gf equity v valenzona

8/9/2019 GF Equity v Valenzona

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Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 156841 June 30, 2005

GF EQUITY, INC.,petitioner,vs.RTURO !"EN#ON,respondent.

D ! I S I O N

CRPIO$MOR"ES, J.:

On challen"e via Petition for Revie# on Certiorariis the !ourt of $ppeals October %&, '(('Decision%reversin" that of the Re"ional Trial !ourt )RT!* of Manila dated +une ', %--'#hichdis/issed the co/plaint of herein respondent $rturo Valen0ona )Valen0ona* for breach of contract#ith da/a"es a"ainst herein petitioner 12 3uit4, Inc. )12 3uit4*.

The factual antecedents of the case are as follo#s5

12 3uit4, represented b4 its !hief 2inancial Officer 6. Steven 74ten"su )74ten"su*, hiredValen0ona as Head !oach of the $las8a bas8etball tea/ in the Philippine 9as8etball $ssociation)P9$* under a !ontract of /plo4/ent.:

$s head coach, the duties of Valen0ona #ere described in the contract to include the follo#in"5

; ; ;

%. . . . coachin" at all practices and "a/es scheduled for the !ORPOR$TIONat ho/e> and >on the road>?and such rules shall be part of this contract as full4 is )sic * if herein #ritten and shall be theresponsibilit4 of the !O$!H to i/ple/ent? ; ; ;

&. The !O$!H a"rees )a* to report at the ti/e and place fi;ed b4 the !ORPOR$TION in"ood ph4sical condition? )b* to 8eep hi/self throu"hout the entire season in "ood ph4sicalcondition? )c* to "ive his best services, as #ell as his lo4alt4 to the !ORPOR$TION, and to
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serve as bas8etball coach for the !ORPOR$TION and its assi"nees? )d* to be neatl4 andfull4 attired in public and al#a4s to conduct hi/self on and off the court accordin" to thehi"hest standards of honest4, /oralit4, fair pla4 and sports/anship? )e*not to do an4thin"#hich is detri/ental to the best interests of the !ORPOR$TION.

; ; ;

. The !O$!H a"rees that if so re3uested b4 the !ORPOR$TION, he #ill endorse the!ORPOR$TION


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!lose to si; 4ears after the ter/ination of his services, Valen0ona


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6hen e;e/plar4 da/a"es are a#arded, attorne4The contract /ust bind both contractin" parties? its validit4 or co/pliance cannot be left to the #ill ofone of the/.>

The above le"al provision is a virtual reproduction of $rticle %'@A of the old !ivil !ode but it #as sophrased as to e/phasi0e the principle that the contract /ust bind bothparties. This, of course is

based firstl4, on the principle that obli"ations arisin" fro/ contracts have the force of la# bet#eenthe contractin" parties and secondl4, that there must be mutuality between the parties based ontheir essential equality to which is repugnant to have one party bound by the contract leavingthe other free therefrom (8 Manresa 556. !ts ultimate purpose is to render void a contractcontaining a condition which ma"es its fulfillment dependent e#clusively upon theuncontrolled will of one of the contracting parties.

; ; ; )/phasis, italics and underscorin" supplied*

The ulti/ate purpose of the +u(u)( &)n)eis thus to nullif4 a contract containin" a condition#hich /a8es its fulfill/ent or pre=ter/ination dependent e;clusivel4 upon the uncontrolled #ill of oneof the contractin" parties.

