Answer the questions that follow each situation. A mere yes or no will not merit any points.

Cite the applicable provision in your explanation.

1. X entered into a contract with a corporation. In a suit against the corporation, its
lawyer raises the defense that the contract was in violation of its by-laws. Is this
defense tenable?
2. The authority given to the board of directors to amend its by-laws was revoked in a
meeting of stockholders without previous notice that such matter could be acted
upon in the meeting. Is the revocation valid?
3. A meeting of stockholders was improperly called and held. The business
transacted at the meeting was questioned. What arguments can be raised to
uphold its validity?
4. After the existence of a quorum has been determined in a meeting of stockholders,
a number of them left the meeting, thereby leaving less than a quorum. Is the
majority vote of those present sufficient to validly decide a matter properly
presented?
5. X pledged his shares of stock to Y. as between them, who has the right to attend
and vote at meetings of stockholders?

1. No, the defense is not tenable.

2. No, the revocation is not valid.
3. The arguments can be raised to uphold its validity are the business transacted at a
meeting of the stockholders or members is within the powers or authority of the
corporation and that all the stockholders or members of the corporation are present
or duly represented at the meeting and not one of them expressly states at the
beginning of the meeting that the purpose of their attendance is to object to the
transaction of any business because the meeting is not lawfully called or
convened.
4. Yes, the majority vote of those present sufficient to validly decide a matter properly
presented.
5. X has the right to attend and vote at meetings of stockholders.

Explanation:

1. In the case of Valley Golf & Country Club, Inc. vs. Vda. de Caram, G.r No. 158805,
April 16, 2009, by-laws are defined as "the rules and regulations or private laws
enacted by the corporation to regulate, govern and control its own actions, affairs
and concerns and its stockholders or members and directors and officers with
relation thereto and among themselves in their relation to it.". Thus, only the
corporations, board of directors or trustees and stockholders or members are
bound by the by-laws. Any person who has no actual or constructive knowledge
about the by-laws of the corporation and the employees of the corporation are not
bound by the by-laws of the corporation,
In the case at bar, X was a third person who entered into a contract with a corporation. In a
suit against the corporation, its lawyer raises the defense that the contract was in violation
of its by-laws. However, there was no mention that X has actual or even constructive
knowledge of the by-laws of the corporation. Thus, absence of such knowledge, whether
actual or constructive on the part of X, he is not bound by the by-laws.

Therefore, the defense that the contract was in violation of its by-laws is untenable because
X is not bound by such by-laws of the corporation.

2.Section 47 of the Revised Corporation Code of the Philippines provides that:

" xxx Provided, That any power delegated to the board of directors or trustee to amend or
repeal the bylaws or adopt new bylaws shall be considered as revoke whenever
stockholders owning or representing a majority of the outstanding capital stock or majority
of the members shall so vote at a regular or special meeting."
Furthermore, Section 50 provides that:
" xxx Notice of meetings shall be sent through the means of communication provided in the
bylaws, which notice shall state the time, place and purpose of the meetings. xxx "
In the case at bar, the authority given to the board of directors to amend its by-laws was
revoked in a meeting of stockholders without previous notice that such matter could be
acted upon in the meeting. Applying the law, the notice should contain the purpose of the
meeting. Only those stated in the notice can be taken up in the meeting unless all of the
stockholders attend the meeting and they agreed to vary the agenda of such meeting to
include the revocation of the delegation . In this case, since the revocation of the delegation
was not stated in the notice, such revocation was invalid because there was also no
mention that all of the stockholders were present and agreed to include in the agenda the
revocation of the delegation.

Therefore, the revocation is not valid.

3.Section 50 of the Revised Corporation Code provides that:

" xxx
All proceedings and any business transacted at a meeting of the stockholders or members,
if within the powers or authority of the corporation, shall be valid even if the meeting is
improperly held or called: Provided, That all the stockholders or members of the corporation
are present or duly represented at the meeting and not one of them expressly states at the
beginning of the meeting that the purpose of their attendance is to object to the transaction
of any business because the meeting is not lawfully called or convened."

In the case at bar, the meeting of stockholders was improperly called and held and the
business transacted there was questioned. Applying the law, in order to uphold the validity
of the business transacted it can be argued the business transacted at a meeting of the
stockholders or members is within the powers or authority of the corporation and that all the
stockholders or members of the corporation are present or duly represented at the meeting
and not one of them expressly states at the beginning of the meeting that the purpose of
their attendance is to object to the transaction of any business because the meeting is not
lawfully called or convened.

4.Section 51 of the Revised Corporation Code provides that:

" Quorum in Meetings. - Unless otherwise provided in this Code or in the bylaws, a quorum
shall consist of the stockholders representing a majority of the outstanding capital stock or a
majority of the members in the case of nonstock corporations."
In the case at bar, after the existence of a quorum has been determined in a meeting of
stockholders, a number of them left the meeting, thereby leaving less than a quorum.
Quorum is needed only to constitute a valid meeting. Thus, after determining that there is
already a quorum at the start of the meeting, the meeting is now valid and the fact that a
number left the meeting thereby leaving less than a quorum, will not matter for a business
can still be transacted provided that the vote is still majority of those present sufficient to
validly decide a matter properly presented.
Therefore, if at the start of the meeting a quorum was attained but such quorum was
subsequently lost, a matter can still be properly presented provided it receives the vote of
the stockholders necessary to count as quorum of those who are still present.

5.Section 54 of the Revised Corporation Code provides that:

" In case a stockholder grants security interest in his or her shares in stock corporations, the
stockholder-grantor shall have the right to attend and vote at meetings of stockholders,
unless the secured creditor is expressly given by the stockholder-grantor such right in
writing which is recorded in the appropriate corporate books.
Executors, administrators, receivers, and other legal representatives duly appointed by the
court may attend and vote on behalf of the stockholders or members without need of any
written proxy."

In the case at bar, X pledged his shares of stock to Y. Applying the law, X, the stockholder-
grantor shall have the right to attend and vote at meetings of stockholders. He has the right
to do so because there was no mention that Y was expressly given by the X the right to
attend and vote in the meetings of stockholders in writing which was recorded in the
appropriate corporate books.

Therefore, the general rule applies and X has the right to attend and vote at meetings of
stockholders.