Tiu v. Platinum Plans Phil.
REITERATIONFacts
The Antecedents: Petitioner Daisy B. Tiu was initially employed by respondent Platinum Plans Philippines, Inc. (a domestic corporation engaged in the pre-need industry) as its Division Marketing Director from 1987 to 1989. Respondent re-hired petitioner on January 1, 1993, as Senior Assistant Vice-President and Territorial Operations Head for its Hongkong and Asean operations, with a five-year employment contract. Petitioner stopped reporting for work on September 16, 1995, and subsequently became the Vice-President for Sales of Professional Pension Plans, Inc., a competitor in the pre-need industry. Procedural History: Respondent sued petitioner for damages, alleging breach of the non-involvement clause in her contract, which stipulated that for two years after separation, she shall not engage in any corporation directly or indirectly involved in the same pre-need industry. The clause also stipulated ₱100,000.00 as liquidated damages for any breach. The Regional Trial Court (RTC) of Pasig City, Branch 261, ruled in favor of the respondent, ordering petitioner to pay ₱100,000.00 as liquidated damages. The Court of Appeals (CA) affirmed the RTC decision, upholding the validity of the non-involvement clause. Petitioner's motion for reconsideration was denied. The Petition: Petitioner elevated the case to the Supreme Court via certiorari, arguing that the CA erred in sustaining the validity of the non-involvement clause as it is void for being offensive to public policy, and in sustaining the award of liquidated damages as it is excessive, iniquitous, or unconscionable.
Issue(s)
Whether the non-involvement clause in the petitioner's contract of employment is valid and enforceable. Whether the award of liquidated damages is excessive, iniquitous, or unconscionable.
Ruling
The petition is DENIED for lack of merit. The Decision of the Court of Appeals affirming the trial court's ruling is AFFIRMED.
Ratio Decidendi
On the validity of the non-involvement clause: The Supreme Court reiterated that a non-involvement clause is not necessarily void for being in restraint of trade, provided there are reasonable limitations as to time, trade, and place. In this case, the clause had a two-year time limit from the termination of employment and was limited to engaging in any pre-need business akin to the respondent's. The Court found these limitations reasonable, especially considering the petitioner's high-ranking position as Senior Assistant Vice-President and Territorial Operations Head, which gave her access to confidential marketing strategies. Allowing her to join a rival business soon after separation would make the respondent's trade secrets vulnerable in a competitive market. Therefore, the clause was deemed not contrary to public welfare and not greater than necessary for fair and reasonable protection of the respondent. The Court also invoked Article 1306 of the Civil Code, stating that parties may establish stipulations not contrary to law, morals, good customs, public order, or public policy, and Article 1159, which provides that obligations arising from contracts have the force of law between the parties and must be complied with in good faith. Since the clause was not contrary to public policy, it had the force of law between the parties. On the award of liquidated damages: The Court affirmed the trial court's and CA's award of ₱100,000.00 as liquidated damages for the breach of the non-involvement provision. The Court noted that while it has equitably reduced liquidated damages in certain cases, it could not do so here because the petitioner had not shown the least intention to fulfill the non-involvement clause in good faith from the start. The breach itself, coupled with the petitioner's immediate employment with a competitor, justified the imposition of the stipulated liquidated damages.
Main Doctrine
A non-involvement clause in a contract of employment is valid and enforceable if it contains reasonable limitations as to time, trade, and place, and is not greater than what is necessary to afford fair and reasonable protection to the employer.