CEBU COUNTRY CLUB, INC. (CCCI) VS ELIZAGAQUE GR 160273 1/182008

TORTS/II-INTENTIONAL TORTS/HUMAN RELATIONS/CATCH ALL PROVISIONS/ABUSE OF RIGHTS – ART. 19

FACTS – CCCI is a domestic corporation operating as a non-profit and non-stock private membership club. (In 1987, San Miguel Corp., a special company proprietary member designated E (for short), its senir vice president and operations manager for Visayas and Mindanao, as a special non-proprietary member.) In 1996, E filed with CCCI an application for proprietary membership, endorsed by 2 members of CCCI. Since it was required for a member to have a proprietary share the price of which was P 5M, the president of CCCI offered respondent a share of only P 3.5M. E however, purchased the share of a certain Dr. Butalid for P 3M. However, his application was deferred. Subsequently, his application was disapproved. Three letters for reconsideration were sent to the BoD, however, no reply was sent by the latter. Hence, E filed with the RTC a complaint for damages. RTC ruled in favor of E. CA affirmed the RTC ruling. Hence, this petition. (It should be mentioned that the By-Laws of the Corporation provided that his eligibility as member required a unanimous vote from the Board of Directors. This provision, however, was not included in the application form. It was further revealed that among the members of the BoD, only one voted his disapproval of the application. This, however, was not made known to E.)

ISSUE - Should CCCI be held liable for damages despite the fact that it has the right to choose its members?

HELD - Obviously, the CCCI Board of Directors, under its Articles of Incorporation, has the right to approve or disapprove an application for proprietary membership. But such right should not be exercised arbitrarily. Articles 19 and 21 of the Civil Code on the Chapter on Human Relations provide restrictions, thus:

Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.

Article 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.

In GF Equity, Inc. v. Valenzona,⁵ we expounded Article 19 and correlated it with Article 21, thus:

This article, known to contain what is commonly referred to as the principle of abuse of rights, sets certain standards which must be observed not only in the exercise of one's rights but also in the performance of one's duties. These standards are the following: to act with justice; to give everyone his due; and to observe honesty and good faith. The law, therefore, recognizes a primordial limitation on all rights; that in their exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though by itself legal because recognized or granted by law as such, may nevertheless become the source of some illegality. When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be held responsible. But while Article 19 lays down a rule of conduct for the government of human relations and for the maintenance of social order, it does not provide a remedy for its violation. Generally, an action for damages under either Article 20 or Article 21 would be proper. (Emphasis in the original)

In rejecting respondent’s application for proprietary membership, we find that petitioners violated the rules governing human relations, the basic principles to be observed for the rightful relationship between human beings and for the stability of social order. The trial court and the Court of Appeals aptly held that petitioners committed fraud and evident bad faith in disapproving respondent’s applications. This is contrary to morals, good custom or public policy. Hence, petitioners are liable for damages pursuant to Article 19 in relation to Article 21 of the same Code.

It bears stressing that the amendment to Section 3(c) of CCCI’s Amended By-Laws requiring the unanimous vote of the directors present at a special or regular meeting was not printed on the application form respondent filled and submitted to CCCI. What was printed thereon was the original provision of Section 3(c) which was silent on the required number of votes needed for admission of an applicant as a proprietary member.

Petitioners explained that the amendment was not printed on the application form due to economic reasons. We find this excuse flimsy and unconvincing. Such amendment, aside from being extremely significant, was introduced way back in 1978 or almost twenty (20) years before respondent filed his application. We cannot fathom why such a prestigious and exclusive golf country club, like the CCCI, whose members are all affluent, did not have enough money to cause the printing of an updated application form.

It is thus clear that respondent was left groping in the dark wondering why his application was disapproved. He was not even informed that a unanimous vote of the Board members was required. When he sent a letter for reconsideration and an inquiry whether there was an objection to his application, petitioners apparently ignored him. Certainly, respondent did not deserve this kind of treatment. Having been designated by San Miguel Corporation as a special non-proprietary member of CCCI, he should have been treated by petitioners with courtesy and civility. At the very least, they should have informed him why his application was disapproved.

The exercise of a right, though legal by itself, must nonetheless be in accordance with the proper norm. When the right is exercised arbitrarily, unjustly or excessively and results in damage to another, a legal wrong is committed for which the wrongdoer must be held responsible.⁶ It bears reiterating that the trial court and the Court of Appeals held that petitioners’ disapproval of respondent’s application is characterized by bad faith.

As to petitioners’ reliance on the principle of damnum absque injuria or damage without injury, suffice it to state that the same is misplaced. In Amonoy v. Gutierrez,⁷ we held that this principle does not apply when there is an abuse of a person’s right, as in this case.