G.R. No. 66614 - Leveriza vs. Intermediate Appellate Court

Case Summary (G.R. No. 66614)

Overview of Lease Contracts and Disputed Land

Three contracts of lease pertain to the same parcel of land at Manila International Airport, leased originally by the Republic of the Philippines through the Civil Aeronautics Administration (CAA):

Contract A (April 2, 1965): Lease between CAA (lessor) and Rosario C. Leveriza (lessee) covering 4,502 sqm for 25 years.
Contract B (May 23, 1965): Sublease by Rosario C. Leveriza (lessor) to Mobil Oil Philippines, Inc. (lessee) over 3,000 sqm of Contract A’s leased land for 25 years.
Contract C (June 1, 1968): Lease by CAA directly to Mobil Oil for 3,000 sqm for 25 years.

The fundamental legal issue arises because Mobil Oil leased the land from both CAA and Leveriza, while Leveriza’s lease from CAA (Contract A) allegedly was canceled due to the unauthorized sublease (Contract B).

Positions of the Parties

Plaintiff (Mobil Oil Philippines): Sought cancellation of Contracts A and B, claiming Contract A was canceled by CAA and Contract C is the valid existing lease.
Defendants Leveriza and Heirs: Argued Contract A was never legally canceled and remains valid, thus Contract C is void.
CAA: Maintains Contract A’s cancellation was ineffective without Department Secretary approval; however, Contract B breached Contract A by subleasing without consent. Also challenged the validity of Contract C on procedural grounds.

Trial Court Ruling and Intermediate Appellate Court Affirmation

The trial court declared:

Contract A was validly canceled June 28, 1966; hence, Contract B also ceased effect.
Contract C was validly executed June 1, 1968, and remains subsisting.
Ordered refunds to Leverizas and Mobil Oil due to rental payments.
Denied all counterclaims and cross-claims.

The Intermediate Appellate Court affirmed this decision in toto, finding no reversible error.

Issues on Statutory Authority to Execute and Cancel Lease Contracts

Petitioners argued:

Section 567 and 568 of the Revised Administrative Code require the President or a duly designated officer’s approval for contracts involving government real property, thus the CAA Administrator lacked authority to enter or cancel leases without the Secretary of Public Works and Communications’ approval.
Cancellation executed by the Airport General Manager was unauthorized.
Contract B was a valid sublease and did not require CAA’s prior consent since prohibition must be express under Civil Code provisions.

Respondents contended:

Under Section 32(24) of Republic Act 776, the CAA Administrator has express authority to enter into contracts for airports without needing Department Secretary approval.
The contract cancellation by the Airport General Manager, ratified by the CAA Director, was valid.
Sublease without lessor’s consent violated Contract A’s clear provisions requiring prior approval for “transfer of rights,” making Contract B void.

Analysis on Contract Cancellation Validity

Contract A explicitly required written lessor consent for any “transfer of rights,” which includes subleasing, under paragraph 7. Violation of this condition justified cancellation under paragraph 8 without judicial demand. The execution of Contract B without consent justified cancellation by CAA as lessor.

Cancellation letter signed by Airport General Manager “for the Director” carried presumption of regularity and effective ratification by CAA Director. Thus, Petitioners’ claim challenging the cancellation authority of the Airport General Manager was rejected.

Errors by government accounting in continued billing after cancellation were deemed immaterial because government errors do not legalize invalid transactions, consistent with public interest jurisprudence.

Interpretation of Sublease and Contractual Terms

The Court rejected Petitioners’ contention that Contract B was a mere sublease not requiring consent. The text of Contract A requires consent for transfer of rights to the leased premises, which includes subleasing and was thus not a mere assignment under Civil Code Articles 1649 and 1650.

The presence of Mobil Oil in Contract A was a condition guarding ownership of improvements, not an approval of subleasing rights.

Clear and plain language of contracts demanded strict adherence, leaving no room for alternative interpretation.

Authority of CAA Administrator under Special Law Supersedes General Code

While Sections 567 and 568 of the Revised Administrative Code provide general rules on government contracts over real property requiring presidential or departmental officer approval, Republic Act 776 specifically grants CAA Administrator authority to enter into contracts relating to government properties they administer without such prior approval.

The principle that special laws govern over general laws, especially where special provisions directly apply, was upheld to validate CAA Administrator’s authority to execute Contract C without Secretary of Public Works and Communications’ approval.

Final Ruling and Effect of Decision

The Supreme Court dismissed the Petition for Review for lack of merit, affirming the Court of Appeals decision. It confirmed the validity of the cancellation of Contracts A and B based on the breach of contractual terms and uphel

Case Syllabus (G.R. No. 66614)

Facts of the Case

The dispute arose from three leases contracts involving the same parcel of land situated in the Manila International Airport (MIA) area.
Contract A: Executed on April 2, 1965, between the Republic of the Philippines represented by the Civil Aeronautics Administration (CAA) as lessor, and Rosario C. Leveriza as lessee, covering approximately 4,502 square meters for 25 years at a monthly rental of ₱450.20.
Contract B: Executed on May 23, 1965, between Rosario C. Leveriza as lessor and Mobil Oil Philippines, Inc. as lessee, covering 3,000 square meters of the same parcel, effectively a sublease, for 25 years at ₱1,500 monthly rent.
Contract C: Executed on June 1, 1968, between CAA as lessor and Mobil Oil Philippines, Inc. as lessee, leasing the same 3,000 square meters for approximately 29 years with rents calculated per square meter.
The principal issue is the overlapping and conflicting leases where CAA leased the property to Leveriza, who in turn subleased a portion to Mobil Oil, and later, CAA directly leased to Mobil Oil.
Rosario C. Leveriza had died, and her heirs—Primitivo Leveriza, Fe Leveriza Parungao, and Antonio C. Vasco—were substituted as defendants.
Plaintiff Mobil Oil Philippines sought rescission of Contracts A and B, asserting cancellation of Contract A by CAA, and maintained that only Contract C was valid and subsisting.
Defendants Leveriza claimed Contract A was not legally cancelled and remained valid, and that Contract C was void.
CAA took an intermediate stance, asserting Contract A’s cancellation was ineffective without Department Head approval but claimed Contract B violated Contract A's prohibition on subleasing without consent.
CAA further claimed Contract C was invalid due to lacking approval by the Secretary of Public Works and Communications.

Trial Court Decision

Rendered on April 6, 1976, the trial court:
- Declared Contract A validly cancelled as of June 28, 1966.
- Declared Contract B also ceased due to cancellation of Contract A.
- Held Contract C valid and subsisting.
- Ordered CAA to refund defendants Leveriza ₱32,189.30 plus 6% interest until fully paid.
- Ordered defendants Leveriza to refund Mobil Oil ₱48,000 plus 6% interest until fully paid.
- Dismissed all counterclaims and cross-claims among parties.
Motions for new trial and reconsideration filed by defendants and CAA respectively were denied.

Intermediate Appellate Court Ruling

On February 29, 1984, the Intermediate Appellate Court affirmed the trial court’s decision in