Land Bank of the Philippines Vs. Eduardo M. Cacayuran G.R. No. 191667. April 17, 2013

Land Bank of the Philippines Vs. Eduardo M. Cacayuran G.R. No. 191667. April 17, 2013

https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/55806

Estela Perlas-Bernabe

## Issues

In its Decision dated March 26, 2010, the CA affirmed with modification the RTC’s ruling, excluding Vice Mayor Eslao from any personal liability arising from the Subject Loans.
It held, among others, that:

(1) Cacayuran had locus standi to file his complaint, considering that (a) he was born, raised and a bona fide resident of the Municipality; and  (b) the issue at hand involved public interest of transcendental importance;

(2) Resolution Nos. 68-2005, 139-2005, 58-2006, 128-2006 and all other related resolutions (Subject Resolutions) were invalidly passed due to the SB’s non-compliance with certain sections of Republic Act No. 7160, otherwise known as the “Local Government Code of 1991” (LGC);

(3) the Plaza Lot, which served as collateral for the Subject Loans, is property of public dominion and thus, cannot be appropriated either by the State or by private persons; and

(4) the Subject Loans are ultra vires because they were transacted without proper authority and their collateralization constituted improper disbursement of public funds.

A.  Cacayuran’s standing to sue

* A person suing as a taxpayer, however, must show that the act complained of directly involves the illegal disbursement of public funds derived from taxation. In other words, for a taxpayer’s suit to prosper, two requisites must be met namely,
* (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 any event, it is observed that 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.
* First, although the construction of the APC would be primarily sourced from the proceeds of the Subject Loans, which Land Bank insists are not taxpayer’s money, there is no denying that public funds derived from taxation are bound to be expended as the Municipality assigned a portion of its IRA as a security for the foregoing loans.
* The Court believes, however, that although these funds may be posted as a security, its collateralization should only be deemed effective during the incumbency of the public officers who approved the same, else those who succeed them be effectively deprived of its use.
* Second, as a resident-taxpayer of the Municipality, Cacayuran is directly affected by the conversion of the Agoo Plaza which was funded by the proceeds of the Subject Loans. It is well-settled that public plazas are properties for public use and therefore, belongs to the public dominion.
* In this light, Cacayuran had a direct interest in ensuring that the Agoo Plaza would not be exploited for commercial purposes through the APC’s construction.
* In Mamba v. Lara, it has been held that a taxpayer need not be a party to the contract to challenge its validity; as long as taxes are involved, people have a right to question contracts entered into by the government.

B.  Validity of the Subject Resolutions

* 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.

C.  Ultra vires nature of the Subject Loans

* 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.

## Decisions

**WHEREFORE**, the petition is **DENIED.** Accordingly, the March 26, 2010 Decision of the Court of Appeals in CA-G.R. CV. No. 89732 is hereby **AFFIRMED.**