Up V Dizon Full Case

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FIRST DIVISION Abrigo, and Josefina R.

Licuanan, was docketed as Civil Case


[G.R. NO. 171182 - August 23, 2012] No. Q-93-14971 of the Regional Trial Court in Quezon City
UNIVERSITY OF THE PHILIPPINES, JOSE V. ABUEVA, RAUL P. (RTC).4ςrνll
DE GUZMAN, RUBEN P. ASPIRAS, EMMANUEL P. BELLO,
WILFREDO P. DAVID, CASIANO S. ABRIGO, and JOSEFINA R. After trial, on November 28, 2001, the RTC rendered its
LICUANAN, Petitioners, v. HON. AGUSTIN S. DIZON, his decision in favor of the plaintiffs, 5 viz:ςηαñRî
capacity as Presiding Judge of the Regional Trial Court of ¿blεš νιr†υαl lαω lιbrαrÿ
Quezon City, Branch 80, STERN BUILDERS, INC., and Wherefore, in the light of the foregoing, judgment is hereby
SERVILLANO DELA CRUZ, Respondents. rendered in favor of the plaintiff and against the defendants
ordering the latter to pay plaintiff, jointly and severally, the
DECISION following, to wit:ςηαñrο
blεš νιr†υαl lαω lιbrαrÿ
BERSAMIN, J.: 1. P503,462.74 amount of the third billing, additional
accomplished work and retention money
Trial judges should not immediately issue writs of execution or 2. P5,716,729.00 in actual damages
garnishment against the Government or any of its 3. P10,000,000.00 in moral damages
subdivisions, agencies and instrumentalities to enforce money 4. P150,000.00 and P1,500.00 per appearance as attorney s
judgments.1 They should bear in mind that the primary fees; andcralawlibrary
jurisdiction to examine, audit and settle all claims of any sort 5. Costs of suit.
due from the Government or any of its subdivisions, agencies
and instrumentalities pertains to the Commission on Audit SO ORDERED.
(COA) pursuant to Presidential Decree No. 1445 (Government chanrobles virtual law library
Auditing Code of the Philippines). Following the RTC s denial of its motion for reconsideration on
May 7, 2002,6 the UP filed a notice of appeal on June 3,
The Case 2002.7 Stern Builders and dela Cruz opposed the notice of
appeal on the ground of its filing being belated, and moved for
On appeal by the University of the Philippines and its then the execution of the decision. The UP countered that the
incumbent officials (collectively, the UP) is the decision notice of appeal was filed within the reglementary period
promulgated on September 16, 2005, 2 whereby the Court of because the UP s Office of Legal Affairs (OLS) in Diliman,
Appeals (CA) upheld the order of the Regional Trial Court Quezon City received the order of denial only on May 31, 2002.
(RTC), Branch 80, in Quezon City that directed the garnishment On September 26, 2002, the RTC denied due course to the
of public funds amounting to P16,370,191.74 belonging to the notice of appeal for having been filed out of time and granted
UP to satisfy the writ of execution issued to enforce the already the private respondents motion for execution.8ςrνll
final and executory judgment against the UP.
The RTC issued the writ of execution on October 4, 2002,9 and
Antecedents the sheriff of the RTC served the writ of execution and notice
of demand upon the UP, through its counsel, on October 9,
On August 30, 1990, the UP, through its then President Jose V. 2002.10 The UP filed an urgent motion to reconsider the order
Abueva, entered into a General Construction Agreement with dated September 26, 2002, to quash the writ of execution
respondent Stern Builders Corporation (Stern Builders), dated October 4, 2002, and to restrain the
represented by its President and General Manager Servillano proceedings.11 However, the RTC denied the urgent motion on
dela Cruz, for the construction of the extension building and April 1, 2003.12ςrνll
the renovation of the College of Arts and Sciences Building in
the campus of the University of the Philippines in Los Baños On June 24, 2003, the UP assailed the denial of due course to
(UPLB).3ςrνll its appeal through a Petition for Certiorariin the Court of
Appeals (CA), docketed as CA-G.R. No. 77395.13ςrνll
In the course of the implementation of the contract, Stern On February 24, 2004, the CA dismissed the petition
Builders submitted three progress billings corresponding to for certiorari upon finding that the UP s notice of appeal had
the work accomplished, but the UP paid only two of the been filed late,14 stating:ςηαñrοblεÅ
billings. The third billing worth P273,729.47 was not paid due ¡ νιr†υαl lαω lιbrαrÿ
to its disallowance by the Commission on Audit (COA). Despite Records clearly show that petitioners received a copy of the
the lifting of the disallowance, the UP failed to pay the billing, Decision dated November 28, 2001 and January 7, 2002, thus,
prompting Stern Builders and dela Cruz to sue the UP and its they had until January 22, 2002 within which to file their
co-respondent officials to collect the unpaid billing and to appeal. On January 16, 2002 or after the lapse of nine (9) days,
recover various damages. The suit, entitled Stern Builders petitioners through their counsel Atty. Nolasco filed a Motion
Corporation and Servillano R. Dela Cruz v. University of the for Reconsideration of the aforesaid decision, hence, pursuant
Philippines Systems, Jose V. Abueva, Raul P. de Guzman, Ruben to the rules, petitioners still had six (6) remaining days to file
P. Aspiras, Emmanuel P. Bello, Wilfredo P. David, Casiano S. their appeal. As admitted by the petitioners in their petition
(Rollo, p. 25), Atty. Nolasco received a copy of the Order On their part, Stern Builders and dela Cruz filed their ex parte
denying their motion for reconsideration on May 17, 2002, motion for issuance of a release order.25ςrνll
thus, petitioners still has until May 23, 2002 (the remaining six
(6) days) within which to file their appeal. Obviously, On October 14, 2003, the RTC denied the UP s urgent motion
petitioners were not able to file their Notice of Appeal on May to quash, and granted Stern Builders and dela Cruz s ex
23, 2002 as it was only filed on June 3, 2002. parte motion for issuance of a release order.26ςrν
ll
In view of the said circumstances, We are of the belief and so The UP moved for the reconsideration of the order of October
holds that the Notice of Appeal filed by the petitioners was 14, 2003, but the RTC denied the motion on November 7,
really filed out of time, the same having been filed seventeen 2003.27ςrνll
(17) days late of the reglementary period. By reason of which,
the decision dated November 28, 2001 had already become On January 12, 2004, Stern Builders and dela Cruz again sought
final and executory. "Settled is the rule that the perfection of the release of the garnished funds.28Despite the UP s
an appeal in the manner and within the period permitted by opposition,29 the RTC granted the motion to release the
law is not only mandatory but jurisdictional, and failure to garnished funds on March 16, 2004.30 On April 20, 2004,
perfect that appeal renders the challenged judgment final and however, the RTC held in abeyance the enforcement of the
executory. This is not an empty procedural rule but is writs of execution issued on October 4, 2002 and June 3, 2003
grounded on fundamental considerations of public policy and and all the ensuing notices of garnishment, citing Section 4,
sound practice." (Ram s Studio and Photographic Equipment, Rule 52, Rules of Court, which provided that the pendency of a
Inc. v. Court of Appeals, 346 SCRA 691, 696). Indeed, Atty. timely motion for reconsideration stayed the execution of the
Nolasco received the order of denial of the Motion for judgment.31ςrνll
Reconsideration on May 17, 2002 but filed a Notice of Appeal
only on June 3, 3003. As such, the decision of the lower On December 21, 2004, the RTC, through respondent Judge
court ipso facto became final when no appeal was perfected Agustin S. Dizon, authorized the release of the garnished funds
after the lapse of the reglementary period. This procedural of the UP,32 to wit:ςηαñrοblεš
caveat cannot be trifled with, not even by the High νιr†υαl lαω lιbrαrÿ
Court.15ςrνll WHEREFORE, premises considered, there being no more legal
chanrobles virtual law library impediment for the release of the garnished amount in
The UP sought a reconsideration, but the CA denied the UP s satisfaction of the judgment award in the instant case, let the
motion for reconsideration on April 19, 2004. 16Ï‚r amount garnished be immediately released by the
νll Development Bank of the Philippines, Commonwealth Branch,
On May 11, 2004, the UP appealed to the Court by Petition for Quezon City in favor of the plaintiff.ςηαñrοb
Review on Certiorari (G.R. No. 163501). lεš νιr†υαl lαω lιbrαrÿ
SO ORDERED.
On June 23, 2004, the Court denied the Petition for Review chanrobles virtual law library
.17 The UP moved for the reconsideration of the denial of its The UP was served on January 3, 2005 with the order of
Petition for Review on August 29, 2004,18 but the Court denied December 21, 2004 directing DBP to release the garnished
the motion on October 6, 2004.19 The denial became final and funds.33ςrνll
executory on November 12, 2004.20ςrνll
On January 6, 2005, Stern Builders and dela Cruz moved to cite
In the meanwhile that the UP was exhausting the available DBP in direct contempt of court for its non-compliance with
remedies to overturn the denial of due course to the appeal the order of release.34ςrνll
and the issuance of the writ of execution, Stern Builders and
dela Cruz filed in the RTC their motions for execution despite Thereupon, on January 10, 2005, the UP brought a Petition
their previous motion having already been granted and despite for Certiorari in the CA to challenge the jurisdiction of the RTC
the writ of execution having already issued. On June 11, 2003, in issuing the order of December 21, 2004 (CA-G.R. CV No.
the RTC granted another motion for execution filed on May 9, 88125).35 Aside from raising the denial of due process, the UP
2003 (although the RTC had already issued the writ of averred that the RTC committed grave abuse of discretion
execution on October 4, 2002).21ςrνll amounting to lack or excess of jurisdiction in ruling that there
was no longer any legal impediment to the release of the
On June 23, 2003 and July 25, 2003, respectively, the sheriff garnished funds. The UP argued that government funds and
served notices of garnishment on the UP s depository banks, properties could not be seized by virtue of writs of execution
namely: Land Bank of the Philippines (Buendia Branch) and the or garnishment, as held in Department of Agriculture v.
Development Bank of the Philippines (DBP), Commonwealth National Labor Relations Commission,36 and citing Section 84
Branch.22 The UP assailed the garnishment through an urgent of Presidential Decree No. 1445 to the effect that "revenue
motion to quash the notices of garnishment;23 and a motion to funds shall not be paid out of any public treasury or depository
quash the writ of execution dated May 9, 2003.24ςrνll except in pursuance of an appropriation law or other specific
statutory authority;" and that the order of garnishment
clashed with the ruling in University of the Philippines Board of With the end in view of seeing to it that the check in question
Regents v. Ligot-Telan37 to the effect that the funds belonging is deposited by the plaintiff at the Development Bank of the
to the UP were public funds. Philippines (garnishee bank), Branch Sheriff Herlan Velasco is
directed to accompany and/or escort the plaintiff in making
On January 19, 2005, the CA issued a temporary restraining the deposit of the check in
order (TRO) upon application by the UP.38ςrνl question.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
l SO ORDERED.
On March 22, 2005, Stern Builders and dela Cruz filed in the chanrobles virtual law library
RTC their amended motion for sheriff s assistance to On September 16, 2005, the CA promulgated its assailed
implement the release order dated December 21, 2004, decision dismissing the UP s Petition for Certiorari, ruling that
stating that the 60-day period of the TRO of the CA had already the UP had been given ample opportunity to contest the
lapsed.39 The UP opposed the amended motion and countered motion to direct the DBP to deposit the check in the name of
that the implementation of the release order be Stern Builders and dela Cruz; and that the garnished funds
suspended.40ςrνll could be the proper subject of garnishment because they had
been already earmarked for the project, with the UP holding
On May 3, 2005, the RTC granted the amended motion for the funds only in a fiduciary capacity,48 viz:ςηαñrοblε
sheriff s assistance and directed the sheriff to proceed to the š νιr†υαl lαω lιbrαrÿ
DBP to receive the check in satisfaction of the judgment.41ςηα Petitioners next argue that the UP funds may not be seized for
ñrοblεš νιr†υαl lαω lιbrαrÿ execution or garnishment to satisfy the judgment award. Citing
The UP sought the reconsideration of the order of May 3, Department of Agriculture v. NLRC, University of the
2005.42ςrνll Philippines Board of Regents v. Hon. Ligot-Telan, petitioners
chanrobles virtual law library contend that UP deposits at Land Bank and the Development
On May 16, 2005, DBP filed a motion to consign the check Bank of the Philippines, being government funds, may not be
representing the judgment award and to dismiss the motion to released absent an appropriations bill from Congress.
cite its officials in contempt of court.43ςrνll
The argument is specious. UP entered into a contract with
On May 23, 2005, the UP presented a motion to withhold the private respondents for the expansion and renovation of the
release of the payment of the judgment award.44ςrνll Arts and Sciences Building of its campus in Los Baños, Laguna.
Decidedly, there was already an appropriations earmarked for
On July 8, 2005, the RTC resolved all the pending the said project. The said funds are retained by UP, in a
matters,45 noting that the DBP had already delivered to the fiduciary capacity, pending completion of the construction
sheriff Manager s Check No. 811941 for P16,370,191.74 project.ςηαñrοblεš νιrâ
representing the garnished funds payable to the order of Stern € υαl lαω lιbrαrÿ
Builders and dela Cruz as its compliance with the RTC s order We agree with the trial Court [sic] observation on this
dated December 21, 2004.46 However, the RTC directed in the score:ςrαlαω
same order that Stern Builders and dela Cruz should not
encash the check or withdraw its amount pending the final "4. Executive Order No. 109 (Directing all National
resolution of the UP s Petition for Certiorari, to Government Agencies to Revert Certain Accounts Payable to
wit:47ςηαñrοblεš Πthe Cumulative Result of Operations of the National
½Î¹r†υαl lαω lιbrαrÿ Government and for Other Purposes) Section 9. Reversion of
To enable the money represented in the check in question (No. Accounts Payable, provides that, all 1995 and prior years
00008119411) to earn interest during the pendency of the documented accounts payable and all undocumented
defendant University of the Philippines application for a writ accounts regardless of the year they were incurred shall be
of injunction with the Court of Appeals the same may now be reverted to the Cumulative Result of Operations of the
deposited by the plaintiff at the garnishee Bank (Development National Government (CROU). This shall apply to accounts
Bank of the Philippines), the disposition of the amount payable of all funds, except fiduciary funds, as long as the
represented therein being subject to the final outcome of the purpose for which the funds were created have not been
case of the University of the Philippines et al., v. Hon. Agustin accomplished and accounts payable under foreign assisted
S. Dizon et al., (CA G.R. 88125) before the Court of Appeals. projects for the duration of the said project. In this regard, the
Department of Budget and Management issued Joint-Circular
Let it be stated herein that the plaintiff is not authorized to No. 99-6 4.0 (4.3) Procedural Guidelines which provides that
encash and withdraw the amount represented in the check in all accounts payable that reverted to the CROU may be
question and enjoy the same in the fashion of an owner during considered for payment upon determination thru
the pendency of the case between the parties before the Court administrative process, of the existence, validity and legality of
of Appeals which may or may not be resolved in plaintiff s the claim. Thus, the allegation of the defendants that
favor. considering no appropriation for the payment of any amount
awarded to plaintiffs appellee the funds of defendant-
appellants may not be seized pursuant to a writ of execution
issued by the regular court is misplaced. Surely when the It must be emphasized that this Court s finding, i.e., that there
defendants and the plaintiff entered into the General was sufficient appropriation earmarked for the project, was
Construction of Agreement there is an amount already upheld by the Court of Appeals in its decision dated September
allocated by the latter for the said project which is no longer 16, 2005. Being a finding of fact, the Supreme Court will,
subject of future appropriation."49ςrνll ordinarily, not disturb the same was said Court is not a trier of
chanrobles virtual law library fact. Such being the case, defendants arguments that there
After the CA denied their motion for reconsideration on was no sufficient appropriation for the payment of the
December 23, 2005, the petitioners appealed by Petition for judgment obligation must fail.
Review .
While it is true that the former Presiding Judge of this Court in
Matters Arising During the Pendency of the Petition its Order dated January 30, 2006 had stated that:ςηαñ
On January 30, 2006, Judge Dizon of the RTC (Branch 80) rοblεš νιr†υαl lαω lιbrαrÿ
denied Stern Builders and dela Cruz s motion to withdraw the Let it be stated that what the Court meant by its Order dated
deposit, in consideration of the UP s intention to appeal to the July 8, 2005 which states in part that the "disposition of the
CA,50 stating:ςηΠamount represented therein being subject to the final
±Ã±rοblεš νιr†υαl lαω lιbrαrÿ outcome of the case of the University of the Philippines, et. al.,
Since it appears that the defendants are intending to file a v. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125 before the
Petition for Review of the Court of Appeals resolution in CA- Court of Appeals) is that the judgment or resolution of said
G.R. No. 88125 within the reglementary period of fifteen (15) court has to be final and executory, for if the same will still be
days from receipt of resolution, the Court agrees with the elevated to the Supreme Court, it will not attain finality yet
defendants stand that the granting of plaintiffs subject motion until the highest court has rendered its own final judgment or
is premature. resolution.
chanrobles virtual law library
Let it be stated that what the Court meant by its Order dated it should be noted that neither the Court of Appeals nor the
July 8, 2005 which states in part that the "disposition of the Supreme Court issued a preliminary injunction enjoining the
amount represented therein being subject to the final release or withdrawal of the garnished amount. In fact, in its
outcome of the case of the University of the Philippines, et. al., present Petition for Review before the Supreme Court, U.P.
v. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125 before the System has not prayed for the issuance of a writ of preliminary
Court of Appeals) is that the judgment or resolution of said injunction. Thus, the Court doubts whether such writ is
court has to be final and executory, for if the same will still be forthcoming.
elevated to the Supreme Court, it will not attain finality yet
until the highest court has rendered its own final judgment or The Court honestly believes that if defendants petition
resolution.51ςrνll assailing the Order of this Court dated December 31, 2004
chanrobles virtual law library granting the motion for the release of the garnished amount
However, on January 22, 2007, the UP filed an Urgent was meritorious, the Court of Appeals would have issued a writ
Application for A Temporary Restraining Order and/or A Writ of injunction enjoining the same. Instead, said appellate court
of Preliminary Injunction,52 averring that on January 3, 2007, not only refused to issue a wit of preliminary injunction prayed
Judge Maria Theresa dela Torre-Yadao (who had meanwhile for by U.P. System but denied the petition, as well. 54ςrνll
replaced Judge Dizon upon the latter s appointment to the CA) chanrobles virtual law library
had issued another order allowing Stern Builders and dela Cruz The UP contended that Judge Yadao thereby effectively
to withdraw the deposit,53 to reversed the January 30, 2006 order of Judge Dizon disallowing
wit:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ the withdrawal of the garnished amount until after the
decision in the case would have become final and executory.
It bears stressing that defendants liability for the payment of Although the Court issued a TRO on January 24, 2007 to enjoin
the judgment obligation has become indubitable due to the Judge Yadao and all persons acting pursuant to her authority
final and executory nature of the Decision dated November 28, from enforcing her order of January 3, 2007,55 it appears that
2001. Insofar as the payment of the [sic] judgment obligation on January 16, 2007, or prior to the issuance of the TRO, she
is concerned, the Court believes that there is nothing more the had already directed the DBP to forthwith release the
defendant can do to escape liability. It is observed that there garnished amount to Stern Builders and dela Cruz; 56 and that
is nothing more the defendant can do to escape liability. It is DBP had forthwith complied with the order on January 17,
observed that defendant U.P. System had already exhausted 2007 upon the sheriff s service of the order of Judge
all its legal remedies to overturn, set aside or modify the Yadao.57ςrνll
decision (dated November 28, 2001( rendered against it. The
way the Court sees it, defendant U.P. System s petition before These intervening developments impelled the UP to file in this
the Supreme Court concerns only with the manner by which Court a supplemental petition on January 26, 2007, 58 alleging
said judgment award should be satisfied. It has nothing to do that the RTC (Judge Yadao) gravely erred in ordering the
with the legality or propriety thereof, although it prays for the immediate release of the garnished amount despite the
deletion of [sic] reduction of the award of moral damages. pendency of the Petition for Review in this Court.
The UP filed a second supplemental petition 59 after the RTC sought to be restrained had already been done, thereby
(Judge Yadao) denied the UP s motion for the redeposit of the rendering the said Order ineffectual.
withdrawn amount on April 10, 2007,60 to wit:ςηαñrοblε
š νιr†υαl lαω lιbrαrÿ After a careful and thorough study of the arguments advanced
This resolves defendant U.P. System s Urgent Motion to by the parties, the Court is of the considered opinion that there
Redeposit Judgment Award praying that plaintiffs be directed is no legal basis to grant defendant U.P. System s motion to
to redeposit the judgment award to DBP pursuant to the redeposit the judgment amount. Granting said motion is not
Temporary Restraining Order issued by the Supreme Court. only contrary to law, but it will also render this Court s final
Plaintiffs opposed the motion and countered that the executory judgment nugatory. Litigation must end and
Temporary Restraining Order issued by the Supreme Court has terminate sometime and somewhere, and it is essential to an
become moot and academic considering that the act sought to effective administration of justice that once a judgment has
be restrained by it has already been performed. They also become final the issue or cause involved therein should be laid
alleged that the redeposit of the judgment award was no to rest. This doctrine of finality of judgment is grounded on
longer feasible as they have already spent the same. fundamental considerations of public policy and sound
practice. In fact, nothing is more settled in law than that once
It bears stressing, if only to set the record straight, that this a judgment attains finality it thereby becomes immutable and
Court did not in its Order dated January 3, 2007 (the unalterable. It may no longer be modified in any respect, even
implementation of which was restrained by the Supreme Court if the modification is meant to correct what is perceived to be
in its Resolution dated January 24, 2002) direct that that an erroneous conclusion of fact or law, and regardless of
garnished amount "be deposited with the garnishee bank whether the modification is attempted to be made by the
(Development Bank of the Philippines)". In the first place, court rendering it or by the highest court of the land.
there was no need to order DBP to make such deposit, as the WHEREFORE, premises considered, finding defendant U.P.
garnished amount was already deposited in the account of System s Urgent Motion to Redeposit Judgment Award devoid
plaintiffs with the DBP as early as May 13, 2005. What the of merit, the same is hereby DENIED.ςηαñr
Court granted in its Order dated January 3, 2007 was plaintiff οblεš νιr†υαl lαω lιbrαrÿ
s motion to allow the release of said deposit. It must be SO ORDERED.
recalled that the Court found plaintiff s motion meritorious chanrobles virtual law library
and, at that time, there was no restraining order or preliminary Issues
injunction from either the Court of Appeals or the Supreme
Court which could have enjoined the release of plaintiffs The UP now submits that:
deposit. The Court also took into account the following I
factors:ςηαñrοblεš THE COURT OF APPEALS COMMITTED GRAVE ERROR IN
νιr†υαl lαω lιbrαrÿ DISMISSING THE PETITION, ALLOWING IN EFFECT THE
a) the Decision in this case had long been final and executory GARNISHMENT OF UP FUNDS, WHEN IT RULED THAT FUNDS
after it was rendered on November 28, 2001; HAVE ALREADY BEEN EARMARKED FOR THE CONSTRUCTION
b) the propriety of the dismissal of U.P. System s appeal was PROJECT; AND THUS, THERE IS NO NEED FOR FURTHER
upheld by the Supreme Court; APPROPRIATIONS.
c) a writ of execution had been issued;
d) defendant U.P. System s deposit with DBP was garnished II
pursuant to a lawful writ of execution issued by the Court; THE COURT OF APPEALS COMMITTED GRAVE ERROR IN
andcralawlibrary ALLOWING GARNISHMENT OF A STATE UNIVERSITY S FUNDS
e) the garnished amount had already been turned over to the IN VIOLATION OF ARTICLE XIV, SECTION 5(5) OF THE
plaintiffs and deposited in their account with DBP. CONSTITUTION.
chanrobles virtual law library
The garnished amount, as discussed in the Order dated III
January 16, 2007, was already owned by the plaintiffs, having IN THE ALTERNATIVE, THE UNIVERSITY INVOKES EQUITY AND
been delivered to them by the Deputy Sheriff of this Court THE REVIEW POWERS OF THIS HONORABLE COURT TO
pursuant to par. (c), Section 9, Rule 39 of the 1997 Rules of Civil MODIFY, IF NOT TOTALLY DELETE THE AWARD OF P10 MILLION
Procedure. Moreover, the judgment obligation has already AS MORAL DAMAGES TO RESPONDENTS.
been fully satisfied as per Report of the Deputy Sheriff.
IV
Anent the Temporary Restraining Order issued by the Supreme THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN
Court, the same has become functus oficio, having been issued ORDERING THE IMMEDIATE RELEASE OF THE JUDGMENT
after the garnished amount had been released to the plaintiffs. AWARD IN ITS ORDER DATED 3 JANUARY 2007 ON THE
The judgment debt was released to the plaintiffs on January GROUND OF EQUITY AND JUDICIAL COURTESY.
17, 2007, while the Temporary Restraining Order issued by the
Supreme Court was received by this Court on February 2, 2007.
At the time of the issuance of the Restraining Order, the act
V had no factual basis, because they had been gravely wronged,
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN had been deprived of their source of income, and had suffered
ORDERING THE IMMEDIATE RELEASE OF THE JUDGMENT untold miseries, discomfort, humiliation and sleepless years;
AWARD IN ITS ORDER DATED 16 JANUARY 2007 ON THE that dela Cruz had even been constrained to sell his house, his
GROUND THAT PETITIONER UNIVERSITY STILL HAS A PENDING equipment and the implements of his trade, and together with
MOTION FOR RECONSIDERATION OF THE ORDER DATED 3 his family had been forced to live miserably because of the
JANUARY 2007. wrongful actuations of the UP; and that the RTC correctly
declared the Court s TRO to be already functus officio by
VI reason of the withdrawal of the garnished amount from the
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN NOT DBP.
ORDERING THE REDEPOSIT OF THE GARNISHED AMOUNT TO
THE DBP IN VIOLATION OF THE CLEAR LANGUAGE OF THE The decisive issues to be considered and passed upon are,
SUPREME COURT RESOLUTION DATED 24 JANUARY 2007. therefore:Ï‚rαLî
chanrobles virtual law library ±Ï‰
The UP argues that the amount earmarked for the (a) whether the funds of the UP were the proper subject
construction project had been purposely set aside only for the of garnishment in order to satisfy the judgment
aborted project and did not include incidental matters like the award; and (b) whether the UP s prayer for the
awards of actual damages, moral damages and attorney s fees. deletion of the awards of actual damages
In support of its argument, the UP cited Article 12.2 of the of P5,716,729.00, moral damages of P10,000,000.00
General Construction Agreement, which stipulated that no and attorney s fees of P150,000.00 plus P1,500.00 per
deductions would be allowed for the payment of claims, appearance could be granted despite the finality of
damages, losses and expenses, including attorney s fees, in the judgment of the RTC.
case of any litigation arising out of the performance of the
work. The UP insists that the CA decision was inconsistent with Rulingςηαñrο
the rulings in Commissioner of Public Highways v. San blεš νιr†υαl lαω lιbrαrÿ
Diego61 and Department of Agriculture v. NLRC62 to the effect The Petition for Review is meritorious.
that government funds and properties could not be seized chanrobles virtual law library
under writs of execution or garnishment to satisfy judgment I.
awards. UP s funds, being government funds,
are not subject to garnishment
Furthermore, the UP contends that the CA contravened
Section 5, Article XIV of the Constitution by allowing the The UP was founded on June 18, 1908 through Act 1870 to
garnishment of UP funds, because the garnishment resulted in provide advanced instruction in literature, philosophy, the
a substantial reduction of the UP s limited budget allocated for sciences, and arts, and to give professional and technical
the remuneration, job satisfaction and fulfillment of the best training to deserving students.63 Despite its establishment as a
available teachers; that Judge Yadao should have exhibited body corporate,64 the UP remains to be a "chartered
judicial courtesy towards the Court due to the pendency of the institution"65 performing a legitimate government function. It
UP s Petition for Review; and that she should have also is an institution of higher learning, not a corporation
desisted from declaring that the TRO issued by this Court had established for profit and declaring any dividends.66 In
become functus officio. enacting Republic Act No. 9500 (The University of the
Philippines Charter of 2008), Congress has declared the UP as
Lastly, the UP states that the awards of actual damages the national university67"dedicated to the search for truth and
of P5,716,729.00 and moral damages of P10 million should be knowledge as well as the development of future
reduced, if not entirely deleted, due to its being leaders."68ςrνll
unconscionable, inequitable and detrimental to public service.
