The Supreme Court has affirmed an arbitral ruling ordering the Camp John Hay Development Corp. (CJH DevCo) to vacate a portion of the John Hay Special Economic Zone in Baguio City it leased from the Bases Conversion and Development Authority.
The en banc through Associate Justice Japar Dimaampao granted the petition for review on certiorari filed by the BCDA questioning the rulings of the Court of Appeals (CA) which had reversed the Regional Trial Court (RTC) confirmation of the arbitral ruling.
The en banc decision dated April 3 also junked the petition for certiorari filed by CJH DevCo challenging the rulings of the Commission on Audit for dismissing its money claim arising from the arbitral ruling.
The High Court said CJH DevCo should return to BCDA the leased property together with improvements. In turn, BCDA should refund to CJH DevCo the rent paid.
The lease of a 247-hectare portion of the John Hay Special Economic Zone was awarded to CJH DevCo by BCDA which shall remain the owner of the leased property, while CJH DevCo shall own improvements it will introduce.
At the end of the lease agreement, CJH DevCo is obligated to transfer the ownership of the improvements to BCDA. CJH DevCo was also authorized under the agreement to sublease leased property to third persons.
However, disputes as to the parties’ respective obligations under the lease agreement prompted CJH DevCo to file a complaint against BCDA with the Philippine Dispute Resolution Center, Inc. (PDRCI).
The PDRCI arbitral tribunal later found both parties guilty of breaches of their obligations under the agreement, thus it said a mutual rescission was warranted, with the parties reverting to their original position prior to the execution of the agreement.
The arbitral tribunal specifically ordered CJH DevCo to return to BCDA the leased property, together with all improvements.
BCDA, in turn, must refund to CJH DevCo the rent the latter had paid, amounting to more than P1.4 billion.
The RTC also confirmed the final award by issuing a writ of execution.
However, CJH DevCo filed a very urgent omnibus motion praying that the notice to vacate be enforced only on CJH DevCo, and not its sub-lessees. Before the RTC could rule on the motion, CJH DevCo also lodged a petition for certiorari and prohibition before the appellate court.
The appellate court subsequently nullified the notice to vacate and writ of execution, finding grave abuse of discretion on the part of the RTC for enforcing the award against the sub-lessees who were excluded from the arbitration.
The CA further enjoined the RTC from enforcing the final award, writ of execution, and notice to vacate against the sub-lessees.
The BCDA then elevated the case to the SC.
In its decision, the en banc held that the certiorari petition by CJH DevCo before the CA was premature since it did not wait for the RTC to rule on its pending omnibus motion.
“By granting CJH DevCO’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 said in a briefer.
The en banc also cited Section 40 of Republic Act 9285, or the Alternative Dispute Resolution and the Special Rules of Court on Alternative Dispute Resolution in its ruling against CJH DevCo.
Section 40 states that a “domestic arbitral award when confirmed shall be enforced in the same manner as final and executory decisions of the Regional Trial Court” while the Special Rules provides that “the court shall not disturb the arbitral tribunal’s determination of facts and or interpretation of law.”
The High Court said the RTC was correct in confirming the final award, adding that the CA failed to abide by the rules of arbitration when it rendered its challenged rulings.
The High Court said it found tthe CA modified the final award on several points namely when it made an exception to the obligations of CJH DevCo to vacate and deliver the leased property to the BCDA in favor of the former’s sub-lessees, when it declared CJH DevCo’s obligation to vacate the leased property contingent only upon the BCDA’s full payment of the arbitral award and when it imposed additional obligations upon the BCDA to respect and not disturb the various contracts of CJH DevCo with its sub-lessees, with whom the BCDA, as the original lessor, had no privity of contract, to assist in the processing of CJH DevCo’s claim with the COA.
“However, none of the aforementioned conditions can be found in the Final Award,” the SC said, adding that 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. As the RTC did not commit grave abuse of discretion in issuing the Order confirming the Final Award, the CA rulings modifying the Final Award are invalid, “ the SC added.
Finally, the High Court found that no grave abuse of discretion may be attributed to the Commission on Audit when it dismissed CJH DevCo’s money claim pending resolution of the BCDA petition before the court.
It said that it was proper for the COA to have dismissed the money claim since the issue of the execution of the final award Award, whether the payment of BCDA was contingent upon the return of the entire leased property and the new improvements by CJH DevCo, remains under litigation and is therefore beyond the limited jurisdiction of the COA.
