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G.R. Nos. 109642-43 January 5, 1995 LESLIE W. ESPINO, petitioner, vs. HON.

NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE AIR LINES, respondents.

ROMERO, J.: The controversy generated in the instant case once again calls for the resolution of the issue of whether or not the National Labor Relations Commission (NLRC) has jurisdiction over a complaint filed by a corporate Executive Vice President-Chief Operating Officer for illegal dismissal resulting from the termination of his services as such officer by virtue of four (4) separate resolutions of the Board of Directors Air Lines (PAL). The undisputed facts are as follows: Petitioner Leslie W. Espino was the Executive Vice President-Chief Operating Officer of private respondent Philippine Airlines (PAL) when his services were terminated sometime in December 1990 by the Board of Directors of PAL as a result of the findings of the panels created by then President Corazon C. Aquino to investigate the administrative charges filed against him and other senior officers for their purported involvement in four, denominated "Goldair," "Robelle," "Kasbah/La Primavera," and "Middle East" which allegedly prejudiced the interests of both PAL and the Philippine Government. Petitioner started his employment with PAL on February 25, 1960 as a Traffic and Sales Trainee and, for 30 years, was successively promoted 1 until he became, by virtue of an election in March 1988 conducted by the Board of Directors, Executive Vice President and Chief Operating Officer for a term of one (1) year and who holds said office until his successor is elected and qualified, pursuant to Section 7, Article III in relation to Section 1, Article IV of the Amended By-Laws of PAL. The last time he was elected as such was on October 20, 1989. Sometime on July 2, 1990, petitioner and several other senior officers of PAL were administratively charged by Romeo S. David, Senior Vice President for Corporate Services and Logistics Group, for their purported involvement in four cases, labelled as "Goldair," "Robelle," "Kasbah/Primavera" and "Middle East." Except for the conflict of interest charges in the "Robelle" case, petitioner and several other senior officers of PAL were uniformly charged in the three (3) other aforementioned cases of gross incompetence, mismanagement, inefficiency, negligence, mismanagement, dereliction of duty, failure to observe and/or implement administrative and executive policies, and related acts or omissions resulting in the concealment or coverup and prevention of the seasonable discovery of anomalous transactions which, as a consequence, caused prejudice to the best interest of PAL and the Government. Pending investigation by the panels created by then President Corazon C. Aquino, petitioner and other senior officers of PAL were placed under suspension by the Board of Directors. On October 19, 1990, during the organizational meeting of the PAL Board of Directors, the election or appointment of some senior officers of the company who, like petitioner, had been charged

administratively with various offenses and accordingly suspended, were deferred by the Board of Directors. During the said organizational meeting, Feliciano Belmonte was elected Chairman of the Board while Dante Santos was elected as President and Chief Executive Officer. On the basis of the findings submitted by the presidential investigating panels, the Board issued separate resolutions dated January 19, 1991 in the "Goldair," "Robelle," and Kasbah/La Primavera," cases and another dated August 9, 1991 in the "Middle East" case wherein petitioner was considered resigned from the service effective immediately for loss of confidence and for acts inimical to the interests of the company. As a result of his termination, petitioner Espino filed a complaint for illegal dismissal against PAL with the National Labor Relations Commission, Arbitration Branch, NCR, praying, among others, for reinstatement with backwages, recovery of P50 Million as moral damages, P10 Million as exemplary damages and attorney's fees. The case was docketed as NLRC Case No. 00-05-03210-91. PAL justified the legality of petitioner Espino's dismissal from the service before the Labor Arbiter but questioned the jurisdiction of the NLRC contending that, because the investigating panels were created by President Corazon C. Aquino, it became, together with the PAL Board of Directors, a "parallel arbitration unit" which substituted the NLRC. As such, PAL argued that since the Board resolutions of the aforesaid cases; cannot be reviewed by the NLRC, the recourse of petitioner Espino should have been addressed, by way of an appeal, to the Office of the President of the Republic of the Philippines. On February 20, 1992, Labor Arbiter Cresencio J. Ramos rendered a decision 2 finding that petitioner Espino was dismissed just and valid cause and accordingly ordered his reinstatement to his former position as Executive Vice-President-Chief Operating Officer without loss of seniority rights plus full backwages and other benefits appurtenant thereto, without qualification or deduction from the time of his illegal dismissal up to the date of his actual reinstatement. The dispositive portion reads: WHEREFORE, premises considered, judgment is hereby rendered: 1. Ordering complainant's immediate reinstatement to his former position as Executive Vice President-Chief Operating Officer without loss of seniority rights plus full backwages and other benefits appurtenant thereto, without qualification or deduction, from the time of his illegal dismissal up to the time of his actual reinstatement. His backwages as of February 29, 1992 as computed are in the total sum of P2,925,000.00 (P195,000.00 x 15 months, including the one month suspension).
Ordering respondent PAL to pay complainant Leslie Espino the following sums: Backwages as of February 1992 Cash equivalent of Annual trip passes on first class, (1 for international, 1 for regional, and 1 for domestic) for complainant, his spouse, qualified dependent and parents worth approximately US $45,000.00 at current rate of exchange rate of exchange P26.50/dollar Midyear and Christmas bonuses 1,192,000.00 P2,925,000.00

equivalent to two (2) months pay Awarding moral damages to complainant in the sum of P20 million plus exemplary damages of P2.0 TOTAL Granting attorney's fees of 10% of the total monetary award GRAND TOTAL

