GR 153468; (August, 2006) (Digest)
G.R. No. 153468 August 17, 2006
PAUL LEE TAN, ET AL. AND GRACE CHRISTIAN HIGH SCHOOL, Petitioners, vs. PAUL SYCIP AND MERRITTO LIM, Respondents.
FACTS
Petitioner Grace Christian High School (GCHS) is a nonstock corporation with fifteen regular members constituting its board of trustees. By April 6, 1998, four of these members had died, leaving eleven living members. During the annual members’ meeting on that date, seven of the eleven living members attended via proxy. Atty. Sabino Padilla Jr. convened and chaired the meeting over an objection regarding quorum. In the meeting, four petitioners were voted to replace the deceased trustees.
The Securities and Exchange Commission (SEC) declared the meeting null and void for lack of quorum. The SEC ruled that the basis for the quorum should be the total number of members as specified in the articles of incorporation, including the deceased members. The SEC en banc affirmed this decision. Petitioners elevated the matter to the Court of Appeals, which dismissed the appeal on a technicality: the Verification and Certification of Non-Forum Shopping was signed by only one petitioner, Atty. Padilla, without proof of authority to sign for the others.
ISSUE
The primary issue is whether, in a nonstock corporation, deceased members should still be counted in determining the quorum for a members’ meeting.
RULING
The Supreme Court granted the petition, ruling that deceased members should not be counted. The legal logic is anchored on the distinct nature of membership in a nonstock corporation versus shareholding in a stock corporation. For stock corporations, a quorum under Section 52 of the Corporation Code is based on outstanding voting stock, which has an independent existence from the stockholder. In contrast, membership in a nonstock corporation is personal.
A member’s rights, including the right to vote, are extinguished upon death under Sections 90 and 91 of the Corporation Code. These rights are neither transferred to heirs nor considered part of the estate; they are simply extinguished. Consequently, for quorum purposes under Section 52, only actual, living members with voting rights should be counted. The Court emphasized that the term “members entitled to vote” refers to those with existing rights. Since the four deceased members no longer possessed any rights in the corporation, the quorum should be based on the eleven living members. With seven present, a quorum was validly constituted. The Court also excused the procedural lapse in verification in the interest of substantial justice, given the purely legal question involved.