SEC v.

CJH Dev Corp

SC decision on CJH major victory for SEC

MANILA, Philippines - The Securities and Exchange Commission (SEC) has scored a major victory
against Camp John Hay Development Corp.(CJHDC)  after the Supreme Court upheld the SEC’s
decision preventing CJHDC from selling unregistered securities.

In an interview last week, SEC chairperson Teresita Herbosa said the high court’s decision is a
welcome victory for the SEC.

“The Supreme Court ruled in our favor. This is a major victory for us,” Herbosa said.

In a decision dated Nov. 28, 2016 but made public only recently, the Supreme Court likewise
affirmed the authority of the SEC to determine what instruments are securities.

CJHDC is a domestic corporation, which is engaged in the acquisition, development, sale, lease
and management of real estate while CJH Suites Corp. (CJHSC) is a wholly-owned subsidiary of
CJHDC formed primarily for the purpose of acquiring, maintaining, operating and managing
hotels, inns, lodging houses, restaurants and other allied businesses.

The case stemmed when CJHDC entered into a lease agreement with the Bases Conversion and
Development Authority (BCDA) for the development of a 247-hectare property within the John
Hay Special Economic Zone in Baguio City into a public tourism complex.

The complex includes a multiple-use forest watershed and human resource development
center.

As part of the development plan, CJHDC offered to the general public two condominium hotels
in the area – The Manor and The Suites.

The first offer scheme is a straight purchase and sale contract where the buyer pays the
purchase price for the unit bought, either in lump sum or on installment basis and, thereafter,
enjoys the benefits of full ownership.

The second scheme involved the sale of the unit with an added option to avail of a “leaseback”
or a “money-back” arrangement. 

Under the second option, the buyer pays for the unit bought and, subsequently, surrenders its
possession to the management of CJHDC or CJHSC.

These corporations would then create a pool of these units and, in turn, will offer them for
billeting under the management of the hotel operated by the Camp John Hay Leisure Inc.
(CJHLI).
This arrangement is good for a period of 15 years with a renewal option for the same period
until 2046.

The buyers who opted for the “leaseback” arrangement will receive either a proportionate
share in 70 percent of the annual income derived from the hotel operation of the pooled rooms
or a guaranteed eight percent return on their investment.