Orchard Golf & Country Club, Inc. vs. Yu

A corporation may validly suspend its members for violations of club rules and regulations despite an inconsistent bylaw provision requiring more votes than the number of existing directors when such provision is clearly an oversight; the recommendation of a house committee is not mandatory when the governing provision uses permissive language; and procedural rules may be relaxed to serve substantial justice when the delay is excusable, the appeal is meritorious, and no material prejudice is caused to the adverse party.

The case arose from a long-standing dispute between The Orchard Golf & Country Club, Inc. and two of its members, Ernesto Yu and Manuel Yuhico, stemming from an incident on May 28, 2000, where the respondents violated the Club's "no twosome" policy and engaged in disrespectful conduct toward club management. This led to their suspension and subsequent multi-layered litigation involving the Securities and Exchange Commission (SEC), Regional Trial Courts (RTC), and Court of Appeals (CA), culminating in this petition for review on certiorari.

• On May 28, 2000, respondents Ernesto Yu and Manuel Yuhico went to the Orchard Golf & Country Club to play golf on a Sunday. Their third player cancelled at the last minute.
• Due to the Club's "no twosome" policy prohibiting groups of less than three players from teeing off on weekends before 1:00 p.m., they requested management find another player.
• When unable to find a third player, Yu shouted invectives ("kamote ka" and "gago") at Francis Montallana, the assistant golf director, after the latter refused to allow them to tee off from hole no. 10.
• Respondents teed off without permission and without securing a tee time control slip, violating the Membership Handbook rules.
• Montallana filed an incident report with the Board of Directors on the same day.
• On May 31, 2000, the Board, through petitioner Clemente, requested respondents to submit written comments on the incident.
• On June 29, 2000, the Board resolved to suspend respondents from July 16 to October 15, 2000, for violating Club rules and conduct inimical to the Club's interest.
• Respondents admitted violating the "no twosome" policy and teeing off without the required tee time slip. Yu admitted uttering derogatory remarks to Montallana.
• The Board gave respondents due notice and opportunity to be heard, including offering them meetings to present their side, which they refused to attend.
• The By-Laws provision on suspension (Article XIV, Section 1) requires the affirmative vote of eight members, but the Articles of Incorporation and By-Laws limit the number of directors to seven.
• At the time of suspension, only six affirmative votes were cast, as one director had been suspended and refused to participate.
• The RTC Imus awarded respondents P2,000,000.00 moral damages, P2,000,000.00 exemplary damages, P500,000.00 attorney's fees, and P100,000.00 costs of litigation.
• Petitioners paid the total amount of P9,200,000.00 pursuant to a writ of execution issued on March 2, 2009, before the CA reversed its earlier grant of extension to file the petition for review.

• The delay in filing the proper petition for review was excusable, consisting of only seven days, and they exhibited earnest effort to correct their procedural error by filing an urgent motion for extension and candidly admitting their mistake.
• The cases of Land Bank v. Ascot Holdings and Atty. Abrenica v. Law Firm of Abrenica are inapplicable because they involved prohibited pleadings or inexcusable delays of almost eight months, unlike the present case.
• The suspension of respondents was valid under Section 1, Article XIV of the By-Laws, which allows suspension for violation of rules and regulations or conduct inimical to the Club's interest.
• The provision requiring eight votes for suspension is an obvious oversight since the Articles of Incorporation and By-Laws limit the number of directors to seven.
• Former Senator Helena Z. Benitez could not be counted as the eighth member as she was merely an Honorary Chairperson, not a regularly elected director with voting authority.
• At the time of suspension, only six affirmative votes were actually needed as one director had been suspended and refused to participate.
• The recommendation of the House Committee is not a prerequisite for suspension under Section 1, Article XIV, which uses mandatory language, unlike Section 2(b), Article XI which uses the permissive word "may."
• Respondents admitted violating the "no twosome" policy and uttering invectives at Montallana.
• The award of damages has no factual and legal basis as the suspension was a valid exercise of the Club's rights, constituting damnum absque injuria.

• The procedural lapse of filing a notice of appeal instead of a petition for review was not excusable and should not be relaxed, following the strict application of rules in Land Bank and Atty. Abrenica.
• The suspension was invalid because it was not supported by the required eight votes of the Board members as mandated by Section 1, Article XIV of the By-Laws.
• Former Senator Helena Z. Benitez should be counted as the eighth member to satisfy the voting requirement.
• The House Committee's recommendation was a prerequisite for the validity of the suspension under Section 2(b), Article XI of the By-Laws.
• The "no twosome" policy had been relaxed in the past, and they were allowed to play without causing harm to other members.
• They were entitled to moral and exemplary damages, attorney's fees, and costs of litigation due to the wrongful suspension and the humiliation they suffered.

• Procedural Issues:
  • Whether the Court of Appeals committed grave abuse of discretion in reconsidering its Resolution dated January 15, 2009, which had granted petitioners a fifteen-day period to file a petition for review under Rule 43.
  • Whether the seven-day delay in filing the proper petition for review constitutes excusable delay warranting relaxation of procedural rules.
• Substantive Issues:
  • Whether the suspension of respondents as members of The Orchard Golf & Country Club, Inc. is valid despite the By-Laws requiring the affirmative vote of eight members when the Board only has seven directors.
  • Whether the recommendation of the House Committee is a prerequisite for the valid suspension of a club member.
  • Whether respondents are entitled to moral damages, exemplary damages, attorney's fees, and costs of litigation.

• Procedural:
  • The Supreme Court granted the petition and annulled the CA Resolutions dated September 16, 2009 and January 21, 2010.
  • The Court distinguished this case from Land Bank v. Ascot Holdings and Atty. Abrenica v. Law Firm of Abrenica, noting that petitioners committed an excusable delay of merely seven days, exhibited honest and earnest effort to file the proper pleading, and candidly admitted their procedural error.
  • While procedural rules setting periods for appeal are generally inviolable and jurisdictional, they may be relaxed to serve substantial justice when the appeal appears meritorious and there are compelling reasons to relieve a litigant of injustice not commensurate with the degree of thoughtlessness in not complying with the prescribed procedure.
  • Under A.M. No. 04-9-07-SC, the CA may grant an additional period of fifteen days and a further extension not exceeding fifteen days for compelling reasons, indicating that the reglementary period is not impregnable.
  • No material prejudice was caused to respondents as the injunction had already restored their rights and privileges.
• Substantive:
  • The suspension of respondents is valid. The Court found that the provision in Article XIV, Section 1 of the By-Laws requiring the affirmative vote of eight members is obviously a result of an oversight, given that both the Articles of Incorporation and By-Laws expressly limit the number of directors to seven.
  • Former Senator Helena Z. Benitez, named as Honorary Chairperson in the Membership Handbook, could not be included as a regular Board member absent evidence that she was elected pursuant to the Corporation Code and the By-Laws or that she had authority to vote in Board meetings.
  • At the time the Board resolved to suspend respondents, the affirmative votes of only six members already sufficed as one director had been suspended and refused to participate in management affairs.
  • Section 1, Article XIV of the By-Laws governs the procedure for suspension, not Section 2(b), Article XI. The latter provision, which states the House Committee "may" recommend suspension, uses permissive language and does not make the recommendation mandatory.
  • Respondents admitted violating the "no twosome" policy and teeing off without the required tee time slip. Yu admitted shouting "kamote ka" and "gago" at Montallana.
  • The claim that the policy was relaxed was unsupported by concrete examples prior to the incident.
  • Respondents were given due notice and opportunity to be heard before the Board imposed the penalty.
  • The award of damages has no basis. The suspension was a valid exercise of the Club's rights under the By-Laws. The damages suffered, if any, constitute damnum absque injuria—damage without injury. There was no fault or negligence on the part of petitioners.
  • Membership in the Club is a privilege subject to its rules and regulations. The mental anguish respondents experienced was brought upon themselves by deliberately violating Club rules.
  • The RTC decision was reversed, the damages award was deleted, and respondents were ordered to return the P9,200,000.00 previously paid to them.

• Damnum absque injuria — Damage without injury; loss or harm resulting from the exercise of a lawful right that does not violate any legal duty owed to the plaintiff. The Court applied this doctrine to hold that the Club's valid suspension of its members, being a lawful exercise of its rights under the By-Laws, did not constitute a legal wrong even if respondents suffered damage to their reputation or business dealings.
• Qui jure suo utitur nullum damnum facit — One who makes use of his own legal right does no injury. The Court cited this maxim to emphasize that the proper exercise of a lawful right cannot constitute a legal wrong for which damages may be recovered.
• Relaxation of Procedural Rules for Substantial Justice — While procedural rules setting periods for appeal are mandatory and jurisdictional, they may be relaxed or dispensed with to serve and achieve substantial justice when the delay is excusable, the appeal appears meritorious, and no material prejudice is caused to the adverse party.
• Harmonization of Corporate By-Laws — When interpreting corporate bylaws, provisions that are inconsistent or impossible to comply with (such as requiring eight votes when only seven directors exist) should be harmonized by recognizing obvious oversights and applying practical interpretations that give effect to the corporation's disciplinary mechanisms.

