Corpo Case Digests Set12

CORPORATION
LAW CASE DIGESTS

3C & 3S – ATTY. CARLO BUSMENTE
PADCOM CONDOMINIUM vs. ORTIGAS CENTER ASSOCIATION INC. 2. PADCOM added that it could not be compelled to become a
G.R. No. 146807 – May 9, 2002 member without violating its right to freedom of association.
3. It cannot be compelled to be a member of the Association
FACTS: because when it bought the land, the Association was still
Petitioner Padcom Condominium Corporation (hereafter PADCOM) inexistent. and since it was not a member of the Association, it
owns and manages the Padilla Office Condominium Building (PADCOM was not liable for membership dues interests and penalties.
Building) located at Emerald Avenue, Ortigas Center, Pasig City. The
land on which the building stands was originally acquired from the RTC: Dismissed, Association then appealed
Ortigas & Compant Limited Partnership (OCLP), by Tierra Dev’t Corp
(TDC) under a Deed of Sale. Among the terms and conditions in the CA: Reversed and set aside, PADCOM ordered to pay association
deed of sale was the requirement that the transferee and its successor-‐ membership dues (639,961.47php) and atty’s fees (25k php).
in-‐interest must become members of an association for realty owners
and long-‐term lessees in the area later known as the Ortigas Center. Reason: The intent to pass the obligation to prospective
Subsequently, the said lot, together with improvements thereon, was transferees was evident from the annotation of the same clause at the
conveyed by TDC in favor of PADCOM in a Deed of Transfer dated 25 back of the Transfer Certificate of Title covering the lot. Despite
February 1975. disavowal of membership, PADCOM's membership in the Association
was evident from these facts: (1) PADCOM was included in the
In 1982, respondent Ortigas Center Association, Inc (hereafter the Association's list ofbona fide members as of 30 March 1995; (2)
Association) was organized to advance the interests and promote the Narciso Padilla, PADCOM's President, was one of the Association's
gen. welfare of the real estate owners and long-‐term lessees of lots in incorporators; and (3) having received the demands for payment,
the Ortigas Center. It sought the collection of membership dues of PADCOM not only acknowledged them, but asked for and was
(P2,724.40) per month from PADCOM. The corporate books showed granted repeated extensions, and even proposed a scheme for the
that PADCOM owed the Association P639,961.47, representing settlement of its obligation. The Court of Appeals also ruled that
membership dues, interests and penalty charges from April 1983 to PADCOM cannot evade payment of its obligation to the Association
June 1993. The letters exchanged between the parties through the without violating equitable principles underlying quasi-‐contracts.
years showed repeated demands for payment, requests for extensions Being covered by the Association's avowed purpose to promote the
of payment, and even a settlement scheme proposed by PADCOM in interests and welfare of its members, PADCOM cannot be allowed to
September 1990. expediently deny and avoid the obligation arising from such
membership.
In view of PADCOM's failure and refusal to pay the Association filed a
complaint for collection of sum of money. PADCOM contended that : ISSUE:
1. it is a non-‐stock, non-‐profit association, and for it to become a 1. Whether or not PADCOM can be compelled to join the
special member of the Association, it should first apply for and association pursuant to the provision on automatic
be accepted for membership by the latter's Board of Directors. membership appearing as a condition in the Deed of Sale
No automatic membership was apparently contemplated in 2. Whether or not the contention of PADCOM that the By-‐laws of
the Association's By-‐laws the Association requires application for membership and
CORPO CASE DIGESTS 3C & 3S || 1

CORPORATION LAW CASE DIGESTS
acceptance before they could be a member thereof is with taking a certificate of title for value and in good faith, shall hold the
MERIT. same free from all encumbrances except those noted on said certificate
and any of the following encumbrances which may be subsisting,
HELD: namely: . . .”
1. YES. PADCOM can be compelled.
Under the Torrens system of registration, claims and liens of whatever
a. The agreement on AUTOMATIC MEMBERSHIP WITH THE character, except those mentioned by law, existing against the land
ASSOCIATION provides: “The owner of this lot, its successor-‐in-‐ binds the holder of the title and the whole world.
interest hereby binds himself to become a member of the
ASSOCIATION which will be formed by and among purchasers, fully c. Article 1311 of the Civil Code provides that contracts take effect
paid up Lot BUYERS, Building Owners and the COMPANY in respect to between the parties, their assigns and heirs. Since PADCOM is the
COMPANY OWNED LOTS… the ASSOCIATION when organized shall successor-‐in-‐interest of TDC, it follows that the stipulation on
also, among others, provide for and collect assessments which shall automatic membership with the Association is also binding on the
constitute a lien on the property, junior only to liens of the former
Government for taxes.”
2. NO. The contention is without merit.

Evidently, it was agreed by the parties that dues shall be collected from The By-‐laws reads: that Upon acceptance by the Board of Directors
an automatic member and such fees or assessments shall be a lien on of Ortigas Center Association, Inc., all real estate owners, or long-‐
the property. This stipulation was likewise annotated at the back of term lessees of lots within the boundaries of the Association as
TCT issued to TDC and when the latter sold the lot to PADCOM, the defined in the Articles of Incorporation become regular members,
Deed of Transfer expressly stated: provided, however that the long-‐term lessees of a lot or lots in said
area shall be considered as the regular members in lieu of the
… the transfer of land is free from all liens and encumbrances, owners of the same. Likewise, regular membership in the
except those already annotated at the back of said Transfer Association automatically ceases upon the cessation of a member to
Certificate of Title No. 457308, . . . be an owner or long-‐term lessee of real estate in the area. A lessee
shall be considered a long-‐term lessee if his lease is in writing and
This is so because any lien annotated on previous certificates of title for a period of two (2) years or more. Membership of a long-‐term
should be incorporated in or carried over to the new transfer lessee in the Association shall be co-‐terminus with his legal
certificates of title. Such lien is inseparable from the property as it is a possession (or his lease) of the lot/s in the area. Upon the lessee's
right in rem, a burden on the property whoever its owner may be. It cessation of membership in the Association, the owner shall
subsists notwithstanding a change in ownership; in short, the automatically succeed the lessee as member thereat.
personality of the owner is disregarded. As lot owner, PADCOM is a regular member of the Association.
No application for membership is necessary. If at all, acceptance
b. Section 44 of Presidential Decree No. 1529 mandates that:”Every by the Board of Directors is a ministerial function considering
registered owner receiving a certificate of title in pursuance of a decree that PADCOM is deemed to be a regular member upon the
of registration, and every subsequent purchaser of registered land acquisition of the lot pursuant to the automatic membership

clause annotated in the Certificate of Title of the property and despite the fact that the security guards knew who they were and
the Deed of Transfer. where they lived.

Since the court ruled that PADCOM was indeed a member,
following the law on obligations and contracts, t is obligated to SCHA filed a motion to dismiss arguing that the trial court had no
jurisdiction over the case as it involved an intra-‐corporate dispute
pay its dues incidental pursuant to Art. 1159
between SCHA and its members, the proper forum being the Home
Lastly, under the principle of estoppel, PADCOM is barred from Insurance (and Guaranty) Corporation (HIGC). SCHA stated that
disclaiming membership in the Association. In estoppel, a person, their Articles of Incorporation provides 'that the association shall be
who by his act or conduct has induced another to act in a particular a non-‐stock corporation with all homeowners of Sta. Clara
manner, is barred from adopting an inconsistent position, attitude or constituting its membership.' Also, its by-‐laws contains a provision
course of conduct that thereby causes loss or injury to another (note that 'all real estate owners in Sta. Clara Subdivision automatically
PADCOM has been a lot owner for almost 10 years, there were become members of the association'. The Sps. Gaston, having become
demands to pay but PADCOM repeatedly asked for extensions). lot owners of Sta. Clara Subdivision in 1974 after the approval by the
STA. CLARA HOMES ASSOCIATION vs. GASTON SEC of SCHA's articles of incorporation and by-‐laws, became
G.R. No. 141961 – January 23, 2002 members automatically in 1974 of SCHA. Their non-‐payment of the
association yearly dues did not make them non-‐members of SCHA.
FACTS: And even granting Sps. Gaston were not members of the association,
Spouses Gaston filed a complaint for damages with preliminary HIGC still had jurisdiction over the case pursuant to the Rules of
injunction/preliminary mandatory injunction and TRO before Negros Procedure of the HIGC.
Occidental RTC against Santa Clara Homeowners Association (SCHA),
The complaint alleged that Sps. Gaston were residents of San Jose RTC: Denied the motion
Avenue, Sta. Clara Subdivision. They purchased their lots sometime in
1974, and at the time of purchase, there was no mention or CA: Sustained the RTC
requirement of membership in any homeowners' association. From
that time on, they have remained non-‐members of SCHA. They also ISSUE:
stated that an arrangement was made wherein homeowners who were WON Sps. Gaston automatically became members of the association
non-‐members of the association were issued 'non-‐member' gatepass pursuant to SCHA’s AoI
stickers for their vehicles for identification by the security guards
manning the subdivision's entrances and exits. HELD:
No. The constitutionally guaranteed freedom of association includes
the freedom not to associate. The right to choose with whom one will
However, in 1998, SCHA decreed that only its members in good associate oneself is the very foundation and essence of that
standing were to be issued stickers for use in their vehicles. partnership. It should be noted that the provision guarantees the
right to form an association. It does not include the right to compel
Thereafter, on three separate incidents, members of the Gaston others to form or join one. Private respondents cannot be compelled
Family were required to show their drivers’ license before entering, to become members of the SCHA by the simple expedient of including

them in its Articles of Incorporation and By-‐laws without their respondents fall within the meaning of "general public." We
express or implied consent. True, it may be to the mutual advantage are not convinced. First, the third type of dispute refers only to
of lot owners in a subdivision to band themselves together to cases wherein an association's right to exist as a corporate
promote their common welfare. But that is possible only if the entity is at issue. In the present case, the Complaint filed by
owners voluntarily agree, directly or indirectly, to become members private respondents refers to the SCHA's acts allegedly
of the association. True also, memberships in homeowners' amounting to an impairment of their free access to their place
associations may be acquired in various ways — often through deeds of residence inside the Sta. Clara Subdivision. The existence of
of sale, Torrens certificates or other forms of evidence of property SCHA as a corporate entity is clearly not at issue in the instant
ownership. In the present case, however, other than the said Articles case.
of Incorporation and By-‐laws, there is no showing that private
respondents have agreed to be SCHA members. 2. The HIGC exercises limited jurisdiction over homeowners'
disputes. The law confines its authority to controversies that
As already adverted to, there are cases in which a party who enters arise from any of the following intra-‐corporate relations: (1)
into a contract of sale is also bound by a lien annotated on the between and among members of the association; (2) between
certificate of title. When private respondents purchased their any and/or all of them and the association of which they are
property in 1974 and obtained Transfer Certificates of Title Nos. T-‐ members; and (3) between the association and
126542 and T-‐127462 for Lots 11 and 12 of Block 37 along San Jose the state insofar as the controversy concerns its right to exist
Avenue in Sta. Clara Subdivision, there was no annotation showing as a corporate entity. It should be stressed that the Complaint
their automatic membership in the SCHA. Thus, no privity of contract here is for damages. It does not assert membership in the
arising from the title certificate exists between petitioners and private SCHA as its basis. Rather, it is based on an alleged violation of
respondents. Further, the records are bereft of any evidence that their alleged right of access through the subdivision and on the
would indicate that private respondents intended to become alleged embarrassment and humiliation suffered by the
members of the SCHA. Prior to the implementation of the aforesaid plaintiffs.
Resolution, they and the other homeowners who were not members
of the association were issued non-‐member gate pass stickers for LONG vs. BASA
their vehicles. This fact has not been disputed by petitioners. Thus, G.R. Nos. 134963-‐64 – September 27, 2001
the SCHA recognized that there were subdivision landowners who
were not members thereof, notwithstanding the provisions of its FACTS:
Articles of Incorporation and By-‐laws. A religious group known as "The Church In Quezon City (Church
Assembly Hall), Incorporated" was organized as "an entity of the
Additional Information: brotherhood in Christ.''

