23.

Woodchild vs. Roxax, 436 SCRA 235

FACTS:
The respondent Roxas Electric and Construction Company, Inc. (RECCI),
formerly the Roxas Electric and Construction Company, was the owner of two
parcels of land, identified as Lot No. 491-A-3-B-1 covered by Transfer
Certificate of Title (TCT) No. 78085 and Lot No. 491-A-3-B-2 covered by TCT
No. 78086. A portion of Lot No. 491-A-3-B-1 which abutted Lot No. 491-A-3-B2 was a dirt road accessing to the Sumulong Highway, Antipolo, Rizal.
The respondents Board of Directors approved a resolution authorizing
the corporation, through its president, Roberto B. Roxas, to sell Lot No. 491A-3-B-2 covered by TCT No. 78086, with an area of 7,213 square meters, at a
price and under such terms and conditions which he deemed most
reasonable and advantageous to the corporation; and to execute, sign and
deliver the pertinent sales documents and receive the proceeds of the sale
for
and
on
behalf
of
the
company. [3]
Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy Lot No. 491-A3-B-2 covered by TCT No. 78086 on which it planned to construct its
warehouse building, and a portion of the adjoining lot, Lot No. 491-A-3-B-1.
On July 1, 1991, Roxas, as President of RECCI, as vendor, and Dy, as
President of WHI, as vendee, executed a contract to sell in which RECCI
bound and obliged itself to sell to Dy Lot No. 491-A-3-B-2 covered by TCT No.
78086 for P7,213,000.
Later, WHI complained to Roberto Roxas that the vehicles of RECCI
were parked on a portion of the property over which WHI had been granted a
right of way. Roxas promised to look into the matter. Dy and Roxas discussed
the need of the WHI to buy a 500-square-meter portion of Lot No. 491-A-3-B1 covered by TCT No. 78085 as provided for in the deed of absolute sale.
However, Roxas died soon thereafter. On April 15, 1992, the WHI wrote the
RECCI, reiterating its verbal requests to purchase a portion of the said lot as
provided for in the deed of absolute sale, and complained about the latters
failure to eject the squatters within the three-month period agreed upon in
the
said
deed.
The WHI demanded that the RECCI sell a portion of Lot No. 491-A-3-B-1
covered by TCT No. 78085 for its beneficial use within 72 hours from notice
thereof, otherwise the appropriate action would be filed against it. RECCI

rejected the demand of WHI. WHI reiterated its demand in a Letter dated
May 29, 1992. There was no response from RECCI.
On June 17, 1992, the WHI filed a complaint against the RECCI with the
Regional Trial Court of Makati, for specific performance and damages.
On November 11, 1996, the trial court rendered judgment in favor of
the WHI. The RECCI appealed the decision to the CA, which rendered a
decision on November 9, 1999 reversing that of the trial court, and ordering
the dismissal of the complaint.
ISSUE:
Whether or not the respondent is bound by the provisions in the deed
of absolute sale granting to the petitioner beneficial use and a right of way
over a portion of Lot No. 491-A-3-B-1.
DECISION:
The petitioner avers that, under its Resolution of May 17, 1991, the
respondent authorized Roxas, then its president, to grant a right of way over
a portion of Lot No. 491-A-3-B-1 in favor of the petitioner, and an option for
the respondent to buy a portion of the said property. The petitioner contends
that when the respondent sold Lot No. 491-A-3-B-2 covered by TCT No.
78086, it (respondent) was well aware of its obligation to provide the
petitioner with a means of ingress to or egress from the property to the
Sumulong Highway, since the latter had no adequate outlet to the public
highway. The petitioner asserts that it agreed to buy the property covered by
TCT No. 78085 because of the grant by the respondent of a right of way and
an option in its favor to buy a portion of the property covered by TCT No.
78085. It contends that the respondent never objected to Roxas acceptance
of its offer to purchase the property and the terms and conditions therein;
the respondent even allowed Roxas to execute the deed of absolute sale in
its behalf.
For its part, the respondent posits that Roxas was not so authorized
under the May 17, 1991 Resolution of its Board of Directors to impose a
burden or to grant a right of way in favor of the petitioner on Lot No. 491-A-3B-1, much less convey a portion thereof to the petitioner. Hence, the
respondent was not bound by such provisions contained in the deed of
absolute sale. Besides, the respondent contends, the petitioner cannot
enforce its right to buy a portion of the said property since there was no

