Sometime in December 2012, a seafarer applied with Naess Shipping for possible employment as seaman upon learning of a job opening in its domestic vessel operations. He had completed the training on International Safety Management Code and had undergone the mandatory pre-employment medical examination where he was declared fit for sea service.
On 15 February 2013, the seafarer signed an Embarkation Order stipulating the terms and conditions of his employment. On 18 February 2013, the seafarer executed a 6-month “Contract of Employment for Marine Crew on Board Domestic Vessels” with Royal Dragon, through its agent Naess Shipping, where he was to work as Second Officer with a gross monthly salary of Php30,000.00 aboard the vessel “M/V Melling 11,” an inter-island bulk and cargo carrier. It was stipulated that the contract shall take effect on 12 March 2013.
Subsequently, the seafarer and Royal Dragon executed an “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 the seafarer.
On 8 March 2013, Naess Shipping informed the seafarer that Royal Dragon cancelled his embarkation.
As the seafarer was unable to leave, he filed a complaint for breach of contract against Royal Dragon and Naess Shipping before the Arbitration Branch of the National Labor Relations Commission.
Royal Dragon and Naess Shipping, however, countered that the labor arbiter had no jurisdiction over the complaint. According to them, no employer-employee relationship had existed because the Master of the Vessel had not issued a boarding confirmation to the seafarer.
The labor tribunals ruled in favor of the seafarer. However, the Court of Appeals reversed the said ruling. According to the Court of Appeals, the Office of the Labor Arbiter did not acquire jurisdiction over the seafarer’s complaint because no employer-employee relationship existed between him and Royal Dragon. It emphasized that the supposed contract of employment did not commence since the seafarer’s deployment to his vessel of assignment did not materialize.
Did an employer-employee relationship exist between the seafarer and Royal Dragon?
The Supreme Court ruled in the affirmative.
The Court found that a contract of employment had already been perfected between the seafarer and Royal Dragon. Such contract had passed the negotiation stage or the time the prospective contracting parties had manifested 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. The seafarer and Royal Dragon, freely entered into the contract of employment, affixed their signatures thereto and assented to the terms and conditions of the contract (consent), under which the seafarer bound himself to render service (object) to Royal Dragon on board the domestic vessel “M/V Meiling 11” for the gross monthly salary of P30,000.00 (cause). According to the Court, the seafarer and Royal Dragon assumed obligations which pertain to those of an employer and an employee by virtue of said contract.
Although the Court acknowledged that parties to a contract are free to adopt such stipulations, clauses, terms and conditions as they may deem convenient, such is qualified by the requirement that contractual stipulations therein should not be contrary to law, morals, good customs, public order or public policy.
The Court found that the stipulation contained in Section D of the Addendum was a condition which held in suspense the performance of the respective obligations of the seafarer and Royal Dragon under the contract of employment, or the onset of their employment relations. The Court stated that such condition was solely dependent on the will or whim of Royal Dragon since the commencement of the employment relations was at the discretion or prerogative of the latter’s master of the ship through the issuance of a boarding confirmation to the seafarer. Applying the law1Article 1182 of the Civil Code of the Philippines, which reads: Art. 1182. 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 this Code. and jurisprudence,2Naga Telephone Co., Inc. v. Court of Appeals, G.R. No. 107112, February 24, 1994, 300 PHIL 367-389. the Court viewed this kind of condition as a “potestative condition,” the fulfillment of which depends exclusively upon the will of the debtor, in which case, the conditional obligation is void.
The Court clarified 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.3Romero v. Court of Appeals, G.R. No. 107207, November 23, 1995, 320 PHIL 269-284 In this regard, the condition set forth in the Addendum was one 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 the seafarer to render services on board the ship and for Royal Dragon to pay him the agreed compensation for such services. The Court accordingly ruled that 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 related to the fulfillment of an already existing obligation and not to its inception. The Court added that 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 of the Philippines 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 was accordingly constrained to treat the condition as void and of no effect, and declare the respective obligations of the parties as unconditional. Consequently, the Court declared that the employer-employee relationship between the seafarer and Royal Dragon should be deemed to have arisen as of the agreed effectivity date of the contract of employment, or on 12 March 2013.
Further reading:
- Gemudiano, Jr. v. Naess Shipping Philippines, Inc., G.R. No. 223825, January 20, 2020.
