G.R. No. L-10556 - Gurrea vs. Lezama

Case Summary (G.R. No. L-10556)

Applicable Law and Corporate Bylaws

Section 33 of the Corporation Law mandates that directors organize by electing a president (from among their number), a secretary or clerk who is a resident of the Philippines, and other officers as the by-laws may provide. The bylaws of La Paz Ice Plant explicitly designate the president, vice-president, secretary, and treasurer as officers of the corporation. The position of “manager” is mentioned in the bylaws but not explicitly enumerated as an officer. The bylaws also provide that, with the exception of the president, officers can only be removed or suspended by an affirmative vote of two-thirds of the paid-up shares of the corporation.

Legal Issue: Whether a Manager is an Officer of the Corporation

The dispositive question was whether the position of manager constitutes an officer of the corporation such that his removal requires approval by two-thirds of the stockholders or whether the board of directors may remove him by resolution alone.

Majority Opinion: Manager as Employee, Not Officer

The Supreme Court majority held that only those persons enumerated as officers in the Corporation Law or the corporation's bylaws should be considered officers. Since the manager was not explicitly included in the bylaws’ officer enumeration, he held the status of an employee or subordinate official, not an officer. Consequently, since the board of directors appointed the manager, it followed by ordinary corporate law that the power to appoint carries with it the power to remove, absent any contractual stipulation to the contrary.

The Court emphasized that corporate officers hold their offices as prescribed by law or bylaws, while employees or agents serve at the pleasure of the board. American corporate law authorities cited by the Court supported this distinction, highlighting that the general manager or manager, despite having extensive powers, is not necessarily an officer of the corporation in strict legal terms. Instead, such a manager is an agent or employee and can be removed without the formalities required for officers.

Supporting Authority from American Jurisprudence

The Court extensively quoted authoritative American sources (e.g., Fletcher’s Cyclopedia, Thompson on Corporations) asserting that corporate officers are those enumerated in the charter or bylaws, such as president, vice-president, secretary, and treasurer, and general managers or managers typically are not classified as officers unless so designated. The opinion highlighted that the position of manager is one of agency and employment rather than corporate office, with powers given by contract with the board but not independent corporate status.

Consideration of Statutory Criminal Liability of Managers

The dissent pointed out that various Philippine statutes hold managers criminally liable for certain corporate violations (e.g., Usury Laws, Price Control Law), implying the legislature regarded the manager as a principal executive officer. However, the majority clarified that such liability arises from the nature of delegated duties, not from the constitutional or statutory status as an officer of the corporation.

Dissenting Opinion: Manager as Principal Officer and Intended Protection by Shareholders

Justice Bengzon, in a lengthy dissent, argued the manager is indeed a principal officer of the corporation. He based this on several grounds:

Legislative Recognition: Multiple Philippine laws impose direct liability on the manager but not on other officers, implying legislative recognition of the manager as a principal corporate officer.
Bylaws' Express Provisions: Although the manager is not listed under the section titled “Funcionarios” (officers), he is explicitly mentioned elsewhere in the bylaws as part of the corporation's administration along with the stockholders and board of directors, which signifies an official capacity.
Corporate Practice and History: The managerial position was integral from the inception of the corporation, with a balance of power negotiated among major shareholders that ensured the manager could not be removed by the board without a supermajority vote.
American Jurisprudence: Citing multiple U.S. cases and treatises, he maintained that the manager is recognized as a principal executive officer, particularly when exercising general control over corporate affairs.
Purpose and Fairness: He argued that the two-thirds removal vote in the bylaws was intended by shareholders to provide security and stability for the manager’s position, preventing unilateral removal by a board majority that might be hostile or partisan.

Justice Fehl dissenting similarly emphasized that the manager’s omission from the officer enumeration in the bylaws does not change his effective role and functions as a corporation officer vested with administrative authority. Further, the board’s power does not override the explicit bylaw provisions approved by shareholders.

Corporate Governance Perspective

The majority reasoned that since the manager is appointed by the board, he holds office at the board’s pleasure, and hence the board's resolution removing him is valid. The dissent countered that the internal governance structure embodied in the bylaws, as ratified by

Case Syllabus (G.R. No. L-10556)

Background and Procedural History

Ricardo Gureba, the plaintiff and appellant, instituted an action in the Court of First Instance of Iloilo to have Resolution No. 65 of the Board of Directors of La Paz Ice Plant and Cold Storage Co., Inc., which removed him from his position as manager, declared null and void and to recover damages.
The plaintiff’s action was based on the premise that the resolution was adopted in contravention of the corporation’s by-laws, the Corporation Law, and the mutual understanding and agreement among stockholders.
Defendants answered that the removal was valid pursuant to a proper resolution.
Plaintiff also filed a motion for a preliminary injunction to restrain defendant Jose Manuel Lezama from managing the corporation during the case. This was denied after hearing testimonial and documentary evidence.
Parties agreed to submit the case for judgment on the sole legal question whether the plaintiff could be removed from the managerial post solely by resolution of the board of directors or if a two-thirds affirmative vote of paid shares was obligatory.
The trial court ruled the removal lawful, dismissing the complaint.
On appeal, the Court of Appeals certified the case to the Supreme Court, as the question raised is one purely of law.

Applicable Law and By-laws on Corporate Officers and Removal

Section 33 of the Corporation Law mandates that after election, a corporation's directors must organize by electing a president (from among themselves), a secretary or clerk resident in the Philippines, and other officers as provided in the by-laws.
The by-laws of La Paz Ice Plant and Cold Storage Co., Inc., specifically mention a board consisting of a president, vice-president, secretary, and treasurer as the corporation’s officers.
The by-laws provide for the removal or suspension of officers (excluding the president) only by an affirmative vote of two-thirds of the paid-up shares of the corporation.
The position of manager is mentioned in the by-laws as vested with administration of the corporation but is not enumerated as an officer.

Legal Characterization of the Manager’s Position

The Court emphasized that only those persons designated as officers by the Corporation Law or the corporation’s by-laws can be deemed officers; others are considered employees or subordinate officials.
The plaintiff was appointed by the board as manager, a position not enumerated among officers.
Consequently, the manager can be removed or suspended by the board of directors at their discretion, not pursuant to the two-thirds vote required by the by-laws for officers.
The power to appoint is concomitant with the power to remove; thus, since the board appointed the manager, it logically follows that the board has authority to remove him.
The Court acknowledged supporting American jurisprudence and authoritative corporate law treatises, which commonly hold that general managers are not corporate officers if not so designated by charter or by-laws.

American Jurisprudence and Academic Authorities on the Officer vs. Employee Distinction

Fletcher’s treatise and other American authorities distinguish officers, who are enumerated by charter or by-laws and elected by directors or stockholders, from agents or employees like the manager, who hold their position at the pleasure of appointing authorities.
Cases cited establish that general managers, even with broad influence, may be considered employees rather than officers for purposes of removal and statutory obligations.
The difference between officers and agents lies in mode of creation and duties: officers derive their authority from charter/by-laws, while agents are appointed and r