GR 163269; (April, 2006) (Digest)
G.R. No. 163269 ; April 19, 2006
ROLANDO C. RIVERA, Petitioner, vs. SOLIDBANK CORPORATION, Respondent.
FACTS
Petitioner Rolando C. Rivera, a long-time employee of Solidbank Corporation, availed of the bank’s Special Retirement Program (SRP) in 1995. He received a net benefit of P963,619.28 and executed a Release, Waiver, and Quitclaim, along with a supplementary Undertaking. The Undertaking contained a stipulation wherein Rivera promised not to seek employment with a competitor bank or financial institution within one year from his retirement date of February 28, 1995.
Barely two months later, on May 1, 1995, Rivera accepted employment as Manager of the Credit Investigation and Appraisal Division at Equitable Banking Corporation, a direct competitor of Solidbank. Solidbank demanded the return of the retirement benefits, alleging a breach of the Undertaking. Upon Rivera’s refusal, Solidbank filed a complaint for sum of money. The Regional Trial Court ruled in favor of Solidbank, a decision affirmed by the Court of Appeals.
ISSUE
Whether the one-year non-competition clause in the Undertaking executed by Rivera is valid and enforceable.
RULING
No, the non-competition clause is void and unenforceable. The Supreme Court reversed the decisions of the lower courts. The legal logic rests on the principle that restraints on employment and trade are strictly construed against the party seeking their enforcement. For such a stipulation to be valid, it must be reasonable and not contrary to public policy. The clause in question was unreasonable and oppressive.
The Court found the restriction excessive in scope, as it prohibited Rivera from seeking employment with any competitor bank or financial institution without any geographical limitation, effectively barring him nationwide. It was also unreasonable in duration, imposing a one-year ban that deprived Rivera of his right to earn a livelihood in the only field for which he was trained, especially after a voluntary retirement. Crucially, the retirement benefits paid were not consideration for the non-competition agreement but were amounts Rivera had already earned and was entitled to by virtue of his long service. The clause was a gratuitous and onerous addition that served no legitimate protectable interest of Solidbank, as Rivera’s new position did not involve the use of trade secrets or confidential information. Therefore, being an unreasonable restraint of trade, the clause is void.