Removal of Corporate Officer: An Intra-Corporate Dispute

ImageThe Supreme Court recently ruled that a corporate officer’s dismissal or removal is always a corporate act and/or an intra-corporate controversy, over which the Regional Trial Court, and not the National Labor Relations Commission (NLRC) has original and exclusive jurisdiction.

This was the Court’s ruling in Garcia vs. Eastern Telecommunications, Inc. (G.R. No. 173115, April 16, 2009) which had its genesis when Atty. Virgilio R. Garcia was placed under preventive suspension for complaints of sexual harassment. After the period of preventive suspension, Atty. Garcia was terminated as Vice President and Head of Business Support Services and Human Resource Departments of the Eastern Telecommunications Philippines, Inc. (ETPI) by Atty. Salvador C. Hizon, President/Chief Executive Officer of ETPI. Aggrieved by his termination from ETPI, Atty. Garcia filed a case before the National Labor Relations Commission (NLRC) for illegal dismissal with prayer for full back wages.

The Labor Arbiter ruled that the preventive suspension and the subsequent dismissal of Atty. Garcia are illegal. However, the NLRC, on appeal, dismissed the case for lack of jurisdiction. Unperturbed, Atty. Garcia appealed the dismissal of the case to the Court of Appeals (CA). Upon review of the case, the appellate court dismissed the case for lack of merit. The appellate court ruled that Atty. Garcia was a corporate officer at the time he was removed from ETPI and that the issue of lack of jurisdiction was timely raised in ETPI’s reply memorandum,

When the case was appealed to it, the Supreme Court reiterated that “in a long line of cases, [it has been held that] a corporate officer’s dismissal or removal is always a corporate act and/or an intra-corporate controversy, over which the Securities and Exchange Commission [SEC] (now the Regional Trial Court) has original and exclusive jurisdiction.” The decision clarified, however, that before a dismissal could be considered to be an intra-corporate dispute, “it has to be first established that the person removed or dismissed was a corporate officer. “Corporate officers” in the context of Presidential Decree No. 902-A are those officers of the corporation who are given that character by the Corporation Code or by the corporation’s by-laws.  There are three specific officers whom a corporation must have under Section 25 of the Corporation Code. These are the president, secretary and the treasurer.  The number of officers is not limited to these three.  A corporation may have such other officers as may be provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor or general manager.  The number of corporate officers is thus limited by law and by the corporation’s by-laws.”

Atty. Garcia is a corporate officer of ETPI. His termination from ETPI is an intra-corporate dispute not cognizable by the Labor Arbiter, the High Court finally concluded resulting in the dismissal of the case. (Atty. Joan F. Boma)