Lim v. Moldex Land, Inc.
REITERATIONFacts
The Antecedents: Mary E. Lim, a registered unit owner of 1322 Golden Empire Tower and a member of 1322 Roxas Boulevard Condominium Corporation (Condocor), challenged the validity of the July 21, 2012 general membership meeting. Lim alleged that the meeting lacked a quorum, as only 29 out of 108 unit buyers were present, despite the corporate secretary's certification of a quorum based on the voting rights of unsold units held by Moldex Land, Inc. (Moldex). The meeting proceeded to elect individual respondents, who Lim claimed were non-unit buyers and representatives of Moldex, as members of Condocor's Board of Directors. Lim also sought an accounting from the respondents. Procedural History: The case was initially filed before the Regional Trial Court (RTC) of Manila, Branch 24, acting as a special commercial court, seeking the annulment of the July 21, 2012 meeting, the election of directors, and an accounting. The RTC dismissed Lim's complaint, ruling that a quorum existed, Moldex was a valid member entitled to vote its unsold units, and its representatives were eligible for election. Lim appealed this decision to the Supreme Court via a petition for review on certiorari under Rule 45. The Court initially denied the petition, deeming it the wrong mode of appeal, but later reconsidered and granted the petition, finding that the issues raised were purely legal. The Petition: Petitioner Mary E. Lim, through her attorney-in-fact, filed a petition for review on certiorari under Rule 45 of the Rules of Court. The petition assails the RTC's decision, raising several issues, primarily concerning the determination of a quorum in non-stock corporations, the membership status of Moldex Land, Inc. in Condocor, and the eligibility of non-unit owners to be elected as directors. Lim argues that quorum should be based on the number of actual members in good standing, not on voting rights that include unsold units held by the developer. She also contends that Moldex, as an owner-developer, cannot be a member and that its representatives, being non-members, are ineligible for election to the Board of Directors, citing provisions of the Corporation Code and Condominium Act.
Issue(s)
Whether the July 21, 2012 membership meeting was valid. Whether Moldex can be deemed a member of Condocor. Whether a non-unit owner can be elected as a member of the Board of Directors of Condocor. Whether the lower court erred in ruling that non-unit buyers should be included in determining the presence or absence of a quorum. Whether Moldex, as an owner-developer, is entitled to reserved seats on the Board of Directors.
Ruling
The Supreme Court GRANTED the petition, REVERSED and SET ASIDE the decision of the RTC. It declared the July 21, 2012 Annual General Membership Meeting of Condocor null and void, along with the election of its Board of Directors and the subsequent organizational meeting and election of corporate officers.
Ratio Decidendi
On the validity of the July 21, 2012 membership meeting: The Court held that the meeting was null and void due to the lack of a quorum. It clarified that for non-stock corporations, a quorum is determined by the majority of its actual, living members with voting rights, not by the majority of voting rights alone. Section 52 of the Corporation Code and Section 6 of Condocor's By-Laws mandate that a quorum consists of a simple majority of the members in good standing. In this case, only 29 out of 108 unit buyers were present, which did not constitute a majority of the actual members, even considering those in good standing. Therefore, any resolution passed during this meeting was of no force and effect. On whether Moldex is a member of Condocor: The Court affirmed that Moldex is a member of Condocor. Citing Section 2 of the Condominium Act (RA 4726), it stated that holders of separate interests (ownership of a unit) automatically become members or shareholders of the condominium corporation. The Court clarified that ownership, not necessarily acquisition through sale, entitles one to membership. As Moldex was the registered owner of 220 unsold units, it automatically became a member of Condocor upon its creation. The Court distinguished this from the purpose of homeowners' associations under PD 957, which is different from a condominium corporation's role of holding title to common areas. On whether a non-unit owner can be elected as a director: The Court ruled that individual respondents, who were representatives of Moldex but not unit owners themselves, could not be elected as directors or officers of Condocor. Section 23 of the Corporation Code explicitly states that trustees of non-stock corporations must be members thereof. While Moldex, as a member, could appoint representatives (proxies) to attend meetings and vote, these representatives could not hold positions as directors or trustees if they were not members in their own right. The power of a proxy is limited to voting, not to being elected to the board. On the inclusion of non-unit buyers in determining quorum: The Court reiterated that for non-stock corporations, quorum is based on the numerical count of actual members entitled to vote, not solely on voting rights. The RTC erred in including Moldex's voting rights without first establishing a quorum based on the number of actual members present. The By-Laws' phrase "members in good standing" merely qualifies which members are to be counted, not that voting rights alone determine quorum. On reserved seats for owner-developers: The Court found no legal basis for Moldex to have automatically reserved four seats on the Board of Directors. The Corporation Code and the Condominium Act do not provide for such reserved seats for owner-developers. The election of directors must follow the prescribed procedures, and any such reservation would be contrary to the principle of electing directors from among the members.
Main Doctrine
A general membership meeting of a condominium corporation is null and void if there is no quorum. Consequently, all acts and resolutions emanating from such a meeting, including the election of directors and officers, are likewise null and void. Furthermore, while an owner-developer may be a member of a condominium corporation, its representatives cannot be elected as directors or trustees if they are not members in their own right.