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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
In the case of Bases Conversion and Development Authority vs. CJH Development Corporation, et al., G.R. No. 219421, April 3, 2024, the Supreme Court upheld the RTC’s confirmation of the Final Arbitral Award of the tribunal in an arbitration case between the BCDA and CJH DevCo.
To recall, on February 11, 2015, the arbitral tribunal rendered its Final Award ruling that a mutual rescission of the agreements was warranted. As consequence thereof, the arbitral tribunal ordered a mutual restitution on account of breach of obligations from both parties. The parties were reverted as far as practicable to their original position prior to the execution of the original lease agreement. The dispositive portion of the Final Award.
Nevertheless, Filipinos and foreigners alike, who have invested huge amounts of their hard-earned money in beautiful homes and cabins within Camp John Hay feel that the SC’s decision to return the 247-hectare property to the government in line with mutual restitution was unjustified and stripped them off of their rights over said properties.
To give you a better understanding of why the Supreme Court upheld the confirmation of the Final Arbitral Award of mutual restitution, we have summarized the case below.
FACTS:
The Bases Conversion and Development Authority (BCDA) was formed under Republic Act No. 7227. One of its primary purposes was to own, hold, and/or administer several former military reservations held by the United States of America, including the 695-hectare property in Camp John Hay, Baguio City.
Camp John Hay was transformed into the 625-hectare John Hay Special Economic Zone (JHSEZ). The BDCA publicly bid out the lease of a 247-hectare portion of the JHSEZ (leased property) and this project was eventually awarded to CJH Development Corporation (CJH DevCo).
Ensuingly, the BCDA (as lessor) and Fil-Estate Management, Inc., Penta Capital Investment Corporation and CJH DevCo (as lessees) entered into a lease agreement on October 19, 1996 for the use, management, and operation of the leased property. The BCDA remained the owner of the 247-hectare portion, while ownership of the improvements introduced by CJH DevCo pertained to the latter. Nevertheless, CJH DevCo had the obligation to transfer ownership of said improvements to BCDA at the end of the lease agreement.
BCDA authorized CJH DevCo to sublease the property to third persons. As it happened, CJH DevCo developed and marketed the real estate built on the leased property to the public, resulting in various investments on the improvements constructed therein. However, records evince that the parties had disputes regarding their respective obligations under the lease agreement and the subsequent Memoranda of Agreement and Restructured Memorandum of Agreement (RMOA).
CJH DevCo filed a complaint in arbitration with the Philippine Dispute Resolution Center, Inc. against the BCDA. The arbitral tribunal rendered its final award on February 11, 2015, ruling that a mutual rescission of the agreements was warranted. It ordered a mutual restitution on account of breach of obligations from both parties. The parties were reverted as far as practicable to their original position prior to the execution of the original lease agreement. CJH DevCo was ordered to vacate the leased premises and promptly deliver the same, inclusive of all new constructions and permanent improvements introduced during the term of the lease, to BCDA in good and tenable condition. On the other hand, the BCDA was ordered to return the total amount of rentals paid by CJH DevCo.
The Regional Trial Court confirmed the final award in toto, it issued a writ of execution directing the BCDA to pay the monetary award and ordered the sheriffs to issue a notice to vacate against CJH DevCo and all persons claiming under them. Subsequently, a notice to vacate was served upon CJH DevCo and the sub-lessees who occupy the leased property and a demand to pay was served to the BCDA.
CJH DevCo filed a Very Urgent Omnibus Motion seeking to clarify the notice to vacate and praying that the phrase “and all persons claiming under them” be declared to refer only to CJH DevCo, and not to sub-lessees occupying the leased property.
Without the RTC having resolved the Omnibus Motion, CJH DevCo sought recourse before the CA. In due course, the CA rendered the impugned Decision, nullifying the Notice to Vacate and the Writ of Execution, and adjudging that they were issued with grave abuse of discretion as the trial court sought to enforce the arbitral award against the parties who were excluded from arbitration.
Nevertheless, the CA ordered, inter alia, that (1) CJH DevCo promptly vacate and cease operations on the leased premises upon payment of the BCDA of its claim in the amount of PHP1,421,096,052.00; and (2) the BCDA respect and not disturb the various contracts of the sub-lessees occupying the leased premises.
The CA: (1) ordered the RTC to cease and desist from enforcing the writ of execution and notice to vacate; (2) enjoined the RTC from enforcing the final award, writ of execution, and notice to vacate against the sub-lessees and intervenors until their respective rights and interests are determined under compulsory arbitration; (3) ordered CJH DevCo to promptly vacate and cease its operations on the leased premises upon payment of its claim in the amount of PHP1,421,096,052.00 with the COA, to turnover the management of Camp John hay to the BCDA and endorse all contracts it entered into with the sub-lessees during the lease, to furnish BCDA an inventory of all the constructions, buildings, and other improvements on the leased premises; and (4) ordered BCDA to respect and not to disturb the various contracts of the third parties occupying the leased premises and to assist in the processing of the claim of CJH DevCo file with COA.
ISSUES:
1. Whether the CA erred in granting the petitions for certiorari:
2.1. enjoining the implementation of the Writ of Execution and the Notice to Vacate against the sub-lessees who had existing agreements with CJH DevCo.
2.2. directing the BCDA to first pay the arbitral award before CJH DevCo could be ordered to vacate the leased property.
2.3. instructing the BCDA and the sub-lessees to submit themselves to separate arbitration.
2. Whether the COA acted with grave abuse of discretion amounting to lack or excess of jurisdiction in dismissing CJH DevCo’s petition for money claim despite finality of the arbitral award.
