Municipality of Lemery v. Mendoza
REITERATIONFacts
The Antecedents: The municipality of Lemery authorized the lease of its fishing privilege for two years (January 1, 1921, to December 31, 1922). Andres Mendoza submitted the highest bid of P22,999.99 per year and was awarded the contract. Simeon Blas and Mariano Napa executed a bond for P46,000 as sureties for Mendoza's compliance. Mendoza paid P23,000 for the first year's lease but abandoned the privilege for the second year. Procedural History: The municipality of Lemery filed an action against Andres Mendoza and his sureties, Simeon Blas and Mariano Napa, to recover the unpaid lease amount for the second year, plus penalty and costs. The Court of First Instance of Batangas ruled in favor of the municipality. Defendants Mendoza and Blas appealed. The Appeal: The defendants-appellants contended that the contract was not binding because it comprised all salt waters within the municipality, not a definite portion. They also argued the lease was invalid for the second year because the provincial board's approval (Resolution No. 740) mentioned only the year 1921, and that the lease lacked departmental head approval. The sureties further argued their liability was limited to P23,000, not P46,000, based on the wording of the contract.
Issue(s)
Whether the lease of the fishery privilege comprising all salt waters within the municipality is valid. Whether the provincial board's approval of the lease for one year, despite the municipal council's resolution for two years, invalidates the lease for the second year. Whether the lease required the approval of the department head. Whether the sureties' liability is limited to P23,000.
Ruling
The Supreme Court affirmed the judgment against the principal, Andres Mendoza, but reversed the judgment against the surety, Simeon Blas, absolving him from the complaint. The Court found that while the contract was valid, the sureties' liability was limited to the principal obligation as expressed in the contract of suretyship, which was P23,000. Since Mendoza had paid this amount, the sureties were discharged.
Ratio Decidendi
On Issue 1: The Court held that the lease of all salt waters within the municipality's limits was valid. The contention that the lease must be for a "definite portion or area" was deemed unfounded, as describing the lease as comprising all salt waters within the municipality precisely defined the extent of the lease, satisfying the requirement for clarity. On Issue 2: The Court found that the provincial board's approval of the lease was for the full two-year period, despite a clerical error in Resolution No. 740 that mistakenly stated the lease ended on December 31, 1921, instead of 1922. The Court noted that the provincial board's function is to approve or disapprove, not amend, municipal resolutions. The error was considered clerical and did not affect the validity of the two-year lease, especially since a subsequent resolution corrected the date. The Court also pointed out that approval is only required for leases exceeding one year, and the provincial board's approval was thus necessary and given in substance. On Issue 3: The Court clarified that Section 2319 of the Administrative Code, which requires provincial board approval for leases longer than one year "under such conditions as shall be prescribed by the department head," does not necessitate the submission of each particular lease to the department head for approval. Instead, it authorizes the department head to issue general regulations governing such leases. On Issue 4: The Court ruled in favor of the sureties, holding that their liability was limited to P23,000, as explicitly stated in the contract of suretyship. While the bond was for P46,000 (double the principal liability), this amount represented the surety's guarantee for the principal's obligation. The Court emphasized that the obligation of a surety must be express and cannot be extended by implication, citing Article 1827 of the Civil Code. Since the principal obligor, Mendoza, had paid the full P23,000 for the lease, the sureties were discharged from any further liability.
Main Doctrine
The Supreme Court held that the liability of a surety is strictly confined to the terms of the suretyship contract and cannot be extended by implication. In this case, the surety's obligation was limited to P23,000, as stated in the contract, even though the bond was for P46,000, which was double the principal obligation. The Court found that the principal obligor had paid the full P23,000, thereby discharging the surety. Furthermore, the Court affirmed that clerical errors in official resolutions, such as an incorrect date, do not invalidate the contract if the intent is clear and the error is not vital, especially when a subsequent curative resolution is adopted.