Cruz & Co. v. Galandez
REITERATIONFacts
The Antecedents: Respondents Jose B. Galandez (Galandez), Domingo I. Sajuela (Sajuela), and Marlon D. Namoc (Namoc) were employed as warehouseman purchaser, and welder, respectively, by petitioner F.F. Cruz & Co., Inc. Sometime in April and May 2011, respondents were issued notices of termination on the ground of retirement. Believing they were illegally dismissed as they had not yet reached the compulsory retirement age, they initially filed a complaint before the Department of Labor and Employment (DOLE). During conciliation, petitioner agreed to pay separation pay by way of compromise, but failed to honor this undertaking. The DOLE then referred the matter to the National Labor Relations Commission (NLRC), where respondents filed complaints for illegal dismissal with money claims. Procedural History: In a Decision dated December 15, 2011, the Labor Arbiter (LA) ruled in favor of respondents, declaring them illegally dismissed and ordering their reinstatement to their former positions without loss of seniority rights, along with monetary awards for full backwages, 13th month pay, and attorney's fees. Petitioner appealed to the NLRC, which, in a Decision dated July 17, 2012, affirmed the LA's ruling, recomputing the backwages and attorney's fees, subject to further re-computation until actual reinstatement. Petitioner's motion for reconsideration was denied. Respondents subsequently sought to enforce the NLRC Decision, demanding reinstatement and payment of full backwages, and proposing separation pay if reinstatement was no longer viable. Petitioner then paid the provisionally computed monetary award, and respondents executed Quitclaims and Releases. The NLRC, in an Order dated April 30, 2013, approved the quitclaims and declared the case closed and terminated. Respondents moved for reconsideration, alleging they were defrauded into believing they would be reinstated and were not assisted by counsel, but the NLRC denied their motion in a Resolution dated March 31, 2014. The Petition: Aggrieved by the NLRC's rulings, respondents elevated the matter to the Court of Appeals (CA) via a petition for certiorari, contending that the NLRC committed grave abuse of discretion in approving the quitclaims and ruling that they represented the full monetary judgment award. The CA, in its Decision dated February 8, 2017, initially upheld the validity of the quitclaims but ruled that they did not bar respondents from asserting what was legally due them, particularly backwages until reinstatement or separation pay. Upon reconsideration, in a Resolution dated January 4, 2018, the CA reversed its stance, declaring the quitclaims invalid due to unconscionable consideration, given that respondents received far less than what the law required and had repeatedly demanded reinstatement. Petitioner then filed the instant petition for review on certiorari before the Supreme Court, assailing the CA's Decision and Resolution.
Issue(s)
Whether or not the CA committed any reversible error in holding that the questioned Quitclaims and Releases were invalid. Whether or not the CA committed any reversible error in ordering the remand of the case to the NLRC for re-computation of respondents' backwages until their actual reinstatement, or to pay separation pay in lieu of reinstatement; and whether the respondents waived their right to additional backwages but not their right to reinstatement.
Ruling
The petition is PARTLY GRANTED. The Decision dated February 8, 2017 and the Resolution dated January 4, 2018 of the Court of Appeals in CA-G.R. SP. No. 08468 are hereby SET ASIDE. The case is hereby REMANDED to the National Labor Relations Commission (NLRC) for execution proceedings in accordance with this Decision.
Ratio Decidendi
On Issue 1: The Supreme Court found that the Court of Appeals (CA) correctly granted respondents' certiorari petition because the National Labor Relations Commission (NLRC) gravely abused its discretion in completely discharging petitioner from its obligations under a final and executory judgment due to the Quitclaim and Release executed by respondents. While quitclaims are generally valid contracts in the nature of a compromise, their validity requires that there was no fraud or deceit, the consideration is credible and reasonable, and 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. The burden rests on the employer to prove that the quitclaim constitutes a credible and reasonable settlement and that the employee executed it voluntarily and with a full understanding of its import. In this case, the NLRC Decision, which had become final and executory, ordered both monetary awards (13th month pay, backwages, attorney's fees) and reinstatement or separation pay. The Court disagreed that respondents waived their right to reinstatement, noting their consistent averment that the quitclaims were executed with the assurance of reinstatement. The Court emphasized that in determining the intention of parties to a contract, their contemporaneous and subsequent acts shall be principally considered, as per Article 1371 of the Civil Code. The phrase "all claims of whatsoever kind of nature" in the quitclaim was deemed a general, standard clause that could not be strictly construed in its literal sense to include waiver of reinstatement, especially since petitioner, who prepared the quitclaim form, caused the obscurity, invoking Article 1377 of the Civil Code. On Issue 2: The Supreme Court agreed that the respondents waived their right to additional backwages, but not their right to reinstatement. Records did not show that respondents made the same insistence regarding their right to additional backwages, nor did they further demand any additional monetary amount after receiving the initial payment upon signing the Quitclaim and Release. This clearly demonstrates that respondents had voluntarily accepted the said amounts to serve as a complete settlement of the monetary aspect of the NLRC Decision. The Court discerned that the consideration for respondents in acceding to the Quitclaim and Release was to realize the expeditious settlement of petitioner's monetary obligations (13th month pay, backwages, and attorney's fees), without, however, compromising their right to get back their jobs and continue to earn a living in petitioner's employ (reinstatement aspect). To hold otherwise would be illogical, as respondents would not waive reinstatement if it was promised and already decreed under a final judgment, and it would prevent the labor quitclaim from being a fair and reasonable agreement. Therefore, the Quitclaim and Release remains valid but is interpreted as a fair and reasonable settlement between the parties only of the monetary aspect of the NLRC Decision, but not of its reinstatement aspect, which hence, should be implemented as a matter of course. However, the Court recognized that reinstatement might not be a viable remedy if relations are severely strained or if the employee decides not to be reinstated, in which case separation pay would be ordered. Thus, the case was remanded to the NLRC for a determination of whether any of these instances obtain so as to render reinstatement non-viable and hence, instead order petitioner to pay respondents separation pay, as may be deemed appropriate.
Main Doctrine
The main doctrine established or applied in this case clarifies the interpretation and validity of quitclaims and releases in labor disputes, particularly when a final and executory judgment includes both monetary awards and reinstatement. The Supreme Court held that while quitclaims are generally valid contracts of compromise, their scope is strictly construed, especially against the employer who prepared the document. A general waiver clause in a quitclaim will not automatically be interpreted as a waiver of the right to reinstatement if the employee's contemporaneous and subsequent acts demonstrate a clear intent to be reinstated. This doctrine emphasizes that the intent of the parties, gathered from their actions, is paramount in interpreting such agreements, ensuring that the settlement is fair and reasonable and does not prejudice the employee's fundamental right to security of tenure.