Not all contracts thou"h #hich vest to one part4 their deter/ination of validit4 or co/pliance or theri"ht to ter/inate the sa/e are void for bein" violative of the /utualit4 principle. +urisprudence isreplete #ith instances of cases%'#here this !ourt upheld the le"alit4 of contracts #hich left theirfulfill/ent or i/ple/entation to the #ill of either of the parties. In these cases, ho#ever, there #as afindin" of the presence of essential e3ualit4 of the parties to the contracts, thus preventin" theperpetration of inCustice on the #ea8er part4.
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In the case at bar, the contract incorporates in para"raph : the ri"ht of 12 3uit4 to pre=ter/inatethe contract that >if the coach, in the sole opinion of the corporation, fails to exhibit sufficient skillor copetitive abilit! to coach the tea, the corporation a! terinate the contract."The assailedcondition clearl4 trans"resses the principle of /utualit4 of contracts. It leaves the deter/ination of#hether Valen0ona failed to e;hibit sufficient s8ill or co/petitive abilit4 to coach $las8a tea/ solel4to the opinion of 12 3uit4. 6hether Valen0ona indeed failed to e;hibit the re3uired s8ill or

co/petitive abilit4 depended e;clusivel4 on the Cud"/ent of 12 3uit4. In other #ords, 12 3uit4#as "iven an unbridled prero"ative to pre=ter/inate the contract irrespective of the soundness,fairness or reasonableness, or even lac8 of basis of its opinion.

To sustain the validit4 of the assailed para"raph #ould open the "ate for arbitrar4 and ille"aldis/issals, for void contractual stipulations #ould be used as Custification therefor.

The assailed stipulation bein" violative of the /utualit4 principle underl4in" $rticle %:( of the !ivil!ode, it is null and void.

The nullit4 of the stipulation not#ithstandin", 12 3uit4 #as not precluded fro/ the ri"ht to pre=ter/inate the contract. The pre=ter/ination /ust have le"al basis, ho#ever, if it is to be declared

Custified.

12 3uit4 failed, ho#ever, to advance an4 "round to Custif4 the pre=ter/ination. It si/pl4 invo8ed theassailed provision #hich is null and void.

6hile 12 3uit4


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specific precepts of positive la# are the supre/e nor/s of Custice #hich the la# develops and #hichare e;pressed in three principles5 honeste vivere,%&alteru non laedere%@and%us suu quiquetribuere&%Aand he #ho violates the/ violates the la#. 2or this reason, it is not per/issible to abuseour ri"hts to preCudice others.

The dis3uisition in Globe 'acka! Cable and Radio Corporation v. Court of (ppeals%is Cust as

relevant as it is illu/inatin" on the present case. In that case, this !ourt declared that even "rantin"that the therein petitioners /i"ht have had the ri"ht to dis/iss the therein respondent fro/ #or8, theabusive /anner in #hich that ri"ht #as e;ercised a/ounted to a le"al #ron" for #hich thepetitioners /ust be held liable.

One of the /ore notable innovations of the Ne# !ivil !ode is the codification of >so/e basicprinciples that are to be observed for the ri"htful relationship bet#een hu/an bein"s and for thestabilit4 of the social order.> FRPORT ON TH !OD !OMMISSION ON TH PROPOSD !IVIE!OD O2 TH PHIEIPPINS, p. :-G. The fra/ers of the !ode, see8in" to re/ed4 the defect of theold !ode #hich /erel4 stated the effects of the la#, but failed to dra# out its spirit, incorporatedcertain funda/ental precepts #hich #ere >desi"ned to indicate certain nor/s that sprin" fro/ thefountain of "ood conscience> and #hich #ere also /eant to serve as >"uides for hu/an conduct

FthatG should run as "olden threads throu"h societ4, to the end that la# /a4 approach its supre/eideal, #hich is the s#a4 and do/inance of Custice> )Id.*2ore/ost a/on" these principles is thatpronounced in $rticle %- #hich provides5

$rt. %-. ver4 person /ust, in the e;ercise of his ri"hts and in the perfor/ance of his duties, act #ithCustice, "ive ever4one his due, and observe honest4 and "ood faith.

