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Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 161886 March 16, 2007
FILIPINAS PORT SERVICES, INC., represented by stockholders,
ELIODORO C. CRUZ and
MINDANAO TERMINAL AND BROKERAGE SERVICES, INC., Petitioners,
vs.
VICTORIANO S. GO, ARSENIO LOPEZ CHUA, EDGAR C. TRINIDAD,
HERMENEGILDO
M. TRINIDAD, JESUS SYBICO, MARY JEAN D. CO, HENRY CHUA, JOSELITO
S. JAYME,
ERNESTO S. JAYME, and ELIEZER B. DE JESUS, Respondents.
D E C I S I O N
GARCIA, J.:
Assailed and sought to be set aside in this petition for review
on certiorari is the Decision1 dated 19
January 2004 of the Court of Appeals (CA) in CA-G.R. CV No.
73827, reversing an earlier decision of
the Regional Trial Court (RTC) of Davao City and accordingly
dismissing the derivative suit instituted
by petitioner Eliodoro C. Cruz for and in behalf of the
stockholders of co-petitioner Filipinas Port
Services, Inc. (Filport, hereafter).
The case is actually an intra-corporate dispute involving
Filport, a domestic corporation engaged in
stevedoring services with principal office in Davao City. It was
initially instituted with the Securities
and Exchange Commission (SEC) where the case hibernated and
remained unresolved for several years
until it was overtaken by the enactment into law, on 19 July
2000, of Republic Act (R.A.) No. 8799,
otherwise known as the Securities Regulation Code. From the SEC
and consistent with R.A. No. 8799,
the case was transferred to the RTC of Manila, Branch 14,
sitting as a corporate court. Subsequently,
upon respondents motion, the case eventually landed at the RTC
of Davao City where it was docketed as Civil Case No. 28,552-2001.
RTC-Davao City, Branch 10, ruled in favor of the petitioners
prompting
respondents to go to the CA in CA-G.R. CV No. 73827. This time,
the respondents prevailed, hence, this
petition for review by the petitioners.
The relevant facts:
On 4 September 1992, petitioner Eliodoro C. Cruz, Filports
president from 1968 until he lost his bid for reelection as
Filports president during the general stockholders meeting in 1991,
wrote a letter2 to the corporations Board of Directors questioning
the boards creation of the following positions with a monthly
remuneration of P13,050.00 each, and the election thereto of
certain members of the board, to
wit:
Asst. Vice-President for Corporate Planning - Edgar C. Trinidad
(Director)
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Asst. Vice-President for Operations - Eliezer B. de Jesus
(Director)
Asst. Vice-President for Finance - Mary Jean D. Co
(Director)
Asst. Vice-President for Administration - Henry Chua
(Director)
Special Asst. to the Chairman - Arsenio Lopez Chua
(Director)
Special Asst. to the President - Fortunato V. de Castro
In his aforesaid letter, Cruz requested the board to take
necessary action/actions to recover from those
elected to the aforementioned positions the salaries they have
received.
On 15 September 1992, the board met and took up Cruzs letter.
The records do not show what specific action/actions the board had
taken on the letter. Evidently, whatever action/actions the board
took did
not sit well with Cruz.
On 14 June 1993, Cruz, purportedly in representation of Filport
and its stockholders, among which is
herein co-petitioner Mindanao Terminal and Brokerage Services,
Inc. (Minterbro), filed with the SEC a
petition3 which he describes as a derivative suit against the
herein respondents who were then the
incumbent members of Filports Board of Directors, for alleged
acts of mismanagement detrimental to the interest of the
corporation and its shareholders at large, namely:
1. creation of an executive committee in 1991 composed of seven
(7) members of the
board with compensation of P500.00 for each member per meeting,
an office which, to
Cruz, is not provided for in the by-laws of the corporation and
whose function merely
duplicates those of the President and General Manager;
2. increase in the emoluments of the Chairman, Vice-President,
Treasurer and Assistant
General Manager which increases are greatly disproportionate to
the volume and
character of the work of the directors holding said
positions;
3. re-creation of the positions of Assistant Vice-Presidents
(AVPs) for Corporate
Planning, Operations, Finance and Administration, and the
election thereto of board
members Edgar C. Trinidad, Eliezer de Jesus, Mary Jean D. Co and
Henry Chua,
respectively; and
4. creation of the additional positions of Special Assistants to
the President and the Board
Chairman, with Fortunato V. de Castro and Arsenio Lopez Chua
elected to the same, the
directors elected/appointed thereto not doing any work to
deserve the monthly
remuneration of P13,050.00 each.
In the same petition, docketed as SEC Case No. 06-93-4491, Cruz
alleged that despite demands made
upon the respondent members of the board of directors to desist
from creating the positions in question
and to account for the amounts incurred in creating the same,
the demands were unheeded. Cruz thus
prayed that the respondent members of the board of directors be
made to pay Filport, jointly and
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severally, the sums of money variedly representing the damages
incurred as a result of the creation of
the offices/positions complained of and the aggregate amount of
the questioned increased salaries.
In their common Answer with Counterclaim,4 the respondents
denied the allegations of mismanagement
and materially averred as follows:
1. the creation of the executive committee and the grant of per
diems for the attendance
of each member are allowed under the by-laws of the
corporation;
2. the increases in the salaries/emoluments of the Chairman,
Vice-President, Treasurer
and Assistant General Manager were well within the financial
capacity of the corporation
and well-deserved by the officers elected thereto; and
3. the positions of AVPs for Corporate Planning, Operations,
Finance and Administration
were already in existence during the tenure of Cruz as president
of the corporation, and
were merely recreated by the Board, adding that all those
appointed to said positions of
Assistant Vice Presidents, as well as the additional position of
Special Assistants to the
Chairman and the President, rendered services to deserve their
compensation.
In the same Answer, respondents further averred that Cruz and
his co-petitioner Minterbro, while
admittedly stockholders of Filport, have no authority nor
standing to bring the so-called "derivative suit"
for and in behalf of the corporation; that respondent Mary Jean
D. Co has already ceased to be a
corporate director and so with Fortunato V. de Castro, one of
those holding an assailed position; and that
no demand to cease and desist from further committing the acts
complained of was made upon the
board. By way of affirmative defenses, respondents asserted that
(1) the petition is not duly verified by
petitioner Filport which is the real party-in-interest; (2)
Filport, as represented by Cruz and Minterbro,
failed to exhaust remedies for redress within the corporation
before bringing the suit; and (3) the petition
does not show that the stockholders bringing the suit are joined
as nominal parties. In support of their
counterclaim, respondents averred that Cruz filed the alleged
derivative suit in bad faith and purely for
harassment purposes on account of his non-reelection to the
board in the 1991 general stockholders meeting.
As earlier narrated, the derivative suit (SEC Case No.
06-93-4491) hibernated with the SEC for a long
period of time. With the enactment of R.A. No. 8799, the case
was first turned over to the RTC of
Manila, Branch 14, sitting as a corporate court. Thereafter, on
respondents motion, it was eventually transferred to the RTC of
Davao City whereat it was docketed as Civil Case No. 28,552-2001
and
raffled to Branch 10 thereof.
On 10 December 2001, RTC-Davao City rendered its decision5 in
the case. Even as it found that (1)
Filports Board of Directors has the power to create positions
not provided for in the by-laws of the corporation since the board
is the governing body; and (2) the increases in the salaries of the
board
chairman, vice-president, treasurer and assistant general
manager are reasonable, the trial court
nonetheless rendered judgment against the respondents by
ordering the directors holding the positions of
Assistant Vice President for Corporate Planning, Special
Assistant to the President and Special Assistant
to the Board Chairman to refund to the corporation the salaries
they have received as such officers
"considering that Filipinas Port Services is not a big
corporation requiring multiple executive positions"
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and that said positions "were just created for accommodation."
We quote the fallo of the trial courts decision.
WHEREFORE, judgment is rendered ordering:
Edgar C. Trinidad under the third and fourth causes of action to
restore to the corporation the total
amount of salaries he received as assistant vice president for
corporate planning; and likewise ordering
Fortunato V. de Castro and Arsenio Lopez Chua under the fourth
cause of action to restore to the
corporation the salaries they each received as special
assistants respectively to the president and board
chairman. In case of insolvency of any or all of them, the
members of the board who created their
positions are subsidiarily liable.
The counter claim is dismissed.
From the adverse decision of the trial court, herein respondents
went on appeal to the CA in CA-G.R.
CV No. 73827.
In its decision6 of 19 January 2004, the CA, taking exceptions
to the findings of the trial court that the
creation of the positions of Assistant Vice President for
Corporate Planning, Special Assistant to the
President and Special Assistant to the Board Chairman was merely
for accommodation purposes,
granted the respondents appeal, reversed and set aside the
appealed decision of the trial court and accordingly dismissed the
so-called derivative suit filed by Cruz, et al., thus:
IN VIEW OF ALL THE FOREGOING, the instant appeal is GRANTED, the
challenged decision is
REVERSED and SET ASIDE, and a new one entered DISMISSING Civil
Case No. 28,552-2001 with
no pronouncement as to costs.
SO ORDERED.
Intrigued, and quite understandably, by the fact that, in its
decision, the CA, before proceeding to
address the merits of the appeal, prefaced its disposition with
the statement reading "[T]he appeal is
bereft of merit,"7 thereby contradicting the very fallo of its
own decision and the discussions made in the
body thereof, respondents filed with the appellate court a
Motion For Nunc Pro Tunc Order,8 thereunder
praying that the phrase "[T]he appeal is bereft of merit," be
corrected to read "[T]he appeal is impressed
with merit." In its resolution9 of 23 April 2004, the CA granted
the respondents motion and accordingly
effected the desired correction.
Hence, petitioners present recourse.
Petitioners assigned four (4) errors allegedly committed by the
CA. For clarity, we shall formulate the
issues as follows:
1. Whether the CA erred in holding that Filports Board of
Directors acted within its powers in creating the executive
committee and the positions of AVPs for Corporate
Planning, Operations, Finance and Administration, and those of
the Special Assistants to
the President and the Board Chairman, each with corresponding
remuneration, and in
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increasing the salaries of the positions of Board Chairman,
Vice-President, Treasurer and
Assistant General Manager; and
2. Whether the CA erred in finding that no evidence exists to
prove that (a) the positions
of AVP for Corporate Planning, Special Assistant to the
President and Special Assistant
to the Board Chairman were created merely for accommodation, and
(b) the
salaries/emoluments corresponding to said positions were
actually paid to and received
by the directors appointed thereto.
For their part, respondents, aside from questioning the
propriety of the instant petition as the same
allegedly raises only questions of fact and not of law, also put
in issue the purported derivative nature of
the main suit initiated by petitioner Eliodoro C. Cruz allegedly
in representation of and in behalf of
Filport and its stockholders.
The petition is bereft of merit.
It is axiomatic that in petitions for review on certiorari under
Rule 45 of the Rules of Court, only
questions of law may be raised and passed upon by the Court.
Factual findings of the CA are binding
and conclusive and will not be reviewed or disturbed on
appeal.10
Of course, the rule is not cast in stone;
it admits of certain exceptions, such as when the findings of
fact of the appellate court are at variance
with those of the trial court,11
as here. For this reason, and for a proper and complete
resolution of the
case, we shall delve into the records and reexamine the
same.
The governing body of a corporation is its board of directors.
Section 23 of the Corporation Code12
explicitly provides that unless otherwise provided therein, the
corporate powers of all corporations
formed under the Code shall be exercised, all business conducted
and all property of the corporation
shall be controlled and held by a board of directors. Thus, with
the exception only of some powers
expressly granted by law to stockholders (or members, in case of
non-stock corporations), the board of
directors (or trustees, in case of non-stock corporations) has
the sole authority to determine policies,
enter into contracts, and conduct the ordinary business of the
corporation within the scope of its charter,
i.e., its articles of incorporation, by-laws and relevant
provisions of law. Verily, the authority of the
board of directors is restricted to the management of the
regular business affairs of the corporation,
unless more extensive power is expressly conferred.
The raison detre behind the conferment of corporate powers on
the board of directors is not lost on the Court. Indeed, the
concentration in the board of the powers of control of corporate
business and of
appointment of corporate officers and managers is necessary for
efficiency in any large organization.
Stockholders are too numerous, scattered and unfamiliar with the
business of a corporation to conduct its
business directly. And so the plan of corporate organization is
for the stockholders to choose the
directors who shall control and supervise the conduct of
corporate business.13
In the present case, the boards creation of the positions of
Assistant Vice Presidents for Corporate Planning, Operations,
Finance and Administration, and those of the Special Assistants to
the President
and the Board Chairman, was in accordance with the regular
business operations of Filport as it is
authorized to do so by the corporations by-laws, pursuant to the
Corporation Code.
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The election of officers of a corporation is provided for under
Section 25 of the Code which reads:
Sec. 25. Corporate officers, quorum. Immediately after their
election, the directors of a corporation must formally organize by
the election of a president, who shall be a director, a treasurer
who may or
may not be a director, a secretary who shall be a resident and
citizen of the Philippines, and such other
officers as may be provided for in the by-laws. (Emphasis
supplied.)
In turn, the amended Bylaws of Filport14
provides the following:
Officers of the corporation, as provided for by the by-laws,
shall be elected by the board of directors at
their first meeting after the election of Directors. xxx
The officers of the corporation shall be a Chairman of the
Board, President, a Vice-President, a
Secretary, a Treasurer, a General Manager and such other
officers as the Board of Directors may from
time to time provide, and these officers shall be elected to
hold office until their successors are elected
and qualified. (Emphasis supplied.)
Likewise, the fixing of the corresponding remuneration for the
positions in question is provided for in
the same by-laws of the corporation, viz:
xxx The Board of Directors shall fix the compensation of the
officers and agents of the corporation.
(Emphasis supplied.)
Unfortunately, the bylaws of the corporation are silent as to
the creation by its board of directors of an
executive committee. Under Section 3515
of the Corporation Code, the creation of an executive
committee must be provided for in the bylaws of the
corporation.
