NATIONAL TOBACCO ADMINISTRATION represented herein by Administrator AMANTE SIAPNO, EVANGELISTA A. GARCIA, RICARDO BRIONES, CLARITA B. CASTRO, CRISTINA LOPEZ, JESUS C. BONDOC and ROSALINA C. CARINO, petitioners, vs. COMMISSION ON AUDIT, respondents. ULANDU

At bar is a petition for review on certiorari under Rule 45 of the Revised Rules of Court to review and set aside the decision of the Commission on Audit1 [Composed of Commissioners Celso D. Gangan (Chairman); Rogelio B. Espiritu and Sofronio B. Ursala as members.] dated February 7, 1995 in COA Decision No. 95-108.2 [Annex "A," Petition; Rollo, 30-32.]

The National Tobacco Administration (NTA, for short), under Executive Order No. 116, as amended by Executive Order No. 245,3 [Executive Order 245: Implementing the Consolidation of All Agencies and the Creation of the National Tobacco Administration Prescribing its Charter and for Other Purposes. Date of Effectivity: July 24, 1987.] is a government-owned and controlled corporation (GOCC, for brevity) tasked to supervise and improve the viability of the tobacco industry in this country. CÓ alrsc

On August 9, 1989, Congress passed Republic Act No. 6758,4 [Otherwise known as: Salary Standardization Law which took effect on July 1, 1989.] entitled "An Act Prescribing a Revised Compensation and Position Classification in the Government and for Other Purposes." On October 2, 1989, pursuant to Section 23 of said law, the Department of Budget and Management (DBM) issued Corporate Compensation Circular No. 10 (CCC No. 10) to serve as the Implementing Rules and Regulations of R.A. No. 6758.

Pertinent records show that even prior to the effectivity of Republic Act No. 6758, officials and employees of the NTA have been enjoying Mid-Year Social Amelioration Benefit equivalent to one-and-a half (1 1/2) month of their basic salary. From 1989 to 1993, however, the said benefit was reduced to one (1) month of the basic salary due to financial/budgetary constraints. In May, 1993, the nomenclature of subject social amelioration benefit was changed to educational assistance in order to reflect the rationale behind the same, which is to encourage its beneficiaries to pursue graduate studies and to finance the schooling of their children.

Sometime in February, 1994, Miss Dalisay E. Aracan, Resident Auditor of NTA, issued a Notice of Disallowance of the payment of the educational assistance for calendar year 1993, opining that the NTA has no statutory authority to grant the incentive. In January, 1995, the same Resident Auditor caused the disallowance of the same benefit paid in 1994, for the same reason. Calrspä ped

On April 25, 1994, the petitioners appealed to the Commission on Audit, praying for the lifting of the disallowance in question, pointing out that: (1) Benefits received by employees as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized, pursuant to Section 12 of R.A. 6758; (2) the benefit having been received for so many years, even prior to the effectivity of the Salary Standardization Law of 1989, has been a vested right, on the part of the recipients and (3) such allowance regularly granted, forms part of the total compensation package of NTA Officers and employees, and, therefore, the disallowance thereof amounts to unathorized diminution of pay.

On February 7, 1995, the Commission on Audit came out with its questioned Decision the pertinent portion of which, reads:

xxx......xxx......xxx

Undaunted, petitioners found their way to this Court via the present Petition for Review on Certiorari, filed on April 24, 1995, seeking the annulment of the said COA Decision; theorizing that the respondent Commission on Audit erred:

Petitioners raise the pivotal issues: (1) whether or not the social amelioration or educational assistance benefit given to the individual petitioners prior to enactment of R.A. 6758 is authorized under the law, (2) whether or not the disallowance of the said benefit is tantamount to diminution of pay, and (3) whether or not the individual petitioners have acquired a vested right thereover.

