Facts:

This case involves the petitioner, Daisy B. Tiu, and the respondent, Platinum Plans Philippines, Inc. The litigation originates from a contractual dispute regarding a non-involvement clause in Tiu’s employment contract with the respondent. Platinum Plans is a corporation in the pre-need industry, and Tiu had a history with the company, initially serving as Division Marketing Director from 1987 to 1989, before being re-hired in 1993 as Senior Assistant Vice-President and Territorial Operations Head, which made her responsible for the company's operations in Hong Kong and the ASEAN region. The employment relationship commenced again with a five-year contract that included a non-involvement provision prohibiting her from engaging with any competitor in the same industry for two years after leaving the company. On September 16, 1995, Tiu stopped reporting for work and, by November of that same year, began working with Professional Pension Plans, Inc., a competing company in the

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Facts:

Employment History and Rehiring

• Daisy B. Tiu initially worked as the Division Marketing Director for Platinum Plans Philippines, Inc. from 1987 to 1989.
• On January 1, 1993, petitioner was re-hired by respondent as Senior Assistant Vice-President and Territorial Operations Head in charge of its Hongkong and Asean operations under a five-year employment contract.

Contractual Provisions and Non-Involvement Clause

• The employment contract contained a non-involvement clause which stipulated that for two (2) years following separation, the petitioner would not engage in or be involved with any entity in the same pre-need industry as the respondent.
• Violation of the clause would render the petitioner liable to liquidated damages amounting to One Hundred Thousand Pesos (P100,000.00).

Breach of Contract

• On September 16, 1995, petitioner ceased reporting for work, effectively breaching her contractual obligations.
• In November 1995, petitioner accepted employment as Vice-President for Sales of Professional Pension Plans, Inc., a rival company within the pre-need industry, thereby violating the non-involvement clause.

Initiation of Litigation

• Respondent filed an action for damages before the RTC of Pasig City, asserting that the non-involvement clause was breached and seeking various forms of damages, including P100,000 as liquidated damages.
• The trial court ruled in favor of the respondent, ordering petitioner to pay the stipulated liquidated damages, and dismissed additional claims such as moral and exemplary damages, as well as attorney’s fees due to insufficient evidence.

Court of Appeals and Subsequent Proceedings

• The Court of Appeals affirmed the trial court’s decision, emphasizing that petitioner had freely entered into the contract and was bound by all its terms.
• Petitioner’s motion for reconsideration was denied, leading to the present appeal via certiorari.

Arguments Presented by the Parties

• Petitioner contended that:
• The non-involvement clause was unenforceable because it imposed a restraint that was much greater than necessary to protect the respondent’s interests.
• The restriction was excessive given that similar practices (like transferring to a rival company) were common within the pre-need industry.
• There was no significant investment in training or professional development by the respondent, as petitioner already possessed the requisite expertise.
• The strict application of the clause effectively deprived her of the opportunity to engage in the only field in which she was skilled.
• Respondent argued that:
• The clause was valid and enforceable because it was reasonably limited in both time (two years) and scope (restricted to competitors in the pre-need industry).
• Its inclusion was necessary to protect the respondent’s confidential marketing strategies and business interests.

Precedents and Legal Principles Cited

• The decision reviewed several earlier cases regarding non-involvement or restraint clauses:
• Ferrazzini v. Gsell – where an overly broad five-year restraint was deemed unreasonable.
• G. Martini, Ltd. v. Glaiserman – highlighting an undue restraint by broadly prohibiting engagement in any similar business activity.
• Del Castillo v. Richmond – which upheld a similarly limited restraint clause as reasonable.
• Consulta v. Court of Appeals – supporting the enforceability of restrictions imposed by contract under Article 1306 of the Civil Code.
• Statutory backing was provided through:
• Article 1306 – which allows parties to mutually agree on stipulations provided they are not contrary to law, morals, good customs, public order, or public policy.
• Article 1159 – reinforcing the binding nature of contractual obligations when entered in good faith.
• Articles 2226 and 2227 – regarding the nature and equitable reduction of liquidated damages.

Final Resolution

• The Supreme Court, through the decision rendered, affirmed both the trial court and the Court of Appeals’ rulings.
• It was concluded that the non-involvement clause was neither contrary to public policy nor excessive, thus binding petitioner to pay the liquidated damages of P100,000.
• The petition for review was denied for lack of merit, and costs were imposed on the petitioner.

Issue:

Validity of the Non-Involvement Clause

• Whether the non-involvement clause, as agreed upon in the employment contract, is valid and enforceable under Philippine law.
• Whether the clause is contrary to public policy due to its restrictive impact on the petitioner’s right to engage in her chosen profession.

Reasonableness of the Restraint

• Whether the two-year restraint imposed on the petitioner is reasonable and not excessive relative to the legitimate interests of the respondent.
• Whether limiting the restriction to the pre-need industry, in which both companies operate, sufficiently balances the interests of both parties.

Impact on the Employee’s Right to Livelihood

• Whether enforcing the clause deprives the petitioner of the opportunity to engage in the only work she possesses expertise in.
• Evaluating if the petitioner’s prior experience and voluntary acceptance of the contract mitigate the restraint’s adverse effects on her career.

Justification of Liquidated Damages

• Whether the award of P100,000 as liquidated damages for breach of the non-involvement clause is justified and proportional to the breach.
• If the provision should be considered a penalty clause or an enforceable measure, given the terms agreed upon by both parties.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)