Title
Agustin vs. Cruz-Herrera
Case
G.R. No. 174564
Decision Date
Feb 12, 2014
Workers terminated by Podden won reinstatement and backwages but later settled for P35,000 each. Atty. Agustin contested, seeking fees based on the original award. SC upheld the settlement, limiting his fees to 10% of the compromise amount.
illegal dismissal
monetary claims
compromise agreement

Case Summary (G.R. No. 174564)

Factual Background and Underlying Labor Dispute

The complainants were assemblers and/or line leaders in Podden’s production department. In 1993, the complainants were terminated from employment due to alleged financial reverses. However, upon verification with the Department of Labor and Employment, no report of financial reverses and no retrenchment report were found. The complainants therefore filed a complaint for illegal dismissal, monetary claims, and damages against Podden and Herrera.

The complainants engaged Atty. Agustin to handle the case on a verbal contingency arrangement. The parties agreed that he would be paid ten percent (10%) of the final monetary award or such attorneys fees as would be finally determined.

Labor Arbiter’s Decision and Finality of the Judgment

After the proceedings before the Labor Arbiter (LA), the LA rendered a decision dated September 27, 1998 granting the complainants’ claims. The LA ordered the immediate reinstatement of the complainants without loss of seniority and other privileges, together with full backwages from the date of dismissal up to actual reinstatement, and monetary awards for underpayment of wages, thirteenth month pay, premium pay for holidays and rest days, and service incentive leave pay. The LA further awarded moral and exemplary damages in the amount of P40,000.00 per complainant, and awarded ten percent (10%) attorneys fees based on the total awards.

No appeal was taken from the LA decision. On February 2, 1999, the complainants filed a motion for execution. Hearings on execution were reset to allow exploration of settlement.

Herrera’s Opposition: Alleged Non-Feasibility and Quitclaims

Herrera opposed the issuance of a writ of execution by filing a Manifestation and Motion on March 20, 1999, asserting that Podden had ceased operations on December 1, 1994, almost four years before the LA decision. He also argued that nine of the eleven employees had executed waivers and quitclaims, making execution inequitable.

The complainants, through Atty. Agustin, opposed Herrera’s motion. They argued that execution was ministerial because the LA decision was already final and executory. They further alleged that the alleged quitclaims formed part of a scheme to evade liability and defraud the complainants.

The Labor Arbiter’s Order Denying Execution and Validating the Quitclaims

To resolve the dispute, the LA issued an Order dated May 15, 2000 denying the motion for a writ of execution. The LA found the quitclaims and waivers valid and held that they had superseded the issue of execution.

The LA reasoned that all eleven complainants had executed instruments titled “Pagtalikod sa Karapatang Maghabol” absolving Podden and Herrera from liabilities arising from the cases. The LA stressed that the instruments were signed by the complainants and sworn to before a notary public. It also found that the complainants received the LA decision on December 28, 1998, and then signed the quitclaims on March 2, 1999, April 8, 1999, and March 31, 2000. In the LA’s view, the timing and the complainants’ access to the LA decision supported the conclusion that the quitclaims were executed voluntarily and with understanding. The LA also noted that the instruments were written in Filipino, a national language known to and understood by the complainants, and that they did not attend hearings on the motion for execution and opposition.

As to attorneys fees, the LA ruled that Atty. Agustin was entitled to ten percent (10%) of the total monetary award obtained by the complainants from the compromise agreement, as it assumed the effect of the quitclaims.

NLRC Reversal: Nullification of Quitclaims and Order to Execute

On appeal, the NLRC reversed the LA’s Order dated May 15, 2000. The NLRC held that the LA had unlawfully altered and modified the final and executory LA decision dated September 27, 1998 through its ruling on execution. The NLRC likewise declared the quitclaims invalid.

The NLRC characterized the quitclaims’ consideration as unconscionably low. It observed that the amounts each complainant received under the quitclaims ranged between P10,000.00 and P20,000.00, in contrast to the LA’s award of P238,680.00 for each complainant. The NLRC treated the discrepancy as evidence that the quitclaims were waged from unsuspecting complainants.

The NLRC’s Resolution dated May 7, 2003 reversed and set aside the LA Order and directed the issuance of a writ of execution to enforce the LA decision. It nullified the quitclaims, while ordering that amounts received under the quitclaims be deducted from each complainant’s award. The Order dated May 31, 2004 denied Herrera’s motion for reconsideration. The NLRC later issued an Entry of Judgment declaring the May 31, 2004 order final and executory on June 20, 2004.

Proceedings in the Court of Appeals and the Joint Compromise Agreement

On August 6, 2004, Herrera filed a petition for certiorari before the CA assailing NLRC issuances. During the pendency of the petition, a joint compromise agreement was submitted to the CA on August 30, 2005.

The compromise stated that the parties had discussed their differences and decided to amicably settle. It provided that Herrera would pay each complainant Php 35,000.00 immediately upon signing. It also provided that Herrera would pay suit costs and attorneys fees equivalent to 10% (ten percent) of the total settlement agreement. It further stated that the case would be dismissed with prejudice upon signing.

In its assailed Resolution dated September 30, 2005, the CA held that the compromise terms were consistent with law, public order, and public policy. It admitted the compromise, approved it, and ordered that the case be dismissed with prejudice, while enjoining strict compliance with the compromise judgment.

Petitioners’ Arguments Before the Court: Res Judicata and Alleged Vitiation

Atty. Agustin moved for reconsideration, but the CA denied the motion in its Resolution dated September 8, 2006.

Aggrieved, Atty. Agustin—together with the complainants named as co-petitioners—filed the present review. They contended that the CA resolutions violated res judicata because they allegedly amended and altered the final and executory LA decision dated September 27, 1998 and the NLRC resolution dated May 7, 2003. They argued that the compromise agreement was unconscionable and executed without Atty. Agustin’s knowledge and consent, which they associated with the alleged deprivation of the larger monetary award adjudged in the labor case.

Atty. Agustin prayed that the joint compromise be set aside and that the LA decision be executed, including the payment of P335,844.18 attorneys fees pursuant to the final and executory monetary award originally obtained by the complainants.

Disposition of the Petition: Defective Non-Forum Shopping Certification

The Court denied the petition. It first held that the petition was dismissible outright for a procedural defect: the petition was accompanied by a defective certification against forum shopping because the certification was signed by Atty. Agustin rather than by the complainants as the principal parties.

The Court reiterated that for natural persons, the certification against forum shopping must be signed by the principal parties themselves, not by counsel. It anchored this rule on the personal nature of the certification, viewing it as an assurance given to the tribunal that there are no other pending cases involving basically the same parties, issues, and causes of action. The Court recognized that it has sometimes shown leniency where the record established authority for the actual signatory and where substantial merit existed. It held that no analogous justifiable reason existed in the present case.

The Court also noted that the complainants did not seek review because they had already settled the dispute before the CA. The Court viewed Atty. Agustin’s persistence in pursuing the recourse as reflecting a personal resolve to challenge the compromise on the ground that it was inequitable and had denied the larger adjudged award.

Agency and Authority Over Settlement; Compromise Validity Despite Lack of Lawyer’s Consent

The Court then addressed the substantive posture taken by Atty. Agustin. It held that Atty. Agustin acted beyond the scope of his authority in questioning the compromise executed by the complainants, Podden, and Herrera.

The Court emphasized the rule that parties may enter into compromise agreements without the intervention of their lawyer. It explained that client control over the subject matter includes the right to settle a case before judgment, in good faith, without the lawyer’s intervention, knowledge, or consent. Hence, the Court ruled that the absence of counsel’s knowledge or consent does not invalidate a compromise agreement.

The Court further maintained that even if a final judgment already settled the rights between contracting parties, a party may still waive rights through a compromise, provided it is shown to have been voluntarily, freely, and intelligently executed, with full knowledge of the judgment, and provided it is not contrary to law, morals, good customs, and public policy.

It found that Atty. Agustin’s allegations of vitiated consent were speculative and did not amount to evidence. It stressed that there was no proof that the complainants were forced, intimidated, or defrauded into executing the earlier quitclaims. The Court adopted the LA’s factual observations as to voluntary execution: the complainants were presumed to have understood the quitclaims because they received the LA decision and then signed the quitclaims; the quitclaims were in Filipino; they did not attend the hearings for execution; and they consistently manifested before the NLRC and CA that they had settled their claims and sought termination of appeals.

Distinguishing Unicane and Treating Attorneys Fees as the Relevant

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