G.R. No. 53585 February 15, 1990
ROMULO VILLANUEVA, petitioner, vs. HON. FRANCISCO TANTUICO, JR., and EMILIANA CRUZ, respondents.

FACTS

Petitioner Romulo Villanueva, a Bureau of Records Management officer, was designated Administrative Officer and Training Coordinator for two government seminars. Seminar fees, totaling P43,000.00 and collected from participating government agencies pursuant to a Presidential Memorandum Circular, were placed under his control for authorized disbursements related to seminar expenses. Villanueva authorized disbursements for items like food, transportation, and honoraria. After the seminars, a balance of P1,851.80 was deposited with the Bureau Cashier.
Subsequently, Auditor Emiliana Cruz discovered that some participants had already collected transportation and per diem allowances from their home offices. Cruz thus disallowed P31,949.15 of Villanueva’s authorized disbursements for these items, treating the amount as an unauthorized use of public funds. She issued a certificate of permanent disallowance and, invoking Section 624 of the Revised Administrative Code, directed the withholding of Villanueva’s salaries, benefits, and terminal leave pay to settle the alleged debt. The Tanodbayan earlier dismissed a malversation case against Villanueva, finding the seminar fees were not public funds and his disbursements were in good faith, but the Commission on Audit sustained Auditor Cruz’s actions.

ISSUE

Whether respondent Auditor Cruz and the Commission on Audit committed grave abuse of discretion in: (1) declaring the seminar funds as public funds; (2) finding Villanueva indebted to the government based on a disallowance; and (3) applying administrative set-off against his salaries and benefits under Section 624 of the Revised Administrative Code.

RULING

The Supreme Court granted the petition, finding grave abuse of discretion. First, the seminar funds were correctly deemed public funds as they were charged against the appropriations of various government agencies under a Presidential directive, making them subject to audit. However, the audit conclusions were flawed. The Court ruled that Section 624 of the Revised Administrative Code, allowing set-off of a government employee’s indebtedness, requires a liquidated debt that is due and demandable. A mere disallowance in audit does not constitute such a liquidated debt; it only creates a contingent liability. A final judgment from a competent court is necessary to establish a true indebtedness justifying set-off.
Furthermore, the Court found no evidence of bad faith or irregularity in Villanueva’s actions. The disbursements were made for legitimate seminar purposes as authorized, and there was no showing he knew participants had received duplicate allowances. Any liability for duplicate payments should fall on the recipients, not Villanueva. Thus, the withholding of his salaries and benefits based on a mere disallowance, without a judicial determination of debt, was arbitrary and constituted grave abuse of discretion. The certificate of disallowance and the COA resolution were annulled, and the COA was ordered to release Villanueva’s withheld salaries and benefits.