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Austria vs NLRC On February 15, 1993, Labor Arbiter Cesar D.

rendered a decision in favor of the petitioner. The SDA
312 S 410 appealed the decision of the Labor Arbiter to the NLRC
which vacated the findings of the Labor Arbiter on
August 26,1994 and dismissed the case for lack of
merit. Austria filed a motion for reconsideration but the
Pastor Dionisio V. Austria worked with the Seventh-
NLRC issued a Resolution reversing its original
Day Adventists (SDA) for twenty eight (28) years from
decision. The SDA filed a motion for reconsideration
1963 to 1991. He started as a literature evangelist and
saying that the Labor Arbiter had no jurisdiction over
worked his way up until he became District Pastor of
the complaint due to the constitutional provision on the
the Negros Mission of the SDA. In January 1991,
separation of church and state since the case allegedly
Austria was transferred to Bacolod City. He held the
involved an ecclesiastical affair to which the State
position of District Pastor until his services were
cannot interfere. The NLRC, without ruling on the
terminated on October 31, 1991. Before his
merits of the case, reversed itself once again,
termination, Austria had received communications
sustained the argument posed by SDA and,
from Mr. Eufronio Ibesate, the treasurer of the Negros
accordingly, dismissed the complaint of Austria. The
Mission, asking Austria to admit accountability and
Office of the Solicitor General (OSG) filed a
responsibility for the church tithes and offerings
manifestation and motion saying it cannot sustain the
collected by his wife, Mrs. Thelma Austria, in his
resolution of the NLRC and submitting that the
district which amounted to P15,078.10, and to remit
termination of petitioner of his employment may be
the same to the Negros Mission. Austria reasoned in
questioned before the NLRC as the same is secular in
his written explanation dated October 11, 1991 that he
nature, not ecclesiastical.
should not be made accountable for the unremitted
collections since it was Pastor Gideon Buhat and Mr.
Eufronio Ibesate who authorized his wife to collect the
tithes and offerings since Pastor Austria was very sick Was the termination of Pastor Austria’s services an
to do the collecting at that time. On October 16, 1991, ecclesiastical affair and, as such, involved the
Austria went to the office of Pastor Buhat, who was the separation of church and state?
president of the Negros Mission, to persuade Buhat to
convene the Executive Committee to settle a dispute HELD:
between Pastor Austria and Pastor David Rodrigo. But
that meeting ended in a heated altercation between No. An ecclesiastical affair involves the relationship
Austria and Buhat. The next day, the Austria couple between the church and its members and relates to
received an invitation to attend the Executive matters of faith, religious doctrines, worship and
Committee meeting on October 21, 1991 to discuss governance of the congregation. Examples of so-called
the non-remittance of the church collection and the ecclesiastical affairs to which the State cannot meddle
events that transpired on October 16, 1991. A fact- are proceedings for excommunication, ordinations of
finding committee was created to investigate Austria. religious ministers, and administration of sacraments.
Sensing that the investigation would be one-sided, While the matter at hand relates to the church and its
Pastor Austria wrote to Pastor Rueben Moralde, religious minister, it does not give the case a religious
president of the SDA and chairman of the fact-finding significance. What is involved is the relationship of the
committee, to request that certain members of the church as an employer and the minister as an
fact-finding committee be excluded in the investigation employee. It is purely secular and has no relation
and resolution of the case. Out of the six (6) members whatsoever with the practice of faith, worship or
requested to inhibit, only two (2) were actually doctrines of the church. Pastor Austria was not
excluded, namely: Pastor Buhat and Pastor Rodrigo. excommunicated or expelled from the membership of
On October 29, 1991, Austria received a letter of the SDA but was terminated from employment. As
dismissal citing misappropriation of denominational pointed out by the OSG in its memorandum, the
funds, willful breach of trust, serious misconduct, gross grounds invoked for Austria’s dismissal are all based
and habitual neglect of duties, and commission of an on Article 282 of the Labor Code which enumerates the
offense against the person of employer’s duly just causes for termination of employment. It is
authorized representative as grounds for the palpable by this alone that the reason for Austria’s
termination of his services. Austria filed a complaint on dismissal from the service is not religious in nature.
November 14, 1991 before the Labor Arbiter for illegal Coupled with this is the act of the SDA in furnishing
dismissal against the SDA and its officers and prayed NLRC with a copy of Austria’s letter of termination
for reinstatement with back wages and benefits, moral which again is an eloquent admission by the SDA that
and exemplary damages and other labor law benefits. NLRC has jurisdiction over the case. Aside from these,
SDA admitted in a certification issued by Mr. Ibesate
that Austria has been its employee for twenty-eight In his complaint and position paper, Vailoces asserted
(28) years. SDA even registered petitioner with the that Lorenzo Dy, after obtaining control of the majority
Social Security System (SSS) as its employee. As a stock of the bank by buying the shares of Marcelino
matter of fact, the worker’s records of Austria have Maximo, called an illegal stockholders' meeting and
been submitted by SDA as part of their exhibits. It is elected a Board of Directors controlled by him; that
clear from all of these that when the SDA terminated after its illegal constitution, said Board convened on
the services of Austria, it was merely exercising its July 2, 1983 and passed a resolution dismissing him as
management prerogative to fire an employee which it manager, without giving him the opportunity to be
believes to be unfit for the job. As such, the State, heard first; that his dismissal was motivated by
through the Labor Arbiter and the NLRC, has the right Lorenzo Dy's desire to take over the management and
to take cognizance of the case and to determine control of the bank, not to mention the fact that he
whether the SDA, as employer, rightfully exercised its (Dy) harbored ill feelings against Vailoces on account
management prerogative to dismiss an employee. This of the latter's filing of a complaint for violation of the
is in consonance with the mandate of the Constitution corporation code against him and another complaint
to afford full protection to labor. for compulsory recognition of natural child with
damages against Zosimo Dy, Sr.
DY et AL vs NLRC
In their answer, Lorenzo Dy, et al. denied the charge
Petitioners assail in this Court the resolution of the of illegal dismissal. They pointed out that Vailoces'
National Labor Relations Commission (NLRC) position was an elective one, and he was not re-
dismissing their appeal from the decision of the elected as bank manager because of the Board's loss
Executive Labor Arbiter 1 in Cebu City which found of confidence in him brought about by his absenteeism
private respondent to have been illegally dismissed by and negligence in the performance of his duties; and
them. that the Board's action was taken to protect the
interest of the bank and was "designed as an internal
Said private respondent, Carlito H. Vailoces, was the
control measure to secure the check and balance of
manager of the Rural Bank of Ayungon (Negros
authority within the organization."
Oriental), a banking institution duly organized under
Philippine laws. He was also a director and stockholder The Executive Labor Arbiter found that Vailoces was:
of the bank.
(a) Illegally dismissed, first not because of
On June 4, 1983, a special stockholders' meeting was absenteeism and negligence, but of the resentment of
called for the purpose of electing the members of the petitioners against Vailoces which arose from the
bank's Board of Directors. Immediately after the latter's filing of the cases for recognition as natural
election the new Board proceeded to elect the bank's child against Zosimo Dy, Sr. and for violation of the
executive officers. corporation code against Lorenzo Dy; and second,
because he was not afforded the due process of law
Pursuant to Article IV of the bank's by-laws, 2
when he was dismissed during the Board meeting of
providing for the election by the entire membership of
July 2, 1983 the validity of which is seriously doubted;
the Board of the executive officers of the bank, i.e.,
the president, vice-president, secretary, cashier and (b) Not paid his cost of living allowance; and
bank manager, in that board meeting of June 4, 1983,
petitioners Lorenzo Dy, William Ibero and Ricardo (c) Underpaid with only P500 monthly salary,
Garcia were elected president, vice-president and
corporate secretary, respectively. Vailoces was not re- and consequently ordered the individual petitioners —
elected as bank manager, 3 Because of this Lorenzo Dy and Zosimo Dy-but not the Bank itself, to:
development, the Board, on July 2, 1983, passed
(a) Pay Vailoces jointly and severally, the sum of
Resolution No. 5, series of 1983, relieving him as bank
P111,480.60 representing his salary differentials, cost
of living allowances, back wages from date of dismissal
On August 3, 1983, Vailoces filed a complaint for illegal up to the date of the decision (November 29, 1983),
dismissal and damages with the Ministry of Labor and moral and exemplary damages, and attorney's fees;
Employment against Lorenzo Dy and Zosimo Dy, Sr. and
The complaint was amended on September 22, 1983
(b) Reinstate Vailoces to his position as bank
to include additional respondents-William Ibero,
manager, with additional backwages from December 1,
Ricardo Garcia and the Rural Bank of Ayungon, and
1983 on the adjusted salary rate of P620.00 r month
additional causes of action for underpayment of salary
until he is actually reinstated, plus cost-of-living
and non-payment of living allowance.
Lorenzo Dy, et al. appealed to the NLRC, assigning decision from Atty. Zerna. On the merits, they assert
error to the decision of the Labor Arbiter on various that the Arbiter's finding of illegal dismissal was
grounds, among them: that Vailoces was not entitled without evidentiary basis, that it was error to impose
to notice of the Board meeting of July 2, 1983 which the obligation to pay damages upon the individual
decreed his relief because he was no longer a member petitioners, instead of the Rural Bank of Ayungon,
of the Board on said date; that he nonetheless had the which was Vailoces' real employer, and that the
opportunity to refute the charges against him and seek damages awarded are exorbitant and oppressive.
a formal investigation because he received a copy of
the minutes of said meeting while he was still the bank While the comment of Vailoces traverses the
manager (his removal was to take effect only on averments of the petition, that of the Solicitor General
August 15, 1983), instead of which he simply on behalf of public respondents perceives the matter
abandoned the work he was supposed to perform up to as an intracorporate controversy of the class described
the effective date of his relief; and that the matter of in Section 5, par. (c), of Presidential Decree No. 902-A,
his relief was within the adjudicatory powers of the namely:
Securities and Exchange Commission.
(c) Controversies in the election or appointments
The NLRC, however bypassed the issues raised and of directors, trustees, officers or managers of such
simply dismissed the appeal for having been filed late. corporations, partnerships or associations.
It ruled that:
explicitly declared to be within the original and
The record shows that a copy of the decision sent by exclusive jurisdiction of the Securities and Exchange
registered mail to respondents' counsel, Atty. Edmund Commission, and recommends that the questioned
Tubio, was received on January 11, 1984 by a certain resolution of the NLRC as well as the decision of the
Atty. Ramon Elesteria, a law office partner of Atty. Labor Arbiter be set aside as null and void.
Tubio. ... This fact is corroborated by the certification
In truth, the issue of jurisdiction is decisive and
issued by the Postmaster of Dumaguete City...
renders unnecessary consideration of the other
Moreover, the same is admitted by no less than Atty.
questions raised.
Ramon Elesteria himself in his affidavit. It further
appears in the record that on January 30, 1984 a
There is no dispute that the position from which
certain Atty. Francisco Zerna, a new lawyer engaged
private respondent Vailoces claims to have been
by the respondents for the appeal, received a copy of
illegally dismissed is an elective corporate office. He
the decision in this case as certified by Julia Pepito in
himself acquired that position through election by the
an affidavit subscribed before the Senior Labor
bank's Board of Directors at the organizational meeting
Arbitration Specialist. The appeal was filed only on
of November 17, 1979. 10 He lost that position
February 17, 1984.
because the Board that was elected in the special
stockholders' meeting of June 4, 1983 did not re-elect
Considering that it was a law partner of the
him. And when Vailoces, in his position paper
respondents' counsel who received on January 11,
submitted to the Labor Arbiter, impugned said
1984 the registered letter, his actual receipt thereof
stockholders' meeting as illegally convoked and the
completes the service. ... And even assuming that such
Board of Directors thereby elected as illegally
was not a valid service, since the respondents received
constituted, 11 he made it clear that at the heart of
another copy of the decision on January 30, 1984,
the matter was the validity of the directors' meeting of
through their newly engaged counsel, it is therefore
June 4, 1983 which, by not re-electing him to the
our opinion that the appeal herein was filed out of
position of manager, in effect caused termination of his
time, whether the time is reckoned from the receipt by
Atty. Elesteria or Atty. Zerna, and, for this reason, we
can not give due course to his appeal.
The case thus falls squarely within the purview of
Section 5, par. (c), No. 902-A just cited. In PSBA vs.
In this Court, petitioners assail said ruling as an
Leaño, 12 this Court, confronted with a similar
arbitrary deprivation of their right to appeal through
controversy, ruled that the Securities and Exchange
unreasonable adherence to procedural technicality.
Commission, not the NLRC, has jurisdiction:
They argue that they should not be bound by the
service of the Labor Arbiter's decision by Atty. Elesteria
It was at a Board regular monthly meeting held on
on January 11, 1984 or by Atty. Zerna on January 30,
August 1, 1981, that three directors were elected to fill
1984, because neither lawyer was authorized to accept
vacancies. And, it was at the regular Board meeting of
service for their counsel Atty. Tubio, and that their 10
September 5, 1981 that all corporate positions were
day period of appeal should be counted from February
declared vacant in order to effect a reorganization, and
10, 1984 when they actually received the copy of the
at the ensuing election of officers, Tan was not re- all of them and the corporation, partnership or
elected as Executive Vice-President. association of which they are stockholders, members
or associates, respectively; and between such
Basically, therefore, the question is whether the corporation, partnership or association and the state
election of directors on August 1, 1981 and the insofar as it concerns their individual franchise or right
election of officers on September 5, 1981, which to exist as such entity;
resulted in Tan's failure to be re-elected, were validly
held. This is the crux of the question that Tan has c) Controversies in the election or appointments
raised before the SEC. Even in his position paper of directors, trustees, officers or managers of such
before the NLRC, Tan alleged that the election on corporations, partnership or associations.
August 1, 1981 of the three directors was in
contravention of the PSBA By-Laws providing that any This is not a case of dismissal. The situation is that of a
vacancy in the Board shall be filled by a majority vote corporate office having been declared vacant, and of
of the stockholders at a meeting specially called for the Tan's not having been elected thereafter. The matter
purpose. Thus, he concludes, the Board meeting on of whom to elect is a prerogative that belongs to the
September 5, 1981 was tainted with irregularity on Board, and involves the exercise of deliberate choice
account of the presence of illegally elected directors and the faculty of discriminative selection. Generally
without whom the results could have been different. speaking, the relationship of a person to corporation,
whether as officer or as agent or employee, is not
Tan invoked the same allegations in his complaint filed determined by the nature of the services performed,
with the SEC. So much so, that on December 17, but by the incidents of the relationship as they actually
1981, the SEC (Case No. 2145) rendered a Partial exist.
