Philippine economy

SC affirms CA ruling on Smokey Mountain project

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SC affirms CA ruling on Smokey Mountain project

LeAnne Jazul

The case involves the 1993 agreement between private firm R-II Builders and government housing agencies to develop the Smokey Mountain landfill in Tondo, Manila

MANILA, Philippines – The Supreme Court (SC) dismissed petitions filed by national housing agencies to reverse a Court of Appeals (CA) ruling that favored developer R-II Builders on the legal battle over the botched Smokey Mountain Development and Reclamation Project (SMDRP).

It involves the 1993 agreement between private firm R-II Builders and the government through the National Housing Authority (NHA) and the Home Guaranty Corporation (HGC) to develop the landfill in Tondo, Manila into a housing site.

R-II accused the state parties of failing to comply with the agreement, prompting it to file a case with the Quezon City Regional Trial Court (QC RTC). The local court dismissed the petition for settlement so R-II elevated it to the CA. The appellate court reversed the QC RTC ruling in 2012.

The latest SC ruling affirmed the CA decision, which in effect, green lights the settlement of the P4-billion civil suit through the QC RTC. (READ: Compromise over failed Smokey Mountain project ‘unacceptable’

“After judicious consideration of the arguments raised by petitioners [HGC and NHA], the Court resolves to deny the instant petitions for review on certiorari for lack of merit,” said the SC’s 1st Division.

“[The HGC and NHA] failed to sufficiently show that the Court of Appeals committed reversible error in issuing the assailed decision and resolution,” it added.

The SC also junked the HGC and NHA’s argument that the case filed by R-II Builders was similar to the one it had dismissed back in 2011.

“We do not find any merit either in petitioner’s assertions that the instant case must be deemed barred by res judicata and the ‘law of the case’ principle in light of this Court’s earlier decision in Home Guaranty Corporation,” the SC ruled.

Asset pool

In R-II’s original petition, the company owned by businessman Reghis Romero II sought to “recover the residual value of the asset pool after its liquidation and the annulment of the instruments in question.”

R-II and the government had entered into another agreement in 1994 that formed an asset pool to fund the project. The pool consists of: 

  • 21.2-hectare Smokey Mountain site in Tondo, Manila 
  • the NHA’s 79-hectare Manila Bay foreshore property 
  • Smokey Mountain Project Participation Certificates (SMPPCs) to be issued or their monetary proceeds 
  • disposable assets of R-II Builders 
  • P300 million worth of values inputted for the pre-implementation activities 
  • 2,992 housing facilities R-II Builders must construct 
  • all documents and records of the SMDRP 

Both parties also entered into a contract guaranty where the HGC redeemed the regular SMPPCs upon maturity and was required to pay the simple interest of 8.5% annually.

But when the regular SMPPCs reached maturity in 2002 with the aggregate face value of P2.512 billion, there were no sufficient liquid assets to allow the redemption.

Planters Development Bank, then the trustee, executed a deed of assignment and conveyance (DAC) transferring the possession of the whole pool to the HGC. 

R-II argued in its complaint that the HGC’s failure to redeem the regular SMPPCs despite the circumstances favoring them affected their stake in the residual values of the asset pool. –

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