‘Mega bad faith triggered writ’

Megaworld's failure to comply with provisions of a mutual agreement was the straw that broke the camel's back and led construction firm Datem Inc. to seek legal recourse, said a lawyer for the contractor demanding P873 million in debts from the realty giant.

The Quezon City Regional Trial Court, in an order dated 14 November 2023, issued a writ of preliminary attachment on 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.

RTC Presiding Judge Rochelle Yvette Galano stated in the freeze order that Datem had provided sufficient evidence to support its allegation of "fraud" against Megaworld, which justified the issuance of the WPA. Datem's contract with Megaworld has no arbitration clause, and the only provision that applies in the event of a dispute is to bring it before the court.

Counsel Rufino Policarpio said Datem persisted in settling with Megaworld without resorting to a court battle.

"Datem tried to exhaust all remedies to collect the arrears without resorting to a court case, including the signing of a mutual agreement with Megaworld," Policarpio said, adding that Datem did not want "to burn bridges" in seeking an amicable settlement.

"The standard contracts used by the majority of developers and project owners conform to an international practice. Common to them is the arbitration clause that Datem's contracts with Megaworld for the past years did not have," the lawyer told DAILY TRIBUNE.

"Arbitration is a special way of settling disputes, which in the Philippines is done through the Construction Industry Arbitration Commission," he said.

"Instead of going to the regular courts, the dispute is coursed through the CIAC, which is a faster process that takes three months compared to years in the regular courts," he added.

Datem has had 20 huge contracts with Megaworld since 2011, including the five projects covered by the WPA.

Among the completed and accepted projects are the 8 Campus, Venice Corporate Center and Venice Canal Mall, Belmont Hotel (Hamilton Hotel), Two Central, Three Central, One Uptown Residence and Uptown Ritz. Datem completed 12 projects in 10 years without any issues from them or buyers.

Projects turned over

"Would a company keep awarding new projects to Datem for the past 10 years if the quality of work is not good?" Policarpio asked.

Thus, a so-called Mutual Agreement on Turnover of Contracts was signed between both parties on 28 September 2022. Megaworld was obligated to pay P873,324,248.89 covering accomplished works of Datem in the five properties.

In the agreement, Datem confirmed turning over completed works on certain projects.

Datem "undertook to turn over its remaining accomplished works, in consideration of (Megaworld's) payment of overdue receivables of P412,802,194.49 payable within 45 days after mutual reconciliation; P30 million within 30 days from signing; and remaining billings of P441,961,048.63 payable within 45 days after mutual reconciliation; other claims worth P327,778,270.68 upon submission of documents for the accomplished works; and settlement amount of P425 million less payments already received in connection with the 18 Avenue de Tromphe Project resulting in a net offsetting amount of P135,157,065.32.

Thereafter, Policarpio said, Megaworld dangled the possibility of an amicable turnover of the projects from Datem in exchange for payment of the "substantial" obligations.

"Lured and induced by the promise of finally receiving payment for accomplished works, Datem entered into a mutual agreement with the defendant. Meanwhile, Megaworld appropriated for itself the projects," according to the court submissions.

Datem then sent eight letters to Megaworld as a reminder of the agreement, "but the plaintiff's demands fell on deaf ears. The total principal amount of P873,324,248.89 is owed to the plaintiff."

Policarpio said that to this date, Megaworld had not paid its outstanding obligations. Hence, the instant application for WPA, he said.

Ruse resorted to

In seeking a writ of preliminary attachment, or WPA, Datem contended before the court that Megaworld deliberately deprived it of its protection as an unpaid contractor from a mere non-payment of a debt.

Megaworld allegedly lured the company into entering into a mutual agreement to gain possession of the projects without intending to comply with its obligations.

The property giant purportedly used the same tactics it employed on Datem against other contractors, "underscoring its 'fraud' and lack of sincerity in complying with its obligations to Datem."

Policarpio said the "defendant has been selling and continuously selling condominium and residential units to clients and customers, constitutive of disposal of its properties with intent to defraud."

Megaworld, he said, has declared staggering dividends instead of settling its obligations, showing it misappropriated funds for its benefit "by launching other big projects."

Moreover, Megaworld "fraudulently attempted to introduce new deductions to the amounts due."

Hit on credibility

An analyst indicated that now, the dispute will not affect the shares of the listed real estate giant, but the "mere recognition of the charges filed against it through the WPA, which is essentially a freeze order, has a bearing on credibility, which is important in the stock market."

Another market pundit said Megaworld should not have allowed the dispute to become public as it could have been settled quietly and immediately.

"Megaworld has more to lose than Datem," according to the market veteran.

Another stock trader agreed that Megaworld would come out a loser in the friction. "It gives a bad light to Megaworld, so it could be best to settle it if no contradictions or violations have been found. Haggle with Datem for staggered payments," he said.