Bugnay Construction and Development Corporation vs. Laron

A taxpayer's suit requires a showing that the challenged act directly involves an illegal disbursement of public funds raised by taxation and that the plaintiff will suffer a direct pecuniary or monetary injury; absent these, the plaintiff lacks locus standi. A party who, through counsel, files a second action in another branch for the same injunctive relief under the guise of a taxpayer's suit is guilty of litis pendentia and forum shopping, warranting dismissal of both actions.

P and M Agro-Development Corporation was the previous lessee of the Magsaysay Market Area in Dagupan City, while Bugnay Construction and Development Corporation was the lessee under a contract with the City for the construction and operation of a commercial center and public market on the same area. Regino R. Ravanzo, Jr. was P and M's counsel of record and also sued as a resident and taxpayer of Dagupan City.

On March 3, 1978, the City of Dagupan awarded a lease contract in favor of P and M Agro-Development Corporation over the Magsaysay Market Area, with an approximate area of 3,692 square meters. Because P and M failed to comply with the conditions of the contract, the City filed on May 25, 1982 an action to rescind the lease contract with the RTC of Pangasinan in Dagupan City, Branch 41, docketed as Civil Case No. D-6157. The RTC decided the case on January 16, 1985 in favor of the City on the basis of a Joint Manifestation of both parties dated September 20, 1984. Upon motion of the City, a writ of execution was issued on September 26, 1985 ordering immediate delivery of possession of the premises to the City. On November 5, 1985, P and M filed a motion for reconsideration of the decision; the incident was resolved only on August 17, 1987, when the RTC set aside the decision because the Joint Manifestation was not a compromise agreement: it was not signed by the party plaintiff, did not pray for a decision based on it, was not entitled as a compromise, was without prejudice to the continuance of the case, did not specify the proposed terms and conditions, and subjected the proposals to review by the proper government agencies. The City's motion for reconsideration of that resolution was denied on October 26, 1987.

While P and M's motion for reconsideration in D-6157 was pending, the Sangguniang Panlungsod of Dagupan City adopted on April 20, 1987 Resolution No. 1462-87 authorizing City Mayor Liberate Ll. Reyna, Sr. to enter into a contract of lease with Bugnay Construction and Development Corporation over the Magsaysay Market Area. On April 27, 1987, pursuant to the resolution, Bugnay entered into a lease contract with the City over the area, agreeing to finance, establish, construct, develop, manage, operate, maintain, control and supervise a commercial center and a modern public market building, paying a monthly rental of P8.00 per square meter for a period of twenty years beginning from the date the stallholders in the area would be relocated, and to turn over the entire market building and all attached appurtenances to the City upon expiration of the lease period. The contract showed that Bugnay would finance the project and recover its capital investment from rental fees due from the stallholders; it also undertook at its own expense to insure the building, clear the site for construction, hire personnel necessary to prevent unfair competition to its stallholders, and bear the expense of suits arising from the construction without right of reimbursement. Upon the relocation of the stallholders, Bugnay immediately started construction work.

On June 15, 1987, P and M, through its counsel Regino R. Ravanzo, Jr., filed an action for Injunction with Prayer for Preliminary Injunction and Temporary Restraining Order, Annulment of Contract, and Damages against the City, its officials, and Bugnay, docketed as Civil Case No. D-8664 and assigned to Branch 43 of the RTC in Dagupan City. P and M averred that because Civil Case No. D-6157 was still pending, its lease contract with the City continued to exist, so the lease contract executed by the City with Bugnay was null and void ab initio and an ultra vires act; it prayed that Bugnay be enjoined from continuing the construction of the market building. A temporary restraining order issued by Branch 43 on June 19, 1987 was dissolved on June 30, 1987 on the ground that no great or irreparable injury would result to P and M if no restraining order were issued.

On July 17, 1987, Ravanzo, professedly as a resident and taxpayer of Dagupan City, filed with the RTC in Dagupan City an action for Injunction with Preliminary Injunction and Temporary Restraining Order and Damages against the City of Dagupan, the City Mayor, and Bugnay, docketed as Civil Case No. D-8696 and assigned to Branch 44 presided over by respondent Judge Crispin C. Laron. Based on the same facts alleged in D-8664, Ravanzo attacked the legality of the lease contract between the City and Bugnay, alleging thirty reasons why the contract should be declared null and void, and prayed for a writ of injunction directing Bugnay to desist from continuing the questioned construction. On July 24, 1987, Judge Laron issued a restraining order enjoining Bugnay from continuing the construction of the Magsaysay Market building.

On July 28, 1987, the City and its Acting Mayor filed a motion to dismiss on the grounds that Ravanzo was not the real party in interest, the complaint stated no cause of action, there was another action (Civil Case No. D-8664) pending between the same parties involving the same subject matter, issues, purpose and prayer, and there was in effect forum-shopping. Judge Laron denied the motion to dismiss on August 5, 1987, and denied the City's motion for reconsideration on August 7, 1987. Thereafter, Judge Laron granted the filing of a bond by Ravanzo in the amount of P100,000.00 in his order of August 12, 1987, and a writ of preliminary injunction was issued on August 14, 1987. Hence, Bugnay filed this petition.

• Litis Pendentia: Petitioner argued that respondent judge committed grave abuse of discretion when, instead of dismissing Civil Case No. D-8696, he issued the writ of preliminary injunction despite the clear pendency of another action between the same parties for the same cause.
• Lack of Personality / Cause of Action: Petitioner argued that respondent judge gravely abused his discretion in denying the motion to dismiss because respondent Ravanzo had no personality to file a taxpayer's suit and therefore no cause of action against the defendants in the court a quo.
• Forum Shopping: Petitioner argued that under the facts, the private respondents were guilty of forum-shopping.

• Distinct Reliefs: Respondent Ravanzo insisted that Civil Case No. D-8696 was for "Injunction with Prayer for Preliminary Injunction and Temporary Restraining Order" while Civil Case No. D-8664 was for "Injunction with Prayer for Preliminary Injunction, Annulment of Contract and Temporary Restraining Order," so the actions sought distinct and different reliefs.
• No Common Interest: Respondent Ravanzo alleged that he had no interest in common whatsoever with P and M.
• Taxpayer's Suit: Respondent Ravanzo maintained the action as a resident and taxpayer of Dagupan City, attacking the lease contract as null and void and an ultra vires act.
• Injunction Authority: Respondent Judge Laron relied on Sabado vs. Cristina Gonzales, Inc. that a branch of the RTC has jurisdiction to issue a writ of preliminary injunction although a similar writ had been denied by another branch of the same court.

• Litis Pendentia / Grave Abuse of Discretion: Whether respondent judge committed grave abuse of discretion when, instead of dismissing Civil Case No. D-8696, he issued the writ of preliminary injunction despite the pendency of another action between the same parties for the same cause.
• Taxpayer's Locus Standi: Whether respondent judge committed grave abuse of discretion in denying the motion to dismiss Civil Case No. D-8696 despite respondent Ravanzo's lack of personality to file a taxpayer's suit and lack of cause of action.
• Forum Shopping: Whether the private respondents were guilty of forum-shopping under the facts of the case.

• Litis Pendentia / Grave Abuse of Discretion: Yes. There was litis pendentia between D-8664 and D-8696: identity of parties or interests, identity of rights and reliefs founded on the same facts, and a judgment in one would be res judicata in the other. The judge gravely abused his discretion in not dismissing D-8696.
• Taxpayer's Locus Standi: Yes. Ravanzo lacked locus standi as a taxpayer because the lease contract involved no illegal disbursement of public funds raised by taxation and he showed no direct pecuniary or monetary interest; Bugnay was to finance the project.
• Forum Shopping: Yes. Ravanzo, counsel of record for P and M, filed D-8696 as a taxpayer after failing to obtain injunctive relief in D-8664, seeking the same relief; both actions were dismissed.

