ANTHONY POWERS, et al. Trustees of the International School, Inc.
, it was a
vs.
DONALD I. MARSHALL, et al.
G.R. No. L-48064, May 9, 1988
FACTS:
A letter was passed to the members of the
International School, Inc. indicating that that the
Board of Trustees had decided to embark on a
program to construct new buildings and remodel
existing ones to accommodate the increasing
enrollment in the school, and that it was necessary for
the school to raise P35,000,000.00 for this purpose.
The Board intended to raise the needed funds
primarily through subscriptions to capital notes and
prepayment certificates, and any deficiency from
these sources would be covered by collecting a so-
called "development fees" of P2,625 from each
enrollee starting with the school year 1975-1976 and
continuing up to the school year 1986-1987. An
implementing letter was issued indicating therein that
the conditions stated are pre-enrollment
requirements.
Fourteen (14) plaintiffs, all associate
members of the International School, Inc., brought an
action for injunction in the Court of First Instance of
Rizal. A TRO was granted in favor of the defendants.
Subsequently a decision was rendered dismissing the
complaint for lack of cause of action.
ISSUE:
Whether or not the actions of the BOT are
valid.
RULING:
YES.
Section 2 (b) of P.D. No. 732 granting
certain rights to the International School, Inc.,
expressly authorized the Board of Trustees "upon
consultation with the Secretary of Education and
Culture, ... to determine the amount of fees and
assessments which may be reasonably imposed upon
its students, to maintain or conform to the school
standard of education." Such consultation had been
made with the Secretary of Education and Culture
who expressed his conformity with the
reasonableness of the assessment of P2,625.00 per
student for the whole school year to carry out its
development program. Since the collection of the
development fee had been approved by the Board of
valid exercise of corporate power by the Board, and
said assessment was binding upon all the members of
the corporation.
FACTS:
On July 16, 1975, the fourteen (14) plaintiffs,
all associate members of the International School,
Inc., brought an action for injunction against the ten
(10) members of the Board of Trustees of the school,
praying that said Trustees be enjoined from collecting
a "development fee" of P2,625.00 per child-enrollee
per school year for a period of twelve (12) years,
beginning with the school year 1975-1976, as a pre-
requisite for re-enrollment in said school.
The suit was precipitated by a letter
addressed to the parents of the students, giving notice
that the Board of Trustees had decided to embark on
a program to construct new buildings and remodel
existing ones. The Board intended to raise the needed
funds primarily through subscriptions to capital notes
and prepayment certificates, and any deficiency from
these sources would be covered by collecting a so-
called "development fees" of P2,625 from each
enrollee starting with the school year 1975-1976 and
continuing up to the school year 1986-1987.
The trial court issued an order temporarily
restraining the defendants or their authorized
representatives and agents from executing and/or
enforcing in any manner the development program
and after the submission of the parties' memoranda
the trial court issued an order dismissing the
complaint for lack of valid cause of action
ISSUE:
Whether or not the Board of Trustees of the
International School was authorized to adopt the
development plan for which the disputed fee was
being collected from the students.
RULING:
YES.
Section 2 of Article 3 of the By-Laws of the
International School, Inc. provides: The Board of
Trustees, in addition to the powers conferred by these
By-Laws, shall have the right to such powers and do
such acts as may be lawfully exercised or performed
by the corporation, subject to applicable laws and to
1
the provisions of the articles of incorporation and the
By-Laws.
Section 2 (b) of P.D. No. 732 granting
certain rights to the International School, Inc.,
expressly authorized the Board of Trustees, upon
consultation with the Secretary of Education and
Culture, to determine the amount of fees and
assessments which may be reasonably imposed upon
its students, to maintain or conform to the school
standard of education." Such consultation had been
made with the Secretary of Education and Culture
who expressed his conformity with the
reasonableness of the assessment of P2,625.00 per
student for the whole school year to carry out its
development program. Since the collection of the
development fee had been approved by the Board of
Trustees of the International School, Inc., it was a
valid exercise of corporate power by the Board, and
said assessment was binding upon all the members
of the corporation.
G.R. No. L-27694 October 24, 1928
ZAMBOANGA TRANSPORTATION
COMPANY, INC., plaintiff-appellee,
vs. THE BACHRACH MOTOR CO.,
INC., defendant-appellant.
