VVCC vs Africa (GR No. 151969 September 4, 2009)

Valle Verde Country Club Inc. vs Africa
G.R. No. 151969 September 4, 2009

Facts: On February 27, 1996, during the Annual Stockholders Meeting of petitioner Valle Verde Country Club, Inc. (VVCC), the following were elected as members of the VVCC Board of Directors: Ernesto Villaluna, Jaime C. Dinglasan (Dinglasan), Eduardo Makalintal (Makalintal), Francisco Ortigas III, Victor Salta, Amado M. Santiago, Jr., Fortunato Dee, Augusto Sunico, and Ray Gamboa. 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 above-named directors continued to serve in the VVCC Board in a hold-over capacity. On September 1, 1998, Dinglasan resigned from his position as member of the VVCC Board. In a meeting held on October 6, 1998, the remaining directors, still constituting a quorum of VVCCs nine-member board, elected Eric Roxas (Roxas) to fill in the vacancy created by the resignation of Dinglasan. A year later, or on November 10, 1998, Makalintal also 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 Roxas and Ramirez as members of the VVCC Board with the Securities and Exchange Commission (SEC) and the Regional Trial Court (RTC), respectively.

Issue: Whether or not the remaining directors of the corporations Board, still constituting a quorum, can elect another director to fill in a vacancy caused by the resignation of a hold-over director.

Held: 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 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 members election to the Board and until his successors election and qualification is not part of the directors 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.

The holdover period is not part of the term of office of a member of the board of directors.

Term is distinguished from tenure in that an officers tenure represents the term during which the incumbent actually holds office.  The tenure may be shorter (or, in case of holdover, longer) than the term for reasons within or beyond the power of the incumbent.

After the lapse of one year from his election as member of the VVCC Board in 1996, Makalintal’s term of office is deemed to have already expired. That he continued to serve in the VVCC Board in a holdover capacity cannot be considered as extending his term. To be precise, Makalintal’s term of office began in 1996 and expired in 1997, but, by virtue of the holdover doctrine in Section 23 of the Corporation Code, he continued to hold office until his resignation on November 10, 1998. This holdover period, however, is not to be considered as part of his term, which, as declared, had already expired.

The vacancy referred to in Section 29 contemplates a vacancy occurring within the directors term of office. When a vacancy is created by the expiration of a term, logically, there is no more unexpired term to speak of. Hence, Section 29 declares that it shall be the corporations stockholders who shall possess the authority to fill in a vacancy caused by the expiration of a members term.

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