G.R. No. L-30098. February 18, 1970
THE COMMISSIONER OF PUBLIC HIGHWAYS AND THE AUDITOR GENERAL, PETITIONERS, VS. HON. LOURDES P. SAN DIEGO, AS PRESIDING JUDGE OF THE COURT OF FIRST INSTANCE OF RIZAL, BRANCH IX, S…
TEEHANKEE, J.:
In this special civil action for certiorari and prohibition, the Court declares null
and void the two questioned orders of
respondent Court levying upon funds of
petitioner Bureau of Public Highways on deposit with the Philippine National
Bank, by virtue of the
fundamental precept that government funds are not subject to execution or garnishment.
The background facts follow:
On or about November
20, 1940, the Government of the
Philippines filed a complaint for eminent domain
in the Court of First Instance of Rizal[1]
for the expropriation of a parcel of
land belonging to N. T. Hashim, with an area of 14,934 square meters, needed to
construct a public road, now known as Epifanio de los Santos Avenue. On November
25, 1940, the Government took possession of the property upon
deposit with the City Treasurer of
the sum of P23,413.64 fixed by the Court therein as the provisional value of
all the lots needed to construct the road, including Hashim’s
property. The records of the
expropriation case were destroyed and lost during the second world war, and
neither party took any step thereafter to reconstitute the proceedings.
In 1958, however, the estate of N. T. Hashim,
deceased, through its Judicial Administrator, Tomas N. Hashim,
filed a money claim with the Quezon City Engineer’s
Office in the sum of P522,620.00, alleging said amount to be the fair market
value of the property in question, now already converted and used as a public
highway. Nothing having come out of its
claim, respondent estate filed on August 6, 1963, with the Court of First
Instance of Rizal, Quezon
City Branch, assigned to Branch IX, presided by respondent judge,[2]
a complaint for the recovery of the fair market price of the said property in
the sum of P672,030.00 against the Bureau of Public Highways, which complaint
was amended on August 26, 1963,
to include as additional defendants, the Auditor General and the City Engineer
of Quezon City.[3]
The issues were joined in the case with the filing by then
Solicitor General Arturo A. Alafriz of the State’s
answer, stating that the Hashim estate was entitled
only to the sum of P3,203.00 as
the fair market value of the property at the time that the State took
possession thereof on November 25, 1940, with legal interest thereon at 6% per
annum, and that said amount had been available and tendered by petitioner
Bureau since 1958. The parties
thereafter worked out a compromise agreement, respondent estate having proposed
on April 28, 1966, a
payment of P14.00 per sq.m. for its
14,934 sq.m.-parcel of land or the total amount of P209,076.00,
equivalent to the land’s total assessed value,[4] which was confirmed, ratified and approved
in November, 1966 by the Commissioner of Public Highways and the Secretary of
Public Works and Communications. On
November 7, 1966, the Compromise Agreement subscribed by counsel for respondent
estate and by then Solicitor General Antonio P. Barredo, now a member of this
Court, was submitted to the lower Court and under date of November 8, 1966, respondent judge, as
prayed for, rendered judgment approving the Compromise Agreement and ordering
petitioners, as defendants therein, to pay respondent estate as plaintiff
therein, the total sum of P209,076.00 for the expropriated lot.
On October 10, 1968,
respondent estate filed with the lower Court a motion for the issuance of a
writ of execution, alleging that petitioners had failed to satisfy the judgment
in its favor. It further filed on October 12, 1968, an ex-parte motion for the appointment of respondent Benjamin
Garcia as special sheriff to serve the writ of execution. No opposition having been filed by the
Solicitor General’s office to the motion for execution at the hearing thereof
on October 12, 1968,
respondent judge, in an order dated October
14, 1968, granted both motions.
