Claim for Refund of Permanent Partial Disability Benefits

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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

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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).

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-' oflJ 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.

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(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."

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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:

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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.

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ISSUE

ofiJ GSIS Case No. 004-04



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."

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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)

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

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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).

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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)

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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

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GSIS Case No. 004-04 Leyva, 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

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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

Claim for Refund of Permanent Partial Disability Benefits

Documents

Transcript of Claim for Refund of Permanent Partial Disability Benefits