Veloso vs. Department of Labor and Employment

A quitclaim or compromise agreement voluntarily entered into by an employee with full understanding of its terms, with the assistance of counsel and the approval of the DOLE, and supported by a credible and reasonable consideration, is valid and binding and may not later be disowned simply because of a change of mind or a belated claim of "dire necessity."

Petitioners Alfredo Veloso and Edito Liguaton were employees of private respondent Noah's Ark Sugar Carriers, owned by Wilson T. Go. They, together with several co-employees, had filed a complaint against the employer for unfair labor practices, underpayment, and non-payment of overtime, holiday, and other benefits. The controversy centers on the validity of quitclaims and releases executed by the petitioners in favor of their employer while a motion for reconsideration of the labor arbiter's decision was still pending before the Department of Labor and Employment. The legal backdrop involves Article 227 of the Labor Code, which governs compromise settlements and provides that such agreements voluntarily entered into with the assistance of the DOLE are final and binding, subject to exceptions for fraud, misrepresentation, or coercion.

Petitioners Alfredo Veloso and Edito Liguaton were employees of private respondent Noah's Ark Sugar Carriers, a business owned by Wilson T. Go. Together with several co-employees, they filed a complaint against the employer for unfair labor practices, underpayment, and non-payment of overtime, holiday, and other benefits. The complaint was decided in favor of the complainants on October 6, 1987. The employer's motion for reconsideration, treated as an appeal, was dismissed in a resolution dated February 17, 1988, which affirmed the earlier order with modification, deleting the monetary awards to certain co-employees whose claims had already been settled, and directing execution with respect to the awards to Veloso and Liguaton.

On February 23, 1988, the private respondent filed a motion for reconsideration and recomputation of the amounts awarded to the petitioners. While this motion was pending, petitioner Veloso, through his wife Connie, signed a Quitclaim and Release on April 15, 1988, for the consideration of ₱25,000.00. On the same day, his counsel, Atty. Gaga Mauna, manifested "Satisfaction of Judgment" upon receipt of the said sum by Veloso. The quitclaim carried the notation that the payment had been made in the presence of Atty. Gaga Mauna and was attested by Atty. Ferdinand Magabilin, Chief of the Industrial Relations Division of the National Capital Region of the DOLE.

For his part, petitioner Liguaton executed a Release and Quitclaim dated July 19, 1988, for the consideration of ₱20,000.00, which he acknowledged receiving from the private respondent. On July 16, 1988, Liguaton filed a motion to dismiss his complaint based on the quitclaim. The quitclaim was made with the assistance of his counsel, Atty. Leopoldo Balguma, who notarized the document and later confirmed it by filing the motion to dismiss.

On September 20, 1988, the petitioners impugned the releases, claiming they were constrained to sign the documents because of their "extreme necessity." The Undersecretary of Labor, in an Order dated December 16, 1988, rejected their contention, denied the motion to declare the quitclaims null and void, and approved the compromise agreements. Reconsideration was denied on March 7, 1989, prompting the petitioners to elevate the matter to the Supreme Court via certiorari. Notably, Atty. Balguma, who had notarized and invoked Liguaton's quitclaim as basis for the motion to dismiss, now appeared as counsel for both petitioners and challenged the very same quitclaim he had notarized, abandoning an earlier forgery contention and instead arguing that the quitclaim was executed due to the petitioners' dire necessity.

• Validity of Quitclaims: Petitioners argued that the quitclaims they signed should be annulled on the ground that they were constrained to execute them because of "extreme necessity" or "dire necessity."
• Applicable Precedent: Petitioners relied on Pampanga Sugar Development Co., Inc. vs. Court of Industrial Relations, contending that quitclaims obligating workers to forego their benefits are void ab initio as contrary to law, public order, public policy, morals, or good customs under Article 6 of the New Civil Code, and that they result in unjust enrichment under Article 22 of the same Code.
• Relief Sought: Petitioners asked that the quitclaims be annulled and that writs of execution be issued for ₱21,267.92 in favor of Veloso and ₱26,267.92 in favor of Liguaton in settlement of their claims.

• Voluntariness of Quitclaims: Respondent insisted that the petitioners entered into the compromise agreements freely and with open eyes and should not be permitted to reject their solemn commitments.
• Approval by DOLE: Respondent invoked the DOLE's approval of the compromise agreements as reflected in its December 16, 1988 order.

• Validity of Quitclaims: Whether the quitclaims executed by the petitioners are valid and binding despite their claim of "dire necessity" in signing them.
• Applicability of Precedent: Whether Pampanga Sugar Development Co., Inc. vs. Court of Industrial Relations is applicable to the present case.

• Validity of Quitclaims: Yes. The quitclaims were voluntarily and knowingly executed with the assistance of counsel and the approval of the DOLE, supported by credible and reasonable considerations, and not vitiated by fraud, misrepresentation, or coercion.
• Applicability of Precedent: No. Pampanga Sugar was distinguished because the quitclaims therein were secured after the employer had already lost and were entered into without leave of the lower court, whereas here the quitclaims were executed while the motion for reconsideration was pending and with the knowledge and approval of the DOLE.

