Lawyer: Big Hotel operated “legally”

CEBU, Philippines — The Mandaue City Council, during its session the other day, has ratified the deed of assignment between Katumanan Hardware and Cenore Corporation, which reportedly legalized Big Hotel’s operation.

Cenore Corporation legal counsel Deolito Alvarez said that the ratification of the deed of assignment has put to rest the legal issue raised on the alleged lack of authority of the former mayor Jonas Cortes in signing (giving consent to) the assignment of lease.

Earlier, the city government has ordered the closure of Cenero-owned Big Hotel, Big Hotel Suites and Linear Coffee Shop for lack of business permits and for having alleged anomalous contracts.

Cebu Sixth District Representative Jonas Cortes, in a statement released through his chief of staff, Jamaal James Calipayan, said that with the ratification of the deed of assignment, "the deed of assignment is now valid and its alleged defect is now cured."

Vice Mayor Carlo Pontico Fortuna said it was the councilors allied with Cortes who pushed for the ratification despite the adverse findings of the Commission on Audit (COA).

"The ratification or confirmation of the defective act by then Mayor Cortes however is moot because the contract between the City of Mandaue and Katumanan was already rescinded by the city," Fortuna said.

Hence, the deed of assignment made by Katumanan to Cenore will have no effect because the contract of lease that was the basis of the deed of assignment was rescinded before the assignment was hastily ratified by the councilors allied with Congressman Cortes, Fortuna said.

Cortes, however, said that officials of Mandaue City have accused him of entering into an “anomalous” contract with Katumanan and Cenore for consenting to the assignment without “authority” from the Sanggunian and now imputing blame on Cortes for everything that has happened with BIG Hotel.

"Mandaue City implemented the closure of a completely legitimate and honest-to-goodness business in Mandaue. The BIG Hotel group," Cortes said.

Cortes said that prior to the expiration of the 30-day period, Big Hotel was closed the other day as the city alleged that BIG Hotel was in bad faith for writing directly to the City Council requesting ratification for the alleged unauthorized assignment between Katumanan and Cenore.

Lawyer Elaine Bathan, chief of staff of Mandaue City Mayor Luigi Quisumbing, said that Cenore’s insistence on the ratification, instead of honoring the resolution of the council in May 2018, which called for the rescission of the contract with Katumanan Hardware and a new contract with Cenore, was a clear indication of bad faith.

Bathan said the firm’s move is an abandonment of all the efforts that the city has put in to allow them to legalize their standing to do business and negated any further interest to negotiate with the city pursuant to the notice to comply.

Last year, Bathan said that he has personally relayed to Roderick Ngo of Cenore why the ratification was not possible and why entering into a new contract was the legal and proper action to take given the irregularities in the Deed of Assignment which was further confirmed by the COA Audit Findings.

Cortes recalled that Mandaue City and Katumanan Hardware entered into a contract of lease in 2007.

This contract was renegotiated in 2012 to extend the term of the lease which was precipitated by the city's master plan to reinvigorate the Mandaue City South Point and Mantawi International Drive to be the new entertainment and commercial district of the city and the lessee’s desire to infuse additional capital investment for business expansion.

In 2012, Mantawi International Drive was a veritable “dead zone,” apart from Parkmall’s conservative development during that time, the lessees of the City in that area only operated van-yards, bodegas and warehouses.

Among the renegotiated provisions of the new lease with Katumanan Hardware was the requirement to invest an additional P60 million in commercial structures to compliment the entertainment and commercial district spatial plan.

The lease was also extended for an additional 25 years in order to allow a reasonable period for the return of investment of the lessee.

Further, the contract likewise contained a right by the lessee to assign the entire lease to a subsidiary or an affiliate with written approval of the city.

The Sangguniang Panlungsod of Mandaue authorized Cortes to sign the renewed contract of lease with Katumanan Hardware and after the execution by the parties, said contract was ratified by the SP.

In 2013, lessee Katumanan Hardware decided to assign the lease since its line of business is in the hardware and construction supply and it neither had the capability nor the experience to operate a commercial real estate business.

Said assignee was CENORE Corporation.

A deed of assignment was executed by Katumanan Hardware in favor of Cenore Corporation for a consideration of P25 million to be paid to Katumanan Hardware for the transfer of rights.

Cortes had conformed in writing to the assignment.  Thereafter, Cenore constructed Big Hotel.

The authority granted by the SP to the mayor to sign the lease contract with Katumanan Hardware includes the recognition and implementation of all provisions within the lease contract.

The right to assign the lease is expressly granted in the contract, and the only limitations being that it must be assigned to an affiliate and there must be permission of the mayor in writing which was clearly complied by the parties as opined by the City a Legal Office in a document dated April 22, 2013.

However, Cortes said that the present mayor claims that the assignment of the leasehold was defective since there was no authority by the SP for the mayor to sign and approve the assignment.

"This interpretation is the marrow of contention in this issue. Unfortunately, this allegation is gravely mistaken. If the intention of the SP and the parties was to undergo another grant of authority to exercise this provision, it should have been properly expressed in the contract and the requirement for affiliation of the lessee and transferee should have been unnecessary," Cortes added. (FREEMAN)