G.R. No.

151969 September 4, 2009

VALLE VERDE COUNTRY CLUB, INC., ERNESTO VILLALUNA, RAY GAMBOA, AMADO M.
SANTIAGO, JR., FORTUNATO DEE, AUGUSTO SUNICO, VICTOR SALTA, FRANCISCO
ORTIGAS III, ERIC ROXAS, in their capacities as members of the Board of Directors of Valle
Verde Country Club, Inc., and JOSE RAMIREZ, Petitioners,
vs.
VICTOR AFRICA, Respondent.

DECISION

BRION, J.:

In this petition for review on certiorari,1 the parties raise a legal question on corporate governance:
Can the members of a corporation’s board of directors elect another director to fill in a vacancy
caused by the resignation of a hold-over director?

THE FACTUAL ANTECEDENTS

On February 27, 1996, during the Annual Stockholders’ Meeting of petitioner Valle Verde Country
Club, Inc. (VVCC), the following were elected as members of the VVCC Board of Directors: Ernesto
Villaluna, Jaime C. Dinglasan (Dinglasan), Eduardo Makalintal (Makalintal), Francisco Ortigas III,
Victor Salta, Amado M. Santiago, Jr., Fortunato Dee, Augusto Sunico, and Ray Gamboa.2 In the
years 1997, 1998, 1999, 2000, and 2001, however, the requisite quorum for the holding of the
stockholders’ meeting could not be obtained. Consequently, the above-named directors continued
to serve in the VVCC Board in a hold-over capacity.

On September 1, 1998, Dinglasan resigned from his position as member of the VVCC Board. In a
meeting held on October 6, 1998, the remaining directors, still constituting a quorum of VVCC’s
nine-member board, elected Eric Roxas (Roxas) to fill in the vacancy created by the resignation of
Dinglasan.

A year later, or on November 10, 1998, Makalintal also resigned as member of the VVCC Board.
He was replaced by Jose Ramirez (Ramirez), who was elected by the remaining members of the
VVCC Board on March 6, 2001.

Respondent Africa (Africa), a member of VVCC, questioned the election of Roxas and Ramirez as
members of the VVCC Board with the Securities and Exchange Commission (SEC) and the
Regional Trial Court (RTC), respectively. The SEC case questioning the validity of Roxas’
appointment was docketed as SEC Case No. 01-99-6177. The RTC case questioning the validity
of Ramirez’ appointment was docketed as Civil Case No. 68726.

In his nullification complaint3 before the RTC, Africa alleged that the election of Roxas was contrary
to Section 29, in relation to Section 23, of the Corporation Code of the Philippines (Corporation
Code). These provisions read:

Sec. 23. The board of directors or trustees. - Unless otherwise provided in this Code, the corporate
powers of all corporations formed under this Code shall be exercised, all business conducted and
all property of such corporations controlled and held by the board of directors or trustees to be
elected from among the holders of stocks, or where there is no stock, from among the members
of the corporation, who shall hold office for one (1) year until their successors are elected and
qualified.

xxxx
Sec. 29. Vacancies in the office of director or trustee. - Any vacancy occurring in the board of
directors or trustees other than by removal by the stockholders or members or by expiration of
term, may be filled by the vote of at least a majority of the remaining directors or trustees, if still
constituting a quorum; otherwise, said vacancies must be filled by the stockholders in a regular or
special meeting called for that purpose. A director or trustee so elected to fill a vacancy shall be
elected only for the unexpired term of his predecessor in office. xxx. [Emphasis supplied.]

Africa claimed that a year after Makalintal’s election as member of the VVCC Board in 1996, his
[Makalintal’s] term – as well as those of the other members of the VVCC Board – should be
considered to have already expired. Thus, according to Africa, the resulting vacancy should have
been filled by the stockholders in a regular or special meeting called for that purpose, and not by
the remaining members of the VVCC Board, as was done in this case.

Africa additionally contends that for the members to exercise the authority to fill in vacancies in the
board of directors, Section 29 requires, among others, that there should be an unexpired term
during which the successor-member shall serve. Since Makalintal’s term had already expired with
the lapse of the one-year term provided in Section 23, there is no more "unexpired term" during
which Ramirez could serve.

Through a partial decision4 promulgated on January 23, 2002, the RTC ruled in favor of Africa and
declared the election of Ramirez, as Makalintal’s replacement, to the VVCC Board as null and void.

Incidentally, the SEC issued a similar ruling on June 3, 2003, nullifying the election of Roxas as
member of the VVCC Board, vice hold-over director Dinglasan. While VVCC manifested its intent
to appeal from the SEC’s ruling, no petition was actually filed with the Court of Appeals; thus, the
appellate court considered the case closed and terminated and the SEC’s ruling final and
executory.5

THE PETITION

VVCC now appeals to the Court to assail the RTC’s January 23, 2002 partial decision for being
contrary to law and jurisprudence. VVCC made a direct resort to the Court viaa petition for review
on certiorari, claiming that the sole issue in the present case involves a purely legal question.

As framed by VVCC, the issue for resolution is whether the remaining directors of the corporation’s
Board, still constituting a quorum, can elect another director to fill in a vacancy caused by the
resignation of a hold-over director.

Citing law and jurisprudence, VVCC posits that the power to fill in a vacancy created by the
resignation of a hold-over director is expressly granted to the remaining members of the
corporation’s board of directors.

Under the above-quoted Section 29 of the Corporation Code, a vacancy occurring in the board of
directors caused by the expiration of a member’s term shall be filled by the corporation’s
stockholders. Correlating Section 29 with Section 23 of the same law, VVCC alleges that a
member’s term shall be for one year and until his successor is elected and qualified; otherwise
stated, a member’s term expires only when his successor to the Board is elected and qualified.
Thus, "until such time as [a successor is] elected or qualified in an annual election where a quorum
is present," VVCC contends that "the term of [a member] of the board of directors has yet not
expired."

As the vacancy in this case was caused by Makalintal’s resignation, not by the expiration of his
term, VVCC insists that the board rightfully appointed Ramirez to fill in the vacancy.

In support of its arguments, VVCC cites the Court’s ruling in the 1927 El Hogar6 case which states:
Owing to the failure of a quorum at most of the general meetings since the respondent has been
in existence, it has been the practice of the directors to fill in vacancies in the directorate by
choosing suitable persons from among the stockholders. This custom finds its sanction in Article
71 of the By-Laws, which reads as follows:

Art. 71. The directors shall elect from among the shareholders members to fill the vacancies that
may occur in the board of directors until the election at the general meeting.

xxxx

Upon failure of a quorum at any annual meeting the directorate naturally holds over and continues
to function until another directorate is chosen and qualified. Unless the law or the charter of a
corporation expressly provides that an office shall become vacant at the expiration of the term of
office for which the officer was elected, the general rule is to allow the officer to hold over until his
successor is duly qualified. Mere failure of a corporation to elect officers does not terminate the
terms of existing officers nor dissolve the corporation. The doctrine above stated finds expression
in article 66 of the by-laws of the respondent which declares in so many words that directors shall
hold office "for the term of one year or until their successors shall have been elected and taken
possession of their offices." xxx.

It results that the practice of the directorate of filling vacancies by the action of the directors
themselves is valid. Nor can any exception be taken to the personality of the individuals chosen
by the directors to fill vacancies in the body. [Emphasis supplied.]

Africa, in opposing VVCC’s contentions, raises the same arguments that he did before the trial
court.

THE COURT’S RULING

We are not persuaded by VVCC’s arguments and, thus, find its petition unmeritorious.

To repeat, the issue for the Court to resolve is whether the remaining directors of a corporation’s
Board, still constituting a quorum, can elect another director to fill in a vacancy caused by the
resignation of a hold-over director. The resolution of this legal issue is significantly hinged on the
determination of what constitutes a director’s term of office.

The holdover period is not part of the term of office of a member of the board of directors

The word "term" has acquired a definite meaning in jurisprudence. In several cases, we have
defined "term" as the time during which the officer may claim to hold the office as of right, and fixes
the interval after which the several incumbents shall succeed one another.7 The term of office is
not affected by the holdover.8 The term is fixed by statute and it does not change simply because
the office may have become vacant, nor because the incumbent holds over in office beyond the
end of the term due to the fact that a successor has not been elected and has failed to qualify.

Term is distinguished from tenure in that an officer’s "tenure" represents the term during which the
incumbent actually holds office. The tenure may be shorter (or, in case of holdover, longer) than
the term for reasons within or beyond the power of the incumbent.

Based on the above discussion, when Section 239 of the Corporation Code declares that "the board
of directors…shall hold office for one (1) year until their successors are elected and qualified," we
construe the provision to mean that the term of the members of the board of directors shall be only
for one year; their term expires one year after election to the office. The holdover period – that time
from the lapse of one year from a member’s election to the Board and until his successor’s election
and qualification – is not part of the director’s original term of office, nor is it a new term; the
holdover period, however, constitutes part of his tenure. Corollary, when an incumbent member of
the board of directors continues to serve in a holdover capacity, it implies that the office has a fixed
term, which has expired, and the incumbent is holding the succeeding term.10

After the lapse of one year from his election as member of the VVCC Board in 1996, Makalintal’s
term of office is deemed to have already expired. That he continued to serve in the VVCC Board
in a holdover capacity cannot be considered as extending his term. To be precise, Makalintal’s
term of office began in 1996 and expired in 1997, but, by virtue of the holdover doctrine in Section
23 of the Corporation Code, he continued to hold office until his resignation on November 10, 1998.
This holdover period, however, is not to be considered as part of his term, which, as declared, had
already expired.

With the expiration of Makalintal’s term of office, a vacancy resulted which, by the terms of Section
2911 of the Corporation Code, must be filled by the stockholders of VVCC in a regular or special
meeting called for the purpose. To assume – as VVCC does – that the vacancy is caused by
Makalintal’s resignation in 1998, not by the expiration of his term in 1997, is both illogical and
unreasonable. His resignation as a holdover director did not change the nature of the vacancy; the
vacancy due to the expiration of Makalintal’s term had been created long before his resignation.

The powers of the corporation’s board of directors emanate from its stockholders

VVCC’s construction of Section 29 of the Corporation Code on the authority to fill up vacancies in
the board of directors, in relation to Section 23 thereof, effectively weakens the stockholders’ power
to participate in the corporate governance by electing their representatives to the board of
directors. The board of directors is the directing and controlling body of the corporation. It is a
creation of the stockholders and derives its power to control and direct the affairs of the corporation
from them. The board of directors, in drawing to themselves the powers of the corporation,
occupies a position of trusteeship in relation to the stockholders, in the sense that the board should
exercise not only care and diligence, but utmost good faith in the management of corporate
affairs.12

The underlying policy of the Corporation Code is that the business and affairs of a corporation
must be governed by a board of directors whose members have stood for election, and who have
actually been elected by the stockholders, on an annual basis. Only in that way can the directors'
continued accountability to shareholders, and the legitimacy of their decisions that bind the
corporation's stockholders, be assured. The shareholder vote is critical to the theory that
legitimizes the exercise of power by the directors or officers over properties that they do not own.13

This theory of delegated power of the board of directors similarly explains why, under Section 29
of the Corporation Code, in cases where the vacancy in the corporation’s board of directors is
caused not by the expiration of a member’s term, the successor "so elected to fill in a vacancy
shall be elected only for the unexpired term of the his predecessor in office." The law has
authorized the remaining members of the board to fill in a vacancy only in specified instances, so
as not to retard or impair the corporation’s operations; yet, in recognition of the stockholders’ right
to elect the members of the board, it limited the period during which the successor shall serve only
to the "unexpired term of his predecessor in office."

While the Court in El Hogar approved of the practice of the directors to fill vacancies in the
directorate, we point out that this ruling was made before the present Corporation Code was
enacted14 and before its Section 29 limited the instances when the remaining directors can fill in
vacancies in the board, i.e., when the remaining directors still constitute a quorum and when the
vacancy is caused for reasons other than by removal by the stockholders or by expiration of the
term.1avv phi 1

It also bears noting that the vacancy referred to in Section 29 contemplates a vacancy occurring
within the director’s term of office. When a vacancy is created by the expiration of a term, logically,
there is no more unexpired term to speak of. Hence, Section 29 declares that it shall be the
corporation’s stockholders who shall possess the authority to fill in a vacancy caused by the
expiration of a member’s term.

As correctly pointed out by the RTC, when remaining members of the VVCC Board elected
Ramirez to replace Makalintal, there was no more unexpired term to speak of, as Makalintal’s one-
year term had already expired. Pursuant to law, the authority to fill in the vacancy caused by
Makalintal’s leaving lies with the VVCC’s stockholders, not the remaining members of its board of
directors.

