Finals Case 2

CBA FINALS CASE 2 Page 1
compliance with the provisions of the Unions Constitution and By-laws on union
membership and election of officers.
SECOND DIVISION
[ G.R. Nos. 184903-04, October 10, 2012 ]
DIGITAL TELECOMMUNICATIONS PHILIPPINES, INC., PETITIONER,
VS. DIGITEL EMPLOYEES UNION (DEU), ARCEO RAFAEL A. ESPLANA,
ALAN D. LICANDO, FELICITO C. ROMERO, JR., ARNOLD D.
GONZALES, REYNEL FRANCISCO B. GARCIA, ZOSIMO B. PERALTA,
REGINO T. UNIDAD AND JIM L. JAVIER, RESPONDENTS.
DECISION
PEREZ, J.:
This treats of the petition for review filed by Digital Telecommunications
Philippines, Inc. (Digitel) assailing the 18 June 2008 Decision[1] and 9 October 2008
Resolution of the Court of Appeals 10th Division in CA-G.R. SP No. 91719, which
affirms the Order of the Secretary of Labor and Employment directing Digitel to
commence Collective Bargaining Agreement (CBA) negotiations and in CA-G.R. SP
No. 94825, which declares the dismissal of affected Digitel employees as illegal.
The facts, as borne by the records, follow.
By virtue of a certification election, Digitel Employees Union (Union) became the
exclusive bargaining agent of all rank and file employees of Digitel in 1994. The
Union and Digitel then commenced collective bargaining negotiations which resulted
in a bargaining deadlock. The Union threatened to go on strike, but then Acting
Labor Secretary Bienvenido E. Laguesma assumed jurisdiction over the dispute and
eventually directed the parties to execute a CBA.[2]
However, no CBA was forged between Digitel and the Union. Some Union
members abandoned their employment with Digitel. The Union later became
dormant.
Ten (10) years thereafter or on 28 September 2004, Digitel received from Arceo
Rafael A. Esplana (Esplana), who identified himself as President of the Union, a
letter containing the list of officers, CBA proposals and ground rules. [3] The officers
were respondents Esplana, Alan D. Licando (Vice-President), Felicito C. Romero, Jr.
(Secretary), Arnold D. Gonzales (Treasurer), Reynel Francisco B. Garcia (Auditor),
Zosimo B. Peralta (PRO), Regino T. Unidad (Sgt. at Arms), and Jim L. Javier (Sgt. at
Arms).
Digitel was reluctant to negotiate with the Union and demanded that the latter show
On 4 November 2004, Esplana and his group filed a case for Preventive Mediation
before the National Conciliation and Mediation Board based on Digitels violation of
the duty to bargain. On 25 November 2004, Esplana filed a notice of strike.
On 10 March 2005, then Labor Secretary Patricia A. Sto. Tomas issued an Order[4]
assuming jurisdiction over the labor dispute.
During the pendency of the controversy, Digitel Service, Inc. (Digiserv), a non-profit
enterprise engaged in call center servicing, filed with the Department of Labor and
Employment (DOLE) an Establishment Termination Report stating that it will cease
its business operation. The closure affected at least 100 employees, 42 of whom are
members of the herein respondent Union.
Alleging that the affected employees are its members and in reaction to Digiservs
action, Esplana and his group filed another Notice of Strike for union busting, illegal
lock-out, and violation of the assumption order.
On 23 May 2005, the Secretary of Labor ordered the second notice of strike
subsumed by the previous Assumption Order.[5]
Meanwhile, on 14 March 2005, Digitel filed a petition with the Bureau of Labor
Relations (BLR) seeking cancellation of the Unions registration on the following
grounds: 1) failure to file the required reports from 1994-2004; 2) misrepresentation
of its alleged officers; 3) membership of the Union is composed of rank and file,
supervisory and managerial employees; and 4) substantial number of union members
are not Digitel employees.[6]
In a Decision dated 11 May 2005, the Regional Director of the DOLE dismissed the
petition for cancellation of union registration for lack of merit. The Regional
Director ruled that it does not have jurisdiction over the issue of non-compliance
with the reportorial requirements. He also held that Digitel failed to adduce
substantial evidence to prove misrepresentation and the mixing of non-Digitel
employees with the Union. Finally, he declared that the inclusion of supervisory and
managerial employees with the rank and file employees is no longer a ground for
cancellation of the Unions certificate of registration.[7]
The appeal filed by Digitel with the BLR was eventually dismissed for lack of merit
in a Resolution dated 9 March 2007, thereby affirming the 11 May 2005 Decision of
the Regional Director.
CA-G.R. SP No. 91719

In an Order dated 13 July 2005, the Secretary of Labor directed Digitel to commence
the CBA negotiation with the Union. Thus:
WHEREFORE, all the foregoing premises considered, this Office hereby orders:
1.
DIGITEL to commence collective bargaining negotiation with

DEU without further delay; and,
2.
The issue of unfair labor practice, consisting of union-busting,

illegal termination/lockout and violation of the assumption of
jurisdiction, specifically the return-to-work aspect of the 10 March
2005 and 03 June 2005 orders, be CERTIFIED for compulsory
arbitration to the NLRC.[8]
Digitel moved for reconsideration on the contention that the pendency of the petition
for cancellation of the Unions certificate of registration is a prejudicial question that
should first be settled before the DOLE could order the parties to bargain
collectively. On 19 August 2005, then Acting Secretary Manuel G. Imson of DOLE
denied the motion for reconsideration, affirmed the 13 July 2005 Order and reiterated
the order directing parties to commence collective bargaining negotiations.[9]
On 14 October 2005, Digitel filed a petition, docketed as CA-G.R. SP No. 91719,
before the Court of Appeals assailing the 13 July and 19 August 2005 Orders of the
DOLE Secretary and attributing grave abuse of discretion on the part of the DOLE
Secretary for ordering Digitel to commence bargaining negotiations with the Union
despite the pendency of the issue of union legitimacy.
CA-G.R. SP No. 94825
In accordance with the 13 July 2005 Order of the Secretary of Labor, the unfair labor
practice issue was certified for compulsory arbitration before the NLRC, which, on
31 January 2006, rendered a Decision dismissing the unfair labor practice charge
against Digitel but declaring the dismissal of the 13 employees of Digiserv as illegal
and ordering their reinstatement. The Union manifested that out of 42 employees,
only 13 remained, as most had already accepted separation pay. The dispositive
portion of the Decision reads:
WHEREFORE, premises considered, the charge of unfair labor practice is hereby
DISMISSED for lack of merit. However, the dismissal of the remaining thirteen (13)
affected employees is hereby declared illegal and DIGITEL is hereby ORDERED to
reinstate them to their former position with full backwages up to the time they are
reinstated, computed as follows:
x x x x.[10]
Upon motion for reconsideration filed by Digitel, four (4) affected employees,
namely Ma. Loreta Eser, Marites Jereza, Leonore Tuliao and Aline G. Quillopras,
were removed from entitlement to the awards pursuant to the deed of quitclaim and
release which they all signed.[11]
In view of this unfavorable decision, Digitel filed another petition on 9 June 2006 in
CA-G.R. SP No. 94825 before the Court of Appeals, challenging the above NLRC
Decision and Resolution and arguing mainly that Digiserv employees are not
employees of Digitel.
Ruling of the Court of Appeals
On 18 June 2008, the Tenth Division of the Court of Appeals consolidated the two
petitions in CA-G.R. SP No. 91719 and CA-G.R. SP No. 94825, and disposed as
follows:
WHEREFORE, the petition in CA-G.R. SP No. 91719 is DISMISSED. The July
13, 2005 Order and the August 19, 2005 Resolution of the DOLE Secretary are
AFFIRMED in toto. With costs.
The petition in CA-G.R. SP No. 94825 is partially GRANTED, with the effect that
the assailed dispositions must be MODIFIED, as follows:
1) In addition to the order directing reinstatement and payment of full backwages to
the nine (9) affected employees, Digital Telecommunications Philippines, Inc. is
furthered ORDERED, should reinstatement is no longer feasible, to pay separation
pay equivalent to one (1) month pay, or one-half (1/2) month pay for every year of
service, whichever is higher.
2) The one hundred thousand (PhP100,000.00) peso-fine imposed on Digital
Telecommunications Philippines, Inc. is DELETED. No costs.[12]
The Court of Appeals upheld the Secretary of Labors Order for Digitel to commence
CBA negotiations with the Union and emphasized that the pendency of a petition for
the cancellation of a unions registration does not bar the holding of negotiations for
a CBA. The Court of Appeals sustained the finding that Digiserv is engaged in
labor-only contracting and that its employees are actually employees of Digitel.
Digitel filed a motion for reconsideration but was denied in a Resolution dated 9
October 2008.
Hence, this petition for review on certiorari.
Digitel argues that the Court of Appeals seriously erred when it condoned the act of
the Secretary of Labor in issuing an assumption order despite the pendency of an

appeal on the issue of union registration. Digitel maintains that it cannot be
compelled to negotiate with a union for purposes of collective bargaining when the
very status of the same as the exclusive bargaining agent is in question.
Digitel insists that had the Court of Appeals considered the nature of the activities
performed by Digiserv, it would reach the conclusion that Digiserv is a legitimate
contractor. To bolster its claim, Digitel asserts that the affected employees are
registered with the Social Security System, Pag-ibig, Bureau of Internal Revenue
and Philhealth with Digiserv as their employer. Digitel further contends that
assuming that the affected Digiserv employees are employees of Digitel, they were
nevertheless validly dismissed on the ground of closure of a department or a part of
Digitels business operation.
The three issues raised in this petition are: 1) whether the Secretary of Labor erred in
issuing the assumption order despite the pendency of the petition for cancellation of
union registration; 2) whether Digiserv is a legitimate contractor; and 3) whether
there was a valid dismissal.
The pendency of a petition for cancellation
of union registration does not preclude
collective bargaining.
The first issue raised by Digitel is not novel. It is well-settled that the pendency of a
petition for cancellation of union registration does not preclude collective bargaining.
The 2005 case of Capitol Medical Center, Inc. v. Hon. Trajano[13] is apropos. The
respondent union therein sent a letter to petitioner requesting a negotiation of their
CBA. Petitioner refused to bargain and instead filed a petition for cancellation of the
unions certificate of registration. Petitioners refusal to bargain forced the union to
file a notice of strike. They eventually staged a strike. The Secretary of Labor
assumed jurisdiction over the labor dispute and ordered all striking workers to return
to work. Petitioner challenged said order by contending that its petition for
cancellation of unions certificate of registration involves a prejudicial question that
should first be settled before the Secretary of Labor could order the parties to bargain
collectively. When the case eventually reached this Court, we agreed with the
Secretary of Labor that the pendency of a petition for cancellation of union
registration does not preclude collective bargaining, thus:
That there is a pending cancellation proceeding against the respondent Union is not a
bar to set in motion the mechanics of collective bargaining. If a certification election
may still be ordered despite the pendency of a petition to cancel the unions
registration certificate (National Union of Bank Employees vs. Minister of Labor, 110
SCRA 274), more so should the collective bargaining process continue despite its
pendency. We must emphasize that the majority status of the respondent Union is not
affected by the pendency of the Petition for Cancellation pending against it. Unless
its certificate of registration and its status as the certified bargaining agent are
revoked, the Hospital is, by express provision of the law, duty bound to collectively
bargain with the Union.[14]
Trajano was reiterated in Legend International Resorts Limited v. Kilusang
Manggagawa ng Legenda (KML-Independent).[15] Legend International Resorts
reiterated the rationale for allowing the continuation of either a CBA process or a
certification election even during the pendency of proceedings for the cancellation of
the unions certificate of registration. Citing the cases of Association of Court of
Appeals Employees v. Ferrer- Calleja[16] and Samahan ng Manggagawa sa Pacific
Plastic v. Hon. Laguesma,[17] it was pointed out at the time of the filing of the petition
for certification election or a CBA process as in the instant case the union still
had the personality to file a petition for certification - or to ask for a CBA negotiation
as in the present case.
Digiserv is a labor-only contractor.
Labor-only contracting is expressly prohibited by our labor laws. Article 106 of the
Labor Code defines labor-only contracting as supplying workers to an employer
[who] does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited and
placed by such person are performing activities which are directly related to the
principal business of such employer.
Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor
Code (Implementing Rules), as amended by Department Order No. 18-02, expounds
on the prohibition against labor-only contracting, thus:
Section 5. Prohibition against labor-only contracting. - Labor-only contracting is
hereby declared prohibited. For this purpose, labor-only contracting shall refer to an
arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any of the following
elements are present:
i) The contractor or subcontractor does not have substantial capital or investment
which relates to the job, work or service to be performed and the employees
recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the performance of the
work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248
(c) of the Labor Code, as amended.
xxxx

The right to control shall refer to the right reserved to the person for whom, the
services of the contractual workers are performed, to determine not only the end to
be achieved, but also the manner and means to be used in reaching that end.
The law and its implementing rules allow contracting arrangements for the
performance of specific jobs, works or services. Indeed, it is management
prerogative to farm out any of its activities, regardless of whether such activity is
peripheral or core in nature. However, in order for such outsourcing to be valid, it
must be made to an independent contractor because the current labor rules expressly
prohibit labor-only contracting.[18]
After an exhaustive review of the records, there is no showing that first, Digiserv has
substantial investment in the form of capital, equipment or tools. Under the
Implementing Rules, substantial capital or investment refers to capital stocks and
subscribed capitalization in the case of corporations, tools, equipment, implements,
machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service
contracted out. The NLRC, as echoed by the Court of Appeals, did not find
substantial Digiservs authorized capital stock of One Million Pesos
(P1,000,000.00). It pointed out that only Two Hundred Fifty Thousand Pesos
(P250,000.00) of the authorized capital stock had been subscribed and only SixtyTwo Thousand Five Hundred Pesos (P62,500.00) had been paid up. There was no
increase in capitalization for the last ten (10) years.[19]
Moreover, in the Amended Articles of Incorporation, as well as in the General
Information Sheets for the years 1994, 2001 and 2005, the primary purpose of
Digiserv is to provide manpower services. In PCI Automation Center, Inc. v.
National Labor Relations Commission,[20] the Court made the following distinction:
the legitimate job contractor provides services while the labor-only contractor
provides only manpower. The legitimate job contractor undertakes to perform a
specific job for the principal employer while the labor-only contractor merely
provides the personnel to work for the principal employer. The services provided
by employees of Digiserv are directly related to the business of Digitel, as
rationalized by the NLRC in this wise:
It is undisputed that as early as March 1994, the affected employees, except for two,
were already performing their job as Traffic Operator which was later renamed as
Customer Service Representative (CSR). It is equally undisputed that all throughout
their employment, their function as CSR remains the same until they were terminated
effective May 30, 2005. Their long period of employment as such is an indication
that their job is directly related to the main business of DIGITEL which is
telecommunication[s]. Because, if it was not, DIGITEL would not have allowed
them to render services as Customer Service Representative for such a long period of
time.[21]
Furthermore, Digiserv does not exercise control over the affected employees. The
NLRC highlighted the fact that Digiserv shared the same Human Resources,
Accounting, Audit and Legal Departments with Digitel which manifested that it was
Digitel who exercised control over the performance of the affected employees. The
NLRC also relied on the letters of commendation, plaques of appreciation and
certification issued by Digitel to the Customer Service Representatives as evidence
of control.
Considering that Digiserv has been found to be engaged in labor-only contracting,
the dismissed employees are deemed employees of Digitel.
Section 7 of the Implementing Rules holds that labor-only contracting would give
rise to: (1) the creation of an employer-employee relationship between the principal
and the employees of the contractor or sub-contractor; and (2) the solidary liability of
the principal and the contractor to the employees in the event of any violation of the
Labor Code.
Accordingly, Digitel is considered the principal employer of respondent employees.
The affected employees were illegally dismissed.
In addition to finding that Digiserv is a labor-only contractor, records teem with
proof that its dismissed employees are in fact employees of Digitel. The NLRC
enumerated these evidences, thus:
That the remaining thirteen (13) affected employees are indeed employees of
DIGITEL is sufficiently established by the facts and evidence on record.
It is undisputed that the remaining affected employees, except for two (2), were
already hired by DIGITEL even before the existence of DIGISERV. (The other two
(2) were hired after the existence of DIGISERV). The UNION submitted a sample
copy of their appointment paper (Annex A of UNIONs Position Paper, Records,
Vol. 1, p. 100) showing that they were appointed on March 1, 1994, almost three (3)
months before DIGISERV came into existence on May 30, 1994 (Annex B, Ibid,
Records, Vol. 1, p. 101). On the other hand, not a single appointment paper was
submitted by DIGITEL showing that these remaining affected employees were hired
by DIGISERV.
It is equally undisputed that the remaining, affected employees continuously held the
position of Customer Service Representative, which was earlier known as Traffic
Operator, from the time they were appointed on March 1, 1994 until they were
terminated on May 30, 2005. The UNION alleges that these Customer Service
Representatives were under the Customer Service Division of DIGITEL. The
UNIONs allegation is correct. Sample of letter of commendations issued to
Customer Service Representatives (Annexes C and C-1 of UNIONs Position

Paper, Records, p. 100 and 111) indeed show that DIGITEL has a Customer Service
Division which handles its Call Center operations.
efficiency, seniority, physical fitness, age, and financial hardship for certain
workers.[24]
Further, the Certificates issued to Customer Service Representative likewise show

that they are employees of DIGITEL (Annexes C-5, C-6 - C-7 of UNIONs
Position Paper, Records, Vol. 1, pp. 115 to 117), Take for example the Service
Award issued to Ma. Loretta C. Esen, one of the remaining affected employees
(Annex C-5, Supra). The Service Award was signed by the officers of DIGITEL
the VP-Customer Services Division, the VP-Human Resources Division and the
Group Head-Human Resources Division. It was issued by DIGITEL to Esen thru the
above named officers In recognition of her seven (7) years continuous and
valuable contributions to the achievement of Digitels organization objectives.
It cannot be gainsaid that it is only the employer that issues service award to its
employees.[22] (Emphasis not supplied)
Only the first 3 elements of a valid retrenchment had been here satisfied. Indeed, it is
management prerogative to close a department of the company. Digitels decision to
outsource the call center operation of the company is a valid reason to close down
the operations of a department under which the affected employees were employed.
Digitel cited the decline in the volume of transaction of operator-assisted call
services as supported by Financial Statements for the years 2003 and 2004, during
which Digiserv incurred a deficit of P163,624.00 and P164,055.00, respectively.[25]
All affected employees working under Digiserv were served with individual notices
of termination. DOLE was likewise served with the corresponding notice. All
affected employees were offered separation pay. Only 9 out of the 45 employees
refused to accept the separation pay and chose to contest their dismissal before this
Court.
As a matter of fact, even before the incorporation of Digiserv, the affected employees
were already employed by Digitel as Traffic Operators, later renamed as Customer
Service Representatives.
As an alternative argument, Digitel maintains that the affected employees were
validly dismissed on the grounds of closure of Digiserv, a department within Digitel.
In the recent case of Waterfront Cebu City Hotel v. Jimenez,[23] we referred to the
closure of a department or division of a company as retrenchment. The dismissed
employees were undoubtedly retrenched with the closure of Digiserv.
For a valid retrenchment, the following elements must be present:
(1) That retrenchment is reasonably necessary and likely to prevent business losses
which, if already incurred, are not merely de minimis, but substantial, serious,
actual and real, or if only expected, are reasonably imminent as perceived
objectively and in good faith by the employer;
(2)
That the employer served written notice both to the employees and to the
Department of Labor and Employment at least one month prior to the intended
date of retrenchment;
(3) That the employer pays the retrenched employees separation pay equivalent to
one (1) month pay or at least month pay for every year of service, whichever
is higher;
(4) That the employer exercises its prerogative to retrench employees in good faith
for the advancement of its interest and not to defeat or circumvent the
employees right to security of tenure; and
(5) That the employer used fair and reasonable criteria in ascertaining who would be
dismissed and who would be retained among the employees, such as status,
The fifth element regarding the criteria to be observed by Digitel clearly does not
apply because all employees under Digiserv were dismissed. The instant case is all
about the fourth element, that is, whether or not the affected employees were
dismissed in good faith. We find that there was no good faith in the retrenchment.
Prior to the cessation of Digiservs operations, the Secretary of Labor had issued the
first assumption order to enjoin an impending strike. When Digiserv effected the
dismissal of the affected employees, the Union filed another notice of strike.
Significantly, the Secretary of Labor ordered that the second notice of strike be
subsumed by the previous assumption order. Article 263(g) of the Labor Code
provides:
When, in his opinion, there exists a labor dispute causing or likely to cause a strike or
lockout in an industry indispensable to the national interest, the Secretary of Labor
and Employment may assume jurisdiction over the dispute and decide it or certify
the same to the Commission for compulsory arbitration. Such assumption or
certification shall have the effect of automatically enjoining the intended or
impending strike or lockout as specified in the assumption or certification order. If
one has already taken place at the time of assumption or certification, all striking or
locked out employees shall immediately return to work and the employer shall
immediately resume operations and readmit all workers under the same terms and
conditions prevailing before the strike or lockout. The Secretary of Labor and
Employment or the Commission may seek the assistance of law enforcement
agencies to ensure the compliance with this provision as well as with such orders as
he may issue to enforce the same.
The effects of the assumption order issued by the Secretary of Labor are two-fold. It
enjoins an impending strike on the part of the employees and orders the employer to
maintain the status quo.

There is no doubt that Digitel defied the assumption order by abruptly closing down
Digiserv. The closure of a department is not illegal per se. What makes it unlawful
is when the closure is undertaken in bad faith. In St. John Colleges, Inc. v. St. John
Academy Faculty and Employees Union,[26] bad faith was evidenced by the timing of
and reasons for the closure and the timing of and reasons for the subsequent
opening. There, the collective bargaining negotiations between St. John and the
Union resulted in a bargaining deadlock that led to the filing of a notice of strike.
The labor dispute was referred to the Secretary of Labor who assumed jurisdiction.
Pending resolution of the dispute, St. John closed the school prompting the Union to
file a complaint for illegal dismissal and unfair labor practice. The Union members
alleged that the closure of the high school was done in bad faith in order to get rid of
the Union and render useless any decision of the SOLE on the CBA deadlocked
issues. We held that closure was done to defeat the affected employees security of
tenure, thus:
The determination of whether SJCI acted in bad faith depends on the particular facts
as established by the evidence on record. Bad faith is, after all, an inference which
must be drawn from the peculiar circumstances of a case. The two decisive factors in
determining whether SJCI acted in bad faith are (1) the timing of, and reasons for the
closure of the high school, and (2) the timing of, and the reasons for the subsequent
opening of a college and elementary department, and, ultimately, the reopening of
the high school department by SJCI after only one year from its closure.
Prior to the closure of the high school by SJCI, the parties agreed to refer the 1997
CBA deadlock to the SOLE for assumption of jurisdiction under Article 263 of the
Labor Code. As a result, the strike ended and classes resumed. After the SOLE
assumed jurisdiction, it required the parties to submit their respective position
papers. However, instead of filing its position paper, SJCI closed its high school,
allegedly because of the irreconcilable differences between the school management
and the Academys Union particularly the safety of our students and the financial
aspect of the ongoing CBA negotiations. Thereafter, SJCI moved to dismiss the
pending labor dispute with the SOLE contending that it had become moot because of
the closure. Nevertheless, a year after said closure, SJCI reopened its high school and
did not rehire the previously terminated employees.
Under these circumstances, it is not difficult to discern that the closure was done to
defeat the parties agreement to refer the labor dispute to the SOLE; to unilaterally
end the bargaining deadlock; to render nugatory any decision of the SOLE; and to
circumvent the Unions right to collective bargaining and its members right to
security of tenure. By admitting that the closure was due to irreconcilable differences
between the Union and school management, specifically, the financial aspect of the
ongoing CBA negotiations, SJCI in effect admitted that it wanted to end the
bargaining deadlock and eliminate the problem of dealing with the demands of the
Union. This is precisely what the Labor Code abhors and punishes as unfair
labor practice since the net effect is to defeat the Unions right to collective
bargaining.[27] (Emphasis not supplied)
As in St. John, bad faith was manifested by the timing of the closure of Digiserv and
the rehiring of some employees to Interactive Technology Solutions, Inc. (I-tech), a
corporate arm of Digitel. The assumption order directs employees to return to work,
and the employer to reinstate the employees. The existence of the assumption order
should have prompted Digitel to observe the status quo. Instead, Digitel proceeded
to close down Digiserv. The Secretary of Labor had to subsume the second notice of
strike in the assumption order. This order notwithstanding, Digitel proceeded to
dismiss the employees.
The timing of the creation of I-tech is dubious. It was incorporated on 18 January
2005 while the labor dispute within Digitel was pending. I-techs primary purpose
was to provide call center/customer contact service, the same service provided by
Digiserv. It conducts its business inside the Digitel office at 110 E. Rodriguez Jr.
Avenue, Bagumbayan, Quezon City. The former head of Digiserv, Ms. Teresa
Taniega, is also an officer of I-tech. Thus, when Digiserv was closed down, some of
the employees presumably non-union members were rehired by I-tech.
Thus, the closure of Digiserv pending the existence of an assumption order coupled
with the creation of a new corporation performing similar functions as Digiserv
leaves no iota of doubt that the target of the closure are the union memberemployees. These factual circumstances prove that Digitel terminated the services of
the affected employees to defeat their security of tenure. The termination of service
was not a valid retrenchment; it was an illegal dismissal of employees.
It needs to be mentioned too that the dismissal constitutes an unfair labor practice
under Article 248(c) of the Labor Code which refers to contracting out services or
functions being performed by union members when such will interfere with, restrain
or coerce employees in the exercise of their rights to self-organization. At the height
of the labor dispute, occasioned by Digitels reluctance to negotiate with the Union,
I-tech was formed to provide, as it did provide, the same services performed by
Digiserv, the Union members nominal employer.
Under Article 279 of the Labor Code, an illegally dismissed employee is entitled to
backwages and reinstatement. Where reinstatement is no longer viable as an option,
as in this case where Digiserv no longer exists, separation pay equivalent to one (1)
month salary, or one-half (1/2) month pay for every year of service, whichever is
higher, should be awarded as an alternative.[28] The payment of separation pay is in
addition to payment of backwages.[29]
Indeed, while we have found that the closure of Digiserv was undertaken in bad
faith, badges thereof evident in the timing of Digiservs closure, hand in hand, with Itechs creation, the closure remains a foregone conclusion. There is no finding, and
the Union makes no such assertion, that Digiserv and I-tech are one and the same
corporation. The timing of Digiservs closure and I-techs ensuing creation is
doubted, not the legitimacy of I-tech as a business process outsourcing corporation

providing both inbound and outbound services to an expanded local and international
clientele.[30]
In Nueva Ecija I Electric Cooperative, Inc. (NEECO I) Employees Association v.

National Labor Relations Commission, we intoned:
The finding of unfair labor practice hinges on Digitels contracting-out certain

services performed by union member-employees to interfere with, restrain or coerce
them in the exercise of their right to self-organization.
Unfair labor practices violate the constitutional rights of workers and employees to
self-organization, are inimical to the legitimate interests of both labor and
management, including their right to bargain collectively and otherwise deal with
each other in an atmosphere of freedom and mutual respect; and disrupt industrial
peace and hinder the promotion of healthy and stable labor-management relations. As
the conscience of the government, it is the Courts sworn duty to ensure that none
trifles with labor rights.[36]
We have no basis to direct reinstatement of the affected employees to an ostensibly

different corporation. The surrounding circumstance of the creation of I-tech point to
bad faith on the part of Digitel, as well as constitutive of unfair labor practice in
targeting the dismissal of the union member-employees. However, this bad faith
does not contradict, much less negate, the impossibility of the employees
reinstatement because Digiserv has been closed and no longer exists.
Even if it is a possibility that I-tech, as though Digitel, can absorb the dismissed
union member-employees as I-tech was incorporated during the time of the
controversy with the same primary purpose as Digiserv, we would be hard pressed to
mandate the dismissed employees reinstatement given the lapse of more than seven
(7) years.
This length of time from the date the incident occurred to its resolution[31] coupled
with the demonstrated litigiousness of the disputants: (1) with all sorts of allegations
thrown by either party against the other; (2) the two separate filings of a notice of
strike by the Union; (3) the Assumption Orders of the DOLE; (4) our own finding of
unfair labor practice by Digitel in targeting the union member-employees,
abundantly show that the relationship between Digitel and the union memberemployees is strained. Indeed, such discordance between the parties can very well
be a necessary consequence of the protracted and branched out litigation. We adhere
to the oft-quoted doctrine that separation pay may avail in lieu of reinstatement if
reinstatement is no longer practical or in the best interest of the parties.[32]
Under the doctrine of strained relations, the payment of separation pay is considered
an acceptable alternative to reinstatement when the latter option is no longer
desirable or viable. On one hand, such payment liberates the employee from what
could be a highly oppressive work environment. On the other hand, it releases the
employer from the grossly unpalatable obligation of maintaining in its employ a
worker it could no longer trust.[33]
Finally, an illegally dismissed employee should be awarded moral and exemplary
damages as their dismissal was tainted with unfair labor practice.[34] Depending on
the factual milieu, jurisprudence has awarded varying amounts as moral and
exemplary damages to illegally dismissed employees when the dismissal is attended
by bad faith or fraud; or constitutes an act oppressive to labor; or is done in a manner
contrary to good morals, good customs or public policy; or if the dismissal is effected
in a wanton, oppressive or malevolent manner.[35]
We awarded moral damages in the amount of P10,000.00 and likewise awarded

P5,000.00 as exemplary damages for each dismissed employee.
In the recent case of Purefoods Corporation v. Nagkakaisang Samahang
Manggagawa ng Purefoods Rank-and-File,[37] we awarded the aggregate amount of
P500,000.00 as moral and exemplary damages to the illegally dismissed union
member-employees which exact number was undetermined.
In the case at hand, with the Unions manifestation that only 13 employees remain as
respondents, as most had already accepted separation pay, and consistent with our
finding that Digitel committed an unfair labor practice in violation of the employees
constitutional right to self-organization, we deem it proper to award each of the
illegally dismissed union member-employees the amount of P10,000.00 and
P5,000.00 as moral and exemplary damages, respectively.
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals in
CA-G.R. SP No. 91719 is AFFIRMED, while the Decision in CA-G.R. SP No.
94825 declaring the dismissal of affected union member-employees as illegal is
MODIFIED to include the payment of moral and exemplary damages in amount of
P10,000.00 and P5,000.00, respectively, to each of the thirteen (13) illegally
dismissed union-member employees.
Petitioner Digital Telecommunications Philippines, Inc. is ORDERED to pay the
affected employees backwages and separation pay equivalent to one (1) month
salary, or one-half (1/2) month pay for every year of service, whichever is higher.
Let this case be REMANDED to the Labor Arbiter for the computation of monetary
claims due to the affected employees.
SO ORDERED.
THIRD DIVISION
[ G.R. No. 172642, June 13, 2012 ]

ESTATE OF NELSON R. DULAY, REPRESENTED BY HIS WIFE MERRIDY
JANE P. DULAY, PETITIONER, VS. ABOITIZ JEBSEN MARITIME, INC.
AND GENERAL CHARTERERS, INC., RESPONDENTS.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to reverse and set aside the Decision[1] and Resolution[2] dated July 11,
2005 and April 18, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 76489.
The factual and procedural antecedents of the case, as summarized by the CA, are as
follows:
Nelson R. Dulay (Nelson, for brevity) was employed by [herein respondent] General
Charterers Inc. (GCI), a subsidiary of co-petitioner [herein co-respondent] Aboitiz
Jebsen Maritime Inc. since 1986. He initially worked as an ordinary seaman and later
as bosun on a contractual basis. From September 3, 1999 up to July 19, 2000, Nelson
was detailed in petitioners vessel, the MV Kickapoo Belle.
On August 13, 2000, or 25 days after the completion of his employment contract,
Nelson died due to acute renal failure secondary to septicemia. At the time of his
death, Nelson was a bona fide member of the Associated Marine Officers and
Seamans Union of the Philippines (AMOSUP), GCIs collective bargaining agent.
Nelsons widow, Merridy Jane, thereafter claimed for death benefits through the
grievance procedure of the Collective Bargaining Agreement (CBA) between
AMOSUP and GCI. However, on January 29, 2001, the grievance procedure was
declared deadlocked as petitioners refused to grant the benefits sought by the
widow.
On March 5, 2001, Merridy Jane filed a complaint with the NLRC Sub-Regional
Arbitration Board in General Santos City against GCI for death and medical benefits
and damages.
On March 8, 2001, Joven Mar, Nelsons brother, received P20,000.00 from
[respondents] pursuant to article 20(A)2 of the CBA and signed a Certification
acknowledging receipt of the amount and releasing AMOSUP from further liability.
Merridy Jane contended that she is entitled to the aggregate sum of Ninety Thousand
Dollars ($90,000.00) pursuant to [A]rticle 20 (A)1 of the CBA x x x
xxxx
Merridy Jane averred that the P20,000.00 already received by Joven Mar should be
considered advance payment of the total claim of US$90,000.[00].
[Herein respondents], on the other hand, asserted that the NLRC had no jurisdiction
over the action on account of the absence of employer-employee relationship
between GCI and Nelson at the time of the latters death. Nelson also had no claims
against petitioners for sick leave allowance/medical benefit by reason of the
completion of his contract with GCI. They further alleged that private respondent is
not entitled to death benefits because petitioners are only liable for such in case of
death of the seafarer during the term of his contract pursuant to the POEA contract
and the cause of his death is not work-related. Petitioners admitted liability only with
respect to article 20(A)2 [of the CBA]. x x x
xxxx
However, as petitioners stressed, the same was already discharged.
The Labor Arbiter ruled in favor of private respondent. It took cognizance of the case
by virtue of Article 217 (a), paragraph 6 of the Labor Code and the existence of a
reasonable causal connection between the employer-employee relationship and the
claim asserted. It ordered the petitioner to pay P4,621,300.00, the equivalent of
US$90,000.00 less P20,000.00, at the time of judgment x x x
xxxx
The Labor Arbiter also ruled that the proximate cause of Nelsons death was not
work-related.
On appeal, [the NLRC] affirmed the Labor Arbiters decision as to the grant of death
benefits under the CBA but reversed the latters ruling as to the proximate cause of
Nelsons death.[3]
Herein respondents then filed a special civil action for certiorari with the CA
contending that the NLRC committed grave abuse of discretion in affirming the
jurisdiction of the NLRC over the case; in ruling that a different provision of the
CBA covers the death claim; in reversing the findings of the Labor Arbiter that the
cause of death is not work-related; and, in setting aside the release and quitclaim
executed by the attorney-in-fact and not considering the P20,000.00 already received
by Merridy Jane through her attorney-in-fact.
On July 11, 2005, the CA promulgated its assailed Decision, the dispositive portion
of which reads as follows:

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED and the
case is REFERRED to the National Conciliation and Mediation Board for the
designation of the Voluntary Arbitrator or the constitution of a panel of Voluntary
Arbitrators for the appropriate resolution of the issue on the matter of the applicable
CBA provision.
SO ORDERED.[4]
The CA ruled that while the suit filed by Merridy Jane is a money claim, the same
basically involves the interpretation and application of the provisions in the subject
CBA. As such, jurisdiction belongs to the voluntary arbitrator and not the labor
arbiter.
Petitioner filed a Motion for Reconsideration but the CA denied it in its Resolution of
April 18, 2006.
Hence, the instant petition raising the sole issue of whether or not the CA committed
error in ruling that the Labor Arbiter has no jurisdiction over the case.
Petitioner contends that Section 10 of Republic Act (R.A.) 8042, otherwise known as
the Migrant Workers and Overseas Filipinos Act of 1995, vests jurisdiction on the
appropriate branches of the NLRC to entertain disputes regarding the interpretation
of a collective bargaining agreement involving migrant or overseas Filipino workers.
Petitioner argues that the abovementioned Section amended Article 217 (c) of the
Labor Code which, in turn, confers jurisdiction upon voluntary arbitrators over
interpretation or implementation of collective bargaining agreements and
interpretation or enforcement of company personnel policies.
The pertinent provisions of Section 10 of R.A. 8042 provide as follows:
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 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.
Article 217(c) of the Labor Code, on the other hand, states that:
xxxx
(c) Cases arising from the interpretation or implementation of collective bargaining
agreements and those arising from the interpretation or enforcement of company

personnel policies shall be disposed by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in said
agreements.
On their part, respondents insist that in the present case, Article 217, paragraph (c) as
well as Article 261 of the Labor Code remain to be the governing provisions of law
with respect to unresolved grievances arising from the interpretation and
implementation of collective bargaining agreements. Under these provisions of law,
jurisdiction remains with voluntary arbitrators.
Article 261 of the Labor Code reads, thus:
ARTICLE 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary
Arbitrators. The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have
original and exclusive jurisdiction to hear and decide all unresolved grievances
arising from the interpretation or implementation of the Collective Bargaining
Agreement and those arising from the interpretation or enforcement of company
personnel policies referred to in the immediately preceding article. Accordingly,
violations of a Collective Bargaining Agreement, except those which are gross in
character, shall no longer be treated as unfair labor practice and shall be resolved as
grievances under the Collective Bargaining Agreement. For purposes of this article,
gross violations of Collective Bargaining Agreement shall mean flagrant and/or
malicious refusal to comply with the economic provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the Department
of Labor and Employment shall not entertain disputes, grievances or matters under
the exclusive and original jurisdiction of the Voluntary Arbitrator or panel of
Voluntary Arbitrators and shall immediately dispose and refer the same to the
Grievance Machinery or Voluntary Arbitration provided in the Collective Bargaining
Agreement.
The petition is without merit.
It is true that R.A. 8042 is a special law governing overseas Filipino workers.
However, a careful reading of this special law would readily show that there is no
specific provision thereunder which provides for jurisdiction over disputes or
unresolved grievances regarding the interpretation or implementation of a CBA.
Section 10 of R.A. 8042, which is cited by petitioner, simply speaks, in general, of
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. On the other hand, Articles
217(c) and 261 of the Labor Code are very specific in stating that voluntary

arbitrators have jurisdiction over cases arising from the interpretation or
implementation of collective bargaining agreements. Stated differently, the instant
case involves a situation where the special statute (R.A. 8042) refers to a subject in
general, which the general statute (Labor Code) treats in particular.[5] In the present
case, the basic issue raised by Merridy Jane in her complaint filed with the NLRC is:
which provision of the subject CBA applies insofar as death benefits due to the heirs
of Nelson are concerned. The Court agrees with the CA in holding that this issue
clearly involves the interpretation or implementation of the said CBA. Thus, the
specific or special provisions of the Labor Code govern.
In any case, the Court agrees with petitioner's contention that the CBA is the law or
contract between the parties. Article 13.1 of the CBA entered into by and between
respondent GCI and AMOSUP, the union to which petitioner belongs, provides as
follows:
The Company and the Union agree that in case of dispute or conflict in the
interpretation or application of any of the provisions of this Agreement, or
enforcement of Company policies, the same shall be settled through negotiation,
conciliation or voluntary arbitration. The Company and the Union further agree
that they will use their best endeavor to ensure that any dispute will be discussed,
resolved and settled amicably by the parties hereof within ninety (90) days from the
date of filing of the dispute or conflict and in case of failure to settle thereof any of
the parties retain their freedom to take appropriate action.[6] (Emphasis supplied)
From the foregoing, it is clear that the parties, in the first place, really intended to
bring to conciliation or voluntary arbitration any dispute or conflict in the
interpretation or application of the provisions of their CBA. It is settled that when
the parties have validly agreed on a procedure for resolving grievances and to submit
a dispute to voluntary arbitration then that procedure should be strictly observed.[7]
It may not be amiss to point out that the abovequoted provisions of the CBA are in
consonance with Rule VII, Section 7 of the present Omnibus Rules and Regulations
Implementing the Migrant Workers and Overseas Filipinos Act of 1995, as amended
by Republic Act No. 10022, which states that [f]or OFWs with collective bargaining
agreements, the case shall be submitted for voluntary arbitration in accordance with
Articles 261 and 262 of the Labor Code. The Court notes that the said Omnibus
Rules and Regulations were promulgated by the Department of Labor and
Employment (DOLE) and the Department of Foreign Affairs (DFA) and that these
departments were mandated to consult with the Senate Committee on Labor and
Employment and the House of Representatives Committee on Overseas Workers
Affairs.
In the same manner, Section 29 of the prevailing Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels,

promulgated by the Philippine Overseas Employment Administration (POEA),
provides as follows:
Section 29. Dispute Settlement Procedures. - In cases of claims and disputes
arising from this employment, the parties covered by a collective bargaining
agreement shall submit the claim or dispute to the original and exclusive
jurisdiction of the voluntary arbitrator or panel of arbitrators. If the parties are
not covered by a collective bargaining agreement, the parties may at their option
submit the claim or dispute to either the original and exclusive jurisdiction of the
National Labor Relations Commission (NLRC), pursuant to Republic Act (RA)
8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995
or to the original and exclusive jurisdiction of the voluntary arbitrator or panel of
arbitrators. If there is no provision as to the voluntary arbitrators to be appointed by
the parties, the same shall be appointed from the accredited voluntary arbitrators of
the National Conciliation and Mediation Board of the Department of Labor and
Employment.
The Philippine Overseas Employment Administration (POEA) shall exercise original
and exclusive jurisdiction to hear and decide disciplinary action on cases, which are
administrative in character, involving or arising out of violations of recruitment laws,
rules and regulations involving employers, principals, contracting partners and
Filipino seafarers. (Emphasis supplied)
It is clear from the above that the interpretation of the DOLE, in consultation with
their counterparts in the respective committees of the Senate and the House of
Representatives, as well as the DFA and the POEA is that with respect to disputes
involving claims of Filipino seafarers wherein the parties are covered by a collective
bargaining agreement, the dispute or claim should be submitted to the jurisdiction of
a voluntary arbitrator or panel of arbitrators. It is only in the absence of a collective
bargaining agreement that parties may opt to submit the dispute to either the NLRC
or to voluntary arbitration. It is elementary that rules and regulations issued by
administrative bodies to interpret the law which they are entrusted to enforce, have
the force of law, and are entitled to great respect.[8] Such rules and regulations partake
of the nature of a statute and are just as binding as if they have been written in the
statute itself.[9] In the instant case, the Court finds no cogent reason to depart from
this rule.
The above interpretation of the DOLE, DFA and POEA is also in consonance with
the policy of the state to promote voluntary arbitration as a mode of settling labor
disputes.[10]
No less than the Philippine Constitution provides, under the third paragraph, Section

3, Article XIII, thereof that [t]he State shall promote the principle of shared
responsibility between workers and employers and the preferential use of voluntary
modes in settling disputes, including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace.
Consistent with this constitutional provision, Article 211 of the Labor Code provides
the declared policy of the State [t]o promote and emphasize the primacy of free
collective bargaining and negotiations, including voluntary arbitration, mediation and
conciliation, as modes of settling labor or industrial disputes.
On the basis of the foregoing, the Court finds no error in the ruling of the CA that the
voluntary arbitrator has jurisdiction over the instant case.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court
of Appeals in CA-G.R. SP No. 76489 dated July 11, 2005 and April 18, 2006,
respectively, are AFFIRMED.
SO ORDERED.
SECOND DIVISION
[ G.R. No. 191563, June 20, 2012 ]

LEGAL HEIRS OF THE LATE EDWIN B. DEAUNA, REPRESENTED BY
HIS WIFE, MRS. ARLINA DEAUNA, PETITIONERS, VS. FIL-STAR
MARITIME CORPORATION, GREGORIO ORTEGA, CAPT. VICTOR S.
MILLALOS AND GRANDSLAM ENTERPRISES CORPORATION,
RESPONDENTS.
DECISION
REYES, J.:
Before us is a petition for review on certiorari,[1] under Rule 45 of the Rules of
Court, filed by the legal heirs (collectively referred to as the petitioners) of the late
Edwin Deauna (Edwin), represented by his wife, Arlina Deauna, to assail the
Decision[2] dated July 15, 2009 and the Resolution[3] dated March 8, 2010 of the
Court of Appeals (CA) in CA-G.R. SP No. 106199. The dispositive portion of the
assailed decision reads:
WHEREFORE, premises considered, the assailed Decision dated 28 October 2008
of Voluntary Arbitrator Rene Ofreneo in AC 94-NCMB-NCR, is hereby,
REVERSED and SET ASIDE, and a new one entered absolving the petitioner[s]
[herein respondents] from liability for the death benefits under the terms and
conditions of the POEA Contract and Article 29 pf (sic) the AMOSUP/JSU-CBA.
SO ORDERED. [4]
The assailed resolution denied the petitioners' motion for reconsideration.
Antecedent Facts
Respondent Fil-Star Maritime Corporation (Fil-Star) is a local manning agency, with
respondent Captain Victor S. Millalos (Capt. Millalos) as its general manager.
Respondent Grandslam Enterprise Corporation (Grandslam) is among Fil-Star's
foreign principals. Grandslam owns and manages the vessel M/V Sanko Stream
(Sanko) which Edwin boarded on August 1, 2004 for a nine-month engagement as
Chief Engineer. As such, he was responsible for the operations and maintenance of
the entire vessel's engineering equipment. He also determined the requirements for
fuel, lube oil and other consumables necessary for a voyage, conducted inventory of
spare parts, prepared the engine room for inspection by marine and safety authorities,
and took charge of the engine room during maneuvering and emergency situations.
Prior to Edwin's deployment, he underwent the customary Pre-employment Medical
Examination (PEME) and was found as fit to work as was repeatedly the case in
the past 30 years since his first deployment by Fil-Star in 1975.
Sometime in October 2004, Edwin experienced abdominal pains while on-board

Sanko. He was promptly referred to a doctor in Paranagua, Brazil. An ultrasound
examination revealed that he had kidney stones for which he was administered oral
medications. Thereafter, he resumed his work on-board Sanko.
On April 3, 2005 or more or less 8 months from deployment, Edwin was repatriated.
There were, however, conflicting claims regarding the cause of his repatriation. The
respondents claimed that Edwin requested for an early termination of his contract in
order to attend his daughter's graduation ceremony. On the other hand, the
petitioners averred that Edwin was repatriated due to the latter's body weakness and
head heaviness.[5] The petitioners likewise claimed that on April 4, 2005, they
called Capt. Millalos to inform the latter that upon arrival at the airport, Edwin was
very sick, weak, disoriented, and merely wanted to immediately go home to Daet,
Camarines Norte.[6] Edwin can neither physically report in Fil-Star's office nor board
his next vessel of assignment.
On April 27, 2005, Dr. Eduardo R. Mercado (Dr. Mercado), a neurosurgeon at the
Cardinal Santos Medical Center certified that:
Mr. Edwin Deauna, 52 years of age, is presently under my care at the Cardinal
Santos Medical Center. He presented with (sic) behavioral changes associated with a
left-sided facial and upper extremity weakness. An MRI of the brain done [on] April
26, 2005 showed a large right-sided brain tumor with involvement of his right
temporal lobe, basal ganglia, corona radiate and insular cortex. There is associated
severe swelling and shift (mass effect) to the opposite side. He is undergoing
medical decompression to relieve pressure intracranially.
He will need stereotactic biopsy of his brain tumor for grading purposes.
Thereafter, treatment options will be discussed with family but I can predict that he
will need radiation treatment as well as chemotherapy. This is necessary for
palliation purposes and prolongation of life with good quality.[7] (Citation omitted)
The petitioners sent the respondents two letters requesting for the conduct of a
medical examination and treatment of Edwin's brain tumor. The respondents averred
that they provided Edwin with medical assistance for him to be able to promptly
undergo a biopsy.
On May 4, 2005, Dr. Mercado found out from the pathology report that Edwin was
suffering from Glioblastoma WHO Grade 4 (GBM), a malignant and aggressive
form of brain cancer. According to Dr. Mercado, it is logical/safe to surmise that
the tumor has been existent and progressively growing for a number of months.[8]

On May 13, 2005, the company-designated physician, Dr. Nicomedes G. Cruz (Dr.
Cruz), opined that the etiology of GBM is unknown. Further, Edwin's illness is
work-related if he has history of exposure to radiation, vinyl products and the likes
and working in near proximity of power line, otherwise, it is not, and that the
tumor is already present even prior to embarkation but not detectable but (sic)
ordinary PEME.[9]
On August 22, 2005, or about four months after Edwin's repatriation, Dr. Cruz sent
Capt. Millalos a medical report stating that:
The patient was repatriated because of body weakness and head heaviness since
October 2004. He had his consultation in Brazil, where he was evaluated to have
kidney stones after undergoing ultrasound. Patient then finished his contract. At
the airport, upon his arrival last April 03, 2005, he was noted to be drowsy and
disoriented. On April 05, 2005, he was seen by a physician in Daet. CT Scan was
done and he was diagnosed to have hypertension and neurologic disease. He was
seen at the Cardinal Santos Hospital and on April 30, 2005, he underwent biopsy of
the brain mass and the pathology report revealed Glioblastoma Multiforme. He has
completed his 1st period of radiotherapy.
The MRI of the brain showed slight reduction in the size of the tumor. He has
weakness of the left foot resulting to episodic foot drop. He also has facial edema
secondary to steroid intake. He also complains of occasional doubling of vision but
he has no headache.
International Bargaining Forum/Associated Marine Officers and Seamens Union of

the Philippines/International Mariners Management Association of Japan Collective
Bargaining Agreement (IBF/AMOSUP/IMMAJ CBA). The second letter, dated
December 8, 2005, reiterated the petitioners' claims for disability benefits. The
respondents replied that they had already aptly dealt with the illness under the
respective employment agreement. Not long after, the petitioners again wrote the
respondents informing the latter that Edwin's condition was already critical. Hence,
the possibility that the claims for disability benefits would be converted to death
benefits arose. The respondents denied the petitioners' demand.
In December 2005, a complaint for disability benefits, medical and transportation
reimbursements, moral and exemplary damages and attorney's fees were filed before
the National Labor Relations Commission (NLRC). Edwin died on April 13, 2006
during the pendency of the proceedings. He was substituted therein by the
petitioners who sought the payment of death benefits.
After finding that there was an arbitration clause in the IBF/AMOSUP/IMMAJ CBA,
the Labor Arbiter (LA) rendered a decision referring the complaint to voluntary
arbitration. The case was thereafter docketed with the National Conciliation and
Mediation Board (NCMB) as AC 94-NCMB-NCR-39-01-13-07.
On October 28, 2008, Voluntary Arbitrator Rene Ofreneo (VA Ofreneo), invoking the
provisions of the Philippine Overseas Employment Administration Standard
Employment Contract (POEA SEC) and the IBF/AMOSUP/IMMAJ CBA, awarded
death benefits to the petitioners. VA Ofreneo ratiocinated that:
Submitting to you the monthly expenses for his chemotherapy.

DIAGNOSIS:
Glioblastoma Multiforme
Advised to come back on September 23, 2005. [10]
The respondents claimed that out of compassion and intent to avoid legal battles,
they extended to Edwin an allowance of US$6,033.36. They also offered the
payment of US$60,000.00 disability benefits despite having no obligation to do so on
their part as GBM can only be considered as work-related if a person who suffers
therefrom had exposures to radiation or vinyl products, or had worked in the vicinity
of power lines.[11] The respondents claimed that Edwin did not have such exposure
while under their employ.
This Office has also taken cognizance of the following facts that were not questioned
or contested by the parties: One, that EDWIN DEAUNA was under the employ of
the same company for roughly 25 years due to repeated re-hiring from 1975 to 2005,
and Two, that the RESPONDENTS made an earlier settlement offer of US$60,000 as
payment for disability benefits.
On the repatriation of EDWIN DEAUNA and the relationship of his ailment to his
work as Chief Engineer of the vessel Sanko Stream, the medical report dated 22
August 2005 by the company physician, DR. NICOMEDES G. CRUZ, to CAPTAIN
VICTORIO S. MILLALOS, General Manager of Fil-Star Maritime Corporation,
does not need any other interpretation other than observation that EDWIN
DEAUNA's health status had been deteriorating on board. x x x
xxxx
Two demand letters seeking disability benefits were thereafter sent by the petitioners
to the respondents. The first, which was received by the respondents on November
21, 2005, sought the payment of US$125,000.00 as allegedly provided under the
From the foregoing facts and circumstances, it is abundantly clear that the ailment of
EDWIN DEAUNA was work-related and manifested while he was on board in his

last sailing. This ailment developed and progressed in the course of his employment,
that is, during the long and continuous service EDWIN DEAUNA rendered to the
same manning company, which spanned a period of over 25 years. His repatriation,
recorded as made upon his request, was clearly unavoidable given his rapidly
deteriorating health situation as proven no less by the series of medical tests and
treatment EDWIN DEAUNA was subjected to with the help of private and Company
physicians and eventually by his death.[12]
The respondents filed with the CA a petition for review under Rule 43 of the Rules of
Court to challenge VA Ofreneo's award. Before the CA could resolve the case, the
petitioners filed a motion for execution[13] which was granted by VA Ofreneo over the
respondents' vehement opposition.[14] Consequently, the respondents paid to the
petitioners the sum of P5,603,026.00,[15] but the former manifested that their act was
without prejudice to the outcome of the proceedings then pending with the CA.[16]
On July 15, 2009, the CA rendered the now assailed decision reversing VA Ofreneo's
award based on the following grounds:
Under the Definition of Terms found in the Standard Contract, a work-related illness
is defined as any sickness resulting to disability or death as a result of an
occupational disease listed under Section 32-A of this contract with the conditions set
therein satisfied. An illness not otherwise listed in Section 32-A is disputably
presumed work-related.
Glioblastoma multiforme is the most aggressive of the gliomas, a collection of
tumors arising from glia or their precursors within the central nervous system. Most
glioblastoma tumors appear to be sporadic, without any genetic predisposition. No
links have been found between glioblastoma and smoking, diet, cellular phones or
electromagnetic fields. Recently, evidence for a viral cause has been discovered,
possibly SV40 or cytomegalovirus. There also appears to be a small link between
ionizing radiation and glioblastoma. Having one of the following genetic disorders
is associated with an increased incidence of glomas: neurofibromatosis, tuberous
sclerosis, Von Hippel-Lindau disease, Li-Fraumeni syndrome, turcot syndrome.
These tumors manifest de novo, presenting after a short clinical history, usually less
than 3 months.
The presumption was disproved by petitioner[s] [herein respondents] in its (sic)
arguments. Petitioner[s] presented the expert medical opinion of its (sic) companydesignated doctor, opining that the deceased seaman's Glioblastoma Multiforme was
not work-related considering that he was never exposed to factors that would cause
the same during his employment with the petitioners. While opinions of petitioner's
(sic) doctor should not be given evidentiary weight as they are palpably self-serving
and biased in favor of the former, and certainly could not be considered independent,
respondent[s] has (sic) used the medical report of the very same physician to support
their arguments, and is (sic) thus considered in estoppel.
Respondent's (sic) bare assertion, without any scientific or logical proof, that such
employment of the deceased seaman in the vessel of the petitioner[s], is the cause of
his illness and eventual death, cannot be upheld by this court. Under P.D. No. 626, if
an ailment or sickness is not listed as an occupational disease, the claimant must
prove that the risk of contracting the illness suffered was increased by his or her
working conditions. The degree of proof required is substantial evidence.
Jurisprudence defines substantial evidence as that amount of relevant evidence
which a reasonable mind might accept as adequate to justify the conclusion. It
provides that to establish compensability of a non-occupational disease, reasonable
proof and not direct proof of a causal connection between the work and the ailment is
required. To require proof of actual causes or factors which lead to the ailment
would not be consistent with the liberal interpretation of the social justice guarantee
in favor of workers.
Thus, death compensation benefits cannot be awarded unless there is substantial
evidence showing that (a) the cause of Deauna's death was reasonably connected
with his work; or (b) the sickness for which he died is an accepted occupational
disease; or (c) his working conditions increased the risk of contracting the disease for
which he died.
The deceased seaman's cause of death was not connected with his employment on
board the vessel as a Chief Engineer. A Chief Engineer is someone qualified to
oversee the entire engine department. He is also responsible for all operations and
maintenance that has to do with any and all engineering equipment throughout the
entire ship. He also determines the fuel, lube oil, and other consumables required for
a voyage; [r]equired inventory for spare parts, oversees fuel, lube and slop oil
transfers, prepares the engine room for inspection by local marine/safety authorities,
oversees all major maintenance; is required to be in the engine room during
maneuvering operations, and is in charge of the engine room during emergency
situations.
Glioblastoma Multiforme is not an accepted occupational disease of a Chief
Engineer under the POEA-SEC, Art. 32-A. It does not arise from known
occupational hazards, such as being a Chief Engineer as in this case, and its origin
has not yet been pinpointed by any medical experts or organizations up to the
present. Furthermore, to say that his earlier illness of kidney stones, even if such was
proven to have been caused by the deceased seaman's occupation, lead to the
development of the Glioblastoma Multiforme, which eventually caused his death, is
stretching the facts too far. We are not medical experts to be able to connect such
illness as the cause of GBM, which even the former has not yet discovered, and thus,

warrant a new discovery in the field of medicine and grant the death benefits prayed
for by the respondents.
selected/accredited by the petitioner[s] does not necessarily follow that the illness for
which the former died of was acquired during his employment.
Substantial evidence is more than a mere scintilla. The evidence must be real and
substantial, and not merely apparent; for the duty to prove work-causation or workaggravation imposed by law is real and not merely apparent. This Court finds that
under the circumstances[,] respondents' bare allegations do not suffice to discharge
the required quantum of proof of compensability. Awards of compensation cannot
rest on speculations or presumptions, like the one made by herein respondents. The
beneficiaries must present evidence to prove a positive proposition.
Stated differently, for death of a seafarer to be compensable, the death must occur
during the term of his contract of employment. It is the only condition for
compensability of a seafarer's death. Once it is established that the seaman died
during the effectivity of his employment contract, the employer is liable. By
provision of Section 20 (A) of the POEA Standard Employment Contract, based on
POEA Memorandum Circular No. 055, series of 1996, payment of death benefit
pension is mandated in case of death of a seafarer during the term of his
employment.
For the second argument, petitioner[s] argues (sic) that when the deceased seaman
was repatriated on April 3, 2005, whether it is due to finished contract or for medical
reasons, this will have the effect of terminating the employment of the said seaman.
When the seaman died on April 16, 2006, he was no longer under the employment of
the petitioners.
Petitioner[s] cited the case of Gau Sheng v. Joaquin, [through which] the Highest
Tribunal ruled that in order to give effect to the benefits granted under the (sic)
Memorandum Circular No. 41, Series of 1989, it must be shown that the employee
died during the effectivity of the contract of employment.
We rule in the affirmative.
Section 20 (A) (1) and (4) (A, B and C) of the POEA Standard Employment
Contract provides:
Section 20. COMPENSATION AND BENEFITS
A. COMPENSATION AND BENEFITS FOR DEATH
1. In case of death of the seafarer during the term of his contract, the employer
shall pay his beneficiaries the Philippine Currency equivalent to the amount of Fifty
Thousand US dollars (US$50,000) and an additional amount of Seven Thousand US
dollars (US$7,000) to each child under the age of twenty-one (21) but not exceeding
four (4) children, at the exchange rate prevailing during the time of payment.
Art. 29 of the said IBF AMOSUP-JSU IMMAJ CBA provides, in part, that:
xxx
If a seafarer dies of any cause whilst in the employment of the company including
death from natural causes and death occurring whilst traveling to and from the
vessel, or as a result of marine or other similar peril, but excluding death due to
willful act, the Company shall pay the sums specified xxx to a nominated beneficiary
and to each dependent child up to a maximum of four (4) under 21 years of age. The
above compensation shall include those Seafarers who have been missing as a result
of peril of the sea xxx and presumed to be dead three (3) months after the adversity
xxx.
It is clear from the above provision that in order to come under the operation of the
said CBA agreement, it must be shown by the respondent[s] that the ailment must
have been incurred while on the employment with the petitioner[s]. Respondent's
(sic) contention that since the origin or cause of the illness was unknown, it is
presumed to have been contracted during employment, is untenable. There is no
such correlation between the two to give rise to such presumption. The issuance of a
clean bill of health to the deceased seaman, made by the physicians
xxx
xxx
4. The other liabilities of the employer when the seafarer dies as a result of injury or
illness during the term of employment are as follows:
a. The employer shall pay the deceased's beneficiary all outstanding obligations due
the seafarer under this Contract.
b. The employer shall transport the remains and personal effects of the seafarer to the
Philippines at employer's expense except if the death occurred in a port where local
government laws or regulations do not permit the transport of such remains. In case
death occurs at sea, the disposition of the remains shall be handled or dealt with in
accordance with the master's best judgment. In all cases, the employer/master shall
communicate with the manning agency to advice (sic) for disposition of seafarer's
remains.
The employer shall pay the beneficiaries of the seafarer the Philippine currency

equivalent to the amount of One Thousand US dollars (US$1,000) for burial
expenses at the exchange rate prevailing during the time of payment.
This is a similar, if not exact, provision of the CBA aforementioned. The law
demands the same requirements as it was in the latter. The death of a seaman during
the term of employment makes the employer liable to his heirs for death
compensation benefits. Once it is established that the seaman died during the
effectivity of his employment contract, the employer is liable. However, if the
seaman dies after the termination of his contract of employment, his beneficiaries are
not entitled to the death benefits enumerated above.
THE FINDINGS OF FACT OF THE HONORABLE COURT OF APPEALS DO

NOT CONFORM TO THE EVIDENCE ON RECORD. MOREOVER, THERE
WAS A MISAPPRECIATION OF FACTS AND THE HONORABLE COURT OF
APPEALS FAILED TO NOTICE CERTAIN RELEVANT POINTS WHICH IF
CONSIDERED WOULD JUSTIFY A DIFFERENT CONCLUSION. HENCE, THE
DECISION OF THE COURT OF APPEALS IS CONTRARY TO THE
APPLICABLE LAW AND JURISPRUDENCE.
A. THE SURVIVING SPOUSE AND LEGAL HEIRS OF THE DECEASED
SEAFARER ARE ENTITLED TO DEATH COMPENSATION IN THE SUM OF
US$121,000.00 UNDER THE AMOSUP/JSU-CBA;
Finally, the Voluntary Arbitrator has erred in relying only on the medical report
presented by the company physician Dr. Nicomedes G. Cruz in making his
conclusion that the ailment of the deceased seaman was work-related and it
manifested while he was on board of (sic) the vessel in his last sailing. He did not
consider the other equally important points such as whether the death of the seaman
was suffered during the term of his employment or that assuming arguendo, that he
was indeed repatriated due to medical reasons, his death occurred after the term of
his employment has already ceased.
B. PETITIONER[S] [ARE] ENTITLED TO MORAL DAMAGES FOR (sic)

Php1,000,000.00, EXEMPLARY DAMAGES [OF] Php200,000.00 AND TEN
PERCENT (10%) OF THE AWARDS AS AND BY WAY OF ATTORNEY'S FEES.
That administrative quasi-judicial bodies like the Voluntary Arbitrator are not bound
by technical rules of procedure in the adjudication of cases, does not mean that the
basic rules on proving allegations should be entirely dispensed with. A party alleging
a critical fact must still support his allegation with substantial evidence. Any
decision based on unsubstantiated allegation cannot stand as it will offend due
process. The liberality of procedure in administrative actions is subject to limitations
imposed by basic requirements of due process. As this Court said in Ang Tibay v.
CIR, the provision for flexibility in administrative procedure does not go so far as to
justify orders without a basis in evidence having rational probative value.
The petitioners emphasize that under the IBF/AMOSUP/IMMAJ CBA, a seafarer's

death is compensable regardless of its cause and its non work-relatedness as long
as it occurs during the term of the latter's employment. The only exception to
compensability is when death is due to willful acts. In Edwin's case, he had been
under the respondents' employment for the past 30 years. Prior to boarding Sanko,
he passed the PEME but was thereafter medically-repatriated as stated in Dr. Cruz's
report. He died of GBM, the origin of which is unknown. Hence, it can be
presumed that GBM had been contracted during his employment with the
respondents.
Furthermore, as held in Uichico v. NLRC, this procedural rule should not be

construed as a license to disregard certain fundamental evidentiary rules. [17]
(Citations omitted)
The petitioners also point out that the dictum that death must occur during the term
of a seafarer's employment is not even a hard and fast rule. In Carmelita C.
Arambulo v. West Fleet Phil./Pandiman Phil., Inc./Pacific Maritime, Inc.,[19] the
NLRC declared that for an illness to be compensable, it is not necessary for death to
occur during the term of employment. What is merely required is for the connection
between the cause of repatriation and the cause of death to be duly established. In
Seagull Shipmanagement & Transport, Inc. v. NLRC,[20] the Court similarly declared
that if the disease is the proximate cause of the employee's death for which
compensation is sought, the previous physical condition of the employee is
unimportant, and recovery may be had for said death, independently of any preexisting disease.
The CA thereafter issued the assailed resolution denying the petitioners' motion for
reconsideration to the foregoing. Hence, the instant petition.
The Issues
The petitioners submit the following for resolution:
[18]
The Petitioners' Arguments

The petitioners also refute in detail the applicability of the doctrines invoked by the
respondents as the circumstances surrounding them do not obtain in the case at bar.
In Gau Sheng Phils., Inc. v. Joaquin,[21] employment was terminated upon the parties'
mutual consent and the seafarer's claim was anchored on the POEA SEC and not on
the provisions of a CBA. In Hermogenes v. Osco Shipping Services, Inc.,[22] no
evidence was offered to prove the cause of the early termination of the seafarer's
contract. In Spouses Aya-ay, Sr. v. Arpaphil Shipping Corporation,[23] the seafarer
was repatriated due to an eye injury but he died of cardiovascular arrest after his
contract was already terminated. In Prudential Shipping and Management
Corporation v. Sta. Rita,[24] the seafarer was repatriated due to umbilical hernia and
he died ten days after with cardiopulmonary arrest as the immediate cause, acute
renal failure as the antecedent cause and hepatocellular carcinoma as the underlying
cause. In Klaveness Maritime Agency, Inc. v. Beneficiaries of the Late Second
Officer Anthony S. Allas,[25] the seafarer was not medically repatriated. In the Estate
of Posedio Ortega v. Court of Appeals,[26] the seafarer died of lung cancer and his
heirs anchored their claim for death benefits on the POEA SEC, which unfortunately
does not list the said illness as an occupational disease. The petitioners thus
conclude that the contexts of the aforecited cases are different, hence, the doctrines
enunciated therein find no application.
The petitioners also allege that the respondents' prior actions indicated nothing less
but an admission of the latter's legal and moral obligation to pay Edwin the amounts
he was entitled to. For one, the expenses for the initial treatment administered to
Edwin were shouldered by the respondents. Further, the respondents paid Edwin a
full sickness allowance as provided for under POEA SEC. Moreover, the
respondents repeatedly offered Edwin the amount of US$60,000.00 corresponding to
the original claim for disability benefits under the POEA SEC. This clearly meant
that the respondents recognized that Edwin's illness entitled him to benefits under the
POEA SEC.
The petitioners likewise aver their entitlement to moral and exemplary damages and
attorney's fees on account of the respondents' unjustified refusal to comply with their
contractual obligations.
especially in view of the Court's declaration in Rivera v. Wallem Maritime Services,

Inc.,[28] that in the absence of substantial evidence, working conditions cannot be
presumed to have increased the risk of contracting the disease.
In the case at bar, the petitioners' bare allegation, that GBM was work-related as can
be inevitably concluded from Edwin's lengthy and repeated employment with the
respondents, deserves no probative value unless corroborated by substantial
evidence. Dr. Cruz, who had attended to Edwin's medical needs for more than three
months, opined that GBM was not work-related as the latter, in the course of his
employment with the respondents, was never exposed to factors which would have
increased the risk of contracting the illness.
Further, Articles 25 and 26 of the CBA provide for the entitlement of a seafarer to
medical treatment and sick wages for a maximum period of 130 days from
repatriation. In Edwin's case, he died on April 13, 2006 or more than a year after his
repatriation. Hence, when he died, he was no longer under the respondents' employ.
Moreover, his repatriation, regardless of its cause, already terminated his
employment. This is in consonance with Section 18 of the POEA SEC, which in part
expressly provides that a seafarer's employment ceases when he signs off from the
vessel and arrives at the point of hire due to medical reasons. Besides, even Article
29 of the CBA states that death is only compensable if it occurs to the seafarer
whilst in the employment of the company.
The respondents likewise deny that in effect, they admitted their liability when they
made repeated offers to pay the petitioners US$60,000.00. The respondents state that
the offers were made sans prejudice to the defenses they were raising. Further, they
withdrew the offers during the pendency of the proceedings before the LA and VA
Ofreneo.
In Escarcha v. Leonis Navigation Co., Inc.,[29] the heirs of a deceased seafarer were
ordered to return the amount paid to them pursuant to the execution of an award
favorable to them but which was subsequently reversed by the Court. In Edwin's
case, equity dictates that the proper reimbursement be effected as well by the
petitioners.
The Respondents' Contentions

Our Ruling
[27]
In their Comment with Manifestation, the respondents counter that Edwin's illness
was not work-related and his death occurred not during the term of his employment.
Thus, the petitioners are not entitled to the payment of any benefits. The mere
circumstance that the manifestations of an illness appeared while the seafarer is onboard does not necessarily render it as work-related. In the POEA SEC, the words
during the term of contract refer to the time when death occurs while workrelated refers to the cause of death. The two requisites must both be proven
While generally, only questions of law

can be raised in a petition for review on
certiorari under Rule 45 of the Rules of
Court, the instant petition falls among
the exceptions in the light of the
conflicting factual findings of the VA
and the CA.
The instant petition ascribes misappreciation of facts on the part of the CA, which if
allegedly reconsidered, would yield a conclusion favorable to the petitioners. As a
rule, only questions of law, not questions of fact, may be raised in a petition for
review on certiorari under Rule 45.[30] The Court is thus generally bound by the
CA's factual findings. There are, however, exceptions to the foregoing, among which
is when the CA's factual findings are contrary to those of the trial court or
administrative body exercising quasi-judicial functions from which the action
originated.[31] The instant petition falls under the aforementioned exception in the
light of the divergent factual findings of the VA and the CA.
Anent the substantive arguments, we find the instant petition partially
impressed with merit.
The petitioners insist their entitlement to the payment of death compensation benefits
not pursuant to the provisions of the POEA SEC but under Article 29 of the CBA.
According to them, the CBA merely focuses on the fact of death occurring during the
term of a seafarer's employment, regardless of its cause. They further claim that
even if death occurs beyond the term of a seafarer's employment, compensation
should still be awarded as long as a connection can be established between the causes
of repatriation and death.
On the other hand, the respondents' denial of the petitioners' claims rests on the (1)
circumstance that Edwin died after the termination of his employment contract or
more than a year after he was already repatriated; and (2) argument that GBM was
supposedly not work-related in the absence of proofs of exposure of a seafarer to
vinyl, radiation or power lines while in the work place.
The IBF/AMOSUP/IMMAJ CBA provisions govern the relations of the parties
especially since the issue of the VA's jurisdiction was never challenged in the
proceedings below.
The IBF/AMOSUP/IMMAJ CBA
provisions govern the relations of the
parties especially since the issue of the
VA's jurisdiction was never challenged
in the proceedings below.
It bears noting that the petitioners' complaint was initially filed with the NLRC
which referred the same to the NCMB for voluntary arbitration. VA Ofreneo took
cognizance and ruled on the complaint. Thereafter, the respondents assailed before
the CA, through a petition for review under Rule 43 of the Rules of Court, the notice
of award issued by VA Ofreneo. In the said petition, the parties never raised the
issue of the VA's jurisdiction. In effect, it was an admission on the part of both the
petitioners and the respondents that the controversy involves the interpretation of
CBA provisions relative to the claims for death compensation benefits. Stated
otherwise, in the proceedings below, the contending parties both impliedly
acquiesced to the applicability of the CBA provisions and not of the POEA SEC over
the claims of the petitioners.
More importantly, the special clauses on collective bargaining agreements must
prevail over the standard terms and benefits formulated by the POEA in its Standard
Employment Contract. A contract of labor is so impressed with public interest that
the more beneficial conditions must be endeavored in favor of the laborer. This is in
consonance with the avowed policy of the State to give maximum aid and full
protection to labor as enshrined in Article XIII of the 1987 Constitution.[32]
We thus proceed to the inquiry on whether or not within the purview of the
IBF/AMOSUP/IMMAJ CBA, Edwin's death on April 13, 2006, or more than a year
from his repatriation, can be considered as one occurring while he was still in the
employment of the respondents.
Under the IBF/AMOSUP/IMMAJ
CBA provisions, Edwin's death a little
more than a year from his repatriation
can still be considered as one occurring
while he was still under the
respondents' employ.
Articles 22 (Termination of Employment), 25 (Medical), 26 (Sick Pay) and 29 (Loss

of Life Death in Service) and Appendix 3 of the IBF/AMOSUP/IMMAJ CBA state
in part:
22.1 The employment shall be terminated:
xxxx
(b) when signing off owing to sickness or injury, after medical examination in
accordance with Article 25, but subject to the provision of Article 29.
xxxx
25.3 A seafarer repatriated to their port of engagement, unfit as a result of sickness or

injury, shall be entitled to medical attention (including hospitalisation) at the
Company's expense:
(a) in the case of sickness, for up to a minimum of sixty (60) days and a maximum
of one hundred and thirty (130) days after repatriation, subject to the submission of
satisfactory medical reports.
xxxx
Loss of Life Death in Service
Death in service benefits as provided in Article 29 of this Agreement shall, unless
more favourable benefits are negotiated, be:
xxxx
26.1 When a seafarer is landed at any port because of sickness or injury, payment of
their basic wages shall continue until they have been repatriated at the Company's
expense.
To the nominated beneficiary .............. US$75,000.00

To each dependent child (maximum four (4) under 21 years of age)
...............................................................US$15,000.00
(Emphasis and underlining supplied)
26.2 Thereafter[,] the seafarers shall be entitled to sick pay at the rate equivalent to
their basic wage while they remain sick up to a minimum of sixty (60) days and a
maximum of one hundred and thirty (130) days.
Article 22.1(b) considers an employment as terminated if a seafarer signs off from

the vessel due to sickness, but subject to the provisions of Article 29.
xxxx
26.4 Proof of continued entitlement to sick pay shall be by submission of satisfactory
medical reports, endorsed where necessary, by a Company[-] appointed doctor. If a
doctor appointed by or in behalf of the seafarer disagrees with the assessment, a third
doctor may be nominated jointly between the Company and the Union and the
decision of this doctor shall be final and binding on both parties.
xxxx
29.1 If a Seafarer dies through any cause whilst in the employment of the
Company including death from natural causes and death occurring whilst
travelling to and from the vessel, or as a result of marine or other similar peril, but
excluding death due to willful acts, the Company shall pay the sums specified in the
attached APPENDIX 3 to a nominated beneficiary and to each dependent child up to
a maximum of four (4) under 21 years of age. x x x
xxxx
29.4 For the purpose of this clause[,] a seafarer shall be regarded as in the
employment of the company for so long as the provisions of Articles 25 and 26
apply and provided the death is directly attributable to sickness or injury that
caused the seafarer's employment to be terminated in accordance with Article
22.1(b).
Appendix 3
Article 29.1 of the IBF/AMOSUP/IMMAJ CBA provides that the death of a

seafarer, for any cause, is compensable when it occurs while he is in the
employment of the company. Article 29.4, on the other hand, clarifies that the
seafarer shall be considered as in the employment of the company for so long
as the provisions of Articles 25 and 26 apply and provided the death is directly
attributable to sickness or injury that caused the seafarer's employment to be
terminated in accordance with Article 22.1(b).
Under Article 25.3, a seafarer repatriated to the port of his engagement, unfit as a
result of sickness, shall be entitled to medical attention at the company's expense for
up to a maximum period of 130 days after repatriation, subject to the submission of
satisfactory medical reports. Article 26.2 further states that a seafarer shall likewise
be entitled to sick pay at the rate equivalent to his basic wage while he remains sick
up to a maximum of 130 days. Article 26.4 allows continued entitlement to sick pay
beyond the 130 day period, reckoned from repatriation, provided satisfactory medical
reports shall be submitted and endorsed where necessary, by a company-appointed
doctor.
We now apply the provisions of the IBF/AMOSUP/IMMAJ CBA to the
circumstances surrounding Edwin's death.
On August 22, 2005, or more or less 130 days from Edwin's arrival in the
Philippines, the company-designated physician, Dr. Cruz, indicated in a medical
report[33] addressed to Capt. Millalos that Edwin's repatriation was due to body
weakness and head heaviness since October 2004. Dr. Cruz also stated that upon
Edwin's arrival at the airport on April 3, 2005, the latter was noted to be drowsy and

disoriented. Dr. Cruz diagnosed Edwin to be suffering from GBM and submitted
the monthly expenses for the latter's chemotherapy to Capt. Millalos. Edwin was
advised to come back on September 23, 2005. Edwin eventually died of GBM on
April 13, 2006.
We note that body weakness, head heaviness, drowsiness and disorientedness are
among the symptoms associated with GBM. Dr. Cruz indicated that these symptoms
were exhibited by Edwin since October 2004 while he was still on board Sanko and
were notable even when the latter was repatriated on April 3, 2005. Prior to
repatriation, Edwin had only been diagnosed in Brazil to be suffering from kidney
stones, but no exhaustive examination was conducted on him and no finding was
rendered declaring that he had GBM. Nonetheless, the symptoms previously
referred to were the cause of Edwin's repatriation more or less than a month before
his contract was about to expire. On May 4, 2005 or about a month after
repatriation, Dr. Mercado found that Edwin was afflicted with GBM and that the
tumor had been progressively growing for months.[34] Further, the medical report,
dated August 22, 2005, addressed to Capt. Millalos, submitting to him the monthly
expenses for Edwin's chemotherapy and advising the latter to come back on
September 23, 2005, was an implied admission on the part of Dr. Cruz that medical
assistance and sick pay should indeed be extended to Edwin even beyond the 130day period prescribed by Articles 25 and 26 of the IBF/AMOSUP/IMMAJ CBA.
From the foregoing, we can thus conclude that at the time of Edwin's death on April
13, 2006 due to GBM, he was still in the employment of the respondents. While it is
true that Article 22.1 of the IBF/AMOSUP/IMMAJ CBA considers a seafarer as
terminated when he signs off from the vessel due to sickness, the foregoing is subject
to the provisions of Article 29. Under Article 29, a seafarer remains under the
respondents' employ as long as the former is still entitled to medical assistance and
sick pay, and provided that the death which eventually occurs is directly attributable
to the sickness which caused the seafarer's employment to be terminated. As
discussed above, the company-designated physician, Dr. Cruz, in effect admitted that
Edwin was repatriated due to symptoms which a person suffering from GBM
normally exhibits. Further, he recommended to Capt. Millalos Edwin's entitlement
to medical assistance and sick pay for a period beyond 130 days from repatriation.
Edwin subsequently died of GBM, the symptoms of which were the cause of his
earlier repatriation. Hence, since Edwin's death is reasonably connected to the cause
of his repatriation, within the purview of the IBF/AMOSUP/IMMAJ CBA, he
indubitably died while under the respondents' employ, thus, entitling the petitioners
to death benefits as provided for in Appendix 3 of the said CBA.
The petitioners are, however, not
entitled to moral and exemplary
damages and attorney's fees.
We find that the acts of the respondents hardly indicate an intent on their part to
evade the payment of their obligations so as to justify the award of moral and
exemplary damages and attorney's fees to the petitioners. The respondents extended
medical assistance and allowances to Edwin while he went through his treatment.
Further, the respondents offered an amount of US$60,000.00 as disability benefits
even when the petitioners' claims had not been conclusively established yet.
WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is
PARTIALLY GRANTED. The Decision dated July 15, 2009 and Resolution dated
March 8, 2010 of the Court of Appeals, absolving the respondents from liability for
death benefits pertaining to the petitioners by reason of Edwin Deaunas death, are
REVERSED and SET ASIDE. The Decision dated October 28, 2008 of the
Voluntary Arbitrator, awarding the amount of US$121,000.00 to the petitioners in
accordance with Appendix 3 of the International Bargaining Forum/Associated
Marine Officers and Seamens Union of the Philippines/International Mariners
Management Association of Japan Collective Bargaining Agreement, is
REINSTATED. However, interests on the award shall no longer be imposed in view
of the execution of the said decision already made on May 28, 2009.
SO ORDERED.
Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 87297 August 5, 1991

ALFREDO VELOSO and EDITO LIGUATON petitioners,
vs.
DEPARTMENT OF LABOR AND EMPLOYMENT, NOAH'S ARK SUGAR
CARRIERS AND WILSON T. GO, respondents.
CRUZ, J.:p
The law looks with disfavor upon quitclaims and releases by employees who are
inveigled or pressured into signing them by unscrupulous employers seeking to
evade their legal responsibilities. On the other hand, there are legitimate waivers that
represent a voluntary settlement of laborer's claims that should be respected by the
courts as the law between the parties.
In the case at bar, the petitioners claim that they were forced to sign their respective
releases in favor of their employer, the herein private respondent, by reason of their
dire necessity. The latter, for its part, insists that the petitioner entered into the
compromise agreement freely and with open eyes and should not now be permitted
to reject their solemn commitments.
The controversy began when the petitioners, along with several co-employees, filed a
complaint against the private respondent for unfair labor practices, underpayment,
and non-payment of overtime, holiday, and other benefits. This was decided in favor
of the complainants on October 6,1987. The motion for reconsideration, which was
treated as an appeal, was dismissed in a resolution dated February 17, 1988, the
dispositive portion of which read as follows:
WHEREFORE, the instant appeal is hereby DISMISSED and the
questioned Order affirmed with the modification that the monetary
awards to Jeric Dequito, Custodio Ganuhay Conrado Mori and
Rogelio Veloso are hereby deleted for being settled. Let execution
push through with respect to the awards to Alfredo Veloso and
Edito Liguaton.
On February 23, 1988, the private respondent filed a motion for reconsideration and
recomputation of the amount awarded to the petitioners. On April 15, 1988, while the
motion was pending, petitioner Alfredo Veloso, through his wife Connie, signed a
Quitclaim and Release for and in consideration of P25,000.00, 1 and on the same day
his counsel, Atty. Gaga Mauna, manifested "Satisfaction of Judgment" by receipt of
the said sum by Veloso. 2 For his part, petitioner Liguaton filed a motion to dismiss
dated July 16, 1988, based on a Release and Quitclaim dated July 19,1988 , 3 for and
in consideration of the sum of P20,000.00 he acknowledged to have received from
the private respondent. 4
These releases were later impugned by the petitioners on September 20, 1988, on the
ground that they were constrained to sign the documents because of their "extreme
necessity." In an Order dated December 16, 1988, the Undersecretary of Labor
rejected their contention and ruled:
IN VIEW THEREOF, complainants Motion to Declare Quitclaim
Null and Void is hereby denied for lack of merit and the
compromise agreements/settlements dated April 15, 1988 and July
19, 1988 are hereby approved. Respondents' motion for
reconsideration is hereby denied for being moot and academic.
Reconsideration of the order having been denied on March 7, 1989, the petitioners
have come to this Court on certiorari. They ask that the quitclaims they have signed
be annulled and that writs of execution be issued for the sum of P21,267.92 in favor
of Veloso and the sum of P26,267.92 in favor of Liguaton in settlement of their
claims.
Their petition is based primarily on Pampanga Sugar Development Co., Inc. v. Court
of Industrial Relations, 5 where it was held:
... while rights may be waived, the same must not be contrary to
law, public order, public policy, morals or good customs or
prejudicial to a third person with a right recognized by law. (Art. 6,
New Civil Code) ...
... The above-quoted provision renders the quitclaim agreements
void ab initio in their entirety since they obligated the workers
concerned to forego their benefits, while at the same time,
exempted the petitioner from any liability that it may choose to
reject. This runs counter to Art. 22 of the new Civil Code which
provides that no one shall be unjustly enriched at the expense of
another.
The Court had deliberated on the issues and the arguments of the parties and finds
that the petition must fail. The exception and not the rule shall be applied in this case.
The case cited is not apropos because the quitclaims therein invoked were secured by
the employer after it had already lost in the lower court and were subsequently
rejected by this Court when the employer invoked it in a petition for certiorari. By
contrast, the quitclaims in the case before us were signed by the petitioners while the
motion for reconsideration was still pending in the DOLE, which finally deemed it
on March 7, 1989. Furthermore, the quitclaims in the cited case were entered into
without leave of the lower court whereas in the case at bar the quitclaims were made
with the knowledge and approval of the DOLE, which declared in its order of

December 16, 1988, that "the compromise agreement/settlements dated April 15,
1988 and July 19, 1988 are hereby approved."
It is also noteworthy that the quitclaims were voluntarily and knowingly made by
both petitioners even if they may now deny this. In the case of Veloso, the quitclaim
he had signed carried the notation that the sum stated therein had been paid to him in
the presence of Atty. Gaga Mauna, his counsel, and the document was attested by
Atty. Ferdinand Magabilin, Chief of the Industrial Relations Division of the National
Capitol Region of the DOLE. In the case of Liguaton, his quitclaim was made with
the assistance of his counsel, Atty. Leopoldo Balguma, who also notarized it and later
confirmed it with the filing of the motion to dismiss Liguaton's complaint.
The same Atty. Balguma is the petitioners' counsel in this proceeding. Curiously, he
is now challenging the very same quitclaim of Liguaton that he himself notarized and
invoked as the basis of Liguaton's motion to dismiss, but this time for a different
reason. whereas he had earlier argued for Liguaton that the latter's signature was a
forgery, he has abandoned that contention and now claims that the quitclaim had
been executed because of the petitioners' dire necessity.
"Dire necessity" is not an acceptable ground for annulling the releases, especially
since it has not been shown that the employees had been forced to execute them. It
has not even been proven that the considerations for the quitclaims were
unconscionably low and that the petitioners had been tricked into accepting them.
While it is true that the writ of execution dated November 24, 1987, called for the
collection of the amount of P46,267.92 each for the petitioners, that amount was still
subject to recomputation and modification as the private respondent's motion for
reconsideration was still pending before the DOLE. The fact that the petitioners
accepted the lower amounts would suggest that the original award was exorbitant and
they were apprehensive that it would be adjusted and reduced. In any event, no
deception has been established on the part of the Private respondent that would
justify the annulment of the Petitioners' quitclaims.
The petitioners cannot renege on their agreement simply because they may now feel
they made a mistake in not awaiting the resolution of the private respondent's motion
for reconsideration and recomputation. The possibility that the original award might
have been affirmed does not justify the invalidation of the perfectly valid
compromise agreements they had entered into in good faith and with full
voluntariness. In General Rubber and Footwear Corp. vs. Drilon, 6 we "made clear
that the Court is not saying that accrued money claims can never be effectively
waived by workers and employees." As we later declared in Periquet v. NLRC: 7
Not all waivers and quitclaims are invalid as against public policy.
If the agreement was voluntarily entered into and represents a
reasonable settlement, it is binding on the parties and may not later
be disowned simply because of a change of mind. It is only where
there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are
unconscionable on its face, that the law will step in to annul the
questionable transaction. But where it is shown that the person
making the waiver did so voluntarily, with full understanding of
what he was doing, and the consideration for the quitclaim is
credible and reasonable, the transaction must be recognized as a
valid and binding undertaking. As in this case.
We find that the questioned quitclaims were voluntarily and knowingly executed and
that the petitioners should not be relieved of their waivers on the ground that they
now feel they were improvident in agreeing to the compromise. What they call their
"dire necessity" then is no warrant to nullify their solemn undertaking, which cannot
be any less binding on them simply because they are laborers and deserve the
protection of the Constitution. The Constitution protects the just, and it is not the
petitioners in this case.
WHEREFORE, the petition is DISMISSED, with costs against the petitioners. It is
so ordered.
The applicable law is Article 227 of the Labor Code providing clearly as follows:
Art. 227. Compromise agreements. Any compromise settlement,
including those involving labor standard laws, voluntarily agreed
upon by the parties with the assistance of the Bureau or the
regional office of the Department of Labor, shall be final and
binding upon the parties. The National Labor Relations
Commission or any court shall not assume jurisdiction over issues
involved therein except in case of non-compliance thereof or if
there is prima facie evidence that the settlement was obtained
through fraud, misrepresentation or coercion.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 84578 September 7, 1989

JOSE VICENTE SANTIAGO, IV, petitioner,
vs.
BONIER DE GUZMAN, GUZMAN INSTITUTE OF TECHNOLOGY, LABOR
ARBITER PERLITA B. VELASCO AND NATIONAL LABOR RELATIONS
COMMISSION, respondents.
1. That respondent hereby agrees to pay as separation pay the sum

of SIX THOUSAND SIXTEEN (sic) AND SIXTY FOUR
CENTAVOS (P 6,016.64) to complainant within fifteen (15) days
from the signing of this Compromise Agreement;
2. That respondent hereby pays complainant the amount of NINE
HUNDRED NINETY FIVE PESOS AND FORTY CENTAVOS (P
995.40) as service incentive leave pay from 1981-1984;
FERNAN, C.J.:
Article 24 of the Civil Code of the Philippines provides that "(I)n all contractual,
property and other relations, when one of the parties is at a disadvantage on account
of his moral dependence, ignorance, indigence, mental weakness, tender age or other
handicap, the courts must be vigilant for his protection." We heed this dictum in the
instant petition.
The present controversy stems from the complaint for illegal dismissal filed before
the respondent National Labor Relations Commission (NLRC) on July 15,1986 by
petitioner Jose Vicente Santiago IV against private respondents Bonier de Guzman
and Guzman Institute of Technology. In his complaint docketed as NLRC Case No.
7-2747-86 and assigned to Labor Arbiter Perlita V. Velasco for hearing and
disposition, petitioner Santiago alleged in the main that he was an instructor at the
Guzman Institute of Technology during the periods from June 1955 to March 1956,
June 1956 to March 1957, and June 1976 until November 10, 1984, when he
reported for the second semester of the school year 1984-1985 but was not given any
teaching load or assignment for said semester-, and that by this omission private
respondents indirectly and in bad faith terminated his employment without cause and
notice. He therefore prayed that private respondents be ordered to reinstate him to his
former position at the same rate of salary as of the time of his dismissal; should
private respondents propose to retire him, for the former to pay the full retirement
pay plus damages; and in either case, to pay damages due to loss of income in the
amount of P 34,334.30; P 27,103.51 for actual damages, P 60,209.19 for moral
damages; P 4,022.78 for loss of income from 13th month pay and Wage Order No. 3;
and the accrued money value of his Service Incentive Leave from November 10,
1984 to June, 1986 in the amount of P2,866.00. In addition, he prayed for such
further and other relief as may be deemed just and equitable. 1
Thereafter, the parties submitted for approval a Compromise Agreement dated
September 29, 1986, the central text of which reads as follows:
COMPROMISE AGREEMENT
xxxxxxxxx
3. That complainant hereby releases and discharges respondent

from any money claim whatsoever in connection with his previous
employment with respondent school;
4. That in the event parties fails (sic) to comply with the terms and
conditions of this Compromise Agreement, complainant is entitled
to a Writ of Execution. 2
On November 26, 1986, petitioner filed two pleadings with the Labor Arbiter;
namely: (1) Motion for Write (sic) of Execution dated November 24, 1986 and (2)
Complainant Position Paper dated November 15,1986.
On November 28, 1986, finding the Compromise Agreement to be in order and not
contrary to law or public morals, Labor Arbiter Velasco issued an Order approving
the same. Upon receipt of a copy of said Order by ordinary mail on December 11,
1986, petitioner filed on the same day a "motion to correct errors in the compromise
agreement and to resolve the issue of illegal dismissal." He subsequently filed an
undated Manifestation, a motion on breach of agreement dated January 21,1987 and
a motion dated March 16,1987 wherein he submitted certain exhibits and rested his
case.
On March 30,1987, Labor Arbiter Velasco issued an Order dismissing the "Motion
on Breach of Agreement" for being moot and academic and declaring the case
settled, closed and terminated, upon a finding that therein complainant "has received
the amount of SEVEN THOUSAND TWELVE PESOS AND 04/100 (P 7,012.04)
from respondents ... in full settlement of his claims pursuant to the compromise
agreement ... and the Order ...dated November 28,1986. 3
From this Order, petitioner filed an Exception and Notice of Appeal to the NLRC on
the grounds of fraud and serious errors in the computation of the compromise
agreement and failure of the labor arbiter to give due consideration to his claim for
illegal dismissal. 4 Private respondents opposed the motion.
On September 30, 1987, the NLRC Second Division promulgated a resolution
affirming the assailed Order and dismissing the appeal for being moot and academic.

Petitioner's motion for reconsideration and new trial was denied for lack of merit in a
resolution dated December 14, 1987. Petitioner then filed a pleading denominated
"Exception and Notice of Appeal" wherein he gave notice of his intention to appeal
the case to the then Intermediate Appellate Court, now Court of Appeals, which in
turn certified the case to this Court for appropriate action. 5
Pursuant to this Court's Resolution of March 23, 1988, petitioner filed a petition for
review, which, however, did not comply with the Rules. We therefore resolved to
refer petitioner to the Citizens Legal Assistance Office (CLAO) for appropriate legal
assistance. 6 After several extensions, the CLAO filed a Revised Petition for Review
on Certiorari, presenting the following issues for resolution:
1. WHETHER OR NOT THE LABOR ARBITER'S DECISION
BASED ON THE COMPROMISE AGREEMENT IS VALID.
2. SINCE THE COMPROMISE AGREEMENT WAS NOT
VALID, WHETHER PETITIONER IS ENTITLED TO
SEPARATION PAY AND BACKWAGES AND DAMAGES.
3. WHETHER PETITIONER SANTIAGO WAS DENIED DUE
PROCESS BOTH BY HIS EMPLOYER, RESPONDENT LABOR
ARBITER AND RESPONDENT NLRC. 7
Petitioner contends basically that he was denied due process of law when both the
Labor Arbiter and the NLRC ignored his pleas that corrections be made in the
computation of his separation and service incentive leave pays and that the issue of
illegal dismissal be heard and determined. Both public and private respondents, on
the other hand, maintain that the Compromise Agreement which was allegedly
entered into by petitioner voluntarily and willingly put an end to the controversy and
that having accepted the benefits therefrom, petitioner cannot now back track to
impugn the same.
We find for petitioner.
Settlement of disputes by way of compromise whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced, 8
is an accepted, nay desirable and encouraged practice in courts of law and
administrative tribunals. Toward this end, the Rules governing proceedings before
the Labor Arbiter exhort, thus:
Section 1. Initial conference/hearing.- Within two (2) days from

receipt of an assigned case, the Labor Arbiter shall summon the
parties to an initial conference/hearing for the purpose of amicably
settling the case upon a fair compromise or determining the real
parties in interest, defining and simplifying the issues in the case
and threshing out other preliminary matters. ...
Should the parties arrive at any agreement as to the whole or any
part of the dispute, the same shall be reduced to writing and signed
by the parties before the Labor Arbiter. The settlement shall be
approved by the Labor Arbiter after being satisfied that it was
voluntarily entered into by the parties and after having explained
to them the terms and consequences thereof.
A compromise agreement entered into by the parties not in the
presence of the Labor Arbiter before whom the case is pending
shall be approved by him if, after confronting the parties,
particularly the complainants, he is satisfied that they understand
the terms and conditions of the settlement and that it was entered
into freely and voluntarily by them. 9
Under these Rules, it is incumbent upon the Labor Arbiter not only to persuade the
parties to settle amicably, but equally to ensure that the compromise agreement
entered into by them is a fair one and that the same was forged freely, voluntarily and
with a full understanding of the terms and conditions embodied therein as well as the
consequences thereof. The latter onus devolving upon the Labor Arbiter gains
considerable significance when taken in conjunction with Article 222 of the Labor
Code of the Philippines, as amended, which allows non-lawyers to appear before the
labor tribunal in representation of their own selves.
Applied to the case at bar, the conclusion reached is that Labor Arbiter Velasco was
remiss in her above-stated duty when she approved the Compromise Agreement in
question and when she subsequently declared the case closed and terminated. The
different pleadings filed by petitioner after the submission of the compromise
agreement for approval and even after the issuance of the Order approving said
compromise agreement vividly demonstrate that petitioner did not understand the
terms and conditions embodied in the compromise agreement as well as the
consequences thereof. illustrative of this non-comprehension is the contradictory
pleadings denominated as "Motion for Writ of Execution" 10 and "Complainant
Position Paper" 11 filed by petitioner prior to the approval of the compromise
agreement and the Motion to Correct Errors in the Compromise Agreement and to
Resolve Issue of Illegal Dismissal 12 and Motion on Breach of Agreement. 13
It must be observed that the motion for a writ of execution was filed on November
26, 1986, or two (2) days before the compromise agreement was approved, when

there was nothing yet to execute. The Complainant Position Paper, although dated
November 15, 1986, was likewise filed on November 26, 1986. These two (2)
contradictory pleadings are sufficient to engender the suspicion that petitioner, a
college instructor and a non-lawyer, did not fully understand the terms and
conditions contained in, and the consequences of entering into the compromise
agreement. Confronted with this ambivalent stance on the part of petitioner, it
became incumbent upon Labor Arbiter Velasco, if she was to satisfy herself that "the
parties, particularly the complainant ...understood the terms and conditions of the
settlement" to call the parties for this purpose and to explain the import of the
settlement. This was not done; instead the compromise agreement was approved
notwithstanding indications that complainant therein did not fully understand the
terms and conditions thereof. Certainly, this act is characterized by grave abuse of
discretion calling for the corrective writ of certiorari.
object of compromise, and consequently, no compromise agreement in law to speak

of.
The situation was exacerbated when the Labor Arbiter did not rule upon the Motion
to Correct Errors in the Compromise Agreement and to Resolve the Issue of Illegal
Dismissal. This motion sheds light on the seeming ambivalent position taken by
petitioner. Said motion alleged in part:
Respondent Labor Arbiter relied heavily on the fact that petitioner received from
private respondents the amount stipulated in the compromise agreement. We have
ruled that the acceptance of separation pay is not a bar to contesting the legality of
one's dismissal. Separated employees need the money to tide them over until they
can find other employment pending their reinstatement. 17
1. That complaint filed by undersigned consists of two (2) issues:

(a) termination and/or separation pay and (b) dismissal without due
written notice as provided by law (Art. 278 (b) and Sec. 2, Rule
XIV, Book V.)
2. That the termination and/or separation pay was tentatively
covered by a compromise agreement dated September 29, 1986
and filed with this Honorable Office on October 29, 1986 which
contain grossly inaccurate computations.
xxx xxx xxx
3. That the second issue of illegal dismissal or violation of the
provisions of labor code for failure of respondent to notify in
writing the termination of employment of complainant. ... 14
It is quite evident from these allegations that to petitioner's mind, what he was
settling when he entered into the compromise agreement was merely his claims for
termination and service incentive leave pays, but not his claim for illegal dismissal,
which partial settlement is allowed and recognized by the Rules of the NLRC abovequoted. Such intention to settle partially, however, gave rise to complications, since
the stipulation contained in the compromise agreement whereby petitioner released
and discharged private respondents from any money claim whatsoever in connection
with his previous employment with respondent school cannot be given effect as such
waiver was made without a full understanding of the right being relinquished; and
further, that there was absolutely no meeting of minds between the parties as to the
Indeed, by giving it a little more thought and attention, respondent Labor Arbiter
could have easily treated the motion under consideration as a repudiation of the
compromise agreement on the ground of mistake so as to vitiate consent under
Article 2038 of the Civil Code. 15 The same can be said of the Motion on Breach of
Agreement wherein petitioner asked for the setting aside of the compromise
agreement for failure of private respondents to abide by it in good faith, which is a
recognized ground for repudiation of compromise agreement under Article 2041 of
the Civil Code. 16 Not having done so, and by simply ignoring the contentions of
petitioner, respondent labor arbiter had effectively and in a substantial manner denied
petitioner his light to due process.
The NLRC in affirming the Labor Arbiter's Order of March 30, 1987 proceeded from
the wrong assumption that petitioner is a lawyer, thus:
It is safe to assume that complainant is a lawyer from the
complaint, thus:
COMES now above-named complainant, thru and by his attorney,
and to this Honorable Commission respectfully allege;
since he signed the complaint itself, and the subsequent pleadings
filed. As such he is aware of the full impact of the Compromise
Agreement he entered into. His assent to receive as compromise
separation pay necessarily follows his agreement in the severance
of his employer-employee relationship. He likewise released and
discharged, after agreeing to receive the amount of P 6,016.64 as
separation pay and P 995.40 as incentive leave pay, respondent
from any money claim whatsoever in connection with his
employment with respondent. 18
Considering, as adverted to above, that non- lawyers are allowed to appear before the
labor tribunal on their own representation, it was a grave abuse of discretion for
respondent NLRC to simply assume a fact material to the determination of the
controversy and to accept it as gospel truth. The Resolution of the NLRC dated
September 30, 1987, being based on a false assumption, speculation and conjecture,
should be, as it is hereby set aside.

WHEREFORE, the Orders of November 28,1986 and March 30, 1987 issued by
respondent Labor Arbiter as well as the resolutions of the respondent NLRC dated
September 30, 1987 and December 14,1987 are hereby set aside. The case is ordered
remanded to the Labor Arbiter for trial on the merits of petitioner's claims for illegal
dismissal and separation pay, with instructions that this case be given priority
considering the health and age of the petitioner. The amount received by petitioner
shall be deducted from the correct amount of separation pay due him. No
pronouncement as to costs.
SO ORDERED.

