GR 211485; (May, 2016) (Digest)
G.R. No. 211485 , May 30, 2016
Magallanes Watercraft Association, Inc., represented by its Board of Trustees, Petitioner, vs. Margarito C. Auguis and Dioscoro C. Basnig, Respondents.
FACTS
Petitioner Magallanes Watercraft Association, Inc. (MWAI) is an association of motorized banca operators. Respondents Auguis and Basnig were its members and officers. Due to their refusal to pay membership dues and berthing fees, pending their demand for a financial audit, MWAI’s Board of Trustees passed resolutions suspending their membership rights and berthing privileges for thirty days. The respondents failed to settle their obligations, leading to a second suspension.
Subsequently, respondents filed an action for damages with a prayer for injunction before the Regional Trial Court (RTC). The RTC ordered respondents to pay their unpaid accounts but also held MWAI liable for actual damages and attorney’s fees. The Court of Appeals affirmed with modification, deleting the actual damages but awarding temperate damages and attorney’s fees. The CA ruled that MWAI committed an ultra vires act, as its Articles of Incorporation and By-Laws contained no express authority to impose disciplinary sanctions that effectively suspended the respondents’ right to operate their bancas, a privilege granted by a Certificate of Public Convenience from MARINA.
ISSUE
Whether the Court of Appeals erred in awarding temperate damages and attorney’s fees to the respondents.
RULING
The Supreme Court granted the petition and reversed the CA. The Court held that MWAI acted within its corporate powers. A corporation, under the Corporation Code, possesses not only express powers but also implied and incidental powers necessary to achieve its purposes. MWAI’s By-Laws expressly obligated members to obey its rules and pay dues. The power to suspend delinquent members is an implied and incidental power essential to enforce these obligations and protect the association’s financial integrity. The suspension of berthing privileges was a legitimate exercise of this disciplinary power, directly related to the respondents’ failure to pay prescribed fees.
Consequently, the suspension was lawful and not ultra vires. Any financial loss suffered by the respondents (damnum) resulted from a valid corporate act and did not constitute a legal injury (injuria). The principle of damnum absque injuria applies; no damages are recoverable for losses arising from a lawful act. Furthermore, the award of attorney’s fees was baseless, as such fees are not recoverable when a party litigates under a mistaken belief in the righteousness of its cause. The complaint for damages was dismissed for lack of merit.