Stolt-Nielsen v. Medequillo, January 18, 2011

11/17/21, 12:27 PM SUPREME COURT REPORTS ANNOTATED VOLUME 663
G.R. No. 177498. January 18, 2012.*

STOLT-NIELSEN TRANSPORTATION GROUP, INC.
AND CHUNG GAI SHIP MANAGEMENT, petitioners, vs.
SULPECIO MEDEQUILLO, JR., respondent.
Civil Law; Obligations; Novation; Novation is the

extinguishment of an obligation by the substitution or change of
the obligation by a subsequent one which extinguishes or modifies
the first, either by changing the object or principal conditions, or,
by substituting another in place of the debtor, or by subrogating a
third person in the rights of the creditor.—Novation is the
extinguishment of an obligation by the substitution or change of
the obligation by a subsequent one which extinguishes or modifies
the first, either by changing the object or principal conditions, or,
by substituting another in place of the debtor, or by subrogating a
third person in the rights of the creditor. In order for novation to
take place, the concurrence of the following requisites is
indispensable: 1. There must be a previous valid obligation, 2.
There must be an agreement of the parties concerned to a new
contract, 3. There must be the extinguishment of the old contract,
and 4. There must be the validity of the new contract.
_______________
* SECOND DIVISION.
292
292 SUPREME COURT REPORTS ANNOTATED
Stolt-Nielsen Transportation Group, Inc. vs. Medequillo, Jr.
Labor Law; Evidence; Substantial Evidence; Factual findings

of labor officials, who are deemed to have acquired expertise in
matters within their jurisdiction, are generally accorded not only
respect but even finality by the courts when supported by
substantial evidence.—Equally settled is the rule that factual
findings of labor officials, who are deemed to have acquired
expertise in matters within their jurisdiction, are generally
accorded not only respect but even finality by the courts when
supported by substantial evidence, i.e., the amount of relevant
evidence which a reasonable mind might accept as adequate to
justify a conclusion. But these findings are not infallible. When
there is a showing that they were arrived at arbitrarily or in
disregard of the evidence on record, they may be examined by the
courts. In this case, there was no showing of any arbitrariness on
the part of the lower courts in their findings of facts. Hence, we
follow the settled rule.
https://central.com.ph/sfsreader/session/0000017d2c2d666732dfae31000d00d40059004a/t/?o=False 1/15
Same; Seafarers; Recruitment; Philippine Overseas

Employment Administration (POEA) Standard Employment
Contract; The Philippine Overseas Employment Administration
(POEA) Standard Employment Contract provides that
employment shall commence “upon the actual departure of the
seafarer from the airport or seaport in the port of hire.”—The
POEA Standard Employment Contract provides that employment
shall commence “upon the actual departure of the seafarer from
the airport or seaport in the port of hire.” We adhere to the terms
and conditions of the contract so as to credit the valid prior
stipulations of the parties before the controversy started. Else, the
obligatory force of every contract will be useless. Parties are
bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to
their nature, may be in keeping with good faith, usage and law.
Same; Same; Same; Employer-Employee Relationship; Even
before the start of any employer-employee relationship,
contemporaneous with the perfection of the employment contract
was the birth of certain rights and obligations, the breach of which
may give rise to a cause of action against the erring party.—We
rule that distinction must be made between the perfection of the
employment contract and the commencement of the employer-
employee relationship. The perfection of the contract, which in
this case coincided with the date of execution thereof, occurred
when petitioner and respondent agreed on the object and the
cause, as well as the rest of the terms
293
VOL. 663, JANUARY 18, 2012 293
and conditions therein. The commencement of the employer-

