G.R. No. L-40003 - Yap vs. Court of Appeals

Alejandro Mercader was employed by the Manila Polo Club on May 11, 1946, through the intervention of the club’s treasurer, Alex D. Stewart.
He was engaged as a bookkeeper and accountant with an initial salary of P375 per month.

On August 19, 1949, his salary was raised to P400 per month, allocated as follows:

P375 as the regular pay;
P25 as a premium for work on Sundays, legal holidays, overtime, and other special duties.

On March 26, 1951, Mercader requested leave with pay for the period from April 1 to August 1, which was granted.
On April 17, 1951, while still on leave, he received a letter from Mr. H. J. MacLean, the club manager, indicating:

The Club would limit sick leave for 1951 to only two weeks.
A one-month severance pay was to be rendered, evidenced by an enclosed check for P405.

Filed a claim at the Department of Labor on June 16, 1951.
The claim (docketed as Case No. 1224) sought P10,000 for what was alleged as due overtime work and benefits as per the August 19, 1949 communication.

The Department of Labor subsequently ordered the Manila Polo Club to pay him P10,623.24 on September 24, 1951.
On November 9, 1951, an amicable settlement was reached:

Mercader and his attorney Constancio Leuterio executed a receipt acknowledging the acceptance of a P7,000 check in full settlement of all claims, including overtime, vacation, and sick leave privileges.
This settlement thereby closed Case No. 1224.

Despite the settlement, on January 9, 1953, Mercader filed a complaint at the Court of First Instance of Manila.
In his complaint, he alleged:

That while employed at a monthly rate of P375 with certain assurances regarding job security and benefits (15 days each of vacation and sick leave annually), his termination was arbitrary and violated the contract of service.
That he suffered economic and non-economic damages, including loss of income and moral injury, as a result of the termination.

P5,000 per annum from the date of his separation (May 15, 1951) until the final resolution;
A lump sum of P50,000 for moral damages;
P2,000 for attorney’s fees; and
P200 for litigation expenses.

The Manila Polo Club, in its answer, acknowledged the employment facts but contended that:

The Club stressed that the November 9, 1951 settlement (receipt) released it from any further claims related to overtime, vacation, and sick leave.
The defendant also counterclaimed for attorney’s fees amounting to P5,000, arguing that Mercader’s action compelled them to retain legal counsel.

The preponderance of evidence favoring the defendants;
The binding effect of the settlement receipt that waived all claims by Mercader.

Whether the prior settlement executed on November 9, 1951, constituting an absolute waiver of all claims, including benefits and overtime, bars Mercader’s subsequent action for wrongful termination.
Whether Mercader’s contention regarding the alleged permanent nature of his employment and the arbitrary termination has merit despite the executed settlement.
Whether the award of attorney’s fees (P600) in favor of the defendants is justifiable and properly computed, especially considering the absence of evidence that Mercader’s action was malicious or intended merely to prejudice the defendants.