Ticzon vs. Video Post Manila, Inc.

A preliminary injunction issued to enforce a two-year post-employment non-compete prohibition has the same lifetime as the prohibition; once the two-year period expires, a challenge to the writ becomes functus oficio and moot, although the principal action for damages remains justiciable and must be heard on the merits. A preliminary finding on the validity of a contract for purposes of issuing a preliminary injunction is provisional and does not dispose of the main case.

Respondent Video Post Manila, Inc. is a post-production business that purchased computerized editing equipment referred to as "Henry." Petitioners Michael Thomas S. Plana and Paul Hendrik P. Ticzon were employed by respondent under contracts containing Clause 5, a covenant prohibiting employment with a competing business for two years after termination. Petitioner Omni Post is the enterprise alleged to have competed with respondent and to have hired the individual petitioners. A related administrative matter, RTJ-97-1379, resulted in the respondent judge being admonished for acts connected with the impugned writ. The procedural posture implicates Rule 58 of the 1997 Rules of Civil Procedure and Rule 65, because the challenged orders granted and affirmed a writ of preliminary injunction.

In December 1992, respondent Video Post Manila, Inc. purchased a computerized editing equipment referred to as "Henry," to be used for editing and post-production. It hired petitioner Michael Thomas S. Plana on March 16, 1991 as a video editor and petitioner Paul Hendrik P. Ticzon on October 22, 1993 as a computer graphics artist. Both signed employment contracts containing Clause 5, which prohibited them, during their employment and for two years thereafter, from being employed or engaged in any other capacity or undertaking and from being interested or concerned, directly or indirectly, in any business firm or corporation carrying on a similar business or one that might compete with respondent.

In November 1995, Ticzon and Plana resigned. From December 1995 to January 1996, they applied for employment with petitioner Omni Post, which eventually hired them. On May 17, 1996, respondent instituted a Complaint for Damages, alleging that Plana and Ticzon breached Clause 5 by seeking employment with Omni Post. The complaint alleged that Omni Post was organized to compete with respondent; that after the resignations and subsequent employment, respondent lost accounts and clients, was unable to submit bids and obtain contracts for highly technical jobs, hired a Hong Kong consultant to train its new Henry operator and graphic artists, and shut down one of its two editing suites; that the loss of business was about P6,000,000.00; and that exemplary damages of P1,000,000.00 each were warranted.

On June 18, 1996, respondent moved for a temporary restraining order and preliminary injunction to enjoin petitioners from working with Omni Post as video editors. The RTC granted the TRO on June 26, 1996. In an Order dated July 30, 1996, Judge Teofilo L. Guadiz Jr. issued a Writ of Preliminary Injunction. The trial court found Clause 5 not necessarily void as a restraint of trade, and held it reasonable and valid for purposes of the injunction because its effectivity was limited to the period of employment and two years thereafter and because it was limited as to trade, prohibiting only employment in a competing business rather than any employment. On April 2, 1997, the RTC denied petitioners' Motion for Reconsideration due to lack of verification, explaining that evidence on a preliminary injunction need not be conclusive or complete and that respondent had shown substantial investments in capital equipment, technical information, and trade secrets, making Clause 5 reasonably necessary to protect its investments.

Respondent also filed a contempt case against petitioners for violating the preliminary injunction, alleging that they continued to work for Omni Post despite the writ; the independent Petition for Contempt was dated September 12, 1997 and docketed as Civil Case No. 97-2173. On June 9, 1997, petitioners challenged the RTC Orders in a Petition for Certiorari under Rule 65 before the Court of Appeals. The Court of Appeals dismissed the Petition as moot and academic, and denied reconsideration. The trial court's factual findings for the preliminary injunction were that respondent had made substantial investments in capital equipment and in technical information and trade secrets to which the individual petitioners had been exposed, and that Clause 5 was reasonably necessary to protect those investments. The Court of Appeals found that the two-year prohibition had expired in November 1997. These findings framed the Supreme Court's review of whether the challenge to the writ was moot and whether the lower courts had prejudged the main case.

