On 1 October 2001, the Labor Arbiter rendered his Decision in favor of respondent. Its decretal portion reads as follows:

WHEREFORE, premises considered, judgment is hereby rendered declaring [respondent's] dismissal from employment illegal. Accordingly, [petitioners] are hereby ordered:

1. To reinstate [respondent] to his former or equivalent position without loss of seniority rights, benefits, and privileges;

2. Jointly and severally liable to pay [respondent's] unpaid wages in the amount of P450,000.00 per month from [26 March 1996] up to time of dismissal in the total amount of P6,300,000.00;

3. Jointly and severally liable to pay [respondent's] full backwages in the amount of P450,000.00 per month from date of dismissal until actual reinstatement which at the time of promulgation amounted to P21,600.000.00;

4. Jointly and severally liable to pay moral damages in the amount of P100,000.00 and attorney's fees in the amount of 5% of the total monetary award.22 [Emphasis supplied.]

In the aforesaid Decision, the Labor Arbiter initially resolved petitioners' Motion to Dismiss by finding the ground of lack of jurisdiction to be without merit. The Labor Arbiter elucidated that petitioners failed to adduce evidence to prove that the present case involved an intracorporate controversy. Also, respondent's money claim did not arise from his being a director or stockholder of petitioner corporation but from his position as being its General Manager. The Labor Arbiter likewise held that respondent was not a corporate officer under petitioner corporation's by-laws. As such, respondent's complaint clearly arose from an employer-employee relationship, thus, subject to the Labor Arbiter's jurisdiction.

The Labor Arbiter then declared respondent's dismissal from employment as illegal. Respondent, being a regular employee of petitioner corporation, may only be dismissed for a valid cause and upon proper compliance with the requirements of due process. The records, though, revealed that petitioners failed to present any evidence to justify respondent's dismissal.

Aggrieved, petitioners appealed the aforesaid Labor Arbiter's Decision to the NLRC.

In its Resolution dated 15 October 2002, the NLRC ruled in favor of petitioners by giving credence to the Secretary's Certificate, which evidenced petitioner corporation's Board of Directors' meeting in which a resolution was approved appointing respondent as tis corporate officer with designation as General Manager. Therefrom, the NLRC reversed and set aside the Labor Arbiter's Decision dated 1 October 2001 and dismissed respondent's Complaint for want of jurisdiction. 23

The NLRC enunciated that the validity of respondent's appointment and termination from the position of General Manager was made subject to the approval of petitioner corporation's Board of Directors. Had respondent been an ordinary employee, such board action would not have been required. As such, it is clear that respondent was a corporate officer whose dismissal involved a purely intra-corporate controversy. The NLRC went further by stating that respondent's claim for 30% of the net profit of the corporation can only emanate from his right of ownership therein as stockholder, director and/or corporate officer. Dividends or profits are paid only to stockholders or directors of a corporation and not to any ordinary employee in the absence of any profit sharing scheme. In addition, the question of remuneration of a person who is not a mere employee but a stockholder and officer of a corporation is not a simple labor problem. Such matter comes within the ambit of corporate affairs and management and is an intra-corporate controversy in contemplation of the Corporation Code. 24

When respondent's Motion for Reconsideration was denied in another Resolution 25 dated 23 January 2003, he filed a Petition for Certiorari with the Court of Appeals ascribing grave abuse of discretion on the part of the NLRC.

On 20 June 2005, the Court of Appeals rendered its now assailed Decision declaring that the Labor Arbiter has jurisdiction over the present controversy. It upheld the finding of the Labor Arbiter that respondent was a mere employee of petitioner corporation, who has been illegally dismissed from employment without valid cause and without due process. Nevertheless, it ordered the records of the case remanded to the NLRC from the determination of the appropriate amount of monetary awards to be given to respondent. The Court of Appeals, thus, decreed:

WHEREFORE, the petition is by US PARTIALLY GRANTED. The Labor Arbiter is DECLARED to have jurisdiction over the controversy. The records are REMANDED to the NLRC for further proceedings to determine the appropriate amount of monetary awards to be adjudged in favor of [respondent]. Costs against the [petitioners] in solidum. 26

III.

ASSUMING GRATIS ARGUENDO THAT THE NLRC HAS JURISDICTION OVER THE CASE THE COURT OF APPEALS ERRED IN NOT RULING THAT THE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION IN AWARDING MULTI-MILLION PESOS IN COMPENSATION AND BACKWAGES BASED ON THE PURPORTED GROSS INCOME OF [PETITIONER CORPORATION].

IV.

THE COURT OF APPEALS SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION IN NOT MAKING ANY FINDINGS AND RULING THAT [PETITIONER LUCILA] SHOULD NOT BE HELD SOLIDARILY LIABLE IN THE ABSENCE OF EVIDENCE OF MALICE AND BAD FAITH ON HER PART.28

Petitioners fault the Court of Appeals for having sustained the Labor Arbiter's finding that respondent was not a corporate officer under petitioner corporation's by-laws. They insist that there is no need to amend the corporate by-laws to specify who its corporate officers are. The resolution issued by petitioner corporation's Board of Directors

coupled with his assumption of the said position, positively made him its corporate officer. More so, respondent's position, being a creation of petitioner corporation's Board of Directors pursuant to its by-laws, is a corporate office sanctioned by the Corporation Code and the doctrines previously laid down by this Court. Thus, respondent's removal as petitioner corporation's General Manager involved a purely intra-corporate controversy over which the RTC has jurisdiction.

Petitioners further contend that respondent's claim for 30% of the net profit of petitioner corporation was anchored on the purported Management Contract dated 16 January 1994. It should be noted, however, that said Management Contract was executed at the time petitioner corporation was still nonexistent and had no juridical personality yet. Such being the case, respondent cannot invoke any legal right therefrom as it has no legal and binding effect on petitioner corporation. Moreover, it is clear from the Articles of Incorporation of petitioner

052380-2

corporation that respondent was its director and stockholder. Indubitably, respondent's claim for his share in the profit of petitioner corporation was based on his capacity as such and not by virtue of any employee relationship.

Petitioners further avow that even if the present case does not pose an intra-corporate controversy, still, the Labor Arbiter's multimillion peso awards in favor of respondent were erroneous. The same was merely based on the latter's self-serving computations without any supporting documents.

Finally, petitioners maintain that petitioner Lucila cannot be held solidarily liable with petitioner corporation. There was neither allegation nor iota of evidence presented to show that she acted with malice and bad faith in her dealings with respondent. Moreover, the Labor Arbiter, in his Decision, simply concluded that petitioner Lucila was jointly and severally liable with petitioner corporation without making any findings thereon. It was, therefore, an error for the Court of Appeals to hold petitioner Lucila solidarily liable with petitioner corporation.

From the foregoing arguments, the initial question is which between the Labor Arbiter or the RTC, has jurisdiction over respondent's dismissal as General Manager of petitioner corporation. Its resolution necessarily entails the determination of whether respondent as General Manager of petitioner corporation is a corporate officer or a mere employee of the latter.

While Article 217(a) 229 of the Labor Code, as amended, provides that it is the Labor Arbiter who has the original and exclusive jurisdiction over cases involving termination or dismissal of workers when the person dismissed or terminated is a corporate officer,

the case automatically falls within the province of the RTC. The dismissal of a corporate officer is always regarded as a corporate act and/or an intra-corporate controversy.30

Under Section 531 of Presidential Decree No. 902-A, intra-corporate controversies are those controversies arising out of intracorporate or partnership relations, between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State insofar as it concerns their individual franchise or right to exist as such entity. It also includes controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations. 32

Accordingly, in determining whether the SEC (now the RTC) has jurisdiction over the controversy, the status or relationship of the parties and the nature of the question that is

30 Easycall Commissions Phils., Inc. v. King, 514 Phil. 296, 302 (2005).

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

(a) Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or partnership, amounting to fraud and misrepresentation which may be detrimental to the interest to the interest of the public and/or of the stockholder, partners, members of associations or organization registered with the Commission;

(b)

Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders. members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity; and

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

In Easycall Communications Phils., Inc. v. King, this Court held that in the context of Presidential Decree No. 902-A, corporate officers are those officers of a corporation who are given that character either by the Corporation Code or by the corporation's by-laws. Section 2534 of the Corporation Code specifically enumerated who are these corporate officers, to wit: (1) president; (2) secretary; (3) treasurer; and (4) such other officers as may be provided for in the bylaws.35

The aforesaid Section 25 of the Corporation Code, particularly the phrase "such other officers as may be provided for in the by-laws," has been clarified and elaborated in this Court's recent pronouncement in Matling Industrial and Commercial Corporation v. Coros, where it held, thus:

Conformably with Section 25, a position must be expressly mentioned in the [b]y-[I]aws in order to

V.

33 Nacpil International Broadcasting Corporation, 429 Phil. 410, 416 (2002); Union Motors Corporation v. The National Labor Relations Commissions, 373 Phil. 310, 319 (1999).

34 Sec. 25. Corporate officers, quorum. Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as president and treasurer at the same time.

The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business, and every decision of at least a majority of the directors or trustees present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of officers which shall require the vote of a majority of all the members of the board. Directors or trustees cannot attend or vote by proxy at board meetings.

