NICANOR F. MALCABA, CHRISTIAN C.

(Malcaba), a corporate officer, should have questioned

NEPOMUCENO, AND LAURA MAE FATIMA F. his dismissal before the Regional Trial Court, not before
PALIT-ANG, PETITIONERS, V. PROHEALTH the Labor Arbiter. It likewise held that Christian C.
PHARMA PHILIPPINES, INC., GENEROSO R. Nepomuceno (Nepomuceno) and Laura Mae Fatima F.
DEL CASTILLO, JR., AND DANTE M. BUSTO, Palit-Ang (Palit-Ang) were validly dismissed from service
RESPONDENTS. for loss of trust and confidence, and insubordination,
respective1y.
DECISION ProHealth Pharma Philippines, Inc. (ProHealth) is a
LEONEN, J.: corporation engaged in the sale of pharmaceutical
This case involves fundamental principles in labor cases. products and health food on a wholesale and retail basis.
First, in appeals of illegal dismissal cases, employers are Generoso Del Castillo (Del Castillo) is the Chair of the
strictly mandated to file an appeal bond to perfect their Board of Directors and Chief Executive Officer while
appeals. Substantial compliance, however, may merit Dante Busto (Busto) is the Executive Vice President.
liberality in its application. Malcaba, Tomas Adona, Jr. (Adona), Nepomuceno, and
Second, before any labor tribunal takes cognizance of Palit-Ang were employed as its President, Marketing
termination disputes, it must first have jurisdiction over Manager, Business Manager, and Finance Officer,
the action. The Labor Arbiter and the National Labor respectively. [4]
Relations Commission only exercise jurisdiction over Malcaba had been employed with ProHealth since it
termination disputes between an employer and an started in 1997. He was one of its incorporators together
employee. They do not exercise jurisdiction over with Del Castillo and Busto, and they were all members
termination disputes between a corporation and a of the Board of Directors in 2004. He held 1,000,000
corporate officer. shares in the corporation. He was initially the Vice
Third, while this Court recognizes the inherent right of President for Sales then became President in 2005. [5]
employers to discipline their employees, the penalties Malcaba alleged that Del Castillo did acts that made his
imposed must be commensurate to the infractions job difficult. He asked to take a leave on October 23,
committed. Dismissal of employees for minor and 2007. When he attempted to return on November 5,
negligible offenses may be considered as illegal 2007, Del Castillo insisted that he had already resigned
dismissal. and had his things removed from his office. He attested
This is a Petition for Review on Certiorari [1] assailing the that he was paid a lower salary in December 2007 and
Court of Appeals February 19, 2013 Decision [2] and his benefits were withheld.[6] On January 7, 2008,
September 10, 2013 Resolution[3] in CA-G.R. SP No. Malcaba tendered his resignation effective February 1,
119093, which reversed the judgments of the Labor 2008.[7]
Arbiter and of the National Labor Relations Commission.
The Court of Appeals found that Nicanor F. Malcaba
Nepomuceno, for his part, alleged that he was initially which she would reimburse after the repairs were done.
hired as a medical representative in 1999 but was Del Castillo was dissatisfied with her explanation and
eventually promoted to District Business Manager for transferred her to another office.[14]
South Luzon. On March 24, 2008, he applied for vacation On December 3, 2007, Palit-Ang was invited to a fact-
leave for the dates April 24, 25, and 28, 2008, which finding investigation,[15] which was held on December 10,
Busto approved. When he left for Malaysia on April 23, 2007, where Palit-Ang was again asked to explain her
2008, ProHealth sent him a Memorandum dated April 24, actions.[16]
2008 asking him to explain his absence. He replied On December 17, 2007, she was handed a notice of
through email that he tried to call ProHealth to inform termination effective December 31, 2007, for disobeying
them that his flight was on April 22, 2008 at 9:00p.m. and the order of ProHealth's highest official.[17]
not on April 23, 2008 but was unable to connect on the Malcaba, Nepomuceno, Palit-Ang, and Adona separately
phone. He tried to explain again on May 2, 2008 and filed Complaints[18] before the Labor Arbiter for illegal
requested for a personal dialogue with Del Castillo. [8] dismissal, nonpayment of salaries and 13th month pay,
On May 7, 2008, Nepomuceno was given a notice of damages, and attorney's fees.
