INOCENCIA DELUAO AND FELIPE DELUAO, PLAINTIFFS-APPELLEES, VS. NICANOR CASTEEL AND JUAN DEPRA, DEFENDANTS, NICANOR CASTEEL, DEFENDANT-APPELLANT.

Deluao versus Casteel

The Case

This is the case of Deluao versus Casteel. Inocencia Deluao and Felipe Deluao sued Nicanor Casteel and Juan Depra in the Court of First Instance of Davao, seeking to enforce what they called a contract of service over a fishpond of the public domain in Padada, Davao. The Deluaos asked the court to compel Casteel to honor an agreement dividing the fishpond between them. The case matters because it teaches the boundary between judicial and administrative power over public lands, and because it holds that a contract to divide a fishpond of the public domain is void when it conflicts with the fisheries laws and regulations. The Supreme Court decided the case on August 29, 1969, and later resolved the Deluaos' motion for reconsideration in the resolution reproduced here.

Procedural History

The Deluaos filed a complaint for specific performance and damages against Casteel and Depra in the Court of First Instance of Davao. The trial court ruled in favor of the Deluaos. Casteel appealed to the Supreme Court. On December 24, 1968, the Supreme Court rendered its decision. The Deluaos then filed a motion for reconsideration on February 8, 1969. The resolution before us addresses that motion, discussing the Deluaos' arguments one by one.

Facts

Nicanor Casteel applied for a fishpond permit over an area in Padada, Davao, covered by Fishpond Application Number 1717, with a total area of about 178.86 hectares. The area was the subject of administrative cases in the Department of Agriculture and Natural Resources, DANR Cases 353 and 353-B, where Casteel sought to be placed in possession. On September 15, 1950, the Secretary of Agriculture and Natural Resources decided both cases in favor of Casteel, awarding him the area. The decisions became final and executory, and the Secretary ordered their execution as early as August 4, 1955.

Meanwhile, the Deluaos entered into a contract of service with Casteel, marked as Exhibit A, which they claimed created a partnership or co-ownership over the fishpond and obliged Casteel to divide it into two equal parts. The Deluaos insisted that the agreement was merely an agreement to divide, and that its implementation depended on a favorable outcome in the pending DANR cases. When the Secretary ruled in Casteel's favor, the Deluaos claimed the condition was fulfilled and demanded that Casteel execute a formal transfer of one half of the fishpond and secure official approval.

Casteel refused. The Deluaos filed several protests, appeals, motions to intervene, and motions for reconsideration before the Commissioner of Fisheries and the DANR Secretary, all aimed at preventing execution of the 1950 decisions. These were denied. The Commissioner of Fisheries and the DANR Secretary both observed that the Deluaos' moves were intended to delay execution. The Deluaos then went to court, and the trial court ruled in their favor, prompting Casteel's appeal to the Supreme Court.

Issues

• Whether or not Fisheries Administrative Order 14, Section 37(a), which prohibits the transfer or sublease of a fishpond without prior approval of the Director of Fisheries, is a valid administrative regulation consistent with the Fisheries Act.
• Whether or not the prohibition applies even before a permit or lease has been issued to the applicant.
• Whether or not the contract of service between the Deluaos and Casteel is valid and enforceable, or void for being contrary to law and public policy.
• Whether or not the courts may compel Casteel to divide the fishpond in violation of the final decisions of the DANR Secretary.

Applicable Provisions

Section 63 of the Fisheries Act, Act Number 4003, provides:

Permits or leases entitling the holders thereof, for a certain stated period of time not to exceed twenty years, to enter upon definite tracts of a public forest land to be devoted exclusively for fishponds purposes, or to take certain fishery products or to construct fishponds within tidal, mangrove and other swamps, ponds and stream within public forest lands or proclaimed timber lands or established forest reserves, may be issued or executed by the Secretary of Agriculture and Natural Resources, subject to the restrictions and limitations imposed by the forest laws and regulations, to such persons, associations or corporations as are qualified to utilize or take forest products under Act Number Thirty-six hundred and seventy-four.

This provision limits the privilege of occupying and operating fishponds of the public domain to holders of permits or leases issued by the Secretary, which supports the validity of the administrative prohibition against unauthorized transfers.

Section 4 of the Fisheries Act, as discussed in the decision, authorizes the Secretary of Agriculture and Natural Resources to:

issue instructions, orders, rules and regulations consistent with this Act, as may be necessary to carry into effect the provisions thereof.

This is the source of authority for Fisheries Administrative Order 14, Section 37(a), which the Court upheld as a valid implementing regulation.

Ruling

On the first issue, the Court held that Fisheries Administrative Order 14, Section 37(a), is valid. Section 63 of the Fisheries Act grants the privilege of constructing, occupying, and operating fishponds within public land only to holders of permits and leases issued by the Secretary. A transferee or sublessee is not such a holder. The Court applied the maxim inclusio unius est exclusio alterius, meaning the inclusion of one thing excludes all others. Since the law allows only permit holders, the administrative order prohibiting transfers without approval merely carries out the legislative will. It is a valid regulation issued under Section 4 of the Fisheries Act.

On the second issue, the Court rejected the Deluaos' theory that the prohibition did not apply because no permit had yet been issued to Casteel. The Court called this a dangerous theory that invites promiscuous violation of the administrative order. Otherwise, a would-be permittee could simply transfer the fishpond before a permit is issued and then claim there was no violation. The Court held that the Secretary's decisions in DANR Cases 353 and 353-B approved Casteel's application and awarded him the area, and that the non-issuance of the permit was due to the Deluaos' own delaying tactics.

On the third issue, the Court held that the contract of service was void. A partnership cannot be formed for an illegal purpose or one contrary to public policy, and where the object of a partnership is the prosecution of an illegal business, the partnership is void. Since the contract was null and void, Casteel was not bound to execute a formal transfer of one half of the fishpond or to secure official approval.

On the fourth issue, the Court held that it could not require Casteel to divide the fishpond in violation of the final decisions of the DANR Secretary. Purely administrative and discretionary functions may not be interfered with by the courts. The Court declined to impose its judgment on the Secretary in a case where the Secretary was not even a party.

Doctrine

A contract whose object is the division or transfer of a fishpond of the public domain, in violation of the fisheries laws and regulations, is void for being contrary to law and public policy. A partnership formed for an illegal purpose is void, and no suspensive condition can make an illegal undertaking demandable. Administrative regulations issued to carry out the provisions of the Fisheries Act, such as the prohibition against unauthorized transfers of fishpond rights, are valid and binding. The privilege of occupying and operating fishponds of the public domain belongs only to holders of permits or leases issued by the Secretary of Agriculture and Natural Resources. Courts may not interfere with purely administrative and discretionary functions of the executive department.

Disposition

The Supreme Court denied the Deluaos' motion for reconsideration and upheld its earlier decision in favor of Casteel.

Remember This

The single line worth memorizing is that a contract to divide a fishpond of the public domain is void, and courts cannot compel the Secretary of Agriculture and Natural Resources to act contrary to final administrative decisions. Examiners use this case to test the validity of administrative regulations under the Fisheries Act and the doctrine of separation of powers over public lands.