G.R. No. L-10859; August 29, 1958
FLAVIANO BAUTISTA, petitioner, vs. The AUDITOR GENERAL of the Republic of the Philippines and The GENERAL MANAGER of the Government Service Insurance System, respondents.

FACTS

Petitioner Flaviano Bautista was an Auditor in the General Auditing Office who was automatically and compulsorily retired on June 16, 1952, at the age of 65 years, 5 months and 21 days with 46 years, 6 months and 2 days of creditable service. He chose to receive a lump sum payment of the present value of his annuity for the first five years under Commonwealth Act No. 186, as amended by Republic Act No. 660, the law in force at his retirement. The Government Service Insurance System (GSIS) paid him P14,853.61, after deducting P2,060.75 as a discount at 5% per annum, compounded annually, from the total annuity of P18,007.80 for the first five years, and also deducting his premium account. Bautista objected to the discount deduction, invoking the rule in Espejo vs. Auditor General. The GSIS denied his request, explaining that the “present value” under the law required such discounting and that he was not covered by a subsequent exemption in Republic Act No. 728 because he was not 65 years old on the date of approval of Republic Act No. 660 (June 16, 1951). The Auditor General upheld the GSIS decision, prompting this petition for review.

ISSUE

Whether the Government Service Insurance System correctly deducted a discount from the lump sum payment of the present value of the petitioner’s annuity for the first five years upon his compulsory retirement.

RULING

No. The Supreme Court reversed the decision of the Auditor General. Applying the rule established in Espejo vs. Auditor General, the Court held that the petitioner’s retirement rights became vested under Republic Act No. 660 at the time of his compulsory retirement on June 16, 1952. At that time, the law provided for a lump sum payment of the annuity for the first five years without any mention of a discount. The proviso in the subsequent Republic Act No. 728, which restricted the no-discount privilege, could not operate retroactively to prejudice the petitioner’s vested right to full payment. Furthermore, the term “present value” in the law should be understood in its ordinary, not technical, sense to align with the law’s purpose of providing substantial support for retired employees. The subsequent amendatory acts, Republic Act No. 1123 and Republic Act No. 1573, which removed the proviso, clarified that no such deduction should be made. The Court ordered the GSIS to pay the petitioner the deducted sum of P2,060.75.