Atty. Efren L. Cordero

January 18, 1989 Atty. Efren L. Cordero Rm. 510 National Life Insurance Bldg. Ayala Avenue, Makati, Metro Manila Sir : This relates to your letter, dates November 22, 1988, requesting the opinion of this Commission on the query posed therein. It appears therein that your client, Ms. Hipolita R. Gutierrez, is a member of the Board of Directors of First Neighborhood Directories Corporation and at the same time, the Marketing Manager thereof. However, on September 30, 1988, the Board of Directors of subject corporation passed and approved the following resolution: "A member of the Board shall not hold a position as line officer of the company except the position of President and Finance Manager." The above resolution will affect one of the functions held by your client, hence your request for opinion as to the validity of said resolution. Most modern statutes allow the removal of directors by the shareholders with or without cause and irrespective of tenure. In our jurisdiction, Section 28 of the Corporation Code reads: "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 . . .". A board of Directors has no power to expel a fellow director if the term of office is fixed by the general statute or by the charter of the corporation. (2 Fletcher Cyc. Corps. 1982 Rev. Vol., sec. 351). In relation to this, Section 23 of the Corporation Code prescribes that "Unless otherwise provided in this Code, the corporate powers of the corporation formed under this Code shall be exercised, all business conducted and all property of such corporation controlled and held by the board of directors or trustees to be elected from among the holders of stocks, . . . who shall hold office for one year and until their successors are elected and qualified." Hence, a member of the board cannot be removed by the Board of Directors as member thereof. Insofar as the power to remove corporate officers, the same must ordinarily be vested in the body or officer authorized to elect or appoint. (SEC Opinion dated September 29, 1987). Under Section 25 of the Corporation Code the power to elect the officers is vested in the Directors. Consequently, the general right of removal of officers in a corporation is vested on the members of the Board. The rulings insofar as when they can be removed are quoted as follows: If an officer of a corporation is serving under a contract with the corporation for a fixed term, he cannot be lawfully removed at pleasure, either by the stockholders or by the directors or other superior officers, except for incompetency or violation of the contract between him and the corporation. If he is removed without cause, his authority to represent or act for the corporation ceases, but the corporation will be liable to him for breach of contract, as in other cases of employment..(Fletcher, Supra, sec. 352, p. 154, citing United Producers and Consumers Cooperative v. Held, 225 F2d 615; Barber v. Southern Services Corp.,182 Ga. 124, 185 SE 93; and others). prcd "If the term of an officer is not fixed by contract the charter or general law, he may be removed at any time, with or without cause, at the pleasure of the appointing body and no specific cause need be assigned therefor," (Fletcher, Supra, Sec. 353, citing People v. Higgings, 15 Ill. 110, Leson Chevrolet, Inc. v. Trapp (La App.),391 So 2d. 1371). Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman