Lily Ann Baldago, et al. vs. Agnes G. Enguito-Abad, et al.

[SEC-SICD * CASE NO. 10-96-5466. October 16, 1997.] LILY ANN BALDAGO and LEDA-LAYO DANAO, for themselves and in behalf of Philippine Nurses Association (PNA) , petitioners , vs .AGNES G. ENGUITO-ABAD, EULARITO A. TAGALOG, and HERMAN ZOLETA, in their capacity as PNA Comelec Commissioners; Marcelo T. Lopez, Maria Rita V. Tamse, Nimia P. Juanday, Leonila A. Faire, Nilda B. Pascual, Edmunda B. Rillon, Pearlie M. Mintalar and Vilma L. Comoda, in their capacity as members of the PNA Board of Governors; and John Does , respondents . D E C I S I O N What is the effect of having a New By-Laws of Philippine Nurses Association, Inc.? This is the main issue to be resolved in this instant case. The petitioners seeks to nullify the election of the Philippine Nurses Association, Inc. (PNA for short) Board of Governors held on October 5, 1996, to declare all candidates in the same PNA election disqualified, to declare open for election the entire seventeen (17) seats in the PNA Board of Governors and to call for a new election, and to declare as null and void certain provisions of the PNA Election Code which are contrary to the provisions of the PNA By-Laws. The petitioners' prayer for the issuance of a Temporary Restraining Order, as contained in an Amended Petition, was granted to seventy-two (72) hours only. Thereafter, before the injunctive relief could be heard, petitioners, through their counsel, manifested that the hearing on the injunctive relief be cancelled and that the hearing on the main case be resumed. On May 5, 1997, the petitioners' Motion for Judgment on the Pleadings was denied. Subsequent hearings on the merit were held. Petitioners presented as their documentary evidence in 1984 Amended PNA By-Laws, the 1990 New By-Laws, the 1996 Amended PNA By-Laws, the corresponding certificates of filing and the PNA Election Code of 1990. Petitioners Lily Ann Baldago and Leda-Lago Danao also testified for and in their behalf Respondents presented Maria Rita V. Tamse as their witness. Respondents admit that during their recent annual elections, the entire seventeen (17) seats in the Board of Governors were not opened for election. It is now the contention of the petitioners that the entire seats of the Board of Governors of PNA. should be opened for election by, virtue of the approval of the New By-Laws in 1990. The 1996 Amended By-Laws of PNA provides: "ARTICLE IV Board of Governors SECTION 1. ... xxx xxx xxx SECTION 4. Term of Office the Board of Governors shall have a term of office of three (3) years provided that of the first governors elected immediately after the ratification of this By-Laws, the six (6) within the highest number of votes shall have a term of three (3) years the next six (6),two (2) years, and the last five (5) one (1) year. Thereafter, annual elections shall be held to replace the governors whose terms have expired. Governors are allowed only one (1) re-election or a maximum of six (6) years . ..." (Exhibit "C-2") while the New By-Laws of 1990, the provision regarding the term of office of the Board of Governors shows: "ARTICLE IV The Officers SECTION 1. ... xxx xxx xxx SECTION 3. Term of Office The Board of Governors shall have a term of office of three (3) years provided that of the first governors elected immediately after the ratification of these By-Laws, the first six (6) within the highest number of votes shall have a term of three (3) years the next six (6),two (2) years, and the last five (5) one (1) year. Thereafter, annual elections shall be held to replace the governors whose terms have expired. Governors are allowed only one (1) re-election or a maximum of six (6) years . ..." (Exhibit "B-2") and the 1984 Amended By-Laws reveals: "ARTICLE I General Provisions SECTION 1. ... xxx xxx xxx SECTION 7. Term of Office Of one third (1/3) of the number of Board of Governors shall expire every year, and subsequent elections of Board members comprising one third (1/3) of the Board members shall be held annually, and Board Members elected shall have a term of three (3) years . If for any valid reason, no election is held or failure to elect incumbent members, the Board of Governors shall continue office until their successors are duly elected and qualified. ..." (Exhibit "A-2") As can be observed, the 1996 provisions are the same as that of the 1990 although denominated as Amended By-Laws; while the 1990 provisions are not worded in the same manner as the 1984 provisions but the intention really is to have a staggered term of the Board of Governors. In other words, the provisions of the 1990 New By-Laws were worded just to correct the situation in 1984 because there are actually seventeen (17 seats of the Board and one-third (1/3) of this is not a whole number. And so, the 1990 New By-Laws provide for specific term for every number of seats in the board. In a hearing held on July 21, 1997, the counsels themselves clarified this to wit: "xxx xxx xxx Hearing Officer: What is the purpose of this witness? Atty. Arroyo: Your Honor, the purpose is merely to show that since 1990 up to the present, we have been following the staggered term of electing the governors nothing more. Hearing Officer: Counsel, when you say you don't stipulate the fact, you mean to say it was not staggered? Atty. Guzman: Actually, Your Honor, it is our position that the 3-1 scheme was never implemented. Hearing Officer: The 3-1 scheme was never implemented in the sense that? Atty. Guzman: In the sense that the 17 seats were not open for election so that the 3-1 scheme will be implemented, Your Honor. Hearing Officer: You mean to say, the election was staggered? Atty. Guzman: I'm not. Hearing Officer: You mean to say, if the 17 seats were not open for election, then it was partial in the sense that. ... Atty. Guzman: They continued with the old practice, Your Honor. Hearing Officer: Old practice? What is that old practice? Atty. Guzman: The 1990 PNA By-Laws is a new By-Laws. Hearing Officer: What is that old practice? Atty. Guzman: The old practice that under the 1984 PNA By-Laws supposed to be 1/3 of the 17 seats of the Board of Governors will be elected for the first year and another 1/3 for the second year. But since there is no 1/3 of the 17, Your Honor, the 1990 PNA By-Laws corrected that. ..." (TSN, July 21, 1997, pp. 33-36) and further revealed that there were 5, 5, 7, 6, 5 and 5 seats of the board that were elected in the years 1997, 1992, 1993, 1994, 1995 and 1996 elections respectively. (pp. 37-39 TSN July 21, 1997) The purpose and intention of the body in rewording the 1990 New By-Laws then is to correct the situation but not to render the entire 17 seats vacant. The phrase "that of the first governors elected immediately after the ratification of these By-Laws" stated in the By-Laws refers to the governors elected just after the incorporation of PNA and the ratification referred therein is the ratification of the original PNA By-Laws. A different interpretation would unjustly shorten the term of the governors, thus tantamount to their removal, which is not upheld by foreign jurisprudence, among which are: a) "Where the certificate of incorporation names directors to serve for the first year and neither the charter nor the bylaws make any provisions for the removal of directors, a bylaw subsequently adopted providing for the removal may be inconsistent with and a limitation upon the charter and consequently invalid" (In re Automotive Manufacturers' Assn.,120 Misc. 405, 199 NYS 313 as cited in Sec. 353 of Fletcher Cyclopedia Corporations, Vol. 2 p. 182) and b) "In other words, a corporation may adopt a bylaw providing for the removal of a director with or without cause, but such a bylaw may not be effective to authorize the removal of a director without cause who was in office at the time of its adoption or where removal is affected by provision in certificate providing for classification of directors for staggered three-year terms." (Section 354 of Fletcher Cyclopedia Corporations, p. 184 thereof) The Corporation Code of The Philippines requires that the original articles of incorporation of a corporation must be signed and acknowledged by all of the incorporators (Section 14 of the Corporation Code) and any amendment thereto likewise requires the vote or written assent of two-thirds (2/3) of the members. Also, Sec. 28 (Ibid) mandates that any trustee of a corporation may be removed from office by a vote of at least two-thirds (2/3) of the members entitled to vote. In other words, the law that installs the trustees requires a two-thirds vote of the members to remove them, while the amendment to and adoption of By-Laws which is being invoked by petitioners to declare the 17 seats of the Board of Governors open for election and thereby shortening their term requires majority vote of the members only. (Section 48, Ibid.). One can not unseat a trustee without complying with the two-thirds (2/3) vote of the members as a requirement, inter alia, of Section 28 of the Corporation Code. LibLex This Commission then can not support the petitioners' contention that the 17 seats of the PNA Board of