206

SUPREME COURT REPORTS ANNOTATED

Municipality of Makati vs. Court of Appeals
*

G.R. Nos. 8989899. October 1, 1990.

MUNICIPALITY OF MAKATI, petitioner, vs. THE

HONORABLE COURT OF APPEALS, HON. SALVADOR
P. DE GUZMAN, JR., as Judge RTC of Makati, Branch
CXLII,
ADMIRAL
FINANCE
CREDITORS
CONSORTIUM, INC., and SHERIFF SILVINO R.
PASTRANA, respondents.
Civil Procedure Attachment Execution Administrative Law
Public Funds Properties of a municipality, whether real or
personal, which are necessary for public use cannot be attached
and sold at execution sale to satisfy a money judgment against the
municipality. Public funds are not subject to levy and execution.
The funds depos
_______________
*

THIRD DIVISION.

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Municipality of Makati vs. Court of Appeals

ited in the second PNB Account No. S/A 2635308507 are public
funds of the municipal government. In this jurisdiction, well
settled is the rule that public funds are not subject to levy and
execution, unless otherwise provided for by statute [Republic v.
Palacio, supra. The Commissioner of Public Highways v. San
Diego, G.R. No. L30098, February 18, 1970, 31 SCRA 616]. More

particularly, the properties of a municipality, whether real or

personal, which are necessary for public use cannot be attached
and sold at execution sale to satisfy a money judgment against
the municipality. Municipal revenues derived from taxes, licenses
and market fees, and which are intended primarily and
exclusively for the purpose of financing the governmental
activities and functions of the Municipality, are exempt from
execution [See Viuda De Tan Toco v. The Municipal Council of
Iloilo, 49 Phil. 52 (1926) The Municipality of Paoay, Ilocos Norte
v. Manaois, 86 Phil. 629 (1950) Municipality of San Miguel,
Bulacan v. Fernandez, G.R. No. 61744, June 25, 1984, 130 SCRA
56]. The foregoing rule finds application in the case at bar. Absent
a showing that the municipal council of Makati has passed an
ordinance appropriating from its public funds an amount
corresponding to the balance due under the RTC decision dated
June 4, 1987, less the sum of P99,743.94 deposited in Account No.
S/A 2655371543, no levy under execution may be validly effected
on the public funds of petitioner deposited in Account No. S/A
2635308507.
Same Mandamus Where a municipality fails without
justifiable cause to pay a final money judgment against it, the
claimant may avail of mandamus to compel the enactment and
approval of the necessary appropriation ordinance and the
corresponding disbursement of municipal funds therefor.
Nevertheless, this is not to say that private respondent and
PSB are left with no legal recourse. Where a municipality fails or
refuses, without justifiable reason, to effect payment of a final
money judgment rendered against it, the claimant may avail of
the remedy of mandamus in order to compel the enactment and
approval of the necessary appropriation ordinance, and the
corresponding disbursement of municipal funds therefor [See
Viuda De Tan Toco v. The Municipal Council of Iloilo, supra
Baldivia v. Lota, 107 Phil. 1099 (1960) Yuviengco v. Gonzales,
108 Phil. 247 (1960)].
Political Law Eminent Domain Just Compensation Just
compensation means not only the correct determination of the
amount to be paid to the owner of the land expropriated, but also
prompt payment thereof.In the case at bar, the validity of the
RTC decision dated June 4, 1987 is not disputed by petitioner. No
appeal was taken therefrom. For three years now, petitioner has
enjoyed possession and
208

208

SUPREME COURT REPORTS ANNOTATED

Municipality of Makati vs. Court of Appeals

use of the subject property notwithstanding its inexcusable failure

to comply with its legal obligation to pay just compensation.
Petitioner has benefited from its possession of the property since
the same has been the site of Makati West High School since the
school year 19861987. This Court will not condone petitioner's
blatant refusal to settle its legal obligation arising from
expropriation proceedings it had in fact initiated. It cannot be
overemphasized that, within the context of the State's inherent
power of eminent domain,. . . [j]ust compensation means not only
the correct determination of the amount to be paid to the owner of
the land but also the payment of the land within a reasonable
time from its taking. Without prompt payment, compensation
cannot be considered "just" for the property owner is made to
suffer the consequence of being immediately deprived of his land
while being made to wait for a decade or more before actually
receiving the amount necessary to cope with his loss [Cosculluela
v. The Honorable Court of Appeals, G.R. No. 77765, August 15,
1988, 164 SCRA 393,400. See also Provincial Government of
Sorsogon v. Vda. de Villaroya, G.R. No. 64037, August 27, 1987,
153 SCRA 291.] The State's power of eminent domain should be
exercised within the bounds of fair play and justice. In the case at
bar, considering that valuable property has been taken, the
compensation to be paid fixed and the municipality is in full
possession and utilizing the property for public purpose, for three
(3) years, the Court finds that the municipality has had more
than reasonable time to pay full compensation.

