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Subleases with Sobrepena-led CJHDevco have been terminated, BCDA says

Posted on February 13, 2015 08:30:00 PM [ BusinessWorld Online ]

LEASE AGREEMENTS that businesses have entered into with a developer of a former US air base in Baguio City “have been terminated,” said the head of a government-led corporation tasked to develop facilities left behind by the US military.

“Whatever agreement they (investors) entered into with CJH Development Corp. (CJHDevco) no longer applies because their subleases have been terminated with the principal lease,” Mr. Arnel Paciano D. Casanova, the President and Chief Executive Officer of the Bases Conversion and Development Authority (BCDA) told a media briefing on Friday in Taguig.

He made these remarks a day after the state-led corporation issued a statement saying that the Sobrepena group -- which secured the contract to develop Camp John Hay in Baguio City -- should vacate the premises within a month. BCDA also told all tenants and stakeholders to coordinate with the government for the evaluation of their contracts.

“Under the rules, in one month they should turn over the property. Actually they should start now -- they should to that willingly and immediately,” Mr. Casanova said.

In a Feb. 11 decision, the arbitration committee in Baguio City ordered Sobrepena-led led CJH Development Corp. to vacate Camp John Hay after failing to pay the government corporation lease rentals and arrears, which reached over P3.4 billion.

Of this amount, P850 million should have gone to the local governments of Baguio, La Trinidad, Itogon, Sablan, Tuba and Tublay, BCDA said in a press statement yesterday.

At present, Camp John Hay houses are around 85 residential structures, 384 hotel rooms owned by private individuals, and a total of 118 business enterprises, restaurants, shops and business process outsourcing offices, John Hay Management Corporation (JHMC) President and Chief Executive Officer Jamie Eloise M. Agbayani said in the same briefing.

Mr. Casanova continued: “CJHDevco has been ordered to vacate the property and they should do so immediately. We want to ensure security in Camp John Hay and prevent sabotage, pilferage and the destruction of property.”

He noted that Camp John Hay must be turned over “in good and tenantable condition.”

The arbitration committee is chaired by Mario E. Valderrama, while Teodoro Kalaw IV and Rogelio C. Nicandro served as co-arbitrators.

BCDA, CJHDevCo both in breach of lease, arbitration says

In rescinding the lease agreement and two subsequent memoranda of agreements, the Philippine Dispute Resolution Center, Inc., ordered BCDA to pay back the P1.42-billion rent CJHDevCo paid since 1998.

In a 274-page ruling, the arbitration panel also cleared CJHDevCo of its liabilities for any unpaid back rent “consistent with the ruling that rescission and mutual restitution is proper in this case.”

Having chosen to rescind the agreement, the panel denied the plea of both parties for damages because “both parties are mutually in breach of the lease agreement.”

The tribunal found that BCDA breached its undertaking to set up a One-Stop Action Center, which would have expedited the release of permits. It also sided with CJHDevCo’s claims that the agency failed to deliver on promises of investor-friendly incentives and the advantages of a special economic zone, such as preferential financial incentives and cutting down on bureaucratic red tape.

Meanwhile, it also found that CJHDevCo failed to pay its rent on time. It also said that the company made “material misrepresentations as to its financial capacity to pay rent” and failed to set up an escrow account.

“Having found that both parties were guilty of breaches on matters that are causal in nature, in addition to our finding that there was mutual mistake on the part of the parties, then we find that mutual rescission is warranted. And, as both parties are at fault, then their respective faults cancel each other such that both parties should be considered in good faith,” the arbitration panel ruling said. -- Vince Alvic A. F. Nonato and Daphne J. Magturo   

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