G.R. No.

153468 August 17, 2006

PAUL LEE TAN, ANDREW LIUSON, ESTHER WONG, STEPHEN CO, JAMES TAN, JUDITH TAN, ERNESTO
TANCHI JR., EDWIN NGO, VIRGINIA KHOO, SABINO PADILLA JR., EDUARDO P. LIZARES and GRACE
CHRISTIAN HIGH SCHOOL, Petitioners,
vs.
PAUL SYCIP and MERRITTO LIM, Respondents.

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.

Facts:

Petitioner 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 held on April 6,
1998, there were only eleven (11) living member-trustees, as four (4) had already died. Out of the eleven, seven
(7) 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.
SEC Hearing Officer Malthie G. Militar declared the April 6, 1998 meeting null and void for lack of quorum. She
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.

Issue:

Whether or not in NON-STOCK corporations, dead members should still be counted in determination of quorum
for purpose of conducting the Annual Members Meeting.

Ruling:
The Right to Vote in Nonstock Corporations
In nonstock corporations, the voting rights attach to membership. Members vote as persons, in accordance with
the law and the bylaws of the corporation. Each member shall be entitled to one vote unless so limited, broadened,
or denied in the articles of incorporation or bylaws. We hold that when the principle for determining the quorum for
stock corporations is applied by analogy to nonstock corporations, only those who are actual members with voting
rights should be counted.
Under Section 52 of the Corporation Code, the majority of the members representing the actual number of voting
rights, not the number or numerical constant that may originally be specified in the articles of incorporation,
constitutes the quorum.
Section 25 of the Code specifically provides that a majority of the directors or trustees, as fixed in the articles of
incorporation, shall constitute a quorum for the transaction of corporate business (unless the articles of
incorporation or the bylaws provide for a greater majority). If the intention of the lawmakers was to base the quorum
in the meetings of stockholders or members on their absolute number as fixed in the articles of incorporation, it
would have expressly specified so. Otherwise, the only logical conclusion is that the legislature did not have that
intention.
Effect of the Death of a Member or Shareholder
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 the estate is effected, the stocks of the decedent are held by the administrator
or executor.
On the other hand, 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.
G.R. No. 151969 September 4, 2009

VALLE VERDE COUNTRY CLUB, INC., ERNESTO VILLALUNA, RAY GAMBOA, AMADO M. SANTIAGO,
JR., FORTUNATO DEE, AUGUSTO SUNICO, VICTOR SALTA, FRANCISCO ORTIGAS III, ERIC ROXAS, in
their capacities as members of the Board of Directors of Valle Verde Country Club, Inc., and JOSE
RAMIREZ, Petitioners,
vs.
VICTOR AFRICA, Respondent.

FACTS
On February 27, 1996, during the Annual Stockholders’ Meeting of petitioner Valle Verde Country Club, Inc.
(VVCC), the VVCC Board of Directors were elected including Eduardo Makalintal (Makalintal) among others. In
the years 1997, 1998, 1999, 2000, and 2001, however, the requisite quorum for the holding of the stockholders’
meeting could not be obtained. Consequently, the directors continued to serve in the VVCC Board in a hold-over
capacity. Later, Makalintal resigned as member of the VVCC Board. He was replaced by Jose Ramirez (Ramirez),
who was elected by the remaining members of the VVCC Board on March 6, 2001. Respondent Africa (Africa), a
member of VVCC, questioned the election of Ramirez as members of the VVCC Board with the Regional Trial
Court (RTC), respectively. Africa claimed that a year after Makalintal’s election as member of the VVCC Board in
1996, his [Makalintal’s] term – as well as those of the other members of the VVCC Board – should be considered
to have already expired. Thus, according to Africa, the resulting vacancy should have been filled by the
stockholders in a regular or special meeting called for that purpose, and not by the remaining members of the
VVCC Board, as was done in this case. The RTC sustained Africa’s complaint.

ISSUE
Whether the remaining directors of the corporation’s Board, still constituting a quorum, can elect another director
to fill in a vacancy caused by the resignation of a hold-over director.

RULING

NO.
When Section 23 of the Corporation Code declares that “the board of directors…shall hold office for one (1) year
until their successors are elected and qualified,” we construe the provision to mean that the term of the members
of the board of directors shall be only for one year; their term expires one year after election to the office. The
holdover period – that time from the lapse of one year from a member’s election to the Board and until his
successor’s election and qualification – is not part of the director’s original term of office, nor is it a new term; the
holdover period, however, constitutes part of his tenure. Corollary, when an incumbent member of the board of
directors continues to serve in a holdover capacity, it implies that the office has a fixed term, which has expired,
and the incumbent is holding the succeeding term.
[Here], when remaining members of the VVCC Board elected Ramirez to replace Makalintal, there was no more
unexpired term to speak of, as Makalintal’s one-year term had already expired. Pursuant to law, the authority to
fill in the vacancy caused by Makalintal’s leaving lies with the VVCC’s stockholders, not the remaining members
of its board of directors. To assume – as VVCC does – that the vacancy is caused by Makalintal’s resignation in
1998, not by the expiration of his term in 1997, is both illogical and unreasonable. His resignation as a holdover
director did not change the nature of the vacancy; the vacancy due to the expiration of Makalintal’s term had been
created long before his resignation.
G.R. No. 11897 September 24, 1918

J. F. RAMIREZ, plaintiff-appellee,
vs.
THE ORIENTALIST CO., and RAMON J. FERNANDEZ, defendants-appellants.

FACTS:
Orientalist Company was engaged in the business of maintaining and conducting a theatre in the city of Manila for
the exhibition of cinematographic films. engaged in the business of marketing films for a manufacturer or
manufacturers, there engaged in the production or distribution of cinematographic material. In this enterprise the
plaintiff was represented in the city of Manila by his son, Jose Ramirez. The directors of the Orientalist Company
became apprised of the fact that the plaintiff in Paris had control of the agencies for two different marks of films,
namely, the “Eclair Films” and the “Milano Films;” and negotiations were begun with said officials of the Orientalist
Company by Jose Ramirez, as agent of the plaintiff. The defendant Ramon J. Fernandez, one of the directors of
the Orientalist Company and also its treasure, was chiefly active in this matter. Ramon J. Fernandez had an
informal conference with all the members of the company’s board of directors except one, and with approval of
those with whom he had communicated, addressed a letter to Jose Ramirez, in Manila, accepting the offer
contained in the memorandum the exclusive agency of the Eclair films and Milano films. In due time the films
began to arrive in Manila, it appears that the Orientalist Company was without funds to meet these obligations.
Action was instituted by the plaintiff to Orientalist Company, and Ramon J. Fernandez for sum of money.

ISSUE:
WON the Orientalist Co. is liable for the acts of its treasurer, Fernandez?

HELD:
Yes. It will be observed that Ramon J. Fernandez was the particular officer and member of the board of directors
who was most active in the effort to secure the films for the corporation. The negotiations were conducted by him
with the knowledge and consent of other members of the board; and the contract was made with their prior
approval. In the light of all the circumstances of the case, we are of the opinion that the contracts in question were
thus inferentially approved by the company’s board of directors and that the company is bound unless the
subsequent failure of the stockholders to approve said contracts had the effect of abrogating the liability thus
created.