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[ GR No. 14027, Nov 08, 1918 ]



39 Phil. 34

[ G.R. No. 14027, November 08, 1918 ]




This is a petition for a writ of mandamus filed in this Court by the Compañia General de Tabacos de Filipinos to compel the Purchasing Agent to draw a warrant in favor of the petitioner for the sum of P322.93 and to compel the Insular Auditor to approve and countersign the same. The Solicitor-General has appeared in behalf of the respondents and interposed a demurrer, based chiefly on'the ground that the petitioner has not exhausted his administrative remedy by appealing to the Governor-General from the adverse decision of the Insular Auditor. The case now comes before us upon this demurrer.

The origin of the claim appears to be this: The petitioner is a common carrier engaged in the transportation of passengers and merchandise in the Philippine coastwise trade, and during the months of January, February, and March of the current year the petitioner rendered services as a common carrier in transporting goods and merchandise for the Government of the Philippine Islands from the port of Manila to sundry ports in the Philippine Islands, at the request of the Purchasing Agent, as chief of the Bureau of Supply. For the services so renderefd said Bureau became indebted to the petitioner in the sum of P322.93, which indebtedness has been fully liquidated, audited and allowed by the Government.

It further appears that on or about January 18, 1918, the petitioner received at Manila upon one of its ships twenty cases of gasoline, to be transported to Laoag, in the Province of Ilocos Norte. Upon the arrival of the plaintiff's ship at the port of destination the twenty cases of gasoline were delivered to the consignee, and it was then discovered that approximately half of the contents of two cans of a total value of P5.92, had escaped by leakage. The consignee of the gasoline thereupon made an annotation upon the bill of lading to the effect that two cases were received in a leaking condition and that the shipment was five gallons short

The petition alleges that said leakage was due to causes unknown to the petitioner and to the respondents, and was not due to any negligence or want of due diligence on the part of the petitioner, its agents or servants. Nevertheless, the petition goes on to state, the Purchasing Agent claims that the value of the gasoline so lost should be deducted from the indebtedness admittedly due from the Bureau of Supply to the petitioner, and this contention has been sustained by the Insular Auditor, who has adjudged that the petitioner is liable to the Government for the value of the gasoline so lost

Acting upon this resolution the respondents have declined to issue to the petitioner a warrant for the full sum of P322.93 and have tendered to it, in satisfaction of the entire Indebtedness, a warrant for the sum of P317.01 only which the petitioner has refused to accept. It is claimed by the petitioner that in adjudging it to be responsible for the loss aforesaid and in allowing the set-off for the value of the gasoline lost by leakage, the Insular Auditor has acted arbitrarily and in excess of his powers, and that if his action is permitted to go into effect, the petitioner will be deprived of property without due process of law.

It is averred, in the complaint that the bill of lading, upon which the shipment of gasoline in question was accepted for transportation, provided, in accordance with the requirements prescribed by the Insular Collector of Customs, that all cargo which from its nature must be stored on deck, will be transported wholly at the risk of the shipper; and it is alleged in the petition that gasoline constitutes cargo of this character, and that the shipment in question was consequently so carried on deck. The bill of lading also, upon which the gasoline was carried, contained a provision that the merchandise was received and would be carried subject to the conditions prescribed in the shipping regulations aforesaid. It is apparent, therefore, that the questions squarely presented are (1) if the Purchasing Agent and the Insular Auditor may offset against a specific, liquidated, and undisputed debt of the Government an unliquidated claim for damages in favor of the Government against the creditor, and (2) assuming that such set-off is improper, if they may be compelled by mandamus to issue a warrant to the creditor for the amount of his credit without deducting what they deem to be due from him upon the claim for damages.

The question here presented is, therefore, very clearly of greater importance than would appear to be indicated in the petty sum in dispute; and the proper solution of the problem requires a somewhat broader range of discussion than is disclosed in the issue presented by the demurrer. In what is here to be said we propose to consider the extent of the power confided to the Insular Auditor with respect to the audit and settlement of claims due from or owing to the government and the nature of the remedy or remedies which may be available to a person aggrieved by his decision.

The fundamental statute from which the power and authority of the Insular Auditor is derived is the Act of Congress of August 29, 1916, generally known as the Jones Law, in sections 24 and 25 of which the office is created and the duties and power of the incumbent defined as follows:

"Sec. 24. That there shall be appointed by the President an Auditor who shall examine, audit, and settle all accounts pertaining to the revenues and receipts, from whatever source, of the Philippine Government and of the provincial and municipal governments of the Philippines, including trust funds and funds derived from bond issues; and audit, in accordance with law and administrative regulations, all expenditures of funds or property pertaining to or held in trust by the Government or the provinces or municipalities thereof. He shall perform a like duty with respect to all government branches.

"He shall keep the general accounts of the Government and preserve the vouchers pertaining thereto.

"It shall be the duty of the Auditor to bring to the attention of the proper administrative officer expenditures of funds or property which, in his opinion, are irregular, unnecessary, excessive, or extravagant.

