G.R. No. 255368 . May 29, 2024.
LEO A. ABAD, ROMEO ABELLA, MARNIE AGAPAY, FELECIANO S. BAHAN, RUEL R. BAHAN, ANGELITO CABAÑAS, JOVILITO G. MAESTRADO, JR., REPRESENTED BY HIS MOTHER, NENITA MAESTRADO, TONY L. MONTANTE, ALVIN D. PAL, VENJIE PLASQUITA, FRANKIE L. SABIO, AND MARIJUL O. UNDAP, PETITIONERS, VS. SAN ROQUE METALS, INC., RESPONDENT.

FACTS

This case originated from complaints for illegal dismissal filed by 35 employees against Prudential Customs Brokerage Services, Inc. (PCBSI) and San Roque Metals, Inc. (SRMI). The Executive Labor Arbiter (ELA) ruled that the employees were illegally dismissed and ordered PCBSI and SRMI to solidarily pay backwages and separation pay. This decision was reversed by the NLRC but reinstated by the Court of Appeals, a ruling which became final and executory after the Supreme Court denied the separate petitions of PCBSI and SRMI.
After finality, 12 of the employees (petitioners) entered into separate, similarly worded compromise agreements with PCBSI and SRMI. Each petitioner agreed to receive a settlement amount and employment with SRMI as the “full, complete, and final satisfaction” of their claims against both companies. During the pre-execution conference, the ELA wrote a note on each agreement stating it was “without prejudice to the outcome of the pre-execution conference/proceedings.” The ELA later issued an Order treating the settlement amounts as advances, computed the total monetary award due to petitioners at PHP 20,160,503.00, and issued a writ of execution holding PCBSI and SRMI solidarily liable.
SRMI filed a Petition for Extraordinary Remedies with the NLRC, arguing the compromise agreements constituted full payment and that its solidary liability was erroneous. The NLRC denied the petition, invalidating the compromise agreements on grounds including vitiated consent (due to the ELA’s note creating ambiguity) and unconscionability (as the settlement amounts ranged from only 5.20% to 23.42% of the computed awards).
The Court of Appeals partially granted SRMI’s subsequent Petition for Certiorari. It upheld SRMI’s solidary liability as final and unalterable but found grave abuse of discretion in the NLRC’s invalidation of the compromise agreements. The CA deemed the agreements valid and considered the amounts paid as full satisfaction of petitioners’ claims, thereby deleting the award of backwages and separation pay. Petitioners’ partial motion for reconsideration was denied.

ISSUE

Whether the Court of Appeals erred in finding grave abuse of discretion on the part of the NLRC when it denied SRMI’s Petition for Extraordinary Remedies (specifically, in ruling that the compromise agreements were valid and constituted full payment of petitioners’ claims).

RULING

Yes, the Court of Appeals erred. The Supreme Court granted the petition, reversing the CA’s decision and reinstating the NLRC Resolutions which upheld the ELA’s Order.
The Court held that the NLRC did not commit grave abuse of discretion. A compromise agreement, to be valid, must not be contrary to law, morals, good customs, public order, or public policy. The NLRC correctly found the agreements invalid for being unconscionable. The amounts received by petitioners (e.g., PHP 80,000.00 for a claim worth PHP 1,712,160.00, or about 4.67%) were grossly disproportionate to the monetary awards they were legally entitled to under the final judgment. Such a huge disparity constitutes unconscionability, which the NLRC has the authority to correct even if not raised by the parties, as it violates public policy. The CA’s finding that the amounts were reasonable, especially considering petitioners’ re-employment, was erroneous.
Furthermore, the NLRC correctly ruled that the issue of SRMI’s solidary liability for backwages and separation pay had been settled with finality in the earlier CA decision and could no longer be relitigated at the execution stage. The Court also affirmed the imposition of legal interest on the monetary awards at the rate of 6% per annum from the finality of the judgment until full satisfaction, pursuant to established jurisprudence.