Rafael M. Crisol, Jr. v. Commission on Audit [G.R. No. 235764, September 14, 2021]

 CASE DIGEST

Rafael M. Crisol, Jr. v. Commission on Audit

G.R. No. 235764, September 14, 2021

EN BANC, ROSARIO, R.

 

Liability of Superior Officers; Gross Negligence; Audit Charges; Individual Participation; Mootness and Immutability

 

A public officer is not civilly liable for acts done in the performance of his official duties absent a clear showing of bad faith, malice or gross negligence, and a superior answers for a subordinate's wrongful acts only if he actually authorized the specific act by written order. Liability for audit charges is determined by the nature of the charge and the officer's own duties, and measured by his individual participation — not by his rank.

 

On 17 September 2010, the District Collector of Customs District II-A, Port of Manila, Bureau of Customs designated Arnel Tabije as Special Collection Officer (SCO). From September to November 2010, Tabije failed to deposit collections amounting to P425,555.53 and did not turn over the auction fund passbook. Rafael M. Crisol, Jr., Chief of the Cash Collection Division, reported Tabije's ten-day absence without leave on 9 December 2010, audited his collections in January 2011 and found the shortage, demanded settlement in writing on 28 February 2011, and referred the matter to the Commission on Audit (COA) on 28 March 2011. 

COA issued Notice of Charge No. 2011-001-101(10) on 12 October 2011 against Tabije, the District Collector, and Crisol. COA National Government Sector (NGS) Cluster A excluded Crisol from liability in Decision No. 2012-006 dated 8 June 2012, but the COA Proper disapproved the exclusion in Decision No. 2016-331 dated 9 November 2016, restored his liability, and referred the case to the Office of the Ombudsman; reconsideration was denied on 7 September 2017 and a Notice of Finality issued on 5 December 2018. Tabije paid the full amount in February 2019. 

 

Whether the petition was mooted by Tabije's full payment and barred by the finality of the COA rulings; and whether COA gravely abused its discretion in holding Crisol, as head of office, solidarily liable for collections his subordinate failed to remit. 

NO AND YES. The petition was neither moot nor barred, and COA gravely abused its discretion. Article 1217 of the Civil Code makes payment by one of the solidary debtors extinguish the obligation, but the question remained whether Crisol could be held solidarily liable in the first place, and the COA finding against him stood together with its referral to the Ombudsman. Immutability likewise admits of exceptions: clerical errors, nunc pro tunc entries causing no prejudice, void judgments, and circumstances arising after finality that render execution unjust and inequitable. 

On the merits, Section 38, Book I, Chapter 9 of the Administrative Code of 1987 provides that a public officer is not civilly liable for acts done in the performance of his official duties absent a clear showing of bad faith, malice or gross negligence, and that a superior is not liable for his subordinates' wrongful acts unless he actually authorized the specific act by written order. Gross negligence is the want of even slight care, acting or omitting to act where there is a duty to act, not inadvertently but willfully and intentionally with a conscious indifference to consequences. 

Crisol's functions — signing collection and statistical reports, withdrawal permits on warehousing entries, certificates of payment of duties and taxes, and matters on tax refunds — did not require him to monitor each and every daily deposit or remittance made by all the collection officers under him, and to say that the failure to remit could have been avoided had he reminded Tabije to comply with the rules is not only speculative but absurd. Under Sections 16.1 and 16.2 of COA Circular No. 2009-006, liability is determined by the nature of the charge and the officer's duties, and measured by his individual participation in the charged transaction.

 

WHEREFORE, the petition was GRANTED. The COA Decision dated 9 November 2016 and Resolution dated 7 September 2017 were REVERSED and SET ASIDE insofar as they hold petitioner Rafael M. Crisol civilly liable under Notice of Charge No. 2011-001-101(10).

 

Full Text: lawphil.net/judjuris/juri2021/sep2021/gr_235764_2021.html

Social Security System v. Commission on Audit [G.R. No. 222217, July 27, 2021]

 CASE DIGEST

Social Security System v. Commission on Audit

G.R. No. 222217, July 27, 2021

EN BANC, ROSARIO, R.

