DIGEST/KAY MARIE BOLANDO/J.A. WOLFSON VS. MANILA STOCK EXCHANGE

J.A WOLFSON V. MANILA STOCK EXCHANGE

FACTS:

The respondent is a non-stock corporation organized under the Philippine laws and registered in the Bureau of Commerce on August 10, 1927. In consideration of the services rendered by the petitioner in assisting in the organization of the Exchange, for which the petitioner charged a nominal fee, and because he consented to act as its secretary for the time being, the original members or incorporators of the respondent corporation approved a resolution at the meeting called to adopt the by-laws on August 16, 1927, unanimously electing the petitioner an honorary member of the Exchange for life with the privileges issued a certificate of membership on September 1, 1927.

Nine (9) years later, the petitioner wrote a letter to the respondent asking for a copy of the revised rules and regulations entitled only regular members to all the privileges and that said rules contain no provision regarding honorary members. The petitioner addressed two or more letters to the respondent calling attention to his "vested rights" an honorary member and the respondent after consulting with counsel, apprised him of the passage of a unanimous resolution by the board of directors on October 2, 1936, rescinding his honorary membership for life.

The respondent, on the other hand, filed the following special defenses to petitioner's complaint:

1. That neither the by-laws nor the articles of incorporation of the Manila Stock Exchange contained any provision or authority for the creation of an honorary membership for life therein and the election of persons other than those mentioned in the by-laws, and that that fact was known to the petitioner.

2. That on August 25, 1927, while the provision in respondent's by-laws limiting membership in the Exchange to ten was in force, five new members were admitted to the Exchange, thereby completing the membership to ten without including the petitioner, with the knowledge and acquiescence of the petitioner.

3. That there have been changes in the number of members of the Manila Stock Exchange, so that at the time of the institution of this action, the membership had been increased to thirty, and that the new members coming after August 16, 1927, purchased their membership without knowledge of petitioner's claim to life membership in the Exchange, and petitioner made no such claim until shortly before the filing of the present action.

4. That the resolution electing the petitioner to honorary membership for life was rescinded by a resolution for the Board of Directors adopted on October 2, 1936.

By way of cross-complaint, respondent, further prayed that petitioner be ordered to surrender his certificate of membership for cancellation.

The Court of First Instance of Manila denied the writ prayed for by the petitioner and ordered the latter to surrender his certificate of membership to the respondent for cancellation.

Hence, the present appeal by the petitioner which has been elevated to this court by the Court of Appeals.

ISSUE:

Whether or not the lower court erred in denying petitioner's petition for mandamus and in ordering petitioner to surrender his certificate of honorary membership for cancellation and in denying motion for new trial.

RULING:

The Court held that the election of the petitioner as honorary member of the respondent corporation appears to not follow the procedure prescribed by the latter's by-laws. The petitioner is a practising attorney and there is no showing that he has ever been a stockbroker. The requisites as to the filing of an application, publication, payment of entrance and subscription fees and the action to be taken by the board of directors, have not been complied with.

Petitioner argues, that there was no need for him to file an application because he was not admitted but elected to membership, that the terms of his election expressly exempted him from the payment of all dues and assessments, that there was no need for the board of directors to act on his election because there was then no extant board of directors and moreover he was elected unanimously by all the members, and that he was not a regular member but only an honorary member.

The Court provides that indeed, if a person is elected and not admitted in the ordinary course, it would seem absurd to require him to file an application and to have that application posted and voted upon after the lapse of a certain period of time. It would also seem absurd further to expect the person concerned to pay the entrance and subscription fees if he is expressly exempted therefrom. However, the Court is concerned with the authority to dispense with the requirements imposed by the by-laws of the respondent corporation. There is no provision in the by-laws for the election of a member, whether regular or honorary. There is not even mention of honorary members, either defining their status or governing their admission or election into the corporation, or providing for their exemption from the payment of all dues and assessments.

The resolution designated the petitioner as honorary member must follow the requisites prescribed for the admission of regular member, for he is to all intents and purposes a regular member.

One cannot be a regular member for the purpose of enjoying the benefits of a regular membership and at the same time evade its corresponding obligations on the ground that he is an honorary member so-called. An honorary membership in a business corporation is an congruity and finds no sanction either in law or custom.

The failure to fulfil the requirement exacted by the by-laws of prospective members is, therefore, fatal to petitioner's pretention to membership in the respondent corporation.

The Court also observed that it was not the board of directors, as required by Section 28 of the Corporation Law or the by-laws of the respondent corporation, but the members present at the meeting of August 16, 1927 who elected the petitioner herein to honorary membership for life.

It is an elementary rule that the powers vested in the directors or trustees of a corporation must be exercised by them, and cannot be exercised by the stockholders, and the stockholders' action can be sustained only in some circumstances which dispense with the directors' action as a mere formality.

It is well settled that mandamus will not lie to compel the performance of acts which are illegal, contrary to public policy, or which tend to aid an unlawful purpose and this Court has repeatedly held that only specific legal rights are enforceable by mandamus, that the right sought to be enforced must be certain and clear, and that the writ will not issue in cases where the right is doubtful.

The judgement of the lower court is affirmed and the petition for the issuance of the writ of mandamus is hereby denied, with costs against the petitioner-appellant.