STONE TREASURES INTERNATIONAL TRADING CORP., AND/OR MR. JONITO C. RACAL, PETITIONERS, VS. BENJIE C. GIMENA AND NATIONAL LABOR RELATIONS COMMISSION (8TH DIVISION, CAGAYAN DE ORO …

Stone Treasures International Trading versus Gimena

The Case

This is a labor case that ends not on the strength of the dismissal claim but on the binding force of a settlement. Stone Treasures International Trading Corporation and its officer, Mr. Jonito C. Racal, are pitted against their former area manager, Benjie C. Gimena, who complained of constructive dismissal after he was indefinitely suspended without pay. The case matters to a reviewee because the Supreme Court, after the labor tribunals had ruled for the employee, approved a compromise agreement reached at the appellate mediation center and treated it as a judgment. The lecture therefore teaches two things at once: the rules on preventive suspension and constructive dismissal, and the doctrine that a judicial compromise has the force and effect of a judgment.

Procedural History

Gimena filed a complaint for constructive dismissal, with a prayer for service incentive leave pay, before the Executive Labor Arbiter of the National Labor Relations Commission in Butuan City. The Labor Arbiter ruled in his favor, ordering reinstatement, full backwages, and the payment of partial backwages. Stone Treasures appealed to the National Labor Relations Commission, Eighth Division, in Cagayan de Oro City, which dismissed the appeal for lack of merit and affirmed the Labor Arbiter in full. The Commission denied the motion for reconsideration. Stone Treasures then came to the Supreme Court by a petition for certiorari under Rule 65, alleging grave abuse of discretion. The Supreme Court referred the controversy to the Philippine Mediation Center, and the parties settled. The Court then rendered judgment approving the compromise agreement.

Facts

Stone Treasures hired Benjie C. Gimena as area manager for its Visayas and Mindanao branches in April 2007. In June 2008, Gimena entered into a sale transaction with the proprietor and the manager of Ultimate Tiles Center in Cagayan de Oro City for the delivery of tiles worth more than two million pesos. The buyer issued sixteen postdated checks, and every one of them was dishonored for insufficiency of funds, beginning with the first check presented for encashment.

In August 2009, Gimena received a memorandum from the corporation indefinitely suspending him from work without pay. The stated ground was that he had violated company policy limiting all provincial dealers to a maximum credit limit of three hundred thousand pesos. Gimena treated this as constructive dismissal and filed his complaint.

Stone Treasures denied dismissing him. It insisted that he was only preventively suspended pending investigation of a sale that exceeded the credit limit and that involved dishonored checks, and that the manner of the sale violated its credit and collection rules. The Labor Arbiter and the Commission both rejected this defense and ruled for Gimena. While the case was pending in the Supreme Court, the parties were referred to mediation and executed a compromise agreement in December 2013, which the corporation's authorized branch manager signed and which the corporation later confirmed by board resolution.

Issues

• Whether or not the National Labor Relations Commission acted with grave abuse of discretion in affirming the Labor Arbiter's finding that Gimena was constructively dismissed.
• Whether or not the compromise agreement executed by the parties before the Philippine Mediation Center is valid and binding, and should be approved as a judgment.

Applicable Provisions

Article 1306 of the Civil Code provides:

Contracting parties may establish such stipulations, clauses, terms, and conditions, as they may deem convenient, provided that they are not contrary to law, morals, good customs, public order, or public policy.

This is the source of the parties' freedom to settle, and it is the provision the Court invokes to test the compromise against the limits of law and public policy.

Article 2028 of the Civil Code, cited by the Court, defines the contract the parties entered into:

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced.

This definition anchors the Court's holding that the settlement is a juridical agreement binding on the parties.

Ruling

On the first issue, the Court did not disturb the findings of the Labor Arbiter and the Commission. The corporation's own memorandum placed Gimena on indefinite suspension without pay, and the tribunals found this to amount to constructive dismissal. The petition for certiorari therefore did not persuade the Court on the merits of the labor dispute.

On the second issue, the Court approved the compromise agreement. It held that a compromise is a contract of reciprocal concessions, and that it is an accepted, even desirable and encouraged, practice in courts and administrative tribunals. A compromise intended to resolve a matter already under litigation is a judicial compromise. Having judicial mandate and entered as the Court's determination of the controversy, it has the force and effect of a judgment. It transcends its identity as a mere contract and becomes a judgment subject to execution under the Rules of Court. Once approved, it attains the effect and authority of res judicata, although no execution may issue unless the court where the litigation is pending approves it and decrees compliance with its terms.

The Court stressed that a compromise is generally favored in law, is binding on the contracting parties, and, provided it is not contrary to law, morals, good customs, public order, or public policy, is immediately executory. To be valid, it must be based on real claims and actually agreed upon in good faith. The Court found both conditions present: the claims were valid, and the agreement was made without fraud or any vice of consent.

Doctrine

A compromise is a contract whereby the parties, by reciprocal concessions, avoid litigation or end one already commenced. When it is made to resolve a matter already under litigation and is approved by the court, it becomes a judicial compromise with the force and effect of a judgment, subject to execution, and it attains the authority of res judicata. It is valid when it rests on real claims and is entered into in good faith, and when its terms are not contrary to law, morals, good customs, public order, or public policy under Article 1306 of the Civil Code. Courts look upon compromise with favor as a means of settling disputes.

Disposition

The Supreme Court approved the compromise agreement, rendered judgment in accordance with its terms, and ordered the parties to comply faithfully with it.

Remember This

Memorize this line: a compromise approved by the court is more than a contract, it is a judgment with the force and effect of res judicata. Examiners use this case to test the validity and binding effect of judicial compromises, and to show that a labor appeal can be ended by a settlement at mediation.