Corporate Law Case Digest: Lee v.

CA (1992)
G.R. No. 93695 February 4, 1992
Lessons Applicable: Voting Trust Agreements (Corporate Law)
FACTS:
November 15, 1985: a complaint for a sum of money was filed by the International Corporate Bank, Inc.
(ICB) against the private respondents
March 17, 1986: private respondents, in turn, filed a 3rd-party complaint against ALFA and ICB
September 17, 1987: petitioners filed a motion to dismiss the third party complaint - denied
July 12, 1988: trial court issued an order requiring the issuance of an alias summons upon ALFA through the
DBP
consequence of the petitioner's letter that ALFA management was transferred to DBP
July 22, 1988: DBP claimed that it was not authorized to receive summons on behalf of ALFA
August 4, 1988: trial court issued an order advising the private respondents to take the appropriate steps to
serve the summons to ALFA
September 12, 1988: petitioners filed a motion for reconsideration submitting that Rule 14, section 13 of the
Revised Rules of Court is not applicable since they were no longer officers of ALFA and that the private
respondents should have availed of another mode of service under Rule 14, Section 16 of the said Rules, i.e.,
through publication to effect proper service upon ALFA - denied
January 19, 1989: 2nd motion for reconsideration was filed by the petitioners reiterating their stand that by
virtue of the voting trust agreement they ceased to be officers and directors of ALFA
attached a copy of the voting trust agreement between all the stockholders of ALFA and the DBP whereby
the management and control of ALFA became vested upon the DBP
April 25, 1989: trial court reversed itself by setting aside its previous Order dated January 2, 1989 and
declared that service upon the petitioners who were no longer corporate officers of ALFA cannot be considered
as proper service of summons on ALFA
October 17, 1989: trial court (NOT notified of the petition for certiorari) declared final its decision on April
25, 1989
ISSUE: W/N the voting trust agreement is valid despite being contrary to the general principle that a
corporation can only be bound by such acts which are within the scope of its officers' or agents' authority
HELD:
voting trust, trust created by an agreement between a group of the stockholders of a corporation and the
trustee or by a group of identical agreements between individual stockholders and a common trustee, whereby it
is provided that for a term of years, or for a period contingent upon a certain event, or until the agreement is
terminated, control over the stock owned by such stockholders, either for certain purposes or for all purposes, is
to be lodged in the trustee, either with or without a reservation to the owners, or persons designated by them, of
the power to direct how such control shall be used (Ballentine's Law Dictionary)
Sec. 59. Voting Trusts One or more stockholders of a stock corporation may create a voting trust for the
purpose of conferring upon a trustee or trustees the right to vote and other rights pertaining to the share for a

period rights pertaining to the shares for a period not exceeding 5 years at any one time: Provided, that in the
case of a voting trust specifically required as a condition in a loan agreement, said voting trust may be for a
period exceeding 5 years but shall automatically expire upon full payment of the loan. A voting trust agreement
must be in writing and notarized, and shall specify the terms and conditions thereof. A certified copy of such
agreement shall be filed with the corporation and with the Securities and Exchange Commission; otherwise,
said agreement is ineffective and unenforceable. The certificate or certificates of stock covered by the voting
trust agreement shall be cancelled and new ones shall be issued in the name of the trustee or trustees stating that
they are issued pursuant to said agreement. In the books of the corporation, it shall be noted that the transfer in
the name of the trustee or trustees is made pursuant to said voting trust agreement.
Valle Verde Country Club v. Africa (2009)
G.R. No. 151969
September 4, 2009
Lessons Applicable: Election of Directors; Vacancy in the Board (Corporate Law)
FACTS:
February 27, 1996: 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
were elected as BOD during the Annual Stockholders Meeting of petitioner Valle Verde Country Club, Inc.
(VVCC)
1997 - 2001: Requisite quorum could not be obtained so they continued in a hold-over capacity
September 1, 1998: Dinglasan resigned, BOD still constituting a quorom elected Eric Roxas (Roxas)
November 10, 1998: Makalintal resigned
on March 6, 2001: Jose Ramirez (Ramirez) was elected by the remaining BOD
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)
as contrary to:
Sec. 23. The board of directors or trustees. - Unless otherwise provided in this Code, the corporate powers
of all corporations formed under this Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be elected from among the holders of
stocks, or where there is no stock, from among the members of the corporation, who shall hold office for 1 year
until their successors are elected and qualified.
Sec. 29. Vacancies in the office of director or trustee. - Any vacancy occurring in the board of directors or
trustees other than by removal by the stockholders or members or by expiration of term, may be filled by the
vote of at least a majority of the remaining directors or trustees, if still constituting a quorum; otherwise, said
vacancies must be filled by the stockholders in a regular or special meeting called for that purpose. A director or
trustee so elected to fill a vacancy shall be elected only for the unexpired term of his predecessor in office. xxx.
Makalintal's term should have expired after 1996 there being no unexpired term. The vacancy should have
been filled by the stockholders in a regular or special meeting called for that purpose
RTC: Favored Africa - Ramirez as Makalintal's replacement = null and void
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
ISSUES:
1. W/N there is an unexpired term - NO
2.
W/N the remaining directors of a corporations Board, still constituting a quorum, can elect another
director to fill in a vacancy caused by the resignation of a hold-over director. - 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. 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 directors term of office (unexpired)
vacancy caused by Makalintals leaving lies with the VVCCs stockholders, not the remaining members of its
board of directors

