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REPUBLIC OF THE PHILIPPINES GOVERNMENT SERVICE INSURANCE SYSTEM
FINANCIAL CENTER, ROXAS BOULEVARD, PASAY CI'IY
BOARD OF TRUSTEES
IN THE MAlTER OF: CLAIM FOR REFUND OF PERMANENT PARTIAL DISABILI'IY BENEFITS (OSTEOARTHRITIS) DEDUCTED FROM COLA, AMELIORATION ALLOWANCE AND JUDGMENT DEBT
GLORIA C. LEYVA, MERCEDES T. RANESES, LEONARDA PEREZ, AMELIA VERGARA, RODRIGO R. GREGORIO, REMEDIOS PEREZ, MARIA B. PINEDA, RENATO NISCE and THE GERSIP ASSOCIATION, INC.,
Petitioners.
LETICIA DE MESA, NILDA LINAO, FELIX LOPEZ, CARLITO ROXAS, MARIANO SANTOS, RODRIGO GREGORIO and THE GERSIP ASSOCIATION, INC.,
Petitioners.
GSIS Case No. 004-04
GSIS Case No. 014-04
}(---------------------------------------------------------------------------------------}(
DECISION
NATURE OF THE CASE
These consolidated cases stem from the petitions for recovery of the
Permanent Partial Disability (PPD) Benefits due to osteoarthritis, separately
filed on 17 March 2004 and 3 September 2004, by officers and some
members of the "GERSIP" (GSIS Early Retirement/Separation Incentive
Plan) Association, Inc., against the Government Service Insurance System
(GSIS).
•
• . ' '1
-' Page 2oflJ GSIS Case No. 004-04
Leyva, et al. v. GSIS
GS/S Case No. 0114-04 De Mesa, et al. v. GSIS
In GSIS Case No. 004-04, petitioners Gloria G. Leyva, et al. and the
GERSIP Association, Inc. seek the recovery of the PPD benefits that were
deducted from the back pay differentials for Amelioration Allowance and the
Cost of Living Allowance (COLA) granted them pursuant to the legal opinion
of the Office of the Government Corporate Counsel (OGCC) 1•
In GSIS Case No. 014-04, petitioners Leticia De Mesa, et al. and the
GERSIP Association, Inc. seek the recovery of the PPD benefits that were
deducted from the refundable 25% Provident Fund Management share
(previously deducted from the retirement benefits of petitioners) pursuant to
the Decisions of the Supreme Court in the consolidated cases of GSIS vs.
COA and GSIS vs. Pineda, et al. (G.R. No. 138381 and G.R. No. 141625)2•
FACTS OF THE CASE
Petitioners were employees of the GSIS who claimed Pennanent
Partial Disability (PPD) benefits due to "OSTEOARTHRITIS" and
subsequently retired under the GSIS Early Retirement Separation Incentive
Plan (GERSIP) in 1997-1998. They were paid the PPD benefits pursuant to
the then Section 9.2.2, Rule IX3, of the 1997 Implementing Rules and
Regulations (IRR) of R.A. No. 8291, to wit:
Rule IX
Section 9.2.2 - Injury resulting in any of the following shall be deemed Pennanent Partial Disability:
t OGCC Opinion No. 278, series of 2002 (11 December 2002), citing several Supreme Court Decisions. 2 381 SCRA 101 (16 April2002), 441 SCRA 532 (10 November 2004) and 482 SCRA 11 (9 February 2006). 3 Now Section 23.2.2 of the 2010 Revised Implementing Rules and Regulations.
' ' ' '
. . '
' ' I
(a) Complete and permanent loss of the use of:
1). Any finger; 2). Any toe; 3). Any arm; 4). One hand; 5). One foot; 6). One leg; 7). One or both ears: 8). Hearing of one or both ear; 9). Sight of one eye; or
Page J of /J GSIS Case No. 004--04
Leyva, eta/. v. GSIS
GSIS Case No. 0114--04 De Mesa, eta/. v. GSIS
(b) Such other cases as may be determined by the GSIS.
XXX XXX XXX
An investigation was conducted after it was observed that most of the
PPD claims were for "Osteoarthritis". The investigation concluded that the
claims for PPD benefits due to Osteoarthritis were paid irregularly and in
contravention of the 1997 IRR of R.A. No. 8291 because said ailment is not
among the ailments or injuries mentioned in Section 9.2.2, Rule IX, of the
1997 IRR of R.A. No. 8291.
Pursuant to Rule IX4 of the 1997 IRR of R.A. No. 8291 and Board
Resolution No. 345,5 dated 21 November 2001, the PPD benefits due to
Osteoarthritis granted to petitioners (GERSIP-retirees) were deducted from
the back pay differentials for Amelioration Allowance and Cost of Living
Allowance (COLA) granted to petitioners (in GSIS Case No. 004-04), and
from the refundable 25% Provident Fund Management share (previously
deducted from the retirement benefits) granted to petitioners (in GSIS Case
No. 014-04).
In Audit Observation Memorandum No. 2004-004 dated 28 May 2004,
the Commission on Audit (COA) observed that the officials of the GSIS
Bataan Field Office had processed and approved the Disability Benefits for
4 Disability and Sickness-Income Benefits. s Reiterating the policy that the basis for osteoarthritis claims is "Loss and/ or Impairment of Income."
• • J
Page 4 of/3 GSIS Case No. 004-04
Leyva, et al. v. GSIS
GSIS Case No. 0114-04 De Mesa, et al. v. GSIS
Degenerative Osteqarthritis to 278 members even without the necessary
operating guidelines and without requiring the claimants to establish actual
loss or impairment of income/compensation. Hence, COA observed that the
grant of the Pl0.26 Million disability benefits was illegal because it was
contrary to Section 9.1.1 6 of the 1997 IRR of R.A. No. 8291 and should be
refunded.
Subsequently, COA issued a Notice of Disallowance (ND NO. RLAO-
2004-023) dated 16 August 2004 disallowing, for lack of legal basis, the
payment of Disability Benefit for Degenerative Osteoarthritis made by the
GSIS Bataan Field Office.
In the reply and Comment to the aforementioned COA Disallowance
and Audit Observation Memorandum (AOM) on the PPD benefits, GSIS
stated that the following actions were taken on the COA disallowance:
1. The Claims Department was instructed to deduct the amount paid on PPD benefits from whatever benefit that will be paid and had requested ITSG to include the same in the Claims and Loans Interdependency Policy (CLIP).
2. Collection letters shall be sent to all active government employees who were paid the PPD benefits.
3. PPD benefits paid to retired government employees shall be deducted from their monthly pension payments.
The COA again issued another Audit Observation Memorandum
finding that the other payments made by the GSIS of PPD benefits due to
Osteoarthritis likewise "did not conform with (sic) the procedural and
documentary requirements under Sec. 9.3.37 of the Implementing Rules and
Regulations (IRR) of R.A. No. 8291." 8
6 "9.1.1. - Disability benefits are the benefits which are granted to a member due to the loss or reduction in earning capacity caused by a loss or impairment of the normal functions of his/her physical and/ or mental faculties as a result of an injury or disease;"
"9.3.3. - The criteria for evaluating the extent of disability of a member are as follows:
. '
Pogd of/J GSIS Case No. 004·04
Leyva, et a/. v. GSIS
GSIS Case No. 0114·04 De Mesa, eta/. v. GSIS
Accordingly, the amounts paid to petitioners by reason of
osteoarthritis were deducted from the back pay differentials for
Amelioration Allowance and Cost of Living Allowance (COLA) granted to
petitioners (in GSIS Case No. 004-04}, and from the refundable 25%
Provident Fund Management share (previously deducted from the
retirement benefits) granted to petitioners (in GSIS Case No. 014-04).
Thus, on 17 March 2004 (GSIS Case No. 004-04) and on 03
September 2004 (GSIS Case No. 014-04) petitioners respectively filed their
Petitions before the GSIS Board of Trustees seeking the recovery and refund
of the PPD benefits due to Osteoarthritis that were deducted from their
Amelioration Allowance, COLA and Provident Fund Management share.
Thereafter the petitioners filed a motion for the consolidation of these
cases which was granted on February 9, 2005.
In both petitions, petitioners alleged that the deductions of the
amounts previously received by them for PPD due to Osteoarthritis were
arbitrarily effected by GSIS.
In its Answer to the consolidated cases, it was interposed that (1) the
petitions are barred by res judicata, and that (2) the petitions fail to state or
do not have a cause of action.
(a) The extent of actual loss of compensation or incapacity to earn; or (b) When the member's incapacity to earn cannot be precisely determined, the loss or reduction in earning
capacity shall be based on the Table of Loss Percentage prescribed by the GSJS; or (c) In the event the injury/disease which caused an impairment not listed in the aforecited Table, the GSIS
shal determine the equivalent percentage of loss or reduction of earning capacity taking into account the extent of the functional and/or anatomical loss resulting from such injury/disease in relation to the over-all physiology of the disabled member."
Quoted in the 29 June 2004 letter of the Senior Vice President, SIG to the Corporate Auditor of the GSIS, citing the Audit Observation Memorandum.
. . ~ .
ISSUE
Page 6 ofiJ GSIS Case No. 004-04
Leyva, et al. v. GSIS
GSIS Case No. 0114-04 De Mesa, et al. v. GSIS
The issue for resolution is whether or not the petitioners are entitled
to the refund of the PPD benefits that were deducted from their refundable
Amelioration Allowance, COLA and 25% Management share of the Provident
Fund.
DISCUSSION
Under Section 9.1.1, Rule IX of the 1997 IRR of R.A. No. 8291,
disability benefits such as PPD benefits " ... are granted to a member due to
the loss or reduction in earning capacity caused by a loss or impairment of
the normal functions of his/her physical and/or mental faculties as a result of
an injury or disease". This was clearly emphasized in GSIS Board Resolution
No. 345 dated 21 November 2001 which reiterated the same requirement
that "the basis for the claim is Loss and/or Impairment of Income".
This was also the basis for the Audit Observation Memoranda and
COA disallowance issued by the COA where it observed that the grant of
disability benefits for degenerative Osteoarthritis was illegal being contrary
to Section 9.1.1 of the 1997 IRR of R.A. No. 8291, having been granted
without operating guidelines and failure to prove the claimants' actual loss
or impairment of income/compensation. The COA further ordered the refund
or collection of the benefits erroneously granted to the claimants under its
Notice of Disallowance (ND NO. RLA0-2004-023) issued on 16 August 2004,
which stated categorically that:
"We have reviewed the transaction/s appearing in the Audit Observation Memorandum (AOM) No. 2004-006-004 dated June 4, 2004, issued by the Audit Team Leader (ATL), Government Service Insurance System (GSIS), Bataan Field Office, Dinalupihan, Bataan, pertaining to the payment of Disability Benefit for Degenerative Osteoarthritis without legal basis, and thus disallowed in audit."
Page 7of13 GS/S Case No. 004-04
Leyva, et a/. v. GSIS
GSIS Case No. 0114-04 De Mesa, eta/. v. GSIS
It further stated that the disallowance should be totally refunded
immediately9 and that the persons liable are all the recipients of the benefits
and all those who signed (certified and approved) in boxes A, Band C of the
disbursement vouchers and/or payroll.
The clarity of the COA disallowance on PPD benefits for Osteoarthritis
precludes further interpretation. It bears stressing that all payments for
PPD benefits due to Osteoarthritis are akin to the grant of PPD benefits for
Osteoarthritis effected by the GSIS Bataan Field Office and as such are
likewise illegal and unwarranted. Thus, it is incumbent upon the GSIS to
take the appropriate actions on the COA recommendations relative to the
COA disallowance, one of which is to collect or refund all other PPD benefits
erroneously granted. Non-compliance with the COA disallowance, which
eventually would be the subject of Notice of Finality of Decision and COA
Order of Execution (COE), would subject GSIS officials and employees to
contempt and appropriate civil suit and administrative or criminal action. 10
Moreover, both petitions are bereft of any statement of facts and legal
basis to show petitioners' entitlement to PPD Benefits for Osteoarthritis.
Even the affidavits submitted by petitioners do not show any legal or factual
basis for their entitlement of PPD. Petitioners merely alleged that while
employed in the GSIS, they were "granted PPD benefits due to
Osteoarthritis in accordance with GSIS policies and procedures in force at
the time of the grant of said benefits," these are bare and general
allegations which are not supported by any independent evidence.
Obviously, such unconfirmed statements will not qualify or entitle
petitioners to PPD benefits.
9 Regional Legal & Adjudication Office (RLAO) 2nd Indorsement dated August 12, 2004. 10 See Sections 3, 3(1) and 4 of the 2009 Revised Rules of Procedure of the Commission on Audit (COA)
Page 8 of/3 GSJS Case No. 004-04
Leyva, et a/. v. GSJS
GSJS Case No. 0114-04 De Mesa, et al. v. GSIS
It is worthy to emphasize that all the payments made for PPD benefits
due to Osteoarthritis, of which the petitioners are recipients, were done
without basis and in contravention of the 1997 IRR of R.A. No. 8291. Hence,
even assuming for the sake of argument that there were no adverse COA
actions regarding the payment of the PPD benefits due to Osteoarthritis, the
GSIS is still duty-bound to recover the same, having been granted without
legal basis. The COA actions (2004) on this matter simply but effectively
bolstered and buttressed Board Resolution No. 345 (2001).
