Rodrigo Law Office

November 19, 1985 Rodrigo Law Office 60 Doa Juana Rodriguez Quezon City Sir : This refers to your letter, dated November 11, 1985, requesting the opinion of this Commission as to whether a special administrator of the estate of a deceased stockholder is qualified to sit as a director of a corporation. LexLib Anent thereto, quoted hereunder are the pertinent provisions of the Corporation Code: "SECTION 55. Right to vote of ... administrator . .... Executors, administrators, receivers, and other legal representatives duly appointed by the court may attend and vote in behalf of the stockholder or member without need of any written proxy." "SECTION 23. The board of Directors or Trustees . ... Every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which share shall stand in his name on the books of the corporation. ...." Section 23 of the Corporation Code prescribes certain minimum qualifications that a person must possess in order to be eligible as director. In addition, the by-laws as provided in Section 47 of the Code may provide additional qualifications for directors. In such a case, no person is eligible to be a director, unless he has the qualifications prescribed in Section 23 of the Code as well as those set forth in the by-laws. As to the requirement of stock ownership, according to the weight of authority, the mere naked legal title to stock is sufficient to qualify one as a director under the statutes, charter, provisions and by-laws requiring directors to be stockholders. Thus: "The general rule is that beneficial ownership is not necessary, and that a person who holds the legal title to stock on the books of the corporation is qualified, although the beneficial ownership may be in another. In other words, it is sufficient that the title of the stock, as it appears on the books of the corporation, is in the director, since the legal title is what counts and it is the person whose name appears as owner on the books of the company who is stockholder and eligible as director." (2 Fletcher, Cyc. Corps.,1969 Rev. Vol.,sec. 300, pp. 91-92, citing Craighton v. Campbell, 27 Colo App. 120, 149 p. 448; People v. Lihme, 269 Ill 351, 109 NE 1051, Ann Cas 1916E 959, affq. 193 Ill app 341). It is settled that on the death of a 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 belongs to said administrator or executor as his personal representative. ( SEC Opinion, dated October 10, 1979 ). Accordingly, an administrator who holds a legal title to the stock standing in his name in the books of the corporation, an who qualifies under the by-laws may be voted upon and elected director. There seems to be no better way for an administrator to effectively manage the estate of the decedent than to participate directly in the management of the corporation. It would seem, however, that a different ruling would apply in the case of a special administrator appointed under Rule 80 of the Rules of Court. "Said special administrator shall take possession and charge of the goods, chattels, rights, credits, and estate of the deceased and preserve the same for the executor or administrator afterwards appointed , and for that purpose may commence and maintain suits as administrator. He may sell only such perishable and other property as the court orders sold. A special administrator shall not be liable to pay any debts of the deceased unless so ordered by the Court. (Sec. 2, Rule 80, Rules of Court). Thus, it has been held that the function of a special administrator is only to collect and preserve the property of the deceased and to return a complete inventory thereof. (3 Moran, Comments on the Rules of Court, 1963 ed., p. 394, citing De Gala v. Gonzales et al., G.R. No. 30289, March 26, 1929, 53 Phil. 104 106). Inasmuch as a special administrator is usually appointed for a special purpose, his powers and duties are limited. Generally, they are restricted to the conservation and preservation of personal property of the decedent until a regular administrator can be appointed .It is the duty of a special administrator to turn over the estate to the regularly appointed administrator or executor upon his appointment or qualification. (21 Am Jur.,sec. 813, p. 833-834). Considering the foregoing, it is opined that a special administrator of the estate of a deceased stockholder is not qualified to sit as director of the corporation. Please be advised accordingly. LexLib Very truly yours, (SGD.) MANUEL G. ABELLO Chairman