Republic of the Philippines
COURT OF APPEALS
Manila
Special Eleventh (11th) Division
BASES
CONVERSION
AND
DEVELOPMENT
AUTHORITY,
CA-G.R. SP No. 126173
Petitioner,
Members:
DICDICAN, I. P., Chairperson,
REYES-CARPIO, A. and
PAREDES, V. I. A., JJ.
*
-versus-
Promulgated:
CJH
DEVELOPMENT
CORPORATION,
September 30, 2014
Respondent.
x----------------------------------------------------------------------x
decision
PAREDES, J.:
The Case
THIS IS A PETITION FOR REVIEW 1 filed by petitioner Bases
Conversion and Development Authority (BCDA) which seeks to annul
and set aside the Order2 dated April 27, 2012, granting the
application of respondent CJH Development Corporation (CJH
DevCo), petitioner below, for the issuance of a writ of preliminary
injunction in Civil Case No. 7561-R for Referral to Arbitration and
Injunction with prayer for Preliminary Injunction and TRO, and the
Order3 dated July 13, 2012, which, inter alia, denied BCDA's motion
for partial reconsideration and affirmed the grant of the writ of
*
Acting Senior Member vice Justice Michael P. Elbinias, per Office Order No. 396-14-ABR, September
18, 2014.
1
Rollo, Vol. I, pp. 3-87.
2
Rollo, pp. 88-93.
3
Rollo, pp. 94-102.
CA-G.R. SP No. 126173
DECISION
Page 2 of 14
preliminary injunction, both issued by the Regional Trial Court,
Branch 6, Baguio City (the “court a quo”).
The ANTECEDENts
On April 27, 2012, Judge Cleto R. Villacorta III (Judge
Villacorta) of the court a quo issued an Order disposing4 of the
pending incident regarding the application of CJH DevCo for a writ of
preliminary injunction, as follows:
WHEREFORE, petitioner [now, respondent]
CJH Development Corporation's application for a writ
of preliminary injunction is granted in part. Upon the
posting by petitioner and approval by this Court of a
bond in the amount of P736,328,465.50, executed to
respondent [now, petitioner] Bases Conversion
Development Authority to the effect that petitioner will
pay this amount to BCDA for damages it may sustain
by reason of this injunction if this Court should finally
decide that petitioner is not entitled to it, issue the writ
of preliminary injunction prayed for.
For the duration of this case before this Court
until a decision is reached, respondent BCDA, its
subsidiaries, officials, employees, agents and other
third-parties are restrained from committing any act
tending to wrest control and/or possession of the
Leased Property, i.e. 247-hectare parcel of land in the
John Hay Special Economic Zone, or portions thereof,
from petitioner, including any forceful occupation
and/or ejectment from the leased premises and/or
award of the rights in the leased Property to a new
entity.
SO ORDERED. (Emphasis and italics in the original)
The parties filed their respective motions for reconsideration of
the court a quo's disposition, which were resolved 5 in the July 13,
4
5
Rollo, supra note 2, pp. 92-3.
Rollo, supra note 3, p. 102.
CA-G.R. SP No. 126173
DECISION
Page 3 of 14
2012 Order of Judge Cecilia Corazon Dulay-Archog (Judge Archog),
thus:
WHEREFORE, premises considered:
a) Petitioner's (CJH DevCo) “Urgent Motion to
Resolve the Petition to Compel Arbitration” is granted.
BCDA is directed to submit itself to the pending
arbitration proceeding docketed as PDRCI Case No.
60-2012.
b) Petitioner's (CJH DevCo) “Motion for Partial
Reconsideration of the 27 April 2012 Order” is granted
in part only with respect to dispensing with the pre-trial
and trial in this case. As to the injunctive relief per
Order dated April 27, 2012 mandating an injunction
bond in the amount of P736,328,465.50, the same is
affirmed. Petitioner is given thirty (30) days from
receipt of this Order to post the injunction bond for the
issuance of a Writ of Preliminary Injunction; and
c) Respondent's (BCDA) “Motion for Partial
Reconsideration dated May 23, 2012 is denied for lack
of merit.