Consequently, the erroneous payment of the PPD benefits to
petitioners despite not being entitled to the same necessarily gives rise to an
obligation on the part of the petitioners to return the amount of PPD benefits
paid by the GSIS to them under the principle of solutio indebiti.
Under the principle of solutio indebiti, if something is received when
there is no right to demand it, and it was unduly delivered through mistake,
the obligation to return it arises.11 Hence, if the payment of PPD benefits
was made to petitioners by mistake, such payment is covered by solutio
indebiti, which gives rise to an obligation on their part to return whatever
was erroneously received.
Petitioners harp on the fact that they received the payment from the
GSIS itself while, completely glossing over the fact that none of them were
able to prove any loss or reduction in earning capacity as required by
Section 9.1.1, Rule IX of the 1997 IRRofR.A. No. 8291. Evidently, there was
patent mistake in the payment of the same.
11 Article 2154, Civil Code of the Philippines
.. . .. Page 9 of/J
GS/S Case No. 004-04 Leyva, et al. v. GSIS
GS/S Case No. 0114-04 De Mesa, et al. v. GSIS
Moreover, there is a presumption that there was a mistake in the
payment "if something which had never been due or had already been paid
was delivered; but he from whom the return is claimed may prove that the
delivery was made out of liberality or for any other just cause.12 Here, no
such proof was adduced by petitioners, thus, the presumption of payment by
mistake stands.
To stress, petitioners received the PPD benefits due to a mistake or
fault in the application of the provisions of law and rules granting PPD
Benefits. Hence, the amounts corresponding to the PPD benefits petitioners
erroneously received became obligations on their part to the GSIS.
Petitioners are legally and duty bound to return to the GSIS the said
amounts under the principle of solutio indebiti.
As aptly explained by the Honorable Supreme Court in its Resolution
dated November 10, 2004 in the consolidated cases of GSIS vs. GOA and
GSIS vs. Pineda/ et al. (G.R. Nos. 138381 and 141625)13:
It cannot be denied that respondents were recipients of benefits that were properly disallowed by the COA. These COA disallowances would otherwise have been deducted from their salaries, were it not for the fact that respondents retired before such deductions could be effected. The GSIS can no longer recover these amounts by any administrative means due to the specific exemption of retirement benefits from COA disallowances. Respondents resultantly retained benefits to which they were not legally entitled which, in turn, gave rise to an obligation on their part to return the amounts under the principle of solutio indebiti.
Under Article 2154 of the Civil Code, if something is received and unduly delivered through mistake when there is no right to demand it, the obligation to return the thing arises. Payment by reason of mistake in the construction or application of a doubtful or difficult question of law also comes within the scope of solutio indebiti.
12 Article 2163, Civil Code of the Philippines. See also PHILIPPINE NATIONAL BANK,vs. COURT OF APPEALS, et al. G.R. No. 97995. January 21, 1993. 13 441 SCRA 532 (2006).
Page /O of/J GSIS Case No. 004·04
Leyva, et al. v. GSIS
GSIS Case No. 0114-04 De Mesa, eta/. v. GSIS
Petitioners likewise aver that the deductions effected by the GSIS to
recover the erroneously paid PPD benefits due to Osteoarthritis were
arbitrarily made.
We find petitioners' assertion untenable. The corresponding amount
of PPD benefits were correctly deducted from the petitioners' amelioration
allowances, COlA, and management share of the Provident Fund pursuant
to the principle of set-off or compensation and the strength of written
authorizations executed by the petitioners themselves.
The validity and the binding effect of the foregoing "authorizations"
were passed upon by the Supreme Court in its Resolution dated February 9,
2006 in the consolidated cases GSIS vs. COA and GSIS vs. Pineda~ et al.,
declaring the authorizations as subsisting and effective, to wit:
In effecting said refund, the parties are reminded of the following guidelines enunciated in the November 10, 2004 resolution:
1. All deductions from respondent's retirement benefits should be refunded except those amounts which may properly be defined as "monetary liability to the GSIS";
2. Any other amount to be deducted from retirement benefits must be agreed upon by and between the parties; and
3. Refusal on the part of respondents to return disallowed benefits shall give rise to a right of action in favor of GSIS before the courts of law. (Underscoring supplied)
As for the amount properly disallowed by the COA and which are covered by "authorizations" executed by respondents, petitioner GSIS may exclude the same from the refund considering that said "authorizations" may be deemed to have been duly executed and covered by (2) above. Absent any appropriate challenge to its validity, the "authorizations" are considered subsisting and in effect, until annulled in a proper proceeding on the grounds cited by respondents. (Underscoring supplied)
. . . '.
Page 11 oflJ GSIS Case No. 004-04
Leyva, et al. v. GSIS
GSJS Case No. 0114-04 De Mesa, et al. v. GSIS
The Honorable Supreme Court further emphasized that such
authorization constitutes an agreement between the petitioners and GSIS
for the latter to deduct any amount from the benefits due them and thus
comes within the purview of number 2 of the guidelines issued by the
Honorable Supreme Court on how to effect the refund of the benefits in the
aforementioned consolidated cases. Thus, the PPD benefits erroneously
paid to the petitioners were legally deducted from their respective refunds
of COLA and amelioration allowances and from their management share of
the Provident Fund.
IN VIEW OF THE FOREGOING, the consolidated petitions are
DISMISSED for lack of merit.
SO ORDERED.
Pasay City, _I_J _A_U_G _2_0 l_Z __
IEL L. LACSON, JR.
~~ ROB RT G. VERGARA
ice Chairman
Chairman
A~~~~~~ KARINA CONSTANTINO-DAVID
Trustee
GERALDI E MARIE BERBERABE-MARTINEZ
Trustee
~ttT~~ Trustee
(o~ LEAVE) DANILO A. GOZO
Trustee
I
FRANCISCO T. DUQUE III* Trustee
*Did not participate in the deliberations.
Copy furnished:
THE GERSIP ASSOCIATION, INC. No. 10 Road 16, Toro Hills, Project 8, Quezon City
ATTY. AGUSTIN S. SUNDIAM Counsel for Petitioners 8 Pangilinan Drive Toro Hills, Quezon City, M.M.
ATTY. MARIANNE C. A. GUINOLBAY Legal Services Group GSIS Financial Center, Roxas Blvd. Pasay City
Page/lof/J GSIS Case No. 004·04
Leyva, et al. v. GSIS
GSIS Case No. 0114-04 De Mesa, et al. v. GSIS
. ' ... . ' I ,. . .' Page 13 of/3
GSIS Case No. 004-04 Leyva, et al. v. GSIS
GSIS Case No. 0114-04 De Mesa, et al. v. GSIS
CERTIFICATION
WE, VANESSA JOY B. ONG FE-JONES, Attorney IV, and JOHN ANDREW R. SALAZAR, Attorney V of the GSIS Legal Services Group, having been assigned as Hearing Officers to draft a Decision in G SIS Board of Trustees Consolidated Case Nos. 004-04 and 014-04 entitled "IN THE MATTER OF: CLAIM FOR REFUND OF PERMANENT PARTIAL DISABILITY BENEFITS (OSTEOARTHRITIS) DEDUCTED FROM COLA, AMELIORATION ALLOWANCE AND JUDGMENT DEBT, Gloria G. Leyva, et al. and Leticia De Mesa, et al., petitioners'' hereby certify that the statement of facts herein stated and being presented before this Board is accurate and true, based on the records of the case, the pleadings and other documents submitted by the parties.
This certification is issued in compliance with Board Resolution No. 198-A
adopted on September 15, 2004.
Pasay Ci1a 23, 012.
VANESSA JOY B. Hearing Offi
-JONES--------~ .JD~~ R. S~=='. ~ Hearing Officer
.. ' .. -
G 5 I 5 Government Service Insurance System Financial Center, Pasay City, Metro Manila 1308
OFFICE OF THE CORPORATE SECRETARY
EXACT COPY OF RES. NO. 133 ADOPTED BY THE GSIS BOARD OF TRUSTEES IN ITS MEETING NO. 16 HELD ON 23 AUGUST 2012
Decision in GSIS Case Nos. 004-04 and 014-04, In the Matter of: Claim for Refund of Permanent Partial
Disability Benefits (Osteoarthritis) Deducted from COLA. Amelioration Allowance and Judgement Debt
RESOLUTION NO. 133
RESOLVED, to APPROVE and CONFIRM the Decision in GSIS Case Nos. 004-04 and 0 14-04, Gloria C. Leyva et al. and Leticia De Mesa et al., Petitioners, entitled In the Matter of: Claim for Refund of Pennanent Partial Disability Benefits (Osteoarthritis) Deducted from COLA, Amelioration AUowance and Judgement Debt. the dispositive portion of which states:
"IN VIEW OF THE FOREGOING, the consolidated petitions are DISMISSED for lack of merit."
A copy of the Decision in GSIS Case Nos. 004-04 and 014-04 is attached and made an integral part of this Resolution.
ED:
ERr&:RGARA v· e-Chairman GSIS Board of Trustees
CERTIFIED CORRECT:
Corporate Secretary