PRIMITIVO LEVERIZA, FE LEVERIZA, PARUNGAO & ANTONIO C. VASCO, PETITIONERS, VS. INTERMEDIATE APPELLATE COURT, MOBIL OIL PHILIPPINES & CIVIL AERONAUTICS ADMINISTRATION, RESPONDENTS.

Leveriza versus Intermediate Appellate Court

The Case

This is a petition for review on certiorari brought by the Leveriza heirs against the Intermediate Appellate Court, Mobil Oil Philippines, and the Civil Aeronautics Administration. The dispute is a three-cornered quarrel over one parcel of land at the Manila International Airport area, governed by three overlapping leases. Mobil Oil asked the trial court to rescind the Leveriza leases and declare its own direct lease with the aviation administration the only valid one. The case matters because it settles who may lawfully execute and cancel a lease of Republic property held by the Civil Aeronautics Administration, and it teaches the rule that a special law prevails over a general law.

Procedural History

Mobil Oil sued the Leveriza heirs and the Civil Aeronautics Administration in the trial court, seeking rescission or cancellation of the first and second leases. The trial court rendered judgment declaring the first lease validly cancelled as of June 28, 1966, the second lease extinguished with it, and the third lease valid and subsisting. It ordered the aviation administration to refund rentals to the Leverizas and the Leverizas to refund Mobil Oil, and dismissed the counterclaims and cross-claim. The Leverizas moved for a new trial, which was denied, and the aviation administration moved for reconsideration, which was likewise denied. On appeal, the Intermediate Appellate Court affirmed the trial court in full. The Leverizas then came to the Supreme Court by petition for review on certiorari.

Facts

On April 2, 1965, the Republic of the Philippines, represented by the Civil Aeronautics Administration, leased about 4,502 square meters at the airport area to Rosario C. Leveriza for twenty-five years, at a modest monthly rental, for the purpose of operating a gasoline station. This was Contract A. On May 23, 1965, Rosario Leveriza, as lessor, leased 3,000 square meters of that same land to Mobil Oil Philippines for twenty-five years. This was Contract B, in effect a sublease.

Rosario Leveriza entered into that sublease without the consent of the aviation administration. On June 28, 1966, the Airport General Manager, signing for the Director, wrote her a letter cancelling the lease for having sublet the property in violation of its stipulations. Later, on June 1, 1968, the aviation administration itself leased the same 3,000 square meters directly to Mobil Oil. This was Contract C, and it was not approved by the Secretary of Public Works and Communications.

Rosario Leveriza had since died, and her heirs were sued: her husband Primitivo Leveriza, her daughter Fe Leveriza Parungao, and her son Antonio C. Vasco. The parties disputed whether the cancellation was effective, whether the sublease needed prior consent, and whether the aviation administration could lease and cancel without departmental approval.

Issues

• Whether or not the Administrator of the Civil Aeronautics Administration had statutory authority to lease real property of the Republic without the approval of the Secretary of Public Works and Communications.
• Whether or not the Administrator had authority, without that approval, to cancel a lease contract that the Secretary had earlier approved.
• Whether or not the sublease to Mobil Oil was entered into without the consent of the aviation administration and therefore furnished a valid ground for cancelling the principal lease.

Applicable Provisions

Section 567 of the Revised Administrative Code provides:

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 officer duly designated by him, unless authority to execute the same is by law expressly vested in some other officer.

This is the general law, and its third category, an officer expressly vested by law, is the door through which the aviation administration enters.

Section 32, paragraph 24 of Republic Act 776 provides:

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: to enter into, make and execute contracts of any kind with any person, firm, or public or private corporation or entity; 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.

This special law expressly vests the leasing power in the Administrator, and the proviso requiring presidential approval covers only sales.

Paragraph 7 of Contract A provides:

The Party of the Second part may transfer her rights to the leased premises but in such eventuality, the consent of the Party of the First Part shall first be secured. In any event, such transfer of rights shall have to respect the terms and conditions of this agreement.

This clause required prior consent to any transfer of rights, which the sublease lacked.

Paragraph 8 of Contract A provides:

Failure on the part of the Party of the Second Part to comply with the terms and conditions herein agreed upon shall be sufficient for revocation of this contract by the Party of the First Part without need of judicial demand.

This clause supplied the contractual ground for cancellation without court action.

Ruling

On the first issue, the Court held that the Administrator may lease Republic property without departmental approval. Section 567 allows execution by an officer expressly vested by law, and Republic Act 776 expressly vests that power in the Administrator. The proviso requiring presidential approval speaks only of sales, and its absence from the other transactions shows no such approval is needed for leases. Being a special law, Republic Act 776 prevails over the general Administrative Code.

On the second issue, the Court held that the cancellation was valid. The terms of revocation were already written into Contract A, which the Department Head had approved, so implementing them required no further approval. The Airport General Manager signed for the Director, his act enjoyed the presumption of regularity, and the Director later ratified it. A later billing by the accounting department was a mere error of government personnel, which cannot prejudice public interest.

On the third issue, the Court held that the sublease was made without consent and was a valid ground for cancellation. Paragraph 7 spoke of a transfer of rights, not an assignment of the lease, and prior consent was required. Mobil Oil's mention in Contract A was not approval of a sublease but protection of the improvements for the administration.

Doctrine

A lease of Republic real property held by the Civil Aeronautics Administration may be executed by its Administrator without the approval of the Department Head, because Section 567 of the Revised Administrative Code permits execution by an officer expressly vested by law, and Republic Act 776 so vests it. General legislation must give way to special legislation on the same subject. Where a lease itself provides that violation of its terms is sufficient ground for revocation without judicial demand, cancellation under that clause needs no further departmental approval. Errors of government personnel do not defeat public interest.

Disposition

The petition was dismissed for lack of merit, and the decision of the appellate court was affirmed in full, leaving Contract C as the valid and subsisting lease.

Remember This

Memorize the line that the leasing power is expressly vested by law in the Administrator, so no departmental approval is required, and that the special law prevails over the general. Examiners use this case on statutory construction, on the powers of government instrumentalities over public property, and on the requisites of a valid sublease.