SO ORDERED.
The petition for issuance of an interim relief filed before the
court a quo was resorted to by CJH DevCo pending arbitration of the
parties before the Philippine Dispute Resolution Center, Inc. (PDRCI).
BCDA narrates herein that it has offered 6 for bid to lease a
certain portion of the 695-hectare John Hay Air Station in the John
Hay Special Economic Zone (JHSEZ) consisting of 246.9967
hectares including all improvements thereon (the leased property).
On October 19, 1996, it entered into a Lease Agreement with FilEstate Management, Inc., Pentacapital Investment Corporation, and
CJH DevCo for the use, management and operation of the leased
property.
6
Petition for Review, rollo, p. 8.
CA-G.R. SP No. 126173
DECISION
Page 4 of 14
BCDA alleges that as early as the second year of their contract,
CJH DevCo already manifested its inability to sustain its financial
obligations such that it asked BCDA to defer payment of the annual
rentals for 1998 and 1999; a Memorandum of Agreement (MOA) for
the same was executed by the parties. Thereafter, a schedule for
installment payment of the rentals for 1999 and 2000, was made.
However, CJH DevCo still delayed the payment of its lease rentals
claiming force majeure. BCDA refused to acknowledge the reason for
the delay; nonetheless, it entered into a MOA dated July 14, 2000.
This, too, was violated by CJH DevCo. Before BCDA could serve a
notice of termination, CJH DevCo submitted an improved offer which
the BCDA found acceptable. This agreement was contained in the
MOA dated July 18, 2003.
CJH DevCo failed to pay all its obligations which, as of June 30,
2008, amounted to P2,686,481,646.00. Several events occurred
which led to the execution by the parties of a Restructuring
Memorandum of Agreement (RMOA)7 on July 1, 2008 which provided
for the following restructured payment scheme for CJH DevCo:
(a) P100,000,000.00 – cash upon signing of the RMOA
(b) P180,341,118.00 – dacion of specific properties
(c) P2,406,140,525.00 – fifteen years.
The parties also executed a Security Agreement 8 on July 1,
2008 to make the RMOA sustainable and viable. BCDA claims that,
despite the execution of the two agreements, CJH DevCo's nonpayment of rentals remained an issue between the parties. On June
10, 2009, Robert John Sobrepeña of CJH DevCo, wrote BCDA a
letter requesting the deferment of its financial obligations. The same
was denied by the BCDA because it would mean restructuring yet
again CJH DevCo's financial obligation under the RMOA. CJH DevCo
failed to pay its financial obligations, such that, based on the
December 6, 2011 demand letter of BCDA, CJH DevCo's current
rental obligation amounted to P581,504,549.00. On January 31,
2012, CJH DevCo's total obligations amounted to P2,945,313,862.00.
BCDA emphasizes that, aside from its default in the payment of
7
8
Rollo, pp. 334-357.
Rollo, pp. 512-5.
CA-G.R. SP No. 126173
DECISION
Page 5 of 14
lease rentals, CJH DevCo committed other breaches of its contract:
(a) non-establishment of the escrow account under the Security
Agreement; (b) fraudulent dacion to BCDA of property previously sold
to another; (c) operation in violation of the Building Code and
squatting in the JHEZ; (e) unsanitary activities within Camp John
Hay; and (f) unjustified interruption of the water supply within the
JHSEZ.9
Meanwhile, on January 9, 2012, CJH DevCo moved to rescind
the RMOA alleging fundamental and material breach by BCDA.
Thereafter, CJH DevCo served a written notice/demand to arbitrate.
On the same day, CJH DevCo filed a complaint against BCDA before
the Philippine Dispute Resolution Center, Inc. (PDRCI) for
confirmation of the rescission of the RMOA and the amendment of
certain provisions of the Lease Agreement, or in the alternative, the
rescission of the Lease Agreement.
On January 24, 2012, CJH DevCo filed with the Baguio City
Regional Trial Court an Urgent Verified Petition10 for the Issuance of
Interim Relief by way of a Writ of Preliminary Injunction and to
Compel to Arbitrate. The case was raffled to RTC-Branch 7 and
docketed as Civil Case No. 7561-R. Meanwhile, the Executive Judge
of RTC Baguio City issued11 a 72-hour TRO against BCDA, which
was extended12 by RTC-Branch 7 for another 17 days.
The parties were scheduled to be heard on the matter of the
application for preliminary injunction of CJH DevCo. At the hearing on
February 27, 2012, the parties agreed to maintain the status quo to
allow the judge to resolve the pending incident, and the parties were
directed to submit their respective memoranda. On March 27, 2012,
CJH DevCo filed a reply-memorandum to which BCDA filed its
rejoinder.
At the hearing set on April 18, 2012, the presiding judge of
RTC-Branch 7, Judge Tabora, inhibited herself; and the case was re9
10
11
12
See Petition for Review, rollo, p. 20.
Rollo, pp. 104-35.
Rollo, p. 559.
Rollo, p. 560.
CA-G.R. SP No. 126173
DECISION
Page 6 of 14
raffled on April 26, 2012 to RTC-Branch 6, the court a quo, presided
over by Judge Villacorta. On April 27, 2012, Judge Villacorta issued
the assailed Order granting CJH DevCo's application for a writ of
preliminary injunction.
On April 30, 2012, the court a quo issued a Notice of pre-trial
scheduled on June 1, 2012. CJH DevCo filed an urgent omnibus
motion to resolve the petition to compel arbitration and dispense with
pre-trial and for partial reconsideration of the April 27, 2012 Order.
The motion was opposed by BCDA. Instead, BCDA filed its own
motion for partial reconsideration alleging that CJH DevCo failed to
show the presence of the requisites for the issuance of a preliminary
injunction. CJH DevCo opposed BCDA's motion.
On July 13, 2012, the court a quo issued the second assailed
Order denying BCDA's motion for partial reconsideration, directing
BCDA to arbitrate, and affirming the issuance of the writ of
preliminary injunction.
Hence, BCDA's petition for review with the grounds raised, as
follows:
1.
INJUNCTIVE RELIEF CANNOT BE AVAILED
OF BY CJH DEVCO TO OBVIATE ANY
CONTRACTUAL RIGHT BELONGING TO BCDA.
THIS IS ESPECIALLY WHERE BCDA, AS A
GOVERNMENT INSTRUMENTALITY VESTED WITH
CORPORATE POWERS, IS ACTING AND WILL ACT
IN ACCORDANCE WITH THE RULE OF LAW.
2.
CJH DEVCO COMMITTED INCURABLE
MATERIAL BREACHES OF ITS CONTRACT WITH
BCDA AND THEREFORE HAS NO CLEAR OR
POSITIVE RIGHT TO REMAIN IN POSSESSION OF
THE LEASED PROPERTY.
3.
THERE IS NO MATERIAL OR SUBSTANTIAL
INVASION OF CJH DEVCO'S RIGHTS TO BE
ENJOINED.
4.
THERE IS NO URGENT NECESSITY FOR THE
WRIT. CJH DEVCO WILL NOT SUFFER ANY GRAVE
CA-G.R. SP No. 126173
DECISION
Page 7 of 14
OR IRREPARABLE INJURY IF INJUNCTION IS NOT
GRANTED.
5.
IT IS THE GOVERNMENT THAT IS
SUFFERING GRAVE AND IRREPARABLE INJURY
FROM CJH DEVCO'S CONTINUING POSSESSION OF
THE LEASE PROPERTY WITHOUT PAYMENT OF
RENT.
The Issue
At the heart of this petition is the issue of whether or not the writ
of preliminary injunction issued by Judge Villacorta and affirmed by
Judge Archog, is with basis.
The Court's Ruling
The petition is meritorious.
