Arlo Aluminum, Inc. vs. Vicente M. Piñon, Jr.

A deed of release, waiver or quitclaim is valid where there is no fraud or deceit, the consideration is sufficient and reasonable, and the contract is not contrary to law, public order, public policy, morals or good customs; and even if declared invalid, the consideration received must be returned or offset against the monetary award. Where the consideration equals or exceeds the labor award computed by the Labor Arbiter, the employer has satisfied its liability and no double compensation may be sanctioned.

Arlo Aluminum, Inc. is a duly registered corporation engaged in the fabrication and supply of aluminum moldings. In 2009, it was contracted by Eton Properties Philippines, Inc. to supply and install aluminum and glass glazing works for the Eton Residences Greenbelt condominium project at Legaspi St., Legaspi Village, Makati City. Pursuant thereto, Arlo Aluminum engaged the services of E.M. Piñon Glazing through subcontracting, and among the latter's employees was Vic Edward Piñon, son of respondent Vicente M. Piñon, Jr.

Arlo Aluminum, Inc., a corporation engaged in the fabrication and supply of aluminum moldings, was contracted in 2009 by Eton Properties Philippines, Inc. to supply and install aluminum and glass glazing works for the Eton Residences Greenbelt condominium project at Legaspi St., Legaspi Village, Makati City. Pursuant thereto, Arlo Aluminum engaged the services of E.M. Piñon Glazing through subcontracting, and among EMP Glazing's employees was Vic Edward Piñon, the son of Vicente M. Piñon, Jr.

On January 27, 2011, eleven employees of EMP Glazing, including Vic Edward, were aboard a gondola used to install glass and aluminum along the perimeter of the building when it crashed from the thirty-second floor of the Eton Residence Project. Ten of the employees, including Vic Edward, died in the incident.

The families of the victims were extended financial assistance in the amount of P150,000.00 by Eton Properties and Arlo Aluminum. The funeral and burial expenses and the SSS contributions pertaining to Vic Edward were also paid. In return, the families signed a Deed of Release, Waiver and Quitclaim dated February 3, 2011, in which Vicente acknowledged receiving the P150,000.00 as financial assistance and as payment of all benefits due under law, and released E.M. Piñon, Eton Properties Philippines, Inc., Arlo Aluminum Company, Inc., C.E. Construction Corporation, Jose Aliling Construction Management, Inc., and other contractors, subcontractors, owners, managers, and representatives from any liability arising from the accident.

On May 3, 2011, Vicente filed a complaint in behalf of his deceased son before the Labor Arbiter for underpayment of wages, overtime pay, 13th month pay, non-payment of holiday pay, holiday premium, rest day premium, service incentive leave pay, separation pay, night shift differential, and claims for damages and death benefits. He asserted that starting 2009, Vic Edward's salary was P280.00, still below the minimum wage rate, and that he was not paid his service incentive leave pay and 13th month pay. Vicente added that during the wake of his son, representatives of Eton Properties and Arlo Aluminum extended the P150,000.00 financial assistance; believing that this was only by way of financial assistance and nothing more, he accepted the same and signed the deed of release, waiver and quitclaim. He eventually learned that the amount paid as salaries to his deceased son was not in accordance with law, and thus filed the suit.

Arlo Aluminum countered that on January 27, 2011, the date of the accident, an on-site labor standards and occupational safety and health standards inspection was conducted by the DOLE-NCR, docketed as Case No. NCR-TSSD-1101-RI-004 SPL, in which it was found that Vic Edward was not an employee of Eton Properties. It averred that on March 18, 2011, DOLE-NCR informed Eton Properties of its findings regarding some contractors that had yet to settle their obligations with their employees, and that Arlo Aluminum and EMP Glazing, who were responsible for hiring Vic Edward, were not among those identified. Arlo Aluminum added that Vicente executed a valid deed of release, waiver and quitclaim in its favor, witnessed by his wife Edna Piñon and Vilma Piñon, and argued that the claim had been satisfied.

The Labor Arbiter found that Vic Edward had an employer-employee relationship with EMP Glazing only, and that the latter was merely hired by Arlo Aluminum as its subcontractor; nevertheless, because EMP Glazing failed to prove payment of correct wages and labor standard benefits, Vicente was awarded underpaid wages, service incentive leave pay, and 13th month pay, while the claims for overtime pay, holiday pay, holiday premium, and rest day premium were denied for lack of factual basis. The NLRC modified the ruling, holding that although EMP Glazing was an independent contractor, Article 106 of the Labor Code made Eton Properties, Arlo Aluminum, and EMP Glazing solidarily liable for the unpaid wages and benefits. The Court of Appeals affirmed, invalidating the quitclaim on the ground that it was signed only a week after Vic Edward's death and that Eton Properties and Arlo Aluminum had taken advantage of Vicente's overwrought state, and finding EMP Glazing to be a labor-only contractor because Arlo Aluminum failed to show that the former had sufficient capital and investments.

• Validity of the Quitclaim: Petitioner argued that the deed of release, waiver and quitclaim was valid; that it clearly showed it was a settlement and satisfaction of any and all labor claims relating to the salaries and benefits that Vic Edward could have been entitled to under relevant labor laws during his lifetime; that the monetary award of P145,276.22 was sufficiently covered by the financial assistance of P150,000.00 voluntarily received by Vicente; that the quitclaim could not be nullified because it had a sufficient consideration of P150,000.00; and that aside from the financial assistance, Arlo Aluminum and Eton Properties provided funeral and burial assistance and paid the SSS contributions of Vic Edward.
• Return or Offset of Consideration: Petitioner contended that even if the quitclaim was declared invalid, the P150,000.00 should have been returned to Arlo Aluminum and Eton Properties, or should have offset their liabilities in the amount of P145,276.22.
• Scope of CA Review: Petitioner maintained that it had not been criminally or civilly declared liable for the incident, and that the CA should not have discussed matters not raised as issues in its petition for certiorari, such as ruling that EMP Glazing was a labor-only contractor.

• Failure to Prove Payment of Wages: Vicente countered that Arlo Aluminum failed to prove that Vic Edward was paid his proper wages.
• Labor-Only Contracting: He argued that EMP Glazing was a mere labor-only contractor because it did not have substantial capital or investment, and that even if EMP Glazing was not a labor-only contractor, Arlo Aluminum and Eton Properties were still liable for non-payment of wages.
• Invalidity of the Quitclaim: He maintained that the deed of release, waiver and quitclaim was invalid because he was made to sign the same when he was still weak and feeble from the tragedy, and that the consideration therein was insufficient to cover all the liabilities of Arlo Aluminum to Vic Edward.
• Bar to Recovery: He asserted that the quitclaim could not bar him from filing the complaint for underpayment of wages.

• Validity of the Quitclaim: Whether the Court of Appeals erred in disregarding and nullifying the release, waiver and quitclaim, contrary to law and prevailing jurisprudence.
• Return or Offset of Consideration: Whether the heirs of Vic Edward Piñon should be directed to return the amount of P150,000.00 or have the same deducted from the judgment award when the quitclaim is invalidated.
• Scope of CA Review: Whether the Court of Appeals should not have decided facts not brought before it for review by the petitioner and not material or relevant to the case.

• Validity of the Quitclaim: Yes. The deed of release, waiver and quitclaim was valid, there being no fraud or deceit and the P150,000.00 consideration being sufficient and reasonable to cover the labor claims.
• Return or Offset of Consideration: Yes. Even if the quitclaim is declared invalid, the consideration received must be returned or offset against the monetary award; since the P150,000.00 adequately covered the P145,276.22 award, Arlo Aluminum and Eton Properties had nothing more to pay.
• Scope of CA Review: Not resolved. The petition was granted on the validity of the quitclaim and the sufficiency of its consideration; the Court instead clarified that claims not arising from the employer-employee relationship fall outside the Labor Arbiter's jurisdiction and must be threshed out in another forum.

• Validity of the Quitclaim: A deed of release, waiver or quitclaim, to be valid, must meet three requisites: (1) no fraud or deceit on the part of any of the parties; (2) the consideration for the quitclaim is sufficient and reasonable; and (3) the contract is not contrary to law, public order, public policy, morals or good customs, or prejudicial to a third person with a right recognized by law. Courts step in only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or where the terms of the settlement are unconscionable on their face. Here, the P150,000.00 consideration was reasonable and sufficient: the Labor Arbiter — the body mandated by the rules to determine the proper computation of judgment awards — concluded that Vicente was entitled to P145,276.22, and the NLRC affirmed this amount. The quitclaim expressly stated that the consideration was for the unpaid salaries and benefits of Vic Edward, as it unequivocally provided that the amount was "bahagi na ang lahat ng sahod at mga benepisyong tinatakda ng batas, polisiya at kaugalian, at kaugnay sa paglilingkod ni VIC EDWARD PIÑON." Arlo Aluminum did not procure the quitclaim with fraud or deceit, and no proof of force or duress was shown; it also provided funeral and death benefits and paid Vic Edward's SSS contributions. The mere fact that the quitclaim was signed during the wake did not conclusively show that Arlo Aluminum and Eton Properties took advantage of Vicente's weak state. Even if Vicente accepted the compensation due to dire economic needs, the quitclaim could not be invalidated on that ground alone, since dire necessity justifies annulment only where the consideration is unconscionably low and the employee was tricked into accepting it, and here the employee was not shown to have been forced to execute it. The Court relied on Goodrich Manufacturing Corp. vs. Ativo, where quitclaims were upheld because their contents were simple, clear and unequivocal and the consideration was not grossly inadequate, and on Jiao vs. National Labor Relations Commission, where the quitclaim was declared valid absent fraud, deceit, force or duress and where the consideration was reasonable under labor laws.
• Return or Offset of Consideration: When a quitclaim is declared invalid for one reason or another, the recipient must return or offset the compensation received. In Emco Plywood Corporation vs. Abelgas, although the employer failed to discharge its burden of proving the quitclaims valid, the amounts already received by the employees pursuant to the quitclaim were ordered deducted from their respective monetary awards. Similarly, in Rondina vs. Court of Appeals, the quitclaims were invalidated for gross disparity between the consideration received and the proper award computed by the voluntary arbitrator, yet the amounts already received under the invalid quitclaim were held deductible from the monetary award. Applying these rulings, even if the deed of release, waiver or quitclaim signed by Vicente were declared invalid, the fact remained that he had already received P150,000.00 in consideration thereof, which amount must either be returned or deducted from the total monetary award of P145,276.22. Since the award was adequately covered by the consideration, Arlo Aluminum and Eton Properties had nothing more to pay as far as the labor claims were concerned. To rule otherwise — requiring Arlo Aluminum to pay the P145,276.22 despite the P150,000.00 already received — would amount to double compensation.
• Scope of CA Review: The jurisdiction of the Labor Arbiter is limited to hearing claims in connection with an existing employer-employee relationship. Article 224 of the Labor Code provides that the Labor Arbiter, in his or her original jurisdiction, and the NLRC, in its appellate jurisdiction, may determine issues involving claims arising from employer-employee relations. The Labor Arbiter has no authority to decide issues not arising from the employment contract of Vic Edward. If Vicente wished to pursue other legal actions against Arlo Aluminum, Eton Properties, and EMP Glazing arising from the tragedy, he must do so in the courts with jurisdiction over the subject matter.

• Requisites of a Valid Quitclaim — A deed of release, waiver or quitclaim, to be valid, must meet three requisites: (1) there was no fraud or deceit on the part of any of the parties; (2) the consideration for the quitclaim is sufficient and reasonable; and (3) the contract is not contrary to law, public order, public policy, morals or good customs, or prejudicial to a third person with a right recognized by law. Courts will annul a quitclaim only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or where the terms of the settlement are unconscionable on their face. Where the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration is sufficient and reasonable, the transaction is a valid and binding undertaking. In this case, all three requisites were satisfied: no fraud or deceit attended the execution, the P150,000.00 consideration exceeded the P145,276.22 labor award, and the quitclaim was not contrary to law, public order, or public policy.
• Offset or Return of Consideration Upon Invalidation of a Quitclaim — When a quitclaim is declared invalid for any reason, the recipient must return or offset the compensation received against the monetary award. The amounts already received under the quitclaim are deducted from the employee's monetary award so as to prevent double compensation. Here, even assuming the quitclaim's invalidity, the P150,000.00 already received by Vicente had to be returned or deducted from the P145,276.22 award; since the consideration adequately covered the award, no further liability remained.
• Jurisdiction of the Labor Arbiter — The Labor Arbiter's jurisdiction is limited to hearing claims in connection with an existing employer-employee relationship, and extends to issues involving claims arising from employer-employee relations under Article 224 of the Labor Code. The Labor Arbiter has no authority to decide issues not arising from the employment contract. Claims arising from a workplace tragedy that do not proceed from the employment relationship must be pursued in the courts with jurisdiction over the subject matter.

• "To be valid, a deed of release, waiver or quitclaim must meet the following requirements: (1) that there was no fraud or deceit on the part of any of the parties; (2) that the consideration for the quitclaim is sufficient and reasonable; and (3) that the contract is not contrary to law, public order, public policy, morals or good customs, or prejudicial to a third person with a right recognized by law." — This passage states the controlling three-part test for the validity of quitclaims, the ratio decidendi on which the Court upheld the deed signed by Vicente.
• "The amounts already received by the present respondents as consideration for signing the Quitclaims should, however, be deducted from their respective monetary awards." — Quoted from Emco Plywood Corporation vs. Abelgas, this is the canonical formulation of the offset rule that the Court applied in holding that the P150,000.00 consideration must be returned or deducted from the labor award.
• "The jurisdiction of the LA is limited to hearing claims in connection with an existing employer-employee relationship." — This passage defines the outer boundary of the Labor Arbiter's authority and grounds the Court's directive that Vicente's other claims arising from the tragedy be threshed out in another forum.
• "Dire necessity may be an acceptable ground to annul quitclaims if the consideration is unconscionably low and the employee was tricked into accepting it. It, however, does not justify the annulment of a quitclaim when it is not shown that the employee had been forced to execute it." — This passage rejects the view that the circumstances surrounding the signing of the quitclaim during the wake, standing alone, sufficed to invalidate it.

• Goodrich Manufacturing Corp. vs. Ativo, 625 Phil. 102 (2010) — Followed. The Court relied on this ruling upholding quitclaims where the contents were simple, clear and unequivocal, the business closure was for legitimate reasons, and the consideration was not grossly inadequate vis-a-vis what the employees should have received in full.
• Jiao vs. National Labor Relations Commission, 686 Phil. 171 (2012) — Followed. Cited for the rule that a quitclaim is valid absent allegations of fraud or deceit, force or duress, and where the consideration is reasonable as based on the amount required by law.
• Emco Plywood Corporation vs. Abelgas, 471 Phil. 460 (2004) — Followed. Cited for the rule that although quitclaims cannot bar employees from demanding benefits to which they are legally entitled, the amounts already received as consideration for signing the quitclaims should be deducted from their respective monetary awards.
• Rondina vs. Court of Appeals, 610 Phil. 27 (2009) — Followed. Cited for the rule that where quitclaims are invalidated for gross disparity between the consideration received and the proper award, the amounts already received under the invalid quitclaim must be subtracted from the monetary award.
• City Government of Makati vs. Odeña, 716 Phil. 284 (2013) — Cited for the principle that a quitclaim is ineffective in barring recovery of the full measure of a worker's rights, and that acceptance of benefits therefrom does not amount to estoppel.
• Zuellig Pharma Corp. vs. Sibal, 714 Phil. 33 (2013) — Cited for the rule that where the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration is sufficient and reasonable, the transaction must be recognized as a valid and binding undertaking.
• Coats Manila Bay, Inc. vs. Ortega, 598 Phil. 768 (2009) — Cited for the rule that dire necessity does not justify the annulment of a quitclaim when it is not shown that the employee had been forced to execute it.
• Milan vs. National Labor Relations Commission, G.R. No. 202961, February 4, 2015, 750 SCRA 1 — Cited for the rule that the Labor Arbiter's jurisdiction is limited to claims arising from employer-employee relations.

• Article 106, Labor Code (as amended) — Provides that in the event the subcontractor fails to pay the wages of its employees, the employer shall be jointly and severally liable to said employees to the extent of the work performed under the contract. The NLRC invoked this provision in holding Eton Properties, Arlo Aluminum, and EMP Glazing solidarily liable for Vic Edward's unpaid wages and benefits, a holding the Court of Appeals affirmed but which the Supreme Court effectively set aside by dismissing the complaint on the ground that the quitclaim's consideration already covered the award.
• Article 224, Labor Code (as renumbered) — Defines the original and exclusive jurisdiction of Labor Arbiters over cases involving workers, including claims for damages arising from employer-employee relations and all other claims arising from employer-employee relations involving an amount exceeding P5,000.00. The Court cited this provision in holding that the Labor Arbiter's jurisdiction is limited to claims arising from an existing employer-employee relationship and that Vicente's other claims arising from the tragedy must be pursued in another forum.
• Article 291, Labor Code — Referred to by the Labor Arbiter in subjecting the monetary award to the three-year prescriptive period. The Court did not disturb this aspect of the computation, which formed part of the P145,276.22 award that the quitclaim consideration was found to cover.
• 2011 NLRC Rules of Procedure, Rule XI, Section 5 (Pre-Execution Conference) — Provides that the Commission or the Labor Arbiter may schedule a pre-execution conference to thresh out matters relevant to execution, including the final computation of monetary award. Cited to establish that the Labor Arbiter is the body mandated by the rules to determine the proper computation of judgment awards, lending weight to the P145,276.22 computation as the benchmark for assessing the sufficiency of the quitclaim's consideration.

Carpio (Chairperson), Peralta, Leonen, and Martires, JJ.