Decision annulling the election of the three directors
and ordered the convening of a stockholders' meeting Respondent Vailoces' invocation of estoppel as against
for the purpose of electing new members of the Board. petitioners with respect to the issue of jurisdiction is
The correctness of d conclusion is not for us to pass unavailing. In the first place, it is not quite correct to
upon in this case. Tan was present at said meeting and state that petitioners did not raise the point in the
again sought the issuance of injunctive relief from the lower tribunal. Although rather off handedly, in their
SEC. appeal to the NLRC they called attention to the Labor
Arbiter's lack of jurisdiction to rule on the validity of
The foregoing indubitably show that, fundamentally, the meeting of July 2, 1983, but the dismissal of the
the controversy is intra-corporate in nature. It revolves appeal for alleged tardiness effectively precluded
around the election of directors, officers or managers consideration of that or any other question raised in
of the PSBA, the relation between and among its the appeal. More importantly, estoppel cannot be
stockholders, and between them and the corporation. invoked to prevent this Court from taking up the
Private respondent also contends that his "ouster" was question of jurisdiction, which has been apparent on
a scheme to intimidate him into selling his shares and the face of the pleadings since the start of litigation
to deprive him of his just and fair return on his before the Labor Arbiter. It is well settled that the
investment as a stockholder received through his decision of a tribunal not vested with appropriate
salary and allowances as Executive Vice-President. Vis- jurisdiction is null and void. Thus, in Calimlim vs.
a-vis the NLRC, these matters fall within the Ramirez, 13 this Court held:
jurisdiction of the SEC. Presidential Decree No. 902-A
vests in the Securities and Exchange Commission: A rule that had been settled by unquestioned
acceptance and upheld in decisions so numerous to
... Original and exclusive jurisdiction to hear and cite is that the jurisdiction of a court over the subject
decide cases involving: matter of the action is a matter of law and may not be
conferred by consent or agreement of the parties. The
a) Devices or schemes employed by or any acts, lack of jurisdiction of a court may be raised at any
of the board of directors, business associates, its stage of the proceedings, even on appeal. This doctrine
officers or partners, amounting to fraud and has been qualified by recent pronouncements which
misrepresentation) which may be detrimental to the stemmed principally from the ruling in the cited case of
interest of the public and/or of the stockholders, Sibonghanoy. It is to be regretted, however, that the
partners, members of associations or organizations holding in said case had been applied to situations
registered with the Commission. which were obviously not contemplated therein. The
exceptional circumstances involved in Sibonghanoy
b) Controversies arising out of intracorporate or
which justified the departure from the accepted
partnership relations, between and among
concept of non-waivability of objection to jurisdiction
stockholders, members or associates; between any of
has been ignored and, instead a blanket doctrine had
been repeatedly upheld that rendered the supposed of the parties (Lagman vs. CA, 44 SCRA 234 [1972]);
ruling in Sibonghanoy not as the exception, but rather hence may be considered by this court motu proprio
the general rule, virtually overthrowing altogether the (Gov't. vs. American Surety Co., 11 Phil. 203
time-honored principle that the issue of jurisdiction is [1908])...
not lost by waiver or by estoppel.
These considerations make inevitable the conclusion
xxx xxx xxx that the judgment of the Labor Arbiter and the
resolution of the NLRC are void for lack of cause of
It is neither fair nor legal to bind a party by the result jurisdiction, and this Court must set matters aright in
of a suit or proceeding which was taken cognizance of the exercise of its judicial power. It is of no moment
in a court which lacks jurisdiction over the same that Vailoces, in his amended complaint, seeks other
irrespective of the attendant circumstances. The relief which would seemingly fan under the jurisdiction
equitable defense of estoppel requires knowledge or of the Labor Arbiter, because a closer look at these-
consciousness of the facts upon which it is based . The underpayment of salary and non-payment of living
same thing is true with estoppel by conduct which may allowance-shows that they are actually part of the
be asserted only when it is shown, among others, that perquisites of his elective position, hence, intimately
the representation must have been made with linked with his relations with the corporation. The
knowledge of the facts and that the party to whom it question of remuneration, involving as it does, a
was made is ignorant of the truth of the matter (De person who is not a mere employee but a stockholder
Castro vs. Gineta, 27 SCRA 623). The filing of an and officer, an integral part, it might be said, of the
action or suit in a court that does not possess corporation, is not a simple labor problem but a matter
jurisdiction to entertain the same may not be that comes within the area of corporate affairs and
presumed to be deliberate and intended to secure a management, and is in fact a corporate controversy in
ruling which could later be annulled if not favorable to contemplation of the Corporation Code.