1. Petitioners likewise contend that even if private respondents It was registered in the same year with the Securities and Exchange
are not members of the SCHA, an intra-‐corporate controversy Commission (SEC) as a non-‐stock, non-‐profit religious corporation for
under the third type of dispute provided in Section 1(b) of the administration of its temporalities or the management of its
Rule II of the HIGC Rules exists. Petitioners posit that private properties.

The Articles of Incorporation and By-‐laws of the CHURCH decree that "that under the By-‐laws, this organization is only for worshipping the
its affairs and operation shall be managed by a Board of Directors true God, not to worship Buddha or men.'' The respondents also
consisting of six (6) members, who shall be members of the CHURCH. warned them that if they persist in their highly improper conduct, they
will be dropped from the membership of the CHURCH.
Zealous in upholding and guarding their Christian faith, and to ensure
unity and uninterrupted exercise of their religious belief, the members These exhortations and warnings to the erring members were made
of the CHURCH vested upon the Board of Directors the absolute power during Sunday worship gatherings, "in small group meetings and even
"to preserve and protect their faith" and to admit and expel a member one-‐on-‐one personal talk with them.'' Since 1988, these warnings were
of the CHURCH. announced by the members of the Board "(s)ometimes once a week
(when they) meet together."
Admission for membership in the CHURCH is so exacting. Only
"persons zealous of the Gospel, faithful in Church work and of sound But petitioners ignored these repeated admonitions.
knowledge of the Truth, as the Board of Directors shall admit to
membership, shall be members of the (CHURCH)." Alarmed that petitioners' conduct will continue to undermine the
integrity of the Principles of Faith of the CHURCH, the Board of
The procedure for the expulsion of an erring or dissident member is Directors, during its August 30, 1993 regular meeting held for the
prescribed in Article VII (paragraph 4) of the CHURCH By-‐laws, which purpose of reviewing and updating the membership list of the
provides that "If it is brought to the notice of the Board of Directors that CHURCH, removed from the said list certain names of members,
any member has failed to observe any regulations and By-‐laws of the including the names of herein petitioners Joseph Lim, Liu Yek See,
Institution (CHURCH) or the conduct of any member has been Alfredo Long and Felix Almeria. They were removed for espousing
dishonorable or improper or otherwise injurious to the character and doctrines inimical or injurious to the Principles of Faith of the
interest of the Institution, the Board of Directors may b(y) resolution CHURCH. A Resolution was issued to that effect.
without assigning any reason therefor expel such member from such
Institution and he shall then forfeit his interest, rights and privileges in All the then six (6) members of the Board, namely, Directors Lim Che
the Institution." Boon, Tan Hon Koc (herein petitioners), Anthony Sayheeliam, Leandro
Basa, Yao Chec and Lydia L. Basa (herein respondents) "were duly
The Board of Directors observed that certain members of the CHURCH, informed" of that meeting. However, Directors Lim Che Boon and Tan
including petitioners herein, exhibited "conduct which was Hon Koc did not appear. Thus, the resolution was signed only by
dishonorable, improper and injurious to the character and interest of Directors Anthony Sayheeliam, Leandro Basa, Yao Chec and Lydia L.
the (CHURCH)" by "introducing (to the members) doctrines and Basa who composed the majority of the Board. The updated
teachings which were not based on the Holy Bible" and the Principles membership list approved by the Board, together with the minutes of
of Faith embraced by the CHURCH. the meeting, were duly filed with the SEC.

