SECONDDIVISION

[G.R.No.152456.April28,2004]

SEVILLA TRADING COMPANY, petitioner, vs. A.V.A. TOMAS E. SEMANA,

SEVILLATRADINGWORKERSUNIONSUPER,respondents.

DECISION
PUNO,J.:

[1]
OnappealistheDecision oftheCourtofAppealsinCAG.R.SPNo.63086dated27November
[2]
2001 sustaining the Decision of Accredited Voluntary Arbitrator Tomas E. Semana dated 13
[3]
November 2000, as well as its subsequent Resolution dated 06 March 2002 denying petitioners
MotionforReconsideration.
Thefactsofthecaseareasfollows:
For two to three years prior to 1999, petitioner Sevilla Trading Company (Sevilla Trading, for
short),adomesticcorporationengagedintradingbusiness,organizedandexistingunderPhilippine
laws,addedtothebasefigure,initscomputationofthe13thmonthpayofitsemployees,theamount
ofotherbenefitsreceivedbytheemployeeswhicharebeyondthebasicpay.Thesebenefitsincluded:

(a)Overtimepremiumforregularovertime,legalandspecialholidays

(b)Legalholidaypay,premiumpayforspecialholidays

(c)Nightpremium

(d)Bereavementleavepay

(e)Unionleavepay

(f)Maternityleavepay

(g)Paternityleavepay

(h)Companyvacationandsickleavepayand

(i)Cashconversionofunusedcompanyvacationandsickleave.

Petitioner claimed that it entrusted the preparation of the payroll to its office staff, including the
computation and payment of the 13thmonth pay and other benefits. When it changed its person in
charge of the payroll in the process of computerizing its payroll, and after audit was conducted, it
allegedlydiscoveredtheerrorofincludingnonbasicpayorotherbenefitsinthebasefigureusedin
the computation of the 13thmonth pay of its employees. It cited the Rules and Regulations
Implementing P.D. No. 851 (13thMonth Pay Law), effective December 22, 1975, Sec. 2(b) which
statedthat:
Basicsalaryshallincludeallremunerationsorearningspaidbyanemployertoanemployeeforservices
renderedbutmaynotincludecostoflivingallowancesgrantedpursuanttoP.D.No.525orLetterofInstruction
No.174,profitsharingpayments,andallallowancesandmonetarybenefitswhicharenotconsideredor
integratedaspartoftheregularorbasicsalaryoftheemployeeatthetimeofthepromulgationoftheDecreeon
December16,1975.

Petitionertheneffectedachangeinthecomputationofthethirteenthmonthpay,asfollows:

13thmonthpay=netbasicpay
12months

where:

netbasicpay=grosspay(nonbasicpayorotherbenefits)

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

a)Overtimepremiumforregularovertime,legalandspecialholidays

b)Legalholidaypay,premiumpayforspecialholidays

c)Nightpremium

d)Bereavementleavepay

e)Unionleavepay

f)Maternityleavepay

g)Paternityleavepay

h)Companyvacationandsickleavepayand

i)Cashconversionofunusedvacation/sickleave.

Hence, the new computation reduced the employees thirteenth month pay. The daily piecerate
workersrepresentedbyprivaterespondentSevillaTradingWorkersUnionSUPER(Union,forshort),
adulyorganizedandregisteredunion,throughtheGrievanceMachineryintheirCollectiveBargaining
Agreement, contested the new computation and reduction of their thirteenth month pay.The parties
failedtoresolvetheissue.
OnMarch24,2000,thepartiessubmittedtheissueofwhetherornottheexclusionofleavesand
other related benefits in the computation of 13thmonth pay is valid to respondent Accredited
Voluntary Arbitrator Tomas E. Semana (A.V.A. Semana, for short) of the National Conciliation and
MediationBoard,forconsiderationandresolution.
The Union alleged that petitioner violated the rule prohibiting the elimination or diminution of
employees benefits as provided for in Art. 100 of the Labor Code, as amended. They claimed that
paidleaves,likesickleave,vacationleave,paternityleave,unionleave,bereavementleave,holiday
payandotherleaveswithpayintheCBAshouldbeincludedinthebasefigureinthecomputationof
their13thmonthpay.

On the other hand, petitioner insisted that the computation of the 13thmonth pay is based on
basic salary, excluding benefits such as leaves with pay, as per P.D. No. 851, as amended. It
maintainedthat,inadjustingitscomputationofthe13thmonthpay,itmerelyrectifiedthemistakeits
personnelcommittedinthepreviousyears.
A.V.A. Semana decided in favor of the Union. The dispositive portion of his Decision reads as
follows:

WHEREFORE,premisesconsidered,thisVoluntaryArbitratorherebydeclaredthat:

1.Thecompanyisherebyorderedtoincludesickleaveandvacationleave,paternityleave,unionleave,
bereavementleaveandotherleavewithpayintheCBA,premiumforworkdoneonrestdaysandspecial
holidays,andpayforregularholidaysinthecomputationofthe13thmonthpaytoallcoveredandentitled
employees

2.Thecompanyisherebyorderedtopaycorrespondingbackwagestoallcoveredandentitledemployeesarising
fromtheexclusionofsaidbenefitsinthecomputationof13thmonthpayfortheyear1999.

PetitionerreceivedacopyoftheDecisionoftheArbitratoronDecember20,2000.Itfiledbefore
theCourtofAppeals,aManifestationandMotionforTimetoFilePetitionforCertiorarionJanuary19,
2001.Amonthlater,onFebruary19,2001,itfileditsPetitionforCertiorariunderRule65ofthe1997
RulesofCivilProcedureforthenullificationoftheDecisionoftheArbitrator.In addition to its earlier
allegations, petitioner claimed that assuming the old computation will be upheld, the reversal to the
oldcomputationcanonlybemadetotheextentofincludingnonbasicbenefitsactuallyincludedby
petitioner in the base figure in the computation of their 13thmonth pay in the prior years. It must
exclude those nonbasic benefits which, in the first place, were not included in the original
computation.Theappellatecourtdeniedduecourseto,anddismissedthepetition.
Hence,thisappeal.PetitionerSevillaTradingenumeratesthegroundsofitsappeal,asfollows:
1.THEDECISIONOFTHERESPONDENTCOURTTOREVERTTOTHEOLDCOMPUTATIONOF
THE13THMONTHPAYONTHEBASISTHATTHEOLDCOMPUTATIONHADRIPENEDINTO
PRACTICEISWITHOUTLEGALBASIS.
2. IF SUCH BE THE CASE, COMPANIES HAVE NO MEANS TO CORRECT ERRORS IN
COMPUTATIONWHICHWILLCAUSEGRAVEANDIRREPARABLEDAMAGETOEMPLOYERS.
[4]

First,weupholdtheCourtofAppealsinrulingthattheproperremedyfromtheadversedecision
of the arbitrator is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure, not a
petitionforcertiorariunderRule65.Section1ofRule43states:

RULE43

AppealsfromtheCourtofTaxAppealsand

QuasiJudicialAgenciestotheCourtofAppeals

SECTION1.Scope.ThisRuleshallapplytoappealsfromjudgmentsorfinalordersoftheCourtofTaxAppeals
andfromawards,judgments,finalordersorresolutionsoforauthorizedbyanyquasijudicialagencyinthe
exerciseofitsquasijudicialfunctions.AmongtheseagenciesaretheCivilServiceCommission,CentralBoard
ofAssessmentAppeals,SecuritiesandExchangeCommission,OfficeofthePresident,LandRegistration
Authority,SocialSecurityCommission,CivilAeronauticsBoard,BureauofPatents,Trademarksand
TechnologyTransfer,NationalElectrificationAdministration,EnergyRegulatoryBoard,National
TelecommunicationsCommission,DepartmentofAgrarianReformunderRepublicActNo.6657,Government
ServiceInsuranceSystem,EmployeesCompensationCommission,AgriculturalInventionsBoard,Insurance
Commission,PhilippineAtomicEnergyCommission,BoardofInvestments,ConstructionIndustryArbitration
Commission,andvoluntaryarbitratorsauthorizedbylaw.[Emphasissupplied.]
 It is elementary that the special civil action of certiorari under Rule 65 is not, and cannot be a
substituteforanappeal,wherethelatterremedyisavailable,asitwasinthiscase.PetitionerSevilla
Tradingfailedtofileanappealwithinthefifteendayreglementaryperiodfromitsnoticeoftheadverse
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 appeal under Rule 43 of the 1997 Rules of Civil Procedure on or
beforeJanuary4,2001.Instead,petitionerfiledonJanuary19,2001aManifestationandMotionfor
TimetoFilePetitionforCertiorari,andonFebruary19,2001,itfiledapetitionforcertiorariunderRule
65ofthe1997RulesofCivilProcedure.Clearly,petitionerSevillaTradinghadaremedyofappealbut
failedtouseit.
AspecialcivilactionunderRule65oftheRulesofCourtwillnotbeacureforfailuretotimelyfile
a petitionforreview on certiorariunderRule45(Rule 43, in the case at bar) of the Rules of Court.
Rule65isanindependentactionthatcannotbeavailedofasasubstituteforthelostremedyofan
ordinaryappeal,includingthatunderRule45(Rule43,inthecaseatbar),especiallyifsuchlossor
[5]
lapsewasoccasionedbyonesownneglectorerrorinthechoiceofremedies.
Thus, the decision of A.V.A. Semana had become final and executory when petitioner Sevilla
Tradingfileditspetition for certiorarionFebruary19,2001.More particularly, the decision of A.V.A.
Semanabecamefinalandexecutoryuponthelapseofthefifteendayreglementaryperiodtoappeal,
oronJanuary5,2001.Hence,theCourtofAppealsiscorrectinholdingthatitnolongerhadappellate
jurisdictiontoalter,ormuchless,nullifythedecisionofA.V.A.Semana.
Even assuming that the present petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedureisaproperaction,westillfindnograveabuseofdiscretionamountingtolackorexcessof
jurisdiction committed by A.V.A. Semana. Grave abuse of discretion has been interpreted to mean
suchcapriciousandwhimsicalexerciseofjudgmentasisequivalenttolackofjurisdiction,or,inother
words where the power is exercised in an arbitrary or despotic manner by reason of passion or
personalhostility,anditmustbesopatentandgrossastoamounttoanevasionofpositivedutyorto
[6]
avirtualrefusaltoperformthedutyenjoinedortoactatallincontemplationoflaw. Wefindnothing
ofthatsortinthecaseatbar.
Onthecontrary,wefindthedecisionofA.V.A.Semanatobesound,valid,andinaccordwithlaw
andjurisprudence.A.V.A. Semana is correct in holding that petitioners stance of mistake or error in
the computation of the thirteenth month pay is unmeritorious. Petitioners submission of financial
statementseveryyearrequirestheservicesofacertifiedpublicaccountanttoaudititsfinances.Itis
quite impossible to suggest that they have discovered the alleged error in the payroll only in 1999.
This implies that in previous years it does not know its cost of labor and operations. This is merely
basic cost accounting. Also, petitioner failed to adduce any other relevant evidence to support its
contention.Aside from its bare claim of mistake or error in the computation of the thirteenth month
pay, petitioner merely appended to its petition a copy of the 19972002 Collective Bargaining
Agreement and an alleged corrected computation of the thirteenth month pay. There was no
explanationwhatsoeverwhyitsinclusionofnonbasicbenefitsinthebasefigureinthecomputationof
their 13thmonth pay in the prior years was made by mistake, despite the clarity of statute and
jurisprudenceatthattime.
The instant case needs to be distinguished from Globe Mackay Cable and Radio Corp. vs.
[7]
NLRC, which petitioner Sevilla Trading invokes. In that case, this Court decided on the proper
computation of the costofliving allowance (COLA) for monthlypaid employees. Petitioner
Corporation, pursuant to Wage Order No. 6 (effective 30October1984), increased the COLA of its
monthlypaid employees by multiplying the P3.00 daily COLA by 22 days, which is the number of
working days in the company. The Union disagreed with the computation, claiming that the daily
COLArateofP3.00shouldbemultipliedby30days,whichhasbeenthepracticeofthecompanyfor
several years. We upheld the contention of the petitioner corporation. To answer the Unions
contentionofcompanypractice,weruledthat:
PaymentinfullbyPetitionerCorporationoftheCOLAbeforetheexecutionoftheCBAin1982andin
compliancewithWageOrdersNos.1(26March1981)to5(11June1984),shouldnotbeconstruedas
constitutiveofvoluntaryemployerpractice,whichcannotnowbeunilaterallywithdrawnbypetitioner.Tobe
consideredassuch,itshouldhavebeenpracticedoveralongperiodoftime,andmustbeshowntohavebeen
consistentanddeliberate...Thetestoflongpracticehasbeenenunciatedthus:

...RespondentCompanyagreedtocontinuegivingholidaypayknowingfullywellthatsaidemployeesarenot
coveredbythelawrequiringpaymentofholidaypay.(OceanicPharmacalEmployeesUnion[FFW]vs.Inciong,
94SCRA270[1979])

Moreover,beforeWageOrderNo.4,therewaslackofadministrativeguidelinesfortheimplementationofthe
WageOrders.ItwasonlywhentheRulesImplementingWageOrderNo.4wereissuedon21May1984thata
formulafortheconversionofthedailyallowancetoitsmonthlyequivalentwaslaiddown.

Absentclearadministrativeguidelines,PetitionerCorporationcannotbefaultedforerroneousapplicationofthe
law...

Intheabovequotedcase,thegrantbytheemployerofbenefitsthroughanerroneousapplication
ofthelawduetoabsenceofclearadministrativeguidelinesisnotconsideredavoluntaryactwhich
cannotbeunilaterallydiscontinued.Suchisnotthecasenow.Inthecaseatbar,theCourtofAppeals
iscorrectwhenitpointedoutthatasearlyas1981,thisCourthasheldinSanMiguelCorporation
[8]
vs.Inciong that:

UnderPresidentialDecree851anditsimplementingrules,thebasicsalaryofanemployeeisusedasthebasis
inthedeterminationofhis13thmonthpay.Anycompensationsorremunerationswhicharedeemednotpartof
thebasicpayisexcludedasbasisinthecomputationofthemandatorybonus.

UndertheRulesandRegulationsImplementingPresidentialDecree851,thefollowingcompensationsare
deemednotpartofthebasicsalary:

a)CostoflivingallowancesgrantedpursuanttoPresidentialDecree525andLetterofInstructionNo.174

b)Profitsharingpayments

c)Allallowancesandmonetarybenefitswhicharenotconsideredorintegratedaspartoftheregularbasic
salaryoftheemployeeatthetimeofthepromulgationoftheDecreeonDecember16,1975.

UnderalatersetofSupplementaryRulesandRegulationsImplementingPresidentialDecree851issuedbythe
thenLaborSecretaryBlasOple,overtimepay,earningsandotherremunerationsareexcludedaspartofthe
basicsalaryandinthecomputationofthe13thmonthpay.

TheexclusionofcostoflivingallowancesunderPresidentialDecree525andLetterofInstructionNo.174and
profitsharingpaymentsindicatetheintentiontostripbasicsalaryofotherpaymentswhichareproperly
consideredasfringebenefits.Likewise,thecatchallexclusionaryphraseallallowancesandmonetarybenefits
whicharenotconsideredorintegratedaspartofthebasicsalaryshowsalsotheintentiontostripbasicsalaryof
anyandalladditionswhichmaybeintheformofallowancesorfringebenefits.

Moreover,theSupplementaryRulesandRegulationsImplementingPresidentialDecree851isevenmore
empathicindeclaringthatearningsandotherremunerationswhicharenotpartofthebasicsalaryshallnotbe
includedinthecomputationofthe13thmonthpay.

WhiledoubtmayhavebeencreatedbythepriorRulesandRegulationsImplementingPresidentialDecree851
whichdefinesbasicsalarytoincludeallremunerationsorearningspaidbyanemployertoanemployee,this
cloudisdissipatedinthelaterandmorecontrollingSupplementaryRulesandRegulationswhichcategorically,
excludefromthedefinitionofbasicsalaryearningsandotherremunerationspaidbyemployertoanemployee.
AcursoryperusalofthetwosetsofRulesindicatesthatwhathashithertobeenthesubjectofabroadinclusion
isnowasubjectofbroadexclusion.TheSupplementaryRulesandRegulationscuretheseemingtendencyofthe
formerrulestoincludeallremunerationsandearningswithinthedefinitionofbasicsalary.

Theallembracingphraseearningsandotherremunerationswhicharedeemednotpartofthebasicsalary
includeswithinitsmeaningpaymentsforsick,vacation,ormaternityleaves,premiumforworksperformedon
restdaysandspecialholidays,payforregularholidaysandnightdifferentials.Assuchtheyaredeemednotpart
ofthebasicsalaryandshallnotbeconsideredinthecomputationofthe13thmonthpay.Iftheywerenotso
excluded,itishardtofindanyearningsandotherremunerationsexpresslyexcludedinthecomputationofthe
13thmonthpay.Thentheexclusionaryprovisionwouldprovetobeidleandwithnopurpose.

In the light of the clear ruling of this Court, there is, thus no reason for any mistake in the
constructionorapplicationofthelaw.WhenpetitionerSevillaTradingstillincludedovertheyearsnon
basicbenefitsofitsemployees,suchasmaternityleavepay,cashequivalentofunusedvacationand
sickleave,amongothersinthecomputationofthe13thmonthpay,thismayonlybeconstruedasa
voluntaryactonitspart.Puttingtheblameonthepetitionerspayrollpersonnelisinexcusable.
[9]
InDavaoFruitsCorporationvs.AssociatedLaborUnions,welikewiseheldthat:

TheSupplementaryRulesandRegulationsImplementingP.D.No.851whichputtorestalldoubtsinthe
computationofthethirteenthmonthpay,wasissuedbytheSecretaryofLaborasearlyasJanuary16,1976,
barelyonemonthaftertheeffectivityofP.D.No.851anditsImplementingRules.Andyet,petitionercomputed
andpaidthethirteenthmonthpay,withoutexcludingthesubjectitemsthereinuntil1981.Petitionercontinued
itspracticeinDecember1981,afterpromulgationoftheaforequotedSanMigueldecisiononFebruary24,1981,
whenpetitionerpurportedlydiscovereditsmistake.

From1975to1981,petitionerhadfreely,voluntarilyandcontinuouslyincludedinthecomputationofits
employeesthirteenthmonthpay,withoutthepaymentsforsick,vacationandmaternityleave,premiumforwork
doneonrestdaysandspecialholidays,andpayforregularholidays.Theconsiderablelengthoftimethe
questioneditemshadbeenincludedbypetitionerindicatesaunilateralandvoluntaryactonitspart,sufficientin
itselftonegateanyclaimofmistake.

Acompanypracticefavorabletotheemployeeshadindeedbeenestablishedandthepaymentsmadepursuant
thereto,ripenedintobenefitsenjoyedbythem.Andanybenefitandsupplementbeingenjoyedbytheemployees
cannotbereduced,diminished,discontinuedoreliminatedbytheemployer,byvirtueofSec.10oftheRules
andRegulationsImplementingP.D.No.851,andArt.100oftheLaborCodeofthePhilippineswhichprohibit
thediminutionoreliminationbytheemployeroftheemployeesexistingbenefits.[Tiangcovs.Leogardo,Jr.,
122SCRA267(1983)]

Withregardtothelengthoftimethecompanypracticeshouldhavebeenexercisedtoconstitute
voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold that
jurisprudencehasnotlaiddownanyrulerequiringaspecificminimumnumberofyears.Intheabove
[10]
quotedcaseofDavaoFruitsCorporationvs.AssociatedLaborUnions, thecompanypractice
lasted for six (6) years. In another case, Davao Integrated Port Stevedoring Services vs.
[11]
Abarquez, the employer, for three (3) years and nine (9) months, approved the commutation to
cashoftheunenjoyedportionofthesickleavewithpaybenefitsofitsintermittentworkers.While in
[12]
Tiangco vs. Leogardo, Jr., the employer carried on the practice of giving a fixed monthly
emergencyallowancefromNovember1976toFebruary1980,orthree(3)yearsandfour(4)months.
Inallthesecases,thisCourtheldthatthegrantofthesebenefitshasripenedintocompanypractice
orpolicywhichcannotbeperemptorilywithdrawn.In the case at bar, petitioner Sevilla Trading kept
the practice of including nonbasic benefits such as paid leaves for unused sick leave and vacation
leave in the computation of their 13thmonth pay for at least two (2) years. This, we rule likewise
constitutes voluntary employer practice which cannot be unilaterally withdrawn by the employer
withoutviolatingArt.100oftheLaborCode:

Art.100.Prohibitionagainsteliminationordiminutionofbenefits.NothinginthisBookshallbeconstruedto
eliminateorinanywaydiminishsupplements,orotheremployeebenefitsbeingenjoyedatthetimeof
promulgationofthisCode.

INVIEWWHEREOF,thepetitionisDENIED.TheDecisionoftheCourtofAppealsinCAG.R.SP
No.63086dated27November2001anditsResolutiondated06March2002areherebyAFFIRMED.
SOORDERED.
Quisumbing,AustriaMartinez,andTinga,JJ.,concur.
Callejo,Sr.,J.,nopart.

[1]
CARollo,pp.124134.
[2]
CARollo,pp.3143.
[3]
Rollo,p.141.
[4]
Rollo,p.22.
[5]
NationalIrrigationAdministrationvs.CourtofAppeals,318SCRA255,265(1999).
[6]
ConcurringOpinionofJusticeAngelinaSandovalGutierrezintheconsolidatedcasesofTecsonvs.COMELEC,G.R.No.
161434, Velez vs. Poe, G.R. No. 161634, and Fornier vs. COMELEC, G.R. No. 161824, 03 March 2004, citing
Benitovs.COMELEC,349SCRA705(2001).
[7]
163SCRA71(1988).
[8]
103SCRA139(1981).
[9]
225SCRA562(1993).
[10]
Ibid.
[11]
220SCRA197(1993).
[12]
122SCRA267(1983).