FIRST DIVISION

G.R. No. 168757: January 19, 2011

RENATO REAL, Petitioner, v. SANGU PHILIPPINES, INC. and/ or

KIICHI ABE, Respondents.

DECISION

DEL CASTILLO, J.:

The perennial question of whether a complaint for illegal dismissal is intra-

corporate and thus beyond the jurisdiction of the Labor Arbiter is the core
issue up for consideration in this case.

This Petition for Review on Certiorari assails the Decision1cralaw dated June
28, 2005 of the Court of Appeals (CA) in CA-G.R. SP. No. 86017 which
dismissed the petition for certiorari filed before it.

Factual Antecedents

Petitioner Renato Real was the Manager of respondent corporation Sangu

Philippines, Inc., a corporation engaged in the business of providing
manpower for general services, like janitors, janitresses and other
maintenance personnel, to various clients. In 2001, petitioner, together with
29 others who were either janitors, janitresses, leadmen and maintenance
men, all employed by respondent corporation, filed their respective
Complaints2cralaw for illegal dismissal against the latter and respondent
Kiichi Abe, the corporation's Vice-President and General Manager. These
complaints were later on consolidated.

With regard to petitioner, he was removed from his position as Manager

through Board Resolution 2001-033cralaw adopted by respondent
corporation's Board of Directors. Petitioner complained that he was neither
notified of the Board Meeting during which said board resolution was passed
nor formally charged with any infraction. He just received from respondents
a letter4cralaw dated March 26, 2001 stating that he has been terminated
from service effective March 25, 2001 for the following reasons: (1)
continuous absences at his post at Ogino Philippines Inc. for several months
which was detrimental to the corporation's operation; (2) loss of trust and
confidence; and, (3) to cut down operational expenses to reduce further
losses being experienced by respondent corporation.
Respondents, on the other hand, refuted petitioner's claim of illegal
dismissal by alleging that after petitioner was appointed Manager, he
committed gross acts of misconduct detrimental to the company since 2000.
According to them, petitioner would almost always absent himself from work
without informing the corporation of his whereabouts and that he would
come to the office only to collect his salaries. As he was almost always
absent, petitioner neglected to supervise the employees resulting in
complaints from various clients about employees' performance. In one
instance, petitioner together with a few others, while apparently drunk, went
to the premises of one of respondents' clients, Epson Precision (Phils.) Inc.,
and engaged in a heated argument with the employees therein. Because of
this, respondent Abe allegedly received a complaint from Epson's Personnel
Manager concerning petitioner's conduct. Respondents likewise averred that
petitioner established a company engaged in the same business as
respondent corporation's and even submitted proposals for janitorial services
to two of the latter's clients. Because of all these, the Board of Directors of
respondent corporation met on March 24, 2001 and adopted Board
Resolution No. 2001-03 removing petitioner as Manager. Petitioner was
thereafter informed of his removal through a letter dated March 26, 2001
which he, however, refused to receive.

Further, in what respondents believed to be an act of retaliation, petitioner

allegedly encouraged the employees who had been placed in the manpower
pool to file a complaint for illegal dismissal against respondents. Worse, he
later incited those assigned in Epson Precision (Phils.) Inc., Ogino Philippines
Corporation, Hitachi Cable Philippines Inc. and Philippine TRC Inc. to stage a
strike on April 10 to 16, 2001. Not satisfied, petitioner together with other
employees also barricaded the premises of respondent corporation. Such
acts respondents posited constitute just cause for petitioner's dismissal and
that same was validly effected.

Rulings of the Labor Arbiter and the National Labor Relations

Commission

The Labor Arbiter in a Decision 5cralaw dated June 5, 2003 declared

petitioner and his co-complainants as having been illegally dismissed and
ordered respondents to reinstate complainants to their former positions
without loss of seniority rights and other privileges and to pay their full
backwages from the time of their dismissal until actually reinstated and
furthermore, to pay them attorney's fees. The Labor Arbiter found no
convincing proof of the causes for which petitioner was terminated and
noted that there was complete absence of due process in the manner of his
termination.
Respondents thus appealed to the National Labor Relations Commission
(NLRC) and raised therein as one of the issues the lack of jurisdiction of the
Labor Arbiter over petitioner's complaint. Respondents claimed that
petitioner is both a stockholder and a corporate officer of respondent
corporation, hence, his action against respondents is an intra-corporate
controversy over which the Labor Arbiter has no jurisdiction.

The NLRC found such contention of respondents to be meritorious. Aside

from petitioner's own admission in the pleadings that he is a stockholder and
at the same time occupying a managerial position, the NLRC also gave
weight to the corporation's General Information Sheet 6cralaw (GIS) dated
October 27, 1999 listing petitioner as one of its stockholders, consequently
his termination had to be effected through a board resolution. These, the
NLRC opined, clearly established petitioner's status as a stockholder and as a
corporate officer and hence, his action against respondent corporation is an
intra-corporate controversy over which the Labor Arbiter has no jurisdiction.
As to the other complainants, the NLRC ruled that there was no dismissal.
The NLRC however, modified the appealed decision of the Labor Arbiter in a
Decision7cralaw dated February 13, 2004, the dispositive portion of which
reads: chanrob1esvirtwallawlibrary

WHEREFORE, all foregoing premises considered, the appealed Decision dated

June 5, 2003 is hereby MODIFIED. Accordingly, judgment is hereby rendered
DISMISSING the complaint of Renato Real for lack of jurisdiction. As to the
rest of the complainants, they are hereby ordered to immediately report
back to work but without the payment of backwages.

All other claims against respondents including attorney's fees are

DISMISSED for lack of merit.

SO ORDERED.

Still joined by his co-complainants, petitioner brought the case to the CA by

way of petition for certiorari.

Ruling of the Court of Appeals

Before the CA, petitioner imputed upon the NLRC grave abuse of discretion
amounting to lack or excess of jurisdiction in declaring him a corporate
officer and in holding that his action against respondents is an intra-
corporate controversy and thus beyond the jurisdiction of the Labor Arbiter.

While admitting that he is indeed a stockholder of respondent corporation,

petitioner nevertheless disputed the declaration of the NLRC that he is a
corporate officer thereof. He posited that his being a stockholder and his
being a managerial employee do not ipso facto confer upon him the status of
a corporate officer. To support this contention, petitioner called the CA's
attention to the same GIS relied upon by the NLRC when it declared him to
be a corporate officer. He pointed out that although said information sheet
clearly indicates that he is a stockholder of respondent corporation, he is not
an officer thereof as shown by the entry "N/A" or "not applicable" opposite
his name in the officer column. Said column requires that the particular
position be indicated if the person is an officer and if not, the entry "N/A".
Petitioner further argued that the fact that his dismissal was effected
through a board resolution does not likewise mean that he is a corporate
officer. Otherwise, all that an employer has to do in order to avoid
compliance with the requisites of a valid dismissal under the Labor Code is to
dismiss a managerial employee through a board resolution. Moreover, he
insisted that his action for illegal dismissal is not an intra-corporate
controversy as same stemmed from employee-employer relationship which
is well within the jurisdiction of the Labor Arbiter. This can be deduced and is
bolstered by the last paragraph of the termination letter sent to him by
respondents stating that he is entitled to benefits under the Labor Code, to
wit: chanrob1esvirtwallawlibrary

In this connection (his dismissal) you are entitled to separation pay and
other benefits provided for under the Labor Code of the
Philippines.8cralaw (Emphasis supplied)

In contrast, respondents stood firm that the action against them is an intra-
corporate controversy. It cited Tabang v. National Labor Relations
Commission9cralaw wherein this Court declared that "an intra-corporate
controversy is one which arises between a stockholder and the corporation;"
that "[t]here is no distinction, qualification, nor any exemption whatsoever;"
and that it is "broad and covers all kinds of controversies between
stockholders and corporations." In view of this ruling and since petitioner is
undisputedly a stockholder of the corporation, respondents contended that
the action instituted by petitioner against them is an intra-corporate
controversy cognizable only by the appropriate regional trial court. Hence,
the NLRC correctly dismissed petitioner's complaint for lack of jurisdiction.

In the assailed Decision10cralaw dated June 28, 2005, the CA sided with
respondents and affirmed the NLRC's finding that aside from being a
stockholder of respondent corporation, petitioner is also a corporate officer
thereof and consequently, his complaint is an intra-corporate controversy
over which the labor arbiter has no jurisdiction. Said court opined that if it
was true that petitioner is a mere employee, the respondent corporation
would not have called a board meeting to pass a resolution for petitioner's
dismissal considering that it was very tedious for the Board of Directors to
convene and to adopt a resolution every time they decide to dismiss their
managerial employees. To support its finding, the CA likewise cited Tabang.
As to petitioner's co-complainants, the CA likewise affirmed the NLRC'S
finding that they were never dismissed from the service. The dispositive
portion of the CA Decision reads: chanrob1esvirtwallawlibrary

WHEREFORE, the instant petition is hereby DISMISSED. Accordingly, the

assailed decision and resolution of the public respondent National Labor
Relations Commission in NLRC NCR CA No. 036128-03 NLRC SRAB-IV-05-
6618-01-B/05-6619-02-B/05-6620-02-B/10-6637-01-B/10-6833-01-B,
STANDS.

