Forest Hills Golf and Country Club Inc. vs. Gardpro Inc

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CORPO LAW – SEC 89 2022-2023

CASE TITLE Forest Hills Golf and Country Club Inc. vs. Gardpro Inc. G.R. NO. G.R. No. 164686

PONENTE BERSAMIN, J. DATE October 22, 2014

DOCTRINE
In interpreting the articles of incorporation and the by-laws of a corporation, the literal meaning of their
provisions shall control, and such provisions should be construed as a whole and not in isolation.

FACTS
In 1996, Gardpro, Inc. bought class "C" common shares of stock, which were special corporate shares that
entitled the registered owner to designate two nominees or representatives for membership in the Club.

Gardpro designated Martin and Reyes to be its corporate nominees; hence, the two applied for membership
in the Club. Forest Hills charged them membership fees of ₱50k each, to which Martin complained about
despite having been assured that no such fees would be collected from them. Assuring that the fees were
temporary, both nominees of Gardpro paid the fees. At that time, the ₱45k membership fees of corporate
members were increased to ₱75k per nominee by virtue of a resolution of the Board of Directors. Both
nominees of Gardpro were then admitted as members upon approval of their applications by the Board of
Directors. Later, Gardpro decided to change its designated nominees, and Forest Hills charged Gardpro new
membership fees of ₱75k per nominee. When Gardpro refused to pay, the replacement did not take place.

Gardpro filed a complaint in the SEC. On June 30, 2000, SEC Hearing Officer ruled in favor of Gardpro. SEC En
Banc and CA affirmed.

ISSUE/S Whether or not the replacement nominees of Gardpro, who were applying for membership in Forest Hills,
should pay the required membership fees.
RULING
No, Forest Hills was not authorized under its articles of incorporation and by-laws to collect new membership
fees for the replacement nominees of Gardpro.

There was an inconsistency between the by-laws of Forest Hills and the affidavit of Albert (General Manager
of the Club) as to the amounts of the membership fees of corporate members. On one hand, Section 13.7
of the by-laws stated that the membership fee of P45,000.00 for corporate members must be paid by
the applicant; on the other, Albert’s affidavit alleged that each nominee shall pay the P75,000.00
membership fee.

To resolve the inconsistency, the by-laws should prevail because they constituted the private statutes of
the corporation and its members and must be strictly complied with and applied to the letter.

In construing and applying the provisions of the articles of incorporation and the by-laws of Forest Hills,
the plain meaning rule embodied in Article 1370 of the Civil Code that if the terms of the contract are clear
and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall
control.

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