LEVERIZA vs.
IAC (1988) - Declared Contract C as VALID and
FACTS
1. This case involves 3 contracts entered into by
different parties.
2. Contract A – a lease contract entered into
between CAA and Leveriza over a certain parcel
of land at the MIA area, consisting of
approximately 4,502 square meters, at a monthly
rental of P450.20, for a period of 25 years
3. Contract B – a lease agreement (in effect a
sublease) executed between Leveriza and Mobil
Oil over over 3,000 square meters of that SAME
Parcel of land subject of Contract A above
mentioned, at a
monthly rental of P1,500.00, for a period of 25
years
4. Contract C – a lease agreement executed
between CAA and Mobil Oil over that SAME
parcel of land containing an area of 3,000 square
meters more or less, at a monthly rental of P.25
per square meter for the second 200 square
meters, and P.20 per square meter for the rest,
for a period of 29 years.
5. It appears that defendant CAA, as lessor, leased
the same parcel of land, for durations of time that
overlapped to two lessees.
6. Plaintiff (Mobil Oil) seeks the rescission or
cancellation of Contract A and Contract B on the
ground that Contract A from which Contract B is
derived and depends has already been cancelled
by the defendant Civil Aeronautics Administration
and maintains that Contract C with the defendant
CAA is the only valid and subsisting contract
insofar as the parcel of land, subject to the
present litigation is concerned.
7. On the other hand, defendants Leverizas' claim
that Contract A which is their contract with CAA
has never been legally cancelled and still valid
and subsisting; that it is Contract C between
plaintiff and defendant CAA which should be
declared void.
8. Defendant CAA asserts that Contract A is still
valid and subsisting because its cancellation by
Guillermo Jurado, the Airport General Manager,
was ineffective and asks the court to annul
Contract A because of the violation committed by
defendant Leveriza in leasing the parcel of land
to plaintiff by virtue of Contract B without the
consent of defendant CAA. Defendant CAA
further asserts that Contract C not having been
approved by the Director of Public Works and
Communications is not valid.
RTC RULING:
- Declared Contract A as having been
validly CANCELLED
- Declared Contract B has likewise
CEASED to have any effect
SUBSISTING
- Ordered defendant CAA to refund to
defendants Leverizas the amount of
P32,189.30 with 6% per annum until fully
paid
9. Defendant Leveriza filed a motion for new trial
on the ground of newly discovered evidence,
lack of jurisdiction of the court over the case and
lack of evidentiary support of the decision which
was denied by the Court.
10. The CAA filed a Motion for Reconsideration,
averring that because the lot lease was properly
registered in the name of the Republic of the
Philippines, it was only the President of the
Philippines or an oEcer duly designated by him
who could execute the lease contract pursuant to
Sec. 567 of the Revised Administrative Code;
that the Airport General Manager has no
authority to cancel Contract A, the contract
entered into between the CAA and Leveriza, and
that Contract C between the CAA and Mobil void
for not having been approved by the Secretary of
Public Works and Communications.
11. Said motion was however denied.
CA RULING:
On appeal, the IAC find no reversible error in the
decision of the lower court and hereby affirmed the
decision in toto. Hence, this petition.
ISSUES
1. Whether the administrator of CAA had statutory
authority to lease, even without approval of the
then Sec of Public Works and Communications,
real property belonging to the RP.
2. Whether the administrator of CAA had statutory
authority, even without approval of then Sec of
Public Works and Comm, to cancel a lease
contract over real property owned by RP which
contract was approved, as required by law, by
the Sec.
SC RULING:
The petition is DISMISSED for lack of merit and the
decision of the Court of Appeals appealed from is
AFFIRMED in toto.
1. YES
The petitioners anchored their claim by citing
Sections 567 ad 586 of the Revised Administrative
Code (general law), and contended that the
administrator of CAA cannot execute without approval
of the Department Secretary, a valid contract of lease
over real property owned by the Republic of the
Philippines.
 SEC. 567. Authority of the President of the
Philippines to execute contracts relative to real
property. — When the Republic of the Philippines is
party to a deed conveying the title to real property or
is party to any lease or other contract relating to real
property belonging to said government, said deed or
contract shall be executed on behalf of said
government by the President of the Philippines or by
an oEcer duly designated by him, unless authority to
execute the same is by law expressly vested in some
other officer.
SEC. 568. Authority of national officials to
make contract. — Written contracts not within the
purview of the preceding section shall, in the absence
of special provision, be executed, with the approval of
the proper Department Head, by the Chief of the
Bureau or OEce having control of the appropriation
against which the contract would create a charge; or if
there is no such chief, by the proper Department Head
himself or the President of the Philippines as the case
may require.
On the other hand, respondent CAA avers that the
CAA Administrator has the authority to lease real
property belonging to the Republic of the Philippines
under its administration even without the approval of
the Secretary of Public Works and Communications,
which authority is expressly vested in it by law, more
particularly Section 32 (24) of Republic Act 776,
which reads:
Sec. 32. Powers and Duties of the
Administrator. — Subject to the general control and
supervision of the Department Head, the
Administrator shall have, among others, the following
powers and duties:
xxx xxx xxx
(24) To administer, operate, manage, control,
maintain and develop the Manila International Airport
and all government aerodromes except those
controlled or operated by the Armed Forces of the
