G.R. No. 191667. April 17, 2013.* subject to ratification and/or validation.

To the former belongs municipal

LAND BANK OF THE PHILIPPINES, petitioner, vs. EDUARDO contracts which (a) are entered into beyond the express, implied or
M. CACAYURAN, respondent. inherent powers of the local government unit; and (b) do not comply with
the substantive requirements of law e.g., when expenditure of public funds
Remedial Law; Civil Procedure; Taxpayer’s Suits; For a is to be made, there must be an actual appropriation and certificate of
taxpayer’s suit to prosper, two requisites must be met namely, (1) public availability of funds; while to the latter belongs those which (a) are entered
funds derived from taxation are disbursed by a political subdivision or into by the improper department, board, officer of agent; and (b) do not
instrumentality and in doing so, a law is violated or some irregularity is comply with the formal requirements of a written contract e.g., the Statute
committed; and (2) the petitioner is directly affected by the alleged act.—It of Frauds.
is hornbook principle that a taxpayer is allowed to sue where there is a Civil Law; Contracts; Article 1409(1) of the Civil Code provides
claim that public funds are illegally disbursed, or that public money is that purpose is contrary to law, morals, good customs, public order or
being deflected to any improper purpose, or that there is wastage of public public policy is considered void and as such, creates no rights or
funds through the enforcement of an invalid or unconstitutional law. A obligations or any juridical relations.—Article 1409(1) of the Civil Code
person suing as a taxpayer, however, must show that the act complained of provides that a contract whose purpose is contrary to law, morals, good
directly involves the illegal disbursement of public funds derived from customs, public order or public policy is considered void and as such,
taxation. In other words, for a taxpayer’s suit to prosper, two requisites creates no rights or obligations or any juridical relations. Consequently,
must be met namely, (1) public funds derived from taxation are disbursed given the unlawful purpose behind the Subject Loans which is to fund the
by a political subdivision or instrumentality and in doing so, a law is commercialization of the Agoo Plaza pursuant to the Redevelopment Plan,
violated or some irregularity is committed; and (2) the petitioner is directly they are considered as ultra vires in the primary sense thus, rendering them
affected by the alleged act. void and in effect, non-binding on the Municipality. At this juncture, it is
Local Government Units; Internal Revenue Allotments (IRA); The equally observed that the land on which the Agoo Plaza is situated cannot
Municipality’s Internal Revenue Allotment, which serves as the local be converted into patrimonial property―as the SB tried to when it
government unit’s just share in the national taxes, is in the nature of passed Municipal Ordinance No. 02-2007―absent any express grant by
public funds derived from taxation.—Although the con- the national government. As public land used for public
_______________ 864
* SECOND DIVISION.

862 864 SUPREME COURT

REPORTS ANNOTATED
862 SUPREME COURT
Land Bank of the Philippines vs.
REPORTS ANNOTATED
Cacayuran
Land Bank of the Philippines vs. use, the foregoing lot rightfully belongs to and is subject to the
administration and control of the Republic of the Philippines. Hence,
Cacayuran without the said grant, the Municipality has no right to claim it as
struction of the APC would be primarily sourced from the proceeds patrimonial property.
of the Subject Loans, which Land Bank insists are not taxpayer’s money, Local Government Units; Ultra Vires Acts; Case law states that
there is no denying that public funds derived from taxation are bound to be public officials can be held personally accountable for acts claimed to
expended as the Municipality assigned a portion of its IRA as a security have been performed in connection with official duties where they have
for the foregoing loans. Needless to state, the Municipality’s IRA, which acted ultra vires.—Nevertheless, while the Subject Loans cannot bind the
serves as the local government unit’s just share in the national taxes, is in Municipality for being ultra vires, the officers who authorized the passage
the nature of public funds derived from taxation. The Court believes, of the Subject Resolutions are personally liable. Case law states that public
however, that although these funds may be posted as a security, its officials can be held personally accountable for acts claimed to have been
collateralization should only be deemed effective during the incumbency performed in connection with official duties where they have acted ultra
of the public officers who approved the same, else those who succeed them vires, as in this case.
be effectively deprived of its use. In any event, it is observed that the
proceeds from the Subject Loans had already been converted into public PETITION for review on certiorari of a decision of the Court of
funds by the Municipality’s receipt thereof. Funds coming from private
Appeals.
sources become impressed with the characteristics of public funds when
they are under official custody.    The facts are stated in the opinion of the Court.
Remedial Law; Civil Procedure; Taxpayer’s Suits; A taxpayer   LBP Legal Services Group for petitioner.
need not be a party to the contract to challenge its validity; as long as   Pablo M. Olarte for respondent.
taxes are involved, people have a right to question contracts entered into
by the government.—As a resident-taxpayer of the Municipality, PERLAS-BERNABE, J.:
Cacayuran is directly affected by the conversion of the Agoo Plaza which Assailed in this Petition for Review on Certiorari  is the 1

