Valley Golf v. Caram

VALLEY GOLF & COUNTRY CLUB, INC. v.
ROSA DE CARAM
G. R. No. 158805; April 16, 2009; TINGA, J.
FACTS:
1. Valley Golf & Country Club (Valley Golf) is a duly constituted
non-stock, non-profit corporation which operates a golf course.
The members are entitled to play golf and avail of other facilities
and privileges, and are likewise assessed monthly membership
dues.
2. In 1961, the late Congressman Fermin Caram, Jr. (Carama),
husband of the present respondent, subscribed and paid in full one
share (Golf Share) in the capital stock of Valley Golf.
3. A stock certificate was issued to him for the Golf Share.
4. Valley Golf alleged that from 1980-1987, Caram stopped paying
his monthly dues. Valley Golf sent 5 letters to Caram for his
delinquent account from 1986-1987. The letters were sent to the
P.O. box address given by Caram.
a. 1st letter: informed Caram that his club privileges were
suspended
b. 2nd letter: Should Carams account remain unpaid for 45
days, his name would be list in the delinquent list posted
on the clubs bulletin board
c. 3rd letter (addressed to his estate Est.): again informed
Caram of his delinquent account and suspension of club
privileges
d. 4th letter (also to his Est.): informed him that should he
fail to settle his delinquencies worth P7.5k within 10 days,
Valley Golf would sell the Golf Share to satisfy the
amount pursuant to the by-laws
e. 5th letter: issued a final deadline until May 31, 1987 for
him to settle his account or face the sale of the Golf Share
5. The Golf Share was sold at public auction for P25k as authorized
by the BOD, as published in the Philippine Daily Inquirer
6. As it turned out, Caram had died on October 6, 1986.
7. Respondent initiated intestate proceedings to settle her husbands
estate. Unaware of the pending controversy over the Golf Share,
Caram family and RTC included the Golf Share as part of
Carams estate.
8. RTC approved a project partition of Carams estate. The Golf

Share was adjudicated to respondent who paid the corresponding
estate tax for it.
9. In 1990, the heirs of Caram learned of the sale of the Golf Share
following their inquiry with Valley Golf about the share. Valley
Golf said the heirs were entitled to the refund of P11k out of the
proceeds of the sale of the Share.
10. Respondent filed an action for reconveyance with damages before
the SEC. The SEC ordered Valley Golf to convey ownership of
the Golf Share or to issue one fully paid share of stock of the
Valley Golf the same class as the Golf Share both with damages.
11. SEC noted that under Sec. 67(2) of the Corporation Code, a share
could only be deemed delinquent and sold in an extrajudicial sale
at public auction only upon failure of the stockholder to pay the
unpaid subscription or balance for the share not for the club
dues. SEC, citing Sec. 6 and 98 of the Corporation Code said that
the by-law used as basis for the sale cannot be applied. Club
delinquencies was merely an ordinary debt enforceable by
judicial action in a civil case.
12. It added that Caram was not properly notified of the
delinquencies citing Carams letter about the change in his
mailing address and time when most of the letters were sent (after
his death).
13. Valley Golf appealed to SEC en banc, it was emphasized that
unless there is an express grant to dispose of shares of stock for
delinquent assessments by the statute or by the charter of a
corporation, it cannot be done.
14. CA affirmed SECs decision. Valley Golf argued that its by-laws
authorized the sale of the Golf Share, but CA ruled that its
validity was doubtful.
ISSUE:
1. WON a non-stock corporation may dispose a share of a fully-paid
member on account of its unpaid dues to the corporation when it
is authorized to do so under the corporate by-laws but not by the
Articles of Incorporation YES, based on Sec. 91
WON the Corporation Code permit the termination of membership
without due notice to the member in this case NO, because
property rights are involved
RATIO:
1. Sec. 67 of the Corporation Code provides the stock corporations
recourse on unpaid subscriptions which is inapt to a non-stock
corporation vis--vis a members outstanding dues.
Based on Sec. 91, the right of a non-stock corporation such as
Valley Golf to expel a member through the forfeiture of the Golf
Share may be established in the by-laws alone, as is the situation in
this case. Thus, both the SEC and the appellate court are wrong in
holding that the establishment of a lien and the loss of the Golf Share
consequent to the enforcement of the lien should have been provided
for in the articles of incorporation.
Termination of membership in a non-stock corporation may occur
when the following successive conditions are met: (1) presentation of
the account of the member; (2) failure of the member to settle the
account within forty-five days after the cut-off date; (3) posting of the
member as delinquent; and (4) issuance of an order by the board of
directors that the share of the delinquent member be sold to satisfy
the claims of Valley Golf. These conditions found in by-laws duly
approved by the SEC warrant due respect and we are disinclined to
rule against the validity of the by-law provisions.
1. The Code itself is silent on that matter, and the argument can be
made that if no notice is provided for in the articles of
incorporation or in the by-laws, then termination may be effected
without any notice at all. However, Membership in Valley Golf
entails the acquisition of a property right. In turn, the loss of such
property right could also involve the application of aspects of
civil law, in addition to the provisions of the Corporation Code.
To put it simply, when the loss of membership in a non-stock
corporation also entails the loss of property rights, the manner of
deprivation of such property right should also be in accordance
with the provisions of the Civil Code.
It is unmistakably wise public policy to require that the

termination of membership in a non-stock corporation be done in
accordance with substantial justice. No matter how one may
precisely define such term, it is evident in this case that the
termination of Carams membership betrayed the dictates of
substantial justice.
Valley Golf acted in clear bad faith when it sent the final notice to Caram
under the pretense they believed him to be still alive, when in fact they
had very well known that he had already died. That it was in the final
notice that Valley Golf had perpetrated the duplicity is specially
blameworthy, since it was that notice that carried the final threat that his
Golf Share would be sold at public auction should he fail to settle his
account on or before 31 May 1987. At the time of the final notice, Valley
Golf knew that Caram, having died and gone, would not be able to settle
the obligation himself, yet they persisted in sending him notice to provide
a color of regularity to the resulting sale.
Petition is denied.

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VALLEY GOLF & COUNTRY CLUB, INC. v.

8. RTC approved a project partition of Carams estate. The Golf

It is unmistakably wise public policy to require that the

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