Case Digests Finals 1.docx

G.R. No. L-21127 1924

February 9,

ALFONSO DEL CASTILLO, plaintiffappellant, vs. SHANNON RICHMOND, defendantappellee. F.R. Feria for appellant. Manly, Goddard and Lockwood for appellee.

JOHNSON, J.: This action was commenced in the Court of First Instance of the Province of Albay on the 18th day of October, 1922. Its purpose was to have declared null and of no effect the following contract executed and delivered on the 20th day of July, 1915: CONTRACT FOR RENDERING SERVICES Know all men by these presents: That Shannon Richmond, of lawful age and a resident of the district of Legaspi, and Alfonso del Castillo, also of lawful age and a resident of the district of Daraga of the municipality and Province of Albay, Philippine Islands, have covenanted and agreed one with the other as follows: 1. That Alfonso del Castillo, in consideration of a monthly remuneration of P125 to be paid to him by Shannon Richmond, agrees to enter the employ of said Shannon Richmond beginning this date, as pharmacist, and to take

charge of the prescription department of the drugstore known as the Botica Americana situated in the district of Legaspi of the municipality and Province of Albay, Philippine Islands, and to perform all the duties and obligations as such pharmacist together with such other duties in connection with the same that by custom correspond to the pharmacist in a drugstore of this kind. 2. That in consideration of the performance of the duties and obligations above indicated by the said Alfonso del Castillo, Shannon Richmond hereby agrees to pay the said Alfonso del Castillo the salary of P125 each month. 3. That in consideration of the fact that the said Alfonso del Castillo has just graduated as a pharmacist and up to the present time has not been employed in the capacity of a pharmacist and in consideration of this employment and the monthly salary mentioned in this contract, the said Alfonso del Castillo also agrees not to open, nor own nor have any interest directly or indirectly in any other drugstore either in his own name or in the name of another; nor have any connection with or be employed by any other drugstore situated within a radius of our miles from the district of Legaspi, municipality and Province of Albay, while the said Shannon Richmond or his

heirs may own or have open a drugstore, or have an interest in any other one within the limits of the districts of Legaspi, Albay, and Daraga of the municipality of Albay, Province of Albay. 4. That either of the parties to this contract may terminate his relations as employer and employee with or without reason, and upon thirty days' notice; remaining, nevertheless, in full force and effect all the other conditions and agreements stipulated in this contract. 5. That the said Alfonso del Castillo furthermore agrees not to divulge or make use of any of the business secrets or private formulas of the said Shannon Richmond. In these terms, we execute this contract for the rendering of services on this 20th day of July, 1915, in the district of Legaspi, municipality and Province of Albay Philippine Islands. (Sgd.) "SHANNON RICHMOND "ALFONSO DEL CASTILLO Signed in the presence of: (Sgd.) "M. GOYENA "L. AZANA" The said contract was acknowledge before a notary on the same day of its execution. The plaintiff alleges that the provisions and conditions contained in the third paragraph of said contract constitute an

illegal and unreasonable restriction upon his liberty to contract, are contrary to public policy, and are unnecessary in order to constitute a just and reasonable protection to the defendant; and asked that the same be declared null and void and of no effect. The defendant interposed a general and special defense. In his special defense he alleges "that during the time the plaintiff was in the defendant's employ he obtained knowledge of his trade and professional secrets and came to know and became acquainted and established friendly relations with his customers so that to now annul the contract and permit plaintiff to establish a competing drugstore in the town of Legaspi, as plaintiff has announced his intention to do, would be extremely prejudicial to defendant's interest." The defendant further, in an amended answer, alleges "that this action not having been brought within four years from the time the contract referred to in the complaint was executed, the same has prescribed." During the trial of the cause an effort was made to sustain the allegations of the complaint that paragraph 3 of the said contract constituted an illegal and unreasonable restriction upon the right of the plaintiff to contract and was contrary to public policy. The lower court found that it was unnecessary to pass upon the question of prescription presented by the defendant. Upon a consideration of the merits, the court a quo concluded "that the contract the annulment of which is sought by the plaintiff is neither oppressive to him, nor unreasonably necessary to protect the defendant's business, nor prejudicial to the public interest." From that judgment the plaintiff appealed to this court. In this court the appellant still insists that said contract is illegal, unreasonable, and contrary to public policy. From a reading of paragraph 3 of the contract above quoted, it will be seen that the only restriction placed upon the right of the plaintiff is, that he shall "not open, nor own, nor have any interest directly or

indirectly in any other drugstore either in his own name or in the name of another; nor have any connection with or be employed by any other drugstore as pharmacist or in any capacity in any drugstore situated within a radius of four miles from the district of Legaspi, municipality and Province of Albay, while the said Shannon Richmond or his heirs may own or have open a drugstore, or to have an interest in any other one within the limits of the districts of Legaspi, Albay, and Daraga of the municipality of Albay, Province of Albay." It will be noted that the restrictions placed upon the plaintiff 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. The law concerning contracts which tend to restrain business or trade has gone through a long series of changes from time to time with the changing conditions of trade and commerce. With trifling exceptions, said changes have been a continuous development of a general rule. The early cases show plainly a disposition to avoid and annul all contract which prohibited or restrained any one from using a lawful trade "at any time or at any place," as being against the benefit of the state. Later, however, the rule became well established that if the restriant was limited to "a certain time" and within "a certain place," such contracts were valid and not "against the benefit of the state." Later cases, and we think the rule is now well established, have held that a contract in restraint of trade is valid providing there is a limitation upon either time or place. A contract, however, which restrains a man from entering into a business or trade without either a limitation as to time or place, will be held invalid. (Anchor Electric Co. vs. Hawkes, 171 Mass., 101; Alger vs. Thacher, 19 Pickering [Mass.] 51; Taylor vs. Blanchard, 13 Allen [Mass.], 370; Lufkin Rule Co. vs. Fringeli, 57 Ohio State, 596; Fowle vs. Park, 131 U.S., 88, 97; Diamond Match Co. vs. Roeber, 106 N.Y., 473; National Benefit Co. vs. Union Hospital Co., 45 Minn., 272; Swigert and Howard vs. Tilden, 121 Iowa, 650.)

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 protection to the other requires, contracts like the one we are discussing will be sustained. The general tendency, we believe, of modern authority, is to make the test whether the restraint is reasonably necessary for the protection of the contracting parties. If the contract is reasonably necessary to protect the interest of the parties, it will be upheld. (Ollendorff vs. Abrahamson, 38 Phil., 585.) In that case we held that a contract by which an employee agrees to refrain for a given lenght of time, after the expiration of the term of his employment, from engaging in a business, competitive with that of his employer, is not void as being in restraint of trade if the restraint imposed is not greater than that which is necessary to afford a reasonable protection. In all cases like the present, the question is whether, under the particular circumstances of the case and the nature of the particular contract involved in it, the contract is, or is not, unreasonable. Of course in establishing 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. 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, we are of the opinion, and so decide, that such limitation is legal and reasonable and not contrary to public policy. Therefore the judgment appealed from should be and is hereby affirmed, with costs. So ordered. Taylor vs Uy Tieng piao G.R. No. L-16109 October 2, 1922

FACTS Ø

Taylor contracted his services to Tan Liuan & Co as superintendent of an oil factory which the latter contemplated establishing Ø The contract extended over 2 years and the salary was P600/month during the first year and P700/month during the second with electric, light and water for domestic consumption or in lieu thereof, P60/month Ø At this time, the machinery for contemplated factory had not been acquired, though ten expellers had been ordered from the US Ø It was understood that should the machinery to be installed fail, for any reason, to arrive in Manila within the period of 6 months, the contract may be cancelled by the party of the second part at its option, such cancellation not to occur before the expiration of such 6 months

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Ø Ø

The machinery did not arrive in Manila within the 6 months; the reason does not appear, but a preponderance of evidence show that the defendants seeing that oil business no longer promised large returns, either cancelled the order for machinery from choice or were unable to supply the capital necessary to finance the project. Ø Defendants communicated to Taylor that they had decided to rescind the contract. Ø Taylor instituted this action to recover damages in the amount of P13k, covering salary and perks due and to become due ISSUE WON in a contract for the prestation of service, it is lawful for the parties to insert a provision giving the employer the power to cancel the contract in contingency which may be dominated by himself HELD Ø

YES. One of the consequences of the stipulation was that the employers were left in a position where they could dominate the contingency, and the result was about the same as if they had been given an unqualified option to dispense

with the services of Taylor at the end of 6 months. But this circumstance does not make the stipulation illegal. A condition at once facultative and resolutory may be valid even though the condition is made to depend upon the will of the obligor. If it were apparent, or could be demonstrated that the defendants were under positive obligation to cause the machinery to arrive in Manila, they would of course be liable, in the absence of affirmative proof showing that the nonarrival of the machinery was due to some cause not having its origin in their own act or will. The contract, however, expresses no such positive obligation, and its existence cannot be implied in the face of the stipulation, defining the conditions under which the defendants can cancel the contract. CFI no error in rejecting Taylor’s claim in so far as damages are sought for the period subsequent to the expiration of 6 months, but in assessing the damages due for the six-month period, the trial judge overlooked the item of P60 (commutation of house rent) This amount Taylor is entitled to recover in addition to P300 awarded by CFI. Constantino v. Espiritu G.R. No. L-22404, 31 May 1971 FACTS: The deed of absolute sale as the binding contract between appellant and appellee conveyed the two storey house in favor of the appellee. The appellee is entrusted of the properties of the appellant’s illegitimate son. The appellee mortgaged the said property to Republic Savings Bank for the payment of the appellee’s loan and thereafter the appellee offered them for sale. The appellant then prayed for the issuance of a writ of execution restraining the appellee and her agents to further alienate or disposed of the said property. The appellant wanted to execute a deed of absolute sale in favor of his son who is the beneficiary.

ISSUE: Whether or not the contract between appellant and appellee was a contract pour autrui. RULING: Yes. It appears then that, upon the facts alleged by appellant, the contract between him and appellee was a contract pour autrui, although couched in the form of a deed of absolute sale, and that appellant’s action was, in effect, one for specific performance. That one of the parties to a contract is entitled to bring an action for its enforcement or to prevent its breach is too clear to need any extensive discussion. Upon the other hand, that the contract involved contained a stipulation pour autrui amplifies this settled rule only in the sense that the third person for whose benefit the contract was entered into may also demand its fulfillment provided he had communicated his acceptance thereof to the obligor before the stipulation in his favor is revoked. It appears that the amended complaint submitted by appellant to the lower court impleaded the beneficiary under the contract as a party co-plaintiff, it seems clear that the three parties concerned therewith would, as a result, be before the court and the latter’s adjudication would be complete and binding upon them.

Florentino v. Encarnacion G.R. No. L-27696, 30 September 1977 FACTS: On May 22, 1964, the petitionersappellants and the petitioner-appellee filed with CFI an application for the registration under Act 496 of a parcel of agricultural land located at Cabugao, Ilocos Sur. The application alleged among other things that the applicants are the common and proindiviso owners in fee simple of the said land with the improvements existing

thereon; that to the best of the knowledge and belief; there is no mortgage, hen or encumbrance of any kind whatsoever affecting said land, nor any other person having any estate or interest thereon, legal or equitable, remainder, reservation at in expectancy; that said applicants had acquired the aforesaid land thru and by inheritance from their predecessors in interest, their aunt, Doña Encarnacion Florentino, and Angel Encarnacion acquire their respective shares of the land thru purchase from the original heirs, Jesus, Caridad, Lourdes and Dolores, all surnamed Singson, on one hand and from Asuncion Florentino on the other. After due notice and publication, the Court set the application for hearing. Only the Director of Lands filed an opposition but was later withdrawn so an order of general default was issued. Upon application of the applicants, the Clerk of Court was commissioned and authorized to receive the evidence of the applicants and ordered to submit the same for the Court’s proper resolution. Exhibit O-1 embodied in the deed of extrajudicial partition (Exhibit O), which states that with respect to the land situated in Barrio Lubong, Dacquel, Cabugao, Ilocos Sur, the fruits thereof shall serve to defray the religious expenses, was the source of contention in this case (Spanish text). Florentino wanted to include ExhibitO-1 on the title but the Encarnacion supposed and subsequently withdrawn their application on their shares, which was opposed by the former. The Court after hearing the motion for withdrawal and the opposition issued an order and for the purpose of ascertaining and implifying that the products of the land made subject matter of this land registration case had been used in answering for the payment of expenses for the religious functions specified in the Deed of Extrajudicial Partition which was no registered in the office of the Register of Deeds from time immemorial; and that the applicants knew of thisarrangement and the Deed of Extrajudicial Partition of August 24,1947, was not signed by Angel

Encarnacion or Salvador Encarnacion, Jr.CFI: The self-imposed arrangement in favor of the Church is a simple donation, but is void since the done has not accepted the donation and Salvador Encarnacion, Jr. and Angel Encarnacion had not made any oral or written grant at all so the court allowed the religious expenses to be made and entered on the undivided shares, interests and participations of all the applicants in this case, except that of Salvador Encarnacion, Sr., Salvador Encarnacion, Jr. and Angel Encarnacion.”the petitioners-appellants filed their Reply to the Opposition reiterating their previous arguments, and also attacking the jurisdiction of the registration court to pass upon the validity or invalidity of the agreement Exhibit O-1, alleging that such is litigable only in an ordinary action and not proper in a land registration proceeding. The Motion for Reconsideration and of New Trial was denied for lack of merit, but the court modified in highlighting that the donee Church has not showed its clear acceptance of the donation, and is the real party of this case, not the petitionersappellants. ISSUE: Whether or Not the court erred in concluding that the stipulation is just an arrangement stipulation. RULING: YES, the court erred in concluding that the stipulation is just an arrangement stipulation. It cannot be revoked unilaterally. The contract must bind both parties, based on the principles (1) that obligation wising from contracts has the force of law between the contracting parties; and (2) that they must be mutuality between the parties band on their essential equality, to which is repugnant to have one party bound by the contract leaving the other free therefrom.

The stipulation (Exhibit O-1) is part of an extrajudicial partition (Exh. O) duly agreed and signed by the parties, hence the same must bind the contracting parties thereto and its validity or compliance cannot be left to the will of one of them. The said stipulation is a Stipulation pour autrui. A stipulation pour autrui is a stipulation in favor of a third person conferring a clear and deliberate favor upon him, and which stipulation is merely a part of a contract entered into by the parties, neither of whom acted as agent of the third person, and such third person may demand its fulfillment provided that he communicates his acceptance to the obligor before it is revoked.