SO ORDERED.

Now alone but still undeterred, petitioner elevated the case to us through
this Petition for Review on Certiorari.

The Parties' Arguments

Petitioner continues to insist that he is not a corporate officer. He argues

that a corporate officer is one who holds an elective position as provided in
the Articles of Incorporation or one who is appointed to such other positions
by the Board of Directors as specifically authorized by its By-Laws. And,
since he was neither elected nor is there any showing that he was appointed
by the Board of Directors to his position as Manager, petitioner maintains
that he is not a corporate officer contrary to the findings of the NLRC and the
CA.

Petitioner likewise contends that his complaint for illegal dismissal against
respondents is not an intra-corporate controversy. He avers that for an
action or suit between a stockholder and a corporation to be considered an
intra-corporate controversy, same must arise from intra-corporate relations,
i.e., an action involving the status of a stockholder as such. He believes that
his action against the respondents does not arise from intra-corporate
relations but rather from employer-employee relations. This, according to
him, was even impliedly recognized by respondents as shown by the earlier
quoted portion of the termination letter they sent to him.

For their part, respondents posit that what petitioner is essentially assailing
before this Court is the finding of the NLRC and the CA that he is a corporate
officer of respondent corporation. To the respondents, the question of
whether petitioner is a corporate officer is a question of fact which, as held
in a long line of jurisprudence, cannot be the subject of review under this
Petition for Review on Certiorari. At any rate, respondents insist that
petitioner who is undisputedly a stockholder of respondent corporation is
likewise a corporate officer and that his action against them is an intra-
corporate dispute beyond the jurisdiction of the labor tribunals. To support
this, they cited several jurisprudence such as Pearson & George (S.E. Asia),
Inc. v. National Labor Relations Commission, 11cralaw Philippine School of
Business Administration v. Leano, 12cralaw Fortune Cement Corporation v.
National Labor Relations Commission 13cralaw and again, Tabang v. National
Labor Relations Commission.14cralawredlaw

Moreover, in an attempt to demolish petitioner's claim that the present

controversy concerns employer-employee relations, respondents
enumerated the following facts and circumstances: (1) Petitioner was an
incorporator, stockholder and manager of respondent company; (2) As an
incorporator, he was one of only seven incorporators of respondent
corporation and one of only four Filipino members of the Board of Directors;
(3) As stockholder, he has One Thousand (1,000) of the Ten Thousand Eight
Hundred (10,800) common shares held by Filipino stockholders, with a par-
value of One Hundred Thousand Pesos ( P 100,000.00); (4) His appointment
as manager was by virtue of Section 1, Article IV of respondent corporation's
By-Laws; (5) As manager, he had direct management and authority over all
of respondent corporation's skilled employees; (6) Petitioner has shown
himself to be an incompetent manager, unable to properly supervise the
employees and even causing friction with the corporation's clients by
engaging in unruly behavior while in client's premises; (7) As if his
incompetence was not enough, in a blatant and palpable act of disloyalty, he
established another company engaged in the same line of business as
respondent corporation; (8) Because of these acts of incompetence and
disloyalty, respondent corporation through a Resolution adopted by its Board
of Directors was finally constrained to remove petitioner as Manager and
declare his office vacant; (9) After his removal, petitioner urged the
employees under him to stage an unlawful strike by leading them to believe
that they have been illegally dismissed from employment. 15cralaw
Apparently, respondents intended to show from this enumeration that
petitioner's removal pertains to his relationship with respondent corporation,
that is, his utter failure to advance its interest and the prejudice caused by
his acts of disloyalty. For this reason, respondents see the action against
them not as a case between an employer and an employee as what
petitioner alleges, but one by an officer and at same time a major
stockholder seeking to be reinstated to his former office against the
corporation that declared his position vacant.

Finally, respondents state that the fact that petitioner is being given benefits
under the Labor Code as stated in his termination letter does not mean that
they are recognizing the employer-employee relations between them. They
explain that the benefits provided under the Labor Code were merely made
by respondent corporation as the basis in determining petitioner's
compensation package and that same are merely part of the perquisites of
petitioner's office as a director and manager. It does not and it cannot
change the intra-corporate nature of the controversy. Hence, respondents
pray that this petition be dismissed for lack of merit.