A. Sections 12 and 17 of R. A. 6758, read: Miä sedp

while Edpâ mis

B. Section 4.1 of CCC No. 10:

C. Sub-Paragraphs 5.4, 5.5 and 5.6 of CCC. No. 10: JuriÓ smis

xxx......xxx......xxx

Petitioners maintain "that since they have been receiving the social amelioration or educational assistance benefit before July 1, 1989, when R.A. No. 6758 took effect, and the benefit was not integrated into their standardized salary rate, they are entitled to receive it even after the effectivity of the said Act."6 [Petition, p. 6; Rollo, 17.] They base their claim on the second sentence of Section 12 and on Section 17 of the Salary Standardization Law which, for the sake of thoroughness and clarity of discussion, we deem it expedient to quote again, to wit:

x x x

It is the submission of the Commission on Audit that payment of the educational assistance in question is not authorized under Republic Act No. 6758, arguing "that the provision of Sec. 12, second sentence thereof as invoked by the Administrator [representing the petitioner herein] should be read in conjunction with the first sentence...;"7 [See: COA Decision, p. 2; Rollo, 31.] and if the entire Section 12 is further considered in relation to sub-paragraphs 5.4, 5.5 and 5.6 of CCC No. 10, respondent concluded that the grant of subject educational assistance would have no legal basis at all.

Confusion as to the proper interpretation of Section 12 springs from two seemingly contradictory provisions. The last clause of the first sentence of Section 12, reads:

while the second sentence of Section 12 is to the following effect:

Before proceeding to rule on the proper interpretation of the two provisos aforecited, the salient features of the provision as a whole should first be pondered upon and tackled. Jksm

Under the first sentence of Section 12, all allowances are integrated into the prescribed salary rates, except:

Analyzing No. 7, which is the last clause of the first sentence of Section 12, in relation to the other benefits therein enumerated, it can be gleaned unerringly that it is a "catch-all proviso." Further reflection on the nature of subject fringe benefits indicates that all of them have one thing in common - they belong to one category of privilege called allowances which are usually granted to officials and employees of the government to defray or reimburse the expenses incurred in the performance of their official functions. In Philippine Ports Authority vs. Commission on Audit,8 [214 SCRA 653 (1992)] this Court rationalized that "if these allowances are consolidated with the standardized rate, then the government official or employee will be compelled to spend his personal funds in attending to his duties."

The conclusion - that the enumerated fringe benefits are in the nature of allowance - finds support in sub-paragraphs 5.4 and 5.5 of CCC No. 10.

Sub-paragraph 5.4 enumerates the allowance/fringe benefits which are not integrated into the basic salary and which may be continued after June 30, 1989 subject to the condition that the grant of such benefit is covered by statutory authority, to wit:

In addition, sub-paragraph 5.5 of the same Implementing Rules provides for the other allowances/fringe benefits not likewise integrated into the basic salary and allowed to be continued only for incumbents as of June 30, 1989 subject to the condition that the grant of the same is with appropriate authorization either from the DBM, Office of the President or legislative issuances, as follows:

On the other hand, the challenged financial incentive is awarded by the government in order to encourage the beneficiaries to pursue further studies and to help them underwrite the expenses for the education of their children and dependents. In other words, subject benefit is in the nature of financial assistance and not of an allowance. For the former, reimbursement is not necessary while for the latter, reimbursement is required. Not only that, the former is basically an incentive wage which is defined as "a bonus or other payment made to employees in addition to guaranteed hourly wages"9 [William S. Anderson, Ed., Ballentine’s Law Dictionary (1969 Edition)] while the latter cannot be reckoned with as a bonus or additional income, strictly speaking.

It is indeed decisively clear that the benefits mentioned in the first sentence of Section 12 and sub-paragraphs 5.4 and 5.5 of CCC No. 10 are entirely different from the benefit in dispute, denominated as Educational Assistance. The distinction elucidated upon is material in arriving at the correct interpretation of the two seemingly contradictory provisions of Section 12. Sjä cj

Cardinal is the rule in statutory construction "that the particular words, clauses and phrases should not be studied as detached and isolated expressions, but the whole and every part of the statute must be considered in fixing the meaning of any of its parts and in order to produce a harmonious whole. A statute must so construed as to harmonize and give effect to all its provisions whenever possible."10 [Ruben Agpalo, Statutory Construction ., 1986 Edition, p. 181; citing Aisporma vs. Court of Appeals, 113 SCRA 459 (1982) ; See also: Danilo Paras vs. Commission on Elections, 264 SCRA 49 (1996)] And the rule - that statute must be construed as a whole - requires that apparently conflicting provisions should be reconciled and harmonized, if at all possible.11 [Ibid ., p. 183; citing Lichauco & Co. vs. Apostol, 44 Phil. 138; See also: Aisporma vs.Court of Appeals, 113 SCRA 459 (1982)] It is likewise a basic precept in statutory construction that the intent of the legislature is the controlling factor in the interpretation of the subject statute.12 [Ibid., p. 38.] With these rules and the foregoing distinction elaborated upon, it is evident that the two seemingly irreconcilable propositions are susceptible to perfect harmony. Accordingly, the Court concludes that under the aforesaid "catch-all proviso," the legislative intent is just to include the fringe benefits which are in the nature of allowances and since the benefit under controversy is not in the same category, it is safe to hold that subject educational assistance is not one of the fringe benefits within the contemplation of the first sentence of Section 12 but rather, of the second sentence of Section 12, in relation to Section 17 of R.A. No. 6758, considering that (1) the recipients were incumbents when R.A. No. 6758 took effect on July 1, 1989, (2) were, in fact, receiving the same, at the time, and (3) such additional compensation is distinct and separate from the specific allowances above-listed, as the former is not integrated into the standardized salary rate. Simply stated, the challenged benefit is covered by the second sentence of Section 12 of R.A. No. 6758, the application of sub-paragraphs 5.4 and 5.5 of CCC No. 10 being only confined to the first sentence of Section 12, particularly the last clause thereof which amplifies the "catch-all proviso." ScÓ jj

Furthermore, the non-inclusion by the Department of Budget and Management of the controverted educational assistance in Sub-paragraphs 5.4 and 5.5 of CCC No. 10 is expected since the term allowance does not include the questioned benefit which belongs to a different genus. The argument that the said fringe benefit should be disallowed on the ground that it is not mentioned in the Implementing Rules of the Statute is consequently fallacious. It is a settled rule of legal hermeneutics that the implementing rules and regulations (CCC No. 10, in this case) cannot amend the act of Congress (R.A. 6758). The second sentence of R.A. No. 6758 expressly provides that "such additional compensation ... being received by incumbents ... not integrated into the standardized salary rates shall continue to be authorized." To be sure, the said Circular cannot go beyond the terms and provisions of the statute as to prohibit something permitted and allowed by law.13 [People vs. Lim, 108 Phil. 1091.] The Circular cannot extend the law or expand its coverage as the power to amend or repeal a statute is vested in the legislature.14 [Conte vs. Commission on Audit, 264 SCRA 19 (1996); Cooley’s Constitutional Limitations, 7th Ed., pp. 126-131; 157-162.]

Conformably, as mandated by the second sentence of Section 12, in relation to Section 17 of the Republic Act under interpretation, the mid-year educational assistance should continue to be authorized. LEX

Gleanable from the wordings of the second sentence of Section 12 of R.A. No. 6758 is the intention of Congress to prevent any diminution of the pay and benefits being received by incumbents at the time of the enactment of the Salary Standardization Law. Verily, disallowing any such benefit is against the spirit of the Statute and is inconsistent with the principle of equity which "regards the spirit and not the letter..."15 [Air Manila vs. Court of Industrial Relations, 83 SCRA 579 589, citing Bouvier’s Law Dictionary, 3rd Revision, p. 1063.] of the law. Hence, while it cannot be said that the NTA employees have acquired a vested right over the educational assistance in dispute as it is always subject to availability of funds,16 [Subjecting the educational assistance to the availability of funds defeats the meaning of vested right which is defined as "one which is fixed, unalterbale or irrevocable;... that it is absolute, complete and unconditional, to the exercise of which no obstacle exists ..." (Luque vs. Villegas, 30 SCRA 409 (417)] nevertheless, disallowing the same, where funds are available as in the case under consideration, would be violative of the principle of equity.

WHEREFORE, the petition is hereby GRANTED; the assailed COA Decision No. 95 - 108 is SET ASIDE, and the disallowance in question LIFTED. No pronouncement as to costs. Jjä sc

Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Pardo, Buena, Gonzaga-Reyes, and Ynares-Santiago, JJ., concur.12/6/99 4:03 PM