G.R. No. L-23361-62 December 27, 1969
Case Parties:

LYDIA BULOS, PACIENCIA BATOON, NATIVIDAD V. MALGAPO, FAUSTINO ABEDOZA, CARMELITA AGGASID, LYDIA ALBINO, JUANITO ANDRES, LEONILA ANDRES, AIDA BATOON, CORNELIO BANGOT, PABLO BAUTISTA, CONSOLACION GALAD, AVELINA CADUAS, ELENA DE LA CRUZ, VICTORIANO DE LA CRUZ, LEOCADIO DASALLA, VIRGINIA DASALLA, FLORA S. DUCAY, CRESENCIA EVIDENCIO, CATALINO GIMENEZ, DIONISIA GUILLERMO, ARSENIA LABASAN, FRANCISCO LAPLANO, DIONISIO LABASAN, MAURICIA LAZATIN, LORETA MACAPAGAL, IGNACIA LUNA, FELICITA MANGADAP, FELICIDAD MARIANO, JULIAN MELCHOR, RICARDO MELCHOR, ANITA MENDOZA, ALBERTO MIGUEL, FERNANDO NAVALTA, PEDRO NOOL, JUANITA ORANI, NEMESIA SOLA, VERONICA SOLA, CECILIA SOLIVEN, MANUEL SAGABAIN, FILEMON SAGABAIN, ANICETA RESPONSO, FELICIANO RICO, PETRONILA RIVERA, ROSALINA TULAWAN and MARIA VILLANUEVA, petitioners,
vs.
THE COURT OF INDUSTRIAL RELATIONS, HONORABLE EMILIANO TABIGNE, HONORABLE AMANDO BUGAYONG, HONORABLE ANSBERTO PAREDES, ASSOCIATE JUDGES, COURT OF INDUSTRIAL RELATIONS; SANTIAGO RICE MILL; KING HONG CO., INC.; SANTIAGO LABOR UNION alias MAGAT LABOR UNION, respondents.

FACTS

1. On June 21, 1952, the Santiago Labor Union filed a petition (CIR Cases Nos. 709-V and V-1) against Santiago Rice Mill (owned by King Hong Co.) for overtime pay, premium pay for night/Sunday/holiday work, minimum wage differentials, and reinstatement with back wages for illegally laid-off workers. The initial claim totaled P123,526.36.
2. After protracted hearings, the Court of Industrial Relations (CIR) en banc, by a split 3-2 vote, reversed the trial judge and rendered a judgment in favor of the workers. This judgment was affirmed by the Supreme Court on August 31, 1962.
3. Upon remand for enforcement, the CIR Chief Examiner filed a Partial Report (Dec. 14, 1962) computing the total judgment liability at P423,756.74, covering: (a) back wages for 35 illegally laid-off workers; (b) overtime and premium pay for 104 workers; and (c) minimum wage differentials for 60 women workers. Petitioners claim the correct total, including 70 other laborers, should be P864,756.74.
4. The union pressed for execution and filed motions for a writ of attachment or for the respondent firm to post a bond, alleging the firm was disposing of assets and preparing for liquidation due to the nationalization of the rice and corn industry.
5. On March 30, 1963, the CIR trial judge ordered the respondent firm to deposit P100,000 in court and file a P100,000 surety bond to guarantee payment of the judgment. This order was affirmed by the CIR en banc and its review was dismissed by the Supreme Court on September 20, 1963.
6. On November 8, 1963, a Compromise Agreement was executed between the respondent firm and the Santiago Labor Union, represented by a majority of its Board of Directors. The agreement settled the entire judgment claim for the sum of P100,000. The CIR, by a split 3-1 vote, approved this settlement in its Orders of November 8, 1963 and March 9, 1964.
7. Two groups filed separate appeals:
* G.R. No. L-23331-32: Filed by the heirs and successors of the union’s retained lawyer, Atty. Teodulo M. Cruz, who had a recorded attorney’s lien. They questioned the approval of the settlement without their knowledge and consent.
* G.R. No. L-23361-62: Filed by 49 claimant-members of the union. They assailed the approval, arguing they were the real parties in interest and did not authorize the settlement. They denounced it as unconscionable, entered into under fraud, deceit, and undue influence, and manifestly unjust.

ISSUE

Whether the Court of Industrial Relations acted with grave abuse of discretion and in excess of jurisdiction in approving the Compromise Agreement which settled the workers’ judgment claims for P100,000, despite: (a) the lack of specific authority from the individual claimant-members who were the real parties in interest; (b) the objection of a union board member regarding the board’s authority to compromise; (c) the recorded attorney’s lien of the union’s counsel; and (d) the alleged unconscionable and inequitable nature of the settlement.

RULING

The Supreme Court SET ASIDE the challenged Orders of the Court of Industrial Relations and REMANDED the cases for proper execution of the final and executory judgment in favor of the workers.
1. On the Authority to Compromise: The Court held that the union’s Board of Directors had no authority to compromise the individual money judgments of the claimant-members. The judgment credits were personal properties of the individual workers, not of the union as an entity. The union, having obtained the favorable judgment for its members, became a mere trustee of the judgment credits for the benefit of the individual claimants. A trustee cannot compromise the trust property without the specific consent of the cestui que trust (beneficiaries). The approval of the settlement without the conformity of the individual claimants was a violation of substantive law and constituted a grave abuse of discretion.
2. On the Attorney’s Lien: The Court ruled that the approval of the settlement without satisfying the recorded attorney’s lien of Atty. Cruz and his successors was improper and invalid. The attorney’s lien, duly recorded, attached to the judgment. The CIR’s approval of the settlement, which did not provide for the payment of the lien, deprived the attorneys of their right to fees and was a denial of due process.
3. On the Nature of the Settlement: The Court found the settlement to be unconscionable and inequitable. The judgment liability was computed at P423,756.74 (with petitioners claiming P864,756.74), while the respondent firm’s own offer during negotiations was P110,000. The settlement for P100,000, which was less than 24% of the computed award, was grossly disproportionate. The Court emphasized its duty to protect workers, who are often at a financial disadvantage, from improvident settlements. The CIR’s approval of such a settlement, over the objection of many claimants and in light of the firm’s ability to post a P200,000 bond, constituted a betrayal of the court’s duty as a guardian of labor rights.
4. On the CIR’s Duty: The Court reiterated that the CIR is not an ordinary court of justice but a social court tasked with implementing the social justice mandate of the Constitution. Its approval of a compromise must be based on its own independent determination that the agreement is reasonable, just, and fair to all parties, especially the workers. Its failure to do so in this case warranted the reversal of its orders.
Dispositive Portion: The Supreme Court granted the petitions, set aside the CIR Orders dated November 8, 1963 and March 9, 1964, and ordered the cases remanded to the CIR for execution of the final judgment. Costs were imposed on the private respondent (Santiago Rice Mill/King Hong Co.).