On the same date, October 14, 1968, respondent Garcia, as special
sheriff, forthwith served a Notice of Garnishment, together with the writ of
execution dated October 14, 1968, issued by respondent Manuela C. Florendo as Deputy Clerk of Court, on respondent Philippine
National Bank, notifying said bank that levy was thereby made upon funds of
petitioners Bureau of Public Highways and the Auditor General on deposit, with
the bank to cover the judgment of P209,076.00 in favor of respondent estate, and
requesting the bank to reply to the garnishment within five days. On October 16, 1968, three days before the
expiration of the five-day deadline, respondent Benjamin V. Coruña
in his capacity as Chief, Documentation Staff, of respondent bank’s Legal Department,
allegedly acting in excess of his authority and without the knowledge and
consent of the Board of Directors and other ranking officials of respondent bank, replied to the notice of
garnishment that in compliance therewith, the bank was holding the amount of P209,076.00 from
the account of petitioner Bureau of
Public Highways. Respondent bank alleged
that when it was served with Notice to Deliver Money signed by respondent
Garcia, as special sheriff, on October 17, 1968, it sent a letter
to the officials of the Bureau of
Public Highways notifying them of the notice of garnishment.
Under date of October 16, 1968, respondent estate further filed
with the lower Court an ex-parte motion for the
issuance of an order ordering respondent bank to release and deliver to the
special sheriff, respondent Garcia, the garnished amount of P209,076.00
deposited under the account of petitioner Bureau, which motion was granted by
respondent judge in an order of October 18, 1968. On the same day, October 18, 1968, respondent Coruña,
allegedly taking advantage of his position, authorized the issuance of a cashier’s check of the
bank in the amount of P209,076.00, taken
out of the funds of petitioner Bureau deposited in current account with
the bank and paid the same to respondent estate, without notice to said
petitioner.
Later on December 20, 1968, petitioners, through then Solicitor General Felix V. Makasiar, wrote respondent bank complaining that the bank
acted precipitately in having delivered such a substantial amount to the
special sheriff without affording petitioner Bureau a reasonable time to contest the validity of the
garnishment, notwithstanding the bank’s being charged with legal knowledge
that government funds are exempt from execution or garnishment, and demanding
that the bank credit the said petitioner’s account in the amount of
P209,076.00, which the bank had allowed to be illegally garnished. Respondent bank replied on January 6, 1969
that it was not liable for the said garnishment of government funds, alleging
that it was not for the bank to decide the question of legality of the
garnishment order and that much as it wanted to wait until it heard from the
Bureau of Public Highways, it was “helpless to refuse delivery under the
teeth” of the special order of October 18, 1968, directing immediate
delivery of the garnished amount.
Petitioners therefore filed on January 28, 1969 the present action against respondents,
in their capacities as above stated in the title of this case, praying for
judgment declaring void the questioned orders of respondent Court. Petitioners also sought the issuance of a
writ of preliminary mandatory injunction for the immediate reimbursement of
the garnished sum of P209,076.00, constituting funds of petitioner Bureau on
deposit with the Philippine National Bank as official depositary of Philippine
Government funds, to the said petitioner’s account with the bank, so as to
forestall the dissipation of said funds, which the government had allocated to
its public highways and infrastructure projects. The Court ordered on January 31, 1969 the issuance of the writ
against the principal respondents solidarily,
including respondent judge therein so that she would take forthwith all the
necessary measures and processes to compel the immediate return of the said government
funds to petitioner Bureau’s account with respondent bank.[5]
In compliance with the writ, respondent bank restored the
garnished sum of P209,076.00 to petitioner Bureau’s account with it.[6]
The primary responsibility for the reimbursement of said amount to petitioner
Bureau’s account with respondent bank, however, rested solely on respondent
estate, since it is the judgment creditor that received the amount upon the
questioned execution.
Strangely enough, as appears
now from respondent bank’s memorandum in lieu of oral argument[7],
what respondent bank did, acting through respondent Coruña
as its counsel, was not to ask respondent estate to reimburse it in turn
in the same amount, but to file with the probate court with jurisdiction over
respondent estate[8],
a motion for the estate to deposit the said amount with it, purportedly in compliance with the
writ. Respondent estate thereupon deposited
with respondent bank as a savings account the sum of P125,446.00, on which
the bank presumably would pay the usual interest,
besides. As to the balance of
P83,630.00, this sum had been in the interval paid as attorney’s fees to Atty.
