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CA stops SEC order vs CJHDevCo

Written by  Benjamin B. Pulta
Friday, 28 September 2012 00:00 [ tribune.net.ph ]

A ruling by the  Court of Appeals (CA) has stopped the Securities and Exchange Commission (SEC) from enforcing the cease and desist order (CDO) it issued against Camp John Hay Development Corp.
(CJHDevCo) which prevented CJHDevCo from allegedly “engaging in the business of selling securities by selling Limited Warranty Deeds (LWD) and Leaseback Agreements to unit buyers for hotel operations” of The Manor and Forest Lodge, formerly known as The Suites at Camp John Hay, in Baguio City.

In a three-page resolution  the CA’s Sixth Division through Associate Justice Hakim Abdulwahid issued a temporary restraining order (TRO) enjoining the SEC from implementing its June 7, 2012 CDO on ground that the John Hay developer has “a clear right to be protected against the immediate enforcement of the assailed order” and that CJH DevCo will suffer grave and irreparable damage from the outright implementation” of the cease and desist order.

“So as not to render this instant petition moot in academic, we hold that, pending determination of the propriety of the application for the issuance of writ of preliminary injunction, the grant of petitioner’s application for a temporary restraining order is warranted,” the resolution stated.

“Wherefore, a temporary restraining order is hereby issued enjoining respondents SEC chairperson and Commissioners, EPD (Enforcement and Prosecution Department), and other persons acting in their behalf from enforcing the assailed order dated June 7, 2012 ... effective for the period of 60 days, unless otherwise recalled or set aside and upon petitioner’s posting of a bond in the amount of P500,000, within five days,” the CA ordered.

Associate Justices Marlene Gonzales-Sison and Edwin  Sorongon concurred in the ruling.

The SEC earlier had issued the CDO after receiving a letter from the Bases Conversion and Development Authority (BCDA) seeking to prevent CJHDevCo from selling units under a LWD and Leaseback Agreement, arguing that this classifies as a “sale of securities.”

However, CJHDevCo argued that the LWD is the accepted and approved legal document, which describes the ownership interest of the unit buyers during the lease period. On the other hand, the offer of Leaseback Agreements is only an “option” for unit buyers and, therefore, does not classify the transaction as a sale of securities but only as a simple lease agreement. Both legal documents described have been in place since the very beginning.

CJHDevCo also questioned the manner in which the alleged investigation by the SEC was conducted, arguing that they were deprived of “due process of law.”
CJH DevCo executive vice president Alfredo Yñiguez stressed the importance of abiding by the rule of law. “All our contracts and actions are based on following the rule of law and we expect that ‘due process’ also be followed at all times,” Yñiguez said.

With the CA enjoining the CDO, CJHDevCo can continue offering LWD and Leaseback Agreements to unit buyers for The Manor and Forest Lodge in Camp John Hay.

The appellate court also directed the SEC Chairman Teresita Herbosa to file their comment to the petition in 10 days, and “to show cause why the application of writ of preliminary injunction should not be granted.”

After which, the CJHDevCo is ordered to file their reply to the comment of the SEC on their petitioner.
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