G.R. No. L-49535 October 28, 1988
ROMANA M. CRUZ, petitioner, vs. HON. FRANCISCO TANTUICO and HON. GREGORIO G. MENDOZA, in their capacity as Acting Chairman and Treasurer of the Philippines of the Commission on Audit and the Bureau of Treasury, respondents.

FACTS

Petitioner Romana M. Cruz, a Cashier IV at the Bureau of Treasury, paid twenty-eight treasury warrants totaling P21,545.08. These warrants, issued by the Department of Education and Culture to fictitious “ghost” teachers in Region IX, were later discovered to be part of a syndicate’s falsification scheme. Cruz paid the warrants upon presentment, finding nothing irregular on their faces or endorsements. An investigation ensued, and initially, the National Cashier recommended action against the falsifying parties, not Cruz, who was deemed to have acted in good faith in her routine duty.
Subsequently, the Commission on Audit (COA), through Acting Chairman Francisco Tantuico, directed Cruz to restore the amount, holding her liable as the “last indorser” of the warrants. When Cruz failed to restitute, COA ordered the withholding of her salary under Section 624 of the Revised Administrative Code. Upon her retirement, respondent Treasurer Gregorio Mendoza, implementing the COA directive, deducted the P21,545.08 from her retirement benefits. Cruz petitioned the Supreme Court to set aside the COA orders and release her benefits.

ISSUE

Whether the COA Acting Chairman and the Treasurer of the Philippines acted with grave abuse of discretion in holding petitioner Romana M. Cruz liable for the value of the fraudulently issued treasury warrants and in deducting this amount from her retirement benefits.

RULING

The Supreme Court granted the petition, setting aside the COA orders and directing the release of Cruz’s retirement benefits. The legal logic proceeded on two primary grounds. First, the Court found that Cruz, as a paying teller, was not an “indorser” of the negotiable treasury warrants. Her act of payment constituted a discharge of the instruments, not an endorsement that would impose warranty liability under the Negotiable Instruments Law. She performed a routine ministerial duty in good faith, with no negligence attributable to her, as the warrants appeared genuine and bore authorized signatures. The loss stemmed from the fraudulent issuance by employees of other agencies, not from Cruz’s encashment.
Second, and decisively, the Court held that the deduction from her retirement benefits was legally impermissible. Retirement benefits are exempt from attachment, levy, or seizure under Section 3 of Act No. 4051 . This specific law prevails over the general authority in Section 624 of the Revised Administrative Code, which allows salary withholding for government accountabilities. To permit the administrative deduction of retirement benefits would circumvent the explicit statutory exemption, allowing indirectly what the law prohibits directly. Therefore, the respondents acted with grave abuse of discretion in ordering and effecting the deduction.