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3aepublic of tbe Jlbilippines

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SPECIAL SECOND DIVISION

LAND BANK OF THE G.R. No. 191667

PHILIPPINES,
Petitioner,
Present:
- versus -
CARPIO, J., Chairperson,
BRION,
EDUARDO M. CACAYURAN, DEL CASTILLO,
Respondent, PEREZ, and
PERLAS-BERNABE, JJ.
MUNICIPALITY OF AGOO,
LA UNION,
Promulgated:
Intervenor.

x-----------------------------------------------------------------------------

AMENDED DECISION

PERLAS-BERNABE, J.:

Before the Court are the following motions: (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), which upheld the Decision 3 dated March 26,
2010 of the Court of Appeals (CA) in CA-G.R. CV. No. 89732 affirming
with modification the Decision4 dated April 10, 2007 of the Regional Trial
Court of Agoo, La Union, Branch 31 in Civil Case No. A-2473; (b) the
Motion for Leave to Intervene with Pleading-in-Intervention Attached 5
dated July 8, 2013, filed by the Municipality of Agoo, La Union
(Municipality) praying that it be allowed to intervene in this case; and (c) the

Rollo, pp. 377-382.

2
Land Bank of the Philippines v. Cacayuran, G.R. No. 191667, April 17, 2013, 696 SCRA 861. See
also rollo, pp. 365-376.
3
Rollo, pp. 42-73. Penned by Associate Justice Celia C. Librea-Leagogo with Associate Justices Ramon
R. Garcia and Stephen C. Cruz concurring.
4
Id. at 74-203. Penned by Executive Judge Clifton U. Ganay.
Id. at 387-393.

~
Amended Decision 2 G.R. No. 191667

Motion for Reconsideration-in-Intervention6 dated July 8, 2013, filed by the

Municipality seeking that the Court set aside its April 17, 2013 Decision and
promulgate a new one in its stead dismissing the case (subject motions).

The Facts

The instant case arose from two (2) loans (Subject Loans) entered into
by the Municipality with LBP in order to finance the Redevelopment Plan of
the Agoo Public Plaza (Public Plaza). Through Resolution Nos. 68-20057
and 139-2005,8 the Sangguniang Bayan of 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 9 and 128-2006, 10 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).11

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].” 12 Further,
Cacayuran requested the municipal officers to furnish him with the various
documents relating to the Public Plaza’s redevelopment, which, however,
went unheeded.13 Thus, Cacayuran, invoking his right as a taxpayer, filed a
complaint14 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.15

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.16

6
Id. at 394-410.
7
Id. at 79-83.
8
Id. at 120-125.
9
Id. at 115-120.
10
Id. at 125-127.
11
See id. at 366-367.
12
Id.
13
Id. at 367.
14
Dated December 18, 2006. Id. at 205-212.
15
See ld. at 210-211.
16
Id. at 367.
Amended Decision 3 G.R. No. 191667

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.20

Aggrieved, LBP and the municipal officers appealed 21 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.22
Thus, only LBP’s appeal was given due course by the CA.23

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, 25 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.26

17
Id. at 219-220.
18
Id. at 367-368.
19
Id. at 74-203.
20
See id. at 368.
21
Not attached to the rollo.
22
Rollo, p. 45.
23
Id. at 368.
24
Id. at 42-73.
25
Entitled “AN ACT PROVIDING FOR A LOCAL GOVERNMENT CODE OF 1991”; approved on October 10,
1991.
26
See rollo, pp. 368-369.
Amended Decision 4 G.R. No. 191667

Dissatisfied, LBP filed a petition for review on certiorari27 before this

Court.

Proceedings Before the 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;29 (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; 30 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.31

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.32

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 be
included 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.

27
Id. at 10-37.
28
Id. at 365-376.
29
Id. at 369-370.
30
Id. at 371-372.
31
Id. at 373-374.
32
See Motion for Reconsideration dated May 22, 2013; id. at 377-382.
33
Id. at 387-393.
34
Id. at 394-410.
35
See Comment/Opposition to Petitioner’s Motion for Reconsideration, and to Intervenor’s Motion for
Reconsideration in-Intervention dated October 24, 2013; id. at 424-439.
Amended Decision 5 G.R. No. 191667

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 the
Municipality 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.38

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.,39 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:

36
Id. at 453-457.
37
Gabatin v. Land Bank of the Philippines, 486 Phil. 366, 379-380 (2004), citing Bank of the Philippine
Islands v. CA, 450 Phil. 532, 541 (2003).
38
See Domingo v. Scheer, 466 Phil. 235, 265 (2004).
39
G.R. No. 201816, April 8, 2013, 695 SCRA 345.
Amended Decision 6 G.R. No. 191667

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.40
(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 the
Municipality; and (b) the Municipality owns the Public Plaza as well as the
improvements constructed thereon, including the Agoo People’s Center. As
the Municipality aptly points out:42

3. 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.

xxxx

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.

xxxx

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

40
Id. at 353, citing Pamplona Plantation Co., Inc. v. Tinghil, 491 Phil. 15, 29 (2005).
41
“A real party-in-interest is the party who stands to be benefited or injured by the judgment in the suit,
or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every
action must be prosecuted or defended in the name of the real party-in-interest.” (Section 2, Rule 3 of
the Rules of Court).
42
See rollo, pp. 395-396.
Amended Decision 7 G.R. No. 191667

case so filed or the party entitled to the avails of the case and is,
therefore, the real party-in-interest.

xxxx

3k. Without having to say so, the RTC dispositions as affirmed

with modification by the CA Decision which, in turn was affirmed by
the 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 jurisdiction44 and, corollarily, the issue on jurisdiction
may be raised at any stage of the proceedings.45 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
43
Rollo, pp. 395-398.
44
Living@Sense, Inc. v. Malayan Insurance Company, Inc., G.R. No. 193753, September 26, 2012, 682
SCRA 59, 64.
45
Francel Realty Corporation v. Sycip, 506 Phil. 407, 415 (2005).
46
See Quilatan v. Heirs of Quilatan (614 Phil 162, 168 [2009]) where the Court ordered the remand of
the case therein all the way back to the RTC for the failure of petitioners therein to implead all the
indispensable parties in their complaint.
Amended Decision 8 G.R. No. 191667

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.

1
AJJ.W
ESTELA M. PLRLAS-BERNABE
Associate Justice

WE CONCUR:

Associate Justice
Chairperson

QVUiuM~
ARTURO D. BRION
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MARIANO C. DEL CASTILLO
Associate Justice Associate Justice

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ATTESTATION

I attest that the conclusions in the above Amended Decision had been

opinion of the Conrt's Division. QZ

reached in consultation before the case was assigned to ~riter of the
l~

ANTONIO T. CARPIO
Associate Justice
Chairperson, Special Second Division
Amended Decision 9 G.R. No. 191667

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

Division Chairperson's Attestation, I certify that the conclusions in the
above Amended Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P.A. SERENO

Chief Justice