Ching v. Quezon City Sports Club
REITERATIONFacts
The Antecedents: Petitioner Catherine Ching was a member of respondent Quezon City Sports Club, Inc. (Club) since 1989. In 2001, the Club faced a significant financial obligation due to an adverse judgment from the National Labor Relations Commission (NLRC) for illegal dismissal. To meet this obligation, the Club's Board of Directors (BOD) passed a resolution imposing a special assessment of P2,500.00 on each member, payable in five monthly installments. Petitioner Catherine did not pay this special assessment, opting instead to pay her regular monthly bills short of the P500.00 installment for the assessment. Procedural History: The Regional Trial Court (RTC) initially ruled in favor of the petitioners, awarding them moral damages, exemplary damages, and attorney's fees, finding that the Club had violated its by-laws by suspending Catherine's membership privileges without proper notice and hearing, and had acted in bad faith. However, the Court of Appeals reversed this decision, dismissing the petitioners' complaint. The appellate court held that the Club's by-laws allowed for automatic suspension of privileges for unpaid accounts and found no bad faith on the part of the respondents. The petitioners then elevated the case to the Supreme Court. The Petition: The petitioners seek review under Rule 45 of the Rules of Court, arguing that the Court of Appeals erred in ruling that the suspension of Catherine Ching's membership privileges could be made under Article 33 of the Club's By-Laws, instead of Article 35 which requires notice and hearing. They also contend that the appellate court erred in finding no bad faith or intent to humiliate in the posting of Catherine's name on a memorandum of suspended members and in disregarding the testimony of a witness regarding instructions to trainers. The Supreme Court, while acknowledging a violation of due process in the suspension, found no clear evidence of bad faith and ultimately awarded nominal damages to the petitioners, holding the Club liable but not its officers personally.
Issue(s)
Whether the suspension of petitioner Catherine Ching's membership privileges was in accordance with the Club's by-laws and due process. Whether the respondents acted in bad faith or with intent to injure or humiliate petitioner Catherine Ching. Whether the testimony of Roland Dacut is admissible and has probative value; and whether the award of damages is proper.
Ruling
The Supreme Court partly granted the petition. It reversed and set aside the Decision of the Court of Appeals and ordered the respondent Quezon City Sports Club, Inc. to pay petitioners nominal damages in the amount of ₱25,000.00. The Court found that while there was a ground for suspension due to non-payment of the special assessment, petitioner Catherine Ching's right to due process was violated as she was not afforded proper notice and hearing prior to the suspension. However, it found no bad faith on the part of the respondents.
Ratio Decidendi
On the issue of suspension of membership privileges and due process: The Court held that the imposition of the special assessment under Board Resolution No. 7-2001 was a violation of a resolution, thus falling under Section 35(a) of the Club's By-Laws, which mandates proper notice and hearing before suspension or expulsion. The Court distinguished this from Section 33(a), which pertains to regular dues and ordinary bills and allows for automatic suspension after notice. The general notices in the Statements of Account were deemed insufficient to satisfy the stricter requirement of Section 35(a) for a specific resolution violation. Therefore, petitioner Catherine Ching's right to due process was violated. However, the Court acknowledged that petitioner Catherine Ching herself admitted to not paying the special assessment, which provided a ground for suspension. The Court also noted that the suspension was not immediate, with privileges only being suspended after a considerable delay, and that the Club's by-laws, under Section 33(a), did allow for posting of suspended accounts on the bulletin board, which could be misconstrued as applicable. On the issue of bad faith and intent to injure: The Court found no clear and convincing evidence of bad faith or ill will on the part of the respondents. It reasoned that the distribution of the memorandum listing suspended members to billing clerks and attendants was a necessary part of the Club's ordinary business operations to prevent mistakenly allowing suspended members access to services, and that any penalty for such a mistake would fall on the employees. The Court also noted that the highlighting of Catherine Ching's name might have been done by the clerks themselves and that other names were also highlighted. The Court emphasized that bad faith cannot be presumed and must be proven by clear and convincing evidence, which was lacking in this case. The Court also pointed out that the Club's actions, while violating due process, were not necessarily driven by malice but by an erroneous application of their by-laws. On the admissibility and probative value of Roland Dacut's testimony and the award of damages: The Court affirmed the Court of Appeals' ruling that Dacut's testimony was hearsay. Dacut testified that he was ordered by the management not to play with the Ching family, but this order was relayed to him by a tennis attendant, Sonny Torres, who in turn mentioned it came from "sa taas" (from the top), without naming the specific official. Dacut himself deduced that it referred to the President, Antonio Chua. The Court explained that hearsay evidence lacks probative value because the original declarant is not presented in court to be cross-examined, and the witness testifying on what they heard does not have personal knowledge of the facts asserted. Therefore, Dacut's testimony, based on a relayed instruction, could not establish that the respondents had personally directed the trainers to avoid the petitioners. Based on the finding of no bad faith, the Court ruled that petitioners were not entitled to moral and exemplary damages, nor attorney's fees. However, recognizing the violation of due process in the suspension of Catherine Ching's privileges without proper notice and hearing, the Court awarded nominal damages of ₱25,000.00 to vindicate the violated right, as provided under Article 2221 of the Civil Code. The Court clarified that only the respondent Club, not its officers, would be liable for these damages, as the corporation has a separate legal personality and the officers acted without malice or bad faith.
Main Doctrine
While a member's violation of a resolution duly promulgated by the Board of Directors may be a ground for suspension under the club's by-laws, the suspension must be preceded by proper notice and hearing to comply with the due process clause. Failure to do so, even without bad faith, entitles the member to nominal damages.