PERCELINO DIAMANTE, PETITIONER, VS. HON. COURT OF APPEALS AND GERARDO DEYPALUBOS, RESPONDENTS.

Assailed in this petition for review is the Resolution of the respondent Court of Appeals
dated 21 March 1979 in C.A.-G.R. No.
SP-04866 setting aside its earlier decision therein, promulgated on 6 December
1978, which reversed the decision of the then Court of First Instance (now
Regional Trial Court) of Iloilo City. The latter nullified the Orders of the Secretary of the Department of
Agriculture and Natural Resources (DANR) dated 29 August 1969, 20 November 1969
and 21 April 1970, declared binding the Fishpond Lease Agreement (FLA) issued
to private respondent and disallowed petitioner from repurchasing from private
respondent a portion of the fishery lot located at Dumangas, Iloilo, covered by
the FLA.

The pleadings of the
parties and the decision of the
respondent Court disclose the factual antecedents of this case.

A fishery lot, encompassing an area of 9.4 hectares and
designated as Lot No. 518-A of the Cadastral Survey of Dumangas, Iloilo, was
previously covered by Fishpond Permit No. F-2021 issued in the name of Anecita
Dionio. Upon Anecita’s death, her
heirs, petitioner Diamante and Primitivo Dafeliz, inherited the property which
they later divided between themselves; petitioner got 4.4 hectares while
Dafeliz got 5 hectares. It is the
petitioner’s share that is the subject of the present controversy. Primitivo Dafeliz later sold his share to
private respondent.

On 21 May 1959, petitioner sold to private respondent his
leasehold rights over the property in question for P8,000.00 with the right to
repurchase the same within three (3) years from said date.

On 16 August 1960, private respondent filed an application with
the Bureau of Fisheries, dated 12 July 1960, for a fishpond permit and a
fishpond lease agreement over the entire lot, submitting therewith the deeds of
sale executed by Dafeliz and the petitioner.

Pressed by urgent financial needs, petitioner, on 17 October
1960, sold all his remaining rights over the property in question to the
private respondent for P4,000.00.

On 25 October 1960, private respondent, with his wife’s consent,
executed in favor of the petitioner an Option to Repurchase the property in question within ten (10) years from
said date, with a ten-year grace period.

Private respondent submitted to the Bureau of Fisheries the
definite deed of sale; he did not, however, submit the Option to Repurchase.

Thereafter, on 2 August 1961, the Bureau of Fisheries issued to
private respondent Fishpond Permit No. 4953-Q; on 17 December 1962, it approved
FLA No. 1372 in the latter’s favor.

On 11 December 1963, petitioner, contending that he has a valid
twenty-year option to repurchase the subject property, requested the Bureau of
Fisheries to nullify FLA No. 1372 insofar as the said property is
concerned. On 18 December 1964, his
letter-complaint was dismissed. Petitioner then sought a reconsideration of the dismissal; the same was
denied on 29 April 1965. His appeal to
the Secretary of the DANR was likewise dismissed on 30 October 1968. Again, on 20 November 1968, petitioner
sought for a reconsideration; this time, however, he was successful. On 29 August 1969, the DANR Secretary granted
his motion in an Order cancelling FLA No. 1372 and stating, inter alia, that:

“Evidently, the application as originally filed, could not be
favorably acted upon by reason of the existing right of a third party over a
portion thereof. It was only the
submission of the deed of absolute sale which could eliminate the stumbling
block to the approval of the transfer and the issuance of a permit or lease
agreement. It was on the basis of this
deed of sale, in fact, the one entitled ‘option to repurchase’ executed barely
a week from the execution of the deed of absolute sale, (which) reverted, in
effect, the status of the land in question to what it was after the execution
of the deed of sale with right to repurchase; that is, the land was again
placed under an encumbrance in favor of a third party. Circumstantially, there is a ground (sic) to
believe that the deed of absolute sale was executed merely with the end in view
of circumventing the requirements for the approval of the transfer of leasehold
rights of Diamante in favor of Deypalubos; and the subsequent execution of the
‘Option to Repurchase’ was made to
assure the maintenance of a vendor a retro’s rights in favor of Diamante. There was, therefore, a misrepresentation of
an essential or material fact committed by the lessee-appellee (Deypalubos) in
his application for the permit and the lease agreement, without which the same
could not have been issued.”^[1]

The Secretary based his action on Section 20 of Fisheries
Administrative Order No. 60, the second paragraph of which reads:

“Any and all of the statements made in the corresponding
application shall be considered as essential conditions and parts of the permit
or lease granted. Any false statements
in the application of facts or any alteration, change or modification of any or
all terms and conditions made therein shall ipso facto cause
the cancellation of the permit or lease.”

Private respondent moved for a reconsideration of this last Order
arguing that the DANR Secretary’s previous Order of 30 October 1968 dismissing
petitioner’s letter-complaint had already become final on the ground that he
(private respondent) was not served a copy of petitioner’s 20 November 1968
motion for reconsideration. On 20
November 1969, private respondent’s motion for reconsideration was denied; a
second motion for reconsideration was likewise denied on 20 April 1970.

On 5 May 1970, private respondent filed with the Court of First
Instance of Iloilo City a special civil action for certiorari with
preliminary injunction (docketed as Civil Case No. 8209), seeking to annul the
Secretary’s Orders of 20 April 1970, 20 November 1969 and 29 August 1969 on the
ground that the Secretary: (1) gravely
abused his discretion in not giving him the opportunity to be heard on the
question of whether or not the Option to Repurchase was forged; and (2) has no
jurisdiction to set aside FLA No. 1372 as the Order of the Bureau of Fisheries
dismissing petitioner’s 11 December 1963 letter-compliant had already become
final.

After issuing a temporary restraining order and a writ of
preliminary injunction, the lower court tried the case jointly with Criminal
Case No. 520 wherein both the petitioner and a certain Atty. Agustin Dioquino,
the Notary Public who notarized the 25 October 1960 Option to Repurchase, were
charged with falsification of a public document.

After due trial, the lower court acquitted the accused in the
criminal case and decided in favor of the private respondent in Civil Case No.
8209; the court ruled that: (1) the
DANR Secretary abused his discretion in issuing the questioned Orders, (2) petitioner cannot repurchase the
property in question as the Option to Repurchase is of doubtful validity, and
(3) FLA No. 1372 in the name of private respondent is valid and binding.

Petitioner appealed to the respondent Court which, on 6 December
1978, reversed the decision of the trial court^[2] on
the ground that no grave abuse of discretion was committed by respondent
Secretary inasmuch as private respondent was given the opportunity to be heard
on his claim that the Option to Repurchase is spurious, and that the trial
court merely indulged in conjectures in not upholding its validity. Said the respondent Court:

“With all the foregoing arguments appellee had exhaustively
adduced to show the spuriousness of the deed of ‘Option to Repurchase’,
appellee can hardly complain of not having been given an opportunity to be
heard, which is all that is necessary in relation to the requirement of notice
and hearing in administrative proceedings. Moreover, appellee never asked for a formal hearing at the first
opportunity that he had to do so, as when he filed his first motion for
reconsideration. He asked for a formal
hearing only in his second motion for reconsideration evidently as a mere
afterthought, upon realizing that his arguments were futile without proofs to
support them.

The only remaining question, therefore, is whether the Secretary
acted with grave abuse of discretion in giving weight to the alleged execution
by appellee of the deed of Option to Repurchase, on the basis of the xerox copy
of said deed as certified by the Notary Public, Agustin Dioquino.

With such documentary evidence duly certified by the Notary Public,
which is in effect an affirmation of the existence of the deed of ‘Option of
Repuchase’ (sic) and its due execution, the Secretary may not be said to have
gravely abused his discretion in giving the document enough evidentiary weight
to justify his action in applying the aforequoted provisions of Fisheries Adm.
Order No. 60. This piece of evidence
may be considered substantial enough to support the conclusion reached by the
respondent Secretary, which is all that is necessary to sustain an administrative
finding of fact (Ortua vs. Encarnacion, 59 Phil. 635; Ang Tibay vs. CIR, 69
Phil. 635; Ramos vs. The Sec. of Agriculture and Natural Resources, et al.
L-29097, Jan. 28, 1974, 55 SCRA 330). Reviewing courts do not re-examine the sufficiency of the evidence in an
administrative case, if originally instituted as such, nor are they authorized
to receive additional evidence that was not submitted to the administrative
agency concerned. For common sense
dictates that the question of whether the administrative agency abused its
discretion in weighing evidence should be resolved solely on the basis of the
proof that the administrative authorities had before them and no other
(Timbancaya vs. Vicente, L-19100, Dec. 27, 1963, 9 SCRA 852). In the instant case the evidence presented
for the first time before the court a quo could be considered
only for the criminal case heard jointly with this case.

The lower court’s action of acquitting the notary public, Agustin
Dioquino, and appellant Diamante in Criminal Case No. 520 for falsification of
public document is in itself a finding that the alleged forgery has not been
conclusively established. This finding
is quite correct considering the admission of the NBI handwriting expert that
he cannot make any finding on the question of whether appellee’s signature on
the deed of ‘Option to Repurchase’ is forged or not, because of the lack of
(sic) specimen signature of appellee for comparative examination. The Secretary may have such signature in the
application papers of appellee on file with the former’s office upon which to
satisfy himself of (sic) the
genuineness of appellee’s
signature. It would be strange, indeed,
that appellee had not provided the NBI expert with a specimen of his signature
when his purpose was to have an expert opinion that his signature on the
questioned document is forged.

On the other hand, as to the signature of his wife, the latter
herself admitted the same to be her own. Thus -?

‘Q
–   There is a signature below the
typewritten words ‘with my marital consent’ and above the name Edelina Duyo,
whose signature is this?

A –   That
is my signature. (T.s.n., Crim. Case
No. 520, April 5, 1971, p. 14).’

In not finding in favor of the perfect validity of the ‘Option to
Repurchase’, the court a quo merely indulged in conjectures. Thus, believing the testimony of appellee
that the latter (sic) could not have executed the deed of option to repurchase
after spending allegedly P12,000.00, and that if there was really a verbal
agreement upon the execution of the deed of absolute sale, as alleged by
appellant, that appellant’s right to repurchase, as was stipulated in the
earlier deed of sale, shall be preserved, such agreement should have been
embodied in the deed of sale of October 17, 1960 (Exh. D), the court doubted
the genuineness of the deed of Option to Repurchase (sic).

It is highly doubtful if appellee had spent P12,000.00 during the
period from October 17, 1960 to October 25, 1960 when the deed of option was
executed. Likewise, the right to
repurchase could not have been embodied in the deed of absolute sale since, as
the Secretary of DANR found, the purpose of the deed of absolute sale is to
circumvent the law and insure the approval of appellee’s application, as with
his right to the 4.4 hectares appearing to be subject to an encumbrance, his
application would not have been given favorable action.

Above all, the speculation and conjectures as indulged in by the
court a quo cannot outweigh the
probative effect of the document itself, a certified xerox copy thereof as
issued by the Notary Public, the non-presentation of the original having been
explained by its loss, as was the testimony of the same Notary Public, who
justly won acquittal when charged with falsification of public document at the
instance of appellee. The fact that the
spaces for the document number, page and book numbers were not filled up in the
photostatic copy presented by the representative of the Bureau of Records
Management does not militate against the genuineness of the document. It simply means that the copy sent to the
said Bureau happens to have those spaces unfilled up (sic). But the sending of a copy of the document to
the Bureau of Records Management attests strongly to the existence of such
document, the original of which was duly executed, complete with the aforesaid
data duly indicated thereon, as shown by the xerox copy certified true by the
Notary Public.

