San Diego vs.
Municipality of Naujan Issue #1 – W/N another public bidding should’ve been done prior to the extension
Gutierrez David
 The Municipal Council of Naujan passed Resolution 46 by which it awarded
the lease of its municipal waters (Butas River, Naujan Lake) to the highest
bidder – Bartolome San Diego
 The Municipality and San Diego thereafter entered into a contract, wherein
they stipulated that for a period of 5 years, San Diego was to be the lessee
of such waters.
o 1948-1952.
o “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”
o Annual rental of 26,000, originally. This was reduced by the
sanggunian by 20%, upon petition of San Diego.
 In 1950, three years in, San Diego requested for a 5-year extension of the
original lease period.
o San Diego wanted to extend his lease because Typhoon Wanda w/c
occurred a month prior to his request for extension destroyed most
of his corrals
 The Council adopted another resolution, granting the extenstion for another
5 years once the original period expires in 1952. This approval was
conditioned on San Diego’s waiver that he won’t ask for a lower amount of
rent.
 On January 2, 1952, the Municipal Council of Naujan, now composed of a
new set of members, adopted a resolution revoking Resolution 222 which
granted the extension.
o Basis: lack of competitive bidding to invite competition and guard
against vaoritism.
o Request for reconsideration based on non-impairment of contracts
denied.
 San Diego instituted this proceeding in the court below, seeking to have the
revoking resolution declared null and void, and prayed 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 1953-
1957.
o In its answer, the Municipality asserted that the Resolution 46,
authorizing the original lease contract, was null and void
(reducing the rentals and renewing the lease) for having been
passed contrary to law.
o The Municipality prayed that its counterclaim for the 20% discount
be granted.
 Trial Court upheld the validity of the lease contract and its extension,
declaring the revoking resolution null and void.
and discount? Yes
 As per Caltex vs. Delgado - the due execution of a contract after public
bidding is a limitation upon the right of the contradicting 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?
o 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.
o 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.
 SC also cited US jurisprudence applying public bidding requirements to
amendments of any contract already executed in compliance with the law,
where such amendments alter the original in some vital and essential
particular.
o This case – PERIOD is vital and essential.
o Since no public bidding, it’s not in accordance with the law.
Resolution 222 is therefore null and void.
 Resolution 59, which lowered the prices, is also null and void
Issue #2 – W/N estopped; in pari delicto? No
 Estoppel cannot be applied against councils to validate contracts which it
had no power to make. Otherwise, a municipal corp would be allowed to do
indirectly what it cannot do directly.
 Further, when a contract is violative of public policy, there can be no
estoppel
o This case, the contract violates public policy because public
biddings, which are held for the best protection of the public and
to give the public the best possible advantages, is being done away
with!
 Not in pari delicto - 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