35 Easycall Communications Phils. Inc. v. King, supra note 30 at 302.

creation of an office pursuant to or under a [b]y[I]aw enabling provision is not enough to make a position a corporate office [in] Guerrea v. Lezama [citation omitted) the first ruling on the matter, held that the only officers of a corporation were these given that character either by the Corporation Code or by the [b]y-[l]aws; the rest of the corporate officers could be considered only as employees or subordinate officials. The, it was held in Easycall Communications Phil., Inc. v. King [citation omitted]:

An "office" is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an employee occupies no office and generally is employed not by the 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.

****

This interpretation is the correct application of Section 25 of the Corporation Code, which plainly states that the corporate officers are the President, Secretary, Treasurer and such other officers as may be provided for in the [b]y-[l]aws. Accordingly, the corporate officers in the context of PD No. 902-A are exclusively those who are given that character either by the Corporation Code or by the corporation's[b]y[l]aws.

A different interpretation can easily leave the way open for the Board of Directors to circumvent the constitutionally guaranteed security of tenure of the employee by the expedient inclusion in the [b]y-[I]aws of an enabling clause on the creation of just any corporate officer position.

It is relevant to state in this connection that the SEC, the primary agency administering the Corporation Code, adopted a similar interpretation of Section 25 of the Corporation Code in its Opinion dated November 25, 1993 [citation omitted], to wit:

Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever are the corporate officers enumerated in the by-Laws are the exclusive Officers of the corporation and the Board has no power to create other Officers without amending first the corporate [b]y-laws. However, the Board may create appointive positions other that the positions of corporate Offices, but the persons occupying such positions are not considered as corporate officers within the meaning of Section 25 of the Corporation Code and are not empowered to exercise the functions of the corporate Officers, except those functions lawfully delegated to them. Their functions and duties are to be determined by the Board of Director/Trustees.36 (Emphasis supplied.]

36 Matling Industrial and Commercial Corporation v. Coros, supra note 32 at 26-27.

A careful perusal of petitioner corporation's by-laws, particularly paragraph 1, Section 1, Article IV, 37 would explicitly reveal that its corporate officers are composed only of: (1) Chairman; (2) President; (3) one or more VicePresident; (4) Treasurer; and (5) Secretary. 38 The position of General Manager was not among those enumerated.

Paragraph 2, Section 1, Article IV of petitioner corporation's by-laws, empowered its Board of Directors to appoint such other officers as it may determine necessary or proper. 39 It is by virtue of this enabling provision that petitioner corporation's Board of Directors allegedly approved a resolution to make the position of General Manager a corporation office, and, thereafter, appointed respondent thereto making him one of its corporate officers. Aii of these acts were done without first amending its by-laws so as to include the General Manager in its roster of corporate

officers.

With the given circumstances and in conformity with Matling Industrial and Commercial Corporation v. Coros, this Court rules that respondent was not a corporate officer of petitioner corporation because his position as General Manager was not specifically mentioned in the roster of corporate officers in its corporate by-laws. The enabling clause in petitioner corporation's bylaws empowering its Board of Directors to create additional officers, i.e., General Manager, and the alleged subsequent passage of a board resolution to that effect cannot make such position a corporate office.

37 ARTICLE IV

OFFICERS

Section 1. Election/Appointment Immediately after their election, the Board of Directors shall formally organize by electing the Chairman, the President, one or move 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 positions may be held concurrently by the same person, expect that no one shall act as President and Treasurer or Secretary at the same time.

Matling clearly enunciated that the board of directors has no power to create other corporate offices without firsts amending the corporate by-laws so as to include therein the newly created corporate office. Though the board of directors may create appointive positions other than the positions of corporate officers, the persons occupying such positions cannot be viewed as corporate officers under Section 25 of the Corporation Code.40 In view thereof, this Court holds that unless and until petitioner corporation's by-laws is amended for the inclusion of General Manager in the list of its corporation officer, such position cannot be considered as a corporate office within the realm of Section 25 of the Corporation Code.

This Court considers that the interpretation of Section 25 of the Corporation Code laid down in Matling safeguards the constitutionally enshrined right of every employee to security of tenure. 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.41

It is also of no moment that respondent, being petitionercorporation's General Manager, was given the functions of a managing director by its Board of Directors. As held in Matling, the only officers of a corporation are those given that character either by the Corporation Code or by the corporate by-laws. It follows then that the corporate officers enumerated in the by-laws are the exclusive officers of the corporation while the rest could only be regarded as mere employees or subordinate officials. 42 Respondent, in this case, though occupying a high ranking and vital position in petitioner corporation but which position was not specifically enumerated or mentioned in the latter's by-laws, can only be regarded as its employee or subordinate official. Noticeably, respondent's compensation as petitioner corporation's General Manager was set, fixed and determined not by the latter's Board of