G.R. No. 217949

THIRD DIVISION

February 20, 2019

G.R. No. 217949

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Petitioner
vs.
REYNALDO P. PALMIERY, Respondent

D E C I S I O N

REYES, A., JR., J.:

By their very nature, retirement laws are humanitarian in character. They reward an employee's loyalty and long service to their employer. For government service in particular, the retirement benefits are meant to attract qualified individuals and promote longevity in the government. Most important is their function to support retirees, especially those who are in their twilight years; during which time, gainful employment is not only difficult to find, but also impractical. The administration of retirement laws should, therefore, always lean on the side of the beneficiary in order to achieve these purposes.1

Before the Court is a petition for review on certiorari2 filed under Rule 45 of the Rules of Court, seeking to reverse and set aside the Decision3 dated January 21, 2015 and the Resolution4 dated April 17, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 129755.

Factual Antecedents

The facts of the case are essentially undisputed. Respondent Reynaldo P. Palmiery (Reynaldo) began his government service on May 2, 1961 as a Laborer in the Philippine Veterans Administration.5 On January 1, 1987, or after more than 25 years of service, he retired as a Manager of the Development Bank of the Philippines (DB-P) when the bank underwent reorganization.6 The DBP paid his gratuity benefit under Republic Act (R.A.) No. 16167 in the amount of Php 189,618.46. Reynaldo received the refund of his contributions amounting to Php 60,395.85.8 In total, he received Php 250,014.31.

On January 2, 1987, Reynaldo re-entered government service when he was appointed as Manager III in the Social Security System (SSS). He continued to work in the SSS until his retirement as a Deputy Administrator effective June 1, 1994.9 Reynaldo then claimed retirement benefits under R.A. No. 660;10 pursuant to which, he was granted a five (5)-year lump sum pension in the amount of Php 532,491.28. This amount was subject to the following deductions: (a) the amount of benefits he received prior (i.e. Php 250,014.31); and (b) his outstanding accountabilities (i.e. Php 57,774.64).11 Thus, Reynaldo received the aggregate amount of Php 224,836.73 on July 4, 1994.12

After four (4) years, or on July 7, 1998, Reynaldo was appointed as a member of the Government Service Insurance System (GSIS) Board of Trustees. During his tenure as a member of the board, he began to concurrently serve as the GSIS Executive Vice-President after his appointment to this position on July 16, 1998.13

On July 11, 2001, Reynaldo refunded to GSIS the amount of Php 895,320.78, or the benefits he previously received from his retirement.14 He also requested for the suspension of his monthly pension, which became effective on July 1, 1999, or five (5) years after the payment of his lump sum pension.15 Reynaldo likewise refunded the pension he received on various dates, pending the GSIS' action on his request. All in all, the total amount Reynaldo refunded to GSIS was Php 920,566.72.16

Reynaldo retired upon reaching the compulsory retirement age on May 28, 2005. On May 14, 2010, he applied for retirement benefits under R.A. No. 8291.17 Included in his application was his request for full credit of his government service starting on July 1, 1961 until his mandatory retirement on May 28, 2005, or approximately 38 years.18

Ruling of the GSIS

In a letter19 dated June 3, 2010, the GSIS Claims Department rejected Reynaldo's application for retirement benefits under R.A. No. 8291, for failure to meet the service requirement. The Claims Department stated that the GSIS would only credit Reynaldo's service after his re-entry to the government in 1998. Reynaldo was likewise informed that the amount previously refunded to the GSIS would be returned to him without interest. Reynaldo replied through a letter20 dated June 21, 2010, in order to protest the denial of his retirement application.

There being no response from the GSIS, Reynaldo filed a petition on January 18, 2011,21 which was later forwarded to the GSIS Committee on Claims.22 The GSIS Committee on Claims, thereafter, denied Reynaldo's claim.23 Unsatisfied with their decision, Reynaldo filed a petition24 dated November 11, 2011 with the GSIS Office of the Corporate Secretary. The petition was then forwarded to the GSIS Chief Legal Counsel for appropriate action.25

Acting on Reynaldo's petition, the GSIS Board of Trustees promulgated its Decision26 dated February 28, 2013, which ruled to dismiss the petition for lack of merit, viz.:

WHEREFORE, the petition is hereby DISMISSED for lack of merit. The GSIS Claims Department is hereby ordered to refund to [Reynaldo] the amount of Php920,566.72, which he returned to the GSIS. The acceptance of the refund shall be deemed as a constructive filing of the claim for separation benefits.