was funded by the proceeds of the Subject Loans. It is well-settled that March 26, 2010 Decision  of the Court of Appeals (CA) in CA-
2

public plazas are properties for public use and therefore, belongs to the G.R. CV. No. 89732 which affirmed with modification the April
public dominion. As such, it can be used by anybody and no one can 10, 2007 Decision  of the Regional Trial Court (RTC) of Agoo, La
3

exercise over it the rights of a private owner. In this light, Cacayuran had a
Union, Branch 31, declaring inter alia the nullity of the loan
direct interest in ensuring that the Agoo Plaza would not be exploited for
commercial purposes through the APC’s construction. Moreover, agreements entered into by petitioner Land Bank of
_______________
Cacayuran need not be privy to the Subject Loans in order to proffer his 1 Rollo, pp. 10-37.
objections thereto. In Mamba v. Lara, 608 SCRA 149 (2009), it has been 2 Id., at pp. 42-73. Penned by Associate Justice Celia C. Librea-Leagogo, with
held that a taxpayer need not be a party to the contract to challenge its Associate Justices Ramon R. Garcia and Stephen C. Cruz, concurring.
validity; as long as taxes are involved, people have a right to question 3 Id., at pp. 74-203. Penned by Executive Judge Clifton U. Ganay.
contracts entered into by the government.
Local Government Units; Ultra Vires Acts; An act which is outside 865
of the municipality’s jurisdiction is considered as a void ultra vires act, VOL. 696, APRIL 17, 2013 865
while an act attended only by an irregularity but remains within the
municipality’s power is considered as an ultra vires act subject to Land Bank of the Philippines vs.
ratification and/or validation.—Generally, an ultra vires act is one
committed outside the object for which a corporation is
Cacayuran
863 the Philippines (Land Bank) and the Municipality of Agoo, La
Union (Municipality).
VOL. 696, APRIL 17, 863 The Facts
From 2005 to 2006, the Municipality’s Sangguniang
2013 Bayan (SB) passed certain resolutions to implement a multi-
Land Bank of the Philippines vs. phased plan (Redevelopment Plan) to redevelop the Agoo Public
Cacayuran Plaza (Agoo Plaza) where the Imelda Garden and Jose Rizal
created as defined by the law of its organization and therefore
Monument were situated.
beyond the powers conferred upon it by law. There are two (2) types of To finance phase 1 of the said plan, the SB initially passed
ultra vires acts. As held in Middletown Policemen’s Benevolent Resolution No. 68-2005  on April 19, 2005, authorizing then
4

