CASE BRIEF NO. 2019-0068


“Money claims against the government cannot be the subject of writs of execution absent any showing that they have been brought before the Commission on Audit, under this Court’s Administrative Circular No. 10-2000 and Commission on Audit Circular No. 2001-002.


CASE: Republic of the Philippines, represented by the Regional Executive Director, Region X, DPWH vs. Benjohn Fetalvero [G.R. No. 198008, February 04, 2019]

PONENTE: Justice Mario Victor F. Leonen

SUBJECT:
A.       CONSTITUTIONAL LAW:
          i.        Article III, Section 9 of the 1987 Constitution
          ii.       Just compensation
          iii.      State Immunity from Suit

B.       REMEDIAL LAW:
      i.        Writ of Execution / Writ of Garnishment – Money Claims against the government
          ii.       Office of the Solicitor General – power to deputize legal officers of government offices
          iii.      Procedure in raising money claim against the government
          iv.      Rule 45 of the Rules of Court
                   –        Questions of fact vs. questions of law
          v.       Judgement on compromise agreement

C.       CIVIL LAW:
          i.        Laches

FACTS:        In 1999, the Department of Public Works and Highways (DPWH), Region X took 569 square meters from Benjohn Fetalvero’s property to be used in its flood control project. Fetalvero demanded just compensation at P15,000.00 per square meter. However, despite negotiations, the parties failed to agree on the amount of just compensation.

On February 13, 2008, the Republic of the Philippines (Republic), through the Office of the Solicitor General (OSG), filed before the Regional Trial Court (RTC) a Complaintfor expropriation against Fetalvero. It prayed “for the determination and payment of the just compensation.”

Subsequently, the OSG sent a letterto Atty. Earnest Anthony L. Lorea (Atty. Lorea), the Legal Staff Chief of the DPWH, Region X deputizing the latter to assist it in the case.

The OSG filed before the trial court a Notice of Appearancedated April 10, 2008. It entered its appearance as counsel for the Republic and informed the trial court that it authorized Atty. Lorea to appear on its behalf. It emphasized that since it “retained supervision and control of the representation in the case and had to approve withdrawal of the case, non-appeal, or other actions which appear to compromise the interest of the Government, only notices of orders, resolutions, and decisions served on him will bind the Republic.”

 On June 27, 2008, the trial court issued an Orderreferring the case to the Philippine Mediation Center for mediation. A copy of which was received by the OSG.

As a result, the parties entered into a Compromise Agreement. In the said agreement, which was signed by Atty. Lorea and Fetalvero, they agreed at 9, 500.00 per square meter as just compensation.

Fetalvero filed before the trial court a motion to approve the Compromise Agreement and for the issuance of judgment, which was approved by the trial court in its Order dated October 17, 2008. On November 6, 2008, the Republic received a copy of the Order.

Fetalvero filed a Motion for the Issuance of an Order for a Writ of Garnishment for the satisfaction of the trial court’s October 17, 2008 Order.

The Republic opposed the Motion, arguing that since the Compromise Agreement was not legally binding, “it cannot be the subject of a valid writ of execution or garnishment.”

In its September 22, 2009 Order, the trial court granted Fetalvero’s Motion.

The Republic moved for reconsideration, but its Motion was denied by the trial court.

The Republic filed before the Court of Appeals (CA) a Petition for Certiorariagainst Fetalvero and the trial court judge.

 The CA rendered a Decision, denying the Petition for lack of merit. It found that the OSG received a copy of the trial court’s October 17, 2008 Order, but did not file any pleading or action to assail it. If the OSG wanted to question the Compromise Agreement’s validity, it should have raised the matter immediately, not when the Order was about to be executed.

The Republic, through the OSG, filed before the Supreme Court (this Court) a Petition for Review on Certiorari.

The Republic claims that the Compromise Agreement is void because: (1) it was not submitted to the OSG for review; and (2) the amount of just compensation was grossly disproportionate to the property’s actual market value, and its computation was not in the Compromise Agreement.


ISSUES:
A.       Whether or not the Compromise Agreement is void for not having been submitted to the OSG for review.
          a.       What is the legal basis of the power of the OSG to deputize legal officers of government offices?
B.       Whether the government is still bound by the Compromise Agreement due to laches.
C.       Whether or not the issue on whether the Compromise Agreement is void since the amount of just compensation is allegedly grossly disadvantageous to the government is proper in Rule 45 petition.
          a.       Distinguish questions of law from questions of fact.
          b.       Judgement of Compromise, explained.
D.      Whether or not government funds may be seized under a writ of execution or a writ of garnishment in satisfaction of court judgments.
          a.       What is the proper process of raising money claims against the government?
          b.       What is the remedy if the COA rejects the money claim against the government?


