Title
Tan vs. Sycip
Case
G.R. No. 153468
Decision Date
Aug 17, 2006
Nonstock corporation quorum dispute: dead members excluded; meeting quorum valid, but trustee election void due to procedural error.

Case Summary (G.R. No. 153468)

Key Dates and Applicable Law

Key dates: April 6, 1998 (annual members’ meeting); SEC hearing decision (June 21, 2000); SEC en banc order (July 6, 2001); Court of Appeals resolutions (January 23 and May 7, 2002); Supreme Court decision (August 17, 2006). Applicable constitutional and statutory framework: 1987 Philippine Constitution (governing judicial procedures and review applicable to decisions rendered post‑1990) and the Corporation Code of the Philippines, particularly Sections 6, 24, 25, 29, 52, 55, 57, 71, 89, 90, 91 and 137, as well as relevant bylaws of GCHS (Art. II(1) on number of regular members; Art. III(2) on vacancies and mode of filling them).

Issues Presented

  1. Whether the Court of Appeals erred in dismissing the petition for review on the ground that the Verification and Certification of Non‑Forum Shopping were signed only by one petitioner without proof of authority (an SPA). 2) Whether, in a nonstock corporation, deceased members must be counted in determining quorum for purposes of conducting the annual members’ meeting, and the consequent validity of actions taken at the April 6, 1998 meeting. 3) Whether the election of replacements for deceased trustees at that members’ meeting complied with the bylaws and statutory rules on filling vacancies.

Procedural Ruling on Verification and Certification of Non‑Forum Shopping

The Supreme Court recognized that the petition before the Court of Appeals was initially defective because the Verification and Certification of Non‑Forum Shopping were signed by only one petitioner (Atty. Padilla) without an attached SPA evidencing authority to sign for the others. However, the Court excused this procedural lapse in the interest of substantial justice after petitioners subsequently submitted an SPA authorizing Padilla to act on their behalf. The Court applied established precedents that permit relaxation of strict verification and certification requirements when no intent to circumvent procedural safeguards exists and when special circumstances—such as the presence of a purely legal question and substantial merit—justify relief. Consequently, the Supreme Court treated the procedural defect as nonfatal and proceeded to resolve the merits.

Legal Principles on Quorum and Voting — Stock Corporations

Under the Corporation Code, the quorum for stockholders’ meetings is determined on the basis of outstanding capital stock (Section 52 read with Section 137). Only shares actually issued and outstanding (excluding treasury shares and delinquent shares) may be counted in determining a quorum or the proportion of votes required for corporate action. Section 6 authorizes one vote per share unless the articles provide otherwise (e.g., preferred or redeemable shares) and establishes that nonvoting shares only vote on certain fundamental matters. Thus, in stock corporations the operative denominator for quorum and required majorities is the number of outstanding voting shares at the time of the meeting.

Legal Principles on Quorum and Voting — Nonstock Corporations

In nonstock corporations, voting rights attach to membership, and each member is entitled to one vote unless limited by the articles or bylaws (Section 89). The Supreme Court held by analogy to the stock corporation rule that the quorum in a nonstock corporation should be based on the actual number of existing members entitled to vote at the time of the meeting, not on an absolute numerical figure originally fixed in the articles of incorporation. The membership book is the best evidence of who are current members. Therefore, under Section 52, a quorum for nonstock corporations consists of a majority of members actually entitled to vote at the time of the meeting.

Effect of Death of a Member on Membership and Quorum

The Court distinguished the legal consequences of a member/shareholder’s death in stock and nonstock corporations. In stock corporations, shares may pass to executors or administrators and such representatives may vote shares of the deceased pending settlement of the estate. In nonstock corporations, however, membership and associated rights are generally personal and nontransferable unless the articles or bylaws provide otherwise (Section 90). Section 91 specifies that termination of membership extinguishes all membership rights unless the articles or bylaws provide otherwise. Because GCHS bylaws expressly provide that membership is terminated by death, the four deceased regular members were no longer members entitled to vote and therefore should not be counted in computing quorum. With eleven living members, a majority (quorum) is six; the annual members’ meeting, conducted with six present (counting valid proxies), therefore satisfied quorum requirements and was valid with respect to the convening and conduct of the meeting.

Filling Vacancies in the Board of Trustees

Section 29 of the Corporation Code permits filling vacancies in the board by a vote of at least a majority of the remaining directors or trustees if they still constitute a quorum; otherwise vacancies must be filled by the stockholders or members in a meeting called for that purpose. The Court emphasized that Section 29 is permissive: corporations may elect to have vacancies filled either by the remaining board members (as a board acting as a body) or by the members in an appropriate members’ meeting, depending on bylaws and choice. GCHS bylaws prescribe that vacancies are to be filled by a majority vote of the remaining members of the board (Art. III(2)). Although the remaining corporate members are

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