the party who filed such suit or proceeding in a court
that lacks jurisdiction to take cognizance of the same, WHEREFORE, the questioned decision of the Labor
such act may not at once be deemed sufficient basis of Arbiter and the Resolution of the NLRC dismissing
estoppel. It could have been the result of an honest petitioners' appeal from said decision are hereby set
mistake or of divergent interpretation of doubtful legal aside because rendered without jurisdiction. The
provisions. If any fault is to be imputed to a party amended complaint for illegal dismissal, etc., basis of
taking such course of action, part of the blame should said decision and Resolution, is ordered dismissed,
be placed on the court which shall entertain the suit, without prejudice to private respondent's seeking
thereby lulling the parties into believing that they recourse in the appropriate forum.
pursued their remedies in the correct forum. Under the
rules, it is the duty of the court to dismiss an action SO ORDERED.
'whenever it appears that court has no jurisdiction over
the subject matter.' (Section 2, Rule 9, Rules of Court)
Should the Court render a judgment without
This is a petition for certiorari with prayer to annul the
jurisdiction, such judgment may be impeached or
resolution dated May 29, 1987 of respondent National
annulled for lack of jurisdiction (Sec. 30, Rule 132,
Labor Relations Commission (NLRC) reversing the
Ibid), within ten (10) years from the finality of the
order dated December 3, 1985 of the Labor Arbiter
same (Art. 1144, par. 3, Civil Code).
which dismissed private respondent Antonio M.
Lagdameo's (Lagdameo for brevity) complaint for
To be sure, petitioners failed to raise the issue of
Illegal Dismissal (NLRC NCR Case No. 1-228-85)
jurisdiction in their petition before this Court. But this,
against petitioner Fortune Cement Corporation (FCC
too, is no hindrance to the Court's considering said
for brevity) for lack of jurisdiction.
Lagdameo is a registered stockholder of FCC.
The failure of the appellees to invoke anew the
aforementioned solid ground of want of jurisdiction of
On October 14, 1975, at the FCC Board of Directors'
the lower court in this appeal should not prevent this
regular monthly meeting, he was elected Executive
Tribunal to take up that issue as the lack of jurisdiction
Vice-President of FCC effective November 1, 1975 (p.
of the lower court is apparent upon the face of the
3, Rollo).
record and it is fundamental that a court of justice
could only validly act upon a cause of action or subject Some eight (8) years later, or on February 10, 1983,
matter of a case over which it has jurisdiction and said during a regular meeting, the FCC Board resolved that
jurisdiction is one conferred only by law; and cannot all of its incumbent corporate officers, including
be acquired through, or waived by, any act or omission Lagdameo, would be "deemed" retained in their
respective positions without necessity of yearly members of associations or organization registered
reappointments, unless they resigned or were with the Commission;
terminated by the Board (p. 4, Rollo).
b) Controversies arising out of intra-corporate or
At subsequent regular meetings held on June 14 and partnership relations, between and among
21, 1983, the FCC Board approved and adopted a stockholders, members, or associates; between any or
resolution dismissing Lagdameo as Executive Vice- all of them and the corporation, partnership or
President of the company, effective immediately, for association of which they are stockholders, members
loss of trust and confidence (p. 4, Rollo). or associates, respectively; and between such
corporation, partnership or association and the state
On June 21, 1983, Lagdameo filed with the National insofar as it concerns their individual franchise or right
Labor Relations Commission (NLRC), National Capital to exist as such entity;
Region, a complaint for illegal dismissal against FCC
(NLRC-NCR Case No. 1-228-85) alleging that his c) Controversies in the election or appointments
dismissal was done without a formal hearing and of directors, trustees, officers or managers of such
investigation and, therefore, without due process (p. corporations, partnership or associations." (Section 5,
63, Rollo). P.D. 902-A; Emphasis supplied.)

On August 5, 1985, FCC moved to dismiss Lagdameo's In reversing the decision of Labor Arbiter Porfirio E.
complaint on the ground that his dismiss as a Villanueva, respondent NLRC held:
corporate officer is a purely intra-corporate
controversy over which the Securities and Exchange . . . . It is not disputed that complainant Lagdameo
Commission (SEC) has original and exclusive was an employee of respondent Fortune Cement
jurisdiction. Corporation, being then the Executive Vice-President.
For having been dismissed for alleged loss of trust and
The Labor Arbiter granted the motion to dismiss (p. confidence, complainant questioned his dismissal on
22, Rollo). On appeal, however, the NLRC set aside the such ground and the manner in which he was
Labor Arbiter's order and remanded the case to the dismissed, claiming that no investigation was
Arbitration Branch "for appropriate proceedings" (NLRC conducted, hence, there was and is denial of due
Resolution dated April 30, 1987). The NLRC denied process. Predicated on the above facts, it is clear to Us
FCC's motion for reconsideration (p. 5, Rollo). that a labor dispute had arisen between the appellant
Dissatisfied, FCC filed this petition for certiorari. and the respondent corporation, a dispute which falls
within the original and exclusive jurisdiction of the
We find merit in the petition. NLRC. A labor dispute as defined in the Labor Code
includes any controversy or matter concerning terms
The sole issue to be resolved is whether or not the
or conditions of employment or the association or
NLRC has jurisdiction over a complaint filed by a
representation of persons in negotiating, fixing,
corporate executive vice-president for illegal dismissal,
maintaining, changing or arranging the terms and
resulting from a board resolution dismissing him as
conditions of employment regardless of whether or not
such officer.
the disputants stand in the proximate relations of
employers and employees." (pp. 16-17, Rollo).
Section 5 of Presidential Decree No. 902-A vests in the
SEC original and exclusive jurisdiction over this
The Solicitor General, declining to defend public
respondent in its pleading entitled "Manifestation in
Lieu of Comment," aptly observed:
Sec. 5. In addition to the regulatory and adjudicative
functions of the Securities and Exchange Commission
The position of "Executive Vice-President," from which
over corporations, partnerships and other forms of
private respondent Lagdameo claims to have been
associations registered with it as expressly granted
illegally dismissed, is an elective corporate office. He
under existing laws and decrees, it shall have original
himself acquired that position through election by the
and exclusive jurisdiction to hear and decide cases
corporation's Board of Directors, although he also lost
the same as a consequence of the latter's resolution.
a) Devices and schemes employed by or any acts,
Indeed the election, appointment and/or removal of an
of the board of directors, business associates, its
executive vice-president is a prerogative vested upon a
officers or partners, amounting to fraud and
corporate board.
misrepresentation which may be detrimental to the
interest of the public and/or stockholders, partners, And it must be, not only because it is a practice
observed in petitioner Fortune Cement Corporation,
but more so, because of an express mandate of law. on-payment of living allowance — shows that they are
(p. 65, Rollo.) actually part of the perquisites of his elective position,
hence, intimately linked with his relations with the
The Solicitor General pointed out that "a corporate corporation.1âwphi1 The question of remuneration,
officer's dismissal is always a corporate act and/or involving as it does, a person who is not a mere
intra-corporate controversy and that nature is not employee but a stockholder and officer, an integral
altered by the reason or wisdom which the Board of part, it might be said, of the corporation, is not a
Directors may have in taking such action." The dispute simple labor problem but a matter that comes within
between petitioner and Lagdameo is of the class the area of corporate affairs and management, and is
described in Section 5, par. (c) of Presidential Decree in fact a corporate controversy in contemplation of the
No. 902-A, hence, within the original and exclusive Corporation Code.
jurisdiction of the SEC. The Solicitor General
recommended that the petition be granted and NLRC- WHEREFORE, the questioned Resolution of the NLRC
NCR Case No. 1-228-85 be dismissed by respondent reversing the decision of the Labor Arbiter, having
NLRC for lack of jurisdiction (p. 95, Rollo). been rendered without jurisdiction, is hereby reversed
and set aside. The decision of the Labor Arbiter dated
In PSBA vs. Leaño (127 SCRA 778), this Court, December 3, 1985 dismissing NLRC-NCR Case No. 1-
confronted with a similar controversy, ruled that the 228-85 is affirmed, without prejudice to private
SEC, not the NLRC, has jurisdiction: respondent Antonio M. Lagdameo's seeking recourse in
the appropriate forum. No costs.
This is not a case of dismissal. The situation is that of a
corporate office having been declared vacant, and of SO ORDERED.
Tan's not having been elected thereafter. The matter
of whom to elect is a prerogative that belongs to the MAINLAND CONSTRUCTION vs MOVILLA
Board, and involves the exercise of deliberate choice
and the faculty of discriminative selection. Generally Petitioners urge this Court to set aside the Decision of
speaking, the relationship of a person to a corporation, the National Labor Relations Commission (NLRC),
whether as officer or as agent or employee is not dated May 30, 1994, in NLRC-CA No. M-000949-92 for
determined by the nature of the services performed, having been rendered with grave abuse of discretion
but by the incidents of the relationship as they actually amounting to lack of jurisdiction. This reversed the
exist. decision of the Labor Arbiter in Case No. RAB-11-10-
99883-91. Petitioners' motion for reconsideration of
Lagdameo claims that his dismissal was wrongful, the NLRC decision was denied in a Resolution, dated
illegal, and arbitrary, because the "irregularities" August 31, 1994.