390,000.00 22,000,000.00 P26,507,000.00 2,650,700 P28,157,700.00

From the said decision, PAL filed on March 5, 1992 an appeal with the NLRC and submitted on March 13, 1992 a supplemental memorandum on appeal. PAL argued that the Labor Arbiter's decision is null and void for lack of jurisdiction over the subject matter as it is the Securities and Exchange Commission, and not the NLRC, which has original and exclusive jurisdiction over cases involving dismissal or removal of corporate officers. Earlier, or more specifically, on February 25, 1992, petitioner Espino filed a motion for issuance of writ of execution on the ground that the decision of the Labor Arbiter ordering reinstatement is immediately executory even pending appeal pursuant to Article 223 of the Labor Code, as amended. On February 28, 1992, the Labor Arbiter issued a writ of execution. PAL, for its part, filed a motion to quash the writ of execution reiterating its argument that the Securities and Exchange Commission (SEC) and not the NLRC has original and exclusive jurisdiction over the subject matter involving the dismissal or removal of corporate officers. On March 31, 1992, after an exchange of pleadings, Labor Arbiter Ramos denied PAL's motion to quash the writ of execution. Thereafter, or on April 2, 1992, an alias writ of execution was issued. PAL then filed on April 23, 1992 with the NLRC a petition for injunction, later amended to implead the Labor Arbiter, praying for the issuance of a temporary restraining order to enjoin the enforcement of said alias writ of execution. On April 27, 1992, the NLRC issued a temporary restraining order enjoining Espino, Sheriff Anam Timbayan, their agents and all persons acting under them, from implementing the alias writ of execution issued on April 2, 1992 upon PAL's posting of P400,000.00 cash or surety bond. On May 5, 1992, PAL posted the P400,000.00 surety bond. On July 31, 1992, the NLRC promulgated a resolution 3 dismissing the complaint for illegal dismissal for lack of jurisdiction and declaring the nullity of the alias writ of execution. Petitioner Espino, Labor Arbiter Cresencio Ramos and Sheriff Anam Timbayan were permanently enjoined from enforcing the said alias writ of execution. Petitioner Espino filed a motion for reconsideration but the same was denied on January 8, 1993. 4 Dissatisfied, petitioner filed the instant petition for certiorari contending mainly that it is the NLRC which has jurisdiction under Article 217, par. (2) of the Labor Code, as amended, to hear the illegal dismissal case he filed against PAL as it involves the termination of a regular and permanent employee and the issues in the dispute involved, not only his removal from office, but also his claim for backwages and other benefits and damages; that PAL is estopped from questioning the jurisdiction of the NLRC. We rule that the petition lacks merit.

The Court, citing Presidential Decree No. 902-A, laid down the rule in the case of Philippine School of Business Administration v. Leano, 5 and consequently reiterated in three (3) other cases 6 that it is the Securities and Exchange Commission (SEC) and not the NLRC which has original and exclusive jurisdiction over cases involving the removal from employment of corporate officers. Sec. 5. of Presidential Decree No. 902-A regarding the jurisdiction of the Securities and Exchange Commission provides, as follows: Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: (a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, members of associations or organizations registered with the Commission. (b) Controversies arising out of intracorporate or partnership relations, between and among 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 their individual franchise or right to exist as such entity. (c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations. (d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree. In intra-corporate concerning the election or appointment of officers of a corporation, Section 5, PD 902-A specifically provides: Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: xxx xxx xxx (c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations.

Indisputably, the position of Executive Vice President-Chief Operating Officer from which petitioner Espino claims to have been illegally dismissed, is an elective office under Section 7, Article III is an elective corporate office under Section 1, Article IV of the Amended by-Laws of PAL. The said corporate office has a fixed term of one (1) year and the one elected shall hold office until a successor shall have been elected and qualified. He lost that position when his appointment or election as Executive Vice President-Chief Operating Officer, together with other senior officers who were similarly charged administratively, were deferred by the Board of Directors in its organizational meeting on October 19, 1990. He was later considered by the Board as resigned from the service, for reasons earlier stated, and the said position was later abolished. The matter of petitioner's not being elected to the office of Executive Vice-President-Chief Operating Officer thus falls squarely within the purview of Section 5 par. (c) of P.D. 902-A. In the case of PSBA v. Leano, supra, which involved an Executive Vice President who was not re-elected to the said position during the election of officers on September 5, 1981 by the PSBA's newly elected Board of Directors, the Court emphatically stated: This is not a case of dismissal. The situation is that of a corporate office having been declared vacant, and that of TAN's not having been elected thereafter. The matter of whom to elect is a prerogative that belongs to the Board, and involves the exercise of deliberate choice and the faculty of discriminative selection. Generally speaking, the relationship of a person to a corporation, whether as officer or as agent or employee, is not determined by the nature of the services performed, but by the incidents of the relationship as they actually exists. A corporate officer's dismissal is always a corporate act and/or an intra-corporate controversy and that nature is not altered by the reason or wisdom which the Board of Directors may have in taking such action. 7 Furthermore, it must be noted that the reason behind the non-election of petitioner to the position of Executive Vice President-Chief Operating Officer arose from, or is closely connected with, his involvement in the alleged irregularities in the aforementioned cases which, upon investigation and recommendation, were resolved by the PAL Board of Directors against him and other senior officers. Evidently, this intra-corporate ruling places the instant case under the specialized competence and expertise of the SEC. The jurisdiction of the SEC has likewise been clarified by this Court in the case of Union Glass and Container Corporation, et al. v. SEC, et al., 8 thus: This grant of jurisdiction must be viewed in the light of the nature and function of the SEC under the law. Section 3 of PD No. 902-A confers upon the latter "absolute jurisdiction, supervision, and control over all corporations, partnerships or associations, who are grantees of primary franchise and/or license or permit issued by the government to operate in the Philippines . . . ." The principal function of the SEC is the supervision and control over corporations, partnerships and associations with the end in view that investment in these entities may be encouraged and protected, and their activities pursued for the promotion of economic development. It is in aid of this office that the adjudicative power of the SEC must be exercised. Thus the law explicitly specified and delimited its jurisdiction to matters intrinsically connected with the regulations of corporations, partnerships and associations and those dealing with the internal affairs of such corporations, partnerships or associations.

