ROSITA PEÑA vs. THE COURT OF APPEALS, SPOUSES RISING T.

YAP and CATALINA YAP, PAMPANGA BUS

CO., INC., JESUS DOMINGO, JOAQUIN BRIONES, SALVADOR BERNARDEZ, MARCELINO ENRIQUEZ and
EDGARDO A. ZABAT,

FACTS:

 Rising T. Yap and Catalina Lugue, are the registered owners of the lots in question, appellants sought to recover
possession over the subject lands from Rosita Peña and Washington Distillery on the ground that being
registered owners, they have to enforce their right to possession against defendants who have been allegedly in
unlawful possession thereof.
 Rosita Peña and Washington Distillery denied the material allegations of the complaint and by way of an
affirmative and special defense asserted that Peña is now the legitimate owner of the subject lands for having
purchased the same in a foreclosure proceeding instituted by the DBP against PAMBUSCO and no valid
redemption having been effected within the period provided by law.
o It was contended that plaintiffs could not have acquired ownership over the subject properties under a
deed of absolute sale executed in their favor by one Marcelino B. Enriquez who likewise could not have
become [the] owner of the properties in question by redeeming the same under an alleged[ly] void deed
of assignment executed in his favor by the original owners of the land in question, the PAMBUSCO.
o The defense was that since the deed of assignment executed by PAMBUSCO in favor of Enriquez was
void ab initio for being an ultra vires act of its board of directors and, for being without any valuable
consideration, it could not have had any legal effect; hence, all the acts which flowed from it and all the
rights and obligations which derived from the aforesaid void deed are likewise void and without any legal
effect.
 Thereafter, the defendants with prior leave of court filed a third-party complaint third-party defendants
PAMBUSCO, Jesus Domingo, Joaquin Briones, Salvador Bernardez (as members of the Board of Directors of
PAMBUSCO), and Marcelino Enriquez.
 After trial, a decision was rendered by the court dismissing the complaint filed by the plaintiffs against the
defendants and declaring as null and void the resolution of the Board of Directors of PAMBUSCO assigning the
PAMBUSCO's right of redemption concerning the parcels involved therein.
 The Court of Appeals reversed the order.

ISSUE:
 THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE RESOLUTION OF RESPONDENT
PAMBUSCO, ADOPTED ON 19 NOVEMBER 1974, ASSIGNING ITS RIGHT OF REDEMPTION IS NOT VOID
OR AT THE VERY LEAST LEGALLY DEFECTIVE.

HELD:
 Section 4, Article III of the amended by-laws of respondent PAMBUSCO, provides as follows:
o Sec. 4. Notices of regular and special meetings of the Board of Directors shall be mailed to each Director
not less than five days before any such meeting, and notices of special meeting shall state the purpose or
purposes thereof Notices of regular meetings shall be sent by the Secretary and notices of special
meetings by the President or Directors issuing the call. No failure or irregularity of notice of meeting shall
invalidate any regular meeting or proceeding thereat; Provided a quorum of the Board is present, nor of
any special meeting; Provided at least four Directors are present.
 The questioned resolution should be declared invalid it having been approved in a meeting attended by only 3 of
the 5 members of the Board of Directors of PAMBUSCO which attendance is short of the number required by the
by-laws of the corporation.
 The by-laws of a corporation are its own private laws which substantially have the same effect as the laws of the
corporation. They are in effect, written, into the charter. In this sense they become part of the fundamental law of
the corporation with which the corporation and its directors and officers must comply.
 Under Section 25 of the Corporation Code of the Philippines, the articles of incorporation or by-laws of the
corporation may fix a greater number than the majority of the number of board members to constitute the quorum
necessary for the valid transaction of business. Any number less than the number provided in the articles or by-
laws therein cannot constitute a quorum and any act therein would not bind the corporation; all that the attending
directors could do is to adjourn.
PMI COLLEGES vs. THE NATIONAL LABOR RELATIONS COMMISSION and ALEJANDRO GALVAN