In contrast, Stern Builders and dela Cruz aver that the Petition Irrefragably, the UP is a government
for Review was fatally defective for its failure to mention the instrumentality,69 performing the State s constitutional
other cases upon the same issues pending between the parties mandate of promoting quality and accessible education.70 As a
(i.e., CA-G.R. No. 77395 and G.R No. 163501); that the UP was government instrumentality, the UP administers special funds
evidently resorting to forum shopping, and to delaying the sourced from the fees and income enumerated under Act No.
satisfaction of the final judgment by the filing of its Petition for 1870 and Section 1 of Executive Order No. 714,71 and from the
Review; that the ruling in Commissioner of Public Works v. San yearly appropriations, to achieve the purposes laid down by
Diego had no application because there was an appropriation Section 2 of Act 1870, as expanded in Republic Act No.
for the project; that the UP retained the funds allotted for the 9500.72 All the funds going into the possession of the UP,
project only in a fiduciary capacity; that the contract price had including any interest accruing from the deposit of such funds
been meanwhile adjusted to P22,338,553.25, an amount in any banking institution, constitute a "special trust fund," the
already more than sufficient to cover the judgment award; disbursement of which should always be aligned with the UP s
that the UP s prayer to reduce or delete the award of damages
mission and purpose,73 and should always be subject to The UP correctly submits here that the garnishment of its
auditing by the COA.74ςrνll funds to satisfy the judgment awards of actual and moral
damages (including attorney s fees) was not validly made if
Presidential Decree No. 1445 defines a "trust fund" as a fund there was no special appropriation by Congress to cover the
that officially comes in the possession of an agency of the liability. It was, therefore, legally unwarranted for the CA to
government or of a public officer as trustee, agent or agree with the RTC s holding in the order issued on April 1,
administrator, or that is received for the fulfillment of some 2003 that no appropriation by Congress to allocate and set
obligation.75 A trust fund may be utilized only for the "specific aside the payment of the judgment awards was necessary
purpose for which the trust was created or the funds because "there (were) already an appropriations (sic)
received."76ςrνll earmarked for the said project."82 The CA and the RTC thereby
unjustifiably ignored the legal restriction imposed on the trust
The funds of the UP are government funds that are public in funds of the Government and its agencies and
character. They include the income accruing from the use of instrumentalities to be used exclusively to fulfill the purposes
real property ceded to the UP that may be spent only for the for which the trusts were created or for which the funds were
attainment of its institutional objectives.77 Hence, the funds received except upon express authorization by Congress or by
subject of this action could not be validly made the subject of the head of a government agency in control of the funds, and
the RTC s writ of execution or garnishment. The adverse subject to pertinent budgetary laws, rules and
judgment rendered against the UP in a suit to which it had regulations.83ςrνll
impliedly consented was not immediately enforceable by
execution against the UP,78because suability of the State did Indeed, an appropriation by Congress was required before the
not necessarily mean its liability.79ςrν judgment that rendered the UP liable for moral and actual
ll damages (including attorney s fees) would be satisfied
A marked distinction exists between suability of the State and considering that such monetary liabilities were not covered by
its liability. As the Court succinctly stated in Municipality of San the "appropriations earmarked for the said project." The
Fernando, La Union v. Firme:80ςηαñrοblΠConstitution strictly mandated that "(n)o money shall be paid
µÅ¡ νιr†υαl lαω lιbrαrÿ out of the Treasury except in pursuance of an appropriation
A distinction should first be made between suability and made by law."84ςrνll
liability. "Suability depends on the consent of the state to be
sued, liability on the applicable law and the established facts. II
The circumstance that a state is suable does not necessarily COA must adjudicate private respondents claim
mean that it is liable; on the other hand, it can never be held before execution should proceed
liable if it does not first consent to be sued. Liability is not
conceded by the mere fact that the state has allowed itself to The execution of the monetary judgment against the UP was
be sued. When the state does waive its sovereign immunity, it within the primary jurisdiction of the COA. This was expressly
is only giving the plaintiff the chance to prove, if it can, that the provided in Section 26 of Presidential Decree No. 1445, to
defendant is liable. wit:ςηαñrοblεš νιr
chanrobles virtual law library †υαl lαω lιbrαrÿ
Also, in Republic v. Villasor,81 where the issuance of an alias Section 26. General jurisdiction. - The authority and powers of
writ of execution directed against the funds of the Armed the Commission shall extend to and comprehend all matters
Forces of the Philippines to satisfy a final and executory relating to auditing procedures, systems and controls, the
judgment was nullified, the Court said:ςηαñr keeping of the general accounts of the Government, the
οblεš νιr†υαl lαω lιbrαrÿ preservation of vouchers pertaining thereto for a period of ten
xxx The universal rule that where the State gives its consent to years, the examination and inspection of the books, records,
be sued by private parties either by general or special law, it and papers relating to those accounts; and the audit and
may limit claimant s action "only up to the completion of settlement of the accounts of all persons respecting funds or
proceedings anterior to the stage of execution" and that the property received or held by them in an accountable capacity,
power of the Courts ends when the judgment is rendered, as well as the examination, audit, and settlement of all debts
since government funds and properties may not be seized and claims of any sort due from or owing to the Government
under writs of execution or garnishment to satisfy such or any of its subdivisions, agencies and instrumentalities. The
judgments, is based on obvious considerations of public policy. said jurisdiction extends to all government-owned or
Disbursements of public funds must be covered by the controlled corporations, including their subsidiaries, and other
corresponding appropriation as required by law. The functions self-governing boards, commissions, or agencies of the
and public services rendered by the State cannot be allowed Government, and as herein prescribed, including non
to be paralyzed or disrupted by the diversion of public funds governmental entities subsidized by the government, those
from their legitimate and specific objects, as appropriated by funded by donations through the government, those required
law. to pay levies or government share, and those for which the
chanrobles virtual law library government has put up a counterpart fund or those partly
funded by the government.
chanrobles virtual law library government funds and properties may not be seized under
It was of no moment that a final and executory decision writs of execution or garnishment to satisfy such judgments, is
already validated the claim against the UP. The settlement of based on obvious considerations of public policy.
the monetary claim was still subject to the primary jurisdiction Disbursements of public funds must be covered by the
of the COA despite the final decision of the RTC having already corresponding appropriation as required by law. The functions
validated the claim.85 As such, Stern Builders and dela Cruz as and public services rendered by the State cannot be allowed
the claimants had no alternative except to first seek the to be paralyzed or disrupted by the diversion of public funds
approval of the COA of their monetary claim. from their legitimate and specific objects, as appropriated by
law.
