Case Summary (G.R. No. 191667)
Petitioner
Land Bank of the Philippines (LBP) — lender in two loan transactions challenged as ultra vires and invalid.
Respondent
Eduardo M. Cacayuran — resident/taxpayer who filed suit invoking taxpayer standing to annul the loans and enjoin commercialization of the Public Plaza.
Intervenor
Municipality of Agoo, La Union — borrower in the loan agreements, owner of the Public Plaza and improvements thereon, later sought leave to intervene asserting status as an indispensable and real party-in-interest.
Key Dates
- Resolutions authorizing loans: 2005 (P4,000,000) and 2006 (P28,000,000).
- Complaint filed by Cacayuran: December 18, 2006.
- Regional Trial Court (RTC) decision: April 10, 2007.
- Court of Appeals (CA) decision: March 26, 2010.
- Supreme Court decision denying LBP’s petition: April 17, 2013.
- Motions for reconsideration and motions to intervene filed 2013–2014; amended Supreme Court resolution issued April 22, 2015. (All applicable proceedings were adjudicated under the 1987 Philippine Constitution.)
Applicable Law
Primary statutory and procedural authorities relied upon in the proceedings included: the 1987 Philippine Constitution (applicable), Republic Act No. 7160 (Local Government Code of 1991), and the Rules of Court (notably Section 7, Rule 3 on compulsory joinder of indispensable parties and Section 2, Rule 3 defining real party-in-interest). Precedent cited by the Court on indispensable-party doctrine and remand practice was also applied.
Facts
The Municipality obtained two loans from LBP to finance redevelopment works at the Public Plaza: a P4,000,000 loan for construction of ten kiosks and a P28,000,000 loan for construction of the “Agoo People’s Center.” The Municipality used, among other things, a 2,323.75-square meter lot within the Public Plaza (Plaza Lot) as collateral. A group of residents led by Cacayuran opposed the redevelopment and the loans as irregular and detrimental to public interest. Cacayuran requested documents from municipal officers but did not receive them, then filed a taxpayer’s complaint against LBP and certain municipal officers (in their personal capacity), but did not implead the Municipality itself as a defendant. During litigation the commercial building was completed and the Sangguniang Bayan later declared the area patrimonial property by ordinance.
Procedural History
The RTC declared the Subject Loans null and void, found the related resolutions highly irregular and ultra vires, held that the Municipality was not bound by the loans, imposed personal liability on the municipal officers, and ruled the Plaza Lot (public use property) could not be used as collateral. The municipal officers’ appeal to the CA was dismissed as abandoned; LBP’s appeal proceeded. The CA affirmed the RTC with modification (excluding Vice Mayor Eslao from personal liability), holding inter alia that Cacayuran had locus standi as a taxpayer, that the resolutions were invalid for non-compliance with the Local Government Code (which requires an ordinance for such loan agreements), that the Plaza Lot was public dominion and could not be collateralized, and that the loans were ultra vires. LBP petitioned to the Supreme Court, which denied the petition in an April 17, 2013 Decision affirming the CA on standing, invalidity of resolutions (ordinance required), and municipal officers’ ultra vires liability. LBP moved for reconsideration; the Municipality moved to intervene and filed a motion for reconsideration-in-intervention asserting indispensable-party status.
Issue Presented
Whether the Municipality of Agoo is an indispensable party and thus must be impleaded in the action seeking annulment of the loans and injunction of the commercialization of the Public Plaza, and whether non-joinder of the Municipality requires remand for impleading and further proceedings.
Court’s Analysis
The Court applied Section 7, Rule 3 of the Rules of Court: indispensable parties are those without whom no final determination can be had because their interest in the subject matter and relief sought is inextricably intertwined with other parties. The Court reiterated that non-joinder of an indispensable party does not automatically warrant dismissal; the proper remedy is impleading the missing parties and proceeding with the case, and dismissal is warranted only if the plaintiff refuses to comply with an order to implead.
...continue readingCase Syllabus (G.R. No. 191667)
Case Caption, Court, and Decision Reference
- Special Second Division of the Supreme Court of the Philippines; G.R. No. 191667; Amended Decision penned by Justice Perlas-Bernabe, dated April 22, 2015 (reported at 759 Phil. 145).
- The subject is an appeal arising from: RTC, Agoo, La Union, Branch 31, Civil Case No. A-2473 (Decision dated April 10, 2007); affirmed with modification by the Court of Appeals in CA-G.R. CV. No. 89732 (Decision dated March 26, 2010); and previously affirmed by this Court in Land Bank of the Philippines v. Cacayuran (G.R. No. 191667, April 17, 2013) before the instant amended decision setting that April 17, 2013 decision aside and remanding the case.
