Gurrea v. Lezama
REITERATIONFacts
The Antecedents: Plaintiff Ricardo Gurrea instituted an action in the Court of First Instance of Iloilo seeking to nullify 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. Gurrea contended that the resolution was adopted in contravention of the corporation's by-laws, the Corporation Law, and the stockholders' agreement. Procedural History: The trial court denied Gurrea's motion for a preliminary injunction. Subsequently, the parties agreed to submit the case for judgment on the sole legal question of whether the manager could be legally removed by a mere resolution of the board of directors or if a two-thirds vote of the paid-up shares was necessary. The trial court ruled that the removal was legal and dismissed the complaint. The case was elevated to the Court of Appeals, which certified it to the Supreme Court due to the purely legal question involved. The Petition: The core of the petition is whether the plaintiff, as manager, could be legally removed by a resolution of the board of directors or if the removal required the affirmative vote of two-thirds of the paid-up shares, as stipulated in the by-laws for the removal of officers.
Issue(s)
Whether the plaintiff, as manager of the corporation, is considered an officer whose removal requires the affirmative vote of two-thirds of the paid-up shares. Whether the Board of Directors has the power to remove the manager by a mere resolution.
Ruling
The Supreme Court affirmed the decision of the trial court, holding that the removal of the plaintiff as manager by Resolution No. 65 of the Board of Directors was legal. The Court ruled that the plaintiff, as manager, is not an officer of the corporation but rather an employee or subordinate official, and therefore, his removal did not require the affirmative vote of two-thirds of the paid-up shares.
Ratio Decidendi
On the issue of whether the plaintiff, as manager, is considered an officer of the corporation: The Court held that only those individuals enumerated as officers in the Corporation Law or the corporation's by-laws can be considered officers. Section 33 of the Corporation Law and the by-laws of La Paz Ice Plant and Cold Storage Co., Inc. specify the president, vice-president, secretary, and treasurer as officers. The manager, although vested with the administration of the corporation, is not included in this enumeration. Consequently, the manager is classified as an employee or subordinate official, not an officer. On the issue of whether the Board of Directors has the power to remove the manager by a mere resolution: The Court reasoned that the power to appoint a manager by the board of directors carries with it the power to remove him. Since the manager is not considered an officer, the provision in the by-laws requiring a two-thirds vote for the removal of officers does not apply to him. Therefore, the board of directors can suspend or remove the manager under such terms as it may deem fit, without the necessity of a two-thirds vote of the paid-up shares. The Court found it incongruous to hold that an appointee of the board could only be removed by the stockholders. American authorities were cited to support the distinction between officers and mere employees or agents, reinforcing the view that a general manager is not ordinarily classed as an officer.
Main Doctrine
A manager of a corporation, not being enumerated as an officer in the Corporation Law or the by-laws, is considered an employee or subordinate official, and thus can be suspended or removed by the board of directors under such terms as it may deem fit, as the power to appoint carries with it the power to remove.