Republic of the Philippines

Court of Appeals
Manila

SIXTH DIVISION

DISC CONTRACTORS, CA-G.R. SP NO. 144298

BUILDERS & GENERAL
SERVICE, INC., Members:
Petitioner,
DIMAAMPAO, J., Chairperson
LAZARO-JAVIER, &
CORALES, JJ.
- versus -

NATIONAL LABOR
RELATIONS COMMISSION
and GEORGE A. BUEN, RUDY
P. EQUIO, ESMERALDA V.
Promulgated:
ESTEBAN and REYNALDO A.
BODAÑO,1 August 25, 2017
Respondents.

DECISION

CORALES, J.:

This is a Petition for Certiorari2 under Rule 65 of the Rules of

Court with prayer for issuance of a temporary restraining order
and/or writ of preliminary injunction against the October 27, 2015

1
Referred as Reynaldo A. Bonado in some parts of the rollo.
2
Rollo, pages 3-19.
CA-G.R. SP No. 144298 Page 2 of 11
Decision

Decision3 and December 28, 2015 Resolution 4 of the National Labor

Relations Commission (NLRC), Third Division in NLRC LAC No. 09-
002409-15. The questioned Decision affirmed the August 10, 2015
Decision5 of the Labor Arbiter which ordered petitioner Disc
Contractors, Builders and General Services, Inc. (Disc Contractors) to
pay Rodolfo G. Canoza (Canoza) and private respondents George A.
Buen, Rudy P. Equio, Reynaldo A. Bodaño, and Esmeralda V.
Esteban's mid-year bonus for 2013 and every year thereafter plus
attorney's fees.

The Antecedents

Canoza and private respondents are regular employees of Disc

Contractors, a wholly-owned subsidiary of the Philippine National
Construction Corporation (PNCC) duly organized under the
Corporation Code and engaged in manufacturing prefabricated steel
structures. Disc Contractors had been granting annual mid-year
bonus to all its employees since 1999, but it was stopped in 2013.

Feeling aggrieved, Canoza and private respondents filed before

the Labor Arbiter a complaint6 for “MID-YEAR BONUS OF 2013 &
THEREAFTER”, damages, and attorney's fees against Disc
Contractors and its President Atty. Luis F. Sison (Atty. Sison). In
their Position Paper, they contended that Disc Contractors' deliberate,
continuous, and voluntary grant of mid-year bonus to all its
employees for 14 years cannot be withdrawn unilaterally without
violating the principle of non-diminution of benefits under Article
100 of the Labor Code. For Disc Contractors' sudden discontinuance
of said bonus, Canoza and private respondents averred that they are
entitled to damages and attorney's fees.7

3
Penned by Commissioner Cecilio Alejandro C. Villanueva with the concurrence of Presiding
Commissioner Alex A. Lopez and Commissioner Pablo C. Espiritu Jr., ibid., pages 23-43.
4
Ibid., pages 44-45.
5
Penned by Labor Arbiter Julio R. Gayaman, ibid., pages 121-127.
6
See Complaint, ibid., page 50.
7
Ibid., pages 291-313.
CA-G.R. SP No. 144298 Page 3 of 11
Decision

Citing Strategic Alliance Development Corporation v. Radstock

Securities Ltd.,8 Disc Contractors claimed that it is a government
owned and controlled corporation (GOCC) like PNCC whose
disbursements for compensation, benefits, allowances and bonuses
are determined by the Governance Commission for GOCCs (GCG).
On June 20, 2013, PNCC received a letter9 from GCG stating that its
mid-year bonus was bereft of any legal basis for lack of prior
approval from the President of the Philippines. Since Disc
Contractors' mid-year bonus was patterned after PNCC's mid-year
bonuses, the management found it prudent to “correct the mistake”
and likewise stop granting the same benefit until the necessary
approval is secured. Stressing that it merely erred in granting the
mid-year bonus, Disc Contractors argued that no vested right may
have arisen in favor of its employees or any diminution of benefit
under Article 100 of the Labor Code may have resulted. Accordingly,
Canoza and private respondents' monetary claims have no leg to
stand on. Disc Contractors claimed that Atty. Sison should be
dropped as party respondent as he cannot be held personally liable
for the company's obligations.10

In Reply,11 Canoza and private respondents countered that Disc

Contractors erroneously relied on the Strategic Alliance case because it
pertains to the validity of a compromise agreement and the status of
PNCC as a private corporation has long been settled in PNCC v.
Pabion12 and Cuenca v. Atas.13 As PNCC's subsidiary, Disc Contractors
is also a private corporation, hence, the President's prior approval is
not required for the payment of its mid-year bonus.

8
G.R. No. 178151. December 4, 2009.
9
Rollo, page 70.
10
See Position Paper and Reply To Complainants' Position Paper, ibid., pages 57-65 and 103-111,
respectively.
11
Ibid., pages 92-102.
12
G.R. No. 131715. December 8, 1999.
13
G.R. No. 146214. October 5, 2007.
CA-G.R. SP No. 144298 Page 4 of 11
Decision

The Rulings of Labor Arbiter and NLRC

In the August 10, 2015 Decision,14 the Labor Arbiter held that
the Pabion and Cuenca cases are controlling insofar as PNCC's status
as a private corporation is concerned. Following the status of its
“parent company”, Disc Contractors is also a private corporation,
thus, GCG has no authority over it or its opinion that the grant of
mid-year bonus needs the President's approval has no force and
effect. The Labor Arbiter concluded that Disc Contractors cannot
unilaterally withdraw the annual mid-year bonus which already
became part of the employees' regular compensation, hence,
enforceable and demandable as a matter of right. The decretal
portion of the Labor Arbiter's Decision reads:

WHEREFORE, judgment is hereby rendered ordering DISC

Contractors, Builders and General Services, Inc. (DCBGSI) to pay
complainants, George A. Buen, Rodolfo G. Canoza, Rudy P. Equio,
Reynaldo A. Bodano, and Esmeralda V. Esteban, their mid-year
bonus for the year 2013 and every year thereafter, in the amount
equivalent to a full one (1)[-]month salary based on each
complainant's basic monthly pay as of May 31 of every year,
including the attorney's fees of ten percent (10%) of the total of the
annual mid-year bonuses.

SO ORDERED.

On appeal, the NLRC, through its October 27, 2015 Decision, 15

sustained the ruling of the Labor Arbiter reasoning that:

xxx

While the main issue involves the claim for payment of

complainants' mid-year bonus, its resolution is contingent upon the
determination of PNCC's status, DCBGSI's parent company, as to
whether it is a GOCC or a private corporation. On one hand, in
consistently claiming that PNCC is a private corporation,
complainants rely on the Pabion and Cuenca cases as the controlling
jurisprudence while, on the other hand, respondents maintain that

14
Supra, at note 4.
15
Supra, at note 2.
CA-G.R. SP No. 144298 Page 5 of 11
Decision

the Strategic Alliance case is the more applicable and relevant one
which must be applied in the case at bar.

xxx

Verily, respondents' invocation that AO No. 59 cannot be

applied in the instant case is grossly misplaced. It bears stressing
that the status of PNCC, DBGSI's parent company, as to whether it
is a GOCC or not is at the heart of contention in the case at bar since
its determination would be germane to the resolution of
complainants' entitlement to claim their mid-year bonus. And such
status of PNCC was given light in Pabion case, and in the
subsequent Cuenca case, it was further reiterated that the
“determination of that PNCC is an acquired asset corporation
removed it from the category of GOCC”. Hence, it is our
considered view that Pabion and Cuenca cases are the controlling
jurisprudence that must be applied in the present case

xxx

Evidently, using the Strategic Alliance case as a reference

point in determining the status of PNCC is off the mark, hence, it is
considered as a mere obiter dictum – which is not necessary in the
determination and resolution of issues defined and raised before
the Supreme Court. As such, as correctly pointed out by the Labor
Arbiter, an obiter dictum is not binding in any manner whatsoever
to any degree as precedent in any case. Thus, the application of the
Strategic Alliance in the instant case is misplaced.

Having resolved that PNCC, the parent company of

DCBGSI, it not a GOCC per AO No. 59, therefore, respondents'
argument that the grant of mid-year bonus to complainants must
be governed by the provisions of RA No. 10149 must perforce fail.
Rather, the award of same to complainants must be within the
ambit of Article 100 of the Labor Code in which the principle of
“non-diminution of benefits” must prevail.

In the case at bar, it is on record that from 1999 to 2012,

DCBGSI's employees were granted mid-year bonus based on the
numerous Board Resolutions passed by its Board of Directors. The
grant of mid-year bonus has indeed ripened into a company
practice and the unilateral withdrawal of same is construed as a
diminution of benefits enunciated under Article 100 of the Labor
Code as it had been implemented by DCBGSI for 14 years without
any interruption.
CA-G.R. SP No. 144298 Page 6 of 11
Decision

In fine, we sustain the findings of the Labor Arbiter that

complainants are entitled to receive their mid-year bonus for the
year 2013 and thereafter.

WHEREFORE, premises considered, the herein appeal is

hereby DISMISSED for lack of merit and the appealed Decision of
the Labor Arbiter is AFFIRMED.

SO ORDERED. (Emphasis and italics appear in the original

text of the Decision)

Disc Contractors moved for reconsideration16 which the NLRC

denied in its December 28, 2015 Resolution.17

Hence, the instant petition for certiorari premised on this lone

ground:

THE NLRC GRAVELY ABUSED ITS DISCRETION

AMOUNTING TO LACK/EXCESS OF JURISDICTION
WHEN IT AWARDED MID-YEAR BONUSES TO BUEN,
ET AL. DESPITE THE CLEAR ABSENCE OF THE
PRESIDENT'S APPROVAL AND GCG'S FINDING
BASED ON THE MISTAKEN APPLICATION OF THE
PABION AND CUENCA CASES. (Italics appear in the
original text of the Petition for Certiorari)

Disc Contractors insists that it is a GOCC under the authority of

GCG applying the Strategic Alliance case. It faults the NLRC in relying
on the Pabion and Cuenca cases despite the fact that the
pronouncement therein that PNCC is a private corporation was for
the limited purpose of determining the applicability of
Administrative Order (AO) No. 5918 which is not the issue herein.
The term GOCC should have been defined based on Republic Act
(R.A.) No. 10149, otherwise known as the GOCC Governance Act of
2011, and not on AO No. 59, as held in the Pabion case. Given that
16
See Motion for Reconsideration, rollo, pages 238-248.
17
Supra, at note 3.
18
Rationalizing the Government Corporate Sector.
CA-G.R. SP No. 144298 Page 7 of 11
Decision

Disc Contractors' authority to grant benefits is limited by Presidential

Decree (P.D.) No. 159719 and R.A. No. 10149, and that it was in fact,
not authorized to dole out mid-year bonus without the President's
approval, there can be no diminution of benefits to speak of.20

Required to Comment, private respondents argue that Disc

Contractors advanced a myopic reading of the Pabion and Cuenca
cases and echo the findings of the labor tribunals that they are entitled
to annual mid-year bonus for 2013 and every year thereafter. 21

This Court's Ruling

The petition is devoid of merit.

A petition for certiorari under Rule 65 of the Rules of Court is

confined to the correction of errors of jurisdiction and will not issue
absent any showing of a capricious and whimsical exercise of
judgment, equivalent to lack of jurisdiction. The prerogative of writ
of certiorari does not lie except to correct a grave abuse of discretion, 22
not just mere errors of fact or law. Thus, the petitioner must be able
to show grave, not just ordinary, abuse of discretion which exists
where an act of a court or tribunal is performed with a capricious or
whimsical exercise of judgment equivalent to lack of jurisdiction, or
where the power is exercised in an arbitrary or despotic manner by
reason of passion or personal hostility which must be so patent and
gross as to amount to an invasion of positive duty or to a virtual
refusal to perform the duty enjoined or to act at all in contemplation
of law.23

There is nothing in this case which would indicate grave abuse

of discretion on the part of the NLRC in affirming the Labor Arbiter's
19
Further Rationalizing the System of Compensation and Position Classification in the National
Government.
20
See Petition for Certiorari, supra, at note 1.
21
See Comment and Show Cause Compliance, rollo, pages 352-378.
22
See Aujero v. Philippine Communications Satellite Corporation, G.R. No. 193484. January 18,
2012.
23
See VMC Rural Electric Service Cooperative, Inc. v. CA, G.R. No. 153144. October 16, 2006.
CA-G.R. SP No. 144298 Page 8 of 11
Decision

decision. The NLRC reviewed the rationale of the Labor Arbiter's

decision and applied the proper case law when it held that Disc
Contractors is a private corporation guilty of non-diminution of
benefits. This conclusion is supported by substantial evidence, thus,
entitled to great respect and considered final.24

Disc Contractors Violated the Principle of Non-Diminution of

Benefits

The Non-Diminution Rule found in Article 100 of the Labor

Code explicitly prohibits employers from eliminating or reducing the
benefits received by their employees. However, this rule applies only
if the benefit is based on an express policy, a written contract, or has
ripened into a practice. To be considered a practice, it must be
consistently and deliberately made by the employer over a long
period of time. An exception to the rule is when “the practice is due
to error in the construction or application of a doubtful or difficult
question of law.” The error, however, must be corrected immediately
after its discovery; otherwise, the rule on Non-Diminution of Benefits
would still apply.25 Thus, there is diminution of benefits when the
following requisites are present: 1) the grant or benefit is founded on
a policy or has ripened into a practice over a long period of time; 2)
the practice is consistent and deliberate; 3) the practice is not due to
error in the construction or application of a doubtful or difficult
question of law; and 4) the diminution or discontinuance is done
unilaterally by the employer.26 It bears stressing that the principle of
non-diminution of benefits is actually founded on the Constitutional
mandate to protect the rights of workers, to promote their welfare,
and to afford them full protection.27

The foregoing elements are all attendant in the case at bench.

Admittedly, Disc Contractors had been consistently and deliberately
24
See Malayang Manggagawa ng Stayfast Phils. Inc. v. NLRC, G.R. No. 155306. August 28, 2013.
25
See Wesleyan University-Philippines v. Wesleyan University-Philippines Faculty and Staff
Association, G.R. No. 181806. March 12, 2014.
26
See Eastern Telecommunications Phils., Inc. v. Eastern Telecoms Employees Union, G.R. No.
185665. February 8, 2012.
27
See Arco Metal Products Co., Inc. v. Samahan ng mga Manggagawa sa Arco Metal-NAFLU
(SAMARM-NAFLU), G.R. No. 170734. May 14, 2008.
CA-G.R. SP No. 144298 Page 9 of 11
Decision

granting annual mid-year bonus to all its employees since 1999 but
unilaterally withdrew the same in 2013. Contrary to Disc
Contractors' asseveration, the practice of giving annual mid-year
bonus to its employees is not a result of error. It cannot invoke
GCG's June 20, 2013 letter28 to PNCC stating that its mid-year bonus
was bereft of any legal basis for lack of prior approval from the
President to justify its refusal to grant annual mid-year bonus
primarily because it is a private corporation beyond the authority of
GCG, following the status of its parent company, PNCC. The
Supreme Court in the Strategic Alliance case29 has settled that PNCC is
a GOCC without original charter as it does not owe its creation to
some charter or special law, but to the Corporation Code. Hence, it is
essentially a private corporation, notwithstanding the government's
interest therein through the debt-to-equity conversion imposed by
P.D. No. 1295.30 Likewise, in the Pabion and Cuenca cases it was held
that PNCC is an acquired asset corporation or a private entity and
not a GOCC. Thus, whether We apply the Strategic Alliance case or
the Pabion and Cuenca cases, We will still arrive at the same conclusion
that the PNCC is a private corporation. By legal consequence, Disc
Contractors is also a private corporation that is beyond the GCG's
supervision. Accordingly, it need not secure the President's approval
before granting annual mid-year bonus to its employees. As aptly
held by the Labor Arbiter, “the opinion rendered by the GCG, that
the grant of mid-year bonus to employees of PNCC (including its
subsidiaries) should be done with the approval of the President, does
not have any force and effect”.

Certainly, Disc Contractors violated the principle of non-

diminution of benefits when it ceased from giving annual mid-year
bonus to its employees. To stress, where there is an established
employer practice of regularly, knowingly and voluntarily granting
benefits to employees over a significant period of time, despite the
lack of a legal or contractual obligation on the part of the employer to
do so, the grant of such benefits ripens into a vested right of the

28
Supra, at note 9.
29
Supra, at note 8.
30
Creating the National Engineering Center.
CA-G.R. SP No. 144298 Page 10 of 11
Decision

employees and can no longer be unilaterally reduced or withdrawn

by the employer,31 as in this case.

WHEREFORE, the instant petition for certiorari is hereby

DISMISSED. The October 27, 2015 Decision and December 28, 2015
Resolution of the National Labor Relations Commission, Third
Division in NLRC LAC No. 09-002409-15 are AFFIRMED.

SO ORDERED.

PEDRO B. CORALES
Associate Justice

WE CONCUR:

JAPAR B. DIMAAMPAO AMY C. LAZARO-JAVIER

Associate Justice Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is

hereby certified that the conclusions in the above Decision were
31
See Metropolitan Bank and Trust Company v. NLRC, G.R. No. 152928. June 18, 2009.
CA-G.R. SP No. 144298 Page 11 of 11
Decision

reached in consultation before the case was assigned to the writer of

the opinion of the Court.

JAPAR B. DIMAAMPAO
Associate Justice
Chairperson, Sixth Division