On its part, the RTC should have exercised utmost caution, chanrobles virtual law library
prudence and judiciousness in dealing with the motions for Moreover, it is settled jurisprudence that upon determination
execution against the UP and the garnishment of the UP s of State liability, the prosecution, enforcement or satisfaction
funds. The RTC had no authority to direct the immediate thereof must still be pursued in accordance with the rules and
withdrawal of any portion of the garnished funds from the procedures laid down in P.D. No. 1445, otherwise known as the
depository banks of the UP. By eschewing utmost caution, Government Auditing Code of the Philippines (Department of
prudence and judiciousness in dealing with the execution and Agriculture v. NLRC, 227 SCRA 693, 701-02 1993 citing Republic
garnishment, and by authorizing the withdrawal of the v. Villasor, 54 SCRA 84 1973). All money claims against the
garnished funds of the UP, the RTC acted beyond its Government must first be filed with the Commission on Audit
jurisdiction, and all its orders and issuances thereon were void which must act upon it within sixty days. Rejection of the claim
and of no legal effect, specifically: (a) the order Judge Yadao will authorize the claimant to elevate the matter to the
issued on January 3, 2007 allowing Stern Builders and dela Cruz Supreme Court on certiorari and in effect, sue the State
to withdraw the deposited garnished amount; (b) the order thereby (P.D. 1445, Sections 49-50).
Judge Yadao issued on January 16, 2007 directing DBP to
forthwith release the garnish amount to Stern Builders and However, notwithstanding the rule that government
dela Cruz; (c) the sheriff s report of January 17, 2007 properties are not subject to levy and execution unless
manifesting the full satisfaction of the writ of execution; and otherwise provided for by statute (Republic v. Palacio, 23 SCRA
(d) the order of April 10, 2007 deying the UP s motion for the 899 1968; Commissioner of Public Highways v. San Diego,
redeposit of the withdrawn amount. Hence, such orders and supra) or municipal ordinance (Municipality of Makati v. Court
issuances should be struck down without exception. of Appeals, 190 SCRA 206 1990), the Court has, in various
instances, distinguished between government funds and
Nothing extenuated Judge Yadao s successive violations of properties for public use and those not held for public use.
Presidential Decree No. 1445. She was aware of Presidential Thus, in Viuda de Tan Toco v. Municipal Council of Iloilo (49
Decree No. 1445, considering that the Court circulated to all Phil 52 1926, the Court ruled that "where property of a
judges its Administrative Circular No. 10-2000,86 issued on municipal or other public corporation is sought to be subjected
October 25, 2000, enjoining them "to observe utmost caution, to execution to satisfy judgments recovered against such
prudence and judiciousness in the issuance of writs of corporation, the question as to whether such property is
execution to satisfy money judgments against government leviable or not is to be determined by the usage and purposes
agencies and local government units" precisely in order to for which it is held." The following can be culled from Viuda de
prevent the circumvention of Presidential Decree No. 1445, as Tan Toco v. Municipal Council of Iloilo:Ï‚rαLî
well as of the rules and procedures of the COA, to ±Ï‰
wit:ςηαñrοblεš νιr†υαl lÎ±Ï 1. Properties held for public uses and generally
‰ lιbrαrÿ everything held for governmental purposes are not
In order to prevent possible circumvention of the rules and subject to levy and sale under execution against such
procedures of the Commission on Audit, judges are hereby corporation. The same rule applies to funds in the
enjoined to observe utmost caution, prudence and hands of a public officer and taxes due to a municipal
judiciousness in the issuance of writs of execution to satisfy corporation.
money judgments against government agencies and local
government units. 2. Where a municipal corporation owns in its
proprietary capacity, as distinguished from its public
Judges should bear in mind that in Commissioner of Public or government capacity, property not used or used
Highways v. San Diego (31 SCRA 617, 625 1970), this Court for a public purpose but for quasi-private purposes, it
explicitly stated:ςηαñrο is the general rule that such property may be seized
blεš νιr†υαl lαω lιbrαrÿ and sold under execution against the corporation.
"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 3. Property held for public purposes is not subject to
proceedings anterior to the stage of execution and that the execution merely because it is temporarily used for
power of the Court ends when the judgment is rendered, since private purposes. If the public use is wholly
abandoned, such property becomes subject to execution unjust and inequitable.90 Moreover, in Heirs of
execution. Maura So v. Obliosca,91 we stated that despite the absence of
the preceding circumstances, the Court is not precluded from
This Administrative Circular shall take effect immediately and brushing aside procedural norms if only to serve the higher
the Court Administrator shall see to it that it is faithfully interests of justice and equity. Also, in Gumaru v. Quirino State
implemented. College,92 the Court nullified the proceedings and the writ of
chanrobles virtual law library execution issued by the RTC for the reason that respondent
Although Judge Yadao pointed out that neither the CA nor the state college had not been represented in the litigation by the
Court had issued as of then any writ of preliminary injunction Office of the Solicitor General.
to enjoin the release or withdrawal of the garnished amount,
she did not need any writ of injunction from a superior court We rule that the UP s plea for equity warrants the Court s
to compel her obedience to the law. The Court is disturbed exercise of the exceptional power to disregard the declaration
that an experienced judge like her should look at public laws of finality of the judgment of the RTC for being in clear
like Presidential Decree No. 1445 dismissively instead of loyally violation of the UP s right to due process.
following and unquestioningly implementing them. That she
did so turned her court into an oppressive bastion of mindless Both the CA and the RTC found the filing on June 3, 2002 by
tyranny instead of having it as a true haven for the seekers of the UP of the notice of appeal to be tardy. They based their
justice like the UP. finding on the fact that only six days remained of the UP s
reglementary 15-day period within which to file the notice of
III appeal because the UP had filed a motion for reconsideration
Period of appeal did not start without effective on January 16, 2002 vis-Ã -vis the RTC s decision the UP
service of decision upon counsel of record; received on January 7, 2002; and that because the denial of
Fresh-period rule announced in the motion for reconsideration had been served upon Atty.
Neypes v. Court of Appeals Felimon D. Nolasco of the UPLB Legal Office on May 17, 2002,
can be given retroactive application the UP had only until May 23, 2002 within which to file the
notice of appeal.
The UP next pleads that the Court gives due course to its
Petition for Review in the name of equity in order to reverse The UP counters that the service of the denial of the motion
or modify the adverse judgment against it despite its finality. for reconsideration upon Atty. Nolasco was defective
At stake in the UP s plea for equity was the return of the considering that its counsel of record was not Atty. Nolasco of
amount of P16,370,191.74 illegally garnished from its trust the UPLB Legal Office but the OLS in Diliman, Quezon City; and
funds. Obstructing the plea is the finality of the judgment that the period of appeal should be reckoned from May 31,
based on the supposed tardiness of UP s appeal, which the RTC 2002, the date when the OLS received the order. The UP
declared on September 26, 2002. The CA upheld the submits that the filing of the notice of appeal on June 3, 2002
declaration of finality on February 24, 2004, and the Court was well within the reglementary period to
itself denied the UP s Petition for Review on that issue on May appeal.ςηαñrοblε
11, 2004 (G.R. No. 163501). The denial became final on š νιr†υαl lαω lιbrαrÿ
November 12, 2004. We agree with the submission of the UP.
chanrobles virtual law library
It is true that a decision that has attained finality becomes Firstly, the service of the denial of the motion for
immutable and unalterable, and cannot be modified in any reconsideration upon Atty. Nolasco of the UPLB Legal Office
respect,87 even if the modification is meant to correct was invalid and ineffectual because he was admittedly not the
erroneous conclusions of fact and law, and whether the counsel of record of the UP. The rule is that it is on the counsel
modification is made by the court that rendered it or by this and not the client that the service should be made. 93ςrνl
Court as the highest court of the land.88 Public policy dictates l
that once a judgment becomes final, executory and That counsel was the OLS in Diliman, Quezon City, which was
unappealable, the prevailing party should not be deprived of served with the denial only on May 31, 2002. As such, the
the fruits of victory by some subterfuge devised by the losing running of the remaining period of six days resumed only on
party. Unjustified delay in the enforcement of such judgment June 1, 2002,94rendering the filing of the UP s notice of appeal
sets at naught the role and purpose of the courts to resolve on June 3, 2002 timely and well within the remaining days of
justiciable controversies with finality.89 Indeed, all litigations the UP s period to appeal.
must at some time end, even at the risk of occasional errors.
