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Lorenzo T. Tangga-an v. Philippine Transmarine Carriers Inc.

& Universe Tankship

Delaware LLC
1. Jan. 31, 2002: Lorenzo entered into an overseas employment contract with Phil.
Transmarine for and in behalf of its employer, Universe Tankship. The contract
had the following terms:
Lorenzo will be employed as Chief Engineer of the S.S. Kure for 6 months
Basic Salary of $5000, with vacation leave pay equivalent to 15 days a month,
which is $2500 and a tonnage bonus of $700/month
2. Feb 11, 2002: Lorenzo was finally deployed.
3. While they were loading at Cedros, Mexico, Lorenzo noticed that the vessel listed
too much at the bow. At that particular time, the shipmaster and the chief mate
were both on shore leave, which was prohibited by maritime standards. Lorenzo
chose to ignore the improper conduct of the two senior officers.
4. March 13, 2002: After discharging its cargo in Japan, the S.S. Kure sailed to the
USA. On the way there, the shipmaster required Lorenzo and the other Filipino
engineer officers to report to his office.
The shipmaster informed them that they would be repatriated on account of
the delay in the discharging of cargo in Japan. This duty, however, was the
responsibility of deck officers.
The shipmaster blamed the delay to the non-readiness of the turbo generator
and the inoperation of the boom.
However, the turbo generator had already been prepared and synchronized
even before the arrival at Japan. An inspection of the boom also revealed that
it was operational.
Upon verification, it was found out that when the Kure docked in Japan, the
cargo hold was not immediately opened (again, a responsibility of the deck
officers and not the engineers) and the stock was not prepared.
Moreover, the shipmaster and the chief mate went on shore leave once again.
They theorized that to save face, the shipmaster shifted the blame to the
Engineering Dept.
5. Despite protests, Lorenzo and the other engineering officers were ordered to
disembark and thereafter, was repatriated.
6. On it part, Phil. Transmarine and Universe Tankship disputed the allegations,
providing an alternative account:
Sometime on March 2002, a test of the cargo discharging conveyor system
revealed that Lorenzo and the engg officers failed to supply power to the
same because they failed to start the turbo generator, even after 3 hours of
trying to start the same.
During that same incident, the shipmaster claims that he called the engine
room but Lorenzo hanged up on him. When the shipmaster went to the
engine room, he said that Lorenzo and the others just pretended to be busy
and productive.
There was another incident where Lorenzo was nowhere to be found when
the generator system and the conveyor boom were to be used. Apparently,
Lorenzo allegedly went on shore leave during that time; this caused a 2-hour
For the 2
incident, the shipmaster required Lorenzo to explain in writing
about the incident. Lorenzo failed to explain why he did not supervise the
operations and instead blamed the shipmaster in the written explanation
His explanation not satisfactory, the company decided to terminate his
services. Thus, a notice of dismissal was issued and he was repatriated.
7. Lorenzo filed a complaint for illegal dismissal, with prayer for payment of
salaries for the unexpired portion of the contract with leave pay, moral and
exemplary damages, with attorneys fees.
8. LA: Lorenzo illegally dismissed.
LA believes that an open investigation should have been conducted as to the
incidents, instead of outright dismissal. Lacking the said investigation, the
dismissal was without just cause.
The dismissal also lacked the twin requirements of notice and hearing.
As to the claim for back salaries, LA found that Lorenzo was entitled not for 4
months (the unexpired portion of his contract) but only to 3 months, along
with the stipulated benefits of vacation leave pay and tonnage bonus.
Award of damages were denied for lack of basis but attorneys fees were
granted as Lorenzo was constrained to litigate.
9. NLRC: LA affirmed.
NLRC upheld the finding of illegal dismissal, as the twin requirements of
notice and hearing were not complied with.
Also upheld the inclusion of benefits as they were part of his employment
contract, and in illegal dismissal cases, the employee is entitled to such.
Also affirmed the award of attorneys fees as there was bad faith on the part
of the company.
10. CA: LA and NLRC affirmed, with modification.
There was illegal dismissal.
But held that Lorenzo is entitled only to 3 months worth of back salaries and
not the benefits. This is pursuant to Sec. 10 of RA 8042.
Award of attorneys fees were also deleted as the CA did not find bad faith
11. Respondents (Transmarine and Universe) and Petitioner (Lorenzo) filed a
petition, with petitioners questioning the deletion of the awards of the benefits
and attorneys fees. On the other hand, respondents supported the CA ruling.

1. WON the CAs interpretation of Sec. 10 of RA 8042 was correct (NO)
2. WON the CAs deletion of the award of attorneys fees was proper (NO)

1. The CA misinterpreted Sec. 10 of RA 8042.
The relevant portion of Sec. 10:
o In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the workers shall be
entitled to the full reimbursement of his placement fee with interest of
twelve percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every year
of the unexpired term, whichever is less.
The CA based its misguided interpretation in the case of Skippers Pacific Inc v.
Skippers Maritime Services. In that case:
o The LA, NLRC and CA all took the view that the employee was entitled to
the salary for the unexpired term of his contract but limited it only to
three months (instead of 4 months, the actual unexpired term), pursuant
to their interpretation of Sec. 10 of 8042.
o The Court did not agree with the ruling and modified the same. It held
that, following the wording of Section 10, when the illegally dismissed
employees employment contract has a term of less that one year, he shall
be entitled to recover the salaries representing the unexpired portion of
the said employment contract.
o The Court found that the CA was confused by the phrase, whichever is
o The correct interpretation is that the choice of which amount to award to
an illegally dismissed overseas contract worker (i.e., whether his salaries
shall be the unexpired contract of his term OR three months salary for
every year of the unexpired term, whichever is lower) ONLY applies when
the employment contract has a term of at least one year or more. If it is
less than one year, then there is no need to make a choice; the employee
shall be entitled to salaries for the unexpired portion of the contract.
Since the employment contract of Lorenzo was for 6 months and he was only
employed for 2 months, he is entitled to his salary for the 4 months left in his
employment contract.
Moreover, the deletion of the award of the benefits stipulated (vacation leave
pay and tonnage bonus) was improper. These benefits were expressly
provided and guaranteed in his employment contract as part of his monthly
salary and benefit package; they were not made contingent. Art. 279 of the
Labor Code mandates that an employees full backwages shall be inclusive of
allowances and other benefits or their monetary equivalent.
Total award = ($5000 basic salary + $2500 vacation leave pay + $700
tonnage bonus) x 4 months = $32,800
2. The deletion of attorneys fees was improper.
In this case, attorneys fees are applied in their extraordinary concept an
indemnity for damages ordered by the court to be paid by the losing party to
the winning party.
Art. 111 of the Labor Code is an exception to the declared policy of strict
construction in the award of attorneys fees. While the merit of awarding the
same will still need to be proven, the finding of bad faith is not a requisite for
the said award of attorneys fees.
Being illegally dismissed, Lorenzo was constrained to litigate. Hence, he is
entitled to receive attorneys fees, equivalent to 10% of the total award