G. R. No. 162372: October 19, 2011
On May 30, 1997, Republic Act No. 8291, otherwise known as "The Government Service Insurance System Act of 1997" (the GSIS Act) was enacted and approved, amending Presidential Decree No. 1146, as amended, expanding and increasing the coverage and benefits of the GSIS, and instituting reforms therein.
On October 17, 2000, pursuant to the powers granted to it under Section 41(n) of the said law, the GSIS Board of Trustees, upon the recommendation of the Management-Employee Relations Committee (MERCOM), approvedBoard Resolution No. 326wherein they adopted theGSIS Employees Loyalty Incentive Plan(ELIP).
Dimagiba, the corporate auditor of GSIS, communicated to the President and General Manager of GSIS that the GSIS RFP was contrary to law.However, the GSIS Legal Services Group opined that the GSIS Board was legally authorized to adopt the plan since Section 28(b) of Commonwealth Act No. 186 as amended by Republic Act No. 4968 has been repealed by Sections 3 and 41(n) of Republic Act No. 8291.
Hence,Board Resolution No. 6was approved, whereinELIPwas renamedGSIS Retirement/Financial Plan(RFP) to conform strictly to the wordings of Section 41(n) of Republic Act No. 8291.
On August 7, 2001, COAs General Counsel Santos M. Alquizalas (Alquizalas) issued a Memorandum to COA Commissioner Raul C. Flores regarding the GSIS RFP.Alquizalas opined that the GSIS RFP is a supplementary retirement plan, which is prohibited underRepublic Act No. 4968, or the "Teves Retirement Law." Alquizalas pronounced that Board Resolution Nos. 360 and 6 are null and void for being violative of Section 28(b) of Commonwealth Act No. 186 as amended by Republic Act No. 4968, which bars the creation of a supplemental retirement scheme;and Section 41(n) of Republic Act No. 8291, which speaks of an early retirement plan or financial assistance.
On August 27, 2001, Garcia responded to Dimagiba, taking exception to the notice of disallowance for being "highly irregular and precipitate" as it was based on a mere opinion of COAs counsel who had no authority to declare the resolution of the GSIS Board of Trustees as null and void.Moreover, Garcia asseverated that COA had neither power nor authority to declare as null and void certain resolutions approved by the Board of Government Corporations, as the power to do so was exclusively lodged before the courts.
In their Memorandum of Appeal,the petitioners mainly argued that GSIS had the power, under its charter, to adopt and implement the GSIS RFP.They alleged that their plan was not unique to GSIS as other government agencies also have their own retirement or financial assistance plans.
On May 27, 2002, theCOA, through Escarda, inCAO I Decision No. 2002-009,affirmed the disallowances made by Dimagiba.Escarda sustained the COA general counsels opinion and said that while the GSIS may have the power to adopt an early retirement or a financial assistance plan under its charter, it cannot supplement a retirement plan already existing under the law. Escarda said that the purpose of an early retirement plan is generally to streamline the organization by encouraging those who would not be qualified for compulsory retirement to retire early under the plan.
  1. Whether or not the Board Resolution Nos 360, 326 and 6 (the GSIS RFP) is legal pursuant to the GSIS Act of 1997 and the GSIS Act as amended by Republic Act No. 4968 or the Teves Retirement Law.
  2. Whether or not the COA acted in grave abuse of discretion in disallowing the Board Resolution.
First Issue: Since Republic Act No. 8291 made no express repeal or abrogation of the provisions of Commonwealth Act No. 186 as amended by the Teves Retirement Law, the reliance of the petitioners on its general repealing clause is erroneous.The failure to add a specific repealing clause in Republic Act No. 8291 indicates that the intent was not to repeal any existing law, unless an irreconcilable inconsistency and repugnancy exists in the terms of the new and old laws.
It is true that under Section 41(n) of Republic Act No. 8291, GSIS is expressly granted the power to adopt a retirement plan and/or financial assistance for its employees, but a closer look at the provision readily shows that this power is not absolute.The retirement plan must be anearlyretirementincentiveplan and such early retirement incentive plan or financial assistance must befor the purpose of retirement.
The fact that GSIS changed the name from "Employees Loyalty Incentive Plan" to "Retirement/Financial Plan" does not change its essential nature.A perusal of the plan shows that its purpose is not to encourage GSISs employees to retire before their retirement age, but to augment the retirement benefits they would receive under our present laws.Without a doubt, the GSIS RFP is a supplementary retirement plan, which is prohibited by the Teves Retirement Law.
Second issue:None of the COA decisions nullified the Board Resolutions adopted by GSISs Board of Trustees.What the COA decisions affirmed were the disallowances made by GSISs own Corporate Auditor, Dimagiba.It is irrelevant that COA, in its decisions, touched upon issues not brought before it, or that it referred to its general counsels opinion on the GSIS RFP, as these were done only to reinforce COAs position.They have no bearing upon the weight of COAs decisions, which are based upon our existing laws and jurisprudence.

As for Dimagiba, while she may have relied on the opinion of COAs legal counsel to support the disallowances she had made, it is worthy to note that she had already informed Garcia of the GSIS RFPs illegality even before she sought COAs opinion on the matter.Moreover, neither Dimagibas nor COAs confidence in the opinion of COAs general counsel could be faulted, as under Presidential Decree No. 1445, or the Government Auditing Code of the Philippines, one of the responsibilities of COAs legal office is to interpret pertinent laws and auditing rules and regulations.