MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K. SPENCER, CATHERINE SPENCER, AND ALEX MANCILLA, PETITIONERS, VS. RICARDO R. COROS, RESPONDENT.

Matling Industrial and Commercial Corporation versus Coros

The Case

This is a labor jurisdiction case. Matling Industrial and Commercial Corporation and its officers, Richard Spencer, Catherine Spencer, and Alex Mancilla, are the petitioners. Ricardo Coros, whom Matling dismissed as its Vice President for Finance and Administration, is the respondent. Coros filed a complaint for illegal suspension and illegal dismissal before the Labor Arbiter. Matling answered that the Labor Arbiter had no jurisdiction, because Coros was a corporate officer and a member of the Board of Directors, so that his removal was an intra-corporate dispute. The case matters because it settles the dividing line between the Labor Arbiter and the Regional Trial Court in dismissal cases, and it fixes who is a corporate officer under the Corporation Code.

Procedural History

Coros filed his complaint for illegal suspension and illegal dismissal before the Labor Arbiter in Iligan City. Matling moved to dismiss on the ground that the matter was intra-corporate and belonged to the Securities and Exchange Commission. The Labor Arbiter granted the motion and dismissed the complaint, holding that Coros was a corporate officer because he held the position of Vice President for Finance and Administration and sat on the Board of Directors.

Coros appealed to the National Labor Relations Commission. The Commission set aside the dismissal. It held that the position of Vice President for Finance and Administration was not listed among the corporate officers in Matling's By-Laws, so Coros was not a corporate officer and the Labor Arbiter had jurisdiction. The Commission remanded the case to the Labor Arbiter of origin. It later denied Matling's motion for reconsideration.

Matling went up to the Court of Appeals by petition for certiorari. The Court of Appeals dismissed the petition and affirmed the Commission, ruling that the position was created not by the Board of Directors but by the President under the By-Laws, and that Coros was appointed by the President, not elected by the Board or the stockholders. The Court of Appeals denied reconsideration. Matling then came to the Supreme Court by petition for review on certiorari.

Facts

Coros served Matling as its Vice President for Finance and Administration. Matling also treated him as a member of its Board of Directors. Coros disputed that status. He said he had never been formally elected as a director, that he owned not a single share of stock, that he had been made to sign in blank an undated indorsement of a stock certificate given to him in 1992, and that Matling had taken back and kept the certificate in its custody.

On April 10, 2000, Matling terminated Coros as Vice President for Finance and Administration. The notice of termination showed that he was removed from that position, not as a director.

On August 10, 2000, Coros filed his complaint for illegal suspension and illegal dismissal against Matling and its corporate officers. Matling moved to dismiss, invoking the jurisdiction of the Securities and Exchange Commission over intra-corporate disputes. The tribunals below divided on whether Coros was a corporate officer, and that question reached the Supreme Court.

Issues

• Whether or not the Labor Arbiter has jurisdiction over a complaint for illegal dismissal of a corporate officer, as distinguished from an ordinary employee.
• Whether or not the position of Vice President for Finance and Administration was a corporate office, so that Coros was a corporate officer of Matling.
• Whether or not Coros's status as a director and stockholder, if true, automatically converted his dismissal into an intra-corporate dispute.

Applicable Provisions

Article 217 of the Labor Code, as amended, provides:

Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 2. Termination disputes; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; 4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; 5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and 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.

This provision gives the Labor Arbiter original and exclusive jurisdiction over termination disputes involving all workers, and the whole question is whether Coros falls within its reach.

Section 5.2 of Republic Act No. 8799, the Securities Regulation Code, provides:

5.2. The Commission's 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.

Because Coros filed his complaint on August 10, 2000, after this law took effect on August 8, 2000, any intra-corporate dispute would belong to the Regional Trial Court, not the Securities and Exchange Commission.

Section 25 of the Corporation Code provides:

Section 25. Corporate officers, quorum.--Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or 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.

This is the decisive provision: a corporate office must be expressly provided for in the By-Laws, and the corporate officers must be elected by the Board of Directors.

Ruling

On the first issue, the Court held that, as a rule, the illegal dismissal of an officer or other employee of a private employer is cognizable by the Labor Arbiter under Article 217 of the Labor Code. Only where the complaint concerns a corporate officer does the controversy become an intra-corporate dispute, which now falls under the Regional Trial Court by virtue of Section 5.2 of Republic Act No. 8799.

On the second issue, the Court ruled that the position of Vice President for Finance and Administration was not a corporate office. Under Section 25 of the Corporation Code, a position must be expressly mentioned in the By-Laws to be a corporate office. Matling's By-Law No. III listed only four corporate officers: President, Executive Vice President, Secretary, and Treasurer. The position of Vice President for Finance and Administration was created by the President under By-Law No. V, which empowered him to create new offices and appoint the officers thereto. That enabling clause was not enough. The Court held that the Board of Directors could not validly delegate to the President the power to create a corporate office, because Section 25 requires the Board itself to elect the corporate officers. The power to create new offices merely allowed the President to create non-corporate offices occupied by ordinary employees. The Court also set aside as obiter dictum the statement in Tabang that offices created under a By-Law enabling provision are corporate offices, and declined to follow it.

On the third issue, the Court held that Coros's status as a director and stockholder, even if true, did not automatically make his dismissal an intra-corporate dispute. The Court rejected the sweeping pronouncement in Tabang that any controversy between a stockholder and the corporation is intra-corporate. Instead, two elements must be considered: the status or relationship of the parties, and the nature of the question that is the subject of their controversy. Coros was removed from a position that was not a corporate office, and he was appointed by the President, not elected by the Board. His complaint therefore remained a termination dispute for the Labor Arbiter.

Doctrine

A corporate officer is one who is given that character either by the Corporation Code or by the corporation's By-Laws. Under Section 25 of the Corporation Code, the corporate officers are the President, the Treasurer, the Secretary, and such other officers as may be provided for in the By-Laws. A position created under a mere By-Law enabling clause is not a corporate office, and the Board of Directors cannot delegate to the President the power to create corporate offices, because the election of corporate officers is a discretionary power vested exclusively in the Board.

The illegal dismissal of an ordinary employee or officer falls under the Labor Arbiter under Article 217 of the Labor Code. The illegal dismissal of a corporate officer is an intra-corporate dispute, which since the effectivity of Republic Act No. 8799 belongs to the Regional Trial Court under Section 5.2. To determine whether a dispute is intra-corporate, consider both the status or relationship of the parties and the nature of the question involved; the mere fact that a complainant is a stockholder does not by itself make the dispute intra-corporate.

Disposition

The Supreme Court denied the petition and affirmed the Court of Appeals, holding that Coros was not a corporate officer and that the Labor Arbiter had jurisdiction over his complaint for illegal dismissal.

Remember This

Memorize this line: a corporate office must be expressly provided for in the By-Laws, and the Board of Directors cannot delegate to the President the power to create one. Examiners use this case to test the Labor Arbiter versus Regional Trial Court divide in dismissal cases, and to test whether a stockholder's dismissal is automatically an intra-corporate dispute.