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CENTURY PROPERTIES v. EDWIN J. BABIANO & EMMA B. CONCEPCION

FACTS:

The case involves a dispute between Century Properties, Inc. (CPI) and its former employees, Edwin J. Babiano and Emma B. Concepcion, regarding the payment of their unpaid commissions. Babiano was initially hired as Director of Sales and eventually became Vice President for Sales, while Concepcion was hired as a Sales Agent and later promoted as Project Director. Both employees were entitled to monthly subsidies, commissions, and cash incentives as per their employment contracts. CPI alleged that Babiano violated the "Confidentiality of Documents and Non-Compete Clause" in his contract when he provided a competitor with CPI's marketing strategies and spread false information about CPI and its projects. As a result, CPI terminated Babiano's employment and withheld his commissions. Concepcion, on the other hand, resigned from CPI through a letter without specifying any reason. Respondents filed a complaint for non-payment of their commissions and damages against CPI. The Labor Arbiter ruled in favor of CPI, but the NLRC reversed the decision and ordered CPI to pay the unpaid commissions of Babiano and Concepcion.

Respondent Ma. Theresa Babiano and respondent Ma. Victoria Concepcion were both hired by petitioner Crown Peak International Corporation (CPI) as sales directors. Babiano had an employment contract which included a provision stating that she would receive commissions for every sale she made. She later resigned from CPI and sought payment for her unpaid commissions. Case M-6907-2004 was filed before the NLRC, and the Labor Arbiter (LA) ruled in favor of Babiano, ordering CPI to pay her commissions.

Concepcion, on the other hand, was initially hired as a sales director, but was later promoted to the position of project director. Like Babiano, she also had an employment contract with CPI. She claimed that she was not paid her commissions for sales made during her employment. Concepcion filed a complaint for non-payment of commissions on June 16, 2011, alleging that she was entitled to a commission of 2.5% for every sale of a CPI property. The LA ruled in favor of Concepcion, and CPI was ordered to pay her commissions.

Both CPI and the respondents filed separate motions for partial reconsideration, but were denied by the LA. CPI appealed to the NLRC, arguing that the respondents were not entitled to the unpaid commissions because they violated the "Confidentiality of Documents and Non-Compete Clause" in their contracts. The NLRC ruled that CPI cannot withhold the unpaid commissions on this ground, as the clause only referred to acts done after the employment relationship ended. The NLRC also found that there was an employer-employee relationship between CPI and Concepcion.

CPI filed a petition for certiorari before the CA, seeking to reverse the NLRC ruling. The CA affirmed the NLRC ruling but increased the award of unpaid commissions to the respondents. CPI's motion for reconsideration was denied by the CA, leading to the filing of this petition before the Supreme Court.

ISSUES:

  1. Whether the "Confidentiality of Documents and Non-Compete Clause" in the employment contract is clear and unambiguous.

  2. Whether the commissions and incentives should be forfeited in case of breach of the employment contract.

  3. Whether or not the "Confidentiality of Documents and Non-Compete Clause" in the employment contract can be invoked during the pendency of the employer-employee relationship.

  4. Whether or not an employer-employee relationship existed between the parties.

  5. Whether or not the NLRC's ruling awarding the unpaid commissions is final and binding on the employee.

  6. Whether or not Concepcion is entitled to her unpaid commissions.

  7. Whether or not the commissions of Babiano should be forfeited.

RULING:

  1. The "Confidentiality of Documents and Non-Compete Clause" in the employment contract is deemed clear and unambiguous. It bars the employee from working with any person whose business is in direct competition with the company while employed and for a year after resignation or termination. It also expressly states that forms of compensation, including commissions, will be forfeited in case of breach.

  2. The commissions and incentives should indeed be forfeited in case of breach of the employment contract.

  3. The Court held that the "Confidentiality of Documents and Non-Compete Clause" can be invoked during the pendency of the employer-employee relationship. The Court disagreed with the Court of Appeals' interpretation that the clause only applies to acts done after the cessation of the employment relationship or "post-employment" relations. The Court emphasized that the parties clearly intended for the clause to be applicable during the employee's employment. Therefore, the employee's breach of the clause while employed justifies the forfeiture of unpaid commissions.

  4. The Court ruled that an employer-employee relationship existed between the parties. The Court applied the control test to determine the presence of an employer-employee relationship, which focuses on the employer's power to control the employee's conduct. The Court found that the employer had the power to hire, pay wages, dismiss, and control the employee's conduct. Moreover, the employee performed functions that were necessary and desirable for the employer's business. The fact that the employee's engagement contract was denominated as a "Contract of Agency for Project Director" did not negate the existence of employer-employee relations.

  5. The Court held that the NLRC's ruling awarding unpaid commissions is not final and binding on the employee. While it is a general rule that a party who has not appealed is deemed to have acquiesced to the judgment, there are exceptions when strict adherence to the rule impairs substantive rights. In this case, the Court found that increasing the monetary award would not impair the substantive rights of the parties, particularly the right of the employee to monetary compensation for the unpaid commissions.

  6. Yes, Concepcion is entitled to her unpaid commissions. The Court of Appeals properly recomputed Concepcion's unpaid commissions, despite her failure to seek a review of the National Labor Relations Commission's (NLRC) computation. Concepcion's right to her earned commissions is a substantive right that cannot be impaired by an erroneous computation.

  7. Yes, the commissions of Babiano should be forfeited. The Court holds that Babiano's commissions were properly forfeited for violating the "Confidentiality of Documents and Non-Compete Clause."

PRINCIPLES:

  • The literal meaning of the stipulations in a contract shall control if the terms are clear and leave no doubt upon the intention of the parties. The intention of the parties must be gathered from the language of the contract alone.

  • In interpreting contracts, the court must first determine whether a provision or stipulation is ambiguous. Absent any ambiguity, the provision on its face will be read as it is written and treated as the binding law of the parties.

  • Obligations arising from contracts, including employment contracts, have the force of law between the contracting parties and should be complied with in good faith.

  • Parties are bound by the stipulations, clauses, terms, and conditions they have agreed to, provided that these are not contrary to law, morals, public order, or public policy.

  • The "Confidentiality of Documents and Non-Compete Clause" in an employment contract can be invoked during the pendency of the employer-employee relationship, not just after its cessation.

  • The control test is used to determine the presence of an employer-employee relationship, focusing on the employer's power to control the employee's conduct.

  • The designation of a contract as an "Contract of Agency for Project Director" does not negate the existence of an employer-employee relationship if the elements of an employment relationship are present.

  • While a party who has not appealed from a judgment is deemed to have acquiesced to it, exceptions exist when strict adherence to the rule impairs substantive rights.

  • The right to monetary compensation for an illegally dismissed employee is a substantive right that cannot be impaired.

  • Equity dictates that the Court set aside a rule that impairs a substantive right to pave the way for a full and just adjudication of the case.

  • Forfeiture of commissions may be justified when an employee violates confidentiality and non-compete clauses.