FIRST DIVISION undisputed, then there is no real or genuine issue or question as to any

fact and summary judgment called for. On the other hand, where the
G.R. No. 163269 April 19, 2006 facts pleaded by the parties are disputed or contested, proceedings for
a summary judgment cannot take the place of a trial. The evidence on
ROLANDO C. RIVERA, Petitioner, record must be viewed in light most favorable to the party opposing the
vs.
motion who must be given the benefit of all favorable inferences as can
SOLIDBANK CORPORATION, Respondent.
reasonably be drawn from the evidence.
Actions; Summary Judgments; Requisites; Where, on the basis of the
pleadings of a moving party, including documents appended thereto, Same; Same; Courts must be critical of the papers presented by the
no genuine issue as to a material fact exists, the burden to produce a moving party and not of the papers/documents in opposition thereto;
genuine issue shifts to the opposing party, and if he fails, the moving When interpreting an ambiguous contract with extrinsic evidence,
party is entitled to a summary judgment.—For a summary judgment to summary judgment is proper so long as the extrinsic evidence
be proper, the movant must establish two requisites: (a) there must be presented to the court supports only one of the conflicting
no genuine issue as to any material fact, except for the amount of interpretations.—Courts must be critical of the papers presented by the
damages; and (b) the party presenting the motion for summary moving party and not of the papers/documents in opposition thereto.
judgment must be entitled to a judgment as a matter of law. Where, on Conclusory assertions are insufficient to raise an issue of material fact.
the basis of the pleadings of a moving party, including documents A party cannot create a genuine dispute of material fact through mere
appended thereto, no genuine issue as to a material fact exists, the speculations or compilation of differences. He may not create an issue
burden to produce a genuine issue shifts to the opposing party. If the of fact through bald assertions, unsupported contentions and
opposing party fails, the moving party is entitled to a summary conclusory statements. He must do more than rely upon allegations
judgment. but must come forward with specific facts in support of a claim. Where
the factual context makes his claim implausible, he must come forward
Same; Same; Words and Phrases; A genuine issue is an issue which with more persuasive evidence demonstrating a genuine issue for trial.
requires the presentation of evidence as distinguished from an issue Where there are no disputed material facts, the determination of
which is sham, fictitious, contrived or a false claim; The evidence on whether a party breached a contract is a question of law and is
record must be viewed in light most favorable to the party opposing the appropriate for summary judgment. When interpreting an ambiguous
motion who must be given the benefit of all favorable inferences as can contract with extrinsic evidence, summary judgment is proper so long
reasonably be drawn from the evidence.—A genuine issue is an issue as the extrinsic evidence presented to the court supports only one of
of fact which requires the presentation of evidence as distinguished the conflicting interpretations. Where reasonable men could differ as
from an issue which is a sham, fictitious, contrived or a false claim. The to the contentions shown from the evidence, summary judgment might
trial court can determine a genuine issue on the basis of the pleadings, be denied.
admissions, documents, affidavits or counter-affidavits submitted by
the parties. When the facts as pleaded appear uncontested or
Same; Same; Labor Law; Competitive Employment Bans; The issue entered into and carried out in good faith. Such a contract will not be
as to whether a post-retirement competitive employment ban discarded even if there was a mistake of law or fact. Courts have no
incorporated in an Undertaking is against public policy is a genuine jurisdiction to look into the wisdom of the contract entered into by and
issue of fact, requiring the parties to present evidence to support their between the parties or to render a decision different therefrom. They
respective claims.—In this case, there is no dispute between the have no power to relieve parties from obligation voluntarily assailed,
parties that, in consideration for his availment of the SRP, petitioner simply because their contracts turned out to be disastrous deals.
executed the Release, Waiver and Quitclaim, and the Undertaking as
supplement thereto, and that he received retirement pay amounting to Same; Same; Same; Same; Retirement plans, in light of the
P963,619.28 from respondent. On May 1, 1995, within the one-year constitutional mandate of affording full protection to labor, must be
ban and without prior knowledge of respondent, petitioner was liberally construed in favor of the employee, it being the general rule
employed by Equitable as Manager of its Credit Investigation and that pension or retirement plans formulated by the employer are to be
Appraisal Division, Consumers’ Banking Group. Despite demands, construed against it.—Retirement plans, in light of the constitutional
petitioner failed to return the P963,619.28 to respondent on the latter’s mandate of affording full protection to labor, must be liberally construed
allegation that he had breached the one-year ban by accepting in favor of the employee, it being the general rule that pension or
employment from Equitable, which according to respondent was a retirement plans formulated by the employer are to be construed
competitor bank. We agree with petitioner’s contention that the issue against it. Retirement benefits, after all, are intended to help the
as to whether the post-retirement competitive employment ban employee enjoy the remaining years of his life, releasing him from the
incorporated in the Undertaking is against public policy is a genuine burden of worrying for his financial support, and are a form of reward
issue of fact, requiring the parties to present evidence to support their for being loyal to the employer.
respective claims.
Same; Same; Same; Same; Public Policy; Words and Phrases; By
Labor Law; Competitive Employment Bans; Retirement; Contracts; “public policy” is intended that principle of law which holds that no
The freedom of contract is both a constitutional and statutory right.— subject or citizen can lawfully do that which has a tendency to be
Article 1306 of the New Civil Code provides that the contracting parties injurious to the public or against the public good, which may be termed
may establish such stipulations, clauses, terms and conditions as they the “policy of the law,” or “public policy in relation to the administration
may deem convenient, provided they are not contrary to law, morals, of the law.”—In Ferrazzini v. Gsell, 34 Phil. 697 (1916), the Court
good customs, public order or public policy. The freedom of contract is defined public policy in civil law countries and in the United States and
both a constitutional and statutory right. A contract is the law between the Philippines: By “public policy,” as defined by the courts in the United
the parties and courts have no choice but to enforce such contract as States and England, is intended that principle of the law which holds
long as it is not contrary to law, morals, good customs and against that no subject or citizen can lawfully do that which has a tendency to
public policy. The well-entrenched doctrine is that the law does not be injurious to the public or against the public good, which may be
relieve a party from the effects of an unwise, foolish or disastrous termed the “policy of the law,” or “public policy in relation to the
contract, entered into with full awareness of what he was doing and administration of the law.” (Words & Phrases Judicially Defined, vol. 6,
p. 5813, and cases cited.) Public policy is the principle under which court’s ruling, for the simple reason that it rendered summary judgment
freedom of contract or private dealing is restricted by law for the good and thereby foreclosed the presentation of evidence by the parties to
of the public. (Id., Id.) In determining whether a contract is contrary to prove whether the restrictive covenant is reasonable or not. Moreover,
public policy the nature of the subject matter determines the source on the face of the Undertaking, the post-retirement competitive
from which such question is to be solved. (Hartford Fire Ins. Co. v. employment ban is unreasonable because it has no geographical
Chicago, M. & St. P. Ry. Co., 62 Fed. 904, 906.) The foregoing is limits; respondent is barred from accepting any kind of employment in
sufficient to show that there is no difference in principle between the any competitive bank within the proscribed period. Although the period
public policy (orden publico) in the two jurisdictions (the United States of one year may appear reasonable, the matter of whether the
and the Philippine Islands) as determined by the Constitution, laws, restriction is reasonable or unreasonable cannot be ascertained with
and judicial decisions. finality solely from the terms and conditions of the Undertaking, or even
in tandem with the Release, Waiver and Quitclaim. Undeniably,
Same; Same; Same; Same; Same; Same; “Trade,” Defined.—The petitioner retired under the SRP and received P963,619.28 from
Court proceeded to define “trade” as follows: x x x In the broader respondent. However, petitioner is not proscribed, by waiver or
sense, it is any occupation or business carried on for subsistence or estoppel, from assailing the post-retirement competitive employment
profit. Anderson’s Dictionary of Law gives the following definition: ban since under Article 1409 of the New Civil Code, those contracts
“Generally equivalent to occupation, employment, or business, whose cause, object or purpose is contrary to law, morals, good
whether manual or mercantile; any occupation, employment or customs, public order or public policy are inexistent or void from the
business carried on for profit, gain, or livelihood, not in the liberal arts beginning. Estoppel cannot give validity to an act that is prohibited by
or in the learned professions.” In Abbott’s Law Dictionary, the word is law or one that is against public policy.
