VII.

Non-Stock Corporations (Sections 86-

94, Revised Corporation Code)
 Case Title and Citation: Alfredo Long and Felix Almeria vs. Lydia Basa, Anthony Sayheeliam and Yao Chek
G.R. Nos. 134963-64, September 27, 2001
Ponente: Sandoval-Gutierrez, J.
Petitioner: Alfredo Long and Felix Almeria
Respondent: Lydia Basa, Anthony Sayheeliam and Yao Chek
Case Summary
This case revolves around a dispute within a religious corporation who were expelled by the Board of Directors
for promoting doctrines that is allegedly contrary to the church’s principles. The expelled members argued that their
removal was done without due process for they were not given a prior notice or hearing. The case reached the Supreme
Court where it was affirmed that religious organizations have the right to self-govern and enforce internal rules on
membership and discipline without civil court interference.

Doctrine/s:
1) Freedom of Religion and Religious Autonomy: Religious corporations are governed by their own internal rules,
particularly when it comes to matters of faith and discipline.

2) Corporation Code , Section 91 & Section 109: Membership in a religious corporation may be terminated in
accordance with its Articles of Incorporation or By-laws.

3) Waiver by Consent: Members who voluntarily agree to a corporation’s rules are bound by those rules, even if
those rules do not require notice before expulsion.

Facts of the Case

• In 1973, a religious group known as The Church in Quezon City was registered with the SEC. Under its By-laws, it
gave its Board of Directors the full authority to admit or expel members.
• From 1988 onwards, members Alfredo Long, Felix Almeria, and others were observed to be promoting doctrines
not based on the Bible or the Church's faith.
• The Board repeatedly warned these members, both in group and one-on-one meetings, to change their
conduct.
• When they did not comply, the Board updated the official membership list in 1993, wherein the names of Long,
Almeria and other were deleted, along with others who had left the country, died, or lost contact.
• The removed members filed a case with the SEC, arguing lack of notice and hearing. The SEC en banc ruled in
their favor and ordered reinstatement.
• The Board appealed to the Court of Appeals, which reversed the SEC ruling.
• Long and others elevated the matter to the Supreme Court.
Issue/s
Was expulsion of the petitioners by the Church’s Board of Directors without prior notice and hearing is valid and
in accordance with the law?

Decision/Ruling and Ratio

• Yes, the expulsion of Long, Almeria, and others was valid even without prior notice or hearing.
• Section 91 of the Corporation Code allows membership termination based on the Articles of incorporation or in
their By-laws.
• Section 109 extends this rule to religious corporations.
• The Church’s By-laws did not require prior notice or hearing before expulsion for the only requirements were: (a)
The Board is informed of improper conduct and (b) A resolution of expulsion is passed.
• Long and others were warned multiple times but continued promoting doctrines against Church teachings and
so, the Board removed them from the membership list in accordance with their By-laws.
• It was argued that by voluntarily joining the Church, they agreed to be bound by its rules, waiving any right to
notice or hearing.
• Even if due process was applied, they had received sufficient informal notice.
• The Supreme Court upheld the expulsion for the religious corporations have the authority to discipline members
based on internal rules, and civil courts will not interfere when those rules are followed.

Significance
• This case affirms the autonomy of religious organizations in managing internal affairs, particularly in matters of
discipline and membership.
• It clarifies that membership can be terminated based solely on the group’s internal rules, without civil court
interference, so long as those rules are followed.
• It reinforces that freedom of religion includes the right of religious groups to self-govern and maintain doctrinal
integrity.

Case Title and Citation: Sta. Clara Homeowners' Association vs. Sps.

Gaston, G.R. No. 141961, Jan. 23, 2002

Ponente: Panganiban, J.

Petitioners: Sta. Clara Homeowners’ Association thru its Board Of Directors

Composed Of Arneil Chua, Luis Sarrosa, Jocelyn Garcia, Ma. Milagros

Vargas, Lorenzo Lacson, Ernesto Piccio, Dindo Ilagan, Danilo Gamboa Jr.

And Rizza De La Rama; Security Guard Capillo; "John Doe"; And Santa

Clara Estate, Inc.

Respondents: Spouses Victor Ma. Gaston And Lydia Gaston

Case Summary: In this case, the Gastons, non-members of the

homeowners’ association, were denied access to the subdivision based on

a board resolution. They argued they had not consented to membership.

The RTC ruled in their favor, and the Supreme Court affirmed, holding that

membership in a homeowners’ association is voluntary and that individuals

cannot be compelled to join without consent. The Court also confirmed that

the RTC had jurisdiction, as the case involved the enforcement of

constitutional rights rather than an intra-corporate dispute.

Doctrine/s:

➔ Voluntary Membership in Homeowners' Associations

The Court ruled that membership in a homeowners' association is

voluntary and cannot be imposed through provisions in the

association's Articles of Incorporation or By-Laws without the

homeowner's express or implied consent.

➔ Doctrine of Corporate Powers under Section 36 of the Corporation

Code: Corporations can only exercise powers expressly granted by

law or by their articles of incorporation, and those necessary or

incidental to the exercise of such powers.

➔ Limited Corporate Authority

Homeowners’ association cannot unilaterally bind non-consenting

property owners to its rules or resolutions.

Facts of the Case:

➔ Spouses Victor Ma. Gaston and Lydia Gaston filed a complaint for

damages with preliminary injunction/preliminary mandatory injunction

and temporary restraining order before the RTC against petitioners

Sta Clara Homeowners Association (SCHA).

➔ The complaint alleged that the private respondents purchased their

lots in Sta. Clara Subdivision and at the time of the purchase, there

was no mention or requirement of membership in any homeowners’

association.

➔ From that time on, they have remained non-members of the SCHA.

➔ They also stated that an arrangement was made wherein

homeowners who were non-members of the association were issued

non-member gate pass stickers for their vehicles for identification by

the security guards manning the subdivision’s entrances and exits.

➔ This arrangement remained undisturbed until sometime in the middle

of March 1998, when SCHA disseminated a board resolution which

decreed that only its members in good standing were to be issued

stickers for use in their vehicles.

➔ Petitioners filed a motion to dismiss arguing that the trial court had no

jurisdiction over the case as it involved an intra-corporate dispute

between SCHA and its members.

➔ The proper forum must be the Home Insurance and Guarantee

Corporation (HIGC).

➔ They stated that the Articles of Incorporation of SCHA, which was

duly approved by the Securities and Exchange Commission, provides

that the association shall be a non-tock corporation with all the

homeowners of Sta. Clara constituting its membership. Its by-laws

also contain a provision that all real estate owners automatically

become members of the association.

➔ The private respondents allegedly enjoyed the privileges of

membership and abided by the rules of the association, and even

attended the general special meeting of the association members.

Issue: WoN private respondents are members of SCHA.

Ruling:

➔ The constitutionally guaranteed freedom of association includes the

freedom not to associate. The right to choose with whom one will

associate oneself is the very foundation and essence of the

partnership. It should be noted that the provision guarantees the right

to form an association. It does not compel others to form or join one.

➔ Private respondents cannot be compelled to become members of

SCHA by the simple expedient of including them in its Articles of

Incorporation and By-Laws without their express or implied consent.

➔ Although it is true, it may be to the mutual advantage of lot owners in

a subdivision to band themselves together to promote their common

welfare. But that is possible only if the owners voluntarily agree,

directly or indirectly, to become members of the association.

➔ Membership in homeowners’ associations may be acquired in various

ways – often through deeds of sale, Torrens certificates or other

forms of evidence of property ownership.

➔ When private respondents purchased their property and obtained

Transfer Certificates of Title, there was no annotation showing

automatic membership in the SCHA. Thus, no privity of contract

arising from the title certificate exists between petitioners and private

respondents.
➔ The Complaint does not allege that private respondents are members

of the SCHA. In point of fact, they deny such membership. Thus, the

HIGC has no jurisdiction over the dispute.

➔ Thus, this should be resolved in a civil case involving the

enforcement of constitutional rights, thus not falling under the

jurisdiction of the HLURB.