• Mootness: Petitioners argued that the Court of Appeals erred in dismissing their June 3, 1997 Petition for Certiorari as moot and academic; by refusing to resolve the merits, the Court of Appeals practically sustained Judge Guadiz's ruling that the Writ of Preliminary Injunction was valid.
• Prejudgment: Petitioners maintained that the Court of Appeals and Judge Guadiz prejudged Civil Case No. 96-703 when they ruled on the reasonableness and validity of Clause 5, even though the only issue was the propriety of issuing the Writ of Preliminary Injunction.
• Rule 58 Violation: Petitioners argued that the July 30, 1996 and April 2, 1997 Orders granting and affirming the preliminary injunction violated Rule 58 of the 1997 Rules of Civil Procedure.
• Contempt Case: Petitioners argued that the contempt case against them precluded the case from being considered moot.
• Constitutional Exception: Petitioners invoked Salonga vs. Cruz-Paño and attempted to introduce a constitutional color to the case, apparently to bring it within an exception to the mootness rule.

• Mootness: Whether the Court of Appeals erred in dismissing the Petition for Certiorari dated June 3, 1997 for being moot and academic.
• Rule 58: Whether the Court of Appeals erred in not holding that the Orders of Judge Teofilo Guadiz dated July 30, 1996 and April 2, 1997 granting and affirming the grant of the preliminary writ of injunction were in violation of Rule 58 of the 1997 Rules of Civil Procedure.
• Prejudgment: Whether the Court of Appeals and Judge Teofilo Guadiz prejudged Civil Case No. 96-703 in ruling on the reasonableness and validity of Clause 5 in the employment contracts when the only issue to be resolved was the propriety of the issuance of the writ of preliminary injunction.

• Mootness: No. The Court of Appeals correctly dismissed the challenge to the preliminary injunction as moot because the two-year prohibition expired in November 1997 and the writ had become functus oficio; the main damages case, however, is not moot and must be heard on the merits.
• Rule 58: Not reached. Because the preliminary injunction issue was moot, the Court declined to discuss whether the RTC Orders violated Rule 58.
• Prejudgment: No. The trial court's finding on Clause 5 was provisional and only for purposes of the preliminary injunction; the Court of Appeals referred to Del Castillo vs. Richmond only to affirm that preliminary finding. The main case still requires proof of violation and damages.

• Mootness: The Court of Appeals declared moot only the issue of whether the lower court erred in granting the Writ of Preliminary Injunction, not the entire case. The prohibition in Clause 5 and the writ had the same two-year lifetime, beginning in November 1995 and ending in November 1997. Any declaration upholding the writ would have been useless because it had outlived its purpose and become functus oficio; even a declaration of invalidity would have been in vain because petitioners were already free to seek employment. Thus, no actual case or controversy remained as to the preliminary injunction. Courts resolve actual cases and controversies, not advisory opinions, and do not take cognizance of moot and academic questions subject to notable exceptions involving constitutional issues. Salonga vs. Cruz-Paño was misplaced because it concerns the duty to formulate guiding and controlling constitutional principles, and no constitutional issue was presented. The contempt case could proceed independently because there was no finding on the validity of the writ, and the court hearing the contempt case could make its own determination. As to damages, the main case remained unresolved. Under Philippine National Bank vs. CA, injunctive reliefs are preservative remedies and injunction is not a cause of action but a provisional remedy adjunct to the main suit; when the act sought to be enjoined has become fait accompli, only the prayer for provisional remedy should be denied, but the trial court should still proceed with the principal action. A remand was therefore necessary.
• Rule 58: The Court stated that in view of its ruling on mootness, the second assigned error need not be discussed. The issue of whether the RTC Orders violated Rule 58 was not resolved because the preliminary injunction challenge was moot.
• Prejudgment: No prejudgment occurred. The Court of Appeals, having found the case moot, referred to Del Castillo vs. Richmond only to affirm the trial court's preliminary finding that Clause 5 was valid and could serve as basis for the writ. The trial court expressly characterized its finding as provisional and "for purposes of the resolution of the application for preliminary injunction." Even if Clause 5 were valid, the main case would not be resolved because respondent still had to prove with sufficient evidence the violation of the clause, the damages suffered, and the amount of such damages. Petitioners prematurely questioned interlocutory orders and attempted to appeal the entire case. In injunctive matters, lower courts have judicial discretion, which should not be interfered with absent manifest abuse; no reason to disturb that exercise appeared.