Otherwise stated, in order that the SEC can take cognizance of a case, the controversy must pertain to any of the following relationships: (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 in so far as its franchise, permit or license to operate is concerned, and (d) among the stockholders, partners or associates themselves. The fact that petitioner sought payment of his backwages, other benefits, as well as moral and exemplary damages and attorney's fees in his complaint for illegal dismissal will not operate to prevent the SEC from exercising its jurisdiction under PD 902-A. While the affirmative reliefs and monetary claims sought by petitioner in his complaint may, at first glance, mislead one into placing the case under the jurisdiction of the Labor Arbiter, a closer examination reveals that they are actually part of the perquisites of his elective position; hence, intimately linked with his relations with the corporation. In Dy v. NLRC, et al., 9 the Court, confronted with the same issue ruled, thus: The question of remuneration, involving as it does, a person who is not a mere employee but a stockholder and officer, an integral part, it might be said, of the corporation, is not a simple labor problem but a matter that comes within the area of corporate affairs and management, and is in fact a corporate controversy in contemplation of the Corporation Code. The Court has likewise ruled in the case of Andaya v. Abadia 10 that in intra-corporate matters, such as those affecting the corporation, its directors, trustees, officers and shareholders, the issue of consequential damages may just as well be resolved and adjudicated by the SEC. Undoubtedly, it is still within the competence and expertise of the SEC to resolve all matters arising from or closely connected with all intra-corporate disputes. Petitioner's reliance on the principle of estoppel to justify the exercise or jurisdiction by the NLRC over the instant complaint is misplaced. it is not accurate for petitioner to conclude that PAL did not raise the issue of jurisdiction at the initial stages of the case, for, while it may be predicated on a different ground, i.e., that appeal from the resolution of the Board of Directors of PAL as regards termination of his services, is to the Office of the President, PAL did in fact question the jurisdiction of the Labor Arbiter. An error of this nature, under the circumstances, could not justify petitioner's insistence that PAL did not raise the issue of jurisdiction at the outset, but only before the NLRC. It is well-settled that jurisdiction over the subject matter is conferred by law and the question of lack of jurisdiction may be raised at anytime even on appeal. 11 The principle of estoppel cannot be invoked to prevent this Court from taking up the question, which has been apparent on the face of the pleadings since the start of the litigation before the Labor Arbiter. In the case of Dy v. NLRC, supra, the Court, citing the case of Calimlim v. Ramirez 12 reiterated that the decision of a tribunal not vested with appropriate jurisdiction is null and void. Again, the Court in Southeast Asian Fisheries Development Center-Aquaculture Department v. NLRC 13 restated the rule that the invocation of estoppel with respect to the issue of jurisdiction is unavailing because estoppel does not apply to confer jurisdiction upon a tribunal that has none over the cause of action. The instant case does not provide an exception to the said rule. In fine, the issue of the SEC's jurisdiction is settled and the Court finds it unnecessary to dwell further on other questions raised by petitioner. Thus, finding no grave abuse of discretion on the part of NLRC in dismissing the complaint for illegal dismissal, the instant petition must be dismissed.

WHEREFORE, the instant petition for certiorari is DISMISSED for lack of merit. The resolution of the National Labor Relations Commission dated July 31, 1992 dismissing the complaint for illegal dismissal for lack of jurisdiction is AFFIRMED, without prejudice to petitioner's seeking relief, if so minded, in the proper forum. SO ORDERED.

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G.R. No. 118088 November 23, 1995 MAINLAND CONSTRUCTION, CO., INC., and/or LUCITA LU CARABUENA, ROBERT L. CARABUENA, ELLEN LU CARABUENA, and MARTIN LU, petitioners, vs. MILA MOVILLA, ERNESTO MOVILLA, JR., MILA JUDITH C. MOVILLA, JUDE BRIX C. MOVILLA, JONARD ELLERY C. MOVILLA, AND MAILA JONAH M. QUIMBO, surviving heirs of ERNESTO MOVILLA, and THE HONORABLE COMMISSIONER of the NATIONAL LABOR RELATIONS COMMISSION-5TH DIVISION,respondents.

HERMOSISIMA, JR., J.: Petitioners urge this Court to set aside the Decision of the National Labor Relations Commission (NLRC), dated May 30, 1994, in NLRC-CA No. M-000949-92 for having been rendered with grave abuse of discretion amounting to lack of jurisdiction. This reversed the decision of the Labor Arbiter in case No. RAB-11-10-99883-91. Petitioners' motion for reconsideration of the NLRC decision was denied in a Resolution, dated August 31, 1994. Mainland Construction Co., Inc. is a domestic corporation, duly organized and existing under Philippine laws, having been issued a certificate of registration by the Securities and Exchange Commission (SEC) on July 26, 1977, under Registry Number 74691. Its principal line of business is the general construction of roads and bridges and the operation of a service shop for the maintenance of equipment. Respondents on the other hand, are the surviving heirs of complainant, Ernesto Movilla, who died during the pendency of the action with the Labor Arbiter. Records show that Ernesto Movilla, who was a Certified Public Accountant during his lifetime, was hired as such by Mainland in 1977. Thereafter, he was promoted to the position of Administrative Officer with a monthly salary of P4,700.00. 1 Ernesto Movilla, recorded as receiving a fixed salary of P4,700.00 a month, was registered with the Social Security System (SSS) as an employee of petitioner Corporation. His contributions to the SSS, Medicare and Employees Compensation Commission (ECC) were deducted from his monthly earnings by his said employer. 2 On April 12, 1987, during petitioner corporation's annual meeting of stockholders, the following were elected members of the Board of Directors, viz.: Robert L. Carabuena, Ellen L. Carabuena, Lucita Lu Carabuena, Martin G. Lu and Ernesto L. Movilla.

On the same day, an organizational meeting was held and the Board of Directors elected Ernesto Movilla as Administrative Manager. 3 He occupied the said position up to the time of his death. On April 2, 1991, the Department of Labor and Employment (DOLE) conducted a routine inspection on petitioner corporation and found that it committed such irregularities in the conduct of its business as: 1. Underpayment of wages under R.A. 6727 and RTWPB-XI-01; 2. Non-implementation of Wage Order No. RTWPB-XI-02; 3. Unpaid wages for 1989 and 1990; 4. Non-payment of holiday pay and service incentive leave pay; and
5. Unpaid 13th month pay (remaining balance for 1990). 4

On the basis of this finding, petitioner corporation was ordered by DOLE to pay to its thirteen employees, which included Movilla, the total amount of P309,435.89, representing their salaries, holiday pay, service incentive leave pay differentials, unpaid wages and 13th month pay. All the employees listed in the DOLE's order were paid by petitioner corporation, except Ernesto Movilla. On October 8, 1991, Ernesto Movilla filed a case against petitioner corporation and/or Lucita, Robert, and Ellen, all surnamed Carabuena, for unpaid wages, separation pay and attorney's fees, with the Department of Labor and Employment, Regional Arbitration, Branch XI, Davao City. On February 29, 1992, Ernesto Movilla died while the case was being tried by the Labor Arbiter and was promptly substituted by his heirs, private respondents herein, with the consent of the Labor Arbiter. The Labor Arbiter rendered judgment on June 26, 1992, dismissing the complaint on the ground of lack of jurisdiction. Specifically, the Labor Arbiter made the following ratiocination:
It is clear that in the case at bar, the controversy presented by complainant is intracorporate in nature and is within the jurisdiction of the Securities and Exchange Commission, pursuant to P.D. 902-A (Phil. School of Business Administration, et al. v. Leano, G.R. No. L-58468, February 24, 1984; Dy et al. v. NLRC, et al., G.R. No. L-68544, October 27, 1986). What Movilla is claiming against respondents are his alleged unpaid salaries and separation pay as Administrative Manager of the corporation for which position he was appointed by the Board of Directors. His claims therefore fall under the jurisdiction of the Securities and Exchange Commission because this is not a simple labor problem; but a matter that comes within the area of corporate affairs and management, and is in fact a corporate controversy in contemplation of the Corporation Code. (Fortune Cement Corporation v. NLRC, et al., G.R. No. 79762, January 24, 1991). 5

Aggrieved by this decision, respondents appealed to the National Labor Relations Commission (NLRC). The NLRC ruled that the issue in the case was one which involved a labor dispute between an employee and petitioner corporation and, thus, the NLRC had jurisdiction to resolve the case. The dispositive portion of the NLRC decision reads:

WHEREFORE, the assailed decision is Reversed and Set Aside. Respondents are ordered to pay the heirs of complainant the following: 1. Unpaid salaries from January 1989 to September 1991 in the sum of P155,100.00; 2. Separation pay in the sum of P65,800.00; 3. Moral damages in the sum of P10,000.00; 4. Indemnity in the sum of P3,000.00; and,
5. Attorney's fees equivalent to 10% of the total award. 6

The pivotal issue in this case is which of the two agencies of the government the NLRC or the SEC has jurisdiction over the controversy. As we stated earlier, it is of course the contention of petitioners that the NLRC committed grave abuse of discretion when it nullified the decision of the Labor Arbiter which dismissed the complaint of Movilla for unpaid wages, separation pay and attorney's fees on the ground of lack of jurisdiction. Petitioners take the position that, since Ernesto Movilla was a corporate officer, the controversy as to his compensation is within the jurisdiction of the SEC as mandated by P.D. 902-A and not with the NLRC. We find for the respondents, it appearing that petitioners' contention is bereft of merit. In order that the SEC can take cognizance of a case, the controversy must pertain to any of the following relationships: 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. 7 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. 8 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. 9 In the case at bench, the claim for unpaid wages and separation pay filed by the complainant against petitioner corporation involves a labor dispute. It does not involve an intra-corporate matter, even when it is between a stockholder and a corporation. It relates to an employer-employee relationship which is distinct from the corporate relationship of one with the other. Moreover, there was no showing of any change in the duties being performed by complainant as an Administrative Officer and as an Administrative Manager after his election by the Board of Directors. What comes to the fore is whether there was a change in the nature of his functions and not merely the nomenclature or title given to his job. Indeed, Ernesto Movilla worked as an administrative officer of the company for several years and was given a fixed salary every month. To further sustain this assertion Movilla also submitted a joint

affidavit executed by Juanito S. Malubay and Delia S. Luciano, Project Engineer and Personnel-InCharge, respectively, of petitioner corporation, attesting that they personally knew Movilla and that he was employed in the company. A Premium Certification issued by an authorized representative of petitioners was also presented to show his actual monthly earnings as well as his monthly contributions to the SSS, Medicare and ECC. 10 Movilla's registration in the SSS by petitioner corporation added strength to the conclusion that he was petitioner corporation's employee as coverage by the said law is predicated on the existence of an employer-employee relationship. 11 Furthermore, petitioner corporation failed to present evidence which showed that, after his election as Administrative Manager, he was excluded from the coverage of the SSS, Medicare and ECC. He also presented, appearing to be relevant to the issue, the result of the investigation conducted by DOLE which found that petitioner corporation has transgressed several labor standard laws against its employees. As correctly ruled by the NLRC:
The claims for unpaid salaries/monetary benefits and separation pay, are not a corporate conflict as respondents presented them to be. If complainant is not an employee, respondent should have contested the DOLE inspection report, What they did was to exclude complainant from the order of payment . . . and worse, he was not both given responsibilities and paid his salaries for the succeeding months . . . . This is a clear case of constructive dismissal without due process . . . 12

