G.R. No.

153468 August 17, 2006

PAUL LEE TAN, et al., Petitioners

vs.

PAUL SYCIP and MERRITTO LIM, Respondents.

Facts: Petitioner Grace Christian High School (GCHS) is a nonstock, non-profit

educational corporation with fifteen (15) regular members, who also constitute the
board of trustees. During the annual members’ meeting held on April 6, 1998, there
were only eleven (11) living member-trustees, as four (4) had already died. Out of
the eleven, seven (7) attended the meeting through their respective proxies.

The meeting was convened and chaired by Atty. Sabino Padilla Jr. over the
objection of Atty. Antonio C. Pacis, who argued that there was no quorum. In the
meeting, Petitioners Ernesto Tanchi, Edwin Ngo, Virginia Khoo, and Judith Tan were
voted to replace the four deceased member-trustees.

When the controversy reached the Securities and Exchange Commission (SEC),
petitioners maintained that the deceased member-trustees should not be counted in
the computation of the quorum because, upon their death, members automatically
lost all their rights (including the right to vote) and interests in the corporation.

SEC Hearing Officer Malthie G. Militar declared the April 6, 1998 meeting null and
void for lack of quorum. She held that the basis for determining the quorum in a
meeting of members should be their number as specified in the articles of
incorporation, not simply the number of living members.

The hearing officer also opined that Article III (2) of the By-Laws of GCHS, insofar
as it prescribed the mode of filling vacancies in the board of trustees, must be
interpreted in conjunction with Section 29 of the Corporation Code (now Section 28
of the Revised Corporation Code).

Issue: Whether dead members should still be counted in the determination of the
quorum, for purposes of conducting the annual members’ meeting.

Ruling/s:

The Right to Vote in Non-Stock Corporations:

In nonstock corporations, the voting rights attach to membership. Each member

shall be entitled to one vote unless so limited, broadened, or denied in the articles
of incorporation or bylaws. We hold that when 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.
Effect of the Death of a Member or Shareholder:

In stock corporations, shareholders may generally transfer their shares. Thus, on

the death of a shareholder, the executor or administrator duly appointed by the
Court is vested with the legal title to the stock and entitled to vote it. Until a
settlement and division of the estate is effected, the stocks of the decedent are held
by the administrator or executor.

On the other hand, 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.

Under the By-Laws of GCHS, membership in the corporation shall, among others,
be terminated by the death of the member.

Therefore, the Court holds that dead members who are dropped from the
membership roster in the manner and for the cause provided for in the By-Laws of
GCHS are not to be counted in determining the requisite vote in corporate matters
or the requisite quorum for the annual members’ meeting.

Vacancy in the Board of Trustees:

The Court held that trustees may fill vacancies in the board, provided that those
remaining still constitute a quorum. The phrase "may be filled" in Section 29 (now
Section 28) shows that the filling of vacancies in the board by the remaining
directors or trustees constituting a quorum is merely permissive, not mandatory.

Corporations, therefore, may choose how vacancies in their respective boards may
be filled up -- either by the remaining directors constituting a quorum, or by the
stockholders or members in a regular or special meeting called for the purpose.

The By-Laws of GCHS prescribed the specific mode of filling up existing vacancies in
its board of directors; that is, by a majority vote of the remaining members of the
board.

While a majority of the remaining corporate members were present, however, the
"election" of the four trustees cannot be legally upheld for the obvious reason that
it was held in an annual meeting of the members, not of the board of trustees. The
Court cannot ignore the GCHS bylaw provision, which specifically prescribes that,
vacancies in the board must be filled up by the remaining trustees. In other words,
these remaining member-trustees must sit as a board in order to validly elect the
new ones.
G.R. No. 151969 September 4, 2009

VALLE VERDE COUNTRY CLUB, INC., et al., Petitioners.

v.

VICTOR AFRICA, Respondent.

Facts: On February 27, 1996, during the Annual Stockholders’ Meeting of petitioner
Valle Verde Country Club, Inc. (VVCC), the following were elected as members of
the VVCC Board of Directors: Ernesto Villaluna, Jaime C. Dinglasan (Dinglasan),
Eduardo Makalintal (Makalintal), Francisco Ortigas III, Victor Salta, Amado M.
Santiago, Jr., Fortunato Dee, Augusto Sunico, and Ray Gamboa.

In the years 1997, 1998, 1999, 2000, and 2001, however, the requisite quorum for
the holding of the stockholders’ meeting could not be obtained. Consequently, the
above-named directors continued to serve in the VVCC Board in a hold-over
capacity.

On September 1, 1998, Dinglasan resigned from his position as member of the

VVCC Board. In a meeting held on October 6, 1998, the remaining directors, still
constituting a quorum of VVCC’s nine-member board, elected Eric Roxas (Roxas) to
fill in the vacancy created by the resignation of Dinglasan.

A year later, or on November 10, 1998, Makalintal also resigned as member of the
VVCC Board. He was replaced by Jose Ramirez (Ramirez), who was elected by the
remaining members of the VVCC Board on March 6, 2001.

Respondent Africa (Africa), a member of VVCC, questioned the election of Roxas

and Ramirez as members of the VVCC Board with the Securities and Exchange
Commission (SEC) and the Regional Trial Court (RTC), respectively.

In his nullification complaint before the RTC, Africa alleged that the election of
Roxas was contrary to Section 29 (now Section 28 of the RCC), in relation to
Section 23 (now Section 22 of the RCC), of the Corporation Code of the Philippines
(Corporation Code).

Africa claimed that a year after Makalintal’s election as member of the VVCC Board
in 1996, his term – as well as those of the other members of the VVCC Board –
should be considered to have already expired. Thus, according to Africa, the
resulting vacancy should have been filled by the stockholders in a regular or special
meeting called for that purpose.

Issue: Whether the remaining directors of a corporation’s Board, still constituting a

quorum, can elect another director to fill in a vacancy caused by the resignation of
a hold-over director?

Ruling: The word "term" has acquired a definite meaning in jurisprudence. In

several cases, we have defined "term" as the time during which the officer may
claim to hold the office as of right, and fixes the interval after which the several
incumbents shall succeed one another. The term of office is not affected by the
holdover.

Term is distinguished from tenure in that an officer’s "tenure" represents the term
during which the incumbent actually holds office. The tenure may be shorter (or, in
case of holdover, longer) than the term for reasons within or beyond the power of
the incumbent.

Based on the above discussion, when Section 23 is construed to mean that the
term of the members of the board of directors shall be only for one year; their term
expires one year after election to the office. The holdover period – that time from
the lapse of one year from a member’s election to the Board and until his
successor’s election and qualification – is not part of the director’s original term of
office, nor is it a new term; the holdover period, however, constitutes part of his
tenure.

After the lapse of one year from his election as member of the VVCC Board in 1996,
Makalintal’s term of office is deemed to have already expired in 1997. That he
continued to serve in the VVCC Board in a holdover capacity cannot be considered
as extending his term.

With the expiration of Makalintal’s term of office, a vacancy resulted which, by the
terms of Section 29 (now Section 28 of the RCC) must be filled by the stockholders
of VVCC in a regular or special meeting called for the purpose. The nature of the
vacancy was not changed through the resignation of a holdover director, since the
vacancy was already due to the expiration of Makalintal’s term had been
created long before his resignation.