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G.R. No. 209085. June 6, 2018.*

NICANOR F. MALCABA, CHRISTIAN C.

NEPOMUCENO, and LAURA MAE FATIMA F. PALIT-
ANG, petitioners, vs. PROHEALTH PHARMA
PHILIPPINES, INC., GENEROSO R. DEL CASTILLO,
JR., and DANTE M. BUSTO, respondents.

Labor Law; Appeals; Appeal Bonds; In labor cases, an appeal

by an employer is perfected only by filing a bond equivalent to the
monetary award.—Appeal is not a matter of right. Courts and
tribunals have the discretion whether to give due course to an
appeal or to dismiss it outright. The perfection of an appeal is,
thus, jurisdictional. Noncompliance with the manner in which to
file an appeal renders the judgment final and executory. In labor
cases, an appeal by an employer is perfected only by filing a bond
equivalent to the monetary award.
Same; Same; Same; The purpose of requiring an appeal bond
is “to guarantee the payment of valid and legal claims against the
employer.”—The purpose of requiring an appeal bond is “to
guarantee the payment of valid and legal claims against the
employer.” It is a measure of financial security granted to an
illegally dismissed employee since the resolution of the employer’s
appeal may take an indeterminable amount of time. In particular:
The requirement that the employer post a cash or surety bond to
perfect its/his appeal is apparently intended to assure the workers
that if they prevail in the case, they will receive the money
judgment in their favor upon the dismissal of the employer’s
appeal. It was intended to discourage employers from using an
appeal to delay, or even evade, their obligation to satisfy their
employees’ just and lawful claims. Procedural rules require that
the appeal bond filed be “genuine.” An appeal bond determined by
the National Labor Relations Commission to be “irregular or not
genuine” shall cause the immediate dismissal of the appeal.

_______________

* THIRD DIVISION.

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Malcaba vs. ProHealth Pharma Philippines, Inc.

Same; Labor Arbiters; National Labor Relations Commission;

Jurisdiction; Under the Labor Code, the Labor Arbiter (LA)
exercises original and exclusive jurisdiction over termination
disputes between an employer and an employee while the National
Labor Relations Commission (NLRC) exercises exclusive appellate
jurisdiction over these cases.—Under the Labor Code, the Labor
Arbiter exercises original and exclusive jurisdiction over
termination disputes between an employer and an employee while
the National Labor Relations Commission exercises exclusive
appellate jurisdiction over these cases: Article 224. [217]
Jurisdiction of the Labor Arbiters and the Commission.—(a)
Except as otherwise provided under this Code, the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the submission of the case
by the parties for decision without extension, even in the absence
of stenographic notes, the following cases involving all workers,
whether agricultural or nonagricultural: . . . (2) Termination
disputes; . . . (b) The Commission shall have exclusive appellate
jurisdiction over all cases decided by Labor Arbiters. The
presumption under this provision is that the parties have an
employer-employee relationship. Otherwise, the case would be
cognizable in different tribunals even if the action involves a
termination dispute.
Same; Corporations; Corporate Officers; Intra-Corporate
Disputes; Under Section 25 of the Corporation Code, the President
of a corporation is considered a corporate officer. The dismissal of
a corporate officer is considered an intra-corporate dispute, not a
labor dispute.—Under Section 25 of the Corporation Code, the
President of a corporation is considered a corporate officer. The
dismissal of a corporate officer is considered an intra-corporate
dispute, not a labor dispute. Thus, in Tabang v. National Labor
Relations Commission, 266 SCRA 462 (1997): A corporate officer’s
dismissal is always a corporate act, or an intra-corporate
controversy, and the nature is not altered by the reason or
wisdom with which the Board of Directors may have in taking
such action. Also, an intra-corporate controversy is one which
arises between a stockholder and the corporation. There is no
distinction, qualification, nor any exemption whatsoever. The
provision is broad and covers all kinds of controversies between
stockholders and corporations.

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520

520 SUPREME COURT REPORTS ANNOTATED

Malcaba vs. ProHealth Pharma Philippines, Inc.

Corporations; Intra-Corporate Disputes; Regional Trial

Courts; Jurisdiction; Corporate Officers; Effective on August 8,
2000, upon the passage of Republic Act (RA) No. 8799, otherwise
known as The Securities Regulation Code, the Securities and
Exchange Commission’s (SEC’s) jurisdiction over all intra-
corporate disputes was transferred to the Regional Trial Court
(RTC), pursuant to Section 5.2 of RA No. 8799.—Effective on
August 8, 2000, upon the passage of Republic Act No. 8799,
otherwise known as The Securities Regulation Code, the SEC’s
jurisdiction over all intra-corporate disputes was transferred to
the RTC, pursuant to Section 5.2 of RA No. 8799, to wit: 5.2. The
Commission’s jurisdiction over all cases enumerated under
Section 5 of Presidential Decree No. 902-A is hereby transferred
to the Courts of general jurisdiction or the appropriate Regional
Trial Court: Provided, that the Supreme Court in the exercise of
its authority may designate the Regional Trial Court branches
that shall exercise jurisdiction over these cases. The Commission
shall retain jurisdiction over pending cases involving intra-
corporate disputes submitted for final resolution which should be
resolved within one (1) year from the enactment of this Code. The
Commission shall retain jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000 until
finally disposed.
Same; Same; Corporate Officers; The clear weight of
jurisprudence clarifies that to be considered a corporate officer,
first, the office must be created by the charter of the corporation,
and second, the officer must be elected by the board of directors or
by the stockholders.—The clear weight of jurisprudence clarifies
that to be considered a corporate officer, first, the office must be
created by the charter of the corporation, and second, the officer
must be elected by the board of directors or by the stockholders.
Petitioner Malcaba was an incorporator of the corporation and a
member of the Board of Directors. Respondent corporation’s By-
Laws creates the office of the President.
Labor Law; Termination of Employment; Loss of Trust and
Confidence; Loss of trust and confidence is a just cause to
terminate either managerial employees or rank-and-file employees
who regularly handle large amounts of money or property in the
regular exercise of their functions.—Article 294 [279] of the Labor
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Code provides that an employer may terminate the services of an

employee only upon just or authorized causes. Article 297 [282]
enumerates the just

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Malcaba vs. ProHealth Pharma Philippines, Inc.

causes for termination, among which is “[f]raud or willful

breach by the employee of the trust reposed in him by his
employer or duly authorized representative[.]” Loss of trust and
confidence is a just cause to terminate either managerial
employees or rank-and-file employees who regularly handle large
amounts of money or property in the regular exercise of their
functions. For an act to be considered a loss of trust and
confidence, it must be first, work-related, and second, founded on
clearly established facts: The complained act must be work-
related such as would show the employee concerned to be unfit to
continue working for the employer and it must be based on a
willful breach of trust and founded on clearly established facts.
The basis for the dismissal must be clearly and convincingly
established but proof beyond reasonable doubt is not necessary.
The breach of trust must likewise be willful, that is, “it is done
intentionally, knowingly and purposely, without justifiable
excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently.”
Same; Management Prerogatives; While an employer is free to
regulate all aspects of employment, the exercise of management
prerogatives must be in good faith and must not defeat or
circumvent the rights of its employees.—While an employer is free
to regulate all aspects of employment, the exercise of
management prerogatives must be in good faith and must not
defeat or circumvent the rights of its employees. In industries
that mainly rely on sales, employers are free to discipline errant
employees who deliberately fail to report for work during a crucial
sales period. It would have been reasonable for respondents to
discipline petitioner Nepomuceno had he been a problematic
employee who unceremoniously refused to do his work. However,
as found by the Labor Arbiter and the National Labor Relations
Commission, petitioner Nepomuceno turned over all of his
pending work to a reliever before he left for Malaysia. He was
able to reach his sales quota and surpass his sales target even
before taking his vacation leave. Respondents did not suffer any

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financial damage as a result of his absence. This was also

petitioner Nepomuceno’s first infraction in his nine (9) years of
service with respondents. None of these circumstances constitutes
a willful breach of trust on his part. The penalty of dismissal,
thus, was too severe for this kind of infraction.

522

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Malcaba vs. ProHealth Pharma Philippines, Inc.

