Republic of
the
Supreme
Court
SECOND DIVISION
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MANUEL N. MAMBA, |
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G.R. No. 165109 |
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RAYMUND P. GUZMAN
and |
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LEONIDES N. FAUSTO, |
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Petitioners, |
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- versus - |
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EDGAR R. LARA, |
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Present: |
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JENERWIN C.
BACUYAG, |
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WILSON O. PUYAWAN, |
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CARPIO,* J., Chairperson, |
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ALDEGUNDO Q.
CAYOSA, JR., |
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CARPIO-MORALES,** |
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NORMAN A. AGATEP, |
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LEONARDO-DE CASTRO,*** |
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ESTRELLA P.
FERNANDEZ, |
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VILMER V.
VILORIA, |
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ABAD, JJ. |
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BAYLON A.
CALAGUI, |
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CECILIA MAEVE T.
LAYOS, |
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PREFERRED
VENTURES CORP., |
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ASSET BUILDERS
CORP., |
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RIZAL COMMERCIAL
BANKING |
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CORPORATION,
MALAYAN |
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INSURANCE CO.,
and LAND BANK |
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OF THE |
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Promulgated: |
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Respondents. |
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December 14, 2009 |
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D E C I
S I O N
The decision to entertain a
taxpayer’s suit is discretionary upon the Court. It can choose to strictly apply the rule or take
a liberal stance depending on the controversy involved. Advocates for a strict application of the rule
believe that leniency would open floodgates to numerous suits, which could hamper
the government from performing its job. Such possibility, however, is not only remote
but also negligible compared to what is at stake - “the lifeblood of the State”.
For this
reason, when the issue hinges on the illegal disbursement of public funds, a
liberal approach should be preferred as it is more in keeping with truth and
justice.
This Petition for Review on Certiorari with prayer for a Temporary
Restraining Order/Writ of Preliminary Injunction, under Rule 45 of the Rules of
Court, seeks to set aside the April 27, 2004 Order[1] of the Regional Trial Court
(RTC), Branch 5, Tuguegarao City, dismissing the Petition for Annulment of Contracts and Injunction with prayer for the
issuance of a Temporary Restraining Order/Writ of Preliminary Injunction,[2] docketed
as Civil Case No. 6283. Likewise
assailed in this Petition is the
Factual
Antecedents
On
On
On February 15,
2002, the Sangguniang Panlalawigan
approved Resolution No. 2002-061-A[7]
authorizing Gov. Lara to negotiate, sign and execute contracts or agreements
pertinent to the flotation of the bonds of the provincial government in an
amount not to exceed P500 million for the construction and improvement
of priority projects to be approved by the Sangguniang
Panlalawigan.
On P500 million to fund the construction and development of the new
Cagayan Town Center. The Resolution likewise
granted authority to Gov. Lara to negotiate, sign and execute contracts and
agreements necessary and related to the bond flotation subject to the approval
and ratification by the Sangguniang Panlalawigan.
On
a.
Trust
Indenture with the Rizal Commercial Banking Corporation (RCBC) – Trust and
Investment Division and Malayan Insurance Company, Inc. (MICO).
b.
Deed of
Assignment by way of security with the RCBC and the Land Bank of the
Philippines (LBP).
c.
Transfer and
Paying Agency Agreement with the RCBC – Trust and Investment Division.
d.
Guarantee
Agreement with the RCBC – Trust and Investment Division and MICO.
e.
Underwriting
Agreement with RCBC Capital Corporation.
On even date,
the Sangguniang Panlalawigan also approved Resolution No.
351-2003,[10]
ratifying the Agreement for the Planning, Design, Construction, and Site Development of the New
Cagayan Town Center[11]
entered into by the provincial government,
represented by Gov. Lara and Asset Builders Corporation, represented by its President, Mr. Rogelio P.
Centeno.
On P213,795,732.39.[12]
Proceedings before the Regional Trial Court
On December 12, 2003, petitioners Manuel N. Mamba, Raymund P. Guzman and
Leonides N. Fausto filed a Petition for Annulment of Contracts and Injunction
with prayer for a Temporary Restraining Order/Writ of Preliminary Injunction[13]
against Edgar R. Lara, Jenerwin C. Bacuyag,
Wilson O. Puyawan, Aldegundo Q.
Cayosa, Jr., Norman A. Agatep, Estrella P. Fernandez, Vilmer V. Viloria, Baylon A. Calagui, Cecilia
Maeve T. Layos, Preferred Ventures Corporation, Asset Builders Corporation,
RCBC, MICO and LBP.
At the time of
the filing of the petition, Manuel N. Mamba was the Representative of the 3rd
Congressional District of the
Edgar R. Lara
was sued in his capacity as governor of Cagayan,[16]
while Jenerwin C. Bacuyag, Wilson O. Puyawan, Aldegundo Q. Cayosa, Jr., Norman
A. Agatep, Estrella P. Fernandez, Vilmer V. Viloria, Baylon A. Calagui and
Cecilia Maeve T. Layos were sued as members of the Sangguniang Panlalawigan
of Cagayan.[17] Respondents Preferred Ventures Corporation, Asset
Builders Corporation, RCBC, MICO and LBP were all impleaded as indispensable or
necessary parties.
Respondent
Preferred Ventures Corporation is the financial advisor of the
In response to
the petition, public respondents filed an Answer with Motion to Dismiss,[23]
raising the following defenses: a) petitioners are not the proper parties
or they lack locus standi in court; b)
the action is barred by the rule on state immunity from suit and c) the issues
raised are not justiciable questions but purely political.
For its part,
respondent Preferred Ventures Corporation filed a Motion to Dismiss[24]
on the following grounds: a) petitioners have no cause of action for
injunction; b) failure to join an indispensable party; c) lack of personality
to sue and d) lack of locus standi. Respondent MICO likewise filed a Motion to
Dismiss[25]
raising the grounds of lack of cause of action and legal standing. Respondent
RCBC similarly argued in its Motion to Dismiss[26]
that: a) petitioners are not the real parties-in-interest or have no legal
standing to institute the petition; b) petitioners have no cause of action as
the flotation of the bonds are within the right and power of both respondent
RCBC and the province of Cagayan and c) the viability of the construction of a
town center is not a justiciable question but a political question.
Respondent Asset
Builders Corporation, on the other hand, filed an Answer[27]
interposing special and affirmative defenses of lack of legal standing and
cause of action. Respondent LBP also filed
an Answer[28]
alleging in the main that petitioners have no cause of action against it as it is
not an indispensable party or a necessary party to the case.
Two days after
the filing of respondents’ respective memoranda on the issues raised during the
hearing of the special and/or affirmative defenses, petitioners filed a Motion
to Admit Amended Petition[29]
attaching thereto the amended petition.[30]
Public respondents opposed the motion for
the following reasons: 1) the motion was belatedly filed; 2) the Amended Petition
is not sufficient in form and in substance; 3) the motion is patently dilatory
and 4) the Amended Petition was filed to cure the defect in the original petition.[31]
Petitioners also
filed a Consolidated Opposition to the Motion to Dismiss[32]
followed by supplemental pleadings[33]
in support of their prayer for a writ of preliminary injunction.
On
The language of Secs. 2 & 3 of Rule 10 of the
1997 Rules of Civil Procedure dealing on the filing of an amended pleading is
quite clear. As such, the Court rules that the motion was belatedly
filed. The granting of leave to file
amended pleadings is a matter peculiarly within the sound discretion of the
trial court. But the rule allowing
amendments to pleadings is subject to the general but inflexible limitation
that the cause of action or defense shall not be substantially changed or the
theory of the case altered to the prejudice of the other party (Avecilla vs.
Yatcvo, 103 Phil. 666).
On the assumption that the controversy presents
justiciable issues which this Court may take cognizance of, petitioners in the
present case who presumably presented legitimate interests in the controversy
are not parties to the questioned contract. Contracts produce effect as between the
parties who execute them. Only a party
to the contract can maintain an action to enforce the obligations arising under
said contract (Young vs. CA, 169 SCRA 213).
Since a contract is binding only upon the parties thereto, a third
person cannot ask for its rescission if it is in fraud of his rights. One who is not a party to a contract has no
rights under such contract and even if the contrary may be voidable, its
nullity can be asserted only by one who is a party thereto; a third person
would have absolutely no personality to ask for the annulment (Wolfson vs.
Estate of Martinez, 20 Phil. 340; Ibañez vs. Hongkong & Shanghai Bank, 22
Phil. 572; Ayson vs. CA, G.R. Nos. L-6501 & 6599,
It was, however, held that a person who is not a
party obliged principally or subsidiarily in a contract may exercise an action
for nullity of the contract if he is prejudiced in his rights with respect to
one of the contracting parties and can show the detriment which would
positively result to him from the contract in which he had no intervention
(Bañez vs. CA, 59 SCRA 15; Anyong Hsan vs. CA, 59 SCRA 110, 112-113; Leodovica
vs. CA, 65 SCRA 154-155). In the case at
bar, petitioners failed to show that they were prejudiced in their rights [or
that a] detriment x x x would positively result to them. Hence,
they lack locus standi in court.
x
x x x
To the mind of the Court, procedural matters in
the present controversy may be dispensed with, stressing that the instant case
is a political question, a question which the court cannot, in any manner, take
judicial cognizance. Courts will not
interfere with purely political questions because of the principle of
separation of powers (Tañada vs. Cuenco, 103 Phil. 1051). Political questions are those questions
which, under the Constitution, are to be decided by the people in their
sovereign capacity or in regard to which full discretionary authority has been
delegated to the legislative or [to the] executive branch of the government
(Nuclear Free Phils. Coalition vs. NPC, 141 SCRA 307 (1986); Torres vs.
Gonzales, 152 SCRA 272; Citizen’s Alliance for Consumer Protection vs. Energy
Regulatory Board, G.R. No. 78888-90, June 23, 1988).
The citation made by the provincial government[,
to] which this Court is inclined to agree, is that the matter falls under the
discretion of another department, hence the decision reached is in the category
of a political question and consequently may not be the subject of judicial
jurisdiction (Cruz in Political Law, 1998 Ed., page 81) is correct.
It is [a] well-recognized principle that purely
administrative and discretionary functions may not be interfered with by the
courts (Adm. Law Test & Cases, 2001 Ed., De Leon, De Leon, Jr.).
The case therefore calls for the doctrine of
ripeness for judicial review. This determines the point at which courts may
review administrative action. The basic
principle of ripeness is that the judicial machinery should be conserved for
problems which are real and present or imminent and should not be squandered on
problems which are future, imaginary or remote.
This case is not ripe for judicial determination since there is no
imminently x x x substantial injury to the petitioners.
In other words, the putting up of the New Cagayan
Town Center by the province over the land fully owned by it and the concomitant
contracts entered into by the same is within the bounds of its corporate power,
an undertaking which falls within the ambit of its discretion and therefore a
purely political issue which is beyond the province of the court x x x. [Consequently, the court cannot,] in any manner,
take judicial cognizance over it. The
act of the provincial government was in pursuance of the mandate of the Local
Government Code of 1991.
x x x x
Indeed, adjudication of the procedural issues
presented for resolution by the present action would be a futile exercise in
exegesis.
What defeats the plea of the petitioners for the
issuance of a writ of preliminary injunction is the fact that their averments
are merely speculative and founded on conjectures. An injunction is not intended to protect contingent
or future rights nor is it a remedy to enforce an abstract right (Cerebo vs.
Dictado, 160 SCRA 759; Ulang vs. CA, 225 SCRA 637). An injunction, whether preliminary or final,
will not issue to protect a right not in in esse and which may never arise,
or to restrain an act which does not give rise to a cause of action. The complainant’s right on title, moreover,
must be clear and unquestioned [since] equity,
as a rule, will not take cognizance of suits to establish title and will
not lend its preventive aid by injunction where the complainant’s title or
right is doubtful or disputed. The
possibility of irreparable damage,
without proof of violation of an actual existing right, is no ground for injunction being a mere damnum,
absque injuria (Talisay-Silay Milling Company, Inc. vs. CFI of Negros
Occidental, et. al. 42 SCRA 577, 582).
x x x x
For lack of cause of action, the case should be dismissed.
The facts and allegations [necessarily] suggest
also that this court may dismiss the case for want of jurisdiction.
The rule has to be so because it can motu
propio dismiss it as its only jurisdiction is to dismiss it if it has no
jurisdiction. This is in line with the
ruling in Andaya vs. Abadia, 46 SCAD 1036, G.R. No. 104033,
Upon the foregoing considerations, the case is hereby dismissed without costs.
SO ORDERED.[34]
Petitioners filed a Motion for Reconsideration[35] to which respondents filed
their respective Oppositions.[36] Petitioners then filed a Motion to Inhibit,
which the court granted. Accordingly,
the case was re-raffled to Branch 1 of the RTC of Tuguegarao City.[37]
On
Issues
Hence, the present recourse where petitioners argue that:
A.
The lower court decided a question of substance in a way not in accord
with law and with the applicable decision of the Supreme Court, and
B.
The lower court has so far departed from the accepted and usual course of
judicial proceedings as to call for an exercise of the power of supervision in
that:
I.
It denied locus standi to petitioners;
II.
[It] determined that the matter of contract entered into by the provincial
government is in the nature of a political question;
III.
[It] denied the admission of Amended Petition; and
IV.
[It] found a defect of substance in the petitioners’ Motion for
Reconsideration.[38]
Our Ruling
The petition
is partially meritorious.
Petitioners have legal standing to sue as taxpayers
A taxpayer is allowed to sue where there is a claim that public funds
are illegally disbursed, or that the public money is being deflected to any
improper purpose, or that there is wastage of public funds through the
enforcement of an invalid or unconstitutional law.[39] 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.[40] He must also prove that he has sufficient
interest in preventing the illegal expenditure of money raised by taxation and
that he will sustain a direct injury because of the enforcement of the questioned
statute or contract.[41] In other words, for a taxpayer’s suit to
prosper, two requisites must be met: (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.[42]
In light of the foregoing, it is
apparent that contrary to the view of the RTC,
a taxpayer need not be a party to the contract to challenge its
validity.[43] As long as taxes are involved, people have a
right to question contracts entered into by the government.
In this case, although the construction of the town center would be primarily
sourced from the proceeds of the bonds, which respondents insist are not
taxpayer’s money, a government support in the amount of P187 million
would still be spent for paying the interest of the bonds.[44] In fact, a Deed of Assignment[45] was executed by the
governor in favor of respondent RCBC over the Internal Revenue Allotment (IRA)
and other revenues of the provincial government as payment and/or security for the
obligations of the provincial government under the Trust Indenture Agreement
dated P25
million for the interest of the bond.[46] Clearly, the first requisite has been met.
As to the second
requisite, the court, in recent cases, has relaxed the stringent “direct injury
test” bearing in mind that locus standi is a procedural technicality.[47] By invoking “transcendental
importance”, “paramount public interest”, or “far-reaching implications”, ordinary
citizens and taxpayers were allowed to sue even if they failed to show direct
injury.[48] In cases where serious legal issues were
raised or where public expenditures of millions of pesos were involved, the court
did not hesitate to give standing to taxpayers.[49]
We find no reason to
deviate from the jurisprudential trend.
To begin with, the
amount involved in this case is substantial.