termination, which was effective May 5, 2008, on the The Labor Arbiter found that Malcaba was constructively
ground of fraud and willful breach of trust. [9] dismissed. He found that ProHealth never controverted
Palit-Ang, on the other hand, was hired to join the allegation that Del Castillo made it difficult for
ProHealth's audit team in 2007. She was later promoted Malcaba to effectively fulfill his duties. He likewise ruled
to Finance Officer.[10] On November 26, 2007, Del that ProHealth's insistence that Malcaba's leave of
Castillo instructed Palit-Ang to give P3,000.00 from the absence in October 2007 was an act of resignation was
training funds to Johnmer Gamboa (Gamboa), a District false since Malcaba continued to perform his duties as
Business Manager, to serve as cash advance. [11] President through December 2007.[19]
On November 27, 2007, Busto issued a show cause The Labor Arbiter declared that Nepomuceno's failure to
memorandum for Palit-Ang's failure to release the cash state the actual date of his flight was an excusable
advance. Palit-Ang was also relieved of her duties and mistake on his part, considering that this was his first
reassigned to the Office of the Personnel and infraction in his nine (9) years of service. He noted that
Administration Manager. [12] no administrative proceedings were conducted before
In her explanation, Palit-Ang alleged that when Gamboa Nepomuceno's dismissal, thereby violating his right to
saw that she was busy receiving cash sales from another due process.[20]
District Business Manager, he told her that he would just Palit-Ang's dismissal was also found to have been illegal
return the next day to collect his cash advance. [13] When as delay in complying with a lawful order was not
he told her that the cash advance was for car repairs, tantamount to disobedience. The Labor Arbiter further
Palit-Ang told him to get the cash from his revolving fund, noted that delay in giving a cash advance for car
maintenance would not have affected the company's b. Full backwages from time of his illegal dismissal [i]n
operations. He declared that Palit-Ang's dismissal was June 2007 until the finality of this decision, which as of
too harsh of a penalty.[21] this date amounts to P609,832.37;
The dispositive portion of the Labor Arbiter's April 5, 2009 c. 13th month pay for 2008 of P10,416.66.
Decision[22] read: Complainants are further awarded moral damages of
WHEREFORE, premises considered, judgment is hereby Php100,000.00 each and exemplary damages of
rendered declaring that complainants were illegally Php100,000.00 each.
dismissed by respondents. Accordingly, respondents are
directed solidarily to pay complainants the following: Finally, respondents are assessed the sum equivalent to
ten percent (10%) of the total monetary award as and for
1. Complainant Nicanor F. Malcaba: attorney's fees.
a. Separation pay of P1,800,000.00;
b. Full backwages from the time of his illegal dismissal All other claims are dismissed for lack of merit.
[o]n 11 November 2007 until the finality of this
decision, which as of this date amounts to SO ORDERED.[23]
P2,810,795.40; ProHealth appealed to the National Labor Relations
c. 13th month pay for the years 2007 and 2008 Commission.[24] On September 29, 2010, the National
amounting to P126,625.00; Labor Relations Commission rendered its
2. Complainant Christian C. Nepomuceno: Decision,[25] affirming the Labor Arbiter's April 5, 2009
a. Separation pay of P190,000.00; Decision with modifications. The dispositive portion of
b. Full backwages from the time of his illegal dismissal this Decision read:
[i]n May 2007 until the finality of this decision, which as WHEREFORE, premises considered, the appeal is
of this date amounts to P568,827.45; partially granted. The assailed Decision is modified in
c. 13th month pay for 2008 amounting to P6,333.33; that: a) complainant Adona is declared to have voluntarily
3. Complainant Laura Mae Fatima F. Palit-Ang: resigned and is entitled only to his 13th month pay; b) the
a. Separation pay of P30,000.00; award of moral and, exemplary damages in favor of
b. Full backwages from the time of her illegal dismissal complainants Nepomuceno and Palit-Ang are deleted;
on 1 January 2008 until the finality of this decision, and c) respondents del Castillo and Busto are held jointly
which as of [t]his date amounts to P266,694.63; and severally liable with ProHealth for the claims of
c. 13th month pay for 2008 of P18,000.00; and complainant Malcaba.
4. Complainant Tomas C. Adona, Jr.: All dispositions not affected by the modifications stay.
a. Separation pay of P75,000.00;
SO ORDERED.[26]
ProHealth moved for reconsideration[27] but was denied While the Court of Appeals ordered the return of the
by the National Labor Relations Commission in its amounts given to Malcaba, it allowed Nepomuceno and
January 31, 2011 Resolution.[28] Thus, ProHealth, Del Palit-Ang to keep the amounts given considering that
Castillo, and Busto filed a Petition for Certiorari [29] before even if the finding of illegal dismissal were reversed on
the Court of Appeals. appeal, the employer was still obliged to reinstate and
On February 19, 2013, the Court of Appeals rendered its pay the wages of a dismissed employee during the
Decision[30] reversing and setting aside the National period of appeal.[36] The dispositive portion of the Court of
Labor Relations Commission September 29, 2010 Appeals February 19, 2013 Decision read:
Decision. WHEREFORE, premises considered, it is hereby ruled:
On the procedural issues, the Court of Appeals found
that ProHealth substantially complied with the (a) that the September 29, 2010 Decision and January 31, 2011
requirement of an appeal bond despite it not appearing in Resolution of the National Labor Relations Commission
the records of the surety company since ProHealth are REVERSED and SET ASIDE for being issued with
believed in good faith that the bond it secured was grave abuse of discretion;
genuine.[31]
On the substantive issues, the Court of Appeals held that
there was no employer-employee relationship between (b) that Our Decision is without prejudice to Mr. Nicanor F.