WHEREFORE, we DENY the petitioners’ petition for review on certiorari, and AFFIRM the partial
decision of the Regional Trial Court, Branch 152, Manila, promulgated on January 23, 2002, in
Civil Case No. 68726. Costs against the petitioners.

SO ORDERED.
G.R. No. 201298 February 5, 2014

RAUL C. COSARE, Petitioner,

vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.

DECISION

REYES, J.:

Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court, which
assails the Decision2 dated November 24, 2011 and Resolution3 dated March 26, 2012 of the Court
of Appeals (CA) in CA-G.R. SP. No. 117356, wherein the CA ruled that the Regional Trial Court
(RTC), and not the Labor Arbiter (LA), had the jurisdiction over petitioner Raul C. Cosare's (Cosare)
complaint for illegal dismissal against Broadcom Asia, Inc. (Broadcom) and Dante Arevalo
(Arevalo), the President of Broadcom (respondents).

The Antecedents

The case stems from a complaint4 for constructive dismissal, illegal suspension and monetary
claims filed with the National Capital Region Arbitration Branch of the National Labor Relations
Commission (NLRC) by Cosare against the respondents.

Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo, who
was then in the business of selling broadcast equipment needed by television networks and
production houses. In December 2000, Arevalo set up the company Broadcom, still to continue
the business of trading communication and broadcast equipment. Cosare was named an
incorporator of Broadcom, having been assigned 100 shares of stock with par value of ₱1.00 per
share.5 In October 2001, Cosare was promoted to the position of Assistant Vice President for Sales
(AVP for Sales) and Head of the Technical Coordination, having a monthly basic net salary and
average commissions of ₱18,000.00 and ₱37,000.00, respectively.6

Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice President for Sales
and thus, became Cosare’s immediate superior. On March 23, 2009, Cosare sent a confidential
memo7 to Arevalo to inform him of the following anomalies which were allegedly being committed
by Abiog against the company: (a) he failed to report to work on time, and would immediately leave
the office on the pretext of client visits; (b) he advised the clients of Broadcom to purchase camera
units from its competitors, and received commissions therefor; (c) he shared in the "under the-
table dealings" or "confidential commissions" which Broadcom extended to its clients’ personnel
and engineers; and (d) he expressed his complaints and disgust over Broadcom’s uncompetitive
salaries and wages and delay in the payment of other benefits, even in the presence of office staff.
Cosare ended his memo by clarifying that he was not interested in Abiog’s position, but only wanted
Arevalo to know of the irregularities for the corporation’s sake.

Apparently, Arevalo failed to act on Cosare’s accusations. Cosare claimed that he was instead
called for a meeting by Arevalo on March 25, 2009, wherein he was asked to tender his resignation
in exchange for "financial assistance" in the amount of ₱300,000.00.8 Cosare refused to comply
with the directive, as signified in a letter9dated March 26, 2009 which he sent to Arevalo.

On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcom’s Manager for
Finance and Administration, a memo10 signed by Arevalo, charging him of serious misconduct and
willful breach of trust, and providing in part:

1. A confidential memo was received from the VP for Sales informing me that you had
directed, or at the very least tried to persuade, a customer to purchase a camera from
another supplier. Clearly, this action is a gross and willful violation of the trust and
 confidence this company has given to you being its AVP for Sales and is an attempt to
deprive the company of income from which you, along with the other employees of this
company, derive your salaries and other benefits. x x x.

2. A company vehicle assigned to you with plate no. UNV 402 was found abandoned in
another place outside of the office without proper turnover from you to this office which had
assigned said vehicle to you. The vehicle was found to be inoperable and in very bad
condition, which required that the vehicle be towed to a nearby auto repair shop for
extensive repairs.

3. You have repeatedly failed to submit regular sales reports informing the company of
your activities within and outside of company premises despite repeated reminders.
However, it has been observed that you have been both frequently absent and/or tardy
without proper information to this office or your direct supervisor, the VP for Sales Mr. Alex
Abiog, of your whereabouts.

4. You have been remiss in the performance of your duties as a Sales officer as evidenced
by the fact that you have not recorded any sales for the past immediate twelve (12) months.
This was inspite of the fact that my office decided to relieve you of your duties as technical
coordinator between Engineering and Sales since June last year so that you could focus
and concentrate [on] your activities in sales.11

Cosare was given forty-eight (48) hours from the date of the memo within which to present his
explanation on the charges. He was also "suspended from having access to any and all company
files/records and use of company assets effective immediately."12 Thus, Cosare claimed that he
was precluded from reporting for work on March 31, 2009, and was instead instructed to wait at
the office’s receiving section. Upon the specific instructions of Arevalo, he was also prevented by
Villareal from retrieving even his personal belongings from the office.

On April 1, 2009, Cosare was totally barred from entering the company premises, and was told to
merely wait outside the office building for further instructions. When no such instructions were
given by 8:00 p.m., Cosare was impelled to seek the assistance of the officials of Barangay San
Antonio, Pasig City, and had the incident reported in the barangay blotter.13

On April 2, 2009, Cosare attempted to furnish the company with a Memo14 by which he addressed
and denied the accusations cited in Arevalo’s memo dated March 30, 2009. The respondents
refused to receive the memo on the ground of late filing, prompting Cosare to serve a copy thereof
by registered mail. The following day, April 3, 2009, Cosare filed the subject labor complaint,
claiming that he was constructively dismissed from employment by the respondents. He further
argued that he was illegally suspended, as he placed no serious and imminent threat to the life or
property of his employer and co-employees.15

In refuting Cosare’s complaint, the respondents argued that Cosare was neither illegally
suspended nor dismissed from employment. They also contended that Cosare committed the
following acts inimical to the interests of Broadcom: (a) he failed to sell any broadcast equipment
since the year 2007; (b) he attempted to sell a Panasonic HMC 150 Camera which was to be
sourced from a competitor; and (c) he made an unauthorized request in Broadcom’s name for its
principal, Panasonic USA, to issue an invitation for Cosare’s friend, one Alex Paredes, to attend
the National Association of Broadcasters’ Conference in Las Vegas, USA.16 Furthermore, they
contended that Cosare abandoned his job17 by continually failing to report for work beginning April
1, 2009, prompting them to issue on April 14, 2009 a memorandum18 accusing Cosare of absence
without leave beginning April 1, 2009.

The Ruling of the LA

On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his Decision19dismissing the
complaint on the ground of Cosare’s failure to establish that he was dismissed, constructively or
otherwise, from his employment. For the LA, what transpired on March 30, 2009 was merely the
respondents’ issuance to Cosare of a show-cause memo, giving him a chance to present his side
on the charges against him. He explained:

It is obvious that [Cosare] DID NOT wait for respondents’ action regarding the charges leveled
against him in the show-cause memo. What he did was to pre-empt that action by filing this
complaint just a day after he submitted his written explanation. Moreover, by specifically seeking
payment of "Separation Pay" instead of reinstatement, [Cosare’s] motive for filing this case
becomes more evident.20

It was also held that Cosare failed to substantiate by documentary evidence his allegations of
illegal suspension and non-payment of allowances and commissions.

Unyielding, Cosare appealed the LA decision to the NLRC.

The Ruling of the NLRC

On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA Menese. The
dispositive portion of the NLRC Decision reads:

WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents are
found guilty of Illegal Constructive Dismissal. Respondents BROADCOM ASIA, INC. and Dante
Arevalo are ordered to pay [Cosare’s] backwages, and separation pay, as well as damages, in the
total amount of ₱1,915,458.33, per attached Computation.

SO ORDERED.22

In ruling in favor of Cosare, the NLRC explained that "due weight and credence is accorded to
[Cosare’s] contention that he was constructively dismissed by Respondent Arevalo when he was
asked to resign from his employment."23 The fact that Cosare was suspended from using the assets
of Broadcom was also inconsistent with the respondents’ claim that Cosare opted to abandon his
employment.

Exemplary damages in the amount of ₱100,000.00 was awarded, given the NLRC’s finding that
the termination of Cosare’s employment was effected by the respondents in bad faith and in a
wanton, oppressive and malevolent manner. The claim for unpaid commissions was denied on the
ground of the failure to include it in the prayer of pleadings filed with the LA and in the appeal.

The respondents’ motion for reconsideration was denied.24 Dissatisfied, they filed a petition for
certiorari with the CA founded on the following arguments: (1) the respondents did not have to
prove just cause for terminating the employment of Cosare because the latter’s complaint was
based on an alleged constructive dismissal; (2) Cosare resigned and was thus not dismissed from
employment; (3) the respondents should not be declared liable for the payment of Cosare’s
monetary claims; and (4) Arevalo should not be held solidarily liable for the judgment award.

In a manifestation filed by the respondents during the pendency of the CA appeal, they raised a
new argument, i.e., the case involved an intra-corporate controversy which was within the
jurisdiction of the RTC, instead of the LA.25 They argued that the case involved a complaint against
a corporation filed by a stockholder, who, at the same time, was a corporate officer.

The Ruling of the CA

On November 24, 2011, the CA rendered the assailed Decision26 granting the respondents’
petition. It agreed with the respondents’ contention that the case involved an intra-corporate
controversy which, pursuant to Presidential Decree No. 902-A, as amended, was within the
exclusive jurisdiction of the RTC. It reasoned:

Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was listed as
one of its directors. Moreover, he held the position of [AVP] for Sales which is listed as a corporate
office. Generally, the president, vice-president, secretary or treasurer are commonly regarded as
the principal or executive officers of a corporation, and modern corporation statutes usually
designate them as the officers of the corporation. However, it bears mentioning that under Section
25 of the Corporation Code, the Board of Directors of [Broadcom] is allowed to appoint such other
officers as it may deem necessary. Indeed, [Broadcom’s] By-Laws provides:

Article IV
Officer

Section 1. Election / Appointment – Immediately after their election, the Board of

Directors shall formally organize by electing the President, the Vice-President, the
Treasurer, and the Secretary at said meeting.

The Board, may, from time to time, appoint such other officers as it may determine
to be necessary or proper. x x x

We hold that [the respondents] were able to present substantial evidence that [Cosare] indeed
held a corporate office, as evidenced by the General Information Sheet which was submitted to
the Securities and Exchange Commission (SEC) on October 22, 2009.27 (Citations omitted and
emphasis supplied)

Thus, the CA reversed the NLRC decision and resolution, and then entered a new one dismissing
the labor complaint on the ground of lack of jurisdiction, finding it unnecessary to resolve the main
issues that were raised in the petition. Cosare filed a motion for reconsideration, but this was
denied by the CA via the Resolution28 dated March 26, 2012. Hence, this petition.

The Present Petition

The pivotal issues for the petition’s full resolution are as follows: (1) whether or not the case
instituted by Cosare was an intra-corporate dispute that was within the original jurisdiction of the
RTC, and not of the LAs; and (2) whether or not Cosare was constructively and illegally dismissed
from employment by the respondents.

The Court’s Ruling

The petition is impressed with merit.

Jurisdiction over the controversy

As regards the issue of jurisdiction, the Court has determined that contrary to the ruling of the CA,
it is the LA, and not the regular courts, which has the original jurisdiction over the subject
controversy. An intra-corporate controversy, which falls within the jurisdiction of regular courts, has
been regarded in its broad sense to pertain to disputes that involve any of the following
relationships: (1) between the corporation, partnership or association and the public; (2) between
the corporation, partnership or association and the state in so far as its franchise, permit or license
to operate is concerned; (3) between the corporation, partnership or association and its
stockholders, partners, members or officers; and (4) among the stockholders, partners or
associates, themselves.29 Settled jurisprudence, however, qualifies that when the dispute involves
a charge of illegal dismissal, the action may fall under the jurisdiction of the LAs upon whose
jurisdiction, as a rule, falls termination disputes and claims for damages arising from employer-
employee relations as provided in Article 217 of the Labor Code. Consistent with this jurisprudence,
the mere fact that Cosare was a stockholder and an officer of Broadcom at the time the subject
controversy developed failed to necessarily make the case an intra-corporate dispute.

