G.R. No. 156841 ; June 30, 2005
GF EQUITY, INC., petitioner, vs. ARTURO VALENZONA, respondent.

FACTS

Petitioner GF Equity, Inc. hired respondent Arturo Valenzona as head coach of its Alaska PBA team under a two-year employment contract commencing January 1, 1988. The contract contained a provision allowing GF Equity to terminate the agreement if, “in the sole opinion of the CORPORATION,” Valenzona failed to exhibit sufficient skill or competitive ability. Despite his lawyer’s advice on the one-sidedness of this clause, Valenzona signed the contract. After the team placed third in two 1988 conferences, GF Equity terminated Valenzona’s services in September 1988 by invoking this provision. Nearly six years later, in 1994, Valenzona filed a complaint for breach of contract with damages, arguing the termination clause violated the principle of mutuality of contracts.

ISSUE

Whether the contractual provision allowing termination based solely on the employer’s opinion is valid and enforceable.

RULING

No. The Supreme Court affirmed the Court of Appeals and ruled the termination clause void for lacking mutuality, contravening Article 1308 of the Civil Code. A contract must bind both parties equally; its validity cannot be left to the will of one alone. The clause made Valenzona’s continued employment dependent purely on GF Equity’s subjective and unilateral opinion, rendering his tenure illusory. The Court rejected the argument that Valenzona voluntarily assumed the risk, as such a potestative condition is void by law. Consequently, the termination was unjustified. The action, being based on a written contract, prescribed in ten years, not four, so the 1994 complaint was timely. GF Equity was ordered to pay Valenzona his salaries for the unexpired portion of the contract, moral and exemplary damages, and attorney’s fees for acting in evident bad faith.