Powers vs. Marshall

The Board of Trustees of the International School, Inc. was authorized under its By-Laws and Section 2(b) of P.D. No. 732 to impose a development fee upon students, after consultation with the Secretary of Education and Culture, as a valid exercise of corporate power binding upon all members.

The International School, Inc. is a corporation whose associate members include the plaintiffs-appellants; its Board of Trustees is composed of the defendants-appellees. Under Section 2, Article 3 of the corporation's By-Laws, the Board may exercise such powers and do such acts as may be lawfully exercised or performed by the corporation, subject to applicable laws and the articles of incorporation and By-Laws. Section 2(b) of P.D. No. 732 granted the school certain rights and expressly authorized the Board, upon consultation with the Secretary of Education and Culture, to determine the amount of fees and assessments reasonably imposed upon its students to maintain or conform to the school standard of education.

The plaintiffs-appellants were fourteen associate members of the International School, Inc., suing on behalf of themselves and 316 other associate members and for the benefit of the school. The defendants-appellees were the ten members of the school's Board of Trustees and Max Snyder, the school superintendent. The dispute concerned a development fee of P2,625.00 per child-enrollee per school year for twelve years, beginning with school year 1975-1976, which the Board required as a prerequisite for re-enrollment.

On May 19, 1975, Donald I. Marshall, president of the Board of Trustees, wrote to the parents of students, notifying them that the Board had decided to construct new buildings and remodel existing ones to accommodate increasing enrollment, and that the school needed to raise P35,000,000.00 for this purpose. The Board intended to raise the funds primarily through subscriptions to capital notes and prepayment certificates, with any deficiency covered by collecting the development fee from each enrollee starting with school year 1975-1976 and continuing up to school year 1986-1987.

On June 11, 1975, Superintendent Dr. Max Snyder, acting under instructions from the Board of Trustees, wrote to the parents of returning students and enclosed an Application for Admission advising that payment of the development fee was a prerequisite for re-enrollment. The plaintiffs protested the imposition. In a petition dated June 18, 1975, they requested the Board to suspend implementation of the requirement of payment of the development fee as a prerequisite to final enrollment or re-enrollment for school year 1975-1976. On July 7, 1975, Marshall, signing for the Board and as president, extended the deadline for selecting the payment option from July 15 to July 22, 1975; allowed deferred payment from August 1, 1975 to October 13, 1975, with quarterly payment; and granted assistance on a case-to-case basis.

On July 16, 1975, the plaintiffs filed a complaint for injunction in the Court of First Instance of Rizal, docketed as Civil Case No. 21612. The next day, the trial court issued a temporary restraining order barring the defendants from enforcing the development program or requiring payment of the development fee or matriculation fee as a prerequisite for re-enrollment or enrollment. During the July 24, 1975 hearing, the trial court heard both the plaintiffs' application for a preliminary injunction and the defendants' motion to dismiss. After memoranda were submitted, the trial court on November 18, 1975 dismissed the complaint for lack of a valid cause of action and dissolved the July 17, 1975 restraining order. The plaintiffs' motion for reconsideration was denied, and they appealed.

• Lack of Authority of the Board: Plaintiffs-appellants alleged, on appeal, four assignments of error reducible to the lone legal question of whether the Board of Trustees of the International School was authorized to adopt the development plan for which the disputed fee was being collected from the students.

• Authority of the Board of Trustees: Whether the Board of Trustees of the International School was authorized to adopt the development plan for which the disputed fee was being collected from the students.

• Authority of the Board of Trustees: Yes. The Board was authorized under Section 2, Article 3 of the By-Laws and Section 2(b) of P.D. No. 732, which permits it, upon consultation with the Secretary of Education and Culture, to determine the amount of fees and assessments reasonably imposed upon students. The collection was a valid exercise of corporate power binding on all members.

