Regional Trial Court Branch 146 Order dated July 08, 2011 Dismissing HCPTI’s application for TRO (Civil Case No. 11-623)

The Regional Trial Court Branch 146, Makati City in its decision dated July 8 2011 denied, for lack of merit, Harbour Centre Port Terminal, Incorporated’s (HCPTI) application for the issuance of a temporary restraining order which would have prevented Home Guaranty Corporation (HGC) from pursuing legitimate claims on the government’s profit share from its HCPTI stocks. In essence, the court’s decision upheld HGC’s right to demand full accounting of all revenues collected by Harbour Centre Port Terminal, Inc. (HCPTI) and the remittance of the 5% government share of revenues.

Earlier this year, the Supreme Court, in its ruling dated March 09, 2011 (GR no 192649, HGC vs. RTC Br. 22, R-II Builders Inc., et al) nullified the lower courts’ decision enjoining HGC from selling properties in the so-called Smokey Mountain Asset Pool (SMAP) even before obligations to creditors have been paid. On June 22, 2011, the SC denied with finality R-II Builders’ motion for reconsideration of its March 9 ruling favoring HGC.

In line with Vice-President and HUDCC Chair Jejomar Binay’s larger goal of revitalizing key shelter agencies, HGC’s recent legal victories attest to its resolve of establishing ownership over its common and preferred stocks and acquired assets and recovering its exposure through proper and judicious disposition of the same.

HGC’s possession of the SMAP and HCPTI stocks was a result of a failed completion of a joint venture agreement between the National Housing Authority (NHA) and R-II Builders Inc. to convert the Smokey Mountain dumpsite into a habitable housing project inclusive of the reclamation of the areas across Radial Road 10 (R-10).

Under the provisions of the 1993 joint venture agreement, termed the Smokey Mountain Development and Reclamation Project (SMRDP), R-II Builders was supposed to finance all aspects of development—including the construction of 2,992 temporary housing and 3,520 units of medium-rise housing and the development of industrial/commercial site within the Smokey Mountain area.

Failure of R-II Builders to finance the SMRDP led to temporary suspension of program implementation pending adoption of a new funding scheme. In 1994, the securitization concept of raising fund for the SMRDP was approved, leading to the formulation of the Smokey Mountain Asset Pool Formation Trust Agreement (SMAPFTA) and the involvement of HGC. The needed project financing was raised through issuance of bonds called Smokey Mountain Project Participation Certificates (SMPPC) backed up by the Smokey Mountain Asset Pool (SMAP) consisting of the 21.2-hectare Smokey Mountain site in Tondo, Manila; the 79-hectare Manila Bay foreshore property to be reclaimed; the SMPPCs issued or their money proceeds; disposable assets due to R-II Builders or its proceeds or both; the resulting values inputted by R-II Builders for pre-implementation activities amounting to P300 million; the 2,992 temporary housing facilities to be constructed by R-II Builders and all pertinent documents and records of the project.

Supreme Court decision dated June 22, 2011 denying with finality the Motion for Reconsideration filed by R-II Builders (GR no 192649, HGC vs. RTC Br, 22, R-II Builders Inc., et al)

In accordance with its mandate of assisting private developers to undertake socialized, low and medium- cost mass housing projects by encouraging private funds to finance such housing projects, HGC took on the role of guarantying the payment of interest and capital of regular SMPPCs. A total of 5,216 SMMPCs had been issued with a par value of P1 million each.

By October 2002, all the regular SMPPCs issued, having matured and unredeemed, amounted to an aggregate face value of P2.513 billion. Planters’ Development Bank (PDB), in its capacity as SMAPFTA trustee, called on HGC’s guaranty—there being a lack of liquid assets to effect redemption of the regular SMPPCs. As provisioned in the agreement, a deed of assignment and conveyance (DAC) of the entire asset pool was executed in favor of HGC.

On September 1, 2005, R-II Builders filed a complaint against HGC and NHA. Insisting that PDB exceeded its authority by executing the DAC prior to HGC’s redemption and payment of the guaranteed SMPPCs, R-II Builders moved for the rescinding of the DAC. Further, according to R-II Builders, the HGC’s failure to redeem the outstanding regular SMPPCs despite obtaining possession of the Asset Pool ballooned the interests and prejudiced R-II Builders’ stake on the residual values of the asset pool. While the estimated value of the asset pool amounted to P5.91 billion as of June 30, 2005, its total liabilities was estimated at P2.79 billion.

The civil suit was filed before Branch 24 of the RTC in Manila, which was designated as a Special Commercial Court. Upon Branch 24’s declaration of being “without authority to hear the case”-- the complaint being an ordinary civil action and not an intra-corporate controversy—the complaint was transferred to Branch 22 of the RTC in Manila. In its order dated March 3, 2009, Branch 22 denied HGC’s motion to dismiss the suit and granted R-II’s motion to admit the amended complaint. HGC’s motion for reconsideration was denied on September 29, 2009. The Court of Appeals upheld the RTC’s jurisdiction to settle the dispute between R-II Builders and HGC.

On March 9, 2011, the Supreme Court (SC) nullified the ruling of both the RTC and the CA and ordered the dismissal of the complaint filed by R-II Builders seeking to enjoin the Home Guaranty Corp. from selling properties in the SMAP.

On March 25, 2009, HGC filed with the RTC QC a Petition for Mandamus to compel HCPTI to recognize the shares conveyed to HGC amounting to 1.4 billion as provisioned in the DAC executed by PDB as SMAPFTA trustee. HPTCI’s motion to dismiss was denied. Resolution of a subsequent motion for reconsideration remains pending, with the court allowing parties to attempt negotiations for settlement.

On April 29, 2011, HGC sent a letter to HCPTI demanding full accounting of all revenues collected and remittance of the corresponding 5% government share from the period September 8, 2003 to December 31, 2010. On a subsequent letter dated June 15, 2011, HGC demanded of HCPTI to surrender possession or vacate property within 10 days upon receipt of letter. On July 8, 2011, HCPTI’s application for a TRO was dismissed for lack of merit.

The Home Guaranty Corporation (HGC) is the government-owned-and-controlled-corporation (GOCC) mandated by law (Republic Act 8763) to promote sustainable home ownership by providing risk coverage or guarantees and tax/fiscal incentives to banks and financial institutions/investors granting housing development loans / credits, and home financing. As such, HGC is in a unique position of being able to mobilize both private and public capital towards the realization of every Filipino’s right to decent yet accessible shelter. Risk is inherent to HGC’s mandate—a mission it fulfills with the best interest of the Filipino ever in mind. Under the leadership of Vice-President and HUDCC Chair Jejomar Binay, every little victory won, is a shelter for our fellow man.