Same; Termination of Employment; Illegal Dismissals;

Reinstatement; Backwages; Separation Pay; Strained Relations
Doctrine; Considering that petitioner Nepomuceno’s dismissal was
done without just cause, he is entitled to reinstatement and full
backwages. If reinstatement is not possible due to strained
relations between the parties, he shall be awarded separation pay
at the rate of one (1) month for every year of service.—Petitioner
Nepomuceno received a memorandum on April 23, 2008, asking
him to explain why no administrative investigation should be held
against him. He submitted an explanation on the same day and
another explanation on May 2, 2008. On May 7, 2008, he was
given his notice of termination, which had already taken effect
two (2) days earlier, or on May 5, 2008. It is true that “[t]he
essence of due process is simply an opportunity to be heard.”
Petitioner Nepomuceno had two (2) opportunities within which to
explain his actions. This would have been sufficient to satisfy the
requirement. The delay in handing him his notice of termination,
however, appears to have been an afterthought. While strictly not
a violation of procedural due process, respondents should have
been more circumspect in complying with the due process
requirements under the law. Considering that petitioner
Nepomuceno’s dismissal was done without just cause, he is
entitled to reinstatement and full backwages. If reinstatement is
not possible due to strained relations between the parties, he
shall be awarded separation pay at the rate of one (1) month for
every year of service.
Same; Same; Willful Disobedience; For disobedience to be
considered as just cause for termination, two (2) requisites must
concur: first, “the employee’s assailed conduct must have been
wilful or intentional,” and second, “the order violated must have
been reasonable, lawful, made known to the employee and must
pertain to the duties which he [or she] had been engaged to
discharge.”—For disobedience to be considered as just cause for

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termination, two (2) requisites must concur: first, “the employee’s

assailed conduct must have been wilful or intentional,” and
second, “the order violated must have been reasonable, lawful,
made known to the employee and must pertain to the duties
which he [or she] had been engaged to discharge.” For
disobedience to be willful, it must be “characterized by a wrongful
and perverse mental attitude rendering the employee’s act
inconsistent with proper subordination.” The conduct complained
of must also constitute “harmful behavior against the business
interest or person of his [or her] employer.” Thus, it is implied in
every case

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Malcaba vs. ProHealth Pharma Philippines, Inc.

of willful disobedience that “the erring employee obtains

undue advantage detrimental to the business interest of the
employer.” Petitioner Palit-Ang, as Finance Officer, was
instructed by respondent Del Castillo to give a cash advance of
P3,000.00 to District Branch Manager Gamboa on November 26,
2007. This order was reasonable, lawful, made known to
petitioner Palit-Ang, and pertains to her duties. What is left to be
determined, therefore, is whether petitioner Palit-Ang
intentionally and willfully violated it as to amount to
insubordination. When Gamboa went to collect the money from
petitioner Palit-Ang, he was told to return the next day as she
was still busy. When petitioner Palit-Ang found out that the
money was to be used for a car tune-up, she suggested to Gamboa
to just get the money from his mobilization fund and that she just
would reimburse it after. The Court of Appeals found that these
circumstances characterized petitioner Palit-Ang’s “arrogance and
hostility,” in failing to comply with respondent Del Castillo’s
order, and thus, warranted her dismissal.
Due Process; “The essence of due process is simply an
opportunity to be heard,” not that the employee must be
accompanied by counsel at all times.—Petitioner Palit-Ang
likewise assails the failure of respondents to inform her of her
right to counsel when she was being investigated for her
infraction. As previously discussed, “[t]he essence of due process is
simply an opportunity to be heard,” not that the employee must
be accompanied by counsel at all times. A hearing was conducted
and she was furnished a notice of termination explaining the

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grounds for her dismissal. She was not denied due process.
Petitioner Palit-Ang, nonetheless, is considered to have been
illegally dismissed, her penalty not having been proportionate to
the infraction committed. Thus, she is entitled to reinstatement
and full backwages. If reinstatement is not possible due to
strained relations between the parties, she shall be awarded
separation pay at the rate of one (1) month for every year of
service.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Poblador, Bautista & Reyes for petitioners.

524

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Malcaba vs. ProHealth Pharma Philippines, Inc.

Atienza, Madrid & Formento for respondents.

Pizarras & Associates Law Offices for respondents.

LEONEN, J.:

This case involves fundamental principles in labor cases.

First, in appeals of illegal dismissal cases, employers are
strictly mandated to file an appeal bond to perfect their
appeals. Substantial compliance, however, may merit
liberality in its application.
Second, before any labor tribunal takes cognizance of
termination disputes, it must first have jurisdiction over
the action. The Labor Arbiter and the National Labor
Relations Commission only exercise jurisdiction over
termination disputes between an employer and an
employee. They do not exercise jurisdiction over
termination disputes between a corporation and a
corporate officer.
Third, while this Court recognizes the inherent right of
employers to discipline their employees, the penalties
imposed must be commensurate to the infractions
committed. Dismissal of employees for minor and negligible
offenses may be considered as illegal dismissal.
This is a Petition for Review on Certiorari1 assailing the
Court of Appeals’ February 19, 2013 Decision2 and

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September 10, 2013 Resolution3 in C.A.-G.R. S.P. No.

119093, which reversed the judgments of the Labor Arbiter
and of the Na

_______________

1 Rollo, pp. 10-74.

2 Id., at pp. 76-101. The Decision was penned by Associate Justice
Danton Q. Bueser, and concurred in by Associate Justices Amelita G.
Tolentino and Ramon R. Garcia of the Fourth Division, Court of Appeals,
Manila.
3 Id., at pp. 103-104. The Resolution was penned by Associate Justice
Danton Q. Bueser, and concurred in by Associate Justices Amelita G.
Tolentino and Ramon R. Garcia of the Fourth Division, Court of Appeals,
Manila.

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Malcaba vs. ProHealth Pharma Philippines, Inc.

tional Labor Relations Commission. The Court of Appeals

found that Nicanor F. Malcaba (Malcaba), a corporate
officer, should have questioned his dismissal before the
Regional Trial Court, not before the Labor Arbiter. It
likewise held that Christian C. Nepomuceno (Nepomuceno)
and Laura Mae Fatima F. Palit-Ang (Palit-Ang) were
validly dismissed from service for loss of trust and
confidence, and insubordination, respectively.
ProHealth Pharma Philippines, Inc. (ProHealth) is a
corporation engaged in the sale of pharmaceutical products
and health food on a wholesale and retail basis. Generoso
Del Castillo (Del Castillo) is the Chair of the Board of
Directors and Chief Executive Officer while Dante Busto
(Busto) is the Executive Vice President. Malcaba, Tomas
Adona, Jr. (Adona), Nepomuceno, and Palit-Ang were
employed as its President, Marketing Manager, Business
Manager, and Finance Officer, respectively.4
Malcaba had been employed with ProHealth since it
started in 1997. He was one of its incorporators together
with Del Castillo and Busto, and they were all members of
the Board of Directors in 2004. He held 1,000,000 shares in
the corporation. He was initially the Vice President for
Sales then became President in 2005.5

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Malcaba alleged that Del Castillo did acts that made his
job difficult. He asked to take a leave on October 23, 2007.
When he attempted to return on November 5, 2007, Del
Castillo insisted that he had already resigned and had his
things removed from his office. He attested that he was
paid a lower salary in December 2007 and his benefits were
withheld.6 On January 7, 2008, Malcaba tendered his
resignation effective February 1, 2008.7

_______________

4 Id., at p. 144, NLRC’s Decision.

5 Id., at p. 150, NLRC’s Decision.
6 Id., at p. 79.
7 Id., at p. 108.

526

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Malcaba vs. ProHealth Pharma Philippines, Inc.

Nepomuceno, for his part, alleged that he was initially

hired as a medical representative in 1999 but was
eventually promoted to District Business Manager for
South Luzon. On March 24, 2008, he applied for vacation
leave for the dates April 24, 25, and 28, 2008, which Busto
approved. When he left for Malaysia on April 23, 2008,
ProHealth sent him a Memorandum dated April 24, 2008
asking him to explain his absence. He replied through e-
mail that he tried to call ProHealth to inform them that his
flight was on April 22, 2008 at 9:00 p.m. and not on April
23, 2008 but was unable to connect on the phone. He tried
to explain again on May 2, 2008 and requested for a
personal dialogue with Del Castillo.8
On May 7, 2008, Nepomuceno was given a notice of
termination, which was effective May 5, 2008, on the
ground of fraud and willful breach of trust.9
Palit-Ang, on the other hand, was hired to join
ProHealth’s audit team in 2007. She was later promoted to
Finance Officer.10 On November 26, 2007, Del Castillo
instructed Palit-Ang to give P3,000.00 from the training
funds to Johnmer Gamboa (Gamboa), a District Business
Manager, to serve as cash advance.11
On November 27, 2007, Busto issued a show cause
memorandum for Palit-Ang’s failure to release the cash
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advance. Palit-Ang was also relieved of her duties and

reassigned to the Office of the Personnel and
Administration Manager.12
In her explanation, Palit-Ang alleged that when Gamboa
saw that she was busy receiving cash sales from another
District Business Manager, he told her that he would just
return the next day to collect his cash advance.13 When he

_______________

8 Id., at p. 80.
9 Id.
10 Id., at p. 81.
11 Id., at p. 82.
12 Id.
13 Id.

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Malcaba vs. ProHealth Pharma Philippines, Inc.

told her that the cash advance was for car repairs, Palit-Ang told
him to get the cash from his revolving fund, which she would
reimburse after the repairs were done. Del Castillo was
dissatisfied with her explanation and transferred her to another
office.14
On December 3, 2007, Palit-Ang was invited to a fact-
finding investigation,15 which was held on December 10,
2007, where Palit-Ang was again asked to explain her
actions.16
On December 17, 2007, she was handed a notice of
termination effective December 31, 2007, for disobeying the
order of ProHealth’s highest official.17
Malcaba, Nepomuceno, Palit-Ang, and Adona separately
filed Complaints18 before the Labor Arbiter for illegal
dismissal, nonpayment of salaries and 13th month pay,
damages, and attorney’s fees.
The Labor Arbiter found that Malcaba was constructively
dismissed. He found that ProHealth never controverted the
allegation that Del Castillo made it difficult for Malcaba to
effectively fulfill his duties. He likewise ruled that ProHealth’s
insistence that Malcaba’s leave of absence in October 2007 was an
act of resignation was false since Malcaba continued to perform
his duties as President through December 2007.19
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The Labor Arbiter declared that Nepomuceno’s failure to

state the actual date of his flight was an excusable mistake
on his part, considering that this was his first infraction in
his nine (9) years of service. He noted that no
administrative

_______________

14 Id., at p. 83.
15 Id., at p. 82.
16 Id., at p. 22.
17 Id., at p. 82.
18 Id., at pp. 171-174. Malcaba filed a Complaint while Adona,
Nepomuceno, and Palit-Ang filed one Grievance Form.
19 Id., at pp. 311-312, Labor Arbiter’s Decision.

