UNIVERSITY OF THE PHILIPPINES V. HON. AGUSTIN S.

DIZON
679 SCRA 54, G.R. NO. 171182
AUGUST 23, 2012
BERSAMIN, J.

FACTS: On August 30, 1990, the University of the Philippines (UP) entered into a General Construction
Agreement with the respondent Stern Builders Corporation (Stern Builders) 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). Stern Builders submitted three progress billings
corresponding to the work accomplished but the UP only paid two billings. The third billing which was
worth ₽273,729.47 was not paid due to its disallowance by the Commission on Audit (COA). The
disallowance was lifted by the COA but the UP failed to pay the billing which prompted Stern Builders to
sue the UP to collect the unpaid billing and recover various damages.

RTC rendered its decision in favour of the plaintiffs. The UP filed a notice of appeal but was denied due
to having it been filed out of time. The RTC issued the writ of execution and a motion for
reconsideration was sought by the institution but it was denied by the Court of Appeals (CA). The UP
assailed the denial through a petition for certiorari but the CA dismissed the petition as the notice of
appeal had been filed late. Stern Builders filed in the RTC their motion of execution which was then
granted. The sheriff served notices of garnishment on the UP’s depository banks namely Land Bank of
the Philippines (Buendia Branch) and Development Bank of the Philippines (Commonwealth Branch).
The garnishment was assailed by the UP through an urgent motion to quash the notices of garnishment
and the reconsideration of the order. RTC both denied the UP’s motions; thus, granting the motion to
release the garnished funds.

The UP brought a petition for certiorari in the CA to challenge the jurisdiction of the RTC in issuing the
order. They argued 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. They stated that government funds and properties could not be seized by virtue of writs of
execution or garnishment to the effect that the funds belonging to the UP were public funds. The CA
issued a temporary restraining order (TRO) upon application by the UP. Stern Builders filed in the RTC
their amended motion to implement the release order which was again granted by the same. The UP
opposed the amended motion and sought the implementation of the release order be suspended. RTC
resolved all the pending matters, noting that the DBP had already delivered the garnished funds payable
to the order of Stern Builders. However, RTC directed in the same order that Stern Builders should not
cash out the check or withdraw its amount before the CA due to the pendency of the case.

ISSUE: Whether or not the UP’s funds were validly garnished?

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

Despite its establishment as a body corporate, the UP remains to be a chartered institution performing a
legitimate function. It is an institution for higher learning and not a corporation established for profit
and declaring any dividends. UP is a government instrumentality, performing the State’s constitutional
mandate of promoting quality and accessible education. As a government instrumentality, the UP
administers 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 Section 2 of Act 1870, as expanded in Republic Act No. 9500. All the funds going into the
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.

The UP’s funds 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 subject of the RTC’s writ of execution or
garnishment. The adverse judgement 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.