G.R. No. L-10184; February 29, 1960
Felix V. Valencia, petitioner, vs. The Auditor General, and the Government Service Insurance System, respondents.

FACTS

Petitioner Felix V. Valencia was dismissed from his service at the Cebu Portland Cement Co. on November 16, 1950. The Court of Industrial Relations ordered his reinstatement with back pay, a decision affirmed by the Supreme Court in March 1954. However, upon motion for reconsideration, the Supreme Court modified its decision, making the reinstatement with back pay subject to applicable laws or regulations promulgated since the case’s institution. Republic Act No. 660 was enacted on June 17, 1951, the date Valencia reached the compulsory retirement age of 65 under that law. Consequently, he received back salary only up to June 17, 1951, and was declared automatically separated from service as of that date, entitled to retirement benefits under Republic Act No. 660 . The Government Service Insurance System (GSIS), implementing the Act, paid Valencia his 5-year lump sum retirement annuity but deducted P2,250.00, representing unpaid retirement premiums (contributions) for five years. Valencia questioned this deduction before the Auditor-General, who upheld the GSIS’s action.

ISSUE

Whether the Government Service Insurance System correctly deducted from Felix V. Valencia’s retirement gratuity the amount representing unpaid retirement premiums for five years, as required under Section 12(a) of Republic Act No. 660 .

RULING

Yes. The Supreme Court sustained the ruling of the Auditor-General approving the deduction. The Court held that under Section 12(a) of Republic Act No. 660 , a member must have made contributions to the retirement fund for at least five years to enjoy retirement benefits. If such contributions were not made, they could be deducted from the retirement annuity upon the member’s request approved by the GSIS Board. The Court found this interpretation consistent with Section 26 of the same Act. Valencia had made no contributions because they were first required on June 17, 1951, the very day he retired. The Court rejected Valencia’s argument that his case fell under Section 12(c), which does not explicitly mention the five-year contribution requirement, citing the precedent in Espejo vs. Auditor-General that the phrase “in all cases” in paragraph (a) applies to paragraph (c) as well. The Court also dismissed Valencia’s reliance on Section 5 of Republic Act No. 728 (amending Republic Act No. 660 ), stating it amended Section 11 and referred to a 5% discount for advancing annuity payments, not to the contribution deductions under Section 12. Therefore, the deduction was proper. Costs were imposed on the petitioner.