POTESTATIVE CONDITION ON THE FULFILLMENT OF EMPLOYMENT OBLIGATIONS, NOT ON THE BIRTH OF THE PERFECTED CONTRACT, AFFECTS ONLY SUCH CONDITION AND NOT THE REST OF THE STIPULATIONS

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Potestative condition, the fulfillment of which depends exclusively upon the will of the debtor, in which case, the conditional obligation is void. If it pertains to the performance of the obligation and not on the birth of the perfected contract it shall affect only such provision and not the entire stipulations.

Thus, the SC held as follows:

Gemudiano vs. Naess Shipping Philippines, Inc.
G.R. No. 223825, January 20, 2020

Employment contract; Perfected employment contract; Potestative condition; Potestative condition, the fulfillment of which depends exclusively upon the will of the debtor, in which case, the conditional obligation is void; Condition imposed not on the birth of the contract of employment since the contract has already been perfected, but only on the fulfillment or performance of their respective obligations must be obliterated from the face of the contract without affecting the rest of the stipulations considering that the condition relates to the fulfillment of an already existing obligation and not to its inception; Jurisdiction of the labor tribunal;

Facts:

In December 2012, Petitioner Luis G. Gemudiano, Jr. (Gemudiano) applied with Respondent respondent Naes Shipping for possible employment as seaman upon learning of a job opening in its domestic vessel operations. He had an interview with Naex Shipping and completed the training.

As advised by Naex Shipping’s crewing manager Leah G. Fetero (Fetero), Gemudiano underwent the mandatory pre-employment medical examination (PEME) where he was declared fit for sea service.

On February 15, 2013, Gemudiano signed an Embarkation Order duly approved by Fetero stipulating the terms and conditions of his employment, directing him to request for all the necessary documents and company properties from the person he was going to replace in his vessel of assignment.

On February 18, 2013, Naess Shipping, for and in behalf of its principal, respondent Royal Dragon, executed a Contract of Employment for Marine Crew on Board Domestic Vessels (contract of employment) engaging the services of Gemudiano as Second Officer aboard the vessel M/V Meiling 11, and inter-island bulk and cargo carrier, for a period of six months with a gross monthly salary of P30,000.00. It was stipulated that the contract shall take effect on March 12, 2013.

Subsequently, Gemudiano and Naes Shipping executed and Addendum to Contract of Employment for Marine Crew Onboard Domestic Vessels stating that the employment relationship between them shall commence once the Master of the Vessel issues a boarding confirmation to Gemudiano.

On March 8, 2013, Gemudiano received a call from Fetero informing him that Royal Dragon cancelled his embarkation. Thus, he filed a complaint for breach of contract against Naes Shipping and/or Royal Dragon Ocean Transport, Inc. (Royal Dragon) and/or Pedro Miguel F. Oca (collectively referred to in this digest as Naes, et al.)

Gemudiano claims that Naes, et al.’s unilateral and unreasonable failure to deploy him despite the perfected contract of employment constitutes breach and gives rise to a liability to pay actual damages. He also asserts that he is entitled to the award of moral and exemplary damages and attorney’s fees on account of Naes et al.’s dishonesty and bad faith, as well as their wanton, fraudulent and malevolent violation of the contract of employment.

Naes, et al. on the other hand, argued that Gemudiano’s employment did not commence because his deployment was withheld by reason of misrepresentation. They stressed that he did not disclosed the fact that he is suffering from diabetes mellitus and asthma which render him unfit for sea service. They claimed that the Labor Arbiter (LA) has no jurisdiction over Gemudiano’s complaint for breach of contract, invoking the absence of employer-employee relationship.

LA Ruling:

The LA found Naes, et al. to have breached their contractual obligation to Gemudiano and ordered them to pay PhP180,000.00 representing his salary for the duration of the contract.

The LA declared that upon perfect of the employment contract on February 18, 2013, the rights and obligations of the parties had already arisen. Thus, when Naes, et al. failed to deploy Gemudiano in accordance with their perfected contract, they became liable to pay him actual damages.

Aggrieved, Naes, et al filed an appeal with the National Labor Relations Commission (NLRC).

NLRC Ruling:

The NLRC affirmed the LA’s Decision but with modification as to damages.

The NLRC held that even without Gemudiano’s actual deployment, the perfected contract already gave rise to Naes, et al.’s obligations under the Philippine Overseas, Employment Administration-Standard Employment Contract (POEA-SEC).

Naes, et al. moved for reconsideration but it was denied. Thus, they went to the Court of Appeals (CA).

CA Ruling:

The CA annulled and set aside the interrelated Decision and Resolution of the NLRC.

The CA declared that the LA did not acquire jurisdiction over Gemudiano’s complaint because of the non-existence of employer-employee relationship between the parties. It emphasized that the perfected contract of employment did not commence since his deployment to his vessel fo assignment did not materialize.

The CA enunciated that Gemudiano does not fall within the definition of “migrant worker” or “seafarer” under R.A. 8042 because his services were engaged for local employment.

Hence, Gemudiano went to the Supreme Court (SC) via petition for review. He maintains that his claim for damages was well-within the jurisdiction of the LA because an employer-employee relationship exists between the parties. He contends that Naes, et al.’s failure to deploy him constitutes breach of his employment contract that warrants his claim for unpaid wages, damages, and attorney’s fees against Naes, et al.

Naes, et al., on the other hand, argue that the LA has no jurisdiction over the case because of the absence of an employer-employee relationship between them. They assert that Gemudiano’s non-deployment was a valid and sound exercise of management prerogative because of his misrepresentation that he was fit to work despite the fact that he was suffering from diabetes mellitus and asthma.

Issue/s:

Whether or not an Addendum to an employment contract that provides a condition solely dependent on the will of one party is void for being a potestative condition

Whether or not the potestative condition renders the entire contract void or only the addendum

Whether or not claims for actual damages involving seafarer’s employment contract which failed to deploy the employee fall within the jurisdiction of the labor tribunal

SC Ruling:

The SC found merit in the petition.

The SC held that there was already a perfected contract of employment between Gemudiano and Naes, et al. The contract had passed the negotiation stage or “the time the prospective contracting parties manifest their interest in the contract. It had reached the perfection stage or the so-called “birth of the contract” as it was clearly shown that the essential elements of a contract, i.e., consent, object, and cause, were all present at the time of its constitution.

Gemudiano and Fetero freely entered into the contract of employment, affixed their signatures thereto and assented to the terms and conditions of the contract (consent), under which Gemudiano binds himself to render service (object) to Naex, et al. on board the domestic vessel “M/V Meiling 11” for the gross monthly salary of PhP30,000.00 (cause). An examination of the terms and conditions agreed upon by the parties will show that their relationship as employer and employee is encapsulated in the perfected contract of employment. Thus, by virtue of said contract, Naex, et al. and Gemudiano assumed obligations which pertain to those of an employer and an employee.

Under Section D of the Addendum, “the employment relationship between the Employer on one hand and the Seaman on the other shall commence once the Master has issued boarding confirmation to the seaman.” Relying on this provision, Naes, et al. insist that there is no employer-employee relationship between them and Gemudiano and that the LA had no jurisdiction over Gemuiano’s complaint. True, the parties to a contract are free to adopt such stipulations, clauses, terms and conditions as they may deem convenient provided such contractual stipulations should not be contrary to law, morals, good customs, public order or public policy. But such is not the case here according to the SC.

The stipulation contained in Section D of the Addendum is a condition which holds in suspense the performance of the respective obligations of Gemudiano and Naes, et al. under the contract of employment, or the onset of their employment relations. It is a condition solely dependent on the will or whim of Naes, et al. since the commencement of the employment relations is at the discretion or prerogative of the latter’s master of the ship through the issuance of a boarding confirmation toGemudiano.

Citing the case of Naga Telephone Co., Inc. vs. Court of Appeals, the SC held that this kind of condition is a “potestative condition,” the fulfillment of which depends exclusively upon the will of the debtor, in which case, the conditional obligation is void. Article 1182 of the Civil Code of the Philippines states that when the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of the Civil Code.

In this regard, the SC stressed in Romero vs. Court of Appeals that where the so-called “potestative condition” is imposed not on the birth of the obligation but on its fulfillment, only the condition is avoided, leaving unaffected the obligation itself.

Clearly, the condition set forth in the Addendum is one that is imposed not on the birth of the contract of employment since the contract has already been perfected, but only on the fulfillment or performance of their respective obligations, i.e., for Gemudiano to render services on board the ship and for Naes, et al. to pay him the agreed compensation for such services. A purely potestative imposition, such as the one in the Addendum, must be obliterated from the face of the contract without affecting the rest of the stipulations considering that the condition relates to the fulfillment of an already existing obligation and not to its inception.

Moreover, the condition imposed for the commencement of the employment relations offends the principle of mutuality of contracts ordained in Article 1308 of the Civil Code which states that contracts must bind both contracting parties, and its validity or compliance cannot be left to the will of one of them. The Court is thus constrained to treat the condition as void and of no effect, and declare the respective obligations of the parties as unconditional. Consequently, the employer-employee relationship between Gemudiano and Naes, et al. should be deemed to have arisen as of the agreed effectivity date of the contract of employment, or on March 12, 2013.

At this point, it is settled that an employer-employee relationship exists between Gemudiano and Naes, et al. Based on Art. 224 of the Labor Code, it is clear that claims for actual, moral, exemplary and other forms of damages arising from employer-employee relations are under the original and exclusive jurisdiction of LAs. While there are cases which hold that the existence of an employer-employee relationship does not negate the civil jurisdiction of the trial courts, in this particular case, the SC found that jurisdiction properly lies with the LA.

The SC held further that not only are the terms under Article 224 clear and unequivocal, practical considerations bolster the Court’s resolve that jurisdiction of the instant case falls under the labor tribunals and not with the civil courts.

The determination of propriety of Gemudiano’s non-deployment necessarily involves the interpretation and application of labor laws, which are within the expertise of labor tribunals. The question of whether Naes, et al. are justified in cancelling the deployment of Gemudiano requires determination of whether a subsequent advice from the same medical provider as to his health could validly supersede its initial finding during the required PEME that he is fit to wok.