Paje v. Spic N' Span Service Corporation
REITERATIONFacts
The Antecedents: Petitioners Gloria Paje, et al. (Paje et al.) were hired by respondent Spic N' Span Service Corporation (Spic N' Span) as merchandisers and assigned to Swift Foods, Inc. (Swift). Paje et al., along with other co-complainants, filed a complaint for illegal dismissal with money claims against Swift and Spic N' Span. Procedural History: The labor arbiter dismissed the claims of Paje et al. but held Swift and Spic N' Span jointly and severally liable for the claims of Edelisa David and Inocencio Fernandez. The National Labor Relations Commission (NLRC) initially held Spic N' Span as the true employer and dismissed the complaint against Swift, sustaining the dismissal of Paje et al.'s claims. The Court of Appeals (CA) reversed the NLRC, remanding the case for computation of Paje et al.'s money claims. This Court, in a prior decision, affirmed the CA ruling with modification, awarding nominal damages. Subsequently, Swift paid Paje et al. P3,588,785.30, representing half of the total award, and Paje et al. executed a Quitclaim and Release in favor of Swift. Paje et al. then filed a motion for execution of the remaining balance. Spic N' Span filed a Motion to Quash the partial writ of execution, arguing that the quitclaim in favor of Swift should also benefit Spic N' Span as a mere agent. The labor arbiter granted the motion to quash, which was affirmed by the NLRC and the CA. The CA ruled that the quitclaim redounded to Spic N' Span's benefit pursuant to Article 1217 of the Civil Code. The Petition: Paje et al. filed a Petition for Review, contending that the quitclaim only benefited Swift to the extent of Swift's share in the total amount due, invoking Article 1222 of the Civil Code. They argued that the quitclaim should not be read in isolation with Article 1233 of the Civil Code, emphasizing that the debt was not fully paid. They also argued that the quitclaim was not intended to release respondent, was a contract of adhesion, and they were not assisted by counsel.
Issue(s)
Whether the Court of Appeals erred in sustaining the quashal of the partial writ of execution on the ground that the Quitclaim and Release executed by petitioners redounded to the benefit of respondent Spic N' Span Service Corporation, considering the explicit terms of the release and the adequacy of the consideration. Whether the Quitclaim and Release executed in favor of Swift Foods, Inc. released Spic N' Span Service Corporation from its solidary liability, considering the principles of solidary obligation under the Labor Code and the Civil Code.
Ruling
The Petition is GRANTED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 128429 are REVERSED AND SET ASIDE. The labor arbiter's Order dated April 18, 2011, which quashed the partial writ of execution, is NULLIFIED. Respondent Spic N' Span Service Corporation is directed to pay petitioners Gloria Paje, Lolita Gomez, Miriam Catacutan, Estrella Zapata, Gloria Sumang, Juanita Julieta Dingal, Myra Amante, and Fe Bernardo the amount of P3,858,785.30, subject to legal interest.
Ratio Decidendi
On the issue of whether the Court of Appeals erred in sustaining the quashal of the partial writ of execution on the ground that the Quitclaim and Release executed by petitioners redounded to the benefit of respondent Spic N' Span Service Corporation, considering the explicit terms of the release and the adequacy of the consideration: The Court ruled in favor of the petitioners. The Quitclaim and Release explicitly stated that petitioners released and discharged "SWIFT FOODS CORP./SWIFT FOODS, INC. (SFI) and/or its officers" from any and all claims. Strict construction of these terms indicates that the quitclaim was meant to release Swift only, and not respondent Spic N' Span. The omission of Spic N' Span was understandable given that its Petition for Review was still pending before the Supreme Court at the time the quitclaim was executed. Furthermore, the consideration for the quitclaim, P3,588,785.30, represented only half of the total obligation of P7,177,570.60, which is an unconscionably low amount for a complete settlement. The Court has consistently held that for a waiver, release, or quitclaim to be valid, the consideration must be reasonable and credible, and not unconscionably low, as to encroach upon public policy. On the issue of whether the Quitclaim and Release executed in favor of Swift Foods, Inc. released Spic N' Span Service Corporation from its solidary liability, considering the principles of solidary obligation under the Labor Code and the Civil Code: The Court reiterated that under Articles 106 and 109 of the Labor Code, Spic N' Span, as a labor-only contractor, and Swift, as the employer, are jointly and severally liable to the employees. This solidary liability is mandated to prevent circumvention of labor laws and to assure workers of payment of their claims. Respondent Spic N' Span cannot misuse the solidary nature of its obligation to escape liability. Article 1216 of the Civil Code grants employees the right to collect from any one of the solidary debtors or both simultaneously, and a demand made against one is not an obstacle to demands against the others as long as the debt has not been fully collected. Since Swift only paid half of the total award, the payment and release in favor of Swift did not bar petitioners from collecting the remaining balance from Spic N' Span. The Court also noted that the nominal damages awarded in the prior decision, amounting to P30,000.00 for each of the nine petitioners, contributed to the outstanding balance.
Main Doctrine
A quitclaim executed in favor of the employer does not operate to discharge the labor-only contractor from liability for the remaining balance of the workers' money claims, especially when the consideration for the quitclaim is unconscionably low and the document explicitly releases only the employer.