Yujuico vs. Atienza

Relief from judgment under Rule 38 cannot be granted for a law office’s failure to forward a court order to the handling lawyer, and mandamus lies to compel the City School Board to pass the appropriation resolution and disburse funds for a final expropriation judgment because the board is not a separate legal personality from the city and its duty to provide the funds specified by ordinance is ministerial.

Petitioner Teresita M. Yujuico owned parcels of land in Manila that the City of Manila identified as a site for the Francisco Benitez Elementary School. The City Council of Manila enacted an ordinance authorizing acquisition by negotiation or expropriation and directing that the cost be defrayed from the City’s Special Education Fund. Under the Local Government Code of 1991, the City School Board is composed of the city mayor and city superintendent as co-chairmen, along with other city officials and representatives, and its members serve without compensation or remuneration.

On 8 December 1995, the City Council of Manila enacted an ordinance authorizing the City Mayor to acquire by negotiation or expropriation certain parcels of land for use as a site for the Francisco Benitez Elementary School. The chosen property, located along Solis Street near Juan Luna Street in the Second District of Manila and containing approximately 3,979.10 square meters, was covered by Transfer Certificates of Title Nos. 71541, 71548, 24423, 71544, and 71546, all in the name of Teresita M. Yujuico. The ordinance provided that an amount not exceeding the prevailing fair market value would be allocated from the City’s Special Education Fund to defray the acquisition cost. After negotiation failed, the City filed an eminent domain case against Yujuico on 22 August 1996; it was raffled to Branch 15 of the RTC of Manila and docketed as Civil Case No. 96-79699. On 30 June 2000, the RTC rendered judgment in the City’s favor, declaring the lots and improvements expropriated for public use, fixing the fair market value at ₱18,164.80 per square meter and the improvements at ₱978,000.00, and ordering payment of the balance of ₱67,894,266.00 with 6% interest per annum from 15 July 1997 until full payment. The judgment became final and executory because neither party appealed.

On 6 April 2001, Yujuico moved for execution, which the trial court granted. Under a Writ of Execution dated 28 June 2001, the branch sheriff served a Notice of Garnishment on City funds deposited with the Land Bank of the Philippines, YMCA Branch, Manila, to satisfy the judgment. The City moved to quash the notice, invoking jurisprudence that public funds cannot be garnished. During the hearing, the City’s counsel manifested that ₱36,403,170.00 had been appropriated by the City School Board under CSB Resolutions Nos. 613 and 623, of which ₱31,039,881.00 was available for release, and that ₱5,363,269.00 had been deposited at the start of the expropriation and received by Yujuico. In an Order dated 2 August 2001, the trial court quashed the Notice of Garnishment, directed the Land Bank to release ₱31,039,881.00 to Yujuico as partial payment, and—upon the City counsel’s manifestation that the CSB had authority to pass the resolution allocating funds for full satisfaction of the just compensation—gave the CSB thirty days from receipt of the Order to pass the necessary resolution for the remaining balance.

A copy of the 2 August 2001 Order was served on the CSB on 3 August 2001. When the thirty-day period lapsed without a resolution, Yujuico sent a letter to the Superintendent of City Schools, filed a manifestation on 30 August 2001 asking whether a resolution had been passed, and sent a letter to the CSB dated 10 September 2001 demanding compliance. No action followed. On 1 February 2002, Yujuico filed a petition for contempt against the officers and members of the CSB, docketed as Civil Case No. 02-102837. Respondents moved to dismiss, claiming they had not disregarded the Order because the matter had been calendared and deliberated upon in CSB meetings; in their Omnibus Reply, they argued that Yujuico should have filed a petition for mandamus to compel the CSB to pass the resolution, and that the Order was merely in furtherance of the Writ of Execution. The trial court denied the contempt petition on 17 May 2002.

On 6 June 2002, Yujuico filed a Petition for Mandamus against the CSB members, seeking to compel them to pass a resolution appropriating the amount necessary to pay the balance of the just compensation. The petition was docketed as Spl. Civil Action No. 02-103748 and raffled to Branch 51 of the RTC of Manila; upon motion, Branch 51 ordered its consolidation with the expropriation case before Branch 15. In a Decision dated 9 October 2002, Branch 15 granted the mandamus petition and ordered respondents to immediately pass a resolution appropriating the necessary amount and the corresponding disbursement for full and complete payment of the remaining balance. The trial court reasoned that the case was on all fours with Municipality of Makati vs. Court of Appeals, that the State’s power of eminent domain must be exercised within fair play and justice, and that the final and executory judgment established a legal right in Yujuico and an imperative duty on respondents. Respondents’ motion for reconsideration was denied on 13 December 2002; no appeal was taken, and the Decision became final and executory on 2 January 2003, with an Entry of Judgment issued on 15 January 2003. The trial court granted Yujuico’s Motion for Execution on 12 March 2003.

