16, 2003, the RTC issued an Order granting these motions and ordering MEGAN to deposit the sugar quedans representing the miller’s share in escrow with the court. Atty. Sabig filed an Omnibus Motion for Reconsideration and Clarification, which was denied on February 19, 2003. On February 28, 2003, the RTC granted EPCIB’s motion for execution. MEGAN filed a petition for certiorari with the Court of Appeals, arguing the RTC erred in finding MEGAN subrogated to CIMICO’s obligations and that the RTC had no jurisdiction over MEGAN. The CA dismissed the petition on August 23, 2004, ruling MEGAN was estopped from assailing jurisdiction due to Atty. Sabig’s active participation. The CA denied MEGAN’s motion for reconsideration on October 12, 2005.

ISSUE

1. Whether petitioner Megan Sugar Corporation is estopped from questioning the assailed RTC orders due to the acts of Atty. Reuben Mikhail Sabig.
2. Whether the Regional Trial Court had jurisdiction to issue the Orders dated January 16, 2003, February 19, 2003, and February 28, 2003.

RULING

The Supreme Court denied the petition, affirming the CA’s decision.
1. On Estoppel: The Court held that MEGAN is estopped from questioning the RTC’s jurisdiction. Atty. Sabig actively participated in the proceedings by appearing at the November 29, 2002 hearing, where he announced representation for MEGAN, explained MEGAN had purchased CIMICO’s interest, and insisted on participating because the motion for intervention directly affected MEGAN. Furthermore, Atty. Sabig filed an Omnibus Motion for Reconsideration seeking affirmative relief. MEGAN received copies of motions and orders at its office but never repudiated Atty. Sabig’s authority. The voluntary appearance and acts of counsel, seeking relief from the court, operate as a submission to its jurisdiction. MEGAN cannot now deny such jurisdiction after having invoked it.
2. On Jurisdiction: The RTC had jurisdiction to issue the assailed orders. The main case (Civil Case No. 02-243) was for sum of money and/or breach of contract, a personal action within the RTC’s jurisdiction. The orders requiring deposit of the miller’s share in escrow were incidental to the court’s authority to preserve the subject matter of the litigation and ensure that any judgment could be satisfied. MEGAN, by stepping into the shoes of CIMICO through their MOA, became bound by the pending case and the court’s ancillary orders. The principle of estoppel by laches applies, as MEGAN questioned jurisdiction only after receiving an adverse order, having previously acquiesced to the court’s proceedings through its counsel’s actions.