TEODORO J. SANTIAGO, PETITIONER, VS. THE COMMISSION ON AUDIT, AND THE GOVERNMENT SERVICE INSURANCE SYSTEM, RESPONDENTS.

Santiago versus Commission on Audit

The Case

This is a petition for certiorari brought by Teodoro J. Santiago against the Commission on Audit and the Government Service Insurance System, asking the Supreme Court to set aside the Commission on Audit's refusal to compute his retirement benefits on the basis of the higher salary he actually received while serving in a second government position. The case matters because it fixes the meaning of the phrase "highest basic salary rate" in the retirement law, and because it announces a rule of interpretation every examinee should carry: retirement laws are read liberally in favor of the retiree.

Procedural History

There was no trial court and no intermediate appellate court in this case. The petitioner retired on March 1, 1989. The Government Service Insurance System computed his retirement benefits using 13,068 pesos as his highest basic salary rate. The Commission on Audit disagreed and paid him on the basis of only 7,219 pesos, his salary as State Auditor IV. The petitioner requested a recomputation. The Commission on Audit denied the request on December 8, 1989, and he was notified on February 5, 1990. On March 7, 1990, he came directly to the Supreme Court by petition for certiorari, alleging grave abuse of discretion on the part of the Commission on Audit.

Facts

Teodoro J. Santiago was employed in the Commission on Audit as State Auditor IV with a monthly salary of 7,219 pesos. In 1988 he was assigned to the Commission on Audit Auditing Unit at the Department of Transportation and Communications and detailed to the Manila International Airport Authority. On July 1, 1988, the board of directors of the Manila International Airport Authority approved his designation as Assistant General Manager for Finance and Administration, effective August 15, 1988, subject to three conditions: that he retain his plantilla position in the Commission on Audit; that his compensation from the Manila International Airport Authority be the difference between the salary of Assistant General Manager and that of State Auditor IV; and that his retirement benefits be chargeable against the Commission on Audit.

The Commission on Audit, through its Chairman, interposed no objection to paying him the difference between his salary of 7,219 pesos and that of Assistant General Manager, which reportedly amounted to 13,068 pesos a month, or a monthly difference of 5,849 pesos, provided that he be formally designated and not appointed, and that the payment be approved by the same office. On August 10, 1988, Secretary Reinerio O. Reyes, concurrently chairman of the board of directors, issued an office order formally designating the petitioner as Acting Assistant General Manager for Finance and Administration, effective August 16, 1988.

The petitioner served in that capacity and collected the differential salary of 5,849 pesos plus his salary of 7,219 pesos, for a total compensation of 13,068 pesos. He received this compensation until December 5, 1988, when he was transferred to the Presidential Management Staff. He retired on March 1, 1989, after forty four years in the government. The Government Service Insurance System used 13,068 pesos as the basis of his retirement benefits, but the Commission on Audit paid on the basis of 7,219 pesos only.

Issues

• Whether or not the additional compensation received by the petitioner from the Manila International Airport Authority may be considered part of his highest basic salary rate in computing his retirement benefits under Section 9 of Executive Order Number 966.
• Whether or not the term appointment in Section 9 of Executive Order Number 966 includes a designation, so that salary fixed by designation falls within the highest salary rate.

Applicable Provisions

Section 9 of Executive Order Number 966 provides:

Section 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 or 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 and budget circular, 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 or employee.

This is the very provision whose meaning the Court must settle, because it defines what salary may be counted in computing retirement benefits.

Section 17 of Act Number 4187 provides:

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: (1) Officers serving as chairman or members of entities and enterprise organized, operated, owned or controlled by the government, who may be paid per diem for each meeting actually attended or when an official travel; (2) Auditors and accountants; (3) Provincial and municipal treasurers and their employees; (4) Employees serving as observers of the Weather Bureau; and (5) Those authorized to receive extra or additional compensation by virtue of the provision of this Act.

This provision supplies the legal basis for the petitioner's additional compensation, since auditors and accountants are among the excepted officers.

Ruling

On the first issue, the Court held that the additional compensation was in the nature of a salary and not a mere honorarium. An honorarium is something given not as a matter of obligation but in appreciation for services rendered, a voluntary donation in consideration of services which admit of no compensation in money. The additional compensation given to the petitioner was received by him as a matter of right in recompense for services rendered as Acting Assistant General Manager, and even the Chairman of the Commission on Audit referred to it as his salary differential. The Court also noted that there was no dispute as to the legality of his occupying the second position and receiving additional compensation, which the Solicitor General admitted was allowed under Section 17 of Act Number 4187.

On the second issue, the Court acknowledged that strictly speaking there is a legal distinction between appointment and designation. Appointment is the selection by the proper authority of an individual who is to exercise the functions of a given office, while designation connotes merely the imposition of additional duties upon a person already in the public service by virtue of an earlier appointment. Appointment is essentially executive while designation is legislative in nature. Nevertheless, the Court agreed with the petitioner that in the law in question the term appointment was used in a general sense to include designation. The Court reasoned that Section 9 itself includes in the highest salary rate compensation for substitutionary services or in an acting capacity, which need not always be conferred by a permanent appointment. A contrary reading would militate against the letter of the law and its spirit, which seeks to extend the maximum benefits to the retiree as an additional if belated recognition of his many years of loyal and efficient service.

The Court added that the second position was distinct and separate from his position in the Commission on Audit, and that he occupied it not for a few days or weeks but for more than three months, so that his designation was not a mere accommodation. Finally, the Court laid down the guiding principle that 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.

Doctrine

Retirement laws are interpreted liberally in favor of the retiree, since their purpose is to provide for his sustenance and comfort after years of public service. The term appointment in Section 9 of Executive Order Number 966 is used in a general sense to include designation, so that salary fixed by a designation, including compensation for substitutionary services or in an acting capacity, forms part of the highest basic salary rate. Additional compensation received as a matter of right in recompense for services rendered is salary and not an honorarium, and therefore counts in the computation of retirement benefits. Double appointments are not prohibited as long as the positions are not incompatible, except that the officer cannot receive additional or double compensation unless specifically authorized by law, as auditors and accountants are under Section 17 of Act Number 4187.

Disposition

The petition was granted, the challenged resolution of the Commission on Audit was set aside, and the Court directed the computation of the petitioner's retirement benefits on the basis of his highest basic salary rate of 13,068 pesos.

Remember This

Memorize the line that retirement laws are interpreted liberally in favor of the retiree, and that appointment in Section 9 of Executive Order Number 966 includes designation. Examiners use this case to test the distinction between appointment and designation, the treatment of additional compensation as salary rather than honorarium, and the liberal construction of retirement statutes.