Issues

From the foregoing and as earlier mentioned, the core issue to be resolved
in this case is whether petitioner's complaint for illegal dismissal constitutes
an intra-corporate controversy and thus, beyond the jurisdiction of the Labor
Arbiter.

Our Ruling

Two-tier test in determining the existence of intra-corporate controversy

Respondents strongly rely on this Court's pronouncement in the 1997 case

of Tabang v. National Labor Relations Commission, to wit:
chanrob1esvirtwallawlibrary

[A]n intra-corporate controversy is one which arises between a stockholder

and the corporation. There is no distinction, qualification nor any exemption
whatsoever. The provision is broad and covers all kinds of controversies
between stockholders and corporations.16cralawredlaw

In view of this, respondents contend that even if petitioner challenges his

being a corporate officer, the present case still constitutes an intra-corporate
controversy as petitioner is undisputedly a stockholder and a director of
respondent corporation.

It is worthy to note, however, that before the promulgation of the Tabang

case, the Court provided in Mainland Construction Co., Inc. v. Movilla17cralaw
a "better policy" in determining which between the Securities and Exchange
Commission (SEC) and the Labor Arbiter has jurisdiction over termination
disputes,18cralaw or similarly, whether they are intra-corporate or not, viz:
chanrob1esvirtwallawlibrary

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 the SEC
(now the Regional Trial Court19cralaw ). 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 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 SEC (now the Regional Trial Court 20cralaw ) can resolve in the exercise
of its adjudicatory or quasi-judicial powers. (Emphasis ours)

And, while Tabang was promulgated later than Mainland Construction Co.,
Inc., the "better policy" enunciated in the latter appears to have developed
into a standard approach in classifying what constitutes an intra-corporate
controversy. This is explained lengthily in Reyes v. Regional Trial Court of
Makati, Br. 142,21cralaw to wit: chanrob1esvirtwallawlibrary

Intra-Corporate Controversy

A review of relevant jurisprudence shows a development in the Court's

approach in classifying what constitutes an intra-corporate controversy.
Initially, the main consideration in determining whether a dispute constitutes
an intra-corporate controversy was limited to a consideration of the intra-
corporate relationship existing between or among the parties. The types of
relationships embraced under Section 5(b) x x x were as follows:
chanrob1esvirtwallawlibrary

a) between the corporation, partnership or association and the public;

chanroblesvirtualawlibrary

b) between the corporation, partnership or association and its stockholders,

partners, members or officers; chanroblesvirtualawlibrary

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 existence of any of the above intra-corporate relations was sufficient to

confer jurisdiction to the SEC (now the RTC), regardless of the subject
matter of the dispute. This came to be known as the relationship test.

However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain
Reserve, Inc., the Court introduced the nature of the controversy test. We
declared in this case that it is not the mere existence of an intra-corporate
relationship that gives rise to an intra-corporate controversy; to rely on the
relationship test alone will divest the regular courts of their jurisdiction for
the sole reason that the dispute involves a corporation, its directors, officers,
or stockholders. We saw that there is no legal sense in disregarding or
minimizing the value of the nature of the transactions which gives rise to the
dispute.

Under the nature of the controversy test, the incidents of that relationship
must also be considered for the purpose of ascertaining whether the
controversy itself is intra-corporate. The controversy must not only be
rooted in the existence of an intra-corporate relationship, but must as well
pertain to the enforcement of the parties' correlative rights and obligations
under the Corporation Code and the internal and intra-corporate regulatory
rules of the corporation. If the relationship and its incidents are merely
incidental to the controversy or if there will still be conflict even if the
relationship does not exist, then no intra-corporate controversy exists.

The Court then combined the two tests and declared that jurisdiction should
be determined by considering not only the status or relationship of the
parties, but also the nature of the question under controversy. This two-tier
test was adopted in the recent case of Speed Distribution Inc. v. Court of
Appeals:

'To determine whether a case involves an intra-corporate controversy, and is

to be heard and decided by the branches of the RTC specifically designated
by the Court to try and decide such cases, two elements must concur: (a)
the status or relationship of the parties, and (2) the nature of the question
that is the subject of their controversy.

The first element requires that the controversy must arise out of intra-
corporate or partnership relations between any or all of the parties and the
corporation, partnership, or association of which they are not stockholders,
members or associates, 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 it concerns the individual franchises. The
second element requires that the dispute among the parties be intrinsically
connected with the regulation of the corporation. If the nature of the
controversy involves matters that are purely civil in character, necessarily,
the case does not involve an intra-corporate controversy.' [Citations
omitted.]

