UNIVERSITY OF THE PHILIPPINES v.

DIZON
G.R. No. 171182, 23 August 2012
BERSAMIN, J.

FACTS:
In August 1990, the University of the Philippines (UP) contracted Stern Builders
Corporation (Stern Builders) to construct a building. Stern Builders submitted three
progress billings, but the UP only paid two. The third billing worth ₱ 273,729.47 was not
paid due to its disallowance by the Commission on Audit (COA). However, despite the
COA lifting the disallowance, the UP still did not pay the third billing. Consequently,
Stern Builders and its president, Servillano dela Cruz, then filed a lawsuit against the UP
to collect the unpaid amount and to recover damages.

The Regional Trial Court (RTC) ruled in favor of Stern Builders and ordered the UP to
pay the amount of the third billing, as well as the actual damage, moral damage, and
appearance as attorney’s fees and costs of suit, which amounted to more than Php
16,000,000. Taken aback, the UP appealed the decision to the Court of Appeals (CA).
However, this was opposed by Stern Builders on the grounds of its filing being belated.

The RTC issued an order garnishing UP funds in the Development Bank of the
Philippines (DBP), while the UP’s appeal was pending. The UP hastily filed a motion for
reconsideration, but the RTC denied it. The UP then filed a petition for certiorari with the
CA, challenging the RTC's jurisdiction to issue the garnishment order, but was dismissed
by the CA. With hopes to stop the execution of the RTC’s decision, the UP filed a motion
for reconsideration and an appeal to the CA but was denied.

On December 21, 2004, the RTC, through respondent Judge Agustin S. Dizon authorized
the release of the garnished funds of the UP. However, on January 6, 2005, Stern Builders
and dela Cruz moved to cite DBP in direct contempt of court for its non-compliance with
the release order.

January 10, 2005, the UP brought a petition for certiorari in the CA to challenge the
jurisdiction of the RTC in issuing the order of December 21, 2004. Granting the IP’s
petition, on January 19, 2005, the CA issued a temporary restraining order (TRO).
However, this is not the only TRO that UP has filed to stop the execution of the RTC
decision of 2004 as both parties continue to fight for their respective rights.
On January 22, 2007, UP filed an Urgent Application for A Temporary Restraining Order
and/or A Writ of Preliminary Injunction, averring that on January 3, 2007, Judge Maria
Theresa dela Torre-Yadao (who had meanwhile replaced Judge Dizon upon the latter's
appointment to the CA) had issued another order allowing Stern Builders and dela Cruz
to withdraw the deposit. It was granted by the Supreme Court on January 24, 2007, and
issued a TRO enjoining Judge Yadao and all persons acting pursuant to her authority
from enforcing her order of January 3, 2007. However, before the issuance of the TRO,
Judge Yadao had already directed the DBP to instantly release the garnished amount to
Stern Builders and dela Cruz.

ISSUES:
1. Whether or not the garnishment of UP’s funds is valid.
2. Whether or not the RTC's decision to garnish UP funds, even while the UP's
appeal was pending, was legal.
3. Whether or not the UP’s right to due process has been violated.

RULING:
1. No, the garnishment of UP’s funds is not valid. The University of the Philippines
is a government instrumentality; therefore, its funds are government funds that are
public in character. Garnishing the UP's funds would violate the constitutional
mandate that "no money shall be paid out of the Treasury except in pursuance of
an appropriation made by law."
2. Yes, the RTC's decision to garnish UP funds, even while the UP's appeal was legal.
Since the Stern Builders have won the case, they have the right to receive their
payment from the UP. However, this was caused by the CA and the RTC, which
unjustifiably ignored the legal restriction imposed on the trust funds of the
Government and its agencies and instrumentalities 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 or by the head of a
government agency in control of the funds.
3. Yes, the UP’s right to due process has been violated. Under the Constitution, no
person shall be deprived of property without due process of law. When UP filed a
motion for consideration, the RTC denied it and issued the writ of execution. It
was clear that even after constant pleadings with the RTC and CA, the UP was not
immediately given a chance to be heard, which led to the result of the initial
decision of the court.