G.R. No. 171182               August 23, 2012


  • On August 30, 1990, the UP, through its then President Jose V. Abueva, entered into a General Construction Agreement with respondent Stern Builders Corporation (Stern Builders), represented by its President and General Manager Servillano dela Cruz, for the construction of the extension building and the renovation of the College of Arts and Sciences Building in the campus of the University of the Philippines in Los Baños (UPLB).
  • Stern Builders submitted three (3) progress billings for the work accomplished but the University of the Philippines (the UP) failed to pay the third billing (P273,729.47) because of the disallowance of the Commission on Audit (COA). After the lift of the disallowance by COA, the UP still failed to pay the third billing.
  • A civil case was filed with the RTC of Quezon City, and such case was decided in favor of Stern Builders. The UP filed a Motion for Reconsideration but was denied by the RTC.
  • The UP filed a notice of appeal but the Stern Builders opposed such appeal on the ground that the appeal was filed belatedly. The RTC denied the notice of appeal of the UP and granted the Motion for Execution filed by the Stern Builders.
  • The Writ of Execution and Notice of Demand was served by the Sherriff. The UP then filed an urgent Motion to Reconsider the Notice of Appeal with the RTC but was also denied.
  • On June 24, 2003, the UP assailed the denial of due course to its appeal through a petition for certiorari in the Court of Appeals (CA), but was then dismissed upon finding that the UP’s notice of appeal had been filed late.
  • In the meanwhile that the UP was exhausting the available remedies to overturn the denial of due course to the appeal and the issuance of the writ of execution, Stern Builders and dela Cruz filed in the RTC their motions for execution despite their previous motion having already been granted and despite the writ of execution having already issued.
  • The sheriff served notices of garnishment on the UP’s depository banks, namely: Land Bank of the Philippines (Buendia Branch) and the Development Bank of the Philippines (DBP), Commonwealth Branch. RTC released the garnished funds.
  • The UP filed with the CA Petition for Certiorari to challenge the jurisdiction of the RTC for the release of garnished funds and averred that such cannot be done because the funds involved are public funds.
  • On appeal, both the CA and the High Court denied UP’s petition. The denial became final and executory. Hence, Stern Builders filed in the RTC their motions for execution despite their previous motion having already been granted and despite the writ of execution having already issued. On June 11, 2003, the RTC granted another motion for execution filed on May 9, 2003 (although the RTC had already issued the writ of execution on October 4, 2002). Consequently, the sheriff served notices of garnishment to the UP’s depositary banks and the RTC ordered the release of the funds.
  • Aggrieved, UP elevated the matter to the CA but the CA sustained the RTC. Hence, this petition.


  1. Whether or not UP funds should be subjected to garnishment?

No, UP funds should not be subjected to garnishment. UP has been created through Act 1870 for provide advanced instruction in literature, philosophy, the sciences, and arts, and to give professional and technical training to deserving students. UP is a chartered institution performing a legitimate government function.

As a government instrumentality, the UP administers special funds sourced from the fees and income enumerated under Act No. 1870 and Section 1 of Executive Order No. 714, and from the yearly appropriations, to achieve the purposes laid down by Act 1870.

All the funds going into the possession of the UP, including any interest accruing from the deposit of such funds in any banking institution, constitute a “special trust fund[1],” the disbursement of which should always be aligned with the UP’s mission and purpose, and should always be subject to auditing by the COA.

The adverse judgment rendered against the UP in a suit to which it had impliedly consented was not immediately enforceable by execution against the UP, because suability of the State did not necessarily mean its liability.

Disbursements of public funds must be covered by the corresponding appropriation as required by law. The functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by law.

An appropriation by Congress was required before the judgment that rendered the UP liable for moral and actual damages (including attorney’s fees) would be satisfied considering that such monetary liabilities were not covered by the “appropriations earmarked for the said project.” The Constitution strictly mandated that “no money shall be paid out of the Treasury except in pursuance of an appropriation made by law.”

  1. Whether or not COA must adjudicate private respondents’ claim before execution should proceed?

The execution of the monetary judgment against the UP was within the primary jurisdiction of the COA. This was expressly provided in Section 26 of Presidential Decree No. 1445, “The authority and powers ofthe Commission shall extend to and comprehend all matters relating to … the examination, audit, and settlement of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies and instrumentalities. The said jurisdiction extends to all government-owned or controlled corporations, including their subsidiaries, and other self-governing boards, commissions, or agencies of the Government, and as herein prescribed, including nongovernmental entities subsidized by the government, those funded by donations through the government, those required to pay levies or government share, and those for which the government has put up a counterpart fund or those partly funded by the government.”

The settlement of the monetary claim was still subject to the primary jurisdiction of the COA despite the final decision of the RTC having already validated the claim.

The RTC had no authority to direct the immediate withdrawal of any portion of the garnished funds from the depository banks of the UP. By eschewing utmost caution, prudence and judiciousness in dealing with the execution and garnishment, and by authorizing the withdrawal of the garnished funds of the UP, the RTC acted beyond its jurisdiction, and all its orders and issuances thereon were void and of no legal effect.

Moreover, it is settled jurisprudence that upon determination of State liability, the prosecution, enforcement or satisfaction thereof must still be pursued in accordance with the rules and procedures laid down in P.D. No. 1445, otherwise known as the Government Auditing Code of the Philippines. “All money claims against the Government must first be filed with the Commission on Audit which must act upon it within sixty days. Rejection of the claim will authorize the claimant to elevate the matter to the Supreme Court on certiorari and in effect, sue the State thereby.”

How to determine whether the public property is subject for execution:

A). Properties held for public uses – and generally everything held for governmental purposes – are not subject to levy and sale under execution against such corporation. The same rule applies to funds in the hands of a public officer and taxes due to a municipal corporation.

B). Where a municipal corporation owns in its proprietary capacity, as distinguished from its public or government capacity, property not used or used for a public purpose but for quasi-private purposes, it is the general rule that such property may be seized and sold under execution against the corporation.

C). Property held for public purposes is not subject to execution merely because it is temporarily used for private purposes. If the public use is wholly abandoned, such property becomes subject to execution.

  1. Whether or not Period of appeal did not start without effective service of decision upon counsel of record; Fresh-period rule announced in Neypes v. Court of Appeals can be given retroactive application?

Yes. The Fresh Period Rule can be given retroactive application. Public policy dictates that once a judgment becomes final, executory and unappealable, the prevailing party should not be deprived of the fruits of victory by some subterfuge devised by the losing party.

Exceptions to the doctrine of immutability of a final judgment:

  • the correction of clerical errors;
  • the so-called nunc pro tunc entries that cause no prejudice to any party; (c) void judgments; and
  • whenever circumstances transpire after the finality of the decision that render its execution unjust and inequitable

The service of the denial of the motion for reconsideration upon Atty. Nolasco was defective considering that its counsel of record was not Atty. Nolasco of the UPLB Legal Office but the OLS in Diliman, Quezon City; and that the period of appeal should be reckoned from May 31, 2002, the date when the OLS received the order. The filing of the notice of appeal on June 3, 2002 was well within the reglementary period to appeal.

“If any party has appeared by counsel, service upon him shall be made upon his counsel or one of them, unless service upon the party himself is ordered by the court. Where one counsel appears for several parties, he shall only be entitled to one copy of any paper served upon him by the opposite side.”(Section 2, Rule 13, 1997 Rules of Court)

“To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to appeal their cases, the Court deems it practical to allow a fresh period of 15 days within which to file the notice of appeal in the Regional Trial Court, counted from receipt of the order dismissing a motion for a new trial or motion for reconsideration.” (Neypes vs CA)

  1. Whether or not Awards of monetary damages, being devoid of factual and legal bases, did not attain finality and should be deleted?

The term findings of fact that must be found in the body of the decision refers to statements of fact, not to conclusions of law. The Constitution and the Rules of Court require not only that a decision should state the ultimate facts but also that it should specify the supporting evidentiary facts, for they are what are called the findings of fact.

The actual damages sought by the Stern Builders were not duly proved. Without the clear and distinct findings of fact and law, the award amounted only to an ipse dixit on the part of the RTC, and did not attain finality.

The moral damages constituted another judicial ipse dixit, the inevitable consequence of which was to render the award of moral damages incapable of attaining finality. As a juridical entity, a corporation is incapable of experiencing pain and suffering from emotional distress.


[1] “Trust fund”- fund that officially comes in the possession of an agency of the government or of a public officer as trustee, agent or administrator, or that is received for the fulfillment of some obligation. A trust fund may be utilized only for the “specific purpose for which the trust was created or the funds received.”


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