JOSE VICENTE SANTIAGO, IV, PETITIONER, VS. BONIER DE GUZMAN, GUZMAN INSTITUTE OF TECHNOLOGY, LABOR ARBITER PERLITA B. VELASCO AND NATIONAL LABOR RELATIONS COMMISSION, RESPONDENTS.

Article 24 of the Civil Code of the Philippines provides that
“(I)n all contractual, property and other relations, when one of the
parties is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts must be
vigilant for his protection.” We need this dictum in the instant petition.

The present controversy stems from the complaint for illegal
dismissal filed before the respondent National Labor Relations Commission
(NLRC) on July 15, 1986 by
petitioner Jose Vicente Santiago IV against private respondents Bonier de
Guzman and Guzman Institute of Technology. 
In his complaint docketed as NLRC Case No. 7-2747-86 and assigned to
Labor Arbiter Perlita V. Velasco for hearing and
disposition, petitioner Santiago alleged in the main that he was an instructor
at the Guzman Institute of Technology during the periods from June 1955 to
March 1956, June 1956 to March 1957, and June 1976 until November 10, 1984,
when he reported for the second semester of the school year 1984-1985 but was
not given any teaching load or assignment for said semester; and that by this
omission private respondents indirectly and in bad faith terminated his
employment without cause and notice.  He
therefore prayed that private respondents be ordered to reinstate him to his
former position at the same rate of salary as of the time of his dismissal;
should private respondents propose to retire him, for the former to pay the
full retirement pay plus damages; and in either case, to pay damages due to
loss of income in the amount of P34,334.30; P27,103.51 for actual damages,
P60,209.19 for moral damages; P4,022.78 for loss of income from 13th month pay
and Wage Order No. 3; and the accrued money value of his Service Incentive
Leave from November 10, 1984 to June, 1986 in the amount of P2,866.00.  In addition, he prayed for such further and
other relief as may be deemed just and equitable.^[1]

Thereafter, the parties submitted for approval a Compromise
Agreement dated September 29, 1986,
the central text of which reads as follows:

“COMPROMISE AGREEMENT

xxx       xxx       xxx

1. That respondent hereby agrees to pay as separation pay the sum
of SIX THOUSAND SIXTEEN (sic) AND SIXTY FOUR CENTAVOS (P6,016.64) to
complainant within fifteen (15) days from the signing of this Compromise
Agreement;

2. That respondent hereby pays complainant the amount of NINE
HUNDRED NINETY FIVE PESOS AND FORTY CENTAVOS (P995.40) as service incentive
leave pay from 1981-1984;

3. That complainant hereby releases and discharges respondent from
any money claim whatsoever in connection with his previous employment with
respondent school;

4. That in the event parties fails (sic) to comply with the terms
and conditions of this Compromise Agreement, complainant is entitled to a Writ
of Execution.”^[2]

On November 26, 1986,
petitioner filed two pleadings with the Labor Arbiter; namely:  (1) Motion for Write (sic) of Execution dated
November 24, 1986 and (2)
Complainant Position Paper dated November
15, 1986.

On November 28, 1986, finding the Compromise Agreement to be in
order and not contrary to law or public morals, Labor Arbiter Velasco issued an
Order approving the same.  Upon receipt
of a copy of said Order by ordinary mail on December 11, 1986, petitioner filed on the same day a
“motion to correct errors in the compromise agreement and to resolve the
issue of illegal dismissal.” He subsequently filed an undated
Manifestation, a motion on breach of agreement dated January 21, 1987 and a motion dated March 16, 1987 wherein he submitted
certain exhibits and rested his case.

On March 30, 1987, Labor Arbiter Velasco issued an Order
dismissing the “Motion on Breach of Agreement” for being moot and
academic and declaring the case settled, closed and terminated, upon a finding
that therein complainant “has received the amount of SEVEN THOUSAND TWELVE
PESOS AND 04/100 (P7,012.04) from respondents x x x in full settlement of his claims pursuant to the
compromise agreement x x x
and the Order x x x dated
November 28, 1986.”^[3]

From this Order, petitioner filed an Exception and Notice of
appeal to the NLRC on the grounds of fraud and serious errors in the
computation of the compromise agreement and failure of the labor arbiter to
give due consideration to his claim for illegal dismissal.^[4]
Private respondents opposed the motion.

