JESUS N. BORROMEO, PETITIONER, VS. THE HON. CIVIL SERVICE COMMISSION AND SECRETARY OF BUDGET AND MANAGEMENT, RESPONDENTS.

Should the terminal leave pay of petitioner Borromeo,
Chairman of the Civil Service Commission (CSC) until his retirement on April 1, 1986, be computed on the
basis of the highest monthly salary plus cost of living allowance (COLA) and
representation and transportation allowance (RATA) or solely on the basis of
highest monthly salary without said allowances? 
This is the issue that confronts the Court.

On August 18, 1988,
the petitioner wrote a letter to the Commission on Audit (COA) Chairman,
coursed through the CSC Chairman, requesting an opinion on whether or not the
money value of the terminal leave of retired Constitutional Commission members
should include the allowances received at the time of retirement.  The petitioner, in his letter, further stated
that while retired members of other Constitutional Commissions received
terminal leave pay computed on the basis of highest   monthly salary including allowances, the former’s
terminal leave was computed solely on the basis of highest monthly salary.

In a First Indorsement to the COA
Chairman on September 1, 1988,
the CSC Chairman recommended the approval of the petitioner’s request for
payment of the money value of his terminal leave based on salary plus allowances.

On September 28, 1989, the COA rendered Decision No. 992
(hereinafter referred to as the COA decision) stating that “in line with the
action taken by this Commission in the previous similar cases of former COA
Commissioners Hermogenes P. Pobre
and Silvestre D. Sarmiento,” the COA “will interpose
no objection” to the petitioner’s claim.

Upon the petitioner’s request for payment of terminal leave
differential representing the unpaid COLA and RATA amounting to P111,229.04, the CSC Chairman informed the petitioner that the
release of the corresponding advice of allotment and cash outlay to cover the payment of his terminal leave
differential had already been requested from the Department of Budget and
Management (DBM).

On January 25, 1990, in a letter
addressed to the CSC Chairman, the DBM denied the petitioner’s request for
payment of terminal leave differential for the following reasons, among others:

1) Computation of the money
value of vacation and sick leave is based on “basic pay” or “basic salary”
pursuant to the provisions of the Revised Administrative Code, as amended by
R.A. No. 1081.

2) Under Section 2(1) of
P.D. No. 1146, the term salary refers to the basic pay or salary received by an
employee, excluding per diems, bonuses, overtime pay and allowance.

3) The cases of former COA
Commissioners Pobre and Sarmiento
cannot be validly invoked as precedents for purposes of DBM Budgetary action
since said claims were processed without prior involvement of the DBM.

Faced with the DBM refusal to release the corresponding
allotment, the CSC yielded to DBM instead of asserting its initial
determination.  It issued Resolution No.
90-514 dated May 30, 1990
wherein the Commission deemed it proper not to rule on the issue on “ethical
considerations” and “compulsions of delicadeza” and
advised the petitioner to file an action for declaratory relief (sic) on the issue with the Supreme Court.

Petitioner Borromeo sought
reconsideration of CSC Resolution No. 90-514, reasoning that neither the CSC
Resolution nor the opinion of the DBM Secretary could prevail over the COA
decision which had become final and executory.

On October 18, 1990,
the CSC issued Resolution No. 90-945 denying reconsideration of the
petitioner’s case.  Inspite
of the CSC Chairman’s earlier approval of the claim for payment, the CSC ruled
that the COA decision “has no sufficient legal mooring and therefore cannot be
the basis for allowing payment of the claims.” The Resolution likewise cited a June 13, 1990 letter from former Court
Administrator Meynardo A Tiro
informing the CSC that “the money value of the terminal leave credits of the
Justices of the Supreme Court and other members of the Judiciary is based only
on the highest basic salary (plus longevity pay) but excluding RATA as
certified to by our Director of Fiscal Management and Budget Office.”

Hence, this petition.

The Secretary of Budget and Management was ordered impleaded try the Court in a resolution
dated January 31, 1991.

The petitioner seeks the nullification of CSC Resolution Nos.
90-514 and 90-945.  He urges that the COA
decision which interposed no objection to the computation of his terminal leave
pay based on salary plus allowances had already become final and executory since no timely appeal had been taken therefrom.

Respondent CSC, on the other hand, maintains that the COA
decision is not final and conclusive since said decision merely stated that the COA will not interpose any
objection to the payment of the petitioner’s claim.  More importantly, respondent CSC adds, the determination of the legality of claims on leave
matters is within the province of the CSC.

