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Republic of the Philippines

SECOND DIVISION

G.R. No. 172342 July 13, 2009

LWV CONSTRUCTION CORPORATION, Petitioner,

DECISION

QUISUMBING, J.:

Petitioner LWV Construction Corporation appeals the Decision1 dated December 6, 2005 of the Court of Appeals in
CA-G.R. SP No. 76843 and its Resolution2 dated April 12, 2006, denying the motion for reconsideration. The Court
of Appeals had ruled that under Article 87 of the Saudi Labor and Workmen Law (Saudi Labor Law), respondent
Marcelo Dupo is entitled to a service award or longevity pay amounting to US$12,640.33.

The antecedent facts are as follows:

Petitioner, a domestic corporation which recruits Filipino workers, hired respondent as Civil Structural
Superintendent to work in Saudi Arabia for its principal, Mohammad Al-Mojil Group/Establishment (MMG). On
February 26, 1992, respondent signed his first overseas employment contract, renewable after one year. It was
renewed five times on the following dates: May 10, 1993, November 16, 1994, January 22, 1996, April 14, 1997,
and March 26, 1998. All were fixed-period contracts for one year. The sixth and last contract stated that
respondent’s employment starts upon reporting to work and ends when he leaves the work site. Respondent left
Saudi Arabia on April 30, 1999 and arrived in the Philippines on May 1, 1999.

On May 28, 1999, respondent informed MMG, through the petitioner, that he needs to extend his vacation because
his son was hospitalized. He also sought a promotion with salary adjustment.3 In reply, MMG informed respondent
that his promotion is subject to management’s review; that his services are still needed; that he was issued a plane
ticket for his return flight to Saudi Arabia on May 31, 1999; and that his decision regarding his employment must be
made within seven days, otherwise, MMG "will be compelled to cancel [his] slot."4

On July 6, 1999, respondent resigned. In his letter to MMG, he also stated:

xxxx

I am aware that I still have to do a final settlement with the company and hope that during my more than seven (7)
[years] services, as the Saudi Law stated, I am entitled for a long service award.5 (Emphasis supplied.)

xxxx

According to respondent, when he followed up his claim for long service award on December 7, 2000, petitioner
informed him that MMG did not respond.6

On December 11, 2000, respondent filed a complaint7 for payment of service award against petitioner before the
National Labor Relations Commission (NLRC), Regional Arbitration Branch, Cordillera Administrative Region,
Baguio City. In support of his claim, respondent averred in his position paper that:

xxxx

Under the Law of Saudi Arabia, an employee who rendered at least five (5) years in a company within the
jurisdiction of Saudi Arabia, is entitled to the so-called long service award which is known to others as longevity pay
of at least one half month pay for every year of service. In excess of five years an employee is entitled to one month
pay for every year of service. In both cases inclusive of all benefits and allowances.

This benefit was offered to complainant before he went on vacation, hence, this was engrained in his mind. He
reconstructed the computation of his long service award or longevity pay and he arrived at the following computation
exactly the same with the amount he was previously offered [which is US$12,640.33].8 (Emphasis supplied.)

xxxx

Respondent said that he did not grab the offer for he intended to return after his vacation.

For its part, petitioner offered payment and prescription as defenses. Petitioner maintained that MMG "pays its
workers their Service Award or Severance Pay every conclusion of their Labor Contracts pursuant to Article 87 of
the [Saudi Labor Law]." Under Article 87, "payment of the award is at the end or termination of the Labor Contract
concluded for a specific period." Based on the payroll,9 respondent was already paid his service award or severance
pay for his latest (sixth) employment contract.

Petitioner added that under Article 1310 of the Saudi Labor Law, the action to enforce payment of the service award
must be filed within one year from the termination of a labor contract for a specific period. Respondent’s six
contracts ended when he left Saudi Arabia on the following dates: April 15, 1993, June 8, 1994, December 18, 1995,
March 21, 1997, March 16, 1998 and April 30, 1999. Petitioner concluded that the one-year prescriptive period had
lapsed because respondent filed his complaint on December 11, 2000 or one year and seven months after his sixth
contract ended.11
In his June 18, 2001 Decision,12 the Labor Arbiter ordered petitioner to pay respondent longevity pay of
US$12,640.33 or ₱648,562.69 and attorney’s fees of ₱64,856.27 or a total of ₱713,418.96.13

The Labor Arbiter ruled that respondent’s seven-year employment with MMG had sufficiently oriented him on the
benefits given to workers; that petitioner was unable to convincingly refute respondent’s claim that MMG offered him
longevity pay before he went on vacation on May 1, 1999; and that respondent’s claim was not barred by
prescription since his claim on July 6, 1999, made a month after his cause of action accrued, interrupted the
prescriptive period under the Saudi Labor Law until his claim was categorically denied.

Petitioner appealed. However, the NLRC dismissed the appeal and affirmed the Labor Arbiter’s decision.14 The
NLRC ruled that respondent is entitled to longevity pay which is different from severance pay.

Aggrieved, petitioner brought the case to the Court of Appeals through a petition for certiorari under Rule 65 of the
Rules of Court. The Court of Appeals denied the petition and affirmed the NLRC. The Court of Appeals ruled that
service award is the same as longevity pay, and that the severance pay received by respondent cannot be equated
with service award. The dispositive portion of the Court of Appeals decision reads:

WHEREFORE, finding no grave abuse of discretion amounting to lack or in (sic) excess of jurisdiction on the part of
public respondent NLRC, the petition is denied. The NLRC decision dated November 29, 2002 as well as and (sic)
its January 31, 2003 Resolution are hereby AFFIRMED in toto.

SO ORDERED.15

After its motion for reconsideration was denied, petitioner filed the instant petition raising the following issues:

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FINDING NO GRAVE

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE
SERVICE AWARD OF THE RESPONDENT [HAS] NOT PRESCRIBED WHEN HIS COMPLAINT WAS
FILED ON DECEMBER 11, 2000.

III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN APPLYING IN THE CASE
AT BAR [ARTICLE 1155 OF THE CIVIL CODE].

IV.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN APPLYING ARTICLE NO.
7 OF THE SAUDI LABOR AND WORKMEN LAW TO SUPPORT ITS FINDING THAT THE BASIS OF
THE SERVICE AWARD IS LONGEVITY [PAY] OR LENGTH OF SERVICE RENDERED BY AN
EMPLOYEE.16

Essentially, the issue is whether the Court of Appeals erred in ruling that respondent is entitled to a service award or
longevity pay of US$12,640.33 under the provisions of the Saudi Labor Law. Related to this issue are petitioner’s
defenses of payment and prescription.

Petitioner points out that the Labor Arbiter awarded longevity pay although the Saudi Labor Law grants no such
benefit, and the NLRC confused longevity pay and service award. Petitioner maintains that the benefit granted by
Article 87 of the Saudi Labor Law is service award which was already paid by MMG each time respondent’s contract
ended.

Petitioner insists that prescription barred respondent’s claim for service award as the complaint was filed one year
and seven months after the sixth contract ended. Petitioner alleges that the Court of Appeals erred in ruling that
respondent’s July 6, 1999 claim interrupted the running of the prescriptive period. Such ruling is contrary to Article
13 of the Saudi Labor Law which provides that no case or claim relating to any of the rights provided for under said
law shall be heard after the lapse of 12 months from the date of the termination of the contract.

Respondent counters that he is entitled to longevity pay under the provisions of the Saudi Labor Law and quotes
extensively the decision of the Court of Appeals. He points out that petitioner has not refuted the Labor Arbiter’s
finding that MMG offered him longevity pay of US$12,640.33 before his one-month vacation in the Philippines in
1999. Thus, he "submits that such offer indeed exists" as he sees no reason for MMG to offer the benefit if no law
grants it.

After a careful study of the case, we are constrained to reverse the Court of Appeals. We find that respondent’s
service award under Article 87 of the Saudi Labor Law has already been paid. Our computation will show that the
severance pay received by respondent was his service award.

Article 87 clearly grants a service award. It reads:

Article 87

Where the term of a labor contract concluded for a specified period comes to an end or where the employer cancels
a contract of unspecified period, the employer shall pay to the workman an award for the period of his service to be
computed on the basis of half a month’s pay for each of the first five years and one month’s pay for each of the
subsequent years. The last rate of pay shall be taken as basis for the computation of the award. For fractions of a
year, the workman shall be entitled to an award which is proportionate to his service period during that year.
Furthermore, the workman shall be entitled to the service award provided for at the beginning of this article in the
following cases:

A. If he is called to military service.

B. If a workman resigns because of marriage or childbirth.

Respondent, however, has called the benefit other names such as long service award and longevity pay. On the
other hand, petitioner claimed that the service award is the same as severance pay. Notably, the Labor Arbiter was
unable to specify any law to support his award of longevity pay.18 He anchored the award on his finding that
respondent’s allegations were more credible because his seven-year employment at MMG had sufficiently oriented
him on the benefits given to workers. To the NLRC, respondent is entitled to service award or longevity pay under
Article 87 and that longevity pay is different from severance pay. The Court of Appeals agreed.

Considering that Article 87 expressly grants a service award, why is it correct to agree with respondent that service
award is the same as longevity pay, and wrong to agree with petitioner that service award is the same as severance
pay? And why would it be correct to say that service award is severance pay, and wrong to call service award as
longevity pay?

We found the answer in the pleadings and evidence presented. Respondent’s position paper mentioned how his
long service award or longevity pay is computed: half-month’s pay per year of service and one-month’s pay per year
after five years of service. Article 87 has the same formula to compute the service award.

The payroll submitted by petitioner showed that respondent received severance pay of SR2,786 for his sixth
employment contract covering the period April 21, 1998 to April 29, 1999.19 The computation below shows that
respondent’s severance pay of SR2,786 was his service award under Article 87.

Service Award = ½ (SR5,438)20 + (9 days/365 days)21 x ½ (SR5,438)

Service Award = SR2,786.04

Respondent’s service award for the sixth contract is equivalent only to half-month’s pay plus the proportionate
amount for the additional nine days of service he rendered after one year. Respondent’s employment contracts
expressly stated that his employment ended upon his departure from work. Each year he departed from work and
successively new contracts were executed before he reported for work anew. His service was not cumulative.
Pertinently, in Brent School, Inc. v. Zamora,22 we said that "a fixed term is an essential and natural appurtenance" of
overseas employment contracts,23 as in this case. We also said in that case that under American law, "[w]here a
contract specifies the period of its duration, it terminates on the expiration of such period. A contract of employment
for a definite period terminates by its own terms at the end of such period."24 As it is, Article 72 of the Saudi Labor
Law is also of similar import. It reads:

A labor contract concluded for a specified period shall terminate upon the expiry of its term. If both parties continue
to enforce the contract, thereafter, it shall be considered renewed for an unspecified period.25

Regarding respondent’s claim that he was offered US$12,640.33 as longevity pay before he returned to the
Philippines on May 1, 1999, we find that he was not candid on this particular point. His categorical assertion about
the offer being "engrained in his mind" such that he "reconstructed the computation … and arrived at the …
computation exactly the same with the amount he was previously offered" is not only beyond belief. Such assertion
is also a stark departure from his July 6, 1999 letter to MMG where he could only express his hope that he was
entitled to a long service award and where he never mentioned the supposed previous offer. Moreover, respondent’s
claim that his monthly compensation is SR10,248.9226 is belied by the payroll which shows that he receives
SR5,438 per month.

We therefore emphasize that such payroll should have prompted the lower tribunals to examine closely
respondent’s computation of his supposed longevity pay before adopting that computation as their own.

On the matter of prescription, however, we cannot agree with petitioner that respondent’s action has prescribed
under Article 13 of the Saudi Labor Law. What applies is Article 291 of our Labor Code which reads:

ART. 291. Money claims. — All money claims arising from employer-employee relations accruing during the
effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued; otherwise they
shall be forever barred.

xxxx

In Cadalin v. POEA’s Administrator,27 we held that Article 291 covers all money claims from employer-employee
relationship and is broader in scope than claims arising from a specific law. It is not limited to money claims
recoverable under the Labor Code, but applies also to claims of overseas contract workers.28 The following ruling in
Cadalin v. POEA’s Administrator is instructive:

First to be determined is whether it is the Bahrain law on prescription of action based on the Amiri Decree No. 23 of
1976 or a Philippine law on prescription that shall be the governing law.

Article 156 of the Amiri Decree No. 23 of 1976 provides:

"A claim arising out of a contract of employment shall not be actionable after the lapse of one year from the date of
the expiry of the contract" x x x.

As a general rule, a foreign procedural law will not be applied in the forum. Procedural matters, such as service of
1avvphi1

process, joinder of actions, period and requisites for appeal, and so forth, are governed by the laws of the forum.
This is true even if the action is based upon a foreign substantive law (Restatement of the Conflict of Laws, Sec.
685; Salonga, Private International Law, 131 [1979]).

