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9. Cosare vs. B.A. Inc.

Facts: Cosare 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. In October 2001, Cosare was promoted to
the position of Assistant Vice President for Sales (AVP for Sales) and Head of the Technical
Coordination.

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
memo to Arevalo to inform him of the anomalies which were allegedly being committed by
Abiog against the company. Arevalo failed to act on Cosare’s accusations and instead called
Cosare for a meeting and was asked to tender his resignation in exchange for "financial
assistance" in the amount of P300,000.00. Cosare refused to comply with the directive.

Cosare received a memo charging him of serious misconduct and willful breach of trust. Thus,
Cosare was precluded from reporting for work on March 31, 2009, and was instead instructed to
wait at the office’s receiving section. 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. On April 3, 2009, Cosare filed the subject labor complaint.

The Labor Arbiter rendered his Decision dismissing the complaint. Cosare appealed the LA
decision to the NLRC. The NLRC rendered its Decision reversing the Decision of the Labor
Arbiter, and found that the Respondents are found guilty of Illegal Constructive Dismissal.
Thereafter, the CA rendered the assailed Decision granting the respondents’ petition. It agreed
with the respondents’ contention that the case involved an intra-corporate controversy which,
pursuant to Presidential Decree No. 902-A, as amended, was within the exclusive jurisdiction of
the RTC.

Issue: Whether or not the instant suit is an intra-corporate controversy, where as such is within
the jurisdiction of the RTC.

Ruling: It is not an intra-corporate controversy. An intra-corporate controversy, which falls


within the jurisdiction of regular courts, has been regarded in its broad sense to pertain to
disputes that involve any of the following relationships: (1) between the corporation,
partnership or association and the public; (2) between the corporation, partnership or
association and the state in so far as its franchise, permit or license to operate is concerned;
(3) between the corporation, partnership or association and its stockholders, partners,
members or officers; and (4) among the stockholders, partners or associates,
themselves. Settled jurisprudence, however, qualifies that when the dispute involves a charge of
illegal dismissal, the action may fall under the jurisdiction of the LAs upon whose jurisdiction, as
a rule, falls termination disputes and claims for damages arising from employer-employee
relations as provided in Article 217 of the Labor Code. Consistent with this jurisprudence, the
mere fact that Cosare was a stockholder and an officer of Broadcom at the time the subject
controversy developed failed to necessarily make the case an intra-corporate dispute.

The LA has 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.

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.

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." 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. 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.

10. MICC vs. Coros

Facts: 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.

The petitioners moved to dismiss the complaint, 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 Matling’s
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, insisting that his status as a member
of Matling’s 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.

Issue: Whether or not the case is considered as an intra corporate controversy.

Ruling: NO. 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 bank’s 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.

11. Esguerra vs. HP, Inc.

Mercantile Law; Corporation Law; The power of a corporation to sue and be sued is exercised
by the board of directors.—The general rule is that a corporation can only exercise its powers
and transact its business through its board of directors and through its officers and agents when
authorized by a board resolution or its bylaws. The power of a corporation to sue and be sued is
exercised by the board of directors. The physical acts of the corporation, like the signing of
documents, can be performed only by natural persons duly authorized for the purpose by
corporate bylaws or by a specific act of the board. Absent the said board resolution, a petition
may not be given due course. In Bank of the Philippine Islands v. Court of Appeals, 632 SCRA
322 (2010), the Court held that the application of the rules must be the general rule, and the
suspension or even mere relaxation of its application, is the exception. This Court may go
beyond the strict application of the rules only on exceptional cases when there is truly substantial
compliance with the rule.

12. Gokongwei, Jr. vs. SEC


Facts: Petitioner stockholder of San Miguel Corp. filed a petition with the SEC for the
declaration of nullity of the by-laws etc. against the majority members of the BOD and San
Miguel. It is stated in the by laws that the amendment or modification of the by-laws may only
be delegated to the BODs upon an affirmative vote of the stockholders representing not less than
2/3 of the subscribed and paid up capital stock of the corporation, which 2/3 could have been
computed on the basis of the capitalization at the time of the amendment. Petitioner contends that
the amendment was based on the 1961 authorization, the Board acted without authority and in
usurpation of the power of the stockholders and amending the by-laws in 1976. He also contends
that the 1961 authorization was already used in 1962 and 1963. He also contends that the
amendment deprived him of his right to vote and be voted upon as a stockholder (because it
disqualified competitors from nomination and election in the BOD of SMC), thus the amended
by-laws were null and void. While this was pending, the corporation called for a stockholder’s
meeting for the ratification of the amendment to the by-laws. This was denied by the SEC. In
another case filed by petitioner, he alleged that the corporation had been using corporate funds in
other corps and businesses outside the primary purpose clause of the corporation in violation of
the Corporation Code.

Issue: Whether the amended by-laws of SMC disqualifying a competitor from nomination or
election to the Boardof Directors of SMC are valid and reasonable.

Ruling: Yes. The validity and reasonableness of a by-law is purely question of law. Whether by-
law is in conflict with the law of the land, or with the charter of the corporation or is in legal
sense unreasonable and therefore unlawful is a question of law. However, this is limited where
the reasonableness of a by-law is a mere matter of judgment, and one upon which reasonable
minds must necessarily differ, a court would not be warranted in substituting its judgment instead
of the judgment of those who are authorized to make by-laws and who have exercised authority
prescribed by law to prescribe the qualifications of directors. It has the inherent power to adopt
by-laws for its internal government, and to regulate the conduct and prescribe the rights and
duties of its members towards itself and among themselves in reference to the management of its
affairs.

A corporation, under the Corporation law, may prescribe in its by-laws the qualifications,
duties and compensation of directors, officers, and employees. Any person who buys stock
in a corporation does so with the knowledge that its affairs are dominated by a majority of
the stockholders and he impliedly contracts that the will of the majority shall govern in all
matters within the limits of the acts of incorporation and lawfully enacted by laws and not
forbidden by law.

Any corporation may amend its by-laws by the owners of the majority of the subscribed stock. It
cannot thus be said that petitioner has the vested right, as a stockholder, to be elected director, in
the face of the fact that the law at the time such stockholder’s right was acquired contained the
prescription that the corporate charter and the by-laws shall be subject to amendment, alteration
and modification. A director stands in a fiduciary relation to the corporation and its shareholders,
which is characterized as a trust relationship. An amendment to the corporate by-laws which
renders a stockholder ineligible to be director, if he be also director in a corporation whose
business is in competition with that of the other corporation, has been sustained valid. This is
based upon the principle that where the director is employed in the service of a rival company, he
cannot serve both, but must betray one or the other. The amendment in this case serves to
advance the benefit of the corporation and is good. Corporate officers are also not permitted to
use their position of trust and confidence to further their private need is deemed to be for the
benefit of the corporation. This is called the corporate opportunity.

13. GD Express Worldwide N.V. vs. CA

Facts: Petitioner GD Express Worldwide N.V. (GD Express) is a corporation duly organized and
existing under the laws of the Netherlands. On 27 September 1990, its predecessor-in-interest,
TNT Limited (TNT) entered into a joint venture agreement with Philippine Aerospace
Development Corporation (PADC) for the establishment of a domestic corporation as their
corporate vehicle to operate as an international air freight carrier. The joint venture agreements
stipulated that PADC would own 80% of the shares of stock of the corporate vehicle while TNT
would own the remaining 20%.

The agreements essentially laid down the relationship between TNT and PADC and the
management, control and existence of the corporation. Also, pursuant to the joint venture
agreements, PADC and TNT registered with the SEC a corporation to be known as Air
Philippines Corporation (APC).

Subsequently, on 11 December 1992, APC amended its articles of incorporation to change its
corporate name to Pacific East Asia Cargo Airlines, Inc. (PEAC). On 02 April 1993, TNT
transferred all its shares in PEAC to petitioner GD Express. PEAC immediately commenced
operations. Herein petitioner Amihan Management Services, Inc. (Amihan), a domestic
corporation, was contracted to undertake the daily operations in PEAC pursuant to the joint
venture agreement.

Sometime in 1994, the Office of the President mandated the Committee on Privatization to
require the Asset Privatization Trust (APT) to dispose of PADC’s 80% share in PEAC. Thus,
petitioner GD Express and PADC executed the Terms of Reference that would govern the
disposition of PADC’s equity comprising 12,800 subscribed shares of stock in PEAC.

Issue: Whether or not an intra-corporate dispute is exclusively cognizable by the SEC.

Ruling: NO. The designation of certain RTC branches to handle specific cases is nothing new.
For instance, pursuant to the provisions of the R.A. No. 6657 or the Comprehensive Agrarian
Reform Law, the Supreme Court has assigned certain RTC branches to hear and decide cases
under Sections 56 and 57 of R.A. No. 6657.
The RTC exercising jurisdiction over an intra-corporate dispute can be likened to
an RTC exercising its probate jurisdiction or sitting as a special agrarian court. The
designation of the SCCs as such has not in any way limited their jurisdiction to hear and
decide cases of all nature, whether civil, criminal or special proceedings.
Incidentally, not all the prayers and reliefs sought by respondent Filchart in SEC Case
No. 08-97-5746 can be characterized as intra-corporate in nature. For instance, respondent
Filchart’s petition does not allege that the cause of action for the nullification of the management
contract between PEAC and petitioner Amihan is being instituted as a derivative suit. It is an
ordinary action for the nullification of a contract, which is cognizable by courts of general
jurisdiction.

14. LBP vs. Ascot Holdings Association

Facts: After the Philippine Airlines (PAL) was privatized, Land Bank purchased from the
National Government PAL shares. Minority stockholders in PR Holdings filed a case with the
Securities and Exchange Commission (SEC), seeking the distribution of PR Holdings’ shares of
stock in PAL to its stockholders in proportion to their equity. Land Bank, along with PNB, DBP,
AFP-RSBS and GSIS, have the so- called put-option to sell their PAL shares of stock to
respondents and the latter are obligated to buy the same at Five Pesos (P5.00) per share on the
sixth year after the effectivity of the Stockholders’ Agreement. Instead of honoring the
Stockholders' Agreement, respondents filed with the RTC of Makati a complaint against Land
Bank, PNB, DBP, GSIS, AFP-RSBS and the Republic of the Philippines, praying that they be
released from the obligation to buy the PAL shares of petitioner and other defendants therein at
P5.00 per share, as earlier agreed upon under the Stockholders' Agreement, on ground of alleged
radical change in the conditions prevailing at the time the said agreement was entered and the
present. . Trial court ruled in favor of the respondents. Trial court denied Land Bank's motion for
reconsideration. Therefrom, Land Bank decided to go to the CA on a petition for review. For the
purpose, it filed with the CA, a motion for extension of time to file the intended petition for
review. The motion was denied by the CA.

Issue: Whether or not the filing of a motion for reconsideration before the trial court toll the
reglementary period to appeal the judgment

Ruling: No. It is beyond quibbling that the assailed “Judgment” in Civil Case was issued by the
RTC in the exercise of its special jurisdiction over intra-corporate controversies under R.A. No.
8799. Civil Case was, therefore, governed by the Interim Rules of Corporate Rehabilitation and
the Interim Rules of Procedure Governing Intra- Corporate Controversies under R.A. No. 8799,
as well as A.M. No. 04- 9-07-SC of this Court prescribing the mode of appeal from decisions of
the RTC in intra-corporate controversies.

Under Section 8(3), Rule 1 of the Interim Rules of Procedure Governing Intra-Corporate
Controversies Under R.A. No. 8799, motion for new trial, or for reconsideration of
judgment or order, or for re- opening of trial are prohibited pleadings in said cases. Hence,
the filing by petitioner of a motion for reconsideration before the trial court did not toll the
reglementary period to appeal the judgment via a petition for review under Rule 43 of the
1997 Rules of Civil Procedure, as amended. As a consequence, the CA has no more
jurisdiction to entertain the petition for review which Land Bank intended to file before it,
much less to grant the motion for extension of time for the filing thereof.

