Rep. Charles C. Diggs Jr. (D-Mich.) acknowledged in testimony yesterday that he had used the congressional salaries of his employes to pay his personal bills but said that he had not intended to do anything illegal.

Diggs took the witness stand in his trial in United States District Court here following the earlier appearance of four major civil rights leaders - Corretta Scott King, United Nations Ambassador Andrew Young, Detroit Mayor Coleman Young and the Rev. Jesse Jackson - all of whom strongly endorsed Diggs' honesty and integrity.

In his testimony, Diggs insisted his employes had willingly made their salaries available to him so he could pay his bills. In that respect as well as in others. Diggs' testimony differed sharply with the earlier testimony of major prosecution witnesses who said they had either resisted or been reluctant to pay Diggs' bills.

Diggs testified that he arranged in 1973 with his office manager, Jean G. Stultz, to pay some of his bills. "I was in very dire financial straits. She was dealing with the creditors. I said, 'Can you help me out?" She said, 'Yes, I'm prepared to help you out."

Stultz testified last week that her agreement to help Diggs with his bills - after he had inflated her salary and used the excess to do so - was against her wishes, that she believed the arrangement to be improper and that she had gone along with it only because Diggs had made the issue virtually "a condition of employment."

Diggs has been charged by the government with 29 counts of mail fraud and illegal diversion of more than $60,000 in congressional salaries to pay his personal and congressional bills.

According to Diggs, the arrangement with Stultz began in 1973 after he became chairman of the House District Committee and arranged to have what he described as the traditional portrait of himself painted to hang in the committee hearing room.

Stultz Diggs testified, told him that Diggs' administrative assistant, Dorothy Quarker, had suggested that Stultz pay for the portrait from her salary. Diggs said that when Stultz asked him if that was proper, he replied. "As far as I know you can do anything you want with your salary."

Subsequently, Diggs testified, Stultz's salary was increased to help pay for the $2,500 portrait. Later, Stultz helped Diggs pay his mortgage, other personal expenses and even lent him $1,000 to avert a mortgage foreclosure on his home.

In his testimony last week. Stultz said she had objected several times to the financial arrangement she had with Diggs. Yesterday, however, Diggs flatly contradicted her. "There was never a time that I can remember that she expressed any unwillingness to make a portion of her salary available to me," Diggs said. "She was willing to do it. She loaned me money."

Asked by defense lawyer David Povich if the payments were a condition of employment, Diggs said, "She could hire quit anytime she wanted to." The salary money went directly into her bank account, Diggs said. "I had no control over it . . . She could spend her money for whatever she wanted, whenever she wanted . . . She could have cut if off anytime she wanted to."

Similarly, Diggs said that Felix R. Matlock a congressional employe who wished in Digg's Detroit district office, had never complained about portions of his salary being used to pay expenses of his congressional office.

Diggs, 55, the senior black representative in Congress after serving since 1955, answered defense lawyer Povich's questions in a deep, steady voice for about 90 minutes. On cross-examination, Diggs matched the combativeness of Justice Department prosecutor John Kotelly.

Diggs acknowledged that he had hired Jeralee Richmond to work for his Detroit funeral home and to do some congressional work, but that Richmond had received only her congressional salary as compensation. Diggs did not dispute Richmond's earlier estimate that she had spent only 20 percent of her time on congressional business and the rest working for the funeral home.

"What she did after she took care of my congressional business was her business." Diggs testified. "What she did beyond that was not my concern."

Diggs acknowledged putting Richmond on his congressional staff in 1974 when he had an opening but no hands to pay her. Diggs said he did so because Quarker was on her "death bed" and he thought he could give Richmond back pay later.

When Kotelly asked Diggs if he had been "planning ahead" in giving Richmond the job. "I knew Dorothy Quarker was going to be dead within the next 30 to 60 days," Diggs testified. "If you call that planning ahead, then, yes, sir." Richmond subsequently was given back pay to compensate her for the first months of her employment.

Earlier, the jury heard from four of the most prominent members of the civil rights movement, who appeared in quick succession to vouch for Diggs honesty and integrity. U.S. District Court Judge Oliver Gasch limited narrowly the testimony of the four witnesses - called to testify solely on Diggs' character - to the question of his reputation and their opinion of his reputation and their opinion of his truthfulness.

None of the four qualified his or her support in any way. Mayor Young, a friend of Diggs since boyhood, told the jury, "In friendship and politics, the coin of exchange is a man's word and I've never known Charlie Diggs to lie or go back on her word."

Ambassador Young, who served two terms in Congress with Diggs, said, "In my dealings with him he's always been honest and straightforward - a man you can trust."

Jesse Jackson, president of People United to Save Humanity (PUSH), said Diggs' "character is impectable. His leadership has been based on his integrity . . . I trust him absolutely."

And Mrs. King, the Rev. Martin Luther King Jr.'s widow, told the jury, "In my opinion, Congressman Diggs is a man of great integrity and honesty and a man of dedication."

The trial is to resume this morning with further cross examination of Diggs.