National Housing Authority vs. Heirs of Isidro Guivelondo

A plaintiff in an expropriation case may not dismiss or discontinue the proceedings after the order of condemnation has become final and executory, and the funds of a government-owned and controlled corporation are not exempt from garnishment to satisfy a final judgment for just compensation.

The National Housing Authority initiated expropriation proceedings against several landowners, including the Heirs of Isidro Guivelondo, to acquire land within a blighted urban center for a socialized housing project. The Heirs waived their objections to the NHA's power to expropriate, prompting the trial court to issue an order declaring the NHA's lawful right to take the property. The NHA did not appeal this order. Subsequently, commissioners were appointed to ascertain just compensation, which the trial court fixed at P11,200.00 per square meter. The NHA's challenges to the amount of just compensation were dismissed by the trial court and the appellate courts, and the partial judgment became final and executory. Only after these adverse rulings did the NHA file a motion to dismiss the expropriation case, alleging that the unconscionable value of the land rendered the housing project impossible.

• The Expropriation Filing and Order of Condemnation: On February 23, 1999, the NHA filed an Amended Complaint for eminent domain against the Heirs of Isidro Guivelondo and others to acquire land for a socialized housing project. On November 12, 1999, the Heirs waived their objections to the NHA's power to expropriate. Consequently, the trial court issued an Order declaring that the NHA had the lawful right to expropriate the Heirs' properties. The NHA did not appeal this order.
• Determination of Just Compensation and Finality of Judgment: The trial court appointed three commissioners who recommended fixing just compensation at P11,200.00 per square meter. On August 7, 2000, the trial court rendered a Partial Judgment adopting this valuation. The NHA filed two motions for reconsideration, one assailing the inclusion of certain lots and another challenging the amount of just compensation. The trial court granted the motion regarding the inclusion of lots but denied the motion regarding the valuation. The Partial Judgment, as modified, became final and executory, and an Entry of Judgment was issued on October 31, 2000. The NHA's subsequent petitions before the Court of Appeals and the Supreme Court assailing the just compensation were dismissed.
• Motion to Dismiss and Subsequent Execution: On July 16, 2001, prior to the final denial of its petition for review by the Supreme Court, the NHA filed a Motion to Dismiss the expropriation case with the trial court. The NHA alleged that the implementation of the socialized housing project was rendered impossible by the unconscionable value of the land, which intended beneficiaries could not afford. The trial court denied the motion on September 17, 2001, reasoning that the Partial Judgment had already become final and executory. The NHA's certiorari petition before the Court of Appeals challenging this denial was dismissed on July 16, 2002. Meanwhile, the trial court sheriff served a Notice of Levy and a Notice of Third Garnishment against the NHA's funds and properties to enforce the final judgment.

• Authority to Dismiss Expropriation: Petitioner argued that the State cannot be compelled or coerced by courts to continue exercising its inherent power of eminent domain when the intended public use is rendered nugatory by the unconscionable value of the land, which intended beneficiaries cannot afford.
• Exemption from Estoppel and Laches: Petitioner maintained that estoppel or laches does not apply to the government, implying that its late attempt to dismiss the proceedings should not be barred by prior delays or final judgments.
• Exemption from Execution and Garnishment: Petitioner contended that writs of execution and garnishment may not be issued against the State in an expropriation case where the exercise of the power of eminent domain will not serve a public use or purpose, invoking Supreme Court Administrative Circular No. 10-2000.

• Finality of Judgment: Respondent countered that the trial court's judgment is already final and executory, having been upheld by the Supreme Court in a prior petition, and can no longer be disturbed or set aside.
• Suability to Garnishment: Respondent argued that the funds and assets of the petitioner, as a government-owned and controlled corporation, are not exempt from levy and garnishment.
• Res Judicata of Prior Issues: Respondent maintained that the issues raised in the second petition for review had already been resolved by the Supreme Court in the first petition.

• Dismissal of Expropriation: Whether the State, as plaintiff in an expropriation case, may dismiss or discontinue the proceedings after the order of condemnation has become final and executory.
• Garnishment of Government Funds: Whether the funds and properties of the National Housing Authority, a government-owned and controlled corporation, are exempt from levy and garnishment to satisfy a final judgment for just compensation.