SUPREME COURT
Manila

FIRST DIVISION
G.R. No. 80918 August 16, 1989
JOSEFINA M. PRINCIPE, petitioner
vs.
PHILIPPINE-SINGAPORE TRANSPORT SERVICES, INC. and CHUAN
HUP AGENCIES, PTE. LTD., NATIONAL LABOR RELATIONS
COMMISSION AND PHILIPPINE OVERSEAS EMPLOYEES
EMPLOYMENT ADMINISTRATION, respondents.
R. C. Carrera Law Firm for petitioner.
Eladio B. Samson for private respondent.
GANCAYCO, J.:
Once again this Tribunal is faced with the issue of the validity of the quitclaim
executed by the employee's heir in favor of the employer.
Petitioner is the widow of the late Abelardo Principe who was then the Chief
Engineer of M/V OSAM Falcon, a commercial vessel of Singaporean registry owned
by Chuan Hup Agencies, Pte. Ltd. (Chuan Hup for brevity), one of the private
respondents herein, who is the principal of Philippine-Singapore Transport Services,
Inc. (PSTSI), also a private respondent herein. The contract of employment of the
deceased with private respondent Chua Hup provides, among others, that Principe
would receive Singapore $2,800.00 a month to commence on September 7, 1982,
medical benefits and insurance coverage through group hospitalization and surgical
insurance and group and personal accident insurance for a capital sum of
US$75,000.00. It also provides that the laws of Singapore shall apply in cases of
disputes arising out of the said appointment and that said disputes are to be resolved
by the courts of the Republic of Singapore. 1
On September 15,1982, while Principe was on duty in Malintoc Field, Palawan,
Philippines, he suddenly contracted a serious illness which eventually resulted to his
death. 2
On July 5, 1983, petitioner filed a complaint 3 against PSTSI with the Workers
Assistance and Adjudication Office of the Philippine Overseas Employment
Administration (POEA), seeking the payment of death compensation benefits and
other benefits accruing to her deceased husband. While the aforesaid case was
pending, the parties entered into a compromise agreement. On December 22, 1983,
petitioner executed a release and quitclaim in favor of PSTSI in consideration of the

sum of Seven Thousand Pesos (P7,000.00) together with hospital, burial and other
incidental expenses previously disbursed by PSTSI in favor of petitioner's deceased
husband. 4 Consequently, Atty. Wellington Lachica, counsel for petitioner, with the
latter's conformity, filed a motion to dismiss the case with prejudice against PSTSI
and without prejudice as against Chuan Hup 5
On the basis of the compromise agreement and the motion to dismiss dated
November 23, 1983, the POEA issued an order dated December 27, 1983, dismissing
petitioner's complaint with prejudice against PSTSI.
On April 21, 1986, petitioner filed with the POEA another claim for death benefits
against PSTSI, this time including Chuan Hup. The new case was docketed as POEA
Case No. (L) 86-04-328. In the decision dated January 27, 1987, the POEA
dismissed the complaint on the ground that there exist identity of parties, subject
matter and cause of action between the previous case, POEA Case No. L-635-83 and
the new case, and that the present case is barred by prior judgment based on a
compromise agreement in the previous case. 6
Petitioner appealed to the National Labor Relations Commission
(NLRC).lwph1.t In a resolution dated September 25, 1987, the NLRC dismissed
the appeal for lack of merit. 7
Hence, the present petition.
It is the position of the petitioner that the release and quitclaim that she signed in
favor of private respondent PSTSI is null and void on the ground that the
consideration given in exchange thereof in the amount of P7,000.00 is extremely low
and unconscionable. Petitioner added that she was merely misled to sign the
quitclaim due to the assurance given by PSTSI that it will help her recover the death
compensation and insurance proceeds due her deceased husband. She argued that
even on the assumption that the quitclaim is valid, the release should benefit PSTSI
alone and should not include Chua Hup as the quitclaim was executed only in favor
of PSTSI. Further she contended that notwithstanding the quitclaim executed in favor
of PSTSI, the latter may still be held liable since it is an agent of Chuan Hup here in
the Philippines. 8
The Solicitor General supports petitioner's view stating that the principle of res
judicata is inapplicable to the case at bar since petitioner and PSTSI agreed that the
dismissal of the suit against the latter is without prejudice insofar as the principal
Chuan Hup is concerned; that the quitclaim is null and void as the consideration
given is unconscionably low as it is not even equal to one percent (1%) of petitioner's
claim; and that the quitclaim is inequitable and incongrous to the declared policy of
the State to afford protection to labor, citing Section 3, Article XIII of the 1987
Constitution. 9

We rule for the petitioner.
The release and quitclaim in question reads as follows:
JOSEFINA M. PRINCIPLE, of legal age,widow, and resident at 1287-E, G. Tuazon
St., Sampaloc, Manila in favor of PHILIPPINE-SINGAPORE TRANS-PORT
SERVICES, INC., a domestic corpo-ration domiciled and having its principal place
of business at 205 Martinez Bldg.,Dasmarinas, Manila.
WITNESSETH, that:
WHEREAS, on July 5, 1983, Josefina M. Principe fled a complaint
for death benefits against Philippine-Singapore Transport Services,
Inc. as a shipping agency of Chuan Hup Agencies Pte. Ltd. of the
Republic of Singapore for the death of her husband, Engr.
Abelardo D. Principe, on September 15, 1982 in Matinloc Field,
Offshore Palawan, Philippines while in the course of as
employment as Chief Engineer of OSAM Falcon' in POEA Case
No. (L) 635-83 of the Philippine Overseas Employment
Administration, entitled Josefina M. Principe vs. PhilippineSingapore Transport Services, Inc.;'
WHEREAS, the parties have agreed to settle the above- entitled
case amicably.
death of said Abelardo D. Principe, and further, that she hereby

manifests that any and all rights or claims which she, as a surviving
forced heir of the late Abelardo D. Principe might have against
Philippine-Singapore Transport Services, Inc., its directors,
employees, principals and agents arising out of or by reason of the
death of said Abelardo D. Principe are hereby deemed waived and
discharged and she have (sic) Philippine-Singapore Transport
Services, Inc., its directors, officers, employees, principals and
agents and whoever may be held liable, completely free and
harmless from any claim and/or liabilities that may arise from the
death of said Abelardo D. Principe (sic).
That in the event that any other person/persons, as surviving
spouse of the deceased Abelardo D. Principe should claim against
Philippine-Singapore Transport Services, Inc. for such
damages/support arising from the death of Abelardo D. Principe,
and the claim is held valid, then Josefina M. Principe hereby
undertakes and agrees to reimburse to Philippine-Singapore
Transport Services, Inc. the amounts hereunder received, plus legal
interest therein.
That she further states that the foregoing consideration is
voluntarily accepted by her as a full and final compromise,
adjustment and settlement of any and all claims that she may have
against Philippine-Singapore Transport Services, Inc., its directors,
officers, employees, principals and agents; and she hereby
irrevocably affirm (sic) that Philippine-Singapore Transport
Services, Inc. has made this settlement solely to buy peace, avoid
litigation and on human consideration, and she acknowledges that
the payment of said consideration is not and shall never be
construed as an admission of liability or obligation by PhilippineSingapore Transport Services, Inc., its officers, directors,
employees, principals and agents. 10
NOW, THEREFORE, for and in consideration of the sum of

SEVEN THOUSAND PESOS (P7,000.00), Philippine currency
and of the hospital, burial and other incidental expenses previously
disbursed by Philippine-Singapore Transport Services, Inc., receipt
of which in full is hereby acknowledged to her full and complete
satisfaction, JOSEFINA M. PRINCIPLE have (sic) released and
discharged, as she hereby releases and discharges, PhilippineSingapore Transport Services, Inc., its directors, officers,
employees, principals and agents from any and all claims, actions
obligations and liabilities which she have or might have against
Philippine-Singapore Transport Services, Inc. in connection with
the death of her husband Abelardo D. Principe on September 15,
1982 in Matintoc Field, Offshore Palawan under the circumstances
narrated in the aforementioned case.
It is true that a compromise agreement once approved by the court has the effect of
res judicata between the parties and should not be disturbed except for vices of
consent and forgery. However, settled is the rule that the NLRC may disregard
technical rules of procedure in order to give life to the constitutional mandate
affording protection to labor and to conform to the need of protecting the working
class whose inferiority against the employer has always been earmarked by
disadvantage. 11
That she hereby represents and warrants to Philippine-Singapore

Transport Services, Inc. that she is the surviving spouse legally
entitled to claim for damages/support which may arise from the
The Court finds that the compromise agreement entered into by the petitioner in
favor of PSTSI was not intended to totally foreclose her right over the death benefits
of her husband. First, the motion to dismiss, filed by petitioner through Atty. Lachica

before the POEA, which cited the compromise agreement entered into by the parties,
clearly and unequivocally reflects the undertaking that the release is without
prejudice as regards private respondent Chuan Hup. This fact was acknowledged in
the decision of POEA Administrator Tomas D. Achacoso in POEA Case No. (L) 8604-328. It is surprising why both the POEA and the NLRC failed to consider this
aspect in the resolution of the second complaint filed by the petitioner against PSTSI
and Chuan Hup.
The second complaint was filed by petitioner to enforce the joint and several liability
of PSTSI and Chuan Hup per joint affidavit of responsibility executed by said parties
in entering into a principal agent relationship after PSTSI failed to live up to its
commitment to assist petitioner in the recovery of death compensation. 12 This
observation is supported by the provisions of the release signed by the petitioner
wherein the parties referred to therein were only the petitioner and PSTSI. The
release is from any claim against PSTSI. Chuan Hup is not a party thereto. He cannot
be considered covered by the release.
Moreover, the Court sees no reason why petitioner, with the assistance of a counsel
would ever agree to foreclose her right against Chuan Hup over the death benefits of
her husband in exchange for a very measly sum of Seven Thousand Pesos
(P7,000.00). They must have been aware that should she pursue her case, she was
assured of getting at least One Hundred Thousand Eight Hundred Singapore dollars
(US$100,800.00). This Court has laid down the rule in similar cases that applying the
Singapore Maritime Laws in case of a seaman's death, the heirs of the seaman should
receive the equivalent of 36 months wages of the deceased seaman. 13
The fact that petitioner received the sum of P7,000.00 only should not be taken to
mean as a waiver of her right. The circumstances she was confronted with during that
time left her with no other alternative but to accept the same as she was in dire need
of money due to the sudden death of her husband. PSTSI contends that it was
precisely because of her need for cash that petitioner thereby totally waived her right
over the death benefits of her husband. We do not think so. What is plausible is the
protestation of petitioner that PSTSI took advantage of her financial distress and led
her to signing the release and quitclaim without explaining the consequences to her.
While it may be true that her counsel assisted her in the process, said counsel must
have been persuaded by the assurance of PSTSI that it shall help obtain for her the
corresponding benefits from Chuan Hup.
Even assuming for the sake of argument that the quitclaim had foreclosed petitioner's
right over the death benefits of her husband, the fact that the consideration given in
exchange thereof was very much less than the amount petitioner is claiming renders
the quitclaim null and void for being contrary to public policy. 14 The State must be
firm in affording protection to labor. The quitclaim wherein the consideration is
scandalously low and inequitable cannot be an obstacle to petitioner's pursuing her
legitimate claim. 15 Equity dictates that the compromise agreement should be voided
in this instance.
Lastly, it must be noted that the first complaint of petitioner was merely an action
against PSTSI whereas in the second complaint Chuan Hup was already included.
The POEA ruled that the second complaint was merely an afterthought, and that it
was a product of a pre-conceived mind considering the interval of time from the
issuance of the order of dismissal in the previous case and the institution of the
second complaint. We do not think so. On the contrary, the Court holds that the delay
was due to PSTSI's failure to make good its promise to assist the petitioner in
recovering the death benefits of her husband. We see no other reason thereby. Hence,
even if the second action was filed beyond the three (3) year reglementary period as
provided by law for such claims, We cannot buy PSTSI's argument that the claim is
already barred. The blame for the delay, if any, can only be attributed to PSTSI.
On the other hand, PSTSI argues that it cannot be held responsible on the ground that
the aforesaid affidavit of undertaking with Chua Hup is applicable only to those
members of the crew recruited by PSTSI in the Philippines for and in behalf of its
principal Chuan Hup and that since Principe was directly hired by Chuan Hup,
PSTSI cannot be held responsible as it has no privity of contract with those personnel
recruited in Singapore.
The argument is untenable. This is the first time PSTSI raised this defense when it
had all the chance to do so below. Moreover, if PSTSI honestly believed it had no
privity of contract with Principe who was directly recruited by Chuan Hup, then
there is no reason why it entered into a compromise agreement with herein petitioner.
From the very start, it should have asked for the dismissal of the case against it on
the ground of lack of cause of action, but it did not do so. What is obvious is that
Principe was actually recruited by PSTSI and that he signed the employment contract
with the principal Chuan Hup. Thus, private respondents stand jointly and severally
liable for the claim of petitioner.
Anent the argument that the Philippine courts are without jurisdiction over the
subject matter as jurisdiction was, by agreement of the parties, vested in the courts of
the Republic of Singapore, it is well-settled that an agreement to deprive a court of
jurisdiction conferred on it by law is void and of no legal effect. 16 In this jurisdiction
labor cases, are within the competence of the National Labor Relations Commission.
With respect to petitioner's monetary claim, since the parties agreed that the laws of
Singapore shall govern their relationship and that any dispute arising from the
contract shall be resolved by the law of that country, then the petitioner is entitled to
death benefits equivalent to 36 months salary of her husband. 17 As the wage of
deceased Abelardo Principe was S$2,800.00 a month, then petitioner is entitled to a
total of S$100,800.00.

WHEREFORE, premises considered, the petition is granted. The resolution of the
NLRC dated September 25,1987 is hereby set aside and another decision is hereby
rendered ordering private respondents PSTSI and Chuan Hup Agencies, Pte. Ltd. to
jointly and severally pay petitioner the sum of S$100,800. 00 in its equivalent in
Philippine pesos. This decision is immediately executory.
SO ORDERED.

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CBA FINALS CASE 2 Page 1

CBA FINALS CASE 2 Page 2

DIGITEL to commence collective bargaining negotiation with

The issue of unfair labor practice, consisting of union-busting,

CBA FINALS CASE 2 Page 3

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CBA FINALS CASE 2 Page 5

Further, the Certificates issued to Customer Service Representative likewise show

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In Nueva Ecija I Electric Cooperative, Inc. (NEECO I) Employees Association v.

The finding of unfair labor practice hinges on Digitels contracting-out certain

We have no basis to direct reinstatement of the affected employees to an ostensibly

We awarded moral damages in the amount of P10,000.00 and likewise awarded

CBA FINALS CASE 2 Page 8

CBA FINALS CASE 2 Page 9

agreements and those arising from the interpretation or enforcement of company

CBA FINALS CASE 2 Page 10

Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels,

CBA FINALS CASE 2 Page 11

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Sometime in October 2004, Edwin experienced abdominal pains while on-board

CBA FINALS CASE 2 Page 13

International Bargaining Forum/Associated Marine Officers and Seamens Union of

Submitting to you the monthly expenses for his chemotherapy.

CBA FINALS CASE 2 Page 14

CBA FINALS CASE 2 Page 15

CBA FINALS CASE 2 Page 16

THE FINDINGS OF FACT OF THE HONORABLE COURT OF APPEALS DO

B. PETITIONER[S] [ARE] ENTITLED TO MORAL DAMAGES FOR (sic)

The petitioners emphasize that under the IBF/AMOSUP/IMMAJ CBA, a seafarer's

Furthermore, as held in Uichico v. NLRC, this procedural rule should not be

The Petitioners' Arguments

CBA FINALS CASE 2 Page 17

especially in view of the Court's declaration in Rivera v. Wallem Maritime Services,

The Respondents' Contentions

While generally, only questions of law

CBA FINALS CASE 2 Page 18

Articles 22 (Termination of Employment), 25 (Medical), 26 (Sick Pay) and 29 (Loss

CBA FINALS CASE 2 Page 19

To the nominated beneficiary .............. US$75,000.00

Article 22.1(b) considers an employment as terminated if a seafarer signs off from

Article 29.1 of the IBF/AMOSUP/IMMAJ CBA provides that the death of a

CBA FINALS CASE 2 Page 20

Republic of the Philippines

G.R. No. 87297 August 5, 1991

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Republic of the Philippines

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1. That respondent hereby agrees to pay as separation pay the sum

3. That complainant hereby releases and discharges respondent

CBA FINALS CASE 2 Page 24

Section 1. Initial conference/hearing.- Within two (2) days from

CBA FINALS CASE 2 Page 25

object of compromise, and consequently, no compromise agreement in law to speak

1. That complaint filed by undersigned consists of two (2) issues:

CBA FINALS CASE 2 Page 26

Republic of the Philippines

CBA FINALS CASE 2 Page 27

petitioner executed a release and quitclaim in favor of PSTSI in consideration of the

CBA FINALS CASE 2 Page 28

death of said Abelardo D. Principe, and further, that she hereby

NOW, THEREFORE, for and in consideration of the sum of