G.R. No. 177498 | Stolt-Nielsen Transportation Group, Inc. v. Medequillo, Jr.

8/16/24, 19:28

SECOND DIVISION

[G.R. No. 177498. January 18, 2012.]

STOLT-NIELSEN TRANSPORTATION GROUP, INC. AND CHUNG GAI SHIP

MANAGEMENT, petitioners,vs.SULPECIO MEDEQUILLO, JR., respondent.

DECISION

PEREZ, J : p

Before the Court is a Petition for Review on Certiorari [1] of the Decision [2] of the First Division of
the Court of Appeals in CA-G.R. SP No. 91632 dated 31 January 2007, denying the petition for certiorari
filed by Stolt-Nielsen Transportation Group, Inc. and Chung Gai Ship Management (petitioners) and
affirming the Resolution of the National Labor Relations Commission (NLRC).The dispositive portion of
the assailed decision reads:

WHEREFORE,the petition is hereby DENIED.Accordingly, the assailed Decision

promulgated on February 28, 2003 and the Resolution dated July 27, 2005 are AFFIRMED.
[3]

The facts as gathered by this Court follow:

On 6 March 1995, Sulpecio Madequillo (respondent) filed a complaint before the Adjudication
Office of the Philippine Overseas Employment Administration (POEA) against the petitioners for illegal
dismissal under a first contract and for failure to deploy under a second contract. In his complaint-
affidavit, [4] respondent alleged that:

1. On 6 November 1991 (First Contract),he was hired by Stolt-Nielsen Marine Services,

Inc. on behalf of its principal Chung-Gai Ship Management of Panama as Third
Assistant Engineer on board the vessel "Stolt Aspiration" for a period of nine (9)
months;

2. He would be paid with a monthly basic salary of $808.00 and a fixed overtime pay of
$404.00 or a total of $1,212.00 per month during the employment period
commencing on 6 November 1991;

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3. On 8 November 1991, he joined the vessel MV "Stolt Aspiration";

4. On February 1992 or for nearly three (3) months of rendering service and while the
vessel was at Batangas, he was ordered by the ship's master to disembark the
vessel and repatriated back to Manila for no reason or explanation;

5. Upon his return to Manila, he immediately proceeded to the petitioner's office where
he was transferred employment with another vessel named MV "Stolt Pride" under
the same terms and conditions of the First Contract; aTADcH

6. On 23 April 1992, the Second Contract was noted and approved by the POEA;

7. The POEA, without knowledge that he was not deployed with the vessel, certified the
Second Employment Contract on 18 September 1992.

8. Despite the commencement of the Second Contract on 21 April 1992, petitioners

failed to deploy him with the vessel MV "Stolt Pride";

9. He made a follow-up with the petitioner but the same refused to comply with the
Second Employment Contract.

10. On 22 December 1994, he demanded for his passport, seaman's book and other
employment documents. However, he was only allowed to claim the said documents
in exchange of his signing a document;

11. He was constrained to sign the document involuntarily because without these
documents, he could not seek employment from other agencies.

He prayed for actual, moral and exemplary damages as well as attorney's fees for his illegal
dismissal and in view of the Petitioners' bad faith in not complying with the Second Contract.

The case was transferred to the Labor Arbiter of the DOLE upon the effectivity of the Migrant
Workers and Overseas Filipinos Act of 1995.

The parties were required to submit their respective position papers before the Labor Arbiter.
However, petitioners failed to submit their respective pleadings despite the opportunity given to them. [5]

On 21 July 2000, Labor Arbiter Vicente R. Layawen rendered a judgment [6] finding that the
respondent was constructively dismissed by the petitioners. The dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby rendered, declaring the

respondents guilty of constructively dismissing the complainant by not honoring the
employment contract. Accordingly, respondents are hereby ordered jointly and solidarily to

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pay complainant the following:

1. $12,537.00 or its peso equivalent at the time of payment. [7]

The Labor Arbiter found the first contract entered into by and between the complainant and the
respondents to have been novated by the execution of the second contract. In other words, respondents
cannot be held liable for the first contract but are clearly and definitely liable for the breach of the second
contract. [8] However, he ruled that there was no substantial evidence to grant the prayer for moral and
exemplary damages. [9]