defined as “an occupation, employment or business carried on for gain
or profit.” Among the definitions given in the Encyclopaedic Dictionary Same; Same; Same; Same; Restraint of Trade; An employer is
is the following: “The business which a person has learnt, and which burdened to establish that a restrictive covenant barring an employee
he carries on for subsistence or profit; occupation; particularly from accepting a competitive employment after retirement or
employment, whether manual or mercantile, as distinguished from the resignation is not an unreasonable or oppressive, or in undue or
liberal arts or the learned professions and agriculture.” Bouvier limits unreasonable restraint of trade, thus, unenforceable for being
the meaning to commerce and traffic, and the handicraft of mechanics. repugnant to public policy; There are two principal grounds on which
(In re Pinkney, 47 Kan., 89.) We are inclined to adopt and apply the the doctrine is founded that a contract in restraint of trade is void as
broader meaning given by the lexicographers. against public policy—one is, the injury to the public by being deprived
of the restricted party’s industry; and the other is, the injury to the party
Same; Same; Same; Same; Estoppel; A post-retirement competitive himself by being precluded from pursuing his occupation, and thus
employment ban is unreasonable where it has no geographical limits; being prevented from supporting himself and his family.—Respondent,
Estoppel cannot give validity to an act that is prohibited by law or one as employer, is burdened to establish that a restrictive covenant
that is against public policy.—There is no factual basis for the trial barring an employee from accepting a competitive employment after
retirement or resignation is not an unreasonable or oppressive, or in which every day imposes upon the ordinary man. What one creates by
undue or unreasonable restraint of trade, thus, unenforceable for being his own labor is his. Public policy does not intend that another than the
repugnant to public policy. As the Court stated in Ferrazzini v. Gsell, producer shall reap the fruits of labor; rather, it gives to him who labors
34 Phil. 697 (1916), cases involving contracts in restraint of trade are the right by every legitimate means to protect the fruits of his labor and
to be judged according to their circumstances, to wit: x x x There are secure the enjoyment of them to himself. Freedom to contract must not
two principal grounds on which the doctrine is founded that a contract be unreasonably abridged. Neither must the right to protect by
in restraint of trade is void as against public policy. One is, the injury to reasonable restrictions that which a man by industry, skill and good
the public by being deprived of the restricted party’s industry; and the judgment has built up, be denied.
other is, the injury to the party himself by being precluded from
pursuing his occupation, and thus being prevented from supporting Same; Same; Same; Same; Same; In determining whether the
himself and his family. contract is reasonable or not, the trial court should consider the
following factors: (a) whether the covenant protects a legitimate
Same; Same; Same; Same; Same; In cases where an employee business interest of the employer; (b) whether the covenant creates an
assails a contract containing a provision prohibiting him from accepting undue burden on the employee; (c) whether the covenant is injurious
competitive employment as against public policy, the employer has to to the public welfare; (d) whether the time and territorial limitations
adduce evidence to prove that the restriction is reasonable and not contained in the covenant are reasonable; and (e) whether the restraint
greater than necessary to protect the employer’s legitimate business is reasonable from the standpoint of public policy.—The Court
interests; While freedom to contract must not be unreasonably reiterates that the determination of reasonableness is made on the
abridged, neither must the right to protect by reasonable restrictions particular facts and circumstances of each case. In Esmerson Electric
that which a man by industry, skill and good judgment has built up, be Co. v. Rogers, 418 F. 3d 841, 486 (2005), it was held that the question
denied.—In cases where an employee assails a contract containing a of reasonableness of a restraint requires a thorough consideration of
provision prohibiting him or her from accepting competitive surrounding circumstances, including the subject matter of the
employment as against public policy, the employer has to adduce contract, the purpose to be served, the determination of the parties, the
evidence to prove that the restriction is reasonable and not greater than extent of the restraint and the specialization of the business of the
necessary to protect the employer’s legitimate business interests. The employer. The court has to consider whether its enforcement will be
restraint may not be unduly harsh or oppressive in curtailing the injurious to the public or cause undue hardships to the employee, and
employee’s legitimate efforts to earn a livelihood and must be whether the restraint imposed is greater than necessary to protect the
reasonable in light of sound public policy. Courts should carefully employer. Thus, the court must have before it evidence relating to the
scrutinize all contracts limiting a man’s natural right to follow any trade legitimate interests of the employer which might be protected in terms
or profession anywhere he pleases and in any lawful manner. But it is of time, space and the types of activity proscribed. Consideration must
just as important to protect the enjoyment of an establishment in trade be given to the employee’s right to earn a living and to his ability to
or profession, which its employer has built up by his own honest determine with certainty the area within which his employment ban is
application to every day duty and the faithful performance of the tasks restituted. A provision on territorial limitation is necessary to guide an
employee of what constitutes as violation of a restrictive covenant and authority is that forfeitures for engaging in subsequent competitive
whether the geographic scope is coextensive with that in which the employment included in pension and retirement plans are valid even
employer is doing business. In considering a territorial restriction, the though unrestricted in time or geography. The raison d’être is explained
facts and circumstances surrounding the case must be considered. by the United States Circuit Court of Appeals in Rochester Corporation
Thus, in determining whether the contract is reasonable or not, the trial v. W.L. Rochester, Jr.: x x x The authorities, though, generally draw a
court should consider the following factors: (a) whether the covenant clear and obvious distinction between restraints on competitive
protects a legitimate business interest of the employer; (b) whether the employment in employment contracts and in pension plans. The strong
covenant creates an undue burden on the employee; (c) whether the weight of authority holds that forfeitures for engaging in subsequent
covenant is injurious to the public welfare; (d) whether the time and competitive employment, included in pension retirement plans, are
territorial limitations contained in the covenant are reasonable; and (e) valid, even though unrestricted in time or geography. The reasoning
whether the restraint is reasonable from the standpoint of public policy. behind this conclusion is that the forfeiture, unlike the restraint included
in the employment contract, is not a prohibition on the employee’s
Same; Same; Same; Same; Same; Words and Phrases; “Post- engaging in competitive work but is merely a denial of the right to
Employment Competitive Employment or Restraint on Trade in participate in the retirement plan if he does so engage. A leading case
Employment Contracts” and “Restraints on Post-Retirement on this point is Van Pelt v. Berefco, Inc., supra, 208 N.E.2d at p. 865,
Competitive Employment in Pension and Retirement Plans,” where, in passing on a forfeiture provision similar to that here, the Court
Distinguished; The strong weight of authority is that forfeitures for said: “A restriction in the contract which does not preclude the
engaging in subsequent competitive employment, included in pension employee from engaging in competitive activity, but simply provides for
and retirement plans, are valid, even though unrestricted in time or the loss of rights or privileges if he does so is not in restraint of trade.”
geography; A post-retirement competitive employment restriction is (emphasis added) A post-retirement competitive employment
designed to protect the employer against competition by former restriction is designed to protect the employer against competition by
employees who may retire and obtain retirement or pension benefits former employees who may retire and obtain retirement or pension
and, at the same time, engage in competitive employment.—We are benefits and, at the same time, engage in competitive employment.
not impervious of the distinction between restrictive covenants barring
an employee to accept a post-employment competitive employment or PETITION for review on certiorari of the decision and resolution of the
restraint on trade in employment contracts and restraints on post- Court of Appeals.
retirement competitive employment in pension and retirement plans
either incorporated in employment contracts or in collective bargaining The facts are stated in the opinion of the Court.
agreements between the employer and the union of employees, or
separate from said contracts or collective bargaining agreements Antonio S. Reyes for petitioner.
which provide that an employee who accepts post retirement
Delos Reyes, Bañaga, Briones & Associates for respondent.
competitive employment will forfeit retirement and other benefits or will
be obliged to restitute the same to the employer. The strong weight of DECISION
CALLEJO, SR., J.: retirement benefits and promised that "[he] would not, at any time, in
any manner whatsoever, directly or indirectly engage in any unlawful
Assailed in this Petition for Review on Certiorari is the Decision1 of the activity prejudicial to the interest of Solidbank, its parent, affiliate or
Court of Appeals (CA) in CA-G.R. CV No. 52235 as well as its subsidiary companies, their stockholders, officers, directors, agents or
Resolution2 denying the Motion for Partial Reconsideration of petitioner employees, and their successors-in-interest and will not disclose any
Rolando C. Rivera. information concerning the business of Solidbank, its manner or
operation, its plans, processes, or data of any kind."9
Petitioner had been working for Solidbank Corporation since July 1,
1977.3 He was initially employed as an Audit Clerk, then as Credit Aside from acknowledging that he had no cause of action against
Investigator, Senior Clerk, Assistant Accountant, and Assistant Solidbank or its affiliate companies, Rivera agreed that the bank may
Manager. Prior to his retirement, he became the Manager of the Credit bring any action to seek an award for damages resulting from his
Investigation and Appraisal Division of the Consumer’s Banking Group. breach of the Release, Waiver and Quitclaim, and that such award
In the meantime, Rivera and his brother-in-law put up a poultry would include the return of whatever sums paid to him by virtue of his
business in Cavite. retirement under the SRP.10 Rivera was likewise required to sign an
undated Undertaking as a supplement to the Release, Waiver and
In December 1994, Solidbank offered two retirement programs to its Quitclaim in favor of Solidbank in which he declared that he received
employees: (a) the Ordinary Retirement Program (ORP), under which in full his entitlement under the law (salaries, benefits, bonuses and
an employee would receive 85% of his monthly basic salary multiplied other emoluments), including his separation pay in accordance with the
by the number of years in service; and (b) the Special Retirement SRP. In this Undertaking, he promised that "[he] will not seek
Program (SRP), under which a retiring employee would receive 250% employment with a competitor bank or financial institution within one
of the gross monthly salary multiplied by the number of years in (1) year from February 28, 1995, and that any breach of the
service.4 Since Rivera was only 45 years old, he was not qualified for Undertaking or the provisions of the Release, Waiver and Quitclaim
retirement under the ORP. Under the SRP, he was entitled to would entitle Solidbank to a cause of action against him before the
receive P1,045,258.95 by way of benefits.5 appropriate courts of law.11 Unlike the Release, Waiver and Quitclaim,
the Undertaking was not notarized.
Deciding to devote his time and attention to his poultry business in
Cavite, Rivera applied for retirement under the SRP. Solidbank On May 1, 1995, the Equitable Banking Corporation (Equitable)
approved the application and Rivera was entitled to receive the net employed Rivera as Manager of its Credit Investigation and Appraisal
amount of P963,619.28. This amount included his performance Division of its Consumers’ Banking Group.12 Upon discovering this,
incentive award (PIA), and his unearned medical, dental and optical Solidbank First Vice-President for Human Resources Division (HRD)
allowances in the amount of P1,666.67, minus his total accountabilities Celia J.L. Villarosa wrote a letter dated May 18, 1995, informing Rivera
to Solidbank amounting to P106,973.00.6 Rivera received the amount that he had violated the Undertaking. She likewise demanded the
and confirmed his separation from Solidbank on February 25, 1995.7 return of all the monetary benefits he received in consideration of the
SRP within five (5) days from receipt; otherwise, appropriate legal
action would be taken against him.13
Subsequently, Solidbank required Rivera to sign an undated Release,
Waiver and Quitclaim, which was notarized on March 1, 1995.8 Rivera
acknowledged receipt of the net proceeds of his separation and When Rivera refused to return the amount demanded within the given
period, Solidbank filed a complaint for Sum of Money with Prayer for
Writ of Preliminary Attachment14 before the Regional Trial Court (RTC) Solidbank appended the Affidavit of HRD First Vice-President Celia
of Manila on June 26, 1995. Solidbank, as plaintiff, alleged therein that Villarosa and a copy of the Release, Waiver and Quitclaim and
in accepting employment with a competitor bank for the same position Undertaking which Rivera executed.16
he held in Solidbank before his retirement, Rivera violated his
Undertaking under the SRP. Considering that Rivera accepted In an Order dated July 6, 1995, the trial court issued a Writ of
employment with Equitable barely three months after executing the Preliminary Attachment17 ordering Deputy Sheriff Eduardo Centeno to
Undertaking, it was clear that he had no intention of honoring his attach all of Rivera’s properties not exempt from execution. Thus, the
commitment under said deed. Sheriff levied on a parcel of land owned by Rivera.

Solidbank prayed that Rivera be ordered to return the net amount In his Answer with Affirmative Defenses and Counterclaim, Rivera
of P963,619.28 plus interests therein, and attorney’s fees, thus: admitted that he received the net amount of P963,619.28 as
separation pay. However, the employment ban provision in the
WHEREFORE, it is respectfully prayed that: Undertaking was never conveyed to him until he was made to sign it
on February 28, 1995. He emphasized that, prior to said date,
1. At the commencement of this action and upon the filing of a Solidbank never disclosed any condition to the retirement scheme, nor
bond in such amount as this Honorable Court may fix, a writ of did it impose such employment ban on the bank officers and
preliminary attachment be forthwith issued against the employees who had previously availed of the SRP. He alleged that the
properties of the defendant as satisfaction of any judgment that undertaking not to "seek employment with any competitor bank or
plaintiff may secure; financial institution within one (1) year from February 28, 1995" was
void for being contrary to the Constitution, the law and public policy,
2. After trial, judgment be rendered ordering defendant to pay that it was unreasonable, arbitrary, oppressive, discriminatory, cruel,
plaintiff the following sums: NINE HUNDRED SIXTY-THREE unjust, inhuman, and violative of his human rights. He further claimed
THOUSAND SIX HUNDRED NINETEEN AND 28/100 ONLY that the Undertaking was a contract of adhesion because it was
(P963,619.28) PESOS, Philippine Currency, as of 23 May prepared solely by Solidbank without his participation; considering his
1995, plus legal interest of 12% per annum until fully paid; moral and economic disadvantage, it must be liberally construed in his
favor and strictly against the bank.
3. Such sum equivalent to 10% of plaintiff’s claims
plus P2,000.00 for every appearance by way of attorney’s fees; On August 15, 1995, Solidbank filed a Verified Motion for Summary
and Judgment, alleging therein that Rivera raised no genuine issue as to
any material fact in his Answer except as to the amount of damages. It
prayed that the RTC render summary judgment against Rivera.
4. Costs of suit.
Solidbank alleged that whether or not the employment ban provision
contained in the Undertaking is unreasonable, arbitrary, or oppressive
PLAINTIFF prays for other reliefs just and equitable under the is a question of law. It insisted that Rivera signed the Undertaking
premises.15 voluntarily and for valuable consideration; and under the Release,
Waiver and Quitclaim, he was obliged to return the P963,619.28 upon
accepting employment from a competitor bank within the one-year
proscribed period. Solidbank appended to its motion the Affidavit of
Villarosa, where she declared that Rivera was employed by Equitable and all he did was accept it. He stressed that the decision whether to
on May 1, 1995 for the same position he held before his retirement allow him to avail of the SRP belonged solely to Solidbank. He also
from Solidbank. pointed out that the employment ban provision in the Undertaking was
not a consideration for his availment of the SRP, and that if he did not
Rivera opposed the motion contending that, as gleaned from the avail of the retirement program, he would have continued working for
pleadings of the parties as well as Villarosa’s Affidavit, there are Solidbank for at least 15 more years, earning more than what he
genuine issues as to material facts which call for the presentation of received under the SRP. He alleged that he intended to go full time into
evidence. He averred that there was a need for the parties to adduce the poultry business, but after about two months, found out that,
evidence to prove that he did not sign the Undertaking voluntarily. He contrary to his expectations, the business did not provide income
claimed that he would not have been allowed to avail of the SRP if he sufficient to support his family. Being the breadwinner, he was then
had not signed it, and consequently, his retirement benefits would not forced to look for a job, and considering his training and experience as
have been paid. This was what Ed Nallas, Solidbank Assistant Vice- a former bank employee, the job with Equitable was all he could find.
President for HRD and Personnel, told him when he received his check He insisted that he had remained faithful to Solidbank and would
on February 28, 1995. Senior Vice-President Henry Valdez, his continue to do so despite the case against him, the attachment of his
superior in the Consumers’ Banking Group, also did not mention that family home, and the resulting mental anguish, torture and expense it
he would have to sign such Undertaking which contained the assailed has caused them.19
provision. Thus, he had no choice but to sign it. He insisted that the
question of whether he violated the Undertaking is a genuine issue of In his Supplemental Opposition, Rivera stressed that, being a former
fact which called for the presentation of evidence during the hearing on bank employee, it was the only kind of work he knew. The ban was, in
the merits of the case. He also asserted that he could not cause injury fact, practically absolute since it applied to all financial institutions for
or prejudice to Solidbank’s interest since he never acquired any one year from February 28, 1995. He pointed out that he could not
sensitive or delicate information which could prejudice the bank’s work in any other company because he did not have the qualifications,
interest if disclosed. especially considering his age. Moreover, after one year from February
28, 1995, he would no longer have any marketable skill, because by
Rivera averred that he had the right to adduce evidence to prove that then, it would have been rendered obsolete by non-use and rapid
he had been faithful to the provisions of the Release, Waiver and technological advances. He insisted that the ban was not necessary to
Quitclaim, and the Undertaking, and had not committed any act or done protect the interest of Solidbank, as, in the first place, he had no access
or said anything to cause injury to Solidbank.18 to any "secret" information which, if revealed would be prejudicial to
Solidbank’s interest. In any case, he was not one to reveal whatever
Rivera appended to his Opposition his Counter-Affidavit in which he knowledge or information he may have acquired during his
reiterated that he had to sign the Undertaking containing the employment with said bank.20
employment ban provision, otherwise his availment of the SRP would
not push through. There was no truth to the bank’s allegation that, "in In its Reply, Solidbank averred that the wisdom of requiring the
exchange for receiving the larger amount of P1,045,258.95 under the Undertaking from the 1995 SRP is purely a management prerogative.
SRP, instead of the very much smaller amount of P224,875.81 under It was not for Rivera to question and decry the bank’s policy to protect
the ORP, he agreed that he will not seek employment in a competitor itself from unfair competition and disclosure of its trade secrets. The
bank or financial institution within one year from February 28, 1995." It substantial monetary windfall given the retiring officers was meant to
was the bank which conceived the SRP to streamline its organization tide them over the one-year period of hiatus, and did not prevent them
from engaging in any kind of business or bar them from being WHEREFORE, the appeal is PARTIALLY GRANTED. The decision
employed except with competitor banks/financial institutions.21 appealed from is AFFIRMED with the modification that the attachment
and levy upon the family home covered by TCT No. 51621 of the
On December 18, 1995, the trial court issued an Order of Summary Register of Deeds, Las Piñas, Metro Manila, is hereby SET ASIDE and
Judgment.22 The fallo of the decision reads: DISCHARGED.

WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of SO ORDERED.24

plaintiff and against defendant ordering the latter to pay to plaintiff bank
the amount of NINE HUNDRED SIXTY-THREE THOUSAND SIX The CA declared that there was no genuine issue regarding any
HUNDRED NINETEEN AND 28/100 (P963,619.28) PESOS, Philippine material fact except as to the amount of damages. It ratiocinated that
Currency, as of May 23, 1995, plus legal interest at 12% per annum the agreement between Rivera and Solidbank was the law between
until fully paid, and the costs of the suit. them, and that the interpretation of the stipulations therein could not be
left upon the whims of Rivera. According to the CA, Rivera never
FURTHER, NEVERTHELESS, both parties are hereby encouraged as denied signing the Release, Waiver, and Quitclaim, including the
they are directed to meet again and sit down to find out how they can Undertaking regarding the employment prohibition. He even admitted
finally end this rift and litigation, all in the name of equity, for after all, joining Equitable as an employee within the proscribed one-year
defendant had worked for the bank for some 18 years.23 period. The alleged defenses of Rivera, the CA declared, could not
prevail over the admissions in his pleadings. Moreover, Rivera’s
1avv phil.net

The trial court declared that there was no genuine issue as to a matter justification for taking the job with Equitable, "dire necessity," was not
of fact in the case since Rivera voluntarily executed the Release, an acceptable ground for annulling the Undertaking since there were
Waiver and Quitclaim, and the Undertaking. He had a choice not to no earmarks of coercion, undue influence, or fraud in its execution.
retire, but opted to do so under the SRP, and, in fact, received the Having executed the said deed and thereafter receiving the benefits
benefits under it. under the SRP, he is deemed to have waived the right

According to the RTC, the prohibition incorporated in the Undertaking to assail the same, hence, is estopped from insisting or retaining the
was not unreasonable. To allow Rivera to be excused from his said amount of P963,619.28.
undertakings in said deed and, at the same time, benefit therefrom
would be to allow him to enrich himself at the expense of Solidbank. However, the CA ruled that the attachment made upon Rivera’s family
The RTC ruled that Rivera had to return the P963,619.28 he received home was void, and, pursuant to the mandate of Article 155, in relation
from Solidbank, plus interest of 12% per annum from May 23, 1998 to Article 153 of the Family Code, must be discharged.
until fully paid.
Hence, this recourse to the Court.
Aggrieved, Rivera appealed the ruling to the CA which rendered
judgment on June 14, 2002 partially granting the appeal. The fallo of Petitioner avers that –
the decision reads:
I.
THE COURT OF APPEALS ERRED IN UPHOLDING THE retirement benefits, and interest thereon at 12% per annum as of May
PROPRIETY OF THE SUMMARY JUDGMENT RENDERED BY THE 23, 1995 until payment of the full amount.
TRIAL COURT CONSIDERING THE EXISTENCE OF GENUINE
ISSUES AS TO MATERIAL FACTS WHICH CALL FOR THE On the first issue, petitioner claims that, based on the pleadings of the
PRESENTATION OF EVIDENCE IN A TRIAL ON THE MERITS. parties, and the documents and affidavits appended thereto, genuine
issues as to matters of fact were raised therein. He insists that the
II. resolution of the issue of whether the employment ban is unreasonable
requires the presentation of evidence on the circumstances which led
THE COURT OF APPEALS ERRED IN NOT DECLARING THE ONE- to respondent bank’s offer of the SRP and ORP, and petitioner’s
YEAR EMPLOYMENT BAN IMPOSED BY RESPONDENT eventual acceptance and signing of the Undertaking on March 1, 1995.
SOLIDBANK UPON HEREIN PETITIONER NULL AND VOID FOR There is likewise a need to adduce evidence on whether the
BEING UNREASONABLE AND OPPRESSIVE AND FOR employment ban is necessary to protect respondent’s interest, and
CONSTITUTING RESTRAINT OF TRADE WHICH VIOLATES whether it is an undue restraint on petitioner’s constitutional right to
PUBLIC POLICY AS ENUNCIATED IN OUR CONSTITUTION AND earn a living to support his family. He further insists that respondent is
LAWS. burdened to prove that it sustained damage or injury by reason of his
alleged breach of the employment ban since neither the Release,
III. Waiver and Quitclaim, and Undertaking he executed contain any
provision that respondent is automatically entitled to the restitution of
the P963,619.28. Petitioner points out that all the deeds provide is that,
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL
in case of breach thereof, respondent is entitled to protection before
COURT’S DECISION ORDERING HEREIN RESPONDENT TO PAY
the appropriate courts of law.
SOLIDBANK THE AMOUNT OF P963,619.28 AS OF MAY 23, 1995,
PLUS LEGAL INTEREST OF 12% PER ANNUM UNTIL FULLY PAID.
On the second issue, petitioner avers that the prohibition incorporated
in the Release, Waiver and Quitclaim barring him as retiree from
IV.
engaging directly or indirectly in any unlawful activity and disclosing
any information concerning the business of respondent bank, as well
MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN as the employment ban contained in the Undertaking he executed, are
AFFIRMING THE PORTION OF THE SUMMARY JUDGMENT oppressive, unreasonable, cruel and inhuman because of its
ORDERING PETITIONER TO PAY SOLIDBANK LEGAL INTEREST overbreath. He reiterates that it is against public policy, an
OF 12% PER ANNUM UNTIL FULLY PAID ON THE unreasonable restraint of trade, because it prohibits him to work for one
AFOREMENTIONED SUM [OF] P963,619.28.25 year in the Philippines, ultimately preventing him from supporting his
family. He points out that a breadwinner in a family of four minor
The issues for resolution are: (1) whether the parties raised a genuine daughters who are all studying, with a wife who does not work, one
issue in their pleadings, affidavits, and documents, that is, whether the would have a very difficult time meeting the financial obligations even
employment ban incorporated in the Undertaking which petitioner with a steady, regular-paying job. He insists that the Undertaking
executed upon his retirement is unreasonable, oppressive, hence, deprives him of the means to support his family, and ultimately, his
contrary to public policy; and (2) whether petitioner is liable to children’s chance for a good education and future. He reiterates that
respondent for the restitution of P963,619.28 representing his the returns in his poultry business fell short of his expectations, and
unfortunately, the business was totally destroyed by typhoon "Rosing" sum of P963,619.28 which was given to him for and in consideration
in November 1995. of his early retirement.

