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Case Law on GARNISHMENT OF SALARY

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-21189 November 28, 1964

JOSE AVENDAO and MARTA AVENDAO, petitioners,

vs.
THE HON. FEDERICO C. ALIKPALA, THE SHERIFF OF MANILA, THE MANILA RAILROAD
COMPANY and Luzviminda PARUNGAO SAN PEDRO, respondents.

Jose G. Mendoza for petitioners.

Lea T. Castelo for respondent LuzvimindaParugao San Pedro.
Corporate Legal Counsel Tomas P. Matic, Jr. and F. S. Aldana for respondent Manila Railroad
Company.

PAREDES, J.:

This case seeks to test the propriety and validity of an order of Garnishment issued pursuant to
a Writ of Execution of a Judgment for Sum of Money.

On complaint of respondent LuzvimindaParugao San Pedro with the Municipal Court of Manila
(Civ. Case No. 95957) against petitioners Jose Avendao and Marta Avendao (husband and
wife), the latter were ordered to pay plaintiff therein, the sum of P2,000.00 plus 12% interest
from November 30, 1960, P200.00 as attorney's fees and another P200.00 for actual damages,
and the costs.

The decision of the Municipal Court was appealed to the CFI of Manila (Civil Case, No. 50273)
and assigned to the sala of respondent Judge. For failure of defendants to reproduce their
answer and their third-party complaint, they were declared in default and the evidence of
respondent San Pedro was received by the Clerk of Court, as commissioner. The respondent
judge's decision stated:

The promissory notes, however, were all signed alone by defendant Marta Avendao
and there was no showing that the loans evidenced by said documents were obtained
with the knowledge and consent of the husband. Accordingly, the other defendant cannot
be held liable also to pay the amount due to plaintiff.

WHEREFORE, judgment is hereby rendered sentencing the defendant Marta

Avendao to pay the plaintiff the sum of P2,000.00 with interest thereon at the rate of 6%
per annum from March 6, 1962, the date of the filing of the complaint until fully paid, plus
the amount of P100.00 as and for attorney's fees and the costs of the suit.

Upon finality of the above judgment, plaintiff San Pedro prayed for the issuance of a Writ of
Execution, on the "goods and chattels of Marta Avendao which was granted by respondent
Judge on October 30, 1962. Pursuant to said Writ, the respondent Sheriff of Manila sued out a
Writ of Garnishment on the salaries of petitioner Maria Avendao with the respondent Manila
Railroad Company where she was employed. In effect, the said Manila Railroad Company, had
not delivered her salaries to her since November 15, 1962 up and including April, 1963 (filing of

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the instant petition). It was only on November 15, 1962 that petitioner Marta Avendao came to
know of the decision of the CFI, when her pay was garnished. Petitioners moved for the setting
aside of the Order of Default, and failing to do so, they filed with the Court in the same case, a
petition to have the Writ of Garnishment invalidated on various grounds, to wit:

(1) that the goods and chattels which the writ of execution directed to be seized are
those of petitioner Marta Avendao alone, whereas the salary being garnished was
"conjugal property" and therefore not covered by the writ;

(2) that garnishment of salaries, is not sanctioned by law in fact, there is a prohibition to
that effect on the ground of public policy;

(3) that even if salary is subject to garnishment, it becomes effective only if it is in excess
for the needs of petitioner and her family.

The petition and the subsequent motion for reconsideration were both denied by the respondent
Judge.

Claiming that respondent Judge, in denying their petition to declare invalid the Writ of
Garnishment and motion for reconsideration, acted without, or in excess of jurisdiction and/or
with grave abuse of discretion, petitioners commenced with this Court, the present proceedings
for Certiorari and Mandamus, with Preliminary Mandatory Injunction, praying that the Writ of
Garnishment be declared null and void; and that pending the final resolution of the matter, a writ
of preliminary injunction be issued.

On April 24, 1963, this Court gave due course to the petition and issued a Writ of Preliminary
Injunction, directing the respondent Sheriff of Manila and the Manila Railroad Company to
refrain from enforcing the Writ of Garnishment with respect to the salary of petitioner Marta
Avendao until further orders from this Court.

The Manila Railroad Company and San Pedro filed separate answers. The former, after denying
all the allegations in the Petition, for alleged lack of knowledge or information sufficient to form a
belief as to the truth thereof, prayed that judgment be rendered as justice and equity demanded
in the, premises. The latter maintained in her answer that the salary of petitioner Marta
Avendao is liable for garnishment, provided the same has already been set side or segregated
from the mass of the public fund; that even if the salary were conjugal, the same could be made
liable to answer for the indebtedness of the spouses.

We are of the opinion that the writ of Garnishment is illegal. It has been shown by
unrebutted proofs, that the salary of petitioner Marta Avendao was not sufficient for her
expenses and that of her family. Under the Revised Rules, the following, among others, is
declared exempt from execution.

(1) So much of the earnings of the debtor for his personal services within the month
preceding the levy as are necessary for the support of his family (Sec. 12, Rule 39).

The salary of Marta Avendao is P200.00 a month, but her take-home pay after the legal
deductions is only P151.50. A summary of her share in the monthly maintenance of the family is
in Annex K-1, which indicates that she should at least contribute P220.00. The amount
garnished is therefore, much less than what she ought to contribute, and obviously, it is exempt
from execution. Being exempt from execution, it should not also be reached by garnishment.
Petitioners have pointed out to the respondent judge the matter of exemption of Marta
Avendao's salary, in spite of which his Honor denied their petition to declare the garnishment
illegal. There was, therefore grave abuse of discretion on the part of the, respondent judge in
that aspect, and lack or excess of jurisdiction on the part of the Sheriff in suing out the Writ of
Garnishment. In the case of Garcia vs. Castillo, 43 Phil. 364, it has been held that the issuance
of a writ of execution on P50.00 of the total P65.00 received as monthly salary from the
employer, was premature and unlawful, the court saying:

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Only salary "due" the judgment debtor is subject to attachment and execution, and then
only if it is not made to appear by the affidavit of the debtor or otherwise that such
earnings are necessary for the support of his family. ... .

Morever, in the case of Dir. of Commerce and Industry vs. Concepcion, 43 Phil. 384., this Court
ruled:

A rule, which has never been seriously questioned, is that money in the hands of public
officers, although it may be due government employees, is not liable to the creditors of
these employees in the process of garnishment, ... . Another reason is that moneys
sought to be garnished as long as they remain in the hands of the disbursing officer of
the Government, belong to the latter, although the defendant may be entitled to a
specific portion thereof. And still another reason which covers both of the foregoing is
that every consideration of public policy forbids it.

xxx xxx xxx

To state such a principle is to refute it. No government can sanction it. At all times it
would be found embarrassing, and under some circumstances, it might be fatal to the
public service. ... .

In view of the conclusions hitherto reached, the other questions raised need no longer be
considered.

WHEREFORE, the Writ of Garnishment in question is hereby declared null and void, and the
Writ of Preliminary Injunction earlier issued, is made permanent. No special pronouncement as
to costs.

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Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-9031 May 22, 1922

THE DIRECTOR OF THE BUREAU OF COMMERCE AND INDUSTRY, petitioner,

vs.
Honorable PEDRO CONCEPCION, Judge of the Court of First Instance of the city of
Manila, ET AL.,respondents.

Attorney-General Villa-Real for petitioner.

Vicente J. Francisco for respondents.

MALCOLM, J.:

In this case the question is distinctly presented, whether or not the salary due from the
Government of the Philippine Islands to a public officer or employee can by garnishment,
be seized before being paid to him and appropriated to the payment of his judgment
debts.

Alfredo S. Galvez, an officer in the coastguard service in the employ of the Bureau of
Commerce and Industry, had, on November 21, 1921, to his credit, accrued leave salary of
P1,359.92, which had not been paid to him because of the loss of equipment for which he was
accountable. Shortly after the above-mentioned date, Benito GimenezZoboli instituted an action
in the Court of First Instance of Manila against Galvez for the recovery of the sum of P1,230.
Judge of First Instance Concepcion, at the instance of plaintiff Gimenez, issued a writ of
attachment which authorized the sheriff of Manila to attach all the rights of defendant Galvez to
his accrued leave salary in a sum no in excess of P1,300. The said merit of attachment was
served on the Director of the Bureau of Commerce and Industry, on January 6, 1922. The
Attorney-General, on behalf of the Director of this Bureau, presented a motion in the Court of
First Instance to dissolve the attachment on the ground that it was improperly issued, because
officers of the Government are not subject to such process. This motion was denied by Judge
Concepcion.

The Director of the Bureau of Commerce and Industry has now instituted an action in certiorari
in this court, in which it is contended that the order of attachment of the accrued leave salary of
Galvez is improper, unauthorized, and illegal, because (a) it is an indirect suit against the
Government of the Philippine Islands without its consent; (b) the money garnished does not
belong to Galvez until paid over to him; (c) it is embarrassing and sometimes fatal to public
service; and (d) it is contrary to public policy. It is then prayed that the order of attachment which
has been issued be revoked and discharged.

The respondents have interposed a demurrer. The first ground of the demurrer is based on the
premise that a plain, speedy, and adequate remedy, which is by appeal to this court, exists. No
time need, however, be taken up with a discussion on this point, in view of the decision in the
case of Leung Ben vs. O'Brien ([1918]), 38 Phil., 182) On the authority of this decision, the
petitioner may, by means of certiorari, ask the dissolution of an attachment which, it is
contended, is unauthorized by law. The second ground of the demurrer, going to the merits of
the case, is based on the principal premise that the Code of Civil Procedure, in enumerating the
property which is exempt from execution, fails to name the salary of a government employee.

The case is not at all difficult of resolution if fundamental principles are kept to the forefront.

The proceeding known in American civil procedure as the process of garnishment, while not
mentioned by that name in the Philippine Code of Civil Procedure, is nevertheless, covered by

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the provisions of the Code. By the process of garnishment, the plaintiff virtually sues the
garnishee for a debt due to defendant. The debtor stranger becomes a forced intervenor. The
Director of the Bureau of Commerce and Industry, an officer of the Government of the Philippine
Islands, when served with the writ of attachment, thus became a party to the action. (Tayabas
Land Co. vs. Sharruf [1921], 41 Phil., 382.)lvvph1n+

A rule, which has never been seriously questioned, is that money in the hands of public officers,
although it may be due government employees, is not liable to the creditors of these employees
in the process of garnishment. One reason is, that the State, by virtue of its sovereignty, may
not be sued in its own courts except by express authorization by the Legislature, and to subject
its officers to garnishment would be to permit indirectly what is prohibited directly. Another
reason is that moneys sought to be garnished, as long as they remain in the hands of the
disbursing office of the Government, belong to the latter, although the defendant in garnishment
may be entitled to a specific portion thereof. And still another reason which covers both of the
foregoing is that every consideration of public policy forbids it.

The United States Supreme Court, in the leading case of Buchanan vs. Alexander ([1846], 4
How., 19), in speaking of the right of creditors of seamen, by process of attachment, to divert the
public money from its legitimate and appropriate object, said:

To state such a principle is to refute it. No government can sanction it. At all times it
would be found embarrassing, and under some circumstances it might be fatal to the
public service. . . . So long as money remains in the hands of a disbursing officer, it is as
much the money of the United States, as if it had not been drawn from the treasury. Until
paid over by the agent of the government to the person entitled to it, the fund cannot, in
any legal sense, be considered a part of his effects. (See, further, 12 R. C. L., p. 841;
Keene vs. Smith [1904], 44 Ore., 525, Wild vs. Ferguson [1871], 23 La. Ann., 752; Bank
of Tennessee vs. Dibrell [1855], 3 Sneed [Tenn.], 379.)

The first mistake made by the trial judge in his analysis of the citations invoked in favor of the
motion of the Attorney-General for the dissolution of the order of garnishment, was in
considering it essential that the official be a party defendant. As explained, the order of
garnishment had the effect of drawing the officer into the case. The second mistake of the trial
judge was in considering it essential that the Code of Civil Procedure exclude salaries of
government officials from execution, whereas the principle governing the case is one lying at the
foundation of orderly government, and requiring no express statement in legislation.

It results, therefore, that the order of attachment was improperly and illegally issued.
Accordingly, the demurrer must be overruled and unless the respondents shall, within five days,
file an answer, the writ prayed for shall issue, with costs against the respondents. So ordered.

THIRD DIVISION

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NATIONAL HOME MORTGAGE G.R. No. 166508

FINANCE CORPORATION,

Petitioner,

- versus -

MARIO ABAYARI, MAY ALMINE,

MA. VICTORIA ALPAJARO,
FLORANTE AMORES, ANGELINA
ANCHETA, ANGELINE ODIEM-
ARANETA, CECILIA PACIBLE,
MIRIAM BAJADO, EDUARDO
BALAURO, EVANGELINA BALIAO,
LUISA BANUA, RIZALINA
BENLAYO, MARJORIE BINAG,
CRESENCIA BISNAR, CARMELITA
BREBONERIA, JOSELYN BUNYI,
EMILIO CABAMONGAN, JR., PAZ
DIVINA CABANERO, RAUL
CABANILLA, LEONILA WYNDA
CADA, CELSTINA CASAO,
ELIZABETH CASAS, ARNULFO
CATALAN, FRANCIS DE LA CHICA,
JAIME CORTES, JAIME DE LA
CRUZ, JHONNY CUSTODIO, MA.
BELINDA DAPULA, REMEDIOS
DEBUQUE, REBECCA DECARA,
JOCELYN DIEGO, JAIME DUQUE,
LUCIA ENRIQUEZ, MA. LUCIA
ESPEROS, HELEN EVANGELISTA,
CELSO FERNANDEZ, EDILBERTO

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SAN GABRIEL, REYNALDO SAN

GABRIEL, EDMUNDO GARAIS,
JENNILYN GOZADO, EVELYN
GUEVARRA, MA. MAGDALENA
HIDONA, VICTORINO INDEFONSO,
JR., GRACE CECILLE JAVIER,
MARIETA JOSE, MA. CECILIA
KAPAW-AN, EVANGELINE LABAY,
SENORA LUCUNSAY, MILAGROSO
ALLAN LAMBAN, VIOLETA DE
LEON, CHARITO LONTAYAO,
REMEDIOS LOYOLA, NORA
MALALUAN, ALBERTO
MALIFICIADO, DENNIS
MANZANO, MA. CONCEPCION
MARQUEZ, REYNALDO
MASILANG, MAGDALENA
MENDOZA, MELCHOR NANUD,
MILAGROS NEPOMUCENO,
ROSEMARIE NEPOMUCENO,
APOLO NISPEROS, ANNALIZA
NOBRERA, EVANGELINE NUESCA,
YUMINA PABLO, GLORIA
PANGANIBAN, ROGELIO PAQUIZ,
ROLANDO PAREDES, NORA
PEDROSO, MARIA HILNA DELA
PEA VICTORIA, PEARADA,
MELVIN PERALTA, DOROTHY
PEREZ, FREDERICK MICHAEL
PORTACION, ROMMEL RABACA,
RODERICK REALUBIT,
GWENDOLYN REMORIN,
ANTONIO DE LOS REYES,
NERISSA REYES, NENITA
ROBRIGADO, ALLAN ROMERO,
MA. ROSARIO ROMULO, LUIS DEL
ROSARIO, CRISTINA ROSAS,
DEXTER SALAZAR, MAGDALENA
SALOMON, OLIVIA SALOMON,
ELENITA SANCHEZ, ANGELINA
SANTELICES, ANABELLE SANTOS,
SHARLENE SANTOS, JAIME SINGH
DELMASINGUN, EVELYN SO,
MILAGROS SOLMIRANO,
CHRISTINE TALUSIK, CYRIL
ROMUADO TEJA EFREN
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TESORERO, PENNYLANE
TIONGSON, CYPRIANO TOMINES,
RONILO UMALI, MA. LOURSES
VALDUAZA, MA. ANTONIA
VALENZUELA, EDWIN
VANGUARDIA, CARLO VEGA,
ANNAMOR VELASCO, ESTEFANIA
VILLANUEVA, CANDELARIA
YODICO,

Respondents.

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Present:

YNARES-SANTIAGO, J.,

Chairperson,

CHICO-NAZARIO,

VELASCO, JR.,

NACHURA, and

PERALTA, JJ.

Promulgated:

October 2, 2009
x-----------------------------------------------------x

DECISION

PERALTA, J.:

In this petition for review under Rule 45 of the Rules of Court, the National
Home Mortgage Finance Corporation assails the August 20, 2004 Decision of the
Court of Appeals in CA-G.R. SP No. 82637, which dismissed its petition for
certiorari from the October 14, 2003 and December 15, 2003 Orders issued by the
Regional Trial Court (RTC) of Makati City, Branch 138. The said Orders, in turn,

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respectively granted the issuance of a writ of execution and denied petitioners

motion for reconsideration in Civil Case No. 99-1209 a case for mandamus.

The antecedents follow.

Petitioner, the National Home Mortgage Finance Corporation (NHMFC), is

a government-owned and controlled corporation created under the authority of
Presidential Decree No. 1267 for the primary purpose of developing and providing
a secondary market for home mortgages granted by public and/or private home-
financing institutions. In its employ were respondents, mostly rank-and-file
employees, who all profess as having been hired after June 30, 1989.

On July 1, 1989, Republic Act No. 6758, otherwise known as The

Compensation and Position Classification Act of 1989, was enacted and was
subsequently approved on August 21, 1989. Section 12 thereof directed that all
allowances namely representation and transportation allowance, clothing and
laundry allowance, subsistence allowance, hazard pay and other allowances as may
be determined by the budget department enjoyed by covered employees should
be deemed included in the standardized salary rates prescribed therein, and that the
other additional compensation being received by incumbents only as of July 1,
1989 not integrated into the standardized salary rates should continue to be
authorized. To implement the law, the Department of Budget and Management
(DBM) issued Corporate Compensation Circular No. 10. Section 5.5 thereof
excluded certain allowances and benefits from integration into the standardized
basic salary but continued their grant to those who were incumbents as of June 30,
1989 and who were actually receiving the benefits as of said date. These are the
allowances involved in this case.

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Respondents filed a petition for mandamus with the RTC of Makati City,
Branch 138 to compel petitioner to pay them meal, rice, medical, dental, optical
and childrens allowances, as well as longevity pay, which allegedly were already
being enjoyed by other NHMFC employees as early as July 1, 1989. In its April
27, 2001 Decision, the trial court ruled favorably and ordered petitioner to pay
respondents the allowances prayed for, retroactive to the respective dates of
appointment. The dispositive portion of the Decision reads:

WHEREFORE, judgment is hereby rendered in favor of the petitioners

and respondent is ordered to pay petitioners their meal allowance, rice allowance,
medical allowance, longevity pay and childrens allowance retroactive to the dates
of their respective appointments up to the present or for the time that they were
employed by the respondent.

SO ORDERED.

In arriving at the conclusion that respondents were entitled to the prayed-for

benefits, the trial court explained, thus,

The use of the word only before the words July 1, 1989 in section 12 of
Republic Act No. 6758 appears to be the source of the dispute.

Section 12 is clear that other additional compensation being received by

incumbents only as of July 1, 1989 that are not integrated into the standardized
salary rates shall continue to be authorized. The law is prospective in effect and it
does not say that such additional compensation shall not continue to be authorized
for employees appointed after June 30, 1989. The use of the word only before
the words as of July 1, 1989 qualifies the additional compensation which can be
continued. The foregoing applies to all employees whether permanent or casual.

DBM Circular No. 10, the Implementing Rules and Regulations

particularly section 5.5 thereofuse the word only for incumbents as of June
30, 1989 and by implication the same shall not apply to employees appointed after
June 30, 1989. This is in effect another qualification limiting the grant of benefits
to those who are incumbents as of June 30, 1989, a condition not imposed by
Section 12 of Republic Act No. 6758 for which reason it has to be strike (sic)
down.

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Petitioner timely filed an appeal with the Court of Appeals. In its November
21, 2001 Decision, the appellate court affirmed the trial courts ruling. No appeal
was taken from the decision and upon its finality, respondents moved for
execution.

However, the motion for execution was withdrawn when on May 12, 2002,
petitioner and respondents executed a Compromise Agreement in which petitioner
bound itself to comply with the decision rendered in the case, except that the
payment of the allowances adjudicated in favor of respondents would be made in
four installments instead. It was, likewise stipulated therein that the parties waive
all claims against each other. The trial court did not take any positive action on the
compromise except to note the same since the parties did not intend to novate the
April 27, 2001 Decision. On that basis, petitioner had started paying respondents
the arrears in benefits.

Conflict arose when the DBM sent a letter dated July 15, 2003 to NHMFC
President Angelico Salud disallowing the payment of certain allowances, including
those awarded by the trial court to respondents. A reading of the letter reveals that
the disallowance was made in accordance with the 2002 NHMFC Corporate
Operating Budget previously issued by the DBM.

To abide by the DBMs directive, petitioner then issued a memorandum

stating that effective August 2003, the grant of benefits to its covered employees,
including those awarded to respondents, would be curtailed pursuant to the
DBM letter. This eventuality compelled respondents to file for the second time a
motion for a writ of execution of the trial courts April 27, 2001 decision.

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In its October 14, 2003 Order, the trial court found merit in respondents
motion; hence, it directed the execution of the judgment. Petitioner moved for
reconsideration but it was denied. On February 16, 2004, the trial court issued a
Writ of Execution/Garnishment with a directive to the sheriff to tender to
respondents the amount of their collective claim equivalent to P4,806,530.00 to be
satisfied out of petitioners goods and chattels and if the same be not sufficient, out
of its existing real property. Respondents then sought the garnishment of its funds
under the custody of the Land Bank of the Philippines.

Bent on preventing execution, petitioner filed a petition for certiorari with

the Court of Appeals, docketed as CA-G.R. SP No. 82637. In it, petitioner
ascribed grave abuse of discretion to the trial court in ordering the execution of the
judgment. It pointed out that the trial court disregarded the fact that the DBMs
issuance amounted to a supervening event, or an occurrence that changed the
situation of the parties that would make the continued payment of allowances to
respondents impossible and illegal, and disregarded the DBMs exclusive authority
to allow or disallow the payment of the benefits in question. It likewise faulted the
trial court in ordering the garnishment of its funds despite the settled rule that
government funds may not be garnished in the absence of an appropriation made
by law.

The Court of Appeals, however, found no grave abuse of discretion on the

part of the trial court; hence, in its August 20, 2004 Decision, it dismissed the
petition for lack of merit.

In its present recourse, petitioner, on the one hand, insists that it is difficult
not to consider the issuance of the DBM in this case as a supervening event that
would make the execution of the trial courts decision inequitable and/or
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impossible, since the determination of entitlement to benefits and allowances

among government employees is within the agencys exclusive authority. It argues
that, hence, both the trial court and the Court of Appeals were in error to order the
execution of the decision as the same totally disregards the rule that issuances of
administrative agencies are valid and enforceable. Again, it asserts that the
garnishment of its funds was not in order as there was no existing appropriation
therefor.

Respondents, on the other hand, argue in the main that inasmuch as the core
issue of whether they were entitled to the schedule of benefits under Section 12 of
R.A. No. 6758 had already been settled by both the trial court in Civil Case No.
99-1209 and the Court of Appeals in CA-G.R. SP No. 66303, the DBM letter
should not be allowed to interfere with the decision and render the same
ineffective. Since the said decision had already attained finality, they posit that
execution appeared to be the only just and equitable measure under the premises
and that garnishment lies against petitioners funds inasmuch as it has a personality
separate and distinct from the government.

There is partial merit in the petition.

To begin with, a writ of mandamus is a command issuing from a court of

law of competent jurisdiction, in the name of the state or sovereign, directed to an
inferior court, tribunal, or board, or to some corporation or person, requiring the
performance of a particular duty therein specified, which duty results from the
official station of the party to whom the writ is directed, or from operation of
law. It is employed to compel the performance, when refused, of a ministerial
duty which, as opposed to a discretionary one, is that which an officer or tribunal
performs in a given state of facts, in a prescribed manner, in obedience to the

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mandate of legal authority, without regard to or the exercise of his or its own
judgment upon the propriety or impropriety of the act done.

A favorable judgment rendered in a special civil action for mandamus is in

the nature of a special judgment. As such, it requires the performance of any other
act than the payment of money or the sale or delivery of real or personal property
the execution of which is governed by Section 11, Rule 39 of the Rules of Court
which states:

SECTION 11. Execution of Special Judgment.When the

judgment requires the performance of any act other than those
mentioned in the two preceding sections, a certified copy of the
judgment shall be attached to the writ of execution and shall be
served by the officer upon the party against whom the same is
rendered, or upon any other person required thereby, or by law, to
obey the same, and such party or person may be punished for
contempt if he disobeys such judgment.

While the April 17, 2001 Decision of the trial court ordered petitioner to pay
the benefits claimed by respondents, it by no means ordered the payment of a
specific sum of money and instead merely directed petitioner to extend to
respondents the benefits under R.A. No. 6758 and its implementing rules. Being a
special judgment, the decision may not be executed in the same way as a judgment
for money handed down in an ordinary civil case governed by Section 9, Rule 39
of the Rules Court which sanctions garnishment of debts and credits to satisfy a
monetary award. Garnishment is proper only when the judgment to be enforced is
one for payment of a sum of money. It cannot be employed to implement a special
judgment such as that rendered in a special civil action for mandamus.

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On this score, not only did the trial court exceed the scope of its judgment
when it awarded the benefits claimed by respondents. It also committed a blatant
error when it issued the February 16, 2004 Order directing the garnishment of
petitioners funds with the Land Bank of the Philippines equivalent to
P4,806,530.00, even though the said amount was not specified in the decision it
sought to implement.

Be that as it may, assuming for the sake of argument that execution by

garnishment could proceed in this case against the funds of petitioner, it must bear
stress that the latter is a government-owned or controlled corporation with a charter
of its own. Its juridical personality is separate and distinct from the government
and it can sue and be sued in its name. As such, while indeed it cannot evade the
effects of the execution of an adverse judgment and may not ordinarily place its
funds beyond an order of garnishment issued in ordinary cases, it is imperative in
order for execution to ensue that a claim for the payment of the judgment award be
first filed with the Commission on Audit (COA).

Under Commonwealth Act No. 327, as amended by P.D. No. 1445, the
COA, as one of the three independent constitutional commissions, is specifically
vested with the power, authority and duty to examine, audit and settle all accounts
pertaining to the revenue and receipts of, and expenditures or uses of funds and
property owned or held in trust by the government, or any of its subdivisions,
agencies or instrumentalities, including government-owned and controlled
corporations. To ensure the effective discharge of its functions, it is vested with
ample powers, subject to constitutional limitations, to define the scope of its audit
and examination and establish the techniques and methods required therefor, to
promulgate accounting and auditing rules and regulations, including those for the
prevention and disallowance of irregular, unnecessary, excessive, extravagant or

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unconscionable expenditures or uses of government funds and properties . Section

1, Rule II of the COA Rules of Procedure materially provides:

Section 1. General Jurisdiction.The Commission on Audit shall have

the power, authority and duty to examine, audit and settle all accounts pertaining
to the revenue and receipts of, and expenditures or uses of funds and property,
owned or held in trust by, or pertaining to the Government, or any of its
subdivisions, agencies or instrumentalities, including government owned and
controlled corporations with original charters, and on a post-audit basis: (a)
constitutional bodies, commissions and offices that have been granted fiscal
autonomy under the Constitution; (b) autonomous state colleges and universities;
(c) other government-owned or controlled corporations and their subsidiaries; and
(d) such non-governmental entities receiving subsidy or equity directly or
indirectly, from or through the government, which are required by law or the
granting institution to submit to such audit as a condition of subsidy or equity.
However, where the internal control system of the audited agencies is inadequate,
the Commission may adopt such measures, including temporary or special pre-
audit, as are necessary or appropriate to correct the deficiencies. It shall keep the
general accounts of the Government, and for such period as may be provided by
law, preserve the vouchers and other supporting papers pertaining thereto.

xxxx

Specifically, such jurisdiction shall extend over but not limited to the
following: x x x Money claims due from or owing to any government agency
x x x.

Clearly, the matter of allowing or disallowing a money claim against

petitioner is within the primary power of the COA to decide. This no doubt
includes money claims arising from the implementation of R.A. No. 6758.
Respondents claim against petitioner, although it has already been validated by the
trial courts final decision, likewise belongs to that class of claims; hence, it must
first be filed with the COA before execution could proceed. And from the decision
therein, the aggrieved party is afforded a remedy by elevating the matter to this
Court via a petition for certiorari in accordance with Section 1 Rule XI, of the
COA Rules of Procedure. It states:

Section 1. Petition for Certiorari. - Any decision, order or resolution of

the Commission may be brought to the Supreme Court on certiorari by the
aggrieved party within thirty (30) days from receipt of a copy thereof in the
manner provided by law, the Rules of Court and these Rules.

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When the decision, order or resolution adversely affects the interest of any
government agency, the appeal may be taken by the proper head of the agency.

At this juncture, it is unmistakable that the recourse of respondents in CA-

G.R. SP No. 82637 as well as in the petition before us is at best premature. Thus,
the Court cannot possibly rule on the merits of the petition lest we would only be
preempting the action of the COA on the matter. Suffice it to say that the propriety
or regularity of respondents claim under the judgment of the trial court may
properly be addressed by the COA in an appropriate action. And even if we
endeavor to take great lengths in deciding the merits of the case and determine the
propriety of the DBMs issuance, its sufficiency to prevent the execution of the
final judgment rendered in this case, and the entitlement or non-entitlement of each
one of the respondents to the benefits under R.A. No. 6758, the same would
nevertheless be a futile exercise. This, because after having pored over the records
of the case, we found nothing sufficient to support respondents uniform claim that
they were incumbents as of July 1, 1989 the date provided in Section 12 of R.A.
6758 except perhaps their bare contention that they were all hired after June 30,
1989.

With this disquisition, we find no compelling reason to unnecessarily

lengthen the discussion by undeservingly proceeding further with the other issues
propounded by the parties.

WHEREFORE, the petition is GRANTED IN PART. The Writ of

Execution dated February 16, 2004 issued in Civil Case No. 99-1209 is hereby
SET ASIDE. The Regional Trial Court of Makati, Branch 138 is DIRECTED to
issue a writ of execution in accordance with this Decision and execute the
judgment pursuant to Section 11, Rule 39, of the Rules of Court.

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SO ORDERED.

Exempt from garnishments

1.HOME DEVELOPMENT MUTUAL

FUND LAW
OF 1980
PRESIDENTIAL DECREE NO. 1752, AS AMENDED

AMENDING THE ACT CREATING THE HOME DEVELOPMENT

MUTUAL FUND
(As amended by Executive Order No. 35 and Republic Act No.
7742)

SEC. 16. Tax and Guarantee Benefits. - Notwithstanding any provisions of existing
law, decree, executive or administrative order, rule or regulation to the contrary, the
Fund and all its assets, collections, receivables and increments as well as all
distributions therefrom, whether of contributions, ratable income of the Fund, or
dividends paid or received by the members thereof, or their heirs/beneficiaries, shall
be exempt from the payment of any and all forms of taxes, assessments and other
charges. All such provident payments shall not be liable to attachment, garnishment,
levy or seizure by or under any legal or equitable process whatsoever, either before or
after receipt by the persons entitled thereto, except to pay any debt of the covered
member to the Fund. In addition, the Government of the Republic of the Philippines
hereby guarantees the payment of employees and employers contributions and
dividends to the members when they are due.

EN BANC

[G.R. No. 138381. April 16, 2002]

GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, vs. COMMISSION ON

AUDIT, respondent.

[G.R. No. 141625. April 16, 2002]

GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, vs. ALFREDO D. PINEDA,

DANIEL GO, FELINO BULANDUS, FELICIMO J. FERRARIS, JR., BEN HUR PORLUCAS,
LUIS HIPONIA, MARIA LUISA A. FERNANDEZ, VICTORINA JOVEN, CORAZON S.
ALIWANAG, SILVER L. MARTINES, SR., RENATO PEREZ, LOLITA CAYLAN, DOUGLAS
VALLEJO and LETICIA ALMAZAN, on their own behalf and on behalf of all GSIS retirees
with all of whom they share a common and general interest, respondents.

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DECISION

YNARES-SANTIAGO, J.:

At the core of these two consolidated petitions is the determination of whether the Commission
on Audit (COA) properly disallowed on post-audit, certain allowances and/or fringe benefits
granted to employees of the Government Service Insurance System (GSIS), after the effectivity
of Republic Act No. 6758, otherwise known as the Salary Standardization Law on July 1, 1989.

I. G.R. No. 138381

In this special civil action for certiorari under Rule 65 in relation to Rule 64 of the 1997 Rules of
Civil Procedure, petitioner GSIS seeks the annulment of COA Decision No. 98-337 dated August
25, 1998, which affirmed the Resident Auditors disallowance of monetary benefits granted to or
paid by GSIS in behalf of its employees.

After the effectivity of R.A. No. 6758 on July 1, 1989, petitioner GSIS increased the following
benefits of its personnel: a) longevity pay; b) childrens allowance; c) housing allowance for
its branch and assistant branch managers; and d) employers share in the GSIS Provident Fund
from 20% to 45% of basic salary for incumbent employees as of June 30, 1989.

The GSIS also remitted employers share to the GSIS Provident Fund for new employees hired
after June 30, 1989, continued the payment of premiums for group personnel accident insurance
and granted loyalty cash award to its employees in addition to a service cash award.

Upon post-audit and examination, the GSIS Corporate Auditor disallowed the aforementioned
allowances and benefits, citing Section 12 of R.A. No. 6758 in relation to sub-paragraphs 5.4 and
5.5 of its implementing rules, DBM Corporate Compensation Circular No. 10 (CCC No. 10).
The first paragraph of Section 12, R.A. No. 6758 reads:

SEC. 12. Consolidation of Allowances and Compensation.- All allowances, except for
representation and transportation allowances; clothing and laundry allowances; subsistence
allowance of marine officers and crew on board government vessels and hospital personnel;
hazard pay; allowances of foreign service personnel stationed abroad; and such other additional
compensation not otherwise specified herein as may be determined by the DBM, shall be
deemed included in the standardized salary rates herein prescribed. Such other additional
compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989,
not integrated into the standardized salary rates shall continue to be authorized. x x x

Sub-paragraphs 5.4 and 5.5 of CCC No. 10, meanwhile, supplemented Section 12 above by
enumerating the additional compensation authorized to be continued for incumbent employees as
of July 1, 1989.

According to the Corporate Auditor, R.A. No. 6758 authorized the continued grant of
allowances/fringe benefits not integrated into the standardized salary for incumbents as of June
30, 1989. However, these non-integrated benefits may not be increased after effectivity of the
statute, without prior approval of the DBM or Office of the President or in the absence of
legislative authorization in accordance with CCC No. 10. Explaining this position, the Corporate
Auditor invoked COA Memorandum No. 90-653 dated June 4, 1990, which states:

x x x While it is true that R.A. 6758 and Corporate Compensation Circular (CCC) No. 10 are
silent with respect to the increase of allowances/fringe benefits not integrated into the basic
salary and allowed to be continued only for incumbents as of June 30, 1989, it would be
inconsistent to allow further increase in said allowances and fringe benefits after July 1, 1989

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since continuance thereof for incumbents is merely being tolerated until they vacate their present
positions for which they have been authorized to receive allowances/fringe benefits.

The Corporate Auditor also did not allow in audit the remittance of employers share to the GSIS
Provident Fund for new-hires because the continuation of said benefit was only in favor of
incumbents, as explicitly stated in the law. The payment of group insurance premiums covering
all employees was likewise disallowed, for the reason that under sub-paragraph 5.6 of CCC No.
10, all fringe benefits granted on top of basic salary not otherwise enumerated under sub-
paragraphs 5.4 and 5.5 thereof were already discontinued effective November 1, 1989. As for the
loyalty cash award and the service cash award, the Corporate Auditor opined that only one of the
two monetary incentives may be availed of by GSIS personnel.

On February 26, 1993, Mr. Julio Navarrete, Vice-President of the GSIS Human Resources
Group, wrote to respondent COA appealing, in behalf of GSIS, the afore-stated disallowances by
the Corporate Auditor. Mr. Navarrete averred that although it may be conceded that the Salary
Standardization Law did not extend the subject benefits to new-hires after the laws effectivity,
the increase thereof should nonetheless be allowed for incumbents since these benefits have been
enjoyed by said employees even prior to the passage of said law.

In the case of Philippine Ports Authority v. Commission on Audit, which involved a similar
increase, after the enactment of R.A. No. 6758, in the representation and transportation
allowance (RATA) of Philippine Ports Authority (PPA) employees, it was held that:

x x x the date July 1, 1989 does not serve as a cut-off date with respect to the amount of RATA.
The date July 1, 1989 becomes crucial only to determine that as of said date, the officer was an
incumbent and was receiving the RATA, for purposes of entitling him to its continued grant. This
given date should not be interpreted as fixing the maximum amount of RATA to be received by
the official.

It was further alleged that contrary to the Corporate Auditors contention, the GSIS Board of
Trustees retained its power to fix and determine the compensation package for GSIS employees
despite the passage of the Salary Standardization Law, pursuant to Section 36 of Presidential
Decree No. 1146, as amended by Presidential Decree No. 1981, to wit:

Sec. 36. x x x

The Board of Trustees has the following powers and functions, among others:

xxx xxx xxx

(d) Upon the recommendation of the President and General Manager, to approve the Systems
organizational and administrative structure and staffing pattern, and to establish, fix, review,
revise and adjust the appropriate compensation package for the officers and employees of the
System, with reasonable allowances, incentives, bonuses, privileges and other benefits as may be
necessary or proper for the effective management, operation and administration of the System.
For the purpose of this and the preceding subsection, the System shall be exempt from the rules
and requirements of the Office of the Budget and Management and the Office of the
Compensation and Position Classification;

xxx xxx xxx

Pursuant thereto, the GSIS Board of Trustees may validly increase and grant the subject benefits,
even without securing the imprimatur of the DBM, Office of the President or Congress.

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On August 25, 1998, the COA affirmed the disallowances made by the Corporate Auditor and
held that Section 36 of P.D. No. 1146, as amended, was already repealed by Section 16 of R.A.
No. 6758. The COA similarly concluded that the GSIS Board of Trustees may not unilaterally
augment or grant benefits to its personnel, without the necessary authorization required under
CCC No. 10.

GSIS filed a motion for reconsideration of the COA decision, invoking the ruling in De Jesus, et
al. v. COA and Jamoralin. Corporate Compensation Circular No. 10 (CCC No. 10) was declared
to be of no legal force or effect due to its non-publication in the Official Gazette or a newspaper
of general circulation. In view of this development, GSIS posited that the questioned
disallowances no longer had any leg to stand on and that COA should consequently lift the
disallowances premised on CCC No. 10.

On March 23, 1999, the COA denied the motion for reconsideration stating:

Although CCC No. 10 has been declared ineffective due to its non-publication as provided for in
Article 2 of the Civil Code of the Philippines, the disallowances on the increased rates of the
allowances/fringe benefits can still be sustained because as ruled earlier, the power of the
governing boards of corporations to fix compensation and allowances of personnel, including the
authority to increase the rates, pursuant to their specific charters had already been repealed by
Sec. 3 of P.D. 1597 and Section 16 of R.A. 6758. The other reasons or grounds relied upon by
the petitioner upon which the Motion is predicated have already been judiciously passed upon by
this Commission when it rendered the subject COA Decision No. 98-337.

Accordingly, there being no new, sufficient and material evidence adduced as would warrant a
reversal or modification of the decision herein sought to be reconsidered, this Commission
denies with finality the instant motion for reconsideration for utter lack of merit.

Hence, this petition, challenging the above decision and resolution of the COA on the following
grounds:

A.) RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING

TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT THE POWER
SPECIFICALLY GRANTED BY PRESIDENTIAL DECREE NO. 1146, AS AMENDED, TO
THE GSIS BOARD OF TRUSTEES, TO ESTABLISH AND FIX THE APPROPRIATE
COMPENSATION PACKAGE FOR GSIS OFFICERS AND EMPLOYEES HAS ALREADY
BEEN REPEALED BY REPUBLIC ACT NO. 6758.

B.) RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING

TO LACK OR EXCESS OF JURISDICTION IN DENYING PETITONERS MOTION FOR
RECONSIDERATION DESPITE THE DECLARATION BY THIS HONORABLE COURT IN
THE CASE OF RODOLFO S. DE JESUS et al. vs. COMMISSION ON AUDIT and
LEONARDO L. JAMORALIN, THAT CCC NO. 10 - THE MAIN BASIS OF THE
QUESTIONED DISALLOWANCE - IS INVALID AND INEFFECTIVE FOR LACK OF THE
REQUIRED PUBLICATION.

II. G.R. No. 141625

This petition for review on certiorari under Rule 45 of the Rules of Court was precipitated by the
factual antecedents of G.R. No. 138381. While GSIS was appealing the disallowances made by
the Corporate Auditor above, some of its employees retired and submitted the requisite papers
for the processing of their retirement benefits. Since the retired employees received allowances
and benefits which had been disallowed by the Corporate Auditor, GSIS required them to
execute deeds of consent that would authorize GSIS to deduct from their retirement benefits the

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previously paid allowances, in case these were finally adjudged to be improper. Some of the
retired employees agreed to sign the deed, while others did not. Nonetheless, GSIS went ahead
with the deductions.

On April 16, 1998, a number of these retired GSIS employees (hereafter referred to as retirees)
brought Case No. 001-98 before the GSIS Board of Trustees (hereafter referred to as GSIS
Board) questioning the legality of the deductions. They claimed that COA disallowances can
not be deducted from retirement benefits, considering that these were explicitly exempted from
such deductions under the last paragraph of Section 39, Republic Act No. 8291, which states:

SEC. 39. Exemption from Tax, Legal Process and Lien. - x x x

xxx xxx xxx

The funds and/or the properties referred to herein as well as the benefits, sums or monies
corresponding to the benefits under this Act shall be exempt from attachment, garnishment,
execution, levy or other processes issued by the courts, quasi-judicial agencies or administrative
bodies including Commission on Audit (COA) disallowances and from all financial obligations
of the members, including his pecuniary accountability arising from or caused or occasioned by
his exercise or performance of his official functions or duties, or incurred relative to or in
connection with his position or work except when his monetary liability, contractual or
otherwise, is in favor of the GSIS.

The GSIS Board subsequently referred the case for hearing to its Corporate Secretary, Atty.
Alicia Albert. Thereafter, the retirees and GSIS, through its Legal Services Group (LSG), entered
into a stipulation of facts and agreed on a focal issue, namely: whether the COA disallowances
may be legally deducted from the retirement benefits, on the premise that the same are monetary
liabilities of the retirees in favor of GSIS under Section 39 above. GSIS also insisted that since
the deductions were anchored on the disallowances made by the COA, the retirees remedy was
to ventilate the issue before said Commission and not the GSIS Board.

Meanwhile, the De Jesus case mentioned in G.R. No. 138381 was promulgated, rendering CCC
No. 10 legally ineffective. This prompted the hearing officer to suggest that the parties enter into
an agreement as to what allowances and benefits are covered by CCC No. 10, so that a partial
decision can be rendered thereon. The retirees thus filed a motion for partial decision, submitting
that there no longer existed any obstacle to the increase in allowances and benefits covered by
CCC No. 10. These allegedly include: a) GSIS managements share in the Provident Fund; b)
initial payment of the productivity bonus; c) acceleration implementation of the new salary
schedule effective August 1, 1995; d) increase in clothing allowance, rice allowance, meal
subsidy, childrens allowance and longevity pay; e) loyalty award; f) 1995 mid-year financial
assistance; and g) other allowances as may be suggested by the Vice-President of the GSIS
Human Resources Group.

On November 25, 1998, GSIS filed an opposition to the retirees motion for partial decision,
asserting that De Jesus had no bearing on the principal issue which, as agreed upon, was the
interpretation of Section 39 of RA No. 8291. GSIS also filed on even date, a motion to dismiss,
alleging that the nullity of CCC No. 10 rendered the petition moot and academic and paved the
way for the payment of the controverted allowances earlier deducted from the retirement
benefits.

Replying to the two pleadings filed by GSIS, the retirees countered that a motion to dismiss was
a prohibited pleading under Section 14.13, Rule XIV of the GSIS Implementing Rules and
Regulations. Moreover, the retirees maintained that a motion to dismiss may be filed in
proceedings before the GSIS Board only prior to the filing of an answer which GSIS had already

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done. Also, the LSG had previously agreed to a partial decision based on the De Jesus case; it
could thus no longer take a contradictory stand by opposing the retirees motion for partial
decision.

On January 14, 1999, the retirees filed a motion for summary judgment claiming that there were
no factual issues involved and that the question raised in the petition was purely legal in nature.
The matter was directly submitted to the GSIS Board for its consideration and resolution.

On March 3, 1999, the GSIS Board issued Resolution No. 72, dismissing the petition. A motion
for reconsideration filed by the retirees was also denied by the Board in its Resolution No. 161
dated May 18, 1999.

The matter was then elevated to the Court of Appeals, which rendered a decision on September
30, 1999, disposing as follows:

IN THE LIGHT OF ALL THE FOREGOING, the Petition is GRANTED. Resolution No. 72,
Annex A of the Petition and Resolution No. 161 Annex C of the Petition are hereby SET
ASIDE and NULLIFIED. The Hearing Officer of the Board of Trustees of the Respondent is
directed to proceed, with dispatch, with the proceedings of Case No. 001-98, as provided for in
the Rules and regulations implementing Republic Act 8291 (IRR).

SO ORDERED.

The appellate court held that the motion to dismiss filed by the LSG before the GSIS Board is a
prohibited pleading under applicable GSIS rules. The GSIS also had jurisdiction over the
retirees petition, as it pertained to the interpretation and application of Section 39 of R.A. No.
8291, a law exclusively administered by the GSIS Board. Contrary to the LSGs submissions, the
Court of Appeals ruled that there was no identity in subject matter between the retirees petition
and the appeal from the auditors disallowances filed by GSIS with the COA. Thus, the GSIS
Board may take cognizance of the retirees petition independently from the COA proceedings.

Hence, this second petition, assigning the following as errors:

THE COURT OF APPEALS ERRED IN RULING THAT THE BOARD OF TRUSTEES OF

GSIS HAS JURISDICTION OVER THE CASE.

II

THE COURT OF APPEALS ERRED IN RULING THAT THE CASE PENDING BEFORE
THE SUPREME COURT IS DIFFERENT FROM THE PRESENT CASE.

On August 20, 2001, the two petitions were consolidated.

During the pendency of these petitions, GSIS Board Resolution No. 79, which authorized the
Provident Fund rate increase for incumbent employees, was approved retroactively from March
1, 1994 by then President Joseph Estrada. Thus, there no longer appears to be any basis for
disallowing the rate increase in management contribution to the Provident Fund from 20% to
45% of the basic salary received by petitioners incumbent employees. The presidential approval
cured the lack of authorization cited by respondent COA for disallowing this particular increase
in benefit.

We now proceed to the resolution of the twin petitions.

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Petitioner GSIS insists that the GSIS Board retained its power to increase the subject benefits
under Section 36 of P.D. 1146, as amended (or the Revised GSIS Charter), despite the passage of
R.A. No. 6758, particularly Section 16 thereof. The latter, which is a general law, can not repeal
or take precedence over the former because the Revised GSIS Charter is a special law that
specifically exempts GSIS from Office of the Compensation and Position Classification
coverage.

We need not delve lengthily into this submission as this was earlier laid to rest by the Court in
Philippine International Trading Corporation (PITC) v. COA, where we held that the repeal by
Section 16 of RA 6758 of all corporate charters that exempt agencies from the coverage of the
system was clear and expressed necessarily to achieve the purposes for which the law was
enacted, that is, the standardization of salaries of all employees in government owned and/or
controlled corporations to achieve equal pay for substantially equal work. As things now
stand, GSIS is already exempt from salary standardization by express provision of R.A. 8291 a
subsequent enactment approved on May 30, 1997 which amended the Revised GSIS Charter.
But since GSIS was still governed by the latter at the time the increase in benefits were
disallowed in audit, GSIS was then yet covered by the Salary Standardization Law, thereby
making our ruling in PITC presently relevant and applicable.

We now come to the legal propriety of the COA disallowances.

For purposes of clarity, a distinction must initially be made between those allowances which are
deemed consolidated into the standardized salary and those which are not under the terms of
R.A. No. 6758. As correctly pointed out by petitioner GSIS, the housing allowance, longevity
pay and childrens allowance are non-integrated benefits, expressly made so by sub-paragraphs
5.4 and 5.5 of CCC No. 10 in relation to the last sentence of Section 12 (par. 1), R.A. No. 6758.
On the other hand, the payment of group personnel accident insurance premiums, loyalty cash
award and service cash award are not excluded from the standardized salary by the same
provisions of CCC No. 10 or R.A. No. 6758. These latter allowances are thus considered
integrated into the basic salary and are treated differently under the same law.

A. NON-INTEGRATED BENEFITS AND ALLOWANCES

a. Longevity Pay and Childrens Allowance

As regards the increase in longevity pay and childrens allowance, we find applicable our
pronouncement in Philippine Ports Authority (PPA) v. COA. This case involved an adjustment in
the representation and transportation allowance (RATA) of incumbent PPA employees after the
effectivity of R.A. No. 6758 on July 1, 1989. The RATA therein is similar to the longevity pay
and childrens allowance subject of the instant petition, in the sense that: a) it is also a non-
integrated allowance authorized to be continued for incumbents under Section 12, R.A. No.
6758; and b) the rate thereof did not consist of a definite amount but was subject to certain
factors and/or stipulations that were nonetheless fixed before R.A. 6758 took effect.

In the PPA case, the adjustment was brought about by a corresponding increase in the employees
basic salary upon which the 40% RATA was based. Respondent Commission disallowed the
payment of RATA differentials arguing, as in this petition, that the RATA should be fixed at the
prevailing rate prior to July 1, 1989, regardless of the increase in basic salary. It was postulated
therein that consistent with the second sentence of said Section 12 (par. 1), the RATA should no
longer be based on 40% of basic standardized salary but on the highest amount of RATA
received by the incumbent as of July 1, 1989.

We rejected respondent COAs interpretation of Section 12 and held that the date July 1, 1989
should not be construed as a cut-off date for setting the amount of allowances authorized to be

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continued under said provision. The date July 1, 1989 is important only for determining whether
an employee is an incumbent and receiving the allowance prior to the laws effectivity in order to
ascertain if such employee is qualified to its continued grant. It is not, however, to be interpreted
as fixing the maximum amount of allowance that an incumbent employee is authorized to
receive, but is only a qualifying date imposed by the statute.

Accordingly, the specific amount of longevity pay and childrens allowance being received by an
incumbent GSIS employee as of July 1, 1989 is not to be considered as the highest amount
authorized under the law.

It is thus evident that in adjusting the amount of allowances mentioned above, petitioner GSIS
was merely complying with the policy of non-diminution of pay and benefits enunciated in R.A.
No. 6758. This policy does not only pertain specifically to the amount being received by the
incumbent as of July 1, 1989, but also to the terms and conditions attached to these benefits prior
to the passage of the statute. Relative to this, it should be noted that respondent COA did not
dispute the fact that these benefits, including the terms and conditions thereof, are part of a
compensation package granted by the GSIS Board to incumbents even before R.A. 6758 took
effect. In turn, this compensation package was incorporated in the 1978 GSIS Revised
Compensation System approved by the President, upon recommendation of the Department of
Budget and Management (DBM).

Thus, to peg the amount of these non-integrated allowances at the figure being received by the
incumbent as of July 1, 1989 would vary the terms of the benefits to which the incumbents are
entitled. This could not have been the intendment of the statute, because such interpretation
would effectively impair the incumbents rights to these allowances, which have already accrued
prior to July 1, 1989. In other words, before R.A. No. 6758 was enacted, incumbent GSIS
employees had a fixed right to these allowances under the terms and conditions then obtaining.
They could not therefore be excluded from its enjoyment under the same terms and conditions
without violating basic precepts of fairness and due process.

b. Housing Allowance

In contrast to the two preceding non-integrated benefits, it appears that the housing allowance
given to petitioners incumbent branch and assistant branch managers before the passage of R.A.
No. 6758 consisted of a fixed amount of P500.00 and P300.00 respectively. Said amounts were
subsequently increased to P2,000.00 and P3,000.00 by virtue of GSIS Board Resolution No. 294
dated July 26, 1991.

As stated earlier, the power of the GSIS Board to establish, fix, review, revise and adjust the
allowances, privileges and other benefits of its employees under Section 36 of the Revised GSIS
Charter has been repealed by R.A. No. 6758. As a consequence, the GSIS Board may no longer
grant any increase in housing allowance on its own volition after June 30, 1989.

Further, unlike the two preceding non-integrated benefits, it cannot be said that the affected
branch and assistant branch managers acquired a vested right to any amount of housing
allowance in excess of that granted to them before the passage of R.A. No. 6758. They could not
have been entitled to any amount other than that which was already determined before the law
took effect, because the terms of this allowance did not admit of any adjustment. Otherwise
stated, since the amount of said housing allowance was fixed, the disallowance by the COA of
increases therein would not result in any diminution of benefits for these incumbent managers.
Neither can the GSIS Board unilaterally grant said increases by board resolution because it no
longer had any power to do so when it issued Resolution No. 294.

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It appears that respondent COA did not totally disallow the increase in housing allowance, but
merely approved a lesser amount. Respondent COA allowed a 100% increase of P1,000.00 and
P600.00 respectively, in accordance with the amount authorized by the DBM. In fact, the DBM
permitted the increase in express recognition of the fact that this has been the practice in GSIS
before the advent of R.A. No. 6758. Consequently, it is only to the extent of the approved
amount that the housing allowance should be allowed in audit.

B. INTEGRATED BENEFITS AND ALLOWANCES

a. Group Personnel Accident Insurance Premiums

As stated earlier, the payment of premiums for group personnel accident insurance in favor of
incumbent GSIS employees was not listed as an exception to the standardized salary under
Section 12, R.A. No. 6758 and sub-paragraphs 5.4 and 5.5 of CCC No. 10. As such, it is
considered as a fringe benefit granted on top of basic salary which, according to sub-paragraph
5.6 of CCC No. 10, must be discontinued as of November 1, 1989.

However, as pointed out by petitioner GSIS, CCC No. 10 was declared to be of no legal force
and effect in De Jesus v. COA. It can not thus be utilized as a justification for depriving
incumbent employees of integrated benefits which they were receiving prior to R.A. No. 6758.
As held in De Jesus:

x x x it is decisively clear that DBM CCC No. 10, which completely disallows payment of
allowances and other additional compensation to government officials and employees, starting
November 1, 1989, is not a mere interpretative and internal regulation. It is something more than
that. And why not, when it tends to deprive government workers of their allowances and
additional compensation sorely needed to keep body and soul together. At the very least, before
said circular under attack may be permitted to substantially reduce their income, the government
officials and employees concerned should be apprised and alerted by the publication of subject
circular in the Official Gazette or in a newspaper of general circulation in the Philippines-to the
end that they may be given amplest opportunity to voice out whatever opposition they may have,
and to ventilate their stance on the matter. This approach is more in keeping with democratic
precepts and rudiments of fairness and transparency.

Conformably, since the disallowance of the premium payments was founded upon CCC No. 10,
the consequent outcome of the latters nullification is to remove any obstacle to the aforesaid
benefit.

The subsequent publication of CCC No. 10 in the Official Gazette on March 1, 1999, neither
cured the defect nor retroact to the time that the aforesaid items were disallowed in audit. Again,
in PITC v. COA, we ruled that from the time the COA disallowed the benefit up to the filing of
the instant petition, CCC No. 10 remained in legal limbo due to its lack of publication. And
because publication is a condition precedent to the effectivity of CCC No. 10, it must first be
complied with before affecting individual rights; otherwise, such omission would offend due
process insofar as it would deny the public, knowledge of the laws that are supposed to govern
it.

b. Loyalty and Service Cash Award

We have carefully examined the records of the case and find that the disallowance of the
simultaneous grant of these two integrated benefits was not so much founded on CCC No. 10,
but upon a ruling made by the Civil Service Commission (CSC). Notably, with respect to the
loyalty and service cash award, respondent COA held:

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As regards the payment of loyalty cash award under Sec. 7 (e), Rule X, of the CSC Omnibus
rules Implementing Book V of E.O. No. 292 and service cash award, this Commission holds that
only one can be availed of by GSIS employees in the light of the clear ruling of the Civil Service
Commission embodied in a letter dated May 12, 1993 that since both benefits have the same
rationale, which is to reward long and dedicated service, availment of the award can be made
only under either system, whichever is more advantageous to the employees.

The foregoing conclusion was apparently based on the position taken by Corporate Auditor Fe R.
Munoz, who expounded thereon in a second indorsement dated December 14, 1993 as follows:

Service Cash Award is an incentive granted exclusively to any officer or employee of the GSIS
who has rendered at least fifteen (15) years continuous and dedicated service to the GSIS. It
entitles them to receive amounts ranging from P500.00 to P15,000.00 according to the number of
years of service, pursuant to the provisions of the Collective Bargaining Agreement (CBA),
which payments are deducted by this Office from payment of Loyalty (Cash) Award. On the
other hand, this should not be confused with the amount of Loyalty (Cash) Award in graduated
amounts of P1,200.00, P1,300.00, P1,400.00 and P1,500.00 for every year of service of GSIS
executives and employees who have completed at least ten (10) years of continuous service as
authorized under Board Resolution No. 333 dated October 29, 1992 (Annex 7), using as legal
basis Section 7 (e), Rule X of the Omnibus Civil Service Law and Rules, Implementing Book V
of Executive Order No. 292, providing for the cash bonus of not less than One Hundred Pesos
(P100.00) per year of service, chargeable against Agencys savings. It seems that the foregoing
provision allows for a minimum but not for a maximum amount to be given, thereby giving the
agencies enough flexibility to fix their own maximum amounts depending on the agencys
savings.

It is worthy to note in this connection that when the Civil Service Commission issued
Memorandum Circular No. 42, series 1992, amending Section 7 (e), Rule X of the Omnibus
Civil Service Law and Rules, providing that the amount of cash bonus to be given should not be
more than P100.00 per year of service, the GSIS returned to the old computation as authorized
under Board Resolutions No. 192 and 187 dated May 16, 1989 and May 29, 1992 respectively
(Annexes 8 and 9). Hence, the matter was referred to the Civil Service Commission for
clarification. The Commission ruled in a letter dated May 12, 1993 (Annex 10) addressed to
PGM Cesar N. Sarino, that the availment of the award can be made only under either system,
whichever is more advantageous to the employees.

Petitioner GSIS did not squarely address the above finding of respondent COA or the Corporate
Auditor. Instead, it based its arguments on the general assumption that all the benefits and
allowances subject of this petition were disallowed on the basis of Section 12, R.A. No. 6758 and
its implementing rules. This is beside the point, however, as it can readily be seen that
respondent COAs ruling on the loyalty and service cash award is actually based on a purported
CSC declaration relative thereto. As a result, there has been no real joinder of issues as far as
these benefits are concerned.

Coming now to G.R. No. 141625, the Court of Appeals did not commit any reversible error when
it held that the petition filed before the GSIS Board questioning the legality of the deductions
could proceed independently from the appeal brought by petitioner GSIS from the COA
disallowances. No error could be attributed to the appellate courts finding that there was no
identity of subject matter or issue between the COA proceedings and the retirees claim before
the GSIS Board.

However, considering that it has already been resolved in G.R. No. 138381, we no longer find it
necessary to discuss whether GSIS can deduct the COA disallowances from the
respondents/retirees retirement benefits. Having settled G. R. No. 138381, it is now incumbent

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upon petitioner GSIS to reimburse the proper amounts to respondents/retirees. Necessarily, the
amount of said refund should be in accord with our ruling in G.R. No. 138381.

WHEREFORE, in view of the foregoing, G.R. No. 138381 is PARTLY GRANTED. The
disallowance of the adjustment in longevity pay and childrens allowance and the payment of
group personnel accident insurance premiums in favor of incumbent GSIS employees is SET
ASIDE. The disallowance of the increase in housing allowance and the simultaneous grant of
loyalty and service cash award are AFFIRMED. Petitioner GSIS is further ordered to REFUND
the amounts deducted from the retirement benefits in G.R. No. 141625, corresponding to the
amount of benefits allowed in G.R. No. 138381.

SO ORDERED.

G.R. No. L-44169 December 3, 1985

ROSARIO A. GAA, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, EUROPHIL INDUSTRIES
CORPORATION, and CESAR R. ROXAS, Deputy Sheriff of Manila, respondents.

Federico C. Alikpala and Federico Y. Alikpala, Jr. for petitioner.

Borbe and Palma for private respondent.

PATAJO, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals
promulgated on March 30, 1976, affirming the decision of the Court of First Instance of
Manila.

It appears that respondent Europhil Industries Corporation was formerly one of the
tenants in Trinity Building at T.M. Kalaw Street, Manila, while petitioner Rosario A. Gaa
was then the building administrator. On December 12, 1973, Europhil Industries
commenced an action (Civil Case No. 92744) in the Court of First Instance of Manila for
damages against petitioner "for having perpetrated certain acts that Europhil Industries
considered a trespass upon its rights, namely, cutting of its electricity, and removing its
name from the building directory and gate passes of its officials and employees" (p. 87
Rollo). On June 28, 1974, said court rendered judgment in favor of respondent Europhil
Industries, ordering petitioner to pay the former the sum of P10,000.00 as actual
damages, P5,000.00 as moral damages, P5,000.00 as exemplary damages and to pay
the costs.

The said decision having become final and executory, a writ of garnishment was issued
pursuant to which Deputy Sheriff Cesar A. Roxas on August 1, 1975 served a Notice of
Garnishment upon El Grande Hotel, where petitioner was then employed, garnishing
her "salary, commission and/or remuneration." Petitioner then filed with the Court of
First Instance of Manila a motion to lift said garnishment on the ground that her
"salaries, commission and, or remuneration are exempted from execution under Article
1708 of the New Civil Code. Said motion was denied by the lower Court in an order
dated November 7, 1975. A motion for reconsideration of said order was likewise

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denied, and on January 26, 1976 petitioner filed with the Court of Appeals a petition for
certiorari against filed with the Court of Appeals a petition for certiorari against said
order of November 7, 1975.

On March 30, 1976, the Court of Appeals dismissed the petition for certiorari. In
dismissing the petition, the Court of Appeals held that petitioner is not a mere laborer as
contemplated under Article 1708 as the term laborer does not apply to one who holds a
managerial or supervisory position like that of petitioner, but only to those "laborers
occupying the lower strata." It also held that the term "wages" means the pay given" as
hire or reward to artisans, mechanics, domestics or menial servants, and laborers
employed in manufactories, agriculture, mines, and other manual occupation and
usually employed to distinguish the sums paid to persons hired to perform manual labor,
skilled or unskilled, paid at stated times, and measured by the day, week, month, or
season," citing 67 C.J. 285, which is the ordinary acceptation of the said term, and that
"wages" in Spanish is "jornal" and one who receives a wage is a "jornalero."

In the present petition for review on certiorari of the aforesaid decision of the Court of
Appeals, petitioner questions the correctness of the interpretation of the then Court of
Appeals of Article 1708 of the New Civil Code which reads as follows:

ART. 1708. The laborer's wage shall not be subject to execution or attachment, except for
debts incurred for food, shelter, clothing and medical attendance.

It is beyond dispute that petitioner is not an ordinary or rank and file laborer but "a
responsibly place employee," of El Grande Hotel, "responsible for planning, directing,
controlling, and coordinating the activities of all housekeeping personnel" (p. 95, Rollo)
so as to ensure the cleanliness, maintenance and orderliness of all guest rooms,
function rooms, public areas, and the surroundings of the hotel. Considering the
importance of petitioner's function in El Grande Hotel, it is undeniable that petitioner is
occupying a position equivalent to that of a managerial or supervisory position.

In its broadest sense, the word "laborer" includes everyone who performs any kind of
mental or physical labor, but as commonly and customarily used and understood, it only
applies to one engaged in some form of manual or physical labor. That is the sense in
which the courts generally apply the term as applied in exemption acts, since persons of
that class usually look to the reward of a day's labor for immediate or present support
and so are more in need of the exemption than are other. (22 Am. Jur. 22 citing Briscoe
vs. Montgomery, 93 Ga 602, 20 SE 40; Miller vs. Dugas, 77 Ga 4 Am St Rep 192; State
ex rel I.X.L. Grocery vs. Land, 108 La 512, 32 So 433; Wildner vs. Ferguson, 42 Minn
112, 43 NW 793; 6 LRA 338; Anno 102 Am St Rep. 84.

In Oliver vs. Macon Hardware Co., 98 Ga 249 SE 403, it was held that in determining
whether a particular laborer or employee is really a "laborer," the character of the word
he does must be taken into consideration. He must be classified not according to the
arbitrary designation given to his calling, but with reference to the character of the
service required of him by his employer.

In Wildner vs. Ferguson, 42 Minn 112, 43 NW 793, the Court also held that all men who
earn compensation by labor or work of any kind, whether of the head or hands,
including judges, laywers, bankers, merchants, officers of corporations, and the like, are
in some sense "laboring men." But they are not "laboring men" in the popular sense of
the term, when used to refer to a must presume, the legislature used the term. The
Court further held in said case:

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There are many cases holding that contractors, consulting or assistant engineers, agents,
superintendents, secretaries of corporations and livery stable keepers, do not come
within the meaning of the term. (Powell v. Eldred, 39 Mich, 554, Atkin v. Wasson, 25 N.Y.
482; Short v. Medberry, 29 Hun. 39; Dean v. De Wolf, 16 Hun. 186; Krausen v. Buckel, 17
Hun. 463; Ericson v. Brown, 39 Barb. 390; Coffin v. Reynolds, 37 N.Y. 640; Brusie v.
Griffith, 34 Cal. 306; Dave v. Nunan, 62 Cal. 400).

Thus, in Jones vs. Avery, 50 Mich, 326, 15 N.W. Rep. 494, it was held that a traveling
salesman, selling by sample, did not come within the meaning of a constitutional
provision making stockholders of a corporation liable for "labor debts" of the corporation.

In Kline vs. Russell 113 Ga. 1085, 39 SE 477, citing Oliver vs. Macon Hardware Co.,
supra, it was held that a laborer, within the statute exempting from garnishment the
wages of a "laborer," is one whose work depends on mere physical power to perform
ordinary manual labor, and not one engaged in services consisting mainly of work
requiring mental skill or business capacity, and involving the exercise of intellectual
faculties.

So, also in Wakefield vs. Fargo, 90 N.Y. 213, the Court, in construing an act making
stockholders in a corporation liable for debts due "laborers, servants and apprentices"
for services performed for the corporation, held that a "laborer" is one who performs
menial or manual services and usually looks to the reward of a day's labor or services
for immediate or present support. And in Weymouth vs. Sanborn, 43 N.H. 173, 80 Am.
Dec. 144, it was held that "laborer" is a term ordinarily employed to denote one who
subsists by physical toil in contradistinction to those who subsists by professional skill.
And in Consolidated Tank Line Co. vs. Hunt, 83 Iowa, 6, 32 Am. St. Rep. 285, 43 N.W.
1057, 12 L.R.A. 476, it was stated that "laborers" are those persons who earn a
livelihood by their own manual labor.

Article 1708 used the word "wages" and not "salary" in relation to "laborer" when it
declared what are to be exempted from attachment and execution. The term "wages" as
distinguished from "salary", applies to the compensation for manual labor, skilled or
unskilled, paid at stated times, and measured by the day, week, month, or season, while
"salary" denotes a higher degree of employment, or a superior grade of services, and
implies a position of office: by contrast, the term wages " indicates considerable pay for
a lower and less responsible character of employment, while "salary" is suggestive of a
larger and more important service (35 Am. Jur. 496).

The distinction between wages and salary was adverted to in Bell vs. Indian Livestock
Co. (Tex. Sup.), 11 S.W. 344, wherein it was said: "'Wages' are the compensation given
to a hired person for service, and the same is true of 'salary'. The words seem to be
synonymous, convertible terms, though we believe that use and general acceptation
have given to the word 'salary' a significance somewhat different from the word 'wages'
in this: that the former is understood to relate to position of office, to be the
compensation given for official or other service, as distinguished from 'wages', the
compensation for labor." Annotation 102 Am. St. Rep. 81, 95.

We do not think that the legislature intended the exemption in Article 1708 of the New
Civil Code to operate in favor of any but those who are laboring men or women in the
sense that their work is manual. Persons belonging to this class usually look to the
reward of a day's labor for immediate or present support, and such persons are more in
need of the exemption than any others. Petitioner Rosario A. Gaa is definitely not within
that class.

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We find, therefore, and so hold that the Trial Court did not err in denying in its order of
November 7, 1975 the motion of petitioner to lift the notice of garnishment against her
salaries, commission and other remuneration from El Grande Hotel since said salaries,
Commission and other remuneration due her from the El Grande Hotel do not constitute
wages due a laborer which, under Article 1708 of the Civil Code, are not subject to
execution or attachment.

IN VIEW OF THE FOREGOING, We find the present petition to be without merit and
hereby AFFIRM the decision of the Court of Appeals, with costs against petitioner.

SO ORDERED.

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

Melencio-Herrera (Chairperson) and Relova, JJ., is on leave.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

A.M. No. P-87-72 July 3, 1991

ANTONIO C. SY, complainant,

vs.
MARLEO J. ACADEMIA, ET AL., respondents.

A.M. No. P-90-481 July 3, 1991

JUDGE BERNARDO P. PARDO, complainant,

vs.
MARLEO J. ACADEMIA, Deputy Sheriff, RTC, Manila, Branch 27, respondent.

Yabut Law Office for complainant.

RESOLUTION

PER CURIAM:p

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Within a period of three years and three months, the following administrative cases
were filed against Marleo J. Academia, a Deputy Sheriff of the Regional Trial Court of
Manila, National Capital Judicial Region:

I. ADM. MATTER NO. P-87-72, which is based on a Complaint-Affidavit of Antonio C. Sy

filed on 8 April 1987 by complainant's counsel, Atty. Victorino R. Yabut, Jr. in the Office
of the Court Administrator charging him and Atty. Alex Y. Tan of bribery, qualified theft,
and violation of the Anti-Graft and Corrupt Practices Act (R.A. No. 3019, as amended)
and praying that respondent Academia, as well as his sheriff guards or representatives
and other deputy sheriffs who assisted him be administratively dealt with and removed
or suspended from office. Complainant allege therein that he is the President of the
PENTA COPYER CORPORATION, which was impleaded, together with him,
Evangeline Borromeo, Benson Pe Chua, Juanito Co Sekbi, Santos Pablo, as
defendants in Civil Case No. 87-39611 of the Regional Trial Court of Manila, Branch
XXVII; a writ of preliminary attachment was issued ex-parte by the Court; on the last
working day of the week, March 6, 1987, a three-pronged blitz was made against
PENTA by a group of men led by respondent Academia, assisted by Atty. Alex Tan,
some fully-armed members of PC-CAPCOM and other persons acting under the behest
of the "marauding party's ringleaders"; the first group of respondent Academia pounced
upon the premises of PENTA's main office and thereupon caused to be levied upon and
seized personal properties of PENTA; the second group, composed of alleged deputy
sheriffs of Manila, barged into PENTA's bodega in Intramuros, Manila and likewise
levied upon and seized the corporation's properties; then, to cap the operation,
respondent Academia, by and through his unnamed assistants, likewise served notices
of garnishment to several banks in Manila, garnishing bank deposits not only of PENTA
but also of the individual stockholders/defendants in the civil case.

Complainant further alleges that the dispossession was done without regard to the
nature, value and quantity of PENTA'S properties which, according to the law, should
have been only for such as may be necessary to satisfy plaintiffs' demand;
notwithstanding his sworn duty to keep the property under his own official custody to
await judgment and execution in the action, Academia, in connivance with the plaintiffs,
their representatives and counsel, Atty. Tan, entrusted and transferred the custody of
and delivered the seized properties to the plaintiffs immediately after its seizure on 6
March 1987; they were hauled and brought to a dilapidated bodega with a "hole-infested
roof', owned by plaintiffs or persons in cahoots with plaintiffs, located at Romy St.,
Maysilo, Malabon, Metro Manila, or outside the territorial jurisdiction of the court; on 26
March 1987 the court issued an Order directing the return of the attached properties
and the recall of all notices of garnishment. Due to the continuous unexplained absence
of Academia and the unavailabity of the Presiding Judge of the court, the Order could
not be enforced, prompting defendants to file an Urgent Ex-Parte Motion to Appoint a
Sheriff, which was favorably acted upon by Judge Abelardo Dayrit who appointed sheriff
Rolando Mariano to implement the release order.

In the bodega aforestated, it was discovered that, among others, most of the seized
copying machines were cannibalized, their important parts and accessories either
pilfered or substituted with junk parts; copying machines laid bare on watery floorings,
some of the machines and parts were used as sleeping beds, dining tables and
makeshift kitchen; worse, one ISUZU KC 20 van and other units of equipment which
were seized could not be accounted for.

In the Resolution of 27 May 1987 this Court required respondents to Answer the
complaint-affidavit.

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Respondent Academia filed his Answer on 28 August 1987 denying the allegations in
the complaint.

Complainant filed a Reply to the Answer on 15 September 1987 wherein he reiterated

the charges and prayer in his complaint-affidavit.

On 14 February 1990 We issued a resolution requiring complainant to specifically

identify the other implicated unnamed respondents within ten days from notice, and
referring the complaint against Atty. Alex Tan to the Office of the Bar Confidant for
appropriate action within thirty days and against the other respondents to Executive
Judge Bernardo Pardo of the Regional Trial Court of Manila for investigation, report and
recommendation within three months.

On 3 April 1990 complainant filed a motion to dismiss his complaint alleging therein that
he is no longer interested in pursuing this complaint against all respondents on the
ground that the parties in Civil Case No. 87-39611 had entered into a Compromise
Agreement wherein they agreed, inter alia, to dismiss all claims, counterclaims, charges
and countercharges against each party and their respective counsel. The Compromise
Agreement was made the basis of the decision of the trial court of 3 November 1989.

On 10 July 1990 Judge Pardo formally transmitted his Report and Recommendation
dated 21 June 1990, pertinent portions of which read as follows:

xxx xxx xxx

Respondent appeared on the date of the hearing in person without benefit of counsel. He
was advised by the investigator that he could avail himself of the services of counsel.
Due to the non-appearance of the complainant, respondent deputy sheriff stated that he
was submitting the case for resolution on the basis of his comment dated August 21,
1987 filed in this case. He reiterated that the administrative case against him be
dismissed for lack of merit as he was merely performing the duties vested in his position
in carrying out the writ of attachment issued by the Regional Trial Court of Manila, Branch
27, in Civil Case No. 87-39611, entitled Spouses Rolando V. Mendoza, et al., Plaintiffs,
versus Penta Copyer Corporation, et al., Defendants.

On April 18, 1990, complainant filed a motion to dismiss dated March 26, 1990, praying
that the above-entitled administrative case be dismissed for the reason that the parties
had settled Civil Case No. 87-39611 by a compromise agreement filed with the court on
September 2, 1989.

Notwithstanding such motion to dismiss which was filed before the Supreme Court, we
submit that there is more than adequate basis for administrative action to be taken
against Deputy Sheriff Marleo J. Academia on the basis of indubitable facts appearing on
the record which the court may take judicial notice of and on admissions made by
respondent deputy sheriff in his comment above-mentioned. Res ipsa loquitur.

Thus, the record shows that:

(1) Respondent Marleo J. Academia is the duly appointed deputy sheriff, Regional Trial
Court, Manila, Branch 27, qualified and performing his functions as such.

(2) On February 27, 1987, there was filed with the Regional Trial Court of Manila a
complaint for recovery of the sum of P1.5 million as principal obligation plus unspecified
amount of moral and exemplary damages and 25% of the principal obligation as
attorney's fees, entitled Spouses Rolando V. Mendoza and Narcisa M. Mendoza, plaintiffs
versus Penta Copyer Corporation and/or Evangeline (sic) A. Borromeo, Benson Pe Chua,
Antonio C. Sy, Juanita Co Sekbi and Santos A. Pablo, defendants, docketed as Civil
Case No. 87-39611. The case was assigned to Branch 27 presided over by Judge
Ricardo D. Diaz.

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(3) On March 3, 1987, Judge Diaz, acting on the complaint, issued a writ of preliminary
attachment upon the filing of (sic) the plaintiffs of an attachment bond in the amount of
P1.5 million.

(4) On March 4, 1987, plaintiffs filed an attachment bond subscribed by Interworld

Assurance Corporation duly approved by Judge Diaz and on March 5, 1987, the
corresponding order of attachment was issued by Judge Diaz. The order of attachment
was addressed to Deputy Sheriff Marleo J. Academia, commanding him to attach the
estate, real and personal, of defendants to the value of the demand amounting to P1.5
million.

(5) In the morning of March 6, 1987, with prepared notice of levy pursuant to a writ of
attachment (already mimeographed attachment), Deputy Sheriff Marleo J. Academia
together with a group of men including Atty. Alex Y. Tan, counsel for plaintiffs, fully armed
soldiers of the PC/CAPCOM and policemen of the Western Police District and other men
hired by him went to the premises of Penta Copyer Corporation at its main office at 677
Carlos Palanca St., San Miguel Manila, to carry out the levy on attachment on personal
properties of defendant Penta Copyer Corporation. Simultaneously, another group
composed of other deputy sheriffs of Manila whose identities were not revealed to
complainant, but who were admittedly acting as deputies of Sheriff Marleo, J. Academia
without any express court order, went to defendant Penta Copyer Corporation's bodega
in Intramuros, Manila, and likewise carried out the writ of attachment against personal
properties of the defendants.