Malcaba and ProHealth since he was a corporate officer. Malcaba's available recourse for relief through the
Thus, he should have filed his complaint with the appropriate remedy in the proper forum;
Regional Trial Court, not with the Labor Arbiter, since his
dismissal from service was an intra-corporate dispute.[32]
The Court of Appeals likewise concluded that ProHealth (c) that all the amounts released in favor of Mr. Nicanor F.
was justified in dismissing Nepomuceno and Palit-Ang Malcaba amounting to Four Million Nine Hundred Thirty[-
since both were given opportunities to fully explain their ]Seven Thousand Four Hundred Twenty pesos and 40/100
sides.[33] It found that Nepomuceno's failure to diligently (P4,937,420.[40]) be RETURNED to herein petitioners;
check the true schedule of his flight abroad and his
subsequent lack of effort to inform his superiors were
enough for his employer to lose its trust and confidence (d) that NO REFUND will be ordered by this Court against
in him.[34] It likewise found that Palit-Ang displayed Mr. Christian Nepomuceno and Ms. Laura Mae Fatima
"arrogance and hostility" when she defied the lawful Palit-Ang.
orders of the company's highest ranking officer; thus, her SO ORDERED.[37]
insubordination was just cause to terminate her Malcaba, Nepomuceno, and Palit-Ang moved for
services.[35] reconsideration but were denied in a Resolution [38] dated
September 10, 2013. Hence, this Petition [39] was filed Petitioners likewise argue that petitioners Nepomuceno
before this Court. and Palit-Ang were illegally dismissed. They claim that
Petitioners argue that the Court of Appeals should have petitioner Nepomuceno committed an "honest and
dismissed outright the Petition for Certiorari since negligible mistake"[43] that should not have warranted
respondents failed to post a genuine appeal bond before dismissal considering his loyal service for nine (9) years.
the National Labor Relations Commission. They allege They contend that petitioner Nepomuceno's absence did
that when Sheriff Ramon Nonato P. Dayao attempted to not injure respondent ProHealth's business since he
enforce the judgment award against the appeal bond, he turned over all pending work to a reliever before he left
was informed that the appeal bond procured by and even surpassed his sales quota for the
respondents did not appear in the records of Alpha month.[44] They likewise claim that his dismissal was
Insurance and Surety Company, Inc. (Alpha Insurance). done in violation of his right to due process since he was
They also claim that respondents were notified by the not given any opportunity to explain his side and was
National Labor Relations Commission four (4) times that only given a notice of termination two (2) days after he
their appeal bond was not genuine, showing that was actually dismissed.[45]
respondents did not comply with the requirement in good Petitioners maintain that petitioner Palit-Ang believed in
faith.[40] good faith that Gamboa would just claim his cash
Petitioners contend that petitioner Malcaba properly filed advance the day after he tried to claim it and that there
his Complaint before the Labor Arbiter since he was an was nothing in her actions that would prove that she
employee of respondent ProHealth, albeit a high-ranking intended to disobey or defy respondent Del Castillo's
one. They argue that respondents merely alleged that instructions. They insist that delay in complying with
petitioner Malcaba is a corporate officer but failed to orders is not tantamount to disobedience and would not
substantiate this allegation.[41] They maintain that constitute just cause for petitioner Palit-Ang's dismissal.
petitioner Malcaba did not resign on September 24, 2007 They likewise submit that while petitioner Palit-Ang was
considering that the General Information Sheet for 2007 subjected to a fact-finding investigation, respondents
submitted on October 11, 2007 listed him as respondent failed to inform her of her right to be assisted by
ProHealth's President. They submit that respondent Del counsel.[46]
Castillo's action took a toll on petitioner Malcaba's well- Respondents, on the other hand, counter that a liberal
being; hence, the latter merely took a leave of absence application of the procedural rules was necessary in their
and returned to work in November 2007. They claim that case since they acted in good faith in posting their appeal
respondents made it difficult for petitioner Malcaba to bond.[47] They likewise contend that the issue should
continue his work upon his return, resulting in his have already been considered moot since petitioners
resignation in January 2008. Thus, they argue that "were able to garnish and collect the amounts allegedly
petitioner Malcaba was constructively dismissed.[42] due to them."[48]
Respondents likewise insist that petitioner Malcaba was Review. Thus, each petitioner's case will have to be
a corporate officer considering that he was not only an resolved separately within this Decision. This Court's
incorporator and stockholder, but also an elected Director ruling over one (1) petitioner may not necessarily affect
and President of respondent ProHealth.[49] They also the other co-petitioners. The National Labor Relations
point out that he filed his labor complaint seven (7) Commission's zeal for economy and convenience should
months after his resignation and that his voluntary never prejudice the individual rights of each party. The
resignation already disproves his claim of constructive National Labor Relations Commission should know the
dismissal.[50] rule that joinder of parties[53] or causes of
Respondents argue that they were justified in dismissing action[54] applies suppletorily in appeals[55] and for good
petitioners Nepomuceno and Palit-Ang. They contend reason.[56]
that petitioner Nepomuceno's abandonment of his duties Petitioners raise the common procedural issue of
at a critical sales period and his failure to immediately whether or not respondents failed to perfect their appeal
advise his superiors of his whereabouts was ground for when it was discovered that their appeal bond was a
respondents to lose their trust and confidence in forged bond, which this Court will address before
him.[51] They likewise maintain that petitioner Palit-Ang proceeding with the substantive issues. The substantive
was correctly found by the Court of Appeals to have issues raised, however, are dependent on the factual
defied the lawful instructions of respondent Del Castillo circumstances applicable to each petitioner. This Court
and illustrated her "grave disrespect towards tackles these substantive issues in order:
authority."[52]
From the arguments and allegations of the parties, it is First, whether or not the Labor Arbiter and National Labor
clear that this case involves three (3) different illegal Relations Commission had jurisdiction over petitioner
dismissal complaints, with three (3) different Nicanor F. Malcaba's termination dispute considering the
complainants in three (3) different factual situations allegation that he was a corporate officer, and not a mere
during three (3) different time periods. The only employee;
commonality is that they involve the same respondents.