This article, 8no#n to contain #hat is co//onl4 referred to as the principle of abuse of ri"hts, setscertain standards #hich /ust be observed not onl4 in the e;ercise of ones ri"hts but also in theperfor/ance of ones duties. These standards are the follo#in"5 to act #ith Custice? to "ive ever4onehis due? and to observe honest4 and "ood faith. The la#, therefore, reco"ni0es a pri/ordial li/itationon all ri"hts? that in their e;ercise, the nor/s of hu/an conduct set forth in $rticle %- /ust beobserved. &)'-(, (-ou'- )(7e* e' eu7e &eo'n);e/ o& '&n(e/ 7 7u-, +

nee&(-ee77 eo+e (-e 7ou&e o* 7o+e )e')(. %-en &)'-( )7 e9e&)7e/ )n +nne&-)- /oe7 no( on*o&+ )(- (-e no&+7 en7-&)ne/ )n &()e 1 n/ &e7u(7 )n /+'e (ono(-e&, e' &on' )7 (-e&e o++)((e/ *o& -)- (-e &on'/oe& +u7( e -e/&e7on7)e.9ut #hile $rticle %- la4s do#n a rule of conduct for the "overn/ent of hu/an relationsand for the /aintenance of social order, it does not provide a re/ed4 for its violation. 1enerall4, anaction for da/a"es under either $rticle '( or $rticle '% #ould be proper.%/phasis andunderscorin" supplied*.

$s for 12 3uit4 is applied onl4 in theabsence of, and never a"ainst, statutor4 la#.(equetas nunqua contravenit legis.Thus, #here the
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clai/ #as filed #ithin the statutor4 period of prescription, recover4 therefor cannot be barred b4laches. The doctrine of laches should never be applied earlier than the e;piration of ti/e li/ited forthe co//ence/ent of actions at la#,'(unless, as a "eneral rule, ine;cusable dela4 in assertin" ari"ht and ac3uiescense in e;istin" conditions are proven.'%12 3uit4 has not proven, na4 alle"ed,these.

7nder $rticle %%&&''of the Ne# !ivil !ode, an action upon a #ritten contract /ust be brou"ht #ithin%( 4ears fro/ the ti/e the ri"ht of action accrues. Since the action filed b4 Valen0ona is an action forbreach upon a #ritten contract, his filin" of the case A 4ears fro/ the date his cause of action arose#as #ell #ithin the prescriptive period, hence, the defense of laches #ould not, under thecircu/stances, lie.

!onse3uentl4, Valen0ona is entitled to recover actual da/a"es his salar4 #hich he should havereceived fro/ the ti/e his services #ere ter/inated up to the ti/e the e/plo4/ent contracte;pired.':

$s for /oral da/a"es #hich the appellate court a#arded, $rticle '''( of the Ne# !ivil !ode allo#ssuch a#ard to breaches of contract #here the defendant acted fraudulentl4 or in bad faith. Malice or

bad faith i/plies a conscious and intentional desi"n to do a #ron"ful act for a dishonest purpose or/oral obli3uit4. It conte/plates a state of /ind affir/ativel4 operatin" #ith furtive desi"n or ill=#ill.'&9ad faith /eans a breach of a 8no#n dut4 throu"h so/e /otive of interest or ill #ill. It /ust,ho#ever, be substantiated b4 evidence. 9ad faith under the la# cannot be presu/ed, it /ust beestablished b4 clear and convincin" evidence.

$s earlier stated, ho#ever, the pre=ter/ination of the contract #as not #illful as 12 3uit4 based iton a provision therein #hich is void. Malice or bad faith cannot thus be ascribed to 12 3uit4.

The unbro8en Curisprudence is that in breach of contract cases #here a part4 is not sho#n to haveacted fraudulentl4 or in bad faith, liabilit4 for da/a"es is li/ited to the natural and probableconse3uences of the breach of the obli"ation #hich the parties had foreseen or could reasonabl4have foreseen. The da/a"es, ho#ever, do not include /oral da/a"es.'@

The a#ard b4 the appellate court of /oral da/a"es /ust thus be set aside. $nd so /ust the a#ardof e;e/plar4 da/a"es, absent a sho#in" that 12 3uit4 acted in a #anton, fraudulent, rec8less,oppressive or /alevolent /anner.'A

The a#ard to Valen0ona of attorne4


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Foo(no(e7

%C( Rollo&=-'.

'Records at '%%='%:.

