Rolando Rivera vs Solidbank Corporation

GR No. 163269; 19 April 2006

Callejo, Sr., J.

Petitioner Rivera was employed by respondent Solidbank for 18 years when he decided to avail of the
Special Retirement Program (SRP) to devote his time to his poultry business. Under SRP, petitioner
received net amount of Php 963,619.29. Solidbank further required petitioner to sign the ff:

1. Release, Waiver and Quitclaim where he acknowledged receipt of retirement benefits and
promised not to engage in any unlawful activity prejudicial to Solidbank and disclose information
on operations or data of said bank, and;
2. Undertaking where he is prohibited from accepting any kind of employment in any competitor
bank/financial institution within 1 year from 28 Feb 1995.

In case of breach, the petitioner may be sued for damages and may be compelled to the return of
monetary benefits paid to him under SRP among other things.

On 1 May 1995, Equitable Bank employed petitioner as Manager of Credit Investigation and Appraisal
Division, a position he held previously in Solidbank. On 19 May 1995, Solidbank informed petitioner that
he violated the Undertaking and demanded the return of all monetary benefits. However, petitioner
refused. Solidbank then filed a complaint and asked for a summary judgment before RTC Manila for
breach of contract.

Petitioner argued that the employment ban in the Undertaking was void for being unreasonable and
oppressive. He alleged that contrary to his expectations, his poultry business income was not sufficient to
support his family, thus forcing him to find a job in the only field where he was qualified – banking.
Solidbank maintained that the Undertaking is a management prerogative to protect the bank from unfair
competition and disclosure of trade secrets; and that it is valid because the petitioner voluntarily signed it.

RTC and CA ruled in favor of Solidbank saying that petitioner can no longer assail the employment ban
because he signed the Undertaking and received his benefits under SRP already. Hence, this petition.

ISSUES:
1. Whether the contract of restraint (employment ban) in the Undertaking is unreasonable and oppressive
hence contrary to public policy;
2. Whether petitioner is liable to return Php 963,619.29 in retirement benefits plus interest

RULING: The petition is granted. The case is remanded to RTC Manila for further proceedings.

1. Unreasonableness still needs to be determined because evidence is lacking. In this case, the issue of
whether employment ban is contrary to public policy is a genuine issue of fact that requires parties to
present evidence to support their respective claims. However, the SC held that granting of the summary
judgment foreclosed the presentation of evidence on whether the ban is unreasonable.

Art. 1306 provides that a contract is the law between the parties and courts have no choice but to enforce
such contract as long as it is not contrary to law, morals, good customs or public policy.
It is essential for the employer to prove that the employment ban is reasonable and not greater than
necessary to protect the employer’s business interests. Likewise, it may not be harsh or oppressive in
curtailing the employee’s legitimate efforts to earn a livelihood and must be reasonable in light of sound
public policy.

In determining whether a contract is reasonable, the trial court should consider the following: whether
a. the covenant protects a legitimate business interest of the employer;
b. the covenant creates undue burden on the employee;
c. the covenant is injurious to the public welfare;
d. the time and territorial limitations contained in the covenant are reasonable;
e. the restraint is reasonable from public policy’s standpoint

2. No, petitioner is not liable to return the amount. The Undertaking contained a broad and
comprehensive “cause of action for protection in the courts of law”. The SC ruled that actual or
compensatory damages in breach of contracts may be awarded if offended party provides competent proof
that it suffered damages and the actual amount of losses. Thus, in this case, even if employment ban is
valid and there was breach of contract, restitution of said amount is not automatic since the respondent
still has to prove that it suffered damages and is entitled to the amount of Php 963, 619.28.

> Retirement plans must be liberally construed in favor of the employee since retirement benefits, a
form of reward for being loyal to the employer, are intended to help the employee enjoy the remaining
years of his life without worrying for his financial support.

> Summary Judgment may be granted if there are no disputed material facts and/or if evidence
presented to the court supports only one interpretation. Two requisites that must be established:
a. there is no genuine issue as to any material fact, except on amount of damages;
b. the party presenting for summary judgment is entitled to such as matter of law

Limitless Potentials, Inc. (LPI) vs Hon. Reinato Quilala

GR No. 157931; 15 July 2005
Callejo, Sr., J.

On 14 November 1989, an Amendment to an Agreement dated 20 October 1987 was executed whereby
the Roman Catholic Archbishop of Manila (RCAM) leased to petitioner Limitless Potentials, Inc. (LPI)
certain lots including Lot 28-B for advertising purposes for Php12,000/month from 1 February 1990 to 1
March 1997.

On 18 January 1990, LPI as sublessor, and ASTRO as sublessee, executed a Sublease Agreement whereby
LPI sublet Lot 28-B from 1 February 1990 to 1 February 1995 in which ASTRO would directly pay
monthly rentals to RCAM. LPI and ASTRO paid monthly rentals to RCAM until August and July 1993,
respectively. LPI was not credited the rental payments made by ASTRO.

On 28 September 1993, RCAM and LPI executed a Memorandum of Agreement (MOA) which expressly
cancelled their prior agreements. In this MOA, RCAM leased to LPI from 1 August 1993 to 31 July 1997
the areas subject of the lease agreement, including those sublet to ASTRO, for Php60,783.96/month.
Further, the parties agreed that if lease were to be extended, LPI would pay Php97,084.15/month.
When the lease to ASTRO expired in February 1995, instead of turning over the areas to LPI, RCAM
leased them to Macgraphics Carranz International Corporation (MCIC). In a letter dated 11 February
1995, LPI informed MCIC that it was the lessee of the premises and demanded to remove billboards
within 24 hours. However, MCIC ignored such leter.

On 12 October 1995, RCAM informed LPI that the MOA is considered rescinded as LPI violated the
MOA due to: 1. Non-payment of rentals since March 1995; 2. Misuse of property since November 1994;
and 3. Causing of inconvenience, disturbance and nuisance. RCAM also demanded payment of back
rentals and ordered LPI to vacate the property.

On 19 October 1995, LPI filed a complaint against RCAM for consignation of P300,000.00 as back
rentals with writ of preliminary injunction and TRO; and counterclaims. LPI alleged that it should be
credited for the rental payments of ASTRO to RCAM from February 1990 to February 1995. ( This was
later on dismissed.)

Still unaware of complaint, RCAM demanded LPI to pay its back rentals including ASTRO’s and
damages. Thereafter, on 13 November 1995, RCAM filed an unlawful detainer against LPI befor MTC
Makati docketed as Civil Case No. 50450. LPI averred that since ASTRO’s payment to RCAM was
credited to LPI during the second lease period (from 1 August 1993 to 1 February 1995), ASTRO’s rental
payments in the first period (1 February 1990 to 1 August 1993) should also be credited and deducted
from its accountability in the March to October 1995 period. The MTC that first period payment of sublet
rentals should not be credited to LPI since it is considered a donation to RCAM and such is a stipulation
pour autrui.

The RTC ruled that LPI should be credited the first period payment rentals should be credited to LPI.

CADIZ