Mr. Carlos H. Beloso

January 26, 1983 Mr. Carlos H. Beloso C. H. Beloso Realty & Consultancy Svcs. No. 181 Roxas Blvd. Ext. Paraaque, Metro Manila Sir : This has reference to your letter dated January 22, 1983, requesting the opinion of this Commission on the queries posed therein relative to the election of officers of the Real Estate Brokers Association of the Philippines (REBAP),Inc. As a matter of policy, this Commission refrains from giving its opinion on hypothetical cases. However, for purposes of general information only, the following observations pertinent to your query may be given, in the order they are presented. 1. Section 47 of the Corporation Code authorizes the corporation to provide in its by-laws: xxx xxx xxx "7. the manner of election or appointment and the term of all officers other than directors." In a previous opinion, this Commission has ruled that "The by-laws govern the election of officers and members of the Board of Directors. Should such procedure be inadequate to meet certain situations, the applicable provision of the Corporation Code shall be resorted to. ( Ltr. to Liwag Law Office dtd. March 18, 1981 ) Sec. 1, Art. III of your approved by-laws on file with this Commission reads thus: "SECTION 1. General . The officers of the organization shall consist of a chairman of the Board of Directors, a President, an Executive Vice President, a Treasurer, and a Secretary ... All these officers shall be elected annually by a majority of the members of the Board from among themselves ." (Emphasis supplied) From these provisions, it can be clearly gleaned that it is the members of the Board of Directors, not the general membership, who elect the officers. As regards the election of directors, the pertinent provisions of your by-laws are quoted hereunder: "Section 1 of Article II: Qualification and Election . The general management of the organization shall be vested in a Board of Directors of eleven (11) Directors who shall be elected annually by the members from among themselves and who shall serve until the election and qualification of their successors." (Emphasis supplied) "Section 4 of Article V. Annual Meeting . The annual meeting of the members shall be held on the first Sunday of October in each calendar year at 9:00 A.M when they shall elect by a majority vote by ballot a Board of Eleven (11) Directors ..." (Emphasis supplied). It may be noted herein that your annual election to be held on January 29, 1983 does not coincide with the date of the annual meeting fixed in your by-laws, and there is no showing that you amended said by-laws. Furthermore, Section 24 of the Corporation Code provides thus: ...Unless otherwise provided in the articles of incorporation or in the by-laws, members of the corporation which have no capital stock may cast as many votes as there are trustees to be elected but may not cast more than one vote for one candidate ." (Emphasis supplied) cdll Considering that your approved by-laws provide for eleven (11) directors and the manner of electing them, we do not see how the intention of the Corporation Code to provide a wide choice be thwarted by allowing the majority to close the nomination after it has nominated a number of directors corresponding to the maximum number required by the By-Laws. 2. The body cannot elect fifteen (15) directors if the by-laws merely provide for eleven (11) without the corresponding amendment and approval of the articles of incorporation and the by-laws by this Commission, pursuant to the provisions of Section 16 and 48 of the Corporation Code, respectively. This Commission, in a previous opinion, cited the case of In re Election of Directors of Hammond Light and Power Co., Inc. (229 N.Y.S. 863, where it was held that the election of five (5) directors of a corporation where the certificate of incorporation provides for and allows but three (3) is irregular and voidable on the application of any person aggrieved thereby." ( Ltr. to Atty. Marcelo P. Karaan, dtd. Oct. 14, 1963 ). Furthermore, we beg to disagree with your premise that the number of directors is not stated in the articles of incorporation inasmuch as Sec. 14, subsec. 6 of the Corporation Code provides that the number of directors or trustees, which shall not be less than five (5) nor more than fifteen (15), shall be stated in the articles of incorporation. Even the old Corporation Law, specifically, Section 6 thereof, requires this. Where there's a conflict between the articles of incorporation and the by-laws, the articles of incorporation naturally must prevail. In fact, Sec. 47 of the Corporation Code, the matter to be included in the By-laws are enumerated, but subject only to the limitation that the By-Laws must not be in conflict with the corporate charter. (Balbin & Gloria, The Corporate Organization: New Dimensions, p. 63). 3. As mentioned heretofore, the provisions of the By-Laws shall govern and must be observed in the election of the members of the Board of Directors. 4. It is the opinion of this Commission that the two-thirds (2/3) vote needed to delegate the power to amend the by-laws to the board of directors in accordance with Section 48 of the Corporation Code be reckoned with the entire number of members in good standing but not all present in the convention. 5. This Commission is inclined to agree that the mechanics for the election as prepared by COMELEC chairman pursuant to a previous mandate of the Board of Directors should prevail considering that the rule is well-settled that the acts of the Directors, within the power of the corporation done in good faith and in the exercise of an honest business judgment are valid and binding on the corporation. The courts will not interfere with the conduct of the directors in the reasonable and honest exercise of their judgment. ( Ltr. to Mr. Zoilo Alberto dtd. January 21, 1977 citing 11 Am. Jur. 575-576). Please be guided accordingly. Very truly yours, (SGD.) JESUS J. VALDES Associate Commissioner