Rallos vs. City of Cebu

A petition for indirect contempt against public officers for refusing to satisfy a final money judgment against a local government unit is dismissible for forum shopping if the petitioner has filed another action founded on the same facts and seeking the same relief; independently, execution of such a judgment cannot be compelled through contempt absent a valid appropriation ordinance and the prior filing and approval of the money claim with the Commission on Audit.

The dispute stemmed from the 1963 expropriation of two parcels of land in Barangay Sambag I, Cebu City, owned by the Heirs of Fr. Vicente Rallos. In 1997, the heirs initiated Civil Case No. CEB-20388 for just compensation. The Regional Trial Court (RTC) rendered a series of decisions eventually fixing just compensation at ₱9,500 per square meter plus 12% annual interest from 40 days after the July 24, 2001 Decision until full payment. The City of Cebu paid ₱34,905,000 in 2001 but refused to pay the remaining balance, which the heirs computed at over ₱133 million. When the heirs sought execution of the final judgment, the city resisted on the ground that no appropriation ordinance covered the payment and that the claim must first be submitted to the COA. The heirs responded by filing several indirect contempt petitions against city officials, culminating in the present original action in the Supreme Court.

• The Expropriation and Just Compensation Case: In 1963, the City of Cebu expropriated Lots 485-D and 485-E of the Banilad Estate, with a combined area of 4,654 square meters, for road construction. The Heirs of Fr. Vicente Rallos, as registered owners, filed a complaint for just compensation in 1997 (Civil Case No. CEB-20388) before the RTC of Cebu City, Branch 9. After trial, the RTC in a Decision dated July 24, 2001 ordered the City to pay ₱34,905,000 plus 12% annual interest from 40 days after the decision until full payment, plus attorney’s fees and litigation expenses. Upon reconsideration, the amount was increased to ₱9,500 per square meter (total ₱44,213,000) through a Consolidated Order dated March 21, 2002. The City’s appeal was dismissed by the Court of Appeals (CA) for failure to file a record on appeal, and the Supreme Court denied the City’s petition for review via Minute Resolution on December 5, 2007 (G.R. No. 179662), which became final on April 21, 2008.

• Execution Efforts and City’s Resistance: The Heirs moved for execution, claiming a balance of ₱46,546,920 (later escalating to over ₱133 million when interest was compounded). The City acknowledged an unpaid balance but only ₱16,893,162.08. A writ of execution issued on December 4, 2008. The RTC later interpreted the writ to apply interest on the declining balance, which the heirs challenged as an impermissible modification. In CA-G.R. SP No. 04418, the CA ruled that the final judgment required interest on the full amount, not on a declining balance, and that interest on interest was due under Article 2212 of the Civil Code. The Supreme Court affirmed via Minute Resolution dated December 6, 2010 (G.R. No. 194111), which became final on June 16, 2011. In the execution stage, the City filed multiple motions—Urgent Omnibus Motions to Quash Writ of Execution, a Supplement, and a Motion for Status Quo Order—raising a 1940 Convenio allegedly obligating the heirs’ predecessors to donate the lots. The RTC denied these motions in Orders dated October 26, 2011 and January 26, 2012, ruling the Convenio was not a supervening event. The City did not appeal those orders but instead filed a Petition for Annulment of Final Decisions/Orders with the CA (CA-G.R. SP No. 06676), which issued a temporary restraining order and later a writ of preliminary injunction halting execution. Meanwhile, the COA Regional Director, responding to a query from Mayor Rama, opined that money claims against the government must first be filed with COA and that a writ of execution against public funds was beyond the court’s power.

• Multiple Contempt Petitions: Starting October 3, 2011, Lucena B. Rallos filed a series of indirect contempt petitions before various RTC branches and one in the Supreme Court (G.R. No. 202515 against CA justices). The sixth, and the one directly relevant here, was SCA No. CEB-38292, filed on December 6, 2011 before RTC Cebu City, Branch 14, against substantially the same set of respondents (the City, Mayor Rama, and the city councilors). That petition sought imprisonment of the respondents until they complied with the final and executory Consolidated Order of March 21, 2002. The present petition (G.R. No. 202651) was filed on August 1, 2012, naming additional respondents—the lawyers from the Office of the City Attorney—but asserting the same core grievance: that the respondents willfully refused to execute the final judgment.

