JOSE O. TEODORO AND ESPARANZA ZACARIAS, PETITIONERS, VS. HON. GUILLERMO CARAGUE, AS INCUMBENT SECRETARY OF BUDGET AND MANAGEMENT AND MESSRS. ALBERTO ROMULO AND MANUEL ALBA, RESP…

Teodoro versus Carague

The Case

This is a petition filed directly with the Supreme Court by two retired officers of the Philippine Foreign Service, Jose Teodoro and Esperanza Zacarias, against the incumbent Secretary of Budget and Management, Guillermo Carague, and his predecessors in that office. The petitioners ask the Court to annul its own earlier resolutions dismissing their first petition, and to compel the release of the balance of their terminal leave pay computed in United States dollars at the rate of two pesos to one dollar. The case matters for two reasons: it is a rare instance in which the Court set aside a judgment that had long become final in the name of substantial justice, and it is a leading authority on the non-retroactivity of a department order that would amend a presidential decree.

Procedural History

The petitioners first came to the Supreme Court on a petition for mandamus and damages, seeking to compel the then Budget Minister to release the balance of their terminal leave pay. The Court dismissed that petition in a resolution promulgated in March 1987, and denied both the motion for reconsideration and the second motion for reconsideration in resolutions issued in September 1987 and November 1987. The petitioners received the resolution denying their second motion for reconsideration in December 1987. About three years later, in November 1990, they filed the present petition for review, asking the Court to annul those three resolutions and to grant the reliefs they had earlier been denied.

Facts

Jose Teodoro retired from the Foreign Service with the rank of Ambassador effective March 14, 1977. His highest basic salary at retirement was 29,866 pesos per annum, or 2,488.83 pesos per month. In about thirty one years of government service he accumulated 285.96 working days of unenjoyed leave credits, of which 275.082 days were earned abroad and the remaining 10.834 days in the Home Office. Esperanza Zacarias retired with the rank of Career Minister effective June 20, 1980, with a highest basic salary of 3,112 pesos per month. She accumulated 980.328 days of leave credits, but under the Foreign Service Act and its implementing regulations she was entitled to a maximum of only 120 days of vacation leave and 240 days of sick leave, or 360 days in all, forfeiting the excess of 620 days. It was admitted that all of her 360 compensable days were earned abroad.

Because Teodoro retired in 1977, his unspent leave credits earned abroad were computed under the rules existing before Presidential Decree No. 1285 took effect on January 1, 1978, under which such credits were payable in United States dollars at the rate of two pesos to one dollar. Zacarias retired in 1980, but she had earned the first 120 days of her vacation leave credits and the first 240 days of her sick leave credits before January 1, 1978, so the same rule applied to her. On that basis the Ministry of Foreign Affairs computed Teodoro's entitlement at 15,000 dollars, and Zacarias's 360 days at 27,326.02 dollars, from which was deducted the 16,327.22 dollars she had already received from the Philippine Consulate General in San Francisco, with a trust deposit of 2,899.10 dollars refunded and added back, leaving her a net of 13,846.90 dollars.

The Ministry referred both claims to the Commission on Audit, which concurred with the computations and passed the claims in audit. The Foreign Minister then informed the Budget Minister that the Ministry would pay the terminal leave benefits in United States dollars at two pesos to one dollar, and requested the release of 429,558 pesos. The Budget Minister denied the request and released only 123,416.66 pesos, relying on Joint Ministry of Foreign Affairs and Ministry of the Budget Order No. 30-83 dated December 1, 1983, which required payment in Philippine pesos converted at the rate of exchange prevailing at the time of retirement.

Issues

• Whether or not the grounds in support of the petition are meritorious, considering that the earlier judgment had already become final.
• Whether or not the petitioners are entitled to the reliefs demanded.

Applicable Provisions

Section 6 of Joint Ministry of Foreign Affairs and Ministry of the Budget Order No. 30-83, dated December 1, 1983, provides:

Section 6. The foreign service portion of the terminal leave credits earned prior to 1 January 1978, computed on the basis of highest salary received shall be converted to US dollars at the rate of P2.00 to $1.00 pursuant to Department Order No. 35-67 dated 9 October 1967 and Section 10 of P.D. No. 1285, and shall be payable in Philippine pesos at the rate of exchange prevailing at the time of retirement, resignation, separation from the service or death.

This is the order the Budget Minister applied, and the Court held that it cannot apply retroactively to the petitioners, who retired before it took effect.

Section 3 of Department Order No. 35-67, dated October 9, 1967, provides:

Section 3. Leave credits. Upon application, the money value of the leave credits earned abroad of any official, officer, or employee who retires, resigns or dies while in the service may be paid to him in foreign currency at the rate P2.00 to $1.00.

This is the rule the Court held applicable to the petitioners, because it governed at the time of their retirement and does not require conversion at the rate prevailing at retirement.

Section 10 of Presidential Decree No. 1285, which took effect on January 13, 1978, provides:

Section 10. Accumulated leaves. Upon retirement, death or separation from the service of any officer or employee in the foreign service, unenjoyed vacation or sick leave credits shall be computed on the basis of actual salary and shall be paid in Philippine pesos and otherwise shall be on the same basis as home office personnel who retire in the Philippines: Provided, That any accumulated leaves earned as of the effectivity of this Decree may be paid to officers and employees leaving the service on the basis of applicable rules and regulations existing prior to this Decree.

The proviso is the decisive text: leave credits earned before the decree took effect are paid under the rules existing prior to the decree, which is precisely the petitioners' situation.

Ruling

On the first issue, the Court acknowledged that the earlier decision had long become final, and that the old case and the present case have identity of parties, subject matter, and cause of action. Ordinarily the petition would be barred. But the Court held that, considering the surrounding circumstances, technical rules may be tempered with substantive justice, since rules of procedure are intended to promote, not to defeat, substantial justice. It also invoked its inherent power to amend, modify, or reconsider a final judgment when supervening events make it imperative in the higher interest of justice, noting that no private individual would be financially prejudiced and that the government itself accepts that there is a price to pay for distributive justice. The Court answered the objection of some members by holding that res judicata must at times yield to other policies, and that it is to be disregarded if its application would involve the sacrifice of justice to technicality.

On the second issue, the Court held that Order No. 30-83, which took effect on December 1, 1983, cannot apply retroactively to the claims of the petitioners, who retired in March 1977 and June 1980. The applicable law is Section 3 of Department Order No. 35-67, which does not require that the foreign currency due be paid in Philippine pesos converted at the rate prevailing at retirement. The Court added that to apply Order No. 30-83 to leaves earned before Presidential Decree No. 1285 took effect would in effect amend the decree by a mere department order, and a law cannot be amended by a simple department order. Finally, since other officers and employees similarly situated were paid at the rate of exchange at the time of payment, to pay the petitioners at the retirement rate would discriminate against them and cause injustice.

Doctrine

First, a department order cannot amend a presidential decree; a mere order of department heads must yield to the law it purports to implement. Second, a department order operates prospectively and cannot be applied retroactively to rights that vested before its effectivity, such as terminal leave benefits fixed at the time of retirement. Third, under the proviso of Section 10 of Presidential Decree No. 1285, accumulated leaves earned before the decree took effect are paid under the rules and regulations existing prior to the decree. Fourth, res judicata, though a pillar of public policy, may be set aside where its application would sacrifice justice to technicality and bar the vindication of a legitimate grievance, especially where no private party and no public interest would be prejudiced.

Disposition

The Court granted the petition and ordered the Budget Secretary to release to the Department of Foreign Affairs the sum of 306,141 pesos for the payment of the balance due the petitioners on their claims for terminal leave pay.

Remember This

Memorize this line: a law such as Presidential Decree No. 1285 cannot be amended by a simple department order, and a final judgment may be reopened where its rigid application would sacrifice justice to technicality. Examiners use this case to test the hierarchy of laws and the limits of res judicata, often pairing it with questions on the retroactivity of administrative orders.