Lopez, Jr. vs. Court of Appeals

An employee who satisfies the requirements for retirement under more than one subsection of Section 12 of C.A. No. 186, as amended, is entitled to choose the subsection under which to retire; the option belongs to the retiree, not the employer, and the employer’s lack of a specific appropriation does not excuse payment of an approved retirement gratuity.

The City of Manila employed Galicano P. Manapat. Petitioners were its Mayor, City Budget Officer, Chairman of the Committee for Retirement Gratuity and Terminal Leave Pay, and City Treasurer. The governing statutory backdrop was C.A. No. 186, the Government Service Insurance System Charter, as amended by R.A. No. 660 and R.A. No. 1616, which established several modes of retirement and allocated liability for benefits between the GSIS and the employer.

Galicano P. Manapat retired from the government service on 29 February 1972 as Chief of the Legal Division of the Office of the Municipal Board of Manila. He retired under R.A. No. 1616, as amended, after rendering twenty years of service to the City of Manila, and received P24,479.02 as his full retirement benefit. In April 1977, the City of Manila reemployed him as Secretary of the City of Manila Board of Tax Assessment Appeals, with a monthly salary of P3,993.33. He occupied that position until he reached the compulsory retirement age of sixty-five on 27 June 1989. The City extended his service for six months, up to 27 December 1989. During that extension, on 1 July 1989, the Salary Standardization Law (R.A. No. 6758) took effect and increased his monthly salary from P3,993.33 to P11,385.00.

Upon expiration of his extended service, Manapat filed with the Government Service Insurance System an application for retirement under R.A. No. 1616, as amended. The GSIS approved the application on 6 April 1990, initially on the basis of his previous salary of P3,993.33 per month; on that basis, he was entitled to a total retirement gratuity of P179,274.04, less the P24,479.02 he had previously received, leaving a net balance of P154,795.02. On 16 May 1990, the GSIS adjusted the approved application to conform with his last standardized monthly salary of P11,385.00. The adjustment resulted in a total collectible retirement pay or gratuity of P486,634.84.

The approved adjusted claim was forwarded by the GSIS to the Board of Tax Assessment Appeals of the City of Manila. By Indorsement dated 21 May 1990, the Assistant Department Head of that Board transmitted the papers to the Chairman of the Committee on the Settlement of Claims for Retirement Gratuity and Terminal Leave Pay. The next day, however, the Chairman returned the papers to the Manila Board of Tax Assessment Appeals without acting on the claim, on the ground that it was existing policy of the City of Manila that an employee who had reached the compulsory retirement age of sixty-five must retire under R.A. No. 660 and not under R.A. No. 1616, as amended. Manapat appealed the Chairman’s action to the City Budget Officer. The City Budget Officer replied that the claim had been forwarded to the then Mayor of Manila, petitioner Gemiliano Lopez, Jr., and to the City Legal Officer for legal advice.

On 1 October 1990, the City Legal Officer rendered a written opinion that the City, as employer, had discretionary authority to allow or disallow a claim to retire under R.A. No. 1616, as amended, considering that retirement under that law was optional and payment of retirement benefits thereunder was subject to the availability of funds. A week later, on 8 October 1990, Manapat received a letter from petitioner City Mayor advising that his request for settlement of his claim for retirement gratuity under R.A. No. 1616 could not be favorably acted upon due to financial constraints upon the City Government.

Manapat then commenced in the Regional Trial Court of the City of Manila a special civil action for mandamus to compel petitioner officials of the City of Manila to allow him to retire under the provisions of R.A. No. 1616, as amended. The record before the Supreme Court showed that petitioners did not dispute that Manapat had, at the time of his second retirement on 27 December 1989, rendered a total of thirty-five years of government service, thereby satisfying the requirements of Sections 12(a), 12(b), 12(c), and 12(e) of C.A. No. 186 as amended. The Court of Appeals also found that in 1990 the City of Manila had an annual appropriation for retirement benefits of P14,000,000.00; that because no new budget was enacted for 1991, the 1990 budget was considered re-enacted and the appropriation remained in force at the time the case was filed on 22 January 1991; that the appropriation was classified as “Statutory and Contractual Obligation” and could not be used for any other purpose; and that the City Budget Officer had assured that she would indicate the source of funds to pay Manapat’s claim provided his request was acted upon favorably.

• Mandatory Retirement Under Section 12(e): Petitioners maintained that a government employee who has reached the compulsory retirement age of sixty-five years, with at least fifteen years of service, has no choice but to retire under Section 12(e) of C.A. No. 186 as amended (R.A. No. 660), because retirement thereunder is automatic and compulsory.
• Discretionary Authority and Availability of Funds: Petitioners argued that the City of Manila, as employer, had discretionary authority to allow or disallow a claim to retire under R.A. No. 1616, as amended, since retirement under that law was optional and payment of benefits was subject to the availability of funds; they cited financial constraints.
• Absence of Specific Appropriation: Petitioners asserted that the City had no item in its General Appropriation Ordinance specifically earmarking the amount of P486,634.84 for Manapat, and that this lack of funds or appropriation barred compelled payment.

• Choice of Retirement Mode: Whether a government employee who has reached the compulsory retirement age of sixty-five years may opt to retire under R.A. No. 1616, as amended, or is entitled only to retirement benefits under the mandatory retirement clause of R.A. No. 660.
• Mandamus to Compel Payment Despite Lack of Funds: Whether the City of Manila as employer may be compelled to pay the retirement benefits of its employee under R.A. No. 1616, notwithstanding lack of available funds for that purpose.
• Moral Damages and Attorney’s Fees: Whether the Court of Appeals properly awarded P30,000.00 as moral damages and P30,000.00 as attorney’s fees.

• Choice of Retirement Mode: Yes. An employee who satisfies the requirements for retirement under more than one subsection of Section 12 of C.A. No. 186 as amended is entitled to choose the subsection under which to retire; the option belongs to the retiree, not the employer. Section 12(e)’s automatic and compulsory retirement at sixty-five does not preclude retirement under Section 12(c) where the employee also meets its requirements.
• Mandamus to Compel Payment Despite Lack of Funds: Yes. Once Manapat’s application was approved and adjusted under Section 12(c), providing the funds necessary to pay his lawfully accrued retirement gratuity became ministerial. Mandamus lies to compel payment, and the absence of a specific appropriation is not a legal obstacle because Section 12(c) authorizes the employer to provide the necessary appropriation or pay from unexpended items or savings.
• Moral Damages and Attorney’s Fees: No as to moral damages; yes as to attorney’s fees. The award of moral damages was deleted for lack of clear and convincing evidence of evident bad faith and arbitrariness. The award of attorney’s fees was affirmed because petitioners’ act or omission compelled Manapat to litigate to protect his right to retirement benefits.

