PHILIP TURNER and ELNORA TURNER, Petitioners, petitioners.
This prompted the Petitioners to elevate the same to
LORENZO SHIPPING CORPORATION, Respondent
G.R. No. 157479, November 24, 2010
Facts:
Petitioners Philip and Elnora Turner were the owners of
1,010,000 shares of stocks of Respondent Lorenzo Shipping
Corporation.
Petitioners voted against the restriction of pre-emptive right to
newly issued stocks, to be effected via the amendment of the
articles of incorporation of the Respondent Corporation. They
alleged that it is prejudicial to their interests as shareholders.
Thus, through the exercise of their appraisal right, they
demanded the payment of their shares at P2.276/share
(P2,298,760.00).
Respondent Corporation countered that it was an acceptable
amount alleging that, the FMV of Petitioners’ shares before the
implementation of the corporate action to deny pre-emptive right
was at P0.41/share (P414,100.00).
Respondent Corporation further alleged that the corporation had
no unrestricted retained earnings at the time the demand was
made.
Disagreement to stock valuation led to the constitution of an
appraisal committee which valued the shares in dispute at
P2.54/share (2,565,000.00).Petitioners then asked for payment
at said value plus 2% interest per month from the date of original
demand.
Respondent Corporation, through a letter, told Petitioners that
they cannot pay due to the absence of URE, and that the
corporation had a deficit of P72,973,114.00. This led petitioner
to file an action for collection of sum of money and damages
with RTC Makati.
Respondent Corporation alleged that the cause of action of the
Petitioners has not yet accrued due to the absence of the
former’s URE. RTC Makati, in finding that the suit was an
intracorporate dispute, ordered the re-raffle of the case pursuant
to the Interim Rules of Intracorporate Dispute. The case was
raffled in RTC Manila, the court which exercise territorial
jurisdiction in the place where the principal office of Respondent
Corporation is found
RTC Manila, in ruling in favor of the Petitioners and ordering the
Respondent to pay, stated that the Corporation Code does not
require that URE must exist at the time of demand. Even if there
is no URE at such time, if there would be URE later, the FMV of
the stocks shall be paid, provided that there must be sufficient
funds to cover creditors after such payment. Respondents,
aggrieved, elevated the case to the Court of Appeals which
reversed the RTC Decision and enjoined the payment to the
the Supreme Court, thus, this recourse.
Issue: Whether or not the Court of Appeals erred in reversing
the RTC Decision.
Ruling:
No. The RTC erred in ordering the Respondent Corporation to
pay, and that the same exceeded in the exercise of its
jurisdiction in rendering judgment in favor of Petitioners and in
the issuance of writ of execution. A stock holder who dissents
certain corporate actions has the right to demand FMV of his
share (appraisal right), provided that the corporation has URE as
provided for under Sec. 81 of the Corporation Code. Such right
may be exercised when there is a change in the AoI prejudicing
the interests of the stockholder. No payment shall be made
unless there are unrestricted retained earnings in its books to
cover such payment. Payment by the corporation to a dissenting
stockholder exercising his appraisal right without the existence
of URE is in violation of the trust fund doctrine which proscribes
the distribution of assets to a stockholder without first paying
corporate debts because the assets of the corporation are held
in trust by the same for the benefit of its creditors. Payment
made under such circumstance is prejudicial to the corporate
creditors and is null and void. Creditors are always preferred
over stockholders.
Petitioners’ cause of action is premature, because there is no
URE at the time of demand. Right to demand has not yet
accrued. No valid demand, no actionable wrong. The
subsequent existence of URE does not cure the lack of cause of
action. Petition for Certiorari Denied. Yeah.
VICTOR AFRICA vs. PRESIDENTIAL COMMISSION ON
GOOD GOVERNMENT, JOSE LAURETA, MELQUIADES
GUTIERREZ, EDUARDO M. VILLANUEVA, EDUARDO DE
LOS ANGELES and ROMAN MABANTA, JR.
