A. D. SANTOS, INC., PETITIONER, VS. COURT OF INDUS­TRIAL RELATIONS AND CITY CAB LABOR UNION, RESPONDENTS.

A. D. Santos versus Court of Industrial Relations

The Case

This is a petition for certiorari filed by A. D. Santos, Incorporated against the Court of Industrial Relations and the City Cab Labor Union. The company asks the Supreme Court to set aside two orders of the labor court that would compel it to pay, a second time, sums it had already paid — money that had in fact reached the union's lawyer and the driver-claimants. The case matters because it shows the Supreme Court striking down a labor order that, in the name of protecting workers, had itself become arbitrary and had violated the employer's right to due process.

Procedural History

The labor controversy began before the Court of Industrial Relations, which adjudged A. D. Santos, Incorporated guilty of unfair labor practice as far back as December 10, 1969. The company elevated the matter to the Supreme Court in a certiorari proceeding, which was dismissed. The labor court then issued a writ of execution on June 27, 1973. The company assailed that writ in another certiorari proceeding before the Supreme Court, which was dismissed for lack of merit on September 6, 1973, and its motion for reconsideration was denied with finality on September 25, 1973.

In this third proceeding, the company raised a due process question, impugning an order of the Court of Industrial Relations en banc dated July 29, 1974, which modified the earlier order of May 2, 1974. The Supreme Court treated the petition as one for certiorari and resolved it on the merits.

Facts

The Court of Industrial Relations had ordered A. D. Santos, Incorporated to pay backwages to five driver-claimants: Johnie Sante, Daniel Andrade, Jose Olores, Dioscoro Tua, and Juanito Leobonchiong. The company made payments to the drivers in 1971 and 1972, and also paid 5,200 pesos to the union's counsel, Attorney Emiliano Tambaoan, Junior, who was authorized in writing to receive payments on behalf of the union. Of that amount, 1,000 pesos was afterwards received by two union members.

The Hearing Examiner, Nestor Lim, rendered a report computing what the company still had to deposit. The order of May 2, 1974 adopted that report and directed the company to comply with it. On reconsideration, the Court of Industrial Relations en banc issued its resolution of July 29, 1974, modifying the order. It ruled that the company had violated and circumvented the final order of June 27, 1973, and directed it to deposit a balance of 9,429.86 pesos. This included 4,200 pesos representing the balance of the 5,200 pesos taken by Attorney Tambaoan, Junior, and 2,854.28 pesos representing attorney's fees for Attorneys Eliseo Cruz and Emiliano Tambaoan, Junior, to be shared by the five driver-claimants.

The company protested that it was being made to pay these sums again, even though they had already been received by the lawyer and by the drivers. It prayed that the order and resolution be set aside insofar as they condemned it to pay the 4,200 pesos and the 2,854.28 pesos.

Issues

• Whether or not the Court of Industrial Relations acted with arbitrariness and violated due process in requiring the company to deposit again the 4,200 pesos already paid to and received by Attorney Tambaoan, Junior.
• Whether or not the Court of Industrial Relations acted with arbitrariness and violated due process in requiring the company to pay the 2,854.28 pesos in attorney's fees that had already been paid to the driver-claimants, and in giving the resolution a retroactive effect.

Applicable Provisions

Article II, Section 9 of the Constitution provides:

The State shall afford protection to labor, promote full employment and equality in employment, ensure equal work opportunities regardless of sex, race, or creed, and regulate the relations between workers and employers. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work. The State may provide for compulsory arbitration.

This is the constitutional mandate the Court invoked, observing that by its turn of events the labor court had failed to protect labor as the Constitution commands, because the challenged orders only produced further delay.

Ruling

On the first issue, the Court ruled for the company. The order of May 2, 1974 itself found as a fact that the 4,200 pesos had been paid to Attorney Tambaoan, Junior, as the union's lawyer, authorized in writing to receive payments. To require the company to deposit that sum again would amount to awarding an additional 4,200 pesos to the complainants and their lawyer, and would unjustly enrich the lawyer at the company's expense. The Court acknowledged the power of a quasi-judicial tribunal to assure that counsel is duly compensated, but held that a contract for attorney's fees cannot be used as a cloak for an exorbitant exaction. Requiring a second deposit for the same purpose would be exactly such an exaction. The test is fairness, and the due process clause protects clients, counsel, and, in appropriate cases, the adverse party.

On the second issue, the Court also ruled for the company. The labor court itself found that the payments to the drivers were made in 1971 and 1972, long before the order of March 15, 1973 that the company was said to have violated. The company therefore could not have violated, circumvented, or disregarded an order that did not yet exist. Even assuming the company's conduct was not blameless, the penalty of having to pay again would be disproportionate to the offense. The Court added that the taint of retroactivity, the payments having been made long before the challenged order, was at war with the cardinal right to due process. It also noted that from the drivers' standpoint, attending to their financial needs early was more conducive to their welfare than leaving them to loan sharks.

Doctrine

A quasi-judicial tribunal may assure that counsel is duly compensated, but a contract for attorney's fees cannot be used as a cloak for an exorbitant exaction. Where a sum has already been paid to and received by counsel duly authorized in writing to collect, an order requiring the employer to deposit the same sum again is an exorbitant exaction and violates due process. The test is fairness, and the due process clause protects the client, the counsel, and, in appropriate cases, the adverse party.

An employer cannot be penalized for violating an order that did not yet exist at the time of the acts complained of; such a retroactive application is repugnant to due process. And the constitutional protection of labor does not authorize arbitrary orders that produce further delay rather than prompt relief.

Disposition

The Supreme Court granted the petition, modifying the order of May 2, 1974 and the resolution of July 29, 1974 by setting aside so much of them as required the company to pay the 4,200 pesos and the 2,854.28 pesos in attorney's fees, and declared the decision immediately executory.

Remember This

Memorize this line: a contract for attorney's fees cannot be used as a cloak for an exorbitant exaction, and requiring an employer to pay twice what was already received is precisely such an exaction. Examiners use this case in labor law and in due process questions on the limits of a quasi-judicial tribunal's power over attorney's fees and on the prohibition against retroactive orders.