Case Digest: Grace Christian High School v.

CA
GRACE CHRISTIAN HIGH SCHOOL, petitioner,vs. THE COURT OF APPEALS, GRACE VILLAGE
ASSOCIATION, INC., ALEJANDRO G. BELTRAN, and ERNESTO L. GO, respondents.

G.R. No. 108905 October 23, 1997

MENDOZA, J.:

Petitioner Grace Christian High School is an educational institution located at the Grace Village in Quezon
City, while Private respondent Grace Village Association, Inc. ["Association'] is an organization of lot
and/or building owners, lessees and residents at Grace Village.

The original 1968 by-laws provide that the Board of Directors, composed of eleven (11) members, shall
serve for one (1) year until their successors are duly elected and have qualified.

On 20 December 1975, a committee of the board of directors prepared a draft of an amendment to the
by-laws which provides that "GRACE CHRISTIAN HIGH SCHOOL representative is a permanent
Director of the ASSOCIATION."

However, this 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.

On 13 February 1990, the association's committee on election sought to change the by-laws and
informed the Petitioner's school principal "the proposal to make the Grace Christian High School
representative as a permanent director of the association, although previously tolerated in the past
elections should be reexamined."

Following this advice, notices were sent to the members of the association that the provision on election
of directors of the 1968 by-laws of the association would be observed. Petitioner requested the chairman
of the election committee to change the notice to honor the 1975 by-laws provision, but was denied.

The school then brought suit for mandamus in the Home Insurance and Guaranty Corporation (HIGC) to
compel the board of directors to recognize its right to a permanent seat in the board.

Meanwhile, the opinion of the SEC was sought by the association, and SEC rendered an opinion to the
effect that the practice of allowing unelected members in the board was contrary to the existing by-laws of
the association and to 92 of the Corporation Code (B.P. Blg. 68). This was adopted by the association in
its Answer in the mandamus filed with the HIGC.

The HIGC hearing officer ruled in favor of the association, which decision was affirmed by the HIGC
Appeals Board and the Court of Appeals.

Issue: W/N the 1975 provision giving the petitioner a permanent board seat was valid.

Ruling: No.

Section 23 of the Corporation Code (and its predecessor Section 28 and 29 of the Corporation Law)
leaves no room for doubt that the Board of Directors of a Corporation 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 these
instances, the unelected members sit as ex officio members, i.e., by virtue of and for as long as they hold
a particular office (e.g. whoever is the Archbishop of Manila is considered a member of the board of
Cardinal Santos Memorial Hospital, Inc.)
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 it has gone unchallenged for fifteen years
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.

It is more accurate to say that the members merely tolerated petitioner's representative and tolerance
cannot be considered ratification.

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.
Posted by P.L.S. at 8:14 PM

Grace Christian High School (GCHS) is an educational institution in Grace Village (QC?).
Grace Village Association, Inc. (GVAI)is the homeowners association in Grace Village. GVAI
has an existing by-laws which was already in effect since 1968. But in 1975, the board of
directors made a draft amending the by-laws whereby the representative of GCHS shall
have a permanent seat in the 15-seat board. The draft however was never presented to the
general membership for approval. But nevertheless, the representative of GCHS held a seat
in the board for 15 years until in 1990 when a proposal was made to the board to reconsider
the practice of allowing the GCHS representative in taking a permanent seat. Thereafter, an
election was scheduled for the 15 seat in the board. GCHS opposed the election as it insists
that the election should only be for 14 directors because it has a permanent seat. GVAI
argued that GCHS claim has no basis because the 1975 proposed amendment was never
ratified. GCHS averred that it was ratified when it was allowed to take the seat for 15 years
and as such its right has already vested.

ISSUE: Whether or not the representative from Grace Christian High School should be
allowed to have a permanent seat in the board of directors.

HELD: No. The Corporation Code is clear when it provides that members of the board of a
corporation must be elected by the stockholders (stock corporation) or the members (non-
stock corporation). Admittedly, there are corporations who allow some of their directors to sit
in the board without being elected but such practice cannot prevail over provisions of law.
Practice, no matter how long continued, cannot give rise to any vested right if it is contrary
to law. Further, there is no reason as to why a representative from GCHS should be given
an automatic seat. It should therefore go through the process of election. It cannot also be
argued that the draft of the by-laws in 1975 was ratified when GCHS was allowed to take its
seat for 15 years without an election. In the first place, the proposal was merely a draft and
even if passed and approved by the general membership, it cannot be given effect because
it is void and contrary to the law. GCHS seat in the corporate board is at best merely
tolerated by GVAI.

............

Facts: Petitioner Grace Christian High School is an educational

institution offering preparatory, kindergarten and secondary courses
at the Grace Village in Quezon City. Private respondent Grace Village
Association, Inc., is an organization of lot and/or building owners,
lessees and residents at Grace Village, while private respondents
Alejandro G. Beltran and Ernesto L. Go were its president and
chairman of the committee on election. It appears that a committee of
the board of directors prepared a draft of an amendment to the by-
laws which says that Grace Christian High school will have a
permanent director of the association. This draft was never presented
to the general membership for approval. Nevertheless, the petitioner
was given a permanent seat in the board of directors of the
association. The association committee on election informed that the
petitoners permanent seat in board is invalid because it was never
approved by the majority of its members. Hence they will have an
election. The petitioner school requested the cancellation of the
election, the association denied. So the petitioner school instituted an
action to the Home Insurance Guaranty Corporation but their action
was denied. The board adopted a resolution declaring the 1975
provision null and void for lack of approval by members of the
association and the 1968 by-laws to be effective. The petitioner school
appealed to the CA but CA ruled that the amended by laws in 1975 is
null and void.

Issue: WON Grace Christian High school can have permanent seat in
board as director?

Held: No. 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. 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 petitioners claim that its right is coterminus with
the existence of the association.