Indeed, in the absence of positive and convincing proof of forgery,
a public instrument executed with the intervention of a Notary Public must be
held in high respect and accorded full integrity, if only upon the presumption
of the regularity of official functions as is the nature of those of a notary
public (Bautista vs. Dy Bun Chin,
49 OG 179; El Hogar Filipino vs. Olviga, 60 Phil. 17).”

Subsequently, the respondent Court,
acting on private respondent’s motion for reconsideration, promulgated on 21
March 1979 the challenged Resolution^[3]
setting aside the earlier decision and affirmed, in toto, the
ruling of the trial court, thus:

“x x x the respondent (DANR) Secretary had gone beyond his
statutory authority and had clearly acted in abuse of discretion in giving due
weight to the alleged option to repurchase whose (sic) genuineness (sic) and
due execution had been impugned and denied by petitioner-appellee
(Deypalubos). While the certified true
copy of the option to repurchase may have been the basis of the respondent
Secretary in resolving the motion for reconsideration, the Court believes that
he should have first ordered the presentation of evidence to resolve this
factual issue considering the conflicting claims of the parties. As earlier pointed out, all that was
submitted to the Bureau of Fisheries and consequently to the respondent
Secretary, was a xerox copy of the questioned document which was certified to
by a notary public to be a copy of a deed found in his notarial file which did
not bear any specimen of the signatures of the contracting parties. And assuming that a certification made by a
notary public as to the existence of a document should be deemed an affirmation
that such document actually exists. Nevertheless, (sic) when such claim is impugned, the one who assails the
existence of a document should be afforded the opportunity to prove such claim,
because, at most, the presumption of regularity in the performance of official
duties is merely disputable and can be rebutted by convincing and positive
evidence to the contrary.”

His motion for reconsideration having been denied, the petitioner
filed the instant petition for review.

Petitioner contends that the Rules of Court should not be
strictly applied to administrative proceedings and that the findings of fact of
administrative bodies, absent a showing of arbitrariness, should be accorded
respect.

While the petition has merit, petitioner’s victory is hollow and
illusory for, as shall hereafter be shown, even as We reverse the assailed
resolution of the respondent Court of Appeals, the questioned decision of the
Secretary must, nevertheless, be set aside on the basis of an erroneous conclusion
of law with respect to the Option to Repurchase.

The respondent Court correctly held in its decision of 6 December
1978 that the respondent Secretary provided the private respondent sufficient
opportunity to question the authenticity of the Option to Repurchase and
committed no grave abuse of discretion in holding that the same was in fact
executed by private respondent. We thus
find no sufficient legal and factual moorings for respondent Court’s sudden turnabout
in its resolution of 21 March 1979. That private respondent and his wife executed the Option to Repurchase
in favor of petitioner on 25
October 1960 is beyond dispute. As
determined by the respondent Court in its decision of 6 December 1978, private
respondent’s wife, Edelina Duyo, admitted having affixed her signature to the
said document. Besides, the trial court
itself, in Criminal Case No. 520 which was jointly tried with the civil case,
acquitted both the petitioner and the notary public, before whom the Option to
Repurchase was acknowledged, of the crime of falsification of said document.

We hold, however, that the respondent Secretary gravely erred in
holding that private respondent’s non-disclosure and suppression of the fact that
4.4 hectares of the area subject of the application is burdened with or
encumbered by the Option to Repurchase constituted a falsehood or a
misrepresentation of an essential or material fact which, under the second
paragraph of Section 29 of Fisheries Administrative Order No. 60 earlier
quoted, “shall ipso facto cause the cancellation of the permit
or lease.” In short, the Secretary was of the opinion that the Option to
Repurchase was an encumbrance on the property which affected the absolute and
exclusive character of private respondent’s ownership over the 4.4 hectares
sold to him by petitioner. This is a
clear case of a misapplication of the law on conventional redemption and a
misunderstanding of the effects of a right to repurchase granted subsequently
in an instrument different from the original document of sale.

