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Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 179532 May 30, 2011

CLAUDIO S. YAP, Petitioner,

vs.
THENAMARIS SHIP'S MANAGEMENT and INTERMARE MARITIME AGENCIES, INC., Respondents.

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure, seeking the
reversal of the Court of Appeals (CA) Decision2 dated February 28, 2007, which affirmed with modification the
National Labor Relations Commission (NLRC) resolution3 dated April 20, 2005.

The undisputed facts, as found by the CA, are as follows:

[Petitioner] Claudio S. Yap was employed as electrician of the vessel, M/T SEASCOUT on 14 August 2001 by
Intermare Maritime Agencies, Inc. in behalf of its principal, Vulture Shipping Limited. The contract of employment
entered into by Yap and Capt. Francisco B. Adviento, the General Manager of Intermare, was for a duration of 12
months. On 23 August 2001, Yap boarded M/T SEASCOUT and commenced his job as electrician. However, on or
about 08 November 2001, the vessel was sold. The Philippine Overseas Employment Administration (POEA) was
informed about the sale on 06 December 2001 in a letter signed by Capt. Adviento. Yap, along with the other
crewmembers, was informed by the Master of their vessel that the same was sold and will be scrapped. They were
also informed about the Advisory sent by Capt. Constatinou, which states, among others:

" …PLEASE ASK YR OFFICERS AND RATINGS IF THEY WISH TO BE TRANSFERRED TO OTHER VESSELS
AFTER VESSEL S DELIVERY (GREEK VIA ATHENS-PHILIPINOS VIA MANILA…

…FOR CREW NOT WISH TRANSFER TO DECLARE THEIR PROSPECTED TIME FOR REEMBARKATION IN
ORDER TO SCHEDULE THEM ACCLY…"

Yap received his seniority bonus, vacation bonus, extra bonus along with the scrapping bonus. However, with
respect to the payment of his wage, he refused to accept the payment of one-month basic wage. He insisted that he
was entitled to the payment of the unexpired portion of his contract since he was illegally dismissed from
employment. He alleged that he opted for immediate transfer but none was made.

[Respondents], for their part, contended that Yap was not illegally dismissed. They alleged that following the sale of
the M/T SEASCOUT, Yap signed off from the vessel on 10 November 2001 and was paid his wages corresponding
to the months he worked or until 10 November 2001 plus his seniority bonus, vacation bonus and extra bonus. They
further alleged that Yap’s employment contract was validly terminated due to the sale of the vessel and no
arrangement was made for Yap’s transfer to Thenamaris’ other vessels.4

Thus, Claudio S. Yap (petitioner) filed a complaint for Illegal Dismissal with Damages and Attorney’s Fees before the
Labor Arbiter (LA). Petitioner claimed that he was entitled to the salaries corresponding to the unexpired portion of

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 his contract. Subsequently, he filed an amended complaint, impleading Captain Francisco Adviento of respondents
Intermare Maritime Agencies, Inc. (Intermare) and Thenamaris Ship’s Management (respondents), together with
C.J. Martionos, Interseas Trading and Financing Corporation, and Vulture Shipping Limited/Stejo Shipping Limited.

On July 26, 2004, the LA rendered a decision5 in favor of petitioner, finding the latter to have been constructively
and illegally dismissed by respondents. Moreover, the LA found that respondents acted in bad faith when they
assured petitioner of re-embarkation and required him to produce an electrician certificate during the period of his
contract, but actually he was not able to board one despite of respondents’ numerous vessels. Petitioner made
several follow-ups for his re-embarkation but respondents failed to heed his plea; thus, petitioner was forced to
litigate in order to vindicate his rights. Lastly, the LA opined that since the unexpired portion of petitioner’s contract
was less than one year, petitioner was entitled to his salaries for the unexpired portion of his contract for a period of
nine months. The LA disposed, as follows:

WHEREFORE, in view of the foregoing, a decision is hereby rendered declaring complainant to have been
constructively dismissed. Accordingly, respondents Intermare Maritime Agency Incorporated, Thenamaris Ship’s
Mgt., and Vulture Shipping Limited are ordered to pay jointly and severally complainant Claudio S. Yap the sum of
$12,870.00 or its peso equivalent at the time of payment. In addition, moral damages of ONE HUNDRED
THOUSAND PESOS (₱100,000.00) and exemplary damages of FIFTY THOUSAND PESOS (₱50,000.00) are
awarded plus ten percent (10%) of the total award as attorney’s fees.

