G.R. No. 91478, 7 February 1991
PAMBUSCO is the owner of the three lots in dispute. It mortgaged the lots to DBP which were later on foreclosed.
Pena was awarded the lots in a foreclosure sale for being the highest bidder. Ther certificate of sale was later issued to her and registered in her name.
The BODs of PAMBUSCO, 3 out of 5 directors, issued a resolution to assign its right of redemption over the lots in favor of any interested party. The right of redemption was later on assigned to Enriquez, who redeemed the property.
He then sold the lots to sps. Yap. Meanwhile, a case involving the validity of the sale to the sps Yap was pending, and despite the protestations of Pena as to the validity of the PAMBUSCO’s assignment of the right of redemption, the lots were somehow registered in the name of spouses Yap. Despite the registration to the Yap’s, Pena retained possession of the property.
Sps Yap sought to recover the possession of the lots from Pena. The latter countered that she is now the legitimate owner of the subject lands for having purchased the same in a foreclosure proceeding instituted by the DBP against PAMBUSCO and no valid redemption having been effected within the period provided by law.
The defense was that since the deed of assignment executed by PAMBUSCO in favor of Enriquez was void ab initio for being an ultra vires act of its BODs and for being without any valuable consideration, it could not have had any legal effect.
CFI ruled in favor of Petitioner Pena, but the same was overturned by the CA.
Whether there was a proper quorum as to the issuance of the resolution.
The Court disagrees.
The by-laws of a corporation are its own private laws which substantially have the same effect as the laws of the corporation. They are in effect, written, into the charter. In this sense they become part of the fundamental law of the corporation with which the corporation and its directors and officers must comply.
Apparently, only three (3) out of five (5) members of the board of directors of respondent PAMBUSCO convened on November 19, 1974 by virtue of a prior notice of a special meeting. There was no quorum to validly transact business since, under Section 4 of the amended by-laws hereinabove reproduced, at least four (4) members must be present to constitute a quorum in a special meeting of the board of directors of respondent PAMBUSCO.
Under Section 25 of the Corporation Code of the Philippines, the articles of incorporation or by-laws of the corporation may fix a greater number than the majority of the number of board members to constitute the quorum necessary for the valid transaction of business. Any number less than the number provided in the articles or by-laws therein cannot constitute a quorum and any act therein would not bind the corporation; all that the attending directors could do is to adjourn.
*Case Digest by Jhazel Zhan Jebone, JD-4, Andres Bonifacio Law School, SY 2019-2020