Republic of the Philippines

Department of Trade and Industry

CONSTRUCTION INDUSTRY ARBITRATION
COMMISSION
Makati City

S.C. MEGAWORLD
CONSTRUCTION AND
DEVELOPMENT CORP.,
Claimant,

-versus- CIAC CASE NO. 62-A & B-

2014

AMVEL LAND DEVELOPMENT

CORPORATION,
Respondent.
x----------------------------x

ANSWER
RESPONDENT AMVEL LAND DEVELOPMENT
CORPORATION (hereinafter referred to as “Respondent”
for brevity), through the undersigned Law Firm, unto this
Honorable Commission, most respectfully avers:

PRELIMINARY STATEMENT

The instant Answer is being filed in compliance to the

Order of the Honorable Commission given in open court on
22 May 2015, directing the Respondent to file an Answer
within fifteen (15) days from the afore-said date.
Respondent respectfully manifests that the filing of this
pleading is without prejudice to the Motion to Dismiss filed
before this Honorable Commission on 16 April 2015.

DENIALS AND ADMISSIONS

1. Paragraph 3 of the Complaint is ADMITTED

except on the allegation that Mr. Mariano Z. Velarde is a
representative of Respondent as will further be discussed in

1
the Special and Affirmative Defenses as hereinafter set
forth.

2. Paragraph 4 is ADMITTED except on the

allegation that Claimant is officially chosen as the nominated
sub-contractor as will further be discussed in the Special and
Affirmative Defenses as hereinafter set forth.

3. Paragraph 5 is ADMITTED except on the

allegation that the Letter of Intent/Notice to Proceed
(“LOI/NTP”) was prepared sans any input or participation
of the Claimant as will further be discussed in the Special
and Affirmative Defenses as hereinafter set forth.

4. Paragraphs 6 to 28, are hereby SPECIFICALLY

DENIED, the reasons for which are stated in the Special and
Affirmative Defenses hereinafter set forth.

SPECIAL AND AFFIRMATIVE DEFENSES

Facts of the case

5. Respondent is a corporation engaged in the

business of real estate development with Mr. Mariano Z.
Velarde as the President and CEO of Respondent
corporation. Note, however, that the operations of
Respondent are handled by Dr. Franklin Churchill Velarde, as
its Chief Operations Officer.

6. Meanwhile, Engineer Macario Blasino works as

project manager for the Respondent.

7. Sometime in 2003, Respondent pursued the

construction of condominium towers dubbed as The Amvel
Mansions in Sucat, Paranaque City. Said project is composed
of eight (8) residential towers.

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 8. Pursuant thereto, Respondent hired the services of
Jose Aliling and Associates (“JAA”) as Project Manager;
Davis Langdon & Seah Philippines, Inc. (“DLS”) as Quantity
Surveyor; AROMIN & SY + ASSOCIATES, INC. (“AROMIN”)
as Structural Designer; and Sylvia Santos, Inc. (“SSI”) as
Project Consultant.

9. Invitations to bid were also sent out for the

positions of General Contractor and thereafter, Sub-
Contractors.

10. Among those that participated and later on

nominated as General Contractors were ASIAN
CONSTRUCTION AND DEVELOPMENT CORPORATION
(“AsianKonstrukt”) and L&M Maxco (“Maxco”) for
Towers One and Two respectively.

11. As nominated General Contractors, each of the

said companies was issued with LOI/NTP 1. In the said
LOI/NTPs, it was expressly stated the following provisions,
to wit:

“8. Supplementary Conditions;

xxx

c. Nomination Procedure; -Other

specialty packages i.e. Plumbing,
Electrical, Mechanical, etc., shall be
nominated to the General Contractor. A
nomination fee of 1.5% (Supply
Package) and 2.0% (Supply and Install
Package) shall be paid to L&M Maxco

1. Upon nomination, L&M Maxco shall

be fully responsible for all the
Nominated Subcontractor/Supplier in
connection to the following:

1
LOI/NTP for Maxco as Exhibit “A”
3
a. NSC’s schedule inclusive of delivery
and installation schedule;
b. NSC’s temporary facilities inclusive of
scaffoldings available on site,
temporary water and power, etc.
c. Checking/facilitating of shop drawings
prior to consultants (sic) approval
d. Coordination
e. Control of the whole project.

2. L&M Maxco shall be fully

responsible for completion of the project
inclusive of all Nominated and Direct
Packages based on the General
Contractor’s master schedule.

3. L&M Maxco shall be held

responsible for any delay incurred due
to the fault of the L&M Maxco and/or the
Nominated Sub-Contractors/ Suppliers.
All damages due to delay i.e. financial
charges, liquidated damages, etc. shall
be the sole responsibility of L&M Maxco.

xxx

5. The contract shall be between

the General Contractor and the
Nominated Sub-
contractors/Suppliers for all
nominated packages. However,
payment shall be made directly by the
Owner to the Nominated Sub-
contractors/Suppliers through L&M
Maxco. All checks shall be made in
favour (sic) of the Nominated Sub-
contractors/Suppliers and shall be
released by L&M Maxco.

6. All progress billings made by the

Nominated Sub-contractors/Suppliers
shall be endorsed and checked by L&M
Maxco prior to the submission and
evaluation by the Quantity Surveyors.
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 The Quantity Surveyors shall not
evaluate any progress billings
submitted by any Nominated Sub-
contractors/Suppliers without prior
endorsement from L&M Maxco.”2
(Emphases supplied.)

12. Furthermore, Respondent and the General

Contractors also executed Articles of Agreement3. In the said
Agreement, it was expressly concurred by the parties that
“[N]othing in the Contract Documents shall be construed as
creating any relationship whatsoever between the owner and
the Contractor’s employees or any of the Contractor’s Sub-
contractors.”4

13. The said Agreement also provided for an

arbitration clause exclusively for the Owner and the
Contractor, as can be gleaned in Article 105 thereof. It begs
emphasis that there was no mention that said Clause
extends to the Sub-contractors.

14. After the nomination and selection of the General

Contractors, Respondent then sent out its invitations to bid
for the Sub-contractors, for the Electrical, Plumbing and
Sanitary works for Towers 1, 3, and 6, and Electrical Works
for Towers 2, 4, and 5. Among those that participated as
bidders to undertake said works was the Claimant.

15. Claimant then submitted the required documents

as well as its bid on lump sum basis, to the Respondent.
Having been satisfied with its bid, Claimant was then
appointed as the Nominated Sub-contractor for the
Electrical, Plumbing and Sanitary Works for Towers 1, 3, and
6; and Electrical Works for Towers 2, 4, and 5. Pursuant
thereto, the Claimant was issued LOI/NTPs.6

16. It begs stating at this point that the LOI/NTPs are

issued by the Respondent to the nominated sub-contractors,
2
Exhibit “A-1”
3
Articles of Agreement for Maxco as Exhibit “B”
4
Exhibit “A-1”
5
Exhibit “A-2”
6
Exhibits “2” “3”, and “6” of the Complaint
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such as the Claimant, to acknowledge the nomination of the
said sub-contractors, to inform them of the terms of
payment, and that the terms in the Main Contract with the
General Contractors shall bind them. The LOI/NTPs have the
same provisions for all of the nominated sub-contractors for
all its projects.

17. Furthermore, it was expressly stated in the said

LOI/NTPs that Claimant “shall enter into a Nominated Sub-
Contract Agreement with L&M Maxco, Inc./Asian
Construction and Development Corporation which shall be
supplemental to the Main Contract between Amvel Land
Development Corporation and L&M Maxco, Inc./Asian
Construction and Development Corporation.”

18. Insofar as price escalation vis-à-vis variations of

work is concerned, the LOI/NTPs provide that:

“8. Variations:

a. xxx
b. When variations are used
which add/omit elements of work,
whether it be in part or in whole,
the rates used for valuing the
addition/deletion shall be the full
rates inserted in the Bill of
Quantities; no adjustment will be
made to the rates for loss of profit
or the like. Consideration may be given
to a Contractor’s claim of loss of profit
or the like in relation to the omission of
elements of work, should the value of
the Final Account be significantly less
than the Contract amount. Such
consideration shall only be given on
submission of detailed loss and expense
claim.” (Emphases ours.)

19. Insofar as Retention is concerned, same LOI/NTPs

provide that the Respondent shall release to the Claimant
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the total retained amount ninety days after the turn-over
and acceptance of the Respondent of the work and upon
presentation of a Guarantee Bond for one (1) year
equivalent to the amount of retention.7 It is worth
noting that no qualification was given insofar as securing a
Guarantee Bond for the purpose of release of Retention is
concerned.

20. After the issuance of the said LOI/NTPs, the

General Contractors, Asiankonstrukt and Maxco, executed
their respective Agreements with the Claimant.

21. More particularly, Maxco executed the following

documents: Notice to Proceed8, Work Order9, and
Conditions of Contract to the Claimant.

22. Meanwhile, Asiankonstrukt executed a Trade

Subcontract Agreement with the Claimant.10

23. It bears stressing that all those documents

previously mentioned were executed by and between the
general contractors and the Claimant, and are mere
supplementary to the Main Contract between the
Respondent and the general contractors. Under pain of
reiteration, the afore-said documents are the supplementary
documents to the Main Contract—not the other way around.

24. In fact, under the organizational structure adopted

by the Respondent, the nominated sub-contractors,
while nominated by the Respondent, are under the
direct control and supervision of the general
contractors. Any and all concerns anent the project such as
construction works, billings, quotations, and progress
reports are referred to the Project Manager. These are, in
turn, referred to the Quantity Surveyor who shall undertake
to verify the veracity of the said project concerns, especially
when it pertains to the billings made by the contractors. If
7
Paragraph 5, LOI/NTPs
8
“Exhibit 8a” of the Complaint
9
“Exhibit 8b” of the Complaint
10
Exhibit “9” of the Complaint
7
found that the said billings are true and correct, it shall refer
the same to the Owner/Respondent for payment.

25. Note that this structure is observed by the

Respondent to ensure that all reports that come to the
Respondent had been properly verified.

26. After the award of the contracts to the General

Contractors and their Nominated Sub-contractors,
Respondent issued all the construction drawings and
specification needed. These documents were all part of
contract documents. Also, they were provided a construction
plan for construction reference.

27. However, Claimant only began working on the

Electrical works on Tower 2 in July 2003, and the Electrical
works, Plumbing and Sanitary works on Tower 1 in March
2003.

28. During the construction of the said Towers,

however, there were several defects encountered in their
construction.

29. It appeared that there had been issues with the

general construction of the Towers. Works were made
without complying with the approved construction
drawings issued by the JAA, as the Asiankonstrukt
and the Claimant opted to follow the mock-up
drawings instead of the approved construction
drawings notwithstanding the fact that Claimant and
the general contractors were already furnished with
the construction plan and drawings.

30. Unfortunately, there were differences in the mock-

up drawings and the approved construction drawings, and
hence, some works had to be repeated. It bears stressing
that neither Asiankonstrukt nor Claimant sought for
prior permission from the Project Manager that they
would use the mock-up drawings.

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 31. This fact was not made known immediately to the
Respondent because, as afore-mentioned, even the project
manager was not informed that the construction was based
on the mock-up drawings.

32. Worse, the initial construction works were

defective, such as defective columns, shearwalls, and
beams, honeycombing and bulging on some areas like the
beams and stair walls, absence of lintel beams that caused
the collapse and cracking of the door, window, and elevator
walls and beams, wrong installations of rebars, and the like.
A detailed list and description of construction defects can be
found in the Site Inspection Report conducted by Aromin 11.

33. Worse still, it appeared that the defects in the

works as well as the delays in the project completion were
attributable to both Claimant and the general contractors, as
evinced by the letter12 of Asiankonstrukt dated 28 January
2004. In the said letter, Asinakonstrukt made apparent the
delay in the works as caused by the failure of the Claimant
to provide the necessary manpower and materials on site,
and even demanded that failure to rectify the said deficiency
will compel Asiankonstrukt to seek for another sub-
contractor.

34. This, notwithstanding, Claimant on its own

volition and sans prior instructions from the JAA and
without a Work Authorization Order (“WAO”) from the
JAA, proceeded with the Electrical works for Tower 2,
and the Electrical, Plumbing and Sanitary works for
Tower 1.

