G.R. No. 260428, March 01, 2023
Clarita D. Aclado, Petitioner, vs. Government Service Insurance System, Respondent.

FACTS

Petitioner Clarita D. Aclado, a public school teacher, availed of several loans from the GSIS. Upon her retirement on August 5, 2016, her unpaid loan accounts were subjected to interest on arrears at 12% per annum compounded monthly and a penalty of 6% per annum compounded monthly. Her retirement benefits were processed, resulting in zero cash surrender value, but she received net proceeds of PHP 163,322.96 under retirement Option 1. Petitioner requested a refund of loan overpayments and contested certain loans (Emergency Loan Assistance and Summer One Month Salary Loan), claiming she never availed of them. GSIS provided copies of negotiated checks and informed her that her accounts were fully paid after deductions from her retirement benefits. From January 2017 to April 2018, petitioner requested a reduction of interest on arrears and penalties, which GSIS denied, citing no recorded monthly payments and that Board Resolution No. 97 had already been used to reduce interest, resulting in a refund of PHP 139,075.28. Petitioner appealed to the GSIS Committee on Claims (COC), which denied her request on January 15, 2019. Petitioner appealed to the GSIS Board of Trustees, which dismissed the appeal as filed out of time (38 days late), noting receipt of the COC Decision on January 17, 2019, making the deadline March 18, 2019. The Court of Appeals upheld the GSIS Board’s resolutions. Petitioner argues she received the COC Decision late (on March 13, 2019, at her Taguig address, while residing in Mariveles, Bataan) and was unassisted by counsel, and that the imposed interests are unreasonable.

ISSUE

1. Whether the COC Decision dated January 15, 2019, attained finality.
2. Whether petitioner is entitled to the reduction of interest and penalties on her loan accounts with GSIS.

RULING

The Supreme Court granted the petition, reversing the Court of Appeals.
1. On finality, the Court relaxed the doctrine of immutability of judgment and procedural rules. The case involves petitioner’s retirement benefits, a matter of property, warranting substantial justice. The GSIS Board of Trustees erred in dismissing the appeal on procedural grounds, as Section 33, Rule V of the Revised Implementing Rules and Regulations of Republic Act No. 8291 mandates deciding cases on their merits to promote justice and equity. Petitioner’s delay was justified as she was not notified promptly of the COC Decision (received by relatives in Taguig while she lived in Bataan) and was unassisted by counsel, leading to a layperson’s misunderstanding of the appeal period. The lack of prejudice to GSIS and the merits of the case further supported relaxation.
2. On the reduction of interest and penalties, the Court found the imposed penalties unconscionable and reduced them. While GSIS has the authority to impose interest and penalties under its Charter and loan agreements, the penalty of 6% per annum compounded monthly, added to the 12% interest on arrears, was deemed iniquitous and violative of the principle that penalties must be reasonable. Citing precedents (Medel v. Court of Appeals, Ruiz v. Court of Appeals), the Court reduced the penalty to 1% per month of the unpaid amortizations, consistent with the intent to penalize delay, not impose additional interest. The 12% interest on arrears remained, but only on the unpaid principal from the time of default until June 30, 2013, and at 6% per annum from July 1, 2013, until full payment, following the shift in legal interest rates under Bangko Sentral ng Pilipinas Circular No. 799. The Court ordered GSIS to recompute petitioner’s total loan obligation accordingly and refund any excess deductions from her retirement benefits.