Corporate Law Case Digest: Tan v. Sycip (2006)

G.R. No. 153468 August 17, 2006

Lessons Applicable: Release from Subscription Obligation (Corporate Law)

FACTS:

Grace Christian High School (GCHS) is a nonstock, non-profit educational corporation w/ 15 regular members, who also constitute the board of trustees.
April 6, 1998: During the annual members’ meeting only 11 living member-trustees, as 4 had already died.

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 4 deceased member-trustees.

ISSUE: W/N dead members should still be counted in the quorum - NO based on by-laws

HELD: NO. remaining members of the board of trustees of GCHS may convene and fill up the vacancies in the board

Except as provided, the vote necessary to approve a particular corporate act as provided in this Code shall be deemed to refer only to stocks with voting rights:

1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporation property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another corporation or other corporations;
7. Investment of corporate funds in another corporation or business in accordance with this Code; and
8. Dissolution of the corporation.

quorum in a members’ meeting is to be reckoned as the actual number of members of the corporation
stock corporations - shareholders may generally transfer their shares

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

nonstock corporation - personal and non-transferable unless the articles of incorporation or the bylaws of the corporation provide otherwise

Section 91 of the Corporation Code: termination extinguishes all the rights of a member of the corporation, unless otherwise provided in the articles of incorporation or the bylaws.
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

By-Laws of GCHS: membership in the corporation shall be terminated by the death of the member
With 11 remaining members, the quorum = 6.

SECTION 29. Vacancies in the office of director or trustee. -- Any vacancy occurring in the board of directors or trustees other than by removal by the stockholders or members or by expiration of term, may be filled by the vote of at least a majority of the remaining directors or trustees, if still constituting a quorum; otherwise, said vacancies must be filled by the stockholders in a regular or special meeting called for that purpose. A director or trustee so elected to fill a vacancy shall be elected only for the unexpired term of his predecessor in office.

the filling of vacancies in the board by the remaining directors or trustees constituting a quorum is merely permissive, not mandatory

either by the remaining directors constituting a quorum, or by the stockholders or members in a regular or special meeting called for the purpose

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
remaining member-trustees must sit as a board (as a body in a lawful meeting)

in order to validly elect the new ones

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