In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished between a
"regular employee" and a "corporate officer" for purposes of establishing the true nature of a
dispute or complaint for illegal dismissal and determining which body has jurisdiction over it.
Succinctly, it was explained that "[t]he determination of whether the dismissed officer was a regular
employee or corporate officer unravels the conundrum" of whether a complaint for illegal dismissal
is cognizable by the LA or by the RTC. "In case of the regular employee, the LA has jurisdiction;
otherwise, the RTC exercises the legal authority to adjudicate.31

Applying the foregoing to the present case, the LA had the original jurisdiction over the complaint
for illegal dismissal because Cosare, although an officer of Broadcom for being its AVP for Sales,
was not a "corporate officer" as the term is defined by law. We emphasized in Real v. Sangu
Philippines, Inc.32 the definition of corporate officers for the purpose of identifying an intra-corporate
controversy. Citing Garcia v. Eastern Telecommunications Philippines, Inc.,33 we held:

" ‘Corporate officers’ in the context of Presidential Decree No. 902-A are those officers of the
corporation who are given that character by the Corporation Code or by the corporation’s by-laws.
There are three specific officers whom a corporation must have under Section 25 of the
Corporation Code. These are the president, secretary and the treasurer. The number of officers is
not limited to these three. A corporation may have such other officers as may be provided for by
its by-laws like, but not limited to, the vice-president, cashier, auditor or general manager. The
number of corporate officers is thus limited by law and by the corporation’s by-laws."34 (Emphasis
ours)

In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of corporate
offices:

It has been held that an "office" is created by the charter of the corporation and the officer is elected
by the directors and 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.36 (Citations
omitted)

As may be deduced from the foregoing, there are two circumstances which must concur in order
for an individual to be considered a corporate officer, as against an ordinary employee or officer,
namely: (1) the creation of the position is under the corporation’s charter or by-laws; and (2) the
election of the officer is by the directors or stockholders. It is only when the officer claiming to have
been illegally dismissed is classified as such corporate officer that the issue is deemed an intra-
corporate dispute which falls within the jurisdiction of the trial courts.

To support their argument that Cosare was a corporate officer, the respondents referred to Section
1, Article IV of Broadcom’s by-laws, which reads:

ARTICLE IV
OFFICER

Section 1. Election / Appointment – Immediately after their election, the Board of

Directors shall formally organize by electing the President, the Vice-President, the
Treasurer, and the Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine to be necessary
or proper. Any two (2) or more compatible positions may be held concurrently by the same person,
except that no one shall act as President and Treasurer or Secretary at the same time.37 (Emphasis
ours)

This was also the CA’s main basis in ruling that the matter was an intra-corporate dispute that was
within the trial courts’ jurisdiction.

The Court disagrees with the respondents and the CA. As may be gleaned from the aforequoted
provision, the only officers who are specifically listed, and thus with offices that are created under
Broadcom’s by-laws are the following: the President, Vice-President, Treasurer and Secretary.
Although a blanket authority provides for the Board’s appointment of such other officers as it may
deem necessary and proper, the respondents failed to sufficiently establish that the position of
AVP for Sales was created by virtue of an act of Broadcom’s board, and that Cosare was
specifically elected or appointed to such position by the directors. No board resolutions to establish
such facts form part of the case records. Further, it was held in Marc II Marketing, Inc. v.
Joson38 that an enabling clause in a corporation’s by-laws empowering its board of directors to
create additional officers, even with the subsequent passage of a board resolution to that effect,
cannot make such position a corporate office. The board of directors has no power to create other
corporate offices without first amending the corporate by-laws so as to include therein the newly
created corporate office.39 "To allow the creation of a corporate officer position by a simple inclusion
in the corporate by-laws of an enabling clause empowering the board of directors to do so can
result in the circumvention of that constitutionally well-protected right [of every employee to security
of tenure]."40

The CA’s heavy reliance on the contents of the General Information Sheets41, which were submitted
by the respondents during the appeal proceedings and which plainly provided that Cosare was an
"officer" of Broadcom, was clearly misplaced. The said documents could neither govern nor
establish the nature of the office held by Cosare and his appointment thereto. Furthermore,
although Cosare could indeed be classified as an officer as provided in the General Information
Sheets, his position could only be deemed a regular office, and not a corporate office as it is defined
under the Corporation Code. Incidentally, the Court noticed that although the Corporate Secretary
of Broadcom, Atty. Efren L. Cordero, declared under oath the truth of the matters set forth in the
General Information Sheets, the respondents failed to explain why the General Information Sheet
officially filed with the Securities and Exchange Commission in 2011 and submitted to the CA by
the respondents still indicated Cosare as an AVP for Sales, when among their defenses in the
charge of illegal dismissal, they asserted that Cosare had severed his relationship with the
corporation since the year 2009.

Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the case’s filing
did not necessarily make the action an intra- corporate controversy. "Not all conflicts between the
stockholders and the corporation are classified as intra-corporate. There are other facts to consider
in determining whether the dispute involves corporate matters as to consider them as intra-
corporate controversies."42Time and again, the Court has ruled that in determining the existence of
an intra-corporate dispute, the status or relationship of the parties and the nature of the question
that is the subject of the controversy must be taken into account.43Considering that the pending
dispute particularly relates to Cosare’s rights and obligations as a regular officer of Broadcom,
instead of as a stockholder of the corporation, the controversy cannot be deemed intra-corporate.
This is consistent with the "controversy test" explained by the Court in Reyes v. Hon. RTC, Br.
142,44 to wit:

Under the nature of the controversy test, the incidents of that relationship must also be considered
for the purpose of ascertaining whether the controversy itself is intra-corporate. The controversy
must not only be rooted in the existence of an intra-corporate relationship, but must as well pertain
to the enforcement of the parties’ correlative rights and obligations under the Corporation Code
and the internal and intra-corporate regulatory rules of the corporation. If the relationship and its
incidents are merely incidental to the controversy or if there will still be conflict even if the
relationship does not exist, then no intra-corporate controversy exists.45 (Citation omitted)

It bears mentioning that even the CA’s finding46 that Cosare was a director of Broadcom when the
dispute commenced was unsupported by the case records, as even the General Information Sheet
of 2009 referred to in the CA decision to support such finding failed to provide such detail.

All told, it is then evident that the CA erred in reversing the NLRC’s ruling that favored Cosare
solely on the ground that the dispute was an intra-corporate controversy within the jurisdiction of
the regular courts.

The charge of constructive dismissal

Towards a full resolution of the instant case, the Court finds it appropriate to rule on the correctness
of the NLRC’s ruling finding Cosare to have been illegally dismissed from employment.

In filing his labor complaint, Cosare maintained that he was constructively dismissed, citing among
other circumstances the charges that were hurled and the suspension that was imposed against
him via Arevalo’s memo dated March 30, 2009. Even prior to such charge, he claimed to have
been subjected to mental torture, having been locked out of his files and records and disallowed
use of his office computer and access to personal belongings.47 While Cosare attempted to furnish
the respondents with his reply to the charges, the latter refused to accept the same on the ground
that it was filed beyond the 48-hour period which they provided in the memo.

Cosare further referred to the circumstances that allegedly transpired subsequent to the service of
the memo, particularly the continued refusal of the respondents to allow Cosare’s entry into the
company’s premises. These incidents were cited in the CA decision as follows:

On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could retrieve
his personal belongings, but the latter said that x x x Arevalo directed her to deny his request, so
[Cosare] again waited at the receiving section of the office. On April 1, 2009, [Cosare] was not
allowed to enter the office premises. He was asked to just wait outside of the Tektite (PSE) Towers,
where [Broadcom] had its offices, for further instructions on how and when he could get his
personal belongings. [Cosare] waited until 8 p.m. for instructions but none were given. Thus,
[Cosare] sought the assistance of the officials of Barangay San Antonio, Pasig who advised him
to file a labor or replevin case to recover his personal belongings. x x x.48 (Citation omitted)

It is also worth mentioning that a few days before the issuance of the memo dated March 30, 2009,
Cosare was allegedly summoned to Arevalo’s office and was asked to tender his immediate
resignation from the company, in exchange for a financial assistance of ₱300,000.00.49 The
directive was said to be founded on Arevalo’s choice to retain Abiog’s employment with the
company.50 The respondents failed to refute these claims.

Given the circumstances, the Court agrees with Cosare’s claim of constructive and illegal
dismissal. "[C]onstructive dismissal occurs when there is cessation of work because continued
employment is rendered impossible, unreasonable, or unlikely as when there is a demotion in rank
or diminution in pay or when a clear discrimination, insensibility, or disdain by an employer
becomes unbearable to the employee leaving the latter with no other option but to quit."51 In
Dimagan v. Dacworks United, Incorporated,52 it was explained:

The test of constructive dismissal is whether a reasonable person in the employee’s position would
have felt compelled to give up his position under the circumstances. It is an act amounting to
dismissal but is made to appear as if it were not. Constructive dismissal is therefore a dismissal in
disguise. The law recognizes and resolves this situation in favor of employees in order to protect
their rights and interests from the coercive acts of the employer.53 (Citation omitted)
It is clear from the cited circumstances that the respondents already rejected Cosare’s continued
involvement with the company. Even their refusal to accept the explanation which Cosare tried to
tender on April 2, 2009 further evidenced the resolve to deny Cosare of the opportunity to be heard
prior to any decision on the termination of his employment. The respondents allegedly refused
acceptance of the explanation as it was filed beyond the mere 48-hour period which they granted
to Cosare under the memo dated March 30, 2009. However, even this limitation was a flaw in the
memo or notice to explain which only further signified the respondents’ discrimination, disdain and
insensibility towards Cosare, apparently resorted to by the respondents in order to deny their
employee of the opportunity to fully explain his defenses and ultimately, retain his employment.
The Court emphasized in King of Kings Transport, Inc. v. Mamac54 the standards to be observed
by employers in complying with the service of notices prior to termination:

[T]he first written notice to be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the opportunity
to submit their written explanation within a reasonable period. "Reasonable opportunity" under the
Omnibus Rules means every kind of assistance that management must accord to the employees
to enable them to prepare adequately for their defense. This should be construed as a period of at
least five (5) calendar days from receipt of the notice to give the employees an opportunity to study
the accusation against them, consult a union official or lawyer, gather data and evidence, and
decide on the defenses they will raise against the complaint. Moreover, in order to enable the
employees to intelligently prepare their explanation and defenses, the notice should contain a
detailed narration of the facts and circumstances that will serve as basis for the charge against the
employees. A general description of the charge will not suffice. Lastly, the notice should specifically
mention which company rules, if any, are violated and/or which among the grounds under Art. 282
is being charged against the employees.55 (Citation omitted, underscoring ours, and emphasis
supplied)

In sum, the respondents were already resolute on a severance of their working relationship with
Cosare, notwithstanding the facts which could have been established by his explanations and the
respondents’ full investigation on the matter. In addition to this, the fact that no further investigation
and final disposition appeared to have been made by the respondents on Cosare’s case only
negated the claim that they actually intended to first look into the matter before making a final
determination as to the guilt or innocence of their employee. This also manifested from the fact
that even before Cosare was required to present his side on the charges of serious misconduct
and willful breach of trust, he was summoned to Arevalo’s office and was asked to tender his
immediate resignation in exchange for financial assistance.

The clear intent of the respondents to find fault in Cosare was also manifested by their persistent
accusation that Cosare abandoned his post, allegedly signified by his failure to report to work or
file a leave of absence beginning April 1, 2009. This was even the subject of a memo56 issued by
Arevalo to Cosare on April 14, 2009, asking him to explain his absence within 48 hours from the
date of the memo. As the records clearly indicated, however, Arevalo placed Cosare under
suspension beginning March 30, 2009. The suspension covered access to any and all company
files/records and the use of the assets of the company, with warning that his failure to comply with
the memo would be dealt with drastic management action. The charge of abandonment was
inconsistent with this imposed suspension. "Abandonment is the deliberate and unjustified refusal
of an employee to resume his employment. To constitute abandonment of work, two elements
must concur: ‘(1) the employee must have failed to report for work or must have been absent
without valid or justifiable reason; and (2) there must have been a clear intention on the part of the
employee to sever the employer- employee relationship manifested by some overt act.’"57 Cosare’s
failure to report to work beginning April 1, 2009 was neither voluntary nor indicative of an intention
to sever his employment with Broadcom. It was illogical to be requiring him to report for work, and
imputing fault when he failed to do so after he was specifically denied access to all of the
company’s assets. As correctly observed by the NLRC:

[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on April 1,
2009. However[,] the show-cause letter dated March 3[0], 2009 (Annex "F", ibid) suspended
[Cosare] from using not only the equipment but the "assets" of Respondent [Broadcom]. This
insults rational thinking because the Respondents tried to mislead us and make [it appear] that
[Cosare] failed to report for work when they had in fact had [sic] placed him on suspension. x x x.58

Following a finding of constructive dismissal, the Court finds no cogent reason to modify the
NLRC's monetary awards in Cosare's favor. In Robinsons Galleria/Robinsons Supermarket
Corporation v. Ranchez,59 the Court reiterated that an illegally or constructively dismissed
employee is entitled to: (1) either reinstatement, if viable, or separation pay, if reinstatement is no
longer viable; and (2) backwages.60 The award of exemplary damages was also justified given the
NLRC's finding that the respondents acted in bad faith and in a wanton, oppressive and malevolent
manner when they dismissed Cosare. It is also by reason of such bad faith that Arevalo was
correctly declared solidarily liable for the monetary awards.

WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and Resolution
dated March 26, 2012 of the Court of Appeals in CA-G.R. SP. No. 117356 are SET ASIDE. The
Decision dated August 24, 2010 of the National Labor Relations Commission in favor of petitioner
Raul C. Cosare is AFFIRMED.

SO ORDERED.
G.R. No. 191154 April 7, 2014

SPI TECHNOLOGIES, INC. and LEA VILLANUEVA, Petitioners,

vs.
VICTORIA K. MAPUA, Respondent.

DECISION

REYES, J.:

The Court remains steadfast on its stand that the determination of the continuing necessity of a
particular officer or position in a business corporation is a management prerogative, and the
courts will not interfere unless arbitrary or malicious action on the part of management is shown.
Indeed, an employer has no legal obligation to keep more employees than are necessary for the
operation of its business.1 In the instant case however, we find our intrusion indispensable, to
look into matters which we would otherwise consider as an exercise of management prerogative.
"Management prerogative" are not magic words uttered by an employer to bring him to a realm
where our labor laws cannot reach.

This is a petition for review on certiorari2 under Rule 45 of the Rules of Court of the
Decision3 dated October 28, 2009 and Resolution4 dated January 18, 2010 of the Court of
Appeals (CA) in CA-G.R. SP. No. 107879.

The Facts

Victoria K. Mapua (Mapua) alleged that she was hired in 2003 by SPI Technologies, Inc. (SPI)
and was the Corporate Development’s Research/Business Intelligence Unit Head and Manager
of the company. Subsequently in August 2006, the then Vice President and Corporate
Development Head, Peter Maquera (Maquera) hired Elizabeth Nolan (Nolan) as Mapua’s
supervisor.5

Sometime in October 2006, the hard disk on Mapua’s laptop crashed, causing her to lose files
and data. Mapua informed Nolan and her colleagues that she was working on recovering the lost
data and asked for their patience for any possible delay on her part in meeting deadlines.6

On November 13, 2006, Mapua retrieved the lost data with the assistance of National Bureau of
Investigation Anti-Fraud and Computer Crimes Division. Yet, Nolan informed Mapua that she
was realigning Mapua’s position to become a subordinate of co-manager Sameer Raina (Raina)
due to her missing a work deadline. Nolan also disclosed that Mapua’s colleagues were
"demotivated" [sic] because she was "taking things easy while they were working very hard," and
that she was "frequently absent, under timing, and coming in late every time [Maquera] goes on
leave or on vacation."7

On November 16, 2006, Mapua obtained a summary of her attendance for the last six months to
prove that she did not have frequent absences or under time when Maquera would be on leave
or vacation. When shown to Nolan, she was merely told not to give the matter any more
importance and to just move on.8

In December 2006, Mapua noticed that her colleagues began to ostracize and avoid her. Nolan
and Raina started giving out majority of her research work and other duties under Healthcare and
Legal Division to the rank-and-file staff. Mapua lost about 95% of her work projects and job
responsibilities.9

Mapua consulted these work problems with SPI’s Human Resource Director, Lea Villanueva
(Villanueva), and asked if she can be transferred to another department within SPI.
Subsequently, Villanueva informed Mapua that there is an intra-office opening and that she
would schedule an exploratory interview for her. However, due to postponements not made by
Mapua, the interview did not materialize.

On February 28, 2007, Mapua allegedly saw the new table of organization of the Corporate
Development Division which would be renamed as the Marketing Division. The new structure
showed that Mapua’s level will be again downgraded because a new manager will be hired and
positioned between her rank and Raina’s.10

On March 21, 2007, Raina informed Mapua over the phone that her position was considered
redundant and that she is terminated from employment effective immediately. Villanueva notified
Mapua that she should cease reporting for work the next day. Her laptop computer and company
mobile phone were taken right away and her office phone ceased to function.11

Mapua was shocked and told Raina and Villanueva that she would sue them. Mapua
subsequently called her lawyer to narrate the contents of the termination letter,12 which reads:

March 21, 2007

xxxx

Dear Ms. MAPUA,

xxxx

This notice of separation, effective March 21, 2007 should be regarded as redundancy. Your
separation pay will be computed as one month’s salary for every year of service, a fraction of at
least six months will be considered as one year.

Your separation pay will be released on April 20, 2007 subject to your clearance of
accountabilities and as per Company policy.

x x x x13

Mapua’s lawyer, in a phone call, advised Villanueva that SPI violated Mapua’s right to a 30-day
notice.

On March 27, 2007, Mapua filed with the Labor Arbiter (LA) a complaint for illegal dismissal,
claiming reinstatement or if deemed impossible, for separation pay. Afterwards, she went to a
meeting with SPI, where she was given a second termination letter,14 the contents of which were
similar to the first one.15

On April 25, 2007, Mapua received through mail, a third Notice of Termination16 dated March 21,
2007 but the date of effectivity of the termination was changed from March 21 to April 21, 2007. It
further stated that her separation pay will be released on May 20, 2007 and a notation was
inscribed, "refused to sign and acknowledge" with unintelligible signatures of witnesses.

On May 13, 2007, a recruitment advertisement17 of SPI was published in the Philippine Daily
Inquirer (Inquirer advertisement, for brevity). It listed all vacancies in SPI, including a position for
Marketing Communications Manager under Corporate Support – the same group where Mapua
previously belonged.

SPI also sent a demand letter18 dated May 15, 2007 to Mapua, asking her to pay for the
remaining net book value of the company car assigned to her under SPI’s car plan policy. Under
the said plan, Mapua should pay the remaining net book value of her car if she resigns within five
years from start of her employment date.

In her Reply19 and Rejoinder,20 Mapua submitted an affidavit21 and alleged that on July 16, 2007,
Prime Manpower Resources Development (Prime Manpower) posted an advertisement on the
website of Jobstreet Philippines for the employment of a Corporate Development Manager in an
unnamed Business Process Outsourcing (BPO) company located in Parañaque City. Mapua
suspected that this advertisement was for SPI because the writing style used was similar to
Raina’s. She also claimed that SPI is the only BPO office in Parañaque City at that time.
Thereafter, she applied for the position under the pseudonym of "Jeanne Tesoro". On the day of
her interview with Prime Manpower’s consultant, Ms. Portia Dimatulac (Dimatulac), the latter
allegedly revealed to Mapua that SPI contracted Prime Manpower’s services to search for
applicants for the Corporate Development Manager position.

Because of these developments, Mapua was convinced that her former position is not redundant.
According to her, she underwent psychiatric counseling and incurred medical expenses as a
result of emotional anguish, sleepless nights, humiliation and shame from being jobless. She
also averred that the manner of her dismissal was unprofessional and incongruous with her rank
and stature as a manager as other employees have witnessed how she was forced to vacate the
premises on the same day of her termination.

On the other hand, SPI stated that the company regularly makes an evaluation and assessment
of its corporate/organizational structure due to the unexpected growth of its business along with
its partnership with ePLDT and the acquisition of CyMed.22 As a result, SPI underwent a
reorganization of its structure with the objective of streamlining its operations. This was
embodied in an Inter-Office Memorandum23 dated August 28, 2006 issued by the company’s
Chief Executive Officer.24 It was then discovered after assessment and evaluation that the duties
of a Corporate Development Manager could be performed/were actually being performed by
other officers/managers/departments of the company. As proof that the duties of Mapua are
being/could be performed by other SPI officers and employees, Villanueva executed an
affidavit25 attesting that Mapua’s functions are being performed by other SPI managers and
employees.

On March 21, 2007, the company, through Villanueva, served a written notice to Mapua,
informing her of her termination effective April 21, 2007. Mapua refused to receive the notice,
thus, Villanueva made a notation "refused to sign and acknowledge" on the letter. On that same
day, SPI filed an Establishment Termination Report with the Office of the Regional Director of the
Department of Labor and Employment-National Capital Region (DOLE-NCR) informing the latter
of Mapua’s termination. Mapua was offered her separation and final pay, which she refused to
receive. Before the effective date of her termination, she no longer reported for work. SPI has not
hired a Corporate Development Manager since then.

SPI denied contracting the services of Prime Manpower for the hiring of a Corporate
Development Manager and emphasized that Prime Manpower did not even state the name of its
client in the Jobstreet website. SPI also countered that Dimatulac’s alleged revelation to Mapua
that its client is SPI must be struck down as mere hearsay because only Mapua executed an
affidavit to prove that such disclosure was made. While SPI admitted the Inquirer advertisement,
the company stated that Mapua was a Corporate Development Manager and not a Marketing
Communications Manager, and that from the designations of these positions, it is obvious that
the functions of one are entirely different from that of the other.26

LA Decision

On June 30, 2008, the LA rendered a Decision,27 with the following dispositive portion:
WHEREFORE, prescinding from the foregoing, the redundancy of [Mapua’s] position being in
want of factual basis, her termination is therefore hereby declared illegal. Accordingly, she should
be paid her backwages, separation pay in lieu of reinstatement, moral and exemplary damages
and attorney’s fees as follows:

a) Backwages:

03/21/07-06/30/08

₱67,996 x 15.30 mos. = ₱1,040,338.80

13th Month Pay:

₱1,040,338.80/12= ₱520,169.40 ₱1,560,508.20

b) Separation Pay: (1 mo. per year of service)

12/01/03-06/30/08 = 5.7 or 6 yrs.

₱67,996.00 x 6 = 407,976.00

c) Moral Damages: ₱500,000.00

d) Exemplary Damages: 250,000.00

e) Attorney’s Fees: 196,848.42

Total Award ₱2,915,332.62

or a grand total of TWO MILLION NINE HUNDRED FIFTEEN THOUSAND THREE HUNDRED
THIRTY-TWO and 62/100 (₱2,915,332.62)Pesos only.

Respondents are further ordered to award herein complainant the car assigned to her.

SO ORDERED.28

Unrelenting, SPI appealed the LA decision to the National Labor Relations Commission (NLRC).

NLRC Ruling

On October 24, 2008, the NLRC rendered its Decision,29 with the fallo, as follows:

WHEREFORE, the foregoing premises considered, the instant appeal is hereby GRANTED. The
Decision appealed from is REVERSED and SET ASIDE, and a new one is issued finding the
appellants not guilty of illegal dismissal.

However, appellants are ordered to pay the sum of Three Hundred Thirty[-]Four Thousand Five
Hundred Thirty[-]Eight Pesos and Thirty[-]Four Centavos ([P]334,538.34) representing her
separation benefits and final pay in the amount of [P]203,988.00 and [P]130,550.34, respectively.

SO ORDERED.30
In ruling so, the NLRC held that "[t]he determination of whether [Mapua’s] position as Corporate
Development Manager is redundant is not for her to decide. It essentially and necessarily lies
within the sound business management."31 As early as August 28, 2006, Ernest Cu, SPI’s Chief
Executive Officer, announced the corporate changes in the company.

A month earlier, the officers held their Senior Management Strategic Planning Session with the
theme, "Transformation" or re-invention of SPI purposely to create an organizational structure
that is streamlined, clear and efficient.32 In fact, Nolan and Raina, Mapua’s superiors were
actually doing her functions with the assistance of the pool of analysts, as attested to by
Villanueva.

At odds with the NLRC decision, Mapua elevated the case to the CA by way of petition for
certiorari, arguing that based on evidence, the LA decision should be reinstated.

CA Ruling

Mapua’s petition was initially dismissed by the CA in its Resolution33 dated March 25, 2009 for
lack of counsel’s MCLE Compliance number, outdated IBP and PTR numbers of counsel, and
lack of affidavit of service attached to the petition.

Mapua filed a motion for reconsideration which was granted by the CA, reinstating the petition in
its Resolution34dated May 26, 2009.

On October 28, 2009, the CA promulgated its Decision,35 reinstating the LA’s decree, viz:

WHEREFORE, in view of the foregoing, the assailed decision dated October 24, 2008, as well as
the resolution dated December 23, 2008 of the National Labor Relations Commission in NLRC
LAC No. 09-003262-08 (8) NLRC NCR CN. 00-03-02761-07 are hereby REVERSED and SET
ASIDE. The decision of the Labor Arbiter dated June 30, 2008 in NLRC-NCR Case No. 00-03-
02761-07 is hereby REINSTATED with MODIFICATION in that the amount of 13th month pay of
[P]520,169.40 is hereby reduced to [P]86,694.90.

