GRACE CHRISTIAN HIGH SCHOOL, petitioner, vs.

CA, GRACE VILLAGE

ASSOCIATION, INC., ALEJANDRO G. BELTRAN, and ERNESTO L. GO,
respondents.
G.R. No. 108905. October 23, 1997

FACTS
Petitioner Grace Christian High School is an educational institution at the Grace
Village in Quezon City while private respondent Grace Village Association, Inc., is an
organization of lot and/or building owners, lessees and residents at Grace Village.
On December 20, 1975, a committee of the board of directors of the Association
prepared a draft of an amendment to the 1968 by-laws of the Association providing,
among others, that the first 14 highest number of votes shall be elected as board of
directors and that "GRACE CHRISTIAN HIGH SCHOOL representative is a permanent
Director of the ASSOCIATION," but the draft was never presented to the general
membership for approval. Nevertheless, from 1975 to 1990, petitioner was given a
permanent seat in the board of directors of the Association. However, on February
13, 1990, the Association's committee on election informed the principal of the
school that all directors should be elected by members of the Association and that
making the School representative as a permanent director of the Association should
be reexamined. The School protested saying that it runs counter to the practice of
previous years and that it deprives the School of its vested right. As its request was
denied, the School then brought suit to compel the board of directors of the
Association to recognize its right to a permanent seat in the board before the Home
Insurance and Guaranty Corp.
The Association sought the opinion of the SEC which opined that the same was
contrary to existing by-laws and the Corporation Code. The petitioner claimed that
the amended by-laws is valid and binding and that the Association is now estopped
from questioning the practice. It also claimed that there was no prohibition as Sec.
92 of the Corporation Code only provides for the manner of the election. The HGIC
dismissed the case filed by Grace Christian HS. On appeal, the HIGC Appeals board
affirmed the decision. The Court of Appeals also affirmed the same decision.
ISSUE:
Whether or not Grace Christian High School has a vested right that allows it to be a
permanent director of the Association.
HELD:
No. The Corporation Law requires members of the boards of directors of
corporations to be elected. The provision in question is contrary to law. The fact that
for several years it has not been questioned but, on the contrary, appears to have
been implemented by the members of the Association, cannot forestall a later
challenge to its validity. Nor can petitioner claim a vested right to sit in the board on
the basis of "practice."
DTEAHI

It is actually 28 and 29 of the Corporation Law not 92 of the present law or

29 of the former one which require members of the boards of directors of
corporations to be elected. The present Corporation Code (B.P. Blg. 68), which took
effect on May 1, 1980, 12 similarly provides.
These provisions of the former and present corporation law leave no room for doubt
as to their meaning: the board of directors of corporations must be elected from
among the stockholders or members. There may be corporations in which there are
unelected members in the board but it is clear that in the examples cited by
petitioner the unelected members sit as ex officio members, i.e., by virtue of and for
as long as they hold a particular office. But in the case of petitioner, there is no
reason at all for its representative to be given a seat in the board. Nor does
petitioner claim a right to such seat by virtue of an office held. In fact it was not
given such seat in the beginning. It was only in 1975 that a proposed amendment to
the by-laws sought to give it one.
Since the provision in question is contrary to law, the fact that for fifteen years it
has not been questioned or challenged but, on the contrary, appears to have been
implemented by the members of the association cannot forestall a later challenge
to its validity. Neither can it attain validity through acquiescence because, if it is
contrary to law, it is beyond the power of the members of the association to waive
its invalidity. For that matter the members of the association may have formally
adopted the provision in question, but their action would be of no avail because no
provision of the by-laws can be adopted if it is contrary to law.
It is probable that, in allowing petitioner's representative to sit on the board, the
members of the association were not aware that this was contrary to law. It should
be noted that they did not actually implement the provision in question except
perhaps insofar as it increased the number of directors from 11 to 15, but certainly
not the allowance of petitioner's representative as an unelected member of the
board of directors. It is more accurate to say that the members merely tolerated
petitioner's representative and tolerance cannot be considered ratification.
cdtai

Nor can petitioner claim a vested right to sit in the board on the basis of "practice."
Practice, no matter how long continued, cannot give rise to any vested right if it is
contrary to law. Even less tenable is petitioner's claim that its right is "coterminus
with the existence of the association." 14