• Choice of Retirement Mode: Both R.A. No. 660 and R.A. No. 1616 amended C.A. No. 186, the Government Service Insurance System Charter. Section 12 of C.A. No. 186 as amended provides several modes of retirement: Section 12(a) requires thirty years of service and attainment of age fifty-seven; Section 12(b) allows retirement after thirty years of service regardless of age; Section 12(c) allows retirement after at least twenty years of service, the last three of which are continuous, regardless of age; and Section 12(e) makes retirement automatic and compulsory at age sixty-five with at least fifteen years of service. Petitioners did not dispute that Manapat had rendered thirty-five years of total government service and had complied with each of these four modes. Petitioners nevertheless insisted that because he had reached sixty-five, he had no choice but to retire under Section 12(e). The Court rejected that interpretation. Nothing in the statute suggests that an employee who satisfies both Section 12(e) and Sections 12(a), (b), or (c) must necessarily retire under Section 12(e). It would be difficult to understand why an employee with thirty-five years of service should be deprived of the right to retire under Section 12(c), which requires only twenty years. The petitioners’ interpretation was at war with the basic policy purpose of C.A. No. 186 as amended by R.A. No. 1616, which was to create an added incentive for qualified government employees to remain in the service. Statutes must be read to give effect to their purpose; retirement statutes, in case of real doubt or ambiguity, must be construed to give meaning and effect to their humanitarian purposes and to reasonably benefit employees who opted to stay in government service for many years. Section 12(c) therefore applied to Manapat because he had complied with its requirement of at least twenty years of service. Its benefits are available to anyone who has rendered at least twenty years of service, regardless of the age reached at retirement. The Court agreed with the Court of Appeals that Section 12(e) is mandatory only for those who have reached sixty-five and have rendered at least fifteen years of government service but not for those who have rendered at least twenty years; the latter are given the option to retire under R.A. No. 1616 regardless of age. R.A. No. 1616 was intended to provide two other modes of retirement: after thirty years of service regardless of age, and after at least twenty years of service regardless of age. Thus, a retiree, regardless of age—whether or not sixty-five—may retire under R.A. No. 1616 as long as he has rendered at least twenty years or thirty years of service. The phrase “regardless of age” in Section 12(c) is particularly meaningful because Section 12(e) itself gives an employee who has reached sixty-five the option to remain in service to complete the fifteen-year minimum. An employee who satisfies the requirements for retirement under more than one subsection is entitled to choose the subsection under which he shall retire. That option belonged to Manapat, not to the City of Manila, and could not be taken away by the employer through a policy restricting the options of a retiree who has reached sixty-five to retirement under Section 12(e). To sustain the City’s policy would effectively amend the statute.
• Mandamus to Compel Payment Despite Lack of Funds: Manapat’s application for retirement having been approved and adjusted under Section 12(c), it became ministerial for the City of Manila, as his employer, to provide the funds necessary to pay his lawfully accrued retirement gratuity. The Court expressly rejected the argument that funding the retirement gratuity under Section 12(c) was discretionary on the part of the employer. The fact that the City may have had no item in its General Appropriation Ordinance specifically earmarking P486,634.84 for Manapat presented no legal obstacle. In Baldivia, et al. vs. Lota, etc., where petitioners were denied terminal leave pay because the municipality allegedly had no budget or appropriation ordinance, the Court held that the respondent mayor could and should have included the claim in the general budget or prepared a special budget and urged the municipal council to appropriate the necessary sum; if the mayor failed or refused to make the necessary appropriation, the claimants could bring an action against the municipality for recovery and, after securing judgment, seek mandamus against the municipal council and mayor to compel the enactment or approval of the appropriation ordinance. In Municipality of Makati vs. Court of Appeals, the Court held that mandamus was available to compel not only the enactment and approval of the necessary appropriation ordinance but also the corresponding payment of municipal funds where the municipality failed or refused, without justifiable reason, to pay a final money judgment. The Court of Appeals also pointed out that the City of Manila had an annual appropriation for retirement benefits of P14,000,000.00 in 1990; that because it failed to enact a new budget for 1991, its 1990 budget was considered re-enacted and the appropriation was deemed in force at the time the case was filed on 22 January 1991; that the appropriation could not be used for any other purpose because it was classified as “Statutory and Contractual Obligation”; and that the City Budget Officer had assured that she would indicate the source of funds to pay Manapat’s claim provided his request was acted upon favorably. Section 12(c) itself dispenses with the need for an ordinance specifically appropriating Manapat’s retirement pay or inserting an item for it in the General Appropriation Ordinance, because it provides that the gratuity is payable by the employer or officer concerned, which is authorized to provide the necessary appropriation or pay the same from any unexpended items of appropriations or savings. Section 12(c) thus furnished statutory authority to pay Manapat’s claim out of any savings the City may have from its other appropriations.
• Moral Damages and Attorney’s Fees: The record as a whole did not show, in a clear and convincing manner, the evident bad faith and arbitrariness on the part of petitioners that would generate liability for moral damages; the award of P30,000.00 as moral damages was therefore deleted. The award of attorney’s fees was entirely just and equitable because petitioners’ act or omission compelled Manapat, a life-long government employee, to have recourse to litigation to protect his right to retirement benefits. The Court cited Article 2208 (2) and (11) of the Civil Code in connection with the award of attorney’s fees.

• Retirement Mode Selection / Option of the Retiree — Under Section 12 of C.A. No. 186 as amended, an employee who satisfies the requirements for retirement under more than one subsection is entitled to choose the subsection under which to retire. The option belongs to the retiree, not the employer. The automatic and compulsory retirement at age sixty-five under Section 12(e) does not preclude retirement under Section 12(c) where the employee also meets the latter’s requirements. Section 12(c) requires at least twenty years of service, the last three of which are continuous, and applies regardless of age; Section 12(e) requires at least fifteen years of service and attainment of age sixty-five. Manapat, having rendered thirty-five years and satisfied all four modes, could retire under R.A. No. 1616 as amended.
• Liberal Construction of Retirement Statutes — Retirement statutes must be construed to give effect to their humanitarian purposes and to reasonably benefit employees who opted to stay in the government service. The Court applied this principle to reject the City’s policy that a sixty-five-year-old employee must retire only under Section 12(e), because that interpretation would defeat the purpose of R.A. No. 1616 to create an added incentive for qualified government employees to remain in service.
• Ministerial Duty to Fund Approved Retirement Gratuity; Mandamus — Once a retirement application is approved and adjusted under Section 12(c), the employer’s duty to provide the funds necessary to pay the lawfully accrued retirement gratuity becomes ministerial. Mandamus lies to compel payment. The absence of a specific appropriation item is not a legal obstacle; Section 12(c) authorizes the employer to provide the necessary appropriation or pay the gratuity from unexpended items of appropriations or savings. Mandamus may also compel the enactment and approval of the necessary appropriation ordinance and the corresponding disbursement of municipal funds where the municipality fails or refuses, without justifiable reason, to pay.
• Moral Damages and Attorney’s Fees — Moral damages require clear and convincing evidence of evident bad faith and arbitrariness; absent such proof, the award must be deleted. Attorney’s fees may be awarded when the claimant is compelled to litigate to protect his right, as where a life-long government employee had to sue for retirement benefits.

• “We consider, therefore, and so hold that an employee who shall have satisfied the requirements for retirement under more than one (1) subsection of Section 12 of C.A. No. 186 as amended is entitled to choose the subsection (whose requirement he has complied with and) under which he shall retire. The option of retiring under Section 12(c) or Section 12(e), in the circumstances of this case, belongs to private respondent Manapat and not to his employer, the City of Manila.” — This passage states the Court’s central holding on the retiree’s option among multiple qualifying retirement modes.
• “The interpretation urged by petitioners is conspicuously at war with the basic policy purpose of C.A. No. 186 as amended by R.A. No. 1616 which is, of course, to create an added incentive for qualified government employees to remain in the service of the government.” — This passage articulates the policy basis for construing the retirement statute in favor of the employee.
• “The application for retirement of Manapat having been approved and adjusted under the provisions of Section 12(c), C.A. No. 186 as amended, it became ministerial on the part of petitioner City of Manila as employer of Manapat to provide the funds necessary to pay the latter’s lawfully accrued retirement gratuity. We expressly reject the argument of petitioners that the funding of private respondent’s retirement gratuity under Section 12(c) is “discretionary” on the part of such employer.” — This passage establishes the ministerial nature of the employer’s duty to fund an approved retirement gratuity and rejects the discretionary-funding defense.
• “In other words, Section 12(c) itself furnishes statutory authority to petitioners to pay Manapat’s claim out of any savings the City of Manila may have from its other appropriations.” — This passage explains why the absence of a specific appropriation did not bar payment.

• Baldivia, et al. vs. Lota, etc., 107 Phil. 1099 (1960) — Cited for the rule that where a municipality allegedly lacks a budget for terminal leave pay, the mayor should include the claim in the general budget or prepare a special budget; if the mayor fails or refuses to appropriate, the claimant may sue the municipality for recovery and then seek mandamus to compel the enactment or approval of the appropriation ordinance.
• Municipality of Makati vs. Court of Appeals, 190 SCRA 206 (1990) — Cited for the rule that mandamus is available to compel not only the enactment and approval of the necessary appropriation ordinance but also the corresponding payment of municipal funds where the municipality fails or refuses, without justifiable reason, to pay a final money judgment.
• Cena vs. Civil Service Commission, G.R. No. 97419, July 3, 1992 — Cited by the Court in its discussion of the retirement provisions and the meaning of “regardless of age” in Section 12(c).

• Section 12, C.A. No. 186, as amended by R.A. No. 660 and R.A. No. 1616 — Governs the conditions for retirement. Section 12(a) requires thirty years of service and age fifty-seven; Section 12(b) allows retirement after thirty years of service regardless of age; Section 12(c) allows retirement after at least twenty years of service, the last three continuous, regardless of age, with the gratuity payable by the employer; Section 12(e) makes retirement automatic and compulsory at age sixty-five with at least fifteen years of service. The Court held that Manapat satisfied all these modes and could choose Section 12(c).
• R.A. No. 1616, as amended — Inserted Sections 12(b) and 12(c) into C.A. No. 186. The Court applied Section 12(c) to allow Manapat to retire regardless of age because he had rendered at least twenty years of service. The provision also authorizes the employer to provide the necessary appropriation or pay the gratuity from unexpended items of appropriations or savings.
• R.A. No. 660 — Introduced paragraphs (a), (d), (e), (f), and (g) of Section 12 of C.A. No. 186. The Court held that the mandatory retirement clause in Section 12(e) did not preclude retirement under Section 12(c) where the employee also qualified under the latter.
• R.A. No. 6758 (Salary Standardization Law) — Took effect on 1 July 1989 and increased Manapat’s monthly salary from P3,993.33 to P11,385.00; this standardized salary was the basis for the GSIS adjustment of his retirement gratuity to P486,634.84.
• Article 2208 (2) and (11), Civil Code — Cited in the footnote as the basis for attorney’s fees; the Court affirmed the award because petitioners’ act or omission compelled Manapat to litigate to protect his retirement benefits.
• Section 2295, Revised Administrative Code — Cited in the Baldivia vs. Lota quotation for the duty of the municipal mayor to submit a general budget; the Court quoted it in discussing the funding of retirement claims.

Gutierrez, Jr., Cruz, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon, Bellosillo, and Melo, JJ., concurred. Campos, Jr., took no part. Narvasa, C.J., and Medialdea, J., were on leave.