FACTS:
 PMI Colleges, an educational institution offering courses on basic seamans training hired private respondent as
contractual instructor with an agreement that the latter shall be paid at an hourly rate of P30.00 to P50.00,
depending on the description of load subjects and on the schedule for teaching the same.
 Initially, private respondent and other instructors were compensated for services rendered during the first three
periods of the contract. However, for reasons unknown to private respondent, he stopped receiving payment for
the succeeding rendition of services. Repeated demands having likewise failed, private respondent was soon
constrained to file a complaint before the National Capital Region Arbitration Branch seeking payment for salaries
earned.
 Private respondents claims were resisted by petitioner. It alleged that classes in the courses offered which
complainant claimed to have remained unpaid were not held or conducted in the school premises of PMI
Colleges.
o Only private respondent knew whether classes were indeed conducted.
o Petitioner maintained that it exercised no appropriate and proper supervision of the said classes which
activities allegedly violated certain rules and regulations of the Department of Education, Culture and
Sports (DECS).
o Furthermore, the claims, according to petitioner, were all exaggerated and that, at any rate, private
respondent abandoned his work at the time he should have commenced the same.
 In reply, private respondent belied petitioners allegations contending, among others,
o that he conducted lectures within the premises of petitioners rented space located at 5th Floor,
Manufacturers Bldg., Sta. Cruz, Manila;
o that his students duly enrolled with the Registrars Office of petitioner;
o that shipyard and plant visits were conducted at Fort San Felipe, Cavite Naval Base;
o that petitioner was fully aware of said shipyard and plant visits because it even wrote a letter for that
purpose;
o and that basic seaman courses 41 and 42 were sanctioned by the DECS as shown by the records of the
Registrars Office.
 Hence, a decision was subsequently rendered by the Labor Arbiter finding for the private respondent. On appeal,
the NLRC affirmed the same in toto in its decision.

ISSUE:
 Whether the money claims of private respondent representing salaries/wages as contractual instructor for class
instruction, on-the-job training and shipboard and plant visits have valid legal and factual bases

HELD:
 Petitioner places so much emphasis on its argument that private respondent did not produce a copy of the
contract pursuant to which he rendered services. The absence of such copy does not in any manner negate the
existence of a contract of employment since (C)ontracts shall be obligatory, in whatever form they have been
entered into, provided all the essential requisites for their validity are present. The only exception to this rule is
when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a
contract be proved in a certain way. However, there is no requirement under the law that the contract of
employment of the kind entered into by petitioner with private respondent should be in any particular form.
 At any rate, the vouchers prepared by petitioners own accounting department and the letter-request of its Acting
Director asking for payment of private respondents services suffice to support a reasonable conclusion that
private respondent was employed with petitioner.
 Petitioners evidence is wanting in this respect while private respondent affirmatively stated that the same arose
out of his employment with petitioner. As between the two, the latter is weightier inasmuch as we accord
affirmative testimony greater value than a negative one. For the foregoing reasons, we find it difficult to agree with
petitioners assertion that the absence of a copy of the alleged contract should nullify private respondents claims.
 Neither can we concede that such contract would be invalid just because the signatory thereon was not the
Chairman of the Board which allegedly violated petitioners by-laws. Since by-laws operate merely as internal
rules among the stockholders, they cannot affect or prejudice third persons who deal with the corporation, unless
they have knowledge of the same. No proof appears on record that private respondent ever knew anything about
the provisions of said by-laws.
 In fact, petitioner itself merely asserts the same without even bothering to attach a copy or excerpt thereof to
show that there is such a provision. How can it now expect the Labor Arbiter and the NLRC to believe it? That this
allegation has never been denied by private respondent does not necessarily signify admission of its existence
because technicalities of law and procedure and the rules obtaining in the courts of law do not strictly apply to
proceedings of this nature.
GRACE CHRISTIAN HIGH SCHOOL, vs. THE COURT OF APPEALS, GRACE VILLAGE ASSOCIATION, INC.,
ALEJANDRO G. BELTRAN, and ERNESTO L. GO

FACTS:
 Grace Christian High School is an educational institution offering preparatory, kindergarten and secondary
courses at the Grace Village in Quezon City. Private respondent Grace Village Association, Inc., is an
organization of lot and/or building owners, lessees and residents at Grace Village, while private respondents
Alejandro G. Beltran and Ernesto L. Go were its president and chairman of the committee on election.

 December 20, 1975, a committee of the board of directors prepared a draft of an amendment to the by-laws.
o The Charter and Associate Members shall elect the Directors of the Association. The candidates
receiving the first fourteen (14) highest number of votes shall be declared and proclaimed elected until
their successors are elected and qualified. GRACE CHRISTIAN HIGH SCHOOL representative is a
permanent Director of the ASSOCIATION.
 This draft was never presented to the general membership for approval. Nevertheless, from 1975, after it was
presumably submitted to the board, up to 1990, petitioner was given a permanent seat in the board of directors of
the association

