Legal inesse QUARTERLY NEWSLETTER OF FORTUN NARVASA & SALAZAR • www.fnslaw.com.ph OCTOBER — DECEMBER 2011 f Companies with "general managers" beware. Unless your corporate by-laws define this position, individuals ap- pointed as such cannot be considered corporate officers. For this reason, issues concerning their removal from of- fice will be governed by the Labor Code and not the Rules on Intra-Corporate Dispute. In illegal termination cases filed by employees under the Labor Code, companies have the burden of proving that the dismissal is for lawful cause and that they complied with procedural due process requiring a show cause memo and a notice of termination. The Supreme Court held in Marc II Marketing Inc. vs. Alfredo M. Joson (G.R. No. 171993, December 12, 2011) that only those persons whose positions are listed in the Corporation Code and the by-laws of corporation are enti- tled to be called corporate officers. The Corporation Code enumerates who are these corporate officers: president, secretary, treasurer and other officers as may be provided in the by-laws. On the hand, express lane forms from the Securities and Exchange Commission additionally list the chairman of the board and the vice-president to round out the top management. Companies have to amend their by- laws if they want to include the position of general manag- er in the list of officers. The "general manager" in the Marc II case sued the company before the National Labor Relations Commission on the ground of illegal dismissal. The company countered with a motion to dismiss alleging that since the complain- ant was a "general manager," the NLRC does not have any jurisdiction over the case. The labor arbiter found that the position of general manager was not defined by the by- laws of the company so the complainant should be treated as a mere employee. And, as the complainant was merely given a notice of termination, the labor arbiter declared his dismissal as unlawful. The High Tribunal cited Easycall Communications Philip- pines vs. Edward King (G.R. No. 145901, December 15, 2005) involving the illegal dismissal of a "vice president for national expansion." In the Easycall case, the Supreme Court reiterated the distinction between an "office" which is created by the charter of the corporation and the "officer" as a person elected by the directors or stockholders while, 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 compensa- tion to be paid to such employee. The High Court also relied on Matling Industrial and Commercial Corporation v. Coros (G.R. No. 157802, October 13, 2010), a case where the "vice president for finance and administration" sued the employer for illegal dismissal before the NLRC. In Matling, the Court ruled that the board of direc- tors 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 can- not be viewed as corporate officers under the Corporation Code. Moreover, even though the complainant was also a direc- tor and a stockholder of Marc II Marketing, this fact did not automatically make the case fall within the ambit of intra- corporate controversy and subject to the jurisdiction of the regular courts. Not all conflicts between the stockholders and the corporation are classified as intra-corporate. Other factors such as the status or relationship of the parties and the nature of the question that is the subject of the controversy must be considered in determining whether the dispute involves corpo- rate matters so as to regard them as intra-corporate controver- sies. Relatedly, companies should not confuse the definition of "corporate officer" in the Marc II case with the list of officers allowed to receive summons under the Rules of Court. The list provided by the Rules of Court, which also includes a general manager and an in-house counsel, prescribes the responsible individuals in the company who are tasked to inform the cor- poration about the filing of a complaint against the entity and take action on the legal paper served upon said party. The on- ly purpose for this list is to allow the court to acquire jurisdic- tion over the entity. LF
Transcript
Legal inesse QUARTERLY NEWSLETTER OF FORTUN NARVASA & SALAZA R • www.fnslaw.com.ph
OCTOBER — DECEMBER 2011
f
Companies with "general managers" beware. Unless
your corporate by-laws define this position, individuals ap-
pointed as such cannot be considered corporate officers.
For this reason, issues concerning their removal from of-
fice will be governed by the Labor Code and not the Rules
on Intra-Corporate Dispute.
In illegal termination cases filed by employees under
the Labor Code, companies have the burden of proving that
the dismissal is for lawful cause and that they complied
with procedural due process requiring a show cause memo
and a notice of termination.
The Supreme Court held in Marc II Marketing Inc. vs.
Alfredo M. Joson (G.R. No. 171993, December 12, 2011)
that only those persons whose positions are listed in the
Corporation Code and the by-laws of corporation are enti-
tled to be called corporate officers. The Corporation Code
enumerates who are these corporate officers: president,
secretary, treasurer and other officers as may be provided
in the by-laws. On the hand, express lane forms from the
Securities and Exchange Commission additionally list the
chairman of the board and the vice-president to round out
the top management. Companies have to amend their by-
laws if they want to include the position of general manag-
er in the list of officers.
The "general manager" in the Marc II case sued the
company before the National Labor Relations Commission
on the ground of illegal dismissal. The company countered
with a motion to dismiss alleging that since the complain-
ant was a "general manager," the NLRC does not have any
jurisdiction over the case. The labor arbiter found that the
position of general manager was not defined by the by-
laws of the company so the complainant should be treated
as a mere employee. And, as the complainant was merely
given a notice of termination, the labor arbiter declared his
dismissal as unlawful.
The High Tribunal cited Easycall Communications Philip-
pines vs. Edward King (G.R. No. 145901, December 15, 2005)
involving the illegal dismissal of a "vice president for national
expansion." In the Easycall case, the Supreme Court reiterated
the distinction between an "office" which is created by the
charter of the corporation and the "officer" as a person elected
by the directors or stockholders while, 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 compensa-
tion to be paid to such employee.
The High Court also relied on Matling Industrial and
Commercial Corporation v. Coros (G.R. No. 157802, October
13, 2010), a case where the "vice president for finance and
administration" sued the employer for illegal dismissal before
the NLRC. In Matling, the Court ruled that the board of direc-
tors 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 can-
not be viewed as corporate officers under the Corporation
Code.
Moreover, even though the complainant was also a direc-
tor and a stockholder of Marc II Marketing, this fact did not
automatically make the case fall within the ambit of intra-
corporate controversy and subject to the jurisdiction of the
regular courts. Not all conflicts between the stockholders and
the corporation are classified as intra-corporate. Other factors
such as the status or relationship of the parties and the nature
of the question that is the subject of the controversy must be
considered in determining whether the dispute involves corpo-
rate matters so as to regard them as intra-corporate controver-
sies.
Relatedly, companies should not confuse the definition of
"corporate officer" in the Marc II case with the list of officers
allowed to receive summons under the Rules of Court. The list
provided by the Rules of Court, which also includes a general
manager and an in-house counsel, prescribes the responsible
individuals in the company who are tasked to inform the cor-
poration about the filing of a complaint against the entity and
take action on the legal paper served upon said party. The on-
ly purpose for this list is to allow the court to acquire jurisdic-
tion over the entity. LF
{continued to p.3}
{Issuances}
The Supreme Court released last October 2011 the
Rules of Procedure for Intellectual Property Rights Cas-
es. The new Rules are applicable to IP cases before the
regular courts covering both civil and criminal actions.
The following are the notable features of the IP Rules:
Prior determination of issues. The trial court can make
a prior determination of the issues involved in a civil
case and issue a special order that instead of the new IP
Rules, the regular rules of procedure under the Rules of
Court will apply. Without such an initial finding, the
Rules of Court will have suppletory application.
Orders are immediately executory. As a general rule,
except in cases of Injunction, Receivership, Accounting,
and Support, all orders and resolutions issued by the
court under the Rules of Court can be stayed by the time-
ly filing of a motion for reconsideration or appeal. The
court has to resolve the motion for reconsideration or ap-
peal of the losing party before the winning party can exe-
cute the order of the court. Under the new IP Rules, on
the other hand, all orders are immediately executory, un-
less restrained by a superior court.
All pleadings filed have to be verified. Under the Rules
of Court, generally only initiatory pleadings need to be
verified by a party before a notary public that all facts in
the pleadings are true and correct of the party's personal
knowledge or that the facts are based on authentic rec-
ords. On the other hand, the new IP Rules requires that
all pleadings filed by the parties must be verified.
Pleadings allowed. The new IP Rules limits the filing of
pleadings in civil cases to the complaint, compulsory
counterclaim, and cross-claims pleaded in the answer,
and the answers thereto. The list is similar to the one
contained under the Rules on Summary Procedure appli-
cable to cases before municipal and metropolitan trial
courts.
Form of pleadings and affidavits to be filed. The new
IP Rules also prescribes a detailed specification of the
form and contents of the complaint and other pleadings
to be filed. For a civil complaint, facts showing the ca-
pacity of a party to sue or be sued, or the authority of
party to sue or be sued in a representative capacity, or the
legal existence of an organized association of persons
that is made a party, must be averred. In the case of jurid-
ical persons, proof of capacity to sue must be attached to
the complaint. The affidavits shall be in question-and-
answer format and must state only facts of direct person-
al knowledge of the affiants. The affidavits must also
show the competence of the affiants to testify to the mat-
ters stated therein.
New modes of effecting service upon a foreign private
juridical entity. Courts under the new IP Rules may is-
sue summons upon a foreign private juridical entity not
registered in the Philippines, or one who has no Philip-
pine agent, by personal service coursed through the ap-
propriate court in the foreign country where the juridical
entity is located, with the assistance of the Department of
Foreign Affairs. Should personal service fail, service of
the summons by publication once in a newspaper of gen-
eral circulation in the country where the defendant may
be found and by serving a copy of the summons and the
court order by registered mail at the last known address
of the defendant. Serving the summons by facsimile or
any recognized means that can generate proof of service
is also allowed as a secondary means of acquiring juris-
diction over the foreign entity.
No declaration of default. While the party who fails to
answer may not be declared in default, the claimant is
allowed under the IP Rules to move that judgment be
rendered with respect to his claim as may be warranted
by the complaint and the evidence on record.
Mandatory submission of draft decisions. The IP
Rules adopts the procedure in administrative cases before
the IPOPHL where the parties are required to submit
their respective draft decisions. This ensures the speedy
disposition of IP cases as the court need only consider
the draft decision submitted by the prevailing party in
rendering judgment.
{Issuances}
{continued from p.2}
Revenue Regulation No. 16-2011 (October 27, 2011)
The BIR increased the threshold amounts for Value-
added Tax ('VAT') exemption of the following transac-
tions: (a) sale of residential lot with gross selling price
not exceeding P1,919,500.00; (b) sale of residential
house and lot or other residential dwellings with gross
selling price not exceeding P3,199,200.00; (c) sale or
lease of goods or properties or the performance of ser-
vices with gross annual sales and/or receipts not exceed-
ing P1,919,500.00; and (d) lease of residential units with
a monthly rental per unit not exceeding P12,800.00, re-
gardless of the amount of aggregate rentals received by
the lessor during the year (but the same shall be subject
to 3% percentage tax).
Where the lessor has several residential units for
lease, the gross receipts from rental not exceeding
P12,800.00 per month per unit shall be exempt from
VAT regardless of the aggregate annual gross receipts.
The gross receipts from rentals exceeding P12,800.00 per
month per unit shall be subject to VAT if the aggregate
annual gross receipts from said units only (not including
the gross receipts from units leased for not more than
P12,800.00) exceeds P1,919,500.00. Otherwise, the
gross receipts will be subject to the 3% percentage tax.
Revenue Memorandum Order No. 55-2011
(November 10, 2011)
For purposes of reckoning the one-year redemption
period on the foreclosed asset of natural persons and the
period within which to pay Capital Gains Tax or Credita-
ble Withholding Tax and Documentary Stamp Tax on the
foreclosure of Real Estate Mortgage, the same shall be
counted from the date of registration of the sale in the
Office of the Register of Deeds.
For juridical persons in an extrajudicial foreclosure
under the General Banking Law of 2000, its right of re-
demption shall be until, but not after, the registration of
the certificate of foreclosure sale with the appropriate
Register of Deeds which in no case shall be more than 3
months after foreclosure, whichever is earlier. In Com-
missioner of Internal Revenue vs. United Coconut Plant-
ers Bank (G.R. No. 179063 October 23, 2009) the Su-
preme Court ruled that it shall begin from the date of ap-