Under the various agreements entered into by the governor, which were
ratified by the Sangguniang Panlalawigan, the provincial government of
Cagayan would incur the following costs:[50]
Compensation to Preferred Ventures - P 6,150,000.00
(3%
of P205M)[51] Resolution No. 290-2001
Management
and Underwriting Fees - 3,075,000.00
(1.5%
of P205M)[52]
Documentary
Tax - 1,537,500.00
(0.75%
of P205M)[53]
Guarantee
Fee[54] - 7,350,000.00
Construction
and Design of town center[55] - 213,795,732.39
Total Cost -
P231,908,232.39
What is more, the provincial government would be shelling out a total
amount of P187 million for the period of seven years by way of subsidy
for the interest of the bonds. Without a
doubt, the resolution of the present
petition is of paramount importance to the people of Cagayan who at the end of
the day would bear the brunt of these agreements.
Another point to consider
is that local government units now possess more powers, authority and resources
at their disposal,[56] which in the hands of
unscrupulous officials may be abused and misused to the detriment of the
public. To protect the interest of the people and to prevent taxes from being
squandered or wasted under the guise of government projects, a liberal approach must therefore be
adopted in determining locus standi in public suits.
In view of the
foregoing, we are convinced that petitioners
have sufficient standing to file the present suit. Accordingly, they should be given the
opportunity to present their case before the RTC.
Having resolved the
core issue, we shall now proceed to the remaining issues.
The controversy involved is justiciable
A political question is a question of policy, which is to be decided by
the people in their sovereign capacity or by the legislative or the executive
branch of the government to which full discretionary authority has been
delegated.[57]
In filing the instant case before the RTC, petitioners seek to restrain
public respondents from implementing the bond flotation and to declare null and
void all contracts related to the bond flotation and construction of the town
center. In the petition before the RTC,
they alleged grave abuse of discretion and clear violations of law by public
respondents. They put in issue the
overpriced construction of the town center; the grossly disadvantageous bond
flotation; the irrevocable assignment of the provincial government’s annual
regular income, including the IRA, to respondent RCBC to cover and secure the
payment of the bonds floated; and the lack of consultation and discussion with
the community regarding the proposed project, as well as a proper and
legitimate bidding for the construction of the town center.
Obviously, the issues raised in the petition do not refer to the wisdom
but to the legality of the acts complained of. Thus, we find the instant controversy within
the ambit of judicial review. Besides, even
if the issues were political in nature, it would still come within our powers
of review under the expanded jurisdiction conferred upon us by Section 1,
Article VIII of the Constitution, which includes the authority to determine
whether grave abuse of discretion amounting to excess or lack of jurisdiction
has been committed by any branch or instrumentality of the government.[58]
The Motion to Admit Amended Petition was properly denied
However, as to the
denial of petitioners’ Motion to Admit Amended Petition, we find no reason to
reverse the same. The inclusion of the
In any case, there is no need to amend the petition because petitioners,
as we have said, have legal standing to sue as taxpayers.
Section 5, Rule 15 of the Rules of Court was
substantially complied with
This brings us to the fourth and
final issue.
A perusal of the
Motion for Reconsideration filed by petitioners would show that the notice of
hearing was addressed only to the Clerk of Court in violation of Section 5,
Rule 15 of the Rules of Court, which requires the notice of hearing to be
addressed to all parties concerned. This
defect, however, did not make the motion a mere scrap of paper. The rule is not a ritual to be followed
blindly.[59] The purpose of a notice of hearing is simply to
afford the adverse parties a chance to be heard before a motion is resolved by
the court.[60] In
this case, respondents were furnished copies of the motion, and consequently,
notified of the scheduled hearing. Counsel
for public respondents in fact moved for the postponement of the hearing, which
the court granted.[61]
Moreover, respondents were afforded
procedural due process as they were given sufficient time to file their
respective comments or oppositions to the motion. From the foregoing, it is clear that the rule
requiring notice to all parties was substantially complied with.[62]
In effect, the defect in the Motion for Reconsideration was cured.
