Case Summary (G.R. No. 171182)
Key Dates
• August 30, 1990: UP–Stern Builders General Construction Agreement.
• November 28, 2001: RTC decision awarding Stern Builders P16.37 million (breakdown: P503,462.74 unpaid billing; P5.72 million actual damages; P10 million moral damages; P150,000 attorney’s fees plus P1,500 per appearance; costs).
• May 7, 2002: RTC denied UP’s motion for reconsideration.
• September 26, 2002: RTC denied due course to UP’s notice of appeal and granted execution.
• February 24, 2004: Court of Appeals dismissed UP’s certiorari petition.
• May 11, 2004: Supreme Court denied UP’s petition for review; final Nov. 12, 2004.
• August 23, 2012: Supreme Court decision reversing garnishment and deleting certain damage awards.
Applicable Law
• 1987 Constitution
– Article VI, Section 29 (“No money shall be paid out of the Treasury…except in pursuance of an appropriation law.”)
– Article XIV, Section 5(5) (state universities and colleges as government instrumentalities).
• Presidential Decree No. 1445 (Government Auditing Code of the Philippines)
– Section 26: COA’s primary jurisdiction over claims against the Government.
– Section 84: Trust funds may be used only for their specific purpose without express statutory authority.
• Republic Act No. 9500 (UP Charter of 2008)
– Declares UP a government instrumentality; its funds constitute special trust funds.
• Rules of Court
– Rule 13, Section 2: Service upon counsel of record.
– Rule 22, Section 1: Computation of appeal periods.
Factual Background
UP contracted Stern Builders for an extension and renovation project. Stern Builders submitted three progress billings; UP paid only two. The third (P273,729.47) was disallowed by COA, later lifted, but UP still did not pay. Stern Builders sued for unpaid billing and claimed actual, moral, and attorney’s fees. The RTC rendered judgment in favor of Stern Builders; UP’s attempts to appeal were deemed untimely by the RTC and CA, rendering the decision final and executory. A writ of execution issued, and garnishment notices were served on UP’s depository banks. UP challenged garnishment on the ground that public/trust funds are not subject to execution without appropriation and that COA must first audit and settle the claim.
Issues
- Whether UP’s public/trust funds could be garnished to satisfy a money judgment without congressional appropriation and outside COA settlement.
- Whether the awards of actual damages (P5.7 million), moral damages (P10 million), and attorney’s fees (P150,000 plus P1,500 per appearance) attained finality given lack of clear factual and legal findings.
- Proper reckoning of the appeal period and the validity of UP’s appeal.
Supreme Court Ruling
Garnishment of UP Funds Voided
• State instrumentality funds are public trust funds and not subject to garnishment or execution except under specific appropriation law (1987 Constitution, Art. VI, Sec. 29) and only after COA’s audit and settlement (PD 1445, Sec. 26).
• RTC and CA erred in authorizing garnishment and release orders for UP’s funds. All such orders and resulting withdrawals are void.Appeal Period and Finality
• Service of the denial of UP’s motion for reconsideration was made on the wrong counsel (UP Legal Office in Los Baños instead of Office of Legal Affairs in Diliman). Proper service occurred only May 31, 2002, so UP’s notice of appeal filed June 3, 2002 was timely.
• Even under the old rule, retroactive application of the “fresh-period” rule (Neypes v. CA, 2005) affords UP a full 15-day period to appeal, making its appeal timely.Deletion of Certain Damage Awards
• Constitutional and statutory mandates (1987 Constitution Art. VIII, Sec. 14; Rule 36, Sec. 1) require clear and distinct findings of fact and law in the body of the decision.
• RTC failed to itemize or prove the P5.7 million actual damages; award was speculative and lacked evidentiary support (Civil Code
Case Syllabus (G.R. No. 171182)
Facts and Contractual Background
- On August 30, 1990, the University of the Philippines (UP), represented by President Jose V. Abueva, entered into a General Construction Agreement with Stern Builders, Inc., represented by Servillano dela Cruz, for extension and renovation works at UPLB.
- Stern Builders submitted three progress billings; UP paid the first two but refused the third (₱273,729.47) after the Commission on Audit (COA) disallowed it.
- Despite COA’s subsequent lifting of the disallowance, UP did not pay the third billing.
Trial Court Decision (RTC, Nov. 28, 2001)
- The Regional Trial Court of Quezon City, Branch 80, rendered judgment for Stern Builders and Servillano dela Cruz, ordering UP to pay jointly and severally:
• ₱503,462.74 (third billing, extra work, retention money)
• ₱5,716,729.00 actual damages
• ₱10,000,000.00 moral damages
• ₱150,000.00 attorney’s fees plus ₱1,500.00 per appearance
• Costs of suit
Post-Judgment Proceedings and Garnishment
- UP’s motion for reconsideration denied May 7, 2002; UP filed a notice of appeal on June 3, 2002.
- Stern Builders moved for execution, contending UP’s appeal was belated.
- RTC ruled the appeal out of time (Sept. 26, 2002), issued a writ of execution (Oct. 4, 2002), and garnishment notices served on UP’s depository banks (Land Bank and DBP).
- UP’s urgent motions to quash writs and garnishment denied; multiple motions granted by Stern Builders to release garnished funds.
- RTC orders (Dec. 21, 2004; May 3, 2005) directed banks to release funds (₱16,370,191.74) to Stern Builders; RTC subsequently enjoined encashment pending appellate resolution.
Appellate History
- UP filed certiorari petition in the Court of Appeals (CA) challenging RTC’s jurisdiction to release public funds; CA issued TRO (Jan. 19, 2005).
- CA dismissed UP’s certiorari petition (Sept. 16, 2005), holding appropriations for the project already existed and UP held funds in a fiduciary capacity.
- CA denied motion f