agreement in the deed of absolute sale on the price thereof as well as the
specific portion and area to be purchased by the petitioner.
Generally, the acts of the corporate officers within the scope of their
authority are binding on the corporation. However, under Article 1910 of the
New Civil Code, acts done by such officers beyond the scope of their
authority cannot bind the corporation unless it has ratified such acts
expressly or tacitly, or is estopped from denying them.
As for any obligation wherein the agent has exceeded his power, the
principal is not bound except when he ratifies it expressly or tacitly.
Thus, contracts entered into by corporate officers beyond the scope of
authority are unenforceable against the corporation unless ratified by the
corporation.
24.

Filipinas Port vs. Go 518 SCRA 453

FACTS:
The case is actually an intra-corporate dispute involving Filport, a
domestic corporation engaged in stevedoring services with principal office in
Davao City. It was initially instituted with the Securities and Exchange
Commission (SEC) where the case hibernated and remained unresolved for
several years until it was overtaken by the enactment into law, on 19 July
2000, of Republic Act (R.A.) No. 8799, otherwise known as the Securities
Regulation Code.
Petitioner Eliodoro C. Cruz, Filport's president from 1968 until he lost
his bid for reelection as Filport's president during the general stockholders'
meeting in 1991, wrote a letter to the corporation's Board of Directors
questioning the board's creation of the certain positions with a monthly
remuneration of P13,050.00 each, and the election thereto of certain
members of the board. In his aforesaid letter, Cruz requested the board to
take necessary action/actions to recover from those elected to the
aforementioned positions the salaries they have received.
On 15 September 1992, the board met and took up Cruz's letter. The
records do not show what specific action/actions the board had taken on the
letter. Evidently, whatever action/actions the board took did not sit well with
Cruz.

On 14 June 1993, Cruz, purportedly in representation of Filport and its

stockholders, among which is herein co-petitioner Mindanao Terminal and
Brokerage Services, Inc. (Minterbro), filed with the SEC a petition which he
describes as a derivative suit against the herein respondents.
In the same petition, docketed as SEC Case No. 06-93-4491, Cruz
alleged that despite demands made upon the respondent members of the
board of directors to desist from creating the positions in question and to
account for the amounts incurred in creating the same, the demands were
unheeded. Cruz thus prayed that the respondent members of the board of
directors be made to pay Filport, jointly and severally, the sums of money
variedly representing the damages incurred as a result of the creation of the
offices/positions complained of and the aggregate amount of the questioned
increased salaries.
The respondents denied the allegations of mismanagement and further
averred that Cruz and his co-petitioner Minterbro, while admittedly
stockholders of Filport, have no authority nor standing to bring the so-called
"derivative suit" for and in behalf of the corporation; that respondent Mary
Jean D. Co has already ceased to be a corporate director and so with
Fortunato V. de Castro, one of those holding an assailed position; and that no
demand to cease and desist from further committing the acts complained of
was made upon the board.
By way of affirmative defenses, respondents asserted that (1) the
petition is not duly verified by petitioner Filport which is the real party-ininterest; (2) Filport, as represented by Cruz and Minterbro, failed to exhaust
remedies for redress within the corporation before bringing the suit; and (3)
the petition does not show that the stockholders bringing the suit are joined
as nominal parties. In support of their counterclaim, respondents averred
that Cruz filed the alleged derivative suit in bad faith and purely for
harassment purposes on account of his non-reelection to the board in the
1991 general stockholders' meeting.
RTC-Davao City rendered its decision against the respondents by
ordering the directors holding the positions of Assistant Vice President for
Corporate Planning, Special Assistant to the President and Special Assistant
to the Board Chairman to refund to the corporation the salaries they have
received as such officers "considering that Filipinas Port Services is not a big
corporation requiring multiple executive positions"and that said
positions "were just created for accommodation."

From the adverse decision of the trial court, herein respondents went
on appeal. CA granted the respondents' appeal, reversed and set aside the
appealed decision of the trial court and accordingly dismissed the so-called
derivative suit filed by Cruz.
Hence, petitioners' present recourse.
ISSUE:
Whether the CA erred in holding that Filport's Board of Directors acted
within its powers in creating the executive committee and the positions of
AVPs for Corporate Planning, Operations, Finance and Administration, and
those of the Special Assistants to the President and the Board Chairman,
each with corresponding remuneration, and in increasing the salaries of the
positions of Board Chairman, Vice-President, Treasurer and Assistant General
Manager.
DECISION:
The governing body of a corporation is its board of directors. Section
23 of the Corporation Code explicitly provides that unless otherwise provided
therein, the corporate powers of all corporations formed under the Code shall
be exercised, all business conducted and all property of the corporation shall
be controlled and held by a board of directors. Thus, with the exception only
of some powers expressly granted by law to stockholders (or members, in
case of non-stock corporations), the board of directors (or trustees, in case of
non-stock corporations) has the sole authority to determine policies, enter
into contracts, and conduct the ordinary business of the corporation within
the scope of its charter, i.e., its articles of incorporation, by-laws and relevant
provisions of law. Verily, the authority of the board of directors is restricted to
the management of the regular business affairs of the corporation, unless
more extensive power is expressly conferred.
The raison d'etre behind the conferment of corporate powers on the
board of directors is not lost on the Court. Indeed, the concentration in the
board of the powers of control of corporate business and of appointment of
corporate officers and managers is necessary for efficiency in any large
organization. Stockholders are too numerous, scattered and unfamiliar with
the business of a corporation to conduct its business directly. And so the plan
of corporate organization is for the stockholders to choose the directors who
shall control and supervise the conduct of corporate business.

In the present case, the board's creation of the positions of Assistant

Vice Presidents for Corporate Planning, Operations, Finance and
Administration, and those of the Special Assistants to the President and the
Board Chairman, was in accordance with the regular business operations of
Filport as it is authorized to do so by the corporation's by-laws, pursuant to
the Corporation Code.
25.

Tan vs. Sycip, 499 SCRA 216

FACTS:
Petitioner Grace Christian High School (GCHS) is a nonstock, non-profit
educational corporation with fifteen regular members, who also constitute
the board of trustees. During the annual members' meeting held on April 6,
1998, there were only eleven living member-trustees, as four had already
died. Out of the eleven, seven attended the meeting through their respective
proxies. The meeting was convened and chaired by Atty. Sabino Padilla Jr.
over the objection of Atty. Antonio C. Pacis, who argued that there was no
quorum. In the meeting, Petitioners Ernesto Tanchi, Edwin Ngo, Virginia Khoo,
and Judith Tan were voted to replace the four deceased member-trustees.

When the controversy reached the Securities and Exchange Commission

(SEC), petitioners maintained that the deceased member-trustees should not
be counted in the computation of the quorum because, upon their death,
members automatically lost all their rights (including the right to vote) and
interests in the corporation.
Upon appeal, the CA dismissed the appeal of petitioners, because the
Verification and Certification of Non-Forum Shopping had been signed only
by Atty. Sabino Padilla Jr. No Special Power of Attorney had been attached to
show his authority to sign for the rest of the petitioners.
Hence, this present petition.
ISSUE:

Whether or not in NON-STOCK corporations, dead members should still

be counted in determination of quorum for purposed of conducting the
Annual Members' Meeting.
DECISION:
Membership in and all rights arising from a nonstock corporation are
personal and non-transferable, unless the articles of incorporation or the
bylaws of the corporation provide otherwise. In other words, the
determination of whether or not "dead members" are entitled to exercise
their voting rights (through their executor or administrator), depends on
those
articles
of
incorporation
or
bylaws.
Under the By-Laws of GCHS, membership in the corporation shall,
among others, be terminated by the death of the member. Section 91 of the
Corporation Code further provides that termination extinguishes all the rights
of a member of the corporation, unless otherwise provided in the articles of
incorporation or the bylaws.
Applying Section 91 to the present case, we hold that dead members
who are dropped from the membership roster in the manner and for the
cause provided for in the By-Laws of GCHS are not to be counted in
determining the requisite vote in corporate matters or the requisite quorum
for the annual members' meeting. With 11 remaining members, the quorum
in the present case should be 6. Therefore, there being a quorum, the annual
members' meeting, conducted with six members present, was valid.
26.

Estacio vs. Pampanga I 596 SGRA 542

FACTS:
Petitioner Estacio had been employed at respondent PELCO I as a bill
custodian since 1977, while petitioner Manliclic had been working for
respondent PELCO I as a bill collector since June 1992.
Respondent Engr. Allas filed administrative complaints against
petitioners. petitioners Estacio and Manliclic separately filed with the Board
of Directors of respondent PELCO I their memoranda of appeal.
The Board of Directors of respondent PELCO I subsequently passed two
resolutions, with essentially the same contents, i.e., Resolutions No.

38[19] dated 15 November 2002 and No. 39, [20] dated 25 November 2002,
respectively. In said Resolutions, the Board of Directors of respondent PELCO
I reinstated petitioners to their positions without loss of seniority, and
ordered respondent Engr. Allas to pay in full the salaries and other incentives
accruing to petitioners after deducting the first 15 days of their suspension.
Notwithstanding the approval of Resolutions No. 38 and No. 39,
respondent Engr. Allas refused to reinstate petitioners and proceeded to
dismiss them from service.
National Electrification Administration through Regional Director
Alberto A. Guiang issued another letter to the Board of Directors of
respondent PELCO I dated 10 December 2002 stating that it was
disapproving Resolution No. 39 issued by the Board of Directors of
respondent PELCO I granting the letter of appeal of petitioners.
The foregoing events prompted petitioners to file with the NLRC, Regional
Arbitration Board (RAB)-III, City of San Fernando, Pampanga, their Complaints
against respondents for illegal dismissal and payment of backwages,
13th month pay, and other benefits.
In a Decision dated 30 April 2004, the Labor Arbiter ruled in favor of
respondents. Disgruntled with the Labor Arbiter's Decision, petitioners
appealed to the NLRC. NLRC ruled in favor of petitioners but upon appeal, CA
decided for respondents. Hence, this present petition.
ISSUE:
Whether or not the court of appeals acted in accordance with evidence
on record, applicable laws and jurisprudence when it ruled that resolutions
nos. 38 and 39 granting the letters of appeal of estacio and manliclic and
ordering their reinstatement without loss of seniority rights and the payment
of their backwages invalid.
DECISION:
Petitioners have the knowledge and the means of knowledge of the
truth as to the facts in question. In issuing Resolutions No. 38 and No. 39, the
Board of Directors of respondent PELCO I relayed its initial determination that
petitioners' dismissal from service was harsh and drastic. These Resolutions
merely expressed the position of the Board of Directors of respondent PELCO
I at the time of their issuance. The subsequent passing of Board Resolution

No. 53-06 by the same Board of Directors of respondent PELCO I, explicitly

conveyed a change of mind, i.e., the Board now wanted to contest, through
respondent Engr. Allas, the finding of the NLRC that petitioners were illegally
dismissed.
Also, Board Resolution No. 53-06 was unanimously passed by all the
directors of respondent PELCO I. There is no allegation, much less, evidence,
of any irregularity committed by the Board in the approval and issuance of
said Board Resolution. Hence, the Court cannot simply brush Board
Resolution No. 53-06 aside. Questions of policy and of management are left
to the honest decision of the officers and directors of a corporation (or in this
case, cooperative), and the courts are without authority to substitute their
judgment for the judgment of the board of directors. The board is the
business manager of the corporation, and so long as it acts in good faith, its
orders are not reviewable by the courts.
27.

