THE Court of Appeals (CA) on Friday stopped the Bases Conversion and Development Authority (BCDA) from evicting the more than 1,600 third-party investors and private developer Camp John Hay Development Corp. (CJHDevCo) from the 247-hectare former American recreational facility in Baguio City, unless the BCDA fully complies with the “Final Award” rendered earlier by the arbitral tribunal.
In a 67-page ruling written by Associate Justice Noel Tijam, the CA Second Division said the BCDA granted the petition for certiorari and prohibition filed by private developer CJHDevCo, seeking to annul and set aside the implemention of the writ of execution dated April 14, and the notice to vacate dated April 20, issued by the Regional Trial Court in Baguio City (RTC).
The appellate court held that the RTC in Baguio City committed grave abuse of discretion in enforcing the arbitral award against third parties occupying the leased property.
It noted that the final award directed only CJHDevCo to vacate the leased property and to surrender the improvements and constructions constructed by the company during the existence of the lease, but did not make any categorical statement that it should be enforced against third parties.
The CA said the arbitral decision merely settled the dispute between CJHDevCo and the BCDA.
“These third parties invested their hard-earned money in the said buildings and improvements in good faith and acquired the same for value. The third parties acted in good faith, investing their money in the improvements and acquired the same prior to the existence of the dispute between CJHDevCo and the BCDA, and prior to the commencement of the arbitration,” the CA said.
“These third parties should not be held to bear the breaches and mistakes of CJHDevCo and the BCDA with respect to their respective obligations under the lease agreement,” it added.
The CA noted that the arbitral panel did not mention in its decision about effect of the rescission of the lease agreement between CJHDevCo and the BCDA on the third parties.
“Evidently, the third parties occupying the leased property never had their day in court. They were never heard before the arbitration proceedings and in the proceedings before the RTC,” it added.
Furthermore, the CA said to require CJHDevCo to turnover the leased property, inclusive of all improvements and constructions free of the third parties occupying the same, is “neither practicable nor possible.”
CJHDevCo was joined by third-party investors CAP John Hay Trade and Cultural Center Inc. (JHTCC) , CJHGolf Club, and a number of unit and property owners as petitioners and interveners in the petition.
CAP JHTCC, CJHGolf and the individual tenants all claimed that their ownership rights over their properties are protected by a 50-year leasehold agreement they signed with CJHDevCo. The leasehold agreement, according to third-party investors, remains valid until 2046.
CJHDevCo to stay until BCDA pays P1.42 billion
LIKEWISE, the CA held that the BCDA cannot force CJHDevCo to vacate the leased property until there is certainty as to when the arbitral award of P1.42 billion is paid.
Under the law, CJHDevCo has to file first a claim with the Commission on Audit (COA) for the satisfaction of the BCDA’s liability for the payment of P1.42 billion.
Being a government-owned and -controlled corporation, the CA noted, the BCDA is subject to the COA rules and any disbursement of public funds must first go through the auditing procedures of the COA.
“However, pending the filing of the claim with the COA and pending payment thereof to CJHDevCo, the latter cannot be forced to vacate the leased property, consistent with the principle of mutual restitution,” the CA ruled.
The CA noted that the COA has 60 days to act on CJHDevCo’s claim for compensation under the law.
However, it barred CJHDevCo from entering into new contracts with third parties or perform any action that would “contravene the tenor of the arbitral award before receipt of its payment.”
Meanwhile, the CA directed CAP JHTCC and other third-party investors who intervened in the case to submit themselves to arbitration with the BCDA pursuant to the provisions of the original lease agreement it signed with CJHDevCo, which are equally binding on the third parties.
If the parties refuse to submit to compulsory arbitration, the CA said the BCDA and third parties should immediately litigate their respective rights and obligations before the regular court as alternative.
On the other hand, the CA ordered CJHDevCo to vacate and cease its operations upon payment of its claim in the amount of P1,421,096,052 with the COA.
“Private respondent BCDA is hereby ordered to respect and not to disturb the various contracts of the third parties occupying the leased premises; to assist in the processing of the claim of petitioner CJHDevCo filed with the COA, who must act within 60 days, pursuant to existing laws…” the CA ordered.
Concurring with the ruling were Associate Justices Myra Garcia-Fernandez and Victoria Isabel Paredes.
The petitioners sought relief from the CA, after the BCDA included Camp John Hay’s tenants in the implementation of the order of the RTC in Baguio City.
CJHDevCo argued that the final arbitral award and even the writ of execution of the RTC in Baguio City did not impose upon it the obligation to deliver the leased property to the BCDA free of occupants, tenants or owners.
By requiring it, as well as the third parties, to turnover the leased premises to the BCDA, the petitioners and interveners said the RTC in Baguio “effectively and unlawfully modified the final award” that the trial court cannot change, “considering that it has been confirmed in toto and that neither CJHDevCo nor the BCDA filed a motion to modify it.”