SC: CJHDEVCO should vacate leased portion of Camp John Hay

THE Supreme Court has affirmed the ruling of the Regional Trial Court of Baguio City ordering the Camp John Hay Development Corporation (CJHDEVCO) to vacate the 247-hectare property that it leased from the Bases Conversion and Development Authority (BCDA) in Baguio City.

The decision penned by Associate Justice Japar B. Dimaampao was reached by the Court en banc last April 3, 2024; however, a copy of the decision had yet to be officially released as of Wednesday.

The Court’s decision granted the petition for review filed by the BCDA assailing the Court of Appeals (CA) ruling that reversed the Baguio RTC’S confirmation of the arbitral ruling issued by the Philippine Dispute Resolution Center Inc. (PDRCI).

It its February 2017 ruling, the PDRCI directed CJHDEVCO to return to BCDA the subject portions of Camp John Hay that it leased from the latter. The arbitral proceedings stemmed from the complaint for arbitration filed by CJHDEVCO against BCDA, following disputes over their respective obligations under the leave agreement.

The PDRCI arbitral tribunal found that both parties were guilty of breaches of their obligations under the agreement, warranting the rescission of the contract.

On April 14, and 20, 2015, the Baguio RTC issued a writ of execution and notice to vacate, respectively, against CJHDEVCO and its sub-lessees occupying the leased property.

BCDA, on the other hand, was served a demand to pay CJHDEVCO the amount of P1.42 billion awarded by the PDRCI.

While the BCDA opened an escrow account in the amount fixed in the arbitral award, CJHDEVCO filed a motion before the Baguio RTC, praying that the notice to vacate be enforced only on CJHDEVCO, and not its sublessees.

But before the RTC could rule on motion, CJHDEVCO filed a petition for certiorari and prohibition before the CA, along with the sublessees, assailing the notice to vacate issued by the trial court.

In a ruling issued in July 2015, the CA granted the petition filed by CJHDEVCO to annul the orders issued by the Baguio RTC.

The appellate court held that the Baguio RTC 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 CJHDEVCO 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 BCDA.

CJHDEVCO was joined by third party investors John Hay Trade and Cultural Center Inc. (JHTCC), CJHGOLF Club and a number of unit and property owners as petitioners and intervenors in the CA petition.

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.

Likewise, the CA held that BCDA cannot force CJHDEVCO to vacate the leased property until there is certainty as to when the arbitral award of P1.42 billion will be paid.

Under existing laws, CJHDEVCO has to file first a claim with the Commission on Audit (COA) for the satisfaction of BCDA’S liability for the payment of P1.42 billion.

The court’s ruling

IN reversing the CA’S decision, the SC held that CJHDEVCO’S petition filed before the appellate court was premature.

The SC said the CA hastily acted on CJHDEVCO’S certiorari petition without waiting for the RTC to rule on its pending motion.

“By granting CJHDEVCO’S petitions for certiorari and prohibition, the CA, in effect, already ruled on the merits of the proceedings still pending before the RTC,” the SC stressed.

“Without the RTC’S ruling on the same, there can be no definitive pronouncement that it indeed acted capriciously under the circumstances, ” it added.

Furthermore, the SC held that the CA failed to abide by the rules of arbitration when it modified the PDRCI’S final award without valid grounds.

The Court stressed that under Section 40 of Republic Act No. 9285, or the Alternative Dispute Resolution (ADR) Act,“[a] domestic arbitral award when confirmed shall be enforced in the same manner as final and executory decisions of the Regional Trial Court.”

It also noted that Special Rules of Court on ADR (Special ADR Rules), provides that “[t]he court shall not disturb the arbitral tribunal’s determination of facts and/or interpretation of law.”

“Thus, as a rule, the arbitrator’s award cannot be set aside for mere errors of judgment either as to the law or as to the facts. Judicial review is hence confined strictly to the limited exceptions under arbitration laws for the arbitration process to be effective and the basic objectives of the law to be achieved,” the SC explained.

“In the present case, without showing that any of the grounds to modify the award exist or that the same amounts to a violation of an overriding public policy, the RTC was thus correct in confirming the Final Award,” it added.

The Court found that the CA modified the arbitral ruling when it made an exception to CJHDEVCO’S obligations to vacate and deliver the leased property to the BCDA in favor of the former’s sublessees; when it declared CJHDEVCO’S obligation to vacate the leased property dependent only upon the BCDA’S full payment of the arbitral award; when it imposed additional obligations upon the BCDA, such as to respect and not disturb the various contracts of CJHDEVCO and to assist in the processing of CJHDEVCO’S claim with the COA; and to arbitrate and/or litigate with CJHDEVCO’S sub-lessees to determine their respective rights and interests.

“In requiring the BCDA to fulfill the conditions outside of the Final Award, the CA made its own findings of fact and provided its own legal interpretation of the parties’obligations. This is clearly beyond the power of the CA, ruled the Court,” the SC pointed out.

The Court said the PDRCI’S final award did not make CJHDEVCO’S obligation to vacate the leased property contingent upon BCDA’S full payment of the amount of P1.42 billion.

The SC declared that CJHDEVCO should return to BCDA the leased property together with improvements while BCDA should refund to CJHDEVCO the rent already paid.

Likewise, the High Court affirmed the COA’S dismissal of CJHDEVCO’S money claim pending resolution of the BCDA petition before the Court.

The Court held that the COA correctly dismissed the money claim since the issue of the execution of the final award remains under litigation and is therefore beyond the limited jurisdiction of the COA.

Based on the records, BCDA was created in 1992 to implement the government’s policy to accelerate the sound and balanced conversion of former United States (US) military bases into alternative productive uses and enhance derived benefits to promote economic and social development.

Among BCDA’S powers is to own, hold, and/or administer several former US military reservations, including Camp John Hay in Baguio City.

Following the transformation of Camp John Hay into the 625-hectare John Hay Special Economic Zone (SEZ), the lease and development of a 247-hectare portion was awarded to CJH Devco.

BCDA, as lessor, then entered into a lease agreement with CJH Devco, Fil-estate Management, Inc., and Penta Capital Investment Corporation, as lessees, for the use, management, and operation of the leased property.

Under the lease agreement, BCDA remains owner of the leased property, while CJHDEVCO shall own improvements it will introduce.

However, at the end of the lease agreement, CJHDEVCO must transfer the ownership of the improvements to BCDA.

CJHDEVCO was also authorized under the agreement to sublease the leased property to third persons.