G.R. No. 112940 November 21, 1994
DAI-CHI ELECTRONICS MANUFACTURING CORPORATION, petitioner, vs. HON. MARTIN S. VILLARAMA, JR., Presiding Judge, Regional Trial Court, Branch 156, Pasig, Metro Manila and ADONIS C. LIMJUCO, respondents.

FACTS

Petitioner Dai-Chi Electronics Manufacturing Corporation filed a complaint for damages with the Regional Trial Court against private respondent Adonis C. Limjuco, a former employee. The complaint alleged that private respondent violated a provision in their Contract of Employment dated August 27, 1990, which prohibited him from being connected with any business similar to or in competition with petitioner for a period of two years after termination of his service. Petitioner claimed that within two years from his resignation on January 30, 1992, private respondent became an employee of Angel Sound Philippines Corporation, a competitor, holding a similar position. Petitioner sought to recover liquidated damages in the amount of P100,000.00 as stipulated in the contract for such a violation. The Regional Trial Court dismissed the complaint on the ground of lack of jurisdiction, ruling that the claim for damages arose from employer-employee relations and thus fell under the exclusive original jurisdiction of the Labor Arbiter pursuant to Article 217(4) of the Labor Code, as amended.

ISSUE

Whether petitioner’s claim for liquidated damages based on a post-employment contractual obligation is a claim arising from employer-employee relations cognizable by the Labor Arbiter, or an intrinsically civil dispute cognizable by the regular courts.

RULING

The Supreme Court ruled that the claim is cognizable by the regular courts. The cause of action is for breach of a contractual obligation, specifically a post-employment stipulation, and is grounded on civil law. The Court held that for a claim for damages to fall under the jurisdiction of the Labor Arbiter under Article 217(4) of the Labor Code, it must have a reasonable causal connection with any of the other claims provided for in that article, such as unfair labor practices or terms and conditions of employment. Petitioner’s claim, which seeks to enforce a contractual stipulation for liquidated damages due to a post-employment breach, does not have such a connection with employer-employee relations. The Court cited Singapore Airlines Limited v. Paño, which held that an action for damages based on the breach of a contractual obligation in an employment agreement, when coupled with averments of wanton failure, refusal, and malicious and bad faith violation, is a civil dispute. The rationale is that the complaint is anchored not on the termination of employment per se, but on the breach of a contractual covenant. The Court also found that petitioner did not commit forum shopping, as the labor case filed by private respondent was disclosed and the liquidated damages claim was raised merely as a counterclaim in that case. Accordingly, the Orders of the Regional Trial Court were set aside, and it was ordered to continue with the proceedings.