Motions Presented to the Supreme Court in the Amended Decision
- Motion for Reconsideration dated May 22, 2013 filed by petitioner Land Bank of the Philippines (LBP) assailing the April 17, 2013 Decision of the Court.
- Motion for Leave to Intervene with Pleading-in-Intervention Attached dated July 8, 2013 filed by the Municipality of Agoo, La Union (Municipality), seeking to be allowed to intervene.
- Motion for Reconsideration-in-Intervention dated July 8, 2013 filed by the Municipality, seeking that the Court set aside its April 17, 2013 Decision and promulgate a new one dismissing the case.
Underlying Facts and Subject Transactions
- The dispute arose from two loans (referred to as the Subject Loans) entered into by the Municipality with LBP to finance redevelopment of the Agoo Public Plaza (Public Plaza).
- Loan particulars:
- One loan for P4,000,000.00 authorized by Sangguniang Bayan Resolutions Nos. 68-2005 and 139-2005, proceeds used to construct ten kiosks at the Public Plaza.
- A subsequent loan for P28,000,000.00 authorized by Sangguniang Bayan Resolutions Nos. 58-2006 and 128-2006, for construction of a commercial center named "Agoo People's Center" within the Public Plaza premises.
- Collateral:
- Among the collaterals was a 2,323.75-square meter lot situated at the south eastern portion of the Public Plaza (Plaza Lot).
- Opposition and demands for documents:
- A group of residents led by respondent Eduardo M. Cacayuran opposed the redevelopment and the Subject Loans as "highly irregular, violative of the law, and detrimental to public interests, and will result to wanton desecration of the [Public Plaza]."
- Cacayuran requested municipal officers to furnish documents relating to the redevelopment; those requests went unheeded.
- Plaintiff's action:
- Asserting his right as a taxpayer, Cacayuran filed a complaint dated December 18, 2006 against LBP and various municipal officers, including then-Mayor Eufranio Eriguel, but excluding the Municipality itself as defendant, seeking injunction against commercialization and declaring the loan agreements invalid.
- Procedural and factual developments during litigation:
- The municipal officers initially moved to dismiss the complaint; dismissal was denied and they filed answers.
- LBP argued that Cacayuran lacked cause of action because he was not privy to the loan agreements.
- Construction of the Agoo People's Center was completed during the proceedings.
- The Sangguniang Bayan later passed Municipal Ordinance No. 02-2007 declaring the area where the building stood as patrimonial property of the Municipality.
RTC Decision (April 10, 2007)
- Principal holdings by the Regional Trial Court:
- Declared the Subject Loans null and void because the resolutions approving the loans were passed in a highly irregular manner and were ultra vires.
- Pronounced that the Municipality was not bound by the Subject Loans and that municipal officers should be held personally liable for the loans.
- Ruled that the Plaza Lot is property for public use and therefore cannot be used as collateral for the Subject Loans.
Appeal to the Court of Appeals and Result (March 26, 2010)
- Appellate disposition:
- The municipal officers' appeal was deemed abandoned and dismissed for failure to file appellants' brief; thus LBP's appeal alone proceeded.
- The Court of Appeals affirmed the RTC decision with modification excluding then-Vice Mayor Antonio Eslao from personal liability.
- Key CA conclusions:
- Cacayuran had locus standi to file the complaint as a resident and because the issue involved public interest of transcendental importance.
- Resolution Nos. 68-2005, 138-2005, 58-2006, 126-2006 were invalidly passed due to non-compliance with certain provisions of Republic Act No. 7160 (Local Government Code of 1991).
- The Plaza Lot is of public dominion and cannot be used as collateral.
- The procurement of the Subject Loans were ultra vires acts entered into without proper authority and the collaterals used constituted improper disbursement of public funds.
Petition for Review to the Supreme Court and April 17, 2013 Decision
- LBP filed petition for review on certiorari to this Court.
- In the April 17, 2013 Decision, this Court denied LBP's petition and affirmed the CA ruling.
- The Court's holdings in April 17, 2013 included:
- Affirmation that Cacayuran had legal standing to institute a taxpayer's suit.
- Resolution Nos. 68-2005, 139-2005, 58-2006, 126-2006 could not validate the Subject Loans because the LGC requires the passing of an ordinance for any loan agreement to be valid.
- The procurement of the Subject Loans were ultra vires acts of the municipal officers who approved them, and liability thus devolves upon those municipal officers.
Post-Decision Motions and Positions of Parties
- LBP's Motion for Reconsideration (May 22, 2013):
- Reiterated arguments that Cacayuran lacked legal standing and that the cited resolutions could validate the Subject Loans.
- Municipality's Motion to Int