Jesus B. Santos, counsel for the estate, by the administrator, allegedly
without authority of the probate court.[9] Accordingly, respondent estate has not
reimbursed the respondent bank either as to this last amount, and the bank has
complacently not taken any steps in the lower court to require such
reimbursement.
The ancillary questions now belatedly raised by the State may
readily be disposed of. Petitioners may
not invoke the State’s immunity from suit, since the case below was but a
continuation in effect of the pre-war expropriation proceedings instituted by
the State itself. The expropriation of
the property, which now forms part of Epifanio de los Santos Avenue,
is a fait accompli and is not questioned by respondent estate. The only question at issue was the amount of
the just compensation due to respondent estate in payment of the expropriated
property, which properly pertained to the jurisdiction of the lower court.[10]
It is elementary that in expropriation proceedings, the State precisely submits
to the Court’s jurisdiction and asks the Court to affirm its lawful right to
take the property sought to be expropriated for the public use or purpose
described in its complaint and to determine the amount of just compensation to
be paid therefor.
Neither may the State impugn the validity of the compromise
agreement executed by the Solicitor General on behalf of the State with the
approval of the proper government officials, on the ground that it was executed
only by the lawyer of respondent estate, without any showing of having been
specially authorized to bind the estate thereby, because such alleged lack of
authority may be questioned only by the
principal or client, and respondent estate as such principal has on the
contrary confirmed and ratified the compromise agreement.[11]
As a matter of fact, the Solicitor General, in representation of the State, makes
in the petition no prayer for the annulment of the compromise agreement or
of the respondent court’s decision approving the same.
On the principal issue, the Court holds that respondent Court’s
two questioned orders (1) for execution of the judgment, in pursuance whereof
respondent deputy clerk issued the corresponding writ of execution and
respondent special sheriff issued the notice of garnishment, and (2) for
delivery of the garnished amount of P209,076.00 to respondent estate as
judgment creditor through respondent special sheriff, are null an void on the
fundamental ground that government funds are not subject to execution or
garnishment.
1. As early as 1919, the
Court has pointed out that although the Government, as plaintiff in expropriation
proceedings, submits itself to
the jurisdiction of the Court and thereby waives its immunity from suit, the judgment that is thus rendered requiring
its payment of the award determined as
just compensation for the condemned property as a condition precedent to the
transfer to the title thereto in its favor, cannot be realized upon execution.[12] The Court there added that it is incumbent
upon the legislature to appropriate any additional amount, over and above the
provisional deposit, that may be necessary to pay the award determined in the
judgment, since the Government cannot keep the land and dishonor the judgment.
In another early case, where the government by an act of the
Philippine Legislature, expressly consented to be sued by the plaintiff in an action
for damages and waived its immunity from suit, the Court adjudged the
Government as not being legally liable on the complaint, since the State under
our laws would be liable only for torts caused by its special agents, specially
commissioned to carry out the acts complained of outside of such agents’
regular duties. We held that the
plaintiff would have to look to the legislature for another legislative
enactment and appropriation of sufficient funds, if the Government intended
itself to be legally liable only for
the damages sustained by plaintiff as a result of the negligent act of one of its employees.[13]
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.
Thus, as pointed out by the Court in Belleng
vs. Republic[14],
while the State has given its consent to be sued in compensation cases, the
pauper-claimant therein must look specifically to the Compensation Guarantee
Fund provided by the Workmen’s Compensation
Act for the corresponding disbursement in satisfaction of his claim, since the
State in Act 3083, the general law waiving
its immunity from suit “upon any money claim involving liability arising from contract express or implied”, imposed the limitation in Sec. 7 thereof that “no execution shall issue upon any judgment rendered by any Court against the Government of the (Philippines) under the provisions of
this Act”; and that otherwise, the claimant would have to prosecute his money claim against the State
under Commonwealth Act 327.