• Litis Pendentia / Grave Abuse of Discretion: The SC applied the requisites of litis pendentia: (1) identity of parties or at least such as represent the same interest in both actions; (2) identity of the rights asserted and prayed for, the relief being founded on the same facts; and (3) identity in both cases such that the judgment in the pending case, regardless of which party is successful, would amount to res judicata in the other. Although D-8664 was filed by P and M while D-8696 was filed by Ravanzo, both represented the same interest: Ravanzo was P and M's counsel of record in D-8664, and he filed D-8696 after P and M failed to obtain a preliminary injunction against Bugnay's construction. Ravanzo even filed common pleadings for himself and P and M before the SC. The reliefs were also the same: D-8696 actually asked for the declaration of nullity of the lease contract, which was also prayed for in D-8664. A judgment in D-8664 would necessarily be res judicata in D-8696. A party cannot vary the form of action or adopt a different method of presenting his case to escape the principle that one and the same cause of action shall not be twice litigated. The RTC should have dismissed D-8696 outright.
• Taxpayer's Locus Standi: The SC held that a taxpayer's suit is allowed only when the act complained of directly involves an illegal disbursement of public funds raised by taxation. The essence of the taxpayer's right to institute such an action hinges on the existence of a requisite pecuniary or monetary interest. The taxpayer-plaintiff must sufficiently show that he would be benefited or injured by the judgment or entitled to the avails of the suit as a real party in interest; he must specifically prove sufficient interest in preventing the illegal expenditure of money raised by taxation and that he would sustain a direct injury from the enforcement of the questioned statute or contract. A mere general interest common to all members of the public is not enough. The RTC's reliance on City Council of Cebu City vs. Cuizon was self-defeating because that doctrine itself requires an illegal disbursement of public funds raised by taxation. Gonzales vs. Marcos held that funds from donations and contributions, not taxation, did not satisfy the requisite pecuniary or monetary interest. The lease contract showed that no public funds had been or would be used in the construction: Bugnay was to finance the project and recover its capital investment from rental fees due from stallholders; it undertook at its own expense to insure the building, clear the site, hire personnel necessary to prevent unfair competition, and bear the expense of suits arising from the construction without reimbursement; and the building would be turned over to the City at the end of the lease as exclusive owner without reimbursement. No disbursement of public funds, legal or otherwise, being involved, Ravanzo's locus standi was non-existent.
• Forum Shopping: The SC described forum-shopping as an act of malpractice proscribed and condemned as trifling with the courts and abusing their processes. Paragraph 17 of the Interim Rules and Guidelines issued on January 11, 1983 provides that no petition may be filed in the then Intermediate Appellate Court, now the CA, if another similar petition has been filed or is still pending in the SC, and vice versa; a violation constitutes contempt of court and a cause for summary dismissal of both petitions. Limpin, Jr. vs. Intermediate Appellate Court applied the rule where a party filed an action in one branch of the RTC and shopped for the same remedies of a restraining order and a writ of preliminary injunction in another branch; the sanction was dismissal of both actions for gross abuse of judicial processes. Ravanzo did the same: after the restraining order in D-8664 was lifted and P and M's prayer for preliminary injunction was not acted upon, he filed D-8696 as a taxpayer to enjoin the very same construction. Sabado vs. Cristina Gonzales, Inc. was distinguished because it involved two actions with different causes of action and no forum shopping. The SC also noted that Branch 43, hearing D-8664, treated D-6157 as a prejudicial question and ordered status quo, and did not appear to have taken further action, bolstering the dismissal of both actions.

