[WITH RESOLUTION OF APRIL 18, 1960]

Following a public bidding conducted by the municipality of Naujan,
Oriental Mindoro for the lease of its municipal waters, Resolution 46,
series of 1947 was passed by the municipal council thereof awarding the
concession of the Butas River and the Naujan Lake to the highest bidder
Bartolome San Diego. Consequently, a contract was entered into between
the said San Diego and the municipality, stipulating that for a period
of five (5) years, from January 1, 1948 to December 31, 1952, the
former was to be the lessee of “the exclusive privilege of erecting
fish corrals along the Butas River beginning from its junction with the
San Agustin River up to the Naujan Lake itself,” for an annual rental
of P26,300.00, or a total of P131,500.00 for five years. Upon petition
by the lessee, however, the said council reduced the annual rental by
20% by virtue of Resolution 59, series of 1949.

On September 5, 1950, the lessee requested for a five-year extension
of the original lease period. The request was, for some time, left
pending before the municipal council, but on December 1, 1951, after
the lessee had reiterated his petition for extension, for the reason
that the typhoon “Wanda”, which took place that month, destroyed most
of his fish corrals, the council adopted Resolution 222, series of 1951
extending the lease for another five (5) years beginning January 1,
1952, with the express condition that the plaintiff would waive the
privilege to seek for reduction of the amount of rent which was to be
based on the original contract. After the resolution had been approved
by the Provincial Board of Oriental Mindoro, the lessor and the lessee,
on December 23, 1951, contracted for the extension of the period of the
lease. The contract was approved and confirmed on December 29, 1951 by
Resolution 229, series of 1951, of the municipal council of Naujan
whose term was then about to expire. Pursuant to the said contract, the
lessee filed a surety bond of P52,000.00 and then reconstructed his
fish corrals and stocked the Naujan Lake with bañgus fingerlings.

On January 2, 1952, the municipal council of Naujan, this time
composed of a new set of members, adopted Resolution 3, series of 1952,
revoking Resolution 222, series of 1951. On the same date, the new
council also passed Resolution 11, revoking Resolution 229 of the old
council which confirmed the extension of the lease period. The lessee
requested for reconsideration and recall of Resolution 3, on the
ground, among others, that it violated the contract executed between
him and the municipality on December 23, 1951, and, therefore, contrary
to Article III, section 1, clause 10 of the Constitution. The request,
however, was not granted.

On September 4, 1952, the lessee instituted this proceedings in the
court below seeking to have Resolution 3, series of 1952, of the
municipal council of Naujan, declared null and void, for being
unconstitutional, and praying for an order enjoining the defendant
municipality from conducting a public bidding for the leasing of the
Naujan fisheries to any person other than the plaintiff during the
period from January 1, 1953 to December 31, 1957.

Answering the complaint, the defendant asserted the validity of
Resolution 3, series of 1951, alleging by way of special defense that
the resolutions authorizing the original lease contract, reducing the
lease rentals and renewing the lease are null and void for not having
been passed in accordance with law. Defendant further put up a
counterclaim for the amount representing the illegal reduction of 20%
of the original rentals, plus the sum of P2,191.60 per month beginning
December 1, 1952 until the case shall have been terminated.

After trial, the lower court rendered judgment upholding the
validity of the lease contract, as well as its extension, and declaring
Resolution 3, series of 1952, null and void. The municipality of Naujan
has taken this appeal.

The main question to be decided is whether or not Resolution No. 3,
series of 1952, revoking Resolution 222, series of 1951, of the
municipal council of Naujan is valid.

For clarity, we have to reiterate that Resolution 222, series of
1951, is an approval of plaintiff-appellee’s petition for extension for
another five years, effective January 1, 1953, of his five-year lease
concession granted under Resolution 46, series of 1947. Said Resolution
222, however, was revoked by the municipal council under a new set of
members in its Resolution 3, series of 1952, for the reason, among
others, that the extension was illegal, it having been granted without
competitive public bidding. It is this last mentioned resolution that
has been declared null and void by the trial court.

The law (Sec. 2323 of the Revised Administrative Code) requires that
when the exclusive privilege of fishery or the right to conduct a
fish-breeding ground is granted to a private party, the same shall be
let to the highest bidder in the same manner as is being done in
exploiting a ferry, a market or a slaughterhouse belonging to the
municipality (See Municipality of San Luis vs. Ventura, et
al., 56 Phil., 329). The requirement of competitive bidding is for the
purpose of inviting competition and to guard against favoritism, fraud
and corruption in the letting of fishery privileges (See 3 McQuillin,
Municipal Corporations, 2nd Ed., p. 1170; Harles Gaslight Co. vs. New York, 33 N. Y. 309; and 2 Dillon, Municipal Corporations, p. 1219).

There is no doubt that the original lease contract in this case was
awarded to the highest bidder, but the reduction of the rental and the
extension of the term of the lease appear to have been granted without
previous public bidding. In the case of Caltex (Phil.), Inc., et al. vs. Delgado Bros., Inc., et al, 96 Phil., 368, the amendment to an arrastre
contract was declared null and void on the ground that it was made
without previous public bidding. In so declaring, this Court has
adopted the following opinion:

“* * * it is the opinion of the Court that the said
agreement * * * executed and entered into without previous public
bidding, is null and void, and cannot adversely affect the rights of
third parties * * * and of the public in general. The Court agrees with
the contention of counsel for the plaintiffs that the due execution of
a contract after public bidding is a limitation upon the right of the
contracting parties to alter or amend it without another public
bidding, for otherwise what would a public bidding be good for if after
the execution of a contract after public bidding, the contracting
parties may alter or amend the contract or even cancel it, at their
will! Public biddings are held for the protection of the public, and to
give the public the best possible advantages, by means of open
competition between the bidders. He who bids or offers the best terms
is awarded the contract subject of the bid, and it is obvious that such
protection and best possible advantages to the public will disappear if
the parties to a contract executed after public bidding may alter or
amend it without another previous public bidding.”

While in that case we ruled that although the “arrastre contract”
therein questioned authorized the parties to alter or amend any of the
terms thereof, such authority must be considered as being subject to
the requirement of previous public bidding, a formality observed before
the original contract was awarded, with more reason should the rule
requiring such public bidding be strictly applied in the instant ease
where no such authority to alter or amend the terms of the contract was
reserved.

Furthermore, it has been ruled that statutes requiring public
bidding apply to amendments of any contract already executed in
compliance with the law where such amendments alter the original
contract in some vital and essential particular (See Morse vs.
Boston, 148 N.E. 813 253 Mass. 247.). Inasmuch as the period in a lease
is a vital and essential particular to the contract, we believe that
the extension of the lease period in this case, which was granted
without the essential requisite of public bidding, is not in accordance
with law. And it follows that Resolution, 222, series of 1951, and the
contract authorized thereby, extending the original five-year lease to
another five years are null and void as contrary to law and public
policy.

We agree with the defendant-appellant in that the questioned
Resolution 3 is not an impairment of the obligation of contract,
because the constitutional provision on impairment refers only to
contract legally executed. While, apparently, Resolution 3 tended to
abrogate the contract extending the lease, legally speaking, there was
no contract abrogated because, as we have said, the extension contract
is void and inexistent.

The lower court, in holding that the defendant-appellant
municipality has been estopped from assailing the validity of the
contract into which it entered on December 23, 1951, seems to have
overlooked the general rule that—

“* * * the doctrine of estoppel cannot be applied as
against a municipal corporation to validate a contract which it has no
power to make or which it is authorized to make only under prescribed
conditions, within prescribed limitations, or in a prescribed mode or
manner, although the corporation has accepted the benefits thereof and
the other party has fully performed his part of the agreement, or has
expended large sums in preparation for performance. A reason frequently
assigned for this rule is that to apply the doctrine of estoppel
against a municipality in such case would be to enable it to do
indirectly what it cannot do directly. Also, where a contract is
violative of public policy, the municipality executing it cannot be
estopped’ to assert the invalidity on this ground; nor can it be
estopped to assert the invalidity of a contract which has ceded away,
controlled, or embarrassed its legislative or government powers.” (38
Am. Jur. pp. 202-204).

As pointed out above, “public biddings are held for the best
protection of the public and to give the public the best possible
advantages by means of open competition between the bidders.” Thus,
contracts requiring public bidding affect public interest, and to
change them without complying with that requirement would indeed be
against public policy. There is, therefore, nothing to
plaintiff-appellee’s contention that the parties in this case being in pari delicto should be left in the situation where they are found, for “although the parties are in pari delicto,
yet the court may interfere and grant relief at the suit of one of
them, where public policy requires its intervention, even though the
result may be that a benefit will be derived by a plaintiff who is in
equal guilt with defendant. But here the guilt of the parties is not
considered as equal to the higher right of the public, and the guilty
party to whom the relief is granted is simply the instrument by which
the public is served.” (13 C. J. p. 497).

In view of the foregoing, we hold that the municipal council of
Naujan acted aright in adopting Resolution 3, series of 1952, now in
question.

In consonance with the principles enunciated above, Resolution 59,
series of 1947, reducing the rentals by 20% of the original price,
which was also passed without public bidding, should likewise be held
void, since a reduction of the rental to be paid by the lessee is a
substantial alteration in the contract, making it a distinct and
different lease contract which requires the prescribed formality of
public bidding.

There seems to be no necessity of passing on the validity of
Resolution 46, series of 1947, for defendant-appellant, apparently, did
not mean to have it annulled, as may be seen from its prayer in the
court below and also in this appeal. At any rate, the validity of said
resolution does not alter our finding to the effect that Resolution 59,
series of 1949, and Resolution 222, series of 1951, are illegal and
void; and that Resolution 3, series of 1952, is valid.

