Tan v. Sycip
NEW DOCTRINEFacts
The Antecedents: Petitioner Grace Christian High School (GCHS) is a nonstock, non-profit educational corporation. During its annual members' meeting on April 6, 1998, only eleven (11) of the fifteen (15) regular member-trustees were alive. Seven (7) of these eleven attended through proxies. The meeting was convened and chaired by Atty. Sabino Padilla Jr., despite an objection that there was no quorum. Petitioners Ernesto Tanchi, Edwin Ngo, Virginia Khoo, and Judith Tan were elected to replace four deceased member-trustees. Procedural History: The Securities and Exchange Commission (SEC) Hearing Officer declared the April 6, 1998 meeting null and void for lack of quorum, holding that the basis for quorum should be the number specified in the articles of incorporation, not just living members. The SEC en banc denied petitioners' appeal. The Court of Appeals (CA) dismissed petitioners' appeal due to the Verification and Certification of Non-Forum Shopping being signed by only one petitioner (Atty. Padilla) without a Special Power of Attorney (SPA). The Petition: Petitioners sought to reverse the CA's dismissal, arguing that dead members should not be counted in determining the quorum for nonstock corporations and that the CA erred in dismissing the case on a technicality. They also contended that the SEC ruling was based on an inapplicable SEC Opinion.
Issue(s)
Whether the Court of Appeals erred in denying the Petition for Review on the basis of a defective Verification and Certification of Non-Forum Shopping. Whether dead members should still be counted in the determination of the quorum for purposes of conducting the annual members' meeting of a nonstock corporation; and whether the election of the four trustees was valid.
Ruling
The Petition is partly GRANTED. The assailed Resolutions of the Court of Appeals are REVERSED AND SET ASIDE. The remaining members of the board of trustees of Grace Christian High School (GCHS) may convene and fill up the vacancies in the board, in accordance with this Decision. No pronouncement as to costs.
Ratio Decidendi
On the issue of the defective Verification and Certification of Non-Forum Shopping: The Court excused the initial procedural lapse. While the Verification and Certification were signed by only one petitioner without an SPA, the petitioners subsequently submitted an SPA authorizing Atty. Padilla to file the action. The Court considered the substantial merits of the case and the purely legal question involved as special circumstances justifying an exception to the strict requirements, emphasizing that there was no intention to circumvent the rules and that substantial justice should be served. On the issue of counting dead members in the quorum for nonstock corporations and the validity of the election of trustees: The Court held that for nonstock corporations, only actual, living members with voting rights should be counted in determining the quorum. Section 52 of the Corporation Code, when applied by analogy to nonstock corporations, requires a majority of the members representing actual voting rights, not the original number specified in the articles of incorporation. Furthermore, under the By-Laws of GCHS, membership is terminated by death, and Section 91 of the Corporation Code states that termination extinguishes all rights of a member. Therefore, dead members, who are dropped from the membership roster, are not to be counted in determining the quorum. With 11 remaining members, a quorum should be 6, and the meeting with six members present was valid. The Court clarified that while Section 29 of the Corporation Code allows remaining trustees to fill vacancies if they constitute a quorum, the By-Laws of GCHS specifically prescribed that vacancies must be filled by a majority vote of the remaining members of the board. Although a majority of the remaining members were present at the annual meeting, the election of the four trustees could not be legally upheld because it was held in a members' meeting, not a board meeting. The Court emphasized the distinction between corporate acts of the board and those of the constituent members, stating that the member-trustees must convene as a board to validly elect new trustees.
Main Doctrine
For nonstock corporations, only 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. Vacancies in the board of trustees may be filled by the remaining trustees if they still constitute a quorum, or by the members in a regular or special meeting.