Topic: SSS Law – Constitutionality and Other Concepts

Roman Catholic Archbishop of Manila vs. Social Security Commission

GR No. L-15045. January 20, 1961

Mini Digest:

The Roman Catholic Archbishop filed with the SSC a request for Catholic Charities and all
religious organizations be exempted from the coverage of the Social Security law because:

1. SSS Law is a labor law, thus, limited to businesses organized for profit;
2. Per the principle of ejusdem generis, the term “employer” shall be limited to those who
carry activities w/c have the element of profit because it is preceded by the words “any
trade, business, industry”;
3. It violates the constitutional prohibition against using public funds to support any priest;
4. It impairs right to disseminate religious information because they’re in the form of taxes

The SC held that:

1. The SSS Law extends to employment of all kinds except those expressly excluded;
2. If the law intends to limit “employer” as one for profit, it wouldn’t have include
“Government”; SSS Law was enacted to provide protection to EEs against hazards of
disability, sickness, old age, death, such enactment is a legitimate exercise of police
power as it promotes social justice. Being a social legislation, it’s compatible with the
policy of the Church to ameliorate living conditions of working class;
3. The funds contributed to the System is not public funds but funds belonging to members
and held in trust by the Government; assuming it were public funds, it won’t violate the
constitution as such payment is made to the priest as an employee and not as a priest;
4. they are not taxes but are intended for the protection of the EEs in line with promotion
of social justice

 In 1958, Roman Catholic Archbishop of Manila filed with respondent SSC a request for
exemption of all charities, religious and charitable institutions/organizations which it
operates, from the compulsory coverage of RA 1161, as amended, otherwise known as
the Social Security Law of 1954.
 The request was based on the claim that RA 1161 is a labor law and does not cover
religious and charitable institutions but is limited to businesses and activities organized for
profit.
 Respondent SSC denied the request. Hence, this appeal taken in pursuance of section 5(c)
of RA 1161, as amended.
 From the legal provisions in Sec 8 and 9 of RA 1161 (see Notes), it is apparent that the
coverage of the Social Security Law is predicated on the existence of an employer-
employee relationship of more or less permanent nature and extends to employment of
all kinds except those expressly excluded.
 Roman Catholic Archbishop contends that the term "employer" as defined in the law
should — following the principle of ejusdem generis or “of the same kind” where a general
term following a list of specific terms will be limited to the more specific term — be limited
to those who carry on "undertakings or activities which have the element of profit or gain,
 or which are pursued for profit or gain," because the phrase ,activity of any kind" in the
definition is preceded by the words "any trade, business, industry, undertaking."

ISSUE & RULING: Whether the rule ejusdem generis applies in this case?

NO. The rule ejusdem generis applies only where there is uncertainty. It is not controlling
where the plain purpose and intent of the Legislature would thereby be hindered and defeated.
(Grosjean vs. American Paints Works [La], 160 So. 449).

Here, definition of the term "employer" is sufficiently comprehensive as to include religious and
charitable institutions or entities not organized for profit, like herein appellant, within its
meaning. This is made more evident by the fact that it contains an exception in which said
institutions or entities are not included. And, certainly, had the Legislature really intended to
limit the operation of the law to entities organized for profit or gain, it would not have defined
an "employer" in such a way as to include the Government and yet make an express exception
of it.

Note: ejusdem generis - Literally “of the same kind.” A rule used in statutory interpretation that
presumes that a general term following a list of specific terms will be limited to the more
specific term — in other words, the general term will be defined to be “of the same kind” as the
more specific preceding terms.

1. Whether SSS Law’s coverage is only limited to relations between capital and
labor in industry and agriculture?

NO. The Social Security Law was enacted pursuant to the "policy of the Republic of the
Philippines to develop, establish gradually and perfect a social security system which shall be
suitable to the needs of the people throughout the Philippines and shall provide protection to
employees against the hazards of disability, sickness, old age and death." (See. 2, Republic Act
No. 1161, as amended.) Such enactment is a legitimate exercise of the police power. It affords
protection to labor, especially to working women and minors, and is in full accord with the
constitutional provisions on the "promotion of social justice to insure the well-being and
economic security of all the people."

Being in fact a social legislation, compatible with the policy of the Church to ameliorate living
conditions of the working class, appellant cannot arbitrarily delimit the extent of its provisions to
relations between capital and labor in industry and agriculture.

2. Whether funds of SSS are public funds, and thus the inclusion of religious
organizations under the coverage of the Social Security Law violates the
constitutional prohibition against the application of public funds for the use,
benefit or support of any priest who might be employed by appellant?

NO. SSS funds are private funds. Thus, the inclusion of religious organizations under the
coverage of the Social Security Law does not violate the constitutional prohibition against the
application of public funds for the use, benefit or support of any priest who might be employed
by the church.
The funds contributed to the System created by the law are not public funds, but funds
belonging to the members which are merely held in trust by the Government. At any rate,
assuming that said funds are impressed with the character of public funds, their payment as
retirement death or disability benefits would not constitute a violation of the cited provisions of
the Constitution, since such payment shall be made to the priest not because he is a priest but
because he is an employee.

Neither may it be validly argued that the enforcement of the Social Security Law impairs
appellant's right to disseminate religious information. All that is required of appellant is to make
monthly contributions to the System for covered employees in its employ. These contributions,
contrary to appellant's contention, are not in the nature of taxes on employment." Together
with the contributions imposed upon the employees and the Government, they are intended for
the protection of said employees against the hazards of disability, sickness, old age and death
in line with the constitutional mandate to promote social justice to insure the well-being and
economic security of all the people. SSSC Resolutions affirmed.

NOTES: Section 9 of the Social Security Law, as amended, provides that coverage "in the
System shall be compulsory upon all members between the age of sixteen and sixty years
inclusive, if they have been for at least six months in the service of an employer who is a
member of the System, Provided, that the Commission may not compel any employer to
become member of the System unless he shall have been in operation for at least two years
and has at the time of admission, if admitted for membership during the first year of the
System's operation at least fifty employees, and if admitted for membership the following year
of operation and thereafter, at least six em-ployees x x x."

The term "employer" as used in the law is defined as "any person, natural or juridical, domestic
or foreign, who carries in the Philippines any trade, business, industry, undertaking, or activity of
any kind and uses the services of another person who is under his orders as regards the
employment, except the Government and any of its political subdivisions, branches or
instrumentalities, including corporations owned or controlled by the Government" (par. [c], sec.
8), while an "employee" refers to "any person who performs services for an 'employer' in which
either or both mental and physical efforts are used and who receives compensation for such
services" (par. [d], sec. 8).

"Employment", according to paragraph [j] of said section 8, covers any service performed by an
employer except those expressly enumerated thereunder, like employment under the
Government, or any of its political subdivisions, branches or instrumentalities including
corporations owned and controlled by the Government,. domestic service in a private home,
employment purely casual, etc.

PHILIPPINE BLOOMING MILLS vs SSS

Mini Digest:

The Company employed six Japanese technicians from April 1957 to Oct 1958. After being
informed that alien employed in the PH are covered by SSS (with rebate upon departure for
ER), the Company started paying contributions. When the employment contract expired, they
 filed a claim with SSS but it was denied because the SSS Law was amended in Jan 1958
requiring at least 2 years membership before claiming and that the ER is not entitled to refund.
The Company argued that:
1. the amendments constituted impairment of contract;
2. they are not bound by the amended rules requiring 2 years membership as it was
published by the Official Gazette only on Nov 1958 (when the employment has ceased)

SC held that:
1. the Company assumes that EE’s membership in the System established a bilateral
contractual relationship, however, this is wrong because SSS Law’s compulsory
coverage is a legal imposition designed to provide social security, and thus, a legitimate
exercise of police power;
2. They are covered because the original IRR specifically provided that any amendment
subsequently adopted shall take effect on the date of its approval by the President,
hence delayed publication will not affect its date of effectivity.

 This suit is brought by the employer, Philippine Blooming Mills Co., Inc. (PBMC) and its alien
employees against the Social Security System.
 PBMC is a domestic corporation since 1957 which has employed Japanese technicians for
employment contracts ranging from 6 to 24 months. From April 28, 1957 to October 26,
1958, it employed six Japanese technicians. PBMC inquired with SSS if the said aliens are
subject to compulsory coverage under SSS, to which the latter replied that while they are
compulsorily covered, they are entitled to rebate a proportionate amount of their SSS
contributions. Their employers shall also be entitled to the same proportionate rebate.
 However, when PBMC filed a claim with SSS for refund of its premiums, SSS controverted
it by saying that at least 2 years of membership in the system is required to be entitled to
a rebate. This requirement was made through an amendment of the SSS Rules and
Regulations which became effective on January 14, 1958-- before the termination of the
employment of the subject aliens. Appellants contend that this amendment impaired their
contract with SSS.

ISSUE: whether or not the said amendment violates the non-impairment clause

NO, there was no violation of the non-impairment clause the Official Gazette is material only when
the statute does not provide a specific date of effectivity.

Invoking the non-impairment clause assumes the existence of a contract, which is not the case
here. Membership in SSS is not the result of a bilateral, consensual agreement where the rights
and obligations of the parties are defined by and subject to their will. Republic Act 1161 requires
compulsory coverage of employers and employees under the System. It is actually a legal
imposition, on said employers and employees, designed to provide social security to the
workingmen. Membership in the SSS is, therefore, in compliance with a lawful exercise of the
police power of the State, to which the principle of non-impairment of the obligation of contract
is not a proper defense.

ISSUE: Whether due process was observed in implementing the SSS law, resulting in
the denial of appellants' claim for refund of their premium contributions
YES, due process was observed. Amendments are effective from the time PROVIDED for by the
statute, which in this case is the time of approval of the president. The date of publication in

Rule I Section 3 (d) and Rule IX was amended to read as follows:

(d) Aliens who are employed in the Philippines shall also be compulsorily covered (Sec. 3,
Rule I)

EFFECT OF SEPARATION FROM EMPLOYMENT

When an employee under compulsory coverage is separated from employment, his

employer's contribution on his account shall cease at the end of the month of separation;
but such employee may continue his membership in the System and receive the benefits
of the Act, as amended, in accordance with these rules. If he continues paying the 6 per
cent monthly premiums representing his as well as the employer's contribution, based on
his monthly salary at the time of his separation; but if at the time of his separation the
covered employee has been a member of the System for at least two years, he shall have
the option to choose any one of the following adjustments of his membership in the
System:

1. A refund of an amount equivalent to his total contributions of two and one-half per
centum plus interests at the rate of three per centum per annum, compounded annually;

While the amendment to the Rules may have been lawfully made by the Commission and duly
approved by the President on January 14, 1958, such amendment was only published in the
November 1958 issue of the Official Gazette, and after appellants' employment had already
ceased. Suffice it to say, in this regard, that under Article 2 of the Civil Code,5 the date of
publication of laws in the Official Gazette is material for the purpose of determining their
effectivity, only if the statutes themselves do not so provide.

In the present case, the original Rules and Regulations of the SSS specifically provide
that any amendment thereto subsequently adopted by the Commission, shall take
effect on the date of its approval by the President. Consequently, the delayed publication
of the amended rules in the Official Gazette did not affect the date of their effectivity, which is
January 14, 1958, when they were approved by the President. It follows that when the
Japanese technicians were separated from employment in October, 1958, the rule governing
refund of premiums is Rule IX of the amended Rules and Regulations, which requires membership
for 2 years before such refund of premiums may be allowed.

CMS Estate vs. SSS, SSC

GR L-26298, September 28, 1984, Cuevas, J

Mini Digest:

The Company started as a real estate business in 1952 with 6 employees. However, it
amended its AOI to engage in logging business effective Sept. 1957 when it entered into a
contract of management with Eufracio Rojas in the logging operation with 89 employees; but
such contract also ended in Dec. 1957. The next year, the Company became a member of the
SSS with respect to its real estate business; and then requested to revoke the same. The SSS
denied it on the ground that the Company is considered a member of the System since 1952,
when it started the real estate business. The company argued:
1. The contributions are in the nature of excise taxes
2. SSS cannot indiscriminately combine two distinct and separate businesses (when one
has not yet been in operation for more than 2 years) for the purposes of SSS
coverage
3. Rojas is an independent contractor

The SC held:
1. Taxing power is exercised for revenues, here SSS Law’s emphasis is more on the
promotion of general welfare. The funds contributed belong to members who will
receive benefits
2. The amendatory law in 1960 eliminated the 2-year stabilization period because
employers now become automatically covered immediately upon the start of the
business. The amended is retroactive because the intention of the law is to cover as
many persons as possible in the pursuit of social justice. It should be pointed out that
the employer, either naturel or juridical, is subject to compulsory business, NOT the
business. Once an employer is covered in a particular kind of business, he should be
automatically covered with respect to any new line of business he may subsequently
undertake even under a new name.
3. Rojas is an employee as he was subject to control of his employer; thus he’s covered
by the SSS law

 CMS Estate is primarily for the real estate business. On December 1, 1952, it started
doing business with six employees. From the Bureau of Forestry, it secured an
ordinary license to operate a forest concession of 13k hectares in Baganga, Davao
 On January 28, 1957, CMS Estate entered in to a contract of management with a Eufracio
Rojas for the operation and exploitation of the forest concession.
 The logging operations actually started on April 1, 1957, with four monthly
salaried employees.
 On December 26, 1957, CMS Estate revoked its contract of management with Rojas.
 On August 1, 1958, CMS Estate became a member of the SSS with respect to its real
estate business.
 On September 6, 1958, CMS Estate remitted to the System an initial premium on the
monthly salaries of the employees in its logging business.
 On October 9, 1958, CMS Estate demanded the refund of the amount, claiming it was not
yet subject to compulsory coverage with respect with the logging business. Such demand
and claim was denied on the ground that CMS Estate already became a member
when it commenced its business in 1952.
 CMS Estate filed a petition for determination of the effectivity of the compulsory coverage
with the SSC, which was not in favor with them as they already became a member of SSS.
 MR denied, thus, present appeal.

ISSUE: Whether compulsory coverage applies to both CMS Estate’s real estate
business and logging business
YES. Under Sec 2, RA 1161, it provides a clear enactment implementing the general welfare
mandate of the Constitution and constitutes a legitimate exercise of the police power of the State.

The taxing power of the State is exercised for purpose of raising revenues. Under the SSS law, it
is more on emphasis on the promotion of general welfare. The funds contributed to SSS belong
to the members who will receive benefits, as a matter of right, whenever the hazards (disability,
sickness, old age, death) provided by law occur.

It should be pointed out that the employer, either naturel or juridical, is subject to
compulsory business, NOT the business. Once an employer is covered in a particular
kind of business, he should be automatically covered with respect to any new line of
business he may subsequently undertake even under a new name.

In this case, CMS Estate, with respect to the real estate business, it subject to
compulsory coverage as of December 1 1952, first day of operation, and with respect
to the logging operation, it is subject under the coverage as of April 1, 1957.

CMS Estate contends that the SSC cannot combine for purposes of coverage two distinct and
separate businesses when one has not yet been in operation for more than two years thus
rendering nugatory the period of stabilization fixed by the Act. This contention lacks merit since
the amendatory law, RA 2658, which was approved on June 18, 1960, eliminated the two-year
stabilization period as employers now become automatically covered immediately upon the start
of the business.

Other notes:
PH Blooming Mills vs. SSS states that: “Membership in the SSS is not a result of bilateral,
consensual agreement where the rights and obligations of the parties are defined by and subject
to their will. RA 1161 requires compulsory coverage of employees and employers under the
System. It is actually a legal imposition on said employers and employees, designed to provide
social security to the workingmen. Membership in the SSS is therefore, in compliance with the
lawful exercise of the police power of the State, to which the principle of non-impairment of the
obligation of contract is not a proper defense.”

CMS Estate contends that Rojas is an independent contractor. However, records show he is but
a mere employee, who should be entitled to the compulsory coverage of SSS. Rojas was under
the control of his employer, he was had no power to hire employees, CMS furnished equipment
for use for the logging business.

Sonza vs ABS-CBN Broadcasting Corporation

Topic: SSS Law > Who are covered?

 Respondent ABS-CBN signed an Agreement with the Mel and Jay Management and
Development Corporation (MJMDC). MJMDC agreed to provide Sonza’s services exclusively
to ABS-CBN as talent for radio and television. ABS-CBN agreed to pay for Sonza’s services
a monthly talent fee of P310,000 for the first year and P317,000 for the second and third
year, to be paid on the 10th and 25th day of the month.
  Thereafter, Sonza wrote a letter to ABS-CBN’s president rescinding the Agreement in light
of the resignation of Sonza. Sonza waived and renounced the remaining amount stipulated
in the Agreement but reserves the right to seek recovery of the other benefits under the
Agreement.
 SONZA filed a complaint against ABS-CBN before DOLE, alleging that ABS-CBN did not
pay his salaries, separation pay, SIL, 13th month pay, signing bonus, travel allowance and
amounts due under the Employees Stock Option Plan (“ESOP”).
 ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship
existed between the parties.
 The Labor Arbiter ruled that a “talent” cannot be considered as an employee by reason of
the peculiar circumstances surrounding the engagement of his services. He was engaged
because of his skills and talents as a host and radio broadcaster. He was also free to
perform services in his own style. The talent fees he was receiving are higher than those
generally given to employees. Even though he was subject to ABS-CBN’s Rules and
Regulations, it does not detract from the absence of employer-employee relationship.
 The NLRC and the Court of Appeals affirmed the ruling of the Labor Arbiter.
 As held by the NLRC (and quoted by the CA), the MJMDC is not a mere labor-only
contractor of ABS-CBN such that there exists ER-EE relationship between Mr. Sonza and
ABS-CBN. MJMDC is an agent of Mr. Sonza. Jurisdiction belongs to the regular courts as
the nature of the action is alleged breach of contractual obligation.

Issue: Whether or not Sonza is an employee of ABS-CBN and as such, entitled to the
benefits under the Labor Code.

Ruling: NO.

Case law has consistently held that the elements of an employer-employee relationship are: (a)
the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer’s power to control the employee on the means and methods by
which the work is accomplished.

(1) ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of
SONZA’s peculiar skills, talent and celebrity status. Independent contractors often present
themselves to possess unique skills, expertise or talent to distinguish them from ordinary
employees. The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship. If SONZA did not possess such unique
skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with
SONZA but would have hired him through its personnel department just like any other employee.

(2) All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBN’s employee, there would be no need for the parties to
stipulate on benefits such as “SSS, Medicare, x x x and 13th month pay” which the law
automatically incorporates into every employer-employee contract. Whatever benefits SONZA
enjoyed arose from contract and not because of an employer-employee relationship. His talent
fees are so huge and out of the ordinary that they indicate more an independent contractual
relationship rather than an ER-EE relationship. Moreover, he also has bargaining power.
(3) For violation of any provision of the Agreement, either party may terminate their relationship.
SONZA failed to show that ABS-CBN could terminate his services on grounds other than breach
of contract, such as retrenchment to prevent losses as provided under labor laws.

(4) ABS-CBN was not involved in the actual performance that produced the finished product of
SONZA’s work. ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved
the right to modify the program format and airtime schedule “for more effective programming.”
ABSCBN’s sole concern was the quality of the shows and their standing in the ratings. Clearly,
ABS-CBN did not exercise control over the means and methods of performance of SONZA’s work.

The Agreement stipulates that SONZA shall abide with the rules and standards of performance
“covering talents” of ABS-CBN. The Agreement does not require SONZA to comply with the rules
and standards of performance prescribed for employees of ABS-CBN. The code of conduct
imposed on SONZA under the Agreement refers to the “Television and Radio Code of the
Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY
(ABS-CBN) as its Code of Ethics.” The KBP code applies to broadcasters, not to employees of
radio and television stations.

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay,
service incentive leave, signing bonus, travel allowance, and amounts due under the Employee
Stock Option Plan. The Supreme Court held that SONZA’s claims are all based on the May 1994
Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does not
call for an application of the Labor Code provisions but an interpretation and implementation of
the May 1994 Agreement. In effect, SONZA’s cause of action is for breach of contract which is
intrinsically a civil dispute cognizable by the regular courts.

Aurora Land Projects Corp. vs. NLRC, 266 SCRA 48, G.R. No. 114733 January
2, 1997

Mini Digest:

Dona Aurora hired Dagui as handyman in charge of maintenance and repair of

Tanjangco apartments and residential buildings in 1953. When Dona Aurora died in
1982, her daughter Teresita took over. In 1991, Teresita unceremoniously fired Dagui.
Dagui filed a complaint for illegal dismissal. Teresita argues that he’s merely a
job/independent contractor who’s not entitled to labor standards (and SSS).

The SC held:
1. He’s a regular employee (used control test and Art. 280); he’s not a project employee
2. He was illegally dismissed (no twin notice)
3. Teresita is jointly liable with the Company because as highest ranking officer, she could
be jointly liable for unpaid money claims and since she is also directly involved in the
illegal dismissal
4. Separation must be computed only from 1982 when Teresita took over. Claims for SP
for 1953 to 1982 should’ve been filed with Dona Aurora’s estate
  Private respondent Honorio Dagui was hired by Doña Aurora Suntay Tanjangco in 1953
to take charge of the maintenance and repair of the Tanjangco apartments and residential
buildings. He was to perform carpentry, plumbing, electrical and masonry work.
 Upon the death of Doña Aurora Tanjangco in 1982, her daughter, petitioner Teresita
Tanjangco Quazon, took over the administration of all the Tanjangco properties.
 On June 8, 1991, private respondent Dagui received the shock of his life when Mrs.
Quazon suddenly told him: “Wala ka nang trabaho mula ngayon,” on the alleged ground
that his work was unsatisfactory.
 On August 19, 1991, private respondent, who was then already sixty-two (62) years old,
filed a complaint for illegal dismissal with the Labor Arbiter.
 LA: awarded 195K separation pay and attorneys fees.
 NLRC: affirmed LA’s decision, deleting atty’s fees, separation pay only.
 Petitioner’s defense: Dagui was an independent contractor, and paid per undertaking.
Issue: Whether or not private respondent is a regular employee.
YES. Under the control test (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employer’s power to control
the employee’s conduct, he was a regular employee.
Private respondent was hired in 1953 by Doña Aurora Suntay Tanjangco (mother of
Teresita Tanjangco-Quazon), who was then the one in charge of the administration of
the Tanjangco’s various apartments and other properties.
Dagui was not compensated in terms of profits for his labor or services like an
independent contractor. Rather, he was paid on a daily wage basis at the rate of P180.00.
Employees are those who are compensated for their labor or services by wages rather
than by profits. Clearly, Dagui fits under this classification.
Doña Aurora and later her daughter petitioner Teresita Quazon evidently had the power
of dismissal for cause over the private respondent.
Private respondent’s work therein as a maintenance man had to be performed within the
premises of petitioners and he had to report for work from 7:00 o’clock in the morning
until 4:00 o’clock in the afternoon. It is not far-fetched to expect, therefore, that Dagui
had to observe the instructions and specifications given by then Doña Aurora and later
by Mrs. Teresita Quazon as to how his work had to be performed. Employers had control.
Private respondent Dagui should likewise be considered a regular employee by the mere
fact that he rendered service for the Tanjangcos for more than one year, that is,
beginning 1953 until 1982, under Doña Aurora; and then from 1982 up to June 8, 1991
under the petitioners, for a total of twenty-nine (29) and nine (9) years respectively.
Owing to private respondent’s length of service, he became a regular employee, by
operation of law, one year after he was employed in 1953 and subsequently in 1982. In
Baguio Country Club Corp. v. NLRC, we decided that it is more in consonance with the
intent and spirit of the law to rule that the status of regular employment attaches to the
casual employee on the day immediately after the end of his first year of service. To rule
otherwise is to impose a burden on the employee which is not sanctioned by law. Thus,
the law does not provide the qualification that the employee must first be issued a regular
appointment or must first be formally declared as such before he can acquire a regular
status.
Other notes:
Due process:
Twin requirements of notice and hearing constitute the essential elements of due
process.
No due process in this case:
Petitioner Quazon dismissed private respondent on June 8, 1991, without giving him any
written notice informing the worker herein of the cause for his termination. Neither was
there any hearing conducted in order to give Dagui the opportunity to be heard and
defend himself. He was simply told: “Wala ka nang trabaho mula ngayon,” allegedly
because of poor workmanship on a previous job. The undignified manner by which private
respondent’s services were terminated smacks of absolute denial of the employee’s right
to due process and betrays petitioner Quazon’s utter lack of respect for labor.
Separation Pay: Modified to cover only time re-hired.
Petitioners’ liability for separation pay ought to be reckoned from 1982 when petitioner
Teresita Quazon, as manager of Aurora Plaza, continued to employ private respondent.
From 1953 up to the death of Doña Aurora sometime in 1982, private respondent’s claim
for separation pay should have been filed in the testate or intestate proceedings of Doña
Aurora. This is because the demand for separation pay covered by the years 1953-1982
is actually a money claim against the estate of Doña Aurora, which claim did not survive
the death of the old woman. Barred.
SINGER SEWING MACHINE vs. DRILON

G.R. No. 91307. January 24, 1991

Mini Digest

The Union filed a petition for direct certification as the sole and exclusive bargaining agent of
all collectors of the Company. The Company opposed on the ground that the union members
are not employees but are independent contractors as stated in their contracts. But the Union
claims that they are employees because they perform work that’s necessary & desirable, they
don’t have substantial capital or investment to be independent contractors, they work under
control of the company.
 The SC held:
1. They are independent contractors. Applying the control test, requiring the agents to
utilize standard receipt/report forms by the company are intended to facilitate order in
office procedures and monthly collection quota is also a normal requirement.
2. They are not under the control of the ER as they’re not required to work in the office,
devote exclusively their time for the Company (he can do his work on his own time
w/o a daily time frame), the manner of collective is left to their discretion/

 the respondent union filed a petition for direct certification as the sole and exclusive
bargaining agent of all collectors of the Singer Sewing Machine Company, Baguio City
branch
 Singer opposed on the ground that the union members are actually not employees but
are independent contractors as evidenced by the collection agency agreement
 Respondent Med-Arbiter finding that there exists an employer-employee relationship
between the union members and the Company, granted the petition for certification
election
 on appeal, Sec. of Labor Drilon affirmed
 in this petition, they Singer Company alleges that public respondents acted in excess of
jurisdiction in ruling that there was existence of EER and that it is well-settled that
commission agents are not employees, but independent contractors
 respondents argue that the provisions of the Collection Agency Agreement belie the
Company’s position that the union members are employees

ISSUE: Whether the union members are employees of petitioner

RULING: No. The Collection Agent Agreement confirms the status of the collecting agent in this
case as an independent contractor not only because he is explicitly described as such but also
because the provisions permit him to perform collection services for the company without being
subject to the control of the latter except only as to the result of his work. The requirement
that collection agents utilize only receipt forms and report forms issued by the
Company and that reports shall be submitted at least once a week is not necessarily
an indication of control over the means by which the job of collection is to be
performed. The agreement itself specifically explains that receipt forms shall be used for the
purpose of avoiding a co-mingling of personal funds of the agent with the money collected on
behalf of the Company. Likewise, the use of standard report forms as well as the regular time
within which to submit a report of collection are intended to facilitate order in office procedures.
Even if the report requirements are to be called control measures, any control is only
with respect to the end result of the collection since the requirements regulate the
things to be done after the performance of the collection job or the rendition of the
service.

The plain language of the agreement reveals that the designation as collection agent
does not create an employment relationship and that the applicant is to be considered
at all times as an independent contractor. This is consistent with the first rule of
interpretation that the literal meaning of the stipulations in the contract controls (Article 1370,
Civil Code; La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations, 123
SCRA 679 [1983]). No such words as “to hire and employ” are present. Moreover, the
agreement did not fix an amount for wages nor the required working hours. Compensation is
earned only on the basis of the tangible results produced, i.e., total collections made
(Sarra v. Agarrado, 166 SCRA 625 [1988]). In Investment Planning Corp. of the Philippines v.
Social Security System, 21 SCRA 924 [1967] which involved commission agents, this Court had
the occasion to rule, thus: “We are convinced from the facts that the work of petitioner’s agents
or registered representatives more nearly approximates that of an independent contractor than
that of an employee. The latter is paid for the labor he performs, that is, for the acts of which
such labor consists; the former is paid for the result thereof x x x. xxx xxx xxx Even if an agent
of petitioner should devote all of his time and effort trying to sell its investment plans he would
not necessarily be entitled to compensation therefor. His right to compensation depends upon
and is measured by the tangible results he produces.”

The Court finds that since private respondents are not employees of the Company, they
are not entitled to the constitutional right to join or form a labor organization for
purposes of collective bargaining. Accordingly, there is no constitutional and legal basis for
their “union” to be granted their petition for direct certification. This Court made this
pronouncement in La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations,
supra: “x x x The question of whether employer-employee relationship exists is a
primordial consideration before extending labor benefits under the workmen’s
compensation, social security, medicare, termination pay and labor relations law. It
is important in the determination of who shall be included in a proposed bargaining
unit because it is the sine qua non, the fundamental and essential condition that a
bargaining unit be composed of employees. Failure to establish this juridical relationship
between the union members and the employer affects the legality of the union itself. It means
the ineligibility of the union members to present a petition for certification election as well as to
vote therein x x x.” (At p. 689)

SSS vs Court of Appeals

Mini Digest

SSC threatened Philippine Guards Protection Unit (PGPU) with court action if it did not remit
to the System. PGPU petitioned to be excluded from SSC’s coverage because it’s merely an
agent and not the employer of 39 guards. RA 1792 requires at least 6 EEs for compulsory
coverage; RA 2658 eliminated such requirement. So the issue is W/N the guards are
considered as employees under both RA 1792 and RA 2658.

The SC held:
This is a case of job contracting. The guards are employees of PGPU (agency) and not of its
client companies. The Agency engages the guard and assigns them to clients and is in charge
of the payrolls; the client does not determine the salary, they merely pay the fee in their
contracts. Being the bona fide employer of the guards, they are covered by the System from
August 1958 and the coverage upon all its employees is compulsory.

1960, SSS sent a letter compelling the Philippine Guards Protection Unit (PGPU) to continue to
remit its contributions to the System. Otherwise, SSS would file a suit.
PGPU filed a petition for exclusion from coverage under the System and for a refund its
remittances for September and October 1958 averring that it is not subject to compulsory
coverage under the Social Security Act of 1954 because it is not the employer, but
merely the agent, of the 39 security guards or watchmen who are SSS members. Also,
it has only one employee, namely, the clerk-secretary of the office.

Section 9 of the Social Security Act of 1954, as amended by Republic Act No. 1792, which took
effect on June 21, 1957 states that "the Commission may not compel any employer to become a
member of the System unless he shall have been in operation for at least two years and has, at
the time of admission, if admitted for membership during the first year of the System's operation,
at least fifty employee's and if admitted for membership in the following year of operation and
thereafter, at least six employees x x x.”

Social Security Commission declared that PGPU was the employer of the security guards or
watchmen, and accordingly declaring the latter subject to compulsory coverage.

Court of Appeals reversed the resolution and order pursuant to Section 9 of the Social Security
Act as amended by Republic Act No. 2658, which eliminated, the requirement that the employer
should have at least six employees for purposes of compulsory coverage. However, it
is not clear from the appealed decision if it is also the sense and intent of that court that the
security guards or watchmen should, likewise not be considered employees of the said
respondent.

ISSUE: Whether or not for purposes of social security coverage, the security guards or watchmen
in question should be considered private respondent's employees not only under Republic Act No.
1792, but also under Republic Act No. 2658.

Yes. The Social Security Act of 1954, in its Section 8, contains, for purposes of social security
coverage, definitions of terms, among which are the following:

(c) Employer.—Any person, natural or juridical, domestic or foreign, who carries on in the
Philippines any trade, business, industry, undertaking, or activity of any kind and uses the
services of another person who is under his orders as regards the employment, except the
Government and any of its political subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government

(d) Employee.—Any person who performs services for an 'employer' in which either or both
mental and physical efforts are used and who receives compensation for such services, where
there is an employer-employee relationship."

There are practical considerations why private respondent PGPU, and not its clients, should be
considered, for purposes of social security coverage, the employer of the 39 guards or watchmen
listed in its roster:

(a) A watchman is not permanently assigned to a client; for one reason or another he may he
pulled out of a particular assignment and detailed to another client. Consequently, different
 clients will have to deduct premiums from different watchmen at different times and remit
them to the System together with the clients' own share of the premiums.
(b) Under the arrangements between private respondent and its clients, the latter do not
determine how much salary is to be paid to the watchmen. The clients merely pay
to private respondent the fee stipulated in their contracts. How, then, can a client
deduct the premiums due from a watchman? And how can it determine the amount of the
watchman's premium as well as its own?
(c) Service performed by one person for another is not considered an employment if the same is
"purely casual and not for the purposes of occupation or business of the
employer.” Under private respondent's hypothesis, a watchman may at times be considered
an employee and at other times not depending on whether or not he happens to be assigned
to a client which carries on a trade, business, industry, undertaking or activity of any kind. A
fortiori, of private respondent’s 39 watchmen, some may be covered by the System's plan,
while others not. To pursue the matter further, all the 39 watchmen may be covered
sometimes, and not at other times.
(d) If private respondent's clients are considered the watchmen's employers, it may happen that
the 39 different watchmen will have 39 different employers, which seems absurd, considering
that all the watchmen are on the payroll and under the supervision of only one entity.

Topic: SSS Law – Who are Covered

Pajarillo, et al. vs. Social Security System

No. L-21930. August 31, 1966.

Mini Digest:

Pajarillo, owner of fishing boats, enter into agreement with pilots who take charge of fishing
vessels and “hires” the crew. SSC requires the vessel-owners to register as employers because
while the crew is engaged by the pilots, the pilots are mere agents of the owners. Pajarillo
contends that there’s no EE/ER between the crew and the owners.

The SC held:
There’s no EE/ER, it is but a joint venture, with the boat-owner supplying the boat and
equipment, and the pilot and crew contributing the necessary labor, and the parties getting
specific shares for their respective contributions. But assuming that they are employees, they
still cannot be covered by the SSS because they are not obligated to remain in the same boat
for any definite period, impossible to determine the monthly wage, there’s no regular sched of
fishing trips, even when completed there’s no assurance of income. This set up is comparable
to leasehold tenants w/c is specifically excluded from definition of employment.

 Appellants are owners of fishing boats being used for fishing at sea. They entered into
agreement with so called patrons or pilots who took charge of the vessels, equipment and
gear used for fishing.
 Once entrusted with the equipment, the pilot "hires" the crew to man the boat and secures
their provisions.
 The fishing trips are not regular. The fishermen go out to the sea only when there is no
moon or it is not yet very bright. For this reason, even in months of fine weather, the
 most that a boat can make are 18 fishing days every month. These men have no
regular income.
 If the trip yields a catch, the proceeds thereof are divided into three parts: 1/3 to the
boat-owner, 1/3 to cover expenses of the boat and 1/3 is divided among the men, with
the pilot getting 3 times the share of a crew-member; and the "machinist", who
tends or operates the engine of the motorized boat, receiving twice the share
of a crew-member.
 The men (usually 12 for every vessel, including the pilot) are under no obligation to stay
in one outfit. Sometimes, they join as members of the crew for one night only;
sometimes two, or three days. Then, they leave and join other outfits. Even the pilot
himself is not bound to retain his charge for any definite duration. He can return
the boat to its owner anytime, if he does not want to manage it anymore.
 The vessel-owners, appellants in the present case, required to register as employers
with the Social Security System, filed a joint petition with the Social Security
Commission. They claimed that there exists no employer-employee relationship between
them and the crew of their fishing vessels. They prayed that they be exempted from the
compulsory coverage of the law.
 The petition was denied. The SSCommission held that while the services of the crew-
members are engaged by the pilots, the latter are mere employees or agents of the boat-
owners. Thus, it is contended, a boat-owner can abolish the employment of the crew-
members by withdrawing from the pilot the authority to take charge of the vessel.
 Appellants, consequently, were directed to report their coverage and that of their
respective pilots and crew-members to the Commission and to pay the prescribed
premiums pursuant to Sections 18, 19 and 20 of the Republic Act 1161, as amended. The
boat-owners filed the present appeal.

ISSUE & RULING:

1. Whether under the facts set forth above, there exists an employer-employee
relationship between the petitioners and the crew-members of their respective
fishing boats within the meaning of Republic Act 1161, as amended?

NO. Under the law, an employer is a "person, natural or juridical, domestic or foreign, who carries
on in the Philippines any trade, business, industry, undertaking, or activity of any kind and uses
the services of another person who is under his orders as regards the employment.”

In the case at bar, the pilots are not under the orders of the boat-owners as regards their
employment. They go out to sea not upon direction of the boat-owners, but upon their own
volition as to when, how long and where to go fishing. Much less do the boat-owners in any way
control the crew-members with whom the former have no relationship whatsoever. These crew-
members simply join every trip for which the pilots allow them, without any reference to the
owners of the vessel.

On the other hand, an employee is defined as a "person who performs services for an
'employer' in which either or both mental and physical efforts are used and who receives
compensation for such services, where there is an employer-employee relationship."
In the present case, neither the pilots nor the crew-members receive compensation from the
boat-owners. They only share in their own catch produced by their own efforts. There is no
showing that outside of their one-third share, the boat-owners have anything to do with the
distribution of the rest of the catch among the pilots and the crew-members. The latter perform
no service for the boat-owners, but mainly for their own benefit.

