Gargallo vs. Dohle Seafront Crewing (Manila), Inc.

Under Section 10 of Republic Act No. 8042, as amended by Republic Act No. 10022, corporate directors and officers of a recruitment/placement agency are jointly and solidarily liable with the agency for money claims or damages awarded to overseas Filipino workers; and attorney's fees are not warranted where the seafarer's disability claim was filed prematurely and without compliance with the POEA-SEC conflict-resolution procedure, because there was no unlawful withholding of benefits.

Petitioner Jakerson G. Gargallo was a seafarer whose overseas employment was arranged through the respondent manning agencies, Dohle Seafront Crewing (Manila), Inc. and Dohle Manning Agencies, Inc., with Mr. Mayronilo B. Padiz named as a corporate officer. The employment relationship was governed by the 2010 POEA-SEC and the 2008-2011 ver.di IMEC IBF CBA, which prescribe assessment by a company-designated physician and a third-doctor conflict-resolution procedure when the seafarer's physician disagrees. Republic Act No. 8042, as amended by Republic Act No. 10022, governs money claims of overseas Filipino workers and imposes joint and solidary liability on principals, employers, recruitment/placement agencies, and corporate officers or directors.

Petitioner Jakerson G. Gargallo was a seafarer whose overseas employment was arranged through Dohle Seafront Crewing (Manila), Inc. and Dohle Manning Agencies, Inc., with Mr. Mayronilo B. Padiz named as a respondent corporate officer. On July 20, 2012, he filed a complaint for permanent total disability benefits against respondents before the National Labor Relations Commission. The complaint was based on his claim that he accidentally fell on deck while lifting heavy loads of lube oil drum, with his left arm hitting the floor first and bearing his full body weight. He claimed that he remained permanently unfit for further sea service despite major surgery and further treatment by the company-designated physicians, and that his chosen physician's certification of permanent total unfitness must prevail over the company-designated physicians' assessment, which he described as palpably self-serving and biased.

Respondents countered that the fit-to-work findings of the company-designated physicians must prevail over petitioner's independent doctor because the company-designated physicians continuously treated and monitored petitioner's medical condition. They also averred that petitioner failed to comply with the conflict-resolution procedure under the Philippine Overseas Employment Administration-Standard Employment Contract (POEA-SEC), and that the filing of the disability claim was premature since petitioner was still undergoing medical treatment within the allowable 240-day period at the time the complaint was filed.

The Labor Arbiter and the NLRC gave more credence to the medical report of petitioner's independent doctor and granted his disability claim, ordering respondents to pay permanent total disability benefits, although at different amounts. The Court of Appeals disagreed, dismissed the complaint, and ruled that the claim was premature because at the time of filing petitioner was still under medical treatment by the company-designated physicians, no medical assessment had yet been issued by them within the allowable 240-day treatment period during which he was considered under temporary total disability, and petitioner had not yet consulted his own doctor. The Court of Appeals also gave more credence to the fit-to-work assessment of the company-designated physician who treated and closely monitored petitioner's condition over the contrary declaration of petitioner's doctor, who attended to him only once, two months after the filing of the complaint.

The undisputed record showed that petitioner was repatriated on March 11, 2012 and immediately subjected to medical treatment. Despite the lapse of the initial 120-day period on July 9, 2012, treatment continued due to persistent pain until his 180th day of treatment on September 7, 2012. Petitioner needed continuous medical treatment for 194 days from his repatriation on March 11, 2012 until his last visit with the company-designated physician on September 21, 2012, when he was declared fit to work. Petitioner consulted his chosen physician only on October 2, 2012, more than two months after the complaint was filed.

• Permanent Total Disability After 120 Days: Petitioner argued that the lapse of the 120-day period from the onset of disability rendered him permanently and totally disabled because the extension of medical treatment was unjustified.
• Third-Doctor Procedure: Petitioner maintained that resort to a third doctor is directory, not mandatory.
• Independent Physician's Certification: Petitioner claimed that his chosen physician's certification of permanent total unfitness must prevail over the company-designated physicians' assessment, which he characterized as palpably self-serving and biased.
• Padiz's Solidary Liability: Petitioner argued that it was erroneous to absolve Padiz from joint and several liability with Dohle Seafront and Dohle Manning for the payment of the income benefit, invoking Section 10 of RA 8042, as amended.

• Company-Designated Physicians' Findings: Respondents countered that the fit-to-work findings of the company-designated physicians must prevail over petitioner's independent doctor because they continuously treated and monitored petitioner's medical condition.
• Conflict-Resolution Procedure: Respondents argued that petitioner failed to comply with the conflict-resolution procedure under the POEA-SEC.
• Prematurity: Respondents averred that the filing of the disability claim was premature since petitioner was still undergoing medical treatment within the allowable 240-day period at the time the complaint was filed.
• Income Benefit Coverage: Respondents contended that entitlement to income benefit is applicable only to land-based employees compulsorily registered with the Social Security System (SSS).
• SSS Liability: Respondents argued that the obligation to pay the income benefit falls on the SSS in view of their compliance with the duty to cover petitioner.
• Attorney's Fees: Respondents supplicated that the award of attorney's fees must be deleted.

• Permanent Total Disability Benefits: Whether the lapse of the 120-day period from the onset of disability and the alleged directory nature of the third-doctor procedure entitled petitioner to permanent total disability benefits.
• Solidary Liability of Padiz: Whether Padiz is jointly and solidarily liable with Dohle Seafront and Dohle Manning for petitioner's income benefit under Section 10 of RA 8042, as amended.
• Income Benefit for Temporary Total Disability: Whether petitioner is entitled to income benefit for 194 days of temporary total disability, and whether such benefit is limited to land-based employees registered with the SSS or payable by the SSS rather than the employer.
• Attorney's Fees: Whether the award of attorney's fees equivalent to 10% of the adjudged income benefit should be deleted.

• Permanent Total Disability Benefits: No. The claim was premature and petitioner failed to comply with the mandated conflict-resolution procedure under the POEA-SEC and CBA; the company-designated physician's fit-to-work certification prevails.
• Solidary Liability of Padiz: Yes. Section 10 of RA 8042, as amended, expressly makes corporate directors and officers jointly and solidarily liable with the recruitment/placement agency for money claims or damages awarded to overseas Filipino workers.
• Income Benefit for Temporary Total Disability: Yes. Petitioner is entitled to income benefit for 194 days; the benefit is not limited to land-based SSS-registered employees, and the employer must advance it subject to reimbursement by the SSS.
• Attorney's Fees: No. The award must be deleted because there was no unlawful withholding of benefits, the complaint having been filed prematurely and without compliance with the conflict-resolution procedure.

• Permanent Total Disability Benefits: The September 16, 2015 Decision had already dismissed the complaint on grounds of premature filing and failure to comply with the mandated conflict-resolution procedure under the POEA-SEC. Petitioner was repatriated on March 11, 2012 and immediately treated; despite the lapse of the initial 120-day period on July 9, 2012, treatment continued due to persistent pain until his 180th day on September 7, 2012. The complaint filed on July 20, 2012 was premature because petitioner was still under the company-designated physicians' treatment within the allowable 240-day period, no assessment as to fitness or disability had yet been issued, and petitioner had not yet secured an assessment from his chosen physician, whom he consulted only on October 2, 2012. Petitioner also failed to comply with Section 20(A)(3) of the 2010 POEA-SEC and Clause 25.2 of the CBA, which require the joint appointment of a third doctor when the seafarer's physician disagrees with the company-designated physician's assessment. Under Veritas Maritime Corporation vs. Gepanaga, Jr., non-compliance with this procedure militates against the seafarer's claims and results in the affirmance of the company-designated physician's fit-to-work certification. Thus, the arguments that the 120-day lapse rendered petitioner permanently and totally disabled and that the third-doctor procedure is merely directory were untenable.
• Solidary Liability of Padiz: Section 10 of RA 8042, as amended, provides that if the recruitment/placement agency is a juridical being, the corporate officers and directors and partners shall themselves be jointly and solidarily liable with the corporation or partnership for claims and damages. Although a corporate director, trustee, or officer who entered into contracts on behalf of the corporation generally cannot be held personally liable for corporate liabilities, personal liability may validly attach when a specific provision of law makes him personally answerable for his corporate action. Sealanes Marine Services, Inc. vs. Dela Torre sustained the joint and solidary liability of the manning agency, its foreign principal, and the manning agency's President under Section 10 of RA 8042, as amended. Dohle Seafront is also presumed to have submitted a verified undertaking by its officers and directors that they will be jointly and severally liable with the company over claims arising from an employer-employee relationship when it applied for a license to operate a seafarer's manning agency, as required under the 2003 POEA Rules. Applicable laws form part of, and are read into, contracts, especially labor contracts imbued with public interest. Thus, Padiz was jointly and solidarily liable with Dohle Seafront and Dohle Manning for the income benefit.
• Income Benefit for Temporary Total Disability: Petitioner's entitlement was shown by the undisputed fact that he needed continuous medical treatment for 194 days from his repatriation on March 11, 2012 until his last visit with the company-designated physician on September 21, 2012, when he was declared fit to work. The contention that income benefit applies only to land-based employees compulsorily registered with the SSS was rejected because the 2010 POEA-SEC imposes upon the manning agency/foreign principal the duty to cover Filipino seafarers under the SSS and other social protection government agencies. The argument that the SSS should pay was likewise rejected because the income benefit arising from a covered employee's temporary total disability is to be advanced by the employer, subject to reimbursement by the SSS upon compliance with the conditions under Section 1, Rule X of the Rules Implementing Title II, Book IV of the Labor Code. Accordingly, the directive for respondents to jointly and severally pay petitioner his income benefit for 194 days was sustained, with Padiz included as a solidary debtor.
• Attorney's Fees: As a rule, the mere fact of having been forced to litigate to protect one's interest does not justify an award of attorney's fees. Jurisprudence holds that attorney's fees may be awarded to a claimant compelled to litigate by reason of an unjustified act or omission of the party from whom it is sought only when there is sufficient showing of bad faith in refusing to pay. Montierro vs. Rickmers Marine Agency Phils., Inc. held that in labor cases, the withholding of wages and benefits need not be coupled with malice or bad faith; all that is required is that the refusal to pay was without justification, compelling the employee to litigate. However, because the complaint in Montierro was filed while the petitioner was still under treatment, prior to the company-designated physician's assessment within the allowable 240-day period, and without complying with the prescribed conflict-resolution procedure, there was no unlawful withholding of benefits, rendering the award of attorney's fees improper. Similar circumstances obtained in this case, so the award of attorney's fees was deleted.

• Joint and Solidary Liability of Corporate Officers under RA 8042, as amended — Section 10 of RA 8042, as amended by RA 10022, expressly provides that if the recruitment/placement agency is a juridical being, its corporate officers and directors and partners shall themselves be jointly and solidarily liable with the corporation or partnership for all money claims or damages awarded to overseas Filipino workers. The Court applied this to hold Padiz solidarily liable with Dohle Seafront and Dohle Manning for petitioner's income benefit, notwithstanding the general rule on separate corporate personality.
• Prematurity of Seafarer Disability Claim — A claim for permanent total disability benefits filed while the seafarer is still under the company-designated physician's treatment within the allowable 240-day period, before any assessment of fitness or disability has been issued, and before the seafarer has consulted his own physician, is premature and dismissible for lack of cause of action. The Court applied this to deny petitioner's claim for permanent total disability benefits.
• Mandatory Conflict-Resolution Procedure under POEA-SEC and CBA — When the seafarer's physician disagrees with the company-designated physician's assessment, the parties must jointly appoint a third doctor whose decision is final and binding. Non-compliance with this procedure militates against the seafarer's claims and results in the affirmance of the company-designated physician's fit-to-work certification. The Court applied this to reject petitioner's reliance on his chosen physician's certification.
• Employer's Duty to Advance Income Benefit for Temporary Total Disability — The income benefit arising from a covered employee's temporary total disability is to be advanced by the employer, subject to reimbursement by the SSS upon compliance with the conditions under Section 1, Rule X of the Rules Implementing Title II, Book IV of the Labor Code. The Court applied this to sustain the award of income benefit for 194 days against the manning agencies and Padiz.
• Attorney's Fees in Labor Cases — In labor cases, the withholding of wages and benefits need not be coupled with malice or bad faith to warrant attorney's fees; it is enough that the refusal to pay was without justification, compelling the employee to litigate. However, no unlawful withholding exists where the complaint was filed prematurely and without compliance with the conflict-resolution procedure, so attorney's fees are improper. The Court applied this to delete the 10% attorney's fees award.

• "If the recruitment/placement agency is a juridical being, the corporate officers and directors and partners as the case may be, shall themselves be jointly and solidarity liable with the corporation or partnership for the aforesaid claims and damages." — This passage from Section 10 of RA 8042, as amended, is the statutory basis for holding Padiz jointly and solidarily liable with the manning agencies for petitioner's income benefit.
• "The [POEA-SEC] and the CBA clearly provide that when a seafarer sustains a work-related illness or injury while on board the vessel, his fitness or unfitness for work shall be determined by the company-designated physician." — This passage states the rule that the company-designated physician determines fitness or unfitness for work, subject to the agreed conflict-resolution procedure.
• "Thus, while petitioner had the right to seek a second and even a third opinion, the final determination of whose decision must prevail must be done in accordance with an agreed procedure. Unfortunately, the petitioner did not avail of this procedure; hence, we have no option but to declare that the company-designated doctor's certification is the final determination that must prevail." — This passage explains why petitioner's non-compliance with the third-doctor procedure resulted in the affirmance of the company-designated physician's fit-to-work certification.
• "However, in the case of Montierro v. Rickmers Marine Agency Phils., Inc. (Montierro), similarly involving a claim for permanent total disability benefits filed by a seafarer, the Court had pronounced that in labor cases, the withholding of wages and benefits need not be coupled with malice or bad faith to warrant the grant of attorney's fees since all that is required is that the refusal to pay was without justification, thus, compelling the employee to litigate." — This passage states the attorney's fees rule in labor cases, which the Court then distinguished because the complaint was premature and the conflict-resolution procedure was not followed.

• Veritas Maritime Corporation vs. Gepanaga, Jr., G.R. No. 206285, February 4, 2015, 750 SCRA 104, 117-118 — Reiterated that the seafarer's non-compliance with the mandated conflict-resolution procedure under the POEA-SEC and CBA militates against his claims and results in the affirmance of the company-designated physician's fit-to-work certification.
• Sealanes Marine Services, Inc. vs. Dela Torre, G.R. No. 214132, February 18, 2015, 751 SCRA 243, 254-255 — Sustained the joint and solidary liability of the manning agency, its foreign principal, and the manning agency's President under Section 10 of RA 8042, as amended.
• Queensland-Tokyo Commodities, Inc. vs. George, 644 Phil. 574, 584 (2010) — Cited for the exception to separate corporate personality: personal liability of a corporate director, trustee, or officer may attach when a specific provision of law makes him personally answerable for his corporate action.
• Montierro vs. Rickmers Marine Agency Phils., Inc., G.R. No. 210634, January 14, 2015, 746 SCRA 287 — Held that in labor cases, the withholding of wages and benefits need not be coupled with malice or bad faith to warrant attorney's fees; but attorney's fees were improper because the complaint was filed while the seafarer was still under treatment, before assessment within the 240-day period, and without complying with the conflict-resolution procedure.
• Asian Terminals, Inc. vs. Allied Guarantee Insurance, Co., Inc., G.R. No. 182208, October 14, 2015 — Cited for the rule that attorney's fees may be awarded only when there is sufficient showing of bad faith in refusing to pay.
• Sameer Overseas Placement Agency, Inc. vs. Cabiles, G.R. No. 170139, August 5, 2014, 732 SCRA 22, 69-70 — Cited in support of the State policy of affording protection to labor and assuring overseas Filipino workers immediate and sufficient payment of what is due them.
• Halili vs. Justice for Children International, G.R. No. 194906, September 9, 2015 — Cited for the principle that applicable laws form part of, and are read into, contracts without need for express reference, especially labor contracts imbued with public interest.

• Section 10, Republic Act No. 8042, as amended by Republic Act No. 10022 — Money Claims. Provides that the liability of the principal/employer and the recruitment/placement agency for claims under the section is joint and several; if the recruitment/placement agency is a juridical being, the corporate officers and directors and partners shall themselves be jointly and solidarily liable with the corporation or partnership for the claims and damages. Applied to hold Padiz solidarily liable with Dohle Seafront and Dohle Manning for petitioner's income benefit.
• Section 20(A)(3), 2010 POEA-SEC — Requires the joint appointment by the parties of a third doctor in case the seafarer's personal doctor disagrees with the company-designated physician's fit-to-work assessment. Petitioner failed to comply with this procedure.
• Clause 25.2, 2008-2011 ver.di IMEC IBF CBA — Provides that the disability suffered by the seafarer shall be determined by a doctor appointed by the company; if the seafarer's doctor disagrees, a third doctor may be nominated jointly between the company and the union, and the decision of this doctor shall be final and binding on both parties. Petitioner did not avail of this procedure.
• Section 1, Rule X, Rules Implementing Title II, Book IV, Labor Code — Conditions for entitlement to income benefit for temporary total disability. The employer shall be liable for the benefit if the illness or injury occurred before the employee is duly reported for coverage; the income benefit is to be advanced by the employer, subject to reimbursement by the SSS. Applied to sustain the award of income benefit for 194 days.
• Section 1(A)(2), 2010 POEA-SEC — Imposes on the principal/employer/master/company the duty to extend coverage to seafarers under the SSS, PhilHealth, ECC, and Pag-IBIG Fund, unless otherwise provided in multilateral or bilateral agreements. Applied to reject respondents' argument that income benefit is only for land-based SSS-registered employees.
• Section 18, Article II, and Section 3, Article XIII, 1987 Constitution — State policies on protection to labor. Cited in support of incorporating RA 8042, as amended, and the pertinent POEA Rules into petitioner's employment contract.

• Chief Justice Sereno (Chairperson)
• Justice Leonardo-De Castro
• Justice Bersamin
• Justice Perez