Valle Verde Country Club, Inc., v. Africa

G.R. No. 151969, 4 September 2009

FACTS:

In 1996, during the Annual Stockholders’ Meeting of Valle Verde Country Club, Inc. (VVCC), Villaluna, Dinglasan, Makalintal, Ortigas III, Salta, Santiago, Jr., Dee, Sunico, and Gamboa were elected as members of the VVCC Board of Directors. From 1997 to 2001, 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. In 1998, Dinglasan resigned from his position. He was replaced by Roxas who was elected by the board still constituting a quorum. A year later, Makalintal also resigned and was replaced by Jose Ramirez in 2001. Ramirez was elected by the remaining members of the Board.

Africa, a member of VVCC, questioned the election of Roxas and Ramirez with the SEC and the RTC, respectively. Before the RTC, Africa alleged that a year after Makalintal’s election as member of the VVCC Board in 1996, his term – as well as those of the other members of the VVCC Board – should be considered to have already expired. According to him, for the members to exercise the authority to fill in vacancies in the board of directors, that there should be an unexpired term during which the successor-member shall serve. Further, that 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.

ISSUE:

Whether or not 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:

Petition DENIED. Under Section 29 of the Corporation Code, a vacancy occurring in the board of directors caused by the expiration of a member’s term shall be filled by the corporation’s stockholders. As the vacancy in this case was caused by Makalintal’s resignation, not by the expiration of his term, VVCC insists that the board rightfully appointed Ramirez to fill in the vacancy.

The holdover period is not part of the term of office of a member of the board of directors. In several cases, we have defined “term” as the time during which the officer may claim to hold the office as of right, and fixes the interval after which the several incumbents shall succeed one another. The term of office is not affected by the holdover.

Section 23 of the Corporation Code declares 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. After the lapse of one year from his election, Makalintal’s term of office is deemed to have already expired. With the expiration of Makalintal’s term of office, a vacancy resulted which, by the terms of Section 29, must be filled by the stockholders of VVCC in a regular or special meeting called for the purpose. 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.

*Case Digest by Stephanie C. Castillo, JD-IV, Andres Bonifacio College, SY: 2019-2020

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