In the undertaking in question, the boat-owners obviously are not responsible for the wage,
salary, or fee of the pilot and crew-members. Their sole participation in the venture is the
furnishing or delivery of the equipment used for fishing, after which, they merely wait for the
boat's return and receive their share in the catch, if there is any. For this part, a person who joins
the outfit is entitled to a share or participation in the fruit of the fishing trip. If it gives no return,
the men get nothing.

It appears to us, therefore, that the undertaking is in the nature of a joint venture, with the boat-
owner supplying the boat and its equipments, and the pilot and crew-members contributing the
necessary labor, and the parties getting specific shares for their respective contributions.

2. Whether the pilot and crew members shall be covered by the SSS Law if it would
be assumed that they are employees of the boat-owners?

NO. Even assuming arguendo that the pilot and crew-members may be treated as employees of
the boat-owners, they cannot also be made subject to compulsory coverage under the Social
Security Act. As previously stated, the men are under no obligation to remain in the outfit for any
definite period. Thus, one can be the crew-member of an outfit for one day and be the member
of the crew of another vessel the next day. Also, a fishing boat has no regular schedule of fishing
trips. It all depends on the weather and other natural conditions, and the volition of the pilots
and crew-men themselves. And, even when a fishing trip is completed, it is no assurance of
income for the fishermen and the boat-owner as well.

Clearly, the services rendered by the fishermen are no different from the agricultural labor
performed by a share or leasehold tenant or worker, which is specifically excluded from the
definition of "employment", and exempted from the coverage of the Social Security Act.

Resolution of the Social Security Commission appealed from is hereby set aside.
Petitioners-appellants are declared exempted from compulsory coverage of the Social
Security law.

Social Security System vs Davac, et al.

Mini Digest:

Petronilo Davac designated Candelaria (“wife”) as beneficiary for his SSS premiums.
When he died, two women filed their claims including Candelaria and Lourdes (his first
original wife). Lourdes argues that she’s the rightful beneficiary because the a
beneficiary under SSS partakes the nature of a beneficiary in life insurance policy (a
donation), thus, bigamous wives cannot receive for being contrary to law.
 The SC held:
1. The disqualification is inapplicable because Candelaria isn’t guilty of concubinage (no
proof of knowledge of previous marriage)
2. Benefits from SSS do not form part of the properties of conjugal partnership since they
are from a public special fund (a special privilege) created for social security purposes.
The benefits are non transferable and exempted from tax and lien.
3. If there is a named beneficiary and the designation is not invalid (as it is not so in this case),
it is not the heirs of the employee who are entitled to receive the benefits (unless they are
the designated beneficiaries themselves). It is only when there is no designated
beneficiaries or when the designation is void, that the laws of succession are applicable.
And we have already held that the Social Security Act is not a law of succession

 The late Petronilo Davac, a former employee of Lianga Bay Logging Co., Inc. became a
member of the Social Security System (SSS). In SSS form E-1 (Member’s Record)
which he accomplished and filed with the SSS, he designated respondent Candelaria
Davac as his beneficiary and indicated his relationship to her as that of “wife”.
 He died later and so Candelaria Davac and Lourdes Tuplano each filed their
claims for death benefit with the SSS. Based from their claims, it appears that
Petronilo contracted two marriages: first with claimant Lourdes Tuplano on
1946, and the second with Candelaria Davac on 1949.
 The Social Security Commission declared Candelaria Davac as the person entitle
to receive the death benefits payable for the death of Petronilo Davac.

Issue: Whether or not Candelaria Davac is entitled to receive the death benefits of
Petronilo Davac.

Ruling: Yes. Section 13, Republic Act No. 1161, as amended by Republic Act No. 1792, in force
at the time Petronilo Davac’s death on April 5, 1959, provides:

“SEC. 13. Upon the covered employee’s death or total and permanent disability
under such conditions as the Commission may define, before becoming eligible for
retirement and if either such death or disability is not compensable under the
Workmen’s Compensation Act, he or, in case of his death, his beneficiaries, as
recorded by his employer shall be entitled to the following benefit: x x x.”
Under this provision, the beneficiary “as recorded” by the employee’s employer is the one entitled
to the death benefits.

But appellant contends that the designation herein made in the person of the second and,
therefore, bigamous wife is null and void, because (1) it contravenes the provisions of the Civil
Code, and (2) it deprives the lawful wife of her share in the conjugal property as well as of her
own and her child’s legitime in the inheritance.

As to the issue that a beneficiary under the SSS partakes of the nature of a beneficiary
in life insurance policy and, therefore, the same qualifications and disqualifications
should be applied.
Without deciding whether the naming of a beneficiary of the benefits accruing from membership
in the Social Security System is a donation, or that it creates a situation analogous to the relation
of an insured and the beneficiary under a life insurance policy, it is enough, for the purpose
of the instant case, to state that the disqualification mentioned in Article 739 is not
applicable to herein appellee Candelaria Davac because she was not guilty of
concubinage, there being no proof that she had knowledge of the previous marriage
of her husband Petronilo.

As to the issue that benefits accruing from membership in the SSS form part of the
properties of the conjugal partnership of the covered member.
The benefits accruing from membership in the Social Security System do not form part of the
properties of the conjugal partnership of the covered member. They are disbursed from a
public special fund created by Congress in pursuance to the declared policy of the Republic
“to develop, establish gradually and perfect a social security system which. x x x shall provide
protection against the hazards of disability, sickness, old age and death.

The amounts that may thus be received cannot be considered as property earned by the member
during his lifetime. His contribution to the fund, it may be noted, constitutes only an insignificant
portion thereof. Then, the benefits are specifically declared not transferable, and exempted from
tax, legal processes, and lien.

If there is a named beneficiary and the designation is not invalid (as it is not so in this
case), it is not the heirs of the employee who are entitled to receive the benefits
(unless they are the designated beneficiaries themselves). It is only when there is no
designated beneficiaries or when the designation is void, that the laws of succession
are applicable. And it is already held that the Social Security Act is not a law of
succession. Government guarantees the solvency of the system

Lo vs. Court of Appeals, 321 SCRA 190, G.R. No. 128667 December 17, 1999

Mini Digest:

Jose Lo hired Polangui as mechanic at the Rice Mill and Bijon Factory in 1959 until
1970. When Jose died, his children took over and rehired Polangui in 1981. In 1984,
Polangui met an accident which forced him to retire early, he then filed for SSS
benefits however, he found out that contributions were remitted only from Oct 1983
(but he knew that he’s been deducted 3.50/month since 1957). The Lo’s contend that
the action has prescribed and that Polangui isn’t an employee.

The SC held:
1. RA 1161 states the right to institute action against ER may be commenced within 20
years form the time the delinquency is known. Meanwhile, criminal actions for
violation of SSS law prescribed in 4 years. The discovery of the violation was in 1985,
and the case was commenced in the same year.
 2. PD 1636 amended RA 1161 and provided a 20-year prescriptive period. For rights
arising before PD 1636, the 20-year period shall take effect as long as the original
prescriptive period (10 yrs) has not expired.
3. Polangui is an employee as his testimony was explicit and clear (he named the exact
dates of his actual employment and the wages); compared to the Lo’s inconsistent
statements.

 On April 22, 1953, private respondent Gregorio Luguibis began working as a mechanic at the
Polangui Rice Mill, Inc., owned by Jose Lo. Private respondent was paid P4.00 daily. In 1959,
in addition to his work at the rice mill, he was asked to render services as a mechanic at the
Polangui Bijon Factory also owned by Jose Lo. His wage was later increased, and from 1964
to 1970, when he resigned due to illness, he was receiving a daily wage of P10.00.
 In 1981, private respondent was rehired by Jose Lo, as mechanic, with a daily wage of P34.00,
plus allowance. While repairing one of the defective machines at the noodle factory on
August 11, 1984, private respondent met an accident and suffered injuries which
forced him to retire soon thereafter. During that time, the rice mill was under the
management of Jose’s son, Rafael Lo (petitioner).
 In 1985, private respondent filed his application for retirement benefits with the Social
Security System (SSS). His application, however, was denied since per SSS records
he became a member only in 1983, and contributions in his favor were remitted
only from October 1983 to September 1984. As private respondent knew that SSS
contributions of P3.50 have been deducted from his monthly salary since compulsory SSS
coverage took effect in 1957, private respondent filed a petition with the Social Security
Commission against petitioner Rafael Lo and Jose Lo.
 Social Security Commission (SSC) ruled infavor of Laguibis and ordered Lo to remit
contributions from 1957-1984.
 Petitioners appealed to CA: affirmed, modifying period from 1981-1983 only.
 Lo’s defense: action has already prescribed, 1) present case involves civil claims and should,
therefore, be governed by the Civil Code provisions on prescription. 2) 20-year prescriptive
period does not apply to private respondent’s claims prior to 1980 because Presidential Decree
No. 1636, which amended R.A. 1161 to provide for such period, took effect on January 1,
1980.

Issue: Whether the action to file claims has already prescribed.

No. Section 22(b), par. 2, of Republic Act No. 1161, or the SSS Law, as amended,
states:
The right to institute the necessary action against the employer may be commenced
within twenty (20) years from the time the delinquency is known or the
assessment is made by the SSS, or from the time the benefit accrues, as the case
may be.
In Benedicto v. Abad Santos, we held that §22(b) of R.A. 1161 applies to administrative
and civil actions against an employer for his failure to remit SSS contributions. Criminal
actions for violations of the SSS law, on the other hand, prescribes in four years, as
provided in Act No. 3326.
Private respondent, in this case, discovered the delinquency of petitioner in remitting his
SSS contributions only after his separation from employment on September 13, 1984.
Prior thereto, private respondent could not have known that his SSS contributions were
not being remitted by petitioner since deductions were made on his salary monthly. Thus,
even if petitioner is correct in saying that the prescriptive period should be counted from
the day on which the corresponding action could have been instituted, the action in this
case could only be instituted when the delinquency was made known to the private
respondent and not when the obligation to pay the premiums accrued. Thus, even if the
case of People v. Monteiro were not applied to the present case, R.A. 1161, §22(b)
expressly provides that the period of prescription to file the necessary action against the
employer should likewise commence on the day said violation was discovered. For cases,
therefore, with rights arising prior to P.D. 1636, the 20-year prescriptive period shall take
effect as long as the original prescriptive period has not expired. Even assuming that the
prescriptive period has begun to run in this case prior to the discovery of the violation in
1985, it could have started only at the time the benefit accrued, i.e., in September 1970
when private respondent left his job due to illness. On January 1, 1980, when P.D. 1636
took effect, the 10-year prescriptive period has not expired and was, thus, deemed
extended to 20 years.
PROFETA vs. DRILON

G.R. No. 104139. December 22, 1992

Mini Digest:

Dr. Profeta is the Dean and the President of Rizal College (1974-1979). She filed a courtesy
resignation in 1986 and then was appointed as acting President of EARIST in 1988. After
reaching 65y/o in 1989, she asked GSIS if she could extend her services beyond 65 y/o to
avail of the old-age pension retirement benefits. She was advised to continue working and
that the exact date of her retirement falls on 14 August 1992; consequently, Pres. Aquino
extended her term as President. But in 1990, EARIST Union filed an admin complaint for
irregular appointment. Pending investigation, she was reassigned with DECS. OP declared her
compulsory retired as of Oct 15 1991.

The SC held:

 Petitioner, Dr. Lydia M. Profeta, served as Executive Dean of the Rizal Technological
Colleges for 4 years and later served as president for 8 years
  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.
 petitioner was appointed Acting President then later appointed President of EARIST School
29 March 1989
 After reaching the age of (65) years on 16 June 1989, petitioner inquired from the GSIS
as to whether she may be allowed to extend her services with the government as President
of EARIST beyond the age of sixty-five (65) years, to enable her to avail of the old-age
pension retirement benefits under PD 1146
 petitioner was advised by the GSIS that she is not eligible to retire under PD 1146 since
she did not render the sufficient number of years of service by 16 June 1989 having served
only 12 years and 2 months
 DECS Secretary and the Board of Trustees of EARIST extended the term of
petitioner as President until she shall have completed the required 15 years
 In March 1990, 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
 Pending investigation, petitioner was placed under preventive suspension of 90 days, but
re-assumed her duties and functions thereafter
 Pending resolution of the administrative charges against her, petitioner was detailed with
the DECS Central Office
 Petitioner filed a petition for certiorari, prohibition and mandamus before the Regional
Trial Court of Manila seeking her reinstatement as EARIST president
 Petition was dismissed, CA likewise denied appeal
 The Office of the President likewise dismissed the administrative complaint against
petitioner and in the same decision, declared petitioner as compulsorily retired as of 15
October 1991 since the 62 working days sick leave and 2 weeks that she served as a
Professional Lecturer should be added to the creditable service
 Petitioner requested the GSIS to determine the exact date of her retirement
 GSIS advised her that the date of her retirement was 14 August 1992
 Petitioner filed an MR assailing that decision of the OP declaring her compulsorily retired
by 15 October 1991 alleging that the office had not jurisdiction to resolve such issue
however such was denied

ISSUE: Whether the Office of the President has the jurisdiction to determine when a member is
qualified for retirement.

RULING: NO. We hold that it is the GSIS which 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. 1146, based on its computation of a member’s years of service with the
government. The computation of a member’s service includes not only full time but also part time
and other services with compensation as may be included under the rules and regulations
prescribed by the System. 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 of 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. Hence, 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 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, be 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.

A pension is not a gratuity but rather a form of deferred compensation for services
performed and his right to it commences to vest upon his entry into the retirement system and
becomes an enforceable obligation in court upon fulfillment of all conditions under
which it is to be paid. Similarly, retirement benefits receivable by public employees are
valuable parts of the consideration for entrance into and continuation in public office or
employment.

Beronilla vs. Government Service Insurance System

FACTS:
• In all his applications from 1917 to 1925 (employment, insurance and civil service exam),
Beronilla uniformly indicated that his date of birth is January 14, 1898.
• In 1959, he requested the Commissioner of Civil Service, that his date of birth indicated in the
records be changed to January 14, 1900. It was only in 1955, that petitioner discovered that
his true date of birth.
• The letter was endorsed by the Commission to the GSIS. GSIS denied the same since "all official
records point to January 14, 1898 as the birthday of Mr. Hilarion Beronilla.” Beronilla submitted
photostat copies of the yearbooks stating his date of birth as January 14, 1900. GSIS still
denied.
• In 1960, the General Manager of the System, Mr. Andal, placed "OK" indicating approval
of the requested change.
• In 1962, The notes were sent to the Commission of Civil Service and the PNB and the Deputy
Auditor General.
• In 1963, Beronilla was acting as and performing the duties of Auditor of the PNB.
• Almost three years after Mr. Andal approved the change of petitioner's date of birth, Mr. Mathay,
then Auditor of the Central Bank wrote "in the course of the audit of the transactions of
the PNB, it was found that Beronilla has been continuously paid since January 15,
1963, his salary allowances and other fringe benefits as Auditor of said Bank
notwithstanding the fact that Mr. Beronilla has attained his sixty-fifth (65th) the
date of his automatic and compulsory retirement.
• The Board adopted the disputed resolution without even notifying petitioner of Mr. Mathay's
letter and without giving him any opportunity to be heard regarding the same.

ISSUES:
1. Whether the power to decide such matter is legally lodged in the General
Manager and not in the Legal Counsel, nor in the Board. [No].
2. Whether the Board, assuming it has authority to review the acts of the General
Manager, is either guilty of laches or estopped from revising the same.

Even granting it to be true that, pursuant to what is generally the practice and the rule,
applications for retirement annuities in the GSIS are subject to final approval by the
General Manager after its being approved by one of the Assistant General Managers
and/or one or two Department Managers, it is clear to Us that under the GSIS charter, the
General Manager's approval is not beyond review and reprobation by the Board of Trustees.
Section 16 of said charter, the System ''shall be managed by the Board of Trustees ..." and Section
17 adds that the Board "shall have the following powers and authority: (a) to adopt by-laws, rules
and regulations for the administration of the System and the transaction of its business." By
express statutory authority, the Board of Trustees directly manages the System and the General
Manager is only the chief executive officer of the Board. In other words, even if the Board
may entrust to the General Manager the power to give final approval to applications
for retirement annuities, the finality of such approval cannot be understood to divest
the Board, in appropriate cases and upon its attention being called to a flaw, mistake
or irregularity in the General Manager's action, of the authority to exercise its power of
supervision and control which flows naturally from the ultimate and final responsibility for the
proper management of the System imposed upon it by the charter.

ESTOPPEL: The mere fact that the resolution granting the authority expressly gives the character
of finality to the General Manager's acts does not constitute such a representation to third parties
dealing with the System that such finality is definite even vis-a-vis the Board as to create any
estoppel, for the simple reason that it is not legally possible for the Board to divest itself of an
authority which the charter of the System places upon its direct responsibility. Mere innocent
silence will not work estoppel. There must also be some element of turpitude or negligence
connected with the silence by which another is misled to his injury.

RETIREMENT: The retirement of government employees is imposed by law and is not the result
of any contractual stipulation.

DUE PROCESS: Suffice it to say that since there is no showing that under the procedure
established in the GSIS, such notice and hearing are required. As regards petitioner's argument
that the Board's resolution in question constitutes an impairment of the obligations of his contract
of insurance, it is obvious that the constitutional injunction that is evidently the basis of such
argument refers to the legislature and not to resolutions even of government corporations.
Cena vs CSC

1. Gaudencio Cena worked for 7 years as a Legal Officer of the Law Dep’t of Caloocan City.
2. He was then transferred to the Office of the Congressman where he worked as a Supervising Staff
Officer for 3 months.
3. He was then appointed as Registrar of the RD (Register of Deeds) in Malabon.
4. In total, he has rendered gov’t service for 11 years, 9 months and 6 days.
5. Now, Before reaching his 65th bday, he requested the LRA Administrator that he be allowed to
extend his service to complete the 15-year service requirement to enable him to retire with full
benefits of old age pension.
6. The LRA Administrator sought a ruling from the CSC. The CSC denied the extension but Cena filed
a motion for reconsideration.
 CSC denied petitioner Cena's request for extension of service declaring therein, that Mr.
Cena shall be considered retired from the service on January 22, 1991, the date when he
shall reach the compulsory retirement age of sixty-five (65) years, unless his retention for
another year is sought by the head of office under Civil Service Memorandum Circular No.
27, s. 1990 (MC–27).

7. This time around, CSC granted a 1-yr extension to him.

 Cena was allowed for one year extension as per MC–27 which states that “Any request
for the extension of service of compulsory retirees to complete the 15 years of 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”.

