G.R. No. 174564 , February 12, 2014
ATTY. EMMANUEL D. AGUSTIN, JOSEPHINE SOLANO, ADELAIDA FERNANDEZ, ALEJANDRO YUAN, JOCELYN LAVARES, MARY JANE OLASO, MELANIE BRIONES, ROWENA PATRON, MA. LUISA CRUZ, SUSAN TAPALES, RUSTY BAUTISTA, and JANET YUAN, Petitioners, vs. ALEJANDRO CRUZ-HERRERA, Respondent.

FACTS

Respondent Alejandro Cruz-Herrera, President of Podden International Philippines, Inc., terminated the employment of the complainants (assemblers/line leaders) in 1993 due to alleged financial reverses, but no report of such was filed with the Department of Labor and Employment. The complainants filed an illegal dismissal case against Podden and Herrera, engaging Atty. Emmanuel D. Agustin as counsel under a verbal contingency fee agreement of 10% of the final monetary award. The Labor Arbiter (LA) ruled in favor of the complainants, ordering reinstatement with full backwages totaling approximately ₱2,625,480.00, plus monetary claims, ₱40,000.00 each as moral and exemplary damages, and 10% attorney’s fees. The decision became final and executory. During execution proceedings, Herrera presented Waivers and Quitclaims signed by the complainants, which the LA initially upheld, denying the writ of execution but ordering Herrera to pay Atty. Agustin 10% of the amount received from the compromise. The NLRC reversed the LA, nullifying the quitclaims as unconscionable (amounts ranged from ₱10,000₱20,000 versus the award of ₱238,680 each) and ordering execution of the original decision. The NLRC’s resolution became final. Herrera filed a certiorari petition with the Court of Appeals (CA). Pending the CA petition, Herrera and the complainants (without Atty. Agustin’s knowledge) entered into a Joint Compromise Agreement, wherein Herrera agreed to pay each complainant ₱35,000 and 10% of the total settlement as attorney’s fees. The CA approved the agreement. Atty. Agustin moved for reconsideration, arguing the compromise altered final judgments and was unconscionable, but the CA denied it. Atty. Agustin and the complainants filed this petition.

ISSUE

Whether the Court of Appeals erred in approving the Joint Compromise Agreement between Herrera and the complainants, thereby amending final and executory judgments of the Labor Arbiter and NLRC, and whether Atty. Agustin is entitled to his attorney’s fees based on the original monetary award.

RULING

The Supreme Court denied the petition. First, the petition was dismissible due to a defective certification of non-forum shopping, signed only by Atty. Agustin instead of the complainants as principal parties. On substantive grounds, the Court upheld the CA’s approval of the compromise agreement. Compromises are judicially encouraged as a means to settle disputes, provided they are not contrary to law, public order, or public policy. The agreement here was voluntary, with each complainant receiving ₱35,000a sum not deemed unconscionable given the circumstances, including Podden’s cessation of operations and the complainants’ explicit assent. The complainants, as principals, had the right to settle their claims, and their decision bound their attorney. Atty. Agustin’s claim for fees based on the original award was untenable; his entitlement was limited to 10% of the actual settlement amount (₱385,000 total), as stipulated in the compromise agreement approved by the CA. The Court affirmed the CA resolution and ordered Herrera to pay Atty. Agustin 10% of the total settlement within ten days.