G.R. No.

141707            May 7, 2002

CAYO G. GAMOGAMO, petitioner,
vs.
PNOC SHIPPING AND TRANSPORT CORP., respondent.

DAVIDE, JR., C.J.:

The pivotal issue raised in the petition in this case is whether, for the purpose of computing an
employee’s retirement pay, prior service rendered in a government agency can be tacked in and
added to the creditable service later acquired in a government-owned and controlled corporation
without original charter.

On 23 January 1963, Petitioner Cayo F. Gamogamo was first employed with the Department of
Health (DOH) as Dental Aide. On 22 February 1967, he was promoted to the position of Dentist 1.
He remained employed at the DOH for fourteen years until he resigned on 2 November 1977. 1

On 9 November 1977, petitioner was hired as company dentist by Luzon Stevedoring Corporation
(LUSTEVECO), a private domestic corporation. 2 Subsequently, respondent PNOC Shipping and
Transport Corporation (hereafter Respondent) acquired and took over the shipping business of
LUSTEVECO, and on 1 August 1979, petitioner was among those who opted to be absorbed by the
Respondent.3 Thus, he continued to work as company dentist. In a letter dated 1 August 1979,
Respondent assumed without interruption petitioner’s service credits with LUSTEVECO, 4 but it did
not make reference to nor assumed petitioner’s service credits with the DOH.

On 10 June 1993, then President Fidel V. Ramos issued a memorandum 5 approving the privatization
of PNOC subsidiaries, including Respondent, pursuant to the provisions of Section III(B) of the
Guidelines and Regulations to implement Executive Order No. 37. 6 Accordingly, Respondent
implemented a Manpower Reduction Program to govern employees whose respective positions
have been classified as redundant as a result of Respondent’s decrease in operations and the
downsizing of the organization due to lay-up and sale of its vessels pursuant to its direction towards
privatization.7 Under this program, retrenched employees shall receive a two-month pay for every
year of service.

Sometime in 1995, petitioner requested to be included in the next retrenchment schedule. However,
his request was turned down for the following reasons: 8

1. As a company dentist he was holding a permanent position;

2. He was already due for mandatory retirement in April 1995 under his retirement plan (first
day of the month following his 60th birthday which was on 7 March 1995).

Eventually, petitioner retired after serving the Respondent and LUSTEVECO for 17 years and 4
months upon reaching his 60th birthday, on 1 April 1995. He received a retirement pay of
P512,524.15,9 which is equivalent to one month pay for every year of service and other benefits.

On 30 August 1995, Admiral Carlito Y. Cunanan, Repondent’s president, died of Dengue Fever and
was forthwith replaced by Dr. Nemesio E. Prudente who assumed office in December 1995. The
new president implemented significant cost-saving measures. In 1996, after petitioner’s retirement,
the cases of Dr. Rogelio T. Buena (company doctor) and Mrs. Luz C. Reyes (telephone operator),
who were holding permanent/non-redundant positions but were willing to be retrenched under the
program were brought to the attention of the new president who ordered that a study on the cost-
effect of the retrenchment of these employees be conducted. After a thorough study, Respondent’s
Board of Directors recommended the approval of the retrenchment. These two employees were
retrenched and paid a 2-month separation pay for every year of service under Respondent’s
Manpower Reduction Program.10

In view of the action taken by Respondent in the retrenchment of Dr. Buena and Mrs. Reyes,
petitioner filed a complaint at the National Labor Relations Commission (NLRC) for the full payment
of his retirement benefits. Petitioner argued that his service with the DOH should have been included
in the computation of his years of service. Hence, with an accumulated service of 32 years he should
have been paid a two-month pay for every year of service per the retirement plan and thus should
have received at least P1,833,920.00.

The Labor Arbiter dismissed petitioner’s complaint. 11 On appeal, however, the NLRC reversed the
decision of the Labor Arbiter. In its decision12 of 28 November 1997, the NLRC ruled:

WHEREFORE, the Decision of the Labor Arbiter dated May 30, 1997 is hereby SET ASIDE
and another judgment is hereby rendered to wit:

(1) the government service of the complainant with the Department of Health
numbering fourteen (14) years is hereby considered creditable service for purposes
of computing his retirement benefits;

(2) crediting his fourteen (14) years service with the Department of Health, together
with his nearly eighteen (18) years of service with the respondent, complainant
therefore has almost thirty-two (32) years service upon which his retirement benefits
would be computed or based on;

(3) complainant is entitled to the full payment of his retirement benefits pursuant to
the respondent’s Retirement Law or the retrenchment program (Manpower
Reduction Program). In any case, he is entitled to two (2) months
retirement/separation pay for every year of service.

(4) all other claims are DISMISSED.

SO ORDERED.

Respondent filed a motion for reconsideration but it was denied. 13

Unsatisfied with the reversal, Respondent filed with the Court of Appeals a special civil action
for certiorari which was docketed as CA-G.R. SP No. 51152. In its decision 14 of 8 November 1999,
the Court of Appeals set aside the NLRC judgment and decreed:

WHEREFORE, the petition is hereby GIVEN DUE COURSE and the writ prayed for
GRANTED. Consequently, the Decision and Resolution of the National Labor Relations
Commission (Second Division) dated November 28, 1997 and May 15, 1998, respectively,
are hereby SET ASIDE AND NULLIFIED, without prejudice to private respondent Cayo F.
Gamo-gamo’s recovery of whatever benefits he may have been entitled to receive by reason
of his fourteen (14) years of service with the Department of Health.

No pronouncement as to costs.
His motion for reconsideration having been denied by the Court of Appeals, 15 petitioner filed with us
the petition in the case at bar. Petitioner contends that: (1) his years of service with the DOH must
be considered as creditable service for the purpose of computing his retirement pay; and (2) he was
discriminated against in the application of the Manpower Reduction Program. 16

Petitioner maintains that his government service with the DOH should be recognized and tacked in
to his length of service with Respondent because LUSTEVECO, which was later bought by
Respondent, and Respondent itself, were government-owned and controlled corporations and were,
therefore, under the Civil Service Law. Prior to the separation of Respondent from the Civil Service
by virtue of the 1987 Constitution, petitioner’s length of service was considered continuous. The
effectivity of the 1987 Constitution did not interrupt his continuity of service. He claims that he is
supported by the opinion of 18 May 1993 of the Civil Service Commission in the case of Petron
Corporation, where the Commission allegedly opined:

… that all government services rendered by employees of the Petron prior to 1987
Constitution are considered creditable services for purposes of computation of retirement
benefits. This must necessarily be so considering that in the event that Petron would
consider only those services of an employee with Petron when it was excluded from the civil
service coverage (that is after the 1987 Constitution), it would render nugatory his
government agencies prior to his transfer to Petron. Hence, Petron or any other PNOC
subsidiary has to include in its retirement scheme or in its Collective Bargaining Agreement a
provision of the inclusion of the other government services of its employees rendered outside
Petron, otherwise, it would be prejudicial to the interest of the retireable employee
concerned.

Petitioner asserts that with the tacking in of his 14 years of service with the DOH to his 17 years and
4 months service with LUSTEVECO and Respondent, he had 31 years and 4 months creditable
service as basis for the computation of his retirement benefits. Thus, pursuant to Respondent’s
Manpower Reduction Program, he should have been paid two months pay for every year of his 31
years of service.

Petitioner likewise asserts that the principle of tacking is anchored on Republic Act No. 7699. 17

Petitioner concludes that there was discrimination when his application for coverage under the
Manpower Reduction Program was disapproved. His application was denied because he was
holding a permanent position and that he was due for retirement. However, Respondent granted the
application of Dr. Rogelio Buena, who was likewise holding a permanent position and was also
about to retire. Petitioner was only given one-month pay for every year of service under the regular
retirement plan while Dr. Buena was given a 2-month pay for every year of service under the
Manpower Reduction Program.

In its Comment to the petition, Respondent maintains that although it is a government-owned and
controlled corporation, it has no original charter. Hence, it is not within the coverage of the Civil
Service Law. It cites the decision in PNOC-EDC v. Leogardo,18 wherein we held that only
corporations created by special charters are subject to the provisions of the Civil Service Law. Those
without original charters are covered by the Labor Code. Respondent also asserts that R.A. No.
7699 is not applicable. Under this law an employee who has worked in both the private and public
sectors and has been covered by both the Government Service Insurance System (GSIS) and the
Social Security System (SSS), shall have his creditable services or contributions in both Systems
credited to his service or contribution record in each of the Systems, which shall be summed up for
purposes of old age, disability, survivorship and other benefits in case the covered member does not
qualify for such benefits in either or both Systems without the totalization.
Respondent further contends that petitioner was not discriminated upon when his application under
the Manpower Reduction Program was denied. At the time of his retirement in 1995, redundancy
was the main consideration for qualification for the Manpower Reduction Program. Petitioner was
not qualified. However in 1996, in order to solve the company’s business reversals, the new
president, Dr. Nemesio Prudente, found it necessary to implement cost-saving strategies, among
which was the retrenchment of willing employees. Thus, the applications for retrenchment of Dr.
Buena and Mrs. Reyes were approved. Respondent had the prerogative to amend its policies to
meet the contingencies of the business for self-preservation.

We rule in the negative the issue of whether petitioner’s service with the DOH should be included in
the computation of his retirement benefits.

Respondent’s Retirement scheme19 pertinently provides:

ARTICLE IV

RETIREMENT BENEFITS

SEC 4.1. Normal Retirement Date/Eligibility. -- The normal retirement date of an employee

SEC. 4.2. Normal Retirement Benefit. -- The retirement benefit shall be payable in lump sum
upon retirement which shall be determined on the basis of the retiree’s final monthly basic
salary (14/12) as follows:

(a) One (1) month’s pay for every year of service for those who have completed at
least twenty (20) years of continuous service with the Company.

(b) One and one-half (1 1/2) months’ pay for every year of service for those who
have completed twenty-one (21) to thirty (30) continuous years of service with the
Company.

(c) Two (2) months’ pay for every year of service for those who have completed at
least thirty-one (31) years of service with the Company.

It is clear therefrom that the creditable service referred to in the Retirement Plan is the retiree’s
continuous years of service with Respondent.

Retirement results from a voluntary agreement between the employer and the employee whereby
the latter after reaching a certain age agrees to sever his employment with the former. 20

Since the retirement pay solely comes from Respondent’s funds, it is but natural that Respondent
shall disregard petitioner’s length of service in another company for the computation of his retirement
benefits.

Petitioner was absorbed by Respondent from LUSTEVECO on 1 August 1979. Ordinarily, his
creditable service shall be reckoned from such date. However, since Respondent took over the
shipping business of LUSTEVECO and agreed to assume without interruption all the service credits
of petitioner with LUSTEVECO,21 petitioner’s creditable service must start from 9 November 1977
when he started working with LUSTEVECO22 until his day of retirement on 1 April 1995. Thus,
petitioner’s creditable service is 17.3333 years.

We cannot uphold petitioner’s contention that his fourteen years of service with the DOH should be
considered because his last two employers were government-owned and controlled corporations,
and fall under the Civil Service Law. Article IX(B), Section 2 paragraph 1 of the 1987 Constitution
states --

Sec. 2. (1) The civil service embraces all branches, subdivisions, instrumentalities, and
agencies of the Government, including government-owned or controlled corporations with
original charters.

It is not at all disputed that while Respondent and LUSTEVECO are government-owned and
controlled corporations, they have no original charters; hence they are not under the Civil Service
Law. In Philippine National Oil Company-Energy Development Corporation v. National Labor
Relations Commission,23 we ruled:

xxx "Thus under the present state of the law, the test in determining whether a government-
owned or controlled corporation is subject to the Civil Service Law are [sic] the manner of its
creation, such that government corporations created by special charter(s) are subject to its
provisions while those incorporated under the General Corporation Law are not within its
coverage."

Consequently, Respondent was not bound by the opinion of the Civil Service Commission of 18 May
1993.

Petitioner’s contention that the principle of tacking of creditable service is mandated by Republic Act
No. 7699 is baseless. Section 3 of Republic Act No. 7699 reads:

SEC 3. Provisions of any general or special law or rules and regulations to the contrary
notwithstanding, a covered worker who transfer(s) employment from one sector to another or
is employed in both sectors, shall have his creditable services or contributions in both
systems credited to his service or contribution record in each of the Systems and shall be
totalized for purposes of old-age, disability, survivorship, and other benefits in case the
covered employee does not qualify for such benefits in either or both Systems without
totalization: Provided, however, That overlapping periods of membership shall be credited
only once for purposes of totalization (underscoring, ours).

Obviously, totalization of service credits is only resorted to when the retiree does not qualify for
benefits in either or both of the Systems. Here, petitioner is qualified to receive benefits granted by
the Government Security Insurance System (GSIS), if such right has not yet been exercised. The
pertinent provisions of law are:

SEC. 12 Old Age Pension. -- (a) xxx

(b) A member who has rendered at least three years but less than fifteen years of service at
the time of separation shall, upon reaching sixty years of age or upon separation after age
sixty, receive a cash payment equivalent to one hundred percent of his average monthly
 compensation for every year of service with an employer (Presidential Decree No, 1146, as
amended, otherwise known as the Government Service Insurance Act of 1977).

SEC. 4. All contributions paid by such member personally, and those that were paid by his
employers to both Systems shall be considered in the processing of benefits which he can
claim from either or both Systems: Provided, however, That the amount of benefits to be
paid by one System shall be in proportion to the number of contributions actually remitted to
that System (Republic Act No. 7699).

In any case, petitioner’s fourteen years of service with the DOH may not remain uncompensated
because it may be recognized by the GSIS pursuant to the aforequoted Section 12, as may be
determined by the GSIS. Since petitioner may be entitled to some benefits from the GSIS, he cannot
avail of the benefits under R.A. No. 7699.

It may also be pointed out that upon his receipt of the amount of P512,524.15 from Respondent as
retirement benefit pursuant to its retirement scheme, petitioner signed and delivered to Respondent
a Release and Undertaking wherein he waives all actions, causes of actions, debts, dues, monies
and accounts in connection with his employment with Respondent. 24 This quitclaim releases
Respondent from any other obligation in favor of petitioner. While quitclaims executed by employees
are commonly frowned upon as contrary to public policy and are ineffective to bar claims for the full
measure of the employees’ legal rights, there are legitimate waivers that represent a voluntary and
reasonable settlement of laborers’ claims which should be respected by the courts as the law
between the parties.25 Settled is the rule that not all quitclaims are per se invalid or against public
policy, except (1) where there is clear proof that the waiver was wangled from an unsuspecting or
gullible person; and (2) where the terms of settlement are unconscionable on their face. 26 We discern
nothing from the record that would suggest that petitioner was coerced, intimidated or deceived into
signing the Release and Undertaking. Neither are we convinced that the consideration for the
quitclaim is unconscionable because it is actually the full amount of the retirement benefit provided
for in the company’s retirement plan.

In light of the foregoing, we need not discuss any further the issue of whether petitioner was
discriminated by Respondent in the implementation of the Manpower Reduction Program. In any
event, that issue is factual and petitioner has failed to demonstrate that, indeed, he was
discriminated upon.

WHEREFORE, no reversible error on the part of the Respondent Court of Appeals having been
shown, the petition in this case is DENIED and the appealed decision in CA-G.R. SP No. 51152 is
hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.

Puno, Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.