Ms. Evelyn R. San Buenaventura

February 8, 1990 Ms. Evelyn R. San Buenaventura San Buenaventura & Co.,CPAs 3rd Flr.,Mile Long Specialty Theme Center Amorsolo cor. Javier Streets, Legaspi Village, Makati, Metro Manila M a d a m : This refers to your letter dated September 6, 1989, which was referred to this Commission by the Housing and Land Use Regulatory Board for appropriate action on the queries posed therein. You stated that Mile Long Association, Inc. is a non-profit, non-stock association, organized to "manage, administer, maintain and preserve the common areas in Mile Long Building situated at Amorsolo Street, Makati, Metro Manila, and to promote the health, safety and welfare of all unit owners in the building in accordance with its Articles of Incorporation, By-laws, and such other applicable laws of the Philippines." The articles of incorporation of the association limits its membership to the unit owners of Mile Long such that any member who ceases to own a unit automatically ceases to be a member of the association. As of July 31, 1989, the number of unit owners in Mile Long, Inc. who became automatically members of the association are thirty (30).Most of the unit owners of Mile Long, Inc. are corporations who lease their units to tenants who are the actual occupants of the building and who are made to assume the payment of association dues while they occupy the lease units. On July 28, 1989, a meeting of the unit owners discussed the financial situation of the association and while only 5 members attended, their circular stated 70% of the unit owners were represented. During such meeting, several resolutions were passed affecting the interest of all unit owners. LexLib From the foregoing facts, you posed the following queries which we answer in the order in which they were propounded in the letter: 1. "Is it legal for a non-profit, non-stock association to provide in its by-laws that voting rights of members be allocated in proportion to their square-meter unit ownership?" The pertinent provision of the Corporation Code provides: "SECTION 89. Right to vote . The right of the members of any class or classes to vote may be limited, broadened or denied to the extent specified in the articles of incorporation or the by-laws .Unless so limited, broadened or denied, each member, regardless of class shall be entitled to one vote. ...(emphasis supplied) From the above provision it is clear that the by-laws may provide for the desired voting rights for members of a non-stock corporation. Accordingly, your query is answered in the affirmative. 2. "Can a new unit owner who became a member of the association but was not an incorporator propose to amend the by-laws by herself alone, or what majority of membership is required?" Any member of the association may propose amendments to the by-laws regardless of whether he is an incorporator or not. However, amendments thereto are valid only if approved in accordance with Section 48 of the Corporation Code which provides, as follows: "SECTION 48. Amendments to by-laws . The board of directors or trustees, by a majority vote thereof, and the owners of at least a majority of the outstanding capital stock or at least a majority of the members of a non-stock corporation ,at a regular or special meeting duly called for the purpose, may amend or repeal any by-laws or adopt new by-laws. The owners of two-thirds (2/3) of the outstanding capital stock or two-thirds (2/3) of the members in a non-stock corporation may delegate to the Board of directors or trustees to amend or repeal any by-laws or adopt new by-laws. .... xxx xxx xxx The amended or new by-laws shall only be effective upon the issuance by the Securities and Exchange Commission of a certification that the same are not inconsistent with this Code." (emphasis supplied) 3. "In deliberating and deciding on issues affecting all unit owners, what constitutes a quorum so that actions deliberated thereon can be valid?" 4. "On what should the quorum be based, on voting rights of members or by the number of members attending?" Section 52 of the Corporation Code provides that " Unless otherwise provided for in this Code or in the by-laws , a quorum shall consists of the stockholders representing a majority of the outstanding capital stock or majority of the members in case of non-stock corporation." In like manner, Section 47 of the Corporation Code provides that "subject to the provisions of the constitution, this Code, other special laws, and the articles of incorporation, a private corporation may provide in its by-laws for :...3. The required quorum in meetings of stockholders and members and the manner of voting them." The by-laws of Mile Long Association, Inc. stipulates that "the presence of members representing a majority of the members of the association will constitute a quorum to transact business in all meetings of the association, except in cases where the Corporation Law requires the affirmative vote of a greater proportion of the members." (Section 7, Articles II) However, since Section 5 of Article II of the by-laws provides that "each member shall be entitled to one vote for every square-meter of the floor area of the units owned by him" the required majority quorum in membership meeting shall be based on the number of voting rights of members and not on the number of members present. The provision in the by-laws relative to quorum, however, will not hold true in those instances where the Corporation Code or applicable special law explicitly prescribes the proportion of stockholders or members necessary to resolve or carry out a particular corporate proposal. In such cases therefore the quorum shall consists of such ratio of stockholders or members as may be declared by statutory provisions. It is a cardinal rule that a by-law providing what shall constitute a quorum is invalid if it is in conflict with the provisions of statute on the subject. (5 Fletcher, Cyc. Corp. Sec. 2013) Thus, where the number necessary to constitute a quorum is prescribed by statute, a by-law requiring less than the proportion required by the particular legislation is subordinate to the statute. "By-laws cannot be used to defeat the provisions of the statute. (Fletcher, Supra). On the other hand, in directors' meeting, the presence of "three members of the board shall be sufficient to constitute a quorum for the transaction of business and a decision of at least three of those present in a meeting shall be valid and binding upon the association." (section 3, Article II of the By-laws) 5. "What recourse is open to unit owners who were not present during the meeting and refused to be bound by the actions of those who attended the meeting?" All members are bound by what was done at a meeting regularly convened . If they absent themselves, they cannot ordinarily complain. However, if a meeting is held or conducted fraudulently or unfairly, even though a majority of the stockholders or members may express their assent, it will be illegal, and a court of law or equity will set the proceedings aside at the suit of injured stockholders or members. (5 Fletcher, Sec. 2024) Thus, if a member feels he has a valid and justifiable objection on what was transacted during the meeting, he may file a formal complaint with the Commission pursuant to PD 902-A, as amended. 6. "In cases where units are leased to tenants, can membership in the association be conveyed to the tenants for the duration of the lease, since the tenants are the ones required by the unit owners to pay the association dues and they are the ones physically occupying the premises and entitled to the benefits being administered by the association?" The pertinent provision of the Corporation Code provides: "SECTION 90. Non-transferability of membership . Membership on non-stock corporation, and all rights arising therefrom, are personal and non-transferable ,unless the articles of incorporation or the by-laws otherwise provide." (emphasis supplied) Corollary thereto, the by-laws of subject association provides: 'Membership in the association shall be limited exclusively to owners of units in the Mile Long Building. However, a unit owner may designate the person or persons to represent him, as a member of the association. With respect to his unit or units, provided that the said designation shall be in writing and filed with the secretary of the association and shall continue in effect for all intents and purposes until receipt by the secretary of a written revocation. Membership in the association being a mere appurtenance of ownership of a unit in the building cannot be transferred, conveyed, encumbered or otherwise disposed of separately from the unit of which it is an appurtenance .Any member who ceases to own a unit or represent as owner of a unit shall automatically cease to be a member of the association." (emphasis supplied) Membership in the association is therefore exclusive only to unit owners. Accordingly, payment of association dues and physical occupation of the premises do not confer membership to tenants/lessees. The most that can be granted to tenants/lessees of a unit is the mere right of representation executed by the unit owner in favor of the former so that he can exercise the delegated rights of membership. cdll Please be advised accordingly. Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner