G.R. No. 131680 - Subic Bay Metropolitan Authority vs. Universal International Group of Taiwan

On May 25, 1995, a Lease and Development Agreement (LDA) was executed between petitioners (Subic Bay Metropolitan Authority [SBMA]) and respondent Universal International Group of Taiwan (UIG).
Under the LDA, UIG was to lease the Binictican Golf Course and its appurtenant facilities from SBMA and transform it into a world-class 18-hole golf course, golf club/resort, commercial tourism and residential center.
The agreement contained pre-termination clauses, specifying that:

An act or omission by the tenant (including material breach) could be deemed a default if not cured within prescribed periods (30 or 60 days).
In the event of default, SBMA (the landlord) had the discretion to terminate the contract, retain previously paid rents, reenter, renovate or relet the property, and cancel tenant privileges.

On February 4, 1997, SBMA sent a letter to UIG alleging several contractual violations, particularly:

Failure to complete the rehabilitation of the Golf Course in time for the APEC Leaders’ Summit.
Failure to pay accumulated lease rentals and utilities.
Failure to post the required performance bond.

UIG responded on February 7, 1997, attributing the delays to the default of its main contractor, FF Cruz, and promising prompt compliance.
On March 7, 1997, SBMA sent another letter declaring UIG in default under Section 22.1 of the LDA, demanding an explanation for non-compliance.
Despite paying the rental arrearages, UIG failed to satisfy its other contractual obligations.
On September 8, 1997, SBMA served a pre-termination letter, requiring UIG to vacate the premises.
On September 12, 1997, SBMA formally closed the Subic Bay Golf Course, took over possession of the property, and UIG then filed a complaint for Injunction and Damages.
Subsequent judicial orders:

The Regional Trial Court (RTC) of Olongapo City issued an order granting a writ of preliminary mandatory and prohibitory injunction, directing petitioners to restore possession to respondents.
A second RTC order denied petitioners’ Motion to Dismiss and partially granted the dismissal as to Richard J. Gordon’s private capacity, while retaining him as defendant in his official capacity.

Petition was filed under Rule 45 seeking review of the Court of Appeals (CA) decision which had:

The case was ultimately elevated to the Supreme Court focusing on the propriety of extrajudicial rescission and takeover of the property.
The decision also involved complex issues regarding the capacity of foreign corporations to sue, the standing of assigned parties (UIGDC and SBGCCI), and compatibility with Section 21 of RA 7227.

Questioning the capacity of the foreign respondent (UIG) to sue.
Failing to reconsider the material interest and standing of UIG’s assignees (UIGDC and SBGCCI) as real parties in interest.
Asserting that the RTC had jurisdiction over what was allegedly an ejectment suit.

Whether the writ issued by the RTC contravened Section 21 of RA 7227.
Whether the respondents were entitled to the injunctive relief based on the following:

Their clear and unmistakable right to continue operating the golf course.
Demonstration of irreparable damage if the rescission was allowed to proceed without such an order.

Whether the extrajudicial rescue and takeover of the property by SBMA, based on a contractual stipulation, was legally justifiable without a prior judicial determination.

Whether a reversal of the lower court decision would adversely affect the confidence of foreign investors by altering established doctrines.
Whether such a ruling would conflict with the constitutional guarantee that contracts freely entered into must be honored.