Second, whether or not petitioner Christian C.
While this Court commends the economy by which the Nepomuceno was validly dismissed for willful breach of
National Labor Relations Commission resolved these trust when he failed to inform respondents ProHealth
cases, the three (3) complaints should have been Pharma Philippines, Inc., Generoso R. Del Castillo, Jr.,
resolved separately since the three (3) petitioners raise and Dante M. Busto of the actual dates of his vacation
vastly different substantive issues. This leaves this Court leave; and
with the predicament of having to resolve three (3)
different cases of illegal dismissal in one (1) Petition for
Finally, whether or not petitioner Laura Mae Fatima F. (ii) posting of a cash or surety bond as provided in
Palit-Ang was validly dismissed for willful disobedience Section 6 of this Rule[.]
when she failed to immediately comply with an order of ....
her superior.
Section 6. Bond. — In case the decision of the Labor
I Arbiter or the Regional Director involves a monetary
Appeal is not a matter of right.[57] Courts and tribunals award, an appeal by the employer may be perfected only
have the discretion whether to give due course to an upon the posting of a bond, which shall either be in the
appeal or to dismiss it outright. The perfection of an form of cash deposit or surety bond equivalent in the
appeal is, thus, jurisdictional. Non-compliance with the amount to the monetary award, exclusive of damages
manner in which to file an appeal renders the judgment and attorney's fees.
final and executory.[58]
In labor cases, an appeal by an employer is perfected In case of surety bond, the same shall be issued by a
only by filing a bond equivalent to the monetary award. reputable bonding company duly accredited by the
Thus, Article 229 [223][59] of the Labor Code provides: Commission and shall be accompanied by original or
Article 229. [223] Appeal. certified true copies of the following:
...
In case of a judgment involving a monetary award, an (a) a joint declaration under oath by the employer, his/her
appeal by the employer may be perfected only upon the counsel, and the bonding company, attesting that the
posting of a cash or surety bond issued by a reputable bond posted is genuine, and shall be in effect until final
bonding company duly accredited by the Commission in disposition of the case;
the amount equivalent to the monetary award in the
judgment appealed from. (b) an indemnity agreement between the employer
appellant and bonding company;
This requirement is again repeated m the 2011 National
Labor Relations Commission Rules of Procedure: (c) proof of security deposit or collateral securing the
bond: provided, that a check shall not be considered as
Section 4. Requisites for Perfection of Appeal. — (a) The an acceptable security; and,
appeal shall be:
.... (d) notarized board resolution or secretary's certificate
(5) accompanied by: from the bonding company showing its authorized
.... signatories and their specimen signatures.
The Commission through the Chairman may on justifiable The purpose of requiring an appeal bond is "to guarantee
grounds blacklist an accredited bonding company. the payment of valid and legal claims against the
employer."[61] It is a measure of financial security granted
A cash or surety bond shall be valid and effective from to an illegally dismissed employee since the resolution of
the date of deposit or posting, until the case is finally the employer's appeal may take an indeterminable
decided, resolved or terminated, or the award satisfied. amount of time. In particular:
This condition shall be deemed incorporated in the terms The requirement that the employer post a cash or surety
and conditions of the surety bond, and shall be binding bond to perfect its/his appeal is apparently intended to
on the appellants and the bonding company. assure the workers that if they prevail in the case, they
will receive the money judgment in their favor upon the
The appellant shall furnish the appellee with a certified dismissal of the employer's appeal. It was intended to
true copy of the said surety bond with all the above- discourage employers from using an appeal to delay, or
mentioned supporting documents. The appellee shall even evade, their obligation to satisfy their employees'
verify the regularity and genuineness thereof and just and lawful claims.[62]
immediately report any irregularity to the Commission. Procedural rules require that the appeal bond filed be
"genuine." An appeal bond determined by the National
Upon verification by the Commission that the bond is Labor Relations Commission to be "irregular or not
irregular or not genuine, the Commission shall cause the genuine" shall cause the immediate dismissal of the
immediate dismissal of the appeal, and censure the appeal.[63]
responsible parties and their counsels, or subject them to In this case, petitioners allege that respondents' appeal
reasonable fine or penalty, and the bonding company should not have been given due course by the National
may be blacklisted. Labor Relations Commission since the appeal bond they
filed "[did] not appear in the records of [Alpha
No motion to reduce bond shall be entertained except on Insurance]"[64] and was, therefore, not genuine. As
meritorious grounds, and only upon the posting of a bond evidence, they presented a certification from Alpha
in a reasonable amount in relation to the monetary Insurance, which read:
award. This is to certify that the bond being presented by MR.
