September 6, 1996, CCCI issued Proprietary Ownership Certificate No. 1446 to respondent. DECISIONS OF A DIRECTOR G.R. No.

160273 CEBU COUNTRY CLUB, INC., petitioners, vs. RICARDO F. ELIZAGAQUE, respondent. SANDOVAL-GUTIERREZ, J.: For our resolution is the instant Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision1 dated January 31, 2003 and Resolution dated October 2, 2003 of the Court of Appeals in CA-G.R. CV No. 71506. The facts are: Cebu Country Club, Inc. (CCCI), petitioner, is a domestic corporation operating as a non-profit and non-stock private membership club, having its principal place of business in Banilad, Cebu City. Petitioners herein are members of its Board of Directors. Sometime in 1987, San Miguel Corporation, a special company proprietary member of CEBU COUNTRY CLUB, INC (CCCI), designated respondent Ricardo F. Elizagaque, its Senior Vice President and Operations Manager for the Visayas and Mindanao, as a special non-proprietary member. The designation was thereafter approved by the CCCIs Board of Directors. In 1996, respondent filed with CCCI an application for proprietary membership. The application was indorsed by CCCIs two (2) proprietary members, namely: Edmundo T. Misa and Silvano Ludo. As the price of a proprietary share was around the P5 million range, Benito Unchuan, then president of CCCI, offered to sell respondent a share for only P3.5 million. Respondent, however, purchased the share of a certain Dr. Butalid for only P3 million. Consequently, on On August 6, 1997, Edmundo T. Misa, on behalf of respondent, wrote CCCI a letter of reconsideration. As CCCI did not answer, respondent, on October 7, 1997, wrote another letter of reconsideration. Still, CCCI kept silent. On November 5, 1997, respondent again sent CCCI a letter inquiring whether any member of the Board objected to his application. Again, CCCI did not reply. Consequently, on December 23, 1998, respondent filed with the Regional Trial Court (RTC), Branch 71, Pasig City a complaint for damages against petitioners, docketed as Civil Case No. 67190. After trial, the RTC rendered its Decision dated February 14, 2001 in favor of respondent, thus: WHEREFORE, judgment is hereby rendered in favor of plaintiff: 1. Ordering defendants to pay, jointly and severally, plaintiff the amount of P2,340,000.00 as actual or compensatory damages. 2. Ordering defendants to pay, jointly and severally, plaintiff the amount of P5,000,000.00 as moral damages. 3. Ordering defendants to pay, jointly and severally, plaintiff the amount of P1,000,000.00 as exemplary damages. 4. Ordering defendants to pay, jointly and severally, plaintiff the amount of P1,000,000.00 as and by way of attorneys fees and P80,000.00 as litigation expenses. During the meetings dated April 4, 1997 and May 30, 1997 of the CCCI Board of Directors, action on respondents application for proprietary membership was deferred. In another Board meeting held on July 30, 1997, respondents application was voted upon. Subsequently, or on August 1, 1997, respondent received a letter from Julius Z. Neri, CCCIs corporate secretary, informing him that the Board disapproved his application for proprietary membership.

5. Costs of suit. Counterclaims are hereby DISMISSED for lack of merit. SO ORDERED.2 On appeal by petitioners, the Court of Appeals, in its Decision dated January 31, 2003, affirmed the trial courts Decision with modification, thus: WHEREFORE, premises considered, the assailed Decision dated February 14, 2001 of the Regional Trial Court, Branch 71, Pasig City in Civil Case No. 67190 is hereby AFFIRMED with MODIFICATION as follows: 1. Ordering defendants-appellants to pay, jointly and severally, plaintiff-appellee the amount ofP2,000,000.00 as moral damages; 2. Ordering defendants-appellants to pay, jointly and severally, plaintiff-appellee the amount ofP1,000,000.00 as exemplary damages; 3. Ordering defendants-appellants to pay, jointly and severally, plaintiff-appellee the mount of P500,000.00 as attorneys fees and P50,000.00 as litigation expenses; and 4. Costs of the suit. The counterclaims are DISMISSED for lack of merit. SO ORDERED.3 On March 3, 2003, petitioners filed a motion for reconsideration and motion for leave to set the motion for oral arguments. In its Resolution4 dated October 2, 2003, the appellate court denied the motions for lack of merit. Hence, the present petition.

The issue for our resolution is whether in disapproving respondents application for proprietary membership with CCCI, petitioners are liable to respondent for damages, and if so, whether their liability is joint and several. Petitioners contend, inter alia, that the Court of Appeals erred in awarding exorbitant damages to respondent despite the lack of evidence that they acted in bad faith in disapproving the latters application; and in disregarding their defense of damnum absque injuria. For his part, respondent maintains that the petition lacks merit, hence, should be denied. CCCIs Articles of Incorporation provide in part: SEVENTH: That this is a non-stock corporation and membership therein as well as the right of participation in its assets shall be limited to qualified persons who are duly accredited owners of Proprietary Ownership Certificates issued by the corporation in accordance with its By-Laws. Corollary, Section 3, Article 1 of CCCIs Amended By-Laws provides: SECTION 3. HOW MEMBERS ARE ELECTED The procedure for the admission of new members of the Club shall be as follows: (a) Any proprietary member, seconded by another voting proprietary member, shall submit to the Secretary a written proposal for the admission of a candidate to the "Eligible-forMembership List"; (b) Such proposal shall be posted by the Secretary for a period of thirty (30) days on the Club bulletin board during which time any member may interpose objections to the admission of the applicant by communicating the same to the Board of Directors; (c) After the expiration of the aforesaid thirty (30) days, if no objections have been filed or if there are, the Board considers

the objections unmeritorious, the candidate shall be qualified for inclusion in the "Eligible-for-Membership List"; (d) Once included in the "Eligible-for-Membership List" and after the candidate shall have acquired in his name a valid POC duly recorded in the books of the corporation as his own, he shall become a Proprietary Member, upon a non-refundable admission fee of P1,000.00, provided that admission fees will only be collected once from any person. On March 1, 1978, Section 3(c) was amended to read as follows: (c) After the expiration of the aforesaid thirty (30) days, the Board may, by unanimous vote of all directors present at a regular or special meeting, approve the inclusion of the candidate in the "Eligible-for-Membership List". As shown by the records, the Board adopted a secret balloting known as the "black ball system" of voting wherein each member will drop a ball in the ballot box. A white ball represents conformity to the admission of an applicant, while a black ball means disapproval. Pursuant to Section 3(c), as amended, cited above, a unanimous vote of the directors is required. When respondents application for proprietary membership was voted upon during the Board meeting on July 30, 1997, the ballot box contained one (1) black ball. Thus, for lack of unanimity, his application was disapproved. Obviously, the CCCI Board of Directors, under its Articles of Incorporation, has the right to approve or disapprove an application for proprietary membership. But such right should not be exercised arbitrarily. Articles 19 and 21 of the Civil Code on the Chapter on Human Relations provide restrictions, thus: Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. Article 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.

In GF Equity, Inc. v. Valenzona,5 we expounded Article 19 and correlated it with Article 21, thus: This article, known to contain what is commonly referred to as the principle of abuse of rights, sets certain standards which must be observed not only in the exercise of one's rights but also in the performance of one's duties. These standards are the following: to act with justice; to give everyone his due; and to observe honesty and good faith. The law, therefore, recognizes a primordial limitation on all rights; that in their exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though by itself legal because recognized or granted by law as such, may nevertheless become the source of some illegality. When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be held responsible. But while Article 19 lays down a rule of conduct for the government of human relations and for the maintenance of social order, it does not provide a remedy for its violation. Generally, an action for damages under either Article 20 or Article 21 would be proper. (Emphasis in the original) In rejecting respondents application for proprietary membership, we find that petitioners violated the rules governing human relations, the basic principles to be observed for the rightful relationship between human beings and for the stability of social order. The trial court and the Court of Appeals aptly held that petitioners committed fraud and evident bad faith in disapproving respondents applications. This is contrary to morals, good custom or public policy. Hence, petitioners are liable for damages pursuant to Article 19 in relation to Article 21 of the same Code. It bears stressing that the amendment to Section 3(c) of CCCIs Amended By-Laws requiring the unanimous vote of the directors present at a special or regular meeting was not printed on the application form respondent filled and submitted to CCCI. What was printed thereon was the original provision of Section 3(c) which was silent on the required number of votes needed for admission of an applicant as a proprietary member.

Petitioners explained that the amendment was not printed on the application form due to economic reasons. We find this excuse flimsy and unconvincing. Such amendment, aside from being extremely significant, was introduced way back in 1978 or almost twenty (20) years before respondent filed his application. We cannot fathom why such a prestigious and exclusive golf country club, like the CCCI, whose members are all affluent, did not have enough money to cause the printing of an updated application form. It is thus clear that respondent was left groping in the dark wondering why his application was disapproved. He was not even informed that a unanimous vote of the Board members was required. When he sent a letter for reconsideration and an inquiry whether there was an objection to his application, petitioners apparently ignored him. Certainly, respondent did not deserve this kind of treatment. Having been designated by San Miguel Corporation as a special non-proprietary member of CCCI, he should have been treated by petitioners with courtesy and civility. At the very least, they should have informed him why his application was disapproved. The exercise of a right, though legal by itself, must nonetheless be in accordance with the proper norm. When the right is exercised arbitrarily, unjustly or excessively and results in damage to another, a legal wrong is committed for which the wrongdoer must be held responsible.6 It bears reiterating that the trial court and the Court of Appeals held that petitioners disapproval of respondents application is characterized by bad faith. As to petitioners reliance on the principle of damnum absque injuria or damage without injury, suffice it to state that the same is misplaced. In Amonoy v. Gutierrez,7 we held that this principle does not apply when there is an abuse of a persons right, as in this case. As to the appellate courts award to respondent of moral damages, we find the same in order. Under Article 2219 of the New Civil Code, moral damages may be recovered, among others, in acts and actions referred to in Article 21. We believe respondents testimony that he suffered mental anguish, social humiliation and wounded feelings as a result of the arbitrary denial of his application. However, the amount of P2,000,000.00 is excessive. While there is no hard-and-fast rule in

determining what would be a fair and reasonable amount of moral damages, the same should not be palpably and scandalously excessive. Moral damages are not intended to impose a penalty to the wrongdoer, neither to enrich the claimant at the expense of the defendant.8 Taking into consideration the attending circumstances here, we hold that an award to respondent of P50,000.00, instead of P2,000,000.00, as moral damages is reasonable. Anent the award of exemplary damages, Article 2229 allows it by way of example or correction for the public good. Nonetheless, since exemplary damages are imposed not to enrich one party or impoverish another but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions,9 we reduce the amount fromP1,000,000.00 to P25,000.00 only. On the matter of attorneys fees and litigation expenses, Article 2208 of the same Code provides, among others, that attorneys fees and expenses of litigation may be recovered in cases when exemplary damages are awarded and where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered, as in this case. In any event, however, such award must be reasonable, just and equitable. Thus, we reduce the amount of attorneys fees (P500,000.00) and litigation expenses (P50,000.00) to P50,000.00 andP25,000.00, respectively. Lastly, petitioners argument that they could not be held jointly and severally liable for damages because only one (1) voted for the disapproval of respondents application lacks merit. Section 31 of the Corporation Code provides: SEC. 31. Liability of directors, trustees or officers. Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faithin directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. (Emphasis ours)

WHEREFORE, we DENY the petition. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 71506 are AFFIRMED with modification in the sense that (a) the award of moral damages is reduced fromP2,000,000.00 to P50,000.00; (b) the award of exemplary damages is reduced from P1,000,000.00 to P25,000.00; and (c) the award of attorneys fees and litigation expenses is reduced from P500,000.00 and P50,000.00 toP50,000.00 and P25,000.00, respectively. Costs against petitioners. SO ORDERED. TRUST RECEIPTS LAW [G.R. No. 119858. April 29, 2003] EDWARD C. ONG, petitioner, vs. THE COURT OF APPEALS AND THE PEOPLE OF THE PHILIPPINES, respondents. DECISION The Case Petitioner Edward C. Ong (petitioner) filed this petition for review on certiorari[1] to nullify the Decision[2] dated 27 October 1994 of the Court of Appeals in CA-G.R. C.R. No. 14031, and its Resolution[3] dated 18 April 1995, denying petitioners motion for reconsideration. The assailed Decision affirmed in toto petitioners conviction[4] by the Regional Trial Court of Manila, Branch 35,[5] on two counts of estafa for violation of the Trust Receipts Law,[6] as follows: WHEREFORE, judgment is rendered: (1) pronouncing accused EDWARD C. ONG guilty beyond reasonable doubt on two counts, as principal on both counts, of ESTAFA defined under No. 1 (b) of Article 315 of the Revised Penal Code in relation to Section 13 of Presidential Decree No. 115, and penalized under the 1st paragraph of the same Article 315, and sentenced said accused in each count to TEN (10) YEARS of prision mayor, as minimum, to TWENTY (20) YEARS of reclusion temporal, as maximum;