Association v. Township of Middletown, 162 N.J. 361, 368 (2000): There is Mayor Eufranio Eriguel (Mayor Eriguel) to obtain a loan from
a distinction between an act utterly beyond the jurisdiction of a Land Bank and incidental thereto, mortgage a 2,323.75 square
municipal corporation and the irregular exercise of a basic power meter lot situated at the southeastern portion of the Agoo Plaza
under the legislative grant in matters not in themselves jurisdictional. (Plaza Lot) as collateral. To serve as additional security, it further
The former are ultra vires in the primary sense and void; the latter, ultra authorized the assignment of a portion of its internal revenue
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
allotment (IRA) and the monthly income from the proposed
essential justice. (Emphasis and underscoring supplied) In other words, an project in favor of Land Bank.  The foregoing terms were
5

act which is outside of the municipality’s jurisdiction is considered as a confirmed, approved and ratified on October 4, 2005 through
void ultra vires act, while an act attended only by an irregularity but Resolution No. 139-2005.  Consequently, on November 21, 2005,
6

remains within the municipality’s power is considered as an ultra vires act Land Bank extended a P4,000,000.00 loan in favor of the
Municipality (First Loan),  the proceeds of which were used to
7
On May 8, 2007, the SB passed Municipal Ordinance No. 02-
construct ten (10) kiosks at the northern and southern portions of 2007,  declaring the area where the APC stood as patrimonial
20

the Imelda Garden. After completion, these kiosks were rented property of the Municipality.
out. 8 _______________
16 Id., at pp. 205-212.
On March 7, 2006, the SB passed Resolution No. 58- 17 Id., at p. 208.
2006,  approving the construction of a commercial center on the
9
18 Id., at p. 49.
_______________ 19 Id., at p. 53.
4 Id., at pp. 79-83. 20 Id., at pp. 219-220.
5 Id., at p. 63.
6 Id., at pp. 120-125. 868
7 Id., at p. 64.
8 Id., at pp. 87-88. 86 SUPREME COURT REPORTS
9 Id., at pp. 115-120. Records reveal that there are two (2) versions of
Resolution No. 58-2006. While in both versions the SB approved the construction of 8 ANNOTATED
the said commercial center, the second
Land Bank of the Philippines vs.
866 Cacayuran
86 SUPREME COURT REPORTS The Ruling of the RTC
6 ANNOTATED In its Decision dated April 10, 2007,  the RTC ruled in favor
21

of Cacayuran, declaring the nullity of the Subject Loans.  It found 22

Land Bank of the Philippines vs. that the resolutions approving the said loans were passed in a
Cacayuran highly irregular manner and thus, ultra vires; as such, the
Plaza Lot as part of phase II of the Redevelopment Plan. To Municipality is not bound by the same.  Moreover, it found that
23

finance the project, Mayor Eriguel was again authorized to obtain the Plaza Lot is proscribed from collateralization given its nature
a loan from Land Bank, posting as well the same securities as that as property for public use. 24

of the First Loan. All previous representations and warranties of Aggrieved, Land Bank filed its Notice of Appeal on April 23,
Mayor Eriguel related to the negotiation and obtention of the new 2007.  On the other hand, the Implicated Officers’ appeal was
25

loan  were ratified on September 5, 2006 through Resolution No.

10 deemed abandoned and dismissed for their failure to file an
128-2006.  In consequence, Land Bank granted a second loan in
11 appellants’ brief despite due notice.  In this regard, only Land
26

favor of the Municipality on October 20, 2006 in the principal Bank’s appeal was given due course by the CA.
amount of P28,000,000.00 (Second Loan). 12 Ruling of the CA
Unlike phase 1 of the Redevelopment Plan, the construction In its Decision dated March 26, 2010,  the CA affirmed with
27

of the commercial center at the Agoo Plaza was vehemently modification the RTC’s ruling, excluding Vice Mayor Eslao from
objected to by some residents of the Municipality. Led by any personal liability arising from the Subject Loans. 28

respondent Eduardo Cacayuran (Cacayuran), these residents It held, among others, that: (1) Cacayuran had locus standi to
claimed that the conversion of the Agoo Plaza into a commercial file his complaint, considering that (a) he was born, raised and
center, as funded by the proceeds from the First and Second Loans a bona fide resident of the Municipality; and (b) the issue at hand
(Subject Loans), were “highly irregular, violative of the law, and involved public interest of transcendental importance;  (2) 29