528

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Malcaba vs. ProHealth Pharma Philippines, Inc.

proceedings were conducted before Nepomuceno’s

dismissal, thereby violating his right to due process.20
Palit-Ang’s dismissal was also found to have been illegal
as delay in complying with a lawful order was not
tantamount to disobedience. The Labor Arbiter further
noted that delay in giving a cash advance for car
maintenance would not have affected the company’s
operations. He declared that Palit-Ang’s dismissal was too
harsh of a penalty.21
The dispositive portion of the Labor Arbiter’s April 5,
2009 Decision22 read:

WHEREFORE, premises considered, judgment is hereby

rendered declaring that complainants were illegally
dismissed by respondents. Accordingly, respondents are
directed solidarily to pay complainants the following:
1. Complainant Nicanor F. Malcaba:
a. Separation pay of P1,800,000.00;
b. Full backwages from the time of his illegal
dismissal [o]n 11 November 2007 until the
finality of this decision, which as of this
date amounts to P2,810,795.40;
c. 13th month pay for the years 2007 and 2008
amounting to P126,625.00;
2. Complainant Christian C. Nepomuceno:
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a. Separation pay of P190,000.00;

b. Full backwages from the time of his illegal
dismissal [i]n May 2007 until the finality of
this decision, which as of this date
amounts to P568,827.45;

_______________

20 Id., at pp. 313-314, Labor Arbiter’s Decision.

21 Id., at p. 314.
22 Id., at pp. 294-320. The Decision, docketed as NLRC NCR CASE
NO. 08-12090-08, was penned by Labor Arbiter Fedriel S. Panganiban of
the National Labor Relations Commission, Quezon City.

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Malcaba vs. ProHealth Pharma Philippines, Inc.

c. 13th month pay for 2008 amounting to

P6,333.33;
3. Complainant Laura Mae Fatima F. Palit-Ang:
a. Separation pay of P30,000.00;
b. Full backwages from the time of her illegal
dismissal on 1 January 2008 until the
finality of this decision, which as of [t]his
date amounts to P266,694.63;
c. 13th month pay for 2008 of P18,000.00; and
4. Complainant Tomas C. Adona, Jr.:
a. Separation pay of P75,000.00;
b. Full backwages from time of his illegal
dismissal [i]n June 2007 until the finality
of this decision, which as of this date
amounts to P609,832.37;
c. 13th month pay for 2008 of P10,416.66.

Complainants are further awarded moral damages

of Php100,000.00 each and exemplary damages of
Php100,000.00 each.
Finally, respondents are assessed the sum
equivalent to ten percent (10%) of the total monetary
award as and for attorney’s fees.
All other claims are dismissed for lack of merit.
SO ORDERED.23

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ProHealth appealed to the National Labor Relations

Commission.24 On September 29, 2010, the National Labor
Relations Commission rendered its Decision,25 affirming
the Labor

_______________

23 Id., at pp. 318-320, Labor Arbiter’s Decision.

24 Id., at pp. 322-361.
25 Id., at pp. 143-167. The Decision, docketed as NLRC LAC NO. 08-
002162-09, was penned by Commissioner Isabel G. Panganiban-
Ortiguerra, and concurred in by Presiding Commissioner Benedicto R.
Palacol and Commissioner Nieves Vivar-De Castro of the Sixth Division,
National Labor Relations Commission, Quezon City.

530

530 SUPREME COURT REPORTS ANNOTATED

Malcaba vs. ProHealth Pharma Philippines, Inc.

Arbiter’s April 5, 2009 Decision with modifications. The

dispositive portion of this Decision read:

WHEREFORE, premises considered, the appeal is

partially granted. The assailed Decision is modified in that:
a) complainant Adona is declared to have voluntarily
resigned and is entitled only to his 13th month pay; b) the
award of moral and, exemplary damages in favor of
complainants Nepomuceno and Palit-Ang are deleted; and
c) respondents del Castillo and Busto are held jointly and
severally liable with ProHealth for the claims of
complainant Malcaba.
All dispositions not affected by the modifications stay.
SO ORDERED.26

ProHealth moved for reconsideration27 but was denied

by the National Labor Relations Commission in its January
31, 2011 Resolution.28 Thus, ProHealth, Del Castillo, and
Busto filed a Petition for Certiorari29 before the Court of
Appeals.
On February 19, 2013, the Court of Appeals rendered its
Decision30 reversing and setting aside the National Labor
Relations Commission’s September 29, 2010 Decision.
On the procedural issues, the Court of Appeals found that
ProHealth substantially complied with the requirement of an
appeal bond despite it not appearing in the records of the surety
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company since ProHealth believed in good faith that the bond it

secured was genuine.31

_______________

26 Id., at p. 166.
27 Id., at pp. 362-379.
28 Id., at pp. 168-170. The Resolution was penned by Commissioner
Isabel G. Panganiban-Ortiguerra, and concurred in by Presiding
Commissioner Benedicto R. Palacol and Commissioner Nieves Vivar-De
Castro of the Sixth Division, National Labor Relations Commission,
Quezon City.
29 Id., at pp. 105-142.
30 Id., at pp. 76-101.
31 Id., at p. 86.

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Malcaba vs. ProHealth Pharma Philippines, Inc.

On the substantive issues, the Court of Appeals held

that there was no employer-employee relationship between
Malcaba and ProHealth since he was a corporate officer.
Thus, he should have filed his complaint with the Regional
Trial Court, not with the Labor Arbiter, since his dismissal
from service was an intra-corporate dispute.32
The Court of Appeals likewise concluded that ProHealth
was justified in dismissing Nepomuceno and Palit-Ang
since both were given opportunities to fully explain their
sides.33 It found that Nepomuceno’s failure to diligently
check the true schedule of his flight abroad and his
subsequent lack of effort to inform his superiors were
enough for his employer to lose its trust and confidence in
him.34 It likewise found that Palit-Ang displayed
“arrogance and hostility” when she defied the lawful orders
of the company’s highest ranking officer; thus, her
insubordination was just cause to terminate her services.35
While the Court of Appeals ordered the return of the
amounts given to Malcaba, it allowed Nepomuceno and
Palit-Ang to keep the amounts given considering that even
if the finding of illegal dismissal were reversed on appeal,
the employer was still obliged to reinstate and pay the
wages of a dismissed employee during the period of appeal.
36
The dispositive portion of the Court of Appeals’ February
19, 2013 Decision read:
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WHEREFORE, premises considered, it is hereby ruled:

(a) that the September 29, 2010 Decision and
January 31, 2011 Resolution of the National
Labor Relations Commission are REVERSED
and SET

_______________

32 Id., at pp. 87-90.

33 Id., at p. 95.
34 Id., at pp. 91-92.
35 Id., at p. 93.
36 Id., at pp. 96-100.

532

532 SUPREME COURT REPORTS ANNOTATED

Malcaba vs. ProHealth Pharma Philippines, Inc.

ASIDE for being issued with grave abuse of

discretion;
(b) that Our Decision is without prejudice to Mr.
Nicanor F. Malcaba’s available recourse for
relief through the appropriate remedy in the
proper forum;
(c) that all the amounts released in favor of Mr.
Nicanor F. Malcaba amounting to Four Million
Nine Hundred Thirty[-]Seven Thousand Four
Hundred Twenty pesos and 40/100 (P4,937,420.
[40]) be RETURNED to herein petitioners;
(d) that NO REFUND will be ordered by this Court
against Mr. Christian Nepomuceno and Ms.
Laura Mae Fatima Palit-Ang.
SO ORDERED.37

Malcaba, Nepomuceno, and Palit-Ang moved for

reconsideration but were denied in a Resolution38 dated
September 10, 2013. Hence, this Petition39 was filed before
this Court.
Petitioners argue that the Court of Appeals should have
dismissed outright the Petition for Certiorari since respondents
failed to post a genuine appeal bond before the National Labor
Relations Commission. They allege that when Sheriff Ramon
Nonato P. Dayao attempted to enforce the judgment award
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against the appeal bond, he was informed that the appeal bond
procured by respondents did not appear in the records of Alpha
Insurance and Surety Company, Inc. (Alpha Insurance). They also
claim that respondents were notified by the National Labor
Relations Commission four (4) times that

_______________

37 Id., at pp. 100-101.

38 Id., at pp. 103-104.
39 Id., at pp. 10-74. The Comment (Id., at pp. 632-647) was filed on
March 21, 2014 while the Reply (Id., at pp. 662-681) was filed on July 24,
2014.