(6) After listing the personal properties levied upon in the aforesaid prepared notice of
levy dated March 2, 1987, Deputy Sheriff Marleo J. Academia and his men immediately
seized the various personal properties in the two (2) premises, pulled them out and
boarded them into several trucks supplied by plaintiffs, deposited them on the same day
at plaintiffs' bodega situated at Romy St., Maysilo, Malabon, Metro Manila under sheriff
guard. Among the personal properties seized were several units of new Ricoh Copier
machines, and included one (1) unit Isuzu KC 20 van with plate No. KPG-631 in good
running condition and one (1) unit Suzuki motorcycle, model B-120, with plate No. 1418.
The Malabon bodega was dilapidated and was owned by plaintiffs (sic) Mendoza.

(7) Sheriff Marleo J. Academia even required plaintiff spouses Mendoza through their
counsel, Atty. Alex Y. Tan to acknowledge receipt of the personal properties seized from
the two (2) premises aforesaid of the defendant Penta Copyer Corporation.

(8) Also on March 6, 1987, respondent Deputy Sheriff Marleo J. Academia served upon
several banking institutions notice of garnishment against the bank account of defendants
and worse, respondent even garnished the accounts of stockholders of the corporation.

(9) Even though the value of the properties seized by Deputy Sheriff Marleo J. Academia
from defendant Penta Copyer Corporation is about P1.8 million, which is more than the
amount sought to be recovered in the action, on March 10, 1987, at the instance of Atty.
Alex Y. Tan, counsel for plaintiffs, respondent deputy sheriff Marleo J. Academia went to
the address of defendant Evangeline Borromeo at 23 Mabolo, Malabon, Metro Manila,
served her a copy of the writ of attachment, summons with complaint and bond, then
levied upon personal properties found inside the said premises consisting of six (6) units
of generating sets.

(10) Again, the generating sets seized from the premises of defendant Evangeline
Borromeo were pulled out from the said address and deposited for safekeeping at
plaintiffs bodega situated at Romy St., Maysilo, Malabon, Metro Manila and turned over to
the custody of the plaintiff spouses Mendoza through lawyer Alex Y. Tan.

(11) On March 26, 1987, the court(Judge Diaz) discharged the writ of preliminary
injunction issued on March 5, 1987 and ordered deputy sheriff Marleo J. Academia and
the plaintiffs Mendoza to forthwith return the levied properties of the defendants and
likewise set aside the notices of garnishment issued pursuant to said writ of attachment.

(12) However, due to the absence of respondent deputy sheriff Marleo J. Academia, the
return of the seized properties could not be effected and the then executive judge

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appointed a special sheriff in order to secure the return of the levied properties to the
defendants.

(13) At the time the return of the levied properties was to be carried out, many of the
seized items were missing or parts thereof cannibalized causing substantial loss to the
defendants. What is more, the Isuzu KC 20 van with plate No. KPG 631 could no longer
be located in the bodega. This van was reported missing or carnapped to the police and
constabulary authorities but despite all efforts, the van could not be located until it was
intercepted on July 3, 1987 in front of City Bank Building, Paseo de Roxas, Makati, driven
by a driver of a certain Atty. Cristino Abasolo, Jr. who claimed that the vehicle was lent to
his wife in June, 1987 by her friends, a former ranking official of the Tanodbayan.

On the basis of the facts disclosed above which are incontrovertible, we are of the
opinion that respondent deputy sheriff Marleo J. Academia is guilty of serious misconduct
in office for having acted with abuse of authority in the manner in which the writ of
attachment was carried out. Thus, even assuming the regularity of the procedure in
carrying out the seizure of defendants' properties in (sic) virtue of the order of attachment,
respondent deputy sheriff Marleo J. Academia grossly violated the law and the Rules of
Court in carting away the seized items, boarding them in trucks and depositing them in
plaintiffs' own bodega at Romy St., Maysilo, Malabon, Metro Manila, inadequately
secured from pilferage and exposed to elements in a place outside the territorial
jurisdiction of the court and the enforcing sheriff. Respondent Academia failed to
adequately secure and safekeep the items which are very delicate and can be easily
stolen. In fact, with respect to the Isuzu KC 20 van, the vehicle could have been easily
parked at the parking area of the Manila Regional Trial Court and its keys kept in the
possession of the sheriff. But respondent deputy sheriff turned over to plaintiffs' counsel
possession of the vehicle which was illegally lent to and used by unauthorized persons,
and was recovered only after about three (3) months with much effort.

What is more, respondent deputy sheriff Marleo J. Academia gravely abused his authority
by making excessive levy on property of the defendants, simultaneously attaching such
property situated in different places, in addition to garnishment of bank accounts, worth
far in excess of plaintiffs' demand in the complaint. (Padolina vs. Henson, 173 SCRA
269).

As a deputy sheriff, respondent Marleo J. Academia has no authority without an express

order of the court which issued the writ to designate other sheriffs as his deputies in order
to carry out simultaneous seizures of defendants' properties situated at different places
and the garnishment of defendants' bank accounts in several banks.

The seriousness of the illegal acts committed by respondent deputy sheriff call for the
imposition of the most severe penalty in the civil service which is dismissal from the
service with forfeiture of retirement rights, if any.

WHEREFORE, we find the respondent deputy sheriff Marleo J. Academia guilty of grave
misconduct in office and accordingly, recommend that the Supreme Court dismiss him
from the service with forfeiture of his retirement rights, if any.

In connection with the second part of the resolution dated February 14, 1990, referring
the complaint against Atty. Alex Y. Tan to the Bar Confidant for appropriate action, we
respectfully recommend that the investigation be extended to Atty. Cristino Abasolo, Jr. in
whose possession the Isuzu LV (sic) 20 van subject of levy, was found.

II. ADM. MATTER NO. P-90-841, which is based on the verified letter, dated 13 July
1990, of Executive Judge Bernardo Pardo of the Regional Trial Court of Manila wherein
he charges Marleo J. Academia with dishonesty committed as follows:

1. In Civil Case No. 83-21859 entitled Vicente T. Ang, Plaintiff, versus Admiral Investment
and Financing Co., Inc., et al., Defendants, and Deputy Sheriff of Branch 27, Respondent
Marleo J. Academia received the amount of P219,023.16 as the bid for the sale at public
auction of property levied upon. The bid price was paid for by RCBC Manager's Check
No. UN003261-0218 dated April 5, 1984, in the amount of P210,000.00, payable to the
Clerk of Court, Regional Trial Court, Manila, and cash in the amount of P9,023.16.

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Deputy Sheriff Academia delivered the check to then Clerk of Court Cesar P. Javier who
deposited the same with the Philippine National Bank but Deputy Sheriff Academia
pocketed the cash in the amount of P9,023.16.

2. By failing to deposit with the Clerk of Court the cash amounting to P9,023.16 received
by him constituting part of the proceeds of an auction sale, respondent deputy sheriff
committed an act of dishonesty.

and prays that respondent be ordered dismissed from the service with forfeiture of
retirement rights, if any, and to pay to the Clerk of Court, Regional Trial Court of Manila
on account of Civil Case No. 83-21859, the amount of P9,023.16 with interest at the
legal rate from 7 March 1984, until fully paid.

In the Resolution of 1 August 1990 this Court directed Deputy Court Administrator
Juanito A. Bernad to investigate the complaint and to submit his report and
recommendation after the termination thereof.

In a notice of Hearing dated 14 September 1990, Deputy Court Administrator Bernad

set the healing on 28 September 1990 and furnished respondent with a copy of the
letter complaint requiring him to submit his Comments thereon on or before the
scheduled hearing. He further informed respondent that he may appear with counsel at
such hearing.

At the hearing on 28 September 1990 complainant testified and offered documentary

evidence. Respondent appeared alone and openly declared that he did not need time to
secure the services of counsel. He waived his right to cross-examine the complainant,
and when asked if he had anything to say about the testimony of complainant, he just
answered:

If I have committed a mistake, Sir, please forgive me, anyway I have paid already the
amount complained of. (TSN, p. 5; Rollo, p. 28)

Respondent chose not to testify, and offered as his only evidence the official receipt
(O.R. No. 12986) for his payment on 26 September 1990 of the amount of P9,023.16.
(Exh. "1").

After the hearing Deputy Court Administrator Bernad submitted the following report,
dated 19 October 1990, which was duly concurred in by Court Administrator Meynardo
A. Tiro:

xxx xxx xxx

Judge Bernardo P. Pardo, while taking the witness stand propounded the questions to
himself and testified that he knows respondent being one of the Deputy Sheriffs of RTC,
Manila, assigned to Branch 27; that as Executive Judge of RTC, Manila, he ordered an
inventory of the contents of the safety deposit box of the outgoing Clerk of Court Atty.
Cesar Javier who was newly appointed judge of the RTC of Pampanga; that among the
papers he found, was PNB passbook No. 010-686608-2 marked as Exhibit "C-1" in the
name of the Clerk of Court, RTC, Manila in trust for Branch 27, Civil Case No. 83-21859
where there was a balance of P210,000.00 on April 27, 1984, and a withdrawal on June
6, 1984 of P50,000.00; that he asked for the record of Civil Case No. 83-21859 and after
examining the record he discovered from the Sheriffs Return that the actual money
received by the Deputy Sheriff as bid money was P219,023.16 but the money deposited
at the PNB was only P210,000.00; that he was convinced that on the basis of the record,
there was a discrepancy in the amount of P9,023.16 which was unaccounted for; that in
the same order, he had the PNB update the bank book, Exhibit "C-1 ", and it was so
updated showing a balance of P228,975.48 as of March 26, 1990 because of the
interests that had accummulated from June 6,1984. From the last entry of the balance of

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P160,000.00, the amount had increased to P228,975.48 as of March 26, 1990; that in the
same order, he required the Asst. Clerk of Court who had already taken over the position
of Clerk of Court in a temporary manner to close this account No. 010686608-2 in the
name of the Clerk of Court, RTC, Manila in trust for Branch 27, Civil Case No. 8321859,
and to transfer the balance of the account to the Fiduciary Account of the RTC, Manila
under account No. 068-576012-6; that on July 13, 1990, he filed an administrative case
against Deputy Sheriff Marleo J. Academia for dishonesty which is now the subject of this
investigation;

Judge Pardo offered as evidence, Exhibit "A", the Certificate of Sale dated March 6, 1984
consisting of 2 pages, the second page marked as Exhibit "A-1", showing that Deputy
Sheriff Marleo J. Academia conducted an auction sale of the property of the defendants
by virtue of an Order of Attachment and that the highest bid was in the amount of
P219,023.16;

Exhibit "B", the manifestation/motion dated March 12, 1984 of the Deputy Sheriff Marleo
J. Academia wherein he acknowledged that he received the amount of P210,000.00 in
check of the Rizal Banking Corporation and cash in the amount of P9,023.16 as full
payment of the said bid;

Exhibit "C", is the manifestation of Clerk of Court appearing in the record dated March 27,
1984 showing that he deposited the amount of P210,000.00 with the PNB under account
No. 010-686608-2 in the name of Clerk of Court, RTC, Manila in trust for Branch 27 in
Civil Case No. 83-21859;

Exhibit "C-1" is the passbook itself of account No. 010-686608-2;

Exhibit "D" is the order dated April 2, 1984 in Civil Case No. 83-21859 showing that the
court has authorized the withdrawal of P50,000.00 to be remanded to the plaintiff in said
case from the account deposited with the PNB under Exhibit "C-1";

Exhibit "D-1", the entry in the passbook, withdrawal of P50,000.00 on June 6, 1989,
leaving a balance of P160,000;

Exhibit "E", the receipt dated June 6, 1984 showing that the plaintiff Victor P. Ang,
received the amount of P50,000.00 from Deputy Sheriff Marleo J. Academia;

Exhibit "F" and "F-l", the Sheriffs return in Civil Case No. 83-21859, entitled "Victor P. Ang
vs. Admiral Investment Finance Company, Inc." consisting of 2 pages;

Exhibit "G", the order dated February 28, 1990 of the Executive Judge in Civil Case No.
83-21859 (p. 3, Rollo);

Exhibit "G-l" (p. 4, Ibid.) is the second page of that order.

With the admission of all these exhibits, the complaint rested his case.

On the part of the respondent, he offered Receipt No. 129186 (sic) dated September 26,
1990 in the amount of P9,023.16 showing that he has refunded the aforesaid amount to
the court marked as Exhibit "l" (p. 22, Rollo); that when the undersigned investigator
asked him if he had any other evidence, he said he had none and that with the admission
of his solitary exhibit, he rested his case throwing himself to the mercy of this Court
asking forgiveness and that he had already paid the amount complained of.

From the foregoing, the complainant Judge Bernardo P. Pardo, Executive Judge of
Manila has duly proved his case for dishonesty against the respondent beyond
reasonable doubt. The respondent perhaps realizing that the case against him is
indefensible, paid the amount to the court on September 26, 1990 as shown by Official
Receipt No. 1212986 (sic) for the sum of P9,023.16 marked as Exhibit "1". Upon his plea
of mercy to the Investigator, the undersigned told him that it was not in his power to grant
mercy but from the Honorable Court.

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We shall decide both cases jointly.

ADM. MATTER NO. P-87-72

Judge Pardo correctly disregarded the motion to dismiss on the ground that "there is
more than adequate basis for administrative action to be taken against" respondent
Academia "on the basis of indubitable facts appearing on the record which the court
may take judicial notice of and on admissions made by" him. We would go further by
saying that complaints against public officers and employees relating or incidental to or
in connection with the performance of their duties are necessarily impressed with public
interest. By express Constitutional mandate, a public office is a public trust (Section 1,
Article XI, 1987 Constitution of the Philippines) and the holder thereof is a servant of the
people to whom he is accountable at all times. He is not relieved of that accountability
by the benevolence of a private party. Thus, a complaint for misconduct, malfeasance or
misfeasance against a public officer or employee cannot just be withdrawn at any time
by the complainant simply because he has lost interest in the prosecution of the case.
Where, as in the instant case, the charges are very serious and are supported by
sufficient evidence attached to the sworn complaint itself, and the complainant
vigorously reiterated such charges in his reply to the answer of the respondent, any
withdrawal or dismissal thereof upon motion of complainant would not only be suspect
but would be inimical to public interest. If the charges are in fact true, the grant of a
motion to dismiss by complainant would hide the evil deed committed with the
disciplining authority being used therefor.

Public interest and the need to maintain the faith and confidence of our people in the
Government and its agencies and instrumentalities demand then that proceedings in
administrative cases against public officers and employees should not be made to
depend on the whims and caprices of complainants.

In a real sense, the complainants in such cases are just witnesses, and therefore,
regardless of their motions to dismiss and/or to withdraw the complaints, the
proceedings thereon may continue.

We agree with Judge Pardo that the acts committed by respondent Academia in relation
to the execution or implementation of the writ of preliminary attachment constituted
serious misconduct in office which would warrant the imposition of the penalty he
recommended.

ADM. MATTER NO. P-90-481

In this case this Court agrees with the investigator that the complainant has duly proved
beyond reasonable doubt his case for dishonesty against respondent.

The same act of respondent, however, also constitutes grave misconduct and conduct
prejudicial to the best interest of the service.

Respondent's refund of the amount he misappropriated and his plea for forgiveness are
of no moment and do not serve to mitigate his administrative liability. The refund was
made only on 26 September 1990, or two days short of seven (7) months after he was
ordered by complainant to account for the amount misappropriated (Order of 28
February 1990, Exh. "G") and a little over two (2) months after complainant prepared his
letter-complaint. He received the amount from the highest bidder on 7 March 1984 yet
(Exh. "F"). Were it not for the extraordinary diligence and zeal of complainant Executive

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Judge, the misappropriation would have remained concealed in the safe deposit box of
the Clerk of Court.

Respondent's plea for forgiveness is insincere and does not proceed from a voluntary
admission that his misappropriation was "a mistake" and from a repentant heart. The
plea is conditioned on a prior determination that what he did was "a mistake". Without a
tinge of sorrow and unaffected by even a twinge of remorse, he merely nonchalantly
stated:

If I have committed a mistake, Sir, please forgive me, anyway I already paid the amount
complained of. (TSN, Testimony of Judge Pardo, p. 5; Rollo, p. 28).

Yet, he ought to know from the very beginning that what he did was not just a mistake; it
was a well-planned, wrongful, and illegal act. It should be noted that the bid price was
P219,023.16. However, only P210,000.00 thereof was covered by the Manager's Check
of RCBC, payable to the Clerk of Court. The remaining amount of P9,023.16 was paid
in cash, which respondent did not turn over to the Clerk of Court. No reason had been
advanced as to why the full amount of the bid price was not covered by the Manager's
check. It is logical to assume that the splitting of the payment of the bid price into a
Manager's Check and cash was made at the instance or upon instruction of respondent
Sheriff so that, without the slightest difficulty, he could withhold the cash and keep it for
himself. He could not have done so had the full amount been covered by the Manager's
check.

CONCLUSION

The administration of justice is a sacred task. By the very nature of their duties and
responsibilities, all those involved in it must faithfully adhere to, hold inviolate, and
invigorate the principle solemnly enshrined in the 1987 Constitution that a public office
is a public trust; and all public officers and employees must at all times be accountable
to the people, serve them with utmost responsibility, integrity, loyalty and efficiency, and
act with patriotism and justice, and lead modest lives. (Sec. 1, Article XI). 1

This Court condemns and would never countenance any conduct, act or omission on
the part of all those involved in the administration of justice which would violate the
norm of public accountability and would diminish or even just tend to diminish the faith
of the people in the Judiciary. In Jereos Jr. vs. Reblando, Sr. (71 SCRA 126, 131-132),
We laid down the rule that the conduct and behavior of every one connected with an
office charged with the dispensation of justice, like the court below, from the presiding
judge to the lowliest clerk, should be circumscribed with the heavy burden of
responsibility. His conduct, at all times, must not only be characterized by propriety and
decorum but above all else must be above suspicion.

Indeed, every employee of the judiciary should be an example of integrity, uprightness

and honesty. (Ablanida vs. Intia, Adm. Matter No. R-770-P, May 17, 1988).

The acts complained of in the aforesaid two cases show beyond doubt the unfitness of
respondent to continue to hold any government position. They are indicia of a character
that resists reform or reconstruction to meet the strict demands of a public office or
refuses to be bound by the ethical standards which public officers and employees must
uphold.

WHEREFORE, in the light of the foregoing, the Court resolved to DISMISS respondent
MARLEO J. ACADEMIA from the service for dishonesty, grave misconduct and conduct

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prejudicial to the best interest of the service, with forfeiture of all benefits and with
prejudice to re-employment in any branch or service of the government, including
government-owned or controlled corporations.

In Adm. Matter No. P-90-481, respondent is further ordered to pay to the Clerk of Court
of Branch 27, RTC, Manila, which the latter shall deposit in the Fiduciary Account of the
RTC of Manila (Account No. 068-576012-6), the interests, at the legal rate, on the
amount of P9,023.16 from 7 March 1984 until 25 September 1990, within ten (10) days
from notice hereof.

SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Padilla,
Bidin, Sarmiento, Grio-Aquino, Medialdea, Regalado and Davide, Jr., JJ., concur.

Gancayco, J., is on leave.

Footnotes

1 To implement this provision the new Congress of the Philippines passed Republic Act
No. 6713, otherwise known as the Code of Conduct and Ethical Standards for Public
Officials and Employees, which the President approved on 20 February 1989.

The Lawphil Project - Arellano Law Foundation

ORDER OF PECUNIARY LIABILITES

THIRD DIVISION

[G.R. No. 134172. September 20, 2004]

MIRIAM ARMI JAO YU, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

May an accused found guilty of violations of Batas Pambansa Blg. 22[1] be made to
suffer subsidiary imprisonment in case he fails to pay the fines imposed by the trial court
for such violations? This is the lone issue raised in this petition for review on certiorari.
[2]

On March 25, 1991, petitioner was charged with 19 counts of violation of Batas
Pambansa Blg. 22 before the Regional Trial Court, Branch 91, Quezon City, docketed
as Criminal Cases Nos. 19468 to 19486.

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Upon arraignment, petitioner entered a plea of not guilty. After hearing, the trial court
rendered a Decision finding her guilty of the charges and imposing upon her the
following penalties:

WHEREFORE, premises considered, judgment is hereby rendered finding accused

Miriam Armi Jao Yu guilty beyond reasonable doubt of violation of Batas Pambansa Blg.
22 and sentencing her as follows:

to pay a fine of P200,000.00 and

1. Crim. Case No.
indemnify Susan Andaya in the
19468
amount of P300,000.00;
to pay a fine of P150,000.00 and
2. Crim. Case No.
indemnify Susan Andaya in the
19469
amount of P150,000.00;
to pay a fine of P200,000.00 and
3. Crim. Case No.
indemnify Susan Andaya in the
19470
amount of P200,000.00;
to pay a fine of P200,000.00 and
4. Crim. Case No.
indemnify Susan Andaya in the
19471
amount of P385,000.00;
to pay a fine of P15,000.00 and
5. Crim. Case No.
indemnify Susan Andaya in the
19472
amount of P15,000.00;
to pay a fine of P15,000.00 and
6. Crim. Case No.
indemnify Susan Andaya in the
19473
amount of P300,000.00;
to pay a fine of P200,000.00 and
7. Crim. Case No.
indemnify Susan Andaya in the
19474
amount of P350,000.00;
to pay a fine of P200,000.00 and
8. Crim. Case No.
indemnify Susan Andaya in the
19475
amount of P385,000.00;
to pay a fine of P200,000.00 and
9. Crim. Case No.
indemnify Susan Andaya in the
19476
amount of P300,000.00;
to pay a fine of P200,000.00 and
10. Crim. Case No.
indemnify Susan Andaya in the
19477
amount of P300,000.00;
to pay a fine of P15,000.00 and
11. Crim. Case No.
indemnify Susan Andaya in the
19478
amount of P15,000.00;
to pay a fine of P15,000.00 and
12. Crim. Case No.
indemnify Susan Andaya in the
19479
amount of P15,000.00;
to pay a fine of P200,000.00 and
13. Crim. Case No.
indemnify Susan Andaya in the
19480
amount of P450,000.00;
to pay a fine of P25,000.00 and
14. Crim. Case No.
indemnify Susan Andaya in the
19481
amount of P25,000.00;
to pay a fine of P200,000.00 and
15. Crim. Case No.
indemnify Susan Andaya in the
19482

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amount of P500,000.00;
to pay a fine of P17,500.00 and
16. Crim. Case No.
indemnify Susan Andaya in the
19483
amount of P17,500.00;
to pay a fine of P13,475.00 and
17. Crim. Case No.
indemnify Susan Andaya in the
19484
amount of P13,475.00;
to pay a fine of P15,000.00 and
18. Crim. Case No.
indemnify Susan Andaya in the
19485
amount of P15,000.00;
to pay a fine of P15,000.00 and
19. Crim. Case No.
indemnify Susan Andaya in the
19486
amount of P15,000.00;

to suffer subsidiary imprisonment in case of non-payment of the fine in each of

the above-entitled cases and to pay the costs of suit.

SO ORDERED. (Underscoring ours)

Upon appeal, the Court of Appeals affirmed in toto the trial courts Decision.

Petitioner then filed a motion for reconsideration but was denied by the Appellate Court
in its Resolution dated May 29, 1998.

In the instant petition, petitioner contends that Section 1 of Batas Pambansa Blg. 22,
which reads:

Section 1. Checks without sufficient funds. Any person who makes or draws and
issues any check to apply on account or for value, knowing at the time of issue that he
does not have sufficient funds in or credit with the drawee bank for the payment of such
check in full upon its presentment, which check is subsequently dishonored by the
drawee bank for insufficiency of funds or credit or would have been dishonored for the
same reason had not the drawer, without any valid reason, ordered the bank to stop
payment, shall be punished by imprisonment of not less than thirty days but not
more than one (1) year or by a fine of not less than but not more than double the
amount of the check which fine shall in no case exceed Two Hundred Thousand
Pesos, or both such fine and imprisonment at the discretion of the court.

The same penalty shall be imposed upon any person who, having sufficient funds in
or credit with the drawee bank when he makes or draws and issues a check, shall fail to
keep sufficient funds or to maintain a credit to cover the full amount of the check if
presented within a period of ninety (90) days from the date appearing thereon, for which
reason it is dishonored by the drawee bank. Where the check is drawn by a
corporation, company or entity, the person or persons who actually signed the check in
behalf of such drawer shall be liable under this Act.

Where the check is drawn by a corporation, company or entity, the person or persons
who actually signed the check in behalf of such drawer shall be liable under this Act.
(Underscoring ours)

provides only the imposition of imprisonment or fine, or both, in cases of violation of

Batas Pambansa Blg. 22. Thus, she should not suffer subsidiary imprisonment in case
of non-payment of the fines imposed by the trial court.

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The Solicitor General disagrees with petitioner and prays that the Decision of the Court
of Appeals be affirmed.

The petition must fail.

The imposition of subsidiary imprisonment is expressly provided under Articles 38 and

39 of the Revised Penal Code, thus:

ART. 38. Pecuniary liabilities Order of payment. In case the property of the offender
should not be sufficient for the payment of all his pecuniary liabilities, the same shall be
met in the following order:

1. The reparation of the damage caused.

2. Indemnification of consequential damages.
3. The fine.
4. The costs of the proceedings. (Underscoring ours)

ART. 39. Subsidiary penalty. If the convict has no property with which to meet
the fine mentioned in paragraph 3 of the next preceding article, he shall be
subject to a subsidiary personal liability at the rate of one day for each eight
pesos, subject to the following rules:

1. If the principal penalty imposed be prision correccional or arresto and fine, he shall
remain under confinement until his fine referred in the preceding paragraph is satisfied,
but his subsidiary imprisonment shall not exceed one-third of the term of the sentence,
and in no case shall it continue for more than one year, and no fraction or part of a day
shall be counted against the prisoner.

2. When the principal penalty imposed be only a fine, the subsidiary

imprisonment shall not exceed six months, if the culprit shall have been
prosecuted for a grave or less grave felony, and shall not exceed fifteen days, if
for a light felony.

3. When the principal penalty imposed is higher than prision correccional no subsidiary
imprisonment shall be imposed upon the culprit.

4. If the principal penalty imposed is not to be executed by confinement in a penal

institution, but such penalty is of fixed duration, the convict, during the period of time
established in the preceding rules, shall continue to suffer the same deprivation as
those of which the principal penalty consists.

5. The subsidiary personal liability which the convict may have suffered by reason of his
insolvency shall not relieve him from the fine in case his financial circumstances should
improve. (Underscoring ours)

We hold that the above provisions on subsidiary imprisonment can be applied

suppletorily to Batas Pambansa Blg. 22 pursuant to Article 10 of the same Code, which
provides:

ART. 10. Offenses not subject to the provisions of this Code. Offenses which are or
in the future may be punishable under special laws are not subject to the provisions of
this Code. This Code shall be supplementary to such laws, unless the latter
should specially provide the contrary. (Underscoring ours)

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As early as 1959, this Court, in People vs. Cubelo,[3] held:

Appellants contention that the trial court committed error in ordering him to serve
subsidiary imprisonment in case of insolvency in the payment of fine with the reason
that Act No. 4003, which prohibits fishing with the use of explosive, fails to provide for
such subsidiary imprisonment, and that being a special law, it is not subject to the
provisions of the Revised Penal Code, is untenable. The second paragraph of Article
10 of the said Code provides that this Code shall be supplementary to such laws,
unless the latter should specially provide the contrary. Articles 100 (civil liability) and
39 (subsidiary penalty) are applicable to offenses under special laws (People vs.
Moreno, 60 Phil. 178; Copiaco vs. Luzon Brokerage, 66 Phil. 184).

Indeed, the absence of an express provision on subsidiary imprisonment in Batas

Pambansa Blg. 22 does not and cannot preclude its imposition in cases involving its
violations.

It bears stressing that on February 14, 2001, we issued Administrative Circular No. 13-
2001 clarifying the imposition of imprisonment for violations of Batas Pambansa Blg. 22
and subsidiary imprisonment upon the accused found guilty but is unable to pay the fine
he is sentenced to pay. In clarifying the imposition of subsidiary imprisonment, the
Circular states that if the accused is unable to pay the fine imposed by the trial court,
there is no legal obstacle to the application of the Revised Penal Code provisions on
subsidiary imprisonment. The full text of the Circular reads:

ADMINISTRATIVE CIRCULAR NO. 13-2001

TO : ALL JUDGES

SUBJECT : CLARIFICATION OF ADMINISTRATIVE CIRCULAR NO. 12-2000

ON THE PENALTY FOR VIOLATION OF BATAS PAMBANSA BLG.
22, OTHERWISE KNOWN AS THE BOUNCING CHECKS LAW

Clarification has been sought by concerned Judges and other parties regarding the
operation of Administrative Circular 12-2000 issued on 21 November 2000. In
particular, queries have been made regarding the authority of Judges to

1. Impose the penalty of imprisonment for violations of Batas Pambansa Blg. 22;
and

2. Impose subsidiary imprisonment in the event that the

accused, who is found guilty of violating the provisions of B.P.
Blg. 22, is unable to pay the fine which he is sentenced to pay

considering that Administrative Circular No. 12-2000 adopted the rulings in Eduardo
Vaca v. Court of Appeals (G.R. No. 131714, 16 November 1998, 298 SCRA 656) and
Rosa Lim v. People of the Philippines (G.R. No. 130038, 18 September 2000) as a
policy of the Supreme Court on the matter of the imposition of penalties for violations of
B.P. Blg. 22, without mentioning whether subsidiary imprisonment could be resorted to
in case of the accuseds inability to pay the fine.

The clear tenor and intention of Administrative Circular No. 12-2000 is not to remove
imprisonment as an alternative penalty, but to lay down a rule of preference in the
application of the penalties provided for in B.P. Blg. 22.

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The pursuit of this purpose clearly does not foreclose the possibility of imprisonment for
violators of B.P. Blg. 22. Neither does it defeat the legislative intent behind the law.

Thus, Administrative Circular No. 12-2000 establishes a rule of preference in the

application of the penal provisions of B.P. Blg. 22 such that where the circumstances of
both the offense and the offender clearly indicate good faith or a clear mistake of fact
without taint of negligence, the imposition of a fine alone should be considered as the
more appropriate penalty. Needless to say, the determination of whether the
circumstances warrant the imposition of a fine alone rests solely upon the
Judge. Should the Judge decide that imprisonment is the more appropriate penalty,
Administrative Circular No. 12-2000 ought not be deemed a hindrance.

It is, therefore, understood that

1. Administrative Circular 12-2000 does not remove imprisonment as an

alternative penalty for violations of B.P. Blg. 22;

2. The Judges concerned may, in the exercise of sound discretion, and taking
into consideration the peculiar circumstances of each case, determine
whether the imposition of a fine alone would best serve the interests of
justice or whether forbearing to impose imprisonment would depreciate the
seriousness of the offense, work violence on the social order, or otherwise
be contrary to the imperatives of justice;

3. Should only a fine be imposed and the accused be unable to pay the
fine, there is no legal obstacle to the application of the Revised Penal
Code provisions on subsidiary imprisonment.

The issuance of this Administrative Circular was authorized by the Court En Banc in
A.M. No. 00-11-01-SC at its session of 13 February 2001.

The Clerk of Court of the Supreme Court and the Court Administrator shall immediately
cause the implementation of this Administrative Circular.

This Administrative Circular shall be published in a newspaper of general circulation not

later than 20 February 2001.

Issued this 14th day of February, 2001.

(Sgd.)
HILARIO G. DAVIDE, JR.
Chief Justice (Underscoring
ours)

In Felicito Abarquez vs. Court of Appeals and People of the Philippines

promulgated on August 7, 2003[4] a case which involves the application of penalties for
violations of Batas Pambansa Blg. 22 we did not only modify the amount of the fines
imposed by the Court of Appeals in Criminal Cases Nos. D-8137, D-8176 and D-8177,
but also imposed subsidiary imprisonment in case of insolvency in accordance with
Article 39 of the Revised Penal Code in each case.

Administrative Circular No. 13-2001 and our Decision in Felicito Abarquez vs. Court
of Appeals and People of the Philippines should now lay to rest the controversy at
bar.

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WHEREFORE, the petition is DENIED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 148557 August 7, 2003

FELICITO ABARQUEZ, petitioner,

vs.
COURT OF APPEALS (Special Former Seventh Division) and the PEOPLE OF THE
PHILIPPINES, respondents.

YNARES-SANTIAGO, J.:

This is an appeal from the decision of the Court of Appeals 1 which affirmed with
modification the decision of the Regional Trial Court of Dagupan City, Branch 41, 2
finding petitioner Felicito Abarquez guilty beyond reasonable doubt of five (5) counts of
violations of Batas Pambansa Blg. 22 or the Bouncing Checks Law.

There is no dispute that petitioner issued in favor of Fertiphil Corporation five (5) checks
drawn against Republic Planters Bank, Dagupan Branch. The checks issued are as
follows:

Check No. Date Amount

2956654 June 5, P372,000.00
1986
2956655 June 5, P340,000.00
1986
2954047 June 13, P 27,600.00
1986
2956660 June 27, P 58,500.00
1986
2956662 July 1, 1986 P 52,200.00

Likewise, it is undisputed that the checks were dishonored for having been drawn
against insufficient funds. Fertiphil demanded that petitioner make good the checks but
to no avail, prompting the former to file criminal complaints against him. Consequently,
five informations for violation of BP Blg. 22 were filed with the RTC of Dagupan City,
Branch 41. The information in Criminal Case No. D-8135 3 reads:

That on or about the 14th day of June, 1986, in the City of Dagupan, Philippines,
and within the territorial jurisdiction of this Honorable Court, the above-named

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accused FELICITO ABARQUEZ, did then and there willfully, unlawfully and
criminally, draw, issue and deliver to FERTIPHIL CORPORATION, Makati, Metro
Manila, a Republic Planters Bank check No. 2956660, Dagupan City Branch,
postdated June 27, 1986, in the amount of FIFTY-EIGHT THOUSAND FIVE
HUNDRED PESOS (P58,500.00) Philippine currency, in payment of several bags
of fertilizer purchased from said corporation, although the said accused knew
fully well that his funds deposited in the said bank, if any, were not sufficient to
cover its face value, such that when the said check was presented to the drawee
bank for payment, the same was dishonored for reason 'DRAWN AGAINST
INSUFFICIENT FUNDS' and returned to the complainant and despite notice of
dishonor and to make good said check, accused failed and/or refused to pay
and/or make good the amount of said check despite the lapse of more than five
(5) banking days, to the damage and prejudice of the herein complainant,
Fertiphil CORPORATION, represented by NOEL DE LA ROSA, Chief
Accountant, in the aforesaid amount of P58,500.00 and other consequential
damages.

Contrary to Batas Pambansa Bilang 22.

Except for the dates of commission, the check numbers, the dates and the amounts of
said checks, the following informations were similarly worded. In Criminal Case No. D-
8136,4 petitioner issued Check No. 2954047 on May 10, 1986 postdated June 13, 1986
in the amount of P27,600.00. In Criminal Case No. D-8137, 5 petitioner issued Check
No. 2956662 on June 16, 1986 postdated July 1, 1986 in the amount of P52,200.00. In
Criminal Case No. D-8176,6 petitioner issued Check No. 2956665 on June 5, 1986 in
the amount of P340,000.00 and, in Criminal Case No. D-8177, 7 petitioner issued Check
No. 2956654 on June 5, 1986 in the amount of P372,000.00.

After trial on the merits, the court a quo rendered its decision disposing as follows:

WHEREFORE, the accused Felicito Abarquez is found guilty beyond reasonable

doubt of violation of Batas Pambansa Bilang 22 as charged in Criminal Case
Nos. D-8135, D-8136, D-8137, D-8176 and D-8177 and hereby imposes upon
him for each case, the penalty of One (1) year imprisonment and to indemnify
Fertiphil Corporation the total amount of P844,500.00 and to pay the costs.

SO ORDERED.8

Petitioner appealed to the Court of Appeals, which affirmed with modification the
decision of the trial court, thus:

IN VIEW OF THE FOREGOING, the judgment appealed from is AFFIRMED with

MODIFICATION. In line with Administrative Circular No. 12-2000 issued by the
Supreme Court En Banc on November 12, 2000, judgment is hereby rendered
ordering appellant to pay a fine of ONE MILLION SEVEN HUNDRED
THOUSAND SIX HUNDRED PESOS (P1,700,600.00) which is double the total
amount of the five checks issued by appellant. The penalty of imprisonment is
deleted.

SO ORDERED.9

Not satisfied with the decision, petitioner is now before us and submits the following
issues:

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1. Whether the trial court and the Court of Appeals erred in convicting petitioner
in Criminal Case No. D-8137 though the check subject thereof was dishonored
for being drawn against uncollected deposit (DAUD) and not for being drawn
against insufficient funds (DAIF) or closed account (CA) which are the only
punishable acts under BP 22;

2. Whether the trial court and the Court of Appeals erred in convicting petitioner
in Criminal Case Nos. D-8135 and D-8136 despite the unrebutted evidence
showing payment thereof after the dishonor by the drawee bank;

3. Whether the trial court and the Court of Appeals erred in convicting the
accused in Criminal Case Nos. D-8176 and D-8177; and

4. Whether the Court of Appeals erred in imposing the penalty of fine in the
amount of One Million Seven Hundred Thousand Six Hundred pesos
(P1,700,600.00) which is double the total amount of the five checks despite the
express provision of BP 22 that the fine imposed shall in no case exceed Two
Hundred Thousand pesos (Sec. 1, BP 22).10

Petitioner admits having issued the subject checks but insists that he is not liable under
BP Blg. 22. Thus, in Criminal Case No. D-8135, Abarquez alleges that although Check
No. 2956660 dated June 27, 1986 in the amount of P58,500.00 was dishonored by the
bank on July 3, 1986 for insufficiency of funds, the same however was paid on July 28,
1986 via telegraphic transfer through Republic Planters Bank, Dagupan Branch as
evidenced by O.R. No. 902575 before any notice of dishonor or demand to pay the
same was made.

In Criminal Case No. D-8136, petitioner submits that Check No. 2954047 dated June
13, 1986 in the amount of P27,600.00 was likewise dishonored for insufficiency of
funds. He avers however that even before any notice of dishonor or demand to pay the
same was made, he already made the corresponding payments by means of a demand
draft and telegraphic transfer through Republic Planters Bank, Dagupan Branch on July
17, 1986 and August 19, 1986, as evidenced by O.R. Nos. 902868 and 902672.

As regards Check No. 2956662 in the amount of P52,500.00 which is the subject of
Criminal Case No. D-8137, petitioner admits that the same was dishonored, but alleges
that he could not be made liable under BP Blg. 22, as the same was dishonored for
having been drawn against uncollected deposits and not against insufficiency of funds.

As to Check No. 2956655 issued in the amount of P340,000.00 and Check No.
2956654 for P372,000.00, the subject of Criminal Case Nos. D-8176 and D-8177
respectively, which were dishonored for insufficiency of funds, petitioner argues that he
could not be made liable under the Bouncing Checks Law, considering that both checks
were not issued for account or for value as they were merely intended to secure the
payment of his debt to Fertiphil after reconciliation of their books of account.

In Meriz v. People,11 it was held that the essential elements of the offense penalized
under BP Blg. 22 are:

1. The making, drawing and issuance of any check to apply to account or for
value;

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2. The knowledge of the maker, drawer or issuer that at the time of issue he does
not have sufficient funds or credit with the drawee bank for the payment of such
check in full upon its presentment; and

3. Subsequent dishonor of the check by the drawee bank for insufficiency of

funds or credit or dishonor for the same reason had not the drawer, without any
valid cause, ordered the bank to stop payment.

Both the spirit and letter of the Bouncing Checks Law require, for the act to be
punished under said law, not only that the accused issued a check that was
dishonored, but that likewise the accused was actually notified in writing of the
fact of dishonor. The consistent rule is that penal statutes have to be construed
strictly against the State and liberally in favor of the accused. 12

The prima facie presumption that the drawer has knowledge of the insufficiency of funds
or credit at the time of the issuance, or on the presentment for payment, of the check
may be rebutted by payment of the value of the check either by the drawer or by the
drawee bank within five banking days from notice of the dishonor given to the drawer.
The payment thus becomes a complete defense regardless of the strength of the
evidence offered by the prosecution. It must be presupposed, then, that the issuer
received a notice of dishonor and that, within five days from receipt thereof, he failed to
pay the amount of the check or to make arrangement for its payment. 13

In Caras v. Court of Appeals,14 we note that the law provides for a prima facie rule of
evidence. Knowledge of insufficiency of funds in or credit with the bank is presumed
from the act of making, drawing, and issuing a check payment of which is refused by the
drawee bank for insufficiency of funds when presented within 90 days from the date of
issue. However, this presumption is rebutted when it is shown that the maker or drawer
pays or makes arrangements for the payment of the check within five banking days after
receiving notice that such check had been dishonored. Thus, it is essential for the
maker or drawer to be notified of the dishonor of her check, so he could pay the value
thereof or make arrangements for its payment within the period prescribed by law.

In Criminal Case No. D-8135, petitioner paid the face value of the subject check in the
amount of P58,500.00 even before Fertiphil made any formal written demand to pay the
face value of the dishonored check.15 In fact, petitioner paid the face value of the check
on July 28, 1986, a little over three weeks from the time the check was presented for
payment on July 3, 1986. Petitioner was only informed through a demand letter dated
September 27, 1986, or two months after petitioner paid the face value of the
dishonored check.16 Petitioner, therefore, cannot be held liable under B.P. 22 in Criminal
Case No. D-8135.

In Criminal Case No. D-8136, petitioner paid the face value of Check No. 2954047 in
the amount of P27,000.00 by means of Demand Draft and Telegraphic Transfer on July
17, 1986.17 In fact, petitioner paid the face value of the dishonored check on the same
day the subject check was presented for payment, on July 17, 1986, and before the
formal written demand letter was sent to petitioner on September 27, 1986. Petitioner,
therefore, cannot also be held liable under B.P. 22 in Criminal Case No. D-8136.

In Griffith v. Court of Appeals,18 we held that:

While we agree with the private respondent that the gravamen of violation of B.P.
22 is the issuance of worthless checks that are dishonored upon their
presentment for payment, we should not apply penal laws mechanically. We must

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find if the application of the law is consistent with the purpose of and reason for
the law. Ratione cessat lex, et cessat lex. (When the reason for the law ceases,
the law ceases.) It is not the letter alone but the spirit of the law also that gives it
life. This is especially so in this case where a debtor's criminalization would not
serve the ends of justice but in fact subvert it. The creditor having collected
already more than a sufficient amount to cover the value of the checks for
payment of rentals, via auction sale, we find that holding the debtor's president to
answer for a criminal offense under B.P. 22 two years after said collection, is no
longer tenable nor justified by law or equitable considerations.

In Criminal Case No. D-8137, Check No. 2956662 dated July 1, 1986 with a face value
of P52,200.00 was dishonored for being drawn against uncollected deposit (DAUD) and
not for being drawn against insufficient funds (DAIF). According to petitioner, B.P. 22
punishes the drawer of a check if it is drawn against insufficient funds but not when it is
drawn against uncollected deposit. He ratiocinated that at the time the check was
presented for payment on July 8, 1986, the balance as shown in the ledger of
petitioner's account was more than the face value of the subject check. Even then, he
claims that he is not liable since he paid the value of the check within five (5) banking
days from knowledge of dishonor.

Petitioner was not being entirely forthright when he claims that Check No. 2956662 was
dishonored for being drawn against uncollected deposit (DAUD). On the contrary, the
records show that the stated reason for the dishonor of said check was insufficient
funds (DAIF).19 Indeed, the ledger of the Republic Planters Bank, Dagupan Branch
showed that the subject check had insufficient funds at the time it was drawn on July 1,
1986 as petitioner's account had only a balance of P48,166.196 as of June 30, 1986. 20
Subsequently, when the check was presented for payment on July 8, 1986, the check
still had insufficient funds because the check deposit made by petitioner which was
supposedly more than enough to cover the face value of the subject check had not
been credited by the bank.

In Tan v. People,21 we held that even with uncollected deposits, the bank may honor the
check at its discretion in favor of clients, in which case there would be no violation of
B.P. Blg. 22. Corollarily, if the bank so desires, it could likewise dishonor the check if
drawn against uncollected deposits, in which case the drawer could be held liable for
violation of BP Blg. 22.

In Criminal Case Nos. D-8176 and D-8177, petitioner claims that Fertiphil had no right
to encash Check No. 2956655 in the amount of P340,000.00 and Check No. 2956654
for P372,000.00 as they were not issued for account or for value. Petitioner avers that
he only issued those checks as advance payment to Fertiphil but only after
reconciliation of their books of account.

We do not agree. In Ong v. People,22 we held that what the law punishes is the issuance
of a bouncing check, not the purpose for which it was issued nor the terms and
conditions relating to its issuance. The mere act of issuing a worthless check is malum
prohibitum, provided the other elements of the offense are properly proved. 23

The fact that petitioner issued the subject checks knowing the inadequacy of his funds
in the bank to cover said checks makes him liable under B.P. 22. As elaborated in Meriz
v. People:24

The Court has consistently declared that the cause or reason for the issuance of
the check is inconsequential in determining criminal culpability under BP 22. The

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Court has since said that 'a check issued as an evidence of debt, although not
intended for encashment, has the same effect like any other check' and must
thus be held to be 'within the contemplation of BP 22.' Once a check is presented
for payment, the drawee bank gives it the usual course whether issued in
payment of an obligation or just as a guaranty of an obligation. BP 22 does not
concern itself with what might actually be envisioned by the parties, its primordial
intention being to instead ensure the stability and commercial value of checks as
being virtual substitutes for currency. It is a policy that can easily be eroded if one
has yet to determine the reason for which checks are issued, or the terms and
conditions for their issuance, before an appropriate application of legislative
enactment can be made. The gravamen of the offense under BP 22 is the act of
making or issuing a worthless check or a check that is dishonored upon
presentment for payment. The act effectively declares the offense to be one of
malum prohibitum. The only valid query then is whether the law has been
breached, i.e., by the mere act of issuing a bad check, without so much regard as
to the criminal intent of the issuer.

Therefore, in Criminal Cases Nos. D-8137, D-8176 and D-8177, both the trial court and
the Court of Appeals correctly found petitioner guilty beyond reasonable doubt of
violation of B.P. 22. The trial court sentenced petitioner to suffer imprisonment of one (1)
year for each count, but the Court of Appeals deleted the penalty of imprisonment. The
appellate court based its decision on Administrative Circular No. 12-2000, where this
Court, adopting the rulings in Vaca v. Court of Appeals25 and Lim v. People,26 authorized
the non-imposition of the penalty of imprisonment in B.P. 22 cases subject to certain
conditions. However, the Court of Appeals failed to explain the basis for the deletion of
the prison sentence imposed by the trial court.

It should be clarified that the non-imposition of the penalty of imprisonment in B.P. 22

cases should be based on the peculiar circumstances set forth in the Vaca case, which
were cited in Lim, more particularly:

Petitioners are first-time offenders. They are Filipino entrepreneurs who presumably
contribute to the national economy. Apparently, they brought this appeal, believing in all
good faith, although mistakenly, that they had not committed a violation of B.P. Blg. 22.
Otherwise, they could simply have accepted the judgment of the trial court and applied
for probation to evade prison term. It would beset serve the ends of criminal justice if in
fixing the penalty within the range of discretion allowed by 1, par. 1, the same
philosophy underlying the Indeterminate Sentence Law is observed, namely, that of
redeeming valuable human material and preventing unnecessary deprivation of
personal liberty and economic usefulness with due regard to the protection of social
order.27

In other words, Administrative Circular No. 12-2000 does not authorize the non-
imposition of imprisonment in each and every case of B.P. 22. Having this in mind, the
Court issued on February 14, 2001 Administrative Circular 13-2001 which modified
Administrative Circular No. 12-2000 by stressing that "the clear tenor of Administrative
Circular No. 12-2000 is not to remove imprisonment as an alternative penalty, but to lay
down a rule of preference in the application of the penalties provided for in B.P. 22." It is
further stated therein:

Thus, Administrative Circular 12-2000 establishes a rule of preference in the application

of the penal provisions of B.P. 22 such that where the circumstances of both the offense
and the offender clearly indicate good faith or a clear mistake of fact without taint of
negligence, the imposition of a fine alone should be considered as the more appropriate

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penalty. Needless to say, the determination of whether the circumstances warrant the
imposition of a fine alone rests solely upon the Judge. Should the Judge decide that
imprisonment is the more appropriate penalty, Administrative Circular 12-2000 ought not
be deemed a hindrance.

It is, therefore, understood that:

1. Administrative Circular 12-2000 does not remove imprisonment as an

alternative penalty for violations of B.P. 22;

2. The Judges concerned may, in the exercise of sound discretion, and taking
into consideration the peculiar circumstances of each case, determine whether
the imposition of a fine alone would best serve the interests of justice, or whether
forbearing to impose imprisonment would depreciate the seriousness of the
offense, work violence on the social order, or otherwise be contrary to the
imperatives of justice;

3. Should only a fine be imposed and the accused be unable to pay the fine,
there is no legal obstacle to the application of the Revised Penal Code provisions
on subsidiary imprisonment.28

The foregoing notwithstanding, we note that the Court of Appeals rendered the assailed
judgment on January 12, 2001, prior to the issuance of Administrative Circular No. 13-
2001. Consequently, it was justified in relying merely on Administrative Circular No. 12-
2000 in imposing on petitioner the penalty of fine in lieu of imprisonment.

However, the Court of Appeals erred in fixing the amounts of the fine insofar as Criminal
Cases Nos. D-8176 and D-8177 are concerned. Section 1 of B.P. 22 explicitly provides
that while the violation thereof shall be punished by a fine of not less than but not more
than double the amount of the check, such fine shall in no case exceed P200,000.00.
Therefore, the appealed decision of the Court of Appeals should be modified. Petitioner
should be sentenced to pay a fine in the amount of P104,400.00 in Criminal Case No.
D-8137; P200,000.00 in Criminal Case No. D-8176; and P200,000.00 in Criminal Case
No. D-8177; with subsidiary imprisonment in case of insolvency in accordance with
Article 39 of the Revised Penal Code.

WHEREFORE, in view of the foregoing, the assailed decision of the Court of Appeals in
CA-G.R. CR No. 18632 is AFFIRMED with MODIFICATIONS.

In Criminal Cases Nos. D-8135 and D-8136, petitioner Felicito Abarquez is

ACQUITTED.

In Criminal Case No. D-8137, petitioner is found GUILTY beyond reasonable doubt of
violation of Batas Pambansa Blg. 22, and is sentenced to pay a fine of P104,400.00 and
to indemnify Fertiphil Corporation in the amount of P52,200.00.

In Criminal Case No. D-8176, petitioner is found GUILTY beyond reasonable doubt of
violation of Batas Pambansa Blg. 22, and is sentenced to pay a fine of P200,000.00,
and to indemnify Fertiphil Corporation in the amount of P340,000.00.

In Criminal Case No. D-8177, petitioner is found GUILTY beyond reasonable doubt of
violation of Batas Pambansa Blg. 22, and is sentenced to pay a fine of P200,000.00 and
to indemnify Fertiphil Corporation in the amount of P372,000.00.

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Costs de oficio.

SO ORDERED.

G.R. No. 134172 September 20, 2004

MIRIAM ARMI JAO YU, petitioner,

vs.
PEOPLE OF THE PHILIPPINES, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

May an accused found guilty of violations of Batas Pambansa Blg. 221 be made to suffer
subsidiary imprisonment in case he fails to pay the fines imposed by the trial court for such
violations? This is the lone issue raised in this petition for review on certiorari.2

On March 25, 1991, petitioner was charged with 19 counts of violation of Batas Pambansa Blg.
22 before the Regional Trial Court, Branch 91, Quezon City, docketed as Criminal Cases Nos.
19468 to 19486.

Upon arraignment, petitioner entered a plea of not guilty. After hearing, the trial court rendered a
Decision finding her guilty of the charges and imposing upon her the following penalties:

"WHEREFORE, premises considered, judgment is hereby rendered finding accused

Miriam Armi Jao Yu guilty beyond reasonable doubt of violation of Batas Pambansa Blg.
22 and sentencing her as follows:

1. Crim. Case No. 19468 to pay a fine of P200,000.00 and indemnify Susan
Andaya in the amount of P300,000.00;

2. Crim. Case No. 19469 to pay a fine of P150,000.00 and indemnify Susan
Andaya in the amount of P150,000.00;

3. Crim. Case No. 19470 to pay a fine of P200,000.00 and indemnify Susan
Andaya in the amount of P200,000.00;

4. Crim. Case No. 19471 to pay a fine of P200,000.00 and indemnify Susan
Andaya in the amount of P385,000.00;

5. Crim. Case No. 19472 to pay a fine of P15,000.00 and indemnify Susan
Andaya in the amount of P15,000.00;

6. Crim. Case No. 19473 to pay a fine of P15,000.00 and indemnify Susan
Andaya in the amount of P300,000.00;

7. Crim. Case No. 19474 to pay a fine of P200,000.00 and indemnify Susan
Andaya in the amount of P350,000.00;

8. Crim. Case No. 19475 to pay a fine of P200,000.00 and indemnify Susan
Andaya in the amount of P385,000.00;

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9. Crim. Case No. 19476 to pay a fine of P200,000.00 and indemnify Susan
Andaya in the amount of P300,000.00;

10. Crim. Case No. 19477 to pay a fine of P200,000.00 and indemnify Susan
Andaya in the amount of P300,000.00;

11. Crim. Case No. 19478 to pay a fine of P15,000.00 and indemnify Susan
Andaya in the amount of P15,000.00;

12. Crim. Case No. 19479 to pay a fine of P15,000.00 and indemnify Susan
Andaya in the amount of P15,000.00;

13. Crim. Case No. 19480 to pay a fine of P200,000.00 and indemnify Susan
Andaya in the amount of P450,000.00;

14. Crim. Case No. 19481 to pay a fine of P25,000.00 and indemnify Susan
Andaya in the amount of P25,000.00;

15. Crim. Case No. 19482 to pay a fine of P200,000.00 and indemnify Susan
Andaya in the amount of P500,000.00;

16. Crim. Case No. 19483 to pay a fine of P17,500.00 and indemnify Susan
Andaya in the amount of P17,500.00;

17. Crim. Case No. 19484 to pay a fine of P13,475.00 and indemnify Susan
Andaya in the amount of P13,475.00;

18. Crim. Case No. 19485 to pay a fine of P15,000.00 and indemnify Susan
Andaya in the amount of P15,000.00;

19. Crim. Case No. 19486 to pay a fine of P15,000.00 and indemnify Susan
Andaya in the amount of P15,000.00;

to suffer subsidiary imprisonment in case of non-payment of the fine in each of the

above-entitled cases and to pay the costs of suit.

SO ORDERED." (Underscoring ours)

Upon appeal, the Court of Appeals affirmed in toto the trial courts Decision.

Petitioner then filed a motion for reconsideration but was denied by the Appellate Court in its
Resolution dated May 29, 1998.

In the instant petition, petitioner contends that Section 1 of Batas Pambansa Blg. 22, which
reads:

"Section 1. Checks without sufficient funds. Any person who makes or draws and issues
any check to apply on account or for value, knowing at the time of issue that he does not
have sufficient funds in or credit with the drawee bank for the payment of such check in
full upon its presentment, which check is subsequently dishonored by the drawee bank
for insufficiency of funds or credit or would have been dishonored for the same reason
had not the drawer, without any valid reason, ordered the bank to stop payment, shall be
punished by imprisonment of not less than thirty days but not more than one (1) year or
by a fine of not less than but not more than double the amount of the check which fine

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shall in no case exceed Two Hundred Thousand Pesos, or both such fine and
imprisonment at the discretion of the court.

The same penalty shall be imposed upon any person who, having sufficient funds in or
credit with the drawee bank when he makes or draws and issues a check, shall fail to keep
sufficient funds or to maintain a credit to cover the full amount of the check if presented
within a period of ninety (90) days from the date appearing thereon, for which reason it is
dishonored by the drawee bank. Where the check is drawn by a corporation, company or
entity, the person or persons who actually signed the check in behalf of such drawer shall
be liable under this Act.

Where the check is drawn by a corporation, company or entity, the person or persons who
actually signed the check in behalf of such drawer shall be liable under this Act."
(Underscoring ours)

provides only the imposition of imprisonment or fine, or both, in cases of violation of Batas
Pambansa Blg. 22. Thus, she should not suffer subsidiary imprisonment in case of non-payment
of the fines imposed by the trial court.

The Solicitor General disagrees with petitioner and prays that the Decision of the Court of
Appeals be affirmed.

The petition must fail.

The imposition of subsidiary imprisonment is expressly provided under Articles 38 and 39 of the
Revised Penal Code, thus:

"ART. 38. Pecuniary liabilities Order of payment. In case the property of the offender
should not be sufficient for the payment of all his pecuniary liabilities, the same shall be
met in the following order:

1. The preparation of the damage caused.

2. Indemnification of consequential damages.

3. The fine.

4. The costs of the proceedings. (Underscoring ours)

"ART. 39. Subsidiary penalty. If the convict has no property with which to meet the fine
mentioned in paragraph 3 of the next preceding article, he shall be subject to a subsidiary
personal liability at the rate of one day for each eight pesos, subject to the following
rules:

1. If the principal penalty imposed be prision correccional or arresto and fine, he

shall remain under confinement until his fine referred in the preceding paragraph
is satisfied, but his subsidiary imprisonment shall not exceed one-third of the term
of the sentence, and in no case shall it continue for more than one year, and no
fraction or part of a day shall be counted against the prisoner.

2. When the principal penalty imposed be only a fine, the subsidiary

imprisonment shall not exceed six months, if the culprit shall have been
prosecuted for a grave or less grave felony, and shall not exceed fifteen days, if
for a light felony.

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3. When the principal penalty imposed is higher than prision correccional no

subsidiary imprisonment shall be imposed upon the culprit.

4. If the principal penalty imposed is not to be executed by confinement in a penal

institution, but such penalty is of fixed duration, the convict, during the period of
time established in the preceding rules, shall continue to suffer the same
deprivation as those of which the principal penalty consists.

