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[Syllabus]

FIRST DIVISION
[G.R. No. 103525. March 29, 1996]
MARCOPPER MINING CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and NATIONAL MINES AND ALLIED WORKERS UNION (NAMAWUMIF), respondents.
DECISION
KAPUNAN, J.:
Social justice and full protection to labor guaranteed by the fundamental law of this land is not
some romantic notion, high in rhetoric but low in substance. The case at bench provides yet
another example of harmonizing and balancing the right of labor to its just share in the fruits of
production and the right of enterprises to reasonable returns on investments, and to expansion
and growth.[1]
In this petition for certiorari and prohibition under Rule 65 of the Revised Rules of Court,
Marcopper Mining Corporation impugns the decision rendered by the National Labor Relations
Commission (NLRC) on 18 November 1991 in RAB-IV-12-2588-88 dismissing petitioners
appeal, and the resolution issued by the said tribunal dated 20 December 1991 denying
petitioners motion for reconsideration.
There is no disagreement as to the following facts:
On 23 August 1984, Marcopper Mining Corporation, a corporation duly organized and existing
under the laws of the Philippines, engaged in the business of mineral prospecting, exploration
and extraction, and private respondent NAMAWU-MIF, a labor federation duly organized and
registered with the Department of Labor and Employment (DOLE), to which the Marcopper
Employees Union (the exclusive bargaining agent of all rank-and-file workers of petitioner) is
affiliated, entered into a Collective Bargaining Agreement (CBA) effective from 1 May 1984
until 30 April 1987.
Sec. 1, Art. V of the said Collective Bargaining Agreement provides:
Section 1. The COMPANY agrees to grant general wage increase to all employees within the
bargaining unit as follows:
Effectivity

Increase per day on


the Basic Wage

May 1,1985

5%

May 1,1986

5%

It is expressly understood that this wage increase shall be exclusive of any increase in the
minimum wage and/or mandatory living allowance that may be promulgated during the life of
this Agreement.[2]
Prior to the expiration of the aforestated Agreement, on 25 July 1986, petitioner and private
respondent executed a Memorandum of Agreement (MOA) wherein the terms of the CBA,
specifically on matters of wage increase and facilities allowance, were modified as follows:
1. The COMPANY hereby grants a wage increase of 10% of the basic rate to all employees and
workers within the bargaining units (sic) as follows:
(a) 5% effective May 1,1986.
This will mean that the members of the bargaining unit will get an effective increase of 10%
from May 1, 1986.
(b)

5% effective May 1,1987.

2. The COMPANY hereby grants an increase of the facilities allowance from P50.00 to P100.00
per month effective May 1, 1986.[3]
In compliance with the amended CBA, petitioner implemented the initial 5% wage increase due
on 1 May 1986.[4]
On 1 June 1987, Executive Order (E.O.) No. 178 was promulgated mandating the integration of
the cost of living allowance under Wage Orders Nos. 1, 2, 3, 5 and 6 into the basic wage of
workers, its effectivity retroactive to 1 May 1987.[5] Consequently, effective on 1 May 1987, the
basic wage rate of petitioners laborers categorized as non-agricultural workers was increased by
P9.00 per day.[6]
Petitioner implemented the second five percent (5%) wage increase due on 1 May 1987 and
thereafter added the integrated COLA.[7]
Private respondent, however, assailed the manner in which the second wage increase was
effected. It argued that the COLA should first be integrated into the basic wage before the 5%
wage increase is computed.[8]
Consequently, on 15 December 1988, the union filed a complaint for underpayment of wages
before the Regional Arbitration Branch IV, Quezon City.
On 24 July 1989, the Labor Arbiter promulgated a decision in favor of the union. The
dispositive part reads, thus:
WHEREFORE, consistent with the tenor hereof, judgment is rendered directing respondent
company to pay the wage differentials due its rank-and-file workers retroactive to 1 May 1987.

SO ORDERED.[9]
The Labor Arbiter ruled in this wise:
First and foremost, the written instrument and the intention of the parties must be brought to the
fore. And talking of intention, we conjure to sharp focus the provision embossed in Section 1,
Article V of the collective agreement, viz:
xxx xxx

xxx.

