EXTENSIVE ENTERPRISES CORPORATION, petitioner, vs. SARBRO and CO., INC., ET AL., respondents. THE ASSISTANT EXECUTIVE SECRETARY, ET AL., petitioners, vs. SARBRO and CO., INC., respondent.
FACTS
The Director of Forestry published Notice No. 1900 for bids on a 29,000-hectare forest area in Compostela, Davao. The Committee on Award, after considering bids from Sarbro & Co., Inc. (Sarbro) and Extensive Enterprises Corporation (Extensive), awarded the entire area to Sarbro subject to two conditions: (1) Sarbro must establish a plywood factory within one year from license issuance, and (2) its president/manager or any stockholder with an interest in another forest area (Notice No. 1788) must relinquish that interest, with an affidavit of compliance to be filed within 15 days. Failure to comply would cause cancellation. Both Sarbro and Extensive moved for reconsideration. The Secretary of Agriculture and Natural Resources denied Sarbro’s request to remove the conditions, upholding a policy against monopoly, and gave Sarbro five days to comply. He also denied Extensive’s motion. Sarbro filed a second motion for reconsideration. On June 2, 1958, the Secretary cancelled Sarbro’s award for non-compliance. Sarbro moved for reconsideration again and later filed a manifestation and affidavits purporting to show compliance by its officers relinquishing interests in the other area and transferring shares in the related corporation L.S. Sarmiento & Co., Inc. On November 25, 1958, the Secretary reinstated the award to Sarbro and denied Extensive’s motion. Extensive and another bidder appealed to the Office of the President. Pending appeal, the Executive Secretary on February 5, 1959, authorized a temporary permit for Sarbro, which then began operations and made investments. On December 29, 1959, the Acting Executive Secretary rendered a decision dividing the area between Extensive and Sarbro, revoking Sarbro’s temporary permit effective upon division. This order was later amended. On March 21, 1960, the Executive Secretary directed cancellation of Sarbro’s permit as division had been made. Sarbro, without first moving for reconsideration of the Executive Secretary’s order, filed a special civil action for certiorari and mandamus with preliminary injunction in the Court of First Instance of Manila, seeking to annul the Executive Secretary’s decision and compel officials to award it the entire area and issue a final license. Extensive filed an answer with a cross-petition seeking the entire area. The trial court affirmed the Executive Secretary’s decision dividing the area. Both parties appealed; the appeals were certified to the Court of Appeals. Contempt cases arose during the trial: one by Sarbro against Extensive and its lawyers, and one by Extensive against Sarbro. The trial court found Extensive and its lawyers guilty of contempt and dismissed the case against Sarbro. The Court of Appeals affirmed the contempt decision but modified the main decision by ordering the award of the entire 29,000-hectare area to Sarbro and issuance of a corresponding timber license. Extensive and the government officials petitioned for review.
ISSUE
1. Whether Sarbro failed to exhaust administrative remedies before filing its court petition.
2. Whether the Executive Secretary committed grave abuse of discretion in dividing the forest area between Sarbro and Extensive.
3. Whether Extensive and its lawyers are guilty of contempt.
RULING
1. On exhaustion of administrative remedies: The Supreme Court held that Sarbro’s failure to move for reconsideration of the Executive Secretary’s decision before going to court did not bar its petition. The rule on exhaustion is not absolute; exceptions exist when the question is purely legal, when the administrative body is in estoppel, or when the act complained of is patently illegal or performed without jurisdiction. The Court found the Executive Secretary’s decision dividing the area was a patent nullity because it constituted a reversal of a final decision by the Secretary of Agriculture, which had already become final and executory after the period for appeal had lapsed. The President’s power of control does not extend to reviewing, reversing, or modifying a final decision of a Department Secretary when no appeal is taken. Therefore, Sarbro was not required to exhaust remedies.
2. On the Executive Secretary’s discretion: The Supreme Court ruled that the Acting Executive Secretary committed a grave abuse of discretion in dividing the area. The Secretary of Agriculture’s decision of November 25, 1958, reinstating the award to Sarbro, had become final after 30 days from notice, as no appeal was taken by the government. The Executive Secretary’s subsequent decision effectively reviewed and reversed this final decision without jurisdiction. The division was arbitrary, as it disregarded Sarbro’s vested right based on the final award and its substantial investments made under the temporary permit. The policy against monopoly cited by the Secretary was not a valid ground for the Executive Secretary to modify the final award.
3. On contempt: The Supreme Court affirmed the finding that Extensive and its lawyers were guilty of contempt. Their arguments-that Sarbro’s license was issued before a restraining order, that Sarbro’s permit was automatically revoked, and that the permit was temporary and revocable-were untenable. They were held in contempt for acts attempting to cancel Sarbro’s license despite the pending petition and preliminary injunction protecting Sarbro’s possession.
The Supreme Court modified the Court of Appeals decision. It declared Extensive entitled to one-half of the area as per the Acting Executive Secretary’s decision of December 29, 1959, and ordered the issuance of a corresponding timber license to Extensive for that half. The decision was affirmed in all other respects. No costs.
