G.R. No. L-1458 : March 29, 1906

MAX L. FORNOW, plaintiff-appellant, vs. J. C. HOFFMEISTER, defendant-appellee.

FACTS:
On January 24, 1901, in Manila, plaintiff Max L. Fornow and defendant J. C. Hoffmeister executed a contract of employment. The contract stipulated, among other things, that upon its termination, Hoffmeister would not work for any other firm or engage in business for himself in the Philippine Islands for three years. A penalty of 10,000 marks was stipulated for any breach of this condition. Fornow also agreed to pay Hoffmeister’s travel expenses to return to Europe. Hoffmeister returned to Singapore, secured a refund for part of his ticket, and then came back to Manila to work for another firm, thereby violating the contract. Fornow filed an action to recover the 10,000-mark penalty and the travel expenses he had advanced. At trial, Hoffmeister admitted all the factual allegations of the complaint but argued the contract was unenforceable for violating the U.S. Contract Labor Law, which had been extended to the Philippines. The trial court dismissed the complaint, holding the contract void ab initio under said law.

ISSUE:
Whether the contract executed in Manila on January 24, 1901 is null and void for violating the Alien Contract Labor Law of the United States.

RULING:
NO. The Supreme Court reversed the trial court’s decision. The contract dated January 24, 1901, was the only contract proven and admitted by the parties. There was no competent evidence to establish that an earlier contract, which would have been subject to the Contract Labor Law (extended to the Philippines on June 6, 1899), was made between the parties. The stipulation in the 1901 contract that it was effective retroactively from July 1, 1900, did not prove the existence of a prior, separate contract made in violation of the law. Therefore, the contract in question was valid and enforceable. The defendant was ordered to pay the stipulated penalty of 10,000 marks (or its equivalent in Philippine currency) with legal interest from the filing of the complaint. However, the plaintiff could not recover the advanced travel expenses, as that payment was a voluntary fulfillment of an unconditional obligation under the contract.