charged against him were not investigated (p. 85,
Rollo); that the case of PSBA vs. Leaño (supra) cited Mainland Construction Co., Inc. is a domestic
by the Labor Arbiter finds no application to his case corporation, duly organized and existing under
because it is not a matter of corporate office having Philippine laws, having been issued a certificate of
been declared vacant but one where a corporate officer registration by the Securities and Exchange
was dismissed without legal and factual basis and Commission (SEC) on July 26, 1977, under Registry
without due process; that the power of dismissal Number 74691. Its principal line of business is the
should not be confused with the manner of exercising general construction of roads and bridges and the
the same; that even a corporate officer enjoys security operation of a service shop for the maintenance of
of tenure regardless of his rank (p. 97, Rollo); and that equipment. Respondents on the other hand, are the
the SEC is without power to grant the reliefs prayed for surviving heirs of complainant, Ernesto Movilla, who
in his complaint (p. 106, Rollo). died during the pendency of the action with the Labor
The issue of the SEC's power or jurisdiction is decisive
and renders unnecessary a consideration of the other Records show that Ernesto Movilla, who was a Certified
questions raised by Lagdameo. Thus did this Court rule Public Accountant during his lifetime, was hired as
in the case of Dy vs. National Labor Relations such by Mainland in 1977. Thereafter, he was
Commission (145 SCRA 211) which involved a similar promoted to the position of Administrative Officer with
situation: a monthly salary of P4,700.00.

It is of no moment that Vailoces, in his amended Ernesto Movilla, recorded as receiving a fixed salary of
complaint, seeks other reliefs which would seemingly P4,700.00 a month, was registered with the Social
fall under the jurisdiction of the Labor Arbiter, because Security System (SSS) as an employee of petitioner
a closer look at these — underpayment of salary and corporation. His contributions to the SSS, Medicare
and Employees Compensation Commission (ECC) were "It is clear that in the case at bar, the controversy
deducted from his monthly earnings by his said presented by complainant is intra-corporate in nature
employer. and is within the jurisdiction of the Securities and
Exchange Commission, pursuant to P.D. 902-A (Phil.
On April 12, 1987, during petitioner corporation's School of Business Administration, et al. v. Leano, G.R.
annual meeting of stockholders, the following were No. L--58468, February 24, 1984; Dy et al. v. NLRC, et
elected members of the Board of Directors, viz: al., G.R. No. L-68544, October 27, 1986). What
Robert L. Carabuena, Ellen L. Carabuena, Lucita Lu Movilla is claiming against respondents are his alleged
Carabuena, Martin G. Lu and Ernesto L. Movilla. unpaid salaries and separation pay as Administrative
Manager of the corporation for which position he was
On the same day, an organizational meeting was held
appointed by the Board of Directors. His claims
and the Board of Directors elected Ernesto Movilla as
therefore fall under the jurisdiction of the Securities
Administrative Manager. He occupied the said position
and Exchange Commission because this is not a simple
up to the time of his death.
labor problem; but a matter that comes within the
area of corporate affairs and management, and is in
On April 2, 1991, the Department of Labor and
fact a corporate controversy in contemplation of the
Employment (DOLE) conducted a routine inspection on
Corporation Code. (Fortune Cement Corporation v.
petitioner corporation and found that it committed
NLRC, et al., G.R No. 79762, January 24, 1991)."
such irregularities in the conduct of its business as:
Aggrieved by this decision, respondents appealed to
"1. Underpayment of wages under R.A. 6727 and
the National Labor Relations Commission (NLRC). The
NLRC ruled that the issue in the case was one which
2. Non-implementation of Wage Order No. RTWPB-XI- involved a labor dispute between an employee and
02; petitioner corporation and, thus, the NLRC had
jurisdiction to resolve the case. The dispositive portion
3. Unpaid wages for 1989 and 1990; of the NLRC decision reads:

4. Non-payment of holiday pay and service incentive "WHEREFORE, the assailed decision is Reversed and
leave pay; and Set Aside. Respondents are ordered to pay the heirs
of complainant the following:
5. Unpaid 13th month pay (remaining balance for
"1990." 1. Unpaid salaries from January 1989 to September
1991 in the sum of P155,100.00;
On the basis of this finding, petitioner corporation was
ordered by DOLE to pay to its thirteen employees, 2. Separation pay in the sum of P65,800.00;
which included Movilla, the total amount of
P309,435.89, representing their salaries, holiday pay, 3. Moral damages in the sum of P10,000.00;.
service incentive leave pay differentials, unpaid wages
4. Indemnity in the sum of P3,000.00; and,
and 13th month pay.
5. Attorney's fees equivalent to 10% of the total
All the employees listed in the DOLE's order were paid
by petitioner corporation, except Ernesto Movilla.
