PAUL LEE TAN v. PAUL SYCIP, GR NO.

153468, 2006-08-17
Facts:
Grace Christian High School (GCHS) is a nonstock, non-profit educational corporation with
fifteen (15) regular members, who also constitute the board of trustees.
During the annual members' meeting... there were only eleven
(11)[5] living member-trustees, as four (4) had already died. Out of the eleven, seven (7)[6]
attended the meeting through their respective proxies.
The meeting was convened... over the... objection... 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.
SEC... declared the... meeting null and void for lack of quorum.
held that the basis for determining the quorum in a meeting of members should be their
number as specified in the articles of incorporation, not simply the number of... living
members.
The hearing officer also opined that Article III (2)[11] of the By-Laws of GCHS, insofar as it
prescribed the mode of filling vacancies in the board of trustees, must be interpreted in
conjunction with Section 29[12] of the Corporation
Code.
The SEC en banc denied the appeal of petitioners and affirmed the Decision of the hearing
officer in toto.
Issues:
whether dead members should still be counted in the determination of the quorum, for
purposes of... conducting the annual members' meeting.
Ruling:
Generally, stockholders' or members' meetings are called for the purpose of electing
directors or trustees[23] and transacting some other business calling for or requiring the
action or consent of the shareholders or members,[24] such... as the amendment of the
articles of incorporation and bylaws, sale or disposition of all or substantially all corporate
assets, consolidation and merger and the like, or any other business that may properly
come before the meeting.
Under the Corporation Code, stockholders or members periodically elect the board of
directors or trustees, who are charged with the management of the corporation.
The board, in turn, periodically elects officers to carry out management functions on a...
day-to-day basis. As owners, though, the stockholders or members have residual powers
over fundamental and major corporate changes.
While stockholders and members (in some instances) are entitled to receive profits, the
management and direction of the corporation are lodged with their representatives and
agents -- the board of directors or trustees.[26] In other words, acts of... management
pertain to the board; and those of ownership, to the stockholders or members. In the latter
case, the board cannot act alone, but must seek approval of the stockholders or members.
Principles:
For stock corporations, the "quorum" referred to in Section 52 of the Corporation Code is
based on the number of outstanding voting stocks. For nonstock corporations, only those
who are actual, living members with voting rights... shall be counted in determining the
existence of a quorum during members' meetings. Dead members shall not be counted.