FFW-DOWELL CONTAINER & PACKAGING CORPORATION CHAPTER, CLEMENTE FORTALEZA, OSCAR RODRIGUEZ, RANULFO USON AND ANDRES FLORES PETITIONERS, VS. DOWELL CONTAINER & PACKAGING CORPORATI…

FFW-Dowell Container and Packaging Corporation Chapter versus Dowell Container and Packaging Corporation

The Case

This is a labor case that reached the Supreme Court as a petition for certiorari. The FFW-Dowell Container and Packaging Corporation Chapter, together with Clemente Fortaleza, Oscar Rodriguez, Ranulfo Uson and Andres Flores, challenged the rulings of the Labor Arbiter and the National Labor Relations Commission, which had dismissed their complaint for illegal closure and dismissal against Dowell Container and Packaging Corporation. The case matters for two reasons. First, it shows how the Court treats a compromise agreement freely entered into by the parties. Second, it illustrates the rule that not every quitclaim is void as against public policy. The Court never reached the merits of the labor dispute, because the parties settled it.

Procedural History

The complainants filed a complaint for illegal closure and dismissal before the Labor Arbiter. The Labor Arbiter dismissed the complaint, finding no proof of anti-union motive in the closure and no underpayment of separation pay. The complainants appealed to the National Labor Relations Commission, which denied the appeal and affirmed the Labor Arbiter. The complainants moved for reconsideration, but the Commission denied that motion as well. The complainants then filed a petition for certiorari before the Supreme Court, imputing grave abuse of discretion on the Commission. After the company filed its comment, the case was submitted for decision. Before the Court could rule on the merits, the parties filed a Joint Motion to Approve Compromise Agreement, and the Court resolved the case on that basis.

Facts

Dowell Container and Packaging Corporation operated in Libis, Quezon City, manufacturing corrugated boxes for industrial clients. The FFW-Dowell chapter was the local chapter of the Federation of Free Workers, a legitimate labor federation registered with the Department of Labor and Employment. On February 2, 2011, the union filed a notice of strike before the National Conciliation and Mediation Board on grounds of unfair labor practice. On May 30, 2011, while conciliation was pending, the company sent letters to the Department of Labor and Employment and to the union's officers and members, announcing its intention to close its manufacturing operations on June 30, 2011. The union protested.

Union officers nevertheless met with management representatives before the National Conciliation and Mediation Board and executed a Compromise Agreement on severance packages consisting of 48 days of pay for every year of service plus a lump sum of 30 days of basic pay. On August 18, 2011, the complainants filed a complaint for illegal closure and dismissal. They alleged that the company did not actually close but continued operating under the name Golden Swan Paper Products Corporation, a newly created corporation meant to serve as a run-away shop. They also alleged that even if the closure was legal, the company underpaid separation pay, because the Collective Bargaining Agreement and the Memorandum of Agreement provided 60 days of pay per year of service, while the company paid only 48 days.

The company answered that the closure was in accord with Article 283 of the Labor Code, and that the complainants had negotiated separation packages exceeding what the law required. The Labor Arbiter dismissed the complaint, and the National Labor Relations Commission affirmed. While the case was pending before the Supreme Court, the parties filed a Joint Motion to Approve Compromise Agreement dated April 30, 2014. Under it, each complainant would receive an additional 100,000 pesos, for a total of 400,000 pesos, as full and complete settlement of all claims, and the complainants would institute no further action against the company.

Issues

• Whether or not the compromise agreement between the parties is valid and binding, such that it may be approved by the Court.
• Whether or not the complainants' waiver and quitclaim of their claims is valid as against public policy.
• Whether or not the case should be dismissed in view of the settlement.

Applicable Provisions

Article 2029 of the Civil Code provides:

Article 2029. The court shall endeavor to persuade the litigants in a civil case to agree upon some fair compromise.

This provision is the Court's stated basis for encouraging the amicable settlement of disputes, and it is the provision the Court invokes in closing the case.

Article 283 of the Labor Code, as quoted in the decision, provides:

Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the worker and the Ministry of Labor and Employment at least one month before the intended date thereof. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher. A fraction of at least six months shall be considered as one whole year.

This is the provision the company invoked to justify the closure and the separation pay it gave, and it is the standard against which the Labor Arbiter and the Commission measured the packages.

Ruling

On the first issue, the Court granted the Joint Motion to Approve Compromise Agreement. It defined a compromise as a contract whereby parties, making reciprocal concessions, avoid litigation or put an end to one already commenced. It noted that a first Compromise Agreement had already been executed before the National Conciliation and Mediation Board, under which each petitioner received 48 days of pay per year of service plus a lump sum of 30 days of basic pay. A second Compromise Agreement then gave each petitioner an additional 100,000 pesos as full settlement. Taken together, these agreements convinced the Court that the parties had reached a reasonable conciliation, which it found commendable.

On the second issue, the Court held that not all waivers and quitclaims are invalid as against public policy. Quoting Periquet versus National Labor Relations Commission, it ruled:

Not all waivers and quitclaims are invalid as against public policy. 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. 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. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking.

On the third issue, keeping in mind Article 2029 of the Civil Code, which encourages the amicable settlement of disputes between parties, the Court considered the case closed and settled, and dismissed it.

Doctrine

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. Not all waivers and quitclaims are invalid as against public policy. A quitclaim voluntarily entered into, with full understanding of what the person is doing, and supported by credible and reasonable consideration, is a valid and binding undertaking. It may not later be disowned simply because of a change of mind. The law will step in to annul the transaction only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or where the terms of settlement are unconscionable on their face. Courts are directed by Article 2029 of the Civil Code to persuade litigants to agree upon some fair compromise, and a reasonable settlement reached under that encouragement will be approved.

Disposition

The Court granted the Joint Motion to Approve Compromise Agreement and dismissed the case, with each petitioner receiving an additional 100,000 pesos as full settlement of all claims.

Remember This

The line to memorize is that not all waivers and quitclaims are invalid as against public policy, and a voluntary, reasonable settlement binds the parties. Examiners use this case to test the validity of compromise agreements and quitclaims in labor disputes, and the limits on setting them aside.