G.R. No. 191667 Case Digest

G.R. No. 191667, April 17, 2013

Land Bank of the Philippines

vs Eduardo M. Cacayuran

Ponente: Perlas-Bernabe

Facts:

This is a petition for Review on Certiorari of the CA affirming the RTC in declaring the nullity of the loan agreements entered into by Land Bank and the Municipality of Agoo, La Union.

Agoo SB passed a certain resolution to implement a redevelopment plan to redevelop the Agoo Public Plaza. To finance the plan, SB passed a resolution authorizing then Maor Eriguel to obtain a loan from Land Bank, incidental to it, mortgaged a portion of the plaza as collateral. It has also authorized the assignment of a portion if the IRA and monthly income in favor of Land Bank to secure the payment. 10 Kiosks were made at the plaza, then were rented out. Later, a commercial center on the Plaza lot was built too, with a loan from Land Bank, posting the same securities as the first loan.

The commercial loan was opposed by some residents of the municipality embodied in a manifesto launched through a signature campaign by the residents and Cacayuran. Invoking his right as taxpayer, Cacayuran filed a complaint against the officials and Land bank assailing the validity of the loans on the ground that the Plaza lot used as collateral is property of public dominion and therefore beyond the commerce of man.

RTC Ruling: declared the nullity of the subject loans, saying that the oans were passed in a highly irregular manner, as such, the Municipality is not bound by the same.

Aggrieved, Land Bank filed notice of appeal.

Ruling of CA: affirmed with modification the RTC's ruling, excluding the Vice Mayor from any personal liability arising from the subject loans. Cacayuran has locus standi as resident and taxpayer in the municipality and the issue involves public interest. The plaza cannot be a valid collateral to a loans for it is of public dominion.

Land Bank filed this instant petition.

Issues:

(1) whether Cacayuran has locus standi (2) whether the subject resolutions were validly passed and (3) whether the subject loans are ultra vires. [The doctrine in the law of corporations that holds that if a corporation enters into a contract that is beyond the scope of its corporate powers, the contract is illegal.]

SC Ruling:

(1) Taxpayer is allowed to sue if: (1) public funds derived from taxation are disbursed by a political subdivision or instrumentality and in doing so, a law is violated or some irregularity is committed; and (2) the petitioner is directly affected by the alleged act.

In the case, the proceeds from the Subject Loans had already been converted into public funds by the Municipality’s receipt thereof. Funds coming from private sources become impressed with the characteristics of public funds when they are under official custody. Public plaza belongs to public dominion, Cacayuran need not to be a privy to the loans, as long as taxes are involved, people have a right to question the contracts entered into by the government.

(2) While ordinances are laws and possess a general and permanent character, resolutions are merely declarations of the sentiment or opinion of a law making body on a specific matter and are temporary in nature. As opposed to ordinances, "no rights can be conferred by and be inferred from a resolution." In this accord, it cannot be denied that the SB violated Section 444(b)(1)(vi) of the LGC altogether. Noticeably, the passage of the Subject Resolutions was also tainted with other irregularities, such as (1) the SB’s failure to submit the Subject Resolutions to the Sangguniang Panlalawigan of La Union for its review contrary to Section 56 of the LGC; and (2) the lack of publication and posting in contravention of Section 59 of the LGC.

(3) Generally, an ultra vires act is one committed outside the object for which a corporation is created as defined by the law of its organization and therefore beyond the powers conferred upon it by law.43 There are two (2) types of ultra vires acts. There is a distinction between an act utterly beyond the jurisdiction of a municipal corporation and the irregular exercise of a basic power under the legislative grant in matters not in themselves jurisdictional. The former are ultra vires in the primary sense and void; the latter, ultra vires only in a secondary sense which does not preclude ratification or the application of the doctrine of estoppel in the interest of equity and essential justice.

Applying these principles to the case at bar, it is clear that the Subject Loans belong to the first class of ultra vires acts deemed as void. Records disclose that the said loans were executed by the Municipality for the purpose of funding the conversion of the Agoo Plaza into a commercial center pursuant to the Redevelopment Plan. However, the conversion of the said plaza is beyond the Municipality’s jurisdiction considering the property’s nature as one for public use and thereby, forming part of the public dominion. Accordingly, it cannot be the object of appropriation either by the State or by private persons. Nor can it be the subject of lease or any other contractual undertaking.