On this preliminary issue, the Court rules against the
petitioner’s assertion that the COA decision has become final and executory and, therefore, beyond review; that the DBM has
no alternative but to obey it.  Article
IX-A, Section 7 of the 1987 Constitution provides:

“xxx
Unless otherwise provided by this Constitution or by law, any decision,
order or ruling of each Commission may be brought to the Supreme Court on certiorari
by the aggrieved party within thirty (30) days from receipt of a copy thereof.”

The above-cited article refers to an aggrieved party raising a decision to this Court.  Unfortunately for the petitioner, neither the
Civil Service Commission nor the Secretary of Budget and Management may be
viewed as an aggrieved party.  The CSC is
not an aggrieved party because it recommended the approval of the petitioner’s
request for payment of terminal leave computed on the basis of his monthly
salary plus allowances and likewise interceded in behalf of the petitioner for
the release of funds from the DBM.  The COA upheld this initial
position.  Nor is the DBM an aggrieved
party because it was not privy to the case before the COA.  Moreover, even if the DBM was eventually
apprised of the COA decision, the DBM’s recourse was
not to bring the matter on a petition for certiorari before the
Court.  As the agency tasked to release
government funds, it simply ignored the COA ruling with which it
disagreed.  It refused to approve the
release of allotment and outlay for terminal leave differential since in its
opinion, payment thereof had no legal basis. 
The records do not show any authority of COA to compel acceptance of its
ruling in this particular case.

The respondent CSC’s stance, however,
that it is the body empowered to determine the legality of claims on leave
matters, to the exclusion of COA, is not well-taken.  While the implementation and enforcement of
leave benefits are matters within the functions of the CSC as the central
personnel agency of the government, the duty to examine accounts and
expenditures relating to leave benefits properly pertains to the COA.  Where government expenditures or use of funds
is involved, the CSC cannot claim an exclusive domain simply because leave
matters are also involved.

The COA, the CSC, and the Commission on Elections are equally pre-eminent
in their respective spheres.  Neither one
may claim dominance over the others.  In
case of conflicting rulings, it is the Judiciary which interprets the meaning
of the law and ascertains which view shall prevail.

The basic question for the Court’s consideration is whether or
not RATA and COLA should be added to the highest monthly salary in computing
the petitioner’s terminal leave pay.

The petitioner anchors his claim on the Memorandum Order issued
by President Marcos on November 20,
1980.  Apparently, this
Memorandum Order was also the basis for the COA decision, invoked by the
petitioner as final and executory, interposing no
objection to his claim for terminal leave differential.  The Memorandum Order reads:

“TO:  The Chairman

Commission on Audit

Quezon City

With reference to the request of that Office for clarification on
the accumulated leave credits of retired Chairman Perez and Commissioners Duque and Bayot, I hereby direct that:

The computation of the terminal leave in question shall be computed
on the basis of the total number of days of leave credits each accumulated by
Chairman Perez and Commissioners Duque and Bayot on the day of their retirement, not on the basis of
300 days as provided in Sec. 1014 of P.D. 1587.

The money value of the terminal leave shall be paid as computed on the basis of the highest monthly
salary including allowance received at the time of the retirement.

(Sgd.) FERDINAND E. MARCOS

President of the Philippines

November 20, 1980.”
(p. 27, Rollo)

The above Order was the former President’s response to a July 7,
1980 query initiated by former COA Chairman Francisco A. Tantuico,
Jr. seeking clarification from the Office of the President respecting the claim
of retired Chairman Leonardo B. Perez and Commissioners Venancio
S. Duque and Flores A. Bayot
of the Commission on Elections for the payment of the money value of their
accumulated leaves.  Since the Memorandum
order specifically applies to these three officials, then said Order cannot
automatically benefit others not mentioned therein.  While it has persuasive value as a matter of
contemporaneous interpretation especially as regards Presidential Decrees or
other presidential acts, we cannot confer upon this Order the status of a law of general application.

The petitioner also invokes
Administrative Order No. 44
dated December 13, 1979, extending to the Chairman and members of the Constitutional
Commissions the same benefits enjoyed by retiring members of the Judiciary in
the matter of rationalized rate of allowances and liberalized computation of
retirement benefits and accumulated leave credits.

The Solicitor General, acting on behalf of the CSC and Secretary
of Budget and Management, advances the argument that there is no provision in
Administrative Order No. 444, or in any other law, which expressly authorizes
the inclusion of allowances in the computation of the money value of the petitioner’s accumulated leaves.

The pertinent portions of Administrative Order No. 444 provide:

xxx                            xxx                               xxx

“3.     The accumulated leave
credit of a Chairman/Commissioner of a Constitutional Commission shall be
computed under the same rules as those applicable to members of the Judiciary.

4.       Upon retirement, the
lump sum of five years gratuity as provided under R.A. 3595 for the
Chairman/Commissioner shall be computed on the basis of the highest monthly
salary plus the duly authorized transportation, living and representation
allowances in the last month prior to retirement or expiration of term.”

xxx                            xxx                               xxx

The law pertaining to retirement benefits respecting members of
the Judiciary is Republic Act (R.A.) No.
910, as amended by Presidential
Decree No. 1438, which reads:

xxx                            xxx                               xxx

“Sec. 3. Upon retirement, a justice of the
Supreme Court or of the Court of Appeals, or a judge of the Court of First
Instance, Circuit Criminal Court, Agrarian Relations, Tax Appeals, Juvenile and
Domestic Relations, city or municipal court, or any other court hereafter
established shall be automatically entitled to a lump sum of five years
gratuity computed on the basis of the highest monthly salary plus the highest
monthly aggregate of transportation, living and representation allowances he
was receiving on the date of his retirement; xxx.”

xxx                            xxx                               xxx

It is clear from RA 910 as amended that the five-year gratuity is
based on highest monthly salary plus transportation, living and representation
allowance.  Should the computation of
terminal leave pay, which is given
on the same occasion of retirement and which arises from the same
considerations of government gratitude that for most retirees is based on a lifetime of service, be accorded similar
treatment?

The Solicitor General stresses that under Section 286 of the
Revised Administrative Code, as amended by Republic Act No. 1081 and Executive
Order No. 1077, the computation of the money value of the terminal leave pay is
based only on monthly basic salary.

Section 286 of the Revised Administrative Code, as amended by RA No. 1081, states:

Section 286. When
vacation leave and sick leave may be taken. – Vacation leave and sick
leave shall be cumulative and any part thereof which may not be taken within
the calendar year in which earned may be carried over to the succeeding years,
but whenever any officer, employee, or laborer of the Government of the
Philippines shall voluntarily
resign or be separated from the service through no fault of his own, he shall
be entitled to the commutation of all accumulated vacation and/or sick leaves
to his credit:  Provided, That the total
vacation leave and sick leave that can accumulate to the credit of any officer
of employee shall, in no case, exceed ten months:  Provided, further, That the proper Department
Head may in his discretion authorize the commutation of the
salary that would be received during the
period of vacation and sick leave of any appointed officer or employee or
teacher or laborer of the Philippine Government and direct its payment on or
before the beginning of such leave from the fund out of which the salary would
have been paid:  Provided, furthermore,
That no person whose leave has been commuted following his separation from the
service shall be reappointed or reemployed under the Government of the
Philippines before the expiration of the leave commuted unless he first refunds
the money value of the unexpired portion of the leave commuted.  (Underlining supplied)”

(Executive Order No. 1077 later amended Section 286 by removing
the limitation on the number of days of vacation and sick leaves that a retiree may accumulate, although all employees
are required to go on a minimum of five days vacation leave annually.)

The only provision in Section 286 of the Revised Administrative
Code, as amended, which could seemingly support the Solicitor General’s view is the
above underlined clause which allows the “commutation of salary” of a
government officer, employee or laborer.

“Commutation of salary” as used in Section 286 is, however, not
the same as “commutation of leave credits”. 
The former is applied for by an employee during employment
when he goes on ordinary leave. 
Thus, if his Department Head allows it, the employee may receive his
salary for the period of the vacation or sick leave before the beginning
of such leave; otherwise, he gets his salary only on the pay days covered by
the vacation or sick leave
period or upon returning to work.  In
contrast, commutation of leave credits, more commonly known as terminal leave,
is applied for by an officer or employee who retires, resigns or is separated
from the service through no fault of his own. 
(Manual on Leave Administration
Course for Effectiveness published by the Civil Service Commission, pages
16-17).  In the exercise of sound
personnel policy, the Government encourages unused leaves to be
accumulated.  The Government recognizes
that for most public servants, retirement pay is always less than generous if
not meager and scrimpy.  A modest nest
egg which the senior citizen may look forward
to is thus provided.  Terminal leave
payments are given not only at the same time but also for the same policy
considerations governing retirement benefits.

Since terminal leave is applied for by an officer or employee who
has already severed his connection with his employer and who is no longer
working, then it follows that the terminal leave pay, which is the cash value
of his accumulated leave credits, should not be treated as compensation for
services rendered at that time.  (Re:  Request of Atty. Bernardo Zialcita,
190 SCRA 851 [1990]) It can not be viewed as salary for purposes which would
reduce it.  (supra)
There can thus be no “commutation of salary” when a government retiree applies
for terminal leave because he is not receiving it as salary.  What he applies for is a “commutation of
leave credits.” It is an accumulaton of credits
intended for old age or separation from the service.  Hence, Section 286 of the Revised
Administrative Code is not applicable. 
It cannot be construed as limiting the basis of the computation of
terminal leave pay to monthly
salary only.

