Republic of the Philippines vs. Benjohn Fetalvero

A compromise agreement approved by the trial court binds the government when the OSG, as principal counsel, receives notice of the approving order and fails to contest it, but satisfaction of the resulting money claim cannot be enforced by writ of execution or garnishment; the claim must first be filed with the Commission on Audit.

Benjohn Fetalvero owned a 2,787-square meter parcel of land in Iligan City, Lanao del Norte, covered by Transfer Certificate of Title No. T-25,233 (a.f.). The Department of Public Works and Highways, Region X, took a portion of that property for a flood control project, and the parties disagreed on the amount of just compensation, with Presidential Administrative Order No. 50, series of 1999, cited as fixing the rate at ₱2,500.00 per square meter based on the 1999 Bureau of Internal Revenue zonal valuation. The Republic, represented by the Office of the Solicitor General, was the plaintiff in the expropriation case; the OSG’s deputation of DPWH legal staff and its reservation of supervision and control over the case frame the dispute. The Commission on Audit’s primary jurisdiction over money claims against the government supplies the procedural backdrop for the enforcement issue.

Benjohn Fetalvero owned a 2,787-square meter parcel of land in Iligan City, Lanao del Norte, covered by Transfer Certificate of Title No. T-25,233 (a.f.). In 1999, the Department of Public Works and Highways, Region X, took 569 square meters from Fetalvero’s property for use in its flood control project. Fetalvero stated that the project’s construction on that portion rendered the remaining part useless, so he demanded payment for the entire area at ₱15,000.00 per square meter. Under Presidential Administrative Order No. 50, series of 1999, however, the just compensation Fetalvero was entitled to was only ₱2,500.00 per square meter, or a total of ₱1,422,500.00, plus 10% thereof, based on the Bureau of Internal Revenue zonal valuation in 1999, when the property was taken. Despite negotiations, the parties failed to agree on the amount of just compensation.

On February 13, 2008, the Republic of the Philippines, through the Office of the Solicitor General, filed before the Regional Trial Court a Complaint for expropriation against Fetalvero, praying for the determination and payment of just compensation and the entry of a judgment of condemnation of the 569-square-meter portion of his property. The case, docketed as Civil Case No. 7118, was raffled to Branch 3 under Presiding Judge Albert B. Abragan. The Office of the Solicitor General sent a letter dated April 10, 2008 to Atty. Earnest Anthony L. Lorea, the Legal Staff Chief of the Department of Public Works and Highways, Region X, deputizing him to assist the Office of the Solicitor General in Civil Case No. 7118, subject to the reservation contained in the Notice of Appearance. On April 16, 2008, the Office of the Solicitor General filed a Notice of Appearance dated April 10, 2008, entering its appearance as counsel for the Republic and authorizing Atty. Lorea to appear on its behalf, but emphasizing that it retained supervision and control of the representation and had to approve withdrawal of the case, non-appeal, or other actions which appeared to compromise the interest of the Government; only notices of orders, resolutions, and decisions served on the Office of the Solicitor General would bind the Republic.

On June 27, 2008, the trial court issued an Order referring the case to the Philippine Mediation Center for mediation. On September 1, 2008, the parties entered into a Compromise Agreement stating that the area involved was 1,428 square meters; that the price per square meter was ₱9,500.00, or a total of ₱13,566,000.00, to be paid in full by the plaintiff to the defendant not later than September 2009; that after September 2009, it would earn interest at 12% per annum until fully paid; and that expenses for documentation and transfer would be for the account of the plaintiff. The agreement was signed by Atty. Lorea for the plaintiff and by Fetalvero as defendant. Fetalvero filed a motion to approve the Compromise Agreement and for the issuance of judgment. On October 17, 2008, the trial court issued an Order approving the Compromise Agreement. On November 6, 2008, the Republic received a copy of the Order.

In a letter dated May 13, 2009, Jaime A. Pacanan, Assistant Secretary and Central Right of Way Committee Chair of the Department of Public Works and Highways, Manila, requested advice from the Office of the Solicitor General regarding the Compromise Agreement’s legality. In its letter dated June 4, 2009, the Office of the Solicitor General replied that the government cannot be bound by the Compromise Agreement since it was not submitted to its office for review, which was a condition under the deputation letter and the Notice of Appearance; that it was improper for the Department of Public Works and Highways to directly submit the Compromise Agreement to the trial court for judgment; and that the Compromise Agreement failed to state how it arrived at the just compensation of ₱9,500.00 per square meter.

On July 20, 2009, Fetalvero filed a Motion for the Issuance of an Order for a Writ of Garnishment for the satisfaction of the trial court’s October 17, 2008 Order. He alleged that Sheriff Sandor B. Bantuas served a Writ of Execution on Atty. Lorea on June 2, 2009 and June 24, 2009, and that Atty. Lorea ignored it and refused to comply with and satisfy the trial court’s judgment. The Republic opposed the Motion, arguing that since the Compromise Agreement was not legally binding, it cannot be the subject of a valid writ of execution or garnishment, and that government funds and properties in official depositaries cannot be garnished or levied.

The trial court found that the Office of the Solicitor General had been furnished a copy of the October 17, 2008 Order approving the Compromise Agreement and, despite the lapse of almost a year, never questioned its validity; it also found that funds had already been appropriated under SAA-SR 2009-05-001538 of the Department of Public Works and Highways for payment of road-rights-of-way. The Court of Appeals likewise found that the Office of the Solicitor General received a copy of the October 17, 2008 Order but did not file any pleading or action to assail it.

• Technical Dismissal and Public Funds: Petitioner asserted that the Court of Appeals erred in dismissing its Petition on a purely technical ground and should have resolved the case on the merits because it involves a substantial amount of public funds.
• Validity of Compromise Agreement — OSG Review: Petitioner argued that the Compromise Agreement is void because it was entered into contrary to the reservation in the deputation letter and the Notice of Appearance; it was directly submitted to the trial court without the Office of the Solicitor General’s prior review and approval.
• Grossly Disadvantageous Just Compensation: Petitioner averred that the just compensation is grossly disadvantageous to the government; the actual market value of properties in Mahayahay, Iligan City was ₱500.00 to ₱1,000.00 per square meter in 2003, while the compromise fixed ₱9,500.00 per square meter for property expropriated in 1999, and the agreement did not indicate how the amount was reached.
• Execution/Garnishment of Government Funds: Petitioner contended that despite the approval of the allocation under SAA-SR 2009-05-001538 and the partial payment of just compensation, it can still question the Compromise Agreement’s validity; assuming respondent proves he has a claim, he cannot seize government funds by writ of execution or garnishment and must first file before the Commission on Audit under Commonwealth Act No. 327, as amended by Section 26 of Presidential Decree No. 1445.

• Finality of Compromise Judgment: Respondent noted that the Compromise Agreement had been approved by the trial court on October 17, 2008 and had already attained finality by the time petitioner questioned its validity in June 2009.
• Failure to Avail Remedies: Respondent pointed out that petitioner did not file an appeal, a motion for new trial, a petition for relief, or a petition to annul the trial court Orders, but instead filed a petition for certiorari to indirectly annul the judgments.
• No Grave Abuse of Discretion: Respondent added that the Court of Appeals correctly denied the Petition for Certiorari because petitioner failed to show that Judge Abragan committed grave abuse of discretion; the issuance of the garnishment orders was proper and imperative since the compromise judgment had long become final and executory and may be enforced by a writ of execution.
• Partial Payment: Respondent stated that he was issued a Release of Funds to Cover Payment of Right-of-Way Claims for Region X under SARO No. BMB-A-10-0018567 on September 23, 2010 in the amount of ₱898,266.30, and a Disbursement Voucher in the same amount as partial payment or satisfaction of the court order in Civil Case No. 7118 on November 22, 2010.

• Validity of Compromise Agreement — OSG Review: Whether the Compromise Agreement is void for not having been submitted to the Office of the Solicitor General for review.
• Validity of Compromise Agreement — Just Compensation: Whether the Compromise Agreement is void because the amount of just compensation is allegedly grossly disadvantageous to the government.
• Execution/Garnishment of Government Funds: Whether government funds may be seized under a writ of execution or a writ of garnishment in satisfaction of court judgments.

• Validity of Compromise Agreement — OSG Review: No, not void in effect. Although the Compromise Agreement was not submitted to the OSG for review as required by the deputation letter and Notice of Appearance, the government is still bound by it due to laches because the OSG received the October 17, 2008 Order and failed to contest it.
• Validity of Compromise Agreement — Just Compensation: No. The claim that just compensation is grossly disadvantageous raises a question of fact improper in a Rule 45 petition; the compromise judgment is a judgment on the merits, res judicata, and immediately final and executory unless set aside for falsity or vices of consent.
• Execution/Garnishment of Government Funds: No. Government funds cannot be seized by writ of execution or garnishment; the money claim must first be filed with the Commission on Audit under Administrative Circular No. 10-2000 and Commission on Audit Circular No. 2001-002, even if there is an existing appropriation.

• Validity of Compromise Agreement — OSG Review: The OSG may deputize legal officers to assist it, but the deputized counsel is no more than a surrogate; the OSG remains principal counsel entitled to service of all court orders, notices, and decisions. The deputation letter and Notice of Appearance both reserved to the OSG supervision and control and required its approval of actions compromising government interest. Atty. Lorea entered mediation on behalf of the principal counsel, and the resulting Compromise Agreement had to be submitted to the Solicitor General for review and approval, especially because the amount claimed was significantly larger than what respondent was allegedly entitled to. Without the Solicitor General’s approval, the agreement could not bind the government. Nevertheless, the government is bound by laches. The OSG was furnished the June 27, 2008 Order referring the case to mediation and later received the October 17, 2008 Order approving the Compromise Agreement on November 6, 2008; it filed no appeal or motion to contest the Order or the agreement’s validity. Under the deputation letter and Notice of Appearance, only notices served on the OSG bind the government, and service on the OSG is the proper basis for computing the reglementary period and determining finality. The OSG’s unexplained inaction allowed estoppel by laches to set in. Petitioner also resorted to certiorari only after failing to appeal within the reglementary period, and certiorari is not a substitute for a lost appeal.
• Validity of Compromise Agreement — Just Compensation: A Rule 45 petition raises only questions of law, not factual issues. Whether the just compensation was grossly disadvantageous requires calibration of evidence and factual determination, which is improper in this petition. The findings of fact of the trial court, affirmed by the Court of Appeals, are conclusive on the Supreme Court. A judgment on a compromise agreement is a judgment on the merits, has the effect of res judicata, and is immediately final and executory unless set aside because of falsity or vices of consent. The doctrine of immutability of judgments bars modification of decisions that have attained finality even to correct errors of fact or law.
• Execution/Garnishment of Government Funds: The general rule is that government funds cannot be seized by writs of execution or garnishment. This rests on public policy: disbursements of public funds must be covered by corresponding appropriation, and public services cannot be paralyzed by diversion of funds from their legitimate objects. No money can be taken out of the treasury without appropriation. Here, the trial court found and petitioner admitted an appropriation for payment of road-rights-of-way under SAA-SR 2009-05-001538. Since the government is bound by the Compromise Agreement and there is an existing appropriation, respondent is legally entitled to his money claim. However, he must still follow the procedure for claims against the government. Under Atty. Roxas vs. Republic Real Estate Corporation, money claims against the Republic must first be brought before the Commission on Audit; writs of execution violate Administrative Circular No. 10-2000 and Commission on Audit Circular No. 2001-002. Commonwealth Act No. 327, as amended by Presidential Decree No. 1445, requires all money claims against the government to be filed with the COA, which must act within 60 days; only rejection allows elevation to the Supreme Court on certiorari. Executive Order No. 292, Chapter 4, Section 11 gives COA power to settle all government accounts. Respondent failed to show he first raised his claim before the COA, so the money claim cannot be entertained through a writ of execution. Finally, under Article III, Section 9 of the 1987 Constitution, private property shall not be taken for public use without just compensation. Because petitioner had enjoyed the use of respondent’s property for almost 20 years without paying the full just compensation, the remaining just compensation is subject to 12% interest per annum from the time of taking until June 30, 2013, and 6% per annum from July 1, 2013 until fully paid, consistent with Nacar vs. Gallery Frames; the claim should be adjusted accordingly and filed before the COA.

• State Immunity from Execution / Money Claims Against the Government — Under the general rule, government funds and properties may not be seized under writs of execution or garnishment to satisfy money judgments. The State’s consent to be sued does not include consent to execution; disbursement of public funds requires appropriation, and public services cannot be disrupted. All money claims against the government must first be filed with the Commission on Audit under Administrative Circular No. 10-2000 and Commission on Audit Circular No. 2001-002; the COA must act within 60 days, and only its rejection allows the claimant to elevate the matter to the Supreme Court on certiorari. Applied: the writ of garnishment was reversed; respondent must file an adjusted money claim before the COA.
• OSG as Principal Counsel; Deputized Counsel as Surrogate — The OSG may deputize legal officers of government agencies to assist it, but the deputized counsel is merely a surrogate; the OSG remains principal counsel, retains supervision and control, and must approve actions compromising government interest. Only notices of orders, resolutions, and decisions served on the OSG bind the government; service on the OSG is the proper basis for computing reglementary periods and finality. Applied: Atty. Lorea’s compromise agreement required OSG review and approval to bind the government.
• Estoppel by Laches Against the Government — Although the government is generally not bound by a compromise agreement lacking OSG approval, it may be bound by laches when the OSG, as principal counsel, receives notice of the order approving the compromise and fails, without explanation, to contest it within the available remedies. Applied: the OSG received the October 17, 2008 Order on November 6, 2008 but filed no appeal or motion; laches set in.
• Judgment on Compromise Agreement; Res Judicata and Immutability — A judgment on a compromise agreement is a judgment on the merits, has the effect of res judicata, and is immediately final and executory unless set aside because of falsity or vices of consent. The doctrine of immutability bars courts from modifying final judgments even to correct errors of fact or law. Applied: petitioner’s factual attack on the just compensation was barred.
• Questions of Law vs. Questions of Fact in Rule 45 — A petition for review on certiorari under Rule 45 shall raise only questions of law. A question of fact exists when the doubt arises as to the truth or falsehood of alleged facts or requires calibration of evidence. Findings of fact of the trial court, affirmed by the Court of Appeals, are conclusive on the Supreme Court. Applied: the claim that just compensation was grossly disadvantageous was a factual issue not entertainable.
• Certiorari Not a Substitute for Lost Appeal — A special civil action for certiorari under Rule 65 lies only when there is no appeal or plain, speedy, and adequate remedy in the ordinary course of law; it cannot be used as a substitute for a lost appeal. Applied: petitioner’s certiorari challenge after failing to appeal was improper.
• Just Compensation and Legal Interest — Article III, Section 9 of the 1987 Constitution requires just compensation for private property taken for public use. Where payment is delayed for almost 20 years, legal interest may be imposed on the remaining just compensation. Applied: 12% per annum from taking until June 30, 2013, and 6% per annum from July 1, 2013 until allowance by the COA.

• "Money claims against the government cannot be the subject of writs of execution absent any showing that they have been brought before the Commission on Audit, under this Court's Administrative Circular No. 10- 2000 and Commission on Audit Circular No. 2001-002." — States the core rule barring execution against government funds without prior COA proceedings.
• "Nonetheless, despite the lack of the Solicitor General's approval, this Court holds that the government is still bound by the Compromise Agreement due to laches." — States the decisive holding that the government was bound by the compromise notwithstanding the OSG approval defect.
• "The general rule is that government funds cannot be seized by virtue of writs of execution or garnishment." — Formulates the general rule on immunity of government funds from execution and garnishment.
• "A judgment on compromise agreement is a judgment on the merits. It has the effect of res judicata, and is immediately final and executory unless set aside because of falsity or vices of consent." — Defines the finality and res judicata effect of a compromise judgment, supporting the rejection of the factual challenge to just compensation.

• Republic of the Philippines vs. Viaje, et al., 779 Phil. 405 (2016) — Clarified that a deputized counsel is only a surrogate of the OSG; the OSG remains principal counsel and service on it determines finality and reglementary periods. Followed.
• South Pacific Sugar Corporation, et al. vs. Court of Appeals, et al., 657 Phil. 563 (2011) — Explained that the reservation to approve actions compromising government interest protects the government; cited to support the OSG approval requirement.
• Republic of the Philippines vs. Intermediate Appellate Court, 273 Phil. 662 (1991) — Held that the government’s failure to file a motion to set aside a compromise judgment after due notice indicated no government interest was prejudiced; cited to support laches.
• Nippon Paint Employees Union-Olalia vs. Court of Appeals, 485 Phil. 675 (2004) — Held that certiorari is not a substitute for a lost appeal; cited to reject petitioner’s certiorari after failure to appeal.
• DST Movers Corporation vs. Peoples General Insurance Corporation, 778 Phil. 235 (2016) — Held that a Rule 45 petition raises only questions of law; cited to reject the factual just-compensation issue.
• Gadrinab vs. Salamanca, et al., 736 Phil. 279 (2014) — Held that a judgment on compromise is on the merits, res judicata, and immediately final and executory unless set aside for falsity or vices of consent; followed.
• Commissioner of Public Highways vs. San Diego, G.R. No. L-30098, February 18, 1970, 31 SCRA 616 — Held that government funds and properties may not be seized under writs of execution or garnishment; controlling precedent.
• Gonzales vs. Hon. Raquiza, 259 Phil. 736 (1989) — Held that no money can be taken out of the treasury without appropriation; cited.
• Atty. Roxas vs. Republic Real Estate Corporation, 786 Phil. 163 (2016) — Held that money claims against the Republic must first be brought before the COA and that writs of execution violate Administrative Circular No. 10-2000 and Commission on Audit Circular No. 2001-002; controlling precedent.
• Nacar vs. Gallery Frames, 716 Phil. 267 (2013) — Cited for the interest rates imposed on the remaining just compensation.
• Land Bank of the Philippines vs. Manzano, et al., G.R. No. 188243, January 24, 2018 — Cited for Article III, Section 9 and the interest rates.

• Article III, Section 9, 1987 Constitution — Provides that private property shall not be taken for public use without just compensation. Applied to impose legal interest on the remaining just compensation because respondent had been deprived of his property for almost 20 years.
• Administrative Circular No. 10-2000 — Orders judges of lower courts to observe utmost caution, prudence, and judiciousness in issuing writs of execution to satisfy money judgments against government agencies and local government units. Applied to bar the garnishment.
• Commission on Audit Circular No. 2001-002 — Requires concerned officials to observe Administrative Circular No. 10-2000. Applied together with Administrative Circular No. 10-2000.
• Commonwealth Act No. 327, as amended by Section 26 of Presidential Decree No. 1445 — Requires all money claims against the government to be filed before the Commission on Audit, which must act within 60 days; only rejection allows elevation to the Supreme Court on certiorari. Applied to require respondent to file his adjusted claim before the COA.
• Presidential Decree No. 1445, Sections 49-50 — Govern the filing and resolution of money claims against the government and the remedy after rejection. Applied in the same manner.
• Executive Order No. 292, Chapter 4, Section 11 — Gives the Commission on Audit the power and mandate to settle all government accounts. Applied to affirm COA jurisdiction.
• Rule 45, Section 1, 1997 Rules of Civil Procedure — Provides that a petition for review on certiorari shall raise only questions of law. Applied to reject petitioner’s factual challenge to just compensation.
• Presidential Administrative Order No. 50, series of 1999 — Cited as the basis for the just compensation rate of ₱2,500.00 per square meter plus 10%, using the 1999 Bureau of Internal Revenue zonal valuation. Applied in the background of the compensation dispute.
• Section 35(7), Executive Order No. 292 and Section 11(e), Presidential Decree No. 1275 — Cited in the deputation letter as authority for deputizing Atty. Lorea to assist the Solicitor General. Applied to the OSG deputation issue.

Peralta (Chairperson), A. Reyes, Jr., Hernando, and Carandang, JJ., concur. Carandang was designated as an additional Member per Special Order No. 2624 dated November 28, 2018.