Significance:

➔ Reinforces that membership in homeowners’ associations is

voluntary and cannot be imposed through Articles of Incorporation or

By-Laws without consent.

➔ Upholds the constitutional right not to associate, protecting

homeowners from being compelled into membership.

➔ Confirms that the RTC has authority to hear disputes involving

non-members, especially when constitutional rights are at stake.

➔ Serves as a guide on the scope of rights and obligations of

homeowners versus the governing board of an association.

Case Title and Citation: Padcom Condominium Corporation vs. Ortigas Center Association, Inc. G.R. No. 146807, May 9, 2002
Ponente: Chief Justice Hilario G. Davide, Jr.
Petitioner: Padcom Condominium Corporation (PADCOM)
Respondent: Ortigas Center Association, Inc. (the Association)

Case Summary:
The case is a suit for collection of unpaid membership dues filed by the Ortigas Center Association, a non-stock corporation,
against PADCOM, a building owner in the Center. The land on which PADCOM's building stands contained a specific covenant,
annotated on the title, requiring the owner and its successor-in-interest to be an automatic member of the Association and pay
assessments. PADCOM refused to pay, arguing it couldn't be compelled to join as it violated its freedom of association and that
the Association's By-laws required a formal application. The Supreme Court upheld the Association's right to collect, ruling that
PADCOM, as the successor-in-interest, was bound by the covenant annotated on its Transfer Certificate of Title.

Doctrines
• Binding Effect of Covenants on Successors-in-Interest: A restriction on real property, especially one concerning
automatic membership in a non-stock association and payment of dues, when annotated on the Transfer Certificate
of Title (TCT), constitutes an encumbrance that runs with the land. It binds the property and is enforceable against
the buyer and any subsequent successor-in-interest (Art.1311,Civil Code).
• Non-Stock Corporations and Compulsory Membership: The right to freedom of association is not violated when a party
is bound to join a non-stock association like a homeowners owners association by a voluntary contract or property deed
containing an automatic membership clause. By purchasing the property with the annotated condition, the successor-
in-interest voluntarily assumed the obligation.
• By-Laws vs. Covenants in Title: The By-laws of a non-stock corporation cannot alter or modify a clear condition or lien
that is legally annotated on a property's TCT. The covenant in the title takes precedence.

Facts of the Case

• Ortigas & Company, Limited Partnership (OCLP) sold a lot to Tierra Development Corporation (TDC).
• The Deed of Sale contained a covenant, subsequently annotated on the TCT, that the transferee and its successor-in-
interest must become members of an association (later known as the Ortigas Center Association, Inc.) and pay
assessments for the maintenance and welfare of the area.
• TDC subsequently conveyed the lot to Padcom Condominium Corporation (PADCOM), with the annotation remaining
on the title. The Ortigas Center Association, Inc. (a non-stock, non-profit corporation) was organized in 1982.
• It demanded payment of membership dues, interests, and penalties from PADCOM, which had accrued a total
arrearage of P639,961.47. PADCOM refused to pay, claiming that it was not automatically a member since the
Association’s By-laws required a formal application and acceptance by the Board of Directors, and that the compulsory
membership violated its constitutional right to freedom of association.
• The Association filed a complaint for collection.
Issues
• Whether PADCOM, as the successor-in-interest, is legally bound by the automatic membership clause annotated on
the Transfer Certificate of Title and thus liable to pay the Association dues.
• Whether compelling PADCOM to become a member and pay dues violates its constitutional right to freedom of
association.

