Contractors had long suffered from Megaworld's fraudulent behavior and lack of sincerity in honoring obligations — that was reflected in property contractor Datem Inc.'s claim for P873 million in unpaid projects.
A counsel of Datem said the property contractor's case is merely the tip of the iceberg in malpractices that spans years and involves several construction firms that worked on Megaworld projects. Other contractors are reportedly in a similar situation as Datem.
Documents provided to DAILY TRIBUNE showed that at least two big contractors have pending claims against Megaworld running into hundreds of millions of pesos.
In an order dated 14 November 2023, Presiding Judge Rochelle Yvette Galano of the Quezon City Regional Trial Court affirmed that Megaworld must pay P873,324,248.89 to Datem under a mutual agreement sealed in September 2022.
The court issued a writ of preliminary attachment, or WPA, on assets of the property giant, including on its deposits in a list of banks.
The projects covered by the RTC decision were Uptown Parksuites Towers 1 and 2, Eastwood Global Plaza corporate tower and luxury residences, One Le Grand Tower, 18 Avenue De Triomphe, and Clark Green Frontier.
Galano stated in the order that Datem had provided sufficient evidence to support its allegation of "fraud" against Megaworld, which justified the issuance of the WPA.
Provided with the attachment notices were Megaworld deposits in banks, including the Land Bank of the Philippines, Philippine National Bank and Security Bank.
Several banks of Megaworld, including Asia United Bank, Union Bank of the Philippines, Bank of the Philippine Islands, Banco De Oro, China Bank, PS Bank, East West Bank, Maybank, Metropolitan Bank and Trust Co. and Rizal Commercial Banking Corp., were issued notices of garnishment on 16 November.
A notice of garnishment cautions the receiving bank to prohibit delivering, transferring, or disposing of Megaworld's property to any entity except the court sheriff.
Two other contractors, Monolith Construction and Development Corp. and Monocrete Construction Philippines Inc., have aired their problems with Megaworld.
In a final demand for payment, Monolith had sought P211 million from Megaworld, while Monocrete demanded payment of P185 million.
A lawyer of Datem said contractors of the property giant had been consulting each other and found they had similar experiences with Megaworld regarding huge arrears.
"My estimate is that five or more contractors will file legal actions against Megaworld and its subsidiary Suntrust," said Datem's lawyer.
The RTC ruling on the issuance of a WPA indicated finding instances of "fraud."
"Verily, the alleged 'fraud' committed by the defendant is considered. To the court, such equates to the defendant's insincerity in paying the amount due to the plaintiff, knowing fully well that it was already in default," according to Judge Galano.
She added: "These circumstances of 'fraud' committed undoubtedly support the issuance of a Writ of Preliminary Attachment in favor of the plaintiff."
Galano said in the ruling that "circumstances are sufficient evidence to support allegations that the defendant committed 'fraud' in contracting the debt and in the performance of its obligation."
Megaworld signed commitment
Datem's case was based on a mutual agreement that became a settlement agreement signed by Megaworld involving the turnover of accomplished and completed works on the premise that Megaworld shall pay unpaid claims.
Megaworld had indicated in its defense chronic delays in the implementation of the projects that a counsel of Datem said: "precisely confirms that it had no intention to be bound by or to comply with its undertaking under the mutual agreement."
Megaworld, during the course of construction, had consistently delayed or withheld payments or made unilateral and unauthorized deductions to billings before releasing payment.
"Datem was not paid after rendering already accomplished works. Despite the remaining unpaid amounts of receivables for already accomplished works, it was lured into entering into a mutual agreement and giving up possession of accomplished works with the promise of eventual payment," the Datem lawyer noted.
During the process of reconciliation of the obligations, Megaworld would consistently come up with new and additional deductions to be charged against Datem, which were not brought up during the discussions on the Mutual Agreement on Turnover of Contracts.
"Information received showed that Megaworld used this same scheme not only with Datem but also with other contractors," according to the lawyer.
Following a series of reports on Megaworld Corp.'s alleged non-payment of its financial obligations to Datem Inc., two more construction companies surfaced over the weekend to reveal the same experience they had working with the Andrew L. Tan-led company.
Demand letters issued
Documents obtained by DAILY TRIBUNE showed that Monolith Construction and Development Corp. had appealed to Megaworld through two demand letters on 23 April 2021 for the One Paseo Project, formerly One Woodside Avenue, and World Commerce Place.
According to Monolith, Megaworld owed the company a total of P210,922,758.25 of unpaid billing, retention, change for overhead, labor escalation, and insurance claims for the One Paseo Project.
For World Commerce Place, Monolith demanded that Megaworld pay P439,269,256.62.
In separate demand documents dated 03 April 2023 and 08 May 2023, Monocrete said Megaworld had a pending balance of P184,778,926.24 for the Iloilo Center Mall project, which was launched as the Festive Walk Mall in 2018.
Collectively, the demand letters insisted that Megaworld benefitted from the completion of these projects despite the contractors being unpaid for the work done. They also pointed out that Megaworld, a publicly-listed firm, should demonstrate good corporate governance by settling all outstanding obligations.
Nonetheless, Megaworld remained firm that it never evaded any significant payment claims by any of its business partners, despite an ongoing dispute with Datem.
Megaworld even argued that it incurred additional costs because of Datem's alleged delays in delivering its projects.
Additionally, Megaworld, in a stock exchange disclosure, clarified that the WPA issued does not prompt a "cessation of any of Megaworld's business operations, including concerning the projects."
"Megaworld is prepared to immediately avail of remedies to lift the WPA and any such notices of garnishment, including by immediately posting a counter-bond, without prejudice to availing of other remedies to challenge the propriety of the WPA," it said.
Datem maintained that it had "actively adhered to court procedures to oblige Megaworld to honor this mutual agreement, yet the developer only tried to gain possession of the projects without settling its debts."
The company even elevated its legal dispute with Megaworld to the local stock exchange regulator — a move the construction firm said was necessary to finally settle millions of pesos in unpaid projects.