SO ORDERED.27

According to the GSIS Board of Trustees, it has approved Policy and Procedural Guidelines (PPG) No. 183-06 on January 4, 2006, which established a clear procedure in the processing of retirement claims of re-employed government officials. Under these guidelines, government employees who re-entered on or after the effectivity of R.A. No. 8291, or on June 24, 1997, cannot claim their previous years of service upon retirement.28 Since Reynaldo re-entered government service after June 24, 1997, the GSIS Board of Trustees excluded the years of service prior to his re-entry in the computation of his service under R.A. No. 8291.29

Ruling of the CA

Reynaldo appealed to the CA via a petition for review30 under Rule 43 of the Rules of Court. In a Decision31 dated January 21, 2015, the CA granted his appeal and ruled as follows:

WHEREFORE, in light of all the foregoing, the petition is GRANTED. Accordingly, the decision dated February 28, 2013 of [GSIS] in GSIS Case No. 005-11 is hereby REVERSED and SET ASIDE.

Respondent GSIS is DIRECTED to process the total retirement benefits accruing in favor of [Reynaldo], based on his total length of government service.

SO ORDERED.32

The CA held that under Section 12(g) of Commonwealth Act (C.A.) No. 186,33 a reinstated government employee may receive full credit for the years of service, provided that the retirement and pension benefits previously received are refunded to the GSIS. This is the applicable policy, despite the amendments enacted under R.A. No. 660 and R.A. No. 728.34 The CA further found that later laws, such as Presidential Decree (P.D.) No. 1146,35 P.D. No. 1981,36 and R.A. No. 8291, all failed to expressly repeal this provision of C.A. No. 186. Finally, as a piece of social legislation, the CA held that retirement laws should be liberally construed in favor of their beneficiaries.37

In a motion dated February 12, 2015, the GSIS sought the reconsideration of the CA's decision.38 The CA denied this motion in its Resolution39 dated April 17, 2015:

WHEREFORE, the instant Motion for Reconsideration is hereby DENIED for lack of merit.

SO ORDERED.40

Disagreeing with the adverse rulings of the CA, the GSIS filed the present petition before the Court. According to the GSIS, Section 10(b) of R.A. No. 8291 is clear with respect to employees who re-enter government service after retirement. The law supposedly considers these employees as new entrants, as a consequence of which, the GSIS excludes the services credited to the previous retirement in the computation of benefits.41 Furthermore, the GSIS argues that there is a distinction between those who re-entered government service before the effectivity of R.A. No. 8291, and those who re-entered and retired after its effectivity.42 Since Reynaldo falls under the latter category, his previous years of service cannot be included in the computation of his retirement benefits.43

In his comment, Reynaldo submits that the GSIS erroneously interpreted Section 10(b) of R.A. No 8291. He argues that only the service credited for retirement for which corresponding benefits have been awarded is excluded in the computation.44 He likewise subscribes to the CA's finding that the Primer on the GSIS Act of 1997 allows the refund of previously received benefits for the purpose of giving full credit in the computation of retirement benefits.45 Lastly, he submits that the GSIS Board of Trustees cannot rely on PPG No. 183-06 to deny his claim because at the time he refunded the previously received benefits to GSIS, this policy was not yet in place.46

The Court must, therefore, resolve whether Reynaldo's previous years in government should be included in the computation for his retirement benefits.

Ruling of the Court

The Court finds the petition without merit. The GSIS should give full credit to Reynaldo's years of service in the government.

In computing the years of service, the present GSIS Law excludes only services credited for retirement for which the corresponding benefits have been awarded.

