Intra-Corporate Controversy

A review of relevant jurisprudence shows a development in the Courts

approach in classifying what constitutes an intra-corporate
controversy. Initially, the main consideration in determining whether a dispute
constitutes an intra-corporate controversy was limited to a consideration of the
intra-corporate relationship existing between or among the parties. The types
of relationships embraced under Section 5(b) x x x were as follows:

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.

The existence of any of the above intra-corporate relations was

sufficient to confer jurisdiction to the SEC (now the RTC), regardless of the
subject matter of the dispute. This came to be known as the relationship test.

What are the tests to determine

whether a dispute constitutes an
intra-corporate controversy and
dispute?
How would jurisdiction be determined?

1. Relationship Test; and

2. Nature of the Controversy Test.

Jurisdiction should be determined by considering not only the status or relationship of the parties, but
also of the nature of the question under controversy. This two-tier test was adopted in the case of
Speed Distribution, Inc. vs. Court of Appeals: To determine whether a case involves an intra-
corporate controversy, and is to be heard and decided by the branches of the RTC specifically
designated by the Court to try and decide such cases, two elements must concur:

1. the status or relationship of the parties (relationship test); and

2. the nature of the question that is subject of the controversy (nature of the controversy test).

The first element requires that the controversy must arise out of intracorporate partnership relations
between any or all of the parties 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 franchises.

The Second element requires that the dispute among the parties be intrinsically connected with the
regulation of the corporation. If the nature of the controversy involves matters that are purely civil in
character, necessarily, the case does not involve an intra-corporate controversy. (Reyes vs. Zenith
Insurance Corp., G.R. No. 165744, August 11, 2008, [Brion, J.])

What is meant by the Relationship

Test?
Initially, the main consideration in determining whether a dispute constitutes an intra-corporate
controversy was limited to a consideration of the intra-corporate relationship (also known as the
Relationship Test) existing between or among parties. The types of relationships embraced under
Section 5(b), as declared in the case of Union Glass & Container Corp. vs. SEC, were as follows:

1. Between the corporation, partnership, or association and the public;

2. Between the corporation, partnership, or association and its stockholders, partners, members or
officers;

3. Between the corporation, partnership, or association and the State as far as its franchise, permit
or license to operate is concerned; and

4. Among the stockholder, partners, or associates themselves. (Reyes vs. Zenith Insurance Corp.,
G.R. No. 165744, August 11, 2008, [Brion, J.])
The rights of parties in administrative proceedings are not violated as long as the
constitutional requirement of due process has been satisfied. In the landmark case
of Ang Tibay v. CIR, we laid down the cardinal rights of parties in administrative
proceedings, as follows:
1) The right to a hearing, which includes the right to present ones
case and submit evidence in support thereof.
2) The tribunal must consider the evidence presented.
3) The decision must have something to support itself.
4) The evidence must be substantial.
5) The decision must be rendered on the evidence presented at
the hearing, or at least contained in the record and disclosed to
the parties affected.
6) The tribunal or body or any of its judges must act on its or his
own independent consideration of the law and facts of the
controversy and not simply accept the views of a subordinate in
arriving at a decision.
7) The board or body should, in all controversial question, render
its decision in such a manner that the parties to the proceeding
can know the various issues involved, and the reason for the
decision rendered.

What is the nature of the proceedings before the LaborTribunal?

The NLRC Rules describe the proceedings before the Labor Arbiter as non-litigious. Subject to
the requirements of due process, the technicalities of law and procedure in the regular courts do not
apply in the labor arbitration proceedings.

WHAT IS JURISDICTION?
VENUE?
> Power or authority given by the law to a court or tribunal to hear and determine certain
controversies
> Power of courts to hear and determine a controversy involving rights which are demandable
and enforceable
 VENUE
-Particular country or geographical area in which a court with jurisdiction may hear or
determine a case

-Procedural

-In civil cases, may be waived or stipulated by the parties

JURISDICTION
-Power of the court to decide a case on the merits

-Place of trial

-Substantive

-Granted by law or by the constitution and cannot be waived or stipulated

What are the cases falling under the jurisdiction of the Labor Arbiters?

Under Article 217 of the Labor Code, Labor Arbiters have original jurisdiction over the following cases:

1. Unfair labor practice (ULP) cases;

2. Termination disputes (or illegal dismissal cases);

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 employer-employee
relations;

5. Cases arising from any violation of Article 264 of the Labor Code, including questions involving the
legality of strikes and lockouts;

6. Except claims for employees compensation not included in the next succeeding paragraph, 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), whether or not accompanied with a claim for reinstatement;

7. Wage distortion disputes in unorganized establishments not voluntarily settled by the parties
pursuant to Republic Act No. 6627;

8. Enforcement of compromise agreements when there is non-compliance by any of the parties

pursuant to Article 227 of the Labor Code, as amended;

9. Money claims arising out of employer-employee relationship or by virtue of any law or contract,
involving Filipino workers for overseas employment, including claims for actual, moral, exemplary and
other forms of damages as provided by Section 10 of R.A. No. 8042, as amended by R.A. No. 10022;

10.Contested cases under the exception clause of Article 128(b) of the Labor Code, as amended by
R.A. 7730; and

11.Other cases as may be provided by law.

What are the two kinds of jurisdiction of the NLRC?

The National Labor Relations Commission exercises two (2) kinds of jurisdiction:
1. original jurisdiction; and
2. exclusive appellate jurisdiction.

1. Original jurisdiction of NLRC

a. Injunction in ordinary labor disputes to enjoin or restrain any actual or
threatened commission of any or all prohibited or unlawful acts or to require the
performance of a particular act in any labor dispute which, if not restrained or
performed forthwith, may cause grave or irreparable damage to any party.
b. Injunction in strikes or lockouts under Article 264 of the Labor Code. c.
Certified labor disputes causing or likely to cause a strike or lockout in an
industry indispensable to the national interest, certified to it by the Secretary of
Labor and Employment for compulsory arbitration.
2. NLRC Appelate Jurisdiction

The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters.

CBA cases

Cases arising from the interpretation or implementation of collective bargaining agreements

and those arising from the interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitration

What is the doctrine of forum non conveniens? May this be invoked against the
exercise of jurisdiction by the Labor Arbiters/NLRC?

In the case of The Manila Hotel Corp. vs. NLRC, (G. R. No. 120077, October13,
2000), the Supreme Court ruled that under the international law doctrine of forum non
conveniens, the NLRC has no jurisdiction when the main aspects of the case transpired
in foreign jurisdictions and the only link that the Philippines has with the case is that the
employee is a Filipino Citizen. In this case, the Filipino was hired directly (without the
intervention of the POEA) by the foreign employer while he was working in Oman and
was assigned to a hotel in China. The NLRC is not a convenient forum given that all the
incidents of the case from the time of recruitment, to employment, to dismissal -
occurred outside the Philippines. The inconvenience is compounded by the fact that the
proper defendants the Palace Hotel and MHICL - are not nationals of the Philippines.
Neither are they doing business in the Philippines. Likewise, the main witnesses, Mr.
Schmidt and Mr. Henk are non-residents of the Philippines.

The said Manila Hotel case should be distinguished from Philippine National
Bank vs. Cabansag, [G. R. No. 157010, June 21, 2005]. Here, respondent was hired
by the Singapore branch of petitioner-bank while she was a tourist in Singapore in 1998.
Petitioner is a private banking corporation organized and existing under the laws of the
Philippines, with principal offices at the PNB Financial Center, Roxas Boulevard, Manila.
At the time, too, the Branch Office had two (2) types of employees: (a) expatriates or the
regular employees, hired in Manila and assigned abroad including Singapore; and (b)
locally (direct) hired. She applied for and was hired as Branch Credit Officer. After her 3-
month probationary period, she was terminated. Subsequently, she filed a complaint
before a Labor Arbiter. One of the issues presented before the Supreme Court was
whether or not the arbitration branch of the NLRC in the National Capital Region has
jurisdiction over the instant controversy. The Supreme Court, in answering this query in
the affirmative, ruled that the Labor Arbiter has jurisdiction because the issue here
involves termination of an OFW. While she may have been directly hired in Singapore
by petitioner, however, noteworthy is the fact that respondent likewise applied for and
secured an Overseas Employment Certificate from the POEA through the Philippine
Embassy in Singapore. The Certificate declared her a bona-fide contract worker in
Singapore. Thus, even assuming arguendo that she was considered at the start of her
employment as a direct hire governed by and subject to the laws, common practices
and customs prevailing in Singapore, she subsequently became a contract worker or an
OFW who was covered by Philippine labor laws and policies upon certification by the
POEA. At the time her employment was illegally terminated, she already possessed the
POEA Employment Certificate. Moreover, petitioner admits that it is a Philippine
corporation doing business through a branch office in Singapore. Significantly,
respondents employment by the Singapore branch office had to be approved by the
president of the bank whose principal offices were in Manila. This circumstance militates
against petitioners contention that respondent was locally hired; and totally governed
by and subject to the laws, common practices and customs of Singapore, not of the
Philippines. Instead, with more reason does this fact reinforce the presumption that
respondent falls under the legal definition of migrant worker, in this case one deployed
in Singapore. Hence, petitioner cannot escape the application of Philippine laws or the
jurisdiction of the NLRC and the Labor Arbiter.

JURISDICTION OVER IMMUNED ENTITIES.

Labor Arbiters have no jurisdiction over labor cases involving entities immuned
from suit. Exception: when said entities perform proprietary activities (as distinguished
from governmental functions).

For instance, in an illegal dismissal case filed against the Asian Development
Bank (ADB), the Supreme Court ruled that it enjoys immunity from legal process of
every form and, therefore, the suit cannot prosper. ADB's officers, on their part, enjoy
immunity in respect of all acts performed by them in their official capacity. The Charter
and the Headquarters Agreement granting these immunities and privileges are treaty
covenants and commitments voluntarily assumed by the Philippine government which
must be respected. (Department of Foreign Affairs vs. NLRC, et al., G. R. No. 113191,
September 18, 1996, 262 SCRA 39, 43-44).

In 1995, the Supreme Court had occasion to assert and reiterate said rule in an
illegal dismissal case filed against a specialized agency of the United Nations. In
dismissing the case, the Court said that being a member of the United Nations and a
party to the Convention on the Privileges and Immunities of the Specialized Agencies of
the United Nations, the Philippine Government adheres to the doctrine of immunity
granted to the United Nations and its specialized agencies. Both treaties have the force
and effect of law. (Lasco, et al. vs. United Nations Revolving Fund for Natural
Resources Exploration [UNRFNRE], et al., G. R. Nos. 109095-109107, February 29,
1995; World Health Organization vs. Aquino, 48 SCRA 242 [1972]).

There is an exception to the immunity rule as exemplified by the case of United

States vs. Hon. Rodrigo, [G. R. No. 79470, Feb. 26, 1990, 182 SCRA 644, 660].
Here, it was held that when the function of the foreign entity otherwise immune from
suit, partakes of the nature of a proprietary activity, such as the restaurant services
offered at John Hay Air Station undertaken by the United States Government as a
commercial activity for profit and not in its governmental capacity, the case for illegal
dismissal filed by a Filipino cook working therein is well within the jurisdiction of
Philippine courts. The reason is that by entering into the employment contract with the
cook in the discharge of its proprietary functions, it impliedly divested itself of its
sovereign immunity from suit.

Venue of Labor Dispute

All cases within the jurisdiction of the LA to hear and decide may be filed with the
Regional Arbitration Branch (RAB) having jurisdiction over the workplace of the
complainant.

Venue place where the employee is regularly employed at the time the cause
of action arose; whether on temporary detail, assignment or travel. For field, ambulant
or itinerant workers, the workplace shall mean the place where they are regularly
assigned or where they are supposed to regularly receive their salaries / wages and
report the result of their assignment.

If 2 or more RABs have jurisdiction over the workplace of the

complainant, the branch that first acquired jurisdiction over the case shall
exclude the others.
Venue of a case may be transferred to another branch upon written
agreement of the parties or upon order of the LA or NLRC, upon motion
by the proper party in meritorious cases.
Cases involving OFWs RAB having jurisdiction over the place where
the complainant resides or where the principal office of any of the
respondents is situated, at the option of the complainant.
Subject to Art. 263 (g) of the Code, the LA shall dispose of the case
assigned to him including any or all incidents thereof in the same
proceeding to avoid multiplicity of suits.