:Id. at =%(.

&Id. at A.

@Id. at %%=%'.

AId. at %=A.

+ide note '.

+ide note %.

-Rollo at A.

%(Tolentino, !ivil !ode Of The Philippines, Vol. IV, %--( ed., p. &%(.

%%'% S!R$ @@@, @@=@A( )%-A*.

%'.g., +espaCo Realt4 v. !ourt of $ppeals:-( S!R$ ', :- )'(('*. This !ourt in this caseenunciated the rule that the e;press provision in the lease a"ree/ent of the parties that

violation of an4 of the ter/s and conditions of the contract shall be sufficient "round forter/ination thereof b4 the lessor, re/oves the contract fro/ the application of $rticle %:(.

In Ta4lor v. 74 Tien" Piao, &: Phil. : )%-''*, this !ourt ruled that $rticle %'@A )no#$rt. %:(* creates no i/pedi/ent to the insertion in a contract for personal service ofa resolutor4 condition per/ittin" the cancellation of the contract b4 one of the parties.Such a stipulation, as can be readil4 seen, does not /a8e either the validit4 of thefulfill/ent of the contract dependent upon the #ill of the part4 to #ho/ is concededthe privile"e of cancellation? for #here the contractin" parties have a"reed that suchoption shall e;ist, the e;ercise of the option is as /uch in the fulfill/ent of thecontract as an4 other act #hich /a4 have been the subCect of a"ree/ent. ; ; ;.

In(llied anking Corporation v. Court of (ppeals, '& S!R$ :@, :A:=:A@ )%--*,this !ourt held5 >The fact that such option is bindin" onl4 on the lessor and can bee;ercised onl4 b4 the lessee does not render it void for lac8 of /utualit4. $fter all, thelessor is free to "ive or not to "ive the option to the lessee. $nd #hile the lessee hasa ri"ht to elect #hether to continue #ith the lease or not, once he e;ercises his optionto continue and the lessor accepts, both parties are thereafter bound b4 the ne#lease a"ree/ent. Their ri"hts and obli"ations beco/e /utuall4 fi;ed, and the lesseeis entitled to retain possession of the propert4 for the duration of the ne# lease, andthe lessor /a4 hold hi/ liable for the rent therefore. The lessee cannot thereafterescape liabilit4 even if he should subse3uentl4 decide to abandon the pre/ises.
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Mutualit4 obtains in such a contract and e3ualit4 e;ists bet#een the lessor and thelessee since the4 re/ain #ith the sa/e faculties in respect to fulfill/ent.>)7nderscorin" supplied*

%:'%% S!R$ ':, :( )%--'*.

%&To live honorabl4, creditabl4, or virtuousl4.

%@Not to inCure another.

%ATo render to ever4one his o#n.

%%A S!R$ , -(=-% )%--*.

%Id.at :=&.

%-!have0 v. 9onto=Pere0, '&' S!R$ :, ( )%--@*.

'(I/perial Victor4 Shippin" $"enc4 v. NER! '(( S!R$ %, %& )%--%*.

'%J. . Eotho, Inc. v. Ice K !old Stora"e Industries of the Phils., Inc.: S!R$ &&, @()%-A%*? uenaventura v. #avid, : Phil. &:@ )%-%*.

''$rt. %%&&. The follo#in" actions /ust be brou"ht #ithin %( 4ears fro/ the ti/e the ri"ht ofaction accrues.

)%* 7pon a #ritten contract?

)'* 7pon an obli"ation created b4 la#?

):* 7pon a Cud"/ent.

':In Te8ni8a S8ills and Trade Services, Inc. v. NER!, '%' S!R$ %:', %:-=%&( )%--'*, this!ourt held5

>The principal cause of action in private respondent


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'A$rticle '':' of the Ne# !ivil !ode? alvador v. Court of (ppeals, G.R. $o. /01233, March:(, '((&.

'$rticle ''( of the Ne# !ivil !ode provides5

$rt. ''(. In the absence of stipulation, attorne4

gf equity v valenzona

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