• Moot and Academic Principle — Courts are called upon to resolve actual cases and controversies, not to render advisory opinions. They cannot take cognizance of moot and academic questions, subject to notable exceptions involving constitutional issues. The Court applied this principle to hold that the challenge to the preliminary injunction was moot because the two-year non-compete prohibition it enforced had expired.
• Functus Oficio — A preliminary injunction issued to enforce a two-year post-employment non-compete prohibition has the same lifetime as the prohibition. Upon expiration of the two-year period, the writ becomes functus oficio and any suit questioning its validity is moot. The Court applied this to the preliminary injunction, which expired in November 1997.
• Injunction as Provisional Remedy — Injunction is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. When the act sought to be enjoined has become fait accompli, only the prayer for provisional remedy should be denied; the trial court should still proceed with the determination of the principal action so that the rights of the parties may be adjudicated. The Court applied this to remand the main damages case for trial on the merits.
• Provisional Nature of Injunctive Findings — A finding on the validity of a contract for purposes of resolving an application for preliminary injunction is provisional and does not dispose of the main case. The Court used this to reject the claim that the trial court and the Court of Appeals had prejudged Civil Case No. 96-703.
• Judicial Discretion in Injunctive Matters — Lower courts exercise judicial discretion in injunctive matters, and such exercise should not be interfered with except where there is manifest abuse. The Court found no reason to disturb the lower courts' exercise of discretion.

• "A preliminary injunction issued in an action to enforce a contract, which prohibits an employee from working in a competing enterprise within two years from resignation, has the same lifetime as the prohibition — two years also. Therefore, upon the expiration of the said period, a suit questioning the validity of the issuance of the writ becomes functus oficio and therefore moot." — States the core ruling on mootness and the lifetime of the preliminary injunction.
• "Courts are called upon to resolve actual cases and controversies, not to render advisory opinions. They cannot take cognizance of moot and academic questions, subject to notable exceptions involving constitutional issues." — States the mootness doctrine and its constitutional-exception qualification.
• "When the act sought to be enjoined ha[s] become fait accompli, only the prayer for provisional remedy should be denied. However, the trial court should still proceed with the determination of the principal action so that an adjudication of the rights of the parties can be had." — Supports the remand of the main damages case despite the mootness of the preliminary injunction.
• "What is abundantly clear is the provisional nature of its finding on the validity of Clause 5 which, it clarified, was "for purposes of the resolution of the application for preliminary injunction."" — Rejects the claim of prejudgment and defines the limited effect of the trial court's preliminary finding.

• Bacolod-Murcia Planters' Association, Inc. vs. Bacolod-Murcia Milling Co., Inc., 30 SCRA 67, October 31, 1969 — Cited for the rule that courts act only on actual controversies and do not render advisory opinions; supports the dismissal of the moot preliminary-injunction issue.
• Philippine National Bank vs. CA, 291 SCRA 271, June 26, 1998 — Cited for the principle that injunctive reliefs are preservative remedies and that when the act sought to be enjoined has become fait accompli, only the provisional remedy is denied while the principal action proceeds; supports the remand for trial on damages.
• Salonga vs. Cruz-Paño, 134 SCRA 438, February 18, 1985 — Distinguished; its exception for the formulation of guiding and controlling constitutional principles did not apply because the case was a simple breach-of-contract dispute without a constitutional issue.
• Top-Weld Manufacturing, Inc. vs. ECED, S.A., 138 SCRA 118, August 9, 1985 — Cited in support of the mootness of the preliminary injunction after the period of prohibition expired.
• Del Castillo vs. Richmond, 45 Phil. 679, February 9, 1924 — Cited by the trial court and the Court of Appeals for the validity of a non-compete clause limited as to time and trade; the Supreme Court clarified that the Court of Appeals referred to it only to affirm the trial court's preliminary finding.
• Ferrassini vs. Gsell, 34 Phil. 697 — Cited in the trial court's preliminary injunction order for the rule that a contract in restraint of trade is not necessarily void and must be tested for reasonableness under the circumstances.

• Rule 45, Rules of Court — The basis for the Petition for Review on Certiorari filed before the Supreme Court assailing the CA Decision and Resolution.
• Rule 65, Rules of Court — The basis for petitioners' Petition for Certiorari before the Court of Appeals challenging the RTC Orders granting and affirming the preliminary injunction.
• Rule 58, 1997 Rules of Civil Procedure — Invoked by petitioners as the provision allegedly violated by the RTC Orders; the Court did not discuss the alleged violation because the preliminary-injunction issue was moot.
• Clause 5, Employment Contracts — The contractual non-compete provision prohibiting the individual petitioners, during employment and for two years thereafter, from being employed or engaged in any capacity in a competing business. Its two-year duration determined the lifetime of the preliminary injunction and the mootness of the challenge to the writ.

Melo, Purisima, and Gonzaga-Reyes, JJ., concurred. Vitug, J., was abroad on official business. No separate concurring opinion is summarized in the text.