"There shall be a Deputy Auditor appointed in the same manner as the Auditor. The Deputy Auditor shall sign such official papers as the Auditor may designate and perform such other duties as the Auditor may prescribe, and in case of the death, resignation, sickness, or other absence of the Auditor from his office, from any cause, the Deputy Auditor shall have charge of such office. In case of the absence from duty, from any cause, of both the Auditor and the Deputy Auditor, the Governor-General may designate an assistant, who shall have charge of the office.

"The administrative jurisdiction of the Auditor over accounts, whether of funds or property, and all vouchers and records pertaining thereto, shall be exclusive. With the approval of the Governor-General he shall from time to time make and promulgate general or special rules and regulations, not inconsistent with law, covering the method of accounting for public funds and property, and funds and property held in trust by the Government or any of its branches: Provided, That any officer accountable for public funds or property may require such additional reports or returns from his subordinates or others as he may deem necessary for his own information and protection.

"The decisions of the Auditor shall be final and conclusive upon the Executive Branches of the Government, except that appeal therefrom may be taken by the party aggrieved or the Head of the Department concerned within one year, in the manner hereinafter prescribed. The Auditor shall, except as hereinafter provided, have like authority as that conferred by law upon the several auditors of the United States and the Comptroller of the United States Treasury and is authorized to communicate directly with any person having claims before him for settlement, or with any department, officer, or person having official relations with his office.

"As soon after the close of each fiscal year as the accounts of said year may be examined and adjusted, the Auditor shall submit to the Governor-General and the Secretary of War an annual report of the fiscal concerns of the Government, showing the receipts and disbursements of the various Departments and Bureaus of the Government and of the various provinces and municipalities, and make such other reports as may be required of him by the Governor-General or the Secretary of War.

"In the execution of their duties the Auditor and the Deputy Auditor are authorized to summon witnesses, administer oaths, and to take evidence, and, in the pursuance of these provisions may issue subpoenas and enforce the attendance of witnesses, as now provided by law.

"The office of the Auditor shall be under the general supervision of the Governor-General and shall consist of the Auditor and Deputy Auditor and such necessary assistants as may be prescribed by law.

"Sec. 25. That any person aggrieved by the action or decision of the Auditor in the settlement of his account or claim may, within one year, take an appeal in writing to the Governor-General, which appeal shall specifically set forth the particular action of the Auditor to which exception is taken, with the reason and. authorities relied on for reversing such decision.

"If the Governor-General shall confirm the action of the Auditor, he shall so indorse the appeal and transmit it to the Auditor, and the action shall thereupon be final and conclusive. Should the Governor-General fail to sustain the action of the Auditor, he shall forthwith transmit his grounds of disapproval to the Secretary of War, together with the appeal and the papers necessary to a proper understanding of the matter. The decision of the Secretary of War in such case shall be final and conclusive."

The local statutory provisions relating to the organization and administration of the Bureau of Audits are chiefly contained in the Accounting Law, which constitutes chapter 26 (sees. 581-658) of the Administrative Code (1917). The original source of these provisions is found in Act No. 1792 of the Philippine Commission.

The most important of the sections of the Accounting Law for the purposes of this inquiry are those defining the general jurisdiction of the Bureau of Audits (sec. 584, Administrative Code, 1917) and authorizing set-offs (sec. 624, Administrative Code, 1917) as follows:

"Sec. 584. General jurisdiction of Bureau of Audits. The authority and powers of the Bureau of Audits extend to and comprehend all matters relating to accounting procedure, including the keeping of the accounts of the Government, the preservation of vouchers, the methods of accounting, the examination and inspection of the books, records, and papers relating to such accounts, and to the audit and settlement of the accounts of all persons respecting funds or property received or held by them in an accountable capacity, as well as to the examination and audit of all debts and claims of any sort due from or owing to the Government of the Philippine Islands in any of its branches.

"Sec. 624. Retention of salary for satisfaction of indebtedness to Government. When any person is indebted to the Government of the Philippine Islands or Government of the United States, the Insular Auditor may direct the proper officer to withhold the payment of any money due him or his estate, the same to be applied in satisfaction of such indebtedness."

The Bureau of Audits, under the cited statutes, constitutes the accounting branch of the governmental service. Its competency extends to two different subjects, namely, (1) accounting procedure, and (2) the examination, audit, and settlement of all debts and claims due from or owing to the Government. Under the latter head, it will be noted that the authority and powers of the Bureau extend not only to the audit and settlement of the accounts of Government officers and employees, but also to the examination and audit of "all debts and claims of any sort due from or owing to the Government of the Philippine Islands in any of its branches."

It would hardly be possible to frame a statement concerning the power of the Bureau with reference to public finance in more inclusive terms; and if the power of "examination and audit" of "all claims * * * owing to the Government" should be found to include the power conclusively to adjudicate the existence, validity, and amount of disputed unliquidated claims which the executive officers of the Government may deem to exist and in its favor and to offset such claims against conceded debts of the Government, the contention of respondents must prevail.

The first and most important branch of our inquiry involves an inquiry into the power of the Auditor with respect to stich unliquidated claims in favor of the Government, as regards the effect of his decisions concerning them, (1) upon the executive branch of the Government and (2) upon the alleged debtor and the courts.

So far as the executive branches of the Government are concerned the decisions of the Auditor within the scope of his authority are conclusive (sec. 655, Administrative Code of 1917), unless appealed from (section 653, Administrative Code, 1917) to the higher executive authorities. If in the instant case t£e petitioner had acquiesced in the findings and conclusions of the Auditor, his decision that the amount of the loss arising from the alleged leakage was P5.92 would, in the absence of an appeal under section 653, supra, be conclusive upon the Bureau of Supply, the officer to whom the goods were consigned, and all other officials of the Government who might be concerned, and would, subject to the provisions of section 657 of the Administrative Code of 1917, protect the petitioner herein against any future contention on the part of any other government official that the actual loss was greater. Furthermore, the acquiescence of the claimant as to the amount of the counter-claim would convert it into a liquidated debt and make it properly subject to set-off.

But as the petitioner denies the alleged liability and refuses to consent to its liquidation by the Auditor, we must determine (1) if the Auditor may lawfully proceed to liquidate and set-off the demand, regardless of such protest and objection, and (2) if his action is conclusive upon the courts.

Section 584 of the Administrative Code of 1917 is very similar in its terms to section 236 of the Revised Statutes of the United States, which reads as follows:

"All claims and demands whatever by the United States and against them, and all accounts whatever in which the United States are concerned, either as debtors or as creditors, shall be settled and adjusted in the Department of the Treasury."

Nevertheless, the words "all claims and demands whatever * * * against" the United States as used in this statute have been held repeatedly not to authorize the officers of the Treasury Department to entertain unliquidated claims against the United States for damages. In the case of Power vs. United States (18 C. Cls. R., 275), Judge Davis, writing the opinion of the court, said:

"An account is something which may be adjusted and liquidated by an arithmetical process * * *. But no law authorizes Treasury officials to allow and pass in accounts a number not the'result of numerical computation upon a subject within the operation of a mutual part of a contract. Claims for unliquidated damages require for their settlement the application of the qualities of judgment and discretion. They are frequently, perhaps generally sustained by extraneous proof, having no relation to the subjects of the contract, which are common to both parties * * *. The results to be reached in such cases can in no just sense be called an account, and are not committed by law to the control and decision of Treasury accounting officers."

Upon the same subject it was said by Judge Richardson in McKee's Case (12 C. Cls. R., 05) that this construction must properly exclude "* * * claims for unliquidated damages, founded on neglect or breach of obligations, or otherwise, and so, by the well defined and accepted meaning of the word 'account' and the sense in which the same and the words 'accounting* and 'accounting officers' appear to be used in the numerous sections of the numerous acts of Congress wherein they occur, it would seem that the accounting officers have no jurisdiction of such claims except in special and exceptional cases, in which it has been expressly conferred upon them by speeial or private acts. And such has been the opinion of five Attorneys-General all who have officially advised the executive officers on the subject: Attorney-General Taney in 1832, whose opinion is referred to by his successors in office; Attorney-General Nelson in 1844 (4 Opins., 327); Attorney-General Clifford in 1847 (4 Opins., 627); Attorney-General Cushing in 1854 (6 Opins,, 524) and Attorney-General Williams in 1872 (14 Opins., 24). And the same views were expressed by this court in 1866 (Carmack vs. The United States, 2 C. Cls. R., 126,140.)"

Attorney-General Cushing in the opinion cited by Judge Richardson (6 Op. Atfcys. Gen., 523) says:

"To audit is to examine and adjust an account. There is an indissoluble connection between account and auditor, the functions of the one indicating the nature of the other. Yet no definition of the terms audit and auditor implies the adjudication of damages or other determination of controversy,"

In the case of McClure vs. United States (19 C. Cls. R., 173) referred to the Court of Claims by the Secretary of the Treasury under the Bowman Act, it was said:

"It is further insisted by the government that this is a claim 'for unliquidated damages for the breach of a contract which the department have not and never have had, jurisdiction to examine and settle.' In a very broad sense every suit founded on contract may be regarded as a suit for damages ; out where in any proceeding the damages do not depend upon, discretion or the exercise of judicial judgment they are not unliquidated, but certain and specific."

Again, it was said by Chief Justice Richardson, in the case of Dennis vs. United States (20 Ct. Cls. R., 119) :

"'Technically, all claims for money, due on contracts, where the exact amount payable is not thereby fixed, as in the case of goods purchased or work done without an agreed price, are claims for unliquidated damages. But * * * their settlement rarely requires anything more than the ordinary processes of accounting, the prices being readily determined by the vouchers and reports of the public officers incurring the expense, or by other means within reach of the accounting officers, who very properly take, jurisdiction and pass upon such claims * * *. But claims for unliquidated damages founded on neglect or breach of obligations contrary to the terms of a contract, and not necessarily arising therefrom, are of quite a different class. They must be sustained by extraneous proof, often involving a broad field of investigation and requiring the application of judgment and discretion upon the measure of damages and the weight of conflicting evidence. As was said in Power's Case (18 Ct. Cls. R., 275), 'The results to be reached in such cases can in no sense be called an account, and are not committed by law to the control and decision of Treasury accounting officers.' "

The principle under consideration was the basis of the decision in the very recent and important case of Smith vs. Jackson, decided by the Supreme Court of the United States, April 15, 1918 (Advance Sheets, 1918, p. 476). The plaintiff in that proceeding was the judge of the district court of the Panama Canal Zone, and was entitled, by statute, to an annual salary of $6,000, payable at the rate of $500 a month. A dispute arose between Judge Jackson and H. A. Smith, the auditor of the Canal Zone, arising from the fact that the iudge had occupied a house belonging to the government for which, in the opinion of the auditor, he should have paid rent. The Auditor was also of the opinion that the judge had overstayed his leave of absence by several days, and that he should be deprived of his salary for the corresponding period. The judge denied the liability. The auditor thereupon proceeded to liquidate the alleged claim of the government against the judge, and to enforce his decision by offsetting the supposed debt against the judge's salary. The judge declined to acquiesce in this ruling and filed suit in the district court of the Canal Zone for a mandamus against the auditor to compel him to pay the salary without any deductions whatsoever. The Honorable Henry D. Clayton, district judge of the middle and northern districts of Alabama, was designated by the President to hear the case. In a carefully prepared opinion, based upon an exhaustive citation of authorities, Judge Clayton held that the writ should issue, and that the auditor was without authority to set-off against the liquidated debt of the government to the petitioner the unliquidated claim which he conceived to exist in favor of the government.

From that decision the auditor appealed to the United States Court of Appeals for the Fifth Circuit. That court adopted in its entirety (241 Fed., 747) the reasoning of the opinion of Judge Clayton and affirmed his judgment. The respondent thereupon sued out a writ of error to the Supreme Court of the United States, where the judgment was again affirmed in a brief but emphatic opinion in which the Chief Justice, speaking for the court, said that the decision of Judge Clayton made "perfectly manifest the error of the action of the auditor," and that the prosecution of the writ of error "constituted a plain abuse by the auditor of his administrative functions."

The doctrine stated in the elaborate opinion of Judge Clayton in th'e cited case, supported as it is by the persuasive force of its logical reasoning, and the unanimous approval of the judges of the Circuit Court of Appeal and of the Justices of the Supreme Court of the United States, is, in our judgment, directly applicable to the instant case. The principle underlying that case is that while an auditor may and should offset a liquidated debt in favor of the government against a liquidated debt due from it, he has no authority conclusively to adjudicate unliquidated and contested claims against creditors of the government as such a course would be, in effect, the assumption of judicial power. Upon this point Judge Clayton said:

"Mr. AttorneyzGeneral Gregory was correct in saying that if the authorities in the Canal Zone believe that the rektor in the present case owed any amounts of money whatsoever to the Panama Canal, it was 'a question for judicial rather than administrative determination,' and that the claim now urged by the respondent in this case 'could only be enforced through proceedings in the courts,' That is a sententious and felicitous statement of this case.

"Judge Jackson has never had his day in court- He has been deprived of his salary, or the sum of $1,131.76, without due process of law. It has been withheld from him by the refusal of the auditor in this case to issue his voucher upon which the salary is paid. The indebtedness is denied by Judge Jackson. He denies it upon the grounds that there was no law or regulation under which the indebtedness was or could have been created. He denies that the respondent has authority to withhold any part of his pay in the collection of an alleged but disputed indebtedness. And yet the executive officer,has sat as a court and without evidence or hearing, except what he considered evidence, and except what he considered a hearing, decided a controversy that he created by his own action. He has passed upon a disputed claim which is a disputed claim merely because he has created the dispute in refusing to make payment where it was his plain duty to make such payment. His conduct, however good his intention may have been, hardly falls short of being shocking to the judicial sense of justice, proper and orderly procedure, in a matter that is clearly justiciable. Perhaps it is not to be doubted that if, after he had made a careful examination, the Attorney-General had found Judge Jackson was indebted, owed the items amounting to the salary which has been withheld by the Auditor, the account would have been settled without court proceedings. Or, if not so settled, then appropriate court action would have been had for its collection. In any event Judge Jackson was entitled to his day in court. But the auditor here held that, having the money for Judge Jackson under his control and subject to his disbursement, he had the right to determine the claim against Judge Jackson one disputed in law and in fact, and now insists that his summary way of determining an issue of law and an issue of fact, and the collection by deduction from the Judge's salary of a disputed indebtedness, cannot be reviewed or questioned by the court. Notwithstanding that view I think the Attorney-General was right in saying that the matter 'was one for judicial rather than administrative determination,' and that whatever demand or offset that the Government may have 'could only be enforced through proceedings in the Courts.' "

In some of the opinions of former Attorneys-General of the United States cited by Judge Clayton reference is made to the Act of Congress of March 2ft 1875, (2 Fed. Stat. Ann., 18) wherein it is provided, "That when any final judgment recovered against the United States or other claim duly allowed by legal authority shall be presented to the Secretary of the Treasury for payment and the plaintiff or claimant therein shall be indebted to the United States in any manner, whether as principal or surety, it shall be the duty of the Secretary to withhold payment of an amount of such judgment or claim equal to the debt thus due to the United States; and if such plaintiff or claimant assents to such set-off and discharges his judgment or an amount thereof equal to said debt or claim, the Secretary shall execute a discharge/of the debt due from the plaintiff to the United States. (But if such plaintiff or claimant denies his indebtedness to the United States or refuses to consent to the set-off, then the Secretary shall withhold payment of such further amount of such judgment or claim as in his opinion will be sufficient to cover all legal charges and costs in prosecuting the debt of the United States to final judgment. And if such debt is not already in suit, it shall be the duty of the Secretary to cause legal proceedings to be immediately commenced to enforce the same and to cause the same to be prosecuted to final judgment with all reasonable dispatch. And if in such action judgment shall be rendered against the United States or the amount recovered for debt and costs shall be less than the amount so withheld, as before provided, the balance shall then be paid over to such plaintiff by such Secretary with six per cent interest thereon for the time it has been withheld from the plaintiff."

This Act of Congress is of great importance and is, we believe, of controlling authority in this case. It has been noted that section 24 of the Jones Law confers upon the Insular Auditor "like authority as that conferred by law upon the several auditors of the United States and the Comptroller of the United States Treasury," except as otherwise expressly provided in that Act. This grant of authority is, we believe, to be construed as limiting as well as conferring authority, and that unless the authority now asserted by the Insular Auditor has been conferred upon similar officials of the United States, it has not been conferred upon him by the Jones Law.

An examination of the quoted section of the Act of March 3, 1875, will show that the duty of acting upon contested unliquidated claims in favor of the United States against persons holding claims against the Government which have been liquidated by being reduced to judgment or "duly allowed by legal authority" is made to devolve upon the Secretary of the Treasury, not upon the auditors and the comptroller. Certainly, it could hardly be contended, in the light of the fact that the statutes defining the duties of the auditors and the Comptroller of the Treasury of the United States do not in terms confer upon them the power conclusively to allow or disallow contested unliquidated claims for damages as set-offs against audited debts of the Government, that they can exercise that power, which has been expressly denied to the Secretary of the Treasury, to whom they are subordinate. It follows, therefore, that the grant to the Insular Auditor by the quoted section of the Jones Law of "like authority" to that conferred upon the auditors of the United States and the comptroller of the United States Treasury did not carry with it the power conclusively and finally to adjudicate and set-off unliquidated claims, as such power is not possessed by those officers.

It is important to note, as an aid to the construction of our own statutes and as indicative of the practice and policy of our Government in such matters, that the Act of March 3, 1875 (18 Stat. at L., sec. 481) did not attempt to confer upon the Secretary of the Treasury the power to adjudicate disputed claims of the United States for the purpose of offsetting them. If the claimant "assents to such set-off" the deduction is made forthwith, but if he "denies his indebtedness to the United States or refuses to consent to the set-off," the Secretary is authorized only to retain a sufficient amount of the claim to cover the offset, and thereupon "to cause legal proceedings to be immediately commenced to enforce the same and to cause the same to be prosecuted to final judgment with all reasonable dispatch."

That is to say, in no event is one who is admittedly s/ creditor of the United States to be deprived of his credit by set-off against an unliquidated and disputed claim of damages, whether arising from tort or breach of contract, without having his day in court if he demands it. After that has been done, if it be found that the claimant is indeed also a debtor of the government in a settled and definite sum, then both credits being liquidated, compensation is effected by operation of law.

We conclude, therefore, that no power to adjudicate and offset disputed unliquidated claims for damages is conferred upon the Insular Auditor by the cited provisions of the Jones Law or by the general grant of jurisdiction to examine and audit claims owing to the Government contained in section 584 of the Administrative Code. It now remains for us to determine if that authority is conferred by section 624 of that statute.

Section 624 of the Administrative Code of 1917 is as follows:

"When any person is indebted to the Government of the Philippine Islands or Government of the United States, the Insular Auditor may direct the proper officer to withhold the payment of any money due him or his estate, the same to be applied in satisfaction of such indebtedness."

This section, beyond a doubt, authorizes the Insular Auditor, when it appears that a creditor of the Government is also "indebted to the Government" to "offset" one "debt" against another. Does it, however, confer upon the Auditor the exclusive power to determine whether such indebtedness exists if the supposed debtor denies it? We think not. Certainly it is not lightly to be assumed that such an authority, to be exercised with none of the safeguards which surround a judicial inquiry into such matters, has been conferred.

It is important, in construing section 624 of the Administrative Code, to ascertain the meaning of the term "indebted" as there used. To be indebted is to owe a debt." The word "debt," in legal parlance, is of more restricted meaning than the terms "obligation" or "liability." "A debt" says Sir John Cross, in Ex parte Thompson (Mon. & B., 219), "is a demand for a sum certain." A debt is an amount actually ascertained. That there must be an ascertained debt and not a mere unliquidated demand or liability, "is sustained by all the cases, legal and equitable." (In re Adams [N. Y.], 12 Daly, 454.) In Bacon's Abridgement the term "debt" is defined as limited to cases in which the certainty of the sum is made to appear and that therefore "the plaintiff is to recover the same in numero and not to be repaired in damages by the jury as in those actions sounding the damage." (Watson vs. McNairy, 4 Ky., 356.)

"A debt is properly opposed to unliquidated damages * * *." (Commercial National Bank vs. Taylor, 19 N. Y. Supp., 533.) It seems to us, therefore, quite clear that the authority conferred upon the Auditor by section 624 of the Administrative Code of 1917 to set-off "debts" to the Government against "money due" the debtor does not extend to unliquidated, disputed claims arising from tort or breach of contract.

The Act of Congress of March 3, 1807, which allows set-offs against claims by the Government, has been most liberally construed by the Supreme Court of the United States (U. S. vs. Ripley, 7 Peters, 18); but no claims based upon unliquidated damages have ever been permitted as a set-off. (U. S. vs. Robeson, 9 Peters, 319.) It is reasonable that this should be so, for the theory of set-off, like the compensatio of the Civil Law, is that one of the debts extinguishes the other by operation of law. As stated by Comptroller Lawrence, in the Kansas Case (Lawrence, First Comptroller's Decisions, vol. 2, p. 315) :

"The object of compensatio, as in set-off, was the prevention of unnecessary suits and payments."

Compensation and set-off are, therefore, forms of payment by the mutual extinction, by operation of law, of concurring debts. In our Civil Code the subject is dealt with under the general heading "The Extinction of Obligations;" and it is provided in article 1196 that in order for compensation to take place (1) both debts must "consist of a sum of money * * *;" (2) that both debts be due and demandable; and (3) that both be liquidated. The Code in this respect is merely declaratory of the earlier law, for in its decision of April 6, 1889, cited by Manresa (vol.  8, p. 378) the supreme court of Spain had ruled that "compensation can only take place between certain and liquidated debts, and in no event can it include the unliquidated claims of one of the parties for alleged damages or for untaxed court costs."

It is, of course, obvious, that in normal times, no one, is under legal duty to extend credit to the Government, whether it be for the sale of merchandise or for its transportation. Had the petitioner in this case demanded that it be paid in advance before accepting Government cargo for transportation, its demand would have been wholly justifiable, just as would be a like demand for cash by a merchant asked to sell to the Government the goods on his shelf.

The manifest unfairness of taking advantage of the fact that a citizen has voluntarily permitted the Government to become his debtor in order to extinguish by administrative fiat a contested claim for unliquidated damages, which the Government would otherwise have to submit to the courts, requires no comment.

An examination of the local statutes will show that the Legislature has provided a method by which the Insular Auditor may have unliquidated claims in favor of the Government reduced to judgment, if the liability legally exists. Section 650 of the Administrative Code of 1917 reads as follows:

"The Insular Auditor shall, through the proper channels, supervise and procure the collection and enforcement of all debts and claims, and the restitution of all funds and property, found to be due the Government in his settlement and adjustment of accounts; and if any legal proceeding is necessary to such end, he shall request the Governor-General to authorize and direct the institution of the same.

"All money demands in- favor of the Government shall bear interest at six per centum per annum from the date of the Auditor's written demand."

This section grants to the Insular Auditor and the Governor-General, jointly, the same power vested in the Secretary of the Federal Treasury by the Act of Congress of March 3, 1875. It is ample for the protection of the interests of the Government and secures to the citizen the right to a full hearing before an unbiased tribunal before he is deprived of his property. The contention which may be advanced, that it will work a hardship upon the Government to require it to submit such controversies to the courts, may be answered by saying that it is not to be presumed that just claims, particularly far small amounts, will always be resisted; and, further, should they be, the unsuccessful litigant may be made to pay the costs of the suit, in addition to incurring the expense of employing counsel. These considerations, in the vast majority of cases, prevent unreasonable resistance to just .demands as between private individuals and there is no reason for assuming that they would not be equally efficacious in protecting the Government. Oh the other hand, it is to be remembered that while in the United States a large class of claims against the Federal Government arising from contract may be presented to the Court of Claims (Judicial Code, sec. 145) or to the District Courts (Judicial Code, section 24) for adjudication and that similar provisions are to be found in the laws of several of the States, the Philippine Government has not as yet made provision for the submission of such claims to judicial investigations at the instance of its creditors.

The power which the Insular Auditor claims is, if it exists, clearly judicial in its nature. It implies the hearing of evidence, the making of findings of fact, the application of the law to such findings, and the pronouncement of a decision all acts essentially judicial in their character. As was said by Attorney-General Black (Vol. 9, Ops. Atty. Gen., 198) in a similar case: /

"No such jurisdiction is given to the Secretary of the Treasury by any law, and if the Constitution is not a dead letter Congress cannot confer it. The Fifth Amendment declares that 'no person shall be deprived of his life, liberty or property, without due process of law.' This means, and has always been held to mean, that the right of a citizen to his property, as well as his life or liberty, could be taken away only upon an open, public, and fair trial before a judicial tribunal, according to the forms prescribed by the law of the land for the investigation of such subjects. If an executive officer can make an order that the widow and children of Reside shall be deprived of twenty-four thousand dollars without a trial, then the same officer may, with equal propriety, issue a warrant to hang them, since the Constitution puts life and property on the same footing."

As the asserted authority is judicial in character, if section 624 of the Administrative Code must be construed as conferring it upon the Insular Auditor, the very grave question would be presented whether such power could validly be delegated to him. The judicial power, both by the Philippine Bill and the Jones Law, is vested in the established courts, and Congress has reserved to itself the power of divesting it. (Barrameda vs. Moir, 25 Phil. Rep., 44.)

