Atty. Earnest A. Soberano

November 15, 1995 Atty. Earnest A. Soberano Consolidated Rural Bank (Cagayan Valley),Inc. Santiago, Isabela S i r : This refers to your letter of November 6, 1995 inquiring the Board of Directors of Consolidated Rural Bank (Cagayan Valley),Inc. has the power to reinstate a member of the Board who was allegedly terminated by the Board of Directors for cause, taking into consideration that his termination was already subsequently confirmed by the stockholders. Please be advised that the Commission does not, as a matter of settled policy, render opinion on queries or transactions based on allegations involving justiciable issues which may eventually be litigated in the future or which could only be clarified and determined in a proper proceeding, such as those presented in your letter. The opinion which may be rendered thereon would not be binding upon private parties who would in all probability if the opinion happens to be adverse to their interest, take issue therewith and contest it before the proper forum. The Commission, therefore, has to refrain from giving a categorical answer to the query raised in your letter so that it will not be estopped to resolve any controversy pertaining thereto if brought before it in a proper proceeding. However, for purposes of information only, the following are imparted. The Board of Directors has no power to remove a fellow director. Said power is vested in the stockholders or members of the corporation. This will-settled doctrine is embodied in the Corporation Code which explicitly provides: "SECTION 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 two-thirds (2/3) of the outstanding capital stock , or if the corporation be a non-stock corporation, by a vote of 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 special meeting called for the purpose, and in either case, after previous notice to the 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 the 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. Should the secretary fail or refuse to call the special meeting upon such demand or fail or refuse to give the notice, or if there is no secretary, the call for the meeting may be addressed directly to the stockholders or members by any stockholder or member of the corporation signing the demand. 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 by this Code. The vacancy resulting from removal pursuant to this section may be filled by election at the same meeting without further notice, or at any regular or at any special meeting called for the purpose, after giving notice as prescribed in this Code. 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 provided) Thus, a member of the Board can only be removed from office by following the procedure above set forth. It also appears from the above provision that the removal may be with or without cause. On the matter of filling-up a vacancy in the Board resulting from removal by the stockholders or members, such power also belongs to the latter. The pertinent provision of the Corporation Code provides thus: "SECTION 29. Vacancies in the office of the 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." (Emphasis supplied) Please be advised accordingly. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner