January 2011 Philippine Supreme Court Decisions on Commercial Law

Here are selected January 2011 rulings of the Supreme Court of the Philippines on commercial law:

Corporate officers; definition.  “‘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.

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.”  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.   Renato Real vs. Sangu Philippines, Inc. et al., G.R. No. 168757, January 19, 2011.

Intra-corporate controversy.  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. It was only after respondents invoked the Labor Arbiter’s lack of jurisdiction over petitioner’s complaint in the Supplemental Memorandum of Appeal 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 217 of the Labor Code. Renato Real vs. Sangu Philippines, Inc. et al., G.R. No. 168757, January 19, 2011.

(Note: this post will be updated after the rest of the January 2011 cases become available)