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84 - Grace Christian High School v. CA

Partnership Case

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53 views3 pages

84 - Grace Christian High School v. CA

Partnership Case

Uploaded by

MariaHannahKristenRamirez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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84.

Grace Christian High School v CA 281 SCR 133 (1997)

DOCTRINE:

These provisions of the former and present corporation law leave no room for
doubt as to their meaning: the board of directors of corporations must be elected from
among the stockholders or members. There may be corporations in which there are
unelected members in the board but it is clear that in the examples cited by petitioner
the unelected members sit as ex officio members, i.e., by virtue of and for as long as
they hold a particular office. But in the case of petitioner, there is no reason at all for its
representative to be given a seat in the board. Nor does petitioner claim a right to such
seat by virtue of an office held.

FACTS:

1. A committee of the board of directors of Grace Village Association Inc. prepared


a draft of an amendment to the by-laws, reading as follows:
The Annual Meeting of the members of the Association shall be held on
the second Thursday of January of each year. Each Charter or Associate
Member of the Association is entitled to vote. He shall be entitled to as many
votes as he has acquired thru his monthly membership fees only computed on a
ratio of TEN (P10.00) PESOS for one vote.

The Charter and Associate Members shall elect the Directors of the
Association. The candidates receiving the first fourteen (14) highest number of
votes shall be declared and proclaimed elected until their successors are elected
and qualified. GRACE CHRISTIAN HIGH SCHOOL representative is a
permanent Director of the ASSOCIATION.

2. The draft was never presented to the general membership for approval. Despite
that, from year 1975 up to 1990, after it was presumably submitted to the board,
the petitioner was given a permanent seat in the board of directors of the
association.

3. The association's committee on election in a letter then informed James Tan,


principal of the school, that "it was the sentiment that all directors should be
elected by members of the association" because "to make a person or entity a
permanent Director would deprive the right of voters to vote for fifteen (15)
members of the Board," and "it is undemocratic for a person or entity to hold
office in perpetuity."

4. Tan was advised that "the proposal to make the Grace Christian High School
representative as a permanent director of the association, although previously
tolerated in the past elections should be re-examined." Because of the advice,
notices were sent to the members of the association that the provision on
election of directors of the 1968 by-laws of the association shall be observed.
5. The petitioner then requested the chairman of the election committee to change
the notice of election by following the procedure in previous elections, claiming
that the notice issued for the 1990 elections ran "counter to the practice in
previous years" and was "in violation of the by-laws (of 1975)" and "unlawfully
deprived Grace Christian High School of its vested right to a permanent seat in
the board."

6. When the association denied the request, the school brought the case for
mandamus in the Home Insurance and Guaranty Corporation to compel the
board of directors of the association to recognize its right to a permanent seat in
the board.

7. HIGC affirmed the decision of the hearing officer which denied the petition.
Petitioner appealed but CA likewise affirmed.

ISSUE:
Whether Grace Christian High School is entitled to the permanent seat in the
Board of the Grace Village Association.

DECISION:

These provisions of the former and present corporation law leave no room for
doubt as to their meaning: the board of directors of corporations must be elected from
among the stockholders or members. There may be corporations in which there are
unelected members in the board but it is clear that in the examples cited by petitioner
the unelected members sit as ex officio members, i.e., by virtue of and for as long as
they hold a particular office. But in the case of petitioner, there is no reason at all for its
representative to be given a seat in the board. Nor does petitioner claim a right to such
seat by virtue of an office held. In fact it was not given such seat in the beginning. It was
only in 1975 that a proposed amendment to the by-laws sought to give it one.

Since the provision in question is contrary to law, the fact that for fifteen years it
has not been questioned or challenged but, on the contrary, appears to have been
implemented by the members of the association cannot forestall a later challenge to its
validity. Neither can it attain validity through acquiescence because, if it is contrary to
law, it is beyond the power of the members of the association to waive its invalidity. For
that matter the members of the association may have formally adopted the provision in
question, but their action would be of no avail because no provision of the by-laws can
be adopted if it is contrary to law.

It is probable that, in allowing petitioner's representative to sit on the board, the


members of the association were not aware that this was contrary to law. It should be
noted that they did not actually implement the provision in question except perhaps
insofar as it increased the number of directors from 11 to 15, but certainly not the
allowance of petitioner's representative as an unelected member of the board of
directors. It is more accurate to say that the members merely tolerated petitioner's
representative and tolerance cannot be considered ratification.

Nor can petitioner claim a vested right to sit in the board on the basis of
"practice." Practice, no matter how long continued, cannot give rise to any vested right if
it is contrary to law. Even less tenable is petitioner's claim that its right is "coterminus
with the existence of the association."

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