G.R. No.

176628               March 19, 2012

PHILIPPINE TOURISM AUTHORITY, Petitioner, 

vs.
PHILIPPINE GOLF DEVELOPMENT & EQUIPMENT, INC., Respondent.

RESOLUTION

BRION, J.:

Before this Court is a petition for certiorari, under Rule 65 of the 1997 Rules of Civil Procedure, to
annul the decision dated December 13, 2006 of the Court of Appeals (CA) in CA G.R. SP No.
1 

90402. This CA decision dismissed the petition for annulment of judgment which sought to set aside
the decision of the Regional Trial Court (RTC) of Muntinlupa City, Branch 203, in Civil Case No. 03-
2 

212. The RTC held the Philippine Tourism Authority (PTA) liable for its unpaid obligation to
Philippine Golf Development & Equipment, Inc. (PHILGOLF).

FACTUAL BACKGROUND

On April 3, 1996, PTA, an agency of the Department of Tourism, whose main function is to bolster
and promote tourism, entered into a contract with Atlantic Erectors, Inc. (AEI) for the construction of
the Intramuros Golf Course Expansion Projects (PAR 60-66) for a contract price of Fifty-Seven
Million Nine Hundred Fifty-Four Thousand Six Hundred Forty-Seven and 94/100 Pesos
(₱57,954,647.94).

The civil works of the project commenced. Since AEI was incapable of constructing the golf course
aspect of the project, it entered into a sub-contract agreement with PHILGOLF, a duly organized
domestic corporation, to build the golf course amounting to Twenty-Seven Million Pesos
(₱27,000,000.00). The sub-contract agreement also provides that PHILGOLF shall submit its
progress billings directly to PTA and, in turn, PTA shall directly pay PHILGOLF. 3

On October 2, 2003, PHILGOLF filed a collection suit against PTA amounting to Eleven Million Eight
Hundred Twenty Thousand Five Hundred Fifty and 53/100 Pesos (₱11,820,550.53), plus interest, for
the construction of the golf course. Within the period to file a responsive pleading, PTA filed a motion
for extension of time to file an answer.

On October 30, 2003, the RTC granted the motion for extension of time. PTA filed another motion for
extension of time to file an answer. The RTC again granted the motion.

Despite the RTC’s liberality of granting two successive motions for extension of time, PTA failed to
answer the complaint. Hence, on April 6, 2004, the RTC rendered a judgment of default, ruling as
follows:

WHEREFORE, judgment is hereby rendered, ordering the defendant to pay plaintiff:

1. The amount of Eleven Million, Eight Hundred Twenty Thousand, Five Hundred Fifty Pesos
and Fifty Three Centavos (₱11,820,550.53), representing defendant’s outstanding obligation,
plus interest thereon of twelve percent (12%) per annum from the time the unpaid billings of
plaintiff were due for payment by the defendant, until they are fully paid.

2. The amount of Two Hundred Thousand Pesos (₱200,000.00), as attorney’s fees.

 3. The amount of One Hundred Twenty Eight Thousand, Five Hundred Twenty Nine Pesos
and Fourteen Centavos (₱128,529.14), as filing fees and other costs of litigation.

4. The amount of Three Hundred Thousand Pesos (₱300,000.00), as moral damages.

5. The amount of One Hundred Fifty Thousand (Pesos (₱150,000.00), as nominal damages,
and

6. The amount of Two Hundred Fifty Thousand Pesos (₱250,000.00), as exemplary

damages.

SO ORDERED. 4

On July 11, 2005, PTA seasonably appealed the case to the CA. But before the appeal of PTA could
be perfected, PHILGOLF already filed a motion for execution pending appeal with the RTC. The
RTC, in an Order dated June 2, 2004, granted the motion and a writ of execution pending appeal
was issued against PTA. On June 3, 2004, a notice of garnishment was issued against PTA’s bank
account at the Land Bank of the Philippines, NAIA-BOC Branch to fully satisfy the judgment.

PTA filed a petition for certiorari with the CA, imputing grave abuse of discretion on the part of the
RTC for granting the motion for execution pending appeal. The CA ruled in favor of PTA and set
aside the order granting the motion for execution pending appeal.

On July 11, 2005, PTA withdrew its appeal of the RTC decision and, instead, filed a petition for
5 

annulment of judgment under Rule 47 of the Rules of Court. The petition for annulment of judgment
was premised on the argument that the gross negligence of PTA’s counsel prevented the
presentation of evidence before the RTC.

On December 13, 2006, the CA dismissed the petition for annulment of judgment for lack of merit.
PTA questions this CA action in the present petition for certiorari.

THE PETITION

The petition cites three arguments: first, that the negligence of PTA’s counsel amounted to an
extrinsic fraud warranting an annulment of judgment; second, that since PTA is a government entity,
it should not be bound by the inactions or negligence of its counsel; and third, that there were no
other available remedies left for PTA but a petition for annulment of judgment.

OUR RULING

We find the petition unmeritorious.

The Rules of Court specifically provides for deadlines in actions before the court to ensure an orderly
disposition of cases. PTA cannot escape these legal technicalities by simply invoking the negligence
of its counsel. This practice, if allowed, would defeat the purpose of the Rules on periods since every
party would merely lay the blame on its counsel to avoid any liability. The rule is that "a client is
bound by the acts, even mistakes, of his counsel in the realm of procedural technique[,]and unless
such acts involve gross negligence that the claiming party can prove, the acts of a counsel bind the
client as if it had been the latter’s acts."
6
In LBC Express - Metro Manila, Inc. v. Mateo, the Court held that "[g]ross negligence is
7 

characterized by want of even slight care, acting or omitting to act in a situation where there is a duty
to act, not inadvertently but willfully and intentionally with a conscious indifference to consequences
insofar as other persons may be affected." This cannot be invoked in cases where the counsel is
merely negligent in submitting his required pleadings within the period that the rules mandate.

It is not disputed that the summons together with a copy of the complaint was personally served
upon, and received by PTA through its Corporate Legal Services Department, on October 10,
2003. Thus, in failing to submit a responsive pleading within the required time despite sufficient
8 

notice, the RTC was correct in declaring PTA in default.

There was no extrinsic fraud

"Extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation which is committed
outside of the trial of the case, whereby the unsuccessful party has been prevented from exhibiting
fully his case, by fraud or deception practiced on him by his opponent." Under the doctrine of this
9 

cited case, we do not see the acts of PTA’s counsel to be constitutive of extrinsic fraud.

The records reveal that the judgment of default was sent via registered mail to PTA’s counsel.
10 

However, PTA never availed of the remedy of a motion to lift the order of default. Since the failure of
11 

PTA to present its evidence was not a product of any fraudulent acts committed outside trial, the
RTC did not err in declaring PTA in default.

Annulment of judgment is not the proper remedy

PTA’s appropriate remedy was only to appeal the RTC decision. "Annulment of Judgment under
Rule 47 of the Rules of Court is a recourse equitable in character and allowed only in exceptional
cases where the ordinary remedies of new trial, appeal, petition for relief or other appropriate
remedies are no longer available through no fault of petitioner." 12

In this case, appeal was an available remedy. There was also no extraordinary reason for a petition
for annulment of judgment, nor was there any adequate explanation on why the remedy for new trial
or petition for relief could not be used. The Court is actually at a loss why PTA had withdrawn a
properly filed appeal and substituted it with another petition, when PTA could have merely raised the
same issues through an ordinary appeal.

PTA was acting in a proprietary character

PTA also erred in invoking state immunity simply because it is a government entity. The application
of state immunity is proper only when the proceedings arise out of sovereign transactions and not in
cases of commercial activities or economic affairs. The State, in entering into a business contract,
descends to the level of an individual and is deemed to have tacitly given its consent to be sued. 13

Since the Intramuros Golf Course Expansion Projects partakes of a proprietary character entered
into between PTA and PHILGOLF, PTA cannot avoid its financial liability by merely invoking
immunity from suit.

A special civil action for certiorari under Rule 65 is proper only when there is no other plain, speedy,
and adequate remedy
Lastly, a special civil action under Rule 65 of the Rules of Court is only available in cases when a
tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess
of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction,
and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law. It
is not a mode of appeal, and cannot also be made as a substitute for appeal. It will not lie in cases
where other remedies are available under the law. 1âwphi1

In Land Bank of the Philippines v. Court of Appeals, the Court had the occasion to state:
14 

The general rule is that a [certiorari] will not issue where the remedy of appeal is available to the
aggrieved party. The remedies of appeal in the ordinary course of law and that of certiorari under
Rule 65 of the Revised Rules of Court are mutually exclusive and not alternative or cumulative.
Hence, the special civil action for certiorari under Rule 65 is not and cannot be a substitute for an
appeal, where the latter remedy is available. xxx

xxxx

The proper recourse of the aggrieved party from a decision of the CA is a petition for review on
certiorari under Rule 45 of the Revised Rules of Court. On the other hand, if the error subject of the
recourse is one of jurisdiction, or the act complained of was perpetrated by a quasi-judicial officer or
agency with grave abuse of discretion amounting to lack or excess of jurisdiction, the proper remedy
available to the aggrieved party is a petition for certiorari under Rule 65 of the said Rules.
[emphases supplied; citations omitted]

In sum, PTA had the remedy of appealing the RTC decision to the CA and, thereafter, to us. Under
the circumstances, we find no adequate reason to justify the elevation of this case to the CA and
then to us, under Rule 65 of the Rules of Court.

WHEREFORE, premises considered, we hereby DISMISS the petition for certiorari. No costs.

SO ORDERED.

G.R. No. 171182               August 23, 2012

UNIVERSITY OF THE PHILIPPINES, JOSE V. ABUEVA, RAUL P. DE GUZMAN, RUBEN P.

ASPIRAS, EMMANUEL P. BELLO, WILFREDO P. DAVID, CASIANO S. ABRIGO, and JOSEFINA
R. LICUANAN,Petitioners, 
vs.
HON. AGUSTIN S. DIZON, his capacity as Presiding Judge of the Regional Trial Court of
Quezon City, Branch 80, STERN BUILDERS, INC., and SERVILLANO DELA
CRUZ, Respondents.

DECISION

BERSAMIN, J.:

Trial judges should not immediately issue writs of execution or garnishment against the Government
or any of its subdivisions, agencies and instrumentalities to enforce money judgments. They should
1 

bear in mind that the primary jurisdiction to examine, audit and settle all claims of any sort due from
the Government or any of its subdivisions, agencies and instrumentalities pertains to the
Commission on Audit (COA) pursuant to Presidential Decree No. 1445 (Government Auditing Code
of the Philippines).

The Case

On appeal by the University of the Philippines and its then incumbent officials (collectively, the UP) is
the decision promulgated on September 16, 2005, whereby the Court of Appeals (CA) upheld the
2 

order of the Regional Trial Court (RTC), Branch 80, in Quezon City that directed the garnishment of
public funds amounting to ₱ 16,370,191.74 belonging to the UP to satisfy the writ of execution
issued to enforce the already final and executory judgment against the UP.

Antecedents

On August 30, 1990, the UP, through its then President Jose V. Abueva, entered into a General
Construction Agreement with respondent Stern Builders Corporation (Stern Builders), represented
by its President and General Manager Servillano dela Cruz, for the construction of the extension
building and the renovation of the College of Arts and Sciences Building in the campus of the
University of the Philippines in Los Baños (UPLB). 3

In the course of the implementation of the contract, Stern Builders submitted three progress billings
corresponding to the work accomplished, but the UP paid only two of the billings. The third billing
worth ₱ 273,729.47 was not paid due to its disallowance by the Commission on Audit (COA).
Despite the lifting of the disallowance, the UP failed to pay the billing, prompting Stern Builders and
dela Cruz to sue the UP and its co-respondent officials to collect the unpaid billing and to recover
various damages. The suit, entitled Stern Builders Corporation and Servillano R. Dela Cruz v.
University of the Philippines Systems, Jose V. Abueva, Raul P. de Guzman, Ruben P. Aspiras,
Emmanuel P. Bello, Wilfredo P. David, Casiano S. Abrigo, and Josefina R. Licuanan, was docketed
as Civil Case No. Q-93-14971 of the Regional Trial Court in Quezon City (RTC). 4

After trial, on November 28, 2001, the RTC rendered its decision in favor of the plaintiffs, viz:
5 

Wherefore, in the light of the foregoing, judgment is hereby rendered in favor of the plaintiff and
against the defendants ordering the latter to pay plaintiff, jointly and severally, the following, to wit:

1. ₱ 503,462.74 amount of the third billing, additional accomplished work and retention
money

2. ₱ 5,716,729.00 in actual damages

3. ₱ 10,000,000.00 in moral damages

4. ₱ 150,000.00 and ₱ 1,500.00 per appearance as attorney’s fees; and

5. Costs of suit.

SO ORDERED.

Following the RTC’s denial of its motion for reconsideration on May 7, 2002, the UP filed a notice of
6 

appeal on June 3, 2002. Stern Builders and dela Cruz opposed the notice of appeal on the ground of
7 

its filing being belated, and moved for the execution of the decision. The UP countered that the
notice of appeal was filed within the reglementary period because the UP’s Office of Legal Affairs
(OLS) in Diliman, Quezon City received the order of denial only on May 31, 2002. On September 26,
2002, the RTC denied due course to the notice of appeal for having been filed out of time and
granted the private respondents’ motion for execution. 8

The RTC issued the writ of execution on October 4, 2002, and the sheriff of the RTC served the writ
9 

of execution and notice of demand upon the UP, through its counsel, on October 9, 2002. The UP10 

filed an urgent motion to reconsider the order dated September 26, 2002, to quash the writ of
execution dated October 4, 2002, and to restrain the proceedings. However, the RTC denied the
11 

urgent motion on April 1, 2003. 12

On June 24, 2003, the UP assailed the denial of due course to its appeal through a petition
for certiorari in the Court of Appeals (CA), docketed as CA-G.R. No. 77395. 13

On February 24, 2004, the CA dismissed the petition for certiorari upon finding that the UP’s notice
of appeal had been filed late, stating:
14 

Records clearly show that petitioners received a copy of the Decision dated November 28, 2001 and
January 7, 2002, thus, they had until January 22, 2002 within which to file their appeal. On January
16, 2002 or after the lapse of nine (9) days, petitioners through their counsel Atty. Nolasco filed a
Motion for Reconsideration of the aforesaid decision, hence, pursuant to the rules, petitioners still
had six (6) remaining days to file their appeal. As admitted by the petitioners in their petition (Rollo,
p. 25), Atty. Nolasco received a copy of the Order denying their motion for reconsideration on May
17, 2002, thus, petitioners still has until May 23, 2002 (the remaining six (6) days) within which to file
their appeal. Obviously, petitioners were not able to file their Notice of Appeal on May 23, 2002 as it
was only filed on June 3, 2002.

In view of the said circumstances, We are of the belief and so holds that the Notice of Appeal filed by
the petitioners was really filed out of time, the same having been filed seventeen (17) days late of
the reglementary period. By reason of which, the decision dated November 28, 2001 had already
become final and executory. "Settled is the rule that the perfection of an appeal in the manner and
within the period permitted by law is not only mandatory but jurisdictional, and failure to perfect that
appeal renders the challenged judgment final and executory. This is not an empty procedural rule
but is grounded on fundamental considerations of public policy and sound practice." (Ram’s Studio
and Photographic Equipment, Inc. vs. Court of Appeals, 346 SCRA 691, 696). Indeed, Atty. Nolasco
received the order of denial of the Motion for Reconsideration on May 17, 2002 but filed a Notice of
Appeal only on June 3, 3003. As such, the decision of the lower court ipso facto became final when
no appeal was perfected after the lapse of the reglementary period. This procedural caveat cannot
be trifled with, not even by the High Court.15

The UP sought a reconsideration, but the CA denied the UP’s motion for reconsideration on April 19,
2004.16

On May 11, 2004, the UP appealed to the Court by petition for review on certiorari (G.R. No.
163501).

On June 23, 2004, the Court denied the petition for review. The UP moved for the reconsideration of
17 

the denial of its petition for review on August 29, 2004, but the Court denied the motion on October
18 

6, 2004. The denial became final and executory on November 12, 2004.
19  20

In the meanwhile that the UP was exhausting the available remedies to overturn the denial of due
course to the appeal and the issuance of the writ of execution, Stern Builders and dela Cruz filed in
the RTC their motions for execution despite their previous motion having already been granted and
despite the writ of execution having already issued. On June 11, 2003, the RTC granted another
motion for execution filed on May 9, 2003 (although the RTC had already issued the writ of
execution on October 4, 2002). 21

On June 23, 2003 and July 25, 2003, respectively, the sheriff served notices of garnishment on the
UP’s depository banks, namely: Land Bank of the Philippines (Buendia Branch) and the
Development Bank of the Philippines (DBP), Commonwealth Branch. The UP assailed the
22 

garnishment through an urgent motion to quash the notices of garnishment; and a motion to quash
23 

the writ of execution dated May 9, 2003. 24

On their part, Stern Builders and dela Cruz filed their ex parte motion for issuance of a release
order.25

On October 14, 2003, the RTC denied the UP’s urgent motion to quash, and granted Stern Builders
and dela Cruz’s ex parte motion for issuance of a release order. 26

The UP moved for the reconsideration of the order of October 14, 2003, but the RTC denied the
motion on November 7, 2003. 27

On January 12, 2004, Stern Builders and dela Cruz again sought the release of the garnished
funds. Despite the UP’s opposition, the RTC granted the motion to release the garnished funds on
28  29 

March 16, 2004. On April 20, 2004, however, the RTC held in abeyance the enforcement of the
30 

writs of execution issued on October 4, 2002 and June 3, 2003 and all the ensuing notices of
garnishment, citing Section 4, Rule 52, Rules of Court, which provided that the pendency of a timely
motion for reconsideration stayed the execution of the judgment. 31

On December 21, 2004, the RTC, through respondent Judge Agustin S. Dizon, authorized the
release of the garnished funds of the UP, to wit: 32 

WHEREFORE, premises considered, there being no more legal impediment for the release of the
garnished amount in satisfaction of the judgment award in the instant case, let the amount garnished
be immediately released by the Development Bank of the Philippines, Commonwealth Branch,
Quezon City in favor of the plaintiff.

SO ORDERED.

The UP was served on January 3, 2005 with the order of December 21, 2004 directing DBP to
release the garnished funds. 33

On January 6, 2005, Stern Builders and dela Cruz moved to cite DBP in direct contempt of court for
its non-compliance with the order of release. 34

Thereupon, on January 10, 2005, the UP brought a petition for certiorari in the CA to challenge the
jurisdiction of the RTC in issuing the order of December 21, 2004 (CA-G.R. CV No. 88125). Aside
35 

from raising the denial of due process, the UP averred that the RTC committed grave abuse of
discretion amounting to lack or excess of jurisdiction in ruling that there was no longer any legal
impediment to the release of the garnished funds. The UP argued that government funds and
properties could not be seized by virtue of writs of execution or garnishment, as held in Department
of Agriculture v. National Labor Relations Commission, and citing Section 84 of Presidential Decree
36 

No. 1445 to the effect that "revenue funds shall not be paid out of any public treasury or depository
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 Regents v. Ligot-
Telan to the effect that the funds belonging to the UP were public funds.
37 

On January 19, 2005, the CA issued a temporary restraining order (TRO) upon application by the
UP.38

On March 22, 2005, Stern Builders and dela Cruz filed in the RTC their amended motion for sheriff’s
assistance to implement the release order dated December 21, 2004, stating that the 60-day period
of the TRO of the CA had already lapsed. The UP opposed the amended motion and countered that
39 

the implementation of the release order be suspended. 40

On May 3, 2005, the RTC granted the amended motion for sheriff’s assistance and directed the
sheriff to proceed to the DBP to receive the check in satisfaction of the judgment. 41

The UP sought the reconsideration of the order of May 3, 2005. 42

On May 16, 2005, DBP filed a motion to consign the check representing the judgment award and to
dismiss the motion to cite its officials in contempt of court. 43

On May 23, 2005, the UP presented a motion to withhold the release of the payment of the judgment
award. 44

On July 8, 2005, the RTC resolved all the pending matters, noting that the DBP had already
45 

delivered to the sheriff Manager’s Check No. 811941 for ₱ 16,370,191.74 representing the
garnished funds payable to the order of Stern Builders and dela Cruz as its compliance with the
RTC’s order dated December 21, 2004. However, the RTC directed in the same order that Stern
46 

Builders and dela Cruz should not encash the check or withdraw its amount pending the final
resolution of the UP’s petition for certiorari, to wit:
47

To enable the money represented in the check in question (No. 00008119411) to earn interest
during the pendency of the defendant University of the Philippines application for a writ of injunction
with the Court of Appeals the same may now be deposited by the plaintiff at the garnishee Bank
(Development Bank of the Philippines), the disposition of the amount represented therein being
subject to the final outcome of the case of the University of the Philippines et al., vs. Hon. Agustin S.
Dizon et al., (CA G.R. 88125) before the Court of Appeals.

Let it be stated herein that the plaintiff is not authorized to encash and withdraw the amount
represented in the check in question and enjoy the same in the fashion of an owner during the
pendency of the case between the parties before the Court of Appeals which may or may not be
resolved in plaintiff’s favor.

With the end in view of seeing to it that the check in question is deposited by the plaintiff at the
Development Bank of the Philippines (garnishee bank), Branch Sheriff Herlan Velasco is directed to
accompany and/or escort the plaintiff in making the deposit of the check in question.

SO ORDERED.

On September 16, 2005, the CA promulgated its assailed decision dismissing the UP’s petition for
certiorari, ruling that the UP had been given ample opportunity to contest the motion to direct the
DBP to deposit the check in the name of Stern Builders and dela Cruz; and that the garnished funds
could be the proper subject of garnishment because they had been already earmarked for the
project, with the UP holding the funds only in a fiduciary capacity, viz:
48 

Petitioners next argue that the UP funds may not be seized for execution or garnishment to satisfy
the judgment award. Citing Department of Agriculture vs. NLRC, University of the Philippines Board
of Regents vs. Hon. Ligot-Telan, petitioners contend that UP deposits at Land Bank and the
Development Bank of the Philippines, being government funds, may not be released absent an
appropriations bill from Congress.

The argument is specious. UP entered into a contract with private respondents for the expansion
and renovation of the Arts and Sciences Building of its campus in Los Baños, Laguna. Decidedly,
there was already an appropriations earmarked for the said project. The said funds are retained by
UP, in a fiduciary capacity, pending completion of the construction project.

We agree with the trial Court [sic] observation on this score:

"4. Executive Order No. 109 (Directing all National Government Agencies to Revert Certain
Accounts Payable to the Cumulative Result of Operations of the National Government and
for Other Purposes) Section 9. Reversion of Accounts Payable, provides that, all 1995 and
prior years documented accounts payable and all undocumented accounts regardless of the
year they were incurred shall be reverted to the Cumulative Result of Operations of the
National Government (CROU). This shall apply to accounts payable of all funds, except
fiduciary funds, as long as the purpose for which the funds were created have not been
accomplished and accounts payable under foreign assisted projects for the duration of the
said project. In this regard, the Department of Budget and Management issued Joint-Circular
No. 99-6 4.0 (4.3) Procedural Guidelines which provides that all accounts payable that
reverted to the CROU may be considered for payment upon determination thru
administrative process, of the existence, validity and legality of the claim. Thus, the allegation
of the defendants that 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 defendants and the
plaintiff entered into the General Construction of Agreement there is an amount already
allocated by the latter for the said project which is no longer subject of future appropriation."
49

After the CA denied their motion for reconsideration on December 23, 2005, the petitioners appealed
by petition for review.

Matters Arising During the Pendency of the Petition

On January 30, 2006, Judge Dizon of the RTC (Branch 80) denied Stern Builders and dela Cruz’s
motion to withdraw the deposit, in consideration of the UP’s intention to appeal to the CA, stating:
50 

Since it appears that the defendants are intending to file a petition for review of the Court of Appeals
resolution in CA-G.R. No. 88125 within the reglementary period of fifteen (15) days from receipt of
resolution, the Court agrees with the defendants stand that the granting of plaintiffs’ subject motion is
premature.

Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part that
the "disposition of the amount represented therein being subject to the final outcome of the case of
the University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125 before
the Court of Appeals) is that the judgment or resolution of said court has to be final and executory,
for if the same will still be elevated to the Supreme Court, it will not attain finality yet until the highest
court has rendered its own final judgment or resolution. 51

However, on January 22, 2007, the UP filed an Urgent Application for A Temporary Restraining
Order and/or A Writ of Preliminary Injunction, averring that on January 3, 2007, Judge Maria
52 

Theresa dela Torre-Yadao (who had meanwhile replaced Judge Dizon upon the latter’s appointment
to the CA) had issued another order allowing Stern Builders and dela Cruz to withdraw the
deposit, to wit:
53 

It bears stressing that defendants’ liability for the payment of the judgment obligation has become
indubitable due to the final and executory nature of the Decision dated November 28, 2001. Insofar
as the payment of the [sic] judgment obligation is concerned, the Court believes that there is nothing
more the defendant can do to escape liability. It is observed that there is nothing more the defendant
can do to escape liability. It is observed that defendant U.P. System had already exhausted all its
legal remedies to overturn, set aside or modify the decision (dated November 28, 2001( rendered
against it. The way the Court sees it, defendant U.P. System’s petition before the Supreme Court
concerns only with the manner by which said judgment award should be satisfied. It has nothing to
do with the legality or propriety thereof, although it prays for the deletion of [sic] reduction of the
award of moral damages.

It must be emphasized that this Court’s finding, i.e., that there was sufficient appropriation
earmarked for the project, was upheld by the Court of Appeals in its decision dated September 16,
2005. Being a finding of fact, the Supreme Court will, ordinarily, not disturb the same was said Court
is not a trier of fact. Such being the case, defendants’ arguments that there was no sufficient
appropriation for the payment of the judgment obligation must fail.

While it is true that the former Presiding Judge of this Court in its Order dated January 30, 2006 had
stated that:

Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part that
the "disposition of the amount represented therein being subject to the final outcome of the case of
the University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125 before
the Court of Appeals) is that the judgment or resolution of said court has to be final and executory,
for if the same will still be elevated to the Supreme Court, it will not attain finality yet until the highest
court has rendered its own final judgment or resolution.

it should be noted that neither the Court of Appeals nor the Supreme Court issued a preliminary
injunction enjoining the release or withdrawal of the garnished amount. In fact, in its present petition
for review before the Supreme Court, U.P. System has not prayed for the issuance of a writ of
preliminary injunction. Thus, the Court doubts whether such writ is forthcoming.

The Court honestly believes that if defendants’ petition assailing the Order of this Court dated
December 31, 2004 granting the motion for the release of the garnished amount was meritorious,
the Court of Appeals would have issued a writ of injunction enjoining the same. Instead, said
appellate court not only refused to issue a wit of preliminary injunction prayed for by U.P. System but
denied the petition, as well. 54

The UP contended that Judge Yadao thereby effectively reversed the January 30, 2006 order of
Judge Dizon disallowing the withdrawal of the garnished amount until after the decision in the case
would have become final and executory.
Although the Court issued a TRO on January 24, 2007 to enjoin Judge Yadao and all persons acting
pursuant to her authority from enforcing her order of January 3, 2007, it appears that on January 16,
55 

2007, or prior to the issuance of the TRO, she had already directed the DBP to forthwith release the
garnished amount to Stern Builders and dela Cruz;  and that DBP had forthwith complied with the
56 

order on January 17, 2007 upon the sheriff’s service of the order of Judge Yadao. 57

These intervening developments impelled the UP to file in this Court a supplemental petition on
January 26, 2007, alleging that the RTC (Judge Yadao) gravely erred in ordering the immediate
58

release of the garnished amount despite the pendency of the petition for review in this Court.

The UP filed a second supplemental petition after the RTC (Judge Yadao) denied the UP’s motion
59 

for the redeposit of the withdrawn amount on April 10, 2007, to wit:
60 

This resolves defendant U.P. System’s Urgent Motion to Redeposit Judgment Award praying that
plaintiffs be directed to redeposit the judgment award to DBP pursuant to the Temporary Restraining
Order issued by the Supreme Court. Plaintiffs opposed the motion and countered that the
Temporary Restraining Order issued by the Supreme Court has become moot and academic
considering that the act sought to be restrained by it has already been performed. They also alleged
that the redeposit of the judgment award was no longer feasible as they have already spent the
same.

It bears stressing, if only to set the record straight, that this Court did not – in its Order dated January
3, 2007 (the implementation of which was restrained by the Supreme Court in its Resolution dated
January 24, 2002) – direct that that garnished amount "be deposited with the garnishee bank
(Development Bank of the Philippines)". In the first place, there was no need to order DBP to make
such deposit, as the garnished amount was already deposited in the account of plaintiffs with the
DBP as early as May 13, 2005. What the Court granted in its Order dated January 3, 2007 was
plaintiff’s motion to allow the release of said deposit. It must be recalled that the Court found
plaintiff’s motion meritorious and, at that time, there was no restraining order or preliminary injunction
from either the Court of Appeals or the Supreme Court which could have enjoined the release of
plaintiffs’ deposit. The Court also took into account the following factors:

a) the Decision in this case had long been final and executory after it was rendered on
November 28, 2001;

b) the propriety of the dismissal of U.P. System’s appeal was upheld by the Supreme Court;

c) a writ of execution had been issued;

d) defendant U.P. System’s deposit with DBP was garnished pursuant to a lawful writ of
execution issued by the Court; and

e) the garnished amount had already been turned over to the plaintiffs and deposited in their
account with DBP.

The garnished amount, as discussed in the Order dated January 16, 2007, was already owned by
the plaintiffs, having been delivered to them by the Deputy Sheriff of this Court pursuant to par. (c),
Section 9, Rule 39 of the 1997 Rules of Civil Procedure. Moreover, the judgment obligation has
already been fully satisfied as per Report of the Deputy Sheriff.
Anent the Temporary Restraining Order issued by the Supreme Court, the same has become
functus oficio, having been issued after the garnished amount had been released to the plaintiffs.
The judgment debt was released to the plaintiffs on January 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 sought to be restrained had already been
done, thereby rendering the said Order ineffectual.

After a careful and thorough study of the arguments advanced by the parties, the Court is of the
considered opinion that there is no legal basis to grant defendant U.P. System’s motion to redeposit
the judgment amount. Granting said motion is not only contrary to law, but it will also render this
Court’s final executory judgment nugatory. Litigation must end and terminate sometime and
somewhere, and it is essential to an effective administration of justice that once a judgment has
become final the issue or cause involved therein should be laid to rest. This doctrine of finality of
judgment is grounded on fundamental considerations of public policy and sound practice. In fact,
nothing is more settled in law than that once a judgment attains finality it thereby becomes
immutable and unalterable. It may no longer be modified in any respect, even if the modification is
meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of
whether the modification is attempted to be made by the court rendering it or by the highest court of
the land.

WHEREFORE, premises considered, finding defendant U.P. System’s Urgent Motion to Redeposit
Judgment Award devoid of merit, the same is hereby DENIED.

SO ORDERED.

Issues

The UP now submits that:

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DISMISSING THE PETITION,

ALLOWING IN EFFECT THE GARNISHMENT OF UP FUNDS, WHEN IT RULED THAT FUNDS
HAVE ALREADY BEEN EARMARKED FOR THE CONSTRUCTION PROJECT; AND THUS,
THERE IS NO NEED FOR FURTHER APPROPRIATIONS.

II

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN ALLOWING GARNISHMENT OF A

STATE UNIVERSITY’S FUNDS IN VIOLATION OF ARTICLE XIV, SECTION 5(5) OF THE
CONSTITUTION.

III

IN THE ALTERNATIVE, THE UNIVERSITY INVOKES EQUITY AND THE REVIEW POWERS OF
THIS HONORABLE COURT TO MODIFY, IF NOT TOTALLY DELETE THE AWARD OF ₱ 10
MILLION AS MORAL DAMAGES TO RESPONDENTS.

IV
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE RELEASE
OF THE JUDGMENT AWARD IN ITS ORDER DATED 3 JANUARY 2007 ON THE GROUND OF
EQUITY AND JUDICIAL COURTESY.

THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE RELEASE

OF THE JUDGMENT AWARD IN ITS ORDER DATED 16 JANUARY 2007 ON THE GROUND
THAT PETITIONER UNIVERSITY STILL HAS A PENDING MOTION FOR RECONSIDERATION OF
THE ORDER DATED 3 JANUARY 2007.

VI

THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN NOT ORDERING THE REDEPOSIT OF

THE GARNISHED AMOUNT TO THE DBP IN VIOLATION OF THE CLEAR LANGUAGE OF THE
SUPREME COURT RESOLUTION DATED 24 JANUARY 2007.

The UP argues that the amount earmarked for the construction project had been purposely set aside
only for the aborted project and did not include incidental matters like the awards of actual damages,
moral damages and attorney’s fees. In support of its argument, the UP cited Article 12.2 of the
General Construction Agreement, which stipulated that no deductions would be allowed for the
payment of claims, damages, losses and expenses, including attorney’s fees, in case of any
litigation arising out of the performance of the work. The UP insists that the CA decision was
inconsistent with the rulings in Commissioner of Public Highways v. San Diego and Department of
61 

Agriculture v. NLRC to the effect that government funds and properties could not be seized under
62 

writs of execution or garnishment to satisfy judgment awards.

Furthermore, the UP contends that the CA contravened Section 5, Article XIV of the Constitution by
allowing the garnishment of UP funds, because the garnishment resulted in a substantial reduction
of the UP’s limited budget allocated for the remuneration, job satisfaction and fulfillment of the best
available teachers; that Judge Yadao should have exhibited judicial courtesy towards the Court due
to the pendency of the UP’s petition for review; and that she should have also desisted from
declaring that the TRO issued by this Court had become functus officio.

Lastly, the UP states that the awards of actual damages of ₱ 5,716,729.00 and moral damages of ₱
10 million should be reduced, if not entirely deleted, due to its being unconscionable, inequitable and
detrimental to public service.

In contrast, Stern Builders and dela Cruz aver that the petition for review was fatally defective for its
failure to mention the other cases upon the same issues pending between the parties (i.e., CA-G.R.
No. 77395 and G.R No. 163501); that the UP was evidently resorting to forum shopping, and to
delaying the satisfaction of the final judgment by the filing of its petition for review; that the ruling in
Commissioner of Public Works v. San Diego had no application because there was an appropriation
for the project; that the UP retained the funds allotted for the project only in a fiduciary capacity; that
the contract price had been meanwhile adjusted to ₱ 22,338,553.25, an amount already more than
sufficient to cover the judgment award; that the UP’s prayer to reduce or delete the award of
damages had no factual basis, because they had been gravely wronged, had been deprived of their
source of income, and had suffered untold miseries, discomfort, humiliation and sleepless years; that
dela Cruz had even been constrained to sell his house, his equipment and the implements of his
trade, and together with his family had been forced to live miserably because of the wrongful
actuations of the UP; and that the RTC correctly declared the Court’s TRO to be already functus
officio by reason of the withdrawal of the garnished amount from the DBP.
The decisive issues to be considered and passed upon are, therefore:

(a) whether the funds of the UP were the proper subject of garnishment in order to satisfy the
judgment award; and (b) whether the UP’s prayer for the deletion of the awards of actual damages
of ₱ 5,716,729.00, moral damages of ₱ 10,000,000.00 and attorney’s fees of ₱ 150,000.00 plus ₱
1,500.00 per appearance could be granted despite the finality of the judgment of the RTC.

Ruling

The petition for review is meritorious.

I.
UP’s funds, being government funds,
are not subject to garnishment

The UP was founded on June 18, 1908 through Act 1870 to provide advanced instruction in
literature, philosophy, the sciences, and arts, and to give professional and technical training to
deserving students. Despite its establishment as a body corporate, the UP remains to be a
63  64 

"chartered institution" performing a legitimate government function. It is an institution of higher

65 

learning, not a corporation established for profit and declaring any dividends. In enacting Republic
66 

Act No. 9500 (The University of the Philippines Charter of 2008), Congress has declared the UP as
the national university "dedicated to the search for truth and knowledge as well as the development
67 

of future leaders." 68

Irrefragably, the UP is a government instrumentality, performing the State’s constitutional mandate

69 

of promoting quality and accessible education. As a government instrumentality, the UP administers

70 

special funds sourced from the fees and income enumerated under Act No. 1870 and Section 1 of
Executive Order No. 714, and from the yearly appropriations, to achieve the purposes laid down by
71 

Section 2 of Act 1870, as expanded in Republic Act No. 9500. All the funds going into the
72 

possession of the UP, including any interest accruing from the deposit of such funds in any banking
institution, constitute a "special trust fund," the disbursement of which should always be aligned with
the UP’s mission and purpose, and should always be subject to auditing by the COA.
73  74

