Title
Cacho vs. Balagtas
Case
G.R. No. 202974
Decision Date
Feb 7, 2018
A corporate officer's dismissal case, deemed an intra-corporate dispute, falls under regular courts' jurisdiction, not labor arbiters.
constructive dismissal
lack of jurisdiction
labor arbiter

Case Summary (G.R. No. 202974)

Factual Background

Respondent Virginia D. Balagtas alleged she was one of the original incorporators-directors of North Star International Travel, Inc., and that she served as General Manager and later as Executive Vice President/Chief Executive Officer from the corporation’s start in 1990 until she was placed under a thirty-day preventive suspension by Board resolution on March 19, 2004 for alleged questionable transactions.
While under preventive suspension, respondent attempted to resume her duties, sent letters asserting her assumption of the Executive Vice President/Chief Executive Officer role effective April 5, 2004, and inquired into the audit of the 2003 financial statements; she alleged that she was thereafter prevented from re-assuming office and effectively constructively dismissed on April 12, 2004, prompting her complaint for constructive dismissal before the Labor Arbiter.

Labor Arbiter Proceedings and Decision

In the complaint docketed NLRC-NCR Case No. 04-04736-04, respondent sought reinstatement or separation pay and backwages and other monetary reliefs.
The Labor Arbiter found that respondent Balagtas had been illegally dismissed and, in the Decision dated March 28, 2005, ordered North Star International Travel, Inc. to pay separation pay computed at thirty days’ pay for every year of service with backwages, commissions and other benefits; additionally ordered three million pesos as moral damages, two million pesos as exemplary damages, and ten percent attorney’s fees.

NLRC Proceedings and Resolution

Petitioners appealed to the NLRC, asserting lack of jurisdiction on the ground that respondent was a corporate officer, incorporator, and member of the board, and that her dismissal constituted an intra-corporate controversy within the exclusive original jurisdiction of the ordinary courts.
In its Resolution dated September 30, 2008, the NLRC reversed and set aside the Labor Arbiter’s Decision and dismissed the complaint for lack of jurisdiction, finding that respondent had been elected Executive Vice President and Chief Executive Officer by Board action, that she admitted occupying those positions, and that the vice-presidential office is provided in the corporation’s by-laws; the NLRC concluded that a corporate officer’s dismissal is an intra-corporate controversy beyond the Labor Arbiter’s competence.

Court of Appeals Proceedings and Decision

Respondent Balagtas filed a petition for certiorari with the Court of Appeals challenging the NLRC’s dismissal for lack of jurisdiction.
The Court of Appeals granted the petition in its November 9, 2011 Decision, reversed the NLRC, affirmed the Labor Arbiter’s March 28, 2005 Decision, and remanded the case to the NLRC for recomputation of backwages and attorney’s fees, applying a two-tier test consisting of the relationship test and the nature of the controversy test and concluding that the by-laws did not expressly enumerate the exact title “Executive Vice President” and that the dismissal involved labor issues.

Issues Presented to the Supreme Court

Petitioners raised three primary issues: (a) whether respondent Balagtas was a corporate officer as defined by the Corporation Code, case law, and North Star’s by-laws; (b) whether the Court of Appeals correctly reversed the NLRC’s finding that the complaint was an intra-corporate controversy; and (c) whether the monetary awards granted were appropriate.

Parties’ Contentions before the Supreme Court

Petitioners Cacho and North Star maintained that respondent was a corporate officer — Executive Vice President and Chief Executive Officer — as shown by Board resolutions and Secretary’s Certificates, and that the position of Vice President is a corporate office under the by-laws; they argued that the dismissal of a corporate officer is an intra-corporate controversy and thus outside the jurisdiction of the Labor Arbiter and NLRC.
Respondent Balagtas countered that she was not a corporate officer but only a titular Executive Vice President without authority, that the Secretary’s Certificates and Board resolutions were falsified, that she was not listed as an officer in the 2003 General Information Sheet, that she ceased to be a director and stockholder, and that petitioners were estopped from raising jurisdictional objections after litigating before the Labor Arbiter.

Supreme Court’s Ruling — Disposition

The petition was granted.
The Decision dated November 9, 2011 and the Resolution dated August 6, 2012 of the Court of Appeals in CA-G.R. SP No. 111637 were set aside.
NLRC-NCR Case No. 04-04736-04 was dismissed for lack of jurisdiction, without prejudice to the filing of an appropriate case before the proper tribunal.

Legal Basis and Reasoning — Relationship Test

The Court applied the established two-tier test to determine whether an intra-corporate controversy exists: the relationship test and the nature of the controversy test, following Reyes v. Regional Trial Court of Makati, Speed Distributing Corporation v. Court of Appeals, and Real v. Sangu Philippines, Inc.
Under the relationship test, a dispute is intra-corporate when it concerns the corporation and its stockholders, partners, members, or officers. The Court held that corporate officers are those designated by the Corporation Code or by corporate by-laws and that two conditions must be met to qualify a person as a corporate officer: (1) the position must be created by charter or by-laws, and (2) the officer must be elected or appointed by the board of directors, citing Easycall Communications Phils., Inc. v. King.

Legal Basis and Reasoning — Application to the Executive Vice President Office

The Court examined North Star’s by-laws, Article IV, which provides for the election of “one or more Vice-President(s)” and permits the Board to appoint other officers; the Court concluded that the phrase “one or more vice president” embraces variations such as Executive Vice President, and that requiring each variation to be specifically enumerated would unduly restrict the corporation’s power to adopt its own by-laws, citing the general corporate power under Sec. 36 of the Corporation Code and pertinent precedents.
The Court further found that respondent had been appointed by the Board as Executive Vice President as evidenced by a Secretary’s Certificate dated April 22, 2003 which listed her as Executive Vice President; respondent’s subsequent inconsistent reliance on that same document before the Labor Arbiter undermined her present contention that the document was forged.
The Court rejected reliance on the General Information Sheet as determinative, noting that the GIS does not establish a corporate office under the Corporation Code.

Legal Basis and Reasoning — Nature of the Controversy Test

The Court explained that the existence of an intra-corporate relationship alone is not dispositive; the nature of the controversy must implicate the enforcement of correlative rights and obligations under the Corporation Code and corporate internal rules. The dismissal of a corporate officer constitutes an intra-corporate controversy only when the dismissal relates to duties and responsibilities attached to the corporate office or actions performed in an official capacity.
Applying that principle, the Court found that petitioner’s complaint and the respondents’ defenses showed that the allegations concerned respondent’s conduct as Executive Vice Preside


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