Sharpe Sea Personnel, Inc. vs. Mabunay, Jr.

A company-designated physician's failure to issue a final and definite assessment of a seafarer's fitness to work or disability grade within the prescribed 120- or 240-day periods renders the seafarer totally and permanently disabled; an interim disability rating does not bind the parties and cannot be the basis for a disability award.

Mabunay was hired by Sharpe Sea, an agent for C.F. Sharp & Company Pte. Ltd/Monte Carlo, under a nine-month contract as an oiler aboard M/V Larisa; Florem was Sharpe Sea's fleet manager. The employment was governed by the 2000 POEA-SEC, which supplies standard terms on compensation and benefits for work-related injury or illness and designates the company-designated physician to assess fitness or disability. The POEA-SEC also provides for a third-doctor procedure if the seafarer's physician disagrees with the company-designated physician's assessment.

On March 23, 2009, Macario G. Mabunay, Jr. entered into a contract of employment with Sharpe Sea, an agent for C.F. Sharp & Company Pte. Ltd/Monte Carlo, represented by its fleet manager Moises R. Florem, Jr. Mabunay was hired as an oiler for nine months aboard M/V Larisa with a total monthly salary of US$1,083.00. He boarded M/V Larisa on April 14, 2009. The following day, while cleaning the second floor of the engine room, he slipped and hit his back on the purifier. He lost consciousness when he fell; when he awoke, his back was numb and he had difficulty getting up. That night, he informed 2nd Engineer Castro of the accident, but Castro directed him to continue with his assigned duties. Despite persistent back pain and numbness in his legs, Mabunay continued working from April 16 to April 18, 2009, until Chief Engineer Manuel De Leon allowed him to have a medical checkup when the ship docked in Nanjing, China.

On April 23, 2009, Mabunay was brought to Nanjing Hospital, where he was diagnosed with chest and spinal column bone damage and declared unfit to work by his attending physician. He was medically repatriated to Manila on April 29, 2009. On April 30, 2009, he reported to Sharpe Sea's office and was told to report to Dr. Nicomedes G. Cruz, a company-designated physician. From April 30 to June 3, 2009, he was confined at Manila Doctors Hospital and diagnosed with "Cervical Spondylosis, C4C5; Thoracolumbar Spondylosis; and Mild chronic compression fracture of T12 & LI vertebral bodies." He was provided a cervical collar and lumbosacral corset, told to continue physical therapy, and advised to return on July 7, 2009 for further checkup.

On August 14, 2009, after it was noted that Mabunay was not responding to physical therapy, Dr. Cruz recommended that he undergo a discectomy "for decompression of cervical area with fusion and bone grafting and fixation of cervical plates and screws." On November 24, 2009, Mabunay underwent surgery, and Dr. Cruz observed that he "tolerated the procedure well." He was discharged from the hospital on December 5, 2009. On January 21, 2010, Mabunay filed a complaint against Sharpe Sea, Monte Carlo, and Florem for payment of medical expenses, total disability benefits, damages, and attorney's fees.

On June 3, 2010, Mabunay sought the opinion of Dr. Alan Leonardo R. Raymundo, an orthopedic surgeon, who diagnosed him with "herniated disc, C4-C5" and opined that he was unfit to work as a seaman in his present condition. On July 2, 2010, another orthopedic surgeon, Dr. Rommel F. Fernando, also found him unfit to work, certifying that his current condition and predicament made him "UNFIT TO WORK until such time as further work ups (MRI, repeat xrays, etc) can be done to better establish the cause of his symptoms and treat him accordingly."

The Labor Arbiter found that the company-designated physicians and Mabunay's personal physicians had found him unfit for sea duty because he still needed regular medical checkups and treatment. The Labor Arbiter rejected Sharpe Sea's claim that its company-designated physicians assessed Mabunay with a Grade 8 disability rating because it was not supported by the records, and emphasized that more than 240 days had elapsed from April 23, 2009, when he was found unable to work in Nanjing Hospital, to July 2, 2010, when Dr. Fernando examined him and still found him unable to work. The NLRC initially affirmed the finding that the records lacked evidence of a Grade 8 rating, but on reconsideration it gave credence to a medical report dated August 18, 2009 from Dr. Cruz, which petitioners attached to their motion for reconsideration, and reduced the award to a Grade 8 rating. The Court of Appeals found that Sharpe Sea failed to adequately explain why it submitted the Grade 8 medical report only in its motion for reconsideration and that it acted in bad faith in belatedly submitting the rating.

• POEA-SEC as Governing Law: Petitioners argued that under the POEA-SEC, for disability compensation to be validly awarded, the illness or injury must have been suffered during the seafarer's employment and a company-designated physician must determine the disability rating; respondent signed this contract.
• Primacy of Company-Designated Physician's Rating: Petitioners maintained that the Court of Appeals erred in disregarding the Grade 8 disability rating given by Dr. Cruz, since doing so disregarded the terms and conditions of the POEA-SEC.
• 120-Day Rule Inapplicable: Petitioners asserted that a seafarer's inability to perform his job for more than 120 days cannot be found in the POEA-SEC, which is the law between the parties, and that Article 192(c)(i) of the Labor Code applies only to claims before the Employees Compensation Commission, not to POEA-SEC claims.
• Third-Doctor Procedure: Petitioners argued that the POEA-SEC mandates a company-designated physician to conduct the medical evaluation and provide the disability grading, and provides a procedure for resolution if the seafarer disagrees; respondent failed to comply with this procedure and should be bound by the company-designated physician's Grade 8 assessment.
• Special Law for Seafarers: Petitioners stressed that the disability compensation scheme for seafarers is governed by a special law, the POEA-SEC, in recognition that seafarers belong to a class of their own, and that its provisions should be applied by the courts.
• No Bad Faith: Petitioners claimed they were not guilty of bad faith since they shouldered respondent's treatment and rehabilitation expenses, making the award of damages and attorney's fees baseless.
• Belated Submission Explained: Petitioners stated that the belated submission of the medical certificate with Grade 8 rating was because respondent's medical treatment was extended due to his back operation, and they never intended to conceal his medical condition.
• Grade 8 Should Enjoy Primacy: In their Memorandum, petitioners continued to assert that the Grade 8 disability rating issued by Dr. Cruz should enjoy primacy over the findings of respondent's private physicians, and denied acting in bad faith or in an oppressive or malicious manner since they shouldered all medical expenses and acted within their POEA-SEC rights.

• Refusal to Assess Disability: Respondent insisted that he repeatedly requested Dr. Cruz and Dr. Castillo, the company-designated physicians, to assess the degree of his disability, but they refused to do so; left with no other choice, he consulted Dr. Raymundo and Dr. Fernando, who both concluded that he was unfit to work as a seaman.
• Abdication of POEA-SEC Duty: Respondent contended that Dr. Cruz abdicated the duty imposed on him by the POEA-SEC when he refused to timely issue an assessment of respondent's disability grading.
• Impossibility of Third-Doctor Referral: Respondent pointed out that it was impossible to engage the opinion of a third doctor jointly agreed upon by the parties, as required by the POEA-SEC, since 240 days had already lapsed since his repatriation without Dr. Cruz issuing a disability assessment.
• Unexplained Belated Submission: Respondent emphasized that petitioners failed to adequately explain their belated submission of Dr. Cruz's medical report with an interim assessment of Grade 8; the medical report was dated August 18, 2009, yet it was only submitted on July 19, 2011.
• Damages Based on Inhuman Treatment: To support his claims for damages, respondent adopted the findings of the Court of Appeals and referred to the inhuman treatment he experienced aboard M/V Larisa, where he was expected to continue working despite informing his superior that he was under extreme pain, and his medical treatment was stopped even if he had not yet fully recuperated.

• Grade 8 Disability Rating: Whether the Grade 8 disability rating of the company-designated physician should be upheld over the contrary findings of respondent's private physicians.
• Damages and Attorney's Fees: Whether there is sufficient basis for the award of damages and attorney's fees.

