Parreño vs.

Commission on Audit

FACTS:

The Antecedent Facts

Salvador Parreño (petitioner) served in the Armed Forces of the Philippines (AFP) for 32 years. On 5
January 1982, petitioner retired from the Philippine Constabulary with the rank of 2nd Lieutenant.
Petitioner availed, and received payment, of a lump sum pension equivalent to three years pay. In
1985, petitioner started receiving his monthly pension amounting to P13,680.

Petitioner migrated to Hawaii and became a naturalized American citizen. In January 2001, the AFP
stopped petitioner's monthly pension in accordance with Section 27 of Presidential Decree No.
1638(PD 1638), as amended by Presidential Decree No. 1650.Section 27 of PD 1638, as amended,
provides that a retiree who loses his Filipino citizenship shall be removed from the retired list and his
retirement benefits terminated upon loss of Filipino citizenship. Petitioner requested for
reconsideration but the Judge Advocate General of the AFP denied the request.

Petitioner filed a claim before the COA for the continuance of his monthly pension.

The Ruling of the Commission on Audit

In its 9 January 2003 Decision, the COA denied petitioner's claim for lack of jurisdiction.

Premises considered, the request is denied for lack of jurisdiction to adjudicate the same. Claimant is
advised to file his claim with the proper court of original jurisdiction.[6]

Petitioner filed a motion for reconsideration. Petitioner alleged that the COA has the power and
authority to incidentally rule on the constitutionality of Section 27 of PD 1638, as amended. Petitioner
alleged that a direct recourse to the court would be dismissed for failure to exhaust administrative
remedies. Petitioner further alleged that since his monthly pension involves government funds, the
reason for the termination of the pension is subject to COA's authority and jurisdiction.

n its 13 January 2004 Resolution, the COA denied the motion. The COA ruled that the doctrine of
exhaustion of administrative remedies does not apply if the administrative body has, in the first place,
no jurisdiction over the case. The COA further ruled that even if it assumed jurisdiction over the claim,
petitioner's entitlement to the retirement benefits he was previously receiving must necessarily cease
upon the loss of his Filipino citizenship in accordance with Section 27 of PD 1638, as amended.

The Issues

Petitioner raises the following issues:

1. Whether Section 27 of PD 1638, as amended, is constitutional;

2. Whether the COA has jurisdiction to rule on the constitutionality of Section 27 of PD 1638, as
amended; and

3. Whether PD 1638, as amended, has retroactive or prospective effect

 Doctrine

Equal Protection; Requisites for Valid Classification.

—The constitutional right to equal protection of the laws is not absolute but is
subject to reasonable classification. To be reasonable, the classification (a)
must be based on substantial distinctions which make real differences; (b)
must be germane to the purpose of the law; (c) must not be limited to existing
conditions only; and (d) must apply equally to each member of the class.
There is compliance with all these conditions. There is a substantial difference between retirees
who are citizens of the Philippines and retirees who lost their Filipino citizenship by naturalization
in another country, such as petitioner in the case before us. The constitutional right of the state
to require all citizens to render personal and military service[20] necessarily includes not only
private citizens but also citizens who have retired from military service. A retiree who had lost
his Filipino citizenship already renounced his allegiance to the state. Thus, he may no longer be
compelled by the state to render compulsory military service when the need arises. Petitioner's
loss of Filipino citizenship constitutes a substantial distinction that distinguishes him from other
retirees who retain their Filipino citizenship. If the groupings are characterized by substantial
distinctions that make real differences, one class may be treated and regulated differently from
another

Jurisdictions; The jurisdiction of the Commission on Audit (COA) over money

claims against the government does not include the power to rule on the
constitutionality or validity of laws.

—The jurisdiction of the COA over money claims against the government does
not include the power to rule on the constitutionality or validity of laws. The
1987 Constitution vests the power of judicial review or the power to declare
unconstitutional a law, treaty, international or executive agreement,
presidential decree, order, instruction, ordinance, or regulation in this Court
and in all Regional Trial Courts. Petitioner’s money claim essentially involved
the constitutionality of Section 27 of PD 1638, as amended. Hence, the COA
did not commit grave abuse of discretion in dismissing petitioner’s money
claim.

Armed Forces of the Philippines; Retirement; Since PD 1638, as amended, is

about the new system of retirement and separation from service of military
personnel, it should apply to those who were in the service at the time of its
approval.

—We do not agree with the interpretation of petitioner and the OSG that PD
1638, as amended, should apply only to those who joined the military after its
effectivity. Since PD 1638, as amended, is about the new system of retirement
and separation from service of military personnel, it should apply to those who
were in the service at the time of its approval. In fact, Section 2 of PD 1638,
 as amended, provides that “th[e] Decree shall apply to all military personnel
in the service of the Armed Forces of the Philippines.” PD 1638, as amended,
was signed on 10 September 1979. Petitioner retired in 1982, long after the
approval of PD 1638, as amended. Hence, the provisions of PD 1638, as
amended, apply to petitioner.

Due Process; Vested Rights; It is only upon retirement that military

personnel acquire a vested right to retirement benefits.

—PD 1638, as amended, does not impair any vested right or interest of
petitioner. Where the employee retires and meets the eligibility requirements,
he acquires a vested right to the benefits that is protected by the due process
clause. At the time of the approval of PD 1638 and at the time of its
amendment, petitioner was still in active service. Hence, petitioner’s
retirement benefits were only future benefits and did not constitute a vested
right. Before a right to retirement benefits or pension vests in an employee,
he must have met the stated conditions of eligibility with respect to the nature
of employment, age, and length of service. It is only upon retirement that
military personnel acquire a vested right to retirement benefits. Retirees enjoy
a protected property interest whenever they acquire a right to immediate
payment under pre-existing law.

Retirement benefits of military personnel are purely gratuitous in nature.

—The retirement benefits of military personnel are purely gratuitous in nature.

They are not similar to pension plans where employee participation is
mandatory, hence, the employees have contractual or vested rights in the
pension which forms part of the compensation.

Compulsory Military Service; The constitutional right of the state to require all
citizens to render personal and military service necessarily includes not only private
citizens but also citizens who have retired from military service.

—There is compliance with all these conditions. There is a substantial

difference between retirees who are citizens of the Philippines and retirees who
lost their Filipino citizenship by naturalization in another country, such as
petitioner in the case before us. The constitutional right of the state to require
all citizens to render personal and military service necessarily includes not only
private citizens but also citizens who have retired from military service. A
retiree who had lost his Filipino citizenship already renounced his allegiance to
the state. Thus, he may no longer be compelled by the state to render
compulsory military service when the need arises. Petitioner’s loss of Filipino
citizenship constitutes a substantial distinction that distinguishes him from
other retirees who retain their Filipino citizenship. If the groupings are
characterized by substantial distinctions that make real differences, one class
may be treated and regulated differently from another.
Even when a retiree is no longer in the active service, he is still a part of the
Citizen Armed Forces.

— Republic Act No. 7077 (RA 7077) affirmed the constitutional right of the
state to a Citizen Armed Forces. Section 11 of RA 7077 provides that citizen
soldiers or reservists include ex-servicemen and retired officers of the AFP.
Hence, even when a retiree is no longer in the active service, he is still a part
of the Citizen Armed Forces. Thus, we do not find the requirement imposed by
Section 27 of PD 1638, as amended, oppressive, discriminatory, or contrary to
public policy. The state has the right to impose a reasonable condition that is
necessary for national defense. To rule otherwise would be detrimental to the
interest of the state.

An AFP retiree who lost his retirement benefits as a result of his naturalization in
some other country will be entitled to receive his monthly pension should he reacquire
his Filipino citizenship since he will again be entitled to the benefits and privileges of
Filipino citizenship reckoned from the time of his reacquisition of Filipino citizenship.

—Petitioner has other recourse if he desires to continue receiving his monthly

pension. Just recently, in AASJS Member-Hector Gumangan Calilung v. Simeo
Datumanong, 523 SCRA 105 (2007), this Court upheld the constitutionality of
RA 9225. If petitioner reacquires his Filipino citizenship, he will even recover
his natural-born citizenship. In Tabasa v. Court of Appeals, 500 SCRA 9 (2006),
this Court reiterated that “[t]he repatriation of the former Filipino will allow
him to recover his natural-born citizenship x x x.” Petitioner will be entitled to
receive his monthly pension should he reacquire his Filipino citizenship since
he will again be entitled to the benefits and privileges of Filipino citizenship
reckoned from the time of his reacquisition of Filipino citizenship. There is no
legal obstacle to the resumption of his retirement benefits from the time he
complies again with the condition of the law, that is, he can receive his
retirement benefits provided he is a Filipino citizen. Parreño vs. Commission
on Audit, 523 SCRA 390, G.R. No. 162224 June 7, 2007