The Supreme Court’s decision in Matling Industrial and Commercial Corporation v. Coros clarifies the crucial distinction between a corporate officer and a regular employee in resolving illegal dismissal claims. The Court held that the Labor Arbiter (LA) has jurisdiction over cases involving regular employees, while the Regional Trial Court (RTC) handles disputes involving corporate officers. This ruling hinges on whether the position is explicitly defined as a corporate office in the corporation’s by-laws, thereby impacting where an employee can seek redress for grievances.

Dismissal in the Ranks: Did Coros’ Position Warrant Labor Court or Corporate Scrutiny?

Ricardo Coros, formerly the Vice President for Finance and Administration at Matling Industrial and Commercial Corporation, filed a complaint for illegal dismissal against the company and its officers after his termination. Matling countered that the case fell under the jurisdiction of the Securities and Exchange Commission (SEC), now the RTC, because Coros held a corporate office as a member of the Board of Directors. This sparked a jurisdictional battle that ultimately reached the Supreme Court, requiring a clear determination of Coros’ employment status and the nature of his position within the company.

The central question before the Court was whether Coros’ position as Vice President for Finance and Administration constituted a corporate office. This determination is vital because, as a general rule, the Labor Arbiter (LA) has jurisdiction over illegal dismissal cases involving regular employees, as stipulated in Article 217 (a) 2 of the Labor Code:

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…the following cases involving all workers, whether agricultural or non-agricultural:

2. Termination disputes;

However, disputes involving corporate officers fall under the jurisdiction of the RTC, particularly those arising from intra-corporate relations. This jurisdiction was initially with the SEC but was transferred to the RTC under Republic Act No. 8799, also known as The Securities Regulation Code.

Matling argued that By-Law No. V granted its President the authority to create new offices and appoint officers, thereby making Coros’ position a corporate office. They referenced Tabang v. National Labor Relations Commission, which suggested that offices created by the board of directors or empowered under the by-laws could be considered corporate offices. However, the Court clarified that merely creating a position under a by-law provision does not automatically qualify it as a corporate office. The position must be expressly specified in the By-Laws to be considered a corporate office.

The Supreme Court emphasized the importance of Section 25 of the Corporation Code, which states that corporate officers are the President, Secretary, Treasurer, and “such other officers as may be provided for in the by-laws.” This provision implies that only positions explicitly mentioned in the By-Laws can be deemed corporate offices. The Court supported this view by citing Guerrea v. Lezama, which affirmed that only officers explicitly defined in the Corporation Code or By-Laws are considered corporate officers, with all others treated as employees or subordinate officials.

In this context, the Court underscored the limits of delegating power. The Board of Directors cannot delegate the power to create a corporate office to the President because Section 25 of the Corporation Code explicitly requires the Board itself to elect corporate officers. This ensures that the power to elect corporate officers remains a discretionary power vested exclusively in the Board, preventing potential circumvention of employee security of tenure. Therefore, any office created by the President, such as the Vice President for Finance and Administration, remains an ordinary, non-corporate office.

Despite Coros being a Director and stockholder, the Court clarified that his dismissal did not automatically qualify as an intra-corporate dispute. The Court noted that an intra-corporate controversy requires examining both the relationship of the parties and the nature of the dispute. This principle was highlighted in Viray v. Court of Appeals, which stated that not every conflict between a corporation and its stockholders falls under the SEC’s jurisdiction.

The Court considered Coros’ long tenure with Matling, starting in 1966, and his gradual rise through the ranks to Vice President for Finance and Administration in 1987. This promotion was based on his years of service rather than his later status as a stockholder or Director. Consequently, his role as Vice President for Finance and Administration was fundamentally that of an employee, not a corporate officer tied to his status as a stockholder or director.

This aligns with the precedent set in Prudential Bank and Trust Company v. Reyes, where a bank manager who rose through the ranks was deemed a regular employee, emphasizing that the nature of work and length of service are primary in determining employment status. As such, the Supreme Court ultimately affirmed the Court of Appeals’ decision, confirming that the Labor Arbiter had proper jurisdiction over Coros’ illegal dismissal complaint.

FAQs

What was the key issue in this case?	The central issue was whether Ricardo Coros, as Vice President for Finance and Administration of Matling, held a corporate office or an ordinary employment position, which determined whether the Labor Arbiter or the Regional Trial Court had jurisdiction over his illegal dismissal complaint.
What is the difference between a corporate officer and a regular employee in this context?	A corporate officer holds a position expressly defined in the corporation’s by-laws and is elected by the board of directors. A regular employee, on the other hand, occupies a position created by the management, and their employment terms are governed by labor laws.
Why is it important to determine whether a position is a corporate office or not?	The determination dictates which court has jurisdiction over disputes, such as illegal dismissal claims. Labor Arbiters handle disputes involving regular employees, while Regional Trial Courts handle disputes involving corporate officers.
What did the court say about the power to create corporate offices?	The court clarified that the power to create corporate offices lies exclusively with the Board of Directors, as mandated by Section 25 of the Corporation Code. This power cannot be delegated to subordinate officers.
How did the employee’s status as a stockholder or director affect the court’s decision?	The court ruled that the employee’s status as a stockholder or director did not automatically make his dismissal an intra-corporate dispute. The primary consideration was the nature of the position and whether his role was fundamentally that of an employee.
What was the significance of Section 25 of the Corporation Code in this case?	Section 25 of the Corporation Code defines the corporate officers as those expressly mentioned in the by-laws, namely the President, Secretary, Treasurer, and any other officers specifically provided for. This provision was crucial in determining that the Vice President position was not a corporate office.
What previous rulings did the court clarify or distinguish in this case?	The court clarified its stance on rulings like Tabang v. National Labor Relations Commission, emphasizing that offices not expressly mentioned in the By-Laws do not automatically qualify as corporate offices, even if created under a by-law enabling provision.
What practical implications does this case have for corporations and their employees?	This case provides clearer guidelines for corporations in defining corporate officer positions in their by-laws, and it assures employees that their rights will be protected by the appropriate labor laws and tribunals.

In conclusion, the Supreme Court’s decision in Matling Industrial and Commercial Corporation v. Coros offers valuable clarity on the distinction between corporate officers and regular employees, emphasizing the importance of clearly defining corporate positions within a company’s by-laws. This distinction ensures that disputes are properly adjudicated in the correct legal venue, safeguarding the rights and protections afforded to employees under Philippine labor laws.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Matling Industrial and Commercial Corporation v. Coros, G.R. No. 157802, October 13, 2010