Dy vs. NLRC

A controversy arising from the non-re-election of a corporate officer who is also a stockholder and director, where the validity of the stockholders' meeting and the composition of the Board are themselves challenged, is an intra-corporate dispute within the original and exclusive jurisdiction of the Securities and Exchange Commission under Section 5(c) of Presidential Decree No. 902-A, not the NLRC.

Carlito H. Vailoces served as manager, director, and stockholder of the Rural Bank of Ayungon (Negros Oriental), a banking institution organized under Philippine law. His position as bank manager was elective under Article IV of the bank's by-laws, which vested in the entire Board of Directors the power to elect the bank's executive officers, including the president, vice-president, secretary, cashier, and bank manager. He had acquired the position through election by the Board at the organizational meeting of November 17, 1979. The case implicates the jurisdictional division between labor tribunals and the Securities and Exchange Commission under Presidential Decree No. 902-A, which vests in the SEC original and exclusive jurisdiction over controversies in the election or appointment of directors, trustees, officers, or managers of corporations.

Carlito H. Vailoces was the manager, director, and stockholder of the Rural Bank of Ayungon (Negros Oriental), a banking institution duly organized under Philippine laws. His position as bank manager was elective under Article IV of the bank's by-laws, which provided for the election by the entire membership of the Board of the bank's executive officers—the president, vice-president, secretary, cashier, and bank manager. Vailoces had acquired the position through election by the Board of Directors at the organizational meeting of November 17, 1979.

On June 4, 1983, a special stockholders' meeting was called for the purpose of electing the members of the bank's Board of Directors. Immediately after the election, the new Board proceeded to elect the bank's executive officers. Pursuant to the by-laws, petitioners Lorenzo Dy, William Ibero, and Ricardo Garcia were elected president, vice-president, and corporate secretary, respectively. Vailoces was not re-elected as bank manager. On July 2, 1983, the Board passed Resolution No. 5, series of 1983, relieving him as bank manager.

On August 3, 1983, Vailoces filed a complaint for illegal dismissal and damages with the Ministry of Labor and Employment against Lorenzo Dy and Zosimo Dy, Sr. The complaint was amended on September 22, 1983 to include additional respondents—William Ibero, Ricardo Garcia, and the Rural Bank of Ayungon—and additional causes of action for underpayment of salary and non-payment of living allowance. Vailoces asserted that Lorenzo Dy, after obtaining control of the majority stock of the bank by buying the shares of Marcelino Maximo, called an illegal stockholders' meeting and elected a Board of Directors controlled by him; that the Board then convened on July 2, 1983 and passed a resolution dismissing him as manager without giving him the opportunity to be heard first; and that his dismissal was motivated by Lorenzo Dy's desire to take over the management and control of the bank, compounded by ill feelings arising from Vailoces's filing of a complaint for violation of the Corporation Code against Dy and another complaint for compulsory recognition of a natural child with damages against Zosimo Dy, Sr.

In their answer, Lorenzo Dy and the other petitioners denied the charge of illegal dismissal. They contended that Vailoces's position was elective and that he was not re-elected because of the Board's loss of confidence in him due to his absenteeism and negligence in the performance of his duties, characterizing the Board's action as an internal control measure to secure the check and balance of authority within the organization. The Executive Labor Arbiter found that Vailoces was illegally dismissed—not because of absenteeism or negligence, but because of the petitioners' resentment over the cases he had filed against them, and because he was not afforded due process when he was dismissed during the Board meeting of July 2, 1983, the validity of which was seriously doubted. The Labor Arbiter also found that Vailoces was underpaid at only ₱500 monthly salary and was not paid his cost of living allowance, and accordingly ordered the individual petitioners—Lorenzo Dy and Zosimo Dy, but not the Bank itself—to pay Vailoces jointly and severally the sum of ₱111,480.60 representing salary differentials, cost of living allowances, backwages, moral and exemplary damages, and attorney's fees, and to reinstate him to his position as bank manager with additional backwages from December 1, 1983 at the adjusted salary rate of ₱620.00 per month until actual reinstatement, plus cost-of-living allowance. Petitioners appealed to the NLRC, which dismissed the appeal for having been filed late, reckoning the appeal period from receipt of the decision by a law partner of petitioners' counsel on January 11, 1984 or by newly engaged counsel on January 30, 1984, with the appeal filed only on February 17, 1984.

• Procedural Due Process in Appeal: Petitioners argued that the NLRC's dismissal of their appeal on the basis of procedural technicality was arbitrary and deprived them of their right to appeal. They maintained that they should not be bound by the service of the Labor Arbiter's decision upon Atty. Elesteria on January 11, 1984 or upon Atty. Zerna on January 30, 1984, because neither lawyer was authorized to accept service for their counsel Atty. Tubio, and that their ten-day appeal period should be counted from February 10, 1984 when they actually received the copy of the decision from Atty. Zerna.
• Evidentiary Basis of Illegal Dismissal Finding: Petitioners asserted that the Labor Arbiter's finding of illegal dismissal was without evidentiary basis.
• Liability for Damages: Petitioners argued that it was error to impose the obligation to pay damages upon the individual petitioners rather than the Rural Bank of Ayungon, which was Vailoces's real employer.
• Excessive Damages: Petitioners contended that the damages awarded were exorbitant and oppressive.

• Estoppel on Jurisdiction: Respondent Vailoces invoked estoppel against petitioners with respect to the issue of jurisdiction, arguing that petitioners had not properly raised the jurisdictional question before the lower tribunal.
• Traversing Petition's Averments: Vailoces traversed the averments of the petition in his comment.
• Solicitor General's Position: The Solicitor General, on behalf of public respondents, perceived the matter as an intra-corporate controversy under Section 5(c) of Presidential Decree No. 902-A and recommended that the questioned NLRC resolution and the Labor Arbiter's decision be set aside as null and void for lack of jurisdiction.

• Jurisdiction: Whether the NLRC and the Labor Arbiter had jurisdiction over a complaint for illegal dismissal filed by a corporate officer who was not re-elected to an elective position, where the validity of the stockholders' meeting and the composition of the Board of Directors were themselves challenged.
• Estoppel on Jurisdiction: Whether the jurisdictional issue could be raised and resolved by the Supreme Court notwithstanding the parties' failure to seasonably raise it before the lower tribunals.

• Jurisdiction: No. The Labor Arbiter and the NLRC lacked jurisdiction because the controversy is intra-corporate in nature, falling within the original and exclusive jurisdiction of the Securities and Exchange Commission under Section 5(c) of Presidential Decree No. 902-A.
• Estoppel on Jurisdiction: No. Estoppel cannot prevent the Court from taking up the question of jurisdiction, which was apparent on the face of the pleadings from the start; jurisdiction is conferred only by law and may not be waived or conferred by the parties' conduct.

• Jurisdiction: The position from which Vailoces claimed to have been illegally dismissed was an elective corporate office, which he himself acquired through election by the Board of Directors. He lost that position because the Board elected at the special stockholders' meeting of June 4, 1983 did not re-elect him. By impugning in his position paper the validity of that stockholders' meeting and the Board elected thereat as illegally constituted, Vailoces made clear that the heart of the matter was the validity of the corporate election that resulted in his non-re-election. This placed the controversy squarely within Section 5(c) of PD 902-A, which vests in the SEC original and exclusive jurisdiction over controversies in the election or appointments of directors, trustees, officers, or managers of corporations. The Court relied on PSBA vs. Leaño, where a similar controversy involving the non-re-election of an Executive Vice-President was held to be intra-corporate and within SEC jurisdiction. The Court further noted that Vailoces's additional claims for underpayment of salary and non-payment of living allowance were actually perquisites of his elective position, intimately linked with his relations with the corporation, and thus part of a corporate controversy rather than a simple labor problem. The question of remuneration, involving a person who was not a mere employee but a stockholder and officer—an integral part of the corporation—comes within the area of corporate affairs and management.

• Estoppel on Jurisdiction: It was not entirely accurate that petitioners had failed to raise the jurisdictional point below; they had, albeit offhandedly, called attention to the Labor Arbiter's lack of jurisdiction in their appeal to the NLRC, but the dismissal of the appeal for tardiness precluded its consideration. More importantly, estoppel cannot be invoked to prevent the Court from taking up a jurisdictional question apparent on the face of the pleadings since the inception of the litigation. It is well settled that a decision of a tribunal not vested with appropriate jurisdiction is null and void. Jurisdiction over the subject matter is a matter of law and may not be conferred by consent or agreement of the parties; the lack of jurisdiction may be raised at any stage of the proceedings, even on appeal, and may be considered by the court motu proprio. The equitable defense of estoppel requires knowledge or consciousness of the facts upon which it is based, and the filing of an action in a court lacking jurisdiction may have been the result of an honest mistake or divergent interpretation of doubtful legal provisions rather than a deliberate act intended to secure a favorable ruling.

• Jurisdiction as a Matter of Law — Jurisdiction over the subject matter of an action is conferred only by law and may not be acquired through, or waived by, any act or omission of the parties. The lack of jurisdiction of a tribunal may be raised at any stage of the proceedings, even on appeal, and may be considered by the court motu proprio. A decision rendered without jurisdiction is null and void. The Court applied this doctrine to hold that both the Labor Arbiter's decision and the NLRC's resolution were void for lack of jurisdiction, notwithstanding the parties' failure to seasonably raise the issue.

• Intra-corporate Controversy Doctrine — Under Section 5(c) of Presidential Decree No. 902-A, controversies in the election or appointments of directors, trustees, officers, or managers of corporations are within the original and exclusive jurisdiction of the Securities and Exchange Commission. Where the validity of a stockholders' meeting and the composition of the Board of Directors are themselves challenged, and the non-re-election of an officer flows from that challenged election, the dispute is intra-corporate in nature. The relationship of a person to a corporation, whether as officer or employee, is not determined by the nature of the services performed but by the incidents of the relationship as they actually exist. The Court applied this doctrine to hold that Vailoces's complaint, though framed as illegal dismissal, was fundamentally an intra-corporate controversy.

• "It is well settled that the decision of a tribunal not vested with appropriate jurisdiction is null and void." — This passage articulates the fundamental principle that jurisdiction is conferred only by law and cannot be waived, and that judgments rendered without jurisdiction are void, forming the basis for setting aside both the Labor Arbiter's decision and the NLRC resolution.

• "This is not a case of dismissal. The situation is that of a corporate office having been declared vacant, and of Tan's not having been elected thereafter. The matter of whom to elect is a prerogative that belongs to the Board, and involves the exercise of deliberate choice and the faculty of discriminative selection." — This quotation from PSBA vs. Leaño, adopted by the Court, distinguishes non-re-election from dismissal and characterizes the election of corporate officers as a Board prerogative, establishing that such controversies are intra-corporate and within SEC jurisdiction.

• "The question of remuneration, involving as it does, a person who is not a mere employee but a stockholder and officer, an integral part, it might be said, of the corporation, is not a simple labor problem but a matter that comes within the area of corporate affairs and management, and is in fact a corporate controversy in contemplation of the Corporation Code." — This passage explains why even Vailoces's claims for salary differentials and allowances fall within the SEC's jurisdiction, because they are perquisites of his elective position as a stockholder-officer rather than ordinary labor claims.

• PSBA vs. Leaño, 127 SCRA 778 — Controlling precedent. The Court applied the same reasoning to hold that a controversy involving the non-re-election of a corporate officer, where the validity of the election of directors and officers is challenged, is intra-corporate and within the SEC's original and exclusive jurisdiction, not the NLRC's.

• Calimlim vs. Ramirez, 118 SCRA 399 — Followed for the doctrine that jurisdiction over the subject matter is a matter of law, may not be conferred by consent or agreement of the parties, and that lack of jurisdiction may be raised at any stage of the proceedings, even on appeal.

• PLDT Co. vs. Free Telephone Workers' Union, 116 SCRA 145 — Cited for the proposition that the lack of jurisdiction of the lower court, apparent upon the face of the record, may be considered by the appellate court motu proprio.

• Section 5(c), Presidential Decree No. 902-A — Vests in the Securities and Exchange Commission original and exclusive jurisdiction over controversies in the election or appointments of directors, trustees, officers, or managers of corporations, partnerships, or associations. The Court applied this provision to hold that Vailoces's complaint, though framed as illegal dismissal, was fundamentally a controversy involving the election of corporate officers and thus within the SEC's jurisdiction.

• Section 2, Rule 9, Rules of Court — Provides that it is the duty of the court to dismiss an action whenever it appears that the court has no jurisdiction over the subject matter. The Court cited this provision in support of the principle that jurisdiction may be considered motu proprio.

• Article 1144, paragraph 3, Civil Code — Prescribes a ten-year prescriptive period for actions to annul a judgment rendered without jurisdiction. Cited in connection with the principle that a judgment without jurisdiction may be impeached or annulled.

Yap (Chairman), Melencio-Herrera, Cruz, and Feliciano, JJ., concurred.