Meat Packing Corporation of the Philippines vs. Sandiganbayan

A party who actively participates in the merits of a proceeding and seeks affirmative relief voluntarily submits to the court's jurisdiction, notwithstanding an initial special appearance limited to challenging jurisdiction.

Petitioner Meat Packing Corporation of the Philippines (MPCP), a wholly-owned Government Service Insurance System (GSIS) corporation, leased its meat packing plant to Philippine Integrated Meat Corporation (PIMECO) under a lease-purchase agreement containing automatic rescission clauses triggered by the failure to pay rentals equivalent to three annual installments. Following the sequestration of PIMECO's assets by the PCGG in 1986, MPCP sought to rescind the agreement due to rental arrears and regain possession of the plant. The PCGG initially passed resolutions turning over the plant to GSIS/MPCP, but the Sandiganbayan nullified the turnover for being executed without the required court approval and for exceeding the PCGG's own resolutions. To prevent the accumulation of arrears that would trigger automatic rescission, the PCGG tendered partial rental payments to MPCP, which refused acceptance.

• The Lease-Purchase Agreement: On November 3, 1975, MPCP leased its meat processing plant to PIMECO under a lease-purchase arrangement for P38,515,789.87, payable over 28 years. A Supplementary and Loan Agreement increased the total contract price to P93,695,552.59, with an annual rental rate of P3,346,269.70. The contract stipulated automatic cancellation without judicial intervention if PIMECO defaulted on rentals equivalent to three annual installments, and authorized rescission upon 180 days' written notice for any violation.
• Sequestration and Attempted Rescission: On March 17, 1986, the PCGG sequestered all of PIMECO's assets, including the meat packing plant and the lease-purchase agreement. On November 17, 1986, MPCP notified PIMECO of the rescission of the agreement due to non-payment of over P2,000,000.00 in rentals for 1986. GSIS requested the PCGG to exclude the plant from sequestration, but the PCGG denied the request.
• The Turnover Controversy: The PCGG passed resolutions on September 20, 1988, and January 24, 1989, ordering the turnover of the meat packing complex to GSIS/MPCP, subject to conditions including Sandiganbayan approval and the execution of a Memorandum of Agreement (MOA). A MOA was executed on April 28, 1989, but without the required court approval. Defendant Peter Sabido opposed the turnover. The Sandiganbayan issued a temporary restraining order and subsequently a writ of preliminary injunction. On November 29, 1989, the Sandiganbayan declared the turnover null and void ab initio, finding that the PCGG gravely abused its discretion and that the MOA exceeded the scope of the PCGG resolutions.
• Tender of Payment and Consignation: On August 30, 1990, PIMECO filed a petition for declaratory relief (Civil Case No. 0108) regarding the rescission clause. To avert the automatic cancellation of the lease-purchase agreement, the PCGG tendered two checks totaling P5,000,000.00 to MPCP as partial payment of accrued rentals. MPCP refused to accept the payment, maintaining that the agreement had been rescinded. The PCGG filed an Urgent Motion in Civil Case No. 0024 to compel MPCP to accept the consigned amount. MPCP appeared specially to contest the Sandiganbayan's jurisdiction but simultaneously argued the merits of the motion. The Sandiganbayan granted the motion on July 2, 1991, and denied MPCP's motion for reconsideration on November 29, 1991.

• Lack of Jurisdiction: MPCP argued that the Sandiganbayan did not acquire jurisdiction over its person because it was not a party to Civil Case No. 0024 and PIMECO had not been served summons.
• Estoppel of PCGG: MPCP maintained that the PCGG was estopped from denying the rescission of the lease-purchase agreement because its en banc resolutions explicitly admitted that the agreement had been validly rescinded by GSIS.
• Unjustified Refusal of Tender: MPCP asserted that its refusal to accept the tendered payment was justified because the lease-purchase agreement had already been rescinded as early as November 1986, rendering the consignation invalid.

