The Court of Appeals has stamped its approval into the compromise agreement entered into by the National Housing Authority and property developer R-II Builders Inc. involving the controversial P6.7 billion Smokey Mountain mass housing project in Manila.
In a 25-page decision, the CA’s Special First Division through Presiding Justice Romeo F. Barza, has ordered the NHA and R-II Builders, owned by businessman Reghis M. Romero II, to comply with the compromise agreement they signed on Nov. 21, 2018 to settle the state agency’s unpaid obligation to the latter amounting to P1.12 billion.
“Withal, this Court finds that the Compromise Agreement dated November 21, 2018 is not contrary to law, morals, good customs and public policy. Moreover, it appears to be freely executed by herein parties R-II and NHA. Thusly, no cogent reason exists for the Court to refuse to grant the prayer of the parties and hereby bestowed judicial approval of their compromise agreement,” the appellate court ruled.
Under the agreement, the R-II Builders will release NHA from any legal liabilities and obligations in connection with the project upon payment of the said amount.
The R-II Builders is also obliged under the agreement to cause the cancellation of the notice of levy on attachment issued by the trial court against NHA’s properties to answer for its unpaid obligations.
“In the case at bench, this Court finds for the validity of the herein Compromise Agreement and finds no distinct reason to deny the motion for approval thereof,” the CA said.
In its earlier comment, the Office of the Government Corporate Counsel had manifested that the NHA general manager’s authority was limited to negotiations only and that negotiations on specific additional properties should have a separate authority from the NHA board.
The OGCC assailed the six-month period from the execution of the compromise agreement within which to pay the obligation as “disadvantageous to the NHA.”
The OGCC also pointed out that the settlement of the parties must be premised on the withdrawal of all suits filed by R-II Builders against NHA and not only those in connection with the former’s civil case in the Quezon City RTC.
However, the appellate court noted that the NHA general manager, having been authorized to sign for and in behalf of NHA, “need not have specific authority for the other mentioned properties, the same being part of the reduced amount of P1.12 billion to which NHA freely gave its consent.”
“In the same breath, neither does this Court find issue as to the substance of the Compromise Agreement with regard to the settlement of all claims as asseverated by the OGCC,” it held.
Likewise, the CA also did not give weight to the petition-in-intervention filed by Home Guaranty Corporation (HGC) seeking to block R-II from claiming any amount from NHA in connection with the project.
HGC insisted that it has the right to claim all the amount owing to the Asset Pool, which was created to back the project.
But the CA said that it was HGC itself that expressed no objection as to the compromise agreement executed between the parties as expressed in its comment to the petition for approval of the agreement.
“After all, HGC is not left without any recourse in law. As the agreement is only binding upon the parties to the compromise, there is no prejudice as to any negotiations or concessions made between HGC and the latter parties separate and distinct from the said agreement,“ the CA said.
The case arose from the complaint on the specific performance and damages with application for preliminary attachment filed by R-II Builders against HNA on September 11, 2008 before the Regional Trial Court of Quezon City.
It its complaint, RII Builders contended that beginning March 1993, it entered into contracts with the NHA in connection with the SMDRP which include a Joint Venture Agreement dated March 19, 1993; Amended and Restated JVA (ARJVA) dated February 21, 1994; Amendment to the Amended and Restated Joint Venture Agreement (AARJVA) dated August 11, 1994; Supplemental Agreement (SA) dated March 20, 1998; and Amended Supplemental Agreement (ASA) dated November 2001.
The JVA was aimed at implementing a two-phase conversion of the Smokey Mountain Dumpsite into a habitable housing project inclusive of the reclamation of the area across radial road (R-10).
R-II was hired by NHA as developer for the various stages of the project, causing it to incur significant and considerable construction costs and related expenses in the performance of its tasks under the agreement.
But R-II claimed that its prior appointment as developer of the SMDRP was terminated in July 2002, when the national government decided to submit the additional works amounting to P480 million and ASA to public bidding.
Due to the unilateral termination by NHA of R-II services, the latter informed the agency of its intent to contest the said termination and locked the proposed new bidding on the remaining and future works of the project, in the event it failed to fully compensate the company for all its work accomplishments and other related costs.
It based its right to demand such compensation from the provisions of ASA.
In order to allow the national government to proceed with the new public bidding, R-II and NHA executed a memorandum of agreement on August 27, 2003 stipulating the terms and conditions of the termination of all contracts related to the project.
In the MOA, the NHA expressly acknowledged its indebtedness to R-II Builders and committed to pay and settle all its claims after proper validation, Subsequently, it was determined that the amount payable to R-II Builder was P1.8 billion which under the MOA should be paid within 12 months or until August 27, 2004, upon validation.
However, despite repeated demands, NHA failed to pay its obligations to R-II Builders prompting it to seek redress from the court.
At the time of the filing of the complaint for specific performance, NHA had only paid R-II Builders a total amount of P806 million, leaving a balance of at least P1 billion.
On December 2, 2011, the Regional Trial Court of Quezon City ruled in favor of R-II Builders and subsequently issued notices of garnishment against NHA’s bank accounts to cover for the amount.
The HGC and NHA sought reconsideration of the ruling that was denied by the court, thus, the case was elevated before the CA.