On September 30, 1987,
the NLRC Second Division promulgated a resolution affirming the assailed Order
and dismissing the appeal for being moot and academic.  Petitioner’s motion for reconsideration and
new trial was denied for lack of merit in a resolution dated December 14, 1987.  Petitioner then filed a pleading denominated
“Exception and Notice of Appeal” wherein he gave notice of his
intention to appeal the case to the then Intermediate Appellate Court, now
Court of Appeals, which in turn certified the case to this Court for
appropriate action.^[5]

 Pursuant to this Court’s
Resolution of March 23, 1988,
petitioner filed a petition for review, which, however, did not comply with the
Rules.  We therefore resolved to refer
petitioner to the Citizens Legal Assistance Office (CLAO) for appropriate legal
assistance.^[6]
After several extensions, the CLAO filed a Revised Petition for Review on Certiorari,
presenting the following issues for resolution:

1. WHETHER OR NOT THE LABOR ARBITER’S DECISION BASED ON THE
COMPROMISE AGREEMENT IS VALID.

2. SINCE THE COMPROMISE AGREEMENT WAS NOT VALID, WHETHER PETITIONER
IS ENTITLED TO SEPARATION PAY AND BACKWAGES AND DAMAGES.

3. WHETHER PETITIONER SANTIAGO
WAS DENIED DUE PROCESS BOTH BY HIS EMPLOYER, RESPONDENT LABOR ARBITER AND
RESPONDENT NLRC.^[7]

Petitioner contends basically that he was denied due process of
law when both the Labor Arbiter and the NLRC ignored his pleas that corrections
be made in the computation of his separation and service incentive leave pays and
that the issue of illegal dismissal be heard and determined.  Both public and private respondents, on the
other hand, maintain that the Compromise Agreement which was allegedly entered
into by petitioner voluntarily and willingly put an end to the controversy and
that having accepted the benefits therefrom,
petitioner cannot now back track to impugn the same.

We find for petitioner.

Settlement of disputes by way of compromise whereby the parties,
by making reciprocal concessions, avoid a litigation or put an end to one
already commenced,^[8]
is an accepted, nay desirable and encouraged practice in courts of law and
administrative tribunals.  Toward this
end, the Rules governing proceedings before the Labor Arbiter exhort, thus:

Section 1.  Initial
conference/hearing. – Within two (2) days from receipt of an assigned case, the
Labor Arbiter shall summon the parties to an initial conference/hearing for the
purpose of amicably settling the case upon a fair compromise or
determining the real parties in interest, defining and simplifying the issues
in the case and threshing out other preliminary matters.  x x x.

Should the parties arrive at any agreement as to the
whole or any part of the dispute, the same shall be
reduced to writing and signed by the parties before the Labor Arbiter.  The settlement shall be approved by the Labor
Arbiter after being satisfied that it was
voluntarily entered into by the parties
and after having explained to them the
terms and consequences thereof.

A compromise agreement entered into by the parties not in the
presence of the Labor Arbiter before whom the case is pending shall be approved
by him if, after confronting the parties, particularly the complainants,
he is satisfied that they understand the
terms and conditions of the settlement
and that it was entered into freely
and voluntarily by them.^[9]

Under these Rules, it is incumbent upon the Labor Arbiter not
only to persuade the parties to settle amicably, but equally to ensure that the
compromise agreement entered into by them is a fair one and that the same was
forged freely, voluntarily and with a full understanding of the terms and
conditions embodied therein as well as the consequences thereof.  The latter onus devolving upon the Labor
Arbiter gains considerable significance when taken in conjunction with Article
222 of the Labor Code of the Philippines, as amended, which allows non-lawyers
to appear before the labor tribunal in representation of their own selves.