533

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Malcaba vs. ProHealth Pharma Philippines, Inc.

their appeal bond was not genuine, showing that

respondents did not comply with the requirement in good
faith.40
Petitioners contend that petitioner Malcaba properly
filed his Complaint before the Labor Arbiter since he was
an employee of respondent ProHealth, albeit a high-
ranking one. They argue that respondents merely alleged
that petitioner Malcaba is a corporate officer but failed to
substantiate this allegation.41 They maintain that
petitioner Malcaba did not resign on September 24, 2007
considering that the General Information Sheet for 2007
submitted on October 11, 2007 listed him as respondent
ProHealth’s President. They submit that respondent Del
Castillo’s action took a toll on petitioner Malcaba’s well-
being; hence, the latter merely took a leave of absence and
returned to work in November 2007. They claim that
respondents made it difficult for petitioner Malcaba to
continue his work upon his return, resulting in his
resignation in January 2008. Thus, they argue that
petitioner Malcaba was constructively dismissed.42
Petitioners likewise argue that petitioners Nepomuceno
and Palit-Ang were illegally dismissed. They claim that
petitioner Nepomuceno committed an “honest and
negligible mistake”43 that should not have warranted
dismissal considering his loyal service for nine (9) years.
They contend that petitioner Nepomuceno’s absence did not
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injure respondent ProHealth’s business since he turned

over all pending work to a reliever before he left and even
surpassed his sales quota for the month.44 They likewise
claim that his dismissal was done in violation of his right to
due process since he was not given any opportunity to
explain his side and was only given a no-

_______________

40 Id., at pp. 29-34.

41 Id., at pp. 36-45.
42 Id., at pp. 46-54.
43 Id., at p. 55.
44 Id., at pp. 55-57.

534

534 SUPREME COURT REPORTS ANNOTATED

Malcaba vs. ProHealth Pharma Philippines, Inc.

tice of termination two (2) days after he was actually

dismissed.45
Petitioners maintain that petitioner Palit-Ang believed
in good faith that Gamboa would just claim his cash
advance the day after he tried to claim it and that there
was nothing in her actions that would prove that she
intended to disobey or defy respondent Del Castillo’s
instructions. They insist that delay in complying with
orders is not tantamount to disobedience and would not
constitute just cause for petitioner Palit-Ang’s dismissal.
They likewise submit that while petitioner Palit-Ang was
subjected to a fact-finding investigation, respondents failed
to inform her of her right to be assisted by counsel.46
Respondents, on the other hand, counter that a liberal
application of the procedural rules was necessary in their
case since they acted in good faith in posting their appeal
bond.47 They likewise contend that the issue should have
already been considered moot since petitioners “were able
to
48
garnish and collect the amounts allegedly due to them.”
Respondents likewise insist that petitioner Malcaba was
a corporate officer considering that he was not only an
incorporator and stockholder, but also an elected Director
and President of respondent ProHealth.49 They also point
out that he filed his labor complaint seven (7) months after

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his resignation and that his voluntary resignation already

disproves his claim of constructive dismissal.50
Respondents argue that they were justified in
dismissing petitioners Nepomuceno and Palit-Ang. They
contend that petitioner Nepomuceno’s abandonment of his
duties at a criti-

_______________

45 Id., at pp. 57-59.

46 Id., at pp. 60-63.
47 Id., at pp. 633-635.
48 Id., at p. 635.
49 Id., at pp. 636-637.
50 Id., at p. 641.

535

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Malcaba vs. ProHealth Pharma Philippines, Inc.

cal sales period and his failure to immediately advise his

superiors of his whereabouts was ground for respondents to
lose their trust and confidence in him.51 They likewise
maintain that petitioner Palit-Ang was correctly found by
the Court of Appeals to have defied the lawful instructions
of respondent Del Castillo and illustrated her “grave
disrespect towards authority.”52
From the arguments and allegations of the parties, it is
clear that this case involves three (3) different illegal
dismissal complaints, with three (3) different complainants
in three (3) different factual situations during three (3)
different time periods. The only commonality is that they
involve the same respondents.
While this Court commends the economy by which the
National Labor Relations Commission resolved these cases,
the three (3) complaints should have been resolved
separately since the three (3) petitioners raise vastly
different substantive issues. This leaves this Court with
the predicament of having to resolve three (3) different
cases of illegal dismissal in one (1) Petition for Review.
Thus, each petitioner’s case will have to be resolved
separately within this Decision. This Court’s ruling over
one (1) petitioner may not necessarily affect the other co-
petitioners. The National Labor Relations Commission’s
zeal for economy and convenience should never prejudice
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the individual rights of each party. The National Labor

Relations Commission should know the rule that joinder of
parties53 or causes of action54 applies suppletorily in
appeals55 and for good reason.56

_______________

51 Id., at pp. 642-643.

52 Id., at pp. 643-644.
53 Rules of Court, Rule 3, Sec. 6.
54 Id., Rule 2, Sec. 5.
55 2011 NLRC Rules of Procedure, Rule I, Sec. 3 provides:
Section 3. Suppletory Application of the Rules of Court.—In the
absence of any applicable provision in these Rules, and in order to
effectuate the objectives of the Labor Code, the perti-

536

536 SUPREME COURT REPORTS ANNOTATED

Malcaba vs. ProHealth Pharma Philippines, Inc.

Petitioners raise the common procedural issue of

whether or not respondents failed to perfect their appeal
when it was discovered that their appeal bond was a forged
bond, which this Court will address before proceeding with
the substantive issues. The substantive issues raised,
however, are dependent on the factual circumstances
applicable to each petitioner. This Court tackles these
substantive issues in order:
First, whether or not the Labor Arbiter and National
Labor Relations Commission had jurisdiction over
petitioner Nicanor F. Malcaba’s termination dispute
considering the allegation that he was a corporate officer,
and not a mere employee;
Second, whether or not petitioner Christian C.
Nepomuceno was validly dismissed for willful breach of
trust when he failed to inform respondents ProHealth
Pharma Philippines, Inc., Generoso R. Del Castillo, Jr., and
Dante M. Busto of the actual dates of his vacation leave;
and
Finally, whether or not petitioner Laura Mae Fatima F.
Palit-Ang was validly dismissed for willful disobedience
when she failed to immediately comply with an order of her
superior.

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Appeal is not a matter of right.57 Courts and tribunals

have the discretion whether to give due course to an appeal
or to

_______________

nent provisions of the Rules of Court of the Philippines may, in the

interest of expeditious dispensation of labor justice and whenever
practicable and convenient, be applied by analogy or in a
suppletory character and effect.
56 See Republic v. Hernandez, 323 Phil. 606; 253 SCRA 509 (1996)
[Per J. Regalado, Second Division] where this Court discussed the
rationale for the procedural rule on joinder of parties and causes of action.
57 See Colby Construction and Management Corporation v. National
Labor Relations Commission, 564 Phil. 145; 539 SCRA 159 (2007) [Per J.
Chico-Nazario, Third Division].

537

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Malcaba vs. ProHealth Pharma Philippines, Inc.

dismiss it outright. The perfection of an appeal is, thus,

jurisdictional. Noncompliance with the manner in which to file an
appeal renders the judgment final and executory.58
In labor cases, an appeal by an employer is perfected
only by filing a bond equivalent to the monetary award.
Thus, Article 229[223]59 of the Labor Code provides:

Article 229[223]. Appeal.—

....
In case of a judgment involving a monetary award, an
appeal by the employer may be perfected only upon the
posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Commission in the
amount equivalent to the monetary award in the judgment
appealed from.

This requirement is again repeated in the 2011 National

Labor Relations Commission Rules of Procedure:

Section 4. Requisites for Perfection of Appeal.—(a) The

appeal shall be:
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....
(5) accompanied by:
....
(ii) posting of a cash or surety bond as provided in Section
6 of this Rule[.]
....
Section 6. Bond.—In case the decision of the Labor
Arbiter or the Regional Director involves a monetary award,
an appeal by the employer may be perfected only upon the
posting of a bond, which shall either be in the form of cash
deposit or surety bond equivalent in the amount to the
monetary award, exclusive of damages and attorney’s fees.

_______________

58 See Navarro v. National Labor Relations Commission, 383 Phil.

765; 327 SCRA 22 (2000) [Per J. Quisumbing, Third Division].
59 As amended by Rep. Act No. 6715, Sec. 12.

538

538 SUPREME COURT REPORTS ANNOTATED

Malcaba vs. ProHealth Pharma Philippines, Inc.