Presidential Decree No. 1445 defines a "trust fund" as a fund that officially comes in the possession
of an agency of the government or of a public officer as trustee, agent or administrator, or that is
received for the fulfillment of some obligation. A trust fund may be utilized only for the "specific
75 

purpose for which the trust was created or the funds received." 76

The funds of the UP are government funds that are public in character. They include the income
accruing from the use of real property ceded to the UP that may be spent only for the attainment of
its institutional objectives. Hence, the funds subject of this action could not be validly made the
77 

subject of the RTC’s writ of execution or garnishment. The adverse judgment rendered against the
UP in a suit to which it had impliedly consented was not immediately enforceable by execution
against the UP, because suability of the State did not necessarily mean its liability.
78  79

A marked distinction exists between suability of the State and its liability. As the Court succinctly
stated in Municipality of San Fernando, La Union v. Firme: 80

A distinction should first be made between suability and liability. "Suability depends on the consent
of the state to be sued, liability on the applicable law and the established facts. The circumstance
that a state is suable does not necessarily mean that it is liable; on the other hand, it can never be
held 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 be sued. When the state does waive its sovereign immunity, it is only
giving the plaintiff the chance to prove, if it can, that the defendant is liable.

Also, in Republic v. Villasor, where the issuance of an alias writ of execution directed against the
81 

funds of the Armed Forces of the Philippines to satisfy a final and executory judgment was nullified,
the Court said:

xxx The universal rule that where the State gives its consent to be sued by private parties either by
general or special law, it may limit claimant’s action "only up to the completion of proceedings
anterior to the stage of execution" and that the power of the Courts ends when the judgment is
rendered, since government funds and properties may not be seized under writs of execution or
garnishment to satisfy such judgments, is based on obvious considerations of public policy.
Disbursements of public funds must be covered by the corresponding appropriation as required by
law. The functions and public services rendered by the State cannot be allowed to be paralyzed or
disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated
by law.

The UP correctly submits here that the garnishment of its funds to satisfy the judgment awards of
actual and moral damages (including attorney’s fees) was not validly made if there was no special
appropriation by Congress to cover the liability. It was, therefore, legally unwarranted for the CA to
agree with the RTC’s holding in the order issued on April 1, 2003 that no appropriation by Congress
to allocate and set aside the payment of the judgment awards was necessary because "there (were)
already an appropriations (sic) earmarked for the said project." The CA and the RTC thereby
82 

unjustifiably ignored the legal restriction imposed on the trust funds of the Government and its
agencies and instrumentalities to be used exclusively to fulfill the purposes for which the trusts were
created or for which the funds were received except upon express authorization by Congress or by
the head of a government agency in control of the funds, and subject to pertinent budgetary laws,
rules and regulations. 83

Indeed, an appropriation by Congress was required before the judgment that rendered the UP liable
for moral and actual damages (including attorney’s fees) would be satisfied considering that such
monetary liabilities were not covered by the "appropriations earmarked for the said project." The
Constitution strictly mandated that "(n)o money shall be paid out of the Treasury except in pursuance
of an appropriation made by law." 84

II
COA must adjudicate private respondents’ claim
before execution should proceed

The execution of the monetary judgment against the UP was within the primary jurisdiction of the
COA. This was expressly provided in Section 26 of Presidential Decree No. 1445, to wit:

Section 26. General jurisdiction. - The authority and powers of the Commission shall extend to and
comprehend all matters relating to auditing procedures, systems and controls, the keeping of the
general accounts of the Government, the preservation of vouchers pertaining thereto for a period of
ten years, the examination and inspection of the books, records, and papers relating to those
accounts; and the audit and settlement of the accounts of all persons respecting funds or property
received or held by them in an accountable capacity, as well as the examination, audit, and
settlement of all debts and claims of any sort due from or owing to the Government or any of its
subdivisions, agencies and instrumentalities. The said jurisdiction extends to all government-owned
or controlled corporations, including their subsidiaries, and other self-governing boards,
commissions, or agencies of the Government, and as herein prescribed, including non governmental
entities subsidized by the government, those funded by donations through the government, those
required to pay levies or government share, and those for which the government has put up a
counterpart fund or those partly funded by the government.

It was of no moment that a final and executory decision already validated the claim against the UP.
The settlement of the monetary claim was still subject to the primary jurisdiction of the COA despite
the final decision of the RTC having already validated the claim. As such, Stern Builders and dela
85 

Cruz as the claimants had no alternative except to first seek the approval of the COA of their
monetary claim.

On its part, the RTC should have exercised utmost caution, prudence and judiciousness in dealing
with the motions for execution against the UP and the garnishment of the UP’s funds. The RTC had
no authority to direct the immediate withdrawal of any portion of the garnished funds from the
depository banks of the UP. By eschewing utmost caution, prudence and judiciousness in dealing
with the execution and garnishment, and by authorizing the withdrawal of the garnished funds of the
UP, the RTC acted beyond its jurisdiction, and all its orders and issuances thereon were void and of
no legal effect, specifically: (a) the order Judge Yadao issued on January 3, 2007 allowing Stern
Builders and dela Cruz to withdraw the deposited garnished amount; (b) the order Judge Yadao
issued on January 16, 2007 directing DBP to forthwith release the garnish amount to Stern Builders
and dela Cruz; (c) the sheriff’s report of January 17, 2007 manifesting the full satisfaction of the writ
of execution; and (d) the order of April 10, 2007 deying the UP’s motion for the redeposit of the
withdrawn amount. Hence, such orders and issuances should be struck down without exception.

Nothing extenuated Judge Yadao’s successive violations of Presidential Decree No. 1445. She was
aware of Presidential Decree No. 1445, considering that the Court circulated to all judges its
Administrative Circular No. 10-2000, issued on October 25, 2000, enjoining them "to observe utmost
86 

caution, prudence and judiciousness in the issuance of writs of execution to satisfy money
judgments against government agencies and local government units" precisely in order to prevent
the circumvention of Presidential Decree No. 1445, as well as of the rules and procedures of the
COA, to wit:

In order to prevent possible circumvention of the rules and procedures of the Commission on
Audit, judges are hereby enjoined to observe utmost caution, prudence and judiciousness in
the issuance of writs of execution to satisfy money judgments against government agencies
and local government units.

Judges should bear in mind that in Commissioner of Public Highways v. San Diego (31 SCRA 617,
625 1970), this Court explicitly stated:

"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 Court 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.

Moreover, it is settled jurisprudence that upon determination of State liability, the

prosecution, enforcement or satisfaction thereof must still be pursued in accordance with the
rules and procedures laid down in P.D. No. 1445, otherwise known as the Government
Auditing Code of the Philippines (Department of Agriculture v. NLRC, 227 SCRA 693, 701-02
1993 citing Republic vs. Villasor, 54 SCRA 84 1973). All money claims against the
Government must first be filed with the Commission on Audit which must act upon it within
sixty days. Rejection of the claim will authorize the claimant to elevate the matter to the
Supreme Court on certiorari and in effect, sue the State thereby (P.D. 1445, Sections 49-50).

