China-Banking-Corporation-vs-CA-CD
China-Banking-Corporation-vs-CA-CD
RULING: Chinabank.
The general rule really is that third persons are not bound by the by-laws of a corporation
since they are not privy thereto (Fleischer v. Botica Nolasco, 47 Phil. 584).
The exception to this is when third persons have actual or constructive knowledge of the same.
In order to be bound, the third party must have acquired knowledge of the pertinent by-laws at the time
the transaction or agreement between said third party and the shareholder was entered into, in this
case, at the time the pledge agreement was executed. VGCCI could have easily informed petitioner of its
by-laws when it sent notice formally recognizing petitioner as pledgee of one of its shares registered in
Calapatia’s name. Petitioner’s belated notice of said by-laws at the time of foreclosure will not suffice.
SEC ruling was reinstated by the SC.