Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 157802 October 13, 2010

MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K. SPENCER,

CATHERINE SPENCER, AND ALEX MANCILLA, Petitioners,
vs.
RICARDO R. COROS, Respondent.

DECISION

BERSAMIN, J.:

This case reprises the jurisdictional conundrum of whether a complaint for illegal dismissal is
cognizable by the Labor Arbiter (LA) or by the Regional Trial Court (RTC). The determination of
whether the dismissed officer was a regular employee or a corporate officer unravels the
conundrum. In the case of the regular employee, the LA has jurisdiction; otherwise, the RTC
exercises the legal authority to adjudicate.

In this appeal via petition for review on certiorari, the petitioners challenge the decision dated
September 13, 20021and the resolution dated April 2, 2003,2 both promulgated in C.A.-G.R. SP No.
65714 entitled Matling Industrial and Commercial Corporation, et al. v. Ricardo R. Coros and
National Labor Relations Commission, whereby by the Court of Appeals (CA) sustained the ruling of
the National Labor Relations Commission (NLRC) to the effect that the LA had jurisdiction because
the respondent was not a corporate officer of petitioner Matling Industrial and Commercial
Corporation (Matling).

Antecedents

After his dismissal by Matling as its Vice President for Finance and Administration, the respondent
filed on August 10, 2000 a complaint for illegal suspension and illegal dismissal against Matling and
some of its corporate officers (petitioners) in the NLRC, Sub-Regional Arbitration Branch XII, Iligan
City.3

The petitioners moved to dismiss the complaint,4 raising the ground, among others, that the
complaint pertained to the jurisdiction of the Securities and Exchange Commission (SEC) due to the
controversy being intra-corporate inasmuch as the respondent was a member of Matlings Board of
Directors aside from being its Vice-President for Finance and Administration prior to his termination.

The respondent opposed the petitioners motion to dismiss,5 insisting that his status as a member of
Matlings Board of Directors was doubtful, considering that he had not been formally elected as
such; that he did not own a single share of stock in Matling, considering that he had been made to
sign in blank an undated indorsement of the certificate of stock he had been given in 1992; that
Matling had taken back and retained the certificate of stock in its custody; and that even assuming
that he had been a Director of Matling, he had been removed as the Vice President for Finance and
Administration, not as a Director, a fact that the notice of his termination dated April 10, 2000
showed.
On October 16, 2000, the LA granted the petitioners motion to dismiss,6 ruling that the respondent
was a corporate officer because he was occupying the position of Vice President for Finance and
Administration and at the same time was a Member of the Board of Directors of Matling; and that,
consequently, his removal was a corporate act of Matling and the controversy resulting from such
removal was under the jurisdiction of the SEC, pursuant to Section 5, paragraph (c) of Presidential
Decree No. 902.

Ruling of the NLRC

The respondent appealed to the NLRC,7 urging that:

THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION GRANTING

APPELLEES MOTION TO DISMISS WITHOUT GIVING THE APPELLANT AN OPPORTUNITY TO
FILE HIS OPPOSITION THERETO THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE
PROCESS.

II

THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING THE CASE FOR
LACK OF JURISDICTION.

On March 13, 2001, the NLRC set aside the dismissal, concluding that the respondents complaint
for illegal dismissal was properly cognizable by the LA, not by the SEC, because he was not a
corporate officer by virtue of his position in Matling, albeit high ranking and managerial, not being
among the positions listed in Matlings Constitution and By-Laws.8 The NLRC disposed thuswise:

WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered declaring and holding
that the case at bench does not involve any intracorporate matter. Hence, jurisdiction to hear and act
on said case is vested with the Labor Arbiter, not the SEC, considering that the position of Vice-
President for Finance and Administration being held by complainant-appellant is not listed as among
respondent's corporate officers.

Accordingly, let the records of this case be REMANDED to the Arbitration Branch of origin in order
that the Labor Arbiter below could act on the case at bench, hear both parties, receive their
respective evidence and position papers fully observing the requirements of due process, and
resolve the same with reasonable dispatch.

SO ORDERED.

The petitioners sought reconsideration,9 reiterating that the respondent, being a member of the
Board of Directors, was a corporate officer whose removal was not within the LAs jurisdiction.

The petitioners later submitted to the NLRC in support of the motion for reconsideration the certified
machine copies of Matlings Amended Articles of Incorporation and By Laws to prove that the
President of Matling was thereby granted "full power to create new offices and appoint the officers
thereto, and the minutes of special meeting held on June 7, 1999 by Matlings Board of Directors to
prove that the respondent was, indeed, a Member of the Board of Directors.10

Nonetheless, on April 30, 2001, the NLRC denied the petitioners motion for reconsideration.11
 Ruling of the CA

The petitioners elevated the issue to the CA by petition for certiorari, docketed as C.A.-G.R. No. SP
65714, contending that the NLRC committed grave abuse of discretion amounting to lack of
jurisdiction in reversing the correct decision of the LA.

In its assailed decision promulgated on September 13, 2002,12 the CA dismissed the petition for
certiorari, explaining:

For a position to be considered as a corporate office, or, for that matter, for one to be considered as
a corporate officer, the position must, if not listed in the by-laws, have been created by the
corporation's board of directors, and the occupant thereof appointed or elected by the same board of
directors or stockholders. This is the implication of the ruling in Tabang v. National Labor Relations
Commission, which reads:

"The president, vice president, secretary and 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, other offices are sometimes created by the charter or by-laws
of a corporation, or the board of directors may be empowered under the by-laws of a corporation to
create additional offices as may be necessary.

It has been held that an 'office' is created by the charter of the corporation and the officer is elected
by the directors or 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."

This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor Relations
Commission and De Rossi v. National Labor Relations Commission.

The position of vice-president for administration and finance, which Coros used to hold in the
corporation, was not created by the corporations board of directors but only by its president or
executive vice-president pursuant to the by-laws of the corporation. Moreover, Coros appointment to
said position was not made through any act of the board of directors or stockholders of the
corporation. Consequently, the position to which Coros was appointed and later on removed from, is
not a corporate office despite its nomenclature, but an ordinary office in the corporation.

Coros alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the labor arbiter.

WHEREFORE, the petition for certiorari is hereby DISMISSED.

SO ORDERED.

The CA denied the petitioners motion for reconsideration on April 2, 2003.13

Issue

Thus, the petitioners are now before the Court for a review on certiorari, positing that the respondent
was a stockholder/member of the Matlings Board of Directors as well as its Vice President for
Finance and Administration; and that the CA consequently erred in holding that the LA had
jurisdiction.
The decisive issue is whether the respondent was a corporate officer of Matling or not. The
resolution of the issue determines whether the LA or the RTC had jurisdiction over his complaint for
illegal dismissal.

Ruling

The appeal fails.

The Law on Jurisdiction in Dismissal Cases

As a rule, the illegal dismissal of an officer or other employee of a private employer is properly
cognizable by the LA. This is pursuant to Article 217 (a) 2 of the Labor Code, as amended, which
provides as follows:

Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as otherwise
provided under this Code, 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 without extension, even in the absence of stenographic notes, the following cases involving
all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;

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

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 (5,000.00) regardless of whether accompanied with
a claim for reinstatement.

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

(c) Cases arising from the interpretation or implementation of collective bargaining

agreements and those arising from the interpretation or enforcement of company personnel
policies shall be disposed of by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said agreements. (As amended
by Section 9, Republic Act No. 6715, March 21, 1989).
Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls
under the jurisdiction of the Securities and Exchange Commission (SEC), because the controversy
arises out of intra-corporate or partnership relations between and among stockholders, members, or
associates, or 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 the controversy concerns their individual
franchise or right to exist as such entity; or because the controversy involves the election or
appointment of a director, trustee, officer, or manager of such corporation, partnership, or
association.14 Such controversy, among others, is known as an intra-corporate dispute.

Effective on August 8, 2000, upon the passage of Republic Act No. 8799,15 otherwise known as The
Securities Regulation Code, the SECs jurisdiction over all intra-corporate disputes was transferred
to the RTC, pursuant to Section 5.2 of RA No. 8799, to wit:

5.2. The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential
Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate
Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority may designate
the Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission
shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final
resolution which should be resolved within one (1) year from the enactment of this Code. The
Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed
as of 30 June 2000 until finally disposed.

Considering that the respondents complaint for illegal dismissal was commenced on August 10,
2000, it might come under the coverage of Section 5.2 of RA No. 8799, supra, should it turn out that
the respondent was a corporate, not a regular, officer of Matling.

II

Was the Respondents Position of Vice President

for Administration and Finance a Corporate Office?

We must first resolve whether or not the respondents position as Vice President for Finance and
Administration was a corporate office. If it was, his dismissal by the Board of Directors rendered the
matter an intra-corporate dispute cognizable by the RTC pursuant to RA No. 8799.

The petitioners contend that the position of Vice President for Finance and Administration was a
corporate office, having been created by Matlings President pursuant to By-Law No. V, as
amended,16 to wit:

BY LAW NO. V
Officers

The President shall be the executive head of the corporation; shall preside over the meetings of the
stockholders and directors; shall countersign all certificates, contracts and other instruments of the
corporation as authorized by the Board of Directors; shall have full power to hire and discharge any
or all employees of the corporation; shall have full power to create new offices and to appoint the
officers thereto as he may deem proper and necessary in the operations of the corporation and as
the progress of the business and welfare of the corporation may demand; shall make reports to the
directors and stockholders and perform all such other duties and functions as are incident to his
office or are properly required of him by the Board of Directors. In case of the absence or disability of
the President, the Executive Vice President shall have the power to exercise his functions.
The petitioners argue that the power to create corporate offices and to appoint the individuals to
assume the offices was delegated by Matlings Board of Directors to its President through By-Law
No. V, as amended; and that any office the President created, like the position of the respondent,
was as valid and effective a creation as that made by the Board of Directors, making the office a
corporate office. In justification, they cite Tabang v. National Labor Relations Commission,17 which
held that "other offices are sometimes created by the charter or by-laws of a corporation, or the
board of directors may be empowered under the by-laws of a corporation to create additional officers
as may be necessary."

The respondent counters that Matlings By-Laws did not list his position as Vice President for
Finance and Administration as one of the corporate offices; that Matlings By-Law No. III listed only
four corporate officers, namely: President, Executive Vice President, Secretary, and
Treasurer; 18 that the corporate offices contemplated in the phrase "and such other officers as may
be provided for in the by-laws" found in Section 25 of the Corporation Code should be clearly and
expressly stated in the By-Laws; that the fact that Matlings By-Law No. III dealt with Directors &
Officers while its By-Law No. V dealt with Officers proved that there was a differentiation between
the officers mentioned in the two provisions, with those classified under By-Law No. V being ordinary
or non-corporate officers; and that the officer, to be considered as a corporate officer, must be
elected by the Board of Directors or the stockholders, for the President could only appoint an
employee to a position pursuant to By-Law No. V.

We agree with respondent.

Section 25 of the Corporation Code provides:

Section 25. Corporate officers, quorum.--Immediately after their election, the directors of a
corporation must formally organize by the election of a president, who shall be a director, a treasurer
who may or may not be a director, a secretary who shall be a resident and citizen of the
Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more
positions may be held concurrently by the same person, except that no one shall act as president
and secretary or as president and treasurer at the same time.

The directors or trustees and officers to be elected shall perform the duties enjoined on them by law
and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a
greater majority, a majority of the number of directors or trustees as fixed in the articles of
incorporation shall constitute a quorum for the transaction of corporate business, and every decision
of at least a majority of the directors or trustees present at a meeting at which there is a quorum
shall be valid as a corporate act, except for the election of officers which shall require the vote of a
majority of all the members of the board.

Directors or trustees cannot attend or vote by proxy at board meetings.

Conformably with Section 25, a position must be expressly mentioned in the By-Laws in order to be
considered as a corporate office. Thus, the creation of an office pursuant to or under a By-Law
enabling provision is not enough to make a position a corporate office. Guerrea v. Lezama,19 the first
ruling on the matter, held that the only officers of a corporation were those given that character either
by the Corporation Code or by the By-Laws; the rest of the corporate officers could be considered
only as employees or subordinate officials. Thus, it was held in Easycall Communications Phils., Inc.
v. King:20

An "office" is created by the charter of the corporation and the officer is elected by the directors or
stockholders. On the other hand, an employee occupies no office and generally is employed not by
the 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.

In this case, respondent was appointed vice president for nationwide expansion by Malonzo,
petitioner's general manager, not by the board of directors of petitioner. It was also Malonzo who
determined the compensation package of respondent. Thus, respondent was an employee, not a
"corporate officer." The CA was therefore correct in ruling that jurisdiction over the case was properly
with the NLRC, not the SEC (now the RTC).

This interpretation is the correct application of Section 25 of the Corporation Code, which plainly
states that the corporate officers are the President, Secretary, Treasurer and such other officers as
may be provided for in the By-Laws. Accordingly, the corporate officers in the context of PD No. 902-
A are exclusively those who are given that character either by the Corporation Code or by the
corporations By-Laws.

A different interpretation can easily leave the way open for the Board of Directors to circumvent the
constitutionally guaranteed security of tenure of the employee by the expedient inclusion in the By-
Laws of an enabling clause on the creation of just any corporate officer position.

It is relevant to state in this connection that the SEC, the primary agency administering the
Corporation Code, adopted a similar interpretation of Section 25 of the Corporation Code in its
Opinion dated November 25, 1993,21 to wit:

Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever are the
corporate officers enumerated in the by-laws are the exclusive Officers of the corporation and the
Board has no power to create other Offices without amending first the corporate By-laws. However,
the Board may create appointive positions other than the positions of corporate Officers, but
the persons occupying such positions are not considered as corporate officers within the
meaning of Section 25 of the Corporation Code and are not empowered to exercise the functions
of the corporate Officers, except those functions lawfully delegated to them. Their functions and
duties are to be determined by the Board of Directors/Trustees.

Moreover, the Board of Directors of Matling could not validly delegate the power to create a
corporate office to the President, in light of Section 25 of the Corporation Code requiring the Board
of Directors itself to elect the corporate officers. Verily, the power to elect the corporate officers was
a discretionary power that the law exclusively vested in the Board of Directors, and could not be
delegated to subordinate officers or agents.22 The office of Vice President for Finance and
Administration created by Matlings President pursuant to By Law No. V was an ordinary, not a
corporate, office.

To emphasize, the power to create new offices and the power to appoint the officers to occupy them
vested by By-Law No. V merely allowed Matlings President to create non-corporate offices to be
occupied by ordinary employees of Matling. Such powers were incidental to the Presidents duties as
the executive head of Matling to assist him in the daily operations of the business.

The petitioners reliance on Tabang, supra, is misplaced. The statement in Tabang, to the effect that
offices not expressly mentioned in the By-Laws but were created pursuant to a By-Law enabling
provision were also considered corporate offices, was plainly obiter dictum due to the position
subject of the controversy being mentioned in the By-Laws. Thus, the Court held therein that the
position was a corporate office, and that the determination of the rights and liabilities arising from the
ouster from the position was an intra-corporate controversy within the SECs jurisdiction.
In Nacpil v. Intercontinental Broadcasting Corporation,23 which may be the more appropriate ruling,
the position subject of the controversy was not expressly mentioned in the By-Laws, but was created
pursuant to a By-Law enabling provision authorizing the Board of Directors to create other offices
that the Board of Directors might see fit to create. The Court held there that the position was a
corporate office, relying on the obiter dictum in Tabang.

Considering that the observations earlier made herein show that the soundness of their dicta is not
unassailable, Tabang and Nacpil should no longer be controlling.

III

Did Respondents Status as Director and

Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?

Yet, the petitioners insist that because the respondent was a Director/stockholder of Matling, and
relying on Paguio v. National Labor Relations Commission24 and Ongkingko v. National Labor
Relations Commission,25 the NLRC had no jurisdiction over his complaint, considering that any case
for illegal dismissal brought by a stockholder/officer against the corporation was an intra-corporate
matter that must fall under the jurisdiction of the SEC conformably with the context of PD No. 902-A.

The petitioners insistence is bereft of basis.

To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings, the complainants
were undeniably corporate officers due to their positions being expressly mentioned in the By-Laws,
aside from the fact that both of them had been duly elected by the respective Boards of Directors.
But the herein respondents position of Vice President for Finance and Administration was not
expressly mentioned in the By-Laws; neither was the position of Vice President for Finance and
Administration created by Matlings Board of Directors. Lastly, the President, not the Board of
Directors, appointed him.

True it is that the Court pronounced in Tabang as follows:

Also, an intra-corporate controversy is one which arises between a stockholder and the corporation.
There is no distinction, qualification or any exemption whatsoever. The provision is broad and covers
all kinds of controversies between stockholders and corporations.26

However, the Tabang pronouncement is not controlling because it is too sweeping and does not
accord with reason, justice, and fair play. In order to determine whether a dispute constitutes an
intra-corporate controversy or not, the Court considers two elements instead, namely: (a) the status
or relationship of the parties; and (b) the nature of the question that is the subject of their
controversy. This was our thrust in Viray v. Court of Appeals:27

The establishment of any of the relationships mentioned above will not necessarily always confer
jurisdiction over the dispute on the SEC to the exclusion of regular courts. The statement made in
one case that the rule admits of no exceptions or distinctions is not that absolute. The better policy in
determining which body has jurisdiction over a case would be to consider not only the status or
relationship of the parties but also the nature of the question that is the subject of their controversy.

Not every conflict between a corporation and its stockholders involves corporate matters that only
the SEC can resolve in the exercise of its adjudicatory or quasi-judicial powers. If, for example, a
person leases an apartment owned by a corporation of which he is a stockholder, there should be no
question that a complaint for his ejectment for non-payment of rentals would still come under the
jurisdiction of the regular courts and not of the SEC. By the same token, if one person injures
another in a vehicular accident, the complaint for damages filed by the victim will not come under the
jurisdiction of the SEC simply because of the happenstance that both parties are stockholders of the
same corporation. A contrary interpretation would dissipate the powers of the regular courts and
distort the meaning and intent of PD No. 902-A.

In another case, Mainland Construction Co., Inc. v. Movilla,28 the Court reiterated these determinants
thuswise:

In order that the SEC (now the regular courts) can take cognizance of a case, the controversy must
pertain to any of the following relationships:

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

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

members or officers;

c) between the corporation, partnership or association and the State as far as its franchise,
permit or license to operate is concerned; and

d) among the stockholders, partners or associates themselves.

The fact that the parties involved in the controversy are all stockholders or that the parties involved
are the stockholders and the corporation does not necessarily place the dispute within the ambit of
the jurisdiction of SEC. The better policy to be followed in determining jurisdiction over a case should
be to consider concurrent factors such as the status or relationship of the parties or the nature of the
question that is the subject of their controversy. In the absence of any one of these factors, the SEC
will not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between the
corporation and its stockholders would involve such corporate matters as only the SEC can resolve
in the exercise of its adjudicatory or quasi-judicial powers.29

The criteria for distinguishing between corporate officers who may be ousted from office at will, on
one hand, and ordinary corporate employees who may only be terminated for just cause, on the
other hand, do not depend on the nature of the services performed, but on the manner of creation of
the office. In the respondents case, he was supposedly at once an employee, a stockholder, and a
Director of Matling. The circumstances surrounding his appointment to office must be fully
considered to determine whether the dismissal constituted an intra-corporate controversy or a labor
termination dispute. We must also consider whether his status as Director and stockholder had any
relation at all to his appointment and subsequent dismissal as Vice President for Finance and
Administration.

Obviously enough, the respondent was not appointed as Vice President for Finance and
Administration because of his being a stockholder or Director of Matling. He had started working for
Matling on September 8, 1966, and had been employed continuously for 33 years until his
termination on April 17, 2000, first as a bookkeeper, and his climb in 1987 to his last position as Vice
President for Finance and Administration had been gradual but steady, as the following sequence
indicates:

1966 Bookkeeper
 1968 Senior Accountant

1969 Chief Accountant

1972 Office Supervisor

1973 Assistant Treasurer

1978 Special Assistant for Finance

1980 Assistant Comptroller

1983 Finance and Administrative Manager

1985 Asst. Vice President for Finance and Administration

1987 to April 17, 2000 Vice President for Finance and Administration

Even though he might have become a stockholder of Matling in 1992, his promotion to the position
of Vice President for Finance and Administration in 1987 was by virtue of the length of quality
service he had rendered as an employee of Matling. His subsequent acquisition of the status of
Director/stockholder had no relation to his promotion. Besides, his status of Director/stockholder was
unaffected by his dismissal from employment as Vice President for Finance and Administration. 1avv phi 1

In Prudential Bank and Trust Company v. Reyes,30 a case involving a lady bank manager who had
risen from the ranks but was dismissed, the Court held that her complaint for illegal dismissal was
correctly brought to the NLRC, because she was deemed a regular employee of the bank. The Court
observed thus:

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. 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." 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; that is, her services may be terminated only for a just or authorized
cause. 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.
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision of the Court of
Appeals.

Costs of suit to be paid by the petitioners.

SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

PRINCE TRANSPORT, INC. and MR. G.R. No. 167291

RENATO CLAROS,
Petitioners, Present:

CARPIO, J., Chairperson,

NACHURA,
- versus - PERALTA,
ABAD, and
_____________,** JJ.