• Authority of the Board of Trustees: Section 2, Article 3 of the By-Laws granted the Board such powers and the right to do such acts as may be lawfully exercised or performed by the corporation, subject to applicable laws and the articles of incorporation and By-Laws. Section 2(b) of P.D. No. 732 expressly authorized the Board, upon consultation with the Secretary of Education and Culture, to determine the amount of fees and assessments which may be reasonably imposed upon its students to maintain or conform to the school standard of education. Such consultation had been made, and the Secretary expressed conformity with the reasonableness of the assessment of P2,625.00 per student for the whole school year to carry out the development program. The lower court observed that the expansion of school facilities, by improving old buildings and/or constructing new ones, is an ordinary business transaction well within the competence of the Board of Trustees; being directly related to the purpose of elevating and maintaining the school's standard of instruction ordained by P.D. No. 732, the expansion could not result in any radical or fundamental change in the kind of activity conducted by the school that might require the consent of the members. Since the collection of the development fee had been approved by the Board of Trustees, it was a valid exercise of corporate power, and the assessment was binding upon all members. The action to stop collection was correctly dismissed for lack of a valid cause of action against the school.

• Board of Trustees' power to impose fees and assessments — Under Section 2, Article 3 of the By-Laws and Section 2(b) of P.D. No. 732, the Board of Trustees may determine the amount of fees and assessments reasonably imposed upon students, provided it consults the Secretary of Education and Culture, to maintain or conform to the school standard of education. In this case, consultation was made and the Secretary expressed conformity with the reasonableness of the P2,625.00 per student assessment, so the fee was valid.
• Expansion of school facilities as an ordinary corporate act — The improvement of old buildings and construction of new ones is an ordinary business transaction within the competence of the Board of Trustees. Because it is directly related to the school's purpose of elevating and maintaining its standard of instruction under P.D. No. 732, such expansion does not constitute a radical or fundamental change requiring the consent of the members.
• Binding effect of Board-approved assessments on members — Where the collection of a development fee is approved by the Board of Trustees as a valid exercise of corporate power, the assessment binds all members of the corporation, and an action to stop collection for lack of a valid cause of action must fail.

• "Section 2 (b) of P.D. No. 732 granting certain rights to the International School, Inc., expressly authorized the Board of Trustees "upon consultation with the Secretary of Education and Culture, ... to determine the amount of fees and assessments which may be reasonably imposed upon its students, to maintain or conform to the school standard of education."" — This states the statutory basis for the Board's authority to impose the development fee.
• "Since the collection of the development fee had been approved by the Board of Trustees of the International School, Inc., it was a valid exercise of corporate power by the Board, and said assessment was binding upon all the members of the corporation." — This is the ratio decidendi on the validity and binding effect of the assessment.
• "... the expansion of the school facilities, which is to be done by improving old buildings and/or constructing new ones, is an ordinary business transaction well within competence of the Board of Trustees to act upon, ... Being directly related to the purpose of elevating and maintaining the school's standard of instruction, which is ordained in fact by Presidential Decree No. 732, the expansion cannot result in any radical or fundamental change in the kind of activity being conducted by the school that might require the consent of the members composing it." — This adopts the lower court's characterization of the expansion as an ordinary corporate act not requiring member consent.

• Section 2, Article 3, By-Laws of the International School, Inc. — Granted the Board of Trustees, in addition to the powers conferred by the By-Laws, the right to exercise such powers and do such acts as may be lawfully exercised or performed by the corporation, subject to applicable laws and the articles of incorporation and By-Laws. The Court relied on this as part of the Board's authority to act on the development plan.
• Section 2(b), Presidential Decree No. 732 — Expressly authorized the Board of Trustees, upon consultation with the Secretary of Education and Culture, to determine the amount of fees and assessments reasonably imposed upon its students to maintain or conform to the school standard of education. The Court found consultation was made and the Secretary conformed, making the P2,625.00 assessment valid.

Justice Narvasa, Justice Cruz, and Justice Gancayco concurred.