 

COA Appeal Procedure; Notice to Counsel; GOCC Compensation Control; Officer and Recipient Liability

 

For registered mail, the mailing date is deemed the filing date under the COA Rules, and notice to counsel is notice to the client. A GOCC's charter authority to fix compensation does not exempt it from the President's control, through the DBM, over allowances and fringe benefits. An approving officer's good faith may excuse solidary liability, but every recipient — officer or passive payee — must individually return what they received.

 

In 2010, SSS-Western Mindanao Division paid its personnel P7,198,182.96 in Special Counsel Allowance, Short Term Variable Pay, Bank/Christmas Gift Certificates, and Rice Subsidy. On post-audit, the Commission on Audit (COA) issued Notices of Disallowance Nos. 2012-01 and 2012-02, disallowing the payments for exceeding or departing from the DBM-approved 2010 Corporate Operating Budget; the Social Security System (SSS) received the Notices on 28 March 2012. 

SSS claimed it appealed by registered mail on 21 September 2012 — 177 days into the six-month appeal period, leaving only three (3) days — though COA's receiving stamp showed 5 October 2012. The COA Regional Director denied the appeal and required refund; the decision reached SSS's Legal Services Division on 9 January 2014, though the assigned lawyer personally received it on 13 January 2014. SSS filed its Petition for Review with the COA Proper on 17 January 2014, which the COA Proper dismissed as filed beyond the remaining appeal period.

 

 

Whether SSS's appeal to the COA Regional Director, filed by registered mail, was timely, and whether its subsequent Petition for Review to the COA Proper was timely; and whether the approving/certifying officers and the recipients may be held liable for the disallowed P7,198,182.96. 

YES AND NO. The first appeal was timely; the second was not, though the Court relaxed the rule. Under Sec. 3, Rule IX of the 2009 COA Rules, the date of mailing is the date of filing for registered mail; the Court accepted 21 September 2012 as the mailing date, so the first appeal was timely. But notice to counsel is notice to the client — receipt by SSS's Legal Services Division on 9 January 2014 bound SSS, and internal routing to the assigned lawyer could not restart the six-month clock, leaving only the remaining three (3) days. The 17 January 2014 Petition for Review was thus technically late, though the Court relaxed the rule given the short delay, the absence of intent to delay, and counsel's prompt action upon actual receipt. 

On the merits, the disallowance was sustained: GOCCs like SSS remain subject to Presidential supervision and control, and charter authority to fix compensation does not conflict with the President's exercise, through the DBM, of control over allowances and fringe benefits under P.D. No. 1597. SSS paid benefits the DBM had disapproved or capped, without the required Presidential approval, so COA committed no grave abuse of discretion. 

On liability, the Court distinguished officers from recipients: the approving/certifying officers were absolved from solidary liability for good faith, as no prevailing ruling had yet settled the charter-versus-Presidential-approval issue in 2010, but the recipients — whether officers or passive payees — were each individually liable to return what they personally received, the benefits having no legal basis.

 

WHEREFORE, the petition was GRANTED IN PART. COA Proper Decision No. 2015-51 disallowing P7,198,182.96 was AFFIRMED WITH MODIFICATION: the approving/certifying officers were absolved from solidary liability, but the recipients were each held individually liable to return the amounts they received.

 

Full Text: lawphil.net/judjuris/juri2021/jul2021/gr_222217_2021.html

Social Security System v. Commission on Audit [G.R. No. 217075, June 22, 2021]

 CASE DIGEST

Social Security System v. Commission on Audit

[G.R. No. 217075, June 22, 2021]

EN BANC, ROSARIO, R.

 

Rule 64 Petition for Certiorari; COA Disallowance; CNA Incentives; Solutio Indebiti

 

Under Rule 64 of the Rules of Court, a timely motion for reconsideration interrupts the thirty (30)-day period to assail a Commission on Audit (COA) decision; upon denial of the motion, the aggrieved party has only the remaining period, which in no case shall be less than five (5) days from notice. Collective Negotiation Agreement (CNA) incentives may be given only to the rank-and-file employees who are members of the negotiating unit, and any amount disallowed by COA for want of legal basis must be returned by the responsible officers and recipients pursuant to the rules on liability for disallowed government expenditures.

 

On 6 July 2005, the Social Security Commission approved a P20,000.00 Collective Negotiation Agreement (CNA) incentive for employees belonging to the negotiating unit, and an equal “counterpart” benefit for personnel outside it, including confidential, coterminous, and contractual employees, lawyers, and executives. On post-audit, the Commission on Audit (COA) issued Notice of Disallowance No. SSS-2007-001, disallowing the counterpart benefit in the total amount of P6.18 million, on the ground that only rank-and-file employees covered by the CNA were entitled to the incentive. 

The COA Legal Services Sector, and later the COA Commission Proper, affirmed the disallowance. The Social Security System (SSS) received the Commission Proper's decision on 15 May 2014 and filed a motion for reconsideration (MR) on 11 June 2014, by which time only three (3) days remained of the thirty (30)-day period under Rule 64. SSS received the Commission Secretary's Notice denying the MR on 4 February 2015 but, after first seeking clarification from COA, filed its Rule 64 petition for certiorari with the Supreme Court only on 20 March 2015. 

 

Whether the Rule 64 petition for certiorari was timely filed and, if so, whether the Commission on Audit correctly disallowed the P6.18 million counterpart CNA incentive and correctly ordered its return. 

NO. The Supreme Court dismissed the petition for having been filed out of time. A timely MR interrupts the 30-day period under Rule 64, Section 3; it does not give a fresh 30 days. Upon denial, only the remaining period resumes, subject to a five (5)-day minimum from notice. SSS's MR left only three (3) days of the original period; counting the five (5)-day minimum from its receipt of the 4 February 2015 Notice of denial, SSS had until 9 February 2015 to file. It filed only on 20 March 2015, 39 days too late. The Commission Secretary's prescribed Notice, issued under COA Resolution No. 2013-018, was sufficient notice of denial; SSS could not postpone the period by seeking clarification. 

Even so, the Court addressed the merits arguendo and sustained the disallowance. Review of COA decisions under Rule 64 is by certiorari, not ordinary appeal; absent grave abuse of discretion, the Court will not disturb COA's findings, given its constitutional mandate as guardian of public funds. On the merits, P.D. No. 1597, E.O. No. 180, A.O. No. 103, and the PSLMC resolutions limit CNA incentives to eligible rank-and-file employees within the negotiating unit; executives, lawyers, and managerial, confidential, and coterminous personnel outside that unit are not entitled to a “counterpart” benefit merely for contributing to the agency's savings. Applying Madera v. COA, the approving/certifying officers could not invoke the presumption of good faith because the payment violated explicit rules, and the recipients, having no legal entitlement to the incentive, were required to return what they received on the basis of solutio indebiti.

 

WHEREFORE, the petition was DISMISSED. COA Decision No. 2014-069 and the denial of the motion for reconsideration were AFFIRMED. The disallowance of the P6.18 million counterpart CNA incentive stood, and the responsible approving/certifying officers and the recipients were held liable to return the disallowed amount.

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RA 6552 - the Maceda Law [Study Notes]

Torni Dors · May Batas Pala Diyan? ·

The Maceda Law

Republic Act No. 6552, the “Realty Installment Buyer Act” · Approved August 26, 1972 · 9 sections

THE LAW IN ONE LINE. A buyer of residential real estate on installment who has paid at least two years and then defaults gets a grace period of one month for every year paid, and on cancellation a refund of the cash surrender value — 50% of total payments, rising to a 90% cap. And the seller’s cancellation is not effective until both a notarial notice has run 30 days and the cash surrender value has actually been paid.

Three years of amortization on a subdivision lot. Then the payments stop — a job lost, a hospital bill, a business that folded. The developer sends a letter saying the contract is canceled and everything paid is forfeited.

That letter is usually wrong, and the law that makes it wrong is older than most of the people it protects.

The only law here named after a person

Almost nobody calls this the Realty Installment Buyer Act. Everyone calls it the Maceda Law, after Senator Ernesto Maceda, who sponsored it — the same way we say the Lemon Law or the Eddie Garcia Act.

But open the statute and Sec. 1 says something else

The Act’s own short title is the Realty Installment Buyer Act. The statute never mentions Senator Maceda at all. Both citations are understood in practice — but in a pleading, cite it by number and statutory title.

A small point people get wrong. Sec. 9 provides that the Act takes effect upon its approval — 26 August 1972. It does not use the fifteen-days-after-publication formula later statutes adopt.

Check first whether you are covered

Question	Answer under Sec. 3
What transactions?	Sec. 3 opens: “In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding…” — coverage and exclusions sit in one continuous clause, not two sentences.
What is excluded?	Industrial lots; commercial buildings; and sales to tenants under RA 3844, as amended by RA 6389.
What triggers the Sec. 3 rights?	That the buyer “has paid at least two years of installments” and then defaults.

The threshold gates both rights. The grace period in Sec. 3(a) and the cash surrender value in Sec. 3(b) both sit under the same condition — at least two years of installments paid. A buyer eighteen months in is not entitled to a 50% refund under this Act; that buyer falls under Sec. 4, which is a thinner remedy. Never state the refund as a general rule for every defaulting buyer.

A month for every year

Section 3(a) lets the buyer pay the unpaid installments due without additional interest, within a grace period the section fixes at one month for every one year of installment payments made.

Installments paid	Grace period earned
2 years	2 months
3 years	3 months
5 years	5 months
7 years	7 months

Do not drop the proviso. The section continues: “Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.” A buyer who used the grace period in year three cannot use it again in year six.

Two things it is not. It is not a payment holiday — the arrears still have to be paid, only without additional interest. And it is not open-ended forbearance: once the earned period lapses, Sec. 3(b) takes over.

You do not walk away with nothing

If the contract is canceled, the seller shall refund the cash surrender value of the payments on the property. Section 3(b) computes it like this:

The base

50%

Fifty per cent of the total payments made — the floor, once two years of installments are paid.

The increment

+5% a year

After five years of installments, an additional five per cent every year.

The ceiling

90%

Not to exceed ninety per cent of the total payments made. It stops there.

A separate clause

Watch its object

Sec. 3’s closing sentence includes down payments, deposits or options in the computation of the total number of installment payments made — the count, not the peso base.

Read the increment carefully. The extra 5% a year begins after five years of installments — it is not a scale climbing from the first year. And 90% is an absolute cap: a buyer twelve years in does not recover more than 90%.

Read the object of that clause precisely. The sentence is “Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made.” Its object is the count, not the peso base — practically, it can pull a buyer over the two-year threshold and lengthen the earned grace period. Whether a down payment also forms part of “total payments made” for computing the 50% is not settled by the express terms of Sec. 3. Do not assert that it is.

The word that decides everything

The proviso to Sec. 3(b) — read the conjunction

Actual cancellation of the contract takes place after thirty (30) days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act — AND upon full payment of the cash surrender value to the buyer.

The inner or is real: the seller may use either a notice of cancellation or a demand for rescission. The outer conjunction is and. Both limbs must be satisfied.

Which means a cancellation announced by letter, by text message, or even by a perfectly proper notarial notice, is not effective while the cash surrender value remains unpaid. No refund, no valid cancellation.

The sequence, in order

1. The buyer defaults, having paid at least two years of installments.
2. The buyer’s earned grace period runs under Sec. 3(a) — one month per year paid, arrears payable without additional interest, available once every five years.
3. If the arrears are not paid within that period, the seller may move to cancel.
4. The seller serves a notice of cancellation or demand for rescission by a notarial act; thirty days must run from the buyer’s receipt.
5. The seller pays the cash surrender value in full.
6. Only on the concurrence of steps 4 and 5 does actual cancellation take place.

Note whose receipt starts the clock. The thirty days run from receipt by the buyer — not from the date of the notice, and not from the date of mailing. Proof of receipt therefore matters.

And if you have paid less than two years?

Item	Rule under Sec. 4
Grace period	The seller shall give a grace period of not less than sixty (60) days from the date the installment became due.
If still unpaid	The seller may cancel thirty (30) days after receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act.
Cash surrender value	None under Sec. 4. The refund obligation lives in Sec. 3(b) and is gated by the two-year threshold.

What Sec. 4 still preserves. Even below the threshold, two protections survive: a minimum sixty-day grace period, and the requirement that cancellation proceed by notarial act with thirty days running from the buyer’s receipt. Informal forfeiture is not available to the seller at any level of payment.

Three more rights in the same nine sections

Sec. 5

Sell, assign or reinstate

During the grace period and before actual cancellation, the buyer may sell or assign his rights to another person, or reinstate by updating the account — by notarial act.

Sec. 6

Pay ahead, free

Pay any installment or the full unpaid balance at any time without interest, and have full payment annotated in the certificate of title.

Sec. 7

You cannot waive it

Any stipulation in a contract hereafter entered into contrary to Secs. 3, 4, 5 and 6 is null and void.

Sec. 7 is what makes the Act work

Without it, a developer could simply draft around Secs. 3 to 6 in the contract to sell. Sec. 7 makes those rights non-waivable — a forfeiture clause purporting to let the seller keep all payments on default is, to that extent, void.

Sec. 5 has a wider window than sellers assume. The right to sell, assign or reinstate runs during the grace period and before actual cancellation. Read with Sec. 3’s closing proviso, actual cancellation has not occurred until the cash surrender value is paid — so the window stays open longer than a notice letter suggests.

What the Act does not say

There is no penalty clause. RA 6552 carries no criminal or administrative penalty. It operates civilly — through the invalidity of a defective cancellation and of contrary stipulations. A seller who cancels improperly is not committing an offense under this Act; the consequence is that the cancellation does not take effect.

There is no forum or procedure. The Act names no agency, prescribes no complaint mechanism and sets no prescriptive period of its own. Where such a dispute goes is governed by other law — in practice PD 957 and the DHSUD (formerly HLURB) route for subdivision and condominium projects, or the ordinary courts.

There is no definition section. “Installment,” “total payments made” and “actual cancellation” are not defined. The only interpretive aid inside the Act is Sec. 3’s closing sentence, which includes down payments, deposits or options in the computation of the total number of installment payments made.

Eight things people get wrong

“If I stop paying, I lose everything.” Not where two years of installments have been paid. Sec. 3(b) requires a refund of the cash surrender value, and Sec. 7 voids a contrary stipulation.

“Every defaulting buyer gets 50% back.” No. The refund is gated by the two-year threshold in Sec. 3. Below it, Sec. 4 gives a grace period but no cash surrender value.

“The developer sent a notice, so the contract is canceled.” Not yet. Cancellation takes effect only on the concurrence of the thirty-day notarial notice and full payment of the cash surrender value.

“The grace period is available every time I fall behind.” It may be exercised only once in every five years of the life of the contract.

“My down payment does not count for anything.” It does — but for a specific purpose. Sec. 3’s closing sentence includes down payments, deposits or options in the computation of the total number of installment payments made, which can carry a buyer over the two-year threshold and lengthen the earned grace period.

“The contract says I waive these rights.” Sec. 7 makes any such stipulation, in a contract entered into after the Act, null and void.

“It covers any property bought on installment.” Industrial lots, commercial buildings and sales to tenants under RA 3844 as amended by RA 6389 are excluded. Residential condominium apartments are expressly included.

“The statute calls it the Maceda Law.” It does not. Sec. 1 says Realty Installment Buyer Act.

Worth remembering

“It is hereby declared a public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions.”

Republic Act No. 6552, Sec. 2 — Declaration of policy

Section map

Sec.	Subject
1	Short title — “Realty Installment Buyer Act”
2	Declaration of public policy — protection against onerous and oppressive conditions
3	Coverage and exclusions; the two-year threshold; (a) grace period of one month per year, once in every five years of the life of the contract and its extensions, without additional interest; (b) cash surrender value of 50% rising 5% a year after five years of installments to a 90% cap, with the proviso fixing when actual cancellation takes place; and a closing sentence including down payments, deposits or options in the total number of installment payments made
4	Where less than two years have been paid — grace of not less than 60 days; cancellation 30 days after receipt of notice by notarial act
5	Right to sell or assign rights, or to reinstate by updating the account, by notarial act
6	Right to pay in advance without interest and to have full payment annotated in the certificate of title
7	Stipulations contrary to Secs. 3 to 6 are null and void
8–9	Separability; effectivity upon approval

Source. Republic Act No. 6552, the “Realty Installment Buyer Act,” approved 26 August 1972, Secs. 1 to 9. The source text consulted (lawphil.net) carries no amendment annotation; confirm against the Official Gazette before relying on it as current.

Read with. Presidential Decree No. 957, the Subdivision and Condominium Buyers’ Protective Decree, and the DHSUD (formerly HLURB) rules, which supply the forum most of these disputes actually reach; Republic Act No. 4726, the Condominium Act; Republic Act No. 3844 as amended by Republic Act No. 6389 for the excluded tenant sales; and the Civil Code on rescission of reciprocal obligations, against which Sec. 3’s special regime is the exception.

Disclaimer. This post is for general information and educational purposes only. It is not legal advice and does not create a lawyer-client relationship. A defective cancellation raises live questions of remedy and forum that turn on the contract and the facts — read the statute in full and consult counsel before acting.

Watch the short version on Torni Dors — “May Batas Pala Diyan?” Episode 10.

Corporate Officer vs. Employee [Study Notes]

Study Smart Law · Corporate Law | Labor Law [Study Notes]

Corporate Officer or
Employee?

The two-box test that decides which court hears the case · RA 11232 (Revised Corporation Code), Sec. 24

THE TEST IN ONE LINE. A corporate office exists only if the position is named in the charter or by-laws and the person is elected to it by the board or stockholders — fail either one, and the person is an employee, whatever the title on the door says.

“Vice President.” “General Manager.” “Comptroller.” Titles like these have landed on both sides of the line in decided cases — sometimes the very same title, decided differently depending on two things the Supreme Court keeps coming back to. Getting the classification wrong is not a paperwork slip: it decides whether a dismissal case belongs to the Regional Trial Court or the Labor Arbiter, and filing in the wrong forum can mean losing the case on jurisdiction alone.

The Two-Box Test

Both boxes below must be checked before a position is a corporate office. This is the rule the Supreme Court settled in Matling Industrial and Commercial Corp. v. Coros (G.R. No. 157802, 13 Oct. 2010), building on Tabang v. NLRC (1997) and Nacpil v. Int’l Broadcasting Corp. (2002).

Box 1

Created in the charter or by-laws

The office itself — its name, and ideally its functions — must be written into the Articles of Incorporation or, more commonly, the By-Laws. A board resolution that merely authorizes the board to create offices, without the by-laws actually naming one, does not satisfy this box.

Box 2

Elected by the board or stockholders

The specific person must be elected or appointed to that named office by the Board of Directors (or Trustees), or by the stockholders or members — not merely hired, assigned, or given the title by the president or the HR department acting alone.

Both conditions must concur. Fail either one — the office is unnamed in the by-laws, or the person was never actually elected to it by the board — and the person is an employee, however senior the title reads on the organizational chart.

The sleeper provision — Sec. 24, RCC

Only three offices are named by the statute itself: president, treasurer, secretary. Every other corporate office exists only because the by-laws say so — which is why a board resolution alone, without a matching by-law provision, does not create an office.

“Immediately after their election, the directors or trustees of a corporation must formally organize by the election of: (a) a president, who must be a director; (b) a treasurer, who must be a resident; (c) a secretary, who must be a citizen and resident of the Philippines; and (d) such other officers as may be provided in the by-laws.”

Revised Corporation Code, Sec. 24

Titles are not self-executing. “Vice President,” “General Manager,” “Comptroller,” “Assistant Vice President,” “Manager” have all appeared on both sides of the line in decided cases — sometimes the same title landing differently depending on whether the by-laws named the office and the board did the electing.

The Pattern Across the Cases

Ten cases, the same two questions asked each time: was the office named in the by-laws, and did the board itself do the electing?

1997

Tabang v. NLRC

Corporate secretary / director role in dispute

Foundational: only offices the Corporation Code or by-laws give that character are corporate offices.

2002

Nacpil v. IBC

Comptroller

Corporate Officer — named in the by-laws and elected by the board. Forum: RTC / SEC.

2005

Easycall Communications v. King

VP for Nationwide Expansion

Employee — not named in the by-laws; appointed by the CEO, not elected by the board. Forum: NLRC.

2009

Okol v. Slimmers World Int’l

VP for Sales (also a director)

Corporate Officer — by-laws authorized the office and the board elected her to it. Forum: RTC.

2010

Matling Industrial v. Coros

VP for Finance and Administration

Employee — by-laws only authorized creation, didn’t name the office; appointed by the President, not the Board. Forum: NLRC.

2010

Locsin v. Nissan Lease Phils.

Executive Vice President

Corporate Officer — named in the by-laws and elected by the board. Forum: RTC.

2011

Real v. Sangu Philippines

Manager

Employee — not named in the by-laws. Forum: NLRC.

2011

Marc II Marketing v. Joson

General Manager

Employee — the by-law amendment naming the office was not shown effective at the relevant time. Forum: NLRC.

2014

Cosare v. Broadcom Asia

AVP for Sales

Employee — not named in the by-laws; appointed by the President. Forum: NLRC.

2014

Wesleyan Univ.-Phils. v. Reyes

University President

Corporate Officer — named per charter/by-laws and elected by the board. Forum: RTC.

This is a teaching summary of the reported holdings, not a verbatim quotation of any decision. G.R. numbers and dates are given in the case notes below.

This table is a teaching summary of the reported holdings, not a verbatim quotation of any decision. G.R. numbers and dates are given below.

What the Supreme Court Has Said

“A corporate office is created only by the corporate charter or the by-laws, and the officer must be elected to it by the directors or stockholders… a Vice President for Finance and Administration who was appointed by the President rather than elected by the Board, to a position not itself named in the by-laws, was held to be a regular employee, and the dismissal dispute belonged to the Labor Arbiter, not the Regional Trial Court.”

Matling Industrial and Commercial Corp. v. Coros, G.R. No. 157802, 13 Oct. 2010

“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 is generally employed not by action of the directors or stockholders but by the managing officer of the corporation.”

Easycall Communications Phils., Inc. v. King, G.R. No. 145901, 15 Dec. 2005

By contrast, a Vice President for Sales who was also a director was held a corporate officer: the by-laws authorized the board to create the office, and the board did, by resolution, elect her to it. Performing managerial or sales functions similar to those of an ordinary manager did not change the analysis — the source of the appointment did.

Okol v. Slimmers World International, G.R. No. 160146, 11 Dec. 2009

A General Manager’s dismissal case was held to belong to the NLRC, not the RTC, because the by-laws in force at the time did not yet name “General Manager” as a corporate office — a later amendment adding it could not retroactively convert an earlier appointment into a corporate office.

Marc II Marketing, Inc. v. Joson, G.R. No. 171993, 12 Dec. 2011

Common Mistakes — The Seven Traps

Almost every misclassification dispute traces back to one of these. Read this list twice — it is the part practitioners get wrong most often.

