REPORT ON THE FINANCIAL AUDIT CONDUCTED ON THE BOOKS OF ACCOUNTS OF OIC MELINDA DESEO, MTC, GENERAL TRIAS, CAVITE,

Report on the Financial Audit of the Books of Accounts of OIC Melinda Deseo

The Case

This is an administrative matter arising from a financial audit ordered by the Supreme Court itself, upon the letter of Judge Lerio Castigador of the Municipal Trial Court of General Trias, Cavite, reporting that Court Interpreter Melinda Deseo, who had served as Officer-in-Charge of that court, had used her cash collections to encash personal checks. The case is not a contest between private litigants; it is the Court examining its own house. It matters because it fixes the standard of accountability for every clerk and officer entrusted with the Fiduciary Fund, and because it draws the line between an admonition, which is no penalty at all, and the suspension that misconduct in the handling of trust funds deserves.

Procedural History

The matter began with the letter of Judge Castigador dated February 4, 1999, informing the Supreme Court of the irregularities. The Office of the Court Administrator conducted a financial audit of the books of the Municipal Trial Court of General Trias, Cavite, covering the Fiduciary Fund for the period November 1997 to February 4, 1999, and the General and Judiciary Development Funds for the period August 1998 to January 31, 1999. Melinda Deseo submitted her written explanation dated February 13, 1999, admitting the allegations. On October 20, 1999, the Office of the Court Administrator recommended that she be merely admonished with a warning, that the incumbent Officer-in-Charge, Corazon Perez, be advised to comply strictly with the circulars, and that Judge Castigador be admonished to monitor the handling of cash collections closely. Because the recommendation was so light, the Supreme Court returned the matter to the Office of the Court Administrator for revision of its recommendations. In a memorandum dated February 9, 2000, the Office reiterated its previous recommendation. The matter then came before the Supreme Court for resolution as an administrative case.

Facts

Melinda Deseo was designated Officer-in-Charge of the Municipal Trial Court of General Trias, Cavite on September 25, 1995, while holding the position of Court Interpreter. In that capacity she received fiduciary collections, which she was bound to deposit in the authorized depository bank for the account of the court. Instead, she used her cash collections to encash personal checks — her own checks from the Government Service Insurance System for salary and salary loan, and the checks of her friends and relatives as well — depositing those checks in the savings account of the court in lieu of the cash she had taken.

In her explanation dated February 13, 1999, she admitted the allegations. She claimed good faith, saying she had seen to it that the amounts taken from her collections equaled the amounts of the checks she deposited. She said she acted out of necessity, to defray the expenses of her sick mother and to avoid unscrupulous money changers who cashed checks at huge discounts. She admitted she did all this without the authority of Judge Castigador, and expressed regret.

The audit confirmed the report and found further irregularities: the Rural Bank of General Trias was being used as depository instead of the Land Bank of the Philippines or the local treasurer; interest earned on the Fiduciary Fund was not remitted quarterly to the National Treasury; receipts were not issued in strict numerical sequence as required; and the cashbook did not reconcile with the monthly reports submitted to the Accounting Division of the Office of the Court Administrator. The audit also noted an overage deposit of 1,500 pesos pertaining to a deposit made by Perfecto Villanueva in a criminal case, which had already been refunded to him, and unwithdrawn interest of 180 pesos and 12 centavos, making a total overage of 1,680 pesos and 12 centavos.

Issues

• Whether or not Melinda Deseo is administratively liable for using her cash collections to encash personal checks, notwithstanding her claim of good faith and her alleged lack of training in handling fiduciary funds.
• Whether or not the admonition recommended by the Office of the Court Administrator is the appropriate penalty for her offense.
• Whether or not Judge Lerio Castigador bears responsibility for the irregularities committed by his subordinate.

Applicable Provisions

Circular Number 50-95, on Court Fiduciary Funds, provides on the manner of making deposits:

Deposits of fiduciary funds shall be made under a savings account. A current account may also be maintained provided that a savings account is also maintained with automatic fund transfer arrangement.

This fixes the authorized manner of holding fiduciary collections, which Deseo disregarded by treating her cash on hand as a personal encashment facility.

The same Circular provides on the deposit of collections:

All collections from bailbonds, rental deposits, and other fiduciary collections shall be deposited within twenty four (24) hours by the Clerk of Court concerned, upon receipt thereof, with the Land Bank of the Philippines.

This is the twenty four hour rule she violated, since the collections were not deposited but diverted to encash checks.