In case of surety bond, the same shall be issued by a

reputable bonding company duly accredited by the
Commission and shall be accompanied by original or
certified true copies of the following:
(a) a joint declaration under oath by the employer,
his/her counsel, and the bonding company, attesting
that the bond posted is genuine, and shall be in effect
until final disposition of the case;
(b) an indemnity agreement between the employer
appellant and bonding company;
(c) proof of security deposit or collateral securing the
bond: provided, that a check shall not be considered
as an acceptable security; and,
(d) notarized board resolution or secretary’s
certificate from the bonding company showing its
authorized signatories and their specimen signatures.
The Commission through the Chairman may on
justifiable grounds blacklist an accredited bonding
company.
A cash or surety bond shall be valid and effective from
the date of deposit or posting, until the case is finally

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decided, resolved or terminated, or the award satisfied. This

condition shall be deemed incorporated in the terms and
conditions of the surety bond, and shall be binding on the
appellants and the bonding company.
The appellant shall furnish the appellee with a certified
true copy of the said surety bond with all the above
mentioned supporting documents. The appellee shall verify
the regularity and genuineness thereof and immediately
report any irregularity to the Commission.
Upon verification by the Commission that the bond is
irregular or not genuine, the Commission shall cause the
immediate dismissal of the appeal, and censure the
responsible parties and their counsels, or subject them to

539

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Malcaba vs. ProHealth Pharma Philippines, Inc.

reasonable fine or penalty, and the bonding company may

be blacklisted.
No motion to reduce bond shall be entertained except on
meritorious grounds, and only upon the posting of a bond in
a reasonable amount in relation to the monetary award.
The mere filing of a motion to reduce bond without
complying with the requisites in the preceding paragraphs
shall not stop the running of the period to perfect an appeal.
60

The purpose of requiring an appeal bond is “to

guarantee the payment of valid and legal claims against
the employer.”61 It is a measure of financial security
granted to an illegally dismissed employee since the
resolution of the employer’s appeal may take an
indeterminable amount of time. In particular:

The requirement that the employer post a cash or surety bond

to perfect its/his appeal is apparently intended to assure the
workers that if they prevail in the case, they will receive the
money judgment in their favor upon the dismissal of the
employer’s appeal. It was intended to discourage employers from
using an appeal to delay, or even evade, their obligation to satisfy
their employees’ just and lawful claims.62

Procedural rules require that the appeal bond filed be

“genuine.” An appeal bond determined by the National
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Labor Relations Commission to be “irregular or not

genuine”
63
shall cause the immediate dismissal of the appeal.

_______________

60 2011 NLRC Rules of Procedure, Rule 6, Secs. 3 and 6. Section 6

was amended by NLRC En Banc Res. No. 14-15 (2015).
61 Supra note 58 at p. 774; pp. 28-29.
62 Viron Garments Mftg., Co., Inc. v. NLRC, G.R. No. 97357, March 18,
1992, 207 SCRA 339, 342 [Per J. Griño-Aquino, First Division].
63 2011 NLRC Rules of Procedure, Rule 6, Sec. 6, as amended by
NLRC En Banc Res. No. 14-15 (2015).

540

540 SUPREME COURT REPORTS ANNOTATED

Malcaba vs. ProHealth Pharma Philippines, Inc.

In this case, petitioners allege that respondents’ appeal

should not have been given due course by the National
Labor Relations Commission since the appeal bond they
filed “[did] not appear in the records of [Alpha Insurance]”
64
and was, therefore, not genuine. As evidence, they
presented a certification from Alpha Insurance, which read:

This is to certify that the bond being presented by MR.

JOSEPH D. DE JESUS is allegedly a Surety Bond filed
with the NATIONAL LABOR RELATIONS COMMISSION,
identified as Bond No. G(16)00358/2009 on an alleged case
NLRC NCR Case No. 08-12090-08, is a faked and forged
bond, and it was not issued by ALPHA INSURANCE &
SURETY COMPANY, INC.65

This Court in Navarro v. National Labor Relations

Commission66 found that an employer failed to perfect its
appeal as it submitted an appeal bond that was “bogus[,]
having been issued by an officer no longer connected for a
long time with the bonding company.”67 The mere
fictitiousness of the bond, however, was not the only factor
taken into consideration. This Court likewise took note of
the employer’s failure to sufficiently explain this
irregularity and its failure to file the bond within the
reglementary period.
In Quiambao v. National Labor Relations Commission,68 this
Court held that the mandatory and jurisdictional requirement of

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the filing of an appeal bond could be relaxed if there was

substantial compliance. Quiambao proceeded to outline situations
that could be considered as substantial compliance, such as late
payment, failure of the Labor Arbiter to state the exact amount of
money judgment due, and reli-

_______________

64 Rollo, p. 30.
65 Id., at p. 468.
66 Supra note 58.
67 Id., at p. 776; pp. 28-29.
68 324 Phil. 455; 254 SCRA 211 (1996) [Per J. Mendoza, Second
Division].

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Malcaba vs. ProHealth Pharma Philippines, Inc.

ance on a notice of judgment that failed to state that a bond

must first be filed in order to appeal.69 Rosewood
Processing v. National Labor Relations Commission70
likewise enumerated other instances where there would be
a liberal application of the procedural rules:

Some of these cases include: (a) counsel’s reliance on the footnote

of the notice of the decision of the labor arbiter that the aggrieved
party may appeal . . . within ten (10) working days; (b)
fundamental consideration of substantial justice; (c) prevention of
miscarriage of justice or of unjust enrichment, as where the tardy
appeal is from a decision granting separation pay which was
already granted in an earlier final decision; and (d) special
circumstances of the case combined with its legal merits or the
amount and the issue involved.71

Thus, while the procedural rules strictly require the

employer to submit a genuine bond, an appeal could still be
perfected if there was substantial compliance with the
requirement.
In this instance, the National Labor Relations
Commission certified that respondents filed a security
deposit in the amount of P6,512,524.84 under Security
Bank check no. 0000045245,72 showing that the premium
for the appeal bond
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_______________

69 Id., at pp. 462-463; p. 217, citing Rada v. NLRC, 282 Phil. 80; 205
SCRA 69 (1992) [Per J. Regalado, Second Division]; Blancaflor v. NLRC,
291-A Phil. 398; 218 SCRA 366 (1993) [Per J. Regalado, Second Division];
and YBL (Your Bus Lines) v. NLRC, 268 Phil. 169; 190 SCRA 160 (1990)
[Per J. Gancayco, First Division].
70 352 Phil. 1013; 290 SCRA 408 (1998) [Per J. Panganiban, First
Division].
71 Id., at p. 1029; p. 421, citing Philippine Airlines, Inc. v. National
Labor Relations Commission, 328 Phil. 814; 259 SCRA 459 (1996) [Per J.
Francisco, Third Division].
72 Rollo, pp. 570-571.

542

542 SUPREME COURT REPORTS ANNOTATED

Malcaba vs. ProHealth Pharma Philippines, Inc.

was duly paid and that there was willingness to post it.73
Respondents likewise attached documents proving that Alpha
Insurance was a legitimate and accredited bonding company.74
Despite their failure to collect on the appeal bond,
petitioners do not deny that they were eventually able to
garnish the amount from respondents’ bank deposits.75
This fulfills the purpose of the bond, that is, “to guarantee
the payment of valid and legal claims against the
employer[.]”76 Respondents are considered to have
substantially complied with the requirements on the
posting of an appeal bond.

II

Under the Labor Code, the Labor Arbiter exercises

original and exclusive jurisdiction over termination
disputes between an employer and an employee while the
National Labor Relations Commission exercises exclusive
appellate jurisdiction over these cases:

Article 224[217]. Jurisdiction of the Labor Arbiters and

the Commission.—(a) Except as otherwise provided under
this Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the
parties for decision without extension, even in the absence

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of stenographic notes, the following cases involving all

workers, whether agricultural or nonagricultural:
...
(2) Termination disputes;
...

_______________

73 See Garcia v. KJ Commercial, 683 Phil. 376; 667 SCRA 396 (2012)
[Per J. Carpio, Second Division].
74 Rollo, pp. 572-582.
75 Id., at p. 665.
76 Supra note 58 at p. 774; pp. 28-29.

543

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Malcaba vs. ProHealth Pharma Philippines, Inc.

(b) The Commission shall have exclusive appellate

jurisdiction over all cases decided by Labor Arbiters.77

The presumption under this provision is that the parties

have an employer-employee relationship. Otherwise, the
case would be cognizable in different tribunals even if the
action involves a termination dispute.
Petitioner Malcaba alleges that the Court of Appeals
erred in dismissing his complaint for lack of jurisdiction,
insisting that he was an employee of respondent, not a
corporate officer.
At the time of his alleged dismissal, petitioner Malcaba
was the President of respondent corporation. Strangely,
this same petitioner disputes this position as respondents’
bare assertion,78 yet he also insists that his name appears
as President in the corporation’s General Information
Sheet for 2007.79
Under Section 25 of the Corporation Code,80 the
President of a corporation is considered a corporate officer.
The dismissal of a corporate officer is considered an intra-
corporate

_______________

77 Labor Code, Art. 224[217] as amended by Rep. Act No. 6715, Sec. 9.
78 Rollo, p. 38.

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79 Id., at pp. 46-47. Petitioner Malcaba argued that his name still
appeared in the 2007 GIS to dispute respondents’ claim that he had
already resigned in 2007.
80 Corp. Code, Sec. 25 states:
Section 25. Corporate officers, quorum.—Immediately after their
election, the directors of a corporation must formally organize by
the election of a president, who shall be a director, a treasurer who
may or may not be a director, a secretary who shall be a resident
and citizen of the Philippines, and such other officers as may be
provided for in the bylaws. Any two (2) or more positions may be
held concurrently by the same person, except that no one shall act
as president and secretary or as president and treasurer at the
same time.

