Gamogamo vs. PNOC Shipping and Transport Corp.

Prior service in a government agency cannot be tacked to later service in a government-owned or controlled corporation without an original charter for purposes of computing retirement benefits under that corporation’s retirement plan, because such corporation is not covered by the Civil Service Law and R.A. No. 7699 totalization applies only when the employee does not qualify for benefits in either or both systems. A Release and Undertaking signed upon receipt of the full retirement benefit under the company plan is a valid quitclaim absent proof of coercion, intimidation, or deception and unconscionable terms.

Petitioner Cayo G. Gamogamo was a company dentist who had earlier served in the Department of Health, while respondent PNOC Shipping and Transport Corporation was a government-owned and controlled corporation without an original charter that had acquired the shipping business of Luzon Stevedoring Corporation. The dispute concerns the computation of retirement benefits under respondent’s retirement scheme and the Manpower Reduction Program implemented in connection with the privatization of PNOC subsidiaries. The legal backdrop includes Article IX(B), Section 2(1) of the 1987 Constitution, which limits the civil service to government-owned or controlled corporations with original charters, and Republic Act No. 7699, which provides for totalization of creditable services under the GSIS and SSS.

Petitioner Cayo G. Gamogamo began government service on 23 January 1963 as Dental Aide in the Department of Health. On 22 February 1967, he was promoted to Dentist 1. He remained employed at the DOH for fourteen years until he resigned on 2 November 1977. On 9 November 1977, he was hired as company dentist by Luzon Stevedoring Corporation, a private domestic corporation.

Respondent PNOC Shipping and Transport Corporation subsequently acquired and took over the shipping business of LUSTEVECO. On 1 August 1979, petitioner was among those who opted to be absorbed by respondent and continued to work as company dentist. In a letter dated 1 August 1979, respondent assumed without interruption petitioner’s service credits with LUSTEVECO, but it did not make reference to nor assume petitioner’s service credits with the DOH.

On 10 June 1993, then President Fidel V. Ramos issued a memorandum approving the privatization of PNOC subsidiaries, including respondent, pursuant to Section III(B) of the Guidelines and Regulations to implement Executive Order No. 37. Respondent implemented a Manpower Reduction Program to govern employees whose positions had been classified as redundant as a result of respondent’s decrease in operations and downsizing due to the lay-up and sale of its vessels pursuant to its direction towards privatization. Under this program, retrenched employees would receive a two-month pay for every year of service.

Sometime in 1995, petitioner requested to be included in the next retrenchment schedule. His request was turned down because, as company dentist, he held a permanent position and because he was already due for mandatory retirement in April 1995 under his retirement plan, the first day of the month following his 60th birthday on 7 March 1995. Petitioner eventually retired after serving respondent and LUSTEVECO for 17 years and 4 months upon reaching his 60th birthday on 1 April 1995. He received a retirement pay of P512,524.15, equivalent to one month pay for every year of service and other benefits. Upon receipt of this amount, he signed and delivered a Release and Undertaking waiving all actions, causes of actions, debts, dues, monies, and accounts in connection with his employment with respondent.

On 30 August 1995, Admiral Carlito Y. Cunanan, respondent’s president, died of Dengue Fever and was replaced by Dr. Nemesio E. Prudente, who assumed office in December 1995. The new president implemented significant cost-saving measures. In 1996, after petitioner’s retirement, the cases of Dr. Rogelio T. Buena, a company doctor, and Mrs. Luz C. Reyes, a telephone operator, who held permanent or non-redundant positions but were willing to be retrenched under the program, were brought to the attention of the new president, who ordered a study on the cost-effect of their retrenchment. After a thorough study, respondent’s Board of Directors recommended approval. These two employees were retrenched and paid a two-month separation pay for every year of service under respondent’s Manpower Reduction Program.

In view of respondent’s action in the retrenchment of Dr. Buena and Mrs. Reyes, petitioner filed a complaint at the National Labor Relations Commission for the full payment of his retirement benefits. Petitioner argued that his service with the DOH should have been included in the computation of his years of service. Hence, with an accumulated service of 32 years, he should have been paid a two-month pay for every year of service per the retirement plan and thus should have received at least P1,833,920.00. It was not disputed that while respondent and LUSTEVECO are government-owned and controlled corporations, they have no original charters.

• Tacking of DOH Service: Petitioner maintained that his fourteen years of service with the DOH should be recognized and tacked in to his length of service with respondent because LUSTEVECO, which was later bought by respondent, and respondent itself were government-owned and controlled corporations and were therefore under the Civil Service Law. Prior to the separation of respondent from the Civil Service by virtue of the 1987 Constitution, petitioner’s length of service was considered continuous, and the effectivity of the 1987 Constitution did not interrupt his continuity of service. He claimed support from the opinion of 18 May 1993 of the Civil Service Commission in the case of Petron Corporation, which allegedly stated that all government services rendered by employees of Petron prior to the 1987 Constitution are considered creditable services for purposes of computation of retirement benefits. With the tacking in of his fourteen years with the DOH to his seventeen years and four months with LUSTEVECO and respondent, he had 31 years and 4 months creditable service and should have been paid two months’ pay for every year of service under respondent’s Manpower Reduction Program.
• Republic Act No. 7699: Petitioner asserted that the principle of tacking is anchored on Republic Act No. 7699.
• Discrimination: Petitioner concluded that he was discriminated against when his application for coverage under the Manpower Reduction Program was disapproved because he was holding a permanent position and was due for retirement, while respondent granted the application of Dr. Rogelio Buena, who was likewise holding a permanent position and was also about to retire. Petitioner was given only one-month pay for every year of service under the regular retirement plan, while Dr. Buena was given a two-month pay for every year of service under the Manpower Reduction Program.

• Civil Service Coverage: Respondent maintained that although it is a government-owned and controlled corporation, it has no original charter; hence, it is not within the coverage of the Civil Service Law. It cited PNOC-EDC vs. Leogardo, where only corporations created by special charters are subject to the provisions of the Civil Service Law, while those without original charters are covered by the Labor Code.
• Republic Act No. 7699 Inapplicability: Respondent asserted that R.A. No. 7699 is not applicable. Under this law, an employee who has worked in both the private and public sectors and has been covered by both the Government Service Insurance System and the Social Security System shall have his creditable services or contributions in both Systems credited to his service or contribution record in each of the Systems, which shall be summed up for purposes of old-age, disability, survivorship, and other benefits in case the covered member does not qualify for such benefits in either or both Systems without totalization.
• No Discrimination: Respondent contended that petitioner was not discriminated against. At the time of his retirement in 1995, redundancy was the main consideration for qualification under the Manpower Reduction Program, and petitioner was not qualified. In 1996, in order to solve the company’s business reversals, the new president, Dr. Nemesio Prudente, found it necessary to implement cost-saving strategies, among which was the retrenchment of willing employees. Thus, the applications for retrenchment of Dr. Buena and Mrs. Reyes were approved. Respondent had the prerogative to amend its policies to meet the contingencies of the business for self-preservation.

• Tacking of DOH Service: Whether petitioner’s fourteen years of service with the Department of Health should be included in computing his retirement benefits from respondent.
• Civil Service Coverage: Whether respondent and LUSTEVECO, as government-owned and controlled corporations without original charters, are covered by the Civil Service Law such that petitioner’s government service is continuous and creditable.
• Republic Act No. 7699: Whether Republic Act No. 7699 mandates the tacking or totalization of petitioner’s DOH service with his service with respondent.
• Discrimination: Whether petitioner was discriminated against in the implementation of respondent’s Manpower Reduction Program.
• Release and Undertaking: Whether the Release and Undertaking signed by petitioner upon receiving his retirement pay bars his claim for additional benefits.

• Tacking of DOH Service: No. The creditable service under respondent’s Retirement Plan is the retiree’s continuous years of service with respondent; petitioner’s creditable service is 17.3333 years, from 9 November 1977 to 1 April 1995.
• Civil Service Coverage: No. Article IX(B), Section 2(1) of the 1987 Constitution covers government-owned or controlled corporations with original charters; respondent and LUSTEVECO had no original charters and were not under the Civil Service Law.
• Republic Act No. 7699: No. Totalization applies only when the covered employee does not qualify for benefits in either or both Systems without totalization; petitioner qualified for GSIS benefits for his DOH service.
• Discrimination: No. The issue is factual, and petitioner failed to demonstrate that he was discriminated against.
• Release and Undertaking: Yes, it is valid. The quitclaim is a legitimate waiver absent proof of coercion, intimidation, or deception, and its consideration was not unconscionable.