The Circular further provides on interest:

Interest earned on these deposits and any forfeited amounts shall accrue to the general fund of the national government. Within two (2) weeks after the end of each quarter, the Clerk of Court shall withdraw such interest and forfeited amounts and shall remit the same to the National Treasury under a separate remittance advice, duplicate copy thereof to be furnished the Chief Accountant of the Supreme Court for record and control purposes.

This is the quarterly remittance duty the audit found unperformed.

And on the depository bank:

Only one depository bank shall be maintained and the bank must be formally informed by the Executive/Presiding judge as to who are the authorized signatories to the withdrawal slips and that every withdrawal slip must be accompanied by a court order authorizing the withdrawal of the amount indicated thereat.

This confirms that fiduciary funds may be withdrawn only upon court order, which is why the Court describes the fund as one held in trust.

Ruling

On the first issue, the Court held that there is no doubt Deseo violated Circular Number 50-95 by using her cash collections, which she should have deposited in the bank for the account of the Municipal Trial Court, to encash not only her personal checks but also those of her friends and relatives. The Fiduciary Fund is in the nature of a trust fund which should not be withdrawn without authority of the court; its use for other purposes constitutes a misappropriation of public funds placed in the care of the public officer concerned. Her claim that she encashed the checks because her friends and relatives badly needed cash, and to defray the expenses of her sick mother, cannot be justified; the Court has rejected the same excuse, as the activity is no different from the activities of money changers victimizing lowly employees in need of cash, and is in truth a lending operation with the use of public funds.

On the second issue, the Court disagreed with the Office of the Court Administrator. Her alleged lack of prior training and orientation in administering Fiduciary Fund collections cannot relieve her of administrative liability, because her collections and deposits of the Judiciary Development Fund and the General Fund were in order, and her responsibilities for those funds are substantially the same as for the Fiduciary Fund. It is difficult to believe she was ignorant of the Circular; she might have been unaware of it at the beginning, but surely not for the three years she was Officer-in-Charge. The Court stressed that admonition is not a penalty, quoting its own definition of admonition as a gentle or friendly reproof, a mild rebuke, warning or reminder, counseling on a fault, error or oversight, an expression of authoritative advice or warning. Her offense deserved more. The Court held her guilty of misconduct, for which suspension for six months and one day without pay is the appropriate penalty, and added that it is no excuse that the funds of the court were all accounted for.

On the third issue, the Court held that Judge Castigador, as her superior, should have exercised direct and immediate supervision over her to ensure that she observed the provisions of Circular Number 50-95. The Court quoted its own teaching that a vital administrative function of a judge is the effective management of his court, and this includes control of the conduct of the court's ministerial officers, and that no protestation of good faith can override the mandatory nature of the circulars designed to promote full accountability for government funds. He cannot entirely wash his hands of responsibility by disclaiming knowledge of her activities, but he must be given credit for getting wind of them and bringing them to the attention of the Court.

Doctrine

First, the Fiduciary Fund is a trust fund; it may not be withdrawn without authority of the court, and its use for any other purpose is misappropriation of public funds. Second, using cash collections to encash personal checks, whether one's own or those of friends and relatives, is a lending operation with public funds and cannot be excused by good faith, necessity, or the fact that the funds were eventually accounted for. Third, lack of training or orientation does not relieve an accountable officer of administrative liability, especially where she faithfully handled other funds of the same character. Fourth, admonition is not a penalty; it is a gentle or friendly reproof, a mild rebuke, a warning or reminder, counseling on a fault, error or oversight, an expression of authoritative advice or warning. Fifth, misconduct in the handling of fiduciary funds warrants suspension for six months and one day without pay. Sixth, judges are bound to exercise effective supervision over their ministerial officers, and no protestation of good faith can override the mandatory nature of the circulars designed to promote full accountability for government funds.

Disposition

The Court found Melinda Deseo guilty of misconduct and ordered her suspension for six months and one day without pay, with a warning that a repetition of the offense would be dealt with more severely; admonished Judge Lerio Castigador to exercise effective supervision over the personnel of his court, especially those charged with the collection of the Fiduciary Fund and other trust funds; and advised Corazon Perez, the incumbent Officer-in-Charge, to observe strictly Circular Number 50-95 and the pertinent circulars of the Court.

Remember This

Memorize the line that admonition is not a penalty, and that the Fiduciary Fund is a trust fund that cannot be withdrawn without court order. Examiners use this case to test the penalty for misconduct in handling judiciary funds, the rejection of good faith and lack of training as defenses, and the administrative duty of judges to supervise their collecting officers.