35. The same is true with the supposed rectification

works made by the Claimant on the Electrical works in
Tower 2 and the Electrical, Plumbing and Sanitary Works in
Tower 1. Delays are attributable to the defects in the
construction due to non-compliance with the construction
specifications.

11
Exhibit “23” of the Complaint
12
Exhibit “58” of the Complaint
9
 36. This apparent failure of Claimant and
Asiankonstrukt to secure a WAO is evinced by the Non-
Compliance Notice (“NCN”) issued by JAA against Claimant
and Asiankonstrukt for failure to comply with the
construction in accordance with the specifications.

37. Hence, all problems pertaining to the construction

of Towers 1 and 2 arose from the erroneous action of the
Claimant in basing its work on the mock-up drawings and
aggravated by doing the rectification works sans a WAO.

38. On 23 November 2004, DLS even cited the Duty

of the General Contractor to warn the Project Manager (JAA)
of defects or insufficiency of the designs, which
Asiankonstrukt did not do.

39. Verily then, the construction issues had been

between the general contractors and the Claimant all along.

40. Several demands were made by Claimant directly

to the Respondent. The latter opted not to respond, as the
organizational structure dictates that any claims and payable
amounts should first have been endorsed by DLS. As the
said organizational structure suggests, billings or quotations
should first pass through the General Contractor and the
Project Manager for verification and inspection of the work
sought to be billed for. The Project Manager will then refer
the same to the Quantity Surveyor for final evaluation.
These steps were clearly not abided by the Claimant.

41. As the demand letters kept on being sent to

Respondent, Mr. Mariano Velarde opted to refer the same to
Respondent’s project manager, Engineer Blasino, for
verification. Note that when Mr. Velarde referred the
supposed payables to Engineer Blasino, the said referral was
premised as a question as to whether there were still
payables in favor of Claimant. It was not a confirmation
or acknowledgment of liability. Pursuant to Engineer
Blasino’s verification, he was able to secure from the
Accounting Department a Statement of Account dated 18
April 2005 pertaining to Claimant’s account.

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 42. Engineer Blasino’s controversial note “cost claims
ok above contract k subject for verification on cost
evaluation with joint with DLSPI” as may be found on the
letter dated 16 April 2005 by Claimant is, in fact, proof that
the claims of the Claimant is still subject to evaluation by
DLS.

43. Meanwhile, Respondent had continued paying the

Claimant for its works as can be gleaned in the Summary of
Payments from 1 January 2001 until 2015.13

44. After the completion of the works, Claimant

demanded for the release of the Retention through a letter
dated 10 May 2006. DLS promptly replied positively, with
the minimum requirement of the compliance with the
application for a Guarantee Bond and Affidavit of Quitclaim,
in accordance with the LOI/NTPs and the Conditions of
Contract.

45. However, Claimant refused to comply with the

said requirements based on its albeit erroneous belief that it
is no longer necessary, due to the delay in the completion of
the project, which, as the facts and documents would show,
is attributable to it.

46. Hence, due to Claimant’s non-compliance with the

afore-said requirements, the Retention was not processed
for release.

ALLEGATIONS IN SUPPORT OF THE SPECIAL AND

AFFIRMATIVE DEFENSES

Claimant is not
entitled to any
monetary claims

13
Exhibit “D”
11
pertaining to alleged
additional works

47. Stripped bare of all redundancies, the core of the

Claimant’s monetary claim is hinged on its alleged “extra
works” and additional costs in the materials due to changes
in the materials price over the years.

48. However, all of the supposed cause for such

payables is not made by the Respondent but by the general
contractors and the claimant.

49. As afore-stated, the proximate cause for the delay

and error in construction is the erroneous decision of
Asiankonstrukt and Claimant to use the mock-up drawings
instead of the approved construction drawings and
construction plan.

