Mainland Construction, Co., Inc. vs. Movilla

A claim for unpaid wages and separation pay by a corporate officer who also performs employee functions and receives a fixed salary, SSS coverage, and other employee benefits is a labor dispute within the NLRC’s jurisdiction under Article 217 of the Labor Code, not an intra-corporate controversy within SEC jurisdiction under P.D. 902-A.

Mainland Construction Co., Inc. is a domestic corporation registered with the SEC on July 26, 1977 under Registry No. 74691, engaged in the general construction of roads and bridges and the operation of a service shop. Ernesto Movilla was a Certified Public Accountant hired by Mainland in 1977 and later promoted to Administrative Officer; he was also elected to the corporation’s board of directors and as Administrative Manager. P.D. 902-A vests the SEC with jurisdiction over intra-corporate controversies, while Article 217 of the Labor Code vests the NLRC with jurisdiction over labor disputes.

Mainland Construction Co., Inc. is a domestic corporation duly organized and existing under Philippine laws, issued a certificate of registration by the Securities and Exchange Commission on July 26, 1977 under Registry Number 74691. Its principal line of business is the general construction of roads and bridges and the operation of a service shop for the maintenance of equipment. Ernesto Movilla, a Certified Public Accountant during his lifetime, was hired as such by Mainland in 1977 and was thereafter promoted to the position of Administrative Officer with a monthly salary of P4,700.00. He was registered with the Social Security System as an employee of the corporation, and his contributions to the SSS, Medicare, and Employees Compensation Commission were deducted from his monthly earnings by his employer.

On April 12, 1987, during Mainland’s annual meeting of stockholders, Robert L. Carabuena, Ellen L. Carabuena, Lucita Lu Carabuena, Martin G. Lu, and Ernesto L. Movilla were elected members of the Board of Directors. On the same day, an organizational meeting was held and the Board of Directors elected Ernesto Movilla as Administrative Manager. He occupied the said position up to the time of his death.

On April 2, 1991, the Department of Labor and Employment conducted a routine inspection on Mainland and found that it committed irregularities in the conduct of its business: underpayment of wages under R.A. 6727 and RTWPB-XI-01; non-implementation of Wage Order No. RTWPB-XI-02; unpaid wages for 1989 and 1990; non-payment of holiday pay and service incentive leave pay; and unpaid 13th month pay, representing the remaining balance for 1990. On the basis of this finding, Mainland was ordered by DOLE to pay thirteen employees, including Movilla, the total amount of P309,435.89, representing their salaries, holiday pay, service incentive leave pay differentials, unpaid wages, and 13th month pay. All the employees listed in the DOLE order were paid by Mainland, except Ernesto Movilla.

On October 8, 1991, Ernesto Movilla filed a case against Mainland and/or Lucita, Robert, and Ellen, all surnamed Carabuena, for unpaid wages, separation pay, and attorney’s fees with the Department of Labor and Employment, Regional Arbitration, Branch XI, Davao City. On February 29, 1992, Ernesto Movilla died while the case was being tried by the Labor Arbiter and was promptly substituted by his heirs, private respondents herein, with the consent of the Labor Arbiter.

The NLRC found that Movilla had worked as an administrative officer of the company for several years and was given a fixed salary every month. A joint affidavit executed by Juanito S. Malubay and Delia S. Luciano, Project Engineer and Personnel-In-Charge, respectively, of Mainland, attested that they personally knew Movilla and that he was employed in the company. A Premium Certification issued by an authorized representative of petitioners was also presented to show his actual monthly earnings as well as his monthly contributions to the SSS, Medicare, and ECC. The NLRC further found no showing that, after his election as Administrative Manager, Movilla was excluded from the coverage of the SSS, Medicare, and ECC, and no showing of any change in the duties he performed as Administrative Officer and as Administrative Manager. The DOLE investigation had also found that Mainland transgressed several labor standard laws against its employees.

• Grave Abuse of Discretion: Petitioners argued that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction when it nullified the decision of the Labor Arbiter dismissing Movilla’s complaint for lack of jurisdiction.
• SEC Jurisdiction: Petitioners maintained that, because Ernesto Movilla was a corporate officer, the controversy as to his compensation was within the jurisdiction of the SEC as mandated by P.D. 902-A and not with the NLRC.

• Jurisdiction (NLRC vs. SEC): Whether the NLRC or the SEC has jurisdiction over Ernesto Movilla’s claim for unpaid wages and separation pay against Mainland Construction Co., Inc.
• Employer-Employee Relationship: Whether Ernesto Movilla was an employee of Mainland Construction Co., Inc., such that his claims constitute a labor dispute.
• Grave Abuse of Discretion: Whether the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction in reversing the Labor Arbiter’s dismissal.

• Jurisdiction (NLRC vs. SEC): NLRC. The claim involved a labor dispute, not an intra-corporate matter, and Article 217 of the Labor Code confers jurisdiction on the NLRC.
• Employer-Employee Relationship: Yes. Movilla was an employee; his fixed salary, SSS registration, deductions, and unchanged duties after election as Administrative Manager established an employer-employee relationship, and a corporate officer may also be an employee.
• Grave Abuse of Discretion: No. The NLRC’s findings were supported by substantial evidence, and no grave abuse of discretion was shown.

• Jurisdiction (NLRC vs. SEC): For the SEC to 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, partners or associates themselves. The mere fact that the parties involved are all stockholders, or that the parties are the stockholders and the corporation, does not necessarily place the dispute within the ambit of SEC jurisdiction. The better policy is 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. Not every conflict between the corporation and its stockholders involves corporate matters that only the SEC can resolve. Here, the claim for unpaid wages and separation pay filed by Movilla against Mainland involved a labor dispute. It did not involve an intra-corporate matter, even when it was between a stockholder and a corporation. It related to an employer-employee relationship distinct from the corporate relationship of one with the other. Thus, the NLRC had jurisdiction under Article 217 of the Labor Code.
• Employer-Employee Relationship: There was no showing of any change in the duties performed by Movilla as Administrative Officer and as Administrative Manager after his election by the Board of Directors. What came to the fore was whether there was a change in the nature of his functions, not merely the nomenclature or title given to his job. Movilla worked as an administrative officer of the company for several years and was given a fixed salary every month. A joint affidavit executed by Juanito S. Malubay and Delia S. Luciano, Project Engineer and Personnel-In-Charge, respectively, attested that they personally knew Movilla and that he was employed in the company. A Premium Certification issued by an authorized representative of petitioners showed his actual monthly earnings as well as his monthly contributions to the SSS, Medicare, and ECC. Movilla’s registration in the SSS by Mainland added strength to the conclusion that he was the corporation’s employee, as coverage by the said law is predicated on the existence of an employer-employee relationship. Mainland failed to present evidence showing that, after his election as Administrative Manager, he was excluded from the coverage of the SSS, Medicare, and ECC. The DOLE investigation also found that Mainland transgressed several labor standard laws against its employees. The NLRC correctly ruled that the claims for unpaid salaries, monetary benefits, and separation pay were not a corporate conflict; if complainant was not an employee, respondent should have contested the DOLE inspection report, but instead excluded complainant from the order of payment and did not give him responsibilities or pay his salaries for the succeeding months, which was a clear case of constructive dismissal without due process. The existence of an employer-employee relationship is a factual question, and the public respondent’s findings are accorded great weight and respect as they are supported by substantial evidence. Mainland was not prohibited from hiring its corporate officers to perform services under circumstances that made them employees. Although a director of a corporation is not, merely by virtue of his position, its employee, said director may act as an employee or accept duties that make him also an employee. Since Movilla’s complaint involved a labor dispute, the NLRC had jurisdiction under Article 217 of the Labor Code.
• Grave Abuse of Discretion: Because the NLRC had jurisdiction over the labor dispute and its conclusion that Movilla was an employee was supported by substantial evidence, no grave abuse of discretion amounting to lack or excess of jurisdiction was shown. The petition was accordingly dismissed and the NLRC decision affirmed.

• SEC jurisdiction over intra-corporate disputes — Under P.D. 902-A, the SEC may take cognizance of a case only when the controversy pertains 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, partners or associates themselves. The mere fact that the parties are all stockholders, or that the parties are the stockholders and the corporation, does not necessarily place the dispute within SEC jurisdiction. The better policy is 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. Applied here, the claim for unpaid wages and separation pay was a labor dispute, not an intra-corporate controversy, and therefore fell outside SEC jurisdiction.
• Corporate officer may also be employee — A director or corporate officer is not, merely by virtue of his position, an employee of the corporation. However, a corporation is not prohibited from hiring its corporate officers to perform services under circumstances that make them employees, and a director may act as an employee or accept duties that make him also an employee. Applied here, Movilla, though elected Administrative Manager and a stockholder/director, performed administrative functions, received a fixed monthly salary, was registered with the SSS, and had contributions deducted from his earnings; no showing existed that his duties changed after his election, so he was an employee.
• Employer-employee relationship as a factual question; substantial evidence — The existence of an employer-employee relationship is a factual question, and the NLRC’s findings, when supported by substantial evidence, are accorded great weight and respect. Applied here, the NLRC’s finding that Movilla was an employee was upheld based on his fixed salary, SSS registration, deductions, affidavits, and the DOLE inspection findings.
• Constructive dismissal without due process — The NLRC characterized the withholding of responsibilities and salaries from Movilla as constructive dismissal without due process. The Supreme Court affirmed the NLRC’s ruling on this point.

• "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." — This passage states the controlling test for SEC jurisdiction and rejects the mere stockholder or corporate relationship as sufficient to confer jurisdiction.
• "In the case at bench, the claim for unpaid wages and separation pay filed by the complainant against petitioner corporation involves a labor dispute. It does not involve an intra-corporate matter, even when it is between a stockholder and a corporation. It relates to an employer-employee relationship which is distinct from the corporate relationship of one with the other." — This is the ratio decidendi on the jurisdictional issue, characterizing Movilla’s monetary claims as a labor dispute cognizable by the NLRC.
• "It is pertinent to note that petitioner corporation is not prohibited from hiring its corporate officers to perform services under a circumstance which will make him an employee." — This passage supports the holding that a corporate officer may simultaneously be an employee for labor law purposes.
• "Moreover, although a director of a corporation is not, merely by virtue of his position, its employee, said director may act as an employee or accept duties that make him also an employee." — This excerpt defines the rule that corporate office does not automatically negate employee status and was applied to Movilla’s fixed salary and SSS coverage.

• Philippine School of Business Administration vs. Leano, G.R. No. L-58468, February 24, 1984 — Cited by the Labor Arbiter in support of dismissing the complaint for lack of jurisdiction on the ground that the controversy was intra-corporate; the Supreme Court did not adopt that jurisdictional conclusion.
• Dy vs. NLRC, G.R. No. L-68544, October 27, 1986 — Also cited by the Labor Arbiter for the same intra-corporate/SEC jurisdiction theory.
• Fortune Cement Corporation vs. NLRC, G.R. No. 79762, January 24, 1991 — Cited by the Labor Arbiter to characterize the matter as a corporate controversy under the Corporation Code.
• Magalad vs. Premiere Financing Corporation, 209 SCRA 260 (1992) — Cited for the rule that SEC jurisdiction requires the controversy to pertain to one of the enumerated relationships.
• Torio vs. Court of Appeals, 230 SCRA 626 (1994) — Cited for the rule that jurisdiction is determined by concurrent factors such as the status or relationship of the parties and the nature of the question.
• Viray vs. Court of Appeals, 191 SCRA 308 (1990) — Cited for the principle that not every conflict between a corporation and its stockholders involves corporate matters exclusively cognizable by the SEC.
• Cosmopolitan Funeral Homes, Inc. vs. Maalat, 187 SCRA 108 (1990) and Flores vs. Nuestro, 160 SCRA 568 (1988) — Cited for the proposition that SSS coverage is predicated on the existence of an employer-employee relationship.
• Cathedral School of Technology vs. NLRC, 214 SCRA 551 (1992) — Cited for the rule that the existence of an employer-employee relationship is a factual question and NLRC findings supported by substantial evidence are accorded great weight and respect.
• Gregorio Araneta University Foundation vs. Teodoro, 167 SCRA 79 (1988) — Cited for the rule that a corporation may hire its corporate officers to perform services that make them employees.

• Article 217, Labor Code of the Philippines — The Court held that because Movilla’s complaint involved a labor dispute, the NLRC has jurisdiction under this article.
• Presidential Decree No. 902-A — The Court discussed SEC jurisdiction over intra-corporate controversies. It held that the controversy did not fall under the enumerated relationships and was not intra-corporate; hence SEC jurisdiction did not attach.
• Republic Act No. 6727 and Wage Orders Nos. RTWPB-XI-01 and RTWPB-XI-02 — Cited in the DOLE inspection findings for underpayment of wages and non-implementation of wage orders; these findings formed part of the factual basis for Movilla’s monetary claims and the labor dispute.

Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.