However, notwithstanding the rule that government properties are not subject to levy and execution
unless otherwise provided for by statute (Republic v. Palacio, 23 SCRA 899 1968; Commissioner of
Public Highways v. San Diego, supra) or municipal ordinance (Municipality of Makati v. Court of
Appeals, 190 SCRA 206 1990), the Court has, in various instances, distinguished between
government funds and properties for public use and those not held for public use. Thus, in Viuda de
Tan Toco v. Municipal Council of Iloilo (49 Phil 52 1926, the Court ruled that "where property of a
municipal or other public corporation is sought to be subjected to execution to satisfy judgments
recovered against such corporation, the question as to whether such property is leviable or not is to
be determined by the usage and purposes for which it is held." The following can be culled from
Viuda de Tan Toco v. Municipal Council of Iloilo:

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

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

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

This Administrative Circular shall take effect immediately and the Court Administrator shall see to it
that it is faithfully implemented.

Although Judge Yadao pointed out that neither the CA nor the Court had issued as of then any writ
of preliminary injunction to enjoin the release or withdrawal of the garnished amount, she did not
need any writ of injunction from a superior court to compel her obedience to the law. The Court is
disturbed that an experienced judge like her should look at public laws like Presidential Decree No.
1445 dismissively instead of loyally following and unquestioningly implementing them. That she did
so turned her court into an oppressive bastion of mindless tyranny instead of having it as a true
haven for the seekers of justice like the UP.

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

The UP next pleads that the Court gives due course to its petition for review in the name of equity in
order to reverse or modify the adverse judgment against it despite its finality. At stake in the UP’s
plea for equity was the return of the amount of ₱ 16,370,191.74 illegally garnished from its trust
funds. Obstructing the plea is the finality of the judgment based on the supposed tardiness of UP’s
appeal, which the RTC declared on September 26, 2002. The CA upheld the declaration of finality
on February 24, 2004, and the Court itself denied the UP’s petition for review on that issue on May
11, 2004 (G.R. No. 163501). The denial became final on November 12, 2004.

It is true that a decision that has attained finality becomes immutable and unalterable, and cannot be
modified in any respect, even if the modification is meant to correct erroneous conclusions of fact
87 

and law, and whether the modification is made by the court that rendered it or by this Court as the
highest court of the land. Public policy dictates that once a judgment becomes final, executory and
88 

unappealable, the prevailing party should not be deprived of the fruits of victory by some subterfuge
devised by the losing party. Unjustified delay in the enforcement of such judgment sets at naught the
role and purpose of the courts to resolve justiciable controversies with finality. Indeed, all litigations
89

must at some time end, even at the risk of occasional errors.

But the doctrine of immutability of a final judgment has not been absolute, and has admitted several
exceptions, among them: (a) the correction of clerical errors; (b) the so-called nunc pro tunc entries
that cause no prejudice to any party; (c) void judgments; and (d) whenever circumstances transpire
after the finality of the decision that render its execution unjust and inequitable. Moreover, in Heirs
90 

of Maura So v. Obliosca, we stated that despite the absence of the preceding circumstances, the
91 

Court is not precluded from brushing aside procedural norms if only to serve the higher interests of
justice and equity. Also, in Gumaru v. Quirino State College, the Court nullified the proceedings and
92 

the writ of execution issued by the RTC for the reason that respondent state college had not been
represented in the litigation by the Office of the Solicitor General.

We rule that the UP’s plea for equity warrants the Court’s exercise of the exceptional power to
disregard the declaration of finality of the judgment of the RTC for being in clear violation of the UP’s
right to due process.

Both the CA and the RTC found the filing on June 3, 2002 by the UP of the notice of appeal to be
tardy. They based their finding on the fact that only six days remained of the UP’s reglementary 15-
day period within which to file the notice of appeal because the UP had filed a motion for
reconsideration on January 16, 2002 vis-à-vis the RTC’s decision the UP received on January 7,
2002; and that because the denial of the motion for reconsideration had been served upon Atty.
Felimon D. Nolasco of the UPLB Legal Office on May 17, 2002, the UP had only until May 23, 2002
within which to file the notice of appeal.

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

We agree with the submission of the UP.

Firstly, the service of the denial of the motion for reconsideration upon Atty. Nolasco of the UPLB
Legal Office was invalid and ineffectual because he was admittedly not the counsel of record of the
UP. The rule is that it is on the counsel and not the client that the service should be made. 93

That counsel was the OLS in Diliman, Quezon City, which was served with the denial only on May
31, 2002. As such, the running of the remaining period of six days resumed only on June 1,
2002, rendering the filing of the UP’s notice of appeal on June 3, 2002 timely and well within the
94 

remaining days of the UP’s period to appeal.

Verily, the service of the denial of the motion for reconsideration could only be validly made upon the
OLS in Diliman, and no other. The fact that Atty. Nolasco was in the employ of the UP at the UPLB
Legal Office did not render the service upon him effective. It is settled that where a party has
appeared by counsel, service must be made upon such counsel. Service on the party or the party’s
95 

employee is not effective because such notice is not notice in law. This is clear enough from Section
96 

2, second paragraph, of Rule 13, Rules of Court, which explicitly states that: "If any party has
appeared by counsel, service upon him shall be made upon his counsel or one of them, unless
service upon the party himself is ordered by the court. Where one counsel appears for several
parties, he shall only be entitled to one copy of any paper served upon him by the opposite side." As
such, the period to appeal resumed only on June 1, 2002, the date following the service on May 31,
2002 upon the OLS in Diliman of the copy of the decision of the RTC, not from the date when the UP
was notified. 97

Accordingly, the declaration of finality of the judgment of the RTC, being devoid of factual and legal
bases, is set aside.

Secondly, even assuming that the service upon Atty. Nolasco was valid and effective, such that the
remaining period for the UP to take a timely appeal would end by May 23, 2002, it would still not be
correct to find that the judgment of the RTC became final and immutable thereafter due to the notice
of appeal being filed too late on June 3, 2002.

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 paragraph of Section 3, Rule 41 of the Rules of Court to the effect that
the filing of a motion for reconsideration interrupted the running of the period for filing the appeal;
and that the period resumed upon notice of the denial of the motion for reconsideration. For that
reason, the CA and the RTC might not be taken to task for strictly adhering to the rule then
prevailing.

However, equity calls for the retroactive application in the UP’s favor of the fresh-period rule that the
Court first announced in mid-September of 2005 through its ruling in Neypes v. Court of
Appeals, viz:
98 

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

The retroactive application of the fresh-period rule, a procedural law that aims "to regiment or make
the appeal period uniform, to be counted from receipt of the order denying the motion for new trial,
motion for reconsideration (whether full or partial) or any final order or resolution," is impervious to
99 

any serious challenge. This is because there are no vested rights in rules of procedure. A law or
100 

regulation is procedural when it prescribes rules and forms of procedure in order that courts may be
able to administer justice. It does not come within the legal conception of a retroactive law, or is not
101 

subject of the general rule prohibiting the retroactive operation of statues, but is given retroactive
effect in actions pending and undetermined at the time of its passage without violating any right of a
person who may feel that he is adversely affected.

We have further said that a procedural rule that is amended for the benefit of litigants in furtherance
of the administration of justice shall be retroactively applied to likewise favor actions then pending,
as equity delights in equality. We may even relax stringent procedural rules in order to serve
102 

substantial justice and in the exercise of this Court’s equity jurisdiction. Equity jurisdiction aims to
103 
do complete justice in cases where a court of law is unable to adapt its judgments to the special
circumstances of a case because of the inflexibility of its statutory or legal jurisdiction. 104

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 absurdity – injustice, because the judgment in question was issued on
November 28, 2001 as compared to the judgment in Neypes that was rendered in 1998; absurdity,
because parties receiving notices of judgment and final orders issued in the year 1998 would enjoy
the benefit of the fresh-period rule but the later rulings of the lower courts like that herein would not. 105

Consequently, even if the reckoning started from May 17, 2002, when Atty. Nolasco received the
denial, the UP’s filing on June 3, 2002 of the notice of appeal was not tardy within the context of the
fresh-period rule. For the UP, the fresh period of 15-days counted from service of the denial of the
motion for reconsideration would end on June 1, 2002, which was a Saturday. Hence, the UP had
until the next working day, or June 3, 2002, a Monday, within which to appeal, conformably with
Section 1 of Rule 22, Rules of Court, which holds that: "If the last day of the period, as thus
computed, falls on a Saturday, a Sunday, or a legal holiday in the place where the court sits, the
time shall not run until the next working day."

IV
Awards of monetary damages,
being devoid of factual and legal bases,
did not attain finality and should be deleted

Section 14 of Article VIII of the Constitution prescribes that express findings of fact and of law should
be made in the decision rendered by any court, to wit:

Section 14. No decision shall be rendered by any court without expressing therein clearly and
distinctly the facts and the law on which it is based.

No petition for review or motion for reconsideration of a decision of the court shall be refused due
course or denied without stating the legal basis therefor.

Implementing the constitutional provision in civil actions is Section 1 of Rule 36, Rules of Court, viz:

Section 1. Rendition of judgments and final orders. — A judgment or final order determining the
merits of the case shall be in writing personally and directly prepared by the judge, stating clearly
and distinctly the facts and the law on which it is based, signed by him, and filed with the clerk of the
court. (1a)

The Constitution and the Rules of Court apparently delineate two main essential parts of a judgment,
namely: the body and the decretal portion. Although the latter is the controlling part, the importance
106 

of the former is not to be lightly regarded because it is there where the court clearly and distinctly
states its findings of fact and of law on which the decision is based. To state it differently, one
without the other is ineffectual and useless. The omission of either inevitably results in a judgment
that violates the letter and the spirit of the Constitution and the Rules of Court.

The term findings of fact that must be found in the body of the decision refers to statements of fact,
not to conclusions of law. Unlike in pleadings where ultimate facts alone need to be stated, the
107 

Constitution and the Rules of Court require not only that a decision should state the ultimate facts
but also that it should specify the supporting evidentiary facts, for they are what are called the
findings of fact.
The importance of the findings of fact and of law cannot be overstated. The reason and purpose of
the Constitution and the Rules of Court in that regard are obviously to inform the parties why they
win or lose, and what their rights and obligations are. Only thereby is the demand of due process
met as to the parties. As Justice Isagani A. Cruz explained in Nicos Industrial Corporation v. Court of
Appeals: 108

It is a requirement of due process that the parties to a litigation be informed of how it was decided,
with an explanation of the factual and legal reasons that led to the conclusions of the court. The
court cannot simply say that judgment is rendered in favor of X and against Y and just leave it at that
without any justification whatsoever for its action. The losing party is entitled to know why he lost, so
he may appeal to a higher court, if permitted, should he believe that the decision should be reversed.
A decision that does not clearly and distinctly state the facts and the law on which it is based leaves
the parties in the dark as to how it was reached and is especially prejudicial to the losing party, who
is unable to pinpoint the possible errors of the court for review by a higher tribunal.

Here, the decision of the RTC justified the grant of actual and moral damages, and attorney’s fees in
the following terse manner, viz:

xxx The Court is not unmindful that due to defendants’ unjustified refusal to pay their outstanding
obligation to plaintiff, the same suffered losses and incurred expenses as he was forced to re-
mortgage his house and lot located in Quezon City to Metrobank (Exh. "CC") and BPI Bank just to
pay its monetary obligations in the form of interest and penalties incurred in the course of the
construction of the subject project. 109

The statement that "due to defendants’ unjustified refusal to pay their outstanding obligation to
plaintiff, the same suffered losses and incurred expenses as he was forced to re-mortgage his house
and lot located in Quezon City to Metrobank (Exh. "CC") and BPI Bank just to pay its monetary
obligations in the form of interest and penalties incurred in the course of the construction of the
subject project" was only a conclusion of fact and law that did not comply with the constitutional and
statutory prescription. The statement specified no detailed expenses or losses constituting the ₱
5,716,729.00 actual damages sustained by Stern Builders in relation to the construction project or to
other pecuniary hardships. The omission of such expenses or losses directly indicated that Stern
Builders did not prove them at all, which then contravened Article 2199, Civil Code, the statutory
basis for the award of actual damages, which entitled a person to an adequate compensation only
for such pecuniary loss suffered by him as he has duly proved. As such, the actual damages allowed
by the RTC, being bereft of factual support, were speculative and whimsical. Without the clear and
distinct findings of fact and law, the award amounted only to an ipse dixit on the part of the
RTC, and did not attain finality.
110 

There was also no clear and distinct statement of the factual and legal support for the award of
moral damages in the substantial amount of ₱ 10,000,000.00. The award was thus also speculative
and whimsical. Like the actual damages, the moral damages constituted another judicial ipse dixit,
the inevitable consequence of which was to render the award of moral damages incapable of
attaining finality. In addition, the grant of moral damages in that manner contravened the law that
permitted the recovery of moral damages as the means to assuage "physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury." The contravention of the law was manifest considering that Stern
111 

Builders, as an artificial person, was incapable of experiencing pain and moral sufferings. Assuming
112 

that in granting the substantial amount of ₱ 10,000,000.00 as moral damages, the RTC might have
had in mind that dela Cruz had himself suffered mental anguish and anxiety. If that was the case,
then the RTC obviously disregarded his separate and distinct personality from that of Stern
Builders. Moreover, his moral and emotional sufferings as the President of Stern Builders were not
113 
the sufferings of Stern Builders. Lastly, the RTC violated the basic principle that moral damages
were not intended to enrich the plaintiff at the expense of the defendant, but to restore the plaintiff to
his status quo ante as much as possible. Taken together, therefore, all these considerations
exposed the substantial amount of ₱ 10,000,000.00 allowed as moral damages not only to be
factually baseless and legally indefensible, but also to be unconscionable, inequitable and
unreasonable.

Like the actual and moral damages, the ₱ 150,000.00, plus ₱ 1,500.00 per appearance, granted as
attorney’s fees were factually unwarranted and devoid of legal basis. The general rule is that a
successful litigant cannot recover attorney’s fees as part of the damages to be assessed against the
losing party because of the policy that no premium should be placed on the right to litigate. Prior to
114 

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 2208 of the Civil Code came to be recognized. Nonetheless,
115  116 

with attorney’s fees being allowed in the concept of actual damages, their amounts must be
117 

factually and legally justified in the body of the decision and not stated for the first time in the
decretal portion. Stating the amounts only in the dispositive portion of the judgment is not
118 

enough; a rendition of the factual and legal justifications for them must also be laid out in the body
119 

of the decision. 120

That the attorney’s fees granted to the private respondents did not satisfy the foregoing requirement
suffices for the Court to undo them. The grant was ineffectual for being contrary to law and public
121 

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. 122

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, the failure to comply with the constitutional requirement for a
123 

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." The 124 

other item granted by the RTC (i.e., ₱ 503,462.74) 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

ASIDE the 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 ₱
5,716,729.00, moral damages of ₱ 10,000,000.00, and attorney's fees of ₱ 150,000.00, plus ₱
1,500.00 per appearance, in favor of Stern Builders Corporation and Servillano dela Cruz.

The Court ORDERS Stem Builders Corporation and Servillano dela Cruz to redeposit the amount of
₱ 16,370,191.74 within 10 days from receipt of this decision.

Costs of suit to be paid by the private respondents.

SO ORDERED.