 February 13, 1990, the associations committee on election in a letter informed James Tan, principal of the school,
that it was the sentiment that all directors should be elected by members of the association because to make a
person or entity a permanent Director would deprive the right of voters to vote for fifteen (15) members of the
Board, and it is undemocratic for a person or entity to hold office in perpetuity.
o For this reason, Tan was told that the proposal to make the Grace Christian High School representative
as a permanent director of the association, although previously tolerated in the past elections should be
reexamined.
o Following this advice, notices were sent to the members of the association that the provision on election
of directors of the 1968 by-laws of the association would be observed.
 Petitioner requested the chairman of the election committee to change the notice of election, claiming that the
notice issued for the 1990 elections ran counter to the practice in previous years and was in violation of the by-
laws (of 1975) and unlawfully deprive[d] Grace Christian High School of its vested right [to] a permanent seat in
the board
 As the association denied its request, the school brought suit for mandamus in the Home Insurance and Guaranty
Corporation to compel the board of directors of the association to recognize its right to a permanent seat in the
board.
o Petitioner based its claim on the following portion of the proposed amendment which, it contended, had
become part of the by-laws of the association
 June 20, 1990, the hearing officer of the HIGC rendered a decision dismissing petitioners action. The hearing
officer held that the amended by-laws, upon which petitioner based its claim, [was] merely a proposed by-laws
which, although implemented in the past, had not yet been ratified by the members of the association nor
approved by competent authority
 The appeals board of the HIGC affirmed the decision of the hearing office.
 The Court of Appeals held that there was no valid amendment of the associations by-laws because of failure to
comply with the requirement of its existing by-laws, prescribing the affirmative vote of the majority of the members
of the association at a regular or special meeting called for the adoption of amendment to the by-laws

ISSUE:
 Whether or not the association unlawfully deprived Grace Christian High School of its vested right to a permanent
seat in the board

HELD:
 Article XIX of the by-laws provides,
o The members of the Association by an affirmative vote of the majority at any regular or special meeting
called for the purpose, may alter, amend, change or adopt any new by-laws.
 This provision of the by-laws actually implements Section 22 of the Corporation Law (Act No. 1459) which provides:
o Section 22. The owners of a majority of the subscribed capital stock, or a majority of the members if there
be no capital stock, may, at a regular or special meeting duly called for the purpose, amend or repeal any
by-law or adopt new by-laws. The owners of two-thirds of the subscribed capital stock, or two-thirds of the
members if there be no capital stock, may delegate to the board of directors the power to amend or
repeal any by-law or to adopt new by-laws:
 The proposed amendment to the by-laws was never approved by the majority of the members of the association
as required by these provisions of the law and by-laws.
 Petitioner disputes the ruling that the provision in question, giving petitioners representative a permanent seat in
the board of the association, is contrary to law. Petitioner claims that that is not so because there is really no
provision of law prohibiting unelected members of boards of directors of corporations. Referring to 92 of the
present Corporation Code.
 It is actually 28 and 29 of the Corporation Law not 92 of the present law or 29 of the former one which require
members of the boards of directors of corporations to be elected. These provisions read:
o Section 28. Unless otherwise provided in this Act, the corporate powers of all corporations formed under
this Act shall be exercised, all business conducted and all property of such corporations controlled and
held by a board of not less than five nor more than eleven directors to be elected from among the holders
of stock or, where there is no stock, from the members of the corporation…
o Section 29. At the meeting for the adoption of the original by-laws, or at such subsequent meeting as may
be then determined, directors shall be elected to hold their offices for one year and until their successors
are elected and qualified. Thereafter the directors of the corporation shall be elected annually by the
stockholders if it be a stock corporation or by the members if it be a nonstock corporation, and if no
provision is made in the by-laws for the time of election the same shall be held on the first Tuesday after
the first Monday in January…
 The present Corporation Code (B.P. Blg. 68), which took effect on May 1, 1980, [12] similarly provides:
o 23. The Board of Directors or Trustees. - Unless otherwise provided in this Code, the corporate powers of
all corporations formed under this Code shall be exercised, all business conducted and all property of
such corporations controlled and held by the board of directors or trustees to be electedfrom among the
holders of stocks, or where there is no stock, from among the members of the corporation, who shall hold
office for one (1) year and until their successors are elected and qualified
 These provisions of the former and present corporation law leave no room for doubt as to their meaning: the
board of directors of corporations must be elected from among the stockholders or members. There may be
corporations in which there are unelected members in the board but it is clear that in the examples cited by
petitioner the unelected members sit as ex officio members, i.e., by virtue of and for as long as they hold a
particular office. But in the case of petitioner, there is no reason at all for its representative to be given a seat in
the board
 Since the provision in question is contrary to law, the fact that for fifteen years it has not been questioned or
challenged but, on the contrary, appears to have been implemented by the members of the association cannot
forestall a later challenge to its validity. Neither can it attain validity through acquiescence because, if it is contrary
to law, it is beyond the power of the members of the association to waive its invalidity. For that matter the
members of the association may have formally adopted the provision in question, but their action would be of no
avail because no provision of the by-laws can be adopted if it is contrary to law.