OTHER CORPORATE POWERS

LAND BANK OF THE PHILIPPINES VS EDUARDO M. CACAYURAN; G.R. No. 191667, April 17,
2013

FACTS:

This is a petition for Review on Certiorari of the CA affirming the RTC in declaring the nullity of
the loan agreements entered into by Land Bank and the Municipality of Agoo, La Union.

Agoo SB passed a certain resolution to implement a redevelopment plan to redevelop the Agoo
Public Plaza. To finance the plan, SB passed a resolution authorizing then Maor Eriguel to obtain
a loan from Land Bank, incidental to it, mortgaged a portion of the plaza as collateral. It has also
authorized the assignment of a portion if the IRA and monthly income in favor of Land Bank to
secure the payment. 10 Kiosks were made at the plaza, then were rented out. Later, a commercial
center on the Plaza lot was built too, with a loan from Land Bank, posting the same securities
as the first loan.

The commercial loan was opposed by some residents of the municipality embodied in a manifesto
launched through a signature campaign by the residents and Cacayuran. Invoking his right as
taxpayer, Cacayuran filed a complaint against the officials and Land bank assailing the validity
of the loans on the ground that the Plaza lot used as collateral is property of public dominion
and therefore beyond the commerce of man.

RTC Ruling: declared the nullity of the subject loans, saying that the oans were passed in a
highly irregular manner, as such, the Municipality is not bound by the same.

Aggrieved, Land Bank filed notice of appeal.

Ruling of CA: affirmed with modification the RTC's ruling, excluding the Vice Mayor from any
personal liability arising from the subject loans. Cacayuran has locus standi as resident and
taxpayer in the municipality and the issue involves public interest. The plaza cannot be a valid
collateral to a loans for it is of public dominion.

Land Bank filed this instant petition.

ISSUES:

(1) Whether Cacayuran has locus standi

(2) Whether the subject resolutions were validly passed and
(3) Whether the subject loans are ultra vires. [The doctrine in the law of corporations that holds
that if a corporation enters into a contract that is beyond the scope of its corporate powers, the
contract is illegal.]

HELD:

(1) Taxpayer is allowed to sue if:

(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.
In the case, the proceeds from the Subject Loans had already been converted into public
funds by the Municipality’s receipt thereof. Funds coming from private sources become
impressed with the characteristics of public funds when they are under official custody.
Public plaza belongs to public dominion, Cacayuran need not to be a privy to the loans,
 as long as taxes are involved, people have a right to question the contracts entered into
by the government.

(2) While ordinances are laws and possess a general and permanent character, resolutions are
merely declarations of the sentiment or opinion of a law making body on a specific matter and
are temporary in nature. As opposed to ordinances, "no rights can be conferred by and be inferred
from a resolution." In this accord, it cannot be denied that the SB violated Section 444(b)(1)(vi)
of the LGC altogether. Noticeably, the passage of the Subject Resolutions was also tainted with
other irregularities, such as:
(1) the SB’s failure to submit the Subject Resolutions to the Sangguniang Panlalawigan
of La Union for its review contrary to Section 56 of the LGC; and
(2) the lack of publication and posting in contravention of Section 59 of the LGC.

(3) Generally, an ultra vires act is one committed outside the object for which a corporation is
created as defined by the law of its organization and therefore beyond the powers conferred upon
it by law.

There are two (2) types of ultra vires acts. There is a distinction between an act utterly beyond
the jurisdiction of a municipal corporation and the irregular exercise of a basic power under the
legislative grant in matters not in themselves jurisdictional. The former are ultra vires in the
primary sense and void; the latter, ultra 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 essential
justice.

Applying these principles to the case at bar, it is clear that the Subject Loans belong to the first
class of ultra vires acts deemed as void. Records disclose that the said loans were executed by
the Municipality for the purpose of funding the conversion of the Agoo Plaza into a commercial
center pursuant to the Redevelopment Plan. However, the conversion of the said plaza is beyond
the Municipality’s jurisdiction considering the property’s 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 of lease or any other
contractual undertaking.

JAVIER v. CA; G.R. No. 49065 June 1, 1994

FACTS:

Provincial engineer Maximiano Sentina and 40 officials and employees of the Office of the
Provincial Engineer filed a petition for mandamus and damages against the entire Provincial
Board of Antique. They contended that the abolition of the OPE was a circumvention of the
constitutional mandate on security of tenure and intended only to weed out provincial officials
and employees who opposed the Provincial Board’s candidacy in the 1971 elections.
Respondents insisted that the abolition of the OPE was motivated instead by a provision
of P.D. 17 which lowered the internal revenue allotment to the road and bridge fund of the
province from 50% to 17.5% thereby leaving an inadequate allotment for materials, salaries and
operating expenses of the OPE. They averred that the power of the provincial board to create an
office carried with it the power to abolish it.
The lower court held that the “drastic decrease in the amount available for appropriation”
was the principal consideration that impelled the Provincial Board to abolish the office. The Court
of Appeals reversed the court a quo’s decision and held that “the passage of Resolution No. 206
was prompted in the main by reasons other than those stated therein” and that personal and
political animosities on the part of Sentina and respondents caused the respondent Provincial
Board to enact said resolution.

ISSUE: Whether or not the Provincial Board had the authority under the then existing laws
to enact the questioned resolution

HELD: YES.

Section 9, Article XVII of the 1973 Constitution did convey an authority to carry out a
valid reorganization in any branch or agency of the Government but this general provision could
not have meant or envisioned an absolute proscription on local governments, if and when
minded, from themselves creating or abolishing positions, an authority that they theretofore had
under the then existing laws.
One such law was Section 18 of R.A. 5185 (Local Autonomy Act), then still in force, which
empowered provincial governments to create, among other positions, the office of a provincial
engineer.
While the law did not expressly vest on provincial governments the power ot abolish that
office, absent, however, any contrary provision, that authority should be deemed embraced by
implication from the power to create it.
The power of the Province of Antique to abolish the office in question did exist at that
time.

ALBON v. FERNANDO; G.R. No. 148357 June 30, 2006

FACTS:

In May 1999, the City of Marikina undertook a public works project to widen, clear and repair
the existing sidewalks of Marikina Greenheights Subdivision. It was undertaken by the city
government pursuant to Ordinance No. 59.

Subsequently, petitioner Albon filed a taxpayer’s suit for certiorari, prohibition and injunction
with damages against respondents City Engineer Alfonso Espirito, Assistant City Engineer Anaki
Maderal and City Treasurer Natividad Cabalquinto.

According to the petitioner it was unconstitutional and unlawful for respondents to use
government equipment and property, and to disburse public funds, of the City of Marikina for
the grading, widening, clearing, repair and maintenance of the existing sidewalks of Marikina
Greenheights Subdivision. He alleged that the sidewalks were private property because Marikina
Greenheights Subdivision was owned by V.V. Soliven, Inc. Hence, the city government could not
use public resources on them.

In undertaking the project, therefore, respondents allegedly violated the constitutional

proscription against the use of public funds for private purposes as well as Sections 335 and 336
of RA 7160 and the Anti-Graft and Corrupt Practices Act.

The trial court ruled in favor of the respondents. Ordinance No. 59 is a valid enactment. The
court recognized the inherent police power of the municipality and with this it is allowed to carry
out the contested works.
The Court of Appeals sustained the decision of the trial court stating that sidewalks of Marikina
Greenheights Subdivision were public in nature and ownership thereof belonged to the City of
Marikina or the Republic of the Philippines following the 1991White Plains Association decision.
Thus, the improvement and widening of the sidewalks pursuant to Ordinance No. 59 of 1993
was well within the LGU’s powers.

ISSUE:
Whether the Court of Appeals erred in upholding the validity of Ordinance No. 59

HELD:

NO.

Like all LGUs, the City of Marikina is empowered to enact ordinances for the purposes set forth
in the Local Government Code (RA 7160). It is expressly vested with police powers delegated to
LGUs under the general welfare clause of RA 7160. With this power, LGUs may prescribe
reasonable regulations to protect the lives, health, and property of their constituents and
maintain peace and order within their respective territorial jurisdictions.

Cities and municipalities also have the power to exercise such powers and discharge such
functions and responsibilities as may be necessary, appropriate or incidental to efficient and
effective provisions of the basic services and facilities, including infrastructure facilities intended
primarily to service the needs of their residents and which are financed by their own funds. These
infrastructure facilities include municipal or city roads and bridges and similar facilities.

There is no question about the public nature and use of the sidewalks in the Marikina
Greenheights Subdivision. One of the “whereas clauses” of PD 1216 (which amended PD 957)
declares that open spaces, roads, alleys and sidewalks in a residential subdivision are for public
use and beyond the commerce of man. In conjunction herewith, PD 957, as amended by PD
1216, mandates subdivision owners to set aside open spaces which shall be devoted exclusively
for the use of the general public.

Thus, the trial and appellate courts were correct in upholding the validity of Ordinance No. 59,
s. 1993. It was enacted in the exercise of the City of Marikina’s police powers to regulate the use
of sidewalks. However, both the trial and appellate courts erred when they invoked our 1991
decision in White Plains Association and automatically applied it in this case.

The ruling in the 1991 White Plains Association decision relied on by both the trial and
appellate courts was modified by this Court in 1998 in White Plains Association v. Court
of Appeals. Citing Young v. City of Manila, this Court held in its 1998 decision that
subdivision streets belonged to the owner until donated to the government or until
expropriated upon payment of just compensation.

The word “street,” in its correct and ordinary usage, includes not only the roadway used for
carriages and vehicular traffic generally but also the portion used for pedestrian travel. The part
of the street set aside for the use of pedestrians is known as a sidewalk. Ownership of the
sidewalks in a private subdivision belongs to the subdivision owner/developer until it is either
transferred to the government by way of donation or acquired by the government through
expropriation.

Section 335 of RA 7160 is clear and specific that no public money or property shall be
appropriated or applied for private purposes. This is in consonance with the fundamental
principle in local fiscal administration that local government funds and monies shall be spent
solely for public purposes.

In Pascual v. Secretary of Public Works, the Court laid down the test of validity of a public
expenditure: it is the essential character of the direct object of the expenditure which
must determine its validity and not the magnitude of the interests to be affected nor
the degree to which the general advantage of the community, and thus the public welfare,
may be ultimately benefited by their promotion. Incidental advantage to the public or to
the State resulting from the promotion of private interests and the prosperity of private
enterprises or business does not justify their aid by the use of public money.

In Pascual, the validity of RA 920 (“An Act Appropriating Funds for Public Works”) which
appropriated P85,000 for the construction, repair, extension and improvement of feeder roads
within a privately-owned subdivision was questioned. The Court held that where the land on
which the projected feeder roads were to be constructed belonged to a private person, an
appropriation made by Congress for that purpose was null and void.

In Young v. City of Manila, 73 Phil. 537 (1941), the City of Manila undertook the filling of low-
lying streets of the Antipolo Subdivision, a privately-owned subdivision. The Court ruled that as
long as the private owner retained title and ownership of the subdivision, he was under the
obligation to reimburse to the city government the expenses incurred in land-filling the streets.
Moreover, the implementing rules of PD 957, as amended by PD 1216, provide that it is the
registered owner or developer of a subdivision who has the responsibility for the maintenance,
repair and improvement of road lots and open spaces of the subdivision prior to their donation
to the concerned LGU. The owner or developer shall be deemed relieved of the responsibility of
maintaining the road lots and open space only upon securing a certificate of completion and
executing a deed of donation of these road lots and open spaces to the LGU.

Therefore, the use of LGU funds for the widening and improvement of privately-owned sidewalks
is unlawful as it directly contravenes Section 335 of RA 7160. This conclusion finds further
support from the language of Section 17 of RA 7160 which mandates LGUs to efficiently and
effectively provide basic services and facilities. The law speaks of infrastructure facilities intended
primarily to service the needs of the residents of the LGU and “which are funded out of municipal
funds.” It particularly refers to “municipal roads and bridges” and “similar facilities.”

Applying the rules of ejusdem generis, the phrase “similar facilities” refers to or includes
infrastructure facilities like sidewalks owned by the LGU. Thus, RA 7160 contemplates that only
the construction, improvement, repair and maintenance of infrastructure facilities owned by the
LGU may be bankrolled with local government funds.

Clearly, the question of ownership of the open spaces (including the sidewalks) in Marikina
Greenheights Subdivision is material to the determination of the validity of the challenged
appropriation and disbursement made by the City of Marikina. Similarly significant is the
character of the direct object of the expenditure, that is, the sidewalks.

Whether V.V. Soliven, Inc. has retained ownership of the open spaces and sidewalks or has
already donated them to the City of Marikina, and whether the public has full and unimpeded
access to the roads and sidewalks of Marikina Greenheights Subdivision, are factual matters.
There is a need for the prior resolution of these issues before the validity of the challenged
appropriation and expenditure can be determined.

This case is REMANDED to the Regional Trial Court of Marikina City for the reception of evidence
to determine (1) whether V.V. Soliven, Inc. has retained ownership of the open spaces and
sidewalks of Marikina Greenheights Subdivision or has donated them to the City of Marikina
and (2) whether the public has full and unimpeded access to, and use of, the roads and sidewalks
of the subdivision.

CITY OF ANGELES vs. CA; 261 SCRA 90 (1996)

FACTS:

In a Deed of Donation dated March 9, 1984, private respondent donated to the City of Angeles,
51 parcels of land situated in Barrio Pampang, City of Angeles, with an aggregate area of 50,676
square meters, more or less, part of a bigger area also belonging to private respondent.

It was subsequently superseded by a Deed of Donation dated September 27, 1984 and an
Amended Deed of Donation dated November 26, 1984.
City of Angeles vs. Court of Appeals
On July 19, 1988, petitioners started the construction of a drug rehabilitation center on a portion
of the donated land.

Upon learning thereof, private respondent protested such action for being violative of the terms
and conditions of the amended deed and prejudicial to its interest and to those of its clients and
residents.
Private respondent also offered another site for the rehabilitation center.
City of Angeles vs. Court of Appeals
However, petitioners ignored the protest, maintaining that the construction was not violative of
the terms of the donation.

The alternative site was rejected because, according to petitioners, the site was too isolated and
had no electric and water facilities.

Private respondent filed a complaint alleging a breach of the conditions imposed in the amended
deed of donation and sought the revocation of the donation and damages, with preliminary
injunction and/or temporary restraining order to halt the construction of the said center.
City of Angeles vs. Court of Appeals
But the construction was already completed by 40%.

FACTS (DALAWA NAHANAP KO KASI)

Timog Silangan Devt. Corporation donated 5% of the gross area of its medium-density subdivision in favor of City
of Angeles. This donation is pursuant to PD1216 which requires the subdivision developer to donate a portion of
its subdivision to the city or municipality where it is located. This donated property is to be devoted for non-
buildable open spaces (parks, playgrounds) for the benefit of the public, and outside the commerce of men. Under
PD 1216, Timog Silangan is obliged to donate 7% of its property to City of Angeles since its subdivision is
considered as medium-density.

In the Deed of Donation, Timog Silangan imposed the condition that the city government should construct a
sports complex thereon. Failure to observe this condition will cause the donor to revoke said donation and recover
the donated property with its improvements thereon.

City of Angeles constructed a drug rehabilitation facility instead. So, Timog Silangan sued for revocation of the
donation.

According to the City of Angeles, since the donor is mandated by law to donate a portion of its
subdivision to the city or municipality concerned, it has no right to impose the condition to construct a sports
complex thereon. It cannot prescribe any condition as to the use of the area donated because the use of the open
spaces is already governed by PD 1216. Therefore, said condition is deemed not written.

Issue 1: Can the donor impose conditions on the said donation?

HELD: YES, because the general law on donations does not prohibit the imposition of conditions on a donation
so long as the conditions are not illegal or impossible. Conditions may be imposed so long as they are not contrary
to law, morals, good customs, public order or public policy. Also, the special law involved does not provide that
donations made by the subdivision in favor of the city or municipality should be unconditional.

Issue 2: Was the condition imposed valid?

HELD: No, the condition was not valid. Timog Silangan was mandated by PD 1216 to donate 7% of its subdivision
to the city government to be designated as non-buildable open spaces (for parks and playgrounds), but it only
donated 5% of its area. As there is actually a deficiency in the area donated, the whole property should be reserved
for said parks and playgrounds; the sports complex cannot be constructed thereon. Said sports complex could
only be built if Timog Silangan donated more than 7% of its gross area tot he city government. So, the donation is
valid and subsisting, except for the condition to construct a sports complex on the donated land. The condition
was considered void.

Issue 3: Can Timog Silangan revoke the donation for the breach committed by City of Angeles?

HELD: No. Timog Silangan and the City of Angeles are considered in pari delicto because:* Timog Silangan
donated less than that required by law, and for agreeing to construct a sports complex on such non-buildable
area; and*City of Angeles constructed a drug rehabilitation center on such non-buildable area. Since the condition
to construct a sports complex on the donated land is contrary to law(see Issue 2), revocation of the donation and
the recovery of the property cannot be done because:*there was no valid stipulation that was breached; and*the
donated property was considered by PD 1216 as property beyond the commerce of men and property of public
dominion.

Issue 4: Whether or not petitioner is immune from suit.

HELD: The Court ruled that public officials are not immune from damages in their personal
capacities arising from acts done in bad faith.
City of Angeles vs. Court of Appeals
In theory, the cost of such demolition, and the reimbursement of the public funds expended in
the construction thereof, should be borne by the officials of the City of Angeles who ordered and
directed such construction.

Otherwise stated, a public official may be liable in his personal capacity for whatever damage he
may have caused by his act done with malice and in bad faith or beyond the scope of his authority
or jurisdiction.
In the instant case, the public officials concerned deliberately violated the law and persisted in
their violations, going so far as attempting to deceive the courts by their pretended change of
purpose and usage for the center, and “making a mockery of the judicial system.”
City of Angeles vs. Court of Appeals
Indisputably, said public officials acted beyond the scope of their authority and jurisdiction and
with evident bad faith.

However, as noted by the trial court, the petitioners mayor and members of the Sangguniang
Panlungsod of Angeles City were sued only in their official capacities, hence, they could not be
held personally liable without first giving them their day in court.
City of Angeles vs. Court of Appeals
Prevailing jurisprudence holding that public officials are personally liable for damages arising
from illegal acts done in bad faith are premised on said officials having been sued both in their
official and personal capacities.

CITY COUNCIL OF CEBU CITY VS. CUIZON; 47 SCRA 325, October 31, 1972

FACTS:

The plaintiffs are majority members of the city of Cebu praying that the contract entered into on
February 5, 1966 by and between defendant, Mayor Cuizon on behalf of the city for the purchase
of road construction equipment from Tropical be declared as null and void ab initio.

Because the contract was without the necessary authority and approval of the city council, and
that the city treasurer had not certified to the city mayor, as required by section 607 of the
Revised Administrative Code that funds have been duly appropriated for the said contract and
that the amount necessary to cover the contract was available for expenditure on account thereof.

The City Council approved Resolution No. 1648 authorizing the City Mayor, for and in behalf of
the City of Cebu, to negotiate and to contract for, by public bidding, on deferred payment plan
and by lot bid, U.S. or European made road construction equipments for the City of Cebu and
authorizing him for this purposes, to sign the corresponding contract and other pertinent papers.
It also approved Resolution No. 1831, authorizing the City Mayor, in connection with the
authority granted him under Resolution No. 1648, current series, to utilize the Time Deposit of
the City of Cebu with the Philippine National Bank, as Bond guarantee in the opening of a Letter
of Credit in connection with the City of Cebu's application to directly purchase road construction
equipments from abroad, to the extent of the amount that the Letter of Credit may require.

By reason of the fact that the call to bid by the defendant City Mayor Carlos J. Cuizon were for
bidders who should be exclusive distributors of the equipments being bidded and the said
supplier must have a sales and service outlet in the City of Cebu, the other bidders then became
disqualified and the bid was awarded to the only bidder, the defendant

Tropical Commercial Co., Inc. Hence, on January 20, 1966, the City Council approved Resolution
No. 122, to request the Award Committee to forward to this Body the pertinent papers in
connection with the bidding for two (2) complements of light and heavy equipments to be used
by the City Engineering Department for ratification by this Body.

Notwithstanding the request contained in Resolution No. 122, the defendant City Mayor, Carlos
J. Cuizon, without having been duly authorized thru proper resolution of the City Council, and
without compliance with Resolution No. 122, signed a contract with the Tropical Commercial
Co., Inc. for the acquisition of the heavy equipments on February 5, 1966. The City Council,
without knowledge that the contract had already been signed by defendant City Mayor Carlos J.
Cuizon and the Tropical Commercial Co., Inc. and revoked prior resolutions.

The presiding officer of the City Council, City Councilor Florencio S. Urot, sent a telegram to the
Manager of the Philippine National Bank. The defendant Acting City Treasurer, Jesus E. Zabate,
sent a reply to the Asst. Vice- President of the defendant Philippine National Bank in Cebu City
refusing the request of the Philippine National Bank (to withhold P3, 000,000.00 from the time
deposit of the City of Cebu) on the ground that no appropriation for the purchase of heavy
equipments was made by the City Council.
That notwithstanding the knowledge of the revocation by Resolution No. 473 of Resolution No.
1648 and Resolution No. 1831, series of 1965 of the City Council of Cebu City, the said City
Mayor, Carlos J. Cuizon, continued with the transaction by placing the order with the Equipment
Division of the Continental Ore Corporation of New York U.S.A. for the purchase of the said heavy
equipment. Hence, plaintiffs- appellants filed their complaint against defendants-appellees. The
lower court dismissed the appeal.

ISSUE: WON City of Cebu is exempted and the same not liable for any and all obligations to the
defendant Philippine National Bank

HELD:

1. It seems clearly self-evident from the foregoing recitation of the undisputed antecedents and
factual background that the lower court gravely erred in issuing its dismissal order on the ground
of plaintiffs' alleged lack of interest or legal standing as city councilors or as taxpayers to
maintain the case at bar. The lower court's fundamental error was in treating plaintiffs' complaint
as a personal suit on their own behalf and applying the test in such cases that plaintiffs should
show personal interest as parties who would be benefited or injured by the judgment sought.
Plaintiffs' suit is patently not a personal suit. Plaintiffs clearly and by the express terms of their
complaint filed the suit as a representative suit on behalf and for the benefit of the city of Cebu.
The appeal at bar must therefore be granted and the case ordered remanded to the lower court
where the parties may be properly given the opportunity at the trial to present evidence in
support of their respective contentions for disposition and judgment on the merits.

2. The lower court entirely missed the point that the action filed by plaintiffs-appellants as city
councilors (composing practically the entire city council, at that) and as city taxpayers is to
declare null and void the P3-million contract executed by defendant city mayor for the purchase
of road construction equipment purportedly on behalf of the city from its co-defendant Tropical
and to declare equally null and void the corresponding letters of credit opened with the bank by
defendant mayor and to prevent the disbursement of any city funds therefor and toexempt the
City of Cebu and hold it not liable for any obligation arising from such contract and letters of
credit specifically and precisely questioned in the complaint filed by plaintiffs on behalf of the
City as having beenexecuted without authority and contrary to law.

