G.R. No. 48289 ; June 1, 1942
THE MUNICIPALITY OF HAGONOY, plaintiff-appellant, vs. TEOFILO EVANGELISTA, defendant-appellee.

FACTS

The Municipality of Hagonoy filed a complaint to enforce a 20% surcharge penal clause from four fishpond lease contracts against defendant Teofilo Evangelista. The original ten-year leases (July 1, 1925 to June 30, 1935) were granted to Jose Evangelista, later transferred to Josefa Evangelista, and upon her death, succeeded by the defendant. Neither the original leases nor their transfers were submitted to or approved by the Provincial Governor as required. On June 30, 1934, defendant petitioned the Municipal Council for an extension to pay the rent without surcharge. The Council, by Resolution No. 81 (approved by the Provincial Board on August 31, 1934), granted the extension, allowing payment in two installments without surcharge. Defendant paid the full rent according to this resolution. The trial court dismissed the complaint, finding both parties acted in good faith under a common mistake regarding the Municipal Council’s power to grant the extension.

ISSUE

Whether the penal clause for surcharge can be enforced against the defendant.

RULING

No. The Supreme Court affirmed the dismissal of the complaint. The Court held the lease contracts were void ab initio for two independent reasons: (1) lack of approval by the Provincial Governor as mandated by Section 2196 of the Revised Administrative Code, and (2) because, under Sections 2323 and 2319 of the same Code, a municipality cannot lease fishponds for more than five years, rendering the leases void from the commencement of the sixth year. Since the principal obligation (the leases) was void for being executed contrary to law (Civil Code, Article 42), the accessory penal clause was also void (Civil Code, Article 1155). The void contracts could not be ratified or confirmed by the parties’ conduct. Consequently, the courts would not aid either party to enforce any stipulation, including the penal clause.