8. Cena still filed a case against CSC for grave abuse of discretion when it granted an extension of
only 1 yr. He contends that the law(Sec 11, PD 1146 also known as Revised Gov’t Insurance Act)
does not limit or specify the maximum number of years the retiree may avail of to complete the
15-year service. Thus, the CSC has no authority to limit through a memorandum the number of
years.
9. In defense, CSC said that since it is the central personnel agency of the gov’t, it is vested with
power to grant or allow extension of service beyond retirement age.

Issue: Whether or not Cena is allowed to continue in the service to complete the 15-year
service requirement?
Yes. An administrative circular, such as a memorandum of the CSC cannot limit PD 1146, on
extension of service of employees who reach 65. While it is true that CSC is given the authority to
take appropriate action on all appointments and other personnel matters in the Civil Service, it
cannot extend to matters not covered. The CSC’s authority is limited only to carrying into effect
what PD 1146 says. It cannot go beyond the terms and provisions of the basic law.
The CSC Memorandum, being in the nature of an administrative regulation, must be governed by
the principle that a regulation must be in harmony with the provisions of the law and should be for
the sole purpose of carrying into effect its general provisions. CSC has no power to supply or add
perceived omissions in PD 1146.
There’s no justifiable reason in not allowing ordinary EEs on a case to case basis to continue in
the service to complete 15 year requirement.
1. By limiting the extension to 1 yr would defeat the beneficial intendment of the retirement
provisions of PD 1146.
2. In the case of officials of the Judiciary, the Court allows a making up or compensating for lack
of required age or service only if satisfied that the career of the retiree was marked by
competence, integrity, and dedication to the public service (Re: Gregorio Pineda, supra).
It must be so in the instant case.
3. In the original text of CA 186 or GSIS 1936, there’s no indication that it contemplates a
borderline situation where the compulsory retiree on his 65th bday has completed more than
14 but less than 15 yr of govt service.
4. The rule on limiting to only one (1) year the extension of service of an employee who has
reached the compulsory retirement age of 65 years, but has less than 15 years of service
under Civil Service Memorandum Circular No. 27 s. 1990, cannot likewise be accorded validity
because it has no relation to or connection with any provision of P.D. 1146 supposed to be
carried into effect. The rule was an addition to or extension of the law, not merely a mode of
carrying it into effect. The Civil Service Commission has no power to supply perceived
omissions in P.D. 1146.

Additional notes to ruling:

Accordingly, the Petition is GRANTED. The Land Registration Authority (LRA) and Department of
Justice has the discretion to allow petitioner Gaudencio Cena to extend his 11 years, 9 months and 6
days of government to complete the fifteen-year service so that he may retire with full benefits under
Section 11, paragraph (b) of P.D. 1146

The Court reached the above conclusion primarily on the basis of the "plain and ordinary meaning" of
Section 11 (b) of P.D. No. 1146. Section 11 may be quoted in its entirety:

Sec. 11 Conditions for Old-Age Pension. — (a) Old-Age Pension shall be paid to a member who
(1) has at least fifteen (15) years of service;
(2) is at least sixty (60) years of age; and
(3) is separated from the service.
(b) unless the service is extended by appropriate authorities, retirement shall be compulsory for an employee at
sixty-five-(65) years of age with at least fifteen (15) years of service; Provided, that if he has less than fifteen
(15) years of service, he shall he allowed to continue in the service to completed the fifteen (15) years.

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;

1. the Civil Service Commission Circular No. 27, Series of 1990 and
  limits the extension for only three years and the latter, only on meritorious reasons,
limits up to 6 months only.

2. Memorandum Circular No. 65 of the Office of the President.

Medialdea, J. 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.
Medialdea, J wrote:

The Civil Service Commission Memorandum Circular No. 27 being in the nature of an administrative
regulation, must be governed by the principle that administrative regulations adopted under legislative
authority by a particular department must be in harmony with the provisions of the law, and should be for
the sole purpose of carrying into effect its general provisions . . . The rule on limiting to one the year the
extension of service of an employee who has reached the compulsory retirement age of sixty-five
(65) years, but has less than fifteen (15) years of service under Civil Service Memorandum Circular
No. 27, S. 1990, cannot likewise be accorded validity because it has no relationship or connection
with any provision of P.D. 1146 supposed to be carried into effect. The rule was an addition to or
extension of the law, not merely a mode of carrying it into effect. The Civil Service Commission has
no power to supply perceived omissions in P.D. 1146.

Worth pondering also are the points raised by the Civil Service Commission that extending the service
of compulsory retirees for longer than one (1) year would: (1) give a premium to late-comers in the
government service and in effect discriminate against those who enter the service at a younger age;
(2) delay the promotion of the latter and of next-in-rank employees; and (3) prejudice the chances for
employment of qualified young civil service applicants who have already passed the various
government examinations but must wait for jobs to be vacated by "extendees" who have long passed
the mandatory retirement age but are enjoying extension of their government service to complete 15
years so they may qualify for old-age pension.

Rabor v CSC

 Dionisio Rabor is a Utility worker in the Office of the Mayor in Davao city. Since he already
reached the age of 68, he is now advised to apply for retirement but then he wishes for extension
so he can avail the benefits of the retirement laws given to the employees of the Government by
GSIS, in which one of the requirements is that you have served for 15 years in the government;
 by that time, it is just his 13th year in the government that’s why he requested for extension of
service and he also presents 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 government of Davao City wrote to the Regional Director of the Civil Service Commission,
Region XI (CSRO-XI) and Director Cawad states that:
 Rabor’s request is contrary to Memorandum Circular No. 65 for it is stated to such
memorandum that employees who have reached the compulsory retirement age of 65 shall not
be retained and, only in meritorious cases, may be extend only for 6 months.
 Mayor Duterte then informed Rabor about the decision of CSRO-XI and advised him to stop
reporting starting August 16, 1991.

 Then, he sent a letter to CSRO-XI asking for extension and asking for another 2 years so he
could avail the benefits given to government employees. His request was denied.

 Rabor next wrote to the Office of the President seeking for reconsideration of CSRO-XI.
  The Office of the President referred it to the Civil Service Commission but again, CSC dismissed
his appeal and affirmed decision of CSRO-XI and stated CSC M.C No 27, s. 1990:
1. Any request for extension of service of compulsory retirees to complete the fifteen 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 of not exceeding one (1) year.

2. Plus the fact that as early as October 1988 Rabor already reached the retirement age.

 On October 28, 1992, invoking the decision in Cena v. Civil Service Commission, the petitioner
sought for reconsideration and asked for reinstatement with back salaries and benefits. And
again, his reconsideration was denied.
 Then he filed a petition to the Supreme Court appealing from CSC.
 Rabor contends that his case squarely falls within the ruling in the case of Cena. Opposing,
CSC stated that it is different for the court gave the discretion to the Land Registration
Authority.

Issue: WON the ruling, regarding the validity of CSC M.C No. 27, in the case of Cena can be use as basis
for granting Rabor’s request.

Held:
NO. Clearly, therefore, Cena when it required a considerably higher degree of detail in the statute to
be implemented, went against prevailing doctrine. It seems clear that if the governing or enabling
statute is quite detailed and specific to begin with, there would be very little need (or occasion) for
implementing administrative regulations. It is, however, precisely the inability of legislative bodies to
anticipate all (or many) possible detailed situations in respect of any relatively complex subject
matter, that makes subordinate, delegated rule-making by administrative agencies so important and
unavoidable. All that may be reasonably demanded is a showing that the delegated legislation
consisting of administrative regulations are germane to the general purposes projected by the
governing or enabling statute. This is the test that is appropriately applied in respect of Civil Service
Memorandum Circular No. 27, Series of 1990, and to this test we now turn.

Like what Mr. Justice J.B.L. Reyes said in the ruling of People v. Exconde case:

1. It is well established in this jurisdiction that, while the making of laws is a non-delegable
activity that corresponds exclusively to Congress, nevertheless, the latter may
constitutionally delegate authority and promulgate rules and regulations to implement
a given legislation and effectuate its policies, for the reason that the legislature often
finds it impracticable (if not impossible) to anticipate and provide for the multifarious
and complex situations that may be met in carrying the law into effect. All that is
required is that the regulation should be germane to the objects and purposes
of the law; that the regulation be not in contradiction with it, but conform to
standards that the law prescribes
2. Plus, not only P.D. No. 1146 is the statute that should appropriately be examined
is the present Civil Service law there is Administrative Code of 1987 which
provides 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."
 3. Furthermore the limitation of permissible extensions of service after an employee
has reached sixty-five (65) years of age has no reasonable relationship is
ACTUALLY germane to the foregoing provisions of the present Civil Service Law.
The physiological and psychological processes associated with ageing in
human beings are in fact related to the efficiency and quality of the service
that may be expected from individual persons. The policy considerations which
guided the Civil Service Commission in limiting the maximum extension of service
allowable for compulsory retirees, were summarized by Griño-Aquino, J. in her
dissenting opinion in Cena:

Worth pondering also are the points raised by the Civil Service Commission that extending
the service of compulsory retirees for longer than one (1) year would: (1) give a premium
to late-comers in the government service and in effect discriminate against those who enter
the service at a younger age; (2) delay the promotion of the latter and of next-in-rank
employees; and (3) prejudice the chances for employment of qualified young civil service
applicants who have already passed the various government examination but must wait
for jobs to be vacated by "extendees" who have long passed the mandatory retirement age
but are enjoying extension of their government service to complete 15 years so they may
qualify for old-age pension.

