G.R. No. 89898-99 - Municipality of Makati vs. Court of Appeals

Case Summary (G.R. No. 89898-99)

Procedural History

The Municipality of Makati instituted eminent domain proceedings (Civil Case No. 13699) to expropriate the property registered in Arceli P. Jo’s name. The complaint included a certification that a PNB Buendia account (Account No. S/A 265-537154-3) had been opened for the case containing P417,510.00 pursuant to PD No. 42. After hearings and presentation of appraisals, the RTC rendered judgment fixing just compensation at P5,291,666.00 and directed payment less the advanced P338,160.00 previously released, rendering the net judgment. The judgment became final and executory, and the private respondent sought issuance of a writ of execution which the trial court granted.

Garnishment and Related Proceedings

Following the writ, Sheriff Pastrana served a Notice of Garnishment on PNB Buendia (January 14, 1988) but encountered a "hold code" on the municipal account. Private respondent moved to compel the bank to deliver the unpaid balance under the RTC decision. Petitioner moved to lift the garnishment, arguing the trial court erred in not ordering installment payments and later manifested that title had been transferred to PSB after an extrajudicial foreclosure sale. PSB disclosed consolidation of ownership as mortgagee/purchaser and later entered into a compromise with private respondent to divide the compensation. The RTC approved the compromise and ordered PNB Buendia to release P4,953,506.45 (the balance under the RTC decision) to PSB from the garnished account, and directed PSB and private respondent to execute conveyancing documents in favor of petitioner. The trial court denied petitioner’s motion to lift garnishment and held Antonio Bautista in contempt for failing to obey the release order.

Appeals and TRO

Petitioner and the PNB manager filed separate certiorari petitions in the Court of Appeals (CA), which dismissed them and sustained the RTC’s authority to levy on the funds in the PD No. 42 account. Petitioner sought further review in the Supreme Court and obtained a temporary restraining order against enforcement of the RTC order dated December 21, 1988 and the writ of garnishment. In the Supreme Court proceedings petitioner first admitted that Account No. S/A 265-537154-3 was opened specifically for the expropriation and posed no objection to garnishing that account’s balance (later said to be P99,743.94), but asserted that it also had a separate PNB account (S/A 263-530850-7) containing public funds (allegedly P170,098,421.72) intended for statutory municipal obligations and that such public funds could not be levied upon without a proper appropriation.

Legal Issues Presented

Whether the municipality’s bank funds beyond the PD No. 42 expropriation account (i.e., general municipal funds) are subject to garnishment and levy to satisfy a final money judgment against the municipality. 2) Whether the PD No. 42 account established for the expropriation is seizable to satisfy the judgment. 3) Appropriate remedies available to the private claimant where a municipality refuses or fails to pay a final judgment.

Legal Principles and Reasoning Applied

Eminent domain requires prompt payment of just compensation; constitutional protection (under the 1987 Constitution) demands not only correct valuation but payment within a reasonable time after taking, lest compensation cease to be "just" when the owner is deprived of the property but must wait unduly for the proceeds (citing Cosculluela and related authorities).
The established doctrine in this jurisdiction (Republic v. Palacio and subsequent cases) is that public funds, including municipal revenues intended for financing governmental activities and statutory obligations, are generally exempt from levy and execution unless a statute permits or the funds have been properly appropriated for payment of the judgment. Municipal properties necessary for public use and municipal revenues earmarked for public functions are not subject to attachment and sale to satisfy money judgments against the municipality.
Funds specifically set aside pursuant to PD No. 42 for expropriation proceedings and deposited in an account for that purpose are distinguishable from general municipal revenues and, by their purpose and the enabling decree, may be subject to the court’s execution process in furtherance of just compensation. The trial court and CA sustained that the PD No. 42 account could be levied upon for satisfaction of the judgment arising from the very expropriation proceedings that gave rise to the account.

Application of Law to the Facts

Petitioner conceded the PD No. 42 account (Account No. S/A 265-537154-3) was created for the expropriation and accepted garnishment of its remaining balance (P99,743.94). The core dispute became whether the court could validly levy against the separate municipal account (S/A 263-530850-7) containing general public funds to satisfy the larger balance (the RTC-derived net obligation of approximately P4,953,506.45). Applying the Palacio doctrine and its progeny, the Supreme Court held there was merit in petitioner’s contention that public funds intended for municipal statutory obligations could not be subjected to levy in the absence of a specific appropriation by the municipal council authorizing the disbursement to satisfy the judgment. The Court noted the municipality had possessed and used the property for three years (Makati West High School) and had more than reasonable time to make payment; nevertheless, absent evidence of appropriation by ordinance for the judgment amount, execution on general municipal funds

Case Syllabus (G.R. No. 89898-99)