Confronted with this situation, the respondents, as members of the Petitioners Lim Che Boon, Tan Hon Koc, Joseph Lim, Liu Yek See and
Board of Directors, and some responsible members of the CHURCH, others questioned their expulsion by filing with the SEC Securities
advised the petitioners "to correct their ways'' and reminded them Investigation and Clearing Department a petition against Directors Yao

Chek, Leandro Basa, Lydia Basa and Anthony Sayheeliam. It sought another Hearing Officer in SEC Case No. 4994 for the declaration of
mainly the annulment of the membership list and the reinstatement of nullity of the general membership meeting held on February 12, 1995."
the original list on the ground that the expulsion was made without Upon denial of the separate motions for reconsideration of both
prior notice and hearing. parties, the respondents filed with the SEC en banc a petition for
review on certiorari, docketed as SEC EB Case No. 484. A review of the
The SEC hearing officer denied the petition reasoning out that the records show that the issue posed in this case is also the validity of the
expulsion was in accordance with the provisions of paragraph 4, questioned expulsion already resolved by the SEC en banc in its
Article VII of the CHURCH By-‐laws, reasoning that "the notice referred decision dated July 11, 1994 in SEC EB Case No. 389 which had
to in par. 4 is notice to the Board of Directors of the grounds for attained finality.
expulsion enumerated therein and not notice to the (erring) members .
On July 31, 1996, the SEC en banc, by a vote of two to one, with one
. . " Perea's order further stated: "It is also clear (from par. 4) that the Commissioner abstaining, issued an order in SEC EB Case No. 484,
resolution of expulsion need not state the reason for expelling a setting aside the expulsion of certain members of the CHURCH
member." approved by its Board of Directors on August 30, 1993 for being void
and ordering the reinstatement of petitioners as members of the
Petitioners elevated Perea's order of February 22, 1994 to the SEC en CHURCH.
banc via a petition for certiorari, docketed as SEC EB Case No. 389. The
SEC, in an en banc decision dated July 11, 1994, affirmed the Perea ruling Promptly, herein respondents Anthony Sayheeliam and Lydia Basa
and "dismissed for lack of merit" the petition. filed a petition for review with the Court of Appeals assailing the July
31, 1996 order.
Petitioners did not appeal from the decision of the SEC en banc.
The Court of Appeals promulgated its now assailed decision granting
Since the said SEC en banc decision pertains only to the preliminary respondents' consolidated petitions and reversing the July 31, 1996
injunction incident, the SEC, through a hearing panel, conducted order of the SEC en banc in SEC EB Case No. 484.
further proceedings to hear and decide the permissive counterclaim
and third-‐party complaint incorporated in respondents' supplemental ISSUES:
answer, including their prayer for injunctive relief to prevent WON the CA erred in reversing the July 31, 1996 order of the SEC en
petitioners from interfering and usurping the functions of the Board of banc therefore making the expulsion of the petitioners valid.
Directors.
WON the petitioners should have first been given notice before their
Petitioners subsequently filed motions to dismiss/strike out the expulsion.
counterclaim and third-‐party complaint. But the motions were denied
by the hearing panel in its omnibus order dated October 2, 1995. The HELD:
said order also declined to act on respondents' third-‐party complaint's FIRST ISSUE:
prayer for injunctive relief since "there is a case pending before No. CA is correct in upholding the expulsion of the petitioners. The
issue of the validity of the expulsion had long been resolved and

