MUNICIPALITY OF MAKATI, PETITIONER, VS. THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN, JR., AS JUDGE RTC OF MAKATI, BRANCH CXLII, ADMIRAL FINANCE CREDITORS CONSORTI…

The
present petition for review is an off-shoot of expropriation proceedings
initiated by petitioner Municipality of
Makati against private respondent Admiral
Finance Creditors Consortium, Inc., Home Building System & Realty
Corporation and one Arceli P. Jo, involving a parcel
of land and improvements thereon located at Mayapis
St., San Antonio Village, Makati and registered in
the name of Arceli P. Jo under TCT No. S-5499.

It appears that the action for eminent
domain was filed on May 20, 1986,
docketed as Civil Case No. 13699. 
Attached to petitioner’s complaint was a certification that a bank
account (Account No. S/A 265-537154-3) had been opened with the PNB Buendia Branch under petitioner’s name containing the sum
of P417,510.00, made pursuant to the provisions of Pres. Decree No. 42.  After due hearing where the parties presented
their respective appraisal reports regarding the value of the property,
respondent RTC judge rendered a decision on June 4, 1987, fixing the appraised
value of the property at P5,291,666.00, and ordering petitioner to pay this
amount minus the advanced payment of P338,160.00 which was earlier released to
private respondent.

After this decision became final and
executory, private respondent moved for the issuance of a writ of
execution.  This motion was granted by respondent RTC
judge.  After issuance of the writ of
execution, a Notice of Garnishment dated January 14, 1988 was served by respondent sheriff Silvino R. Pastrana upon the
manager of the PNB Buendia Branch.  However, respondent sheriff was informed that
a “hold code” was placed on the account of petitioner.  As a result of this, private respondent filed
a motion dated January 27, 1988
praying that an order be issued directing the bank to deliver to respondent
sheriff the amount equivalent to the unpaid balance due under the RTC decision
dated June 4, 1987.

Petitioner filed a motion to lift the
garnishment, on the ground that the manner of payment of the expropriation
amount should be done in installments which the respondent RTC judge failed to
state in his decision.  Private
respondent filed its opposition to the motion.

Pending resolution of the above motions, petitioner filed
on July 20, 1988 a
“Manifestation” informing the court that private respondent was no
longer the true and lawful owner of the subject property because a new title
over the property had been registered in the name of Philippine Savings Bank,
Inc. (PSB).  Respondent RTC judge issued
an order requiring PSB to make available the documents pertaining to its
transactions over the subject property, and the PNB Buendia
Branch to reveal the amount in petitioner’s account which was garnished by
respondent sheriff.  In compliance with
this order, PSB filed a manifestation informing the court that it had
consolidated its ownership over the property as mortgagee/purchaser at an extra-judicial
foreclosure sale held on April 20,
1987.  After several
conferences, PSB and private respondent entered into a compromise agreement
whereby they agreed to divide between themselves the compensation due from the
expropriation proceedings.

Respondent trial judge subsequently
issued an order dated September 8, 1988 which: (1) approved the compromise
agreement; (2) ordered PNB Buendia Branch to
immediately release to PSB the sum of P4,953,506.45 which corresponds to the
balance of the appraised value of the subject property under the RTC decision
dated June 4, 1987, from the garnished
account of petitioner; and, (3) ordered PSB and private respondent to execute
the necessary deed of conveyance over the subject property in favor of
petitioner.  Petitioner’s motion to lift the garnishment was denied.

Petitioner filed a motion for
reconsideration, which was duly opposed by private respondent.  On the other hand, for failure of the manager
of the PNB Buendia Branch to comply with the order dated September 8, 1988,
private respondent filed two succeeding motions to require the bank manager to
show cause why he should not be held in contempt of court. 
During the hearings conducted for the above motions, the general manager
of the PNB Buendia Branch, a Mr. Antonio Bautista, informed the court
that he was still waiting for proper authorization from the PNB head office
enabling him to make a disbursement for the amount so ordered.  For its part, petitioner contended that its
funds at the PNB Buendia Branch could neither be
garnished nor levied upon execution, for to do so would result in the
disbursement of public funds without the proper appropriation required under
the law, citing the case of Republic of the Philippines
v. Palacio [G.R. No. L-20322, May 29,1968,
23 SCRA 899.]

Respondent trial judge issued an order
dated December 21, 1988
denying petitioner’s motion for reconsideration on the ground that the doctrine
enunciated in Republic v. Palacio
did not apply to the case because petitioner’s PNB Account No. S/A 265-537154-3
was an account
specifically opened for the expropriation proceedings of the subject property
pursuant to Pres. Decree No. 42. 
Respondent RTC judge likewise declared Mr. Antonio Bautista guilty of
contempt of court for his inexcusable refusal to obey the order dated September 8, 1988, and thus ordered
his arrest and detention until
his compliance with the said order.

Petitioner
and the bank manager of PNB Buendia Branch then filed
separate petitions for certiorari with the Court of Appeals, which were
eventually consolidated.  In a decision
promulgated on June 28, 1989, the Court of Appeals dismissed both petitions for
lack of merit, sustained the jurisdiction of respondent RTC judge over
the funds contained in petitioner’s PNB Account No. 265-537154-3, and affirmed
his authority to levy on such funds.

Its
motion for reconsideration having been denied by the Court of Appeals,
petitioner now files the present petition for review with prayer for
preliminary injunction.

On
November 20, 1989, the Court resolved to issue a temporary restraining order enjoining
respondent RTC judge, respondent sheriff, and their representatives, from enforcing
and/or carrying out the RTC order dated December 21, 1988 and the writ of garnishment issued
pursuant thereto.  Private respondent
then filed its comment to the petition, while petitioner filed its reply.

