AURELIO TIRO, AS CITY SUPERINTENDENT OF SCHOOLS OF CEBU CITY, PETITIONER-APPELLANT, VS. HONORABLE AGAPITO HONTANOSAS, JUDGE OF THE COURT OF FIRST INSTANCE OF CEBU, BRANCH XI, ZA…

Tiro versus Hontanosas

The Case

This is the story of a schools superintendent who said no. Zafra Financing Enterprise had been lending money to public school teachers in Cebu City, and the teachers signed promissory notes and special powers of attorney letting Zafra collect their salary checks from the schools division office. Superintendent Aurelio Tiro refused to honor those powers of attorney, invoking a circular of the Director of Public Schools. Zafra went to court to compel him, to strike down the circular, and to recover damages. The case matters because it fixes a rule every examinee should know: before a salary check is physically delivered to the government employee, that check belongs to the Government, and the employee cannot assign it without the Government's consent.

Procedural History

Zafra Financing Enterprise filed a civil case in the Court of First Instance of Cebu against Tiro in his official capacity as Superintendent of Schools. The trial court ruled for Zafra: it granted the prayer to compel Tiro to honor the special powers of attorney and declared the circular illegal. The trial court, however, disallowed the claim for attorney's fees and damages, finding that Tiro had acted in good faith in implementing the circular. Tiro then brought the matter to the Supreme Court by petition for review, seeking a reversal of the trial court's decision.

Facts

Zafra Financing Enterprise extended loans to public school teachers in Cebu City. As security and as a collection mechanism, the teachers executed promissory notes and special powers of attorney in favor of Zafra, authorizing it to take and collect their salary checks from the Division Office in Cebu City of the Bureau of Public Schools.

Tiro forbade the collection of the checks. He relied on Circular Number 21, series of 1969, dated December 5, 1969, issued by the Director of Public Schools, which prohibited payment of salary to persons other than the employee concerned, except when the person authorized is an immediate member of the family of the employee, and in all other cases except upon proper authorization of the Assistant Executive Secretary for Legal and Administrative Matters, with the recommendation of the Financial Assistant.

Zafra sued to compel Tiro to honor the special powers of attorney, to declare the circular illegal, and to make him pay attorney's fees and damages. The trial court sided with Zafra on the first two prayers but disallowed the money claim because Tiro had acted in good faith. Tiro elevated the case to the Supreme Court.

Issues

• Whether or not Circular Number 21, series of 1969, of the Director of Public Schools is valid and enforceable.
• Whether or not the circular impairs the obligation of contracts between Zafra and the teachers.

Applicable Provisions

Section 79, paragraph b, of the Revised Administrative Code, on the power to regulate, provides:

SEC. 79 (b). Power to regulate - The Department Head shall have power to promulgate, whoever he may see fit to do so, all rules, regulations, orders, circular, memorandums, not contrary to law, necessary to regulate the proper working and harmonious and efficient administration of each and all of the offices and dependencies of his Department, and for the strict enforcement and proper execution of the laws relative to matters under the jurisdiction of said Department; but none of said rules or orders shall prescribe penalties. All rules, regulations, orders or instructions of a general and permanent character promulgated in conformity with this section shall be numbered by each Department consecutively each year, and shall be duly published.

This is the statutory source of the authority to issue the circular, and the Court used it to uphold the circular as a valid administrative regulation.

Section 21 of the Magna Carta for Teachers, Republic Act Number 4670, on deductions prohibited, provides:

SEC. 21. Deductions Prohibited. - No person shall make any deduction whatsoever from the salaries of teachers except under specific authority of law authorizing such deductions: Provided, however, that upon written authority executed by the teacher concerned, (1) lawful dues and fees owing to the Philippine Public School Teachers Association, and (2) premiums properly due on insurance policies, shall be deductible.

This provision reinforces the protection of teachers' salaries and shows the legislative policy against diverting those salaries to other persons without specific authority of law.

Ruling

On the first issue, the Court held that the circular is valid and enforceable, and the answer is definitely in the affirmative. The core reasoning is a rule on ownership of the salary check. The salary check of a government officer or employee such as a teacher does not belong to him before it is physically delivered to him. Until that time the check belongs to the Government. Accordingly, before there is actual delivery of the check, the payee has no power over it; he cannot assign it without the consent of the Government. On this basis the circular stands on firm legal footing. The Court also found that the circular is authorized by relevant statutes extant when it was issued, namely Section 79, paragraph b, of the Revised Administrative Code and Section 21 of the Magna Carta for Teachers.

On the second issue, the Court held that Zafra's claim of impairment of the obligation of contracts is baseless. The circular does not prevent Zafra from collecting the loans. It merely makes the Government a non-participant in their collection, which is within its competence to do.

Doctrine

First, a salary check of a government officer or employee does not belong to the payee before physical delivery; until then it belongs to the Government, and the payee cannot assign it without the Government's consent. Second, a department head may promulgate rules, regulations, orders, circulars, and memorandums not contrary to law, necessary to regulate the proper working and harmonious and efficient administration of the offices and dependencies of his Department, as provided in Section 79, paragraph b, of the Revised Administrative Code; a circular issued under this authority is valid and enforceable. Third, no person shall make any deduction whatsoever from the salaries of teachers except under specific authority of law authorizing such deductions, as provided in Section 21 of the Magna Carta for Teachers. Fourth, a regulation that merely makes the Government a non-participant in the collection of loans does not impair the obligation of contracts, because the creditor may still collect from the debtor by other lawful means.

Disposition

The Supreme Court granted the petition, set aside the judgment of the trial court, and ordered costs against the private respondent, Zafra Financing Enterprise.

Remember This

Memorize this line: before actual delivery, the salary check belongs to the Government, and the payee cannot assign it without the Government's consent. Examiners like to use this case on the validity of administrative circulars under the power to regulate, on the prohibition against deductions from teachers' salaries under the Magna Carta for Teachers, and on the non-impairment clause as applied to regulations that merely keep the Government out of private collection arrangements.