G.R. No. 191667. April 22, 2015.

LAND BANK OF THE PHILIPPINES, petitioner, vs. EDUARDO

M. CACAYURAN, respondent,
MUNICIPALITY OF AGOO, LA UNION, intervenor.

Remedial Law; Civil Procedure; Parties; Indispensable Parties;

Section 7, Rule 3 of the Rules of Court mandates that all indispensable
parties should be joined in a suit.—Section 7, Rule 3 of the Rules of Court
mandates that all indispensable parties should be joined in a suit, viz.: SEC.
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.
Same; Same; Same; Same; Words and Phrases; An indispensable party
is one whose interest will be affected by the court’s action in the litigation,
and without whom no final determination of the case can be had.—“An
indispensable party is one whose interest will be affected by the court’s
action in the litigation, and without whom no final determination of the case
can be had. The party’s interest in the subject matter of the suit and in the
relief sought are so inextricably intertwined with the other parties’ that his
legal presence as a party to the proceeding is an absolute necessity. In his
absence, there cannot be a resolution of the dispute of the parties before the
court which is effective, complete, or equitable.” Thus, the absence of an
indispensable party renders all subsequent actions of the court null and void,
for want of authority to act, not only as to the absent parties but even as to
those present.
Same; Same; Same; Same; It must be stressed that the failure to
implead any indispensable party to a suit does not necessarily result in the
outright dismissal of the complaint.—Nevertheless, it must be stressed that
the failure to implead any indispensable party to a suit does not necessarily
result in the outright dismissal of the complaint. In Heirs of Mesina v. Heirs
of Fian, Sr., 695 SCRA 345 (2013), the Court definitively explained that in
instances of nonjoin-

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* SPECIAL SECOND DIVISION.

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 der of indispensable parties, the proper remedy is to implead them and
not to dismiss the case: The nonjoinder of indispensable parties is not a
ground for the dismissal of an action. At any stage of a judicial
proceeding and/or at such times as are just, parties may be added on the
motion of a party or on the initiative of the tribunal concerned. If the
plaintiff refuses to implead an indispensable party despite the order of the
court, that court may dismiss the complaint for the plaintiff’s failure to
comply with the order. The remedy is to implead the nonparty claimed to
be indispensable.
Same; Same; Same; Same; The presence of indispensable parties is
necessary to vest the court with jurisdiction and, corollarily, the issue on
jurisdiction may be raised at any stage of the proceedings.—Be that as it
may, the Court is not precluded from taking cognizance of the
Municipality’s status as an indispensable party even at this stage of the
proceedings. Indeed, the presence of indispensable parties is necessary to
vest the court with jurisdiction and, corollarily, the issue on jurisdiction may
be raised at any stage of the proceedings. Thus, as it has now come to the
fore that any resolution of this case would not be possible and, hence, not
attain any real finality due to the nonjoinder of the Municipality, the Court is
constrained to set aside all subsequent actuations of the courts a quo in this
case, including that of the Court’s, and remand the case all the way back to
the RTC for the inclusion of all indispensable parties to the case and its
immediate disposition on the merits. With this, the propriety of the
Municipality’s present intervention is now mooted.

MOTION FOR RECONSIDERATION of a decision of the Supreme

Court; MOTION for Leave to Intervene in the Supreme Court;
and MOTION FOR RECONSIDERATION-in-Intervention in the
Supreme Court.
The facts are stated in the amended opinion of the Court.
LBP Legal Services Group for petitioner.
Pablo M. Olarte for respondent.
Camara, Meris, Millares, Madrid & Associates for intervenor
Municipality of Agoo, La Union.

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Land Bank of the Philippines vs. Cacayuran

AMENDED DECISION

PERLAS-BERNABE, J.:

Before the Court are the following motions: (a) the Motion for
Reconsideration1 dated May 22, 2013, filed by petitioner Land Bank
of the Philippines (LBP) assailing the Decision2 dated April 17,
2013 of the Court (April 17, 2013 Decision), which upheld the
Decision3 dated March 26, 2010 of the Court of Appeals (CA) in
C.A.-G.R. CV No. 89732 affirming with modification the Decision4
dated April 10, 2007 of the Regional Trial Court of Agoo, La Union,
Branch 31 in Civil Case No. A-2473; (b) the Motion for Leave to
Intervene with Pleading-in-Intervention Attached5 dated July 8,
2013, filed by the Municipality of Agoo, La Union (Municipality)
praying that it be allowed to intervene in this case; and (c) the
Motion for Reconsideration-in-Intervention6 dated July 8, 2013,
filed by the Municipality seeking that the Court set aside its April
17, 2013 Decision and promulgate a new one in its stead dismissing
the case (subject motions).

