Casino Español de Manila

March 3, 1986 Casino Espaol de Manila c/o Atty. Pedro Molo 3rd Flr.,Zaragosa Bldg. 102 Gamboa St.,Legaspi Vill. Makati, Metro Manila Gentlemen: This refers to your letter dated November 18, 1985 requesting for legal opinion on the queries posed therein. It appears that your client, the Casino Espaol de Manila, is a non-profit social and recreational membership club. Voting rights in the Casino belong only to its proprietary members as provided in the by-laws. In view of a plan to sell the present property of the Casino and to relocate its site to another place, the Board of Directors intends to secure the consent and authorization of at least 2/3 of the proprietary members in compliance with Section 40 of the Corporation Code. However, legal questions arose as to the satisfaction of the voting status of some proprietary certificates of members of the Casino. Thus, you pose the following queries: "1. In cases where some voting members are ineligible to vote at the meeting due to disqualification as authorized in the by-laws, which should be the numerical base for purposes of satisfying the minimum 2/3 affirmative vote requirement under Section 40 of the Corporation Code? Is it the number of members eligible to vote at the meeting or the totality of the membership of the corporation regardless of the ineligibility of some members? 2. Are resigned or terminated members, whose rights, and obligations to the corporation as such members already cease upon resignation or termination, still to be counted in determining the requisite 2/3 affirmative vote while their certificates or proprietary membership are not yet sold or transferred? How about deceased members whose certificates are considered suspended under the by-laws pending determination of their legal transferees or beneficiaries?" Any corporation, whether stock or non-stock, is authorized to provide in its by-laws a specific number of stockholders or members necessary to constitute a quorum for the transaction of corporate business, except in those cases where the Corporation Code itself provides a greater number of stockholders or members necessary to constitute a quorum . (SEC Opinion dated January 2, 1980). Even the California Law adheres to the rule that "if the quorum requirements are satisfied, the affirmative vote of the majority of the voting power represented at the meeting, entitled to vote and voting on any such matter in the act of the members unless the vote of a greater number or voting classes is required by law ...."(1B Ballantine & Sterling, 1982 ed. sec. 490.02 par. 1 at 19-292, emphasis supplied) The pertinent provision of the Corporation Code provides: "SECTION 40. Sale or other disposition of assets . Subject to the provisions of existing laws on illegal combinations and monopolies, a corporation may, by a majority vote of its board of directors or trustees ,sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its property and assets, including its goodwill, upon such terms and conditions and for such consideration, which may be money, stocks, bonds or other instruments for the payment of money or other property or consideration, as its board of directors or trustees may deem expedient when authorized by the vote of stockholders representing at least two-thirds (2/3) of the outstanding capital stock; or in the case of non-stock corporation, by the vote of at least two-thirds (2/3) of the members in a stockholders" or members meeting duly called for the purpose." (emphasis supplied) Since Section 40 of the Corporation Code expressly requires the votes of two-thirds (2/3) of the members to approve the disposition of corporate assets, it is clear that said proportion of all the members who have not been dropped from the membership roster is required to carry out the particular proposal. In such case, however, the majority vote of the Board of Directors/Trustees is required. LibLex Regarding query No. 2, Section 91 of the Corporation Code provides: "SECTION 91. Termination of membership . Membership shall be terminated in the manner and for the causes provided in the articles of incorporation or the by-laws .Termination of membership shall have the effect of extinguishing all rights of a member in the corporation or in its property, unless otherwise provided in the articles of incorporation or by-laws." (emphasis supplied) Consequently, resigned or terminated members who are dropped from the membership roster in the manner and for causes provided for in the aforecited Article 18 (Chapter II) of your by-laws are not counted in determining the requisite vote in corporate matters. As regards deceased members, the pertinent provision of your by-laws provides: "ARTICLE 14. In the event of death of a Proprietary member his certificate of co-ownership shall be considered suspended until it is resolved who is the heir or beneficiary of the certificate in question . It is understood that once the heir or beneficiary of the certificate of co-ownership has been legally determined, the admission of said heir or beneficiary as a Proprietary Member shall be governed by the provision in Article 17-20 of Chapter III of these by-laws." (emphasis supplied) The foregoing provision is silent on the right to vote of administrator of deceased members . In this connection, the Corporation Code provides: "SECTION 55. Right to vote of ....administrator. .... Executors, administrators ,receivers and other legal representatives duly appointed by the court may attend and vote in behalf of the stockholder or member without need of any written proxy." (Emphasis supplied) It is settled "that on the death of a shareholder, his executor or administrator becomes vested with the legal title to the stock and entitled to vote the same at all meetings, and that until a settlement and division of the estate is effected, the stock of the decedent belongs to the said administrator or executor or his personal representative. (SEC Opinion dated November 19, 1985) Accordingly, an administrator of a deceased member may vote on corporate matters, and therefore, should be counted in determining the requisite vote approving a corporate act. There seems to be no better way for an administrator to effectively manage the estate of the decedent than to participate in the management of the corporation. Please be advised accordingly. LibLex Very truly yours, (SGD.) JULIO A. SULIT, JR. Associate Commissioner