IF YOU HANDLE LABOR CASES, THIS IS ANOTHER VERY INTERESTING CASE FOR YOU. THIS INVOLVES A LABOR CASE WHERE RESPONDENTS, INSTEAD OF FILING A POSITION PAPER THEY FILED A MOTION TO DISMISS.  WHEN DENIED, THEY WENT UP TO C.A. ON CERTIORARI. IS THIS THE CORRECT PROCEDURE? PETITIONER WAS THE CHAIRMAN AND EVP/TREASURER OF RESPONDENT COMPANY AND HE FILED A CASE FOR ILLEGAL DISMISSAL. DOES NLRC HAVE JURISDICTION OVER HIS CASE?

 

READ THE FULL TEXT OF THE DECISION IN jabbulao.com under the category RECENT SUPREME COURT DECISIONS.

 

ARSENIO Z. LOCSIN VS. NISSAN CAR LEASE PHILS. INC. AND LUIS BANSON (G.R. NO. 185567, 20 OCTOBER 2010)

 

DOCTRINES: 1. RE TECHNICAL RULE MUST BE SET ASIDE FOR THE SAKE OF JUSTICE; 2. A PERSON HOLDING THE POSITION OF CHAIRMAN AND EVP/TREASURER IS A CORPORATE OFFICER AND THUS NOT UNDER THE JURISDICTION OF NLRC.

 

DIGEST

 

FACTS:

 

ABC WAS ELECTED CHAIRMAN OF XYZ CORP. HE WAS ALSO APPOINTED EVP/TREASURER REPORTING EVERYDAY, RECEIVING SALARY AND BEING DEDUCTED SSS CONTRIBUTION, WITHHOLDING TAX, ETC., JUST AS OTHER EMPLOYEES. DURING A BOARD MEETING OF XYZ CORP., HE WAS NOT APPOINTED TO ANY OF THESE POSITIONS. HE FILED A CASE FOR ILLEGAL DISMISSAL, REINSTATEMENT, DAMAGES AND ATTORNEY’S FEES  AT NLRC. RESPONDENTS, INSTEAD OF FILING POSITION PAPER FILED A MOTION TO DISMISS FOR LACK OF JURISDICTION. THE LABOR ARBITER DENIED THE MOTION TO DISMISS AND RULED THAT HE HAS JURISDICTION OVER THECASE. RESPONDENTS FILED PETITION FOR CERTIORARI AT C.A.. THE LATER GRANTED THE PETITION AND REVERSED THE RULING OF THE LABOR ARBITER ON THE GROUND THAT ABC WAS A CORPORATE OFFICER AND THUS NLRC HAS NO JURISDICTION. ABC FILED PETITION FOR REVIEW AT S.C.

 

ISSUES:

 

WHETHER OR NOT IT WAS PROPER FOR RESPONDENTS TO FILE MOTION TO DISMISS AND WHEN DENIED TO ELEVATE THE MATTER TO THE C.A.?

 

WHETHER OR NOT ABC WHO IS CHAIRMAN AND EVP/TREASURER IS A CORPORATE OFFICER?

 

 

RULING:

 

THE PROCEDURE FOLLOWED BY RESPONDENTS WAS WRONG. IN STEAD OF FILING A MOTION TO DISMISS, THEY SHOULD HAVE FILED A POSITION PAPER STATING THEREIN THEIR GROUND FOR DISMISSAL. ALSO, THEIR FILING OF PETITION FOR CERTIORARI AT C.A. ON THE DENIAL OF THEIR MOTION TO DISMISS WAS WRONG. THE ORDER OF THE LABOR ARBITER IS INTERLOCUTORY AND THEREFORE INAPPEALABLE TO C.A.. THEY SHOULD HAVE FILED AN APPEAL WITH THE COMMISSION, NOT C.A. PER NLRC RULES. BUT S.C. SAID THEY WOULD HAVE TO DISREGARD THIS PROCEDURAL LAPSE. FOR TO DO SO WOULD RESULT TO INJUSTICE. WHY? BECAUSE IF THEY FOLLOW STRICTLY THE RULES, THEN THEY HAVE TO DISREGARD THE C.A. DECISION FOR LACK OF JURISDICTION AND THUS THE RULING OF THE LABOR ARBITER WOULD BE UPHELD WHICH IS A WRONG RULING.

 

ABC WHO WAS ELECTED CHAIRMAN AND EVP/TREASURER IS A CORPORATE OFFICER BECAUSE THE POSITION OF EVP/TREASURER IS PROVIDED FOR IN THE BY-LAWS OF XYZ CORP. HE WAS ELECTED BY THE BOARD OF XYZ CORP TO SUCH POSITION ACCORDING TO THE BY-LAWS OF SAID CORPORATION. THEREFORE, NLRC HAS NO JURISDICTION OVER HIS CASE.

 

SAID THE COURT:

          We resolve to deny the petition for lack of merit.

At the outset, we stress that there are two (2) important considerations in the final determination of this case.  On the one hand, Locsin raises a procedural issue that, if proven correct, will require the Court to dismiss the instant petition for using an improper remedy.  On the other hand, there is the substantive issue that will be disregarded if a strict implementation of the rules of procedure is upheld.  

          Prefatorily, we agree with Locsin’s submission that the NCLPI incorrectly elevated the Labor Arbiter’s denial of the Motion to Dismiss to the CA.  Locsin is correct in positing that the denial of a motion to dismiss is unappealable. As a general rule, an aggrieved party’s proper recourse to the denial is to file his position paper, interpose the grounds relied upon in the motion to dismiss before the labor arbiter, and actively participate in the proceedings. Thereafter, the labor arbiter’s decision can be appealed to the NLRC, not to the CA.   

As a rule, we strictly adhere to the rules of procedure and do everything we can, to the point of penalizing violators, to encourage respect for these rules.  We take exception to this general rule, however, when a strict implementation of these rules would cause substantial injustice to the parties. 

We see it appropriate to apply the exception to this case for the reasons discussed below; hence, we are compelled to go beyond procedure and rule on the merits of the case.  In the context of this case, we see sufficient justification to rule on the employer-employee relationship issue raised by NCLPI, even though the Labor Arbiter’s interlocutory order was incorrectly brought to the CA under Rule 65.

The NLRC Rules are clear: the denial by the labor arbiter of the motion to dismiss is not appealable because the denial is merely an interlocutory order.

 

In Metro Drug v. Metro Drug Employees,[1][27] we definitively stated that the denial of a motion to dismiss by a labor arbiter is not immediately appealable.[2][28]

We similarly ruled in Texon Manufacturing v. Millena,[3][29] in Sime Darby Employees Association v. National Labor Relations Commission[4][30] and in Westmont Pharmaceuticals v. Samaniego.[5][31]  In Texon, we specifically said:

The Order of the Labor Arbiter denying petitioners’ motion to dismiss is interlocutory.  It is well-settled that a denial of a motion to dismiss a complaint is an interlocutory order and hence, cannot be appealed, until a final judgment on the merits of the case is rendered. [Emphasis supplied.][6][32]

and indicated the appropriate recourse in Metro Drug, as follows:[7][33]

x x x The NLRC rule proscribing appeal from a denial of a motion to dismiss is similar to the general rule observed in civil procedure that an order denying a motion to dismiss is interlocutory and, hence, not appealable until final judgment or order is rendered [1 Feria and Noche, Civil Procedure Annotated 453 (2001 ed.)]. The remedy of the aggrieved party in case of denial of the motion to dismiss is to file an answer and interpose, as a defense or defenses, the ground or grounds relied upon in the motion to dismiss, proceed to trial and, in case of adverse judgment, to elevate the entire case by appeal in due course [Mendoza v. Court of Appeals, G.R. No. 81909, September 5, 1991, 201 SCRA 343].  In order to avail of the extraordinary writ of certiorari, it is incumbent upon petitioner to establish that the denial of the motion to dismiss was tainted with grave abuse of discretion. [Macawiwili Gold Mining and Development Co., Inc. v. Court of Appeals, G.R. No. 115104, October 12, 1998, 297 SCRA 602]

          In so citing Feria and Noche, the Court was referring to Sec. 1 (b), Rule 41 of the Rules of Court, which specifically enumerates interlocutory orders as one of the court actions that cannot be appealed.  In the same rule, as amended by A.M. No. 07-7-12-SC, the aggrieved party is allowed to file an appropriate special civil action under Rule 65.  The latter rule, however, also contains limitations for its application, clearly outlined in its Section 1 which provides:  

Section 1. Petition for certiorari.
When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.

In the labor law setting, a plain, speedy and adequate remedy is still open to the aggrieved party when a labor arbiter denies a motion to dismiss. This is Article 223 of Presidential Decree No. 442, as amended (Labor Code), [8][34] which states:

ART. 223. APPEAL

 

            Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders.  Such appeal may be entertained only on any of the following grounds:

(a)               If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter; x  x  x [Emphasis supplied.]

Pursuant to this Article, we held in Metro Drug (citing Air Services Cooperative, et al. v. Court of Appeals[9][35]) that the NLRC is clothed with sufficient authority to correct any claimed “erroneous assumption of jurisdiction” by labor arbiters:

In Air Services Cooperative, et al. v. The Court of Appeals, et al., a case where the jurisdiction of the labor arbiter was put in issue and was assailed through a petition for certiorari, prohibition and annulment of judgment before a regional trial court, this Court had the opportunity to expound on the nature of appeal as embodied in Article 223 of the Labor Code, thus:

            x  x  x  Also, while the title of the Article 223 seems to provide only for the remedy of appeal as that term is understood in procedural law and as distinguished from the office of certiorari, nonetheless, a closer reading thereof reveals that it is not as limited as understood by the petitioners  x  x  x.

Abuse of discretion is admittedly within the ambit of certiorari and its grant of review thereof to the NLRC indicates the lawmakers’ intention to broaden the meaning of appeal as that term is used in the Code.  For this reason, petitioners cannot argue now that the NLRC is devoid of any corrective power to rectify a supposed erroneous assumption of jurisdiction by the Labor Arbiter x  x  x.  [Air Services Cooperative, et al. v. The Court of Appeals, et al. G.R. No. 118693, 23 July 1998, 293 SCRA 101]

          Since the legislature had clothed the NLRC with the appellate authority to correct a claimed “erroneous assumption of jurisdiction” on the part of the labor arbiter – a case of grave abuse of discretion – the remedy availed of by petitioner in this case is patently erroneous as recourse in this case is lodged, under the law, with the NLRC.

          In Metro Drug, as in the present case, the defect imputed through the NLCPI Motion to Dismiss is the labor arbiter’s lack of jurisdiction since Locsin is alleged to be a corporate officer, not an employee. Parallelisms between the two cases is undeniable, as they are similar on the following points: (1) in Metro Drug, as in this case, the Labor Arbiter issued an Order denying the Motion to Dismiss by one of the parties; (2) the basis of the Motion to Dismiss is also the alleged lack of jurisdiction by the Labor Arbiter to settle the dispute; and (3) dissatisfied with the Order of the Labor Arbiter, the aggrieved party likewise elevated the case to the CA via Rule 65.

The similarities end there, however.  Unlike in the present case, the CA denied the petition for certiorari and the subsequent Motion for Reconsideration in Metro Drug; the CA correctly found that the proper appellate mechanism was an appeal to the NLRC and not a petition for certiorari under Rule 65.  In the present case, the CA took a different position despite our clear ruling in Metro Drug, and allowed, not only the use of Rule 65, but also ruled on the merits. 

From this perspective, the CA clearly erred in the application of the procedural rules by disregarding the relevant provisions of the NLRC Rules, as well as the requirements for a petition for certiorari under the Rules of Court.  To reiterate, the proper action of an aggrieved party faced with the labor arbiter’s denial of his motion to dismiss is to submit his position paper and raise therein the supposed lack of jurisdiction.  The aggrieved party cannot immediately appeal the denial since it is an interlocutory order; the appropriate remedial recourse is the procedure outlined in Article 223 of the Labor Code, not a petition for certiorari under Rule 65.  

A strict implementation of the NLRC Rules and the Rules of Court would cause injustice to the parties because the Labor Arbiter clearly has no jurisdiction over the present intra-corporate dispute.

 

Our ruling in Mejillano v. Lucillo[10][36] stands for the proposition that we should strictly apply the rules of procedure.  We said:

Time and again, we have ruled that procedural rules do not exist for the convenience of the litigants.  Rules of Procedure exist for a purpose, and to disregard such rules in the guise of liberal construction would be to defeat such purpose.  Procedural rules were established primarily to provide order to and enhance the efficiency of our judicial system. [Emphasis supplied.]

An exception to this rule is our ruling in Lazaro v. Court of Appeals[11][37] where we held that the strict enforcement of the rules of procedure may be relaxed in exceptionally meritorious cases: 

x x x Procedural rules are not to be belittled or dismissed simply because their non-observance may have resulted in prejudice to a party’s substantive rights. Like all rules, they are required to be followed except only for the most persuasive of reasons when they may be relaxed to relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed. The Court reiterates that rules of procedure, especially those prescribing the time within which certain acts must be done, “have oft been held as absolutely indispensable to the prevention of needless delays and to the orderly and speedy discharge of business.  x  x  x  The reason for rules of this nature is because the dispatch of business by courts would be impossible, and intolerable delays would result, without rules governing practice x  x  x. Such rules are a necessary incident to the proper, efficient and orderly discharge of judicial functions.” Indeed, in no uncertain terms, the Court held that the said rules may be relaxed only in exceptionally meritorious cases. [Emphasis supplied.]

Whether a case involves an exceptionally meritorious circumstance can be tested under the guidelines we established in Sanchez v. Court of Appeals,[12][38] as follows: 

Aside from matters of life, liberty, honor or property which would warrant the suspension of the Rules of the most mandatory character and an examination and review by the appellate court of the lower court’s findings of fact, the other elements that should be considered are the following: (a) the existence of special or compelling circumstances, (b) the merits of the case, (c) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules, (d) a lack of any showing that the review sought is merely frivolous and dilatory, and (e) the other party will not be unjustly prejudiced thereby. [Emphasis supplied.]

Under these standards, we hold that exceptional circumstances exist in the present case to merit the relaxation of the applicable rules of procedure. 

Due to existing exceptional circumstances, the ruling on the merits that Locsin is an officer and not an employee of Nissan must take precedence over procedural considerations.

          We arrived at the conclusion that we should go beyond the procedural rules and immediately take a look at the intrinsic merits of the case based on several considerations.

          First, the parties have sufficiently ventilated their positions on the disputed employer-employee relationship and have, in fact, submitted the matter for the CA’s consideration.

Second, the CA correctly ruled that no employer-employee relationship exists between Locsin and Nissan. 

          Locsin was undeniably Chairman and President, and was elected to these positions by the Nissan board pursuant to its By-laws.[13][39] As such, he was a corporate officer, not an employee.  The CA reached this conclusion by relying on the submitted facts and on Presidential Decree 902-A, which defines corporate officers as “those officers of a corporation who are given that character either by the Corporation Code or by the corporation’s by-laws.” Likewise, Section 25 of Batas Pambansa Blg. 69, or the Corporation Code of the Philippines (Corporation Code) provides that corporate officers are the president, secretary, treasurer and such other officers as may be provided for in the by-laws.

          Third.  Even as Executive Vice-President/Treasurer, Locsin already acted as a corporate officer because the position of Executive Vice-President/Treasurer is provided for in Nissan’s By-Laws.   Article IV, Section 4 of these By-Laws specifically provides for this position, as follows:

ARTICLE IV

Officers

Section 1. Election and Appointment – The Board of Directors at their first meeting, annually thereafter, shall elect as officers of the Corporation a Chairman of the Board, a President, an Executive Vice-President/Treasurer, a Vice-President/General Manager and a Corporate Secretary.  The other Senior Operating Officers of the Corporation shall be appointed by the Board upon the recommendation of the President.

x  x  x  x

Section 4. Executive Vice-President/Treasurer – The Executive Vice-President/Treasurer shall have such powers and perform such duties as are prescribed by these By-Laws, and as may be required of him by the Board of Directors.  As the concurrent Treasurer of the Corporation, he shall have the charge of the funds, securities, receipts, and disbursements of the Corporation.  He shall deposit, or cause to be deposited, the credit of the Corporation in such banks or trust companies, or with such banks of other depositories, as the Board of Directors may from time to time designate.  He shall tender to the President or to the Board of Directors whenever required an account of the financial condition of the corporation and of all his transactions as Treasurer.  As soon as practicable after the close of each fiscal year, he shall make and submit to the Board of Directors a like report of such fiscal year.  He shall keep correct books of account of all the business and transactions of the Corporation.

          In Okol v. Slimmers World International,[14][40] citing Tabang v. National Labor Relations Commission,[15][41] we held that –

x  x  x  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. [Emphasis supplied.]

In this case, Locsin was elected by the NCLPI Board, in accordance with the Amended By-Laws of the corporation.  The following factual determination by the CA is elucidating:

More important, private respondent failed to state any such “circumstance” by which the petitioner corporation “engaged his services” as corporate officer that would make him an employee.  In the first place, the Vice-President/Treasurer was elected on an annual basis as provided in the By-Laws, and no duties and responsibilities were stated by private respondent which he discharged while occupying said position other than those specifically set forth in the By-Laws or required of him by the Board of Directors.  The unrebutted fact remains that private respondent held the position of Executive Vice-President/Treasurer of petitioner corporation, a position provided for in the latter’s by-laws, by virtue of election by the Board of Directors, and has functioned as such Executive Vice-President/Treasurer pursuant to the provisions of the said By-Laws.  Private respondent knew very well that he was simply not re-elected to the said position during the August 5, 2005 board meeting, but he had objected to the election of a new set of officers held at the time upon the advice of his lawyer that he cannot be “terminated” or replaced as Executive Vice-President/Treasurer as he had attained tenurial security.[16][42]

We fully agree with this factual determination which we find to be sufficiently supported by evidence.  We likewise rule, based on law and established jurisprudence, that Locsin, at the time of his severance from NCLPI, was the latter’s corporate officer.

a.  The Question of Jurisdiction

 

Given Locsin’s status as a corporate officer, the RTC, not the Labor Arbiter or the NLRC, has jurisdiction to hear the legality of the termination of his relationship with Nissan.  As we also held in Okol, a corporate officer’s dismissal from service is an intra-corporate dispute:

In a number of cases [Estrada v. National Labor Relations Commission, G.R. No. 106722, 4 October 1996, 262 SCRA 709; Lozon v.  National Labor Relations Commission, 310 Phil. 1 (1995); Espino v. National Labor Relations Commission, 310 Phil. 61 (1995); Fortune Cement Corporation v. National Labor Relations Commission, G.R. No. 79762, 24 January 1991, 193 SCRA 258], we have held that a corporate officer’s dismissal is always a corporate act, or an intra-corporate controversy which arises between a stockholder and a corporation.[17][43] [Emphasis supplied.]

so that the RTC should exercise jurisdiction based on the following legal reasoning: 

Prior to its amendment, Section 5(c) of Presidential Decree No. 902-A (PD 902-A) provided that intra-corporate disputes fall within the jurisdiction of the Securities and Exchange Commission (SEC):

            Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:

x  x  x  x

            c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations.

Subsection 5.2, Section 5 of Republic Act No. 8799, which took effect on 8 August 2000, transferred to regional trial courts the SEC’s jurisdiction over all cases listed in Section 5 of PD 902-A:

            5.2. The Commission’s 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. [Emphasis supplied.]

 

b.     Precedence of Substantive Merits;

Primacy of Element of Jurisdiction

 

Based on the above jurisdictional considerations, we would be forced to remand the case to the Labor Arbiter for further proceedings if we were to dismiss the petition outright due to the wrongful use of Rule 65.[18][44]  We cannot close our eyes, however, to the factual and legal reality, established by evidence already on record, that Locsin is a corporate officer whose termination of relationship is outside a labor arbiter’s jurisdiction to rule upon.

Under these circumstances, we have to give precedence to the merits of the case, and primacy to the element of jurisdiction. Jurisdiction is the power to hear and rule on a case and is the threshold element that must exist before any quasi-judicial officer can act.  In the context of the present case, the Labor Arbiter does not have jurisdiction over the termination dispute Locsin brought, and should not be allowed to continue to act on the case after the absence of jurisdiction has become obvious, based on the records and the law.  In more practical terms, a contrary ruling will only cause substantial delay and inconvenience as well as unnecessary expenses, to the point of injustice, to the parties. This conclusion, of course, does not go into the merits of termination of relationship and is without prejudice to the filing of an intra-corporate dispute on this point before the appropriate RTC.   

WHEREFORE, we DISMISS the petitioner’s petition for review on certiorari, and AFFIRM the Decision of the Court of Appeals, in CA-G.R. SP No. 103720, promulgated on August 28, 2008, as well as its Resolution of December 9, 2008, which reversed and set aside the March 10, 2008 Order of Labor Arbiter Concepcion in NLRC NCR Case No. 00-06-06165-07.  This Decision is without prejudice to petitioner Locsin’s available recourse for relief through the appropriate remedy in the proper forum. 

No pronouncement as to costs.

SO ORDERED.

  ARTURO D. BRION

  Associate Justice

 

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

  

 

      

 ANTONIO EDUARDO B. NACHURA          

                    Associate Justice

  

  JOSE CATRAL MENDOZA

Associate Justice

 

MARIA LOURDES P.A. SERENO

Associate Justice

 

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                           ARTURO D. BRION

                                                                Associate Justice

                                                              Acting Chairperson

                     

 

 

 

 

 

 

 

 

 

 

CERTIFICATION

 

Pursuant to Section 13, Article VIII of the Constitution, and the Division Acting Chairperson’s Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                          RENATO C. CORONA

                                                                    Chief Justice                                                                      


 


[1][27] G.R. No. 142666, September 26, 2005, 471 SCRA 45.

[2][28] Id. at 56.

[3][29] G.R. No. 141380, April 14, 2004, 427 SCRA 377.

[4][30] G.R. No. 148021, December 6, 2006, 510 Phil. 204.

[5][31] G.R. Nos. 146653-54 and G.R. Nos. 147407-08, February 20, 2006, 482 SCRA 611.

[6][32] Supra note 29, at 383.

[7][33] Supra note 27, at 56.

[8][34] Cited in Metro Drug, id.

[9][35] G.R. No. 118693, July 23, 1998, 293 SCRA 101.

[10][36] G.R. No. 154717, June 19, 2009, 590 SCRA 1, 9.

[11][37] G.R. No. 137761, April 6, 2000, 330 SCRA 208, 214.

[12][38] G.R. No. 152766, June 20, 2003, 404 SCRA 540, 546.

[13][39] Rollo, p. 212.

[14][40] G.R. No. 160146, December 11, 2009, 608 SCRA 97.

[15][41] G.R. No. 121143, January 21, 1997, 266 SCRA 462, 467.

[16][42] Rollo, p. 70.

[17][43] Supra note 40.

[18][44] Supra note 27, at 59.