This doctrine was again stressed by the Court in Republic vs. Palacio[15],
setting aside as null and void the order
of garnishment issued by the sheriff pursuant to the lower Court’s writ
of execution on funds of the Pump Irrigation Trust Fund in the account of the
Government’s Irrigation Service Unit with the Philippine National Bank. The Court emphasized then and re-emphasizes
now that judgments against the State or its agencies and instrumentalities in cases where the
State has consented to be sued, operate
merely to liquidate and establish the plaintiff’s claim; such judgments may not
be enforced by writs of execution or garnishment and it is for the legislature
to provide for their payment through the corresponding appropriation, as
indicated in Act 3083.
2. Respondent bank and its
Chief, Documentation Staff, respondent Coruña, have
advanced two specious arguments to justify their wrongful delivery of the
garnished public funds to respondent estate.
Their first contention that the said government funds by reason of their being deposited by
petitioner Bureau under a current account subject to withdrawal by check,
instead of being deposited as special trust funds, “lost their kind and
character as government funds”,[16] is untenable. As the official depositary of the Philippine
Government, respondent bank and its officials should be the first ones to know
that all government funds deposited with it by any agency or instrumentality of
the government, whether by way of general or special deposit, remain government
funds, since such government agencies or instrumentalities do not have any non-public
or private funds of their own.
Their second contention that said government funds lost their
character as such “the moment they were deposited with the respondent
bank”,[17]
since the relation between a depositor and a depository bank is that of creditor
and debtor, is just as untenable, absolutely.
Said respondents shockingly ignore the fact that said government funds
were deposited with respondent bank as the official depositary of the
Philippine Government. Assuming for the
nonce the creation of such relationship of creditor and debtor, petitioner
Bureau thereby held a credit against respondent bank whose obligation as debtor
was to pay upon demand of said petitioner-creditor the public funds thus
deposited with it; even though title to the deposited funds passes to the bank
under this theory since the funds become mingled with other funds which the
bank may employ in its ordinary
business, what was garnished was not the bank’s own funds but the credit of
petitioner bureau against the bank to receive payment of its funds, as a
consequence of which respondent bank delivered to respondent estate the
garnished amount of P209,076.00 belonging to said petitioner. Petitioner bureau’s credit against respondent
bank thereby never lost its character as a credit representing government funds
thus deposited. The moment the payment
is made by respondent bank on such deposit, what it pays out represents the public funds thus
deposited which are not garnishable and may be
expended only for their legitimate objects as authorized by the corresponding
legislative appropriation. Neither
respondent bank nor respondent Coruña are the duly
authorized disbursing officers and auditors of the Government to authorize and
cause payment of the public funds of petitioner Bureau for the benefit of
private persons, as they wrongfully did in this case.
3. Respondents bank and Coruña next pretend that refusal on their part to obey
respondent judge’s order to deliver the garnished amount, “which is valid
and binding unless annulled, would have exposed them for contempt of
court.”[18]
They make no excuse for not having asked the lower court for time and
opportunity to consult petitioner
Bureau or the Solicitor General with regard to the garnishment and execution of
said deposited public funds which were allocated to specific government
projects, or for not having simply replied to the sheriff that what they held
on deposit for petitioner Bureau were non-garnishable
government funds. They have not given
any cogent reason or explanation, — charged as they were with knowledge of the
nullity of the writ of execution and notice of garnishment against government
funds, for in the earlier case of Republic vs. Palacio,
supra, they had then prudently and timely notified the proper government
officials of the attempted levy on the funds of the Irrigation Service Unit
deposited with it, thus enabling the Solicitor General to take the
corresponding action to annul the garnishment — for their failure to follow
the same prudent course in this case.
Indeed, the Court is appalled at the improper haste and lack of
circumspection with which respondent Coruña and other
responsible officials of respondent bank precipitately allowed the garnishment
and delivery of the large amount involved, all within the period of just
four days, even before the expiration of the five-day reglementary
period to reply to the sheriff’s notice of garnishment.
Failure on the State’s part to oppose the issuance of the writ of
execution, which was patently null and void as an execution against government
funds, could not relieve them of their own responsibility.
