TAN v. SYCIP

G.R. No. 153468 August 17, 2006 PAUL LEE TAN, ANDREW LIUSON, ESTHER WONG, STEPHEN CO, JAMES TAN, JUDITH TAN, ERNESTO TANCHI JR., EDWIN NGO, VIRGINIA KHOO, SABINO PADILLA JR., EDUARDO P. LIZARES and GRACE CHRISTIAN HIGH SCHOOL, Petitioners,vs.PAUL SYCIP and MERRITTO LIM, Respondents. FACTS: Grace Christian High School (GCHS) is a nonstock, non-profit educational corporation with 15 regular members, who also constitute the board of trustees. During the annual members’ meeting, there were only 11 living member-trustees, as 4 have already died. Out of the 11, 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 four deceased membertrustees. The controversy reached SEC and the petitioners maintained that the deceased member-trustees should not be counted in the computation of the quorum because, upon their death, members automatically lost all their rights (including the right to vote) and interests in the corporation. SEC declared the meeting null and void and ruled that the phrase “entitled to vote” under Sec 24 should be read with Sec 89 of Corpo Code. ISSUE: In a non-stock corporation, should dead members still be counted in determination of quorum for purposed of conducting the Annual Members’ Meeting? HELD: For stock corporations, the "quorum" referred to in Section 52 of the Corporation Code is based on the number of outstanding voting stocks. For nonstock corporations, only those who are actual, living members with voting rights shall be counted in determining the existence of a quorum during members’ meetings. Dead members shall not be counted. One of the most important rights of a qualified shareholder or member is the right to vote -- either personally or by proxy -- for the directors or trustees who are to manage the corporate affairs. The right to vote is inherent in and incidental to the ownership of corporate stocks. In nonstock corporations, the voting rights attach to membership. The principle for determining the quorum for stock corporations is applied by analogy to nonstock corporations, only those who are actual members with voting rights should be counted. Under Section 52, the majority of the members representing the actual number of voting rights, not the number or numerical constant that may originally be specified in the articles of incorporation, constitutes the quorum. 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 what happens in the event of the death of one of them. In stock corporations, 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. On the other hand, membership in and all rights arising from a nonstock corporation are personal and non-transferable, unless the articles of incorporation or the bylaws of the corporation provide otherwise. In other words, the determination of 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. Under the By-Laws of GCHS, membership in the corporation shall, among others, be terminated by the death of the member. Applying Section 91, dead members who are dropped from the membership roster in the manner and for the cause provided for in the ByLaws of GCHS are not to be counted in determining the requisite vote in corporate matters

or the requisite quorum for the annual members’ meeting. With 11 remaining members, the quorum in the present case should be 6. Therefore, there being a quorum, the annual members’ meeting was valid.