Appeal filed with Supreme Court BCDA hits CA over John Hay decision

The state-owned Bases Conversion and Development Authority (BCDA) filed an appeal before the Supreme Court Tuesday to protect the rights and interest of government in the Camp John Hay after the Court of Appeals’ Former Special Fifth Division issued a decision that was grossly disadvantageous to government and leading to billions of pesos in lost revenues.

BCDA president and CEO ArnelPaciano D. Casanova said the highly irregular CA decision was prejudicial to the general public as it unduly deprived the government of the use, possession and generation of revenues of  a government property—the Camp John Hay,  in favor of the private interest of the Sobrepeña-led CJHDevCo.

“We are going to challenge the CA decision because it is grossly disadvantageous to public interest as it deprives government of at least P5 billion and allows for the continued practice of corporate fraud,” Casanova said.

The BCDA official said public interest was the driving force behind the development of Camp John Hay.  The government corporation was created by law to carry out the policy:  “to enhance the benefits to be driven from said properties in order to promote the economic and social development of Central Luzon in particular and the country in general.”

The BCDA declares that from the inception of the lease of government property to CJHDevCo, the latter, from 1998 to 2000 fraudulently paid more than 1.274 billion as dividends and advances to its stockholders, affiliates but feigned financial incapacity to BCDA in order to wangle deferment in rental payments of at least 1.275 billion during the same period.

Casanova added lost revenues could easily translate to infrastructure projects such as schools, hospitals, roads and a new landfill area not to mention better health and social services for the people of the Cordilleras in particular and the nation in general. 

The BCDA said the CA ruling was “highly irregular” for the following reasons:  “First, the CA modified the Arbitral Award—the final award—declaring the CJHDevCo’s obligation to vacate and deliver the Leased Property to BCDA as dependent on BCDA’s payment of P1.4B.  This secision effectively rendered the arbitral award an empty one.  BCDA, which was supposed to recover “all” new constructions and permanent improvements as provided in the final award—will instead recover none.

“Second, the contested CA decision ignored the admission of Camp John Hay that its contractual relationship with the so-called “third parties” was a sublease and ruled that the sub-lessees should not be evicted.”     

The BCDA said the Sobrepeña-led CJH Development Corporation (CJHDevCo) misled its sub-lessees to believe that sub-lessees into believing that sub-lessees were not at all affected by the  Arbitral Tribunal’s  final award.  In previous decisions by Honorable Courts it was consistently held that the sublessees “can invoke no right superior to that of his sub-lessor, and the moment the sub-lessor is duly ousted from the premises, the sub-lessee has no leg to stand on.”

Among those who reportedly benefited from the CA decision were CJHDevCo’s wholly-owned subsidiaries, CJH Hotel Corporation and CJH Suites Corporation and affiiliates such as Camp John Hay Golf Club, Inc. and the CAP-John Hay Trade and Cultural Center, as well as CJHDevCo executives Robert John Sobrepena, Ferdinand Santos and Alfredo Yniguez, who are all claiming ownership of cabins in the mountain resort.

The BCDA said “The CA went beyond its limited jurisdiction in a petition for certiorari.  In the case of Lee vs. People (2004), “in a petition for certiorari, the jurisdiction of the court is narrow in scope.  It is limited to resolving errors of jurisdiction. It is not to stray at will and resolve questions or issues beyond its competence such as errors of judgment.”        

BCDA head for legal services lawyer Peter Paul Andrew T. Flores said based on the merits of the case, the BCDA is confident that the patently erroneous CA decision will not fly in the SC.  

He noted that public good and interest is far more superior and always outweighs private interest. “Public interest will eventually prevail,” Flores said.

He said that should the CA decision be enforced, government will not have benefited because the sublessees have already paid their lease to CJHDevCo until 2046. 

The structures will be worthless by the time these are turned over to the BCDA in 2046 as the usable life of a building is only about 50 years.

He added as part of Arbitral Tribunal’s Final Award, BCDA will be refunding CJHDevCo P1.42 billion which is more than what CJHDevCo actually paid to BCDA as lease rentals considering that some of the payments were in the form of hotel units and golf shares.

“Government has not earned anything from the Camp John Hay lease since 1997 and government will not earn anything while Mr. Sobrepeña continues to exploit and profit from the use of government property until 2046. Where is the justice in that?” Flores said.

He said the CA overstepped its jurisdiction by ordering BCDA to assume all of CJHDevCo’s contractual obligations but without enjoying any of the rights.

 Flores noted that the CA decision goes beyond what the Arbitral Tribunal’s Final Award said.

“The CA does not have any jurisdiction to interpret nor modify the Final Award of the Arbitral Tribunal,” Flores said.

Flores noted that the 67-page decision favoring CJHDevCo as ordered by CA Associate Justice Noel G. Tijam runs contrary to the Philippine Dispute Resolution Center, Inc.  (PDRCI) Arbitral Tribunal’s Final Award issued last February 2015. Concurring the decision were Associate Justice Myra V. Garcia-Fernandez and Associate Justice Victoria Isabel A. Paredes.

 Justice Tijam was also the judge who ruled in favor of R-II Builders on a case against Home Guaranty Corp. (HGC) and the National Housing Authority (NHA). HGC went to the Supreme Court, which reversed the decision of Tijam, citing “error upon error” in its proceedings.

The Supreme Court also said the Court of Appeals “gravely erred” on the issue of jurisdiction.

The Arbitral Tribunal of the Philippine Dispute Resolution Center, Inc. last February came out with its Final Award that ordered CJHDevCo to vacate Camp John Hay and promptly deliver the leased property, inclusive of all new constructions and permanent improvements to the BCDA. The Final Award also ordered the BCDA to return to CJHDevCo the amount of P1.42-B which the CJHDevCo paid to the BCDA as lease payments.

Both the BCDA and CJHDevCo filed a petition to confirm the Final Award before the Baguio Regional Trial Court (RTC) that led to the confirmation of the Final Award making it binding, executory and non-appealable.

The Baguio RTC issued a Writ of Execution to implement the Final Award, however, CJHDevCo was able to secure a Temporary Restraining Order (TRO) from the CA and eventually the CA decision itself putting a halt to the implementation of the Final Award not to mention modifying the Final Award.

Flores said after CJHDevCo’s payment of the first annual rental of P425 million in 1997, CJHDevCo repeatedly requested for the deferment of its rental payments, claiming it was financially incapable of doing so. Rental obligations to government reached P3,007,712,654.  In May 2012, citing “material and incurable breaches” of CJHDevCo’s contractual obligations, BCDA has terminated the lease agreement with its non-paying lessee.