Other money claims are DISMISSED for lack of merit.

SO ORDERED.6

Aggrieved, respondents sought recourse from the NLRC.

In its decision7 dated January 14, 2005, the NLRC affirmed the LA’s findings that petitioner was indeed
constructively and illegally dismissed; that respondents’ bad faith was evident on their wilful failure to transfer
petitioner to another vessel; and that the award of attorney’s fees was warranted. However, the NLRC held that
instead of an award of salaries corresponding to nine months, petitioner was only entitled to salaries for three
months as provided under Section 108 of Republic Act (R.A.) No. 8042,9 as enunciated in our ruling in Marsaman
Manning Agency, Inc. v. National Labor Relations Commission.10 Hence, the NLRC ruled in this wise:

WHEREFORE, premises considered, the decision of the Labor Arbiter finding the termination of complainant illegal
is hereby AFFIRMED with a MODIFICATION. Complainant[’s] salary for the unexpired portion of his contract should
only be limited to three (3) months basic salary.

Respondents Intermare Maritime Agency, Inc.[,] Vulture Shipping Limited and Thenamaris Ship Management are
hereby ordered to jointly and severally pay complainant, the following:

1. Three (3) months basic salary – US$4,290.00 or its peso equivalent at the time of actual payment.

2. Moral damages – ₱100,000.00

3. Exemplary damages – ₱50,000.00

4. Attorney’s fees equivalent to 10% of the total monetary award.

SO ORDERED.11

Respondents filed a Motion for Partial Reconsideration,12 praying for the reversal and setting aside of the NLRC
decision, and that a new one be rendered dismissing the complaint. Petitioner, on the other hand, filed his own
Motion for Partial Reconsideration,13 praying that he be paid the nine (9)-month basic salary, as awarded by the LA.

On April 20, 2005, a resolution14 was rendered by the NLRC, affirming the findings of Illegal Dismissal and
respondents’ failure to transfer petitioner to another vessel. However, finding merit in petitioner’s arguments, the
NLRC reversed its earlier Decision, holding that "there can be no choice to grant only three (3) months salary for
every year of the unexpired term because there is no full year of unexpired term which this can be applied." Hence –

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 WHEREFORE, premises considered, complainant’s Motion for Partial Reconsideration is hereby granted. The
award of three (3) months basic salary in the sum of US$4,290.00 is hereby modified in that complainant is entitled
to his salary for the unexpired portion of employment contract in the sum of US$12,870.00 or its peso equivalent at
the time of actual payment.

All aspect of our January 14, 2005 Decision STANDS.

SO ORDERED.15

Respondents filed a Motion for Reconsideration, which the NLRC denied.

Undaunted, respondents filed a petition for certiorari16 under Rule 65 of the Rules of Civil Procedure before the CA.
On February 28, 2007, the CA affirmed the findings and ruling of the LA and the NLRC that petitioner was
constructively and illegally dismissed. The CA held that respondents failed to show that the NLRC acted without
statutory authority and that its findings were not supported by law, jurisprudence, and evidence on record. Likewise,
the CA affirmed the lower agencies’ findings that the advisory of Captain Constantinou, taken together with the other
documents and additional requirements imposed on petitioner, only meant that the latter should have been re-
embarked. In the same token, the CA upheld the lower agencies’ unanimous finding of bad faith, warranting the
imposition of moral and exemplary damages and attorney’s fees. However, the CA ruled that the NLRC erred in
sustaining the LA’s interpretation of Section 10 of R.A. No. 8042. In this regard, the CA relied on the clause "or for
three months for every year of the unexpired term, whichever is less" provided in the 5th paragraph of Section 10 of
R.A. No. 8042 and held:

In the present case, the employment contract concerned has a term of one year or 12 months which commenced on
August 14, 2001. However, it was preterminated without a valid cause. [Petitioner] was paid his wages for the
corresponding months he worked until the 10th of November. Pursuant to the provisions of Sec. 10, [R.A. No.] 8042,
therefore, the option of "three months for every year of the unexpired term" is applicable.17

Thus, the CA provided, to wit:

WHEREFORE, premises considered, this Petition for Certiorari is DENIED. The Decision dated January 14, 2005,
and Resolutions, dated April 20, 2005 and July 29, 2005, respectively, of public respondent National Labor Relations
Commission-Fourth Division, Cebu City, in NLRC No. V-000038-04 (RAB VIII (OFW)-04-01-0006) are hereby
AFFIRMED with the MODIFICATION that private respondent is entitled to three (3) months of basic salary computed
at US$4,290.00 or its peso equivalent at the time of actual payment.

Costs against Petitioners.18

Both parties filed their respective motions for reconsideration, which the CA, however, denied in its Resolution19
dated August 30, 2007.

Unyielding, petitioner filed this petition, raising the following issues:

1) Whether or not Section 10 of R.A. [No.] 8042, to the extent that it affords an illegally dismissed migrant
worker the lesser benefit of – "salaries for [the] unexpired portion of his employment contract or for three (3)
months for every year of the unexpired term, whichever is less" – is constitutional; and

2) Assuming that it is, whether or not the Court of Appeals gravely erred in granting petitioner only three (3)
months backwages when his unexpired term of 9 months is far short of the "every year of the unexpired term"
threshold.20

In the meantime, while this case was pending before this Court, we declared as unconstitutional the clause "or for
three months for every year of the unexpired term, whichever is less" provided in the 5th paragraph of Section 10 of
R.A. No. 8042 in the case of Serrano v. Gallant Maritime Services, Inc.21 on March 24, 2009.

Apparently, unaware of our ruling in Serrano, petitioner claims that the 5th paragraph of Section 10, R.A. No. 8042,
is violative of Section 1,22 Article III and Section 3,23 Article XIII of the Constitution to the extent that it gives an
erring employer the option to pay an illegally dismissed migrant worker only three months for every year of the

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 unexpired term of his contract; that said provision of law has long been a source of abuse by callous employers
against migrant workers; and that said provision violates the equal protection clause under the Constitution
because, while illegally dismissed local workers are guaranteed under the Labor Code of reinstatement with full
backwages computed from the time compensation was withheld from them up to their actual reinstatement, migrant
workers, by virtue of Section 10 of R.A. No. 8042, have to waive nine months of their collectible backwages every
time they have a year of unexpired term of contract to reckon with. Finally, petitioner posits that, assuming said
provision of law is constitutional, the CA gravely abused its discretion when it reduced petitioner’s backwages from
nine months to three months as his nine-month unexpired term cannot accommodate the lesser relief of three
months for every year of the unexpired term.24

On the other hand, respondents, aware of our ruling in Serrano, aver that our pronouncement of unconstitutionality
of the clause "or for three months for every year of the unexpired term, whichever is less" provided in the 5th
paragraph of Section 10 of R.A. No. 8042 in Serrano should not apply in this case because Section 10 of R.A. No.
8042 is a substantive law that deals with the rights and obligations of the parties in case of Illegal Dismissal of a
migrant worker and is not merely procedural in character. Thus, pursuant to the Civil Code, there should be no
retroactive application of the law in this case. Moreover, respondents asseverate that petitioner’s tanker allowance
of US$130.00 should not be included in the computation of the award as petitioner’s basic salary, as provided under
his contract, was only US$1,300.00. Respondents submit that the CA erred in its computation since it included the
said tanker allowance. Respondents opine that petitioner should be entitled only to US$3,900.00 and not to
US$4,290.00, as granted by the CA. Invoking Serrano, respondents claim that the tanker allowance should be
excluded from the definition of the term "salary." Also, respondents manifest that the full sum of ₱878,914.47 in
Intermare’s bank account was garnished and subsequently withdrawn and deposited with the NLRC Cashier of
Tacloban City on February 14, 2007. On February 16, 2007, while this case was pending before the CA, the LA
issued an Order releasing the amount of ₱781,870.03 to petitioner as his award, together with the sum of
₱86,744.44 to petitioner’s former lawyer as attorney’s fees, and the amount of ₱3,570.00 as execution and deposit
fees. Thus, respondents pray that the instant petition be denied and that petitioner be directed to return to Intermare
the sum of US$8,970.00 or its peso equivalent.25

On this note, petitioner counters that this new issue as to the inclusion of the tanker allowance in the computation of
the award was not raised by respondents before the LA, the NLRC and the CA, nor was it raised in respondents’
pleadings other than in their Memorandum before this Court, which should not be allowed under the
circumstances.26

The petition is impressed with merit.

Prefatorily, it bears emphasis that the unanimous finding of the LA, the NLRC and the CA that the dismissal of
petitioner was illegal is not disputed. Likewise not disputed is the tribunals’ unanimous finding of bad faith on the
part of respondents, thus, warranting the award of moral and exemplary damages and attorney’s fees. What
remains in issue, therefore, is the constitutionality of the 5th paragraph of Section 10 of R.A. No. 8042 and,
necessarily, the proper computation of the lump-sum salary to be awarded to petitioner by reason of his illegal
dismissal.

Verily, we have already declared in Serrano that the clause "or for three months for every year of the unexpired
term, whichever is less" provided in the 5th paragraph of Section 10 of R.A. No. 8042 is unconstitutional for being
violative of the rights of Overseas Filipino Workers (OFWs) to equal protection of the laws. In an exhaustive
discussion of the intricacies and ramifications of the said clause, this Court, in Serrano, pertinently held:

The Court concludes that the subject clause contains a suspect classification in that, in the computation of the
monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on the claim of
OFWs with an unexpired portion of one year or more in their contracts, but none on the claims of other OFWs or
local workers with fixed-term employment. The subject clause singles out one classification of OFWs and burdens it
with a peculiar disadvantage.27

Moreover, this Court held therein that the subject clause does not state or imply any definitive governmental
purpose; hence, the same violates not just therein petitioner’s right to equal protection, but also his right to
substantive due process under Section 1, Article III of the Constitution.28 Consequently, petitioner therein was
accorded his salaries for the entire unexpired period of nine months and 23 days of his employment contract,

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 pursuant to law and jurisprudence prior to the enactment of R.A. No. 8042.

We have already spoken. Thus, this case should not be different from Serrano.

As a general rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no
protection; it creates no office; it is inoperative as if it has not been passed at all. The general rule is supported by
Article 7 of the Civil Code, which provides:

Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by
disuse or custom or practice to the contrary.

The doctrine of operative fact serves as an exception to the aforementioned general rule. In Planters Products, Inc.
v. Fertiphil Corporation,29 we held:

The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair play. It
nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination
of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The past
cannot always be erased by a new judicial declaration.

The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have
relied on the invalid law. Thus, it was applied to a criminal case when a declaration of unconstitutionality would put
the accused in double jeopardy or would put in limbo the acts done by a municipality in reliance upon a law creating
it.30

Following Serrano, we hold that this case should not be included in the aforementioned exception. After all, it was
not the fault of petitioner that he lost his job due to an act of illegal dismissal committed by respondents. To rule
otherwise would be iniquitous to petitioner and other OFWs, and would, in effect, send a wrong signal that
principals/employers and recruitment/manning agencies may violate an OFW’s security of tenure which an
employment contract embodies and actually profit from such violation based on an unconstitutional provision of law.

In the same vein, we cannot subscribe to respondents’ postulation that the tanker allowance of US$130.00 should
not be included in the computation of the lump-sum salary to be awarded to petitioner.

