Title
Lim vs. Moldex Land, Inc.
Case
G.R. No. 206038
Decision Date
Jan 25, 2017
Condominium owner challenges validity of annual meeting, quorum, and election of non-unit owners as directors; Supreme Court nullifies meeting and elections.
condominium corporation
meeting
election

Case Summary (G.R. No. 206038)

Factual Background

Mary E. Lim was a registered unit owner in 1322 Golden Empire Tower, a condominium project developed by Moldex Land, Inc. Condocor is the condominium corporation created for the Golden Empire Tower, and Lim was a member of Condocor by virtue of unit ownership. Moldex retained title to 220 unsold units, parking lots, and storage areas in the project and designated representatives to attend and vote in Condocor meetings. On July 21, 2012, Condocor held its annual general membership meeting. The corporate secretary certified, and Jeffrey Jaminola as chairman declared, that a quorum existed although only 29 of the 108 unit buyers were physically present; the declaration relied on the presence of voting rights, inclusive of Moldex’s 58,504 voting rights. Lim, through her attorney-in-fact, objected; upon denial she and most other unit owners present walked out. The meeting proceeded and elected the challenged directors and officers.

Trial Court Proceedings

Lim filed an election protest in the RTC seeking annulment of the July 21, 2012 general membership meeting, annulment of the election of the individual respondents as board members, and an accounting. The RTC dismissed her complaint, ruling that a quorum existed because a majority of the voting rights in good standing were present, that Moldex was a member of Condocor by virtue of ownership of the unsold units, and that the individual respondents as Moldex’s representatives could exercise full membership rights, including election and being voted to the board.

Issues Presented

The petition boiled down to three principal legal questions: whether the July 21, 2012 membership meeting was valid; whether Moldex could be deemed a member of Condocor; and whether non-unit owners, specifically the individual respondents as representatives of Moldex, could be elected as members of the Board of Directors of Condocor.

Procedural Question on Mode of Appeal

Respondents contended Lim filed the wrong mode of appeal because intra-corporate disputes adjudicated by the RTC acting as a special commercial court are appealable to the Court of Appeals under A.M. No. 04-9-07-SC via Rule 43. The Court evaluated whether the petition presented pure questions of law suitable for a Rule 45 petition and concluded that Lim’s arguments raised predominantly legal issues permitting review under Rule 45 despite the RTC’s status as a special commercial court and the general procedures directing appeals to the Court of Appeals for intra-corporate controversies.

Lim’s Continued Membership Status

Respondents argued Lim lacked locus standi because she executed a Deed of Assignment transferring the unit to relatives. The Court examined Condocor’s By-Laws and the Master Deed, which required registration of transfers with the Register of Deeds and reporting to the corporation. No record showed registration or reporting of the alleged transfer. The Court held Lim remained the registered owner and therefore a member of Condocor. The later Confirmatory Special Power of Attorney by Lim reinforced that the Deed of Assignment did not effectuate a transfer of ownership. The Court cited Casabuena v. CA to observe that an assignee acquires only the rights that his assignor possessed.

Quorum Rule for Non-Stock Corporations

The Court analyzed quorum requirements and observed that for non-stock corporations Section 52 of the Corporation Code provides that a quorum consists of a majority of the members. The Court emphasized the distinction between determining quorum and counting voting rights. It explained that the proper basis for quorum in a non-stock corporation is the numerical majority of actual members in good standing, subject to any lawful provision in the By-Laws. Condocor’s By-Laws (Section 6 and Section 7) defined quorum as the attendance of a simple majority of members in good standing and limited voting to members in good standing. The Court held that the RTC erred in determining quorum by reference to the majority of total voting rights regardless of the separate rule on members in good standing.

Application to the July 21, 2012 Meeting

Applying the foregoing rules, the Court found that only 29 of the 108 unit buyers were present at the July 21, 2012 meeting and that the requisite majority of members in good standing was not present. Consequently, the meeting lacked a valid quorum and any resolutions or elections undertaken at that meeting were null and void.

Moldex’s Membership and Right to Be Represented

The Court treated the separate question whether Moldex was a member of Condocor. Relying on RA 4726 (the Condominium Act), especially Sections 2 and 10, the Court held that ownership of a unit or other recognized separate interest in a condominium project entitles the holder to automatic membership in the condominium corporation. The form of acquisition of ownership — whether by sale, donation, or other mode — was immaterial so long as title vested. Consequently, Moldex, as registered owner of the unsold units, became a member of Condocor. The Court further observed that proxies and representatives are permitted under Section 58 of the Corporation Code and under Condocor’s By-Laws; therefore Moldex may lawfully appoint representatives to attend and vote at members’ meetings.

Eligibility of Representatives to Serve as Directors

Despite recognizing Moldex’s rights to designate representatives, the Court evaluated whether those representatives could be elected as directors or trustees. Citing Sections 23 and 92 of the Corporation Code, the Court reiterated the statutory rule that directors or trustees in corporations must be elected from among the holders of stocks or, in non-stock corporations, from among the members of the corporation. The Court held that a proxy or representative who is not himself a member in his own right cannot be elected a director or trustee because the proxy’s authority is limited to voting and does not confer individual membership status. Thus, the election of the individual respondents, who were non-members acting as Moldex’s representatives, to the board and to officer positions was invalid. The Court noted that Heirs of Gamboa v. Teves precluded reliance on SEC legal opinions as having regulatory force.

Other Legal Points Considered

The Court addressed Lim’s reliance on P.D. No. 957, finding that the decree concerns homeowners associations and does not purport to regulate condominium corporations governed by RA 4726; accordingly P.D. No. 957 did not support Lim’s contention that an owner-developer cannot be a member. The Court also observed that even if certain officers might be elected from outside the board under some by-law provisions, the nullity of the membership meeting rendered all subsequent organizational acts and appointments devoid of legal effect.

Ruling of the Court

The petition was granted. The Court reversed and

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