Applied to the case at bar, the conclusion reached is that Labor
Arbiter Velasco was remiss in her above-stated duty when she approved the
Compromise Agreement in question and when she subsequently declared the case
closed and terminated.  The different
pleadings filed by petitioner after the submission of the compromise agreement
for approval and even after the issuance of the Order approving said compromise
agreement vividly demonstrate that petitioner did not understand the terms and
conditions embodied in the compromise agreement as well as the consequences
thereof.  Illustrative of this
non-comprehension is the contradictory pleadings denominated as “Motion
for Writ of Execution”^[10]
and “Complainant Position Paper”^[11]
filed by petitioner prior to the approval of the compromise agreement and the
Motion to Correct Errors in the Compromise Agreement and to Resolve Issue of
Illegal Dismissal^[12]
and Motion on Breach of Agreement.^[13]

It must be observed that the motion for a writ of execution was
filed oh November 26, 1986, or two (2) days before the compromise agreement was
approved, when there was nothing yet to execute.  The Complainant Position Paper, although
dated November 15, 1986, was likewise filed on November 26, 1986.  These two (2) contradictory pleadings are
sufficient to engender the suspicion that petitioner, a college instructor and
a non-lawyer, did not fully understand the terms and conditions contained in,
and the consequences of entering into the compromise agreement.  Confronted with this ambivalent stance on the
part of petitioner, it became incumbent upon Labor Arbiter Velasco, if she was
to satisfy herself that “the parties, particularly the complainant x x x understood the terms and
conditions of the settlement” to call the parties for this purpose and to
explain the import of the settlement. 
This was not done; instead the compromise agreement was approved
notwithstanding indications that complainant therein did not fully understand
the terms and conditions thereof. 
Certainly, this act is characterized by grave abuse of discretion
calling for the corrective writ of certiorari.

The situation was exacerbated when the Labor Arbiter did not rule
upon the Motion to Correct Errors in the Compromise Agreement and to Resolve
the Issue of Illegal Dismissal.  This
motion sheds light on the seeming ambivalent position taken by petitioner.  Said motion alleged in part:

“1.  That complaint filed by
undersigned consists of two (2) issues: 
(a) termination and/or separation pay and (b) dismissal without due
written notice as provided by law (Art. 278 (b) and Sec. 2, Rule XIV, Book V.

“2. That the termination and/or separation pay was tentatively
covered by a compromise agreement dated September
29, 1986 and filed with this Honorable Office on October 29, 1986 which contain
grossly inaccurate computations.

x x x              x x x                 x x x

“8. That the second issue of illegal dismissal or violation of
the provisions of labor code for failure of respondent to notify in writing the
termination of employment of complainant. 
x x x“^[14]

It   is quite evident from
these allegations that to petitioner’s mind, what he was settling when he
entered into the compromise agreement was merely his claims for termination and
service incentive leave pays, but not his claim for illegal dismissal, which
partial settlement is allowed and recognized by the Rules of the NLRC
above-quoted.  Such intention to settle
partially, however, gave rise to complications, since the stipulation contained
in the compromise agreement whereby petitioner released and discharged private
respondents from any money claim whatsoever in connection with his previous
employment with respondent school cannot be given effect as such waiver was
made without a full understanding of the right being relinquished; and further,
that there was absolutely no meeting of minds between the parties as to the
object of compromise, and consequently, no compromise agreement in law to speak
of.

Indeed, by giving it a little more thought and attention,
respondent Labor Arbiter could have easily treated the motion under
consideration as a repudiation of the compromise agreement on the ground of
mistake so as to vitiate consent under Article 2038 of the Civil Code.^[15]
The same can be said of the Motion on Breach of Agreement wherein petitioner
asked for the setting aside of the compromise agreement for failure of private
respondents to abide by it in good faith, which is a recognized ground for
repudiation of compromise agreement under Article 2041 of the Civil Code.^[16]
Not having done so, and by simply ignoring the contentions of petitioner,
respondent labor arbiter had effectively and in a substantial manner denied
petitioner his right to due process.

