Vincent Cabreza | April 9th, 2015
BAGUIO CITY—A court here on Tuesday enforced the Feb. 11 arbitration ruling that ended the contractual dispute between the government and the developer of Camp John Hay, saying existing subleases of homeowners and third-party contractors must be addressed by Civil Code provisions governing all contracts.
In a March 27 order that was released here on Tuesday, Judge Cecilia Corazon Dulay-Archog, of the Baguio Regional Trial Court, confirmed the Feb. 11 ruling of the arbitral tribunal formed by the Philippine Dispute Resolution Center (PDRC).
Archog had required the Bases Conversion and Development Authority (BCDA), which administers the Camp John Hay reservation and the John Hay Special Economic Zone, and the developer, the Camp John Hay Development Corp. (CJHDevco), to settle their contractual dispute in the PDRC in a June 2012 order.
A PDRC tribunal concluded that both parties violated the 1996 lease agreement to convert more than 200 hectares of the former American baseland into a tourism estate.
To resolve the dilemma, the arbitral tribunal voided the agreement, and required CJHDevco to vacate the leased area, including all the properties it developed and sold, in exchange for a P1.42 billion reimbursement of its rent payments to the government.
Alfredo Yñiguez III, CJHDevco executive vice president and chief operating officer, said Archog’s order set in motion the process for ending the dispute.
BCDA president Arnel Paciano Casanova said the government is prepared to turn over the reimbursement to the Baguio court and is awaiting a court-issued writ of execution so the government can acquire full control of Camp John Hay.
The court also tried to resolve a controversy that arose from the PDRC ruling regarding the status of other businesses operating inside the CJHDevco leased area, and the property owners who bought hotel rooms and home lots for 25 years, renewable by another 25 years.
In her order, Archog said: “The final award is clear. It needs no further interpretation… As to the list of sublessees (tenants) and/or vested rights holders, they will be governed by the law on obligations and contracts.”
Book IV of the Civil Code of the Philippines states that “obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.”
Article 1385 of the Civil Code also states that a contract’s rescission may not affect the “object of the contract” when it is “legally in the possession of third persons who did not act in bad faith.”
Yñiguez said Archog’s order guarantees that subleases and other contracts are protected by law, and are not required to vacate Camp John Hay along with CJHDevco.
But Casanova said the code also stipulates that “a sublease is dependent on the original lease, and when the mother lease is voided, then so did the subcontracts.”
He said the agency put up help desks to assist homeowners and other sub lessors deal with this complication “because we may have to renegotiate some of these agreements to suit the conditions set by the arbitral ruling.”