THIRD DIVISION
[G.R. No. 136342. June 15, 2000]
PAUL HENDRIK
P. TICZON, MICHAEL THOMAS S. PLANA, and OMNI POST, petitioners, vs. VIDEO
POST MANILA, INC., respondent.
D E C I S I O N
PANGANIBAN, J.:
A preliminary injunction issued in an action
to enforce a contract, which prohibits an employee from working in a competing
enterprise within two years from resignation, has the same lifetime as the
prohibition -- two years also. Therefore, upon the expiration of the said
period, a suit questioning the validity of the issuance of the writ becomes functus
oficio and therefore moot. Courts are called upon to resolve actual cases
and controversies, not to render advisory opinions. They cannot take cognizance
of moot and academic questions, subject to notable exceptions involving
constitutional issues.
The
Case
Before us is a Petition for Review on Certiorari
under Rule 45 of the Rules of Court assailing the March 9, 1998 Decision of the
Court of Appeals[1] (CA), as well as its November 18, 1998 Resolution[2] denying petitioners' Motion for Reconsideration. The
dispositive part of the Decision reads:
"WHEREFORE,
the foregoing considered, the Petition, for being moot and academic, is
hereby DISMISSED.
SO ORDERED."[3] (emphasis ours)
The
Facts
Sometime in December 1992, Respondent Video
Post Manila, Inc. purchased a computerized editing equipment referred to as
"Henry," which was to be used for editing and post-production.
On March 16, 1991 and October 22, 1993,
Petitioners Michael Thomas S. Plana and Paul Hendrik P. Ticzon were hired by
the respondent as video editor and computer graphics artist, respectively. Both
of them signed an employment contract with a common clause[4] prohibiting them, within two years from the termination
of their employment, from working in a business firm or corporation that was
engaged in a similar business or that might compete with respondent
corporation.
Sometime in November 1995, Petitioners
Ticzon and Plana resigned. From December 1995 to January 1996, the two
subsequently applied for employment with Petitioner Omni Post, which eventually
hired them.
On May 17, 1996, respondent instituted a
Complaint for Damages alleging that Plana and Ticzon had committed a breach of
their contract, particularly Clause 5 thereof, when they sought employment with
Omni Post.[5]
On June 18, 1996, Respondent Video Post
filed a Motion for the Issuance of a Temporary Restraining Order (TRO) and
Preliminary Injunction to enjoin petitioners from working with Omni Post as
video editors. The Regional Trial Court (RTC) granted the TRO on June 26, 1996.
Thereafter, in an Order dated July 30, 1996 signed by Judge Teofilo L. Guadiz
Jr., the trial court issued the Writ of Preliminary Injunction. The pertinent
part of the Order is reproduced below:
"At the
center of the controversy involved herein is the validity of Clause 5 of the
employment contract of defendant Ticzon and Plana with the plaintiff.
"Contracts
which prohibit an employee from engaging in business in competition with the
employer [are] not necessarily void for being in restraint of trade. In the
language of Ferrassini v. Gsell 34 Phil. 697, 713, citing Gibbs v. Consolidated
Gas Co. of Baltimore 130 U.S. 396:
‘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.’
"Also, as a
general rule[,] an employment contract provision barring the employee from
competing with the employer after termination of the employment is enforceable
if reasonable and supported by a valuable consideration. There is no inflexible
formula for deciding the ubiquitous question of reasonableness. Precedents are
of little value, because the question of reasonableness must be decided on an
ad hoc basis. The question whether the agreement will be enforced is to be
determined in view of the circumstances x x x.
"It has been
held that a contract that is limited to time and trade is considered reasonable
and, therefore, valid and enforceable. In del Castillo v. Richmond 45 Phil.
679, the Supreme Court made the following observation:
‘The law
concerning contracts which tend to restrain business and 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 contracts 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 cases, and we think the rule is now
well-established, have held that a contract in restraint of trade is valid
provid[ed] there is a limitation upon either time or place. A contract,
however, which restraints a man from entering into a business or trade without
either a limitation as to time or place, will be held invalid.’
"On the other
hand, a contract may be limited in duration but not as to trade, rendering it
unenforceable just the same for being unreasonable. In this connection, the
Supreme Court in Ferrassini, supra [said] that:
‘The contract
under consideration, tested by the law, rules and principles above set forth 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.’
"In view of
the foregoing, the Court is of the opinion and so holds that the employment
contract involved in the present case is reasonable and, therefore, valid. It
appears that the effectivity of Clause 5 is limited in duration in that it
prohibits an employee of plaintiff only during his employment therein and for
only two years thereafter. Moreover, a cursory reading of Clause 5 reveals that
it does not prohibit an employee of plaintiff from engaging in any kind of
employment or business after his tenure with plaintiff. Such employee is merely
prohibited from engaging in any business in competition with plaintiff or from
being employed in a competing firm. Thus, Clause 5 does not prevent defendants
Ticzon and Plana from being employed as directors, production manager,
post-production consultants, account executives, etc. The prohibition in Clause
5 is, therefore, limited as to trade."[6] (citations omitted)
Through an April 2, 1997 Order issued by the
RTC, the subsequent Motion for Reconsideration was denied due to lack of
verification. The trial court, in upholding the validity of Clause 5,
explained:
"Based on the
evidence presented in support of the application for a writ of preliminary
injunction, the plaintiff appears to have made substantial investments not only
on capital equipment for use in its business, but also on technical information
and trade secrets to which the defendants have been exposed during their
employment with the plaintiff. Viewed in this context, and subject to the
defenses which the defendants may prove during the trial, the Court, for
purposes of the resolution of the application for preliminary injunction,
is of the opinion and so holds that Clause 5 of the employment contracts of
defendants Ticzon and Plana with the plaintiff is reasonably necessary to
protect the investments of the plaintiff, consistent with the ruling of the
Supreme Court in Del Castillo v. Richmond 45 Phil. 679. It is settled that
the evidence to be submitted during the hearing on the application for
preliminary injunction need not be conclusive or complete, the evidence needed
being only a ‘sampling’ and intended to give the court an idea of the
justification for the preliminary injunction pending the decision o[n] the case
[based] on the merits. The plaintiff has shown that it is entitled to the
injunctive relief prayed for in its application for a writ of preliminary
injunction."[7] (some citations omitted, emphasis ours)
We note that a contempt case was also filed
by Respondent Video Post against petitioners for violating the preliminary
injunction. It alleged that they continued to work for Omni Post despite the
issuance of the writ.
On June 9, 1997, petitioners challenged the
RTC Orders in their Petition for Certiorari under Rule 65 before the
Court of Appeals. Taking into account several pleadings filed by both parties,[8] the CA rendered its assailed Decision denying the
Petition for being moot and academic. The subsequent Motion for Reconsideration[9] proved unavailing.
Ruling
of the Court of Appeals
In denying the Petition before it, the CA
declared that the questions raised were rendered moot by the expiration of the
period prohibiting petitioners from seeking employment under Clause 5. Briefly,
the CA disposed of this case thus:
"x x x The
prohibition against employment in a competing company contained in the
above-quoted Clause 5, which private respondent seeks to enforce by the
assailed writ, had already expired sometime in the middle of November 1997. The
parties appear to have been unmindful of the running of the time for its
expiration, as they were feverishly filing pleadings well into August 1997,
three (3) months before the prohibition was to have become ineffectual. As
things go, it was not possible for us, due to the great number of cases
awaiting disposition, to have decided the instant case earlier.
"For being
moot and academic, we therefore deny the petition.
"Courts exist
to decide actual controversies, not to give opinions upon abstract
propositions. That a court will not sit for the purpose of trying moot cases
and spend its time in deciding questions the resolution of which can not in any
way affect the rights of the person or persons presenting them is well settled.
"There is
no longer any rhyme of reason for this court to decide on whether the
respondent judge was in error or not in granting the questioned writ, for
even with it, the petitioners are now released from any and all legal
impediments which may have barred their unfettered employment with whatsoever
company they so wish to become employed, and to exercise whatever skill,
industry, expertise or talent they may have acquired, from wherever they may
have acquired it. There is likewise no more public purpose to be served in
resolving such a moot query; whatever misgivings petitioner may have had with
respect to the actuations of the respondent judge should be satisfied by the
resolution of the Honorable Supreme Court in Administrative Matter RTJ-97-1379,
wherein the said respondent was admonished by the High Tribunal for acts done
in connection with the impugned writ."[10] (citations omitted, emphasis ours)
Hence, this Petition.[11]
The
Issues
These are the alleged errors presented
before us:
"I.....Whether
the Honorable Court of Appeals erred in dismissing the petition for certiorari
dated June 3, 1997 for being moot and academic.
II.....Whether
the Honorable Court of Appeals erred in not holding that the Orders of the
Honorable Judge Teofilo Guadiz dated July 30, 1996 and April 2, 1997 granting
and affirming the grant of the preliminary writ of injunction were in violation
of Rule 58 of the 1997 Rules of Civil Procedure.
III.....Whether
the Honorable Court of Appeals and the Honorable Judge Teofilo Guadiz prejudged
Civil Case No. 96-703 in ruling on the reasonableness and validity of Clause 5
in the employment contracts of petitioners Mike and Paul with respondent Video
Post Manila when the only issue to be resolved [was] the propriety of the
issuance of the writ of preliminary injunction."[12]
In view of this Court’s ruling on the issue
of mootness, the second of the assigned errors need not be discussed. Thus, we
shall take up only two of them: 1) whether the issue of the validity of the
preliminary injunction is moot and academic and 2) whether the trial and the
appellate courts "prejudged" the case.
The
Court’s Ruling
The Petition has no merit. The trial court
is, however, ordered to hear on the merits the main case for damages.
First
Issue: Mootness
Petitioners’ contention is based on the
notion that the appellate court had prejudged the case before it was heard on
the merits.[13] However, it is clear from the ruling of the CA that
what was declared moot and academic was the issue of whether the lower court
had erred in granting the questioned Writ of Preliminary Injunction. Hence, the
appellate court held that there was no longer any reason to decide whether the
respondent judge erred in issuing the Writ.[14] It was that question,[15] not the entire case, that its Decision declared
moot. Its subsequent Resolution denying petitioners’ Motion for Reconsideration
was of the same tenor.
Of course, the CA Decision would have been
clearer had it also ordered the remand of the case for hearing on the main
claim for damages.[16] However, the fact remains: the question regarding
the issuance of the Writ of Preliminary Injunction was rendered moot by the
expiration of the prohibition contained in Clause 5 of the employment
contracts.[17]
We thus agree with the ruling of the CA. But
we stress that the mootness applies only to the issue of the trial court’s
grant of the provisional remedy assailed by petitioners. Having become moot,
the issue was correctly ignored by the appellate court. We have said in Bacolod-Murcia
Planters’ Association, Inc. v. Bacolod-Murcia Milling Co., Inc.:[18]
"While the
assertion made by appellants that a resolution of the question of law raised
could indeed provide future guidance of judges and of attorneys, we are called
upon to act and to decide only lawsuits wherein there still remains an actual
and antagonistic assertion of rights by one party against the other in a
controversy wherein judicial intervention is unavoidable. We are not called
upon to render mere advisory opinions."
Indeed, there was no longer any purpose[19] in determining whether the trial court's issuance of
the Writ amounted to grave abuse of discretion. The period within which the
petitioners were prohibited from engaging in or working for an enterprise that
competed with the respondent -- the very purpose of the preliminary injunction
-- had expired.[20] Hence, any declaration upholding the propriety of
the Writ would have been entirely useless. Having outlived its purpose, it had
already become functus oficio. The prohibition and, necessarily, the
Writ were effective only for two years. This period began in November 1995 and
ended November 1997. Similarly, even if we say that the injunction was invalid,
it would be in vain, as petitioners are now free to seek employment wherever
they want to, the two-year prohibition period having already lapsed. Therefore,
we hold that there is no actual case or controversy between the parties[21] insofar as the preliminary injunction is concerned.
Indeed, courts should not take cognizance of moot and academic questions,
subject to notable exceptions involving constitutional issues.[22]
Petitioners’ invocation of the case of Salonga
v. Cruz-Paño[23] is misplaced and a bit strained. First, as
stated above, what was declared moot was the issue of the preliminary
injunction. Second, Salonga refers to the court’s duty to
formulate guiding and controlling constitutional principles.[24] The attempt to introduce a constitutional color[25] to this otherwise simple case of breach of contract
is uncalled for.
On the argument of petitioners that the
contempt case against them precludes the mootness of this case, suffice it to
say that such contempt case may proceed independently of our ruling here. There
is no finding on the validity of the Writ; therefore, the court a quo hearing
the contempt case may make its own determination. That is a function more
suitably exercised by the trial court rather than by this Court.
Unquestionably, the contempt case has not even reached this Court.
Damages
As earlier adverted to, the issue of damages
remains unresolved. In Philippine National Bank v. CA,[26] we said:
"In the
instant case, aside from the principal action for damages, private respondent
sought the issuance of a temporary restraining order and writ of preliminary
injunction to enjoin the foreclosure sale in order to prevent an alleged
irreparable injury to private respondent. It is settled that these injunctive
reliefs are preservative remedies for the protection of substantive rights and
interests. Injunction is not a cause of action in itself but merely a
provisional remedy, an adjunct to a main suit. When the act sought
to be enjoined ha[s] become fait accompli, only the prayer for provisional
remedy should be denied. However, the trial court should still proceed with the
determination of the principal action so that an adjudication of the rights of
the parties can be had."
In a similar vein, the main case here is not
moot at all. The main issue of damages being sought[27] by the respondent against petitioners should be
taken up during the trial on the merits when the allegations of the parties may
properly be addressed. A remand of this case for that purpose is necessary.
Second
Issue: Alleged "Prejudgment"
What confronts us now is whether there was
indeed a "prejudgment" on the part of the trial and the appellate
courts.
We find no basis for petitioners’ claim that
the CA prejudged the entire case when it applied Del Castillo v. Richmond.[28] As far as it was concerned, the case was already
moot. It referred to Del Castillo only to affirm the trial court’s
preliminary finding that Clause 5 was valid and could thus be the basis for the
issuance of the Writ.
In the same vein, we find no prejudgment on
the part of the trial court. What is abundantly clear is the provisional nature
of its finding on the validity of Clause 5 which, it clarified, was "for
purposes of the resolution of the application for preliminary injunction."[29] Moreover, even if that proviso in the
employment contracts is found to be valid, the case is not yet resolved, since
Respondent Video Post must prove the following with sufficient evidence: the
violation of such clause by petitioners, the fact that it suffered damages due
to the petitioners' acts, and the amount of such damages. Therefore, the
declaration of the validity of Clause 5 does not dispose of the entire case. Several
factual matters must be still addressed. Unfortunately, petitioners jumped the
gun. They chose to question the interlocutory orders of the trial court and
prematurely tried to appeal the entire case. In the interest of due
process, we cannot allow them to short-circuit court processes.
In injunctive matters, even the cases cited
by petitioners recognize the principle allowing lower courts judicial
discretion, the exercise of which should not be interfered with except where
there is manifest abuse.[30] There is no reason to disturb such exercise here.
WHEREFORE, the Petition is DENIED, and the
appealed Decision AFFIRMED but we emphasize that the trial court must
conduct further trial on the merits in the main case.
SO ORDERED.
Melo, (Chairman), Purisima, and Gonzaga-Reyes, JJ., concur.
Vitug, J., abroad on official business.
[1] Fifteenth Division composed of Justices Ricardo P.
Galvez (Division chairman, now solicitor general), Romeo A. Brawner (ponente)
and Marina L. Buzon (member). Justices Galvez and Buzon concurred with the ponencia
of Justice Brawner.
[2] Rollo, pp. 212-216.
[3] CA Decision, p. 3; rollo, p. 164.
[4] Clause 5 of these employment
contracts states:
"In consideration
for your training, you are absolutely prohibited, during your employment with
the Company and for a period of two (2) years thereafter, from being employed
or engaged in any other capacity or undertaking and shall NOT be interested or
concerned, directly or indirectly in any business firm or corporation
undertaking or carrying on any business of a similar nature, or which may
compete with that of the Company.
[5] The case was filed before the Regional Trial Court of
Makati City, Branch 147, docketed as Civil Case No. 96
[6] Order dated July 30, 1996, pp. 2-4; rollo, pp.
60-62.
[7] Order dated April 2, 1997, pp. 1-2; rollo, pp.
64-65.
[8] These are: respondent’s Comment dated July 21, 1997;
petitioners' Reply dated August 4, 1997; respondent’s Rejoinder dated August
13, 1997; petitioners' Sur-Rejoinder dated August 18, 1997. Meanwhile, an
independent Petition for Contempt dated September 12, 1997 was filed by
Respondent Video Post against petitioners and docketed as Civil Case No.
97-2173.
[9] Dated March 26, 1998. The CA required the respondent
to file a Comment on petitioners’ Motion for Reconsideration; the latter
complied on May 22, 1998. Petitioners filed on June 18, 1998, a Reply to
respondent’s Comment.
[10] CA Decision, pp. 1-2; rollo, pp. 162-163.
[11] The case was deemed submitted for resolution on
February 7, 2000, upon receipt by this Court of petitioners’ Memorandum signed
by Attys. Benjamin Z. de Leon and Tranquil G.S. Salvador III of Romulo,
Mabanta, Buenaventura, Sayoc & De los Angeles. Respondent’s Memorandum,
signed by Attys. Roberto S. Dio and Regina G. Pimentel of Castillo Laman Tan Pantaleon
& San Jose, was received earlier on January 18, 2000.
[12] Petition for Review on Certiorari, pp. 14-15; rollo,
pp. 21-22.
[13] Hence, in their Reply, petitioners
assert:
"xxx The Honorable
Court of Appeals by holding the petitioners’ Petition dated June 3, 1997 as
moot and academic practically sustained the ruling of Honorable Guadiz that the
Writ of Preliminary Injunction was valid. Simply said, the Court of Appeals by
refusing to resolve the merits of the Petition is deemed to have adopted the
ruling of Honorable Guadiz in Civil Case No. 97-2173." (Petitioners’
Reply, September 9, 1999, p. 6; rollo, p. 327)
[14] See quoted CA Decision above.
[15] Under Rule 65 alleging that the respondent court
exercised grave abuse of discretion in granting a TRO and a writ of
preliminary injunction.
[16] See Philippine National Bank v. CA, 291 SCRA
271, June 26, 1998. This point is further discussed below.
[17] See Top-Weld Manufacturing, Inc. v. ECED, S.A.,
138 SCRA 118, August 9, 1985.
[18] 30 SCRA 67, 68-69, October 31, 1969, per Fernando, J.
(emphasis supplied)
[19] See Phil. Sugar Institute v. Asso. of
Philsugin Employees, 115 SCRA 835, August 19, 1982; Rojas v. CA, 39 SCRA
230, May 31, 1971.
[20] See Top-Weld Manufacturing, Inc. v. ECED,
SA, supra.
[21] See Ozaeta v. Oil Industry Commission, 98 SCRA
417, June 30, 1980 citing several cases.
[22] See ABS-CBN Broadcasting Corporation v.
Comelec, GR No. 133486, January 28, 2000; Salonga v. Cruz-Pano, 134 SCRA
438, February 18, 1985.
[23] Supra.
[24] Therein we said:
"The Court also has the
duty to formulate guiding and controlling constitutional principles, precepts,
doctrines, or rules. It has the symbolic function of educating bench and bar on
the extent of protection given by constitutional guarantees." (supra,
at 463, per Guitierrez, J.)
See also Republic v.
Villarama Jr., 278 SCRA 736, September 5, 1997.
[25] See Petition, pp. 27-28; rollo, pp.
34-35.
[26] 291 SCRA 271, 277, June 26, 1998, per Bellosillo, J.
[27] The respondent’s Complaint alleges in
part:
"8. Defendant
corporation was organized recently for the purpose of directly competing with
plaintiff. After the resignation of defendants Plana and Ticzon and their
subsequent employment with defendant corporation, plaintiff lost some of its
accounts and clients to defendant corporation. Plaintiff was unable to submit
bids and obtain contracts for highly technical jobs due to the loss of its
trained employees. Likewise, plaintiff was compelled to hire a Hong Kong
consultant to train its new Henry operator and graphic artists and shut down
one of its two editing suites. The loss of business due to defendants’ acts or
omissions is about P6,000,000.00.
"9. Furthermore,
on account of the wanton and malicious manner by which defendants Ticzon and
Plana have breached their contractual undertaking, they are liable to plaintiff
in the amount of P1,000,000.00 each by way of exemplary damages."
(Respondent’s complaint dated May 16, 1996, pp. 2-3; rollo, pp. 45-46)
[28] 45 Phil. 679, February 9, 1924.
[29] Order dated April 2, 1997, p. 2; rollo, p. 65.
[30] See Government Service Insurance System v. Florendo,
178 SCRA 76, 89, September 29, 1989; Ortigas & Company Limited Partnership
v. CA, 162 SCRA 165, 168, June 16, 1988.