4. Respondents bank and Coruña further made common cause with respondent estate
beyond the legal issues that should solely concern them, by reason of their
having wrongfully allowed the garnishment and delivery of government funds,
instead assailing petitioners for
not having come to court with “clean hands” and asserting that in
fairness, justice and equity, petitioners should not impede, obstruct or in any
way delay the payment of just compensation to the land owners for their
property that was occupied way back in 1940.
This matter of payment of respondent estate’s judgment credit is of no
concern to them as custodian and depositary of the public funds deposited with
them, whereby they are charged with the obligation of assuring that the funds
are not illegally or wrongfully paid out.
Since they have gone into the records of the expropriation case,
then it should be noted that they should have considered the vital fact that at
the time that the compromise agreement therein was executed in November, 1966,
respondent estate was well aware of the fact that the funds for the payment of
the property in the amount of P209,076.00 still had to be released by the
Budget Commissioner and that at the time of the garnishment, respondent estate
was still making the necessary representations for the corresponding release of
such amount, pursuant to the Budget Commissioner’s favorable recommendation.[19]
And with regard to the merits of the case, they should have likewise considered
that respondent estate could have no complaint against the fair attitude of the
authorities in not having insisted on their original
stand in their answer that respondent estate was entitled only to the sum of P3,203.00 as the fair market value of the
property at the time the State took possession thereof on November 25, 1940, with legal interests
thereon, but rather agreed to pay therefor the greatly
revised and increased amount of P209,076.00 at P14.00 per square meter, not to
mention the consequential benefits derived by said respondent from the construction
of the public highway with the resultant enhanced value of its remaining
properties in the area.
5. The manner in which respondent
bank’s counsel and officials
proceeded to comply with the writ of preliminary mandatory injunction issued by
the Court commanding respondent estate, its judicial administrator and
respondents bank and Coruña, in solidum, to reimburse forthwith the account
of petitioner Bureau in the garnished amount of P209,076.00, does not speak
well of their fidelity to the bank’s interests.
For while respondent bank had restored with its own funds the said
amount of P209,076.00 to petitioner Bureau’s account, it has not required
respondent estate as the party primarily
liable therefor as the recipient of the garnished
amount to reimburse it in turn in this same amount. Rather, said bank officials have allowed respondent estate to keep all this time
the whole amount of P209,076.00 wrongfully garnished by it. For as stated above, respondent bank allowed
respondent estate merely to deposit with it as a savings account, of respondent
estate, the lesser sum of P125,446.00 on which the bank presumably has paid and
continues paying respondent estate, besides the usual interest rates on such
savings accounts, and neither has it taken any steps to require reimbursement
to it from respondent estate of the remainder of P83,630.00 which respondent
estate of its own doing and responsibility paid by way of attorney’s fees.
It thus appears that all this time, respondent bank has not been
reimbursed by respondent estate as the party primarily liable for the whole
amount of P209,076.00 wrongfully and illegally garnished and received by
respondent estate. This grave breach of
trust and dereliction of duty on the part of respondent bank’s officials
should be brought to the attention of respondent bank’s Board of Directors and
management for the appropriate administrative action and other remedial action
for the bank to recover the damages it has been made to incur thereby.
6. The Solicitor General
has likewise questioned the legality of respondent Court’s Order of October 14,
1968, appointing respondent Garcia as “special sheriff” for the
purpose of effecting service of the writ of execution, simply on respondent
estate’s representation that it was desirable “for a speedy enforcement of the
writ.”
The Court finds this general practice of the lower courts of
appointing “special sheriffs” for the service of writs of execution
to be unauthorized by law. The duty of
“executing all processes” of the courts in civil cases, particularly,
writs of execution, devolves upon the sheriff or his deputies, under Section
183 of the Revised Administrative Code and Rule 39, section 8 of the Rules of Court.
Unlike the service of summons
which may be made, aside from
the sheriff or other proper court officers, “for special reasons by any
person especially authorized by the
judge of the court issuing the summons” under Rule 14, section 5 of
the Rules of Court, the law requires that the responsibility of serving writs
of execution, which involve the taking delivery of money or property in trust
for the judgment creditor, should be carried out by regularly bonded sheriffs
or other proper court officers.
