University of the Philippines v.

Dizon

Facts:
UP, through its then President Jose V. Abueva, entered into a General Construction Agreement
with respondent Stern Builders Corporation 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.

In the course of the implementation of the contract, Stern Builders submitted three progress
billings corresponding to the work accomplished, bu UP paid only two of the billings. The third billing
worth P273,729.47 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 to sue the UP for
collection of sum of money and damages in the RTC of Quezon City.

After trial, the RTC rendered a decision in favor of Stern Builders. Stern Builders filed in the RTC
their motions for execution which the RTC granted. The sheriff then served notices of garnishment on
the UP's depository banks. The RTC then authorized the release of the garnished funds of the UP.

UP brought a petition for certiorari in the CA to challenge the jurisdiction of the RTC in
authorizing the release of the garnished funds. UP argued that government funds and properties could
not be seized by virtue of writs of execution or garnishment, citing Section 84 of Presidential Decree 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.

The CA promulgated its assailed decision dismissing UP's petition for certiorari, ruling that the
garnished funds could be the proper subject of garnishment because they had been already earmarked
for the project, with UP holding the funds only in a fiduciary capacity.

ISSUE & RULING:

Whether or not the funds of the UP were the proper subject of garnishment

NO, the funds of UP were not the proper subject of garnishment.

The Constitution strictly mandated that "no money shall be paid out of the Treasury except in
pursuance of an appropriation made by law." Thus, trust funds of the Government and its agencies and
instrumentalities are 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.

The UP is a government instrumentality, performing the State's constitutional mandate of

promoting quality and accessible education. All the funds going into the possession of the UP 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. Hence, the funds subject of this action
could not be validly made the subject of the RTC's writ of execution or garnishment. Furthermore, 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. The UP correctly submits here that the garnishment of its funds to satisfy the judgment
was not validly made if there was no special appropriation by Congress to cover the liability.

Whether or not the RTC had primary jurisdiction to adjudicate the claim against UP?

NO, because the primary jurisdiction belonged to COA.

It is a settled 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.

In addition, Section 26 of Presidential Decree No. 1445 provides that the authority and powers
of the Commission on Audit shall extend to and comprehend all matters relating to 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.

Thus, 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. 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.

Doctrines:
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.

Rules on levy of public properties:

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.