City of Caloocan vs. Allarde

Public funds are exempt from garnishment or levy, but the exemption does not apply when the legislature or local sanggunian has enacted a specific appropriation ordinance allocating those funds for the payment of the judgment debt. Once such an appropriation exists, the funds are deemed earmarked and may be validly reached by judicial processes to enforce a final money judgment against the government entity.

In 1972, Caloocan City Mayor Marcial Samson abolished the position of Assistant City Administrator and 17 other positions. Delfina Hernandez Santiago, then Assistant City Administrator, together with the other affected employees, successfully challenged the abolition before the trial court, which ordered reinstatement and payment of back salaries. The City’s appeal was ultimately declared frivolous and dilatory by the Supreme Court in G.R. No. L-39288-89, and the decision became final in 1985. Although the City partially paid Santiago’s backwages and later included the balance in a supplemental budget, it persistently refused to release the money, sparking a protracted execution battle that traversed multiple courts and quasi-judicial bodies over two decades.

• Nature of the Action: Petition for certiorari under Rule 65 seeking to annul the Court of Appeals’ decision that ordered the RTC to implement an alias writ of execution, and challenging the garnishment of the City’s bank deposits and the levy and sale of its motor vehicles.

• The Underlying Judgment: In 1972, Mayor Marcial Samson abolished Santiago’s position through Ordinance No. 1749. The CFI declared the abolition illegal and ordered reinstatement and payment of back salaries. The City’s appeal was dismissed as frivolous by the Supreme Court in G.R. No. L-39288-89. The decision became final in 1985. Santiago received partial payment of ₱75,083.37, leaving an unpaid balance of ₱530,761.91.

• Appropriation and Continued Refusal to Pay: In 1987, the City included Santiago’s unpaid back salaries in Supplemental Budget No. 3, yet refused to release the funds. A writ of execution issued in 1991 was unsuccessfully challenged by the City all the way to the Supreme Court (G.R. No. 98366), which dismissed the petition with finality.

• Alias Writ and Execution Efforts: On March 3, 1992, the RTC issued an alias writ of execution. The City moved to quash, arguing Santiago was not entitled to backwages for 1983–1986. The motion was denied. Sheriff Alberto A. Castillo levied on a city vehicle (plate no. SBH-165) and sold it at public auction on July 27, 1992, for ₱100,000. The proceeds were delivered to Santiago, leaving a balance of ₱439,377.14.

• Further Levy and Appropriation Ordinance: The RTC ordered levy on three additional municipal vehicles. On October 5, 1992, the City Council passed Ordinance No. 0134, Series of 1992, appropriating exactly ₱439,377.14 for Santiago’s claim. The RTC thereafter ordered the City Treasurer to deliver a manager’s check. However, Mayor Macario Asistio, Jr., who had signed the ordinance, refused to sign the check. The Acting Mayor likewise declined, citing lack of authority and the formal turnover of the check by the absent mayor.

• Garnishment and Final Satisfaction: On May 7, 1993, the RTC ordered garnishment of the City’s funds with Philippine National Bank (PNB), Sangandaan Branch. Despite a warning from the City Treasurer, PNB complied and released a manager’s check for ₱439,378, fully settling the judgment after 21 years. The RTC subsequently lifted the levy on the three vehicles and ordered their return to the City.

• Immunity of Public Funds: Petitioner City of Caloocan argued that its funds deposited with PNB were public funds exempt from garnishment, and that the rule was absolute, admitting no exception even in the presence of an appropriation ordinance. The mayor’s signature was indispensable for release, and its absence rendered the ordinance ineffectual for execution purposes.

• Exemption of Municipal Vehicles: Petitioners maintained that the three motor vehicles were necessary for public use and therefore exempt from levy and execution sale.

• Irregularities in the Auction Sale: Petitioners contended that the auction sale of the vehicle with plate no. SBH-165 was void due to non-compliance with posting requirements, failure to consummate the sale at the designated time and place upon actual payment, violation of the requirement that property capable of manual delivery be sold within the view of attendees, and false narration of facts in the sheriff’s certificate of sale.

• Expiration of the Alias Writ: Petitioners asserted that the levy on the three vehicles was based on an alias writ that had already expired, rendering the levy invalid.

• Denial of Due Process (Abracia): Petitioner Norma Abracia claimed she was denied due process when the trial court refused her request for a ten-day period to engage counsel of choice to respond to the contempt charge, and argued that her agreement to surrender the vehicles was coerced.

• Exception to Immunity Applies: Respondent Santiago argued that Ordinance No. 0134, Series of 1992, constituted the specific appropriation required by law, thereby bringing the case squarely within the recognized exception to the immunity of public funds. The appropriated sum was earmarked solely for the satisfaction of the final judgment and could be reached by garnishment.

• Presumption of Regularity and Valid Sale: Respondents maintained that the sheriff’s sale was conducted in accordance with procedural rules, was held publicly at the designated time and place, and enjoyed the presumption of regularity, which petitioners failed to rebut with competent evidence.

• Finality and Abuse of Process: Respondent Santiago emphasized that all substantive issues regarding her entitlement to backwages and the period covered had been conclusively settled by final judgments, and that the City’s continued resistance constituted a blatant abuse of judicial processes.

• Garnishment of Appropriated Public Funds: Whether the garnishment of the City’s funds deposited with PNB was valid despite the general rule that public funds are exempt from execution.

• Mayoral Signature and Release: Whether the absence of the mayor’s signature on the check barred the garnishment, notwithstanding the existence of an appropriation ordinance signed by the mayor.

• Levy on Municipal Vehicles and Mootness: Whether the levy and sale of the City’s motor vehicles were valid, or whether the issue had become moot.

• Regularity of the Auction Sale: Whether the sheriff’s auction sale of the vehicle with plate no. SBH-165 was vitiated by procedural irregularities.

• Due Process in Contempt Proceedings: Whether petitioner Abracia was denied due process when the trial court denied her request for additional time to secure counsel of her choice.

• Garnishment of Appropriated Public Funds: The garnishment was valid. The general rule that government funds deposited in official depositaries are immune from garnishment or levy is not absolute; it admits an exception when a specific appropriation has been enacted by law or ordinance. Ordinance No. 0134, Series of 1992, passed by the City Council and approved by the mayor, appropriated the exact amount of Santiago’s claim. The appropriation segregated the sum from other city funds and earmarked it solely for the judgment debt, thereby lifting the exemption and rendering the funds subject to judicial process.

• Mayoral Signature and Release: The mayor’s signature approving the appropriation ordinance signified his assent to the allocation. His subsequent refusal to sign the release check did not nullify the appropriation. Under Section 55 of the Local Government Code, the mayor could have vetoed the particular item but did not. The ordinance remained effective, and the garnishment was properly effected upon the appropriated funds.

• Levy on Municipal Vehicles and Mootness: The trial court had already lifted the levy on the three vehicles and ordered their return to the City after the judgment was fully satisfied through garnishment. The issue was therefore rendered moot and no longer required adjudication.

• Regularity of the Auction Sale: The sheriff’s sale was valid. A sheriff’s performance of official duties carries a presumption of regularity, which can only be overcome by clear and convincing evidence. Petitioners offered no substantial evidence to substantiate the alleged irregularities. The records, including petitioners’ own admissions, showed that the sale was conducted publicly in front of the Caloocan City Hall on the date fixed, July 27, 1992. The bare allegations of procedural defects were insufficient to invalidate the sale.

• Due Process in Contempt Proceedings: No denial of due process occurred. Petitioner Abracia was notified of the contempt charge, appeared with a representative, and was given the opportunity to be heard. The denial of her request for an extension to hire different counsel did not violate due process. Her subsequent manifestation in open court, made after conferring with her representative, that she was willing to surrender the vehicles on condition that the contempt motion be withdrawn, was a voluntary and freely made decision.

• Exception to the Immunity of Public Funds from Execution/Garnishment — Public funds are generally exempt from levy, garnishment, or execution. However, this immunity does not apply where there exists a corresponding specific appropriation by law or ordinance allocating funds precisely for the satisfaction of the judgment. Once appropriated, the funds are deemed segregated and earmarked, and may be validly reached by judicial processes to enforce a final money judgment against the government entity.

• Presumption of Regularity in Sheriff’s Sales — The conduct of a sheriff’s execution sale is clothed with the presumption of regularity. A party alleging procedural irregularities must present clear and convincing evidence to rebut this presumption; unsubstantiated allegations are insufficient.

• Mootness — A court will not pass upon issues that have been rendered moot by supervening events, such as the satisfaction of the judgment or the lifting of the levy, where no further practical relief can be granted.

• Effect of Executive Approval of Appropriation Ordinance — A local chief executive’s approval of an appropriation ordinance denotes assent to the allocation. Subsequent refusal to release the appropriated funds does not annul the appropriation, as the remedy lies in a line-item veto at the time of enactment, not in post-approval non-compliance.

• “The rule is and has always been that all government funds deposited in the PNB or any other official depositary of the Philippine Government by any of its agencies or instrumentalities, whether by general or special deposit, remain government funds and may not be subject to garnishment or levy, in the absence of a corresponding appropriation as required by law.” — The core statement of the general rule and its exception, which controlled the validity of the garnishment.

• “Inasmuch as an ordinance has already been enacted expressly appropriating the amount x x x as payment to the respondent-appellee, then the herein case is covered by the exception to the general rule.” — Quoted from Pasay City Government, this passage applied the exception directly to the factual milieu.

• “For 21 long years, starting 1972 when this controversy started up to 1993 when her claim was fully paid out of the garnished funds of the City of Caloocan, respondent Santiago was cruelly and unjustly deprived of what was due her.” — The passage underscored the Court’s condemnation of the city’s prolonged defiance of a final judgment.

• Pasay City Government, et al. vs. CFI of Manila, Br. X, et al.,, 132 SCRA 156 (1984) — Followed. Held that an ordinance appropriating funds for the payment of a judgment debt places the case within the exception to the rule on immunity of public funds from garnishment.

• Municipality of Makati vs. Court of Appeals, et al.,, 190 SCRA 206 (1990) — Cited. Reiterated that public funds are not subject to levy unless otherwise provided by statute, thus implicitly recognizing the exception applied here.

• Commissioner of Public Highways vs. San Diego,, 31 SCRA 616 (1970) — Cited. Established the general rule of immunity; the present case fell within the recognized exception due to the specific appropriation ordinance.

• Section 55, Local Government Code (R.A. No. 7160) — Veto power of the local chief executive over specific items in an appropriations ordinance. The Court noted that Mayor Asistio did not veto the item for Santiago’s backwages, hence the appropriation stood and the funds were reachable.

• Section 21, Rule 39, Rules of Court (now Section 25, Rule 39, 1997 Rules of Civil Procedure) — Requirement that personal property capable of manual delivery be sold within the view of those attending the sale. Petitioners alleged a violation, but no evidence was presented to overcome the sheriff’s presumption of regularity.

Panganiban (Acting Chairman), Sandoval-Gutierrez, and Carpio-Morales, JJ., concurred. Puno (Chairman), J., was on official leave.