Court nixes hotel's bid to stop SBMA's cease and desist order

SUBIC BAY FREEPORT, Philippines – The Regional Trial Court in Olongapo City has denied a petition by the operator of the Legenda Resort Hotel in this Freeport to enjoin the Subic Bay Metropolitan Authority from enforcing its cease and desist order against the hotel, which has defaulted in its rentals to the Subic authority.

In an order dated June 15, 2009, Olongapo’s RTC Branch 72 dismissed the petition of the Legend International Resorts Limited (LIRL) for a temporary restraining order due to lack of merit.

LIRL, which operates the Legenda Hotel and Casino in Subic, has filed a civil case before the court in an attempt to stop the SBMA from taking further action against the LIRL.

However, with the court denying LIRL’s petition, there is no more legal obstruction to enforce the CDO, the SBMA said in a statement.

The SBMA had previously cancelled the LIRL’s Certificate of Registration and Tax Exemption and Permit to Operate (PTO), as well as terminated the firm’s lease agreement with the SBMA, after the LIRL failed to settle more than P850 million in debt to the SBMA.

According to SBMA records, the LIRL has “admitted and uncontested” obligations to the SBMA in the amount of more than P339.31 million.

Along with the obligations contested by the LIRL, the SBMA said it has a total claim of more than P850.17 million against the Malaysian hotel operator.

Accrued rentals

The SBMA said it was not able to collect unpaid accrued rentals from the LIRL since 2004 because of the pending corporate rehabilitation proceedings and a stay order issued by the Olongapo RTC.

However, the RTC finally dismissed the rehabilitation case and lifted the stay order on Feb. 9, 2009, thereby giving the SBMA the right to collect and enforce contractual remedies from the defaulting investor.

SBMA administrator/chief executive officer Armand Arreza said the legal impediment to the SBMA has previously resulted in a “grossly disadvantageous situation” for the government, thereby leading the agency to send a notice of termination of lease contract to the LIRL on Feb. 12 and demanding payment of unpaid rentals amounting to P836.71 million.

However, the LIRL did not pay upon the lapse of the 90-day period, thereby forcing the SBMA to send the LIRL on May 22, 2009 a notice to vacate and a final demand for payment.

Arreza said that with the cancellation of LIRL’s registration, permit and lease agreement, “LIRL ceased to become a duly registered Subic Bay Freeport Zone locator and its rights and privileges to operate a business likewise ceased to exist.”

“In view of this, the public is hereby advised against doing business with the LIRL, which is now illegally occupying the land and improvements in Subic and illegally doing business here,” Arreza said.

The LIRL’s failure to settle its rental fees to the SBMA was the second financial problem the Malaysian firm has met while operating in the Subic Bay Freeport.