G.R. No. 83831 January 9, 1992
FACTS: Victor Africa, who claims to be an employee of ETPI
holding the positions of vice-president, general counsel (on
official leave without pay), corporate secretary and special
assistant to the chairman (and president), filed directly with this
Court on June 30, 1988 a petition for injunction docketed as
G.R. No. 83831, seeking to enjoin the PCGG and its
nominees/designees to the board of directors and the newly-
installed officers of ETPI from implementing their alleged illegal,
invalid and immoral act of ousting him from his offices and
positions at the ETPI pending the determination of whether they
have validly, legally and morally assumed their supposed
positions and offices as "directors" and/or "officers" of ETPI.
He contends that the reasons advanced by the PCGG-
sponsored board of directors for ousting him from his offices
(redundancy, need to conserve company funds and loss of
confidence) are flimsy, whimsical and arbitrary, evidencing not
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only the PCGG-sponsored board's discriminatory and
oppressive attitude towards him but, more importantly, its clear
intent to harass him into refraining from questioning before
several tribunals all the invalid, illegal and immoral acts of said
PCGG-sponsored board which have caused and are still causing
ETPI damages because they constitute dissipation of assets.
ISSUE: Whether or not the acts and orders of the PCGG which
led to the nomination and election of the new members of the
board of directors and officers of the ETPI correct.
RULING: YES. In upholding therein the right of a stockholder of
a sequestered company to inspect and/or examine the records
of a corporation pursuant to Section 74 of the Corporation Code,
the Court found nothing in Executive Orders Nos. 1, 2 and 14,
as well as in BASECO, to indicate an implied amendment of the
Corporation Code, much less an implied modification of a
stockholder's right of inspection as guaranteed by Section 74
thereof. The only express limitation on the right of inspection,
according to the Court, is that (1) the right of inspection should
be exercised at reasonable hours on business days; (2) the
person demanding the right to examine and copy excerpts from
the corporate records and minutes has not improperly used any
information secured through any previous examination of the
records of such corporation; and (3) the demand is made in
good faith or for a legitimate purpose.
THE PRESIDENT OF PHILIPPINE DEPOSIT INSURANCE
CORPORATION AS LIQUIDATOR OF PACIFIC BANKING
CORPORATION, petitioner, vs. HON. WILFREDO D. REYES,
Pairing Judge, RTC Manila, Branch 31; ANG ENG JOO; ANG
KEONG LAN; and E.J. ANG INTERNATIONAL, LTD.,
represented by FORNIER & FORNIER LAW, respondents.
[G.R. No. 154973. June 21, 2005]
Principle: a corporation, whose existence has been terminated,
is entitled to an interest in the concept of actual and
compensatory damages from the time such investment was
made until the closure of the corporation.
Facts:
Pacific Banking Corporation (PaBC) was placed under
receivership on the ground of insolvency. Subsequently, it was
placed under liquidation and by filing with the Regional Trial
Court (RTC) of Manila, a petition for assistance in the liquidation
Naagas, President of the PDIC, was appointed.
Private respondents represented by their attorney-in-fact filed
their claim before the liquidating court. They claimed to be
preferred creditors and prayed for the return of their equity
investment in the amount of US$2,531,632.18 with interest until
the closure of the PaBC.
After due hearing the liquidation court, rendered its decision in
favor of the private respondent. Consequently, the liquidation
court, through the pairing judge Hon. Wilfredo D. Reyes, issued
an Order directing the President of the Land Bank of the
Philippines (LBP) to release to the Sheriff the garnished amount
of US$2,531,632.18.
The Bureau of Internal Revenue (BIR) and the Bangko Sentral
ng Pilipinas promptly filed before the liquidation court separate
motions to hold in abeyance the liquidation courts orders which
was however denied by judge reyes and ordered the payment of
accrued legal interest on the Singaporeans equity investment of
US$2,531,632.18 at the rate of 12% per annum computed from
the date the outward remittance and the investment were
actually made, until its full payment, at the exchange rate
prevailing at the time of payment.
