City of Caloocan vs Allarde

CITY OF CALOOCAN vs. ALLARDE

G.R. No. 107271, September 10, 2003

Facts:

In 1972, Mayor Marcial Samson of Caloocan abolished the position of Assistant City Administrator and 17 other positions via Ordinance No. 1749. The affected employees assailed the legality of the abolition. The CFI in 1973 declared abolition illegal and ordered the reinstatement of all the dismissed employees and the payment of their back-wages and other emoluments. The City Government appealed the decision but such was dismissed.

In 1986 the City paid respondent Santiago P75,083.37 as partial payment of her back-wages. The others were paid in full. In 1987 the City appropriated funds for her unpaid back salaries but the City refused to release the money to Santiago.

On July 27, 1992 Sheriff Castillo levied and sold at public auction one of the motor vehicles of the City Government for P100,000. The amount was given to Santiago in partial satisfaction of her claim. The City Government questioned the validity of the auction sale, alleging that the properties of the municipality were exempt from execution. Judge Allarde denied the motion and directed the sheriff to levy and schedule at public auction 3 more vehicles of the City.

On October 5, 1993 the City Council of Caloocan passed Ordinance No. 0134 which included the amount of P439,377.14 claimed by Santiago as back-wages, plus interest. Then Caloocan Mayor Macario A. Asistio, Jr., however, refused to sign the check intended as payment for respondent Santiago’s claims.  This, despite the fact that he was one of the signatories of the ordinance authorizing such payment.

Thus, on May 7, 1993. Judge Allarde ordered the Sheriff to immediately garnish the funds of the City Government of Caloocan corresponding to the claim of Santiago. Notice of garnishment was forwarded to the PNB but the City Treasurer sent an advice letter to PNB that the garnishment was illegal with a warning that it would hold PNB liable for any damages which may be caused by the withholding the funds of the city. PNB opted to comply with the order of Judge Allarde and released to the Sheriff a manager’s check amounting to P439,378.00.

Issue:

Whether or not the funds of City of Caloocan, in PNB, may be garnished (i.e. exempt from execution), to satisfy Santiago’s claim.

Held:

Garnishment is considered a specie of attachment by means of which the plaintiff seeks to subject to his claim property of the defendant in the hands of a third person, or money owed by such third person or garnishee to the defendant.

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:

Even though the rule as to immunity of a state from suit is relaxed, the power of the courts ends when the judgment is rendered. Although the liability of the state has been judicially ascertained, the state is at liberty to determine for itself whether to pay the judgment or not, and execution cannot issue on a judgment against the state. Such statutes do not authorize a seizure of state property to satisfy judgments recovered, and only convey an implication that the legislature will recognize such judgment as final and make provision for the satisfaction thereof.

The rule is based on obvious considerations of public policy. The functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by law.

However, the rule is not absolute and admits of a well-defined exception, that is, when there is a corresponding appropriation as required by law. Otherwise stated, the rule on the immunity of public funds from seizure or garnishment does not apply where the funds sought to be levied under execution are already allocated by law specifically for the satisfaction of the money judgment against the government. In such a case, the monetary judgment may be legally enforced by judicial processes.

In the instant case, the City Council of Caloocan already approved and passed Ordinance No. 0134, Series of 1992, allocating the amount of P439,377.14 for respondent Santiago’s back salaries plus interest. Thus this case fell squarely within the exception. For all intents and purposes, Ordinance No. 0134, Series of 1992, was the “corresponding appropriation as required by law.” The sum indicated in the ordinance for Santiago were deemed automatically segregated from the other budgetary allocations of the City of Caloocan and earmarked solely for the City’s monetary obligation to her. The judgment of the trial court could then be validly enforced against such funds.