Guided by this recent jurisprudence, we thus find no merit in respondents'

contention that the fact alone that petitioner is a stockholder and director of
respondent corporation automatically classifies this case as an intra-
corporate controversy. To reiterate, not all conflicts between the
stockholders and the corporation are classified as intra-corporate. There are
other factors to consider in determining whether the dispute involves
corporate matters as to consider them as intra-corporate controversies.

What then is the nature of petitioner's Complaint for Illegal Dismissal? Is it

intra-corporate and thus beyond the jurisdiction of the Labor Arbiter? We
shall answer this question by using the standards set forth in the Reyes
case.

No intra-corporate relationship between the parties

As earlier stated, petitioner's status as a stockholder and director of

respondent corporation is not disputed. What the parties disagree on is the
finding of the NLRC and the CA that petitioner is a corporate officer. An
examination of the complaint for illegal dismissal, however, reveals that the
root of the controversy is petitioner's dismissal as Manager of respondent
corporation, a position which respondents claim to be a corporate office.
Hence, petitioner is involved in this case not in his capacity as a stockholder
or director, but as an alleged corporate officer. In applying the relationship
test, therefore, it is necessary to determine if petitioner is a corporate officer
of respondent corporation so as to establish the intra-corporate relationship
between the parties. And albeit respondents claim that the determination of
whether petitioner is a corporate officer is a question of fact which this Court
cannot pass upon in this petition for review on certiorari, we shall
nonetheless proceed to consider the same because such question is not the
main issue to be resolved in this case but is merely collateral to the core
issue earlier mentioned.

Petitioner negates his status as a corporate officer by pointing out that

although he was removed as Manager through a board resolution, he was
never elected to said position nor was he appointed thereto by the Board of
Directors. While the By-Laws of respondent corporation provides that the
Board may from time to time appoint such officers as it may deem necessary
or proper, he avers that respondents failed to present any board resolution
that he was appointed pursuant to said By-Laws. He instead alleges that he
was hired as Manager of respondent corporation solely by respondent Abe.
For these reasons, petitioner claims to be a mere employee of respondent
corporation rather than as a corporate officer.

We find merit in petitioner's contention.

"'Corporate officers' in the context of Presidential Decree No. 902-A are

those officers of the corporation who are given that character by the
Corporation Code or by the corporation's by-laws. There are three specific
officers whom a corporation must have under Section 25 of the Corporation
Code. These are the president, secretary and the treasurer. The number of
officers is not limited to these three. A corporation may have such other
officers as may be provided for by its by-laws like, but not limited to, the
vice-president, cashier, auditor or general manager. The number of
corporate officers is thus limited by law and by the corporation's by-
laws."22cralawredlaw

Respondents claim that petitioner was appointed Manager by virtue of

Section 1, Article IV of respondent corporation's By-Laws which provides:
chanrob1esvirtwallawlibrary

ARTICLE IV

OFFICER

Section 1. Election/Appointment - Immediately after their election, the Board

of Directors shall formally organize by electing the President, Vice-President,
the Secretary at said meeting.

The Board, may from time to time, appoint such other officers as it
may determine to be necessary or proper. Any two (2) or more
positions may be held concurrently by the same person, except that no one
shall act as President and Treasurer or Secretary at the same time.

x x x23cralaw (Emphasis ours)

We have however examined the records of this case and we find nothing to
prove that petitioner's appointment was made pursuant to the above-quoted
provision of respondent corporation's By-Laws. No copy of board resolution
appointing petitioner as Manager or any other document showing that he
was appointed to said position by action of the board was submitted by
respondents. What we found instead were mere allegations of respondents
in their various pleadings24cralaw that petitioner was appointed as Manager
of respondent corporation and nothing more. "The Court has stressed time
and again that allegations must be proven by sufficient evidence because
mere allegation is definitely not evidence."25cralawredlaw

It also does not escape our attention that respondents made the following
conflicting allegations in their Memorandum on Appeal 26cralaw filed before
the NLRC which cast doubt on petitioner's status as a corporate officer, to
wit: chanrob1esvirtwallawlibrary
xxx

24. Complainant-appellee Renato Real was appointed as the manager of

respondent-appellant Sangu on November 6, 1998. Priorly [sic], he was
working at Atlas Ltd. Co. at Mito-shi, Ibaraki-ken Japan. He was staying in
Japan as an illegal alien for the past eleven (11) years. He had a problem
with his family here in the Philippines which prompted him to surrender
himself to Japan's Bureau of Immigration and was deported back to the
Philippines. His former employer, Mr. Tsutomo Nogami requested Mr.
Masahiko Shibata, one of respondent-appellant Sangu's Board of Directors, if
complainant-appellee Renato Real could work as one of its employees here
in the Philippines because he had been blacklisted at Japan's Immigration
Office and could no longer go back to Japan. And so it was arranged that
he would serve as respondent-appellant Sangu's manager, receiving
a salary of P 25,000.00 . As such, he was tasked to oversee the
operations of the company. x x x (Emphasis ours)

xxx

As earlier stated, complainant-appellee Renato Real was hired as the

manager of respondent-appellant Sangu. As such, his position was reposed
with full trust and confidence. x x x

While respondents repeatedly claim that petitioner was appointed as

Manager pursuant to the corporation's By-Laws, the above-quoted
inconsistencies in their allegations as to how petitioner was placed in said
position, coupled by the fact that they failed to produce any documentary
evidence to prove that petitioner was appointed thereto by action or with
approval of the board, only leads this Court to believe otherwise. It has been
consistently held that "[a]n 'office' is created by the charter of the
corporation and the officer is elected (or appointed) by the directors or
stockholders."27cralaw Clearly here, respondents failed to prove that
petitioner was appointed by the board of directors. Thus, we cannot
subscribe to their claim that petitioner is a corporate officer. Having said
this, we find that there is no intra-corporate relationship between the parties
insofar as petitioner's complaint for illegal dismissal is concerned and that
same does not satisfy the relationship test.

Present controversy does not relate to intra-corporate dispute

We now go to the nature of controversy test. As earlier stated, respondents

terminated the services of petitioner for the following reasons: (1) his
continuous absences at his post at Ogino Philippines, Inc; (2) respondents'
loss of trust and confidence on petitioner; and, (3) to cut down operational
expenses to reduce further losses being experienced by the corporation.
Hence, petitioner filed a complaint for illegal dismissal and sought
reinstatement, backwages, moral damages and attorney's fees. From these,
it is not difficult to see that the reasons given by respondents for dismissing
petitioner have something to do with his being a Manager of respondent
corporation and nothing with his being a director or stockholder. For one,
petitioner's continuous absences in his post in Ogino relates to his
performance as Manager. Second, respondents' loss of trust and confidence
in petitioner stemmed from his alleged acts of establishing a company
engaged in the same line of business as respondent corporation's and
submitting proposals to the latter's clients while he was still serving as its
Manager. While we note that respondents also claim these acts as
constituting acts of disloyalty of petitioner as director and stockholder, we,
however, think that same is a mere afterthought on their part to make it
appear that the present case involves an element of intra-corporate
controversy. This is because before the Labor Arbiter, respondents did not
see such acts to be disloyal acts of a director and stockholder but rather, as
constituting willful breach of the trust reposed upon petitioner as
Manager.28cralaw It was only after respondents invoked the Labor Arbiter's
lack of jurisdiction over petitioner's complaint in the Supplemental
Memorandum of Appeal29cralaw filed before the NLRC that respondents
started considering said acts as such. Third, in saying that they were
dismissing petitioner to cut operational expenses, respondents actually want
to save on the salaries and other remunerations being given to petitioner as
its Manager. Thus, when petitioner sought for reinstatement, he wanted to
recover his position as Manager, a position which we have, however, earlier
declared to be not a corporate position. He is not trying to recover a seat in
the board of directors or to any appointive or elective corporate position
which has been declared vacant by the board. Certainly, what we have here
is a case of termination of employment which is a labor controversy and not
an intra-corporate dispute. In sum, we hold that petitioner's complaint
likewise does not satisfy the nature of controversy test.

With the elements of intra-corporate controversy being absent in this case,

we thus hold that petitioner's complaint for illegal dismissal against
respondents is not intra-corporate. Rather, it is a termination dispute and,
consequently, falls under the jurisdiction of the Labor Arbiter pursuant to
Section 21730cralaw of the Labor Code.