First. It is only at this late stage, more particularly in their Memorandum, that respondents are raising this issue. It
was not raised before the LA, the NLRC, and the CA. They did not even assail the award accorded by the CA, which
computed the lump-sum salary of petitioner at the basic salary of US$1,430.00, and which clearly included the
US$130.00 tanker allowance. Hence, fair play, justice, and due process dictate that this Court cannot now, for the
first time on appeal, pass upon this question. Matters not taken up below cannot be raised for the first time on
appeal. They must be raised seasonably in the proceedings before the lower tribunals. Questions raised on appeal
must be within the issues framed by the parties; consequently, issues not raised before the lower tribunals cannot
be raised for the first time on appeal.31 1avvphi1

Second. Respondents’ invocation of Serrano is unavailing. Indeed, we made the following pronouncements in
Serrano, to wit:

The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, DOLE
Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in which salary is
understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is
compensation for all work "performed" in excess of the regular eight hours, and holiday pay is compensation for any
work "performed" on designated rest days and holidays.32

A close perusal of the contract reveals that the tanker allowance of US$130.00 was not categorized as a bonus but
was rather encapsulated in the basic salary clause, hence, forming part of the basic salary of petitioner.
Respondents themselves in their petition for certiorari before the CA averred that petitioner’s basic salary, pursuant
to the contract, was "US$1,300.00 + US$130.00 tanker allowance."33 If respondents intended it differently, the
contract per se should have indicated that said allowance does not form part of the basic salary or, simply, the
contract should have separated it from the basic salary clause.

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 A final note.

We ought to be reminded of the plight and sacrifices of our OFWs. In Olarte v. Nayona,34 this Court held that:

Our overseas workers belong to a disadvantaged class. Most of them come from the poorest sector of our society.
Their profile shows they live in suffocating slums, trapped in an environment of crimes. Hardly literate and in ill
health, their only hope lies in jobs they find with difficulty in our country. Their unfortunate circumstance makes them
easy prey to avaricious employers. They will climb mountains, cross the seas, endure slave treatment in foreign
lands just to survive. Out of despondence, they will work under sub-human conditions and accept salaries below the
minimum. The least we can do is to protect them with our laws.

WHEREFORE, the Petition is GRANTED. The Court of Appeals Decision dated February 28, 2007 and Resolution
dated August 30, 2007 are hereby MODIFIED to the effect that petitioner is AWARDED his salaries for the entire
unexpired portion of his employment contract consisting of nine months computed at the rate of US$1,430.00 per
month. All other awards are hereby AFFIRMED. No costs.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

Footnotes

1 Rollo, pp. 33-56.

2 Penned by Associate Justice Antonio L. Villamor, with Associate Justices Pampio A. Abarintos and Stephen
C. Cruz, concurring; id. at 60-73.

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 3 Id. at 166-170.

4 Supra note 2, at 63-65.

5 Rollo, pp. 121-129.

6 Id. at 129.

7 Id. at 130-149.

8 The last clause in the 5th paragraph of Section 10, R.A. No. 8042, provides to wit:

Sec. 10. MONEY CLAIMS. — x x x.

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. (Emphasis and
underscoring supplied.)

9 The Migrant Workers and Overseas Filipinos Act of 1995, effective July 15, 1995.

10 371 Phil. 827 (1999).

11 Supra note 7, at 148-149.

12 Rollo, pp. 157-163.

13 Id. at 150-156.

14 Id. at 166-170.

15 Id. at 170.

16 Id. at 171-196.

17 Supra note 2, at 70.

18 Id. at 72-73.

19 Rollo, pp. 96-99.

20 Supra note 1, at 44-45.

21 G.R. No. 167614, March 24, 2009, 582 SCRA 254.

22 Section 1, Article III of the Constitution provides:

Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall
any person be denied the equal protection of the laws.

23 Section 3, Article XIII of the Constitution pertinently provides:

Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized,
and promote full employment and equality of employment opportunities for all.

24 Rollo, pp. 312-331.

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 25 Id. at 290-303.

26 Supra note 24.

27 Supra note 21, at 295.

28 Id. at 303.

29 G.R. No. 166006, March 14, 2008, 548 SCRA 485.

30 Id. at 516-517. (Citations omitted.)

31 Ayson v. Vda. De Carpio, 476 Phil. 525, 535 (2004).

32 Supra note 21, at 303. (Emphasis supplied.)

33 Supra note 16, at 173.

34 461 Phil. 429, 431 (2003).

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