GR 171351; (March, 2008) (Digest)
G.R. No. 171351; March 14, 2008
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, Petitioner, vs. GENARO C. BAUTISTA, et al., Respondents.
FACTS
The case involves a claim for payment of salary differentials by numerous employees of the Metropolitan Waterworks and Sewerage System (MWSS). The employees, led by Genaro Bautista, filed a complaint before the Regional Trial Court (RTC) seeking the implementation of a reclassification and upgrading scheme under the Salary Standardization Law. The RTC ruled in favor of the employees, ordering MWSS to pay the differentials. MWSS appealed to the Court of Appeals (CA), which affirmed the RTC decision but modified the computation of the differentials.
A pivotal issue arose from an agreement wherein the respondent-employees agreed to pay Genaro Bautista, who acted as their agent and lawyer, ten percent (10%) of the amounts recovered as attorney’s fees and litigation expenses. MWSS, in its appeal to the Supreme Court, argued that it should not be compelled to directly deduct and remit this ten percent to Bautista from the total monetary award, contending that it was not a party to the fee agreement and that such a deduction would violate the principle of relativity of contracts.
ISSUE
The primary issue is whether MWSS can be compelled to directly deduct the ten percent (10%) attorney’s fees from the total monetary award payable to the employees and remit it to Genaro Bautista.
RULING
The Supreme Court ruled in the negative, affirming the Court of Appeals’ modification. The Court held that MWSS cannot be ordered to make the direct deduction. The legal logic rests on the principle of relativity of contracts under Article 1311 of the Civil Code, which states that contracts are binding only upon the parties who entered into them. The fee agreement was strictly between the respondent-employees and Genaro Bautista. MWSS was not a party to this contract and did not consent to it.
Consequently, the obligation to pay the attorney’s fees lies solely with the individual employees who signed the agreement. The Court clarified that the judgment obligation of MWSS is to pay the full adjudicated amounts directly to the entitled employees. It is then the personal responsibility of each employee to fulfill their contractual commitment to Bautista from the proceeds they receive. To order MWSS to withhold the fees would unjustly impose upon it an obligation it never assumed and would amend the terms of a private contract to which it is a stranger. The Court upheld the validity of the fee agreement among the private parties but absolved MWSS from any duty concerning its enforcement.