Unjust Enrichment: Security Agency Must Return Illegally Garnished NFA Funds

The Supreme Court has ruled that a security agency must return over P8.4 million it obtained from the National Food Authority (NFA) through a void writ of execution. The case clarifies that money taken without a valid final judgment cannot be kept, even if the recipient claims it was payment for services rendered. The ruling reinforces the principle that no one may enrich themselves at another's expense through an illegal court process.

The Dispute

In 1990, Continental Watchman and Security Agency, Inc. was among twelve agencies contracted to provide security services to the NFA. The contracts were periodically extended until a new NFA Administrator initiated a review and new bidding procedures. When Continental failed to be included in the final bidding, the NFA terminated its services in 1993.

Continental filed a complaint for damages and injunction before the Quezon City Regional Trial Court. The court issued a temporary restraining order and later a writ of preliminary injunction preventing the NFA from terminating Continental's contracts. However, the Court of Appeals annulled part of the injunction, and the Supreme Court affirmed this in National Food Authority v. Court of Appeals (G.R. Nos. 115121-25, February 9, 1996).

The Illegal Garnishment

Based on that decision, Continental moved for execution of P8,445,161.00 for security services allegedly rendered. Despite the fact that no trial had been held and no final judgment existed in the main case, the RTC issued a writ of execution on October 9, 1996. The following day, the amount was garnished from the NFA's deposit with the Philippine National Bank.

The NFA challenged this before the Supreme Court in David v. Velasco (G.R. No. 126592, October 2, 2001). The Court declared the writ of execution null and void, ruling that a writ of execution may only be issued after a final and executory judgment. The Court emphasized that "a writ issued without final judgment is manifestly void and of no legal effect. It is as if the writ was not issued at all."

The Order to Return

Following the David ruling, the RTC ordered Continental to return the garnished amount to the NFA. Continental refused, arguing that it should be allowed to set off the amount against the salaries of security guards who rendered services during the injunction period. The Court of Appeals denied Continental's petition, and the case reached the Supreme Court.

The Supreme Court's Ruling

In Continental Watchman and Security Agency, Inc. v. National Food Authority (G.R. No. 171015, August 25, 2010), the Supreme Court denied Continental's petition. The Court held that Continental had no legal basis to hold the P8,445,161.00 because it resulted from a void writ of execution and defective garnishment.

The Court rejected Continental's set-off argument, noting that the salaries it wanted to set off were the subject of a supplemental complaint still pending before the RTC. The Court found that submitting a live issue still pending before the trial court was "a clear abuse of process" and imposed treble costs against Continental.

The Court also ordered Continental to pay interest on the amount—six percent per annum from the date the NFA filed its motion to intervene in the David case, and twelve percent per annum from the finality of the Decision.

Practical Takeaways

• A writ of execution issued without a final and executory judgment is void and of no legal effect.
• Money obtained through a void writ must be returned, regardless of claims that it was payment for services.
• Set-off cannot be used to justify keeping illegally obtained funds when the underlying claim is still pending litigation.
• Courts may impose treble costs against parties who abuse court processes by raising issues already pending before lower courts.
• The principle against unjust enrichment applies even when the recipient claims a good-faith basis for holding the funds.