De la Victoria vs. Burgos

A government employee's salary or RATA check remains public funds and does not belong to the payee before physical delivery; until delivery, it cannot be garnished to satisfy the payee's judgment debt.

Raul H. Sesbreño was the plaintiff in a damages action against Assistant City Fiscals Bienvenido N. Mabanto, Jr. and Dario D. Rama, Jr. Loreto D. de la Victoria was the City Fiscal of Mandaue City, the head of office through whom the Department of Justice transmitted salary and RATA checks to Mabanto, Jr., who was then detailed there. The dispute implicated Section 16 of the Negotiable Instruments Law on delivery of negotiable instruments and the public policy against using garnishment to divert public funds from their appropriated purposes.

Raul H. Sesbreño filed a complaint for damages against Assistant City Fiscals Bienvenido N. Mabanto, Jr. and Dario D. Rama, Jr. before the Regional Trial Court of Cebu City. After trial, judgment was rendered ordering the defendants to pay P11,000.00 to Sesbreño. The decision became final and executory, and on Sesbreño's motion the trial court ordered its execution. The defendants questioned the execution order before the Court of Appeals. On 15 January 1992, a writ of execution was issued.

On 4 February 1992, a notice of garnishment was served on Loreto D. de la Victoria as City Fiscal of Mandaue City, where Mabanto, Jr. was then detailed. The notice directed petitioner not to disburse, transfer, release, or convey to any other person except the deputy sheriff concerned the salary checks or other checks, monies, or cash due or belonging to Mabanto, Jr., under penalty of law. On 10 March 1992, Sesbreño filed a motion before the trial court for examination of the garnishees. On 25 May 1992, the petition pending before the Court of Appeals was dismissed. The trial court, finding no more legal obstacle to act on the motion for examination of the garnishees, directed petitioner on 4 November 1992 to submit a report showing the amount of the garnished salaries of Mabanto, Jr. within fifteen days from receipt, taking into consideration Section 12, paragraphs (f) and (i), Rule 39 of the Rules of Court.

On 24 November 1992, Sesbreño filed a motion to require petitioner to explain why he should not be cited in contempt of court for failing to comply with the 4 November 1992 order. On 19 January 1993, petitioner moved to quash the notice of garnishment. He claimed that he was not in possession of any money, funds, credit, property, or anything of value belonging to Mabanto, Jr., except his salary and RATA checks, but that those checks were not yet properties of Mabanto, Jr. until delivered to him. He further claimed that, as such, they were still public funds which could not be subject to garnishment.

On 9 March 1993, the trial court denied both motions and ordered petitioner to immediately comply with its 4 November 1992 order. It found that the checks of Mabanto, Jr. had already been released through petitioner by the Department of Justice, duly signed by the officer concerned, and that upon service of the writ of garnishment petitioner, as custodian of the checks, was under obligation to hold them for the judgment creditor. It also stated that petitioner became a virtual party to, or a forced intervenor in, the case and that the trial court thereby acquired jurisdiction to bind him to its orders and processes. On the contempt charge, the trial court was not morally convinced of petitioner's guilt; while his explanation suffered from procedural infirmities, he had sent a written explanation dated 22 July 1992 requesting the lifting of the notice of garnishment on the ground that the notice should have been sent to the Finance Officer of the Department of Justice. Petitioner insisted that he had no authority to segregate a portion of the salary of Mabanto, Jr. The explanation was not submitted to the trial court for action because the stenographic reporter failed to attach it to the record.

On 20 April 1993, the motion for reconsideration was denied. The trial court's factual premise remained that the checks were in petitioner's custody and had not been physically delivered to Mabanto, Jr.

• Non-Delivery and Ownership: Petitioner argued that the salary and RATA checks were not owned by Mabanto, Jr. because they were not yet delivered to him, and that before physical delivery the payee had no power over them.
• Public Funds Exemption: Petitioner maintained that the salary checks still formed part of public funds and were therefore beyond the reach of garnishment proceedings.
• No Obligation to Hold and Deliver: Petitioner claimed that as garnishee he had no legal obligation to hold and deliver the checks to the trial court to be applied to Mabanto, Jr.'s judgment debt.
• Lack of Authority and Proper Custodian: Petitioner asserted that he had no authority to segregate a portion of Mabanto, Jr.'s salary and that the notice of garnishment should have been sent to the Finance Officer of the Department of Justice.