Plaintiffs' suit is clearly not one brought by them in their personal capacity for the annulment of
a particular contract entered into between two other contracting parties, in which situation
Article 1397 of the Civil Code may rightfully be invoked to question their legal capacity or interest
to file the action, since they are not in such case in anyway obliged thereby principally or
subsidiarily.

On the contrary, plaintiffs' suit is one filed on behalf of the City of Cebu, instituted by them in
pursuance of their prerogative and duty as city councilors and taxpayers, in order to question
and declare null and void a contract which according to their complaint was executed by
defendant city mayor purportedly on behalf of the city without valid authority and which had
been expressly declared by the Auditor-General to be null and void ab initio and therefore could
not give rise to any valid or allowable monetary claims against the city.

3. Plaintiffs' right and legal interest as taxpayers to file the suit below and seek judicial assistance
to prevent what they believe to be an attempt to unlawfully disburse public funds of the city and
to contest the expenditure of public funds under contracts and commitments with defendants
bank and Tropical which they assert to have been entered into by the mayor without legal
authority and against the express prohibition of law have long received the Court's sanction and
recognition. Even defendant Tropical so understood that plaintiffs' suit was a representative suit
in behalf of the City of Cebu, hence their counterclaim in their answer, should the lower court
uphold plaintiffs' "capacity or interest to bring this suit in behalf of the City of Cebu," for
judgment against the City of Cebu for the repayment with legal interest of bank charges in the
total sum of P242,939.90 which it had advanced on the letters of credit opened by the defendant
bank at the mayor's instance in favor of its U.S. supplier, supra."

Parenthetically, it may be noted with reference to said letters of credit opened by the bank at the
mayor's instance, that the same were caused by the mayor to be established, according to the
allegations of the complaint, notwithstanding the mayor's knowledge and notice of the
city council having revoked by its resolution No. 473 on March 10, 1966 its previous resolutions
authorizing him to enter into the transaction.

4. Plaintiffs' right and legal interest as city councilors to file the suit below and to prevent what
they believe to be unlawful disbursements of city funds by virtue of the questioned contracts and
commitments entered into by the defendant city mayor notwithstanding the city council's
revocation of his authority with due notice thereof to defendant bank must likewise be
recognized.

The lower court's narrow construction of the city charter, Republic Act No. 3857, that under
section 20 (c) thereof, it is only the city mayor who is empowered "to cause to be instituted judicial
proceedings to recover properties and funds of the city wherever found and cause to be defended
all suits against the city," and that plaintiffs' suit must therefore fail since "there is no provision
in the said charter which authorizes expressly or impliedly the city council or its members to
bring an action in behalf of the city" cannot receive the Court's sanction.

The case at bar shows the manifest untenability of such a narrow construction. Here where the
defendant city mayor's acts and contracts purportedly entered into on behalf of the city are
precisely questioned as unlawful, ultra vires and beyond the scope of his authority, and the city
should therefore not be bound thereby nor incur any liability on account thereof, the city mayor
would be the last person to file such a suit on behalf of the city, since he precisely maintains the
contrary position that his acts have been lawful and duly bind the city.

To adhere to the lower court's narrow and unrealistic interpretation would mean that no action
against a city mayor's actuations and contract in the name and on behalf of the city could ever
be questioned in court and subjected to judicial action for a declaration of nullity and invalidity,
since no city mayor would file such an action on behalf of the city to question, much less nullify,
contracts executed by him on behalf of the city and which he naturally believes to be valid and
within his authority.

5. Section 20 (c) of the city charter invoked by the lower court, however, has no applicability to
the present suit, which is not one to recover properties and funds of the city or a
suit against the city, but rather a representativesuit on behalf of and purportedly for the benefit
of the city, which the city mayor is however loath to institute.

Under such circumstances, in the same manner that a stockholder of a corporation is permitted
to institute derivative or representative suits as nominal party plaintiff for the benefit of the
corporation which is the real party in interest, more so may plaintiffs as city councilors
exclusively empowered by the city charter to "make all appropriations for the expenses of the
government of the city" and who were the very source of the authority granted to the city mayor
to enter into the questioned transactions which authority was later revoked by them, as per the
allegations of the complaint at bar, be deemed to possess the necessary authority, and interest,
if not duty, to file the present suit on behalf of the City and to prevent the disbursement of city
funds under contracts impugned by them to have been entered into by the city mayor without
lawful authority and in violation of law.

ACCORDINGLY, the order appealed from is hereby set aside and the lower court is ordered to
proceed with the trial and disposition of the case below on its merits. No costs. So ordered.

RAMOS vs. COURT OF APPEALS; G.R. No. 99425 March 3, 1997

FACTS:

On April 18, 1990, petitioners Antonio C. Ramos, Rosalinda M. Perez, Norma C. Castillo, and the
Baliuag Market Vendors Association, Inc. filed a petition for the Declaration of Nullity of
Municipal Ordinances No. 91 (1976) and No. 7 (1990) and the contract of lease over a commercial
arcade to be constructed in the municipality of Baliuag, Bulacan, Preliminary injunction, was
issued by the court a quo on May 9, 1990.

The provincial Fiscal and the Provincial Attorney, Oliviano D. Regalado, filed an Answer in behalf
of respondent municipality. At the pre-trial conference scheduled on May 28, 1990, Atty. Roberto
B. Romanillos appeared, manifesting that he was counsel for respondent municipality.

On June 18, 1990, Provincial Attorney Oliviano D. Regalado appeared as collaborating counsel
of Atty. Romanillos. The Provincial Fiscal did not appear. It was Atty. Romanillos who submitted
the Reply to petitioners' Opposition to respondents' motion to dissolve injunction and a written
formal offer of evidence for respondent municipality.

Petitioners opposed the personality of Atty. Romanillos to appear as counsel of the respondent
municipality, and motioned to disqualify Atty. Romanillos from appearing as counsel for
respondent municipality and to declare null and void the proceedings participated in and
undertaken by Atty. Romanillos. Atty. Romanillos withdrew as counsel for respondent
municipality and that Atty. Regalado, as his collaborating counsel for respondent municipality,
is adopting the entire proceedings participated in/undertaken by Atty. Romanillos.

Respondent Judge issued the Order denied petitioners' motion to disqualify Atty. Romanillos as
counsel for respondent municipality and to declare null and void the proceeding participated in
by Atty. Romanillos; and on the other hand, granted Atty. Regalado's motion "to formally adopt
the entire proceedings including the formal offer of

evidence”. It is noted that Atty. Romanillos initially entered his appearance as collaborating
counsel of the Provincial Prosecutor and the Provincial Attorney when he filed a motion to
dissolve injunction under motion dated May 30, 1990 and since then despite his active
participation in the proceedings, the opposing counsel has never questioned his appearance until
after he made a formal offer of evidence for the respondents. The acquiescence of petitioners'
counsel of his appearance is tantamount to a waiver and petitioners are, therefore, estopped to
question the same.

ISSUES:

1. Who has the legal authority to represent a municipality in law-suits?

2. If an unauthorized lawyer represents a municipality what is the effect of his participation in

the proceedings?
3. Parenthetically, does a motion to withdraw the appearance of the unauthorized counsel have
to comply with Rule 15 of the Rules of Court regarding notice and hearing of motions?

HELD: We affirm the Decision and Resolution of public respondent.

1. Only provincial fiscal and the municipal attorney can represent a province or
municipality in their lawsuits. In the recent case of Municipality of Pililla, Rizal vs. Court of
Appeals, set in clear-cut terms the answer to the question of who may legally represent a
municipality in a suit for or against it, thus: we ruled that private attorneys cannot represent a
province or municipality in lawsuits.

Section 1683 of the Revised Administrative Code provides: Sec. 1683. Duty of fiscal to represent
provinces and provincial subdivisions in litigation. — The provincial fiscal shall represent the
province and any municipality or municipal district thereof in any court, except in cases whereof
(sic) original jurisdiction is vested in the Supreme Court or in cases where the municipality or
municipal district in question is a party adverse to the provincial government

or to some other municipality or municipal district in the same province. When the interests of
a provincial government and of any political division thereof are opposed, the provincial fiscal
shall act on behalf of the province.

When the provincial fiscal is disqualified to serve any municipality or other political subdivision
of a province a special attorney may be employed by its council.

Under the above provision, complemented by Section 3, Republic Act No. 2264, the Local
Autonomy Law, only provincial fiscal and the municipal attorney can represent a province or
municipality in their lawsuits. The provision is mandatory. The municipality's authority to
employ a private lawyer is expressly limited only to situations where the provincial fiscal is
disqualified to represent it. For the aforementioned exception to apply, the fact that the provincial
fiscal was disqualified to handle the municipality's case must appear on record. In the instant
case, there is nothing in the records to show that the provincial fiscal is disqualified to
act as counsel for the Municipality of Pililla on appeal, hence the appearance of herein
private counsel is without authority of law. The provincial fiscal's functions as legal officer
and adviser for the civil cases of a province and corollarily, of the municipalities thereof, were
subsequently transferred to the provincial attorney.

The foregoing provisions of law and jurisprudence show that only the provincial fiscal, provincial
attorney, and municipal attorney should represent a municipality in its lawsuits. Only in
exceptional instances may a private attorney be hired by a municipality to represent it in
lawsuits. It may be said that Atty. Romanillos appeared for respondent municipality inasmuch
as he was already counsel of Kristi Corporation which was sued with respondent municipality in
this same case. The fact that the municipal attorney and the fiscal are supposed to collaborate
with a private law firm does not legalize the latter's representation of the municipality of Hagonoy.
While a private prosecutor is allowed in criminal cases, an analogous arrangement is not allowed
in civil cases wherein a municipality is the plaintiff.

Private lawyers may not represent municipalities on their own. Neither may they do so
even in collaboration with authorized government lawyers. This is anchored on the principle
that only accountable public officers may act for and in behalf of public entities and that public
funds should not be expanded to hire private lawyers.

2. YES, We agree with public respondent that such adoption produces validity. It does not appear
that the adoption of proceedings participated in or undertaken by Atty. Romanillos when he was
private counsel for the respondent municipality of Baliuag — such as the proceedings on the
motion to dissolve the injunction, wherein petitioners had even cross- examined the witnesses
presented by Atty. Romanillos in support of said motion and had even started to present their
witnesses to sustain their objection to the motion — would have resulted in any substantial
prejudice to petitioners' interest. To declare the said proceedings null and void —
notwithstanding the formal adoption thereof by Atty. Regalado as Provincial Attorney of Bulacan
in court — and to require trial anew to cover the same subject matter, to hear the same witnesses
and to admit the same evidence adduced by the same parties cannot enhance the promotion of
justice.

This Court believes that conferring legitimacy to the appearance of Atty. Romanillos would
not cause substantial prejudice on petitioners. Requiring new trial on the mere legal
technicality that the municipality was not represented by a legally authorized counsel would not
serve the interest of justice. In sum, although a municipality may not hire a private lawyer to
represent it in litigations, in the interest of substantial justice however, we hold that a
municipality may adopt the work already performed in good faith by such private lawyer, which
work is beneficial to it (1) provided that no injustice it thereby heaped on the adverse party and
(2) provided further that no compensation in any guise is paid therefor by said municipality to
the private lawyer. Unless so expressly adopted, the private lawyers work cannot bind the
municipality.

3. NO, a motion to withdraw the appearance of an unauthorized lawyer is a non-adversarial

motion that need not comply with Section 4 Rule 15 as to notice to the adverse party. The
disqualification of Atty. Romanillos was what petitioners were really praying for when they
questioned his authority to appear for the municipality. The disqualification was granted, thereby
serving the relief prayed for by petitioners. such being the case, no "notice directed to the parties
concerned and served at least 3 days before the hearing thereof" need be given petitioners, the

questioned motion not being contentious. Besides, what petitioners were questioning as to lack
of authority was remedied by the adoption of proceedings by an authorized counsel, Atty.
Regalado.

WHEREFORE, premises considered, the Petition is DENIED and the assailed Decision and
Resolution are AFFIRMED. No costs.

OFFICE OF THE SOLICITOR GENERAL V. CA AND MUNICIPAL GOVERNMENT OF

SAGUIRAN, LANAO DEL SUR

FACTS:

The Municipality of Saguiran was named a respondent in a petition for mandamus4 filed with
RTC of Lanao del Sur by the former members of the Sangguniang Bayan of Saguiran, namely,
Macmod P. Masorong, Amrosi Macote Samporna, Alanie L. Dalama, Hassan P. Amai-Kurot and
Cadalay S. Rataban. Therein petitioners sought to compel the Municipality of Saguiran to pay
them the aggregate amount of 726,000.00, representing their unpaid terminal leave benefits
under Section 5 of the Civil Service Commission Memorandum Circular Nos. 41, Series of 1998
and 14, Series of 1999. The Municipality of Saguiran sought the trial court’s dismissal of the
petition through its Verified Answer with Affirmative Defenses and Counterclaim.

RTC issued an Order dismissing the petition on the ground that the act being sought by therein
petitioners was not a ministerial duty. The RTC explained that the payment of terminal leave
benefits had to undergo the ordinary process of verification, approval or disapproval by municipal
officials. The Municipality of Saguiran partially appealed the order of the RTC to the CA. The
OSG initially moved for a suspension of the period to file the required memorandum, explaining
that it had not received any document or pleading in connection with the case. It asked for a
period of 30 days from receipt of such documents within which to file the required memorandum.
On April 23, 2010, the OSG’s motion was denied by the CA on the ground that the relief sought
was not among the remedies allowed under the Rules of Court. The OSG was instead given a
non-extendible period of 90 days from notice within which to file the memorandum. OSG filed a
Manifestation and Motion12 requesting to be excused from filing the memorandum on the
ground of lack of legal authority to represent the Municipality of Saguiran but it was denied.

ISSUE:
The Honorable CA committed grave abuse of discretion amounting to lack or excess of
jurisdiction in compelling the OSG to represent the municipal government of Saguiran, Lanao
del Sur in its lawsuit.

HELD:
Meritorious. OSG’s mandate under the Administrative Code must be construed taking into
account the other statutes that pertain to the same subject of representation in courts. As the
Court explained in Philippine Economic Zone Authority v. Green Asia Construction &
Development Corporation:

Statutes are in pari materia when they relate to the same person or thing or to the same class of
persons or things, or object, or cover the same specific or particular subject matter.

It is axiomatic in statutory construction that a statute must be interpreted, not only to be

consistent with itself, but also to harmonize with other laws on the same subject matter, as to
form a complete, coherent and intelligible system. The rule is expressed in the maxim,
“interpretare et concordare legibus est optimus interpretandi,” or every statute must be so
construed and harmonized with other statutes as to form a uniform system of jurisprudence.

Specifically for local government units, the LGC limits the lawyers who are authorized to
represent them in court actions, as the law defines the mandate of a local government unit’s
legal officer.

Evidently, this provision of the LGC not only identifies the powers and functions of a local
government unit’s legal officer. It also restricts, as it names, the lawyer who may represent the
local government unit as its counsel in court proceedings. Being a special law on the issue of
representation in court that is exclusively made applicable to local government units, the LGC
must prevail over the provisions of the Administrative Code, which classifies only as a general
law on the subject matter.

Given the foregoing, the CA committed grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing the assailed resolutions which obligated the OSG to represent the
Municipality of Saguiran.

The mere fact that the OSG initially filed before the CA a motion for extension of time to file the
required memorandum could not have estopped it from later raising the issue of its lack of
authority to represent the Municipality of Saguiran. Its mandate was to be traced from existing
laws. No action of the OSG could have validated an act that was beyond the scope of its authority.

VICENCIO VS. VILLAR; 675 SCRA 468

The mandate of the Commission on Audit is to observe the policy that government
funds and property should be fully protected and conserved; and that irregular, unnecessary,
excessive or extravagant expenditures or uses of such funds and property should be prevented.

FACTS:

The City Council or the Sangguniang Panglungsod ng Malabon (SPM),

presided by Hon. Benjamin Galauran, then acting Vice-Mayor, adopted and
approved City Ordinance No. 15-2003, entitled “An Ordinance Granting Authority
to the City Vice-Mayor, Hon. Jay Jay Yambao, to Negotiate and Enter into Contract
for Consultancy Services for Consultants in the Sanggunian Secretariat Tasked to
Function in their Respective Areas of Concern.”

Arnold Vicencio was elected City Vice-Mayor of Malabon. By virtue of

this offce, he also became the Presiding Offcer of the SPM and, at the same time,
the head of the Sanggunian Secretariat. Vicencio, representing the City Government
of Malabon City, entered into Contracts for Consultancy Services. After the
signing of their respective contracts, the three consultants rendered consultancy
services to the SPM. Thereafter, the three consultants were correspondingly
paid for their services pursuant to the contracts therefor. However, an Audit
Observation Memorandum (AOM) was issued disallowing the amount for being
an improper disbursement. Aggrieved by the disallowance, Vicencio appealed it
to the Adjudication and Settlement Board (ASB) of the Commission on Audit
(COA) which subsequently denied it.

ISSUE:

Whether or not the Commission on Audit committed serious errors and

grave abuse of discretion amounting to lack of or excess of jurisdiction when it
affrmed ASB’s decision relative to the disallowance of disbursements concerning
the services rendered by hired consultants for the Sangguniang Panlungsod ng
Malabon

HELD:

Under Section 456 of R.A. 7160, or the Local Government Code, there
is no inherent authority on the part of the city vice-mayor to enter into contracts
on behalf of the local government unit, unlike that provided for the city mayor.
Thus, the authority of the vice-mayor to enter into contracts on behalf of the city
was strictly circumscribed by the ordinance granting it. Ordinance No. 15-2003
specifcally authorized Vice-Mayor Yambao to enter into contracts for consultancy
services. As this is not a power or duty given under the law to the Offce of
the Vice-Mayor, Ordinance No. 15-2003 cannot be construed as a “continuing
authority” for any person who enters the Offce of the Vice-Mayor to enter into
subsequent, albeit similar, contracts.

The COA’s assailed Decision was made in faithful compliance with its
mandate and in judicious exercise of its general audit power as conferred on it
by the Constitution. The COA was merely fulflling its mandate in observing
the policy that government funds and property should be fully protected and
conserved; and that irregular, unnecessary, excessive or extravagant expenditures
or uses of such funds and property should be prevented. Thus, no grave abuse of
discretion may be imputed to the COA.
PROVINCE OF CAGAYAN V. LARA, G.R. NO. 188500 (RESOLUTION), [JULY 24, 2013], 715
PHIL 172-179

FACTS: On September 14, 2007, Lara obtained an Industrial Sand and Gravel Permit (ISAG
Permit) from the Mines and Geosciences Bureau (MGB) of the Department of Environment and
Natural Resources (DENR), authorizing him to conduct quarrying operations in a twenty-hectare
area situated in Barangay Centro, Municipality of Peñablanca (Peñablanca), Cagayan (Permit
Area) and extract and dispose of sand, gravel, and other unconsolidated materials from the
Permit Area. For the same purpose, Lara obtained an Environmental Compliance Certificate
(ECC) from the DENR Environmental Management Bureau (EMB). EaCSTc

On January 3, 2008, Jovy Balisi (Balisi), Lara’s representative, went to the Cagayan Provincial
Treasurer’s Office (Treasurer’s Office) to pay the extraction fee and other fees for Lara’s quarrying
operations but she was directed to first secure an Order of Payment from the Environmental and
Natural Resources Officer, petitioner Robert Adap (ENRO Adap). However, when Balisi went to
ENRO Adap, the latter refused to issue an Order of Payment. Despite various pleas from Balisi
and Atty. Victorio N. Casauay (Atty. Casauay), Lara’s counsel, ENRO Adap remained adamant
with his refusal. This prompted Atty. Casauay to tender and deposit the amount of P51,500.00
with the Treasurer’s Office corresponding to the said extraction fee and other related fees.

On January 11, 2008, Lara commenced his quarrying operations. Later that day, however, a
total of four trucks loaded with sand and gravel extracted from the Permit Area were stopped and
impounded by several local officials. Consequently, Lara filed an action for injunction with prayer
for the issuance of a writ of preliminary injunction, docketed as Civil Case No. 7049, against the
said officials, seeking to enjoin the stoppage of his quarrying operations. After due proceedings,
a writ of preliminary injunction was issued enabling Lara to restart his business.

Nonetheless, on March 17, 2008, Lara received a Stoppage Order dated March 13, 2008
(Stoppage Order) this time from Cagayan Governor Alvaro T. Antonio (Gov. Antonio), directing
him to stop his quarrying operations for the following reasons: (a) the ISAG Permit was not in
accordance with Republic Act No. (RA) 7942, otherwise known as the “Philippine Mining Act of
1995,” and its implementing rules and regulations; (b) Lara’s failure to pay sand and gravel fee
under Provincial Ordinance No. 2005-07; and (c)[Lara’s] failure to secure all necessary permits
or clearances from the local government unit concerned as required by the [ECC]. Hence, Lara
filed the present action for injunction and damages with an urgent and ex-parte motion for the
issuance of a temporary restraining order and/or preliminary injunction before the RTC,
docketed as Civil Case No. 7077.

ISSUE: WON THE ISSUANCE OF INJUNCTION IS PROPER.

HELD: NO. It is well-settled that a writ of injunction would issue upon the satisfaction of two (2)
requisites, namely: (a) the existence of a right to be protected; and (b) acts which are violative of
the said right. In the absence of a clear legal right, the issuance of the injunctive relief constitutes
grave abuse of discretion. Injunction is not designed to protect contingent or future rights. Where
the complainant’s right is doubtful or disputed, injunction is not proper. The possibility of
irreparable damage without proof of actual existing right is not a ground for an injunction.

In order for an entity to legally undertake a quarrying business, he must first comply with all the
requirements imposed not only by the national government, but also by the local government
unit where his business is situated. Particularly, Section 138 (2) of RA 7160requires that such
entity must first secure a governor’s permit prior to the start of his quarrying operations, viz.:
AaSHED

SECTION 138. Tax on Sand, Gravel and Other Quarry Resources. — . . . .

The permit to extract sand, gravel and other quarry resources shall be issued exclusively by
the provincial governor, pursuant to the ordinance of the sangguniang panlalawigan.
(Emphasis and underscoring supplied)

xxx xxx xxx

In connection thereto, the Sangguniang Panlalawigan of Cagayan promulgated Provincial

Ordinance No. 2005-07, Article H, Section 2H.04 of which provides:

SECTION 2H.04. Permit for Gravel and Sand Extraction and Quarrying. — No person shall extract
ordinary stones, gravel, earth, boulders and quarry resources from public lands or from the beds
of seas, rivers, streams, creeks or other public waters unless a permit has been issued by the
Governor (or his deputy as provided herein) . . . . (Emphasis and underscoring supplied)

A plain reading of the afore-cited provisions clearly shows that a governor’s permit is a pre-
requisite before one can engage in a quarrying business in Cagayan. Records, however, reveal
that Lara admittedly failed to secure the same; hence, he has no right to conduct his quarrying
operations within the Permit Area. Consequently, he is not entitled to any injunction.

SANGALANG vs INTERMEDIATE APPELLATE COURT G.R. No. 71169 December 22, 1988

FACTS:

Jose Sangalang and wife, herein petitioners are residents of Jupiter Street, Makati Metro Manila.
Sangalang and the other petitioners who are also residents of Jupiter Street initially filed a case
against Ayala to enforce by specific performance restrictive easement upon property pursuant to
stipulations embodied in the deeds of sale covering the subdivision, and for damages. The other
petitions were also for the enforcement of the aforesaid restrictions stipulated in the deeds of
sale executed by the Ayala Corporation.

The lots which were acquired by the petitioners, were all sold by MDC subject to certain
conditions and easements contained in Deed Restrictions which formed a part of each deed of
sale. When MDC sold the above-mentioned lots to appellees' predecessors-in-interest, the whole
stretch of the commercial block between Buendia Avenue and Jupiter Street, from Reposo Street
in the west to Zodiac Street in the east, was still undeveloped. Altough it was not part of the
original plan, MDC constructed a fence or wall on the commercial block along Jupiter.

In 1975, the municipal council of Makati enacted its ordinance No. 81, providing for the
zonification of Makati (Exh. 18). Under this Ordinance, Bel-Air Village was classified as a Class
A Residential Zone, with its boundary in the south extending to the center line of Jupiter Street.
Under the zoning classifications, Jupiter Street, therefore, is a common boundary of Bel-Air
Village and the commercial zone.
Gates had been installed by BAVA (Bell-Arat strategic locations across Jupiter Street which were
manned and operated by its own security guards who were employed to maintain, supervise and
enforce traffic regulations in the roads and streets of the village. Then, on January 17, 1977, the
Office of the Mayor of Makati directed that, in the interest of public welfare and for the purpose
of easing traffic congestion, the streets in Bel-Air Village should be opened for public use. The
other streets in Bel- Air Village were voluntarily opened except Jupiter Street. The Municipal
Engineer of Makati in a letter addressed to BAVA advised the latter to open for vehicular and
pedestrian traffic the entire portion of Jupiter Street from Makati Avenue to Reposo Street.
Finally, the municipal officials of Makati concerned allegedly opened, destroyed and removed the
gates constructed/located at the corner of Reposo Street and Jupiter Street as well as the
gates/fences located/constructed at Jupiter Street and Makati Avenue forcibly, and then opened
the entire length of Jupiter Street to public traffic.

Petitioners brought the present action for damages against the defendant-appellant Ayala
Corporation predicated on both breach of contract and on tort or quasi-delict. After trial on the
merits, the then Court of First Instance favored the petitioners and awarded damages. Defendant
is further ordered to restore/reconstruct the

perimeter wall at its original position in 1966 from Reposo Street in the west to Zodiac Street in
the east, at its own expense,

On appeal, CA reversed the lower court, finding the decision appealed from as not supported by
the facts and the law on the matter, it was set aside and another one entered dismissing the case
for lack of a cause of action.

ISSUES:

1. Whether or not Ayala Corporation is liable for damages as a result of the destruction of the
perimeter wall.

2. Whether or not the exercise of police power is valid.

HELD:

1. NO. Jupiter Street lies as the boundary between Bel-Air Village and Ayala Corporation's
commercial section, it had been considered as a boundary not as a part of either the residential
or commercial zones of Ayala Corporation's real estate development projects, hence it cannot be
said to have been "for the exclusive benefit" of Bel-Air Village residents.

Jupiter Street lies as a mere boundary, a fact acknowledged by the authorities of Makati and the
National Government and, as a scrutiny of the records themselves reveals, by the petitioners
themselves, as the articles of incorporation of Bel-Air Village Association itself would confirm. As
a consequence, Jupiter Street was intended for the use by both -the commercial and residential
blocks. It was not originally constructed, therefore, for the exclusive use of either block, least of
all the residents of Bel-Air Village, but, we repeat, in favor of both, as distinguished from the
general public. When the wall was erected in 1966 and rebuilt twice, in 1970 and 1972, it was
not for the purpose of physically separating the two blocks. According to Ayala Corporation, it
was put up to enable the Bel-Air Village Association "better control of the security in the area,
and as the Ayala Corporation's "show of goodwill". That maintaining the wall was a matter of a
contractual obligation on the part of Ayala, to be pure conjecture. In fine, we cannot hold the
Ayala Corporation liable for damages for a commitment it did not make, much less for alleged
resort to machinations in evading it.
2. Yes. While non-impairment of contracts is constitutionally guaranteed, the rule is not
absolute, since it has to be reconciled with the legitimate exercise of police power, i.e., "the power
to prescribe regulations to promote the health, morals, peace, education, good order or safety
and general welfare of the people.' Invariably described as "the most essential, insistent, and
illimitable of powers" and "in a sense, the greatest and most powerful attribute of government,"
the exercise of the power may be judicially inquired into and corrected only if it is capricious,
whimsical, unjust or unreasonable, there having been a denial of due process or a violation of
any other applicable constitutional guarantee. Resolution No. 27, 1960 declaring the western
part of High way 54, now E. de los Santos Avenue (EDSA, for short) from Shaw Boulevard to the
Pasig River as an industrial and commercial zone, was obviously passed by the Municipal Council
of Mandaluyong, Rizal in the exercise of police power to safeguard or promote the health, safety,
peace, good order and general welfare of the people in the locality.

PILAPIL v. CA; G.R. No. 97619 November 26, 1992

FACTS:
Spouses Pilapil own a parcel of land in Bahak, Poblacion, Liloan, Cebu. Spouses
Colomida, on the other hand, bought a parcel of land located also in Bahak. Now this land owned
by the Colomidas has for its ingress and egress to the National Road a camino vecinal (barrio
road). However, this camino vecinal transverses the property of the Pilapil, which was the root of
all their problems.
The Pilapil denied the existence of the camino vecinal. Socrates Pilapil, the husband,
presented himself as witness (which was lousy) as well as Engineer Epifanio Jordan, Municipal
Planning and Development Coordinator of Liloan. The engineer said that while that zoning map
of Poblacion, Liloan made reference to a camino vecinal, said reference was but a mere proposal
of its existence to the Sangguniang Bayan of Liloan.
The Colomidas, on the other hand, relied on old-timers as witnesses – witnesses such as
Florentino Pepito, who attested to the existence of the Camino vecinal and its availability to the
general public since practically time immemorial.
The trial court ruled in favor of the Colomidas because the zoning map used as evidence
by the Pilapil did not specifically indicate that the amino vecinal was indeed merely “proposed”
since other roads and streets were classified as such. The CA upheld that trial court, basically
because it said that findings of facts by the trial court, as a general rule, should be undisturbed.

ISSUE: WON the zoning plan must give way to the claims of the adversaries?
HELD: NO

In its infinite wisdom, the SC said that it didn’t matter what opinion the Colomidas or the
engineer gave regarding the existence of the camino vecinal. What really mattered is the zoning
plan (the Urban Land Use Plan) as finally approved by the Sangguniang Bayan of the Municipality
of Liloan. The zoning plan showed that the camino vecinal was declared closed. And it’s beyond
dispute that the abandonment, closure or establishment of the camino vecinal is the sole
prerogative of the Municipality of Liloan under the LGU of 1983. The SC rebuked the parties for
not having resorted to a pre-trial conference which would have prevented the dragging of a trivial
case for six years.

CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC. (CREBA), vs.
 THE
SECRETARY OF AGRARIAN REFORM; G.R. No. 183409, June 18, 2010

FACTS:
The Secretary of Agrarian Reform issued, on 29 October 1997, DAR AO No. 07-97,3
entitled “Omnibus Rules and Procedures Governing Conversion of Agricultural Lands to Non-
Agricultural Uses,” which consolidated all existing implementing guidelines related to land use
conversion. The aforesaid rules embraced all private agricultural lands regardless of tenurial
arrangement and commodity produced, and all untitled agricultural lands and agricultural lands
reclassified by Local Government Units (LGUs) into non-agricultural uses after 15 June 1988.
Subsequently, on 30 March 1999, the Secretary of Agrarian Reform issued DAR AO No.
01-99,4 entitled “Revised Rules and Regulations on the Conversion of Agricultural Lands to Non-
agricultural Uses,” amending and updating the previous rules on land use conversion. Its
coverage includes the following agricultural lands, to wit: (1) those to be converted to residential,
commercial, industrial, institutional and other non-agricultural purposes; (2) those to be devoted
to another type of agricultural activity such as livestock, poultry, and fishpond ─ the effect of
which is to exempt the land from the Comprehensive Agrarian Reform Program (CARP) coverage;
(3) those to be converted to non-agricultural use other than that previously authorized; and (4)
those reclassified to residential, commercial, industrial, or other non-agricultural uses on or after
the effectivity of Republic Act No. 6657.
Secretary of Agrarian Reform issued another Administrative Order, i.e., DAR AO No. 01-
02, entitled “2002 Comprehensive Rules on Land Use Conversion,” which further amended DAR
AO No. 07-97 and DAR AO No. 01-99, and repealed all issuances inconsistent therewith. The
aforesaid DAR AO No. 01-02 covers all applications for conversion from agricultural to non-
agricultural uses or to another agricultural use.
To address the unabated conversion of prime agricultural lands for real estate
development, the Secretary of Agrarian Reform further issued Memorandum No. 88 on 15 April
2008, which temporarily suspended the processing and approval of all land use conversion
applications.
By reason thereof, petitioner claims that there is an actual slow down of housing projects,
which, in turn, aggravated the housing shortage, unemployment and illegal squatting problems
to the substantial prejudice not only of the petitioner and its members but more so of the whole
nation.

ISSUE:

WHETHER THE DAR SECRETARY HAS JURISDICTION OVER LANDS THAT HAVE BEEN
RECLASSIFIED AS RESIDENTIAL, COMMERCIAL, INDUSTRIAL, OR FOR OTHER NON-
AGRICULTURAL USES.

HELD:
yes?
Under DAR AO No. 01-02, as amended, "lands not reclassified as residential, commercial,
industrial or other non-agricultural uses before 15 June 1988" have been included in the
definition of agricultural lands. In so doing, the Secretary of Agrarian Reform merely acted within
the scope of his authority stated in the aforesaid sections of Executive Order No. 129-A, which
is to promulgate rules and regulations for agrarian reform implementation and that includes the
authority to define agricultural lands for purposes of land use conversion. Further, the definition
of agricultural lands under DAR AO No. 01-02, as amended, merely refers to the category of
agricultural lands that may be the subject for conversion to non-agricultural uses and is not in
any way confined to agricultural lands in the context of land redistribution as provided for under
Republic Act No. 6657.
More so, Department of Justice Opinion No. 44, Series of 1990, which Opinion has been
recognized in many cases decided by this Court, clarified that after the effectivity of Republic Act
No. 6657 on 15 June 1988 the DAR has been given the authority to approve land conversion.38
Concomitant to such authority, therefore, is the authority to include in the definition of
agricultural lands "lands not reclassified as residential, commercial, industrial or other non-
agricultural uses before 15 June 1988" for purposes of land use conversion.
 It is clear from the aforesaid distinction between reclassification and conversion that
agricultural lands though reclassified to residential, commercial, industrial or other non-
agricultural uses must still undergo the process of conversion before they can be used for the
purpose to which they are intended.
Nevertheless, emphasis must be given to the fact that DAR’s conversion authority can
only be exercised after the effectivity of Republic Act No. 6657 on 15 June 1988.45 The said date
served as the cut-off period for automatic reclassification or rezoning of agricultural lands that
no longer require any DAR conversion clearance or authority. 46 Thereafter, reclassification of
agricultural lands is already subject to DAR’s conversion authority. Reclassification alone will
not suffice to use the agricultural lands for other purposes. Conversion is needed to change the
current use of reclassified agricultural lands. It bears stressing that the act of reclassifying
agricultural lands to non-agricultural uses simply specifies how agricultural lands shall be
utilized for non-agricultural uses and does not automatically convert agricultural lands to non-
agricultural uses or for other purposes.

CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC. (CREBA) v. THE

SECRETARY OF AGRARIAN REFORM

FACTS: Oct 1997 Sec of DAR issued DAR A.O. entitled Omnibus Rules and Procedures
Governing Conversion of Agricultural Lands to Non Agricultural Uses. The said AO embraced all
private agricultural lands regardless of tenurial arrangement and commodity produced and all
untitled agricultural lands and agricultural lands reclassified by LGU into non-agricultural uses
after 15 June 1988. March 1999, Sec DAR issued Revised Rules and Regulations on Conversion
of Agricultural Lands to Non AgriculturalUses, it covers the following: (1) those to be converted
to residential, commercial, industrial, institutional and other non-agricultural purposes; (2)
those to be devoted to another type of agricultural activity such as livestock, poultry, and
fishpond ─ the effect of which is to exempt the land from the Comprehensive Agrarian Reform
Program (CARP) coverage; (3) those to be converted to non-agricultural use other than that
previously authorized; and (4) those reclassified to residential, commercial, industrial, or other
non-agricultural uses on or after the effectivity of Republic Act No. 6657 on 15 June 1988
pursuant to Section 20 of Republic Act No. 7160 and other pertinent laws and regulations, and
are to be converted to such uses. The 2 earlier AOs was further amended by an AO issued Feb
2002 - 2002 Comprehensive Rules on Land Use Conversion; covers all applications for
conversion from agricultural to non-agricultural uses or to another agricultural use.

The AO was amended again in 2007 to include provisions particularly addressing land conversion
in time of exigencies and calamities. To address the conversion to lands to non agricultural, Sec
of DAR suspended processing and approval of land conversion through DAR Memo 88. CREBA
claims that there is a slowdown of housing projects because of such stoppage

ISSUES: Is DAR's AO unconstitutional?

HELD: RA 6657 and 8435 defines agricultural land as lands devoted to or suitable for the
cultivation of the soil, planting of crops, growing of fruit trees, raising of livestock, poultry or fish,
including the harvesting of such farm products, and other farm activities and practices
performed by a farmer in conjunction with such farming operations done by a person whether
natural or juridical, and not classified by the law as mineral, forest, residential, commercial or
industrial land. However, he issued an AO included in this definition - lands not reclassified as
residential, commercial, industrial or other non-agricultural uses before 15 June 1988. In effect,
lands reclassified from agricultural to residential, commercial, industrial, or other non-
agricultural uses after 15 June 1988 are considered to be agricultural lands for purposes of
conversion, redistribution, or otherwise. This is violation of RA 6657 because there is nothing in
Section 65 of Republic Act No. 6657 or in any other provision of law that confers to the DAR the
jurisdiction or authority to require that non-awarded lands or reclassified lands be submitted to
its conversion authority.
Also, it violates Section 20 of Republic Act No. 7160, because it was not provided therein that
reclassification by LGUs shall be subject to conversion procedures or requirements, or that the
DARs approval or clearance must be secured to effect reclassification. The said Section 2.19 of
DAR AO No. 01-02, as amended, also contravenes the constitutional mandate on local autonomy
under Section 25, Article II and Section 2, Article X of the 1987 Philippine Constitution. There is
deprivation of liberty and property without due process of law because under DAR AO No. 01-
02, as amended, lands that are not within DARs jurisdiction are unjustly, arbitrarily and
oppressively prohibited or restricted from legitimate use on pain of administrative and criminal
penalties. More so, there is discrimination and violation of the equal protection clause of the
Constitution because the aforesaid administrative order is patently biased in favor of the
peasantry at the expense of all other sectors of society. DISMISSED.