Municipality of San Miguel, Bulacan vs. Hon. Oscar C. Fernandez

Public funds of a municipality are exempt from levy and execution to satisfy a money judgment absent a corresponding lawful appropriation in the form of an ordinance duly passed by the Sangguniang Bayan.

The Municipality of San Miguel, Bulacan was held liable in a civil case for the partial revocation of a deed of donation, reconveyance of five lots, payment of collected rentals, and attorney's fees. The private respondents sought execution of the money judgment component against the municipality's funds held by the provincial and municipal treasurers, prompting the municipality to contest the executability of its public funds.

In Civil Case No. 604-B, the Court of First Instance of Bulacan rendered judgment on April 28, 1978, ordering the Municipality of San Miguel, Bulacan to partially revoke a deed of donation, execute a deed of reconveyance over five lots, pay P64,440.00 in collected rentals with interest, and pay P3,000.00 in attorney's fees. The municipality's appeal was dismissed for failure to file the record on appeal on time. The dismissal was affirmed by the Court of Appeals in CA-G.R. No. SP-12118 and by the Supreme Court in G.R. No. 59938, rendering the judgment final.

Thereafter, private respondents moved for the issuance of a writ of execution. On July 27, 1982, the respondent judge issued an order granting the writ. The municipality filed a motion to quash on July 30, 1982, arguing that its funds were public and exempt from execution. The motion was denied on August 23, 1982, and an alias writ of execution stood in full force and effect. On September 13, 1982, the respondent judge issued an order directing the Municipal Treasurer of San Miguel and the Provincial Treasurer of Bulacan to comply with the money judgment, noting that the municipality had sufficient funds. When the treasurers failed to comply, the respondent judge ordered their arrest, to be released only upon compliance. This prompted the municipality to elevate the issue to the Supreme Court.

• Exemption from Execution: Petitioner argued that the municipality's property and funds are all public funds exempt from execution for the satisfaction of a money judgment.

• Executability of Public Funds: Whether the funds of the Municipality of San Miguel, Bulacan in the hands of the provincial and municipal treasurers are public funds exempt from execution for the satisfaction of a money judgment.

• Executability of Public Funds: Yes. The funds are public funds exempt from execution, and the writ of execution was set aside for lack of a specific appropriation ordinance and non-compliance with the procedure under Rule 39.

• Executibility of Public Funds: Public funds are not subject to levy and execution because they are held in trust for the people and intended for municipal purposes; subjecting them to execution would materially impede or defeat those purposes. Furthermore, under Section 2(a) of Presidential Decree No. 477, no money shall be paid out of the treasury except in pursuance of a lawful appropriation or specific statutory authority, meaning the Sangguniang Bayan must pass an ordinance to that effect. In this case, no such ordinance was shown to have been passed. Additionally, Section 15, Rule 39 of the New Rules of Court outlines the procedure for enforcing money judgments by levying on property not otherwise exempt from execution, a procedure that was not followed.

• Public Funds Exemption Doctrine — Public funds and property of municipal corporations cannot be seized under execution, as they are held in trust for the people and intended for public purposes. The Court applied this by holding that the funds in the hands of the municipal and provincial treasurers are exempt from execution to satisfy the money judgment.

• "Well settled is the rule that public funds are not subject to levy and execution." — This statement establishes the core principle that municipal funds, held in trust for the public, are immune from execution.
• "No money shall be paid out of the treasury except in pursuance of a lawful appropriation or other specific statutory authority." — This quotation of PD 477 emphasizes the requirement of a valid appropriation ordinance before public funds can be disbursed.

• Municipality of Paoay vs. Manaois, 86 Phil. 629 — Cited to support the rule that public funds are held in trust for the people and subjecting them to execution would impede municipal purposes.
• Tantoco vs. Municipal Council of Iloilo, 49 Phil. 52 — Cited for the doctrine that public property, taxes, and revenues of municipal corporations cannot be seized under execution.

• Section 2(a), Presidential Decree No. 477 (The Decree on Local Fiscal Administration) — Applied to require a lawful appropriation or statutory authority before any money is paid out of the municipal treasury.
• Section 15, Rule 39 of the New Rules of Court — Outlines the procedure for enforcing money judgments by levying on property not otherwise exempt from execution, which was not followed in this case.

Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr., and De la Fuente, JJ., concur.