FACTS:

The Municipality of Hagonoy, Bulacan and its former chief executive, Mayor Felix V. Ople, filed a Joint Petition under Rule 45 of the Rules of Court, appealing the Decision and the Resolution of the Court of Appeals. The complaint in this case was filed by private respondent Emily Rose Go Ko Lim Chao against the Municipality and Mayor Ople, alleging that she entered into an agreement with Ople for the delivery of motor vehicles to the municipality. Chao claimed that she delivered the vehicles but was not paid, resulting in a total obligation of P10,026,060.13. Chao prayed for the payment of the said amount, damages, attorney's fees, and costs of the suit. The trial court granted Chao's prayer for a writ of preliminary attachment and issued the writ. The Municipality and Mayor Ople filed a motion to dismiss and a motion to dissolve the writ of preliminary attachment. They argued that the alleged contract was unenforceable under the statute of frauds and invoked immunity of the state from suit, unenforceability of the contract, and failure to substantiate the allegation of fraud. The trial court denied both motions. Petitioners moved for reconsideration, but their motions were denied. They then filed a petition for certiorari before the Court of Appeals, challenging the trial court's denial of their motions. The Court of Appeals affirmed the trial court's order and denied petitioners' motion for reconsideration. The parties filed their respective memoranda, and the case was deemed submitted for decision.

ISSUES:

1. Whether or not the case should be dismissed based on the statute of frauds.

2. Whether or not the writ of preliminary attachment should be discharged.

3. Whether the writ of preliminary attachment should be lifted, considering that the funds of the municipality are public in nature and, therefore, beyond the reach of garnishment and attachment proceedings.

4. Whether the unenforceability of the contract and the veracity of the allegation of fraud should be taken up in resolving the motion to dissolve the writ of attachment.

5. Whether the Court of Appeals committed an error in denying the motion for reconsideration filed by an unauthorized counsel.

6. Whether the Writ of Preliminary Attachment issued in Civil Case No. CEB-28587 should be lifted.

7. Whether the respondent has proven that there are grounds for lifting the Writ of Preliminary Attachment.

RULING:

1. The case should not be dismissed based on the statute of frauds. The court ruled that since there exists an indication of performance by one party, the case is excluded from the coverage of the rule on dismissals based on unenforceability under the statute of frauds.

2. The writ of preliminary attachment should not be discharged. The court held that the arguments against the writ of preliminary attachment touch on matters that should be ruled upon in the hearing for the motion to discharge, which would amount to a trial of the case on the merits.

3. The writ of preliminary attachment must be dissolved. The funds of the municipality are public in nature and, thus, cannot be seized under writs of execution or garnishment to satisfy judgments. Furthermore, government funds and properties must be covered by the corresponding appropriations required by law, and the functions and public services rendered by the State must not be disrupted by the diversion of public funds from their legitimate and specific objects.

4. The issues of the unenforceability of the contract and the veracity of the allegation of fraud pertain to the merits of the main action and should not be taken up in resolving the motion to dissolve the writ of attachment. These issues should be addressed during the trial on the merits.

5. The Court of Appeals erred in treating the motion for reconsideration filed by an unauthorized counsel as a mere scrap of paper. The municipal legal officer had previously adopted all the pleadings filed for and in behalf of petitioner municipality, including the motion for reconsideration. However, the motion for reconsideration would still be denied because there were no new issues raised that have not yet been addressed in the assailed decision and the proceedings below.

6. The Court orders the lifting of the Writ of Preliminary Attachment issued in Civil Case No. CEB-28587.

PRINCIPLES:

• Material allegations of the complaint are deemed to be hypothetically admitted when a motion to dismiss is filed.

• When the allegations in the complaint provide sufficient basis for the complaint to be maintained, it should not be dismissed regardless of the defenses raised by the defendants.

• The existence of a contract can be acknowledged, but its enforceability can be challenged if it does not comply with the legal requirement of being reduced into writing.

• Municipal corporations have the power to sue and be sued.

• The state and its political subdivisions may be sued only with their consent.

• Suability and liability are different. Even if the state is suable, it has the discretion to determine whether to satisfy the judgment or not.

• Government funds and properties may not be seized under writs of execution or garnishment to satisfy judgments, as disbursements of public funds must be covered by the corresponding appropriations required by law. The functions and public services rendered by the State must not be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects.

• Issues pertaining to the merits of the main action should not be taken up in resolving a motion to dissolve a writ of attachment, as these should be addressed during the trial on the merits.

• Municipalities may engage private counsel in lawsuits, but only under well-defined exceptions. Adopting previous pleadings filed by an unauthorized counsel may be considered as a valid representation by the municipal legal officer.

• A Writ of Preliminary Attachment may be lifted if the party seeking its lifting is able to prove that there are valid grounds for doing so.