CASE TITLE (AMENDED DECISION) APRIL 22, 2015
LAND BANK OF THE PHILIPPINES, Petitioner,
- versus - EDUARDO M. CACAYURAN, Respondent, MUNICIPALITY OF AGOO, LA UNION, Intervenor.
PONENTE
PERLAS-BERNABE, J.:
PETITION
(a)
the Motion for Reconsideration 1 dated May 22,
2013, filed by petitioner Land Bank of the Philippines (LBP) assailing the
Decision2 dated April 17, 2013 of the Court (April 17, 2013 Decision),
(b)
Motion for Leave to Intervene with Pleading-in-Intervention
Attached dated July 8, 2013, filed by the Municipality of Agoo, La Union (Municipality)
praying that it be allowed to intervene in this case;
(c)
The Motion for Reconsideration-in-Intervention dated
July 8, 2013,
FACTS OF THE CASE AS
FOLLOWS
The instant case
arose from two (2) loans (Subject Loans) entered into by the Municipality with
LBP in order tofinance the Redevelopment Plan of the Agoo Public Plaza (Public
Plaza). Through Resolution Nos. 68-2005 and 139-2005, the Sangguniang Bayanof
the Municipality (Sangguniang Bayan) authorized its then-Mayor Eufranio Eriguel
(Mayor Eriguel) to enter into a 4,000,000.00-loan with LBP, the proceeds of
which were used to construct ten (10) kiosks at the Public Plaza. Around a year
later, the SB issued Resolution Nos. 58-2006 and 128-2006, this time authorizing Mayor Eriguel
to obtain a 28,000,000.00-loan from LBP for the construction of a commercial
center named “Agoo People’s Center” within the premises of the Public Plaza. In
order to secure the Subject Loans, the Municipality used as collateral, among
others, a 2,323.75-square meter lot situated at the south eastern portion of
the Public Plaza (Plaza Lot).
However, a group
of residents,led by respondent Eduardo M. Cacayuran (Cacayuran), opposed the
redevelopment of the Public Plaza, as well as the funding therefor thru the
Subject Loans, claiming that these were “highly irregular, violative of the
law, and detrimental to public interests, and will result to wanton desecration
of the [Public Plaza].”
Further, Cacayuran
requested the municipal officers to furnish him with the various documents
relating to the Public Plaza’s redevelopment, which, however, went unheeded.
Thus, Cacayuran,
invoking his right as a taxpayer, filed a complaint against LBP and various
officers of the Municipality, including Mayor Eriguel (but excluding the
Municipality itself as party-defendant), assailing the validity of the
aforesaid loan agreements and praying that the commercialization of the Public
Plaza be enjoined.
Initially, the
municipal officers moved for the outright dismissal of the complaint, which was
denied, thus constraining them to file their respective answers. For its part,
LBP asserted, inter alia, that Cacayuran did not have any cause of action since
he was not privy to the loan agreements entered into by LBP and the
Municipality
During the
pendency of the proceedings, the construction of the Agoo People’s Center was
completed. Later on, the Sangguniang Bayan passed Municipal Ordinance No.
02-200717 declaring the area where such building stood as patrimonial property
of the Municipality.18
The RTC Ruling
In a Decision19 dated April 10,
2007, the RTC declared the Subject Loans null and void, finding that the
resolutions approving the procurement of the same were passed in a highly
irregular manner and thus, ultra vires.
As such, it pronounced that the
Municipality was not bound by the Subject Loans and that the municipal officers
should, instead, be held personally liable for the same. Further, it ruled that
since the Plaza Lot is a property for public use, it cannot be used as collateral
for the Subject Loans.
Aggrieved, LBP and the municipal
officers appealed to the CA. However, the appeal of the municipal officers was
deemed abandoned and dismissed for their failure to file an appellants’ brief
despite due notice. Thus, only LBP’s appeal was given due course by the CA.
The CA Ruling
In a Decision24 dated March 26,
2010, the CA affirmed the ruling of the RTC, with modification excluding
then-Vice Mayor Antonio Eslao from personal liability arising from the Subject
Loans. It held that:
(a) Cacayuran had
locus standi to file the instant complaint, considering that he is a resident
of the Municipality and the issue at hand involved public interest of transcendental
importance;
(b) 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, otherwise
known as the Local Government Code of 1991 (LGC);
(c) the Plaza
Lot is property of public dominion, and thus, cannot be used as collateral; and
(d) the procurement of the Subject Loans were ultra vires acts for having been
entered into without proper authority and that the collaterals used therefor
constituted improper disbursement of public funds.
