Lao v. Local Government Unit of Cagayan de Oro City
REITERATIONFacts
The Antecedents: The City Council of Cagayan de Oro City passed City Ordinance No. 10557-2007, approving an unsolicited proposal for the redevelopment of the Agora Complex under a build-operate-transfer (BOT) scheme by MEGA Integrated Agro-Livestock Farm Corporation (Mega Farm). The City Council later resolved not to object to the draft BOT Contract and published an Invitation to Qualify and Bid. No competing bid was submitted. Subsequently, on January 27, 2009, Mega Farm and the newly elected Mayor Constantino Jaraula executed the Agora Complex BOT Contract, allegedly with terms different from the draft. Procedural History: Petitioners, including City Councilors Teodulfo E. Lao, Jr., Roger A. Abaday, Zaldy O. Ocon, and Barangay Captain Enrico D. Salcedo, filed a Complaint for Declaration of Nullity of the contract and related ordinances, resolutions, and motions, praying for a Temporary Restraining Order (TRO) and preliminary injunction. They alleged that Mega Farm was unqualified and the contract was disadvantageous. The Regional Trial Court (RTC) denied their prayer for a TRO and dismissed their complaint. The RTC ruled that it was prohibited by Republic Act No. 8975 from issuing injunctive relief against national government projects, classifying the BOT contract as such. It also found that petitioners lacked standing as they were not parties to the contract and no public funds were appropriated. The Petition: Petitioners filed a Petition for Review on Certiorari with the Supreme Court, arguing that the RTC erred in dismissing their case for lack of jurisdiction and that the prohibition under Republic Act No. 8975 only applied to TROs and injunctions, not the main cause of action for nullity. They also contended that the contract was unconstitutional, that they had locus standi as elected officials representing the people, and that the mayor lacked authority to sign the contract. They also questioned Mega Farm's financial capacity.
Issue(s)
Whether it was proper for the petitioners to file a Petition for Review under Rule 45 directly with the Supreme Court. Whether the petition's Verification and Certification of Non-Forum Shopping is fatally defective. Whether the Regional Trial Court correctly denied the issuance of a temporary restraining order against the Agora Complex Build-Operate-Transfer Contract. Whether the petitioners have locus standi to file a complaint to have the Agora Complex Build-Operate-Transfer Contract declared null and void.
Ruling
The petition is PARTIALLY GRANTED. The dismissal of the Complaint for the Declaration of Nullity of the Redevelopment of Agora Market and Terminal Contract Under Build-Operate-Transfer Scheme and All Ordinances, Resolutions and Motions of the City Council Relative Thereto with Prayer for Temporary Restraining Order and Preliminary Prohibitory Injunction with Damages is REVERSED. The denial of the issuance of a Temporary Restraining Order and/or Writ of Preliminary Prohibitory Injunction is AFFIRMED. The case is REMANDED to the Regional Trial Court of origin for further proceedings.
Ratio Decidendi
On the propriety of direct resort to the Supreme Court: The Court held that direct resort to the Supreme Court via a petition for review on certiorari under Rule 45 is permitted only when questions of law are involved. While the issue of whether the RTC correctly denied the TRO and dismissed the complaint due to lack of jurisdiction and standing is a question of law, the nullity of the contract due to the mayor's alleged lack of authority and the proponent's alleged lack of financial capacity require the reception and examination of evidence, thus constituting questions of fact not cognizable in a Rule 45 petition. Therefore, the petition was only partially proper. On the defect in the Verification and Certification of Non-Forum Shopping: The Court noted that the petition's Verification and Certification of Non-Forum Shopping, as well as the Affidavit of Proof of Service, lacked statements that the affiants were personally known to the notary public or had presented competent evidence of identity, as required by the 2004 Rules on Notarial Practice. However, in view of the merits of the case, this defect was overlooked. The Court also directed the notary public, Atty. Manolo Z. Tagarda, Sr., to show cause why he should not be held administratively liable for violating the Notarial Rules and the Code of Professional Responsibility. On the denial of the Temporary Restraining Order: The Court affirmed the RTC's denial of the TRO. It clarified that Republic Act No. 8975 prohibits courts, other than the Supreme Court, from issuing TROs or injunctions against national government projects, which include BOT projects of local government units. The exception for extreme urgency involving a constitutional issue was not met, as the petitioners' claims of fraudulent maneuvers were not shown to be a clear and compelling breach of a constitutional provision, nor did they demonstrate grave injustice or irreparable injury. The RTC correctly found that the Agora Complex BOT Contract fell within the prohibition of Republic Act No. 8975. On the locus standi of the petitioners: The Court found the RTC's dismissal of the complaint due to lack of standing to be erroneous. It held that members of the City Council have legal standing to file a case to question a contract entered into by the city mayor without the City Council's authority, as provided by Section 455(b)(1)(vi) of the Local Government Code. This requirement for prior authorization serves as a check and balance on the mayor's power. The City Council represents the city, which is the real party in interest that stands to be benefited or injured by the judgment. Therefore, the petitioners, as councilors, had the right and duty to question the contract's validity.
Main Doctrine
Members of the Sangguniang Panlungsod have legal standing to file a case to declare a contract entered into by the city mayor null and void for lack of prior authorization from the Sangguniang Panlungsod, as required by the Local Government Code. However, courts are prohibited by Republic Act No. 8975 from issuing temporary restraining orders or preliminary injunctions against national government projects, including Build-Operate-Transfer projects of local government units, unless an extreme constitutional issue is involved.