SC allows Land Bank to claim liability from Megaworld over defects in construction of headquarters

The Supreme Court (SC) has recognized the claim of the Land Bank of the Philippines (LBP) against Megaworld Corporation in connection with defects in the construction of its corporate headquarters in Manila.

In a recent 13-page decision, the SC 1st Division modified the September 27, 2010 ruling of the Court of Appeals (CA) that increased LBP’s unpaid dues to Megaworld to P35.78 million.

The CA had denied LBP’s counterclaims for the costs of electrical works for the telephone system and the cost of rectification works pertaining to the slope of parking areas.

The deleted amounts of P4.72 million and P16.2 million were previously awarded by the Construction Industry Arbitration Commission (CIAC) in favor of LBP in its January 28, 2008 ruling. These amounts offset the state bank’s liability towards Megaworld and reduced it to P6.18 million.

The SC reinstated the said counterclaims, but remanded the case back to the CIAC for the proper computation of Megaworld’s liability.

Although it agreed with the CA’s reasoning that there was no agreement authorizing the deduction of such costs, the SC said the CIAC should still determine if it was a general industry practice that should be applied in this case.

The SC also noted that Megaworld admitted its responsibility regarding the “water ponding” issue caused by the mistake in the slope of the parking area.

“With its admission, Megaworld’s obligation to compensate Landbank for such rectification works should no longer be in doubt. Only the exact amount of Megaworld’s liability remained undetermined,” read the decision penned by then-Chief Justice Lucas Bersamin.

LBP in 1995 entered into the property development contract with Megaworld to construct the 35-storey building in Malate district that is now known as Land Bank Plaza.

Megaworld in 1999 notified LBP about the completion of the project, but the bank only paid P168 million based on an accomplishment rate of 96.7586%. LBP claimed it had to engage other contractors to fix the construction defects. #

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