G.R. No. L-51824 February 7, 1992
PERCELINO DIAMANTE, petitioner, vs. HON. COURT OF APPEALS and GERARDO DEYPALUBUS, respondents.

FACTS

The case involves a 4.4-hectare portion of a fishery lot in Dumangas, Iloilo. Petitioner Percelino Diamante initially sold his leasehold rights over the property to private respondent Gerardo Deypalubus with a right to repurchase within three years. Later, due to financial need, Diamante executed an absolute deed of sale in favor of Deypalubus. Simultaneously, Deypalubus executed an “Option to Repurchase” in favor of Diamante, allowing repurchase within twenty years. Deypalubus then applied for a Fishpond Lease Agreement (FLA) with the Bureau of Fisheries, submitting the absolute deed of sale but concealing the Option to Repurchase. Based on this application, FLA No. 1372 was issued to Deypalubus.
Upon discovering the issuance, Diamante sought the cancellation of the FLA with the Bureau of Fisheries and the Department of Agriculture and Natural Resources (DANR). The DANR Secretary granted Diamante’s plea, cancelling the FLA on the ground that Deypalubus committed a material misrepresentation by withholding the Option to Repurchase, which constituted an encumbrance, in violation of Fisheries Administrative Order No. 60. Deypalubus challenged this cancellation before the Court of First Instance (CFI), which ruled in his favor, declaring the FLA valid and binding. The Court of Appeals initially reversed the CFI but later set aside its own decision upon Deypalubus’s motion for reconsideration.

ISSUE

Whether the DANR Secretary gravely abused his discretion in cancelling Fishpond Lease Agreement No. 1372 based on the private respondent’s failure to disclose the Option to Repurchase.

RULING

The Supreme Court granted the petition, reversing the Court of Appeals and the CFI, and reinstated the DANR Secretary’s orders cancelling the FLA. The Court held that the DANR Secretary did not commit grave abuse of discretion. The legal logic is anchored on the principle that a fishpond lease agreement is a privilege granted by the state, and the applicant must comply with all regulatory requirements in good faith. Section 20 of Fisheries Administrative Order No. 60 explicitly states that any false statement in the application is a ground for ipso facto cancellation of the permit or lease.
By submitting the absolute deed of sale while deliberately concealing the contemporaneously executed Option to Repurchase, Deypalubus misrepresented the true nature of the transaction. The Option effectively reinstated Diamante’s redeemable rights, creating an encumbrance on the property. This omission was material, as the Bureau of Fisheries would not have approved the FLA had it known of this outstanding interest. The Secretary’s finding of misrepresentation was thus supported by substantial evidence. The Court further ruled that the Secretary had jurisdiction to cancel the FLA even after the Bureau’s initial dismissal of Diamante’s complaint, as the power to investigate and cancel leases for violations is continuous and inherent in the administrative agency’s regulatory function.