Montemar Beach Club, Inc.

February 26, 1987 Montemar Beach Club, Inc. Cacho-Gonzalez Building Legaspi Village, Makati Metro Manila Attention : Mr . Jose Mari Cacho General Manager Gentlemen: This relates to your letter dated January 7, 1987, requesting the opinion of this Commission on the queries posed therein. Montemar Beach Club, Inc. was registered with this Commission on November 9, 1975, for the purpose, among others, of fostering, promoting and conducting legitimate athletic exercises, sports, pleasure, recreational, social, cultural, and educational activities, as well as entertainments of all kinds. The club was incorporated as a non-stock corporation and membership therein and right of participation in and management of its assets and business are acquired and enjoyed by proprietary members, who upon admission pay certain membership fee, as may be fixed by the majority of the proprietary members and as provided for in the by-laws. Record further shows that membership fee certificate represents a pro-rata equity in the assets for the corporation and vests upon the holder thereof such voting power in the corporation. Your queries as further orally elucidated by your corporate secretary, Mr. Dominador Patawaran, are restated as follows: In cases where proprietary members, whose certificates are fully paid incur liabilities to the club, on account of unpaid monthly dues, food and room accommodations, may the club sell at auction a number of certificates of said delinquent members? In the event that some of the certificates are not auctioned, may the club and/or the developer for La Colina Resorts Corporation exercise the option to purchase these certificates by pegging the price to the corresponding liabilities of the members? Whether or not a corporation has the power to forfeit or sell proprietary certificate of a member because of non-payment of assessments thereon depends upon whether such power has been expressly conferred upon it by the legislative or by the agreement of the members . (12 Fletcher Cyc. Corps., 5695). Thus, quoted hereunder is the pertinent provision of the by-laws of Montemar Beach Club, Inc. which directly answers your first query, to wit: "ARTICLE IX. Indebtedness. SECTION 1. The account of the members of the club shall be presented to them and settled monthly. If the bill or bills of another member remains unpaid for a period of two months after the current month, the Treasurer shall notify him that, unless the same is paid within two months thereafter, his name will be posted as delinquent and reported to the Board of Directors, in which case, the Board may order his membership certificate sold at auction and the proceeds applied to the unpaid or delinquent account, and captive the member of his membership in the club. No member whose account is in arrears for more than one (1) month thereafter shall be entitled to enjoy the privileges of the club. No member whose name is posted as delinquent shall use, enjoy or participate in any of the privileges or facilities of the club or be entitled to vote in any meeting." (Emphases supplied). Hence, for as long as the power set forth above is properly exercised, your first query is answered in the affirmative. In the auction sale of certificates of delinquent members, the provisions of Section 2, Article IX of the by-laws of the Club must, likewise, be considered. By the express provision of said by-laws, the Club may enter a bid. However, please be informed that "a sale at auction, like every other sale, must have the assent, express or implied of both seller and buyers "(5 Am. Jur. sec. 17). An auctioneer is possessed of a large measure of discretion in the conduct of the sale. (Am. Jur., sec. 20). He may, in the exercise of his discretion, refuse to accept a bid, when it would be a virtual sacrifice of the property to accept it, and either adjourn the auction or withdraw the property from sale (Ibid). Thus, "an auctioneer may be held liable to the owner where he has failed to exercise any discretion or caution whatever, so that the property was sold at a ruinous sacrifice, even though no minimum figures below which the property should not be sold had been stated to him". (Annotation; 57 L.R.A. 787, cited in Am. Jur., Supra). LibLex It is, therefore, advised that you should be guided accordingly in the auction sale of proprietary certificates of delinquent members. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman