Valley Golf & Country Club, Inc. v. Vda. de Guzman

Valley Golf & Country Club, Inc. v. Vda.
De Guzman
G.R. No. 158805, Apr 16, 2009
FACTS: Valley Golf is a non-stock, non-profit corp that operates a golf course.
1961 — Cong. Caram subscribed to and paid for one Golf Share in Valley Golf, receiving Stock
Certificate No. 389 (w/ par value of P9K).
Cong. Caram stopped paying his monthly dues on January 25, 1980.
Valley Golf claimed they sent five letters to Cong. Caram bet. January 27, 1986 and May 3,
1987, about his delinquent account and the potential sale of his Golf Share to satisfy the
outstanding amount, all pursuant to the provisions of the by-laws.
June 11, 1987 — Despite these notices, Cong. Caram's Golf Share was sold at a public auction
for P25K.
As it turned out, Cong. Caram had died on October 6, 1986, and his estate, unaware of the
sale, included the Golf Share in the estate proceedings.
1990 — the heirs of Caram learned of the sale and were later informed of a refund entitlement
of P11,066.52 from the sale proceeds.
Respondent Rosa O. Vda. de Caram (Caram's widow) filed an action for reconveyance of the
share with damages before the SEC.
SEC: ruled in favor of Vda. de Caram, ordering Valley Golf to convey ownership of the Golf
Share or issue a fully paid share of stock to Vda. de Caram and awarded damages.
SEC en banc & CA: affirmed the decision.
ISSUE: May a non-stock corporation seize and dispose of the membership share of a fully-paid
member on account of its unpaid debts to the corporation when it is authorized to do so under
the corporate by-laws but not by the Articles of Incorporation?
RULING: NO. A non-stock corporation cannot seize and dispose of a fully-paid member's
membership share to satisfy unpaid debts if such authority is not provided in the Articles of
Incorporation.
HERE: The lien on the Golf Share in favor of Valley Golf is not valid, as the power to constitute
such a lien should be provided in the articles of incorporation, and not merely in the by-laws.
DISCUSSION RE TERMINATION OF MEMBERSHIP
However, there is a specific provision under Title XI on Non-Stock Corporations of the

Corporation Code dealing with termination of membership.
SEC. 91. Termination of membership.— Membership shall be
terminated in the manner and for the causes provided in the articles of
incorporation or the by-laws. Termination of membership shall have the effect
of extinguishing all rights of a member in the corporation or in its property, unless
otherwise provided in the articles of incorporation or the by-laws.
Clearly, 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.
NOTE: in the by-law provisions of Valley Golf, the termination of membership 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.
DISCUSSION RE TERMINATION OF CARAM’S MEMBERSHIP
It may be conceded that the actions of Valley Golf were, technically speaking, in accord with
the provisions of its by-laws on termination of membership, vaguely defined as these are. Yet
especially since the termination of membership in Valley Golf is inextricably linked to the
deprivation of property rights over the Golf Share, the emergence of such adverse
consequences make legal and equitable standards come to fore.
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 Caram's 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 especially
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.
Valley Golf could have very well addressed that notice to the estate of Caram, as it had done
with the third and fourth notices. That it did not do so signifies that Valley Golf was bent on
selling the Golf Share, impervious to potential complications that would impede its intentions,
such as the need to pursue the claim before the estate proceedings of Caram.
By pretending to assume that Caram was then still alive, Valley Golf would have been able to
capitalize on his previous unresponsiveness to their notices and proceed in feigned good faith
with the sale. Whatever the reason Caram was unable to respond to the earlier notices, the
fact remains that 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.

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Valley Golf & Country Club, Inc. v. Vda.

SEC en banc & CA: affirmed the decision.

DISCUSSION RE TERMINATION OF MEMBERSHIP

However, there is a specific provision under Title XI on Non-Stock Corporations of the

(1) presentation of the account of the member;

DISCUSSION RE TERMINATION OF CARAM’S MEMBERSHIP

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