1
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, attending the board meetings were excluded in the computation of his retirement
vs.
CIVIL SERVICE COMMISSION and DR. MANUEL BARADERO, respondents
FACTS: 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 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 GSIS
contested the resolution:
(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 full-time service and
received substantial amount of per diems such that "the so-called 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
benefits. 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.
ISSUE:
(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?
1 HELD: NO
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 benefit 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
its. The circular is clear that services rendered on a per diem bases are not creditable for
 2
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.
2HELD: 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.
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.
DIONISIO M. RABOR, petitioner,
vs.
CIVIL SERVICE COMMISSION, respondent.
Facts:
Dionisio M. Rabor is a Utility Worker in the Office of the Mayor, Davao City. He
entered the government service as a Utility Worker on 10 April 1978 at the age of 55
years. Sometime in May 1991, an official in the Office of the Mayor of Davao City, advised
Dionisio M. Rabor to apply for retirement, considering that he had already more than 68
years old. Rabor responded by showing a GSIS certificate with a notation to the effect that
his service is extended for him to complete the 15-years requirement for retirement.
The Davao City Government wrote to the Regional Director of the Civil Service
Commission, Region XI, Davao City informing the latter of the foregoing and requesting
advice as to what action should be taken on Rabor’s case. Director Caward replied by
saying that Rabor’s continued employment is contrary to OP M.C. No. 65 hence, it is non-
extendible. Mayor Duterte furnished Rabor a copy of Cawad’s letter and order him not to
work anymore. Rabor asked Director Cawad for extension of his job until he completed
the 15-year requirement but was denied. Rabor then asked OP for an extension. His
request was referred by OP to CSC and thereafter CSC denied Rabor’s request. Rabor
asked for reconsidered of CSC ruling citing Cena case but was denied. Rabor reiterated his
request to Mayor Duterte but was rebuffed. Hence, this petition.
Issue:
WON Rabor request for extension should be granted in view of Cena case
Held:
No. Cena doctrine overturned. In Cena v. CSC, the Court reached its conclusion
primarily on the basis of the "plain and ordinary meaning" of Section 11 (b) of P.D. No.
1146. While Section 11 (b) appeared cast in verbally unqualified terms, there were (and
still are) two (2) administrative issuances which prescribe limitations on the extension of
service that may be granted to an employee who has reached sixty-five (65) years of age.
These are CSC Circular No. 27, s. 1990 and OP M.C. No. 65. The Court resolved the
challenges posed by the above two (2) administrative regulations by, firstly, considering
as invalid Civil Service Memorandum No. 27 and, secondly, by interpreting the Office of
the President's Memorandum Circular No. 65 as inapplicable to the case of Gaudencio T.
Cena.
Nevertheless, the Court now ruled that the SC in Cena made a narrow
interpretation. It is incorrect to decide the issue on the basis only of PD 1146. Reading the
pertinent provisions the Admin Code particularly the provisions governing the CSC, it is
clear that both the Admin Code and PD 1146 are the governing laws relating to
retirement of government officials and employees. It was on the basis of the above quoted
provisions of the 1987 Administrative Code that the Civil Service Commission
promulgated its Memorandum Circular No. 27. In doing so, the Commission was acting as
"the central personnel agency of the government empowered to promulgate policies,
standards and guidelines for efficient, responsive and effective personnel administration
in the government." It was also discharging its function of "administering the retirement
program for government officials and employees" and of "evaluat[ing] qualifications for
retirement." It is also incorrect to say that limitation of permissible extensions of service
after an employee has reached sixty-five (65) years of age has no reasonable relationship
or is not germane to the foregoing provisions of the present Civil Service Law. The
physiological and psychological processes associated with ageing in human beings are in
 3
fact related to the efficiency and quality of the service that may be expected from
individual persons.
CSC Memo No. 27 is not invalid for having gone beyond the parameters set by
PD 1146. In fact what the legislature intends is that the CSC should “fill in the details” in
the implementation of PD 1146.
