[A.M. No. 05-3-35-SC. January 31, 2006.]
RE: AUDIT OBSERVATION MEMORANDUM
RESOLUTION
Sirs/Mesdames :
Quoted hereunder, for your information, is a resolution of the Court of the Court En Banc dated JANUARY 31, 2006.
A.M. No. 05-3-35-SC — (Re: Audit Observation Memorandum). — This refers to the Audit Observation Memorandum AOM No. 05-008-101-(04) dated March 28, 2005 signed by Ms. Cecilia E. Caga-anan, Supervising Auditor of the Judiciary addressed to former Chief Justice Hilario G. Davide, Jr., through Ms. Corazon M. Ordoñez, Director V, Fiscal Management & Budget Office (FMBO). In said Memorandum, Ms. Caga-anan stated that:
"1. Interest earned on the Fiduciary Fund and forfeited/confiscated bonds in the amount of P3,890,318.85 and P3,106,175, respectively, were not remitted to the Bureau of Treasury contrary to Section 7, General Provisions of the General Appropriations Act, CY 2004."
Section 7, General Provisions of the General Appropriations Act, CY 2004 state:
". . . . Provided, that any interest accruing on deposits and any forfeited amounts shall be deposited with the National Treasury and shall accrue to the General Fund. . . . ."
Audit disclosed that the interest earned with the Land Bank of the Philippines on the Court's Fiduciary Fund Account, National Capital Region and forfeited/confiscated bonds in the amount of P3,890,318.85 and P3,106,175, respectively, (Schedule 1-3) for the year 2004 were not remitted to the Bureau of Treasury. Instead, the total amount of P6,996,493.85 was still remitted to the Judiciary Development Fund (JDF) pursuant to Supreme Court En Bank (sic) Resolution Under Administrative Matters No. 99-8-01, which took effect on November 1, 1999.
The Resolution of the Supreme Court however appears to be an administrative function of the Court while Section 7 of the General Provisions of the General Appropriations Act is a provision of law and in case of conflict, the latter prevails under paragraph 3, Article 7 of the Civil Code of the Philippines which states that: "administrative or executive acts, orders, and regulations shall be valid only when they are not contrary to the laws or the Constitution."
Ms. Caga-anan recommends that the Court comply strictly with the Provision of Section 7 of the General Provisions of the General Appropriations Act (GAA) by remitting the interest earned on Fiduciary Fund and confiscated/forfeited bonds with the Bureau of Treasury.
In the Resolution dated 5 April 2005, the Court referred the matter to Chief Attorney Edna C. Diño, Atty. Eden T. Canderlaria, Chief, Office of Administrative Services, and Ms. Corazon M. Ordoñez, Chief, Fiscal Management and Budget Office, for evaluation, report and recommendation.
In compliance with the aforesaid resolution, Atty. Candelaria submitted a Memorandum dated April 28, 2005, stating that Presidential Decree No. 1949 was issued on July 18, 1984 establishing a Judiciary Development Fund (JDF). It was explicitly stated therein that "the Judiciary in the discharge of its functions and duties can generate its own funds and resources to help augment its budgetary requirements and ensure the uplift of its members and personnel." 1
In Administrative Matter No. 99-8-01, the Court, among others, resolved to DECLARE as part of the Judiciary Development Fund:
xxx xxx xxx
e) Interests on deposits of money paid to or deposited with clerks of court or other accountable officials of the courts for any purpose, such as, for interpleader, consignation, etc. which have been or to be treated as trust fund or special fund.
f) Confiscated cash bonds, satisfaction of judgments against bonds, and proceeds from the public sale of confiscated property bonds, in both civil and criminal cases where such bonds were posted.
Atty. Candelaria further stated that Section 7 of the 2004 GAA is a mere general provision and has not expressly nor impliedly repealed the provisions of P.D. No. 1949 which is a special law. In case of conflict between P.D. No. 1949 which is a special law and the GAA which is a general law, the former shall prevail. She, therefore, recommends that the AOM should be set aside.
Expounding on the aforesaid disquisition, Chief Attorney Edna Diño submitted her Report dated May 10, 2005 where she explained that the JDF was established by P.D. No. 1949 "to help ensure and guarantee the independence of the Judiciary as mandated by the Constitution and public policy and required by the impartial administration of justice." The JDF is "derived from, among others, the increase in the legal fees prescribed in the amendments to Rule 141 of the Rules of Court to be promulgated by the Supreme Court of the Philippines."
Another provision of P.D. No. 1949 states that:
SECTION 3. The amounts accruing to the Fund shall be deposited by the Chief Justice or his duly authorized representative in an authorized government depository bank or private bank owned or controlled by the Government and the income or interest earned shall likewise form part of the Fund. The Commission on Audit through the Auditor of the Supreme Court or his duly authorized representative shall quarterly audit the receipts, revenues, uses, disbursements and expenditures of the Fund, and shall submit the appropriate report in writing to the Chairman of the Commission on Audit and to the Chief Justice of the Supreme Court, copy furnished the Presiding Appellate Justice of the Intermediate Appellate Court and all Executive Judges. (Emphasis supplied)
It is, therefore, clear that interests earned by all amounts that form part of the JDF are mandated by law to be part of the JDF. Pursuant to the authority granted by Section 5 of P.D. No. 1949 which states that: "The Supreme Court shall promulgate the rules and regulations to implement this Decree," A.M. No. 99-8-01-SC dated September 14, 1999 was issued declaring confiscated bonds as part of the JDF. Thus, interests earned out of the deposited forfeited/confiscated cash bonds form part of the JDF and need not be remitted to the National Treasury.
Ms. Ruby C. Esteban-Garcia, now Assistant Chief of Office of the FMBO in her Compliance dated April 25, 2005, also states that A.M. No. 99-8-01-SC is a "Resolution Providing for Other Sources of the Judiciary Development Fund" which derives its mandate From P.D. No. 1949, the JDF Law which took effect on July 18, 1984. She further stated that:
Noteworthy is the fact that the provision under Section 7 of R.A. No. 9206 is found in the annual GAA even before the enactment of the JDF Law in 1984. Hence, prior to the JDF Law, all fiduciary and trust funds are deposited in the National Treasury and the income derived therefrom accrued in favor of the National Government. The subsequent inclusion of similar provision in the GAA even after the JDF Law notwithstanding, the JDF Law must continue to prevail. Otherwise, the very purpose of the enactment of the JDF Law will [be] put to naught.
Accordingly, it is respectfully submitted that the Court continue to uphold its assertion of fiscal autonomy over the fiduciary and trust fund.
The comments and assertions of Chief Administrative Officer, Atty. Eden Candelaria, Ms. Garcia of the FMBO, and Chief Attorney Atty. Diño are noted.
The Court is asked to pass upon the recommendation of Ms. Caga-anan to remit the interests on the Fiduciary funds and confiscated bonds pursuant to Section 7 of the General Provisions in the GAA which has been re-enacted through the years. It reads:
Section 7. Performance Bonds and Deposits. — Performance bonds and deposits filed or posted by private persons or entities with agencies of the government shall be deposited with the National Treasury as trust receipts under the name of the agency concerned. Upon faithful performance of the undertaking or termination of the obligation for which the bond or deposit was required, any amount due shall be returned to the filing party by the office or agency concerned, withdrawable in accordance with accounting and auditing rules and regulations: PROVIDED, That any interest accruing on deposits and any forfeited amounts on performance bonds and deposits shall be deposited with the National Treasury and shall accrue to the General Fund pursuant to Section 44, Chapter 5, Book VI of E.O. No. 292.
This provision shall apply to bonds posted in cash, such as bidders bond, guaranty bonds, bail bonds, judicial deposits for the benefits of clients, cash under litigation deposited in courts or quasi-judicial bodies and other refundable and judicial bonds, and all bonds and deposits required by law, rules and regulations to be posted to ensure the faithful performance of an activity or undertaking.
The aforementioned provision refers to the fiduciary funds deposited in court which are held in trust for the parties and litigants. Fiduciary funds are derived from bail bonds, rental deposits, etc. and are held in trust by the court for litigants. 2 Deposits on Fiduciary Fund also includes deposits for cash bonds, rental deposits received by the court in consignation and all fiduciary collections. Amounts held in trust ill courts are deposited in a Fiduciary Fund account. 3
In the implementation of the GAA provision and the handling of the fiduciary funds, several Circulars were issued by the Supreme Court providing guidelines for the collection, deposit and withdrawal of such fields, to wit:
A. Memorandum Circular No. 5, issued by Court Administrator Lorenzo Relova dated October 6, 1980 (took effect on December 1, 1980), addressed to all Clerks of Court of the Courts of First Instance, Circuit Criminal Courts and the Juvenile and Domestic Relations Courts, states that:
"The fiduciary funds collected by the Judiciary fall under the classification on trust liabilities, pursuant to Section 6, of Batas Pambansa Blg. 40.
"Generally, all receipts credited to trust liabilities are remitted to the National Treasury. However, under Batas Pambansa Blg. 40, the Judiciary is authorized to deposit its trust receipts in the authorized government depository banks . . . .
"Deposits under a savings . . . account earn interest at rates allowed by the bank. These interests earned shall accrue to the general fund of the Government. When the interests earned reach the amount of P1,000.00 at any given time, the Clerk of Court shall withdraw such interests and remit them to the National Treasury . . . ."
B. Circular No. 13-92, issued on March 1, 1992 by Court Administrator Josue N. Bellosillo addressed to All Executive Judges and Clerks of Court of the Regional Trial Courts and Shari'a District Courts, states:
"All collections from bailbonds, rental deposits and other fiduciary collections shall be deposited immediately by the Clerk of Court concerned, upon receipt thereof, with an authorized government depository bank.
"Interests earned on these deposits and any forfeited amounts shall accrue to the General Fund of the government. Within two (2) weeks after the end of each quarter, the Clerk of Court shall withdraw such interests and forfeited amounts and shall remit the same to the National Treasury under a separate Remittance Advice, duplicate copy thereof to be furnished the Chief Accountant of the Supreme Court for record and control purposes."
C. Circular No. 8A-93, effective March 1, 1993 was issued by Court Administrator Ernani Cruz Paño designating the Land Bank of the Philippines as the authorized government depository bank for the Judiciary, for all collections from bailbonds, rental deposits and other fiduciary collections, following the same guidelines laid out in Circular No. 13-92.
D. Circular No. 50-95, issued by Court Administrator Ernani Cruz Paño which took effect on November 1, 1995 provided for the guidelines and procedure for purposes of uniformity in the manner of collections and deposits of court fiduciary funds.
(4) All collections from bailbonds, rental deposits, and other fiduciary collections shall be deposited within twenty-four (24) hours by the Clerk of Court concerned, upon receipt thereof, with the Land Bank of the Philippines.
(5) Interest earned on these deposits and any forfeited amounts shall accrue to the general fund of the national government. Within two (2) weeks after the end of each quarter, the Clerk of Court shall withdraw such interest and forfeited amounts and shall remit the same to the National Treasury, under a separate remittance advice, duplicate copy thereof to be furnished the Chief Accountant of the Supreme Court for record and control purposes.
Proceeding from above, Section 7 of the GAA and the Supreme Court Circulars all support the thesis that interests earned on deposits of fiduciary collections and any forfeited amounts must accrue to the General Fund.
Against a specific pronouncement in the law and circulars just cited, the only apparent basis for the view that interests earned on the fiduciary fund shall accrue to the Supreme Court is A.M. No. 99-8-01-SC which we quote hereunder:
A.M. NO. 99-8-01-SC
RESOLUTION PROVIDING FOR OTHER SOURCES
WHEREAS, Presidential Decree No. 1949, promulgated on 18 July 1984, established the Judiciary Development Fund "for the benefit of the members and personnel of the Judiciary to help ensure and guarantee the independence of the Judiciary as mandated by the Constitution and public policy and required by the impartial administration of justice;" and to "safeguard the integrity of its members;"
WHEREAS, Section 1 of the Decree provides that the "Fund shall be derived from, among others, the increase in the legal fees prescribed in the amendments to Rule 141 of the Rules of Court to be promulgated by the Supreme Court;"
WHEREAS, the phrase "among others" in Section 1 of the Decree logically refers to such sources as may be prescribed or defined by the Supreme Court, having in view the purpose for which the Judiciary Development Fund is established, i.e., "to help ensure and guarantee the independence of the judiciary" and of the constitutional mandate that the "Judiciary shall enjoy fiscal autonomy" (Sec. 3, Art. VIII, Constitution);
WHEREAS, the Court's authority to determine, fix and prescribe such other sources of the Judiciary Development Fund is affirmed in the third WHEREAS clause of Presidential Decree No. 1949 that "the Judiciary, in the discharge of its functions and duties, can generate its own funds and resources to help augment its budgetary requirements and ensure the uplift of its members and personnel." (Italics supplied for emphasis);
WHEREAS, considering the greatly increased cost of living, the devaluation of the peso and inflation, on the one hand, and the urgent need to attract more qualified lawyers and individuals to the Judiciary, on the other hand, it is necessary to augment the Judiciary Development Fund by (a) increasing the docket and other fees prescribed in Rule 141 of the Rules of Court, with due regard to the constitutional guarantee that free access to the courts shall not be denied to any person by reason of poverty (Sec. 11, Article III, Constitution), and (b) determining, fixing and prescribing other sources of the Judiciary Development Fund;
NOW, THEREFORE, in order to augment the Judiciary Development Fund created by P.D. No. 1949, the Supreme Court hereby RESOLVES:
1. To (a) increase the docket and other fees presently prescribed in Rule 141 of the Rules of Court, and (b) prescribe and impose docket fees on estafa cases where the offended party fails to manifest within fifteen (15) days following the filing of the information that the civil liability arising from the crime has been, or would be, separately prosecuted; motions for postponement after completion of the pre-trial stage; applications for notarial commissions; bonds by sureties in criminal and civil cases; applications for and entries of certificates of sale and final deeds of sale in extrajudicial foreclosures of mortgages; and applications for and certificates of sale in notarial foreclosures. For this purpose, the Office of the Court Administrator shall submit, for the approval of the Court, the appropriate recommendation thereon not later than 15 October 1999;
2. To DECLARE as part of the Judiciary Development Fund the following:
a) Incomes derived by the Judiciary from:
(1) Sales of
(aa) reports (of Decisions of the Supreme Court, Court of Appeals, Sandiganbayan), books, periodicals, pamphlets or the like, printed by the Supreme Court printing press or any other printing firm at the instance of or for the Supreme Court, Court of Appeals, or Sandiganbayan or as the case may be;
(bb) unserviceable equipment and pieces of furniture (such as vehicles, computers, typewriters, chairs, tables, etc.)
(cc) disposable records or papers; and
(2) The pursuit or operation of transportation facilities for members and personnel of the Judiciary offered by the Supreme Court, or the lower courts;
(3) The grant of concessions to operate canteens or to provide other services; and
(4) Rentals of facilities.
b) Fees, collected from Bar candidates or participants of seminars/workshops or conferences offered or conducted by the Court.
c) Fees now authorized to be paid or collected by sheriffs, such as sheriff's commissions.
d) Interest on deposits of its income.
e) Interests on deposits of money paid to or deposited with clerks of courts or other accountable officials of courts for any purpose such as for interpleader, consignation, etc., which have been, or to be treated as trust fund or special fund.
f) Confiscated cash bonds, satisfaction of judgments against bonds, and proceeds from the public sale of confiscated property bonds, in both civil and criminal cases where such bonds were posted.
This Resolution shall take effect on 1 November 1999 and shall be published in two newspapers of general circulation in the Philippines.
Let copies of this Resolution be furnished the Office of the President, the Senate President, the Speaker of the House of Representatives, and the Secretaries of the Department of Budget and Management, Department of Finance and the Department of Justice.
Promulgated this 14th day of September, 1999.
The aforementioned Resolution was issued by the Court upon the mandate provided by P.D. No. 1949, the JDF Law which reads as follows:
PRESIDENTIAL DECREE NO. 1949
ESTABLISHING A JUDICIARY DEVELOPMENT
WHEREAS, the independence of the Judiciary must be maintained by the State:
WHEREAS, the economic conditions of the members and personnel of the Judiciary must be periodically reviewed and upgraded in order to preserve and enhance the independence of the Judiciary at all times and safeguard the integrity of its members;
WHEREAS, the Judiciary, in the discharge of its functions and duties, can generate its own funds and resources to help augment its budgetary requirements and ensure the uplift of its members and personnel.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby decree:
SECTION 1. There is hereby established a Judiciary Development Fund, hereinafter referred to as the Fund, for the benefit of the members and personnel of the Judiciary to help ensure and guarantee the independence of the Judiciary as mandated by the Constitution and public policy and required by the impartial administration of justice. The Fund shall be derived from, among others, the increase in the legal fees prescribed in the amendments to Rule 141 of the Rules of Court to be promulgated by the Supreme Court of the Philippines. The Fund shall be used to augment the allowances of the members and personnel of the Judiciary and to finance the acquisition, maintenance and repair of office equipment and facilities; Provided, That at least eighty percent (80%) of the Fund shall be used for cost of living allowances, and not more than twenty percent (20%) of the said Fund shall be used for office equipment and facilities of the Courts located where the legal fees are collected: Provided, further, That said allowances of the members and personnel of the Judiciary shall be distributed in proportion of their basic salaries; and Provided, finally, That bigger allowances may be granted to those receiving a basic salary of less than P1,000.00 a month.
SECTION 2. The Chief Justice of the Supreme Court shall administer and allocate the Fund and shall have the sole exclusive power and duty to approve and authorize disbursements and expenditures of the Fund in accordance with the guidelines set in this Decree and its implementing rules and regulations.
SECTION 3. The amounts accruing to the Fund shall be deposited by the Chief Justice or his duly authorized representative in an authorized government depository bank or private bank owned or controlled by the Government, and the income or interest earned shall likewise form part of the Fund. The Commission on Audit through the Auditor of the Supreme Court or his duly authorized representative shall quarterly audit the receipts, revenues, uses, disbursements and expenditures of the Fund, and shall submit the appropriate report in writing to the Chairman of the Commission on Audit and to the Chief Justice of the Supreme Court, copy furnished the Presiding Appellate Justice of the Intermediate Appellate Court and all Executive Judges.
SECTION 4. Nothing herein shall be construed to affect or diminish the duty of local government units to provide office spaces, equipment and facilities to the courts within their respective territorial jurisdiction as required under existing laws. Moreover, there shall be no reduction of the compensation, allowances, benefits and privileges enjoyed by the members and personnel of the Judiciary on the date of the effectivity of this Decree.
SECTION 5. The Supreme Court shall promulgate the rules and regulations to implement this Decree.
SECTION 6. All laws, decrees, executive or administrative orders, rules and regulations, or parts thereof, inconsistent with this Decree are hereby modified, amended or repealed.
SECTION 7. This Decree shall take effect upon the promulgation of the revised schedule of legal fees prescribed in Rule 141 of the Rules of Court.
Done in the City of Manila, this 18th day of July in the year of our Lord, nineteen hundred and eighty-four.
There is no question that the Court has the authority to promulgate the rules and regulations in order to implement and obtain the noble objective of P.D. No. 1949. Section 1 of P.D. No. 1949 clearly states that the fund shall be derived from, among others, increases in the legal fees prescribed in the amendments to Rule 141 of the Rules of Court to be promulgated by the Supreme Court of the Philippines. Aside from the increases in the legal fees, 4 the Court was empowered to look for other sources which are actually income generating, to augment the JDF. Pursuant to the third "whereas clause" of P.D. No. 1949, the SC thereby issued the resolution (A.M. No. 99-8-01-SC) which declared/designated other sources from where the JDF can be derived and included the questioned funds, i.e., interests on the fiduciary funds, confiscated bonds. As earlier discussed, the very nature of the fiduciary funds denotes that these rightfully belong to the parties or the litigants. Thus, the interests thereon or any forfeited amounts should accrue to the General Fund as clearly provided in the GAA. The SC cannot just appropriate or allocate to itself what the law expressly states shall be remitted to the national government. A perusal of the JDF law or the SC resolution does not explicitly mention that "interests on the fiduciary fund" shall form part of the JDF. Absent a provision, the Court cannot add what the law does not provide. To do so would be to arrogate unto the court a power that does not belong to it. What is more, judicial legislation proscribed by the fundamental law of the land would result. 5
More importantly, it must be noted that even after the enactment of the JDF Law in 1984 and the issuance of A.M. No. 99-8-01-SC in 1999, the Court maintained the practice of remitting the interests on the fiduciary fund to the national government. Circular No. 50-95 issued on October 11, 1995 6 appears to be the latest and controlling circular governing the collection, withdrawals, and remittances of court fiduciary funds in which the SC requires all Judges and Clerks of Courts to strictly comply with up to the present. Therein, the Court recognized the existence of the interests on fiduciary funds and any forfeited amounts accruing to the national government. Within two (2) weeks after the end of each quarter, the Clerk of Court shall withdraw such interest and forfeited amounts and shall remit the same to the National Treasury under a separate, remittance advice, the duplicate copy thereof to be furnished the Chief Accountant of the Supreme Court for record and control purposes. 7
Acting on the Audit Observation Memorandum AOM No. 05-008-101-(04) dated March 28, 2005, the same is hereby NOTED and GRANTED. The Fiscal Management & Budget Office (FMBO) is DIRECTED to comply with said Memorandum by remitting the interests earned on the Fiduciary Funds and forfeited/confiscated bonds to the Bureau of Treasury as contained in Section 7, General Provisions of the General Appropriations Act, CY 2004.
Very truly yours,
(SGD.) MA. LUISA D. VILLARAMAClerk of Court
Footnotes
1. Third paragraph of the WHEREAS Clause, Presidential Decree No. 1949.
2. Id.
3. Clerk of Court Marilou M. Gamboa vs. Judge Philbert Iturralde, A.M. No. RTJ-99-1471, December 5, 2000.
4. A.M. No. 00-2-01-SC dated February 1, 2000 and A.M. No. 04-2-04-SC dated July 20, 2004; Resolutions Amending Rule 141 (Legal Fees) of the Revised Rules of Court.
5. See PAL vs. NLRC, 356 Phil. 399, 406 (1998).
6. Supreme Court Issuances on Administrative Supervision of Lower Courts 1973-2002, published on February 2003, p. 399.
7. Circular No. 50-95, B Guidelines in Making Withdrawals, (5).