In the light of the reasons which impelled the law to include
COLA and RATA in computing retirement benefits of certain officials, we rule
that terminal leave payments must also be governed by the same principle.  COLA and RATA should be included in computing
the terminal leave credits when the officials retire or the official
relationship is lawfully terminated.

The Solicitor General cites our ruling in Paredes
v. Acting Chairman, 116 SCRA 176 [1982] to support his
position.

Commonwealth Act (CA) No. 186, as amended, provides for the
retirement of government employees, other than members of the Judiciary,
Constitutional Commissions and those whose
retirement is not covered by special law.  Section 12(c) of CA 186 reads:

“(c)    Retirement is likewise
allowed to any official or employee,
appointive or elective, regardless of age and employment status, who has rendered a total of at least twenty years of
service, the last three years of which are continuous.  The benefit shall, in additional to the
return of his personal contributions with interest compounded monthly and the
payment of corresponding employer’s premiums described in subsection (a) of
Section five hereof, without interest, be only a gratuity equivalent to one
month’s salary for every year of the first twenty years of service, plus one
and one-half month’s salary for every year of service over twenty but below
thirty years and two month’s salary for every year of service over thirty years
in case of employees based on the highest rate received and in case of elected
officials on the rates of pay as provided by law.  xxx Officials and
employees retired under this Act shall be entitled to the commutation of the
unused vacation and sick leave, based on the highest rate received, which they
may have to their credit at the time of retirement.”

xxx                            xxx                               xxx

Under the last sentence, officials and employees retired under CA
186, as amended, shall be entitled to the commutation of the vacation and sick
leave credits based on the highest rate received.

In Paredes v. Acting Chairman, supra, the Court construed
the phrase “highest rate received” as referring to the retiree’s “highest
monthly salary”:

“The foregoing legal provision (Section 12(c) of CA 186 requires
the computation of the money value of the terminal leave to be based on the
retiree’s highest rate received.  And a
reading of the entire provision shows that the highest rate received refers to
the retiree’s highest monthly salary.”

The petitioner in that case was a former Assistant City Auditor
of Manila who sought to have his RATA included in the computation of his
terminal leave pay.  The Court therein
held that “allowances are not considered part of salary for purposes of
retirement and payment of the money value of terminal leave.”

It must be noted, however, that the Court, in that case,
construed “highest rate received” as highest monthly salary mainly because the
retirement gratuity received by employees under Section 12(c) of CA 186 is
based only on monthly salary. 
Thus, under the aforementioned provision, the benefit for employees
shall be “a gratuity equivalent to one
month’s salary for every year of the first twenty years of service, plus
one and one-half month’s salary for every year of service over 20 but
below 30 years and two months’ salary for every year of service over thirty years xxx based on
the highest rate received xxx Officials and
employees retired under this act shall be entitled to the
commutation of the unused vacation and sick leave, based on the
highest rate received xxx.”  (Underlining supplied.)

A reading of Section 12(c) of CA 186 therefore reveals an intent on the part of the legislature to provide a
uniform basis in computing both the retirement gratuity and the terminal leave
pay.  In CA 186, that uniform basis is salary.

A different law, R.A. 910 as amended, governs the
petitioner.  In the case of members of
the Judiciary and Constitutional Commissions, the basis in computing the retirement
gratuity is the highest monthly salary plus the highest monthly
aggregate of transportation, living and representation
allowance (COLA and RATA).  The same rule of uniformity which we applied
in Paredes v. Acting Chairman
for those retiring under CA 186 as amended should also apply for those who
retire under R.A. 910 as amended.  The
rate used in computing retirement gratuities also applies in the computation of
terminal leave credits.

