Bank wants out of land deal

BY MA. ELOISA I. CALDERON/BUSINESSWORLD A long-drawn legal battle is preventing state-owned Land Bank of the Philippines (Landbank) from fulfilling its obligations under a P362.15-million property sale it had entered into two years ago, involving land formerly owned by businessman Ramon "RJ" Jacinto. Landbank officials said they have opened talks with the undisclosed buyer of the disputed property for the possible nullification of the sale, which, if approved by the Landbank board, could be the bank’s first-ever contractual default in its entire history of asset disposal. "In view of the fact that there are pending cases, which will take time to resolve, we floated the idea [and asked] if [the buyer is] open to rescinding the contract. The main issue here is how we can comply with the terms of the conditional sale," Landbank President Gilda E. Pico told BusinessWorld, declining to name the buyer citing the contract’s confidentiality rules. The 58,364-square-meter lot, houses the radio transmitter of the Jacinto-owned Rajah Broadcasting Network (RBN). It was one of three properties in Novaliches, Quezon City mortgaged by the Jacinto group — one of Landbank’s biggest borrowers — to secure a credit facility it obtained from the state bank in 1997. Court records showed that when the Jacintos failed to pay the loan, Landbank filed a petition for foreclosure of the mortgaged properties before a Quezon City court. On June 26, 2001, the court awarded the bank the certificate of sale covering the properties with transfer certificate of title (TCT) numbers 12814, 12816 and 12818. Two years later, on Aug. 20, 2003, the court issued a writ of possession ordering the sheriff to place the bank in possession of the three properties. Landbank sold the Jacinto property covered by TCT 12818 in May 2005 for P362.15 million after a failed public bidding in August 2002. The selling price was based on the appraised value determined in 2002. The deal, a conditional sale that required the removal of the RBN transmitter and machines, however, is being hampered by a string of cases filed by the Jacinto group, Ms. Pico said. The buyer has already shelled out 10% of the negotiated P362.15 million, but the bank has yet to deliver the title to the property. "We need to remove the structure but we have a problem because of the pending cases," she said. Sought for comment on the bank’s plan to rescind the sale contract, Glicerio Perez, spokesman for the Jacinto-led broadcasting company, told BusinessWorld: "Mr. Jacinto says he’s not privy to the outcome of the case. It’s a pure Landbank decision." He declined to elaborate. Documents obtained by BusinessWorld showed that shortly after Landbank secured the writ of possession, the Jacinto group filed a motion that sought more time to vacate the property. A Landbank official privy to the ongoing dispute said the bank had offered Mr. Jacinto a fore-closed lot in Bulacan as an alternative site for the RBN tower in a bid to expedite the clearing of the property ahead of its sale. The businessman, however, rejected the proposal. In October 2005, the Jacinto group filed a pleading before the Quezon City court, seeking to exclude TCT 12818 from the writ. It cited the "usufructuary nature" of the Novaliches property, which allowed the Jacintos access. In legal parlance, usufruct is the right to use and enjoy the fruits or profits of an estate belonging to another. The deed of usufruct was executed between the Jacintos and Forward Properties, an affiliate, which acted as mortgagor for the Landbank loan. That motion was denied by the Quezon City court, which ruled that Mr. Jacinto’s move to ask for more time to vacate the property was tantamount to his admitting that he had lost his right to the Novaliches lot. Later, Mr. Jacinto reportedly asked Landbank to "have a portion of that property where he could maintain his tower, but since [Landbank] sold the property already, the buyer won’t budge. We have no recourse but for RBN to leave," said the Landbank official, who asked not to be identified. In 2006, the case reached the Court of Appeals, where the Jacinto group sought a preliminary injunction against the writ. The appellate court issued a temporary restraining order, which expired in September last year. Subsequently, Landbank filed with the trial court a "motion for break open and demolition" of the disputed property in Novaliches. The Jacinto group, meanwhile, asked the trial court to expunge from court records all pleadings filed by Landbank lawyers. Mr. Jacinto’s lawyers argued that Landbank, being a government financial institution, should have the Office of the Government Corporate Counsel as counsel. In a Sept. 22 hearing before a Quezon City court, a state lawyer entered his appearance on behalf of Landbank. Unfazed, the Jacinto group elevated to the Court of Appeals its bid to quash the pleadings. It likewise reiterated its plea for an injunction against the writ. Quezon City Regional Trial Court Branch 218 Judge Hilario Laqui, meanwhile, ceded to the Court of Appeals the decision on the Landbank lawyers’ authority to represent the bank. The appellate court has to first settle the "prejudicial issue" before the lower court can rule on the bank’s motion to demolish the tower on Novaliches property. The two Jacinto cases pending before the Court of Appeals remain unresolved. Adding to the controversy is a report of the Commission on Audit (CoA), which questioned the sale. At a price of P362.15 million, state auditors claimed the transaction was disadvantageous to the government. Landbank Vice President for corporate finance Alex J. Macapagal pointed out that the plan to cancel the contract was not tantamount to yielding to the state auditors’ findings, which indicated that the negotiated price was far below CoA appraisers’ estimated valuation of P773 million. Landbank insisted that the sale price was valid as it was close to a third-party estimate. The buyer has yet to respond to Landbank’s proposal to rescind the sale, Ms. Pico said "If [the buyer is] amenable [to rescinding the sale], we will bring it to the board. The negotiations are still at the lower level," the Landbank chief said. Mr. Macapagal downplayed suggestions that the move might scare prospective investors away from buying the bank’s foreclosed properties, amounting to less than P12 billion. Landbank nearly two weeks ago concluded a successful public auction that unloaded P160 million worth of non-performing assets. It plans to hold another auction within the year. "We have a track record of delivering [the properties]. Even this particular buyer knows that. This is an isolated case," the Landbank official pointed out. Landbank had earlier argued that the sale had been carried out in "faithful compliance" with the bank’s policies and procedures. The bank, however, admitted that it revisited its policy on asset disposal following the CoA findings. As a result, Landbank officials have decided that properties that fail to be sold in a public bidding will be disposed of with within a year through a negotiated sale or a rebidding. Prior to the changes, the bank had no policy on when a new public bidding should be held.-Report from BusinessWorld