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Calatagan Golf Club v Clemente

Facts: Clemente applied to purchase one share stock of Calatagan, indicating in his application his mailing
address, complete residential address, office and residence telephone numbers as well as the company
with which he was connected. Calatagan issued to him a Certificate of Stock. Calatagan charges monthly
dues to meet expenses for general operations, costs for upkeep and improvement of grounds and facilities
as provided for by its Articles of Incorporation. After paying the monthly dues initially, Clemente failed to
pay and Calatagan demanded payment for the monthly dues through letters which were sent to his
mailing address but were sent back to sender with the postal note that the address has been closed ,
twice. Calatagan declared Clemente delinquent for failing to pay his monthly dues and included him in its
list of delinquent members. Calatagan's board of directors adopted a resolution authorizing the foreclosure
of shares of delinquent members and the public acution of these shares. Calatagan sent a third and final
letter to the same address containing a warning that unless Clemente settles his outstanding dues, his
share will be included among the shares to be sold at the public auction. Clemente's share was sold with
the notice of foreclosure published in the issue of Business World. Clemente learned of the sale after 4
years and filed a claim with SEC seeking to restore his shareholding in Calatagan with damages. SEC
dismissed the complaint, citing Sec. 69 of the Corporation Code which provides that the sale of share at an
auction sale can only be questioned within 6 months and Clemente's claim was filed long after the period
provided. SEC further held hat Calatagan complied with all the requirements for a valid sale of the share,
Clemente failing to inform Calatagan that the address he supplied was no longer his address and that
Clemente acted in bad faith assuming as he claimed that his non-payment of dues would merely render his
share inactive. CA reversed SEC's ruling, restoring the share and awarded damages minnus the unpaid
monthly dues Clemente owed. CA found that SEC erred in citing a case it decided, Caram v Valley Golf
Country Club that Sec. 69 specifically refers to unpaid subscriptions to capital stock and not to any other
debt of stockholders. CA employed Art. 1140 of the Civil Code as the proper rule of prescription which is at
8 years since Sec. 69 does not apply to unpaid membership dues in non-stock corporations. Also Calatagan
knew that the previous 2 letters it sent were sent back to them and so the demand letter would not be
received by Clemente.
Issue: W/N Calatagan is liable for damages under Art. 19 of the Civil Code.
Ruling: Sec. 69 of the Corporation Code refers specifically to unpaid subscriptions to capital stock. The sale
of delinquent stock is the non-payment of the subscription price for the share of stock itself and the
stockholder has yet to fully pay for the value of the shares subscribed. Clemente had already fully paid for
the share and Calatagan no longer had any outstanding obligation to deprive him of full title to his share.
Section 69 will only be applicable if Clemente still has not fully paid for the share and the non-stock
corporation decided to sell such share as a consequence which is not the case at bar. Sec. 91 of the Corp.
Code provides that termination of membership in non-stock corporations are governed by its articles of
incorporation or by-laws. In accordance with it's by-laws, Calatagan sent the third and final demand letter
with the warning but it was sent ot the mailing address which Calatagan knew was already closed. The
Corporate Secretary under its by-laws is required by law to keep a record of the addresses of all
stockholder and that the Secretary needs to notify the shareholder of the order to sell at auction of said
shareholder's stock. The Corporate Secretary being a lawyer is knowledgeable on the law and of corporate
records and should have known that the third demand letter would still have been sent back to them. Due
diligence was not exercised by the Corporate Secretary, there was even no inquiry as to the mailing
address or verification of the other addresses on record provided by Clemente and knowing that the PO
box was already closed it still persisted in sending the final demand and warning letter to the same PO box
which constituted bad faith. Calatagan's bad faith and failure to observe its own by-laws resulted not
merely in the loss of Clemente's privilege to enjoy Calatagan's facilities but also in significant pecuniary
damage to him. Knowing as Clemente did that Calatagan was in possession of his home address as well as
residence and office telephone numbers, he had every reason to assume that the club would not be at a
loss should it need to contact him. A non-stock corporation like Calatagan is not exempt from the
obligation laid down by Articles 19-21 which obliges under law every person to act fairly and in good faith
towards one another. Clemente has sustained pecuniary injry by reason of Calatagan's wrongful violation
of its own by-laws and CA's award of moral and exemplary damages as well as attorney's fees are
warranted. Calatagan was cited in violation of Art. 32 of the CC by CA which allows recovery of damages
from any private individual who directly or indirectly obstructs, defeats, violates or in any manner impeded
or impairs the right against deprivation of property without due process of laws. CA's decision is affirmed
with costs against Calatagan.

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