Ms. Noemi Cruz

September 21, 2001 SEC OPINION Ms. Noemi Cruz Northeastern College Inc. Santiago, Isabela Dear Ms. Cruz, This refers to your letter dated 07 December 2000 seeking opinion relative to the following issues: 1. Whether or not there is a conflict or violation of the by-laws or the Corporation Code regarding the application of the Article VII (1) of the by-laws of Northeastern College of Santiago City which states that: No member of the Board of Directors should hold any other office in the corporation without forfeiting his seat in the Board nor shall any member thereof during his incumbency be appointed to any position in the corporation which may have been created or the emolument thereof shall be increased while he was a member. 2. Whether or not stockholders can cast votes for or in behalf of deceased stockholders by way of proxy voting? 3. Whether or not the stockholdings of the deceased can be voted upon by way of extra-judicial arrangement/settlement by the heirs? Anent your first query, please be informed that, in general, officers of a corporation are elected from the roster of the Board of Directors. The only officers of a corporation are those who are given such character by Section 25 of the Corporation Code of the Philippines or the by-laws. All others are merely considered as employees or subordinate officials. Section 25 of the Corporation Code provides, in part, that: Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same person except that no one shall act as president and secretary or as president and treasurer at the same time ... Article IX of the corporation's by-laws states: The officers of the corporation shall consist of a Chairman of the Board, President, Treasurer and Secretary whose powers shall be hereinafter provided and as the Board of Directors may fix in conformity with the provisions of these by-laws. In view of the above-cited provisions, the President is the only officer required by law to maintain its membership in the Board of Directors. It can also be gleaned therein that the corporate by-laws does not state that the Dean and Professor positions are corporate officers. Thus, Ms. Madell Bautista's alleged simultaneous occupation for the positions of a member of the Board of Directors, Dean of the Graduate School and a professor, should not be construed as a violation of the above-mentioned provision of the by-laws since Dean and Professor positions are not officially or formally constituted as corporate offices. Consequently, they are merely considered employees or subordinate positions. With regard to your second query, the deceased stockholders cannot cast their votes by proxy. It is a well-settled principle in law that civil personality is extinguished by death. Accordingly, a deceased person has no power to do acts that will produce legal effects. As to your third query, immediately after the death of a stockholder, no person can yet vote his shares. As aptly ruled by SEC, "Where the estate of the deceased stockholder is still undivided and there is no administrator duly appointed by the court nor an executor designated in a will to administer said estate, no person can vote or represent the shares of the deceased since nobody can legally represent his estate under the second paragraph of Section 55 of the Corporation Code. (SEC opinion dtd February 28, 1967, Mindanao Portland Cement Corporation). Also, the fact that petitioners are heirs of the deceased stockholders of record (Filomena and Francisco T.V. Sison) does not make them automatically stockholders of record, and therefore, they do not have the right to inspect the books of the corporation. To enforce their rights as stockholders of records, petitioners, being legal heirs of the deceased stockholders of record, should first have the corporation register them as stockholders and if they are denied registry, their remedy is to file a petition for mandamus with the SEC. (Miguel A.B. Sison et al vs. Hon. Agellon et al SEC-EB No. 293 November 23, 1992.) It is also settled that on the death of the shareholder, his executor or administrator becomes vested with the legal title to the stock and entitled to vote the same at all meetings, and that until a settlement and division of the estate is effected, the stock of the decedent belong to the executor or administrator as his personal representative. This rule is true even if the shares stand in the books of the corporation in the name of the deceased stockholder or without a formal transfer of stocks in the books of the corporation. (SEC opinions dtd October 10, 1979, Mrs. S.F. de la Cruz; March 3, 1986, Casino Espaol de Manila; May 12, 1988, Mr. Antonio Ibaez, October 3, 1988, Mr. Gilberto P. Romulo and February 15, 1993 Atty. Vicente G. Villamil) For your information. Very truly yours, (SGD.) FE ELOISA C. GLORIA Commissioner