Petitioner further maintains that respondent’s management prerogative Neither can petitioner be subjected to the penalty of paying 12%
does not give it a license to entice its employees to retire at a very interest per annum on his retirement pay of P963,619.28 from May 23,
young age and prohibit them from seeking employment in a so-called 1995, as it is improper and oppressive to him and his family. As of July
competitor bank or financial institution, thus prevent them from working 3, 2002, the interest alone would amount to P822,609.67, thus
and supporting their families (considering that banking is the only kind doubling the amount to be returned to respondent bank under the
of work they know). Petitioner avers that "management’s prerogative decision of the RTC and the CA. The imposition of interest has no basis
must be without abuse of discretion. A line must be drawn between because the Release, Waiver and Quitclaim, and the Undertaking do
management prerogative regarding business operations per se and not provide for payment of interest. The deeds only state that breach
those which affect the rights of the employees. In treating its thereof would entitle respondent to bring an action to seek damages,
employees, management should see to it that its employees are at to include the return of the amount that may have been paid to
least properly informed of its decision or modes of action." petitioner by virtue thereof. On the other hand, any breach of the
Undertaking or the Release, Waiver and Quitclaim would only entitle
On the last issue, petitioner alleges that the P1,045,258.95 he received respondent to a cause of action before the appropriate courts of law.
was his retirement benefit which he earned after serving the bank for Besides, the amount received by petitioner was not a loan and,
18 years. It was not a mere gift or gratuity given by respondent bank, therefore, should not earn interest pursuant to Article 1956 of the Civil
without the latter giving up something of value in return. On the Code.
contrary, respondent bank received "valuable consideration," that is,
petitioner quit his job at the relatively young age of 45, thus enabling Finally, petitioner insists that he acted in good faith in seeking
respondent to effect its reorganization plan and forego the salary, employment with another bank within one year from February 28, 1995
benefits, bonuses, and promotions he would have received had he not because he needed to earn a living to support his family and finance
retired early. his children’s education. Hence, the imposition of interest, which is a
penalty, is unwarranted.
Petitioner avers that, under the Undertaking, respondent would be
entitled to a cause of action against him before the appropriate courts By way of Comment on the petition, respondent avers that the
of law if he had violated the employment ban. He avers that respondent Undertaking is the law between it and petitioner. As such, the latter
must prove its entitlement to the P963,619.28. The Undertaking could not assail the deed after receiving the retirement benefit under
contains no provision that he would have to return the amount he the SRP. As gleaned from the averments in his petition, petitioner
received under the SRP; much less does it provide that he would have admitted that he executed the Undertaking after having been informed
to pay 12% interest per annum on said amount. On the other hand, the of the nature and consequences of his refusal to sign the same, i.e.,
Release, Waiver and Quitclaim does not contain the provision he would not be able to receive the retirement benefit under the SRP.
prohibiting him from being employed with any competitor bank or
financial institution within one year from February 28, 1995. Petitioner Respondent maintains that courts have no power to relieve parties of
insists that he acted in good faith when he received his retirement obligations voluntarily entered into simply because their contracts
benefits; hence, he cannot be punished by being ordered to return the turned out to be disastrous deeds. Citing the ruling of this Court in
Eastern Shipping Lines, Inc. v. Court of Appeals,26 respondent avers
that petitioner is obliged to pay 12% per annum interest of including documents appended thereto, no genuine issue as to a
the P963,619.28 from judicial or extrajudicial demand. material fact exists, the burden to produce a genuine issue shifts to the
opposing party. If the opposing party fails, the moving party is entitled
In reply, petitioner asserts that respondent failed to prove that it to a summary judgment.28
sustained damages, including the amount thereof, and that neither the
Release, Waiver and Quitclaim nor the Undertaking obliged him to pay A genuine issue is an issue of fact which requires the presentation of
interest to respondent. evidence as distinguished from an issue which is a sham, fictitious,
contrived or a false claim. The trial court can determine a genuine issue
The petition is meritorious. on the basis of the pleadings, admissions, documents, affidavits or
counteraffidavits submitted by the parties. When the facts as pleaded
Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure appear uncontested or undisputed, then there is no real or genuine
provide: issue or question as to any fact and summary judgment called for. On
the other hand, where the facts pleaded by the parties are disputed or
contested, proceedings for a summary judgment cannot take the place
Section 1. Summary judgment for claimant. – A party seeking to
of a trial.29 The evidence on record must be viewed in light most
recover upon a claim, counterclaim, or cross-claim or to obtain a
favorable to the party opposing the motion who must be given the
declaratory relief may, at any time after the pleading in answer thereto
benefit of all favorable inferences as can reasonably be drawn from the
has been served, move with supporting affidavits, depositions or
evidence.30
admissions for a summary judgment in his favor upon all or any part
thereof.
Courts must be critical of the papers presented by the moving party
and not of the papers/documents in opposition thereto.31 Conclusory
xxxx
assertions are insufficient to raise an issue of material fact.32 A party
cannot create a genuine dispute of material fact through mere
Sec. 3. Motion and proceedings thereon. – The motion shall be served speculations or compilation of differences.33 He may not create an
at least ten (10) days before the time specified for the hearing. The issue of fact through bald assertions, unsupported contentions and
adverse party may serve opposing affidavits, depositions, or conclusory statements.34 He must do more than rely upon allegations
admissions at least three (3) days before the hearing. After the hearing, but must come forward with specific facts in support of a claim. Where
the judgment sought shall be rendered forthwith if the pleadings, the factual context makes his claim implausible, he must come forward
supporting affidavits, depositions, and admissions on file, show that, with more persuasive evidence demonstrating a genuine issue for
except as to the amount of damages, there is no genuine issue as to trial.35
any material fact and that the moving party is entitled to a judgment as
a matter of law.
Where there are no disputed material facts, the determination of
whether a party breached a contract is a question of law and is
For a summary judgment to be proper, the movant must establish two appropriate for summary judgment.36 When interpreting an ambiguous
requisites: (a) there must be no genuine issue as to any material fact, contract with extrinsic evidence, summary judgment is proper so long
except for the amount of damages; and (b) the party presenting the as the extrinsic evidence presented to the court supports only one of
motion for summary judgment must be entitled to a judgment as a the conflicting interpretations.37 Where reasonable men could differ as
matter of law.27 Where, on the basis of the pleadings of a moving party,
to the contentions shown from the evidence, summary judgment might As gleaned from the records, petitioner made two undertakings. The
be denied. first is incorporated in the Release, Waiver and Quitclaim that he
signed, to wit:
In United Rentals (North America), Inc. v. Keizer,38 the U.S. Circuit
Court of Appeals resolved the issue of whether a summary judgment 4. I will not, at any time, in any manner whatsoever, directly or indirectly
is proper in a breach of contract action involving the interpretation of engage in any unlawful activity prejudicial to the interest of the BANK,
such contract, and ruled that: its parent, affiliate or subsidiary companies, their stockholders, officers,
directors, agents or employees, and their successors-in-interest and
[A] contract can be interpreted by the court on summary judgment if (a) will not disclose any information concerning the business of the BANK,
the contract’s terms are clear, or (b) the evidence supports only one its manner or operation, its plans, processes or data of any kind.40
construction of the controverted provision, notwithstanding some
ambiguity. x x x If the court finds no ambiguity, it should proceed to The second undertaking is incorporated in the Undertaking following
interpret the contract – and it may do so at the summary judgment petitioner’s execution of the Release, Waiver and Quitclaim which
stage. If, however, the court discerns an ambiguity, the next step – reads:
involving an examination of extrinsic evidence – becomes essential. x
x x Summary judgment may be appropriate even if ambiguity lurks as 4. That as a supplement to the Release and Quitclaim, I executed in
long as the extrinsic evidence presented to the court supports only one favor of Solidbank on FEBRUARY 28, 1995, I hereby expressly
of the conflicting interpretations.39 undertake that I will not seek employment with any competitor bank or
financial institution within one (1) year from February 28, 1995.41
In this case, there is no dispute between the parties that, in
consideration for his availment of the SRP, petitioner executed the In the Release, Waiver and Quitclaim, petitioner declared that
Release, Waiver and Quitclaim, and the Undertaking as supplement respondent may bring "an action for damages which may include, but
thereto, and that he received retirement pay amounting to P963,619.28 not limited to the return of whatever sums he may have received from
from respondent. On May 1, 1995, within the one-year ban and without respondent under said deed if he breaks his undertaking therein."42 On
prior knowledge of respondent, petitioner was employed by Equitable the other hand, petitioner declared in the Undertaking that "any breach
as Manager of its Credit Investigation and Appraisal Division, on his part of said Undertaking or the terms and conditions of the
Consumers’ Banking Group. Despite demands, petitioner failed to Release, Waiver and Quitclaim will entitle respondent to a cause of
return the P963,619.28 to respondent on the latter’s allegation that he action against [petitioner] for protection before the appropriate courts
had breached the one-year ban by accepting employment from of law."43
Equitable, which according to respondent was a competitor bank.