It is axiomatic that retirement laws are liberally construed
and administered in favor of the persons intended to be benefited.  All doubts as to the intent of the law should
be resolved in favor of the retiree to achieve its humanitarian purposes.  (In Re: 
Amount of the Monthly Pension of Judges and Justices starting from the
Sixth year of their Retirement and after the Expiration of the Initial
Five-Year Period of Retirement, 190 SCRA 315 [1990]; Ortiz v. Commission on
Elections, 162 SCRA 812 [1988]; Bautista v. Auditor General, 104 Phil. 428
[1958])

Although terminal leave pay is not synonymous with, and is not a
part of, the five-year lump sum gratuity provided under RA 910 as amended and
Administrative Order No. 444, the former may, in a broad sense, partake of the
nature of a gratuity rather than actual salary. 
A gratuity is that paid to the beneficiary for past services rendered
purely out of generosity of the giver or grantor.  (Peralta v. Auditor General, 100 Phil 1051
[1957]) It is a mere bounty given by the government in consideration or in
recognition of meritorious services and springs from the appreciation and
graciousness of the government.  (Pirovano v. De La Rama Steamship
Co., 96 Phil. 335, 357 [1954]) While it is true that vacation and sick leave
credits are earned during one’s period of employment, they are, by their very
nature and purpose, supposed to be enjoyed or exhausted during employment.  When these accumulated leave benefits are
allowed to be accumulated, not to be paid while one is working but to be reserved
for old age, then this constitutes the gratuity.

Through the years, laws pertaining to accumulation of leave
credits show a liberal trend with a view to favoring the retiring
employee.  Under Act 2711 (dated March 10, 1917), accumulated leaves
that may be commuted cannot exceed 5 months. 
Republic Act No. 1081 (dated June
15, 1954) increased the limit from 5
to 10 months.  With the passage of
Executive Order No. 1077 on January 9,
1986, the retiring employee became entitled to the commutation of all
accumulated vacation and sick leaves to his credit, without limitation as to
the number of days of vacation and sick leave that he may accumulate.

Since terminal leave pay may also be considered a gratuity, then
applying the rule on liberal interpretation
of retirement laws, the basis for its computation in the case of members of the
Judiciary and Constitutional Commissions must be the same as that used in
computing the 5-year lump sum gratuity under RA 910 as amended and
Administrative Order No. 444.

The Court is cognizant of
the incongruity that may ensue if
the terminal leave pay of
members of the Judiciary and Constitutional Commissions is computed only on the
basis of highest basic monthly salary.

If, for example a member
of the CSC has an accumulated leave credit of one month and, in the two months immediately prior to retiring,
consumes his accumulated leaves by going on fifteen days’ vacation leave twice,
there is no dispute that he will be paid two months’ salary plus
COLA and RATA for this two-month period, although no work has been rendered by him.  If, on the other hand, he chooses to work
until the last day of employment and
upon retirement, applies for the commutation of his accumulated leave
credit of one month, following the proposition of the Solicitor General, he
will receive terminal leave pay equivalent only to one month’s salary, without
COLA and RATA.  In the latter case, why should he be
penalized for faithfully working continuously and not consuming his leave
credits until his last working day?  Why
should the basis for the commutation of leave credits be different just because
he chose to avail himself of his leave benefits immediately before and not
immediately after retirement?  Surely
this disparity in consequence could not have been intended by our lawmakers.

There is more reason now to include COLA in the computation of
terminal leave pay.  Section 12 of
Republic Act 6758, known as the Compensation and Position Classification Act of
1989, mandated the integration of COLA to the basic salary and, therefore, to the
retirement pay of all employees.  While
it is true that RA 6758 took effect only on July 1, 1989, long after petitioner had already retired
on April 1, 1986, his COLA
should nevertheless have been included in computing terminal leave pay for the
same reasons stated above.

In Re:  Request
of Atty. Bernardo Zialcita,
supra, the affected agency filed a motion for partial reconsideration
stressing that the benefits of our ruling should not be open-ended and made to
apply retroactively to all the unknown and uncomplaining persons who may have
retired as far back as decades ago.  We
provided a cut-off date.  The same
practical considerations and budgetary restraints constrain the Court to impose
a cut-off date for claims for terminal leave differentials.  The Court therefore, rules that the inclusion
of COLA and RATA as basis in
arriving at terminal leave pay shall apply only to those qualified members of
the Judiciary and Constitutional Commissions who retired or shall retire on or
after the change of government in February, 1986.

WHEREFORE, the petition is hereby GRANTED.  Resolutions 90-514 and 90-945 issued by the
Civil Service Commission are set aside. 
The Secretary of Budget and Management is ordered to release the corresponding
allotment and cash outlay for the terminal leave differential claimed by the
petitioner.  The terminal leave pay of
qualified members of the Judiciary and Constitutional Commissions who retired
or shall retire on or after the February, 1986 political upheaval shall be
based on highest monthly salary plus COLA and RATA.

SO ORDERED.

Fernan, C.J., Narvasa,
Melencio-Herrera, Cruz, Paras,
Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Griño-Aquino, Medialdea, Regalado, and Davide, Jr., JJ., concur.