MAKATI SPORTS CLUB INC vs.

CHENG, MC FOODS and RAMON SABARRE

FACTS:

- 1994. Makati Sports Club Inc Board of Directors adopted a resolution authorizing the sale of 19
unissued shares at a floor price of P400,000 and P450,000 per share for Class A and B,
respectively.
- 1995. Cheng was a Treasurer and Director of Makati Sports Club

- July 7, 1995. Hodreal expressed his interest to buy a share, so he sent the letter requesting to be
wait listed
- November 1995. McFoods acquired shares of Makati Sports Club at P1,800,000 through Urban
Bank
- December 15, 1995: Stock certificate was issued to McFoods
- December 27, 1995: McFoods advised its offer to resell
- November 24, 1995: Hodreal paid McFoods P1,400,000
- December 27, 1995: Hodreal again paid P1,400,000
- February 7, 1996: Cheng advised sale by McFoods to Hodreal of the share evidenced by a
certificate
- then a new certificate was issued
- 1997: investigation showed that Cheng profited from the transaction because of her knowledge

Makati Sports Club Inc sought judgment that would order Cheng to pay the sum of P1,000,000.00,
representing the amount allegedly defrauded, together with interest and damages

- RTC dismissed; CA affirmed RTC.

ISSUE:

Whether or not the sale of the stocks where Cheng profited from the transaction because of her
knowledge is illicit (Nopes).

HELD:

The sale of the stocks was valid. Article 1459 of the Civil Code provides that the thing must be
licit, and the vendor must have a right to transfer the ownership thereof at the time it is delivered. It is licit
because it is not contrary to law, morals, good customs, public order, and public policy.