Cojuangco v. Vargas: #AndStill or #AndNew?

by: JD Garcia

If you’ve been keeping track of Batas Sportiva (why wouldn’t you?) you’d have a fairly good idea of what the Philippine Olympic Committee (“POC”) is all about. If you want to refresh your memory (or read up on Philippine sports arbitration as brilliantly articulated by our fearsome leader Mickey Ingles), you can click here, here and here. Recently, there has been a lot of hoopla on the leadership of the POC. And since political elections have been quite the fad these days, the POC figured to be no different.

For the past twelve (12) years, the POC presidency has been held by Mr. Jose “Peping” Cojuangco, Jr. Based on the by-laws of the POC (which you can access here – http://olympic.ph/index.php/about-poc/new-by-laws/), the term of the president shall be for a period of four (4) years, which means that Mr. Cojuangco has been elected and re-elected for three (3) consecutive terms since 2004. Needless to say, it has been a long reign in the POC for Mr. Cojuangco. Whether this is something good or detrimental to Philippine sports—we are in no position to say (we’d like to keep politics out of this).

The president of the POC is essentially the CEO. His major duties include signing any deed, agreement, contract or instrument, rendering reports on the affairs of the POC, and in general he performs “all duties incident to the office of the president.” That last one, being worded in such general language, can be construed with such vagueness that one can argue that the president has the power to do and perform whatever may reasonably be considered as attendant to his position as president. Quite a mouthful but in other words, he has great leeway in performing acts for and on behalf of the POC. With the influence that the POC holds in Philippine sports, this may be the reason that the POC presidency is quite a coveted position.

The next elections for the POC presidency will take place on November 25, 2016. And as expected, Mr. Cojuangco is again running, this time for a fourth (4th) consecutive term. However, the peculiarity of this year’s elections is that he is facing strong opposition in the name of Mr. Victorico “Ricky” P. Vargas. Mr. Vargas is currently the head of the Association of Boxing Alliances in the Philippines and has been a strong influence (albeit behind the scenes) on the development of the famous MVP Gilas basketball program.

Apparently, Mr. Vargas filed his candidacy for the presidency of the POC motivated by, as he says, encouragement from both athletes and various heads of national sporting associations. It seems, based on statements made by Mr. Vargas’ camp to the media, that those in the sporting community are clamoring for change: a change allegedly embodied by Mr. Vargas.

Unfortunately for Mr. Vargas, the POC comelec deemed him ineligible to run for president. The reason? He lacked the requirement of “active participation” in the POC. This requirement is based on Article 7, Section 11 of the POC by-laws, which states that: “The Chairman and the President of the POC must have had at least 4 years experience as NSA President of an Olympic Sport at the time of his election as POC Chairman or President; provided, that they must be elected from any of the incumbent NSA Presidents representing an Olympic sports, and provided, further, that they have been an active member of the POC General Assembly for two consecutive years at the time of their election.”

The POC comelec, headed by Mr. Frank Elizalde, ruled that the “active participation” requirement means that the candidate must have attended “50% plus one” of the total number of general assemblies for the past two (2) years and held every two (2) months. According to the POC comelec, Mr. Vargas was only present for three (3) general assemblies for the past two (2) years (unfortunately, Batas Sportiva does not have access to POC attendance records, so we are unable to vet the accuracy of this). Expectedly, Mr. Vargas filed a protest against his disqualification. His protest was mainly anchored on the argument that the POC comelec effectively amended the POC by-laws when it interpreted “active participation” as equivalent to “50% plus one” of total number of general assemblies. However, the POC comelec denied his protest and upheld his disqualification. As of this article’s writing, Mr. Vargas has expressed his intention to bring this matter to court.

In trying to resolve whether Mr. Vargas has valid claim to candidacy, the POC by-laws is most crucial. As the POC comelec has already given its interpretation of the “active participation” requirement, the next question is should the POC comelec’s interpretation stand? The underlying question being how should the by-laws be construed and, perhaps more importantly, who has the authority to do so?

Under Batas Pambansa Blg. 68 or the Corporation Code of the Philippines, every corporation (including the POC, which was incorporated pursuant to the Corporation Code) shall adopt its own by-laws which shall be done by the affirmative vote of stockholders representing at least a majority of the outstanding capital stock of the corporation (Section 46, Corporation Code). The by-laws is intended to be the code for the corporation’s governance, including, among others, the qualifications of directors, officers and employees (Section 47, Corporation Code). Any amendment to the by-laws shall be allowed only with the consent of the majority of the directors and the stockholders (Section 48, Corporation Code).

The questions still remains, however, as to who is vested with the right/duty to interpret the by-laws. The Securities and Exchange Commission (“SEC”) provides guidance:

“By-laws and their amendments should be construed and given effect in the same manner and upon the same principles as agreements in writing between private individuals. Hence, the rules of contracts interpretation are generally applicable to the interpretation of by-laws. (Fletcher, sec. 4195 at 696). Article 1371 of the new Civil Code of the Philippines on interpretation of contracts provides that in order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. (SEC Opinion dated 08 February 1999 addressed to Bashir D. Rasuman, citing SEC Opinion dated February 4, 1988 addressed to Philippine Nurses Association, Inc.)

Based on the foregoing opinion of the SEC, it would appear that the interpretation of the by-laws should necessarily reflect the intention of the contracting parties—who in this case are the members of the corporation.

The implication, therefore, both on the basis of the provisions of the Corporation Code for amendment of by-laws and the SEC’s opinion cited above, is that the stockholders or members of the corporation are the ones with the power to interpret the by-laws. What is even clearer is that it is outside the POC comelec’s authority to construe the by-laws to such an extent and manner as to add certain requirements that are not clearly expressed therein. To give credence to the POC comelec’s interpretation of what constitutes “active participation” may necessitate an act/resolution of both board of directors and stockholders of the POC.

Unless this matter is brought to the courts, we will not know whether the POC comelec’s decision was actually legal and valid, and consequently, whether their decision to disqualify Mr. Vargas was lawful (but we should assume so nonetheless). In the meantime, let’s just sit back and enjoy more politics. Anyway, sports is, like most things, not free from politics. Whatever happens, let’s just hope that whoever sits as the next POC president will make strides in developing and improving Philippine sports for the sake of national pride and our courageous athletes.

Disclosure: JD Garcia has worked with Mr. Vargas during the latter’s stint as president of a water utility company. They’re not FB friends though, so they’re not that close.

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