TIU vs. PLATINUM PLANS PHILIPPINES G.R. No.

163512 February 28, 2007

Doctrine/Article:

Article 1159. Obligations arising from contracts have the force of law between the contracting
parties and should be complied within good faith.
Article 1306. The contracting parties 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.
Facts

Respondent Platinum Plans Philippines, Inc. is a Philippine-based company that operates

in the pre-need business sector. Petitioner Daisy B. Tiu served as the Division Marketing
Director for the company from 1987 through 1989. Petitioner was rehired by respondent on
January 1, 1993, in the capacity of Senior Assistant Vice-President and Territorial
Activities Head, with responsibility for the company's operations in Hong Kong and the Asean
region. The parties agreed to and signed a contract for employment that would be valid for a
period of five years. Petitioner failed to show up for work for the last time on September 16,
1995. It was in November of 1995 when she was promoted to the position of Vice President for
Sales at Professional Pension Plans, Inc., a company that was also active in the pre-need
business. As a direct consequence of this, respondent filed a complaint against petitioner for
damages with the Regional Trial Court of Pasig City Branch 261. Respondent said, among other
things, that the petitioner's job with Professional Pension Plans, Inc. was in violation of the non-
involvement clause in her employment contract. In its ruling that upheld the constitutionality of
the non-involvement provision, the trial court declared that a contract in restriction of
commerce is acceptable provided that there is a limitation upon either time or location. This
limitation was required for the contract to be considered legal. In the context of the pre-need
sector, the trial court determined that the two-year restriction was lawful and appropriate. The
decision of the trial court was upheld after it was appealed to the Court of Appeals. It came to
the conclusion that the petitioner had done so of her own free choice when entering into the
contract. As a result, she committed herself to fulfilling not only what was specifically
mentioned in the contract, but also all of its ramifications as long as they were not in
violation of law, good faith, or practice. Taking into consideration the nature of the
respondent's industry, the appeal court decided that the stipulation that prohibited non-
employment for a period of two years was lawful and enforceable.

Issues:

Whether the non-involvement clause is valid and enforceable.

Whether the liquidated damages stipulated are excessive and unconscionable.

Ruling:

The Supreme Court upheld the validity of the non-involvement clause, stating it was not
contrary to public welfare and was necessary to protect the company’s trade secrets.
The Court referenced Article 1306 of the Civil Code, which allows parties to establish contract
terms provided they are not contrary to law, morals, good customs, public order, or public
policy.

It also cited Article 1159, emphasizing that obligations arising from contracts must be complied
with in good faith.

The Court denied the reduction of liquidated damages, affirming the need for Tiu to fulfill the
non-involvement clause in good faith.

Gregorio Fernandez vs. The Manila Electric Railroad and Light Company G.R. No.: 38651 Date:
October 16, 1909

Doctrine:

Article 1308. The contract must bind both contracting parties; its validity or compliance cannot
be left to the will of one of them. (1256a)
Facts:

 Gregorio Fernandez, a policeman in Manila, sued the Manila Electric Railroad and Light
Company for personal injuries caused by a negligently placed electric light wire.
 The incident occurred on January 29, 1906, when Fernandez, while on duty in Calle
Gagalangin, came in contact with a wire that was loosely dangling in the street and
heavily charged with electricity.
 Fernandez sustained shocks and burns, rendering him temporarily unconscious.
 Fernandez was taken to the Civil Hospital, where two agents of the defendant company,
V. and L., went to make a settlement with him.
 After a conversation lasting about 20 minutes, Fernandez accepted a payment of P20
and signed a release absolving the defendant from further liability for the negligence.

Issue:

Whether the settlement and release are binding. If the release was obtained by fraudulent
means.

Ruling:

 The Supreme Court ruled the release binding, barring further damages.
 The rationale was based on the credibility of witnesses and the circumstances at the
time of the release.
 The Court found no evidence of fraud or incapacity to understand the release.
 The Civil Code principles, such as the validity of contracts (Art. 1308), were considered
in affirming the release’s legitimacy.

William Uy and Rodel Roxas vs. Court of Appeals, Hon. Robert Balao, and National Housing
Authority

G.R. No.: 120465

September 9, 1999

Doctrine/Related Articles:

Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.
Article 1311. Contracts take effect only between the parties, their assigns and heirs, except in
case where the rights and obligations arising from the contract are not transmissible by their
nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the
property he received from the decedent.
Article 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (1261)
Facts:

 Petitioners William Uy and Rodel Roxas, as agents, offered to sell eight parcels of land
located in Tuba, Tadiangan, Benguet to the National Housing Authority (NHA) for a
housing project.
 The NHA approved the acquisition of the lands, with an area of 31.8231 hectares, at the
cost of P23.867 million.
 However, the NHA only paid for five parcels due to a report from the Land Geosciences
Bureau of the Department of Environment and Natural Resources (DENR) that the
remaining area is located at an active landslide area and therefore, not suitable for
development into a housing project.
 The NHA issued Resolution No. 2352 cancelling the sale over the three parcels of land.

Issue:

Whether the petitioners, as agents, have the right to file for damages.

Whether the cancellation of the contract by NHA was justified.

Ruling:

The Supreme Court denied the petition, stating that the petitioners, as agents, are not the real
parties-in-interest and thus cannot claim damages.

The Court held that the motive of NHA (suitability of land for housing) was the cause for
entering the contract, making the contract inexistent upon realization of the mistake regarding
land quality.

Relating to the Civil Code, the Court cited Articles 1311, 1318, and 1191 to support its decision,
emphasizing the importance of cause in contract validity and the right of resolution in reciprocal
obligations.