Conflicting Opinions of OGCC and GCG over the Resignation as Hold-over Director of Leo Hernandez and His Request for Reinstatement at the Philippine Mining Development Corp.

DOJ OPINION NO. 34, s. 2023 August 24, 2023 Atty. Alberto B. Sipaco, Jr. Chairman, President and CEO Philippine Mining Development Corporation Unit 3001B West Tower, Philippine Stock Exchange Exchange Rd., Ortigas Center, 1605 Pasig City Dear Chairman Sipaco : We refer to your request for "legal intervention" in view of the "conflicting opinions" of the Office of the Government Corporate Counsel (OGCC), and Governance Commission for Government Owned and Controlled Corporations (GCG) relative to the resignation as hold-over director of Mr. Leo Espiritusanto Hernandez (Mr. Hernandez) and his subsequent request for reinstatement in the said position at the Philippines Mining Development Corporation (PMDC), a government owned corporation. aScITE Mr. Hernandez was appointed as Member of the Board of Directors of the PMDC by the President of the Philippines on 06 April 2020, to serve as such until 30 June 2020. After his term of office ended, he remained as a director of PMDC in a hold-over capacity. While holding such position, Mr. Hernandez tendered his resignation on 24 June 2022 through an email to the Chairman, CEO and President of the PMDC, copy furnished all members of the Board of Directors and selected Management Officers of the PMDC, effective 01 August 2022. On 25 August 2022, however, he sent an email to you, as Chairman, CEO and President of the PMDC, expressing his desire to continue his duties as a hold-over director until the appointment of his replacement or renewal of his appointment. As the statutory counsel of PMDC, you referred the matter to OGCC. In the meantime, the Secretary of the Department of Environment and Natural Resources Secretary, sought confirmation from the GCG. Thereafter, OGCC and GCG rendered their respective opinion with seemingly conflicting views. In its Opinion No. 115, dated 02 June 2023, the OGCC is of the view that while Mr. Hernandez continued in office as hold over Director, this cannot be considered as extending his term of office, as the vacancy of the position occurred even long before his unconditional resignation on 1 August 2022. His request for reinstatement by the PMDC Board is without factual and legal bases. It concluded that the PMDC has no legal basis to issue an appointment to Mr. Hernandez, not even to hold-over, as there was already a resignation tendered on 1 August 2022. GCG, on the other hand, was of the view that since there was no acceptance of Mr. Hernandez' resignation by a competent and lawful authority, he remains an Appointive Director of the Governing Board of the PMDC, in accordance with GCG Memorandum Circular (MC) 2012-3. The said MC states that all Appointive Directors of GOCCs whose term expired have been legally deemed to be on hold-over capacity, having the full powers and prerogatives of regular Appointive Directors until they shall have either been reappointed or replaced as the case may be. Hence, the instant request. Consistent with sound administrative practice, more than official courtesy, this Department is constrained from rendering a legal opinion on the issue raised which falls within the primary jurisdiction of the CGC and Office of the President. This rule arises not only from practical considerations, but also out of due respect and deference for the competence and expertise of the office having primary jurisdiction to resolve the matter for its familiarity with the policy repercussions of the question as well as from logical recognition of the lawful exercise of an authority conferred by law. 1 Republic Act (R.A.) No. 10149 (GOCC Governance Act of 2011) places upon the CGC, which is attached to the Office of the President, the authority to oversee the operations of GOCCs, including the authority to recommend to the President of the Philippines the list of suitable and qualified candidates for Appointive Directors of GOCCs. 2 Considering that the CGC has already ruled on the matter, resolution of the instant query would indubitably involve the determination of the correctness of the ruling of the CGC, which is beyond our authority to review. 3 Nonetheless, for your information and guidance only , we refer you to the case of Valle Verde Country Club, Inc. vs. Africa , 4 where the Supreme Court ruled that the holdover period is not part of the term of office of a member of the board of directors. Further elucidating on this point, the Court stated that The word "term" has acquired a definite meaning in jurisprudence. 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. The term is 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. Term is distinguished from tenure in that an officer's "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. Based on the above discussion, 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 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. xxx xxx xxx With the expiration of Makalintal's term of office, a vacancy resulted which, by the terms of Section 29 of the Corporation Code, must be filled by the stockholders of VVCC in a regular or special meeting called for the purpose. 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 . (Emphasis supplied.) xxx xxx xxx In the case of Mr. Hernandez, his position is already deemed vacant because of the expiration of his term of office, and during the hold over period, he no longer holds his position as a matter of right. R.A. No. 10149 only allows him to hold the said position for the purpose of ensuring that the interest of the State is protected through the continued operations of the PMDC. Such privilege of holding the position beyond the term fixed by law should be exercised conscientiously to prevent any controversy on the legality of the corporate actions or decisions of the director and board of directors. Mr. Hernandez' request for reinstatement as holdover director of PMDC, therefore, may be considered an application for appointment, which cannot be acted upon by the PMDC. This authority is vested upon the President of the Philippines pursuant to Section 15 of R.A. No. 10149. 8 The appointee shall come from the shortlist of suitable and qualified candidates for Appointive Directors to be recommended by the GCG. 9 Please be guided accordingly. Very truly yours, (SGD.) JESUS CRISPIN C. REMULLA Secretary Footnotes 1. DOJ Opinion No. 021 (July 14, 2021), No. 029 (November 7, 2022) and No. 007 (January 19, 2009). 2. Sec. 5. Creation of the Governance Commission for Government-Owned or -Controlled Corporations. There is hereby created a central advisory, monitoring, and oversight body with authority to formulate, implement and coordinate policies to be known as the Governance Commission for Government-Owned or -Controlled Corporations, hereinafter referred to as the GCG, which shall be attached to the Office of the President. The GCG shall have the following powers and functions: xxx xxx xxx. (e) In addition to the qualifications required under the individual charter of the GOCCs and in the by-laws of GOCCs without original charters, the GCG shall identify necessary skills and qualifications required for Appointive Directors and recommend to the President a shortlist of suitable and qualified candidates for Appointive Directors; xxx xxx xxx. 3. DOJ Opinion No. 085, s. 2000, citing Opinion No. 2, s. 1999 and Nos. 47 and 159, s. 1993. 4. Valle Verde Country Club, Inc. vs. Africa , G.R. No. 151969, September 4, 2009. 5. Note from the Publisher: Copied verbatim from official document. Missing Footnote Reference and Footnote Text. 6. Note from the Publisher: Copied verbatim from official document. Missing Footnote Reference and Footnote Text. 7. Note from the Publisher: Copied verbatim from official document. Missing Footnote Reference and Footnote Text. 8. Sec. 15. Appointment of the Board of Directors/Trustees of GOCCs. An Appointive Director shall be appointed by the President of the Philippines from a shortlist prepared by the GCG. 9. Section 5, R.A. No. 10149.