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ALFREDO VELOSO vs. DEPARTMENT OF LABOR AND EMPLOYMENT.

The case cited is not apropos because the quitclaims therein invoked were
secured by the employer after it had already lost in the lower court and were
FACTS: the petitioners, along with several co-employees, filed a complaint against subsequently rejected by this Court when the employer invoked it in a petition for
the private respondent for unfair labor practices, underpayment, and non-payment certiorari. By contrast, the quitclaims in the case before us were signed by the
of overtime, holiday, and other benefits. This was decided in favor of the petitioners while the motion for reconsideration was still pending in the DOLE,
complainants on October 6,1987. The motion for reconsideration, which was which finally deemed it on March 7, 1989. Furthermore, the quitclaims in the cited
treated as an appeal, was dismissed in a resolution dated February 17, 1988. case were entered into without leave of the lower court whereas in the case at bar
the quitclaims were made with the knowledge and approval of the DOLE, which
the private respondent filed a motion for reconsideration and recomputation of the declared in its order of December 16, 1988, that “the compromise
amount awarded to the petitioners. On April 15, 1988, while the motion was agreement/settlements dated April 15, 1988 and July 19, 1988 are hereby
pending, petitioner Alfredo Veloso, through his wife Connie, signed a Quitclaim approved.”
and Release for and in consideration of P25,000.00, 1 and on the same day his
counsel, Atty. Gaga Mauna, manifested “Satisfaction of Judgment” by receipt of It is also noteworthy that the quitclaims were voluntarily and knowingly made by
the said sum by Veloso. 2 For his part, petitioner Liguaton filed a motion to dismiss both petitioners even if they may now deny this. In the case of Veloso, the
dated July 16, 1988, based on a Release and Quitclaim dated July 19,1988 , 3 for quitclaim he had signed carried the notation that the sum stated therein had been
and in consideration of the sum of P20,000.00 he acknowledged to have received paid to him in the presence of Atty. Gaga Mauna, his counsel, and the document
from the private respondent. was attested by Atty. Ferdinand Magabilin, Chief of the Industrial Relations
Division of the National Capitol Region of the DOLE. In the case of Liguaton, his
the petitioners claim that they were forced to sign their respective releases in favor quitclaim was made with the assistance of his counsel, Atty. Leopoldo Balguma,
of their employer, the herein private respondent, by reason of their dire necessity. who also notarized it and later confirmed it with the filing of the motion to dismiss
The latter, for its part, insists that the petitioner entered into the compromise Liguaton’s complaint.
agreement freely and with open eyes and should not now be permitted to reject
their solemn commitments. The same Atty. Balguma is the petitioners’ counsel in this proceeding. Curiously,
he is now challenging the very same quitclaim of Liguaton that he himself
These releases were later impugned by the petitioners on September 20, 1988, on notarized and invoked as the basis of Liguaton’s motion to dismiss, but this time
the ground that they were constrained to sign the documents because of their for a different reason. whereas he had earlier argued for Liguaton that the latter’s
“extreme necessity.” In an Order dated December 16, 1988, the Undersecretary of signature was a forgery, he has abandoned that contention and now claims that
Labor rejected their contention and ruled: the quitclaim had been executed because of the petitioners’ dire necessity.

IN VIEW THEREOF, complainants Motion to Declare Quitclaim Null and Void is “Dire necessity” is not an acceptable ground for annulling the releases, especially
hereby denied for lack of merit and the compromise agreements/settlements dated since it has not been shown that the employees had been forced to execute them.
April 15, 1988 and July 19, 1988 are hereby approved. Respondents’ motion for It has not even been proven that the considerations for the quitclaims were
reconsideration is hereby denied for being moot and academic. unconscionably low and that the petitioners had been tricked into accepting them.
While it is true that the writ of execution dated November 24, 1987, called for the
Reconsideration of the order having been denied on March 7, 1989, the petitioners collection of the amount of P46,267.92 each for the petitioners, that amount was
have come to this Court on certiorari. still subject to recomputation and modification as the private respondent’s motion
for reconsideration was still pending before the DOLE. The fact that the petitioners
accepted the lower amounts would suggest that the original award was exorbitant
ISSUE:
and they were apprehensive that it would be adjusted and reduced. In any event,
no deception has been established on the part of the Private respondent that
RULING: The Court had deliberated on the issues and the arguments of the would justify the annulment of the Petitioners’ quitclaims.
parties and finds that the petition must fail. The exception and not the rule shall be
applied in this case.
“On June 9, 1997, [respondent] opposed the motion on the ground that the judgment award
had been fully satisfied. In their Reply, [petitioners] claimed that they received only partial
payments of the judgment award.

