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158805, April 16, 2009

Valley Golf and Country Club, Inc. versus Rosa O. Vda. De Caram
The late Congressman Caram (Respondents husband) subscribed to
purchased and paid for in full one share (Golf Share) in the capital stock of Petitioner.
Despite the five demand letters sent by Petitioner, Caram defaulted in paying his
monthly dues. Thus, Petitioner sold Carams golf membership share at a public
As it turned out, Caram had died on October 6, 1986. His wife, herein
Respondent, initiated instestate proccedings before the RTC of Iloilo City, Branch 35.
As a result, Carams Golf Share was adjudicated to herein Respondent.
An action for reconveyance of the Golf Share with damages was filed by
Respondent before the Securities and Exchange Commission (SEC) against Petitioner.
The SEC Hearing Officer ordered Petitioner to convey ownership of the Golf Share, or
in the alternative, to issue one fully paid share of stock of the same class as the Golf
Share to Respondent, plus damages in the amount of P90,000.00.
The SEC en banc and the Court of Appeals affirmed the SEC Hearing Officers
Whether or not a non-stock corporation may seize and dispose of the
membership of a fully-paid member on account of its unpaid debts to the corporation
when it is authorized to do so under the corporate-by-laws but not the Articles of
Citing Section 91 of the Corporation Code which deals with termination of
membership in a non-stock corporation, the Supreme Court ruled that the right of a
non-stock corporation to expel a member through the forfeiture of the Golf Share
may be established in the by-laws alone. Section 91 provides:
SEC. 91. Termination of membership.Membership shall be
terminated in the manner and for the causes provided in the
articles of incorporation or the by-laws. Termination of
membership shall have the effect of extinguishing all rights of a
member in the corporation or in its property, unless otherwise
provided in the articles of incorporation or the by-laws.
However, the Honorable Supreme Court pointed out that Petitioner acted in
bad faith when it sent the final notice to Caram under the pretense they believed him
to be still alive, when in fact they had very well known that he had already died,
thus, he would not be able to settle the obligation himself, resulting to the sale of his
golf membership share.
The Court ruled that this reason alone is sufficient to nullify the sale and
sustain the rulings of the SEC and the Court of Appeals. The same, as ruled by the
Supreme Court, could bring into operation Articles 19, 20 and 21 under the Chapter
on Human Relations of the Civil Code. These provisions enunciate a general obligation
under law for every person to act fairly and in good faith towards one another. Nonstock corporations and its officers are not exempt from that obligation.


G.R. No. 164182, February 26, 2008

Power Homes Unlimited Corporation versus Securities and Exchange
Commission and Noel Manero
Petitioner is a domestic corporation duly registered with Public Respondent
SEC, and is engaged in the transaction of promoting, acquiring, managing, leasing,
obtaining options on, development, and improvement of real estate properties for
subdivision and allied purposes, and in the purchase, sale and/or exchange of said
subdivision and properties through network marketing.
Public Respondent SEC acted on the letters of Respondent Noel Manero and a
certain Romulo Munsayac, Jr. Manero alleged that in a seminar he attended,
Petitioner claimed that it sells properties that were inexistent and without any
brokers license. Munsayac on the other hand, inquired whether Petitioners business
is legitimate or not.
After investigation, Public Respondent SEC found out that Petitioner is
engaged in the sale or offer for sale or distribution of investment contracts, which are
considered securities under Sec. 3.1 (b) of Republic Act (R.A.) No. 8799 (The
Securities Regulation Code), but failed to register them in violation of Sec. 8.1 of the
same Act, Public Respondent SEC issued a Cease and Desist Order against Petitioner.
Petitioner filed this petition for review after the Court of Appeals denied its
petition for lack of merit and affirmed in toto Public Respondents Cease and Desist
1. Whether or not Public Respondent SEC followed due process in the
issuance of the assailed Cease and Desist Order;
2. Whether or not Petitioners business constitutes an investment contract
which should be registered with Public Respondent SEC before its sale or
offer for sale or distribution to the public.
1. The Court held that Petitioner was not denied of due process. The records
reveal that Public Respondent SEC properly examined petitioners business
operations when it (1) called into conference three of petitioners
incorporators, (2) requested information from the incorporators regarding the
nature of petitioners business operations, (3) asked them to submit
documents pertinent thereto, and (4) visited petitioners business premises
and gathered information thereat. All these were done before the CDO was
issued by the Public Respondent SEC.
2. The Court ruled that Petitioners business constitutes an investment contract,
thus, should be registered with Public Respondent SEC before its sale or offer
for sale of distribution to the public.
To determine whether a transaction falls within the scope of an investment
contract, the Court made use of the Howey Test which provides that an
investment contract requires a transaction, contract, or scheme whereby a
person: (1) makes an investment of money, (2) in a common enterprise, (3)

with the expectation of profits, (4) to be derived solely from the efforts of
Ciiting SEC v. Glenn W. Turner Enterprises, Inc. et al., the Court therefore
ruled that the business operation or the scheme of Petitioner constitutes an
investment contract that is a security under R.A. No. 8799. Thus, it must be
registered with Public Respondent SEC before its sale or offer for sale or
distribution to the public. As petitioner failed to register the same, its offering
to the public was rightfully enjoined by Public Respondent SEC. The CDO was
proper even without a finding of fraud.