DIOSDADO GARCIA, LUISITO

GARCIA, RODANTE ROMERO, REX Promulgated:
BARTOLOME, FELICIANO GASCO,
JR., DANILO ROJO, EDGAR
SANFUEGO, AMADO GALANTO,
EUTIQUIO LUGTU, JOEL January 12, 2011
GRAMATICA, MIEL CERVANTES,
TERESITA CABANES, ROE DELA
CRUZ, RICHELO BALIDOY, VILMA
PORRAS, MIGUELITO SALCEDO,
CRISTINA GARCIA, MARIO
NAZARENO, DINDO TORRES, ESMAEL
RAMBOYONG, ROBETO*MANO,
ROGELIO BAGAWISAN, ARIEL
SNACHEZ, ESTAQULO VILLAREAL,
NELSON MONTERO, GLORIA
 ORANTE, HARRY TOCA, PABLITO
MACASAET and RONALD GARCITA
Respondents.
x-----------------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court praying for the annulment of the Decision[1] and Resolution[2] of the Court of
Appeals (CA) dated December 20, 2004 and February 24, 2005, respectively, in CA-
G.R. SP No. 80953. The assailed Decision reversed and set aside the Resolutions
dated May 30, 2003[3] and September 26, 2003[4] of the National Labor Relations
Commission (NLRC) in CA No. 029059-01, while the disputed Resolution denied
petitioners' Motion for Reconsideration.

The present petition arose from various complaints filed by herein respondents
charging petitioners with illegal dismissal, unfair labor practice and illegal
deductions and praying for the award of premium pay for holiday and rest day,
holiday pay, service leave pay, 13th month pay, moral and exemplary damages and
attorney's fees.

Respondents alleged in their respective position papers and other related pleadings
that they were employees of Prince Transport, Inc. (PTI), a company engaged in the
business of transporting passengers by land; respondents were hired either as drivers,
conductors, mechanics or inspectors, except for respondent Diosdado Garcia
(Garcia), who was assigned as Operations Manager; in addition to their regular
monthly income, respondents also received commissions equivalent to 8 to 10% of
their wages; sometime in October 1997, the said commissions were reduced to 7 to
9%; this led respondents and other employees of PTI to hold a series of meetings to
discuss the protection of their interests as employees; these meetings led petitioner
Renato Claros, who is the president of PTI, to suspect that respondents are about to
form a union; he made known to Garcia his objection to the formation of a union; in
December 1997, PTI employees requested for a cash advance, but the same was
denied by management which resulted in demoralization on the employees' ranks;
later, PTI acceded to the request of some, but not all, of the employees; the foregoing
circumstances led respondents to form a union for their mutual aid and protection;
in order to block the continued formation of the union, PTI caused the transfer of all
union members and sympathizers to one of its sub-companies, Lubas Transport
(Lubas); despite such transfer, the schedule of drivers and conductors, as well as
their company identification cards, were issued by PTI; the daily time records,
tickets and reports of the respondents were also filed at the PTI office; and, all claims
for salaries were transacted at the same office; later, the business of Lubas
deteriorated because of the refusal of PTI to maintain and repair the units being used
therein, which resulted in the virtual stoppage of its operations and respondents' loss
of employment.
Petitioners, on the other hand, denied the material allegations of the complaints
contending that herein respondents were no longer their employees, since they all
transferred to Lubas at their own request; petitioners have nothing to do with the
management and operations of Lubas as well as the control and supervision of the
latter's employees; petitioners were not aware of the existence of any union in their
company and came to know of the same only in June 1998 when they were served a
copy of the summons in the petition for certification election filed by the union; that
before the union was registered on April 15, 1998, the complaint subject of the
present petition was already filed; that the real motive in the filing of the complaints
was because PTI asked respondents to vacate the bunkhouse where they
(respondents) and their respective families were staying because PTI wanted to
renovate the same.

Subsequently, the complaints filed by respondents were consolidated.

On October 25, 2000, the Labor Arbiter rendered a Decision,[5] the dispositive
portion of which reads as follows:

WHEREFORE, judgment is hereby rendered:

1. Dismissing the complaints for Unfair Labor Practice, non-

payment of holiday pay and holiday premium, service incentive leave pay
and 13th month pay;
 Dismissing the complaint of Edgardo Belda for refund of
boundary-hulog;
2. Dismissing the complaint for illegal dismissal against the
respondents Prince Transport, Inc. and/or Prince Transport Phils.
Corporation, Roberto Buenaventura, Rory Bayona, Ailee Avenue, Nerissa
Uy, Mario Feranil and Peter Buentiempo;

3. Declaring that the complainants named below are illegally

dismissed by Lubas Transport; ordering said Lubas Transport to pay
backwages and separation pay in lieu of reinstatement in the following
amount:

Complainants Backwages Separation Pay

(1) Diosdado Garcia P222,348.70 P79,456.00
(2) Feliciano Gasco, Jr. 203,350.00 54,600.00
(3) Pablito Macasaet 145,250.00 13,000.00
(4) Esmael Ramboyong 221,500.00 30,000.00
(5) Joel Gramatica 221,500.00 60,000.00
(6) Amado Galanto 130,725.00 29,250.00
(7) Miel Cervantes 265,800.00 60,000.00
(8) Roberto Mano 221,500.00 50,000.00
(9) Roe dela Cruz 265,800.00 60,000.00
(10) Richelo Balidoy 130,725.00 29,250.00
(11) Vilma Porras 221,500.00 70,000.00
(12) Miguelito Salcedo 265,800.00 60,000.00
(13) Cristina Garcia 130,725.00 35,100.00
(14) Luisito Garcia 145,250.00 19,500.00
(15) Rogelio Bagawisan 265,800.00 60,000.00
(16) Rodante H. Romero 221,500.00 60,000.00
(17) Dindo Torres 265,800.00 50,000.00
(18) Edgar Sanfuego 221,500.00 40,000.00
(19) Ronald Gacita 221,500.00 40,000.00
(20) Harry Toca 174,300.00 23,400.00
(21) Amado Galanto 130,725.00 17,550.00
(22) Teresita Cabaes 130,725.00 17,550.00
(23) Rex Bartolome 301,500.00 30,000.00
(24) Mario Nazareno 221,500.00 30,000.00
(25) Eustaquio Villareal 145,250.00 19,500.00
(26) Ariel Sanchez 265,800.00 60,000.00
(27) Gloria Orante 263,100.00 60,000.00
(28) Nelson Montero 264,600.00 60,000.00
 (29) Rizal Beato 295,000.00 40,000.00
(30) Eutiquio Lugtu 354,000.00 48,000.00
(31) Warlito Dickensomn 295,000.00 40,000.00
(32) Edgardo Belda 354,000.00 84,000.00
(33) Tita Go 295,000.00 70,000.00
(34) Alex Lodor 295,000.00 50,000.00
(35) Glenda Arguilles 295,000.00 40,000.00
(36) Erwin Luces 354,000.00 48,000.00
(37) Jesse Celle 354,000.00 48,000.00
(38) Roy Adorable 295,000.00 40,000.00
(39) Marlon Bangcoro 295,000.00 40,000.00
(40)Edgardo Bangcoro 354,000.00 36,000.00

4. Ordering Lubas Transport to pay attorney's fees equivalent to

ten (10%) of the total monetary award; and

6. Ordering the dismissal of the claim for moral and exemplary

damages for lack merit.
SO ORDERED.[6]

The Labor Arbiter ruled that petitioners are not guilty of unfair labor practice in the
absence of evidence to show that they violated respondents right to self-organization.
The Labor Arbiter also held that Lubas is the respondents employer and that it
(Lubas) is an entity which is separate, distinct and independent from PTI.
Nonetheless, the Labor Arbiter found that Lubas is guilty of illegally dismissing
respondents from their employment.

Respondents filed a Partial Appeal with the NLRC praying, among others, that PTI
should also be held equally liable as Lubas.

In a Resolution dated May 30, 2003, the NLRC modified the Decision of the Labor
Arbiter and disposed as follows:

WHEREFORE, premises considered, the appeal is hereby PARTIALLY

GRANTED. Accordingly, the Decision appealed from
is SUSTAINED subject to the modification that Complainant-Appellant
Edgardo Belda deserves refund of his boundary-hulog in the amount
of P446,862.00; and that Complainants-Appellants Danilo Rojo and
 Danilo Laurel should be included in the computation of Complainants-
Appellants claim as follows:

Complainants Backwages Separation Pay

41. Danilo Rojo P355,560.00 P48,000.00
42. Danilo Laurel P357,960.00 P72,000.00

As regards all other aspects, the Decision appealed from is SUSTAINED.

SO ORDERED.[7]

Respondents filed a Motion for Reconsideration, but the NLRC denied it in its
Resolution[8] dated September 26, 2003.

Respondents then filed a special civil action for certiorari with the CA assailing the
Decision and Resolution of the NLRC.

On December 20, 2004, the CA rendered the herein assailed Decision which granted
respondents' petition. The CA ruled that petitioners are guilty of unfair labor
practice; that Lubas is a mere instrumentality, agent conduit or adjunct of PTI; and
that petitioners act of transferring respondents employment to Lubas is indicative of
their intent to frustrate the efforts of respondents to organize themselves into a union.
Accordingly, the CA disposed of the case as follows:

WHEREFORE, the Petition for Certiorari is hereby GRANTED.

Accordingly, the subject decision is hereby REVERSED and SET ASIDE
and another one ENTERED finding the respondents guilty of unfair labor
practice and ordering them to reinstate the petitioners to their former
positions without loss of seniority rights and with full backwages.

With respect to the portion ordering the inclusion of Danilo Rojo and
Danilo Laurel in the computation of petitioner's claim for backwages and
with respect to the portion ordering the refund of Edgardo Belda's
boundary-hulog in the amount of P446,862.00, the NLRC decision is
affirmed and maintained.

SO ORDERED.[9]
Petitioners filed a Motion for Reconsideration, but the CA denied it via its
Resolution[10] dated February 24, 2005.

Hence, the instant petition for review on certiorari based on the following grounds:

A
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN GIVING DUE COURSE TO THE RESPONDENTS'
PETITION FOR CERTIORARI

1. THE COURT OF APPEALS SHOULD HAVE RESPECTED

THE FINDINGS OF THE LABOR ARBITER AND AFFIRMED
BY THE NLRC

2. ONLY ONE PETITIONER EXECUTED AND VERIFIED

THE PETITION
3. THE COURT OF APPEALS SHOULD NOT HAVE GIVEN
DUE COURSE TO THE PETITION WITH RESPECT TO
RESPONDENTS REX BARTOLOME, FELICIANO GASCO,
DANILO ROJO, EUTIQUIO LUGTU, AND NELSON
MONTERO AS THEY FAILED TO FILE AN APPEAL TO THE
NLRC

B
THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING
THAT PETITIONERS PRINCE TRANSPORT, INC. AND MR.
RENATO CLAROS AND LUBAS TRANSPORT ARE ONE AND THE
SAME CORPORATION AND THUS, LIABLE IN SOLIDUM TO
RESPONDENTS.

