EN BANC

[G.R. No. 96032. July 31, 1991.]

JESUS N. BORROMEO , petitioner, vs. THE HON. CIVIL SERVICE

COMMISSION and SECRETARY OF BUDGET AND MANAGEMENT ,
respondents.

SYLLABUS

1. CONSTITUTIONAL LAW; 1987 CONSTITUTION; CONSTITUTIONAL

COMMISSIONS; APPEAL BY CERTIORARI TO THE SUPREME COURT; REFERS TO AN
AGGRIEVED PARTY RAISING A DECISION TO THE HIGH TRIBUNAL; CASE AT BAR. —
Article IX-A, Section 7 of the 1987 Constitution refers to an aggrieved party raising a
decision to this Court. Unfortunately for the petitioner, neither the Civil Service
Commission nor the Secretary of Budget and Management may be viewed as an
aggrieved party. The CSC is not an aggrieved party because it recommended the
approval of the petitioner's request for payment of terminal leave computed on the
basis of his monthly salary plus allowances and likewise interceded in behalf of the
petitioner for the release of funds from the DBM. The COA upheld this initial position.
Nor is the DBM an aggrieved party because it was not privy to the case before the COA.
2. ID.; ID.; ID.; CIVIL SERVICE COMMISSION; JURISDICTION. — While the
implementation and enforcement of leave bene ts are matters within the functions of
the CSC as the central personnel agency of the government, the duty to examine
accounts and expenditures relating to leave bene ts properly pertains to the COA.
Where government expenditures or use of funds is involved, the CSC cannot claim an
exclusive domain simply because leave matters are also involved.
3. ID.; ID.; ID.; EQUALLY PRE-EMINENT IN THEIR RESPECTIVE SPHERES. —
The COA, the CSC, and the Commission on Elections are equally pre-eminent in their
respective spheres. Neither one may claim dominance over the others.
4. ID.; ID.; ID.; ID.; ROLE OF JUDICIARY IN CASE OF CONFLICTING RULINGS. —
In case of con icting rulings, it is the Judiciary which interprets the meaning of the law
and ascertains which view shall prevail.
5. ADMINISTRATIVE LAW; REVISED ADMINISTRATIVE CODE; RETIREMENT;
COMMUTATION OF SALARY DIFFERENTIATED FROM COMMUTATION OF LEAVE
CREDITS. — "Commutation of salary" as used in Section 286 is, however, not the same
as "commutation of leave credits." The former is applied for by an employee during
employment when he goes on ordinary leave. In contrast, commutation of leave credits,
more commonly known as terminal leave, is applied for by an o cer or employee who
retires, resigns or is separated from the service through no fault of his own (Manual on
Leave Administration Course for Effectiveness published by the Civil Service
Commission, pages 16-17).
6. ID.; ID.; ID.; TERMINAL LEAVE; NATURE, CONSTRUED. — Since terminal
leave is applied for by an o cer or employee who has already severed his connection
with his employer and who is no longer working, then it follows that the terminal leave
pay, which is the cash value of his accumulated leave credits, should not be treated as
compensation for services rendered at that time (Re: Request of Atty. Bernardo Zialcita,
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 190 SCRA 851 [1990]). It cannot be viewed as salary for purposes which would reduce
it. (supra)
7. ID.; COMMONWEALTH ACT NO. 186; RETIREMENT OF GOVERNMENT
EMPLOYEES OTHER THAN MEMBERS OF THE JUDICIARY, CONSTITUTIONAL
COMMISSIONS AND THOSE WHOSE RETIREMENT IS NOT COVERED BY SPECIAL LAW;
COMMUTATION OF VACATION AND SICK LEAVE CREDITS; BASIS. — Commonwealth
Act (CA) No. 186, as amended, provides for the retirement of government employees,
other than members of the Judiciary, Constitutional Commissions and those whose
retirement is not covered by special law. Under the last sentence of Section 12 (c),
o cials and employees retired under CA 186, as amended, shall be entitled to the
commutation of the vacation and sick leave credits based on the highest rate received.
I n Paredes vs. Acting Chairman, supra, the Court construed the phrase "highest rate
received" as referring to the retiree's "highest monthly salary."
8. ID.; REPUBLIC ACT NO. 910; RETIREMENT OF MEMBERS OF THE
JUDICIARY AND CONSTITUTIONAL COMMISSIONS; RETIREMENT GRATUITY; BASIS. —
R.A. No. 910 as amended, governs the petitioner. In the case of members of the
Judiciary and Constitutional Commissions, the basis in computing the retirement
gratuity is the highest monthly salary plus the highest monthly aggregate of
transportation, living and representation allowance (COLA and RATA) . The same rule of
uniformity which we applied in Paredes vs. Acting Chairman for those retiring under CA
186 as amended should also apply for those who retire under R.A. 910 as amended.
The rate used in computing retirement gratuities also applies in the computation of
terminal leave credits.
9. STATUTORY CONSTRUCTION; RETIREMENT LAWS; LIBERALLY
CONSTRUED AND ADMINISTERED IN FAVOR OF THE PERSONS INTENDED TO BE
BENEFITED. — Retirement laws are liberally construed and administered in favor of the
persons intended to be bene ted. All doubts as to the intent of the law should be
resolved in favor of the retiree to achieve its humanitarian purposes. (In Re: Amount of
the Monthly Pension of Judges and Justices starting from the Sixth year of their
Retirement and after the Expiration of the Initial Five-year Period of Retirement, 190
SCRA 315 [1990]; Ortiz vs. Commission on Elections, 162 SCRA 812 [1988]; Bautista
vs. Auditor General, 104 Phil. 428 [1958]).
10. ADMINISTRATIVE LAW; REVISED ADMINISTRATIVE CODE; RETIREMENT;
GRATUITY; NATURE. — A gratuity is that paid to the bene ciary for past services
rendered purely out of generosity of the giver or grantor (Peralta vs. Auditor General,
100 Phil. 1051 [1957]). It is a mere bounty given by the government in consideration or
in recognition of meritorious services and springs from the appreciation and
graciousness of the government (Pirovano vs. De La Rama Steamship Co., 96 Phil. 335,
357 [1954]).
11. ID.; ID. ; ID.; ID.; ACCUMULATED LEAVE CREDITS, WITHIN ITS SCOPE. —
While it is true that vacation and sick leave credits are earned during one's period of
employment, they are, by their very nature and purpose, supposed to be enjoyed or
exhausted during employment. When these accumulated leave bene ts are allowed to
be accumulated, not to be paid while one is working but to be reserved for old age, then
this constitutes the gratuity.
12. ID.; REPUBLIC ACT NO. 6758; RETIREMENT; INTEGRATION OF COST OF
LIVING ALLOWANCE TO THE BASIC SALARY. — Section 12 of Republic Act 6758,
known as the Compensation and Position Classi cation Act of 1989, mandated the
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 integration of COLA to the basic salary and, therefore, to the retirement pay of all
employees.
13. ID.; REPUBLIC ACT NO. 910; RETIREMENT OF MEMBERS OF THE
JUDICIARY AND CONSTITUTIONAL COMMISSIONS; TERMINAL LEAVE DIFFERENTIALS;
INCLUSION OF COLA AND RATA THEREIN; CUT-OFF DATE. — Practical considerations
and budgetary restraints constrain the Court to impose a cut-off date for claims for
terminal leave differentials. The Court therefore, rules that the inclusion of COLA and
RATA as basis in arriving at terminal leave pay shall apply only to those quali ed
members of the Judiciary and Constitutional Commissions who retired or shall retire on
or after the change of government in February, 1986.

DECISION

GUTIERREZ, JR. , J : p

Should the terminal leave pay of petitioner Borromeo, Chairman of the Civil
Service Commission (CSC) until his retirement on April 1, 1986, be computed on the
basis of the highest monthly salary plus cost of living allowance (COLA) and
representation and transportation allowance (RATA) or solely on the basis of highest
monthly salary without said allowances? This is the issue that confronts the Court.
On August 18, 1988, the petitioner wrote a letter to the Commission on Audit
(COA) Chairman, coursed through the CSC Chairman, requesting an opinion on whether
or not the money value of the terminal leave of retired Constitutional Commission
members should include the allowances received at the time of retirement. The
petitioner, in his letter, further stated that while retired members of other Constitutional
Commissions received terminal leave pay computed on the basis of highest monthly
salary including allowances, the former's terminal leave was computed solely on the
basis of highest monthly salary.
In a First Indorsement to the COA Chairman on September 1, 1988, the CSC
Chairman recommended the approval of the petitioner's request for payment of the
money value of his terminal leave based on salary plus allowances.
On September 28, 1989, the COA rendered Decision No. 992 (hereinafter referred
to as the COA decision) stating that "in line with the action taken by this Commission in
the previous similar cases of former COA Commissioners Hermogenes P. Pobre and
Silvestre D. Sarmiento," the COA "will interpose no objection" to the petitioner's claim.
Upon the petitioner's request for payment of terminal leave differential
representing the unpaid COLA and RATA amounting to P111,229.04, the CSC Chairman
informed the petitioner that the release of the corresponding advice of allotment and
cash outlay to cover the payment of his terminal leave differential had already been
requested from the Department of Budget and Management (DBM).
On January 25, 1990, in a letter addressed to the CSC Chairman, the DBM denied
the petitioner's request for payment of terminal leave differential for the following
reasons, among others:
1) Computation of the money value of vacation and sick leave is based on
"basic pay" or "basic salary" pursuant to the provisions of the Revised Administrative
Code, as amended by R.A. No. 1081.
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 2) Under Section 2(1) of P.D. No. 1146, the term salary refers to the basic
pay or salary received by an employee, excluding per diems, bonuses, overtime pay and
allowance.
3) The cases of former COA Commissioners Pobre and Sarmiento cannot be
validly invoked as precedents for purposes of DBM Budgetary action since said claims
were processed without prior involvement of the DBM.
Faced with the DBM refusal to release the corresponding allotment, the CSC
yielded to DBM instead of asserting its initial determination. It issued Resolution No.
90-514 dated May 30, 1990 wherein the Commission deemed it proper not to rule on
the issue on "ethical considerations" and "compulsions of delicadeza" and advised the
petitioner to le an action for declaratory relief (sic) on the issue with the Supreme
Court. LLpr

Petitioner Borromeo sought reconsideration of CSC Resolution No. 90-514,

reasoning that neither the CSC Resolution nor the opinion of the DBM Secretary could
prevail over the COA decision which had become final and executory.
On October 18, 1990, the CSC issued Resolution No. 90-945 denying
reconsideration of the petitioner's case. Inspite of the CSC Chairman's earlier approval
of the claim for payment, the CSC ruled that the COA decision "has no su cient legal
mooring and therefore cannot be the basis for allowing payment of the claims." The
Resolution likewise cited a June 13, 1990 letter from former Court Administrator
Meynardo A. Tiro informing the CSC that "the money value of the terminal leave credits
of the Justices of the Supreme Court and other members of the Judiciary is based only
on the highest basic salary (plus longevity pay) but excluding RATA as certi ed to by
our Director of Fiscal Management and Budget Office."
Hence, this petition.
The Secretary of Budget and Management was ordered impleaded by the Court
in a resolution dated January 31, 1991.
The petitioner seeks the nulli cation of CSC Resolution Nos. 90-514 and 90-945.
He urges that the COA decision which interposed no objection to the computation of
his terminal leave pay based on salary plus allowances had already become nal and
executory since no timely appeal had been taken therefrom.
Respondent CSC, on the other hand, maintains that the COA decision is not nal
and conclusive since said decision merely stated that the COA will not interpose any
objection to the payment of the petitioner's claim. More importantly, respondent CSC
adds, the determination of the legality of claims on leave matters is within the province
of the CSC.
On this preliminary issue, the Court rules against the petitioner's assertion that
the COA decision has become nal and executory and, therefore, beyond review; that
the DBM has no alternative but to obey it. Article IX-A, Section 7 of the 1987
Constitution provides:
". . . Unless otherwise provided by this Constitution or by law, any decision, order
or ruling of each Commission may be brought to the Supreme Court on certiorari
by the aggrieved party within thirty (30) days from receipt of a copy thereof."

The above-cited article refers to an aggrieved party raising a decision to this

Court. Unfortunately for the petitioner, neither the Civil Service Commission nor the
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 Secretary of Budget and Management may be viewed as an aggrieved party. The CSC is
not an aggrieved party because it recommended the approval of the petitioner's
request for payment of terminal leave computed on the basis of his monthly salary plus
allowances and likewise interceded in behalf of the petitioner for the release of funds
from the DBM. The COA upheld this initial position. Nor is the DBM an aggrieved party
because it was not privy to the case before the COA. Moreover, even if the DBM was
eventually apprised of the COA decision, the DBM's recourse was not to bring the
matter on a petition for certiorari before the Court. As the agency tasked to release
government funds, it simply ignored the COA ruling with which it disagreed. It refused
to approve the release of allotment and outlay for terminal leave differential since in its
opinion, payment thereof had no legal basis. The records do not show any authority of
COA to compel acceptance of its ruling in this particular case. LLjur

The respondent CSC's stance, however, that it is the body empowered to

determine the legality of claims on leave matters, to the exclusion of COA, is not well-
taken. While the implementation and enforcement of leave bene ts are matters within
the functions of the CSC as the central personnel agency of the government, the duty to
examine accounts and expenditures relating to leave bene ts properly pertains to the
COA. Where government expenditures or use of funds is involved, the CSC cannot claim
an exclusive domain simply because leave matters are also involved.
The COA, the CSC, and the Commission on Elections are equally pre-eminent in
their respective spheres. Neither one may claim dominance over the others. In case of
con icting rulings, it is the Judiciary which interprets the meaning of the law and
ascertains which view shall prevail.
The basic question for the Court's consideration is whether or not RATA and
COLA should be added to the highest monthly salary in computing the petitioner's
terminal leave pay.
The petitioner anchors his claim on the Memorandum Order issued by President
Marcos on November 20, 1980. Apparently, this Memorandum Order was also the
basis for the COA decision, invoked by the petitioner as nal and executory, interposing
no objection to his claim for terminal leave differential. The Memorandum Order reads:
"TO: The Chairman
Commission on Audit
Quezon City.

With reference to the request of that O ce for clari cation on the accumulated
leave credits of retired Chairman Perez and Commissioners Duque and Bayot, I
hereby direct that:
1. The computation of the terminal leave in question shall be computed on
the basis of the total number of days of leave credits each accumulated by
Chairman Perez and Commissioners Duque and Bayot on the day of their
retirement, not on the basis of 300 days as provided in Sec. 1014 of P.D. 1587.

2. The money value of the terminal leave shall be paid as computed on the
basis of the highest monthly salary including allowance received at the time of
the retirement.
(Sgd.) FERDINAND E. MARCOS
President of the Philippines
November 20, 1980." (p. 27, Rollo)
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 The above Order was the former President's response to a July 7, 1980 query initiated by
former COA Chairman Francisco A. Tantuico, Jr. seeking clarification from the Office of the
President respecting the claim of retired Chairman Leonardo B. Perez and Commissioners
Venancio S. Duque and Flores A. Bayot of the Commission on Elections for the payment of
the money value of their accumulated leaves. Since the Memorandum order specifically
applies to these three officials, then said Order cannot automatically benefit others not
mentioned therein. While it has persuasive value as a matter of contemporaneous
interpretation especially as regards Presidential Decrees or other presidential acts, we
cannot confer upon this Order the status of a law of general application.
The petitioner also invokes Administrative Order No. 44 dated December 13, 1979,
extending to the Chairman and members of the Constitutional Commissions the same
benefits enjoyed by retiring members of the Judiciary in the matter of rationalized rate of
allowances and liberalized computation of retirement benefits and accumulated leave
credits. cdll

The Solicitor General, acting on behalf of the CSC and Secretary of Budget and
Management, advances the argument that there is no provision in Administrative Order No.
444, or in any other law, which expressly authorizes the inclusion of allowances in the
computation of the money value of the petitioner's accumulated leaves.
The pertinent portions of Administrative Order No. 444 provide:
xxx xxx xxx
"3. The accumulated leave credit of a Chairman Commissioner of a
Constitutional Commission shall be computed under the same rules as those
applicable to members of the Judiciary.
4. Upon retirement, the lump sum of ve years gratuity as provided under R.A.
3595 for the Chairman Commissioner shall be computed on the basis of the
highest monthly salary plus the duly authorized transportation, living and
representation allowances in the last month prior to retirement or expiration of
term."
xxx xxx xxx

The law pertaining to retirement bene ts respecting members of the Judiciary is

Republic Act (R.A.) No. 910, as amended by Presidential Decree No. 1438, which reads:
xxx xxx xxx
"Sec. 3. Upon retirement, a justice of the Supreme Court or of the Court of
Appeals, or a judge of the Court of First Instance, Circuit Criminal Court, Agrarian
Relations, Tax Appeals, Juvenile and Domestic Relations, city or municipal court,
or any other court hereafter established shall be automatically entitled to a lump
sum of ve years gratuity computed on the basis of the highest monthly salary
plus the highest monthly aggregate of transportation, living and representation
allowances he was receiving on the date of his retirement; . . ."
xxx xxx xxx

It is clear from RA 910 as amended that the ve-year gratuity is based on highest
monthly salary plus transportation, living and representation allowance. Should the
computation of terminal leave pay, which is given on the same occasion of retirement
and which arises from the same considerations of government gratitude that for most
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 retirees is based on a lifetime of service, be accorded similar treatment?
The Solicitor General stresses that under Section 286 of the Revised
Administrative Code, as amended by Republic Act No. 1081 and Executive Order No.
1077, the computation of the money value of the terminal leave pay is based only on
monthly basic salary.
Section 286 of the Revised Administrative Code, as amended by RA No. 1081,
states:
Section 286. When vacation leave and sick leave may be taken. — Vacation
leave and sick leave shall be cumulative and any part thereof which may not be
taken within the calendar year in which earned may be carried over to the
succeeding years, but whenever any o cer, employee, or laborer of the
Government of the Philippines shall voluntarily resign or be separated from the
service through no fault of his own, he shall be entitled to the commutation of all
accumulated vacation and or sick leaves to his credit: Provided, That the total
vacation leave and sick leave that can accumulate to the credit of any o cer of
employee shall, in no case, exceed ten months: Provided, further, That the proper
Department Head may in his discretion authorize the commutation of the
salarythat would be received during the period of vacation and sick leave of any
appointed o cer or employee or teacher or laborer of the Philippine Government
and direct its payment on or before the beginning of such leave from the fund out
of which the salary would have been paid: Provided, furthermore, That no person
whose leave has been commuted following his separation from the service shall
be reappointed or reemployed under the Government of the Philippines before the
expiration of the leave commuted unless he rst refunds the money value of the
unexpired portion of the leave commuted. (Emphasis supplied)"

(Executive Order No. 1077 later amended Section 286 by removing the limitation
on the number of days of vacation and sick leaves that a retiree may accumulate,
although all employees are required to go on a minimum of ve days vacation leave
annually.)
The only provision in Section 286 of the Revised Administrative Code, as
amended, which could seemingly support the Solicitor General's view is the above
underlined clause which allows the "commutation of salary" of a government o cer,
employee or laborer.
"Commutation of salary" as used in Section 286 is, however, not the same as
"commutation of leave credits." The former is applied for by an employee during
employment when he goes on ordinary leave. Thus, if his Department Head allows it, the
employee may receive his salary for the period of the vacation or sick leave before the
beginning of such leave; otherwise, he gets his salary only on the pay days covered by
the vacation or sick leave period or upon returning to work. In contrast, commutation of
leave credits, more commonly known as terminal leave, is applied for by an o cer or
employee who retires, resigns or is separated from the service through no fault of his
own. (Manual on Leave Administration Course for Effectiveness published by the Civil
Service Commission, pages 16-17). In the exercise of sound personnel policy, the
Government encourages unused leaves to be accumulated. The Government
recognizes that for most public servants, retirement pay is always less than generous if
not meager and scrimpy. A modest nest egg which the senior citizen may look forward
to is thus provided. Terminal leave payments are given not only at the same time but
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 also for the same policy considerations governing retirement benefits. LLjur

Since terminal leave is applied for by an o cer or employee who has already
severed his connection with his employer and who is no longer working, then it follows
that the terminal leave pay, which is the cash value of his accumulated leave credits,
should not be treated as compensation for services rendered at that time. (Re: Request
of Atty. Bernardo Zialcita, 190 SCRA 851 [1990]) It can not be viewed as salary for
purposes which would reduce it. (supra) There can thus be no "commutation of salary"
when a government retiree applies for terminal leave because he is not receiving it as
salary. What he applies for is a "commutation of leave credits." It is an accumulation of
credits intended for old age or separation from the service. Hence, Section 286 of the
Revised Administrative Code is not applicable. It cannot be construed as limiting the
basis of the computation of terminal leave pay to monthly salary only.
In the light of the reasons which impelled the law to include COLA and RATA in
computing retirement bene ts of certain o cials, we rule that terminal leave payments
must also be governed by the same principle. COLA and RATA should be included in
computing the terminal leave credits when the o cials retire or the o cial relationship
is lawfully terminated.
The Solicitor General cites our ruling in Paredes v. Acting Chairman , 116 SCRA
176 [1982] to support his position.
Commonwealth Act (CA) No. 186, as amended, provides for the retirement of
government employees, other than members of the Judiciary, Constitutional
Commissions and those whose retirement is not covered by special law. Section 12(c)
of CA 186 reads:
"(c) Retirement is likewise allowed to any o cial or employee, appointive or
elective, regardless of age and employment status, who has rendered a total of at
least twenty years of service, the last three years of which are continuous. The
bene t shall, in addition to the return of his personal contributions with interest
compounded monthly and the payment of corresponding employer's premiums
described in subsection (a) of Section ve hereof, without interest, be only a
gratuity equivalent to one month's salary for every year of the rst twenty years of
service, plus one and one-half month's salary for every year of service over twenty
but below thirty years and two month's salary for every year of service over thirty
years in case of employees based on the highest rate received and in case of
elected o cials on the rates of pay as provided by law . . . O cials and
employees retired under this Act shall be entitled to the commutation of the
unused vacation and sick leave, based on the highest rate received, which they
may have to their credit at the time of retirement."
xxx xxx xxx

Under the last sentence, o cials and employees retired under CA 186, as
amended, shall be entitled to the commutation of the vacation and sick leave credits
based on the highest rate received.
I n Paredes v. Acting Chairman, supra , the Court construed the phrase "highest
rate received" as referring to the retiree's "highest monthly salary":
"The foregoing legal provision (Section 12(c) of CA 186 requires the computation
of the money value of the terminal leave to be based on the retiree's highest rate
received. And a reading of the entire provision shows that the highest rate
received refers to the retiree's highest monthly salary."
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 The petitioner in that case was a former Assistant City Auditor of Manila who
sought to have his RATA included in the computation of his terminal leave pay. The
Court therein held that "allowances are not considered part of salary for purposes of
retirement and payment of the money value of terminal leave."
It must be noted, however, that the Court, in that case, construed "highest rate
received" as highest monthly salary mainly because the retirement gratuity received by
employees under Section 12(c) of CA 186 is based only on monthly salary. Thus, under
the aforementioned provision, the bene t for employees shall be "a gratuity equivalent
to one month's salary for every year of the rst twenty years of service, plus one and
one-half month's salary for every years of service over 20 but below 30 years and two
months' salary for every year of service over thirty years . . . based on the highest rate
received . . . O cials and employees retired under this act shall be entitled to the
commutation of the unused vacation and sick leave, based on the highest rate received
. . . ." (Emphasis supplied.)
A reading of Section 12(c) of CA 186 therefore reveals an intent on the part of
the legislature to provide a uniform basis in computing both the retirement gratuity and
the terminal leave pay. In CA 186, that uniform basis is salary.
A different law, R.A. 910 as amended, governs the petitioner. In the case of
members of the Judiciary and Constitutional Commissions, the basis in computing the
retirement gratuity is the highest monthly salary plus the highest monthly aggregate of
transportation, living and representation allowance (COLA and RATA) . The same rule of
uniformity which we applied in Paredes v. Acting Chairman for those retiring under CA
186 as amended should also apply for those who retire under R.A. 910 as amended.
The rate used in computing retirement gratuities also applies in the computation of
terminal leave credits. LLpr

It is axiomatic that retirement laws are liberally construed and administered in

favor of the persons intended to be bene ted. All doubts as to the intent of the law
should be resolved in favor of the retiree to achieve its humanitarian purposes. (In Re:
Amount of the Monthly Pension of Judges and Justices starting from the Sixth year of
their Retirement and after the Expiration of the Initial Five-Year Period of Retirement,
190 SCRA 315 [1990]; Ortiz v. Commission on Elections, 162 SCRA 812 [1988];
Bautista v. Auditor General, 104 Phil. 428 [1958]).
Although terminal leave pay is not synonymous with, and is not a part of, the ve-
year lump sum gratuity provided under RA 910 as amended and Administrative Order
No. 444, the former may, in a broad sense, partake of the nature of a gratuity rather than
actual salary. A gratuity is that paid to the bene ciary for past services rendered purely
out of generosity of the giver or grantor. (Peralta v. Auditor General, 100 Phil 1051
[1957]) It is a mere bounty given by the government in consideration or in recognition
of meritorious services and springs from the appreciation and graciousness of the
government. (Pirovano v. De La Rama Steamship Co., 96 Phil. 335, 357 [1954]) While it
is true that vacation and sick leave credits are earned during one's period of
employment, they are, by their very nature and purpose, supposed to be enjoyed or
exhausted during employment. When these accumulated leave bene ts are allowed to
be accumulated, not to be paid while one is working but to be reserved for old age, then
this constitutes the gratuity.
Through the years, laws pertaining to accumulation of leave credits show a liberal
trend with a view to favoring the retiring employee. Under Act 2711 (dated March 10,
1917), accumulated leaves that may be commuted cannot exceed 5 months. Republic
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 Act No. 1081 (dated June 15, 1954) increased the limit from 5 to 10 months. With the
passage of Executive Order No. 1077 on January 9, 1986, the retiring employee
became entitled to the commutation of all accumulated vacation and sick leaves to his
credit, without limitation as to the number of days of vacation and sick leave that he
may accumulate.
Since terminal leave pay may also be considered a gratuity, then applying the rule
on liberal interpretation of retirement laws, the basis for its computation in the case of
members of the Judiciary and Constitutional Commissions must be the same as that
used in computing the 5-year lump sum gratuity under RA 910 as amended and
Administrative Order No. 444.
The Court is cognizant of the incongruity that may ensue if the terminal leave pay
of members of the Judiciary and Constitutional Commissions is computed only on the
basis of highest basic monthly salary.
If, for example a member of the CSC has an accumulated leave credit of one
month and, in the two months immediately prior to retiring, consumes his accumulated
leaves by going on fteen days' vacation leave twice, there is no dispute that he will be
paid two months' salary plus COLA and RATA for this two-month period, although no
work has been rendered by him. If, on the other hand, he chooses to work until the last
day of employment and upon retirement, applies for the commutation of his
accumulated leave credit of one month, following the proposition of the Solicitor
General, he will receive terminal leave pay equivalent only to one month's salary, without
COLA and RATA. In the latter case, why should he be penalized for faithfully working
continuously and not consuming his leave credits until his last working day? Why should
the basis for the commutation of leave credits be different just because he chose to
avail himself of his leave bene ts immediately before and not immediately after
retirement? Surely this disparity in consequence could not have been intended by our
lawmakers. cdll

There is more reason now to include COLA in the computation of terminal leave
pay. Section 12 of Republic Act 6758, known as the Compensation and Position
Classi cation Act of 1989, mandated the integration of COLA to the basic salary and,
therefore, to the retirement pay of all employees. While it is true that RA 6758 took
effect only on July 1, 1989, long after petitioner had already retired on April 1, 1986, his
COLA should nevertheless have been included in computing terminal leave pay for the
same reasons stated above.
I n Re: Request of Atty. Bernardo Zialcita, supra, the affected agency led a
motion for partial reconsideration stressing that the benefits of our ruling should not be
open-ended and made to apply retroactively to all the unknown and uncomplaining
persons who may have retired as far back as decades ago. We provided a cut-off date.
The same practical considerations and budgetary restraints constrain the Court to
impose a cut-off date for claims for terminal leave differentials. The Court therefore,
rules that the inclusion of COLA and RATA as basis in arriving at terminal leave pay shall
apply only to those qualified members of the Judiciary and Constitutional Commissions
who retired or shall retire on or after the change of government in February, 1986.
WHEREFORE, the petition is hereby GRANTED. Resolutions 90-514 and 90-945
issued by the Civil Service Commission are set aside. The Secretary of Budget and
Management is ordered to release the corresponding allotment and cash outlay for the
terminal leave differential claimed by the petitioner. The terminal leave pay of quali ed
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 members of the Judiciary and Constitutional Commissions who retired or shall retire on
or after the February, 1986 political upheaval shall be based on highest monthly salary
plus COLA and RATA.
SO ORDERED.
Fernan, C .J ., Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla,
Bidin, Sarmiento, Griño-Aquino, Medialdea, Regalado and Davide, Jr., JJ ., concur.

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