NECTARINA S. RANIEL and G.R. No. 153413

MA. VICTORIA R. PAG-ONG,
Petitioners,
Present:
YNARES-SANTIAGO, J., Chairperson,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR.,
CHICO-NAZARIO, and
DECISION
Assailed in the present Petition for Review on Certiorari is the Decision[1] of the Court of Appeals (CA) dated
April 30, 2002, affirming with modification the Decision dated October 27, 2000 rendered by the Securities and
Exchange Commission (SEC) which held as valid the removal of petitioners Ma. Victoria R. Pag-ong (Pag-ong)
as director and Nectarina S. Raniel (Raniel) as director and corporate officer of Nephro Systems Dialysis Center
(Nephro).
Petitioners first questioned their removal in SEC Case No. 02-98-5902 for Declaration of Nullity of the Illegal
Acts of Respondents, Damages and Injunction. Petitioners, together with respondents Paul Jochico (Jochico),
John Steffens and Surya Viriya, were incorporators and directors of Nephro, with Raniel acting as Corporate
Secretary and Administrator. The conflict started when petitioners questioned respondents' plan to enter into a
joint venture with the Butuan Doctors' Hospital and College, Inc. sometime in December 1997. Because of this,
petitioners claim that respondents tried to compel them to waive and assign their shares with Nephro but they
refused. Thereafter, Raniel sought an indefinite leave of absence due to stress, but this was denied by Jochico, as
Nephro President. Raniel, nevertheless, did not report for work, causing Jochico to demand an explanation from
her why she should not be removed as Administrator and Corporate Secretary. Raniel replied, expressing her
sentiments over the disapproval of her request for leave and respondents' decision with regard to the Butuan
venture.
On January 30, 1998, Jochico issued a Notice of Special Board Meeting on February 2, 1998. Despite receipt of
the notice, petitioners did not attend the board meeting. In said meeting, 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, appointing Otelio Jochico as the new Corporate Secretary and
authorizing the call of a Special Stockholders' Meeting on February 16, 1998 for the purpose of the removal of
petitioners as directors of Nephro.
Otelio Jochico issued the corresponding notices for the Special Stockholders' Meeting to be held on February
16, 1998 which were received by petitioners on February 2, 1998. Again, they did not attend the meeting. The
stockholders who were present removed the petitioners as directors of Nephro. Thus, petitioners filed SEC Case
No. 02-98-5902.
On October 27, 2000, the SEC rendered its Decision, the dispositive portion of which reads:
WHEREFORE, the Commission so holds that complainants cannot be awarded the reliefs prayed for in
reinstating Nectarina S. Raniel as secretary and administrator.
The corporation acting thru its Board of Directors can validly remove its corporate officers, particularly
complainant Nectarina S. Raniel as corporate secretary, treasurer and administrator of the Dialysis Clinic.
Also, the Commission cannot grant the relief prayed for by complainants in restraining the respondents from
interfering in the administration of the Dialysis Clinic owned by the corporation and the use of corporate funds.