JOSEPH D. DE JESUS is allegedly a Surety Bond filed
with the NATIONAL LABOR RELATIONS COMMISSION,
The mere filing of a motion to reduce bond without
identified as Bond No. G(16)00358/2009 on an alleged
complying with the requisites in the preceding
case NLRC NCR Case No. 08-12090-08, is a faked and
paragraphs shall not stop the running of the period to
forged bond, and it was not issued by ALPHA
perfect an appeal.[60]
INSURANCE & SURETY COMPANY, INC.[65]
This Court in Navarro v. National Labor Relations Thus, while the procedural rules strictly require the
Commission[66] found that an employer failed to perfect employer to submit a genuine bond, an appeal could still
its appeal as it submitted an appeal bond that was be perfected if there was substantial compliance with the
"bogus[,] having been issued by an officer no longer requirement.
connected for a long time with the bonding
company."[67] The mere fictitiousness of the bond, In this instance, the National Labor Relations
however, was not the only factor taken into consideration. Commission certified that respondents filed a security
This Court likewise took note of the employer's failure to deposit in the amount of P6,512,524.84 under Security
sufficiently explain this irregularity and its failure to file the Bank check no. 0000045245,[72] showing that the
bond within the reglementary period. premium for the appeal bond was duly paid and that
In Quiambao v. National Labor Relations there was willingness to post it.[73] Respondents likewise
Commission,[68] this Court held that the mandatory and attached documents proving that Alpha Insurance was a
jurisdictional requirement of the filing of an appeal bond legitimate and accredited bonding company. [74]
could be relaxed if there was substantial Despite their failure to collect on the appeal bond,
compliance. Quiambao proceeded to outline situations petitioners do not deny that they were eventually able to
that could be considered as substantial compliance, such garnish the amount from respondents' bank
as late payment, failure of the Labor Arbiter to state the deposits.[75] This fulfills the purpose of the bond, that is,
exact amount of money judgment due, and reliance on a "to guarantee the payment of valid and legal claims
notice of judgment that failed to state that a bond must against the employer[.]"[76] Respondents are considered
first be filed in order to appeal.[69] Rosewood Processing to have substantially complied with the requirements on
v. National Labor Relations Commission[70] likewise the posting of an appeal bond.
enumerated other instances where there would be a II
liberal application of the procedural rules: Under the Labor Code, the Labor Arbiter exercises
Some of these cases include: (a) counsel's reliance on original and exclusive jurisdiction over termination
the footnote of the notice of the decision of the labor disputes between an employer and an employee while
arbiter that the aggrieved party may appeal . . . within ten the National Labor Relations Commission exercises
(10) working days; (b) fundamental consideration of exclusive appellate jurisdiction over these cases:
substantial justice; (c) prevention of miscarriage of justice
or of unjust enrichment, as where the tardy appeal is Article 224. [217] Jurisdiction of the Labor Arbiters and the
from a decision granting separation pay which was Commission. — (a) Except as otherwise provided under
already granted in an earlier final decision; and (d) this Code, the Labor Arbiters shall have original and
special circumstances of the case combined with its legal exclusive jurisdiction to hear and decide, within thirty (30)
merits or the amount and the issue involved. [71] calendar days after the submission of the case by the
parties for decision without extension, even in the Directors may have in taking such action. Also, an intra-
absence of stenographic notes, the following cases corporate controversy is one which arises between a
involving all workers, whether agricultural or non- stockholder and. the corporation. There is no distinction,
agricultural: qualification, nor any exemption whatsoever. The
... provision is broad and covers all kinds of controversies
(2) Termination disputes; between stockholders and corporations.[82]
... Further, in Matling Industrial and Commercial Corporation
(b) The Commission shall have exclusive appellate v. Coros,[83] this Court stated that jurisdiction over intra-
jurisdiction over all cases decided by Labor Arbiters. [77] corporate disputes involving the illegal dismissal of
The presumption under this provision is that the parties corporate officers was with the Regional Trial Court, not
have an employer-employee relationship. Otherwise, the with the Labor Arbiter:
case would be cognizable in different tribunals even if the Where the complaint for illegal dismissal concerns a
action involves a termination dispute. corporate officer, however, the controversy falls under
the jurisdiction of the Securities and Exchange
Petitioner Malcaba alleges that the Court of Appeals Commission (SEC), because the controversy arises out
erred m dismissing his complaint for lack of jurisdiction, of intra-corporate or partnership relations between and
insisting that he was an employee of respondent, not a among stockholders, members, or associates, or
corporate officer. between any or all of them and the corporation,
partnership, or association of which they are
At the time of his alleged dismissal, petitioner Malcaba stockholders, members, or associates, respectively; and
was the President of respondent corporation. Strangely, between such corporation, partnership, or association
this same petitioner disputes this position as and the State insofar as the controversy concerns their
respondents' bare assertion,[78] yet he also insists that his individual franchise or right to exist as such entity; or
name appears as President in the corporation's General because the controversy involves the election or
Information Sheet for 2007.[79] appointment of a director, trustee, officer, or manager of
Under Section 25 of the Corporation Code, [80] the such corporation, partnership, or association. Such
President of a corporation is considered a corporate controversy, among others, is known as an intra-
officer. The dismissal of a corporate officer is considered corporate dispute.
an intra-corporate dispute, not a labor dispute. Thus,
in Tabang v. National Labor Relations Commission:[81] Effective on August 8, 2000, upon the passage of
A corporate officer's dismissal is always a corporate act, Republic Act No. 8799, otherwise known as The
or an intra-corporate controversy, and the nature is not Securities Regulation Code, the SEC's jurisdiction over
altered by the reason or wisdom with which the Board of
all intra-corporate disputes was transferred to the RTC, It has been held that an "office" is created by the charter
pursuant to Section 5.2 of RA No. 8799, to wit: of the corporation and the officer is elected by the
directors or stockholders. On the other hand, an
5.2. The Commission's jurisdiction over all cases "employee" usually occupies no office and generally is
enumerated under Section 5 of Presidential Decree No. employed not by action of the directors or stockholders
902-A is hereby transferred to the Courts of general but by the managing officer of the corporation who also
jurisdiction or the appropriate Regional Trial Court: determines the compensation to be paid to such
Provided, that the Supreme Court in the exercise of its employee.[85]
authority may designate the Regional Trial Court The clear weight of jurisprudence clarifies that to be
branches that shall exercise jurisdiction over these considered a corporate officer, first, the office must be
cases. The Commission shall retain jurisdiction over created by the charter of the corporation, and second, the
pending cases involving intra-corporate disputes officer must be elected by the board of directors or by the
submitted for final resolution which should be resolved stockholders.
within one (1) year from the enactment of this Code. The Petitioner Malcaba was an incorporator of the corporation
Commission shall retain jurisdiction over pending and a member of the Board of Directors.[86] Respondent
suspension of payments/rehabilitation cases filed as of corporation's By-Laws creates the office of the President.
30 June 2000 until finally disposed.[84] That foundational document also states that the
The mere designation as a high-ranking employee, President is elected by the Board of Directors:
however, is not enough to consider one as a corporate ARTICLE IV
officer. In Tabang, this Court discussed the distinction OFFICER
between an employee and a corporate officer, regardless Section 1. Election/Appointment — Immediately after
of designation: their election, the Board of Directors shall formally
organize by electing the President, the Vice President,
The president, vice-president, secretary and treasurer the Treasurer, and the Secretary at said meeting. [87]
are commonly regarded as the principal or executive This case is similar to Locsin v. Nissan Lease
officers of a corporation, and modern corporation statutes Philippines:[88]
usually designate them as the officers of the corporation. Locsin was undeniably Chairman and President, and was
However, other offices are sometimes created by the elected to these positions by the Nissan board pursuant
charter or by-laws of a corporation, or the board of to its By-laws. As such, he was a corporate officer, not an
directors may be empowered under the by-laws of a employee. The CA reached this conclusion by relying on
corporation to create additional offices as may be the submitted facts and on Presidential Decree 902-A,
necessary. 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." currency and to ensure the collection of foreign bills or
Likewise, Section 25 of Batas Pambansa Blg. 69, or the checks purchased, including the signing of transmittal
Corporation Code of the Philippines (Corporation Code) letters covering the same. It has been stated that "the
provides that corporate officers are the president, primary standard of determining regular employment is
secretary, treasurer and such other officers as may be the reasonable connection between the particular activity
provided for in the by-laws.[89] (Emphasis in the performed by the employee in relation to the usual trade
original) or business of the employer.["] Additionally, "an employee
Petitioners cite Prudential Bank and Trust Company v. is regular because of the nature of work and the length of
Reyes[90] as basis that even high-ranking officers may be service, not because of the mode or even the reason for
considered regular employees, not corporate hiring them." As Assistant Vice-President of the Foreign
officers.[91] Prudential Bank, however, is not applicable to Department of the Bank she performs tasks integral to
this case. the operations of the bank and her length of service with
In Prudential Bank, an employer was the bank totaling 28 years speaks volumes of her status
considered estopped from raising the argument of an as a regular employee of the bank. In fine, as a regular
intra-corporate dispute since this was only raised when employee, she is entitled to security of tenure; that is, her
the case was filed with this Court. This Court also noted services may be terminated only for a just or authorized
that an employee rose from the ranks and was regularly cause. This being in truth a case of illegal dismissal, it is
performing tasks integral to the business of the employer no wonder then that the Bank endeavored to the very
throughout the length of her tenure, thus: end to establish loss of trust and confidence and serious
It appears that private respondent was appointed misconduct on the part of private respondent but, as will
Accounting Clerk by the Bank on July 14, 1963. From be discussed later, to no avail.[92]
that position she rose to become supervisor. Then in An "Assistant Vice President" is not among the officers
1982, she was appointed Assistant Vice-President which stated in Section 25 of the Corporation Code.[93] A
she occupied until her illegal dismissal on July 19, 1991. corporation's President, however, is explicitly stated as a
The bank's contention that she merely holds an elective corporate officer.
position and that in effect she is not a regular employee Finding that petitioner Malcaba is the President of
is belied by the nature of her work and her length of respondent corporation and a corporate officer, any issue
service with the Bank. As earlier stated, she rose from on his alleged dismissal is beyond the jurisdiction of the
the ranks and has been employed with the Bank since Labor Arbiter or the National Labor Relations
1963 until the termination of her employment in 1991. As Commission. Their adjudication on his money claims is
Assistant Vice President of the foreign department of the void for lack of jurisdiction. As a matter of equity,
Bank, she is tasked, among others, to collect checks petitioner Malcaba must, therefore, return all amounts
drawn against overseas banks payable in foreign received as judgment award pending final adjudication of
his claims. This Court's dismissal of petitioner Malcaba's however, contend that as District Business Manager,
claims, however, is without prejudice to his filing of the petitioner Nepomuceno lost the corporation's trust and
appropriate case in the proper forum. confidence by failing to report for work during a crucial
sales period.
