Opinion No. 24-02Re: Composition of Board of Trustees of a Condominium Corporation

Exchange Securities and Commission N

OFFICE OF THE GENERAL COUNSEL

SEC OGC Opinion No. 24-02 Re: Composition of Board of Trustees of a Condominium Corporation ( January 2024

amclopez@iglawph.com juanito.angeles@empire-east.com The Cambridge Village Condominium Association, Inc. Blk 19 Kabisig Road San Andres Floodway Cainta Rizal

Attn: Mr. Juanito N. Angeles Property Manager Gentlemen:

the Board of Trustees of The Cambridge Village Condominium Association, Inc. ("TCVCAI"). This refers to your lettert requesting for the Commission's opinion as regards the composition of

existing under Philippine laws. Currently, its Articles of Incorporation (AOl) and By-laws provide for five (5) trustees to be appointed as Board members. However, per TCVCAI's Master Deed and Declaration of Restrictions (MDDR), the same requires seven (7) trustees to be appointed as members of the Board. You mentioned in your letter that TCVCAI is a non-stock non-profit corporation registered and

and By-laws or 2) MDDR shall be followed. Specifically, you raise the following issues: In relation to the foregoing, you seek guidance and confirmation on which between the two: 1) AOI

1. In view of Section 10 of Republic Act (RA) No. 4726 or the Condominium Act, does the prescribed 2 If the MDDR prescribed number is to be followed, is there a need to amend TCVCAI's AOI and By- number of board of trustees in the MDDR (7 in the case of TCVCAI's MDDR) prevail over what is stated in the company's AOI and By-laws (5 in the case of TCVCAI's AOI and By-laws)?

3 If no quorum is mustered to amend the AOI and By-laws, which number of trustees should be used laws?;

In the determination of quorum, are all members including those in delinquent status entitled to during the elections, pending amendment of the AOl and By-laws?; and vote or only those in good standing? Condominium Corporation's Master Deed vis-a-vis its AOI and By-Laws

Section 10 of the RA No. 4726 or the Condominium Act2, as amended, provides:

to or inconsistent with the provisions of this Act, the enabling or master deed, or the declaration of restrictions of the project xxx" (Emphasis ours) "xxx The articles of inco rporation or by-laws of the corporation shall not contain any provision contrarg

By-laws and Master Deed, the provision of the latter shall prevail.3 As to your first query, settled is the rule that in case of inconsistencies in the provisions of the AOI/

Condominium Corp. 2 Republic Act No. 4726, The Condominium Act,18 June 1966, as amended by Republic Act No. 7899, 23 February1995 I Letter Request from The Cambridge Village Condominium Association Inc. dated 4 May 2022. SEC-OGC Opinion No. 18-05 addressed to Salvador Llanillo & Bernardo March 19, 2018 dated 19 March 2018, Re: Membership in a

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law prevails. Generalia specialibus non derogant.4 The provisions of the Revised Corporation Code (RCC) 5 , a general law, should therefore give way to the Condominium Act, a special law. Consequently, while as a rule, a corporation is authorized to provide in its By-laws, guidelines and rules for transacting corporate business, the same shall be subject to the provisions of an applicable special law (i.e. the Condominium Act), which explicitly provides for a specific rule on how to carry out the affairs of the condominium corporation. It is a basic tenet in statutory construction that between a general law and a special law, the special

should be followed. Hence, for purposes of determining the composition of the Board of Trustees, it is the MDDR that

Condominium Act, TCVCAI's AO1 and By-laws must be amended to be consistent with the provisions stated in its MDDR. As to your second query, considering the express and strict construction of Section 10 of the

Quorum

Section 51 of the RCC provides:

Section 51, Quorum in Meetings. - Unless otherwise provided in this Code or in the bylaws, a quorum shall consist of the stockholders representing a majority of the outstanding capital stock or a majority of the members in the case of nonstock corporations.

Meanwhile, Section 52 of the RCC provides for the quorum in meetings of directors or trustees:

act. (Emphasis supplied) incorporation or the bylaws provides for a greater majority, a majority of the directors or trustees as decision reached by at least a majority of the directors or trustees constituting a quorum, except for the election Section 52. Reg stated in the articles of incorporation shall constitute a quorum to transact corporate business, and every of officers which shall require the vote of a majority of all the members of the board, shall be valid as a corporate and Special Meetings of Director or Trustees; Quorur - Unless the articles of

transaction of a corporate business. However, the provision in the By-Laws relative to quorum will not hold true in those instances where the RCC 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, a quorum shall consist of such ratio of stockholders or members as may be declared by statutory provisions.6 Some of these instances are: As a rule, a corporation is authorized to provide in its By-laws the desired quorum for the

corporate assets.10 1. Amendment to the Articles of Incorporation; 2. Removal of directors or trustees;8 3. Extension or shortening of corporate term;9 4. Sale, lease, exchange, mortgage, pledge or any disposition of all or substantially all of the

