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DLSU Commercial Law Review Digest G02

(2015-2016)
048 PETRONILO J. BARAYUGA v ADVENTIST UNIVERSITY OF THE PHILIPPINES
G.R. No. 168008, August 17, 2011
Ponente: BERSAMIN, J:
DOCTRINE: A person occupying the office in a hold-over capacity, could be removed at any
time, without cause, upon the election or appointment of his successor.
AUP, a non-stock and non-profit domestic educational institution incorporated and was directly
under the North Philippine Union Mission (NPUM) of the Southern Asia Pacific Division of the
Seventh Day Adventists. Respondent Nestor D. Dayson was elected Chairman while the
petitioner was chosen Secretary. Thereafter, the Board of Trustees appointed the petitioner
President of AUP. During his tenure, or from November 11 to November 13, 2002, a group from
the NPUM conducted an external performance audit.
The audit revealed the petitioners autocratic management style, like making major decisions
without the approval or recommendation of the proper committees. That he had himself done
the canvassing and purchasing of materials and made withdrawals and reimbursements for
expenses without valid supporting receipts and without the approval of the Finance Committee.
The audit concluded that he had committed serious violations of fundamental rules and procedure
in the disbursement and use of funds.
The NPUM Executive Committee and the Board of Trustees decided to immediately request the
services of the General Conference Auditing Service (GCAS) to determine the veracity of the audit
finding. The CGAS report confirmed the initial findings of the auditor. The NPUM informed the
petitioner of the findings and required him to explain. The Board of Trustees set a special meeting,
in that meeting, he provided copies of the auditors report and his answers to the members of the
Board of Trustees.
In the January 27, 2003 special meeting, the petitioner sent a letter to the Board of Trustees. The
members, by secret ballot, voted to remove him as President because of his serious violations of
fundamental rules and procedures in the disbursement and use of funds as revealed by the special
audit. In turn, he handed to Chairman Dayson a letter requesting two weeks within which to seek a
reconsideration, stating that he needed time to obtain supporting documents because he was then
attending to his dying mother.
The Board of Trustees, reconvened to consider and decide the petitioners request for
reconsideration. During the meeting, he made an emotional appeal to allow him to continue as
President. He added that should the Board of Trustees not favor his appeal, he would settle for a
retirement package for him and his wife and would leave the church. But the Board of Trustees
denied the petitioners request for reconsideration because his reasons were not meritorious. Board
Member Elizabeth Role served the notice of the denial on him the next day, but he refused to
receive the notice. The petitioner brought his suit for injunction and damages in the RTC, with
prayer for the issuance of a temporary restraining order (TRO), impleading AUP and its Board of
Trustees, represented by Chairman Dayson, and the interim committee. His complaint alleged that
the Board of Trustees had relieved him as President without valid grounds despite his five-year
term; that the Board of Trustees had thereby acted in bad faith; and that his being denied ample
and reasonable time to present his evidence deprived him of his right to due process. The suit
being intra-corporate and summary in nature, the application for TRO was heard by means of
affidavits. The respondents denied the allegations of the petitioner, and averred that he had been
validly removed for cause; and that he had been granted ample opportunity to be heard in his
defense. RTC: ruled in favor of the petitioner. CA reversed the ruling

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ISSUE: whether the CA correctly ruled that the petitioner had no legal right to the position of
President of AUP that could be protected by the injunctive writ issued by the RTC- Yes.
RULING
RTC acted in patently grave abuse of discretion in issuing the TRO and writ of injunction. Based on
the foregoing principles guiding the issuance of the TRO and the writ of injunction, the issuance of
the assailed order constituted patently grave abuse of discretion on the part of the RTC, and that
the CA rightly set aside the order of the RTC.
To begin with, the petitioner rested his claim for injunction mainly upon his representation that he
was entitled to serve for five years as President of AUP under the Constitution, By-Laws and
Working Policy of the General Conference of the Seventh Day Adventists (otherwise called the
Bluebook). All that he presented in that regard, however, were mere photocopies of pages 225-226
of the Bluebook. Yet, the document had no evidentiary value. It had not been officially adopted for
submission to and approval of the Securities and Exchange Commission. It was nothing but an
unfilled model form. Furthermore, the petitioners assertion of a five-year duration for his term of
office lacked legal basis. Section 108 of Corporation Code determines the membership and
number of trustees in an educational corporation, viz:
Section 108. Board of trustees. Trustees of educational institutions organized as educational
corporations shall not be less than five (5) nor more than fifteen (15): Provided, however, That the
number of trustees shall be in multiples of five (5).
Unless otherwise provided in the articles of incorporation or the by-laws, the board of trustees of
incorporated schools, colleges, or other institutions of learning shall, as soon as organized, so
classify themselves that the term of office of one-fifth (1/5) of their number shall expire every year.
Trustees thereafter elected to fill vacancies, occurring before the expiration of a particular term,
shall hold office only for the unexpired period. Trustees elected thereafter to fill vacancies caused
by expiration of term shall hold office for five (5) years. A majority of the trustees shall constitute a
quorum for the transaction of business. The powers and authority of trustees shall be defined in the
by-laws.
For institutions organized as stock corporations, the number and term of directors shall be
governed by the provisions on stock corporations. The second paragraph of the provision, although
setting the term of the members of the Board of Trustees at five years, contains a proviso
expressly subjecting the duration to what is otherwise provided in the articles of incorporation or
by-laws of the educational corporation. That contrary provision controls on the term of office. In
AUPs case, its amended By-Laws provided the term of the members of the Board of Trustees, and
the period within which to elect the officers, thusly: each of whom shall hold his office for a term of
two years, or until his successor has been elected and qualified. In light of foregoing, the members
of the Board of Trustees were to serve a term of office of only two years; and the officers, who
included the President, were to be elected from among the members of the Board of Trustees
during their organizational meeting, which was held during the election of the Board of Trustees
every two years. Naturally, the officers, including the President, were to exercise the powers vested
by Section 2 of the amended By-Laws for a term of only two years, not five years.
Ineluctably, the petitioner, having assumed as President of AUP on January 23, 2001, could serve
for only two years, or until January 22, 2003. By the time of his removal for cause as President on
January 27, 2003, he was already occupying the office in a hold-over capacity, and could be
removed at any time, without cause, upon the election or appointment of his successor. His

DLSU Commercial Law Review Digest G02


(2015-2016)
insistence on holding on to the office was untenable, therefore, and with more reason when one
considers that his removal was due to the loss of confidence on the part of the Board of Trustees.
DISPOSITIVE PORTION: WHEREFORE, we DENY the petition for review on certiorari for lack of
merit, and hereby DISMISS SEC Case No. 028-03 entitled Dr. Petronilo Barayuga v. Nelson D.
Dayson, et al.

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