EUSEBIO G. DIMAANO, PETITIONER, VS. THE AUDITOR GENERAL AND THE GOVERNMENT SERVICE INSURANCE SYSTEM, RESPONDENTS.

Dimaano versus Auditor General

The Case

This is a petition for review brought by Eusebio G. Dimaano against the Auditor General and the Government Service Insurance System, asking the Supreme Court to order the refund of a sum deducted from the lump sum annuity he received upon compulsory retirement from government service. The case matters because it settles a recurring question in the retirement law: whether the requirement of at least five years of contributions applies to an employee who is compulsorily retired at age sixty-five, and whether the System may deduct the missing contributions from his annuity. It is the case that keeps the Espejo doctrine alive against the supposed inroad of the Bautista ruling.

Procedural History

Dimaano first wrote to the General Manager of the Government Service Insurance System, claiming a refund of the amount deducted from his annuity and invoking the Bautista decision. The General Manager refused, and refused again on reconsideration. Dimaano then appealed to the Auditor General, who upheld the General Manager and denied the claim. After receiving notice of that decision, Dimaano gave notice of his intention to appeal and, within the reglementary period, sent his petition for review to the Supreme Court by registered mail. The case thus reached the Court as a petition for review under Rule 45 of the Rules of Court, and the Court affirmed the Auditor General.

Facts

On 16 January 1953, Eusebio G. Dimaano retired as a Supervising Treasurer in the Department of Finance under Commonwealth Act No. 186, as amended by Republic Act No. 660. He was awarded the total sum of 20,500 pesos and 80 centavos as his annuity for the first five years of retirement. From that amount, 1,012 pesos and 68 centavos was deducted, and only 19,488 pesos and 12 centavos was paid to him in February 1953.

On 6 October 1958, Dimaano wrote the General Manager of the System, claiming that the deduction was illegal under the Supreme Court's decision in Bautista versus the Auditor General, and asking for a refund. The General Manager answered that only 990 pesos had been deducted, not 1,012 pesos and 68 centavos, and that the deduction was made under Section 12, paragraph (a), of Commonwealth Act No. 186, as amended, because the retiree must have made contributions for at least five years.

Dimaano replied that Republic Act No. 1573, which took effect on 16 June 1956, did not apply to him, since the law in force at the time of his retirement was Republic Act No. 660. The exchange of letters continued through a request for reconsideration, which the General Manager denied on 31 January 1959. Dimaano appealed to the Auditor General, who on 17 April 1959 upheld the General Manager and denied the claim. Hence the petition for review.

Issues

• Whether or not Commonwealth Act No. 186, as amended by Republic Act No. 660, the law in force at the time of Dimaano's compulsory retirement, authorized the deduction of the required contributions from his annuity.
• Whether or not the requirement of at least five years of contributions applies to one compulsorily retired at age sixty-five, and not only to one who exercises the option to retire at age fifty-seven.
• Whether or not the Court abandoned the Espejo doctrine in the Bautista case.

Applicable Provisions

Section 12, paragraph (a), of Commonwealth Act No. 186, as amended by Republic Act No. 660, provides:

On completion of thirty years of total service and attainment of age fifty-seven years, a member shall have the option to retire. In all cases, the last three years of service before retirement must be continuous, and he has made contributions for at least five years, which contributions may, upon his request approved by the Board, be deducted from his life annuity under such terms and conditions as the Board may prescribe.

This is the very provision under which the deduction was made, and its phrase "In all cases" is the textual anchor of the ruling.

Section 12, paragraph (c), of the same Act provides:

Retirement shall be automatic and compulsory at the age of sixty-five years, if he has completed fifteen years of service, and if he has not, he shall be allowed to continue in the service until he shall have completed fifteen years unless he is otherwise eligible for disability retirement.

This paragraph governs Dimaano's compulsory retirement, and the question is whether the five-year contribution requirement reaches it.

Republic Act No. 1573, the later amendatory act, provides:

In all cases of retirement under this Act, he must have made contributions for at least five years, which contribution may, upon his request approved by the Board, be deducted from his life annuity under such terms and conditions as the Board may prescribe.

The Court read this as a mere clarification of an ambiguity, not as a new burden, so it did not change the result for Dimaano.

Ruling

On the first issue, the Court held that the deduction was authorized. Section 12, paragraph (a), expressly allows the contributions to be deducted from the life annuity, upon the retiree's request approved by the Board, under such terms as the Board may prescribe. The petitioner's contention that no deduction was allowed was therefore untenable.

On the second issue, the Court held that the five-year contribution requirement applies to compulsory as well as optional retirement. Speaking through Justice Padilla, the Court quoted with approval its earlier ruling in Espejo versus the Auditor General:

This position is untenable. The fact that the condition that the member must make five year contributions at least is not repeated in paragraph (c), does not alter its character of general condition precedent to retirement benefits; the preceding expression in paragraph (a), "In all cases, contributions for at least five years," makes it clear that the contributions must have been made whether retirement is optional or compulsory.

The Court explained the reason behind the rule: when the retirement system was established, many employees were at once eligible to retire, yet the fund could not meet the obligations, because contributions began only on the last day of the third calendar month following approval of the law. Hence the law requires every retiree, optional or compulsory, to have contributed for at least five years, and if he has not, authorizes the Board to deduct the necessary amount from his annuity. Republic Act No. 1573 merely clarified the ambiguity caused by the absence of the requirement in paragraph (c).

On the third issue, the Court held that Bautista did not abandon Espejo. The Bautista case involved only the discounting of a sum equivalent to five percent a year compounded annually from the present value of a lump sum annuity, not a deduction paid into the retirement fund as in Espejo. In fact, Bautista itself said there was no cogent reason for abandoning the rule. Having so ruled, the Court found it unnecessary to pass upon the Solicitor General's arguments on failure to seek reconsideration and on laches.

Doctrine

The requirement of at least five years of contributions is a general condition precedent to retirement benefits under Commonwealth Act No. 186, as amended, and applies whether retirement is optional at age fifty-seven or automatic and compulsory at age sixty-five. The phrase "In all cases" in Section 12, paragraph (a), supplies the requirement even though paragraph (c) does not repeat it. The Board of Trustees may deduct the necessary contributions from the retiree's annuity upon his request approved by the Board. Republic Act No. 1573 did not create a new requirement; it clarified an ambiguity. And the Bautista ruling, which bars discounting the present value of a lump sum annuity, does not authorize a refund of contributions deducted for the retirement fund.

Disposition

The Supreme Court affirmed the decision of the Auditor General denying the claim, with costs against the petitioner Dimaano.

Remember This

Memorize the line: the five-year contribution requirement applies "in all cases" of retirement, optional or compulsory, and may be deducted from the annuity. Examiners use this case to test the distinction between the Bautista discount and the Espejo contribution deduction, and to test whether a later amendatory act clarifies or changes the retirement law.