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CORP: Nature of Exercise of Power to

DE ROSSI V. NLRC
113 Terminate Officers
G.R. No. 108710 September 14, 1999 QUISUMBING, J. Matt
Petitioners: Respondents:
ARMANDO T. DE ROSSI MATLING INDUSTRIAL AND COMMERCIAL
CORPORATION AND RICHARD K. SPENCER
Recit Ready Summary

Italian citizen Armando De Rossi is the Executive Vice President (EVP) and General Manager of Matling
Industrial and Commercial Corporation (MICC) since 1985. In 1988, MICC terminated his employment
based on the ground that he failed to secure his employment permit, grossly mismanaged the business
affairs of the company, and misused the corporate funds.

De Rossi filed a complaint for illegal dismissal with the National Labor Relations Commission (NLRC). The
Labor Arbiter ruled in favor of De Rossi and issued a writ of execution for De Rossi’s reinstatement and
MICC’s payment of back wages to De Rossi.

MICC filed a MR arguing that SEC has jurisdiction over the case; not NLRC. MICC further argued that the
position of EVP is an elective post specifically provided by MICC’s by-laws. Thus, it is an intra-corporate
matter within the jurisdiction of SEC. NLRC dismissed the case and applied SC’s previous rulings
recognizing SEC’s jurisdiction over such a case.

The issue is W/N SEC has jurisdiction over the matter - YES by virtue of PD902-A

SC ruled that it is within SEC’s jurisdiction. PD 902-A provides that SEC has jurisdiction over intra-corporate
affairs regarding election or appointment of officers of a corporation. An office is created by the charter of
the corporation under which a corporation is organized, and the officer is elected by the directors or
stockholders. MICC’s bylaws state that the EVP is an officer elected and/or appointed by the Board. The
by-laws being in force, clearly De Rossi is considered an officer of MICC, elected and/or designated by its
board of directors.

CLV Outline: An officer’s removal is a corporate act, and if such removal occasions an intra-corporate
controversy, its nature is not altered by the reason or wisdom, or lack thereof, with which the Board of
Directors might have in taking such action. Perforce, the matter would come within the area of corporate
affairs and management, and such a corporate controversy would call for SEC adjudicative expertise [now
RTC Special Commercial Courts], not that of NLRC.
Facts
1. Petitioner Armando De Rossi (De Rossi) is an Italian citizen and the Executive Vice President and
General Manager of Respondent Matling Industrial and Commercial Corporation (MICC).
2. He started work on JULY 1, 1985. MICC terminated his employment on AUGUST 10, 1988.
Aggrieved, De Rossi filed with the National Labor Relations Commission (NLRC) a complaint for
illegal dismissal.
3. MICC based petitioner’s dismissal on the ground that De Rossi failed to secure his employment
permit, grossly mismanaged the business affairs of the company, and misused corporate funds.
4. The Labor Arbiter (LA) ruled in favor of De Rossi. MICC appealed said decision of the NLRC on
the ground that the LA committed grave abuse of discretion amounting to lack of jurisdiction in
reinstating De Rossi because De Rossi’s termination was for a valid cause
5. De Rossi filed a motion for issuance of a writ of execution but MICC opposed. MICC filed a counter
manifestation and motion contending that the position of Executive Vice-President is an elective
post, specifically provided by the corporate’s by-laws. Thus, De Rossi’s dismissal was an intra-
corporate matter within the jurisdiction of the Securities and Exchange Commission (SEC) and not
with the LA nor the NLRC.

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6. NLRC dismissed the case even if it is in the belief that it has jurisdiction over the case. The
Commission stated that they must yield to the SC’s decisions recognizing SEC’s jurisdiction over
such a case.
7. De Rossi asserts the jurisdiction of NLRC and claims that he was neither elected to the post nor is
he a stockholder of MICC.
8. MICC argues that under the Corporation Code, there is no requirement that an Executive Vice-
President of a corporation should be a stockholder or a member of the Board of Directors. Further,
the jurisdiction of the SEC is not limited to controversies in the election or appointment of directors
and trustees, but also included officers or managers of such corporations, partnerships, or
associations.
Issues Ruling
1. W/N SEC has jurisdiction over cases involving removal of 1. YES, by virtue of
Corporate Officers? PD902-A
Rationale
1. The SEC has jurisdiction.
- Sec. 5. PD902-A:
In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction
to hear and decide cases involving:
(c) Controversies in the election or appointments of directors, trustees, officers or managers of
such corporation, partnership or association.
 In the present case, private respondents aver that the officers and their terms of office are
prescribed by the corporations’ by-laws, which provide as follows:
BY-LAW NO. III Directors and Officers: The officers of the corporation shall be the President,
Executive Vice President, Secretary and Treasurer, each of whom may hold his office until his
successor is elected and qualified, unless sooner removed by the Board of Directors...
 The by-laws being in force, clearly De Rossi is considered an officer of MICC, elected and/or
designated by its board of directors.
 Following Section 5(c) of P.D. No. 902-A, the SEC exercises exclusive jurisdiction over
controversies regarding the election and/or designation of directors, trustees, officers or
managers of a corporation, partnership or association. This provision is indubitably
applicable to the petitioner’s case. Jurisdiction here is not with the Labor Arbiter nor the NLRC,
but with the SEC.
 A corporate officer’s removal from his office is a corporate act. If such removal occasions an
intra-corporate controversy, its nature is not altered by the reason or wisdom, or lack thereof, with
which the Board of Directors might have in taking such action
 When petitioner, as Executive Vice President allegedly diverted company funds for his personal
use resulting in heavy financial losses to the company, this matter would amount to fraud. Such
fraud would be detrimental to the interest not only of the corporation but also of its members.
 This type of fraud encompasses controversies in a relationship within the corporation
covered by SEC jurisdiction. Perforce, the matter would come within the area of corporate
affairs and management, and such a corporate controversy would call for the adjudicative
expertise of the SEC, not the Labor Arbiter or the NLRC.
Disposition

Petition denied.