G.R. No. 168964, 23 January 2006


Recarredo Valenzuela was employed by the defunct Air Transportation Unit (ATU) of BSPs Security Investigation and Transportation Department (SITD). He executed a certification in his capacity as Administrative Services Officer II/Property Supply Officer, assuming responsibility over all the properties issued to the outgoing Chief Aircraft Maintenance Officer/PSO. Upon Valenzuela’s retirement, BSP refused to release his retirement benefits for failure to settle his property accountabilities. According to BSPs Administrative Services Department (ASD), respondents remaining unaccounted spare parts consist of 1,314 pieces worth P1,007,263.59.

Respondent filed a complaintwith the Human Resources Management Department (HRMD) of BSP against ASD for the banks refusal to release his retirement benefits, but HRMD denied the same. On appeal by respondent to the COA, the latter rendered a decision allowing the release of the retirement benefits. It held that retirement gratuities cannot be withheld, deducted or applied to the indebtedness of an employee to the government without his/her consent.

BSP filed a motion for reconsideration contending that since Valenzuela assumed responsibility over all the properties under the custody of the former Aircraft Maintenance Chief and affixed his signature in the list of unaccounted properties, he thereby admitted his indebtedness to BSP. BSP averred that compensation should take place between it and respondent since they are both creditors and debtors in their own right.


Whether or not BSP may validly withhold respondent’s retirement benefits and unilaterally apply the same to his indebtedness to the government.


The Court rules in the negative. In Cruz v. Tantuico, it was held that retirement benefits accruing to a public officer may not, without his consent, be withheld and applied to his indebtedness to the government. The Court also held in Tantuico, Jr. v. Domingo, and Government Service Insurance System v. Commission on Audit that benefits under retirement laws cannot be withheld regardless of the employees monetary liability to the government. Retirement laws are liberally interpreted in favor of the retiree because the intention is to provide for the retirees sustenance and comfort when he is no longer capable of earning his livelihood.

Moreover, compensation or set off between respondents retirement benefits and his alleged liability to BSP cannot be allowed under Section 21, Chapter 4, Subtitle-B (Commission on Audit), Book V of the Revised Administrative Code of 1987, which provides:

Sec. 21.Retention of Money for Satisfaction of Indebtedness to the Government. When any person is indebted to any government agency, the Commission may direct the proper officer to withhold the payment of any money due such person or his estate to be applied in satisfaction of his indebtedness.

The indebtedness contemplated therein pertains to one that is acknowledged by the employee or one that is adjudged by the court. Absent any of these two circumstances, no compensation under Article 1278 of the Civil Code.

The COA correctly debunked the averment that respondent admitted his indebtedness when he issued a certification assuming responsibility over the properties turned over by the former Aircraft Maintenance Chief. To warrant the application of set off under Article 1278 of the Civil Code, the debtors admission of his obligation must be clear and categorical and not one which merely arise by inference or implication from the customary execution of official documents in assuming the responsibilities of a predecessor, as in the instant case. Neither would respondent’s signature in the list of unaccounted properties operate as an acknowledgement of an obligation. Suffice it to state that said signature alone hardly satisfies the requisite open and direct recognition of an obligation that would justify the diminution of retirement benefits. There must be an independent evidence showing the employees intention to unmistakably recognize his indebtedness which was never shown in the present controversy. On the contrary, respondent categorically stated in his letter to the BSP that he never admitted any indebtedness nor consented to the retention of his benefits by the bank.

Furthermore, even assuming that the list of unaccounted items bearing the signature of respondent can be construed as an admission of indebtedness, still, said purported admission cannot extend to the alleged unlocated 1,314 spare parts/furnitures/tools with an acquisition cost of P1,007,263.59, for which respondent is being held responsible. This is so because the latter items were never shown to be included in the inventory signed by respondent. Hence, the amount allegedly owed by respondent to BSP is contestable and inconclusive. It cannot thus qualify as a debt for compensation or set off to be operative under Article 1279 of the Civil Code.

* Case digest by Paula Bianca B. Eguia, LLB-1, Andres Bonifacio Law School, SY 2017-2018