• Tacking of DOH Service: Respondent’s Retirement Plan, Article IV, Sections 4.1 and 4.2, provides that the normal retirement date is the first day of the month next following the employee’s 60th birthday; that to be eligible for the retirement benefit, the employee must have rendered at least ten years of continuous service with the Company; and that the retirement benefit shall be one month’s pay for every year of service for those who have completed at least twenty years of continuous service, one and one-half months’ pay for those who have completed twenty-one to thirty continuous years, and two months’ pay for those who have completed at least thirty-one years of service. The creditable service referred to in the Retirement Plan is the retiree’s continuous years of service with respondent. Retirement results from a voluntary agreement between the employer and the employee whereby the latter, after reaching a certain age, agrees to sever his employment with the former. Since the retirement pay solely comes from respondent’s funds, it is but natural that respondent shall disregard petitioner’s length of service in another company for the computation of his retirement benefits. Petitioner was absorbed by respondent from LUSTEVECO on 1 August 1979, and ordinarily his creditable service would be reckoned from such date. However, because respondent took over the shipping business of LUSTEVECO and agreed to assume without interruption all of petitioner’s service credits with LUSTEVECO, petitioner’s creditable service must start from 9 November 1977, when he started working with LUSTEVECO, until his retirement on 1 April 1995. Thus, petitioner’s creditable service is 17.3333 years.
• Civil Service Coverage: Article IX(B), Section 2(1) of the 1987 Constitution states that the civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters. It is not at all disputed that while respondent and LUSTEVECO are government-owned and controlled corporations, they have no original charters; hence, they are not under the Civil Service Law. In Philippine National Oil Company-Energy Development Corporation vs. National Labor Relations Commission, the test in determining whether a government-owned or controlled corporation is subject to the Civil Service Law is the manner of its creation, such that government corporations created by special charter are subject to its provisions while those incorporated under the General Corporation Law are not within its coverage. Consequently, respondent was not bound by the opinion of the Civil Service Commission of 18 May 1993. Petitioner’s contention that his fourteen years of service with the DOH should be considered because his last two employers were government-owned and controlled corporations and fell under the Civil Service Law cannot be upheld.
• Republic Act No. 7699: Section 3 of Republic Act No. 7699 provides that a covered worker who transfers employment from one sector to another or is employed in both sectors shall have his creditable services or contributions in both Systems credited to his service or contribution record in each of the Systems and shall be totalized for purposes of old-age, disability, survivorship, and other benefits in case the covered employee does not qualify for such benefits in either or both Systems without totalization, provided that overlapping periods of membership shall be credited only once for purposes of totalization. Totalization of service credits is only resorted to when the retiree does not qualify for benefits in either or both of the Systems. Here, petitioner is qualified to receive benefits granted by the Government Service Insurance System, if such right has not yet been exercised. Under Section 12(b) of Presidential Decree No. 1146, as amended, a member who has rendered at least three years but less than fifteen years of service at the time of separation shall, upon reaching sixty years of age or upon separation after age sixty, receive a cash payment equivalent to one hundred percent of his average monthly compensation for every year of service with an employer. Under Section 4 of Republic Act No. 7699, all contributions paid by the member personally and those paid by his employers to both Systems shall be considered in the processing of benefits which he can claim from either or both Systems, provided that the amount of benefits to be paid by one System shall be in proportion to the number of contributions actually remitted to that System. Petitioner’s fourteen years of service with the DOH may not remain uncompensated because it may be recognized by the GSIS pursuant to Section 12, as may be determined by the GSIS. Since petitioner may be entitled to some benefits from the GSIS, he cannot avail of the benefits under R.A. No. 7699.
• Discrimination: In light of the foregoing, the Court found no need to discuss further the issue of whether petitioner was discriminated against by respondent in the implementation of the Manpower Reduction Program. In any event, that issue is factual and petitioner failed to demonstrate that he was discriminated upon.
• Release and Undertaking: Upon his receipt of P512,524.15 from respondent as retirement benefit pursuant to its retirement scheme, petitioner signed and delivered to respondent a Release and Undertaking wherein he waived all actions, causes of actions, debts, dues, monies, and accounts in connection with his employment with respondent. This quitclaim releases respondent from any other obligation in favor of petitioner. While quitclaims executed by employees are commonly frowned upon as contrary to public policy and are ineffective to bar claims for the full measure of the employees’ legal rights, there are legitimate waivers that represent a voluntary and reasonable settlement of laborers’ claims which should be respected by the courts as the law between the parties. Settled is the rule that not all quitclaims are per se invalid or against public policy, except (1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible person; and (2) where the terms of settlement are unconscionable on their face. Nothing in the record suggests that petitioner was coerced, intimidated, or deceived into signing the Release and Undertaking. Neither is the consideration for the quitclaim unconscionable, because it is actually the full amount of the retirement benefit provided for in the company’s retirement plan.

• Tacking of Creditable Service — Prior service with another employer, including a government agency, is not included in computing retirement benefits under a company retirement plan unless the employer assumes it or a law requires it. The creditable service is the retiree’s continuous years of service with the employer. Applied: petitioner’s DOH service was excluded; his creditable service was 17.3333 years with LUSTEVECO and respondent.
• Civil Service Coverage of Government-Owned or Controlled Corporations — Under Article IX(B), Section 2(1) of the 1987 Constitution, the civil service embraces government-owned or controlled corporations with original charters only; those incorporated under the General Corporation Law are not covered. Applied: respondent and LUSTEVECO had no original charters, so they were not under the Civil Service Law and the Civil Service Commission opinion was not binding on respondent.
• Totalization under Republic Act No. 7699 — Totalization of creditable services or contributions in the GSIS and SSS is resorted to only when the covered employee does not qualify for benefits in either or both Systems without totalization; overlapping periods are credited only once. Applied: petitioner qualified for GSIS benefits for his DOH service, so R.A. No. 7699 did not mandate tacking.
• Validity of Quitclaims — Not all quitclaims are per se invalid or against public policy. A legitimate waiver representing a voluntary and reasonable settlement of an employee’s claims is respected, except where there is clear proof that the waiver was wangled from an unsuspecting or gullible person or where the terms of settlement are unconscionable on their face. Applied: petitioner’s Release and Undertaking was valid; no coercion, intimidation, or deception was shown, and the consideration was the full retirement benefit under the company plan.
• Retirement as a Voluntary Agreement — Retirement results from a voluntary agreement between employer and employee whereby the employee, after reaching a certain age, agrees to sever employment; retirement pay solely from the employer’s funds may be governed by the employer’s retirement plan. Applied: respondent could limit creditable service to continuous service with it.
• Discrimination in Retrenchment — A claim of discrimination in the implementation of a retrenchment or manpower reduction program is factual and must be demonstrated by evidence. Applied: petitioner failed to demonstrate discrimination.

• "It is clear therefrom that the creditable service referred to in the Retirement Plan is the retiree’s continuous years of service with Respondent." — The passage states the ratio for excluding petitioner’s DOH service from the computation of retirement benefits.
• "It is not at all disputed that while Respondent and LUSTEVECO are government-owned and controlled corporations, they have no original charters; hence they are not under the Civil Service Law." — This states the constitutional basis for denying the tacking of petitioner’s DOH service.
• "Obviously, totalization of service credits is only resorted to when the retiree does not qualify for benefits in either or both of the Systems." — This defines the condition for applying R.A. No. 7699 and explains why petitioner could not invoke it.
• "Settled is the rule that not all quitclaims are per se invalid or against public policy, except (1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible person; and (2) where the terms of settlement are unconscionable on their face." — This states the test for validity of quitclaims applied to petitioner’s Release and Undertaking.

• Philippine National Oil Company-Energy Development Corporation vs. National Labor Relations Commission, 201 SCRA 487 [1991] — Cited as the controlling precedent on the test for whether a government-owned or controlled corporation is subject to the Civil Service Law: the manner of creation, such that corporations created by special charter are covered while those incorporated under the General Corporation Law are not.
• PNOC-EDC vs. Leogardo, 175 SCRA 26 [1989] — Cited by respondent for the rule that only corporations created by special charters are subject to the Civil Service Law, while those without original charters are covered by the Labor Code.
• Producers Bank of the Philippines vs. National Labor Relations Commission, 298 SCRA 517, 524 [1998] — Cited for the principle that retirement results from a voluntary agreement between employer and employee, supporting respondent’s authority to define creditable service under its retirement plan.
• Alcosero vs. National Labor Relations Commission, 288 SCRA 129, 143 [1998] — Cited for the rule that legitimate waivers representing voluntary and reasonable settlements of laborers’ claims should be respected by the courts.
• Bogo-Medellin Sugarcane Planters Association, Inc. vs. National Labor Relations Commission, 296 SCRA 108, 125 [1998] — Cited for the rule that not all quitclaims are per se invalid or against public policy, except in cases of wangled waiver or unconscionable terms.

• Article IX(B), Section 2(1), 1987 Constitution — Provides that the civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters. Applied to exclude respondent and LUSTEVECO, which had no original charters, from the Civil Service Law.
• Section 3, Republic Act No. 7699 — Provides for totalization of a covered worker’s creditable services or contributions in both Systems for old-age, disability, survivorship, and other benefits only when the covered employee does not qualify for such benefits in either or both Systems without totalization, with overlapping periods credited only once. Applied to hold that totalization was not available because petitioner qualified for GSIS benefits.
• Section 12(b), Presidential Decree No. 1146, as amended (Government Service Insurance Act of 1977) — Provides that a member who has rendered at least three years but less than fifteen years of service at separation shall, upon reaching sixty years of age or upon separation after age sixty, receive a cash payment equivalent to one hundred percent of average monthly compensation for every year of service with an employer. Applied to show petitioner’s fourteen years with the DOH may be recognized by the GSIS.
• Section 4, Republic Act No. 7699 — Provides that contributions paid by the member and by his employers to both Systems shall be considered in processing benefits from either or both Systems, with the amount paid by one System in proportion to the number of contributions actually remitted to that System. Applied in connection with petitioner’s possible GSIS benefits.
• Article IV, Sections 4.1 and 4.2, Respondent’s Retirement Plan — Defines the normal retirement date and benefits based on continuous service with the Company; the creditable service is the retiree’s continuous years of service with respondent. Applied to compute petitioner’s creditable service at 17.3333 years.

Puno, Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.