A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed either as
procedural or substantive, depending on the characterization given such a law.

xxxx

However, the characterization of a statute into a procedural or substantive law becomes irrelevant when the country
of the forum has a "borrowing statute." Said statute has the practical effect of treating the foreign statute of limitation
as one of substance (Goodrich, Conflict of Laws, 152-153 [1938]). A "borrowing statute" directs the state of the
forum to apply the foreign statute of limitations to the pending claims based on a foreign law (Siegel, Conflicts, 183
[1975]). While there are several kinds of "borrowing statutes," one form provides that an action barred by the laws of
the place where it accrued, will not be enforced in the forum even though the local statute has not run against it
(Goodrich and Scoles, Conflict of Laws, 152-153 [1938]). Section 48 of our Code of Civil Procedure is of this kind.
Said Section provides:

"If by the laws of the state or country where the cause of action arose, the action is barred, it is also barred in the
Philippine Islands."

Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article 2270 of said Code
repealed only those provisions of the Code of Civil Procedure as to which were inconsistent with it. There is no
provision in the Civil Code of the Philippines, which is inconsistent with or contradictory to Section 48 of the Code of
Civil Procedure (Paras, Philippine Conflict of Laws, 104 [7th ed.]).

In the light of the 1987 Constitution, however, Section 48 [of the Code of Civil Procedure] cannot be enforced ex
proprio vigore insofar as it ordains the application in this jurisdiction of [Article] 156 of the Amiri Decree No. 23 of
1976.

The courts of the forum will not enforce any foreign claim obnoxious to the forum’s public policy x x x. To enforce the
one-year prescriptive period of the Amiri Decree No. 23 of 1976 as regards the claims in question would contravene
the public policy on the protection to labor.29

xxxx

Thus, in our considered view, respondent’s complaint was filed well within the three-year prescriptive period under
Article 291 of our Labor Code. This point, however, has already been mooted by our finding that respondent’s
service award had been paid, albeit the payroll termed such payment as severance pay.

WHEREFORE, the petition is GRANTED. The assailed Decision dated December 6, 2005 and Resolution dated
April 12, 2006, of the Court of Appeals in CA-G.R. SP No. 76843, as well as the Decision dated June 18, 2001 of
the Labor Arbiter in NLRC Case No. RAB-CAR-12-0649-00 and the Decision dated November 29, 2002 and
Resolution dated January 31, 2003 of the NLRC in NLRC CA No. 028994-01 (NLRC RAB-CAR-12-0649-00) are
REVERSED and SET ASIDE. The Complaint of respondent is hereby DISMISSED.

No pronouncement as to costs.

SO ORDERED.

LEONARDO A. QUISUMBING Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES

MINITA V. CHICO-NAZARIO* TERESITA J. LEONARDO-DE CASTRO**

ARTURO D. BRION
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes
*
Designated member of the Second Division per Special Order No. 658.
**
Designated member of the Second Division per Special Order No. 635.

1 Rollo, pp. 17-29. Penned by Associate Justice Lucenito N. Tagle, with Associate Justices Rodrigo V. Cosico
and Regalado E. Maambong concurring.

2 Id. at 30-31.

3 CA rollo, p. 26.

4 Id. at 27.

5 Id. at 28.

6 Id. at 19.

7 Id. at 8.
 8 Id. at 20-21.

9 Id. at 93.

10 Id. at 153.

Article 13

No complaint shall be heard by any Commission in respect of violations of the provisions of this
Law or of the rules, decisions or orders issued in accordance therewith, after the lapse of twelve
months from the date of the occurrence of such violation. No case or claim relating to any of the
rights provided for in this Law shall be heard after the lapse of twelve months from the date of
termination of the contract. Also, no action or claim relating to any of the rights provided for in
any previous regulations shall be heard after the lapse of one full year from the effective date of
this Law.

11 Id. at 11-13.

12 Id. at 34-38.

13 Id. at 38.

14 Id. at 99.

15 Rollo, p. 28.

16 Id. at 185.

17 CA rollo, pp. 172-173.

18 Id. at 36-37.

19 Id. at 93.

20 Id. Respondent’s monthly salary is SR5,438.

21 April 21, 1999 to April 29, 1999 is 9 days.

22 G.R. No. 48494, February 5, 1990, 181 SCRA 702.

23 Id. at 714.

24 Id. at 709.

25 CA rollo, p. 166.

26 Id. at 21.

27 G.R. Nos. 104776 and 104911-14, December 5, 1994, 238 SCRA 721.

28 Degamo v. Avantgarde Shipping Corp., G.R. No. 154460, November 22, 2005, 475 SCRA 671, 676-677,
reiterating the ruling in Cadalin v. POEA’s Administrator, supra at 721.

29 Cadalin v. POEA’s Administrator, supra at 760-762.

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