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Gokongwei, Jr. vs.

Securities and Exchange Commission 97 SCRA 78 , April 21, 1980

In this petition for review, petitioner seeks to nullify and set aside the resolution en banc dated May 7, 1979 of
respondent Securities and Exchange Commission in SEC Case No. 1375, sustaining the findings of the San Miguel
Corporation’s Board of Directors that petitioner is engaged in a business competitive with or antagonistic to that
of the San Miguel Corporation and, therefore, ineligible for election as director, pursuant to Section 3, Article III
of the amended by-laws.
Petitioner’s allegation that respondent Commission (Securities and Exchange Commission) could not have validly
sustained the resolution of the San Miguel Corporation Board because some members of the Board were also
disqualified as they were situated like petitioner appears inapposite. The alleged disqualification of some
members of the Board was never in issue during the hearing of the disqualification case, and petitioner has not
submitted any evidence in support of his contention.
Whether the petitioner is correct.
Aside from the presumptive validity of the amended by-laws at the time the questioned resolution was
rendered by respondent Securities and Exchange Commission, the Chief Justice and six (6) Justices of this Court
had already promulgated their opinions that the validity of the amended by-laws insofar and only insofar as the
parties herein are concerned, can no longer be relitigated on the basis of the “law of the case” doctrine and,
therefore, the enforcement of the amended by-laws could not have been ipso factor stayed by the motion for
Petitioner’s assertion that the order of respondent Commission disqualifying him is based on evidence which are
“at the most, contingent and flimsy” appears unsupported by the records. The order of respondent Commission
was based principally on the affidavits of Nazario Avendaño, Ruperto Sarandi, Jr., Fernando Constantino, Jose
Picornell and Mabini Antonio and documentary evidence showing that petitioner is engaged in agricultural and
poultry business competitive with that of San Miguel Corporation. Petitioner did not adduce any evidence to
rebut the evidence of his disqualification. It is well-settled that findings of fact of administrative bodies will not
be interferred with by the courts in the absence of grave abuse of discretion on the part of said agencies, or
unless the afore-mentioned findings are not supported by substantial evidence (Central Bank v. Cloribel, 44
SCRA 307 [1972]).