It is expressly understood that this wage increase shall be exclusive of increase in the minimum
wage and/or mandatory living allowance that may be promulgated during the life of this
Agreement. (Italics ours.)
The foregoing phrase albeit innocuously framed offers the cue. This ushers us to the inner
sanctum of what really was the intention of the parties to the contract. Treading along its lines, it
becomes readily discernible that this portion of the contract is the stop-lock gate or known in
its technical term as the non-chargeability clause. There can be no quibbling that on the
strength of this provision, the wage/allowance granted under this accord cannot be credited to
similar form of benefit that may be thereafter ordained by the government through legislation.
That the parties therefore were consciously aware at the time of the conclusion of the agreement
of the never-ending rise in the cost of living is a logical corollary. And while this upward trend
may not be a welcome phenomenon, there was the intention to yield and comply in the event of
an imposition. Of course, there cannot likewise be any rivalry that if the Executive Order were
to retroact to 2 May 1987 or a day after the last contractual increase, this question will not arise.
It is in this sense of fairness that we cannot allow this one (1) day to be an insulating medium
to deny the workers the benediction endowed by Executive Order No. 178.[10]
Petitioner appealed the Labor Arbiters decision and on 18 November 1991 the NLRC rendered
its decision sustaining the Labor Arbiters ruling. The dispositive portion states:
WHEREFORE, in view of the foregoing, the Decision of the Labor Arbiter is hereby
AFFIRMED and the appeal filed is hereby DISMISSED for lack of merit.
SO ORDERED.[11]
The NLRC declared:
x x x Increments to the laborers financial gratification, be they in the form of salary increases or
changes in the salary scale are aimed at one thing -improvement of the economic predicament of
the laborers. As such, they should be viewed in the light of the States avowed policy to protect
labor. Thus, having entered into an agreement with its employees, an employer may not be
allowed to renege on its obligation under a collective bargaining agreement should, at the same
time, the law grants the employees the same or better terms and conditions of employment.
Employee benefits derived from law are exclusive of benefits arrived at through negotiation and

agreement unless otherwise provided by the agreement itself or by law. (Meycauayan College v.
Hon. Franklin N. Drilon, 185 SCRA 50).[12]
Petitioners motion for reconsideration was denied by the NLRC in its resolution dated 20
December 1991.
In the present petition, Marcopper challenges the NLRC decision on the following grounds:
I
PUBLIC RESPONDENT NLRC ACTED WITH GRAVE ABUSE OF DISCRETION IN
AFFIRMING THE DECISION OF LABOR ARBITER JOAQUIN TANODRA DIRECTING
MARCOPPER TO PAY WAGE DIFFERENTIALS DUE ITS RANK-AND-FILE
EMPLOYEES RETROACTIVE TO 1 MAY 1987 CONSIDERING THAT SANS EO 178, THE
FUNDAMENTAL MEANING OF THE BASIC WAGE IS CLEARLY DIFFERENT FROM,
AND DOES NOT INCLUDE THE COLA AT THE TIME THE CBA WAS ENTERED INTO.
THUS, PUBLIC RESPONDENTS READING OF THE CBA, AS AMENDED BY THE
MEMORANDUM OF AGREEMENT DATED 25 JULY 1986, ULTIMATELY
DISREGARDED THE ORDINARY MEANING OF THE PHRASE BASIC WAGE,
OTHERWISE INTENDED BY THE PARTIES DURING THE TIME THE CBA WAS
EXECUTED.
II
THE LABOR ARBITER AND PUBLIC RESPONDENT NLRCS RELIANCE ON THE LAST
PARAGRAPH OF SECTION 1, ARTICLE V OF THE CBA WHICH STATES: IT IS
EXPRESSLY UNDERSTOOD THAT THIS WAGE INCREASE SHALL BE EXCLUSIVE OF
ANY INCREASE IN THE MINIMUM WAGE AND/OR MANDATORY LIVING
ALLOWANCE THAT MAY BE PROMULGATED DURING THE LIFE OF THIS
AGREEMENT IS MISPLACED AND WITHOUT BASIS BECAUSE SAID PROVISION
HARDLY OFFERS A HINT AS TO WHAT BASIC WAGE THE PARTIES HAD IN MIND
AT THE TIME THEY EXECUTED THE CBA AS AMENDED BY THE MEMORANDUM
OF AGREEMENT.
III
PETITIONER COMPUTED THE 5% WAGE INCREASE BASED ON THE
UNINTEGRATED BASIC WAGE IN ACCORDANCE WITH THE INTENT AND TERMS
OF THE CBA, AS AMENDED BY THE MEMORANDUM OF AGREEMENT. THIS WAS IN
FULL ACCORD AND IN FAITHFUL COMPLIANCE WITH EO 178. HENCE,
PETITIONER DID NOT COMMIT ANY UNDERPAYMENT.
IV
THE DOCTRINE OF LIBERAL INTERPRETATION IN FAVOR OF LABOR IN CASE OF
DOUBT IS NOT APPLICABLE TO THE INSTANT CASE.[13]

Stripped of the non-essentials, the question for our resolution is what should be the basis for the
computation of the CBA increase, the basic wage without the COLA or the so-called
integrated basic wage which, by mandate of E.O. No. 178, includes the COLA.
It is petitioners contention that the basic wage referred to in the CBA pertains to the
unintegrated basic wage. Petitioner maintains that the rules on interpretation of contracts,
particularly Art. 1371 of the New Civil Code which states that:
Art. 1371. In order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered.
should govern. Accordingly, applying the aforequoted provision in the case at bench, petitioner
concludes that it was clearly not the intention of the parties (petitioner and private respondent) to
include the COLA in computing the CBA/MOA mandated increase since the MOA was entered
into a year before E.O. No. 178 was enacted even though their effectivity dates coincide. In
other words, the situation contemporaneous to the execution of the amendatory MOA was that
there was yet no law requiring the integration of the COLA into the basic wage.[14] Petitioner,
therefore, cannot be compelled to undertake an obligation it never assumed or contemplated
under the CBA or MOA.
Siding with the petitioner, the Solicitor General opines that for the purpose of complying with
the obligations imposed by the CBA, the integrated COLA should not be considered due to the
exclusivity of the benefits under the said CBA and E.O. No. 178. He explains thus:
A collective bargaining agreement is a contractual obligation. It is distinct from an obligation
imposed by law. The terms and conditions of a CBA constitute the law between the parties.
Thus, employee benefits derived from either the law or a contract should be treated as distinct
and separate from each other. (Meycauayan College vs. Drilon, supra.)
xxx xxx

xxx.

Very clearly, the CBA and E.O. 178 provided for the exclusiveness of the benefits to be given or
awarded to the employees of petitioner. Thus, when petitioner computed the 5% wage increase
based on the unintegrated basic wage, it complied with its contractual obligations under the
CBA. When it thereafter integrated the COLA into the basic wage, it complied also with the
mandate of E.O. 178. Petitioner, therefore, complied with its contractual obligations in the CBA
as well as with the legal mandate of the law. Consequently, petitioner is not guilty of
underpayment.
To follow the theory of private respondent, that is - to integrate first the COLA into the basic
wage and thereafter compute the 5% wage increase therefrom, would violate the exclusiveness
of the benefits granted under the CBA and under E.O. 178.[15]

Private respondent counters by asserting that the purpose, nature and essence of CBA negotiation
is to obtain wage increases and benefits over and above what the law provides and that the
principle of non-diminution of benefits should prevail.
The NLRC, which filed its own comment, likewise, made the following assertions:
x x x However, to state outright that the parties intended the basic wage to remain invariable
even after the advent of EO 178 is unfounded and presumptuous a claim as such inevitably
works to the utmost disadvantage of the workers and runs counter to the constitutional guarantee
of affording protection to labor. Evidently, the rationale for the integration of the COLA with
the basic wage was primarily to increase the base wage for purposes of computation of such
items as overtime and premium pay, fringe benefits, etc. To adopt the statement and claim of the
petitioner would then redound to depriving the workers of the full benefits the law intended for
them, which in the final analysis was solely for the purpose of alleviating their plight due to the
continuous undue hardship they suffer caused by the ever escalating prices of prime
commodities.[16]
We rule for the respondents.
The principle that the CBA is the law between the contracting parties stands strong and true.[17]
However, the present controversy involves not merely an interpretation of CBA provisions.
More importantly, it requires a determination of the effect of an executive order on the terms and
the conditions of the CBA. This is, and should be, the focus of the instant case.
It is unnecessary to delve too much on the intention of the parties as to what they allegedly meant
by the term basic wage at the time the CBA and MOA were executed because there is no
question that as of 1 May 1987, as mandated by E.O. No. 178, the basic wage of workers, or the
statutory minimum wage, was increased with the integration of the COLA. As of said date, then,
the term basic wage includes the COLA. This is what the law ordains and to which the
collective bargaining agreement of the parties must conform.
Petitioners arguments eventually lose steam in the light of the fact that compliance with the law
is mandatory and beyond contractual stipulation by and between the parties; consequently,
whether or not petitioner intended the basic wage to include the COLA becomes immaterial.
There is evidently nothing to construe and interpret because the law is clear and unambiguous.
Unfortunately for petitioner, said law, by some uncanny coincidence, retroactively took effect on
the same date the CBA increase became effective. Therefore, there cannot be any doubt that the
computation of the CBA increase on the basis of the integrated wage does not constitute a
violation of the CBA.
Petitioners contention that under the Rules Implementing E.O. No. 178, the definition of the
term -basic wage has remained unchanged is off the mark since said definition expressly
allows integration of monetary benefits into the regular pay of employees:
Chapter 1. Definition of Terms and Coverage.

Section 1. Definition of Terms.


xxx xxx

xxx.

(j) Basic Wage means all regular remuneration or earnings paid by an employer for services
rendered on normal working days and hours but does not include cost-of- living allowances,
profit-sharing payments, premium payments, 13th month pay, and other monetary benefits which
are not considered as part of or integrated into the regular salary of the employee on the date the
Order became effective. (Italics ours.)
What E.O. No. 178 did was exactly to integrate the COLA under Wage Orders Nos. 1, 2, 3, 5
and 6 into the basic pay so as to increase the statutory daily minimum wage. Section 2 of the
Rules is quite explicit:
Section 2. Amount to be Integrated. - Effective on the dates specified, as a result of the
integration, the basic wage rate of covered workers shall be increased by the following amounts:
(Italics ours.)
xxx xxx

xxx.

Integration of monetary benefits into the basic pay of workers is not a new method of increasing
the minimum wage.[18] But even so, we are still guided by our ruling in Davao Integrated Port
Stevedoring Services v. Abarquez,[19] which we herein reiterate:
While the terms and conditions of the CBA constitute the law between the parties, it is not,
however, an ordinary contract to which is applied the principles of law governing ordinary
contracts. A CBA, as a labor contract within the contemplation of Article 1700 of the Civil Code
of the Philippines which governs the relations between labor and capital, is not merely
contractual in nature but impressed with public interest, thus, it must yield to the common good.
As such, it must be construed liberally rather than narrowly and technically, and the courts must
place a practical and realistic construction upon it, giving due consideration to the context in
which it is negotiated and purpose which it is intended to serve.
Finally, petitioner misinterprets the declaration of the Labor Arbiter in the assailed decision that
when the pendulum of judgment swings to and fro and the forces are equal on both sides, the
same must be stilled in favor of labor. While petitioner acknowledges that all doubts in the
interpretation of the Labor Code shall be resolved in favor of labor,[20] it insists that what is
involved-here is the amended CBA which is essentially a contract between private persons.
What petitioner has lost sight of is the avowed policy of the State, enshrined in our Constitution,
to accord utmost protection and justice to labor, a policy, we are, likewise, sworn to uphold.
In Philippine Telegraph & Telephone Corporation v. NLRC,[21] we categorically stated that:
When conflicting interests of labor and capital are to be weighed on the scales of social justice,
the heavier influence of the latter should be counter-balanced by sympathy and compassion the
law must accord the underprivileged worker.

Likewise, in Terminal Facilities and Services Corporation v. NLRC,[22] we declared:


Any doubt concerning the rights of labor should be resolved in its favor pursuant to the social
justice policy.
The purpose of E.O. No. 178 is to improve the lot of the workers covered by the said statute. We
are bound to ensure its fruition.
WHEREFORE, premises considered, the petition is hereby DISMISSED.
SO ORDERED.
Padilla, Bellosillo, Vitug, and Hermosisima, Jr., concur.
[1] THE 1987 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES, Art. XIII, Sec.
3.
[2] Rollo, p.6.
[3] Original Records, Volume 1, pp. 20, 43.
[4] Ibid.
[5] Executive Order No. 178
INCREASING THE STATUTORY DAILY MINIMUM WAGES AFTER INTEGRATING
THE COST OF LIVING ALLOWANCES UNDER WAGE ORDERS NOS. 1, 2, 3, 5 AND 6
INTO THE BASIC PAY OF ALL COVERED WORKERS
WHEREAS, the National Tripartite Conference, held on April 10-11, 1987, has agreed in
principle on the integration of existing cost-of-living allowances (COLAs) into the basic pay,
leaving to the President of the Philippines the decision on the manner and schedule of
integration;
NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Philippines, do hereby order:
SECTION 1. The cost-of-living allowances mandated under existing Wage Order shall be
integrated into the basic wage of all covered workers based on the following schedule:
a)

COLAs under Wage Orders Nos. 1, 2 and 3 effective May 1, 1987

b)

COLAs under Wage Orders Nos. 5 and 6 effective October 1, 1987

For establishments with less than 30 employees and paid-up capital of P500,000 or less:

a) COLAs under Wage Orders Nos. 1 and 2, effective May 1, 1987


b)

COLAs under Wage Order No. 3, effective October 1, 1987

c)

COLAs under Wage Orders Nos. 5 and 6, effective January 1, 1988

SECTION 2. The Secretary of Labor and Employment, as Chairman of the National Wages
Council, shall promulgate the necessary rules and regulations to implement this Executive Order.
SECTION 3. All laws, orders, issuances, rules and regulations or parts thereof inconsistent with
this Executive Order are hereby repealed or modified accordingly.
SECTION 4. This Executive Order shall take effect on May 1. 1987.
[6] Rules Implementing E.O. No. 178, Chapter 11, Sec. 2.
[7] Rollo, p.7.
[8] Id at 28; 80.
[9] Id., at 30.
[10] Id., at 28-29.
[11] Id., at 49.
[12] Id., at 48-49.
[13] Id., at 9-10.
[14] Id., at 187.
[15] Id., at 84-85.
[16] Id., at 115.
[17] Kimberly Clark Phils. v. Lorredo, 226 SCRA 639(1993); Plastic Town Center Corporation
v. NLRC, 172 SCRA 580(1989).
[18] See P.D. 1751 dated 14 May 1980 which increased the statutory daily minimum wage at all
levels by P4.00 after integrating the mandatory emergency living allowance under PD Nos. 525
and 1123 into the basic pay of all covered workers. (Meycauayan College v. Drilon, 185 SCRA
50 [1990].)
[19] 220 SCRA 197(1993).

[20] Art 4, Labor Code. Construction in favor of labor. - All doubts in the implementation and
interpretation of the provisions of this Code, including its implementing rules and regulations,
shall be resolved in favor of labor.
[21] 183 SCRA 451 (1990).
[22] 199 SCRA 269(1991).

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 98395 October 28, 1994
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,
vs.
CIVIL SERVICE COMMISSION and DR. MANUEL BARADERO, respondents.
G.R. No. 102449
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,
vs.
CIVIL SERVICE COMMISSION and MATILDE S. BELO, respondents.
Belo, Abiera & Associates for Matilde S. Belo.
QUIASON, J.:
Before us are two petitions docketed as G.R. No. 98395 and G.R.
No. 102449. The petitions were consolidated since they principally involved the same issue and
parties.
We grant both petitions.
I
G.R. No. 98395
This is a petition for certiorari under Rule 65 of the Revised Rules of Court, to reverse and set
aside four orders of the Civil Service Commission (CSC), namely: (1) the Resolution No. 90-642
dated July 16, 1990, which resolved as creditable for retirement purposes the service of private
respondent Manuel Baradero, who served as Sangguniang Bayan member on a per diem basis
from January 1, 1976 to October 20, 1978; (2) the Order dated September 20, 1990 directing the
implementation of CSC Resolution No. 90-642; (3) the Order dated December 7, 1990 directing
the President and General Manager of petitioner Government Service Insurance System (GSIS)
to show cause why they should not be held in contempt for the delay in the implementation of
Resolution No. 90-642; and (4) the Resolution No. 91-526 dated April 23, 1991, which
dismissed petitioner's Motion for Reconsideration of the Order dated September 20, 1990.
Dr. Manuel Baradero was a government employee, who occupied the position of Medical Officer
IV in the Philippine Medical Care Commission, until he reached the mandatory age of retirement
of 65 years old.
He served the Philippine Army as an enlisted man from November 17, 1942 until June 30, 1945.
He resumed his government career on January 1, 1976, when he was elected a member of the
Sangguniang Bayan of the Municipality of La Castellana, Negros Occidental. As such, he
received per diem for every session attended. He resigned from the Sangguniang Bayan on
October 10, 1976. On October 20, 1978, he was appointed Medical Officer I at the Philippine
Medical Care Commission, where he served until he reached the compulsory retirement age of
65 years old (Rollo, p. 28).
Prior to turning 65 years old, Dr. Baradero applied for compulsory retirement with petitioner,
which credited in his favor 13 years of government service, excluding his term as a Sangguniang

Bayan member. He requested an extension of service from the CSC to enable him to complete 15
years of government service. This was necessary so that he may avail of retirement benefits.
The request was denied by the CSC in its Resolution No. 90-642 dated July 16, 1990. Instead, it
ruled that Dr. Baradero's two-year stint as a member of the Sangguniang Bayan be considered as
creditable service, hence completing the mandatory 15-year service and making him eligible for
retirement benefits (Rollo, p. 28).
The GSIS contested the resolution, alleging that:
(1) Per diem was expressly excluded in the definition of compensation in RA
1573 on June 16, 1956. Prior to this, services paid on per diem basis were
considered creditable.
(2) Per diems were excluded from the definition of compensation because " per
diems, by themselves are usually of minimal amounts which cannot actually
support an insurance coverage" (Office of the General Counsel Opinion 08-85,
June 3, 1985). It had been maintained that "salary is essential to insurance in the
System, as it serves as the basis for the determination of the monthly premiums or
contributions" (Government Corporate Counsel Opinion No. 198, s. 1957).
(3) In the case of the late Commissioner Inocencio V. Ferrer of the Social Security
System, Commissioner Ferrer received per diems not only for attending meetings
of the Commission but also for hearing cases as hearing officer. With the almost
daily hearings of Commissioner Ferrer, he was said to have been performing fulltime service and received substantial amount of per diems such that "the socalled per diems that
he received were not really per diems but compensation" (OGC Opinion 08-85).
Hence, his services as hearing Commissioner were considered creditable, but
his per diem for attending the board meetings were excluded in the computation
of his retirement benefits (Rollo, p. 32).
The GSIS advised that the CSC extend the services of Dr. Baradero until he completes the
required 15 years so that he may avail of retirement benefits.
On September 20, 1990, the CSC issued an order directing the GSIS to implement Resolution
No. 90-642 (Rollo, p. 35).
The GSIS filed a motion for reconsideration of the order (Rollo, p. 37), which was denied by the
CSC in its Resolution No. 91-526 dated April 23, 1991. The resolution further directed the GSIS
to comply with the CSC resolution and order under pain of contempt (Rollo, p. 49).
Hence, this petition where the GSIS charges the CSC with grave abuse of discretion in ruling
that: (1) services rendered on a per diem basis is creditable for purposes of retirement; and (2) it
has exclusive jurisdiction in the determination of services which are creditable.
The Office of the Solicitor General filed a "Manifestation and Motion in Lieu of Comment,"
which submitted its position that the law expressly excludes services rendered on per diem basis
in determining creditable government service for retirement purposes.
The Solicitor General is of the opinion that the CSC's resolutions and order crediting such
services were in violation of the law, and encroached on the power of the GSIS to administer and
implement retirement laws. He therefore recommended that the instant petition be given due
course (Rollo, p. 100).
G.R. No. 102449
This is a petition for certiorari under Rule 65 of the Revised Rules of Court, to reverse and set
aside three orders of the CSC, namely: (1) the Resolution dated June 7, 1989, which resolved as

creditable for retirement purposes the services rendered by respondent Matilde S. Belo, who
served as Vice-Governor of Capiz in a hold-over capacity from December 31, 1976 to January 1,
1979; (2) the Order dated July 18, 1991 directing the President and General Manager of
petitioner to show cause why they should not be held in contempt for the delay in the
implementation of CSC Resolution No. 89-368; and (3) the Order dated October 3, 1991, finding
the President and General Manager of petitioner guilty of indirect contempt with penalty of a
fine of P1,000.00 per day of defiance until the implementation of CSC Resolution
No. 89-368.
Matilde Belo retired from the government service on February 2, 1988. At the time of her
retirement, Belo was the Vice-Governor of Capiz in a
hold-over capacity. She served as Governor of Capiz from January 25, 1972 until February 1,
1988.
As an elected government official, Belo received a fixed salary of P13,000.00 per annum from
January 25, 1976 until December 31, 1976. Thereafter, she held the same position in a hold-over
capacity and was remunerated as follows: (1) from December 31, 1976 until January 1, 1979, she
received per diem for every session attended of the Sangguniang Panlalawigan; and (2) from
December 31, 1979 until February 1, 1988, she received a fixed salary ranging from P23,000.00
to P45,000.00 per annum (Rollo, p. 25).
Belo sought an opinion from the CSC to determine if the services she rendered from December
31, 1976 until January 1, 1979, in which period she was paid on a per diem basis, is creditable
for retirement purposes.
In response to the query, the CSC issued Resolution No. 89-368 dated June 7, 1987, which
affirmed that her services for said period was creditable (Rollo, pp. 25-26).
Belo's application for retirement was referred to the GSIS Committee on Claims, which adopted
a position contrary to that of the CSC.
On August 6, 1991, the GSIS received the Order dated July 18, 1991, which directed its
President and General Manager to show cause why they should not be held in contempt for the
delay in the implementation of CSC Resolution No. 89-368 (Rollo, pp. 28).
The GSIS filed its "Manifestation/Explanation," alleging that it cannot implement the resolution
considering that it has a pending petition for certiorari before this Court in the case of Dr.
Baradero (G.R. No. 98395), where the same issue was raised (Rollo, p. 30).
On October 3, 1991, the CSC issued an order finding the President and General Manager of
GSIS guilty of indirect contempt. Both were meted a penalty of P1,000.00 fine for each day of
defiance until the implementation of Resolution No. 89-368. The CSC noted that the mere
pendency of the case of Dr. Baradero cannot prevent the implementation of its resolution unless
this Court issues a temporary restraining order, and that said case had nothing to do with the case
of Belo (Rollo, p. 34).
The GSIS filed the instant petition, charging the CSC with committing the same errors in G.R.
No. 98395.
The Office of the Solicitor General manifested that it was adopting its "Manifestation and
Motion in Lieu of Comment" filed in G.R. No. 98395, holding the view that the law excluded
services rendered on a per diem basis, in crediting the length of service for retirement purposes
(Rollo, p. 62).
In her comment, Belo insisted that CSC was correct in finding that her services rendered on a per
diem basis are creditable for retirement purposes. She claimed that the case of Commissioner
Ferrer of the Social Security Commission applied to her case by analogy.

She likewise contended that Executive Order No. 292 (Administrative Code of 1987) vests in the
CSC jurisdiction over matters regarding
the accreditation of government services. She particularly cites Section 12, Chapter 3, Book V
thereof which enumerates the powers and functions of the CSC, among which is to:
xxx xxx xxx
17. Administer the retirement program for government employees and accredit
government servicesand evaluate qualifications for retirement (Emphasis
supplied);
xxx xxx xxx
II
The issues to be resolved are: (1) Is government service rendered on a per diem basis creditable
for computing the length of service for retirement purposes; and (2) Is petitioner the proper
government agency in determining what service is creditable for retirement purposes?
Section 35 of P.D. No. 1146 (Government Service Insurance Act of 1987) vests in petitioner the
power to implement the provisions of said law, which includes the guaranty of retirement
benefits.
Under the epigraph "Benefits," Section 10 thereof provides for the computation of service, and
reads:
xxx xxx xxx
Computation of Service.
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 prescribed by the
System (Emphasis supplied).
It is therefore material in the claim of retirement benefits that the employee should have
rendered service with compensation.
"Compensation" is defined by Section 1(c) of R.A. No. 1573, which amended Section 1(c) of
C.A. No. 186 (Government Service Insurance Act), thus:
(c) "Salary, pay, or compensation" shall be construed as to exclude all
bonuses, per diems, allowances and overtime pay, or salary, pay or compensation
given in addition to the base pay of the position or rank as fixed by law or
regulations (Emphasis supplied).
A similar definition is provided in Section 2(i) of P.D. No. 1146:
(i) Compensation the basic pay or salary received by an employee, pursuant to
his employment/appointments, excluding per diems, bonuses, overtime pay, and
allowances (Emphasis supplied).
The law is very clear in its intent to exclude per diem in the definition of "compensation."
Originally, per diem was not among those excluded in the definition of compensation
(See Section 1(c) of C.A. No. 186), not until the passage of the amending laws which redefined it
to exclude per diem.
The law not only defines the word "compensation," but it also distinguishes it from other forms
of remunerations. Such distinction is significant not only for purposes of computing the
contribution of the employers and employees to the GSIS but also for computing the employees'
service record and benefits.
The Secretary of Justice, in his Opinion No. 196, s. 1976, opined:

. . . That such receipt of salary is an indispensable requirement for membership,


especially in the Retirement Insurance Fund, is logically inferred from these
provisions of the GSIS Act: Section 5 which requires that to receive the benefits
provided for and described in the GSIS Act, each official or employee who is a
member of the System and his employer shall pay the prescribed monthly rates of
contributions or premiums based on a percentage of the "monthly salary" of the
employee or official; Sections 11 and 12, providing that the amount of retirement
annuity or gratuity, or death or disability benefits granted thereunder, shall be
based on the monthly "salary"; and Section 13, providing that the term "service"
for purposes of computing the aggregate period of service which forms the basis
for retirement, shall include only service with "compensation" (Emphasis
supplied; G.R. No. 98395,Rollo, p. 67).
In essence, the grant of retirement benefits necessitates an obligation on the part of the employee
to contribute to the insurance fund of petitioner. Such obligation only arises where the employee
is receiving "salary, pay or compensation" and not per diem, which is not capable of paying off
the premium contributions to petitioner.
Also enlightening is the "Joint Civil Service Commission, Department of Budget and
Management and Government Service Insurance System Circular No. 1-89" dated July 13, 1989.
It prescribes the guidelines on the filing and processing of retirement applications, and we quote:
IV. Certification of Services Rendered.
xxx xxx xxx
C. In certifying to services rendered, Heads and Personnel
Officers/Administrative Officers of agencies shall be guided by the existing laws,
rules and regulations followed by GSIS in determiningcreditable services for
retirement purposes which are as follows:
1. All previous services rendered by an official/employee pursuant to a duly
approved appointment, including those of Presidential appointees, to a position in
the Civil Service with compensation or salary or pay whether on permanent,
provisional, temporary, emergency, substitute, or casual status, and whether paid
monthly, daily, or hourly, subject to these conditions:
xxx xxx xxx
2. Services of government employees paid on per diem basis up to June 15, 1956
only.
D. All cases not covered by the procedures/guidelines above shall be referred to
GSIS for final determination (G.R. No. 98395, Rollo, pp. 75 and 77; Emphasis
supplied).
The circular is clear that services rendered on a per diem bases are not creditable for retirement
purposes. It likewise confirms that it is the GSIS, and not the CSC which is the proper agency in
determining services which are creditable for retirement purposes.
In Profeta v. Drilon, 216 SCRA 777 (1992), we ruled that the GSIS has the original and
exclusive jurisdiction to determine whether a member is qualified or not to avail of the old-age
pension benefit under P.D. No. 1146, based on its computation of a member's years of
government service. By analogy, we reiterate our ruling in the cases at bench.
The case of Commissioner Inocencio V. Ferrer of the Social Security System is unapplicable.
While it is true that Commissioner Ferrer was granted retirement benefits notwithstanding being
paid on a per diem basis, we find merit in the GSIS explanation that the grant was consistent

with its policy, since the service which was creditable in Commissioner Ferrer's favor was his
full time service as Hearing Officer, and not his attendance at board meetings, which was not
credited.
Anent the CSC's power to "administer the retirement program . . . and accredit government
services . . . for retirement" (Administrative Code of 1987, Book V, Chapter 3, Section 12), we
rule that CSC role is ministerial. "Accredit" merely means acknowledge. It must not be confused
with the power to determine what service is creditable for retirement purposes. It has been
established that such power belongs to the GSIS (cf. Profeta v. Drilon, 216 SCRA 777 [1992]).
The aforementioned provision relied upon by public respondent is derived from the
Administrative Code of 1987, which is a general law. It cannot prevail over the Revised
Government Insurance Act of 1977, which is a special law (cf. Cena v. Civil Service
Commission, 211 SCRA 179 [1992]).
With the passage of the Administrative Code of 1987, members of the Sangguniang Bayan are
no longer paid per diem, but are now receiving compensation. Thus, services rendered after the
effectivity of the law may therefore be considered creditable for retirement purposes.
Private respondents both claim that retirement laws must be liberally interpreted in favor of the
retirees. However, the doctrine of liberal construction cannot be applied in the instant petitions,
where the law invoked is clear, unequivocal and leaves no room for interpretation or
construction. Moreover, to accommodate private respondents' plea will contravene the purpose
for which the law was enacted, and will defeat the ends which it sought to attain (cf. Re: Judge
Alex Z. Reyes, 216 SCRA 720 [1992])
WHEREFORE, the petitions are both GRANTED. The CSC resolutions and orders in question
are REVERSED and SET ASIDE. No pronouncement as to costs.
SO ORDERED.
Narvasa, Cruz, Padilla, Bidin, Regalado, Davide, Jr., Romero, Melo, Puno, Vitug and Kapunan,
JJ., concur.
Bellosillo, J., took no part.
Feliciano, J., is on leave.