On 14 March 2003, respondents filed a Petition for Relief from Judgment with a prayer for a temporary restraining order and writ of preliminary injunction, invoking excusable negligence for their failure to seasonably appeal. They alleged that Ronald Silva, an employee of the Office of the City Legal Officer, received the Order denying their motion for reconsideration on 17 December 2002 because the designated employee was out on official business; that the employees were busy preparing for the office Christmas party; that Silva forgot the Order and remembered it only when the entry of judgment was received on 29 January 2003; and that by then the Order had been misplaced. The trial court denied the TRO but granted the Petition for Relief from Judgment in an Order dated 25 June 2004, thereby giving due course to respondents’ appeal despite the finality of the mandamus Decision. Yujuico elevated the matter to the Supreme Court.

• Reversal of the Relief Order: Petitioner asked that the 25 June 2004 Order giving due course to respondents’ appeal be reversed and set aside on a pure question of law.
• Grave Abuse of Discretion: Petitioner’s petition alleged reversible error, which the Court treated as contextual averments of grave abuse of discretion on the part of the court a quo.
• Mandamus as the Proper Remedy: Petitioner sought to compel respondents to pass a resolution appropriating the amount necessary to pay the balance of the just compensation awarded in the expropriation case, after respondents themselves had argued in the contempt case that mandamus was the proper remedy.

• Interlocutory Order: Respondents argued that the order granting the petition for relief from judgment is interlocutory and cannot be the subject of an appeal.
• Hierarchy of Courts: Respondents maintained that petitioner failed to respect the rule on hierarchy of courts because the Supreme Court’s original certiorari jurisdiction is concurrent with the RTC and Court of Appeals.
• Failure to Implead New CSB Members: Respondents argued that because five new members composed the CSB, any decision requiring the CSB to act as a body would be legally impossible; the former members could no longer be compelled, and the new members had not been impleaded, so jurisdiction over them was not acquired.
• Verification Defects: Respondents claimed that the petition failed to comply with Section 4, Rule 7 and Section 4, Rule 45 of the 1997 Rules of Civil Procedure, as amended, because it lacked a verified statement of material dates and the verification did not state that petitioner had read the petition and that the copies were based on authentic records; these defects allegedly rendered the petition without legal effect.
• Excusable Negligence: Respondents asserted that they were prevented from seasonably filing a notice of appeal by excusable negligence: Ronald Silva of the OCLO failed to forward the Order denying their motion for reconsideration to the handling lawyers.
• Separate Personality: Respondents defended on the ground that the CSB has a personality separate and distinct from the City and should not be made to pay the City’s obligations.
• Discretionary Function: Respondents argued that the members of the CSB cannot be directed to decide a discretionary function in the specific manner the court desired.
• Proper Remedy: In the contempt case, respondents argued that petitioner should have filed a petition for mandamus to force the CSB to pass the necessary resolution, and that the Order was a mere order in furtherance of the Writ of Execution, not a writ of mandamus; petitioner allegedly took that route to escape docket fees.

• Procedural Treatment of the Petition: Whether the order granting relief from judgment, being interlocutory, may be appealed; and whether the petition may be treated as a special civil action for certiorari under Rule 65.
• Hierarchy of Courts: Whether the rule on hierarchy of courts should be relaxed under the circumstances.
• Substitution of Parties: Whether the failure to implead the new CSB members bars the action and whether substitution is proper.
• Verification: Whether defects in the verification and material-date statement warrant dismissal of the petition.
• Excusable Negligence: Whether the OCLO employee’s failure to forward the Order denying the motion for reconsideration to the handling lawyers constitutes excusable negligence under Rule 38.
• Good and Substantial Defense / Separate Personality: Whether the CSB has a personality separate and distinct from the City, such that it cannot be compelled to pay the City’s obligation.
• Mandamus and Discretionary Function: Whether mandamus lies to compel the CSB to pass a resolution appropriating and disbursing funds for the balance of the just compensation.

• Procedural Treatment of the Petition: No, the order granting relief from judgment is interlocutory and cannot be appealed; however, the petition was treated as a special civil action for certiorari under Rule 65 because it alleged grave abuse of discretion and was filed within the reglementary period.
• Hierarchy of Courts: Yes, the rule was relaxed. Exceptional circumstances existed because the judgment had long attained finality, the property had been used as a school site for five years, and just compensation remained unpaid.
• Substitution of Parties: No, the failure to implead the new members did not bar the action. Substitution was ordered under Section 17, Rule 3, and technical rules were liberally construed.
• Verification: No, the defects did not justify dismissal. Verification is a formal requirement, and there was sufficient compliance.
• Excusable Negligence: No. The failure of counsel’s clerk to forward the order to the handling lawyer is not a pardonable oversight; the clerk’s negligence binds counsel and the client.
• Good and Substantial Defense / Separate Personality: No. The CSB is not a separate legal personality from the City, and respondents were estopped by their counsel’s manifestations that the CSB had authority to appropriate the funds.
• Mandamus and Discretionary Function: Yes. Mandamus lies to compel the enactment of the appropriation ordinance and disbursement for a final money judgment against an LGU; once the ordinance specified the SEF as the source, the CSB’s duty became ministerial.

• Procedural Treatment of the Petition: Rule 45 was not the proper mode because the order granting relief from judgment is interlocutory and cannot be appealed. However, the Court may treat a petition erroneously captioned as a petition for review on certiorari as a special civil action for certiorari in the interest of justice, as held in Salinas vs. NLRC, especially since it was filed within the reglementary period. The allegations of reversible error were treated as averments of grave abuse of discretion, and the RTC Presiding Judge was impleaded as party-respondent.
• Hierarchy of Courts: The rule is not an iron-clad dictum and may be relaxed for exceptional and compelling circumstances. Here, the judgment sought to be satisfied had long attained finality, the expropriated property had been used as a school site for five years, and the awarded just compensation had not been fully paid. These circumstances warranted relaxation to serve substantial justice.
• Substitution of Parties: The Court’s 8 August 2005 Resolution ordered substitution of original respondents by new CSB members. Section 17, Rule 3’s phrase “or such time as may be granted by the Court” allows a longer period for substitution. Technical rules on substitution should not be narrowly construed to prevent decision on the merits. Petitioner attempted to implead the new members by making the CSB a respondent before the Supreme Court, and there was no showing that the new members deviated from their predecessors’ stand.
• Verification: The purpose of verification is to assure that allegations are made in good faith, true and correct, not speculative. It is a condition affecting the form of pleadings, and noncompliance does not necessarily render the petition fatally defective. Perusal showed sufficient compliance, and the alleged defects were not material enough to justify dismissal.
• Excusable Negligence: Rule 38 requires (1) fraud, accident, mistake, or excusable negligence preventing appeal, and (2) a good and substantial cause of action or defense. Relief from judgment is premised on equity and allowed only in exceptional cases. Respondents’ excuse was that Ronald Silva, an OCLO employee, received the Order denying their motion for reconsideration on 17 December 2002, forgot it because employees were busy preparing for the Christmas party, and misplaced it. The Court held this was not excusable negligence. The inability to perfect an appeal because a counsel’s clerk failed to notify the handling lawyer is not a pardonable oversight; the clerks’ faults are attributable to the handling lawyers. The OCLO is akin to a law firm. Thus, the trial court committed grave abuse of discretion in granting relief.
• Good and Substantial Defense / Separate Personality: Even assuming excusable negligence, the second requisite was absent. Respondents’ defense was that the CSB has a separate personality from the City. However, the same counsel, the OCLO, represented the City in the expropriation case and all but one of the individual respondents. The City’s counsel had manifested that the CSB had authority to pass the resolution allocating funds for full satisfaction of the just compensation, and the trial court relied on that manifestation in giving the CSB thirty days to pass the resolution. Acts of counsel within general or implied authority bind the client. Under Article 1431 of the Civil Code, an admission or representation is conclusive upon the person making it and cannot be denied against the person relying on it. The City and respondents were therefore estopped. Moreover, the Local Government Code of 1991 does not make the CSB independent from the City: under Section 98, the city mayor and city superintendent are co-chairmen, and under Section 101, members serve without compensation or remuneration, with non-government officials receiving only allowances. These features negate separate personality.
• Mandamus and Discretionary Function: The question whether the enactment of an ordinance to satisfy a final money judgment against an LGU may be compelled by mandamus was settled in Municipality of Makati vs. Court of Appeals. Where a municipality fails or refuses, without justifiable reason, to pay a final money judgment, the claimant may avail of mandamus to compel the enactment and approval of the necessary appropriation ordinance and the corresponding disbursement. The ordinance authorizing expropriation expressly stated that payment would be defrayed from the SEF. Its legality is presumed. Since the City Council specified the source, the passage of the resolution for allocation and disbursement became a ministerial duty of the CSB. Respondents themselves had argued in the contempt case that mandamus was the proper remedy, and petitioner relied on that representation. The Court also emphasized that just compensation includes payment within a reasonable time from taking; without prompt payment, compensation cannot be considered just. The decision awarding just compensation was promulgated in 2000, and five years had passed without full satisfaction. Under Republic vs. Lim, failure to pay just compensation within five years from finality of the expropriation judgment may entitle the owner to recover possession. Reversion was not a remote prospect if respondents and the City persisted.

• Relief from Judgment under Rule 38 — Relief from judgment is an act of grace premised on equity and allowed only in exceptional cases. It requires (1) fraud, accident, mistake, or excusable negligence that prevented a party from taking an appeal, and (2) a good and substantial cause of action or defense. In this case, neither requisite was satisfied: the clerk’s failure to forward the order was not excusable, and the separate-personality defense was not substantial.
• Clerk’s Negligence Binding on Counsel and Client — The failure of a counsel’s clerk to notify the handling lawyer of a court order is not excusable negligence; the clerk’s faults are attributable to the handling lawyers. The OCLO is treated like a law firm for this purpose. This doctrine supported the finding that the trial court gravely abused its discretion in granting relief.
• Estoppel by Counsel’s Acts — An act performed by counsel within the scope of a general or implied authority is regarded as an act of the client. Under Article 1431 of the Civil Code, an admission or representation is conclusive upon the person making it and cannot be denied or disproved against the person relying on it. The City and respondents were estopped from denying the CSB’s authority to appropriate funds after their counsel had manifested that authority.
• City School Board Not a Separate Legal Personality — Under the Local Government Code of 1991, the city school board is composed of the city mayor and city superintendent as co-chairmen and other city officials and representatives; members serve without compensation or remuneration, and non-government officials receive only allowances. These features negate the claim that the CSB has a personality separate and distinct from the city.
• Mandamus to Compel Appropriation and Disbursement for Final Money Judgment — Where a municipality or city fails or refuses, without justifiable reason, to pay a final money judgment, the claimant may avail of mandamus to compel the enactment and approval of the necessary appropriation ordinance and the corresponding disbursement of funds. Once the ordinance specifies the source of funds, the passage of the resolution becomes a ministerial duty.
• Just Compensation Includes Payment within Reasonable Time — Just compensation means not only the correct determination of the amount to be paid but also payment within a reasonable time from taking. Without prompt payment, compensation cannot be considered just. Failure to pay just compensation within five years from finality of the expropriation judgment may entitle the owner to recover possession of the expropriated property.
• Liberal Construction of Procedural Rules — The hierarchy of courts is not an iron-clad rule and may be relaxed for exceptional and compelling circumstances. A petition erroneously captioned as a Rule 45 petition may be treated as a Rule 65 special civil action for certiorari; verification defects are formal and do not necessarily render a petition fatally defective; and substitution of parties should be liberally construed.

• "The inability to perfect an appeal in due time by reason of failure of a counsel’s clerk to notify the handling lawyer is not a pardonable oversight." — This states the ratio decidendi on excusable negligence under Rule 38 and explains why the trial court’s grant of relief from judgment was reversed.
• "The fact that the highest ranking official of a local government unit (LGU) is designated as co-chairman of the school board negates the claim in this case that the CSB has a personality separate and distinct from the City." — This is the Court’s core reasoning on why the City School Board cannot escape the City’s obligation to pay just compensation.
• "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 therefore" — This defines the mandamus doctrine applied to compel the CSB to pass the appropriation resolution and disburse the funds.
• "(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" — This articulates the standard of just compensation and supports the Court’s warning that reversion of the expropriated property was not a remote prospect.

• Municipality of Makati vs. Court of Appeals, G.R. Nos. 89898-99, 1 October 1990, 190 SCRA 206 — Cited as controlling precedent on the rule that public funds are not subject to levy and execution, and more importantly for the rule that mandamus lies to compel a municipality to enact the necessary appropriation ordinance and disburse funds for a final money judgment.
• Salinas vs. NLRC, 377 Phil. 55 (1999) — Cited to support treating a petition erroneously captioned as a petition for review on certiorari as a special civil action for certiorari in the interest of justice.
• PAL vs. Arca, 125 Phil. 711 (1967) — Cited for the rule that a counsel’s clerk’s failure to notify the handling lawyer is not excusable negligence and that uncritical acceptance of such excuse is grave abuse of discretion.
• Negros Stevedoring Co., Inc. vs. Court of Appeals, G.R. No. L-36003, 21 June 1988, 162 SCRA 371 — Cited to hold that law firms must adopt a system for distributing notices and pleadings, and that clerks’ negligence binds the lawyers; the OCLO was treated similarly.
• Air Philippines Corp. vs. International Business Aviation Services, Phils., Inc., G.R. No. 151963, 9 September 2004 — Cited for the rule that acts of counsel within the scope of general or implied authority are regarded as acts of the client.
• Dirige vs. Biranya, 124 Phil. 269 (1966) — Cited for the principle that relief from judgment is premised on equity and is an act of grace allowed only in exceptional cases.
• Viuda De Tan Toco vs. Municipal Council of Iloilo; Baldivia vs. Lota, 107 Phil. 1099 (1960); Yuviengco vs. Gonzales, 108 Phil. 247 (1960) — Cited as authorities that mandamus may be used to compel enactment and approval of an appropriation ordinance and disbursement of municipal funds to satisfy a final money judgment.
• Consculluela vs. Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393 — Cited for the rule that just compensation includes payment within a reasonable time from taking, and that without prompt payment compensation cannot be considered just.
• Provincial Government of Sorsogon vs. Vda. De Villaroya, G.R. No. 64037, August 27, 1987, 153 SCRA 291 — Cited in support of the same principle on just compensation and prompt payment.
• Republic vs. Lim, G.R. No. 161656, 29 June 2005 — Cited for the rule that failure to pay just compensation within five years from finality of the expropriation judgment may entitle the owner to recover possession of the expropriated property.
• Torres vs. Specialized Packaging Dev’t. Corp., G.R. No. 149634, 6 July 2004, 433 SCRA 455 — Cited for the purpose of verification and the rule that noncompliance does not necessarily render a pleading fatally defective.
• Buklod ng Kawaning EIIB vs. Zamora, 413 Phil. 281 (2001); Fortich vs. Corona, 359 Phil. 461 (1998); Dario vs. Mison, G.R. No. 81954, 8 August 1989, 176 SCRA 84; The Province of Batangas vs. Hon Alberto G. Romulo, et al., G.R. No. 152774, 27 May 2004, 429 SCRA 736 — Cited for the rule that the hierarchy of courts is not an iron-clad dictum and may be relaxed for exceptional and compelling circumstances.

• Rule 38, Sections 2 and 3, 1997 Rules of Civil Procedure — Requisites for relief from judgment: fraud, accident, mistake, or excusable negligence preventing appeal, and a good and substantial cause of action or defense. Applied: neither requisite was met.
• Rule 45 and Rule 65, 1997 Rules of Civil Procedure — The petition was originally filed under Rule 45 but treated as a Rule 65 special civil action for certiorari because the challenged order was interlocutory and grave abuse of discretion was alleged.
• Rule 3, Section 17, 1997 Rules of Civil Procedure — Substitution of parties; the phrase “or such time as may be granted by the Court” allowed the substitution of new CSB members, and technical rules were liberally construed.
• Rule 7, Section 4 and Rule 45, Section 4, 1997 Rules of Civil Procedure, as amended by A.M. No. 00-2-10-SC — Verification and material-date requirements; the Court found sufficient compliance and held that defects in verification are formal and do not necessarily render the petition fatally defective.
• Article 1431, Civil Code — Estoppel: an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved against the person relying thereon. Applied to the City and respondents through their counsel’s manifestations.
• Sections 98 and 101, Local Government Code of 1991 (Republic Act No. 7160) — Creation, composition, and compensation of local school boards. Section 98 shows the city mayor and city superintendent as co-chairmen; Section 101 shows members serve without compensation or remuneration. These provisions negated the CSB’s claim of separate personality.
• Ordinance enacted by the City Council of Manila on 8 December 1995 — Authorized expropriation and provided that the cost be allocated from the Special Education Fund. The Court used it to hold that the source of funds was specified and the CSB’s duty to pass the resolution became ministerial.

Reynato S. Puno (Chairman, On Leave), Ma. Alicia Austria-Martinez, Romeo J. Callejo, Sr., and Minita V. Chico-Nazario.