Certainly, no interpretation of a statute which will bring it into conflict with the fundamental law will be adopted if avoidable. To avoid that conflict section 624 of the Administrative Code must be construed, in conjunction with section 650 of the same code, as requiring the Auditor, when his contention regarding the propriety of offsetting unliquidated claims is disputed, to submit the controversy to the courts, and as authorizing him, during the pendency of the litigation, to withhold payment of a sufficient amount of the admitted indebtedness of the Government to the claimant to offset it should the Government's contention be upheld by the court, and the unliquidated claim converted into a liquidated debt. (Civil Code, art. 1196.)

But it is argued that the decisions of the Auditor upon all matters connected with the accounting service are conclusive and binding upon all other branches 'of the Government. That they are conclusively binding upon the executive branches of the Government may, as we have seen, be conceded; but that conclusion does not of necessity imply that his decisions are equally binding upon the courts. This, we think, will be apparent from a consideration of the wording of the present statutes and their legislative antecedents.

Section 6 of the original Accounting Act contains the following language:

"The decisions of the Auditor shall be final and conclusive upon the executive branches of the Government, except that appeal therefrom may be taken by the party aggrieved or the head of the Department concerned, within one year, in the manner hereinafter prescribed."'

This provision was carried into the Administrative Code of 1916 (Act No. 2657) by the codifiers in the following form [sec. 687]:

"A decision of the Insular Auditor or of a district auditor upon any matter within their respective powers shall be conclusive, subject to appeal or review as hereinafter provided."

It will be observed that the significant words "upon the executive branches of the Government," immediately following the word "conclusive," are omitted from the provision as it appeared in the Administrative Code of 1916. However, very shortly after this Code went into effect, the Congress of the United States passed the Act of August 29, 1916, commonly known as the Jones Law; and in the sixth paragraph of section 24 of this Act (supra) is found a reenactment of the language which we have quoted above from section 6 of Act No. 1792. A few months later the Philippine Legislature adopted a revision of the Administrative Code which is contained in Act No. 2711; and it is noteworthy that in this last edition of said Code, the Legislature, doubtless in obedience to the will of the Congress of the United States as expressed in the Jones Law, restored the words which had been omitted from section 687 of the Administrative Code of 1916, so that the provision as it now stands in the law reads as follows [sec. 655] :

"A decision of the Insular Auditor or of a district auditor upon any matter within their respective powers shall be conclusive upon the executive branches of the Government, subject to appeal or review as hereinafter provided." (Administrative Code of 1917, section 655.)

Reflection upon the meaning of the language contained in this provision, as well as a consideration of the import of the legislative changes by which that provision acquired its present form, leads us to believe that, in the end and after all is said and done, the action of the Insular Auditor in passing upon the propriety and validity of any debt or claim which comes before him for audit is purely and solely an administrative act and has no binding force except as it affords a conclusive rule for the guidance and control of the executive branches of the Government. This idea comports with the principle accepted in the United States with respect to the functions of auditors; and it is further indicated in another provision found in section 24 (supra) of the Jones Law, which is in these words:

"The administrative jurisdiction of the auditor over accounts, whether of funds or property, and all vouchers and records pertaining thereto, shall be exclusive."

As the same provision appears in section 6 of the earlier Act No. 1792, the word "administrative" before "jurisdiction" is wanting. Its insertion in the later Act would seem to indicated recognition of the fact that the acts of the Auditor are of a purely administrative character.

The truth is that the embarrassment to which any individual is subject in his financial relations with the Government does not arise so much from the conclusiveness of the Insular Auditor's action upon his claim as it does from the rule that the Government is not subject to be sued in its own courts without its consent. If a party having a justiciable claim against the Government could go into court and maintain an action against it, as against any other defendant, no one would ever have supposed that the rejection of the claim by an auditor would have the effect of a conclusive adjudication on the right. Manifestly it can have no such effect; and when the statute says that the Insular Auditor's decision shall be conclusive on the executive branches of the Government, it is as much as to say that it is not conclusive on the judicial branch. This was the conclusion expressed by the Court of Claims in the case of McKnight vs. United States (13 C. Cls. R., 307), construing a similar statute, in which it was said:

"* * * in 1868 an act was passed, which is now incorporated into the Revised Statutes as section 191, which provides that the balances certified by the comptrollers 'shall be conclusive upon the executive branch of the Government * * *.' But this conclusiveness is probably intended to be * * * conclusive upon the executive branch of the Government but not upon Congress or the courts."

But it is argued that the action cannot be maintained because it does not appear from the petition that the petitioner has appealed from the action of the Insular Auditor to the Governor-General. In section 653 of the Administrative Code (1917) it is declared that any person aggrieved by a decision of the Insular Auditor may, within one year, appeal to the Governor-General. In section 656 it is declared that the action of the Governor-General affirming the Auditor's decision shall be final; but if he reverses the Auditor, the matter goes to the Secretary of War whose decision shall be conclusive. Provisions to the same effect are found in the Jones Law, sections 24, 25. It is our opinion that the word "final," as used in section 656 of the Administrative Code in speaking of the action of the Secretary of War, has reference to the finality and conclusiveness of the proceedings in an administrative sense that is, final and conclusive upon the executive branches of the Government. In other words, section 656 follows the tenor of section 655 where it is said that the decision of the Insular Auditor shall be conclusive, subject to appeal or review as in section 656 provided. It results that the proceedings under sections 653 to 656, inclusive, of the Administrative Code (1917) are at no stage binding upon the courts, whether an administrative appeal is taken or not. The circumstance that no appeal to the Governor-General was taken by the petitioner in the instant case is, therefore, immaterial so far as the judicial solution of the controversy is concerned. By its election not to take the matter before the Governor-General, the petitioner left the decision of the Insular Auditor, in effect, considered as an administrative decision, and section 653, as we have already seen, defines the effect to be given to it. The petitioner, of course, was bound to await action by the Insular Auditor because, until this officer acted, it could not be known that the petitioner's claim was questioned. The failure to appeal from the Auditor's decision does not affect petitioner's right of redress in the courts.

It having been shown that an adjudication made by the Insular Auditor is not binding on the courts, it remains to consider what remedy, if any, the law affords to a person who considers himself aggrieved by the Auditor's action and the conditions under which such remedy may be exerted. That no action can be brought directly by the creditor against the Government, in the absence of an enabling statute, to recover from it upon any supposed liability goes without saying. In the United States, as we have stated, a judicial determination of the validity of a great variety of claims df private individuals against the Federal Government may be submitted to judicial investigation, and administrative courts are common in the countries of continental Europe; but the Philippine Government, however, has not as yet made provision for such action, although in several instances special' statutes have opened the doors of the courts to individual claimants.

In considering the case before us, it is important to bear in mind that the Government is admittedly indebted to the petitioner in the definite and certain sum of P322.93. No action, either administrative or judicial, is therefore necessary to fix this liability upon the Government. In so far as legal liability can result from governmental activities, liability exists and upon the demurrer is admitted. Furthermore, said liability is such that it should be absolved by a warrant drawn by the Purchasing Agent and countersigned by the Insular Auditor. The law makes provision for the payment of the money in this way, and it cannot otherwise be gotten out of the Insular Treasury.

The legal remedy here indicated as proper is the writ of mandamus to compel the Purchasing Agent and the Insular Auditor to issue, countersign, and deliver the proper warrant to the petitioner. (Hoey vs. Baldwin, 1 Phil. Rep., 551.)

The liability of these officers to the coercive process of mandamus arises from the fact that a valid claim exists for the payment of which provision has been made, that these officers are the appointed agents for making the payment, and that under these circumstances the execution and delivery to the creditor of the warrant are merely ministerial functions involving no discretionary action whatever.

It is, of course, beyond dispute that the courts will not attempt to control the discretion of executive officers; but to require of them the performance of merely ministerial acts does not infringe upon that discretion. The decision of the Supreme Court of the United States in the Jackson case (supra) is in itself sufficient authority, directly in point, to uphold us in our conclusion that the execution and delivery of a warrant for the payment of an admitted indebtedness involves the exercise of no discretion whatever. If further justification be required we find it in the decision of the Supreme Court of the United States in the case of Roberts vs. Valentine (176 U. S., 221) wherein it was said:

"Unless the writ of mandamus is to become practically valueless, and is to be refused even where a public officer is commanded to do a particular act by virtue of a particular statute, this writ should be granted. Every statute to some extent requires construction by the public officer whose duties may be defined therein. Such officer must read .the law, and he must therefore, in a certain sense, construe it, in order to form a judgment from its language of what duty he is directed by the statute to perform. But that does not necessarily and in all cases make the duty of the officer anything other than a purely ministerial one. If the law directs him to perform an act in regard to which no discretion is committed to him, and which, upon the facts existing he is bound to perform, then that act is ministerial, although depending upon a statute which requires, in some degree, a construction of its language by the officer. Unless this be so, the value of this writ is very greatly impaired. Every executive officer whose duty is plainly devolved upon him by statute might refuse to perform it, and when his refusal is brought before the court he might successfully plead that the performance of the duty involved the construction of a statute by him, and therefore it was not ministerial, and the court would on that account be powerless to give relief. Such a limitation of the powers of the court, we think, would be most unfortunate, as it would relieve from judicial supervision all executive officers in the performance of their duties, whenever they should plead that the duty required of them arose upon the construction of a statute, no matter how plain its language, nor how plainly they violated their duty in refusing to perform the act required."

As it is averred in the complaint and admitted by the demurrer that the respondents are not withholding the warrant to enable them, with all due diligence, to submit the disputed claim to the courts, but that the Auditor has assumed to pass definite and final judgment upon the validity and amount of the alleged offset, contrary to the expressed wishes of petitioner, we are of the opinion that the petition states a cause of action, that the demurrer is not well taken, and it, therefore, must be and is overruled. Respondents may answer the petition within five days from the receipt of notice of this ruling and order.

Arellano C. J., Torres, Johnson, Araullo, Street, Malcolm, and Avanceña, JJ., concur.