SC’s conclusion is that the doctrine of Cena should be and is hereby modified to this extent: that
Civil Service Memorandum Circular No. 27, Series of 1990, more specifically paragraph (1) thereof, is
hereby declared valid and effective. Section 11 (b) of P.D. No. 1146 must, accordingly, be read
together with Memorandum Circular No. 27. We reiterate, however, the holding in Cena that the
head of the government agency concerned is vested with discretionary authority to allow or
disallow extension of the service of an official or employee who has reached sixty-five (65)
years of age without completing fifteen (15) years of government service; this discretion is,
nevertheless, to be exercised conformably with the provisions of Civil Service Memorandum
Circular No. 27, Series of 1990.

 Dionisio Rabor works as a utility worker at the Mayor’s Office Davao City on 10 April 1978 at the age of 55 years.
 Sometime in May 1991, Alma, D. Pagatpatan, an official in the Office of the Mayor of Davao City, advised Dionisio M. Rabor to
1

apply for retirement, considering that he had already reached the age of (68) years and (7) months, with (13) years and (1) month
of government service.
 Rabor showed a "Certificate of Membership" issued by "GSIS" and dated 12 May 1988. At the bottom of this "Certificate of
2

Membership" is a typewritten statement of the following tenor: "Service extended to comply 15 years service reqts." This statement
is followed by a non-legible initial with the following date "2/28/91."
 Director Filemon B. Cawad of CSRO-XI advised Davao City Mayor Rodrigo R. Duterte as follows: Please be informed that the
extension of services of Mr. Rabor is contrary to M.C. No. 65 of the Office of the President, the relevant portion of which is hereunder
quoted: “Officials and employees who have reached the compulsory retirement age of 65 years shall not be retained the service,
except for extremely meritorious reasons in which case the retention shall not exceed 6 months.”
 Mayor Duterte advised him to stop reporting for work effective August 16,1991. Petitioner asked for extension until he
completes the 15-year requirement, asserting that he is still in good condition to work and avail of the retirement benefits given to
the employees of the government. The request for extension was denied.
 Petitioner wrote to the Office of the President for reconsideration of the decision. It was also denied for the reason that any request
for extension is allowed only to permanent appointees in the career service who are regular members of GSIS and shall granted
for a period not exceeding a year. As early as October 1988, Rabor was already due for retirement, denying his request of due
course.
 Petitioner also asked for reinstatement with back salaries and benefits, having been separated from government service last august
16, 1991.

Issue: WON the petitioner is entitled to reinstatement and complete the 15-year extension under PD 1146?
Held: NO. Petitioner invoked the decision in the Cena case wherein Cena was granted 3 years, 3 months, and 24 days
to complete the 15-year requirement and be entitiled of full benefits under Sec. 11(b) of PD 1146. In this case, the
Cena doctrine was not applied because Cena laid heavy stress on the interest of retirees or would be retirees, something
that is, in itself, quite appropriate. At the same time, however, we are bound to note that there should be countervailing
stress on the interests of the employer agency and of other government employees as a whole. The results flowing
from the striking down of the limitation established in Civil Service Memorandum Circular No. 27 may well be "absurd
and inequitable”. An employee who has rendered only 3 years of government service at age 65 can have his service
extended for 12 years and finally retire at the age of 77. This reduces the significance of the general principle of
compulsory retirement at age 65 very close to the vanishing point.

The doctrine of Cena should be and is hereby modified to this extent: that Civil Service Memorandum Circular No. 27,
Series of 1990, more specifically paragraph (1) thereof, is hereby declared valid and effective. Section 11 (b) of P.D.
No. 1146 must, accordingly, be read together with Memorandum Circular No. 27. However, the holding in Cena that
the head of the government agency concerned is vested with discretionary authority to allow or disallow extension of
the service of an official or employee who has reached 65 years of age without completing 15 years of government
service; this discretion is, nevertheless, to be exercised conformably with the provisions of Civil Service Memorandum
Circular No. 27.

We do not believe it necessary to deal specifically with Memorandum Circular No. 65. It will be noted from the text
itself of Memorandum Circular No. 65 (and for that matter, that of Memorandum Circular No. 163 does not purport to
apply only to officers or employees who have reached the age of 65 years and who have at least 15 years of government
service.

Cena interpreted Memorandum Circular No. 65 as referring only to officers and employees who have both reached the
compulsory retirement age of 65 and completed the 15 years of government service. Cena so interpreted this
Memorandum Circular precisely because Cena had reached the conclusion that employees who have reached 65 years
of age, but who have less than 15 years of government service, may be allowed such extension of service as may be
needed to complete fifteen (15) years of service. In other words, Cena read Memorandum Circular No. 65 in such a
way as to comfort with Cena's own conclusion reached without regard to that Memorandum Circular. In view of the
conclusion that we today reached in the instant case, this last ruling of Cena is properly regarded as merely orbiter.

The Court do not believe it necessary to determine whether Civil Service Memorandum Circular No. 27 is fully compatible
with Office of the President's Memorandum Circular No. 65; this question must be reserved for detailed analysis in
some future justiciable case.

Teodoro Santiago vs. Commission on Audit and GSIS

GR 92284, July 12, 1991, Cruz, J

 Santiago was employed in COA, as State Auditor IV, with a monthly salary of
P7,219.
 He was later assigned to the COA Auditing Unit at Department of Transportation and
Communications, detailed to the Manila International Airport Authority (MIAA).
 MIAA Board of Directors passed a resolution, providing that Santiago will be designated
as General Manager for Finance and Administration (GM), receiving a monthly
salary P13,068, subject to approval and the ff. conditions:
1. (1) he will retain his plantilla position in COA,
2. (2) his compensation from MIAA, shall be the difference bet. the salary as GM and
that of State Auditor IV,
3. (3) his retirement benefits shall be chargeable against COA.
 COA received the resolution, and replied stating no objections, and added that he should
be formally “designated (not appointed)” by approval of MIAA.
  Santiago was then formally designated as Acting Assistant GM. He received a
differential salary of P5,849 plus his salary of P7,219 for a total compensation
of P13,068. Such compensation continued to be received until he was transferred to the
Presidential Management Staff under a COA Order.
 On March 1, 1989, Santiago retired after working in the government for 44 years.
 In computing for his retirement benefits based on EO 996, Sec 9*, the GSIS used as
basis the amount of P13,068, as highest basic salary rate received in the course of his
employment. This was disagreed by COA, claiming basis is P7,219.
 Santiago sought for recomputation but it was denied again.
 Santiago then sought for reversal of the COA decision due to grave abuse of discretion.
 OSG argues:
1. Double appointments are prohibited
2. The P13,068 is merely an honorarium and not a salary
3. He was not appointed (contrary to what EO 996, Sec.9), but designated

Whether there is double appointments/double compensation

YES. Generally, double appointments are prohibition provided that the positions involved are not
incompatible and that he won’t receive double compensation unless specifically authorized by
law.

In this case, the double compensation was expressly approved by COA and because it is allowed
under Sec. 17 of Act No. 4187:

Any existing act, rule or order to the contrary notwithstanding, no full time officer or employee of
the government shall hereafter receive directly or indirectly any kind of additional or extra
compensation or salary including per diems and bonuses from any fund of the government, its
dependencies, and semi-government entities or boards created by law except: (2) Auditors and
accountants;

Whether the P13,068 was in the nature of an honorarium, not salary (No)

 The Solicitor General claims that the additional compensation received by Santiago was a
mere honorarium, not salary.
 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.
 In this case, such additional compensation was in the nature of a salary because
it was received by him as a matter of right in recompense for services rendered
as Acting Assistant GM.

Whether Sec 9 cannot be invoked because his GM position was given through appointment, not
designation (No)

 The Solicitor General stressed that under Sec 9, “the compensation of salary or pay which
may be used in computing the retirement benefits shall be received by an official employee
as fixed by law and/or indicated in his duly approved appointment.”
 Strictly speaking, there is an accepted legal distinction. While appointment is the selection
by the proper authority of an individual who is to exercise the functions of a given office,
 designation 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).
 In this case, there is no distinction was intended between the two terms in Sec 9 of EO
966. SC believes this to be a more reasonable interpretation, especially considering that
the provision includes in the highest salary rate “compensation for substitutionary services
or in an acting capacity.”

To conclude:
Petition granted. Santiago is entitled to the compensation on the basis of his highest basic salary
rate of P13,068 of his appointed/designated GM position.

Other notes:

Sec. 9. Highest Basic Salary Rate.—The compensation of salary or pay which may be used
in computing the retirement benefits shall be limited to the highest salary rate
actually received by an official/ employee as fixed by law and/or indicated in his duly
approved appointment. This shall include salary adjustments duly authorized and implemented
by the presidential issuance(s) and budget circular(s), additional basic compensation or salary
indicated in an appointment duly approved as an exception to the prohibition on additional or
double compensation, merit increases, and compensation for substitutionary services or in an
acting capacity. For this purpose, all other compensation and/or fringe benefits such as per diems,
allowances, bonuses, overtime pay, honoraria hazard pay, flying time fees, consultancy or
contractual fees, or fees in correcting and/or releasing examination papers shall not be considered
in the computation of the retirement benefits of an official/employee.

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 and so he will receive the maximum benefits provided by
law.

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."

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.

It is noteworthy that the petitioner occupied the second office not only for a few days or weeks but for
more than three months. His designation as Acting Assistant General Manager for Finance and
1âwphi1

Administration was not a mere accommodation by the MIAA. On the contrary, in his letter to
Chairman Domingo requesting the petitioner's services, MIAA General Manager Evergisto C.
Macatulad said, "Considering his qualifications and work experience, we believe that a finance man
of his stature and caliber can be of great help in the efficient and effective performance of the
Airport's functions."