Philippines including such power and duties as: . . .
(b) to enter into, make and execute contracts of any
kind with any person, firm, or public or private
corporation or entity; (c) to acquire, hold, purchase, or
lease any personal or real property, right of ways, and
easements which may be proper or necessary:
Provided, that no real property thus acquired and any
other real property of the Civil Aeronautics
Administration shall be sold without the approval of
the President of the Philippines.
There is no dispute that the Revised Administrative
Code is a general law while Republic Act 776 is a
special law nor in the fact that the real property
subject of the lease in Contract "C" is real property
belonging to the Republic of the Philippines.
Under 567 of the Revised Administrative Code, such
contract of lease must be executed:
(1) by the President of the Philippines; or
(2) by an officer duly designated by him; or
(3) by an officer expressly vested by law.
It is readily apparent that in the case at bar, the Civil
Aeronautics Administration has the authority to enter
into Contracts of Lease for the government under the
third category.
Thus, as correctly ruled by the Court of Appeals, the
Civil Aeronautics Administration has the power to
execute the deed or contract involving leases of real
properties belonging to the Republic of the
Philippines, not because it is an entity duly designated
by the President but because the said authority to
execute the same is, by law expressly vested in it.
Under the above-cited Section 32 (par. 24) of
Republic Act 776, the Administrator (Director) of the
Civil Aeronautics Administration by reason of its
creation and existence, administers properties
belonging to the Republic of the Philippines and it is
on these properties that the Administrator must
exercise his vast power and discharge his duty to
enter into, make and execute contract of any kind with
any person, firm, or public or private corporation or
entity and to acquire, hold, purchase, or lease any
personal or real property, right of ways and
easements which may be proper or necessary.
The exception, however, is the sale of properties
acquired by CAA or any other real properties of the
same which must have the approval of the President
of the Philippines.
SPECIFIC STATUTE PREVAILS OVER A GENERAL
STATUTE
2. YES
Leverizas and the CAA assailed the validity of such
cancellation, claiming that the Airport General
Manager had no legal authority to make the
cancellation. They maintain that it is only the
Secretary of Public Works and Communications,
acting for the President, or by delegation of power, the
Director of Civil Aeronautics Administration who could
validly cancel the contract. They do admit, however,
and it is evident from the records that the Airport
General Manager signed "For the Director."
Under the circumstances, there is no question that
such act enjoys the presumption of regularity, not to
mention the unassailable fact that such act
wassubsequently affirmed or ratified by the Director of
the CAA himself.
Petitioners argue that cancelling or setting aside a
contract approved by the Secretary is, in effect,
repealing an act of the Secretary which is beyond the
authority of the Administrator.
Such argument is untenable. The terms and
conditions under which such revocation or
cancellation may be made, have already been
specifically provided for in Contract "A" which has
already been approved by the Department Head. It is
evident that in the implementation of aforesaid
contract, the approval of said Department Head is no
longer necessary if not redundant.
It is further contended that even granting that such
cancellation was effective, a subsequent billing by the
Accounting Department of the CAA has in effect
waived or nullified the rescission of Contract "A."
It will be recalled that the questioned cancellation of
Contract "A" was among others, mainly based on the
violation of its terms and conditions, specifically,
thesublease of the property by the lessee without the
consent of the lessor.
The billing of the petitioners by the Accounting
Department of the CAA if indeed it transpired, after
the cancellation of Contract "A" is obviously an error.
However, this Court has already ruled that the
mistakes of government personnel should not affect
public interest.
In San Mauricio Mining Company v. Ancheta (105
SCRA 391, 422), it has been held that as a matter of
law rooted in the protection of public interest, and also
as a general policy to protect the government and the
people, errors of government personnel in the
performance of their duties should never deprive the
people of the right to rectify such error and recover
what might be lost or be bartered away in any
actuation, deal or transaction concerned.
In the case at bar, the lower court in itsdecision which
has been affirmed by the Court of Appeals, ordered
the CAA to refund tothe petitioners the amount of
rentals which was not due from them with 6% interest
perannum until fully paid.
SEC OF DOTC vs. MABALOT (2002)
FACTS
1. DOTC Sec Garcia issued Memo Order No. 96-735
which directed Land Transportation Franchising
Regulatory Board (LTFRB) Chairman Dante Lantin to
effect the transfer of regional functions of that office to
the DOTC-CAR Regional Office pending the creation
of a regular Regional Franchising and Regulatory
Office pursuant to Section 17 of Executive Order No.
202.
2. Relative thereto, respondent Roberto Mabalot filed a
petition for certiorari and prohibition with prayer for
preliminary injunction before the Regional Trial Court
(RTC) of Quezon City, praying that Memorandum
Order No. 90-735 be declared illegal and without
effect.
3. The trial court issued a writ of preliminary injunction.
4. Thereafter, Secretary Amado Lagdameo, Jr. issued
Department Order No. 97-1025 creating the DOTC-
CAR Regional Office as the regional office of the
LTFRB.
5. Respondent Mabalot included the regional office in his
Supplemental Petition.
6. After trial, the lower court declared Memorandum
Order No. 96-735 and Department Order No. 97-1025
as null and void and without any legal effect.