Governors be declared open for election. Thus the issue as to whether the implementation of the new By-Laws was waived is not necessary to be discussed. The next issue involves the contradictory provisions in the PNA By-Laws and the PNA Election Code concerning the filing of candidacy. Section 2, Article VIII of the 1990 PNA New By-Laws states: SECTION 2. Filing of Candidacy . Any qualified candidates ( sic ) shall file their ( sic ) certificate of candidacy to the Comelec not later that sixty (60) days prior to the annual elections. This is carried over in the 1996 Amended By-Laws. On the other hand, the PNA Election Code of 1990 as amended in Resolution No. 100-N Series of 1990 (amended on 22 October 1992) provides for a different period within which to file the certificate of candidacy. Section 19, Article III of the PNA Election Code states: "SECTION 19. Filing of Certificate of Candidacy . The certificate of candidacy shall be filed in triplicate on any day from the commencement of the election period but not later than 30 days immediately preceding the day of the election as herein after fixed; provided that in case of postponement or failure of election, no additional certificate of candidacy shall be accepted." And Section 6, Article 1 of the same code provides: "SECTION 6. Election Period The election period commences thirty (30) days before the day of election and shall end thirty (30) days thereafter." It is very apparent that the Election Code is in conflict with the By-Laws. These provisions of the Election Code are in effect amendments to the By-Laws which could not be tolerated by this Commission. The PNA Comelec is a body which was created by and under the authority of the PNA By-Laws. To give validity to the aforequoted provisions in the PNA Election Code would be giving undue authority to the PNA Comelec to amend the PNA By-Laws. The PNA Comelec has no power or legal authority to do so. It is not included among those bodies authorized by law to amend the by-laws of a corporation. Section 6, Art. 1 and Section 19, Article III of the PNA Election Code are therefore null and void for being contrary to the PNA Amended By-Laws. The principle of estoppel being invoked by the respondents does not apply in the instant case. Petitioners are not estopped from questioning the validity of the pertinent provisions of the PNA Election Code when they discovered later on that the said provisions contradict the relevant provision in the PNA By-Laws. As officers of the PNA tasked to implement and uphold the By-Laws of the association, they have to correct all the wrong practices that were and are being committed, even though they may have unwittingly committed the same practice in the past. Besides, this Commission would not hesitate to act and exercise its adjudicatory and regulatory powers over corporations and associations, even motu proprio, if it comes to its attention that the by-laws of a corporation or association is being disregarded or violated with impunity. Petitioner also seek to nullify the 1996 PNA election and to disqualify the candidate of the same election for the above stated reasons. However, taking into account the legal ramification in case said election is nullified, and the candidate therein disqualified, as it will open the floodgates for suits as consequence of all the acts of the board. Judicial expediency dictates that the effect of the declaration of the nullity of the pertinent provisions of the PNA Election Code should be prospective in nature. By-Laws of a corporation should be construed according to the general rules governing the construction of contracts. (18 Am. Jur. 2d 699) They should be made to apply prospectively, not retroactively. (De Leon, Corporation C od e of the Phils., 1993 Ed., p. 386) Stated differently, this shall take effect this coming PNA elections. WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. declaring the election of the PNA Board of Governors held on October 5, 1996 as valid; 2. declaring the candidates in the October 5, 1996 election as qualified for that election only; 3. PNA to continue with the staggered manner of electing its Board of Governors; 4. declaring Section 19, Art. III and Section 6; Art. 1 of the PNA Election Code as null and void for being contrary to the provisions of the 1996 Amended PNA By-Laws, which shall be prospective in effect, and 5. PNA to conduct the regular annual election of its Board of Governors to be held in accordance with its By-Laws. No pronouncement as to damages and cost. SO ORDERED. (SGD.) MANOLITO S. SOLLER Hearing Officer