CJH DevCo filed the petition for preliminary injunction as a
main case pursuant to Section 14 of RA 876 or the “Arbitration Law”
which, provides as follows:
SECTION 14. Subpoena and Subpoena Duces Tecum.
— Arbitrators shall have the power to require any
person to attend a hearing as a witness. They shall have
the power to subpoena witnesses and documents when
the relevancy of the testimony and the materiality
thereof has been demonstrated to the arbitrators.
Arbitrators may also require the retirement of any
witness during the testimony of any other witness. All
of the arbitrators appointed in any controversy must
attend all the hearings in that matter and hear all the
allegations and proofs of the parties; but an award by
the majority of them is valid unless the concurrence of
all of them is expressly required in the submission or
contract to arbitrate. The arbitrator or arbitrators shall
have the power at any time, before rendering the award,
without prejudice to the rights of any party to petition
the court to take measures to safeguard and/or conserve
CA-G.R. SP No. 126173
DECISION
Page 8 of 14
any matter which is the subject of the dispute in
arbitration (Underscoring supplied).
Petitioner questions13 the Orders of the court a quo on the
ground that CJH DevCo failed to meet and prove the requirements for
the grant of preliminary injunction, i.e. (1) applicant must have a clear
and unmistakable right to be protected that is a right in esse; (2) there
is a material and substantial invasion of such right; (3) there is an
urgent need for the writ to prevent irreparable injury to the applicant;
and (4) there is no other ordinary, speedy, and adequate remedy
exists to prevent the infliction of irreparable injury.
CJH DevCo resorted to the court for the grant of an interim
measure in arbitration, the requirements of which are elaborated in
Section 28 of Republic Act 9285 or the “Alternative Dispute
Resolution Act of 2004”, which provides, that:
SECTION 28. Grant of Interim Measure of Protection.
-- (a) It is not incompatible with an arbitration
agreement for a party to request, before constitution of
the tribunal, from a Court an interim measure of
protection and for the Court to grant such measure.
After constitution of the arbitral tribunal and during
arbitral proceedings, a request for an interim measure of
protection, or modification thereof, may be made with
the arbitral tribunal or to the extent that the arbitral
tribunal has no power to act or is unable to act
effectively, the request may be made with the Court.
The arbitral tribunal is deemed constituted when the
sole arbitrator or the third arbitrator, who has been
nominated, has accepted the nomination and written
communication of said nomination and acceptance has
been received by the party making the request.
(b) The following rules on interim or provisional
relief shall be observed:
(1)
Any party may request that provisional relief be
granted against the adverse party.
(2)
Such relief may be granted:
13
Petition for review citing St. James College of Parañaque et al. vs. Equitable PCI Bank, G.R. No.
179441, August 9, 2010.
CA-G.R. SP No. 126173
DECISION
Page 9 of 14
(i)
(ii)
to prevent irreparable loss or injury;
to provide security for the performance of
any obligation;
(iii) to produce or preserve any evidence; or
(iv) to compel any other appropriate act or
omission.
(3)
The order granting provisional relief may be
conditioned upon the provision of security or any act or
omission specified in the order.
(4)
Interim or provisional relief is requested by
written application transmitted by reasonable means to
the Court or arbitral tribunal as the case may be and the
party against whom the relief is sought, describing in
appropriate detail the precise relief, the party against
whom the relief is requested, the grounds for the relief,
and the evidence supporting the request.
(5)
The order shall be binding upon the parties.
(6)
Either party may apply with the Court for
assistance in implementing or enforcing an interim
measure ordered by an arbitral tribunal.
(7)
A party who does not comply with the order
shall be liable for all damages resulting from
noncompliance, including all expenses, and reasonable
attorney's fees, paid in obtaining the order's judicial
enforcement.
