G.R. No. L-32312 November 25, 1983
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, ZAFRA FINANCING ENTERPRISE and MARCELINO ZAFRA, respondents-appellees.

FACTS

Zafra Financing Enterprise extended loans to public school teachers in Cebu City. The teachers executed promissory notes and special powers of attorney authorizing Zafra to collect their salary checks directly from the Division Office of the Bureau of Public Schools. Petitioner Aurelio Tiro, the City Superintendent of Schools, refused to honor these authorizations and forbade the release of the checks to Zafra. His refusal was based on Circular No. 21, series of 1969, issued by the Director of Public Schools, which prohibited disbursing officers from paying salaries to any person other than the employee concerned, except to an immediate family member, unless specific higher authorization was obtained. The Circular aimed to discourage the practice of salary assignment, deemed adverse to employee morale and efficiency.
Zafra filed a suit to compel Tiro to honor the special powers of attorney, to declare Circular No. 21 illegal, and to claim attorney’s fees and damages. The Court of First Instance ruled in favor of Zafra, ordering Tiro to honor the authorizations and declaring the Circular invalid, although it disallowed the monetary claims against Tiro due to his good faith. Tiro appealed this decision to the Supreme Court.

ISSUE

The core issue is whether Circular No. 21, series of 1969, issued by the Director of Public Schools, is valid and enforceable, thereby allowing the Superintendent to refuse salary checks to a financing company holding assignments from teachers.

RULING

The Supreme Court granted the petition and reversed the trial court’s decision, upholding the validity of Circular No. 21. The legal logic rests on the nature of a government salary check before its delivery. The Court ruled that until a salary check is physically delivered to the government employee, it remains the property of the Government. Consequently, the employee-payee has no power to assign or encumber it without the Government’s consent. The Circular, which withholds such consent by restricting third-party collections, is therefore firmly grounded in law.
The Circular finds statutory authorization under Section 79(b) of the Revised Administrative Code, which empowers department heads to issue rules and regulations for the efficient administration of their offices. Furthermore, Section 21 of the Magna Carta for Teachers ( Republic Act No. 4670 ) explicitly prohibits any deduction from a teacher’s salary except under specific legal authority, and while it permits deductions for certain authorized items like association dues or insurance premiums upon written request, it does not authorize the outright assignment or collection of the salary check itself by a private financing entity. The Court dismissed Zafra’s claim that the Circular impaired the obligation of contracts, clarifying that the Circular does not nullify the loan contracts between Zafra and the teachers; it merely regulates the Government’s role in the collection process by refusing to participate as a channel for private debt collection, a prerogative well within its administrative competence.