Philippine Apparel Workers Union v. National Labor Relations Commission and Philippine Apparel, Inc.
REITERATIONFacts
The Antecedents: The Supreme Court rendered a judgment on July 31, 1981, granting a writ of certiorari, setting aside the decision of the National Labor Relations Commission (NLRC), and directing Philippine Apparel, Inc. (PAI) to pay increased allowances, a negotiated wage increase of P0.80 daily effective April 1, 1977, and other wage increases embodied in the collective bargaining agreement (CBA). The decision was immediately executory. Procedural History: Petitioner's counsel filed a notice of attorney's lien. Subsequently, petitioner's counsel filed a motion to declare the Bagong Pilipino Philippine Apparel Workers Union (BPPAWU) and its officers and counsel in contempt for allegedly causing the circulation of a "Kapahintulutan" authorizing BPPAWU and its counsel to negotiate the payment of backwages, and for agreeing with PAI to credit the first year's wage increase against the living allowance, potentially compromising the P0.80 daily wage increase awarded by the Court. PAI filed a motion for reconsideration, which was denied and declared final. Entry of Judgment was made. The Petition: Petitioner alleged that BPPAWU and its officers and counsel were attempting to subvert the Court's decision by circulating a special check-off authorization for legal expenses from backwages and by encouraging members to accept a mere P500.00 upon signing a release and quitclaim, which would be considered full settlement of their claims. Petitioner prayed for a restraining order and for the NLRC to immediately execute the decision, and for those obstructing it to be declared in contempt. Petitioner also reiterated its prayer for a temporary restraining order and for the contempt charges against BPPAWU officers and counsel. PAI commented that it had made payments and questioned the validity of the examiner's report, while petitioner countered that employees had not received any payment and that quitclaims were used to avoid paying differentials. BPPAWU denied conniving in spreading rumors or campaigning for reduced payments, stating it had no participation in the payment of backwages. The Solicitor General averred that the NLRC had not been remiss in its duties, explaining the process of computation and noting that PAI had made payments despite objections. PAI further averred it could not be held liable for contempt for seeking releases and quitclaims as it had already made payments. Petitioner replied that releases and quitclaims were used to avoid payments and that the company would only release amounts if employees agreed to full settlement. The Court issued a temporary restraining order enjoining the collection of special assessments for legal expenses.
Issue(s)
Whether the acts of the BPPAWU, its counsel, and respondent company constitute contempt of court for attempting to subvert the Supreme Court's executory decision. Whether the substitution of counsel by Atty. Luis D. Flores for the Paterno D. Menzon Law Office was valid. Whether the quitclaims and releases signed by employees are valid and extinguish the liability of Philippine Apparel, Inc. Whether the Paterno D. Menzon Law Office, as the original counsel, is entitled to represent the petitioner's members in the execution of the decision. Whether the attorney's fees of 10% of the recovered amount are applicable.
Ruling
The Court found the BPPAWU, its counsel Atty. Luis D. Flores, and respondent Philippine Apparel, Inc. guilty of contempt of court. The Court declared the quitclaims and releases signed by the employees as null and void. The Court affirmed that the Paterno D. Menzon Law Office is the lawful counsel for the petitioner's members in the execution of the decision. The Court ordered Philippine Apparel, Inc. to immediately comply with the decision, pay partial backwages with 10% attorney's fees, make payrolls available for computation of remaining backwages, and pay the remaining backwages. The BPPAWU, Atty. Luis D. Flores, and Philippine Apparel, Inc. were ordered to pay a fine for contempt.
Ratio Decidendi
On the issue of contempt of court: The Court held that the attempts by the BPPAWU, its counsel, and respondent company to render the Supreme Court's executory decision meaningless by paying backwages in a lesser amount and by coercing employees to sign quitclaims and releases constituted a willful disregard of the Court's authority. The Court emphasized that the BPPAWU and its counsel could not feign protection of employees when encouraging them to accept amounts significantly less than what was due, especially when coupled with obligations to release the company from further liability. Such actions were deemed a disrespect for the administration of justice and an attempt to subvert the Court's judgment, which is contrary to public policy and the sanctity of contracts as interpreted by the Court. The Court cited Mercury Drug Co. v. CIR to support the nullification of quitclaims and releases obtained under such circumstances. On the validity of the substitution of counsel: The Court ruled that the alleged substitution of the Paterno D. Menzon Law Office by Atty. Luis D. Flores was void and ineffective. The Court reiterated the requisites for a valid substitution of counsel under Rule 138, Section 26 of the Revised Rules of Court, which include a written application, written consent of the client, written consent of the attorney to be substituted (or proof of service of notice if consent cannot be obtained). Since these requisites were not complied with, the substitution was deemed invalid, and the Paterno D. Menzon Law Office remained the lawful counsel. On the validity of quitclaims and releases: The Court declared the quitclaims and releases signed by the employees as null and void. The Court reasoned that these documents were utilized by the company to avoid paying differentials in wages, overtime pay, and other benefits, and that employees were pressured to sign them to receive any amount at all. Following the principle established in Mercury Drug Co. v. CIR, the Court held that quitclaims and releases obtained under such circumstances, where the amount received is significantly less than what is due and the employee is coerced into signing, do not extinguish the employer's liability. Allowing such acts would render the Court's awards to the whim of the losing company and undermine the sanctity of contracts as interpreted by the Court. On who represents the petitioner's members in execution: The Court held that the Paterno D. Menzon Law Office, having been the petitioner's counsel from the inception of the case until its successful conclusion, is the lawful representative for the execution of the decision. The Court clarified that the issue was not which union should represent the members, but which law office lawfully represents them in court. The contention that the Paterno D. Menzon Law Office had been substituted was dismissed due to the failure to comply with the procedural requirements for substitution. On attorney's fees: The Court affirmed the retainer agreement for 10% attorney's fees for the Paterno D. Menzon Law Office, citing Article III of the Labor Code and Section 11 of Rule VIII of its implementing rules, which allow for attorney's fees equivalent to ten percent of the amount of wages recovered in cases of unlawful withholding of wages. These fees are permissible to be deducted from the total amount due the winning party.
Main Doctrine
Attempts by a union and its counsel, along with the respondent company, to render a Supreme Court decision meaningless by paying backwages in a lesser amount than awarded, and by coercing employees to sign quitclaims and releases, constitute contempt of court and willful disregard of the Court's authority. Substitution of counsel is void if procedural requisites are not met. Quitclaims and releases signed under duress or misrepresentation, especially when the amount received is significantly less than what is due, are considered null and void.