This is an appeal from a decision rendered by the Court of First Instance of Manila, ordering the defendant corporation to pay to each of the three plaintiffs the amount of P507.02, including interest thereon from May 2, 1930, to date of payment,  with costs.

The action which gave rise to this appeal was brought by Alberto Barretto, Jose de Amusategui, and Jose Barretto, who had  been directors of the defendant corporation  from its incorporation up to the month of March, 1929, to recover from the defendant, La Previsora Filipina, a mutual building and loan association, 1 per cent to each of the plaintiffs of the net profits of said corporation for the year 1929, which amount to P50,727.53, under and in accordance with the following amendment to the by-laws of the defendant corporation, which was made at a general meeting of the stockholders thereof on February 23, 1929, to wit:

"ARTICULO 68.° A. En consideration a los valiosos servicios que por varios anos hasta la fecha han venido prestando gratuitamente a favor de la Sociedad, los senores Alberto Barretto, Ariston de Guzman, Miguel Romualdez, Pedro Mata, Vicente L.  Legarda, Alexander Bachrach,  Jose  M. de Amusategui y Jose A.  Barretto y Moratinos, se acuerda y concede por la presente, a todos  y cada uno de dichos senores, una cantidad igualal uno por ciento (1%)  de todas las utilidades liquidas de la Sociedad, del  ano y aiios en que se deje de ser director de la misma. Entendiendose,  sin embargo, que esta remuneration  especial subsistira mientras  dicho director viva, y cesara durante el tiempo en que dicho sefior  vuelva a ser director de la Sociedad.   Se hace constar por la presente,  que este articulo de  los presentes Estatutos constituye un contrato formal  entre la Sociedad y cada unp de los senores directores arriba mencionados, y este  contrato no podra ser modificado ni enmendado sino por mutuo convenio entre las partes."

The case  was set for  trial on  July 30, 1930, and after the presentation of the plaintiffs'  evidence, counsel for the defendant informed the  court that  they desired, before offering defendant's evidence, to present a motion to dismiss the complaint on the ground that the plaintiffs  had  not shown a cause of action against the defendant, and requested time to file said motion in writing and to present a written memorandum in support thereof.   This request was granted by the court below and on August 2,  1930, counsel for the defendant presented, with the reservation of the  right to offer  defendant's evidence in support of its special  defenses and counterclaim in the event it was denied, a written motion  to  dismiss the complaint  on  the  above mentioned ground.

On the 29th day of August, 1930, the court below entered an order, in which it held that the evidence  offered by the plaintiffs showed a cause of action on the part of the plaintiffs and constituted sufficient legal reason to require the defendant corporation to present its evidence, if it so desired, in support of the allegations contained in its answer, and denied the defendant's motion to dismiss the complaint and set the  case for a continuation of the hearing on  September 22,  1930.  On  September 4,  1930, the  defendant filed its exception to the order of the trial court of August 29, 1930, in so far as it declared that the evidence offered by the plaintiffs  showed a cause of action and  denied the dismissal of the complaint.

On September 2,  1930, the plaintiffs, through their attorney, presented to the court below a petition praying the said court to issue an order declaring that the  defendant had no right to present evidence; that the case be declared submitted; and that judgment be entered in accordance with the prayer of the complaint.

After  hearing the parties, and without setting aside its former order giving the defendant the right to present its evidence and setting the case for a continuation of the hearing on September 22, 1930, the court,  on  September 11, 1930, rendered its  decision in this  case holding that  the defendant, by  presenting its  motion to dismiss the complaint, had impliedly waived its right to present its evidence, and rendering  judgment in favor of each of the plaintiffs and against the defendant for the sum of P505.25,  with legal interest  thereon from May 2, 1930,  until paid, with the costs  of  the action.

On October  1, 1930, defendant moved the trial court for a reconsideration of its decision of September 11,  1930, and that said decision be set aside, and that the trial of the case be  continued for the taking of the evidence of the defendant,  for the reasons stated  therein.  This motion was denied on  October  7,  1930, whereupon the defendant excepted to  the decision and the order of the court below denying its motion  for a reconsideration, and moved for a new trial on the ground that the decision was contrary to law  and the weight of the evidence.  This motion was denied  by the trial  court on October  18, 1930,  and on October 25,  1930, the  defendant filed  its  exception to  said order and gave notice of its intention to appeal from said decision and orders, and the case has been brought to this court by way of bill of exceptions.

After a careful consideration we fully  agree with the appellant.   Article 68-A of the amended by-laws of the defendant corporation upon which the action is based, does not  under the law  as applied to the express  provisions thereof create any legal obligation on  its part to pay to the persons named therein, including the  plaintiffs, such a life gratuity or pension out of its net profits.   A by-law provision of this nature must be regarded as  clearly beyond the lawful powers of a mutual building  and loan association, such  as the defendant corporation.

While such associations are expressly authorized by the Corporation  Law  to adopt by-laws for  their government, section  20, of that Act, as construed  by this court in the case of Fleischer  vs. Botica Nolasco  Co. (47 Phil., 583), expressly limits such authority to the adoption of by-laws which are not inconsistent with the provisions  of the law. The appellees contend that the article  in question rs merely a provision for the compensation of directors, which is not only consistent with but expressly authorized  by section 21 of the  Corporation  Law.   We  cannot agree with this contention.  The authority conferred  upon corporations in that section refers only to providing compensation for the future services of directors, officers, and employees thereof after the adoption of the by-law or other provision in  relation  thereto, and cannot in any sense be  held to authorize the giving, as in this case, of continuous compensation to particular  directors after their employment has  terminated for past services rendered gratuitously by them to the corporation.   To permit the transaction involved in this case would be to create an obligation unknown to the law, and to countenance  a  misapplication of the funds  of the defendant building and loan association to the prejudice of the substantial right of its shareholders.

Building and  loan associations are peculiar and  special corporations.  They are founded upon  principles of strict mutuality and equality of benefits and obligations, and the trend of the more recent decisions is that any contract made or  by-law  provision adopted  by such  an  association  in contravention of the statute  is ultra vires  and  void.  It stands in a trust relation to the contributors in respect to the funds  contributed, and there is an implied contract with  its members that it  shall not divert  its funds  or powers to  purposes other  than those for  which  it was created.  The fundamental law of building and loan associations  organized under the different statutes throughout the American  Union  is that  all  members must  participate equally in the profits and bear the losses, if any, in the same proportion, and any diversion of their funds to purposes not authorized  by the law of their creation  is violative of the principles  of  mutuality  between  the  members,   (See Bertche vs. Equitable Loan etc. Association,  147 Mo.,  343; 71  A. S.  R., 571.)   As correctly staled  in the case  of McCauley vs. Building and Saving Assn.  (97 Tenn.,  421; 56 A. S. R.,  813,  818), "Strict mutuality  and equality of benefits and obligations must be kept the groundwork and basis  of these associations, and if they are not so founded they are not truly building and loan associations, entitled to the protection given  such associations by the  statute." When we consider the fundamental nature and  purposes of building and  loan associations, as above stated, in relation to the subject matter of this by-law, it  is obvious that  the provisions thereof are  entirely foreign  to  the government  of  defendant corporation,  inconsistent with and subversive  of the legislative scheme  governing  such associations,  and  contrary  to  the spirit of the law, and cannot therefore be the basis of a cause of  action against the defendant corporation.

Irrespective of our conclusion that the provision in question is ultra  vires, we are of the opinion that said by-law cannot be held to establish a contractual relation between the parties to  this action, because the essential elements of a contract are lacking.  The article which the appellees rely upon is merely a by-law provision adopted by the stock-holders of  the  defendant corporation,  without any action having been taken in relation thereto by its board of directors.  The law is settled that contracts between a corporation and third persons must be made by or under the authority of  its board  of  directors and not by its stockholders.  Hence, the action of the stockholders  in such matters is only advisory and not in  any  wise  binding on the corporation.   (See Ramirez vs. Orientalist Co.  and  Fernandez,  38 Phil., 634.)  There could not be a  contract without  mutual consent, and it appears that the plaintiffs did not consent to the provisions of the by-law in question, but, on the contrary, they  objected to and voted against it in  the  stockholders' meeting in  which it was adopted. Furthermore, the said by-law shows on its face that there was no  valid  consideration  for the  supposed  obligation mentioned  therein.  It is  clearly an attempt to give in the future to certain directors compensation for past services gratuitously  rendered  by  them  to the  corporation. Such a provision is without  consideration,  and imposes no obligation  on the corporation which  can  be  enforced  by action at law.   (4 Fletcher  on  Corporations, p. 2762, and cases cited.)

The appellees in their  brief  refer to the  cases of  El Hogar Filipino vs. Rafferty  (37 Phil., 995),  and  Government of the Philippine Islands vs. El  Hogar Filipino (50 Phil., 399J", and contend that those decisions are authority for sustaining the validity of the by-law  in this  case. We have carefully examined those decisions, and find that those cases  are  clearly distinguishable from  the present action.   It is sufficient to say that the causes of action are not of the same nature, and the facts upon  which those decisions  are based are entirely different from the facts of the present case.

The  judgment of the court below  is reversed,  and  the complaint is dismissed with  the costs  of this  instance against the appellees.  So ordered.

Avanceña, C. J., Street, Malcolm,  Villamor, Villa-Real, Abad Santos, Hull, Vickers, Imperial, and Butte, JJ., concur.