Notwithstanding the silence of Filports bylaws on the matter, we
cannot rule that the creation of the executive committee by the
board of directors is illegal or unlawful. One reason is the
absence of a
showing as to the true nature and functions of said executive
committee considering that the "executive
committee," referred to in Section 35 of the Corporation Code
which is as powerful as the board of
directors and in effect acting for the board itself, should be
distinguished from other committees which
are within the competency of the board to create at anytime and
whose actions require ratification and
confirmation by the board.16
Another reason is that, ratiocinated by both the two (2) courts
below, the
Board of Directors has the power to create positions not
provided for in Filports bylaws since the board is the corporations
governing body, clearly upholding the power of its board to
exercise its prerogatives in managing the business affairs of the
corporation.
As well, it may not be amiss to point out that, as testified to
and admitted by petitioner Cruz himself, it
was during his incumbency as Filport president that the
executive committee in question was created,
and that he was even the one who moved for the creation of the
positions of the AVPs for Operations,
Finance and Administration. By his acquiescence and/or
ratification of the creation of the aforesaid
offices, Cruz is virtually precluded from suing to declare such
acts of the board as invalid or illegal. And
it makes no difference that he sues in behalf of himself and of
the other stockholders. Indeed, as his
voice was not heard in protest when he was still Filports
president, raising a hue and cry only now leads
NashLasamHighlight
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to the inevitable conclusion that he did so out of spite and
resentment for his non-reelection as president
of the corporation.
With regard to the increased emoluments of the Board Chairman,
Vice-President, Treasurer and
Assistant General Manager which are supposedly disproportionate
to the volume and nature of their
work, the Court, after a judicious scrutiny of the increase
vis--vis the value of the services rendered to
the corporation by the officers concerned, agrees with the
findings of both the trial and appellate courts
as to the reasonableness and fairness thereof.
Continuing, petitioners contend that the CA did not appreciate
their evidence as to the alleged acts of
mismanagement by the then incumbent board. A perusal of the
records, however, reveals that petitioners
merely relied on the testimony of Cruz in support of their bold
claim of mismanagement. To the mind of
the Court, Cruz testimony on the matter of mismanagement is
bereft of any foundation. As it were, his testimony consists merely
of insinuations of alleged wrongdoings on the part of the board.
Without
more, petitioners posture of mismanagement must fall and with it
goes their prayer to hold the respondents liable therefor.
But even assuming, in gratia argumenti, that there was
mismanagement resulting to corporate damages
and/or business losses, still the respondents may not be held
liable in the absence, as here, of a showing
of bad faith in doing the acts complained of.
If the cause of the losses is merely error in business judgment,
not amounting to bad faith or negligence,
directors and/or officers are not liable.17
For them to be held accountable, the mismanagement and the
resulting losses on account thereof are not the only matters to
be proven; it is likewise necessary to show
that the directors and/or officers acted in bad faith and with
malice in doing the assailed acts. Bad faith
does not simply connote bad judgment or negligence; it imports a
dishonest purpose or some moral
obliquity and conscious doing of a wrong, a breach of a known
duty through some motive or interest or
ill-will partaking of the nature of fraud.18
We have searched the records and nowhere do we find a
"dishonest purpose" or "some moral obliquity," or "conscious
doing of a wrong" on the part of the
respondents that "partakes of the nature of fraud."
We thus extend concurrence to the following findings of the CA,
affirmatory of those of the trial court:
xxx As a matter of fact, it was during the term of appellee
Cruz, as president and director, that the
executive committee was created. What is more, it was appellee
himself who moved for the creation of
the positions of assistant vice presidents for operations, for
finance, and for administration. He should
not be heard to complain thereafter for similar corporate
acts.
The increase in the salaries of the board chairman, president,
treasurer, and assistant general manager are
indeed reasonable enough in view of the responsibilities
assigned to them, and the special knowledge
required, to be able to effectively discharge their respective
functions and duties.
Surely, factual findings of trial courts, especially when
affirmed by the CA, are binding and conclusive
on this Court.
NashLasamHighlight
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There is, however, a factual matter over which the CA and the
trial court parted ways. We refer to the
accommodation angle.
The trial court was with petitioner Cruz in saying that the
creation of the positions of the three (3) AVPs
for Corporate Planning, Special Assistant to the President and
Special Assistant to the Board Chairman,
each with a salary of P13,050.00 a month, was merely for
accommodation purposes considering that
Filport is not a big corporation requiring multiple executive
positions. Hence, the trial courts order for said officers to
return the amounts they received as compensation.
On the other hand, the CA took issue with the trial court and
ruled that Cruzs accommodation theory is not based on facts and
without any evidentiary substantiation.
We concur with the line of the appellate court. For truly, aside
from Cruzs bare and self-serving testimony, no other evidence was
presented to show the fact of "accommodation." By itself, the
testimony of Cruz is not enough to support his claim that
accommodation was the underlying factor
behind the creation of the aforementioned three (3)
positions.
It is elementary in procedural law that bare allegations do not
constitute evidence adequate to support a
conclusion. It is basic in the rule of evidence that he who
alleges a fact bears the burden of proving it by
the quantum of proof required. Bare allegations, unsubstantiated
by evidence, are not equivalent to proof
under the Rules of Court.19
The party having the burden of proof must establish his case by
a
preponderance of evidence.20
Besides, the determination of the necessity for additional
offices and/or positions in a corporation is a
management prerogative which courts are not wont to review in
the absence of any proof that such
prerogative was exercised in bad faith or with
malice.1awphi1.nt
Indeed, it would be an improper judicial intrusion into the
internal affairs of Filport were the Court to
determine the propriety or impropriety of the creation of
offices therein and the grant of salary increases
to officers thereof. Such are corporate and/or business
decisions which only the corporations Board of Directors can
determine.
So it is that in Philippine Stock Exchange, Inc. v. CA,21
the Court unequivocally held:
Questions of policy or of management are left solely to the
honest decision of the board as the business
manager of the corporation, and the court is without authority
to substitute its judgment for that of the
board, and as long as it acts in good faith and in the exercise
of honest judgment in the interest of the
corporation, its orders are not reviewable by the courts.
In a last-ditch attempt to salvage their cause, petitioners
assert that the CA went beyond the issues raised
in the court of origin when it ruled on the absence of receipt
of actual payment of the
salaries/emoluments pertaining to the positions of Assistant
Vice-President for Corporate Planning,
Special Assistant to the Board Chairman and Special Assistant to
the President. Petitioners insist that the
issue of nonpayment was never raised by the respondents before
the trial court, as in fact, the latter
allegedly admitted the same in their Answer With
Counterclaim.
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We are not persuaded.
By claiming that Filport suffered damages because the directors
appointed to the assailed positions are
not doing anything to deserve their compensation, petitioners
are saddled with the burden of proving that
salaries were actually paid. Since the trial court, in effect,
found that the petitioners successfully proved
payment of the salaries when it directed the reimbursements of
the same, respondents necessarily have
to raise the issue on appeal. And the CA rightly resolved the
issue when it found that no evidence of
actual payment of the salaries in question was actually adduced.
Respondents alleged admission of the fact of payment cannot be
inferred from a reading of the pertinent portions of the parties
respective initiatory pleadings. Respondents allegations in their
Answer With Counterclaim that the officers corresponding to the
positions created "performed the work called for in their
positions" or "deserve
their compensation," cannot be interpreted to mean that they
were "actually paid" such compensation.
Directly put, the averment that "one deserves ones compensation"
does not necessarily carry the implication that "such compensation
was actually remitted or received." And because payment was not
duly proven, there is no evidentiary or factual basis for the
trial court to direct respondents to make
reimbursements thereof to the corporation.
