Prudential Bank and Trust Company

PRUDENTIAL BANK and TRUST COMPANY, petitioner, vs. CLARITA T. REYES,
respondent.

The Bank created a committee to investigate the findings of the auditors involving the two
checks which were not collected and became stale.

DECISION

On March 8, 1991, the president of the Bank issued a memorandum to the complainant
informing her of the findings of the auditors and asked her to give her side. In reply,
complainant requested for an extension of one week to submit her explanation. In a
subsequent letter, dated March 14, 1991, to the president, complainant stated that in view
of the refusal of the Bank that she be furnished copies of the pertinent documents she is
requesting and the refusal to grant her a reasonable period to prepare her answer, she was
constrained to make a general denial of any misfeasance or malfeasance on her part and
asked that a formal investigation be made.

GONZAGA-REYES, J.:
Before the Court is a petition for review on certiorari of the Decision,[1] dated October 15,
1999 of the Court of Appeals in C.A.-G.R. SP No. 30607 and of its Resolution, dated
December 6, 1999 denying petitioners motion for reconsideration of said decision. The
Court of Appeals reversed and set aside the resolution[2] of the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 009364-95, reversing and setting aside the labor
arbiters decision and dismissing for lack of merit private respondents complaint.[3]
The case stems from NLRC NCR Case No. 00-06-03462-92, which is a complaint for illegal
suspension and illegal dismissal with prayer for moral and exemplary damages, gratuity,
fringe benefits and attorneys fees filed by Clarita Tan Reyes against Prudential Bank and
Trust Company (the Bank) before the labor arbiter. Prior to her dismissal, private
respondent Reyes held the position of Assistant Vice President in the foreign department of
the Bank, tasked with the duties, among others, to collect checks drawn against overseas
banks payable in foreign currency and to ensure the collection of foreign bills or checks
purchased, including the signing of transmittal letters covering the same.
After proceedings duly undertaken by the parties, judgment was rendered by Labor Arbiter
Cornelio L. Linsangan, the dispositive portion of which reads:
WHEREFORE, finding the dismissal of complainant to be without factual and legal basis,
judgment is hereby rendered ordering the respondent bank to pay her back wages for
three (3) years in the amount of P540,000.00 (P15,000.00 x 36 mos.). In lieu of
reinstatement, the respondent is also ordered to pay complainant separation pay
equivalent to one month salary for every year of service, in the amount of P420,000.00
(P15,000 x 28 mos.). In addition, the respondent should also pay complainant profit sharing
and unpaid fringe benefits. Attorneys fees equivalent to ten (10%) percent of the total
award should likewise be paid by respondent.
SO ORDERED.[4]
Not satisfied, the Bank appealed to the NLRC which, as mentioned at the outset, reversed
the Labor Arbiters decision in its Resolution dated 24 March 1997. Private respondent
sought reconsideration which, however, was denied by the NLRC in its Resolution of 28 July
1998. Aggrieved, private respondent commenced on October 28, 1998, a petition for
certiorari before the Supreme Court.[5] The subject petition was referred to the Court of
Appeals for appropriate action and disposition per resolution of this Court dated November
25, 1998, in accordance with the ruling in St. Martin Funeral Homes vs. NLRC.[6]
In its assailed decision, the Court of Appeals adopted the following antecedent facts
leading to Reyess dismissal as summarized by the NLRC:
The auditors of the Bank discovered that two checks, No. 011728-7232-146, in the amount
of US$109,650.00, and No. 011730-7232-146, in the amount of US$115,000.00, received
by the Bank on April 6, 1989, drawn by the Sanford Trading against Hongkong and
Shanghai Banking Corporation, Jurong Branch, Singapore, in favor of Filipinas Tyrom, were
not sent out for collection to Hongkong Shanghai Banking Corporation on the alleged order
of the complainant until the said checks became stale.

As the complainant failed to attend and participate in the formal investigation conducted
by the Committee on May 24, 1991, despite due notice, the Committee proceeded with its
hearings and heard the testimonies of several witnesses.
The Committees findings were:
a) The two (2) HSBC checks were received by the Foreign Department on 6 April 1989. On
the same day, complainant authorized the crediting of the account of Filipinas Tyrom in the
amount of P4,780,102.70 corresponding to the face value of the checks, (Exhibits 6, 22 to
22-A and 23 to 23-A). On the following day, a transmittal letter was prepared by Ms. Cecilia
Joven, a remittance clerk then assigned in the Foreign Department, for the purpose of
sending out the two (2) HSBC checks for collection. She then requested complainant to
sign the said transmittal letters (Exhibits 1, 7 and 25; TSN, 11 March 1993, pp. 42-52), as it
is complainant who gives her instructions directly concerning the transmittal of foreign bills
purchased. All other transmittal letters are in fact signed by complainant.
b) After Ms. Joven delivered the transmittal letters and the checks to the Accounting
Section of the Foreign Department, complainant instructed her to withdraw the same for
the purpose of changing the addressee thereon from American Express Bank to Bank of
Hawaii (ibid.) under a special collection scheme (Exhibits 4 and 5 to 5-B).
c) After complying with complainants instruction, Ms. Joven then returned to complainant
for the latter to sign the new transmittal letters. However, complainant told Ms. Joven to
just hold on to the letters and checks and await further instructions (ibid.). Thus, the new
transmittal letters remained unsigned. (See Exhibits 5 to 5-B).
d) In June 1989, Ms. Joven was transferred to another department. Hence, her duties,
responsibilities and functions, including the responsibility over the two (2) HSBC checks,
were turned over to another remittance clerk, Ms. Analisa Castillo (Exhibit 14; TSN, 4 June
1993, pp. 27-29).
e) When asked by Ms. Castillo about the two (2) HSBC checks, Ms. Joven relayed to the
latter complainants instruction (Exhibit 14; TSN, 4 June 1993, p. 42).
f) About fifteen (15) months after the HSBC checks were received by the Bank, the said
checks were discovered in the course of an audit conducted by the Banks auditors. Atty.
Pablo Magno, the Banks legal counsel, advised complainant to send the checks for
collection despite the lapse of fifteen (15) months.
g) Complainant, however, deliberately withheld Atty. Magnos advice from her superior, the
Senior Vice-President, Mr. Renato Santos and falsely informed the latter that Atty. Magno
advised that a demand letter be sent instead, thereby further delaying the collection of the
HSBC checks.

h) On 10 July 1990, the HSBC checks were finally sent for collection, but were returned on
16 July 1990 for the reason account closed (Exhibits 2-A and 3-A).
After a review of the Committees findings, the Board of Directors of the Bank resolved not
to re-elect complainant any longer to the position of assistant president pursuant to the
Banks By-laws.
On July 19, 1991, complainant was informed of her termination of employment from the
Bank by Senior Vice President Benedicto L. Santos, in a letter the text of which is quoted in
full:
Dear Mrs. Reyes:

respondents officers, complainant is liable to pay moral and exemplary damages and
attorneys fees.[7]
The Court of Appeals found that the NLRC committed grave abuse of discretion in ruling
that the dismissal of Reyes is valid. In effect, the Court of Appeals reinstated the judgment
of the labor arbiter with modification as follows:
WHEREFORE, in the light of the foregoing, the decision appealed from is hereby REVERSED
and SET ASIDE. In lieu thereof, judgment is hereby rendered ordering respondent Bank as
follows:
1. To pay petitioner full backwages and other benefits from July 19, 1991 up to the finality
of this judgment;

After a thorough investigation and appreciation of the charges against you as contained in
the Memorandum of the President dated March 8, 1991, the Fact Finding Committee which
was created to investigate the commission and/or omission of the acts alluded therein, has
found the following:

2. To pay petitioner separation pay equivalent to one (1) month salary for every year of
service in lieu of reinstatement; and

1. You have deliberately held the clearing of Checks Nos. 11728 and 11730 of Hongkong
and Shanghai Banking Corporation in the total amount of US$224,650.00 by giving
instructions to the collection clerk not to send the checks for collection. In view thereof,
when the said checks were finally sent to clearing after the lapse of 15 months from receipt
of said checks, they were returned for the reason Account closed. To date, the value of said
checks have not been paid by Filipinas Tyrom, which as payee of the checks, had been
credited with their peso equivalent;

SO ORDERED.[8]

2. You tried to influence the decision of Atty. Pablo P. Magno, Bank legal counsel, by asking
him to do something allegedly upon instructions of a Senior Vice President of the Bank or
else lose his job when in truth and in fact no such instructions was given; and
3. You deliberately withheld from Mr. Santos, Senior Vice President, the advice given by the
legal counsel of the Bank which Mr. Santos had asked you to seek. As a matter of fact, you
even relayed a false advice which delayed further the sending of the two checks for
collection. Likewise, you refused to heed the advice of the Banks legal counsel to send the
checks for collection.
These findings have given rise to the Banks loss of trust and confidence in you, the same
being acts of serious misconduct in the performance of your duties resulting in monetary
loss to the Bank. In view thereof, the Board has resolved not to re-elect you to the position
of Assistant Vice President of the Bank. Accordingly, your services are terminated effective
immediately. In relation thereto, your monetary and retirement benefits are forfeited
except those that have vested in you.
In her position paper, complainant alleged that the real reason for her dismissal was her
filing of the criminal cases against the bank president, the vice president and the auditors
of the Bank, such filing not being a valid ground for her dismissal. Furthermore, she alleged
that it would be self-serving for the respondent to state that she was found guilty of gross
misconduct in deliberately withholding the clearing of the two dollar checks. She further
alleged that she was not afforded due process as she was not given the chance to refute
the charges mentioned in the letter of dismissal. Hence, she was illegally dismissed.
On the other hand, respondent argues that there were substantial bases for the Bank to
lose its trust and confidence on the complainant and, accordingly, had just cause for
terminating her services. Moreover, for filing the clearly unfounded suit against the

3. To pay attorneys fee equivalent to ten (10%) percent of the total award.

Hence, the Banks recourse to this Court contending in its memorandum that:
IN SETTING ASIDE THE DECISION DATED 24 MARCH 1997 AND THE RESOLUTION DATED 28
JULY 1998 OF THE NLRC AND REINSTATING WITH MODIFICATION THE DECISION DATED 20
JULY 1995 OF LABOR ARBITER CORNELIO L. LINSANGAN, THE HONORABLE COURT OF
APPEALS SERIOUSLY ERRED, IN VIEW OF THE FOLLOWING:
I.
IT IS THE SEC (NOW THE REGIONAL TRIAL COURT) AND NOT THE NLRC WHICH HAS
ORIGINAL AND EXCLUSIVE JURISDICTION OVER CASES INVOLVING THE REMOVAL FROM
OFFICE OF CORPORATE OFFICERS.
II.
EVEN ASSUMING ARGUENDO THAT THE NLRC HAS JURISDICTION, THERE WAS SUBSTANTIAL
EVIDENCE OF RESPONDENTS MISCONDUCT JUSTIFYING THE BANKS LOSS OF TRUST AND
CONFIDENCE ON (sic) HER.
III.
EVEN ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO BACKWAGES, THE
HONORABLE COURT OF APPEALS ERRED IN AWARDING UNLIMITED AND UNQUALIFIED
BACKWAGES THEREBY GOING FAR BEYOND THE LABOR ARBITERS DECISION LIMITING THE
SAME TO THREE YEARS, WHICH DECISION RESPONDENT HERSELF SOUGHT TO EXECUTE.[9]
In sum, the resolution of this petition hinges on (1) whether the NLRC has jurisdiction over
the complaint for illegal dismissal; (2) whether complainant Reyes was illegally dismissed;
and (3) whether the amount of back wages awarded was proper.
On the first issue, petitioner seeks refuge behind the argument that the dispute is an intracorporate controversy concerning as it does the non-election of private respondent to the
position of Assistant Vice-President of the Bank which falls under the exclusive and original
jurisdiction of the Securities and Exchange Commission (now the Regional Trial Court)

under Section 5 of Presidential Decree No. 902-A. More specifically, petitioner contends
that complainant is a corporate officer, an elective position under the corporate by-laws
and her non-election is an intra-corporate controversy cognizable by the SEC invoking
lengthily a number of this Courts decisions.[10]

that is, her services may be terminated only for a just or authorized cause.[14] This being
in truth a case of illegal dismissal, it is no wonder then that the Bank endeavored to the
very end to establish loss of trust and confidence and serious misconduct on the part of
private respondent but, as will be discussed later, to no avail.

Petitioner Bank can no longer raise the issue of jurisdiction under the principle of estoppel.
The Bank participated in the proceedings from start to finish. It filed its position paper with
the Labor Arbiter. When the decision of the Labor Arbiter was adverse to it, the Bank
appealed to the NLRC. When the NLRC decided in its favor, the bank said nothing about
jurisdiction. Even before the Court of Appeals, it never questioned the proceedings on the
ground of lack of jurisdiction. It was only when the Court of Appeals ruled in favor of private
respondent did it raise the issue of jurisdiction. The Bank actively participated in the
proceedings before the Labor Arbiter, the NLRC and the Court of Appeals. While it is true
that jurisdiction over the subject matter of a case may be raised at any time of the
proceedings, this rule presupposes that laches or estoppel has not supervened. In this
regard, Baaga vs. Commission on the Settlement of Land Problems,[11] is most
enlightening. The Court therein stated:

This brings us to the second issue wherein the Bank insists that it has presented
substantial evidence to prove the breach of trust on the part of private respondent
warranting her dismissal. On this point, the Court of Appeals disagreed and set aside the
findings of the NLRC that Reyes deliberately withheld the release of the two dollar checks;
that she is guilty of conflict of interest that she waived her right to due process for not
attending the hearing; and that she was dismissed based on loss of trust and confidence.
We quote pertinent portions of the decision, to wit:

This Court has time and again frowned upon the undesirable practice of a party submitting
his case for decision and then accepting the judgment, only if favorable, and attacking it
for lack of jurisdiction when adverse. Here, the principle of estoppel lies. Hence, a party
may be estopped or barred from raising the question of jurisdiction for the first time in a
petition before the Supreme Court when it failed to do so in the early stages of the
proceedings.
Undeterred, the Bank also contends that estoppel cannot lie considering that from the
beginning, petitioner Bank has consistently asserted in all its pleadings at all stages of the
proceedings that respondent held the position of Assistant Vice President, an elective
position which she held by virtue of her having been elected as such by the Board of
Directors. As far as the records before this Court reveal however, such an assertion was
made only in the appeal to the NLRC and raised again before the Court of Appeals, not for
purposes of questioning jurisdiction but to establish that private respondents tenure was
subject to the discretion of the Board of Directors and that her non-reelection was a mere
expiration of her term. The Bank insists that private respondent was elected Assistant Vice
President sometime in 1990 to serve as such for only one year. This argument will not do
either and must be rejected.
It appears that private respondent was appointed Accounting Clerk by the Bank on July 14,
1963. From that position she rose to become supervisor. Then in 1982, she was appointed
Assistant Vice-President which she occupied until her illegal dismissal on July 19, 1991. The
banks contention that she merely holds an elective position and that in effect she is not a
regular employee is belied by the nature of her work and her length of service with the
Bank. As earlier stated, she rose from the ranks and has been employed with the Bank
since 1963 until the termination of her employment in 1991. As Assistant Vice President of
the foreign department of the Bank, she is tasked, among others, to collect checks drawn
against overseas banks payable in foreign currency and to ensure the collection of foreign
bills or checks purchased, including the signing of transmittal letters covering the same. It
has been stated that the primary standard of determining regular employment is the
reasonable connection between the particular activity performed by the employee in
relation to the usual trade or business of the employer.[12] Additionally, an employee is
regular because of the nature of work and the length of service, not because of the mode
or even the reason for hiring them.[13] As Assistant Vice-President of the Foreign
Department of the Bank she performs tasks integral to the operations of the bank and her
length of service with the bank totaling 28 years speaks volumes of her status as a regular
employee of the bank. In fine, as a regular employee, she is entitled to security of tenure;

FIRST: Respondent Bank heavily relied on the testimony and affidavit of Remittance Clerk
Joven in trying to establish loss of confidence. However, Jovens allegation that petitioner
instructed her to hold the subject two dollar checks amounting to $224,650.00 falls short of
the requisite proof to warrant petitioners dismissal. Except for Jovens bare assertion to
withhold the dollar checks per petitioners instruction, respondent Bank failed to adduce
convincing evidence to prove bad faith and malice. It bears emphasizing that respondent
Banks witnesses merely corroborate Jovens testimony.
Upon this point, the rule that proof beyond reasonable doubt is not required to terminate
an employee on the charge of loss of confidence and that it is sufficient that there is some
basis for such loss of confidence, is not absolute. The right of an employer to dismiss
employees on the ground that it has lost its trust and confidence in him must not be
exercised arbitrarily and without just cause. For loss of trust and confidence to be valid
ground for an employees dismissal, it must be substantial and not arbitrary, and must be
founded on clearly established facts sufficient to warrant the employees separation from
work (Labor vs. NLRC, 248 SCRA 183).
SECOND. Respondent Banks charge of deliberate withholding of the two dollar checks finds
no support in the testimony of Atty. Jocson, Chairman of the Investigating Committee. On
cross examination, Atty. Jocson testified that the documents themselves do not show any
direct withholding (pp. 186-187, Rollo). There being conflict in the statement of witnesses,
the court must adopt the testimony which it believes to be true (U.S. vs. Losada, 18 Phil.
90).
THIRD. Settled is the rule that when the conclusions of the Labor Arbiter are sufficiently
substantiated by the evidence on record, the same should be respected by appellate
tribunals since he is in a better position to assess and evaluate the credibility of the
contending parties (Ala Mode Garments, Inc. vs. NLRC, 268 SCRA 497). In this regard, the
Court quotes with approval the following disquisition of Labor Arbiter Linsangan, thus:
This Office has repeatedly gone over the records of the case and painstakingly examined
the testimonies of respondent banks witnesses. One thing was clearly established: that the
legality of complainants dismissal based on the first ground stated in respondents letter of
termination (exh. 25-J, supra) will rise or fall on the credibility of Miss Joven who
undisputedly is the star witness for the bank. It will be observed that the testimonies of the
banks other witnesses, Analiza Castillo, Dante Castor and Antonio Ragasa pertaining to the
non-release of the dollar checks and their corresponding transmittal letters were all
anchored on what was told them by Ms. Joven, that is: she was instructed by complainant
to hold the release of subject checks. In a nutshell, therefore, the issue boils down to who
between complainant and Ms. Joven is more credible.

After painstakingly examining the testimonies of Ms. Joven and respondents other
witnesses this Office finds the evidence still wanting in proof of complainants guilt. This
Office had closely observed the demeanor of Ms. Joven while testifying on the witness
stand and was not impressed by her assertions. The allegation of Ms. Joven in that her nonrelease of the dollar checks was upon the instruction of complainant Reyes is extremely
doubtful. In the first place, the said instruction constitutes a gross violation of the banks
standard operating procedure. Moreover, Ms. Joven was fully aware that the instruction, if
carried out, will greatly prejudice her employer bank. It was incumbent upon Ms. Joven not
only to disobey the instruction but even to report the matter to management, if same was
really given to her by complainant.
Our doubt on the veracity of Ms. Jovens allegation even deepens as we consider the fact
that when the non-release of the checks was discovered by Ms. Castillo the former
contented herself by continuously not taking any action on the two dollar checks. Worse,
Ms. Joven even impliedly told by Ms. Castillo (sic) to ignore the two checks and just
withhold their release. In her affidavit Ms. Castillo said:
4. When I asked Cecille Joven what I was supposed to do with those checks, she said the
same should be held as per instruction of Mrs. Reyes. (Exh. 14, supra).
The evidence shows that it was only on 16 May 1990 that Ms. Joven broke her silence on
the matter despite the fact that on 15 November 1989, at about 8:00 p.m. the
complainant, accompanied by driver Celestino Banito, went to her residence and
confronted her regarding the non-release of the dollar checks. It took Ms. Joven eighteen
(18) months before she explained her side on the controversy. As to what prompted her to
make her letter of explanation was not even mentioned.
On the other hand, the actions taken by the complainant were spontaneous. When
complainant was informed by Mr. Castor and Ms. Castillo regarding the non-release of the
checks sometime in November, 1989 she immediately reported the matter to Vice
President Santos, Head of the Foreign Department. And as earlier mentioned, complainant
went to the residence of Ms. Joven to confront her. In this regard, Celestino Bonito,
complainants driver, stated in his affidavit, thus:
1. Sometime on November 15, 1989 at about 7:00 oclock in the evening, Mrs. Clarita Tan
Reyes and I were in the residence of one Ms. Cecille Joven, then a Processing Clerk in the
Foreign Department of Prudential Bank;
2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan Reyes were seated in the sala
when the latter asked the former, Ms. Cecille Joven, how it came about that the two dollar
checks which she was then holding with the transmittal letters, were found in a plastic
envelope kept day-to-day by the former;
3. Hesitatingly, Cecille Joven said: Eh, Mother (Mrs. Tan Reyes had been intimately called
Mother in the Bank) akala ko bouncing checks yon mga yon.
4. Mrs. Clarita Tan Reyes, upon hearing those words, was surprised and she said: Ano,
papaano mong alam na bouncing na hindi mo pa pinadadala;
5. Mrs. Cecille Joven turned pale and was not able to answer.
There are other factors that constrain this Office to doubt even more the legality of
complainants dismissal based on the first ground stated in the letter of dismissal. The nonrelease of the dollar checks was reported to top management sometime on 15 November
1989 when complainant, accompanied by Supervisor Dante Castor and Analiza Castillo,

reported the matter to Vice President Santos. And yet, it was only on 08 March 1991, after
a lapse of sixteen (16) months from the time the non-release of the checks was reported to
the Vice President, that complainant was issued a memorandum directing her to submit an
explanation. And it took the bank another four (4) months before it dismissed complainant.
The delayed action taken by respondent against complainant lends credence to the
assertion of the latter that her dismissal was a mere retaliation to the criminal complaints
she filed against the banks top officials.
It clearly appears from the foregoing that the complainant herein has no knowledge of,
much less participation in, the non-release of the dollar checks under discussion. Ms. Joven
is solely responsible for the same. Incidentally, she was not even reprimanded by the bank.
FOURTH. Respondent Bank having failed to furnish petitioner necessary documents
imputing loss of confidence, petitioner was not amply afforded opportunity to prepare an
intelligent answer. The Court finds nothing confidential in the auditors report and the
affidavit of Transmittal Clerk Joven. Due process dictates that management accord the
employees every kind of assistance to enable him to prepare adequately for his defense,
including legal representation.
The issue of conflict of interest not having been covered by the investigation, the Court
finds it irrelevant to the charge.[15]
We uphold the findings of the Court of Appeals that the dismissal of private respondent on
the ground of loss of trust and confidence was without basis. The charge was predicated on
the testimony of Ms. Joven and we defer to the findings of the Labor Arbiter as confirmed
and adopted by the Court of Appeals on the credibility of said witness. This Court is not a
trier of facts and will not weigh anew the evidence already passed upon by the Court of
Appeals.[16]
On the third issue, the Bank questions the award of full backwages and other benefits from
July 19, 1991 up to the finality of this judgment; separation pay equivalent to one (1)
month salary for every year of service in lieu of reinstatement; and attorneys fees
equivalent to ten (10%) percent of the total award. The Bank argues, in the main, that
private respondent is not entitled to full backwages in view of the fact that she did not
bother to appeal that portion of the labor arbiters judgment awarding back wages limited
to three years. It must be stressed that private respondent filed a special civil action for
certiorari to review the decision of the NLRC[17] and not an ordinary appeal. An ordinary
appeal is distinguished from the remedy of certiorari under Rule 65 of the Revised Rules of
Court in that in ordinary appeals it is settled that a party who did not appeal cannot seek
affirmative relief other than the ones granted in the decision of the court below.[18] On the
other hand, resort to a judicial review of the decisions of the National Labor Relations
Commission in a petition for certiorari under Rule 65 of Rules of Court is confined to issues
of want or excess of jurisdiction and grave abuse of discretion.[19] In the instant case, the
Court of Appeals found that the NLRC gravely abused its discretion in finding that the
private respondents dismissal was valid and so reversed the same. Corollary to the
foregoing, the appellate court awarded backwages in accordance with current
jurisprudence.
Indeed, jurisprudence is clear on the amount of backwages recoverable in cases of illegal
dismissal. Employees illegally dismissed prior to the effectivity of Republic Act No. 6715 on
March 21, 1989 are entitled to backwages up to three (3) years without deduction or
qualification, while those illegally dismissed after are granted full backwages inclusive of
allowances and other benefits or their monetary equivalent from the time their actual
compensation was withheld from them up to the time of their actual reinstatement.[20]

Considering that private respondent was terminated on July 19, 1991, she is entitled to full
backwages from the time her actual compensation was withheld from her (which, as a rule,
is from the time of her illegal dismissal) up to the finality of this judgment (instead of
reinstatement) considering that reinstatement is no longer feasible as correctly pointed out
by the Court of Appeals on account of the strained relations brought about by the litigation
in this case. Since reinstatement is no longer viable, she is also entitled to separation pay
equivalent to one (1) month salary for every year of service.[21] Lastly, since private
respondent was compelled to file an action for illegal dismissal with the labor arbiter, she is
likewise entitled to attorneys fees[22] at the rate above-mentioned. There is no room to
argue, as the Bank does here, that its liability should be mitigated on account of its good
faith and that private respondent is not entirely blameless. There is no showing that private
respondent is partly at fault or that the Bank acted in good faith in terminating an
employee of twenty-eight years. In any event, Article 279 of Republic Act No. 6715[23]
clearly and plainly provides for full backwages to illegally dismissed employees.

RENATO REAL, Petitioner,
vs.
SANGU PHILIPPINES, INC. and/ or KIICHI ABE, Respondents.

WHEREFORE, the instant petition for review on certiorari is DENIED, and the assailed
Decision of the Court of Appeals, dated October 15, 1999, is AFFIRMED.

This Petition for Review on Certiorari assails the Decision1 dated June 28, 2005 of the Court
of Appeals (CA) in CA-G.R. SP. No. 86017 which dismissed the petition for certiorari filed
before it.

SO ORDERED.

DECISION
DEL CASTILLO, J.:
The perennial question of whether a complaint for illegal dismissal is intra-corporate and
thus beyond the jurisdiction of the Labor Arbiter is the core issue up for consideration in
this case.

Factual Antecedents
Petitioner Renato Real was the Manager of respondent corporation Sangu Philippines, Inc.,
a corporation engaged in the business of providing manpower for general services, like
janitors, janitresses and other maintenance personnel, to various clients. In 2001,
petitioner, together with 29 others who were either janitors, janitresses, leadmen and
maintenance men, all employed by respondent corporation, filed their respective
Complaints2 for illegal dismissal against the latter and respondent Kiichi Abe, the
corporation’s Vice-President and General Manager. These complaints were later on
consolidated.
With regard to petitioner, he was removed from his position as Manager through Board
Resolution 2001-033adopted by respondent corporation’s Board of Directors. Petitioner
complained that he was neither notified of the Board Meeting during which said board
resolution was passed nor formally charged with any infraction. He just received from
respondents a letter4 dated March 26, 2001 stating that he has been terminated from
service effective March 25, 2001 for the following reasons: (1) continuous absences at his
post at Ogino Philippines Inc. for several months which was detrimental to the
corporation’s operation; (2) loss of trust and confidence; and, (3) to cut down operational
expenses to reduce further losses being experienced by respondent corporation.

G.R. No. 168757

January 19, 2011

Respondents, on the other hand, refuted petitioner’s claim of illegal dismissal by alleging
that after petitioner was appointed Manager, he committed gross acts of misconduct
detrimental to the company since 2000. According to them, petitioner would almost always
absent himself from work without informing the corporation of his whereabouts and that he
would come to the office only to collect his salaries. As he was almost always absent,
petitioner neglected to supervise the employees resulting in complaints from various
clients about employees’ performance. In one instance, petitioner together with a few
others, while apparently drunk, went to the premises of one of respondents’ clients, Epson
Precision (Phils.) Inc., and engaged in a heated argument with the employees therein.

Because of this, respondent Abe allegedly received a complaint from Epson’s Personnel
Manager concerning petitioner’s conduct. Respondents likewise averred that petitioner
established a company engaged in the same business as respondent corporation’s and
even submitted proposals for janitorial services to two of the latter’s clients. Because of all
these, the Board of Directors of respondent corporation met on March 24, 2001 and
adopted Board Resolution No. 2001-03 removing petitioner as Manager. Petitioner was
thereafter informed of his removal through a letter dated March 26, 2001 which he,
however, refused to receive.
Further, in what respondents believed to be an act of retaliation, petitioner allegedly
encouraged the employees who had been placed in the manpower pool to file a complaint
for illegal dismissal against respondents. Worse, he later incited those assigned in Epson
Precision (Phils.) Inc., Ogino Philippines Corporation, Hitachi Cable Philippines Inc. and
Philippine TRC Inc. to stage a strike on April 10 to 16, 2001. Not satisfied, petitioner
together with other employees also barricaded the premises of respondent corporation.
Such acts respondents posited constitute just cause for petitioner’s dismissal and that
same was validly effected.
Rulings of the Labor Arbiter and the National Labor Relations Commission
The Labor Arbiter in a Decision5 dated June 5, 2003 declared petitioner and his cocomplainants as having been illegally dismissed and ordered respondents to reinstate
complainants to their former positions without loss of seniority rights and other privileges
and to pay their full backwages from the time of their dismissal until actually reinstated
and furthermore, to pay them attorney’s fees. The Labor Arbiter found no convincing proof
of the causes for which petitioner was terminated and noted that there was complete
absence of due process in the manner of his termination.
Respondents thus appealed to the National Labor Relations Commission (NLRC) and raised
therein as one of the issues the lack of jurisdiction of the Labor Arbiter over petitioner’s
complaint. Respondents claimed that petitioner is both a stockholder and a corporate
officer of respondent corporation, hence, his action against respondents is an intracorporate controversy over which the Labor Arbiter has no jurisdiction.
The NLRC found such contention of respondents to be meritorious. Aside from petitioner’s
own admission in the pleadings that he is a stockholder and at the same time occupying a
managerial position, the NLRC also gave weight to the corporation’s General Information
Sheet6 (GIS) dated October 27, 1999 listing petitioner as one of its stockholders,
consequently his termination had to be effected through a board resolution. These, the
NLRC opined, clearly established petitioner’s status as a stockholder and as a corporate
officer and hence, his action against respondent corporation is an intra-corporate
controversy over which the Labor Arbiter has no jurisdiction. As to the other complainants,
the NLRC ruled that there was no dismissal. The NLRC however, modified the appealed
decision of the Labor Arbiter in a Decision7 dated February 13, 2004, the dispositive portion
of which reads:

WHEREFORE, all foregoing premises considered, the appealed Decision dated June 5, 2003
is hereby MODIFIED. Accordingly, judgment is hereby rendered DISMISSING the complaint
of Renato Real for lack of jurisdiction. As to the rest of the complainants, they are hereby
ordered to immediately report back to work but without the payment of backwages.
All other claims against respondents including attorney’s fees are DISMISSED for lack of
merit.
SO ORDERED.
Still joined by his co-complainants, petitioner brought the case to the CA by way of petition
for certiorari.
Ruling of the Court of Appeals
Before the CA, petitioner imputed upon the NLRC grave abuse of discretion amounting to
lack or excess of jurisdiction in declaring him a corporate officer and in holding that his
action against respondents is an intra-corporate controversy and thus beyond the
jurisdiction of the Labor Arbiter.
While admitting that he is indeed a stockholder of respondent corporation, petitioner
nevertheless disputed the declaration of the NLRC that he is a corporate officer thereof. He
posited that his being a stockholder and his being a managerial employee do not ipso
facto confer upon him the status of a corporate officer. To support this contention,
petitioner called the CA’s attention to the same GIS relied upon by the NLRC when it
declared him to be a corporate officer. He pointed out that although said information sheet
clearly indicates that he is a stockholder of respondent corporation, he is not an officer
thereof as shown by the entry "N/A" or "not applicable" opposite his name in the officer
column. Said column requires that the particular position be indicated if the person is an
officer and if not, the entry "N/A". Petitioner further argued that the fact that his dismissal
was effected through a board resolution does not likewise mean that he is a corporate
officer. Otherwise, all that an employer has to do in order to avoid compliance with the
requisites of a valid dismissal under the Labor Code is to dismiss a managerial employee
through a board resolution. Moreover, he insisted that his action for illegal dismissal is not
an intra-corporate controversy as same stemmed from employee-employer relationship
which is well within the jurisdiction of the Labor Arbiter. This can be deduced and is
bolstered by the last paragraph of the termination letter sent to him by respondents stating
that he is entitled to benefits under the Labor Code, to wit:
In this connection (his dismissal) you are entitled to separation pay and other benefits
provided for under the Labor Code of the Philippines.8 (Emphasis supplied)
In contrast, respondents stood firm that the action against them is an intra-corporate
controversy. It cited Tabang v. National Labor Relations Commission9 wherein this Court
declared that "an intra-corporate controversy is one which arises between a stockholder
and the corporation;" that "[t]here is no distinction, qualification, nor any exemption

whatsoever;" and that it is "broad and covers all kinds of controversies between
stockholders and corporations." In view of this ruling and since petitioner is undisputedly a
stockholder of the corporation, respondents contended that the action instituted by
petitioner against them is an intra-corporate controversy cognizable only by the
appropriate regional trial court. Hence, the NLRC correctly dismissed petitioner’s complaint
for lack of jurisdiction.
In the assailed Decision10 dated June 28, 2005, the CA sided with respondents and affirmed
the NLRC’s finding that aside from being a stockholder of respondent corporation,
petitioner is also a corporate officer thereof and consequently, his complaint is an intracorporate controversy over which the labor arbiter has no jurisdiction. Said court opined
that if it was true that petitioner is a mere employee, the respondent corporation would not
have called a board meeting to pass a resolution for petitioner’s dismissal considering that
it was very tedious for the Board of Directors to convene and to adopt a resolution every
time they decide to dismiss their managerial employees. To support its finding, the CA
likewise cited Tabang. As to petitioner’s co-complainants, the CA likewise affirmed the
NLRC’S finding that they were never dismissed from the service. The dispositive portion of
the CA Decision reads:
WHEREFORE, the instant petition is hereby DISMISSED. Accordingly, the assailed decision
and resolution of the public respondent National Labor Relations Commission in NLRC NCR
CA No. 036128-03 NLRC SRAB-IV-05-6618-01-B/05-6619-02-B/05-6620-02-B/10-6637-01B/10-6833-01-B, STANDS.
SO ORDERED.
Now alone but still undeterred, petitioner elevated the case to us through this Petition for
Review on Certiorari.
The Parties’ Arguments
Petitioner continues to insist that he is not a corporate officer. He argues that a corporate
officer is one who holds an elective position as provided in the Articles of Incorporation or
one who is appointed to such other positions by the Board of Directors as specifically
authorized by its By-Laws. And, since he was neither elected nor is there any showing that
he was appointed by the Board of Directors to his position as Manager, petitioner maintains
that he is not a corporate officer contrary to the findings of the NLRC and the CA.
Petitioner likewise contends that his complaint for illegal dismissal against respondents is
not an intra-corporate controversy. He avers that for an action or suit between a
stockholder and a corporation to be considered an intra-corporate controversy, same must
arise from intra-corporate relations, i.e., an action involving the status of a stockholder as
such. He believes that his action against the respondents does not arise from intracorporate relations but rather from employer-employee relations. This, according to him,
was even impliedly recognized by respondents as shown by the earlier quoted portion of
the termination letter they sent to him.

For their part, respondents posit that what petitioner is essentially assailing before this
Court is the finding of the NLRC and the CA that he is a corporate officer of respondent
corporation. To the respondents, the question of whether petitioner is a corporate officer is
a question of fact which, as held in a long line of jurisprudence, cannot be the subject of
review under this Petition for Review on Certiorari. At any rate, respondents insist that
petitioner who is undisputedly a stockholder of respondent corporation is likewise a
corporate officer and that his action against them is an intra-corporate dispute beyond the
jurisdiction of the labor tribunals. To support this, they cited several jurisprudence such
as Pearson & George (S.E. Asia), Inc. v. National Labor Relations Commission, 11 Philippine
School of Business Administration v. Leano,12 Fortune Cement Corporation v. National Labor
Relations Commission13 and again, Tabang v. National Labor Relations Commission.14
Moreover, in an attempt to demolish petitioner’s claim that the present controversy
concerns employer-employee relations, respondents enumerated the following facts and
circumstances: (1) Petitioner was an incorporator, stockholder and manager of respondent
company; (2) As an incorporator, he was one of only seven incorporators of respondent
corporation and one of only four Filipino members of the Board of Directors; (3) As
stockholder, he has One Thousand (1,000) of the Ten Thousand Eight Hundred (10,800)
common shares held by Filipino stockholders, with a par-value of One Hundred Thousand
Pesos (P100,000.00); (4) His appointment as manager was by virtue of Section 1, Article IV
of respondent corporation’s By-Laws; (5) As manager, he had direct management and
authority over all of respondent corporation’s skilled employees; (6) Petitioner has shown
himself to be an incompetent manager, unable to properly supervise the employees and
even causing friction with the corporation’s clients by engaging in unruly behavior while in
client’s premises; (7) As if his incompetence was not enough, in a blatant and palpable act
of disloyalty, he established another company engaged in the same line of business as
respondent corporation; (8) Because of these acts of incompetence and disloyalty,
respondent corporation through a Resolution adopted by its Board of Directors was finally
constrained to remove petitioner as Manager and declare his office vacant; (9) After his
removal, petitioner urged the employees under him to stage an unlawful strike by leading
them to believe that they have been illegally dismissed from employment. 15 Apparently,
respondents intended to show from this enumeration that petitioner’s removal pertains to
his relationship with respondent corporation, that is, his utter failure to advance its interest
and the prejudice caused by his acts of disloyalty. For this reason, respondents see the
action against them not as a case between an employer and an employee as what
petitioner alleges, but one by an officer and at same time a major stockholder seeking to
be reinstated to his former office against the corporation that declared his position vacant.
Finally, respondents state that the fact that petitioner is being given benefits under the
Labor Code as stated in his termination letter does not mean that they are recognizing the
employer-employee relations between them. They explain that the benefits provided under
the Labor Code were merely made by respondent corporation as the basis in determining
petitioner’s compensation package and that same are merely part of the perquisites of
petitioner’s office as a director and manager. It does not and it cannot change the intracorporate nature of the controversy. Hence, respondents pray that this petition be
dismissed for lack of merit.

Issues
From the foregoing and as earlier mentioned, the core issue to be resolved in this case is
whether petitioner’s complaint for illegal dismissal constitutes an intra-corporate
controversy and thus, beyond the jurisdiction of the Labor Arbiter.

A review of relevant jurisprudence shows a development in the Court’s 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:

Our Ruling

a) between the corporation, partnership or association and the public;

Two-tier test in determining the existence of intra-corporate controversy

b) between the corporation, partnership or association and its stockholders,
partners, members or officers;

Respondents strongly rely on this Court’s pronouncement in the 1997 case of Tabang v.
National Labor Relations Commission, to wit:
[A]n intra-corporate controversy is one which arises between a stockholder and the
corporation. There is no distinction, qualification nor any exemption whatsoever. The
provision is broad and covers all kinds of controversies between stockholders and
corporations.16
In view of this, respondents contend that even if petitioner challenges his being a
corporate officer, the present case still constitutes an intra-corporate controversy as
petitioner is undisputedly a stockholder and a director of respondent corporation.
It is worthy to note, however, that before the promulgation of the Tabang case, the Court
provided in Mainland Construction Co., Inc. v. Movilla 17 a "better policy" in determining
which between the Securities and Exchange Commission (SEC) and the Labor Arbiter has
jurisdiction over termination disputes,18 or similarly, whether they are intra-corporate or
not, viz:
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 the SEC (now the Regional Trial Court 19). 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 subject of their controversy. 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 SEC (now the Regional Trial Court 20) can resolve in
the exercise of its adjudicatory or quasi-judicial powers. (Emphasis ours)
And, while Tabang was promulgated later than Mainland Construction Co., Inc., the "better
policy" enunciated in the latter appears to have developed into a standard approach in
classifying what constitutes an intra-corporate controversy. This is explained lengthily
in Reyes v. Regional Trial Court of Makati, Br. 142,21 to wit:
Intra-Corporate Controversy

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.
However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc., the
Court introduced the nature of the controversy test. We declared in this case that it is not
the mere existence of an intra-corporate relationship that gives rise to an intra-corporate
controversy; to rely on the relationship test alone will divest the regular courts of their
jurisdiction for the sole reason that the dispute involves a corporation, its directors,
officers, or stockholders. We saw that there is no legal sense in disregarding or minimizing
the value of the nature of the transactions which gives rise to the dispute.
Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intra-corporate.
The controversy must not only be rooted in the existence of an intra-corporate relationship,
but must as well pertain to the enforcement of the parties’ correlative rights and
obligations under the Corporation Code and the internal and intra-corporate regulatory
rules of the corporation. If the relationship and its incidents are merely incidental to the
controversy or if there will still be conflict even if the relationship does not exist, then no
intra-corporate controversy exists.
The Court then combined the two tests and declared that jurisdiction should be determined
by considering not only the status or relationship of the parties, but also the nature of the
question under controversy. This two-tier test was adopted in the recent case of Speed
Distribution Inc. v. 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: (a) the status or relationship of the parties,
and (2) the nature of the question that is the subject of their controversy.
The first element requires that the controversy must arise out of intra-corporate or
partnership relations between any or all of the parties and the corporation, partnership, or
association of which they are not 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 the 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.’ [Citations omitted.]
Guided by this recent jurisprudence, we thus find no merit in respondents’ contention that
the fact alone that petitioner is a stockholder and director of respondent corporation
automatically classifies this case as an intra-corporate controversy. To reiterate, not all
conflicts between the stockholders and the corporation are classified as intra-corporate.
There are other factors to consider in determining whether the dispute involves corporate
matters as to consider them as intra-corporate controversies.
What then is the nature of petitioner’s Complaint for Illegal Dismissal? Is it intra-corporate
and thus beyond the jurisdiction of the Labor Arbiter? We shall answer this question by
using the standards set forth in the Reyes case.
No intra-corporate relationship between the parties
As earlier stated, petitioner’s status as a stockholder and director of respondent
corporation is not disputed. What the parties disagree on is the finding of the NLRC and the
CA that petitioner is a corporate officer. An examination of the complaint for illegal
dismissal, however, reveals that the root of the controversy is petitioner’s dismissal as
Manager of respondent corporation, a position which respondents claim to be a corporate
office. Hence, petitioner is involved in this case not in his capacity as a stockholder or
director, but as an alleged corporate officer. In applying the relationship test, therefore, it is
necessary to determine if petitioner is a corporate officer of respondent corporation so as
to establish the intra-corporate relationship between the parties. And albeit respondents
claim that the determination of whether petitioner is a corporate officer is a question of
fact which this Court cannot pass upon in this petition for review on certiorari, we shall
nonetheless proceed to consider the same because such question is not the main issue to
be resolved in this case but is merely collateral to the core issue earlier mentioned.
Petitioner negates his status as a corporate officer by pointing out that although he was
removed as Manager through a board resolution, he was never elected to said position nor
was he appointed thereto by the Board of Directors. While the By-Laws of respondent
corporation provides that the Board may from time to time appoint such officers as it may
deem necessary or proper, he avers that respondents failed to present any board

resolution that he was appointed pursuant to said By-Laws. He instead alleges that he was
hired as Manager of respondent corporation solely by respondent Abe. For these reasons,
petitioner claims to be a mere employee of respondent corporation rather than as a
corporate officer.
We find merit in petitioner’s contention.
"‘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 vicepresident, cashier, auditor or general manager. The number of corporate officers is thus
limited by law and by the corporation’s by-laws."22
Respondents claim that petitioner was appointed Manager by virtue of Section 1, Article IV
of respondent corporation’s By-Laws which provides:
ARTICLE IV
OFFICER
Section 1. Election/Appointment – Immediately after their election, the Board of Directors
shall formally organize by electing the President, Vice-President, the Secretary at said
meeting.
The Board, may from time to time, appoint such other officers as it may
determine to be necessary or proper. Any two (2) or more positions may be held
concurrently by the same person, except that no one shall act as President and Treasurer
or Secretary at the same time.
x x x x23 (Emphasis ours)
We have however examined the records of this case and we find nothing to prove that
petitioner’s appointment was made pursuant to the above-quoted provision of respondent
corporation’s By-Laws. No copy of board resolution appointing petitioner as Manager or any
other document showing that he was appointed to said position by action of the board was
submitted by respondents. What we found instead were mere allegations of respondents in
their various pleadings24 that petitioner was appointed as Manager of respondent
corporation and nothing more. "The Court has stressed time and again that allegations
must be proven by sufficient evidence because mere allegation is definitely not
evidence."25

It also does not escape our attention that respondents made the following conflicting
allegations in their Memorandum on Appeal26 filed before the NLRC which cast doubt on
petitioner’s status as a corporate officer, to wit:
xxxx
24. Complainant-appellee Renato Real was appointed as the manager of respondentappellant Sangu on November 6, 1998. Priorly [sic], he was working at Atlas Ltd. Co. at
Mito-shi, Ibaraki-ken Japan. He was staying in Japan as an illegal alien for the past eleven
(11) years. He had a problem with his family here in the Philippines which prompted him to
surrender himself to Japan’s Bureau of Immigration and was deported back to the
Philippines. His former employer, Mr. Tsutomo Nogami requested Mr. Masahiko Shibata, one
of respondent-appellant Sangu’s Board of Directors, if complainant-appellee Renato Real
could work as one of its employees here in the Philippines because he had been blacklisted
at Japan’s Immigration Office and could no longer go back to Japan. And so it was
arranged that he would serve as respondent-appellant Sangu’s manager,
receiving a salary of P25,000.00. As such, he was tasked to oversee the operations of
the company. x x x (Emphasis ours)
xxxx
As earlier stated, complainant-appellee Renato Real was hired as the manager of
respondent-appellant Sangu. As such, his position was reposed with full trust and
confidence. x x x
While respondents repeatedly claim that petitioner was appointed as Manager pursuant to
the corporation’s By-Laws, the above-quoted inconsistencies in their allegations as to how
petitioner was placed in said position, coupled by the fact that they failed to produce any
documentary evidence to prove that petitioner was appointed thereto by action or with
approval of the board, only leads this Court to believe otherwise. 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."27 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 intracorporate relationship between the parties insofar as petitioner’s complaint for illegal
dismissal is concerned and that same does not satisfy the relationship test.
Present controversy does not relate to intra-corporate dispute
We now go to the nature of controversy test. As earlier stated, 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.28 It was only after respondents invoked the Labor Arbiter’s lack of
jurisdiction over petitioner’s complaint in the Supplemental Memorandum of Appeal 29 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 21730 of the Labor Code.
We take note of the cases cited by respondents and find them inapplicable to the case at
bar. Fortune Cement Corporation v. National Labor Relations Commission 31 involves a
member of the board of directors and at the same time a corporate officer who claims he
was illegally dismissed after he was stripped of his corporate position of Executive VicePresident because of loss of trust and confidence. On the other hand, Philippine School of
Business Administration v. Leano32 and Pearson & George v. National Labor Relations
Commission33 both concern a complaint for illegal dismissal by corporate officers who were
not re-elected to their respective corporate positions. The Court declared all these cases as
involving intra-corporate controversies and thus affirmed the jurisdiction of the SEC (now
the RTC)34 over them precisely because they all relate to corporate officers and their
removal or non-reelection to their respective corporate positions. Said cases are by no
means similar to the present case because as discussed earlier, petitioner here is not a
corporate officer.
With the foregoing, it is clear that the CA erred in affirming the decision of the NLRC which
dismissed petitioner’s complaint for lack of jurisdiction. In cases such as this, the Court
normally remands the case to the NLRC and directs it to properly dispose of the case on
the merits. "However, when there is enough basis on which a proper evaluation of the

