The Supreme Court has clarified the importance of due process in the suspension of club membership privileges. Even when a member violates club rules, the club must still adhere to its own by-laws regarding notice and hearing before suspending membership. This ruling underscores the contractual nature of club memberships and the need for fair procedures.

Suspended Privileges: When Can a Sports Club Suspend a Member Without a Hearing?

In Catherine Ching, et al. v. Quezon City Sports Club, Inc., et al., the central issue revolved around the suspension of Catherine Ching’s membership privileges at the Quezon City Sports Club, Inc. (QCSC) due to her failure to pay a special assessment. The Chings filed a complaint for damages, alleging that the suspension was implemented without proper notice and hearing, violating their rights. The QCSC, on the other hand, argued that the suspension was justified under their by-laws concerning unpaid accounts. The Supreme Court ultimately addressed the question of whether the club followed the correct procedure in suspending Catherine Ching’s membership, considering the specific nature of the unpaid assessment and the club’s internal regulations.

The Supreme Court’s analysis hinged on interpreting the QCSC’s by-laws, specifically Section 33(a) concerning the billing of members and posting of suspended accounts, and Section 35(a) dealing with suspension and expulsion for violations of by-laws, rules, and resolutions. Section 33(a) allows for the suspension of a member with unpaid bills after notice, while Section 35(a) requires notice and hearing before suspension or expulsion for violating the by-laws or resolutions. The Court emphasized that club by-laws are binding contracts between the club and its members, and strict compliance is necessary.

The Court distinguished between regular dues and ordinary accounts, which fall under Section 33(a), and the special assessment, which stemmed from an extraordinary circumstance – the need to settle a monetary judgment. The special assessment was imposed by the QCSC’s Board of Directors (BOD) through Board Resolution No. 7-2001. Because Catherine Ching’s non-payment was a violation of this specific Board Resolution, the Court determined that Section 35(a) of the by-laws should have been applied.

Sec. 35. (a) For violating these By-Laws or rules and regulations of the Club, or resolution and orders duly promulgated at Board or stockholders’ meeting, or for any other causes and acts of a member which in the opinion of the Board are serious or prejudicial to the Club such as acts or conduct of a member or the immediate members of his family, his guest or visitors, which the Board may deem disorderly or injurious to the interest or hostile to the objects of the Club, the offending member may be suspended, or expelled by a two-thirds (2/33) vote of the Board of Directors upon proper notice and hearing.

The Court found that the QCSC violated Catherine Ching’s right to due process because she did not receive specific notice advising her that she could be suspended for non-payment of the special assessment and was not afforded a hearing before her suspension. The general notice printed on her statements of account was insufficient to meet the requirements of Section 35(a).

However, the Court also acknowledged that Catherine Ching admitted to violating Board Resolution No. 7-2001 by not paying the special assessment. This acknowledgement became crucial in mitigating the damages awarded. The Court also addressed the issue of bad faith, noting that it requires a dishonest purpose or some moral obliquity and conscious doing of wrong, which must be substantiated by evidence. It cited Philippine National Bank v. Heirs of Estanislao Militar, emphasizing that bad faith cannot be presumed but must be established by clear and convincing evidence.

The Court found no evidence of bad faith on the part of the QCSC in implementing Catherine Ching’s suspension or in distributing the memorandum listing suspended members. The actions were deemed to be in the ordinary course of business to implement Board Resolutions Nos. 7-2001 and 3-2002. The Court further discredited the testimony of Roland Dacut, a tennis trainer, regarding alleged instructions to avoid the Chings, ruling it as hearsay evidence lacking probative value. Dacut had no personal knowledge, only relying on what a tennis assistant relayed to him.

In light of these findings, the Court determined that while the QCSC had violated Catherine Ching’s right to due process, there was justifiable ground for her suspension due to her non-payment of the special assessment. Consequently, the Court deemed that the Chings were not entitled to moral or exemplary damages or attorney’s fees, as bad faith was not proven.

Despite the absence of bad faith, the Supreme Court awarded nominal damages to the Chings. According to Article 2221 of the Civil Code, nominal damages are awarded to vindicate or recognize a right that has been violated, not to indemnify for losses suffered. The Court found that the QCSC’s failure to observe due process warranted the award of nominal damages. Only the Quezon City Sports Club, Inc. was held liable for the nominal damages, emphasizing that, absent malice and bad faith, officers of a corporation are not personally liable for the corporation’s liabilities.

The ruling underscores the importance of adhering to due process even when there is a valid reason for disciplinary action. While Catherine Ching did violate the club’s resolution, the club’s failure to follow its own by-laws in implementing the suspension led to the award of nominal damages. This case highlights the contractual nature of club memberships and the necessity of fair procedures in enforcing club rules.

FAQs

What was the key issue in this case?	The key issue was whether the Quezon City Sports Club properly suspended Catherine Ching’s membership privileges for failing to pay a special assessment, considering the club’s by-laws regarding notice and hearing.
Why was Catherine Ching’s membership suspended?	Catherine Ching’s membership was suspended because she did not pay a special assessment of P2,500 imposed by the club to cover monetary judgments from a labor case.
What are nominal damages?	Nominal damages are a small monetary award granted when a legal right has been violated but no actual financial loss has occurred; these damages serve to recognize the violation of the right.
What is the significance of the club’s by-laws in this case?	The club’s by-laws were crucial because they outline the procedures for suspending members, and the Supreme Court determined that the club failed to follow the correct procedure.
Did the Supreme Court find that the club acted in bad faith?	No, the Supreme Court found no evidence of bad faith on the part of the Quezon City Sports Club in implementing Catherine Ching’s suspension.
What is the “Business Judgment Rule” and how does it apply here?	The Business Judgment Rule generally protects corporate decisions from court interference if made in good faith, but it doesn’t excuse failure to comply with due process requirements outlined in by-laws.
What was the role of Roland Dacut’s testimony in the case?	Roland Dacut’s testimony, regarding an alleged order for trainers to avoid playing with the Chings, was considered hearsay and given no probative value by the Court.
What was the basis for awarding nominal damages in this case?	The award of nominal damages was based on the Quezon City Sports Club’s failure to provide proper notice and a hearing before suspending Catherine Ching’s membership, violating her right to due process.

This case serves as a reminder that organizations must respect due process rights when enforcing their rules. While clubs and associations have the right to manage their affairs, they must do so in a manner that is fair and consistent with their own governing documents.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Catherine Ching, et al. v. Quezon City Sports Club, Inc., et al., G.R. No. 200150, November 7, 2016