Grace Christian High School vs CA

G.R. No. 108905. October 23, 1997

FACTS: 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.