III
]
Article 294 [279] of the Labor Code provides that an As found by the National Labor Relations Commission,
employer may terminate the services of an employee petitioner Nepomuceno had filed for leave, which was
only upon just or authorized causes.[94] Article 297 [282] approved, for April 24, 25, and 28, 2008 to go on
enumerates the just causes for termination, among which vacation in Malaysia. However, he left for Malaysia on
is "[f]raud or willful breach by the employee of the trust the evening of April 22, 2008, and thus, failed to report
reposed in him by his employer or duly authorized for work on April 23, 2008.
representative[.]"
Loss of trust and confidence is a just cause to terminate Petitioner Nepomuceno claims that he only knew that his
either managerial employees or rank-and-file employees flight was for the evening of April 22, 2008 on the day of
who regularly handle large amounts of money or property his flight. Respondents, however, insist that he
in the regular exercise of their functions.[95] "deliberately concealed the actual date of departure as
For an act to be considered a loss of trust and he knows that he would be out of the country on a crucial
confidence, it must be first, work-related, and second, period of sales generation and bookings . . . [and]
founded on clearly established facts: therefore knew that his application for leave would be
The complained act must be work related such as would denied."[98] Otherwise stated, respondents contend that
show the employee concerned to be unfit to continue his dismissal was a valid exercise of their management
working for the employer and it must be based on a willful prerogative to discipline and dismiss managerial
breach of trust and founded on clearly established facts. employees unworthy of their trust and confidence.
The basis for the dismissal must be clearly and The concept of a management prerogative was already
convincingly established but proof beyond reasonable passed upon by this Court in San Miguel Brewery Sales
doubt is not necessary.[96] Force Union v. Ople:[99]
The breach of trust must likewise be willful, that is, "it is Except as limited by special laws, an employer is free to
done intentionally, knowingly and purposely, without regulate, according to his own discretion and judgment,
justifiable excuse, as distinguished from an act done all aspects of employment, including hiring, work
carelessly, thoughtlessly, heedlessly or inadvertently." [97] assignments, working methods, time, place and manner
Petitioner Nepomuceno alleges that he was illegally of work, tools to be used, processes to be followed,
dismissed merely for his failure to inform his superiors of supervision of workers, working regulations, transfer of
the actual dates of his vacation leave. Respondents,
employees, work supervision, lay-off of workers and the turned over all of his pending work to a reliever before he
discipline, dismissal and recall of work. . . . left for Malaysia. He was able to reach his sales quota
and surpass his sales target even before taking his
Every business enterprise endeavors to increase its vacation leave. Respondents did not suffer any financial
profits. In the process, it may adopt or devise means damage as a result of his absence. This was also
designed towards that goal. In Abott Laboratories vs. petitioner Nepomuceno's first infraction in his nine (9)
NLRC, . . . We ruled: years of service with respondents.[101] None of these
. . . Even as the law is solicitous of the welfare of the circumstances constitutes a willful breach of trust on his
employees, it must also protect the right of an employer part. The penalty of dismissal, thus, was too severe for
to exercise what are clearly management prerogatives. this kind of infraction.
The free will of management to conduct its own business The manner of petitioner Nepomuceno's dismissal was
affairs to achieve its purpose cannot be denied. likewise suspicious. In all cases of employment
termination, the employee must be granted due process.
So long as a company's management prerogatives are The manner by which this is accomplished is stated in
exercised in good faith for the advancement of the Book V, Rule XXIII, Section 2 of the Rules Implementing
employer's interest and not for the purpose of defeating the Labor Code:
or circumventing the rights of the employees under
special laws or under valid agreements, this Court will Section 2. Standard of due process: requirements of
uphold them.[100] notice.
While an employer is free to regulate all aspects of
employment, the exercise of management prerogatives — In all cases of termination of employment, the
must be in good faith and must not defeat or circumvent following standards of due process shall be substantially
the rights of its employees. observed.

In industries that mainly rely on sales, employers are free I. For termination of employment based on just causes as
to discipline errant employees who deliberately fail to defined in Article 282 of the Code:
report for work during a crucial sales period. It would
have been reasonable for respondents to discipline (a) A written notice served on the employee specifying
petitioner Nepomuceno had he been a problematic the ground or grounds for termination, and giving to said
employee who unceremoniously refused to do his work. employee reasonable opportunity within which to explain
his side;
However, as found by the Labor Arbiter and the National
Labor Relations Commission, petitioner Nepomuceno
(b) A hearing or conference during which the employee awarded separation pay at the rate of one (1) month for
concerned, with the assistance of counsel if the every year of service. [105]
employee so desires, is given opportunity to respond to IV
the charge, present his evidence or rebut the evidence Under Article 297 [282] of the Labor Code, an employer
presented against him; and may terminate the services of an employee who commits
willful disobedience of the lawful orders of the employer:
(c) A written notice of termination served on the
employee indicating that upon due consideration of all Article 297. [282] Termination by Employer. — An
the circumstance, grounds have been established to employer may terminate an employment for any of the
justify his termination. following causes:

Here, petitioner Nepomuceno received a memorandum (a) Serious misconduct or willful disobedience by the
on April 23, 2008, asking him to explain why no employee of the lawful orders of his employer or
administrative investigation should be held against him. representative in connection with his work[.]
He submitted an explanation on the same day and
another explanation on May 2, 2008. On May 7, 2008, he For disobedience to be considered as just cause for
was given his notice of termination, which had already termination, two (2) requisites must concur: first, "the
taken effect two (2) days earlier, or on May 5, 2008. [102] employee's assailed conduct must have been wilful or
It is true that "[t]he essence of due process is simply an intentional," and second, "the order violated must have
opportunity to be heard."[103] Petitioner Nepomuceno had been reasonable, lawful, made known to the employee
two (2) opportunities within which to explain his actions. and must pertain to the duties which he [or she] had been
This would have been sufficient to satisfy the engaged to discharge."[106] For disobedience to be willful,
requirement. The delay in handing him his notice of it must be "characterized by a wrongful and perverse
termination, however, appears to have been an mental attitude rendering the employee's act inconsistent
afterthought. While strictly not a violation of procedural with proper subordination."[107]
due process, respondents should have been more The conduct complained of must also constitute "harmful
circumspect in complying with the due process behavior against the business interest or person of his [or
requirements under the law. her] employer."[108] Thus, it is implied in every case of
Considering that petitioner Nepomuceno's dismissal was willful disobedience that "the erring employee obtains
done without just cause, he is entitled to reinstatement undue advantage detrimental to the business interest of
and full backwages.[104] If reinstatement is not possible the employer."[109]
due to strained relations between the parties, he shall be Petitioner Palit-Ang, as Finance Officer, was instructed
by respondent Del Castillo to give a cash advance of
P3,000.00 to District Branch Manager Gamboa on with the spirit of our Constitution and laws to lean over
November 26, 2007. This order was reasonable, lawful, backwards in favor of the working class, and with the
made known to petitioner Palit-Ang, and pertains to her mandate that every doubt must be resolved in their favor.
duties.[110] What is left to be determined, therefore, is
whether petitioner Palit-Ang intentionally and willfully Although we recognize the inherent right of the employer
violated it as to amount to insubordination. to discipline its employees, we should still ensure that the
When Gamboa went to collect the money from petitioner employer exercises the prerogative to discipline
Palit-Ang, he was told to return the next day as she was humanely and considerately, and that the sanction
still busy. When petitioner Palit-Ang found out that the imposed is commensurate to the offense involved and to
money was to be used for a car tune-up, she suggested the degree of the infraction. The discipline exacted by the
to Gamboa to just get the money from his mobilization employer should further consider the employee's length
fund and that she just would reimburse it after. [111] The of service and the number of infractions during his
Court of Appeals found that these circumstances employment. The employer should never forget that
characterized petitioner Palit-Ang's "arrogance and always at stake in disciplining its employee are not only
hostility,"[112] in failing to comply with respondent Del his position but also his livelihood, and that he may also
Castillo's order, and thus, warranted her dismissal. have a family entirely dependent on his earnings. [114]
On the contrary, there was no ill will between Gamboa Petitioner Palit-Ang likewise assails the failure of
and petitioner Palit-Ang. Petitioner Palit-Ang's failure to respondents to inform her of her right to counsel when
immediately give the money to Gamboa was not the she was being investigated for her infraction. As
result of a perverse mental attitude but was merely previously discussed, "[t]he essence of due process is
because she was busy at the time. Neither did she profit simply an opportunity to be heard,"[115] not that the
from her failure to immediately give the cash advance for employee must be accompanied by counsel at all times.
the car tune-up nor did respondents suffer financial A hearing was conducted and she was furnished a notice
damage by her failure to comply. The severe penalty of of termination explaining the grounds for her
dismissal was not commensurate to her infraction. dismissa1.[116] She was not denied due process.
In Dongon v. Rapid Movers and Forwarders:[113] Petitioner Palit-Ang, nonetheless, is considered to have
To us, dismissal should only be a last resort, a penalty to been illegally dismissed, her penalty not having been
be meted only after all the relevant circumstances have proportionate to the infraction committed. Thus, she is
been appreciated and evaluated with the goal of ensuring entitled to reinstatement and full backwages. [117] If
that the ground for dismissal was not only serious but reinstatement is not possible due to strained relations
true. The cause of termination, to be lawful, must be a between the parties, she shall be awarded separation
serious and grave malfeasance to justify the deprivation pay at the rate of one (1) month for every year of
of a means of livelihood. This requirement is in keeping service.[118]
WHEREFORE, the Petition is PARTIALLY GRANTED.
Petitioner Christian C. Nepomuceno and petitioner Laura
Mae Fatima F. Palit-Ang are DECLARED to have been
illegally dismissed. They are, therefore, entitled to
reinstatement without loss of seniority rights, or in lieu
thereof, separation pay; and the payment of backwages
from the filing of their Complaints until finality of this
Decision.
The Court of Appeals February 19, 2013 Decision and
September 10, 2013 Resolution in CA-G.R. SP No.
119093, finding that the National Labor Relations
Commission had no jurisdiction to adjudicate petitioner
Nicanor F. Malcaba's claims is SUSTAINED. Petitioner
Malcaba is further ordered to RETURN the amount of
P4,937,420.40 to respondents for having been
erroneously awarded. This shall be without prejudice to
the filing of petitioner Malcaba's claims in the proper
forum.
This case is hereby REMANDED to the Labor Arbiter for
the proper computation of petitioners Christian C.
Nepomuceno's and Laura Mae Fatima F. Palit-Ang's
money claims.
SO ORDERED.