Facts:

• The case involves Santiago Banaag vs. Vicente Singson Encarnacion concerning a lease contract for a fish corral in the Pansipit River, Batangas.
• Santiago Banaag entered into a lease agreement on June 3, 1943, under the Philippine Executive Commission, a de facto government during the Japanese occupation.
• The lease was for five years, from July 1, 1943, to June 30, 1948, with terms for construction, fee payments, and record submissions.
• Banaag paid an annual rental fee of P8,501, the highest bid in a public auction by the Bureau of Forestry and Fishery.
• The contract allowed for suspension or cancellation by competent authorities.
• After Batangas was liberated, the municipalities of Taal and Lemery, represented by Vicente Singson Encarnacion, claimed the lease was terminated or could be canceled.
• The trial court ruled in favor of Banaag on February 11, 1946, declaring the lease valid, leading to an appeal by the municipalities.

Issue:

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Ruling:

• The Supreme Court reversed the lower court's decision, declaring the lease executed on June 3, 1943, as canceled and without effect since the liberation of Batangas or at least since August 17, 1945.
• The Court...(Unlock)

Ratio:

• The ruling was based on the principle that the Philippine Executive Commission, which granted the lease, was a de facto government lacking authority to bind the Philippine government post-liberation.
• The Court referenced Article 55, Section III of the Hague Conventions of 1907, stating that an occupying state can only act as an administrator and cannot make contracts extending beyond the occupation.
• The fisheries belonged to the municipalities of Taal and Lemery, making the lease unenforceable after liber...continue reading