The Facts

The instant case arose from two (2) loans (Subject Loans) entered
into by the Municipality with LBP in order to finance the
Redevelopment Plan of the Agoo Public Plaza (Public Plaza).
Through Resolution Nos. 68-20057 and 139-

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1 Rollo, pp. 377-382.

2 Land Bank of the Philippines v. Cacayuran, G.R. No. 191667, April 17, 2013,
696 SCRA 861. See also Rollo, pp. 365-376.
3 Id., at pp. 42-73. Penned by Associate Justice Celia C. Librea-Leagogo, with
Associate Justices Ramon R. Garcia and Stephen C. Cruz, concurring.
4 Id., at pp. 74-203. Penned by Executive Judge Clifton U. Ganay.
5 Id., at pp. 387-393.
6 Id., at pp. 394-410.
7 Id., at pp. 79-83.

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2005,8 the Sangguniang Bayan of the Municipality (Sangguniang

Bayan) authorized its then Mayor Eufranio Eriguel (Mayor Eriguel)
to enter into a P4,000,000.00-loan with LBP, the proceeds of which
were used to construct ten (10) kiosks at the Public Plaza. Around a
year later, the SB issued Resolution Nos. 58-20069 and 128-2006,10
this time authorizing Mayor Eriguel to obtain a P28,000,000.00-loan
from LBP for the construction of a commercial center named “Agoo
People’s Center” within the premises of the Public Plaza. In order to
secure the Subject Loans, the Municipality used as collateral, among
others, a 2,323.75-square-meter lot situated at the south eastern
portion of the Public Plaza (Plaza Lot).11
However, a group of residents, led by respondent Eduardo M.
Cacayuran (Cacayuran), opposed the redevelopment of the Public
Plaza, as well as the funding therefor thru the Subject Loans,
claiming that these were “highly irregular, violative of the law, and
detrimental to public interests, and will result to wanton desecration
of the [Public Plaza].”12 Further, Cacayuran requested the municipal
officers to furnish him with the various documents relating to the
Public Plaza’s redevelopment, which, however, went unheeded.13
Thus, Cacayuran, invoking his right as a taxpayer, filed a
complaint14 against LBP and various officers of the Municipality,
including Mayor Eriguel (but excluding the Municipality itself as
party-defendant), assailing the validity of the aforesaid loan
agreements and praying that the commercialization of the Public
Plaza be enjoined.15
Initially, the municipal officers moved for the outright dismissal
of the complaint, which was denied, thus constraining

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8 Id., at pp. 120-125.

9 Id., at pp. 115-120.
10 Id., at pp. 125-127.
11 Id., at pp. 366-367.
12 Id.
13 Id., at p. 367.
14 Dated December 18, 2006. Id., at pp. 205-212.
15 Id., at pp. 210-211.

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them to file their respective answers. For its part, LBP asserted,
inter alia, that Cacayuran did not have any cause of action since he
was not privy to the loan agreements entered into by LBP and the
Municipality.16
During the pendency of the proceedings, the construction of the
Agoo People’s Center was completed. Later on, the Sangguniang
Bayan passed Municipal Ordinance No. 02-200717 declaring the area
where such building stood as patrimonial property of the
Municipality.18

The RTC’s Ruling

In a Decision19 dated April 10, 2007, the RTC declared the

Subject Loans null and void, finding that the resolutions approving
the procurement of the same were passed in a highly irregular
manner and thus, ultra vires. As such, it pronounced that the
Municipality was not bound by the Subject Loans and that the
municipal officers should, instead, be held personally liable for the
same. Further, it ruled that since the Plaza Lot is a property for
public use, it cannot be used as collateral for the Subject Loans.20
Aggrieved, LBP and the municipal officers appealed21 to the CA.
However, the appeal of the municipal officers was deemed
abandoned and dismissed for their failure to file an appellants’ brief
despite due notice.22 Thus, only LBP’s appeal was given due course
by the CA.23

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16 Id., at p. 367.
17 Id., at pp. 219-220.
18 Id., at pp. 367-368.
19 Id., at pp. 74-203.
20 Id., at p. 368.
21 Not attached to the Rollo.
22 Rollo, p. 45.
23 Id., at p. 368.

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The CA’s Ruling

In a Decision24 dated March 26, 2010, the CA affirmed the ruling

of the RTC, with modification excluding then Vice Mayor Antonio
Eslao from personal liability arising from the Subject Loans. It held
that: (a) Cacayuran had locus standi to file the instant complaint,
considering that he is a resident of the Municipality and the issue at
hand involved public interest of transcendental importance; (b)
Resolution Nos. 68-2005, 138-2005, 58-2006, 126-2006 were
invalidly passed due to noncompliance with certain provisions of
Republic Act No. 7160,25 otherwise known as the Local
Government Code of 1991 (LGC); (c) the Plaza Lot is property of
public dominion, and thus, cannot be used as collateral; and (d) the
procurement of the Subject Loans were ultra vires acts for having
been entered into without proper authority and that the collaterals
used therefor constituted improper disbursement of public funds.26
Dissatisfied, LBP filed a petition for review on certiorari27
before this Court.

Proceedings Before the Court

In a Decision28 dated April 17, 2013 the Court denied LBP’s

petition, and accordingly, affirmed the ruling of the CA. Agreeing
with the CA, the Court held that: (a) Cacayuran had legal standing
to institute a taxpayer’s suit;29 (b) Resolution Nos. 68-2005, 139-
2005, 58-2006, 126-2006 cannot be relied upon to validate the
Subject Loans, as the LGC requires the

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24 Id., at pp. 42-73.

 25 Entitled “An Act Providing for a Local Government Code of 1991”; approved
on October 10, 1991.
26 See Rollo, pp. 368-369.
27 Id., at pp. 10-37.
28 Id., at pp. 365-376.
29 Id., at pp. 369-370.

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Land Bank of the Philippines vs. Cacayuran

passing of an ordinance in order for any loan agreement to be

valid;30 and (c) the procurement of the Subject Loans are ultra vires
acts of the municipal officers who approved the same, and thus,
liability therefor shall devolve upon them.31
Undaunted, LBP moved for reconsideration, basically reiterating
its earlier position that Cacayuran had no legal standing to sue, and
that Resolution Nos. 68-2005, 139-2005, 58-2006, and 126-2006
may be relied upon in validating the Subject Loans.32
Meanwhile, the Municipality filed a Motion for Leave to
Intervene with Pleading-in-Intervention Attached33 dated July 8,
2013 and a Motion for Reconsideration-in-Intervention34 of even
date, praying that it be included as a party-litigant to the instant case.
It contends that as a contracting party to the Subject Loans, it is an
indispensable party to the action filed by Cacayuran. As such, there
cannot be any “real disposition” of the instant suit by reason of its
exclusion from the same.
In opposition,35 Cacayuran maintains that LBP did not raise any
new matter to warrant reconsideration of the April 17, 2013
Decision. Anent the Municipality’s motion to intervene, Cacayuran
insists that the Municipality is not a real party-in-interest to the
instant case as his complaint is against the municipal officers in their
personal capacity for their ultra vires acts which are not binding on
the Municipality.
Finally, in its Comment on the Motion for Leave to Intervene and
Motion for Reconsideration-in-Intervention36 dated

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30 Id., at pp. 371-372.

31 Id., at pp. 373-374.
32 See Motion for Reconsideration dated May 22, 2013; id., at pp. 377-382.
33 Id., at pp. 387-393.
34 Id., at pp. 394-410.
35 See Comment/Opposition to Petitioner’s Motion for Reconsideration, and to
Intervenor’s Motion for Reconsideration-in-Intervention dated October 24, 2013; id.,
at pp. 424-439.
36 Id., at pp. 453-457.

