Lim vs. Moldex Land, Inc.

In non-stock corporations, the existence of a quorum is determined by the numerical majority of actual members who are entitled to vote (members in good standing), not by the majority of the total voting rights or outstanding capital stock; consequently, non-members cannot be elected as directors or trustees of a non-stock corporation even if they represent a corporate member.

The case arises from a dispute over the control and management of 1322 Golden Empire Tower, a condominium project developed by Moldex Land, Inc. Moldex retained ownership of 220 unsold units and sought to exercise control over the condominium corporation (Condocor) through its appointed representatives, who were elected as directors and officers during a controversial general membership meeting. This raised significant issues regarding the proper composition of the board of a condominium corporation and the rights of owner-developers versus unit buyers.

• Mary E. Lim is a registered unit owner of 1322 Golden Empire Tower, a condominium project developed by Moldex Land, Inc. (Moldex).
• 1322 Roxas Boulevard Condominium Corporation (Condocor) is the registered non-stock, non-profit condominium corporation for the project.
• Moldex owns 220 unsold units in the building and consequently holds 58,504 voting rights based on the condominium's voting system (one vote per square meter).
• On July 21, 2012, Condocor held its Annual General Membership Meeting. Only 29 of the 108 unit buyers were physically present.
• The corporate secretary certified and the chairman declared the existence of a quorum based on the presence of the majority of voting rights (83.33%), including the voting rights of Moldex exercised through its representatives (the individual respondents).
• Lim, through her attorney-in-fact, objected to the validity of the meeting on the ground of lack of quorum, but her objection was denied. Lim and other unit owners walked out.
• Despite the walkout, the meeting proceeded and elected the individual respondents (Jaminola, Macalintal, Milanes, and Roman) as members of the Board of Directors. These individuals are not unit owners but were purportedly Moldex's representatives.
• An organizational meeting followed where the individual respondents were elected as corporate officers: Jaminola as Chairman/President, Milanes as Vice-President, Roman as Treasurer, and Macalintal as Corporate Secretary.
• Lim filed a case for annulment of the meeting and election, accounting, and damages.

• The lower court erred in ruling that quorum should be determined by including non-unit buyers (Moldex's voting rights) contrary to the Condocor By-Laws, the Corporation Code, and settled jurisprudence.
• The lower court erred in recognizing Moldex as a member of Condocor entitled to appoint representatives to the Board.
• Even assuming Moldex is a member, there is no basis for it to be elected to the Board because it is a juridical person, and its representatives (who are non-members) cannot sit as directors.
• The lower court erred in recognizing Moldex as owner-developer with four reserved seats, which effectively allows the developer to dominate the condominium corporation contrary to the intent of P.D. No. 957 (The Subdivision and Condominium Buyers' Protective Decree).

• The petition should be dismissed for improper mode of appeal (Rule 45 instead of Rule 43 via the Court of Appeals) because it involves mixed questions of fact and law.
• Lim has no cause of action because she allegedly assigned her unit to her nephew and niece, ceasing to be a member of Condocor.
• Quorum was properly constituted based on the majority of voting rights (83.33% presence) as provided in the By-Laws and Section 52 of the Corporation Code.
• Moldex is a member of Condocor by virtue of its ownership of 220 unsold units under the Condominium Act (RA 4726), and as a corporate member, it may appoint representatives to exercise its membership rights, including the right to vote and be voted as directors.
• SEC Opinions support the election of authorized representatives of corporate members as directors.

• Procedural: Whether the petition for review on certiorari under Rule 45 is the proper mode of appeal from the RTC decision in an intra-corporate dispute, or whether it should have been filed with the Court of Appeals under Rule 43.
• Substantive Issues: Whether the July 21, 2012 Annual General Membership Meeting was valid, specifically whether a quorum existed. Whether Moldex Land, Inc., as owner-developer of unsold units, is a member of Condocor. Whether non-unit owners (individual respondents) can be elected as directors and officers of Condocor.

