Magallanes Watercraft Association v.

Auguis

FACTS:
• MWAI suspended Auguis and Basnig for 30 days due to their refusal to pay membership
dues and berthing fees.
• A second suspension of 30 days was imposed when they still didn't settle their
obligations.
• Auguis and Basnig filed a case for damages and attorney's fees against MWAI.
• RTC Ordered Auguis and Basnig to pay their unpaid accounts and required MWAI to pay
them actual damages and attorney's fees.
• MWAI appealed the RTC decision to the CA

CA Decision:

• Affirmed the RTC decision.

• Concluded that MWAI's actions were ultra vires
• Noted that MWAI lacked the authority to suspend the respondents' rights to operate their
bancas.
• Held MWAI liable for damages.

ISSUE:

WON petitioner committed an Ultra Vires Act.

RULING:
• No.
• SC reversed CA’s decision.
• MWAI by-laws provide that members are bound to obey it and to pay membership dues
and other assessments.
• The fact that its AI and BL neither granted its BOD the authority to discipline its member
does not make the suspension an ulta vires.
• In NPC vs. Vera, the court stressed that act might be considered within the Corporate
powers, even if it was not among the express powers, if the same served the corporate
ends.
• Here, payment of membership dues enables MWAI to discharge its duties and function,
hence MWAI can imposed sanction.
• YES. The Court held that the appellate court was correct in finding that the decrease in
Sinophil’s capital stock was legal and that the SEC’s approval thereof was proper.
• What applies to the case at bar is Section 38 of the Corporation Code.
• Under Section 38 of the Corporation Code, such decrease only requires:
(1) the approval of a majority of the board of directors and,
(2) at a stockholder's meeting duly called for the purpose, two-thirds (2/3) vote of the
outstanding capital stock.

• So long as written notice of the proposed increase or diminution of the capital stock was
made to all stockholders, the presence and approval of at least 2/3 of the capital stock is
enough to make the increase or diminution valid.
• This is the plain language of the provision over which no other interpretation may be
made.