This brings us to the respondents claim that the case filed by
the petitioners before the SEC, which eventually landed in
RTC-Davao City as Civil Case No. 28,552-2001, is not a derivative
suit, as
maintained by the petitioners.
We sustain the petitioners.
Under the Corporation Code, where a corporation is an injured
party, its power to sue is lodged with its
board of directors or trustees. But an individual stockholder
may be permitted to institute a derivative
suit in behalf of the corporation in order to protect or
vindicate corporate rights whenever the officials of
the corporation refuse to sue, or when a demand upon them to
file the necessary action would be futile
because they are the ones to be sued, or because they hold
control of the corporation.22
In such actions,
the corporation is the real party-in-interest while the suing
stockholder, in behalf of the corporation, is
only a nominal party.23
Here, the action below is principally for damages resulting from
alleged mismanagement of the affairs
of Filport by its directors/officers, it being alleged that the
acts of mismanagement are detrimental to the
interests of Filport. Thus, the injury complained of primarily
pertains to the corporation so that the suit
for relief should be by the corporation. However, since the ones
to be sued are the directors/officers of
the corporation itself, a stockholder, like petitioner Cruz, may
validly institute a "derivative suit" to
vindicate the alleged corporate injury, in which case Cruz is
only a nominal party while Filport is the
real party-in-interest. For sure, in the prayer portion of
petitioners petition before the SEC, the reliefs prayed were asked
to be made in favor of Filport.
Besides, the requisites before a derivative suit can be filed by
a stockholder are present in this case, to
wit:
a) the party bringing suit should be a shareholder as of the
time of the act or transaction
complained of, the number of his shares not being material;
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b) he has tried to exhaust intra-corporate remedies, i.e., has
made a demand on the board
of directors for the appropriate relief but the latter has
failed or refused to heed his plea;
and
c) the cause of action actually devolves on the corporation, the
wrongdoing or harm
having been, or being caused to the corporation and not to the
particular stockholder
bringing the suit.24
Indisputably, petitioner Cruz (1) is a stockholder of Filport;
(2) he sought without success to have its
board of directors remedy what he perceived as wrong when he
wrote a letter requesting the board to do
the necessary action in his complaint; and (3) the alleged wrong
was in truth a wrong against the
stockholders of the corporation generally, and not against Cruz
or Minterbro, in particular. In the end, it
is Filport, not Cruz which directly stands to benefit from the
suit. And while it is true that the
complaining stockholder must show to the satisfaction of the
court that he has exhausted all the means
within his reach to attain within the corporation itself the
redress for his grievances, or actions in
conformity to his wishes, nonetheless, where the corporation is
under the complete control of the
principal defendants, as here, there is no necessity of making a
demand upon the directors. The reason is
obvious: a demand upon the board to institute an action and
prosecute the same effectively would have
been useless and an exercise in futility. In fine, we rule and
so hold that the petition filed with the SEC
at the instance of Cruz, which ultimately found its way to the
RTC of Davao City as Civil Case No.
28,552-2001, is a derivative suit of which Cruz has the
necessary legal standing to institute.
WHEREFORE, the petition is DENIED and the challenged decision of
the CA is AFFIRMED in all
respects.
No pronouncement as to costs.
SO ORDERED.
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Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 157802 October 13, 2010
MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K.
SPENCER,
CATHERINE SPENCER, AND ALEX MANCILLA, Petitioners,
vs.
RICARDO R. COROS, Respondent.
D E C I S I O N
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, 20021 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
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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.
On October 16, 2000, the LA granted the petitioners motion to
dismiss,6 ruling that the respondent was a corporate officer
because he was occupying the position of Vice President for Finance
and
Administration and at the same time was a Member of the Board of
Directors of Matling; and that,
consequently, his removal was a corporate act of Matling and the
controversy resulting from such
removal was under the jurisdiction of the SEC, pursuant to
Section 5, paragraph (c) of Presidential
Decree No. 902.
Ruling of the NLRC
The respondent appealed to the NLRC,7 urging that:
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:
WHEREFORE, the Order appealed from is SET ASIDE. A new one is
entered declaring and holding
that the case at bench does not involve any intracorporate
matter. Hence, jurisdiction to hear and act on
said case is vested with the Labor Arbiter, not the SEC,
considering that the position of Vice-President
for Finance and Administration being held by
complainant-appellant is not listed as among respondent's
corporate officers.
Accordingly, let the records of this case be REMANDED to the
Arbitration Branch of origin in order
that the Labor Arbiter below could act on the case at bench,
hear both parties, receive their respective
evidence and position papers fully observing the requirements of
due process, and resolve the same with
reasonable dispatch.
SO ORDERED.
The petitioners sought reconsideration,9 reiterating that the
respondent, being a member of the Board of
Directors, was a corporate officer whose removal was not within
the LAs jurisdiction.
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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.
In its assailed decision promulgated on September 13,
2002,12
the CA dismissed the petition for
certiorari, explaining:
For a position to be considered as a corporate office, or, for
that matter, for one to be considered as a
corporate officer, the position must, if not listed in the
by-laws, have been created by the corporation's
board of directors, and the occupant thereof appointed or
elected by the same board of directors or
stockholders. This is the implication of the ruling in Tabang v.
National Labor Relations Commission,
which reads:
"The president, vice president, secretary and treasurer are
commonly regarded as the principal or
executive officers of a corporation, and modern corporation
statutes usually designate them as the
officers of the corporation. However, 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 offices as may be necessary.
It has been held that an 'office' is created by the charter of
the corporation and the officer is elected by
the directors or stockholders. On the other hand, an 'employee'
usually occupies no office and generally
is employed not by action of the directors or stockholders but
by the managing officer of the corporation
who also determines the compensation to be paid to such
employee."
This ruling was reiterated in the subsequent cases of Ongkingco
v. National Labor Relations
Commission and De Rossi v. National Labor Relations
Commission.
The position of vice-president for administration and finance,
which Coros used to hold in the
corporation, was not created by the corporations board of
directors but only by its president or executive vice-president
pursuant to the by-laws of the corporation. Moreover, Coros
appointment to said position was not made through any act of the
board of directors or stockholders of the corporation.
Consequently, the position to which Coros was appointed and
later on removed from, is not a corporate
office despite its nomenclature, but an ordinary office in the
corporation.
Coros alleged illegal dismissal therefrom is, therefore, within
the jurisdiction of the labor arbiter.
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WHEREFORE, the petition for certiorari is hereby DISMISSED.
SO ORDERED.
The CA denied the petitioners motion for reconsideration on
April 2, 2003.13
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
The appeal fails.
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:
Article 217. Jurisdiction of the Labor Arbiters and the
Commission. - (a) Except as otherwise provided
under this Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the submission of the
case by the parties for decision without
extension, even in the absence of stenographic notes, the
following cases involving all workers, whether
agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file
involving wages, rates of pay, hours of work and other terms and
conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from the
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions
involving the legality of strikes and lockouts; and
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6. Except claims for Employees Compensation, Social Security,
Medicare and maternity
benefits, all other claims arising from employer-employee
relations, including those of
persons in domestic or household service, involving an amount
exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied with a claim
for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction
over all cases decided by Labor
Arbiters.
(c) Cases arising from the interpretation or implementation of
collective bargaining agreements
and those arising from the interpretation or enforcement of
company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary
arbitration as may be provided in said agreements. (As amended
by Section 9, Republic Act No.
6715, March 21, 1989).
Where the complaint for illegal dismissal concerns a corporate
officer, however, the controversy falls
under the jurisdiction of the Securities and Exchange Commission
(SEC), because the controversy arises
out of intra-corporate or partnership relations between and
among stockholders, members, or associates,
or between any or all of them and the corporation, partnership,
or association of which they are
stockholders, members, or associates, respectively; and between
such corporation, partnership, or
association and the State insofar as the controversy concerns
their individual franchise or right to exist as
such entity; or because the controversy involves the election or
appointment of a director, trustee,
officer, or manager of such corporation, partnership, or
association.14
Such controversy, among others, is
known as an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act
No. 8799,15
otherwise known as The
Securities Regulation Code, the SECs jurisdiction over all
intra-corporate disputes was transferred to the RTC, pursuant to
Section 5.2 of RA No. 8799, to wit:
5.2. The Commissions jurisdiction over all cases enumerated
under Section 5 of Presidential Decree No. 902-A is hereby
transferred to the Courts of general jurisdiction or the
appropriate Regional Trial
Court: Provided, that the Supreme Court in the exercise of its
authority may designate the Regional Trial
Court branches that shall exercise jurisdiction over these
cases. The Commission shall retain jurisdiction
over pending cases involving intra-corporate disputes submitted
for final resolution which should be
resolved within one (1) year from the enactment of this Code.
The Commission shall retain jurisdiction
over pending suspension of payments/rehabilitation cases filed
as of 30 June 2000 until finally disposed.
Considering that the respondents complaint for illegal dismissal
was commenced on August 10, 2000, it might come under the coverage
of Section 5.2 of RA No. 8799, supra, should it turn out that
the
respondent was a corporate, not a regular, officer of
Matling.
II
Was the Respondents Position of Vice President for
Administration and Finance a Corporate Office?
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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 President shall be the executive head of the corporation;
shall preside over the meetings of the
stockholders and directors; shall countersign all certificates,
contracts and other instruments of the
corporation as authorized by the Board of Directors; shall have
full power to hire and discharge any or
all employees of the corporation; shall have full power to
create new offices and to appoint the officers
thereto as he may deem proper and necessary in the operations of
the corporation and as the progress of
the business and welfare of the corporation may demand; shall
make reports to the directors and
stockholders and perform all such other duties and functions as
are incident to his office or are properly
required of him by the Board of Directors. In case of the
absence or disability of the President, the
Executive Vice President shall have the power to exercise his
functions.
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.
We agree with respondent.
Section 25 of the Corporation Code provides:
Section 25. Corporate officers, quorum.--Immediately after their
election, the directors of a corporation
must formally organize by the election of a president, who shall
be a director, a treasurer who may or
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may not be a director, a secretary who shall be a resident and
citizen of the Philippines, and such other
officers as may be provided for in the by-laws. Any two (2) or
more positions may be held
concurrently by the same person, except that no one shall act as
president and secretary or as president
and treasurer at the same time.
The directors or trustees and officers to be elected shall
perform the duties enjoined on them by law and
the by-laws of the corporation. Unless the articles of
incorporation or the by-laws provide for a greater
majority, a majority of the number of directors or trustees as
fixed in the articles of incorporation shall
constitute a quorum for the transaction of corporate business,
and every decision of at least a majority of
the directors or trustees present at a meeting at which there is
a quorum shall be valid as a corporate act,
except for the election of officers which shall require the vote
of a majority of all the members of the
board.
Directors or trustees cannot attend or vote by proxy at board
meetings.
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,19
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. Thus, it was held in
Easycall Communications Phils., Inc. v. King:20
An "office" is created by the charter of the corporation and the
officer is elected by the directors or
stockholders. On the other hand, an employee occupies no office
and generally is employed not by the
action of the directors or stockholders but by the managing
officer of the corporation who also
determines the compensation to be paid to such employee.
In this case, respondent was appointed vice president for
nationwide expansion by Malonzo, petitioner's general manager, not
by the board of directors of petitioner. It was also Malonzo who
determined the
compensation package of respondent. Thus, respondent was an
employee, not a "corporate officer." The
CA was therefore correct in ruling that jurisdiction over the
case was properly with the NLRC, not the
SEC (now the RTC).
This interpretation is the correct application of Section 25 of
the Corporation Code, which plainly states
that the corporate officers are the President, Secretary,
Treasurer and such other officers as may be
provided for in the By-Laws. Accordingly, the corporate officers
in the context of PD No. 902-A are
exclusively those who are given that character either by the
Corporation Code or by the corporations By-Laws.
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:
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Thus, pursuant to the above provision (Section 25 of the
Corporation Code), whoever are the corporate
officers enumerated in the by-laws are the exclusive Officers of
the corporation and the Board has no
power to create other Offices without amending first the
corporate By-laws. However, the Board may
create appointive positions other than the positions of
corporate Officers, but the persons
occupying such positions are not considered as corporate
officers within the meaning of Section 25
of the Corporation Code and are not empowered to exercise the
functions of the corporate Officers,
except those functions lawfully delegated to them. Their
functions and duties are to be determined by
the Board of Directors/Trustees.
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.
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 SECs
jurisdiction.
In Nacpil v. Intercontinental Broadcasting Corporation,23
which may be the more appropriate ruling, the
position subject of the controversy was not expressly mentioned
in the By-Laws, but was created
pursuant to a By-Law enabling provision authorizing the Board of
Directors to create other offices that
the Board of Directors might see fit to create. The Court held
there that the position was a corporate
office, relying on the obiter dictum in Tabang.
Considering that the observations earlier made herein show that
the soundness of their dicta is not
unassailable, Tabang and Nacpil should no longer be
controlling.
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 Commission24
and Ongkingko v. National Labor Relations
Commission,25
the NLRC had no jurisdiction over his complaint, considering
that any case for illegal
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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.
The petitioners insistence is bereft of basis.
To begin with, the reliance on Paguio and Ongkingko is
misplaced. In both rulings, the complainants
were undeniably corporate officers due to their positions being
expressly mentioned in the By-Laws,
aside from the fact that both of them had been duly elected by
the respective Boards of Directors. But
the herein respondents position of Vice President for Finance
and Administration was not expressly mentioned in the By-Laws;
neither was the position of Vice President for Finance and
Administration
created by Matlings Board of Directors. Lastly, the President,
not the Board of Directors, appointed him.
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.26
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
controversy 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. This was our thrust in
Viray v. Court of Appeals:27
The establishment of any of the relationships mentioned above
will not necessarily always confer
jurisdiction over the dispute on the SEC to the exclusion of
regular courts. The statement made in one
case that the rule admits of no exceptions or distinctions is
not that absolute. The better policy in
determining which body has jurisdiction over a case would be to
consider not only the status or
relationship of the parties but also the nature of the question
that is the subject of their controversy.
Not every conflict between a corporation and its stockholders
involves corporate matters that only the
SEC can resolve in the exercise of its adjudicatory or
quasi-judicial powers. If, for example, a person
leases an apartment owned by a corporation of which he is a
stockholder, there should be no question
that a complaint for his ejectment for non-payment of rentals
would still come under the jurisdiction of
the regular courts and not of the SEC. By the same token, if one
person injures another in a vehicular
accident, the complaint for damages filed by the victim will not
come under the jurisdiction of the SEC
simply because of the happenstance that both parties are
stockholders of the same corporation. A
contrary interpretation would dissipate the powers of the
regular courts and distort the meaning and
intent of PD No. 902-A.
In another case, Mainland Construction Co., Inc. v.
Movilla,28
the Court reiterated these determinants
thuswise:
In order that the SEC (now the regular courts) can take
cognizance of a case, the controversy must
pertain to any of the following relationships:
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a) between the corporation, partnership or association and the
public;
b) between the corporation, partnership or association and its
stockholders, partners, members or
officers;
c) between the corporation, partnership or association and the
State as far as its franchise, permit
or license to operate is concerned; and
d) among the stockholders, partners or associates
themselves.
The fact that the parties involved in the controversy are all
stockholders or that the parties involved are
the stockholders and the corporation does not necessarily place
the dispute within the ambit of the
jurisdiction of SEC. The better policy to be followed in
determining jurisdiction over a case should be to
consider concurrent factors such as the status or relationship
of the parties or the nature of the question
that is the subject of their controversy. In the absence of any
one of these factors, the SEC will not have
jurisdiction. Furthermore, it does not necessarily follow that
every conflict between the corporation and
its stockholders would involve such corporate matters as only
the SEC can resolve in the exercise of its
adjudicatory or quasi-judicial powers.29
The criteria for distinguishing between corporate officers who
may be ousted from office at will, on one
hand, and ordinary corporate employees who may only be
terminated for just cause, on the other hand,
do not depend on the nature of the services performed, but on
the manner of creation of the office. In the
respondents case, he was supposedly at once an employee, a
stockholder, and a Director of Matling. The circumstances
surrounding his appointment to office must be fully considered to
determine whether
the dismissal constituted an intra-corporate controversy or a
labor termination dispute. We must also
consider whether his status as Director and stockholder had any
relation at all to his appointment and
subsequent dismissal as Vice President for Finance and
Administration.
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
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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
Even though he might have become a stockholder of Matling in
1992, his promotion to the position of
Vice President for Finance and Administration in 1987 was by
virtue of the length of quality service he
had rendered as an employee of Matling. His subsequent
acquisition of the status of
Director/stockholder had no relation to his promotion. Besides,
his status of Director/stockholder was
unaffected by his dismissal from employment as Vice President
for Finance and
Administration.1avvphi1
In Prudential Bank and Trust Company v. Reyes,30
a case involving a lady bank manager who had risen
from the ranks but was dismissed, the Court held that her
complaint for illegal dismissal was correctly
brought to the NLRC, because she was deemed a regular employee
of the bank. The Court observed
thus:
It appears that private respondent was appointed Accounting
Clerk by the Bank on July 14, 1963. From
that position she rose to become supervisor. Then in 1982, she
was appointed Assistant Vice-President
which she occupied until her illegal dismissal on July 19, 1991.
The banks contention that she merely
holds an elective position and that in effect she is not a
regular employee is belied by the nature of
her work and her length of service with the Bank. As earlier
stated, she rose from the ranks and has
been employed with the Bank since 1963 until the termination of
her employment in 1991. As Assistant
Vice President of the Foreign Department of the Bank, she is
tasked, among others, to collect checks
drawn against overseas banks payable in foreign currency and to
ensure the collection of foreign bills or
checks purchased, including the signing of transmittal letters
covering the same. It has been stated that
"the primary standard of determining regular employment is the
reasonable connection between the
particular activity performed by the employee in relation to the
usual trade or business of the employer.
Additionally, "an employee is regular because of the nature of
work and the length of service, not
because of the mode or even the reason for hiring them." As
Assistant Vice-President of the Foreign
Department of the Bank she performs tasks integral to the
operations of the bank and her length of
service with the bank totaling 28 years speaks volumes of her
status as a regular employee of the bank.
In fine, as a regular employee, she is entitled to security of
tenure; that is, her services may be
terminated only for a just or authorized cause. This being in
truth a case of illegal dismissal, it is no
wonder then that the Bank endeavored to the very end to
establish loss of trust and confidence and
serious misconduct on the part of private respondent but, as
will be discussed later, to no avail.
WHEREFORE, we deny the petition for review on certiorari, and
affirm the decision of the Court of
Appeals.
Costs of suit to be paid by the petitioners.
SO ORDERED.
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Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 149660 January 20, 2009
MARANAW HOTELS AND RESORT CORP., Petitioner,
vs.
COURT OF APPEALS, SHERYL OABEL AND MANILA RESOURCE
DEVELOPMENT
CORP., Respondents.
D E C I S I O N
PUNO, C.J.:
Before the Court is a petition for review on certiorari
assailing a resolution issued by the Court of
Appeals. The resolution denied the petition for review filed by
petitioner Maranaw Hotels and Resort
Corp.
The present proceedings emanate from a complaint for
regularization, subsequently converted into one
for illegal dismissal, filed before Labor Arbiter Madjayran H.
Ajan by private respondent Sheryl Oabel.
It appears that private respondent Oabel was initially hired by
petitioner as an extra beverage attendant
on April 24, 1995. This lasted until February 7, 1997.1
Respondent worked in Century Park Hotel, an
establishment owned by the petitioner.
On September 16, 1996,2 petitioner contracted with Manila
Resource Development Corporation.
3
Subsequently, private respondent Oabel was transferred to
MANRED, with the latter deporting itself as
her employer.4 MANRED has intervened at all stages of these
proceedings and has consistently claimed
to be the employer of private respondent Oabel. For the duration
of her employment, private respondent
Oabel performed the following functions:
Secretary, Public Relations Department: February 10, 1997 -
March 6, 1997
Gift Shop Attendant: April 7, 1997 - April 21, 1997
Waitress: April 22, 1997 - May 20, 1997
Shop Attendant: May 21, 1997 - July 30, 19985
On July 20, 1998, private respondent filed before the Labor
Arbiter a petition for regularization of
employment against the petitioner. On August 1, 1998, however,
private respondent Oabel was
dismissed from employment.6 Respondent converted her petition
for regularization into a complaint for
illegal dismissal.
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Labor Arbiter Madjayran H. Ajan rendered a decision on July 13,
1999, dismissing the complaint
against the petitioner. The decision held:
While complainant alleged that she has been working with the
respondent hotel in different department
(sic) of the latter on (sic) various capacities (although not
all departments are part and parcel of the
hotels), complainant never disputed the fact that her work with
the same were on a per function basis or
on a "need basis" co-terminus with the function she was hired
for.Considering that complainant job (sic) with the respondent
hotel was on a per function basis or on a "need basis", complainant
could not
even be considered as casual employee or provisional employee.
Respondent hotel consider (sic)
complainant, at most, a project employee which does not ripened
(sic) into regular employee (sic).7
Private respondent appealed before the National Labor Relations
Commission (NLRC). The NLRC
reversed the ruling of the Labor Arbiter and held that: (1)
MANRED is a labor-only contractor, and (2)
private respondent was illegally dismissed.
Of the first holding, the NLRC observed that under the very
terms of the service contract, MANRED
shall provide the petitioner not specific jobs or services but
personnel and that MANRED had
insufficient capitalization and was not sufficiently equipped to
provide specific jobs.8 The NLRC
likewise observed that the activities performed by the private
respondent were directly related to and
usually necessary or desirable in the business of the
petitioner.9
With respect to the termination of private respondents
employment, the NLRC held that it was not effected for a valid or
just cause and was therefore illegal. The dispositive portion of
the ruling reads
thus:
WHEREFORE, the decision appealed from is hereby REVERSED. xxxx
Respondents Century Park
Hotel and Manila Resource Development Corporation are hereby
declared jointly and severally liable
for the following awards in favor of complainant: 1) her full
backwages and benefits from August 1,
1998 up to the date of her actual reinstatement; 2) her salary
differentials, share in the service charges,
service incentive leave pay and 13th month pay from July 20,
1995 to July 31, 1998.
SO ORDERED.10
Petitioner subsequently appealed before the Court of Appeals. In
a resolution, the appellate court
dismissed the petition on account of the failure of the
petitioner to append the board resolution
authorizing the counsel for petitioner to file the petition
before the Court of Appeals. The Court of
Appeals held:
After a careful perusal of the records of the case, We resolve
to DISMISS the present petition on the
ground of non-compliance with the rule on certification against
forum shopping taking into account that
the aforesaid certification was subscribed and verified by the
Personnel Director of petitioner
corporation without attaching thereto his authority to do so for
and in behalf of petitioner corporation per
board resolution or special power of attorney executed by the
latter.11
Petitioner duly filed its motion for reconsideration which was
denied by the Court of Appeals in a
resolution dated August 30, 2001.12
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In the present petition for review, the petitioner invokes
substantial justice as justification for a reversal
of the resolution of the Court of Appeals.13
Petitioner likewise contends that the filing of a motion for
reconsideration with the certificate of non-forum shopping
attached constitutes substantial compliance
with the requirement.14
There is no merit to the petition.
Well-settled is the rule that the certificate of non-forum
shopping is a mandatory requirement.
Substantial compliance applies only with respect to the contents
of the certificate but not as to its
presence in the pleading wherein it is required.
Petitioners contention that the filing of a motion for
reconsideration with an appended certificate of non forum-shopping
suffices to cure the defect in the pleading is absolutely specious.
It negates the very
purpose for which the certification against forum shopping is
required: to inform the Court of the
pendency of any other case which may present similar issues and
involve similar parties as the one
before it. The requirement applies to both natural and juridical
persons.
Petitioner relies upon this Courts ruling in Digital Microwave
Corp. v. Court of Appeals15 to show that its Personnel Director has
been duly authorized to sign pleadings for and in behalf of the
petitioner.
Petitioner, however, has taken the ruling in Digital Microwave
out of context. The portion of the ruling
in Digital Microwave upon which petitioner relies was in
response to the issue of impossibility of
compliance by juridical persons with the requirements of
Circular 28-91.16
The Courts identification of duly authorized officers or
directors as the proper signatories of a certificate of non
forum-shopping was
in response to that issue. The ruling does not, however, ipso
facto clothe a corporate officer or director
with authority to execute a certificate of non-forum shopping by
virtue of the formers position alone.
Any doubt on the matter has been resolved by the Courts ruling
in BPI Leasing Corp. v. Court of Appeals
17 where this Court emphasized that the lawyer acting for the
corporation must be specifically
authorized to sign pleadings for the corporation.18
Specific authorization, the Court held, could only
come in the form of a board resolution issued by the Board of
Directors that specifically authorizes the
counsel to institute the petition and execute the certification,
to make his actions binding on his
principal, i.e., the corporation.19
This Court has not wavered in stressing the need for strict
adherence to procedural requirements. The
rules of procedure exist to ensure the orderly administration of
justice. They are not to be trifled with
lightly.
For this reason alone, the petition must already be dismissed.
However, even if this grave procedural
infirmity is set aside, the petition must still fail. In the
interest of averting further litigation arising from
the present controversy, and in light of the respective
positions asserted by the parties in the pleadings
and other memoranda filed before this Court, the Court now
proceeds to resolve the case on the merits.
Petitioner posits that it has entered into a service agreement
with intervenor MANRED. The latter, in
turn, maintains that private respondent Oabel is its employee
and subsequently holds itself out as the
employer and offers the reinstatement of private respondent.
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Notably, private respondents purported employment with MANRED
commenced only in 1996, way after she was hired by the petitioner
as extra beverage attendant on April 24, 1995. There is thus
much
credence in the private respondents claim that the service
agreement executed between the petitioner and MANRED is a mere ploy
to circumvent the law on employment, in particular that which
pertains on
regularization.
In this regard, it has not escaped the notice of the Court that
the operations of the hotel itself do not
cease with the end of each event or function and that there is
an ever present need for individuals to
perform certain tasks necessary in the petitioners business.
Thus, although the tasks themselves may vary, the need for
sufficient manpower to carry them out does not. In any event, as
borne out by the
findings of the NLRC, the petitioner determines the nature of
the tasks to be performed by the private
respondent, in the process exercising control.
This being so, the Court finds no difficulty in sustaining the
finding of the NLRC that MANRED is a
labor-only contractor.20
Concordantly, the real employer of private respondent Oabel is
the petitioner.
It appears further that private respondent has already rendered
more than one year of service to the
petitioner, for the period 1995-1998, for which she must already
be considered a regular employee,
pursuant to Article 280 of the Labor Code:
Art. 280. Regular and casual employment. The provisions of
written agreement to the contrary
notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to
be regular where the employee has been engaged to perform
activities which are usually necessary or
desirable in the usual business or trade of the employer, except
where the employment has been fixed for
a specific project or undertaking the completion or termination
of which has been determined at the time
of the engagement of the employee or where the work or service
to be performed is seasonal in nature
and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered
by the preceding paragraph:
Provided, That any employee who has rendered at least one year
of service, whether such service
is continuous or broken, shall be considered a regular employee
with respect to the activity in
which he is employed and his employment shall continue while
such activity exists. (Emphasis
supplied)
IN VIEW WHEREOF, the present petition is DENIED. The resolution
of the Court of Appeals dated
June 15, 2001 is affirmed.
Costs against petitioner.
SO ORDERED.
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Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 153653 October 2, 2009
SAN MIGUEL BUKID HOMEOWNERS ASSOCIATION, INC., herein
represented by its
PRESIDENT, MR. EVELIO BARATA, Petitioner,
vs.
THE CITY OF MANDALUYONG, represented by the HON. MAYOR BENJAMIN
ABALOS,
JR.; A.F. CALMA GENERAL CONSTRUCTION, represented by its
President, ARMENGO F.
CALMA, Respondents.
D E C I S I O N
PERALTA, J.:
This resolves the petition for certiorari under Rule 65 of the
Rules of Court, seeking nullification of the
Resolutions of the Court of Appeals (CA) dated April 16, 20021
and May 14, 2002,
2 in CA-G.R. SP No.
69827, dismissing the petition for certiorari filed by herein
petitioner.
The undisputed facts are as follows.
Petitioner San Miguel Bukid Homeowners Association, Inc.