RULING:
A.
On the Republic’s first claim, this Court takes this opportunity to reiterate our ruling in Republic of the Philippines v. Viaje, et al., 779 Phil. 405 (2016), which clarified the role of a deputized counsel in relation to the OSG:

The power of the OSG to deputize legal officers of government departments, bureaus, agencies and offices to assist it in representing the government is well settled. The Administrative Code of 1987 explicitly states that the OSG shall have the power to “deputize legal officers of government departments, bureaus, agencies and offices to assist the Solicitor General and appear or represent the Government in cases involving their respective offices, brought before the courts and exercise supervision and control over such legal officers with respect to such cases.” But it is likewise settled that the OSG’s deputized counsel is “no more than the ‘surrogate’ of the Solicitor General in any particular proceeding” and the latter remains the principal counsel entitled to be furnished copies of all court orders, notices, and decisions. . . . The appearance of the deputized counsel did not divest the OSG of control over the case and did not make the deputized special attorney the counsel of record.

Here, the OSG, as the principal counsel, is shown in both the deputation letter addressed to Atty. Lorea and the Notice of Appearance filed before the trial court.

The deputation letter, in part, read:

“Xxx
Atty. Earnest Anthony L. Lorea, Chief, Legal Staff, Department of Public Works and Highways (DPWH), Region 10, Bulua, Cagayan de Oro City has been authorized to appear in this case and, therefore, should also be furnished notices of hearings, orders[,] resolutions, decisions, and other processes. However, as the Solicitor General retains supervision and control of the representation in this case and has to approve withdrawal of the case, non-appeal or other actions which appear to compromise the interest of the Government, only notices of orders, resolutions, and decisions served on him will bind the party represented. Xxx”

In South Pacific Sugar Corporation, et al. v. Court of Appeals, et al., 657 Phil. 563 (2011),  this Court explained that:

“[The] reservation to “approve the withdrawal of the case, the non-appeal, or other actions which appear to compromise the interest of the government” was meant to protect the interest of the government in case the deputized . . . counsel acted in any manner prejudicial to government.”

When Atty. Lorea entered into mediation, he only did so on behalf of the principal counsel, the Solicitor General. Mediation necessarily involves bargaining of the parties’ interests, and a compromise agreement is one (1) of its consequences. Under the reservation in the Notice of Appearance, Atty. Lorea must submit the resulting Compromise Agreement to the OSG for review and approval, especially since the amount Fetalvero claims is significantly larger than what he was allegedly only entitled to get. Without the Solicitor General’s positive action on the Compromise Agreement, it cannot be given any effect and cannot bind the Solicitor General’s client, the government.


B.      
Nonetheless, despite the lack of the Solicitor General’s approval, the government is still bound by the Compromise Agreement due to laches.

The OSG is assumed to have known of the Compromise Agreement since, as principal counsel, it was furnished a copy of the trial court’s Order referring the case to mediation. Even if the OSG did not know that Atty. Lorea signed a Compromise Agreement, it was later informed of it through the copy of the trial court’s Order, which approved the Compromise Agreement. Despite receipt, the OSG filed no appeal or motion to contest the Order or the Compromise Agreement’s validity.

Thus, the Solicitor General’s receipt of the Order approving the Compromise Agreement bound the Republic.


In Republic of the Philippines v. Intermediate Appellate Court, 273 Phil. 662 (1991), the government failed to oppose the petition for reconstitution. This is despite receiving copies of the petition and its annexes through the Registrar of Deeds, Director of Lands, Solicitor General, and the Provincial Fiscal, and even after judgment on the compromise agreement. This Court held:

Thereafter, when judgment was rendered based on the compromise agreement without awaiting the report and recommendation of the Land Registration Administration and the verification of the Registrar of Deeds concerned, its failure to file a motion to set aside the judgment of the court after due notice likewise proves that no interest of the government was prejudiced by such judgment.

The OSG could have contested the trial courts Orders, but it did not. There was no explanation of its inaction in any of the pleadings. By the time the Republic filed a Petition for Certiorari, estoppel by laches has already set in.

In addition, the Republic only resorted to a petition or certiorari when it failed to appeal the case within the reglementary period. In Nippon Paint Employees Union-Olalia v. Court of Appeals, 485 Phil. 675 (2004):

It is elementary in remedial law that the use of an erroneous mode of appeal is cause for dismissal of the petition for certiorari and it has been repeatedly stressed that a petition for certiorari is not a substitute for a lost appeal. This is due to the nature of a Rule 65 petition for certiorari which lies only where there is “no appeal,” and “no plain, speedy and adequate remedy in the ordinary course of law.”


C.
The Republic’s claim that the Compromise Agreement is void since the amount of just compensation is allegedly grossly disadvantageous to the government is a question of fact improper in a petition for review under Rule 45.

In DST Movers Corporation v. People’s General Insurance Corporation, 778 Phil. 235 (2016):

A Rule 45 petition pertains to questions of law and not to factual issues. Rule 45, Section 1 of the 1997 Rules of Civil Procedure is unequivocal:

SECTION 1. Filing of Petition with Supreme Court. — A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.

This court’s Decision in Cheesman v. Intermediate Appellate Court distinguished questions of law from questions of fact:

As distinguished from a question of law — which exists “when the doubt or difference arises as to what the law is on a certain state of facts” — “there is a question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts;” or when the “query necessarily invites calibration of the whole evidence considering mainly the credibility of witnesses, existence and relevancy of specific surrounding circumstances, their relation to each other and to the whole and the probabilities of the situation.”

Seeking recourse from this court through a petition for review on certiorari under Rule 45 bears significantly on the manner by which this court shall treat findings of fact and evidentiary matters. As a general rule, it becomes improper for this court to consider factual issues: the findings of fact of the trial court, as affirmed on appeal by the Court of Appeals, are conclusive on this court. “The reason behind the rule is that [this] Court is not a trier of facts and it is not its duty to review, evaluate, and weigh the probative value of the evidence adduced before the lower courts.” (Citations omitted)

Moreover, this Court held in Gadrinab v. Salamanca, et al. 736 Phil. 279 (2014):

A judgment on compromise agreement is a judgment on the merits. It has the effect of res judicata, and is immediately final and executory unless set aside because of falsity or vices of consent. The doctrine of immutability of judgments bars courts from modifying decisions that have already attained finality, even if the purpose of the modification is to correct errors of fact or law.


D.     
The general rule is that government funds cannot be seized by virtue of writs of execution or garnishment.This doctrine has been explained in Commissioner of Public Highways v. San Diego, G.R. No. L-30098, February 18, 1970:

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.

Simply put, “no money can be taken out of the treasury without an appropriation [Gonzales v. Hon. Raquiza, 259 Phil. 736 (1989)].

Here, the trial court already found that there is an appropriation intended by law for payment of road-rights-of-way. Fetalvero called the attention of the court of the existence of SAA-SR 2009-05-001538 of the DPWH Main and/or Regional Office appertaining to the fund intended for payment of the road-rights-of-way.

Even the Republic admitted in its Memorandum “the approval of allocation for payment of road right of way projects within Region 10 under SAA-SR 2009-001538.” Since there is an existing appropriation for the payment of just compensation, and it is already settled that the Republic is bound by the Compromise Agreement, Fetalvero is legally entitled to his money claim. However, he still has to go through the appropriate procedure for making a claim against the Government.

In Atty. Roxas v. Republic Real Estate Corporation, 786 Phil. 163 (2016), this Court elaborated on the proper process of raising money claims against the government. In that case, the trial court issued a writ of execution over the government funds for payment of land reclaimed by Republic Real Estate Corporation. This Court held:

“The money claim against the Republic should have been first brought before the Commission on Audit.

The Writ of Execution and Sheriff De Jesus’ Notice [of Execution] violate this Court’s Administrative Circular No. 10-2000 and Commission on Audit Circular No. 2001-002, which govern the issuance of writs of execution to satisfy money judgments against government.

Administrative Circular No. 10-2000 dated October 25, 2000 orders all judges of lower courts to observe utmost caution, prudence, and judiciousness in the issuance of writs of execution to satisfy money judgments against government agencies. This Court has emphasized that:….

. . . 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[residential] D[ecree] 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[residential] D[ecree] [No.] 1445, Sections 49-50).