544

544 SUPREME COURT REPORTS ANNOTATED

Malcaba vs. ProHealth Pharma Philippines, Inc.

dispute, not a labor dispute. Thus, in Tabang v. National

Labor Relations Commission:81

A corporate officer’s dismissal is always a corporate act,

or an intra-corporate controversy, and the nature is not
altered by the reason or wisdom with which the Board of
Directors may have in taking such action. Also, an intra-
corporate controversy is one which arises between a
stockholder and the corporation. There is no distinction,
qualification, nor any exemption whatsoever. The provision
is broad and covers all kinds of controversies between
stockholders and corporations.82

Further, in Matling Industrial and Commercial

Corporation v. Coros,83 this Court stated that jurisdiction
over intra-corporate disputes involving the illegal dismissal
of corporate officers was with the Regional Trial Court, not
with the Labor Arbiter:
Where the complaint for illegal dismissal concerns a corporate
officer, however, the controversy falls under the jurisdiction of the
Securities and Exchange Commission (SEC), because the
controversy arises out of intra-corporate or partnership relations
between and among stockholders, members, or associates, or
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,

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partnership, or association and the State insofar as the

controversy concerns their individual franchise or right to

_______________

81 334 Phil. 424; 266 SCRA 462 (1997) [Per J. Regalado, Third
Division].
82 Id., at p. 430; p. 468, citing Fortune Cement Corporation v. NLRC,
271 Phil. 268; 193 SCRA 258 (1991) [Per J. Griño-Aquino, First Division];
and Securities and Exchange Commission vs. Court of Appeals, 278 Phil.
141; 201 SCRA 124 (1991) [Per J. Padilla, Second Division].
83 647 Phil. 324; 633 SCRA 12 (2010) [Per J. Bersamin, Third
Division].

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exist as such entity; or because the controversy involves the

election or appointment of a director, trustee, officer, or
manager of such corporation, partnership, or association.
Such controversy, among others, is known as an intra-
corporate dispute.
Effective on August 8, 2000, upon the passage of
Republic Act No. 8799, otherwise known as The Securities
Regulation Code, the SEC’s jurisdiction over all intra-
corporate disputes was transferred to the RTC, pursuant to
Section 5.2 of RA No. 8799, to wit:
5.2. The Commission’s jurisdiction over all cases
enumerated under Section 5 of Presidential Decree
No. 902-A is hereby transferred to the Courts of
general jurisdiction or the appropriate Regional Trial
Court: Provided, that the Supreme Court in the
exercise of its authority may designate the Regional
Trial Court branches that shall exercise jurisdiction
over these cases. The Commission shall retain
jurisdiction over pending cases involving intra-
corporate disputes submitted for final resolution
which should be resolved within one (1) year from the
enactment of this Code. The Commission shall retain
jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000
until finally disposed.84

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The mere designation as a high-ranking employee,

however, is not enough to consider one as a corporate
officer. In Tabang, this Court discussed the distinction
between an employee and a corporate officer, regardless of
designation:

The president, vice president, secretary and treasurer

are commonly regarded as the principal or executive officers
of a corporation, and modern corporation statutes

_______________

84 Mating Industrial and Commercial Corporation v. Coros, id., at p.

339; pp. 21-22, citing Pres. Decree No. 902-A, Sec. 5.

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usually designate them as the officers of the corporation. However,

other offices are sometimes created by the charter or bylaws of a
corporation, or the board of directors may be empowered under the
bylaws of a corporation to create additional offices as may be
necessary.
It has been held that 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 generally is employed not by 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.85

The clear weight of jurisprudence clarifies that to be

considered a corporate officer, first, the office must be
created by the charter of the corporation, and second, the
officer must be elected by the board of directors or by the
stockholders.
Petitioner Malcaba was an incorporator of the
corporation and a member of the Board of Directors.
86
Respondent corporation’s By-Laws creates the office of
the President. That foundational document also states that
the President is elected by the Board of Directors:

ARTICLE IV
OFFICER
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Section 1. Election/Appointment.—Immediately after their

election, the Board of Directors shall formally or-

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85 Tabang v. National Labor Relations Commission, 334 Phil. 424,

429; 266 SCRA 462, 467 (1997) [Per J. Regalado, Third Division], citing 2
Fletcher Cyc. Corp., 1982 Rev. Ed., Sec. 2690, as cited in Lopez, R.N., The
Corporation Code of the Philippines Annotated, Vol. I, p. 423; Corp. Code,
Sec. 25; SEC Opinion, dated March 25, 1983, Mr. Edison Alba; Campos,
Jr., J., The Corporation Code, Comments, Notes and Selected Cases, pp.
383-384; 2 Fletcher Cyc. Corp., Ch. II, Sec. 266; and Aldritt v. Kansas
Centennial Global Exposition, Inc., 189 Kan 649, 371 P2d 818, 424.
86 Rollo, p. 150.

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ganize by electing the President, the Vice President, the

Treasurer, and the Secretary at said meeting.87

This case is similar to Locsin v. Nissan Lease

Philippines:88

Locsin was undeniably Chairman and President, and

was elected to these positions by the Nissan board pursuant
to its Bylaws. As such, he was a corporate officer, not an
employee. The CA reached this conclusion by relying on the
submitted facts and on Presidential Decree 902-A, which
defines corporate officers as “those officers of a corporation
who are given that character either by the Corporation
Code or by the corporation’s bylaws.” Likewise, Section 25
of Batas Pambansa Blg. 69, or the Corporation Code of the
Philippines (Corporation Code) provides that corporate
officers are the president, secretary, treasurer and such
other officers as may be provided for in the bylaws.89
(Emphasis in the original)

Petitioners cite Prudential Bank and Trust Company v. Reyes

90 as basis that even high-ranking officers may be considered
regular employees, not corporate officers.91 Prudential Bank,
however, is not applicable to this case.
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In Prudential Bank, an employer was considered estopped

from raising the argument of an intra-corporate dispute since
this was only raised when the case was filed with this Court. This
Court also noted that an employee rose from the ranks and was
regularly performing tasks integral to the business of the
employer throughout the length of her tenure, thus:

_______________

87 Id., at p. 396.
88 648 Phil. 596; 634 SCRA 392 (2010) [Per J. Brion, Third Division].
89 Id., at p. 612; p. 409.
90 404 Phil. 961; 352 SCRA 316 (2001) [Per J. Gonzaga-Reyes, Third
Division].
91 Rollo, p. 39.

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It appears that private respondent was appointed

Accounting Clerk by the Bank on July 14, 1963. From that
position she rose to become supervisor. Then in 1982, she
was appointed Assistant Vice President which she occupied
until her illegal dismissal on July 19, 1991. The bank’s
contention that she merely holds an elective position and
that in effect she is not a regular employee is belied by the
nature of her work and her length of service with the Bank.
As earlier stated, she rose from the ranks and has been
employed with the Bank since 1963 until the termination of
her employment in 1991. As Assistant Vice President of the
foreign department of the Bank, she is tasked, among
others, to collect checks drawn against overseas banks
payable in foreign currency and to ensure the collection of
foreign bills or checks purchased, including the signing of
transmittal letters covering the same. It has been stated
that “the primary standard of determining regular
employment is the reasonable connection between the
particular activity performed by the employee in relation to
the usual trade or business of the employer.[”] Additionally,
“an employee is regular because of the nature of work and
the length of service, not because of the mode or even the
reason for hiring them.” As Assistant Vice President of the
Foreign Department of the Bank she performs tasks
integral to the operations of the bank and her length of
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service with the bank totaling 28 years speaks volumes of

her status as a regular employee of the bank. In fine, as a
regular employee, she is entitled to security of tenure; that
is, her services may be terminated only for a just or
authorized cause. This being in truth a case of illegal
dismissal, it is no wonder then that the Bank endeavored to
the very end to establish loss of trust and confidence and
serious misconduct on the part of private respondent but, as
will be discussed later, to no avail.92

92 Prudential Bank and Trust Company v. Reyes, supra note 90 at p.

474; p. 327, citing Bernardo v. National Labor Relations Commission, 369
Phil. 443; 310 SCRA 186 (1999) [Per J. Panganiban, Third Division].

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An “Assistant Vice President” is not among the officers

stated in Section 25 of the Corporation Code.93 A
corporation’s President, however, is explicitly stated as a
corporate officer.
Finding that petitioner Malcaba is the President of
respondent corporation and a corporate officer, any issue
on his alleged dismissal is beyond the jurisdiction of the
Labor Arbiter or the National Labor Relations Commission.
Their adjudication on his money claims is void for lack of
jurisdiction. As a matter of equity, petitioner Malcaba
must, therefore, return all amounts received as judgment
award pending final adjudication of his claims. This Court’s
dismissal of petitioner Malcaba’s claims, however, is
without prejudice to his filing of the appropriate case in the
proper forum.

III

Article 294[279] of the Labor Code provides that an

employer may terminate the services of an employee only
upon just or authorized causes.94 Article 297[282]
enumerates the

_______________

93 Corp. Code, Sec. 25 provides:

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Section 25. Corporate officers, quorum.—Immediately after their

election, the directors of a corporation must formally organize by
the election of a president, who shall be a director, a treasurer who
may or may not be a director, a secretary who shall be a resident
and citizen of the Philippines, and such other officers as may be
provided for in the bylaws. Any two (2) or more positions may be
held concurrently by the same person, except that no one shall act
as president and secretary or as president and treasurer at the
same time.
94 Labor Code, Art. 294 provides:
Article 294[279]. Security of Tenure.—In cases of regular
employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title.
An employee who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to
his other benefits or their monetary

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550 SUPREME COURT REPORTS ANNOTATED

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just causes for termination, among which is “[f]raud or willful breach by

the employee of the trust reposed in him by his employer or duly
authorized representative[.]”
Loss of trust and confidence is a just cause to terminate either
managerial employees or rank-and-file employees who regularly
handle large amounts of money or property in the regular exercise
of their functions.95
For an act to be considered a loss of trust and
confidence, it must be first, work-related, and second,
founded on clearly established facts:

The complained act must be work-related such as would

show the employee concerned to be unfit to continue
working for the employer and it must be based on a willful
breach of trust and founded on clearly established facts. The
basis for the dismissal must be clearly and convincingly
established but proof beyond reasonable doubt is not
necessary.96

The breach of trust must likewise be willful, that is, “it

is done intentionally, knowingly and purposely, without

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justifiable excuse, as distinguished from an act done

carelessly, thoughtlessly, heedlessly or inadvertently.”97
Petitioner Nepomuceno alleges that he was illegally
dismissed merely for his failure to inform his superiors of
the actual dates of his vacation leave. Respondents,
however,

_______________

equivalent computed from the time his compensation was withheld

from him up to the time of his actual reinstatement.
95 See Alvarez v. Golden Tri Bloc, Inc., 718 Phil. 415; 706 SCRA 406
(2013) [Per J. Reyes, First Division].
96 Alvarez v. Golden Tri Bloc, Inc., id., at p. 426; pp. 418-419, citing
Jerusalem v. Keppel Monte Bank, 662 Phil. 676; 647 SCRA 313 (2011) [Per
J. Del Castillo, First Division].
97 Atlas Consolidated Mining & Development Corp. v. NLRC, 352 Phil.
1088, 1097; 290 SCRA 479, 488 (1998) [Per J. Puno, Second Division].

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contend that as District Business Manager, petitioner

Nepomuceno lost the corporation’s trust and confidence by
failing to report for work during a crucial sales period.
As found by the National Labor Relations Commission,
petitioner Nepomuceno had filed for leave, which was
approved, for April 24, 25, and 28, 2008 to go on vacation in
Malaysia. However, he left for Malaysia on the evening of
April 22, 2008, and thus, failed to report for work on April
23, 2008.
Petitioner Nepomuceno claims that he only knew that
his flight was for the evening of April 22, 2008 on the day of
his flight. Respondents, however, insist that he
“deliberately concealed the actual date of departure as he
knows that he would be out of the country on a crucial
period of sales generation and bookings. . . [and] therefore
knew that his application for leave would be denied.”98
Otherwise stated, respondents contend that his dismissal
was a valid exercise of their management prerogative to
discipline and dismiss managerial employees unworthy of
their trust and confidence.

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The concept of a management prerogative was already

passed upon by this Court in San Miguel Brewery Sales
Force Union v. Ople:99

Except as limited by special laws, an employer is free to

regulate, according to his own discretion and judgment, all
aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, tools to
be used, processes to be followed, supervision of workers,
working regulations, transfer of employees, work
supervision, lay-off of workers and the discipline, dismissal
and recall of work. . .

_______________

98 Rollo, p. 158.
99 252 Phil. 27; 170 SCRA 25 (1989) [Per J. Griño-Aquino, First
Division].

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Every business enterprise endeavors to increase its

profits. In the process, it may adopt or devise means
designed towards that goal. In Abott Laboratories v.
NLRC . . . We ruled:
. . . Even as the law is solicitous of the welfare of
the employees, it must also protect the right of an
employer to exercise what are clearly management
prerogatives. The free will of management to conduct
its own business affairs to achieve its purpose cannot
be denied.
So long as a company’s management prerogatives are
exercised in good faith for the advancement of the
employer’s interest and not for the purpose of defeating or
circumventing the rights of the employees under special
laws or under valid agreements, this Court will uphold
them.100

While an employer is free to regulate all aspects of

employment, the exercise of management prerogatives
must be in good faith and must not defeat or circumvent
the rights of its employees.

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In industries that mainly rely on sales, employers are

free to discipline errant employees who deliberately fail to
report

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100 Id., at pp. 30-31; pp. 27-28, citing National Labor Union v. Insular-
Yebana Tobacco Corpation, 112 Phil. 821; 2 SCRA 924 (1961) [Per J.
Labrador, En Banc]; Republic Savings Bank v. Court of Industrial
Relations, 128 Phil. 230; 21 SCRA 226 (1967) [Per J. Castro, En Banc];
Hernandez, Perfecto V., Labor Relations Law, p. 44 (1985); Abbott
Laboratories (Phils.), Inc. v. NLRC, 238 Phil. 699; 154 SCRA 713 (1987)
[Per J. Gutierrez, Jr., Third Division]; LVN Pictures Employees and
Workers Asso. v. LVN Pictures, Inc., 146 Phil. 153; 35 SCRA 147 (1970)
[Per J. Castro, Second Division]; Phil. American Embroideries, Inc. v.
Embroidery & Garment Workers Union, 136 Phil. 36; 26 SCRA 634 (1969)
[Per J. Makalintal, En Banc]; and Phil. Refining Co., Inc. v. Garcia, 124
Phil. 698; 18 SCRA 107 (1966) [Per J. J.B.L. Reyes, En Banc].

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for work during a crucial sales period. It would have been

reasonable for respondents to discipline petitioner Nepomuceno
had he been a problematic employee who unceremoniously
refused to do his work.
However, as found by the Labor Arbiter and the
National Labor Relations Commission, petitioner
Nepomuceno turned over all of his pending work to a
reliever before he left for Malaysia. He was able to reach
his sales quota and surpass his sales target even before
taking his vacation leave. Respondents did not suffer any
financial damage as a result of his absence. This was also
petitioner Nepomuceno’s first infraction in his nine (9)
years of service with respondents.101 None of these
circumstances constitutes a willful breach of trust on his
part. The penalty of dismissal, thus, was too severe for this
kind of infraction.
The manner of petitioner Nepomuceno’s dismissal was
likewise suspicious. In all cases of employment
termination, the employee must be granted due process.
The manner by which this is accomplished is stated in

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Book V, Rule XXIII, Section 2 of the Rules Implementing

the Labor Code:

Section 2. Standard of due process: requirements of notice.

—
— In all cases of termination of employment, the following
standards of due process shall be substantially observed.
I. For termination of employment based on just causes as
defined in Article 282 of the Code:
(a) A written notice served on the employee specifying
the ground or grounds for termination, and giving to said
employee reasonable opportunity within which to explain
his side;

_______________

101 Rollo, p. 159.

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(b) A hearing or conference during which the employee

concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge,
present his evidence or rebut the evidence presented
against him; and
(c) A written notice of termination served on the
employee indicating that upon due consideration of all the
circumstance, grounds have been established to justify his
termination.

Here, petitioner Nepomuceno received a memorandum

on April 23, 2008, asking him to explain why no
administrative investigation should be held against him.
He submitted an explanation on the same day and another
explanation on May 2, 2008. On May 7, 2008, he was given
his notice of termination, which had already taken effect
two (2) days earlier, or on May 5, 2008.102
It is true that “[t]he essence of due process is simply an
opportunity to be heard.”103 Petitioner Nepomuceno had
two (2) opportunities within which to explain his actions.
This would have been sufficient to satisfy the requirement.
The delay in handing him his notice of termination,
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however, appears to have been an afterthought. While

strictly not a violation of procedural due process,
respondents should have been more circumspect in
complying with the due process requirements under the
law.
Considering that petitioner Nepomuceno’s dismissal was
done without just cause, he is entitled to reinstatement and
full backwages.104 If reinstatement is not possible due to

_______________

102 Id., at p. 157.

103 Philippine Long Distance Telephone Company v. NLRC, G.R. No.
71499, July 19, 1989, 175 SCRA 437, 440 [Per J. Griño-Aquino, First
Division], citing Bermejo v. Barrios, 142 Phil. 655; 31 SCRA 764 (1970)
[Per J. Zaldivar, First Division].
104 Labor Code, Art. 294 provides:

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strained relations between the parties, he shall be awarded

separation pay at the rate of one (1) month for every year of
service.105

IV

Under Article 297[282] of the Labor Code, an employer

may terminate the services of an employee who commits
willful disobedience of the lawful orders of the employer:

Article 297[282]. Termination by Employer.—An employer

may terminate an employment for any of the following
causes:
(a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or
representative in connection with his work[.]

For disobedience to be considered as just cause for

termination, two (2) requisites must concur: first, “the
employee’s assailed conduct must have been wilful or
intentional,” and second, “the order violated must have
been reasonable, lawful, made known to the employee and
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must pertain to the duties which he [or she] had been

engaged to discharge.”106 For dis-

_______________

Article 294[279]. Security of Tenure.—In cases of regular

employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title.
An employee who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement. (Emphasis supplied)
105 See De Vera v. NLRC, 269 Phil. 653; 191 SCRA 632 (1990) [Per J.
Cruz, First Division].
106 Gold City Integrated Port Services, Inc. v. NLRC, 267 Phil. 863,
872; 189 SCRA 811, 816-817 (1990) [Per J. Feliciano, Third Divi

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obedience to be willful, it must be “characterized by a wrongful

and perverse mental attitude rendering the employee’s act
inconsistent with proper subordination.”107
The conduct complained of must also constitute
“harmful behavior against the business interest or person
of his [or her] employer.”108 Thus, it is implied in every case
of willful disobedience that “the erring employee obtains
undue advantage detrimental to the business interest of
the employer.”109
Petitioner Palit-Ang, as Finance Officer, was instructed
by respondent Del Castillo to give a cash advance of
P3,000.00 to District Branch Manager Gamboa on
November 26, 2007. This order was reasonable, lawful,
made known to petitioner Palit-Ang, and pertains to her
duties.110 What is left to be determined, therefore, is
whether petitioner Palit-Ang intentionally and willfully
violated it as to amount to insubordination.
When Gamboa went to collect the money from petitioner Palit-
Ang, he was told to return the next day as she was still busy.
When petitioner Palit-Ang found out that the money was to be
used for a car tune-up, she suggested to Gamboa to just get the
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money from his mobilization fund and that she just would
reimburse it after.111 The Court of Appeals found that these
circumstances characterized petitioner Palit-Ang’s

_______________

sion], citing Batangas Laguna Tayabas Bus Co. v. Court of Appeals, 163
Phil. 494; 71 SCRA 470 (1976) [Per J. Martin, First Division].
107 Batangas Laguna Tayabas Bus Co. v. Court of Appeals, id., at p.
502; pp. 476-477, citing 35 Am. Jur., p. 478.
108 Dongon v. Rapid Movers and Forwarders Co., Inc., 716 Phil. 533,
544; 704 SCRA 56, 67-68 (2013) [Per J. Bersamin, First Division], citing
the Separate Opinion of J. Tiñga in Agabon v. National Labor Relations
Commission, 485 Phil. 248; 442 SCRA 573 (2004) [Per J. Ynares-Santiago,
En Banc].
109 Id.
110 Rollo, p. 19.
111 Id., at p. 164.

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“arrogance and hostility,”112 in failing to comply with

respondent Del Castillo’s order, and thus, warranted her
dismissal.
On the contrary, there was no ill will between Gamboa and
petitioner Palit-Ang. Petitioner Palit-Ang’s failure to immediately
give the money to Gamboa was not the result of a perverse mental
attitude but was merely because she was busy at the time.
Neither did she profit from her failure to immediately give the
cash advance for the car tune-up nor did respondents suffer
financial damage by her failure to comply. The severe penalty of
dismissal was not commensurate to her infraction. In Dongon v.
Rapid Movers and Forwarders:113

To us, dismissal should only be a last resort, a penalty to

be meted only after all the relevant circumstances have
been appreciated and evaluated with the goal of ensuring
that the ground for dismissal was not only serious but true.
The cause of termination, to be lawful, must be a serious
and grave malfeasance to justify the deprivation of a means
of livelihood. This requirement is in keeping with the spirit
of our Constitution and laws to lean over backwards in

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favor of the working class, and with the mandate that every
doubt must be resolved in their favor.
Although we recognize the inherent right of the employer
to discipline its employees, we should still ensure that the
employer exercises the prerogative to discipline humanely
and considerately, and that the sanction imposed is
commensurate to the offense involved and to the degree of
the infraction. The discipline exacted by the employer
should further consider the employee’s length of service and
the number of infractions during his employment. The
employer should never forget that always at stake in
disciplining its employee are not only his posi-

_______________

112 Id., at p. 93.

113 Dongon v. Rapid Movers and Forwarders Co., Inc., supra note 108.

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tion but also his livelihood, and that he may also have a family
entirely dependent on his earnings.114

Petitioner Palit-Ang likewise assails the failure of

respondents to inform her of her right to counsel when she
was being investigated for her infraction. As previously
discussed, “[t]he essence of due process is simply an
opportunity to be heard,”115 not that the employee must be
accompanied by counsel at all times. A hearing was
conducted and she was furnished a notice of termination
explaining the grounds for her dismissal.116 She was not
denied due process.
Petitioner Palit-Ang, nonetheless, is considered to have been
illegally dismissed, her penalty not having been proportionate to
the infraction committed. Thus, she is entitled to reinstatement
and full backwages.117 If reinstatement is not possible due to
strained relations between the parties, she

_______________

114 Id., at pp. 545-546; pp. 69-70, citing Hongkong and

Shanghai Banking Corp. v. NLRC, 328 Phil. 1156; 260
SCRA 49 (1996) [Per J. Panganiban, Third Division]; Coca-

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Cola Bottlers Phils., Inc. v. Daniel, 499 Phil. 491; 460 SCRA
494 (2005) [Per J. Panganiban, Third Division]; Pioneer
Texturizing Corp. v. NLRC, 345 Phil. 1057; 280 SCRA 806
(1997) [Per J. Francisco, En Banc]; and Almira v. B.F.
Goodrich Philippines, Inc., 157 Phil. 110; 58 SCRA 120
(1974) [Per J. Fernando, Second Division].
115 Philippine Long Distance Telephone Company v.
NLRC, supra note 103 at p. 440, citing Bermejo v. Barrios,
supra note 103.
116 Rollo, p. 165.
117 Labor Code, Art. 294 provides:
Article 294[279]. Security of Tenure.—In cases of
regular employment, the employer shall not
terminate the services of an employee except for a just
cause or when authorized by this Title. An employee
who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation
was withheld from him up to the time of his actual
reinstatement. (Emphasis supplied)

559

VOL. 864, JUNE 6, 2018 559

Malcaba vs. ProHealth Pharma Philippines, Inc.

shall be awarded separation pay at the rate of one (1)

month for every year of service.118
WHEREFORE, the Petition is PARTIALLY
GRANTED. Petitioner Christian C. Nepomuceno and
petitioner Laura Mae Fatima F. Palit-Ang are
DECLARED to have been illegally dismissed. They are,
therefore, entitled to reinstatement without loss of
seniority rights, or in lieu thereof, separation pay; and the
payment of backwages from the filing of their Complaints
until finality of this Decision.
The Court of Appeals’ February 19, 2013 Decision and
September 10, 2013 Resolution in C.A.-G.R. S.P. No.
119093, finding that the National Labor Relations
Commission had no jurisdiction to adjudicate petitioner
Nicanor F. Malcaba’s claims is SUSTAINED. Petitioner
Malcaba is further ordered to RETURN the amount of
P4,937,420.40 to respondents for having been erroneously

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3/21/23, 7:30 PM SUPREME COURT REPORTS ANNOTATED 864

awarded. This shall be without prejudice to the filing of

petitioner Malcaba’s claims in the proper forum.
This case is hereby REMANDED to the Labor Arbiter
for the proper computation of petitioners Christian C.
Nepo-muceno’s and Laura Mae Fatima F. Palit-Ang’s
money claims.
SO ORDERED.

Velasco, Jr. (Chairperson), Bersamin, Martires and

Gesmundo, JJ., concur.

Petition partially granted, petitioner Christian C.

Nepomuceno and petitioner Laura Mae Fatima F. Palit-Ang
declared to have been illegally dismissed. Case remanded to
Labor Arbiter for computation of money claims.

_______________

118 Supra note 105.

560

560 SUPREME COURT REPORTS ANNOTATED

Malcaba vs. ProHealth Pharma Philippines, Inc.

Upon the enactment of Republic Act (RA) No. 8799,

jurisdiction over intra-corporate disputes, including
derivatives suits, is now vested in the Regional Trial
Courts (RTCs) designated as special commercial courts
(SCCs) by the Supreme Court (SC) pursuant to A.M. No.
00-11-03-SC promulgated on November 21, 2000. (Forest
Hills Golf and Country Club, Inc. vs. Fil-Estate Properties,
Inc., 797 SCRA 655 [2016])

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