• Procedural: The Supreme Court held that while intra-corporate disputes are generally appealable to the Court of Appeals under Rule 43, a direct petition for review on certiorari under Rule 45 before the Supreme Court is proper when the issues raised are purely legal and do not involve an examination of the probative value of evidence. The Court found that Lim's arguments involved pure questions of law (interpretation of the Corporation Code, Condominium Act, and By-Laws), thus the petition was properly entertained.
• Substantive: The Court reversed the RTC on the quorum issue, holding that in non-stock corporations, quorum is determined by the numerical majority of actual members entitled to vote (members in good standing), not by the majority of total voting rights. Section 52 of the Corporation Code distinguishes between stock corporations (quorum based on outstanding capital stock) and non-stock corporations (quorum based on majority of members). Since only 29 of 108 members were present, there was no quorum, rendering the meeting null and void. The Court affirmed that Moldex is a member of Condocor. Under Section 2 and 10 of RA 4726 (Condominium Act), ownership of a unit automatically makes one a member of the condominium corporation. This applies to owner-developers holding unsold units. Membership is not limited to unit buyers but extends to registered owners regardless of how ownership was acquired (sale, donation, etc.). The Court ruled that individual respondents, being non-members (they were merely representatives of Moldex), cannot be elected as directors or trustees of Condocor. Sections 23 and 92 of the Corporation Code mandate that trustees of non-stock corporations must be members thereof. While proxies may vote, they cannot be elected as directors if they are not members in their own right. Consequently, their election as officers (President, VP, Secretary) was also void because these positions require directorship (except Treasurer, which was still void due to the nullity of the meeting).

• Quorum in Non-Stock Corporations — In non-stock corporations, quorum is determined by the numerical majority of actual members who are entitled to vote (members in good standing), not by the majority of the total voting rights or outstanding capital stock. The basis is the number of members present, not the aggregate voting power they represent.
• Membership in Condominium Corporations — Under the Condominium Act (RA 4726), ownership of a condominium unit, whether acquired by sale, donation, or inheritance, automatically entitles the holder to membership in the condominium corporation. Owner-developers holding unsold units are valid members.
• Qualifications of Directors/Trustees in Non-Stock Corporations — Section 92 of the Corporation Code requires that trustees of non-stock corporations must be members thereof. Non-members, even if acting as proxies or representatives of corporate members, cannot be elected as directors or trustees.
• Distinction Between Quorum and Voting Rights — Quorum refers to the presence of the required number of members to transact business, while voting rights refer to the power to approve specific actions. In non-stock corporations, a member may hold multiple voting rights based on unit ownership, but for quorum purposes, each member counts as one unit regardless of voting rights attached.

• "Thus, for stock corporations, the quorum is based on the number of outstanding voting stocks while for non-stock corporations, only those who are actual, living members with voting rights shall be counted in determining the existence of a quorum."
• "To be clear, the basis in determining the presence of quorum in non-stock corporations is the numerical equivalent of all members who are entitled to vote, unless some other basis is provided by the By-Laws of the corporation."
• "Trustees of non-stock corporations must be members thereof."
• "While Moldex may rightfully designate proxies or representatives, the latter, however, cannot be elected as directors or trustees of Condocor."
• "As there was no quorum, any resolution passed during the July 21, 2012 annual membership meeting was null and void and, therefore, not binding upon the corporation or its members."

• Century Iron Works, Inc. v. Banas, 711 Phil. 576 (2013) — Cited to distinguish between questions of law (reviewable under Rule 45) and questions of fact (requiring evaluation of evidence).
• Tan v. Sycip, 530 Phil. 609 (2006) — Cited for the principle regarding quorum in non-stock corporations.
• Sunset View Condominium Corp. v. Hon. Campos, Jr., 191 Phil. 606 (1981) — Cited to define "separate interest" in condominium ownership and automatic membership; distinguished regarding the requirement of full payment for ownership (Lim's argument rejected).
• Casabuena v. CA, 350 Phil. 237 (1998) — Cited regarding the effect of assignment of rights (assignee acquires only rights of assignor).
• Heirs of Gamboa v. Teves, 696 Phil. 276 (2012) — Cited to establish that SEC Legal Opinions do not have the force and effect of SEC rules and regulations.
• Medical Plaza Makati Condominium Corporation v. Cullen, 720 Phil. 732 (2013) — Cited regarding the nature and purpose of condominium corporations under RA 4726.

• Section 52, Corporation Code — Defines quorum as majority of outstanding capital stock for stock corporations and majority of members for non-stock corporations.
• Section 23, Corporation Code — Requires directors/trustees to be elected from among members (for non-stock) or stockholders (for stock).
• Section 92, Corporation Code — Explicitly states that no person shall be elected as trustee unless he is a member of the corporation.
• Section 25, Corporation Code — Mandates that the President must be a director.
• Section 58, Corporation Code — Allows members to vote by proxy.
• Section 89, Corporation Code — Recognizes power of non-stock corporations to limit voting rights.
• Section 90, Corporation Code — States that membership in non-stock corporations is personal and non-transferable unless otherwise provided.
• Republic Act No. 4726 (Condominium Act), Sections 2 and 10 — Provide for automatic membership of unit owners in condominium corporations and non-transferability of membership separate from the unit.
• Presidential Decree No. 957, Section 30 — Discussed but held inapplicable to condominium corporations (distinguishes homeowners associations from condominium corporations).
• A.M. No. 04-9-07-SC — Interim Rules on intra-corporate controversies and mode of appeal.