Title
Forest Hills Golf and Country Club, Inc. vs. Gardpro, Inc.
Case
G.R. No. 164686
Decision Date
Oct 22, 2014
Forest Hills Golf Club charged Gardpro new membership fees for nominee replacements, violating its by-laws. Courts ruled fees unauthorized, upheld Gardpro’s rights, and deemed amicus curiae intervention unnecessary.
articles of incorporation
literal meaning
interpretation

Case Summary (G.R. No. 164686)

Factual Background

Forest Hills Golf and Country Club, Inc. was a non-profit stock corporation organized to promote social, recreational and athletic activities for its members and to maintain golf and other sports facilities. Fil-Estate entities engaged marketing agents to offer Forest Hills shares for sale, and purchasers were informed that membership remained a privilege subject to Board approval. In 1996 Gardpro, Inc. purchased Class C common shares that entitled the registered owner to designate two nominees for membership. In October 1997 Gardpro designated Fernando R. Martin and Rolando N. Reyes as its nominees. Forest Hills charged each nominee P50,000.00 as membership fees, which Martin paid after assurances by the Club’s general manager that the fees were temporary and refundable. A Board resolution of August 26, 1997 increased corporate membership fees and provided a discount for timely payment; subsequent attempts by Gardpro to replace its nominees were met by the Club’s demand for new membership fees of P75,000.00 per nominee, and Gardpro refused to pay such sums.

Procedural History

Gardpro filed a complaint with the Securities and Exchange Commission on July 7, 1999. The SEC Hearing Officer rendered a decision on June 30, 2000, ordering the Club restrained from collecting membership fees for the two replacement members, directing that fees already paid be applied to those replacements, and awarding attorneys’ fees to Gardpro. The SEC En Banc affirmed the Hearing Officer’s findings on June 28, 2001 but denied attorneys’ fees. Forest Hills appealed to the Court of Appeals, which denied the petition for review on September 26, 2003 and affirmed the SEC in toto. The Court of Appeals denied motions for intervention by the Federation of Golf Clubs of the Philippines, Inc., and denied reconsideration. Forest Hills filed a petition for review on certiorari with the Supreme Court raising legal issues concerning interpretation of the by-laws, board prerogatives, and amicus intervention; the Supreme Court promulgated its decision on October 22, 2014.

Issues Presented

The petition presented, in substance, three issues: whether the replacement nominees of Gardpro, Inc. were required to pay membership fees under applicable principles of contractual interpretation; whether the Court of Appeals had encroached upon the Club’s prerogative and the Board of Directors’ power to determine membership rules and to construe the articles and by-laws; and whether the Court of Appeals erred in denying leave to the Federation of Golf Clubs of the Philippines, Inc. to intervene as amicus curiae.

Parties’ Contentions

Forest Hills contended that its articles of incorporation and by-laws authorized the collection of membership fees from replacement nominees and that judicial review improperly intruded upon the Board’s internal prerogatives and construction of the by-laws; it also argued that the Federation should have been permitted to intervene as amicus curiae. Gardpro maintained that it was the real club member as owner of the Class C shares, that its designated nominees merely held playing rights, and that the by-laws did not authorize collection of fresh membership fees upon replacement of nominees but provided for a transfer fee instead; Gardpro relied on testimony that marketing agents had represented nominees would be automatically entitled to membership and on assurances by club officers regarding fees.

Ruling of the Securities and Exchange Commission and the Court of Appeals

The SEC Hearing Officer ordered relief restraining the Club from collecting membership fees for the replacement nominees and applied fees already paid to the replacements while awarding attorneys’ fees. The SEC En Banc affirmed those substantive findings but denied attorneys’ fees. The Court of Appeals affirmed the SEC En Banc on September 26, 2003, holding that nowhere in the by-laws was the Club authorized to collect membership fees every time a corporate member replaced its designated nominees, that Section 2.2.2 of the by-laws prescribed a transfer fee for every change in designated nominees, and that Section 13.7 governed payment of membership fees by the applicant corporate member within thirty days of approval for purposes of registration in the Stock and Transfer Books. The Court of Appeals distinguished the transfer fee for change of nominees from the transfer fee for transfer of shares and concluded that Gardpro, as the real member, should not be assessed membership fees upon each replacement of nominees.

Supreme Court’s Disposition

The Supreme Court affirmed the decision of the Court of Appeals. The Court held that the by-laws did not authorize the Club to collect new membership fees from replacement nominees of Gardpro, Inc., that the Court of Appeals had not usurped the Board’s prerogatives in construing the articles and by-laws, and that the denial of intervention by the Federation as amicus curiae was proper. The Court ordered the petitioner to pay the costs of suit.

Legal Basis and Reasoning

The Court reasoned from first principles that the articles of incorporation and the by-laws constituted the private statutes binding the corporation and its members and that their literal meaning controlled where the language was clear, citing Article 1370 of the Civil Code. The Court applied Article 1374 to interpret stipulations together so that doubtful provisions acquired meaning from the agreement as a whole. The Court observed that Section 13.7 of the by-laws required the membership fee to be paid by the applicant within thirty days from approval before registration of the share in the Stock and Transfer Books and that, under the by-laws, the juridical entity, not the individual nominee, was the applicant obligated to pay membership fees. The Court relied on Section 2.2.2 to show that a juridical owner of a Class C share was entitled to designate nominees and that the by-laws expressly prescribed a transfer fee for every change in designated nominees, a provision distinct from the transfer fee applicable to actual transfer of shares under Section 13.6. The Court concluded that requiring membership fees upon each replacement would d

...continue reading

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster, building context before diving into full texts. AI-powered analysis, always verify critical details.

About Privacy Terms