(2) ACQUITTING accused BENITO ONG of the crime charged against him, his guilt thereof not having been established by the People beyond reasonable doubt; (3) Ordering accused Edward C. Ong to pay private complainant Solid Bank Corporation the aggregate sum of P2,976,576.37 as reparation for the damages said accused caused to the private complainant, plus the interest thereon at the legal rate and the penalty of 1% per month, both interest and penalty computed from July 15, 1991, until the principal obligation is fully paid; (4) Ordering Benito Ong to pay, jointly and severally with Edward C. Ong, the private complainant the legal interest and the penalty of 1% per month due and accruing on the unpaid amount ofP1,449,395.71, still owing to the private offended under the trust receipt Exhibit C, computed from July 15, 1991, until the said unpaid obligation is fully paid; (5) Ordering accused Edward C. Ong to pay the costs of these two actions. SO ORDERED.[7] The Charge Assistant City Prosecutor Dina P. Teves of the City of Manila charged petitioner and Benito Ong with two counts of estafa under separate Informations dated 11 October 1991. In Criminal Case No. 92-101989, the Information indicts petitioner and Benito Ong of the crime of estafa committed as follows: That on or about July 23, 1990, in the City of Manila, Philippines, the said accused, representing ARMAGRI International Corporation, conspiring and confederating together did then and there willfully, unlawfully and feloniously defraud the SOLIDBANK Corporation represented by its Accountant, DEMETRIO LAZARO, a corporation duly organized and existing under the laws of the Philippines located at Juan Luna Street, Binondo, this City, in the following manner, to wit:

the said accused received in trust from said SOLIDBANK Corporation the following, to wit: 10,000 bags of urea valued at P2,050,000.00 specified in a Trust Receipt Agreement and covered by a Letter of Credit No. DOM GD 90-009 in favor of the Fertiphil Corporation; under the express obligation on the part of the said accused to account for said goods to Solidbank Corporation and/or remit the proceeds of the sale thereof within the period specified in the Agreement or return the goods, if unsold immediately or upon demand; but said accused, once in possession of said goods, far from complying with the aforesaid obligation failed and refused and still fails and refuses to do so despite repeated demands made upon him to that effect and with intent to defraud, willfully, unlawfully and feloniously misapplied, misappropriated and converted the same or the value thereof to his own personal use and benefit, to the damage and prejudice of the said Solidbank Corporation in the aforesaid amount of P2,050,000.00 Philippine Currency. Contrary to law. In Criminal Case No. 92-101990, the Information likewise charges petitioner of the crime of estafa committed as follows: That on or about July 6, 1990, in the City of Manila, Philippines, the said accused, representing ARMAGRI International Corporation, did then and there willfully, unlawfully and feloniously defraud the SOLIDBANK Corporation represented by its Accountant, DEMETRIO LAZARO, a corporation duly organized and existing under the laws of the Philippines located at Juan Luna Street, Binondo, this City, in the following manner, to wit: the said accused received in trust from said SOLIDBANK Corporation the following goods, to wit: 125 pcs. Rear diff. assy RNZO 49 50 pcs. Front & Rear diff assy. Isuzu Elof 85 units 1-Beam assy. Isuzu Spz all valued at P2,532,500.00 specified in a Trust Receipt Agreement and covered by a Domestic Letter of Credit No. DOM GD 90-006 in favor

of the Metropole Industrial Sales with address at P.O. Box AC 219, Quezon City; under the express obligation on the part of the said accused to account for said goods to Solidbank Corporation and/or remit the proceeds of the sale thereof within the period specified in the Agreement or return the goods, if unsold immediately or upon demand; but said accused, once in possession of said goods, far from complying with the aforesaid obligation failed and refused and still fails and refuses to do so despite repeated demands made upon him to that effect and with intent to defraud, willfully, unlawfully and feloniously misapplied, misappropriated and converted the same or the value thereof to his own personal use and benefit, to the damage and prejudice of the said Solidbank Corporation in the aforesaid amount of P2,532,500.00 Philippine Currency. Contrary to law. Arraignment and Plea With the assistance of counsel, petitioner and Benito Ong both pleaded not guilty when arraigned. Thereafter, trial ensued. Version of the Prosecution The prosecutions evidence disclosed that on 22 June 1990, petitioner, representing ARMAGRI International Corporation[8] (ARMAGRI), applied for a letter of credit forP2,532,500.00 with SOLIDBANK Corporation (Bank) to finance the purchase of differential assemblies from Metropole Industrial Sales. On 6 July 1990, petitioner, representing ARMAGRI, executed a trust receipt[9] acknowledging receipt from the Bank of the goods valued at P2,532,500.00. On 12 July 1990, petitioner and Benito Ong, representing ARMAGRI, applied for another letter of credit for P2,050,000.00 to finance the purchase of merchandise from Fertiphil Corporation. The Bank approved the application, opened the letter of credit and paid to Fertiphil Corporation the amount of P2,050,000.00. On 23 July 1990,

petitioner, signing for ARMAGRI, executed another trust receipt[10] in favor of the Bank acknowledging receipt of the merchandise. Both trust receipts contained the same stipulations. Under the trust receipts, ARMAGRI undertook to account for the goods held in trust for the Bank, or if the goods are sold, to turn over the proceeds to the Bank. ARMAGRI also undertook the obligation to keep the proceeds in the form of money, bills or receivables as the separate property of the Bank or to return the goods upon demand by the Bank, if not sold. In addition, petitioner executed the following additional undertaking stamped on the dorsal portion of both trust receipts: I/We jointly and severally agreed to any increase or decrease in the interest rate which may occur after July 1, 1981, when the Central Bank floated the interest rates, and to pay additionally the penalty of 1% per month until the amount/s or installment/s due and unpaid under the trust receipt on the reverse side hereof is/are fully paid.[11] Petitioner signed alone the foregoing additional undertaking in the Trust Receipt for P2,253,500.00, while both petitioner and Benito Ong signed the additional undertaking in the Trust Receipt for P2,050,000.00. When the trust receipts became due and demandable, ARMAGRI failed to pay or deliver the goods to the Bank despite several demand letters.[12] Consequently, as of 31 May 1991, the unpaid account under the first trust receipt amounted to P1,527,180.66,[13] while the unpaid account under the second trust receipt amounted to P1,449,395.71.[14] Version of the Defense After the prosecution rested its case, petitioner and Benito Ong, through counsel, manifested in open court that they were waiving their right to present evidence. The trial court then considered the case submitted for decision.[15] The Ruling of the Court of Appeals

Petitioner appealed his conviction to the Court of Appeals. On 27 October 1994, the Court of Appeals affirmed the trial courts decision in toto. Petitioner filed a motion for reconsideration but the same was denied by the Court of Appeals in the Resolution dated 18 April 1995. The Court of Appeals held that although petitioner is neither a director nor an officer of ARMAGRI, he certainly comes within the term employees or other x x x persons therein responsible for the offense in Section 13 of the Trust Receipts Law. The Court of Appeals explained as follows: It is not disputed that appellant transacted with the Solid Bank on behalf of ARMAGRI. This is because the Corporation cannot by itself transact business or sign documents it being an artificial person. It has to accomplish these through its agents. A corporation has a personality distinct and separate from those acting on its behalf. In the fulfillment of its purpose, the corporation by necessity has to employ persons to act on its behalf. Being a mere artificial person, the law (Section 13, P.D. 115) recognizes the impossibility of imposing the penalty of imprisonment on the corporation itself. For this reason, it is the officers or employees or other persons whom the law holds responsible.[16] The Court of Appeals ruled that what made petitioner liable was his failure to account to the entruster Bank what he undertook to perform under the trust receipts. The Court of Appeals held that ARMAGRI, which petitioner represented, could not itself negotiate the execution of the trust receipts, go to the Bank to receive, return or account for the entrusted goods. Based on the representations of petitioner, the Bank accepted the trust receipts and, consequently, expected petitioner to return or account for the goods entrusted.[17] The Court of Appeals also ruled that the prosecution need not prove that petitioner is occupying a position in ARMAGRI in the nature of an officer or similar position to hold him the person(s) therein responsible for the offense. The Court of Appeals held that petitioners admission that his participation was merely incidental still makes him fall within the purview of the law as one of the corporations employees or other officials or persons therein responsible for the

offense. Incidental or not, petitioner was then acting on behalf of ARMAGRI, carrying out the corporations decision when he signed the trust receipts. The Court of Appeals further ruled that the prosecution need not prove that petitioner personally received and misappropriated the goods subject of the trust receipts. Evidence of misappropriation is not required under the Trust Receipts Law. To establish the crime of estafa, it is sufficient to show failure by the entrustee to turn over the goods or the proceeds of the sale of the goods covered by a trust receipt. Moreover, the bank is not obliged to determine if the goods came into the actual possession of the entrustee. Trust receipts are issued to facilitate the purchase of merchandise. To obligate the bank to examine the fact of actual possession by the entrustee of the goods subject of every trust receipt will greatly impede commercial transactions. Hence, this petition. The Issues Petitioner seeks to reverse his conviction by contending that the Court of Appeals erred: 1. IN RULING THAT, BY THE MERE CIRCUMSTANCE THAT PETITIONER ACTED AS AGENT AND SIGNED FOR THE ENTRUSTEE CORPORATION, PETITIONER WAS NECESSARILY THE ONE RESPONSIBLE FOR THE OFFENSE; AND 2. IN CONVICTING PETITIONER UNDER SPECIFICATIONS NOT ALLEGED IN THE INFORMATION. The Ruling of the Court The Court sustains the conviction of petitioner.

First Assigned Error: Petitioner comes within the purview of Section 13 of the Trust Receipts Law. Petitioner contends that the Court of Appeals erred in finding him liable for the default of ARMAGRI, arguing that in signing the trust receipts, he merely acted as an agent of ARMAGRI. Petitioner asserts that nowhere in the trust receipts did he assume personal responsibility for the undertakings of ARMAGRI which was the entrustee. Petitioners arguments fail to persuade us. The pivotal issue for resolution is whether petitioner comes within the purview of Section 13 of the Trust Receipts Law which provides: x x x. If the violation is committed by a corporation, partnership, association or other juridical entities, the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the offense. (Emphasis supplied) We hold that petitioner is a person responsible for violation of the Trust Receipts Law. The relevant penal provision of the Trust Receipts Law reads: SEC. 13. Penalty Clause. The failure of the entrustee to turn over the proceeds of the sale of the goods, documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or to return said goods, documents or instruments if they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa, punishable under the provisions of Article Three Hundred and Fifteen, Paragraph One (b), of Act Numbered Three Thousand Eight Hundred and Fifteen, as amended, otherwise known as the Revised Penal Code. If the violation or offense is committed by a corporation, partnership, association or other juridical entities, the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the criminal offense. (Emphasis supplied)

The Trust Receipts Law is violated whenever the entrustee fails to: (1) turn over the proceeds of the sale of the goods, or (2) return the goods covered by the trust receipts if the goods are not sold.[18] The mere failure to account or return gives rise to the crime which is malum prohibitum.[19] There is no requirement to prove intent to defraud.[20] The Trust Receipts Law recognizes the impossibility of imposing the penalty of imprisonment on a corporation. Hence, if the entrustee is a corporation, the law makes the officers or employees or other persons responsible for the offense liable to suffer the penalty of imprisonment. The reason is obvious: corporations, partnerships, associations and other juridical entities cannot be put to jail. Hence, the criminal liability falls on the human agent responsible for the violation of the Trust Receipts Law. In the instant case, the Bank was the entruster while ARMAGRI was the entrustee. Being the entrustee, ARMAGRI was the one responsible to account for the goods or its proceeds in case of sale. However, the criminal liability for violation of the Trust Receipts Law falls on the human agent responsible for the violation. Petitioner, who admits being the agent of ARMAGRI, is the person responsible for the offense for two reasons. First, petitioner is the signatory to the trust receipts, the loan applications and the letters of credit. Second, despite being the signatory to the trust receipts and the other documents, petitioner did not explain or show why he is not responsible for the failure to turn over the proceeds of the sale or account for the goods covered by the trust receipts. The Bank released the goods to ARMAGRI upon execution of the trust receipts and as part of the loan transactions of ARMAGRI. The Bank had a right to demand from ARMAGRI payment or at least a return of the goods. ARMAGRI failed to pay or return the goods despite repeated demands by the Bank. It is a well-settled doctrine long before the enactment of the Trust Receipts Law, that the failure to account, upon demand, for funds or property held in trust is evidence of conversion or misappropriation. [21] Under the law, mere failure by the entrustee to account for the goods received in trust constitutes estafa. The Trust Receipts Law punishes dishonesty and abuse of confidence in the handling of money or goods to the prejudice of public order.[22] The mere failure to deliver the

proceeds of the sale or the goods if not sold constitutes a criminal offense that causes prejudice not only to the creditor, but also to the public interest.[23] Evidently, the Bank suffered prejudice for neither money nor the goods were turned over to the Bank. The Trust Receipts Law expressly makes the corporations officers or employees or other persons therein responsible for the offense liable to suffer the penalty of imprisonment. In the instant case, petitioner signed the two trust receipts on behalf of ARMAGRI[24] as the latter could only act through its agents. When petitioner signed the trust receipts, he acknowledged receipt of the goods covered by the trust receipts. In addition, petitioner was fully aware of the terms and conditions stated in the trust receipts, including the obligation to turn over the proceeds of the sale or return the goods to the Bank, to wit: Received, upon the TRUST hereinafter mentioned from SOLIDBANK CORPORATION (hereafter referred to as the BANK), the following goods and merchandise, the property of said BANK specified in the bill of lading as follows: x x x and in consideration thereof, I/we hereby agree to hold said goods in Trust for the said BANK and as its property with liberty to sell the same for its account but without authority to make any other disposition whatsoever of the said goods or any part thereof (or the proceeds thereof) either by way of conditional sale, pledge, or otherwise. In case of sale I/we agree to hand the proceeds as soon as received to the BANK to apply against the relative acceptance (as described above) and for the payment of any other indebtedness of mine/ours to SOLIDBANK CORPORATION. x x x. I/we agree to keep said goods, manufactured products, or proceeds thereof, whether in the form of money or bills, receivables, or accounts, separate and capable of identification as the property of the BANK. I/we further agree to return the goods, documents, or instruments in the event of their non-sale, upon demand or within _______ days, at the option of the BANK.

x x x. (Emphasis supplied)[25] True, petitioner acted on behalf of ARMAGRI. However, it is a well-settled rule that the law of agency governing civil cases has no application in criminal cases. When a person participates in the commission of a crime, he cannot escape punishment on the ground that he simply acted as an agent of another party. [26] In the instant case, the Bank accepted the trust receipts signed by petitioner based on petitioners representations. It is the fact of being the signatory to the two trust receipts, and thus a direct participant to the crime, which makes petitioner a person responsible for the offense. Petitioner could have raised the defense that he had nothing to do with the failure to account for the proceeds or to return the goods. Petitioner could have shown that he had severed his relationship with ARMAGRI prior to the loss of the proceeds or the disappearance of the goods. Petitioner, however, waived his right to present any evidence, and thus failed to show that he is not responsible for the violation of the Trust Receipts Law. There is no dispute that on 6 July 1990 and on 23 July 1990, petitioner signed the two trust receipts[27] on behalf of ARMAGRI. Petitioner, acting on behalf of ARMAGRI, expressly acknowledged receipt of the goods in trust for the Bank. ARMAGRI failed to comply with its undertakings under the trust receipts. On the other hand, petitioner failed to explain and communicate to the Bank what happened to the goods despite repeated demands from the Bank. As of 13 May 1991, the unpaid account under the first and second trust receipts amounted to P1,527,180.60 and P1,449,395.71, respectively.[28] Second Assigned Error: Petitioners conviction under the allegations in the two Informations for Estafa. Petitioner argues that he cannot be convicted on a new set of facts not alleged in the Informations. Petitioner claims that the trial courts decision found that it was ARMAGRI that transacted with the Bank, acting through petitioner as its agent. Petitioner asserts that this contradicts the specific allegation in the Informations that it was petitioner who was constituted as the entrustee and was thus obligated

to account for the goods or its proceeds if sold. Petitioner maintains that this absolves him from criminal liability. We find no merit in petitioners arguments. Contrary to petitioners assertions, the Informations explicitly allege that petitioner, representing ARMAGRI, defrauded the Bank by failing to remit the proceeds of the sale or to return the goods despite demands by the Bank, to the latters prejudice. As an essential element of estafa with abuse of confidence, it is sufficient that the Informations specifically allege that the entrustee received the goods. The Informations expressly state that ARMAGRI, represented by petitioner, received the goods in trust for the Bank under the express obligation to remit the proceeds of the sale or to return the goods upon demand by the Bank. There is no need to allege in the Informations in what capacity petitioner participated to hold him responsible for the offense. Under the Trust Receipts Law, it is sufficient to allege and establish the failure of ARMAGRI, whom petitioner represented, to remit the proceeds or to return the goods to the Bank. When petitioner signed the trust receipts, he claimed he was representing ARMAGRI. The corporation obviously acts only through its human agents and it is the conduct of such agents which the law must deter.[29] The existence of the corporate entity does not shield from prosecution the agent who knowingly and intentionally commits a crime at the instance of a corporation.[30] Penalty for the crime of Estafa. The penalty for the crime of estafa is prescribed in Article 315 of the Revised Penal Code, as follows: 1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if the amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos; and if such amount exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its maximum period, adding one year for each additional 10,000 pesos; but the total penalty which may be imposed should not exceed twenty years. x x x.

In the instant case, the amount of the fraud in Criminal Case No. 92-101989 is P1,527,180.66. In Criminal Case No. 92-101990, the amount of the fraud is P1,449,395.71. Since the amounts of the fraud in each estafa exceeds P22,000.00, the penalty of prision correccional maximum to prision mayor minimum should be imposed in its maximum period as prescribed in Article 315 of the Revised Penal Code. The maximum indeterminate sentence should be taken from this maximum period which has a duration of 6 years, 8 months and 21 days to 8 years. One year is then added for each additional P10,000.00, but the total penalty should not exceed 20 years. Thus, the maximum penalty for each count of estafa in this case should be 20 years. Under the Indeterminate Sentence Law, the minimum indeterminate sentence can be anywhere within the range of the penalty next lower in degree to the penalty prescribed by the Code for the offense. The minimum range of the penalty is determined without first considering any modifying circumstance attendant to the commission of the crime and without reference to the periods into which it may be subdivided.[31] The modifying circumstances are considered only in the imposition of the maximum term of the indeterminate sentence.[32]Since the penalty prescribed in Article 315 is prision correccional maximum to prision mayor minimum, the penalty next lower in degree would be prision correccional minimum to medium. Thus, the minimum term of the indeterminate penalty should be anywhere within 6 months and 1 day to 4 years and 2 months.[33] Accordingly, the Court finds a need to modify in part the penalties imposed by the trial court. The minimum penalty for each count of estafa should be reduced to four (4) years and two (2) months of prision correccional. As for the civil liability arising from the criminal offense, the question is whether as the signatory for ARMAGRI, petitioner is personally liable pursuant to the provision of Section 13 of the Trust Receipts Law. In Prudential Bank v. Intermediate Appellate Court,[34] the Court discussed the imposition of civil liability for violation of the Trust Receipts Law in this wise:

It is clear that if the violation or offense is committed by a corporation, partnership, association or other juridical entities, the penalty shall be imposed upon the directors, officers, employees or other officials or persons responsible for the offense. The penalty referred to is imprisonment, the duration of which would depend on the amount of the fraud as provided for in Article 315 of the Revised Penal Code. The reason for this is obvious: corporation, partnership, association or other juridical entities cannot be put in jail. However, it is these entities which are made liable for the civil liabilities arising from the criminal offense. This is the import of the clause without prejudice to the civil liabilities arising from the criminal offense. (Emphasis supplied) In Prudential Bank, the Court ruled that the person signing the trust receipt for the corporation is not solidarily liable with the entrusteecorporation for the civil liability arising from the criminal offense. He may, however, be personally liable if he bound himself to pay the debt of the corporation under a separate contract of surety or guaranty. In the instant case, petitioner did not sign in his personal capacity the solidary guarantee clause[35] found on the dorsal portion of the trust receipts. Petitioner placed his signature after the typewritten words ARMCO INDUSTRIAL CORPORATION found at the end of the solidary guarantee clause. Evidently, petitioner did not undertake to guaranty personally the payment of the principal and interest of ARMAGRIs debt under the two trust receipts. In contrast, petitioner signed the stamped additional undertaking without any indication he was signing for ARMAGRI. Petitioner merely placed his signature after the additional undertaking. Clearly, what petitioner signed in his personal capacity was the stamped additional undertaking to pay a monthly penalty of 1% of the total obligation in case of ARMAGRIs default. In the additional undertaking, petitioner bound himself to pay jointly and severally a monthly penalty of 1% in case of ARMAGRIs default.[36] Thus, petitioner is liable to the Bank for the stipulated monthly penalty of 1% on the outstanding amount of each trust receipt. The penalty shall be computed from 15 July 1991, when petitioner received the demand letter,[37]until the debt is fully paid. WHEREFORE, the assailed Decision is AFFIRMED with MODIFICATION. In Criminal Case No. 92-101989 and in Criminal

Case No. 92-101990, for each count of estafa, petitioner EDWARD C. ONG is sentenced to an indeterminate penalty of imprisonment from four (4) years and two (2) months of prision correccional as MINIMUM, to twenty (20) years of reclusion temporal as MAXIMUM. Petitioner is ordered to pay SOLIDBANK CORPORATION the stipulated penalty of 1% per month on the outstanding balance of the two trust receipts to be computed from 15 July 1991 until the debt is fully paid. SO ORDERED. JURISDICTION / LABOR RELATED G.R. No. 185567 ARSENIO Z. LOCSIN, Petitioner NISSAN CAR LEASE PHILS., INC. and LUIS BANSON, Respondents. DECISION Through a petition for review on certiorari,[1] petitioner Arsenio Z. Locsin (Locsin) seeks the reversal of the Decision[2] of the Court of Appeals (CA) dated August 28, 2008,[3] in Arsenio Z. Locsin v. Nissan Car Lease Phils., Inc. and Luis Banson, docketed as CA-G.R. SP No. 103720 and the Resolution dated December 9, 2008,[4] denying Locsins Motion for Reconsideration. The assailed ruling of the CA reversed and set aside the Decision[5] of the Hon. Labor Arbiter Thelma Concepcion (Labor Arbiter Concepcion) which denied Nissan Lease Phils. Inc.s (NCLPI) and Luis T. Bansons (Banson) Motion to Dismiss. THE FACTUAL ANTECEDENTS On January 1, 1992, Locsin was elected Executive Vice President and Treasurer (EVP/Treasurer) of NCLPI. As EVP/Treasurer, his duties and responsibilities included: (1) the

management of the finances of the company; (2) carrying out the directions of the President and/or the Board of Directors regarding financial management; and (3) the preparation of financial reports to advise the officers and directors of the financial condition of NCLPI. [6] Locsin held this position for 13 years, having been re-elected every year since 1992, until January 21, 2005, when he was nominated and elected Chairman of NCLPIs Board of Directors.[7] On August 5, 2005, a little over seven (7) months after his election as Chairman of the Board, the NCLPI Board held a special meeting at the Manila Polo Club. One of the items of the agenda was the election of a new set of officers. Unfortunately, Locsin was neither re-elected Chairman nor reinstated to his previous position as EVP/Treasurer.[8] Aggrieved, on June 19, 2007, Locsin filed a complaint for illegal dismissal with prayer for reinstatement, payment of backwages, damages and attorneys fees before the Labor Arbiter against NCLPI and Banson, who was then President of NCLPI.[9] The Compulsory Arbitration Proceedings before the Labor Arbiter. On July 11, 2007, instead of filing their position paper, NCLPI and Banson filed a Motion to Dismiss,[10] on the ground that the Labor Arbiter did not have jurisdiction over the case since the issue of Locsins removal as EVP/Treasurer involves an intra-corporate dispute. On August 16, 2007, Locsin submitted his opposition to the motion to dismiss, maintaining his position that he is an employee of NCLPI.

On March 10, 2008, Labor Arbiter Concepcion issued an Order denying the Motion to Dismiss, holding that her office acquired jurisdiction to arbitrate and/or decide the instant complaint finding extant in the case an employer-employee relationship.[11] NCLPI, on June 3, 2008, elevated the case to the CA through a Petition for Certiorari under Rule 65 of the Rules of Court.[12] NCLPI raised the issue on whether the Labor Arbiter committed grave abuse of discretion by denying the Motion to Dismiss and holding that her office had jurisdiction over the dispute. The CA Decision - Locsin was a corporate officer; the issue of his removal as EVP/Treasurer is an intra-corporate dispute under the RTCs jurisdiction.

That private respondent is a corporate officer cannot be disputed. The position of Executive VicePresident/Treasurer is specifically included in the roster of officers provided for by the (Amended) By-Laws of petitioner corporation, his duties and responsibilities, as well as compensation as such officer are likewise set forth therein.[14] Article 280 of the Labor Code, the receipt of salaries by Locsin, SSS deductions on that salary, and the element of control in the performance of work duties indicia used by the Labor Arbiter to conclude that Locsin was a regular employee were held inapplicable by the CA.[15] The CA noted the Labor Arbiters failure to address the fact that the position of EVP/Treasurer is specifically enumerated as an office in the corporations by-laws.[16] Further, the CA pointed out Locsins failure to state any circumstance by which NCLPI engaged his services as a corporate officer that would make him an employee. The CA found, in this regard, that Locsins assumption and retention as EVP/Treasurer was based on his election and subsequent re-elections from 1992 until 2005. Further, he performed only those functions that were specifically set forth in the By-Laws or required of him by the Board of Directors.[17] With respect to the suit Locsin filed with the Labor Arbiter, the CA held that: Private respondent, in belatedly filing this suit before the Labor Arbiter, questioned the legality of his dismissal but in essence, he raises the issue of whether or not the Board of Directors had the authority to remove him from the corporate office to which he was elected pursuant to the By-Laws of the petitioner corporation. Indeed, had private respondent been an ordinary employee, an election conducted by

On August 28, 2008,[13] the CA reversed and set aside the Labor Arbiters Order denying the Motion to Dismiss and ruled that Locsin was a corporate officer. Citing PD 902-A, the CA defined corporate officers as those officers of a corporation who are given that character either by the Corporation Code or by the corporations by-laws. In this regard, the CA held: Scrutinizing the records, We hold that petitioners successfully discharged their onus of establishing that private respondent was a corporate officer who held the position of Executive Vice-President/Treasurer as provided in the by-laws of petitioner corporation and that he held such position by virtue of election by the Board of Directors.

the Board of Directors would not have been necessary to remove him as Executive VicePresident/Treasurer. However, in an obvious attempt to preclude the application of settled jurisprudence that corporate officers whose position is provided in the bylaws, their election, removal or dismissal is subject to Section 5 of P.D. No. 902-A (now R.A. No. 8799), private respondent would even claim in his Position Paper, that since his responsibilities were akin to that of the companys Executive Vice-President/Treasurer, he was hired under the pretext that he was being elected into said post.[18] [Emphasis supplied.] As a consequence, the CA concluded that Locsin does not have any recourse with the Labor Arbiter or the NLRC since the removal of a corporate officer, whether elected or appointed, is an intra-corporate controversy over which the NLRC has no jurisdiction.[19] Instead, according to the CA, Locsins complaint for illegal dismissal should have been filed in the Regional Trial Court (RTC), pursuant to Rule 6 of the Interim Rules of Procedure Governing Intra-Corporate Controversies.[20] Finally, the CA addressed Locsins invocation of Article 4 of the Labor Code. Dismissing the application of the provision, the CA cited Dean Cesar Villanueva of the Ateneo School of Law, as follows: x x x the non-coverage of corporate officers from the security of tenure clause under the Constitution is now well-established principle by numerous decisions upholding such doctrine under the aegis of the 1987 Constitution in the face of contemporary decisions of the same Supreme Court likewise confirming that security of tenure covers all employees or workers including managerial employees.[21]

THE PETITIONERS ARGUMENTS Failing to obtain a reconsideration of the CAs decision, Locsin filed the present petition on January 28, 2009, raising the following procedural and substantive issues: (1) Whether the CA has original jurisdiction to review decision of the Labor Arbiter under Rule 65? (2) Whether he is a regular employee of NCLPI under the definition of Article 280 of the Labor Code? and (3) Whether Locsins position as Executive VicePresident/Treasurer makes him a corporate officer thereby excluding him from the coverage of the Labor Code? Procedurally, Locsin essentially submits that NCLPI wrongfully filed a petition for certiorari before the CA, as the latters remedy is to proceed with the arbitration, and to appeal to the NLRC after the Labor Arbiter shall have ruled on the merits of the case. Locsin cites, in this regard, Rule V, Section 6 of the Revised Rules of the National Labor Relations Commission (NLRC Rules), which provides that a denial of a motion to dismiss by the Labor Arbiter is not subject to an appeal. Locsin also argues that even if the Labor Arbiter committed grave abuse of discretion in denying the NCLPI motion, a special civil action for certiorari, filed with the CA was not the appropriate remedy, since this was a breach of the doctrine of exhaustion of administrative remedies. Substantively, Locsin submits that he is a regular employee of NCLPI since - as he argued before the Labor Arbiter and the CA - his relationship with the company meets the four-fold test. First, Locsin contends that NCLPI had the power to engage his services as EVP/Treasurer. Second, he received regular wages from

NCLPI, from which his SSS and Philhealth contributions, as well as his withholding taxes were deducted. Third, NCLPI had the power to terminate his employment.[22] Lastly, Nissan had control over the manner of the performance of his functions as EVP/Treasurer, as shown by the 13 years of faithful execution of his job, which he carried out in accordance with the standards and expectations set by NCLPI. [23] Further, Locsin maintains that even after his election as Chairman, he essentially performed the functions of EVP/Treasurer handling the financial and administrative operations of the Corporation thus making him a regular employee.[24] Under these claimed facts, Locsin concludes that the Labor Arbiter and the NLRC not the RTC (as NCLPI posits) has jurisdiction to decide the controversy. Parenthetically, Locsin clarifies that he does not dispute the validity of his election as Chairman of the Board on January 1, 2005. Instead, he theorizes that he never lost his position as EVP/Treasurer having continuously performed the functions appurtenant thereto.[25] Thus, he questions his unceremonious removal as EVP/Treasurer during the August 5, 2005 special Board meeting. THE RESPONDENTS ARGUMENTS It its April 17, 2009 Comment,[26] Nissan prays for the denial of the petition for lack of merit. Nissan submits that the CA correctly ruled that the Labor Arbiter does not have jurisdiction over Locsins complaint for illegal dismissal. In support, Nissan maintains that Locsin is a corporate officer and not an employee. In addressing the procedural defect Locsin raised, Nissan brushes the issue aside, stating that (1) this issue was belatedly raised in the Motion for Reconsideration, and that (2) in any case, Rule VI, Section 2(1) of the NLRC does not apply since only appealable decisions, resolutions and orders are covered under the rule.