For purposes of amending the AOI, Section 15 of the RCC provides that: Section. 15. Amendment of Articles of Incorporation. - Unless otherwise prescribed by this Code or by special law, and for legitimate purposes, any provision or matter stated in the articles of incorporation may stockholders representing at least two-thirds (2/3) of the outstanding capital stock, without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code. The articles of incorporation of a nonstock corporation may be amended by the vote or written assent of De majority of the trustees and at least two-thirds (2 /3) of the members amended by a majority vote of the board of directors or trustees and the vote or written assent of the

xxx. (Emphasis ours)

+ Leviste Management System, Inc. v. Legaspi Towers 200, Inc., G.R. Nos. 199353 & 199389, April 4, 2018 6 SEC-OGC Opinion No. 23-11 dated April 13, 2011 ci ting Letter dated 25 Nover Opinion dated February 4, 1997, citing previous SEC Opinion and 5 Fletcher Cyc. Corp. Sec. 2013. Section 15 of the Revised Corporation Code. 8 Section 27, Ibid. Section 36, Ibid. Republic Act No.11232,20 February 2019 Section39Ibid ber 1998 addressed to Ernesto C. Ignacio, citing SEC

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Meanwhile, for the amendment of the By-Laws.

of at least a majority of the outstanding capital stock, or at least a majority of the members of a repeal the bylaws or adopt new bylaws. The owners of two-thirds (2/3) of the outstanding capital stock or two-thirds (2/3) of the members in a nonstock corporation may delegate to the board of directors or trustees the power to amend or repeal the bylaws or adopt new bylaws: Provided, That any power delegated to the board of directors or trustees to amend or repeal the bylaws or adopt Section 47. Amendment to Bylaws. -- A majority of the board of directors or trustees, and the owners nonstock corporation, at a regular or special meeting duly called for the purpose, may amend or outstanding capital stock or majority of the members shall so vote at a regular or special r bylaws shall be considered as revoked whenever sto plders owning or representing a majority of the meeting Y

xxx. (Emphasis ours)

stockholders and trustees must be met. In the case of the trustees, the required quorum shall be majority of seven (7), which is the prescribed number in the MDDR, based on the principle that the MDDR shall prevail over the AOI and By-laws. Accordingly, if TCVCAI is to amend its AOI and By-Laws, the required quorum for both

amendment of the AOI and By-laws, the number of trustees that shall be elected must also be seven (7). Likewise, and to answer your third query, for purposes of election of board of trustees pending

Effect of Delinquency

Section 70 of the RCC is clear on the effect of delinquency of a stockholder/ member, to wit: Section. 70. Effect of Delinquency. - No delinquent stock shall be voted for, be entitled to vote, or b represented at any stockholder's meeting, nor shall the holder thereof be entitled to any of the rights of a stockholder except the right to dividends in accordance with the provisions of this Code. until and unless payment is made by the holder of such delinquent stock for the amount due on the subscription with accrued interest, and the costs and expenses of advertisement, if any. (Emphasis ours)

stock corporations, when pertinent, shali be applicable to non-stock corporations, except as may be covered by special provisions of this Title". Meanwhile, Section 86 of the RCC, paragraph 2 thereof, provides: "The provisions governing

In the case of Tan v. Sycip, G.R. No. 15346811, the Supreme Court held: "The Right to Vote in Nonstock Corporations

the law and the bylaws of the corporation. Each member shall be entitled to one vote unless so limited, broad- ened, or denied in the articles of incorporation or bylaws. We hold that when the principle for determining the quorum for stock corporations is applied by analogy to nonstock corporations, only those who are actual members with voting rights should be counted. x x x. onstock c ations, the voting rights attach to membership. Members vote as persons, in accordar

non-stock corporations 12 like TCVCAI. Thus, like delinquent stockholders, delinquent members are not entitled to vote.13 Accordingly, to answer your fourth query, delinquent members should not be included in determining the existence of the required quorum.14 As such, while Section 70 of the RCC pertains to stock corporations, the same may be applied to

circumstances and documents disclosed/submitted, and should be considered relevant solely to the Commission in other cases or upon the courts whether of similar or dissimilar circumstances.1s if upon particular issue raised therein. It shall not be used in the nature of a standing rule binding upon the It shall be understood that the foregoing opinion is rendered solely on the basis of the facts,

11 Tan v. Sycip, G.R. No. 153468, August 17, 2006, 530 PHIL 609-627 12 SEC-OGC Opinion No. 12-06 dated February 15, 2006. 15 Paragraph 7, SEC Memorandum Circular No. 15, Series of 2003. 14 SEC Opinion No. 05-05 dated June 8, 2005. 13 Ibid.

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investigation, it will be disclosed that the facts relied upon are different, this opinion shall be rendered null and void.

Please be guided accordingly.

Very truly yours. Cunmuarteomatm Romuald C Padilla feneral Counsel

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