Pacific Ocean Manning, Inc. vs. Bobiles

Attorney's fees under Article 111 of the Labor Code are recoverable only where there is unlawful withholding of wages, not in claims limited to disability or death indemnification; attorney's fees under Article 2208(2) of the Civil Code require litigation or expense in relation to third persons, and under Article 2208(8) require an action for indemnity under workmen's compensation and employer's liability laws, not contract such as the POEA-SEC. Applied to a seafarer whose company-designated physician failed to issue a final and definitive assessment within the extended period, disability was total and permanent by operation of law, compensable under the POEA-SEC, without attorney's fees.

V. Ships UK Ltd. is a foreign juridical entity engaged in shipping, with Pacific Ocean Manning, Inc. as its duly licensed domestic manning agent. Nicolas F. Bobiles was hired as pumpman for nine months on vessel Nordic Vega under a POEA-approved contract covered by the Filipino ITF IBF TCC AMOSUP Collective Bargaining Agreement and deemed integral to the Standard Terms and Conditions Governing the Employment of Filipino Seafarers On Board Ocean-Going Vessels. The POEA-SEC framework governs the periods for company-physician assessment, the third-doctor conflict-resolution procedure, and the schedule of disability allowances.

Bobiles was hired on October 17, 2016 as pumpman with basic salary of USD 764.00, overtime pay of USD 1,425.00 plus USD 5.00 per hour in excess of 85.0 hours, and vacation leave of 11 days per month for a nine-month tour working 44 hours per week. Before engagement he underwent required tests and was declared fit without medical issue, then boarded Nordic Vega on December 24, 2016 where he was exposed to harsh sea conditions, severe stress from separation from family, and overfatigue from long duty hours.

On January 27, 2017, while inspecting welded pumps and lifting equipment for servicing in the work area, he felt something snap in his back nerves, with pain radiating from shoulder to waist that rendered him incapable of work. The Master sought medical service from CIRM in Italy, which prescribed oral medications and cabin rest, but stiffness and intense piercing back pain left him practically immobile in his cabin for two weeks. When he attempted to return to duty on February 6, 2017, excruciating pain prevented resumption of functions and he continued bed rest and medication.

Upon arrival in Vadinar, India on February 27, 2017, he was disembarked on the Master's advice and brought to Divya Orthopaedic Hospital & Physiotherapy Center, where Dr. Niraj Vora, after X-ray and MRI of the lumbosacral spine, found L2-L3 instability, prescribed medications, and recommended repatriation. He arrived in the Philippines on February 28, 2017, reported to the manning agent, and was referred to Marine Medical Clinic in Manila and then to Cardinal Santos Medical Center under Dr. Robert Lim. MRI on March 2, 2017 showed at L4-5 a mild disc bulge with superimposed 3x10 mm central and bilateral paracentral disc protrusion effacing the ventral thecal sac without nerve root impingement, plus minimal L2-3 and L3-4 disc bulges; EMG-NCV followed on March 8, 2017, and on April 21, 2017 the company doctor diagnosed L4-L5 disc herniation with L5 radiculopathy. He underwent physiotherapy at Marine Medical Services from April 22, 2017 to May 18, 2017, extended to June 13, 2017 and thereafter month to month, without favorable prognosis.

According to petitioners, based on lumbosacral MRI showing only mild disc bulges, Bobiles was not permanently unfit as he might improve over time, and on September 4, 2017 the company doctor gave a final disability assessment of Grade 11 for slight rigidity or 1/3 loss of lifting power of the trunk, offering USD 7,465.00, which Bobiles refused without then presenting a contrary second medical report. Bobiles, for his part, sought a second opinion from Dr. Manuel Fidel M. Magtira, who in a Medical Certificate dated October 30, 2017 certified continued lower back pain and discomfort, inability to tolerate prolonged walking and standing, failure to regain usual capacity, unfitness to return as seaman, and permanent disability given heavy seafaring demands. Grievance proceedings ensued in which petitioners were willing to refer him to a third doctor, but his representative moved to terminate for failure to reach amicable settlement. He prayed for USD 102,308.00 total permanent disability under the CBA, USD 4,000.00 unpaid sick wages, P500,000.00 actual and exemplary damages, plus 10% attorney's fees, while petitioners sought dismissal or alternatively payment of USD 7,465.00, maintaining the injury was not accident-caused and thus not covered by the CBA and that damages and attorney's fees were not recoverable.