• Grade 8 Disability Rating: No. The Grade 8 rating cannot be upheld over the contrary findings of respondent's private physicians. The company-designated physician issued only an interim rating, and no final and definite assessment or fit-to-work certification was issued within the prescribed 120- or 240-day periods; respondent is therefore deemed totally and permanently disabled. The belatedly submitted rating was also not adequately explained.
• Damages and Attorney's Fees: Yes. Bad faith was established by petitioners' belated submission of the ante-dated interim medical report and their concealment of the interim diagnosis, which forced respondent to seek private physicians; moral and exemplary damages and attorney's fees are proper.

• Grade 8 Disability Rating: The 2000 POEA-SEC governed because Sharpe Sea and Mabunay entered into a contract of employment on March 23, 2009. Section 20(B) provides the requisites for compensable disability, and it was undisputed that Mabunay encountered an accident a day after boarding M/V Larisa and later underwent spine surgery. Petitioners claimed that Dr. Cruz issued a Grade 8 disability rating, but the Labor Arbiter and the NLRC found no evidence of such rating in the records. Petitioners only attached Dr. Cruz's medical report, dated August 18, 2009, to their Motion for Reconsideration of the NLRC Decision, submitting it on July 19, 2011, or about two years later, without adequate explanation. Although technical rules of evidence are not binding in labor cases and the NLRC may receive evidence on appeal, the delay in submission must be adequately explained. Petitioners could have attached the report to their Position Paper, Memorandum on Appeal, or Comment, but failed to do so, giving rise to a reasonable suspicion that the report was nonexistent on the date indicated. Even if the explanation were accepted, Dr. Cruz only issued an interim disability rating: "The interim disability grading under the POEA schedule of disabilities is Grade 8 total stiffness of the neck due to fracture or dislocation of the cervical spines." Under Magsaysay Maritime Corp. vs. Cruz, a company-designated physician is expected to come up with a definite assessment of a seafarer's fitness or lack of fitness to work, or to determine the degree of disability, within 120 or 240 days from repatriation; an interim disability grading is merely an initial prognosis and does not provide sufficient basis for an award of disability benefits. After Dr. Cruz issued the interim Grade 8 rating, Mabunay underwent a discectomy, and Dr. Cruz's only feedback was that Mabunay "tolerated the procedure well." This was not the definite and conclusive assessment required to bind the parties. Dr. Cruz, Dr. Castillo, or any other company-designated physician failed to issue either a fit-to-work certification or a final disability rating after the operation and before the lapse of 240 days from repatriation. Thus, the Court of Appeals did not err in considering respondent permanently and totally disabled. This follows Kestrel Shipping vs. Munar, which explained that injuries or disabilities with a disability grading from 2 to 14, though partial and permanent, may be deemed totally and permanently disabled if they incapacitate a seafarer from performing usual sea duties for more than 120 or 240 days, depending on the need for further medical treatment; the company-designated physician is expected to arrive at a definite assessment within 120 or 240 days, and if he fails to do so and the seafarer's medical condition remains unresolved, the seafarer shall be deemed totally and permanently disabled. Petitioners' argument that respondent should have consulted a third doctor did not persuade, because petitioners themselves failed to substantiate the Grade 8 rating and withheld the interim diagnosis.
• Damages and Attorney's Fees: Bad faith is not simply bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong, and means a breach of a known duty through some motive or interest or ill-will that partakes of the nature of fraud. By not timely releasing Dr. Cruz's interim disability grading, petitioners revealed an intention to leave respondent in the dark regarding his future as a seafarer and forced him to seek diagnosis from private physicians. Petitioners' bad faith was further exacerbated when they tried to invalidate the findings of respondent's private physicians for his supposed failure to move for the appointment of a third-party physician as required by the POEA-SEC, despite their own deliberate concealment of their physician's interim diagnosis from respondent and the labor tribunals. The Court of Appeals correctly awarded moral and exemplary damages. In light of petitioners' patently malicious act in belatedly submitting an ante-dated medical report, the Court increased moral damages from ₱50,000.00 to ₱100,000.00 as compensation for the anxiety and inconvenience respondent suffered, and increased exemplary damages from ₱50,000.00 to ₱100,000.00 to serve as a deterrent against similar oppressive acts. The NLRC's absolution of Florem from personal liability, in the absence of evidence that he had a direct hand in denying respondent's disability claims, was never contested and was left undisturbed. Legal interest was fixed at 6% per annum on the total award from date of finality of judgment until full satisfaction.

• Total and Permanent Disability by Operation of Law — Under the POEA-SEC and the relevant provisions of the Labor Code and the Amended Rules on Employee Compensation, a seafarer whose injury or disability, though graded from 2 to 14, incapacitates him from performing his usual sea duties for more than 120 or 240 days, depending on the need for further medical treatment, is deemed totally and permanently disabled. The company-designated physician is expected to arrive at a definite assessment of the seafarer's fitness to work or permanent disability within 120 or 240 days; if he fails to do so and the seafarer's medical condition remains unresolved, the seafarer shall be deemed totally and permanently disabled. The Court applied this doctrine because Dr. Cruz issued only an interim Grade 8 rating and no final fit-to-work certification or definite disability rating after Mabunay's surgery and before the lapse of 240 days from repatriation.
• Interim Disability Rating — An interim disability grading is merely an initial prognosis or initial determination of the seafarer's condition for the time being; it does not fully assess the seafarer's condition and cannot provide sufficient basis for an award of disability benefits. The Court relied on Magsaysay Maritime Corp. vs. Cruz and noted that after Dr. Cruz issued the interim Grade 8 rating, Mabunay still underwent a discectomy and required further treatment, so the interim rating did not bind the parties.
• Bad Faith — Bad faith is not simply bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong, and means a breach of a known duty through some motive or interest or ill-will that partakes of the nature of fraud. The Court found bad faith in petitioners' belated submission of Dr. Cruz's ante-dated interim medical report and their concealment of the interim diagnosis, which forced respondent to consult private physicians and supported moral and exemplary damages.
• Liberal Rules of Evidence in Labor Cases and Belated Evidence — Technical rules of evidence are not binding in labor cases, and the NLRC is not precluded from receiving evidence for the first time on appeal, but the delay in the submission of evidence must be adequately explained. The Court found that petitioners failed to adequately explain why Dr. Cruz's medical report dated August 18, 2009 was submitted only on July 19, 2011, despite opportunities to attach it to their Position Paper, Memorandum on Appeal, or Comment.

• "The company-designated physicians' failure to arrive at a final and definite assessment of a seafarer's fitness to work or level of disability within the prescribed periods means that the seafarer shall be deemed to be totally and permanently disabled." — This states the Court's core ratio decidendi, establishing that the company-designated physician's failure to issue a final and definite assessment within the prescribed periods results in total and permanent disability by operation of law.
• "Being an interim disability grade, this declaration is an initial determination of respondent’s condition for the time being. It is only an initial prognosis of the health status of respondent because after its issuance, respondent was still required to return for reevaluation, and to continue therapy and medication; as such, it does not fully assess respondent’scondition and cannot provide sufficient basis for the award of disability benefits in his favor." — Quoted from Magsaysay Maritime Corp. vs. Cruz, this passage defines why an interim disability rating cannot support an award of disability benefits and was applied to Dr. Cruz's Grade 8 rating.
• "Bad faith is not simply bad judgment or negligence. “[I]t imports a dishonest purpose or some moral obliquity and conscious doing of wrong. It means a breach of a known duty through some motive or interest or ill-will that partakes of the nature of fraud.”" — This is the Court's canonical formulation of bad faith, used to justify the award of moral and exemplary damages against petitioners.
• "That while the seafarer is partially injured or disabled, he is not precluded from earning doing the same work he had before his injury or disability or that he is accustomed or trained to do. Otherwise, if his illness or injury prevents him from engaging in gainful employment for more than 120 or 240 days, as the case may be, he shall be deemed totally and permanently disabled." — Quoted from Kestrel Shipping vs. Munar, this passage explains when a partial disability may be treated as total and permanent and supports the Court's conclusion that Mabunay was totally and permanently disabled.