CENA VS CSC
facts : November 16, 1978 – February 15, 1987: Cena entered government service as
Legal Officer II of the Law Department of Caloocan City. He stayed here for 7 years until
his transfer to the Office of the Congressman of 1stDistrict of Caloocan where he worked
for 3 months as Supervising Staff Officer July 16, 1987: Appointed Register of Deeds of
Malabon, Metro Manila. January 22, 1991: Cena’s 65thbirthday also the compulsory
retirement age. Total years of service on 65th birthday = 11 years, 9 months and 6
days. Before reaching his 65th birthday, Cena requested the Secretary of Justice, through
the Administrator of the Land Registration Authority (LRA) that he be allowed to extend
his service to complete the 15-year requirement to enable him to retire with full benefits
of old age pension under Sec 11 of P.D. 1146or the Revised Government Service
Insurance Act of 1977.
LRA Administrator sought ruling from CSC WON to allow extension of 3 years and 3
months. If allowed, Cena would be retiring at the age of 68.
CSC: denied Cena’s request at first but upon a motion for reconsideration (MR) from
Cena, allowed the extension of 1 year. Citing CSC Memo Circular No. 27:“Any request for
the extension of service of compulsory retirees to complete the 15 years service
requirement for retirement shall be allowed only to permanent appointees in the career
service who are regular members of the Government Service Insurance System (GSIS),
and shall be granted for a period not exceeding 1 year.”2nd MR denied.
OSG:the questioned provision being generally worded, Section 11 par. (b), P.D. 1146 has
general application, thus respondent CSC has no authority to limit through CSC Memo
Circular No. 27 the privilege under said section to government employees who lack just
one year to complete the 15-year service requirement.
CSC: CSC has the power and authority, among others, to grant or allow extension of
service beyond retirement age pursuant to Section 12 par. (14), Chapter 3, Subtitle A,
Title I, Book V of Executive Order No. 292 (Administrative Code of 1987)
Issue: WON CSC may limit the extension of service of an employee through a
memorandum order? NO,the Administrative Code cannot be interpreted to authorize CSC
to limit to only 1 year the extension of service of an employee who has reached the
compulsory retirement age of 65 without having completed 15 years of service,when
said limitation has no relation to or connection with the provision of the law
supposed to be carried into effect.
Ruling: The LRA of the Department of Justice has the discretion to allow Cena to extend
and complete the 15-year service so that he may retire with full benefits under Section 11
par. (b) of P.D. 1146. As a law of general application, the Administrative Code of 1987
cannot authorize the modification of an express provision of a special law (PD 1146).
Otherwise, the intent and purpose of the provisions on retirement and pension of P.D.
1146 would be rendered nugatory and meaningless.
Relevant Law =>PD 1146 provides:
Sec. 11. Conditions for Old-Age Pension. — (a) Old-age pension shall be paid to a member
who: (b) Unless the service is extended by appropriate authorities, retirement shall be
compulsory for an employee of sixty-five years of age with at least fifteen years of service:
Provided, That if he has less than 15 years of service, he shall be allowed to continue
in the service to complete the fifteen years.
Being remedial in character, a statute creating a pension or establishing
retirement plan should be liberally construed and administered in favor of the persons
intended to be benefited thereby. The liberal approach aims to achieve the humanitarian
purposes of the law in order that the efficiency, security and well-being of government
employees may be enhanced (Bautista vs. Auditor General)
Double purpose of pension, which partakes of the nature of "retained wages" of the
retiree.
(1) to entice competent men and women to enter the government service, and
(2) permit them to retire from the service with relative security, not only for those who
have retained their vigor, but more so for those who have been incapacitated by illness or
accident.
The Supreme Court has applied the liberal approach in interpreting statutes
creating pension or establishing retirement plans in cases involving officials of the
Judiciary who lacked the age and service requirement for retirement. We see no
 4
cogent reason to rule otherwise in the case of ordinary employees of the Executive
Branch. (In Re: Application for Gratuity Benefits of Associate Justice Plana; in Re:
Application for Retirement under RA 910 of Associate JusticeBritanico of the
Intermediate Appellate Court)
Recent Cases of extension approved by the Supreme Court:
1990: Allowed clerk of court to extend for 5 years even if she had only been in
government service for 10 years.The Court observed that Mrs. Bocade is still performing
her duties without any adverse complaints from her superior and that she is physically fit
for work per report of the Medical Clinic.
1991: Ms. Tiangco, Budget Officer of the Supreme Court was given an extension of 3 years
and she has been in government service for only 11 years and 1 month.
Limitation: when the Court allows seeming exceptions to fixed rules for certain retired
Judges or Justices, there are ample reasons behind each grant of an exception. The
crediting of accumulated leaves to make up for lack of required age or length of service is
not done indiscriminately. It is always on case to case basis(In re: Gregorio G.
Pineda).
Essential Factor in Granting the Extension:only if satisfied that the career of the retiree
was marked by competence, integrity, and dedication to the public service (Re: Gregorio
Pineda)
The right under Section 11, par. (b) is open to all employees similarly situated, so it does
not offend the constitutional guarantee of equal protection of the law.
Memo Circular 65 n/a to Cena
Memo Circular No. 65allowing retention of service for only 6 months for "extremely
meritorious reasons" should apply only to employees or officials who have reached
the compulsory retirement age of 65 years but who have completed the 15-year
service requirement for retirement purposes. It should not apply to those who have
reached the compulsory retirement age of 65 years, but who opted to avail of the old-age
pension under P.D. 1146, in which case, they are allowed, at the discretion of the agency
concerned, to complete the 15-year service requirement.
LYDIA M. PROFETA, petitioner,
vs.
HON. FRANKLIN M. DRILON, in his capacity as Executive Secretary, Office of the
President of the Philippines, respondent.
Facts: Petitioner, Dr. Lydia M. Profeta, served as Executive Dean of the Rizal
Technological Colleges from 24 October 1974 to 15 October 1978. From 16 October 1978
to 30 April 1979, petitioner was the appointed Acting President of said College until her
promotion to President of the same college on 1 May 1979.
After the 1986 EDSA revolution or on 5 March 1986, petitioner filed her courtesy
resignation as President of the Rizal Technological Colleges and the same was accepted
on 21 March 1986. A day before the acceptance of her courtesy resignation, petitioner
applied for sick leave.
On 4 November 1988, petitioner was appointed Acting President of Eulogio "Amang"
Rodriguez Institute of Science and Technology (hereinafter referred to as EARIST) and
was thereafter appointed its President on 29 March 1989.
After reaching the age of 65 she inquired the GSIS as to whether she may be allowed to
extend her service with the government as president of the EARIST beyond the age of 65
to enable her to avail of the old-age pension retirement benefits under PD 1146. The GSIS
advised her to return to the servise until she have fulfilled the 15 years requirement.
Later on the EARIST Faculty and Employees Union filed an administrative complaint
against petitioner before the Office of the President, for her alleged irregular appointment
and for graft and corrupt practices which the Office of the President dismissed due to lack
of evidence and declared her as compulsary retired because the Office of the President
included her sick leave and her service as lecturer.
Issue: Whether or not petitioner shall be considered as compulsary retired and entitled
to the benefits uner P.D. 1146?
Held: The sixty-two (62) days leave of absence of petitioner between 20 March to 17 June
1986 and her part-time service as a lecturer f approximately two (2) weeks, or a total of
three-and-a-half (3 1/2) months is not reflected in her service record. Said period should
be considered as part of her service with the government and it is only but proper that
her service record be amended to reflect said period of service.
We have observed that the computation made by the GSIS of petitioner's date of
retirement failed to take into account the three-and-a-half (3 1/2) months service of
 5
petitioner which was not reflected in her service record. If we deduct this unrecorded
three-and-a-half (3 1/2) months service of petitioner from 14 August 1992, petitioner is
to be considered retired on 30 April 1992.
The order of the Office of the President declaring petitioner as compulsorily retired as of
15 October 1991 defeats the purpose for allowing petitioner to remain in the service until
she has completed the fifteen (15) years service requirement. Between the period of 16
October 1991 to 30 April 1992, petitioner should have been allowed to continue in the
service to be able to complete the fifteen (15) years service requirement; she was
prepared to render services for said period but was not allowed to do so; she should,
therefore, the entitled to all her salaries, benefits and other emoluments during said
period (16 October 1991 - 30 April 1992). However, petitioner's claim for reinstatement
to her former position to enable her to complete the fifteen (15) year service requirement
for retirement purposes is no longer possible, considering that she is deemed to have
completed the said service requirement as of 30 April 1992.
TEODORO J. SANTIAGO, petitioner,
vs.
THE COMMISSION ON AUDIT, and the GOVERNMENT SERVICE INSURANCE
SYSTEM, respondents.
FACTS: The petitioner was employed in the Commission on Audit as State Auditor IV with
a monthly salary of P7,219.00. In 1988, he was assigned to the COA Auditing Unit at the
DOTC and detailed to the Manila International Airport Authority. On July 1, 1988, the
BODs of the MIAA passed a resolution and communicate it to COA, stating that Santiago
shall retain his plantilla position in COA; that his compensation from MIAA shall be the
difference between the salary of Assistant General Manager and that of State Auditor IV;
and that his retirement benefits shall be chargeable against COA. The said resolution was
replied and not objected by COA through its Chairman.
The petitioner served in this capacity and collected the differential salary of P5,849.00
plus his salary of P7,219.00 for a total compensation of P13,068.00. He received this
compensation until December 5, 1988, when he was transferred to the Presidential
Management Staff under COA Office. On March 1, 1989, the petitioner retired after
working in the government for 44 years.
In computing his retirement benefits, GSIS used as basis the amount of P13,068.00,
considering this the highest basic salary rate received by the petitioner in the course of
his employment.The COA disagreed, however, and paid his retirement benefits on the
basis of only his monthly salary of P7,219.00 as State Auditor IV.
The petitioner requested recomputation based on what he claimed as his highest basic
salary rate of P13,068.00. This was denied. On March 7, 1990, he came to this Court to
seek reversal of the decision of the COA on the ground of grave abuse of discretion.
ISSUES:
1. What will be the correct interpretation of E.O. No. 966, Section 9 in connection
with the term “Highest Basic Salary Rate.”
2. What will be the highest basic salary rate that will be used for the computation
of the retirement benefits to be received by the petitioner?
HELD:
We note at the outset that there is no dispute regarding the legality of the petitioner's
occupying the second position in the MIAA and receiving additional compensation for his
services therein. As the Solicitor General observed. "What the petitioner was receiving
from the MIAA was the additional compensation allowed under Section 17 of Act No.
4187 which, in turn, is allowed under Section 8, Paragraph B, Article IX of the
Constitution."
In Quimzon v. Ozaeta, 7 this Court held that double appointments are not prohibited as
long as the positions involved are not incompatible, except that the officer or employee
appointed cannot receive additional or double compensation unless specifically
authorized by law. The additional compensation received by the petitioner is not an issue
in the case at bar because of its express approval by the COA and the admission of the
Solicitor General that it is allowed under the cited provision.
The Solicitor General argues, albeit not too strongly, that the additional compensation
received by the petitioner was merely an honorarium and not a salary. As a mere
honorarium, it would not fall under the provision of Section 9 and so should not be added
to his salary in computing his retirement benefits.
 6
We cannot accept this contention. An honorarium is defined as something given not as
a matter of obligation but in appreciation for services rendered; a voluntary donation in
consideration of services which admit of no compensation in money. The additional
compensation given to the petitioner was in the nature of a salary because it was receive
by him as a matter of right in recompense for services rendered by him as Acting
Assistant General Manager for Finance and Administration. In fact, even Chairman
Domingo referred to it in his letter dated July 14, 1988, as the petitioner's "salary
differential."
The Solicitor General's main argument is that the petitioner cannot invoke Section 9
because he was not appointed to the second position in the MIAA but only designated
thereto. Petitioner, on the other hand, maintains that there is no substantial distinction
between appointment and designation.
Strictly speaking, there is an accepted legal distinction between appointment and
designation. While appointment is the selection by the proper authority of an individual
who is to exercise the functions of a given office, designation, on the other hand, connotes
merely the imposition of additional duties, usually by law, upon a person already in the
public service by virtue of an earlier appointment (or election).
Nevertheless, we agree with the petitioner that in the law in question, the term
"appointment" was used in a general sense to include the term "designation." In other
words, no distinction was intended between the two terms in Section 9 of Executive
Order No. 966. We think this to be the more reasonable interpretation, especially
considering that the provision includes in the highest salary rate "compensation for
substitutionary services or in an acting capacity." This need not always be conferred by a
permanent appointment. A contrary reading would, in our view, militate against the letter
of the law, not to mention its spirit as we perceive it. That spirit seeks to extend the
maximum benefits to the retiree as an additional if belated recognition of his many years
of loyal and efficient service in the government.
As thus interpreted, Section 9 clearly covers the petitioner, who was designated Acting
Assistant General Manager for Finance and Administration in the office order issued by
Secretary Reyes on August 10, 1988. The position was then vacant and could be filled
either by permanent appointment or by temporary designation. It cannot be said that the
second position was only an extension of the petitioner's office as State Auditor IV in the
Commission on Audit as otherwise there would have been no need for his designation
thereto. The second office was distinct and separate from his position in the Commission
on Audit. For the additional services he rendered for the MIAA, he was entitled to
additional compensation which, following the letter and spirit of Section 9, should be
included in his highest basic salary rate.
Retirement laws should be interpreted liberally in favor of the retiree because their
intention is to provide for his sustenance, and hopefully even comfort, when he no longer
has the stamina to continue earning his livelihood. After devoting the best years of his life
to the public service, he deserves the appreciation of a grateful government as best
concretely expressed in a generous retirement gratuity commensurate with the value and
length of his services. That generosity is the least he should expect now that his work is
done and his youth is gone. Even as he feels the weariness in his bones and glimpses the
approach of the lengthening shadows, he should be able to luxuriate in the thought that
he did his task well, and was rewarded for it.
GOVERNMENT SERVICE INSURANCE SYSTEM, Cebu City Branch, petitioner, vs.
MILAGROS O. MONTESCLAROS, respondent.
The Facts : Sangguniang Bayan member Nicolas Montesclaros (“Nicolas”) married
Milagros Orbiso (“Milagros”) on 10 July 1983. Nicolas was a 72- year old widower when
he married Milagros who was then 43 years old.
On 4 January 1985, Nicolas filed with the Government Service Insurance System (“GSIS”)
an application for retirement benefits effective 18 February 1985 under Presidential
Decree No. 1146 or the Revised Government Service Insurance Act of 1977 (“PD 1146”).
In his retirement application, Nicolas designated his wife Milagros as his sole beneficiary.
Nicolas’ last day of actual service was on 17 February 1985. On 31 January 1986, GSIS
approved Nicolas’ application for retirement “effective 17 February 1984,” granting a
lump sum payment of annuity for the first five years and a monthly annuity thereafter.
Nicolas died on 22 April 1992. Milagros filed with GSIS a claim for survivorship pension
under PD 1146. On 8 June 1992, GSIS denied the claim because under Section 18 of PD
1146, the surviving spouse has no right to survivorship pension if the surviving spouse
contracted the marriage with the pensioner within three years before the pensioner
qualified for the pension. According to GSIS, Nicolas wed Milagros on 10 July 1983, less
than one year from his date of retirement on “17 February 1984.”
 7
On 2 October 1992, Milagros filed with the trial court a special civil action for declaratory
relief questioning the validity of Section 18 of PD 1146 disqualifying her from receiving
survivorship pension.
On 9 November 1994, the trial court rendered judgment declaring Milagros eligible for
survivorship pension. The trial court ordered GSIS to pay Milagros the benefits due
including interest. Citing Articles 115 and 117 of the Family Code, the trial court held that
retirement benefits, which the pensioner has earned for services rendered and for which
the pensioner has contributed through monthly salary deductions, are onerous
acquisitions. Since retirement benefits are property the pensioner acquired through
labor, such benefits are conjugal property. The trial court held that the prohibition in
Section 18 of PD 1146 is deemed repealed for being inconsistent with the Family Code, a
later law. The Family Code has retroactive effect if it does not prejudice or impair vested
rights.
GSIS appealed to the Court of Appeals, which affirmed the decision of the trial court.
Hence, this petition for review.
In the meantime, in a letter dated 10 January 2003, Milagros informed the Court that she
has accepted GSIS’ decision disqualifying her from receiving survivorship pension and
that she is no longer interested in pursuing the case. Commenting on Milagros’ letter,
GSIS asserts that the Court must decide the case on the merits.
The Court will resolve the issue despite the manifestation of Milagros. The issue involves
not only the claim of Milagros but also that of other surviving spouses who are similarly
situated and whose claims GSIS would also deny based on the proviso. Social justice and
public interest demand that we resolve the constitutionality of the proviso.
The Ruling of the Court of Appeals
The Court of Appeals agreed with the trial court that the retirement benefits are onerous
and conjugal because the pension came from the deceased pensioner’s salary deductions.
The Court of Appeals held that the pension is not gratuitous since it is a deferred
compensation for services rendered.
The Issues
GSIS raises the following issues:
1. Whether Section 16 of PD 1146 entitles Milagros to survivorship pension;
2. Whether retirement benefits form part of conjugal property;
3. Whether Articles 254 and 256 of the Family Code repealed Section 18 of PD 1146.
The Court’s Ruling
The pertinent provisions of PD 1146 on survivorship benefits read:
SEC. 16. Survivorship Benefits. When a member or pensioner dies, the beneficiary shall
be entitled to survivorship benefits provided for in sections seventeen and eighteen
hereunder. The survivorship pension shall consist of:
(1) basic survivorship pension which is fifty percent of the basic monthly pension; and
(2) dependent’s pension not exceeding fifty percent of the basic monthly pension payable
in accordance with the rules and regulations prescribed by the System.
SEC. 17. Death of a Member. (a) Upon the death of a member, the primary beneficiaries
shall be entitled to:
(1) the basic monthly pension which is guaranteed for five years; Provided, That, at the
option of the beneficiaries, it may be paid in lump sum as defined in this Act: Provided,
further, That, the member is entitled to old-age pension at the time of his death; or
(2) the basic survivorship pension which is guaranteed for thirty months and the
dependent’s pension; Provided, That, the deceased had paid at least thirty-six monthly
contributions within the five-year period immediately preceding his death, or a total of at
least one hundred eighty monthly contributions prior to his death.
(b) At the end of the guaranteed periods mentioned in the preceding sub-section (a), the
survivorship pension shall be paid as follows:
(1) when the dependent spouse is the only survivor, he shall receive the basic
survivorship pension for life or until he remarries;
(2) when only dependent children are the survivors, they shall be entitled to the
survivorship pension for as long as they are qualified;
(3) when the survivors are the dependent spouse and the dependent children, they shall
be entitled to the survivorship pension so long as there are dependent children and,
thereafter, the surviving spouse shall receive the basic survivorship pension for life or
until he remarries.
(c) In the absence of primary beneficiaries, the secondary beneficiaries designated by the
deceased and recorded in the System, shall be entitled to:
(1) a cash payment equivalent to thirty times the basic survivorship pension when the
member is qualified for old-age pension; or
(2) a cash payment equivalent to fifty percent of the average monthly compensation for
each year he paid contributions, but not less than five hundred pesos; Provided, That,
the member paid at least thirty-six monthly contributions within the five-year period
immediately preceding his death or paid a total of at least one hundred eighty monthly
contributions prior to his death.
 8
(d) When the primary beneficiaries are not entitled to the benefits mentioned in
paragraph (a) of this section, they shall receive a cash payment equivalent to one
hundred percent of the average monthly compensation for each year the member paid
contributions, but not less than five hundred pesos. In the absence of primary
beneficiaries, the amount shall revert to the funds of the System.
SEC. 18. Death of a Pensioner. Upon the death of a pensioner, the primary beneficiaries
shall receive the applicable pension mentioned under paragraph (b) of section seventeen
of this Act: Provided, That, the dependent spouse shall not be entitled to said
pension if his marriage with the pensioner is contracted within three years before
the pensioner qualified for the pension. When the pensioner dies within the period
covered by the lump sum, the survivorship pension shall be paid only after the expiration
of the said period. This shall also apply to the pensioners living as of the effectivity of this
Act, but the survivorship benefit shall be based on the monthly pension being received at
the time of death. (Emphasis supplied)
Under PD 1146, the primary beneficiaries are (1) the dependent spouse until such
spouse remarries, and (2) the dependent children. The secondary beneficiaries are the
dependent parents and legitimate descendants except dependent children. The law
defines dependent as “the legitimate, legitimated, legally adopted, acknowledged natural
or illegitimate child who is unmarried, not gainfully employed, and not over twenty-one
years of age or is over twenty-one years of age but physically or mentally incapacitated
and incapable of self-support.” The term also includes the legitimate spouse dependent
for support on the member, and the legitimate parent wholly dependent on the member
for support.
The main question for resolution is the validity of the proviso in Section 18 of PD 1146,
which proviso prohibits the dependent spouse from receiving survivorship pension if
such dependent spouse married the pensioner within three years before the pensioner
qualified for the pension (“the proviso”).
We hold that the proviso, which was the sole basis for the rejection by GSIS of Milagros’
claim, is unconstitutional because it violates the due process clause. The proviso is also
discriminatory and denies equal protection of the law.
Retirement Benefits as Property Interest
Under Section 5 of PD 1146, it is mandatory for the government employee to pay monthly
contributions. PD 1146 mandates the government to include in its annual appropriation
the necessary amounts for its share of the contributions. It is compulsory on the
government employer to take off and withhold from the employees’ monthly salaries
their contributions and to remit the same to GSIS. The government employer must also
remit its corresponding share to GSIS. Considering the mandatory salary deductions from
the government employee, the government pensions do not constitute mere gratuity but
form part of compensation.
In a pension plan where employee participation is mandatory, the prevailing view is that
employees have contractual or vested rights in the pension where the pension is part of
the terms of employment. The reason for providing retirement benefits is to compensate
service to the government. Retirement benefits to government employees are part of
emolument to encourage and retain qualified employees in the government service.
Retirement benefits to government employees reward them for giving the best years of
their lives in the service of their country.
Thus, where the employee retires and meets the eligibility requirements, he acquires a
vested right to benefits that is protected by the due process clause. Retirees enjoy a
protected property interest whenever they acquire a right to immediate payment under
pre-existing law. Thus, a pensioner acquires a vested right to benefits that have become
due as provided under the terms of the public employees’ pension statute. No law can
deprive such person of his pension rights without due process of law, that is, without
notice and opportunity to be heard.
In addition to retirement and disability benefits, PD 1146 also provides for benefits to
survivors of deceased government employees and pensioners. Under PD 1146, the
dependent spouse is one of the beneficiaries of survivorship benefits. A widow’s right to
receive pension following the demise of her husband is also part of the husband’s
contractual compensation.
Denial of Due Process
The proviso is contrary to Section 1, Article III of the Constitution, which provides that
“[n]o person shall be deprived of life, liberty, or property without due process of law, nor
shall any person be denied the equal protection of the laws.” The proviso is unduly
oppressive in outrightly denying a dependent spouse’s claim for survivorship pension if
the dependent spouse contracted marriage to the pensioner within the three-year
prohibited period. There is outright confiscation of benefits due the surviving spouse
without giving the surviving spouse an opportunity to be heard. The proviso undermines
the purpose of PD 1146, which is to assure comprehensive and integrated social security
and insurance benefits to government employees and their dependents in the event of
sickness, disability, death, and retirement of the government employees.
 9

Vda. De Consuegra v. GSIS - Retirement Insurance Benefits

Facts: Jose Consuegra was employed as a shop foreman of the Office of the District
Engineer in Surigao Del Norte.When he was still alive, he contracted two marriages:
o First – Rosario Diaz; 2 children = Jose Consuegra Jr. and Pedro but both predeceased
him
o 2nd – Basilia Berdin; 7 children. (this was contracted in GF while the first marriage
subsisted)
Being a GSIS member when he died, the proceeds of his life insurance were paid by the
GSIS to Berdin and her children who were the beneficiaries named in the policy. Since he
was in the gov’t service for 22.5028 years, he was entitled to retirement insurance
benefits, for which no beneficiary was designated. Both families filed their claims with the
GSIS, which ruled that the legal heirs were Diaz who is entitled to one-half or 8/16 of the
retirement benefits and Berdin and her children were entitled to the remaining half, each
to receive an equal share of 1/16.
> Berdin went to CFI on appeal. CFI affirmed GSIS decision.

Issue: To whom should the retirement insurance benefits be paid?

Held: Both families are entitled to half of the retirement benefits.

The beneficiary named in the life insurance does NOT automatically become the
beneficiary in the retirement insurance. When Consuegra, during the early part of 1943,
or before 1943, designated his beneficiaries in his life insurance, he could NOT have
intended those beneficiaries of his life insurance as also the beneficiaries of his
retirement insurance because the provisions on retirement insurance under the GSIS
came about only when CA 186 was amended by RA 660 on June 18, 1951.

Sec. 11(b) clearly indicates that there is need for the employee to file an application for
retirement insurance benefits when he becomes a GSIS member and to state his
beneficiary. The life insurance and the retirement insurance are two separate and
distinct systems of benefits paid out from 2 separate and distinct funds.

In case of failure to name a beneficiary in an insurance policy, the proceeds will accrue to
the estate of the insured. And when there exists two marriages, each family will be
entitled to one-half of the estate.