Privity of contract

Why does the Bases Conversion and Development Authority (BCDA) continue to involve SM Prime Holdings Inc. (SMPI) in its tussle with the Taguig city government? This perplexes a lot of people.

As a backgrounder, the BCDA transferred certain parcels of land to Taguig City via a deed of conveyance based on a memorandum of agreement signed by both parties in 2004 relative to an encroachment issue involving the American Battle Monument Cemetery. In the deed of conveyance, BCDA agreed to convey to Taguig City the equivalent area of the encroached land through another property in Fort Bonifacio.

Part of the conveyed land was bidded out by Taguig City apparently for the construction of the Taguig City Civic Center provided for under City Council Resolution No. 218 which was approved in 2009. As defined by the resolution, the Taguig City Civic Center includes the construction of various facilities within the civic center area like supermarket, department store, cinemas, convention hall, local government and private offices, retail shops, among others. The resolution also defined other uses like hotel, clinic, museum, place of worship, school, public library, and other support services.

SM Properties won the bidding conducted by the Taguig city government and the two entered into a lease agreement. SM Aura, the SM group’s newest mall, now stands on the leased property.

The construction of the huge mall has been going on for sometime but no complaint was aired by the Taguig city government, nor by BCDA. It was only when SM Aura was already finished that BCDA opposed the existence of the facility.

One of the issues raised by the BCDA is that SM Aura violates Republic Act no. 7917 or the law creating the BCDA. But obviously, any such issue should be addressed to the Taguig city government and not SM, which is a mere lessee of the property. There is no privity of contract between SM and BCDA and as such, SM is only accountable to the lessor, in this case Taguig City.

Another issue being raised is that SM unlawfully entered the fence along McKinley Parkway Drive. But according to informed sources, no fence was destroyed by SM. Instead, SM was able to secure a clearance from the Taguig City government, after the city won a temporary restraining order against BCDA, to construct the unfinished portion of the McKinley Parkway that leads to Forbes and provides access to the SM Aura and the Serendra condominium buildings.  Officials insist that the local government has jurisdiction over all roads within the city, whether publicly or privately owned to protect the interest of the general public and as such, Taguig City has exercised this authority and supported by the decision of the Taguig court, allowed SM to construct and not to destroy the unfinished portion of the road.

It is also being claimed that SM Aura violates the master development plan for BGC “which ensures the safety and convenience of the people living and working in BGC and that one only needs to experience the horrendous traffic that SM Aura has caused, not to mention the apparently poor water drainage capabilities of the building, to realize that it was never meant to be there in the first place.”

But sources insist that the land on which SM Aura is located is owned by Taguig City and therefore, outside the property owned by BCDA and outside BCDA’s jurisdiction.  Therefore, it is not possible for SM to violate said master development plan, which in fairness to BCDA, is a good plan.

We’ve also heard that the cause of the horrendous traffic, especially during SM Aura’s opening day, was precisely because of BCDA’s refusal to allow the road to be finished.

BCDA has also alleged that the excavation done by SM endangered the lives of residents below the construction area due to the absence of a proper retaining wall, which SM has yet to install. But our sources say that no such excavation was done by BCDA and that the only place that SM worked on was the road and the pedestrian walk way along McKinley Parkway right in front of Aura and Serendra condominium building. The road construction was given a go signal by the Taguig regional trail court based on a petition for TRO filed by Taguig City versus BCDA’s action to prevent the road construction.

And lastly, about the allegation that BCDA staff used or threatened to use force against SM staff, there is reportedly a video of it uploaded on Youtube which speaks for itself.

Unfortunately, all these issues are seen and heard by the foreign investment community and it is not to the best interest of our country that our soon to be most valuable company (with the merger of SM’s property-related companies) is being harassed by no less than an agency of the Philippine government.

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