The current governing law for retirees in the government service is R.A. No. 8291, otherwise known as "The Government Service Insurance System Act of 1997" It amended P.D. No. 1146, or the "Revised Government Service Insurance Act of 1977." Under this law, all government employees who have not reached the mandatory retirement age are compulsorily required to become members of the GSIS. This membership entitles employees, except those in the judiciary and constitutional commissions, to life insurance, retirement, and other benefits (e.g. disability, survivorship, separation, and unemployment).47

For retirement benefits, in particular, R.A. No. 8291 provides the following conditions before a member may become qualified to receive this benefit, viz.: (a) the employee must have rendered at least 15 years of service; (b) the employee must be at least 60 years old at the time of retirement; and (c) the employee must not be receiving a monthly pension as a result of permanent total disability.48 R.A. No. 8291 further provides for the manner by which service is computed, thus:

SECTION 10. Computation of Service. — (a) The computation of service for the purpose of determining the amount of benefits payable under this Act shall be from the date of original appointment/election, including periods of service at different times under one or more employers, those performed overseas under the authority of the Republic of the Philippines, and those that may be prescribed by the GSIS in coordination with the Civil Service Commission.

(b) All service credited for retirement, resignation or separation for which corresponding benefits have been awarded under this Act or other laws shall be excluded in the computation of service in case of reinstatement in the service of an employer and subsequent retirement or separation which is compensable under this Act.

For the purpose of this section the term service shall include full time service with compensation: Provided, That part time and other services with compensation may be included under such rules and regulations as may be prescribed by the GSIS.49 (Emphases Ours)

Pursuant to this provision, the GSIS argues that there is no longer "any exemption or condition such as refund of previously received benefits[,] as a restorative recourse of adding previous services in the computation of service [for reinstated employees]."50 The provision in Section 12(g) of C.A. No. 186, which allows for the refund of previously received benefits, is no longer found in the present law. Thus, the GSIS argues that this recourse is not available to those who re-entered government service after the effectivity of R.A. No. 8291.51

The Court does not agree.

While it is true that Section 12(g) of C.A. No. 186 explicitly provides for giving full credit to the prior years of service upon the refund of benefits previously received, the absence of a similar provision in R.A. No. 8291 does not necessarily mean that the law has abandoned this policy. A review of Section 12 of C.A. No. 186 shows that it covered the conditions for retirement. This provision prescribed the requirements for an employee-member to avail of the retirement benefits under C.A. No. 186, as well as the specific benefits to which such member may be entitled, given the various enumerated conditions.

Section 12(g) of C.A. No. 186 specifically makes reference to Section 12(f), which disqualifies separated employees receiving the annuity under Section 11 of C.A. No. 186,52 from being appointed to another appointive position, unless he or she possesses special qualifications. During the period of new employment, the annuity payment is suspended. Payment of the annuity resumes only after the termination of the employment.

But under Section 12(g) of C.A. No. 186, the GSIS should give full credit to the services rendered prior to the reinstatement, if such separated employee is not receiving the annuity mentioned in Section 11. The full credit of services is conditioned upon the refund of contributions for retirement, and the benefits previously received under any pension or retirement plan.

Thus, taken in its proper context, Section 12(g) of C.A. No. 186 applies to a specific category of employees and their corresponding benefits. The provision's subsequent absence in R.A. No. 8291 is attributable to the revised conditions for retirement under the new law, which was streamlined to only three (3) requirements for eligibility.53 The Court cannot interpret its absence in R.A. No. 8291 as an express prohibition against refunding previously received benefits for purposes of claiming retirement benefits under the law. The GSIS, therefore, erroneously relied on the absence of this provision to deny the claim of Reynaldo.

More importantly, a plain reading of Section 10(b) of R.A. No. 8291 reveals that employees who already received the retirement benefits under R.A. No. 8291, or the other laws, cannot credit their years of service prior to their re-entry in the government. Conversely, this means that employees who have not received their retirement benefits are entitled to full credit of their service.