For its part, COA Circular No. 2001-002 dated July 31, 2001 requires the following to observe this Court’s Administrative Circular No. 10-2000.

Chapter 4, Section 11 of Executive Order No. 292 gives the COA the power and mandate to settle all government accounts. Thus, the finding that government is liable in a suit to which it consented does not translate to enforcement of the judgment by execution.

As a rule, public funds may not be disbursed absent an appropriation of law or other specific statutory authority. Commonwealth Act No. 327, as amended by Presidential Decree No. 1445, requires that all money claims against government must first be filed before the Commission on Audit, which, in turn, must act upon them within 60 days.

Only when the Commission on Audit rejects the claim can the claimant elevate the matter to this Court on certiorari and, in effect, sue the state. 

Here, Fetalvero failed to show that he first raised his claim before the Commission on Audit. Without this necessary procedural step, Fetalvero’s money claim cannot be entertained by the courts through a writ of execution.

Additional Note:
Under Article III, Section 9 of the 1987 Constitution, “[p]rivate property shall not be taken for public use without just compensation.”.
This Court notes that for almost 20 years now, the Republic had been enjoying the use of Fetalvero’s property without paying the full amount of just compensation under the Compromise Agreement. Fetalvero had been deprived of his property for almost two (2) decades. In keeping with substantial justice, this Court imposes the payment of legal interest on the remaining just compensation due to Fetalvero. Consistent with this Court’s ruling in Nacar v. Gallery Frames, 716 Phil. 267 (2013), this Court imposes interest at the rate of twelve percent (12%) per annum from the time of taking until June 30, 2013, and six percent (6%) per annum from July 1, 2013 until fully paid.
Thus, Fetalvero’s money claim under the Compromise Agreement should be adjusted to reflect the interest rates imposed by this Court.

Related Case Briefs:
a)       Republic of the Philippines v. Viaje, et al., 779 Phil. 405 (2016)
b)       South Pacific Sugar Corporation, et al. v. CA, et al., 657 Phil. 563 (2011)
c)       Nacar v. Gallery Frames, 716 Phil. 267 (2013)
d)       Atty. Roxas v. Republic Real Estate Corporation, 786 Phil. 163 (2016)
e)       Republic of the Philippines v. Intermediate Appellate Court, 273 Phil. 662 (1991)
f)       DST Movers Corporation v. PGIC, 778 Phil. 235 (2016):
g)       Gadrinab v. Salamanca, et al. 736 Phil. 279 (2014):
————————————————-

THINGS DECIDED:

A.       The OSG’s deputized counsel is “no more than the ‘surrogate’ of the Solicitor General in any particular proceeding” and the latter remains the principal counsel entitled to be furnished copies of all court orders, notices, and decisions.

B.       Under the reservation in the Notice of Appearance, Atty. Lorea must submit the resulting Compromise Agreement to the OSG for review and approval, especially since the amount Fetalvero claims is significantly larger than what he was allegedly only entitled to get. Without the Solicitor General’s positive action on the Compromise Agreement, it cannot be given any effect and cannot bind the Solicitor General’s client, the government.

C.       Despite the lack of the Solicitor General’s approval, the government is still bound by the Compromise Agreement due to laches.

The OSG is assumed to have known of the Compromise Agreement since, as principal counsel, it was furnished a copy of the trial court’s Order referring the case to mediation. Even if the OSG did not know that Atty. Lorea signed a Compromise Agreement, it was later informed of it through the copy of the trial court’s Order, which approved the Compromise Agreement. Despite receipt, the OSG filed no appeal or motion to contest the Order or the Compromise Agreement’s validity.

D.      The Republic’s claim that the Compromise Agreement is void since the amount of just compensation is allegedly grossly disadvantageous to the government is a question of fact improper in a petition for review under Rule 45.

E.       Chapter 4, Section 11 of Executive Order No. 292 gives the COA the power and mandate to settle all government accounts. Thus, the finding that government is liable in a suit to which it consented does not translate to enforcement of the judgment by execution.

As a rule, public funds may not be disbursed absent an appropriation of law or other specific statutory authority. Commonwealth Act No. 327, as amended by Presidential Decree No. 1445, requires that all money claims against government must first be filed before the Commission on Audit, which, in turn, must act upon them within 60 days.

Only when the Commission on Audit rejects the claim can the claimant elevate the matter to this Court on certiorari and, in effect, sue the state. 

‘Stand by things decided’ ~ Stare Decisis


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