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enabling provision is not enough to make a position a corporate office.—Conformably with Section 25, a
position must be expressly mentioned in the By-Laws in order to be considered as a corporate office.
Thus, the creation of an office pursuant to or under a By-Law enabling provision is not enough to make a
position a corporate office. Guerrea v. Lezama, 103 Phil. 553 (1958), the first ruling on the matter, held
that the only officers of a corporation were those given that character either by the Corporation Code or
by the By-Laws; the rest of the corporate officers could be considered only as employees or subordinate
officials.
Same; Same; Same; The power to elect the corporate officers was a discretionary power that the law
exclusively vested in the Board of Directors, and could not be delegated to subordinate officers or
agents.—The Board of Directors of Matling could not validly delegate the power to create a corporate
office to the President, in light of Section 25 of the Corporation Code requiring the Board of Directors itself
to elect the corporate officers. Verily, the power to elect the corporate officers was a discretionary power
that the law exclusively vested in the Board of Directors, and could not be delegated to subordinate
officers or agents. The office of Vice President for Finance and Administration created by Matling’s
President pursuant to By-Law No. V was an ordinary, not a corporate, office.
Same; Same; Same; The statement in Tabang, to the effect that offices not expressly mentioned in the
By-Laws but were created pursuant to a By-Law enabling provision were also considered corporate
offices, was plainly obiter dictum.—The petitioners’ reliance on Tabang, supra, is misplaced. The
statement in Tabang, to the effect that offices not expressly mentioned in the By-Laws but were created
pursuant to a By-Law enabling provision were also considered corporate offices, was plainly obiter dictum
due to the position subject of the controversy being mentioned in the By-Laws. Thus, the Court held
therein that the position was a corporate office, and that the determination of the rights and liabilities
arising from the ouster from the position was an intra-corporate controversy within the SEC’s jurisdiction.
Same; Same; Same; Elements in order to determine whether a dispute constitutes an intra-corporate
controversy or not.—True it is that the Court pronounced in Tabang as follows: “Also, an intra-corporate
controversy is one which arises between a stockholder and the corporation. There is no distinction,
qualification or any exemption whatsoever. The provision is broad and covers all kinds of controversies
between stockholders and corporations.” However, the Tabang pronouncement is not controlling because
it is too sweeping and does not accord with reason, justice, and fair play. In order to determine whether a
dispute constitutes an intra-corporate contro versy or not, the Court considers two elements instead,
namely: (a) the status or relationship of the parties; and (b) the nature of the question that is the subject of
their controversy.
THIRD DIVISION
DECISION
BERSAMIN, J.:
This case reprises the jurisdictional conundrum of whether a complaint for
illegal dismissal is cognizable by the Labor Arbiter (LA) or by the Regional Trial
Court (RTC). The determination of whether the dismissed officer was a regular
employee or a corporate officer unravels the conundrum. In the case of the regular
employee, the LA has jurisdiction; otherwise, the RTC exercises the legal authority
to adjudicate.
In this appeal via petition for review on certiorari, the petitioners challenge
the decision dated September 13, 2002[1] and the resolution dated April 2,
2003,[2] both promulgated in C.A.-G.R. SP No. 65714 entitled Matling Industrial
and Commercial Corporation, et al. v. Ricardo R. Coros and National Labor
Relations Commission, whereby by the Court of Appeals (CA) sustained the ruling
of the National Labor Relations Commission (NLRC) to the effect that the LA had
jurisdiction because the respondent was not a corporate officer of petitioner
Matling Industrial and Commercial Corporation (Matling).
Antecedents
After his dismissal by Matling as its Vice President for Finance and
Administration, the respondent filed on August 10, 2000 a complaint for illegal
suspension and illegal dismissal against Matling and some of its corporate officers
(petitioners) in the NLRC, Sub-Regional Arbitration Branch XII, Iligan City.[3]
The petitioners moved to dismiss the complaint,[4] raising the ground, among
others, that the complaint pertained to the jurisdiction of the Securities and
Exchange Commission (SEC) due to the controversy being intra-corporate
inasmuch as the respondent was a member of Matlings Board of Directors aside
from being its Vice-President for Finance and Administration prior to his
termination.
The respondent opposed the petitioners motion to dismiss,[5] insisting that his status
as a member of Matlings Board of Directors was doubtful, considering that he had
not been formally elected as such; that he did not own a single share of stock in
Matling, considering that he had been made to sign in blank an undated
indorsement of the certificate of stock he had been given in 1992; that Matling had
taken back and retained the certificate of stock in its custody; and that even
assuming that he had been a Director of Matling, he had been removed as the Vice
President for Finance and Administration, not as a Director, a fact that the notice of
his termination dated April 10, 2000 showed.
I
THE HONORABLE LABOR ARBITER COMMITTED GRAVE
ABUSE OF DISCRETION GRANTING APPELLEES MOTION TO
DISMISS WITHOUT GIVING THE APPELLANT
AN OPPORTUNITY TO FILE HIS OPPOSITION THERETO
THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE
PROCESS.
II
THE HONORABLE LABOR ARBITER COMMITTED AN ERROR
IN DISMISSING THE CASE FOR LACK OF JURISDICTION.
On March 13, 2001, the NLRC set aside the dismissal, concluding that the
respondents complaint for illegal dismissal was properly cognizable by the LA, not
by the SEC, because he was not a corporate officer by virtue of his position in
Matling, albeit high ranking and managerial, not being among the positions listed
in Matlings Constitution and By-Laws.[8] The NLRC disposed thuswise:
The petitioners later submitted to the NLRC in support of the motion for
reconsideration the certified machine copies of Matlings Amended Articles of
Incorporation and By Laws to prove that the President of Matling was thereby
granted full power to create new offices and appoint the officers thereto, and
the minutes of special meeting held on June 7, 1999 by Matlings Board of
Directors to prove that the respondent was, indeed, a Member of the Board of
Directors.[10]
Nonetheless, on April 30, 2001, the NLRC denied the petitioners motion for
reconsideration.[11]
Ruling of the CA
The petitioners elevated the issue to the CA by petition for certiorari, docketed as
C.A.-G.R. No. SP 65714, contending that the NLRC committed grave abuse of
discretion amounting to lack of jurisdiction in reversing the correct decision of the
LA.
Issue
Thus, the petitioners are now before the Court for a review on certiorari,
positing that the respondent was a stockholder/member of the Matlings Board of
Directors as well as its Vice President for Finance and Administration; and that the
CA consequently erred in holding that the LA had jurisdiction.
The decisive issue is whether the respondent was a corporate officer of Matling or
not. The resolution of the issue determines whether the LA or the RTC had
jurisdiction over his complaint for illegal dismissal.
Ruling
I
The Law on Jurisdiction in Dismissal Cases
As a rule, the illegal dismissal of an officer or other employee of a private
employer is properly cognizable by the LA. This is pursuant to Article 217 (a) 2 of
the Labor Code, as amended, which provides as follows:
2. Termination disputes;
II
Was the Respondents Position of Vice President
for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondents position as Vice President for
Finance and Administration was a corporate office. If it was, his dismissal by the
Board of Directors rendered the matter an intra-corporate dispute cognizable by the
RTC pursuant to RA No. 8799.
The petitioners contend that the position of Vice President for Finance and
Administration was a corporate office, having been created by Matlings President
pursuant to By-Law No. V, as amended,[16] to wit:
BY LAW NO. V
Officers
The petitioners argue that the power to create corporate offices and to
appoint the individuals to assume the offices was delegated by Matlings Board of
Directors to its President through By-Law No. V, as amended; and that any office
the President created, like the position of the respondent, was as valid and effective
a creation as that made by the Board of Directors, making the office a corporate
office. In justification, they cite Tabang v. National Labor Relations
Commission,[17] which held that other offices are sometimes created by the charter
or by-laws of a corporation, or the board of directors may be empowered under the
by-laws of a corporation to create additional officers as may be necessary.
The respondent counters that Matlings By-Laws did not list his position as Vice
President for Finance and Administration as one of the corporate offices; that
Matlings By-Law No. III listed only four corporate officers, namely: President,
Executive Vice President, Secretary, and Treasurer; [18] that the corporate offices
contemplated in the phrase and such other officers as may be provided for in the
by-laws found in Section 25 of the Corporation Code should be clearly and
expressly stated in the By-Laws; that the fact that Matlings By-Law No. III dealt
with Directors & Officers while its By-Law No. V dealt with Officers proved that
there was a differentiation between the officers mentioned in the two provisions,
with those classified under By-Law No. V being ordinary or non-
corporate officers; and that the officer, to be considered as a corporate officer,
must be elected by the Board of Directors or the stockholders, for the President
could only appoint an employee to a position pursuant to By-Law No. V.
A different interpretation can easily leave the way open for the Board of
Directors to circumvent the constitutionally guaranteed security of tenure of the
employee by the expedient inclusion in the By-Laws of an enabling clause on the
creation of just any corporate officer position.
It is relevant to state in this connection that the SEC, the primary agency
administering the Corporation Code, adopted a similar interpretation of Section 25
of the Corporation Code in its Opinion dated November 25, 1993,[21] to wit:
Moreover, the Board of Directors of Matling could not validly delegate the
power to create a corporate office to the President, in light of Section 25 of
the Corporation Code requiring the Board of Directors itself to elect the corporate
officers. Verily, the power to elect the corporate officers was a discretionary
power that the law exclusively vested in the Board of Directors, and could not be
delegated to subordinate officers or agents.[22] The office of Vice President for
Finance and Administration created by Matlings President pursuant to By Law No.
V was an ordinary, not a corporate, office.
To emphasize, the power to create new offices and the power to appoint the
officers to occupy them vested by By-Law No. V merely allowed Matlings
President to create non-corporate offices to be occupied by ordinary employees of
Matling. Such powers were incidental to the Presidents duties as the executive
head of Matling to assist him in the daily operations of the business.
III
Did Respondents Status as Director and
Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?
Yet, the petitioners insist that because the respondent was a Director/stockholder of
Matling, and relying on Paguio v. National Labor Relations
Commission and Ongkingko v. National Labor Relations Commission,[25] the
[24]
NLRC had no jurisdiction over his complaint, considering that any case for illegal
dismissal brought by a stockholder/officer against the corporation was an intra-
corporate matter that must fall under the jurisdiction of the SEC conformably with
the context of PD No. 902-A.
Obviously enough, the respondent was not appointed as Vice President for Finance
and Administration because of his being a stockholder or Director of Matling. He
had started working for Matling on September 8, 1966, and had been employed
continuously for 33 years until his termination on April 17, 2000, first as a
bookkeeper, and his climb in 1987 to his last position as Vice President for Finance
and Administration had been gradual but steady, as the following sequence
indicates:
1966 Bookkeeper
1968 Senior Accountant
1969 Chief Accountant
1972 Office Supervisor
1973 Assistant Treasurer
1978 Special Assistant for Finance
1980 Assistant Comptroller
1983 Finance and Administrative Manager
1985 Asst. Vice President for Finance and Administration
1987 to April 17, 2000 Vice President for Finance and
Administration
WHEREFORE, we deny the petition for review on certiorari, and affirm the
decision of the Court of Appeals.
SO ORDERED.