CIVIL PROCEDURE RULE 3 CASE #3

G.R. No. 191667, April 22, 2015

LAND BANK OF THE PHILIPPINES VS EDUARDO M. CACAYURAN
MUNICIPALITY OF AGOO, LA UNION – INTERVENOR
This is an amended decision by Justice Perlas-Bernabe

This case is a Motion for Reconsideration filed by LBP.

Facts:
The Municipality of Agoo entered into two loans with LBP in order to finance a Redevelopment
Plan of the Agoo Public Plaza. The Sangguniang Bayan of the Municipality authorized the mayor
Eufranio Eriguel to enter into a P4M loan with LBP for the Public Plaza and again for the amount
of P28M to construct a commercial center called Agoo People’s Center within the Plaza’s
premises. The Municipality used as collateral a 2,323.75 sqm lot at the south-eastern portion of
the Plaza.
Cacayuran and other residents opposed the redevelopment of the Plaza as well as the means of
the funding. They claim that these are highly irregular, violative of the law, and detrimental to
public interest resulting in the desecration of the public plaza. Cacayuran’s request for the
documents relating to the plaza’s redevelopment was not granted. Cacayuran invokes his
taxpayer right and files a complaint against LBP and officers of the municipality but does not
include the municipality itself as party-defendant. He questioned the validity of the loan
agreements and prays that the redevelopment is enjoined.
The municipal officers moved for the dismissal but were denied. LBP asserted that Cacayuran
did not have any cause of action because he was not privy to the loan agreements.

RTC Ruling:
Subject loans are null and void. Resolutions approving the procurement were passed irregularly
and are thus ultra vires. Municipality is not bound so it is the officers that will be held liable.
Plaza lot is property for public use and not valid as collateral.
LBP and the officers appealed to the CA. The municipal officers’ appeal is deemed abandoned
for failing to file an appellants’ brief. LBP was given due course.

CA Ruling:
RTC decision affirmed with modification: Vice-Mayor Antonio Eslao is free from personal
liability. Cacayuran has locus standi as resident and the issue is of transcendental importance to
public interest. Resolutions approving the loan are invalidly passed. Plaza lot is invalid as
collateral. Procurement is ultra vires
LBP files petition for certiorari with SC.

Proceedings Before the SC:

LBP petition is denied and CA decision affirmed. LBP moves for reconsideration, Municipality of
Agoo files a Motion for Leave to Intervene with Pleading-In-Intervention Attached praying to be
included as party litigant. It contends that being a contracting party to the subject loans, it is an
indispensable party. Cacayuran insists that they are not real party in interest because the
complaint is against the municipal officers in their personal capacity for their ultra vires acts not
binding to the municipality.

Issue Before the SC:

WON the Municipality of Agoo should be deemed an indaspensible party to the case and thus
be ordered impleaded herein. – YES it is an indispensable party under Sec 7, Rule 3 of the Rules
of Court.

SC Ruling:
Sec 7, Rule 3 mandates that all indispensable parties are to be joined in a suit as it is the party
whose interest will be affected by the court’s action and without whom no final determination
of the case can be had. His legal presence is an absolute necessity. Absence of the
indispensable party renders all subsequent actions of the court null and void for want of
authority to act.
Failure to implead any indispensable party is not a ground for the dismissal of the complaint.
The proper remedy is to implead them. In this case, Cacayuran failed to implead the
Municipality, a real party in interest and an indispensable party that stands to be directly
affected by any judicial resolution. It is the contracting party and the owner of the public plaza.
It stands to be benefited or injured by the judgment of the case.
The decision of the RTC, affirmed with modification by the CA, and finally affirmed by the SC is
not binding upon the Municipality as it was not impleaded as defendant in the case.

Subject motions are PARTLY GRANTED. Previous decisions are SET ASIDE. Instant case is
REMANDED to the RTC and Cacayuran is DIRECTExDfhdfhfdhd to implead all indispensable
parties.