Case Digest: Stolt-Nielsen v. Medequillo

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




Sulpecio Medequillo (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. He prayed for actual, moral and exemplary damages as well as attorneys fees for his illegal dismissal and in view of 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.

Labor Arbiter Vicente R. Layawen rendered a judgmentfinding that the respondent was constructively dismissed by the petitioners. 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.

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.

NLRC affirmed with modification the Decision of the Labor Arbiter. 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 respondent.

The petitioners filed a Petition forCertioraribefore the Court of Appeals. Finding no grave abuse of discretion, the Court of Appeals AFFIRMED the Decision of the labor tribunal.

ISSUE: Whether or not the first employment contract between petitioners and the private respondent is different from and independent of the second contract subsequently executed upon repatriation of respondent to Manila which justifies termination of respondent?

HELD: Court of Appeals decision is sustained.


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.

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.


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.

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.


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