• Third-Doctor Referral: Petitioner argued that there was complete refusal on respondent's part to have the matter referred to a third doctor under the POEA-SEC conflict-resolution procedure.
• Extension of Treatment Period: Petitioner maintained that there was sufficient justification for extension of medical treatment beyond 120 days, having covered treatment costs and sickness allowances.
• CBA Coverage: Petitioner argued that the injury was not a result of an accident, thus not covered by the CBA, and at most Grade 11 compensation of USD 7,465.00 was due.
• Attorney's Fees: Petitioner argued that respondent was not entitled to attorney's fees since respondent's refusal to undergo conflict resolution prompted litigation, while petitioners shouldered medical treatment and full sickness allowances.

• Effect of Late Assessment: Respondent countered that since the company physician failed to issue the disability rating within the required period, the law grants permanent total disability benefits.
• Inapplicability of Third-Doctor Procedure: Respondent argued that the POEA-SEC provision on appointment of a third doctor did not apply because the company physician failed to issue a definite and accurate medical assessment.
• Damages and Attorney's Fees: Respondent argued that he was entitled to damages due to petitioners' bad faith as well as attorney's fees since he was compelled to litigate.

• Third-Doctor Referral: Whether referral to a third doctor was mandatory where no valid and timely company-physician assessment was issued and the seafarer-appointed doctor's contrary finding was involved.
• Finality of Assessment and Total Permanent Disability: Whether the Grade 11 assessment dated September 4, 2017 constituted a final medical assessment within the extended 240-day period, or whether disability became total and permanent by operation of law.
• Applicable Compensation Rate: Whether disability compensation should be based on CBA rates for accident-caused permanent disability or on the POEA-SEC Schedule of Disability Allowances.
• Attorney's Fees under Article 111: Whether attorney's fees were recoverable under Article 111 of the Labor Code in a claim limited to disability compensation without unlawful withholding of wages.
• Attorney's Fees under Article 2208: Whether attorney's fees were recoverable under Article 2208(2), (8), or (11) of the Civil Code where the seafarer was compelled to litigate for disability benefits under the POEA-SEC.

• Third-Doctor Referral: No. Referral is mandatory only with a valid and timely company-physician assessment refuted by the seafarer-appointed doctor; absent a conclusive assessment, compliance was not required.
• Finality of Assessment and Total Permanent Disability: No, the September 4, 2017 Grade 11 rating was not final because a same-date certificate directed continued medication and re-evaluation, so disability was total and permanent by operation of law.
• Applicable Compensation Rate: POEA-SEC applies. The CBA rate for permanent disability as a result of an accident was inapplicable, so USD 50,000.00 x 120% or USD 60,000.00 was due, with 6% legal interest from finality until full payment.
• Attorney's Fees under Article 111: No. Article 111 is limited to cases of unlawful withholding of wages and does not apply to a case involving only disability compensation.
• Attorney's Fees under Article 2208: No. Paragraph (2) requires litigation or expense in relation to third persons, paragraph (8) requires indemnity under workmen's compensation and employer's liability laws not contract, and paragraph (11) lacked factual, legal, or equitable justification.

• Third-Doctor Referral: Referral to a third doctor presupposes a valid and timely assessment by the company-designated physician later refuted by the seafarer-appointed doctor, pursuant to Marlow Navigation Philippines Inc. vs. Osias and Paleracio vs. Sealanes Marine Services, Inc. Where no conclusive and definite assessment was issued before expiration of the 120- or 240-day periods, the conflict-resolution mechanism was not triggered and the law steps in to deem disability total and permanent.
• Finality of Assessment and Total Permanent Disability: Under Elburg Shipmanagement Phils., Inc. vs. Quiogue, Jr., the company physician must issue a final grading within 120 days from reporting; failure without justifiable reason makes disability permanent and total, while justified need for further treatment or seafarer non-cooperation extends diagnosis and treatment to 240 days, with the employer bearing the burden of justification, and failure within 240 days makes disability permanent and total regardless of justification. Repatriated February 28, 2017, the 120th day was June 28, 2017, with no final assessment issued; the June 14, 2017 report directing continued therapy, medication, and June 30, 2017 re-evaluation showed need for further treatment and justified extension, consistent with Paleracio. However, the September 4, 2017 Grade 11 rating was negated as final by a contemporaneous certificate noting status quo, continued medications and home exercises, and re-evaluation on October 11, 2017; following Benhur Shipping Corp. vs. Riego, an assessment accompanied by a finding of need for further treatment or reevaluation is not the final assessment contemplated by the POEA-SEC and Elburg, transforming disability to permanent total regardless of grade.
• Applicable Compensation Rate: Because the CBA disability rates applied only to permanent disability as a result of an accident and respondent's condition did not result from such, reliance on the POEA-SEC Schedule at USD 50,000.00 x 120% or USD 60,000.00 was correct. Pursuant to jurisprudence on legal interest, the amount bears 6% legal interest per annum from finality until fully paid.
• Attorney's Fees under Article 111: Article 111 expressly speaks of attorney's fees equivalent to ten percent of wages recovered in cases of unlawful withholding of wages and unlawful exaction in proceedings for recovery of wages, situated under Title II, Chapter III on Payment of Wages. Heirs of Aniban vs. National Labor Relations Commission inaccurately extended it to death benefits; the correct application in G.J.T. Rebuilders Machine Shop vs. Ambos and T&H Shopfitters Corporation/Gin Queen Corporation vs. T&H Shopfitters Corporation/Gin Queen Workers Union limits the 10% award to unlawful withholding of wages. Mere compulsion to engage counsel, without premium on the right to litigate, does not suffice, and no wages or unlawful withholding were involved here.
• Attorney's Fees under Article 2208: Paragraph (2) unequivocally requires compulsion to litigate with third persons or incur expenses to protect interest in relation to third persons, reflecting the wrongful-act doctrine where the defendant's wrong involves the plaintiff in litigation with others or places plaintiff in relation with others necessitating expense, as expounded by Senator Vicente J. Francisco, American Jurisprudence, Iowa case law, and The Borden Company vs. Doctors Pharmaceuticals, Inc. Litigation solely against the defendant, with expense inherent in almost every suit, cannot trigger paragraph (2) lest fees become the general rule. Paragraph (8) applies only to actions for indemnity under workmen's compensation and employer's liability laws, formerly Act No. 3428 and Act No. 1874 and later Title II, Book IV of the Labor Code, not to contractual indemnity under the POEA-SEC. Paragraph (11) demands factual, legal, or equitable justification for judicial discretion per Estate of Buan vs. Camaganacan; bare compulsion to litigate was insufficient, especially where petitioners covered treatment costs and full sickness allowances, warranting deletion.