C
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN ORDERING THE REINSTATEMENT OF
RESPONDENTS TO THEIR PREVIOUS POSITION WHEN IT IS NOT
 ONE OF THE ISSUES RAISED IN RESPONDENTS' PETITION
FOR CERTIORARI.[11]

Petitioners assert that factual findings of agencies exercising quasi-judicial functions

like the NLRC are accorded not only respect but even finality; that the CA should
have outrightly dismissed the petition filed before it because
in certiorari proceedings under Rule 65 of the Rules of Court it is not within the
province of the CA to evaluate the sufficiency of evidence upon which the NLRC
based its determination, the inquiry being limited essentially to whether or not said
tribunal has acted without or in excess of its jurisdiction or with grave abuse of
discretion. Petitioners assert that the CA can only pass upon the factual findings of
the NLRC if they are not supported by evidence on record, or if the impugned
judgment is based on misapprehension of facts which circumstances are not present
in this case. Petitioners also emphasize that the NLRC and the Labor Arbiter
concurred in their factual findings which were based on substantial evidence and,
therefore, should have been accorded great weight and respect by the CA.

Respondents, on the other hand, aver that the CA neither exceeded its jurisdiction
nor committed error in re-evaluating the NLRCs factual findings since such findings
are not in accord with the evidence on record and the applicable law or jurisprudence.

The Court agrees with respondents.

The power of the CA to review NLRC decisions via a petition for certiorari under
Rule 65 of the Rules of Court has been settled as early as this Courts decision in St.
Martin Funeral Homes v. NLRC.[12] In said case, the Court held that the proper
vehicle for such review is a special civil action for certiorari under Rule 65 of the
said Rules, and that the case should be filed with the CA in strict observance of the
doctrine of hierarchy of courts. Moreover, it is already settled that under Section 9
of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, the CA
pursuant to the exercise of its original jurisdiction over petitions for certiorari is
specifically given the power to pass upon the evidence, if and when necessary, to
resolve factual issues.[13] Section 9 clearly states:

xxxx
 The Court of Appeals shall have the power to try cases and conduct
hearings, receive evidence and perform any and all acts necessary to
resolve factual issues raised in cases falling within its original and
appellate jurisdiction, including the power to grant and conduct new trials
or further proceedings. x x x

However, equally settled is the rule that factual findings of labor officials, who are
deemed to have acquired expertise in matters within their jurisdiction, are generally
accorded not only respect but even finality by the courts when supported by
substantial evidence, i.e., the amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion.[14] But these findings are not
infallible. When there is a showing that they were arrived at arbitrarily or in disregard
of the evidence on record, they may be examined by the courts.[15] The CA can grant
the petition for certiorari if it finds that the NLRC, in its assailed decision or
resolution, made a factual finding not supported by substantial evidence.[16] It is
within the jurisdiction of the CA, whose jurisdiction over labor cases has been
expanded to review the findings of the NLRC.[17]

In this case, the NLRC sustained the factual findings of the Labor Arbiter. Thus,
these findings are generally binding on the appellate court, unless there was a
showing that they were arrived at arbitrarily or in disregard of the evidence on
record. In respondents' petition for certiorari with the CA, these factual findings
were reexamined and reversed by the appellate court on the ground that they were
not in accord with credible evidence presented in this case. To determine if the CA's
reexamination of factual findings and reversal of the NLRC decision are proper and
with sufficient basis, it is incumbent upon this Court to make its own evaluation of
the evidence on record.[18]

After a thorough review of the records at hand, the Court finds that the CA did not
commit error in arriving at its own findings and conclusions for reasons to be
discussed hereunder.
Firstly, petitioners posit that the petition filed with the CA is fatally defective,
because the attached verification and certificate against forum shopping was signed
only by respondent Garcia.

The Court does not agree.

While the general rule is that the certificate of non-forum shopping must be signed
by all the plaintiffs in a case and the signature of only one of them is insufficient, the
Court has stressed that the rules on forum shopping, which were designed to promote
and facilitate the orderly administration of justice, should not be interpreted with
such absolute literalness as to subvert its own ultimate and legitimate
objective.[19] Strict compliance with the provision regarding the certificate of non-
forum shopping underscores its mandatory nature in that the certification cannot be
altogether dispensed with or its requirements completely disregarded.[20] It does not,
however, prohibit substantial compliance therewith under justifiable circumstances,
considering especially that although it is obligatory, it is not jurisdictional.[21]

In a number of cases, the Court has consistently held that when all the petitioners
share a common interest and invoke a common cause of action or defense, the
signature of only one of them in the certification against forum shopping
substantially complies with the rules.[22] In the present case, there is no question that
respondents share a common interest and invoke a common cause of action. Hence,
the signature of respondent Garcia is a sufficient compliance with the rule governing
certificates of non-forum shopping. In the first place, some of the respondents
actually executed a Special Power of Attorney authorizing Garcia as their attorney-
in-fact in filing a petition for certiorari with the CA.[23]

The Court, likewise, does not agree with petitioners' argument that the CA should
not have given due course to the petition filed before it with respect to some of the
respondents, considering that these respondents did not sign the verification attached
to the Memorandum of Partial Appeal earlier filed with the NLRC. Petitioners assert
that the decision of the Labor Arbiter has become final and executory with respect
to these respondents and, as a consequence, they are barred from filing a petition
for certiorari with the CA.
With respect to the absence of some of the workers signatures in the verification, the
verification requirement is deemed substantially complied with when some of the
parties who undoubtedly have sufficient knowledge and belief to swear to the truth
of the allegations in the petition had signed the same. Such verification is deemed a
sufficient assurance that the matters alleged in the petition have been made in good
faith or are true and correct, and not merely speculative. Moreover, respondents'
Partial Appeal shows that the appeal stipulated as complainants-appellants Rizal
Beato, et al., meaning that there were more than one appellant who were all workers
of petitioners.

