End of an era

Capitol Hills Golf and Country Club Inc. has closed its fairways and greens to its members and the golfing public effective last Thursday.

Capitol, located in Old Balara, Diliman, Quezon City, was built in 1960 and is an 18-hole golf course whose flat fairways and rolling hills provide a short yet challenging course to its golfers, as one club shares trading firm describes it. It was reportedly designed by Celestino Tugot, one of the greatest Filipino golfers. It used to be a par 72 golf course, but has been reduced to a mere par 62 over the years after portions were converted into subdivisions, one of which is the plush Ayala Hillside Estate.

Way back in 2002, I reported that Ayala Land and Capitol Hills management entered into a joint venture arrangement to convert a portion of the golf course into a residential project (Ayala Hillside Estate). CHGCCI is supposed to have a share in the proceeds of the project and will use the money to build a new golf course in Macabut, Rizal so that existing CHGCCI shareowners will be able to play in two courses. I wonder what happened to that plan.

Anyway, the golf club management explained that the golf course will be closed effective last Sept. 14 at 4 p.m. and will remain closed until judicial relief is obtained from a competent court.

The closure is in compliance with the omnibus order promulgated by Judge Reynaldo Daway of the Quezon City Regional Trial Court Branch 90 on motions of shareholders lawyer Martin Aliling and Rainier Madrid ordering CHGCCI to cease and desist from maintaining and operating the golf course as well as another cease and desist order issued by the Quezon City Business Permits and License Office dated Sept. 8, 2017.

QC BPLO department head Garry Domingo, in the closure order dated Sept. 8 signed by him, said that “considering the order dated Aug. 16 of the Branch 90, RTC, Quezon City, in case no. Q-11-216, whose authority and jurisdiction this office respected, directing the board of liquidators of CHGCCI to cease and desist from further continuing the club’s business for which it was established, that is, from operating and maintaining the golf course, it is hereby directed that the business operations of CHGCCI be stopped and the establishment be closed.”

According to the club management, legal pleadings to lift the CDO will be filed at the soonest possible time, while other shareholders and stakeholders are encouraged to take their own appropriate steps to manifest their desire to keep the golf course open.

It explained that as a result of the omnibus order, CHGCCI may not be able to generate enough funds to pay for maintenance, security, and other government mandated taxes and fees.

“We pray for the more than 300 families of employees and caddies who depend solely on the continuing operation of the golf course as their only means to earn a living. The closure of golf operations is a catastrophe to them,” it said.

In a message sent to this writer, CHGCCI general manager Jose Dagdagan said that talking to the caddies and employees about the closure was the most unpleasant duty he had to carry out as GM.

But nevertheless, he pointed out that they need to comply with the order of competent authorities, especially after the RTC rejected Capitol’s argument to preserve the assets pending liquidation.

Dagdagan, however, revealed that they would exhaust all legal remedies to lift the CDO. “At least, we want the club to remain operational while the liquidation process is ongoing,” he said.

He explained that the trouble besetting Capitol can be traced back to its expired corporate term, which lapsed on Jan. 26, 2010. Ayala Land bought shares and became part of management in 2011, and owns around 19 percent of CHGCCI.

Dagdagan said that by law, Capitol had to liquidate after its corporate term expired. But while doing so, it opted to operate as a measure to preserve and secure its assets. Unfortunately, the court rejected that argument, he said.

Section 122 of the Corporation Code provides that “every corporation whose charter expires, or is terminated, shall nevertheless be continued as a body corporate for three years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established.”

Capitol earlier filed a temporary restraining order to prevent the implementation of the CDO, but it was explained that this has been mooted. So now, the lawyers are preparing to file a petition for injunction to stop the CDO and allow the club to continue operating.

So why would the two shareholders, namely Aliling and Madrid, want the golf operations to stop, but not the rest of the club affairs? The court order covered only the operation of the golf course, and does not affect the leases to several locators in the club house, which include a culinary school, several restaurants and coffee shops, a salon, among others.

According to Dagdagan, it is the contention of the two that because of the golf operations, the club was incurring losses. But the GM explained that the club has been EBITDA-positive, which means that its income from operations has been positive. It is the government taxes, in particular the real estate taxes which amount to about P14 million a year, which has been killing the club.

He emphasized that if the club is not allowed to continue operations, the value of the property would depreciate.

Following the expiration of CHGCCI’s corporate term, the golf course almost lost several of its holes.

It was learned that the QC government foreclosed holes five and six of the golf course and sold the property in an auction. However, CHGCCI has assailed the validity of the foreclosure and the subsequent foreclosure sale, saying there was no due notice and the members could have easily raised the needed amount had they been informed. Dagdagan said the title to holes 5 and 6 remain with the club as well as possession.

Meanwhile, holes 10, 11, 12 and 13 of Capitol was earlier the subject of a preliminary attachment issued by another branch of the QC RTC upon petition from the company employees. But Dagdagan said the club was able to reacquire these holes after paying the petitioning employees their salaries and benefits.

So what happens to the owners of the 6,000 shares of CHGCCI?

It was learned that some of the other properties owned by CHGCCI other than the golf course itself have already been sold and the amount used to pay debts owed to some creditors as well as to the employees. The liquidation of CHGCCI, which was supposed to happen immediately after the expiration of its corporate term, took quite a long time before it gained momentum because the records were messed up.

Liquidation, also referred to as winding up, is the process by which the company’s assets are gathered and disposed off or distributed to satisfy claims from creditors, the government (for payment of taxes), employees, etc. Whatever remains is then divided among the stockholders in proportion to their shareholdings.

Dagdagan revealed that most of the shareholders and club member he had talked to want to retain and reopen the golf course in case it is awarded to the shareholders. “Ultimately, it will be the owners who will decide,” he said.

This early, however, a number of its golf caddies have started looking for employment in other golf clubs. It will not be easy, though, as there are no new golf courses being built and as the existing ones are not expanding their operations.

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