Article 1306 of the New Civil Code provides that the contracting parties
We agree with petitioner’s contention that the issue as to whether the may establish such stipulations, clauses, terms and conditions as they
post-retirement competitive employment ban incorporated in the may deem convenient, provided they are not contrary to law, morals,
Undertaking is against public policy is a genuine issue of fact, requiring good customs, public order or public policy. The freedom of contract is
the parties to present evidence to support their respective claims. both a constitutional and statutory right.44 A contract is the law between
the parties and courts have no choice but to enforce such contract as
long as it is not contrary to law, morals, good customs and against The foregoing is sufficient to show that there is no difference in
public policy. principle between the public policy (orden publico) in the two
jurisdictions (the United States and the Philippine Islands) as
The well-entrenched doctrine is that the law does not relieve a party determined by the Constitution, laws, and judicial decisions.49
from the effects of an unwise, foolish or disastrous contract, entered
into with full awareness of what he was doing and entered into and The Court proceeded to define "trade" as follows:
carried out in good faith. Such a contract will not be discarded even if
there was a mistake of law or fact. Courts have no jurisdiction to look x x x In the broader sense, it is any occupation or business carried on
into the wisdom of the contract entered into by and between the parties for subsistence or profit. Anderson’s Dictionary of Law gives the
or to render a decision different therefrom. They have no power to following definition: "Generally equivalent to occupation, employment,
relieve parties from obligation voluntarily assailed, simply because or business, whether manual or mercantile; any occupation,
their contracts turned out to be disastrous deals.45 employment or business carried on for profit, gain, or livelihood, not in
the liberal arts or in the learned professions." In Abbott’s Law
On the other hand, retirement plans, in light of the constitutional Dictionary, the word is defined as "an occupation, employment or
mandate of affording full protection to labor, must be liberally construed business carried on for gain or profit." Among the definitions given in
in favor of the employee, it being the general rule that pension or the Encyclopaedic Dictionary is the following: "The business which a
retirement plans formulated by the employer are to be construed person has learnt, and which he carries on for subsistence or profit;
against it.46 Retirement benefits, after all, are intended to help the occupation; particularly employment, whether manual or mercantile, as
employee enjoy the remaining years of his life, releasing him from the distinguished from the liberal arts or the learned professions and
burden of worrying for his financial support, and are a form of reward agriculture." Bouvier limits the meaning to commerce and traffic, and
for being loyal to the employer.47 the handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are
inclined to adopt and apply the broader meaning given by the
In Ferrazzini v. Gsell,48 the Court defined public policy in civil law lexicographers.50
countries and in the United States and the Philippines:
In the present case, the trial court ruled that the prohibition against
By "public policy," as defined by the courts in the United States and petitioner accepting employment with a competitor bank or financial
England, is intended that principle of the law which holds that no institution within one year from February 28, 1995 is not unreasonable.
subject or citizen can lawfully do that which has a tendency to be The appellate court held that petitioner was estopped from assailing
injurious to the public or against the public good, which may be termed the post-retirement competitive employment ban because of his
the "policy of the law," or "public policy in relation to the administration admission that he signed the Undertaking and had already received
of the law." (Words & Phrases Judicially Defined, vol. 6, p. 5813, and benefits under the SRP.
cases cited.) Public policy is the principle under which freedom of
contract or private dealing is restricted by law for the good of the public. The rulings of the trial court and the appellate court are incorrect.
(Id., Id.) In determining whether a contract is contrary to public policy
the nature of the subject matter determines the source from which such There is no factual basis for the trial court’s ruling, for the simple reason
question is to be solved. (Hartford Fire Ins. Co. v. Chicago, M. & St. P. that it rendered summary judgment and thereby foreclosed the
Ry. Co., 62 Fed. 904, 906.) presentation of evidence by the parties to prove whether the restrictive
covenant is reasonable or not. Moreover, on the face of the Public welfare is first considered, and if it be not involved, and the
Undertaking, the post-retirement competitive employment ban is restraint upon one party is not greater than protection to the other party
unreasonable because it has no geographical limits; respondent is requires, the contract may be sustained. The question is, whether,
barred from accepting any kind of employment in any competitive bank under the particular circumstances of the case and the nature of the
within the proscribed period. Although the period of one year may particular contract involved in it, the contract is, or is not,
appear reasonable, the matter of whether the restriction is reasonable unreasonable.53
or unreasonable cannot be ascertained with finality solely from the
terms and conditions of the Undertaking, or even in tandem with the In cases where an employee assails a contract containing a provision
Release, Waiver and Quitclaim. prohibiting him or her from accepting competitive employment as
against public policy, the employer has to adduce evidence to prove
Undeniably, petitioner retired under the SRP and that the restriction is reasonable and not greater than necessary to
received P963,619.28 from respondent. However, petitioner is not protect the employer’s legitimate business interests.54 The restraint
proscribed, by waiver or estoppel, from assailing the post-retirement may not be unduly harsh or oppressive in curtailing the employee’s
competitive employment ban since under Article 1409 of the New Civil legitimate efforts to earn a livelihood and must be reasonable in light
Code, those contracts whose cause, object or purpose is contrary to of sound public policy.55
law, morals, good customs, public order or public policy are inexistent
or void from the beginning. Estoppel cannot give validity to an act that Courts should carefully scrutinize all contracts limiting a man’s natural
is prohibited by law or one that is against public policy.51 right to follow any trade or profession anywhere he pleases and in any
lawful manner. But it is just as important to protect the enjoyment of an
Respondent, as employer, is burdened to establish that a restrictive establishment in trade or profession, which its employer has built up by
covenant barring an employee from accepting a competitive his own honest application to every day duty and the faithful
employment after retirement or resignation is not an unreasonable or performance of the tasks which every day imposes upon the ordinary
oppressive, or in undue or unreasonable restraint of trade, thus, man. What one creates by his own labor is his. Public policy does not
unenforceable for being repugnant to public policy. As the Court stated intend that another than the producer shall reap the fruits of labor;
in Ferrazzini v. Gsell,52 cases involving contracts in restraint of trade rather, it gives to him who labors the right by every legitimate means
are to be judged according to their circumstances, to wit: to protect the fruits of his labor and secure the enjoyment of them to
himself.56 Freedom to contract must not be unreasonably abridged.
