While Title II, Book IV of the Labor Code on Employees Compensation and State Insurance Fund has already superseded Article 1711 of the Civil Code, heirs of injured or deceased workers still have a choice of remedy between filing a compensation claim under the Labor Code or proceeding against the employer in an action for damages under the Civil Code.

Thus held the Supreme Court in an En Banc Decision penned by Justice Rodil V. Zalameda, declaring Article 1711 of the Civil Code impliedly repealed by Title II, Book IV of the Labor Code of the Philippines. In the same case, the Court abandoned its 2007 ruling in Candano Shipping Lines, Inc. v. Sugata-on (Candano) which had allowed the awarding of indemnity for loss of future income based on Article 1711 of the Civil Code. The abandonment of the Candano ruling, however, shall be applied prospectively.

The Court hence set the following guidelines on the application of Candano and the transition to its abandonment, as follows:

1. 1. For actions filed prior to August 6, 2007, which is the finality of Candano, Article 1711 of the Civil Code shall be considered to have been impliedly repealed by Title II, Book IV of the Labor Code. Thus, Article 1711 of the Civil Code cannot sustain any action for, or award of, indemnity. Candano was not yet a binding precedent at the time these actions were filed. In Candano’s absence, there is no legal basis to give effect to a repealed provision of the Civil Code.
   2. For actions filed during the applicability of Candano, e., from its finality on August 6, 2007 until the finality of this Decision, Article 1711 of the Civil Code shall be given effect based on the Candano ruling.
   3. For actions filed after the finality of this Decision, Article 1711 of the Civil Code shall not be given any effect since Article 1711 has been repealed by the Labor Code. Thus, Article 1711 of the Civil Code can no longer be used against employers to claim indemnity for work-related injury or death.

The case stemmed from the 2012 complaint filed by respondent Jenny Rose G. Nedic (Nedic) who sought from petitioner Oceanmarine Resources Corporation (Oceanmarine) claims representing the “Lost Future Income” of Romeo Ellao (Ellao), Nedic’s common-law partner and father of her minor son.

On November 2, 2011, Ellao, who was working as a company driver for Oceanmarine, was shot dead by two unidentified motorcycle-riding assailants after he withdrew money from Oceanmarine’s banks. The assailants immediately took the bag of money in the vehicle and escaped.

Following Ellao’s death, Nedic’s counsel wrote a letter to Oceanmarine demanding damages by way of loss future income. Oceanmarine denied the claim.

This prompted Nedic to file before the Parañaque City Regional Trial Court (RTC) the present claim under Article 1711 of the Civil Code, which expressly holds owners of enterprises and other employers liable to pay compensation for the death of their employees if the death arose out of and in the course of employment even if it was accidental or entirely due to a fortuitous cause.

In its September 22, 2014 Decision, the RTC dismissed Nedic’s complaint for failure to establish the causal connection between Oceanmarine’s negligence and Ellao’s death. On appeal, the Court of Appeals (CA) reversed the RTC’s ruling and awarded Nedic actual damages for loss of earning capacity. Citing Candano, the CA held that the employer’s obligation for indemnity automatically attaches so long as the employee died or was injured in the course of employment. Oceanmarine then filed a Petition for Review on Certiorari before the Supreme Court.

Applying the aforesaid guidelines, the Supreme Court affirmed with modification the December 19, 2017 Decision of the CA and ordered Oceanmarine to pay the heirs of Romeo ₱1,410,000 as indemnity for loss of earning capacity, attorney’s fees, and costs of the suit.

The Court held that while Nedic erred in relying on Article 1711 of the Civil Code, which is now considered impliedly repealed by Title II, Book IV of the Labor Code, her action under Article 1711 was considered meritorious and entitled to relief pursuant to Candano, which was the prevailing doctrine at the time the action was filed and prior to the abandonment of such doctrine.

The Court noted that in the absence of an express repeal of the provisions of the Civil Code on employees’ compensation and claims, confusion arose as to the effect of acceptance of benefits under the Workmen’s Compensation Act (now, the Labor Code) on the right to sue for additional amounts under the Civil Code.

Comparing Article 1711 of the Civil Code and Title II, Book IV of the Labor Code, however, the Court found that the latter law impliedly repealed the former since the Labor Code, as amended by PD 626, covers the whole subject matter of compensation for work-related injury or death of an employee, providing the system for which an injured or deceased worker is compensated. Hence, the said Labor Code provisions were clearly intended as the controlling law for payment of compensation for all work-related injury or death, in effect substituting Article 1711 of the Civil Code.

Moreover, the Court found that Article 1711 of the Civil Code and Title II, Book IV of the Labor Code are irreconcilably inconsistent. The former law makes the employer directly liable for the payment of compensation for work-related injuries or death, which occurs through no fault of the employer, while the latter law has effectively shifted the liability for said injury or death to the State Insurance Fund.

While Article 1711 of the Civil Code had been repealed by the Labor Code, Candano, however, upon its finality on August 6, 2007, seemingly revived the provision and validated its continued effectivity, held the Court.

Hence, while Nedic’s claim under Article 1711 of the Civil Code has no statutory basis since damages may not be adjudicated based on an inexistent law, her claim nevertheless finds jurisprudential mooring in Candano, since her action was filed during Candano’s effectivity.

The Court also clarified that a claim for compensation for work-related injury or death, regardless of the existence of negligence of the employer, is granted through the prevailing compensation act, which is now the Labor Code of the Philippines, particularly Title II, Book IV of the Labor Code on Employees Compensation and State Insurance Fund. A claim for damages, on the other hand, is filed under the Civil Code—not the repealed provision under Article 1711, but the Civil Code’s provisions on torts where the causal relationship between the act and negligence of the employer and the injury or death of the worker should be established.

While the damages recoverable under the Civil Code are much more extensive than the compensation set by the Labor Code, the amounts obtained under the latter course is balanced by the relief of burden to prove a causal connection between the employer’s negligence and the resulting injury or death, and of having to establish the extent of the damage suffered.

The Court added, however, that while employees or their heirs may choose between the remedy of compensation under the Labor Code or the remedy of damages under the Civil Code, upon electing a remedy, claimants shall be deemed to have waived the other remedy, except when the choice of the first remedy was based on ignorance or mistake of fact, or when there are supervening facts or developments occurring after the first remedy was chosen.

G.R. No. 236263. July 19, 2022: Oceanmarine Resources Corporation Vs. Jenny Rose G. Nedic, on behalf of her minor son, Jerome Nedic Ellao