PENA V.

CA 193 SCRA 7117 (1991)

G.R. No. 91478 February 7, 1991

ROSITA PEÑA petitioner,
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, respondents.
Cesar L. Villanueva for petitioner.
Martin N. Roque for private respondents.

193 SCRA 717 – Business Organization – Corporation Law – Board resolutions may be questioned by third persons – Board
Meetings – Quorum – Sale of Corporate Properties
In 1962, the Pampanga Bus Company (PAMBUSCO) took out a loan from the Development Bank of the Philippines (DBP).
PAMBUSCO used the parcels of land it owns to secure the loan. In October 1974, due to PAMBUSCO’s nonpayment, DBP
foreclosed the parcels of land. Rosita Peña was the highest bidder. Meanwhile, in November 1974, the Board of Directors of
PAMBUSCO had a meeting. The meeting was attended by only 3 out of the 5 Directors. In the said meeting, the Board, through
a resolution, authorized one of the directors, Atty. Joaquin Briones, to assign the properties of PAMBUSCO. Pursuant to the
resolution, Briones assigned PAMBUSCO’s assets to Marcelino Enriquez. Enriquez, knowing that the properties were previously
mortgaged and foreclosed, exercised PAMBUSCO’s right to redeem. So in August 1975, he redeemed the said properties and
thereafter he sold them to Rising Yap.
Yap then registered the properties under his name. He then demanded Peña to vacate the properties. Peña refused to do hence
Yap filed a complaint. In her defense, Peña averred that Yap acquired no legal title over the property because the board
resolution issued by PAMBUSCO in November 1974 is void; that it is void because the resolution was issued without a quorum;
that there was no quorum because under the by-laws of PAMBUSCO, a quorum constitutes the presence of 4 out of 5 directors
yet the meeting was only attended by three directors. As such, the authority granted to Briones to assign the properties is void;
that the subsequent assignment by Briones to Enriquez is void; that Enriquez acquired no title hence, likewise, Yap acquired no
title. Yap insists that Peña has no legal standing to question the board resolution because she is not a stockholder.
ISSUE: Whether or not the board resolution is valid.
HELD: No, it is void. The by-laws are the laws of the corporation. PAMBUSCO’s by-laws provides that a quorum consists of at
least four directors. Hence, the meeting attended by only three directors did not comply with the required quorum. As such, the
three directors were not able to come up with a valid resolution which could bind the corporation. Anent the issue of Peña being
a third person, she can question the board resolution. The resolution here is liken to a contract. Under the law, a person who is
not a party obliged principally or subsidiarily in a contract may exercise an action for nullity of the contract if he or she is
prejudiced in his or her rights with respect to one of the contracting parties, and can show the detriment which would positively
result to him or her from the contract in which he or she had no intervention.
Further, the sale of the properties of PAMBUSCO did not comply with the procedure laid down by the Corporation Law. Under
the law, the sale or disposition of an and/or substantially all properties of the corporation requires, in addition to a proper board
resolution, the affirmative votes of the stockholders holding at least two-thirds (2/3) of the voting power in the corporation in a
meeting duly called for that purpose. No doubt, the questioned resolution was not confirmed at a subsequent stockholders
meeting duly called for the purpose by the affirmative votes of the stockholders holding at least two-thirds (2/3) of the voting
power in the corporation.
Further still, the Supreme Court discovers a few other anomalies with PAMBUSCO. One is that PAMBUSCO has been inactive
since 1949 as per the records provided by the Securities and Exchange Commission. Its general information sheet with the SEC
has not been updated regularly even. And the three directors present were not even listed as current directors of PAMBUSCO.