• "In general, procedural rules setting the period for perfecting an appeal or filing a petition for review are inviolable considering that appeal is not a constitutional right but merely a statutory privilege and that perfection of an appeal in the manner and within the period permitted by law is not only mandatory but jurisdictional. However, procedural rules may be waived or dispensed with in order to serve and achieve substantial justice."
• "Relaxation of the rules may be had when the appeal, on its face, appears to be absolutely meritorious or when there are persuasive or compelling reasons to relieve a litigant of an injustice not commensurate with the degree of thoughtlessness in not complying with the prescribed procedure."
• "Both the provisions of Articles of Incorporation and By-Laws of the Club expressly limit the number of directors to seven (7); hence, the provision on suspension and expulsion of a member which requires the affirmative vote of eight (8) members is obviously a result of an oversight."
• "The proper exercise of a lawful right cannot constitute a legal wrong for which an action will lie, although the act may result in damage to another, for no legal right has been invaded. One may use any lawful means to accomplish a lawful purpose and though the means adopted may cause damage to another, no cause of action arises in the latter's favor. Any injury or damage occasioned thereby is damnum absque injuria."
• "One who makes use of his own legal right does no injury. Qui jure suo utitur nullum damnum facit. If damage results from a person's exercising his legal rights, it is damnum absque injuria."
• "Certainly, membership in the Club is a privilege. Regular members are entitled to use all the facilities and privileges of the Club, subject to its rules and regulations."

• Yu v. The Orchard Gold & Country Club, Inc., 546 Phil. 1 (2007) — The prior related case involving the same parties and the underlying suspension incident, where the Court ruled on the effectivity of SEC injunctions and the CA TRO.
• Land Bank of the Philippines v. Ascot Holdings and Equities, Inc., 562 Phil. 974 (2007) — Cited by respondents and distinguished by the Court; involved a motion for extension filed after the reglementary period had expired due to the filing of a prohibited pleading.
• Atty. Abrenica v. Law Firm of Abrenica, Tungol & Tibayan, 534 Phil. 34 (2006) — Cited by respondents and distinguished by the Court; involved an inexcusable delay of almost eight months in filing the proper petition for review.
• Spouses Custodio v. Court of Appeals, 323 Phil. 575 (1996) — Cited for the definition and application of damnum absque injuria, explaining that damage without injury does not constitute a cause of action.
• Pro Line Sports Center, Inc. v. Court of Appeals, 346 Phil. 143 (1997) — Cited for the maxim qui jure suo utitur nullum damnum facit.
• Calipay v. National Labor Relations Commission, 640 Phil. 458 (2010) — Cited for the principle that procedural rules may be relaxed when there are compelling reasons.
• Philippine National Bank v. Commissioner of Internal Revenue, 678 Phil. 660 (2011) — Cited for the principle that procedural rules may be waived or dispensed with to serve substantial justice.
• Asia United Bank v. Goodland Company, Inc., 650 Phil. 174 (2010) — Cited for the standard for relaxing procedural rules.

• Rule 43 of the Rules of Court — Governs appeals from the Regional Trial Court to the Court of Appeals in cases formerly cognizable by the SEC; petitioners were required to file under this rule instead of Rule 41.
• Rule 45 of the Rules of Court — Governs petitions for review on certiorari to the Supreme Court; the present petition was filed under this rule.
• A.M. No. 04-9-07-SC (Re: Mode of Appeal in Cases Formerly Cognizable by the Securities and Exchange Commission) — Prescribed Rule 43 as the proper mode of appeal for intra-corporate controversies transferred to the RTC; provides that the CA may grant extensions of time for compelling reasons.
• Section 1, Article XIV of the Club's By-Laws — Governs suspension and expulsion of members, requiring the affirmative vote of eight members (interpreted as an oversight) and enumerating grounds for suspension; held to be the governing provision over Section 2(b), Article XI.
• Section 2(b), Article XI of the Club's By-Laws — Grants the House Committee permissive authority to recommend suspension; held not to be a mandatory prerequisite for suspension.
• Article VI of the Club's Articles of Incorporation — Limits the number of directors to seven, creating the inconsistency with Article XIV, Section 1.
• Article VII of the Club's By-Laws — Also limits the number of directors to seven.
• Article II, Sections 1 and 2 of the Club's By-Laws — Provide that membership is a privilege and subject to Club rules and regulations.
• Civil Code provisions on Damages — Articles governing moral damages, exemplary damages, attorney's fees, and costs of suit; held inapplicable as no legal injury was committed by the Club.