G.R. No. L-10712; August 10, 1916
ANSELMO FERRAZZINI, plaintiff-appellee, vs. CARLOS GSELL, defendant-appellant.

FACTS:
Anselmo Ferrazzini was employed by Carlos Gsell under a contract for an indefinite period, which stipulated that termination required a “written advice of six months in advance.” Gsell discharged Ferrazzini without providing this notice. Gsell justified the dismissal by alleging that Ferrazzini was habitually absent from work to take drinks, was unfaithful, and was disobedient to orders. Specifically, Gsell claimed Ferrazzini frequently left the factory without permission despite repeated warnings from the manager, and that at a mess dinner, Ferrazzini made statements to a fellow employee indicating Gsell had no confidence in his workers and that the employee’s salary was insufficient. Ferrazzini admitted to occasionally going out for a drink but claimed it was with prior permission. The trial court found in favor of Ferrazzini, awarding damages for wrongful discharge. Gsell appealed, arguing the dismissal was justified and that the court erred in not considering his counterclaim.

ISSUE:
1. Was Ferrazzini’s discharge by Gsell without the six-month notice justified by Ferrazzini’s conduct, thereby constituting a breach of the contract of service by the employee?
2. Was the restrictive covenant in the contract, which prohibited Ferrazzini from engaging in any similar business in the Philippine Islands without Gsell’s written permission for two years after termination, valid and enforceable?

RULING:
1. On the Justification for Discharge: No, the discharge was not justified. The Supreme Court, after reviewing the evidence, found that Gsell failed to prove Ferrazzini’s conduct constituted a breach of his duties sufficient to warrant dismissal without notice. The Court held that while a master may dismiss a servant for just cause (such as disloyalty, unfaithfulness, or disobedience to reasonable orders), the evidence did not establish that Ferrazzini’s occasional absences for drinks (which he believed were permitted) or his dinner conversation (which was a private expression of opinion not shown to have caused actual harm or incited others to breach their contracts) rose to the level of a breach of an express or implied contractual duty. Therefore, Gsell’s termination without the required six-month notice was a breach of contract, making him liable for damages.
2. On the Restrictive Covenant: No, the restrictive covenant was void as against public policy. The Court ruled that a contract in restraint of trade is valid only if it is reasonable and not greater than necessary for the protection of the employer, without causing undue hardship to the employee or injury to the public. The covenant here was unreasonable because: (a) it was not limited as to the kind of trade or business Ferrazzini could engage in, covering “any other industrial enterprise of a similar nature”; (b) it covered the entire Philippine Islands; and (c) it would force Ferrazzini to leave the country to earn a livelihood if Gsell withheld permission. The covenant was broader than necessary for Gsell’s protection (which was already addressed by other confidentiality clauses in the contract) and was therefore an undue and unreasonable restraint of trade.

DISPOSITIVE PORTION: The judgment of the trial court in favor of Ferrazzini was affirmed. Gsell was liable for damages for wrongful discharge, and the restrictive covenant was declared void.