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1.

SEVILLA TRADING COMPANY, pet i t ioner, vs.A.V.A. TOMAS E.SEMANA, SEVILLA TRADING WORKERS UNIONSUPER, respondents.

D E C I S I O NPUNO, J .:

On appeal is the Decision[1]of the Court of Appeals in CA-G.R. SP No.63086 dated 27 November 2001 sustaining the Decision[2]of AccreditedVoluntary Arbitrator Tomas E. Semana dated 13 November 2000, as well asits subsequent Resolution[3]dated 06 March 2002 denying petitioners Motionfor Reconsideration.

The facts of the case are as follows:For two to three years prior to 1999, petitioner Sevilla Trading Company

(Sevilla Trading, for short), a domestic corporation engaged in tradingbusiness, organized and existing under Philippine laws, added to the basefigure, in its computation of the 13th-month pay of its employees, the amountof other benefits received by the employees which are beyond the basicpay. These benefits included:

(a) Overtime premium for regular overtime, legal and special holidays;

(b) Legal holiday pay, premium pay for special holidays;

(c) Night premium;

(d) Bereavement leave pay;

(e) Union leave pay;

(f) Maternity leave pay;

(g) Paternity leave pay;

(h) Company vacation and sick leave pay; and

(i) Cash conversion of unused company vacation and sick leave.

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Petitioner claimed that it entrusted the preparation of the payroll to itsoffice staff, including the computation and payment of the 13th-month pay andother benefits. When it changed its person in charge of the payroll in theprocess of computerizing its payroll, and after audit was conducted, itallegedly discovered the error of including non-basic pay or other benefits inthe base figure used in the computation of the 13th-month pay of itsemployees. It cited the Rules and Regulations Implementing P.D. No. 851(13th-Month Pay Law), effective December 22, 1975, Sec. 2(b) which statedthat:

Basic salary shall include all remunerations or earnings paid by an employer to an

employee for services rendered but may not include cost-of-living allowances granted

pursuant to P.D. No. 525 or Letter of Instruction No. 174, profit-sharing payments,

and all allowances and monetary benefits which are not considered or integrated as

part of the regular or basic salary of the employee at the time of the promulgation of

the Decree on December 16, 1975.

Petitioner then effected a change in the computation of the thirteenthmonth pay, as follows:

13th-month pay = net basic pay

12 months

where:

net basic pay = gross pay(non-basic pay or other benefits)

Now excluded from the base figure used in the computation of the thirteenthmonth pay are the following:

a) Overtime premium for regular overtime, legal and special holidays;

b) Legal holiday pay, premium pay for special holidays;

c) Night premium;

d) Bereavement leave pay;

e) Union leave pay;

f) Maternity leave pay;

g) Paternity leave pay;

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h) Company vacation and sick leave pay; and

i) Cash conversion of unused vacation/sick leave.

Hence, the new computation reduced the employees thirteenth month

pay. The daily piece-rate workers represented by private respondent SevillaTrading Workers Union SUPER (Union, for short), a duly organized andregistered union, through the Grievance Machinery in their CollectiveBargaining Agreement, contested the new computation and reduction of theirthirteenth month pay. The parties failed to resolve the issue.

On March 24, 2000, the parties submitted the issue of whether or not theexclusion of leaves and other related benefits in the computation of 13th-month pay is valid to respondent Accredited Voluntary Arbitrator Tomas E.Semana (A.V.A. Semana, for short) of the National Conciliation and Mediation

Board, for consideration and resolution.The Union alleged that petitioner violated the rule prohibiting the

elimination or diminution of employees benefits as provided for in Art. 100 ofthe Labor Code, as amended. They claimed that paid leaves, like sick leave,vacation leave, paternity leave, union leave, bereavement leave, holiday payand other leaves with pay in the CBA should be included in the base figure inthe computation of their 13th-month pay.

On the other hand, petitioner insisted that the computation of the 13 th-month pay is based on basic salary, excluding benefits such as leaves with

pay, as per P.D. No. 851, as amended. It maintained that, in adjusting itscomputation of the 13th-month pay, it merely rectified the mistake its personnelcommitted in the previous years.

A.V.A. Semana decided in favor of the Union. The dispositive portion ofhis Decision reads as follows:

WHEREFORE, premises considered, this Voluntary Arbitrator hereby declared that:

1. The company is hereby ordered to include sick leave and vacation leave,

paternity leave, union leave, bereavement leave and other leave with pay in the CBA,

premium for work done on rest days and special holidays, and pay for regularholidays in the computation of the 13 th-month pay to all covered and entitled

employees;

2. The company is hereby ordered to pay corresponding backwages to all covered

and entitled employees arising from the exclusion of said benefits in the computation

of 13th-month pay for the year 1999.

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Petitioner received a copy of the Decision of the Arbitrator on December20, 2000. It filed before the Court of Appeals, a Manifestation and Motion forTime to File Petition for Certiorari onJanuary 19, 2001. A month later,on February 19, 2001, it filed its Petition for Certiorari under Rule 65 of the1997 Rules of Civil Procedure for the nullification of the Decision of the

Arbitrator. In addition to its earlier allegations, petitioner claimed thatassuming the old computation will be upheld, the reversal to the oldcomputation can only be made to the extent of including non-basic benefitsactually included by petitioner in the base figure in the computation of their13th-month pay in the prior years. It must exclude those non-basic benefitswhich, in the first place, were not included in the original computation. Theappellate court denied due course to, and dismissed the petition.

Hence, this appeal. Petitioner Sevilla Trading enumerates the grounds ofits appeal, as follows:

1. THE DECISION OF THE RESPONDENT COURT TO REVERT TO THE OLDCOMPUTATION OF THE 13TH-MONTH PAY ON THE BASIS THAT THE OLDCOMPUTATION HAD RIPENED INTO PRACTICE IS WITHOUT LEGAL BASIS.

2. IF SUCH BE THE CASE, COMPANIES HAVE NO MEANS TO CORRECTERRORS IN COMPUTATION WHICH WILL CAUSE GRAVE AND IRREPARABLEDAMAGE TO EMPLOYERS.[4]

First, we uphold the Court of Appeals in ruling that the proper remedy fromthe adverse decision of the arbitrator is a petition for review under Rule 43 ofthe 1997 Rules of Civil Procedure, not a petition for certiorari under Rule65. Section 1 of Rule 43 states:

RULE 43

Appeals from the Court of Tax Appeals and

Quasi-Judicial Agencies to the Court of Appeals

SECTION 1. Scope.This Rule shall apply to appeals from judgments or final

orders of the Court of Tax Appeals and from awards, judgments, final orders or

resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-

judicial functions. Among these agencies are the Civil Service Commission, CentralBoard of Assessment Appeals, Securities and Exchange Commission, Office of the

President, Land Registration Authority, Social Security Commission, Civil

Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer,

National Electrification Administration, Energy Regulatory Board, National

Telecommunications Commission, Department of Agrarian Reform under Republic

Act No. 6657, Government Service Insurance System, Employees Compensation

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Commission, Agricultural Inventions Board, Insurance Commission, Philippine

Atomic Energy Commission, Board of Investments, Construction Industry Arbitration

Commission, and voluntary arbitrators authorized by law. [Emphasis supplied.]

It is elementary that the special civil action of certiorariunder Rule 65 is

not, and cannot be a substitute for an appeal, where the latter remedy isavailable, as it was in this case. Petitioner Sevilla Trading failed to file anappeal within the fifteen-day reglementary period from its notice of theadverse decision of A.V.A. Semana. It received a copy of the decision of

A.V.A. Semana on December 20, 2000, and should have filed its appealunder Rule 43 of the 1997 Rules of Civil Procedure on or before January 4,2001. Instead, petitioner filed on January 19, 2001 a Manifestation andMotion for Time to File Petition for Certiorari, and on February 19, 2001, itfiled a petition for certiorariunder Rule 65 of the 1997 Rules of CivilProcedure. Clearly, petitioner Sevilla Trading had a remedy of appeal butfailed to use it.

A special civil action under Rule 65 of the Rules of Court will not be a curefor failure to timely file a petition for review on certiorariunder Rule 45 (Rule43, in the case at bar) of the Rules of Court. Rule 65 is an independent actionthat cannot be availed of as a substitute for the lost remedy of an ordinaryappeal, including that under Rule 45 (Rule 43, in the case at bar), especially ifsuch loss or lapse was occasioned by ones own neglect or error in the choiceof remedies.[5]

Thus, the decision of A.V.A. Semana had become final and executorywhen petitioner Sevilla Trading filed its petition for certiorarion February 19,2001. More particularly, the decision of A.V.A. Semana became final andexecutory upon the lapse of the fifteen-day reglementary period to appeal, oron January 5, 2001. Hence, the Court of Appeals is correct in holding that itno longer had appellate jurisdiction to alter, or much less, nullify the decisionof A.V.A. Semana.

Even assuming that the present petition for certiorariunder Rule 65 of the1997 Rules of Civil Procedure is a proper action, we still find no grave abuseof discretion amounting to lack or excess of jurisdiction committed by A.V.A.

Semana. Grave abuse of discretion has been interpreted to mean suchcapricious and whimsical exercise of judgment as is equivalent to lack of

jurisdiction, or, in other words where the power is exercised in an arbitrary ordespotic manner by reason of passion or personal hostility, and it must be sopatent and gross as to amount to an evasion of positive duty or to a virtualrefusal to perform the duty enjoined or to act at all in contemplation oflaw.[6]We find nothing of that sort in the case at bar.

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On the contrary, we find the decision of A.V.A. Semana to be sound, valid,and in accord with law and jurisprudence. A.V.A. Semana is correct in holdingthat petitioners stance of mistake or error in the computation of the thirteenthmonth pay is unmeritorious. Petitioners submission of financial statementsevery year requires the services of a certified public accountant to audit itsfinances. It is quite impossible to suggest that they have discovered thealleged error in the payroll only in 1999. This implies that in previous years itdoes not know its cost of labor and operations. This is merely basic costaccounting. Also, petitioner failed to adduce any other relevant evidence tosupport its contention. Aside from its bare claim of mistake or error in thecomputation of the thirteenth month pay, petitioner merely appended to itspetition a copy of the 1997-2002 Collective Bargaining Agreement and analleged corrected computation of the thirteenth month pay. There was noexplanation whatsoever why its inclusion of non-basic benefits in the basefigure in the computation of their 13th-month pay in the prior years was madeby mistake, despite the clarity of statute and jurisprudence at that time.

The instant case needs to be distinguished from Globe Mackay Cableand Radio Corp. vs. NLRC,[7]which petitioner Sevilla Trading invokes. In thatcase, this Court decided on the proper computation of the cost-of-livingallowance (COLA) for monthly-paid employees. Petitioner Corporation,pursuant to Wage Order No. 6 (effective 30 October 1984), increased theCOLA of its monthly-paid employees by multiplying the P3.00 daily COLA by22 days, which is the number of working days in thecompany. The Union disagreed with the computation, claiming that the daily

COLA rate of P3.00 should be multiplied by 30 days, which has been thepractice of the company for several years. We upheld the contention of thepetitioner corporation. To answer the Unions contention of company practice,we ruled that:

Payment in full by Petitioner Corporation of the COLA before the execution of the

CBA in 1982 and in compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11

June 1984), should not be construed as constitutive of voluntary employer practice,

which cannot now be unilaterally withdrawn by petitioner. To be considered as such,

it should have been practiced over a long period of time, and must be shown to have

been consistent and deliberate . . . The test of long practice has been enunciated thus:

. . . Respondent Company agreed to continue giving holiday pay knowing fully

wellthat said employees are not covered by the law requiring payment of holiday

pay. (Oceanic Pharmacal Employees Union [FFW] vs. Inciong, 94 SCRA 270

[1979])

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Moreover, before Wage Order No. 4, there was lack of administrative guidelines for

the implementation of the Wage Orders. It was only when the Rules Implementing

Wage Order No. 4 were issued on 21 May 1984 that a formula for the conversion of

the daily allowance to its monthly equivalent was laid down.

Absent clear administrative guidelines, Petitioner Corporation cannot be faulted forerroneous application of the law . . .

In the above quoted case, the grant by the employer of benefits throughan erroneous application of the law due to absence of clear administrativeguidelines is not considered a voluntary act which cannot be unilaterallydiscontinued. Such is not the case now. In the case at bar, the Court of

Appeals is correct when it pointed out that as early as 1981, this Court hasheld in San Miguel Corporation vs. Inciong[8]that:

Under Presidential Decree 851 and its implementing rules, the basic salaryof anemployee is used as the basis in the determination of his 13 th-month pay. Any

compensations or remunerations which are deemed not part of the basic pay is

excluded as basis in the computation of the mandatory bonus.

Under the Rules and Regulations Implementing Presidential Decree 851, the

following compensations are deemed not part of the basic salary:

a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of

Instruction No. 174;

b) Profit sharing payments;

c) All allowances and monetary benefits which are not considered or integrated as part

of the regular basic salary of the employee at the time of the promulgation of the

Decree on December 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing Presidential

Decree 851 issued by the then Labor Secretary Blas Ople, overtime pay, earnings and

other remunerationsare excluded as part of the basic salary and in the computation of

the 13th-month pay.

The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter

of Instruction No. 174 and profit sharing payments indicate the intention to strip basic

salary of other payments which are properly considered as fringe

benefits. Likewise, the catch-all exclusionary phrase all allowances and monetary

benefits which are not considered or integrated as part of the basic salary shows also

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the intention to strip basic salary of any and all additions which may be in the form of

allowances or fringe benefits.

Moreover, the Supplementary Rules and Regulations Implementing Presidential

Decree 851 is even more empathic in declaring that earnings and other remunerations

which are not part of the basic salary shall not be included in the computation of the13th-month pay.

While doubt may have been created by the prior Rules and Regulations Implementing

Presidential Decree 851 which defines basic salary to include all remunerations or

earningspaid by an employer to an employee, this cloud is dissipated in the later and

more controlling Supplementary Rules and Regulations which categorically, exclude

from the definition of basic salary earnings and other remunerations paid by employer

to an employee. A cursory perusal of the two sets of Rules indicates that what has

hitherto been the subject of a broad inclusion is now a subject of broad exclusion. The

Supplementary Rules and Regulations cure the seeming tendency of the former rulesto include all remunerations and earnings within the definition of basic salary.

The all-embracing phrase earnings and other remunerations which are deemed not

part of the basic salary includes within its meaning payments for sick, vacation, or

maternity leaves, premium for works performed on rest days and special holidays, pay

for regular holidays and night differentials. As such they are deemed not part of the

basic salary and shall not be considered in the computation of the 13th-month pay. If

they were not so excluded, it is hard to find any earnings and other remunerations

expressly excluded in the computation of the 13 th-month pay. Then the exclusionary

provision would prove to be idle and with no purpose.

In the light of the clear ruling of this Court, there is, thus no reason for anymistake in the construction or application of the law. When petitioner SevillaTrading still included over the years non-basic benefits of its employees, suchas maternity leave pay, cash equivalent of unused vacation and sick leave,among others in the computation of the 13th-month pay, this may only beconstrued as a voluntary act on its part. Putting the blame on the petitionerspayroll personnel is inexcusable.

In Davao Fruits Corporation vs. Associated Labor Unions,we likewiseheld that:[9]

The Supplementary Rules and Regulations Implementing P.D. No. 851 which put to

rest all doubts in the computation of the thirteenth month pay, was issued by the

Secretary of Labor as early as January 16, 1976, barely one month after the effectivity

of P.D. No. 851 and its Implementing Rules. And yet, petitioner computed and paid

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the thirteenth month pay, without excluding the subject items therein until

1981. Petitioner continued its practice in December 1981, after promulgation of the

aforequoted San Migueldecision on February 24, 1981, when petitioner purportedly

discovered its mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in thecomputation of its employees thirteenth month pay, without the payments for sick,

vacation and maternity leave, premium for work done on rest days and special

holidays, and pay for regular holidays. The considerable length of time the

questioned items had been included by petitioner indicates a unilateral and voluntary

act on its part, sufficient in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the

payments made pursuant thereto, ripened into benefits enjoyed by them. And any

benefit and supplement being enjoyed by the employees cannot be reduced,

diminished, discontinued or eliminated by the employer, by virtue of Sec. 10 of theRules and Regulations Implementing P.D. No. 851, and Art. 100 of the Labor Code of

the Philippines which prohibit the diminution or elimination by the employer of the

employees existing benefits. [Tiangco vs. Leogardo, Jr., 122 SCRA 267 (1983)]

With regard to the length of time the company practice should have beenexercised to constitute voluntary employer practice which cannot beunilaterally withdrawn by the employer, we hold that jurisprudence has not laiddown any rule requiring a specific minimum number of years. In the abovequoted case of Davao Fruits Corporation vs. Associated LaborUnions,[10]the company practice lasted for six (6) years. In anothercase, Davao Integrated Port Stevedoring Services vs. Abarquez,[11]theemployer, for three (3) years and nine (9) months, approved the commutationto cash of the unenjoyed portion of the sick leave with pay benefits of itsintermittent workers. While in Tiangco vs. Leogardo, Jr.,[12]the employercarried on the practice of giving a fixed monthly emergency allowance fromNovember 1976 to February 1980, or three (3) years and four (4) months. Inall these cases, this Court held that the grant of these benefits has ripenedinto company practice or policy which cannot be peremptorily withdrawn. Inthe case at bar, petitioner Sevilla Trading kept the practice of including non-basic benefits such as paid leaves for unused sick leave and vacation leave inthe computation of their 13th-month pay for at least two (2) years. This, werule likewise constitutes voluntary employer practice which cannot beunilaterally withdrawn by the employer without violating Art. 100 of the LaborCode:

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Art. 100. Prohibition against elimination or diminution of benefits.Nothing in this

Book shall be construed to eliminate or in any way diminish supplements, or other

employee benefits being enjoyed at the time of promulgation of this Code.

IN VIEW WHEREOF, the petition is DENIED. The Decision of the Court of

Appeals in CA-G.R. SP No. 63086 dated 27 November 2001 and itsResolution dated 06 March 2002 are hereby AFFIRMED.

SO ORDERED.

Quisumbing, Austria-Martinez, andTinga, JJ., concur.Callejo, Sr., J., no part.

2.

NESTL PHILIPPINES, INC., petitioner,vs.NATIONAL LABOR RELATIONS COMMISSION, EUGENIA C. NUNEZ, LIZA T. VILLANUEVA,EMMANUEL S. VILLENA, RUDOLPH C. ARMAS, RODOLFO M. KUA and RODOLFO A.SOLIDUM, respondents.

Siguion Reyna, Montecillo & Ongsiako for petitioner.

Banzuela, Flores, Miralles, Raneses, Sy, Taquio & Associates for private respondents.

GRIO-AQUINO, J.:p

This petition for certiorariseeks a review of the resolutions dated May 28, 1988 and September 1,1988 of the National Labor Relations Commission (NLRC) in Injunction Case No. 1582 granting theinjunction prayed for by the private respondents, to hold in abeyance the cancellation of their carloans and payments of the monthly amortizations thereon pending the resolution of their complaintsfor illegal dismissal.

The private respondents were employed by the petitioner either as sales representatives or medicalrepresentatives. By reason of the nature of their work they were each allowed to avail of thecompany's car loan policy. Under that policy, the company advances the purchase price of a car tobe paid back by the employee through monthly deductions from his salary, the company retainingthe ownership of the motor vehicle until it shall have been fully paid for. All of the privaterespondents availed of the petitioner's car loan policy.

On September 14, 1987, private respondents Nuez, Villanueva, Villena and Armas were dismissedfrom the service for having participated in an illegal strike. On December 26, 1987, respondents Kuaand Solidum were also dismissed for certain irregularities. All the private respondents filedcomplaints for illegal dismissal in the Arbitration Branch of the NLRC. The Labor Arbiter dismissed

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their complaints and upheld the legality of their dismissal. They appealed to the NLRC where theirappeals are still pending.

In the Notices of Dismissal which they received from Nestl, the private respondents had beendirected to either settle the remaining balance of the cost of their respective cars, or return them tothe company for proper disposition.

As they failed and refused to avail of either option, the company filed in the Regional Trial Court ofMakati a civil suit to recover possession of the cars. The Court issued an Order dated March 7, 1988directing the Deputy Sheriff to take the motor vehicles into his custody.

The private respondents sought a temporary restraining order in the NLRC to stop the company fromcancelling their car loans and collecting their monthly amortizations pending the final resolution oftheir appeals in the illegal dismissal case.

On May 27, 1988, the NLRC en banc, issued a resolution granting their petition for injunction. Itsorder reads:

Acting on the Urgent Petition for the Issuance of a Temporary Restraining Order, theCommission sitting en bancafter deliberation, Resolved to hold in abeyance thecancellation of the petitioners' car loans and the payment of the monthlyamortizations thereof pending resolution of their illegal dismissal cases. (p. 5, Rollo.)

The company filed a motion for reconsideration, but it was denied for tardiness. Hence, this petitionfor certiorarialleging that the NLRC acted with grave abuse of discretion amounting to lack of

jurisdiction when it issued a labor injunction without legal basis and in the absence of any labordispute related to the same.

The private respondents, in their comment on the petition, alleged that there is a labor disputebetween the petitioner and the private respondents and that their default in paying the amortizations

for their cars was brought about by their illegal dismissal from work by the petitioner as punishmentfor their participation in the illegal strike of the Union of Filipro Employees of which they aremembers. If they had not participated in the strike, they would not have been dismissed from workand they would not have defaulted in the payment of their amortizations. Private respondentsadmitted their civil obligation to the petitioner.

The Office of the Solicitor General filed a manifestation on June 13, 1989, stating that "after judiciousscrutiny of the records, . . . and in consonance with the applicable law and jurisprudence on thematter, the Office of the Solicitor General is convinced that it cannot, without violating the law,sustain the findings of the National Labor Relations Commission in the case at bar. So as not toprejudice NLRC's case, the OSG deems it best to refrain from filing its Comment, even as it begsleave of the Honorable Court to be excused from further appearing in behalf of the NLRC in thisparticular case" (p. 173, Rollo).

Filing its own comment, the NLRC argued that as the illegal dismissal case is a labor dispute whichis still pending resolution before it, "it is clothed with authority to issue the contested resolutionsbecause under the law, PD 442, otherwise known as the Labor Code of the Philippines as amended,it is vested with the authority to resolve labor disputes" (p. 252, Rollo).

The power of the NLRC to issue writs of injunction is found in Article 218 of the Labor Code, whichprovides:

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Art. 218 Powers of the Commission. The Commission shall have the power andauthority:

xxx xxx xxx

(e) To enjoin or restrain any actual or threatened commission of any or all prohibited

or unlawful acts or to require the performance of a particular act in any labordisputewhich, if not restrained or performed forthwith, may cause grave orirreparable damage to any party or render ineffectual any decision in favor of suchparty: . . . (Emphasis ours.)

That power, as the statute provides, can only be exercised in a labor dispute. Paragraph (1) ofArticle 212 of the Labor Code defines a labor dispute as follows:

(1) "Labor dispute" includes any controversy or matters concerning terms orconditions of employment or the association or representation of persons innegotiating, fixing, maintaining, changing or arranging the terms and conditions ofemployment, regardless of whether the disputants stand in the proximate relation of

employer and employee.

Nestl's demand for payment of the private respondents' amortizations on their car loans, or, in thealternative, the return of the cars to the company, is not a labor, but a civil, dispute. It involvesdebtor-creditor relations, rather than employee-employer relations.

Petitioner Nestl Philippines, Inc., correctly pointed out that:

The twin directives contained in petitioner's letters to the private respondents toeither (1) settle the remaining balance on the value of their assigned cars under thecompany car plan or return the cars to the company for proper disposition; or (2) topay all outstanding accountabilities to the company are matters related to the

enforcement of a civil obligation founded on contract. It is not dependent on orrelated to any labor aspect under which a labor injunction can be issued. Whether ornot the private respondents remain as employees of the petitioner, there is noescape from their obligation to pay their outstanding accountabilities to the petitioner;and if they cannot afford it, to return the cars assigned to them.

As noted, the options given to the private respondents are civil in nature arising fromcontractual obligations. There is no labor aspect involved in the enforcement of thoseobligations. (p. 7, Rollo.)

The NLRC gravely abused its discretion and exceeded its jurisdiction by issuing the writ of injunctionto stop the company from enforcing the civil obligation of the private respondents under the car loanagreements and from protecting its interest in the cars which, by the terms of those agreements,belong to it (the company) until their purchase price shall have been fully paid by the employee. Theterms of the car loan agreements are not in issue in the labor case. The rights and obligations of theparties under those contracts may be enforced by a separate civil action in the regular courts, not inthe NLRC.

WHEREFORE, the petition for certiorariis granted. The questioned resolution dated May 27, 1988 ofthe NLRC in Injunction Case No. 1582 (Annex A) is hereby annulled and set aside. Costs againstthe private respondents.

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SO ORDERED.

3.

DAVAO FRUITS CORPORATION, petitioner,vs.ASSOCIATED LABOR UNIONS (ALU) for in behalf of all the rank-and-file workers/employeesof DAVAO FRUITS CORPORATION and NATIONAL LABOR RELATIONSCOMMISSION, respondents.

Dominguez & Paderna Law Offices for petitioners.

The Solicitor General for public respondents.

QUIASON, J .:

This is a petition for certiorari to set aside the resolution of the National Labor Relations Commission(NLRC), dismissing for lack of merit petitioner's appeal from the decision of the Labor Arbiter inNLRC Case No. 1791-MC-X1-82.

On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the rank-and-file workers and employees of petitioner, filed a complaint (NLRC Case No. 1791-MC-XI-82)before the Ministry of Labor and Employment, Regional Arbitration Branch XI, Davao City, againstpetitioner, for "Payment of the Thirteenth-Month Pay Differentials." Respondent ALU sought torecover from petitioner the thirteenth month pay differential for 1982 of its rank-and-file employees,equivalent to their sick, vacation and maternity leaves, premium for work done on rest days and

special holidays, and pay for regular holidays which petitioner, allegedly in disregard of companypractice since 1975, excluded from the computation of the thirteenth month pay for 1982.

In its answer, petitioner claimed that it erroneously included items subject of the complaint in thecomputation of the thirteenth month pay for the years prior to 1982, upon a doubtful and difficultquestion of law. According to petitioner, this mistake was discovered only in 1981 after thepromulgation of the Supreme Court decision in the case of San Miguel Corporation v. Inciong(103SCRA 139).

A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of respondentALU. The dispositive portion of the decision reads as follows:

WHEREFORE, in view of all the foregoing considerations, judgment is herebyrendered ordering respondent to pay the 1982 13th month pay differential to all itsrank-and-file workers/employees herein represented by complainant Union (Rollo, p.32).

Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said decisionaccordingly dismissed the appeal for lack of merit.

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for work done on rest days special holidays, as well as pay for regular holidays, are likewiseexcluded in computing the basic salary for the purpose of determining the thirteen month pay.

Petitioner claims that the mistake in the interpretation of "basic salary" was caused by the opinions,orders and rulings rendered by then Acting Labor Secretary Amado C. Inciong, expressly includingthe subject items in computing the thirteenth month pay. The inclusion of these items is clearly not

sanctioned under P.D. No. 851, the governing law and its implementing rules, which speak only of"basis salary" as the basis for determining the thirteenth month pay.

Moreover, whatever doubt arose in the interpretation of P.D. No. 851 was erased by theSupplementary Rules and Regulations which clarified the definition of "basic salary."

As pointed out in San Miguel Corporation v. Inciong, (supra):

While doubt may have been created by the prior Rules and Regulations andImplementing Presidential Decree 851 which defines basic salary to include allremunerations or earnings paid by an employer to an employee, this cloud isdissipated in the later and more controlling Supplementary Rules and Regulations

which categorically, exclude from the definition of basic salary earnings and otherremunerations paid by employer to an employee. A cursory perusal of the two sets ofRules indicates that what has hitherto been the subject of broad inclusion is now asubject of broad exclusion. The Supplementary Rules and Regulations cure theseeming tendency of the former rules to include all remunerations and earningswithin the definition of basic salary.

The all-embracing phrase "earnings and other remunerations which are deemed notpart of the basic salary includes within its meaning payments for sick, vacation, ormaternity leaves, premium for work performed on rest days and special holidays, payfor regular holidays and night differentials. As such they are deemed not part of thebasic salary and shall not be considered in the computation of the 13th-month pay. Ifthey were not so excluded, it is hard to find any "earnings and other remunerations"expressly excluded in computation of the 13th month-pay. Then the exclusionaryprovision would prove to be idle and with purpose.

The "Supplementary Rules and Regulations Implementing P.D. No. 851," which put to rest all doubtsin the computation of the thirteenth month pay, was issued by the Secretary of Labor as early asJanuary 16, 1976, barely one month after the effectivity of P.D. No. 851 and its Implementing Rules.

And yet, petitioner computed and paid the thirteenth month pay, without excluding the subject itemstherein until 1981. Petitioner continued its practice in December 1981, after promulgation of theafore-quoted San Migueldecision on February 24, 1981, when petitioner purportedly "discovered" itsmistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of

its employees' thirteenth month pay, the payments for sick, vacation and maternity leaves, premiumsfor work done on rest days and special holidays, and pay for regular holidays. The considerablelength of time the questioned items had been included by petitioner indicates a unilateral andvoluntary act on its part, sufficient in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the paymentsmade pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplementbeing enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by theemployer, by virtue of Section 10 of the Rules and Regulations Implementing P.D. No. 851, and

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Article 100 of the labor of the Philippines, which prohibit the diminution or elimination by theemployer of the employees' existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).

Petitioner cannot invoke the principle of solutio indebiti which as a civil law concept that is notapplicable in Labor Law. Besides, in solutio indebiti, the obligee is required to return to the obligorwhatever he received from the latter (Civil Code of the Philippines, Arts. 2154 and 2155). Petitioner

in the instant case, does not demand the return of what it paid respondent ALU from 1975 until 1981;it merely wants to "rectify" the error it made over these years by excluding unilaterally from thethirteenth month pay in 1982 the items subject of litigation. Solutio indebiti, therefore, is notapplicable to the instant case.

WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is herebyDISMISSED, and the questioned decision of respondent NLRC is AFFIRMED accordingly.

Cruz, Grio-Aquino, Davide, Jr. and Bellosillo, JJ., concur.

4. DAVAO INTEGRATED PORT STEVEDORING SERVICES, petitioner, vs. RUBEN V.ABARQUEZ, in his capacity as an accredited Voluntary Arbitrator and THE ASSOCIATION OF

TRADE UNIONS (ATU-TUCP), respondents.

Libron, Gaspar & Associates for petitioner.

Bansalan B. Metilla for Association of Trade Unions (ATUTUCP).

SYLLABUS

1. LABOR LAWS AND SOCIAL LEGISLATION; LABOR RELATIONS; COLLECTIVE BARGAININGAGREEMENT; DEFINED; NATURE THEREOF; CONSTRUCTION TO BE PLACED THEREON. A collective bargaining agreement (CBA), as used in Article 252 of the Labor Code, refers to acontract executed upon request of either the employer or the exclusive bargaining representative

incorporating the agreement reached after negotiations with respect to wages, hours of work and allother terms and conditions of employment, including proposals for adjusting any grievances orquestions arising under such agreement. While the terms and conditions of a CBA constitute the lawbetween the parties, it is not, however, an ordinary contract to which is applied the principles of lawgoverning ordinary contracts. A CBA, as a labor contract within the contemplation of Article 1700 ofthe Civil Code of the Philippines which governs the relations between labor and capital, is not merelycontractual in nature but impressed with public interest, thus, it must yield to the common good. Assuch, it must be construed liberally rather than narrowly and technically, and the courts must place apractical and realistic construction upon it, giving due consideration to the context in which it isnegotiated and purpose which it is intended to serve.

2. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. It is thus erroneous for petitioner to isolate Section 1,Article VIII of the 1989 CBA from the other related section on sick leave with pay benefits,specifically Section 3 thereof, in its attempt to justify the discontinuance or withdrawal of the privilegeof commutation or conversion to cash of the unenjoyed portion of the sick leave benefit to regularintermittent workers. The manner they were deprived of the privilege previously recognized andextended to them by petitioner-company during the lifetime of the CBA of October 16, 1985 untilthree (3) months from its renewal on April 15, 1989, or a period of three (3) years and nine (9)months, is not only tainted with arbitrariness but likewise discriminatory in nature. It must be notedthat the 1989 CBA has two (2) sections on sick leave with pay benefits which apply to two (2) distinctclasses of workers in petitioner's company, namely: (1) the regular non-intermittent workers or thoseworkers who render a daily eight-hour service to the company and are governed by Section 1, Article

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VIII of the 1989 CBA; and (2) intermittent field workers who are members of the regular labor pooland the present regular extra labor pool as of the signing of the agreement on April 15, 1989 orthose workers who have irregular working days and are governed by Section 3, Article VIII of the1989 CBA. It is not disputed that both classes of workers are entitled to sick leave with pay benefitsprovided they comply with the conditions set forth under Section 1 in relation to the last paragraph ofSection 3, to wit: (1) the employee-applicant must be regular or must have rendered at least one

year of service with the company; and (2) the application must be accompanied by a certificationfrom a company-designated physician. the phrase "herein sick leave privilege," as used in the lastsentence of Section 1, refers to the privilege of having a fixed 15-day sick leave with pay which, asmandated by Section 1, only the non-intermittent workers are entitled to. This fixed 15-day sick leavewith pay benefit should be distinguished from the variable number of days of sick leave, not toexceed 15 days, extended to intermittent workers under Section 3 depending on the number ofhours of service rendered to the company, including overtime pursuant to the schedule providedtherein. It is only fair and reasonable for petitioner-company not to stipulate a fixed 15-day sick leavewith pay for its regular intermittent workers since, as the term "intermittent" implies, there isirregularity in their work-days. Reasonable and practical interpretation must be placed on contractualprovisions. Interpetatio fienda est ut res magis valeat quam pereat. Such interpretation is to beadopted, that the thing may continue to have efficacy rather than fail.

3. ID.; ID.; ID.; SICK LEAVE BENEFITS; NATURE AND PURPOSE. Sick leave benefits, likeother economic benefits stipulated in the CBA such as maternity leave and vacation leave benefits,among others, are by their nature, intended to be replacements for regular income which otherwisewould not be earned because an employee is not working during the period of said leaves. They arenon-contributory in nature, in the sense that the employees contribute nothing to the operation of thebenefits. By their nature, upon agreement of the parties, they are intended to alleviate the economiccondition of the workers.

4. ID.; ID.; JURISDICTION OF VOLUNTARY ARBITRATOR; CASE AT BAR. Petitioner-company's objection to the authority of the Voluntary Arbitrator to direct the commutation of theunenjoyed portion of the sick leave with pay benefits of intermittent workers in his decision ismisplaced. Article 261 of the Labor Code is clear. The questioned directive of the herein public

respondent is the necessary consequence of the exercise of his arbitral power as VoluntaryArbitrator under Article 261 of the Labor Code "to hear and decide all unresolved grievances arisingfrom the interpretation or implementation of the Collective Bargaining Agreement." We, therefore,find that no grave abuse of discretion was committed by public respondent in issuing the award(decision). Moreover, his interpretation of Sections 1 and 3, Article VIII of the 1989 CBA cannot befaulted with and is absolutely correct.

5. ID.; CONDITIONS OF EMPLOYMENT; PROHIBITION AGAINST ELIMINATION OR DIMINUTIONOF BENEFITS; BENEFITS GRANTED PURSUANT TO COMPANY PRACTICE OR POLICYCANNOT BE PEREMPTORILY WITHDRAWN. Whatever doubt there may have been early onwas clearly obliterated when petitioner-company recognized the said privilege and paid itsintermittent workers the cash equivalent of the unenjoyed portion of their sick leave with pay benefitsduring the lifetime of the CBA of October 16, 1985 until three (3) months from its renewal on April 15,1989. Well-settled is it that the said privilege of commutation or conversion to cash, being an existingbenefit, the petitioner-company may not unilaterally withdraw, or diminish such benefits. It is a factthat petitioner-company had, on several instances in the past, granted and paid the cash equivalentof the unenjoyed portion of the sick leave benefits of some intermittent workers. Under thecircumstances, these may be deemed to have ripened into company practice or policy which cannotbe peremptorily withdrawn.

D E C I S I O N

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ROMERO, J p:

In this petition for certiorari, petitioner Davao Integrated Port Services Corporation seeks to reversethe Award 1 issued on September 10, 1991 by respondent Ruben V. Abarquez, in his capacity asVoluntary Arbitrator of the National Conciliation and Mediation Board, Regional Arbitration Branch XIin Davao City in Case No. AC-211-BX1-10-003-91 which directed petitioner to grant and extend the

privilege of commutation of the unenjoyed portion of the sick leave with pay benefits to itsintermittent field workers who are members of the regular labor pool and the present regular extrapool in accordance with the Collective Bargaining Agreement (CBA) executed between petitionerand private respondent Association of Trade Unions (ATU-TUCP), from the time it was discontinuedand henceforth.

The facts are as follows:

Petitioner Davao Integrated Port Stevedoring Services (petitioner-company) and private respondentATU-TUCP (Union), the exclusive collective bargaining agent of the rank and file workers ofpetitioner-company, entered into a collective bargaining agreement (CBA) on October 16, 1985which, under Sections 1 and 3, Article VIII thereof, provide for sick leave with pay benefits each year

to its employees who have rendered at least one (1) year of service with the company, thus:

"ARTICLE VIII

Section 1. Sick Leaves The Company agrees to grant 15 days sick leave with pay each year toevery regular non-intermittent worker who already rendered at least one year of service with thecompany. However, such sick leave can only be enjoyed upon certification by a companydesignated physician, and if the same is not enjoyed within one year period of the current year, anyunenjoyed portion thereof, shall be converted to cash and shall be paid at the end of the said oneyear period. And provided however, that only those regular workers of the company whose work arenot intermittent, are entitled to the herein sick leave privilege.

xxx xxx xxx

Section 3. All intermittent field workers of the company who are members of the Regular LaborPool shall be entitled to vacation and sick leaves per year of service with pay under the followingschedule based on the number of hours rendered including overtime, to wit:

Hours of Service Per Vacation Sick Leave

Calendar Year Leave

Less than 750 NII NII

751 825 6 days 6 days

826 900 7 7

901 925 8 8

926 1,050 9 9

1,051 1,125 10 10

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1,126 1,200 11 11

1,201 1,275 12 12

1,276 1,350 13 13

1,351 1,425 14 14

1,426 1,500 15 15

The conditions for the availment of the herein vacation and sick leaves shall be in accordance withthe above provided Sections 1 and 2 hereof, respectively."

Upon its renewal on April 15, 1989, the provisions for sick leave with pay benefits were reproducedunder Sections 1 and 3, Article VIII of the new CBA, but the coverage of the said benefits wasexpanded to include the "present Regular Extra Labor Pool as of the signing of this Agreement."Section 3, Article VIII, as revised, provides, thus:

"Section 3. All intermittent field workers of the company who are members of the Regular LaborPool and present Regular Extra Labor Pool as of the signing of this agreement shall be entitled tovacation and sick leaves per year of service with pay under the following schedule based on thenumber of hours rendered including overtime, to wit:

Hours of Service Per Vacation Sick Leave

Calendar Year Leave

Less than 750 NII NII

751 825 6 days 6 days

826 900 7 7

901 925 8 8

926 1,050 9 9

1,051 1,125 10 10

1,126 1,200 11 11

1,201 1,275 12 12

1,276 1,350 13 13

1,351 1,425 14 14

1,426 1,500 15 15

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The conditions for the availment of the herein vacation and sick leaves shall be in accordance withthe above provided Sections 1 and 2 hereof, respectively."

During the effectivity of the CBA of October 16, 1985 until three (3) months after its renewal on April15, 1989, or until July 1989 (a total of three (3) years and nine (9) months), all the field workers ofpetitioner who are members of the regular labor pool and the present regular extra labor pool who

had rendered at least 750 hours up to 1,500 hours were extended sick leave with pay benefits. Anyunenjoyed portion thereof at the end of the current year was converted to cash and paid at the endof the said one-year period pursuant to Sections 1 and 3, Article VIII of the CBA. The number ofdays of their sick leave per year depends on the number of hours of service per calendar year inaccordance with the schedule provided in Section 3, Article VIII of the CBA.

The commutation of the unenjoyed portion of the sick leave with pay benefits of the intermittentworkers or its conversion to cash was, however, discontinued or withdrawn when petitioner-companyunder a new assistant manager, Mr. Benjamin Marzo (who replaced Mr. Cecilio Beltran, Jr. upon thelatter's resignation in June 1989), stopped the payment of its cash equivalent on the ground that theyare not entitled to the said benefits under Sections 1 and 3 of the 1989 CBA.

The Union objected to the said discontinuance of commutation or conversion to cash of theunenjoyed sick leave with pay benefits of petitioner's intermittent workers contending that it is adeviation from the true intent of the parties that negotiated the CBA; that it would violate the principlein labor laws that benefits already extended shall not be taken away and that it would result indiscrimination between the non-intermittent and the intermittent workers of the petitioner-company.

Upon failure of the parties to amicably settle the issue on the interpretation of Sections 1 and 3,Article VIII of the 1989 CBA, the Union brought the matter for voluntary arbitration before theNational Conciliation and Mediation Board, Regional Arbitration Branch XI at Davao City by way ofcomplaint for enforcement of the CBA. The parties mutually designated public respondent Ruben

Abarquez, Jr. to act as voluntary arbitrator.

After the parties had filed their respective position papers, 2 public respondent Ruben Abarquez, Jr.issued on September 10, 1991 an Award in favor of the Union ruling that the regular intermittentworkers are entitled to commutation of their unenjoyed sick leave with pay benefits under Sections 1and 3 of the 1989 CBA, the dispositive portion of which reads:

"WHEREFORE, premises considered, the management of the respondent Davao Integrated PortStevedoring Services Corporation is hereby directed to grant and extend the sick leave privilege ofthe commutation of the unenjoyed portion of the sick leave of all the intermittent field workers whoare members of the regular labor pool and the present extra pool in accordance with the CBA fromthe time it was discontinued and henceforth.

SO ORDERED."

Petitioner-company disagreed with the aforementioned ruling of public respondent, hence, theinstant petition.

Petitioner-company argued that it is clear from the language and intent of the last sentence ofSection 1, Article VIII of the 1989 CBA that only the regular workers whose work are not intermittentare entitled to the benefit of conversion to cash of the unenjoyed portion of sick leave, thus: ". . . Andprovided, however, that only those regular workers of the Company whose work are not intermittentare entitled to the herein sick leave privilege."

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Petitioner-company further argued that while the intermittent workers were paid the cash equivalentof their unenjoyed sick leave with pay benefits during the previous management of Mr. Beltran whomisinterpreted Sections 1 and 3 of Article VIII of the 1985 CBA, it was well within petitioner-company's rights to rectify the error it had committed and stop the payment of the said sick leavewith pay benefits. An error in payment, according to petitioner-company, can never ripen into apractice.

We find the arguments unmeritorious.

A collective bargaining agreement (CBA), as used in Article 252 of the Labor Code, refers to acontract executed upon request of either the employer or the exclusive bargaining representativeincorporating the agreement reached after negotiations with respect to wages, hours of work and allother terms and conditions of employment, including proposals for adjusting any grievances orquestions arising under such agreement.

While the terms and conditions of a CBA constitute the law between the parties, 3 it is not, however,an ordinary contract to which is applied the principles of law governing ordinary contracts. 4 A CBA,as a labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines which

governs the relations between labor and capital, is not merely contractual in nature but impressedwith public interest, thus, it must yield to the common good. As such, it must be construed liberallyrather than narrowly and technically, and the courts must place a practical and realistic constructionupon it, giving due consideration to the context in which it is negotiated and purpose which it isintended to serve. 5

It is thus erroneous for petitioner to isolate Section 1, Article VIII of the 1989 CBA from the otherrelated section on sick leave with pay benefits, specifically Section 3 thereof, in its attempt to justifythe discontinuance or withdrawal of the privilege of commutation or conversion to cash of theunenjoyed portion of the sick leave benefit to regular intermittent workers. The manner they weredeprived of the privilege previously recognized and extended to them by petitioner-company duringthe lifetime of the CBA of October 16, 1985 until three (3) months from its renewal on April 15, 1989,or a period of three (3) years and nine (9) months, is not only tainted with arbitrariness but likewise

discriminatory in nature. Petitioner-company is of the mistaken notion that since the privilege ofcommutation or conversion to cash of the unenjoyed portion of the sick leave with pay benefits isfound in Section 1, Article VIII, only the regular non-intermittent workers and no other can avail of thesaid privilege because of the proviso found in the last sentence thereof.

It must be noted that the 1989 CBA has two (2) sections on sick leave with pay benefits which applyto two (2) distinct classes of workers in petitioner's company, namely: (1) the regular non-intermittentworkers or those workers who render a daily eight-hour service to the company and are governed bySection 1, Article VIII of the 1989 CBA; and (2) intermittent field workers who are members of theregular labor pool and the present regular extra labor pool as of the signing of the agreement on

April 15, 1989 or those workers who have irregular working days and are governed by Section 3,Article VIII of the 1989 CBA.

It is not disputed that both classes of workers are entitled to sick leave with pay benefits providedthey comply with the conditions set forth under Section 1 in relation to the last paragraph of Section3, to wit: (1) the employee-applicant must be regular or must have rendered at least one year ofservice with the company; and (2) the application must be accompanied by a certification from acompany-designated physician.

Sick leave benefits, like other economic benefits stipulated in the CBA such as maternity leave andvacation leave benefits, among others, are by their nature, intended to be replacements for regular

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income which otherwise would not be earned because an employee is not working during the periodof said leaves. 6 They are non-contributory in nature, in the sense that the employees contributenothing to the operation of the benefits. 7 By their nature, upon agreement of the parties, they areintended to alleviate the economic condition of the workers.

After a careful examination of Section 1 in relation to Section 3, Article VIII of the 1989 CBA in light

of the facts and circumstances attendant in the instant case, we find and so hold that the lastsentence of Section 1, Article VIII of the 1989 CBA, invoked by petitioner-company does not bar theregular intermittent workers from the privilege of commutation or conversion to cash of theunenjoyed portion of their sick leave with pay benefits, if qualified. For the phrase "herein sick leaveprivilege," as used in the last sentence of Section 1, refers to the privilege of having a fixed 15-daysick leave with pay which, as mandated by Section 1, only the non-intermittent workers are entitledto. This fixed 15-day sick leave with pay benefit should be distinguished from the variable number ofdays of sick leave, not to exceed 15 days, extended to intermittent workers under Section 3depending on the number of hours of service rendered to the company, including overtime pursuantto the schedule provided therein. It is only fair and reasonable for petitioner-company not to stipulatea fixed 15-day sick leave with pay for its regular intermittent workers since, as the term "intermittent"implies, there is irregularity in their work-days. Reasonable and practical interpretation must beplaced on contractual provisions. Interpetatio fienda est ut res magis valeat quam pereat. Suchinterpretation is to be adopted, that the thing may continue to have efficacy rather than fail. 8

We find the same to be a reasonable and practical distinction readily discernible in Section 1, inrelation to Section 3, Article VIII of the 1989 CBA between the two classes of workers in thecompany insofar as sick leave with pay benefits are concerned. Any other distinction would causediscrimination on the part of intermittent workers contrary to the intention of the parties that mutuallyagreed in incorporating the questioned provisions in the 1989 CBA.

Public respondent correctly observed that the parties to the CBA clearly intended the same sickleave privilege to be accorded the intermittent workers in the same way that they are both given thesame treatment with respect to vacation leaves - non-commutable and non-cumulative. If they aretreated equally with respect to vacation leave privilege, with more reason should they be on par with

each other with respect to sick leave privileges. 9 Besides, if the intention were otherwise, during itsrenegotiation, why did not the parties expressly stipulate in the 1989 CBA that regular intermittentworkers are not entitled to commutation of the unenjoyed portion of their sick leave with paybenefits?

Whatever doubt there may have been early on was clearly obliterated when petitioner-companyrecognized the said privilege and paid its intermittent workers the cash equivalent of the unenjoyedportion of their sick leave with pay benefits during the lifetime of the CBA of October 16, 1985 untilthree (3) months from its renewal on April 15, 1989. Well-settled is it that the said privilege ofcommutation or conversion to cash, being an existing benefit, the petitioner-company may notunilaterally withdraw, or diminish such benefits. 10 It is a fact that petitioner-company had, onseveral instances in the past, granted and paid the cash equivalent of the unenjoyed portion of thesick leave benefits of some intermittent workers. 11 Under the circumstances, these may be deemedto have ripened into company practice or policy which cannot be peremptorily withdrawn. 12

Moreover, petitioner-company's objection to the authority of the Voluntary Arbitrator to direct thecommutation of the unenjoyed portion of the sick leave with pay benefits of intermittent workers inhis decision is misplaced. Article 261 of the Labor Code is clear. The questioned directive of theherein public respondent is the necessary consequence of the exercise of his arbitral power asVoluntary Arbitrator under Article 261 of the Labor Code "to hear and decide all unresolvedgrievances arising from the interpretation or implementation of the Collective Bargaining

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Agreement." We, therefore, find that no grave abuse of discretion was committed by publicrespondent in issuing the award (decision). Moreover, his interpretation of Sections 1 and 3, ArticleVIII of the 1989 CBA cannot be faulted with and is absolutely correct.

WHEREFORE, in view of the foregoing, the petition is DISMISSED. The award (decision) of publicrespondent dated September 10, 1991 is hereby AFFIRMED. No costs.

SO ORDERED.

5. and confidence such that if reinstated, it may well lead to strained relations between employerand employee. Hence, this does not constitute an exception to the general rule mandatingreinstatement for an employee who has been unlawfully dismissed.

On the other hand, has she betrayed any confidence reposed in her by engaging in transactions thatmay have created conflict of interest situations? Petitioner GMCR points out that as a matter ofcompany policy, it prohibits its employees from involving themselves with any company that hasbusiness dealings with GMCR. Consequently, when private respondent Salazar signed as a witnessto the partnership papers of Concave (a supplier of Ultra which in turn is also a supplier of GMCR),

she was deemed to have placed. herself in an untenable position as far as petitioner was concerned.

However, on close scrutiny, we agree with public respondent that such a circumstance did not createa conflict of interests situation. As a systems analyst, Salazar was very far removed from operationsinvolving the procurement of supplies. Salazar's duties revolved around the development of systemsand analysis of designs on a continuing basis. In other words, Salazar did not occupy a position oftrust relative to the approval and purchase of supplies and company assets.

In the instant case, petitioner has predicated its dismissal of Salazar on loss of confidence. As wehave held countless times, while loss of confidence or breach of trust is a valid ground forterminations it must rest an some basis which must be convincingly established. 35An employee whonot be dismissed on mere presumptions and suppositions. Petitioner's allegation that since Salazar andSaldivar lived together in the same apartment, it "presumed reasonably that complainant's sympathywould be with Saldivar" and its averment that Saldivar's investigation although unverified, was probablytrue, do not pass this Court's test. 36While we should not condone the acts of disloyalty of an employee,neither should we dismiss him on the basis of suspicion derived from speculative inferences.

To rely on the Maramara report as a basis for Salazar's dismissal would be most inequitous becausethe bulk of the findings centered principally oh her friend's alleged thievery and anomaloustransactions as technical operations' support manager. Said report merely insinuated that in view ofSalazar's special relationship with Saldivar, Salazar might have had direct knowledge of Saldivar'squestionable activities. Direct evidence implicating private respondent is wanting from the records.

It is also worth emphasizing that the Maramara report came out after Saldivar had already resignedfrom GMCR on May 31, 1984. Since Saldivar did not have the opportunity to refute management's

findings, the report remained obviously one-sided. Since the main evidence obtained by petitionerdealt principally on the alleged culpability of Saldivar, without his having had a chance to voice hisside in view of his prior resignation, stringent examination should have been carried out to ascertainwhether or not there existed independent legal grounds to hold Salatar answerable as well and,thereby, justify her dismissal. Finding none, from the records, we find her to have been unlawfullydismissed.

WHEREFORE, the assailed resolution of public respondent National Labor Relations Commissiondated December 29, 1987 is hereby AFFIRMED. Petitioner GMCR is ordered to REINSTATE private

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respondent Imelda Salazar and to pay her backwages equivalent to her salary for a period of two (2)years only.

This decision is immediately executory.

SO ORDERED.

Paras, Bidin, Grio-Aquino, Medialdea, Regalado, Davide, Jr. and Nocon, JJ., concur.

Cruz, J., concurs in the result.

Gutierrez, Jr., Feliciano and Padilla, JJ., took no part.

Separate Opinions

MELENCIO-HERRERA, J., dissenting:

I believe there is just cause for dismissal per investigative findings. (See Decision, p. 2.)

Narvasa C.J., concurs

Separate Opinions

MELENCIO-HERRERA, J., dissenting:

I believe there is just cause for dismissal per investigative findings. (See Decision, p. 2.)

Narvasa C.J., concurs

6. MAMERTO B. ASIS, petitioner,vs.MINISTER OF LABOR AND EMPLOYMENT, CENTRAL AZUCARERA DE PILAR, andEMMANUEL JAVELLANA,respondents.

Belo, Ermitano Abiera & Associates for petitioner.

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Yolanda, Quisumbing-Javellana & Associates for respondent Emmanuel Q. Javellana.

V. Veloso & Associates for respondent Central Azucarera

NARVASA, J.:

The facts of this case depict a picture that is hardly edifying: avidity trying to wear the mantle of right.The facts raise a twofold issue: whether a company which has been haled to court by its own in-house counsel is obliged to continue his employment and entrust its legal affairs to him, speciallywhen his cause of action has been shown to be devoid of merit; and whether a firm is bound toretain in its service a personnel manager who has incited the very employees under his supervisionand control to file complaints against it. Asserting a right to sue his employer for a legitimategrievance without meriting retaliatory action, the petitioner claims that his dismissal for such conductor on the ground, essentially, of loss of confidence, was illegal; and he asks this Court to annul the

judgment of the respondent Commission, which upheld the termination of his services in respondentcompany. Said claim finds no support in either the law or the established facts and must, therefore,

be rejected.

The petitioner was appointed Legal Counsel of the Central Azucarera de Pilar1Later, concurrently with hisposition as Legal Counsel, he was named Head of its Manpower and Services Department.

In addition to his basic salaries and other fringe benefits, his employer granted him, and a few otherofficials of the company, a monthly ration of 200 liters of gasoline and a small tank of liquefiedpetroleum gas (LPG). 2This monthly ration was temporarily revoked some five (5) years later as a cost reduction measure of theCentral .3The petitioner and the other officials adversely affected moved for reconsideration. Their plea was denied.

The petitioner then commenced an action against the Central with the Regional Office of the Ministryof Labor and Employment, seeking restoration of his monthly ration of gasoline and LPG which, asaforesaid, had been temporarily suspended. The case was docketed as LRD Case No. 1632.

Shortly afterwards, he filed another action against his employer, docketed as LRD Case No. 1685,this time complaining against the Central's memorandum ordaining his relief (by being placed onleave of absence) as the Central's Legal Counsel and Head of the Manpower Services Department,impleaded by the petitioner as co-respondent was Emmanuel Q. Javellana, the Finance Managerand Comptroller of the Central, who had signed the memorandum for his relief. 4The petitioner theorized thathe had in effect been dismissed, illegally. 5

The two cases were jointly heard and decided by the Regional Director. The latter's judgments 6was for the petitioner's reinstatement to hisformer positions without loss of seniority, benefits and other privileges, the payment to him of back wages from date of his relief up to time ofreinstatement, and the delivery to him of the monthly benefits from the time of their temporary revocation up to actual restoration or, at hisoption, the money equivalent thereof. 7

The Deputy Minister of Labor however reversed this decision of the Regional Director, on appealtaken by the Central; the Deputy Minister ordered the dismissal of the petitioner's complaint. 8 TheDeputy Minister found that the evidence satisfactorily established that the Central's suspension of the petitioner's and others' monthly rationof gasoline and LPG, had been caused by unavoidable financial constraints; that such a suspension, in line with its conservation and cost-saving policy, did not in truth effect any significant diminution of said benefits, since the petitioner was nevertheless entitled to reimbursementof the actual amount of gas consumed; that petitioner had encouraged his co-employees to file complaints against the Central over therations issue, and this, as well as his institution of his own actions, had created an atmosphere of enmity in the Central, and caused the lossby the Central of that trust and confidence in him so essential in a lawyer-client relationship as that theretofore existing between them; andthat under the circumstances, petitioner's discharge as the Central's Legal Counsel and Head of the Manpower & Services Department was

justified. The Deputy Minister's order of dismissal was however subsequently modified, at the petitioner's instance, by decreeing the paymentto the latter of separation pay equivalent to one month's salary for every year of service rendered. 9

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The petitioner theorizes that apart from the fact that the Deputy Minister lacked jurisdiction toentertain the Central's appeal from the decision of the Regional Director, he had gravely abused hisdiscretion in reaching his factual conclusions, pejoratively described as guesswork and speculation.

The petitioner's theory of the Deputy Minister's lack of jurisdiction, founded on the tardy payment bythe Central of the appeal fee of P 25.00, is quickly disposed of by simply adverting to our holding

in Del Rosario & SonsLogging Enterprises, Inc. v. NLRC, 10to wit:

It may be that, as held inAcda vs. MOLE, 119 SCRA 306 [1982], payment of the appeal fee is by nomeans a mere technicality but is an essential requirement in the perfection of an appeal. However,where as in this case, the fee had been paid, unlike in the Acdacase, although payment wasdelayed, the broader interest of justice and the desired objective of resolving controversies on themerits demanded that the appeal be given course as, in fact, it was so given by the NLRC. Besides,it was within the inherent power of the NLRC to have allowed the late payment of the appeal fee.

As regards the temporary revocation of the petitioner's monthly ration of fuel, suffice it to point outthat, as the Solicitor General stresses, this bad been occasioned by force of circumstances affectingthe Central's business. The monthly ration was not a part of his basic salary, and is not indeed found

in any of the management payroll vouchers pertinent to the petitioner. 11Moreover, the adverse consequencesof the suspension of the monthly rations had been largely if not entirely negated by the Central's undertaking to reimburse the petitioner forhis actual consumption of fuel during the period of suspension. These facts are entirely distinct from those obtaining in the case of StatesMarine Corporationand Royal Line, Inc. v. Cebu Seamen's Association, Inc., 12invoked by petitioner and thus preclude application of theruling therein laid down to the case at bar.

A review of the record demonstrates that there is substantial evidence supporting the factual findingsof the respondent Deputy Minister. Said findings, as well as the legal conclusions derived therefrom,cannot be said to have been rendered with grave abuse of discretion, and will thus be affirmed. Infine, and as petitioner could not but have realized from the outset, neither he nor any other employeesimilarly situated had any legitimate grievance against the Central.

WHEREFORE, the petition is DISMISSED for lack of merit, with costs against petitioner.

Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

7. LEXAL LABORATORIES and/or JOSE ANGELES, Manager,petitioners,vs.NATIONAL CHEMICAL INDUSTRIES WORKERS UNION-PAFLU (Lexal Laboratories Chapter)and THE COURT OF INDUSTRIAL RELATIONS,respondents.

Matias, Liboro & Benitez for petitioners.F. M. de los Reyes for respondents.

SANCHEZ, J.:

Condensed, the question before us is this: Areper diemsincluded in backpay? This problem cameabout because of the implementation of the decision of the Court of Industrial Relations (CIR) ofJune 29, 19631directing petitioner Lexal Laboratories (Lexal) to reinstate Guillermo Ponseca, adismissed employee, to his former position "with full back wages from the day of his dismissal up tothe time he is actually reinstated without loss of his seniority rights and of such other rights andprivileges enjoyed by him prior to his lay-off."

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CIR, confirming the report of its Chief Examiner and Economist, ruled in its order of February 16,1965 that Ponseca was entitled to back wages from November 5, 1958 when he ceased reportingfor work, to November 24, 1963 a day prior to his reinstatement on November 25, 1963; and that forthe number of days that he was supposed to be in Manila, he was to earn P4.50 a day, and duringthe periods when he should have been in the provinces, P4.50 a day plus a per diemof P4.00 or atotal of P8.50 daily. This order was subsequently modified by CIR's resolution of May 22, 1965 which

directed the deduction of P5,000.00 previously paid Ponseca under the judgment and P610.00which Ponseca earned from other sources during his lay-off.

Petitioners vigorously objected to the inclusion of the P4.00per diemin the computation ofPonseca's back wages because the latter "did not actually spend for his meals and lodgingsfor hewas all the time in Manila, his station." CIR brushed this contention aside. Whereupon, petitionersappealed to this Court from the order of February 16, 1965 and the resolution of May 22, 1965. 2

1. Our attention has not been drawn to a rule of law or jurisprudence which holds that per diemsareintegral parts of regular wages or salaries. Neither is it suggested in the record that perdiemsformed part of the terms of employment between petitioners and respondent union (of whichPonseca is a member), or with Ponseca himself for that matter. Nor was pronouncement madeeither in the original decision or in the questioned order and resolution of CIR thatper diemsare partof back wages. CIR simply hit upon the idea that per diemsshould be paid as part of the back wagesbecause they were "paid to him regularly."

Per diem, the dictionary definition tells us, is "a daily allowance" given "for each day he (an officer oremployee) was away from his home base".3It would seem to us thatper diemis intended to coverthe cost of lodging and subsistence of officers and employees when the latter are on duty outside oftheir permanent station.4Lexal concedes that whenever its employee, Guillermo Ponseca, was outof Manila, he was allowed aper diemof P4.00 broken down as follows: P1.00 for breakfast; P1.00for lunch; P1.00 for dinner; and P1.00 for lodging. Ponseca during the period involved did notleave Manila. Therefore, he spent nothing for meals and lodging outside of Manila. Because hespent nothing, there is nothing to be reimbursed. Sinceper diemsare in the nature ofreimbursement, Ponseca should not be entitled toper diems.

Besides, back wages are what an employee has lost "in the way of wages" due to his dismissal. Sothat, because Ponseca earned P4.50 a day, "then that is the amount which he lost daily by reason ofhis dismissal, nothing more nothing less:"5

We, accordingly, rule that CIR erred in including per diems in the back wages due and payable toGuillermo Ponseca.

2. The rest is a matter of mathematical computation but first to the facts. The union's evidence is thatsince the last part of October, 1958 Ponseca had been reporting everyday to the bodega ofrespondents.6Anyway, prior to Ponseca's dismissal, he worked daily either in Manila or in theprovinces.7

But the order of February 15, 1965 credits Ponseca with 1,856 days for the period from November 5,1958 to November 24, 1963. We checked the accuracy of this figure. We found that there shouldonly be 1,846 days from November 5, 1958 to November 24, 1963, viz:

November 5, 1958 to December 31, 1958 57 days

January 1, 1959 to December 31, 1959 365 days

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January 1, 1960 to December 31, 1960 366 days

January 1, 1961 to December 31, 1961 365 days

January 1, 1962 to December 31, 1962 365 days

January 1, 1963 to November 24, 1963 328 days

T O T A L 1,846 days

This brings us to the total amount due from Lexa1 to Guillermo Ponseca, as follows: .

1,846 days x P4.50 P8,307.00

Less: Advancepayment

P5,000.00

Earnings from other

sources

P610.00

P5,610.008

NET BACKPAY P2,697.00 .

For the foregoing reasons, the order of February 16, 1965, and the resolution of May 22, 1965, bothof the Court of Industrial Relations, in its Case No. 2002-ULP, entitled "National Chemical IndustriesWorkers Union-PAFLU (Lexal Laboratories Chapter), Complainant, versus Lexal Laboratories andJose Angeles, its Manager, Respondents", are hereby modified; and

Judgment is hereby rendered ordering petitioner Lexal Laboratories to pay Guillermo Ponseca, byway of net backpay, the sum of P2,697.00.

No costs. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Castro, Angeles, Fernando and Capistrano,JJ.,concur.Zaldivar, J.,is on leave.

8. digest

9.REPUBLIC OF THE PHILIPPINES, represented by the Bureau of Customs and the Bureau ofInternal Revenue, petitioner,vs.HONORABLE E.L. PERALTA, PRESIDING JUDGE OF THE COURT OF FIRST INSTANCE OFMANILA, BRANCH XVII, QUALITY TABACCO CORPORATION, FRANCISCO, FEDERACIONOBRERO DE LA INDUSTRIA TABAQUERA Y OTROS TRABAJADORES DE FILIPINAS(FOITAF) USTC EMPLOYEES ASSOCIATION WORKERS UNION-PTGWO, respondents.

Oscar A. Pascua for assignee F. Candelaria.

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Teofilo C. Villarico for respondent Federation.

Pedro A. Lopez for respondent USTC.

FELICIANO,J.:

The Republic of the Philippines seeks the review on certiorari of the Order dated 17 November 1980of the Court of First Instance of Manila in its Civil Case No. 108395 entitled "In the Matter ofVoluntary Insolvency of Quality Tobacco Corporation, Quality Tobacco Corporation, Petitioner," andof the Order dated 19 January 1981 of the same court denying the motion for reconsideration of theearlier Order filed by the Bureau of Internal Revenue and the Bureau of Customs for the Republic.

In the voluntary insolvency proceedings commenced in May 1977 by private respondent QualityTobacco Corporation (the "Insolvent"), the following claims of creditors were filed:

(i) P2,806,729.92, by the USTC Association of Employees and workers Union-PTGWO USTC as

separation pay for their members. This amount plus an additional sum of P280,672.99 as attorney'sfees had been awarded by the National Labor Relations Commission in NLRC Case No. RB-IV-9775-77. 1

(ii) P53,805.05 by the Federacion de la Industria Tabaquera y Otros Trabajadores de Filipinas("FOITAF), as separation pay for their members, an amount similarly awarded by the NLRC in thesame NLRC Case.

(iii) P1,085,188.22 by the Bureau of Internal Revenue for tobacco inspection fees covering theperiod 1 October 1967 to 28 February 1973;

(iv) P276,161.00 by the Bureau of Customs for customs duties and taxes payable on various

importations by the Insolvent. These obligations appear to be secured by surety bonds.2

Some ofthese imported items are apparently still in customs custody so far as the record before this Court goes.

In its questioned Order of 17 November 1980, the trial court held that the above-enumerated claimsof USTC and FOITAF (hereafter collectively referred to as the "Unions") for separation pay of theirrespective members embodied in final awards of the National Labor Relations Commission were tobe preferred over the claims of the Bureau of Customs and the Bureau of Internal Revenue. The trialcourt, in so ruling, relied primarily upon Article 110 of the Labor Code which reads thus:

Article 110. Worker preference in case of bankruptcy In the event of bankruptcy orliquidation of an employer's business, his workers shall enjoy first preference asregards wages due them for services rendered during the period prior to the

bankruptcy or liquidation, any provision of law to the contrary notwithstanding. Unionpaid wages shall be paid in full before other creditors may establish any claim to ashare in the assets of the employer.

The Solicitor General, in seeking the reversal of the questioned Orders, argues that Article 110 ofthe Labor Code is not applicable as it speaks of "wages," a term which he asserts does not includethe separation pay claimed by the Unions. "Separation pay," the Solicitor General contends,

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is given to a laborer for a separation from employment computed on the basis of the number ofyears the laborer was employed by the employer;it is a form of penalty or damage against theemployer in favor of the employee for the latter's dismissal or separation from service . 3

Article 97 (f) of the Labor Code defines "wages" in the following terms:

Wage' paid to any employee shall mean the remuneration or earnings, howeverdesignated, capable of being expressed in terms of money, whether fixed orascertained on a time, task, piece, or commission basis, or other method ofcalculating the same, which ispayable by an employer to an employeeunder awritten or unwritten contract of employment for work done or to be done, or forservices rendered or to be rendered, and includes the fair and reasonable value, asdetermined by the Secretary of Labor, of board, lodging, or other facilities customarilyfurnished by the employer to the employee. 'Fair and reasonable value' shall notinclude any profit to the employer or to any person affiliated with theemployer.(emphasis supplied)

We are unable to subscribe to the view urged by the Solicitor General. We note, in this connection,

that inPhilippine Commercial and Industrial Bank (PCIB) us. National Mines and Allied WorkersUnion, 4the Solicitor General took a different view and there urged that the term "wages" under Article110 of the Labor Code may be regarded as embracing within its scope severance pay or termination orseparation pay. In PCIB, this Court agreed with the position advanced by the Solicitor General. 5We seeno reason for overturning this particular position. We continue to believe that, for the specific purposes ofArticle 110 and in the context of insolvency termination or separation pay is reasonably regarded asforming part of the remuneration or other money benefits accruing to employees or workers by reason oftheir having previously rendered services to their employer; as such, they fall within the scope of"remuneration or earnings for services rendered or to be rendered ." Liability for separation paymight indeed have the effect of a penalty, so far as the employer is concerned. So far as concerns theemployees, however, separation pay is additional remuneration to which they become entitled because,having previously rendered services, they are separated from the employer's service. The relationshipbetween separation pay and services rendered is underscored by the fact that separation pay ismeasured by the amount (i.e., length) of the services rendered. This construction is sustained both by thespecific terms of Article 110 and by the major purposes and basic policy embodied in the Labor Code. 6Itis also the construction that is suggested by Article 4 of the Labor Code which directs that doubts assuming that any substantial rather than merely frivolous doubts remain-in the interpretation of theprovisions of the labor Code and its implementing r