CA upholds P1.12-B settlement between NHA, R-II Builders

THE Court of Appeals (CA) said it affirmed the P1.12-billion settlement between the National Housing Authority (NHA) and a private property developer over the Smokey Mountain project in Manila.

In a 25-page decision dated May 30, the CA special first division upheld the 2018 settlement between NHA and R-II Builders, Inc., the former developer of Smokey Mountain Development and Reclamation Project (SMDRP), which ordered NHA to pay R-II P1.12 billion for the project.

R-II, under the agreement, relieves the government agency of all monetary obligations and liabilities in connection with the claim and cancel any previous notice of levy or attachment against NHA upon payment of the obligation.

“This Court finds that the Compromise Agreement dated Nov. 21, 2018 is not contrary to law, morals, good customs, and public policy,” the court ruled.

“It appears to be freely executed by herein parties R-II and NHA. Thus, no cogent reason exists for the Court to refuse to grant the prayer of the parties and hereby bestows judicial approval of their Compromise Agreement,” it added.

The Office of the Government Corporate Counsel (OGCC) claimed that the authority of the NHA general manager is limited to negotiation and signing of the compromise agreement and has no authority to decide on additional properties.

It also contested the six-month period, upon execution, within which it is ordered to pay the initial amount of the obligation.

The court noted that the general manager of the NHA is authorized to sign for the agency and there is no need for specific authority for other properties that were part of the P1.12-billion obligation to which the NHA gave its consent. It also noted that both parties gave their consent in executing the compromise agreement.

“Significantly, jurisprudence is clear that an essential requisite of the validity of a dacion en pago, and consequently, the total extinguishment of the obligation, is the consent of both parties, which was evident in the case at bench,” the CA said.

“In the same breath, neither does this Court find issue as to the substance of the Compromise Agreement with regard to the settlement of all claims as asseverated by the OGCC,” it added.

The court also dismissed the claims of Home Guaranty Corp. (HGC) which claimed that R-II had no reason to recover in connection with the project as HGC had the right to claim all the amounts owing to the Asset Pool by NHA, saying it has entered negotiations with a settlement amount of P5 million in its favor.

The CA said that HGC did not object the compromise agreement and the agreement was binding only to the parties in it.

“After all, HGC is not left without any recourse in law. As the Agreement is only binding upon the parties to the compromise, there is no prejudice as to any negotiations or concessions made between HGC and the latter parties separate and distinct from the said Agreement,” it said.

R-II entered into five contracts with NHA beginning March 1993 in connection with the SMDRP. However, its appointment as developer of the project was terminated in July 2002 as the government decide to submit the additional works of P480 million and their Amended Supplemental Agreement to public bidding.

Due to the termination of the contract, R-II and NHA executed a Memorandum Agreement (MoA) in 2003 wherein the agency “acknowledged therein its indebtedness to it for actual works” for the project, to allow the government to proceed with the public bidding.

R-II moved its claim to the lower court after NHA failed to settle its obligation in full within 12 months after the execution of the MoA as it was only able to pay P806 million leaving a balance or P993 million.

A Quezon City court ruled in favor of R-II, ordering NHA to pay its obligations and issued Notices of Garnishment to NHA.

The settlement was reached in 2018.

The decision was written by Presiding Justice Romeo F. Barza and concurred in by Associate Justices Jhosep Y. Lopez and Ronaldo Roberto B. Martin. —