The existence of an employer-employee relationship is a factual question and public respondent's findings are accorded great weight and respect as the same are supported by substantial evidence. 13 Hence, we uphold the conclusion of public respondent that Ernesto Movilla was an employee of petitioner corporation. It is pertinent to note that petitioner corporation is not prohibited from hiring its corporate officers to perform services under a circumstance which will make him an employee. 14 Moreover, although a director of a corporation is not, merely by virtue of his position, its employee, said director may act as an employee or accept duties that make him also an employee. 15 Since Ernesto Movilla's complaint involves a labor dispute, it is the NLRC, under Article 217 of the Labor Code of the Philippines, which has jurisdiction over the case at bench. WHEREFORE, the petition is DISMISSED for lack of showing of any grave abuse of discretion on the part of public respondent NLRC. The assailed decision of public respondent is thus AFFIRMED. SO ORDERED.

______G.R. No. 123639 June 10, 1997 ANTONIO M. GARCIA, petitioner, vs. COURT OF APPEALS and PHILIPPINE EXPORT & FOREIGN LOAN GUARANTEE CORPORATION, respondents.

KAPUNAN, J.: Petitioner Antonio Garcia challenges, through this petition for review on certiorari under Rule 45 of the Revised Rules of Court, the decision of the Court of Appeals promulgated on 23 October 1995 in CA-G.R. SP No. 27994 granting the motion to dismiss filed by private respondent Philippine Export & Foreign Loan Guarantee Corporation (Philguarantee) on grounds of lack of jurisdiction. Similarly impugned is the Court of Appeals' resolution dated 31 January 1996 denying petitioner's motion for reconsideration. Petitioner was a major stockholder and president of Dynetics, Inc., a corporation primarily engaged in the manufacture of semi-conductors) originally owning 43% of its outstanding shares of stock. In 1981, Asia Reliability Co. Inc. (ARCI) obtained 28.98% interest in Dynetics. With the said acquisition, the ownership structure of Dynetics became: petitioner Garcia 32.88%; ARCI 28.78%; Vicente Chuidian (petitioner's business partner and a major stockholder of ARCI) 26%; and others 11.26%. 1 In February 1981, ARCI, through the initiative of Chuidian and with the guarantee of private respondent, acquired a foreign loan in the amount of US$25,000,000.00 ostensibly to finance its various business projects. However, the proceeds of the said loan were illegally diverted and used for unauthorized purposes. When ARCI defaulted in the payment of the aforestated loan, the foreign creditors went after the guarantor, herein private respondent. In turn, private respondent filed cases for recovery against Chuidian, both here and in the United States (where Chuidian fled). Unfortunately, Dynetics was caught in the crossfire and became a battlefield for control between Chuidian (who also owns, as previously stated, a substantial interest in Dynetics) and private respondent Philguarantee. 2 In February 1985, Chuidian, as President of Interlek (the marketing arm of Dynetics, organized and based in California, USA) ordered the company to stop its remittances to Dynetics for the latter's assembly services which as of June 1985 amounted to approximately US$5,000,000.00. Consequently, Dynetics filed a collection case against Interlek and Chuidian. Thereafter, four (4) representatives of Philguarantee were assigned one (1) qualifying share each in Dynetics. Thus, on 27 May 1985 during the stockholders meeting of Dynetics, the aforementioned nominees (Victor Macalindog, Cesar Macuja, Eduardo Morato and Manuel Lazaro) were elected members of the Board of Directors of Dynetics (although Lazaro did not assume office). Petitioner was the fifth member of the Board. On 27 November 1985, a Settlement and Mutual Release Agreement (SMRA) was executed by and between Dynetics and Chuidian and another between Philguarantee and Chuidian for the purpose of finally putting an end to the numerous cases filed by the aforestated parties against one another. The agreements, provided the following: (1) dismissal with prejudice of all cases pending between the parties here and abroad, except as to claims against ARCI and Interlek with respect to which the dismissals in the aforementioned actions shall be without prejudice;

(2) the assignment to Defendant Philguarantee of all shares of stocks owned and controlled by Chuidian in Interlek; (3) the assignment to Philguarantee to all shares of Chuidian in ARCI and in Dynetics; (4) the payment by Dynetics of US$100,000.00 per month to Chuidian for five years, backed by a Letter of Credit; and
(5) the assumption by Dynetics of all the obligations of ARCI in favor of Defendant Philguarantee in the aggregate sum of approximately US$47 Million. 3