Article 1601 of the Civil Code provides:

“Conventional redemption shall take place when the vendor
reserves the right to repurchase the thing sold, with the obligation to comply
with the provisions of article 1616 and other stipulations which may have been
agreed upon.”

In Villarica, et al. vs. Court
of Appeals, et al.,^[4] decided on 29 November 1968, or
barely seven (7) days before the respondent Court promulgated its decision in
this case, this Court, interpreting the above Article, held:

“The right of repurchase is not a right granted the vendor by the
vendee in a subsequent instrument, but is a right reserved by the vendor in the
same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is
executed, the vendor can no longer reserve the right to repurchase, and any
right thereafter granted the vendor by the vendee in a separate instrument
cannot be a right of repurchase but some other right like the option to buy in
the instant case. x x x.”

In the earlier case of Ramos, et al. vs.
Icasiano, et al.,^[5]
decided in 1927, this Court had already ruled that “an agreement to
repurchase becomes a promise to sell when made after the sale, because when the
sale is made without such an agreement,
the purchaser acquires the thing sold absolutely, and if he afterwards
grants the vendor the right to repurchase, it is a new contract entered into by
the purchaser, as absolute owner already of the object. In that case the vendor has not reserved to
himself the right to repurchase.”

In Vda. de Cruzo, et al. vs. Carriaga, et al.,^[6]
this Court found another occasion to apply the foregoing principle.

Hence, the Option to Repurchase executed by private respondent in
the present case, was merely a promise to sell,
which must be governed by Article 1479 of the Civil Code which reads as
follows:

“ART. 1479. – A promise to buy and sell a determinate thing
for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the promise is
supported by a consideration distinct from the price.”

A copy of the so-called Option to Repurchase is neither attached
to the records nor quoted in any of the pleadings of the parties. This Court cannot, therefore, properly rule
on whether the promise was accepted and a consideration distinct from the
price, supports the option. Undoubtedly, in the absence of either or both acceptance and separate
consideration, the promise to sell is not binding upon the promissor (private
respondent).

“A unilateral promise to buy or sell is a mere offer, which is not
converted into a contract except at the moment it is accepted. Acceptance is the act that gives life to a
juridical obligation, because, before the promise is accepted, the promissor
may withdraw it at any time. Upon
acceptance, however, a bilateral contract to sell and to buy is created, and
the offeree ipso facto assumes the obligations of a
purchaser; the offeror, on the other hand, would be liable for damages if he
fails to deliver the thing he had offered for sale.

x x x

x x x  The contract of option
is a separate and distinct contract from the contract which the parties may
enter into upon the consummation of the option, and a consideration for an
optional contract is just as important as the consideration for any other kind
of contract. Thus, a distinction should
be drawn between the consideration for the option to repurchase, and the
consideration for the contract of
repurchase itself.”^[7]

Even if the promise was accepted, private respondent was not
bound thereby in the absence of a distinct consideration.^[8]

It may be true that the foregoing issues were not squarely raised
by the parties. Being, however,
intertwined with the issue of the correctness of the decision of the respondent
Secretary and, considering further that the determination of said issues is essential
and indispensable for the rendition of a just decision in this case, this Court
does not hesitate to rule on them.

In Hernandez vs. Andal,^[9]
this Court held:

“If the appellants’ assignment of error be not considered a
direct challenge to the decision of
the court below, we still believe that the objection takes a narrow view of
practice and procedure contrary to the liberal spirit which pervades the Rules
of Court. The first injunction of the
new Rules (Rule 1, section 2) is that they ‘shall be liberally construed in
order to promote their object and to assist the parties in obtaining just,
speedy, and inexpensive determination of every action and proceeding.’ In line
with the modern trends of procedure, we are told that, ‘while an assignment of
error which is required by law or rule of court has been held essential to
appellate review, and only those assigned will be considered, there are a
number of cases which appear to accord to the appellate court a broad
discretionary power to waive the lack of proper assignment of errors and
consider errors not assigned. And an
unassigned error closely related to an error properly assigned, or upon which
the determination of the question raised by the error properly assigned is
dependent, will be considered by the appellate court notwithstanding the
failure to assign it as error.’ (4 C.J.S., 1734; 3 C.J., 1341, footnote
77). At the least, the assignment of
error, viewed in this light, authorizes us to examine and pass upon the
decision of the court below.”

In Insular Life Assurance Co., Ltd.
Employees Association-NATU vs. Insular Life Assurance Co., Ltd.,^[10]
this Court ruled:

“x x x (t)he Supreme Court has ample authority to review and
resolve matters not assigned and specified as errors by either of the parties in
the appeal if it finds the consideration and determination of the same
essential and indispensable in order to arrive at a just decision in the case.^[11]
This Court, thus, has the authority to waive the lack of proper assignment of
errors if the unassigned errors closely relate to errors properly pinpointed
out or if the unassigned errors refer to matters upon which the determination
of the questions raised by the errors properly assigned depend.^[12]

The same also applies to issues not specifically raised by the
parties. The Supreme Court, likewise,
has broad discretionary powers, in the resolution of a controversy, to take
into consideration matters on record which the parties fail to submit to the
Court as specific questions for determination.^[13]
Where the issues already raised also rest on other issues not specifically
presented, as long as the latter issues bear relevance and close relation to
the former and as long as they arise from matters on record, the Court has the
authority to include them in its discussion of the controversy as well as to
pass upon them. In brief, in those
cases wherein questions not particularly raised by the parties surface as
necessary for the complete adjudication of the rights and obligations of the
parties and such questions fall within the issues already framed by the
parties, the interests of justice dictate that the Court consider and resolve
them.”

WHEREFORE, the instant petition is GRANTED. The Resolution of respondent Court of
Appeals of 21 March 1979 in C.A.-G.R. No. SP-04866 and the Decision of the
trial court in Civil Case No. 8209, insofar as they declare, for the reasons
therein given, Fishpond Lease Agreement No. 1372, valid and binding, are hereby
REVERSED and SET ASIDE. The challenged
Orders of the respondent Secretary of Agriculture and Natural Resources of 29
August 1969, 20 November 1969 and 21 April 1970 are likewise REVERSED and SET
ASIDE and Fishpond Lease Agreement No. 1372 is ordered REINSTATED.

No pronouncement as to costs.

IT IS SO
ORDERED.

Gutierrez, Jr., (Chairman), Feliciano, Bidin, and Romero, JJ.,
concur.

^[1]
Rollo, 31.

^[2]
Rollo, 27-38; penned by then Associate Justice Pacifico P. De Castro, concurred in by
Associate Justices Samuel F. Reyes and Carlos Sundiam.

^[3]
Rollo, 41-49; penned by Associate Justice Samuel F. Reyes, concurred in
by Associate Carlos Sundiam and Isidro C. Borromeo.

^[4]
26 SCRA 189.

^[5]
51 Phil. 343.

^[6]
174 SCRA 330.

^[7]
TOLENTINO, Civil Code of the Philippines
vol. V. 1959 ed. 20-21.

^[8]
Mendoza vs. Comple, 15 SCRA 162; Montilla vs. Court of Appeals,
et al., 161 SCRA 167.

^[9]
78 Phil. 196.

^[10]
76 SCRA 50; see also Philippine Commercial and Industrial Bank vs. Court
of Appeals, 159 SCRA 24.

^[11]
Citing Miguel and Miguel vs. Court of Appeals, et al., 29 SCRA 760.

^[12]
Citing Paterno, et al. vs. Jao Yan,
1 SCRA 631; Saura Import & Export Co., Inc. vs. Phil. International
Surety Co., Inc., et al., 8 SCRA 143.

^[13]
Citing Baquiran vs. Court of Appeals, et al., 2 SCRA 873.