Case Summary (G.R. No. L-40367-69)
Procedural History
• RTC Pasig, Branch 261: Respondent sued for breach of the non-involvement clause, claiming P100,000 liquidated damages, moral and exemplary damages, and attorney’s fees. The trial court awarded only the agreed P100,000.
• Court of Appeals (January 20, 2004): Affirmed the RTC decision and denied petitioner’s motion for reconsideration (May 4, 2004).
• Supreme Court: Petitioner filed a petition for certiorari seeking reversal of the non-involvement clause’s validity and the P100,000 award.
Issue
Whether a two-year non-involvement clause in a five-year employment contract, with a P100,000 liquidated damages provision, is valid and enforceable under the 1987 Constitution and Civil Code principles on freedom of contract and public policy.
Facts
• Petitioner ceased reporting for work on September 16, 1995, and in November 1995 joined a competing pre-need corporation.
• The clause at issue provided that, during employment and for two years thereafter, the employee would not “engage in or be involved with any … entity … in the same pre-need industry,” with P100,000 as liquidated damages for breach.
Parties’ Contentions
• Petitioner: The restriction was broader than necessary, prejudiced her only line of work, lacked any direct investment in her training, and thus offended public policy.
• Respondent: The clause was reasonable in time and scope, necessary to protect confidential marketing strategies to which petitioner had access, and was freely negotiated.
Supreme Court Analysis
• Precedents: Ferrazzini v. Gsell (1916) and G. Martini, Ltd. v. Glaiserman (1918) struck down overly broad restraints; Del Castillo v. Richmond (1924) and Consulta v. Court of Appeals (2005) upheld restraints limited in time, place, or trade.
• Civil Code: Article 1306 allows stipulations not contrary to law or public policy; Article 1159 holds that contractual obligations have the force of law.
• Reasonable
Case Syllabus (G.R. No. L-40367-69)
Procedural History
- Regional Trial Court (Pasig City, Branch 261) rendered judgment on February 28, 2002 in an action for damages, ordering Daisy B. Tiu to pay Platinum Plans Philippines, Inc. ₱100,000.00 as liquidated damages for breach of the non-involvement clause and denying attorney’s fees for lack of evidence.
- The Court of Appeals, in CA-G.R. CV No. 74972, affirmed the RTC decision on January 20, 2004, and denied petitioner’s motion for reconsideration by Resolution dated May 4, 2004.
- Petitioner filed a petition for certiorari before the Supreme Court, raising questions on the validity of the non-involvement clause and the nature and amount of liquidated damages.
Parties and Contractual Relationship
- Respondent: Platinum Plans Philippines, Inc., a domestic corporation engaged in the pre-need industry.
- Petitioner: Daisy B. Tiu, initially Division Marketing Director (1987–1989), later re-hired on January 1, 1993 as Senior Assistant Vice-President and Territorial Operations Head for Hong Kong and ASEAN.
- Employment contract valid for five years, containing a non-involvement (restraint-of-trade) clause with stipulated liquidated damages of ₱100,000.00.
Non-Involvement Clause
- Clause 8 (“Non Involvement Provision”) provided:
- During employment and for two years after separation, employee shall not, directly or indirectly, engage in any corporation or entity in the same pre-need industry.
- Breach renders the employee liable for ₱100,000.00 as liquidated damages.
Facts Constituting Breach
- On September 16, 1995, petitioner ceased reporting for work without prior notice.
- In November 1995, petitioner accepted the position of Vice-President for Sales at Professional Pension Plans, Inc., a direct competitor in the