• Ownership of Check Before Delivery: Whether a check still in the hands of the maker or its duly authorized representative is owned by the payee before physical delivery to the latter.
• Garnishment of Public-Fund Salary Check: Whether the salary check of a government official or employee funded with public funds can be subject to garnishment.
• Duty of Garnishee to Inquire: Whether the garnishee may inquire into the validity of the notice of garnishment where he has actual knowledge of the garnisher's lack of entitlement.

• Ownership of Check Before Delivery: No. Under Section 16 of the Negotiable Instruments Law, a negotiable instrument is incomplete and revocable until delivery; delivery requires transfer of possession with intent to transfer title. The checks remained in petitioner's custody and had not been delivered to Mabanto, Jr., so they did not belong to him.
• Garnishment of Public-Fund Salary Check: No. Salary checks of government officers or employees remain public funds until physical delivery; as public funds, they cannot be garnished to satisfy a judgment debt.
• Duty of Garnishee to Inquire: Yes, where the garnishee has actual knowledge of the garnisher's lack of entitlement, he may inquire into the validity of the notice of garnishment; the general rule excusing such inquiry does not apply. The trial court exceeded its jurisdiction in issuing the notice.

• Ownership of Check Before Delivery: Garnishment is a species of attachment for reaching credits belonging to the judgment debtor owing to him from a stranger to the litigation. The focal point is whether the property or credit belongs to the judgment debtor. Under Section 16 of the Negotiable Instruments Law, every contract on a negotiable instrument is incomplete and revocable until delivery for the purpose of giving effect thereto. Delivery means the transfer of possession of the instrument by the maker or drawer with intent to transfer title to the payee and recognize him as the holder thereof. The trial court relied on the last sentence of Section 16, which provides that where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed. That presumption, however, is not conclusive because the provision states "until the contrary is proved"; the trial court deleted this phrase for no apparent reason. Proof to the contrary was the trial court's own finding that the checks were in the custody of petitioner. Inasmuch as the checks had not yet been delivered to Mabanto, Jr., they did not belong to him and still had the character of public funds. In Tiro vs. Hontanosas, the Court ruled that 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. Before actual delivery, the payee has no power over it and cannot assign it without the consent of the Government.

• Garnishment of Public-Fund Salary Check: As a necessary consequence of being public funds, the checks may not be garnished to satisfy the judgment. The rationale is public policy: the functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by law. The trial court therefore exceeded its jurisdiction in issuing the notice of garnishment concerning the salary checks of Mabanto, Jr. in the possession of petitioner.

• Duty of Garnishee to Inquire: The trial court cited Philippine Commercial Industrial Bank vs. Court of Appeals for the proposition that it is not incumbent upon the garnishee to inquire or judge for itself whether the order for advance execution of a judgment is valid. That is the general rule, but the Court has also established exceptions, such as a defect on the face of the writ or actual knowledge by the garnishee of lack of entitlement on the part of the garnisher. Although the ruling referred to the validity of advance execution of judgments, a careful scrutiny of that case and similar cases reveals that it is applicable to a notice of garnishment as well. In this case, it was incumbent upon petitioner to inquire into the validity of the notice of garnishment because he had actual knowledge of the non-entitlement of private respondent to the checks in question. Consequently, the trial court exceeded its jurisdiction in issuing the notice of garnishment concerning the salary checks of Mabanto, Jr. in the possession of petitioner.

• Garnishment — A species of attachment for reaching credits belonging to the judgment debtor owing to him from a stranger to the litigation. Only property or credits belonging to the judgment debtor may be garnished. The Court applied this doctrine by emphasizing that the salary and RATA checks had not yet been delivered to Mabanto, Jr. and therefore did not belong to him; there was no credit belonging to the judgment debtor that could be reached by garnishment.
• Delivery of Negotiable Instruments — Under Section 16 of the Negotiable Instruments Law, every contract on a negotiable instrument is incomplete and revocable until delivery for the purpose of giving effect thereto. Delivery means the transfer of possession of the instrument by the maker or drawer with intent to transfer title to the payee and recognize him as the holder thereof. Where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed, but the presumption is not conclusive because the provision states "until the contrary is proved." The Court applied this doctrine by holding that the presumption of delivery was rebutted by the fact that the checks were still in petitioner's custody; without delivery, Mabanto, Jr. did not own the checks.
• Public Funds Exemption from Garnishment — The salary check of a government officer or employee does not belong to him before it is physically delivered to him; until that time the check belongs to the government. Before actual delivery, the payee has no power over it and cannot assign it without the consent of the Government. As public funds, the checks may not be garnished to satisfy a judgment. The rationale is public policy: the functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by law. The Court applied this doctrine by discharging the notice of garnishment over Mabanto, Jr.'s salary and RATA checks.
• Duty of Garnishee to Inquire — The general rule is that it is not incumbent upon the garnishee to inquire or judge for itself whether the order for advance execution of a judgment is valid. Exceptions exist, such as a defect on the face of the writ or actual knowledge by the garnishee of lack of entitlement on the part of the garnisher. The Court applied the exception by holding that petitioner had actual knowledge of private respondent's non-entitlement to the checks, so it was incumbent upon him to inquire into the validity of the notice of garnishment.

• "Garnishment is considered as a species of attachment for reaching credits belonging to the judgment debtor owing to him from a stranger to the litigation." — This defines garnishment and frames the central inquiry: only credits belonging to the judgment debtor may be reached.
• "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." — This is the controlling rule from Tiro vs. Hontanosas, quoted by the Court, that salary checks remain government property until physical delivery.
• "Inasmuch as said checks had not yet been delivered to Mabanto, Jr., they did not belong to him and still had the character of public funds." — This is the Court's application of the delivery rule to the facts, directly supporting the discharge of the garnishment.
• "[I]t is not incumbent upon the garnishee to inquire or to judge for itself whether or not the order for the advance execution of a judgment is valid." — This states the general rule from Philippine Commercial Industrial Bank vs. Court of Appeals, which the Court qualified with exceptions, including actual knowledge of the garnisher's lack of entitlement.

• Tiro vs. Hontanosas, No. L-32312, 25 November 1983, 125 SCRA 697 — Controlling precedent cited for the rule that the salary check of a government officer or employee does not belong to him before physical delivery; until then, it belongs to the government and cannot be assigned without the Government's consent.
• Commissioner of Public Highways vs. San Diego, No. L-30098, 18 February 1970, 31 SCRA 616 — Cited for the public policy rationale that the functions and public services rendered by the State cannot be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects.
• Philippine Commercial Industrial Bank vs. Court of Appeals, G.R. No. 84526, 28 January 1991, 193 SCRA 452 — Cited for the general rule that a garnishee need not inquire into the validity of an order for advance execution; the Court recognized exceptions, including actual knowledge by the garnishee of the garnisher's lack of entitlement, and applied the exception in this case.

• Section 16, Negotiable Instruments Law — Every contract on a negotiable instrument is incomplete and revocable until delivery for the purpose of giving effect thereto. Where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed "until the contrary is proved." The Court applied this provision by holding that the presumption of delivery was rebutted because the checks were still in petitioner's custody; without delivery, Mabanto, Jr. did not own the checks.
• Section 12, paragraphs (f) and (i), Rule 39, Rules of Court — Cited by the trial court in its 4 November 1992 order directing petitioner to submit a report showing the amount of the garnished salaries of Mabanto, Jr. The Supreme Court set aside the trial court's orders and discharged the notice of garnishment.

Quiason and Kapunan, JJ.

• Justice Davide, Jr. (concurring and dissenting) — He took judicial notice that checks for salaries of employees of various Departments are prepared in Manila days before the payroll period and sent through heads of offices, including City Prosecutors, who then deliver them to payees. The ponencia failed to indicate the payroll period covered by the salary check and the month to which the RATA check corresponded. He submitted that if the salary and RATA checks corresponded to a payroll period and month already lapsed at the time the notice of garnishment was served, the garnishment would be valid, as the checks would cease to be property of the Government and become property of Mabanto, Jr.; upon expiration of such period and month, the sums indicated therein were deemed automatically segregated from the budgetary allocations for the Department of Justice under the General Appropriations Act. The public policy against execution, attachment, or garnishment is directed to public funds. He cited Director of the Bureau of Commerce and Industry vs. Concepcion and Buchanan vs. Alexander. He argued that the authorities cited in the ponencia were inapplicable because they involved public funds deposited with the Philippine National Bank, deposits of the National Media Production Center, and deposits of the Bureau of Public Highways. He also argued that Tiro vs. Hontanosas was not squarely in point because it involved Circular No. 21, series of 1969, and an assignment or waiver of future salaries that were still public funds. He would vote to grant the petition only if the salary and RATA checks corresponded to an unexpired payroll period and RATA month, respectively. Padilla, J., concurs.