• Third-doctor referral rule — Referral to a third doctor is mandatory when (1) there is a valid and timely assessment by the company-designated physician and (2) the seafarer-appointed doctor refuted such assessment. Compliance presupposes a company-physician fitness assessment before expiration of the 120- or 240-day periods; without a conclusive assessment, the seafarer need not comply and disability is deemed total and permanent.
• Elburg rules on seafarer disability assessment periods — (1) The company-designated physician must issue a final medical assessment on disability grading within 120 days from the seafarer's reporting; (2) failure within 120 days without justifiable reason renders disability permanent and total; (3) failure within 120 days with sufficient justification such as need for further treatment or seafarer non-cooperation extends diagnosis and treatment to 240 days, with the employer bearing the burden to prove justification; and (4) failure within extended 240 days renders disability permanent and total regardless of justification. Applied to extend the period for continued therapy but ultimately to deem disability total and permanent for lack of final assessment.
• Finality of company-physician assessment — A medical assessment is not final when accompanied by a contemporaneous finding that further treatment, medication, or re-evaluation is required. Such continuing assessment cannot be treated as the final medical assessment under the POEA-SEC, and failure to issue a final and valid assessment transforms temporary total disability to permanent total disability regardless of grade, dispensing with conflict resolution.
• Attorney's fees under Article 111 of the Labor Code — Recoverable only in cases of unlawful withholding of wages, limited to ten percent of wages recovered, and in fee arrangements from collective bargaining negotiations chargeable to union funds. Not applicable to claims involving only disability or death benefits; being constrained to engage counsel, without more, does not justify the award.
• Attorney's fees under Article 2208(2) of the Civil Code; wrongful-act doctrine — Recoverable only when the defendant's act or omission compelled the plaintiff to litigate with third persons or incur expenses to protect interest in relation to third persons. The plaintiff must show involvement in a legal dispute due to defendant's breach or tort, that the dispute was with a third party not the defendant, and that fees were connected to that dispute as a natural and proximate consequence incurred necessarily and in good faith. Direct litigation against the defendant alone does not qualify.
• Attorney's fees under Article 2208(8) of the Civil Code — Recoverable only in actions for indemnity under workmen's compensation and employer's liability laws, not in contractual indemnity actions such as under the POEA-SEC. Formerly governed by the Workmen's Compensation Act and Employer's Liability Act, now by Title II, Book IV of the Labor Code on Employees' Compensation and State Insurance Fund.
• Attorney's fees under Article 2208(11) of the Civil Code — Award in the court's discretion requires factual, legal, or equitable justification; without such premise the award is left to speculation and must be deleted.

