CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y.

2019-2020

Board of Directors: Delegation of Authority to Corporate Officers. Corporate Officers

LESLIE OKOL vs. SLIMMERS WORLD INTERNATIONAL, BEHAVIOR

MODIFICATIONS, INC., and RONALD JOSEPH MOY
G.R. NO. 160146 : December 11, 2009 : CARPIO, J.

FACTS:
Slimmers World International operating under the name Behavior Modifications, Inc.
(Slimmers World) employed petitioner Leslie Okol (Okol) as a management trainee, she rose up
the ranks to become Head Office Manager and then Director and Vice President from 1996 until
her dismissal on 22 September 1999. Okol filed a complaint with the Arbitration branch of the
NLRC against Slimmers World, Behavior Modifications, Inc. and Moy (collectively called
respondents) for illegal suspension, illegal dismissal and money claims.

The labor arbiter ruled that Okol was the vice-president of Slimmers World at the time of
her dismissal. Since it involved a corporate officer, the dispute was an intra-corporate
controversy falling outside the jurisdiction of the Arbitration branch.

ISSUE:
Who has jurisdiction over the case?

RULING:
Section 25 of the Corporation Code enumerates corporate officers as the president,
secretary, treasurer and such other officers as may be provided for in the by-laws. In Tabang v.
NLRC, we 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.

Clearly, from the documents submitted by respondents, petitioner was a director and
officer of Slimmers World. The charges of illegal suspension, illegal dismissal, unpaid
commissions, reinstatement and back wages imputed by petitioner against respondents fall
squarely within the ambit of intra-corporate disputes. The question of remuneration involving a
stockholder and officer, not a mere employee, is not a simple labor problem but a matter that
comes within the area of corporate affairs and management and is a corporate controversy in
contemplation of the Corporation Code.

It is a settled rule that jurisdiction over the subject matter is conferred by law. The
determination of the rights of a director and corporate officer dismissed from his employment as
well as the corresponding liability of a corporation, if any, is an intra-corporate dispute subject
to the jurisdiction of the regular courts. Thus, it is not the NLRC but the regular courts which
have jurisdiction over the present case.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Board of Directors: Delegation of Authority to Corporate Officers. Corporate Officers

GLORIA V. GOMEZ vs. PNOC DEVELOPMENT AND MANAGEMENT

CORPORATION (PDMC
G.R. NO. 174044 : November 27, 2009 : ABAD, J.

FACTS:
In May 1994, Gomez, was hired by the President of PDMC, a GOCC, as corporate
secretary and legal counsel and later re-hired as administrator and legal counsel. In 1998, the
next president extended her term as administrator beyond her retirement age. In 1999, the new
board of directors removed her as corporate secretary and questioned her continued
employment as administrator. The board sought advice from its legal department which
expressed that Gomez’s term extension was an ultra vires act of the former president. It
reasoned that since her position was functionally that of a vice-president or general manager,
her term could only be extended under the company’s by-laws only with the approval of the
board. Consequently, the board decided to terminate her services retroactive to the date of her
retirement.

Gomez conceded that as corporate secretary, she served only as a corporate officer. But,
when they named her administrator, she became a regular managerial employee. Consequently,
the board did not have to approve either her appointment as such or the extension of her term.
PDMC claims that as administrator petitioner Gomez performed functions that were similar to
those of its vice-president or its general manager, corporate positions that were mentioned in
the company’s by-laws. It points out that Gomez was third in the line of command, next only to
the chairman and president, and had been empowered to make major decisions and manage the
affairs of the company.

ISSUE:
Is Gomez a corporate officer?

RULING:
Ordinary company employees are generally employed not by action of the directors and
stockholders but by that of the managing officer of the corporation who also determines the
compensation to be paid such employees. Corporate officers, on the other hand, are elected or
appointed by the directors or stockholders, and are those who are given that character either by
the Corporation Code or by the corporation’s by-laws. Here, it was the PDMC president who
appointed petitioner Gomez administrator, not its board of directors or the stockholders. The
president alone also determined her compensation package. Moreover, the administrator was
not among the corporate officers mentioned in the by-laws.