detrimental to public interests, and will result to wanton Resolution Nos. 68-2005, 139-2005, 58-2006, 128-2006 and all
desecration of the said historical and public park.”  The foregoing 13 other related resolutions (Subject Resolutions)
_______________
was embodied in a Manifesto,  launched through a signature
14
21 Id., at pp. 74-203.
campaign conducted by the residents and Cacayuran. 22 Id., at p. 199.
In addition, Cacayuran wrote a letter  dated December 8, 2006
15 23 Id., at pp. 148-149.
24 Id., at pp. 145-147.
addressed to Mayor Eriguel, Vice Mayor Antonio Eslao (Vice 25 Id., at p. 56.
Mayor Eslao), and the members of the SB namely, Violeta 26 Id., at p. 45.
Laroya-Balbin, Jaime Boado, Jr., Rogelio De Vera, James 27 Id., at pp. 42-73.
_______________ 28 Id., at p. 69.
version further authorized Mayor Eriguel to negotiate and enter into a loan with 29 Id., at pp. 62-63.
Land Bank for the aforesaid purpose, as well as mortgage, assign, or execute any
other collateral agreement to secure the payment of such loan. 869
10 Id., at p. 65.
11 Id., at pp. 125-127. VOL. 696, APRIL 17, 2013 869
12 Id., at p. 65.
13 Id., at pp. 213-215.
Land Bank of the Philippines vs.
14 Id. Cacayuran
15 Id., at pp. 216-218.
were invalidly passed due to the SB’s non-compliance with
867 certain sections of Republic Act No. 7160, otherwise known as the
VOL. 696, APRIL 17, 2013 867 “Local Government Code of 1991” (LGC); (3) the Plaza Lot,
which served as collateral for the Subject Loans, is property of
Land Bank of the Philippines vs. public dominion and thus, cannot be appropriated either by the
Cacayuran State or by private persons;  and (4) the Subject Loans are ultra
30

Dy, Crisogono Colubong, Ricardo Fronda, Josephus Komiya, vires because they were transacted without proper authority and
Erwina Eriguel, Felizardo Villanueva, and Gerard Mamuyac their collateralization constituted improper disbursement of public
(Implicated Officers), expressing the growing public clamor funds.
against the conversion of the Agoo Plaza into a commercial center. Dissatisfied, Land Bank filed the instant petition.
He then requested the foregoing officers to furnish him certified Issues Before the Court
copies of various documents related to the aforementioned The following issues have been raised for the Court’s
conversion including, among others, the resolutions approving the resolution: (1) whether Cacayuran has standing to sue; (2) whether
Redevelopment Plan as well as the loan agreements for the sake of the Subject Resolutions were validly passed; and (3) whether the
public information and transparency. Subject Loans are ultra vires.
Unable to get any response, Cacayuran, invoking his right as a The Court’s Ruling
taxpayer, filed a Complaint  against the Implicated Officers and
16 The petition lacks merit.
Land Bank, assailing, among others, the validity of the Subject A. Cacayuran’s standing to sue
Loans on the ground that the Plaza Lot used as collateral thereof is Land Bank claims that Cacayuran did not have any standing to
property of public dominion and therefore, beyond the commerce contest the construction of the APC as it was funded through the
of man. 17 proceeds coming from the Subject Loans and not from public
Upon denial of the Motion to Dismiss dated December 27, funds. Besides, Cacayuran was not even a party to any of the
2006,  the Implicated Officers and Land Bank filed their
18 Subject Loans and is thus, precluded from questioning the same.
respective Answers. The argument is untenable.
For its part, Land Bank claimed that it is not privy to the It is hornbook principle that a taxpayer is allowed to sue
Implicated Officers’ acts of destroying the Agoo Plaza. It further where there is a claim that public funds are illegally disbursed, or
asserted that Cacayuran did not have a cause of action against it that public money is being deflected to any im-
_______________
since he was not privy to any of the Subject Loans. 19
30 Id., at p. 67.
During the pendency of the proceedings, the construction of
the commercial center was completed and the said structure later 870
became known as the Agoo’s People Center (APC). 87 SUPREME COURT REPORTS
0 ANNOTATED Land Bank avers that the Subject Resolutions provided ample
authority for Mayor Eriguel to contract the Subject Loans. It posits
Land Bank of the Philippines vs. that Section 444(b)(1)(vi) of the LGC merely requires that the
Cacayuran municipal mayor be authorized by the SB concerned and that such
proper purpose, or that there is wastage of public funds through authorization need not be embodied in an ordinance. 38

