Pentagon Steel v.
CA compromise is not admissible in evidence under Section 27, Rule 130 of the Rules
FACTS:
1. The petitioner, a corporation engaged in the manufacture of G.I. wire and nails,
employed respondent Perfecto Balogo (the respondent) in its wire drawing
department. The petitioner alleged that the respondent absented himself from
work on August 7, 2002 without giving prior notice of his absence. As a result,
the petitioner sent him a letter by registered mail dated August 12, 2002, written
in Filipino, requiring an explanation for his absence. The petitioner sent another
letter to the respondent on August 21, 2002, also by registered mail, informing
him that he had been absent without official leave (AWOL) from August 7, 2002
to August 21, 2002. Other letters were sent to the respondent by registered mail,
all pointing out his absences; however, the respondent failed to respond. Thus, the
petitioner considered him on AWOL from August 7, 2002
2. Respondent then filed a complaint with the Arbitration Branch of the NLRC for
underpayment/nonpayment of salaries and wages, overtime pay, holiday pay,
service incentive leave, 13th month pay, separation pay, and ECOLA alleging that
he contracted flu associated with diarrhea and suffered loose bowel movement
due to the infection. The respondent maintained that his illness had prevented him
from reporting for work for ten (10) days. When the respondent finally reported
for work on August 17, 2002, the petitioner refused to take him back despite the
medical certificate he submitted.
3. During the conciliation proceedings on October 9, 2002, the respondent presented
the medical certificate covering his period of absence. The petitioner required
him, however, to submit himself to the company physician to determine whether
he was fit to return to work in accordance with existing policies. According to
petitioner, the respondent refused to return to work and insisted that he be paid his
separation pay. the respondent formally amended his complaint to include his
claim of illegal dismissal
4. LA held dismissed the claim of illegal dismissal and found that no dismissal took
place.
5. NLRC found that respondent was illegally dismissed ruling that abandonment has
no legal basis since there was no clear intent on the respondents part to sever the
employer-employee relationship. The NLRC found it difficult to accept the
petitioners allegation that the respondent absented himself for unknown reasons;
this kind of action is inconsistent with the respondents 23 years of service and
lack of derogatory record during these years
6. The CA held that the respondent was constructively dismissed when the petitioner
repeatedly refused to accept the respondent back to work despite the valid medical
reason that justified his absence from work. The CA concluded that the
respondent complied with the petitioners directive to submit a written explanation
when the former presented the medical certificate to explain his absences.
7. The petitioner contends that the CA cannot use the parties actions and/or
agreements during the negotiation for a compromise agreement as basis for the
conclusion that the respondent was illegally dismissed because an offer of
of Court.
Issue1: whether or not respondent abandoned his job.
HELD: Respondent did not abandon his job
First, the respondent had a valid reason for absenting himself from work. The
respondent presented a medical certificate from his doctor attesting to the fact that he
was sick with flu associated with diarrhea or loose bowel movement which prevented
him from reporting for work for 10 days. The petitioner never effectively refuted the
respondents reason for his absence. Second, there was no clear intention on the
respondents part to sever the employer-employee relationship. Considering that
intention is a mental state, the petitioner must show that the respondents overt acts
point unerringly to his intent not to work anymore. That abandonment is negated finds
support in a long line of cases where the immediate filing of a complaint for illegal
dismissal was coupled with a prayer for reinstatement; the filing of the complaint for
illegal dismissal is proof enough of the desire to return to work.
The prayer for reinstatement, as in this case, speaks against any intent to sever the
employer-employee relationship. We additionally take note of the undisputed fact that
the respondent had been in the petitioners employ for 23 years. Prior to his dismissal,
the respondents service record was unblemished having had no record of infraction of
company rules. abandonment after the respondents long years of service and the
consequent surrender of benefits earned from years of hard work are highly unlikely.
Under the given facts, no basis in reason exists for the petitioners theory that the
respondent abandoned his job.
Issue2: Whether or not the actions or agreements of the parties during the
compromise agreement could be used as evidence?
Held: NO. The correct reason for the CAs error in considering the actions and
agreements during the conciliation proceedings before the labor arbiter is Article 233
of the Labor Code which states that information and statements made at conciliation
proceedings shall be treated as privileged communication and shall not be used as
evidence in the Commission. Conciliators and similar officials shall not testify in any
court or body regarding any matters taken up at conciliation proceedings conducted
by them.
In the present case, we find that the CA did indeed consider the statements the parties
made during conciliation; thus, the CA erred by considering excluded materials in
arriving at its conclusion. The reasons behind the exclusion are two-fold.
First, since the law favors the settlement of controversies out of court, a person is
entitled to buy his or her peace without danger of being prejudiced in case his or her
efforts fail; hence, any communication made toward that end will be regarded as
privilege indeed, if every offer to buy peace could be used as evidence against a person
who presents it, many settlements would be prevented and unnecessary litigation would
result, since no prudent person would dare offer or entertain a compromise if his or her
compromise position could be exploited as a confession of weakness.

Second, offers for compromise are irrelevant because they are not intended as
admissions by the parties making them. A true offer of compromise does not, in legal
contemplation, involve an admission on the part of a defendant that he or she is legally
liable, or on the part of a plaintiff, that his or her claim is groundless or even doubtful,
since it is made with a view to avoid controversy and save the expense of litigation. It
is the distinguishing mark of an offer of compromise that it is made tentatively,
hypothetically, and in contemplation of mutual concessions

While we agree with the petitioner that the CA should not have considered the
agreements and/or statements made by the parties during the conciliation proceedings,
the CAs conclusion on illegal dismissal, however, was not grounded solely on the
parties statements during conciliation, but was amply supported by other evidence on
record. Based on these other pieces of evidence, the respondent was illegally dismissed;
hence, our ruling regarding the statement made during conciliation has no effect at all
on our final conclusion.