Note: Related case

G.R. No. L-45911 April 11, 1979
DOCTRINE: The doctrine of "corporate opportunity" is precisely a recognition by the courts that the fiduciary
standards could not be upheld where the fiduciary was acting for two entities with competing interests. This
doctrine rests fundamentally on the unfairness, in particular circumstances, of an officer or director taking
advantage of an opportunity for his own personal profit when the interest of the corporation justly calls for
It is not denied that a member of the Board of Directors of the San Miguel Corporation has access to sensitive
and highly confidential information, such as: (a) marketing strategies and pricing structure; (b) budget for
expansion and diversification; (c) research and development; and (d) sources of funding, availability of
personnel, proposals of mergers or tie-ups with other firms.
It is obviously to prevent the creation of an opportunity for an officer or director of San Miguel Corporation, who
is also the officer or owner of a competing corporation, from taking advantage of the information which he
acquires as director to promote his individual or corporate interests to the prejudice of San Miguel Corporation
and its stockholders, that the questioned amendment of the by-laws was made. Certainly, where two
corporations are competitive in a substantial sense, it would seem improbable, if not impossible, for the
director, if he were to discharge effectively his duty, to satisfy his loyalty to both corporations and place the
performance of his corporation duties above his personal concerns.
Petitioner, as stockholder of respondent San Miguel Corporation, filed with the Securities and Exchange
Commission (SEC) a petition for "declaration of nullity of amended by-laws, cancellation of certificate of filing of
amended by- laws, injunction and damages with prayer for a preliminary injunction" against the majority of the
members of the Board of Directors and San Miguel Corporation as an unwilling petitioner.
SEC case 1375
As a first cause of action-----(1976) individual respondents amended by bylaws of the corporation, basing their
authority to do so on a resolution of the stockholders adopted on March 13, 1961, when the outstanding capital
stock of respondent corporation was only P70,139.740.00, divided into 5,513,974 common shares at P10.00 per
share and 150,000 preferred shares at P100.00 per share. At the time of the amendment, the outstanding and
paid up shares totalled 30,127,047 with a total par value of P301,270,430.00. It was contended that according to
section 22 of the Corporation Law and Article VIII of the by-laws of the corporation, the power to amend,
modify, repeal or adopt new by-laws may be delegated to the Board of Directors only by the affirmative vote of
stockholders representing not less than 2/3 of the subscribed and paid up capital stock of the corporation, which
2/3 should have been computed on the basis of the capitalization at the time of the amendment. Since the
amendment was based on the 1961 authorization, petitioner contended that the Board acted without authority
and in usurpation of the power of the stockholders.
As a second cause of action, it was alleged that the authority granted in 1961 had already been exercised in
1962 and 1963, after which the authority of the Board ceased to exist.
As a third cause of action, petitioner averred that the membership of the Board of Directors had changed since
the authority was given in 1961, there being six (6) new directors.
As a fourth cause of action, it was claimed that prior to the questioned amendment, petitioner had all the
qualifications to be a director of respondent corporation, being a Substantial stockholder thereof; that as a
stockholder, petitioner had acquired rights inherent in stock ownership, such as the rights to vote and to be
voted upon in the election of directors; and that in amending the by-laws, respondents purposely provided for
petitioner's disqualification and deprived him of his vested right as afore-mentioned hence the amended by-
laws are null and void. 1
As additional causes of action, it was alleged that:
1. corporations have no inherent power to disqualify a stockholder from being elected as a director and,
therefore, the questioned act is ultra vires and void;
2. that Andres M. Soriano, Jr. and/or Jose M. Soriano, while representing other corporations, entered into
contracts (specifically a management contract) with respondent corporation, which was allowed because the
questioned amendment gave the Board itself the prerogative of determining whether they or other persons are
engaged in competitive or antagonistic business;
3. that the portion of the amended bylaws which states that in determining whether or not a person is engaged
in competitive business, the Board may consider such factors as business and family relationship, is
unreasonable and oppressive and, therefore, void; and
4. that the portion of the amended by-laws which requires that "all nominations for election of directors ... shall
be submitted in writing to the Board of Directors at least five (5) working days before the date of the Annual
Meeting" is likewise unreasonable and oppressive.
In view of the fact that the annual stockholders' meeting of respondent corporation had been scheduled for May
10, 1977, petitioner filed with respondent Commission a Manifestation stating that he intended to run for the
position of director of respondent corporation. Thereafter, respondents filed a Manifestation with respondent
Commission, submitting a Resolution of the Board of Directors of Respondent Corporation disqualifying and
precluding petitioner from being a candidate for director unless he could submit evidence on May 3, 1977 that
he does not come within the disqualifications specified in the amendment to the by-laws, subject matter of SEC
Case No. 1375. By reason thereof, petitioner filed a manifestation and motion to resolve pending incidents in
the case and to issue a writ of injunction, alleging that private respondents were seeking to nullify and render
ineffectual the exercise of jurisdiction by the respondent Commission, to petitioner's irreparable damage and
prejudice, Allegedly despite a subsequent Manifestation to prod respondent Commission to act, petitioner was
not heard prior to the date of the stockholders' meeting.
Petitioner alleges that there appears a deliberate and concerted inability on the part of the SEC to act hence
petitioner came to this Court.
SEC. CASE NO. 1423
Petitioner likewise alleges that, having discovered that respondent corporation has been investing corporate
funds in other corporations and businesses outside of the primary purpose clause of the corporation, in violation
of section 17 1/2 of the Corporation Law.
With respect to the afore-mentioned SEC cases, it is petitioner's contention before this Court that respondent
Commission gravely abused its discretion when it failed to act with deliberate dispatch on the motions of
petitioner seeking to prevent illegal and/or arbitrary impositions or limitations upon his rights as stockholder of
respondent corporation, and that respondent are acting oppressively against petitioner, in gross derogation of
petitioner's rights to property and due process. He prayed that this Court direct respondent SEC to act on
collateral incidents pending before it.
1. Whether or not amended by-laws are valid is purely a legal question which public interest requires to be
2. Whether or not the amended by-laws of SMC of disqualifying a competitor from nomination or election to the
Board of Directors of SMC are valid and reasonable
3. Whether or not respondent SEC gravely abused its discretion in denying petitioner's request for an
examination of the records of San Miguel International Inc., a fully owned subsidiary of San Miguel Corporation
1. Yes. It is settled that the doctrine of primary jurisdiction has no application where only a question of law is
involved. 8a Because uniformity may be secured through review by a single Supreme Court, questions of law
may appropriately be determined in the first instance by courts. 8b In the case at bar, there are facts which
cannot be denied, viz.: that the amended by-laws were adopted by the Board of Directors of the San Miguel
Corporation in the exercise of the power delegated by the stockholders ostensibly pursuant to section 22 of the
Corporation Law; that in a special meeting on February 10, 1977 held specially for that purpose, the amended
by-laws were ratified by more than 80% of the stockholders of record; that the foreign investment in the
Hongkong Brewery and Distellery, a beer manufacturing company in Hongkong, was made by the San Miguel
Corporation in 1948; and that in the stockholders' annual meeting held in 1972 and 1977, all foreign
investments and operations of San Miguel Corporation were ratified by the stockholders.
2. Yes. Petitioner claims that the amended by-laws are invalid and unreasonable because they were tailored to
suppress the minority and prevent them from having representation in the Board", at the same time depriving
petitioner of his "vested right" to be voted for and to vote for a person of his choice as director.
Upon the other hand, respondents Andres M. Soriano, Jr., Jose M. Soriano and San Miguel Corporation content
that ex. conclusion of a competitor from the Board is legitimate corporate purpose, considering that being a
competitor, petitioner cannot devote an unselfish and undivided Loyalty to the corporation; that it is essentially
a preventive measure to assure stockholders of San Miguel Corporation of reasonable protective from the
unrestrained self-interest of those charged with the promotion of the corporate enterprise; that access to
confidential information by a competitor may result either in the promotion of the interest of the competitor at
the expense of the San Miguel Corporation, or the promotion of both the interests of petitioner and respondent
San Miguel Corporation, which may, therefore, result in a combination or agreement in violation of Article 186
of the Revised Penal Code by destroying free competition to the detriment of the consuming public.
LAW -- In this jurisdiction, under section 21 of the Corporation Law, a corporation may prescribe in its by-laws
"the qualifications, duties and compensation of directors, officers and employees ... " This must necessarily refer
to a qualification in addition to that specified by section 30 of the Corporation Law, which provides that "every
director must own in his right at least one share of the capital stock of the stock corporation of which he is a
director ... " In Government v. El Hogar, 14 the Court sustained the validity of a provision in the corporate by-law
requiring that persons elected to the Board of Directors must be holders of shares of the paid up value of
P5,000.00, which shall be held as security for their action, on the ground that section 21 of the Corporation Law
expressly gives the power to the corporation to provide in its by-laws for the qualifications of directors and is
"highly prudent and in conformity with good practice. "
B. NO VESTED RIGHT OF STOCKHOLDER TO BE ELECTED DIRECTOR -- Pursuant to section 18 of the Corporation
Law, any corporation may amend its articles of incorporation by a vote or written assent of the stockholders
representing at least two-thirds of the subscribed capital stock of the corporation If the amendment changes,
diminishes or restricts the rights of the existing shareholders then the disenting minority has only one right, viz.:
"to object thereto in writing and demand payment for his share." Under section 22 of the same law, the owners
of the majority of the subscribed capital stock may amend or repeal any by-law or adopt new by-laws. It cannot
be said, therefore, that petitioner has a vested right to be elected director, in the face of the fact that the law at
the time such right as stockholder was acquired contained the prescription that the corporate charter and the
by-law shall be subject to amendment, alteration and modification.


