G.R. No. L-26990, August 31, 1970
VENANCIO LIM, SR., Plaintiff-Appellee, v. THE SECRETARY OF AGRICULTURE AND NATURAL RESOURCES, THE DIRECTOR OF LANDS, THE SUGAR QUOTA ADMINISTRATOR AND THE SUGAR QUOTA BOARD, Defendants-Appellants. BENITO ROCES, intervenor.

FACTS

On August 5, 1958, the Secretary of Agriculture and Natural Resources, on behalf of the Government, executed a five-year lease contract covering sugar plant marketing allotments of the Mindoro Mill District with Benito Roces. Barely three months later, Venancio Lim, Sr. applied to lease the same allotments for ten crop years beginning 1963-1964. On December 8, 1959, while Roces’ contract still had four years to run, an Acting Secretary executed a lease contract for the same allotments with Lim. On July 5, 1961, Secretary Cesar M. Fortich revoked Lim’s contract, finding its execution “improper, irregular and arbitrary” because it was premature, granted without notifying Roces, and done under suspicious circumstances. The order directed a refund to Lim and allowed Roces’ renewal request to proceed. Lim’s motions for reconsideration were denied by the Secretary. The decision was affirmed by the Executive Secretary, acting by authority of the President. Lim then filed an ordinary action before the Court of First Instance of Rizal, which ruled in his favor, holding the revocation violated due process and the constitutional non-impairment of contracts clause.

ISSUE

Whether the Secretary of Agriculture and Natural Resources committed a grave abuse of discretion in revoking the lease contract executed in favor of Venancio Lim, Sr.

RULING

No. The Supreme Court reversed the lower court’s decision. The revocation by the Secretary of Agriculture and Natural Resources did not constitute a grave abuse of discretion. The Court held that purely administrative and discretionary functions may not be interfered with by the courts absent a showing of grave abuse of discretion equivalent to a capricious, whimsical, arbitrary, or despotic exercise of judgment. The Secretary’s action was a valid exercise of his power to protect public interest, as the lease to Lim over allotments still covered by a subsisting contract with Roces was improper and irregular. The affirmance by the Executive Secretary, acting for the President, further fortified the validity of the administrative action. The constitutional non-impairment clause does not apply to contracts entered into by the government in its sovereign capacity where public welfare is involved. The government, as the lessor, retained the authority to annul a contract executed under questionable circumstances.