CA stops SEC order vs sale of John Hay units by firm

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 it from selling limited warranty deeds and signing leaseback agreements to buyers of units at The Manor and Forest Lodge in Baguio City.

The court’s sixth division, through Justice Hakim Abdulwahid, issued on Sept. 25 a temporary restraining order (TRO) enjoining the SEC from implementing its June 7, 2012 CDO on the ground that the John Hay developer had “a clear right to be protected against the immediate enforcement of the assailed order” and that it would suffer grave and irreparable damage from the implementation of the order.

The SEC issued the CDO after receiving a letter from the Bases Conversion and Development Authority (BCDA) which sought to prevent CJHDevCo from selling units under a limited warranty deed (LWD) and leaseback agreement, arguing that this is classified as a “sale of securities.”

However, CJHDevCo argued that the LWD was the accepted and approved legal document, which described the ownership interest of the unit buyers during the lease period. The company said that the offer of leaseback agreements was only an “option” for unit buyers and therefore did not classify the transaction as a sale of securities but only as a simple lease agreement.

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

CJHDevCo also questioned the manner in which the alleged investigation by the SEC was conducted, saying it was deprived of due process.

“All our contracts and actions are based on the rule of law and we expect due process to be followed at all times,” said Alfredo Yñiguez, CJHDevCo executive vice president, in a statement.

With the CA order, CJHDevCo can continue offering units for sale at The Manor and Forest Lodge in Camp John Hay.

The appellate court also directed the SEC chair, Teresita Herbosa, to comment in 10 days.

CJHDevCo and the BCDA are waging war on each other in courts with the BCDA filing charges of fraud against the John Hay developer and the company accusing the BCDA of hurling one obstacle after another on the path of development in John Hay to make sure the company fails.

CJHDevCo has obtained a status quo order from a Baguio court recently after paying at least P600 million in bonds to stop the BCDA from enforcing its eviction order that CJHDevco officials said was meant to pave the way for the  BCDA to turn over John Hay to another company, an accusation that the BCDA denied.