• Validity of Quitclaims: The Court found that both petitioners voluntarily and knowingly executed their quitclaims. Veloso's quitclaim was signed in the presence of his counsel, Atty. Gaga Mauna, and attested by the Chief of the Industrial Relations Division of the NCR-DOLE. Liguaton's quitclaim was made with the assistance of his counsel, Atty. Leopoldo Balguma, who notarized it and later filed the motion to dismiss on its basis. The fact that Atty. Balguma, now appearing as petitioners' counsel, was challenging the very quitclaim he had notarized and earlier invoked undermined the petitioners' credibility. "Dire necessity" was not an acceptable ground for annulling the releases, as it had not been shown that the employees were forced to execute them. The considerations of ₱25,000.00 for Veloso and ₱20,000.00 for Liguaton were not proven to be unconscionably low, nor was there evidence that the petitioners were tricked into accepting them. The original award of ₱46,267.92 each was still subject to recomputation because the employer's motion for reconsideration was pending, and the fact that the petitioners accepted lower amounts suggested they were apprehensive the original award might be reduced. No deception was established on the part of the private respondent. Under Article 227 of the Labor Code, compromise settlements voluntarily agreed upon with the assistance of the DOLE are final and binding, and jurisdiction may not be assumed over issues involved therein except in case of non-compliance or prima facie evidence of fraud, misrepresentation, or coercion — none of which were present.

• Applicability of Precedent: The Court distinguished Pampanga Sugar Development Co., Inc. vs. Court of Industrial Relations on factual grounds. In that case, the quitclaims were secured by the employer after it had already lost in the lower court and were entered into without leave of the lower court. In the present case, the quitclaims were signed while the motion for reconsideration was still pending before the DOLE and were executed with the knowledge and approval of the DOLE, which expressly approved them in its order of December 16, 1988. The Court also cited General Rubber and Footwear Corp. vs. Drilon for the proposition that accrued money claims can be effectively waived by workers and employees, and Periquet vs. NLRC for the principle that not all waivers and quitclaims are invalid as against public policy.

• Validity of Quitclaims in Labor Law — Not all waivers and quitclaims are invalid as against public policy. A quitclaim or compromise agreement is valid and binding where it is shown that the person making the waiver did so voluntarily, with full understanding of what he or she was doing, and the consideration is credible and reasonable. 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 step in to annul the transaction. In this case, the Court applied this doctrine by finding that the petitioners executed their quitclaims voluntarily with the assistance of counsel and the approval of the DOLE, and that the considerations were not unconscionably low, warranting enforcement of the agreements.

• Article 227 of the Labor Code (Compromise Agreements) — Any compromise settlement, including those involving labor standard laws, voluntarily agreed upon by the parties with the assistance of the Bureau or the regional office of the DOLE, shall be final and binding upon the parties. The NLRC or any court shall not assume jurisdiction over issues involved therein except in case of non-compliance or if there is prima facie evidence that the settlement was obtained through fraud, misrepresentation, or coercion. The Court applied this provision to uphold the validity of the quitclaims, which had been entered into with DOLE assistance and approval.

• "Not all waivers and quitclaims are invalid as against public policy." — This passage articulates the controlling principle that distinguishes valid from invalid quitclaims, and is frequently cited in subsequent labor jurisprudence as the canonical formulation of the rule.

• "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." — This passage defines the binding effect of voluntary compromise agreements and the insufficiency of a mere change of mind as grounds for invalidation.

• "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 questionable transaction." — This passage sets out the two exceptions under which a quitclaim may be annulled — procurement from an unsuspecting or gullible person, or unconscionable terms — establishing the test for invalidity.

• "The Constitution protects the just, and it is not the petitioners in this case." — This closing remark underscores that constitutional protection of labor does not extend to employees who voluntarily and knowingly waive their claims and later seek to renege on their agreements.

• Pampanga Sugar Development Co., Inc. vs. Court of Industrial Relations, 114 SCRA 725 — Distinguished. The Court found this case inapplicable because the quitclaims therein were secured after the employer had already lost and were entered into without leave of the lower court, whereas in the present case the quitclaims were executed while the motion for reconsideration was pending and with DOLE knowledge and approval.

• General Rubber and Footwear Corp. vs. Drilon, 169 SCRA 808 — Followed. The Court cited this case for the proposition that accrued money claims can be effectively waived by workers and employees.

• Periquet vs. NLRC, 186 SCRA 724 — Followed. The Court relied on this case for the principle that not all waivers and quitclaims are invalid as against public policy, and for the test distinguishing valid from invalid quitclaims.

• Article 227, Labor Code (Compromise Agreements) — The Court applied this provision to uphold the validity of the quitclaims, holding that compromise settlements voluntarily agreed upon with the assistance of the DOLE are final and binding, and that courts may not assume jurisdiction over the issues therein except in case of non-compliance or prima facie evidence of fraud, misrepresentation, or coercion — none of which were present.

• Article 6, New Civil Code — Cited by petitioners in reliance on Pampanga Sugar for the rule that rights may be waived provided the waiver 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. The Court did not dispute the provision but found it inapplicable given the factual distinctions.

• Article 22, New Civil Code — Cited by petitioners for the prohibition against unjust enrichment. The Court found no unjust enrichment because the quitclaims were validly executed.

Narvasa (Chairman), Gancayco, Griño-Aquino, and Medialdea, JJ., concurred.