Philippine Export and Foreign Loan Guarantee Corporation v V.P. Eusebio Construction Inc.

Facts:
1. The State Organization of Buildings (SOB), Ministry of Housing and Construction, Baghdad, Iraq
awarded the construction of the Institute of Physical Therapy-Medical Rehabilitation Center in Iraq to
Ayjal Trading and Contracting Company for a total contract price of about $18M.

2. Spouses Santos, in behalf of 3-Plex International, Inc., a local contractor engaged in construction
business, entered into a joint venture agreement with Ayjal wherein the former undertook the execution of
the entire a project, while the latter would be entitled to a commission of 4%.

3. 3-Plex not accredited by the Philippine Overseas Construction Board (POCB) assigned and transferred
all its rights and interests to VPECI.

4. The SOB required the contractors to submit a performance bond representing 5% of the total contract
price, an advance payment bond representing 10% of the advance payment to be released upon signing
of the contract. To comply with these requirements 3-Plex and VPECI applied for a guarantee with
Philguarantee, a government financial institution empowered to issue guarantees for qualified Filipino
contractors.

5. But what SOB required was a guarantee from the Rafidain Bank of Baghdad so Rafidain Bank issued a
performance bond in favor of SOB on the condition that another foreign bank (not Phil Guarantee) would
issue the counter-guarantee. Hence, Al Ahli Bank of Kuwait was chosen to provide the counter
guarantee.

6.Afterwards, SOB and the joint venture of VPECI and Ayjal executed the service contract. Under the
contract, the joint venture would supply manpower and materials, SOB would refund 25% of the project
cost in Iraqi Dinar and 75% in US dollars at an exchange rate of 1 Dinar to $3.37.

7.The project was not completed. Upon seeing the impossibility of meeting the deadline, the joint venture
worked for the renewal or extension (12x) of the performance bond up to December 1986.

8. In October 1986, Al Ahli Bank sent a telex call demanding full payment of its performance bond
counter-guarantee. Upon receipt, VPECI requested Iraq Trade and Economic Development Minister
Fadhi Hussein to recall the telex for being in contravention of its mutual agreement that the penalty will be
held in abeyance until completion of the project. It also wrote SOB protesting the telex since the Iraqi
government lacks foreign exchange to pay VPECI and the non-compliance with the 75% billings in US
dollars.

9. Philguarantee received another telex from Al Ahli stating that it already paid to Rafidain Bank. The
Central Bank authorized the remittance to Al Ahli Bank representing the full payment of the performance
counter-guarantee for VPECI's project in Iraq.

10. Philguarantee sent letters to respondents demanding the full payment of the surety bond.
Respondents failed to pay so petitioner filed a civil case for collection of sum of money.

11. Trial Court ruling: Dismissed. Philguarantee had no valid cause of action against the respondents.
The joint venture incurred no delay in the execution of the project considering that SOB's violations of the
contract rendered impossible the performance of its undertaking.

12. CA: Affirmed.

Issue:
What law should be applied in determining whether or not contractor (joint venture) has defaulted?

Held:
The question of whether there is a breach of the agreement which includes default pertains to the
INTRINSIC validity of the contract.

No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule followed
by most legal systems is that the intrinsic validity of a contract must be governed by lex contractus (proper
law of the contract). This may be the law voluntarily agreed upon by the parties (lex loci voluntatis) or the
law intended by them either expressly or implicitly (lex loci intentionis). The law selected may be implied
from factors such as substantial connection with the transaction, or the nationality or domicile of the
parties. Philippine courts adopt this: to allow the parties to select the law applicable to their contract,
SUBJECT to the limitation that it is not against the law, morals, public policy of the forum and that the
chosen law must bear a substantive relationship to the transaction.

In the case, the service contract between SOB and VPECI contains no express choice of law. The laws of
Iraq bear substantial connection to the transaction and one of the parties is the Iraqi government. The
place of performance is also in Iraq. Hence, the issue of whether VPECI defaulted may be determined by
the laws of Iraq.

BUT! Since foreign law was not properly pleaded or proved, processual presumption will apply.

According to Art 1169 of the Civil Code: In reciprocal obligations, neither party incurs in delay if the other
party does not comply or is not ready to comply in a proper manner what is incumbent upon him.

As found by the lower courts: the delay or non-completion of the project was caused by factors not
imputable to the Joint Venture, it was rather due to the persistent violations of SOB, particularly it's failure
to pay 75% of the accomplished work in US dollars. Hence, the joint venture does not incur in delay if the
other party(SOB) fails to perform the obligation incumbent upon him.



G.R. Nos. 90306-07 July 30, 1990
K.K. SHELL SEKIYU OSAKA HATSUBAISHO and FU HING OIL CO., LTD., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ATLANTIC VENUS CO., S.A., and THE VESSEL M/V
"ESTELLA",respondents.
Hernandez, Velicaria Vibar & Santiago for petitioners.
Cesar C. Cruz & Partners for private respondents

CORTES, J :
Ordinarily, the Court will not disturb the factual findings of the Court of Appeals, these being considered
final and conclusive. However, when its factual conclusions are manifestly mistaken, the Court will step in
to correct the misapprehension [De la Cruz v. Sosing, 94 Phil. 26 (1953); Castillo v. Court of Appeals,
G.R. No. L-48290, September 29, 1983, 124 SCRA 808.] This case is one such instance calling for the
Court's review of the facts.
On January 7,1987, Kumagai Kaiun Kaisha, Ltd. (hereinafter referred to as Kumagai), a corporation
formed and existing under the laws of Japan, filed a complaint for the collection of a sum of money with
preliminary attachment against Atlantic Venus Co., S.A. (hereinafter referred to as "Atlantic"), a
corporation registered in Panama, the vessel MV Estella and Crestamonte Shipping Corporation
(hereinafter referred to as "Crestamonte"), a Philippine corporation. Atlantic is the owner of the MV
Estella. The complaint, docketed as Civil Case No. 8738930 of the Regional Trial Court, Branch XIV,
Manila alleged that Crestamonte, as bareboat charterer and operator of the MV Estella, appointed N.S.
Shipping Corporation (hereinafter referred to as "NSS"), a Japanese corporation, as its general agent in
Japan. The appointment was formalized in an Agency Agreement. NSS in turn appointed Kumagai as its
local agent in Osaka, Japan. Kumagai supplied the MV Estella with supplies and services but despite
repeated demands Crestamonte failed to pay the amounts due.
NSS and Keihin Narasaki Corporation (hereinafter referred to a Keihin filed complaints-in-intervention.
On May 19,1987, petitioner Fu Hing Oil Co., Ltd. (hereinafter referred to as Fu Hing"), a corporation
organized in Hong Kong and not doing business in the Philippines, filed a motion for leave to intervene
with an attached complaint-in-intervention, alleging that Fu Hing supplied marine diesel oil/fuel to the MV
Estella and incurred barge expenses for the total sum of One Hundred Fifty-two Thousand Four Hundred
Twelve Dollars and Fifty-Six Cents (US$152,412.56) but such has remained unpaid despite demand and
that the claim constitutes a maritime lien. The issuance of a writ of attachment was also prayed for.
On July 16, 1987, petitioner K.K. Shell Sekiyu Osaka Hatsubaisho (hereinafter referred to as K.K. Shell"),
a corporation organized in Japan and not doing business in the Philippines, likewise filed a motion to
intervene with an attached complaint-in-intervention, alleging that upon request of NSS, Crestamonte's
general agent in Japan, K.K. Shell provided and supplied marine diesel oil/fuel to the W Estella at the
ports of Tokyo and Mutsure in Japan and that despite previous demands Crestamonte has failed to pay
the amounts of Sixteen Thousand Nine Hundred Ninety-Six Dollars and Ninety- Six Cents
(US$16,996.96) and One Million Yen (Y1,000,000.00) and that K.K. Shell's claim constitutes a maritime
lien on the MV Estella. The complaint-in-intervention sought the issuance of a writ of preliminary
attachment.
The trial court allowed the intervention of Fu Hing and K.K. Shell on June 19,1987 and August 11, 1987,
respectively. Writs of preliminary attachment were issued on August 25, 1987 upon posting of the
appropriate bonds. Upon the posting of counterbonds, the writs of attachment were discharged on
September 3, 1987.
Atlantic and the MV Estella moved to dismiss the complaints-in- intervention filed by Fu Hing and K.K.
Shell.
In the meantime, Atlantic and the AWU Estella filed a petition in the Court of Appeals against the trial
court judge, Kumagai, NSS and Keihin, docketed as CA-G.R. SP No. 12999, which sought the annulment
of the orders of the trial court dated April 30, 1987 and August 11, 1987. Among others, the omnibus
order dated August 11, 1987 denied the motion to reconsider the order allowing Fu Hing's intervention
and granted K.K. Shell's motion to intervene. Again Fu Hing and K.K. Shell intervened, CA-G.R. SP No.
12999 was consolidated with another case (CA-G.R. SP No. 12341). Fu Hing and K.K. Shell intervened in
CA-G.R. SP No. 12999.
In a decision dated June 14, 1989, the Court of Appeals annulled the orders of the trial court and directed
it to cease and desist from proceeding with the case.
According to the Court of Appeals, Fu Hing and K.K. Shell were not suppliers but sub-agents of NSS,
hence they were bound by the Agency Agreement between Crestamonte and NSS, particularly, the
choice of forum clause, which provides:
12.0-That this Agreement shall be governed by the Laws of Japan. Any matters,
disputes, and/or differences arising between the parties hereto concerned regarding this
Agreement shall be subject exclusively to the jurisdiction of the District Courts of Japan.
Thus, concluded the Court of Appeals, the trial court should have disallowed their motions to intervene.
A motion for reconsideration was filed by Fu Hing and K.K. Shell but this was denied by the Court of
Appeals. Hence this petition;
In this case, we shall review the decision of the Court of Appeals only insofar as it relate to the
intervention of K.K. Shell. Fu Hing Oil Co., Ltd. filed a motion to withdraw as co-petitioner on March 7,
1990, alleging that an amicable settlement had been reached with private respondents. The Court
granted the motion on March 19, 1990.
After considering the pleadings filed by the parties and the arguments raised therein, the Court finds
reversible error on the part of the Court of Appeals in so far; as it disallowed petitioners' intervention in the
case before the trial court and ordered the latter to cease and desist from proceeding with the case.
1. A reading of the Agency Agreement fails to support the conclusion that K.K. Shell is a sub-agent of
NSS and is, therefore, bound by the agreement.
The body of the Agency Agreement entered into by and between Crestamonte (referred to in the
agreement as "Owner") and NSS ("Agent") provides:
W I T N E S S E T H
That the OWNER has appointed and by these presents hereby appoints the AGENT as its General
Agents for all Japan in connection with the Owner's vessels and/or providing suitable vessels for Japan
Ports under the following terms and conditions:
1.0 - In general, the Agent will abide by the Owner's decisions regarding the mode of
operations of the vessels in Japan and that all cargo bookings, vessel's fixtures/charters,
etc. by the Agent, shall always be subject to the prior approval and consent of the
Owners.
2.0 - That the Agent shall provide for the necessary services required for the husbanding
of the Owner's vessels in all Japan Ports and issue Bill(s) of Lading to Shippers in the
form prescribed by the Owners.
3.0 - That the Agent shall be responsible for fixing south-bound cargoes with revenues
sufficient to cover ordinary liner operation expenses such as bunkers, additives,
lubricating oil, water, running repairs, drydocking expenses, usual port disbursement
accounts, cargo handling charges including stevedorage, provisions and ship's stores
and cash advance to crew (excluding crew provisions).
The Agent expressly agrees that the Owner's cash flow in Japan shall be essentially the
Agent's responsibility, and should the revenue for south-bound cargoes as above-
mentioned be insufficient to cover the aforesaid expenses, the Agent shall provide credit
to the extent of the vessels' requirements, provided however that said obligation shall be
secured by the Owner committing at least forty-eight (48) mailings of Japan/Philippines
liner service per year.
The Agent shall settle, in behalf of the Owner, all outstanding payments for the operation
costs on Owner's liner service carried forward from the present Owner's agent, subject to
approval of Owner's Representative in Japan in regard to amount and nature thereof.
4.0- That the agent shall furnish office space of approximately thirty (30) square meters
for the exclusive use of the Owner and its representatives, within the premises of the
Agent's office, free of charge.
5.0 That the responsibilities of the Agent in regard to the cargo shall begin, in the case
of imports into the territory of Japan, from the time such cargo has left the ship's tackles,
and shall cease, in case of export, upon completion of loading.
6.0 That the remuneration of the Agent from the Owner shall be as follows:
xxx xxx xxx
7.0 That the Agent shall exert best efforts to recommend to Owners stevedoring and
other expenses incurred in connection with work on board the Owner's vessels, as well
as customs house charges, pilotage, harbour dues, cables, etc. which are for Owner's
account, on the cheapest possible terms. Owners shall decide and may appoint through
the Agent the services described herein.
8.0 That the Agent shall be responsible for the due collection of and due payment to
the Owner of all outward freight prepaid for cargo without delay upon the sailing of each
vessel from the port. The Agent shall be also responsible for the due collection of all
inward freight payable at the port against delivery unless otherwise instructed by the
Owner to the contrary.
9.0 The account statements supported by vouchers in two copies itemized for each
service and/or supply for each vessel, shall be forwarded by the Agent to the Owner
promptly after the departure of each vessel but in no case later than 60 days thereafter.
10.0 That the freightage to be collected by the Agent in Japan shall be paid to the
Owner after deducting the total amount of disbursements incurred in Japan.
11.0 That this Agreement takes effect as of April 15, 1983 and shall remain in force
unless terminated by either party upon 60 days notice.
12.0 That this Agreement shall be governed by the Laws of Japan. Any matters,
disputes, and/or differences arising between the parties hereto concerned regarding this
reement shall be subject exclusively to the jurisdiction of the District Courts of Japan.
[Annex "G" of the Petition, Rollo, pp. 100-104.]
No express reference to the contracting of sub-agents or the applicability of the terms of the agreement,
particularly the choice-of-forum clause, to sub-agents is made in the text of the agreement. What the
contract clearly states are NSS' principal duties, i.e., that it shall provide for the necessary services
required for the husbanding of Crestamonte's vessels in Japanese ports (section 2.0) and shall be
responsible for fixing southbound cargoes with revenues sufficient to cover ordinary expenses (section
3.0).itc-asl
Moreover, the complaint-in-intervention filed by K.K. Shell merely alleges that it provided and supplied the
MV Estella with marine diesel oil/fuel, upon request of NSS who was acting for and as duly appointed
agent of Crestamonte [Rollo, pp. 116117.] There is thus no basis for the Court of Appeal's finding, as
regards K.K Shell in relation to its intervention in Civil Case No. 87-38930, that "the sub-agents admitted
in their pleadings that they were appointed as local agent/sub-agent or representatives by NSS by virtue
of said Agency Agreement" [Decision, p. 7; Rollo, p. 33.] What the Court of Appeals could have been
referring to was K.K. Shell's Urgent Motion for Leave to Intervene dated February 24, 1987 in another
case (Civil Case No. 86-38704) in another court and involving other vessels (NW Ofelia and MV Christina
C), where it was alleged that K.K. Shell is "one of the representatives of NS Shipping Corporation for the
supply of bunker oil, fuel oil, provisions and other necessaries to vessels of which NS Shipping
Corporation was the general agent." [Comment, p. 17; Rollo, p. 274.] However, this allegation does not
conclusively establish a sub-agency between NSS and K.K. Shell. It is therefore surprising how the Court
of Appeals could have come to the conclusion, just on the basis of the Agency Agreement and the
pleadings filed in the trial court, that "Crestamonte is the principal, NSS is the agent and ... Fu Hing and
K.K Shell are the sub-agents." [Decision, p. 6; Rollo, p. 32.]
In view of the inconclusiveness of the Agency Agreement and the pleadings filed in the trial court,
additional evidence, if there be any, would still have to be presented to establish the allegation that K.K.
Shell is a sub-agent of NSS.
In the same vein, as the choice-of-forum clause in the agreement (paragraph 12.0) has not been
conclusively shown to be binding upon K.K. Shell, additional evidence would also still have to be
presented to establish this defense, K.K. Shell cannot therefore, as of yet, be barred from instituting an
action in the Philippines.
2. Private respondents have anticipated the possibility that the courts will not find that K.K. Shell is
expressly bound by the Agency Agreement, and thus they fall back on the argument that even if this were
so, the doctrine offorum non conveniens would be a valid ground to cause the dismissal of K.K. Shell's
complaint-in-intervention.
K.K. Shell counters this argument by invoking its right as maritime lienholder. It cites Presidential Decree
No. 1521, the Ship Mortgage Decree of 1978, which provides:
SEC. 21. Maritime Lien for Necessaries; person entitled to such lien-Any person
furnishing repairs, supplies, to wage, use of dry dock or marine railway, or other
necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of
such vessel, or of a person authorized by the owner, shall have a maritime lien on the
vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove
that credit was given to the vessel.
Private respondents on the other hand argue that even if P.D. No. 1521 is applicable, K.K. Shell cannot
rely on the maritime lien because the fuel was provided not exclusively for the benefit of the MV Estella,
but for the benefit of Crestamonte in general. Under the law it must be established that the credit was
extended to the vessel itself. Now, this is a defense that calls precisely for a factual determination by the
trial court of who benefitted from the delivery of the fuel. Hence, again, the necessity for the reception of
evidence before the trial court.
In other words, considering the dearth of evidence due to the fact that the private respondents have yet to
file their answer in the proceedings below and trial on the merits is still to be conducted, whether or not
petitioners are indeed maritime lienholders and as such may enforce the lien against the MV Estella are
matters that still have to be established.
Neither are we ready to rule on the private respondents' invocation of the doctrine of forum non
conveniens, as the exact nature of the relationship of the parties is still to be established. We leave this
matter to the sound discretion of the trial court judge who is in the best position, after some vital facts are
established, to determine whether special circumstances require that his court desist from assuming
jurisdiction over the suit.
It was clearly reversible error on the. part of the Court of Appeals to annul the trial court's orders, insofar
as K.K. Shell is concerned, and order the trial court to cease and desist from proceeding with Civil Case
No. 87-38930. There are still numerous material facts to be established in order to arrive at a conclusion
as to the true nature of the relationship between Crestamonte and K.K. Shell and between NSS and K.K.
Shell. The best recourse would have been to allow the trial court to proceed with Civil Case No. 87-38930
and consider whatever defenses may be raised by private respondents after they have filed their answer
and evidence to support their conflicting claims has been presented. The Court of Appeals, however,
substituted its judgment for that of the trial court and decided the merits of the case, even in the absence
of evidence, on the pretext of reviewing an interlocutory order.
WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals is REVERSED in CA-
G.R. SP No. 12999, insofar as it annulled the order of the August 11, 1987 and directed the trial court to
cease and desist from proceeding with Civil Case No. 87-38930.
SO ORDERED.

G.R. No. 129584, December 3, 1998



LABOR LAW: Disease as Ground for Dismissal, requisites: (1) the disease must be such that
employees continued employment is prohibited by law or prejudicial to his health as well as to
the health of his co-employees; and (2) there must be a certification by competent public
authority that the disease is of such nature or at such a stage that it cannot be cured within a
period of 6 months with proper medical treatment.
LABOR LAW: same; The requirement for a medical certificate under Article 284 of the Labor
Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary
determination by the employer of the gravity or extent of the employees illness and thus defeat
the public policy on the protection of labor.
PRIVATE INTERNATIONAL LAW: Lex Loci Contractus: Established is the rule that lex loci
contractus (the law of the place where the contract is made) governs in this jurisdiction. There is
no question that the contract ofemployment in this case was perfected here in the Philippines.
PRIVATE INTERNATIONAL LAW: Law of the Forum vis-a-vis Public Policy: Settled is the
rule that the courts of the forum will not enforce any foreign claim obnoxious to the forums
public policy. Here in the Philippines,employment agreements are more than contractual in
nature. The Constitution itself, in Article XIII Section 3, guarantees the special protection of
workers.


FACTS:

Osdana, a Filipino citizen, was recruited by Triple Eight for employment with the latters principal, Gulf
Catering Company (GCC), a firm based in the Kingdom of Saudi Arabia. The employment contract
(originally as food server but later changed to waitress) was executed in the Philippines but was to be
performed in Riyadh. Once in Riyadh, however, Osdana was made to perform strenuous tasks (washing
dishes, janitorial work), which were not included in her designation as a waitress. Because of the long
hours and strenuous nature of her work, she suffered from Carpal Tunnel Syndrome, for which she had
to undergo surgery. But during her weeks of confinement at the hospital for her recovery, she was not
given any salary. And after she was discharged from the hospital, GCC suddenly dismissed her from
work, allegedly on the ground of illness. She was not given any separation pay nor was she paid her
salaries for the periods when she was not allowed to work. Thus, upon her return to the Philippines, she
filed a complaint against Triple Eight, praying for unpaid and underpaid salaries, among others.

The LA ruled in her favour, which ruling NLRC affirmed. Hence, this petition for certiorari.

ISSUE:


Whether or not Osdana was illegally dismissed
If so, whether or not she is entitled to award for salaries for the unexpired portion
of the contract




HELD:

The petition must fail.

Disease as a Ground for Dismissal

Under Article 284 of the Labor Code and the Omnibus Rules Implementing the Labor Code, for disease to
be a valid ground for termination, the following requisites must be present:



1. The disease must be such that employees continued employment is prohibited by law or
prejudicial to his health as well as to the health of his co-employees
2. There must be a certification by competent public authority that the disease is of such nature or
at such a stage that it cannot be cured within a period of 6 months with proper medical
treatment


In the first place, Osdanas continued employment despite her illness was not prohibited by law nor
was it prejudicial to her health, as well as that of her co-employees. In fact, the medical report issued
after her second operation stated that she had very good improvement of the symptoms. Besides,
Carpal Tunnel Syndrome is not a contagious disease.

On the medical certificate requirement, petitioner erroneously argues that private respondent was
employed in Saudi Arabia and not here in the Philippines. Hence, there was a physical impossibility to
secure from a Philippine public health authority the alluded medical certificate that public respondents
illness will not be cured within a period of six months.

Petitioner entirely misses the point, as counsel for private respondent states in the Comment. The
rule simply prescribes a certification by a competent public health authority and not a Philippine public
health authority.

If, indeed, Osdana was physically unfit to continue her employment, her employer could have easily
obtained a certification to that effect from a competent public health authority in Saudi Arabia, thereby
heading off any complaint for illegal dismissal.

The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with;
otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or
extent of the employees illness and thus defeat the public policy on the protection of labor. As the Court
observed in Prieto v. NLRC, The Court is not unaware of the many abuses suffered by our overseas
workers in the foreign land where they have ventured, usually with heavy hearts, in pursuit of a more
fulfilling future. Breach of contract, maltreatment, rape, insufficient nourishment, sub-human lodgings,
insults and other forms of debasement, are only a few of the inhumane acts to which they are subjected
by their foreign employers, who probably feel they can do as they please in their country. While these
workers may indeed have relatively little defense against exploitation while they are abroad, that
disadvantage must not continueto burden them when they return to their own territory to voice their
muted complaint. There is no reason why, in their own land, the protection of our own laws cannot be
extended to them in full measure for the redress of their grievances.

Which law should apply: Lex Loci Contractus

Petitioner likewise attempts to sidestep the medical certificate requirement by contending that since
Osdana was working in Saudi Arabia, her employment was subject to the laws of the host country.
Apparently, petitioner hopes to make it appear that the labor laws of Saudi Arabia do not require any
certification by a competent public health authority in the dismissal of employees due to illness.

Again, petitioners argument is without merit.

First, established is the rule that lex loci contractus (the law of the place where the contract is made)
governs in this jurisdiction. There is no question that the contract of employment in this case was
perfected here in the Philippines. Therefore, the Labor Code, its implementing rules and regulations, and
other laws affecting labor apply in this case. Furthermore, settled is the rule that the courts of the forum
will not enforce any foreign claim obnoxious to the forumspublic policy. Here in the
Philippines, employment agreements are more than contractual in nature. The Constitution itself, in
Article XIII Section 3, guarantees the special protection of workers.

This public policy should be borne in mind in this case because to allow foreign employers to determine
for and by themselves whether an overseas contract worker may be dismissed on the ground of illness
would encourage illegal or arbitrary pre-termination of employment contracts.

Award of Salaries granted but reduced

In the case at bar, while it would appear that the employment contract approved by the POEA was only
for a period of twelve months, Osdanas actual stint with the foreign principal lasted for one year and
seven-and-a-half months. It may be inferred, therefore, that the employer renewed her employment
contract for another year. Thus, the award for the unexpired portion of the contract should have been
US$1,260 (US$280 x 4 months) or its equivalent in Philippine pesos, not US$2,499 as adjudged by the
labor arbiter and affirmed by the NLRC.

As for the award for unpaid salaries and differential amounting to US$1,076 representing seven months
unpaid salaries and one month underpaid salary, the same is proper because, as correctly pointed out by
Osdana, the no work, no pay rule relied upon by petitioner does not apply in this case. In the first
place, the fact that she had not worked from June 18 to August 22, 1993 and then from January 24 to
April 29, 1994, was due to her illness which was clearly work-related. Second, from August 23 to
October 5, 1993, Osdana actually worked as food server and cook for seven days a week at the Hota
Bani Tameem Hospital, but was not paid any salary for the said period. Finally, from October 6 to
October 23, 1993, she was confined to quarters and was not given any work for no reason at all.

Moral Damages granted but reduced

Now, with respect to the award of moral and exemplary damages, the same is likewise proper but should
be reduced. Worth reiterating is the rule that moral damages are recoverable where the dismissal of the
employee was attended by bad faith or fraud or constituted an act oppressive to labor, or was done in a
manner contrary to morals, good customs, or public policy. Likewise, exemplary damages may be
awarded if the dismissal was effected in a wanton, oppressive or malevolent manner.

According to the facts of the case as stated by public respondent, Osdana was made to perform such
menial chores, as dishwashing and janitorial work, among others, contrary to her job designation as
waitress. She was also made to work long hours without overtime pay. Because of such arduous
working conditions, she developed Carpal Tunnel Syndrome. Her illness was such that she had to
undergo surgery twice. Since her employer determined for itself that she was no longer fit to continue
working, they sent her home posthaste without as much as separation pay or compensation for the
months when she was unable to work because of her illness. Since the employer is deemed to have
acted in bad faith, the award for attorneys fees is likewise upheld.

In this petition for certiorari now before us, petitioner Triple Eight Integrated Services Inc.
seeks to annul the decision
[1]
of public respondent National Labor Relations Commission (First
Division, Quezon City) dated March 11, 1997 affirming the August 20, 1996 decision
[2]
of Labor
Arbiter Potenciano Canizares. Petitioner was ordered to pay private respondent Erlinda Osdana
her salaries for the unexpired portion of her employment contract, unpaid salaries, salary
differential, moral and exemplary damages, as well as attorneys fees. On April 28, 1997, the
NLRC denied petitioners motion for reconsideration.
[3]

The antecedent facts follow.
Sometime in August 1992, private respondent Osdana was recruited by petitioner for
employment with the latters principal, Gulf Catering Company (GCC), a firm based in the
Kingdom of Saudi Arabia. Under the original employment contract, Osdana was engaged to
work as Food Server for a period of thirty-six (36) months with a salary of five hundred fifty
Saudi rials (SR550).
Osdana claims she was required by petitioner to pay a total of eleven thousand nine hundred
fifty pesos (P11,950.00) in placement fees and other charges, for which no receipt was
issued. She was likewise asked to undergo a medical examination conducted by the Philippine
Medical Tests System, a duly accredited clinic for overseas workers, which found her to be Fit
of Employment.
Subsequently, petitioner asked Osdana to sign another Contractor-Employee
Agreement
[4]
which provided that she would be employed as a waitress for twelve (12) months
with a salary of two hundred eighty US dollars ($280). It was this employment agreement which
was approved by the Philippine Overseas Employment Administration (POEA).
On September 16, 1992, Osdana left for Riyadh, Saudi Arabia, and commenced working for
GCC. She was assigned to the College of Public Administration of the Oleysha University and,
contrary to the terms and conditions of the employment contract, was made to wash dishes,
cooking pots, and utensils, perform janitorial work and other tasks which were unrelated to her
job designation as waitress. Making matters worse was the fact that she was made to work a
gruelling twelve-hour shift, from six oclock in the morning to six oclock in the evening,
without overtime pay.
Because of the long hours and the strenuous nature of her work, Osdana suffered from
numbness and pain in her arms. The pain was such that she had to be confined at the Ladies
Villa, a housing facility of GCC, from June 18 to August 22, 1993, during which period, she was
not paid her salaries.
After said confinement, Osdana was allowed to resume work, this time as Food Server and
Cook at the Hota Bani Tameem Hospital, where she worked seven days a week from August 22
to October 5, 1993. Again, she was not compensated.
Then, from October 6 to October 23, 1993, Osdana was again confined at the Ladies Villa
for no apparent reason. During this period, she was still not paid her salary.
On October 24, 1993, she was re-assigned to the Oleysha University to wash dishes and do
other menial tasks. As with her previous assignment at the said University, Osdana worked long
hours and under harsh conditions. Because of this, she was diagnosed as having Bilateral Carpal
Tunnel Syndrome, a condition precipitated by activities requiring repeated flexion, pronation,
and supination of the wrist and characterized by excruciating pain and numbness in the arms.
[5]

As the pain became unbearable, Osdana had to be hospitalized. She underwent two surgical
operations, one in January 1994, another on April 23, 1994. Between these operations, she was
not given any work assignments even if she was willing and able to do light work in accordance
with her doctors advice. Again, Osdana was not paid any compensation for the period
between February to April 22, 1994.
After her second operation, Osdana was discharged from the hospital on April 25,
1994. The medical report stated that she had very good improvement of the symptoms and she
was discharged on the second day of the operation.
[6]

Four days later, however, she was dismissed from work, allegedly on the ground of illness.
She was not given any separation pay nor was she paid her salaries for the periods when she was
not allowed to work.
Upon her return to the Philippines, Osdana sought the help of petitioner, but to no avail. She
was thus constrained to file a complaint before the POEA against petitioner, praying for unpaid
and underpaid salaries, salaries for the unexpired portion of the employment contract, moral and
exemplary damages and attorneys fees, as well as the revocation, cancellation, suspension
and/or imposition of administrative sanctions against petitioner.
Pursuant to Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995, the case was transferred to the arbitration branch of the NLRC and
assigned to Labor Arbiter Canizares.
In a decision dated August 20, 1996, the labor arbiter ruled in favor of Osdana. The
dispositive portion of the decision follows:
Wherefore, the respondent is hereby ordered to pay the complainant US$2,499.00 as
salaries for the unexpired portion of the contract, and US$1,076.00 as unpaid salary
and salary differential, or its equivalent in Philippine Peso.
The respondent is likewise ordered to pay the complainant P50,000 moral damages,
and P20,000 exemplary damages.
The respondent is further ordered to pay the complainant 10% of the monetary award
as attorneys fee.
Other claims are hereby dismissed for lack of sufficient evidence.
SO ORDERED.
Aggrieved by the labor arbiters decision, petitioner appealed to the NLRC, which affirmed
the decision in question on March 11, 1997. Petitioners motion for reconsideration was likewise
denied by the NLRC in its order dated April 28, 1997.
Hence, this petition for certiorari.
Petitioner alleges grave abuse of discretion on the part of the public respondents for the
following reasons: (a) ruling in favor of Osdana even if there was no factual or legal basis for the
award and, (b) holding petitioner solely liable for her claims despite the fact that its liability is
joint and several with its principal, GCC.
At the outset, petitioner argues that public respondent Labor Arbiter gravely abused his
discretion when he rendered the questioned decision dated August 20, 1996 without stating the
facts and the law where he derived his conclusions.
[7]
In support of this argument, petitioner
cites the first paragraph of Article VIII, Section 14 of the Constitution: No decision shall be
rendered by any court without expressing therein clearly and distinctly the facts and the law on
which it is based.
On this point, it is enough to note that the decisions of both the labor arbiter and the NLRC
were based mainly on the facts and allegations in Osdanas position paper and supporting
documents. We find these sufficient to constitute substantial evidence to support the questioned
decisions. Generally, findings of facts of quasi-judicial agencies like the NLRC are accorded
great respect and, at times, even finality if supported by substantial evidence. Substantial
evidence is such amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.
[8]

Moreover, well-settled is the rule that if doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter. Thus, in
controversies between a worker and her employer, doubts reasonably arising from the evidence
or in the interpretation of agreements should be resolved in favor of the former.
Petitioner, for its part, was given the same opportunity to file its own position paper but
instead, it opted to file a two-page Answer With Special And Affirmative Defenses, denying
generally the allegations of the complaint.
[9]

As observed by the labor arbiter, The record shows the complainant filed complaint (sic),
position paper, and supporting documents, and prosecuted her case diligently; while the
respondent merely tried to settle the case amicably, failing even to file its position paper.
[10]
The
present case being one for illegal dismissal, it was incumbent upon petitioner employer to show
by substantial evidence that the termination was validly made. In termination cases, the burden
of proof rests on the employer to show that the dismissal is for a just cause.
[11]
Having failed to
file its position paper and to support its denials and affirmative defenses in its answer, petitioner
cannot now fault the labor arbiter and the NLRC for relying on the facts as laid down by Osdana
in her position paper and supported by other documents. The essence of due process is that a
party be afforded reasonable opportunity to be heard and to submit any evidence he may have in
support of his defense,
[12]
and this is exactly what petitioner was accorded, although it chose not
to fully avail thereof.
This Court, therefore, upholds the finding of herein public respondents that the facts and the
evidence on record adduced by Osdana and taken in relation to the answer of petitioner show that
indeed there was breach of the employment contract and illegal dismissal committed by
petitioners principal.
Petitioner claims that public respondents committed grave abuse of discretion when they
ruled that Osdana had been illegally dismissed by GCC. It maintains that the award for salaries
for the unexpired portion of the contract was improper because Osdana was validly dismissed on
the ground of illness.
The argument must fail.
In its Answer, Memorandum of Appeal,
[13]
Petition for Certiorari,
[14]
and Consolidated
Reply,
[15]
petitioner consistently asserted that Osdana was validly repatriated for medical reasons,
but it failed to substantiate its claim that such repatriation was justified and done in accordance
with law.
Article 284 of the Labor Code is clear on the matter of termination by reason of disease or
illness, viz:
Art. 284. Disease as a ground for termination An employer may terminate the
services of an employee who has been found to be suffering from any disease and
whose continued employment is prohibited by law or prejudicial to his health as well
as the health of his co-employees: x x x.
Specifically, Section 8, Rule 1, Book VI of the Omnibus Rules Implementing the Labor
Code provides:
Sec. 8. Disease as a ground for dismissal Where the employee suffers from a
disease and his continued employment is prohibited by law or prejudicial to his
health or to the health of his co-employees, the employer shall not terminate his
employment unless there is a certification by competent public authority that the
disease is of such nature or at such a stage that it cannot be cured within a period of
six (6) months with proper medical treatment. If the disease or ailment can be cured
within the period, the employer shall not terminate the employee but shall ask the
employee to take a leave. The employer shall reinstate such employee to his former
position immediately upon the restoration of his normal health. (Underscoring
supplied)
Viewed in the light of the foregoing provisions, the manner by which Osdana was
terminated was clearly in violation of the Labor Code and its implementing rules and regulations.
In the first place, Osdanas continued employment despite her illness was
not prohibited by law nor was it prejudicial to her health, as well as that of her co-
employees. In fact, the medical report issued after her second operation stated that she had very
good improvement of the symptoms. Besides, Carpal Tunnel Syndrome is not a contagious
disease.
Petitioner attributes good faith on the part of its principal, claiming that It was the concern
for the welfare and physical well being (sic) of private respondent that drove her employer to
take the painful decision of terminating her from the service and having her repatriated to the
Philippines at its expense. The employer did not want to risk the aggravation of the illness of
private respondent which could have been the logical consequence were private respondent
allowed to continue with her job.
[16]

The Court notes, however, that aside from these bare allegations, petitioner has not
presented any medical certificate or similar document from a competent public health authority
in support of its claims.
On the medical certificate requirement, petitioner erroneously argues that private
respondent was employed in Saudi Arabia and not here in the Philippines. Hence, there was a
physical impossibility to secure from a Philippine public health authority the alluded medical
certificate that public respondents illness will not be cured within a period of six months.
[17]

Petitioner entirely misses the point, as counsel for private respondent states in the
Comment.
[18]
The rule simply prescribes a certification by a competent public health authority
and not a Philippine public health authority.
If, indeed, Osdana was physically unfit to continue her employment, her employer could
have easily obtained a certification to that effect from a competent public health authority in
Saudi Arabia, thereby heading off any complaint for illegal dismissal.
The requirement for a medical certificate under Article 284 of the Labor Code cannot be
dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the
employer of the gravity or extent of the employees illness and thus defeat the public policy on
the protection of labor. As the Court observed in Prieto v. NLRC,
[19]
The Court is not unaware
of the many abuses suffered by our overseas workers in the foreign land where they have
ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of contract,
maltreatment, rape, insufficient nourishment, sub-human lodgings, insults and other forms of
debasement, are only a few of the inhumane acts to which they are subjected by their foreign
employers, who probably feel they can do as they please in their country. While these workers
may indeed have relatively little defense against exploitation while they are abroad, that
disadvantage must not continue to burden them when they return to their own territory to voice
their muted complaint. There is no reason why, in their own land, the protection of our own laws
cannot be extended to them in full measure for the redress of their grievances.
Petitioner likewise attempts to sidestep the medical certificate requirement by contending
that since Osdana was working in Saudi Arabia, her employment was subject to the laws of the
host country. Apparently, petitioner hopes to make it appear that the labor laws of Saudi Arabia
do not require any certification by a competent public health authority in the dismissal of
employees due to illness.
Again, petitioners argument is without merit.
First, established is the rule that lex loci contractus (the law of the place where the contract
is made) governs in this jurisdiction. There is no question that the contract of employment in this
case was perfected here in the Philippines. Therefore, the Labor Code, its implementing rules
and regulations, and other laws affecting labor apply in this case. Furthermore, settled is the rule
that the courts of the forum will not enforce any foreign claim obnoxious to the forums public
policy.
[20]
Here in the Philippines, employment agreements are more than contractual in
nature. The Constitution itself, in Article XIII Section 3, guarantees the special protection of
workers, to wit:
The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities
for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining
and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure, humane conditions
of work, and a living wage. They shall also participate in policy and decision-making
processes affecting their rights and benefits as may be provided by law.
x x x x x x x x x.
This public policy should be borne in mind in this case because to allow foreign employers
to determine for and by themselves whether an overseas contract worker may be dismissed on
the ground of illness would encourage illegal or arbitrary pre-termination of employment
contracts.
As regards the monetary award of salaries for the unexpired portion of the employment
contract, unpaid salaries and salary differential granted by public respondents to Osdana,
petitioner assails the same for being contrary to law, evidence and existing jurisprudence, all of
which therefore constitutes grave abuse of discretion.
Although this contention is without merit, the award for salaries for the unexpired portion of
the contract must, however, be reduced. Paragraph 5, Section 10 of R.A. No. 8042, applies in
this case, thus:
In case of termination of overseas employment without just, valid or authorized
cause as defined by law or contract, the worker shall be entitled to the full
reimbursement of his placement fee with interest at twelve percent (12%) per annum,
plus his salaries for the unexpired portion of his employment contract or for three (3)
months for every year of the unexpired term, whichever is less.
In the case at bar, while it would appear that the employment contract approved by the
POEA was only for a period of twelve months, Osdanas actual stint with the foreign principal
lasted for one year and seven-and-a-half months. It may be inferred, therefore, that the employer
renewed her employment contract for another year. Thus, the award for the unexpired portion of
the contract should have been US$1,260 (US$280 x 4 months) or its equivalent in Philippine
pesos, not US$2,499 as adjudged by the labor arbiter and affirmed by the NLRC.
As for the award for unpaid salaries and differential amounting to US$1,076 representing
seven months unpaid salaries and one month underpaid salary, the same is proper because, as
correctly pointed out by Osdana, the no work, no pay rule relied upon by petitioner does not
apply in this case. In the first place, the fact that she had not worked from June 18 to August 22,
1993 and then from January 24 to April 29, 1994, was due to her illness which was clearly work-
related. Second, from August 23 to October 5, 1993, Osdana actually worked as food server and
cook for seven days a week at the Hota Bani Tameem Hospital, but was not paid any salary for
the said period. Finally, from October 6 to October 23, 1993, she was confined to quarters and
was not given any work for no reason at all.
Now, with respect to the award of moral and exemplary damages, the same is likewise
proper but should be reduced. Worth reiterating is the rule that moral damages are recoverable
where the dismissal of the employee was attended by bad faith or fraud or constituted an act
oppressive to labor, or was done in a manner contrary to morals, good customs, or public
policy.
[21]
Likewise, exemplary damages may be awarded if the dismissal was effected in a
wanton, oppressive or malevolent manner.
[22]

According to the facts of the case as stated by public respondent, Osdana was made to
perform such menial chores, as dishwashing and janitorial work, among others, contrary to her
job designation as waitress. She was also made to work long hours without overtime
pay. Because of such arduous working conditions, she developed Carpal Tunnel Syndrome. Her
illness was such that she had to undergo surgery twice. Since her employer determined for itself
that she was no longer fit to continue working, they sent her home posthaste without as much as
separation pay or compensation for the months when she was unable to work because of her
illness. Since the employer is deemed to have acted in bad faith, the award for attorneys fees is
likewise upheld.
Finally, petitioner alleges grave abuse of discretion on the part of public respondents for
holding it solely liable for the claims of Osdana despite the fact that its liability with the principal
is joint and several.
Petitioner misunderstands the decision in question. It should be noted that contrary to
petitioners interpretation, the decision of the labor arbiter which was affirmed by the NLRC did
not really absolve the foreign principal.
Petitioner was the only one held liable for Osdanas monetary claims because it was the only
respondent named in the complaint and it does not appear that petitioner took steps to have its
principal included as co-respondent. Thus, the POEA, and later the labor arbiter, did not acquire
jurisdiction over the foreign principal.
This is not to say, however, that GCC may not be held liable at all. Petitioner can still claim
reimbursement or contribution from it for the amounts awarded to the illegally-dismissed
employee.
WHEREFORE, in view of the foregoing, the instant petition is DISMISSED. Accordingly,
the decisions of the labor arbiter dated August 20, 1996, and of the NLRC dated March 11, 1997,
are AFFIRMED with the MODIFICATION that the award to private respondent Osdana should
be one thousand two hundred sixty US dollars (US$1,260), or its equivalent in Philippine pesos,
as salaries for the unexpired portion of the employment contract, and one thousand seventy six
US dollars (US$1,076), or its equivalent in Philippine pesos, representing unpaid salaries for
seven (7) months and underpaid salary for one (1) month, plus interest.
Petitioner is likewise ordered to pay private respondent P30,000.00 in moral
damages, P10,000.00 in exemplary damages and 10% attorneys fees.
This decision is without prejudice to any remedy or claim for reimbursement or contribution
petitioner may institute against its foreign principal, Gulf Catering Company. No
pronouncement as to costs.
SO ORDERED.