CASE DIGEST: Land Bank v. Naval

G.R. No. 195687 : April 7, 2014

LAND BANK OF THE PHILIPPINES, Petitioners, v. DAVID G. NAVAL, JR., ET AL., Respondents.



In accordance with Letters of Implementation No. (LOI) 104 dated October 12, 1979, petitioner LBP granted its officers and employees Cost of Living Allowance (COLA) equivalent to three hundred pesos (PhP 300) or forty percent (40%) of their monthly basic salary, whichever is higher, every month.

Further, pursuant to LOI 116 dated May 12, 1980, LBP gave its employees a monthly allowance called a "Bank Equity Pay" (BEP). For employees whose monthly basic salary is one thousand five hundred and one pesos (PhP 1,501) and above, the amount of BEP is five hundred pesos (PhP 500), while for those with a basic pay of one thousand five hundred to standardize compensation of government officials and employees, including those in government-owned and controlled corporations, taking into account the nature of the responsibilities pertaining to, and the qualifications required for, the positions concerned;

On July 6, 1988, the LBP Board of Directors issued Resolution No. 88-1098 integrating the COLA into the basic pay of LBP employees. The Resolution took effect on May 16, 19899 supposedly without any opposition from the employees of LBP.

On August 21, 1989, Republic Act No. (RA) 6758, entitled An Act Prescribing a Revised Compensation and Position Classification System in the Government and For Other Purposes, which is otherwise known as the Salary Standardization Law (SSL), was enacted. Section 12 of said law provides, inter alia, for the integration/consolidation of allowances and additional compensation into the standardized salary rates save for certain additional compensation enumerated therein and others that the Department of Budget and Management (DBM) is mandated to determine.

In compliance with the mandate contained in the SSL, DBM issued on October 2, 1989 Corporate Compensation Circular No. 10 (DBM-CCC No. 10), entitled Rules and Regulations for Implementation of the Revised Compensation and Position Classification System Prescribed under R.A. No. 6758 for Government-Owned and/or Controlled Corporations (GOCCs) and Government Financial Institutions (GFIs).

DBM-CCC No. 10 specifically stated that the COLA and BEP granted to employees of GOCCs and GFIs shall be deemed integrated into the basic salary effective July 1, 1989.11 Thus, in conformity with the provisions of DBM-CCC No. 10, LBP likewise integrated the BEP into the basic pay of its employees effective as of July 1, 1989.

On February 23, 1995, RA 7907 removed petitioner LBP from the coverage of the SSL.

On August 12, 1998, this Court nullified DBM-CCC No. 10 in De Jesus v. Commission on Audit13 for the reason that it was not published in the Official Gazette or in a newspaper of general circulation, as required by law.

The DBM remedied its circulars defect by publishing DBM-CCC No. 10 in the Official Gazette in March 1999, which was released on July 1, 1999. Hence, DBM-CCC No. 10, as published, took effect on July 16, 1999.

It appears that after the publication of the Decision in De Jesus, respondents started negotiating with petitioner LBP for the payment of their COLA and BEP benefits over and above their monthly basic salaries, and back payment of the same from the time that LBP stopped to extend them until the finality of the Decision in De Jesus.

On May 17, 2002,14 respondents wrote then LBP President Margarito Teves appealing for the restoration of their COLA and BEP. Receiving no immediate response, respondents sent a final demand letter dated June 21, 2002 reiterating the claim for the payment of their COLA and BEP from July 1, 1989 to March 15, 1999, inclusive.

Petitioner LBP, however, in a letter dated June 25, 2002 denied respondents appeal based on a Civil Service Commission (CSC) ruling citing DBM Budget Circular 2001-03 which prohibits the payment of COLA and similar allowances on top of the basic salary on the ground that it would constitute double compensation.

Thus, on August 30, 2002, respondents instituted a Petition for Mandamus before the RTC of Manila, Branch 40, docketed as Civil Case No. 02-104483 to compel LBP to pay their COLA and the BEP allowances over and above their basic salaries because of their alleged clear legal right to receive these allowances under LOI Nos. 104 and 116.

On June 7, 2004, the trial court issued a Decision19 in respondents favor, granting the petition for mandamus and ordering LBP to pay herein respondents claim.

When its Motion for Reconsideration was denied by the court a quo, petitioner LBP interposed an appeal with the CA, the recourse docketed as CA-G.R. SP No. 99154. Petitioner LBP filed its Memorandum on June 13, 2007.24 Respondents, on the other hand, opted to file a Motion to Dismiss Appeal supposedly because LBPs resort was the wrong mode and the appeal is wanting of material dates.

