LAND BANK OF THE PHILIPPINES, Petitioner,

vs.
EDUARDO M. CACAYURAN, Respondent.

G.R. No. 191667 April 17, 2013

PERLAS-BERNABE, J.:

DOCTRINE: Section 2. Parties in interest. — 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.

Section 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.

FACTS:

The MUNICIPALITY OF AGOO, LA UNION (MUNICIPALITY) entered into 2

loans agreement with LAND BANK OF THE PHILIPPINES, to redevelop the Agoo
Public Plaza (Agoo Plaza) where the Imelda Garden and Jose Rizal Monument were
situated. The Municipality’s Sangguniang Bayan (SB) passed certain resolutions,
authorizing then Mayor Eufranio Eriguel (Mayor Eriguel) to obtain a loan and incidental
thereto, mortgage a 2,323.75 square meter lot situated at the southeastern portion of
the Agoo Plaza (Plaza Lot) as collateral.

Consequently, on November 21, 2005, Land Bank extended a ₱4,000,000.00

loan in favor of the Municipality (First Loan). Thereafter, Land Bank granted a second
loan in favor of the Municipality on October 20, 2006 in the principal amount of
₱28,000,000.00 (Second Loan).

Some residents of the Municipality headed by Eduardo Cacayuran (Cacayuran)

claimed that the conversion of the Agoo Plaza into a commercial center, as funded by
the proceeds from the First and Second Loans (Subject Loans), were "highly irregular,
violative of the law, and detrimental to public interests, and will result to wanton
desecration of the said historical and public park." In addition, Cacayuran wrote a letter
addressed to Mayor Eriguel and Municipality officials expressing the growing public
clamor against the conversion of the Agoo Plaza into a commercial center and
requested the foregoing officers to furnish him certified copies of various documents
related to the said conversion including, among others, the resolutions approving the
Redevelopment Plan as well as the loan agreements.

Unresponded, Cacayuran, invoking his right as a taxpayer, filed a Complaint.

Motion to Dismiss was filed but denied. The Implicated Officers and Land Bank filed
their respective Answers. Land Bank claimed that it is not privy to the Implicated
Officers’ acts of destroying the Agoo Plaza. During the pendency of the proceedings,
the construction of the commercial center was completed and the said structure later
became known as the Agoo’s People Center (APC).

Ruling of the RTC: ruled in favor of Cacayuran, declaring the Subject Loans null and
void. Resolutions passed in a highly irregular manner and thus, ultra vires ; as such, the
Municipality is not bound by the same and Plaza Lot is proscribed from collateralization
given its nature as property for public use.

Land Bank filed Notice of Appeal On the other hand, the Implicated Officers’ appeal was
deemed abandoned and dismissed for their failure to file an appellants’ brief despite
due notice.Hence, only Land Bank’s appeal was given due course by the CA.

Ruling of the CA: RTC’s decision affirmed with modification excluding Vice Mayor
Eslao from any personal liability arising from the Subject Loans. Among others,
Cacayuran had locus standi to file his complaint,and involved public interest of
transcendental importance. Resolutions approving loans were invalidly passed and
Plaza lot in invalid as collateral. Hence procurement is ultra vires. Land Bank filed
instant petition before SC.

ISSUE: WON the Municipality of Agoo, La Union should be deemed an

indispensable party to the case.

HELD: Yes, it is indispensable party.

Sec. 7, Rule 3 mandates that all indespensable 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 indespensable party renders all subsequent actions of the
court null and void for want of jurisdiction to act.

Here, failure to implead any indispensable party is not a ground for the dismissal
of the complaint. The proper remedy is to implead them. Cacayuran failed to implead
the Municipality, a real party in interest and an indispensable party that stands to be
directly affected by any 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 CA and finally affirmed by SC is not binding upon
Municipality as it was not impleaded as defendant in the case.

Digested by:

Magistrado, Emmanuel B.