We cannot overemphasize that procedural rules are mere tools to aid the
courts in the speedy, just and inexpensive resolution of cases.[63] Procedural defects or lapses, if negligible, should
be excused in the higher interest of justice as technicalities should not
override the merits of the case. Dismissal
of cases due to technicalities should also be avoided to afford the parties the
opportunity to present their case. Courts must be reminded that the swift
unclogging of the dockets although a laudable objective must not be done at the
expense of substantial justice.[64]
WHEREFORE, the instant Petition is PARTIALLY GRANTED. The April 27, 2004 Order of Branch 5 and the August 20, 2004 Resolution of Branch
1 of the Regional Trial Court of Tuguegarao City are hereby REVERSED and
SET ASIDE insofar as the dismissal of the petition is concerned. Accordingly, the case is hereby REMANDED
to the court a quo for further proceedings.
SO ORDERED.
MARIANO
C.
Associate
Justice
WE
CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
|
CONCHITA CARPIO MORALES Associate Justice |
TERESITA J. LEONARDO-DE CASTRO Associate Justice |
ROBERTO A. ABAD
Associate Justice
ATTESTATION
I
attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
C E R T I F I C A T I O N
Pursuant
to Section 13, Article VIII of the Constitution, and the Division Chairperson’s
attestation, it is hereby certified that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
* Per
Special Order No. 775 dated
**
In lieu of Justice Arturo D. Brion who
is on leave per Special Order No. 807 dated
***
Additional member per Special Order No.
776 dated
[1] Rollo,
pp. 221-230; penned by Judge Elmo M. Alameda.
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
[23]
[24]
[25]
[26]
[27]
[28]
[29]
[30]
[31]
[32]
[33]
[34]
[35]
[36]
[37]
[38]
[39] Constantino,
Jr. v. Cuisia, G.R. No. 106064, October 13, 2005, 472 SCRA 505, 518-519.
[40] Bayan
(Bagong Alyansang Makabayan v.
[41] Bugnay
Construction and Development Corporation v. Judge Laron, 257 Phil. 245, 256
(1989).
[42] Bagatsing
v.
[43] Abaya
v. Ebdane, Jr., G.R. No. 167919,
[44] Rollo,
p. 129; Answer with Motion to Dismiss of public respondents.
[45]
[46]
[47] Garcillano
v. House of Representatives Committees on Public Information, Public Order and
Safety, National Defense and Security, Information and Communications
Technology, and Suffrage and Electoral
Reforms, G.R. Nos. 1708338 & 179275, December 23, 2008, 575 SCRA 170,
185.
[48] David
v. Macapagal-Arroyo, G.R. Nos. 171396, 171409, 171485, 171483, 171400,
171489 & 171424, May 3, 2006, 489
SCRA 160.
[49] See Constantino,
Jr. v. Cuisia, supra at note 39; Abaya v. Ebdane, Jr., supra at note
43; Province of North Cotabato v. Government of the Republic of the
Philippines Peace Panel on Ancestral Domain (GRP), G.R. Nos. 183591,
183752, 183893, 183951 & 183962, October 14, 2008, 568 SCRA 402; Garcillano
v. House of Representatives Committees on Public Information, Public Order and
Safety, National Defense and Security, Information and Communications
Technology, and Suffrage and Electoral
Reforms, supra at note 47.
[50] See Rollo,
p. 11.
[51]
[52]
[53]
[54]
[55]
[56] Republic Act No. 7160, Section 2,
otherwise known as the “Local Government Code of 1991”.
[57] Association
of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, G.R.
Nos. 78742, 79310, 79744 & 79777,
[58] Daza
v. Singson, G.R. No. 86344,
[59] KKK
Foundation, Inc. v. Calderon-Bargas, G.R. No. 163785,
[60] Vlason Enterprises Corporation v. Court of Appeals, 369 Phil. 269, 299
(1999).
[61] Rollo,
p. 255.
[62] See
Philippine National Bank v. Paneda, G.R. No. 149236,
[63] Incon
Industrial Corporation v. Court of Appeals,
G.R. No. 161871, July 24, 2007, 528 SCRA 139, 144.
[64] Tacloban
II Neighborhood Association, Inc. v. Office of the President, G.R. No.
168561,