THE Court of Appeals (CA) has thwarted a bid by the Philippine Reclamation Authority (PRA) nullifying a compromise agreement with the Pasay City government that ended a dispute over real-property tax obligations amounting to P1.63 billion.
A decision penned by former CA Associate Justice and now Supreme Court (SC) Associate Justice Noel Tijam held that the agreement approved by the Regional Trial Court in Pasay City on May 25, 2005, was not contrary to law or public policy.
The PRA sought to annul the compromise agreement more than 10 years after on the basis of a Supreme Court ruling in PRA v. Parañaque City, declaring all PRA reclaimed properties as exempt from real-estate tax.
Under the agreement, the PRA agreed to cede 3.5 hectares of reclaimed land in Central Business Park-1A in Pasay City as settlement of its tax liabilities from 1992 to 2002, totaling P1,630,072,407.
The property is now subject of a memorandum of agreement between the Pasay City government and SM Development Corp. (SMDC), represented by its vice chairman and CEO, Henry Sy Jr.
SMDC has proposed to turn the property into a mixed residential-commercial complex through a joint-venture undertaking.
The parties agreed that revenues generated by the condominium project would be used for the construction of a new building for the Pasay City University.
The Pasay City government was obliged to contribute its title, ownership, rights and interest to the property, and deliver the physical possession of the same to SMDC ready for development.
The city government also assured that no person or entity will compete with the right and interest of the city, preventing the SMDC from taking full possession of the property.
In upholding the PRA and Pasay City agreement, the CA held that various government agencies, such as the Office of the Solicitor General, Department of Public Works and Highways and the Office of the President, through the Department of Finance, approved of the compromise agreement.
It added the order of the trial court already constituted a judgment on the merits of the compromise agreement, and “has upon the parties the effect and authority of res judicata”, or matter already judged.
“In this case, there was no issue as to the fact that the parties freely entered into the compromise agreement. The PRA did not proffer a shred of evidence to prove that, indeed, the agreement was void, obtained through fraud, mistake or any vice of consent, or would disrupt substantial justice,” the CA said.
“There was also no dispute about the clarity of its terms. One of the parties simply did not wish to abide by the compromise agreement’s terms by alleging, without proving, that the same was contrary to law and public policy,” the CA added.
The CA said even the Office of the Government Corporate Counsel, in its February 8, 2008, opinion, advised the PRA it was duty-bound to comply with the terms of the compromise agreement, despite a Supreme Court ruling on July 20, 2006, in Manila International Airport v. Court of Appeals, et al.
In that case, the Office of the Government Corporate Counsel reminded PRA the mere change in the state of law does not relieve a party to a judgment upon compromise from compliance sans evidence showing fraud.
“For one thing, there is no stipulation in the compromise agreement, or any agreement for that matter, that the PRA’s tax settlement would be subject to any reservation arising from any supervening change in the law or legal interpretation, in view of the eventual ruling of the Supreme Court in the Parañaque case,” the CA ruled.
It pointed out the events surrounding the Parañaque case already existed, even before the PRA and Pasay City’s execution of the compromise agreement.
It added the SC ruling in the Parañaque case cannot be applied retroactively to the properties of the PRA subject of the compromise agreement. Since the agreement is considered valid and binding, the CA said it only follows that the memorandum of agreement entered into between SMDC and Pasay City is also valid.