(Sections 183 and 330, Revised Administrative Code). The bond required by law of the sheriff is
conditioned inter alia, “for the
delivery or payment to the Government, or the persons entitled thereto, of all
the property or sums of money that shall officially come into his or their (his
deputies’) hands” (Section 330, idem), and thus avoids the risk of
embezzlement of such properties and moneys.
Section 185 of the Revised Administrative Code restrictively
authorizes the judge of the Court issuing the process or writ to deputize some suitable person only “when the sheriff is party to
any action or proceeding or is otherwise incompetent to serve process therein.” The
only other contingency provided by law is when the office of sheriff is vacant,
and the judge is then authorized, “in case of emergency, (to) make a
temporary appointment to the office of sheriff … pending the appointment and
qualification of the sheriff in due course; and he may appoint the deputy clerk
of the court or other officer in the government service to act in said
capacity.” (Section 189, idem).
None
of the above contingencies having been shown to be present, respondent Court’s
order appointing respondent Garcia as “special sheriff” to serve the
writ of execution was devoid of authority.
7. No civil liability
attaches, however, to respondents special sheriff and deputy clerk, since they
acted strictly pursuant to orders issued by respondent judge in the discharge of
her judicial functions as presiding judge of the lower court, and respondent
judge’s ‘immunity from civil responsibility covers them, although the said orders
are herein declared null and void.[20]
ACCORDINGLY, the writs of certiorari and prohibition are granted. The respondent court’s questioned Orders of
October 14, and 18, 1968, are declared null and void, and all further proceedings
in Civil Case No. Q-7441 of the Court of First Instance of Rizal, Quezon City, Branch IX are
abated. The writ of preliminary mandatory injunction heretofore issued is made permanent, except as to respondent judge who is excluded
therefrom, without prejudice to any cause of
action that private respondents may have, inter se. Respondent estate and
respondent Tomas N. Hashim as prayed for by
respondent Philippine National Bank in its Answer, are ordered jointly and
severally to reimburse said respondent bank in the amount of P209,076.00 with
legal interest until the date of actual reimbursement. Respondents Estate of
N. T. Hashim, Philippine National Bank and Benjamin Coruña are ordered jointly to pay treble costs.
The Clerk of Court is directed to furnish copies of this decision
to the Board of Directors and to the president of respondent Philippine
National Bank for their information and appropriate action.
SO ORDERED.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Ruiz Castro, Fernando, and Villamor, JJ., concur.
Barredo, J., took no part.
[1]
Civil Case No. 7906, entitled Commonwealth of the Philippines
vs. N. T. Hashim.
[2]
Now Associate Justice of the Court of Appeals.
[3]
Civil Case No. Q-7441, entitled Testate Estate of N. T. Hashim
vs. the Auditor General, et al.
[4]
Amended Complaint, par. 16,
Annex A of Petition.
[5]
Resolution of April 16, 1969.
[6]
PNB Manifestation dated February 11,
1969.
[7]
Filed on April 14, 1969.
[8]
Court of First Instance of Manila, Sp. Proc. No. 71131, entitled “Testate
Estate of N. T. Hashim, deceased, Tomas N.
Hashim, administrator.”
[9]
Respondent heir Jose Hashim’s “Motion to Resolve
Petition” of November 10, 1969.
[10]
R. A. 296, Section 44; Rule 67, Rules of Court.
[11]
Article 1901, Civil Code.
[12]
Visayan Refining Co. vs. Camas & Paredes,
40 Phil. 550, 562 (Dec. 3, 1919). Vide Director of Commerce vs. Concepcion,
43 Phil. 384 (May 22, 1922).
[13]
Merritt vs. Government of P.I., 34
Phil. 311, (March 21, 1916).
[14]
L-19856, Nov. 16, 1963 (9
SCRA 6).
[15]
L-20322, May 29, 1968, 23
SCRA 899.
[16]
Rollo, p.
248.
[17]
Id, p. 88.
[18]
Rollo, p. 126.
[19]
Respondent Estate’s Answer, par. 11, Rollo, p. 132;
Annexes 2 and 3 thereof.
[20]
Alsua vs.
Johnson, 21 Phil. 308.