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Land Bank of the Philippines vs. Cacayuran

May 6, 2014, LBP agrees with the Municipality that the latter is
an indispensable party to the instant case and as such, should be
included herein.

The Issue Before the Court

The core issue for the Court’s resolution is whether or not the
Municipality should be deemed as an indispensable party to the
instant case, and thus, be ordered impleaded herein.

The Court’s Ruling

The Court rules in the affirmative.

Section 7, Rule 3 of the Rules of Court mandates that all
indispensable parties should be joined in a suit, viz.:

SEC. 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.

“An indispensable party is one whose interest will be affected by

the court’s action in the litigation, and without whom no final
determination of the case can be had. The party’s interest in the
subject matter of the suit and in the relief sought are so inextricably
intertwined with the other parties’ that his legal presence as a party
to the proceeding is an absolute necessity. In his absence, there
cannot be a resolution of the dispute of the parties before the court
which is effective, complete, or equitable.”37 Thus, the absence of an
indispensable party renders all subsequent actions of the court null
and void, for want of authority to act, not only as to the absent
parties but even as to those present.38

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37 Gabatin v. Land Bank of the Philippines, 486 Phil. 366, 379-380; 444 SCRA
176, 186 (2004), citing Bank of the Philippine Islands v. Court of Appeals, 450 Phil.
532, 541; 402 SCRA 449, 455 (2003).
38 See Domingo v. Scheer, 466 Phil. 235, 265; 421 SCRA 468, 483 (2004).

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Land Bank of the Philippines vs. Cacayuran

Nevertheless, it must be stressed that the failure to implead any

indispensable party to a suit does not necessarily result in the
outright dismissal of the complaint. In Heirs of Mesina v. Heirs of
Fian, Sr.,39 the Court definitively explained that in instances of
nonjoinder of indispensable parties, the proper remedy is to implead
them and not to dismiss the case:

The nonjoinder of indispensable parties is not a ground for the

dismissal of an action. At any stage of a judicial proceeding and/or at such
times as are just, parties may be added on the motion of a party or on the
initiative of the tribunal concerned. If the plaintiff refuses to implead an
indispensable party despite the order of the court, that court may dismiss the
complaint for the plaintiff’s failure to comply with the order. The remedy is
to implead the nonparty claimed to be indispensable.40 (Emphases and
underscoring supplied)

In this case, a judicious review of the records reveals that

Cacayuran’s complaint against LBP and the municipal officers
primarily prays that the commercialization of the Public Plaza be
enjoined and also, that the Subject Loans be declared null and void
for having been unlawfully entered into by the said officers.
However, Cacayuran failed to implead in his complaint the
Municipality, a real party-in-interest41 and an indispensable party
that stands to be directly affected by any judicial resolution on the
case, considering that: (a) the contracting parties to the Subject
Loans are LBP and the Municipality; and (b) the Municipality owns
the Public Plaza

39 G.R. No. 201816, April 8, 2013, 695 SCRA 345.

40 Id., at p. 353, citing Pamplona Plantation Co., Inc. v. Tinghil, 491 Phil. 15, 29;
450 SCRA 421, 433 (2005).
41 “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. Unless otherwise
authorized by law or these Rules, every action must be prosecuted or defended in the
name of the real party-in-interest.” (Section 2, Rule 3 of the Rules of Court)

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as well as the improvements constructed thereon, including the

Agoo People’s Center. As the Municipality aptly points out:42

3. To recapitulate: The case had its beginnings in the two (2) Loans
obtained by [the Municipality] from [LBP] and by the Board Resolutions
passed and adopted by the Sangguniang Bayan of Agoo, La Union, together
with the Mayor and Vice Mayor of the Municipality.
xxxx
3d. The two (2) Loans were covered and evidenced by separate Loan
Agreements and Mortgage/Assignment Documents. The parties which
entered into and executed the covering documents were [LBP] as lender
and [the Municipality] as borrower.
 3e. When the construction was about 40% complete, [Cacayuran] as a
taxpayer filed the case against the: (i) Mayor; (ii) Vice Mayor; and (iii) Ten
(10) Members [of] the Sangguniang Bayan [of] Agoo, La Union, as
defendants. [The Municipality] was excluded, and was not impleaded as a
defendant in the case.
xxxx
Indeed, [the Municipality] [on whose lands stands and is found the
Agoo Public Plaza, where the Kiosks and Commercial Building were
under construction and which constructions were sought to be
restrained] stands to be benefited or injured by the judgment in the
case so filed or the party entitled to the avails of the case and is,
therefore, the real party-in-interest.
xxxx
3k. Without having to say so, the RTC dispositions as affirmed
with modification by the CA Decision which, in turn was affirmed by
the SC Decision must not be binding upon [the Municipality], the real
party-in-interest, the indispensable

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42 See Rollo, pp. 395-396.

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Land Bank of the Philippines vs. Cacayuran

party in fact, not impleaded as defendant in this case.43 (Emphases

and underscoring supplied)

The Court observes that it is only now that the issue of the
Municipality’s exclusion from the instant case, despite its status as
an indispensable party, became apparent. This recent finding may be
credited to the fact that the initial parties before the Court, i.e., LBP
and Cacayuran, have dissimilar interests from that of the
Municipality, and, hence, had no incentive to raise the issue of the
latter’s status as an indispensable party. On the one hand,
Cacayuran’s interest to the case is centered on the declaration of
nullity of the Subject Loans, as well as the enjoinment of the
commercialization of the Public Plaza; and on the other hand, LBP’s
interest to the case is anchored on its capacity as creditor to the
Subject Loans. To the mind of the Court, the municipal officers
would have been in the best position to raise this issue; however,
they were unable to do so because their appeal before the CA was
deemed abandoned for their failure to file an appellants’ brief on
time.
Be that as it may, the Court is not precluded from taking
cognizance of the Municipality’s status as an indispensable party
even at this stage of the proceedings. Indeed, the presence of
indispensable parties is necessary to vest the court with jurisdiction44
and, corollarily, the issue on jurisdiction may be raised at any stage
of the proceedings.45 Thus, as it has now come to the fore that any
resolution of this case would not be possible and, hence, not attain
any real finality due to the non-joinder of the Municipality, the Court
is constrained to set aside all subsequent actuations of the courts a
quo in this case, including that of the Court’s, and remand the case
all

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43 Id., at pp. 395-398.

44 Living@Sense, Inc. v. Malayan Insurance Company, Inc., G.R. No. 193753,
September 26, 2012, 682 SCRA 59, 64.
45 Francel Realty Corporation v. Sycip, 506 Phil. 407, 415; 469 SCRA 424, 431
(2005).

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the way back to the RTC for the inclusion of all indispensable
parties to the case and its immediate disposition on the merits.46
With this, the propriety of the Municipality’s present intervention is
now mooted.
WHEREFORE, the subject motions are PARTLY GRANTED.
The Decision dated April 17, 2013 of the Court, which upheld the
Decision dated March 26, 2010 of the Court of Appeals in C.A.-
G.R. CV No. 89732 affirming with modification the Decision dated
April 10, 2007 of the Regional Trial Court of Agoo, La Union,
Branch 31 in Civil Case No. A-2473 is hereby SET ASIDE.
Accordingly, the instant case is REMANDED to the court a quo,
which is hereby DIRECTED to order respondent Eduardo M.
Cacayuran to implead all indispensable parties and thereafter,
PROCEED with the resolution of the case on the merits WITH
DISPATCH.
SO ORDERED.

Carpio (Chairperson), Brion, Del Castillo and Perez, JJ.,

concur.

Motions partly granted.

Notes.—Rule 3, Sec. 7 of the Rules of Court defines

indispensable parties as those parties-in-interest without whom there
can be no final determination of an action. (Republic vs. Marcos-
Manotoc, 665 SCRA 367 [2012])
The nonjoinder of indispensable parties is not a ground for the
dismissal of an action; The remedy is to implead the nonparty
claimed to be indispensable. (Heirs of Faustino Mesina vs. Heirs of
Domingo Fian, Sr., 695 SCRA 345 [2013])
 ——o0o——

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46 See Quilatan v. Heirs of Quilatan (614 Phil 162, 168; 597 SCRA 519, 523
[2009]) where the Court ordered the remand of the case therein all the way back to
the RTC for the failure of petitioners therein to implead all the indispensable parties
in their complaint.

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