• Dismissal of Expropriation: The dismissal of the expropriation case was properly denied because the order of condemnation had already attained finality. Expropriation proceedings consist of two stages: first, the determination of the authority to exercise eminent domain and the propriety of its exercise for public use; and second, the determination of just compensation. The outcome of the first phase, whether an order of condemnation or dismissal, is final and appealable. Once the order of condemnation becomes final and no appeal is taken, the authority to expropriate and its public use can no longer be questioned. Under Rule 67, Section 4 of the 1997 Rules of Civil Procedure, after the rendition of an order of condemnation, the plaintiff shall not be permitted to dismiss or discontinue the proceeding except on terms the court deems just and equitable. The public purpose of socialized housing is not diminished by the amount of just compensation fixed. To allow the NHA to abandon the proceedings after the judgment became final simply because it found the compensation unacceptable would arbitrarily prejudice the respondent landowners.
• Garnishment of Government Funds: The garnishment of the NHA's funds was valid because the NHA, as a government-owned and controlled corporation, possesses a separate and distinct juridical personality from the government. While government funds are generally exempt from garnishment to prevent the paralysis of public services, this exemption does not extend to public corporations or government-owned and controlled corporations. When the government enters into commercial business through these entities, it abandons its sovereign capacity and is treated like any other corporation. Precedent has squarely ruled that the funds of the NHA's predecessor, the People's Homesite and Housing Corporation, are not exempt from garnishment.

• Two Stages of Expropriation — Expropriation proceedings consist of two distinct stages. The first is concerned with the determination of the plaintiff's authority to exercise the power of eminent domain and the propriety of its exercise for public use, ending in an order of dismissal or condemnation. The second is concerned with the determination of just compensation by the court with the assistance of commissioners. Both orders are final and appealable. Once the order of condemnation in the first stage becomes final, the authority to expropriate and the public use character of the action can no longer be questioned.
• Garnishment of Government-Owned and Controlled Corporation (GOCC) Funds — Funds of the government are generally exempt from garnishment to ensure public services are not paralyzed. However, if the funds belong to a GOCC clothed with a personality separate and distinct from the government, the funds are not exempt from garnishment. By entering into commercial business, the government abandons its sovereign capacity and is treated like any other corporation.

• "The very moment that it appears at any stage of the proceedings that the expropriation is not for a public use, the action must necessarily fail and should be dismissed, for the reason that the action cannot be maintained at all except when the expropriation is for some public use. That must be true even during the pendency of the appeal of at any other stage of the proceedings. [...] Notably, the foregoing cases refer to the dismissal of an action for eminent domain at the instance of the plaintiff during the pendency of the case. The rule is different where the case had been decided and the judgment had already become final and executory."
• "After the rendition of such an order, the plaintiff shall not be permitted to dismiss or discontinue the proceeding except on such terms as the court deems just and equitable."
• "It is arbitrary and capricious for a government agency to initiate expropriation proceedings, seize a person’s property, allow the judgment of the court to become final and executory and then refuse to pay on the ground that there are no appropriations for the property earlier taken and profitably used. We condemn in the strongest possible terms the cavalier attitude of government officials who adopt such a despotic and irresponsible stance."
• "However, if the funds belong to a public corporation or a government-owned or controlled corporation which is clothed with a personality of its own, separate and distinct from that of the government, then its funds are not exempt from garnishment. This is so because when the government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other corporation."

• City of Manila v. Ruymann, 37 Phil. 421 (1918) — Followed. Established that a plaintiff in an expropriation action may dismiss the petition during the pendency of the case if the necessity for the action no longer exists, subject to court approval and the rights of the defendant.
• Metropolitan Water District v. De Los Angeles, 55 Phil. 776 (1931) — Followed. Applied the rule that an expropriation action must be dismissed if it appears at any stage of the proceedings that the taking is not for public use, but distinguished this rule on the ground that it applies only while the case is pending, not after judgment has become final.
• Cosculluela v. Court of Appeals, G.R. No. L-77765 (1988) — Applied. Condemned the arbitrary and capricious conduct of a government agency that initiates expropriation, allows judgment to become final, and then refuses to pay, which mirrors the NHA's attempt to abandon the proceedings after failing to overturn the just compensation award.
• Philippine National Bank v. CIR, G.R. No. L-32667 (1978) — Followed. Directly ruled that the funds of the People's Homesite and Housing Corporation (the NHA's predecessor), as a government-owned entity, are not exempt from garnishment.
• Philippine Rock Industries, Inc. v. Board of Liquidators, G.R. No. 84992 (1989) — Followed. Reiterated the doctrine that funds of government-owned and controlled corporations, though public in character, are not exempt from garnishment due to their separate juridical personality.

• Rule 67, Section 4, 1997 Rules of Civil Procedure — Governs the order of expropriation. The Court relied on the last paragraph of this provision, which prohibits the plaintiff from dismissing or discontinuing the proceeding after the rendition of an order of condemnation, except on terms the court deems just and equitable. Because the NHA's order of condemnation had become final, dismissal was no longer permissible as a matter of right.

Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ.