ObliCon – Case Digest (Yna)
4. NO RELEVANCE SA CONTRACT (I’VE READ THE ENTIRE CASE ITO TALAGA
NAKALAGAY)
Case Title: National Commercial Bank of Saudi Arabia vs. CA Case No. G.R. 124267
(January 31, 2003)
Petitioner: National Commercial Bank of Saudi Arabia
Respondents: COURT OF APPEALS
Topic: CONSENT (ESSENTIAL REQUISITES)
FACTS
National Commercial Bank of Saudi Arabia (NCBSA) filed a case against Philippine Banking
Corporation in the RTC of Makati on December 4, 1985 to recover the duplication in the payment
of the proceeds of a letter of credit NCBSA has issued because both the head office and regional
office of PBC collected the proceeds of the LOC. The RTC rendered a decision in favor of NCBSA.
PBC filed a motion for reconsideration, however there was no notice of hearing. NCBSA filed a
manifestation pointing out the lack of notice of hearing. On September 27, 1993, NCBSA filed a
Motion for Writ of Execution of the decision of the trial court. On even date, PBC filed a Motion to
Set Motion for Reconsideration for Hearing. It was denied by the RTC. PBC filed another motion
for reconsideration stating that the lack of notice was merely due to an honest mistake by
counsel. RTC denied the MR stating that there was no compelling reason to warrant a liberal
construction on the rules of motion. PBC appealed to the CA which first affirmed the RTC. On
PBC’s Motion for Reconsideration, however, the Court of Appeals, by Amended Decision of March
8, 1996, set aside its February 27, 1995 Decision and granted PBC’s Petition for Certiorari and
directed the trial court to resolve PBC’s Motion for Reconsideration (of the trial court’s August
24, 1993 Decision. The CA stated that to deny the MR is too harsh an application of procedural
rules especially so when petitioner has filed a motion to set the motion for reconsideration for
hearing and had furnished private respondent a copy of the motion, a fact which is not denied by
the latter.
ISSUES:
WON the unrippled doctrine that a motion filed without the requisite notice of hearing
may be cured by subsequently filing a motion to set “the motion” for hearing
RULING:
The requirement of notice under Sections 4 and 5, Rule 15 in connection with Section 2, Rule 37
of the Revised Rules of Court is mandatory. The absence of a notice of hearing is fatal and, in
cases of motions to reconsider a decision, the running of the period to appeal is not tolled by
their filing or pendency. In the case at bar, it is not disputed that PBC‘s Motion for
Reconsideration of the August 24, 1993 decision of the trial court did not contain the requisite
notice of hearing. The motion for reconsideration, however, being fatally defective for lack of
notice of hearing, cannot be cured by a belated filing of a notice of hearing. More so in the case at
bar where the Motion to Set the “Motion for Reconsideration” was filed after the expiration of the
period for filing an appeal. PBC‘s appeal for justice and fairness does not lie, however, there being
nothing on record to show that it has been a victim of injustice or unfairness. On the contrary, as
found by the Court of Appeals in its original decision, PBC had the opportunity to participate in
the trial and present its defense and had actually made full use of the remedies under our rules of
procedure. More importantly, there was no oppressive exercise of judicial authority that would
call for the annulment of the trial court‘s resolutions.
5.
Case Title: ANSELMO FERRAZZINI vs. CARLOS GSELL Case No. 10712
(August 10, 1916)
Petitioner: ANSELMO FERRAZZINI
Respondents: CARLOS GSELL
Topic: CONTRACT IS AGAINST PUBLIC POLICY
FACTS:
Ferrazini and Gsell entered a contract with an indefinite period, when defendant engages the
skilled services of herein plaintiff.
That plaintiff will be provided safe working space; that he shall not be discharge by defendant
without the six months advance notice and that herein plaintiff is not allowed to enter into any
employment of any enterprise with the Philippines without obtaining special written permission
from the defendant for a period of five years from the termination of his contract.
Plaintiff was discharged by defendant without giving him the “written advice of six months in
advance” hence, he filed an action to recover damages from the plaintiff. The trial court rendered
a decision in favor of the plaintiff.
Defendant appealed the said decision stating therein that even though he discharged herein
plaintiff without the written advance notice, the discharge was lawful considering the absences,
unfaithfulness, and disobedience of the said plaintiff.
Defendant further, claims that plaintiff violated the provisions of their contract when it entered
the employment of Mr. Whalen in the Philippines without the consent, written or verbal from
him.
Plaintiff insist that his employment with Mr. Whalen was entirely different and disassociated
from that engaged in by the defendant Gsell.
ISSUES:
WON the provisions of the contract is valid and binding upon Ferrazzini?
RULING: NO, these are not valid and binding because it is against public policy.
The contract wherein the plaintiff agreed to pay to the defendant P10,000 as liquidated
damages for each and every breach. of a clause of the contract which provided that the
plaintiff should not enter into any enterprise whatever in the Philippine Islands except by
special written permission of the defendant, during the period of employment and for a term of
five years from and after the termination of the employment without regard to the cause of such
termination.
In this case, the plaintiff was prohibited from engaging in any business or occupation
whatever in the Philippines for a period of five years from the termination of his contract of
employment without special written permission from the defendant.
The contract is clearly one in undue or unreasonable restraint of trade and therefore
against public policy. It is limited as to time and space but not as to trade. It is not necessary for
the protection of the defendant, as this is provided for in another part of the clause. It would
force the plaintiff to leave the Philippine Islands in order to obtain a livelihood in case the
defendant declined to give him the written permission to work elsewhere in this country.
DOCTRINE:
Manresa, Vol. 8, p. 606, says:
"Public policy (orden público)—which does not here signify the material keeping of public order
—represents in the law of persons the public, social and legal interest, that which is permanent and
essential of the institutions, that which, even if favoring an individual in whom the right lies,
cannot be left to his own will.
CONTENTION OF THE DEFENDANT:
The defendants contends that a similar contract was found valid by the Court in its previous
decision in the case of Gsell vs Koch wherein defendant Koch after learning the trade secret of
making straw hats left the plaintiff’s service and engaged in the manufacture of straw hats in
violation of the provisions of their contracts.
6.
Case Title: ALFONSO DEL CASTILLO vs. SHANNON Case No. 21127
RICHMOND (February 09, 1924)
Plaintiff: ALFONSO DEL CASTILLO
Defendant: SHANNON RICHMOND
Topic: CONTRACT IN RESTRAINT OF TRADE
FACTS:
Plaintiff and Defendant entered a contract wherein the Del Castillo would work as a pharmacist
and take charge of the prescription department of Richmond’s drugstore known as the “Botica
Americana”, located in the district of Legaspi, Albay.
Plaintiff would receive a monthly salary of Php125 and agreed not to open or have any interest in
any other drugstore within a four-mile radius of Legaspi while Richmond or his heirs owned or
had an interest in a drugstore within the districts of Legaspi Albay and Daraga.
Plaintiff claims that the restrictive provision impose upon him is illegal, unreasonable and
contrary to public policy. The trial court ruled in favor of the defendant, stating therein that the
provision is neither oppressive to plaintiff nor unreasonably necessary to protect the defendant’s
business, nor prejudicial to the public interest”.
Hence, plaintiff filed an appeal.
ISSUES:
WON the restrictive provision of the contract is illegal, unreasonable, and contrary to
public policy.
RULING: NO, the limitation is legal and reasonable and not contrary to public
policy.
The rule became well established that if the restraint was limited to "a certain time" and
within "a certain place," such contracts were valid and not "against the benefit of the state."
However, when a contract restrains a man from entering into a business or trade without
either a limitation as to time or place, it will be held invalid.
The restrictions imposed by the defendant are strictly limited (a) to a limited district or
districts, and (b) during the time while the defendant or his heirs may own or have open a
drugstore or have an interest in any other one within said limited district.
Further, to establish whether the contract is a reasonable or unreasonable one, the nature of
the business must also be considered. What would be a reasonable restriction as to time and
place upon the manufacture of railway locomotive engines might be a very unreasonable
restriction when imposed upon the employment of a day laborer.
Hence, considering the nature of the business in which the defendant is engaged, in relation
with the limitation placed upon the plaintiff both as to time and place, the court held that such
limitation is legal and reasonable and not contrary to public policy.
DOCTRINE:
Contracts by virtue of which one person promises not to engage in any particular business
for a definite time and within a limited space are generally held to be valid. The rule is well
established that a contract in restraint of trade is valid providing there is a limitation upon either
time or space. The public welfare. Of course must always be considered, and if it be not involved
and the restraint upon one party is not greater than the protection to the other requires, such
contract would be sustained. The test is whether the restraint is reasonably necessary for the
protection of the contracting parties. If the restraint is reasonably necessary to protect the
interest of the parties, it will be upheld.
