Jaime R. Blanco, et al. vs. Manila Polo Club, Inc., et al.

[SEC-SICD * CASE NO. 08-96-5402. September 23, 1998.] JAIME R. BLANCO, ET AL. , petitioners , vs . MANILA POLO CLUB, INC., ET AL. , respondents . D E C I S I O N This is a petition to mandate the respondents in approving/accepting petitioner Jaime N. Blanco as associate member of Manila Polo Club Inc. (Club for brevity); to declare the resolution which established the overage unmarried 21 to 35 years old dependent membership of the club as illegal; and to award damages as well. llcd Petitioners allege that while individual respondent had already admitted that petitioner son had all of the qualifications for an associate member and there were still 13 available slots, they still denied his application for associate membership on the ground that there was no opening for said membership in the meantime; that the resolution which established a membership of overage dependents consisting of unmarried sons and daughters between the ages 21 to 35 of proprietary member and which prescribed monthly club dues was violative of the By-laws; and that the same would not have been an illegality if only the overage dependents are limited to unmarried daughters and without prescribing monthly club dues from them. In their answer respondents contended that they themselves, as a Board, had been granted by the Club By-laws not only powers in the formulation of corporate policies on the management of the affairs of the club but also discretion in the selection of associate and proprietary members; that even if there had been only 9 associate members who were left out of the 22 members at the time of conversion, individual respondents denied petitioner's son's application for associate membership because the Board felt that an approval thereof may create a bigger problem if other members would follow the same, thus the decision is impelled by good reasons and good faith for the welfare of the club; that even if petitioner son was born prior to the Club's conversion to proprietary, his father elected to become proprietary member at the time of conversion and he was 22 years old at the time he filed his application, his application is still subject to the availability of vacancy in the membership and to the approval of the Board; that since there was no clear provision relative to sons of proprietary members who may become overage dependent, the Board was prompted to adopt the resolution which allows an overage son to avail of the benefits of an overage dependent; and that petitioners be estopped from questioning the legality of the said policy because despite having knowledge as early as 1994, petitioners never raised any objection thereto and it was only when petitioner's son's application was denied that they raised the illegality of the resolution in question. The facts of the case as established by evidence are AS FOLLOWS: Petitioners are father and son who are both of legal age and residing at 114 Cambridge Circle, Forbes Park, Makati City. Petitioner father was a regular member of the club before its conversion into proprietary on September 29, 1997 and by his timely election in accordance with the Club's Amended By-laws, he subsequently became a proprietary member. Petitioner son, on the other, was born on September 27, 1973 or prior to the Club's conversion into proprietary. Respondent Manila Polo Club Inc is a non-profit proprietary membership corporation organized and existing under the laws of the Philippines with principal office at the McKinley Road, Makati City. Individual respondents, namely: Teodoro C. Borlongan, Federico C. Borromeo, Jr., Cesar V. Campos, Luis S. Campos, Jr., Leocadio F. Dominguez, Washington M. Lou, Farrid K. Nassr, Lamberto V. de Ocampo, and Ma. Isabel G. Ongpin were the members of the Club's Board for year 1995-1996. Respondents Borlongan, Borromeo, Dominguez, Lou and de Ocampo were likewise the majority members of the Board of Directors for 1994-1995. dctai Before conversion, the club had three kinds of membership, namely: regular, special regular, and honorary and courtesy members. Petitioner father was then a regular member. On September 29, 1997, the club was converted into a non-profit proprietary membership corporation. Both its Articles of Incorporation and By-laws were amended to reflect, among others: 1. Article Seventh of the Articles of Incorporation provides: "a) Proprietary members shall pay upon admission into membership a proprietary fee as may be provided in the By-laws. xxx xxx xxx g) Proprietary members as well as other membership in the By-laws shall be subject to the payment of monthly dues called club dues as may be prescribed in the By-laws or by the Board of Directors. xxx xxx xxx 2 In addition Article VI of the Amended By-laws of the club provides: "SECTION 1. Classification of Members . Membership shall consist of proprietary, associate and special honorary members. Proprietary members are such persons who are holders of proprietary membership certificates in their own names and registered as such in the membership book of the club. Associate members shall be the following: 1. . . . . . 2. Sons of members of the Club prior to its conversion into a proprietary membership club whose parent elected to become proprietary members at the same time of its conversion, provided that the said sons are at least 21 years of age and not more than 25 years of age at the time of filing of their application of associate membership, and provided further that their acceptance as associate shall be subject to the availability of vacant associate memberships and must at all times be with the approval of the Board. Unmarried daughters of such members are not similarly qualified to be associate but may be treated as dependents even beyond 21 years of age . . . 