Marc II Marketing v. Joson
REITERATIONFacts
The Antecedents: Respondent Alfredo M. Joson was engaged by petitioner Lucila V. Joson, then President of Marc Marketing, Inc., to work as General Manager of petitioner Marc II Marketing, Inc. (petitioner corporation) even before its incorporation. A Management Contract stipulated his entitlement to 30% of net income and 30% of net profit. Pending incorporation, he was designated General Manager of Marc Marketing, Inc., a corporate officer by its by-laws. Upon petitioner corporation's incorporation, he continued as General Manager. The by-laws of petitioner corporation listed its corporate officers as Chairman, President, Vice-President(s), Treasurer, and Secretary, but allowed the Board of Directors to appoint other necessary officers. A Secretary's Certificate indicated a board resolution appointing respondent as General Manager with the designation of managing director. On June 30, 1997, petitioner corporation ceased operations due to poor sales collection and inefficient management, and respondent was informed of the termination of his services. Procedural History: Respondent filed a complaint for illegal dismissal and money claims before the Labor Arbiter. Petitioners moved to dismiss, asserting lack of jurisdiction due to an intra-corporate controversy and prescription. The Labor Arbiter deferred resolution and ordered petitioners to submit a position paper. Petitioners failed to comply, and their motions were denied. The Labor Arbiter rendered a decision finding the dismissal illegal, ordering reinstatement, backwages, moral damages, and attorney's fees. The National Labor Relations Commission (NLRC) reversed the Labor Arbiter's decision, ruling that respondent was a corporate officer and the case was an intra-corporate controversy, thus dismissing the complaint for want of jurisdiction. The Court of Appeals, however, reversed the NLRC, upholding the Labor Arbiter's jurisdiction and finding the dismissal illegal, but remanded the case for determination of monetary awards. The Court of Appeals denied petitioners' motion for reconsideration. The Petition: Petitioners seek review of the Court of Appeals' decision, arguing that the NLRC (and by extension, the Labor Arbiter) lacked jurisdiction as the case involved an intra-corporate matter. They also contend that no employer-employee relationship existed, and the monetary awards were erroneous. They further argue that petitioner Lucila should not be held solidarily liable.
Issue(s)
Whether the Labor Arbiter or the Regional Trial Court has jurisdiction over the dismissal of the respondent as General Manager; and whether the respondent was a corporate officer or a mere employee of petitioner corporation. Whether the respondent's dismissal from employment was illegal. Whether the Management Contract dated January 16, 1994, executed between respondent and petitioner Lucila, was binding on petitioner corporation; and the proper computation of separation pay and nominal damages. Whether petitioner Lucila should be held solidarily liable with petitioner corporation.
Ruling
The Supreme Court affirmed the Court of Appeals' decision with modification. It ruled that the Labor Arbiter has jurisdiction over the case, finding that respondent was a mere employee, not a corporate officer. The dismissal was declared legal but without proper observance of due process. Petitioner corporation, jointly and solidarily liable with petitioner Lucila, was ordered to pay respondent separation pay and nominal damages. The case was remanded to the Labor Arbiter for the computation of separation pay.
Ratio Decidendi
On the jurisdiction and the status of the respondent: The Court held that the respondent was not a corporate officer because his position as General Manager was not expressly enumerated in the by-laws of petitioner corporation. While the by-laws contained an enabling clause allowing the Board of Directors to appoint other officers, this does not automatically make an appointed position a corporate office. Citing Matling Industrial and Commercial Corporation v. Coros, the Court reiterated that only positions expressly mentioned in the by-laws or provided for by the Corporation Code are considered corporate offices. The Court found that the Secretary's Certificate presented by petitioners was a fabrication and did not amend the by-laws. Therefore, the respondent was a mere employee, and his dismissal constituted an employer-employee dispute falling under the jurisdiction of the Labor Arbiter, not the Regional Trial Court. The Court emphasized that the security of tenure of employees is protected and cannot be circumvented by the expedient inclusion of an enabling clause in the by-laws. On the legality of the dismissal: The Court found that the cessation of petitioner corporation's business operations was an authorized cause for termination under Article 283 of the Labor Code. However, petitioner corporation failed to comply with the procedural due process requirements. Specifically, neither the respondent nor the Department of Labor and Employment (DOLE) was given the mandatory one-month prior written notice before the cessation of operations. Furthermore, the respondent was not paid separation pay. The Court clarified that while the cause for dismissal (cessation of business) was authorized, the lack of procedural due process necessitates the award of indemnity in the form of nominal damages. On the Management Contract and the award of separation pay and nominal damages: The Court ruled that the Management Contract dated January 16, 1994, executed between respondent and petitioner Lucila, was not binding on petitioner corporation. This is because the contract was entered into before the corporation's incorporation on August 15, 1994, and there was no evidence of adoption or ratification by the corporation. Consequently, the provision entitling respondent to 30% of the net profit could not be the basis for computing his separation pay. The Court affirmed the entitlement of the respondent to separation pay equivalent to one month's pay or one-half month's pay for every year of service, whichever is higher, as the cessation of business was not due to serious financial reverses. In addition, due to the failure to observe procedural due process, the Court awarded nominal damages in the amount of ₱50,000.00, consistent with jurisprudence that imposes stiffer sanctions for violations of procedural due process in cases of dismissals based on authorized causes initiated by the employer's management prerogative. On the solidary liability of petitioner Lucila: The Court affirmed the solidary liability of petitioner Lucila. It found that she acted in bad faith and with malice in effecting the respondent's dismissal abruptly and without the required notice and separation pay, despite the cessation of business not being due to serious financial reverses. This conduct, as the President of the corporation, justified piercing the corporate veil and holding her personally liable.
Main Doctrine
A General Manager appointed by the Board of Directors pursuant to an enabling clause in the by-laws, but whose position is not expressly enumerated as a corporate office in the by-laws, is considered a mere employee, not a corporate officer. Consequently, disputes regarding their dismissal fall under the jurisdiction of the Labor Arbiter, not the Regional Trial Court. Failure to observe procedural due process in terminating an employee due to cessation of business operations, even if for a valid cause, warrants the award of nominal damages in addition to separation pay.