Lipat vs. Pacific, 402 SCRA 339

FACTS:
On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent, obtained
a P7.3 million loan from the Development Bank of the Philippines for the
construction of his New Gran Hotel Project in Tacloban City. Thereafter, on
September 29, 1976, respondent entered into a building construction
contract with Moreman Builders Co., Inc., (Moreman). They agreed that the
construction would be finished not later than December 22, 1977.
Respondent purchased various construction materials and equipment
in Manila. Moreman, in turn, deposited them in the warehouse of Wilson and
Lily Chan, herein petitioners. The deposit was free of charge.
Unfortunately,
the stipulated time.
then Court of First
Manila, an action for

Moreman failed to finish the construction of the hotel at

Hence, on February 1, 1978, respondent filed with the
Instance (CFI, now Regional Trial Court), Branch 39,
rescission and damages against Moreman.

On November 28, 1978, the CFI rendered its Decision rescinding the
contract between Moreman and respondent and awarding to the latter P
445,000.00 as actual, moral and liquidated damages; P20,000.00
representing the increase in the construction materials; and P35,000.00 as

attorneys fees. Moreman interposed an appeal to the Court of Appeals but

the same was dismissed on March 7, 1989 for being dilatory. He elevated the
case to this Court via a petition for review on certiorari. In a Decision dated
February 21, 1990, we denied the petition. On April 23, 1990, an Entry of
Judgment was issued.
On August 25, 1989, or after almost four (4) years, the trial court
dismissed respondents complaint for his failure to prosecute and for lack of
interest. On September 6, 1994, or five years thereafter, respondent filed a
motion for reconsideration, but the same was denied in the Order dated
September 9, 1994 because of the failure of respondent and his counsel to
appear
on
the
scheduled
hearing.
On October 14, 1994, respondent filed a second motion for
reconsideration. This time, the motion was granted and the case was ordered
reinstated on January 10, 1995, or ten (10) years from the time the action
was originally filed. Thereafter, summons, together with the copies of the
complaint and its annexes, were served on petitioners.
On March 2, 1995, counsel for petitioners filed a motion to dismiss on
several grounds. Respondent, on the other hand, moved to declare
petitioners in default on the ground that their motion to dismiss was filed out
of time and that it did not contain any notice of hearing.

in

On April 27, 1995, the trial court issued an order declaring petitioners
default.

Petitioners filed with the Court of Appeals a petition for certiorari to

annul the trial courts order of default, but the same was dismissed in its
Order dated August 31, 1995. The case reached this Court, and in a
Resolution dated October 25, 1995, we affirmed the assailed order of the
Court of Appeals. On November 29, 1995, the corresponding Entry of
Judgment
was
issued.
ISSUE:
Whether or not respondent presented proof that the construction
materials and equipment were actually in petitioners warehouse when he
asked
that
the
same
be
turned
over
to
him?

DECISION:
In the present case, the record is bereft of any contract of deposit, oral
or written, between petitioners and respondent. If at all, it was only between
petitioners and Moreman. And granting arguendo that there was indeed a
contract of deposit between petitioners and Moreman, it is still incumbent
upon respondent to prove its existence and that it was executed in his favor.
However, respondent miserably failed to do so. The only pieces of evidence
respondent presented to prove the contract of deposit were the delivery
receipts. Significantly, they are unsigned and not duly received or
authenticated by either Moreman, petitioners or respondent or any
of their authorized representatives. Hence, those delivery receipts have
no probative value at all. While our laws grant a person the remedial right to
prosecute or institute a civil action against another for the enforcement or
protection of a right, or the prevention or redress of a wrong, every cause of
action ex-contractu must be founded upon a contract, oral or written,
express
or
implied.
Moreover, respondent also failed to prove that there were construction
materials and equipment in petitioners warehouse at the time he made a
demand
for
their
return.
Considering that respondent failed to prove (1) the existence of any contract
of deposit between him and petitioners, nor between the latter and Moreman
in his favor, and (2) that there were construction materials in petitioners
warehouse at the time of respondents demand to return the same, we hold
that petitioners have no corresponding obligation or liability to respondent
with respect to those construction materials.
28.