the enforcement of an invalid or unconstitutional law. A person A careful perusal of Section 444(b)(1)(vi) of the LGC shows
suing as a taxpayer, however, must show that the act complained that while the authorization of the municipal mayor need not be in
of directly involves the illegal disbursement of public funds the form of an ordinance, the obligation which the said local
derived from taxation. In other words, for a taxpayer’s suit to executive is authorized to enter into must be made pursuant to
prosper, two requisites must be met namely, (1) public funds a law or ordinance, viz.:
Sec. 444. The Chief Executive: Powers, Duties, Functions and
derived from taxation are disbursed by a political subdivision or
Compensation.―
instrumentality and in doing so, a law is violated or some x x x x
irregularity is committed; and (2) the petitioner is directly affected (b) For efficient, effective and economical governance the purpose of
by the alleged act. 31
which is the general welfare of the municipality and its inhabitants
Records reveal that the foregoing requisites are present in the pursuant to Section 16 of this Code, the municipal mayor shall:
instant case. x x x x
First, although the construction of the APC would be (vi) Upon authorization by the sangguniang bayan, represent the
primarily sourced from the proceeds of the Subject Loans, which municipality in all its business transactions and sign on its behalf all
bonds, contracts, and obligations, and such other documents
Land Bank insists are not taxpayer’s money, there is no denying
made pursuant to law or ordinance; (Emphasis and underscoring
that public funds derived from taxation are bound to be expended supplied)
as the Municipality assigned a portion of its IRA as a security for
the foregoing loans. Needless to state, the Municipality’s IRA, In the present case, while Mayor Eriguel’s authorization to
which serves as the local government unit’s just share in the contract the Subject Loans was not contained―as it need not be
national taxes,  is in the nature of public funds derived from
32
contained―in the form of an ordinance, the said loans and
taxation. The Court believes, however, that although these funds _______________
may be posted as a security, its collateralization should only be 38 Rollo, p. 26.
deemed effective during the incumbency of the public officers 873
who approved the same, else those who succeed them be
effectively deprived of its use. VOL. 696, APRIL 17, 2013 873
In any event, it is observed that the proceeds from the Subject Land Bank of the Philippines vs.
Loans had already been converted into public funds by
_______________ Cacayuran
31 Mamba v. Lara, G.R. No. 165109, December 14, 2009, 608 SCRA 149, 162, even the Redevelopment Plan itself were not approved pursuant to
citing Bagatsing v. San Juan, 329 Phil. 8, 13; 260 SCRA 250, 253 (1996). any law or ordinance but through mere resolutions. The distinction
32 Sec. 284 of the LGC provides as follows:
Sec. 284. Allotment of Internal Revenue Taxes.―Local between ordinances and resolutions is wellperceived. While
government units shall have a share in the national internal revenue taxes ordinances are laws and possess a general and permanent
based on the collection of the third fiscal year preceding the current fiscal character, resolutions are merely declarations of the sentiment or
year as follows: x x x x opinion of a lawmaking body on a specific matter and are
871 temporary in nature.  As opposed to ordinances, “no rights can be
39

conferred by and be inferred from a resolution.”  In this accord, it

40

VOL. 696, APRIL 17, 2013 871 cannot be denied that the SB violated Section 444(b)(1)(vi) of the
Land Bank of the Philippines vs. LGC altogether.
Noticeably, the passage of the Subject Resolutions was also
Cacayuran
tainted with other irregularities, such as (1) the SB’s failure to
the Municipality’s receipt thereof. Funds coming from private
submit the Subject Resolutions to the Sangguniang
sources become impressed with the characteristics of public funds
Panlalawigan of La Union for its review contrary to Section 56 of
when they are under official custody. 33

the LGC;  and (2) the lack of publication and posting in con-
41

Accordingly, the first requisite has been clearly met. _______________

Second, as a resident-taxpayer of the Municipality, Cacayuran 39 Municipality of Parañaque v. V.M. Realty Corporation, 354 Phil. 684, 691-
is directly affected by the conversion of the Agoo Plaza which was 695; 292 SCRA 678, 689 (1998).
40 Spouses Yusay v. CA, G.R. No. 156684, April 6, 2011, 647 SCRA 269, 278.
funded by the proceeds of the Subject Loans. It is well-settled that 41 Sec. 56. Review of Component City and Municipal Ordinances or
public plazas are properties for public use  and therefore, belongs
34
Resolutions by the Sangguniang Panlalawigan.―
to the public dominion.  As such, it can be used by anybody and
35 (a) Within three (3) days after approval, the secretary to the sangguniang
no one can exercise over it the rights of a private owner.  In this 36 panlungsod or sangguniang bayan shall forward to the sangguniang
panlalawigan for review, copies of approved ordinances and the resolutions
light, Cacayuran had a direct interest in ensuring that the Agoo approving the local development plans and public investment programs formulated by
Plaza would not be exploited for commercial purposes through the the local development councils.
APC’s construction. Moreover, Cacayuran need not be privy to the (b) Within thirty (30) days after receipt of copies of such ordinances and
resolutions, the sangguniang panlalawigan shall examine the documents or transmit
Subject Loans in order to proffer his objections thereto. In Mamba them to the provincial attorney, or if there be none, to the provincial prosecutor for
v. Lara, it has been held that a taxpayer need not be a party to the prompt examination. The provincial attorney or provincial prosecutor shall, within a
contract to challenge its validity; as long as taxes are involved, period of ten (10) days from receipt of the documents, inform the sangguniang
people have a right to question contracts entered into by the panlalawigan in writing of his comments or recommendations, which may be
considered by the sangguniang panlalawigan in making its decision.
government. 37

_______________ 874
33 See People v. Aquino, G.R. No. L-6063, April 26, 1954.
34 Province of Camarines Sur v. CA, G.R. No. 175064, September 18, 2009, 87 SUPREME COURT REPORTS
600 SCRA 569, 588-589.
35 Art. 420 of the Civil Code provides: 4 ANNOTATED
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, Land Bank of the Philippines vs.
torrents, ports and bridges constructed by the State, banks, shores,
roadsteads, and others of similar character; x x x x (Emphasis supplied)
Cacayuran
36 Province of Camarines Sur v. CA, supra note 34, at p. 587, citing In the travention of Section 59 of the LGC. 42

Matter of Reversion/Recall of Reconstituted Act No. 0-116 Decree No. 388, Heirs of _______________

Palaganas v. Registry of Deeds, Tarlac City, G.R. No. 171304, October 10, 2007, 535 (c) If the sangguniang panlalawigan finds that such an ordinance or resolution
SCRA 476, 484. is beyond the power conferred upon the sangguniang panlungsod or sangguniang
37 Mamba v. Lara, supra note 31, at p. 162, citing Abaya v. Ebdane, Jr., G.R. bayan concerned, it shall declare such ordinance or resolution invalid in whole or in
No. 167919, February 14, 2007, 515 SCRA 720, 758. part. The sangguniang panlalawigan shall enter its action in the minutes and shall
advise the corresponding city or municipal authorities of the action it has taken.
872 (d)  If no action has been taken by the sangguniang panlalawigan within thirty
(30) days after submission of such an ordinance or resolution, the same shall be
87 SUPREME COURT REPORTS presumed consistent with law and therefore valid.
42 Sec. 59. Effectivity of Ordinances or Resolutions.―
2 ANNOTATED (a)  Unless otherwise stated in the ordinance or the resolution approving the
local development plan and public investment program, the same shall take effect
Land Bank of the Philippines vs. after ten (10) days from the date a copy thereof is posted in a bulletin board at the
Cacayuran entrance of the provincial capitol or city, municipal, or barangay hall, as the case may
be, and in at least two (2) other conspicuous places in the local government unit
Therefore, as the above-stated requisites obtain in this case, concerned.
Cacayuran has standing to file the instant suit. (b)  The secretary to the sanggunian concerned shall cause the posting of an
B. Validity of the Subject Resolutions ordinance or resolution in the bulletin board at the entrance of the provincial capitol
and the city, municipal, or barangay hall in at least two (2) conspicuous places in the 877
local government unit concerned not later than five (5) days after approval thereof.
The text of the ordinance or resolution shall be disseminated and posted in VOL. 696, APRIL 17, 2013 877
Filipino or English and in the language or dialect understood by the majority of the
people in the local government unit concerned, and the secretary to Land Bank of the Philippines vs.
the sanggunian shall record such fact in a book kept for the purpose, stating the dates
of approval and posting.
Cacayuran
(c)  The gist of all ordinances with penal sanctions shall be published in a x x x Town plazas are properties of public dominion, to be devoted to
newspaper of general circulation within the province where the local legislative body public use and to be made available to the public in general. They are
concerned belongs. In the absence of any newspaper of general circulation within the outside the commerce of man and cannot be disposed of or even leased by
province, posting of such ordinances shall be made in all mu- the municipality to private parties.
875 In this relation, Article 1409(1) of the Civil Code provides
VOL. 696, APRIL 17, 2013 875 that a contract whose purpose is contrary to law, morals, good
customs, public order or public policy is considered void  and as 50

Land Bank of the Philippines vs.

such, creates no rights or obligations or any juridical
Cacayuran relations.  Consequently, given the unlawful purpose behind the
51

In fine, Land Bank cannot rely on the Subject Resolutions as Subject Loans which is to fund the commercialization of the Agoo
basis to validate the Subject Loans. Plaza pursuant to the Redevelopment Plan, they are considered
C. Ultra vires nature of the Subject Loans as ultra vires in the primary sense thus, rendering them void and in
Neither can Land Bank claim that the Subject Loans do not effect, non-binding on the Municipality.
constitute ultra vires acts of the officers who approved the same. At this juncture, it is equally observed that the land on which
Generally, an ultra vires act is one committed outside the the Agoo Plaza is situated cannot be converted into patrimonial
object for which a corporation is created as defined by the law of property―as the SB tried to when it passed Municipal Ordinance
its organization and therefore beyond the powers conferred upon it No. 02-2007 ―absent any express grant by the national
52

by law.  There are two (2) types of ultra vires acts. As held

43
government.  As public land used for public use, the foregoing lot
53

in Middletown Policemen’s Benevolent Association v. Township of rightfully belongs to and is subject to the administration and
Middletown: 44
control of the Republic of
There is a distinction between an act utterly beyond the jurisdiction _______________
of a municipal corporation and the irregular exercise of a basic power 50 Art. 1409. The following contracts are inexistent and void from the
under the legislative grant in matters not in themselves jurisdictional. beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good
The former are ultra vires in the primary sense and void; the latter, ultra customs,
vires only in a secondary sense which  does not preclude ratification or x x x x
the application of the doctrine of estoppel in the interest of equity and These contracts cannot be ratified. Neither can the right to set up the defense of
essential justice. (Emphasis and underscoring supplied) illegality be waived.
51 See Nunga, Jr. v. Nunga III, G.R. No. 178306, December 18, 2008, 574
_______________ SCRA 760, 780.
nicipalities and cities of the province where the sanggunian of origin 52 Rollo, pp. 219-220.
is situated. 53 Province of Camarines Sur v. CA, supra note 34, at p. 588,
(d)  In the case of highly urbanized and independent component citing Municipality of San Carlos, Pangasinan v. Morfe, 115 Phil. 608; 5 SCRA 625
cities, the main features of the ordinance or resolution duly enacted or (1962).
adopted shall, in addition to being posted, be published once in a local
newspaper of general circulation within the city: Provided, That in the 878
absence thereof the ordinance or resolution shall be published in any
newspaper of general circulation. 87 SUPREME COURT REPORTS
43 Republic v. Acoje Mining Company, Inc., G.R. No. L-18062, February 28,
1963, 7 SCRA 361, citing 19 C.J.S., Sec. 965, p. 419.
8 ANNOTATED
44 162 N.J. 361, 368 (2000), citing Skulski v. Nolan, 68 N.J. 179, 198 (1975). Land Bank of the Philippines vs.
876 Cacayuran
87 SUPREME COURT REPORTS the Philippines.  Hence, without the said grant, the Municipality
54

