G.R. No.

183517 June 22, 2010

PHILIPPINE INTERNATIONAL TRADING CORPORATION, petitioner, vs. COMMISSION ON

AUDIT, Respondent.

The inclusion of allowances in the computation of the retirement/separation benefits of the employees
of petitioner Philippine International Trading Corporation (PITC) is at issue in this petition for certiorari
filed pursuant to Rules 64 and 65 of the 1997 Rules of Civil Procedure, seeking the nullification and
setting aside of the adverse rulings dated July 4, 2003 and February 15, 2008 issued by respondent
Commission on Audit (COA).

The Facts

Created pursuant to Presidential Decree No. 252 dated July 21, 1973, petitioner is a government-owned
and controlled corporation tasked with promoting and developing Philippine trade in pursuance of
national economic development. Subsequent to the repeal of said law with the May 9, 1977 issuance of
Presidential Decree No. 1071, otherwise known as the Revised Charter of the Philippine International
Trading Corporation, then President Ferdinand E. Marcos issued Executive Order No. 756 on December
28, 1981, authorizing the reorganization of petitioner pursuant to his legislative powers to amend
charters of government corporations through executive orders in turn issued pursuant to Presidential
Decree No. 1416, as amended by Presidential Decree No. 1772. On February 18, 1983, President Marcos
issued Executive Order No. 877, authorizing further the reorganization of petitioner for the purpose of
accelerating and expanding the country’s export concerns.1

On December 31, 1983, Eligia Romero, an officer of petitioner, opted to retire under Republic Act No.
1616 and received a total of ₱286,780.00 as gratuity benefits for services rendered from 1955 to 1983.
Immediately re-hired on contractual basis, it appears that said employee remained in the service of
petitioner until her compulsory retirement on April 27, 2000. In receipt of retirement benefits in the
total sum of ₱1,013,952.00 for the period July 1, 1955 to April 27, 2000, net of the ₱286,70.00 gratuity
benefits she received in 1983, Ms. Romero filed a July 16, 2001 request, seeking from petitioner
payment of retirement differentials on the strength of Section 6 of Executive Order No. 756. Said
provision states that "any officer or employee who retires, resigns, or is separated from the service shall
be entitled to one month pay for every year of service computed at highest salary received including
allowances, in addition to the other benefits provided by law, regardless of any provision of law or
regulations to the contrary."2

Confronted with the question of whether the computation of Ms. Romero’s retirement benefits should
include the allowances she had received while under its employ, petitioner sent queries to respondent
and the Office of the Government Corporate Counsel regarding the application of Section 6 of Executive
Order No. 756. On August 20, 2002, then Government Corporate Counsel Amado D. Valdez issued
Opinion No. 197, Series of 2002, espousing a literal interpretation and application of the aforesaid
provision. Invoking the principle that retirement laws should be liberally construed and administered in
favor of the persons intended to be benefited thereby, said opinion declared that, pursuant to the
subject provision, the basis for the computation of the retirement benefits of petitioner’s employees
should be the highest basic salary received by them, including allowances not integrated into the basic
pay.3
On the other hand, on July 4, 2003, COA Assistant Commissioner and General Counsel Raquel R. Habitan
issued the first assailed ruling, the 6th Indorsement dated July 4, 2003, finding the denial of Ms.
Romero’s claim for retirement differentials in order. Taking appropriate note of the fact that the Reserve
for Retirement Gratuity and Commutation of Leave Credits of petitioner’s employees did not include
allowances outside of the basic salary, said officer ruled that Executive Order No. 756 was a special law
issued only for the specific purpose of reorganizing petitioner corporation. Although it was subsequently
adverted to in Executive Order No. 877, Section 6 of Executive Order No. 756 was determined to be
intended for employees retired, separated or resigned in connection with petitioner’s reorganization
and was not meant to be a permanent retirement scheme for its employees.4

Elevated by petitioner on appeal before the respondent,5 the foregoing ruling was affirmed in the
second assailed ruling, the Decision No. 2008-023 dated February 15, 2008,6 which likewise discounted
the legal basis for Ms. Romero’s claim for retirement differentials. Finding that Section 6 of Executive
Order No. 756 was simply an incentive to encourage employees to resign or retire at the height of
petitioner’s reorganization, said decision went on to make the following pronouncements, to wit:

"Moreover, RA No. 4968 prohibits the creation of any insurance retirement plan by any government
agency and government-owned or controlled corporation other than the GSIS, viz.:

‘Section 10. Subsection (b) of Section twenty-eight of the same Act, as amended is hereby amended to
read as follows:

(b) Hereafter no insurance or retirement plan for officers or employees shall be created by the
employer. All supplementary retirement or pension plans heretofore in force in any government office,
agency, or instrumentality or corporation owned or controlled by the government, are hereby declared
inoperative or abolished: Provided, That the rights of those who are already eligible to retire thereunder
shall not be affected.’

The Supreme Court explained the rationale of the above provisions in Avelina B. Conte et al. vs.
Commission on Audit, G.R. No. 116422, November 4, 1996, thusly:

‘Said Sec. 28 (b) as amended by RA 4968 in no uncertain terms bars the creation of any insurance or
retirement plan – other than the GSIS – for government officers and employees, in order to prevent the
undue and iniquitous proliferation of such plans. It is beyond cavil that Res. 56 contravenes the said
provision of law and is therefore invalid, void and of no effect. To ignore this and rule otherwise would
be tantamount to permitting every other government office or agency to put up its own supplementary
retirement benefit plan under the guise of such ‘financial assistance.’

To hold that Section 6 of E.O. 756 is a retirement law for PTIC employees other than the GSIS law would
run counter to the policy of the state to prevent the undue and iniquitous proliferation of retirement
plans that would unduly promote the inequality of treatment in the retirement benefits of government
employees."7

Hence, this petition.

The Issues

Petitioner seeks the nullification and setting aside of the assailed rulings on the following grounds, to
wit:
A.

RESPONDENT COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF

JURISDICTION IN ISSUING THE FIRST ASSAILED RULING, OPINING THAT SECTION 6 OF EO 756 WAS NOT
MEANT TO BE A PERMANENT RETIREMENT SCHEME OF THE PITC.

B.

RESPONDENT COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF

JURISDICTION IN ISSUING THE SECOND ASSAILED RULING DENYING PITC’S REQUEST FOR
RECONSIDERATION OF THE ABOVE OPINION OF COA GENERAL COUNSEL RAQUEL HABITAN, LIKEWISE
HOLDING THAT SECTION 6 of EO 756 WAS NOT MEANT TO BE A PERMANENT SCHEME OF THE PITC.

C.

RESPONDENT COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF

JURISDICTION IN ISSUING THE ASSAILED RULINGS WHICH ARE CONTRARY TO SETTLED JURISPRUDENCE
THAT RETIREMENT LAWS ARE LIBERALLY CONSTRUED AND ADMINISTERED IN FAVOR OF THE PERSONS
INTENDED TO BE BENEFITTED AND THAT ALL DOUBTS AS TO THE INTENT OF THE LAW SHOULD BE
RESOLVED IN FAVOR OF THE RETIREE TO ACHIEVE ITS HUMANITARIAN PURPOSES.

D.

RESPONDENT COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF

JURISDICTION IN RELYING ON SECTION 10 of RA 4968 AS TO THE ALLEGED PROHIBITION AGAINST ANY
INSURANCE OR RETIREMENT PLAN OR RETIREMENT PLAN OTHER THAN THE GSIS, SAID LAW HAVING
BEEN PASSED PRIOR TO THE ISSUANCE OF EO 756. OTHERWISE STATED, SECTION 10 OF RA 4968 IS
DEEMED REVISED, AMENDED, SUPERSEDED OR REPEALED BY EO 756 PURSUANT TO THE REPEALING
CLAUSE OF SAID EO 756.8

The Court’s Ruling

We find the petition bereft of merit.

It is a rule in statutory construction that every part of the statute must be interpreted with reference to
the context, i.e., that every part of the statute must be considered together with the other parts, and
kept subservient to the general intent of the whole enactment.9 Because the law must not be read in
truncated parts, its provisions must be read in relation to the whole law. The statute's clauses and
phrases must not, consequently, be taken as detached and isolated expressions, but the whole and
every part thereof must be considered in fixing the meaning of any of its parts in order to produce a
harmonious whole.10 Consistent with the fundamentals of statutory construction, all the words in the
statute must be taken into consideration in order to ascertain its meaning.11

Applying the foregoing principles to the case at bench, we find it well worth emphasizing at the outset
that Executive Order No. 75612 was meant to reorganize petitioner’s corporate set-up. While
incorporating amendments of petitioner’s Revised Charter under Presidential Decree No. 1071 with
provisions relating to the subscription of its capital,13 the establishment of subsidiaries, including joint
ventures,14 the composition15 and grant of additional powers to its Board of Directors,16 the appointment
of its President,17 the grant of incentive scheme to its officers and employees18 as well as its authority to
deputize commercial attaches19 and to grant franchises to operate Philippine trade houses
abroad,20 Section 4 (1) of Executive Order No. 756 specifically authorized petitioner’s Board of Directors
to " reorganize the structure of the Corporation, in accordance with its expanded role in the
development of Philippine trade, with such officers and employees as may be needed and determine
their competitive salaries and reasonable allowances and other benefits to effectively carry out its
powers and functions." For this purpose, Section 6 of the same law provides as follows:

SECTION 6. Exemption from OCPC. — In recognition of the special nature of its operations, the
Corporation shall continue to be exempt from the application of the rules and regulations of the Office
of the Compensation and Position Classification or any other similar agencies that may be established
hereafter as provided under Presidential Decree No. 1071. Likewise, any officer or employee who
retires, resigns, or is separated from the service shall be entitled to one month pay for every year of
service computed at highest salary received including all allowances, in addition to the other benefits
provided by law, regardless of any provision of law or regulations to the contrary; Provided, That the
employee shall have served in the Corporation continuously for at least two years: Provided, further,
That in case of separated employees, the separation or dismissal is not due to conviction for any offense
the penalty for which includes forfeiture of benefits: and Provided, finally, That in the commutation of
leave credits earned, the employees who resigned, retired or is separated shall be entitled to the full
payment therefor computed with all the allowances then being enjoyed at the time of resignation,
retirement of separation regardless of any restriction or limitation provided for in other laws, rules or
regulations.

As an adjunct to the reorganization mandated under Executive Order No. 756, we find that the foregoing
provision cannot be interpreted independent of the purpose or intent of the law. Rather than the
permanent retirement law for its employees that petitioner now characterizes it to be, we find that the
provision of gratuities equivalent to "one month pay for every year of service computed at highest salary
received including all allowances" was clearly meant as an incentive for employees who retire, resign or
are separated from service during or as a consequence of the reorganization petitioner’s Board of
Directors was tasked to implement. As a temporary measure, it cannot be interpreted as an exception to
the general prohibition against separate or supplementary insurance and/or retirement or pension plans
under Section 28, Subsection (b) of Commonwealth Act No. 186,21 amended. Pursuant to Section 10 of
Republic Act No. 496822 which was approved on June 17, 1967, said latter provision was amended to
read as follows:

Section 10. Subsection (b) of Section twenty-eight of the same Act, as amended is hereby further
amended to read as follows:

(b) Hereafter no insurance or retirement plan for officers or employees shall be created by any
employer. All supplementary retirement or pension plans heretofore in force in any government office,
agency, or instrumentality or corporation owned or controlled by the government, are hereby declared
inoperative or abolished: Provided, That the rights of those who are already eligible to retire thereunder
shall not be affected."

In reconciling Section 6 of Executive Order No. 756 with Section 28, Subsection (b) of Commonwealth
Act No. 186,23 as amended, uppermost in the mind of the Court is the fact that the best method of
interpretation is that which makes laws consistent with other laws which are to be harmonized rather
than having one considered repealed in favor of the other.24 Time and again, it has been held that every
statute must be so interpreted and brought in accord with other laws as to form a uniform system of
jurisprudence – interpretere et concordare legibus est optimus interpretendi.25 Thus, if diverse statutes
relate to the same thing, they ought to be taken into consideration in construing any one of them, as it is
an established rule of law that all acts in pari materia are to be taken together, as if they were one
law.26 We find that a temporary and limited application of the more beneficent gratuities provided
under Section 6 of Executive Order No. 756 is in accord with the pre-existing and general prohibition
against separate or supplementary insurance retirement and/or pension plans under Section 28,
Subsection (b) of Commonwealth Act No. 186.

In the absence of a manifest and specific intent from which the same may be gleaned, moreover,
Section 6 of Executive Order No. 756 cannot be construed as an additional alternative to existing general
retirement laws and/or an exception to the prohibition against separate or supplementary insurance
retirement or pension plans as aforesaid. Aside from the fact that a meaning that does not appear nor is
intended or reflected in the very language of the statute cannot be placed therein by
construction,27 petitioner would likewise do well to remember that repeal of laws should be made clear
and express. Repeals by implication are not favored as laws are presumed to be passed with
deliberation and full knowledge of all laws existing on the subject,28 the congruent application of which
the courts must generally presume.29 For this reason, it has been held that the failure to add a specific
repealing clause particularly mentioning the statute to be repealed indicates that the intent was not to
repeal any existing law on the matter, unless an irreconcilable inconsistency and repugnancy exists in
the terms of the new and old laws.30

The dearth of merit in petitioner’s position is rendered even more evident when it is borne in mind that
Executive Order No. 756 was subsequently repealed by Executive Order No. 877 which was issued on
February 18, 1983 to hasten the reorganization of petitioner, in light of changing circumstances and
developments in the world market. For purposes of clarity, the full text of Executive Order No 877 is
reproduced hereunder, viz.:

"EXECUTIVE ORDER NO. 877

AUTHORIZING THE REORGANIZATION OF THE PHILIPPINE INTERNATIONAL TRADING CORPORATION

CREATED UNDER PRESIDENTIAL DECREE NO. 1071, AS AMENDED

WHEREAS, it is the declared policy of the New Republic to pursue national development with renewed
dedication and determination;

WHEREAS, there is a need to position and gear up the country's export marketing resources in
anticipation of a recovery in the world economy;

WHEREAS, the Philippine International Trading Corporation, hereinafter referred to as the Corporation,
is in the vanguard of marketing Philippine exports worldwide;

WHEREAS, in order to accelerate and expand its exports, there is a need to upgrade the management
and marketing expertise of the Corporation consistent with the requirements of international
marketing;

WHEREAS, in the light of the foregoing, the reorganization of the Corporation becomes imperative;
WHEREAS, under Presidential Decree No. 1416, as amended, the President is empowered to undertake
such organizational changes as may be necessary in the light of changing circumstances and
development;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers
vested in me by the Constitution, and the authority vested on me by Presidential Decree No. 1416, as
amended, do hereby order and direct:

1. Reorganization. — The Minister of Trade and Industry is hereby designated Chief Executive Officer of
the Corporation with full powers to restructure and reorganize the Corporation and to determine or fix
its staffing pattern, compensation structure and related organizational requirements. The Chairman shall
complete such restructuring and reorganization within six (6) months from the date of this Executive
Order. All personnel of the Corporation who are not reappointed by the Chairman under the new
reorganized structure of the Corporation shall be deemed laid off; provided, that personnel so laid off
shall be entitled to the benefits accruing to separated employees under Executive Order No. 756
amending the Revised Chapter of the Corporation.

2. Functions of Chairman. — The Chairman of the Corporation shall have the following functions and
powers:

a. Exercise all the powers incident to the functions of a Chief Executive Officer, including supervision and
control over all personnel of the Corporation;

b. Review, develop, supervise and direct the export marketing thrusts and strategy of the Corporation;

c. Upon recommendation of the President of the Corporation, appoint personnel of the Corporation in
executive and senior management positions;

d. Call meetings of the Board of Directors and of the Executive Committee of the Corporation.

3. Personnel Recruitment and Other Services. — In recognition of the special nature of its operation, the
Corporation shall, in recruiting personnel and in availing of outside technical services, continue to be
exempt from OCPC rules and regulations pursuant to Section 6 of Executive Order No. 756 and Section
28 of Presidential Decree No. 1071. In addition, the provision of Section 7 of Executive Order No. 756 is
hereby reaffirmed.

4. Repealing Clause. — All provisions of Presidential Decree No. 1071 and Executive Order No. 756, as
well as of other laws, decrees, executive orders or issuances, or parts thereof, that are in conflict with
this Executive Order, are hereby repealed or modified accordingly.

5. Effectivity. — This Executive Order shall take effect immediately.

DONE in the City of Manila, this 18th day of February, in the year of Our Lord, Nineteen Hundred and
Eighty-Three."

Specifically mandated to be accomplished within the limited timeframe of six months from the issuance
of the law, the reorganization under Executive Order No. 877 clearly supplanted that which was
provided under Executive Order No. 756. Nowhere is this more evident than Section 4 of said latter law
which provides that, "All provisions of Presidential Decree No. 1071 and Executive Order No. 756, as well
as of other laws, decrees, executive orders or issuances, or parts thereof that are in conflict with this
Executive Order, are hereby repealed or modified accordingly." In utilizing the computation of the
benefits provided under Section 6 of Executive Order No. 756 for employees considered laid off for not
being reappointed under petitioner’s new reorganized structure, Executive Order No. 877 was correctly
interpreted by respondent to evince an intent not to extend said gratuity beyond the six-month
period within which the reorganization is to be accomplished.

In the case of Conte v. Commission on Audit,31 this Court ruled that the prohibition against separate or
supplementary insurance and/or retirement plan under Section 28, Subsection (b) of Commonwealth
Act No. 186 was meant to prevent the undue and iniquitous proliferation of such plans in different
government offices. Both before the issuance and after the effectivity of Executive Order Nos. 756 and
877, petitioner’s employees were governed by and availed of the same retirement laws applicable to
other government employees in view of the absence of a specific provision thereon under Presidential
Decree No. 252,32 its organic law, and Presidential Decree No. 1071, otherwise known as the Revised
Charter of the PITC. As appropriately pointed out by respondent, petitioner’s observance of said general
retirement laws may be gleaned from the fact that the Reserve for Retirement Gratuity and
Commutation of Leave Credits for its employees were based only on their basic salary and did not
include allowances they received. No less than Eligia Romero, petitioner’s employee whose claim for
retirement differentials triggered the instant inquiry, was granted benefits under Republic Act No. 1616
upon her retirement on December 31, 1983.

It doesn’t help petitioner’s cause any that Section 6 of Executive Order No. 756, in relation to Section 3
of Executive Order No. 877, was further amended by Republic Act No. 6758,33 otherwise known as the
Compensation and Classification Act of 1989. Mandated under Article IX B, Section 534 of the
Constitution,35 Section 436 of Republic Act No. 6758 specifically extends its coverage to government
owned and controlled corporations like petitioner. With this Court’s ruling in Philippine International
Trading Corporation v. Commission on Audit37 to the effect that petitioner is included in the coverage of
Republic Act No. 6758, it is evidently no longer exempted from OCPC rules and regulations, in keeping
with said law’s intent to do away with multiple allowances and other incentive packages as well as the
resultant differences in compensation among government personnel.

In the context of petitions for certiorari like the one at bench, grave abuse of discretion is understood to
be such capricious and whimsical exercise of jurisdiction as is equivalent to lack of jurisdiction.38 It is
tantamount to an evasion of a positive duty or to virtual refusal to perform a duty enjoined by law, or to
act at all in contemplation of law, as when the power is exercised in an arbitrary or despotic manner by
reason of passion or personal hostility.39 As the Constitutional office tasked with the duty to examine,
audit and settle all accounts pertaining to the revenue, and receipts of and expenditures or uses of funds
and property, owned or held in trust by or pertaining to the government or any of its
subdivisions,40 respondent committed no grave abuse of discretion in disapproving petitioner’s
utilization of Section 6 of Executive Order No. 756 in the computation of its employees’ retirement
benefits.

WHEREFORE, the petition is DENIED for lack of merit.