G.R. No. L-10375; March 30, 1962
LUIS ACHONDOA, plaintiff-appellant, vs. PROVINCE OF MISAMIS OCCIDENTAL, defendant-appellee.

FACTS

In June 1945, after the liberation and restoration of civil government in Misamis Occidental, the provincial treasurer prevailed upon Luis Achondoa to deposit P20,000 in emergency notes with the provincial treasury. The money was expressly used to pay fifty percent of the salaries of provincial employees who had been retained in service during the Japanese occupation. Receipts were issued describing the amount as a “deposit for safekeeping,” with a notation that it was “to be withdrawn in installments as per agreement provided there will be available cash.” Achondao later sought to recover this sum from the province, plus interest and attorney’s fees.
The Province of Misamis Occidental disclaimed liability, asserting that the provincial treasurer lacked the authority to secure such a loan or deposit. It further contended that, as the emergency notes were registered under Republic Act No. 22 without its consent, any redemption would be governed by the graduated scale in Republic Act No. 369, valuing the claim at less than P5,000. The trial court absolved the province, ruling the treasurer’s act was ultra vires, though it suggested that national authorities find a way to reimburse Achondoa since the province benefited from the funds.

ISSUE

Whether the Province of Misamis Occidental is legally bound to repay the P20,000 to Luis Achondoa based on the transaction conducted by its provincial treasurer.

RULING

No, the province is not legally bound. The Supreme Court affirmed the trial court’s decision, holding the provincial treasurer’s act was ultra vires and therefore not binding on the provincial government. The legal logic rests on the principle of agency and statutory authority. A provincial treasurer’s powers are explicitly defined by law. Section 2089 of the Revised Administrative Code enumerates these duties, which include the disbursement of provincial funds and advising the provincial board of financial shortages. Crucially, nowhere in this provision, or elsewhere in the relevant statutes, is the provincial treasurer granted the authority to borrow money or accept deposits to fund provincial operations.
The power to contract loans for the province is vested solely in the provincial government itself, specifically the provincial board, under Section 2086 of the Revised Administrative Code. The treasurer’s proper course upon a fund shortage was to inform the provincial board and, if necessary, suspend expenditures to avoid an overdraft, not to obtain a private loan. Since the treasurer acted beyond the scope of his delegated statutory powers, his unauthorized contract did not create a valid obligation against the province. The fact that the province benefited from the money, using it to pay salaries, does not validate the otherwise void transaction or create an implied obligation to repay under the principle of quantum meruit, as such a result would circumvent the clear legal restrictions on provincial indebtedness. While recognizing the inequity, the Court could only suggest, not order, that legislative or executive authorities devise a scheme for equitable reimbursement.