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Long v. Basa, et al. Perea denied the hearing for a writ of preliminary injunction.

It was
G.R. No. 134963-64, 135152-53, 137135, Sept. 27, 2001 elevated to the SEC en banc which dismissed it for lack of merit.

FACTS: In 1973, a religious group known as "The Church In Quezon City On 31 July 1996, the SEC en banc, issued an order in SEC EB Case 484,
(Church Assembly Hall), Incorporated" (CHURCH) was organized as "an setting aside the expulsion of certain members of the CHURCH approved
entity of the brotherhood in Christ.'' The members of the CHURCH vested by its Board of Directors on 30 August 1993 for being void and ordering the
upon the Board of Directors the absolute power to preserve and protect reinstatement of Long, et al. as members of the CHURCH. Promptly,
their faith and to admit and expel a member of the CHURCH. Only "persons Sayheeliam and Basa filed a petition for review with the Court of Appeals
zealous of the Gospel, faithful in Church work and of sound knowledge of (CA-GR SP 41551). Yao Check, for his part, filed a motion for
the Truth, as the Board of Directors shall admit to membership, shall be reconsideration of the same order. Upon denial of his motion he also filed
members of the (CHURCH)." with the Court of Appeals a petition for review (CA-GR SP 43389), which
was consolidated with CA-GR SP 41551). On 29 May 1998, the Court of
As early as 1988, the BOD observed that certain members of the CHURCH Appeals Prepared by: Mary Louise M. Ramos 2 promulgated its decision
exhibited "conduct which was dishonorable, improper and injurious to the granting Basa, et al.'s consolidated petitions and reversing the 31 July 1996
character and interest of the (CHURCH)" by "introducing (to the members) order of the SEC en banc in SEC EB Case 484. Long, et al. filed a motion for
doctrines and teachings which were not based on the Holy Bible" and the reconsideration but was denied by the appellate court in a resolution
Principles of Faith embraced by the CHURCH. They were advised "to dated 18 August 1998. Long, Lim Che Boon, et al. filed the petitions for
correct their ways" and warned them that if they persist in their highly review, which were subsequently consolidated.
improper conduct, they will be dropped from the membership of the
CHURCH; during Sunday worship gatherings, Long et al. ignored these ISSUE: Whether the expulsion of Joseph Lim, Liu Yek See, Alfredo Long and
repeated admonitions. Alarmed the Board of Directors, during its regular Felix Almeria from the membership of the CHURCH by its Board of
meeting held for the purpose of reviewing and updating the membership Directors through a resolution issued on August 30, 1993 is in accordance
list of the CHURCH, removed from the said list certain names of members, with law.
including the names of Joseph Lim, Liu Yek See, Alfredo Long and Felix
Almeria. The Board also updated the list by removing the names of those HELD: The By-laws of the CHURCH, which the members have expressly
who have migrated to other countries, those deceased and those whom adhered to, does not require the Board of Directors to give prior notice to
the CHURCH had lost contact with. The updated membership list approved the erring or dissident members in cases of expulsion. In the By-law
by the Board, together with the minutes of the meeting, were duly filed provision, the only requirements before a member can be expelled or
with the SEC. removed from the membership of the CHURCH are: (a) the Board of
Directors has been notified that a member has failed to observe any
The members questioned their expulsion by filing with the SEC Securities regulations and By-laws of the CHURCH, or the conduct of any member has
Investigation and Clearing Department a petition against Directors Yao been dishonorable or improper or otherwise injurious to the character and
Chek, Leandro Basa, Lydia Basa and Anthony Sayheeliam. It sought mainly interest of the CHURCH, and (b) a resolution is passed by the Board
the annulment of the 30 August 1993 membership list and the expelling the member concerned, without assigning any reason therefor.
reinstatement of the original list on the ground that the expulsion was Thus, a member who commits any of the causes for expulsion enumerated
made without prior notice and hearing. After conducting a hearing on the in paragraph 4 of Article VII may be expelled by the Board of Directors,
application for a writ of preliminary injunction, SEC Hearing Officer Manuel through a resolution, without giving that erring member any notice prior to
his expulsion. The resolution need not even state the reason for such
action. The CHURCH By-law provision on expulsion, as phrased, may sound 1974 and from that time on, they have remained non-members of Sta.
unusual and objectionable as there is no requirement of prior notice to be Clara Homeowners Association (SCHA). In the middle of March 1998, SCHA
given to an erring member before he can be expelled; but that is how disseminated a board resolution which decreed that only its members in
peculiar the nature of a religious corporation is vis-a-vis an ordinary good standing were to be issued stickers for use in their vehicles.
corporation organized for profit. It must be stressed that the basis of the Thereafter, on three separate incidents, Sps. Gaston and their son, were
relationship between a religious corporation and its members is the latter's required to present their driver’s license as a prerequisite to enter the
absolute adherence to a common religious or spiritual belief . Once this subdivision. On 1 April 1998, Sps. Gaston, filed a complaint for damages
basis ceases, membership in the religious corporation must also cease. before the RTC against SCHA thru its Board of Directors.
Thus, generally, there is no room for dissension in a religious corporation.
And where any member of a religious corporation is expelled from the Later on, petitioners filed a motion to dismiss arguing that the trial court
membership for espousing doctrines and teachings contrary to that of his had no jurisdiction as it involves an intra-corporate dispute between SCHA
church, the established doctrine in this jurisdiction is that such action from and its members pursuant to R.A. No. 580, as amended by E.O. Nos. 535
the church authorities is conclusive upon the civil courts. Obviously and 90. Also, its by-laws contains a provision that all real estate owners in
recognizing the peculiarity of a religious corporation, the Corporation Code Sta. Clara Subdivision automatically become members of the association.
leaves the matter of ecclesiastical discipline to the religious group
concerned. Section 91 of the Corporation Code, which has been made RTC denied petitioners’ motion to dismiss. On appeal, CA ruled that the
explicitly applicable to religious corporations by the second paragraph of RTC had jurisdiction over the dispute.
Section 109 of the same Code, provides for the termination of
membership. It provides that "Membership shall be terminated in the ISSUE: W/N Sps. Gaston are members of SCHA.
manner and for the causes provided in the articles of incorporation or the
by-laws. Termination of membership shall have the effect of extinguishing HELD: The constitutionally guaranteed freedom of association includes
all rights of a member in the corporation or in its property, unless the freedom not to associate. It should be noted that the provision
otherwise provided in the articles of incorporation or the bylaws." In fact, guarantees the right to form an association. It does not include the right to
Long, et al. really have no reason to bewail the lack of prior notice in the compel others to form or join one.
By-laws. They have waived such notice by adhering to those By-laws. They
became members of the CHURCH voluntarily. They entered into its More to the point, private respondents cannot be compelled to become
covenant and subscribed to its rules. By doing so, they are bound by their members of the SCHA by the simple expedient of including them in its
consent. Even assuming that Long, et al.'s expulsion falls within the Articles of Incorporation and By-laws without their express or implied
Constitutional provisions on "prior notice" or "due process," still the Court consent. True, it may be to the mutual advantage of lot owners in a
can not conclude that Basa, et al. committed a constitutional infraction. subdivision to band themselves together to promote their common
Long, et al. were given more than sufficient notice of their impending welfare. But that is possible only if the owners voluntarily agree, directly or
expulsion, as shown by the records. indirectly, to become members of the association. True also, memberships
in homeowner’s associations may be acquired in various ways -- often
Sta. Clara Homeowners’ Association v. Sps. Gaston through deeds of sale, Torrens certificates or other forms of evidence of
G.R. No. 141961, Jan. 23, 2002 property ownership. In the present case, however, other than the said
Articles of Incorporation and By-laws, there is no showing that private
FACTS: Spouses Victor Ma. Gaston and Lydia M. Gaston were residents of respondents have agreed to be SCHA members.
San Jose Avenue, Sta. Clara Subdivision, Mandalagan, Bacolod City from
As correctly observed by the CA: x x x. The approval by the SEC of the said President, was one of the Association’s incorporators; and (3) having
documents is not an operative act which bestows membership on the received the demands for payment, PADCOM not only acknowledged
