Land Bank v. Cacayuran
REITERATIONFacts
The Antecedents: The Municipality of Agoo, La Union (Municipality), through its Sangguniang Bayan (SB), passed resolutions authorizing Mayor Eufranio Eriguel to obtain loans from Land Bank of the Philippines (Land Bank) to finance a Redevelopment Plan for the Agoo Public Plaza (Agoo Plaza). The first loan of ₱4,000,000.00 was for phase 1, involving the construction of kiosks. The second loan of ₱28,000,000.00 was for phase 2, the construction of a commercial center on the Plaza Lot, using the Plaza Lot and a portion of the Municipality's Internal Revenue Allotment (IRA) as collateral. Respondent Eduardo Cacayuran, a resident-taxpayer, along with other residents, objected to the conversion of the Agoo Plaza into a commercial center, deeming it irregular and detrimental to public interest. Cacayuran requested documents related to the conversion but received no response. He then filed a complaint against the Municipal officers and Land Bank, assailing the validity of the loans, arguing that the Plaza Lot, being property of public dominion, cannot be used as collateral. Procedural History: The Regional Trial Court (RTC) ruled in favor of Cacayuran, declaring the nullity of the loans, finding the resolutions irregular and ultra vires, and the Plaza Lot proscribed from collateralization. Land Bank appealed. The Court of Appeals (CA) affirmed the RTC's ruling with modification, excluding the Vice Mayor from personal liability. The CA held that Cacayuran had locus standi, the resolutions were invalidly passed due to non-compliance with the Local Government Code (LGC), the Plaza Lot is property of public dominion, and the loans were ultra vires due to lack of authority and improper disbursement of public funds. The Petition: Land Bank filed a Petition for Review on Certiorari before the Supreme Court, questioning Cacayuran's standing, the validity of the resolutions, and the ultra vires nature of the loans.
Issue(s)
Whether Cacayuran has legal standing to file the suit. Whether the Subject Resolutions were validly passed. Whether the Subject Loans are ultra vires.
Ruling
The petition is denied. The Decision of the Court of Appeals is affirmed.
Ratio Decidendi
On Cacayuran's standing to sue: The Court held that Cacayuran, as a resident-taxpayer, has legal standing. A taxpayer may sue when there is a claim of illegal disbursement of public funds, improper use of public money, or wastage of public funds through an invalid law. The requisites are met: (1) public funds derived from taxation are involved, as the Municipality's IRA was assigned as security, and the loan proceeds, once received by the Municipality, become impressed with the characteristics of public funds; and (2) Cacayuran, as a resident-taxpayer, is directly affected by the conversion of the Agoo Plaza, a property of public use, into a commercial center. The Court reiterated that a taxpayer need not be privy to a contract to challenge its validity if taxes are involved. On the validity of the Subject Resolutions: The Court found the Subject Resolutions invalidly passed. While Section 444(b)(1)(vi) of the LGC allows the municipal mayor to represent the municipality in business transactions and sign obligations upon authorization by the Sangguniang Bayan (SB), it requires that such obligations must be made pursuant to a law or ordinance. The Redevelopment Plan and the Subject Loans were approved through mere resolutions, which are declarations of sentiment and temporary in nature, unlike ordinances which have the force of law. The Court emphasized the distinction between ordinances and resolutions, stating that no rights can be conferred by a resolution. Furthermore, the passage of the resolutions was tainted with other irregularities, including the failure to submit them to the Sangguniang Panlalawigan for review as required by Section 56 of the LGC, and the lack of publication and posting in contravention of Section 59 of the LGC. On the ultra vires nature of the Subject Loans: The Court ruled that the Subject Loans are void ultra vires acts. An act is considered a void ultra vires act if it is utterly beyond the jurisdiction of the municipal corporation. The Municipality's jurisdiction does not extend to converting a public plaza, which is property of public dominion and intended for public use, into a commercial center. Such property is outside the commerce of man and cannot be the subject of appropriation, lease, or any other contractual undertaking. The loans were executed for the purpose of funding this unlawful conversion, making their purpose contrary to law, morals, good customs, public order, or public policy, thus rendering them void under Article 1409(1) of the Civil Code. The subsequent Municipal Ordinance No. 02-2007 attempting to declare the area as patrimonial property was also ineffective without an express grant from the national government.
Main Doctrine
Loan agreements entered into by a municipality to fund the conversion of a public plaza into a commercial center are void ultra vires acts because such conversion is beyond the municipality's jurisdiction, as public plazas are properties of public dominion and outside the commerce of man. Furthermore, resolutions authorizing such loans must comply with the Local Government Code, particularly regarding the requirement that obligations must be made pursuant to a law or ordinance, and that resolutions are distinct from ordinances and generally lack the force of law for such purposes.