The prohibited motion for reconsideration filed by the petitioner with the trial court did not
suspend the period to appeal the RTC’s “Judgment” . Consequently, that “Judgment” became
final and executory 15-days thereafter. When petitioner filed a motion for extension to file a
petition for review in the CA one hundred twenty four (124) days after it received the RTC
“Judgment,” there was no more period to extend. Given these undeniable facts, the CA cannot be
faulted for denying petitioner’s motion for extension. There is no abuse, much less grave abuse,
of discretion, to speak of.

15. Strategic Alliance Dev. Corporation vs. Radstock Secuirities

Facts: CCDCP Mining Corporation (CDCP Mining), an affiliate of CDCP, obtained loans from
Marubeni Corporation of Japan (Marubeni). A CDCP official issued letters of guarantee for the
loans although there was no CDCP Board Resolution authorizing the issuance of such letters of
guarantee. CDCP Mining secured the Marubeni loans when CDCP and CDCP Mining were still
privately owned and managed.

In 1983, CDCP’s name was changed to Philippine National Construction Corporation (PNCC) in
order to reflect that the Government already owned 90.3% of PNCC and only 9.70% is under
private ownership. Meanwhile, the Marubeni loans to CDCP Mining remained unpaid.

On 20 October 2000 and 22 November 2000, the PNCC Board of Directors (PNCC Board)
passed Board Resolutions admitting PNCC’s liability to Marubeni. Previously, for two decades
the PNCC Board consistently refused to admit any liability for the Marubeni loans.

In January 2001, Marubeni assigned its entire credit to Radstock Securities Limited (Radstock), a
foreign corporation. Radstock immediately sent a notice and demand letter to PNCC.

PNCC and Radstock entered into a Compromise Agreement. Under this agreement, PNCC shall
pay Radstock the reduced amount of P6,185,000,000.00 in full settlement of PNCC’s guarantee
of CDCP Mining’s debt allegedly totaling P17,040,843,968.00 (judgment debt as of 31 July
2006). To satisfy its reduced obligation, PNCC undertakes to (1) "assign to a third party assignee
to be designated by Radstock all its rights and interests" to the listed real properties of PNCC; (2)
issue to Radstock or its assignee common shares of the capital stock of PNCC issued at par value
which shall comprise 20% of the outstanding capital stock of PNCC; and (3) assign to Radstock
or its assignee 50% of PNCC’s 6% share, for the next 27 years, in the gross toll revenues of the
Manila North Tollways Corporation.

Luis Sison, a stockholder and former PNCC President and Chairman, filed a derivative suit
questioning the legality of the compromise agreement.

Issue: Whether or not Sison’s derivative suit is valid.

Ruling: YES. Sison has legal standing to challenge the Compromise Agreement. Although there
was no allegation that Sison filed the case as a derivative suit in the name of PNCC, it could be
fairly deduced that Sison was assailing the Compromise Agreement as a stockholder of PNCC.
A derivative action is a suit by a stockholder to enforce a corporate cause of action.
Under the Corporation Code, where a corporation is an injured party, its power to sue is lodged
with its board of directors or trustees. However, an individual stockholder may file a derivative
suit on behalf of the corporation to protect or vindicate corporate rights whenever the officials of
the corporation refuse to sue, or are the ones to be sued, or hold control of the corporation. In
such actions, the corporation is the real party-in-interest while the suing stockholder, on behalf of
the corporation, is only a nominal party.
In this case, the PNCC Board cannot conceivably be expected to attack the validity of the
Compromise Agreement since the PNCC Board itself approved the Compromise Agreement. In
fact, the PNCC Board steadfastly defends the Compromise Agreement for allegedly being
advantageous to PNCC.