In granting the preliminary injunction, Judge Villacorta reasoned
that CJH DevCo will suffer grave and irreparable injury should BCDA
be allowed to take over the leased premises before the resolution of
their dispute in arbitration. The court a quo stated that the issues
arose due to BCDA's act of not giving CJH DevCo a chance to
remedy its alleged breaches of the RMOA and the notice of
termination required in their agreement. Based on this finding, the
court a quo ruled that CJH DevCo has a clear right to invoke judicial
action prior to its being ejected in the leased premises, pertinent
discussion on the matter reads, thus:
I believe that the injury to be sustained by
petitioner unless BCDA is restrained would be both
grave and irreparable. The amount of damages cited in
CA-G.R. SP No. 126173
DECISION
Page 10 of 14
its request for arbitration is for the rescission (or
resolution) of the lease contract after arbitration
proceedings. Here, there are yet preliminary issues to
be settled, which would become moot if BCDA were
to take over the Leased Property at once. For instance,
what happens to the opportunity to correct breaches,
before a unilateral take-over can proceed? What price
can one tag if these requisites were violated, if such
violation were to occur and be proved? What about the
referral to arbitration? When a party contests the
existence of an alleged breach, is that not a dispute or a
controversy that should be brought to arbitration for
resolution and relief? If the take-over were to happen
now, before answers to these questions are reached,
what standard of compensation can this Court use to
determine with reasonable accuracy the amount to be
given? Will it only be petitioner's losses? Should it
include the employees' as well? What about petitioner's
consuming public? Balancing the interests involved, it
is best to enjoin any act that would give rise, or even so
tend, to these uncertainties.14
Petitioner asserts that CJH DevCo has not established a clear
right and an irreparable injury for the grant of preliminary injunction.
Petitioner asserts that under the agreement, it has the right to enforce
the same considering that CJH DevCo has been in breach of their
agreement and since BCDA is a government entity, it is the public
that suffers for the failure of CJH Devco to fulfill its obligations,
specifically, pay rentals to BCDA. We agree with petitioner.
In the case of Heirs of Melencio Yu vs. Honorable Court of
Appeals, the matter of the issuance of a preliminary injunction was
again explained, as follows:15
A preliminary injunction is an order granted at
any stage of an action or proceeding prior to the
judgment or final order, requiring a party or a court,
agency or a person to refrain from a particular act or
14
15
Rollo, p. 91.
G.R. No. 182371, September 4, 2013.
CA-G.R. SP No. 126173
DECISION
Page 11 of 14
acts. It may also require the performance of a particular
act or acts, in which case it shall be known as a
preliminary mandatory injunction. To justify the
issuance of a writ of preliminary mandatory injunction,
it must be shown that: (1) the complainant has a clear
legal right; (2) such right has been violated and the
invasion by the other party is material and substantial;
and (3) there is an urgent and permanent necessity for
the writ to prevent serious damage. An injunction will
not issue to protect a right not in esse, or a right which
is merely contingent and may never arise since, to be
protected by injunction, the alleged right must be
clearly founded on or granted by law or is enforceable
as a matter of law. As this Court opined in Dela Rosa
v. Heirs of Juan Valdez:
A preliminary mandatory injunction is more
cautiously regarded than a mere prohibitive
injunction since, more than its function of
preserving the status quo between the parties, it also
commands the performance of an act. Accordingly,
the issuance of a writ of preliminary mandatory
injunction is justified only in a clear case, free from
doubt or dispute. When the complainant's right is
doubtful or disputed, he does not have a clear legal
right and, therefore, the issuance of a writ of
preliminary mandatory injunction is improper.
While it is not required that the right claimed by
applicant, as basis for seeking injunctive relief, be
conclusively established, it is still necessary to
show, at least tentatively, that the right exists and is
not vitiated by any substantial challenge or
contradiction.
Thus, a preliminary mandatory injunction
should only be granted "in cases of extreme urgency;
where the right is very clear; where considerations of
relative inconvenience bear strongly in complainant's
favor; where there is a willful and unlawful invasion of
plaintiff's right against his protest and remonstrance,
the injury being a continuing one; and where the effect
of the mandatory injunction is rather to re-establish and
CA-G.R. SP No. 126173
DECISION
Page 12 of 14
maintain a pre-existing continuing relation between the
parties, recently and arbitrarily interrupted by the
defendant, than to establish a new relation.