Issue: Whether corporation, whose existence has been
terminated, be entitled to an interest in the concept of actual and
compensatory damages from the time such investment was
made until the closure of the corporation.
Ruling: Yes,. The interest that may be awarded as actual or
compensatory damages in this case is that provided in No. II-3
of the afore-quoted guidelines. Upon the finality of the Order of
11 September 1992, the award of US$2,531,632.18
representing the Singaporeans equity investment became a
judgment debt. As such, it shall bear an interest of 12% per
annum from the finality of the Order until its full satisfaction.
However, the grant of the said interest does not bar the
Singaporeans from claiming liquidating dividends which may
have accrued from their equity investment after being
determined by the Liquidator.
[G.R. No. 123793. June 29, 1998]
ASSOCIATED BANK, petitioner, vs. COURT OF APPEALS
and LORENZO SARMIENTO JR., respondents.
FACTS: Associated Banking Corporation and Citizens Bank and
Trust Company (CBTC) merged to form just one banking
corporation known as Associated Citizens Bank (later renamed
Associated Bank), the surviving bank. After the merger
agreement had been signed, but before a certificate of merger
was issued, respondent Lorenzo Sarmiento, Jr. executed in
favor of Associated Bank a promissory note, promising to pay
the bank P2.5 million on or before due date at 14% interest per
annum, among other accessory dues. For failure to pay the
amount due, Sarmiento was sued by Associated Bank.
Respondent argued that the plaintiff is not the proper party in
interest because the promissory note was executed in favor of
CBTC. Also, while respondent executed the promissory note in
favor of CBTC, said note was a contract pour autrui, one in favor
of a third person who may demand its fulfillment. Also,
respondent claimed that he received no consideration for the
promissory note and, in support thereof, cites petitioner's failure
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to submit any proof of his loan application and of his actual
receipt of the amount loaned.
ISSUE:
1.) Whether or not Associated Bank, the surviving corporation,
may enforce the promissory note made by private respondent in
favor of CBTC, the absorbed company, after the merger
agreement had been signed, but before a certificate of merger
was issued?
2.) Whether or not the promissory note was a contract pour
autrui and was issued without consideration?
HELD: The petition is impressed with merit. Associated Bank
assumed all the rights of CBTC. Although absorbed corporations
are dissolved, there is no winding up of their affairs or liquidation
of their assets, because the surviving corporation automatically
acquires all their rights, privileges and powers, as well as their
liabilities. The merger, however, does not become effective upon
the mere agreement of the constituent corporations. The
Securities and Exchange Commission (SEC) and majority of the
respective stockholders of the constituent corporations must
have approved the merger. (Section 79, Corporation Code) It will
be effective only upon the issuance by the SEC of a certificate of
merger. Records do not show when the SEC approved the
merger.
But assuming that the effectivity date of the merger was the date
of its execution, we still cannot agree that petitioner no longer
has any interest in the promissory note. The agreement itself
clearly provides that all contracts — irrespective of the date of
execution — entered into in the name of CBTC shall be
understood as pertaining to the surviving bank, herein petitioner.
Such must have been deliberately included in the agreement in
order to avoid giving the merger agreement a farcical
interpretation aimed at evading fulfillment of a due obligation.
Thus, although the subject promissory note names CBTC as the
payee, the reference to CBTC in the note shall be construed,
under the very provisions of the merger agreement, as a
reference to petitioner bank.
On the issue that the promissory note was a contract pour autrui
and was issued without consideration, the Supreme Court held it
was not. In a contract pour autrui, an incidental benefit or
interest, which another person gains, is not sufficient. The
contracting parties must have clearly and deliberately conferred
a favor upon a third person. The "fairest test" in determining
whether the third person's interest in a contract is a stipulation
pour autrui or merely an incidental interest is to examine the
intention of the parties as disclosed by their contract. It did not
indicate that a benefit or interest was created in favor of a third
person. The instrument itself says nothing on the purpose of the
loan, only the terms of payment and the penalties in case of
failure to pay.
Private respondent also claims that he received no consideration
for the promissory note, citing petitioner's failure to submit any
proof of his loan application and of his actual receipt of the
amount loaned. These arguments deserve no merit. Res ipsa
loquitur. The instrument, bearing the signature of private
respondent, speaks for itself. Respondent Sarmiento has not
questioned the genuineness and due execution thereof. That he
partially paid his obligation is itself an express acknowledgment
of his obligation.
WHEREFORE, the petition is GRANTED.
G.R. No. 82341 December 6, 1989
SUNDOWNER DEVELOPMENT CORPORATION, petitioner,
vs. HON. FRANKLIN M. DRILON, in his capacity as
Secretary of the Department of Labor and Employment,
NATIONAL UNION OF WORKERS IN HOTEL, RESTAURANT
AND ALLIED INDUSTRIES, (NUWHRAIN), HOTEL MABUHAY
CHAPTER, THE CHAPTER OFFICERS AND MEMBERS,
HOTEL MABUHAY, INC. and MR. MARIANO PENANO,
President of Hotel Mabuhay, Inc., respondents.
FACTS: Mabuhay Hotel leased the premises belonging to
Syjuco.
However, due to non-payment of rentals, a case for ejectment
was filed by Syjuco against Mabuhay in the MTC court of Manila.
Mabuhay Hotel offered to amicably settle by surrendering the
premises and to sell its assets and personal property to any
interested party.
Syjuco offered the said premises for lease to Sundower.
Mabuhay Hotel offered to sell its assets and personal properties
in the premises to Sundower to which Sundower agreed.
The employees of Mabuhay Hotel subsequently sought labor
rights against Sundower, and the Secretary of Labor directed the
latter to absorb the old employees of Mabuhay Hotel which had
completely ceased operations.
ISSUE: whether or not the purchaser of the assets of an
employer corporation can be considered a successor employer
of the latter’s employees
HELD: The court overturned the Secretary and laid down the
principle involved in assets only transfer.
The rule that unless expressly assumed, labor contracts such as
employment contracts and collective bargaining agreements are
not enforceable against a transferee of an enterprise, labor
contracts being in personam, thus binding only between the
parties. A labor contract merely creates an action in personam
and does not create any real right which should be respected by
third parties.
As a general rule, there is no law requiring a bonafide purchaser
of assets of a on-going concern to absorb in its employ the
employees of the latter. While it is true that petitioner is using the
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leased property for the same type of business as that of
respondent Mabuhay, there can be no continuity of the business
operations of the predecessor employer by the successor
employer as respondent Mabuhay had not retained control of
the business.
What is obvious is that the petitioner, by purchasing the assets
of respondent Mabuhay in the hotel premises, enabled Mabuhay
to pay its obligations to its employees. There being no employer-
employee relationship between the petitioner and the Mabuhay
employees, the petition must fail.
However, although the purchaser of the assets or enterprise is
not legally bound to absorb in its employ the employees of the
seller of such assets or enterprise, the parties are liable to the
employees if the transaction between the parties is colored or
clothes with bad faith.
G.R. No. 113337 March 2, 1995
RONALD MANLIMOS, FROILAN PAGALAN, MERLITA
DUHAY LUNGSOD, ELIZABETH ANDAGAN, DORIS
SERDAN, LEONORA BIBIANO, PERLA CUMPAY, VIRGINIA
ETIC, REMEGIA NOEL, ROSARIO CUARTO, RONALD
BOOC, JAIME TIMBAL, GERMAN GISTA, FEDERICO
AMPER, FRANCISCO EVALE, and RENANTE YACAPIN,
petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and SUPER MAHOGANY PLYWOOD
CORPORATION/ALBERT GO, respondents
Facts: Petitioners were among the regular employees of the
Super Mahogany Plywood Corporation, a domestic corporation
based in Butuan City. They were hired as patchers, taper-
graders and receivers-dryers.
However, a new owner/ management group acquired complete
ownership of the corporation headed by Alfredo Roxas.
Upon the change of ownership, petitioners continued to work for
the new owner until their termination when they received their
separation pay and other benefits due them. Each of them
executed a release a s waiver acknowledged by Atty. Discipulo
and Hearing Officer of Butuan City District Office of DOLE.
The new owner caused a publication for the hiring of workers.
Petitioners filed their applications and were hired on
probationary basis except for Rosario Cuarto.
Two (2) of the employees hired were terminated for their alleged
absence without leave and were considered to have abandoned
their work. The rest were dismissed. Thus, the filing of a
complaint for illegal dismissal.
The Labor Arbiter declared the dismissal invalid. Saying that the
transfer of ownership partook of a cessation of business
operation not due to business reverses and must comply with
the following requisites: (1) service of written notice to the
employees and to the MOLE at least one (1) month before the
intended date thereof, (2) the cessation of or withdrawal from
business operations must be bona fide in character and (3)
payment to the employees of termination pay amounting to at
least one-half month pay for each year of service or one month
pay whichever is higher. The first and third requisites were
present in this cade. However, there was no cessation of
operations which would lead to the dismissal of employees. And
that upon resumpton of work, the complainants were regular
employees for they were engaged in work which was necessary
and desirable to the company’s operations. Thus, they could not
be dismissed without cause and due process.
NLRC however, reversed the judgment of the Labor Arbiter
finding that the change of ownership was made in good faith
since there was no evidence that the former owners conspired
with the new owners to insulate the former management of any
liability to its workers. And sale or disposition of a business
enterprise which has been motivated by good faith is an element
of exemption from liability. Thus, an innocent transferee of a
business has no liability to the employees of the transferor to
continue employing them. Nor is the transferee liable for past
unfair labor practices of the previous owner, except, when the
liability is assumed by the new employer under the contract of
sale, or when liability arises because the new owners
participated in thwarting or defeating the right of the employees.
Hence, this special civil action for certiorari.
Issue: WON the transfer of ownership was done in good faith
making private respondent not guilty of illegal dismissal
Ruling: The rule is that sale or disposition of a business
enterprise which has been motivated by good faith is an element
of exemption from liability. Thus, an innocent transferee of a
business has no liability to the employees of the transferor to
continue employing them. Nor is the transferee liable for past
unfair labor practices of the previous owner, except, when the
liability is assumed by the new employer under the contract of
sale, or when liability arises because the new owners
participated in thwarting or defeating the right of the employees.
Where such transfer of ownership is in good faith, the transferee
is under no obligation to absorb the transferor’s employees as
there is no law compelling such absorption.
In this case, the transfer of ownership was made in good faith
given that there was no evidence that there was conspiracy to
insulate the former management of any liability to its workers.
Thus, petitioners were validly dismissed.
G.R. No. 71837 July 26, 1988
CHUNG KA BIO, WELLINGTON CHUNG, CHUNG SIONG
PEK, VICTORIANO CHUNG, and MANUEL CHUNG TONG
OH, petitioners, Vs. INTERMEDIATE APPELLATE COURT
(2nd Special Cases Division), SECURITIES and EXCHANGE
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 COMMISSION EN BANC, HON. ANTONIO R. MANABAT,
HON. JAMES K. ABUGAN, HON. ANTERO F.L. VILLAFLOR,
JR., HON. SIXTO T.J. DE GUZMAN, JR., ALFREDO CHING,
CHING TAN, CHIONG TIONG TAY, CHUNG KIAT HUA,
CHENG LU KUN, EMILIO TAÑEDO, ROBERTO G. CENON
and PHILIPPINE BLOOMING MILLS COMPANY, INC.,
respondents
FACTS: The Philippine Blooming Mills Company, Inc. was
incorporated on January 19, 1952, for a term of 25 years which
expired on January 19,1977. On May 14, 1977, the members of
its board of directors executed a deed of assignment of all of the
accounts receivables, properties, obligations and liabilities of the
old PBM in favor of Chung Siong Pek in his capacity as treasurer
of the new PBM, then in the process of reincorporation.On June
14, 1977, the new PMB was issued a certificate of incorporation
by the Securities and Exchange Commission.
On May 5, 1981, Chung Ka Bio and the other
petitioners herein, all stockholders of the old PBM, filed with the
SEC a petition for liquidation (but not for dissolution) of both the
old PBM and the new PBM. The allegation was that the former
had become legally non-existent for failure to extend its
corporate life and that the latter had likewise been ipso facto
dissolved for non-use of the charter and continuous failure to
operate within 2 years from incorporation.
ISSUE: Whether or not the board of directors of an already
dissolved corporation have the inherent power, without the
express consent of the stockholders, to convey all its assets to a
new corporation.
RULING: YES. While we agree that the board of directors is not
normally permitted to undertake any activity outside of the usual
liquidation of the business of the dissolved corporation, there is
nothing to prevent the stockholders from conveying their
respective shareholdings toward the creation of a new
corporation to continue the business of the old. Winding up is
the sole activity of a dissolved corporation that does not intend
to incorporate anew. If it does, however, it is not unlawful for the
old board of directors to negotiate and transfer the assets of the
dissolved corporation to the new corporation intended to be
created as long as the stockholders have given their consent.
This was not prohibited by the Corporation Act. In fact, it was
expressly allowed by Section 28-1/2.
The petitioners and the private respondents are not
strangers but relatives and close business associates. The PBM
office is in the heart of Metro Manila. The new corporation, like
the old, employs as many as 2,000 persons, the same personnel
who worked for the old PBM. Additionally, one of the petitioners,
Chung Siong Pek was one of the directors who executed the
deed of assignment in favor of the old PBM and it was he also
who received the deeded assets on behalf and as treasurer of
the new PBM. Surely, these circumstances must operate to bar
the petitioners now from questioning the deed of assignment
after this long period of inaction in the protection of the rights
they are now belatedly asserting. Laches has operated against
them.
ALICIA E. GALA, GUIA G. DOMINGO and RITA G. BENSON
vs. ELLICE AGRO-INDUSTRIAL CORPORATION, MARGO
MANAGEMENT AND DEVELOPMENT CORPORATION,
RAUL E. GALA, VITALIANO N. AGUIRRE II, ADNAN V.
ALONTO, ELIAS N. CRESENCIO, MOISES S. MANIEGO,
RODOLFO B. REYNO, RENATO S. GONZALES, VICENTE C.
NOLAN, NESTOR N. BATICULON
G.R. No. 156819. December 11, 2003
FACTS: On March 28, 1979, the Ellice Agro-Industrial
Corporation was formed and organized. The total subscribed
capital stock of the corporation was P3.5 Million with 35,000
shares. Additional shares were acquired and subscribed from
said corporation. Subsequently, on September 16, 1982, the
Margo Management and Development Corporation (Margo) was
incorporated. The total subscribed capital stock of Margo was
20,000 shares at P200, 000.00. Several transfers of shares of
Ellice to Margo were made by the stockholders and some
payments of subscription were made by transferring parcels of
land by the Gala Spouses.
In essence, petitioners want this Court to disregard the
separate juridical personalities of Ellice and Margo for the
purpose of treating all property purportedly owned by said
corporations as property solely owned by the Gala spouses.
The petitioners’ contention in support of this theory is that the
purposes for which Ellice and Margo were organized should be
declared as illegal and contrary to public policy. They claim that
the respondents never pursued exemption from land reform
coverage in good faith and instead merely used the corporations
as tools to circumvent land reform laws and to avoid estate
taxes. Specifically, they point out that respondents have not
shown that the transfers of the land in favor of Ellice were
executed in compliance with the requirements of Section 13 of
R.A. 3844. Furthermore, they alleged that respondent
corporations were run without any of the conventional corporate
formalities.
ISSUE: Whether or not the purpose of the creation of the two
corporations is illegal and against public policy.
RULING: NO. Impugning the legality of the purposes for which
Ellice and Margo were organized, amount to collateral attacks
which are prohibited in this jurisdiction. The best proof of the
purpose of a corporation is its articles of incorporation and by-
laws. The articles of incorporation must state the primary and
secondary purposes of the corporation, while the by-laws outline
the administrative organization of the corporation, which, in turn,
is supposed to insure or facilitate the accomplishment of said
purpose. A perusal of the Articles of Incorporation of Ellice and
Margo shows no sign of the allegedly illegal purposes that
petitioners are complaining of. If a corporation’s purpose, as
stated in the Articles of Incorporation, is lawful, then the SEC
has no authority to inquire whether the corporation has purposes
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other than those stated, and mandamus will lie to compel it to The commentaries of Lopez advert to an SEC Opinion
issue the certificate of incorporation. dated 29 September 1987 which we can cite with approval.
With regard to their claim that Ellice and Margo were meant to Lopez cites: In order that the action of a corporation in expelling
be used as mere tools for the avoidance of estate taxes, suffice a member for cause may be valid, it is essential, in the absence
it say that the legal right of a taxpayer to reduce the amount of of a waiver, that there shall be a hearing or trial of the charge
what otherwise could be his taxes or altogether avoid them, by against him, with reasonable notice to him and a fair opportunity
means which the law permits, cannot be doubted. to be heard in his defense. If the method of trial is not regulated
Thus, even if Ellice and Margo were organized for the by the by-laws of the association, it should at least permit
purpose of exempting the properties of the Gala spouses from substantial justice. The hearing must be conducted fairly and
the coverage of land reform legislation and avoiding estate openly and the body of persons before whom it is heard or who
taxes, the court cannot disregard their separate juridical are to decide the case must be unprejudiced.
personalities. It is unmistakably wise public policy to require that the
termination of membership in a non-stock corporation be done in
VALLEY GOLF & COUNTRY CLUB, Inc., petitioner vs. VDA. accordance with substantial justice. No matter how one may
DE CARAM, respondent precisely define such term, it is evident in this case that the
G.R. No. 158805 April 16, 2009 termination of Caram’s membership betrayed the dictates of
substantial justice.
FACTS: Valley Golf & Country Club (Valley Golf) is a duly
constituted non-stock, non-profit corporation which operates a
golf course. The members and their guests are entitled to play
golf on the said course and otherwise avail of the facilities and
privileges provided by Valley Golf. The shareholders are likewise
assessed monthly membership dues.
In 1961, the late Congressman Fermin Z. Caram, Jr.
(Caram), the husband of the present respondent, subscribed to
purchased and paid for in full one share (Golf Share) in the
capital stock of Valley Golf. He was issued Stock Certificate No.
389 dated 26 January 1961 for the Golf Share. The Stock
Certificate likewise indicates a par value of P9,000.00.
Valley Golf would subsequently allege that beginning
25 January 1980, Caram stopped paying his monthly dues,
which were continually assessed until 31 June 1987. Valley Golf
claims to have sent five (5) letters to Caram concerning his
delinquent account within the period from 27 January 1986 until
3 May 1987, all forwarded to P.O. Box No. 1566, Makati
Commercial Center Post Office, the mailing address which
Caram allegedly furnished Valley Golf.
The Golf Share was sold at public auction on 11 June
1987 for P25,000.00 after the Board of Directors had authorized
the sale in a meeting on 11 April 1987, and the Notice of Auction
Sale was published in the 6 June 1987 edition of the Philippine
Daily Inquirer.

ISSUE: Whether or not 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. 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.
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