CA orders Leyte Park Hotel operator to pay rent, gov’t to shoulder property taxes

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The Court of Appeals (CA) has more than doubled the amount of rent that the operator of Leyte Park Hotel (LPH) would have to pay the Privatization and Management Office (PMO).

In a recent 29-page decision, the CA 5th Division ordered Unimasters Conglomeration, Inc., to pay at least P67.74 million in rent from January 1, 2001.

This is the due as of September 15, 2018. The CA ordered Unimasters to pay an additional P363,000 per month until it returns the possession of LPH to PMO, the Tourism Infrastructure and Enterprise Zone Authority (TIEZA) and the provincial government of Leyte.

All amounts would be subject to 6% annual legal interest. An additional 3% penalty would also be imposed on the rent for periods when the Tacloban City government granted business permits to Unimasters.

The amount of P258,195.93, which Unimasters paid sometime after the dispute arose in 2001, would be deducted from the accrued rentals.

Meanwhile, the CA ordered PMO, TIEZA and the provincial government to comply with their obligation under the September 15, 1994 lease agreement to shoulder the real property taxes (RPT) owed to the Tacloban City government for several years already.

The case arose from Unimasters’ suspension of its rent payments starting 2001, fed up by the government entities’ refusal to abide by the contractual obligation to pay the RPT liabilities. The city government did not issue business permits to Unimasters for the longest time because of the nonpayment of taxes.

The government agencies claimed tax exemption under Section 234(a) of the Local Government Code, which it interpreted to mean the beneficial user of government property would be liable for the taxes.

The CA, however, said this issue did not justify Unimasters’ suspension of its rental payments.

Although the company feared that its assets would be levied and its operations would be hampered, the CA said it was “not actually or even constructively evicted from the leased property” by the city government.

“The alleged business losses by [Unimasters] during the period when it was not issued a business permit remains an unproven allegation,” read the decision penned by Associate Justice Pablito Perez.

The court noted that the agreement actually gave Unimasters the option to pay the taxes due, but it chose not to because of the lack of assurance that the amount would be deducted from the rent.

Still, it scolded the government entities for reneging on its commitment to assume the tax liabilities. It added that this would be tantamount to a violation of the lease agreement and oppression by the government.

“It is… unacceptable and disturbingly misleading for a government entity to contractually bind itself to pay taxes on a transaction in which it is a party, and then to refuse performance of its obligation,” the CA said.

The CA decision modified the April 21, 2015 order of the Makati City Regional Trial Court (RTC) Branch 132, which reduced Unimasters’ rent to P41.765 million as of September 15, 2018.

The CA said it “found no support in the evidence” to justify the RTC move to reduce the monthly rental rate to P100,000, instead of the agreed-upon rate of P300,000.

The government leased the 6.13-hectare hotel, built in 1970, to Unimasters in 1994, so it could be rehabilitated in time for the 50th anniversary of General Douglas MacArthur’s landing in Leyte Gulf on October 20 that year.

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