[G.R. NO. 153468 : August 17, 2006] Atty. Antonio C. Pacis, who argued that there was no quorum.

tty. Antonio C. Pacis, who argued that there was no quorum.7 In the meeting,
Petitioners Ernesto Tanchi, Edwin Ngo, Virginia Khoo, and Judith Tan were voted to
PAUL LEE TAN, ANDREW LIUSON, ESTHER WONG, STEPHEN CO, JAMES TAN, JUDITH
replace the four deceased member-trustees.
TAN, ERNESTO TANCHI JR., EDWIN NGO, VIRGINIA KHOO, SABINO PADILLA JR.,
EDUARDO P. LIZARES and GRACE CHRISTIAN HIGH SCHOOL, Petitioners, v. PAUL When the controversy reached the Securities and Exchange Commission (SEC),
SYCIP and MERRITTO LIM, Respondents. petitioners maintained that the deceased member-trustees should not be counted
in the computation of the quorum because, upon their death, members
DECISION
automatically lost all their rights (including the right to vote) and interests in the
PANGANIBAN, C.J.: corporation.

For stock corporations, the "quorum" referred to in Section 52 of the Corporation SEC Hearing Officer Malthie G. Militar declared the April 6, 1998 meeting null and
Code is based on the number of outstanding voting stocks. For nonstock void for lack of quorum. She held that the basis for determining the quorum in a
corporations, only those who are actual, living members with voting rights shall be meeting of members should be their number as specified in the articles of
counted in determining the existence of a quorum during members' meetings. Dead incorporation, not simply the number of living members.8 She explained that the
members shall not be counted. qualifying phrase "entitled to vote" in Section 24 9 of the Corporation Code, which
provided the basis for determining a quorum for the election of directors or
The Case trustees, should be read together with Section 89.10
The present Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court The hearing officer also opined that Article III (2) 11 of the By-Laws of GCHS, insofar
seeks the reversal of the January 23 2 and May 7, 2002, 3 Resolutions of the Court of as it prescribed the mode of filling vacancies in the board of trustees, must be
Appeals (CA) in CA-GR SP No. 68202. The first assailed Resolution dismissed the interpreted in conjunction with Section 29 12 of the Corporation Code. The SEC en
appeal filed by petitioners with the CA. Allegedly, without the proper authorization banc denied the appeal of petitioners and affirmed the Decision of the hearing
of the other petitioners, the Verification and Certification of Non-Forum Shopping officer in toto.13 It found to be untenable their contention that the word "members,"
were signed by only one of them - - Atty. Sabino Padilla Jr. The second Resolution as used in Section 52 14 of the Corporation Code, referred only to the living members
denied reconsideration. of a nonstock corporation.15
The Facts As earlier stated, the CA dismissed the appeal of petitioners, because the
Petitioner Grace Christian High School (GCHS) is a nonstock, non-profit educational Verification and Certification of Non-Forum Shopping had been signed only by Atty.
corporation with fifteen (15) regular members, who also constitute the board of Sabino Padilla Jr. No Special Power of Attorney had been attached to show his
trustees.4 During the annual members' meeting held on April 6, 1998, there were authority to sign for the rest of the petitioners.
only eleven (11) 5 living member-trustees, as four (4) had already died. Out of the Hence, this Petition.16
eleven, seven (7) 6 attended the meeting through their respective proxies. The
meeting was convened and chaired by Atty. Sabino Padilla Jr. over the objection of Issues

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Petitioners state the issues as follows: The present Petition is partly meritorious.

"Petitioners principally pray for the resolution of the legal question of whether or Procedural Issue:
not in NON-STOCK corporations, dead members should still be counted in
Verification and Certification of Non-Forum Shopping
determination of quorum for purposed of conducting the Annual Members'
Meeting. The Petition before the CA was initially flawed, because the Verification and
Certification of Non-Forum Shopping were signed by only one, not by all, of the
"Petitioners have maintained before the courts below that the DEAD members
petitioners; further, it failed to show proof that the signatory was authorized to sign
should no longer be counted in computing quorum primarily on the ground that
on behalf of all of them. Subsequently, however, petitioners submitted a Special
members' rights are 'personal and non-transferable' as provided in Sections 90 and
Power of Attorney, attesting that Atty. Padilla was authorized to file the action on
91 of the Corporation Code of the Philippines.
their behalf.18
"The SEC ruled against the petitioners solely on the basis of a 1989 SEC Opinion that
In the interest of substantial justice, this initial procedural lapse may be excused.19
did not even involve a non-stock corporation as petitioner GCHS.
There appears to be no intention to circumvent the need for proper verification and
"The Honorable Court of Appeals on the other hand simply refused to resolve this certification, which are aimed at assuring the truthfulness and correctness of the
question and instead dismissed the Petition for Review on a technicality - the failure allegations in the Petition for Review and at discouraging forum shopping.20 More
to timely submit an SPA from the petitioners authorizing their co-petitioner Padilla, important, the substantial merits of petitioners' case and the purely legal question
their counsel and also a petitioner before the Court of Appeals, to sign the petition involved in the Petition should be considered special circumstances 21 or compelling
on behalf of the rest of the petitioners. reasons that justify an exception to the strict requirements of the verification and
the certification of non-forum shopping.22
"Petitioners humbly submit that the action of both the SEC and the Court of Appeals
are not in accord with law particularly the pronouncements of this Honorable Court Main Issue:
in Escorpizo v. University of Baguio (306 SCRA 497), Robern Development
Basis for Quorum
Corporation v. Quitain (315 SCRA 150,) and MC Engineering, Inc. v. NLRC, (360 SCRA
183). Due course should have been given the petition below and the merits of the Generally, stockholders' or members' meetings are called for the purpose of electing
case decided in petitioners' favor." 17 directors or trustees 23 and transacting some other business calling for or requiring
the action or consent of the shareholders or members, 24 such as the amendment of
In sum, the issues may be stated simply in this wise: 1) whether the CA erred in
the articles of incorporation and bylaws, sale or disposition of all or substantially all
denying the Petition below, on the basis of a defective Verification and Certification;
corporate assets, consolidation and merger and the like, or any other business that
and 2) whether dead members should still be counted in the determination of the
may properly come before the meeting.
quorum, for purposes of conducting the annual members' meeting.
Under the Corporation Code, stockholders or members periodically elect the board
The Court's Ruling
of directors or trustees, who are charged with the management of the corporation.25

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The board, in turn, periodically elects officers to carry out management functions on the outstanding capital stock or a majority of the members in the case of non-stock
a day-to-day basis. As owners, though, the stockholders or members have residual corporations."
powers over fundamental and major corporate changes.
In stock corporations, the presence of a quorum is ascertained and counted on the
While stockholders and members (in some instances) are entitled to receive profits, basis of the outstanding capital stock, as defined by the Code thus:
the management and direction of the corporation are lodged with their
"SECTION 137. Outstanding capital stock defined. - The term 'outstanding capital
representatives and agents - - the board of directors or trustees.26 In other words,
stock' as used in this Code, means the total shares of stock issued under binding
acts of management pertain to the board; and those of ownership, to the
subscription agreements to subscribers or stockholders, whether or not fully or
stockholders or members. In the latter case, the board cannot act alone, but must
partially paid, except treasury shares." (Underscoring supplied)cralawlibrary
seek approval of the stockholders or members.27
The Right to Vote in
Conformably with the foregoing principles, one of the most important rights of a
qualified shareholder or member is the right Stock Corporations
to vote - - either personally or by proxy - - for the directors or trustees who are to
manage the corporate affairs.28 The right to choose the persons who will direct, The right to vote is inherent in and incidental to the ownership of corporate stocks.33
manage and operate the corporation is significant, because it is the main way in It is settled that unissued stocks may not be voted or considered in determining
which a stockholder can have a voice in the management of corporate affairs, or in whether a quorum is present in a stockholders' meeting, or whether a requisite
which a member in a nonstock corporation can have a say on how the purposes and proportion of the stock of the corporation is voted to adopt a certain measure or
goals of the corporation may be achieved.29 Once the directors or trustees are act. Only stock actually issued and outstanding may be voted.34 Under Section 6 of
elected, the stockholders or members relinquish corporate powers to the board in the Corporation Code, each share of stock is entitled to vote, unless otherwise
accordance with law. provided in the articles of incorporation or declared delinquent 35 under Section 67
of the Code.
In the absence of an express charter or statutory provision to the contrary, the
general rule is that every member of a nonstock corporation, and every legal owner Neither the stockholders nor the corporation can vote or represent shares that have
of shares in a stock corporation, has a right to be present and to vote in all corporate never passed to the ownership of stockholders; or, having so passed, have again
meetings. Conversely, those who are not stockholders or members have no right to been purchased by the corporation.36 These shares are not to be taken into
vote.30 Voting may be expressed personally, or through proxies who vote in their consideration in determining majorities. When the law speaks of a
representative capacities.31 Generally, the right to be present and to vote in a given proportion of the stock, it must be construed to mean the shares that have
meeting is determined by the time in which the meeting is held.32 passed from the corporation, and that may be voted.37

Section 52 of the Corporation Code states: Section 6 of the Corporation Code, in part, provides:

"Section 52. Quorum in Meetings. - Unless otherwise provided for in this Code or in "Section 6. Classification of shares. - The shares of stock of stock corporations may
the by-laws, a quorum shall consist of the stockholders representing a majority of be divided into classes or series of shares, or both, any of which classes or series of

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shares may have such rights, privileges or restrictions as may be stated in the articles Taken in conjunction with Section 137, the last paragraph of Section 6 shows that
of incorporation: Provided, That no share may be deprived of voting rights except the intention of the lawmakers was to base the quorum mentioned in Section 52 on
those classified and issued as "preferred" or "redeemable" shares, unless otherwise the number of outstanding voting stocks.38
provided in this Code: Provided, further, that there shall always be a class or series of
The Right to Vote in
shares which have complete voting rights.
Nonstock Corporations
xxx
In nonstock corporations, the voting rights attach to membership.39 Members vote
"Where the articles of incorporation provide for non-voting shares in the cases
as persons, in accordance with the law and the bylaws of the corporation. Each
allowed by this Code, the holders of such shares shall nevertheless be entitled to
member shall be entitled to one vote unless so limited, broadened, or denied in the
vote on the following matters:
articles of incorporation or bylaws.40 We hold that when the principle for
1. Amendment of the articles of incorporation; determining the quorum for stock corporations is applied by analogy to nonstock
corporations, only those who are actual members with voting rights should be
2. Adoption and amendment of by-laws;
counted.
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially
Under Section 52 of the Corporation Code, the majority of the members
all of the corporation property;
representing the actual number of voting rights, not
4. Incurring, creating or increasing bonded indebtedness; the number or numerical constant that may originally be specified in the articles of
incorporation, constitutes the quorum.41
5. Increase or decrease of capital stock;
The March 3, 1986 SEC Opinion 42 cited by the hearing officer uses the phrase
6. Merger or consolidation of the corporation with another corporation or other "majority vote of the members"; likewise Section 48 of the Corporation Code refers
corporations; to 50 percent of 94 (the number of registered members of the association
7. Investment of corporate funds in another corporation or business in accordance mentioned therein) plus one. The best evidence of who are the present members of
with this Code; andcralawlibrary the corporation is the "membership book"; in the case of stock corporations, it is the
stock and transfer book.43
8. Dissolution of the corporation.
Section 25 of the Code specifically provides that a majority of the directors or
"Except as provided in the immediately preceding paragraph, the vote necessary to trustees, as fixed in the articles of incorporation, shall constitute a quorum for the
approve a particular corporate act as provided in this Code shall be deemed to refer transaction of corporate business (unless the articles of incorporation or the bylaws
only to stocks with voting rights." provide for a greater majority). If the intention of the lawmakers was to base the
quorum in the meetings of stockholders or members on their absolute number as
fixed in the articles of incorporation, it would have expressly specified so. Otherwise,
the only logical conclusion is that the legislature did not have that intention.

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Effect of the Death Board of Trustees

of a Member or Shareholder As regards the filling of vacancies in the board of trustees, Section 29 of the
Corporation Code provides:
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 "SECTION 29. Vacancies in the office of director or trustee. - - Any vacancy occurring
what happens in the event of the death of one of them. 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
In stock corporations, shareholders may generally transfer their shares. Thus, on the
the remaining directors or trustees, if still constituting a quorum; otherwise, said
death of a shareholder, the executor or administrator duly appointed by the Court is
vacancies must be filled by the stockholders in a regular or special meeting called for
vested with the legal title to the stock and entitled to vote it. Until a settlement and
that purpose. A director or trustee so elected to fill a vacancy shall be elected only
division of the estate is effected, the stocks of the decedent are held by the
for the unexpired term of his predecessor in office."
administrator or executor.44
Undoubtedly, trustees may fill vacancies in the board, provided that those remaining
On the other hand, membership in and all rights arising from a nonstock corporation
still constitute a quorum. The phrase "may be filled" in Section 29 shows that the
are personal and non-transferable, unless the articles of incorporation or the bylaws
filling of vacancies in the board by the remaining directors or trustees constituting a
of the corporation provide otherwise.45 In other words, the determination of
quorum is merely permissive, not mandatory.48 Corporations, therefore, may choose
whether or not "dead members" are entitled to exercise their voting rights (through
how vacancies in their respective boards may be filled up - - either by the remaining
their executor or administrator), depends on those articles of incorporation or
directors constituting a quorum, or by the stockholders or members in a regular or
bylaws.
special meeting called for the purpose.49
Under the By-Laws of GCHS, membership in the corporation shall, among others, be
The By-Laws of GCHS prescribed the specific mode of filling up existing vacancies in
terminated by the death of the member.46 Section 91 of the Corporation Code
its board of directors; that is, by a majority vote of the remaining members of the
further provides that termination extinguishes all the rights of a member of the
board.50
corporation, unless otherwise provided in the articles of incorporation or the bylaws.
While a majority of the remaining corporate members were present, however, the
Applying Section 91 to the present case, we hold that dead members who are
"election" of the four trustees cannot be legally upheld for the obvious reason that it
dropped from the membership roster in the manner and for the cause provided for
was held in an annual meeting of the members, not of the board of trustees. We are
in the By-Laws of GCHS are not to be counted in determining the requisite vote in
not unmindful of the fact that the members of GCHS themselves also constitute the
corporate matters or the requisite quorum for the annual members' meeting. With
trustees, but we cannot ignore the GCHS bylaw provision, which specifically
11 remaining members, the quorum in the present case should be 6. Therefore,
prescribes that vacancies in the board must be filled up by the remaining trustees. In
there being a quorum, the annual members' meeting, conducted with six 47
other words, these remaining member-trustees must sit as a board in order to
members present, was valid.
validly elect the new ones.
Vacancy in the

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Indeed, there is a well-defined distinction between a corporate act to be done by the
board and that by the constituent members of the corporation. The board of
trustees must act, not individually or separately, but as a body in a lawful meeting.
On the other hand, in their annual meeting, the members may be represented by
their respective proxies, as in the contested annual members' meeting of GCHS.

WHEREFORE, the Petition is partly GRANTED.The assailed Resolutions of the Court

of Appeals are hereby REVERSED AND SET ASIDE. The remaining members of the
board of trustees of Grace Christian High School (GCHS) may convene and fill up the
vacancies in the board, in accordance with this Decision. No pronouncement as to
costs in this instance.

SO ORDERED.

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