In any case, the settled rule is that a pleading which is required by the Rules of Court
to be verified, may be given due course even without a verification if the
circumstances warrant the suspension of the rules in the interest of justice.[24] Indeed,
the absence of a verification is not jurisdictional, but only a formal defect, which
does not of itself justify a court in refusing to allow and act on a case.[25] Hence, the
failure of some of the respondents to sign the verification attached to their
Memorandum of Appeal filed with the NLRC is not fatal to their cause of action.

Petitioners also contend that the CA erred in applying the doctrine of piercing the
corporate veil with respect to Lubas, because the said doctrine is applicable only to
corporations and Lubas is not a corporation but a single proprietorship; that Lubas
had been found by the Labor Arbiter and the NLRC to have a personality which is
separate and distinct from that of PTI; that PTI had no hand in the management and
operation as well as control and supervision of the employees of Lubas.

The Court is not persuaded.

On the contrary, the Court agrees with the CA that Lubas is a mere agent, conduit or
adjunct of PTI. A settled formulation of the doctrine of piercing the corporate veil is
that when two business enterprises are owned, conducted and controlled by the same
parties, both law and equity will, when necessary to protect the rights of third parties,
disregard the legal fiction that these two entities are distinct and treat them as
identical or as one and the same.[26] In the present case, it may be true that Lubas is
a single proprietorship and not a corporation. However, petitioners attempt
to isolate themselves from and hide behind the supposed separate and distinct
personality of Lubas so as to evade their liabilities is precisely what the classical
doctrine of piercing the veil of corporate entity seeks to prevent and remedy.

Thus, the Court agrees with the observations of the CA, to wit:

As correctly pointed out by petitioners, if Lubas were truly a separate

entity, how come that it was Prince Transport who made the decision to
transfer its employees to the former? Besides, Prince Transport never
regarded Lubas Transport as a separate entity. In the aforesaid letter, it
referred to said entity as Lubas operations. Moreover, in said letter, it did
not transfer the employees; it assigned them. Lastly, the existing funds and
201 file of the employees were turned over not to a new company but a
new management.[27]

The Court also agrees with respondents that if Lubas is indeed an entity separate and
independent from PTI why is it that the latter decides which employees shall work
in the former?

What is telling is the fact that in a memorandum issued by PTI, dated January 22,
1998, petitioner company admitted that Lubas is one of its sub-companies.[28] In
addition, PTI, in its letters to its employees who were transferred to Lubas, referred
to the latter as its New City Operations Bus.[29]

Moreover, petitioners failed to refute the contention of respondents that despite the
latters transfer to Lubas of their daily time records, reports, daily income remittances
of conductors, schedule of drivers and conductors were all made, performed, filed
and kept at the office of PTI. In fact, respondents identification cards bear the name
of PTI.

It may not be amiss to point out at this juncture that in two separate illegal dismissal
cases involving different groups of employees transferred by PTI to other
companies, the Labor Arbiter handling the cases found that these companies and PTI
are one and the same entity; thus, making them solidarily liable for the payment of
backwages and other money claims awarded to the complainants therein.[30]
Petitioners likewise aver that the CA erred and committed grave abuse of discretion
when it ordered petitioners to reinstate respondents to their former positions,
considering that the issue of reinstatement was never brought up before it and
respondents never questioned the award of separation pay to them.

The Court is not persuaded.

It is clear from the complaints filed by respondents that they are seeking
reinstatement.[31]

In any case, Section 2 (c), Rule 7 of the Rules of Court provides that a pleading shall
specify the relief sought, but may add a general prayer for such further or other
reliefs as may be deemed just and equitable. Under this rule, a court can grant the
relief warranted by the allegation and the proof even if it is not specifically sought
by the injured party; the inclusion of a general prayer may justify the grant of a
remedy different from or together with the specific remedy sought, if the facts
alleged in the complaint and the evidence introduced so warrant.[32]

Moreover, in BPI Family Bank v. Buenaventura,[33] this Court ruled that the general
prayer is broad enough to justify extension of a remedy different from or together
with the specific remedy sought. Even without the prayer for a specific remedy,
proper relief may be granted by the court if the facts alleged in the complaint and the
evidence introduced so warrant. The court shall grant relief warranted by the
allegations and the proof even if no such relief is prayed for. The prayer in the
complaint for other reliefs equitable and just in the premises justifies the grant of a
relief not otherwise specifically prayed for.[34] In the instant case, aside from their
specific prayer for reinstatement, respondents, in their separate complaints, prayed
for such reliefs which are deemed just and equitable.

As to whether petitioners are guilty of unfair labor practice, the Court finds no cogent
reason to depart from the findings of the CA that respondents transfer of work
assignments to Lubas was designed by petitioners as a subterfuge to foil the formers
right to organize themselves into a union. Under Article 248 (a) and (e) of the Labor
Code, an employer is guilty of unfair labor practice if it interferes with, restrains or
coerces its employees in the exercise of their right to self-organization or if it
discriminates in regard to wages, hours of work and other terms and conditions of
employment in order to encourage or discourage membership in any labor
organization.

Indeed, evidence of petitioners' unfair labor practice is shown by the established fact
that, after respondents' transfer to Lubas, petitioners left them high and dry insofar
as the operations of Lubas was concerned. The Court finds no error in the findings
and conclusion of the CA that petitioners withheld the necessary financial and
logistic support such as spare parts, and repair and maintenance of the transferred
buses until only two units remained in running condition. This left respondents
virtually jobless.

WHEREFORE, the instant petition is DENIED. The assailed Decision and

Resolution of the Court of Appeals, dated December 20, 2004 and February 24,
2005, respectively, in CA-G.R. SP No. 80953, are AFFIRMED.

SO ORDERED.