THE COURTS RULING We resolve to deny the petition for lack of merit. At the outset, we stress that there are two (2) important considerations in the final determination of this case. On the one hand, Locsin raises a procedural issue that, if proven correct, will require the Court to dismiss the instant petition for using an improper remedy. On the other hand, there is the substantive issue that will be disregarded if a strict implementation of the rules of procedure is upheld. Prefatorily, we agree with Locsins submission that the NCLPI incorrectly elevated the Labor Arbiters denial of the Motion to Dismiss to the CA. Locsin is correct in positing that the denial of a motion to dismiss is unappealable. As a general rule, an aggrieved partys proper recourse to the denial is to file his position paper, interpose the grounds relied upon in the motion to dismiss before the labor arbiter, and actively participate in the proceedings. Thereafter, the labor arbiters decision can be appealed to the NLRC, not to the CA. As a rule, we strictly adhere to the rules of procedure and do everything we can, to the point of penalizing violators, to encourage respect for these rules. We take exception to this general rule, however, when a strict implementation of these rules would cause substantial injustice to the parties. We see it appropriate to apply the exception to this case for the reasons discussed below; hence, we are compelled to go beyond procedure and rule on the merits of the case. In the context of this case, we see sufficient justification to rule on the employer-employee relationship issue raised by NCLPI, even though the Labor Arbiters interlocutory order was incorrectly brought to the CA under Rule 65.

The NLRC Rules are clear: the denial by the labor arbiter of the motion to dismiss is not appealable because the denial is merely an interlocutory order. In Metro Drug v. Metro Drug Employees,[27] we definitively stated that the denial of a motion to dismiss by a labor arbiter is not immediately appealable.[28] We similarly ruled in Texon Manufacturing v. Millena, [29] in Sime Darby Employees Association v. National Labor Relations Commission[30] and in Westmont Pharmaceuticals v. Samaniego. [31] In Texon, we specifically said: The Order of the Labor Arbiter denying petitioners motion to dismiss is interlocutory. It is well-settled that a denial of a motion to dismiss a complaint is an interlocutory order and hence,cannot be appealed, until a final judgment on the merits of the case is rendered. [Emphasis supplied.] [32] and indicated the appropriate recourse in Metro Drug, as follows:[33] x x x The NLRC rule proscribing appeal from a denial of a motion to dismiss is similar to the general rule observed in civil procedure that an order denying a motion to dismiss is interlocutory and, hence, not appealable until final judgment or order is rendered [1 Feria and Noche, Civil Procedure Annotated 453 (2001 ed.)]. The remedy of the aggrieved party in case of denial of the motion to dismiss is to file an answer and interpose, as a defense or defenses, the ground or

grounds relied upon in the motion to dismiss, proceed to trial and, in case of adverse judgment, to elevate the entire case by appeal in due course [Mendoza v. Court of Appeals, G.R. No. 81909, September 5, 1991, 201 SCRA 343]. In order to avail of the extraordinary writ of certiorari, it is incumbent upon petitioner to establish that the denial of the motion to dismiss was tainted with grave abuse of discretion. [Macawiwili Gold Mining and Development Co., Inc. v. Court of Appeals, G.R. No. 115104, October 12, 1998, 297 SCRA 602] In so citing Feria and Noche, the Court was referring to Sec. 1 (b), Rule 41 of the Rules of Court, which specifically enumerates interlocutory orders as one of the court actions that cannot be appealed. In the same rule, as amended by A.M. No. 07-7-12-SC, the aggrieved party is allowed to file an appropriate special civil action under Rule 65. The latter rule, however, also contains limitations for its application, clearly outlined in its Section 1 which provides: Section 1. Petition for certiorari. When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.

In the labor law setting, a plain, speedy and adequate remedy is still open to the aggrieved party when a labor arbiter denies a motion to dismiss. This is Article 223 of Presidential Decree No. 442, as amended (Labor Code), [34] which states: ART. 223. APPEAL Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such appeal may be entertained only on any of the following grounds: (a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter; x x x [Emphasis supplied.] Pursuant to this Article, we held in Metro Drug (citing Air Services Cooperative, et al. v. Court of Appeals[35]) that the NLRC is clothed with sufficient authority to correct any claimed erroneous assumption of jurisdiction by labor arbiters: In Air Services Cooperative, et al. v. The Court of Appeals, et al., a case where the jurisdiction of the labor arbiter was put in issue and was assailed through a petition for certiorari, prohibition and annulment of judgment before a regional trial court, this Court had the opportunity to expound on the nature of appeal as embodied in Article 223 of the Labor Code, thus: x x x Also, while the title of the Article 223 seems to provide only for the remedy of appeal as that term is understood in procedural law and as distinguished from the office of certiorari, nonetheless, a closer reading thereof reveals that it is not as limited as understood by the petitioners x x x.

Abuse of discretion is admittedly within the ambit of certiorari and its grant of review thereof to the NLRC indicates the lawmakers intention to broaden the meaning of appeal as that term is used in the Code. For this reason, petitioners cannot argue now that the NLRC is devoid of any corrective power to rectify a supposed erroneous assumption of jurisdiction by the Labor Arbiter x x x. [Air Services Cooperative, et al. v. The Court of Appeals, et al. G.R. No. 118693, 23 July 1998, 293 SCRA 101] Since the legislature had clothed the NLRC with the appellate authority to correct a claimed erroneous assumption of jurisdiction on the part of the labor arbiter a case of grave abuse of discretion the remedy availed of by petitioner in this case is patently erroneous as recourse in this case is lodged, under the law, with the NLRC.

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

The similarities end there, however. Unlike in the present case, the CA denied the petition for certiorari and the subsequent Motion for Reconsideration in Metro Drug; the CA correctly found that the proper appellate mechanism was an appeal to the NLRC and not a petition for certiorari under Rule 65. In the present case, the CA took a different position despite our clear ruling in Metro Drug, and allowed, not only the use of Rule 65, but also ruled on the merits. From this perspective, the CA clearly erred in the application of the procedural rules by disregarding the relevant provisions of the NLRC Rules, as well as the requirements for a petition for certiorari under the Rules of Court. To reiterate, the proper action of an aggrieved party faced with the labor arbiters denial of his motion to dismiss is to submit his position paper and raise therein the supposed lack of jurisdiction. The aggrieved party cannot immediately appeal the denial since it is an interlocutory order; the appropriate remedial recourse is the procedure outlined in Article 223 of the Labor Code, not a petition for certiorari under Rule 65. A strict implementation of the NLRC Rules and the Rules of Court would cause injustice to the parties because the Labor Arbiter clearly has no jurisdiction over the present intra-corporate dispute. Our ruling in Mejillano v. Lucillo[36] stands for the proposition that we should strictly apply the rules of procedure. We said: Time and again, we have ruled that procedural rules do not exist for the convenience of the litigants. Rules of Procedure exist for a purpose, and to disregard such rules in the guise of liberal construction would be to

defeat such purpose. Procedural rules were established primarily to provide order to and enhance the efficiency of our judicial system. [Emphasis supplied.] An exception to this rule is our ruling in Lazaro v. Court of Appeals[37] where we held that the strict enforcement of the rules of procedure may be relaxed inexceptionally meritorious cases: x x x Procedural rules are not to be belittled or dismissed simply because their non-observance may have resulted in prejudice to a party's substantive rights. Like all rules, they are required to be followed except only for the most persuasive of reasons when they may be relaxed to relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed. The Court reiterates that rules of procedure, especially those prescribing the time within which certain acts must be done, "have often been held as absolutely indispensable to the prevention of needless delays and to the orderly and speedy discharge of business. x x x The reason for rules of this nature is because the dispatch of business by courts would be impossible, and intolerable delays would result, without rules governing practice x x x. Such rules are a necessary incident to the proper, efficient and orderly discharge of judicial functions." Indeed, in no uncertain terms, the Court held that the said rules may be relaxed only in exceptionally meritorious cases. [Emphasis supplied.] Whether a case involves an exceptionally meritorious circumstance can be tested under the guidelines we established in Sanchez v. Court of Appeals,[38] as follows: Aside from matters of life, liberty, honor property which would warrant the suspension of Rules of the most mandatory character and examination and review by the appellate court of or the an the

lower courts findings of fact, the other elements that should be considered are the following: (a) the existence of special or compelling circumstances, (b) the merits of the case, (c) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules, (d) a lack of any showing that the review sought is merely frivolous and dilatory, and (e) the other party will not be unjustly prejudiced thereby. [Emphasis supplied.] Under these standards, we hold that exceptional circumstances exist in the present case to merit the relaxation of the applicable rules of procedure. Due to existing exceptional circumstances, the ruling on the merits that Locsin is an officer and not an employee of Nissan must take precedence over procedural considerations. We arrived at the conclusion that we should go beyond the procedural rules and immediately take a look at the intrinsic merits of the case based on several considerations. First, the parties have sufficiently ventilated their positions on the disputed employer-employee relationship and have, in fact, submitted the matter for the CAs consideration. Second, the CA correctly ruled that no employer-employee relationship exists between Locsin and Nissan. Locsin was undeniably Chairman and President, and was elected to these positions by the Nissan board pursuant to its By-laws.[39] As

such, he was a corporate officer, not an employee. The CA reached this conclusion by relying on the submitted facts and on Presidential Decree 902-A, which defines corporate officers as those officers of a corporation who are given that character either by the Corporation Code or by the corporations by-laws. Likewise, Section 25 of Batas Pambansa Blg. 69, or the Corporation Code of the Philippines (Corporation Code) provides that corporate officers are the president, secretary, treasurer and such other officers as may be provided for in the by-laws. Third. Even as Executive Vice-President/Treasurer, Locsin already acted as a corporate officer because the position of Executive Vice-President/Treasurer is provided for in Nissans By-Laws. Article IV, Section 4 of these By-Laws specifically provides for this position, as follows: ARTICLE IV Officers Section 1. Election and Appointment The Board of Directors at their first meeting, annually thereafter, shall elect as officers of the Corporation a Chairman of the Board, a President, an Executive VicePresident/Treasurer, a Vice-President/General Manager and a Corporate Secretary. The other Senior Operating Officers of the Corporation shall be appointed by the Board upon the recommendation of the President. x x x x Section 4. Executive Vice-President/Treasurer The Executive Vice-President/Treasurer shall have such powers and perform such duties as are prescribed by these By-Laws, and as may be required of him by the Board of Directors. As the concurrent Treasurer of the Corporation, he shall have the charge of the funds, securities, receipts, and disbursements of the

Corporation. He shall deposit, or cause to be deposited, the credit of the Corporation in such banks or trust companies, or with such banks of other depositories, as the Board of Directors may from time to time designate. He shall tender to the President or to the Board of Directors whenever required an account of the financial condition of the corporation and of all his transactions as Treasurer. As soon as practicable after the close of each fiscal year, he shall make and submit to the Board of Directors a like report of such fiscal year. He shall keep correct books of account of all the business and transactions of the Corporation. In Okol v. Slimmers World International,[40] citing Tabang v. National Labor Relations Commission,[41] we held that x x x an office is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an employee usually occupies no office and generally is employed not by action of the directors or stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee. [Emphasis supplied.]

remains that private respondent held the position of Executive Vice-President/Treasurer of petitioner corporation, a position provided for in the latters bylaws, by virtue of election by the Board of Directors, and has functioned as such Executive VicePresident/Treasurer pursuant to the provisions of the said By-Laws. Private respondent knew very well that he was simply not re-elected to the said position during the August 5, 2005 board meeting, but he had objected to the election of a new set of officers held at the time upon the advice of his lawyer that he cannot be terminated or replaced as Executive Vice-President/Treasurer as he had attained tenurial security.[42] We fully agree with this factual determination which we find to be sufficiently supported by evidence. We likewise rule, based on law and established jurisprudence, that Locsin, at the time of his severance from NCLPI, was the latters corporate officer. a. The Question of Jurisdiction Given Locsins status as a corporate officer, the RTC, not the Labor Arbiter or the NLRC, has jurisdiction to hear the legality of the termination of his relationship with Nissan. As we also held in Okol, a corporate officers dismissal from service is an intra-corporate dispute: In a number of cases [Estrada v. National Labor Relations Commission, G.R. No. 106722, 4 October 1996, 262 SCRA 709; Lozon v. National Labor Relations Commission, 310 Phil. 1 (1995); Espino v. National Labor Relations Commission, 310 Phil. 61 (1995); Fortune Cement Corporation v. National Labor Relations Commission, G.R. No. 79762, 24 January 1991, 193 SCRA 258], we have held that a corporate officers dismissal is always a corporate act, or an intra-corporate controversy which arises between a stockholder and a corporation.[43] [Emphasis supplied.]

In this case, Locsin was elected by the NCLPI Board, in accordance with the Amended By-Laws of the corporation. The following factual determination by the CA is elucidating: More important, private respondent failed to state any such circumstance by which the petitioner corporation engaged his services as corporate officer that would make him an employee. In the first place, the VicePresident/Treasurer was elected on an annual basis as provided in the By-Laws, and no duties and responsibilities were stated by private respondent which he discharged while occupying said position other than those specifically set forth in the By-Laws or required of him by the Board of Directors. The unrebutted fact

so that the RTC should exercise jurisdiction based on the following legal reasoning: Prior to its amendment, Section 5(c) of Presidential Decree No. 902-A (PD 902-A) provided that intra-corporate disputes fall within the jurisdiction of the Securities and Exchange Commission (SEC): Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: x x x x c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations. Subsection 5.2, Section 5 of Republic Act No. 8799, which took effect on 8 August 2000, transferred to regional trial courts the SECs jurisdiction over all cases listed in Section 5 of PD 902-A: 5.2. The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court. [Emphasis supplied.]

b.

Precedence of Substantive Merits; Primacy of Element of Jurisdiction

Based on the above jurisdictional considerations, we would be forced to remand the case to the Labor Arbiter for further proceedings if we were to dismiss the petition outright due to the wrongful use of Rule 65.[44] We cannot close our eyes, however, to the factual and legal reality, established by evidence already on record, that Locsin is a corporate officer whose termination of relationship is outside a labor arbiters jurisdiction to rule upon. Under these circumstances, we have to give precedence to the merits of the case, and primacy to the element of jurisdiction. Jurisdiction is the power to hear and rule on a case and is the threshold element that must exist before any quasi-judicial officer can act. In the context of the present case, the Labor Arbiter does not have jurisdiction over the termination dispute Locsin brought, and should not be allowed to continue to act on the case after the absence of jurisdiction has become obvious, based on the records and the law. In more practical terms, a contrary ruling will only cause substantial delay and inconvenience as well as unnecessary expenses, to the point of injustice, to the parties. This conclusion, of course, does not go into the merits of termination of relationship and is without prejudice to the filing of an intra-corporate dispute on this point before the appropriate RTC. WHEREFORE, we DISMISS the petitioners petition for review on certiorari, and AFFIRM the Decision of the Court of Appeals, in CA-G.R. SP No. 103720, promulgated on August 28, 2008, as well as its Resolution of December 9, 2008, which reversed and set aside the March 10, 2008 Order of Labor Arbiter Concepcion in NLRC NCR Case No. 00-06-06165-07. This Decision is without prejudice to

petitioner Locsins available recourse for relief through the appropriate remedy in the proper forum. No pronouncement as to costs. SO ORDERED. G.R. No. 173169 IRENE MARTEL FRANCISCO, petitioner vs. NUMERIANO MALLEN, JR., respondent DECISION The Case This petition for review[1] assails the 16 September 2005 Decision[2] of the Court of Appeals in CA-G.R. SP No. 72115. The Court of Appeals set aside the 21 December 2001 Decision[3] of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 022641-00 and reinstated the 25 August 1999 Decision [4] of the Labor Arbiter in NLRC-NCR Case No. 00-07-05608-98. The Facts On 5 April 1994, respondent Numeriano Mallen, Jr. was hired as a waiter for VIPS Coffee Shop and Restaurant, a fine dining restaurant which used to operate at the Harrison Plaza Commercial Complex in Manila. On 30 January 1998 to 1 February 1998, respondent took an approved sick leave. On 15 February 1998, respondent took a vacation leave. Thereafter, he availed of his paternity leave.

