Lockheed Detective and Watchman Agency, Inc. vs. University of the Philippines

Posted Apr 18, 2012

By Anonymous

7 min read

Case Title and Citation

Lockheed Detective and Watchman Agency, Inc., petitioner, vs. University of the Philippines, respondent.
G.R. No. 185918, April 18, 2012
Supreme Court - First Division
Ponente: Justice Martin S. Villarama, Jr.

Facts

Lockheed Detective and Watchman Agency, Inc. (Lockheed) contracted to provide security services to the University of the Philippines (UP).
In 1998 several security guards assigned to UP filed complaints against Lockheed and UP for underpaid wages and related claims.
On February 16, 2000, the Labor Arbiter declared Lockheed and UP solidarily liable and awarded the complainants a total of ₱1,184,763.12; the Arbiter also held UP liable to Lockheed for unpaid legislated salary increases amounting to ₱13,066,794.14, out of which amounts due complainants would be paid.
Both Lockheed and UP appealed; on April 12, 2002 the NLRC modified the Labor Arbiter’s decision, dismissing certain claims and ordering recomputation for the remaining awards. The NLRC denied motions for reconsideration on August 14, 2002, and the decision became final and executory on October 26, 2002.
A writ of execution was issued, later quashed by the Labor Arbiter on November 23, 2003; the NLRC reversed that order by resolution dated June 8, 2004 and directed issuance of a writ of execution.
An alias writ of execution was issued on May 23, 2005. On July 25, 2005 a Notice of Garnishment was served on Philippine National Bank (PNB) — UP Diliman Branch for satisfaction of an award of ₱12,142,522.69 (inclusive of execution fee).
PNB received an order of release dated August 8, 2005. UP filed an Urgent Motion to Quash Garnishment on August 16, 2005, arguing the garnished funds were public/government funds held in UP System Trust Receipts (PNB Savings Account No. 275-529999-8) earmarked for student guaranty deposits, scholarship funds, publications, research grants and miscellaneous trust purposes.
The Labor Arbiter dismissed the Motion to Quash on August 30, 2005. On September 2, 2005 the sheriff withdrew ₱12,062,398.71 from the PNB account.
UP filed a petition for certiorari with the Court of Appeals (CA) on September 12, 2005 arguing gravely abused discretion and lack of jurisdiction in authorizing garnishment of public funds without filing a claim with the Commission on Audit (COA).
On March 12, 2008 the CA dismissed UP’s petition; on reconsideration the CA issued an Amended Decision (August 20, 2008) citing National Electrification Administration v. Morales and indicating that money claims against government entities must first be filed with COA; the CA denied Lockheed’s motion for reconsideration on December 23, 2008.
Lockheed petitioned this Court. The Supreme Court affirmed that although UP is a juridical personality capable of being sued, money claims against it must be presented to COA before execution; the garnishment was erroneous for failing to comply with that procedure.
The Supreme Court ordered Lockheed to reimburse UP ₱12,062,398.71 plus interest (6% per annum from September 12, 2005 to finality; 12% per annum from finality until fully paid).

Issues

Did the NLRC and the Labor Arbiter gravely abuse their discretion by authorizing garnishment of UP’s funds without first filing the claim with the Commission on Audit?
Are the funds in UP’s PNB account public/government funds exempt from execution absent COA procedure?
Is Lockheed liable to reimburse UP for the amount garnished plus interest because the garnishment was erroneously carried out?

Ruling

Yes - The Court held that money claims against UP must first be filed with the Commission on Audit; authorization of garnishment without that procedure was erroneous.
Yes - The Court treated the subject funds as requiring COA procedure under Commonwealth Act No. 327 as amended by Section 26 of P.D. No. 1445; execution against such funds without COA action is improper.
Yes - Because the garnishment was carried out in violation of the required COA procedure, Lockheed was ordered to reimburse UP ₱12,062,398.71 plus interest.

Reasoning / Ratio Decidendi

The Court recognized that UP is a juridical personality separate from the national government and can sue and be sued, citing precedents (e.g., Manila International Airport Authority v. Court of Appeals) and prior CA and NLRC findings. However, suability does not dispense with the statutory requirement governing money claims against government entities.
Commonwealth Act No. 327, as amended by Section 26 of Presidential Decree No. 1445 (Government Auditing Code), grants the Commission on Audit (COA) authority to examine, audit and settle “all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies and instrumentalities,” and the jurisdiction extends to government-owned or controlled corporations and their subsidiaries.
The Court relied on National Electrification Administration v. Morales which mandates that claims for money against government entities must be filed with COA prior to execution; the COA must make allowance or disallowance subject to judicial review by certiorari to this Court.
The Court rejected Lockheed’s argument that NEA was distinguishable on the basis that COA’s jurisdiction over UP is only post-audit; the statutory language in Section 26 does not distinguish among government subdivisions, agencies or instrumentalities regarding the filing requirement.
Because the writ of garnishment and execution occurred without the COA process being observed, the garnishment was erroneous and thus subject to reimbursement remedies. The Court awarded reimbursement of the garnished amount plus legal interest: 6% per annum from the date UP filed its certiorari petition with the CA (September 12, 2005) until finality, and 12% per annum from finality until fully paid.
The Court noted COCOFED’s definition of public funds but emphasized that the controlling consideration is the COA filing requirement under the Government Auditing Code for money claims against government entities.

Doctrine / Legal Principle

Money claims against the government or its subdivisions, agencies, instrumentalities, including juridical entities like UP, must first be presented to and acted upon by the Commission on Audit under Commonwealth Act No. 327 as amended by Section 26 of P.D. No. 1445, before execution may proceed.
Suability of a government instrumentality does not eliminate statutory procedural requirements (COA filing) for money claims and execution.
An execution or garnishment carried out without complying with the COA process is erroneous; the party responsible for such garnishment may be ordered to reimburse the improperly garnished funds with interest.

Disposition

The petition for review on certiorari is DENIED.
Lockheed Detective and Watchman Agency, Inc. is ordered to reimburse the University of the Philippines the amount of ₱12,062,398.71 plus interest of 6% per annum computed from September 12, 2005 until the finality of this Decision, and 12% per annum on the entire amount from finality until fully paid.
No pronouncement as to costs.

Concurring / Dissenting Opinions

The Decision was penned by Justice Martin S. Villarama, Jr.
The Court’s judgment indicates concurrence by Acting Chairperson Teresita J. Leonardo-De Castro and Associate Justices Diosdado M. Peralta, Lucas P. Bersamin, and Bienvenido L. Reyes.
No dissenting opinion is indicated in the reported decision.

Significance / Notes

The decision clarifies that even juridical government entities capable of being sued (such as UP) are subject to the COA filing requirement for money claims under the Government Auditing Code; execution cannot properly proceed prior to COA action.
The case reinforces National Electrification Administration v. Morales as controlling precedent on the procedural prerequisite of COA for money claims against government entities.
Practical effect: claimants seeking to satisfy money awards against government instrumentalities must institute the appropriate COA claim process before seeking execution or garnishment of funds; failure to do so risks reversal and reimbursement liability.
Remedies for improper garnishment include restitution of funds and an award of interest computed from judicial demand or specified triggering dates.
The decision balances the suability of government instrumentalities with statutory safeguards intended for public funds and audit control.

Judicial Review Public Officers Civil Procedure

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