Atty. Annie Victoria G. Aguilar

August 5, 2002 SEC OPINION Atty. Annie Victoria G. Aguilar Tan Acut & Lopez Law Offices 23/F Philippine Stock Exchange Centre East Tower, Exchange Road Ortigas Center, Pasig City Dear Atty. Aguilar, This refers to your letter dated February 18, 2002 requesting confirmation on certain issues pertaining to the membership of your client in Forest Hills Golf and Country Club Inc. (FHGCCI). Firstly, as can be gleaned from the articles of incorporation and by-laws of the club, membership therein is merely a privilege. In fact, "a holder of a share of stock is not ipso facto a member of the club". (Article VII, par 10(8) and Article II, Section 2.1 of the By-laws) A shareholder's admission as a member is subject to the club's rules and the favorable action of the Board of Directors. Corollarily, his withdrawal of membership in the club is also subject to the rules therein. From a perusal of the articles and by-laws of the club, there is no specific provision directly dealing with the procedure for withdrawal of shareholders already admitted as members of the club. In which case, the rules as promulgated by the board of directors of the club shall be followed considering that the same body also regulates the admission of members. Secondly, on the issue of monthly dues, there appears to have two conflicting provisions on the matter: Article VII, par. 10(6) of the Articles of Incorporation and Section 13.1 of the By-laws. The two provisions are quoted hereunder: Article VII (Articles of Incorporation) xxx xxx xxx (6) The registered owner of any class of share shall be subject to the payment of monthly dues in such amount as may be prescribed by resolution of the Board of Directors to meet the expenses for the general operations of the Club, and the maintenance and improvement of its premises and facilities. Such dues, together with all the other obligations of the shareholders to the Corporation, shall constitute a first lien on the shares and in case of Class "D" shares, the lien shall be on the share and on the accompanying Fairway lot; provided that the lien over the lot shall be valid only within the 25-year period, second only to any lien in favor of the national or local government. In the event of delinquency in the payment of monthly dues, the share may be ordered sold by the Board of Directors in the manner provided in the By-laws to satisfy said dues or other obligations of the owner. . . Section 13.1 (By-laws) In order to meet the expenses for the general operations of the Club, and the maintenance and improvement of its premises and facilities, all Regular Members shall pay monthly dues to the Club in such amount as may be fixed by resolution of the Board of Directors; provided, however that a juridical entity which owns a Class "C" Share shall be assessed double the amount of monthly dues whether or not two nominees or representatives have been named. The payment of the monthly dues shall be the principal responsibility of the registered owner of the share, regardless of whether or onto the rights thereto have been assigned in accordance with these by-laws. Such membership dues shall be assessable upon resolution of the Board of Directors which shall not be earlier than the formal turn over of the project by the Developer to the Club. As has been previously opined by the Commission, the articles of incorporation prevail over the by-laws in case of conflict between the two. "By-laws are subordinate to the charter of the corporation. To be valid, it must be consistent with the terms and spirit of the charter of the corporation . . . As in this case, Article VII, which expressly subjects the registered owner of any class of share to the payment of monthly dues prevails over Section 13.1 of the By-laws which limits the imposition of the monthly dues to regular members . . . Certainly, all of them, whether a member or a plain shareholder benefit from the proper maintenance and improvement of the club's facilities and premises, which is the rationale for the imposition of monthly dues." (SEC Opinion dated October 4, 2001, addressed to Attys. Salipsip & San Juan, Jr.) In the instance of your client, despite his withdrawal from club membership, he can still be subject to the payment of monthly dues as a registered owner of share of stock in the corporation under Article VII, par. 10(6) of the articles of incorporation, until such time that he has already disposed of his shares or his shares are auctioned by the club. Very truly yours, (SGD.) JESUS ENRIQUE G. MARTINEZ Commissioner