THE OTHER CORPORATION, HAS BEEN SUSTAINED AS VALID -- section 21 of the Corporation Law expressly
provides that a corporation may make by-laws for the qualifications of directors. Thus, it has been held that an
officer of a corporation cannot engage in a business in direct competition with that of the corporation where he
is a director by utilizing information he has received as such officer, under "the established law that a director or
officer of a corporation may not enter into a competing enterprise which cripples or injures the business of the
corporation of which he is an officer or director.
It is also well established that corporate officers "are not permitted to use their position of trust and confidence
to further their private interests." In a case where directors of a corporation cancelled a contract of the
corporation for exclusive sale of a foreign firm's products, and after establishing a rival business, the directors
entered into a new contract themselves with the foreign firm for exclusive sale of its products, the court held
that equity would regard the new contract as an offshoot of the old contract and, therefore, for the benefit of
the corporation, as a "faultless fiduciary may not reap the fruits of his misconduct to the exclusion of his
principal. 28
3. YEs. Pursuant to the second paragraph of section 51 of the Corporation Law, "(t)he record of all business
transactions of the corporation and minutes of any meeting shall be open to the inspection of any director,
member or stockholder of the corporation at reasonable hours."
The stockholder's right of inspection of the corporation's books and records is based upon their ownership of
the assets and property of the corporation. It is, therefore, an incident of ownership of the corporate property,
whether this ownership or interest be termed an equitable ownership, a beneficial ownership, or a ownership.
This right is predicated upon the necessity of self-protection. It is generally held by majority of the courts that
where the right is granted by statute to the stockholder, it is given to him as such and must be exercised by him
with respect to his interest as a stockholder and for some purpose germane thereto or in the interest of the
corporation. In other words, the inspection has to be germane to the petitioner's interest as a stockholder, and
has to be proper and lawful in character and not inimical to the interest of the corporation. In the case at bar,
considering that the foreign subsidiary is wholly owned by respondent San Miguel Corporation and, therefore,
under its control, it would be more in accord with equity, good faith and fair dealing to construe the statutory
right of petitioner as stockholder to inspect the books and records of the corporation as extending to books and
records of such wholly subsidiary which are in respondent corporation's possession and control.
WHEREFORE, judgment is hereby rendere GRANTING the petition by allowing petitioner to examine the books
and records of San Miguel International, Inc. as specified in the petition. The petition, insofar as it assails the
validity of the amended by- laws and the ratification of the foreign investment of respondent corporation, for
lack of necessary votes, is hereby DISMISSED. No costs.

