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

[SEC-SICD * CASE NO. 3669. March 12, 1992.] JAIME R. BLANCO , petitioner , vs . MANILA POLO CLUB, INC., ET AL. , respondents . D E C I S I O N This is an action for injunction with a prayer for the issuance of a restraining order or writ of preliminary injunction seeking to enjoin the respondent Manila Polo Club, Inc. (Club, for brevity) from further proceeding with the construction and development of its Townhouse Project or otherwise expending funds or utilizing facilities and property of the Club for said Townhouse Project. In his amended petition, petitioner alleged, inter-alia, that the Club is a non-stock, non-profit corporation organized and existing under the laws of the Philippines; that respondents Carlos S. Rufino, Ronald L. Velayo, Dieter Reichert, Oscar P. Beltran, Ramon A. Recto, Alfredo B. Parungao, Francisco V. Holigores, Adrian V. Ocampo and Juan G. Vasquez (hereinafter referred to as the individual respondents) are the incumbent Directors of the Club's Board of Directors from 28th August 1989 such that it was during their said incumbency that they caused the construction of the Club's Townhouse Project to commence on 19th September 1989; that the Club, under its last amended Articles of Incorporation and By-Laws, is a social and sports club organized and existing for the exclusive benefit of its members consisting principally of its 2,200 proprietary voting members one of whom is the petitioner; that the Club has for the exclusive use of its members like petitioner and their dependents social facilities such as, but not limited to, social halls, restaurants and bars and sports facilities such as, but not limited to, polo fields and stables. swimming pools, tennis, squash and pelota courts, bowling alleys and the like, each of which facilities are always available to each proprietary member and his dependents whenever they wish to use such facilities but none of which are reserved for, or restricted to, the long term exclusive availment/use of but a few members to the exclusion of the bulk of the members; that the club on 19th September 1989 commenced the construction of a Townhouse Project consisting of 40 residential housing units within the Club's land, 36 of which shall be, and/or have already been, leased to but an equivalent of 36 proprietary members for the latter's respective exclusive use for 25 years, which Townhouse Project is patently ultra vires because residential housing facilities to the Club's members, and/or the Club's engaging in realty business, are neither expressly nor impliedly within the primary and secondary purposes of the Club's last amended Articles of incorporation and By-Laws; that while the afore-alleged social and sports facilities of the Club cannot at each one occasion accommodate all of the 2,200 proprietary members and their dependents, each are on a first-come first-served basis available to such members unlike the afore-alleged 36 residential units which for 25 years cannot be availed of/used by the balance of 2,164 proprietary members amongst whom is the petitioner, to the discrimination of, and consequent irreparable loss and injury to, said 2,164 proprietary members like petitioner; that until the appropriate amendment to the Club's Articles of Incorporation and By-Laws is effected, the Club, acting through its Officers and Directors, must refrain and desist from further proceeding with the construction and development of the Townhouse Project or otherwise expending funds or utilizing facilities and property of the Club for said Townhouse Project; In support of his application for the issuance of writ of preliminary injunction, petitioner further alleged that it is patent that individual respondents shall not motu proprio undertake any measure to minimize damages to the Club and its proprietary members like petitioner in consequence of the afore-alleged ultra vires act nor to intra vires the Townhouse Project such that it is imperative that the preliminary injunction applied for be forthwith issued; that considering the petitioner is entitled to the relief demanded, the whole of which consists in restraining the continuance of an ultra vires act by the Club, and because the continuance by the Club of its afore-alleged ultra vires act during the pendency of the instant case shall work injustice to petitioner, a preliminary injunction and/or restraining order should forthwith issue enjoining the Club from pursuing its Townhouse Project during the pendency of this case; and, that petitioner shall file with this Commission a bond executed in favor of the Club, in an amount to be fixed by this Commission, to the effect that the petitioner shall pay to the Club all damages which it may sustain by reason of the injunction if the Commission should finally decide that the petitioner is not entitled thereto. Respondents, in their amended answer, denied all the material allegations in the amended petition and, by way of special and affirmative defenses, averred, among other things, that petitioner has no cause of action and the amended petition states no cause of action; that petitioner has not alleged any right that may be violated by the undertaking of the Townhouse project; that petitioner has neither alleged that he would suffer damage or loss by reason of the Townhouse Project; that petitioner is guilty of estoppel; that opportunities were abundant for petitioner to assail the validity of the Townhouse Project but he never raised his objection thereto; that as early as 1987, the Club's House Directorate recommended the undertaking of a residential development project within the Club's premises; that petitioner himself was invited to sit with the committee in one of its meetings during which he stated that he found nothing in the Club's Articles of Incorporation and By-Laws which bars the Club from undertaking such a Townhouse Project; that members of the Club, including petitioner, were and are still continuously apprised and notified of the status of the Townhouse Project through circulars which are regularly issued and other forms of notices; that despite these notice, however, petitioner did not at any time prior to the filing of the instant suit, register his objection to the Townhouse project; that prior to the actual implementation of the Townhouse Project, a survey was conducted to determine whether the Club's membership in favor of the same, and the response was an overwhelming affirmative; that after all the preliminary work on the project had been accomplished, contracts executed, payments made and while the actual construction of the townhouses is ongoing, petitioner all of a sudden demands that the Townhouse Project be discontinued; that this belated attempt on the part of the petitioner to question the validity of the Townhouse Project and his failure to register his objection thereto, places him in estoppel; that the Townhouse Project finds basis in the Club's Articles of Incorporation, to wit: "SECOND: That the principal and primary purpose or object for which said corporation is formed is to establish and maintain a club to promote social intercourse, and to provide a place for members to meet, to engage in sports activities and have social gatherings, recreation and entertainment. In order to carry out the foregoing purpose or object, the corporation shall have the following powers: xxx xxx xxx 4. To borrow or raise money as the purposes of this corporation shall require, and in pursuance thereof to make any instruments and evidences of indebtedness, execute any pledge, mortgage or other liens, or issue and endorse any debentures, bonds, notes securities, or other obligations secured by all or any part of the assets and properties of the corporation. LexLib 5. To make and perform any and all contracts with any person, firm or corporation. xxx xxx xxx 8. And, in general, to exercise any, all and every power which a non-profit corporation or association can be or may be authorized to exercise by applicable law now existing or which may hereafter be enacted. (As amended on March 29, 1965)." that with this Townhouse Project, the affected members would be better able to engage in such social intercourse considering that they would be residing within the Club premises and thus would be continuously exposed to social interaction among themselves and the other members; that the Townhouse Project would likewise provide a convenient place for members to meet and have social gatherings, recreation and entertainment; that the Townhouse Project is also a fund-raising undertaking which is expressly allowed by the Club's Articles of Incorporation; that with the rentals that will be derived from the Townhouse Project, the club will be assured of a steady flow of income to finance its operating expenses and which will ease the financial burden of the Club members while placing the Club in a better position to fulfill its mandate; that even assuming that the Townhouse Project is ultra vires to the Club's corporate powers, it is not, however, void for it is not contrary to law, customs, public order or public policy; that the individual respondents have not acted in bad faith; that the opposition to an application for a preliminary injunction is not constitutive of an act in bad faith but a right afforded to a party-litigant under Section 4, Rule XVIII of the Revised Rules of Procedure in this Commission; that the individual directors could not have manifested or caused the Club to manifest in the Answer dated November 29, 1989 that "they shall not obtain from the Club's proprietary members like petitioner, the corresponding amendments to the Club's Articles of Incorporation and/or By-Laws to intra vires the Townhouse Project", because as of said