In this regard, those similarly situated, or those who refunded their retirement benefits to the GSIS after they re-entered government service should be allowed to include their prior years of service in the computation of their eligibility and retirement benefits. This is consistent with the legal precept against double compensation, which prohibits payment for the same services covering the same period.54 Thus, if the employee has not received his/her retirement benefits, or has returned them to the GSIS, as the case may be, then the prohibition against double retirement benefits cannot apply.

For this reason, giving full credit to Reynaldo's years of service in the government does not contravene any existing statute or policy, especially since it is undisputed that Reynaldo refunded his previously received benefits to the GSIS. The GSIS even suspended his monthly pension effective October 1, 2001, pursuant to the request of Reynaldo.55 His re-entry into government service after the effectivity of R.A. No. 8291 is, therefore, inconsequential to the present case. The distinction that the GSIS created between individuals who re-entered government service before the effectivity of R.A. No. 8291, and those who re-entered after its effectivity, cannot supersede the unambiguous policy in Section 10(b) of the new GSIS Law.

The claim for retirement benefits in this case cannot be jeopardized by GSIS' new interpretation of R.A. No. 8291.

Significantly, when Reynaldo refunded his benefits, the GSIS subscribed to the policy that the prior services of an employee reinstated in the government may be credited as long as a refund of the previously received retirement benefits is made. The GSIS Primer on R.A. No. 8291 states, thus:

Can services for which retirement contributions have been refunded be included in the computation of service in case of reinstatement?

Yes, however, the corresponding contributions plus interests shall be deducted from benefits to be received. Services which are excluded in the computation of service in case of reinstatement are services for which the following retirement and separation benefits have been paid:

(1) cash payments, lump sums or pensions for retirement or old-age benefits under GSIS retirement laws such as R.A. 8291, P.D. 1146 and R.A. 660 and other special retirement laws which include R.A. 910, P.D. 1638, R.A. 6975, R.A. 7699, etc.; or

(2) retirement gratuities under R.A. 1616 and R.A. 6683; or

(3) cash payments and pensions as separation benefits under R.A. 8291.

Are the previous services of an employee credited if upon reinstatement to the service, he/she refunded all the retirement benefits he/she received?

Yes, because technically the employee in this case has not received any retirement or separation benefits. Formerly, refund of retirement benefits received was a requirement upon reinstatement. Under R.A. 8291, there is no such requirement.56

Notably, the GSIS did not dispute Reynaldo's refund. The GSIS accepted the amount and even issued a receipt in his favor.57 Reynaldo's request to suspend the payment of his monthly pension was also granted, as a result of which, the monthly pension under R.A. No. 660 was suspended effective October 1, 2001. Pending the suspension of his monthly pension, Reynaldo made succeeding refunds of the amounts he received from the GSIS. His total refund thus amounted to Php 920,566.72.58

In accepting the refund of Reynaldo, the GSIS cannot subsequently apply PPG No. 183-06, which adopts a new policy prejudicial to the retiree. The GSIS is the primaiy agency tasked with administering the government's retirement system. Reynaldo, thus, correctly assumed that when the GSIS accepted the refund of his retirement benefits, the agency would grant full credit to his years of service in the government. As the Court aptly held in GSIS v. De Leon:59

It must also be underscored that GSIS itself allowed respondent to retire under R.A. No. 910, following jurisprudence laid down by this Court.

One could hardly fault respondent, though a seasoned lawyer, for relying on petitioner's interpretation of the pertinent retirement laws, considering that the latter is tasked to administer the government's retirement system. He had the right to assume that GSIS personnel knew what they were doing.

Since the change in circumstances was through no fault of respondent, he cannot be prejudiced by the same. His right to receive monthly pension from the government cannot be jeopardized by a new interpretation of the law.60

Granting full credit to Reynaldo's years of service is neither unjust enrichment nor violative of the principle against double compensation. There is no express prohibition under R.A. No. 8291 against crediting the years of service upon the refund of previously received retirement benefits. In this case, Reynaldo refunded his retirement pay and monthly pension; and, from the time his monthly pension was suspended, Reynaldo no longer received the benefits due him. Denying his claim is, therefore, tantamount to depriving Reynaldo of his compensation for the years of service he rendered to the government, despite being eligible under the law.

Ultimately, in our jurisdiction, the inflexible rule is that social legislation must be liberally construed in favor of the beneficiaries.61 This includes retirement laws, the main objective of which is to provide support to retirees, especially at a time when their employment has ended.62 The benefits that retirees receive from retirement is also a form of reward for loyally serving their employer.63 In light of the humanitarian purpose of retirement laws, all doubts should be resolved in favor of the retiree as the person primarily intended to be benefited by this legislation.

WHEREFORE, the petition is DENIED. Accordingly, the Decision dated January 21, 2015 and the Resolution dated April 17, 2015, which were both promulgated by the Court of Appeals in relation to CA-G.R. SP No. 129755, are AFFIRMED.

The Government Service Insurance System is directed to give full credit to the years of service of Reynaldo P. Palmiery and to grant the retirement benefits due him, less any lawful deductions and corresponding interest and legal interest, if there are any.

SO ORDERED.

Peralta, (Chairperson), Leonen, Hernando, and Carandang,* JJ., concur.

Footnotes

* Designated as additional Member per Special Order No. 2624 dated November 28, 2018.

1 GSIS v. De Leon, 649 Phil. 610, 622 (2010); Fetalino, et at, v. Commission on Elections, 700 Phil. 129, 149-150 (2012); and Philippine National Bank v. Dalmacio, G.R. No. 202308, July 5, 2017, 830 SCRA 136, 148.

2 Rollo, pp. 22-49.

3 Penned by Associate Justice Sesinando E. Villon, with Associate Justices Rodil V. Zalameda and Maria Elisa Sempio Diy concurring; id. at 56-66.

4 Id. at 68-69.

5 Id. at 117.

6 Id.; see Executive Order No. 81, PROVIDING FOR THE 1986 REVISED CHARTER OF THE DEVELOPMENT BANK OF THE PHILIPPINES (approved on December 3, 1986).

7 AN ACT FURTHER AMENDING SECTION TWELVE OF COMMONWEALTH ACT NUMBERED ONE HUNDRED EIGHTY-SIX, AS AMENDED, BY PRESCRIBING TWO OTHER MODES OF RETIREMENT AND FOR OTHER PURPOSES (approved on May 31, 1957).

8 Rollo, p. 136.

9 Id. at 118.

10 AN ACT TO AMEND COMMONWEALTH ACT NUMBERED ONE HUNDRED AND EIGHTY-SIX ENTITLED "AN ACT TO CREATE AND ESTABLISH A GOVERNMENT SERVICE INSURANCE SYSTEM, TO PROVIDE FOR ITS ADMINISTRATION, AND TO APPROPRIATE THE NECESSARY FUNDS THEREFOR," AND TO PROVIDE RETIREMENT INSURANCE AND FOR OTHER PURPOSES (approved on June 16, 1951).

11 N.B. The accountabilities of Reynaldo to the GSIS included interests on the previously received benefits amounting to Php 33,167.84; rollo, p. 136.

12 Id. at 137.

13 Id. at 119.

14 Id. at 108-109.

15 Id. at 137.

16 Id. at 138.

17 AN ACT AMENDING PRESIDENTIAL DECREE NO. 1146, AS AMENDED, EXPANDING AND INCREASING THE COVERAGE AND BENEFITS OF THE GOVERNMENT SERVICE INSURANCE SYSTEM, INSTITUTING REFORMS THEREIN AND FOR OTHER PURPOSES. Approved on May 30, 1997.

18 Rollo, pp. 107-120.

19 Id. at 124.

20 Id. at 125-126.

21 CA rollo, pp. 105-132.

22 Rollo, pp. 127-128.

23 Id. at 106.

24 Id. at 73-104.

25 Id. at 72.

26 Id. at 135-154.

27 Id. at 152.

28 Id. at 148-149.

29 Id. at 151-152.

30 CA rollo, pp. 30-59.

31 Rollo, pp. 56-66.

32 Id. at 65.

33 AN ACT TO CREATE AND ESTABLISH A "GOVERNMENT SERVICE INSURANCE SYSTEM," TO PROVIDE FOR ITS ADMINISTRATION, AND TO APPROPRIATE THE NECESSARY FUNDS THEREFOR (approved on November 14, 1936).

34 AN ACT TO FURTHER AMEND THE GOVERNMENT SERVICE INSURANCE ACT, AS AMENDED BY REPUBLIC ACT NUMBERED SIX HUNDRED SIXTY, AND TO AMEND SECTION TWENTY-SIX OF THE LATTER ACT (approved on June 18, 1952).

35 AMENDING, EXPANDING, INCREASING AND INTEGRATING THE SOCIAL SECURITY AND INSURANCE BENEFITS OF GOVERNMENT EMPLOYEES AND FACILITATING THE PAYMENT THEREOF UNDER COMMONWEALTH ACT NO. 186, AS AMENDED, AND FOR OTHER PURPOSES (approved on May 31, 1977).

36 FURTHER AMENDING PRESIDENTIAL DECREE NO. 1146, AS AMENDED, OTHERWISE KNOWN AS THE REVISED GOVERNMENT SERVICE INSURANCE ACT OF 1977 (approved on July 19, 1985).

37 Rollo, pp. 60-65.

38 CA rollo, pp. 464-480.

39 Rollo, pp. 68-69.

40 Id. at 68.

41 Id. at 35-38.

42 Id. at 44.

43 Id. at 39.

44 Id. at 167-175.

45 Id. at 176-177.

46 Id. at 181.

47 P.D. No. 1146, as amended by R.A. No. 8291, Section 3.

48 Id. at Section 13-A.

49 Id. at Section 10.

50 Rollo, p. 42.

51 Id. at 45.

52 This provision reads:

Section 11. (a) Amount of annuity. — Upon retirement after faithful and satisfactory service a member shall be automatically entitled to a life annuity guaranteed for at least five years and thereafter as long as he lives. The amount of the monthly annuity at the age of fifty-seven years shall be thirty pesos, plus for each year of service after the sixteenth of June, nineteen hundred and fifty-one, two per centum of the average monthly salary received by him during the last three years of service, plus, for each year of service rendered prior to the sixteenth of June, nineteen hundred and fifty-one, one and two-tenths per centum of said average monthly salary: Provided, That this amount shall be adjusted actuarially if retirement be at an age other than fifty-seven years: Provided, further, That the maximum amount of monthly annuity at age fifty-seven shall not in any case exceed three-fourths of said average monthly salary: And provided, finally, That retirement benefit shall be paid not earlier than one year after the approval of this Act. In lieu of this annuity, he may prior to his retirement elect one of the following equivalent benefits.

(1) Monthly annuity during his lifetime;

(2) Monthly annuity during the joint-lives of the employee and his or her spouse guaranteed for at least five years, which annuity, however, shall, upon death of either and after the five-year guarantees period, be reduced to one-half and be paid to the survivor.

(3) For those who are at least sixty-three years of age, lump-sum payment of present value of annuity for first five years, and for those who are at least sixty but below sixty-three years of age, lump- sum payment of the present value of the annuity for the first three years, with the balance of the five-year guaranteed annuity payable in lump-sum upon reaching sixty-three years of age, and annuity after the guaranteed period to be paid monthly: Provided, further, That it shall be compulsory for an employer to pay on the date of retirement in preference to all other obligations, except salaries and wages of its employees, its share of at least the premiums required to permit an employee to enjoy [these] options.

(4) Such other benefits as may be approved by the System.

53 Supra note 48.

54 See Ocampo v. Commission on Audit, 710 Phil. 706, 722-723 (2013), citing Santos v. Court of Appeals, 399 Phil. 298, 307-308 (2000).

55 Rollo, p. 137.

56 Id. at 123.

57 Id. at 108-109.

58 Id, at 137-138.

59 649 Phil. 610 (2010).

60 Id. at 625.

61 Philippine National Bank v. Dalmacio, G.R. No. 202308, July 5, 2017, 830 SCRA 136.

62 Id. at 148.

63 GSIS v. Da Leon, supra note 59.

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