merits of petitioner’s case may be had, the Court may dispense with the time-consuming
procedure of remand in order to prevent further delays in the disposition of the case." 35 "It
is already an accepted rule of procedure for us to strive to settle the entire controversy in a
single proceeding, leaving no root or branch to bear the seeds of litigation. If, based on the
records, the pleadings, and other evidence, the dispute can be resolved by us, we will do
so to serve the ends of justice instead of remanding the case to the lower court for further
proceedings."36 We have gone over the records before us and we are convinced that we
can now altogether resolve the issue of the validity of petitioner’s dismissal and hence, we
shall proceed to do so.
Petitioner’s dismissal not in accordance with law
"In an illegal dismissal case, the onus probandi rests on the employer to prove that [the]
dismissal of an employee is for a valid cause."37 Here, as correctly observed by the Labor
Arbiter, respondents failed to produce any convincing proof to support the grounds for
which they terminated petitioner. Respondents contend that petitioner has been absent for
several months, yet they failed to present any proof that petitioner was indeed absent for
such a long time. Also, the fact that petitioner was still able to collect his salaries after his
alleged absences casts doubts on the truthfulness of such charge. Respondents likewise
allege that petitioner engaged in a heated argument with the employees of Epson, one of
respondents’ clients. But just like in the charge of absenteeism, there is no showing that an
investigation on the matter was done and that disciplinary action was imposed upon
petitioner. At any rate, we have reviewed the records of this case and we agree with the
Labor Arbiter that under the circumstances, said charges are not sufficient bases for
petitioner’s termination. As to the charge of breach of trust allegedly committed by
petitioner when he established a new company engaged in the same line of business as
respondent corporation’s and submitted proposals to two of the latter’s clients while he
was still a Manager, we again observe that these are mere allegations without sufficient
proof. To reiterate, allegations must be proven by sufficient evidence because mere
allegation is definitely not evidence.38
Moreover, petitioner’s dismissal was effected without due process of law.lawphi1 "The twin
requirements of notice and hearing constitute the essential elements of due process. The
law requires the employer to furnish the employee sought to be dismissed with two written
notices before termination of employment can be legally effected: (1) a written notice
apprising the employee of the particular acts or omissions for which his dismissal is sought
in order to afford him an opportunity to be heard and to defend himself with the assistance
of counsel, if he desires, and (2) a subsequent notice informing the employee of the
employer’s decision to dismiss him. This procedure is mandatory and its absence taints the
dismissal with illegality."39 Since in this case, petitioner’s dismissal was effected through a
board resolution and all that petitioner received was a letter informing him of the board’s
decision to terminate him, the abovementioned procedure was clearly not complied with.
All told, we agree with the findings of the Labor Arbiter that petitioner has been illegally
dismissed. And, as an illegally dismissed employee is entitled to the two reliefs of
backwages and reinstatement,40 we affirm the Labor Arbiter’s judgment ordering
petitioner’s reinstatement to his former position without loss of seniority rights and other
privileges and awarding backwages from the time of his dismissal until actually reinstated.

Considering that petitioner has to secure the services of counsel to protect his interest and
necessarily has to incur expenses, we likewise affirm the award of attorney’s fees which is
equivalent to 10% of the total backwages that respondents must pay petitioner in
accordance with this Decision.
WHEREFORE, the petition is hereby GRANTED. The assailed June 28, 2005 Decision of the
Court of Appeals insofar as it affirmed the National Labor Relations Commission’s dismissal
of petitioner’s complaint for lack of jurisdiction, is hereby REVERSED and SET ASIDE. The
June 5, 2003 Decision of the Labor Arbiter with respect to petitioner Renato Real is
AFFIRMED and this case is ordered REMANDED to the National Labor Relations Commission
for the computation of petitioner’s backwages and attorney’s fees in accordance with this
Decision.
SO ORDERED.

G.R. No. 201298

February 5, 2014

RAUL C. COSARE, Petitioner,
vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.
DECISION
REYES, J.:
Before the Court is a petition for review on certiorari 1 under Rule 45 of the Rules of Court,
which assails the Decision2 dated November 24, 2011 and Resolution3 dated March 26,
2012 of the Court of Appeals (CA) in CA-G.R. SP. No. 117356, wherein the CA ruled that the
Regional Trial Court (RTC), and not the Labor Arbiter (LA), had the jurisdiction over

petitioner Raul C. Cosare's (Cosare) complaint for illegal dismissal against Broadcom Asia,
Inc. (Broadcom) and Dante Arevalo (Arevalo), the President of Broadcom (respondents).

and is an attempt to deprive the company of income from which you, along with
the other employees of this company, derive your salaries and other benefits. x x
x.

The Antecedents
The case stems from a complaint4 for constructive dismissal, illegal suspension and
monetary claims filed with the National Capital Region Arbitration Branch of the National
Labor Relations Commission (NLRC) by Cosare against the respondents.
Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo,
who was then in the business of selling broadcast equipment needed by television
networks and production houses. In December 2000, Arevalo set up the company
Broadcom, still to continue the business of trading communication and broadcast
equipment. Cosare was named an incorporator of Broadcom, having been assigned 100
shares of stock with par value of P1.00 per share.5 In October 2001, Cosare was promoted
to the position of Assistant Vice President for Sales (AVP for Sales) and Head of the
Technical Coordination, having a monthly basic net salary and average commissions
of P18,000.00 and P37,000.00, respectively.6
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice President for
Sales and thus, became Cosare’s immediate superior. On March 23, 2009, Cosare sent a
confidential memo7 to Arevalo to inform him of the following anomalies which were
allegedly being committed by Abiog against the company: (a) he failed to report to work on
time, and would immediately leave the office on the pretext of client visits; (b) he advised
the clients of Broadcom to purchase camera units from its competitors, and received
commissions therefor; (c) he shared in the "under the-table dealings" or "confidential
commissions" which Broadcom extended to its clients’ personnel and engineers; and (d) he
expressed his complaints and disgust over Broadcom’s uncompetitive salaries and wages
and delay in the payment of other benefits, even in the presence of office staff. Cosare
ended his memo by clarifying that he was not interested in Abiog’s position, but only
wanted Arevalo to know of the irregularities for the corporation’s sake.
Apparently, Arevalo failed to act on Cosare’s accusations. Cosare claimed that he was
instead called for a meeting by Arevalo on March 25, 2009, wherein he was asked to tender
his resignation in exchange for "financial assistance" in the amount
of P300,000.00.8 Cosare refused to comply with the directive, as signified in a letter 9dated
March 26, 2009 which he sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcom’s Manager
for Finance and Administration, a memo10 signed by Arevalo, charging him of serious
misconduct and willful breach of trust, and providing in part:
1. A confidential memo was received from the VP for Sales informing me that you
had directed, or at the very least tried to persuade, a customer to purchase a
camera from another supplier. Clearly, this action is a gross and willful violation of
the trust and confidence this company has given to you being its AVP for Sales

2. A company vehicle assigned to you with plate no. UNV 402 was found
abandoned in another place outside of the office without proper turnover from you
to this office which had assigned said vehicle to you. The vehicle was found to be
inoperable and in very bad condition, which required that the vehicle be towed to
a nearby auto repair shop for extensive repairs.
3. You have repeatedly failed to submit regular sales reports informing the
company of your activities within and outside of company premises despite
repeated reminders. However, it has been observed that you have been both
frequently absent and/or tardy without proper information to this office or your
direct supervisor, the VP for Sales Mr. Alex Abiog, of your whereabouts.
4. You have been remiss in the performance of your duties as a Sales officer as
evidenced by the fact that you have not recorded any sales for the past
immediate twelve (12) months. This was inspite of the fact that my office decided
to relieve you of your duties as technical coordinator between Engineering and
Sales since June last year so that you could focus and concentrate [on] your
activities in sales.11
Cosare was given forty-eight (48) hours from the date of the memo within which to present
his explanation on the charges. He was also "suspended from having access to any and all
company files/records and use of company assets effective immediately." 12 Thus, Cosare
claimed that he was precluded from reporting for work on March 31, 2009, and was instead
instructed to wait at the office’s receiving section. Upon the specific instructions of Arevalo,
he was also prevented by Villareal from retrieving even his personal belongings from the
office.
On April 1, 2009, Cosare was totally barred from entering the company premises, and was
told to merely wait outside the office building for further instructions. When no such
instructions were given by 8:00 p.m., Cosare was impelled to seek the assistance of the
officials of Barangay San Antonio, Pasig City, and had the incident reported in the barangay
blotter.13
On April 2, 2009, Cosare attempted to furnish the company with a Memo 14 by which he
addressed and denied the accusations cited in Arevalo’s memo dated March 30, 2009. The
respondents refused to receive the memo on the ground of late filing, prompting Cosare to
serve a copy thereof by registered mail. The following day, April 3, 2009, Cosare filed the
subject labor complaint, claiming that he was constructively dismissed from employment
by the respondents. He further argued that he was illegally suspended, as he placed no
serious and imminent threat to the life or property of his employer and co-employees. 15

In refuting Cosare’s complaint, the respondents argued that Cosare was neither illegally
suspended nor dismissed from employment. They also contended that Cosare committed
the following acts inimical to the interests of Broadcom: (a) he failed to sell any broadcast
equipment since the year 2007; (b) he attempted to sell a Panasonic HMC 150 Camera
which was to be sourced from a competitor; and (c) he made an unauthorized request in
Broadcom’s name for its principal, Panasonic USA, to issue an invitation for Cosare’s friend,
one Alex Paredes, to attend the National Association of Broadcasters’ Conference in Las
Vegas, USA.16 Furthermore, they contended that Cosare abandoned his job 17 by continually
failing to report for work beginning April 1, 2009, prompting them to issue on April 14,
2009 a memorandum18 accusing Cosare of absence without leave beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his
Decision19 dismissing the complaint on the ground of Cosare’s failure to establish that he
was dismissed, constructively or otherwise, from his employment. For the LA, what
transpired on March 30, 2009 was merely the respondents’ issuance to Cosare of a showcause memo, giving him a chance to present his side on the charges against him. He
explained:
It is obvious that [Cosare] DID NOT wait for respondents’ action regarding the charges
leveled against him in the show-cause memo. What he did was to pre-empt that action by
filing this complaint just a day after he submitted his written explanation. Moreover, by
specifically seeking payment of "Separation Pay" instead of reinstatement, [Cosare’s]
motive for filing this case becomes more evident. 20
It was also held that Cosare failed to substantiate by documentary evidence his allegations
of illegal suspension and non-payment of allowances and commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision 21 reversing the Decision of LA Menese.
The dispositive portion of the NLRC Decision reads:
WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents are
found guilty of Illegal Constructive Dismissal. Respondents BROADCOM ASIA, INC. and
Dante Arevalo are ordered to pay [Cosare’s] backwages, and separation pay, as well as
damages, in the total amount of P1,915,458.33, per attached Computation.
SO ORDERED.

22

In ruling in favor of Cosare, the NLRC explained that "due weight and credence is accorded
to [Cosare’s] contention that he was constructively dismissed by Respondent Arevalo when

he was asked to resign from his employment."23The fact that Cosare was suspended from
using the assets of Broadcom was also inconsistent with the respondents’ claim that
Cosare opted to abandon his employment.
Exemplary damages in the amount of P100,000.00 was awarded, given the NLRC’s finding
that the termination of Cosare’s employment was effected by the respondents in bad faith
and in a wanton, oppressive and malevolent manner. The claim for unpaid commissions
was denied on the ground of the failure to include it in the prayer of pleadings filed with
the LA and in the appeal.
The respondents’ motion for reconsideration was denied. 24 Dissatisfied, they filed a petition
for certiorari with the CA founded on the following arguments: (1) the respondents did not
have to prove just cause for terminating the employment of Cosare because the latter’s
complaint was based on an alleged constructive dismissal; (2) Cosare resigned and was
thus not dismissed from employment; (3) the respondents should not be declared liable for
the payment of Cosare’s monetary claims; and (4) Arevalo should not be held solidarily
liable for the judgment award.
In a manifestation filed by the respondents during the pendency of the CA appeal, they
raised a new argument, i.e., the case involved an intra-corporate controversy which was
within the jurisdiction of the RTC, instead of the LA.25They argued that the case involved a
complaint against a corporation filed by a stockholder, who, at the same time, was a
corporate officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed Decision 26 granting the respondents’
petition. It agreed with the respondents’ contention that the case involved an intracorporate controversy which, pursuant to Presidential Decree No. 902-A, as amended, was
within the exclusive jurisdiction of the RTC. It reasoned:
Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was listed
as one of its directors. Moreover, he held the position of [AVP] for Sales which is listed as a
corporate office. Generally, the president, vice-president, secretary or treasurer are
commonly regarded as the principal or executive officers of a corporation, and modern
corporation statutes usually designate them as the officers of the corporation. However, it
bears mentioning that under Section 25 of the Corporation Code, the Board of Directors of
[Broadcom] is allowed to appoint such other officers as it may deem necessary. Indeed,
[Broadcom’s] By-Laws provides:
Article IV
Officer
Section 1. Election / Appointment – Immediately after their election, the Board of Directors
shall formally organize by electing the President, the Vice-President, the Treasurer, and the
Secretary at said meeting.

The Board, may, from time to time, appoint such other officers as it may determine to be
necessary or proper. x x x
We hold that [the respondents] were able to present substantial evidence that [Cosare]
indeed held a corporate office, as evidenced by the General Information Sheet which was
submitted to the Securities and Exchange Commission (SEC) on October 22,
2009.27 (Citations omitted and emphasis supplied)
Thus, the CA reversed the NLRC decision and resolution, and then entered a new one
dismissing the labor complaint on the ground of lack of jurisdiction, finding it unnecessary
to resolve the main issues that were raised in the petition. Cosare filed a motion for
reconsideration, but this was denied by the CA via the Resolution 28 dated March 26, 2012.
Hence, this petition.
The Present Petition
The pivotal issues for the petition’s full resolution are as follows: (1) whether or not the
case instituted by Cosare was an intra-corporate dispute that was within the original
jurisdiction of the RTC, and not of the LAs; and (2) whether or not Cosare was
constructively and illegally dismissed from employment by the respondents.

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.31
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. We
emphasized in Real v. Sangu Philippines, Inc.32 the definition of corporate officers for the
purpose of identifying an intra-corporate controversy. Citing Garcia v. Eastern
Telecommunications Philippines, Inc.,33 we held:
" ‘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 vicepresident, cashier, auditor or general manager. The number of corporate officers is thus
limited by law and by the corporation’s by-laws."34 (Emphasis ours)

The Court’s Ruling
The petition is impressed with merit.
Jurisdiction over the controversy
As regards the issue of jurisdiction, the Court has determined that contrary to the ruling of
the CA, it is the 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. 29 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 Broadcom at the time the subject
controversy developed failed to necessarily make the case an intra-corporate dispute.
In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished
between a "regular employee" and a "corporate officer" for purposes of establishing the

In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of
corporate offices:
It has been held that an "office" is created by the charter of the corporation and the officer
is elected by the directors and stockholders. On the other hand, an "employee" usually
occupies no office and generally is employed not by action of the directors or stockholders
but by the managing officer of the corporation who also determines the compensation to
be paid to such employee.36 (Citations omitted)
As may be deduced from the foregoing, 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.
To support their argument that Cosare was a corporate officer, the respondents referred to
Section 1, Article IV of Broadcom’s by-laws, which reads:
ARTICLE IV
OFFICER