In the case at bar, the court a quo, in granting the preliminary
injunction, held that CJH DevCo's right to the issuance of the
injunction stemmed from the questions of whether BCDA deprived
CJH DevCo of its right to receive a notice of termination and a
chance to remedy its alleged breaches of contract. To the mind of
this Court, the questions being pointed out by the court a quo do not
establish the willful and unlawful invasion of CJH DevCo's right which
is to be remedied by a writ of preliminary injunction. BCDA asserts
that it acted pursuant to their agreement and this renders naught CJH
DevCo's assertion of a violation of its right. CJH DevCo does not
have a right in esse to remedy its breaches of contract as: (1) it is
precisely the issue to be resolved in arbitration; and (2) a contract is
basically consensual, and there must be a meeting of the minds or an
agreement from the parties thereto. Hence, its “right” is, truly, merely
a proposal subject to an agreement from BCDA.
Secondly, the court a quo's ruling that CJH DevCo will suffer
grave, irreparable injury because as it is, the damages that it will
suffer can only be determined after the issues are resolved in
arbitration, does not fall under the requirement of grave and
irreparable injury contemplated for the issuance of a preliminary
injunction. The lack of clarity of CJH Devco's allegations that it will
suffer grave and irreparable injury is apparent because the court a
quo has to pose questions as to what damage CJH DevCo will suffer
in the event that an injunction is not issued. Stated otherwise, CJH
DevCo has not positively shown that it will suffer grave and
irreparable injury so much so that the court a quo had to speculate on
the damages CJH DevCo will suffer if the writ is not issued.
Finally, the records of the case reveal that the factual
allegations of the parties already refer to the merits of the controversy
between them, which is the alleged breach of their RMOA. These
issues are best threshed out in the appropriate arbitration
proceedings. Verily, the trial court must not delve into the primary
CA-G.R. SP No. 126173
DECISION
Page 13 of 14
issues raised in the main action in the hearing for the issuance of an
injunctive writ. The grant of an injunctive writ, being an ancillary
remedy, which could result in a premature resolution of the case - or
will grant the principal objectives of the parties - before the merits can
be passed upon, is proscribed, and the prayer for the relief will be
properly denied16.
It bears emphasis that the parties in this case have been
directed to submit their controversy to arbitration, with due stress on
the policy of the Supreme Court to encourage arbitration as an
alternative method of dispute resolution for, as decided in Home
Bankers Savings and Trust Company v. Court of Appeals and Far
East Bank & Trust Co., Inc.17, that:
Aside from unclogging judicial dockets, it also
hastens solutions especially of commercial disputes.
The Court looks with favor upon such amicable
arrangement and will only interfere with great
reluctance to anticipate or nullify the action of the
arbitrator.
WHEREFORE, premises considered, the Petition for Review is
GRANTED. The Order dated April 27, 2012, is REVERSED and SET
ASIDE, while the Order dated July 13, 2012, both of the Regional
Trial Court, Branch 6, Baguio City in Civil Case No. 7561-R, is
AFFIRMED with modification that the Writ of Preliminary Injunction
is declared void and, therefore, LIFTED.
SO ORDERED.
VICTORIA ISABEL A. PAREDES
Associate Justice
16
Isabel Jael Marquez, Etal. vs. The Presiding Judge, RTC Br. 58, Lucena City, Et. al., G.R. No. 141849,
February 13, 2007.
17
G.R. No. 115412, November 19, 1999.
CA-G.R. SP No. 126173
DECISION
Page 14 of 14
WE CONCUR:
ISAIAS P. DICDICAN
AGNES REYES-CARPIO
Associate Justice
Associate Justice
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby
certified that the conclusions in the above decision were reached in
consultation before the case was assigned to the writer of the opinion of
the Court.
ISAIAS P. DICDICAN
Associate Justice
Chairperson, Special Eleventh Division