William H. Quasha vs. The Manila Polo Club

[SEC-AC NO. 026. February 18, 1980.] WILLIAM H. QUASHA , complainant , vs .THE MANILA POLO CLUB , respondent . D E C I S I O N This is an appeal from the decision of the Hearing Officer on the above-entitled case dated September 12, 1979, confirming the validity of the Amended Articles of Incorporation and Amended By-Laws of the Manila Polo Club, the consequence of which validly converted the club into a proprietary one. A motion for reconsideration was filed by complainant-appellant on said order of the Hearing Officer but was likewise denied. The appeal raises the following assignment of errors: "1. The Hearing Officer erred in finding that only regular members or resident and non-absentee status of respondent club are entitled to vote; "2. The Hearing Officer erred in ruling that only a two-thirds vote of the members entitled to vote of respondent club is necessary to approve the conversion of the respondent club into a proprietary one; "3. The Hearing Officer; erred in finding as valid the adjournment of the members' meeting of respondent club held on August 22 to September 26, 1977 and respondent's acceptance of votes cast for the questioned conversion during the interim period; "4. The Hearing Officer erred in finding the value of the proprietary shares of respondent to be in accordance with laws and regulations governing proprietary club; "5. The Hearing Officer erred in finding that the conversion of respondent club into a proprietary one did not have the effect of dissolving the old club and creating a new one; "6. The Hearing Officer erred in finding the conversion of respondent club into a proprietary club to be legal, equitable and moral." On the first assignment of error, the Commission noted that the hearing officer was guided by the provisions of the by-laws of respondent club in determining who were eligible to vote. Article VI, Sec. 5 of said by-laws definitely states who are eligible to vote. "SECTION 5. Eligibility to vote . Regular members while paying monthly dues prescribed under Article VIII, Sec. 2 and regular honorary members who are residents of Manila and suburbs are the only members who have the right to vote at any meeting of the members and be eligible as directors of the corporation." Sections 5 and 6 of Article VII also provide: "SECTION 5. Regular Members of non-resident status . A regular member living in the Philippines but residing outside 150 kilometers of Manila shall be deemed a non-resident status. "Member in a non-resident status shall enjoy the same privilege as regular non-members, except the right to vote. "A Member on a non-resident status who takes up residence or who is stationed in the Manila area or who signs chits at the club house during any 30-day consecutive period shall cease to be on a non-resident status after said period and shall thereafter pay the full dues provided in Article VIII, Section 2. "SECTION 6. Regular-Members in Absentee Status . A regular member who intends to leave the Philippines shall be entitled to life absentee membership upon the payment of P50.00. After one year of absence, he shall pay P5 per year as life absentee membership dues. Upon returning to the Philippines to take up residence, he will be entitled to resume membership and will, thereafter resume his obligation as regular member." dctai With these provisions, it is clear that only regular members who are within the Philippines; and not otherwise classified to be non-resident or absentee are entitled to vote. The membership of one on absentee status is considered suspended while he is absent from the country although he is retained for membership purposes in the membership roll. This is clear from the phrase " will be entitled to resume membership and will, thereafter resume his obligation as a regular member ." On the second assignment of error, we are of the view that since the act complained of is an amendment of the Articles of Incorporation and the by-laws of respondent-appellee club, the required vote as clearly given under the Corporation Law is 2/3 vote of the members for an amendment of the Articles and a majority vote of the members for an amendment of the by-laws. We cannot therefore subscribe to the view of appellant that a unanimous vote of all the members is required. We cannot likewise subscribe to appellants' view that the conversion dissolved the club and a new one was created necessitating a unanimous vote of all the members. On the third assignment of error, we sustain the finding of the Hearing Officer that the Corporation Law does not prohibit the adjournment of a meeting to another day. Neither is such adjournment prohibited by the by-laws of respondent club. Accordingly, when corporate meetings are adjourned, they are resumed and continued on the adjourned day without further notice for the transaction of whatever business was to come before the original meeting. Moreover, since the adjournment was approved unanimously by the members of the club said adjournment should be rendered as binding to all members. In view thereof, we are of the agreement that the continuance of the annual stockholders' meeting held on August 22, 1977 to September 26, 1977, for the purpose of counting the votes cast for or against the conversion of the club was legal. On the fourth assignment of error, we find the conclusion of the Hearing Officer correct that the value of the proprietary shares of respondent club was in accordance with the Rules and Regulations of the Commission governing proprietary clubs. This is derived from the fact that the assets of the club is more than the total value of the proprietary shares issued and as such would be more than enough to cover the value of these shares. Because of this, the obtaining situation in the respondent-appellee club is one where the members are already more than amply protected. We find this to be in consonance with the intention of the Rules promulgated by the Commission in protecting the investors from speculative schemes and certain devices of fraud that may be used or employed by proprietary clubs. In cases like this, it is our view that the pricing of shares should be left to the management with which the Commission should no longer interfere. The Commission cannot agree with the fifth assignment of error. For while there may be issuance of shares to the members, this cannot be treated as a sale of the club's assets to its stockholders. The club as we are all aware of, continues to be the legal owner of all its present assets. There has been no actual disposition of properties of the club. As such, we cannot agree that a new club was created by the conversion of the respondent club into a proprietary one. Finding the hearing officer to have observed all the pertinent laws, rules and regulations on the matter we cannot subscribe to the 6th and final assignment of error and therefore find the conversion of the respondent-appellee club to be legal, equitable and moral. WHEREFORE, the order appealed from is hereby AFFIRMED IN TOTO. SO ORDERED. (SGD.) ANGEL L. LIMJOCO, JR. Chairman (SGD.) JULIO A. SULIT, JR. (SGD.) SIXTO T. J. DE GUZMAN, JR Associate Commissioner Associate Commissioner Footnotes * By Commission en Banc