On 18 April 1998, respondent suffered from tonsillitis, forcing him to take a three-day sick leave from 18 April 1998 to 20 April 1998. However, instead of his applied three-day sick leave, respondent was given three months leave. The memorandum dated 28 April 1998 reads: TO FROM DATE RE : : : Mr. Numeriano Mallen, Jr. : VIPS Dining Head 28 April 1998 AS STATED

======================================== ============= After a thorough review of your performance and the series of Vacation Leaves (8 days), Paternity Leave (7 days) and Sick Leave (7 days) due to several illness within the first quarter of the year, we have concluded that you are not physically fit and needs to recharge to enable you to regain your physical fitness. As such, we are awarding to you the rest of your Vacation/Sick Leave plus Two and a half (2 ) months (without pay) to rest and regain your physical health within the prescribed vacation. During your vacation, you are not allowed to loiter within the premises of VIPS RESTAURANT; but instead to rest and do some health exercise and medical check-up for your physical fitness recovery program. Moreover, when you report back to work, you are to present to the management a certificate indicating that you are fit to work regularly. Your vacation shall take effect on April 30, 1998 up to August 1, 1998.

For your information and guidance. Sgd. Mr. Patty C. Bocar Noted By: Sgd. Ms. Ma. Theresa Linaja[5]

which nevertheless is not a just cause. We likewise agree that the gesture of respondents to reinstate or re-employ complainant unconditionally during the proceedings did not cure the illegality of complainants dismissal.

The dispositive portion of the Labor Arbiters decision reads: WHEREFORE, premises above considered a decision is hereby issued declaring the dismissal of the complainant illegal. Consequently, respondents VIPs Coffee Shop & Restaurant and/or Irene Francisco are ordered to reinstate complainant to his former or equivalent position without loss of seniority rights, and to pay complainant jointly and severally his backwages hereby fixed at P88,000.00 as of August 31, 1999, plus his paternity pay, and attorneys fees equivalent to the monetary award, all in the aggregate of ninety nine thousand three hundred fifty pesos and 90/100 centavos (P99,350.90). Respondents are likewise ordered to pay complainant P50,000.00 for moral damages and P20,000.00 for exemplary damages. SO ORDERED.[6]

On 5 May 1998, respondent filed before the Department of Labor and Employment-National Capital Region (DOLE-NCR) a complaint for underpayment of wages and non-payment of holiday pay. Sometime in June 1998, respondent reported back to work with a medical certificate stating he was fit to work but he was refused work. On 22 June 1998, the DOLE-NCR endorsed respondents complaint to the NLRC when it determined that the issue of constructive dismissal was involved. On 23 July 1998, respondent filed a complaint for illegal dismissal before the NLRC-NCR. On 3 August 1998, respondent again attempted to return to work but was refused again. The Ruling of the Labor Arbiter On 25 August 1999, Labor Arbiter Madjayran H. Ajan rendered a decision in favor of respondent. The Labor Arbiter found that complainants dismissal was the price of his having filed a case with DOLE-NCR against the respondents, plus his perennial absences,

The Ruling of the NLRC

The NLRC found respondents filing of a complaint for illegal dismissal premature. The NLRC stated [t]his conclusion is supported by the fact that in respondents memorandum to complainant directing him to avail of his vacation/sick leave, the same is to last from April 30,

1998 to August 1, 1998. The complaint therefore filed on May 5, 1998 has no legal basis to support itself. When he filed his complaint on May 5, 1998, his cause of action based on illegal dismissal has not yet accrued. Nevertheless, the NLRC noted, a supervening event occurred during the pendency of the instant case which is the closure of VIPS Coffee Shop and Restaurant effective 26 August 1999, as evidenced by the Notice and report to the Department of Labor and Employment (Annexes 1 and 2 of Appeal). x x x This being the case, and in the spirit of compassion, respondents are directed to pay complainant his separation pay equivalent to one half month pay for every year of service x x x.

The dispositive portion of the Court of Appeals decision reads: WHEREFORE, the petition is hereby GRANTED. The decision of the NLRC, First Division, dated December 21, 2001, is hereby SET ASIDE and the decision of Labor Arbiter Madjayran H. Ajan dated August 25, 1999 is hereby REINSTATED. SO ORDERED.[8] The Issue

The main issue in this case is whether petitioner is personally liable for the monetary awards granted in favor of respondent arising from his alleged illegal termination. The Ruling of this Court

The dispositive portion of the NLRCs decision reads: WHEREFORE, the Decision of the Labor Arbiter dated August 25, 1999 is hereby MODIFIED and respondents are instead directed to pay the complainant separation pay in the amount of P13,750.00 plus his paternity leave pay in the amount of P1,519.00 (P217.00 x 7 days). The award for moral and exemplary damages are deleted and set aside for lack of merit. SO ORDERED.[7] The Ruling of the Court of Appeals The Court of Appeals found respondent constructively dismissed for having been granted an increased three months leave instead of the three days leave he applied for. To hold a director or officer personally liable for corporate obligations, two requisites must concur: (1) complainant must allege in the complaint that the director or officer assented to patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad faith;[11] and (2)complainant must clearly

The petition has merit. In Santos v. National Labor Relations Commission,[9] the Court held that A corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it. The rule is that obligations incurred by the corporation, acting through its directors, officers and employees, are its sole liabilities.[10]

and convincingly prove such unlawful acts, negligence or bad faith.[12] In Carag v. National Labor Relations Commission,[13] the Court did not hold a director personally liable for corporate obligations because the two requisites are lacking, to wit: Complainants did not allege in their complaint that Carag willfully and knowingly voted for or assented to any patently unlawful act of MAC. Complainants did not present any evidence showing that Carag willfully and knowingly voted for or assented to any patently unlawful act of MAC. Neither did Arbiter Ortiguerra make any finding to this effect in her Decision. Complainants did not also allege that Carag is guilty of gross negligence or bad faith in directing the affairs of MAC. Complainants did not present any evidence showing that Carag is guilty of gross negligence or bad faith in directing the affairs of MAC. Neither did Arbiter Ortiguerra make any finding to this effect in her Decision. xxxx To hold a director personally liable for debts of the corporation, and thus pierce the veil of corporate fiction, the bad faith or wrongdoing of the director must be established clearly and convincingly. Bad faith is never presumed. Bad faith does not connote bad judgment or negligence. Bad faith imports a dishonest purpose. Bad faith means breach of a known duty through some ill motive or interest. Bad faith partakes of the nature of fraud. In Businessday Information Systems and Services, Inc. v. NLRC, we held:

There is merit in the contention of petitioner Raul Locsin that the complaint against him should be dismissed. A corporate officer is not personally liable for the money claims of discharged corporate employees unless he acted with evident malice and bad faith in terminating their employment. There is no evidence in this case that Locsin acted in bad faith or with malice in carrying out the retrenchment and eventual closure of the company (Garcia vs. NLRC, 153 SCRA 640), hence, he may not be held personally and solidarily liable with the company for the satisfaction of the judgment in favor of the retrenched employees.[14] (Emphasis supplied)

In McLeod v. NLRC,[15] the Court did not hold a director, an officer, and other corporations personally liable for corporate obligations of the employer because the second requisite was lacking. The Court held: A corporation is an artificial being invested by law with a personality separate and distinct from that of its stockholders and from that of other corporations to which it may be connected. While a corporation may exist for any lawful purpose, the law will regard it as an association of persons or, in case of two corporations, merge them into one, when its corporate legal entity is used as a cloak for fraud or illegality. This is the doctrine of piercing the veil of corporate fiction. The doctrine applies only when such corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend

crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation is the mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. To disregard the separate juridical personality of a corporation, the wrongdoing must be established clearly and convincingly. It cannot be presumed. [16] (Emphasis supplied)

of David willingly and knowingly voting for or assenting to patently unlawful acts of the corporation, or that David was guilty of gross negligence or bad faith.[20] In this case, the Labor Arbiter, whose decision was reinstated by the Court of Appeals, stated that petitioner acted with malice and bad faith in constructively dismissing respondent. Thus, the Labor Arbiter held petitioner personally liable for the monetary awards to respondent. This finding lacks basis. Based on the records, respondent failed to allege either in his complaint or position paper that petitioner, as Vice-President of VIPS Coffee Shop and Restaurant, acted in bad faith. [21] Neither did respondent clearly and convincingly prove that petitioner, as Vice-President of VIPS Coffee Shop and Restaurant, acted in bad faith. In fact, there was no evidence whatsoever to show petitioners participation in respondents alleged illegal dismissal. Clearly, the twin requisites of allegation and proof of bad faith, necessary to hold petitioner personally liable for the monetary awards to respondent, are lacking. In view of the foregoing, the Court deems it unnecessary to determine whether respondent was constructively dismissed. Besides, it appears from the records that VIPS Coffee Shop and Restaurant did not challenge the adverse Court of Appeals decision in CA-G.R. SP No. 72115, rendering such decision final insofar as VIPS Coffee Shop and Restaurant is concerned.[22] WHEREFORE, we GRANT the petition. We MODIFY the Court of Appeals Decision, dated 16 September 2005, in CA-G.R. SP No. 72115 by holding petitioner Irene Martel Francisco not liable for the monetary awards specified in the reinstated Labor Arbiters

In Lowe, Inc. v. Court of Appeals,[17] the Court did not hold the officers personally liable for corporate obligations because the second requisite was lacking, thus: It is settled that in the absence of malice, bad faith, or specific provision of law, a director or an officer of a corporation cannot be made personally liable for corporate liabilities. xxxx Gustilo and Castro, as corporate officers of Lowe, have personalities which are distinct and separate from that of Lowes. Hence, in the absence of any evidence showing that they acted with malice or in bad faith in declaring Mutucs position redundant, Gustilo and Castro are not personally liable for the monetary awards to Mutuc.[18] (Emphasis supplied)

In David v. National Federation of Labor Unions,[19] the Court did not hold an officer liable for corporate obligations because the second requisite was lacking. The Court held that There was no showing

Decision, dated 25 August 1999, in NLRC-NCR Case No. 00-0705608-98. SO ORDERED.

In this appeal via petition for review on certiorari, the petitioners challenge the decision dated September 13, 2002[1] and the resolution dated April 2, 2003,[2]both promulgated in C.A.-G.R. SP No. 65714 entitled Matling Industrial and Commercial Corporation, et al. v. Ricardo R. Coros and National Labor Relations Commission, whereby by the Court of Appeals (CA) sustained the ruling of the National Labor Relations Commission (NLRC) to the effect that the LA had jurisdiction because the respondent was not a corporate officer of petitioner Matling Industrial and Commercial Corporation (Matling). Antecedents

G.R. No. 157802 MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K. SPENCER, CATHERINE SPENCER, AND ALEX MANCILLA, Petitioners, vs. RICARDO R. COROS, Respondent. DECISION This case reprises the jurisdictional conundrum of whether a complaint for illegal dismissal is cognizable by the Labor Arbiter (LA) or by the Regional Trial Court (RTC). The determination of whether the dismissed officer was a regular employee or a corporate officer unravels the conundrum. In the case of the regular employee, the LA has jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate.

After his dismissal by Matling as its Vice President for Finance and Administration, the respondent filed on August 10, 2000 a complaint for illegal suspension and illegal dismissal against Matling and some of its corporate officers (petitioners) in the NLRC, Sub-Regional Arbitration Branch XII, Iligan City.[3] The petitioners moved to dismiss the complaint,[4] raising the ground, among others, that the complaint pertained to the jurisdiction of the Securities and Exchange Commission (SEC) due to the controversy being intra-corporate inasmuch as the respondent was a member of Matlings Board of Directors aside from being its VicePresident for Finance and Administration prior to his termination. The respondent opposed the petitioners motion to dismiss, insisting that his status as a member of Matlings Board of Directors was doubtful, considering that he had not been formally elected as such; that he did not own a single share of stock in Matling, considering that he had been made to sign in blank an undated indorsement of the
[5]

certificate of stock he had been given in 1992; that Matling had taken back and retained the certificate of stock in its custody; and that even assuming that he had been a Director of Matling, he had been removed as the Vice President for Finance and Administration, not as a Director, a fact that the notice of his termination dated April 10, 2000 showed. On October 16, 2000, the LA granted the petitioners motion to dismiss,[6] ruling that the respondent was a corporate officer because he was occupying the position of Vice President for Finance and Administration and at the same time was a Member of the Board of Directors of Matling; and that, consequently, his removal was a corporate act of Matling and the controversy resulting from such removal was under the jurisdiction of the SEC, pursuant to Section 5, paragraph (c) of Presidential Decree No. 902. Ruling of the NLRC The respondent appealed to the NLRC,[7] urging that: I THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION GRANTING APPELLEES MOTION TO DISMISS WITHOUT GIVING THE APPELLANT AN OPPORTUNITY TO FILE HIS OPPOSITION THERETO THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE PROCESS. II THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING THE CASE FOR LACK OF JURISDICTION.

On March 13, 2001, the NLRC set aside the dismissal, concluding that the respondents complaint for illegal dismissal was properly cognizable by the LA, not by the SEC, because he was not a corporate officer by virtue of his position in Matling, albeit high ranking and managerial, not being among the positions listed in Matlings Constitution and By-Laws.[8] The NLRC disposed thuswise: WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered declaring and holding that the case at bench does not involve any intracorporate matter. Hence, jurisdiction to hear and act on said case is vested with the Labor Arbiter, not the SEC, considering that the position of Vice-President for Finance and Administration being held by complainant-appellant is not listed as among respondent's corporate officers. Accordingly, let the records of this case be REMANDED to the Arbitration Branch of origin in order that the Labor Arbiter below could act on the case at bench, hear both parties, receive their respective evidence and position papers fully observing the requirements of due process, and resolve the same with reasonable dispatch. SO ORDERED.

