Title
Lao, Jr. vs. LGU of Cagayan de Oro City
Case
G.R. No. 187869
Decision Date
Sep 13, 2017
Public officials challenged the Agora Complex BOT Contract, alleging lack of City Council authorization and Mega Farm's qualifications. The Supreme Court ruled petitioners had standing but upheld the denial of a TRO, remanding the case for further proceedings.
standing
temporary restraining orders
government projects
A

Case Summary (G.R. No. 187869)

Factual Background

Petitioners were members of the Sangguniang Panlungsod of Cagayan de Oro or a barangay captain. In 2007, MEGA Integrated Agro-Livestock Farm Corporation submitted an unsolicited proposal to redevelop the Agora Complex under a build-operate-transfer (BOT) scheme. The City Council adopted Resolution No. 8651-2007 and published an Invitation to Qualify and to Bid in July 2007. The city Bids and Awards Committee declared no competing bid October 24, 2007. On January 27, 2009, the newly elected Mayor Constantino Jaraula and MEGA Integrated Agro-Livestock Farm Corporation, through its president Erwin Bryan See, executed the Agora Complex BOT Contract, allegedly on terms differing from the earlier draft. Petitioners alleged Mega Farm lacked capacity to undertake a P250,000,000 project given a paid-up capital of P625,000, and they alleged fraud and disadvantageous contract terms, including alleged exclusivity provisions affecting fruits and vegetables landing and bus-terminal operations.

Trial Court Proceedings

Petitioners filed a Complaint for Declaration of Nullity with plea for temporary restraining order (TRO) and preliminary injunction in RTC Civil Case No. 2009-076. Respondents filed an Urgent Omnibus Motion to Dismiss or for a Bill of Particulars, asserting among other defenses that the RTC lacked jurisdiction to issue TROs under Republic Act No. 8975 because BOT projects fall within the definition of “national government projects,” and that petitioners lacked cause of action or standing. The RTC held hearings on March 25 and March 30, 2009.

The Parties’ Contentions in the Courts Below

Petitioners contended the contract was void ab initio because no ordinance authorized the mayor to bind the city and because Mega Farm lacked prequalified financial capacity. They alleged violations of constitutional protections and sought damages and injunctive relief. Public respondents argued that RA 8975 precluded issuance of TROs by the RTC and that petitioners lacked standing because they were not parties to the contract nor taxpayers in the sense of an appropriation of funds. Private respondents Mega Farm and See contended the petition raised mixed questions of fact and law, that the TRO was moot, and that petitioners had no direct business or taxpayer interest.

RTC Resolution and Order

On March 30, 2009, the RTC denied the issuance of a TRO and dismissed the complaint. The RTC ruled that the Agora Complex BOT Contract was covered by Republic Act No. 8975 and therefore the trial court was prohibited from issuing TROs or preliminary injunctions against the project. The RTC found petitioners failed to prove constitutional violations that would justify the statutory exception for extreme urgency, and it held petitioners lacked party status to challenge the contract because they were not parties to it and because the project did not involve appropriation of public funds. The RTC denied reconsideration on May 11, 2009.

Issues Presented to the Supreme Court

The Supreme Court framed four issues: whether petitioners properly resorted directly to the Court by Rule 45; whether the petition’s Verification and Certification of Non-Forum Shopping was fatally defective; whether the RTC correctly denied the TRO under Republic Act No. 8975; and whether petitioners had locus standi to seek declaration of nullity of the Agora Complex BOT Contract.

Mode of Appeal and Questions of Law and Fact

The Court analyzed the propriety of direct review under Rule 45 and explained that direct resort is permitted only when only questions of law are involved. The Court concluded that two of petitioners’ principal arguments—the alleged lack of mayoral authority to sign the contract and Mega Farm’s financial incapacity—were questions of fact requiring reception and examination of evidence and were therefore not cognizable in a Rule 45 petition. The Court held, however, that the legal questions concerning the RTC’s denial of injunctive relief under Republic Act No. 8975 and petitioners’ standing presented questions of law reviewable by this Court.

Notarial Defect and Verification

The Court found the petition’s Verification and Certification of Non-Forum Shopping, and the attached affidavits of service, were improperly notarized because the notary did not state that the affiants were personally known or presented competent evidence of identity as required by the 2004 Rules on Notarial Practice. The notary in the cited documents was identified as Atty. Manolo Z. Tagarda, Sr., who also acted as petitioners’ counsel. The Court observed that notaries must observe the highest degree of care and that failure to indicate competent evidence of identity transgressed both the Notarial Rules and the Code of Professional Responsibility. The Court ordered that Atty. Manolo Z. Tagarda, Sr. be required to show cause for possible administrative liability, but it exercised discretion to overlook the notarization defect for purposes of resolving the merits.

Ruling on Temporary Restraining Order under Republic Act No. 8975

The Court affirmed the RTC’s denial of the TRO. It held that Republic Act No. 8975 expressly prohibited courts other than the Supreme Court from issuing TROs, preliminary injunctions, or preliminary mandatory injunctions against “national government projects,” a definition that includes projects covered by the BOT law, Republic Act No. 6957, as amended by Republic Act No. 7718. The Court reaffirmed precedent that local-government BOT projects fall within RA 8975’s coverage, and it explained that the statute permits injunctive relief by lower courts only when the matter presents extreme urgency involving a constitutional issue and the applicant proves a clear and compelling breach of a constitutional provision. The Court applied settled standards from prior decisions, including the requirement that the plaintiff show by competent “sampling” evidence a present right threatened by the act sought to be enjoined. The Court found petitioners’ constitutional claim regarding a purported violation of the right to free enterprise and the alleged exclusivity provisions was not shown clearly and compellingly. The Court therefore held the statutory bar to TROs applied and affirmed the RTC’s denial of injunctive relief.

Standing and the Real Party in Interest

The Court reversed the RTC’s dismissal of the complaint on the ground

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