The Supreme Court (SC) has upheld a trial court’s ruling that affirmed an arbitral tribunal’s order which directed Camp John Hay Development Corporation (CJHDevCo) to vacate the 247-hectare Baguio City property it leased from the Bases Conversion and Development Authority (BCDA).

The decision, written for the full court by Associate Justice Japar B. Dimaampao, granted the petition filed by BCDA which challenged the Court of Appeals (CA) ruling that reversed Baguio City regional trial court’s (RTC) confirmation of the order issued by the Philippine Dispute Resolution Center, Inc (PDRCI).

The SC’s decision also denied the petition filed by CJHDevCo which questioned the rulings of the Commission on Audit (COA) that dismissed the firm’s money claim against BCDA as a result of the PDRCI order.

A copy of the decision issued in Baguio City during the SC’s start of summer sessions last April 3 has not been made public.  It’s public information office (PIO) issued a summary of the ruling on Wednesday, April 10.

The PIO’s summary of the decision contained in a press briefer:

“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 (leased property) was awarded to CJHDevCo.

“BCDA, as lessor, then entered into a lease agreement with CJHDevCo, 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 shall remain the owner of the leased property, while CJHDevCo shall own improvements it will introduce.

“However, at the end of the lease agreement, CJHDevCo is obligated to transfer the ownership of the improvements to BCDA.

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

“Prompted by disputes as to the parties’ respective obligations under the lease agreement, CJH DevCo filed against BCDA a complaint in arbitration with the Philippine Dispute Resolution Center, Inc. (PDRCI).

“The PDRCI arbitral tribunal found that both parties were guilty of breaches of their obligations under the agreement, thus its mutual rescission was warranted.

“The arbitral’s final award ordered mutual restitution, with the parties reverted to their original position prior to the execution of the agreement as far as practicable.

“CJHDevCo was specifically ordered to return to BCDA the leased property, together with all improvements. BCDA, in turn, must refund to CJHDevCo the rent the latter had already paid, amounting to P1,421,096,052.

“In an order, the RTC confirmed the arbitral’s final award. When the order became final and executory, the RTC issued a writ of execution. A notice to vacate was thus served upon CJHDevCo and its sub-lessees occupying the leased property.

“BCDA, on the other hand, was served a demand to pay CJHDevCo the amount of P1,421,096,052 within 30 days. BCDA opened an escrow account in the amount fixed in the Final Award.

“CJHDevCo, however, filed a very urgent omnibus motion praying that the notice to vacate be enforced only on CJHDevCo, and not to its sub-lessees.

“But before the RTC could rule on the omnibus motion, CJHDevCo filed a petition for certiorari and prohibition before the CA. The sub-lessees filed a separate petition-in-intervention, claiming that their inclusion in the RTC order and writ of execution was unfounded and violative of due process.

“The CA subsequently nullified the notice to vacate and writ of execution, finding grave abuse of discretion on the part of the RTC for enforcing the final 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, ‘until their respective rights and interests are determined upon compulsory arbitration or as may be adjudicated by the regular courts.’

“BCDA was thus prompted to file its present petition before the Court.

“CJHDevCo, meanwhile, filed before the COA a petition for enforcement and payment of a final and executory arbitral award. The COA, however, dismissed CJHDevCo’s money claim ‘without prejudice to its refiling upon the final determination by the Supreme Court of the rights and obligations of the contracting parties.’

“The SC ruled that the certiorari petition filed by CJHDevCo before the CA was premature. Without waiting for the RTC to rule on the pending omnibus motion, CJHDevCo filed a certiorari petition before the CA.

“The SC thus found that the CA hastily acted on CJHDevCo’s certiorari petition. 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.

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

“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.

“In the present case, without a 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.

“On the contrary, the CA failed to abide by the rules of arbitration when it rendered its challenged rulings.

“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.

“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 also stressed that nowhere in the final award did the arbitral tribunal make CJHDevCo’s obligation to vacate the leased property contingent upon BCDA’s full payment of the amount fixed in the final award.

“Thus, the SC held that CJHDevCo should return to BCDA the leased property together with improvements. In turn, BCDA should refund to CJHDevCo the rent already paid.

“Finally, the SC found that no grave abuse of discretion may be attributed to the COA when it dismissed CJH DevCo’s money claim pending resolution of the BCDA petition before the Court.”