La'O v. Republic
REITERATIONFacts
The Antecedents: The Government Service Insurance System (GSIS) was the registered owner of a property in Ermita, Manila. On June 22, 1978, GSIS entered into a lease-purchase agreement with the Republic of the Philippines (through the Office of the Government Corporate Counsel - OGCC) for P1.5 million. On May 10, 1982, GSIS executed a second lease-purchase agreement with petitioner Emilio Gonzales La’O for the same property, this time for P2,000,000, payable in 15 years with 12% interest. This second contract obligated GSIS to construct a building for the OGCC or provide another acceptable property, and allowed the OGCC to continue occupying the premises for an annual rental of P100,000 payable to petitioner. Petitioner also had the right to lease out the ground floor. The second contract was allegedly approved by then President Ferdinand E. Marcos on April 11, 1982, and by the GSIS Board of Trustees on April 23, 1982. Procedural History: In 1989, the Republic and GSIS filed a complaint against petitioner, alleging that the second contract was executed due to petitioner's machinations and President Marcos's orders, making it burdensome and grossly disadvantageous to the government. They sought the nullification of the contract, forfeiture of petitioner's payments, and payment for his occupancy and rentals received. The Regional Trial Court (RTC) ruled in favor of the respondents, declaring the May 10, 1982 agreement null and void and ordering the forfeiture of payments and rentals. The Court of Appeals (CA) affirmed the RTC decision in toto. The Petition: Petitioner seeks to reverse the CA decision, primarily questioning the validity of the second contract. He also raised the issue of jurisdiction for the first time before the Supreme Court, arguing that the Sandiganbayan, not the RTC, should have handled the case.
Issue(s)
Whether the Supreme Court has jurisdiction over the case, considering the issue of jurisdiction was raised for the first time on appeal. Whether the second lease-purchase agreement between GSIS and petitioner is valid or null and void.
Ruling
The petition is denied, and the decision of the Court of Appeals affirming the RTC's declaration of the May 10, 1982 lease-purchase agreement as null and void is affirmed.
Ratio Decidendi
On the issue of jurisdiction: The Court ruled that petitioner is estopped from questioning the jurisdiction of the lower courts. Having voluntarily submitted to the jurisdiction of the RTC and the CA and only raising the issue of jurisdiction after an adverse decision on the merits, it is improper and too late for him to deny the jurisdiction of the courts below. A party who invokes the jurisdiction of a court to secure affirmative relief cannot later deny that same jurisdiction to escape liability. Therefore, the petitioner's contention regarding jurisdiction lacks merit. On the validity of the second contract: The Court affirmed the findings of the CA and RTC that the second contract was null and void ab initio. This was based on the determination that the contract contravened Sections 3(e) and (g) of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act). Both lower courts found that the contract gave petitioner unwarranted benefits and was grossly disadvantageous to the government. The CA's disquisition highlighted that under the first contract, the Republic, through OGCC, enjoyed economic benefits, including liquidating its yearly amortization from rental income and eventually becoming the absolute owner. In contrast, the second contract transferred these economic benefits to petitioner, required the Republic to appropriate additional funds for rentals, and stripped it of the opportunity to own the property. Furthermore, the consideration of P2,000,000 was significantly lower than the property's appraised values in 1982, which ranged from P5,575,000 to P8,005,500. The obligation of GSIS to construct another building for OGCC also imposed an additional economic burden on the government. Consequently, the contract was deemed unlawful and void from the beginning under Article 1409(7) of the Civil Code.
Main Doctrine
A contract that is grossly disadvantageous to the government and gives unwarranted benefits to a private party is null and void ab initio for being in contravention of Republic Act No. 3019, the Anti-Graft and Corrupt Practices Act.