x x x There are two principal grounds on which the doctrine is founded Neither must the right to protect by reasonable restrictions that which
that a contract in restraint of trade is void as against public policy. One a man by industry, skill and good judgment has built up, be denied.57
is, the injury to the public by being deprived of the restricted party’s
industry; and the other is, the injury to the party himself by being The Court reiterates that the determination of reasonableness is made
precluded from pursuing his occupation, and thus being prevented on the particular facts and circumstances of each case.58 In Esmerson
from supporting himself and his family. Electric Co. v. Rogers,59 it was held that the question of
reasonableness of a restraint requires a thorough consideration of
And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court surrounding circumstances, including the subject matter of the
stated the rule thus: contract, the purpose to be served, the determination of the parties, the
extent of the restraint and the specialization of the business of the
employer. The court has to consider whether its enforcement will be
injurious to the public or cause undue hardships to the employee, and benefits or will be obliged to restitute the same to the employer. The
whether the restraint imposed is greater than necessary to protect the strong weight of authority is that forfeitures for engaging in subsequent
employer. Thus, the court must have before it evidence relating to the competitive employment included in pension and retirement plans are
legitimate interests of the employer which might be protected in terms valid even though unrestricted in time or geography. The raison d’etre
of time, space and the types of activity proscribed.60 is explained by the United States Circuit Court of Appeals in Rochester
Corporation v. W.L. Rochester, Jr.:64
Consideration must be given to the employee’s right to earn a living
and to his ability to determine with certainty the area within which his x x x The authorities, though, generally draw a clear and obvious
employment ban is restituted. A provision on territorial limitation is distinction between restraints on competitive employment in
necessary to guide an employee of what constitutes as violation of a employment contracts and in pension plans. The strong weight of
restrictive covenant and whether the geographic scope is co-extensive authority holds that forfeitures for engaging in subsequent competitive
with that in which the employer is doing business. In considering a employment, included in pension retirement plans, are valid, even
territorial restriction, the facts and circumstances surrounding the case though unrestricted in time or geography. The reasoning behind this
must be considered.61 conclusion is that the forfeiture, unlike the restraint included in the
employment contract, is not a prohibition on the employee’s engaging
Thus, in determining whether the contract is reasonable or not, the trial in competitive work but is merely a denial of the right to participate in
court should consider the following factors: (a) whether the covenant the retirement plan if he does so engage. A leading case on this point
protects a legitimate business interest of the employer; (b) whether the is Van Pelt v. Berefco, Inc., supra, 208 N.E.2d at p. 865, where, in
covenant creates an undue burden on the employee; (c) whether the passing on a forfeiture provision similar to that here, the Court said:
covenant is injurious to the public welfare; (d) whether the time and
territorial limitations contained in the covenant are reasonable; and (e) "A restriction in the contract which does not preclude the employee
whether the restraint is reasonable from the standpoint of public from engaging in competitive activity, but simply provides for the loss
policy.62 of rights or privileges if he does so is not in restraint of trade."
(emphasis added)65
Not to be ignored is the fact that the banking business is so impressed
with public interest where the trust and interest of the public in general A post-retirement competitive employment restriction is designed to
is of paramount importance such that the appropriate standard of protect the employer against competition by former employees who
diligence must be very high, if not the highest degree of diligence.63 may retire and obtain retirement or pension benefits and, at the same
time, engage in competitive employment.66
We are not impervious of the distinction between restrictive covenants
barring an employee to accept a post-employment competitive We have reviewed the Undertaking which respondent impelled
employment or restraint on trade in employment contracts and petitioner to sign, and find that in case of failure to comply with the
restraints on post-retirement competitive employment in pension and promise not to accept competitive employment within one year from
retirement plans either incorporated in employment contracts or in February 28, 1995, respondent will have a cause of action against
collective bargaining agreements between the employer and the union petitioner for "protection in the courts of law." The words "cause of
of employees, or separate from said contracts or collective bargaining action for protection in the courts of law" are so broad and
agreements which provide that an employee who accepts post comprehensive, that they may also include a cause of action for
retirement competitive employment will forfeit retirement and other prohibitory and mandatory injunction against petitioner, specific
performance plus damages, or a damage suit (for actual, moral and/or SO ORDERED.
exemplary damages), all inclusive of the restitution of the P963,619.28
which petitioner received from respondent. The Undertaking and the
Release, Waiver and Quitclaim do not provide for the automatic
forfeiture of the benefits petitioner received under the SRP upon his
breach of said deeds. Thus, the post-retirement competitive
employment ban incorporated in the Undertaking of respondent does
not, on its face, appear to be of the same class or genre as that
contemplated in Rochester.

It is settled that actual damages or compensatory damages may be

awarded for breach of contracts. Actual damages are primarily
intended to simply make good or replace the loss covered by said
breach.67 They cannot be presumed. Even if petitioner had admitted to
having breached the Undertaking, respondent must still prove that it
suffered damages and the amount thereof.68 In determining the amount
of actual damages, the Court cannot rely on mere assertions,
speculations, conjectures or guesswork but must depend on
competent proof and on the best evidence obtainable regarding the
actual amount of losses.69 The benefit to be derived from a contract
which one of the parties has absolutely failed to perform is of necessity
to some extent a matter of speculation of the injured party.

On the assumption that the competitive employment ban in the

Undertaking is valid, petitioner is not automatically entitled to return
the P963,619.28 he received from respondent. To reiterate, the terms
of the Undertaking clearly state that any breach by petitioner of his
promise would entitle respondent to a cause of action for protection in
the courts of law; as such, restitution of the P963,619.28 will not follow
as a matter of course. Respondent is still burdened to prove its
entitlement to the aforesaid amount by producing the best evidence of
which its case is susceptible.70

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The

Decision of the Court of Appeals in CA-G.R. CV No. 52235 is SET
ASIDE. Let this case be REMANDED to the Regional Trial Court of
Manila for further proceedings conformably with this decision of the
Court.