Dissatisfied, LBP filed a petition
for review on certiorari27 before this Court.
Proceedings Before
the Supreme Court
In a Decision28 dated April 17,
2013 the Court denied LBP’s petition, and accordingly, affirmed the ruling of
the CA. Agreeing with the CA, the Court held that:
(a) Cacayuran had legal standing to
institute a taxpayer’s suit;
(b) Resolution Nos. 68-2005, 139-2005,
58-2006, 126-2006 cannot be relied upon to validate the Subject Loans, as the
LGC requires the passing of an ordinance in order for any loan agreement to be
valid; and
(c) the procurement of the Subject
Loans are ultra vires acts of the municipal officers who approved the same, and
thus, liability therefor shall devolve upon them.
Undaunted, LBP
moved for reconsideration, basically reiterating its earlier position that
Cacayuran had no legal standing to sue, and that Resolution Nos. 68-2005,
139-2005, 58-2006, and 126-2006 may be relied upon in validating the Subject
Loans.
Meanwhile, the
Municipality filed a Motion for Leave to Intervene with
Pleading-In-Intervention Attached33 dated July 8, 2013 and a Motion for
Reconsideration in-Intervention 34 of even date, praying that it beincluded as
a party-litigant to the instant case. It contends that as a contracting party
to the Subject Loans, it is an indispensable party to the action filed by
Cacayuran. As such, there cannot be any “real disposition” of the instant suit
by reason of its exclusion from the same.
In opposition,35
Cacayuran maintains that LBP did not raise any new matter to warrant
reconsideration of the April 17, 2013 Decision. Anent the Municipality’s motion
to intervene, Cacayuran insists that the Municipality is not a real
party-in-interest to the instant case as his complaint is against the municipal
officers in their personal capacity for their ultra vires acts which are not
binding on the Municipality.
Finally, in its
Comment on the Motion for Leave to Intervene and Motion for Reconsideration-in-Intervention
36 dated May 6, 2014, LBP agrees with the Municipality that the latter is an
indispensable party to the instant case and as such, should be included herein.
The Issue Before the
Court
The core issue for the Court’s
resolution is whether or not theMunicipality should be deemed as an indispensable
party to the instant case, and thus, be ordered impleaded herein.
The Court’s Ruling
The Court rules in the
affirmative. Section 7, Rule 3 of the Rules of Court mandates that all indispensable parties should be joined in
a suit, viz.:
SEC. 7.
Compulsory joinder of indispensable parties. – Parties-in-
interest without
whom no final determination can be had of an action shall be joined either as
plaintiffs or defendants.
“An indispensable
party is one whose interest will be affected by the court’s action in the
litigation, and without whom no final determination of the case can be had. The
party’s interest in the subject matter of the suit and in the relief sought are
so inextricably intertwined with the other parties’ that his legal presence as
a party to the proceeding is an absolute necessity. In his absence, there
cannot be a resolution of the dispute of the parties before the court which is
effective, complete, or equitable.”37 Thus, the absence of an indispensable
party renders all subsequent actions of the court null and void, for want of
authority to act, not only as to the absent parties but even as to those
present.
Nevertheless, it must be stressed that
the failure to implead any indispensable party to a suit does not necessarily
result in the outright dismissal of the complaint. In Heirs of Mesina v. Heirs
of Fian, Sr., the Court definitively explained that in instances of non-joinder
of indispensable parties, the proper remedy is to implead them and not to
dismiss the case:
The non-joinder of indispensable
parties is not a ground for the dismissal of an action. At any stage of a
judicial proceeding and/or at such times as are just, parties may be added on
the motion of a party or on the initiative of the tribunal concerned. If the
plaintiff refuses to implead an indispensable party despite the order of the
court, that court may dismiss the complaint for the plaintiff’s failure to
comply with the order. The remedy is to implead the non-party claimed to be
indispensable.
(Emphases and
underscoring supplied)
In this case, a judicious review
of the records reveals that Cacayuran’s complaint against LBP and the municipal
officers primarily prays that the commercialization of the Public Plaza be enjoined
and also, that the Subject Loans be declared null and void for having been
unlawfully entered into by the said officers. However, Cacayuran failed to
implead in his complaint the Municipality, a real party-in-interest41 and an indispensable
party that stands to be directly affected by any judicial resolution on the
case, considering that:
(a) the
contracting parties to the Subject Loans are LBP and theMunicipality; and
(b) the
Municipality owns the Public Plaza as well as the improvements constructed
thereon, including the Agoo People’s Center. Asthe Municipality aptly points
out:423. To recapitulate: The case had its beginnings in the two (2)Loans
obtained by [the Municipality] from [LBP] and by the Board Resolutions passed
and adopted by the Sangguniang Bayan of Agoo, La Union, together with the Mayor
and Vice-Mayor of the Municipality.
x x x x
3d. The two (2)
Loans were covered and evidenced by separate Loan Agreements and Mortgage/Assignment
Documents. The parties which entered into and executed the covering documents
were [LBP] as lender and [the Municipality] as borrower.
3e. When the construction was
about 40% complete, [Cacayuran] as a taxpayer filed the case against the: (i)
Mayor; (ii) Vice-Mayor; and (iii) Ten (10) Members [of] the Sangguniang Bayan
[of] Agoo, La Union, as defendants. [The Municipality] was excluded, and was
not impleaded as a defendant in the case.
x x x x
Indeed, [the
Municipality] [on whose lands stands and is found the Agoo Public Plaza, where
the Kiosks and Commercial Building were under construction and which constructions
were sought to be restrained] stands to be benefited or injured by the judgment
in the case so filed or the party entitled to the avails of the case and is,therefore,
the real party-in-interest.
x x x x
3k. Without
having to say so, the RTC dispositions as affirmed with modification by the CA
Decision which, in turn was affirmed bythe SC Decision must not be binding upon
[the Municipality], the real party-in-interest, the indispensable party in
fact, not impleaded as defendant in this case.43 (Emphases and underscoring
supplied).
The Court observes
that it is only now that the issue of the
Municipality’s
exclusion from the instant case, despite its status as an indispensable party,
became apparent. This recent finding may be credited to the fact that the
initial parties before the Court, i.e., LBP and Cacayuran, have dissimilar
interests from that of the Municipality, and, hence, had no incentive to raise
the issue of the latter’s status as an indispensable party. On the one hand,
Cacayuran’s interest to the case is centered on the declaration of nullity of
the Subject Loans, as well as the enjoinment of the commercialization of the
Public Plaza; and on the other hand, LBP’s interest to the case is anchored on
its capacity as creditor to the Subject Loans. To the mind of the Court, the
municipal officers would have been in the best position to raise this issue;
however, they were unable to do so because their appeal before the CA was
deemed abandoned for their failure to file an appellants’ brief on time.
Be that as it
may, the Court is not precluded from taking cognizance of the Municipality’s
status as an indispensable party even at this stage of the proceedings. Indeed,
the presence of indispensable parties is necessary to vest the court with
jurisdiction and, corollarily, the issue on jurisdiction may be raised at any
stage of the proceedings. Thus, as it has now come to the fore that any
resolution of this case would not be possible and, hence, not attain any real
finality due to the non-joinder of the Municipality, the Court is constrained
to set aside all subsequent actuations of the courts a quo in this case,
including that of the Court’s, and remand the case all the way back to the RTC
for the inclusion of all indispensable parties to the case and its immediate
disposition on the merits. 46 With this, the propriety of the
Municipality’s
present intervention is now mooted.
WHEREFORE, the
subject motions are PARTLY GRANTED. The Decision dated April 17, 2013 of the
Court, which upheld the Decision dated March 26, 2010 of the Court of Appeals
in CA-G.R. CV. No. 89732 affirming with modification the Decision dated April
10, 2007 of the Regional Trial Court of Agoo, La Union, Branch 31 in Civil Case
No. A-2473 is hereby SET ASIDE. Accordingly, the instant case is REMANDED to
the court a quo, which is hereby DIRECTED to order respondent
Eduardo M. Cacayuran to implead
all indispensable parties and thereafter, PROCEED with the resolution of the
case on the merits WITH DISPATCH.
SO ORDERED.
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