1. The title-alone trap. Assuming a senior-sounding title — Vice President, General Manager, Comptroller — by itself makes someone a corporate officer. It does not.
2. The board-resolution-only trap. Creating a new post by board resolution alone, with no matching by-law provision naming that office.
3. The unregistered-amendment trap. Amending the by-laws to add an office, but treating the amendment as effective before it has gone through the corporation’s own amendment procedure and been filed (see Marc II Marketing).
4. The wrong-forum trap. Filing — or defending — a dismissal dispute in the wrong forum, risking dismissal for lack of jurisdiction while the prescriptive period keeps running.
5. The rubber-stamp trap. Treating “elected by the board” as satisfied by a board simply approving a hire that HR or management already made.
6. The director-vs-officer trap. Forgetting that removal as a director, if the person also holds a board seat, is a separate act under Sec. 27, RCC, with its own 2/3-vote requirement — distinct from removal as an officer under Sec. 24.
7. The over-correction trap. Assuming that because a position is not a corporate office, no board involvement is proper at all — many corporations still confirm senior hires by board resolution as a governance practice, without that alone making them officers.

Implications for HR and Counsel

Dimension	Corporate Officer	Employee
Forum for a dismissal case	Regional Trial Court (intra-corporate dispute)	Labor Arbiter, then the NLRC
Standard for removal	Board’s pleasure; no just/authorized cause needed under the Labor Code	Just or authorized cause, with twin-notice due process
Appeal route	RTC → Court of Appeals, Rule 43	Labor Arbiter → NLRC → CA (Rule 65) → Supreme Court
Prescriptive period	Ordinary civil-law prescription for the cause pleaded	4 yrs illegal dismissal; 3 yrs money claims (Art. 306, Labor Code)
Burden of proof	On whoever asserts officer status	—
SSS / PhilHealth / Pag-IBIG	Mandatory for both	Mandatory for both

Two removals, two different rules. Removing a person as an officer (Sec. 24, RCC — a board act) and removing the same person as a director (Sec. 27, RCC — a stockholders’ act requiring a 2/3 vote of the outstanding capital stock) are governed by different provisions with different actors and votes. They are frequently conflated in practice.

Still an open question. Whether a removed corporate officer’s accrued money claims (unpaid wages, unpaid 13th-month pay) can still be pursued separately at the NLRC is fact-specific and not uniformly resolved across the cases surveyed here. Flag this for specific research before advising on a live dispute.

Applying the Test to Your Org Chart

Take three positions a corporation is considering creating for a new business line: General Manager, Accountant, and Sales & Marketing Manager. Running each through the two-box test before amending the by-laws:

Proposed Position	Two-Box Result	Likely Classification
General Manager	Only if the amended by-laws expressly name it (effective) and the board itself elects the person	Officer — only if both boxes are met
Accountant	Rarely named as its own office; usually hired by management, not board-elected	Employee, ordinarily
Sales & Marketing Manager	Rarely named as its own office; usually hired by management	Employee, ordinarily

The practical safeguard: if the intent is for a position to be non-permanent and removable at the board’s discretion, both boxes need to be affirmatively completed — name the office in the by-laws, have the board (not management) do the electing, and confirm the by-law amendment is effective — rather than relying on the title or a single board resolution alone.

Source. RA 11232, Revised Corporation Code of the Philippines, Sec. 24 · RA 8799, Securities Regulation Code, Sec. 5.2 · Interim Rules of Procedure Governing Intra-Corporate Controversies, A.M. No. 01-2-04-SC.

Read with. Labor Code of the Philippines, Book VI, on security of tenure and money claims.

Disclaimer. This post is for general information and educational purposes only. It is not legal advice and does not create a lawyer-client relationship. Citations were compiled from research and were not re-verified against lawphil.net or the e-Library in this session — confirm each G.R. number, date, and holding against the primary text before relying on it in a pleading, an opinion, or a public post.