• Voluntary Submission to Jurisdiction: Respondents countered that MPCP voluntarily submitted itself to the Sandiganbayan's jurisdiction by actively participating in the proceedings, coordinating with the PCGG, and arguing the merits of the urgent motion rather than solely contesting jurisdiction.
• Validity of Consignation: Respondents argued that the consignation was validly made because the PCGG, as sequestrator, had a duty to preserve and conserve the sequestered assets. Allowing the lease-purchase agreement to be cancelled due to non-payment would be unjust to PIMECO, which was deprived of control over its assets during sequestration.

• Jurisdiction: Whether the Sandiganbayan acquired jurisdiction over the person of MPCP despite it not being an original party to Civil Case No. 0024.
• Rescission and Consignation: Whether the lease-purchase agreement was validly rescinded, rendering MPCP's refusal of the tender of payment justified and the consignation invalid.

• Jurisdiction: Jurisdiction over MPCP was properly acquired by voluntary submission. By appearing in proceedings, actively coordinating with the PCGG, and arguing the merits of the urgent motion rather than limiting its appearance to the jurisdictional objection, MPCP impliedly prayed for affirmative relief. Active participation in the merits constitutes voluntary submission to the court's authority, barring a party from later impugning jurisdiction.
• Rescission and Consignation: The lease-purchase agreement was not rescinded, and the consignation was valid. The acceptance by MPCP and GSIS of payments from PIMECO between 1986 and 1990 negated the claim of rescission. Moreover, the arrears at the time of tender did not reach the threshold of three cumulative annual installments (P10,038,809.10). The valid consignation of P5,000,000.00 reduced the arrears below this threshold, precluding automatic cancellation. The PCGG's duty to preserve sequestered assets justified the tender and consignation to prevent the dissipation of PIMECO's rights.

• Voluntary Appearance / Submission to Jurisdiction — Jurisdiction over the person of the defendant in civil cases is acquired either by voluntary appearance in court and submission to its authority, or by service of summons. A party who enters a special appearance but proceeds to argue the merits of the case and seek affirmative relief voluntarily submits to the court's jurisdiction. Active participation in the proceedings invokes the court's jurisdiction and demonstrates a willingness to abide by the resolution of the case, thereby barring the party from later impugning the court's jurisdiction.
• Tender of Payment and Consignation — Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment, and it generally requires a prior tender of payment. Tender of payment is the antecedent of consignation, being an act preparatory to the solemnities of consignation. Validly made tender and consignation produce the effect of payment and extinguish the obligation. Under Article 1256 of the Civil Code, if the creditor refuses without just cause to accept the tender, the debtor is released from responsibility by the consignation of the sum due.

• "Although MPCP’s lawyer entered a special appearance in the present incident, he did not confine himself to assailing the jurisdiction of this Court over MPCP, but went to the extent of participating in the oral argument on the merits of the motion... it thereby impliedly prayed for affirmative relief in its favor. Under these circumstances, MPCP voluntarily submitted itself to the jurisdiction of the Court." — This passage articulates the rule that arguing the merits under a special appearance constitutes voluntary submission to jurisdiction.
• "When the PCGG sequestered the assets and records of PIMECO, including the lease-purchase agreement over MPCP’s meat packing plant, it assumed the duty to preserve and conserve those assets and documents while they remained in its possession and control." — This establishes the PCGG's duty to preserve sequestered assets, justifying its tender of payment to prevent the contract's rescission.

• Akbayan-Youth v. Comelec — Cited for the definition of grave abuse of discretion, which implies a capricious and whimsical exercise of judgment equivalent to lack of jurisdiction.
• Ascue v. Court of Appeals — Cited for the definition of consignation as the act of depositing the thing due with the court whenever the creditor refuses to accept payment.
• Ang Ping v. Court of Appeals — Cited for the rule that jurisdiction over the person of the defendant is acquired either by voluntary appearance or service of summons.
• Melendres, Jr. v. Comelec — Cited for the doctrine that active participation in proceedings bars a party from later impugning the court's jurisdiction.

• Article 1256, Civil Code — Provides that if the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due. Applied to hold that MPCP's refusal to accept the P5,000,000.00 tender was unjustified, and the subsequent consignation validly reduced the arrears below the rescission threshold.

Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Pardo, Buena, Gonzaga-Reyes, De Leon, Jr., Sandoval-Gutierrez, JJ.