declared valid by the SEC en banc in its decision dated July 11, 1994 in Directors may b(y) resolution without assigning
SEC EB Case No. 389. The petitioners themselves admitted in their any reason therefor expel such member from such
present petition that they did not appeal anymore from the July 11, Institution and he shall then forfeit his interest,
1994 decision of the SEC en banc, thereby rendering the same final and rights and privileges in the Institution."
conclusive. As such, the expulsion order is now inextricably binding on
the parties concerned and can no longer be modified, much less From the above-‐quoted By-‐law provision, the only requirements
reversed. What was definitely resolved in the Perea decision and in before a member can be expelled or removed from the membership of
SEC EB Case No. 389 was the validity of the expulsion proceedings the CHURCH are: (a) the Board of Directors has been notified that a
conducted by the Board of Directors in its meeting on August 30, 1993 member has failed to observe any regulations and By-‐laws of the
wherein a Resolution updating the membership list of the CHURCH CHURCH, or the conduct of any member has been dishonorable or
was approved. On the other hand, the SEC hearing panel conducted improper or otherwise injurious to the character and interest of the
further proceedings only to decide the permissive counterclaim and CHURCH, and (b) a resolution is passed by the Board expelling the
third-‐party complaint incorporated in respondents' supplemental member concerned, without assigning any reason therefor.
answer, including their prayer for injunctive relief to prevent petitioners
from interfering and usurping the functions of the Board of Directors. It is thus clear that a member who commits any of the causes for
Clearly, the issuance by the SEC en banc of its July 31, 1996 order in expulsion enumerated in paragraph 4 of Article VII may be expelled by
SEC EB Case No. 484, which reopened the very same issue of the the Board of Directors, through a resolution, without giving that erring
validity of the expulsion proceedings, completely reversing its final and member any notice prior to his expulsion. The resolution need not
executory en banc decision of July 11, 1994 (SEC EB Case No. 389), is even state the reason for such action.
certainly in gross disregard of the rules and basic legal precept that
accord finality to administrative, quasi-‐judicial and judicial Section 91 of the Corporation Code, which has been made explicitly
determinations. applicable to religious corporations by the second paragraph of Section
109 of the same Code, states:
SECOND ISSUE: "SECTION 91.Termination of membership. —
No. In the first place, the By-‐laws of the CHURCH, which the members Membership shall be terminated in the manner and
have expressly adhered to, does not require the Board of Directors to for the causes provided in the articles of
give prior notice to the erring or dissident members in cases of incorporation or the by-‐laws....
expulsion. This is evident from the procedure for expulsion prescribed
in Article VII (paragraph 4) of the By-‐laws, which reads: Moreover, the petitioners really have no reason to bewail the lack of
prior notice in the By-‐laws. As correctly observed by the Court of
"4.If it is brought to the notice of the Board of Appeals, they have waived such notice by adhering to those By-‐laws.
Directors that any member has failed to observe any They became members of the CHURCH voluntarily. They entered into its
regulations and By-‐laws of the Institution (CHURCH) covenant and subscribed to its rules. By doing so, they are bound by their
or the conduct of any member has been dishonorable consent.
or improper or otherwise injurious to the character
and interest of the Institution, the Board of

Even assuming that petitioners' expulsion falls within the Clearly, although the By-‐laws of the CHURCH do not require the Board
Constitutional provisions on "prior notice" or "due process," still we of Directors to give notice to the dissident petitioners of their
can not conclude that respondents committed a constitutional impending expulsion, more than sufficient notice was given to them
infraction. It bears emphasis that petitioners were given more than before they were expelled by the Board.
sufficient notice of their impending expulsion, as shown by the records.
We have narrated earlier the events which led to the questioned TAN vs. SYCIP
expulsion. From the undisputed testimony of Director Anthony G.R. No. 153468 – August 17, 2006
Sayheeliam (now respondent), it is clear that, as early as 1988, the
respondents-‐Board of Directors patiently and persistently reminded, FACTS:
advised and exhorted the erring members, including herein Petitioner Grace Christian High School (GCHS) is a nonstock, non-‐profit
petitioners, to stop espousing doctrines, teachings and religious belief educational corporation with fifteen (15) regular members, who also
diametrically opposed to the Principles of Faith embraced by the constitute the board of trustees. During the annual members' meeting
CHURCH. The respondents-‐Board of Directors further warned them held on April 6, 1998, there were only eleven (11) living member-‐
during Sunday worship gatherings, in small group meetings and one-‐ trustees, as four (4) had already died. Out of the eleven, seven
on-‐one talk, that they would face disciplinary action and be dropped (7) attended the meeting through their respective proxies. The
from the membership roll should they continue to exhibit acts inimical meeting was convened and chaired by Atty. Sabino Padilla Jr. over the
and injurious to the teachings of the Holy Bible which the CHURCH so objection of Atty. Antonio C. Pacis, who argued that there was no
zealously upholds. quorum. In the meeting, Petitioners Ernesto Tanchi, Edwin Ngo,
Virginia Khoo, and Judith Tan were voted to replace the four deceased
When they ignored petitioners' exhortations and warnings, the erring member-‐trustees.
members should not now complain about their expulsion from the
membership of the CHURCH by the Board of Directors the expulsion When the controversy reached the Securities and Exchange
was not tainted with any arbitrary treatment from the members of the Commission (SEC), petitioners maintained that the deceased member-‐
Board of Directors who, since 1988 up to August 30, 1993, or trustees should not be counted in the computation of the quorum
approximately five (5) years, have patiently exhorted and warned the because, upon their death, members automatically lost all their rights
dissident members. This long period of time is more than adequate an (including the right to vote) and interests in the corporation.
opportunity for the erring members and their followers to contemplate
upon their covenant with the CHURCH on their duty to protect and SEC Hearing Officer Malthie G. Militar declared the April 6, 1998
promote its Principles of Faith and not to violate them. It is a well-‐ meeting null and void for lack of quorum. She held that the basis for
settled principle in law that what due process contemplates is freedom determining the quorum in a meeting of members should be their
from arbitrariness; what it requires is fairness and justice; substance, number as specified in the articles of incorporation, not simply the
rather than the form, being paramount. What it prohibits is not the number of living members. She explained that the qualifying phrase
absence of previous notice but the absolute absence thereof. A formal "entitled to vote" in Section 24 of the Corporation Code, which
or trial type hearing is not at all times and in all instances essential. provided the basis for determining a quorum for the election of
directors or trustees, should be read together with Section 89.


The CA dismissed the appeal of petitioners, because the Verification considered in determining whether a quorum is present in a
and Certification of Non-‐Forum Shopping had been signed only by Atty. stockholders' meeting, or whether a requisite proportion of the stock
Sabino Padilla Jr. No Special Power of Attorney had been attached to of the corporation is voted to adopt a certain measure or act. Only
show his authority to sign for the rest of the petitioners. stock actually issued and outstanding may be voted. Under Section 6 of
the Corporation Code, each share of stock is entitled to vote, unless
ISSUE: otherwise provided in the articles of incorporation or declared
Whether or not in NON-‐STOCK corporations, dead members should still delinquent under Section 67 of the Code.
be counted in determination of quorum for purposes of conducting the
Annual Members' Meeting. Neither the stockholders nor the corporation can vote or represent
shares that have never passed to the ownership of stockholders; or,
HELD: having so passed, have again been purchased by the corporation. These
NO. In the absence of an express charter or statutory provision to the shares are not to be taken into consideration in. determining
contrary, the general rule is that every member of a nonstock majorities. When the law speaks of a given proportion of the stock, it
corporation, and every legal owner of shares in a stock corporation, must be construed to mean the shares that have passed from the
has a right to be present and to vote in all corporate meetings. corporation, and that may be voted.
Conversely, those who are not stockholders or members have no right
to vote. Voting may be expressed personally, or through proxies who Sec. 6 (last paragraph):
vote in their representative capacities. Generally, the right to be "Except as provided in the immediately preceding paragraph, the vote
present and to vote in a meeting is determined by the time in which the necessary to approve a particular corporate act as provided in this
meeting is held. Code shall be deemed to refer only to stocks with voting rights."

