35. Philippine Carpet Manufacturing Corp vs.
quitclaim is not a bar to the pursuit of illegal
Ignacio Tagyamon
Doctrine The law looks with disfavor upon quitclaims
and releases by employees pressured into signing by
unscrupulous employers minded to evade legal
responsibilities.—As the ground for termination of
employment was illegal, the quitclaims are deemed
illegal as the employees’ consent had been vitiated by
mistake or fraud. The law looks with disfavor upon
quitclaims and releases by employees pressured into
signing by unscrupulous employers minded to evade
legal responsibilities. The circumstances show that
petitioner’s misrepresentation led its employees,
specifically respondents herein, to believe that the
company was suffering losses which necessitated the
implementation of the voluntary retirement and
retrenchment programs, and eventually the execution
of the deeds of release, waiver and quitclaim.
FACTS:
Petitioner Philippine Carpet Manufacturing
Corporation (PCMC) is a corporation registered in
the Philippines engaged in the business of
manufacturing wool and yarn carpets and
rugs.4 Respondents were its regular and
permanent employees, but were affected by
petitioner’s retrenchment and voluntary
retirement programs. The alleged reason of PCMC
for such action was because of less demand in the
market of their products due to the un-
competitiveness of their price
On March 15, 2004, Tagyamon, Luna, Badayos,
Dela Cruz, and Comandao, received a uniformly
worded Memorandum of dismissal stating that
they are going to be retrenched because of the
slump in market demand. As to Marcos, Ilao, and
Nemis, they claimed that they were dismissed
effective March 31, 2004, together with fifteen (15)
other employees on the ground of lack of
market/slump in demand. Due to what happened
in September 11(world trade center bombing) and
the war in the middle east. PCMC, however,
claimed that they availed of the company’s
voluntary retirement program and, in fact,
voluntarily executed their respective Deeds of
Release, Waiver, and Quitclaim. Thus, they filed a
complaint for illegal dismissal against PCMC, Mr.
Patricio Lim and Mr. David Lim. These cases were
later consolidated.
Respondents: Relied on the ruling in Philippine
Carpet Employees Association (PHILCEA) v. Hon.
Sto. Tomas as to the validity of the company’s
retrenchment program. They further explained
that PCMC did not, in fact, suffer losses shown by
its acts prior to and subsequent to their
termination. They also insisted that their
acceptance of separation pay and signing of
dismissal case.
PCMC contends that Retrenchment was a
necessary management prerogative. Petitioners
also stressed that respondents belatedly filed
their complaint as they allowed almost three
years to pass making the principle of laches
applicable. Considering that respondents accepted
their separation pay and voluntarily executed
deeds of release, waiver and quitclaim, PCMC
invoked the principle of estoppel on the part of
respondents to question their separation from the
service. Finally, as to Marcos, Ilao and Nemis, PCMC
emphasized that they were not dismissed from
employment, but in fact they voluntarily retired
from employment to take advantage of the
company’s program
LA: DISMISSED. Respondents voluntarily opted to
retire, were subsequently hired on a contractual
basis, terminated, and were paid separation
benefits. The filing of the illegal dismissal case was
a mere afterthought designed primarily for
respondents to collect more money, taking
advantage of the 2006 Supreme Court decision.
NLRC: AFFIRMED LA. It emphasized the
application of the principle of laches for
respondents’ inaction for an unreasonable
period. CA: REVERSED. The case was instituted
prior to the expiration of the prescriptive
period set by law which is four years. It
stressed that said principle cannot be invoked
earlier than the expiration of the prescriptive
period. Citing the Court’s decision in the Philcea
case, the CA applied the doctrine of stare decisis, in
view of the similar factual circumstances of the
cases. As to Ilao, Nemis and Marcos, while
acknowledging their voluntary resignation, the CA
found the same not a bar to the illegal dismissal
case because they did so on the mistaken belief
that PCMC was losing money
ISSUE:
1. Whether laches has barred the action –
NO, it was filled within the 4 year
prescriptive period set by the civil code
2. Whether Stare Decisis applies - NO
3. Whether or not the quitclaim is valid –
NO.