private respondents because the right to associate partakes of the nature them, but asked for and was granted repeated extensions, and even
of freedom of contract which can be exercised by and between the proposed a scheme for the settlement of its obligation.
homeowners amongst themselves, the homeowners’ association and a
homeowner, and the subdivision owner and a homeowner/lot buyer x x x. ISSUE: W/N PADCOM can be compelled to join the association pursuant to
the automatic membership clause appearing as a condition in the Deed of
Padcom v. Ortigas Center Sale.
May 9, 2002
HELD: YES. We are not persuaded by PADCOM’s contention that the By-
FACTS: PADCOM owns and manages the Padilla Office Condominium laws of the Association requires application for membership and
Building (PADCOM Building). The land on which the building stands was acceptance thereof by the Board of Directors. As lot owner, PADCOM is a
originally acquired by Tierra Development Corporation (TDC). Among the regular member of the Association. No application for membership is
terms and conditions in the deed of sale was the requirement that the necessary.
transferee and its successor-in-interest must become members of an
association for realty owners and long-terms lessees in the Ortigas Center. Neither are we convinced by PADCOM’s contention that the automatic
Subsequently, the said lot, was conveyed by TDC in favor of PADCOM in a membership clause is a violation of its freedom of association. PADCOM
Deed of Transfer. was never forced to join the association. It could have avoided such
membership by not buying the land from TDC. Nobody forced it to buy the
Ortigas Center Association, Inc. was organized to advance the interests and land when it bought the building with the annotation of the condition or
promote the general welfare of the real estate owners and long-term lien on the Certificate of Title thereof and accepted the Deed. PADCOM
lessees of lots in the Ortigas Center. It sought the collection of membership voluntarily agreed to be bound by and respect the condition, and thus to
dues in P2,724.40 per month from PADCOM. PADCOM owed the join the association.
Association P639,961.47, representing membership dues, interests and
penalty charges from April 1983 to June 1993. PADCOM failed and refused Tan v. Sycip
to pay its arrears despite repeated demands for payment. Thus, the G.R. No. 153468, August 17, 2006
Association filed a complaint for collection of sum money before the RTC.
FACTS: Grace Christian High School (GCHS) is a nonstock, non-profit
PADCOM contended that no automatic membership was apparently educational corporation with 15 regular members, who also constitute the
contemplated in the Association’s By-laws. PADCOM added that it could board of trustees. During the annual members’ meeting, there were only
not be compelled to become a member without violating its right to 11 living member-trustees, as 4 have already died. Out of the 11, 7
freedom of association. attended the meeting through their respective proxies. The meeting was
convened and chaired by Atty. Sabino Padilla Jr. over the objection of Atty.
The trial court rendered a decision dismissing the complaint. CA reversed Antonio C. Pacis, who argued that there was no quorum. In the meeting,
and set aside the trial court’s dismissal of the civil case. Despite disavowal Petitioners Ernesto Tanchi, Edwin Ngo, Virginia Khoo, and Judith Tan were
of membership, PADCOM’s membership in the Association was evident voted to replace the four deceased member-trustees.
from these facts: (1) PADCOM was included in the Association’s list of bona
fide members as of 30 March 1995; (2) Narciso Padilla, PADCOM’s
When the controversy reached SEC, petitioners maintained that the Under the By-Laws of GCHS, membership in the corporation shall, among
deceased member-trustees should not be counted in the computation of others, be terminated by the death of the member. Applying Section 91 of
the quorum because, upon their death, members automatically lost all the Corporation Code to the present case, dead members who are
their rights (including the right to vote) and interests in the corporation. dropped from the membership roster in the manner and for the cause
SEC declared the meeting null and void and ruled that the phrase “entitled provided for in the By-Laws of GCHS are not to be counted in determining
to vote” under Sec. 24 of the Corporation Code should be read together the requisite vote in corporate matters or the requisite quorum for the
with Sec. 89. annual members’ meeting. With 11 remaining members, the quorum in
the present case should be 6. Therefore, there being a quorum, the annual
The SEC en banc denied the appeal of petitioners and affirmed the Decision members’ meeting was valid.
of the hearing officer in toto. On appeal to the CA, the CA dismissed the
appeal of petitioners.

ISSUE: W/N dead members should still be counted in the determination of


the quorum for purposes of conducting the annual members’ meeting.

HELD: NO. 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.

One of the most important rights of a qualified shareholder or member is


the right to vote -- either personally or by proxy -- for the directors or
trustees who are to manage the corporate affairs. In nonstock
corporations, the voting rights attach to membership. 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.

Having thus determined that the quorum in a members’ meeting is to be


reckoned as the actual number of members of the corporation, the next
question to resolve is what happens in the event of the death of one of
them. 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.
Dulay Enterprises v. CA 4. All the directors have express or implied knowledge of the action in
225 SCRA 678 question and none of them makes prompt objection thereto in writing.

FACTS: Manuel R. Dulay Enterprises, Inc., a domestic corporation, obtained If a directors' meeting is held without call or notice, an action taken therein
various loans for the construction of its hotel project, Dulay Continental within the corporate powers is deemed ratified by a director who failed to
Hotel. Manuel Dulay, by virtue of Board Resolution No. 18, sold the subject attend, unless he promptly files his written objection with the secretary of
property to spouses Maria Theresa and Castrene Veloso. Maria Veloso, the corporation after having knowledge thereof.”
without the knowledge of Manuel Dulay, mortgaged the subject property
to Manuel A. Torres. Upon the failure of Maria Veloso to pay Torres, the In the instant case, petitioner corporation is classified as a close
property was sold to Torres in an extrajudicial foreclosure sale. corporation and consequently a board resolution authorizing the sale or
mortgage is not necessary to bind the corporation for the action of its
Torres filed an action against the corporation, Virgilio Dulay and president. At any rate, corporate action taken at a board meeting without
Nepomuceno Redovan. MTC ordered, among others, the corporation and proper call or notice in a close corporation is deemed ratified by the absent
the tenants to vacate the premises. RTC affirmed the decision. director unless the latter promptly files his written objection with the
secretary of the corporation after having knowledge of the meeting which,
On appeal, the petitioners contend that RTC had acted with grave abuse of in his case, Virgilio Dulay failed to do.
discretion when it applied the doctrine of piercing the veil of corporate
entity considering that the sale has no binding effect on corporation as Although a corporation is an entity which has a personality distinct and
Board Resolution No. 18 which authorized the sale of the subject property separate from its individual stockholders or members, the veil of corporate
was resolved without the approval of all the members of the board of fiction may be pierced when it is used to defeat public convenience justify
directors and said Board Resolution was prepared by a person not wrong, protect fraud or defend crime.
designated by the corporation to be its secretary.
San Juan Structural Steel Fabricators v. CA
ISSUE: W/N the sale to Veloso is valid notwithstanding that it was resolved 296 SCRA 632
without the approval of all the members of the board of directors.
FACTS: San Juan Structural and Steel Fabricators entered into an
HELD: YES. Section 101 of the Corporation Code of the Philippines provides agreement with Motorich Sales Corporation through Nenita Gruenberg,
that, “unless the by-laws provide otherwise, any action by the directors of corporate treasurer of Motorich, for the transfer to the former a parcel of
a close corporation without a meeting shall nevertheless be deemed valid land upon a P100,000 earnest money, balance to be payable within March
if: 2, 1989. Upon payment of the earnest money, and on March 1, 1989, San
1. Before or after such action is taken, written consent thereto is signed by Juan allegedly asked to be submitted a computation of the balance due to
all the directors, or Motorich. The latter, despite repeated demands, refused to execute the
2. All the stockholders have actual or implied knowledge of the action and Deed of Assignment of the land. San Juan discovered that Motorich
make no prompt objection thereto in writing; or entered into a Deed of Absolute Sale of the land to ACL Development
3. The directors are accustomed to take informal action with the express or Corporation. Hence, San Juan filed a complaint with the RTC. On the other
implied acquiesce of all the stockholders, or hand, Motorich contends that since Nenita Gruenberg was only the
treasurer of said corporation, and that its president, Reynaldo Gruenberg,
did not sign the agreement entered into by San Juan and Motorich, the extent of authority, and in case either is controverted, the burden of proof
treasurer’s signature was inadequate to bind Motorich to the agreement. is upon them to establish it. Unless duly authorized, a treasurer, whose
Furthermore, Nenita contended that since San Juan was not able to pay powers are limited, cannot bind the corporation in a sale of its assets. In
within the stipulated period, no deed of assignment could be made. The the case at bar, San Juan had the responsibility of ascertaining the extent
deed was agreed to be executed only after receipt of the cash payment, of Nenita’s authority to represent the corporation. Selling is obviously
and since according to Nenita, no cash payment was made on the due foreign to a corporate treasurer’s function. Neither was real estate sale
date, no deed could have been executed. RTC dismissed the case holding shown to be a normal business activity of Motorich. The primary purpose
that Nenita Gruenberg was not authorized by Motorich to enter into said of said corporation is marketing, distribution, import and export relating to
contract with San Juan, and that a majority vote of the BoD was necessary a general merchandising business. Unmistakably, its treasurer is not
to sell assets of the corporation in accordance with Sec. 40 of the cloaked with actual or apparent authority to buy or sell real property, an
Corporation Code. CA affirmed this decision. activity which falls way beyond the scope of her general authority. Acts of
corporate officers within the scope of their authority are binding on the
ISSUE: W/N there was a valid contract existing between San Juan and corporation. But when these officers exceed their authority, their actions
Motorich. cannot bind the corporation, unless it has ratified such acts or is estopped
from disclaiming them.
HELD: NO. The contract entered into between Nenita and San Juan cannot
bind Motorich, because the latter never authorized nor ratified such sale. A Bustos v. Millians Shoe, Inc.
corporation is a juridical person separate and distinct from its stockholders 824 SCRA 67
or members. Accordingly, the property of the corporation is not the
property of its stockholders and may not be sold by them without express FACTS: Spouses Fernando and Amelia Cruz owned a 464-square-meter lot
authorization from the corporation’s BoD. This is in accordance with Sec. covered by Transfer Certificate of Title (TCT) No. N-126668. On 6 January
23 of the Corporation Code. Indubitably, a corporation can only act 2004, the City Government of Marikina levied the property for non-
through its BoD or, when authorized either by its by laws or by its board payment of real estate taxes. Petitioner then applied for the cancellation of
resolution, through its officers or agents in the normal course of business. TCT of the property. Marikina City RTC, rendered a final and executory
The general principles of agency govern the relation between the Decision ordering the cancellation of the previous title and the issuance of
corporation and its officers or agents, subject to the AoI, by laws, or a new one under the name of petitioner.
relevant provisions of law. A corporate officer or agent may represent and
bind the corporation in transactions with 3rd persons to the extent that On 26 September 2006, petitioner moved for the exclusion of the subject
the authority to do so has been conferred upon him, and this includes property from the Stay Order. He claimed that the lot belonged to Spouses
powers which have been intentionally conferred, and also such powers as, Cruz who were mere stockholders and officers of MSL He further argued
in the usual course of the particular business, are incidental to, or may be that since he had won the bidding of the property before the annotation of
implied from, the powers intentionally conferred, powers added by custom the title, the auctioned property could no longer be part of the Stay Order.
and usage, as usually pertaining to the particular officer or agent, and such The RTC denied the entreaty of petitioner. It ruled that because the period
apparent powers as the corporation has caused persons dealing with the of redemption had not yet lapsed at the time of the issuance of the Stay
officer or agent to believe that it has conferred. Furthermore, persons Order, the ownership thereof had not yet been transferred to petitioner.
dealing with an assumed agent, whether the assumed agency be a general
or special one, are bound at their peril, if they would hold the principal Petitioner moved for reconsideration, but to no avail. He then filed an
liable, to ascertain not only the fact of agency but also the nature and action for certiorari before the CA. He asserted that the Stay Order
undermined the taxing powers of the local government unit. He also stockholders shall be held to strict fiduciary duties to each other and
reiterated his arguments that Spouses Cruz owned the property, and that among themselves. Said stockholders shall be personally liable for
the lot had already been auctioned to him. corporate torts unless the corporation has obtained reasonably adequate
liability insurance.”
The said parcel of land which secured several mortgage liens for the
account of MSI remains to be an asset of the Cruz Spouses, who are the As can be read in that provision, several requisites must be present for its
stockholders and officers of MSI, a close corporation. Incidentally, as an applicability. None of these were alleged in the case of Spouses Cruz.
exception to the general rule, in a close corporation, the stockholders Neither did the RTC or the CA explain the factual circumstances for this
and/or officers usually manage the business of the corporation and are Court to discuss the personally liability of respondents to their creditors
subject to all liabilities of directors, i.e. personally liable for corporate debts because of “corporate torts.”
and obligations. Thus, the Cruz Spouses being stockholders of MSI are
personally liable for the latter's debt and obligations. Petitioner With this in mind, the general doctrine of separate juridical personality
unsuccessfully moved for reconsideration. The CA maintained its ruling and shall be applied, which provides that a corporation has a legal personality
even held that his prayer to exclude the property was time-barred by the separate and distinct from that of people comprising it. By virtue of that
10-day reglementary period to oppose rehabilitation petitions under Rule doctrine, stockholders of a corporation enjoy the principle of limited
4, Section 6 of the Interim Rules of Procedure on Corporate Rehabilitation liability: the corporate debt is not the debt of the stockholder. Being an
Before this Court, petitioner maintains three points: (1) the Spouses Cruz officer or a stockholder of a corporation does not make one’s property the
are not liable for the debts of MSI; (2) the Stay Order undermines the property also of the corporation.
taxing power of Marikina City; and (3) the time bar rule does not apply to
him, because he is not a creditor of MSI. 12 In their Comment, 13 Iglesia Evangelica v. Bishop Lazaro
respondents do not contest that Spouses Cruz own the subject property. 6 July 2010
Rather, respondents assert that as stockholders and officers of a close
corporation, they are personally liable for its debts and obligations. FACTS: Apparently, although the IEMELIF remained a corporation sole on
Furthermore, they argue that since the Rehabilitation Plan of MSI has been paper, it had always acted like a corporation aggregate. The Consistory
approved, petitioner can no longer assail the same. exercised IEMELIF’s decision making powers without ever being
challenged.
ISSUE: W/N Spouses Cruz cannot be considered as stockholders of a close
corporation and thus not liable for the debts of MSI. Subsequently, during its 1973 General Conference, the general
membership voted to put things right by changing IEMELIF’s organizational
HELD: YES. Section 97 of the Corporation Code only specifies that “the structure from a corporation sole to a corporation aggregate. On May 7,
stockholders of the corporation shall be subject to all liabilities of 1973 the Securities and Exchange Commission (SEC) approved the vote. For
directors.” No inference can be taken that stockholders of a close some reasons, however, the corporate papers of the IEMELIF remained
corporation are automatically liable for corporate debts and obligations. unaltered as a corporation sole.
Parenthetically, only Section 100, paragraph 5, of the Corporation Code
explicitly provides for personal liability of stockholders of close Only in 2001, about 28 years later, did the issue reemerge. In answer to a
corporation, “Sec. 100. Agreements by stockholders.—x x x x 5. To the query from the IEMELIF, the SEC replied on April 3, 2001 that, although the
extent that the stockholders are actively engaged in the management or SEC Commissioner did not in 1948 object to the conversion of the IEMELIF
operation of the business and affairs of a close corporation, the into a corporation aggregate, that conversion was not properly carried out
and documented. The SEC said that the IEMELIF needed to amend its
articles of incorporation for that purpose

ISSUE: W/N a corporation sole may be converted into a corporation


aggregate by mere amendment of its articles of incorporation.

HELD: YES. There is no point to dissolving the corporation sole of one


member to enable the corporation aggregate to emerge from it. Whether
it is a non-stock corporation or a corporation sole, the corporate being
remains distinct from its members, whatever be their number. The
increase in the number of its corporate membership does not change the
complexion of its corporate responsibility to third parties. The one
member, with the concurrence of two-thirds of the membership of the
organization for whom he acts as trustee, can self-will the amendment. He
can, with membership concurrence, increase the technical number of the
members of the corporation from "sole" or one to the greater number
authorized by its amended articles.

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