FACTS:
Zamboanga Transportation Co., Inc.
(Zamboanga), is managed by a board of directors
composed of five stockholders; Bachrach Motor Co.
is a corporation engaged in selling automobiles and
their parts. For 10 years, the two have been dealing
with each other. Zamboanga buys trucks,
automobiles, repair and accessory parts for use in the
business of transportation in which it is engaged.
Payments were made by installments, and Zamboanga
executed several chattel mortgages to secure it. Jose
Erquiaga (Erquiaga) was appointed as general
manager in 1924,elected president, and acted as an
auditor in 1925. He is also one of the majority
stockholders and has been its attorney and legal
adviser.
Zamboanga lacked funds and contacted
Mons. Jose Clos, Bishop of Zamboanga and a
principal stock holder of the company, for loans of
money. Since, he was leaving for Rome in February
1925 and could not continue to loan money to
Zamboanga, additional agreements were entered
between Mons. Clos and the Bachrach Motor Co.,
Inc. A new chattel mortgage was executed on by
Zamboanga represented by President Erquiaga. In
this last mortgage the same goods were pledged that
had been hypothecated by the Zamboanga
Transporatation Co., Inc., to the Bachrach Motor Co.,
by virtue of instruments to Mons. Jose Clos Bishop
of Zamboanga, by the virtue of the deed. President
Erquiaga submitted the mortgage deed to the Board
of directors. Upon returning to Zamboanga from
Manila, He discussed the mortgage with two board of
directors, who expressed satisfaction. Zamboanga
also partially complied with the mortgage contract.
Zamboanga paid Bachrach two times. Bachrach sent
a letter cancelling the 2 former chattel mortgage.
Bachrach told Erguiaga to register the cancellation.
Erquiaga replied by stating that the last mortgage was
not approved by the Board of Directors. Jose
Erquiaga went to E.M. Bachman, president of
Bachrach Motor co., to secure his consent to sell the
trucks that were mortgaged. He said this will be used
to pay the unpaid debt. Bachrach denied. Erquiaga
and Zamboaga later on discovered that the last
mortgage was registered in the register of deed.
Zamboanga, then filed for annulment of the last
mortgage because it was registered without their
consent. Bachrach, filed a complaint for Zamboanga
to obtain possession of all the chattels. Bchrach won
and sold the chattel in a public auction where they
were held the highest bidder.
ISSUE: W/N the chattel mortgage executed by the
president and general manager of the plaintiff
corporation, the Zamboanga Transportation Co.,
Inc., is valid
RULING: YES.
While it is true that said last chattel mortgage contract
was not approved by the board of directors of the
Zamboanga Transportation Co., Inc., whose approval
was necessary in order to validate it according to the
by-laws of said corporation, the broad powers vested
in Jose Erquiaga as president, general manager,
auditor, attorney or legal adviser, and one of the
largest shareholders; the approval of his act in
connection with said chattel mortgage contract in
question, with which two other directors expressed
satisfaction, one of which is also one of the largest
shareholders, who together with the president
constitute a majority: The payments made under said
contract with the knowledge of said three directors
are equivalent to a tacit approval by the board of
2
directors of said chattel mortgage contract and binds
the Zamboanga Transportation Co., Inc. In truth and
in fact Jose Erquiaga, in his multiple capacity, was and
is the factotum of the corporation and may be said to
be the corporation itself.
"Halley First National Bank vs. G. V. B. Min. Co.":
Where the chief officers of a corporation are in reality
its owners, holding nearly all of its stock, and are
permitted to manage the business by the directors,
who are only interested nominally or to a small extent,
and are controlled entirely by the officers, the acts of
such officers are binding on the corporation, which
cannot escape liability as to third persons dealing with
it in good faith on the pretense that such acts were
ultra vires.
When the president of a corporation, who is one of
the principal stockholders and at the same time its
general manager, auditor, attorney or legal adviser, is
empowered by its by-laws to enter into chattel
mortgage contracts, subject to the approval of the
board of directors, and enters into such contracts with
the tacit approval of two other members of the board
of directors, one of whom is also a principal
shareholder, both of whom, together with the
president, form a majority, and said corporation takes
advantage of the benefits afforded by said contract,
such acts are equivalent to an implied ratification of
said contract by the board of directors and binds the
corporation even if not formally approved by said
board of directors as required by the by-laws of the
aforesaid corporation.
JULIO SALES vs. SEC
G.R. No. L-54330. January 13, 1989. Cortes, J.
Where the corporation sold its shares to an investment
house on the condition that the same shall be sold to the public
through stockbrokers in block of 1 million shares per buyer and
the condition was not fulfilled, the sale is, nevertheless, presumed
to be valid unless set aside by a competent court. Thus, the buyer,
as a stockholder, cannot be deprived of his right to vote his shares
as it is a right inherent to ownership. The stockholder may be
deprived of the right to vote only upon clear showing of its lawful
denial under the articles of incorporation or by-laws of a
corporation.
Further, issues relating to the directive of the board of
directors of the issuing corporation to issue a stock certificate in
favor of the buyer are questions of policy or management and are
left solely to the honest decision of officers and directors of a
corporation, and so long as they act in good faith, their orders
are not reviewable by the courts.
Facts:
State Investment House entered into a sales
agreement with Sipalay Mining whereby the latter sold
to the former 200M common shares of its capital
stock, on the condition that State Investment shall not
sell more than 1M shares per buyer.
Subsequently, the restriction on the sale of
the shares was modified by allowing sale in blocks
from 1M shares to 5M shares per buyer.
State Investment sold the 200M shares to
Anselmo Trinidad & Co., Inc. (ATCO). During the
time that ATCO held the shares, it voted them in the
stockholders' meetings of Sipalay Mining.
Later on, ATCO in turn sold 198.5M of the
shares to VULCAN. By resolution of the BODs of
Sipalay Mining, its President was directed to sign the
certificate of stock that would effect the transfer.
Prior to the scheduled annual stockholders’
meeting of Sipalay Mining, petitioners filed before the
SEC a petition to nullify the sale of the shares to
VULCAN, with a prayer for the issuance of a writ of
preliminary injunction to enjoin VULCAN from
voting the shares. The SEC temporarily restrained
VULCAN from voting its 198.5M shares at the 1979
annual stockholders’ meeting pending resolution of
petitioners’ petition for the issuance of a writ of
preliminary injunction.
The annual stockholders’ meeting of Sipalay
Mining proceeded without the participation of
VULCAN’s 198.5M shares and the members of the
BODs were elected.
Issue:
W/N the sale of shares to VULCAN is valid and
that the shares in question be counted for quorum and
be allowed to vote and be voted for pending
resolution of the validity of the sale with the court.
Held:
YES;
3
 The sale of the shares of stock had long been
perfected and is presumed valid until declared
otherwise by a competent court.
Thus, during the pendency of the case on the
issue of validity of sale,, VULCAN (the buyer), as a
stockholder, has the right to vote his shares because
the right to vote in the annual stockholders’ meeting
is inherent in stock ownership and can only be
deprived from the stockholders if it is provided for in
the articles of incorporation or by-laws of the
corporation.
The Court is not at liberty to review whether or
not the decision of the board to direct its President to
sign the stock certificate was to the best interest of the
corporation:
It is a well-known rule of law that questions of
policy or of management are left solely to the honest
decision of officers and directors of a corporation,
and the court is without authority to substitute its
judgment for the judgment of the board of directors;
the board is the business manager of the corporation,
and so long as it acts in good faith its orders are not
reviewable by courts.
Petition is DISMISSED.
GOKONGWEI, Jr. v. SEC
FACTS:
This is a petition for “declaration of
nullity of amended by-laws, cancellation of certificate
of filing of amended by-laws and damages” filed by
petitioner John Gokongwei against the majority of the
members of the Board of Directors. He has the ff
causes of action:
1. that the Board in
amending the by-laws, had no authority to
do so because it was based on the a 1961
authorization and the amendment being
contested was in 1976, and the authorization
should have been based on votes made
according to the 1976 shares, not the 1961
shares,
1Sec 2, Art III—Any stockholder having at least 5000
shared registered in his name may be elected as
Director, but he shall not be qualify or be eligible for
nomination or election to the BoD if he is engaged in
2. the authority granted in
1961 had already been exercised in 1962 and
1963, after which the authority of the Board
ceased to exist,
3. membership of the Board
changed since 1961, there are 6 new
directors,
4. that prior to the
amendment of the by-laws1, he had all the
qualifications to be a director (he was a
substantial stockholder) and the aamended
by-laws disqualified him and deprived him of
a vested right to be voted,
5. that the corporation has
no inherent power to disqualify a
stockholder from being elected and
therefore it is an ultra vires and void act.
Petitioner also wanted to inspect records and
documents of San Miguel Corporation but the request
was denied because the request was said to have been
made in bad faith.
Respondents filed their answer to the
petition, denying the substantial allegations therein
and stating, by way of affirmative defenses that "the
action taken by the Board of Directors on September
18, 1976 resulting in the . . . amendments is valid and
legal because the power to 'amend, modify, repeal or
adopt new By-laws' delegated to said Board on March
13, 1961 and long prior thereto has never been
revoked, withdrawn or otherwise nullified by the
stockholders of SMC". Also said that the power of the
Board to amend the by-laws are broad, subject only to
existing laws.
August 1972, the Universal Robina
Corporation (URC), a corporation engaged in
business competitive to that of respondent
corporation, began acquiring shares amounting to
622,987 shares. In October 1972, the Consolidated
Foods Corporation (CFC) likewise began acquiring
shares in respondent corporation that amounted to
P543,959.00. On January 12, 1976, petitioner, who is
president and controlling shareholder of URC and
CFC (both closed corporations) purchased 5,000
shares of stock of respondent corporation, and
thereafter, in behalf of himself, CFC and URC,
any business which competes with or is antagonistic to
that of the Corporation…
4
"conducted malevolent and malicious publicity
campaign against SMC" to generate support from the
stockholder "in his effort to secure for himself and in
representation of URC and CFC interests, a seat in the
Board of Directors of SMC". Petitioner was
rejected by the stockholders in his bid to secure a
seat in the Board of Directors on the basic issue
that petitioner was engaged in a competitive
business and his securing a seat would have
subjected respondent corporation to grave
disadvantages.
On May 6, 1977, this Court issued a
temporary restraining order restraining private
respondents from disqualifying or preventing
petitioner from running or from being voted as
director of respondent corporation and from
submitting for ratification or confirmation or from
causing the ratification or confirmation of the
amendment. SEC held that petitioner should be
allowed to run as a director but that he should not sit
as such until SEC has decided on the validity of the
by-laws in dispute.
Respondents reason out that petitioner is
engaged in businesses competitive and antagonistic to
that of respondent SMC and that the Board realized
the clear and present danger in competitors being
directors because they would have easy and direct
access to SMC’s business and trade secrets.
ISSUE: W/N the amended by-laws of
SMC disqualifying a competitor from nomination
or election to the Board of Directors of SMC are
valid and reasonable.
HELD/RATIONALE: Amendments
are valid.
The validity or reasonableness of a by-law of
a corporation is purely a question of law. Petitioner
claims that the amended by-laws are invalid and
unreasonable because they were tailored to suppress
the minority and prevent them from having
representation in the Board", at the same time
depriving petitioner of his "vested right" to be voted
for and to vote for a person of his choice as director.
Any person "who buys stock in a
corporation does so with the knowledge that its affairs
are dominated by a majority of the stockholders and
that he impliedly contracts that the will of the majority
shall govern in all matters within the limits of the act
of incorporation and lawfully enacted by-laws and not
forbidden by law."
Pursuant to section 18 of the Corporation
Law, any corporation may amend its articles of
incorporation by a vote or written assent of the
stockholders representing at least two-thirds of the
subscribed capital stock of the corporation. If the
amendment changes, diminishes or restricts the rights
of the existing shareholders, then the dissenting
minority has only one right, viz.: "to object thereto in
writing and demand payment for his share." Under
section 22 of the same law, the owners of the majority
of the subscribed capital stock may amend or repeal
any by-law or adopt new by-laws. It cannot be said,
therefore, that petitioner has a vested right to be
elected director, in the face of the fact that the law at
the time such right as stockholder was acquired
contained the prescription that the corporate charter
and the by-law shall be subject to amendment,
alteration and modification.
Although in the strict and technical sense,
directors of a private corporation are not regarded as
trustees, there cannot be any doubt that their
character is that of a fiduciary insofar as the
corporation and the stockholders as a body are
concerned. As agents entrusted with the management
of the corporation, they should act for the collective
benefit of the stockholders.
