Case Summary (G.R. No. 160273)
Petitioner
Cebu Country Club, Inc. and its directors, who voted to disapprove respondent’s application for proprietary membership.
Respondent
Ricardo F. Elizagaque, applicant for CCCI proprietary membership whose application was rejected by the Board.
Key Dates
• 1987: respondent admitted as special non-proprietary member.
• September 6, 1996: CCCI issues Proprietary Ownership Certificate No. 1446 to respondent.
• July 30, 1997: Board meeting where secret “black ball” vote yields one black ball, resulting in disapproval.
• December 23, 1998: respondent files complaint for damages in RTC, Pasig City (Civil Case No. 67190).
• February 14, 2001: RTC Decision awards actual, moral, exemplary damages and attorney’s fees.
• January 31, 2003: CA affirms with reduced awards.
• October 2, 2003: CA denies motions for reconsideration.
• January 18, 2008: Supreme Court Decision on Rule 45 petition.
Applicable Law
• 1987 Philippine Constitution (decision rendered in 2008).
• CCCI Articles of Incorporation (non-stock corporation; membership limited to proprietary certificate holders).
• CCCI Amended By-Laws, Article 1, Section 3 (procedure for election of proprietary members; amended March 1, 1978 to require unanimous Board vote).
• Civil Code: Article 19 (abuse of rights); Article 21 (liability for willful injury contrary to morals, good customs or public policy); Article 2208 (attorney’s fees); Article 2219 (moral damages); Article 2229 (exemplary damages).
• Corporation Code, Section 31 (joint and several liability of directors for bad faith or gross negligence).
Facts
Respondent, a long-standing special non-proprietary member, applied for proprietary membership in 1996. His application was seconded and he acquired a share and certificate. Despite no printed notice on the application form that unanimous Board approval was required, the Board deferred action twice and, on July 30, 1997, rejected him by secret ballot. Respondent sought reconsideration and information on objections by letters in August, October and November 1997, all unanswered.
Procedural History
RTC ruled in respondent’s favor (February 14, 2001), awarding P2,340,000.00 actual damages, P5,000,000.00 moral damages, P1,000,000.00 exemplary damages, P1,000,000.00 attorney’s fees and P80,000.00 litigation expenses. On appeal, the CA (January 31, 2003) affirmed with modifications: P2,000,000.00 moral damages; P1,000,000.00 exemplary damages; P500,000.00 attorney’s fees; P50,000.00 expenses. Motions for reconsideration were denied (October 2, 2003), prompting this Rule 45 petition.
Issue
Whether petitioners acted in bad faith or arbitrarily in disapproving respondent’s application and are jointly and severally liable for damages.
Abuse of Rights and Good Faith Requirement
Under Civil Code Articles 19 and 21, the exercise of corporate rights must observe justice, honesty and good faith. A right exercised arbitrarily or excessively that injures another constitutes abuse of rights and gives rise to liability. The Supreme Court found that petitioners’ silent refusal to explain the basis for rejection, failure to update application forms to reflect the unanimous-vote requirement, and disregard of respondent’s repeated inquiries evidenced bad faith and fraud.
Procedural Fairness and Notice
By withholding material information—namely, the 1978 amendment requiring unanimity—the Board deprived respondent of meaningful opportunity to cure or address objections. The lack of transparency and failure to respond to letters for reconsideration compounded the arbitrary denial.
Damages Award
• Moral damages: Reduced from P2,000,000.00 to P50,000
Case Syllabus (G.R. No. 160273)
Facts of the Case
- Cebu Country Club, Inc. (CCCI) is a non-stock, non-profit private membership club in Cebu City; petitioners are members of its Board of Directors.
- In 1987, San Miguel Corporation designated Ricardo F. Elizagaque as special non-proprietary member; the Board approved.
- In 1996, respondent filed an application for proprietary membership, seconded by two existing proprietary members.
- The market price for a proprietary share was about ₱5 million; respondent bought one for ₱3 million from Dr. Butalid.
- CCCI issued Certificate No. 1446 on September 6, 1996; Board meetings in April and May 1997 deferred action on the application.
- On July 30, 1997, the Board voted by secret “black ball system”; one black ball caused disapproval.
- Respondent received written notice of disapproval on August 1, 1997; letters of reconsideration (August 6 and October 7) and inquiry (November 5) went unanswered.
Procedural History
- December 23, 1998: respondent filed Civil Case No. 67190 at the RTC, Branch 71, Pasig City, for damages.
- February 14, 2001: RTC rendered judgment awarding respondent actual, moral, exemplary damages, attorney’s fees, and litigation expenses; counterclaims dismissed.
- January 31, 2003: Court of Appeals affirmed with modifications—reduced moral and exemplary damages, attorney’s fees, and expenses; counterclaims dismissed.
- October 2, 2003: CA denied petitioners’ motion for reconsideration and oral argument.
- January 18, 2008: Petitioners filed a petition for review on cer