PENA VS CA

G.R. No. 91478

February 7, 1991

FACTS: PAMBUSCO owned three lots, which it mortgaged to DBP. DBP later foreclosed the properties,
and sold to Pena, who was the highest bidder.

PAMBUSCO, in a meeting by 3 out of 5 of its Board of Directors, issued a resolution awarding its right of
redemption in favor of any interested party. It was later sold to Yap.

Pena now assails the claims of Yap, saying that the assignment of the right of redemption was ultra
vires, as the requisite number of directors have not been complied with. Under the bylaws of
PAMBUSCO, they fixed that the majority of the number of directors who may vote on decisions should
be 4, not 3.

ISSUE: Was there a valid deed of assignment of right of redemption?

RULING: NO, the requisite majority has not been complied with.

The by-laws of a corporation are its own private laws which substantially have the same effect as the
laws of the corporation. They are in effect, written, into the charter. In this sense they become part of
the fundamental law of the corporation with which the corporation and its directors and officers must
comply.

Under Section 25 of the Corporation Code of the Philippines, the articles of incorporation or by-laws of
the corporation may fix a greater number than the majority of the number of board members to
constitute the quorum necessary for the valid transaction of business. Any number less than the number
provided in the articles or by-laws therein cannot constitute a quorum and any act therein would not
bind the corporation; all that the attending directors could do is to adjourn.

In the case at bar, the bylaws fixed the number of directors who may vote on decisions to 4, not to 3.
Thus, the requisite number of votes have not been complied with.

Also, the corporation had already been dormant for 25 years. Its only remaining assets were the
mortgaged properties. To dispose of the same, it is required that in addition to a proper board
resolution, the affirmative votes of the stockholders holding at least two-thirds (2/3) of the voting power
in the corporation in a meeting duly called for that purpose. This was not complied with in the case at
bar.

Thus, the assignment of the right of redemption was not valid.