In Norma D. Cacho and North Star International Travel, Inc. v. Virginia D. Balagtas, the Supreme Court addressed whether a labor dispute involving a corporate officer falls under the jurisdiction of labor tribunals or regular courts. The Court ruled that the dismissal of a corporate officer is an intra-corporate controversy, placing it under the jurisdiction of the Regional Trial Court (RTC), not the Labor Arbiter. This decision emphasizes the importance of determining whether an employee holds a corporate office when resolving disputes over termination, impacting where such cases must be filed and adjudicated.
Beyond a Title: Unpacking the Role of Executive Vice President in a Corporate Dismissal
The case originated from a complaint filed by Virginia D. Balagtas against North Star International Travel, Inc. and its President, Norma D. Cacho, for constructive dismissal. Balagtas, who was the Executive Vice President/Chief Executive Officer, claimed she was illegally dismissed after being placed under preventive suspension due to alleged questionable transactions. The Labor Arbiter initially ruled in favor of Balagtas, but the National Labor Relations Commission (NLRC) reversed this decision, citing a lack of jurisdiction because Balagtas was a corporate officer, not a mere employee. The Court of Appeals then reversed the NLRC’s ruling, leading to the Supreme Court appeal.
The central issue revolved around whether Balagtas held a corporate office, thereby making her dismissal an intra-corporate dispute falling under the jurisdiction of regular courts. The Supreme Court applied a two-tier test: the relationship test and the nature of the controversy test. The relationship test assesses the relationship between the parties, specifically whether it exists between the corporation and its officers. The nature of the controversy test examines whether the dispute pertains to the enforcement of rights and obligations under the Corporation Code and the corporation’s internal rules.
Applying the relationship test, the Court scrutinized whether Balagtas’s position as Executive Vice President was a corporate office. The Court referenced Easy call Communications Phils., Inc. v. King, stating that a corporate office is created by the corporate charter and the officer is elected by the directors or stockholders. Thus, two conditions must be met: the position must be created by the by-laws, and the officer must be appointed by the board of directors.
To determine whether the Executive Vice President position was a corporate office, the Court examined North Star’s by-laws. Article IV, Section 1 of the by-laws stated:
Section 1. Election/Appointment – Immediately after their election, the Board of Directors shall formally organize by electing the Chairman, the President, one or more Vice-President (sic), the Treasurer, and the Secretary, at said meeting.
The by-laws clearly provided for one or more vice president positions, which, according to the Court, meant all such positions were corporate offices. The Court rejected the Court of Appeals’ restrictive interpretation that the exact title must appear in the by-laws, arguing that it unduly limits the corporation’s power to manage its internal affairs. The Supreme Court emphasized the importance of upholding a corporation’s inherent right to adopt its own by-laws, provided they are not contrary to law, morals, or public policy, as outlined in Section 36 of the Corporation Code.
Furthermore, the Court pointed to the Secretary’s Certificate dated April 22, 2003, as evidence that Balagtas was elected as Executive Vice President by the Board. The certificate stated:
RESOLVED, AS IT IS HEREBY RESOLVED, that during a meeting of the Board of Directors held last March 31, 2003, the following members of the Board were elected to the corporate position opposite their names:
NAME
The Court noted that Balagtas herself had previously relied on this certificate, undermining her claim that it was falsified. The Supreme Court clarified that while the duties of the Executive Vice President may be assigned by the President, as stated in Article IV, Section 4 of North Star’s By-laws, the appointment or election still rests with the Board. The GIS neither governs nor establishes whether or not a position is an ordinary or corporate office.
The Court also considered the nature of the controversy. To be considered an intra-corporate controversy, the dismissal must relate to the duties and responsibilities attached to the corporate office. In this case, Balagtas claimed dismissal without board authorization and sought separation pay in lieu of reinstatement to her position as Executive Vice President. The Court also cited a prior case Philippine School of Business Administration v. Leano, noting that the dismissal of a corporate officer is always a corporate act, an intra-corporate controversy which arises between a stockholder and a corporation. This was sufficient to consider it an intra-corporate controversy.
Moreover, the Court observed that the reasons for Balagtas’s termination—alleged misappropriation of company funds and breach of trust—were directly linked to her role as Vice President, responsible for approving disbursements and signing checks. The company alleged that Balagtas gravely abused the confidence the Board has reposed in her as vice president and misappropriating company funds for her own personal gain, reinforcing the conclusion that the dismissal was an intra-corporate controversy, not merely a labor dispute.
Finally, the Court addressed Balagtas’s argument that North Star was estopped from questioning the Labor Arbiter’s jurisdiction. Citing Tijam v. Sibonghanoy, Balagtas contended that North Star had actively participated in the proceedings and could not later challenge the jurisdiction. The Court rejected this argument, stating that estoppel applies only in exceptional cases and that the issue of jurisdiction may be raised at any stage. The Court referenced Espino v. National Labor Relations Commission, stating that the principle of estoppel cannot be invoked to prevent this Court from taking up the question, which has been apparent on the face of the pleadings since the start of the litigation before the Labor Arbiter.
FAQs
| What was the central legal question in this case? | The central question was whether the dismissal of Virginia Balagtas, as Executive Vice President of North Star International Travel, Inc., constituted an intra-corporate controversy falling under the jurisdiction of the regular courts or an ordinary labor dispute under the jurisdiction of the Labor Arbiter. |
| What is the “relationship test” in determining jurisdiction? | The “relationship test” examines the relationship between the parties involved in the dispute, such as between the corporation and its stockholders, partners, members, or officers, to determine if an intra-corporate relationship exists. If the relationship exists, it supports the claim that the dispute is an intra-corporate controversy. |
| What is the “nature of the controversy test”? | The “nature of the controversy test” assesses whether the dispute pertains to the enforcement of rights and obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the corporation. The disagreement must be rooted in an intra-corporate relationship and involve the enforcement of correlative rights and obligations. |
| How does a position become a corporate office? | A position becomes a corporate office if it is created by the charter of the corporation and the officer is elected thereto by the directors or stockholders. Two conditions must be met: the position must be created by the by-laws, and the officer must be appointed by the corporation’s board of directors. |
| What did the North Star by-laws say about vice presidents? | North Star’s by-laws provided for the election of “one or more Vice-President(s)” by the Board of Directors. The Supreme Court interpreted this to include positions like Executive Vice President, making them corporate offices if duly appointed by the board. |
| Why was the Secretary’s Certificate important in this case? | The Secretary’s Certificate served as documentary evidence that Virginia Balagtas was elected as Executive Vice President by the Board of Directors, thus confirming her status as a corporate officer of North Star. This certificate was crucial in establishing the intra-corporate relationship between the parties. |
| Can a corporation be estopped from questioning jurisdiction? | Generally, no. The issue of jurisdiction may be raised at any stage of the proceedings, even on appeal, and is not lost by waiver or by estoppel, except in certain cases. However, this is the general rule and in some exceptional cases similar to the factual milieu of Tijam v. Sibonghanoy, it can be invoked. |
| What was the final ruling of the Supreme Court? | The Supreme Court granted the petition, setting aside the Court of Appeals’ decision and dismissing the case for lack of jurisdiction. The Court held that the Labor Arbiter did not have jurisdiction over the case because it was an intra-corporate controversy. |
The Supreme Court’s decision in North Star International Travel, Inc. v. Balagtas clarifies the jurisdictional boundaries between labor tribunals and regular courts in cases involving corporate officers. The ruling underscores the significance of adhering to corporate by-laws and the formal appointment processes when determining an individual’s status as a corporate officer, ultimately influencing the proper venue for dispute resolution.
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: Norma D. Cacho and North Star International Travel, Inc. v. Virginia D. Balagtas, G.R. No. 202974, February 07, 2018
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