The administration of the Dialysis Clinic of the corporation and the use of corporate funds, rightfully belong to
the officers of the corporation, which in this case are the respondents.
The counterclaim of respondents to return or assign back the complainants' shares in favor of respondent Paul
Jochico or his nominee is hereby denied for lack of merit.
The respondents failed to show any clear and convincing evidence to rebut the presumption of the validity and
truthfulness of documents submitted to the Commission in the grant of corporate license.
The claim for attorney's fees and damages of both parties are likewise denied for lack of merit, as neither party
should be punished for vindicating a right, which he/she believes should be protected or enforced.
SO ORDERED.[2]
Dissatisfied, petitioners filed a petition for review with the CA.
On April 30, 2002, the CA rendered the assailed Decision, with the following dispositive portion:
WHEREFORE, in light of the foregoing discussions, the appealed decision of the Securities and Exchange
Commission is hereby AFFIRMED with the MODIFICATION that the renewal of petitioners as directors of
Nephro is declared valid.
SO ORDERED.[3]
Respondents filed a Manifestation and Motion to Correct Typographical Error, stating that the term renewal as
provided in the CA Decision should be removal.[4] Petitioners, on the other hand, filed the present petition for
review on certiorari.
On November 20, 2002, the CA issued a Resolution resolving to refrain from acting on all pending incidents
before it in view of the filing of the petition with the Court.[5]
In the present petition, petitioners raised basically the same argument they had before the SEC and the CA, i.e.,
their removal from Nephro was not valid.
Both the SEC and the CA held that Pag-ong's removal as director and Raniel's removal as director and officer of
Nephro were valid. For its part, the SEC ruled that the Board of Directors had sufficient ground to remove
Raniel as officer due to loss of trust and confidence, as her abrupt and unauthorized leave of absence exhibited
her disregard of her responsibilities as an officer of the corporation and disrupted the operations of Nephro. The
SEC also held that the Special Board Meeting held on February 2, 1998 was valid and the resolutions adopted
therein are binding on petitioners.[6]
The CA upheld the SEC's conclusions, adding further that the special stockholders' meeting on February 16,
1998 was likewise validly held. The CA also ruled that Pag-ong's removal as director of Nephro was justified as
it was due to her undenied delay in the release of Nephro's medical supplies from the warehouse of the Fly-High
Brokerage where she was an officer, on top of her and her co-petitioner Raniel's absence from the
aforementioned directors' and stockholders' meetings of Nephro despite due notice.[7]
It is well to stress the settled rule that the findings of fact of administrative bodies, such as the SEC, will not be
interfered with by the courts in the absence of grave abuse of discretion on the part of said agencies, or unless
the aforementioned findings are not supported by substantial evidence. They carry even more weight when
affirmed by the CA.[8] Such findings are accorded not only great respect but even finality, and are binding upon

this Court, unless it is shown that it had arbitrarily disregarded or misapprehended evidence before it to such an
extent as to compel a contrary conclusion had such evidence been properly appreciated.[9] This rule is rooted in
the doctrine that this Court is not a trier of facts, as well as in the respect to be accorded the determinations
made by administrative bodies in general on matters falling within their respective fields of specialization or
expertise.[10]
A review of the petition failed to demonstrate any reversible error committed by the two tribunals, hence, the
petition must be denied. It does not present any argument which convinces the Court that the SEC and the CA
made any misappreciation of the facts and the applicable laws such that their decisions should be overturned.
A corporation exercises its powers through its board of directors and/or its duly authorized officers and agents,
except in instances where the Corporation Code requires stockholders approval for certain specific acts.[11]
Based on Section 23 of the Corporation Code which provides:
SEC. 23. The Board of Directors or Trustees. Unless otherwise provided in this Code, the corporate powers of
all corporations formed under this Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees x x x.
a corporations board of directors is understood to be that body which (1) exercises all powers provided for
under the Corporation Code; (2) conducts all business of the corporation; and (3) controls and holds all property
of the corporation. Its members have been characterized as trustees or directors clothed with a fiduciary
character. [12] Moreover, the directors may appoint officers and agents and as incident to this power of
appointment, they may discharge those appointed.[13]
In this case, petitioner Raniel was removed as a corporate officer through the resolution of Nephro's Board of
Directors adopted in a special meeting on February 2, 1998. As correctly ruled by the SEC, petitioners' removal
was a valid exercise of the powers of Nephro's Board of Directors, viz.:
In the instant complaint, do respondents have sufficient grounds to cause the removal of Raniel from her
positions as Corporate Secretary, Treasurer and Administrator of the Dialysis Clinic? Based on the facts proven
during the hearing of this case, the answer is in the affirmative.
Raniel's letter of January 26, 1998 speaks for itself. Her request for an indefinite leave, immediately effective
yet without prior notice, reveals a disregard of the critical responsibilities pertaining to the sensitive positions
she held in the corporation. Prior to her hasty departure, Raniel did not make a proper turn-over of her duties
and had to be expressly requested to hand over documents and records, including keys to the office and the
cabinets (Exh. 15).
xxxx
Since Raniel occupied all three positions in Nephro, it is not difficult to foresee the disruption that her
immediate and indefinite absence can inflict on the operations of the company. By leaving abruptly, Raniel
abandoned the positions she is now trying to reclaim. Raniel's actuation has been sufficiently proven to warrant
loss of the Board's confidence.[14]
The SEC also correctly concluded that petitioner Raniel was removed as an officer of Nephro in compliance
with established procedure, thus:
The resolutions of the Board dismissing complainant Raniel from her various positions in Nephro are valid.
Notwithstanding the absence of complainants from the meeting, a quorum was validly constituted. x x x.
xxxx

Based on its articles of incorporation, Nephro has five directors two of the positions were occupied by
complainants and the remaining three are held by respondents. This being the case, the presence of all three
respondents in the Special Meeting of the Board on February 2, 1998 established a quorum for the conduct of
business. The unanimous resolutions carried by the Board during such meeting are therefore valid and binding
against complainants.
It bears emphasis that Raniel was given sufficient opportunity to be heard. Jochico's letters of January 26, 1998
and January 27, 1998, albeit adversarial, recognized her right to explain herself and gave her the chance to do
so. In fact, Raniel did respond to Jochico's letter on January 28, 1998 and took the occasion to voice her
opinions about Jochico's alleged practice of using others for your own benefit, without cost. (Exh. 14).
Moreover, the Special Meeting of the Board could have been the appropriate venue for Raniel to air her side.
Had Raniel decided to grace the meeting with her presence, she could have explained herself before the board
and tried to convince them to allow her to keep her posts.[15]
Petitioners Raniel and Pag-ong's removal as members of Nephro's Board of Directors was likewise valid.
Only stockholders or members have the power to remove the directors or trustees elected by them, as laid down
in Section 28 of the Corporation Code,[16] which provides in part:
SEC. 28. Removal of directors or trustees. -- Any director or trustee of a corporation may be removed from
office by a vote of the stockholders holding or representing at least two-thirds (2/3) of the outstanding capital
stock, or if the corporation be a non-stock corporation, by a vote of at least two-thirds (2/3) of the members
entitled to vote: Provided, that such removal shall take place either at a regular meeting of the corporation or at
a special meeting called for the purpose, and in either case, after previous notice to stockholders or members of
the corporation of the intention to propose such removal at the meeting. A special meeting of the stockholders or
members of a corporation for the purpose of removal of directors or trustees or any of them, must be called by
the secretary on order of the president or on the written demand of the stockholders representing or holding at
least a majority of the outstanding capital stock, or if it be a non-stock corporation, on the written demand of a
majority of the members entitled to vote. x x x Notice of the time and place of such meeting, as well as of the
intention to propose such removal, must be given by publication or by written notice as prescribed in this Code.
x x x Removal may be with or without cause: Provided, That removal without cause may not be used to deprive
minority stockholders or members of the right of representation to which they may be entitled under Section 24
of this Code. (Emphasis supplied)
Petitioners do not dispute that the stockholders' meeting was held in accordance with Nephro's By-Laws. The
ownership of Nephro's outstanding capital stock is distributed as follows: Jochico - 200 shares; Steffens - 100
shares; Viriya - 100 shares; Raniel - 75 shares; and Pag-ong - 25 shares,[17] or a total of 500 shares. A twothirds vote of Nephro's outstanding capital stock would be 333.33 shares, and during the Stockholders' Special
Meeting held on February 16, 1998, 400 shares voted for petitioners' removal. Said number of votes is more
than enough to oust petitioners from their respective positions as members of the board, with or without cause.
Verily therefore, there is no cogent reason to grant the present petition.
WHEREFORE, the petition is DENIED for lack of merit.SO ORDERED.