The petitioners sought reconsideration,[9] reiterating that the respondent, being a member of the Board of Directors, was a corporate officer whose removal was not within the LAs jurisdiction. The petitioners later submitted to the NLRC in support of the motion for reconsideration the certified machine copies of Matlings Amended Articles of Incorporation and By Laws to prove that the President of Matling was thereby granted full power to create

new offices and appoint the officers thereto, and the minutes of special meeting held on June 7, 1999 by Matlings Board of Directors to prove that the respondent was, indeed, a Member of the Board of Directors.[10] Nonetheless, on April 30, 2001, the NLRC denied the petitioners motion for reconsideration.[11] Ruling of the CA The petitioners elevated the issue to the CA by petition for certiorari, docketed as C.A.-G.R. No. SP 65714, contending that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in reversing the correct decision of the LA. In its assailed decision promulgated on September 13, 2002, [12] the CA dismissed the petition for certiorari, explaining: For a position to be considered as a corporate office, or, for that matter, for one to be considered as a corporate officer, the position must, if not listed in the by-laws, have been created by the corporation's board of directors, and the occupant thereof appointed or elected by the same board of directors or stockholders. This is the implication of the ruling in Tabang v. National Labor Relations Commission, which reads: The president, vice president, secretary and 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, other offices are sometimes created by the charter or by-laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation

to create additional offices as may be necessary. It has been held that an 'office' is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an 'employee' usually occupies no office and generally is employed not by action of the directors or stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee. This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor Relations Commission and De Rossi v. National Labor Relations Commission. The position of vice-president for administration and finance, which Coros used to hold in the corporation, was not created by the corporations board of directors but only by its president or executive vicepresident pursuant to the by-laws of the corporation. Moreover, Coros appointment to said position was not made through any act of the board of directors or stockholders of the corporation. Consequently, the position to which Coros was appointed and later on removed from, is not a corporate office despite its nomenclature, but an ordinary office in the corporation. Coros alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the labor arbiter. WHEREFORE, hereby DISMISSED. the petition for certiorari is

SO ORDERED. The CA denied the [13] reconsideration on April 2, 2003.

petitioners motion

for

Issue Thus, the petitioners are now before the Court for a review on certiorari, positing that the respondent was a stockholder/member of the Matlings Board of Directors as well as its Vice President for Finance and Administration; and that the CA consequently erred in holding that the LA had jurisdiction. The decisive issue is whether the respondent was a corporate officer of Matling or not. The resolution of the issue determines whether the LA or the RTC had jurisdiction over his complaint for illegal dismissal. Ruling The appeal fails. I The Law on Jurisdiction in Dismissal Cases As a rule, the illegal dismissal of an officer or other employee of a private employer is properly cognizable by the LA. This is pursuant to Article 217 (a) 2 of theLabor Code, as amended, which provides as follows: Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases; 2. Termination disputes; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; 4. Claims for actual, moral, exemplary and other forms of damages arising from the employeremployee relations; 5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and 6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement. (b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. (c) Cases arising from the interpretation or implementation of collective bargaining agreements and those arising from the interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements. (As amended by Section 9, Republic Act No. 6715, March 21, 1989).

Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls under the jurisdiction of the Securities and Exchange Commission (SEC), because the controversy arises out of intra-corporate or partnership relations between and among stockholders, members, or associates, or 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 the controversy concerns their individual franchise or right to exist as such entity; or because the controversy involves the election or appointment of a director, trustee, officer, or manager of such corporation, partnership, or association.[14] Such controversy, among others, is known as an intra-corporate dispute. Effective on August 8, 2000, upon the passage of Republic Act No. 8799,[15] otherwise known as The Securities Regulation Code, the SECs jurisdiction over all intra-corporate disputes was transferred to the RTC, pursuant to Section 5.2 of RA No. 8799, to wit: 5.2. The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.

Considering that the respondents complaint for illegal dismissal was commenced on August 10, 2000, it might come under the coverage of Section 5.2 of RA No. 8799, supra, should it turn out that the respondent was a corporate, not a regular, officer of Matling. II Was the Respondents Position of Vice President for Administration and Finance a Corporate Office? We must first resolve whether or not the respondents position as Vice President for Finance and Administration was a corporate office. If it was, his dismissal by the Board of Directors rendered the matter an intra-corporate dispute cognizable by the RTC pursuant to RA No. 8799. The petitioners contend that the position of Vice President for Finance and Administration was a corporate office, having been created by Matlings President pursuant to By-Law No. V, as amended,[16] to wit: BY LAW NO. V Officers The President shall be the executive head of the corporation; shall preside over the meetings of the stockholders and directors; shall countersign all certificates, contracts and other instruments of the corporation as authorized by the Board of Directors; shall have full power to hire and discharge any or all employees of the corporation; shall have full power to create new offices and to appoint the officers thereto as he may deem proper and necessary in the operations of the corporation and as the progress of the business and welfare of the corporation may

demand; shall make reports to the directors and stockholders and perform all such other duties and functions as are incident to his office or are properly required of him by the Board of Directors. In case of the absence or disability of the President, the Executive Vice President shall have the power to exercise his functions. The petitioners argue that the power to create corporate offices and to appoint the individuals to assume the offices was delegated by Matlings Board of Directors to its President through By-Law No. V, as amended; and that any office the President created, like the position of the respondent, was as valid and effective a creation as that made by the Board of Directors, making the office a corporate office. In justification, they cite Tabang v. National Labor Relations Commission,[17] which held that other offices are sometimes created by the charter or by-laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation to create additional officers as may be necessary. The respondent counters that Matlings By-Laws did not list his position as Vice President for Finance and Administration as one of the corporate offices; that Matlings By-Law No. III listed only four corporate officers, namely: President, Executive Vice President, Secretary, and Treasurer; [18] that the corporate offices contemplated in the phrase and such other officers as may be provided for in the bylaws found in Section 25 of the Corporation Code should be clearly and expressly stated in the By-Laws; that the fact that Matlings ByLaw No. III dealt with Directors & Officers while its By-Law No. V dealt with Officers proved that there was a differentiation between the officers mentioned in the two provisions, with those classified under By-Law No. V being ordinary or non-corporate officers; and that the officer, to be considered as a corporate officer, must be elected by the

Board of Directors or the stockholders, for the President could only appoint an employee to a position pursuant to By-Law No. V. We agree with respondent. Section 25 of the Corporation Code provides: Section 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. Conformably with Section 25, a position must be expressly mentioned in the By-Laws in order to be considered as a corporate office. Thus, the creation of an office pursuant to or under a By-Law

enabling provision is not enough to make a position a corporate office. Guerrea v. Lezama,[19] the first ruling on the matter, held that the only officers of a corporation were those given that character either by the Corporation Code or by the By-Laws; the rest of the corporate officers could be considered only as employees or subordinate officials. Thus, it was held in Easycall Communications Phils., Inc. v. King:[20] 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. In this case, respondent was appointed vice president for nationwide expansion by Malonzo, petitioner's general manager, not by the board of directors of petitioner. It was also Malonzo who determined the compensation package of respondent. Thus, respondent was an employee, not a corporate officer. The CA was therefore correct in ruling that jurisdiction over the case was properly with the NLRC, not the SEC (now the RTC). 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 By-Laws. 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 corporations ByLaws.

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 ByLaws 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,[21] 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 Offices without amending first the corporate By-laws. However, the Board may create appointive positions other than the positions of corporate Officers, 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 Directors/Trustees. Moreover, the Board of Directors of Matling could not validly delegate the power to create a corporate office to the President, in light of Section 25 of the Corporation Code requiring the Board of Directors itself to elect the corporate officers. Verily, the power to elect the corporate officers was a discretionary power that the law exclusively vested in the Board of Directors, and could not be delegated to subordinate officers or agents.[22] The office of Vice

President for Finance and Administration created by Matlings President pursuant to By Law No. V was an ordinary, not a corporate, office. To emphasize, the power to create new offices and the power to appoint the officers to occupy them vested by By-Law No. V merely allowed Matlings President to create non-corporate offices to be occupied by ordinary employees of Matling. Such powers were incidental to the Presidents duties as the executive head of Matling to assist him in the daily operations of the business. The petitioners reliance on Tabang, supra, is misplaced. The statement in Tabang, to the effect that offices not expressly mentioned in the By-Laws but were created pursuant to a By-Law enabling provision were also considered corporate offices, was plainly obiter dictum due to the position subject of the controversy being mentioned in the By-Laws. Thus, the Court held therein that the position was a corporate office, and that the determination of the rights and liabilities arising from the ouster from the position was an intra-corporate controversy within the SECs jurisdiction. In Nacpil v. Intercontinental Broadcasting Corporation, which may be the more appropriate ruling, the position subject of the controversy was not expressly mentioned in the By-Laws, but was created pursuant to a By-Law enabling provision authorizing the Board of Directors to create other offices that the Board of Directors might see fit to create. The Court held there that the position was a corporate office, relying on the obiter dictum in Tabang.
[23]

Considering that the observations earlier made herein show that the soundness of their dicta is not unassailable, Tabang and Nacpil should no longer be controlling. III Did Respondents Status as Director and Stockholder Automatically Convert his Dismissal into an Intra-Corporate Dispute? Yet, the petitioners insist that because the respondent was a Director/stockholder of Matling, and relying on Paguio v. National Labor Relations Commission[24]and Ongkingko v. National Labor Relations Commission,[25] the NLRC had no jurisdiction over his complaint, considering that any case for illegal dismissal brought by a stockholder/officer against the corporation was an intra-corporate matter that must fall under the jurisdiction of the SEC conformably with the context of PD No. 902-A. The petitioners insistence is bereft of basis. To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings, the complainants were undeniably corporate officers due to their positions being expressly mentioned in the By-Laws, aside from the fact that both of them had been duly elected by the respective Boards of Directors. But the herein respondents position of Vice President for Finance and Administration was not expressly mentioned in the By-Laws; neither was the position of Vice President for Finance and Administration created by Matlings Board of Directors. Lastly, the President, not the Board of Directors, appointed him. True it is that the Court pronounced in Tabang as follows:

Also, an intra-corporate controversy is one which arises between a stockholder and the corporation. There is no distinction, qualification or any exemption whatsoever. The provision is broad and covers all kinds of controversies between stockholders and corporations.
[26]

complaint for damages filed by the victim will not come under the jurisdiction of the SEC simply because of the happenstance that both parties are stockholders of the same corporation. A contrary interpretation would dissipate the powers of the regular courts and distort the meaning and intent of PD No. 902-A. In another case, Mainland Construction Co., Inc. v. Movilla, the Court reiterated these determinants thuswise: In order that the SEC (now the regular courts) can take cognizance of a case, the controversy must pertain to any of the following relationships: a) between the corporation, partnership or association and the public; b) between the corporation, partnership or association and its stockholders, partners, members or officers; c) between the corporation, partnership or association and the State as far as its franchise, permit or license to operate is concerned; and d) among the stockholders, associates themselves. partners or

However, the Tabang pronouncement is not controlling because it is too sweeping and does not accord with reason, justice, and fair play. In order to determine whether a dispute constitutes an intracorporate controversy or not, the Court considers two elements instead, namely: (a) the status or relationship of the parties; and (b) the nature of the question that is the subject of their controversy. This was our thrust in Viray v. Court of Appeals:[27] The establishment of any of the relationships mentioned above will not necessarily always confer jurisdiction over the dispute on the SEC to the exclusion of regular courts. The statement made in one case that the rule admits of no exceptions or distinctions is not that absolute. The better policy in determining which body has jurisdiction over a case would be to consider not only the status or relationship of the parties but also the nature of the question that is the subject of their controversy. Not every conflict between a corporation and its stockholders involves corporate matters that only the SEC can resolve in the exercise of its adjudicatory or quasi-judicial powers. If, for example, a person leases an apartment owned by a corporation of which he is a stockholder, there should be no question that a complaint for his ejectment for non-payment of rentals would still come under the jurisdiction of the regular courts and not of the SEC. By the same token, if one person injures another in a vehicular accident, the

[28]

The fact that the parties involved in the controversy are all stockholders or that the parties involved are the stockholders and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of SEC. The better policy to be followed in determining jurisdiction over a case should be to consider concurrent factors such as the status or relationship of the parties or the nature of the question that is the subject of their controversy. In the absence of any one of these factors, the SEC will not have

jurisdiction. Furthermore, it does not necessarily follow that every conflict between the corporation and its stockholders would involve such corporate matters as only the SEC can resolve in the exercise of its adjudicatory or quasi-judicial powers.[29] The criteria for distinguishing between corporate officers who may be ousted from office at will, on one hand, and ordinary corporate employees who may only be terminated for just cause, on the other hand, do not depend on the nature of the services performed, but on the manner of creation of the office. In the respondents case, he was supposedly at once an employee, a stockholder, and a Director of Matling. The circumstances surrounding his appointment to office must be fully considered to determine whether the dismissal constituted an intra-corporate controversy or a labor termination dispute. We must also consider whether his status as Director and stockholder had any relation at all to his appointment and subsequent dismissal as Vice President for Finance and Administration. Obviously enough, the respondent was not appointed as Vice President for Finance and Administration because of his being a stockholder or Director of Matling. He had started working for Matling on September 8, 1966, and had been employed continuously for 33 years until his termination on April 17, 2000, first as a bookkeeper, and his climb in 1987 to his last position as Vice President for Finance and Administration had been gradual but steady, as the following sequence indicates: 1966 1968 1969 1972 1973 Bookkeeper Senior Accountant Chief Accountant Office Supervisor Assistant Treasurer

1978 1980 1983 1985

Special Assistant for Finance Assistant Comptroller Finance and Administrative Manager Asst. Vice President for Finance and Administration 1987 to April 17, 2000 Vice President for Finance and Administration Even though he might have become a stockholder of Matling in 1992, his promotion to the position of Vice President for Finance and Administration in 1987 was by virtue of the length of quality service he had rendered as an employee of Matling. His subsequent acquisition of the status of Director/stockholder had no relation to his promotion. Besides, his status of Director/stockholder was unaffected by his dismissal from employment as Vice President for Finance and Administration. In Prudential Bank and Trust Company v. Reyes,[30] a case involving a lady bank manager who had risen from the ranks but was dismissed, the Court held that her complaint for illegal dismissal was correctly brought to the NLRC, because she was deemed a regular employee of the bank. The Court observed thus: It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963. From that position she rose to become supervisor. Then in 1982, she was appointed Assistant Vice-President which she occupied until her illegal dismissal on July 19, 1991. The banks contention that she merely holds an elective position and that in effect she is not a regular employee is belied by the nature of her work and her length of service with the Bank. As earlier stated, she rose from the ranks and has been employed with the Bank since 1963 until the termination of her employment in 1991. As Assistant Vice President of the

Foreign Department of the Bank, she is tasked, among others, to collect checks drawn against overseas banks payable in foreign currency and to ensure the collection of foreign bills or checks purchased, including the signing of transmittal letters covering the same. It has been stated that the primary standard of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer. Additionally, an employee is regular because of the nature of work and the length of service, not because of the mode or even the reason for hiring them. As Assistant Vice-President of the Foreign Department of the Bank she performs tasks integral to the operations of the bank and her length of service with the bank totaling 28 years speaks volumes of her status as a regular employee of the bank. In fine, as a regular employee, she is entitled to security of tenure; that is, her services may be terminated only for a just or authorized cause. This being in truth a case of illegal dismissal, it is no wonder then that the Bank endeavored to the very end to establish loss of trust and confidence and serious misconduct on the part of private respondent but, as will be discussed later, to no avail. WHEREFORE, we deny the petition for review on certiorari, and affirm the decision of the Court of Appeals. Costs of suit to be paid by the petitioners. SO ORDERED.