Eventually, the appellate court issued a Decision dated October 11, 2010 affirming with modification the RTC Decision. The Court, in a minute resolution, denied the petition on July 25, 2011. Hence, this Omnibus Motion.

ISSUE: Whether or not respondents and intervenors are entitled to the COLA and the BEP on top of their basic salaries from 1989 up to the present.


After careful re-consideration and re-evaluation of the facts and the law, we are constrained to rule in the negative.

LABOR LAW: cost of living allowance

The SSL Remained Valid Despite the Nullification of DBM-CCC No. 10

To recall, respondents demand for the payment of their COLA and BEP on top of their basic salaries came after this Courts promulgation of De Jesus, which nullified DBM-CCC No. 10 for non-publication. It is their position that by the nullification of DBM-CCC No. 10 which expressly named the COLA and BEP as integrated into the basic salary, LBPs integration of the COLA and the BEP is likewise invalid. In other words, respondents equate the nullification of the implementing rules with the nullification of the very law which orders the integration of these allowances into the basic salary. This Court had already refuted the soundness of this claim.

In Napocor Employees Consolidated Union (NECU) v. National Power Corporation, we clarified that the nullification of DBM-CCC No. 10 is irrelevant to the validity of the provisions of the SSL:

We hold that Rep. Act No. 6758 (Compensation and Classification Act of 1989) can be implemented notwithstanding our ruling in De Jesus vs. Commission on Audit. While it is true that in said case, this Court declared the nullity of DBM-CCC No. 10, yet there is nothing in our decision thereon suggesting or intimating the suspension of the effectivity of Rep. Act No. 6758 pending the publication in the Official Gazette of DBM-CCC No. 10. For sure, in Philippine International Trading Corporation vs. Commission on Audit, this Court specifically ruled that the nullity of DBM-CCC No. 10 will not affect the validity of Rep. Act No. 6758. Says this Court in that case:

The nullity of DBM-CCC No. 10, will not affect the validity of R.A. No. 6758. It is a cardinal rule in statutory construction that statutory provisions control the rules and regulations which may be issued pursuant thereto. Such rules and regulations must be consistent with and must not defeat the purpose of the statute. The validity of R.A. No. 6758 should not be made to depend on the validity of its implementing rules.

Thus, in resolving the issue of whether the COLA and/or the BEP should be paid separately from the basic salary to the employees of LBP as of July 1, 1989, we should look into the very provisions of the SSL. For emphasis, Sec. 12 of the SSL is provided anew:

Section 12. Consolidation of Allowances and Compensation. All allowances, except for representation and transportation allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government vessels and hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.

Existing additional compensation of any national government official or employee paid from local funds of a local government unit shall be absorbed into the basic salary of said official or employee and shall be paid by the National Government.

From the foregoing provision, it is immediately apparent that the SSL mandates the integration of all allowances except for the following:
1. Representation and transportation allowances;
2. Clothing and laundry allowances;
3. Subsistence allowance of marine officers and crew on board government vessels;
4. Subsistence allowance of hospital personnel;
5. Hazard pay;
6. Allowances of foreign service personnel stationed abroad;
7. And such other additional compensation not otherwise specified herein as may be determined by the DBM.
Since the COLA and the BEP are among those expressly excluded by the SSL from integration, they should be considered as deemed integrated in the standardized salaries of LBP employees under the general rule of integration.

In any event, the Court finds the inclusion of COLA in the standardized salary rates proper. The integration of COLA into the standardized salary rates is not dependent on the publication of CCC 10 and NCC 59. This benefit is deemed included in the standardized salary rates of government employees since it falls under the general rule of integration all allowances.

Under the doctrine of stare decisis et non quieta movere, a point of law already established will be followed by the court in subsequent cases where the same legal issue is raised. Thus, we can come to no other conclusion than to deny the payment of the COLA on top of the LBP employees basic salary from July 1, 1989 because (1) it has not been expressly excluded from the general rule on integration by the first sentence of Sec. 12 of the SSL and (2) as we have explained in Gutierrez, the COLA is not granted in order to reimburse employees for the expenses incurred in the performance of their official duties.
WHEREFORE, the instant petition is GRANTED and the Decision dated October 11, 2010 and the Resolution dated February 22, 2011 of the Court of Appeals in CA-G.R. SP No. 99154, which ordered the back payment of the Cost of Living Allowance (COLA) and the Bank Equity Pay (BEP) to respondents, are hereby REVERSED and SET ASIDE.