• Magsaysay Maritime Corp. vs. Cruz, G.R. No. 204769, June 6, 2016, 792 SCRA 344 — Followed; held that a company-designated physician is expected to come up with a definite assessment of a seafarer's fitness or lack of fitness to work or degree of disability within 120 or 240 days from repatriation, and that an interim disability grading is merely an initial prognosis that cannot provide sufficient basis for an award of disability benefits.
• Kestrel Shipping vs. Munar, 702 Phil 717 (2013) — Followed; explained that injuries or disabilities with a disability grading from 2 to 14, though partial and permanent, may be deemed totally and permanently disabled if they incapacitate a seafarer from performing usual sea duties for more than 120 or 240 days, and that failure of the company-designated physician to issue a definite assessment within the prescribed period renders the seafarer totally and permanently disabled.
• Sunit vs. OSM Maritime Services, Inc., G.R. No. 223035, February 27, 2017 — Cited; required a definite and conclusive assessment of the seafarer's disability or fitness to return to work from the company-designated physician or appointed third-party physician.
• Solidbank Corporation vs. Garnier, 649 Phil 54 (2010) — Cited; supplied the definition of bad faith as importing a dishonest purpose or moral obliquity and conscious doing of wrong, and as a breach of a known duty through motive or interest or ill-will that partakes of the nature of fraud.
• Nacar vs. Gallery Frames, 716 Phil 267 (2013) — Cited; basis for the award of legal interest at 6% per annum on the total award from date of finality of judgment until full satisfaction.
• Wallem Maritime Services, Inc. vs. Tanawan, 693 Phil 416 (2012) — Cited; held that the POEA-SEC is deemed included in seafarers' contracts of employment in foreign ocean-going vessels.
• Philippine Telegraph and Telephone Corp. vs. National Labor Relations Commission, 262 Phil 491 (1990); Tanjuan vs. Philippine Postal Savings Bank Inc., 457 Phil 993 (2003); Misamis Oriental II Electric Service Cooperative vs. Cagalawan, 694 Phil 268 (2012) — Cited for the rule that while technical rules of evidence are not binding in labor cases and the NLRC may receive evidence on appeal, the delay in submission must be adequately explained.

• Section 20(B), 2000 POEA-SEC — Provides compensation and benefits for work-related injury or illness suffered during the term of the seafarer's contract. The Court applied it because Mabunay's accident occurred a day after boarding M/V Larisa and he later underwent spine surgery, satisfying the work-related injury or illness requisite.
• Section 20(B)(3), 2000 POEA-SEC — Provides that upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness allowance until declared fit to work or the degree of permanent disability has been assessed by the company-designated physician, but in no case exceeding 120 days; the seafarer must submit to a post-employment medical examination by a company-designated physician within three working days upon return; and if a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly, whose decision shall be final and binding. The Court found that no final assessment was timely issued, so the third-doctor procedure did not cure the failure to issue a definite disability rating.
• Section 32, 2000 POEA-SEC — The Schedule of Disabilities provides that only Grade 1 disabilities are considered total and permanent, while disabilities graded 2 to 14 are partial and permanent. The Court, through Kestrel Shipping vs. Munar, held that such partial disabilities may nonetheless be deemed total and permanent if they incapacitate the seafarer from performing usual sea duties for more than 120 or 240 days.
• Article 192(c)(i), Labor Code — Petitioners invoked this provision, which provides for total and permanent disability if the worker is unable to perform his job for more than 120 days, but argued it applies only to claims before the Employees Compensation Commission and not to POEA-SEC claims. The Court did not adopt that limitation; it applied the 120/240-day concept through Kestrel Shipping vs. Munar and the relevant provisions of the Labor Code and the Amended Rules on Employee Compensation.

Justices Lucas P. Bersamin, Samuel R. Martires, and Alexander G. Gesmundo concurred. Justice Presbitero J. Velasco, Jr. was on official leave.