SO ORDERED.36

SPI’s motion for reconsideration was denied on January 18, 2010. Thus, through a petition for
review on certiorari, SPI submitted the following grounds for the consideration of this Court:

THE CA DECLARED AS ILLEGAL [MAPUA’S] SEPARATION FROM SERVICE SOLELY

ON THE BASIS OF HER SELF-SERVING AND UNFOUNDED ALLEGATION OF A
SUPPOSED JOB ADVERTISEMENT

II

THE CA COMPLETELY DISREGARDED THE FACT THAT [MAPUA] WAS VALIDLY

SEPARATED FROM SERVICE ON THE GROUND OF REDUNDANCY WHICH IS AN
AUTHORIZED CAUSE FOR TERMINATION OF EMPLOYMENT UNDER ARTICLE 283
OF THE LABOR CODE AND PREVAILING JURISPRUDENCE

III

THE CA FOUND THAT [MAPUA] WAS NOT ACCORDED HER RIGHT TO DUE
PROCESS IN UTTER DEROGATION OF THE APPLICABLE PROVISIONS OF THE
LABOR CODE AND THE PERTINENT JURISPRUDENCE
 IV

THE CA COMPLETELY AFFIRMED THE AWARDS OF SEPARATION PAY,

BACKWAGES, DAMAGES AND ATTORNEY’S FEES IN THE [LA’S] DECISION IN
TOTAL DISREGARD OF THE APPLICABLE LAW AND JURISPRUDENCE

THE CA UPHELD THE [LA’S] DECISION HOLDING INDIVIDUAL PETITIONER

SOLIDARILY AND PERSONALLY LIABLE TO [MAPUA] WITHOUT SHOWING ANY
BASIS THEREFOR37

Our Ruling

The Court sustains the CA’s ruling.

Mapua was dismissed from employment supposedly due to redundancy. However, she
contended that her position as Corporate Development Manager is not redundant. She cited that
SPI was in fact actively looking for her replacement after she was terminated. Furthermore, SPI
violated her right to procedural due process when her termination was made effective on the
same day she was notified of it.

Article 283 of the Labor Code provides for the following:

ART. 283. Closure of establishment and reduction of personnel. – The employer may also
terminate the employment of any employee due to installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the worker and the Department of Labor
and Employment at least one (1) month before the intended date thereof. In case of termination
due to installation of labor-saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least one (1) month pay or to at least one (1) month
pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and
in cases of closures or cessation of operations of establishment or undertaking not due to serious
business losses and financial reverses, the separation pay shall be equivalent to one (1) month
pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered as one (1) whole year. (Emphasis ours)

Expounding on the above requirements of written notice and separation pay, this Court in Asian
Alcohol Corporation v. NLRC38 pronounced that for a valid implementation of a redundancy
program, the employer must comply with the following requisites: (1) written notice served on
both the employee and the DOLE at least one month prior to the intended date of termination; (2)
payment of separation pay equivalent to at least one month pay or at least one month pay for
every year of service, whichever is higher; (3) good faith in abolishing the redundant position;
and (4) fair and reasonable criteria in ascertaining what positions are to be declared redundant.39

Anent the first requirement which is written notice served on both the employee and the DOLE at
least one month prior to the intended date of termination, SPI had discharged the burden of
proving that it submitted a notice to the DOLE on March 21, 2007, stating therein that the
effective date of termination is on April 21, 2007. It is, however, quite peculiar that two kinds of
notices were served to Mapua. One termination letter stated that its date of effectivity is on the
same day, March 21, 2007. The other termination letter sent through mail to Mapua’s residence
stated that the effective date of her termination is on April 21, 2007.

Explaining the discrepancy, SPI alleged that the company served a notice to Mapua on March
21, 2007, which stated that the effective date of termination is on April 21, 2007. However she
refused to acknowledge or accept the letter. Later on, Mapua requested for a copy of the said
letter but due to inadvertence and oversight, a draft of the termination letter bearing a wrong
effectivity date was given to her. To correct the oversight, a copy of the original letter was sent to
her through mail.40

Our question is, after Mapua initially refused to accept the letter, why did SPI make a new letter
instead of just giving her the first one – which the Court notes was already signed and witnessed
by other employees? Curiously, there was neither allegation nor proof that the original letter was
misplaced or lost which would necessitate the drafting of a new one. SPI did not even explain in
the second letter that the same was being sent in lieu of the one given to her. Hence, SPI must
shoulder the consequence of causing the confusion brought by the variations of termination
letters given to Mapua.

Also, crucial to the determination of the effective date of termination was that Mapua was very
specific as regards what happened immediately after: "Ms. Villanueva had Ms. Mapua’s assigned
laptop computer and cellphone immediately taken by Human Resources supervisor, Ms. Dhang
Rondael. Within about an hour, Ms. Mapua’s landline phone ceased to function after Ms.
Villanueva’s and Mr. Raina’s announcement." Her company I.D. was taken away from her that
very same day.41 To counter these statements, SPI merely stated that before the effective date of
Mapua’s termination on April 21, 2007, she no longer reported for work. To this Court, this is
insufficient rebuttal to the precise narrative of Mapua.

On the matter of separation pay, there is no question that SPI indeed offered separation pay to
Mapua, but the offer must be accompanied with good faith in the abolishment of the redundant
position and fair and reasonable criteria in ascertaining the redundant position. It is insignificant
that the amount offered to Mapua is higher than what the law requires because the Court has
previously noted that "a job is more than the salary that it carries. There is a psychological effect
or a stigma in immediately finding one’s self laid off from work."42

Moving on to the issue of the validity of redundancy program, SPI asserted that an employer has
the unbridled right to conduct its own business in order to achieve the results it desires. To prove
that Villanueva’s functions are redundant, SPI submitted an Inter-Office Memorandum43 and
affidavit executed by its Human Resources Director, Villanueva. The pertinent portions of the
memorandum read:

ORGANIZATION STRUCTURE

One of the most important elements of successfully effecting change is to create an organization
structure that is streamlined, clear and efficient. We think we have done that and the new format
is illustrated in Attachment A. The upper part shows my direct reports who are heads of the
various shared services departments and the lower part shows the set up of the business units.
The important features of the structure are discussed in the following sections. For brevity, I have
purposely not summarized the roles that will remain the same.

xxxx

Corporate Development

Peter Maquera will continue to head Corporate Development but the group’s scope will be
expanded to include Marketing across the whole company. Essentially, Marketing will be taken
out of the business units and centralized under Corporate Development. Elizabeth Nolan will
move from her role as Publishing’s VP of Sales and Marketing to become the head of Global
Marketing. The unit will continue to focus on strengthening the SPI brand, while at the same time
maximizing the effectiveness of our spending. Josie Gonzales, head of Corporate Relations, will
also be transitioned to Corporate Development.44
The memorandum made no mention that the position of the Corporate Development Manager or
any other position would be abolished or deemed redundant. In this regard, may the affidavit of
Villanueva which enumerated the various functions of a Corporate Development Manager being
performed by other SPI employees be considered as sufficient proof to uphold SPI’s redundancy
program?

In AMA Computer College, Inc. v. Garcia, et al.,45 the Court held that the presentation of the new
table of the organization and the certification of the Human Resources Supervisor that the
positions occupied by the retrenched employees are redundant are inadequate as evidence to
support the college’s redundancy program. The Court quotes the related portion of its ruling:

In the case at bar, ACC attempted to establish its streamlining program by presenting its new
table of organization. ACC also submitted a certification by its Human Resources Supervisor,
Ma. Jazmin Reginaldo, that the functions and duties of many rank and file employees, including
the positions of Garcia and Balla as Library Aide and Guidance Assistant, respectively, are now
being performed by the supervisory employees. These, however, do not satisfy the requirement
of substantial evidence that a reasonable mind might accept as adequate to support a
conclusion. As they are, they are grossly inadequate and mainly self-serving. More compelling
evidence would have been a comparison of the old and new staffing patterns, a description of the
abolished and newly created positions, and proof of the set business targets and failure to attain
the same which necessitated the reorganization or streamlining.46 (Citations omitted and
emphasis ours)

Also connected with the evidence negating redundancy was SPI’s publication of job vacancies
after Mapua was terminated from employment. SPI maintained that the CA erred when it
considered Mapua’s self-serving affidavit as regards the Prime Manpower advertisement
because the allegations therein were based on Mapua’s unfounded suspicions. Also, the failure
of Mapua to present a sworn statement of Dimatulac renders the former’s statements hearsay.

Even if we disregard Mapua’s affidavit as regards the Prime Manpower advertisement, SPI
admitted that it caused the Inquirer advertisement for a Marketing Communications Manager
position.47 Mapua alleged that this advertisement belied the claim of SPI that her position is
redundant because the Corporate Development division was only renamed to Marketing division.

Instead of explaining how the functions of a Marketing Communications Manager differ from a
Corporate Development Manager, SPI hardly disputed Mapua when it stated that, "[j]udging from
the titles or designation of the positions, it is obvious that the functions of one are entirely
different from that of the other."48 SPI, being the employer, has possession of valuable
information concerning the functions of the offices within its organization. Nevertheless, it did not
even bother to differentiate the two positions.

Furthermore, on the assumption that the functions of a Marketing Communications Manager are
different from that of a Corporate Development Manager, it was not even discussed why Mapua
was not considered for the position. While SPI had no legal duty to hire Mapua as a Marketing
Communications Manager, it could have clarified why she is not qualified for that position. In fact,
Mapua brought up the subject of transfer to Villanueva and Raina several times prior to her
termination but to no avail. There was even no showing that Mapua could not perform the duties
of a Marketing Communications Manager.

Therefore, even though the CA based its ruling only on the Prime Manpower advertisement
coupled with the purported disclosure to Mapua, the Court holds that the confluence of other
factors supports the said ruling.

The Court does not agree with the rationalization of the NLRC that "[i]f it were true that her
position was not redundant and indispensable, then the company must have already hired a new
one to replace her in order not to jeopardize its business operations. The fact that there is none
only proves that her position was not necessary and therefore superfluous."49

What the above reasoning of the NLRC failed to perceive is that "[o]f primordial consideration is
not the nomenclature or title given to the employee, but the nature of his functions."50 "It is not the
job title but the actual work that the employee performs."51 Also, change in the job title is not
synonymous to a change in the functions. A position cannot be abolished by a mere change of
job title. In cases of redundancy, the management should adduce evidence and prove that a
position which was created in place of a previous one should pertain to functions which are
dissimilar and incongruous to the abolished office.

Thus, in Caltex (Phils.), Inc. (now Chevron Phils., Inc.) v. NLRC,52 the Court dismissed the
employer’s claim of redundancy because it was shown that after declaring the employee’s
position of Senior Accounting Analyst as redundant, the company opened other accounting
positions (Terminal Accountant and Internal Auditor) for hiring. There was no showing that the
private respondent therein could not perform the functions demanded of the vacant positions, to
which he could be transferred to instead of being dismissed.

On the issue of the solidary obligation of the corporate officers impleaded vis-à-vis the
corporation for Mapua’s illegal dismissal, "[i]t is hornbook principle that personal liability of
corporate directors, trustees or officers attaches only when: (a) they assent to a patently unlawful
act of the corporation, or when they are guilty of bad faith or gross negligence in directing its
affairs, or when there is a conflict of interest resulting in damages to the corporation, its
stockholders or other persons; (b) they consent to the issuance of watered down stocks or when,
having knowledge of such issuance, do not forthwith file with the corporate secretary their written
objection; (c) they agree to hold themselves personally and solidarily liable with the corporation;
or (d) they are made by specific provision of law personally answerable for their corporate
action."53

While the Court finds Mapua’s averments against Villanueva, Nolan, Maquera and Raina as
detailed and exhaustive, the Court takes notice that these are mostly suppositions on her part.
Thus, the Court cannot apply the above-enumerated exceptions when a corporate officer
becomes personally liable for the obligation of a corporation to this case.

With respect to the vehicle under the company car plan which the LA awarded to Mapua, the
Court rules that the subject matter is not within the jurisdiction of the LA but with the regular
courts, the remedy being civil in nature arising from a contractual obligation, following this Court’s
ruling in several cases.54

The Court sustains the CA’s award of moral and exemplary damages. Award of moral and
exemplary damages for an illegally dismissed employee is proper where the employee had been
harassed and arbitrarily terminated by the employer. Moral damages may be awarded to
compensate one for diverse injuries such as mental anguish, besmirched reputation, wounded
feelings, and social humiliation occasioned by the employer’s unreasonable dismissal of the
employee. The Court has consistently accorded the working class a right to recover damages for
unjust dismissals tainted with bad faith; where the motive of the employer in dismissing the
employee is far from noble. The award of such damages is based not on the Labor Code but on
1âw phi1

Article 220 of the Civil Code.55However, the Court observes that the CA decision affirming the
LA’s award of ₱500,000.00 and ₱250,000.00 as moral and exemplary damages, respectively, is
evidently excessive because the purpose for awarding damages is not to enrich the illegally
dismissed employee. Consequently, the Court hereby reduces the amount of ₱50,000.00 each
as moral and exemplary damages.56

Mapua is also entitled to attorney’s fees but the Court is modifying the amount of ₱196,848.42
awarded by the LA and fix such attorney’s fees in the amount of ten percent (10%) of the total
monetary award, pursuant to Article 11157 of the Labor Code.
WHEREFORE, the Decision dated October 28, 2009 and Resolution dated January 18, 2010 of
the Court of Appeals in CA-G.R. SP. No. 107879 are hereby AFFIRMED with the following
MODIFICATIONS:

1. Moral and exemplary damages is hereby reduced to ₱50,000.00 each; and

2. Attorney's fees shall be computed at ten percent (10%) of the aggregate monetary
award.

The monetary awards shall earn interest at the rate of six percent (6%) per annum from the time
of respondent Victoria K. Mapua's illegal dismissal until finality of this Decision, and twelve
percent (12%) legal interest thereafter until fully paid.

Petitioner SPI Technologies, Inc. shall be liable for the foregoing awards.

SO ORDERED
G.R. No. 183860 January 15, 2014

RODOLFO LABORTE and PHILIPPINE TOURISM AUTHORITY, Petitioners,

vs.
PAGSANJAN TOURISM CONSUMERS COOPERATIVE and LELIZA S. FABRICIO, WILLIAM
BASCO, FELICIANO BASCO, FREDIE BASCO, ROGER MORAL NIDA ABARQUEZ, FLORANTE
MUNAR, MARY JAVIER, MARIANO PELAGIO ALEX EQUIZ, ALEX PELAGIO ARNOLD OBIEN,
EDELMIRO ABAQUIN, ARCEDO MUNAR, LIBRADO MALIWANAG, OSCAR LIWAG, OSCAR
ABARQUEZ, JOEL BALAGUER, LIZARDO MUNAR, ARMANDO PANCHACOLA, MANUEL
SAYCO, EDWIN MATIBAG, ARNEL VILLAGRACIA, RODOLFO LERON, ALFONSO ABANILLA,
SONNY LAVA, AND DENNIS BASCO, Respondents.

DECISION

REYES, J.:

This Petition for Review on Certiorari1 under Rule 45 of the 1997 Revised Rules on Civil Procedure
seeks to nullify and set aside:

(a) the Court of Appeals (CA) Decision2 dated May 29, 2008, affirming the Decision3 dated
May 29, 2002 of the Regional Trial Court (RTC), Branch 28, Santa Cruz, Laguna in Civil
Case No. SC-3150; and

(b) the CA Resolution4 dated July 23, 2008, denying the subsequent Motion for
Reconsideration5 thereof.

The antecedent facts are as follows:

Petitioner Philippine Tourism Authority (PTA) is a government-owned and controlled corporation

that administers tourism zones as mandated by Presidential Decree (P.D.) No. 564 and later
amended by P.D. No. 1400. PTA used to operate the Philippine Gorge Tourist Zone (PGTZ)
Administration Complex (PTA Complex), a declared tourist zone in Pagsanjan, Laguna.

Respondent Pagsanjan Tourism Consumers’ Cooperative (PTCC) is a cooperative organized

since 1988 under Republic Act No. 6938, or the "Cooperative Code of the Philippines." The other
individual respondents are PTCC employees, consisting of restaurant staff and boatmen at the
PTA Complex.

In 1989, in order to help the PTCC as a cooperative, the PTA allowed it to operate a restaurant
business located at the main building of the PTA Complex and the boat ride services to ferry guests
and tourists to and from the Pagsanjan Falls, paying a certain percentage of its earnings to the
PTA.6

In 1993, the PTA implemented a reorganization and reshuffling in its top level management. Herein
petitioner Rodolfo Laborte (Laborte) was designated as Area Manager, CALABARZON area with
direct supervision over the PTA Complex and other entities at the Southern Luzon.

On October 22, 1993, Laborte served a written notice upon the respondents to cease the
operations of the latter’s restaurant business and boat ride services in view of the rehabilitation,
facelifting and upgrading project of the PTA Complex. Consequently, on November 9, 1993, the
PTCC filed with the RTC, Branch 28, Santa Cruz, Laguna a Complaint for Prohibition, Injunction
and Damages with Temporary Restraining Order (TRO) and Preliminary Injunction7 against
Laborte, docketed as Civil Case No. 3150. The PTCC also sought from the court the award of
moral and exemplary damages, attorney’s fees and costs of suit. It also prayed for the issuance of
a TRO or writ of preliminary injunction to prohibit Laborte from causing the PTCC to cease the
operations of the restaurant and boat ride services and from evicting the PTCC’s restaurant from
the main building of the PTA Complex.8

In an Order dated November 11, 1993, the trial court issued the TRO prayed for, prohibiting Laborte
from (a) causing the PTCC to cease operations; (b) doing the threatened act of closing the
operation of the PTCC’s restaurant and other activities; (c) evicting the PTCC’s restaurant from
the main building of the PTA Complex; and (d) demolishing the said building. In the same Order,
the trial court set the hearing on the Writ of Preliminary Injunction on November 25, 1993.9

Opposing the issuance of the TRO, Laborte averred that the PTCC does not own the restaurant
facility as it was only tolerated to operate the same by the PTA as a matter of lending support and
assistance to the cooperative in its formative years. It has neither been granted any franchise nor
concession to operate the restaurant nor any exclusive franchise to handle the boating operations
in the complex. Since the PTCC had no contract, concession, or exclusive franchise to operate the
restaurant business and the boating services in the PTA Complex, no existing right has been
allegedly violated by the petitioners. The respondents, therefore, had no right for the injunctive
relief prayed for.10

On December 7, 1993, the PTCC filed with the trial court a Petition for Contempt with Motion for
Early Resolution. It alleged that Laborte and his lawyers defied the TRO and proceeded to close
the restaurant on December 2, 1993. The PTCC also alleged that Laborte prohibited its own
boatmen from ferrying tourists and allowed another association of boatmen to operate.11

On December 13, 1993, Laborte filed his Answer with Counter-Claim.12 He denied the PTCC’s
allegations of harassment, threat and retaliation. He claimed (a) that his actions were upon the
mandate of his superiors and the PTA’s rehabilitation programs in the area;13 (b) that the PTA only
tolerated the PTCC’s operations;14 and (c) that the issuance of a permanent injunction will violate
the PTA’s constitutional freedom to operate a legitimate business enterprise and the legal
requirement of a public bidding for the operation of revenue-generating projects of government
entities involving private third parties.15

On March 14, 1994, the individual respondents, Fabricio et al., who are employees and boatmen
of the PTCC, filed a Complaint-in-Intervention against Laborte.16 They stated that they were
rendered jobless and were deprived of their livelihood because Laborte failed to heed the trial
court’s TRO. Thus, they prayed that the trial court order Laborte to pay their unearned salaries,
among others.17 Laborte opposed but the trial court in an Order dated March 25, 1994 admitted the
Complaint-in-Intervention, finding the same to be well-founded.18

On April 4, 1994, the PTCC filed an Amended Complaint to include petitioner PTA as defendant
and the additional prayer for payment of Thirty Thousand Pesos (₱30,000.00) a month,
representing the PTCC’s unrealized profits from November 1993 up to the actual resumption of its
restaurant and boat ride businesses.19 In return, the PTA filed its Answer with
Counterclaim,20 alleging, among others, that (1) the PTCC has no cause of action against it since
the PTA owned the restaurant and the boat ride facilities within the Complex and that it never
formally entered into a contract with the PTCC to operate the same; (2) the PTA did not violate the
trial court’s TRO and Writ of Preliminary Injunction since the PTA was not yet impleaded as
defendant at that time; (3) the physical rehabilitation of the PTA Complex, including the restaurant
and boat facilities therein, was part of its new marketing strategy; and (4) the action had become
moot and academic in view of the actual closure of the PTCC’s restaurant and boat service
businesses.21

On May 29, 2002, the RTC rendered a decision finding for the respondents, the dispositive portion
of which provides:
WHEREFORE, IN THE LIGHT OF ALL THE FOREGOING CONSIDERATIONS, Judgment is
hereby rendered in favor of the plaintiff and intervenors and against the defendants by ordering
the defendants jointly and severally to pay the plaintiff and intervenors the following sums:

FOR THE PLAINTIFF

1. The sum of ₱1,475,760 representing the income which the plaintiff failed to receive from
December 1993 up to the present, computed at ₱16,417.00 per month;

2. The sum of ₱230,000.00 as costs of restaurants (sic) facilities unlawfully confiscated by

the defendant from the plaintiff when the restaurant was closed; and

3. The sum of ₱25,000.00 as attorney's fees.

FOR THE INTERVENORS:

The total sum of ₱3,971,760.00 representing the monthly salaries of the 8 intervenors who are
employees of the restaurant business and take home pay of 20 boatmen-intervenors for a period
of seven (7) years up to the present; and

Attorney’s fees in the amount of ₱992,940.00 or 25% of the total claim of the intervenors.

SO ORDERED.22

Dissatisfied, Laborte and the PTA appealed to the CA.23 On May 29, 2008, the CA promulgated its
Decision, affirming the RTC Decision24 dated May 29, 2002. The petitioners seasonably filed a
Motion for Reconsideration,25 but the said motion was also denied for lack of merit.26

Hence, the petitioners filed the present petition, raising the following:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT GIVING

DUE COURSE [TO] THE PETITIONERS’ APPEAL AND IN NOT SETTING ASIDE
AND REVERSING THE DECISION OF THE TRIAL COURT.

II

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

THE CLOSURE OF PTCC'S RESTAURANT AND BOAT RIDE BUSINESS WAS
NOT A VALID AND LAWFUL EXERCISE OF PTA'S MANAGEMENT
PREROGATIVE.

III

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING

PETITIONER LABORTE LIABLE BOTH IN HIS PERSONAL AND OFFICIAL
CAPACITY NOTWITHSTANDING THE EXISTENCE OF PECULIAR AND
UNUSUAL CIRCUMSTANCES WHICH WOULD RENDER THE DECISION
UNJUST AND INEQUITABLE, IN THAT:

A) PETITIONER LABORTE, IN HIS CAPACITY AS ACTING RESIDENT

MANAGER OF PGTZ, MERELY COMPLIED IN GOOD FAITH, WITH THE
VALID AND LAWFUL ORDERS OF THE TOP MANAGEMENT OF PTA
TO NOTIFY RESPONDENT PTCC TO CEASE BUSINESS OPERATIONS
 AT THE COMPLEX IN VIEW OF THE INTENDED RENOVATION AND
REPAIR OF THE RESTAURANT FACILITY AT THE COMPLEX.

B) THE FAILURE OF ATTY. HERNANDO CABRERA, FORMER

COUNSEL OF PETITIONERS TO FILE THEIR FORMAL OFFER OF
EVIDENCE AND TO MAKE A MANIFESTATION BEFORE THE TRIAL
COURT THAT THEY WERE ADOPTING IN THE TRIAL PROPER THE
EVIDENCE THEY PRESENTED DURING THE HEARING ON THE
APPLICATION FOR WRIT OF PRELIMINARY INJUNCTION IN CIVIL
CASE NO. SC-3150 IS SO GROSS, PALPABLE AND INEXCUSABLE,
THEREBY RESULTING IN THE VIOLATION OF THE SUBSTANTIVE
RIGHTS OF [THE] PETITIONERS.27

There is merit in the petition.

Anent the procedural issue raised, both the trial court and the CA faulted the petitioners for their
failure to formally offer their evidence inspite of the ample opportunity granted to do so. 28 Thus,
such lapse allegedly militated against the petitioners whose assertions were otherwise supported
by sufficient evidence on record.

Section 34, Rule 132 of the Revised Rules on Evidence provides the general rule, to wit:

Sec. 34. Offer of Evidence. – The Court shall consider no evidence which has not been formally
offered. The purpose for which the evidence is offered must be specified.

From the above provision, it is clear that the court considers the evidence only when it is formally
offered. The offer of evidence is necessary because it is the duty of the trial court to base its
findings of fact and its judgment only and strictly on the evidence offered by the parties. A piece of
document will remain a scrap of paper without probative value unless and until admitted by the
court in evidence for the purpose or purposes for which it is offered.29 The formal offer of evidence
allows the parties the chance to object to the presentation of an evidence which may not be
admissible for the purpose it is being offered.30

However, there are instances when the Court relaxed the foregoing rule and allowed evidence not
formally offered to be admitted. Citing People v. Napat-a31 and People. v. Mate,32 the Court in Heirs
of Romana Saves, et al., v. Heirs of Escolastico Saves, et al.,33enumerated the requirements for
the evidence to be considered despite failure to formally offer it, namely: "first, the same must have
been duly identified by testimony duly recorded and, second, the same must have been
incorporated in the records of the case."34 In People v. Vivencio De Roxas et al.,35 the Court also
considered exhibits which were not formally offered by the prosecution but were repeatedly
referred to in the course of the trial by the counsel of the accused.36

In the instant case, the Court finds that the above requisites are attendant to warrant the relaxation
of the rule and admit the evidence of the petitioners not formally offered. As can be seen in the
records of the case, the petitioners were able to present evidence that have been duly identified
by testimony duly recorded. To identify is to prove the identity of a person or a thing.37 Identification
means proof of identity; the proving that a person, subject or article before the court is the very
same that he or it is alleged, charged or reputed to be.38

In support of his position, Laborte in his testimony presented and identified the following: (a) the
letter informing the Chairman of PTCC about the decision of PTA main office regarding the repair
works to be conducted;39 (b) Office Order No. 1018-93 from a person named Mr. Anota, relative to
the suspension of the boat ride services at the Complex;40 (c) a copy of the memorandum from the
Technical Evaluation Committee (TEC), referring to the conduct of the repair works at the
Complex;41 (d) the letter to PTCC informing it of the repair at the Complex;42 (e) the certificates of
availability of funds for the guesthouse of the PTC Complex and for the repainting, repair works at
the Pagsanjan Administration Complex respectively;43 (f) the program of works dated July 22, 1993
for the renovation of the Pagsanjan Complex and of the swimming pool at the guesthouse
respectively;44 (g) the program of works referring to the repainting and repair works at the Complex
dated August 6, 1993;45 (h) a set of plans and specification of the projects conducted at the
Complex, particularly for the repairs and repainting of the guesthouse shower room, the repair of
the Pagsanjan Administration Complex;46 (i) the office order relative to the directive to Mr. Francisco
Abalos of the PTA main office to close the restaurant facilities;47 (j) a memorandum from Mr. Oscar
Anota, Deputy General Manager for Operation of the PTA, dated December 8, 1993 addressed to
the security office of the Pagsanjan Administration Complex, instructing the same not to allow the
entry of anything without the clearance from the main office in Manila into the Pagsanjan
Complex;48 and (k) the office order signed by Eduardo Joaquin, General Manager of the PTA,
relative to the posting of bond in favor of herein petitioner Laborte by the PTA main office in the
amount of ₱10,000.00 to be deposited with the RTC, Branch 28, Sta. Cruz, Laguna.49

Undeniably, these pertinent evidence were also found in the records of the RTC, i.e. : (a) the letter
informing the Chairman of PTCC about the decision of PTA main office regarding the repair works
to be conducted;50 (b) Office Order No. 1018-93 from a person named Mr. Anota, relative to the
suspension of the boat ride services at the Complex;51 (c) the letter to PTCC informing it of the
repair at the Complex;52 (d) the certificates of availability of funds for the guesthouse of the PTC
Complex and for the repainting, repair works at the Pagsanjan Administration Complex
respectively;53 (e) the program of works dated July 22, 1993 for the renovation of the Pagsanjan
Complex and of the swimming pool at the guesthouse respectively;54 (f) the program of works
referring to the repainting and repair works at the Complex dated August 6, 1993;55 and (g) a
memorandum from Mr. Oscar Anota, Deputy General Manager for Operation of the PTA, dated
December 8, 1993 addressed to the security office of the Pagsanjan Administration Complex,
instructing the same not to allow the entry of anything without clearance from the main office in
Manila into the Pagsanjan Complex.56 In all these, the respondents had all the chance to object to
the documents which Laborte properly identified and marked and which are found in the records
of the trial court. Considering that no objections were made by the respondents to the foregoing
documents, the Court sees no reason why these documents should not be admitted.

The Court notes the CA’s ruling that the closure of the business is a factual matter which need not
be reviewed by the Court under Rule 45. The Court has consistently held that as a general rule, a
petition for review under Rule 45 of the Rules of Court covers questions of law only. The rule,
however, admits of exceptions, subject to the following exceptions, to wit: (1) when the findings
are grounded entirely on speculations, surmises, or conjectures; (2) when the inference made is
manifestly mistaken, absurd, or impossible; (3) when there is a grave abuse of discretion; (4) when
the judgment is based on misappreciation of facts; (5) when the findings of fact are conflicting; (6)
when in making its findings, the same are contrary to the admissions of both appellant and
appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when the facts set
forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the
respondent; and (10) when the findings of fact are premised on the supposed absence of evidence
and contradicted by the evidence on record.57 After a careful review and based on the evidence on
record, the Court finds cogent reason to deviate from the general rule, warranting a reversal of the
decision of the CA.

In their petition, the petitioners assert that:

(1) the PTA is mandated to administer tourism zones and it has adopted a comprehensive
program and project to rehabilitate and upgrade the facilities of the PTA Complex. To prove
this, the petitioners attached Annexes "H-2" to "H-4,"58namely: (a) Program Work/Scope of
works of the repairs and rehabilitation project for the PGTZ dated July 22, 1993;59 (b)
Certificate of Availability of Funds for the repairs and rehabilitation project for PGTZ;60 and
(c) Program of Work/Scope of Works for the repairs and rehabilitation of the restaurant
facility dated August 6, 1993;61
 (2) The petitioners also claimed that bidding out to private parties of the business
operations in the PTA Complex is a legal requirement and a mandate given to every
revenue-generating government entity like the PTA. Thus, since it is only exercising its
mandate and has acted in good faith, petitioner PTA believes that it has not incurred any
liability against respondents.62 Citing Mendoza v. Rural Bank of Lucban,63 the petitioners
argued that: "[L]abor laws discourage interference in employers’ judgments concerning the
conduct of their business. The law must protect not only the welfare of employees, but also
the right of [the] employers."64In other words, the petitioners likened the relationship
between PTA and the respondents to that of an employer and employee;

(3) The petitioners also reiterated that the PTCC is without contract, concession or
exclusive franchise to operate the restaurant and boat ride service at the PTA Complex.
They insisted that the PTA temporarily authorized the PTCC to operate the same in order
to extend financial assistance to its PTA employee-members who are members of the then
fledging PTCC. Thus, for the petitioners, the PTCC has no vested right to continue
operating the restaurant and boat ride services, and therefore, not entitled to
damages;65 and

(4) The petitioners also claimed to have informed the PTCC as early as October 22, 1993
of the intention to rehabilitate and upgrade the facilities of the PTA Complex and for the
PTCC to vacate the area by November 15, 1993. In fact, the deadline was even extended
for another twenty-one (21) days or until December 6, 1993, to allow the PTCC sufficient
time to pack its goods, merchandise and appliances.66

The Court is persuaded.

The PTA is a government owned and controlled corporation which was mandated to administer
tourism zones. Based on this mandate, it was the PTA’s obligation to adopt a comprehensive
program and project to rehabilitate and upgrade the facilities of the PTA Complex as shown in
Annexes "H-2" to "H-4" of the petition. The Court finds that there was indeed a renovation of the
Pagsanjan Administration Complex which was sanctioned by the PTA main office; and such
renovation was done in good faith in performance of its mandated duties as tourism administrator.
In the exercise of its management prerogative to determine what is best for the said agency, the
PTA had the right to terminate at any moment the PTCC’s operations of the restaurant and the
boat ride services since the PTCC has no contract, concession or franchise from the PTA to
operate the above-mentioned businesses. As shown by the records, the operation of the restaurant
and the boat ride services was merely tolerated, in order to extend financial assistance to its PTA
employee-members who are members of the then fledging PTCC.

Except for receipts for rents paid by the PTCC to the PTA, the respondents failed to show any
contract, concession agreement or franchise to operate the restaurant and boat ride services. In 1âw phi 1

fact, the PTCC initially did not implead the PTA in its Complaint since it was well aware that there
was no contract executed between the PTCC and the PTA. While the PTCC has been operating
the restaurant and boat ride services for almost ten (10) years until its closure, the same was by
mere tolerance of the PTA.67 In the consolidated case of Phil. Ports Authority v. Pier 8 Arrastre &
Stevedoring Services, Inc.,68 the Court upheld the authority of government agencies to terminate
at any time hold-over permits.69 Thus, considering that the PTCC’s operation of the restaurant and
the boat ride services was by mere tolerance, the PTA can, at any time, terminate such operation.

The CA ruled that "the closure of the restaurant and boat ride business within the PTA Complex
was tainted with bad faith on the part of [the] defendants-appellants."70 It referred to the Sheriff’s
Report dated January 19, 1994, which stated that no such repairs and rehabilitation were actually
undertaken. Further, the petitioners engaged the services of a new restaurant operator (the New
Selecta Restaurant) after the closure of the restaurant per official receipts showing that the new
operator of the restaurant paid PTA commissions for its catering services from March 1994 to April
1994.71
The Court disagrees. The records disclose that sufficient notice was given by the PTA for the
respondents to vacate the area. The Sheriff’s Report dated January 19, 1994, alleging that there
were, in fact, no repairs and rehabilitation undertaken in the area at the time of inspection cannot
be given weight. It must be noted that the RTC had issued on November 11, 1993 a TRO enjoining
the petitioners from pursuing its actions. Thus, the absence of any business activity in the premises
is even proof of the petitioner’s compliance to the order of the trial court. Furthermore, the Sheriff’s
Report was executed only about a month after the announced construction or development; thus,
it cannot be expected that the petitioners would immediately go full-blast in the implementation of
the repair and renovation.

As to the alleged engagement of the services of a new restaurant operator, the Court agrees with
the petitioners that the engagement of New Selecta Restaurant was temporary and due only to the
requests of the guests who needed catering services for the duration of their stay. The evidence
offered by the respondents which were receipts issued to New Selecta Restaurant on different
dates even emphasize this point.72 From the foregoing, the Court concludes that the engagement
of New Selecta Restaurant is not continuous but on contingency basis only.

With respect to Laborte's liability in his official and personal capacity, the Court finds that Laborte
was simply implementing the lawful order of the PTA Management. As a general rule the officer
cannot be held personally liable with the corporation, whether civilly or otherwise, for the
consequences of his acts, if acted for and in behalf of the corporation, within the scope of his
authority and in good faith.73 Furthermore, the Court also notes that the charges against petitioners
Laborte and the PTA for grave coercion and for the violation of R.A. 6713 74 have all been
dismissed.75 Thus, the Court finds no basis to hold petitioner Laborte liable.

Likewise, the award of damages to the respondents and respondents-intervenors is without basis.
Absent a contract between the PTCC and the PTA, and considering further that the respondents
were adequately notified to properly vacate the PTA Complex, the Court finds no justifiable reason
to award any damages. Neither may the respondents-intervenors claim damages since the act
directed against the PTCC was a lawful exercise of the PTA's management prerogative. While it
is true that the exercise of management prerogative is a recognized right of a corporate entity, it
can not be gainsaid that the exercise of such right must be tempered with justice, honesty, good
faith76 and a careful regard of other party's rights. In the instant case, there is ample evidence to
show that the petitioners were able to observe the same.

WHEREFORE, the petit10n is GRANTED. The Decision dated May 29, 2008 and the Resolution
dated July 23, 2008 of the Court of Appeals are VACATED. The Amended Complaint and the
Complaint-in-Intervention filed by the Respondents in the Regional Trial Court, Branch 28, Sta.
Cruz, Laguna in Civil Case No. SC-3150 are DISMISSED.

SO ORDERED
G.R. No. L-52129 April 21, 1980

JOHN GOKONGWEI, JR., petitioner,

vs.
SECURITIES AND EXCHANGE COMMISSION, SAN MIGUEL CORPORATION, ANDRES M.
SORIANO, JOSE M. SORIANO, ENRIQUE ZOBEL, ANTONIO ROXAS, EMETERIO BUNAO,
WALTHRODE B. CONDE, MIGUEL ORTIGAS, EMIGDIO TANJUATCO and EDUARDO
VISAYA, respondents.

ANTONIO, J.:

In this petition for review, petitioner seeks to nullify and set aside the resolution en banc dated May
7, 1979 of respondent Securities and Exchange Commission in SEC Case No. 1375, sustaining
the findings of the San Miguel Corporation's Board of Directors that petitioner is engaged in a
business competitive with or antagonistic to that of the San Miguel Corporation and, therefore,
ineligible for election as director, pursuant to Section 3, Article III of the amended by-laws.
Petitioner alleges that the matter of petitioner's disqualification should not have been heard in view
of the pendency of petitioner's motion for reconsideration with this Court; that when respondent
Commission sustained the disqualification of petitioner, it failed to consider that private
respondents are precluded from disqualifying petitioner because of the rule of pari delicto; and that
the resolution of disqualification of the respondent Board of Directors was an "over exertion of
corporate power" because by this act the afore-mentioned Board of Directors intended to
perpetuate themselves in power. Considering the afore-mentioned allegations and the comments
thereto, We find no merit in the petition.

Aside from the presumptive validity of the amended by-laws at the time the questioned resolution
was rendered by respondent Securities and Exchange Commission, the Chief Justice and six (6)
Justices of this Court had already promulgated their opinions that the validity of the amended by-
laws insofar and only insofar as the parties herein are concerned, can no longer be relitigated on
the basis of the "law of the. case" doctrine and, therefore, the enforcement of the amended by-
laws could not have been ipso factor stayed by the motion for reconsideration. Petitioner's
allegation that respondent Commission (Securities and Exchange Commission) could not have
validly sustained the resolution of the San Miguel Corporation Board because some members of
the Board were also disqualified as they were situated like petitioner appears inapposite. The
alleged disqualification of some members of the Board was never in issue during the hearing of
the disqualification case, and petitioner has not submitted any evidence in support of his
contention. Petitioner's assertion that the order of respondent Commission disqualifying him is
based on evidence which are "at the most, contingent and flimsy" appears unsupported by the
records. The order of respondent Commission was based principally on the affidavits of Nazario
Avendaño, Ruperto Sarandi, Jr., Fernando Constantino, Jose Picornell and Mabini Antonio and
documentary evidence showing that petitioner is engaged in agricultural and poultry business
competitive with that of San Miguel Corporation. Petitioner did not adduce any evidence to rebut
the evidence of his disqualification. It is well-settled that findings of fact of administrative bodies
will not be interferred with by the courts in the absence of grave abuse of discretion on the part of
said agencies, or unless the afore-mentioned findings are not supported by substantial evidence
(Central Bank V. Cloribel, 44 SCRA 307 [1972]).

WHEREFORE, in view of the foregoing, the Court resolves to DISMISS the petition for lack of
merit.

SO ORDERED.

Separate Opinions
TEEHANKEE, J., dissenting:

The peremptory dismissal of the petition for review "for lack of merit" by an inconclusive vote of six
(namely, Justices Barredo, Makasiar, Antonio, Aquino, Abad Santos and De Castro) to four
(namely Justices Teehankee, Concepcion Jr., Fernandez and Guerrero) is in disregard of the clear
and express intendment and disposition of this Court in its decision of April 11, 1979 in the first
action (of which the present case is but a sequel), a special civil action, viz, L-45911 involving
exactly the same petitioner and respondents for "declaration of nullity of the amended by-laws" of
respondent San Miguel Corporation which would disqualify petitioner from being elected to the
board of directors of said respondent corporation, wherein the court, while dismissing the petition
by an inconclusive vote, expressly qualified that such dismissal was without prejudice to the
question of the actual disqualification of petitioner John Gokongwei, Jr. to run and if elected to sit
as director of respondent San Miguel Corporation being decided, after a new and proper hearing
by the Board of Directors of said corporation, whose decision shall be appealable to the respondent
Securities and Exchange Commission deliberating and acting en bond and ultimately to This Court.
Unless disqualified in the manner herein provided. the prohibition in the aforementioned by-laws
shall not apply to petitioner. 1

The late Chief Justice Fred Ruiz Castro and the now Chief Justice Enrique M. Fernando reserved
their votes, as follows:

Chief Justice Fred Ruiz Castro reserved his vote on the validity of the amended
by-laws, pending hearing by this Court on the applicability of section 13(5) of the
Corporation Law to petitioner.

Justice Fernando reserved his vote on the validity of subject amendment to the by-
laws but otherwise concurs in the result. 2

The present vote of dismissal would be by an even vote of four to four Justices had Justices Aquino
and De Castro maintained here their abstentions in the first case. Following the usual procedure
of the Court of granting due course where the Court is closely or evenly divided, the petition at bar
should be given due course, so that the Court may study the case at length and try to reach a
decisive vote, unlike in the first case which ended in a dismissal for lack of necessary votes which,
as we then stated, "is of no doctrinal value and does not in any manner resolve the issue of the
validity of the questioned amended by-laws nor foreclose the same. 3

(Justice Aquino took no part in the decision of April 11, 1979 and the subsequent Resolution of
May 8, 1979 which denied for lack of necessary votes petitioner's urgent motion for a restraining
order against his disqualification in the SMC elections to be held that very afternoon, which in our
view was an unjustified refusal of this Court "to enforce its unanimous twelve-member decision of
April 11, 1979 that petitioner could run for and sit, if elected, on the SMC board until it shall have
taken a second look at petitioner's foreseen disqualification under the questioned by-laws
amendment. 4 The Chief Justice [t]hen Acting Chief Justice] voted "to issue a restraining order in
accordance with his reservation in the decision of this petition on the question of the validity of the
assailed amendment to the by-laws." Justice Aquino likewise took no part in the Resolution of
November 27, 1979 which denied for lack of necessary votes petitioner's motion for
reconsideration of the decision. Justice De Castro, who initially took part in the decision and quoted
for dismissal of the petition and likewise for denial of petitioner's urgent motion for restraining order
in the Resolution of May 8, 1979, subsequently abstained from taking paid in the Resolution of
November 27, 1979 denying reconsideration of the decision. Mme. Justice Amuerfina Melencio
Herrera abstained completely in that case and in the present case.)
In consonance with the foregoing considerations and the reasons stated in our separate opinion
of April 1, 1979 in the first case, our separate statements in the Resolutions of May 8, 1979 and
November 27, 1979, we vote to grant due course to the petition.

The present petition is precisely by way of appeal for a review of respondent commission's lightning
Resolution of May 7, 1979 sustaining respondent SMC board's unilateral action of disqualifying
petitioner by the simple expedient of declaring him to be engaged in a "competitive or antagonistic
business". The petition raises questions of procedural due process, viz, that petitioner was not
given "the new and proper hearing by the board of directors of said corporation, whose decision
shall be appealable to the respondent Securities and Exchange Commission deliberating and
acting en banc, and ultimately to this Court," as ordered in the decision of April 11, 1979, and
questions of substantive due process as well, viz, that the questioned amended by-laws are
oppressive, arbitrary and unreasonable and specifically tailored to discriminate against petitioner
and deprive him of his vested substantial rights as a substantial SMC stockholder.

More, and contrary to the statement of the main resolution that "the alleged disqualification of some
members of the Board was never in issue during the hearing of the disqualification case," the
petition raises precisely the question of pari delicto and equal application of the questioned by-law
amendment to other board members who should likewise be disqualified for being engaged in
"competitive or antagonistic business."

Furthermore, the petition involves the issue of the application of section 13(5) of the Corporation
Law on which question the late Chief Justice Castro, as per his reserved vote quoted above in the
decision of April 11, 1979, precisely called for a "hearing by this Court" on its applicability. Justice
Barredo had in his written vote of April 3, 1979 expressly voted: "Considering that the issue
regarding the application of section 13(5) has not been fully discussed by the parties, and it is an
issue that is of utmost importance, what with its transcendental implications, apart from being
unprecedented, my vote is to leave the issue open. ... 5

By all standards and the Court's own guidelines that a petition which questions an appealed
decision of the Securities and Exchange Commission on the ground that it "has decided a question
of substance not theretofore determined by the Supreme Court, 6 the petition should be granted
due course and the justiciable and "transcendental" issues raised therein should, after full briefs
and due hearing, be squarely addressed and conclusively determined by the Court.

FERNANDO, CJ., concurring:

concurs in the result by virtue of the doctrine of the law of the case insofar as petitioner is
concerned but leaves the principal legal question open if raised in an appropriate legal proceeding.

Separate Opinions

TEEHANKEE, J., dissenting:

The peremptory dismissal of the petition for review "for lack of merit" by an inconclusive vote of six
(namely, Justices Barredo, Makasiar, Antonio, Aquino, Abad Santos and De Castro) to four
(namely Justices Teehankee, Concepcion Jr., Fernandez and Guerrero) is in disregard of the clear
and express intendment and disposition of this Court in its decision of April 11, 1979 in the first
action (of which the present case is but a sequel), a special civil action, viz, L-45911 involving
exactly the same petitioner and respondents for "declaration of nullity of the amended by-laws" of
respondent San Miguel Corporation which would disqualify petitioner from being elected to the
board of directors of said respondent corporation, wherein the court, while dismissing the petition
by an inconclusive vote, expressly qualified that such dismissal was without prejudice to the
question of the actual disqualification of petitioner John Gokongwei, Jr. to run and if elected to sit
as director of respondent San Miguel Corporation being decided, after a new and proper hearing
by the Board of Directors of said corporation, whose decision shall be appealable to the respondent
Securities and Exchange Commission deliberating and acting en bond and ultimately to This Court.
Unless disqualified in the manner herein provided. the prohibition in the aforementioned by-laws
shall not apply to petitioner. 1

The late Chief Justice Fred Ruiz Castro and the now Chief Justice Enrique M. Fernando reserved
their votes, as follows:

Chief Justice Fred Ruiz Castro reserved his vote on the validity of the amended
by-laws, pending hearing by this Court on the applicability of section 13(5) of the
Corporation Law to petitioner.

Justice Fernando reserved his vote on the validity of subject amendment to the by-
laws but otherwise concurs in the result. 2

The present vote of dismissal would be by an even vote of four to four Justices had Justices Aquino
and De Castro maintained here their abstentions in the first case. Following the usual procedure
of the Court of granting due course where the Court is closely or evenly divided, the petition at bar
should be given due course, so that the Court may study the case at length and try to reach a
decisive vote, unlike in the first case which ended in a dismissal for lack of necessary votes which,
as we then stated, "is of no doctrinal value and does not in any manner resolve the issue of the
validity of the questioned amended by-laws nor foreclose the same. 3

(Justice Aquino took no part in the decision of April 11, 1979 and the subsequent Resolution of
May 8, 1979 which denied for lack of necessary votes petitioner's urgent motion for a restraining
order against his disqualification in the SMC elections to be held that very afternoon, which in our
view was an unjustified refusal of this Court "to enforce its unanimous twelve-member decision of
April 11, 1979 that petitioner could run for and sit, if elected, on the SMC board until it shall have
taken a second look at petitioner's foreseen disqualification under the questioned by-laws
amendment. 4 The Chief Justice [t]hen Acting Chief Justice] voted "to issue a restraining order in
accordance with his reservation in the decision of this petition on the question of the validity of the
assailed amendment to the by-laws." Justice Aquino likewise took no part in the Resolution of
November 27, 1979 which denied for lack of necessary votes petitioner's motion for
reconsideration of the decision. Justice De Castro, who initially took part in the decision and quoted
for dismissal of the petition and likewise for denial of petitioner's urgent motion for restraining order
in the Resolution of May 8, 1979, subsequently abstained from taking paid in the Resolution of
November 27, 1979 denying reconsideration of the decision. Mme. Justice Amuerfina Melencio
Herrera abstained completely in that case and in the present case.)

In consonance with the foregoing considerations and the reasons stated in our separate opinion
of April 1, 1979 in the first case, our separate statements in the Resolutions of May 8, 1979 and
November 27, 1979, we vote to grant due course to the petition.

The present petition is precisely by way of appeal for a review of respondent commission's lightning
Resolution of May 7, 1979 sustaining respondent SMC board's unilateral action of disqualifying
petitioner by the simple expedient of declaring him to be engaged in a "competitive or antagonistic
business". The petition raises questions of procedural due process, viz, that petitioner was not
given "the new and proper hearing by the board of directors of said corporation, whose decision
shall be appealable to the respondent Securities and Exchange Commission deliberating and
acting en banc, and ultimately to this Court," as ordered in the decision of April 11, 1979, and
questions of substantive due process as well, viz, that the questioned amended by-laws are
oppressive, arbitrary and unreasonable and specifically tailored to discriminate against petitioner
and deprive him of his vested substantial rights as a substantial SMC stockholder.
More, and contrary to the statement of the main resolution that "the alleged disqualification of some
members of the Board was never in issue during the hearing of the disqualification case," the
petition raises precisely the question of pari delicto and equal application of the questioned by-law
amendment to other board members who should likewise be disqualified for being engaged in
"competitive or antagonistic business."

Furthermore, the petition involves the issue of the application of section 13(5) of the Corporation
Law on which question the late Chief Justice Castro, as per his reserved vote quoted above in the
decision of April 11, 1979, precisely called for a "hearing by this Court" on its applicability. Justice
Barredo had in his written vote of April 3, 1979 expressly voted: "Considering that the issue
regarding the application of section 13(5) has not been fully discussed by the parties, and it is an
issue that is of utmost importance, what with its transcendental implications, apart from being
unprecedented, my vote is to leave the issue open. ... 5

By all standards and the Court's own guidelines that a petition which questions an appealed
decision of the Securities and Exchange Commission on the ground that it "has decided a question
of substance not theretofore determined by the Supreme Court, 6 the petition should be granted
due course and the justiciable and "transcendental" issues raised therein should, after full briefs
and due hearing, be squarely addressed and conclusively determined by the Court.

FERNANDO, C.J., concurring:

concurs in the result by virtue of the doctrine of the law of the case insofar as petitioner is
concerned but leaves the principal legal question open if raised in an appropriate legal proceeding.