RATIO:
1. Laches is the failure or neglect for an
unreasonable and unexplained length of
time to do that which by exercising due
diligence, could or should have been done
earlier, thus, giving rise to a presumption
that the party entitled to assert it either
has abandoned or declined to assert it.
 Where the claim was filed within the [four-
year] statutory period, recovery therefore
cannot be barred by laches. Courts should
never apply the doctrine of laches earlier
than the expiration of time limited for the
commencement of actions at law."
An action for reinstatement by reason
of illegal dismissal is one based on an
injury to the complainants’ rights
which should be brought within four
years from the time of their dismissal
pursuant to Article 1146 of the Civil
Code. Respondents’ complaint filed
almost 3 years after their alleged
illegal dismissal was still well within
the prescriptive period. Laches cannot,
therefore, be invoked yet. To be sure,
laches may be applied only upon the most
convincing evidence of deliberate
inaction, for the rights of labourers are
protected under the social justice
provisions of the Constitution and under
the Civil Code.
a. NOTE: NCC says within 4 years
but according to the LC
prescription is 3 years (so I guess
the court interprets 3 years as
x<4.
2. Under the doctrine of stare decisis, when a
court has laid down a principle of law as
applicable to a certain state of facts, it will
adhere to that principle and apply it to all
future cases in which the facts are
substantially the same, even though the
parties may be different. Where the facts
are essentially different, however, stare
decisis does not apply, for a perfectly
sound principle as applied to one set of
facts might be entirely inappropriate
when a factual variant is introduced.
This case and the Philcea case involve the
same period which is March to April
2004; the issuance of Memorandum to
 rank-and-file employees does not make
employees informing them of the
implementation of the cost reduction
program; the implementation of the
voluntary retirement program and
retrenchment program, except that this
case involves different employees; the
execution of deeds of release, waiver, and
quitclaim, and the acceptance of
separation pay by the affected employees.
a. The employees in the Philcea
case involved union members in
relation to retrenchment, while
in this case it involved employees
who were designed to take the
early retirement due to their
being misled that the company
was suffering financial loses,
however SGV found that
Philippine Carpet actually
ordered 20,000,000 worth of
machineries, hired 100 new
employees 3 months after they
laid off or allegedly retrenched
the workers and declared a 30.00
peso dividend per share to the
stockholders. This clearly
indicates that there was no
financial loss (again stare decisis
does not apply in this case
because the parties are diff, here
they were led to take early
retirement, and in the other case,
they were retrenched.)
3. The law looks with disfavor upon
quitclaims and releases by employees
pressured into signing by unscrupulous
employers minded to evade legal
responsibilities.—As the ground for
termination of employment was illegal,
the quitclaims are deemed illegal as the
employees’ consent had been vitiated by
mistake or fraud. The law looks with
disfavor upon quitclaims and releases by
employees pressured into signing by
unscrupulous employers minded to evade
legal responsibilities. The circumstances
show that petitioner’s misrepresentation
led its employees, specifically
respondents herein, to believe that the
company was suffering losses which
necessitated the implementation of the
voluntary retirement and retrenchment
programs, and eventually the execution of
the deeds of release, waiver and quitclaim.
Economic necessity constrained
respondents to accept petitioners’
monetary offer and sign the deeds of
release, waiver and quitclaim. That
respondents are supervisors and not
them less susceptible to financial offers,
faced as they were with the prospect of
unemployment. The Court has allowed
supervisory employees to seek payment
of benefits and a manager to sue for illegal
dismissal even though, for a

consideration, they executed deeds of
quitclaims releasing their employers from
liability.

WHEREFORE, premises considered, the
petition is hereby DENIED. The Court of
Appeals Decision dated July 7, 2009 and
Resolution dated February 26, 2010 in
CA-G.R. SP No. 105236 are AFFIRMED.