7. In this petition, respondent Mabalot principally argued
that "a transfer of the powers and functions of the
LTFRB Regional Office to the DOTC Regional Office
or the establishment of the latter as LTFRB Regional
Office is unconstitutional for being an undue exercise
of legislative power.”
ISSUE
Whether such administrative issuances by the DOTC
Sec were valid.
SC RULING
YES. The instant petition is hereby
GRANTED. The decision of the RTC in the Special
Action case is REVERESED AND SET ASIDE.
Mabalot argued that:
"a transfer of the powers and functions of the LTFRB
Regional Office to a DOTC Regional Office or the
establishment of the latter as an LTFRB Regional
Office is unconstitutional" for being "an undue
exercise of legislative power."
The Court does NOT agree.
Accordingly, in the absence of any patent or latent
constitutional or statutory infirmity attending the
issuance of the challenged orders, this Court upholds
Memorandum Order No. 96-735 and Department
Order No. 97-1025 as legal and valid administrative
issuances by the DOTC Secretary. Contrary to the
opinion of the lower court, the President — through
his duly constituted political agent and alter ego,
the DOTC Secretary in the present case — may
legally and validly decree the reorganization of the
Department, particularly the establishment of
DOTC-CAR as the LTFRB Regional Office at the
Cordillera Administrative Region, with the
concomitant transfer and performance of public
functions and responsibilities appurtenant to a
regional office of the LTFRB.
In Admin Law, a public office may be created through
any of the following modes:
1. by the Constitution (fundamental law); or
2. by law (statute duly enacted by Congress);
or
3. by authority of law
Verily, Congress can delegate the power to create
positions. This has been settled by decisions of the
Court upholding the validity of reorganization
statutes authorizing the President to create,
abolish or merge offices in the executive
department. Thus, at various times, Congress has
vested power in the President to reorganize executive
agencies and redistribute functions, and particular
transfers under such statutes have been held to be
within the authority of the President.
Verily, Congress can delegate the power to create
positions. This has been settled by decisions of the
Court upholding the validity of reorganization statutes
authorizing the President to create, abolish or merge
offices in the executive department. Thus, at various
times, Congress has vested power in the President to
reorganize executive agencies and redistribute
functions, and particular transfers under such statutes
have been held to be within the authority of the
President.
In the instant case, the creation and establishment of
LTFRB-CAR Regional Office was made pursuant to
the third mode — by authority of law, which could
be decreed for instance, through an Executive Order
(E.O.) issued by the President or an order of an
administrative agency such as the Civil Service
Commission 8 pursuant to Section 17, Book V of E.O.
292, otherwise known as The Administrative Code of
1987. In the case before us, the DOTC Secretary
issued the assailed Memorandum and Department
Orders pursuant to Administrative Order No. 36 of the
President, 9 dated 23 September 1987,
Section 1 of which explicitly provides:
Section 1. Establishment of Regional Offices in
the CAR — Thevarious departments and other
agencies of the National Government that are
currently authorized to maintain regional offices are
hereby directed to establish forthwith their respective
regional offices in the Cordillera Administrative Region
with territorial coverage as defined under Section 2 of
Executive Order No. 220 dated July 15, 1987, with
regional headquarters at Baguio City.
The President, through Administrative Order No. 36,
did not merely authorize but directed, in no
uncertain terms, the various departments and
agencies of government to immediately undertake
the creation and establishment of their regional
offices in the CAR.
Administrative Order No. 36 is a clear and
unequivocal directive and mandate — no less than
from the Chief Executive — ordering the heads of
government departments and bureaus to effect the
establishment of their respective regional offices in
the CAR.
Simply stated, it is as if the President himself carried
out the creation and establishment of LTFRB-CAR
Regional Office, when in fact, the DOTC Secretary, as
alter ego of the President, directly and merely sought
to implement the Chief Executive's Administrative
Order.
Section 17, Article VII of the Constitution mandates:
"The President shall have control of all executive
departments, bureaus and offices. He shall
ensure that the laws be faithfully executed."
CONTROL - the power of an officer to alter or
modify or nullify or set aside what a subordinate
officer had done in the performance of his duties
and to substitute the judgment of the former for that
of the latter; includes the authority to order the
doing of an act by a subordinate or to undo such
act or to assume a power directly vested in him by
law.
The members of the Cabinet are subject at all times
to the disposition of the President since they are
merely his alter ego.
Villena vs. Sec of Interior: "without minimizing the
importance of the heads of various departments,
their personality is in reality but the projection of
that of the President." Thus, their acts, "performed
and promulgated in the regular course of business,
are, unless disapproved or reprobated by the Chief
Executive, presumptively the acts of the Chief
Executive."
Larin vs. Executive Secretary: inked an extensive
disquisition on the continuing authority of the
President to reorganize the National Government,
which power includes the creation, alteration or
abolition of public offices.
In the said case, the Court held that Section 62 of
Republic Act 7645 (General Appropriations Act
[G.A.A.] for FY 1993) "evidently shows that the
President is authorized to effect organizational BANDA vs. ERMITA
changes including the creation of offices in
thedepartment or agency concerned” –
PRESUMPTION OF REGULARITY APPLIED

Relevant Laws applied:

- R.A. 8174 (G.A.A for FY 1996) contains similar

provisions as embodied in Section 72 (General
Provisions) of said law entitled "Organizational
Changes" and Section 73 (General Provisions)
thereof entitled "Implementation of
Reorganization."
- R.A. 8250 (G.A.A. for FY 1997) has Section 76
(General Provisions) entitled "Organizational
Changes" and Section 77 (General Provisions)
entitled "Implementation of Reorganization."
- Sec 20 of Admin Code provides a strong legal
basis for the Chief Executive's authority to
reorganize the National Government
- PD 1416 as amended by PS 1772 (pls read kay
taas kaayo)

In fine, the "designation" and subsequent

establishment of DOTC-CAR as the Regional
Office of LTFRB in the Cordillera Administrative
Region and the concomitant exercise and
performance of functions by the former as the
LTFRB-CAR Regional Office fall within the scope of
the continuing authority of the President to
effectively reorganize the Department of
Transportation and Communications.

Purpose of the Organization:

- The reorganization in the instant case was

decreed "in the interest of the service" and "for
purposes of economy and more effective
coordination of the DOTC functions in the Cordillera
Administrative Region."

In this jurisdiction, reorganization is regarded as

valid provided it is pursued in good faith. As a
general rule, a reorganization is carried out in good
faith if it is for the purpose of economy or to make
bureaucracy more efficient. the reorganization
pursued in the case at bar bears the earmark of
good faith. As petitioner points out, "tapping the
DOTC-CAR pending the eventual creation of the
LTFRB Regional Office is economical in terms of
manpower and resource requirements, thus,
reducing expenses from the limited resource of the
government."