employee relationship, as earlier discussed, would have taken
place had petitioner been actually deployed from the point of hire.
Thus, even before the start of any employer-employee
relationship, contemporaneous with the perfection of the
employment contract was the birth of certain rights and
obligations, the breach of which may give rise to a cause of action
against the erring party. Thus, if the reverse had happened, that
is the seafarer failed or refused to be deployed as agreed upon, he
would be liable for damages.
Same; Same; Same; Penalties; Failure of the agency to deploy
a worker within the prescribed period without valid reasons shall
be a cause for suspension or cancellation of license or fine. In
addition, the agency shall return all documents at no cost to the
worker.—The POEA Rules and Regulations Governing Overseas
Employment dated 31 May 1991 provides for the consequence and
penalty against in case of non-deployment of the seafarer without
any valid reason. It reads: Section 4. Worker’s Deployment.—An
agency shall deploy its recruits within the deployment period as
indicated below: xxx b. Thirty (30) calendar days from the date
of processing by the administration of the employment contracts
of seafarers. Failure of the agency to deploy a worker

within the prescribed period without valid reasons shall
be a cause for suspension or cancellation of license or fine.
In addition, the agency shall return all documents at no
cost to the worker. (Emphasis and underscoring supplied) The
appellate court correctly ruled that the penalty of reprimand
provided under Rule IV, Part VI of the POEA Rules and
Regulations Governing the Recruitment and Employment of
Land-based Overseas Workers is not applicable in this case. The
breach of contract happened on February 1992 and the law
applicable at that time was the 1991 POEA Rules and
Regulations Governing Overseas Employment. The penalty for
non-deployment as discussed is suspension or cancellation of
license or fine.
Same; Same; Same; Migrant Workers Act (R.A. No. 8042); The
absence of the Philippine Overseas Employment Administration
(POEA) Rules with regard to the payment of damages to the
affected seafarer does not mean that the seafarer is precluded from
claiming the same, the Supreme Court decreed the applicability of
Section 10 of Republic Act No. 8042 (Migrant Workers Act) which
provides for money claims by reason of a contract involving
Filipino workers for
294
overseas deployment.—The POEA Rules Governing the

Recruitment and Employment of Seafarers do not provide for the
award of damages to be given in favor of the employees. The claim
provided by the same law refers to a valid contractual claim for
compensation or benefits arising from employer-employee
relationship or for any personal injury, illness or death at levels
provided for within the terms and conditions of employment of
seafarers. However, the absence of the POEA Rules with regard to
the payment of damages to the affected seafarer does not mean
that the seafarer is precluded from claiming the same. The
sanctions provided for non-deployment do not end with the
suspension or cancellation of license or fine and the return of all
documents at no cost to the worker. As earlier discussed, they do
not forfend a seafarer from instituting an action for damages
against the employer or agency which has failed to deploy him.
We thus decree the application of Section 10 of Republic Act No.
8042 (Migrant Workers Act) which provides for money claims by
reason of a contract involving Filipino workers for overseas
deployment. The law provides: Sec. 10. Money Claims.—
Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC)
shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing of the
complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino
workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damages. x x x

(Underscoring supplied)
Civil Law; Damages; Actual Damages; One is entitled to an
adequate compensation only for such pecuniary loss suffered by
him as he has duly proved.—Applying the rules on actual
damages, Article 2199 of the New Civil Code provides that one is
entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Respondent is thus liable
to pay petitioner actual damages in the form of the loss of nine (9)
months’ worth of salary as provided in the contract. This is but
proper because of the non-deployment of respondent without just
cause.
PETITION for review on certiorari of a decision of the

Court of Appeals.
The facts are stated in the opinion of the Court.
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VOL. 663, JANUARY 18, 2012 295

Stolt-Nielsen Transportation Group, Inc. vs. Medequillo,
Jr.
Rodello B. Ortiz for petitioners.

Linsangan, Linsangan & Linsangan for respondent.
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari1
of the Decision2 of the First Division of the Court of
Appeals in CA-G.R. SP No. 91632 dated 31 January 2007,
denying the petition for certiorari filed by Stolt-Nielsen
Transportation Group, Inc. and Chung Gai Ship
Management (petitioners) and affirming the Resolution of
the National Labor Relations Commission (NLRC). The
dispositive portion of the assailed decision reads:
“WHEREFORE, the petition is hereby DENIED. Accordingly,

the assailed Decision promulgated on February 28, 2003 and the
Resolution dated July 27, 2005 are AFFIRMED.”3
The facts as gathered by this Court follow:

On 6 March 1995, Sulpecio Madequillo (respondent)
filed a complaint before the Adjudication Office of the
Philippine Overseas Employment Administration (POEA)
against the petitioners for illegal dismissal under a first
contract and for failure to deploy under a second contract.
In his complaint-affidavit,4 respondent alleged that:
1. On 6 November 1991 (First Contract), he was hired by Stolt-Nielsen
Marine Services, Inc on behalf of its principal Chung-Gai Ship
Management of Panama as Third
_______________
1 Rule 45, Rule on Civil Procedure.
2 Penned by Associate Justice Mariano C. Del Castillo (now a Member of this Court) with
Presiding Justice Ruben T. Reyes (former Member of this Court) and Associate Justice
Arcangelita Romilla Lontok, concurring. Rollo, pp. 38-54.
3 Id., at p. 53.
4 Id., at pp. 134-139.
296

Assistant Engineer on board the vessel “Stolt Aspiration” for a

period of nine (9) months;
2. He would be paid with a monthly basic salary of $808.00 and a fixed
overtime pay of $404.00 or a total of $1,212.00 per month during
the employment period commencing on 6 November 1991;
3. On 8 November 1991, he joined the vessel MV “Stolt Aspiration”;
4. On February 1992 or for nearly three (3) months of rendering
service and while the vessel was at Batangas, he was ordered by
the ship’s master to disembark the vessel and repatriated back to
Manila for no reason or explanation;
5. Upon his return to Manila, he immediately proceeded to the
petitioner’s office where he was transferred employment with
another vessel named MV “Stolt Pride” under the same terms and
conditions of the First Contract;
6. On 23 April 1992, the Second Contract was noted and approved by
the POEA;
7. The POEA, without knowledge that he was not deployed with the
vessel, certified the Second Employment Contract on 18 September
1992.
8. Despite the commencement of the Second Contract on 21 April
1992, petitioners failed to deploy him with the vessel MV “Stolt
Pride”;
9. He made a follow-up with the petitioner but the same refused to
comply with the Second Employment Contract.
10. On 22 December 1994, he demanded for his passport, seaman’s
book and other employment documents. However, he was only
allowed to claim the said documents in exchange of his signing a
document;
11. He was constrained to sign the document involuntarily because
without these documents, he could not seek employment from other
agencies.
He prayed for actual, moral and exemplary damages as

well as attorney’s fees for his illegal dismissal and in view
of
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the Petitioners’ bad faith in not complying with the Second

Contract.
The case was transferred to the Labor Arbiter of the
DOLE upon the effectivity of the Migrant Workers and
Overseas Filipinos Act of 1995.
The parties were required to submit their respective

position papers before the Labor Arbiter. However,
petitioners failed to submit their respective pleadings
despite the opportunity given to them.5
On 21 July 2000, Labor Arbiter Vicente R. Layawen
rendered a judgment6 finding that the respondent was
constructively dismissed by the petitioners. The dispositive
portion reads:
“WHEREFORE, premises considered, judgment is hereby

rendered, declaring the respondents guilty of constructively
dismissing the complainant by not honoring the employment
contract. Accordingly, respondents are hereby ordered jointly and
solidarily to pay complainant the following:
1. $12,537.00 or its peso equivalent at the time of payment.”7
The Labor Arbiter found the first contract entered into

by and between the complainant and the respondents to
have been novated by the execution of the second contract.
In other words, respondents cannot be held liable for the
first contract but are clearly and definitely liable for the
breach of the second contract.8 However, he ruled that
there was no substantial evidence to grant the prayer for
moral and exemplary damages.9
_______________
5 Id., at p. 61.
6 Id., at pp. 59-62.
7 Id., at p. 62.
8 Id.
9 Id.
298

Jr.
The petitioners appealed the adverse decision before the

National Labor Relations Commission assailing that they
were denied due process, that the respondent cannot be
considered as dismissed from employment because he was
not even deployed yet and the monetary award in favor of
the respondent was exorbitant and not in accordance with
law.10
On 28 February 2003, the NLRC affirmed with
modification the Decision of the Labor Arbiter. The
dispositive portion reads:
“WHEREFORE, premises considered, the decision under

review is hereby, MODIFIED BY DELETING the award of
overtime pay in the total amount of Three Thousand Six Hundred
Thirty Six US Dollars (US $3,636.00).
In all other respects, the assailed decision so stands as,
AFFIRMED.”11
Before the NLRC, the petitioners assailed that they

were not properly notified of the hearings that were
conducted before the Labor Arbiter. They further alleged
that after the suspension of proceedings before the POEA,
the only notice they received was a copy of the decision of
the Labor Arbiter.12
The NLRC ruled that records showed that attempts to
serve the various notices of hearing were made on
petitioners’ counsel on record but these failed on account of
their failure to furnish the Office of the Labor Arbiter a
copy of any notice of change of address. There was also no
evidence that a service of notice of change of address was
served on the POEA.13
The NLRC upheld the finding of unjustified termination
of contract for failure on the part of the petitioners to
present evidence that would justify their non-deployment of
the re-
_______________
10 Id., at p. 64.
11 Id., at p. 68.
12 Id., at pp. 64-65.
13 Id., at p. 65.
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spondent.14 It denied the claim of the petitioners that the

monetary award should be limited only to three (3) months
for every year of the unexpired term of the contract. It
ruled that the factual incidents material to the case
transpired within 1991-1992 or before the effectivity of
Republic Act No. 8042 or the Migrant Workers and
Overseas Filipinos Act of 1995 which provides for such
limitation.15
However, the NLRC upheld the reduction of the
monetary award with respect to the deletion of the
overtime pay due to the non-deployment of the
respondent.16
The Partial Motion for Reconsideration filed by the
petitioners was denied by the NLRC in its Resolution dated
27 July 2005.17
The petitioners filed a Petition for Certiorari before the
Court of Appeals alleging grave abuse of discretion on the
part of NLRC when it affirmed with modification the ruling
of the Labor Arbiter. They prayed that the Decision and
Resolution promulgated by the NLRC be vacated and
another one be issued dismissing the complaint of the
respondent.
Finding no grave abuse of discretion, the Court of
Appeals AFFIRMED the Decision of the labor tribunal.
The Court’s Ruling
The following are the assignment of errors presented

before this Court:
I.
THE COURT A QUO ERRED IN FINDING THAT THE SECOND
CONTRACT NOVATED THE FIRST CONTRACT.
_______________
14 Id., at p. 66.
15 Id., at p. 67.
16 Id.
17 Id., at p. 72.
300

A. THERE WAS NO NOVATION OF THE FIRST

CONTRACT BY THE SECOND CONTRACT; THE
ALLEGATION OF ILLEGAL DISMISSAL UNDER THE
FIRST CONTRACT MUST BE RESOLVED SEPARATELY
FROM THE ALLEGATION OF FAILURE TO DEPLOY
UNDER THE SECOND CONTRACT.
B. THE ALLEGED ILLEGAL DISMISSAL UNDER THE
FIRST CONTRACT TRANSPIRED MORE THAN THREE
(3) YEARS AFTER THE CASE WAS FILED AND
THEREFORE HIS CASE SHOULD HAVE BEEN
DISMISSED FOR BEING BARRED BY PRESCRIPTION.
II.
THE COURT A QUO ERRED IN RULING THAT THERE WAS
CONSTRUCTIVE DISMISSAL UNDER THE SECOND
CONTRACT.
A. IT IS LEGALLY IMPOSSIBLE TO HAVE
CONSTRUCTIVE DISMISSAL WHEN THE
EMPLOYMENT HAS NOT YET COMMENCED.
B. ASSUMING THERE WAS OMISSION UNDER THE
SECOND CONTRACT, PETITIONERS CAN ONLY BE
FOUND AS HAVING FAILED IN DEPLOYING PRIVATE
RESPONDENT BUT WITH VALID REASON.
III.
THE COURT A QUO ERRED IN FAILING TO FIND THAT
EVEN ASSUMING THERE WAS BASIS FOR HOLDING
PETITIONER LIABLE FOR “FAILURE TO DEPLOY”
RESPONDENT, THE POEA RULES PENALIZES SUCH
OMISSION WITH A MERE “REPRIMAND.”18
The petitioners contend that the first employment

