CEBU COUNTRY CLUB, INC.

(CCCI) v Elizagaque
Facts:
San Miguel Corporation is a special company proprietary member of petitioner CCCI
and designated Elizagaque as a special non-proprietary member. Elizagaque filed an
application for proprietary membership and then president of CCCI offered a P3.5M
proprietary share but Elizagaque was able to purchase a share from a different
member for only P3M, a Proprietary Ownership certificate was then issue in favor of
respondent. After postponements of his application's action by the board,
respondent received a letter from CCCI's corporate secretary informing him that his
application for proprietary membership was disapproved. After 3 letters of
reconsideration and inquiry whether any member of the board objected to his
application with no response from CCCI, respondent filed for damages with Pasig
City RTC. RTC rendered a decision awarding actual, moral and exemplary damages
as well as attorney's fee and costs. CA affirmed RTC's findings but deleted the actual
damages and denied MFR of CCCI. Hence this petition.
Issue:
W/N CCCI and private petitioners are liable for damages, jointly or severally.
Ruling:
CCCI's articles of incorporation give the board of directors the right to approve or
disapprove an application for proprietary membership but such right should not be
exercised arbitrarily. In GF Equity Inc. v Valenzona, Art. 19 in relation to Art. 21 was
expounded. Art. 19 prescribes that any person must act with justice, give everyone
his due and observe honesty and good faith. A right, by itself legal as recognized or
granted by law may become the source of some illegality when the right is
exercised in a manner that does not conform with the norms enshrined in Art. 19
and results in damage to another which gives rise to a legal wrong and the
wrongdoer must be held responsible. An action for damages under either Art. 20 or
Art. 21 may be the proper recourse.
The black ball system of voting by each member of the board's conformity with the
application violated Art. 19 as found by the RTC and CA that CCCI and private
petitioners committed fraud and evident bad faith in disapproving the application.
This is contrary to morals, good custom or public policy and so petitioners are liable
for damages pursuant to Art. 19 in relation to Art. 21. The Amended By-Laws of
CCCI that provided for the black ball voting system of approving or disapproving
applications for Proprietary Membership was not in the By-Laws that respondent had
signed when he filed his application, there was no required number of votes needed
for admission of an applicant on the documents that respondent signed. It is clear
that respondent was left wondering why his application was disapproved and was
not even informed that a unanimous vote was required. 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 and at the very least was
informed on why his application was disapproved. CCCI and private petitioners
cannot invoke damnum absque injuria since this does not apply when there is an
abuse of a person's right. The awards of damages were corrected and private
petitioners were held jointly and severally for all the damages as it was provided in

their Articles of Incorporation. CA's decision is affirmed with modification as to the

amounts of the damages awarded.