“On October 20, 1997, six (6) of the eight (8) [petitioners] filed a Manifestation requesting
that the cases be considered closed and terminated as they are already satisfied of what
they have received (a total of P320,000) from [respondent]. Together with said Manifestation
is a Joint Affidavit in the local dialect, dated October 20, 1997, of the six (6) [petitioners]
attesting that they have no more collectible amount from [respondent] and if there is any,
they are abandoning and waiving the same.

“On February 27, 1998, the Labor Arbiter issued an order denying the motion for issuance of
writ of execution and [considered] the cases closed and terminated x x x.

“On appeal, the [National Labor Relations Commission (hereinafter ‘NLRC’)] reversed the
Labor Arbiter and directed the immediate issuance of a writ of execution, holding that a final
and executory judgment can no longer be altered and that quitclaims and releases are
normally frowned upon as contrary to public policy.”
G.R. No. 161003 May 6, 2005
The CA held that compromise agreements may be entered into even after a final judgment.
FELIPE O. MAGBANUA, CARLOS DE LA CRUZ, REMY ARNAIZ, BILLY ARNAIZ, ROLLY Thus, petitioners validly released respondent from any claims, upon the voluntary execution
ARNAIZ, DOMINGO SALARDA, JULIO CAHILIG and NICANOR LABUEN, petitioners, of a waiver pursuant to the compromise agreement.
vs.
RIZALINO UY, respondent.
The appellate court denied petitioners’ motion for reconsideration for having been filed out
FACTS: “As a final consequence of the final and executory decision of the Supreme Court of time.
in Rizalino P. Uy v. National Labor Relations Commission, et. al. (GR No. 117983,
September 6, 1996) which affirmed with modification the decision of the NLRC in NLRC RULING:
Case No. V-0427-93, hearings were conducted [in the National Labor Relations 1) COMPROMISE AFTER FINAL JUDGMENT. A compromise agreement is a contract
Commission Sub-Regional Arbitration Branch in Iloilo City] to determine the amount of wage whereby the parties make reciprocal concessions in order to resolve their differences and
differentials due the eight (8) complainants therein, now [petitioners]. As computed, the thus avoid or put an end to a lawsuit.11 They adjust their difficulties in the manner they have
award amounted to P1,487,312.69 x x x. agreed upon, disregarding the possible gain in litigation and keeping in mind that such gain
is balanced by the danger of losing. Verily, the compromise may be either extrajudicial (to
“On February 3, 1997, [petitioners] filed a Motion for Issuance of Writ of Execution. prevent litigation) or judicial (to end a litigation).
A compromise must not be contrary to law, morals, good customs and public policy; and
must have been freely and intelligently executed by and between the parties. To have the
“On May 19, 1997, [respondent] Rizalino Uy filed a Manifestation requesting that the cases force of law between the parties, it must comply with the requisites and principles of
be terminated and closed, stating that the judgment award as computed had been complied contracts. Upon the parties, it has the effect and the authority of res judicata, once entered
with to the satisfaction of [petitioners]. Said Manifestation was also signed by the eight (8) into.
[petitioners]. Together with the Manifestation is a Joint Affidavit dated May 5, 1997 of
[petitioners], attesting to the receipt of payment from [respondent] and waiving all other
benefits due them in connection with their complaint. When a compromise agreement is given judicial approval, it becomes more than a contract
binding upon the parties. Having been sanctioned by the court, it is entered as a
determination of a controversy and has the force and effect of a judgment. It is immediately
“On June 3, 1997, [petitioners] filed an Urgent Motion for Issuance of Writ of Execution executory and not appealable, except for vices of consent or forgery. The nonfulfillment of
wherein they confirmed that each of them received P40,000 from [respondent] on May 2, its terms and conditions justifies the issuance of a writ of execution; in such an instance,
1997. execution becomes a ministerial duty of the court.
General Rule: Article 2040 of the Civil Code does not refer to the validity of a compromise “The settlement shall be approved by the Labor Arbiter after being satisfied that it was
agreement entered into after final judgment. Moreover, an important requisite, which is lack voluntarily entered into by the parties and after having explained to them the terms and
of knowledge of the final judgment, is wanting in the present case. consequences thereof.

Exceptions: The issue involving the validity of a compromise agreement notwithstanding a “A compromise agreement entered into by the parties not in the presence of the Labor
final judgment is not novel. Jesalva v. Bautista upheld a compromise agreement that Arbiter before whom the case is pending shall be approved by him, if after confronting the
covered cases pending trial, on appeal, and with final judgment. The Court noted that Article parties, particularly the complainants, he is satisfied that they understand the terms and
2040 impliedly allowed such agreements; there was no limitation as to when these should conditions of the settlement and that it was entered into freely and voluntarily by them and
be entered into. Palanca v. Court of Industrial Relations sustained a compromise the agreement is not contrary to law, morals, and public policy.”51
agreement, notwithstanding a final judgment in which only the amount of back wages was
left to be determined. The Court found no evidence of fraud or of any showing that the This provision refers to proceedings in a mandatory/conciliation conference during the initial
agreement was contrary to law, morals, good customs, public order, or public policy. stage of the litigation. Such provision should be made applicable to the proceedings in the
Gatchalian v. Arlegui upheld the right to compromise prior to the execution of a final pre-execution conference, for which the procedure for approving a waiver after final
judgment. The Court ruled that the final judgment had been novated and superseded by a judgment is not stated. There is no reason to make a distinction between the proceedings in
compromise agreement. Also, Northern Lines, Inc. v. Court of Tax Appeals recognized the mandatory/conciliation and those in pre-execution conferences.
right to compromise final and executory judgments, as long as such right was exercised by
the proper party litigants.

There is no justification to disallow a compromise agreement, solely because it was entered


into after final judgment. The validity of the agreement is determined by compliance with the
requisites and principles of contracts, not by when it was entered into. As provided by the
law on contracts, a valid compromise must have the following elements: (1) the consent of
the parties to the compromise, (2) an object certain that is the subject matter of the
compromise, and (3) the cause of the obligation that is established.

The principle of novation supports the validity of a compromise after final judgment.
Novation, a mode of extinguishing an obligation,43 is done by changing the object or
principal condition of an obligation, substituting the person of the debtor, or surrogating a
third person in the exercise of the rights of the creditor.44
For an obligation to be extinguished by another, the law requires either of these two
conditions: (1) the substitution is unequivocally declared, or (2) the old and the new
obligations are incompatible on every point.45 A compromise of a final judgment operates
as a novation of the judgment obligation, upon compliance with either requisite.46 In the
present case, the incompatibility of the final judgment with the compromise agreement is
evident, because the latter was precisely entered into to supersede the former.
2) WAIVER OF QUITCLAIMS. The presence or the absence of counsel when a waiver is
executed does not determine its validity. There is no law requiring the presence of a counsel
to validate a waiver. The test is whether it was executed voluntarily, freely and intelligently;
and whether the consideration for it was credible and reasonable. Where there is clear proof
that a waiver was wangled from an unsuspecting or a gullible person, the law must step in to
annul such transaction.

In the present case, petitioners failed to present any evidence to show that their consent
had been vitiated.

“Should the parties arrive at any agreement as to the whole or any part of the dispute, the
same shall be reduced to writing and signed by the parties and their respective counsel, or
authorized representative, if any,50 before the Labor Arbiter.