ACE NAVIGATION CO., INC. AND/OR CONNING SHIPPING LTD., PETITIONERS, VS. COURT OF APPEALS (THIRTEENTH DIVISION), NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION) AND ORLANDO …

Ace Navigation versus Alonsagay

The Case

This is a petition for review brought by Ace Navigation Company and its foreign principal, Conning Shipping Limited, against a seafarer, Orlando Alonsagay, who had served as a bartender on board the vessel Orient Express. The petitioners ask the Supreme Court to reverse the Court of Appeals, which had dismissed their petition for certiorari on technical grounds and thereby allowed the decision of the National Labor Relations Commission to stand. That Commission decision had ordered the petitioners to pay the seafarer thirty six thousand United States dollars in unpaid tips, on top of his vacation leave pay. The case matters for two reasons. First, it is a standing reminder that rules of procedure are tools of substantial justice and not traps for the unwary. Second, and more importantly for the labor lawyer, it fixes the character of a tip — a gratuity given by the customer out of generosity, not a wage that the employer may be compelled to pay — and it teaches that a contract of employment must be read according to its plain terms and the conduct of the parties.

Procedural History

The seafarer filed a complaint before the labor arbiter, claiming vacation leave pay of four hundred fifty United States dollars and unpaid tips of thirty six thousand United States dollars. The labor arbiter ordered Ace Navigation and Conning to pay, jointly and severally, the vacation leave pay of four hundred fifty United States dollars, and dismissed the claim for tips for lack of merit.

The seafarer appealed to the National Labor Relations Commission. The Commission reversed in part and ordered the petitioners to pay the unpaid tips of thirty six thousand United States dollars in addition to the vacation leave pay. The petitioners moved for reconsideration, and the motion was denied.

The petitioners then went up to the Court of Appeals on a petition for certiorari. The Court of Appeals, in a three page resolution, dismissed the petition, and it later denied the petitioners' motion for reconsideration. Hence this petition for review before the Supreme Court.

Facts

In June 1994, Ace Navigation recruited Orlando Alonsagay to work as a bartender on board the vessel Orient Express, owned by its principal, Conning Shipping. Under the approved contract of employment, he was to receive a monthly basic salary of four hundred fifty United States dollars, flat rate, including overtime pay for twelve hours of work daily, plus tips of two United States dollars per passenger per day. He was also entitled to two and one half days of vacation leave with pay each month. The contract was to last for one year.

He was deployed and boarded the vessel at the seaport of Hong Kong. After the contract expired, he returned to the Philippines and demanded his vacation leave pay. Ace Navigation did not pay him immediately. It told him that such pay should have been given before his disembarkation and repatriation, and that Conning had not remitted any amount for it. Ace Navigation promised to verify the matter and asked him to return after a few days. He never returned.

Instead, he filed a complaint before the labor arbiter for vacation leave pay and unpaid tips. Throughout his employment he had never complained about any failure to receive tips. He demanded only his vacation leave pay upon his return, and he raised the claim for tips only when he filed the complaint.

Issues

• Whether or not the Court of Appeals erred in dismissing the petition for certiorari on purely technical grounds, for failure to attach the affidavit of proof of service to the petition.
• Whether or not the petitioners are liable to pay the seafarer tips of two United States dollars per passenger per day under the contract of employment.
• Whether or not the petitioners are liable to pay the seafarer his vacation leave pay.

Applicable Provisions

Section 13, Rule 13 of the 1997 Rules of Civil Procedure, on proof of service, provides:

Proof of service. Proof of personal service shall consist of a written admission of the party served, or the official return of the server, or the affidavit of the party serving, containing a full statement of the date, place and manner of service. If the service is by ordinary mail, proof thereof shall consist of an affidavit of the person mailing or facts showing compliance with section 7 of this Rule. If service is made by registered mail, proof shall be made by such affidavit and the registry receipt issued by the mailing office. The registry return card shall be filed immediately upon its receipt, or in lieu thereof of the unclaimed letter together with the certified or sworn copy of the notice given by the postmaster to the addressee.

This is the very rule the Court of Appeals applied strictly when it dismissed the petition, and which the Supreme Court declines to apply with rigidity.

Section 1, Rule 65 of the same Rules, on the petition for certiorari, provides:

When any tribunal, board or officer exercising judicial or quasi judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board, officer, and granting such incidental reliefs as law and justice may require. The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the third paragraph of Section 3, Rule 46.

This provision supplies the requirements for the petition, and the Court weighs whether the petitioners substantially complied with them.

Ruling

On the first issue, the Court ruled in favor of the petitioners. Rules of procedure are used to help secure, not override, substantial justice, and the Rules themselves mandate a liberal construction to secure a just, speedy, and inexpensive disposition of every action. Strict and rigid application that frustrates substantial justice must be avoided, and dismissal of an appeal on a purely technical ground is frowned upon, especially where it results in unfairness. The Court found substantial compliance. The petition contained the certified true copy of the Commission's decision, its order, and the sworn certification of non-forum shopping. The registry receipt proving mailing to the seafarer's counsel was attached to the original petition, and the affidavit of service, though omitted at first because counsel forgot to attach it in the afternoon of the day before filing, was later attached to the motion for reconsideration and was dated the day before the filing. The Court treated the subsequent filing as substantial compliance.

On the second issue, the Court ruled against the seafarer. The contract was categorical that his monthly salary was four hundred fifty United States dollars, flat rate, already including overtime pay integrated into his twelve hours of work. The words "plus tips of two United States dollars per passenger per day" were written on the line for overtime; since overtime pay was already included in the monthly salary, the supposed tips must be deemed included there as well. The Court defined a tip as a gratuity, a gift, a present, a fee, money given to a servant to secure better or more prompt service. Because a tip is a pure gift out of benevolence or friendship, it cannot be demanded from the customer; whether it is given depends on the will and generosity of the giver. A gratuity given by an employer to inspire more effort is more properly called a bonus. The Court also relied on the seafarer's conduct: he never complained during his employment, demanded only his vacation leave pay upon his return, and raised the tips only in his complaint, which showed the claim was a mere afterthought. It would be unjust to burden an employer who performed the contract in good faith, and absurd to suppose the employer intended to pay a bartender three thousand four hundred fifty United States dollars a month, more than the three thousand United States dollars received by the ship captain, the highest ranking officer.

On the third issue, the Court ruled in favor of the seafarer. The petitioners denied liability by raising the defense that vacation leave pay is customarily given before repatriation, but they presented no evidence of payment. The burden of proving payment was not discharged.

Doctrine

A tip is a gratuity given by the customer out of generosity, not a fixed wage; it cannot be demanded from the customer and, absent clear stipulation, cannot be exacted from the employer as a contractual obligation. A contract of employment is read according to its plain terms, and where the salary is stated as a flat rate inclusive of overtime, ancillary words written on the overtime line are deemed included in that salary. Rules of procedure are tools designed to facilitate justice, and their strict application must yield to substantial compliance where no unfairness results. Finally, the employer who alleges payment of vacation leave pay bears the burden of proving it.

Disposition

The petition was granted; the resolutions of the Court of Appeals were reversed and set aside, and the decision of the labor arbiter — ordering the petitioners to pay jointly and severally the vacation leave pay of four hundred fifty United States dollars and dismissing the claim for tips — was reinstated.

Remember This

Memorize the line that a tip is a gratuity given by the customer out of generosity, not a wage demandable from the employer. Examiners use this case to test the liberal construction of procedural rules and the characterization of tips, bonuses, and flat rate salaries in seafarers' contracts.