Case Summary (G.R. No. 191667)
Key Dates
- April 19, 2005: SB Resolution No. 68-2005 authorizing Phase I loan and collateral
- October 4, 2005: SB Resolution No. 139-2005 ratifying Phase I authorization
- November 21, 2005: First Loan of ₱4 million granted by Land Bank
- March 7, 2006: SB Resolution No. 58-2006 authorizing Phase II loan and collateral
- September 5, 2006: SB Resolution No. 128-2006 ratifying Phase II representations
- October 20, 2006: Second Loan of ₱28 million granted by Land Bank
- December 2006: Cacayuran’s manifesto, letter, and taxpayer’s complaint filed
- April 10, 2007: RTC Decision declaring loans null and void
- March 26, 2010: CA Decision affirming with modification
- April 17, 2013: SC Decision under 1987 Constitution
Applicable Law
- 1987 Philippine Constitution (post-1990 decision)
- Republic Act No. 7160 (Local Government Code of 1991)
- Civil Code Articles on public dominion (Art. 420) and void contracts (Art. 1409)
- Jurisprudence on taxpayer suits, ultra vires acts, and public dominion (e.g., Mamba v. Lara, Villanueva v. Castañeda)
Facts
From 2005 to 2006, the Agoo Sangguniang Bayan adopted resolutions to finance a Redevelopment Plan for Agoo Public Plaza. Phase I involved a ₱4 million loan secured by the Plaza Lot, a portion of the IRA, and project income; proceeds funded ten kiosks. Phase II entailed a ₱28 million loan with identical security to build a commercial center. Residents led by Cacayuran protested that the conversion of a public dominion property into a commercial enterprise violated law and public interest. Cacayuran sought documents, received none, then filed a taxpayer’s suit challenging the validity of the loan agreements on the grounds that the Plaza Lot is inalienable public domain.
Ruling of the Regional Trial Court
The RTC declared the Subject Loans null and void on two bases:
- The SB resolutions authorizing the loans were ultra vires and passed with procedural irregularities, rendering the Municipality not bound by them.
- The Plaza Lot, being property for public use, could not be validly mortgaged as collateral.
Ruling of the Court of Appeals
The CA affirmed with modification (excluding Vice Mayor Eslao from liability) and held that:
- Cacayuran, as a bona fide resident‐taxpayer, had standing to sue on a matter of public interest involving alleged illegal disbursement or appropriation of public funds.
- The SB passed resolutions in violation of RA 7160—lacking lawful ordinance authority, provincial review, and required publication—thus invalid.
- The Plaza Lot is property of public dominion and beyond commerce; the loans were ultra vires and void.
Issues Before the Supreme Court
- Does Cacayuran have standing to contest the loans?
- Were the SB resolutions validly passed under the LGC?
- Are the Subject Loans ultra vires and void?
Court’s Analysis
A. Standing to Sue
- A taxpayer may challenge illegal disbursement or misuse of public funds.
- The Municipality’s assignment of a portion of its Internal Revenue Allotment constitutes public funds.
- Upon receipt of loan proceeds, they became public funds under official custody.
- As a resident‐taxpayer directly interested in the use of the public plaza, Cacayuran met the requisites for standing.
B. Validity of the SB Resolutions
- Section 444(b)(1)(vi), LGC requires that obligations entered by the mayor be “pursuant to law or ordinance.”
- Resolutions, being temporary expressions of sentiment, cannot substitute for ordinances.
- The SB also failed to submit the resolutions for provincial review (Sec. 56, LGC) and to publish and post them (Sec. 59, LGC).
- Consequently, the resolutions were void for lack of lawful authority and procedural compliance.
C. Ultra Vires Na
Case Syllabus (G.R. No. 191667)
Facts
- From 2005 to 2006, the Sangguniang Bayan (SB) of Agoo, La Union adopted a multi-phased Redevelopment Plan for Agoo Public Plaza, site of Imelda Garden and the Jose Rizal Monument.
- Phase I financed by Resolution No. 68-2005 (April 19, 2005) and ratified by Resolution No. 139-2005 (October 4, 2005), authorizing Mayor Eriguel to obtain a ₱4,000,000 loan (First Loan) from Land Bank, mortgaging a 2,323.75 sqm Plaza Lot, assigning a portion of the IRA and project income as additional security.
- First Loan proceeds used to construct ten kiosks in Imelda Garden, which were subsequently rented out.
- Phase II approved by SB Resolution No. 58-2006 (March 7, 2006) and ratified by Resolution No. 128-2006 (September 5, 2006), authorizing a ₱28,000,000 loan (Second Loan) from Land Bank on the same securities, to build a commercial center (later Agoo People Center, APC) on the Plaza Lot.
- A group of residents led by respondent Eduardo Cacayuran protested that converting the public plaza into a commercial center was irregular, unlawful, detrimental to public interest, and a desecration of a historical park.
- The residents circulated a Manifesto and Cacayuran wrote a December 8, 2006 letter to municipal officials requesting certified copies of all related resolutions and loan agreements, but received no response.
- On December 2006, invoking his taxpayer right, Cacayuran filed a Complaint against the implicated officers and Land Bank, challenging the validity of the Subject Loans on the ground that the Plaza Lot is public domain and beyond commerce.
- Land Bank moved to dismiss for lack of privity; the RTC denied the motion. During trial, the APC was completed and declared patrimonial property by Municipal Ordinance No. 02-2007 (May 8, 2007).
Ruling of the Regional Trial Court
- In an April 10, 2007 Decision, the RTC ruled in favor of Cacayuran and declared the First and Second Loans null and void.
- Found that SB resolutions approving the loans w