The pivotal issue in this case is which of the two
On October 8, 1991, Ernesto Movilla filed a case
agencies of the government - the NLRC or the SEC -
against petitioner corporation and/or Lucita, Robert,
has jurisdiction over the controversy.
and Ellen, all surnamed Carabuena, for unpaid wages,
separation pay and attorney's fees, with the
As we stated earlier, it is of course the contention of
Department of Labor and Employment, Regional
petitioners that the NLRC committed grave abuse of
Arbitration, Branch XI, Davao City.
discretion when it nullified the decision of the Labor
Arbiter which dismissed the complaint of Movilla for
On February 29, 1992, Ernesto Movilla died while the
unpaid wages, separation pay and attorney's fees on
case was being tried by the Labor Arbiter and was
the ground of lack of jurisdiction. Petitioners take the
promptly substituted by his heirs, private respondents
position that, since Ernesto Movilla was a corporate
herein, with the consent of the Labor Arbiter.
officer, the controversy as to his compensation is
The Labor Arbiter rendered judgment on June 26, within the jurisdiction of the SEC as mandated by P.D.
1992, dismissing the complaint on the ground of lack 902-A and not with the NLRC.
of jurisdiction. Specifically, the Labor Arbiter made the
following ratiocination:
We find for the respondents, it appearing that employed in the company. A Premium Certification
petitioners' contention is bereft of merit. issued by an authorized representative of petitioners
was also presented to show his actual monthly
In order that the SEC can take cognizance of a case, earnings as well as his monthly contributions to the
the controversy must pertain to any of the following SSS, Medicare and ECC. Movilla's registration in the
relationships: SSS by petitioner corporation added strength to the
conclusion that he was petitioner corporation's
a. between the corporation, partnership or
employee as coverage by the said law is predicated on
association and the public;
the existence of an employer-employee relationship.
b. between the corporation, partnership or
Furthermore, petitioner corporation failed to present
association and its stockholders, partners,
evidence which showed that, after his election as
members or officers;
Administrative Manager, he was excluded from the
c. between the corporation, partnership or
coverage of the SSS, Medicare and ECC.
association and the State as far as its
franchise, permit or license to operate is He also presented, appearing to be relevant to the
concerned; and issue, the result of the investigation conducted by
d. among the stockholders, partners or associates DOLE which found that petitioner corporation has
themselves. transgressed several labor standard laws against its
The fact that the parties involved in the controversy
are all stockholders or that the parties involved are the As correctly ruled by the NLRC:
stockholders and the corporation does not necessarily
place the dispute within the ambit of the jurisdiction of "The claims for unpaid salaries/monetary benefits and
SEC. The better policy to be followed in determining separation pay are not a corporate conflict as
jurisdiction over a case should be to consider respondents presented them to be. If complainant is
concurrent factors such as the status or relationship of not an employee, respondent should have contested
the parties or the nature of the question that is the the DOLE inspection report. What they did was to
subject of their controversy.[8] In the absence of any exclude complainant from the order of payment x x x
one of these factors, the SEC will not have jurisdiction. and worse, he was not both given responsibilities and
Furthermore, it does not necessarily follow that every paid his salaries for the succeeding months x x x. This
conflict between the corporation and its stockholders is a clear case of constructive dismissal without due
would involve such corporate matters as only the SEC process x x x."
can resolve in the exercise of its adjudicatory or quasi-
judicial powers. The existence of an employer-employee relationship is
a factual question and public respondent's findings are
In the case at bench, the claim for unpaid wages and accorded great weight and respect as the same are
separation pay filed by the complainant against supported by substantial evidence.[13] Hence, we
petitioner corporation involves a labor dispute. It does uphold the conclusion of public respondent that
not involve an intra-corporate matter, even when it is Ernesto Movilla was an employee of petitioner
between a stockholder and a corporation. It relates to corporation.
an employer-employee relationship which is distinct
from the corporate relationship of one with the other. It is pertinent to note that petitioner corporation is not
Moreover, there was no showing of any change in the prohibited from hiring its corporate officers to perform
duties being performed by complainant as an services under a circumstance which will make him an
Administrative Officer and as an Administrative employee. Moreover, although a director of a
Manager after his election by the Board of Directors. corporation is not, merely by virtue of his position, its
What comes to the fore is whether there was a change employee, said director may act as an employee or
in the nature of his functions and not merely the accept duties that make him also an employee.
nomenclature or title given to his job.
Since Ernesto Movilla's complaint involves a labor
Indeed, Ernesto Movilla worked as an administrative dispute, it is the NLRC, under Article 217 of the Labor
officer of the company for several years and was given Code of the Philippines, which has jurisdiction over the
a fixed salary every month. To further sustain this case at bench.
assertion Movilla also submitted a joint affidavit
WHEREFORE, the petition is DISMISSED for lack of
executed by Juanito S. Malubay and Delia S. Luciano,
showing of any grave abuse of discretion on the part of
Project Engineer and Personnel-In-Charge,
public respondent NLRC. The assailed decision of
respectively, of petitioner corporation, attesting that
public respondent is thus AFFIRMED. SO ORDERED.
they personally knew Movilla and that he was