3. . . . "SECTION 2. Nomination of Members . Except as provided in Article C1, Section 1 of these By-laws, every applicant for the purchase of a proprietary membership certificate and for associate membership pursuant to No. 2 of the third paragraph, Section 1 of this Article, shall be nominated and seconded by a proprietary member . . . . The name of the applicant shall be posted in the Club House for a period of four (4) consecutive weeks . . . . prior to his election as an associate member of the club." prLL "SECTION 3. Admission . The Board of Directors shall vote upon the admission of members. . . . . 3. Moreover, Article II, Section 3 of the Amended By-Laws of the club provides: "SECTION 3. Powers . The Board of Directors, in addition to the powers conferred by these By-laws, shall have the right to exercise such power and do such acts as may be exercised by the corporation, . . . . , the Board of Directors of the corporation shall have the full power: a) to elect to membership all such persons as it shall deem qualified and desirable, and to suspend, expel, or otherwise discipline members, in accordance with the authority herein specified: xxx xxx xxx e) to adopt rules and regulations for the government of the members and management of the affairs of the corporation and its properties and facilities. Being nominated by petitioner father, petitioner son filed his application for associate membership on June 1, 1995. He refiled on August 31, 1995. prLL After demands from petitioners, and in a reply letter dated April 11, 1996, respondent Dominguez, as President of the Club, informed the petitioners that although petitioner son have all the qualifications prescribed in Section 1 (2) Article VI of the Amended By-laws and the Club had only 9 remaining associate members of those 22 at the time of conversion, his application was not considered because the Board had decided that there was no opening for associate membership at that time as the Board felt that a consideration of the application may create a bigger problem if the other 200 similarly situated sons of members would follow. Finally, evidence shows that the so-called "overage dependents", who consist of unmarried sons and daughters of proprietary members between the ages 21 to 35 years are granted privileges of availing the use of club's facilities upon payment of monthly fees ranging from P500.00 to P1,500.00 The issues to be resolved in this case are the following: 1. Whether petitioner son's application for associate membership can be accepted and/or approved by the respondent Club's Board of Directors; 2. Whether the so-called 21 to 35 years old "overage dependents" is contrary to the By-laws, hence illegal and void; 3. Whether respondents are liable for damages under the circumstances. As regards the first issue, the positions of the petitioners are (1) that the application of petitioner son should be accepted and approved because he already possessed all the qualifications required in the By-laws for an associate member; (2) that there was a vacancy in the said membership; and (3) that respondents acted in bad faith in not approving the subject application for associate membership. LibLex On the other hand, respondents contend that they are given wide discretion and full authority (as then members of the Board) in the approval of applications for memberships and that, in denying petitioner son's application, they were impelled by good faith and good reason in not opening associate membership at that time because of their fear that they would be swamped with similar applications from those 200 similarly situated sons of proprietary members. Since it was admitted by respondents that petitioner son had already all the personal qualifications to be an associate member of the Club and that at the time there was a vacancy, the only thing then lacking was the approval of the Board of Directors. A very crucial question in this regard is the extent of the Board discretion in the exercise of its power of approval or denial of all applications for associate membership, or, in particular the reasonableness of respondents' decision to close associate membership from all applicants at that time when confronted with petitioner son's application. As clearly shown in the Amended By-laws, all applications for associate membership under the second category are subject to Board approval (Art. VI Sec. 1 (2) by election (Art. II Sec. 3(a) through votation of the members thereof (Art. VI Sec. 3). The Amended By-laws also prescribed limited number of qualifications and requirements for associate membership under the second category, such as: 1. The applicant was born prior to the conversion of the Club into proprietary; 2. He is the son of a Club member parent prior to the conversion who elected to become proprietary member at the time of conversion; 3. He is at least twenty-one years of age and not more than 25 years of age at the time of filing his application; 4. There is available vacant associate membership; and 5. Prior approval of the Board. It appears from the foregoing enumerations that the first four qualifications and requirements are the only guidelines and factors for the Board in approving or denying every application for associate membership under the second category. These are limitations to the discretion of the Board in either approving or denying an application. The absence of one of the qualifications or requirements impels the Board to deny the application. It cannot substitute its discretion on any one of said requirements and thereafter approve an application. Similarly, the concurrence of the first four requirements above renders the approval of an application by the Board almost ministerial in character, and with the act of election through votation by the Board members as a mere formality therefor. The Board cannot in its discretion, prescribe other requirements or conditions than those prescribed in the By-laws. Otherwise the applicant's chance of membership is always subject to the mercy of the individual members of the Board who could easily and freely require other qualifications that may be absent in the applicant. In short, the Club Board is of limited discretion in the approval of application to membership. Once the applicant has all the qualifications prescribed by the By-laws, and there is a vacancy in the associate membership, the Board has no other option but to submit the application for approval through votation by its members as a formal requirement. dctai In the case at bar however, respondents despite their admission of the fact that petitioner son had all the qualifications and that there was a vacancy in the associate membership, did not submit the latter's application for their approval. Instead when confronted with such application and on account of unfounded fear that they would be swamped with similar applications, respondents decided that there was no opening for membership at that time which subsequently, in effect they used for the total denial of petitioner son's application. Respondents, in so doing did not, only unduly deprived petitioner son of his right to become an associate member of the Club (or the rights of those similarly situated at that time) but also deviated from the procedure of denying his application for associate membership. Such a doing in fact violated and made ineffectual the provisions of the By-laws on associate membership. It is noteworthy that there is an age limit qualification in the filing of application for associate membership in the second category. The act of the respondents to temporarily close said membership from all applications would totally deprive the chance of qualified sons between 21 to 25 years old at that time from becoming an associate member. In fact, the best interpretation of the By-laws provision on this second kind of associate membership is that even if there is no vacancy in the associate membership, the Club should not stop the filing of applications therefore because of the requirement on age limit in the said filing. The Board may, however, suspend the approval thereof in the meantime that there is no vacancy or opening because there is no specific age limit at the time of approval by the Board. The Board cannot also immediately deny an application on account that there is no vacancy or opening in the associate membership, but to suspend the approval until such time that there is vacancy. In summary, respondents' act of closing associate membership to all applications and of accordingly denying all applications then pending was unreasonable and violative of the By-laws. Every contention to the effect that respondents were impelled by good faith and good reasons that is to save the Club from being crowded with associate members is of no merit. The intention of the respondents, no matter how noble, should not defeat the rights established in the By-laws. The By-laws is the law that governs the rights and duties or the relationships between and among the members of the Club and/or between them and the Club. (Cheney v. Canfield, 158 Cal 342 in P. 92, 32 LRA (BS) 16). With regard to the second issue, the contention of the petitioners is that the so-called overage dependent is violative of the provisions of the By-laws on membership, particularly Section 1(2) of Article VI, and the same would not have been an illegality if only it consists of unmarried daughters and it does not prescribe monthly club dues or fees. Otherwise stated, they claimed that membership can only be created by and in the By-laws, hence the existence of the so-called overage dependents is a violation thereof. Respondents, on the other argued that they are vested with powers to promulgate policy, rules and regulations for the government of the members and the management of both the affairs and properties/facilities of the club; and that the adoption of existing policies regarding "overage dependents" is in consonance therewith. A deeper analysis of the foregoing arguments requires a determination as to whether the so-called overage dependents is intended, considered, and treated as a new breed of membership in the Club in the same way as and in addition to the other kinds of memberships as defined specifically in the By-laws. dctai The opinion of the Commission is in the negative. In other words, as the term suggests or per the Club's By-laws (Art VI sec. 1 par. 2) and per provisions on Membership Policy on Dependents (Member's Handbook, Exh. "F"). "Overage Dependents" are not members of the Club. They are only dependents of members who are given such privilege of using Club's facilities. They have no membership rights to speak of. They are not new breed of Club members to the effect of increasing the membership of the Club into four kinds. cdll Moreover, the fact that these "overage dependents" are paying Club fees/dues does not make them Club members in any category. The payment thereof is just one of the regulatory measures for the use of club's facilities by these "overage dependents" who anyway are given by the club of such privilege. Thus, every existing policy, rules or regulations relative to overage dependents cannot be simply declared as illegal, as they appear to be non-violative of the By-laws. Finally, petitioners failed to adduce sufficient evidence to establish bad faith as the basis for either declaring respondents as liable for damages or requiring them to pay the same. WHEREFORE, judgment is hereby rendered ordering respondent Manila Polo Club Inc. to submit petitioner son's June 1, 1995 and/or August 31, 1995 application for associate membership for approval through votation by the members of the Board of Directors. No pronouncement as to costs and attorney's fees. SO ORDERED. (SGD.) PAULINO Q. GALLEGOS Hearing Officer