contract between them and the private respondent is
different from and independent of the second contract
subsequently executed upon repatriation of respondent to
Manila.
We do not agree.
_______________
18 Id., at pp. 20-21.
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Novation is the extinguishment of an obligation by the

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

2. There must be an agreement of the parties concerned to a
new contract,
3. There must be the extinguishment of the old contract, and
4. There must be the validity of the new contract.19
In its ruling, the Labor Arbiter clarified that novation

had set in between the first and second contract. To quote:
“xxx [T]his office would like to make it clear that the first
contract entered into by and between the complainant and the
respondents is deemed to have been novated by the execution of
the second contract. In other words, respondents cannot be held
liable for the first contract but are clearly and definitely liable for
the breach of the second contract.”20
This ruling was later affirmed by the Court of Appeals

in its decision ruling that:
“Guided by the foregoing legal precepts, it is evident that

novation took place in this particular case. The parties impliedly
extinguished the first contract by agreeing to enter into the
second contract to placate Medequillo, Jr. who was unexpectedly
dismissed and repatriated to Manila. The second contract would
not have been necessary if the petitioners abided by the terms and
conditions of Madequillo, Jr.’s employment under the first
contract. The records
_______________
19 Philippine Savings Bank v. Sps. Maňalac, Jr., 496 Phil, 671, 686-687; 457
SCRA 203, 217 (2005); Azolla Farms v. Court of Appeals, 484 Phil. 745, 754-755;
442 SCRA 133, 143 (2004).
20 Rollo, p. 61.
302

also reveal that the 2nd contract extinguished the first contract
by changing its object or principal. These contracts were for
overseas employment aboard different vessels. The first contract
was for employment aboard the MV “Stolt Aspiration” while the
second contract involved working in another vessel, the MV “Stolt
Pride.” Petitioners and Madequillo, Jr. accepted the terms and
conditions of the second contract. Contrary to petitioners’
assertion, the first contract was a “previous valid contract” since
it had not yet been terminated at the time of Medequillo, Jr.’s
repatriation to Manila. The legality of his dismissal had not yet
been resolved with finality. Undoubtedly, he was still employed
under the first contract when he negotiated with petitioners on
the second contract. As such, the NLRC correctly ruled that
petitioners could only be held liable under the second contract.”21
We concur with the finding that there was a novation of

the first employment contract.
We reiterate once more and emphasize the ruling in
Reyes v. National Labor Relations Commission,22 to wit:
“x x x [F]indings of quasi-judicial bodies like the NLRC, and

affirmed by the Court of Appeals in due course, are conclusive on
this Court, which is not a trier of facts.
xxxx
x x x Findings of fact of administrative agencies and quasi-
judicial bodies, which have acquired expertise because
their jurisdiction is confined to specific matters, are
generally accorded not only respect, but finality when
affirmed by the Court of Appeals. Such findings deserve full
respect and, without justifiable reason, ought not to be altered,
modified or reversed.” (Emphasis supplied)23
With the finding that respondent “was still employed

under the first contract when he negotiated with
petitioners on the
_______________
21 Id., at pp. 45-46.
22 G.R. No. 160233, 8 August 2007, 529 SCRA 487.
23 Id., at pp. 494 and 499.
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second contract,”24 novation became an unavoidable

