DAISY B. TIU, Petitioner vs. PLATINUM PLANS PHIL., INC., Respondent. G.R . No.
163512
February 28, 2007
FACTS: Respondent Platinum Plans Philippines, Inc. is a domestic corporation engaged in the pre-need
industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division Marketing Director. On January 1,
1993, respondent re-hired petitioner as Senior Assistant Vice-President and Territorial Operations Head
in charge of its Hongkong and Asean operations. The parties executed a contract of employment valid
for five years.
On September 16, 1995, petitioner stopped reporting for work. In November 1995, she became the
Vice-President for Sales of Professional Pension Plans, Inc., a corporation engaged also in the pre-need
industry.
Consequently, respondent sued petitioner for damages alleging, among others, that petitioner’s
employment with Professional Pension Plans, Inc. violated the non-involvement clause in her contract of
employment, to wit:
8. NON INVOLVEMENT PROVISION – The EMPLOYEE further undertakes that during his/her engagement
with EMPLOYER and in case of separation from the Company, whether voluntary or for cause, he/she
shall not, for the next TWO (2) years thereafter, engage in or be involved with any corporation,
association or entity, whether directly or indirectly, engaged in the same business or belonging to the
same pre-need industry as the EMPLOYER. Any breach of the foregoing
provision shall render the EMPLOYEE liable to the EMPLOYER in the amount of One Hundred Thousand
Pesos (P100,000.00) for and as liquidated damages.
In upholding the validity of the non-involvement clause, the trial court ruled that a contract in restraint
of trade is valid provided that there is a limitation upon either time or place. In the case of the pre-need
industry, the trial court found the two-year restriction to be valid and reasonable.
On appeal, the CA affirmed the trial court’s ruling holding that petitioner entered into the contract on
her own will and volition. Thus, she bound herself to fulfill not only what was expressly stipulated in the
contract, but also all its consequences that were not against good faith, usage, and law. The appellate
court also ruled that the stipulation prohibiting nonemployment for two years was valid and enforceable
considering the nature of respondent’s business.
ISSUE: WON the non-involvement clause is valid?
HELD: Yes. Petitioner avers that the non-involvement clause is offensive to public policy since the
restraint imposed is much greater than what is necessary to afford respondent a fair and reasonable
protection. She adds that since the products sold in the pre-need industry are more or less the same,
the transfer to a rival company is acceptable. Petitioner also points out that respondent did not invest in
her training or improvement. At the time she joined respondent, she already had the knowledge and
expertise required in the pre-need industry. Finally, petitioner argues that a strict application of the non-
involvement clause would deprive her of the right to engage in the only work she knows.
Respondent counters that the validity of a non-involvement clause has been sustained by the Supreme
Court in a long line of cases. It contends that the inclusion of the two-year non-involvement clause in
petitioner’s contract of employment was reasonable and needed since her job gave her access to the
company’s confidential marketing strategies. Respondent adds that the non-involvement clause merely
enjoined her from engaging in pre-need business akin to respondent’s within two years from
petitioner’s separation from respondent. She had not been prohibited from marketing other service
plans.
Conformably then with the aforementioned pronouncements, a noninvolvement clause is not
necessarily void for being in restraint of trade as long as there are reasonable limitations as to time,
trade, and place.
In this case, the non-involvement clause has a time limit: two years from the time petitioner’s
employment with respondent ends. It is also limited as to trade, since it only prohibits petitioner from
engaging in any pre-need business akin to respondent’s.
More significantly, since petitioner was the Senior Assistant Vice-President and Territorial Operations
Head in charge of respondent’s Hongkong and Asean operations, she had been privy to confidential and
highly sensitive marketing strategies of respondent’s business. To allow her to engage in a rival business
soon after she leaves would make respondent’s trade secrets vulnerable especially in a highly
competitive marketing environment. In sum, we find the non-involvement clause not contrary to public
welfare and not greater than is necessary to afford a fair and reasonable protection to respondent.
In any event, Article 1306 of the Civil Code provides that parties to a contract may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or public policy.
Article 1159 of the same Code also provides that obligations arising from contracts have the force of law
between the contracting parties and should be complied with in good faith. Courts cannot stipulate for
the parties nor amend their agreement where the same does not contravene law, morals, good
customs, public order or public policy, for to do so would be to alter the real intent of the parties, and
would run contrary to the function of the courts to give force and effect thereto. Not being contrary to
public policy, the non-involvement clause, which petitioner and respondent freely agreed upon, has the
force of law between them, and thus, should be complied with in good faith.
Thus, as held by the trial court and the Court of Appeals, petitioner is bound to pay respondent
P100,000 as liquidated damages. While we have equitably reduced liquidated damages in certain cases,
we cannot do so in this case, since it appears that even from the start, petitioner had not shown the
least intention to fulfill the non-involvement clause in good faith.
