EDELSTAHL DRAINAGE SYSTEMS ASIA, INC. PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND GILBERT C. RAMOS, RESPONDENTS.

Edelstahl Drainage Systems Asia versus National Labor Relations Commission

The Case

This is a petition for certiorari filed by Edelstahl Drainage Systems Asia, Incorporated against the National Labor Relations Commission and its former employee Gilbert Ramos. The company asked the Supreme Court to annul the Commission's decision of July 22, 2005, which had found Ramos constructively dismissed and ordered his reinstatement with full backwages, or separation pay in lieu of reinstatement, plus attorney's fees. The case matters for two reasons: it shows the extraordinary remedy of certiorari under Rule 65 being cut short by a supervening compromise, and it illustrates how a valid compromise agreement, once approved, becomes the judgment itself and ends the litigation.

Procedural History

Gilbert Ramos filed a complaint for constructive dismissal and non-payment of wages and commission, with damages and attorney's fees, against Edelstahl Drainage Systems Asia, Incorporated. The Labor Arbiter proceedings led to a Resolution of the National Labor Relations Commission dated November 20, 2004. On July 22, 2005, the Commission set aside that earlier resolution and entered a new one ordering the company to reinstate Ramos and pay him full backwages from his dismissal on September 17, 2002 until actual reinstatement, or separation pay of one month for every year of service if reinstatement was no longer possible, plus attorney's fees equivalent to ten percent of the total award. The company then came to the Supreme Court by petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, seeking to annul and set aside that Commission decision. While the petition was pending, on May 11, 2006, the parties executed a compromise agreement, and on June 2, 2006 the company filed a motion to dismiss grounded on that agreement. The Court resolved the petition on that basis.

Facts

Gilbert Ramos was employed by Edelstahl Drainage Systems Asia, Incorporated. He was dismissed on September 17, 2002, and he responded by filing a complaint for constructive dismissal and for non-payment of wages and commission, asking for damages and attorney's fees.

The National Labor Relations Commission initially issued a Resolution dated November 20, 2004. On July 22, 2005, it set that resolution aside and ruled in Ramos's favor, ordering reinstatement with full backwages from the date of dismissal, or separation pay should reinstatement no longer be possible, and attorney's fees of ten percent of the total award.

The company brought the matter to the Supreme Court by certiorari. But the dispute did not stay confined to labor law. A civil case for infringement, Civil Case Number 75015, was pending between the same parties, and with it came related criminal cases. Through the efforts of mediator Jorge Garde, the parties executed a compromise agreement on May 11, 2006, settling the civil aspects of that case and all the criminal cases attached to it, and expressly including the labor case that was then pending on appeal. The agreement bound both sides to file their respective desistance simultaneously on June 1, 2006. The company then moved to dismiss the petition before the Supreme Court on the strength of that agreement.

Issues

• Whether or not the compromise agreement executed by the parties on May 11, 2006, which expressly included the labor case then pending before the Supreme Court, is valid and binding.
• Whether or not the petition for certiorari should be dismissed in view of that compromise agreement.

Applicable Provisions

The Court did not quote a statutory provision in the decision text; it applied the compromise agreement itself, whose pertinent stipulations it quoted. The agreement provides:

Parties agreed to settle the civil aspects of this case and of all criminal cases attached to this case after parties discussed their issues and found out that they just had misunderstanding which ended them into these cases filed and counter filed against each other.

This stipulation shows that the settlement was meant to embrace the whole dispute between the parties, not just the infringement case.

The agreement then lists the cases covered, including:

3. Labor Case filed by the Defendant against the Plaintiff with docket # NLRC 039490-04 which is currently at the Appellate Court branch _________

This is the clause that ties the compromise directly to the labor case brought before the Court, which is why the petition could not proceed.

Finally, the agreement provides:

8. Both parties agreed to file desistance to the cases they have filed against each other simultaneously on June 1, 2006.

This stipulation obliged both parties to withdraw their claims against each other, and it is the basis for dismissing the petition.

Ruling

On the first issue, the Court held that the compromise agreement was voluntarily reached by the parties through the efforts of mediator Garde, and that its stipulations applicable to the instant suit are not contrary to law, morals, good customs, public order or public policy. The Court expressly approved the agreement. A compromise voluntarily entered into is binding on the parties, and where its terms are lawful, the Court gives it effect.

On the second issue, because the agreement expressly included the labor case then pending before the Court, and because the parties bound themselves to file their desistance simultaneously, the Court rendered judgment in accordance with the compromise agreement and dismissed the petition for certiorari. The Court did not reach the merits of the Commission's findings on constructive dismissal, backwages, separation pay, or attorney's fees, because the compromise superseded the controversy.

Doctrine

A compromise agreement voluntarily entered into by the parties, and whose stipulations are not contrary to law, morals, good customs, public order or public policy, is binding and may be approved by the Court, which then renders judgment in accordance with it. Once approved, the compromise ends the litigation and the Court will not inquire into the merits of the underlying case. A party who has bound himself in a compromise to desist from a pending case cannot thereafter insist on prosecuting it. For the Bar candidate, the rule is simple: a valid compromise is the law between the parties, and a judgment on compromise is a judgment on the merits of the settlement, not of the original claim.

Disposition

The Court approved the compromise agreement, rendered judgment in accordance with it, and dismissed the petition for certiorari filed by Edelstahl Drainage Systems Asia, Incorporated.

Remember This

A compromise voluntarily entered into and not contrary to law, morals, good customs, public order or public policy binds the parties and becomes the judgment itself. Examiners use this case to test whether a pending labor appeal is extinguished by a subsequent compromise that expressly covers it, and whether the Court will still review the merits of the labor tribunal's award.