Law suits plague sports club

Ever heard of the Nomad Sports Club in the quiet fringes of suburban Parañaque City?

Currently engaged in a legal tussle is the club which exercised its right of first refusal in 2010 to purchase the land, and two of its members the former president Ed Du and director of Multisphere Realty Corp., Kishore Hemlani.

Nomad Sports Club (Nomads) was formed in 1914 as the sporting offshoot of Manila Club which was then the exclusive enclave of British nationals in the Philippines at the time. Its main goal was to promote British sports in the country, particularly football which was very popular then.

Nomads had their original football field in the Ermita/Malate area, the spot now occupied by the Philippine President Lines building. The facilities were basic and refreshments were usually taken at the adjacent Manila Club where the Nomads had their own bar.

When World War II broke out, the activities at both clubs were interrupted and Manila Club was reduced to a shell. After the war, Nomads used the grounds for their renewed activities and became actively involved in rebuilding their parent club. Eventually, in January 1949, Nomad Sports Club was registered as a non-profit corporation with the purpose of promoting the social, athletic and recreational activities of its members.

First on its agenda was to establish and maintain a sports field and clubhouse – the construction of which took place a few months later at a rented lot in Makati City, near the corner of what is now Pasay Road and EDSA.

However, the club was forced to look for another location in the 1960s when the land went up for sale and the club was not able to raise the funds to buy it. In 1969, Nomad Sports Club found its home in Merville Park, Parañaque, leasing a 2.5-hectare property from Nersan Corporation – and the rest, as they say, is history.

Fast forward to 2008 . Edward Du, a former director and president of the club, initiated a complaint with the Securities and Exchange Commission alleging that NSC had been offering ‘unlisted securities’.

Prior to that, the club was given notice by Nersan Corp. sometime in 2007 that there was an offer to purchase the land by a company called MultisphereTrading Inc., majority owned by the family of an Indian national named Kishore Hemlani who is a member of Nomads.

The lease agreement, last signed (ironically by then president Du ) in 2002 for a period of 15 years, gave NSC the right of first refusal to buy the land in the event the owners decide to sell it.

The 2008 Board of Directors voted to exercise the right as stipulated in the contract, in the process agreeing that the members themselves would raise the necessary amount and a separate corporation would be formed for the purpose. This is when the story decidedly took a series of unfortunate events.

First, Multisphere complained that the right of first refusal only extended to Nomad, and not to any other entity that the members might set up. If Nomad itself did not exercise the right, then Multisphere would have the option to purchase.

Second, the sellers of the land, Nersan Corp., having made the agreement to sell the Nomads land to the club, no longer wanted to sell the adjacent school land to Multisphere, and a case was taken by Multisphere against Nersan. The resolution of this was a compromise agreement between the three parties, whereby Multisphere purchased the school, and Nomads purchased its own land. In the event that Nomads was unable to pay by the stipulated date, then the right to purchase would revert to Multisphere.

Nomads was able to secure long-term soft loans and was able to paid in full, pay the taxes due, and execute the absolute deed of sale. Titles were obtained from the Parañaque Registrar of Deeds.

In the meantime the club had held an EGM to restructure its board to be 60-40 percent Filipino-foreign in strict compliance with the law.

The story should have ended there.

Sadly, it didn’t.

Throughout the club’s history, the Board of Directors served the club without remuneration, Nomads being a non-stock, non-profit establishment. However, for the 2008 board, their business dealings, as well as their personal lives, would be affected in ways they had never imagined.

All eight of them were subjected to a Watch List Order (WLO) issued by the Department of Justice in conjunction with the case filed by Du with the SEC. The 60-day WLO was imposed on Aug. 22, 2011, but was lifted only last Dec. 13, 2011. The WLO expired after the two-month period but was still essentially in force because apparently, ‘expiry’ and ‘validity’ do not mean the same.

Be that as it may, it would not take very long after the WLO was finally lifted that the DOJ would find ‘probable cause’ to charge the eight directors for alleged violation of Republic Act 8799, otherwise known as the Securities Regulation Code. In essence, the DOJ resolved that the act of offering membership to the general public upon payment of certain amounts in exchange for the right to enjoy club facilities is tantamount to the offering of securities and requires prior registration with SEC. The commission further claims that “IDs given or issued by NSC to persons who applied for membership are in effect uncertificated securities”.

The case will have far-reaching implications for every non-stock, non-profit membership club in the country. Every club, every gym, every association that charges a joining fee and issues a membership card would henceforth have to register such membership with the SEC.

The civil case as to whether the issuance of a membership card is a form of security which should be registered with the SEC is now awaiting resolution at the Supreme Court.

The criminal case against the 2008 board is due to be heard in August 2012.

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