INTERNATIONAL BROADCASTING CORPORATION, respondent. KAPUNAN, J.: This is a petition for review on certiorari under Rule 45, assailing the Decision of the Court of Appeals dated November 23, 1999 in CA-G.R. SP No. 527551 and the Resolution dated August 31, 2000 denying petitioner Dily Dany Nacpil's motion for reconsideration. The Court of Appeals reversed the decisions promulgated by the Labor Arbiter and the National Labor Relations Commission (NLRC), which consistently ruled in favor of petitioner. Petitioner states that he was Assistant General Manager for Finance/Administration and Comptroller of private respondent Intercontinental Broadcasting Corporation (IBC) from 1996 until April 1997. According to petitioner, when Emiliano Templo was appointed to replace IBC President Tomas Gomez III sometime in March 1997, the former told the Board of Directors that as soon as he assumes the IBC presidency, he would terminate the services of petitioner. Apparently, Templo blamed petitioner, along with a certain Mr. Basilio and Mr. Gomez, for the prior mismanagement of IBC. Upon his assumption of the IBC presidency, Templo allegedly harassed, insulted, humiliated and pressured petitioner into resigning until the latter was forced to retire. However, Templo refused to pay him his retirement benefits, allegedly because he had not yet secured the clearances from the Presidential Commission on Good Government and the Commission on Audit. Furthermore, Templo allegedly refused to recognize petitioner's employment, claiming that petitioner was not the Assistant General Manager/Comptroller of IBC but merely usurped the powers of the Comptroller. Hence, in 1997, petitioner filed with the Labor Arbiter a complaint for illegal dismissal and non-payment of benefits.1wphi1.nt Instead of filing its position paper, IBC filed a motion to dismiss alleging that the Labor Arbiter had no jurisdiction over the case. IBC contended that petitioner was a corporate officer who was duly elected by the Board of Directors of IBC; hence, the case qualifies as an intracorporate dispute falling within the jurisdiction of the Securities and

G.R. No. 144767

March 21, 2002

DILY DANY NACPIL, petitioner, vs.

Exchange Commission (SEC). However, the motion was denied by the Labor Arbiter in an Order dated April 22, 1998.2 On August 21, 1998, the Labor Arbiter rendered a Decision stating that petitioner had been illegally dismissed. The dispositive portion thereof reads: WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the complainant and against all the respondents, jointly and severally, ordering the latter: 1. To reinstate complainant to his former position without diminution of salary or loss of seniority rights, and with full backwages computed from the time of his illegal dismissal on May 16, 1997 up to the time of his actual reinstatement which is tentatively computed as of the date of this decision on August 21, 1998 in the amount of P1,231,750.00 (i.e., P75,000.00 a month x 15.16 months = P1,137,000.00 plus 13th month pay equivalent to 1/12 of P 1,137,000.00 = P94,750.00 or the total amount of P 1,231,750.00). Should complainant be not reinstated within ten (10) days from receipt of this decision, he shall be entitled to additional backwages until actually reinstated. 2. Likewise, to pay complainant the following: a) P 2 Million as and for moral damages; b) P500,000.00 as and for exemplary damages; plus and (sic) c) Ten (10%) percent thereof as and for attorney's fees.

motion for reconsideration that was likewise denied in a Resolution dated April 26, 1999.5 IBC then filed with the Court of Appeals a petition for certiorari under Rule 65, which petition was granted by the appellate court in its Decision dated November 23, 1999. The dispositive portion of said decision states: WHEREFORE, premises considered, the petition for Certiorari is GRANTED. The assailed decisions of the Labor Arbiter and the NLRC are REVERSED and SET ASIDE and the complaint is DISMISSED without prejudice. SO ORDERED.6 Petitioner then filed a motion for reconsideration, which was denied by the appellate court in a Resolution dated August 31, 2000. Hence, this petition. Petitioner Nacpil submits that: I. THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER WAS APPOINTED BY RESPONDENT'S BOARD OF DIRECTORS AS COMPTROLLER. THIS FINDING IS CONTRARY TO THE COMMON, CONSISTENT POSITION AND ADMISSION OF BOTH PARTIES. FURTHER, RESPONDENT'S BY-LAWS DOES NOT INCLUDE COMPTROLLER AS ONE OF ITS CORPORATE OFFICERS. II.

SO ORDERED.3 IBC appealed to the NLRC, but the same was dismissed in a Resolution dated March 2, 1999, for its failure to file the required appeal bond in accordance with Article 223 of the Labor Code.4 IBC then filed a THE COURT OF APPEALS WENT BEYOND THE ISSUE OF THE CASE WHEN IT SUBSTITUTED THE NATIONAL LABOR RELATIONS COMMISSION'S DECISION TO APPLY THE APPEAL BOND REQUIREMENT STRICTLY IN THE INSTANT CASE. THE ONLY ISSUE FOR ITS

DETERMINATION IS WHETHER NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN DOING THE SAME.7 The issue to be resolved is whether the Labor Arbiter had jurisdiction over the case for illegal dismissal and non-payment of benefits filed by petitioner. The Court finds that the Labor Arbiter had no jurisdiction over the same. Under Presidential Decree No. 902-A (the Revised Securities Act), the law in force when the complaint for illegal dismissal was instituted by petitioner in 1997, the following cases fall under the exclusive of the SEC: a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, members of associations or organizations 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; c) Controversies in the election or appointment of directors, trustees, officers, or managers of such corporations, partnerships or associations; d) Petitions of corporations, partnerships, or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses property to cover all of its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to

cover its liabilities, but is under the Management Committee created pursuant to this decree. (Emphasis supplied.) The Court has consistently held that there are two elements to be considered in determining whether the SEC has jurisdiction over the controversy, to wit: (1) the status or relationship of the parties; and (2) the nature of the question that is the subject of their controversy.8 Petitioner argues that he is not a corporate officer of the IBC but an employee thereof since he had not been elected nor appointed as Comptroller and Assistant Manager by the IBC's Board of Directors. He points out that he had actually been appointed as such on January 11, 1995 by the IBC's General Manager, Ceferino Basilio. In support of his argument, petitioner underscores the fact that the IBC's By-Laws does not even include the position of comptroller in its roster of corporate officers.9 He therefore contends that his dismissal is a controversy falling within the jurisdiction of the labor courts.10 Petitioner's argument is untenable. Even assuming that he was in fact appointed by the General Manager, such appointment was subsequently approved by the Board of Directors of the IBC.11 That the position of Comptroller is not expressly mentioned among the officers of the IBC in the By-Laws is of no moment, because the IBC's Board of Directors is empowered under Section 25 of the Corporation Code12 and under the corporation's By-Laws to appoint such other officers as it may deem necessary. The By-Laws of the IBC categorically provides: XII. OFFICERS The officers of the corporation shall consist of a President, a Vice-President, a Secretary-Treasurer, a General Manager, and such other officers as the Board of Directors may from time to time does fit to provide for. Said officers shall be elected by majority vote of the Board of Directors and shall have such powers and duties as shall hereinafter provide (Emphasis supplied).13 The Court has held that in most cases the "by-laws may and usually do provide for such other officers,"14 and that where a corporate office is not specifically indicated in the roster of corporate offices in the by-

laws of a corporation, the board of directors may also be empowered under the by-laws to create additional officers as may be necessary.15 An "office" has been defined as a creation of the charter of a corporation, while an "officer" as a person elected by the directors or stockholders. On the other hand, an "employee" occupies no office and is generally employed not by action of the directors and stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee.16 As petitioner's appointment as comptroller required the approval and formal action of the IBC's Board of Directors to become valid,17 it is clear therefore holds that petitioner is a corporate officer whose dismissal may be the subject of a controversy cognizable by the SEC under Section 5(c) of P.D. 902-A which includes controversies involving both election and appointment of corporate directors, trustees, officers, and managers.18 Had petitioner been an ordinary employee, such board action would not have been required. Thus, the Court of Appeals correctly held that: Since complainant's appointment was approved unanimously by the Board of Directors of the corporation, he is therefore considered a corporate officer and his claim of illegal dismissal is a controversy that falls under the jurisdiction of the SEC as contemplated by Section 5 of P.D. 902-A. The rule is that dismissal or non-appointment of a corporate officer is clearly an intra-corporate matter and jurisdiction over the case properly belongs to the SEC, not to the NLRC.19 As to petitioner's argument that the nature of his functions is recommendatory thereby making him a mere managerial officer, the Court has previously held that the relationship of a person to a corporation, whether as officer or agent or employee is not determined by the nature of the services performed, but instead by the incidents of the relationship as they actually exist.20 It is likewise of no consequence that petitioner's complaint for illegal dismissal includes money claims, for such claims are actually part of the perquisites of his position in, and therefore linked with his relations

with, the corporation. The inclusion of such money claims does not convert the issue into a simple labor problem. Clearly, the issues raised by petitioner against the IBC are matters that come within the area of corporate affairs and management, and constitute a corporate controversy in contemplation of the Corporation Code.21 Petitioner further argues that the IBC failed to perfect its appeal from the Labor Arbiter's Decision for its non-payment of the appeal bond as required under Article 223 of the Labor Code, since compliance with the requirement of posting of a cash or surety bond in an amount equivalent to the monetary award in the judgment appealed from has been held to be both mandatory and jurisdictional.22 Hence, the Decision of the Labor Arbiter had long become final and executory and thus, the Court of Appeals acted with grave abuse of discretion amounting to lack or excess of jurisdiction in giving due course to the IBC's petition for certiorari, and in deciding the case on the merits. The IBC's failure to post an appeal bond within the period mandated under Article 223 of the Labor Code has been rendered immaterial by the fact that the Labor Arbiter did not have jurisdiction over the case since as stated earlier, the same is in the nature of an intra-corporate controversy. The Court has consistently held that where there is a finding that any decision was rendered without jurisdiction, the action shall be dismissed. Such defense can be interposed at any time, during appeal or even after final judgment.23 It is a well-settled rule that jurisdiction is conferred only by the Constitution or by law. It cannot be fixed by the will of the parties; it cannot be acquired through, enlarged or diminished by, any act or omission of the parties.24 Considering the foregoing, the Court holds that no error was committed by the Court of Appeals in dismissing the case filed before the Labor Arbiter, without prejudice to the filing of an appropriate action in the proper court. 1wphi1.nt It must be noted that under Section 5.2 of the Securities Regulation Code (Republic Act No. 8799) which was signed into law by then President Joseph Ejercito Estrada on July 19, 2000, the SEC's jurisdiction over all cases enumerated in Section 5 of P.D. 902-A has been transferred to the Regional Trial Courts.25

WHEREFORE, the petition is hereby DISMISSED and the Decision of the Court of Appeals in CA-G.R. SP No. 52755 is AFFIRMED. SO ORDERED.

PURCHASE PRICE P136,000.00 DOWNPAYMENT 14,000.00 BALANCEP122,000.00 TERM: C A S H MODE OF PAYMENT: Payable upon ejection of occupants on the property subject of my offer. I/We am/are depositing the amount of P14,000.00 in cash/check to accompany my/our offer, it being expressly understood, however, that the same does not bind the DBP to the offer until after my/our receipt of its approval by the higher authorities of the bank. Should the bank receive an offer from a third-party buyer higher by more than 5% or at more advantageous term accompanied by a deposit of at least 10% of the offered price, or a higher offer from the former-owner for at least the updated Total Claim of the Bank accompanied by a minimum deposit of 20% of the purchase price, the Bank may favorably consider the higher offer and thereafter refund my/our deposit within three (3) working days after the determination of the most advantageous offer. The foregoing offer was duly NOTED by petitioners branch head at its Cagayan de Oro City Branch, Jose Z. Lagrito (Lagrito, for brevity), and Official Receipt No. 3081947 was issued for the amount of P14,000.00 as respondents deposit. In a letter dated October 21, 1988[3], sent to respondents via registered mail, Lagrito informed the spouses that the bank recently received an offer from another interested third-partybuyer of the same property at the same price and term, but better and more advantageous to the Bank considering that the buyer will assume the responsibility at her expense for the ejectment of present occupants in the said property. Nonetheless, respondents were given in the same letter three (3) days within which to match the said offer, failing in which the Bank will immediately award the said property to the other buyer, in which event respondents deposit of P14,000.00 shall be refunded to them upon surrender of O.R. No. 3081947. In yet another written offer dated October 28, 1988[4], respondents matched the said offer of the second interested buyer by assuming the responsibility at my/our own expense for the ejection of squatters/occupants, if any, on the property.

G.R. No. 144661 and 144797. June 15, 2005] DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. SPOUSES FRANCISCO ONG and LETICIA ONG, respondents. Appealed to this Court by way of a petition for review on certiorari are the Decision[1] dated March 5, 1999 and Resolution dated July 19, 2000 of the Court of Appeals inCA-G.R. CV No. 54919, affirming in toto an earlier decision of the Regional Trial Court at Cagayan de Oro City, Branch 23, which ruled in favor of herein respondents, the Spouses Francisco Ong and Leticia Ong, in a suit for breach of contract and/or specific performance with prayer for writ of preliminary injunction and damages thereat commenced by them against petitioner Development Bank of the Philippines (DBP). Petitioner filed by registered mail a motion for extension time to submit petition, paying the corresponding docket fees therefor by money order. Upon receipt of the motion, the Court docketed the case as G.R. No. 144797. Before actual receipt of said motion, however, petitioner personally filed its petition, which was docketed with a lower number as G.R. No. 144661. What then appears to be two (2) cases before us are actually just one, now the subject of this decision. The facts are simple and undisputed: Petitioners foreclosed asset, formerly owned by one Enrique Abada under TCT No. T-4786 and located at Corrales Extension, Cagayan de Oro City is the subject of this controversy. On May 25, 1988, respondent Francisco Ong with the conformity of his wife Leticia Ong, addressed a written offer to petitioner thru its branch manager at Cagayan de Oro City to buy the subject property on a negotiated sale basis and submitted his best and last offer to purchase[2] under the following terms:

On April 7, 1989, there was a conference between respondents, together with their counsel, and the bank whereat respondents were informed why the sale could not be awarded to them. Thereafter, in a letter dated September 6, 1990[5], respondents were notified that the property would instead be offered for public bidding on September 24, 1990 at ten 10:00 oclock in the morning. Feeling aggrieved by such turn of events, respondents filed with the Regional Trial Court at Cagayan de Oro City a complaint for breach of contract and/or specific performance against petitioner. Thereat, the complaint was docketed as Civil Case No. 90-422 which was raffled to Branch 23 of the court.
After pre-trial, the parties agreed to submit the case for judgment based on the pleadings. Accordingly, the trial court required them to submit simultaneously their respective memoranda within thirty (30) days. Only petitioner filed its memorandum. In a decision[6] dated April 25, 1995, the trial court dismissed the complaint finding that there was no perfected contract of sale between the parties, hence, there is no breach to speak of since there was no contract from the very beginning. However, upon respondents motion for reconsideration, the trial court vacated its judgment and set the case for the reception of evidence. This time, only the respondents adduced their evidence consisting of the lone testimony of respondent Francisco Ong and the documents identified by him in the course thereof. In his testimony, Ong gave the respondents version of what supposedly transpired in their transaction with petitioner. According to him, he and his wife went to the bank branch at Cabayan de Oro City and looked for Roy Palasan, a bank clerk thereat and told the latter that they were interested to buy two (2) lots. Palasan went to talk to Lagrito, the branch manager. Palasan returned to the spouses and informed them that the branch manager agreed to sell the property to them. Palasan further told them that they will be required to pay ten (10%) percent of the purchase price as downpayment, adding that if they were to pay the purchase price in cash, they would be entitled to a ten (10%) percent discount. After some computations, respondents rounded up the purchase price at P136,000.00 and pegged the downpayment therefor at P14,000.00. They were then required by Palasan to sign a bank form supposedly to express their firm offer to purchase the subject property. But since the form signed by them contains the statement that the approval of higher authorities of the bank is required to close the deal, respondents queried Palasan about it. Palasan, however, told them that the documents

were only for formality purposes, and further assured them that the branch manager has already agreed to sell the subject property to them. Having completed the presentation of their evidence, respondents rested their case. For its part, petitioner no longer adduced any evidence but merely opted to formally offer its documentary exhibits. Thereafter, the case was submitted for resolution.
[7]

On September 26, 1996, the trial court came out with a new decision, this time rendering judgment for the respondents, as follows:

WHEREFORE, by reason of preponderance of evidence, the Court hereby finds in favor of the plaintiffs as against the defendant and hereby orders the defendant: 1. To execute a final sale of the lot subject matter of the contract of sale at the original agreed price of P136,000.00; 2. Defendant to accept the balance of the purchase price from the plaintiffs; 3. Defendant to pay moral damages in the amount of P30,000.00; 4. Defendant to refund the amount of P10,000.00 actual litigation expenses; and to pay attorneys fees in the amount of P20,000.00. SO ORDERED. Therefrom, petitioner went on appeal to the Court of Appeals in CA-G.R. CV No. 54919, and, on March 5, 1999, the appellate court rendered the herein assailed decision[8]affirming in toto that of the trial court, thus: ACCORDINGLY, the foregoing premises considered, the appealed decision is hereby AFFIRMED in toto. SO ORDERED. With its motion for reconsideration of the same decision having been denied by the Court of Appeals in its equally challenged resolution of July 19, 2000,[9] petitioner is now with us thru the present recourse on the following grounds: A.

THAT THE RESPONDENTS INTRODUCTION OF PAROL EVIDENCE TO PROVE THE ALLEGED MEETING OF MINDS BETWEEN THE PARTIES WAS NOT SANCTIONED BY RULE 130, SEC. 9, RULES OF COURT, CONTRARY TO THE FINDINGS OF THE LOWER COURTS, CONSIDERING THAT THERE WAS NO WRITTEN CONTRACT THAT WAS EVER EXECUTED BY THE PARTIES IN THIS CASE, BUT MERELY UNILATERAL WRITTEN COMMUNICATIONS, AT BEST CONSTITUTING OFFERS AND COUNTER-OFFERS. B. THAT THE QUANTUM OF PROOF IS WANTING TO PROVE THE ALLEGED PERFECTION OF CONTRACT OF SALE BETWEEN THE PARTIES BASED ON THE SOLE, UNCORROBORATED, ORAL TESTIMONY THUS FAR PRESENTED BY THE RESPONDENTS. C. THAT THE BURDEN OF PROOF THAT THERE WAS PERFECTION OF THE CONTRACT OF SALE BETWEEN THE PARTIES BASICALLY REST WITH THE RESPONDENTS, NOTWITHSTANDING THE NONOBJECTION ON THE PART OF HEREIN PETITIONER DURING THE INTRODUCTION OF THAT PAROL EVIDENCE; THE ADMISSIBILITY OF PETITIONERS (sic.) PAROL EVIDENCE DOES NOT AUTOMATICALLY RIPEN THE TESTIMONY AS A TRUTH RESPECTING A MATTER OF FACT AS ITS CREDIBILITY AND TRUSTWORTHINESS AND WEIGHT ARE STILL SUBJECT TO JUDICIAL SCRUTINY AND APPRECIATION. D. THAT THERE WAS ACTUALLY OPPOSITION ON THE PART OF THE PETITIONER TO THE CONTENTS OF THE ORAL TESTIMONY OF THE RESPONDENT REGARDING THE ALLEGED PERFECTION OF CONTRACT OF SALE BECAUSE THE PETITIONER HAD ALREADY INTERPOSED THEIR DEFENSES WHEN IT FILED A MEMORANDUM ATTACHING THEREIN THE DOCUMENTARY AS WELL AS DECLARATIONS IN ITS PLEADINGS ON THE NON-PERFECTION OF SUCH CONTRACT WHEN THE CASE WAS THEN SUBMITTED FOR JUDGMENT ON THE PLEADINGS, AS AGREED BY THE PARTIES DURING THE PRE-TRIAL, AND SUCH EVIDENCES WERE ALREADY PASSED UPON BY THE COURT WHEN IT RENDERED A JUDGMENT DATED APRIL 25, 1995.

We GRANT the petition. At the very core of the controversy is the question of whether or not there actually was a perfected contract of sale between petitioner and respondents, for which the Court may compel petitioner to issue a board resolution approving the sale and to execute the final deed of sale in respondents favor, and/or hold petitioner liable for a breach thereof. Needless to state, without a perfected contract of sale, there could be no cause of action for specific performance or breach thereof. The trial court went on one direction by ruling in its earlier decision of April 25, 1995 that there was no perfected contract, but upon respondents motion for reconsideration, went exactly the opposite path by completely reversing itself in its herein challenged decision of September 26, 1996. Apparently, the trial courts ruling that there was already a perfected contract of sale was premised on its following factual findings: 1. That plaintiff [respondents] made a downpayment in a check that was subsequently encashed by the defendant [petitioner] bank; That the sister-in-law of plaintiff [respondents] entered into the same arrangement and was able to buy the property she wanted to buy from defendant [petitioner] bank; That defendant [petitioner] never presented any witness to rebut the positive and clear testimony of plaintiff [respondents] that it was a perfected contract of sale entered into by the former with the defendant [petitioner] bank.[10]

2.

3.

Sustaining the foregoing factual findings of the trial court, the appellate court wrote in its assailed decision of March 5, 1999: This positive and clear testimony of [respondent] Ong was not objected to nor rebutted by the [petiotioner]. Notably, the bank personnel involved in the transaction, namely, Roy Palasan and the Branch Manager of the [petitioners] Cagayan de Oro Branch, Joe Lagrito, were never presented to refute the testimony of the [respondents] that the bank has agreed to sell the property to the [respondents]. Suffice it to state that [respondents] were entitled to rely on the representation of Lagrito who, after all, is the banks manager. Under the premise that a bank is bound by the obligation contracted by its officers, the contract of sale between [petitioner] and the [respondents] was perfected when

Palasan and Lagrito communicated the approval of the sale of the lot to the [respondents]. Significantly, the unrebutted testimony of Francisco Ong reveals that Norma Silfavan, [respondents] sister, made a similar offer to the [petitioner] under the same terms and conditions as to that of the [respondents], and was likewise assured by the same bank personnel that her offer, along with the [respondents] offer was already approved. Eventually, the transaction resulted in a consummated sale between Silfavan and DBP. Under these premises, We can not see any reason why the [petitioner] did not accord the same treatment to the [respondents] who were similarly situated. Evidently, the two (2) courts below were convinced that the actuation of Palasan, a mere bank clerk, upon which respondents relied in believing that their offer to purchase was already approved by the bank manager, would bind the bank to a perfected contract of sale between the parties in this case. The Court of Appeals further added that the acceptance of the offer to purchase was sufficiently established from the parol evidence adduced by respondents during the trial. We do not agree. Concededly, in petitions for review on certiorari, our task is not to review once again the factual findings of the Court of Appeals and the trial court, but to determine if, on the basis of the facts thus found, the conclusions of law reached are correct or not. Judging from the findings of the two (2) courts below and the testimony of respondent Francisco Ong himself, it appears clear to us that the transaction between the respondents and the petitioner was limited to Palasan, one of the clerks of petitioners branch in Cagayan de Oro City. Lagrito, the branch manager, had no personal or direct communication with respondents to express his alleged consent to the sale transaction. Thus, the undisputed evidence showed that it was Palasan, a mere bank clerk, and not the branch manager himself who assured respondents that theirs was a closed deal. We are very much aware of our pronouncement in Rural Bank of Milaor vs. Ocfemia,[11] involving a mandamus suit where the supposed buyer of a foreclosed property from a bank sought a court order to compel the bank to issue the required board resolution confirming the sale between the parties therein. There, this Court, speaking thru Mr. Justice Artemio Panganiban, stated:

Notwithstanding the putative authority of the manager to bind the bank in the Deed of Sale, petitioner has failed to file an answer to the Petition below within the reglementary period, let alone present evidence controverting such authority. Indeed, when one of herein respondents, Marife S. Nio, went to the bank to ask for the board resolution, she was merely told to bring the receipts. The bank failed to categorically declare that Tena had no authority. This Court stresses the following: . . . Corporate transactions would speedily come to a standstill were every person dealing with a corporation held duty-bound to disbelieve every act of its responsible officers, no matter how regular they should appear on their face. This Court has observed in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that In passing upon the liability of a corporation in cases of this kind it is always well to keep in mind the situation as it presents itself to the third party with whom the contract is made. Naturally he can have little or no information as to what occurs in corporate meetings; and he must necessarily rely upon the external manifestation of corporate consent. The integrity of commercial transactions can only be maintained by holding the corporation strictly to the liability fixed upon it by its agents in accordance with law; and we would be sorry to announce a doctrine which would permit the property of man in the city of Paris to be whisked out of his hands and carried into a remote quarter of the earth without recourse against the corporation whose name and authority had been used in the manner disclosed in this case. As already observed, it is familiar doctrine that if a corporation knowingly permits one of its officers, or any other agent, to do acts within the scope of an apparent authority, and thus holds him out to the public as possessing power to do those acts, the corporation will, as against any one who has in good faith dealt with the corporation through such agent, be estopped from denying his authority; and where it is said 'if the corporation permits this means the same as 'if the thing is permitted by the directing power of the corporation.[12] In this light, the bank is estopped from questioning the authority of the bank manager to enter into the contract of sale. If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the agent out to the public as possessing the power to do those acts; thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent's authority.[13] Unquestionably, petitioner has authorized Tena to enter into the Deed of Sale. Accordingly, it has a clear legal duty to issue the board resolution sought by

respondents. Having authorized her to sell the property, it behooves the bank to confirm the Deed of Sale so that the buyers may enjoy its full use. There is, however, a striking and very material difference between the aforecited case and the one at bar. For, unlike in Milaor where it was the branch manager who approved the sale for and in behalf of the bank, here, there is absolutely no approval whatsoever by any responsible bank officer of the petitioner. True it is that the signature of branch manager Lagrito appears below the typewritten word NOTED at the bottom of respondents offer to purchase dated May 25, 1988.[14] By no stretch of imagination, however, can the mere NOTING of such an offer be taken to mean an approval of the supposed sale. Quite the contrary, the very circumstance that the offer to purchase was merely NOTED by the branch manager and not approved, is a clear indication that there is no perfected contract of sale to speak of. The representation of Roy Palasan, a mere clerk at petitioners Cagayan de Oro City branch, that the manager had already approved the sale, even if true, cannot bind the petitioner bank to a contract of sale with respondents, it being obvious to us that such a clerk is not among the bank officers upon whom such putative authority may be reposed by a third party. There is, thus, no legal basis to bind petitioner into any valid contract of sale with the respondents, given the absolute absence of any approval or consent by any responsible officer of petitioner bank. And because there is here no perfected contract of sale between the parties, respondents action for breach of contract and/or specific performance is simply without any leg to stand on and must therefore fall. We also disagree with the Court of Appeals that the encashment of the check representing the P14,000.00 deposit in relation to respondents offer to purchase is an indication or proof of perfection of a contract of sale. It must be noted that the very documents[15] signed by the respondents as their offer to purchase unmistakably state that the deposit shall only form part of the purchase price if the offer to purchase is approved, it being expressly understood xxx that the same (i.e., the deposit) does not bind DBP to the offer until my/our receipt of its approval by higher authorities of the bank. It may be so that the official receipt issued therefor by the petitioner termed such deposit as a downpayment. But the very written offers of the respondents unequivocably and invariably speak of such amount as deposit, above deposit, we are depositing the amount of P14,000.00. Since there never was any approval or acceptance by the higher authorities of petitioner of respondents offer to purchase, the encashment of the check can not in any way represent partial payment of any purchase price.

With the hard reality that no approval or acceptance of respondents offer to buy exists in this case, any independent transaction between petitioner and another third-party, like the one involving respondents sister, would be irrelevant and immaterial insofar as respondents own transaction with the petitioner is concerned. Besides, apart from saying that respondents sister made a similar offer to the [petitioner] under the same terms and conditions as to that of the [respondents], and was likewise assured by the same bank personnel that her offer xxx was already approved, which eventually resulted into a consummated sale between (the sister) and DBP, the Court of Appeals made no finding that the sisters transaction with the petitioner was made exactly under the same circumstances obtaining in the present case. In any event, petitioners favorable action on the offer of respondents sister is hardly, if ever, relevant and determinative in the resolution of the legal issue presented in this case. In sum, we cannot, in law, sustain the herein challenged issuances of the Court of Appeals. WHEREFORE, the instant petition is GRANTED and the assailed decision and resolution of the Court of Appeals REVERSED and SET ASIDE. The complaint filed in this case is accordingly DISMISSED. No pronouncement as to costs. SO ORDERED.