As to the claim if PDMC that Gomez was performing functions that were similar to those
of its vice-president or its general manager (corporate positions mentioned in the by-laws), the
relationship of a person to a corporation, whether as officer or agent or employee, is not
determined by the nature of the services he performs but by the incidents of his relationship
with the corporation as they actually exist. Here, respondent PDMC hired petitioner Gomez as
an ordinary employee without board approval as was proper for a corporate officer. Gomez
served concurrently as corporate secretary for a time is immaterial. A corporation is not
prohibited from hiring a corporate officer to perform services under circumstances which will
make him an employee.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Board of Directors: Delegation of Authority to Corporate Officers. Corporate Officers

E.B. VILLAROSA & PARTNER CO., LTD., vs. HON. HERMINIO I. BENITO
G.R. No. 136426 : August 6, 1999 : GONZAGA-REYES, J.

FACTS:
E.B. Villarosa & Partner Co., Ltd. is a limited partnership with principal office address at
102 Juan Luna St., Davao City and with branch offices at 2492 Bay View Drive, Tambo,
Parañaque, Metro Manila and Kolambog, Lapasan, Cagayan de Oro City. private respondent, as
plaintiff, filed a Complaint for Breach of Contract and Damages against petitioner, as defendant,
before the Regional Trial Court of Makati allegedly for failure of the latter to comply with its
contractual obligation in that, other than a few unfinished low cost houses, there were no
substantial developments therein. Summons, together with the complaint, were served upon the
defendant, through its Branch Manager Engr. Wendell Sabulbero at the stated address at
Kolambog, Lapasan, Cagayan de Oro City 2 but the Sheriff’s Return of Service 3 stated that the
summons was duly served “upon defendant E.B. Villarosa & Partner Co., Ltd. thru its Branch
Manager Engr. Wendell Sabulbero on May 5, 1998 at their new office Villa Gonzalo, Nazareth,
Cagayan de Oro City, and evidenced by the signature on the face of the original copy of the
summons.”

A Motion to Declare Defendant in Default was filed alleging that defendant has failed to
file an Answer despite its receipt allegedly on May 5, 1998 of the summons and the complaint, as
shown in the Sheriff’s Return. trial court issued an Order denying defendant’s Motion to Dismiss
as well as plaintiff’s Motion to Declare Defendant in Default. Defendant was given ten (10) days
within which to file a responsive pleading. The trial court stated that since the summons and
copy of the complaint were in fact received by the corporation through its branch manager
Wendell Sabulbero, there was substantial compliance with the rule on service of summons and
consequently, it validly acquired jurisdiction over the person of the defendant. Defendant, by
Special Appearance, filed a Motion for Reconsideration alleging that Section 11, Rule 14 of the
new Rules did not liberalize but, on the contrary, restricted the service of summons on persons
enumerated therein; and that the new provision is very specific and clear in that the word
“manager” was changed to “general manager”, “secretary” to “corporate secretary”, and
excluding therefrom agent and director.

ISSUE:
Does the trial court have jurisdiction over the person of the petitioner upon service of
summons to its branch manager?

RULING:
No.
When the complaint was filed by Petitioner on April 3, 1998, the 1997 Rules of Civil Procedure
was already in force. The designation of persons or officers who are authorized to accept
summons for a domestic corporation or partnership is now limited and more clearly specified in
Section 11, Rule 14 of the 1997 Rules of Civil Procedure.

The rule now states “general manager” instead of only “manager”; “corporate secretary”
instead of “secretary”; and “treasurer” instead of “cashier.” The phrase “agent, or any of its
directors” is conspicuously deleted in the new rule. A strict compliance with the mode of service
is necessary to confer jurisdiction of the court over a corporation. The officer upon whom service
is made must be one who is named in the statute; otherwise the service is insufficient. . . . . The
purpose is to render it reasonably certain that the corporation will receive prompt and proper
notice in an action against it or to insure that the summons be served on a representative so
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

integrated with the corporation that such person will know what to do with the legal papers
served on him. In other words, ‘to bring home to the corporation notice of the filing of the
action.’

The liberal construction rule cannot be invoked and utilized as a substitute for the plain
legal requirements as to the manner in which summons should be served on a domestic
corporation. we rule that the service of summons upon the branch manager of petitioner at its
branch office at Cagayan de Oro, instead of upon the general manager at its principal office at
Davao City is improper.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Board of Directors: Delegation of Authority to Corporate Officers. Corporate Officers

CAGAYAN VALLEY DRUG CORPORATION vs. COMMISSIONER OF INTERNAL

REVENUE
G.R. NO. 151413 : February 13, 2008 : VELASCO, JR., J.

FACTS:
Cagayan Valley Drug Corp. is a licensed retailer of medicine and other pharmaceutical
products. It operates two drugstores, one in Tuguegarao, Cagayan, and the other in Roxas,
Isabela, under the name and style of “Mercury Drug.” Cagayan alleged that in 1995, it granted
20% sales discounts to qualified senior citizens on purchases of medicine pursuant to Republic
Act No. (RA) 7432. Cagayan filed with the BIR a claim for tax refund/tax credit of the full
amount of the 20% sales discount it granted to senior citizens for the year 1995 in accordance
with Sec. 4 of RA 7432. Cagayan was denied the refund by the Court of Tax Appeals, hence the
latter appealed the same to the Court of Appeals. One of the issues raised before the CA is the
irregularity of the verification and certification of non-forum shopping as it was signed by the
president without any proof of authorization by the Board of Directors of Cagayan.

ISSUE:
Can Cagayan’s president sign the subject verification and certification sans the approval
of its Board of Directors?

RULING:
Yes.
The president can sign the verification and certification. The Court has recognized the
authority of some corporate officers to sign the verification and certification against forum
shopping. In Mactan-Cebu International Airport Authority v. CA, we recognized the authority of
a general manager or acting general manager to sign the verification and certificate against
forum shopping; in Pfizer v. Galan, we upheld the validity of a verification signed by an
“employment specialist” who had not even presented any proof of her authority to represent the
company; in Novelty Philippines, Inc., v. CA, we ruled that a personnel officer who signed the
petition but did not attach the authority from the company is authorized to sign the verification
and non-forum shopping certificate; and in Lepanto Consolidated Mining Company v. WMC
Resources International Pty. Ltd. (Lepanto), we ruled that the Chairperson of the Board and
President of the Company can sign the verification and certificate against non-forum shopping
even without the submission of the board’s authorization.

In sum, we have held that the following officials or employees of the company can sign the
verification and certification without need of a board resolution: (1) the Chairperson of the
Board of Directors, (2) the President of a corporation, (3) the General Manager or Acting
General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a labor case. While
the above cases do not provide a complete listing of authorized signatories to the verification
and certification required by the rules, the determination of the sufficiency of the authority was
done on a case to case basis. The rationale applied in the foregoing cases is to justify the
authority of corporate officers or representatives of the corporation to sign the verification or
certificate against forum shopping, being “in a position to verify the truthfulness and correctness
of the allegations in the petition.”
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Board of Directors: Delegation of Authority to Corporate Officers. Corporate Officers

BOARD OF INVESTMENTS vs. SR METALS, INC.

G.R. No. 219927 : October 03, 2018 : DEL CASTILLO, J.

FACTS:
Board of Investments (BOI) is an attached agency of the Department of Trade and
Industry (DTI) and is the lead government agency responsible for the promotion of investments
in the Philippines. SR Metals, Inc., on the other hand, is a corporation engaged in the business
of mining. SR Metals filed with BOI an Application for Registration as a new producer of
beneficiated nickel ore on a non-pioneer status in relation to its proposed Nickel Project. The
Sangguniang Bayan of the Municipality of Tubay issued Resolution, requesting the cancellation
of SR Metals' BOI registration. The Board resolved to withdraw SR Metals’ ITH incentive for
failure to comply with certain requirements, prompting SR Metals to elevated the case to the CA
which ruled that the latter entitled to the ITH incentive under the Omnibus Investment Code.

SR Metal argued the lack of authority of the Officer-in-Charge (OIC), BOI Managing
Head, Ma. Corazon Halili-Dichosa (OIC Halili-Dichosa), to sign the verification and certification
of non-form shopping as well as the failure of petitioner to attach material portions of the
records of the case.

ISSUE:
Does OIC Halili-Dichosa have jurisdiction to sign verification and certification of the
non-forum shopping?

RULING:
Although it appears that the verification and certification of non-forum shopping was not
among the list of official documents mentioned in Department Order No. 14-39, series of 2014,
the Court is still inclined to uphold the authority of OIC Halili-Dichosa to sign the same. In
Memorandum Order No. 2015-080, Supervising Director Halili-Dichosa was designated OIC of
petitioner in the interest of service as the Undersecretary/Managing Head was on an official
trip. Considering the rationale of the said Memorandum, the Court finds that any doubt as to the
authority of OIC Halili-Dichosa to file the instant case and to sign the verification and
certification of non-forum shopping should be resolved in favor of the government. Obviously,
OIC Halili-Dichosa caused the filing of the instant Petition in the performance of her duties and
in order to protect the interests of the government. Thus, it is more prudent for the Court to
decide the instant Petition on the merits rather than to dismiss it on a mere technicality.

Besides, in recent cases, the Court has allowed certain officials and employees to sign the
verification and certification of non-forum shopping on behalf of the company without need of a
board resolution. These are the chairperson of the board of directors, the president of a
corporation, the general manager or acting general manager, the personnel officer, the
employment specialist in a labor case, and other officials and employees who are "in a position
to verify the truthfulness and correctness of the allegations in the petition."39 In this case, the
Court considers OIC Halili-Dichosa to be in a position to verify the truthfulness and correctness
of the allegations stated in the instant Petition.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Board of Directors: Delegation of Authority to Corporate Officers. Corporate Officers

SUPREME STEEL PIPE CORPORATION and REGAN SY vs. ROGELIO BARDAJE

G.R. NO. 170811 : April 24, 2007 : CALLEJO, SR., J.

FACTS:
Supreme Steel Pipe Corporation (SSPC), a domestic corporation primarily engaged in
the business of manufacturing steel pipes, employed Rogelio Bardaje as a warehouseman. SSPC
employees were required to wear a uniform while at work.

It was a common practice among warehousemen to wear long-sleeved shirts over their
uniforms to serve as protection from heat and dust while working, and Bardaje had on a green
long-sleeved shirt over his uniform. Momentarily, security guard Christopher Barrios called him
in a loud voice, and arrogantly ordered him to remove and turn-over the long-sleeved shirt. A
heated exchange of words ensued, but the brewing scuffle between the two was averted by a co-
employee. Barrios reported the incident to the SSPC management. The next day, Bardaje
received a Memorandum from SSPC stating that pending the investigation for his alleged
violation of the company rule prohibiting "inciting a fight, harassing, coercing, intimidating
and/or threatening co-workers," he was being meted a 30-day preventive suspension.

When Bardaje reported back to work a month after, he was served with a Notice
terminating his employment. Alleging that his dismissal from service was illegal, Bardaje filed a
Complaint against SSPC and its President, Regan Sy.

ISSUE:
Can Regan Sy be held liable together with SSPC?

RULING:
It appears that respondent impleaded SSPC President Regan Sy only because he is an
officer/agent of the company. However, Sy cannot be held solidarily liable with petitioner SSPC
for the termination of respondent's employment, since there is no showing that the dismissal
was attended with malice or bad faith.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Board of Directors: Delegation of Authority to Corporate Officers. Corporate Officers

SALOME PABON and VICENTE CAMONAYAN vs. NATIONAL LABOR RELATIONS

COMMISSION and SENIOR MARKETING CORPORATION
G.R. No. 120457 : September 24, 1998 : MARTINEZ, J.

FACTS:
Complaints for illegal dismissal and non-payment of benefits were filed by petitioners
Salome Pabon and Vicente Camonayan against Senior Marketing Corporation (SMC) and its
Field Manager, R-Jay Roxas Summons and notices of hearings were sent to Roxas at SMC’s
provincial office in 13 Valley Homes, Patul Road, Santiago, Isabela which were received by its
bookkeeper, Mina Villanueva. On September 15, 1994, the Labor Arbiter rendered a judgment
by default after finding that private respondent tried to evade all the summons and orders of
hearing by refusing to claim all the registered mail addressed to it.

ISSUE:
Is Villanueva authorized to receive summons in behalf of the corporation?

RULING:
Yes.
Bookkeeper can be considered as an agent of private respondent corporation within the
purview of Section 13, Rule 14 of the old Rules of Court. The rationale of all rules with respect to
service of process on a corporation is that such service must be made to an agent or a
representative so integrated with the corporation sued as to make it a priori supposable that he
will realize his responsibilities and know what he should do with any legal papers served on him.
The bookkeeper's task is one under consideration. The job of a bookkeeper is so integrated with
the corporation that his regular recording of the corporation's "business accounts" and
"essential facts about the transactions of a business or enterprise" safeguards the corporation
from possible fraud being committed adverse to its own corporate interest.

Although it may be true that the service of summons was made on a person not
authorized to receive the same in behalf of the petitioner, nevertheless since it appears that the
summons and complaint were in fact received by the corporation through its said clerk, the
Court finds that there was substantial compliance with the rule on service of summons. Indeed
the purpose of said rule as above stated to assure service of summons on the corporation had
thereby been attained. The need for speedy justice must prevail over technicality.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Board of Directors: Delegation of Authority to Corporate Officers. Corporate Officers

VLASON ENTERPRISES CORPORATION vs. COURT OF APPEALS and

DURAPROOF SERVICES
G.R. Nos. 121662-64. July 6, 1999 : PANGANIBAN, J.
FACTS:
Poro Point Shipping Services, then acting as the local agent of Omega Sea Transport
Company of Honduras & Panama, a Panamanian company, (hereafter referred to as Omega),
requested permission for its vessel M/V Star Ace, which had engine trouble, to unload its cargo
and to store it at the Philippine Ports Authority (PPA) compound in San Fernando, La Union
while awaiting transshipment to Hong Kong. The request was approved by the Bureau of
Customs. Despite the approval, the customs personnel boarded the vessel when it docked on
January 7, 1989, on suspicion that it was the hijacked M/V Silver Med owned by Med Line
Philippines Co., and that its cargo would be smuggled into the country. The district customs
collector seized said vessel and its cargo pursuant to Section 2301, Tariff and Customs Code.

They entered into a salvage agreement with private respondent to secure and repair the
vessel which was destroyed by the typhoons that hit the province at the agreed consideration of
$1 million and “fifty percent (50%) of the cargo after all expenses, cost and taxes.” Subsequently,
the seizure was lifted for want of fraud.

Ruling that the judgment sought to be reviewed has become final and executory, the
Court of Appeals ordered the Regional Trial Court to take appropriate action on the urgent ex
parte motion for issuance of a writ of execution filed by private respondent. Pursuant thereto,
the Regional Trial Court of Manila issued a writ of possession thus placing private respondent in
possession of petitioner's barge Lawin. Hence, this petition.

The case filed by private respondent with the trial court involved multiple defendants.
Several defendants entered into a compromise agreement with private respondent. A
compromise agreement is immediately final and executory. As to these defendants therefore, the
trial court Decision had become final. Nevertheless, said decision cannot be said to have
attained finality as to petitioner, which was not a party to the compromise. Moreover, petitioner
filed a Motion for Reconsideration two days before the lapse of the reglementary period to
appeal. Execution shall issue as matter of right upon the expiration of the period to appeal if no
appeal has been duly perfected.

ISSUE:
Did the trial court acquired jurisdiction over the petitioner in this case?

RULING:
No. The sheriff's return showed that the president of petitioner corporation was served
summons through his secretary. A summons addressed to a corporation and served on the
secretary of the President binds that corporation. The secretary however, should be an employee
of the corporation sought to be summoned. In the case at bar, the secretary was not an employee
of petitioner but of Vlasons Shipping, Inc.

Acting under the impression that petitioner had been placed under its jurisdiction, the
trial court dispensed with the service on petitioner of new summons for the subsequent
amendments of the petition. But the first service of summons on petitioner was invalid. Thus,
the trial court never acquired jurisdiction over the petitioner. Not having been validly served
summons, it would be legally impossible to declare petitioner to be in default. A default
judgment cannot affect the rights of a party who was never declared in default.
CORPORATION LAW CASE DIGESTS ATTY. MA. LULU G. REYES ∫ S.Y. 2019-2020

Board of Directors: Delegation of Authority to Corporate Officers. Corporate Officers

PRIME WHITE CEMENT CORPORATION vs. HONORABLE INTERMEDIATE

APPELLATE COURT and ALEJANDRO TE
G.R. No. L-68555 : March 19, 1993 : CAMPOS, JR., J.

FACTS:
Falcon, president of Prime White Cement Corporation (PWCC) and Trazo, Board
member of PWCC entered into an agreement with Te, also a Board member of PWCC. They
agreed that the latter shall be the sole dealer of Prime White cement in Mindanao. Te already
made known to the public that he is the sole dealer of cements in Mindanao before the cement is
to be delivered, thus various hardware then approached him to be his sub-dealers and
consequently he entered into various contracts with them.

Falcon and Trazo were not authorized by the Board of PWCC to enter into such contract.
Nevertheless, the Board wished to retain the contract but they wanted some amendment which
includes the increase of the selling price per bag, decrease of the total amount of cement bags
plus the contract shall only be effective for a period of three months and not 6 years. Te refused
the counter-offer. PWCC then awarded the contract to someone else.

ISSUE:
Is PWCC correct in terminating the contract of Te, Falcon and Trazo?

RULING:
Yes.
Te is what can be called as a self-dealing director as he deals business with the same
corporation in which he is a director. There is nothing wrong per se with that. However, Sec. 32
provides that a contract of the corporation with one or more of its directors or trustees or
officers is voidable, at the option of such corporation, unless all the following conditions are
present:

1. That the presence of such director or trustee in the board meeting in which the contract was
approved was not necessary to constitute a quorum for such meeting;
2. That the vote of such director or trustee was not necessary for the approval of the contract;
3. That the contract is fair and reasonable under the circumstances; and
4. That in the case of an officer, the contract with the officer has been previously authorized by
the Board of Directors.

In this particular case, the Supreme Court focused on the fact that the contract between
PWCC and Te through Falcon and Trazo was not reasonable because of the very low selling
price. The Price at that time was at least P13.00 per bag and the original contract only stipulates
P9.70. Also, the original contract was for 6 years and there’s no clause in the contract which
protects PWCC from inflation. As a director, Te in this transaction should protect the
corporation’s interest more than his personal interest. His failure to do so is disloyalty to the
corporation. Hence, PWCC has all the rights to void the contract and look for someone else,
which it did.