Pearson & George, Inc. v. National Labor Relations Commission

G.R. No. 113928 (February 1, 1996)

Llorente's illegal dismissal claim was dismissed; SEC has exclusive jurisdiction over his case.

Facts:

The case involves a dispute between Pearson & George (S.E. Asia), Inc. (the petitioner) and Leopoldo Llorente (the private respondent), who was a member of the Board of Directors and served as the Managing Director of the petitioner. Llorente was elected to these positions during the organizational meeting on January 12, 1989, for a term of one year. On January 29, 1990, he was preventively suspended with pay due to alleged anomalous transactions. Following this, Llorente demanded access to his office, compensation for his suspension, and the return of his stock certificates.

On March 5, 1990, during a stockholders' meeting, Llorente was not reelected as a director, and subsequently, the new Board of Directors abolished the position of Managing Director. On March 12, 1990, Llorente was informed of his non-reelection and the abolition of his position, which the petitioner characterized as a termination for cause.

On April 11, 1990, Llorente filed a complaint with the Labor Arbiter for unfair labor practice, illegal dismissal, and illegal suspension, claiming he was dismissed without due process. The petitioner moved to dismiss the case, arguing that it fell under the jurisdiction of the Securities and Exchange Commission (SEC) due to its intra-corporate nature.

The Labor Arbiter denied the motion to dismiss, ruling that Llorente was not only a director but also acted as a manager or line officer. The Arbiter later ruled in favor of Llorente, declaring his termination illegal and ordering the petitioner to pay back wages, attorney's fees, and moral damages. The petitioner appealed to the National Labor Relations Commission (NLRC), which dismissed the appeal and affirmed the Labor Arbiter's decision.

Legal Issues:

  1. Whether the NLRC had jurisdiction over Llorente's complaint for illegal dismissal, or if it fell under the exclusive jurisdiction of the SEC as an intra-corporate dispute.
  2. Whether Llorente's removal from the position of Managing Director constituted illegal dismissal.

Arguments:

  • Petitioner’s Arguments:

    • The petitioner contended that the NLRC lacked jurisdiction over the case, asserting that the matter was intra-corporate and should be resolved by the SEC under P.D. No. 902-A.
    • It argued that Llorente was not dismissed but rather failed to be reelected, and thus, his removal was not a dismissal but a loss of qualification for the position.

  • Respondent’s Arguments:

    • Llorente maintained that he was an employee of the petitioner and that his complaint for illegal dismissal was within the jurisdiction of the NLRC.
    • He raised procedural defenses, including the timeliness of the petition and the appropriateness of the certiorari remedy.

Court’s Decision and Legal Reasoning:

The Supreme Court ruled in favor of the petitioner, granting the petition for certiorari and annulling the decisions of the NLRC and the Labor Arbiter. The Court held that the removal of Llorente as Managing Director was an intra-corporate matter that fell under the exclusive jurisdiction of the SEC. The Court reasoned that Llorente's loss of the Managing Director position was due to his non-reelection as a director, which is a prerequisite for holding the position of Managing Director. Therefore, the situation did not constitute illegal dismissal but rather a failure to maintain the necessary qualifications for the role.

The Court emphasized that disputes arising from the election of corporate officers and the relations among stockholders are within the SEC's jurisdiction, as outlined in P.D. No. 902-A. The Court also distinguished the case from previous rulings where the NLRC had jurisdiction, noting that Llorente's case was fundamentally about intra-corporate relations rather than employment termination.

Significant Legal Principles Established:

  1. The jurisdiction over disputes arising from intra-corporate relations, including the election and removal of corporate officers, lies exclusively with the SEC.
  2. The loss of a corporate office due to non-reelection does not constitute illegal dismissal under labor laws.
  3. The relationship of a corporate officer to the corporation is determined by the nature of the office held and the incidents of that relationship, rather than solely by the functions performed.