date, the individual respondents were not yet parties to this case; that this Commission is without jurisdiction to award damages as prayed for in the Amended Petition; that petitioner conveniently omitted to state that all qualified members of the Club were given the same opportunity to avail of the units by participating in the selection process which was done through a raffle; that petitioner did not participate in the raffle is a clear indication that he was not interested to avail of the privilege being granted; that petitioner does not have a clear right to the relief demanded and that he would not suffer grave or irreparable injury if his application is denied; that on the contrary, four (4) townhouse units will immediately go to the Club thereby immediately increasing the Club's assets and directly increasing the value of petitioner's proprietary share; that at the end of twenty-five (25) years, all the 36 townhouse units would revert to the Club and will form part of the Clubs assets again thereby increasing petitioner's proprietary share in the Club's assets and thus enhancing its value; that the Club and all its members would benefit from the proceeds of the Townhouse Project which will be used to finance the much-needed capital improvements and the members would enjoy these improved facilities and at no added cost to them; that it is the Club and the thirty-six participating members who will suffer irreparable injury; that the Club will be forced to violate the contracts that it had entered into and in all probability, would be faced with suits for breach of contracts, damages and others of a similar nature; that the thirty-six (36) participating members will likewise be prejudiced considering that they have commenced their respective payments in connection with the right to occupy the units; that a portion of these payments has been actually disbursed to finance the construction of the units and would therefore be impossible to recall; and, that due to the unjustified filing of the petition, respondent were constrained to hire the services of counsel and obligated itself to pay attorney's fees in the amount of P150,000.00 and incur expenses of litigation in the amount of P50,000.00. On February 23, 1990, the petitioner's motion to abandon his application for the issuance of a writ of preliminary injunction was granted and the case was set for pre-trial conference. As agreed upon by the parties and as gathered from the records, the issues to be resolved are: 1. Whether or not the Townhouse Project is Ultra vires or intra vires to the Club's last Amended Articles of Incorporation and By-Laws; 2. If ultra vires, are individual respondents who implemented the Townhouse Project personally liable to the Club and its members like petitioner for all consequential damages inclusive of the costs of removing the townhouses to restore the Club's lot thereof to its original condition; 3. Whether or not petitioner is estopped from questioning the validity of the Townhouse Project; and 4. Whether or not the petitioner is entitled to the injunctive relief being prayed for. This Hearing Officer agrees with the petitioner's contention that the Townhouse Project is ultra vires to the Club's last Amended Articles of Incorporation. The Club is a non-profit, non-stock corporation organized under the laws of the Philippines with the following principal and primary purposes: "SECOND: That the principal and primary purpose or object for which said corporation is formed is to establish and maintain a club to promote social intercourse, and to provide a place for members to meet, to engage in sports activities and have social gatherings, recreation and entertainment. In order to carry out the foregoing purpose or object, the corporation shall have the following powers: 1. To acquire, take, hold, lease, or otherwise acquire any lands, buildings, easements, or property, real and personal, which may be requisite for or capable of being conveniently used in connection with the object or purpose of this corporation. LLjur 2. To acquire by grant, gift, devise or bequest, and to hold and dispose of such property, real and personal, as the purposes of this corporation shall require and in furtherance of its purpose or object. 3. To sell, convey and dispose of any such property acquired under the foregoing two provisions, and to invest, deal with and expend the principal and income thereof as the purposes of the corporation shall require. 4. To borrow or raise money as the purposes of this corporation shall require, and in pursuance thereof to make any instruments and evidences of indebtedness, execute any pledge, mortgage or other liens, or issue and endorse any debentures, bonds, notes, securities, or other obligations secured by all or any part of the assets and properties of the corporation. 5. To make and perform any and all contracts with any person, firm or corporation. 