G.R. No. 162525 September 23, 2008
ASEAN PACIFIC PLANNERS, APP CONSTRUCTION AND DEVELOPMENT CORPORATION AND CESAR GOCO, petitioners, vs. CITY OF URDANETA, CEFERINO J. CAPALAD, WALDO C. DEL CASTILLO, NORBERTO M. DEL PRADO, JESUS A. ORDONO AND AQUILINO MAGUISA, respondents.

FACTS

Respondent Waldo C. Del Castillo, as a taxpayer, filed a complaint for annulment of contracts with prayer for preliminary prohibitory injunction and temporary restraining order against respondents City of Urdaneta and Ceferino J. Capalad (doing business as JJEFWA Builders), and petitioners Asean Pacific Planners (APP) and Asean Pacific Planners Construction and Development Corporation (APPCDC). The complaint alleged that then Mayor Rodolfo E. Parayno entered into five contracts for the design, construction, and management of a commercial center and hotel, funded by a PNB loan of P250 million, with P95 million allegedly paid for minimal work. Del Castillo claimed the contracts were void as the object was land of the public domain devoted to a public elementary school and were all awarded to the Goco family. Respondents Norberto M. Del Prado, Jesus A. Ordono, and Aquilino Maguisa later filed a Complaint-in-Intervention adopting Del Castillo’s allegations. The City of Urdaneta, through its new counsel the Lazaro Law Firm, filed an Omnibus Motion to withdraw its Answer, be dropped as a defendant, and be joined as a plaintiff. The RTC granted this motion in its September 11, 2002 Order, also later allowing Capalad to switch sides and drop his previous counsel. Petitioners APP and APPCDC filed a petition for certiorari before the Court of Appeals, which dismissed it on procedural grounds: defective verification and certification of non-forum shopping, failure to submit certified true copies of the RTC orders, and lack of written explanation for non-personal service. The CA denied their motion for reconsideration.

ISSUE

1. Did the Court of Appeals err in dismissing the petition based on procedural technicalities?
2. Did the Regional Trial Court err and commit grave abuse of discretion in:
a. Entertaining the taxpayers’ suits;
b. Allowing a private law firm to represent Urdaneta City;
c. Allowing respondents Capalad and Urdaneta City to switch from defendants to complainants; and
d. Allowing Capalad’s change of attorneys?

RULING

1. Yes, the Court of Appeals erred in dismissing the petition based on procedural technicalities. The Supreme Court found that petitioners substantially complied with the procedural requirements by submitting in their motion for reconsideration the proof of Cesar Goco’s authority to sign the verification and certification (a Board Resolution for APPCDC and a Special Power of Attorney for APP), certified true copies of the assailed RTC orders, and an explanation with affidavit of service for non-personal service. Given the substantial issues involved, the appellate court should have reinstated the petition.
2. No, the Regional Trial Court did not err or commit grave abuse of discretion.
a. On entertaining the taxpayers’ suits: The RTC properly allowed the suits. The allegation that P95 million of a PNB loan was paid for minimal work constitutes a sufficient claim of illegal disbursement of public funds, as the loan money becomes public fund upon acquisition by the city. Furthermore, petitioners waived their objection to the taxpayers’ personality to sue by not raising it in their Answer.
b. On allowing a private law firm to represent Urdaneta City: The RTC correctly allowed the Lazaro Law Firm to represent the city. The city has the authority to hire a private lawyer, especially when the City Prosecutor, who initially represented it, withdrew his appearance. The city, having no city legal officer, and with the Provincial Prosecutor potentially having a conflict of interest, could engage private counsel to protect its interests.
c. On allowing respondents to switch sides: The RTC acted within its discretion. For Urdaneta City, the withdrawal of its Answer and filing of a complaint in intervention was permissible under the rules to align its position with its interests. For Capalad, the RTC allowed the substitution of his counsel and the filing of his complaint after his original counsel’s pleadings were expunged for failure to comply with a court order, which was not a grave abuse of discretion.
d. On allowing Capalad’s change of attorneys: The RTC did not commit grave abuse. It expunged the pleadings filed by Atty. Sahagun due to his failure to comply with a directive to submit certain documents, effectively removing him as counsel of record. This allowed Atty. Peralta to enter his appearance and file a complaint on Capalad’s behalf.
The Supreme Court denied the petition for lack of merit.