• Litis Pendentia — Requisites: (1) identity of parties or at least such as represent the same interest in both actions; (2) identity of the rights asserted and prayed for, the relief being founded on the same facts; and (3) identity in both cases such that the judgment in the pending case, regardless of which party is successful, would amount to res judicata in the other. The SC applied it because Ravanzo, counsel of P and M, represented the same interest, sought the same injunctive relief and annulment, and a judgment in D-8664 would be res judicata in D-8696.
• Taxpayer's Suit / Locus Standi — A taxpayer may sue only when the act complained of directly involves an illegal disbursement of public funds raised by taxation and the plaintiff has a requisite pecuniary or monetary interest; he must show direct injury, not merely a general interest common to all members of the public. The SC applied it because the lease contract required Bugnay to finance the project and no public funds were to be used.
• Forum Shopping — An act of malpractice proscribed and condemned as trifling with the courts and abusing their processes; a party cannot vary the form of action or adopt a different method of presenting his case to escape the principle that one and the same cause of action shall not be twice litigated. Under Paragraph 17 of the Interim Rules and Guidelines, a violation constitutes contempt and a cause for summary dismissal of both petitions. The SC applied it because Ravanzo filed D-8696 in another branch for the same relief he failed to obtain in D-8664.
• Grave Abuse of Discretion and Interlocutory Orders — Generally, an order denying a motion to dismiss is interlocutory and not appealable, but certiorari and prohibition lie where the denial was issued with grave abuse of discretion or without or in excess of jurisdiction. The SC applied it because the denial of the motion to dismiss D-8696 was tainted by grave abuse of discretion.

• "It is all too ludicrously transparent and readily apparent that respondent Ravanzo merely sought in another branch of the same court, figuratively using the hat of a taxpayer, what he failed to obtained in one branch, under the hat of a representing counsel." — The SC used this to show that Ravanzo represented the same interest as P and M and was seeking the same relief in D-8696.
• "The essence of a taxpayer's right to institute such an action hinges on the existence of that requisite pecuniary or monetary interest." — This defines the core requirement for taxpayer standing.
• "On its face, and there is no evidence to the contrary, the lease contract entered into between petitioner and the City shows that no public funds have been or will be used in the construction of the market building." — This is the factual basis for denying Ravanzo's locus standi as a taxpayer.
• "Undeniably, whatever judgment may be rendered in Case No. D-8664 will necessarily constitute res judicata in Case No. D-8696." — This establishes the third requisite of litis pendentia.

• City Council of Cebu City, etc., et al. vs. Carlos J. Cuizon etc., et al., 47 SCRA 325 (1972) — Cited by the trial court for taxpayer standing; the SC held the reliance self-defeating because the doctrine requires an illegal disbursement of public funds raised by taxation.
• Gonzales vs. Marcos, etc., et al., 65 SCRA 624 (1975) — Relied on to explain that a taxpayer's suit requires the requisite pecuniary or monetary interest and that funds from donations and contributions, not taxation, do not satisfy it.
• Limpin, Jr., et al. vs. Intermediate Appellate Court, et al., 161 SCRA 83 (1988) — Applied as precedent for forum shopping where a party filed an action in one branch and sought the same remedies in another branch; the sanction was dismissal of both actions.
• Sabado, et al. vs. Cristina Gonzales, Inc., et al., 53 Phil. 770 (1928) — Distinguished; it involved two actions with different causes of action and no forum shopping, unlike the present case.
• Kapatiran vs. Tan, G.R. No. 81311, June 30, 1988 — Cited for the SC's power to brush aside technicalities in a taxpayer's suit assailing the constitutionality of a tax law, but the taxpayer still must show direct injury.
• Estate of George Litton vs. Mendoza, G.R. No. 49120, June 30, 1988 — Cited for the requirement that a taxpayer-plaintiff sufficiently show he would be benefited or injured by the judgment or entitled to the avails of the suit as a real party in interest.
• Dumlao, et al. vs. Commission on Elections, 95 SCRA 392 (1980) — Cited for the requirement that a taxpayer must prove sufficient interest in preventing the illegal expenditure of money raised by taxation.
• Sanidad, et al. vs. Commission on Elections, et al., 73 SCRA 333 (1976) — Cited for the requirement that a taxpayer must show direct injury from the enforcement of the questioned statute or contract.

• Paragraph 17, Interim Rules and Guidelines (Jan. 11, 1983) — Provides that no petition may be filed in the then Intermediate Appellate Court, now the CA, if another similar petition has been filed or is still pending in the SC, and vice versa; a violation constitutes contempt of court and a cause for summary dismissal of both petitions. The SC applied it to Ravanzo's filing of D-8696 for the same relief sought in D-8664.