1375. U.P. v.

Dizon 679 SCRA 54 [2012]

FACTS:
The University of the Philippines (UP) entered into a General Construction
Agreement with respondent Stern Builders Corporation (Stern Builders) for the
construction of the extension building and the renovation of the College of Arts
and Sciences Building in the campus of the University of Los Baos (UPLB). In the
course of the implementation of the contract, Stern Builders submitted three
progress billings corresponding to the work accomplished, but the UP paid only
two of the billings. The third billing was not paid due to its disallowance by the
Commission on Audit (COA). Despite the lifting of the disallowance, the UP failed
to pay the billing, prompting Stern Builders to sue the UP and officials to collect
the unpaid billing and to recover various damages.
Meanwhile, the sheriff served notices of garnishment on the UPs depository
banks namely Land Bank of the Philippines (Buendia Branch) and the
Development Bank of the Philippines (Commonwealth Branch). The UP assailed
said garnishment of funds. Stern Builders and dela Cruz, meanwhile, again sought
the release of the garnished funds.
ISSUE:
Whether or not the funds of UP are subject to garnishment?
HELD:
Despite its establishment as a body corporate, the UP remains to be a
chartered institution performing a legitimate government function. The UP is a
government instrumentality, performing the States constitutional mandate of
promoting quality and accessible education. As a government instrumentality, the
UP administers special funds sourced from the fees and income enumerated
under the Act No. 1870 and Section 1 of Executive Order No. 714, and from the
yearly appropriations, to achieve the purposes laid down by Section 2 of Act 1870,
as expanded in Republic Act No. 9500. All the funds going into the possession of
the UP, including any interest accruing from the deposit of such funds in any
banking institution, constitute a special trust fund the disbursement of which
should always be aligned with the UPs mission and purpose, and should always
be subject to auditing by the COA.
The funds of the UP are government funds that are public in character. They
include the income accruing from the use of real property ceded to the UP that
may be spent only for the attainment of its institutional objectives. Hence, the
funds subject of this action could not be validly made the subject of writ
of execution or garnishment. The adverse judgment rendered against the UP
in a suit to which it had impliedly consented was not immediately enforceable by
execution against the UP, because suitability of the State does not
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necessarily mean its liability.

Source: http://ustlawreview.org/