The petitioners appealed the adverse decision before the National Labor Relations Commission
assailing that they were denied due process, that the respondent cannot be considered as dismissed
from employment because he was not even deployed yet and the monetary award in favor of the
respondent was exorbitant and not in accordance with law. [10]

On 28 February 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter. The
dispositive portion reads:

WHEREFORE, premises considered, the decision under review is hereby,

MODIFIED BY DELETING the award of overtime pay in the total amount of Three Thousand
Six Hundred Thirty Six US Dollars (US $3,636.00).

In all other respects, the assailed decision so stands as, AFFIRMED. [11]

Before the NLRC, the petitioners assailed that they were not properly notified of the hearings that
were conducted before the Labor Arbiter. They further alleged that after the suspension of proceedings
before the POEA, the only notice they received was a copy of the decision of the Labor Arbiter. [12]

The NLRC ruled that records showed that attempts to serve the various notices of hearing were
made on petitioners' counsel on record but these failed on account of their failure to furnish the Office of
the Labor Arbiter a copy of any notice of change of address. There was also no evidence that a service
of notice of change of address was served on the POEA. [13] aTcIEH

The NLRC upheld the finding of unjustified termination of contract for failure on the part of the
petitioners to present evidence that would justify their non-deployment of the respondent. [14] It denied
the claim of the petitioners that the monetary award should be limited only to three (3) months for every
year of the unexpired term of the contract. It ruled that the factual incidents material to the case
transpired within 1991-1992 or before the effectivity of Republic Act No. 8042 or the Migrant Workers
and Overseas Filipinos Act of 1995 which provides for such limitation. [15]

However, the NLRC upheld the reduction of the monetary award with respect to the deletion of
the overtime pay due to the non-deployment of the respondent. [16]

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The Partial Motion for Reconsideration filed by the petitioners was denied by the NLRC in its
Resolution dated 27 July 2005. [17]

The petitioners filed a Petition for Certiorari before the Court of Appeals alleging grave abuse of
discretion on the part of NLRC when it affirmed with modification the ruling of the Labor Arbiter. They
prayed that the Decision and Resolution promulgated by the NLRC be vacated and another one be
issued dismissing the complaint of the respondent.

Finding no grave abuse of discretion, the Court of Appeals AFFIRMED the Decision of the labor
tribunal.

The Court's Ruling

The following are the assignment of errors presented before this Court:

I.

THE COURT A QUO ERRED IN FINDING THAT THE SECOND CONTRACT NOVATED
THE FIRST CONTRACT.

1. THERE WAS NO NOVATION OF THE FIRST CONTRACT BY THE SECOND

CONTRACT; THE ALLEGATION OF ILLEGAL DISMISSAL UNDER THE FIRST
CONTRACT MUST BE RESOLVED SEPARATELY FROM THE ALLEGATION OF
FAILURE TO DEPLOY UNDER THE SECOND CONTRACT.

2. THE ALLEGED ILLEGAL DISMISSAL UNDER THE FIRST CONTRACT

TRANSPIRED MORE THAN THREE (3) YEARS AFTER THE CASE WAS FILED
AND THEREFORE HIS CASE SHOULD HAVE BEEN DISMISSED FOR BEING
BARRED BY PRESCRIPTION.

II.

THE COURT A QUO ERRED IN RULING THAT THERE WAS CONSTRUCTIVE

DISMISSAL UNDER THE SECOND CONTRACT.

1. IT IS LEGALLY IMPOSSIBLE TO HAVE CONSTRUCTIVE DISMISSAL WHEN THE

EMPLOYMENT HAS NOT YET COMMENCED.

2. ASSUMING THERE WAS OMISSION UNDER THE SECOND CONTRACT,

PETITIONERS CAN ONLY BE FOUND AS HAVING FAILED IN DEPLOYING
PRIVATE RESPONDENT BUT WITH VALID REASON.

III.

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THE COURT A QUO ERRED IN FAILING TO FIND THAT EVEN ASSUMING THERE WAS
BASIS FOR HOLDING PETITIONER LIABLE FOR "FAILURE TO DEPLOY"
RESPONDENT, THE POEA RULES PENALIZES SUCH OMISSION WITH A MERE
"REPRIMAND." [18]

The petitioners contend that the first employment contract between them and the private
respondent is different from and independent of the second contract subsequently executed upon
repatriation of respondent to Manila.

We do not agree.

Novation is the extinguishment of an obligation by the substitution or change of the obligation by

a subsequent one which extinguishes or modifies the first, either by changing the object or principal
conditions, or, by substituting another in place of the debtor, or by subrogating a third person in the rights
of the creditor. In order for novation to take place, the concurrence of the following requisites is
indispensable: HSTaEC

1. There must be a previous valid obligation,

2. There must be an agreement of the parties concerned to a new contract,

3. There must be the extinguishment of the old contract, and

4. There must be the validity of the new contract. [19]

In its ruling, the Labor Arbiter clarified that novation had set in between the first and second
contract. To quote:

...[T]his office would like to make it clear that the first contract entered into by and
between the complainant and the respondents is deemed to have been novated by the
execution of the second contract. In other words, respondents cannot be held liable for the
first contract but are clearly and definitely liable for the breach of the second contract. [20]

This ruling was later affirmed by the Court of Appeals in its decision ruling that:

Guided by the foregoing legal precepts, it is evident that novation took place in this
particular case. The parties impliedly extinguished the first contract by agreeing to enter into
the second contract to placate Medequillo, Jr. who was unexpectedly dismissed and
repatriated to Manila. The second contract would not have been necessary if the petitioners
abided by the terms and conditions of Madequillo, Jr.'s employment under the first contract.
The records also reveal that the 2nd contract extinguished the first contract by changing its
object or principal. These contracts were for overseas employment aboard different vessels.

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The first contract was for employment aboard the MV "Stolt Aspiration" while the second
contract involved working in another vessel, the MV "Stolt Pride." Petitioners and
Madequillo, Jr. accepted the terms and conditions of the second contract. Contrary to
petitioners' assertion, the first contract was a "previous valid contract" since it had not yet
been terminated at the time of Medequillo, Jr.'s repatriation to Manila. The legality of his
dismissal had not yet been resolved with finality. Undoubtedly, he was still employed under
the first contract when he negotiated with petitioners on the second contract. As such, the
NLRC correctly ruled that petitioners could only be held liable under the second contract.
[21]

We concur with the finding that there was a novation of the first employment contract.

We reiterate once more and emphasize the ruling in Reyes v. National Labor Relations
Commission, [22] to wit:

...[F]indings of quasi-judicial bodies like the NLRC, and affirmed by the Court of
Appeals in due course, are conclusive on this Court, which is not a trier of facts.

xxx xxx xxx

...Findings of fact of administrative agencies and quasi-judicial bodies, which

have acquired expertise because their jurisdiction is confined to specific matters, are
generally accorded not only respect, but finality when affirmed by the Court of
Appeals.Such findings deserve full respect and, without justifiable reason, ought not to be
altered, modified or reversed.(Emphasis supplied) [23]

With the finding that respondent "was still employed under the first contract when he negotiated
with petitioners on the second contract", [24] novation became an unavoidable conclusion.

Equally settled is the rule that factual findings of labor officials, who are deemed to have acquired
expertise in matters within their jurisdiction, are generally accorded not only respect but even finality by
the courts when supported by substantial evidence, i.e., the amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion. [25] But these findings are not
infallible. When there is a showing that they were arrived at arbitrarily or in disregard of the evidence on
record, they may be examined by the courts. [26] In this case, there was no showing of any arbitrariness
on the part of the lower courts in their findings of facts. Hence, we follow the settled rule.

We need not dwell on the issue of prescription. It was settled by the Court of Appeals with its
ruling that recovery of damages under the first contract was already time-barred. Thus:

Accordingly, the prescriptive period of three (3) years within which Medequillo Jr.

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may initiate money claims under the 1st contract commenced on the date of his repatriation.
...The start of the three (3) year prescriptive period must therefore be reckoned on February
1992, which by Medequillo Jr.'s own admission was the date of his repatriation to Manila. It
was at this point in time that Medequillo Jr.'s cause of action already accrued under the first
contract. He had until February 1995 to pursue a case for illegal dismissal and damages
arising from the 1st contract. With the filing of his Complaint-Affidavit on March 6, 1995,
which was clearly beyond the prescriptive period, the cause of action under the 1st contract
was already time-barred. [27] ATHCDa

The issue that proceeds from the fact of novation is the consequence of the non-deployment of
respondent.

The petitioners argue that under the POEA Contract, actual deployment of the seafarer is a
suspensive condition for the commencement of the employment. [28] We agree with petitioners on such
point. However, even without actual deployment, the perfected contract gives rise to obligations on the
part of petitioners.

A contract is a meeting of minds between two persons whereby one binds himself, with respect to
the other, to give something or to render some service. [29] The contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary
to law, morals, good customs, public order, or public policy. [30]

The POEA Standard Employment Contract provides that employment shall commence "upon the
actual departure of the seafarer from the airport or seaport in the port of hire." [31] We adhere to the
terms and conditions of the contract so as to credit the valid prior stipulations of the parties before the
controversy started. Else, the obligatory force of every contract will be useless. Parties are bound not
only to the fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law. [32]

Thus, even if by the standard contract employment commences only "upon actual departure of
the seafarer", this does not mean that the seafarer has no remedy in case of non-deployment without
any valid reason. Parenthetically, the contention of the petitioners of the alleged poor performance of
respondent while on board the first ship MV "Stolt Aspiration" cannot be sustained to justify the non-
deployment, for no evidence to prove the same was presented. [33]

We rule that distinction must be made between the perfection of the employment contract and the
commencement of the employer-employee relationship. The perfection of the contract, which in this case
coincided with the date of execution thereof, occurred when petitioner and respondent agreed on the
object and the cause, as well as the rest of the terms and conditions therein. The commencement of the
employer-employee relationship, as earlier discussed, would have taken place had petitioner been
actually deployed from the point of hire. Thus, even before the start of any employer-employee

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relationship, contemporaneous with the perfection of the employment contract was the birth of certain
rights and obligations, the breach of which may give rise to a cause of action against the erring party.
Thus, if the reverse had happened, that is the seafarer failed or refused to be deployed as agreed upon,
he would be liable for damages. [34]

Further, we do not agree with the contention of the petitioners that the penalty is a mere
reprimand.

The POEA Rules and Regulations Governing Overseas Employment [35] dated 31 May 1991
provides for the consequence and penalty against in case of non-deployment of the seafarer without any
valid reason. It reads:

Section 4. Worker's Deployment. — An agency shall deploy its recruits within

the deployment period as indicated below:

xxx xxx xxx

b. Thirty (30) calendar days from the date of processing by the administration of
the employment contracts of seafarers.

Failure of the agency to deploy a worker within the prescribed period without
valid reasons shall be a cause for suspension or cancellation of license or fine. In
addition, the agency shall return all documents at no cost to the worker. (Emphasis
and underscoring supplied)

The appellate court correctly ruled that the penalty of reprimand [36] provided under Rule IV, Part
VI of the POEA Rules and Regulations Governing the Recruitment and Employment of Land-based
Overseas Workers is not applicable in this case. The breach of contract happened on February 1992 and
the law applicable at that time was the 1991 POEA Rules and Regulations Governing Overseas
Employment. The penalty for non-deployment as discussed is suspension or cancellation of license or
fine.

Now, the question to be dealt with is how will the seafarer be compensated by reason of the
unreasonable non-deployment of the petitioners? DSTCIa

The POEA Rules Governing the Recruitment and Employment of Seafarers do not provide for the
award of damages to be given in favor of the employees. The claim provided by the same law refers to a
valid contractual claim for compensation or benefits arising from employer-employee relationship or for
any personal injury, illness or death at levels provided for within the terms and conditions of employment
of seafarers. However, the absence of the POEA Rules with regard to the payment of damages to the
affected seafarer does not mean that the seafarer is precluded from claiming the same. The sanctions
provided for non-deployment do not end with the suspension or cancellation of license or fine and the

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return of all documents at no cost to the worker. As earlier discussed, they do not forfend a seafarer from
instituting an action for damages against the employer or agency which has failed to deploy him. [37]

We thus decree the application of Section 10 of Republic Act No. 8042 (Migrant Workers Act)
which provides for money claims by reason of a contract involving Filipino workers for overseas
deployment. The law provides:

Sec. 10. Money Claims. — Notwithstanding any provision of law to the contrary,
the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days after
the filing of the complaint, the claims arising out of an employer-employee relationship or by
virtue of any law or contract involving Filipino workers for overseas deployment including
claims for actual, moral, exemplary and other forms of damages. ...(Underscoring supplied)

Following the law, the claim is still cognizable by the labor arbiters of the NLRC under the second
phrase of the provision.

Applying the rules on actual damages, Article 2199 of the New Civil Code provides that one is
entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. Respondent is thus liable to pay petitioner actual damages in the form of the loss of nine (9)
months' worth of salary as provided in the contract. [38] This is but proper because of the non-
deployment of respondent without just cause. STHAaD

WHEREFORE,the appeal is DENIED.The 31 January 2007 Decision of the Court of Appeals in

CA-G.R. SP. No. 91632 is hereby AFFIRMED.The Petitioners are hereby ordered to pay Sulpecio
Medequillo, Jr.,the award of actual damages equivalent to his salary for nine (9) months as provided by
the Second Employment Contract.

SO ORDERED.

Carpio, Sereno, Reyes and Perlas-Bernabe, [*] JJ., concur.

Footnotes

* Designated as additional member per Special Order No. 1174 dated 9 January 2012.

1. Rule 45, Rule on Civil Procedure.

2. Penned by Associate Justice Mariano C. del Castillo (now a Member of this Court) with Presiding
Justice Ruben T. Reyes (former Member of this Court) and Associate Justice Arcangelita Romilla
Lontok, concurring. Rollo,pp. 38-54.

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3. Id. at 53.

4. Id. at 134-139.

5. Id. at 61.

6. Id. at 59-62.

7. Id. at 62.

8. Id.

9. Id.

10. Id. at 64.

11. Id. at 68.

12. Id. at 64-65.

13. Id. at 65.

14. Id. at 66.

15. Id. at 67.

16. Id.

17. Id. at 72.

18. Id. at 20-21.

19. Philippine Savings Bank v. Sps. Mañalac, Jr.,496 Phil. 671, 686-687 (2005);Azolla Farms v. Court
of Appeals,484 Phil. 745, 754-755.

20. Rollo,p. 61.

21. Id. at 45-46.

22. G.R. No. 160233, 8 August 2007, 529 SCRA 487.

23. Id. at 494 and 499.

24. Rollo,p. 46.

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25. Prince Transport, Inc. v. Garcia,G.R. No. 167291, 12 January 2011, 639 SCRA 312, 324 citing
Philippine Veterans Bank v. National Labor Relations Commission,G.R. No. 188882, 30 March
2010, 617 SCRA 204.

26. Id. at 324-325 citing Faeldonia v. Tong Yak Groceries,G.R. No. 182499, 2 October 2009, 602
SCRA 677, 684.

27. Rollo,pp. 47-48.

28. Id. at 48.

29. Article 1305, New Civil Code.

30. Article 1306, New Civil Code.

31. Rollo,p. 48.

32. Article 1315, New Civil Code.

33. Rollo,p. 50.

34. Santiago v. CF Sharp Crew Management, Inc.,G.R. No. 162419, 10 July 2007, 527 SCRA 165,
176.

35. Section 4, par.(b), Rule II, Book III.

36. Section 1 (C) 4. Failure to deploy a worker within the prescribed period without valid reason:

1st Offense — Reprimand.

37. Santiago v. CF Sharp Crew Management, Inc., Supra note 33 at 176-177.

38. In Legahi v. National Labor Relations Commission,376 Phil. 557, 566 (1999),we held: Petitioner's
dismissal without a valid cause constitute a breach of contract. Consequently, he should only be
paid the unexpired portion of his employment contract.

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