PETITION for review of the decision of the Court of

Appeals.
The facts are stated in the resolution of the Court.
Defante & Elegado for petitioner.
Roberto B. Lugue for private respondent Admiral
Finance Creditors' Consortium, Inc.
RESOLUTION
CORTS, J.:
The present petition for review is an offshoot of
expropriation
proceedings
initiated
by
petitioner

Municipality of Makati against private respondent Admiral

Finance Creditors Consortium, Inc., Home Building System
& Realty Corporation and one Arceli P. Jo, involving a
parcel of land and improvements thereon located at
Mayapis St., San Antonio Village, Makati and registered in
the name of Arceli P. Jo under TCT No. S
209

VOL. 190, OCTOBER 1, 1990

209

Municipality of Makati vs. Court of Appeals

5499.
It appears that the action for eminent domain was filed
on May 20,1986, docketed as Civil Case No. 13699.
Attached to petitioner's complaint was a certification that a
bank account (Account No. S/A 2655371543) had been
opened with the PNB Buendia Branch under petitioner's
name containing the sum of P417,510.00, made pursuant to
the provisions of Pres. Decree No. 42. After due hearing
where the parties presented their respective appraisal
reports regarding the value of the property, respondent
RTC judge rendered a decision on June 4, 1987, fixing the
appraised value of the property at P5,291,666.00, and
ordering petitioner to pay this amount minus the advanced
payment of P338,160.00 which was earlier released to
private respondent.
After this decision became final and executory, private
respondent moved for the issuance of a writ of execution.
This motion was granted by respondent RTC judge. After
issuance of the writ of execution, a Notice of Garnishment
dated January 14,1988 was served by respondent sheriff
Silvino R. Pastrana upon the manager of the PNB Buendia
Branch. However, respondent sheriff was informed that a
"hold code" was placed on the account of petitioner. As a
result of this, private respondent filed a motion dated
January 27, 1988 praying that an order be issued directing
the bank to deliver to respondent sheriff the amount
equivalent to the unpaid balance due under the RTC
decision dated June 4, 1987.
Petitioner filed a motion to lift the garnishment, on the
ground that the manner of payment of the expropriation
amount should be done in installments which the
respondent RTC judge failed to state in his decision.
Private respondent filed its opposition to the motion.

Pending resolution of the above motions, petitioner filed

on July 20, 1988 a "Manifestation" informing the court that
private respondent was no longer the true and lawful
owner of the subject property because a new title over the
property had been registered in the name of Philippine
Savings Bank, Inc. (PSB). Respondent RTC judge issued an
order requiring PSB to make available the documents
pertaining to its transactions over the subject property, and
the PNB Buendia Branch to reveal the amount in
petitioner's account which was garnished by respon
210

210

SUPREME COURT REPORTS ANNOTATED

Municipality of Makati vs. Court of Appeals

dent sheriff. In compliance with this order, PSB filed a

manifestation informing the court that it had consolidated
its ownership over the property as mortgagee/purchaser at
an extrajudicial foreclosure sale held on April 20, 1987.
After several conferences, PSB and private respondent
entered into a compromise agreement whereby they agreed
to divide between themselves the compensation due from
the expropriation proceedings.
Respondent trial judge subsequently issued an order
dated September 8,1988 which: (1) approved the
compromise agreement (2) ordered PNB Buendia Branch
to immediately release to PSB the sum of P4,953,506.45
which corresponds to the balance of the appraised value of
the subject property under the RTC decision dated June 4,
1987, from the garnished account of petitioner and, (3)
ordered PSB and private respondent to execute the
necessary deed of conveyance over the subject property in
favor of petitioner. Petitioner's motion to lift the
garnishment was denied.
Petitioner filed a motion for reconsideration, which was
duly opposed by private respondent. On the other hand, for
failure of the manager of the PNB Buendia Branch to
comply with the order dated September 8, 1988, private
respondent filed two succeeding motions to require the
bank manager to show cause why he should not be held in
contempt of court. During the hearings conducted for the
above motions, the general manager of the PNB Buendia
Branch, a Mr. Antonio Bautista, informed the court that he
was still waiting for proper authorization from the PNB

head office enabling him to make a disbursement for the

amount so ordered. For its part, petitioner contended that
its funds at the PNB Buendia Branch could neither be
garnished nor levied upon execution, for to do so would
result in the disbursement of public funds without the
proper appropriation required under the law, citing the
case of Republic of the Philippines v. Palacio [G.R. No. L
20322, May 29, 1968, 23 SCRA 899].
Respondent trial judge issued an order dated December
21, 1988 denying petitioner's motion for reconsideration on
the ground that the doctrine enunciated in Republic v.
Palacio did not apply to the case because petitioner's PNB
Account No. S/A 2655371543 was an account specifically
opened for the expro
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211

Municipality of Makati vs. Court of Appeals

priation proceedings of the subject property pursuant to

Pres. Decree No. 42. Respondent RTC judge likewise
declared Mr. Antonio Bautista guilty of contempt of court
for his inexcusable refusal to obey the order dated
September 8, 1988, and thus ordered his arrest and
detention until his compliance with the said order.
Petitioner and the bank manager of PNB Buendia
Branch then filed separate petitions for certiorari with the
Court of Appeals, which were eventually consolidated. In a
decision promulgated on June 28,1989, the Court of
Appeals dismissed both petitions for lack of merit,
sustained the jurisdiction of respondent RTC judge over the
funds contained in petitioner's PNB Account No. 265
5371543, and affirmed his authority to levy on such funds.
Its motion for reconsideration having been denied by the
Court of Appeals, petitioner now files the present petition
for review with prayer for preliminary injunction.
On November 20,1989, the Court resolved to issue a
temporary restraining order enjoining respondent RTC
judge, respondent sheriff, and their representatives, from
enforcing and/or carrying out the RTC order dated
December 21,1988 and the writ of garnishment issued
pursuant thereto. Private respondent then filed its
comment to the petition, while petitioner filed its reply.
Petitioner not only reiterates the arguments adduced in

its petition before the Court of Appeals, but also alleges for
the first time that it has actually two accounts with the
PNB Buendia Branch, to wit:
xxx
(1) Account No. S/A 2655371543exclusively for the
expropriation of the subject property, with an outstanding
balance of P99,743.94.
(2) Account No. S/A 2635308507for statutory obligations
and other purposes of the municipal government, with a
balance of P1 70,098,421.72, as of July 12,1989.
xxx
[Petition, pp. 67 Rollo, pp. 1112.]

Because the petitioner has belatedly alleged only in this

Court the existence of two bank accounts, it may fairly be
asked
212

212

SUPREME COURT REPORTS ANNOTATED

Municipality of Makati vs. Court of Appeals

whether the second account was opened only for the

purpose of undermining the legal basis of the assailed
orders of respondent RTC judge and the decision of the
Court of Appeals, and strengthening its reliance on the
doctrine that public funds are exempted from garnishment
or execution as enunciated in Republic v. Palacio [supra.]
At any rate, the Court will give petitioner the benefit of the
doubt, and proceed to resolve the principal issues presented
based on the factual circumstances thus alleged by
petitioner.
Admitting that its PNB Account No. S/A 2655371543
was specifically opened for expropriation proceedings it had
initiated over the subject property, petitioner poses no
objection to the garnishment or the levy under execution of
the funds deposited therein amounting to P99,743.94.
However, it is petitioner's main contention that inasmuch
as the assailed orders of respondent RTC judge involved
the net amount of P4,965,506.45, the funds garnished by
respondent sheriff in excess of P99,743.94, which are public
funds earmarked for the municipal government's other

statutory obligations, are exempted from execution without

the .proper appropriation required under the law.
There is merit in this contention. The funds deposited in
the second PNB Account No. S/A 2635308507 are public
funds of the municipal government. In this jurisdiction,
wellsettled is the rule that public funds are not subject to
levy and execution, unless otherwise provided for by
statute [Republic v. Palacio, supra. The Commissioner of
Public Highways v. San Diego, G.R. No. L30098, February
18, 1970, 31 SCRA 616]. More particularly, the properties
of a municipality, whether real or personal, which are
necessary for public use cannot be attached and sold at
execution sale to satisfy a money judgment against the
municipality. Municipal revenues derived from taxes,
licenses and market fees, and which are intended primarily
and exclusively for the purpose of financing the
governmental activities and functions of the municipality,
are exempt from execution [See Viuda De T n Toco v. The
Municipal Council of Iloilo, 49 Phil. 52 (1926) The
Municipality of Paoay, Ilocos Norte v. Manaois, 86 Phil.
629 (1950) Municipality of San Miguel, Bulacan v.
Fernandez, G.R. No. 61744, June 25, 1984, 130 SCRA 56].
The foregoing rule finds application in the case
213

VOL. 190, OCTOBER 1, 1990

213

Municipality of Makati vs. Court of Appeals

at bar. Absent a showing that the municipal council of

Makati has passed an ordinance appropriating from its
public funds an amount corresponding to the balance due
under the RTC decision dated June 4, 1987, less the sum of
P99,743.94 deposited in Account No. S/A 2655371543, no
levy under execution may be validly effected on the public
funds of petitioner deposited in Account No. S/A 263
5308507.
Nevertheless, this is not to say that private respondent
and PSB are left with no legal recourse. Where a
municipality fails or refuses, without justifiable reason, to
effect payment of a final money judgment rendered against
it, the claimant may avail of the remedy of mandamus in
order to compel the enactment and approval of the
necessary appropriation ordinance, and the corresponding
disbursement of municipal funds therefor [See Viuda De

Tan Toco v. The Municipal Council of Iloilo, supra Baldivia

v. Lota, 107 Phil. 1099 (1960) Yuviengco v. Gonzales, 108
Phil. 247 (1960)].
In the case at bar, the validity of the RTC decision dated
June 4, 1987 is not disputed by petitioner. No appeal was
taken therefrom. For three years now, petitioner has
enjoyed possession and use of the subject property
notwithstanding its inexcusable failure to comply with its
legal obligation to pay just compensation. Petitioner has
benefited from its possession of the property since the same
has been the site of Makati West High School since the
school year 19861987. This Court will not condone
petitioner's blatant refusal to settle its legal obligation
arising from expropriation proceedings it had in fact
initiated. It cannot be overemphasized that, within the
context of the State's inherent power of eminent domain,
. . . [j]ust compensation means not only the correct determination
of the amount to be paid to the owner of the land but also the
payment of the land within a reasonable time from its taking.
Without prompt payment, compensation cannot be considered
"just" for the property owner is made to suffer the consequence of
being immediately deprived of his land while being made to wait
for a decade or more before actually receiving the amount
necessary to cope with his loss [Cosculluela v. The Honorable
Court of Appeals, G.R. No. 77765, August 15, 1988,164 SCRA
393,400. See also Provincial Government of Sorsogon v. Vda. de
Villaroya, G.R. No. 64037, August 27, 1987, 153 SCRA 291].
214

214

SUPREME COURT REPORTS ANNOTATED

Municipality of Makati vs. Court of Appeals

The State's power of eminent domain should be exercised

within the bounds of fair play and justice. In the case at
bar, considering that valuable property has been taken, the
compensation to be paid fixed and the municipality is in
full possession and utilizing the property for public
purpose, for three (3) years, the Court finds that the
municipality has had more than reasonable time to pay full
compensation.
WHEREFORE, the Court Resolved to ORDER petitioner
Municipality of Makati to immediately pay Philippine
Savings Bank, Inc. and private respondent the amount of

P4,953,506.45. Petitioner is hereby required to submit to

this Court a report of its compliance with the foregoing
order within a nonextendible period of SIXTY (60) DAYS
from the date of receipt of this resolution.
The order of respondent RTC judge dated December
21,1988, which was rendered in Civil Case No. 13699, is
SET ASIDE and the temporary restraining order issued by
the Court on November 20,1989 is MADE PERMANENT.
SO ORDERED.
Fernan (C.J.), Gutierrez, Jr., Feliciano and Bidin,
JJ., concur.
Order set aside.
Note.Municipal funds in possession of provincial and
municipal treasurers are public funds exempt from
execution. (Municipality of San Miguel, Bulacan vs.
Fernandez, 130 SCRA 56.)
o0o
215