conclusion.
Equally settled is the rule that factual findings of labor
officials, who are deemed to have acquired expertise in
matters within their jurisdiction, are generally accorded
not only respect but even finality by the courts when
supported by substantial evidence, i.e., the amount of
relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.25 But these findings are
not infallible. When there is a showing that they were

arrived at arbitrarily or in disregard of the evidence on
record, they may be examined by the courts.26 In this case,
there was no showing of any arbitrariness on the part of
the lower courts in their findings of facts. Hence, we follow
the settled rule.
We need not dwell on the issue of prescription. It was
settled by the Court of Appeals with its ruling that
recovery of damages under the first contract was already
time-barred. Thus:
“Accordingly, the prescriptive period of three (3) years within

which Medequillo Jr. may initiate money claims under the 1st
contract commenced on the date of his repatriation. xxx The start
of the three (3) year prescriptive period must therefore be
reckoned on February 1992, which by Medequillo Jr.’s own
admission was the date of his repatriation to Manila. It was at
this point in time that Medequillo Jr.’s cause of action already
accrued under the first contract. He had until February 1995 to
pursue a case for illegal dismissal and damages arising from the
1st contract. With the filing of his Complaint-Affidavit on March
6, 1995, which was clearly beyond
_______________
24 Rollo, p. 46.
25 Prince Transport, Inc. v. Garcia, G.R. No. 167291, 12 January 2011, 639
SCRA 312, 324 citing Philippine Veterans Bank v. National Labor Relations
Commission, G.R. No. 188882, 30 March 2010, 617 SCRA 204.
26 Id., at pp. 324-325 citing Faeldonia v. Tong Yak Groceries, G.R. No. 182499,
2 October 2009, 602 SCRA 677, 684.
304

the prescriptive period, the cause of action under the 1st contract
was already time-barred.”27
The issue that proceeds from the fact of novation is the

consequence of the non-deployment of respondent.
The petitioners argue that under the POEA Contract,
actual deployment of the seafarer is a suspensive condition
for the commencement of the employment.28 We agree with
petitioners on such point. However, even without actual
deployment, the perfected contract gives rise to obligations
on the part of petitioners.
A contract is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to
give something or to render some service.29 The contracting
parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are
not contrary to law, morals, good customs, public order, or
public policy.30
The POEA Standard Employment Contract provides
that employment shall commence “upon the actual
departure of the seafarer from the airport or seaport in the

port of hire.”31 We adhere to the terms and conditions of
the contract so as to credit the valid prior stipulations of
the parties before the controversy started. Else, the
obligatory force of every contract will be useless. Parties
are bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good
faith, usage and law.32
Thus, even if by the standard contract employment
commences only “upon actual departure of the seafarer,”
this does
_______________
27 Rollo, pp. 47-48.
28 Id., at p. 48.
29 Article 1305, New Civil Code.
31 Rollo, p. 48.
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not mean that the seafarer has no remedy in case of non-

deployment without any valid reason. Parenthetically, the
contention of the petitioners of the alleged poor
performance of respondent while on board the first ship
MV “Stolt Aspiration” cannot be sustained to justify the
non-deployment, for no evidence to prove the same was
presented.33
We rule that distinction must be made between the
perfection of the employment contract and the
commencement of the employer-employee relationship. The
perfection of the contract, which in this case coincided with
the date of execution thereof, occurred when petitioner and
respondent agreed on the object and the cause, as well as
the rest of the terms and conditions therein. The
commencement of the employer-employee relationship, as
earlier discussed, would have taken place had petitioner
been actually deployed from the point of hire. Thus, even
before the start of any employer-employee relationship,
contemporaneous with the perfection of the employment
contract was the birth of certain rights and obligations, the
breach of which may give rise to a cause of action against
the erring party. Thus, if the reverse had happened, that is
the seafarer failed or refused to be deployed as agreed
upon, he would be liable for damages.34
Further, we do not agree with the contention of the
petitioners that the penalty is a mere reprimand.
The POEA Rules and Regulations Governing Overseas
Employment35 dated 31 May 1991 provides for the
consequence and penalty against in case of non-deployment

of the seafarer without any valid reason. It reads:
“Section 4. Worker’s Deployment.—An agency shall deploy its

recruits within the deployment period as indicated below:
_______________
33 Rollo, p. 50.
34 Santiago v. CF Sharp Crew Management, Inc., G.R. No. 162419, 10 July
2007, 527 SCRA 165, 176.
35 Section 4, par. (b), Rule II, Book III.
306

xxx
b. Thirty (30) calendar days from the date of processing by the
administration of the employment contracts of seafarers.
Failure of the agency to deploy a worker within the
prescribed period without valid reasons shall be a cause
for suspension or cancellation of license or fine. In
addition, the agency shall return all documents at no cost
to the worker.” (Emphasis and underscoring supplied)
The appellate court correctly ruled that the penalty of

reprimand36 provided under Rule IV, Part VI of the POEA
Rules and Regulations Governing the Recruitment and
Employment of Land-based Overseas Workers is not
applicable in this case. The breach of contract happened on
February 1992 and the law applicable at that time was the
1991 POEA Rules and Regulations Governing Overseas
Employment. The penalty for non-deployment as discussed
is suspension or cancellation of license or fine.
Now, the question to be dealt with is how will the
seafarer be compensated by reason of the unreasonable
non-deployment of the petitioners?
The POEA Rules Governing the Recruitment and
Employment of Seafarers do not provide for the award of
damages to be given in favor of the employees. The claim
provided by the same law refers to a valid contractual
claim for compensation or benefits arising from employer-
employee relationship or for any personal injury, illness or
death at levels provided for within the terms and
conditions of employment of seafarers. However, the
absence of the POEA Rules with regard to the payment of
damages to the affected seafarer does not mean that the
seafarer is precluded from claiming the same. The
sanctions provided for non-deployment do not end with the
_______________
36 Section 1 (C) 4. Failure to deploy a worker within the prescribed
period without valid reason:
1st Offense – Reprimand.
307
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suspension or cancellation of license or fine and the return

of all documents at no cost to the worker. As earlier
discussed, they do not forfend a seafarer from instituting
an action for damages against the employer or agency
which has failed to deploy him.37
We thus decree the application of Section 10 of Republic
Act No. 8042 (Migrant Workers Act) which provides for
money claims by reason of a contract involving Filipino
workers for overseas deployment. The law provides:
“Sec. 10. Money Claims.—Notwithstanding any provision of law

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

labor arbiters of the NLRC under the second phrase of the
provision.
Applying the rules on actual damages, Article 2199 of
the New Civil Code provides that one is entitled to an
adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Respondent is thus
liable to pay petitioner actual damages in the form of the
loss of nine (9) months’ worth of salary as provided in the
contract.38 This is
_______________
37 Santiago v. CF Sharp Crew Management, Inc., supra note 34 at pp.
176-177.
38 In Legahi v. National Labor Relations Commission, 376 Phil. 557,
566; 318 SCRA 446, 457 (1999), we held: Petitioner’s dismissal without a
valid cause constitute a breach of contract. Consequently, he should only
be paid the unexpired portion of his employment contract.
308

Jr.
but proper because of the non-deployment of respondent

without just cause.
WHEREFORE, the appeal is DENIED. The 31 January

2007 Decision of the Court of Appeals in CA-G.R. SP. No.
91632 is hereby AFFIRMED. The Petitioners are hereby
ordered to pay Sulpecio Medequillo, Jr., the award of actual
damages equivalent to his salary for nine (9) months as
provided by the Second Employment Contract.
SO ORDERED.
Carpio (Chairperson), Sereno, Reyes and Perlas-

Bernabe,** JJ., concur.
Petition denied, judgment affirmed.
Notes.—Novation may either be extinctive or

modificatory, much being dependent on the nature of the
change and the intention of the parties. (Azarcon vs.
People, 622 SCRA 341 [2010])
Article 291 of the Labor Code is the law governing the
prescription of money claims of seafarers, a class of
overseas contract workers; Article 291 prevails over Section
28 of the Standard Employment Contract for Seafarers
which provides for claims to be brought only within one
year from the date of the seafarer’s return to the point of
hire; Section 28 insofar as it limits the prescriptive period
within which the seafarers may file their money claims, is
hereby declared null and void. (Medline Management, Inc.
vs. Roslinda, 630 SCRA 471 [2010])
——o0o——
_______________
** Designated as additional member per Special Order No. 1174 dated
9 January 2012.
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11/17/21, 12:27 PM SUPREME COURT REPORTS ANNOTATED VOLUME 663

G.R. No. 177498. January 18, 2012.*

Civil Law; Obligations; Novation; Novation is the

292 SUPREME COURT REPORTS ANNOTATED

Stolt-Nielsen Transportation Group, Inc. vs. Medequillo, Jr.

Labor Law; Evidence; Substantial Evidence; Factual findings

Same; Seafarers; Recruitment; Philippine Overseas

VOL. 663, JANUARY 18, 2012 293

Stolt-Nielsen Transportation Group, Inc. vs. Medequillo, Jr.

and conditions therein. The commencement of the employer-

of seafarers. Failure of the agency to deploy a worker

294 SUPREME COURT REPORTS ANNOTATED

Stolt-Nielsen Transportation Group, Inc. vs. Medequillo, Jr.

overseas deployment.—The POEA Rules Governing the

moral, exemplary and other forms of damages. x x x

PETITION for review on certiorari of a decision of the

VOL. 663, JANUARY 18, 2012 295

Rodello B. Ortiz for petitioners.

“WHEREFORE, the petition is hereby DENIED. Accordingly,

The facts as gathered by this Court follow:

1 Rule 45, Rule on Civil Procedure.

4 Id., at pp. 134-139.

296 SUPREME COURT REPORTS ANNOTATED

Assistant Engineer on board the vessel “Stolt Aspiration” for a

He prayed for actual, moral and exemplary damages as

VOL. 663, JANUARY 18, 2012 297

the Petitioners’ bad faith in not complying with the Second

The parties were required to submit their respective

“WHEREFORE, premises considered, judgment is hereby

The Labor Arbiter found the first contract entered into

298 SUPREME COURT REPORTS ANNOTATED

The petitioners appealed the adverse decision before the

“WHEREFORE, premises considered, the decision under

Before the NLRC, the petitioners assailed that they

VOL. 663, JANUARY 18, 2012 299

spondent.14 It denied the claim of the petitioners that the

The Court’s Ruling

The following are the assignment of errors presented

300 SUPREME COURT REPORTS ANNOTATED

A. THERE WAS NO NOVATION OF THE FIRST

The petitioners contend that the first employment

VOL. 663, JANUARY 18, 2012 301

Novation is the extinguishment of an obligation by the

1. There must be a previous valid obligation,

In its ruling, the Labor Arbiter clarified that novation

This ruling was later affirmed by the Court of Appeals

“Guided by the foregoing legal precepts, it is evident that

302 SUPREME COURT REPORTS ANNOTATED

We concur with the finding that there was a novation of

“x x x [F]indings of quasi-judicial bodies like the NLRC, and

With the finding that respondent “was still employed

VOL. 663, JANUARY 18, 2012 303

second contract,”24 novation became an unavoidable

not infallible. When there is a showing that they were

“Accordingly, the prescriptive period of three (3) years within

304 SUPREME COURT REPORTS ANNOTATED

The issue that proceeds from the fact of novation is the

departure of the seafarer from the airport or seaport in the

VOL. 663, JANUARY 18, 2012 305