CITATION: G.R. No. 151969


• (1996) During the Annual Stockholders’ Meeting of petitioner Valle Verde Country Club, Inc. (VVCC), the
following were elected as members of the VVCC Board of Directors:
Ernesto Villaluna,
Jaime C. Dinglasan (Dinglasan),
Eduardo Makalintal (Makalintal),
Francisco Ortigas III,
Victor Salta,
Amado M. Santiago, Jr.,
Fortunato Dee,
Augusto Sunico and
Ray Gamboa

• From the years 1997-2001, the required quorum could not be obtained. Consequently, the above-named
directors continued to serve in the VVCC board in a hold-over capacity.

• 1998, Dinglasan resigned. Hence a meeting on the same year was held by the remaining directors, still
constituting a quorum and elected ERIC ROXAS to fill in the vacancy.

• Makalintal also resigned and was replaced by JOSE RAMIREZ, who was elected by the remaining members of
the board.

• Respondent AFRICA, a member of the VVCC, questioned the election of ROXAS and RAMIREZ as members of
the board with SEC and RTC. Respondent contended that the election was contrary to Sec. 29, in relation to
Sec. 23 of the Corporation Code. He claims that a year after the election of Makalintal as well as those of the
other members should be considered to have already been expired. Thus, the vacancy should have been filled
by the stockholders in a regular or special meeting called for that purpose, and not by the remaining
members of the Board of VVCC.
• Moreover, he contends that for the members to exercise the authority to fill in vacancies in the board, Sec. 29
requires that there should be an unexpired term during which the successor shall serve and since
Makalintal´s tern had already expired, with the lapse of one year, there is no more unexpired term that could

ISSUE (s):
Whether the remaining directors of the corporation´s board, still constituting a quorum, can elect another
director to fill in a vacancy caused by the resignation of a hold over director.

CAVEAT!! Taas kaayu ang discussion sa ruling but promise, worth it basahon kay dghan key points. :)

Section 23 of the Corporation Code declares that:
“the board of directors…shall hold office for one (1) year until their successors are elected and qualified,” it
means that the term of the members of the board of directors shall be only for one year—their term expires one
year after election to the office;
The holdover period—that time from the lapse of one year from a member’s election to the Board and until
his successor’s election and qualification—is not part of the director’s original term of office, nor is it a new
term.—Based on the above discussion, when Sectiontt 23 of the Corporation Code declares that “the board of
directors…shall hold office for one (1) year until their successors are elected and qualified,” we construe the
provision to mean that the term of the members of the board of directors shall be only for one year; their term
expires one year after election to the office. The holdover period—that time from the lapse of one year from a
member’s election to the Board and until his successor’s election and qualification—is not part of the
director’s original term of office, nor is it a new term; the holdover period, however, constitutes part of his
tenure. Corollary, when an incumbent member of the board of directors continues to serve in a holdover
capacity, it implies that the office has a fixed term, which has expired, and the incumbent is holding the
succeeding term.

In the case at bar, After the lapse of one year from his election as member of the VVCC Board in 1996,
Makalintal’s term of office is deemed to have already expired. That he continued to serve in the VVCC Board in a
holdover capacity cannot be considered as extending his term. To be precise, Makalintal’s term of office began
in 1996 and expired in 1997, but, by virtue of the holdover doctrine in Section 23 of the Corporation Code, he
continued to hold office until his resignation on November 10, 1998. This holdover period, however, is not to be
considered as part of his term, which, as declared, had already expired.
With the expiration of Makalintal’s term of office, a vacancy resulted which, by the terms of Section 2911 of the
Corporation Code, must be filled by the stockholders of VVCC in a regular or special meeting called for the
purpose. To assume—as VVCC does—that the vacancy is caused by Makalintal’s resignation in 1998, not by the
expiration of his term in 1997, is both illogical and unreasonable. His resignation as a holdover director did not
change the nature of the vacancy; the vacancy due to the expiration of Makalintal’s term had been created long
before his resignation.

The theory of delegated power of the board of directors similarly explains why, under Section 29 of the
Corporation Code, in cases where the vacancy in the corporation’s board of directors is caused not by the
expiration of a member’s term, the successor “so elected to fill in a vacancy shall be elected only for the
unexpired term of his predecessor in office.”—The underlying policy of the Corporation Code is that the
business and affairs of a corporation must be governed by a board of directors whose members have stood for
election, and who have actually been elected by the stockholders, on an annual basis. Only in that way can the
directors’ continued accountability to shareholders, and the legitimacy of their decisions that bind the
corporation’s stockholders, be assured.

The shareholder vote is critical to the theory that legitimizes the exercise of power by the directors or
officers over properties that they do not own. This theory of delegated power of the board of directors similarly
explains why, under Section 29 of the Corporation Code, in cases where the vacancy in the corporation’s board
of directors is caused not by the expiration of a member’s term, the successor “so elected to fill in a vacancy
shall be elected only for the unexpired term of his predecessor in office.” The law has authorized the remaining
members of the board to fill in a vacancy only in specified instances, so as not to retard or impair the
corporation’s operations; yet, in recognition of the stockholders’ right to elect the members of the board, it
limited the period during which the successor shall serve only to the “unexpired term of his predecessor in

Title: Matling Industrial And Commercial Corporation vs Ricardo R. Coros

Reference: G.R. No. 157802 October 13, 2010
Topic: Corporate Officers

Ricardo Coros filed on August 10, 2000 a complaint for illegal suspension and illegal dismissal against Matling
and some of its corporate officers in the NLRC after his dismissal by Matling as its Vice President for Finance and
Administration. Petitioners moved to dismiss the complaint, raising the ground that the complaint pertained to
the jurisdiction of the Securities and Exchange Commission (SEC) due to the controversy being intra-corporate
because the respondent was a member of Matlings Board of Directors aside from being its Vice-President for
Finance and Administration prior to his termination. 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.
The case was dismissed by the Labor Arbiter on the ground that the controversy is an intra-corporate dispute
considering that the respondent is a corporate officer of the corporation, hence, it is properly cognizable by the
SEC. On appeal, the NLRC ruled that respondent was not a corporate officer by virtue of his position in Matling,
albeit high ranking and managerial, not being among the positions listed in Matling’s Constitution and By-Laws.
The CA also affirmed the decision of the NLRC.
Whether or not Coros was a corporate officer of Matling
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, 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. 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 occupies no office and generally is employed not by the 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.
Thus, pursuant to the above provision (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 Matling’s 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.

Corporation Law
Intra-corporate Controversy
RAUL C. COSARE, Petitioner,
G.R. No. 201298, February 5, 2014

Cosare was employed as a salesman by Arevalo, who was then in the business of selling broadcast
equipment needed by television networks and production houses. In December 2000, Arevalo set up the
company Broadcom, still to continue the business of trading communication and broadcast equipment. Cosare
was named an incorporator of Broadcom, having been assigned 100 shares of stock with par value of P1.00 per
share. In October 2001, Cosare was promoted to the position of Assistant Vice President for Sales (AVP for Sales)
and Head of the Technical Coordination.
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice President for Sales and thus,
became Cosare’s immediate superior. On March 23, 2009, Cosare sent a confidential memo to Arevalo to inform
him of the anomalies which were allegedly being committed by Abiog against the company. Arevalo failed to act
on Cosare’s accusations and instead called Cosare for a meeting and was asked to tender his resignation in
exchange for "financial assistance" in the amount of P300,000.00. Cosare refused to comply with the directive.
On March 30, 2009, Cosare received a memo charging him of serious misconduct and willful breach of
trust. Cosare was precluded from reporting for work on March 31, 2009, and was instead instructed to wait at
the office’s receiving section. On April 1, 2009, Cosare was totally barred from entering the company premises,
and was told to merely wait outside the office building for further instructions.
On April 3, 2009, Cosare filed the a labor complaint, claiming that he was constructively dismissed from
employment by the respondents. He further argued that he was illegally suspended, as he placed no serious and
imminent threat to the life or property of his employer and co-employees. In refuting Cosare’s complaint, the
respondents argued that Cosare was neither illegally suspended nor dismissed from employment.
The Labor Arbiter rendered his Decision dismissing the complaint on the ground of Cosare’s failure to
establish that he was dismissed, constructively or otherwise, from his employment. Cosare appealed the LA
decision to the NLRC. The NLRC rendered its Decision reversing the Decision of the Labor Arbiter, and found that
the Respondents are found guilty of Illegal Constructive Dismissal. Thereafter, the CA rendered the assailed
Decision granting the respondents’ petition. It agreed with the respondents’ contention that the case involved
an intra-corporate controversy which, pursuant to Presidential Decree No. 902-A, as amended, was within the
exclusive jurisdiction of the RTC.

1. Whether or not the case instituted by Cosare was an intra-corporate dispute that was within the original
jurisdiction of the RTC, and not of the LAs
It is not an intra-corporate controversy.
An intra-corporate controversy, which falls within the jurisdiction of regular courts, has been regarded in
its broad sense to pertain to disputes that involve any of the following relationships: (1) between the
corporation, partnership or association and the public; (2) between the corporation, partnership or association
and the state in so far as its franchise, permit or license to operate is concerned; (3) between the corporation,
partnership or association and its stockholders, partners, members or officers; and (4) among the stockholders,
partners or associates, themselves.
Settled jurisprudence, however, qualifies that when the dispute involves a charge of illegal dismissal, the
action may fall under the jurisdiction of the LAs upon whose jurisdiction, as a rule, falls termination disputes and
claims for damages arising from employer-employee relations as provided in Article 217 of the Labor Code.
Consistent with this jurisprudence, the mere fact that Cosare was a stockholder and an officer of Broadcom at
the time the subject controversy developed failed to necessarily make the case an intra-corporate dispute.
It is only when the officer claiming to have been illegally dismissed is classified as such corporate
officer that the issue is deemed an intra-corporate dispute which falls within the jurisdiction of the trial
It was held that there are two circumstances which must concur in order for an individual to be
considered a corporate officer, as against an ordinary employee or officer, namely: (1) the creation of the
position is under the corporation’s charter or by-laws; and (2) the election of the officer is by the directors or
In this case, Cosare, although an officer of Broadcom for being its AVP for Sales, was not a "corporate
officer" as the term is defined by law.
Although a blanket authority provided in the by-laws for the Board’s appointment of such other officers
as it may deem necessary and proper, the respondents failed to sufficiently establish that the position of AVP for
Sales was created by virtue of an act of Broadcom’s board, and that Cosare was specifically elected or appointed
to such position by the directors.
Further, it was held in Marc II Marketing, Inc. v. Joson that an enabling clause in a corporation’s by-laws
empowering its board of directors to create additional officers, even with the subsequent passage of a board
resolution to that effect, cannot make such position a corporate office. The board of directors has no power to
create other corporate offices without first amending the corporate by-laws so as to include therein the newly
created corporate office. "To allow the creation of a corporate officer position by a simple inclusion in the
corporate by-laws of an enabling clause empowering the board of directors to do so can result in the
circumvention of that constitutionally well-protected right (of every employee to security of tenure).
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the case’s filing did not
necessarily make the action an intra- corporate controversy. "Not all conflicts between the stockholders and the
corporation are classified as intra-corporate. There are other facts to consider in determining whether the
dispute involves corporate matters as to consider them as intra-corporate controversies."
The Court has ruled that in determining the existence of an intra-corporate dispute, the status or
relationship of the parties and the nature of the question that is the subject of the controversy must be taken
into account. Considering that the pending dispute particularly relates to Cosare’s rights and obligations as a
regular officer of Broadcom, instead of as a stockholder of the corporation, the controversy cannot be deemed
Controversy Test
Under the nature of the controversy test, the incidents of that relationship must also be considered for
the purpose of ascertaining whether the controversy itself is intra-corporate. The controversy must not only be
rooted in the existence of an intra-corporate relationship, but must as well pertain to the enforcement of the
parties’ correlative rights and obligations under the Corporation Code and the internal and intra-corporate
regulatory rules of the corporation. If the relationship and its incidents are merely incidental to the controversy
or if there will still be conflict even if the relationship does not exist, then no intra-corporate controversy exists.

SPI Tech., Inc. vs Mapua,

G.R. No. 191154, April 7, 2014

Victoria K. Mapua (Mapua) alleged that she was hired in 2003 by SPI Technologies, Inc. (SPI) and was the
Corporate Development’s Research/Business Intelligence Unit Head and Manager of the company. Subsequently
in August 2006, the then Vice President and Corporate Development Head, Peter Maquera (Maquera) hired
Elizabeth Nolan (Nolan) as Mapua’s supervisor.
Sometime in October 2006, the hard disk on Mapua’s laptop crashed, causing her to lose files and data.
Mapua informed Nolan and her colleagues that she was working on recovering the lost data and asked for their
patience for any possible delay on her part in meeting deadlines. Subsequently, Nolan informed Mapua that she
was realigning Mapua’s position to become a subordinate of co-manager Sameer Raina (Raina) due to her
missing a work deadline.
Mapua noticed that her colleagues began to ostracize and avoid her. Nolan and Raina started giving out
majority of her research work and other duties under Healthcare and Legal Division to the rank-and-file staff.
Mapua lost about 95% of her work projects and job responsibilities. Mapua asked the Human Resource
Department if she can be transferred to another department within SPI but this never happened.
Raina informed Mapua over the phone that her position was considered redundant and that she is
terminated from employment effective immediately. Villanueva notified Mapua that she should cease reporting
for work the next day.
Mapua filed with the Labor Arbiter (LA) a complaint for illegal dismissal, claiming reinstatement or if
deemed impossible, for separation pay. She contended that her position as Corporate Development Manager is
not redundant.
She cited that SPI was in fact actively looking for her replacement after she was terminated. In an
affidavit Mapua submitted, she alleged that on July 16, 2007, Prime Manpower Resources Development (Prime
Manpower) posted an advertisement on the website of Jobstreet Philippines for the employment of a Corporate
Development Manager in an unnamed Business Process Outsourcing (BPO) company located in Parañaque City.
Mapua suspected that this advertisement was for SPI because the writing style used was similar to Raina’s. She
also claimed that SPI is the only BPO office in Parañaque City at that time. Thereafter, she applied for the
position under the pseudonym of "Jeanne Tesoro". On the day of her interview with Prime Manpower’s
consultant, Ms. Portia Dimatulac (Dimatulac), the latter allegedly revealed to Mapua that SPI contracted Prime
Manpower’s services to search for applicants for the Corporate Development Manager position.
The Labor Arbiter rendered a decision in favor of Mapua holding Villanueva, Nolan, Maquera and Raina
as solidary liable with the SPI Tech.

Issue: Whether or not the officers may be held solidarily liable with of SPI Tech, Inc.

On the issue of the solidary obligation of the corporate officers impleaded vis-à-vis the corporation for
Mapua’s illegal dismissal, "[i]t is hornbook principle that personal liability of corporate directors, trustees or
officers attaches only when:
a) They assent to a patently unlawful act of the corporation, or when they are guilty of bad faith or gross
negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the
corporation, its stockholders or other persons;
b) They consent to the issuance of watered down stocks or when, having knowledge of such issuance, do
not forthwith file with the corporate secretary their written objection;
c) They agree to hold themselves personally and solidarily liable with the corporation; or
d) they are made by specific provision of law personally answerable for their corporate action."

In this case, while the Court finds Mapua’s averments against Villanueva, Nolan, Maquera and Raina as
detailed and exhaustive, the Court takes notice that these are mostly suppositions on her part. Thus, the Court
cannot apply the above-enumerated exceptions when a corporate officer becomes personally liable for the
obligation of a corporation to this case.