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  • 043 - Heirs of Teodolo Cruz V CIR

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    The union president and board entered into an unfair settlement with the employer without authorization from union members. The court ruled the settlement void because union-member relations require fair dealing in a fiduciary capacity. Specifically: 1) The union members were not properly consulted and the settlement amount was unconscionably low compared to their claims. 2) The union leadership did not have express authority to settle from members. 3) By accepting an unfair deal, the union leadership failed in its duty to secure fair wages for members.

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    043 - Heirs of Teodolo Cruz v CIR

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    The union president and board entered into an unfair settlement with the employer without authorization from union members. The court ruled the settlement void because union-member relations require fair dealing in a fiduciary capacity. Specifically: 1) The union members were not properly consulted and the settlement amount was unconscionably low compared to their claims. 2) The union leadership did not have express authority to settle from members. 3) By accepting an unfair deal, the union leadership failed in its duty to secure fair wages for members.

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    72 views2 pages

    043 - Heirs of Teodolo Cruz V CIR

    Uploaded by

    Patrick Manalo
    The union president and board entered into an unfair settlement with the employer without authorization from union members. The court ruled the settlement void because union-member relations require fair dealing in a fiduciary capacity. Specifically: 1) The union members were not properly consulted and the settlement amount was unconscionably low compared to their claims. 2) The union leadership did not have express authority to settle from members. 3) By accepting an unfair deal, the union leadership failed in its duty to secure fair wages for members.

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    Labor Organization; Union-Member Relations, Nature of Relationship - #43

    Heirs of Teodolo M. Cruz v. CIR (1969)

    Doctrine: The Union President and the Union Board of Directors entered into a compromise agreement with the
    employer-firm under grossly disadvantageous terms without authorization from the Union and its members. Court
    ruled the settlement void, and held that union-member relations are fiduciary in nature and must be attended by
    fair dealing.

    Facts:
    - Santiago Labor Union, whose members are employees of Santiago Rice Mill, filed before respondent Court
    of Industrial Relations a petition for overtime pay, premium pay and for reinstatement of workers illegally
    laid off.
    - CIR dismissed the petition for lack of merit and want of jurisdiction. On MR, the CIR en banc reversed the
    decision and ordered Santiago Rice Mill to pay the overtime claim and to reinstate the claimants. SC
    (presumably from an appeal) affirmed the judgment and remanded the case to the CIR for enforcement.
    - The CIR chief examiner filed a Partial Report detailing the judgment award in favor of the workers totalling
    P423,756.74, and that the firms total assets only amounted to P191k. Petitioners challenged the
    computation, claiming that the correct judgment amount should be P864,756.75, and the total leviable
    assets of the Rice Mill amounted to close to P390k.
    - CIR ordered Santiago Rice Mill to deposit with the Court the amount of P100k and a surety bond worth
    P100k to guarantee payment of whatever amount the Court adjudges the petitioners be entitled to.
    - At a meeting to try to forge a compromise agreement, the Rice Mill offered P110k in full settlement of its
    obligations. Petitioners rejected this and instead counter-offered P200k. No agreement was reached.
    - Later on, an unscheduled conference was called in the chamber of the Trial Judge attended by
    representatives of the Rice Mill, and Maylem (Union President) and 8 Union Directors. The union
    representatives were not assisted by counsel. The parties agreed to settle the case with the payment of
    P110k. This settlement was immediately submitted to the trial judge on the same day, who approved the
    same, stating that “the settlement is well founded and justified and not contrary to law, morals and/or
    public policy.” It was approved despite the existence of several motions questioning the settlement.
    - Petitioner Magalpo, a union director who was not present in the conference, filed a “Manifestation and
    Objection with Ex-Parte Urgent Motion”, charging that Maylem never advised the union representatives
    that the conference was to discuss a compromise settlement, that the Board of Directors did not have any
    express authority to enter into any compromise agreement in behalf of the union, and that the amount of
    P110k is unconscionable considering that their claims amounted to more than P400k. He was joined by
    other movants.
    - Petitioners, joined by 47 other union-claimants, thus moved for CIR en banc to reconsider the trial judge’s
    approval of the settlement. This was denied.
    - Hence, this appeal.

    Issue/s:
    - WoN the Settlement is valid

    Held/Ratio:
    - NO. THE SETTLEMENT IS NOT VALID AS IT GOES AGAINST FUNDAMENTAL CONSIDERATIONS OF JUSTICE,
    EQUITY AND DUE PROCESS.
    o Petitioners were not accorded due process. The conference was made without the presence of
    petitioner’s counsel, and the settlement agreement was unilaterally drafted by the Rice Mill’s
    counsel. They were deprived of a formal conference that was originally scheduled but did not
    push through.
    o The Judge’s instant approval was attended by lack of due deliberation and caution. Despite the
    existence of challenges to the Board’s authority to enter into any compromise agreement in
    behalf of the Union and clear reason to deem the settlement amount unconscionable, the judge
    completely disregarded the same and left such petitions unacted upon.
    o The rushed approval had grave consequences to the union members. P110 would barely be
    enough to cover the attorney’s lien over the same amounting to 30% of the P400k originally
    sought alone.
    o The President and the Board did not have any express authority to execute the settlement.
    Petitioners have timely challenged the former’s authority to do the same, and union members
    themselves have repudiated Maylem and the Board for having betrayed the membership. In fact,
    the new union leadership has joined petitioners in their prayers for redress and asserts that
    union records do not show that Maylem et.al was ever given the power to settle.
    o This case is an instance where there is unfair treatment of employees by their unworthy
    leaders.
     Union-member relations require fair dealing between the union and its members,
    which is fiduciary in nature. It arises out of two factors: 1) the degree of dependence
    of the employee on the union organization; and 2) the comprehensive power vested in
    the union with respect to the individual.
     The union may be considered but the agent of its members for the purpose of securing
    for them fair and just wages.
     In the instant case, the union leadership failed to exercise its duty toward union
    members for failing to disclose to them the full situation.
    o Court thus holds that the settlement was precipitately approved without verification of the union
    board’s authority to execute the compromise settlement. The settlement agreement is therefore
    declared null and void, and the CIR is directed to execute the judgment (100k cash + 100k surety
    bond) previously rendered.

    Digested by: Oyie Javelosa (A2015)

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