Ferrazzini v Gsell | 1916 | Trent, J.
Facts:
Carlos Gsell is engaged in the manufacture of
umbrellas, matches and hats;
Anselmo Ferrazzini was employed by Gsell as
foreman in the umbrella factory;
o At some point, he was discharged by
Gsell so he filed this case to recover
damages for an alleged wrongful
discharge;
Gsell, for his part admitted he discharged
Ferrazzini without written advice of six months
in advance as provided in the contract;
o But, he says the discharge was lawful
on account of absence,
unfaithfulness, and disobedience of
orders;
o He also sought a counterclaim for
further alleged breach by Ferrazzini
after his discharge (that he cannot
enter into employment of any
enterprise in the Philippines, during
his employment and within 5 years
after termination except when given
written permission; if he does, he will
pay Gsell P10k; Gsell was employed
in cement industry);
Trial court favoured Ferrazzini and declined
to consider the counterclaim, so Gsell appealed.
Issues:
1. Was the discharge lawful? Yes.
2. Is the stipulation preventing Ferrazzini
to enter into the employment of any
enterprise in the Philippine Islands,
whatever, save and except after
obtaining special written permission
therefor valid? No, against public
policy.
Ratio:
1. The discharge was lawful.
a. Court looked into whether Gsell had
just cause to discharge Ferrazzini; Gsell
has to prove justification for his act
because it was in contravention of the
six-month clause in the contract; if it was
without just cause, it was in violation of
the contract and Ferrazzini is entitled to
recover;
b. Court based the justifications on the
testimonies of the parties;
1. For Ferrazzinis absences during
working hours for the purpose of
drinking:
o Ferrazini he said he was
allowed by Gsell in the morning
ten or fifteen minutes during the
hot season to absent himself to
have a drink of beer or whiskey,
and the same in the afternoon
and that the manager (whose
name is Bender) merely told him
not to do it in such an
ostentatious manner;
o Gsell he directed the
manager to discontinue the
habit of during; Bender he
expressly told Ferrazini not to
go out without permission;
2. For his unfaithfulness:
o Ferrazzini he
admitted saying to persons at
supper in the mess hall that
Gsell measured the cloth for
the umbrellas, that it is his
idea that Gsell has no
confidence in his employees;
but he testified that he did not
remember saying that Specht,
the foreman, was not
receiving sufficient salary;
o Specht and another co-
worker, however, testified
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 positively to what he said
about Specht;
c. All the foregoing shows a conduct on
the part of Ferrazzini inconsistent with
the due and faithful performance of his
duties as an employee of Gsell; former is
at times a foreman and at times in
charge of important departments of the
factory wherein four hundred employees
work, Gsell did only had the right to
prohibit the drinking but also his duty for
his own interests and the safety of his
other employees;
d. Although, in the record, Gsell
terminated Ferrazzini on account of the
conversation at the mess, he, at the time
of the discharge, was authorized to take
into consideration the latters whole
course of conduct in determining whether
the contract of employment should be
terminated;
2. The stipulation is unlawful for being against
public policy;
a. Public policy the principle under
which the freedom of contract or private
dealing is restricted by law for the good
of the public; intended that the principle
of the law which holds that no subject or
citizen can lawfully do that which has a
tendency to be injurious to the public or
against the public good;
b. Case distinguished from Gsell v Koch
there the provisions in the contract
against the engaging in the
manufacturing of straw hats (by the
terminated employee, being the same
business the employer is in) were held to
be reasonably necessary for the
protection of the plaintiff and not
oppressive;
d. Two principal grounds why a contract
in restraint of trade is void as against
public policy:
1. Injury to the public by being deprived
of the restricted partys industry; and
2. The injury to the party himself by
being precluded from pursuing his
occupation, and thus being prevented
from supporting himself and his
family;
e. Contract under consideration is
clearly one in undue or unreasonable
restraint of trade and therefore against
public policy:
1. It is limited to time and space but not
as to trade;
2. It is not necessary for the protection
of the employer;
3. It would force Ferrazzini to obtain a
livelihood in case the defendant
declined to give him the written
permission to work elsewhere in the
country.
Note: The test on whether a given agreement
constitutes an unlawful machination or a
combination in restraint of trade:
Whether, under the particular circumstances of the
case and the nature of the particular contract
involved in it, the contract is, or is not,
unreasonable.
JUDGMENT: Modified.

c. Contract in undue or unreasonable

restraint of trade unenforceable
because they are repugnant to the
established public policy; illegal in the
sense that the law will not enforce them;
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