Galicia vs. NLRC

A compromise agreement and quitclaim executed by laborers during the pendency of the employer’s appeal cannot bar their legitimate claims where the consideration is unconscionably low relative to the labor arbiter’s judgment award and the workers accepted it under dire necessity; quitclaims are valid only when voluntarily entered into and supported by a reasonable settlement.

The petitioners were among ninety-five workers who, through the National Organization of Workingmen (NOWM), claimed to have been recruited by several contractors and supplied to Globe Paper Mills/Keng Hua Paper Products, Inc. and Armor Industrial Corporation. The Labor Code recognizes compromise settlements voluntarily agreed upon with the assistance of the Bureau of Labor Relations or the Department of Labor and Employment regional office as final and binding, while jurisprudence treats quitclaims executed by laborers with caution as contrary to public policy when not voluntary or reasonable.

On January 8, 1992, ninety-five workers, including the twenty-five petitioners, assisted by the National Organization of Workingmen (NOWM), sued respondent companies for illegal dismissal, regularization, underpayment of wages, holiday pay, premium pay, and other claims. They alleged that Armor Industrial Corporation, Gibson Contractor Services, Juner Contractor Services, Libra Manpower Agency, and Anjo Contractor, all labor-only contractors, recruited them and supplied them to Globe Paper Mills and Keng Hua Paper Products, where they performed activities directly necessary to the companies’ principal business. After several complainants withdrew, the parties filed their respective position papers. On January 15, 1994, Labor Arbiter Ernesto S. Dinopol declared the thirty remaining complainants regular employees of Keng Hua Paper Products, Globe Paper Mills, and Armor Industrial Corporation and ordered their reinstatement. Backwages from February 15, 1991 up to actual reinstatement were awarded in the total amount of P3,223,261.00, with P107,380.00 for each complainant as of January 15, 1994. Respondent companies appealed to the NLRC.

While the appeal was pending, on March 1, 1994, a Compromise Agreement was executed by James Yu, Manager and Vice President of Globe Paper Mills, and Teofilo Rafols, National President of NOWM, representing the complainants, most of whom were still in Romblon. The agreement settled the case for a total of P300,000.00. The complainants arrived from Romblon on March 7, 1994. The next day, each signed a Quitclaim and Release confirming the compromise agreement and receipt of an individual share of P12,000.00. The standard quitclaim stated that, in consideration of P12,000.00 paid by Globe Paper Mills/Armor Industrial Corporation through Rafols, whom they trusted to negotiate with Yu regarding an amicable settlement, they agreed to the company’s last offer, also due to their poverty and lack of income for a long time.

On March 9, 1994, petitioners executed a Sama-samang Sinumpaang Salaysay. They stated that they knew the P12,000.00 each was unjust and insufficient to answer for their claims and the Labor Arbiter’s decision, but due to their hardship from unemployment since 1991 and 1992, they decided to temporarily accept the amount offered by the company. They nevertheless asserted their case because they were oppressed and the acceptance caused hardship, and they sought full justice.

Private respondents submitted the Compromise Agreement and a Joint Motion to Dismiss to the NLRC, which was then considering the appeal. Petitioners filed an Opposition to the Motion to Dismiss and demanded the difference between what they actually received and the judgment award in their favor. On November 29, 1994, the NLRC approved the Compromise Agreement, set aside the Labor Arbiter’s January 15, 1994 decision, and dismissed the case. The NLRC held that the complainants were fully aware of the award when they voluntarily entered into the compromise on March 1, 1994; that they disregarded the judgment award and opted for the last offer instead of waiting out the appeal; and that their contention of signing under compulsion of dire necessity was a mere afterthought. Their motion for reconsideration was denied on March 3, 1995, and the petition for certiorari followed.

• Lack of Authority of NOWM President: Petitioners disclaimed any authority accorded to Mr. Teofilo Rafols, NOWM president, to fix and decide the total amount of the compromise.
• Dire Necessity and Invalid Consent: Petitioners contended that they signed the compromise agreement under the compulsion of “dire necessity” and that their consent was not fully voluntary.
• Unconscionable Consideration: Petitioners demanded the difference between the P12,000.00 each they actually received and the judgment award in their favor, asserting that the amount was unjust and insufficient.
• Opposition to Dismissal: Petitioners filed an Opposition to the Motion to Dismiss, maintaining that the quitclaim could not bar their legitimate claims.

• Validity of Compromise Agreement and Quitclaims: Whether the compromise agreement and quitclaims executed during the pendency of private respondents’ appeal are valid and binding despite the consideration being inordinately lower than the Labor Arbiter’s award and petitioners’ claim of dire necessity.
• Authority of NOWM President: Whether the compromise agreement may be invalidated on the ground that NOWM President Teofilo Rafols lacked authority to fix and decide the total amount.
• Effect of Acceptance of Benefits: Whether petitioners’ signing of the quitclaims and acceptance of P12,000.00 each estop them from pursuing their claims for the difference from the judgment award.

• Validity of Compromise Agreement and Quitclaims: No. The compromise and quitclaims cannot bar petitioners’ legitimate claims because the consideration was inordinately low and exceedingly unreasonable relative to the Labor Arbiter’s award, and the terms were palpably inequitable.
• Authority of NOWM President: No. The claim that Rafols lacked authority to fix the amount lacks basis; any question of authority was waived when petitioners signed the quitclaims and accepted their individual shares.
• Effect of Acceptance of Benefits: No. Acceptance of the P12,000.00 each did not amount to estoppel; petitioners expressly stated in their Sinumpaang Salaysay that they accepted the amount only in the meantime due to destitution and not as full compensation.

• Validity of Compromise Agreement and Quitclaims: A compromise agreement is executed by parties who adjust their difficulties by mutual consent to prevent or end a lawsuit. Under the Labor Code, a compromise settlement voluntarily agreed upon with the assistance of the Bureau of Labor Relations or DOLE regional office is final and binding. Even without labor officials, compromise agreements between workers and employers have been upheld if valid. However, quitclaims by laborers are viewed with caution. Under Periquet vs. NLRC, not all waivers and quitclaims are invalid; if voluntarily entered into and representing a reasonable settlement, they bind the parties and cannot be disowned merely because of a change of mind. But where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on their face, the law will annul the transaction. Here, the consideration of P12,000.00 per worker and P300,000.00 total was inordinately low and exceedingly unreasonable compared to the P107,380.00 per worker and P3,223,261.00 total awarded by the Labor Arbiter. The quitclaim was palpably inequitable and cannot be an obstacle to the pursuit of legitimate claims. The Court found Cruz vs. NLRC relevant because the amount accepted was very much less than the award. The OSG also concluded that dire necessity and unconscionability invalidated the compromise. Thus, the compromise and quitclaims were invalid.
• Authority of NOWM President: The Court found no basis for petitioners’ allegation that they did not authorize Rafols to fix and decide the total amount, apart from their joint affidavit and unsubstantiated claims. Although no written authorization was submitted, at the conference between the parties they confirmed the veracity of the compromise agreement and quitclaim. Even granting a question regarding Rafols’s authority, the same was waived once petitioners signed the quitclaim evidencing receipt of their individual shares. The NLRC ruled that petitioners authorized NOWM to negotiate with management, and it did not commit grave abuse of discretion in utilizing facts presented during the conference, as proceedings thereat are not privileged communication. Thus, lack of authority did not invalidate the compromise.
• Effect of Acceptance of Benefits: Acceptance of benefits does not amount to estoppel where employer and employee do not stand on the same footing. As explained in Lopez Sugar Corporation vs. Federation of Free Workers, the employer drove the employee to the wall; the employee, out of job, faced harsh necessities and was in no position to resist money proffered; his was a case of adherence, not choice. Petitioners did not relent their claim but pressed it. They expressly declared in their Sinumpaang Salaysay, executed the day after the quitclaims, that they knew the amount was unjust and insufficient but accepted it in the meantime due to destitution caused by protracted unemployment. They never accepted it as full compensation. Therefore, acceptance did not bar their claims.

• Compromise Agreement — A compromise agreement is executed by parties who adjust their difficulties by mutual consent to prevent or put an end to a lawsuit; each party is motivated by the hope of gaining, balanced by the danger of losing. Under Article 227 of the Labor Code, a compromise settlement voluntarily agreed upon with the assistance of the Bureau of Labor Relations or DOLE regional office is final and binding. Even without labor officials, compromise agreements between workers and employers have been upheld and considered valid, accepted, and desirable means of settling disputes. In this case, the compromise was not upheld because its consideration was unconscionably low and inequitable.
• Quitclaims and Waivers — Not all waivers and quitclaims are invalid as against public policy. If voluntarily entered into and representing a reasonable settlement, a quitclaim is binding and may not be disowned simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on their face, that the law will annul the transaction. The Court applied this doctrine by invalidating the quitclaims because the P12,000.00 per worker was inordinately low compared to the P107,380.00 per worker awarded by the Labor Arbiter.
• Dire Necessity — The Court recognizes dire necessity of laborers as ample justification to accept even insufficient sums of money from their employers. However, dire necessity does not invalidate an agreement where there is voluntary acceptance and reasonable consideration; in such a case, the excuse is immaterial. Here, dire necessity combined with unconscionable consideration invalidated the compromise and quitclaims.
• Personal and Specific Individual Consent — For a compromise to be voluntarily entered into, there must be personal and specific individual consent. The Court found no basis to disavow the consent given to NOWM President Rafols, and any question of authority was waived when petitioners signed the quitclaims and accepted their shares.
• Estoppel by Acceptance of Benefits — Acceptance of benefits from a quitclaim does not amount to estoppel where the employer and employee do not stand on the same footing and the employee has not relented in his claim. The employee who accepts money out of dire necessity is deemed to have adhered, not chosen, and does not waive his rights. The Court applied this by holding that petitioners’ acceptance of P12,000.00 each did not bar their claims for the difference.

• "Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questioned transaction." — Sets the controlling doctrinal policy on quitclaims and waivers, under which the Court tested the compromise and quitclaims in this case.
• "The consideration for the quitclaim, a measly P12,000.00 per worker and the total sum of P300,000, are inordinately low and exceedingly unreasonable relative to the P107,380.00 per worker and total P3,223,261.00 awarded by the Arbiter. Palpably inequitable, the quitclaim cannot be considered an obstacle to the pursuit of their legitimate claims." — States the ratio decidendi for invalidating the quitclaims on ground of unconscionability.
• "Petitioners never accepted as full compensation the meagre amount they received when they signed the quitclaim and release. In the Sinumpaang Salaysay they executed the next day, they expressly declared their awareness that the amount they received was unjust and insufficient to answer for their just claims and the award given by the Labor Arbiter, but due to destitution caused by their protracted unemployment, they decided to accept the P12,000.00 in the meantime." — Explains why acceptance of the amount did not amount to a waiver or estoppel.

• Lopez Sugar Corporation vs. Federation of Free Workers, 189 SCRA 192 (August 30, 1990) — Explained that acceptance of benefits does not amount to estoppel because employer and employee do not stand on the same footing; the employer drove the employee to the wall, and the employee’s acceptance was adherence, not choice.
• Periquet vs. NLRC, 186 SCRA 724 (June 22, 1990) — Set the guidelines and current doctrinal policy on quitclaims and waivers: not all waivers are invalid; valid if voluntary and reasonable; annulled if wangled or unconscionable.
• Cruz vs. NLRC, 203 SCRA 286 (October 28, 1991) — Found relevant because the amount accepted by petitioners was very much less than the Labor Arbiter’s award; a quitclaim cannot be an obstacle to legitimate claims.
• Olaybar vs. NLRC, 237 SCRA 819 (October 28, 1994) — Distinguished; dire necessity was deemed unacceptable in refuting an agreement where there was voluntary acceptance and reasonable consideration, making the agreement intrinsically valid.
• Morales vs. NLRC, 241 SCRA 103 (February 6, 1995) — Cited for the principle that compromise agreements between workers and employers, even without assistance of labor officials, have been upheld as valid means of settling disputes.
• Victorias Milling Co., Inc. vs. NLRC, 233 SCRA 403 (1994) — Cited together with Morales for the same principle.
• General Rubber vs. Drilon, 169 SCRA 808; Republic vs. NLRC, 244 SCRA 564 (May 31, 1995) — Cited for the requirement that for a compromise to be voluntarily entered into, there must be personal and specific individual consent.

• Article 227, Labor Code — Provides that any compromise settlement voluntarily agreed upon by the parties with the assistance of the Bureau of Labor Relations or the regional office of the Department of Labor and Employment shall be final and binding upon the parties. The Court cited this provision as the statutory backdrop for compromise settlements, but because the compromise in this case was unconscionable and accepted under dire necessity, it did not bar petitioners’ claims.

Regalado, Puno, and Mendoza, JJ., concurred. Torres, Jr., J., was on leave.