Corporate Members Must Adhere to By-Laws and Due Process to Maintain Membership

G.R. No. 112337, January 25, 1996

Imagine joining a prestigious club, paying your dues diligently, and enjoying all the perks of membership. Now, picture this: years later, you find out your membership has been revoked without your knowledge, leaving you excluded and frustrated. This scenario highlights the importance of understanding the rules and regulations that govern corporate membership, as well as the due process requirements that must be followed when membership is at stake. The case of Dr. Antonio L. Azores vs. Securities and Exchange Commission and Philippine Columbian Association delves into these critical issues.

This case explores the conditions under which a corporation can terminate membership, particularly concerning non-payment of dues and changes in citizenship. It also examines the procedural requirements a corporation must adhere to when dealing with membership issues.

Legal Context: Membership, Obligations, and Corporate By-Laws

Corporate membership is governed by the corporation’s by-laws and relevant provisions of the Corporation Code of the Philippines. These by-laws outline the rights, privileges, and obligations of members, as well as the conditions for termination of membership. It’s important to recognize that membership in a non-stock corporation is a contractual relationship, and members are expected to adhere to the established rules.

Section 68 of the Revised Corporation Code highlights the effects of termination of membership:

“Section 68. Effects of Termination of Membership. – Membership shall be terminated in the manner and for the causes provided in the articles of incorporation or the bylaws. 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 bylaws.”

To ensure fairness and prevent arbitrary actions, corporations must follow due process when addressing membership issues. This includes providing members with notice of any potential violations, an opportunity to be heard, and a fair and impartial decision-making process.

For instance, consider a homeowners’ association (HOA). If a homeowner violates a rule, the HOA can’t simply revoke their membership without warning. They must first notify the homeowner of the violation, provide an opportunity to explain their side, and then make a decision based on the evidence. Failing to do so could lead to legal challenges.

Case Breakdown: Dr. Azores and the Philippine Columbian Association

Dr. Antonio Azores, a member of the Philippine Columbian Association (PCA), faced issues regarding his membership after residing in the United States and becoming an American citizen. He had stopped paying dues without informing the PCA of his change in residence and citizenship.

• 1952 & 1954: Dr. Azores acquired Proprietary Membership Certificate No. 094 and Membership Certificate No. 282.
• 1966: Dr. Azores moved to the United States and became a US citizen, failing to inform PCA and ceasing payment of dues.
• 1981: Upon returning to the Philippines, Dr. Azores sought to reactivate his membership.
• PCA requested payment of dues for the years of absence, informing him that his certificates had been cancelled in 1977 due to a recall for replacement.
• Dr. Azores filed a complaint with the Securities and Exchange Commission (SEC) seeking reinstatement of membership.

The SEC Hearing Officer ruled in favor of PCA. Dr. Azores’ appeal was dismissed for being filed out of time.

The Supreme Court upheld the SEC’s decision, emphasizing the importance of adhering to procedural rules and the corporation’s by-laws.

The Court stated:

“The failure of a party to perfect his appeal in the manner and within the period fixed by law renders the decision sought to be appealed final, with the result that no court can exercise appellate jurisdiction to review the decision.”

Furthermore, the Court addressed the argument of the SEC’s alleged errors:

“[T]his is a petition for certiorari under Rule 65. As such, even assuming that errors were allegedly committed by the SEC en banc, the errors are not errors of jurisdiction or grave abuse of discretion.”

Practical Implications: Protecting Your Membership Rights

This case provides valuable lessons for both corporate members and corporations:

For Members:

• Stay informed: Understand your corporation’s by-laws and the conditions for maintaining membership.
• Communicate changes: Promptly notify the corporation of any changes in residence, citizenship, or other relevant information.
• Pay dues on time: Ensure that your membership dues are paid regularly to avoid termination.
• Adhere to deadlines: Be mindful of deadlines for appeals or other legal actions.

For Corporations:

• Follow due process: Provide members with notice and an opportunity to be heard before terminating membership.
• Apply by-laws fairly: Ensure that the corporation’s by-laws are applied consistently and without discrimination.
• Maintain clear records: Keep accurate records of membership, dues payments, and communications with members.

Key Lessons:

• Corporate membership is a contractual relationship governed by the corporation’s by-laws.
• Members must adhere to the rules and regulations outlined in the by-laws to maintain membership.
• Corporations must follow due process when addressing membership issues.
• Failure to perfect an appeal within the prescribed period can result in the finality of a decision.

For example, a cooperative can’t just kick out a member for allegedly violating a rule. They have to show that they followed their own rules for discipline, gave the member a chance to defend themselves, and made a fair decision based on the evidence.

Frequently Asked Questions

Q: What happens if I don’t pay my membership dues?

A: Failure to pay membership dues can lead to suspension or termination of membership, as outlined in the corporation’s by-laws. Make sure to understand the grace periods and consequences for non-payment.

Q: Can a corporation terminate my membership without notice?

A: No, corporations must provide members with notice and an opportunity to be heard before terminating membership. This is a fundamental requirement of due process.

Q: What should I do if I believe my membership was unfairly terminated?

A: If you believe your membership was unfairly terminated, consult with a lawyer to explore your legal options. You may have grounds to challenge the termination if the corporation failed to follow its own by-laws or due process requirements.

Q: Are corporate by-laws legally binding?

A: Yes, corporate by-laws are legally binding on both the corporation and its members. They serve as the governing rules for the corporation’s operations and the rights and obligations of its members.

Q: What is the importance of perfecting an appeal on time?

A: Perfecting an appeal within the prescribed period is crucial because failure to do so can result in the finality of the decision being appealed. This means that the decision cannot be reviewed or overturned by a higher court.

Q: How does a change in citizenship affect corporate membership?

A: Some corporate by-laws may require members to be citizens of a particular country. If a member changes citizenship, their membership may be affected, depending on the specific provisions of the by-laws.

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