Nature of the Case and Procedural Posture

Petition for review to the Supreme Court arising from expropriation proceedings initiated by petitioner Municipality of Makati against Admiral Finance Creditors Consortium, Inc., Home Building System & Realty Corporation and Arceli P. Jo, involving land and improvements at Mayapis St., San Antonio Village, Makati, registered under TCT No. S-5499.
Underlying eminent domain case filed May 20, 1986, docketed Civil Case No. 13699 in the Regional Trial Court (RTC) of Makati, Branch CXLII.
RTC rendered a decision on June 4, 1987 fixing appraised value at P5,291,666.00 and ordering petitioner to pay that amount less an advanced payment previously released to private respondent.
After the decision became final and executory, private respondent sought and obtained a writ of execution; sheriff served a Notice of Garnishment on PNB Buendia Branch (January 14, 1988).
A hold was placed on petitioner’s PNB account; private respondent moved (January 27, 1988) to have the bank deliver the unpaid balance under the RTC decision; petitioner moved to lift the garnishment arguing the RTC judge should have ordered installment payments.
Petitioner later filed a manifestation (July 20, 1988) asserting a new title in favor of Philippine Savings Bank, Inc. (PSB) and PSB disclosed acquisition by extra-judicial foreclosure sale (April 20, 1987).
PSB and private respondent entered into a compromise agreement dividing compensation; RTC judge approved the compromise and ordered PNB to release P4,953,506.45 from the garnished account (Order dated September 8, 1988).
RTC denied petitioner’s motion to lift garnishment; manager of PNB Buendia failed to comply; general manager Antonio Bautista was held in contempt and ordered arrested/detained for noncompliance (Order dated December 21, 1988).
Petitioner and PNB manager separately filed certiorari petitions with the Court of Appeals which were consolidated; Court of Appeals dismissed both petitions (Decision promulgated June 28, 1989), sustaining RTC jurisdiction over the funds and the levy.
Petitioner filed a petition for review with the Supreme Court and sought a preliminary injunction; Supreme Court issued a temporary restraining order on November 20, 1989 enjoining enforcement of the RTC order dated December 21, 1988 and the writ of garnishment.
After briefing and reply, Supreme Court resolved the matter by final resolution dated October 1, 1990.

Factual Background — Property, Expropriation, and Funds

Subject property: parcel of land and improvements at Mayapis St., San Antonio Village, Makati, registered in name of Arceli P. Jo under TCT No. S-5499.
Expropriation complaint filed May 20, 1986, with attached certification that a bank account (Account No. S/A 265-537154-3) had been opened at PNB Buendia Branch under petitioner’s name containing P417,510.00, pursuant to Pres. Decree No. 42.
RTC fixed appraised value at P5,291,666.00 (June 4, 1987), ordered petitioner to pay that amount less an earlier advanced payment of P338,160.00 released to private respondent.
PSB later had registered title as mortgagee/purchaser after an extra-judicial foreclosure sale on April 20, 1987; PSB and private respondent compromised to divide compensation due.
Petitioner later, before the Supreme Court, alleged existence of two PNB Buendia accounts:
- Account No. S/A 265-537154-3 — allegedly exclusively for the expropriation proceedings, with outstanding balance P99,743.94.
- Account No. S/A 263-530850-7 — for statutory obligations and other municipal purposes, with balance P170,098,421.72 as of July 12, 1989.

Chronology of Key Dates and Events

May 20, 1986 — Expropriation complaint filed; certification of PNB account with P417,510.00 attached.
June 4, 1987 — RTC decision fixing appraised value at P5,291,666.00; payment ordered less P338,160.00 advanced payment.
April 20, 1987 — Extra-judicial foreclosure sale (PSB consolidation as mortgagee/purchaser).
January 14, 1988 — Notice of Garnishment served by sheriff on PNB Buendia Branch; bank reported a “hold code” on petitioner’s account.
January 27, 1988 — Private respondent’s motion to order bank to deliver unpaid balance.
July 20, 1988 — Petitioner’s manifestation of PSB title registration.
September 8, 1988 — RTC order approving compromise, ordering release of P4,953,506.45 from garnished account and ordering deed of conveyance to petitioner.
December 21, 1988 — RTC order denying petitioner’s motion for reconsideration and committing PNB general manager Antonio Bautista for contempt for refusing to obey the September 8 order.
June 28, 1989 — Court of Appeals decision dismissing certiorari petitions and upholding RTC authority to levy on the funds.
November 20, 1989 — Supreme Court issues temporary restraining order enjoining enforcement of RTC order dated December 21, 1988 and the writ of garnishment.
October 1, 1990 — Supreme Court resolution ordering payment and setting aside the RTC December 21, 1988 order; TRO made permanent.

Orders and Rulings Below (RTC and Court of Appeals)

RTC (June 4, 1987): Appraised value P5,291,666.00; payment ordered less P338,160.00 advanced payment.
Writ of execution issued; sheriff garnished PNB account (January 1988).
RTC (September 8, 1988): Approved PSB-private respondent compromise; ordered PNB to release P4,953,506.45 (balance under June 4, 1987 decision) from garnished account; ordered PSB and private respondent to execute deed of conveyance to petitioner.
RTC (December 21, 1988): Denied petitioner’s motion for reconsideration; held that Republic v. Palacio doctrine did not apply because Account No. S/A 265-537154-3 was opened pursuant to Pres. Decree No. 42; declared Antonio Baut