Danilo Tiongson vs. Benjamin de Jesus, et al.

[SEC-SICD * CASE NO. 1828. January 12, 1981.] DANILO TIONGSON , petitioner , vs .BENJAMIN DE JESUS, ET AL. , respondents . D E C I S I O N This is a petition for Quo Warranto with prayer for preliminary injunction filed by petitioner Danilo Tiongson to restrain the herein principal respondent, Benjamin de Jesus, from acting and/or exercising the powers and prerogatives as President of the Tarlac Jaycees, Inc. based on the ground that the petitioner, and not respondent Benjamin de Jesus, was the duly elected President of the corporation. Subsequently, petitioner sought, in an amended complaint, to restrain respondent Junior Chamber of the Philippines from extending recognition to respondent Benjamin de Jesus as the duly elected President of the Tarlac Jaycees, Inc. Principal respondent de Jesus, in his answer to the original complaint which is deemed as his answer to the amended complaint, for his failure to file an amended answer, admitted the material allegations of the complaint. In view of said admission, petitioner alleged that no issue was tendered by the Answer, for which reason he moved for a judgment on the pleading in accordance with Section 1, Rule XIV of the New Rules of Procedure in the Securities and Exchange Commission .Finding merit in the motion, the same is hereby given due course. It appears from the amended complaint and as admitted by the respondents that on November 10, 1979 the Tarlac Jaycees, Inc. held its general membership meeting in its principal office in Tarlac, Tarlac. On said meeting, fourteen (14) members of the Board of Trustees of the corporation were elected. Immediately thereafter, and in accordance with the By-Laws of the corporation which, incidentally, has not been filed with this Commission, a consensus election was conducted among the members to choose the President, with the herein petitioner and respondent Benjamin de Jesus as the two aspirants. The petitioner won the consensus election and was proclaimed by the COMELEC (Exh. "4" for the petitioner).The elected members of the Board of Trustees who were present in person and/or represented by proxies subsequently convened a board meeting for the purpose of formally electing the officers of the corporation. During the said election, principal respondent Benjamin de Jesus was nominated for President which was objected to by herein petitioner on the ground that the latter had already won the consensus election for President and nominating the former would constitute a violation of the By-Laws of the corporation, more particularly Section 4, Article VI thereof. The presiding officer ruled that any member of the Board can be nominated for president, provided that in the election, the board shall be guided by the results of the consensus as provided for by the By-Laws. The body proceeded to the election of officers but petitioner together with two others walked out of the meeting. Respondent Benjamin de Jesus ultimately was elected President by the remaining members of the board (Exh. "C" and Exh. "1" for the petitioner and respondents, respectively). The issue to be decided in this case is who has a better right to the presidency petitioner Tiongson who won in the consensus election made among the members or respondent Benjamin de Jesus who was elected by the Board, disregarding the result of the said consensus. Resolution of this issue necessarily involves the interpretation of Section 4, Article VI of the By-Laws of the Corporation, which provides that: "SECTION 4. The Board of Directors shall elect among themselves the officers, namely: a President, Executive Vice-President, Vice-President for Internal Affairs, Vice-President for External Affairs. Secretary, Treasurer, Auditor, Public Relations Officer, Security Officer; provided, however, that in the election of the President the Board of Directors shall be guided by the result of the consensus of the members who took part in the election which shall be taken immediately after the proclamation of the winners." (Emphasis supplied) cdll Petitioner's contention is that the above-quoted proviso is mandatory, and having won the consensus election, the board is left with no choice but to elect him president or at least ratify or confirm his earlier election as such. Petitioner based his argument on the use of the word "shall" which connotes the mandatory nature of the provision. We cannot sustain petitioner's theory. Section 33 of the Corporation Law provides: "SECTION 33. Immediately after election, the directors of a corporation must organize by the election of a president who must be one of their number. ...." The above-quoted provision has exclusively vested in the board of trustees the power to elect the president and other officers of a corporation. This prerogative would be taken away from the board and will be lodged with the members if we were to sustain petitioner's theory that the board cannot elect a president other than the one who won in the consensus election which was participated in by the members. In effect, this would be a circumvention of the above-quoted provision of the Corporation Law. While it is true that the word "shall" is ordinarily used in the imperative sense, in this particular provision, said word shall be interpreted together with the word "guide" in order to have a clearer perspective of the entire provision. Further, even if the word "shall" is given a mandatory connotation, this provision of the By-Laws would be contrary to the law and, therefore, cannot prevail over it. Under the Corporation Law (Sec. 13(7)) as well as the Corporation Code, (Sec. 36(5)) the By-Laws should not be inconsistent with or contrary to any existing law. On the other hand, with respect to the election of respondent Benjamin de Jesus as President, it appears from the minutes of the organizational meeting of the Board of Trustees held on December 10, 1979, that proxies were allowed to vote in the said election. It should be emphasized that voting by proxy in a directors' meeting is not allowed. Thus, "the directors of a corporation cannot vote at a directors meeting by proxy, but must be personally present themselves. A director's personal judgment is necessary, and he cannot delegate his duties" (Agbayani, Vol. 3, Commentaries and Jurisprudence on the Commercial Law of the Philippines, p. 367).Likewise, "a director of a corporation cannot delegate his power to vote in the board by giving his proxy to another person for the purpose of consultation. They cannot vote or act in any manner. A director, of course, cannot act or vote by proxy," (First National Bank of Omaha vs. East Omaha Box Co. 2 Neb. (Unoff.) 820, 90 N.W. 223; Lippman vs. Keheo Stenograph Co.,11 Del. Ch. 20, 95 Atl. 895, cited footnote Vol. 2 Fletcher, par. 427). Further, it has been noted that in the election of the members of the Board of Trustees at the aforesaid general annual meeting of the corporation, fourteen (14) members were elected, despite the fact that the Articles of Incorporation provides for only eleven (11) members. It is also noted that Art. VII, Section 1, of the By-Laws provides for only ten (10) members. The election of a greater number of directors than was provided for and allowed by the certificate of incorporation is irregular. (Vol. 2 Fletcher Cyclopedia of the Law of Private Corporation, Permanent Edition, p. 77). WHEREFORE, the election of the fourteen (14) members of the Board of Trustees of the Tarlac Jaycees, Inc. held on November 10, 1979 is hereby declared null and void because more members were elected than that provided for in the Articles of Incorporation. Likewise, the election of its officers on December 10, 1979 by the irregularly constituted board and during which proxies were used, are hereby null and void. Consequently, respondent Junior Chamber of the Philippines is hereby enjoined from recognizing the respondent members of the Board of Trustees and the Officers of the Tarlac Jaycees, Inc.,for the 1979-1980 term. The Tarlac Jaycees, Inc. thru its hold-over board and officers, are hereby directed to file its By-Laws with this Commission within ten (10) days from finality hereof. Within thirty (30) days from the issuance of the certificate of filing of said By-Laws by this Commission, the said corporation thru the corresponding hold-over board and officers is hereby directed to call and convene its annual membership meeting for the election of its board and the subsequent election of its officers for the year, 1981. Let a copy of this Decision be furnished the Corporate and Legal Department of this Commission. prLL (SGD.) ALFREDO B. OCA Hearing Officer