MATLING INDUSTRIAL AND COMMERCIAL CORPORATION vs.

RICARDO COROS
G.R. No. 157802

October 13, 2010

FACTS:
After respondent Ricardo Coros dismissal by Matling as its Vice President for Finance and
Administration, he filed on August 10, 2000 a complaint for illegal suspension and illegal dismissal
against Matling and some of its corporate officers in the NLRC, Sub-Regional Arbitration Branch
XII, Iligan City. The petitioners moved to dismiss the complaint, raising the ground, among others,
that the complaint pertained to the jurisdiction of the Securities and Exchange Commission due
to the controversy being intra-corporate inasmuch as the respondent was a member of Matlings
Board of Directors aside from being its Vice-President 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 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 Labor Arbiter granted the petitioners
motion to dismiss, ruling that the respondent was a corporate officer. 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. On motion for reconsideration, petitioners submitted a
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.
Nonetheless, the NLRC denied the petitioners motion for reconsideration. The petitioners elevated
the issue to the CA by petition for certiorari. The CA dismissed the petition for certiorari and ruled
that 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. Motion for reconsideration was likewise denied. Hence
this petition for review on certiorari.

ISSUE:
Whether or not respondent was a corporate officer of Matling Industrial and Commercial
Corporation.

RULING:
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, 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.
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, to wit:
Thus, pursuant to 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. 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.

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[G.R. No. 117040. January 27, 2000]
RUBEN SERRANO, petitioner, vs.
NATIONAL LABOR RELATIONSCOMMISSION and ISETANN DEPARTMENT STORE, respondents

FACTS:
Ruben Serrano was the head of the security checkers section of Isetann Department Store. He
was charged with the task of supervising security checkers in their jobs (apprehending shoplifters
and preventing pilferage of merchandise). On October 11, 1991, the management sent him a
letter immediately terminating his services as security section head, effective on the same day.
The reason given by the management was retrenchment; they had opted to hire an
independent security agency as a cost-cutting measure. Serrano filed a complaint for ID, illegal
layoff, ULP, underpayment of wages and non-payment of salary and OT pay with the LA. The LA
rendered a decision in favor of Serrano. It stated that Isetann failed to establish that it had
retrenched its security division, that the petitioner was not accorded due process, etc. and even
stated that the day after Serranos dismissal, Isetann employed a safety and security supervisor
with similar duties to that of the former. The NLRC on the other hand reversed the LA but ordered
Isetann to pay separation pay equivalent to one month per year of service, unpaid salary, et al.
It held that the phase-out of the security section was a valid exercise of management prerogative
on the part of Isetann, for which the NLRC cannot substitute its judgment in the absence of bad
faith or abuse of discretion on the part of the latter; and that the security and safety supervisors
position was long in place prior to Serranos separation from the company, or the phase-out of
the Security Section.

ISSUE:
Whether the petitioners dismissal was illegal.

RULING:
Valid, but ineffectual (without legal effect)- payment of back wages, separation pay and other
monetary claims.
No. The Court held that the dismissal was due to an authorized cause under Art. 283 of the Labor
Code, i.e. redundancy. However, while an authorized cause exists, Isetann failed to follow the
procedural requirement provided by Art. 283 of LC. For termination due to authorized causes, the
employer must give a written notice of termination to the employee concerned and to the DOLE
at least 30 days prior to its effectivity. This Isetann failed to do. The question now arises as to whether
the failure of Isetann to comply with the procedural requirements renders the dismissal invalid, or,
in the event that it is valid, what the appropriate sanction or penalty must be meted out. Prior to
the doctrine laid down in the decision rendered in Wenphil Corp. NLRC in 1989, the termination of
an employee, even for just cause but without following the requisite procedure, renders such
dismissal illegal, and therefore null and void. In the Wenphil doctrine, this was reversed; the said
rule was unjust to employers. Instead, the dismissal was held to be still valid but the employer was
sanctioned by way of the payment of indemnity (damages) in that case, P1,000. The amount of
indemnity will be depended on the circumstances of each case, taking into account the gravity
of the offense committed by the employer. Now, the Court once again examines the Wenphil
doctrine. Puno says that the effect of the Wenphil doctrine was such that there has been a dismiss
now, pay later policy where the employers were able to circumvent the procedural requisites of
termination, which is more convenient than the compliance with the 30-day notice. Panganiban
said that the monetary sanctions were too insignificant, niggardly, and sometimes even late. Both
justices are of the opinion that the deprivation of due process which must be accorded to the
employee renders the dismissal illegal. Puno quoted that Legislative, Executive and Judicial
proceedings that deny due process do so under the pain of nullity. Panganiban stated that such
denial of due process renders decisions and proceedings void for lack of jurisdiction. The present
ruling of the Court held that the dismissal of the employee is merely ineffectual, not void. The
dismissal was upheld but it is ineffectual. The sanction provided was the payment of backwages
from the time of dismissal up to the decision of the court finding just or authorized cause. This was

thought to balance the interests of both parties, recognizing the employees right to notice and
at the same time the right of the employer to dismiss for any of the just and authorized causes. The
Court also responded to the arguments of Justices Puno and Panganiban by stating that the
violation in the procedural requirement of termination is not a denial of the fundamental right to
due process. This is because of the ff reasons:
1) The due process clause is a limitation on governmental powers, inapplicable to the exercise of
private power, such as in this case. The provision No person shall be deprived of life, liberty and
property without due process of law pertains only to the State, as only it has the authority to do
the same.
2) The purpose of the notice and hearing under the Due process clause is to provide an
opportunity for the employee to be heard before the power of the organized society is brought
upon the individual. Under Art. 283, however, the purpose is to give him time to prepare for the
eventual loss of his job and for DOLE to determine whether economic causes exist to justify
termination. It is not to give opportunity to be heard there is no charge against the employee
under Art. 283
3) The employer cannot be expected to be an impartial judge of his own cause.
4) Not all notice requirements are requisites of due process. Some are simply a part of a procedure
to be followed before a right granted to party can be exercised; others are an application of the
Justinian precept. Such is the case here. The failure of the employer to observe a procedure for
the termination of employment which makes the termination of employment merelyineffectual.
5) Art. 279 of the LC provides that only dismissal without just or authorized cause renders such
dismissal illegal. To consider termination without observing procedural reqts as also ID is to add
another ground for ID, thereby amending Art. 279.; Further, there is a disparity in legal treatment,
as employees who resign without giving due notice are only liable for damages; it does not make
their resignation void. In this case, the separation pay was a distinct award from the payment of
backwages as a way of penalty. Petition was denied.

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