50. The Conditions of Contract entered into by

Asiankonstrukt and Maxco explicitly provides that it is their
respective duty to immediately advise the project manager
cesto the defect or insufficiency of the design. The project
manager will have to evaluate and then issue instructions to
clarify the matter.14

51. Any discrepancy between the Contract

Drawings and any of the other Contract Documents
shall be advised to the project manager. Where the
insufficiency in design and/or discrepancy ought to
have been discovered by an experienced Contractor
exercising due skill and care, no reimbursement shall
be made for abortive and/or corrective work or loss
and expense arising from the insufficiency.

52. The said provision is clear. Any issue with the

design and Contract Documents must be immediately made
known to JAA. However, as already admitted by the
Claimant itself, it began its work using the mock-up designs
rather than the construction drawings. When the differences
were finally discovered between the two Contract
14
Item 6, Conditions of Contract
12
Documents, it was already too late. Hence, corrections had
to be made to rectify the errors in construction.

53. As the construction defects were apparently

caused by both the Claimant and the general contractors,
any amount or expense needed to rectify the same should
be borne by them.

54. It is essential to mention that the Claimant

proceeded with the works that were not in accordance with
the construction drawings and construction plan and without
prior consent of JAA.

55. By the time JAA was informed, the defects were

already there and some works had already been rectified.

56. Hence, if at all, Claimant’s claims should be with

the general contractors, which Claimant should have
impleaded as indispensable parties. However, as they were
not impleaded, the instant case ought to be dismissed.

57. Furthermore, the prolongation of works was not

due to Respondent’s fault but by both the General
Contractors and the Claimant. It must be noted that the
Claimant itself could not even specify what “factors (were)
proximately caused by the acts/omissions of the
Respondents” in its Complaint, which goes to show that it is
merely a bare allegation unsupported by evidence.

58. The truth is: delays were incurred because of the

collective negligence of the General Contractors and the
Claimant. They opted to follow mock-up drawings instead of
the approved construction drawings. The apparent
insufficiency of manpower and materials were likewise
demanded from Claimant by Asiankonstrukt.

59. Verily then, the prolonged works should not be

blamed on the Respondent and should not be made liable
thereto.

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Price Escalation was
expressly prohibited
in the LOI/NTPs and
in the Conditions of
Contract with the
General Contractors

60. As previously stated, price escalation is prohibited,

as expressed in the said documents. In fact, this has been
known to the Claimant and had been acknowledged by it. In
an effort to confuse the Honorable Commission, Claimant
insists that what it was demanding is not for the increased
prices in the materials but for the increase in quantity.

61. A careful perusal of its demand letters, however,

would readily belie such claims. At the onset, Claimant had
been demanding for the payment of materials at their
increased price in the market. In fact, even in its letter
dated 3 May 2005, Claimant had expressly stated: “xxx The
cost of materials since we bid (sic) (Nov. 2002) can no
longer be accommodated base (sic) on abrupt increase in
market price.”

62. In fact, even its attached Statement in its letter 15

dated 24 March 2006 would show that what the Claimant
had been demanding is the increase in price of the materials
and not additional quantity of materials, as evinced by the
tabulation of the price based on the Bill of Quantities and
Claimant’s alleged actual purchase.

63. Clearly then, Claimant is demanding for a price

escalation in the materials.

64. Unfortunately, as afore-stated, the delay and

prolongation of works, as well as the rectification of works
were all because of the fault and negligence of the general
contractors and the Claimant. Had they abided by the
construction designs at the very beginning of the
construction works, there would have not been any need to

15
Exhibit “41” of the Complaint
14
rectify works. There would have been no reason to extend
the period of completion.

65. When variations are used which add/omit

elements of work, whether it be in part or in whole, the
rates used for valuing the addition/deletion shall be the full
rates inserted in the Bill of Quantities; no adjustment will be
made to the rates for loss of profit or the like. Hence,
Claimant cannot now demand for payment of the materials
based on increased prices.

The Non-release of
the Retentions is due
to Claimant’s adamant
refusal to comply with
the requirements set
forth in the LOI/NTPs
and Conditions of
Contract

66. Claimant seems too keen on blaming the

Respondent for the withholding of the Retentions.

67. Records would bear, however, that Retentions

were not released due to Claimant’s unilateral decision not
to comply with the requirements given by DLS i.e. securing
a Guarantee Bond and executing an Affidavit of Quitclaim.

