Digest Corpo.docx

1 GRACE CHRISTIAN HIGH SCHOOL, petitioner,vs. THE COURT OF APPEALS, association would be observed. Petitioner requested the chairman of the GRACE VILLAGE ASSOCIATION, INC., ALEJANDRO G. BELTRAN, and ERNESTO election committee to change the notice to honor the 1975 by-laws L. GO, respondents.
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  1 GRACE CHRISTIAN HIGH SCHOOL , petitioner,vs. THE COURT OF APPEALS , GRACE VILLAGE ASSOCIATION, INC., ALEJANDRO G. BELTRAN, and ERNESTO L. GO, respondents. G.R. No. 108905 October 23, 1997   MENDOZA, J.:  Petitioner Grace Christian High School is an educational institution located at the Grace Village in Quezon City, while Private respondent Grace Village Association, Inc. [ Association'] is an organization of lot and/or building owners, lessees and residents at Grace Village. The srcinal 1968 by-laws provide that the Board of Directors, composed of eleven (11) members, shall serve for one (1) year until their successors are duly elected and have qualified. On 20 December 1975, a committee of the board of directors prepared a draft of an amendment to the by-laws which provides that GRACE CHRISTIAN HIGH SCHOOL representative is a permanent Director of the ASSOCIATION. However, this draft was never presented to the general membership for approval. Nevertheless, from 1975 to 1990, petitioner was given a permanent seat in the board of directors of the association. On 13 February 1990, the association's committee on election sought to change the by-laws and informed the Petitioner's school principal the proposal to make the Grace Christian High School representative as a permanent director of the association, although previously tolerated in the past elections should be reexamined. Following this advice, notices were sent to the members of the association that the provision on election of directors of the 1968 by-laws of the association would be observed. Petitioner requested the chairman of the election committee to change the notice to honor the 1975 by-laws provision, but was denied. The school then brought suit for mandamus in the Home Insurance and Guaranty Corporation (HIGC) to compel the board of directors to recognize its right to a permanent seat in the board. Meanwhile, the opinion of the SEC was sought by the association, and SEC rendered an opinion to the effect that the practice of allowing unelected members in the board was contrary to the existing by-laws of the association and to §92 of the Corporation Code (B.P. Blg. 68). This was adopted by the association in its Answer in the mandamus filed with the HIGC. The HIGC hearing officer ruled in favor of the association, which decision was affirmed by the HIGC Appeals Board and the Court of Appeals. Issue: W/N the 1975 provision giving the petitioner a permanent board seat was valid. Ruling:  No. Section 23 of the Corporation Code (and its predecessor Section 28 and 29 of the Corporation Law) leaves no room for doubt that the Board of Directors of a Corporation must be elected from among the stockholders or members. There may be corporations in which there are unelected members in the board but it is clear that in these instances, the unelected members sit as ex officio members, i.e., by virtue of and for as long as they hold a particular office (e.g. whoever is the Archbishop of Manila is considered a member of the board of Cardinal Santos Memorial Hospital, Inc.) But in the case of petitioner, there is no reason at all for its representative  2 to be given a seat in the board. Nor does petitioner claim a right to such seat by virtue of an office held. In fact it was not given such seat in the beginning. It was only in 1975 that a proposed amendment to the by-laws sought to give it one. Since the provision in question is contrary to law, the fact that it has gone unchallenged for fifteen years cannot forestall a later challenge to its validity. Neither can it attain validity through acquiescence because, if it is contrary to law, it is beyond the power of the members of the association to waive its invalidity. It is more accurate to say that the members merely tolerated petitioner's representative and tolerance cannot be considered ratification. Nor can petitioner claim a vested right to sit in the board on the basis of practice. Practice, no matter how long continued, cannot give rise to any vested right if it is contrary to law.  3 MARC II MARKETING, INC. VS. JOSON FACTS Before petitioner corporation was officially incorporated, respondent has already been engaged by petitioner Lucila, in her capacity as President of Marc Marketing, Inc., to work as the General Manager of petitioner corporation. It was formalized through the execution of a Management Contract under the letterhead of Marc Marketing, Inc. as petitioner corporation is yet to be incorporated at the time of its execution. It was explicitly provided therein that respondent shall be entitled to 30% of its net income for his work as General Manager. Respondent will also be granted 30% of its net profit to compensate for the possible loss of opportunity to work overseas. On 15 August 1994, petitioner corporation was officially incorporated and registered with the SEC. Accordingly, Marc Marketing, Inc. was made non-operational. Respondent continued to discharge his duties as General Manager under petitioner corporation. Pursuant to Section 1, Article IV of petitioner corporation’s by -laws, its corporate officers are as follows: Chairman, President, one or more Vice-President(s), Treasurer and Secretary. Its Board of Directors, however, may, from time to time, appoint such other officers as it may determine to be necessary or proper. Per an undated Secretary’s Certificate, petitioner corporation’s Board of Directors conducted a meeting on 29 August 1994 where respondent was appointed as one of its corporate officers with the designation or title of General Manager to function as a managing director with other duties and responsibilities that the Board of Directors may provide and authorized. Nevertheless, on 30 June 1997, petitioner corporation decided to stop and cease its operations due to poor sales collection aggravated by the inefficient management of its affairs. On the same date, it formally informed respondent of the cessation of its business operation. Concomitantly, respondent was apprised of the termination of his services as General Manager since his services as such would no longer be necessary for the winding up of its affairs. Feeling aggrieved, respondent filed a Complaint for Reinstatement and Money Claim against petitioners before the Labor Arbiter. On 1 October 2001, the Labor Arbiter rendered his Decision in favor of respondent. Aggrieved, petitioners appealed the aforesaid Labor Arbiters Decision to the NLRC. In its Resolution dated 15 October 2002, the NLRC ruled in favor of petitioners by giving credence to the Secretary’s Certificate, which evidenced petitioner corporations Board of Directors meeting in which a resolution was approved appointing respondent as its corporate officer with designation as General Manager. Therefrom, the NLRC reversed and set aside the Labor Arbiters Decision dated 1 October 2001 and dismissed respondents Complaint for want of jurisdiction. When respondents Motion for Reconsideration was denied in another Resolution dated 23 January 2003, he filed a Petition for Certiorari with the Court of Appeals ascribing grave abuse of discretion on the part of the NLRC. On 20 June 2005, the Court of Appeals rendered its Decision declaring that the Labor Arbiter has  jurisdiction over the present controversy. It upheld the finding of the Labor Arbiter that respondent was a mere employee of petitioner corporation, who has been illegally dismissed from employment without valid cause and without due process. Nevertheless, it ordered the records of the case remanded to the NLRC for the determination of the appropriate amount of monetary awards to be given to respondent. Hence, this Petition. Petitioners fault the Court of Appeals for having sustained the Labor Arbiters finding that respondent was not a corporate officer under petitioner corporations by-laws. They insist that there is no need to amend the corporate by-laws to specify who its corporate officers are. The resolution issued by petitioner corporations Board of Directors appointing respondent as General Manager, coupled with his assumption of the said position, positively made him its corporate officer. More so, respondents position, being a creation of petitioner corporations Board of Directors pursuant to its by-laws, is a corporate office sanctioned by the Corporation Code and the doctrines previously laid down by this Court. Thus, respondents removal as petitioner corporations General Manager involved a purely intra-corporate controversy over which the RTC has jurisdiction. ISSUE Whether the respondent, as the General Manager of petitioner corporation, is a corporate officer or a mere employee. RULING The respondent is a mere employee of the respondent corporation. In Easycall Communications Phils., Inc. v. King, this Court held that in the context of  4 Presidential Decree No. 902-A, corporate officers are those officers of a corporation who are given that character either by the Corporation Code or by the corporations by-laws. Section 25 of the Corporation Code specifically enumerated who are these corporate officers, to wit: (1) president; (2) secretary; (3) treasurer; and (4) such other officers as may be provided for in the by-laws. The aforesaid Section 25 of the Corporation Code, particularly the phrase such other officers as may be provided for in the by-laws, has been clarified and elaborated in this Courts recent pronouncement in Matling Industrial and Commercial Corporation v. Coros, where it held that a position must be expressly mentioned in the [b]y-[l]aws in order to be considered as a corporate office. Thus, the creation of an office pursuant to or under a [b]y-[l]aw enabling provision is not enough to make a position a corporate office. 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 [b]y-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. A careful perusal of petitioner corporations by-laws would explicitly reveal that its corporate officers are composed only of: (1) Chairman; (2) President; (3) one or more VicePresident; (4) Treasurer; and (5) Secretary. The position of General Manager was not among those enumerated. Paragraph 2, Section 1, Article IV of petitioner corporations by-laws, empowered its Board of Directors to appoint such other officers as it may determine necessary or proper. It is by virtue of this enabling provision that petitioner corporations Board of Directors allegedly approved a resolution to make the position of General Manager a corporate office, and, thereafter, appointed respondent thereto making him one of its corporate officers. All of these acts were done without first amending its by-laws so as to include the General Manager in its roster of corporate officers. With the given circumstances and in conformity with Matling Industrial and Commercial Corporation v. Coros, this Court rules that respondent was not a corporate officer of petitioner corporation because his position as General Manager was not specifically mentioned in the roster of corporate officers in its corporate by-laws. The enabling clause in petitioner corporations bylaws empowering its Board of Directors to create additional officers, i.e., General Manager, and the alleged subsequent passage of a board resolution to that effect cannot make such position a corporate office. Matling clearly enunciated that 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. Though the board of directors may create appointive positions other than the positions of corporate officers, the persons occupying such positions cannot be viewed as corporate officers under Section 25 of the Corporation Code. In view thereof, this Court holds that unless and until petitioner corporations by-laws is amended for the inclusion of General Manager in the list of its corporate officers, such position cannot be considered as a corporate office within the realm of Section 25 of the Corporation Code. Definition of Intra-Corporate Disputes Under Section 5 of Presidential Decree No. 902-A, intra-corporate controversies are those controversies arising out of intra-corporate or partnership relations, between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State insofar as it concerns their individual franchise or right to exist as such entity. It also includes controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations. Accordingly, in determining whether the SEC (now the RTC) has jurisdiction over the controversy, the status or relationship of the parties and the nature of the question that is the subject of their controversy must be taken into consideration.
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