Section 1. Election / Appointment – Immediately after their election, the Board of Directors
shall formally organize by electing the President, the Vice-President, the Treasurer, and the
Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine to be
necessary or proper. Any two (2) or more compatible positions may be held concurrently by
the same person, except that no one shall act as President and Treasurer or Secretary at
the same time.37 (Emphasis ours)
This was also the CA’s main basis in ruling that the matter was an intra-corporate dispute
that was within the trial courts’ jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned from the
aforequoted provision, the only officers who are specifically listed, and thus with offices
that are created under Broadcom’s by-laws are the following: the President, Vice-President,
Treasurer and Secretary. Although a blanket authority provides for the Board’s appointment
of such other officers as it may deem necessary and proper, the respondents failed to
sufficiently establish that the position of AVP for Sales was created by virtue of an act of
Broadcom’s board, and that Cosare was specifically elected or appointed to such position
by the directors. No board resolutions to establish such facts form part of the case records.
Further, it was held in Marc II Marketing, Inc. v. Joson 38 that an enabling clause in a
corporation’s by-laws empowering its board of directors to create additional officers, even
with the subsequent passage of a board resolution to that effect, cannot make such
position a corporate office. The board of directors has no power to create other corporate
offices without first amending the corporate by-laws so as to include therein the newly
created corporate office.39 "To allow the creation of a corporate officer position by a simple
inclusion in the corporate by-laws of an enabling clause empowering the board of directors
to do so can result in the circumvention of that constitutionally well-protected right [of
every employee to security of tenure]."40
The CA’s heavy reliance on the contents of the General Information Sheets 41, which were
submitted by the respondents during the appeal proceedings and which plainly provided
that Cosare was an "officer" of Broadcom, was clearly misplaced. The said documents
could neither govern nor establish the nature of the office held by Cosare and his
appointment thereto. Furthermore, although Cosare could indeed be classified as an officer
as provided in the General Information Sheets, his position could only be deemed a regular
office, and not a corporate office as it is defined under the Corporation Code. Incidentally,
the Court noticed that although the Corporate Secretary of Broadcom, Atty. Efren L.
Cordero, declared under oath the truth of the matters set forth in the General Information
Sheets, the respondents failed to explain why the General Information Sheet officially filed
with the Securities and Exchange Commission in 2011 and submitted to the CA by the
respondents still indicated Cosare as an AVP for Sales, when among their defenses in the
charge of illegal dismissal, they asserted that Cosare had severed his relationship with the
corporation since the year 2009.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the case’s
filing did not necessarily make the action an intra- corporate controversy. "Not all conflicts

between the stockholders and the corporation are classified as intra-corporate. There are
other facts to consider in determining whether the dispute involves corporate matters as to
consider them as intra-corporate controversies." 42 Time and again, the Court has ruled that
in determining the existence of an intra-corporate dispute, the status or relationship of the
parties and the nature of the question that is the subject of the controversy must be taken
into account.43 Considering that the pending dispute particularly relates to Cosare’s rights
and obligations as a regular officer of Broadcom, instead of as a stockholder of the
corporation, the controversy cannot be deemed intra-corporate. This is consistent with the
"controversy test" explained by the Court in Reyes v. Hon. RTC, Br. 142, 44 to wit:
Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intra-corporate.
The controversy must not only be rooted in the existence of an intra-corporate relationship,
but must as well pertain to the enforcement of the parties’ correlative rights and
obligations under the Corporation Code and the internal and intra-corporate regulatory
rules of the corporation. If the relationship and its incidents are merely incidental to the
controversy or if there will still be conflict even if the relationship does not exist, then no
intra-corporate controversy exists.45 (Citation omitted)
It bears mentioning that even the CA’s finding46 that Cosare was a director of Broadcom
when the dispute commenced was unsupported by the case records, as even the General
Information Sheet of 2009 referred to in the CA decision to support such finding failed to
provide such detail.
All told, it is then evident that the CA erred in reversing the NLRC’s ruling that favored
Cosare solely on the ground that the dispute was an intra-corporate controversy within the
jurisdiction of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it appropriate to rule on the
correctness of the NLRC’s ruling finding Cosare to have been illegally dismissed from
employment.
In filing his labor complaint, Cosare maintained that he was constructively dismissed, citing
among other circumstances the charges that were hurled and the suspension that was
imposed against him via Arevalo’s memo dated March 30, 2009. Even prior to such charge,
he claimed to have been subjected to mental torture, having been locked out of his files
and records and disallowed use of his office computer and access to personal
belongings.47While Cosare attempted to furnish the respondents with his reply to the
charges, the latter refused to accept the same on the ground that it was filed beyond the
48-hour period which they provided in the memo.
Cosare further referred to the circumstances that allegedly transpired subsequent to the
service of the memo, particularly the continued refusal of the respondents to allow

Cosare’s entry into the company’s premises. These incidents were cited in the CA decision
as follows:
On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could
retrieve his personal belongings, but the latter said that x x x Arevalo directed her to deny
his request, so [Cosare] again waited at the receiving section of the office. On April 1,
2009, [Cosare] was not allowed to enter the office premises. He was asked to just wait
outside of the Tektite (PSE) Towers, where [Broadcom] had its offices, for further
instructions on how and when he could get his personal belongings. [Cosare] waited until 8
p.m. for instructions but none were given. Thus, [Cosare] sought the assistance of the
officials of Barangay San Antonio, Pasig who advised him to file a labor or replevin case to
recover his personal belongings. x x x.48 (Citation omitted)
It is also worth mentioning that a few days before the issuance of the memo dated March
30, 2009, Cosare was allegedly summoned to Arevalo’s office and was asked to tender his
immediate resignation from the company, in exchange for a financial assistance
of P300,000.00.49 The directive was said to be founded on Arevalo’s choice to retain Abiog’s
employment with the company.50 The respondents failed to refute these claims.
Given the circumstances, the Court agrees with Cosare’s claim of constructive and illegal
dismissal. "[C]onstructive dismissal occurs when there is cessation of work because
continued employment is rendered impossible, unreasonable, or unlikely as when there is a
demotion in rank or diminution in pay or when a clear discrimination, insensibility, or
disdain by an employer becomes unbearable to the employee leaving the latter with no
other option but to quit."51 In Dimagan v. Dacworks United, Incorporated, 52 it was
explained:
The test of constructive dismissal is whether a reasonable person in the employee’s
position would have felt compelled to give up his position under the circumstances. It is an
act amounting to dismissal but is made to appear as if it were not. Constructive dismissal is
therefore a dismissal in disguise. The law recognizes and resolves this situation in favor of
employees in order to protect their rights and interests from the coercive acts of the
employer.53(Citation omitted)
It is clear from the cited circumstances that the respondents already rejected Cosare’s
continued involvement with the company. Even their refusal to accept the explanation
which Cosare tried to tender on April 2, 2009 further evidenced the resolve to deny Cosare
of the opportunity to be heard prior to any decision on the termination of his employment.
The respondents allegedly refused acceptance of the explanation as it was filed beyond the
mere 48-hour period which they granted to Cosare under the memo dated March 30, 2009.
However, even this limitation was a flaw in the memo or notice to explain which only
further signified the respondents’ discrimination, disdain and insensibility towards Cosare,
apparently resorted to by the respondents in order to deny their employee of the
opportunity to fully explain his defenses and ultimately, retain his employment. The Court
emphasized in King of Kings Transport, Inc. v. Mamac54 the standards to be observed by
employers in complying with the service of notices prior to termination:

[T]he first written notice to be served on the employees should contain the specific causes
or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the notice
to give the employees an opportunity to study the accusation against them, consult a
union official or lawyer, gather data and evidence, and decide on the defenses they will
raise against the complaint. Moreover, in order to enable the employees to intelligently
prepare their explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against the employees.
A general description of the charge will not suffice. Lastly, the notice should specifically
mention which company rules, if any, are violated and/or which among the grounds under
Art. 282 is being charged against the employees.55 (Citation omitted, underscoring ours,
and emphasis supplied)
In sum, the respondents were already resolute on a severance of their working relationship
with Cosare, notwithstanding the facts which could have been established by his
explanations and the respondents’ full investigation on the matter. In addition to this, the
fact that no further investigation and final disposition appeared to have been made by the
respondents on Cosare’s case only negated the claim that they actually intended to first
look into the matter before making a final determination as to the guilt or innocence of
their employee. This also manifested from the fact that even before Cosare was required to
present his side on the charges of serious misconduct and willful breach of trust, he was
summoned to Arevalo’s office and was asked to tender his immediate resignation in
exchange for financial assistance.
The clear intent of the respondents to find fault in Cosare was also manifested by their
persistent accusation that Cosare abandoned his post, allegedly signified by his failure to
report to work or file a leave of absence beginning April 1, 2009. This was even the subject
of a memo56 issued by Arevalo to Cosare on April 14, 2009, asking him to explain his
absence within 48 hours from the date of the memo. As the records clearly indicated,
however, Arevalo placed Cosare under suspension beginning March 30, 2009. The
suspension covered access to any and all company files/records and the use of the assets
of the company, with warning that his failure to comply with the memo would be dealt with
drastic management action. The charge of abandonment was inconsistent with this
imposed suspension. "Abandonment is the deliberate and unjustified refusal of an
employee to resume his employment. To constitute abandonment of work, two elements
must concur: ‘(1) the employee must have failed to report for work or must have been
absent without valid or justifiable reason; and (2) there must have been a clear intention
on the part of the employee to sever the employer- employee relationship manifested by
some overt act.’"57Cosare’s failure to report to work beginning April 1, 2009 was neither
voluntary nor indicative of an intention to sever his employment with Broadcom. It was
illogical to be requiring him to report for work, and imputing fault when he failed to do so
after he was specifically denied access to all of the company’s assets. As correctly
observed by the NLRC:

[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on
April 1, 2009. However[,] the show-cause letter dated March 3[0], 2009 (Annex "F", ibid)
suspended [Cosare] from using not only the equipment but the "assets" of Respondent
[Broadcom]. This insults rational thinking because the Respondents tried to mislead us and
make [it appear] that [Cosare] failed to report for work when they had in fact had [sic]
placed him on suspension. x x x.58
Following a finding of constructive dismissal, the Court finds no cogent reason to modify
the NLRC's monetary awards in Cosare's favor. In Robinsons Galleria/Robinsons
Supermarket Corporation v. Ranchez,59 the Court reiterated that an illegally or
constructively dismissed employee is entitled to: (1) either reinstatement, if viable, or
separation pay, if reinstatement is no longer viable; and (2) backwages. 60 The award of
exemplary damages was also justified given the NLRC's finding that the respondents acted
in bad faith and in a wanton, oppressive and malevolent manner when they dismissed
Cosare. It is also by reason of such bad faith that Arevalo was correctly declared solidarily
liable for the monetary awards.
WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and
Resolution dated March 26, 2012 of the Court of Appeals in CA-G.R. SP. No. 117356 are SET
ASIDE. The Decision dated August 24, 2010 of the National Labor Relations Commission in
favor of petitioner Raul C. Cosare is AFFIRMED.
SO ORDERED.

G.R. No. 197011

January 28, 2015

ESSENCIA Q. MANARPIIS, Petitioner,
vs.
TEXAN PHILIPPINES, INC., RICHARD TAN and CATHERINE P. RIALUBINTAN, Respondents.

Dear Ms. Manarpiis,
You are hereby notified that an investigation will be conducted on 20 September 2000 at
2:00 p.m. in our office regarding your alleged violation of company rules and regulations,
specifically: I (par. B) - - Fraudulent Expense/Disbursement expenses

DECISION
I (par. G) - - Collusion/Connivance with Intent to Defraud
VILLARAMA, JR., J.:
II (Section 6) - - Sabotage
Before us is a petition for review on certiorari under Rule 45 assailing the Decision 1 dated
March 24, 2010, and Resolution2 dated May 19, 2011 of the Court of Appeals (CA) in CAG.R. SP No. 106661. The CA reversed and set aside the Decision 3 dated January 25, 2008
and Resolution4 dated September 22, 2008 of the First Division of the National Labor
Relations Commission (NLRC) in NLRC CA No. 029806-01, which affirmed the
Decision5 dated June 28, 2001 of the Labor Arbiter (LA) in NLRC Case No. 00-08-041102000.
Texan Philippines, Inc. (TPI), which is owned and managed by Catherine Rialubin-Tan and
her Singaporean husband Richard Tan (respondents), is a domestic corporation engaged in
the importation, distribution and marketing of imported fragrances and aroma and other
specialized products and services. In July 1999, respondents hired Essencia Q. Manarpiis
(petitioner) as Sales and Marketing Manager of the company's Aroma Division with a
monthly salary of P33,800.00.6
Claiming insurmountable losses, respondents served a written notice (July 27, 2000)
addressed to all their employees that TPI will cease operations by August 31, 2000. 7
On August 7, 2000, petitioner filed a complaint for illegal dismissal, non-payment of
overtime pay, holiday pay, service incentive leave pay, unexpired vacation leave and 13th
month pay and with prayer for moral and actual damages. Subsequently, petitioner
amended her complaint to state the true date of her dismissal which is July 27, 2000 and
not August 31, 2000. She averred that on the same day she was served with notice of
company closure, respondents barred her from reporting for work and paid her last salary
up to the end of July 2000.8
On September 18, 2000, petitioner received the following Memorandum 9:
September 15, 2000
MEMO TO : MS. ESSENCIA MANARPIIS
Sales and Marketing Manager
Aroma Division
SUBJECT : Notice Of Investigation And Grounding

II (Section 12) - - Loss of Confidence
III (Section 2) - - Libel/Slander
III (Section 8 par. e) - - Other acts of Insubordination
V (par. C & D) - - AWOL/Abandonment
V (par. I) - - Committing other acts of gross inefficiency or incompetence said acts
constitutive of gross misconduct, gross insubordination and dishonesty. You may
bring your witnesses and counsel if you so desire. In the meantime, you will not be
allowed to perform your usual functions, but will instead report to the
undersigned.
Additionally, you are directed to submit to the undersigned your explanation in writing,
within (72) hours from receipt hereof (but in no case later than 20 September 2000), why
no appropriate disciplinary action and/or penalties may be imposed against you relative to
the foregoing.
Failure to submit said written explanation within the prescribed period and/or attend the
investigation hearing on 20 September 2000 shall constitute an implied admission of the
charges and waiver on your part to due process.
For your information and compliance.
(SGD.) RICHARD TAN
(President)
Petitioner alleged that assales and marketing manager, she received the agreed
commission based on actual sales collection on the first quarter of 2000 and was expecting
to also receive such commission on the 2nd , 3rd and 4th quarters. However, on July 27,
2000, after receiving a text message from respondent Richard Tan, she proceeded to her
office and learned that her table drawers were forcibly opened and her files confiscated.
She protested the company closure asserting that the alleged business losses were belied

by TPI’s financial documents. But despite her pleas, she was asked to pack up her things
and by the end of the month her salary was discontinued. She then received the
memorandum regarding the company closure and was required to turn over the company
car, pager and cellphone. She was told not to report for work anymore. 10
After receiving the September 15,2000 memorandum, petitioner’s counsel sent a reply
stating that there was no point in the investigation because respondents already dismissed
petitioner purportedly on the ground of cessation of business due to insurmountable losses,
and also it was impossible for petitioner to respond tothe charges which are devoid of
particulars as to the alleged irregularities she committed. It was pointed out that
respondents should have investigated the supposed violations of company rules and
fraudulent acts earlier and not when petitioner had filed an illegal dismissal complaint. 11
Subsequently, petitioner received the following memorandum12:
September 25, 2000
TO : MS. ESSENCIA MANARPIIS
Sales and Marketing Manager
Aroma Division
SUBJECT : NOTICE OF TERMINATION
Ms. Manarpiis,
This is to inform you that your employment with the Company is terminated effective
today, September 25, 2000, due to Dishonesty, Loss of Confidence, and Abandonment of
Work.

(SGD.) RICHARD TAN
President
Believing that her dismissal was without just cause, petitioner prayed for reinstatement if
still viable, and if not, award of separation pay with back wages from August 1, 2000, and
payment of her monetary claims for sales commissions, pro-rated 13th month pay, five
days service incentive leave pay and sick leaves, as well as moral and exemplary damages
plus attorney’s fees.13
Respondents denied the charge of illegal dismissal and explained that TPI’s closure was
averted by a new financing package obtained by respondent Richard Tan. They asserted
that the requisite notices of business closure to government authorities and to their
employees were complied with, and notwithstanding that TPI has in fact continued its
operations, petitioner was found to have committed infractions resulting in loss of
confidence which was the ground for the termination of her employment. They likewise
averred that respondent Rialubin-Tan gave specific instructions to petitioner for her to
continue reporting for work even after August 31, 2000 but she instead went AWOL and
subsequently abandoned her job, to the utmost prejudice of the company. 14
On June 28, 2001, LA Melquiades Sol D. Del Rosario rendered a Decision declaring the
dismissal of petitioner as illegal:
CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered finding complainant’s
dismissal to be illegal. Consequently, she should be paid in solidum by respondents the
following:
a) P304,200.00 as backwages as of May 31, 2001[;]
b) P101,400.00 as separation pay for 3 years[;]

An internal audit of the Company shows that several obligations of the Company were paid
twice to the same supplier. Considering the level of your position, the inescapable
conclusion is that you have colluded with the Company supplier to defraud the Company of
its finances. Moreover, you have fraudulently caused to be reimbursed representation
expenses and other expense statements purporting to be that of your sales
representatives while in truth and in fact they were yours, and you received the
corresponding payments therefor.