Associated Bank vs. Pronstroller, 558 SCRA 113

FACTS:
On April 21, 1988, the spouses Eduardo and Ma. Pilar Vaca (spouses
Vaca) executed a Real Estate Mortgage (REM) in favor of the petitioner over
their parcel of residential land located at Quezon City. For failure of the
spouses Vaca to pay their obligation, the subject property was sold at public
auction with the petitioner as the highest bidder. The spouses Vaca, however,
commenced an action for the nullification of the real estate mortgage and
the foreclosure sale.

During the pendency of the aforesaid cases, RespondentsRafael and Monaliza

Pronstroller offered to purchase the property for P7,500,000.00. Said offer
was made through Atty. Jose Soluta, Jr., petitioners Vice-President,
Corporate Secretary and a member of its Board of Directors.
Petitioner accepted respondents offer of P7.5 million.
Consequently, respondents paid petitioner P750,000.00, or 10%
of the purchase price, as down payment.
On March 18, 1993, petitioner, through Atty. Soluta, and respondents,
executed a Letter-Agreement setting forth therein that respondents shall,
within 90 days, deposit the balance of P6,750,000.00 under an escrow
agreement. On July 14, 1993,respondents and Atty. Soluta, acting for the
petitioner, executed another Letter-Agreement allowing the former to pay
the balance of the purchase price upon receipt of a final order from this
Court (in the Vaca case) and/or the delivery of the property to them free
from occupants.
In early 1994, Atty. Braulio Dayday became petitioners Assistant VicePresident and Head of the Documentation Section, while Atty. Soluta was
relieved of his responsibilities. Atty. Dayday reviewed petitioners records of
its outstanding accounts and discovered that respondents failed to deposit
the balance of the purchase price of the subject property. He, likewise, found
that respondents requested for an extension of time within
which to pay. The said request was disapproved by
Asset Recovery and RemedialManagement Committee (ARRMC) on March 4,
1994 and invoked the rescission or cancellation of the contract due to
respondents breach thereof.
Respondents went to the petitioners office, talked to Atty. Dayday and gave
him the Letter-Agreement of July 14, 1993 to show that they were granted
an extension. However, Atty. Dayday claimed that the letter was a mistake
and that Atty. Soluta was not authorized to give such extension.
On June 6, 1994, respondents proposed to pay the balance of the purchase
price as follows: P3,000,000.00 upon the approval of their proposal and
the balance after six (6)months. However, the proposal was disapproved by
the petitioners President. For failure of the parties to reach an agreement,
respondents, through their counsel, informed petitioner that they would be
enforcing their agreement dated July 14, 1993. Petitioner countered that it
was not aware of the existence of the July 14 agreement and that Atty.

