Immunity of public funds from court writs


CASE DIGEST: G.R. No. 167825 - PROFESSIONAL VIDEO, INC., Petitioner, v. TECHNICAL EDUCATION AND SKILLS DEVELOPMENT AUTHORITY, Respondent. (August 05, 2015).

In this appeal, the petitioner seeks to reverse and set aside the decision promulgated on January 28, 2005,[l] whereby the Court of Appeals (CA) nullified the assailed order issued on December 23, 2002 by the Regional Trial Court in Pasig City (RTC) granting the petitioner's motion for the issuance of a writ of execution to enforce the final and executory judgment rendered in its favor, and the notice of garnishment issued on January 6, 2003 for that purpose.

Antecedents

Under DOLE Administrative Order No. 157, Series of 1992, the respondent was mandated to issue security printed certifications or identification polyvinyl cards (PVCs) to identify the individuals who passed the required assessment system under its National Skills Certification Program. Thus, the respondent contracted the services of the petitioner for the installation of equipment and facilities for the printing and encoding of the PVCs.

The relevant antecedents, as summarized by the CA, follow:
xxx [On] 29 December 1999, TESDA and PROVI entered into a Contract Agreement: Project - PVC ID Card Issuance for the installation of equipment and facilities for the printing and encoding of polyvinyl identification cards.

Then, again, on 24 August 2000, the parties entered into an Addendum to the Contract Agreement, which provides, among others, that for PROVFs supplies and services, TESDA was obliged to pay the latter, following this scheme of payment:
(1) 30% of the total cost of supplies amounting to P39,475,000.00 payable within 30 days after the receipt and acceptance of the supplies;

(2) the balance to be paid within 30 days, but subject to the availability of collections under the SSP Funds (Fund 161);

(3) weekly payment on the following service fees depending on the number of polyvinyl identification card processed:
• printing of the OCRB alternative travel document = P20.00;
• printing of the two dimensional bar code = P20.00;
• total service fee per pre-printed polyvinyl identification card processed = P40.00.
In compliance with its obligation, PROVI delivered to TESDA, on various dates, pre-printed cards, scannable answer sheets, customized dye, and custom hologram foil, amounting to P39,475,000.00. Of this amount, TESDA was able to pay P3,739,500.00 only. Despite PROVI's demands to pay, TESDA failed to settle its obligation.
Not able to collect, the petitioner instituted its complaint for collection and damages in the RTC. It applied for the issuance of a writ of preliminary attachment, and the RTC granted its application. The writ of preliminary attachment was later on quashed and set aside by the CA, whose ruling was upheld by the Court in Professional Video, Inc. v. Technical Education and Skills Development Authority.[5]

On November 11, 2002, the RTC rendered its judgment, holding that the transaction between the parties was commercial in character, and the respondent thereby impliedly waived the Government's immunity from suit; and that the respondent could not conveniently escape its monetary obligation towards the petitioner. The judgment disposed thusly:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendants to pay plaintiff:

a) The sum of Thirty Five Million Seven Hundred Thirty Five Thousand Five Hundred Pesos (P35,735,000.00) (sic) with interest at the rate of fourteen percent (14%) per annum from the time plaintiff fulfilled its obligation to defendant TESDA until fully paid;

b) The sum of Two Hundred Fifty Thousand Pesos (P250,000.00) as and by way of exemplary damages;

c) The sum of Two Hundred Fifty Thousand Pesos (P250,000.00) as attorney's fees including litigation expenses and the costs of suit.

SO ORDERED.
The Office of the Solicitor General (OSG), representing the respondent, received the RTC's judgment on November 22, 2002.[8] The petitioners averred that the respondent did not appeal, thereby rendering the judgment final and executory. As a consequence, the petitioner moved for the issuance of the writ of execution against the respondent.[9]The RTC granted the motion for execution on December 23, 2002.[10]

On its part, the OSG insisted that it had received the petitioner's motion for execution on December 16, 2002; and that the hearing of the motion, although set on December 20, 2002 at 8:30 a.m., had been inexplicably moved to December 23, 2002 without prior notice to the respondent.[11]

On January 6, 2003, the sheriff issued a notice of garnishment to the Land Bank of the Philippines (LBP) to garnish the funds of the respondent deposited thereat.[12]

On February 4, 2003, the respondent instituted a special civil action for certiorari in the CA to quash the granting of the motion for execution and the issuance of the notice of garnishment.

On January 28, 2005, the CA promulgated the assailed decision nullifying and setting aside the order dated December 23, 2002 granting the issuance of a writ of execution, and the notice of garnishment issued on January 6, 2003. It declared that the RTC had gravely abused its discretion in declaring that the contract between the petitioner and the respondent had been made in pursuit of a commercial transaction;[15] and that the respondent's funds, being public in character, could not be the subject of execution or garnishment to recover the judgment debt of the respondent.

Issues

Hence, this appeal, with the petitioner contending that the CA thereby grossly erred considering that the RTC's judgment had already become final and immutable due to the failure of the respondent to timely appeal; and that the remedy of certiorari could not substitute for a lost appeal. Consequently, the petitioner insists, the CA's pronouncement that the respondent did not venture into a commercial transaction as to be considered to have waived its immunity from suit was a gross error.

Ruling of the Court

The Supreme Court DENIED the petition for review on certiorari for its utter lack of merit.

To start with, the petitioner's main contention about the judgment of the RTC having attained finality and immutability was off tangent. The CA, by granting the respondent's petition for certiorari, did not disturb the judgment of the RTC but only annulled and set aside the order granting the motion for the issuance of the writ of execution and the notice of garnishment, a fact clearly borne out by the dispositive portion of the decision.And, secondly, the CA judiciously and properly annulled and set aside the writ of execution and the notice of garnishment. The petitioner ought to recognize and accept that the final and executory money judgment rendered in its favor and against the respondent, an office or agency of the National Government, could not be enforced by writ of execution or by the garnishment of the respondent's funds in the hands of any depository bank or other entity. The reason is that such funds are public in character. The Court itself made this clear in its ruling in Professional Video, Inc. v. Technical Education and Skills Development Authority[18] to wit:
TESDA's funds are public in  character, hence exempt from attachment or garnishment.
Even assuming that TESDA entered into a proprietary contract with PROVI and thereby gave its implied consent to be sued, TESDA's funds are still public in nature and, thus, cannot be the valid subject of a writ of garnishment or attachment. Under Section 33 of the TESDA Act, the TESDA budget for the implementation of the Act shall be included in the annual General Appropriation Act; hence, TESDA funds, being sourced from the Treasury, are moneys belonging to the government, or any of its departments, in the hands of public officials. We specifically spoke of the limits in dealing with this fund in Republic v. Villasor when we said:
This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter. It is therein expressly provided, 'The State may not be sued without its consent.' A corollary, both dictated by logic and sound sense, from such a basic concept, is that public funds cannot be the object of garnishment proceedings even if the consent to be sued had been previously granted and the state liability adjudged. Thus in the recent case of Commissioner of Public Highways vs. San Diego, such a well-settled doctrine was restated in the opinion of Justice Teehankee:

The universal rule that where the State gives its consent to be sued by private parties either by general or special law, it may limit claimant's action 'only up to the completion of proceedings anterior to the stage of execution' and that the power of the Courts ends when the judgment is rendered, since government funds and properties may not be seized under writs of execution or garnishment to satisfy such judgments, is based on obvious considerations of public policy. 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.
The Supreme Court reiterated this doctrine in Traders Royal Bank v. Intermediate Appellate Court, where it was said: "The NMPC's implied consent to be sued notwithstanding, the trial court did not have the power to garnish NMPC deposits to answer for any eventual judgment against it. Being public funds, the deposits are not within the reach of any garnishment or attachment proceedings."

In University of the Philippines v. Dizon,[20] the Court has expressly cautioned judges against issuing such writs of execution or garnishment to enforce their money judgments against the Government, or any of its subdivisions, agencies and instrumentalities, viz.:
Trial judges should not immediately issue writs of execution or garnishment against the Government or any of its subdivisions, agencies and instrumentalities to enforce money judgments. They should bear in mind that the primary jurisdiction to examine, audit and settle all claims of any sort due from the Government or any of its subdivisions, agencies and instrumentalities pertains to the Commission on Audit (COA) pursuant to Presidential Decree No. 1445 (Government Auditing Code of the Philippines).
Indeed, the execution of the monetary judgment against the respondent was within the primary jurisdiction of the Commission on Audit (COA) pursuant to Section 26 of Presidential Decree No. 1445, viz.:
Section 26. General jurisdiction. - The authority and powers of the Commission shall extend to and comprehend all matters relating to auditing procedures, systems and controls, the keeping of the general accounts of the Government, the preservation of vouchers pertaining thereto for a period of ten years, the examination and inspection of the books, records, and papers relating to those accounts; and the audit and settlement of the accounts of all persons respecting funds or property received or held by them in an accountable capacity, as well as 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 non-governmental 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.
It is of no consequence that the judgment of the RTC was already final and executory. Such characterization of the judgment only validated the claim against the respondent. The validation notwithstanding, the settlement of the monetary claim remained subject to the primary jurisdiction of the COA, which must pass upon the claim. Hence, the petitioner has no alternative but to first seek the approval of the COA of its monetary claim.

The RTC had no jurisdiction to authorize the execution of the money judgment through the garnishment of the funds of the respondent in the Land Bank of the Philippines. It was well aware, or ought to have been aware, of the limitation on its judicial competence. Under Administrative Circular No. 10-2000, issued on October 25, 2000,[22] all trial courts have been enjoined "to observe utmost caution, prudence and judiciousness in the issuance of writs of execution to satisfy money judgments against government agencies and local government units" precisely to prevent the circumvention of Presidential Decree No. 1445, and the relevant rules and procedures of the COA on the matter.

Under the circumstances, therefore, the RTC was guilty of acting beyond its jurisdiction, thereby rendering its acts devoid of validity and efficacy. Consequently, the CA rightly struck down the assailed order of the RTC for the execution of its money judgment and the notice of garnishment.


[1] Rollo, pp. 27-35; penned by Associate Justice Japar B. Dimaampao, with Associate Justice Renato C. Dacudao (retired) and Associate Justice Edgardo F. Sundiam (retired/deceased) concurring.
[5] G.R. No. 155504, June 26, 2009, 591 SCRA 83.
[18] G.R. No. 155504, June 26, 2000, 591 SCRA 83.
[20] G.R. No. 171182, August 23, 2012, 679 SCRA 54, 57.
[21] National Home Mortgage Finance Corporation v. Abayari, G.R. No. 166508, October 2, 2009, 602 SCRA 242, 256.
[22] Entitled EXERCISE OF UTMOST CAUTION, PRUDENCE AND JUDICIOUSNESS IN THE ISSUANCE OF WRITS OF EXECUTION TO SATISFY MONEY JUDGMENTS AGAINST GOVERNMENT AGENCIES AND LOCAL GOVERNMENT UNITS.

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