On 12 December 1991, petitioner instituted a complaint for damages before the Regional Trial Court of Makati, Branch 58. On his first cause of action, petitioner alleged that private respondent reneged on its commitment, based on the aforecited SMRA, to rehabilitate Dynetics and Chemark (a subsidiary wholly owned by Dynetics) and this caused the financial ruin of the two corporations. Dynetics and Chemark consequently defaulted on their financial obligations and petitioner, in his capacity as guarantor, was held personally liable. He was forced to compromise with the creditor banks in the total amount of P145,000.000.00. 4 On his second cause of action, petitioner contended that as a result, likewise, of private respondent's failure to rehabilitate Dynetics and because of the implementation of the "onerous" SMRA with Chuidian, the book value of his shares in Dynetics plummeted, from P200.00 per share, to practically zero. On his third cause of action, petitioner alleged that Dynetics incurred severe losses due to the provision in the SMRA directing the said corporation to drop the collection case it filed against Interlek and Chuidian for unpaid remittances. Petitioner thus prayed that private respondent pay the following: 1. On his First Cause of Action, P145,000,000.00 as actual/compensatory damages under the terms and conditions of said compromise agreements mentioned in plaintiff's First Cause of Action dated January 17, 1989; 2. On his Second Cause of Action, P32,000,000.00 representing actual losses of the book value of plaintiff's 159,997 shares of stock of Dynetics, Inc. from P200.00 per share to zero amount per share; 3. On his Third Cause of Action, P3,200,000.00 representing losses of plaintiff's equity in unrealized profit out of said unremitted US$5,000,000.00 due from Interlek; 4. On his Fourth Cause of Action, P15,000,000.00 as moral damages and P10,000,000.00 as exemplary damages.
5. On his Fifth Cause of Action, P30,000,000.00 for and as attorney's fee (15% of the amount involved). 5

On 20 February 1992, private respondent filed a motion to dismiss on grounds of lack of jurisdiction over the subject matter.

On 21 May 1992, the Regional Trial Court of Makati issued an order denying private respondent's motion to dismiss. The order reads thus: ORDER
The decision promulgated on May 6, 1992 by the Hon. Court of Appeals in CA-G.R. SP. No. 27685 entitledPhil. Export and Foreign Loan Guarantee Corporation vs. Hon. Presiding Judge, Br. 58, RTC, Makati directing this Court to resolve said petitioner's motion to dismiss, a copy of said decision having been furnished this Court, is NOTED.

Pending resolution before this Court is the motion to dismiss filed by defendant Philguarantee, the opposition thereto filed by the plaintiff, and the reply to opposition filed by the said defendant. After considering the arguments for and against the motion, the Court resolves to deny the motion. Furthermore, after a meticulous assessment of the record of this case, the Court is more inclined to believe that the nature of this case is for damages rather than an intra-corporate matter and therefore this Court has jurisdiction over this case. Due to the denial of defendant's motion to dismiss as aforementioned, the said defendant is given fifteen (15) days from receipt of a copy of this order within which to file its answer pursuant to Sec. 4, Rule 16 of the Rules of Court. Notify the respective counsel of both parties of this order.
SO ORDERED. 6

Private respondent challenged the trial court's order before the Court of Appeals which, in a decision dated 23 October 1995, reversed the same. The dispositive portion states thus: WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED. The assailed order of respondent court dated May 21,1992 is SET ASIDE.
SO ORDERED. 7

The Court of Appeals ruled that the controversy between petitioner and private respondent is intracorporate in nature and therefore falls under the jurisdiction of the Securities and Exchange Commission (SEC) and not the regular courts. In a resolution dated 20 December 1995, the Court of Appeals denied petitioner's motion for reconsiderations 8Hence, this petition for review on certiorari. Petitioner assigns the following errors: I RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONER'S ACTION BEFORE THE COURT A QUO IS PURELY OF DAMAGES ARISING OUT OF BREACH OF CONTRACT AND THEREFORE WITHIN THE EXCLUSIVE JURISDICTION OF REGULAR CIVIL COURTS. II

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT THE INSTANT ACTION DOES NOT INVOLVE INTRA-CORPORATE MATTERS OR ISSUES AND THEREFORE BEYOND THE JURISDICTION OF THE SECURITIES AND EXCHANGE COMMISSION. 9

In insisting that the SEC does not have jurisdiction, petitioner recounts the events in this manner: before private respondent entered the picture, Chemark, a Dynetics subsidiary, obtained loans from PCIB, BPI, RCBC, PISO, LB and other banks on various dates. These loans were personally guaranteed by petitioner under suretyship agreements he executed in favor of the said banks in 1980. After private respondent gained control of Dynetics, it made a firm commitment, petitioner claims, to rehabilitate Dynetics and Chemark in exchange for his acquiescence to the SMRA even though its terms were prejudicial to Dynetics. However, private respondent reneged on its promise, which caused Dynetics and Chemark to collapse financially. Being the corporations' guarantor, petitioner was forced to settle their debts with the aforementioned banks with his personal properties. Hence, petitioner contends that what he sought to recover in his complaint for damages was primarily the money he paid to the creditor banks of Dynetics and Chemark. Petitioner thus persists in his argument that, being an action for damages due to breach of contract, the present case is cognizable by the regular courts and beyond the jurisdiction of the SEC, for, had private respondent not withdrawn its commitment, petitioner rationalizes, Dynetics would have regained its strong business position. Consequently, it could have settled its obligations with its creditor banks and petitioner would have been released from his obligations as surety. 10 Petitioner further contends that he is suing not as a stockholder of Dynetics but in his personal capacity as the latter's aggrieved surety. In like manner, private respondent is being sued as "a separate entity which authored the notorious SMRA." 11 Petitioner also avers that his principal cause of action is "damages arising from breach of contract." The other causes of action in his complaint are incidental claims which emanate from and are the direct consequences of his main cause of action. 12 The petition is unmeritorious. Jurisdiction over the present controversy is vested in the SEC and not in the regular courts. To determine which body has jurisdiction over the present controversy, we rely on the sound judicial principle that jurisdiction over the subject matter of a case is conferred by law and is determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein. 13 The law, P.D. 902-A, explicitly lays down the parameters of the Securities and Exchange Commission's jurisdiction. Thus: Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporation, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, members of associations or organizations registered with the Commission.

b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any and/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 their individual franchise or right to exist as such entity. c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships, or associations. d) Petition of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possess sufficient property to cover all of its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities but is under the Management Committee created pursuant to this Decree. Jurisprudence, however, has tempered the aforequoted provision, paragraph (b) in particular:
. . . 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.14

We have judiciously gone over petitioner's original complaint and are not deceived by his cunning arguments. The case at bar is a classic illustration of a dispute between stockholders private respondent, the current majority and controlling stockholder of Dynetics and petitioner, the erstwhile majority stockholder of said corporation (although he still holds a substantial interest therein). Petitioner's stubborn insistence that he brought the case for damages in his capacity as an aggrieved surety and not as a stockholder is belied by the opening statement in his complaint:
1. Plaintiff is a Filipino, of legal age, with business address at 7th Floor, Chemphil Building, Pasay Road, Makati, Metro Manila, where he may be served with all court processes; he was (and still is) at all times relevent to his complaint a major stockholder of Dynetics, Inc. (Dynetics for brevity), a corporation duly organized and existing, under the laws of the Philippines; 15 . . . (emphasis ours).

Moreover, in the same complaint petitioner also sought to recover the loss in the book value of his shares of stock in Dynetics and his share in the said corporation's unrealized profits. Although the foregoing may have arisen from the same facts or circumstances, we cannot simply brush these aside as incidental claims because only in his personality as a prejudiced stockholder, and not in his capacity as a mere surety, will petitioner be able to rightly pray for and be granted these claims. More importantly, petitioner became a surety of Dynetics and Chemark because he was then one of the principal stockholders of Dynetics. This was a requisite of the creditor banks. Petitioner's character as surety for Dynetics, therefore, can even be traced to and is interlocked with the fact that he is a major stockholder of the said corporation. Petitioner himself revealed in his complaint:
21. On the other hand, at various times before the aforesaid controversy between the Marcoses and Chuidian, Chemark, a subsidiary of Dynetics, obtained various loans from PCIB, IBAA, SBTC and a consortium of banks (PISO, BPI, RCBC, PCIB, and LB) the security for which loans were required by said creditor banks to include guarantee

and/or suretyships coming from the principal stockholders of Dynetics and Chemark including plaintiff who had to execute such guarantees and/or suretyships in his personal capacity under a joint and several or solidary type of obligation. 16 (emphasis ours).

It is evident from the aforequoted averment that petitioner instituted his complaint primarily as stockholder of Dynetics. Petitioner however, wants us to focus solely on his character as surety and his claim for damages as such to remove the present controversy from Section 5(b) of P.D. 902-A, and corollarily from the jurisdiction of the SEC. Petitioner, likewise, assails the status of private respondent as stockholder of Dynetics. His contention, however, is belied by the allegations in his complaint. As early as 27 May 1985 Philguarantee's representatives were already on the Board of Directors of Dynetics, constituting the majority thereof. In his complaint, petitioner himself stated, that:
9. At the start of the second quarter of 1985, the defendant, acting apparently upon the instructions of the Marcoses, without assuming formal ownership of the company and employing undue power and influence started to gain control of Dynetics. No major decision or fund disbursement was made without the defendant's consent. On May 27, 1985, during a stockholders meeting convened at its proddings, the defendant had its nominees, namely, Victor Macalincag, Cesar Macuja and Eduardo Morato (of HSDC) elected and constituted as a majority in the board of Dynetics. Out of five members, only four assumed office. The fourth member was plaintiff . The fifty member, Manuel Lazaro, then the President's Legal Counsel, was nominated and elected but did not assume office. Chuidian was ousted as a director although he still had sufficient shares in his name and control to elect himself. 17(emphasis ours).

Since both parties in the case at bar are stockholders of the corporation, jurisdiction over their present conflict vests in the SEC pursuant to Sec. 5(b) of P.D. 902-A. Our task, however, does not end here. As stated in Viray v.CA, 18 the establishment of any of the relationships in Sec. 5(b) of PD 902-A does not automatically "confer jurisdiction over the dispute on the SEC to the exclusion of the regular courts." We are quite aware that not all disagreements between stockholders or between a corporation and its stockholder are intra-corporate in nature. Hence, we proceed to the next test: whether or not the nature of the controversy itself is intra-corporate. Contrary to petitioner's averments, this is not a simple action for breach of contract. Digging deeper, the "corporate nature" of the present controversy is eventually revealed. Petitioner attributes to the SMRA the commitment of private respondent to rehabilitate Dynetics and Chemark. This is the reason why, when private respondent withdrew the restructuring plans for the rehabilitation of the aforementioned corporations, petitioner instituted a complaint for breach of contract. The problem with this scenario, however, is that petitioner failed to indicate the exact provision where this specific promise is embodied. Instead, petitioner presented the letter dated 18 October 1985 sent by Cesar P. Macuja, Chairman of the Board of Directors of Dynetics and Executive Vice-President of private respondent to all the creditor banks of Dynetics and Chemark entitled "Proposed Integrated Financial Plan for the Rehabilitation of Dynetics, Inc., Asian Reliability Company, Inc. and Chemark Electric Motors, Inc." The contents of the said letter is hereby reproduced: In accordance with our discussion meetings of 9-11 October 1985, I am submitting to each one of you for review and favorable consideration, the Proposed Integrated Financial Plan for the rehabilitation of the above-mentioned companies.

As reported to you, PHILGUARANTEE has been ceded ownership of these companies


and the success of our rehabilitation of the business will depend largely on your approval to restructure your respective exposures in Dynetics and Chemark. The basic restructuring scheme is summarized as follows:

1. For the Secured Creditors of Dynetics. Unpaid interest up to 31 December 1985 will be capitalized as principal. The consolidated principal amount (original principal balance plus capitalized interest) will be repaid within four (4) years at an interest rate of 14% per annum with a one (1) year grace period on principal repayment. These loans will remain as dollar-denominated liabilities. 2. For the Unsecured Creditors of Dynetics Unpaid interest up to 31 December 1985 will be capitalized as principal. The consolidated principal amount (original principal balance plus capitalized interest) will be repaid within seven (7) years at an interest rate of 1-1/2% over Treasury Bills with two (2) years grace period on principal repayment. 3. For the Chemark's Creditors Unpaid interest up to 31 December 1985 will be capitalized as principal. The consolidated principal amount (original principal balance plus capitalized interest) will be repaid within fifteen (15) years with two (2) years grace period on principal repayment at an interest rate of 10% per annum. 4. New Equity Contribution Since PHIL-GUARANTEE is a government financial institution and not a venture capital company, it is proposed that an "Investors Group" be invited to invest new money of about P44.0 million. COMMERCIAL PLAN The financial projections are prepared on the basis of three (3) divisional commercial plans as follows: a. Semiconductor There will be a continuance of the operations of Dynetics, Inc. as a semi conductor assembly division with gradual buildup of supply orders from its 40 major customers with profitable market recovery during 1986. b. PHILGUARANTEE's acquired assets from ARCI shall be integrated into the operation of Dynetics as Integrated Circuits Testing/Tool and Die Fabrication Divisions. c. Restart the operation of Chemark under the financial assistance from Dynetics in accordance with new business opportunities as reflected by letters of intent. EXPANDED BOARD OF DIRECTORS It is planned that the consolidated operation will have a simple Board of Directors to be expanded from the present five (5) members to nine (9) members. The four (4) new Board representatives are proposed to be nominated from among the creditor banks. You will also note that one of the highlights of the projections, aside from the assumed restructuring terms, is a conservative estimate of Dynetics' overall working

capital requirements, of P89.0 Million. This estimate already took into account Dynetics' financial assistance contemplated for Chemark for about P35.2 million. In this regard, Dynetics management had earlier proposed to source this requirement through short-term borrowings. It is nonetheless the opinion of PHILGUARANTEE that the right funding mix is a combination of short-term borrowings of P45.0 million and fresh equity infusion of the P44.0 million to be supplied by a proposed "Investors Group." PHILGUARANTEE is pursuing this funding mix so as not to overburden Dynetics in terms of financing cost. The Integrated Financial Plan amply illustrates the business potential of this group of companies. May I therefore reiterate that your decision to go with this plan will benefit not just the thousands of people depending on these companies for livelihood. In more ways than one, your concerted efforts will go a long way towards achieving the desired stability of the export electronic industry in the Philippines, and should ultimately redound to the benefit of the private sectors like you. Thank you and regards. CESAR P. MACUJA Chairman of the Board Executive Vice President Dynetics, Incorporated Phil. Export & Foreign Loan Guarantee Corp.
cc: Philguarantee Board of Directors. 19

The aforequoted letter, to use a worn cliche, reveals beyond the shadow of a doubt that the proposed rehabilitation program for the said corporation was made by private respondent in its capacity as the majority or controlling stockholder of Dynetics. The rehabilitation plan was a corporate decision and a corporate action. The root of petitioner's complaint therefore, no matter how cleverly devised and artfully disguised is plainly a corporate affair and being so, jurisdiction over the dispute at bar pertains to the SEC and not to the regular courts. We concur with the findings of the Court of Appeals, thus: The private respondent, however, vigorously asserts that his case is nothing but an action for damages arising from breach of contractual obligation committed by petitioner in unilaterally withdrawing its agreement to rehabilitate Dynetics and Chemark. The contention is clever, but unacceptable. The fact remains that the claim for damages either depends on, or is inextricably linked with, the resolution of the corporate controversies. For instance, the prayer for moral and exemplary damages is grounded on "defendant's total bad faith and malice knowing fully well that its acts were patently injurious to the rights and interests of said corporations and its stockholders, including plaintiff . . ." . . . Clearly, what private respondent filed against petitioner before the court below was an intra-corporate case under the guise of an action for damages employing civil law terms and phrases. The teaching of the Court, en banc, penned by Justice Bellosillo, in the recent case of Andaya vs.Abadia, et al., 228 SCRA 707, 711, further illumines the issue:

The allegations against herein respondents in the amended complaint unquestionably reveal intra-corporate controversies cleverly concealed, although unsuccessfully, by use of civil law terms and phrases, . . . While it may be said that the same corporate acts also give rise to civil liability for damages, it does not follow that the case is necessarily taken out of the jurisdiction of the SEC as it may award damages which can be considered consequential in the exercise of its adjudicative powers . Besides, incidental issues that properly fall within the authority of a tribunal may also be considered by it to avoid multiplicity of actions. Consequently, in intra-corporate matters such as those affecting the corporation, the issue of consequential damages may just as well be resolved and adjudicated by the SEC. (emphasis supplied). 20

In view of the foregoing, the declaration in Union Glass and Container Corp. vs. SEC. 21 is appropriately recalled: . . . The principal function of the SEC is the supervision and control over corporations, partnerships and associations with the end in view that investment in these entities may be encouraged and protected and their activities pursued for the promotion of economic development. It is in aid of this office that the adjudicative power of the SEC must be exercised. Thus the law explicitly specified and delimited its jurisdiction to matters intrinsically connected with the regulation of corporations, partnerships and associations and those dealing with the internal affairs of such corporations, partnerships or associations. (emphasis ours). WHEREFORE, premises considered, the petition for review on certiorari is hereby DENIED. SO ORDERED.