G.R. No. L-33364-65 November 24, 1972
SIMPLICIO PALANCA and UNITED SALES AND SERVICES EMPLOYEES ASSOCIATION (PAFLU), et al., petitioners, vs. COURT OF INDUSTRIAL RELATIONS sitting en banc, respondent.

FACTS

This case originated from two consolidated unfair labor practice cases filed against petitioner Simplicio Palanca. The Court of Industrial Relations (CIR) found Palanca guilty and ordered him to pay back wages to 26 union members. This decision became final and executory. The cases were then remanded to the trial court for the recomputation of the exact back wage amounts. During these recomputation proceedings, Palanca raised objections, including the need to present evidence on the workers’ possible earnings elsewhere during their layoff, which would be deductible from the back wages. Before a scheduled hearing could proceed on these specific issues, the parties submitted a Compromise Agreement dated March 1970, wherein Palanca agreed to pay a lump sum of P31,000.00 to the complainants as full satisfaction of the back wage award.
The CIR, through its trial court, denied approval of the compromise agreement. It reasoned that since the 1964 decision was already final and executory, and the proceedings were merely for recomputation, the court could not grant the motion. Palanca’s motion for reconsideration was denied by the CIR en banc, prompting this appeal by certiorari. The union members, as parties to the compromise, were impleaded as co-petitioners.

ISSUE

Whether the Court of Industrial Relations committed grave abuse of discretion in refusing to approve the compromise agreement submitted by the parties during the execution stage for the recomputation of back wages.

RULING

Yes. The Supreme Court annulled the CIR’s resolutions and approved the compromise agreement. The Court held that the CIR’s refusal constituted a grave abuse of discretion. Its reasoning—that a compromise could not be entertained because the judgment had become final—was erroneous. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. There is no legal prohibition against parties entering into a compromise agreement even after a final judgment, particularly during its execution phase, provided it is not contrary to law, morals, public order, or public policy.
In this case, the judgment had indeed become final regarding Palanca’s liability for back wages. However, the exact amounts due to each worker were not yet definitively fixed; the proceedings were precisely for recomputation, where issues like deductions for interim earnings were still pending. The compromise agreement, therefore, served to settle these very uncertainties and put a definitive end to the litigation. The Court found no evidence that the agreement was vitiated by fraud, coercion, or that it was contrary to public policy. The union members, through their counsel, voluntarily agreed to the sum. The CIR’s duty was to approve such an agreement unless it was patently unlawful, which it was not. Its refusal to act on it deprived the parties of their right to settle their dispute amicably and constituted an arbitrary exercise of power.