(formerly known as Bukid Neighborhood
Landless Association), an association of urban poor dwellers of
San Miguel Bukid Compound,
Plainview, Mandaluyong City, filed with the Regional Trial Court
(RTC) of Mandaluyong City a
Complaint3 for specific performance and damages against
respondents City of Mandaluyong (City) and
A.F. Calma General Construction (Calma). It is alleged therein
that pursuant to the Citys Land for the Landless Program,
petitioner and the City entered into a Memorandum of Agreement
(MOA), whereby
the City purchased lots and then transferred the same to
petitioner with a first real estate mortgage in
favor of the City. Subsequently, the City and Calma entered into
a Contract Agreement for the latter to
construct row houses and medium-rise buildings on the
aforementioned lots within 540 calendar days
for the benefit of petitioners members. In June 1995, Calma
began construction, but in June 1996, work on the project was
stopped. The period of 540 days elapsed sometime in November 1996,
but the houses
and buildings were not yet completed. Petitioners letters sent
to the Mayor of the City requesting an update on the project
remained unanswered. Hence, petitioner filed the complaint praying
that the City
and Calma be ordered to perform their respective undertakings
and obligations under the Contract
Agreement and to pay petitioner attorneys fees, exemplary
damages and litigation expenses.
The City filed an Answer4 within the extended period granted by
the trial court. The Citys main defense
was that the MOA had already been abrogated due to petitioners
failure to secure a loan from the Home Mortgage and Finance
Corporation, and that petitioner had no standing or personality to
institute the
action, as it was not a party to the Contract Agreement.
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Calma did not file an Answer.
On September 12, 2000, petitioner filed a Motion to Declare
Defendant in Default. It pointed out that the
lawyer who signed the Citys Answer was a private counsel, not
the Office of the City Legal Officer which, according to
petitioner, was the only office authorized under Section 248 of the
Local
Government Code to represent the local government unit in all
civil actions. Thus, petitioner prayed that
the City be declared in default on the ground that the Citys
Answer was a mere scrap of paper and should not be admitted in
court for being an unsigned pleading, the same not having been
signed and
filed by a duly authorized representative of the City.
In its Order5 dated June 4, 2001, the RTC denied petitioners
motion, ruling that a party should only be
declared in default in cases showing clear obstinate refusal or
inordinate neglect in complying with the
Orders of the court. Petitioners motion for reconsideration of
said order was also denied per Order6 dated January 7,
2002.1avvphi1
The matter was elevated by petitioner to the CA via a petition
for certiorari. However, in the assailed
Resolution7 dated April 16, 2002, the CA dismissed the petition
outright because the person who signed
the Verification/Certification of Non-Forum Shopping thereof did
not appear to be authorized by
petitioner. Petitioner filed a motion for reconsideration but
the same was denied in the second assailed
Resolution8 dated May 14, 2002.
Hence, petitioner came to this Court seeking the issuance of a
writ of certiorari against the CA, on the
following grounds:
I. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION
WHEN IT HELD THAT THE REPRESENTATIVE OF THE PETITIONER WHO
SIGNED THE
VERIFICATION/CERTIFICATION OF NON-FORUM SHOPPING "DID NOT APPEAR
TO BE
DULY AUTHORIZED TO DO SO," WHEN IN FACT THE SAID REPRESENTATIVE
WAS DULY
AUTHORIZED BY THE PETITIONER CORPORATIONS BOARD OF
DIRECTORS.
II. THE HONORABLE COURT OF APPEALS ERRED IN APPLYING THE RULING
IN BA
SAVINGS BANK VS. SIA (336 SCRA 484) AGAINST THE PETITIONER AND
DISMISSED THE
PETITION FOR CERTIORARI.
III. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION
IN DENYING THE MOTION FOR RECONSIDERATION WHEN IT HELD THAT THE
LACK OF
CERTIFICATION AGAINST FORUM SHOPPING IS GENERALLY NOT CURABLE BY
THE
SUBMISSION THEREOF AFTER THE FILING OF THE PETITION, WHEN IN
TRUTH, WHAT
WAS SUBMITTED BY PETITIONER WITH THE MOTION FOR RECONSIDERATION
WAS NOT
A CERTIFICATION AGAINST FORUM SHOPPING BUT A SECRETARYS
CERTIFICATE OF A BOARD RESOLUTION CONFIRMING AND RATIFYING THE
AUTHORITY OF THE
REPRESENTATIVE TO ACT AS SUCH.9
The petition is doomed to fail.
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Section 1, Rule 65 of the Rules of Court states that certiorari
may be resorted to when there is no
appeal, nor any plain, speedy, and adequate remedy in the
ordinary course of law. Thus, in Abedes v.
Court of Appeals,10
the Court held that:
x x x for a petition for certiorari or prohibition to be
granted, it must set out and demonstrate, plainly and
distinctly, all the facts essential to establish a right to a
writ. The petitioner must allege in his petition
and has the burden of establishing facts to show that any other
existing remedy is not speedy or adequate
and that (a) the writ is directed against a tribunal, board or
officer exercising judicial or quasi-judicial
functions; (b) such tribunal, board or officer has acted without
or in excess of jurisdiction, or with grave
abuse of discretion amounting to excess or lack of jurisdiction;
and, (c) there is no appeal or any plain,
speedy and adequate remedy in the ordinary course of law. These
matters must be threshed out and
shown by petitioner.11
The Resolutions of the CA which petitioner seeks to nullify are
orders of dismissal. In Magestrado v.
People,12
the Court explained that an order of dismissal is a final order
which is a proper subject of an
appeal, not certiorari. This was reiterated in Pasiona v. Court
of Appeals,13
where it was emphasized
that if what is being assailed is a decision, final order or
resolution of the CA, then appeal to this Court
is via a verified petition for review on certiorari under Rule
45 of the Rules of Court. In cases where an
appeal was available, certiorari will not prosper, even if the
ground therefor is grave abuse of
discretion.14
The existence and availability of the right of appeal are
antithetical to the availability of the
special civil action for certiorari, although where it is shown
that the appeal would be inadequate, slow,
insufficient, and will not promptly relieve a party from the
injurious effects of the order complained of,
or where appeal is inadequate and ineffectual, the extraordinary
writ of certiorari may be granted.15
Clearly, since the present case involves a final order of
dismissal issued by the CA, the proper course of
action would have been to file a petition for review on
certiorari under Rule 45. Although there are
exceptions to the general rule, petitioner utterly failed to
allege and prove that the extraordinary remedy
of the writ of certiorari should be granted, because an appeal,
although available, would be inadequate,
insufficient and not speedy enough to address the urgency of the
matter. There is nothing in the petition
to show that this case qualifies as an exception to the general
rule. The circumstances prevailing in this
case reveal that whatever grievance petitioner may be suffering
from the dismissal of its petition with
the CA could be properly addressed through a petition for review
on certiorari.
On the ground alone that petitioner resorted to an improper
remedy, the present petition is already
dismissible and undeserving of the Courts attention. However,
even on the merits, the petition must be struck down.
In Fuentebella v. Castro,16
the Court categorically stated that "if the real
party-in-interest is a corporate
body, an officer of the corporation can sign the certification
against forum shopping so long as he has
been duly authorized by a resolution of its board of
directors."17
In this case, the Certificate of Board
Resolution attached to the petition for certiorari filed with
the CA reads as follows:
x x x in a meeting of the Board of Directors of the SAN MIGUEL
BUK