GR 153674; (December, 2006) (Digest)
G.R. No. 153674 ; December 20, 2006
AVON COSMETICS, INC. and JOSE MARIE FRANCO, petitioners, vs. LETICIA H. LUNA, respondent.
FACTS
Respondent Leticia H. Luna began working for Beautifont, Inc. in 1972, later continuing under petitioner Avon Cosmetics, Inc. after it acquired Beautifont. In 1985, the parties executed a Supervisor’s Agreement, stipulating that Luna was an independent retailer/dealer, not an employee, and that either party could terminate the agreement “at will, with or without cause, at any time upon notice to the other.” In 1988, Luna concurrently became a Group Franchise Director for Sandré Philippines, Inc., selling its products. She circulated a legal opinion among colleagues declaring certain clauses of her Avon agreement invalid. Avon, through its President Jose Marie Franco, then terminated her Supervisor’s Agreement via a letter dated October 11, 1988, citing her concurrent selling activities for another company.
Luna filed a complaint for damages against Avon and Franco. The Regional Trial Court ruled in her favor, finding the termination clause contrary to public policy and that Avon acted in bad faith. The Court of Appeals affirmed the decision. Petitioners Avon and Franco elevated the case to the Supreme Court via a Petition for Review on Certiorari.
ISSUE
Whether the termination clause in the Supervisor’s Agreement, allowing termination “at will, with or without cause,” is valid and enforceable.
RULING
The Supreme Court REVERSED the Court of Appeals and RTC decisions, ruling in favor of petitioners. The termination clause is valid and enforceable. The legal logic is anchored on the principle of contractual freedom and the nature of the agreement. The contract expressly defined Luna as an independent dealer, not an employee, thereby removing the relationship from the protective ambit of labor laws requiring termination only for just or authorized cause. The clause is a reciprocal right equally available to both parties, subject only to the mutual requirement of notice. The Court emphasized that parties are bound by the stipulations in their contract, which is the law between them, so long as they are not contrary to law, morals, good customs, public order, or public policy. The clause does not violate public policy as it pertains to a commercial dealership agreement characterized by independence, not an employment contract. Since the agreement was validly terminated pursuant to its own terms, Avon incurred no liability for damages.