But the doctrine of immutability of a final judgment has not Verily, the service of the denial of the motion for
been absolute, and has admitted several exceptions, among reconsideration could only be validly made upon the OLS in
them: (a) the correction of clerical errors; (b) the so- Diliman, and no other. The fact that Atty. Nolasco was in the
called nunc pro tunc entries that cause no prejudice to any employ of the UP at the UPLB Legal Office did not render the
party; (c) void judgments; and (d) whenever circumstances service upon him effective. It is settled that where a party has
transpire after the finality of the decision that render its appeared by counsel, service must be made upon such
counsel.95 Service on the party or the party s employee is not pending and undetermined at the time of its passage without
effective because such notice is not notice in law.96 This is clear violating any right of a person who may feel that he is
enough from Section 2, second paragraph, of Rule 13, Rules of adversely affected.
Court, which explicitly states that: "If any party has appeared
by counsel, service upon him shall be made upon his counsel We have further said that a procedural rule that is amended
or one of them, unless service upon the party himself is for the benefit of litigants in furtherance of the administration
ordered by the court. Where one counsel appears for several of justice shall be retroactively applied to likewise favor actions
parties, he shall only be entitled to one copy of any paper then pending, as equity delights in equality.102 We may even
served upon him by the opposite side." As such, the period to relax stringent procedural rules in order to serve substantial
appeal resumed only on June 1, 2002, the date following the justice and in the exercise of this Court s equity
service on May 31, 2002 upon the OLS in Diliman of the copy jurisdiction.103 Equity jurisdiction aims to do complete justice
of the decision of the RTC, not from the date when the UP was in cases where a court of law is unable to adapt its judgments
notified.97ςrνll to the special circumstances of a case because of the
inflexibility of its statutory or legal jurisdiction. 104ςrνll
Accordingly, the declaration of finality of the judgment of the
RTC, being devoid of factual and legal bases, is set aside. It is cogent to add in this regard that to deny the benefit of
the fresh-period rule to the UP would amount to injustice and
Secondly, even assuming that the service upon Atty. Nolasco absurdity injustice, because the judgment in question was
was valid and effective, such that the remaining period for the issued on November 28, 2001 as compared to the judgment in
UP to take a timely appeal would end by May 23, 2002, it Neypes that was rendered in 1998; absurdity, because parties
would still not be correct to find that the judgment of the RTC receiving notices of judgment and final orders issued in the
became final and immutable thereafter due to the notice of year 1998 would enjoy the benefit of the fresh-period rule but
appeal being filed too late on June 3, 2002. the later rulings of the lower courts like that herein would
not.105ςrνll
In so declaring the judgment of the RTC as final against the UP,
the CA and the RTC applied the rule contained in the second Consequently, even if the reckoning started from May 17,
paragraph of Section 3, Rule 41 of the Rules of Court to the 2002, when Atty. Nolasco received the denial, the UP s filing
effect that the filing of a motion for reconsideration on June 3, 2002 of the notice of appeal was not tardy within
interrupted the running of the period for filing the appeal; and the context of the fresh-period rule. For the UP, the fresh
that the period resumed upon notice of the denial of the period of 15-days counted from service of the denial of the
motion for reconsideration. For that reason, the CA and the motion for reconsideration would end on June 1, 2002, which
RTC might not be taken to task for strictly adhering to the rule was a Saturday. Hence, the UP had until the next working day,
then prevailing. or June 3, 2002, a Monday, within which to appeal,
conformably with Section 1 of Rule 22, Rules of Court, which
However, equity calls for the retroactive application in the UP holds that: "If the last day of the period, as thus computed, falls
s favor of the fresh-period rule that the Court first announced on a Saturday, a Sunday, or a legal holiday in the place where
in mid-September of 2005 through its ruling in Neypes v. Court the court sits, the time shall not run until the next working
of Appeals,98viz:ςηαñrο day."
blεš νιr†υαl lαω lιbrαrÿ
To standardize the appeal periods provided in the Rules and to IV
afford litigants fair opportunity to appeal their cases, the Court Awards of monetary damages,
deems it practical to allow a fresh period of 15 days within being devoid of factual and legal bases,
which to file the notice of appeal in the Regional Trial Court, did not attain finality and should be deleted
counted from receipt of the order dismissing a motion for a
new trial or motion for reconsideration. Section 14 of Article VIII of the Constitution prescribes that
chanrobles virtual law library express findings of fact and of law should be made in the
The retroactive application of the fresh-period rule, a decision rendered by any court, to
procedural law that aims "to regiment or make the appeal wit:ςηαñrοblεš νιr†Ï
period uniform, to be counted from receipt of the order …αl lαω lιbrαrÿ
denying the motion for new trial, motion for reconsideration Section 14. No decision shall be rendered by any court without
(whether full or partial) or any final order or resolution," 99 is expressing therein clearly and distinctly the facts and the law
impervious to any serious challenge. This is because there are on which it is based.
no vested rights in rules of procedure.100 A law or regulation is
procedural when it prescribes rules and forms of procedure in No Petition for Review or motion for reconsideration of a
order that courts may be able to administer justice. 101 It does decision of the court shall be refused due course or denied
not come within the legal conception of a retroactive law, or is without stating the legal basis therefor.
not subject of the general rule prohibiting the retroactive chanrobles virtual law library
operation of statues, but is given retroactive effect in actions
Implementing the constitutional provision in civil actions is plaintiff, the same suffered losses and incurred expenses as he
Section 1 of Rule 36, Rules of Court, was forced to re-mortgage his house and lot located in Quezon
viz:ςηαñrοblεš νιr†υαl lαω City to Metrobank (Exh. "CC") and BPI Bank just to pay its
lιbrαrÿ monetary obligations in the form of interest and penalties
Section 1. Rendition of judgments and final orders. A judgment incurred in the course of the construction of the subject
or final order determining the merits of the case shall be in project.109ςrνll
writing personally and directly prepared by the judge, stating chanrobles virtual law library
clearly and distinctly the facts and the law on which it is based, The statement that "due to defendants unjustified refusal to
signed by him, and filed with the clerk of the court. (1a) pay their outstanding obligation to plaintiff, the same suffered
chanrobles virtual law library losses and incurred expenses as he was forced to re-mortgage
The Constitution and the Rules of Court apparently delineate his house and lot located in Quezon City to Metrobank (Exh.
two main essential parts of a judgment, namely: the body and "CC") and BPI Bank just to pay its monetary obligations in the
the decretal portion. Although the latter is the controlling form of interest and penalties incurred in the course of the
part,106 the importance of the former is not to be lightly construction of the subject project" was only a conclusion of
regarded because it is there where the court clearly and fact and law that did not comply with the constitutional and
distinctly states its findings of fact and of law on which the statutory prescription. The statement specified no detailed
decision is based. To state it differently, one without the other expenses or losses constituting the P5,716,729.00 actual
is ineffectual and useless. The omission of either inevitably damages sustained by Stern Builders in relation to the
results in a judgment that violates the letter and the spirit of construction project or to other pecuniary hardships. The
the Constitution and the Rules of Court. omission of such expenses or losses directly indicated that
Stern Builders did not prove them at all, which then
The term findings of fact that must be found in the body of the contravened Article 2199, Civil Code, the statutory basis for
decision refers to statements of fact, not to conclusions of the award of actual damages, which entitled a person to an
law.107 Unlike in pleadings where ultimate facts alone need to adequate compensation only for such pecuniary loss suffered
be stated, the Constitution and the Rules of Court require not by him as he has duly proved. As such, the actual damages
only that a decision should state the ultimate facts but also allowed by the RTC, being bereft of factual support, were
that it should specify the supporting evidentiary facts, for they speculative and whimsical. Without the clear and distinct
are what are called the findings of fact. findings of fact and law, the award amounted only to an ipse
dixit on the part of the RTC,110 and did not attain finality.
The importance of the findings of fact and of law cannot be
overstated. The reason and purpose of the Constitution and There was also no clear and distinct statement of the factual
the Rules of Court in that regard are obviously to inform the and legal support for the award of moral damages in the
parties why they win or lose, and what their rights and substantial amount of P10,000,000.00. The award was thus
obligations are. Only thereby is the demand of due process also speculative and whimsical. Like the actual damages, the
met as to the parties. As Justice Isagani A. Cruz explained in moral damages constituted another judicial ipse dixit, the
Nicos Industrial Corporation v. Court of inevitable consequence of which was to render the award of
Appeals:108ςηαñrοblεš νιrâ moral damages incapable of attaining finality. In addition, the
€ υαl lαω lιbrαrÿ grant of moral damages in that manner contravened the law
It is a requirement of due process that the parties to a litigation that permitted the recovery of moral damages as the means to
be informed of how it was decided, with an explanation of the assuage "physical suffering, mental anguish, fright, serious
factual and legal reasons that led to the conclusions of the anxiety, besmirched reputation, wounded feelings, moral
court. The court cannot simply say that judgment is rendered shock, social humiliation, and similar injury."111The
in favor of X and against Y and just leave it at that without any contravention of the law was manifest considering that Stern
justification whatsoever for its action. The losing party is Builders, as an artificial person, was incapable of experiencing
entitled to know why he lost, so he may appeal to a higher pain and moral sufferings.112 Assuming that in granting the
court, if permitted, should he believe that the decision should substantial amount of P10,000,000.00 as moral damages, the
be reversed. A decision that does not clearly and distinctly RTC might have had in mind that dela Cruz had himself
state the facts and the law on which it is based leaves the suffered mental anguish and anxiety. If that was the case, then
parties in the dark as to how it was reached and is especially the RTC obviously disregarded his separate and distinct
prejudicial to the losing party, who is unable to pinpoint the personality from that of Stern Builders.113 Moreover, his moral
possible errors of the court for review by a higher tribunal. and emotional sufferings as the President of Stern Builders
chanrobles virtual law library were not the sufferings of Stern Builders. Lastly, the RTC
Here, the decision of the RTC justified the grant of actual and violated the basic principle that moral damages were not
moral damages, and attorney s fees in the following terse intended to enrich the plaintiff at the expense of the
manner, viz:ςηαñrοblεš νιr†υΠdefendant, but to restore the plaintiff to his status quo ante as
±l lαω lιbrαrÿ much as possible. Taken together, therefore, all these
xxx The Court is not unmindful that due to defendants considerations exposed the substantial amount
unjustified refusal to pay their outstanding obligation to of P10,000,000.00 allowed as moral damages not only to be
factually baseless and legally indefensible, but also to be appearance, in favor of Stern Builders Corporation and
unconscionable, inequitable and unreasonable. Servillano dela Cruz.
The Court ORDERS Stem Builders Corporation and Servillano
Like the actual and moral damages, the P150,000.00, dela Cruz to redeposit the amount of P16,370,191.74 within 10
plus P1,500.00 per appearance, granted as attorney s fees days from receipt of this decision.ςηαñrοblÎ
were factually unwarranted and devoid of legal basis. The µÅ¡ νιr†υαl lαω lιbrαrÿ
general rule is that a successful litigant cannot recover Costs of suit to be paid by the private respondents.
attorney s fees as part of the damages to be assessed against
the losing party because of the policy that no premium should SO ORDERED.
be placed on the right to litigate.114 Prior to the effectivity of
the present Civil Code, indeed, such fees could be recovered
only when there was a stipulation to that effect. It was only
under the present Civil Code that the right to collect attorney
s fees in the cases mentioned in Article 2208115 of the Civil
Code came to be recognized.116 Nonetheless, with attorney s
fees being allowed in the concept of actual damages,117 their
amounts must be factually and legally justified in the body of
the decision and not stated for the first time in the decretal
portion.118 Stating the amounts only in the dispositive portion
of the judgment is not enough;119 a rendition of the factual and
legal justifications for them must also be laid out in the body
of the decision.120ςrνll

That the attorney s fees granted to the private respondents did


not satisfy the foregoing requirement suffices for the Court to
undo them.121 The grant was ineffectual for being contrary to
law and public policy, it being clear that the express findings of
fact and law were intended to bring the case within the
exception and thereby justify the award of the attorney s fees.
Devoid of such express findings, the award was a conclusion
without a premise, its basis being improperly left to
speculation and conjecture.122ςrνll

Nonetheless, the absence of findings of fact and of any


statement of the law and jurisprudence on which the awards
of actual and moral damages, as well as of attorney s fees,
were based was a fatal flaw that invalidated the decision of the
RTC only as to such awards. As the Court declared in Velarde v.
Social Justice Society,123 the failure to comply with the
constitutional requirement for a clear and distinct statement
of the supporting facts and law "is a grave abuse of discretion
amounting to lack or excess of jurisdiction" and that
"(d)ecisions or orders issued in careless disregard of the
constitutional mandate are a patent nullity and must be struck
down as void."124 The other item granted by the RTC
(i.e., P503,462.74) shall stand, subject to the action of the COA
as stated herein.

WHEREFORE, the Court GRANTS the Petition for Review


on Certiorari; REVERSES and SETS ASIDEthe decision of the
Court of Appeals under review; ANNULS the orders for the
garnishment of the funds of the University of the Philippines
and for the release of the garnished amount to Stern Builders
Corporation and Servillano dela Cruz; and DELETES from the
decision of the Regional Trial Court dated November 28, 2001
for being void only the awards of actual damages
of P5,716,729.00, moral damages of P10,000,000.00, and
attorney's fees of P150,000.00, plus P1,500.00 per

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