has no right to claim it as patrimonial property.

6 ANNOTATED
Nevertheless, while the Subject Loans cannot bind the
Land Bank of the Philippines vs. Municipality for being ultra vires, the officers who authorized the
Cacayuran passage of the Subject Resolutions are personally liable. Case law
states that public officials can be held personally accountable for
In other words, an act which is outside of the municipality’s
acts claimed to have been performed in connection with official
jurisdiction is considered as a void ultra vires act, while an act
duties where they have acted ultra vires,  as in this case.
55
attended only by an irregularity but remains within the
WHEREFORE, the petition is DENIED. Accordingly, the
municipality’s power is considered as an ultra vires act subject to
March 26, 2010 Decision of the Court of Appeals in CA-G.R. CV.
ratification and/or validation. To the former belongs municipal
No. 89732 is hereby AFFIRMED.
contracts which (a) are entered into beyond the express, implied or
SO ORDERED.
inherent powers of the local government unit; and (b) do not
Carpio (Chairperson), Brion, Del Castillo and Perez, JJ.,
comply with the substantive requirements of law e.g., when
concur.
expenditure of public funds is to be made, there must be an actual
appropriation and certificate of availability of funds; while to the Petition denied, judgment affirmed.
latter belongs those which (a) are entered into by the improper
department, board, officer of agent; and (b) do not comply with Notes.―A taxpayer is deemed to have the standing to raise a
the formal requirements of a written contract e.g., the Statute of constitutional issue when it is established that public funds from
Frauds. 45
taxation have been disbursed in alleged contravention of the law or
Applying these principles to the case at bar, it is clear that the the Constitution. (Dela Llana vs. The Chairperson, Commission
Subject Loans belong to the first class of ultra vires acts deemed on Audit, 665 SCRA 176 [2012])
as void. Taxpayer’s suit is based on the theory that expenditure of
Records disclose that the said loans were executed by the public funds for the purpose of executing an unconstitutional act is
Municipality for the purpose of funding the conversion of the a misapplication of such funds. (Pambansang Koalisyon ng mga
Agoo Plaza into a commercial center pursuant to the Samahang Magsasaka at Manggagawa sa Niyugan [PKSMMN]
Redevelopment Plan. However, the conversion of the said plaza is vs. Executive Secretary, 669 SCRA 49 [2012])
beyond the Municipality’s jurisdiction considering the property’s ――o0o―― 
nature as one for public use and thereby, forming part of the public
dominion. Accordingly, it cannot be the object of appropriation
either by the State or by private persons.  Nor can it be the subject
46

of lease or any other contractual undertaking.  In Villanueva v.

47

Castañeda, Jr.,  citing Espiritu v. Municipal Council of

48

Pozorrubio,  the Court pronounced that:

49

_______________
45 See ANTONIO E.B. NACHURA, Outline Reviewer in Political Law (2009),
p. 602.
46 Id., at p. 607.
47 238 Phil. 136, 142; 154 SCRA 142, 148 (1987).
48 Id., at p. 144; p. 149.
49 102 Phil. 866, 869-870 (1958).