Opinion No. 19-25 Re: Quorum in Meetings of a Condominium Corporation.

Securities and Exchange Commission Republic of the Philippines Department of Finance

OFFICE OF THE GENERAL COUNSEL

22 July 2019

SEC-0GC Opinion No. 19-25 Re: Quorum in Meetings of a Condominium Corporation

WILLIAM L. CHEW President Pico de Loro Cove

Hamilo Coast, Barangay Papaya 4231 Nasugbu, Batangas Condominium Corporation

Gentlemen:

determining quorum during annual membership meetings of Pico De Loro Cove Condominium Corporation ("Pico De Loro"). This refers to your letter dated 16 March 2018 requesting an opinion on

year. For years 2016 and 2017, the annual meetings were adjourned for failure to whose annual membership meeting is set by its By-Laws on the last day of April of each constitute a quorum. In your letter, you stated that Pico De Loro is a non-stock, non-profit corporation

annual membership meeting is "the attendance of only a simple majority of the basis of quorum should be as stated in the By-Laws and Master Deed with Declaration of Restrictions ("Master Deed"), and that the absence of such quorum would render all acts or transactions made during a meeting of no force and effect, thus, not binding on the corporation or parties concerned. members who are in good standing", you are now seeking confirmation that the proper As some members are suggesting that the basis of quorum for Pico de Loro's

provides: Section 51 in relation to Section 46(c)1 of the Revised Corporation Code2

"Section 51. Quorum in meetings - Unless otherwise provided for in this Code or in the by-laws, 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 non-stock corporation." (Emphasis ours)

Corporation Code (B.P. No. 68) 2 Republic Act No. 11232, Revised Corporation Code of the Philippines, 20 February 2019 ("Revised Corporation meetings of stockholders or members and the manner of voting therein"; xxx; Formerly Section 47(3) of the Code" 1 Section 46 (c) of the Revised Corporation Code of the Philippines: "Contents of By-Laws. The required quorum in

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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.4 quorum for the transaction of a corporation's business and other corporate acts. However, the Commission, citing Section 52 of the Corporation Code3 (now Section 51 of the Revised Corporation Code), has opined that any corporation, whether stock or As a rule, a majority of the members or stockholders is needed to constitute a

voting rights shall be counted in determining the existence of a quorum. Court has held in Tan et al vs. Sycip5 that only those who are actual, living members with In determining the basis for quorum for non-stock corporations, the Supreme

In Lim vs. Moldex Land, Inc.6, the Supreme Court also explained:

in non-stock corporations is the numerical equivalent of all "To be clear, the basis in determining the presence of quorum

be superfluous for although they may attend a particular "with voting rights" simply recognizes the power of a non-stock provided by the By-Laws of the corporation. The qualification corporation to limit or deny the right to vote of any of its meeting, they cannot cast their vote on any matter discussed therein. members. To include these members without voting rights in the total number of members for purposes of quorum would members who are entitled to vote, unless some other basis is XX X

of those members in good standing will constitute a quorum. Thus, 31 members in good standing will suffice in order to consider a meeting valid as regards the presence of quorum. The 31 members will naturally have to exercise their voting rights." (Emphasis ours) x x x Applying the law and Condocor's By-Laws, if there are 100 members in a non-stock corporation, 60 of which are members in good standing, then the presence of 50% plus 1

"Quorum" is defined in Section 8, Article I of Pico de Loro's By-laws as follows:

"The presence of members representing majority (more than 50%) interests in the Corporation and whose units are not delinquent in their duties and assessments shall constitute a quorum. x x x" (Emphasis ours)

area of all units in the condominium project. Declarations of Restrictions by computing the floor area of unit owned over the total On the other hand, "Interest" is defined in Pico de Loro's Master Deed with

3 Batas Pambansa Bilang 68, "The Corporation Code of the Philippines", 1 May 1980 5 Paul Lee Tan et al, vs. Paul Sycip and Merrito Lim, G.R. No. 153468, 17 August 2006 4 SEC-OGC Opinion No. 11-23 dated 13 April 2011, Architect Norberto V. Uy 6 Mary E. Lim vs. Moldex Land Inc. et al, G.R. No. 206038, 27 January 2017

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Considering the above Supreme Court rulings, Pico de Loro's By-Laws and Master Deed, we believe that to constitute a quorum during the annual Pico de Loro membership meeting, majority (more than 50%) interests should be based on the numerical equivalent of the total interest of all members who are entitled to vote, unless there is a clear intention by the members to the contrary. Otherwise, there will be members who will be present but will not be able to vote on any matter that will be taken up during said meeting. As stated in Section 2, Article III of Pico de Loro's By- Laws, only those members who are in good standing are eligible to vote.7 The phrase "whose units are not delinquent in their duties and assessments" in Section 8, Article I of Pico de Loro's By-Laws simply recognizes the power of Pico de Loro to limit or deny the right to vote of any of its members.

We are constrained, however, not to comment on the accuracy of the figures in

Commission shall refrain on rendering opinion where resolution of the queries would necessitate the determination of factual issues. the computation you have presented in your letter. As a matter of policy, the

that no action can be taken except to adjourn.8 Any act or transaction made during a meeting without quorum is rendered of no force and effect, thus, not binding on the corporation or parties concerned.9 As to your query on the effects of an absence of a quorum in a meeting, we opine

circumstances. 1o If, upon'further inquiry and investigation, it will be disclosed that the solely on facts and circumstances disclosed and relevant solely to the particular issues Commission in other cases or upon the courts whether of similar or dissimilar facts relied upon are different, this opinion shall be rendered null and void. raised therein and shall not be used in the nature of a standing rule binding upon the It shall be understood, however, that the foregoing opinion is rendered based

Please be guided accordingly.

CAMD S. CORE General Counsel C

annual membership meeting was null and void and, therefore, not binding upon the corporation or its members. The meeting being null and void, the resolution and disposition of other legal issues emanating from the null and void July at any meeting of the members provided that they are in good standing. A member shall be in good standing if he is not delinquent in paying his dues and assessments and is not subject to any disciplinary action by the Board of 8 The Corporation Code of the Philippines, Annotated by Hector S. De Leon, 2002 Edition, p. 480 9 As held in Lim vs. Moldex Land, inc.: "As there was no quorum, any resolution passed during the July 21, 2012 21, 2012 membership meeting has been rendered unnecessary." 10 SEC Memorandum Circular No. 15, s. of 2003, No.7 7 Section 2, Article III of Pico de Loro's By-Laws provides: "Eligibility to Vote. All members shall have the right to vote Trustees.