Republic vs. Hidalgo

A judgment rendered against a party in default shall not exceed the amount or be different in kind from that prayed for, nor award unliquidated damages, and government funds and properties may not be seized under writs of execution or garnishment to satisfy money judgments against the State.

In July 1975, members of the Presidential Security Group forcibly entered the 4,924.60-square meter Arlegui property of Tarcila Laperal Mendoza, compelled her household to vacate, and took her owner's duplicate copy of TCT No. 118527. A deed of sale dated July 15, 1975, supposedly executed by Mendoza and her husband in favor of the Republic, was used to cancel her title and issue TCT No. 118911 in the name of the Republic. The property, situated near the Malacañang Palace complex, eventually became the Presidential Guest House and office building of the Office of the President.

• The Fictitious Deed: Mendoza denied executing any deed of conveyance in favor of the Republic. Certifications from the Register of Deeds of Manila and the Office of the Clerk of Court, RTC Manila, confirmed that no copy of the supposed deed could be located and that the alleged notary public, Fidel Vivar, was not commissioned in Manila for the year 1975.
• The Default: After the case was remanded and re-raffled to Branch 37, Mendoza filed a Third Amended Complaint. The OSG sought multiple extensions—until June 20, 2003—to file an answer. Despite two further motions for extension filed on July 18 and August 19, 2003, no answer was ever filed. The trial court declared the Republic in default on July 7, 2003.
• The Ex Parte Evidence: Mendoza presented evidence ex parte, testifying that the deed of sale was fictitious. Three other witnesses testified solely on the appraisal and rental values of the property.
• The Staggering Award: In its August 27, 2003 decision, the trial court nullified the deed of sale and TCT No. 118911, reinstated Mendoza's TCT No. 118527, and ordered the Republic to pay ₱143,600,000.00 as just compensation, plus a staggering ₱1,480,627,688.00 representing reasonable rental, interest, and opportunity cost from July 1975 to July 2003. This totaled approximately ₱1.624 billion for a property with an assessed value of only ₱2,388,990.00.
• The Procedural Posture: The Republic filed a motion for new trial on the last day of the 15-day appeal period. Upon its denial, the Republic filed a motion for reconsideration instead of appealing. The trial court declared the motion for reconsideration pro forma, rendering the decision final and executory, denying the subsequent notice of appeal, and issuing a writ of execution.

• Deprivation of Due Process: The Republic argued that the respondent judge committed serious jurisdictional error by proceeding to hear the case and awarding a colossal amount without giving the Republic the opportunity to present its defense.
• Jurisdictional Error in Default and New Trial: The Republic maintained that the trial court gravely abused its discretion in declaring it in default and denying the motion for new trial, citing the negligence of the former handling solicitor, the meritorious nature of its defense, and the high value of the property involved.
• Prescription and Laches: The Republic argued that the trial court should have dismissed the case considering that Mendoza's claim was barred by prescription and/or laches.
• Excessive Monetary Award: The Republic assailed the monetary award for being unconscionable and baseless.
• Execution Against Government Funds: The Republic contended that the writ of execution against government funds was void due to state immunity.

• Default and Due Process: Whether the trial court committed grave abuse of discretion in declaring the Republic in default and rendering a judgment by default without the Republic's participation.
• New Trial: Whether the trial court gravely abused its discretion in denying the motion for new trial.
• Prescription and Laches: Whether the trial court's failure to dismiss the case based on prescription or laches constitutes a correctible error via certiorari.
• Excessive Award in Default: Whether the trial court acted with grave abuse of discretion in awarding monetary relief beyond what was prayed for and proved.
• Execution Against the State: Whether the writ of execution against government funds is valid.

• Default and Due Process: The default order and judgment were validly issued pursuant to Section 3, Rule 9 of the Rules of Court. The Republic's right to due process was not violated; the deprivation of the right to participate in the trial is a penalty imposed by law on a party unwilling to join issue without justification. The handling solicitors squandered the Republic's opportunity to be heard.
• New Trial: The denial of the motion for new trial was proper. The grounds cited—negligence of the former handling solicitor, meritorious defense, and property value—are not recognized under Section 1, Rule 37 of the Rules of Court. Negligence of counsel is binding on the client, and accountability extends to the top of the OSG, as all pleadings bore the signatures of the handling solicitor, the assistant solicitor, and the Solicitor General.
• Prescription and Laches: The trial court's disinclination to appreciate prescription or laches constitutes, at best, an error of judgment, not correctable by certiorari. Moreover, an action for the declaration of the inexistence of a contract does not prescribe, and a void transfer of property can be recovered by accion reivindicatoria.
• Excessive Award in Default: The trial court committed grave abuse of discretion by brazenly violating Section 3(d), Rule 9 of the Rules of Court, which limits a default judgment to what has been alleged and proved. Mendoza prayed for ₱500,000.00 a month (totaling ₱371,440,426.00 for 28 years), yet the trial court awarded ₱1.48 billion in rental, interest, and opportunity cost. The award was modified to ₱20,000.00 a month, deemed reasonable given the property's small area, its assessed value of only ₱2,388,900.00, the lack of imposing structures at the time of taking, and the restrictive entry and egress conditions during the martial law years.
• Execution Against the State: The writ of execution against government funds was nullified. Government funds and properties may not be seized under writs of execution or garnishment to satisfy judgments against the State. A judgment against the State operates merely to liquidate and establish the plaintiff's claim. The Office of the President, having beneficial possession of the property, was strongly enjoined to make appropriate budgetary arrangements to pay the amount adjudged due.

• Extent of Relief in Default Judgments — Under Section 3(d), Rule 9 of the Rules of Court, a judgment rendered against a party in default shall not exceed the amount or be different in kind from that prayed for, nor award unliquidated damages. The court acts in excess of jurisdiction if it awards an amount beyond the claim made in the complaint or beyond that proved by the evidence.
• State Immunity from Execution — Government funds and properties may not be seized under writs of execution or garnishment to satisfy money judgments against the State. A judgment against the State generally operates merely to liquidate and establish the plaintiff's claim in the absence of express statutory provision.
• Imprescriptibility of Actions to Declare Inexistence of Contracts — An action to declare the inexistence of a contract does not prescribe. A void transfer of property can be recovered by accion reivindicatoria, and the legal fiction of indefeasibility of a Torrens title cannot be used to perpetuate fraud.

• "While the ideal lies in avoiding orders of default, the policy of the law being to have every litigated case tried on its full merits, the act of the respondent judge in rendering the default judgment after an order of default was properly issued cannot be struck down as a case of grave abuse of discretion."
• "The court acts in excess of jurisdiction if it awards an amount beyond the claim made in the complaint or beyond that proved by the evidence. While a defaulted defendant may be said to be at the mercy of the trial court, the Rules of Court and certainly the imperatives of fair play see to it that any decision against him must be in accordance with law."
• "It is basic that government funds and properties may not be seized under writs of execution or garnishment to satisfy such judgments."

• Alfonso v. Pasay City, 106 Phil. 1017 (1960) — Followed. Ordered payment of just compensation in the form of interest when a registered owner lost possession of a lot to a municipality without expropriation or payment, and return of the property was no longer feasible.
• Republic v. Palacio, 23 SCRA 899 (1968) — Followed. A judgment against the State generally operates merely to liquidate and establish the plaintiff's claim and cannot be enforced by processes of law.
• Commissioner of Public Highways v. San Diego, 31 SCRA 616 (1970) — Followed. Government funds and properties may not be seized under writs of execution or garnishment to satisfy judgments against the State.

• Section 3, Rule 9, Rules of Court — Governs the declaration of default and the consequences thereof. Applied to sustain the trial court's issuance of the default order consequent to the Republic's failure to file an answer.
• Section 3(d), Rule 9, Rules of Court — Limits the extent of relief that may be awarded in a judgment by default to what is prayed for and proved. Applied to nullify the excessive monetary award granted by the trial court.
• Section 1, Rule 37, Rules of Court — Enumerates the grounds for filing a motion for new trial (fraud, accident, mistake, excusable negligence, newly discovered evidence). Applied to deny the Republic's motion for new trial, as the grounds invoked by the OSG do not fall under these recognized grounds.
• Article 1410, Civil Code — Provides that an action to declare the inexistence of a contract does not prescribe. Applied to reject the Republic's defense of prescription.
• Section 1, Rule 142, Rules of Court — Provides that costs shall not be allowed against the Republic unless otherwise provided by law. Applied to nullify the assessment of costs of suit against the petitioner.

Reynato S. Puno (CJ), Angelina Sandoval-Gutierrez, Renato C. Corona, Adolfo S. Azcuna