Wherefore, the appealed judgment is reversed; plaintiff-appellee is
hereby ordered to pay the defendant-appellant under the latter’s
counterclaim the sum of P17,971.60 representing the unapproved and
ineffective reduction by 20% of the originally stipulated rental, for
the period from July 1, 1949 to December 1, 1952, plus the further sum
of P2,191.60 per month beginning December 1, 1952 to December 31, 1957,
as reasonable compensation for the illegal retention of the Naujan
fisheries. Without special pronouncement as to costs.

Bengzon, Montemayor, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Endencia, and Barrera, JJ., concur.
Paras, C.J., took no part.

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April 18, 1960

GUTIERREZ DAVID, J.:

In the above entitled case, which was decided on February 29, 1960,
the plaintiff-appellee moves for reconsideration of the decision on the
grounds (1) that in virtue of the dispositive portion thereof the
plaintiff-appellee is ordered to pay the sum of P2,191.60 per month
beginning December 1, 1952 to December 31, 1957 as reasonable
compensation for the illegal retention of the Naujan fisheries, while
the contract, which was declared illegal and void covered the period
January 1, 1953 to December 31, 1957, so the period of payment of the
sum of P2,191.60 should begin not from December 1, 1952 but from
January 1, 1953; (2) that plaintiff-appellee has already paid to the
defendant-appellant the said sum of P2,191.60 every month, from January
1, 1953 to December 31, 1957; (3) that by clerical error in the
statement of facts of the decision (second paragraph) it appears that
the extension of the lease contract commenced January 1, 1952, instead
of January 1, 1953; and (4) that this Court ordered the
plaintiff-appellee to pay defendant-appellant the sum of P17,971.60
representing the unapproved and ineffective reduction by 20% of the
originally stipulated rental, which order, from the strictly legal
point of view, cannot be assailed, yet on equitable grounds relief from
such payment of the sum could be given for the reasons alleged in the
motion.

The defendant-appellant, on the other hand, filed an “Answer to the
Motion for Reconsideration and Application for Damages”. The answer
states:

“According to the evidence in this case, after the
approval, in June, 1949, of Resolution 59, series of 1940, reducing the
rental by 20%, the plaintiff-appellee paid defendant-appellant the
reduced rentals from July 1, 1949 to December 31, 1952. The. original
lease, contract “Exhibit “A”, stipulates an annual rental of P26,300.00
payable every trimester, and 20% thereof, is P5,260.00 or Pl.315.00 per
trimester, which amount plaintiff consequently failed to pay from July
1, 1949 to December 31, 1952. Since the period from July 1, 1949 to
December 31, 1952 consists of 14 trimesters, the plaintiff-appellee
failed to pay accordingly, the amount of P18,410.00 during the said
period (session of April 12, 1965, t.s.n. pp. 10-11). However, this
Honorable Court, in ordering the plaintiff to pay the sum of P17,971.60
computed and based the said amount from July 1, 1949 to December 1,
1952, such that the rental corresponding to the month of December, 1952
was not included in the decision (P18,410—P438.34 [representing 20%
monthly reduction] — P17,971.61) (which should be P17,971.66 to be
exact). And since the total unpaid reduction amounting to P17,971.60 as
found by the court in its decision, does not include the rental for the
month of December, 1952, this Court consequently had to order the
plaintiff to pay defendant the full amount of the rental of P2,191.60
(P2,191.66 to be exact), which is one-twelfth (1/12) of P26,300.00,
commencing from December 1, 1952 to December 31, 1967, otherwise, there
would be a gap of one month, that is, there would be no rental for the
entire month of December 1952. * * *”

After a careful consideration of grounds 1, 2 and 3 of the motion
and the answer thereto, which involve clerical errors, this Court deems
it necessary to amend the decision as follows:

Part of the second paragraph to read:

” * * * the council adopted Resolution 222, series of 1951, extending the lease for another five (5) years beginning January 1, 1953,
with the express condition that the plaintiff would waive the privilege
to seek for reduction of the amount of rent which was to be based on
the original contract.”

The dispositive portion to read:

Wherefore, the appealed judgment is reversed;
plaintiff-appellee is hereby ordered to pay the defendant-appellant
under the latter’s counterclaim the sum of P18,410.00 representing the
unapproved and ineffective reduction by 20% of the originally
stipulated rental, for the period from July 1, 1949 to December 31, 1952, plus the further sum of P2,191.60 per month beginning January 1, 1953 to December 31, 1957, as reasonable compensation for the illegal retention of the Naujan fisheries, unless
the said sum of P2,191.60 per month has already been paid by the
plaintiff-appellee to the defendant-appellant during the said period.”

Ground 4 of the Motion for Reconsideration is denied for lack of
merit. And defendant-appellant’s application for damages is likewise
denied, but without prejudice to the filing of the same in the proper
court.

Paras, C. J., Bengzon, Montemayor, Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., and Barrera, JJ., concur.