68. It bears stressing that the provision on securing a

Guarantee Bond made no qualification that it is unnecessary
after a certain period of time. Claimant cannot unilaterally
interpret for itself the terms of the contract, more so if said
contract, is otherwise clear and express.

69. The LOI/NTPs and the Conditions of Contract

provides for requirements that have to be complied with
sub-contractors after the completion of the project. Claimant
cannot, on its own whim, decide on what and what not to
comply.

15
Reconciliation of
Accounts cannot be
done unilaterally

70. Claimant also insists on reconciling the accounts

supposedly payable to it. According to the Claimant, there
were matters that were erroneous in the Statement of
Accounts and/or computations of Respondent.

71. Note, however, that the Summary of Payments by

the Respondent would already show the amounts paid to
Claimant. The Statement of Account issued by Respondent
on 18 April 2005 would show that all works are properly
accounted for.

Grounds for Motion to

dismiss

72. Respondent hereby repleads the allegations and

arguments as stated in its Motion to Dismiss.

73. Under pain of reiteration, the instant case must be

dismissed on the following grounds and arguments:

a. Lack of jurisdiction of the Honorable

Commission over the case as there is no arbitration
agreement between the Claimant and the Respondent.
The supposed arbitration clause being insisted by the
Claimant does not extend nor bind to Respondent, as
the Trade Sub Contract Agreement is between
Asiankonstrukt and the Claimant. Respondent cannot
likewise submit itself for voluntary arbitration as there
is no privity of contract between the Claimant and the
Respondent and because the Claimant miserably failed
to implead indispensable parties.

b. The Claimant likewise failed to state a cause

of action against the Respondent. As previously stated,
there is no privity of contract between the Respondent
and the Claimant as the latter is merely a nominated
sub-contractor. The LOI/NTPs clearly stated that it shall

16
 enter into a direct contract with the general
contractors. Furthermore, any action regarding the
claims of the Claimant is properly addressed to the
general contractors.

c. The Claimant also failed to implead

Asiankonstrukt and Maxco, which are indispensable
parties to the instant case. As the problems arose with
the works of both the general contractors and the
Claimant, a true and complete judgment can only be
had if Asiankonstrukt and Maxco are likewise impleaded
as parties. However, as they were not impleaded, the
instant case must be dismissed.

PRAYER

WHEREFORE, premises considered, respondent

through the undersigned Law Firm, most respectfully prays
unto this Honorable Commission that the ANSWER be
ADMITTED and the instant case be DISMISSED.

OTHER RELIEFS, just and equitable under the

premises, are likewise most respectfully prayed for.

RESPECTFULLY SUBMITTED. Pasig City for Makati

City, 11 June 2015.

THE
LAW FIRM OF
CHAN ROBLES AND ASSOCIATES
Counsel for the Respondent AMVEL LAND
DEVELOPMENT CORPORATION
22nd Floor Suite 2205 Philippine Stock Exchange Centre
Tektite East Tower, Exchange Road, Ortigas Center
Pasig City, Metro Manila
Tel Nos. (632) 634-0741 to 45

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 Fax No. (632) 634-0736
E-mail: [email protected]
By:

CESAR BECERRO TUOZO

PTR No.0380282; 01.06.15; Pasig City
IBP-LRN 06225; 01.04.07; Surigao del Norte
MCLE Compliance No. IV-0013036; 02.27.13; Pasig City
Roll No. 40045

GEOMELYN SARAH DE LEON SACRAMENTO

PTR No. 0380286; 01.06.15; Pasig City
IBP No. 0983695; 01.06.15; Quezon City
MCLE Compliance No. V-0003303; 08.28.14; Pasig City
Roll No. 61272

Copy furnished:

ATTY. JOSE VILLANUEVA CABRERA

Counsel for the Claimant
Suite 601 Building A
Victoria Towers, Diliman, Quezon City

EXPLANATION: A copy of the instant pleading is being served to the

aforesaid addressee through private courier services due to lack of
material time and necessary personnel to effectuate the preferred
mode of service.

GEOMELYN SARAH D. SACRAMENTO

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