RULING:
- Yes, the CA erred in granting the petitions for certiorari. In the certiorari petition before the CA, CJH DevCo averred that the RTC committed grave abuse of discretion in extending the obligation to vacate the leased premises to sub-lessees. To the Court’s mind, the certiorari petition filed by CJH DevCo before the CA, in which the sub-lessees sought to intervene is premature. It appears that CJH DevCo filed a certiorari before the CA without waiting for the RTC to rule on its Omnibus Motion:
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- ) To declare all vested rights holders excluded from the enforcement of the February 11, 2015 Final Award, the April 4, 2015 Writ of Execution and the April 20, 2015 Notice to Vacate; and
- ) To declare as well the BCDA’s reported opening of an escrow account as noncompliance with Section 9(a), Rule 39 of the Rules of Court and to order the BCDA to pay the amount of PhP 1,421,096.052.00 in legal tender or a bank certified check.
Given the foregoing, there can be no quibbling that the CA hastily acted on CJH DevCo’s certiorari petition, in light of the unresolved Omnibus Motion pending before the trial court. Without the RTC’s ruling on the same, there can be no definitive pronouncement that it indeed acted capriciously under the circumstances. In this regard, the assertion that CJH DevCo filed the instant petition since the RTC Judge failed to resolve the aforesaid motion despite its urgency considering the 30-day period provided in the Notice to Vacate was about to end, is of no moment.
The records likewise reflect that some of the respondents each filed affidavits of third-party claim in the same case with the RTC. This being so, it cannot be gainsaid that there are other remedies available to the parties which obviously precludes resorting to the instant petition. It is beyond cavil that there was a plain, speedy and adequate remedy available to the third-party claimant which in fact, was availed by some of them.
Moreover, there was no grave abuse of discretion amounting to lack or excess of jurisdiction as to warrant the CA’s issuance of the writ of certiorari. The RTC-issued execution order did not alter the terms of the arbitral award. Rather, it was the CA which modified the arbitral award. By granting the petitions for certiorari and prohibition and in issuing a cease and desist order therefore, the CA, in effect, already rules on the merits of the proceedings still pending before the RTC.
When the the CA hemmed together its factual findings and legal conclusions, it acted beyond the scope of a petition for certiorari, which, as aforementioned, is simply to determine if a tribunal, board or officer has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction.
Thus, the Final Award decreed the return to the BCDA of the leased premises together with all new construction and permanent improvements introduced during the term of lease. Particularly, the Final Award mandated that the parties are hereby reverted as far as practicable to their original position prior to the execution of the 1996 Lease Agreement. To implement this, it was just and proper for the trial court to order CJH DevCo to deliver the leased premises to the BCDA, along with the improvements, with no exceptions.
The appellate court erred in making a factual determination that the sub-lessees were considered third parties who should have been given their day in court to defend their rights over the improvements they introduced on the leased property. It even held that promissory estoppel would operate against the BCDA after it authorized CJH DevCo to sublet the leased property. It also directed the BCDA to respect the terms and assume the obligations of CJH DevCo under the sub-lease contracts. The CA also ordered the BCDA to return the amount of rentals paid before it can compel CJH DevCo to vacate the leased property.
However, a cursory reading of the Final Award reveals that nowhere therein did the arbitral tribunal make CJH DevCo’s obligation to vacate the leased property contingent upon the BCDA’s full payment. CJH DevCo should return to BCDA the lease property together with improvements. In turn, the BCDA should refund to CJH DevCo the rent already paid, amounting to PHP1,421,096,052.00.
These additional conditions violate Section 40 of Republic Act No. 9285 which states that “[a] domestic arbitral award when confirmed shall be enforced in the same manner as final and executory decisions of the [RTC],” and Rule 11.9 of the Special ADR Rules, which provides that “[t]he court shall not disturb the arbitral tribunal’s determination of facts and/or interpretations of law.“
In a nutshell, the CA modified the Final Award on several points. First, 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. Second, it declared CJH DevCo’s obligation to vacate the leased property contingent only upon the BCDA’s full payment of the arbitral award. Third, it imposed additional obligations upon the BCDA, e.g., 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; and to arbitrate and/or litigate with CJH DevCo’s sub-lessees to determine their respective rights and interests.
- The COA did not commit grave abuse of discretion in dismissing the money claims of CJH DevCo pending resolution of the BCDA petition before the Court.
Section 26 of Presidential Decree No. 1445 provides:
Section 26. General Jurisdiction. The authority and powers of the [COA] shall extend to and comprehend all matters relating to … the examination, audit, and settlement of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies, and instrumentalities.
While it is true that the resolution of CJH DevCo’s money claim was well within the primary jurisdiction of the COA despite finality of the confirmed arbitral award by the RTC pursuant to the Special ADR Rules, it is also axiomatic that the COA’s jurisdiction over final money judgments is necessarily limited.
In Taisei Shimizu Joint Venture v. Commission on Audit, the Court expounded on the COA’s limited jurisdiction, stating that the COA’s exercise of discretion in approving or disapproving money claims that have been determined by final judgment is akin to the power of an execution court.
In the present case, the question to be resolved by the Court pivots on whether the CA, in its issuance of the writ of certiorari, modified the Final Award on its merits, which by law, is beyond the scope of judicial review of arbitral awards. As such, it was but proper for the COA to have dismissed the money claim since the issue of the execution of the Final Award, i.e., whether the payment of the BCDA was contingent upon the return of the entire leased property and the new improvements by CJH DevCo to it, remains under litigation and is therefore beyond the limited jurisdiction of the COA.
The Court highlights that the jurisdiction of the COA over final money judgments rendered by the courts pertains only to the execution stage. Its authority lies in ensuring that public funds are not diverted from their legally appropriated purpose to answer for such money judgments.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
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