Decision/Ruling and Ratio

• The Supreme Court affirmed the Court of Appeals ruling. PADCOM is ordered to pay the membership dues in arrears.
• PADCOM is legally bound to the automatic membership clause.
• The provision on automatic membership was a stipulation in the contract of sale between OCLP and TDC, which was
subsequently annotated on the TCT as an encumbrance.
• This annotation is a lien in rem or a burden on the property that is inseparable from the land and subsists regardless
of a change in ownership.
• Under the Torrens system (Sec.44,[Link].1529), a subsequent purchaser like PADCOM takes the title subject to all
encumbrances and restrictions noted thereon.
• Under the Civil Code (Art.1311), contracts bind the contracting parties, their assigns, and heirs. PADCOM, as the
successor-in-interest of TDC, is bound by the contractual covenant.
• The requirement for the application and or acceptance in the By-laws must be deemed ministerial since PADCOM's
obligation was already established by the annotation on the title.
• The constitutional freedom of association was not violated. PADCOM was never forced to join the Association, it could
have avoided such membership by not purchasing the land which carried the annotated covenant.
• By voluntarily accepting the Deed of Transfer subject to the annotation, PADCOM voluntarily bound itself to respect
the condition and become a member. The choice to purchase the encumbered land was a voluntary act.
Significance
• This case definitively establishes the enforceability of automatic membership clauses in non-stock property owners'
associations against a successor-in-interest when the condition is annotated on the TCT of the property.
• The case clarifies that such clauses do not violate the freedom of association but are contractual obligations that run
with the land, highlighting the paramount binding effect of liens and encumbrances under the Torrens system over
general provisions in a non-stock corporation's By-laws.
 Tan vs. Sycip 17 August 2006, 499 SCRA 216

Case Title and : Tan vs. Sycip 17 August 2006, 499 SCRA 216
Citation
Ponente : Justice Artemio V. Panganiban
Petitioner : Paul Lee Tan, Andrew Liuson, Esther Wong, Stephen Co, James Tan, Judith Tan, Ernesto Tanchi Jr., Edwin Ngo,
Virginia Khoo, Sabino Padilla Jr., Eduardo P. Lizares And Grace Christian High School
Respondents : Paul Sycip and Merritto Lim

Case Summary
The case is a landmark Philippine Supreme Court case that clarified the rules for determining the quorum in non-stock corporations, especially
regarding how to treat a deceased member.

Doctrines
• Determination of Quorum: For non-stock corporations, a quorum is determined based on the number of actual, living members who
have voting rights at the time of the meeting, not the number of members stated in the articles of incorporation.
• Effect of Death: In non-stock corporations, membership and all rights arising from it are personal and non-transferable. When a member
dies, their membership is terminated, and they lose all voting rights. Therefore, deceased members should not be counted in determining
the quorum.

Facts of the Case

• Grace Christian High School (GCHS) was a non-stock, non-profit educational corporation with 15 regular members who also served as
its trustees.
• At the annual members' meeting in April 1998, four of the 15 original members had already died, leaving only 11 living members.
• Seven of the 11 living members attended the meeting through their respective proxies. During the meeting, new trustees were elected to
replace the deceased members.
• Respondents Paul Sycip and Merritto Lim questioned the validity of the meeting, arguing that there was no quorum.
• The Securities and Exchange Commission (SEC) ruled that the quorum should be based on the original 15 members, thus declaring the
meeting and the election null and void.

Issue
• Whether the dead members in a non-stock corporation should still be counted in determining the quorum for the purpose of conducting
the Annual Members’ Meeting.

Decision/Ruling and Ratio

• The Supreme Court partially granted the petition and reversed the SEC's ruling regarding the quorum.
• It held that for a non-stock corporation, a quorum is determined based on the number of actual, living members who have voting rights
at the time of the meeting, not the number of members stated in the articles of incorporation.
• It also held that membership in non-stock corporations and all rights arising from it are personal and non-transferable. When a member
dies, their membership is terminated, and they lose all voting rights. Hence, deceased members should not be counted in determining
the quorum.
• The Court also held that the GCHS meeting was validly constituted. With only 11 living members, a majority of that number (six) was
needed for a quorum. Since seven members were present in person and through proxies, a valid quorum was achieved.
• However, the Court also ruled that the subsequent election of new trustees to fill the vacancies was invalid because it did not follow the
procedure outlined in the corporation's by-laws. The bylaws specified that vacancies could only be filled by the remaining members of
the board of trustees, not during a general members' meeting.

Significance

• The case provided a definitive clarification of several key aspects of corporate law in the Philippines, especially concerning non-stock
corporations. The rulings resolved long-standing ambiguities and provided clear guidance on corporate governance matters.