G.R. No. 164686. October 22, 2014.
FOREST HILLS GOLF AND COUNTRY CLUB, INC., Petitioner, vs. GARDPRO, INC., Respondent.

FACTS

Petitioner Forest Hills Golf and Country Club, Inc. (Forest Hills or Club) is a non-profit stock corporation. In 1996, respondent Gardpro, Inc. (Gardpro) bought Class “C” common shares, which entitled the registered corporate owner to designate two nominees for membership. Gardpro designated Fernando R. Martin and Rolando N. Reyes as nominees. They applied for membership and were charged and paid membership fees of ₱50,000.00 each (a discounted rate from ₱75,000.00) upon assurance from the Club’s General Manager that the fees were temporary. Their applications were approved by the Board of Directors. Later, Gardpro decided to change its designated nominees. Forest Hills demanded new membership fees of ₱75,000.00 per replacement nominee. Gardpro refused to pay, and the replacement did not proceed. Gardpro filed a complaint in the Securities and Exchange Commission (SEC) seeking, among others, a refund of the membership fees paid for its original nominees, arguing that the corporation itself is the member and should not pay new membership fees for nominee changes.
The SEC Hearing Officer ruled in favor of Gardpro, restraining Forest Hills from collecting membership fees for replacement nominees and ordering that the fees already paid be applied for the replacements. The SEC En Banc affirmed but deleted the award of attorney’s fees. The Court of Appeals (CA) affirmed the SEC’s ruling. Forest Hills appealed to the Supreme Court.

ISSUE

Whether, under Forest Hills’ By-Laws, the Club is authorized to collect new membership fees from a corporate shareholder every time it changes its designated nominees.

RULING

No. The Supreme Court affirmed the CA decision. The Court held that the literal meaning of the By-Laws provisions controls. The corporation (Gardpro) is the real club member, not its nominees. Article II, Section 2.2.2 of the By-Laws explicitly states that a juridical entity owning a Class “C” share may designate two nominees who, upon Board approval, may be admitted as Regular Members, and that “[a] transfer fee in such amount as may be prescribed by the Board of Directors, shall be charged for every change in the designated nominee of juridical entity.” This provision authorizes only a “transfer fee” for a change in nominee, not a new “membership fee.”
The payment of a membership fee is governed separately by Article III, Section 13.7, which requires it to be paid within 30 days from the approval of an application to register the share in the Club’s books. Since Gardpro, the corporate member, had already paid the membership fee upon the approval of its original nominees’ applications, it should not be required to pay it again for replacement nominees. To require a new membership fee for every nominee change would constitute unjust enrichment at Gardpro’s expense. The applicable charge for changing nominees is only the “transfer fee” prescribed under Section 2.2.2, which is distinct from the “transfer fee” for transferring the stock itself under another By-Laws provision.