February 2014 Philippine Supreme Court Decisions on Commercial Law

Here are select February 2014 rulings of the Supreme Court of the Philippines on commercial law:

Corporate officer; intra-corporate dispute. There are two circumstances which must concur in order for an individual to be considered a corporate officer, as against an ordinary employee or officer, namely: (1) the creation of the position is under the corporation’s charter or by-laws; and (2) the election of the officer is by the directors or stockholders. It is only when the officer claiming to have been illegally dismissed is classified as such corporate officer that the issue is deemed an intra-corporate dispute which falls within the jurisdiction of the trial courts. Raul C. Cosare v. Broadcom Asia, Inc., et al., G.R. No. 201298, February 5, 2014.

Intra-corporate dispute; illegal dismissal case. As regards the issue of jurisdiction, the Court has determined that contrary to the ruling of the Court of Appeals (CA), it is the labor arbiter (LA), and not the regular courts, which has the original jurisdiction over the subject controversy. An intra-corporate controversy, which falls within the jurisdiction of regular courts, has been regarded in its broad sense to pertain to disputes that involve any of the following relationships: (1) between the corporation, partnership or association and the public; (2) between the corporation, partnership or association and the state in so far as its franchise, permit or license to operate is concerned; (3) between the corporation, partnership or association and its stockholders, partners, members or officers; and (4) among the stockholders, partners or associates, themselves.

Settled jurisprudence, however, qualifies that when the dispute involves a charge of illegal dismissal, the action may fall under the jurisdiction of the LAs upon whose jurisdiction, as a rule, falls termination disputes and claims for damages arising from employer-employee relations as provided in Article 217 of the Labor Code.  Consistent with this jurisprudence, the mere fact that Cosare was a stockholder and an officer of Broadcomat the time the subject controversy developed failed to necessarily make the case an intra-corporate dispute.

In Matling Industrial and Commercial Corporation v. Coros, the Court distinguished between a “regular employee” and a “corporate officer” for purposes of establishing the true nature of a dispute or complaint for illegal dismissal and determining which body has jurisdiction over it.  Succinctly, it was explained that “[t]he determination of whether the dismissed officer was a regular employee or corporate officer unravels the conundrum” of whether a complaint for illegal dismissal is cognizable by the LA or by the RTC.  “In case of the regular employee, the LA has jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate.

Applying the foregoing to the present case, the LA had the original jurisdiction over the complaint for illegal dismissal because Cosare, although an officer of Broadcom for being its AVP for Sales, was not a “corporate officer” as the term is defined by law. Raul C. Cosare v. Broadcom Asia, Inc., et al., G.R. No. 201298, February 5, 2014.

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