It is a settled state law in the United States
that corporations have the power to make by-laws
declaring a person employed in the service of a rival
company to be ineligible for the corporation's Board
of Directors. ". . . (A)n amendment which renders
ineligible, or if elected, subjects to removal, a director
if he be also a director in a corporation whose
business is in competition with or is antagonistic to
the other corporation is valid." This is based upon the
principle that where the director is so employed in the
service of a rival company, he cannot serve both, but
must betray one or the other. Such an amendment
"advances the benefit of the corporation and is good."
The doctrine of "corporate opportunity" is
precisely a recognition that fiduciary standards could
not be upheld where the fiduciary was acting for two
entities with competing interests. It is not denied that
a member of the Board of Directors of the San Miguel
Corporation has access to sensitive and highly
confidential information.
It is obviously to prevent the creation of an
opportunity for an officer or director of San Miguel
Corporation, who is also the officer or owner of a
competing corporation, from taking advantage of the
information which he acquires as director to promote
his individual or corporate interests to the prejudice
of San Miguel Corporation and its stockholders, that
the questioned amendment of the by-laws was made.
5
Certainly, where two corporations are competitive in and qualified to vote shall have chosen one of them
a substantial sense, it would seem improbable, if not to act as presiding officer of the meeting.
impossible, for the director, if he were to discharge
effectively his duty, to satisfy his loyalty to both The subsequent motions to set aside the order was
corporations and place the performance of his
denied. Thus this is a petition for a writ of certiorari.
corporation duties above his personal concerns.
In the absence of any legal prohibition or ISSUE: Whether the TC can validly call for a
overriding public policy, wide latitude may be stockholder’s meeting under the Corporation Code
accorded to the corporation in adopting measures to
protect legitimate corporate interests. The test must HELD: YES it can. On the showing of good cause
be whether the business does in fact compete, not
whether it is capable of an indirect and highly therefor, the court may authorize a stockholder to
unsubstantial duplication of an isolated or non- call a meeting and to preside thereat until the
characteristic activity. majority stockholders representing a majority of the
stock present and permitted to be voted shall have
chosen one among them to preside it. And this
PONCE vs ENCARNACION showing of good cause therefor exists when the
court is apprised of the fact that the by-laws of the
corporation require the calling of a general meeting
FACTS: Daguhoy Enterprises, Inc., was a duly of the stockholders to elect the board of directors
registered corporation. On April 1951 a meeting was but the call for such meeting has not been done.
called where the voluntary dissolution of the
The requirement that "on the showing of good cause
corporation and the appointment of Potenciano
therefor, " the court may grant to a stockholder the
Gapol as receiver were agreed upon. Instead of filing
authority to call such meeting and to preside thereat
a petiton for voluntary dissolution however, the
does not mean that the petition for such authority
respondent Potenciano Gapol, who is the largest
must be set for hearing with notice served upon the
stockholder of the corporation, changed his mind
board of directors. The respondent court was
and filed a complaint to compel the petitioners to
satisfied that there was a showing of good cause for
render an accounting of the funds and assets of the
authorizing the respondent Potenciano Gapol to call
corporation, to reimburse it, jointly and severally
a meeting of the stockholders for the purpose of
such sum as may be found after the accounting shall
electing the board of directors as required and
have been rendered to have been misspent,
provided for in the by-laws, because the chairman of
misapplied, misappropriated and converted by the
the board of directors called upon to do so had
petitioner Domingo Ponce (the president of the
failed, neglected, or refused to perform his duty. It
company) to his own use and benefit. Gapol filed an
may be likened to a writ of preliminary injunction or
action with the TC and prayed for an order directing
of attachment which may be
him to a call a meeting of the stockholders of the
corporation and to preside at such meeting in
It may be likened to a writ of preliminary injunction
accordance with section 26 of the Corporation law.
or of attachment may be issued ex-parte upon
compliance with the requirements of the rules and
TC granted their petition and gave an order granting
upon the court being satisfied that the same should
Potenciano Gapol authority, pursuant to section 26,
issue. Such provisional reliefs have not been deemed
Act No. 1459, otherwise known as the Corporation
and held as violative of the due process of law clause
Law, to call a meeting of the stockholders of the
of the Constitution. Petitioners claim they were
Dagunoy Enterprises, Inc. and to preside at such
deprived of due process, but they had no right to
meeting by giving proper notice to the stockholders,
continue as directors of the corporation unless
as required by law or by laws of the corporation,
reelected by the stockholders in a meeting called for
until after the majority of the stockholders present
that purpose every even year. They had no right to a

6
hold-over brought about by the failure to perform
the duty incumbent upon one of them.
