Manantan v. Municipality of Luna
REITERATIONFacts
The Antecedents: The Municipal Council of Luna, La Union, passed Resolution No. 32, series of 1945, offering at public auction a lease for the privilege to catch "bañgus" fry within a section of the municipal waters. The resolution stipulated a minimum bid of P1,000 for one year, with the possibility of extension for one to four years. The municipal treasurer issued notices for the auction, stating the lease would be for one year from January 1, 1946, to December 31, 1946, but also allowing bids for longer periods up to four years. Julian Segundo Manantan and his associates submitted the highest bid for a four-year lease (1946-1949) at P1,000 for the first year and P2,400 for the succeeding three years. This was confirmed by Resolution No. 37, series of 1946, and a contract was signed. The lessees paid the first year's fee and began operations. Procedural History: A new municipal council, with a new mayor, passed Resolution No. 2, series of 1946, requesting the Provincial Board to annul Resolution No. 32 and the lease granted to Manantan and his associates. The Provincial Board granted this request. Subsequently, the municipal council approved Resolution No. 23, series of 1946, which called for a new auction for the 1947 fishing privilege. Manantan and his partners filed suit in the Court of First Instance (CFI) to declare Resolution No. 23 void and to enjoin the auction. The CFI ruled in favor of the respondents, declaring Resolution No. 37 and the lease contract with petitioners null and void, upholding the lease contract with Timoteo Santaromana, and ordering petitioners to account for the "bañgus" fry caught. The Petition: Petitioners appealed to the Supreme Court, contending that the CFI erred in holding Resolution No. 37 null and void and in not declaring Resolution No. 23 void for violating the constitutional prohibition against the impairment of contracts.
Issue(s)
Whether Resolution No. 37, series of 1946, granting the fishing privilege to petitioners, and the subsequent lease contract, are null and void. Whether Resolution No. 23, series of 1946, which set aside the lease granted to petitioners and called for a new auction, is void for impairing the obligation of contracts.
Ruling
The Supreme Court reversed the decision of the Court of First Instance. It declared the contract of lease entered into between the municipal government of Luna and Julian Segundo Manantan and his associates, under the authority of Resolutions No. 32 and No. 37, to be valid and binding. Consequently, Resolution No. 23, series of 1946, and the contract entered into thereunder with Timoteo Santaromana, were declared void as they violated the constitutional provision against the impairment of the obligation of contracts.
Ratio Decidendi
On the validity of Resolution No. 37 and the lease contract: The Court found that the trial judge erred in holding Resolution No. 37 and the lease contract void. The judge's reasoning was based on the assumption that Resolution No. 32 did not authorize a lease for more than one year, making the notice of auction for a longer period unauthorized. However, the Court clarified that Resolution No. 32, while fixing a minimum price for one year, expressly stated that the lease "can be extended for a period of from one to four years." This indicated an intention not to limit the lease to one year. The municipal treasurer's notice for bids for longer periods, and the subsequent confirmation by the municipal council in Resolution No. 37 of the petitioners' four-year bid, were consistent with this intention. The Court reiterated the principle that the construction placed upon a law at the time by the official in charge of enforcing it should be respected, citing several previous decisions. Therefore, the notice of auction was not unauthorized or void, and the grant of the fishing privilege to the petitioners was valid. On the alleged impairment of contracts: Since the lease contract entered into under Resolution No. 37 was found to be valid and binding, it was protected by the Constitution. The subsequent Resolution No. 23, series of 1946, which attempted to set aside this valid contract and grant the fishing privilege to another party, constituted an impairment of the obligation of contracts. The Court held that such subsequent legislation or resolution cannot impair a pre-existing valid contract. Therefore, Resolution No. 23 and the contract with Timoteo Santaromana were declared void.
Main Doctrine
A municipal council's resolution granting a lease for fishing privileges, once validly entered into and confirmed, is a binding contract protected by the Constitution and cannot be impaired by a subsequent resolution that sets it aside and grants the privilege to another party.