Case Digest (G.R. No. 13228)
Facts:
William Ollendorff v. Ira Abrahamson, G.R. No. 13228. September 13, 1918, the Supreme Court En Banc, Fisher, J., writing for the Court.
Plaintiff-appellee William Ollendorff was, and for a long time had been, engaged in Manila and elsewhere in the Philippine Islands in manufacturing ladies' embroidered underwear for export; he imported materials, selected and supplied designs, and contracted some fifteen thousand home embroiderers and eight hundred factory workers who worked exclusively for him. Plaintiff's business involved substantial investment (about two and a half million pesos) and relied on home-based needle workers who embroidered designs later finished in plaintiff's Manila factory.
On September 10, 1915, plaintiff and defendant Ira Abrahamson executed a written employment contract whereby defendant agreed to serve plaintiff for two years (commencing September 6, 1915) at P50 per week, to devote his entire time and energies to plaintiff's business, and, inter alia, bound himself, his heirs, successors and assigns not to "enter into or engage ... directly or indirectly ... in a similar or competitive business ... anywhere within the Philippine Islands for a period of five years from this date." The agreement also contained a clause permitting plaintiff to terminate defendant for failure to perform "to the satisfaction" of plaintiff.
Defendant worked for plaintiff until April 1916, when he left due to ill health and went to the United States. While employed, defendant had access to all parts of plaintiff's establishment and learned plaintiff's business methods and connections. Several months later defendant returned to Manila as local manager of a corporation (referred to in the record as the Philippine Underwear Company and elsewhere as the Philippine Embroidery Company). That firm did not maintain a local factory but sent material and designs from New York to its local representative, who engaged Filipino needle workers to do home embroidery and finish garments; it produced the same class of goods for the same export market, and defendant admitted the firms "put out the same class of goods" and that some of plaintiff's needle workers were employed by the firm now managed by defendant.
Plaintiff sued to enjoin defendant's continued employment and activity as violating the five-year non‑competition covenant. The Court of First Instan...(Subscriber-Only)
Issues:
- Did defendant breach the covenant not to engage in a similar or competitive business within five years of the contract?
- Is the covenant void for lack of mutuality because plaintiff retained the right to terminate the contract at will?
- Is the covenant an unreasonable restraint of trade and therefore void as contrary to public order?
- May a court grant injunctive relief to enforce a negative covenant absent proof of estimable pecuniary damage ...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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