Issue: WON under the corporation code, the TC
can validly call for a stockholder’s meeting? / Are
the officers deprived of due process in the action of
the TC?
Held: Yes. On the showing of good cause therefor,
the court may authorize a stockholder to call a
meeting and to preside threat until the majority
stockholders representing a majority strockholders
representing a majority of the stock present and
permitted to be voted shall have chosen one among
them to preside it. And this showing of good cause
therefor exists when the court is apprised of the fact
that the by-laws of the corporation require the
calling of a general meeting of the stockholders to
elect the board of directors but call for such meeting
has not been done.
With persistency petitioners claim that they have
been deprived of their right without due process of
law. They had no right to continue as directors of
the corporation unless reflected by the stockholders
in a meeting called for that purpose every even year.
They had no right to a hold-over brought about by
the failure to perform the duty incumbent upon one
of them. If they felt that they were sure to be
reelected, why did they fail, neglect, or refuse to call
the meeting to elect the members of the board? Or,
why did they not seek their reelection at the meeting
called to elect the directors pursuant to the order of
the respondent court.
Corporate Law Case Digest: Valle Verde
Country Club V. Africa (2009)
On February 27, 1996, during the Annual
Stockholders’ Meeting of petitioner Valle Verde
Country Club, Inc. (VVCC), the VVCC Board of
Directors were elected including Eduardo Makalintal
(Makalintal) among others.
In the years 1997, 1998, 1999, 2000, and 2001,
however, the requisite quorum for the holding of the
stockholders’ meeting could not be obtained.
Consequently, the directors continued to serve in the
VVCC Board in a hold-over capacity. Later,
Makalintal resigned as member of the VVCC Board.
He was replaced by Jose Ramirez (Ramirez), who
was elected by the remaining members of the VVCC
Board on March 6, 2001.
Respondent Africa (Africa), a member of VVCC,
questioned the election of Ramirez as members of
the VVCC Board with the Regional Trial Court
(RTC), respectively.
Africa claimed that a year after Makalintal’s election
as member of the VVCC Board in 1996, his
[Makalintal’s] term – as well as those of the other
members of the VVCC Board – should be
considered to have already expired.
Thus, according to Africa, the resulting vacancy
should have been filled by the stockholders in a
regular or special meeting called for that purpose,
and not by the remaining members of the VVCC
Board, as was done in this case.
The RTC sustained Africa’s complaint.
SEC: Roxas as Vice hold-pver director of Dinglasan
= null and void
VVCC appealed in SC for certiorari being partially
contrary to law and jurisprudence
Whether the remaining directors of the corporation’s
Board, still constituting a quorum, can elect another
director to fill in a vacancy caused by the resignation
of a hold-over director.
RULING NO.
When Section 23 of the Corporation Code declares
that “the board of directors…shall hold office for
one (1) year until their successors are elected and
7
 qualified,” we construe the provision to mean that
the term of the members of the board of directors
shall be only for one year; their term expires one year
after election to the office. The holdover period –
that time from the lapse of one year from a
member’s election to the Board and until his
successor’s election and qualification – is not part of
the director’s original term of office, nor is it a new
term; the holdover period, however, constitutes part
of his tenure.
Corollary, when an incumbent member of the board
of directors continues to serve in a holdover
capacity, it implies that the office has a fixed term,
which has expired, and the incumbent is holding the
succeeding term.
[Here], when remaining members of the VVCC
Board elected Ramirez to replace Makalintal, there
was no more unexpired term to speak of, as
Makalintal’s one-year term had already expired.
Pursuant to law, the authority to fill in the vacancy
caused by Makalintal’s leaving lies with the VVCC’s
stockholders, not the remaining members of its
board of directors. To assume – as VVCC does –
that the vacancy is caused by Makalintal’s resignation
in 1998, not by the expiration of his term in 1997, is
both illogical and unreasonable.
His resignation as a holdover director did not change
the nature of the vacancy; the vacancy due to the
expiration of Makalintal’s term had been created
long before his resignation.
ISSUES:
1. W/N there is an unexpired term - NO
HELD: Petition Denied. RTC Affirmed.
1 NO
 “term” time during which the officer may claim
to hold the office as of right
 not affected by the holdover
 fixed by statute and it does not change simply
because the office may have become vacant, nor
because the incumbent holds over in office
beyond the end of the term due to the fact that
a successor has not been elected and has failed
to qualify.
 “tenure”
 term during which the incumbent actually holds
office.
 Section 23 of the Corporation Code: term of
BOD only 1 year - fixed and has expired (1 yr
after 1996)
 2. W/N the remaining directors of a
corporation’s Board, still constituting a
quorum, can elect another director to fill in
a vacancy caused by the resignation of a
hold-over director. - NO
2. NO
 underlying policy of the Corporation Code is
that the business and affairs of a corporation
must be governed by a board of directors whose
members have stood for election, and who have
actually been elected by the stockholders, on an
annual basis. Only in that way can the directors'
continued accountability to shareholders, and
the legitimacy of their decisions that bind the
corporation's stockholders, be assured. The
shareholder vote is critical to the theory that
legitimizes the exercise of power by the
directors or officers over properties that they do
not own.
 theory of delegated power of the board of
directors
 Section 29 contemplates a vacancy
occurring within the director’s term of office
(unexpired)
 vacancy caused by Makalintal’s leaving lies with
the VVCC’s stockholders, not the remaining
members of its board of directors
12. RANIEL VS. JOCHICO
(G.R. No. 153413, March 2, 2007)
DOCTRINE: The directors may appoint officers and
agents and as incident to this power of appointment,
they may discharge those appointed.
FACTS
 Nectarina Raniel and Victoria Pag-ong, are 2
out of the 5 directors of Nephro Systems
Dialysis Center.
8
 Note: Raniel was Corporate Secretary,
Treasurer, and Administrator of the
Dialysis Clinic.
 Petitioners questioned respondents’ plan to
enter into a joint venture with the Butuan
Doctors’ Hospital and College. Respondents
allegedly tried to compel them to waive and
assign their shares with Nephro but
petitioners refused.
 Raniel sought an indefinite leave of absence.
Paul Jochico disapproved the request, but
Raniel nonetheless stopped reporting for
work. When asked for an explanation for her
absence, Raniel expressed her sentiments
over the disapproval of leave, and the joint
venture with Butuan.
Note: Without Raniel, holding three
important positions, the company’s
operations were disrupted. Such also
warranted loss of the Board’s confidence
in her. - SC
 Jochico issued a Notice of Special Board
Meeting. Petitioners were notified, but
they did not attend. The board passed
several resolutions ratifying the disapproval
of Raniel’s request for leave, dismissing her
as Administrator of Nephro, declaring the
position of Corporate Secretary vacant.
 Otelio Jochico was appointed as the new
Corporate Secretary, and a Special
Stockholders’ Meeting was held.
400 Shares voted for petitioners’ removal
 Petitioners filed a case with the SEC, which
held that the removal of petitioners was
valid. Appeal made to the CA, which
affirmed the SEC decision.
ISSUE
WON the petitioners’ removal was valid? YES.
HELD
 The SC ruled in favor of Jochico.
 The directors may appoint officers and agents
and as incident to this power of
appointment, they may discharge those
appointed.
Note: Raniel was removed from her
positions before she was ousted from her
status as a director.
 The unanimous resolutions carried by the
board during such meetings are valid and
binding against complainants.
Note: There was quorum, given that there
were only 5 directors, 3 voted to remove
petitioners.
PETITION DENIED

 Again, petitioners did not attend. The

stockholders that were present removed the
petitioners as directors of Nephro.
Note: Raniel could have explained herself
during these meetings, but she chose not
to attend. - SC

 Side-note: the ownership of the

outstanding capital stock is distributed in
this manner;
Jochico – 200 Shares
Steffens – 100 Shares
Viriya – 100 Shares
Raniel – 25 Shares
Pag-ong – 75 Shares
= 500 Shares
2/3 of OCS is 333.33 Shares