SO ORDERED.15

Also, your attendance record showed that you have been absent without official leave
(AWOL)since August 3, 2000 up to date.

Respondents appealed to the NLRC which affirmed the LA’s decision. Their motion for
reconsideration was also denied.

A notice of AWOL dated September 14, 2000 has been sent to you but you refused to
accept the same, much less, refused to act on it.

In a petition for certiorari filed with the CA, respondents argued that the subsequent
termination of petitioner on the grounds of dishonesty, loss of confidence and
abandonment, after TPI was able to regain financial viability, was made in view of the fact
that commission of the said offenses surfaced only during the audit investigation
conducted after notice of cessation of business operation was sent to the employees.

For your information and guidance

c) 1% of the gross sales of complainant and .75% on other sales as determined by
the parties as complainant’s commissions;
d) 10% for and as attorney’s fees of the money awards.

Despite advice for her to continue reporting for work after August 31, 2000, the effectivity
date of the intended closure, petitioner just stopped doing so and instead filed the
complaint for illegal dismissal and likewise failed to turn over all company documents and
records in her possession. They also discovered that petitioner put up her own company
"Vita VSI Scents," enticing clients to buy the same products they used to purchase from
TPI.
By Decision dated March 24, 2010, the CA reversed the NLRC and ruled that petitioner was
validly dismissed:
WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 25,
2008 and the Resolution dated September 22, 2008 of the National Labor Relations
Commission are hereby REVERSED and SET ASIDE. Resultantly, Essencia Manarpiis’
complaint for illegal dismissal against Texan Philippines, Inc., Richard Tan and Catherine
Realubin-Tan is hereby DISMISSEDfor lack of merit. No costs.
SO ORDERED.16
Petitioner filed a motion for reconsideration but it was denied by the CA.
Hence, this petition arguing that the CA committed patent reversible errors when it: (1)
granted the unverified/unsworn certification of non-forum shopping accompanying
respondents’ petition for certiorari; (2) granted respondents’ petition for certiorari without
finding any grave abuse of discretion on the part of NLRC; (3) disturbed the consistent
factual findings of the LA and NLRC which were duly supported by substantial evidence and
devoid of any unfairness and arbitrariness; and (4) substituted its own findings of facts to
those of the LA and NLRC, the CA’s findings being unsupported by substantial evidence. 17
The petition is meritorious.
We first address petitioner’s contention on the alleged formal infirmity of the petition for
certiorari filed before the CA. Petitioner argued that the same was defective as the jurat
therein was based on the mere community tax certificate of respondent Rialubin-Tan,
instead of a government-issued identification card required under the 2004 Rules on
Notarial Practice. Such ground was never raised by herein petitioner in her comment on the
CA petition, thus, it cannot be validly raised by the petitioner at this stage. 18
Furthermore, we have consistently held that verification of a pleading is a formal, not a
jurisdictional, requirement intended to secure the assurance that the matters alleged in a
pleading are true and correct. Thus, the court may simply order the correction of unverified
pleadings or act on them and waive strict compliance withthe rules. It is deemed
substantially complied with when one who has ample knowledge to swear to the truth of
the allegations in the complaint or petition signs the verification; and when matters alleged
in the petition have beenmade in good faith or are true and correct. 19

Under the Rules of Court and settled doctrine, a petition for review on certiorari under Rule
45 of the Rules of Court is limited to questions of law. As a rule, the findings of fact of the
CA are final and conclusive, and this Court will not review them on appeal. 20
However, there are instances in which factual issues may be resolved by this Court, to wit:
(1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture;
(2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4)
the judgment is based on a misapprehension of facts; (5) the findings of fact are
conflicting; (6) the CA goes beyond the issues of the case and its findings are contrary to
the admissions of both appellant and appellee;(7) the findings of fact of the CA are
contrary to those of the trial court; (8) said findings of facts are conclusions without citation
of specific evidence on which they are based; (9) the facts set forth in the petition aswell
as in the petitioner’s main and reply briefs are not disputed by the respondent; and (10)
the findings of fact of the CA are premised on the supposed absence of evidence and
contradicted by the evidence on record.21
Considering that the findings of facts and the conclusions of the CA are contrary to those of
the LA and the NLRC, we find it necessary to evaluate such findings.
On the issue of illegal dismissal, both the LA and NLRC found no just or authorized cause
for the termination of petitioner’s employment.
LA Del Rosario observed that respondents flip-flopped on the issue of petitioner’s
termination as when they claimed she was dismissed due to insurmountable losses so that
TPI’s personnel were notified of the company closure effective August 31, 2000, and at the
same time they accused petitioner of fraudulent acts and abandonment of work resulting
in loss of trust and confidence which caused her dismissal. He also found there was no
compliance with the legal requisites of the said grounds for dismissal under Article 283
(business closure) suchas the lack of termination report sent to the Department of Labor
and Employment (DOLE), financial documents which are audited and signed by an
independent auditor, and the two-notice requirement sent to the last known address of the
employee alleged to have abandoned work under Book V, RuleXIV, Section 2 of the
Omnibus Rules Implementing the Labor Code. It was noted that while TPI’s financial
documents have BIR stampmark, they were not shown to have been prepared by an
independent auditor.
The NLRC upheld the LA’s ruling that petitioner’s dismissal was not valid, viz:
As between the above, conflicting allegations, We find the version of the complainant more
credible. Record of the instant case would provide that other than respondents’ bare
allegations that complainant was instructed to continue working even beyond 31 August
2000, no evidence was presented to substantiate the same. If respondents could easily
issue a notice of business closure to all its employees, and at the same time, immediately
require the complainant to surrender all company properties assigned to her, We could not
understand why they could not easily issue another letter, this time, intended only for the
complainant informing her that her employment was still necessary.

Relative to the company’s closure due to business losses, prevailing jurisprudence would
dictate that the same should be substantiated by competent evidence. Financial
statements audited by independent external auditors constitute the normal method of
proof of the profit and loss performance of the company. To exempt an employer [from] the
payment of separation pay, he or she must establish by sufficient and convincing evidence
that the losses were serious, substantial and actual x x x.
In the instant case, respondents may have presented before the Labor Arbiter its
Statement of Income for the year 1999. While its preparation may be in compliance with
the requirements of the Bureau of Internal Revenue for taxation purposes, based on the
jurisprudence provided above, the same would not suffice for purposes of respondents’
defense in the instant case. In their appeal, respondents alleged that on the basis of the
audited Statement of Income and Retained Earnings For the Year Ending 31 December
2000, the company incurred a net loss of almost half a million pesos. Assuming the same
to be true since we cannot find a copy of said statement attached to [the] record, it would
appear that the company had attained a better position in year 2000 as compared to year
1999 when they incurred a net loss of more than Two Million Pesos. Furthermore, said
evidence is already immaterial considering that the company’s intended closure did not
actually take effect.
Upon a finding that complainant was not instructed to continue working even beyond 31
August 2000 butwas told not to report to work upon receipt of the notice of company’s
closure, it certainly follows that respondents would no longer inform complainant of the
company’s continued operation after respondent Tan had allegedly succeeded in searching
for funds. In fact, We are not even persuaded that the company’s closure was prevented by
the new funds sought by respondent Tan when in the first place, there was no intended
closure at all but only a decision to dismiss complainant in a manner that would enable
respondents evade liabilities under the Labor Code.
With regard to the alleged violation of company rules and regulations, We agree with the
finding that respondent[s’] acts of issuing the two notices setting the case [for]
investigation were mere afterthoughts. As highlighted in the assailed Decision, the first
notice was issued after respondents had already received the summons in the instant case.
More importantly, the above discussion would provide that prior to issuance of said first
notice, complainant was already illegally dismissed. Furthermore, assuming for the sake of
argument that complainant was not yet terminated, a reading of the said first notice would
show that it does not conform with the requirements of due process. The same had failed
to discuss the circumstances under which each of the charges therein was committed by
the complainant. As can be noted from the letter dated 19 September 2000 sent by
complainant’s counsel to respondent Tan, it was impossible for his client to submit a
written explanation thereto since the notice to explain is devoid of particulars regarding the
alleged irregularities.
As a consequence of complainant[’s] double termination, initially through the purported
cessation of business operations, and thereafter, by imputing offenses violative of
company rules and regulations, we agree with the finding [that] she was illegally
dismissed, and as such, entitled to backwages. She would have been entitled to

reinstatement but we believe that the charges lodged by the respondents against the
complainant had rendered reinstatement non-viable. Thus, she should be granted
separation pay instead.22 (Citations omitted)
The CA, however, considered the evidence of respondents sufficient to prove the alleged
business losses and their good faith in resorting to closure of the company. It cited the
1999 Annual Income Tax Return showing a net loss ofP2,290,580.48 and financial
statement indicating a net loss of P2,301,228.61 for the year ended December 31, 1999;
respondents’ claim that it was forced to sell six company cars; and the DOLE termination
report.
On the other grounds invoked by respondents to justify petitioner’s termination, the CA
cited the following infractions: (a) several company obligations towards a supplier which
were paid twice during her term as Marketing and Sales Manager; (b) company funds
procured by petitioner, represented to be "under the table" expenditures for the Bureau of
Customs which she cannot explain when queried; (c) divulging confidential company
matters to the customers; and (d) establishing her own company while still employed with
TPI.
We reverse the CA and reinstate the LA’s decision as affirmed by the NLRC.
Closure or cessation of business is the complete or partial cessation of the operations
and/or shut-down of the establishment of the employer. It is carried out to either stave off
the financial ruin or promote the business interest of the employer. Closure ofbusiness as
an authorized cause for termination of employment is governed by Article 283 23 of the
Labor Code, as amended.
If the business closure is due to serious losses or financial reverses, the employer must
present sufficient proof of its actual or imminent losses; it must show proof that the
cessation of or withdrawal from business operations was bona fidein character. 24 A written
notice tothe DOLE thirty days before the intended date of closure is also required, the
purpose of which is to inform the employees of the specific date of termination or closure
of business operations, and which must be served upon each and every employee of the
company one month before the date of effectivity to give them sufficient time to make the
necessary arrangement.25
The ultimate test of the validity of closure or cessation of establishment or undertaking is
that it must be bona fidein character.1âwphi1 And the burden of proving such falls upon
the employer.26 After evaluating the evidence on record, we uphold the factual findings and
conclusions of the labor tribunals that petitioner was dismissed without just or authorized
cause, and that the announced cessation of business operations was a subterfuge for
getting rid of petitioner. While the introduction of additional evidence before the NLRC is
not proscribed, the said tribunal was still not persuaded by the company closure
purportedly averted only by the alleged fresh funding procured by respondent Tan, for the
latter claim remained unsubstantiated. The CA’s finding of serious business losses is not
borne by the evidence on record. The financial statements supposedly bearing the stamp

mark of BIR were not signed by an independent auditor. Besides, the non-compliance with
the requirements under Article 283 of the Labor Code, as amended, gains relevance in this
case not for the purpose of proving the illegality of the company closure or cessation of
business, which did not materialize, butas an indication of bad faith on the part of
respondents inhastily terminating petitioner’s employment. Under the circumstances, the
subsequent investigation and termination of petitioner on grounds of dishonesty, loss of
confidence and abandonment of work, clearlyappears as an afterthought as it was done
only after petitioner had filed an illegal dismissal case and respondents have been
summoned for hearing before the LA.
We have laid down the two elements which must concur for a valid abandonment, viz: (1)
the failure to report to work or absence without valid or justifiable reason, and (2) a clear
intention to sever the employer employee relationship, with the second element as the
more determinative factor being manifested by some overt acts.27Abandonment as a just
ground for dismissal requires the deliberate, unjustified refusalof the employee to perform
his employment responsibilities. Mere absence or failure to work, even after notice to
return, is not tantamount to abandonment. 28
Furthermore, it is well-settled that the filing by an employee of a complaint for illegal
dismissal with a prayer for reinstatement is proof enough of his desire to return to work,
thus, negating the employer’s charge of abandonment. 29 An employee who takes steps to
protest his dismissal cannot logically be said to have abandoned his work. 30
Abandonment in this case was a trumped up charge, apparently to make it appear that
petitioner was not yet terminated when she filed the illegal dismissal complaint and to give
a semblance of truth to the belated investigation against the petitioner. Petitioner did not
abandon her work but was told not to report for work anymore after being served a written
notice of termination of company closure on July 27, 2000 and turning over company
properties to respondent Rialubin-Tan.
On the issue of loss of confidence, we have held that proof beyond reasonable doubt is not
needed to justify the loss as long as the employer has reasonable ground to believe that
the employee is responsible for the misconduct and his participation therein renders him
unworthy of the trust and confidence demanded of his position. 31Nonetheless, the right of
an employer to dismiss employees on the ground of loss of trust and confidence, however,
must not be exercised arbitrarily and without just cause. Unsupported by sufficient proof,
loss of confidence is without basis and may not be successfully invoked as a ground for
dismissal. Loss of confidence as a ground for dismissal has never been intended to afford
an occasion for abuse by the employer of its prerogative, as it can easily be subject to
abuse because of its subjective nature, as in the case at bar, and the loss must be founded
on clearly established facts sufficient to warrant the employee’s separation from work. 32
Here, loss of confidence was belatedly raised by the respondents who initiated an
investigation on the alleged irregularities committed by petitioner only after the latter had
questioned the legality of her earlier dismissal due to the purported company closure. As
correctly observed by the NLRC, assuming to be true that respondents had not yet actually
dismissed the petitioner, the notice of cessation of operations (memo dated July 27, 2000)

addressed to all employees never mentioned the supposed charges against the petitioner
who was also never issued a separate memorandum to that effect. Moreover, the turn over
of company properties by petitioner on the same date as demanded by respondent
Rialubin-Tan belies the latter’s claim that she verbally instructed the former to continue
reporting for work in view of the audit of the company’s finances. Indeed, considering the
gravity of the accusations of fraud against the petitioner, it is strange that respondents
have not at least issued her a separate memorandum on her accountability for the alleged
business losses.
To prove the dishonesty imputed to petitioner, respondents submitted before the NLRC a
letter dated August 4, 2000 from one of TPI’s suppliers advising the company of a
supposed double payment made in February and March 2000. However, there is no
showing that such payment was made or ordered by petitioner, and neither was it shown
that this overpayment was reflected in the account books of TPI. Respondents likewise
failed to prove their accusation that petitioner put up a competing business while she was
still employed with TPI, and their bare allegation thatpetitioner divulged confidential
company matters to customers. As to the supposed failure of petitioner to account for
funds intended for "under the table" transactions at the Bureau of Customs, the same was
never raised before the labor tribunals and not a shred of evidence was presented by
respondent to prove this allegation.
Apropos we recall our pronouncement in Lima Land, Inc., et al. v. Cuevas 33:
As a final note, the Court is wont to reiterate that while an employer has its own interest to
protect, and pursuant thereto, it may terminate a managerial employee for a just cause,
such prerogative to dismiss or lay off an employee mustbe exercised without abuse of
discretion. Its implementation should be tempered with compassion and understanding.
The employer should bear in mind that, in the execution of the said prerogative, whatis at
stake is not only the employee’s position, but his very livelihood, his very breadbasket.
Indeed, the consistent rule is that if doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter. The
employer must affirmatively show rationally adequate evidence that the dismissal was for
justifiable cause. Thus, when the breach of trust or loss of confidence alleged is not borne
by clearly established facts, as in this case, such dismissal on the cited grounds cannot be
allowed.34 (Emphasis supplied)
The normal consequences of petitioner’s illegal dismissal are reinstatement without loss of
seniority rights, and payment of back wages computed from the time compensation was
withheld up to the date of actual reinstatement. Where reinstatement is no longer viable as
an option, separation pay equivalent to one month salary for every year of service should
be awarded as an alternative. The payment of separation pay is in addition to payment of
back wages.35 Given the strained relations between the parties, the award of separation
pay, in lieu of reinstatement, is in order.
Finally, on the solidary liabilityof respondents Richard Tan and Catherine Rialubin-Tan for
the monetary awards.1âwphi1 It is basic that a corporation being a juridical entity, may act
only through its directors, officers and employees. Obligations incurred by them, acting as

such corporate agents are not theirs butthe direct accountabilities of the corporation they
represent. However,in certain exceptional situations, solidary liability may be incurred by
corporate officers. In labor cases for instance, this Court has held corporate directors and
officers solidarily liable with the corporation for the termination of employment of
employees done with malice or bad faith.36 We sustain the NLRC’s conclusion that the
schemes implemented by the respondents to justify petitioner’s baseless dismissal, and
the manner by which such schemes were effected showed malice and bad faith on their
part. Consequently, its affirmance of the order of the LA that the amounts awarded to
petitioner are "payable in solidum by respondents"is proper. The NLRC likewise correctly
upheld the award of attorney’s fees considering that petitioner was assisted by a private
counsel to prosecute her illegal dismissal complaint and enforce her rights under our labor
laws.
WHEREFORE, the petition is GRANTED. The Decision dated March 24, 2010 and Resolution
dated May 19, 2011 of the Court of Appeals in CA-G.R. SP No. 106661 are hereby
REVERSED and SET ASIDE.
The Decision dated June 28, 2001 of the Labor Arbiter in NLRC Case No. 00-08-04110-2000,
as affirmed by the Decision dated January 25, 2008 of the National Labor Relations
Commission in NLRC CA No. 029806-01, is hereby REINSTATED.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 208908, March 11, 2015
THE COFFEE BEAN AND TEA LEAF PHILIPPINES, INC. AND WALDEN
CHU, Petitioners, v. ROLLY P. ARENAS, Respondent.

BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the Court of Appeals’
(CA) decision2dated March 26, 2013 and resolution 3 dated August 30, 2013 in CA-G.R. SP
No. 117822. These assailed CA rulings affirmed the National Labor Relations Commission’s
(NLRC) decision4 dated August 13, 2010, which also affirmed the Labor Arbiter’s (LA)
February 28, 2010 decision.
The Antecedent Facts
On April 1, 2008, the Coffee Bean and Tea Leaf Philippines, Inc. (CBTL) hired Rolly P. Arenas
(Arenas) to work as a “barista” at its Paseo Center Branch. His principal functions included
taking orders from customers and preparing their ordered food and beverages. 5 Upon
signing the employment contract,6Arenas was informed of CBTL’s existing employment
policies.
To ensure the quality of its crew’s services, CBTL regularly employs a “mystery guest
shopper” who poses as a customer, for the purpose of covertly inspecting the baristas’ job
performance.7

infractions amounted to serious misconduct or willful disobedience, gross and habitual
neglect of duties, and breach of trust and confidence. To support these allegations, CBTL
presented Arenas’ letter12 where he admitted his commission of the imputed violations.
On March 26, 2013, the CA issued its decision dismissing the petition. The CA ruled that
Arenas’ offenses fell short of the required legal standards to justify his dismissal; and that
these do not constitute serious misconduct or willful disobedience, and gross negligence,
to merit his termination from service. The CA denied CBTL’s motion for reconsideration
opening the way for this present appealvia a petition for review on certiorari.
The main issue before us is whether CBTL illegally dismissed Arenas from employment.
The Petition
CBTL argues that under the terms and conditions of the employment contract, Arenas
agreed to abide and comply with CBTL’s policies, procedures, rules and regulations, as
provided for under CBTL’s table of offenses and penalties and/or employee
handbook.13 CBTL cites serious misconduct as the primary reason for terminating Arenas’
employment. CBTL also imputes dishonesty on the part of Arenas for not immediately
admitting that he indeed left his bottled iced tea inside the ice bin.

In April 2009, a mystery guest shopper at the Paseo Center Branch submitted a report
stating that on March 30, 2009, Arenas was seen eating non-CBTL products at CBTL’s al
fresco dining area while on duty. As a result, the counter was left empty without anyone to
take and prepare the customers’ orders.8

We DENY the petition.

On another occasion, or on April 28, 2009, Katrina Basallo (Basallo), the duty manager of
CBTL, conducted a routine inspection of the Paseo Center Branch. While inspecting the
store’s products, she noticed an iced tea bottle being chilled inside the bin where the ice
for the customers’ drinks is stored; thus, she called the attention of the staff on duty. When
asked, Arenas muttered, “kaninong iced tea?” and immediately picked the bottle and
disposed it outside the store.9

As a rule, in certiorari proceedings under Rule 65 of the Rules of Court, the CA does not
assess and weigh each piece of evidence introduced in the case. The CA only examines
the factual findings of the NLRC to determine whether its conclusions are supported by
substantial evidence, whose absence points to grave abuse of discretion amounting to lack
or excess of jurisdiction.14 In the case of Mercado v. AMA Computer College,15 we
emphasized that:

After inspection, Basallo prepared a store manager’s report which listed Arenas’ recent
infractions, as follows:

As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the
appellate court does not assess and weigh the sufficiency of evidence upon which the
Labor Arbiter and the NLRC based their conclusion. The query in this proceeding is limited
to the determination of whether or not the NLRC acted without or in excess of its
jurisdiction or with grave abuse of discretion in rendering its decision. x x x 16 [Italics
supplied]

1.

Leaving the counter unattended and eating chips in an unauthorized area while on
duty (March 30, 2009);

2.

Reporting late for work on several occasions (April 1, 3 and 22); and

3.

Placing an iced tea bottle in the ice bin despite having knowledge of company
policy prohibiting the same (April 28, 2009).10

Based on the mystery guest shopper and duty manager’s reports, Arenas was required to
explain his alleged violations. However, CBTL found Arenas’ written explanation
unsatisfactory, hence CBTL terminated his employment. 11
Arenas filed a complaint for illegal dismissal. After due proceedings, the LA ruled in his
favor, declaring that he had been illegally dismissed. On appeal, the NLRC affirmed the
LA’s decision.
CBTL filed a petition for certiorari under Rule 65 before the CA. CBTL insisted that Arenas’

Our Ruling

Our review of the records shows that the CA did not err in affirming the LA and the NLRC’s
rulings. No grave abuse of discretion tainted these rulings, thus, the CA’s decision also
warrants this Court’s affirmation. The infractions which Arenas committed do not justify the
application of the severe penalty of termination from service.
First, Arenas was found eating non-CBTL products inside the store’s premises while on duty.
Allegedly, he left the counter unattended without anyone to entertain the incoming
customers. Second, he chilled his bottled iced tea inside the ice bin, in violation of CBTL’s
sanitation and hygiene policy. CBTL argues that these violations constitute willful
disobedience, thus meriting dismissal from employment.
We disagree with CBTL.
For willful disobedience to be a valid cause for dismissal, these two elements must concur:
(1) the employee’s assailed conduct must have been willful, that is, characterized by

a wrongful and perverse attitude; and (2) the order violated must have been
reasonable, lawful, made known to the employee, and must pertain to the duties which he
had been engaged to discharge.17

As a final remark, we note that petitioner Walden Chu (Chu) should not be held jointly and
severally liable with CBTL for Arenas’ adjudged monetary awards. The LA and the NLRC
ruled for their solidary liability but the CA failed to dispose this issue in its decision.

Tested against these standards, it is clear that Arenas’ alleged infractions do not amount to
such a wrongful and perverse attitude. Though Arenas may have admitted these
wrongdoings, these do not amount to a wanton disregard of CBTL’s company policies. As
Arenas mentioned in his written explanation, he was on a scheduled break when he was
caught eating at CBTL’s al fresco dining area. During that time, the other service crews
were the one in charge of manning the counter. Notably, CBTL’s employee handbook
imposes only the penalty of written warning for the offense of eating non-CBTL products
inside the store’s premises.

A corporation is a juridical entity with a legal personality separate and distinct from those
acting for and in its behalf and, in general, from the people comprising it. 23 Thus, as a
general rule, an officer may not be held liable for the corporation’s labor obligations unless
he acted with evident malice and/or bad faith in dismissing an employee. 24

CBTL also imputes gross and habitual neglect of duty to Arenas for coming in late in three
separate instances.
Gross negligence implies a want or absence of, or failure to exercise even a slight care or
diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them.18 There is habitual neglect if
based on the circumstances, there is a repeated failure to perform one’s duties for a period
of time.19
In light of the foregoing criteria, we rule that Arenas’ three counts of tardiness cannot be
considered as gross and habitual neglect of duty. The infrequency of his tardiness already
removes the character of habitualness. These late attendances were also broadly spaced
out, negating the complete absence of care on Arenas’ part in the performance of his
duties. Even CBTL admitted in its notice to explain that this violation does not merit yet a
disciplinary action and is only an aggravating circumstance to Arenas’ other violations. 20
To further justify Arenas’ dismissal, CBTL argues that he committed serious misconduct
when he lied about using the ice bin as cooler for his bottled iced tea. Under CBTL’s
employee handbook, dishonesty, even at the first instance, warrants the penalty of
termination from service.21
For misconduct or improper behavior to be a just cause for dismissal, (a) it must be serious;
(b) it must relate to the performance of the employee’s duties; and (c) it must show that
the employee has become unfit to continue working for the employer. 22
However, the facts on record reveal that there was no active dishonesty on the part of
Arenas. When questioned about who placed the bottled iced tea inside the ice bin, his
immediate reaction was not to deny his mistake, but to remove the bottle inside the bin
and throw it outside. More importantly, when he was asked to make a written explanation
of his action, he admitted that the bottled iced tea was his.
Thus, even if there was an initial reticence on Arenas’ part, his subsequent act of owing to
his mistake only shows the absence of a deliberate intent to lie or deceive his CBTL
superiors. On this score, we conclude that Arenas’ action did not amount to serious
misconduct.
Moreover, the imputed violations of Arenas, whether taken singly or as a whole, do not
necessitate the imposition of the strict and harsh penalty of dismissal from service. The LA,
NLRC and the CA all consistently ruled that these offenses are not grave enough to
qualify as just causes for dismissal.Factual findings of the labor tribunals especially
if affirmed by the CA must be given great weight, and merit the Court’s respect.

In the present case, there was no showing of any evident malice or bad faith on Chu’s part
as CBTL’s president. His participation in Arenas’ termination was not even sufficiently
alleged and argued. Hence, he cannot be held solidarily liable for CBTL’s liabilities to
Arenas.
WHEREFORE, in light of these considerations, we hereby DENY the petition for lack of
merit. The Court of Appeals committed no grave abuse of discretion in its decision of March
26, 2013 and its resolution of August 30, 2013 in CA-G.R. SP No. 117822, except with
respect to the liability of petitioner Walden Chu. We thus absolve petitioner Walden Chu
from paying in his personal capacity the monetary awards of respondent Rolly P. Arenas. No
costs.
SO ORDERED.

introduced in the leased premises shall automatically be owned by the Lessor (petitioners)
upon the expiration/termination of the contract; 4 the lease agreement was terminated by
petitioners in November, 1980 due to non-payment of rentals by Inductocast
Cebu; 5 thereafter, petitioners took actual possession of and occupied the Tipolo properties.
Petitioners likewise alleged in their Complaint that they became aware of the labor dispute
involving Inductocast only after the impugned public auction sale. 6
Atty. Danilo Pilapil, claiming to be the John Doe named in the Complaint, filed a motion to
dismiss on the ground that the trial court had no jurisdiction over the case. The buyers of
the Tipolo properties, as intervenors, also filed a motion to dismiss on the same ground.
Both motions, which were opposed by petitioners, were denied.

G.R. No. 92598 May 20, 1994
PURIFICACION Y. MANLIGUEZ, ANTONINA Y. LUIS and BENJAMIN C.
YBANEZ, petitioners,
vs.
THE COURT OF APPEALS, ET AL., respondents.
Rufino L. Remoreras for petitioners.
Danilo L. Pilapil for private respondents.

PUNO, J.:
This is an appeal by certiorari from the Decision of the Court of Appeals, 1 dated November
16, 1989, denying due course to and dismissing the petition in CA-G.R. SP NO. 18017. 2
The case at bench finds its roots in the Decision of the Department of Labor and
Employment (Region VII), ordering Inductocast Cebu, a partnership based in Mandaue City,
to pay its former employees a total of P232,908.00. As a consequence of the judgment, the
labor department's regional sheriff levied the buildings and improvements standing on Lot
109, Plan 11-5121-Amd., at Tipolo, Mandaue City. The levied properties (hereinafter
referred to as the "Tipolo properties") were subsequently sold at public auction to said
employees.
On May 25, 1988, petitioners filed with the RTC of Cebu City, 7th Judicial Branch, a
Complaint 3 which sought the lifting of the levy over, and annulment of the sale of, the
Tipolo properties. The Complaint was docketed as Civil Case No. Ceb-6917, and raffled to
Branch 8 of the trial court. Petitioners therein alleged that: they are the owners of the Lot
109; they entered into a lease agreement with Inductocast Cebu over Lot 109; the lease
contract provided that, except for machineries and equipment, all improvements

The intervenors, however, moved for reconsideration of the denial. In an Order dated April
18, 1989, the trial court granted the motion and dismissed Civil Case No. Ceb-6917. It held
that the civil case "is actually in the nature of a quashal of the levy and the certificate of
sale, a case arising out of a dispute that was instituted by the previous employees of
Inductocast before the Department of Labor and Employment, Region 7." 7 Citing Pucan
vs. Bengzon, 155 SCRA 692 (1987), it held it had no jurisdiction over the case since the
levy and sale "are connected with the case within the exclusive jurisdiction of the
Department of Labor and Employment." 8
Petitioners questioned the dismissal of their Complaint to the respondent Court of Appeals,
through a petition forcertiorari and preliminary injunction. 9 The appellate court, in its
impugned Decision, denied the petition as it held:
To Our minds, the issue on what forum the case must be tried or heard is
a settled one. The Department of Labor is the agency upon which
devolves the jurisdiction over disputes emanating from and in relation
with labor controversies to the exclusion of the regular courts.
The issue in the case at bar concerns the levy of a property in pursuance
to a writ of execution, arising out of labor disputes. There can be no
doubt that jurisdiction pertains to the Department of Labor.
xxx xxx xxx
In the light of the factual antecedents and incidents that transpired in the
hearing of this case at bar, the (trial court) correctly ruled that indeed the
Department of Labor has jurisdiction over the case. Consequently, WE
see no abuse of discretion let alone a grave one, amounting to lack or in
excess of its jurisdiction correctible with a writ of certiorari.
Indeed, the issue of granting or denying a motion to dismiss is addressed
to the sound discretion of the court, and in the absence of a capricious
and whimsical exercise of power, certiorari will not lie.

