Megan Sugar Corporation vs. Regional Trial Court of Iloilo, Branch 68, Dumangas, Iloilo

A party who actively participates in court proceedings, seeks affirmative relief, and clothes its counsel with apparent authority is estopped from later challenging the court's jurisdiction and the counsel's authority, especially when the party fails to timely repudiate the counsel's actions.

The case arises from a web of corporate takeovers and foreclosure proceedings involving a sugar mill in Iloilo. New Frontier Sugar Corporation (NFSC) defaulted on its loan from Equitable PCI Bank (EPCIB), leading to foreclosure. Central Iloilo Milling Corporation (CIMICO) took over NFSC's operations but later clashed with NFSC, resulting in litigation. MEGAN subsequently assumed CIMICO's rights, stepping directly into an ongoing legal battle over the possession and proceeds of the sugar mill.

• Original Filing: RTC of Dumangas, Iloilo, Branch 68, Civil Case No. 02-243 (CIMICO vs. NFSC, EPCIB, and PISA)
• Lower Court Decision: January 16, 2003 Order (directed MEGAN to deposit sugar quedans in escrow); February 19, 2003 Order (denied MEGAN's motion for reconsideration); February 28, 2003 Order (granted execution)
• Appeal: Petition for Certiorari to the CA (CA-G.R. SP No. 75789) questioning the RTC's jurisdiction and the counsel's authority
• SC Action: Petition for Review on Certiorari under Rule 45, assailing the CA's dismissal of the certiorari petition

• The Loans and Foreclosure: In 1993, NFSC obtained a loan from EPCIB secured by a real estate mortgage over 92 hectares of land and a chattel mortgage over its sugar mill. On May 10, 2002, due to NFSC's default, EPCIB extrajudicially foreclosed the property, bought it at public auction, and consolidated the titles. EPCIB hired Philippine Industrial Security Agency (PISA) to secure the property.
• CIMICO's Takeover and Suit: On November 17, 2000, NFSC and CIMICO entered into a Memorandum of Agreement (MOA) for CIMICO to operate the sugar factory (crop years 2000-2003). Disputes arose, leading CIMICO to file a case for sum of money and breach of contract against NFSC in the RTC (Civil Case No. 02-243). CIMICO impleaded PISA and EPCIB, securing a restraining order to prevent them from taking possession.
• MEGAN's Entry: On October 3, 2002, MEGAN entered into a MOA with CIMICO, assuming CIMICO's rights, interests, and obligations over the property. MEGAN started operating the sugar mill on November 18, 2002.
• Atty. Sabig's Appearance: On November 29, 2002, during the hearing on Passi Sugar's motion for intervention, Atty. Reuben Mikhail Sabig appeared for MEGAN. Opposing counsel objected since MEGAN was not a party, but Atty. Sabig affirmed his statements would bind MEGAN. He was accompanied by Jose Concha, MEGAN's director and general manager.
• The Assailed RTC Orders: Various parties filed motions to deposit mill shares in escrow. On January 16, 2003, the RTC ordered MEGAN to deposit sugar quedans representing the miller's share. Atty. Sabig filed an Omnibus Motion for Reconsideration and Clarification, which the RTC denied on February 19, 2003. On February 28, 2003, the RTC granted EPCIB's Urgent Ex-Parte Motion for Execution.
• Subsequent Actions by Atty. Sabig & MEGAN: Instead of repudiating Atty. Sabig, MEGAN received court pleadings at its own office and forwarded them to Atty. Sabig in Bacolod City. Atty. Sabig filed a Manifestation that MEGAN would deposit the quedans as ordered. He also filed Urgent Ex-Parte Motions (March 27 and April 2, 2003) asking the RTC to direct the Sugar Regulatory Administration (SRA) to release certain quedans, which the RTC granted. MEGAN's Plant Manager, Rene Imperial, even signed the April 2, 2003 RTC Order, agreeing to deliver 30% of the value of the released quedans.

• MEGAN's board of directors never issued a resolution authorizing Atty. Sabig to represent the corporation before the RTC; thus, Atty. Sabig was an unauthorized agent whose actions should not bind the corporation.
• Opposing counsels were aware of Atty. Sabig's lack of authority because he declared in court that he was only appearing voluntarily for the hearing on Passi Sugar's motion for intervention and was still in the process of taking over the case.
• The RTC lacked jurisdiction over MEGAN because MEGAN was not a party to the original case and Atty. Sabig lacked authority to submit MEGAN to the RTC's jurisdiction.

• MEGAN is estopped from assailing Atty. Sabig's authority because he actively participated in the proceedings and filed motions seeking affirmative relief.
• Concha, MEGAN's director and general manager, accompanied Atty. Sabig during hearings, clothing him with apparent authority.
• MEGAN received all motions, pleadings, and court orders at its office and forwarded them to Atty. Sabig, yet never repudiated his authority.

• Procedural Issues: Whether MEGAN is estopped from questioning the assailed RTC orders due to the acts of Atty. Sabig.
• Substantive Issues: Whether the RTC had jurisdiction to issue the Orders dated January 16, 2003, February 19, 2003, and February 28, 2003.

• Procedural: The SC held that MEGAN is estopped from assailing both Atty. Sabig's authority and the RTC's jurisdiction. Atty. Sabig was not a stranger to MEGAN, having represented them in other cases involving the same parties. MEGAN clothed Atty. Sabig with apparent authority by allowing Concha to accompany him and by receiving and forwarding court documents to him without objection. MEGAN's failure to timely repudiate Atty. Sabig after the first adverse order—coupled with Atty. Sabig seeking affirmative relief and MEGAN's plant manager signing an RTC order—bars MEGAN from later attacking the counsel's authority.
• Substantive: The SC held that MEGAN's challenge to the RTC's jurisdiction was a mere afterthought following an unfavorable ruling. Active participation in proceedings coupled with a failure to object to the court's jurisdiction equates to an invocation of that jurisdiction and a willingness to abide by the court's resolution. It is unjust and inequitable to allow a belated jurisdictional challenge after a party has sought and benefited from affirmative relief from the same court.

• Doctrine of Estoppel — Forbids a party from speaking against their own acts, representations, or commitments to the injury of someone who reasonably relied on them. The SC applied this because MEGAN's inaction, negligence in repudiating its counsel, and active compliance with the RTC's orders misled other parties into believing Atty. Sabig had authority and the RTC had jurisdiction.
• Apparent Authority / Doctrine of Ostensible Agency — Imposes liability not from an actual contractual relationship, but from the principal's actions that mislead the public into believing an agency relationship exists. The SC applied this because MEGAN's director accompanied Atty. Sabig, and MEGAN forwarded pleadings to him, creating the reasonable belief that Atty. Sabig was authorized, even without a board resolution.
• Estoppel to Challenge Jurisdiction — Active participation by a party against whom an action is brought, coupled with a failure to object to the court's jurisdiction, bars that party from later impugning the court's jurisdiction. The SC applied this because MEGAN actively sought affirmative relief from the RTC (release of quedans) and only challenged jurisdiction after receiving adverse orders.

• Rule 45, Rules of Court — Governs appeals by Petition for Review on Certiorari to the SC. MEGAN used this rule to elevate the CA's dismissal of its certiorari petition.
• Rule 65, Rules of Court — Governs Petitions for Certiorari. MEGAN originally filed a petition under this rule before the CA to question the RTC's jurisdiction, which the CA dismissed based on estoppel.