• "Over the years, the Court has vacillated on the award of attorney's fees on the basis of Article 111 of the Labor Code and Article 2208 of the Civil Code in worker disability indemnification cases." — Introduces the clarifying ruling that Article 111 requires unlawful withholding of wages and Article 2208(2) and (8) have narrow, distinct fields of application.
• "If the company-designated physician fails to give [their] assessment within the period of 120 days, without any justifiable reason, then the seafarer's disability becomes permanent and total;" — States the controlling Elburg rule applied to deem disability total and permanent absent a timely final assessment.
• "The award of attorney's fees is the exception rather than the rule." — Recalls the restrictive policy against premiums on litigation, invoked to deny fees where only compulsion to sue was shown.
• "The exercise of judicial discretion in the award of attorney's fees under Article 2208(11) of the Civil Code demands a factual, legal, or equitable justification upon the basis of which the court exercises, its discretion." — Defines the justification requirement that foreclosed reliance on the catch-all paragraph here.

• Marlow Navigation Philippines Inc. vs. Osias, 773 Phil. 428 (2015) — Followed as authority that third-doctor referral is mandatory only with a valid timely company-physician assessment refuted by the seafarer's doctor.
• Paleracio vs. Sealanes Marine Services, Inc., 835 Phil. 997 (2018) — Followed for the presupposition of a company-physician fitness assessment within 120 or 240 days and for requiring a significant justifying act such as need for further treatment to avail of the 240-day extension.
• Elburg Shipmanagement Phils., Inc. vs. Quiogue, Jr., 765 Phil. 341 (2015) — Applied as controlling framework of 120-day, justified extension to 240-day, and by-operation-of-law rules for seafarer disability grading.
• Benhur Shipping Corp. vs. Riego, G.R. No. 229179, March 29, 2022 — Followed to hold that an assessment accompanied by continuing treatment or evaluation is not final and yields permanent total disability.
• Heirs of Aniban vs. National Labor Relations Commission, 347 Phil. 46 (1997) — Declared inaccurate insofar as it extended Article 111 attorney's fees to death benefits beyond unlawful withholding of wages.
• G.J.T. Rebuilders Machine Shop vs. Ambos, 752 Phil. 166 (2015) — Followed as correct application limiting Article 111 fees to unlawful withholding of wages or collective-bargaining-derived fees.
• T&H Shopfitters Corporation/Gin Queen Corporation vs. T&H Shopfitters Corporation/Gin Queen Workers Union, 728 Phil. 169 (2014) — Followed to delete 10% attorney's fees absent any claim or proof of unlawful withholding of wages.
• Pacific Ocean Manning, Inc. vs. Langam, 875 Phil. 518 (2020); Anuat vs. Pacific Ocean Manning, Inc., 836 Phil. 618 (2018); Balbarino vs. Pacific Ocean Manning, Inc., 885 Phil. 847 (2020); Pacific Ocean Manning, Inc. vs. Castillo, 903 Phil. 687 (2021) — Cited as instances of vacillation on attorney's fees, denying fees absent bad faith in Langam and Anuat, but granting under Article 2208(2) in Balbarino and under Article 2208(8) in Castillo.
• The Borden Company vs. Doctors Pharmaceuticals, Inc., 90 Phil. 500 (1951) — Followed en banc to refuse Article 2208(2) where litigation was only against the defendant and not with third persons.
• Estate of Buan vs. Camaganacan, 123 Phil. 131 (1966) — Applied to require factual, legal, or equitable justification for discretionary fees under Article 2208(11).
• Lara's Gifts & Decors, Inc. vs. Midtown Industrial Sales, Inc. (Resolution), G.R. No. 225433, September 20, 2022 — Applied as basis for imposing 6% legal interest from finality until full payment.

• Art. 111, Labor Code — Provides ten percent attorney's fees in cases of unlawful withholding of wages and caps fees in wage-recovery proceedings; held inapplicable because the suit sought only disability compensation with no wages unlawfully withheld.
• Art. 2208(2), Civil Code — Allows fees when defendant's act or omission compelled plaintiff to litigate with third persons or incur expenses to protect interest; held inapplicable because respondent was compelled to litigate only against petitioners, not a third person.
• Art. 2208(8), Civil Code — Allows fees in actions for indemnity under workmen's compensation and employer's liability laws; held inapplicable because indemnity was claimed under contract, specifically the POEA-SEC, not under workmen's compensation or employer's liability laws.
• Art. 2208(11), Civil Code — Allows fees in any other case where the court deems it just and equitable; held inapplicable for lack of proffered factual, legal, or equitable justification beyond bare compulsion to litigate.
• POEA-SEC third-doctor and disability-schedule provisions — Govern conflict resolution upon conflicting company-physician and seafarer-physician assessments and fix disability allowances; applied to excuse third-doctor referral for want of final assessment and to fix USD 50,000.00 x 120% or USD 60,000.00.

Gesmundo, C.J. (Chairperson), Zalameda, and Marquez, JJ., concur. Hernando, J., on official business.