DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari of the Decision[1] dated 13

December 2000 of the Court of Appeals in CA-G.R. CV No. 48784. The Court
of Appeals affirmed the Decision[2] of the Regional Trial Court, Branch
21, Cebu City (trial court), which held that Milagros Orbiso Montesclaros is
entitled to survivorship pension.

The Facts

Sangguniang Bayan member Nicolas Montesclaros (Nicolas) married

Milagros Orbiso (Milagros) on 10 July 1983.[3] Nicolas was a 72- year old
widower when he married Milagros who was then 43 years old.
On 4 January 1985, Nicolas filed with the Government Service Insurance
System (GSIS) an application for retirement benefits effective 18 February
1985 under Presidential Decree No. 1146 or the Revised Government Service
Insurance Act of 1977 (PD 1146). In his retirement application, Nicolas
designated his wife Milagros as his sole beneficiary.[4] Nicolas last day of
actual service was on 17 February 1985.[5] On 31 January 1986, GSIS
approved Nicolas application for retirement effective 17 February 1984,
granting a lump sum payment of annuity for the first five years and a monthly
annuity thereafter.[6] Nicolas died on 22 April 1992. Milagros filed with GSIS a
claim for survivorship pension under PD 1146. On 8 June 1992, GSIS denied
the claim because under Section 18 of PD 1146, the surviving spouse has no
right to survivorship pension if the surviving spouse contracted the marriage
with the pensioner within three years before the pensioner qualified for the
pension.[7] According to GSIS, Nicolas wed Milagros on 10 July 1983, less
than one year from his date of retirement on 17 February 1984.
On 2 October 1992, Milagros filed with the trial court a special civil action
for declaratory relief questioning the validity of Section 18 of PD 1146
disqualifying her from receiving survivorship pension.
On 9 November 1994, the trial court rendered judgment declaring Milagros
eligible for survivorship pension. The trial court ordered GSIS to pay Milagros
the benefits due including interest. Citing Articles 115[8] and 117[9] of the
Family Code, the trial court held that retirement benefits, which the pensioner
has earned for services rendered and for which the pensioner has contributed
through monthly salary deductions, are onerous acquisitions. Since retirement
benefits are property the pensioner acquired through labor, such benefits are
conjugal property. The trial court held that the prohibition in Section 18 of PD
1146 is deemed repealed for being inconsistent with the Family Code, a later
law. The Family Code has retroactive effect if it does not prejudice or impair
vested rights.
GSIS appealed to the Court of Appeals, which affirmed the decision of the
trial court. Hence, this petition for review.
In the meantime, in a letter dated 10 January 2003, Milagros informed the
Court that she has accepted GSIS decision disqualifying her from receiving
survivorship pension and that she is no longer interested in pursuing the
case.[10] Commenting on Milagros letter, GSIS asserts that the Court must
decide the case on the merits.[11]
The Court will resolve the issue despite the manifestation of Milagros. The
issue involves not only the claim of Milagros but also that of other surviving
spouses who are similarly situated and whose claims GSIS would also deny
based on the proviso. Social justice and public interest demand that we
resolve the constitutionality of the proviso.

The Ruling of the Court of Appeals

The Court of Appeals agreed with the trial court that the retirement
benefits are onerous and conjugal because the pension came from the
deceased pensioners salary deductions.The Court of Appeals held that the
pension is not gratuitous since it is a deferred compensation for services
rendered.

The Issues

GSIS raises the following issues:

1. Whether Section 16 of PD 1146 entitles Milagros to survivorship pension;
2. Whether retirement benefits form part of conjugal property;
3. Whether Articles 254 and 256 of the Family Code repealed Section 18 of PD
1146.[12]
 The Courts Ruling

The pertinent provisions of PD 1146 on survivorship benefits read:

SEC. 16. Survivorship Benefits. When a member or pensioner dies, the beneficiary
shall be entitled to survivorship benefits provided for in sections seventeen and
eighteen hereunder. The survivorship pension shall consist of:

(1) basic survivorship pension which is fifty percent of the basic monthly pension; and

(2) dependents pension not exceeding fifty percent of the basic monthly pension
payable in accordance with the rules and regulations prescribed by the System.

SEC. 17. Death of a Member. (a) Upon the death of a member, the primary
beneficiaries shall be entitled to:

(1) the basic monthly pension which is guaranteed for five years; Provided, That, at
the option of the beneficiaries, it may be paid in lump sum as defined in this
Act: Provided, further, That, the member is entitled to old-age pension at the time
of his death; or

(2) the basic survivorship pension which is guaranteed for thirty months and the
dependents pension; Provided, That, the deceased had paid at least thirty-six monthly
contributions within the five-year period immediately preceding his death, or a total of
at least one hundred eighty monthly contributions prior to his death.

(b) At the end of the guaranteed periods mentioned in the preceding sub-section (a),
the survivorship pension shall be paid as follows:

(1) when the dependent spouse is the only survivor, he shall receive the basic
survivorship pension for life or until he remarries;

(2) when only dependent children are the survivors, they shall be entitled to the
survivorship pension for as long as they are qualified;

(3) when the survivors are the dependent spouse and the dependent children, they
shall be entitled to the survivorship pension so long as there are dependent children
and, thereafter, the surviving spouse shall receive the basic survivorship pension for
life or until he remarries.

(c) In the absence of primary beneficiaries, the secondary beneficiaries designated by

the deceased and recorded in the System, shall be entitled to:
(1) a cash payment equivalent to thirty times the basic survivorship pension when the
member is qualified for old-age pension; or

(2) a cash payment equivalent to fifty percent of the average monthly compensation
for each year he paid contributions, but not less than five hundred
pesos; Provided, That, the member paid at least thirty-six monthly contributions
within the five-year period immediately preceding his death or paid a total of at least
one hundred eighty monthly contributions prior to his death.

(d) When the primary beneficiaries are not entitled to the benefits mentioned in
paragraph (a) of this section, they shall receive a cash payment equivalent to one
hundred percent of the average monthly compensation for each year the member paid
contributions, but not less than five hundred pesos. In the absence of primary
beneficiaries, the amount shall revert to the funds of the System.

SEC. 18. Death of a Pensioner. Upon the death of a pensioner, the primary
beneficiaries shall receive the applicable pension mentioned under paragraph (b) of
section seventeen of this Act: Provided,That, the dependent spouse shall not be
entitled to said pension if his marriage with the pensioner is contracted within
three years before the pensioner qualified for the pension. When the pensioner
dies within the period covered by the lump sum, the survivorship pension shall be
paid only after the expiration of the said period. This shall also apply to the pensioners
living as of the effectivity of this Act, but the survivorship benefit shall be based on
the monthly pension being received at the time of death. (Emphasis supplied)

Under PD 1146, the primary beneficiaries are (1) the dependent

spouse until such spouse remarries, and (2) the dependent
children.[13] The secondary beneficiaries are the dependent parents and
legitimate descendants except dependent children.[14] The law
defines dependent as the legitimate, legitimated, legally adopted,
acknowledged natural or illegitimate child who is unmarried, not gainfully
employed, and not over twenty-one years of age or is over twenty-one years
of age but physically or mentally incapacitated and incapable of self-support.
The term also includes the legitimate spouse dependent for support on
the member, and the legitimate parent wholly dependent on the member for
support.[15]
The main question for resolution is the validity of the proviso in Section 18
of PD 1146, which proviso prohibits the dependent spouse from receiving
survivorship pension if such dependent spouse married the pensioner within
three years before the pensioner qualified for the pension (the proviso).
 We hold that the proviso, which was the sole basis for the rejection by
GSIS of Milagros claim, is unconstitutional because it violates the due process
clause. The proviso is also discriminatory and denies equal protection of the
law.

Retirement Benefits as Property Interest

Under Section 5 of PD 1146, it is mandatory for the government employee

to pay monthly contributions. PD 1146 mandates the government to include in
its annual appropriation the necessary amounts for its share of the
contributions. It is compulsory on the government employer to take off and
withhold from the employees monthly salaries their contributions and to remit
the same to GSIS.[16] The government employer must also remit its
corresponding share to GSIS.[17] Considering the mandatory salary deductions
from the government employee, the government pensions do not constitute
mere gratuity but form part of compensation.
In a pension plan where employee participation is mandatory, the
prevailing view is that employees have contractual or vested rights in the
pension where the pension is part of the terms of employment.[18] The reason
for providing retirement benefits is to compensate service to the government.
Retirement benefits to government employees are part of emolument to
encourage and retain qualified employees in the government service.
Retirement benefits to government employees reward them for giving the best
years of their lives in the service of their country.[19]
Thus, where the employee retires and meets the eligibility requirements,
he acquires a vested right to benefits that is protected by the due process
clause.[20] Retirees enjoy a protected property interest whenever they acquire
a right to immediate payment under pre-existing law.[21] Thus, a pensioner
acquires a vested right to benefits that have become due as provided under
the terms of the public employees pension statute.[22] No law can deprive such
person of his pension rights without due process of law, that is, without notice
and opportunity to be heard.[23]
In addition to retirement and disability benefits, PD 1146 also provides for
benefits to survivors of deceased government employees and
pensioners. Under PD 1146, the dependent spouse is one of the beneficiaries
of survivorship benefits. A widows right to receive pension following the
demise of her husband is also part of the husbands contractual
compensation.[24]
 Denial of Due Process

The proviso is contrary to Section 1, Article III of the Constitution, which

provides that [n]o person shall be deprived of life, liberty, or property without
due process of law, nor shall any person be denied the equal protection of the
laws. The proviso is unduly oppressive in outrightly denying a dependent
spouses claim for survivorship pension if the dependent spouse contracted
marriage to the pensioner within the three-year prohibited period. There is
outright confiscation of benefits due the surviving spouse without giving the
surviving spouse an opportunity to be heard. The proviso undermines the
purpose of PD 1146, which is to assure comprehensive and integrated social
security and insurance benefits to government employees and their
dependents in the event of sickness, disability, death, and retirement of the
government employees.
The whereas clauses of PD 1146 state:

WHEREAS, the Government Service Insurance System in promoting the efficiency

and welfare of the employees of the Government of the Philippines, administers the
laws that grant to its members social security and insurance benefits;

WHEREAS, it is necessary to preserve at all times the actuarial solvency of the funds
administered by the System; to guarantee to the government employee all the benefits
due him; and to expand and increase the benefits made available to him and his
dependents to the extent permitted by available resources;

WHEREAS, provisions of existing laws have impeded the efficient and effective
discharge by the System of its functions and have unduly hampered the System from
being more responsive to the dramatic changes of the times and from meeting the
increasing needs and expectations of the Filipino public servant;

WHEREAS, provisions of existing laws that have prejudiced, rather than benefited,
the government employee; restricted, rather than broadened, his benefits, prolonged,
rather than facilitated the payment of benefits, must now yield to his paramount
welfare;

WHEREAS, the social security and insurance benefits of government employees must
be continuously re-examined and improved to assure comprehensive and integrated
social security and insurance programs that will provide benefits responsive to their
needs and those of their dependents in the event of sickness, disability, death,
retirement, and other contingencies; and to serve as a fitting reward for dedicated
public service;
WHEREAS, in the light of existing economic conditions affecting the welfare of
government employees, there is a need to expand and improve the social security and
insurance programs administered by the Government Service Insurance System,
specifically, among others, by increasing pension benefits, expanding disability
benefits, introducing survivorship benefits, introducing sickness and income benefits,
and eventually extending the compulsory coverage of these programs to all
government employees regardless of employment status.

PD 1146 has the following purposes:

a. to preserve at all times the actuarial solvency of the funds administered by the
System;
b. to guarantee to the government employee all the benefits due him; and
c. to expand, increase, and improve the social security and insurance benefits made
available to him and his dependents such as:
increasing pension benefits
expanding disability benefits
introducing survivorship benefits
introducing sickness income benefits
extending compulsory membership to all
government employees irrespective of status[25]

The law extends survivorship benefits to the surviving and qualified

beneficiaries of the deceased member or pensioner to cushion the
beneficiaries against the adverse economic effects resulting from the death of
the wage earner or pensioner.[26]

Violation of the Equal Protection Clause

The surviving spouse of a government employee is entitled to receive

survivors benefits under a pension system. However, statutes sometimes
require that the spouse should have married the employee for a certain period
before the employees death to prevent sham marriages contracted for
monetary gain. One example is the Illinois Pension Code which restricts
survivors annuity benefits to a surviving spouse who was married to a state
employee for at least one year before the employees
death. The Illinois pension system classifies spouses into those married less
than one year before a members death and those married one year or more.
The classification seeks to prevent conscious adverse risk selection of
deathbed marriages where a terminally ill member of the pension system
marries another so that person becomes eligible for benefits. In Sneddon v.
The State Employees Retirement System of Illinois,[27] the Appellate Court
of Illinois held that such classification was based on difference in situation and
circumstance, bore a rational relation to the purpose of the statute, and was
therefore not in violation of constitutional guarantees of due process and
equal protection.
A statute based on reasonable classification does not violate the
constitutional guaranty of the equal protection of the law.[28] The requirements
for a valid and reasonable classification are: (1) it must rest on substantial
distinctions; (2) it must be germane to the purpose of the law; (3) it must not
be limited to existing conditions only; and (4) it must apply equally to all
members of the same class.[29] Thus, the law may treat and regulate one class
differently from another class provided there are real and substantial
differences to distinguish one class from another.[30]
The proviso in question does not satisfy these requirements. The proviso
discriminates against the dependent spouse who contracts marriage to the
pensioner within three years before the pensioner qualified for the
pension.[31] Under the proviso, even if the dependent spouse married the
pensioner more than three years before the pensioners death, the dependent
spouse would still not receive survivorship pension if the marriage took place
within three years before the pensioner qualified for pension. The object of the
prohibition is vague. There is no reasonable connection between the means
employed and the purpose intended. The law itself does not provide any
reason or purpose for such a prohibition. If the purpose of the proviso is to
prevent deathbed marriages, then we do not see why the proviso reckons
the three-year prohibition from the date the pensioner qualified for pension
and not from the date the pensioner died. The classification does not rest on
substantial distinctions. Worse, the classification lumps all those marriages
contracted within three years before the pensioner qualified for pension as
having been contracted primarily for financial convenience to avail of pension
benefits.
Indeed, the classification is discriminatory and arbitrary. This is probably
the reason Congress deleted the proviso in Republic Act No. 8291 (RA
8291),[32] otherwise known as the Government Service Insurance Act of 1997,
the law revising the old charter of GSIS (PD 1146). Under the implementing
rules of RA 8291, the surviving spouse who married the member immediately
before the members death is still qualified to receive survivorship pension
unless the GSIS proves that the surviving spouse contracted the marriage
solely to receive the benefit.[33]
 Thus, the present GSIS law does not presume that marriages contracted
within three years before retirement or death of a member are sham
marriages contracted to avail of survivorship benefits. The present GSIS law
does not automatically forfeit the survivorship pension of the surviving spouse
who contracted marriage to a GSIS member within three years before the
members retirement or death. The law acknowledges that whether the
surviving spouse contracted the marriage mainly to receive survivorship
benefits is a matter of evidence. The law no longer prescribes a sweeping
classification that unduly prejudices the legitimate surviving spouse and
defeats the purpose for which Congress enacted the social legislation.
WHEREFORE, the petition is DENIED for want of merit. We declare VOID
for being violative of the constitutional guarantees of due process and equal
protection of the law the proviso in Section 18 of Presidential Decree No.
1146, which proviso states that the dependent spouse shall not be entitled to
said pension if his marriage with the pensioner is contracted within three years
before the pensioner qualified for the pension. The Government Service
Insurance System cannot deny the claim of Milagros O. Montesclaros for
survivorship benefits based on this invalid proviso.
No pronouncement as to costs.