We take note of the cases cited by respondents and find them inapplicable to
the case at bar. Fortune Cement Corporation v. National Labor Relations
Commission31cralaw involves a member of the board of directors and at the
same time a corporate officer who claims he was illegally dismissed after he
was stripped of his corporate position of Executive Vice-President because of
loss of trust and confidence. On the other hand,Philippine School of Business
Administration v. Leano32cralaw and Pearson & George v. National Labor
Relations Commission33cralaw both concern a complaint for illegal dismissal
by corporate officers who were not re-elected to their respective corporate
positions. The Court declared all these cases as involving intra-corporate
controversies and thus affirmed the jurisdiction of the SEC (now the
RTC)34cralaw over them precisely because they all relate to corporate officers
and their removal or non-reelection to their respective corporate positions.
Said cases are by no means similar to the present case because as discussed
earlier, petitioner here is not a corporate officer.

With the foregoing, it is clear that the CA erred in affirming the decision of
the NLRC which dismissed petitioner's complaint for lack of jurisdiction. In
cases such as this, the Court normally remands the case to the NLRC and
directs it to properly dispose of the case on the merits. "However, when
there is enough basis on which a proper evaluation of the merits of
petitioner's case may be had, the Court may dispense with the time-
consuming procedure of remand in order to prevent further delays in the
disposition of the case."35cralaw "It is already an accepted rule of procedure
for us to strive to settle the entire controversy in a single proceeding,
leaving no root or branch to bear the seeds of litigation. If, based on the
records, the pleadings, and other evidence, the dispute can be resolved by
us, we will do so to serve the ends of justice instead of remanding the case
to the lower court for further proceedings." 36cralaw We have gone over the
records before us and we are convinced that we can now altogether resolve
the issue of the validity of petitioner's dismissal and hence, we shall proceed
to do so.

Petitioner's dismissal not in accordance with law

"In an illegal dismissal case, the onus probandi rests on the employer to
prove that [the] dismissal of an employee is for a valid cause." 37cralaw Here,
as correctly observed by the Labor Arbiter, respondents failed to produce
any convincing proof to support the grounds for which they terminated
petitioner. Respondents contend that petitioner has been absent for several
months, yet they failed to present any proof that petitioner was indeed
absent for such a long time. Also, the fact that petitioner was still able to
collect his salaries after his alleged absences casts doubts on the
truthfulness of such charge. Respondents likewise allege that petitioner
engaged in a heated argument with the employees of Epson, one of
respondents' clients. But just like in the charge of absenteeism, there is no
showing that an investigation on the matter was done and that disciplinary
action was imposed upon petitioner. At any rate, we have reviewed the
records of this case and we agree with the Labor Arbiter that under the
circumstances, said charges are not sufficient bases for petitioner's
termination. As to the charge of breach of trust allegedly committed by
petitioner when he established a new company engaged in the same line of
business as respondent corporation's and submitted proposals to two of the
latter's clients while he was still a Manager, we again observe that these are
mere allegations without sufficient proof. To reiterate, allegations must be
proven by sufficient evidence because mere allegation is definitely not
evidence.38cralawredlaw

Moreover, petitioner's dismissal was effected without due process of law.

"The twin requirements of notice and hearing constitute the essential
elements of due process. The law requires the employer to furnish the
employee sought to be dismissed with two written notices before termination
of employment can be legally effected: (1) a written notice apprising the
employee of the particular acts or omissions for which his dismissal is sought
in order to afford him an opportunity to be heard and to defend himself with
the assistance of counsel, if he desires, and (2) a subsequent notice
informing the employee of the employer's decision to dismiss him. This
procedure is mandatory and its absence taints the dismissal with
illegality."39cralaw Since in this case, petitioner's dismissal was effected
through a board resolution and all that petitioner received was a letter
informing him of the board's decision to terminate him, the abovementioned
procedure was clearly not complied with. All told, we agree with the findings
of the Labor Arbiter that petitioner has been illegally dismissed. And, as an
illegally dismissed employee is entitled to the two reliefs of backwages and
reinstatement,40cralaw we affirm the Labor Arbiter's judgment ordering
petitioner's reinstatement to his former position without loss of seniority
rights and other privileges and awarding backwages from the time of his
dismissal until actually reinstated. Considering that petitioner has to secure
the services of counsel to protect his interest and necessarily has to incur
expenses, we likewise affirm the award of attorney's fees which is equivalent
to 10% of the total backwages that respondents must pay petitioner in
accordance with this Decision.

WHEREFORE, the petition is hereby GRANTED. The assailed June 28, 2005
Decision of the Court of Appeals insofar as it affirmed the National Labor
Relations Commission's dismissal of petitioner's complaint for lack of
jurisdiction, is hereby REVERSED and SET ASIDE. The June 5, 2003
Decision of the Labor Arbiter with respect to petitioner Renato Real is
AFFIRMED and this case is ordered REMANDED to the National Labor
Relations Commission for the computation of petitioner's backwages and
attorney's fees in accordance with this Decision.

THIRD DIVISION
G.R. No. 157802 : October 13, 2010

MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD

K. SPENCER, CATHERINE SPENCER, AND ALEX MANCILLA, Petitioners,
v. RICARDO R. COROS, Respondent.cralaw

DECISION

BERSAMIN, J.:

This case reprises the jurisdictional conundrum of whether a complaint for

illegal dismissal is cognizable by the Labor Arbiter (LA) or by the Regional
Trial Court (RTC). The determination of whether the dismissed officer was a
regular employee or a corporate officer unravels the conundrum. In the case
of the regular employee, the LA has jurisdiction; otherwise, the RTC
exercises the legal authority to adjudicate.

In this appeal via petition for review on certiorari, the petitioners challenge
the decision dated September 13, 20021cra1aw and the resolution dated
April 2, 2003,2cra1aw 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.3chanroblesvirtuallawlibrary

The petitioners moved to dismiss the complaint, 4cra1aw 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, 5cra1aw insisting

that his status as a member of Matlings Board of Directors was doubtful,
considering that he had not been formally elected as such; that he did not
own a single share of stock in Matling, considering that he had been made to
sign in blank an undated indorsement of the certificate of stock he had been
given in 1992; that Matling had taken back and retained the certificate of
stock in its custody; and that even assuming that he had been a Director of
Matling, he had been removed as the Vice President for Finance and
Administration, not as a Director, a fact that the notice of his termination
dated April 10, 2000 showed.

On October 16, 2000, the LA granted the petitioners motion to

dismiss,6cra1aw 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, 7cra1aw urging

that:chanroblesvirtualawlibrary

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. 8cra1aw The NLRC
disposed thuswise:chanroblesvirtualawlibrary

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,9cra1aw reiterating that the

respondent, being a member of the Board of Directors, was a corporate
officer whose removal was not within the LAs jurisdiction.

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.10chanroblesvirtuallawlibrary

Nonetheless, on April 30, 2001, the NLRC denied the petitioners motion for
reconsideration.11chanroblesvirtuallawlibrary

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, 12cra1aw the CA

dismissed the petition for certiorari, explaining:chanroblesvirtualawlibrary

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:chanroblesvirtualawlibrary
"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.cralaw

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.

WHEREFORE, the petition for certiorari is hereby DISMISSED.

SO ORDERED.

The CA denied the petitioners motion for reconsideration on April 2,

2003.13chanroblesvirtuallawlibrary

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.

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:chanroblesvirtualawlibrary

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:chanroblesvirtualawlibrary

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

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. 14cra1aw Such
controversy, among others, is known as an intra-corporate dispute.

Effective on August 8, 2000, upon the passage of Republic Act No.

8799,15cra1aw 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:chanroblesvirtualawlibrary

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?

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, 16cra1aw to
wit:chanroblesvirtualawlibrary

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, 17cra1aw 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
cra1aw 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:chanroblesvirtualawlibrary

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 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, 19cra1aw 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:20chanroblesvirtuallawlibrary

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,
1993,21cra1aw to wit:chanroblesvirtualawlibrary

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. 22cra1aw 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, 23cra1aw 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 Commission24cra1aw and Ongkingko v. National Labor Relations
Commission,25cra1aw the NLRC had no jurisdiction over his complaint,
considering that any case for illegal dismissal brought by a
stockholder/officer against the corporation was an intra-corporate matter
that must fall under the jurisdiction of the SEC conformably with the context
of PD No. 902-A.

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:chanroblesvirtualawlibrary

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.26chanroblesvirtuallawlibrary

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:27chanroblesvirtuallawlibrary

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,28cra1aw the

Court reiterated these determinants thuswise:chanroblesvirtualawlibrary

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:chanroblesvirtualawlibrary

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.29chanroblesvirtuallawlibrary

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:chanroblesvirtualawlibrary

1966 Bookkeeper

1968 Senior Accountant

1969 Chief Accountant

1972 Office Supervisor

1973 Assistant Treasurer

1978 Special Assistant for Finance

1980 Assistant Comptroller

1983 Finance and Administrative Manager

1985 Asst. Vice President for Finance and Administration

1987 to April 17, 2000 Vice President for Finance and Administration

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.

In Prudential Bank and Trust Company v. Reyes, 30cra1aw 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:chanroblesvirtualawlibrary

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.