Thus, this appeal where petitioners contend:

may be suffered by the third-party claimant. By "action", as stated in the
Rule, what is meant is a separate and independent action. 10

THE RESPONDENT APPELLATE COURT ERRED IN
HOLDING THAT THE DEPARTMENT OF LABOR HAS
JURISDICTION ON THE SUBJECT MATTER AND NATURE
OF THE CASE AS AGAINST THE CIVIL COURT.
We find merit in the appeal. Firstly, respondent court erred in holding that the trial court
does not have jurisdiction over the case filed by petitioners. It is at once evident that the
Civil Case No. Ceb-6917 is not a labor case. No employer-employee relationship exists
between petitioners and the other parties, and no issue is involved which may be resolved
by reference to the Labor Code, other labor statutes, or any collective bargaining
agreement. Neither can we characterize petitioner's action before the trial court as arising
out of a labor dispute. It was not brought to reverse or modify the judgment of the
Department of Labor and Employment (DOLE). Neither did it question the validity of, or
pray for, the quashal of the writ of execution against Inductocast.
What is to be litigated in Civil Case No. Ceb-6917 is the issue of ownership over the Tipolo
properties. Clearly, it is the RTC and not the labor department which can take cognizance of
the case, as provided by B.P. Blg. 129 ("An Act Reorganizing the Judiciary, Appropriating
Funds Therefor, and For Other Purposes"), thus:
Sec. 19. Jurisdiction in civil case. — Regional Trial Courts shall exercise
exclusive original jurisdiction:
xxx xxx xxx
(2) In all civil actions which involve the title to, or possession of real
property, or any interest therein, except actions for forcible entry into
and unlawful detainer of lands or buildings, original jurisdiction over
which is conferred upon Metropolitan Trial Courts, Municipal Trial Courts,
and Municipal Circuit Trial Courts;
xxx xxx xxx
The action taken by petitioners before the RTC asserting their ownership over the levied
properties is mandated by Section 17, Rule 39 of the Revised Rules of Court. Time and
again, we have held that:
Under Section 17, Rule 39, a third person who claims property levied
upon on execution may vindicate such claim by action. . . . The right of a
person who claims to be the owner of property levied upon on execution
to file a third-party claim with the sheriff is not exclusive, and he may file
an action to vindicate his claim even if the judgment creditor files an
indemnity bond in favor of the sheriff to answer for any damages that

Secondly, it is incorrect to argue that the trial court cannot take cognizance of Civil Case
No. Ceb-6917 without interfering with the writ of attachment and writ of execution of a coequal body. It is settled that the levy and sale of property by virtue of a writ of attachment
is lawful only when the levied property indubitably belongs to the defendant. If property
other than those of the defendant is attached and sold by the sheriff, he acts beyond the
limits of his and the court's authority. 11 In this regard, we held in the case of Uy,
Jr. vs. Court of Appeals, 191 SCRA 275 (1991) that:
The main issue in this case is whether or not properties levied and seized
by virtue of a writ of attachment and later by a writ of execution, were
under custodia legis and therefore not subject to the jurisdiction of
another co-equal court where a third party claimant claimed ownership of
the same properties.
The issue has long been laid to rest in the case of Manila Herald
Publishing Co., Inc. v. Ramos (88 Phil. 94 [1951]) where the Court ruled
that while it is true that property in custody of the law may not be
interfered with, without the permission of the proper court, this rule is
confined to cases where the property belongs to the defendant or one in
which the defendant has proprietary interests. But when the Sheriff,
acting beyond the bounds of his office seizes a stranger's property, the
rule does not apply and interference with his custody is not interference
with another court's order of attachment.
Also, in the more recent case of Santos vs. Bayhon, 199 SCRA 525 (1991), we stated, viz.:
The general rule that no court has the power to interfere by injunction
with the judgments or decrees of another court with concurrent or
coordinate jurisdiction possessing equal power to grant injunctive relief,
applies only when no third-party claimant is involved. . . . When a third
party, or stranger to the action, asserts a claim over the property levied
upon, the claimant may vindicate his claim by an independent action in
the proper civil court which may stop the execution of the judgment on
property not belonging to the judgment debtor (Citations omitted.)
Finally, it must be noted that the Pucan case relied upon by respondent court is
inapplicable to the case at bench which involves a third-party claim over property levied on
execution. In Pucan, we enjoined the Regional Trial Court from acting on the petition for
damages and prohibition against the enforcement of the writ of execution issued by the
NCR director of the then Ministry of Labor and Employment in a labor case for the following
reason:

A perusal of the petition for damages and prohibition filed by Saulog
Transit, Inc., in the lower court reveals that basically, what was being
questioned was the legality or propriety of the alias writ of execution
dated March 1, 1985, as well as the acts performed by the Ministry
officials in implementing the same. In other words, the petition was
actually in the nature of a motion to quash the writ; and with respect to
the acts of the Ministry officials, a case growing out of a labor dispute, as
the acts complained of, were perpetrated during the execution of a
decision of the then Minister of Labor and Employment. However
characterized, jurisdiction over the petition pertains to the Labor Ministry,
now Department and not the regular courts. This conclusion is evident,
not only from the provisions of Article 224(b) of the Labor Code, but also
of
Article 218, as amended by Batas Pambansa Blg. 227 in connection with
Article 255 of the same Code.
xxx xxx xxx
Apparently, Saulog Transit, Inc. was misled by its own prayer for actual,
moral and exemplary damages. It believed that such additional cause of
action could clothe the petition with the mantle of a regular action
cognizable by the regular courts. It was, of course, mistaken for the fact
remains that the acts complained of are mere incidents of a labor
dispute. Such prayer therefore did not alter the complexion of the case
as one arising from a labor dispute, but was subsumed by the nature of
the main case, over which the regular courts had no jurisdiction, much
less the power to issue a temporary or permanent injunction or
restraining order. . . . 12
In fine, we prohibited the action before the trial court in Pucan because it attacked the
regularity of the issuance of the alias writ of execution in the labor case, which is but an
incident of the labor dispute. This is not so in the case at bench where the civil case filed
by petitioners does not even collaterally attack the validity of the DOLE's writ of
attachment. On the contrary, petitioners in Civil Case No. Ceb-6917 pray for the trial
court's ruling that the DOLE's judgment could not be validly executed on the Tipolo
properties, which allegedly do not belong to Inductocast.
IN VIEW WHEREOF, the petition for review is GRANTED. The Decision of the Court of
Appeals in CA-G.R. SP No. 18017, dated November 16, 1989, is REVERSED and SET ASIDE.
The Regional Trial Court of Cebu City, Branch 8 is ordered to try Civil Case Ceb-6917 on its
merit. No costs.
SO ORDERED.
G.R. No. 109272 August 10, 1994

GEORG GROTJAHN GMBH & CO., petitioner,
vs.
HON. LUCIA VIOLAGO ISNANI, Presiding Judge, Regional Trial Court, Makati, Br.
59; ROMANA R. LANCHINEBRE; and TEOFILO A. LANCHINEBRE, respondents.

On December 21, 1992, respondent judge issued the first impugned Order, granting the
motion to dismiss. She held, viz:
Jurisdiction over the subject matter or nature of the action is conferred by
law and not subject to the whims and caprices of the parties.

A.M. Sison, Jr. & Associates for petitioner.
Pedro L. Laso for private respondents.

PUNO, J.:
Petitioner impugns the dismissal of its Complaint for a sum of money by the respondent
judge for lack of jurisdiction and lack of capacity to sue.
The records show that petitioner is a multinational company organized and existing under
the laws of the Federal Republic of Germany. On July 6, 1983, petitioner filed an application,
dated July 2, 1983, 1 with the Securities and Exchange Commission (SEC) for the
establishment of a regional or area headquarters in the Philippines, pursuant to
Presidential Decree No. 218. The application was approved by the Board of Investments
(BOI) on September 6, 1983. Consequently, on September 20, 1983, the SEC issued a
Certificate of Registration and License to petitioner. 2
Private respondent Romana R. Lanchinebre was a sales representative of petitioner from
1983 to mid-1992. On March 12, 1992, she secured a loan of twenty-five thousand pesos
(P25,000.00) from petitioner. On March 26 and June 10, 1992, she made additional cash
advances in the sum of ten thousand pesos (P10,000.00). Of the total amount, twelve
thousand one hundred seventy pesos and thirty-seven centavos (P12,170.37) remained
unpaid. Despite demand, private respondent Romana failed to settle her obligation with
petitioner.
On July 22, 1992, private respondent Romana Lanchinebre filed with the Arbitration Branch
of the National Labor Relations Commission (NLRC) in Manila, a Complaint for illegal
suspension, dismissal and non-payment of commissions against petitioner. On August 18,
1992, petitioner in turn filed against private respondent a Complaint for damages
amounting to one hundred twenty thousand pesos (P120,000.00) also with the NLRC
Arbitration Branch (Manila). 3 The two cases were consolidated.
On September 2, 1992, petitioner filed another Complaint for collection of sum of money
against private respondents spouses Romana and Teofilo Lanchinebre which was docketed
as Civil Case No. 92-2486 and raffled to the sala of respondent judge. Instead of filing their
Answer, private respondents moved to dismiss the Complaint. This was opposed by
petitioner.

Under Article 217 of the Labor Code of the Philippines, the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide, within
thirty (30) calendar days after the submission of the case by the parties
for decision, the following cases involving all workers, whether
agricultural or non-agricultural:
(4) claims for actual, moral, exemplary and other forms of damages
arising from an employer-employee relations.
xxx xxx xxx
(6) Except claims for employees compensation, 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)
regardless of whether or not accompanied with a claim for reinstatement.
In its complaint, the plaintiff (petitioner herein) seeks to recover alleged
cash advances made by defendant (private respondent herein) Romana
Lanchinebre while the latter was in the employ of the former. Obviously
the said cash advances were made pursuant to the employer-employee
relationship between the (petitioner) and the said (private respondent)
and as such, within the original and exclusive jurisdiction of the National
Labor Relations Commission.
Again, it is not disputed that the Certificate of Registration and License
issued to the (petitioner) by the Securities and Exchange Commission
was merely "for the establishment of a regional or area headquarters in
the Philippines, pursuant to Presidential Decree No. 218 and its
implementing rules and regulations." It does not include a license to do
business in the Philippines. There is no allegation in the complaint
moreover that (petitioner) is suing under an isolated transaction. It must
be considered that under Section 4, Rule 8 of the Revised Rules of Court,
facts showing the capacity of a party to sue or be sued or the authority of
a party to sue or be sued in a representative capacity or the legal
existence of an organized association of persons that is made a party
must be averred. There is no averment in the complaint regarding
(petitioner's) capacity to sue or be sued.

Finally, (petitioner's) claim being clearly incidental to the occupation or
exercise of (respondent) Romana Lanchinebre's profession, (respondent)
husband should not be joined as party defendant. 4
On March 8, 1993, the respondent judge issued a minute Order denying petitioner's Motion
for Reconsideration.
Petitioner now raises the following assignments of errors:
I
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE REGULAR
COURTS HAVE NO JURISDICTION OVER DISPUTES BETWEEN AN EMPLOYER
AND AN EMPLOYEE INVOLVING THE APPLICATION PURELY OF THE
GENERAL CIVIL LAW.

Not every dispute between an employer and employee involves matters that only labor
arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial
powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code
is limited to disputes arising from an employer-employee relationship which can only be
resolved by reference to the Labor Code, other labor statutes, or their collective bargaining
agreement. In this regard, we held in the earlier case of Molave Motor Sales, Inc. vs. Laron,
129 SCRA 485 (1984), viz:
Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters,
under paragraph 5 of Article 217 of the Labor Code had jurisdiction over
"all other cases arising from employer-employee relation, unless
expressly excluded by this Code." Even then, the principal followed by
this Court was that, although a controversy is between an employer and
an employee, the Labor Arbiters have no jurisdiction if the Labor Code is
not involved. In Medina vs. Castro-Bartolome, 116 SCRA 597, 604 in
negating jurisdiction of the Labor Arbiter, although the parties were an
employer and two employees, Mr. Justice Abad Santos stated:

II
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT PETITIONER HAS
NO CAPACITY TO SUE AND BE SUED IN THE PHILIPPINES DESPITE THE
FACT THAT PETITIONER IS DULY LICENSED BY THE SECURITIES AND
EXCHANGE COMMISSION TO SET UP AND OPERATE A REGIONAL OR AREA
HEADQUARTERS IN THE COUNTRY AND THAT IT HAS CONTINUOUSLY
OPERATED AS SUCH FOR THE LAST NINE (9) YEARS.

The pivotal question to Our mind is whether or not the
Labor Code has any relevance to the reliefs sought by
plaintiffs. For if the Labor Code has no relevance, any
discussion concerning the statutes amending it and
whether or not they have retroactive effect is
unnecessary.
xxx xxx xxx

III
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE ERRONEOUS
INCLUSION OF THE HUSBAND IN A COMPLAINT IS A FATAL DEFECT THAT
SHALL RESULT IN THE OUTRIGHT DISMISSAL OF THE COMPLAINT.
IV
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE HUSBAND IS
NOT REQUIRED BY THE RULES TO BE JOINED AS A DEFENDANT IN A
COMPLAINT AGAINST THE WIFE.
There is merit to the petition.
Firstly, the trial court should not have held itself without jurisdiction over Civil Case No. 922486. It is true that the loan and cash advances sought to be recovered by petitioner were
contracted by private respondent Romana Lanchinebre while she was still in the employ of
petitioner. Nonetheless, it does not follow that Article 217 of the Labor Code covers their
relationship.

And in Singapore Airlines Limited vs. Paño, 122 SCRA 671, 677, the
following was said:
Stated differently, petitioner seeks protection under the
civil laws and claims no benefits under the Labor Code.
The primary relief sought is for liquidated damages for
breach of a contractual obligation. The other items
demanded are not labor benefits demanded by workers
generally taken cognizance of in labor disputes, such
as payment of wages, overtime compensation or
separation pay. The items claimed are the natural
consequences flowing from breach of an obligation,
intrinsically a civil dispute.
xxx xxx xxx
In San Miguel Corporation vs. NLRC, 161 SCRA 719 (1988), we crystallized the doctrines set
forth in the Medina, Singapore Airlines, and Molave Motors cases, thus:

. . . The important principle that runs through these three (3) cases is
that where the claim to the principal relief sought is to be resolved not by
reference to the Labor Code or other labor relations statute or a
collective bargaining agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular courts of justice and
not to the Labor Arbiter and the NLRC. In such situations, resolutions of
the dispute requires expertise, not in labor management relations nor in
wage structures and other terms and conditions of employment, but
rather in the application of the general civil law. Clearly, such claims fall
outside the area of competence or expertise ordinarily ascribed to Labor
Arbiters and the NLRC and the rationale for granting jurisdiction over
such claims to these agencies disappears.
Civil Case No. 92-2486 is a simple collection of a sum of money brought by petitioner, as
creditor, against private respondent Romana Lanchinebre, as debtor. The fact that they
were employer and employee at the time of the transaction does not negate the civil
jurisdiction of the trial court. The case does not involve adjudication of a labor dispute but
recovery of a sum of money based on our civil laws on obligation and contract.
Secondly, the trial court erred in holding that petitioner does not have capacity to sue in
the Philippines. It is clear that petitioner is a foreign corporation doing business in the
Philippines. Petitioner is covered by the Omnibus Investment Code of 1987. Said law
defines "doing business," as follows:
. . . shall include soliciting orders, purchases, service contracts, opening
offices, whether called "liaison" offices or branches; appointing
representatives or distributors who are domiciled in the Philippines or
who in any calendar year stay in the Philippines for a period or periods
totalling one hundred eighty (180) days or more; participating in the
management, supervision or control of any domestic business firm, entity
or corporation in the Philippines, and any other act or acts that imply a
continuity of commercial dealings or arrangements and contemplate to
that extent the performance of acts or works, or the exercise of some of
the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business
organization. 5
There is no general rule or governing principle as to what constitutes "doing" or "engaging
in" or "transacting" business in the Philippines. Each case must be judged in the light of its
peculiar circumstances. 6 In the case at bench, petitioner does not engage in commercial
dealings or activities in the country because it is precluded from doing so by P.D. No. 218,
under which it was established. 7 Nonetheless, it has been continuously, since 1983, acting
as a supervision, communications and coordination center for its home office's affiliates in
Singapore, and in the process has named its local agent and has employed Philippine
nationals like private respondent Romana Lanchinebre. From this uninterrupted
performance by petitioner of acts pursuant to its primary purposes and functions as a
regional/area headquarters for its home office, it is clear that petitioner is doing business in

the country. Moreover, private respondents are estopped from assailing the personality of
petitioner. So we held in Merrill Lynch Futures, Inc. vs. Court of Appeals, 211 SCRA 824, 837
(1992):
The rule is that a party is estopped to challenge the personality of a
corporation after having acknowledged the same by entering into a
contract with it. And the "doctrine of estoppel to deny corporate
existence applies to foreign as well as to domestic corporations;" "one
who has dealth with a corporation of foreign origin as a corporate entity
is estopped to deny its corporate existence and capacity." The principle
"will be applied to prevent a person contracting with a foreign
corporation from later taking advantage of its noncompliance with the
statutes chiefly in cases where such person has received the benefits of
the contract, . . . (Citations omitted.)
Finally, the trial court erred when it dismissed Civil Case No. 92-2486 on what it found to be
the misjoinder of private respondent Teofilo Lanchinebre as party defendant. It is a basic
rule that "(m)isjoinder or parties is not ground for dismissal of an action." 8 Moreover, the
Order of the trial court is based on Section 4(h), Rule 3 of the Revised Rules of Court, which
provides:
A married woman may not . . . be sued alone without joining her
husband, except . . . if the litigation is incidental to the profession,
occupation or business in which she is engaged,
Whether or not the subject loan was incurred by private respondent as an incident to her
profession, occupation or business is a question of fact. In the absence of relevant
evidence, the issue cannot be resolved in a motion to dismiss.
IN VIEW WHEREOF, the instant Petition is GRANTED. The Orders, dated December 21, 1992
and March 8, 1993, in Civil Case No. 92-2486 are REVERSED AND SET ASIDE. The RTC of
Makati, Br. 59, is hereby ordered to hear the reinstated case on its merits. No costs.
SO ORDERED.