Calilung v. Calatagan Golf Club, Inc.

[SEC-SICD * CASE NO. 4241. August 12, 1998.] FRANCISCO CALILUNG, ET AL. , petitioners , vs .CALATAGAN GOLF CLUB, INC.,ET AL. , respondents . D E C I S I O N This is a petition filed by Francisco S. Calilung, Librado S. Calilung, Rosario S. Calilung-Sy and the Estate of the late Elpidio S. Calilung represented by Atty. Tardisio S. Calilung for annulment of foreclosure and auction sale with damages against the Calatagan Golf Club, Inc.,Jose T. Manosa, Benito R. Araneta, Kurt Bachman and Benjamin D. Tanedo, Jr. Petitioners alleged, among others, that they are members/stockholders of the respondent Calatagan Golf Club, Inc. (hereinafter referred to as Calatagan) which is a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines with its principal office at 5th Floor, Enzo Building, 399 Sen. Gil Puyat Ave. Makati, Metro Manila; that individual respondents are officers of the respondent Calatagan Golf Club, who were responsible for the illegal foreclosure and sale of petitioners' shares; that on December 16, 1991 the shares of the petitioners were sold at public auction by the respondent Calatagan through the individual respondents who were members of the Membership Committee; that respondent Benjamin D. Tanedo, Jr. who is the corporate secretary and acted as auctioneer of the said share issued a Certificate of Sale dated January 28, 1992 covering the foreclosed shares; that the Certificate of Sale stated that the shares of the petitioners were conveyed to the respondent Calatagan since there was no bid received during the auction sale conducted on December 16, 1991; that respondents have no authority or basis to convey petitioner's shares in favor of the respondent Calatagan and that the foreclosure, auction and eventual forfeiture of petitioners' shares violate the by-laws of respondent Calatagan; that despite repeated demands respondents have failed and refused and continue to fail and refuse to set aside and/or annul the illegal auction sale they conducted to the damage and prejudice of the petitioners and that as a result of the forfeiture of petitioners shares in an insidious, fraudulent and malicious manner, petitioners suffered actual, and moral damages and for which respondents must be held liable for such damages. On July 6, 1992 respondents filed their Motion to Dismiss the petition on the grounds that individual respondents are not the real parties in interest and that the petition states no cause of action. Petitioners filed their consolidated opposition on July 29, 1992 and after respondents filed their reply and petitioners' rejoinder, this Commission on December 1, 1993 issued an Order denying respondents' motion to dismiss. On January 18, 1993, respondents filed their answer and denied specifically the material allegations in the petition and by way of an affirmative defenses, respondents alleged, among others, that petitioners have no cause of action against the respondents, that the petition fails to state a cause of action and that individual respondents are not the real parties in interest. In the Orders dated May 4, 1994 and June 27, 1994, this Honorable Commission dismissed the petition in so far as petitioners Librado S. Calilung and the Estate of the late Elpidio S. Calilung, thus, this decision is applicable only to the petitions of Francisco S. Calilung and Rosario S. Calilung-Sy. Hearing on the merits were conducted wherein petitioners and respondents presented testimonial and documentary evidence. From the evidence adduced, the undisputed facts are as follows, to wit: Petitioners were former members of and shareholders of respondent Calatagan Golf Club, Inc. which operates and maintains a golf course located in the Municipality of Calatagan Batangas. Petitioners owned one (1) shares each except petitioner Librado S. Calilung who owned two (2) shares. Petitioners were required to fill-up an application form for membership and among the information petitioners required to provide in their respective application forms are their mailing addresses. Pursuant to the Articles of Incorporation of respondent Calatagan petitioners as owners of shares were subjected to the payment of monthly dues "in the amount as may be prescribed in the By-laws or by the Board of Directors which shall in no case be less than Fifty (P50.00) Pesos, to meet the expenses for the general operations of the Club, and the maintenance and improvements of its premises and facilities, in addition to such fees as may be charged for the actual use of the facilities. .." (Exh. 44"). On January 31, 1991, petitioners requested respondent Calatagan that they be exempted from the payment of monthly dues through the conversion of their accounts from active to inactive status (Exh. "E" & "J" ).However, said letter request was denied by respondent Calatagan, through Mrs. Rose Mara Radoc, in her letter dated March 31, 1991 (Exh. 6 ).Likewise on said letter respondent Calatagan demanded from petitioners to settle their monthly dues. On 25 February 1991, respondent Calatagan sent demand letters to all members, petitioners included, who were delinquent as of January 31, 1991 requiring them to pay their monthly dues. These letters were sent to the members' mailing address indicated or found in the membership application form on file with the office of the respondent Calatagan. On September 16, 1991, respondent Calatagan sent again another demand letters to the petitioners through the same mailing addresses (Exhs. "11" to "14" ).As of said date, petitioners unpaid dues were as follows: Name Francisco S. Calilung 6,100.00 Elpidio S. Calilung 6,000.00 Rosario Calilung- 6,000.00 Librado S. Calilung 16,200.00 On November 18, 1991, the Board of Directors of respondent Calatagan passed a resolution (Exh. "19" ) to the effect that all delinquent shares of its members (petitioners' shares included) will be sold at public auction on December 16, 1991 and January 20, 1992. On November 19, 1991, respondent Calatagan sent final demand letters to all members who were delinquent in the payment of their dues as of October 31, 1991. These letters warned all delinquent members, including the petitioners that should they fail to pay their outstanding obligations on or before December 16, 1991, their shares will be included in the list of delinquent shares which will be foreclosed and sold at public auction on December 16, 1991 and January 20, 1992. (Exhs. "15" to "18" with submarkings).Petitioners' respective delinquencies as of the time of the auction sale on December 16, 1991 (Exhs.) are as follows: LLjur Name Amount of Delinquency Librado S. Calilung P18,600.00 Francisco S. Calilung 7,800.00 Rosario S. Calilung-Sy 7,800.00 Elpidio S. Calilung 7,800.00 Despite repeated demands petitioners failed to settle their obligations. On 16 December 1991, respondent Calatagan foreclosed the shares of all delinquent members, petitioners' shares included. At the public auction, petitioners' shares, did not receive any offer from the bidders then present. As a result, the corporation then bid for and was awarded the shares. Thereafter respondent Tanedo, Jr. the corporate secretary of respondent Calatagan executed a certificate of Sale dated 28 January 1992 (Exh. "5") and cancelled petitioners shares per letter dated February 6, 1992 (Exh. "34"). In a letter dated March 10, 1992, (Exh. "I") petitioners protested to the foreclosure of their shares and demanded for the lifting of the cancellation thereof but their demand was refused by respondents. The principal issue in this case is whether or not petitioners' shares were validly foreclosed, auctioned and cancelled in favor of respondent Calatagan. Petitioners contend that the foreclosure, auction sale and cancellation of petitioners' shares are illegal and void ab initio on the grounds that: 1) The petitioners were not duly notified of the date and time of the auction sale; 2) The bid of respondent Calatagan for the shares of petitioners were all below P10,000.00 pesos in violation of the Club's own guidelines; 3) The foreclosure and auction sale of petitioners' shares were conducted by person not authorized by law to conduct auction sales; and 4) The foreclosure and auction sale was characterized by fraud, inequity and discrimination against the petitioners. Based on the established facts and the evidence adduced, this Hearing Officer is of the opinion and so holds that the contention of respondents is tenable. This Hearing Officer could not subscribe to the arguments of petitioners that the foreclosure, auction sale and cancellation of petitioners shares are illegal. On the contrary, the evidence would show that they were given every opportunity from the time they were declared delinquent up to the time of the auction sale to pay their obligation but despite repeated demands they failed to settle their long due obligations. It is undisputed facts that at the time of the foreclosure petitioners were delinquent in the payment of their monthly dues with respondent Calatagan and that respondents sent demand letters and notices of foreclosure and auction sale to petitioners (Exhibits "15" to "18" ).Evidence, further show that respondents even sent no less than three (3) sets of demand letters to petitioners, the last of which made manifest the intention of Calatagan to foreclosure and sell at public auction the delinquent shares. Again, it is not disputed that these demand letters were sent to the addresses supplied by petitioners found in the application form for membership on file with the office of respondent Calatagan (Exhs "1" to "4" with submarkings).Although the petitioners in this case, Mrs. Rosario Calilung-Sy and Francisco Calilung argued that they never received said letters, nevertheless, the evidence on hand would show that the letters addressed to petitioner Rosario Calilung-Sy were indeed sent and actually received by her per Registry Return Receipt ( "9","9-B","13","13-B","17" and "17-B" ).Further she admitted receiving those letters during the hearing although she failed to take action on it except to refer the same to Atty. Tarciso & Calilung (TSN dated 15 June 1997 p. 17 to 21). On the part of petitioner Francisco Calilung it is conclusively presumed that he received the letters (Exhs. "7", "11" and "15") which were addressed to him as the same were sent to the mailing address which he himself supplied to respondent Calatagan (Exhs. "7-A" , "11-A" and "15-A" ). Section 2 of Rule 131 of the Revised Rules of Court provides some instances of conclusive presumption that "whenever a party has, by his own declaration, act or omission., intentionally and deliberately led another to believe a particular thing true or to act upon such belief he cannot, in any litigation arising out of such declaration act. or omission, be permitted to falsify it. . . ." Considering that those letters were sent to the mailing address of petitioner Francisco Calilung which he intentionally and deliberately supplied to respondent Calatagan, then it could be said that Calatagan was led to believe that said letters would be received by petitioner Calilung if sent to his address. Nevertheless, if these letters were not actually received by the addressee or were "returned to sender" as argued by petitioner, then there is nobody to be blamed except himself. Further, a notice of auction sale was posted in the Bulletin Board of the Clubhouse of respondent Calatagan located in the Municipality of Calatagan, Batangas and the same notice was also given to all the members informing them that public auction of delinquent shares, petitioners shares included, will be conducted in the Board Room, 5th Floor, Enzo Bldg.,399 Sen. Gil Puyat Ave.,Makati City on 16 December 1991 (Exh. "20",TSN dated 9 October 1996 page 32).Furthermore, notice of foreclosure and auction sale of all delinquent shares stating the place, date and time was also published in Business World, a newspaper of general circulation (Exh. "22" Affidavit of Publication, Business World Dec. 10, 1991).Despite demand letters and notices, petitioners failed to settle their outstanding obligations. From the foregoing, it cannot be said that petitioners were not notified of the time and date of the auction sale. Anent the petitioners' arguments that the bid of respondent Calatagan of the petitioners' shares violates the guidelines on auction sale and that the foreclosure and auction sale was conducted by person not authorized by law could not likewise be given credence and are bereft of any merit. It must be noted that of the total fifty three (53) delinquent shares offered for sale at public auction, twenty-nine (29) shares were awarded to the highest bidders (Exh. "25" ) while the remaining twenty-four (24) shares, petitioners' shares included, did not receive any offer from the bidders then present. (Exh. "36" ) As pointed out by respondents, in order to prevent these shares from becoming worthless, respondent Calatagan through its membership committee casted its bid for such shares in the sum equivalent to the amount of delinquency in accordance with paragraph 6 of the guidelines for auction sale (Exh. "21" ), and Section 32 Article Xll of respondent Calatagan's By-laws (Exh. "4") and Sections 41 and 68 of the Corporation Code. On the contention that the auction sale is null and void because Atty. Benjamin D. Tanedo, Jr. a Notary Public, did not observe the chattel mortgage law when he conducted the auction sale is likewise without merit. As correctly pointed out by respondents, there is no substantial difference if the sale is conducted by or before a Notary Public especially on the instant case where the Notary Public was present and supervised the auction proceeding. The Notary Public, Atty. Benjamin Tanedo, Jr. not only conducted the auction sale but likewise certified that he had sold at public auction the foreclosed shares to the highest bidders. (Exhs. "25" & "26", Certificates of Sale). Moreover, the provision of the Chattel Mortgage Law cited by petitioners is not applicable in this instant case simply because the shares sold were not mortgaged to respondent Calatagan. As discussed above, this Hearing Officer is convinced that respondents have observed the Guidelines on Auction Sale and substantially complied with the provisions of the Corporation's Articles and By-laws as well as the Corporation Code when they conducted the foreclosure and auction sale of petitioners' delinquent shares. Finally, we also find merit to the respondents' affirmative defense or arguments that the instant petition is prematurely filed for non-compliance with the condition precedent laid down in Section 69 of the Corporation Code of the Philippines which reads: "SECTION 29. * When sale may be questioned . No action to recover delinquent stock sold can be sustained upon the ground of irregularity or defect in the notice of sale, or in the sale itself of the delinquent stock, unless the party seeking to maintain such action ,first pay or tenders to the party holding the stock the sum of which the same was sold with interest from the date and no such action shall be maintained unless it is commenced by the filing of a complaint within six (6) months from the date of sale." Considering therefore that petitioners failed to allege in their ,petition the fact of prior payment or tender of payment, much less present proof of payment during the proceeding, then the present action for annulment of foreclosure and sale could not be sustained. Petitioners completely failed to comply the mandatory requirements of Section 69 of the Corporation Code of the Philippines. WHEREFORE, premises considered, the above entitled case is hereby DISMISSED. No pronouncement as to cost. SO ORDERED. (SGD.) JAMES K. ABUGAN Hearing Officer * Copied verbatim from documents obtained directly from the Securities and Exchange Commission.