5. The subsidiary personal liability which the convict may have suffered by reason
of his insolvency shall not relieve him from the fine in case his financial
circumstances should improve." (Underscoring ours)

We hold that the above provisions on subsidiary imprisonment can be applied suppletorily to
Batas Pambansa Blg. 22 pursuant to Article 10 of the same Code, which provides:

"ART. 10. Offenses not subject to the provisions of this Code. Offenses which are or in
the future may be punishable under special laws are not subject to the provisions of this
Code. This Code shall be supplementary to such laws, unless the latter should specially
provide the contrary." (Underscoring ours)1awphil.net

As early as 1959, this Court, in People vs. Cubelo,3 held:

"Appellants contention that the trial court committed error in ordering him to serve
subsidiary imprisonment in case of insolvency in the payment of fine with the reason that
Act No. 4003, which prohibits fishing with the use of explosive, fails to provide for such
subsidiary imprisonment, and that being a special law, it is not subject to the provisions
of the Revised Penal Code, is untenable. The second paragraph of Article 10 of the said
Code provides that this Code shall be supplementary to such laws, unless the latter
should specially provide the contrary. Articles 100 (civil liability) and 39 (subsidiary
penalty) are applicable to offenses under special laws (People vs. Moreno, 60 Phil. 178;
Copiaco vs. Luzon Brokerage, 66 Phil. 184)."

Indeed, the absence of an express provision on subsidiary imprisonment in Batas Pambansa Blg.
22 does not and cannot preclude its imposition in cases involving its violations.

It bears stressing that on February 14, 2001, we issued Administrative Circular No. 13-2001
clarifying the imposition of imprisonment for violations of Batas Pambansa Blg. 22 and
subsidiary imprisonment upon the accused found guilty but is unable to pay the fine he is
sentenced to pay. In clarifying the imposition of subsidiary imprisonment, the Circular states that
if the accused is unable to pay the fine imposed by the trial court, "there is no legal obstacle to
the application of the Revised Penal Code provisions on subsidiary imprisonment." The full text
of the Circular reads:

"Administrative Circular No. 13-2001

To : All Judges

subject : clarification of Administrative Circular No. 12-2000 on the penalty for violation
of Batas Pambansa Blg. 22, Otherwise known as the bouncing checks law

Clarification has been sought by concerned Judges and other parties regarding the
operation of Administrative Circular 12-2000 issued on 21 November 2000. In particular,
queries have been made regarding the authority of Judges to

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1. Impose the penalty of imprisonment for violations of Batas Pambansa Blg. 22; and

2. Impose subsidiary imprisonment in the event that the accused, who is found guilty of
violating the provisions of B.P. Blg. 22, is unable to pay the fine which he is sentenced to
pay considering that Administrative Circular No. 12-2000 adopted the rulings in Eduardo
Vaca v. Court of Appeals (G.R. No. 131714, 16 November 1998, 298 SCRA 656) and
Rosa Lim v. People of the Philippines (G.R. No. 130038, 18 September 2000) as a policy
of the Supreme Court on the matter of the imposition of penalties for violations of B.P.
Blg. 22, without mentioning whether subsidiary imprisonment could be resorted to in
case of the accuseds inability to pay the fine.

The clear tenor and intention of Administrative Circular No. 12-2000 is not to remove
imprisonment as an alternative penalty, but to lay down a rule of preference in the
application of the penalties provided for in B.P. Blg. 22.

The pursuit of this purpose clearly does not foreclose the possibility of imprisonment for
violators of B.P. Blg. 22. Neither does it defeat the legislative intent behind the law.

Thus, Administrative Circular No. 12-2000 establishes a rule of preference in the

application of the penal provisions of B.P. Blg. 22 such that where the circumstances of
both the offense and the offender clearly indicate good faith or a clear mistake of fact
without taint of negligence, the imposition of a fine alone should be considered as the
more appropriate penalty. Needless to say, the determination of whether the
circumstances warrant the imposition of a fine alone rests solely upon the Judge. Should
the Judge decide that imprisonment is the more appropriate penalty, Administrative
Circular No. 12-2000 ought not be deemed a hindrance.

It is, therefore, understood that

1. Administrative Circular 12-2000 does not remove imprisonment as an

alternative penalty for violations of B.P. Blg. 22;

2. The Judges concerned may, in the exercise of sound discretion, and taking into
consideration the peculiar circumstances of each case, determine whether the
imposition of a fine alone would best serve the interests of justice or whether
forbearing to impose imprisonment would depreciate the seriousness of the
offense, work violence on the social order, or otherwise be contrary to the
imperatives of justice;

3. Should only a fine be imposed and the accused be unable to pay the fine, there
is no legal obstacle to the application of the Revised Penal Code provisions on
subsidiary imprisonment.

The issuance of this Administrative Circular was authorized by the Court En Banc in
A.M. No. 00-11-01-SC at its session of 13 February 2001.

The Clerk of Court of the Supreme Court and the Court Administrator shall immediately
cause the implementation of this Administrative Circular.

This Administrative Circular shall be published in a newspaper of general circulation not

later than 20 February 2001.

Issued this 14th day of February, 2001.

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(Sgd.)

HILARIO G. DAVIDE, JR.

Chief Justice" (Underscoring ours)

In Felicito Abarquez vs. Court of Appeals and People of the Philippines promulgated on August
7, 20034 a case which involves the application of penalties for violations of Batas Pambansa
Blg. 22 we did not only modify the amount of the fines imposed by the Court of Appeals in
Criminal Cases Nos. D-8137, D-8176 and D-8177, but also imposed "subsidiary imprisonment in
case of insolvency in accordance with Article 39 of the Revised Penal Code" in each case.

Administrative Circular No. 13-2001 and our Decision in Felicito Abarquez vs. Court of Appeals
and People of the Philippines should now lay to rest the controversy at bar.lawphil.net

WHEREFORE, the petition is DENIED.

SO ORDERED.

Panganiban, Corona, and Carpio Morales*, JJ., concur.

Footnotes
*
On leave.
1
"AN ACT PENALIZING THE MAKING OR DRAWING AND ISSUANCE OF A
CHECK WITHOUT SUFFICIENT FUNDS OR CREDIT AND FOR OTHER
PURPOSES."
2
Filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure, as amended.
3
No. L-13678, November 20, 1959, 106 Phil. 496.
4
G.R. No. 148557.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 28638 September 21, 1928

ROSARIO ESLER, VDA. DE TAD-Y, plaintiff-appellant,

vs.
JOSE B. LEDESMA, Provincial Sheriff of Iloilo, NICOLAS VALENCIA and MATEO
VILLAVERT, Clerk of Court of First Instance of Iloilo, defendants-appellees.

Powell and Hill for appellant.

Feria and La O, Clemente Zulueta, M. F. Zamora and A. de Aboitiz Pinaga for appellees.

MALCOLM, J.:

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In its final analysis, this case calls for the application and interpretation in an authoritative
manner of section 74 of the Code of Criminal Procedure, reading as follows:

At any time after the amount of bail is fixed by order, the defendant, instead of giving
bail, may deposit with the nearest Collector of Internal Revenue the sum mentioned in the
order, and, upon delivering to the court a proper certificate of the deposit, must be
discharged from custody. Money thus deposited shall be applied to the payment of the
fine and costs for which judgment may be given, and the surplus, if any, shall be returned
to the defendant.

On November 23, 1926, Mariano Gotera was charged in the Court of First Instance of Iloilo with
the crime of serious physical injuries committed on the person of the parish priest of Molo,
Iloilo, Father Nicolas Valencia. At the time Gotera was informed against in court, he was the
chauffeur of Mrs. Rosario Esler, Vda. de Tad-Y. Gotera was found guilty as charged, and was
sentenced to imprisonment, prision correccional, for two years and four months, to indemnify
the offended party in the sum of P2,996, with subsidiary imprisonment, and to pay the costs. It is
understood that Gotera is now serving his sentence in Bilibid Prison and that the cost have been
satisfied. The appeal centers on the indemnity and the bail offered and accepted to secure the
temporary release of Gotera.

To obtain Gotera's discharged from custody, two gentlemen by the names of Luis Davao and
Eulogio Aguirre and accompanied by attorney Tomas Villareal, counsel for Gotera, presented
themselves in the office of the Clerk of the Court of First Instance and tendered two Liberty
bonds of the value of $1,000 as bail. Thereupon, a bail bond was executed. Also a receipt was
made out by pen and ink by the clerk reading thus:

COURT OF FIRST INSTANCE

PROVINCE OF ILOILO
ILOILO, P. I.

He recibido del acusado Mariano Gotera 2 liberty bonds de quinientos dollars cada uno
($500) como deposito de fianza para su libertad provisional en la causa crim. No. 7441
(P.I.F. vs. Mariano Gotera por lesiones graves).

Iloilo, nov. 24, 1926.

(Fdo.) MATEO VILLAVERT

Escribano

At the foot of the receipt, there was appended in typewriting the following:

Por la presente declaro de que los liberty bonds, a que se refiere el recibo arriba
transcrito, son de la propiedad exclusiva de Da. Rosario Esler, viuda de Tad-Y, y que no
tengo ninguna participacion en la cantidad que representan dichos liberty bonds.

Iloilo, Iloilo, I. F., noviembre 24, 1926.

(Fdo.) MARIANO GOTERA

After the reading of the sentence to the accused, a petition was filed and granted directing the
clerk to apply the Liberty bonds to the payment of the indemnity. The provincial sheriff
converted the Liberty bonds into cash through the offices of the Philippine National Bank. After
deducting the legal fees, the court directed the balance amounting to P1,923.30 to be handed to
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Father Valencia. Mrs. Tad-Y tried unsuccessfully to get the court to set aside its order with the
result that an independent action was eventually begun by her against the provincial sheriff, the
clerk of court, and Father Valencia. The judgment in this case now on appeal dismissed the
complaint.

The appeal can be decided without difficulty if the court keep to the straight and narrow path and
refuses to be led by opposing counsel into treacherous by-ways. We are thus not impressed with
the insinuation to be found in the memorandum presented by the appellees that this action will
not lie on account of the alleged fact that the orders made in the criminal cases are final. Waiving
the point that this argument is not disclosed in any one of the seven propositions found in the
brief for the appellees, it only need be said that the courts everywhere allow parties to contest the
surplus left of the cash bail and determine who is entitled to the fund. On the other hand, as to the
twenty-two errors assigned by counsel for the appellant, he is in no position to argue many of
them. Thus when counsel says that the trial court was without authority to accept Liberty bonds
in lieu of money; that at any rate the bonds should have been deposited with the nearest Collector
of Internal Revenue instead of with the clerk of court; that the provisions of the Executive Order
of the Governor-General of May 9, 1918, concerning acceptance of Liberty bonds as security
have been compiled with; and that the provincial sheriff could not dispose of the Liberty bonds
in any other way than that provided by law, counsel forgets that all these difficulties came
about because his client through her agents and the accused induced the officers of the court to
accept the Liberty bonds and liberate the accused. If illegal action was taken, the plaintiff was a
party to the wrong. It has been directly held in a recent decision that one who induces a court to
take Liberty bonds as bail for one in custody of the law is estopped to deny that the court had
jurisdiction so to do. (Kirshbaum vs. Mayn [1926], 76 Mont., 320; 48 A. L. R., 1425; Dufek vs.
Harrison County [1926], Tex. Civ. App.; 289 S. W., 741; Mundell vs. Wells [1919], Cal., 7 A. L.
R., 383; Moss vs. Summit County [1922], Utah, 26 A. L. R. 206; Bryant vs. City of Bisbee
[1925], Ariz., 44 A. L. R., 1495.)

The first important question to decide is one of fact and relates to the ownership of the two
Liberty bonds. The trial judge found that they were the property of the accused and not the
property of Mrs. Tad-Y. This finding in our opinion does not conform to the weight of the proof
as disclosed by the record. Mrs. Tad-Y testified clearly that the two Liberty bonds belonged to
her. She was corroborated in her testimony to a certain extent by the testimony of the witnesses
Luis Davao and Eulogio Aguirre. More important still is the fact that in the partition of the estate
of the deceased Vicente Tad-Y, Liberty bonds of the fourth issue valued at P2,192, were set aside
for the widow. The bail bond mentions bond of the Fourth Liberty Loan, which corresponds
exactly with the issue of the bonds accruing to the widow on the division of the estate of her
deceased husband. Finally, effect must certainly be given to the statement on the receipt signed
by the accused that the two Liberty bonds were of the exclusive ownership of Mrs. Tad-Y. Error
was undoubtedly committed in not allowing the deposition of Mariano Gotera to be taken in
Bilibid Prison and the deposition of Ildefonso Villareal to be taken in Manila, but probably these
depositions would merely have corroborated the statement found on the receipt for the bonds.
Accordingly, we must find as a fact that the two Liberty bonds presented as cash bail for the
release of the prisoner Mariano Gotera were the property of Dona Rosario Esler, Vda. de Tad-Y.

With the preliminary question of fact out of the way we then have presented a case where Liberty
bonds were deposited with the clerk of court by a friendly third person, the object being to secure
the release from custody of a defendant held to answer to an information. Similar cases have
frequently gained the attention of the courts in the United States in jurisdictions where statues
permit a deposit of money to be made in lieu of bail in criminal cases. The decisions are
unanimous in holding that a fine imposed on the accused may be satisfied from the cash deposit;
and this is true although the money has been furnished by a third person. This is so because the
law contemplates that the deposit shall be made by the defendant. The money, or in this instance
the Liberty bonds, must accordingly be treated as the property of the accused. As a result, the

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money could be applied in payment of any fine imposed and of the costs. (People vs. Laidlaw
[1886], Ct. of App. of New York, 7 N. E., 910, a case frequently cited approvingly in other
jurisdictions; State of Iowa vs. Opwens [1900], 112 Iowa, 403; Mundell vs. Wells, supra.) But
while as between the state and the accused the money deposited by a third person for the release
of the accused is regarded as the money of the accused, it is not so regarded for any other
purpose. As between the accused and a third person, the residue of the cash bail is not subject to
the claim of a creditor of the accused. In the latter case, the ordinary rules of property obtain.
(Wright & Taylor vs. Dougherty [1908], 138 Iowa, 195; People vs. Gould [1902], 78 N. Y. Sup.,
279; Mundell vs. Wells, supra.)

The precise question determining the appeal can fairly be said to be this: Where Libety bonds are
deposited in lieu of money with the clerk of court by a friendly third person to gain the discharge
of a defendant, may the Liberty bonds he applied not only to the payment of the fine and cost but
to the indemnity? In other words, restricting the field of inquiry even further, within the meaning
of section 74 of the Code of Criminal Procedure, may indemnity be considered as coming within
the meaning of the word "fine." It is subject not entirely free from doubt, which merits our close
attention.

The law says "fine and costs." It does not say "fine, costs, and indemnity." Neverthelesss, counsel
for the appellees would have us construe the word "fine" to include indemnity. He relies on the
definition on "fine" found in Bouvier's Law Dictionary, volume 2, page 1225, where, after giving
the customary definition of "fine," it is said that "It may include a forfeiture or penalty
recoverable in a civil action." There is also brought to our attention on behalf of the appellees the
decision of the United States Supreme Court in the case of Freeman vs. United States ([1910],
217 U. S., 539) where the high court, taking under view the provisions of the Penal Code in
connection with the constitutional inhibition against imprisonment for debt, in one place in the
decision observed: "An examination of the statutes of the Philippines and the judgment of the
Supreme Court shows that the imposition of the money penalty was by was of punishment for
the offense committed, and not a requirement to satisfy a debt contractual in its nature or be
imposed in default of payment." As against these authorities is the usual definition of fine as a
pecuniary punishment imposed by a lawful tribunal upon a person convicted of crime or
misdemeanor. Strictly speaking, it is said the term does not embrace those pecuniary penalties or
forfeitures provided by statue that a civil action may be brought to recover (25 C. J., 1148;
Southern Express Co. vs. Walker [1895], 92 Va.,). After all, no one of these authorities is exactly
controlling, and a better method is to forget them for the moment, and independently thereof, to
concentrate on the meaning of the law.

The Code of Criminal Procedure is a penal statute. As such, it should be constructed strictly.
Moreover, the code of Criminal Procedure is a penal statute of American origin. No case can be
found where in the United States cash bail has been applied to anything else than the payment of
the fine and cost as these terms are there known. This is so because criminal actions and civil
actions are tried separate and apart. Damages are not assessed in a criminal action as they are in
the Philippines where the Spanish Penal Code is in force. The Code of Criminal Procedure
recognizes the distinction in section 107 be safe-guarding the civil rights of the person injured by
the offense. This is in line with the provisions of the Penal Code, which clearly recognizes as
distinct one from the other, imprisonment, fine, and indemnity.

The civil liability for reparation of damages and for indemnification for the harm done is purely
statutory (Albert, The Law on Crimes, p.161). In special acts enacted by the Philippine
Legislature analogous in nature to the Code of Criminal Procedure, it has invariably been found
necessary to make particular mention of indemnity it be recoverable. For instance, as Act No.
518 failed to provide for an indemnity, this court, speaking through Mr. Justice Mapa and Mr.
Chief Justice Arellano, held it error to impose upon the defendants the obligation to pay
indemnification (U.S. vs. Patino [1905], 4 Phil., 160; U.S. vs. De Ocampo [1905], 5 Phil., 324).

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Subsidiary imprisonment, according to Act No. 1732, can only be imposed when a fine is meted
out as any part of the punishment for a criminal offense made punishable by any act or acts of the
Philippine Commission. Even in a conviction for a violation of an article of the Penal Code,
when there is no provision in the law authorizing the payment of an indemnity, it cannot legally
be imposed (U.S. vs. Noriega and Tobias [1915], 31 Phil., 310).

Sweeping the mind clear of cumulative authority pro and con, and of all extraneous
consideration, and focusing attention directly on the law, the reason for the law presents itself
clearly. It is this. When the cash bail is allowed, the two parties to the transaction are the state
and the defendant. Unlike other bail bonds, the money may then be used in the payment of that in
which the state is concerned the fine and costs. The right of the government is in the nature of
a lien on the money deposited. But as regards the indemnity, this, while permitted to be fixed in a
criminal action, is primarily of interest to the offended party and the accused. That the distinction
exists seems to us evident, and existing, the court would not be justified in amending the law by
judicial pronouncement so as to include indemnity.

Agreeable to the foregoing, the judgment appealed from shall be reversed, and in the trial court a
new judgment shall issue in favor of the plaintiff and against the defendant Nicolas Valencia for
the sum of P1,923.30, without cost in either instance. So ordered.

Johnson, Villamor, and Ostrand, JJ., concur.

Separate Opinions

STREET, J., concurring:

I am of the opinion that the plaintiff's bonds cannot be applied to the payment of the indemnity
and wish to be understood as reserving my views upon the point whether they could be applied
to the payment of a fine, if a fine had been assessed against the accused.

ROMUALDEZ, J., dissenting:

On the one hand, I believe that since it appears that the plaintiff did not intend to deliver her
bonds as bail for the then accused, Mariano Gotera, they could not be forfeited nor applied to
satisfy the judgment against said accused. On the other hand, I am of the opinion that the word
"fine" used in section 74 of General Orders No. 58 refers not only to the fine but also to the
indemnity to the offended party imposed by the judgment in the criminal case.

Section 74 just cited refers to the deposit made in lieu of bail for the provisional release of the
defendant. The deposit thus made takes the place of bail and answer for what the bail would
answer; and, according to section 67 of said General Orders, the bail answers for the defendant's
appearance for judgment, and that he will deliver himself for the execution thereof, without
excluding the indemnity to the offended party. Furthermore, said word "fine" has, among others,
the following definition:

In Criminal Law. Pecuniary punishment imposed by a lawful Tribunal upon a person

convicted of crime or misdemeanor, . . . . It may include a forfeiture or penalty
recoverable in a civil action. (2 Bouvier's Law Dictionary, 1925.)

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