• Indirect Contempt Through Obstruction of Execution: Petitioner maintained that respondents committed indirect contempt by filing a Petition for Annulment of Final Decision/s and Order/s with the CA based on the Convenio—a document already presented and considered by the RTC—and by filing numerous motions before the RTC solely to prevent or delay execution of final and executory judgments in Civil Case No. CEB-20388. She argued these acts constituted willful defiance of the Supreme Court’s Minute Resolutions in G.R. Nos. 179662 and 194111.

• Forum Shopping and Litis Pendentia: Respondents argued that the petition must be dismissed because petitioner had filed five other indirect contempt proceedings involving the same parties, facts, and issues, rendering the present action barred by litis pendentia and forum shopping.
• Mootness Due to CA Injunction: Respondents contended that the injunctive writs issued by the CA in CA-G.R. SP No. 06676, which restrained execution, rendered the contempt petition moot and academic.
• Legal Justification for Resisting Execution: Respondents asserted that the remedies they invoked were pursued to protect public funds. They pointed out that: (a) the sheriff did not comply with Section 305(a) of the Local Government Code, Administrative Circular No. 10-2000, P.D. No. 1445, and COA rules; (b) under Parel v. Heirs of Simeon Prudencio, execution may be resisted where a change in situation makes it inequitable; (c) the Sangguniang Panlungsod cannot be compelled to pass an appropriation ordinance as that would intrude upon a political question; and (d) government funds cannot be garnished without a corresponding appropriation as held in City of Caloocan v. Hon. Allarde.

• Forum Shopping: Whether petitioner’s filing of multiple indirect contempt petitions, including the present action and SCA No. CEB-38292, constituted forum shopping subject to dismissal.
• Indirect Contempt: Whether respondents’ acts of opposing execution of the final money judgment amounted to indirect contempt of court.

• Forum Shopping: Forum shopping was established. A comparison of the instant petition and SCA No. CEB-38292 pending before RTC Cebu City, Branch 14, revealed identity of parties (the City, its mayor, and city councilors; the additional city attorneys here represented the same interest), identity of rights asserted and reliefs prayed for (declaration of indirect contempt for non-compliance with the March 21, 2002 Consolidated Order), and identity such that a judgment in one would constitute res judicata in the other. The three requisites of litis pendentia were thus present, making petitioner guilty of forum shopping. Consistent with the rule against forum shopping, the petition was dismissed, and the twin-dismissal penalty required also dismissing SCA No. CEB-38292.

• Indirect Contempt: Even if forum shopping were overlooked, the contempt charge would still fail on the merits. While the heirs had a final and executory judgment, its enforcement against the local government was subject to statutory conditions. No appropriation ordinance had been enacted to cover the payment, as required by Section 4(1) of P.D. No. 1445 and Section 305(a) of the Local Government Code. Government funds may not be seized by execution or garnishment without the corresponding appropriation. Furthermore, despite finality of the judicial award, the money claim had not been filed with the Commission on Audit, which retains primary jurisdiction under Section 26 of P.D. No. 1445 to examine and settle all claims against the government. The settlement of a court-adjudicated monetary claim against a government instrumentality is a sine qua non condition before payment; compliance with COA procedures is mandatory. Because respondents’ refusal was legally justified, no indirect contempt arose.

• Forum Shopping and Litis Pendentia — Forum shopping is the act of repetitively availing of multiple judicial remedies in different fora based on the same transactions and essential facts, raising substantially similar issues. It exists where litis pendentia is present or where a final judgment in one case would amount to res judicata in another. The elements of litis pendentia are: (1) identity of parties, or at least such as represent the same interests; (2) identity of rights asserted and reliefs prayed for, founded on the same facts; and (3) identity such that any judgment in the pending case would amount to res judicata in the other case. A finding of forum shopping results in summary dismissal of the pending case and, as a punitive measure, the twin dismissal of the other pending case in a lower court.

• Execution of Money Judgments Against Government Entities — The rule that the state’s immunity from suit is relaxed does not empower courts to seize government property or funds to satisfy judgments. The power of the courts ends when judgment is rendered; execution against the government cannot issue. No money shall be paid out of any public treasury except in pursuance of an appropriation law or other specific statutory authority (Section 4(1), P.D. No. 1445; Section 305(a), Local Government Code). Thus, a writ of execution or garnishment against public funds is impermissible without a corresponding appropriation ordinance.

• Primary Jurisdiction of the Commission on Audit Over Money Claims — Even after a final and executory judgment validates a monetary claim against an agency or instrumentality of the government, the claim must first be filed with the COA for examination, audit, and settlement. COA has primary jurisdiction over all debts and claims of any sort due from or owing to the government or its subdivisions. Filing with COA is a sine qua non before payment can be effected.

• “[T]he grave evil sought to be avoided by the rule against forum shopping is the rendition by two competent tribunals of two separate and contradictory decisions. To avoid any confusion, this Court adheres strictly to the rules against forum shopping, and any violation of these rules results in the dismissal of a case.”

• “Once there is a finding of forum shopping, the penalty is summary dismissal not only of the petition pending before this Court, but also of the other case that is pending in a lower court. This is so because twin dismissal is a punitive measure to those who trifle with the orderly administration of justice.”

• “Even though the rule as to immunity of a state from suit is relaxed, the power of the courts ends when the judgment is rendered. Although the liability of the state has been judicially ascertained, the state is at liberty to determine for itself whether to pay the judgment or not, and execution cannot issue on a judgment against the state.”

• “[D]espite the existence of a final and executory judgment validating the claim against an agency or instrumentality of the Government, the settlement of the said claim is still subject to the primary jurisdiction of the COA.”

• Arevalo v. Planters Development Bank, G.R. No. 193415, 18 April 2012 — Defined forum shopping and enumerated the requisites of litis pendentia; relied on as controlling in the finding of forum shopping.
• Dy v. Mandy Commodities Co., Inc., G.R. No. 171842, 22 July 2009 — Affirmed the twin-dismissal rule as the punitive consequence of forum shopping; applied in ordering dismissal of SCA No. CEB-38292.
• University of the Philippines v. Dizon, G.R. No. 171182, 23 August 2012 — Established that a final and executory judgment against a government entity does not dispense with the requirement of COA approval before payment; followed in ruling that the claim must first be filed with COA.
• City of Caloocan v. Hon. Allarde, 457 Phil. 543 (2003) — Held that government funds in official depositories may not be garnished without a corresponding appropriation; cited in support of the requirement of an appropriation ordinance.

• Presidential Decree No. 1445 (Government Auditing Code of the Philippines)
• Section 4(1) — Prohibits payment of money from any public treasury except in pursuance of an appropriation law or other statutory authority. Applied to bar execution without an appropriation ordinance.
• Section 26 — Vests the COA with jurisdiction to examine, audit, and settle all debts and claims due from or owing to the Government. Applied as basis for requiring COA approval prior to payment.
• Section 305(a), Local Government Code — Echoes the rule that no money shall be paid out of the local treasury except in pursuance of an appropriations ordinance. Applied to confirm that the city could not be compelled to pay without such ordinance.
• Rule VIII, Section 2, 2009 Revised Rules of Procedure of the COA — Prescribes the procedure for filing money claims directly with the Commission Secretary. Noted as the proper avenue for the heirs’ claim.
• Administrative Circular No. 10-2000 — Directs courts to exercise utmost caution in issuing writs of execution against government agencies and local government units, reiterating compliance with P.D. No. 1445. Mentioned as a guiding directive.
• Article 2212, New Civil Code — Provides that interest due shall earn legal interest from the time it is judicially demanded; cited by the CA and referenced in the execution dispute but not directly interpreted in this resolution.

Chief Justice Maria Lourdes P. A. Sereno (Chairperson), Associate Justice Teresita J. Leonardo-De Castro, Associate Justice Lucas P. Bersamin, and Associate Justice Jose Catral Mendoza (Acting Member).