6. Subject to applicable law, to buy, sell and deal in all kinds of equipment and apparatus and all kinds of provisions required by the members of the corporation, for the benefit of the members. 7. Subject to such limitations or restrictions as may now or hereafter be provided by law, to merge, combine, or unite with any other corporation or association organized for objects similar to or analogous with the principal purpose or object of this corporation. 8. And, in general, to exercise any, all and every power which a non-profit corporation or association can be, or may be authorized to exercise by applicable law now existing or which may hereafter be enacted. (Exh. "A")". Section 45 of the Corporation Code of the Philippines states that "No corporation under this Code shall possess or exercise any corporate powers except those conferred by this code or its articles of incorporation and except such as are necessary or incidental to the exercise of the powers so conferred." According to the strict construction of the term, an ultra vires act is one not within the express or implied powers of the corporation as fixed by its charter, the statutes, or the common law (7A Fletcher Cyc Corp Sec. 3379, p. 6 [Perm Ed]). It is an act outside the scope of the articles of incorporation. (Pirovano, et al. vs. De la Rama Steamship Co., G.R. No. L-5377, December 29, 1954, 96 Phil. 360). Based from the aforestated corporate powers of the Club, it appears that its Townhouse Project is not within its implied, incidental and express powers as shown from the pertinent provisions of its Articles of Incorporation, hence, ultra vires. However, the traditional concept that a corporation being a mere creature of the state, can only do such acts that the State allows it to do should no longer be strictly adhered to under modern corporation laws. (Corporation Code, Comments Notes and Selected Cases by Campos and Lopez - Campos, p. 184). Anent the second issue, although this Hearing Officer believes that the construction of the townhouses is ultra vires, this does not necessarily make the individual respondents who implemented the Townhouse Project personally liable to the Club and its members like petitioner for all the alleged consequential damages inclusive of the costs of removing the townhouses to restore the Club's lot to its original condition. Firstly, by itself, an ultra vires act is not necessarily illegal. On the contrary it may be lawful, moral and even praiseworthy. Hence, it is the honest belief of this Hearing Officer that the Townhouse Project will ultimately redound to the benefit not only of the Club but also to its members. Thus, under the term of the Townhouse Project as reported in the explanatory notes of the Financial Statements of the Club for the fiscal year 1990-1991, it shows that: "Under the term of the project, the land will be leased for 25 years beginning on January 1, 1991 and ending on December 31, 2015. The Club received in advance the rent for the leased premises for the entire 25 years. Under the plan, the townhouse units constructed shall automatically become the properties of the Club at the expiration of the term of the lease. "Relative to this project, the Club constructed additional four units to be leased to its qualified members. Part of the advanced rental was used for the construction of these units. (Exh. "34")". Secondly, petitioner is estopped from questioning the validity of the Townhouse Project. Petitioner already knew that since 1987, the Club was bent on pursuing a residential development project and that he never raised any objections thereto. Petitioner was even invited to attend meetings on the proposed project and in one meeting attended by him and Atty. Romarie Villondo, the latter recounted the position taken by petitioner on the said project, to wit: "(ATTY. VILLONCO) WITNESS A. Yes. If I may state for the record, Your Honor, please. As early as 1987 or 1988, there was a meeting held by some members of the Board of Directors, and the witness together with Atty. Blanco to discuss ways and means of augmenting the income of the Manila Polo Club because there were years when Manila Polo Club produce money and there were years that it would break-even. Atty. Blanco, if I may recall, even suggested that why not look into the townhouse project because it might be beneficial for us to have a project that might generate income for the Club. From the statement made by Atty. Blanco, the Manila Polo Club's Board of Directors look(ed) into the matter and found the project feasible. And for which reason, I believe that and after due consultation with its lawyers, Manila Polo Club decided to embark in this project." (TSN, August 30, 1990, p. 28). Respondent Carlos S. Rufino also testified on same meeting as follows: "(ATTY. BLANCO) Q. I will show you, to refresh your recollection, I show you a letter which has been marked as H-1, dated November 19, 1987, addressed to the then General Manager of the Club, Luis Nepomuceno, when I was invited for your meeting wherein I suggested that your committee also invite Mr. Francisco "Toting" del Rosario for his experience in Baguio Country Club and also club member Juan Miguel Madrigal Vasquez for his experience in the sale of light projects and I will show you this letter, does that refresh you recollection as to that meeting you called for that purpose at that time? "(MR. RUFINO) A. I remember having the meeting where we discussed the townhouse project with you." (TSN, Sept. 21, 1990, pp. 34-35). Petitioner had all the opportunity to assail validity of the Townhouse Project as early as 1987 or 1988 but is was only when the construction of the townhouses had begun that he questioned the same and filed the instant case. Moreover, the petitioner had failed to show substantial proof that the individual respondents have acted in bad faith in causing the construction of the Club's Townhouse Project. As to whether or not the petitioner is entitled to the injunctive relief being prayed for, the answer is in the negative. The issuance of a writ of preliminary injunction is unavailing to petitioner since the act he seeks to enjoin, that is the further proceeding with the construction and development of the Club's Townhouse Project has already become a fait accompli. The construction of the Townhouse Project has been completed. (TSN, Jan. 8, 1991. p. 17). There is clearly nothing more to enjoin. Rights lost, however, and wrongs already committed cannot be the subject of injunction. (Lacassague vs. Chapuis 144, Ma. app. 121, 98 SW (2d) 153, cited in Commentaries and Jurisprudence on Injunction by Laureta and Nolledo, 196 Ed., p. 2). Hence, where the act has already been consummated, injunction or restraining order does not lie. (San Miguel Corporation Employees Union vs. Ferrer-Calleja, G.R. No. 80141, July 5, 1989). Petitioner had likewise failed to present substantial proof of any consequential damages to him in case the instant amended petition is not granted. Besides, the following facts, to wit: "1. That an Agreement for the construction of the townhouse was entered into on May 31, 1989. (Exh. "24") 2. That by virtue of the said Agreement, construction commenced and completed. (TSN, Jan. 8, 1991, pp. 49-50, Exhs. "26", "26-A"). 3. That a Project Management Service Agreement was entered into on December 22, 1989. (Exh. "32") 4. That with respect to the construction costs, the contractor has been paid at least P64,349,127.90 as of December 18, 1990. (Exh. "33") 5. That as of January 7, 1991, nineteen (19) out of the thirty-six (36) lessees have occupied their respective units. (Exh. "29", TSN, Jan. 8, 1991, p. 63) 6. That the Club earned an income of P50 million and that it has been fully paid by the unit lessees for the 25-year lease. far outweigh petitioner's objective to demolish the townhouses for being ultra vires. After payments have been made, contracts executed, a ruling in favor of the petitioner will surely cause greater damage to the Club in terms of possible suits that may be filed against it if it is forced to renege on its commitments. This is in addition to huge amounts of money it will have to spend if it will be forced to demolish a structure which has benefited it. Otherwise stated, the alleged damage or injury to be suffered by the petitioner will fail into insignificance as compared to the loss or damage to be suffered by the Club, to wit: the cost of the construction and demolition of the townhouses. Thus, under the principle of comparative injury, where substantial redress can be afforded by the payment of money and the issuance of an injunction would subject the defendant to grossly disproportionate hardship, the equitable relief may be denied although the wrongful acts are indisputable. (Harrisonville v. W.S. Dickey Clay Mfg. Co., 289 US 334, 77 L ed 1208, 53 S Ct 602, cited in 42 Am Jur 2d, p. 800). A fortiori, the injunction which bears heavily upon the respondents without benefit to Petitioner will usually be refused. "Although, under the facts disclosed, the plaintiff would ordinarily be entitled to the writ, the court may, in the exercise of its discretion, deny it, where it appears that the injury to plaintiff from such denial will be relatively insignificant as compared with that which defendant would suffer from the granting of the writ." (10 Fletcher Cyc Corp. Sec. 4849) As regards the respondents' prayer for compulsory counterclaim, the same could not be granted for failure of the respondents to present sufficient evidence in support thereof. WHEREFORE, the instant amended petition, as well as the counterclaim therein, should be, as both are hereby DISMISSED. No pronouncement as to costs. prLL SO ORDERED. (SGD.) ROLANDO C. MALABONGA Hearing Officer