Section 52 of the Corporation Code states: Taken in conjunction with Section 137, the last paragraph of Section 6
shows that the intention of the lawmakers was to base the quorum
"Section 52. Quorum in Meetings. — Unless otherwise provided for in mentioned in Section 52 on the number of outstanding voting stocks.
this Code or in the by-‐laws, a quorum shall consist of the stockholders
representing a majority of the outstanding capital stock or a majority The Right to Vote in
of the members in the case of non-‐stock corporations." Nonstock Corporations
In stock corporations, the presence of a quorum is ascertained and
counted on the basis of the outstanding capital stock, as defined by the In nonstock corporations, the voting rights attach to
Code. membership. Members vote as persons, in accordance with the law and
the bylaws of the corporation. Each member shall be entitled to one
The Right to Vote in vote unless so limited, broadened, or denied in the articles of
Stock Corporations incorporation or bylaws. We hold that when the principle for
determining the quorum for stock corporations is applied by analogy
The right to vote is inherent in and incidental to the ownership of to nonstock corporations, only those who are actual members with
corporate stocks. It is settled that unissued stocks may not be voted or voting rights should be counted.

Under Section 52 of the Corporation Code, the majority of the members the estate is effected, the stocks of the decedent are held by the
representing the actual number of voting rights, not the number or administrator or executor.
numerical constant that may originally be specified in the articles of
incorporation, constitutes the quorum. On the other hand, membership in and all rights arising from a
nonstock corporation are personal and non-‐transferable, unless the
The March 3, 1986 SEC Opinion cited by the hearing officer uses the articles of incorporation or the bylaws of the corporation provide
phrase "majority vote of the members"; likewise Section 48 of the otherwise. In other words, the determination of whether or not "dead
Corporation Code refers to 50 percent of 94 (the number of members" are entitled to exercise their voting rights (through their
registered members of the association mentioned therein) plus one. executor or administrator), depends on those articles of incorporation
The best evidence of who are the present members of the corporation or bylaws.
is the "membership book"; in the case of stock corporations, it is the
stock and transfer book. Under the By-‐Laws of GCHS, membership in the corporation shall,
among others, be terminated by the death of the member. Section 91 of
Section 25 of the Code specifically provides that a majority of the Corporation Code further provides that termination extinguishes
the directors or trustees, as fixed in the articles of incorporation, shall all the rights of a member of the corporation, unless otherwise
constitute a quorum for the transaction of corporate business (unless provided in the articles of incorporation or the bylaws.
the articles of incorporation or the bylaws provide for a greater
majority). If the intention of the lawmakers was to base the quorum in Applying Section 91 to the present case, we hold that dead members
the meetings of stockholders or members on their absolute number as who are dropped from the membership roster in the manner and
fixed in the articles of incorporation, it would have expressly specified for the cause provided for in the By-‐Laws of GCHS are not to be
so. Otherwise, the only logical conclusion is that the legislature did not counted in determining the requisite vote in corporate matters or
have that intention. the requisite quorum for the annual members' meeting. With 11
remaining members, the quorum in the present case should be 6.
Effect of the Death Therefore, there being a quorum, the annual members' meeting,
of a Member or Shareholder conducted with six members present, was valid.

Having thus determined that the quorum in a members' meeting is to
be reckoned as the actual number of members of the corporation, the
next question to resolve is what happens in the event of the death of
one of them.

In stock corporations, shareholders may generally transfer their
shares. Thus, on the death of a shareholder, the executor or
administrator duly appointed by the Court is vested with the legal title
to the stock and entitled to vote it. Until a settlement and division of

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CORPORATION

LAW CASE DIGESTS

CORPO CASE DIGESTS 3C & 3S || 1

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