Soluta was not authorized to sign for and on behalf of the bank. It, likewise,
reiterated the rescission of their previous agreement because of the breach
committed by respondents.
On July 28, 1994, respondents commenced the instant suit by filing a
Complaint for Specific Performance before the RTC of Antipolo, Rizal.
Respondents prayed that petitioner be ordered to sell the subject property to
them in accordance with their letter-agreement of July 14, 1993. For its part,
petitioner contended that their contract had already been rescinded because
of respondents failure to deposit in escrow the balance of the purchase price
within the stipulated period.
On November 14, 1997, the trial court finally resolved the
matter in favor of respondents. On appeal, the CA affirmed the RTC decision
and upheld Atty. Solutas authority to represent the petitioner. Petitioners
motion for reconsideration was denied on May 31, 2001. Hence, the present
petition.
ISSUE:
Whether or not the petitioner is bound by the July 14, 1993 LetterAgreement signed by Atty.Soluta under the doctrine of apparent authority?
DECISION:
The general rule is that, in the absence of authority from the board
of directors, no person, not even its officers, can validly bind a corporation. The
power and responsibility to decide whether the corporation should enter into
a contract that will bind the corporation is lodged in the board
of directors. However, just as a natural person may authorize another todo certain
acts for and on his behalf, the board may validly delegate some of its functions
and powers to officers, committees and agents.
The authority of such individuals to bind the corporation is generally
derived from law, corporate bylaws or authorization from the board, either
expressly or impliedly, by habit, custom, or acquiescence, in the general
course of business. The authority of a corporate officer or agent in dealing
with third persons may be actual or apparent. The doctrine of apparent
authority, with special reference to banks, had long been recognized in this
jurisdiction. Apparent authority is derived not merely from p r a c t i c e . I t s
existence may be ascertained through 1) the general manner in
w h i c h t h e corporation holds out an officer or agent as having the power
to act, or in other words, the apparent authority to act in general, with

which it clothes him; or 2) the acquiescence in his acts of a particular

nature, with actual or constructive knowledge thereof, within or beyond
the scope of his ordinary powers.
Accordingly, the authority to act for and to bind a corporation may be
presumed fromacts of recognition in other instances, wherein the power was
exercised without any objectionfrom its board or shareholders. Undoubtedly,
petitioner had previously allowed Atty. Solutato enter into the first agreement
without a board resolution expressly authorizing him; thus, ithad clothed him with
apparent authority to modify the same via the second letter-agreement.It is not the
quantity of similar acts which establishes apparent authority, but the vesting of
acorporate officer with the power to bind the corporation.

29.

Tan vs. Sycip, 499 SCRA 216

FACTS:

Petitioner Grace Christian High School (GCHS) is a nonstock, non-profit

educational corporation with fifteen regular members, who also constitute
the board of trustees. During the annual members' meeting held on April 6,
1998, there were only eleven living member-trustees, as four had already
died. Out of the eleven, seven attended the meeting through their respective
proxies. The meeting was convened and chaired by Atty. Sabino Padilla Jr.
over the objection of Atty. Antonio C. Pacis, who argued that there was no
quorum. In the meeting, Petitioners Ernesto Tanchi, Edwin Ngo, Virginia Khoo,
and Judith Tan were voted to replace the four deceased member-trustees.

When the controversy reached the Securities and Exchange Commission

(SEC), petitioners maintained that the deceased member-trustees should not
be counted in the computation of the quorum because, upon their death,
members automatically lost all their rights (including the right to vote) and
interests in the corporation.
Upon appeal, the CA dismissed the appeal of petitioners, because the
Verification and Certification of Non-Forum Shopping had been signed only
by Atty. Sabino Padilla Jr. No Special Power of Attorney had been attached to
show his authority to sign for the rest of the petitioners.

Hence, this present petition.

ISSUE:
Whether or not in NON-STOCK corporations, dead members should still
be counted in determination of quorum for purposed of conducting the
Annual Members' Meeting.
DECISION:
Membership in and all rights arising from a nonstock corporation are
personal and non-transferable, unless the articles of incorporation or the
bylaws of the corporation provide otherwise. In other words, the
determination of whether or not "dead members" are entitled to exercise
their voting rights (through their executor or administrator), depends on
those
articles
of
incorporation
or
bylaws.
Under the By-Laws of GCHS, membership in the corporation shall,
among others, be terminated by the death of the member. Section 91 of the
Corporation Code further provides that termination extinguishes all the rights
of a member of the corporation, unless otherwise provided in the articles of
incorporation or the bylaws.
Applying Section 91 to the present case, we hold that dead members
who are dropped from the membership roster in the manner and for the
cause provided for in the By-Laws of GCHS are not to be counted in
determining the requisite vote in corporate matters or the requisite quorum
for the annual members' meeting. With 11 remaining members, the quorum
in the present case should be 6. Therefore, there being a quorum, the annual
members' meeting, conducted with six members present, was valid.