Respondent Labor Arbiter relied heavily on the fact that
petitioner received from private respondents the amount stipulated in the
compromise agreement.  We have ruled that
the acceptance of separation pay is not a bar to contesting the legality of
one’s dismissal.  Separated employees
need the money to tide them over until they can find other employment pending
their reinstatement.^[17]

The NLRC in affirming the Labor Arbiter’s Order of March 30, 1987 proceeded from the
wrong assumption that petitioner is a lawyer, thus:

“It is safe to assume that complainant is a lawyer from the
complaint thus:

‘COMES now above-named complainant, thru and by his attorney, and
to this Honorable Commission respectfully allege:’

since he signed the complaint itself, and
the subsequent pleadings filed.  As such
he is aware of the full impact of the Compromise Agreement he entered
into.  His assent to receive as compromise
separation pay necessarily follows his agreement in the severance of his
employer-employee relationship.  He
likewise released and discharged, after agreeing to receive the amount of
P6,016.64 as separation pay and P995.40 as incentive leave pay, respondent from
any money claim whatsoever in connection with his employment with
respondent.”^[18]

Considering, as adverted to above, that non-lawyers are allowed
to appear before the labor tribunal on their own representation, it was a grave
abuse of discretion for respondent NLRC to simply assume a fact material to the
determination of the controversy and to accept it as gospel truth.  The Resolution of the NLRC dated September 30, 1987, being based on a
false assumption, speculation and conjecture, should be, as it is hereby set
aside.

WHEREFORE, the Orders of November 28, 1986 and March 30, 1987 issued by respondent Labor Arbiter as well
as the resolutions of the respondent NLRC dated September 30, 1987 and December 14, 1987 are hereby set aside.  The case is ordered remanded to the Labor
Arbiter for trial on the merits of petitioner’s claims for illegal dismissal
and separation pay, with instructions that this case be given priority
considering the health and age of the petitioner.  The amount received by petitioner shall be
deducted from the correct amount of separation pay due him.  No pronouncement as to costs.

SO ORDERED.

Gutierrez, Jr., Bidin, and Cortes, JJ., concur.

Feliciano, J., on leave.

^[1]
Annex “A” of the Revised Petition, pp. 49-50, Rollo.

^[2]
Annex “B”, Revised Petition, p. 53, Rollo.

^[3]
Annex “J”, Revised Petition, p. 86, Rollo.

^[4]
Annex “K”, Revised Petition, pp. 88-93, Rollo.

^[5]
Resolution dated March 3, 1988
in CA-G.R. SP No. 14029, Associate Justice Segundino
G. Chua, ponente, concurred in by Associate Justices
Fidel P. Purisima and Nicolas P. Lapena,
Jr.

^[6]
Resolution of May 11, 1988,
p. 19, Rollo.

^[7]
p. 41, Rollo.

^[8]
Art. 2028, Civil Code of the Philippines.

^[9]
Underscoring supplied.

^[10]
Annex “C”, Revised Petition, p. 54, Rollo.

^[11]
Annex “D”, Revised Petition, p. 55, Rollo.

^[12]
Annex “F”, Revised Petition, p. 66, Rollo.

^[13]
Annex “H”, Revised Petition, p. 76, Rollo.

^[14]
pp. 66-67, Rollo.

^[15]
Art. 2038 provides that “A compromise in which there is mistake, fraud,
violence, intimidation, undue influence, or falsity of documents, is subject to
the provisions of Article 1330 of this Code.”

^[16]
Art. 2041 states:  “If one of the
parties fails or refuses to abide by the compromise, the other party may either
enforce the compromise or regard it as rescinded and insist upon his original
demand.”

^[17]
L.R. Aguinaldo & Co. vs. Court of
Industrial Relations, 82 SCRA 309.

^[18]
Resolution of September 30, 1987,
penned by Commissioner Domingo H. Zapanta, and
concurred in by Presiding Commissioner Daniel M. Lucas, Jr. and Commissioner
Oscar N. Abella, p. 99, Rollo.