Petitioner not only reiterates the
arguments adduced in its petition before the Court of Appeals, but also alleges
for the first time that it has actually two accounts with the PNB Buendia Branch, to wit:

*        *           *

(1)     Account No. S/A 265-537154-3 – exclusively
for the expropriation of the subject property, with an outstanding balance of
P99,743.94.

(2)  Account No. S/A 263-530850-7 – for statutory
obligations and other purposes of the municipal government, with a balance of
P170,098,421.72, as of July 12, 1989.

*        *           *

[Petition, pp. 6-7; Rollo, pp. 11-12.]

Because the petitioner has belatedly alleged only in this Court the
existence of two bank accounts, it may fairly be asked whether the second account was opened only for the
purpose of undermining the legal basis of the assailed orders of respondent RTC
judge and the decision of the Court of Appeals, and strengthening its reliance
on the doctrine that public funds are exempted from garnishment or execution as
enunciated in Republic v. Palacio
[supra.] At any rate, the Court will give
petitioner the benefit of the doubt, and proceed to resolve the principal issues presented based
on the factual circumstances thus alleged by petitioner.

Admitting that its
PNB Account No. S/A 265-537154-3 was
specifically opened for expropriation proceedings it had initiated over the subject
property, petitioner poses no objection to
the garnishment or the levy under execution of the funds deposited
therein amounting to P99,743.94. 
However, it is petitioner’s main contention that inasmuch as the
assailed orders of respondent RTC judge involved the net amount of
P4,965,506.45, the funds garnished by respondent sheriff in excess of
P99,743.94, which are public funds earmarked for the municipal government’s
other statutory obligations are exempted from execution without the proper appropriation required under the law.

There is merit in this
contention.  The funds deposited in the
second PNB Account No. S/A 263-530850-7 are public funds of the municipal
government.  In this jurisdiction,
well-settled is the rule that public funds are not subject to levy and
execution, unless otherwise provided for by statute [Republic v. Palacio, supra.; The Commissioner of Public Highways v. San
Diego, G.R. No. L-30098, February 18, 1970, 31 SCRA 616.] More particularly, the properties of a
municipality, whether real or personal, which
are necessary for public use cannot be attached and sold at execution
sale to satisfy a money judgment against the municipality.  Municipal revenues derived from taxes,
licenses and market fees, and which are intended primarily and exclusively for
the purpose of financing the governmental activities and functions of the municipality, are exempt from
execution [See Viuda De Tan Toco v. The Municipal Council of Iloilo, 49 Phil. 52
(1926); The Municipality of Paoay, Ilocos Norte v. Manaois,
86 Phil. 629 (1950); Municipality of San Miguel, Bulacan
v. Fernandez, G.R. No. 61744, June 25, 1984, 130 SCRA 56.] The foregoing rule
finds application in the case at bar. 
Absent a showing that the municipal
council of Makati
has passed an ordinance appropriating from its public funds an amount
corresponding to the balance due under the RTC decision dated June 4, 1987, less the sum of P99,743.94 deposited in Account No. S/A 265-537154-3, no levy
under execution may be validly effected on the public funds of petitioner
deposited in Account No. S/A 263-530850-7.

Nevertheless, this is not to say that private respondent and PSB are left with no legal
recourse.  Where a municipality fails or
refuses, without justifiable reason, to effect payment of a final money
judgment rendered against it, the claimant may avail of the remedy of mandamus
in order to compel the enactment and approval of the necessary appropriation ordinance, and the corresponding disbursement of municipal
funds therefor [See Viuda
De Tan Toco v. The Municipal
Council of Iloilo, supra; Baldivia v. Lota, 107 Phil. 1099
(1960); Yuviengco v. Gonzales, 108 Phil. 247 (1960).]

In the case at bar, the validity of
the RTC decision dated June 4, 1987
is not disputed by petitioner.  No appeal was taken therefrom.  For three years now, petitioner has enjoyed
possession and use of the subject property notwithstanding its inexcusable
failure to comply with its legal obligation to pay just compensation.  Petitioner has benefited from its possession
of the property since the same has been the site of Makati West
High School
since the school year 1986-1987.  This
Court will not condone petitioner’s blatant refusal to settle its legal
obligation arising from expropriation proceedings it had in fact
initiated.  It cannot be over-emphasized
that, within the context of the State’s inherent power of eminent domain.

. . . [j]ust compensation means not only the correct determination
of the amount to be paid to the owner of the land but also the payment of the
land within a reasonable
time from its taking.  Without prompt
payment, compensation cannot be considered “just” for the property
owner is made to suffer the consequence of being immediately deprived of his
land while being made to wait for a decade or more before actually receiving
the amount necessary to cope with his loss [Cosculluela
v. The Honorable Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393, 400.  See also Provincial Government of Sorsogon v. Vda. de Villaroya, G.R. No. 64037, August 27, 1987, 153 SCRA 291.]

The State’s power of eminent domain
should be exercised within the
bounds of fair play and justice.  In the case at bar, considering that
valuable property has been taken, the compensation to be paid fixed and the
municipality is in full possession and utilizing the property for public
purpose, for three (3) years, the Court finds that the municipality has had
more than reasonable time to pay full
compensation.

WHEREFORE, the Court Resolved
to ORDER petitioner
Municipality of Makati to immediately pay
Philippine Savings Bank, Inc. and private respondent the amount of P4,953,506.45.  Petitioner is hereby required to submit to this Court a report of its
compliance with the foregoing order without non-extendible period of SIXTY (60) DAYS from the date of
receipt of this resolution.

The order of respondent RTC judge
dated December 21, 1988,
which was rendered in Civil Case No. 13699, is SET ASIDE and the temporary restraining order issued by the Court
on November 20, 1989 is
MADE PERMANENT.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr.,
Feliciano, and Bidin,
JJ., concur.