G.R. No. 158805 ; April 16, 2009
VALLEY GOLF & COUNTRY CLUB, INC., Petitioner, vs. ROSA O. VDA. DE CARAM, Respondent.

FACTS

Petitioner Valley Golf & Country Club, Inc. is a non-stock, non-profit corporation operating a golf course. In 1961, the late Congressman Fermin Z. Caram, Jr., husband of respondent Rosa O. Vda. de Caram, fully paid for one “Golf Share” and was issued Stock Certificate No. 389. Valley Golf alleged that beginning January 25, 1980, Caram stopped paying his monthly membership dues. The corporation sent five demand letters between January 27, 1986, and May 3, 1987, to a P.O. Box address allegedly furnished by Caram, informing him of his delinquency, the suspension of his club privileges, and the impending sale of his Golf Share at public auction to satisfy the unpaid dues, pursuant to its by-laws. Caram died on October 6, 1986. Notably, the third and fourth demand letters (dated January 25, 1987, and March 7, 1987) were addressed to the “Est. of Fermin Z. Caram, Jr.,” but the fifth letter (dated May 3, 1987) was again addressed to Fermin Caram himself. The Golf Share was sold at public auction on June 11, 1987. The Caram heirs only learned of the sale in May 1990 after inquiring with Valley Golf, which later offered a refund of a portion of the sale proceeds. Respondent filed an action for reconveyance with damages before the Securities and Exchange Commission (SEC). The SEC Hearing Officer ruled in favor of respondent, declaring the auction sale null and void. This decision was affirmed by the SEC en banc and later by the Court of Appeals, which deleted the award of attorney’s fees.

ISSUE

May a non-stock corporation seize and dispose of the fully-paid membership share of a member for unpaid debts to the corporation when authorized by its corporate by-laws but not by its Articles of Incorporation?

RULING

No. The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The Court held that the sale of the fully-paid Golf Share for delinquent membership dues was invalid. The authority for such a sale cannot be based solely on corporate by-laws. Section 6 of the Corporation Code mandates that the rights, privileges, and restrictions attached to shares of stock must be stated in the Articles of Incorporation. Since Valley Golf’s Articles of Incorporation did not provide for a lien on shares for unpaid membership dues or authorize their sale for such delinquency, the relevant by-law provisions could not validly impose such a condition. The Court distinguished this from Section 67 of the Corporation Code, which allows the sale of shares for unpaid subscriptions, a situation not applicable here as the share was fully paid. The delinquency in dues was an ordinary debt collectible through judicial action, not through extrajudicial sale of the share. Furthermore, the Court found issues with the notice of sale, as demand letters sent after Caram’s death were improperly addressed, and the final notice was sent to Caram personally as if he were still alive, raising due process concerns. The sale was effectively a deprivation of property without due process.