DEPARTMENT OF

MECHANICAL
ENGINEERING

MEng 158
Mechanical Engineering Laws, Ethics, Contracts, Codes
and Standards

Case Study Report

Submitted by:
BRYAN R. ALLUSO

Submitted to:

RONARD G. PAÑA

May 2024
i

EXECUTIVE SUMMARY

FAJ Construction and Development Company filed a complaint against

Susan Saulog because she failed to pay the remaining balance for a
construction project and wanted to cancel the contract. Saulog terminated the
contract due to FAJ Construction's unfinished and unsatisfactory work, which
caused substantial damage to the structure. In response, Saulog filed a
counterclaim claiming reimbursement for the increased costs spent in
rebuilding and repairing the damage caused by FAJ Construction's work.
ii

TABLE OF CONTENTS

EXECUTIVE SUMMARY
Table of Contents

INTRODUCTION

CASE STUDY
The Facts
Case Overview and Allegations
Ruling of the Regional Trial Court
Ru;ing of the Court of Appeals

ANALYSIS
Cause
Code of Ethics

LESSONS
Lessons
Reflection

REFERENCES

APPENDICES
1

INTRODUCTION

Construction plays a vital role in shaping the infrastructure and

environments of our society, providing essential buildings, roads, and
facilities. Any building project must follow strict planning and abide by
established standards because of its crucial necessity. This reduces risks,
guarantees effective and safe execution, and satisfies legal and quality
criteria. By giving the built environment such meticulous care, sustainability
and resilience for future usage are ensured.

The purpose of the study is to examine the FAJ Construction and

Development Corporation vs. Susan M. Saulog case. On September 28 and
November 24, 2000, the construction company delivered demand letters to
their client Susan M. Saulog because the client failed to pay the agreed upon
amount and wants to terminate the contract and the reason for the client's
decision to terminate the contract is dissatisfied with the work of the
construction company. Later, FAJ Construction and Development Corporation
filed a complaint against Susan M. Saulog.

The case will be based on the Philippine Mechanical Engineering Act

of 1998 and the code and ethics of Mechanical Engineers of the Philippines.
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CASE STUDY

The Facts

Case Overview and Allegations

FAJ Construction and Development Corporation entered a contract

with Susan M. Saulog on June 15, 1999, to construct a residential building in
Makati City for P12,500,000. After works inspections, they were to make
payments based on the progress bills. Saulog paid P10,592,194.80 but
refused to pay P851,601.58 for billings in October and November 2000 FAJ
brought contract to an end and demanded payment while Saulog claimed that
she would not sustain any further payment since there was defective work.
The unpaid sum plus damages became subject of FAJ’s civil suit against her
while Saulog filed a counterclaim claiming damages resulting from
defectiveness as well as delays and sought for substantial amount of money.
During the trial, FAJ’s lawyer repeatedly sought adjournments; ultimately
leading the trial court to dismiss the suit for lack of prosecution after many his
absences.

FAJ’s petitions for reconsideration were rejected by the courts below

and so they appealed to the Supreme Court which declined jurisdiction
thereby maintaining dismissal of case by CA after blaming delay tactics on
their part. As such this subsequent appeal to the Supreme Court was
dismissed by them also. It attained finality and became executory on August
16, 2005

Ruling of the Regional Trial Court

In civil case numbered Q-02-45865, defendant Susan Saulog

submitted evidence in support of her counterclaim against FAJ Construction.

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The building was evaluated by Architect Rhodora Calinawan who reported

several defects such as unclean floors, misplaced electric sockets, stained

floor, incorrect installations among others. Saulog averred that she had

previously made a total payment of P10,592,194.80 to FAJ and had declined

to pay an extra P851,601.58 because the work remained unfinished and

inferior in quality.

Then she asked for additional amount spent on remedying the defects
in the construction amounting to P3,820,796.21 alongside damages for
delayed projects and poor-quality works. The lower court decided on behalf of
Saulog stating that FAJ’s work was defective; there were delays which led to
abandonment uncompleted project. Finally, the court granted her with:

1.Actual Damages: P3,213,575.91

2. Lost Rentals: P5,391,456.00

3.Moral Damages: P500000

4.Exemplary Damages: P500000

5.Penalties for Delay: P1,387 ,500

6.Attorney’s Fees: 20k + 4k per appearance.

In addition, it is worth noting that the court also granted interest at a

rate of six percent per annum from January 2nd, 2002, when the complaint
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was filed. Thus, claim for additional consequential damages amounted to

another sum of P1,600,000 .00 has been dismissed for lack of proof.

Ruling of the Court of Appeals

The petitioner appealed the trial court's ruling that they were
responsible for a specific amount to the Court of Appeals (CA). They
appealed the damages awarded and argued against the rejection of their
complaint for failure to prosecute. The trial court's ruling was upheld by the
CA, however several elements were changed, such as the complaint's
dismissal and the damages that were granted. The CA turned down the
petitioner's request for reconsideration. The petitioner later appealed the CA's
ruling in a petition to the Supreme Court. The CA's ruling was sustained by
the Supreme Court, which rejected the petition.

The petitioner's arguments were rejected. The petitioner was held

accountable for losses resulting from substandard work, project delays, and
project abandonment, as determined by the Supreme Court, which affirmed
the decision of the CA. The trial and appeal courts' factual conclusions were
deemed to be unwarranted by the court. The court also maintained the
interest added to the damages and the penalties for delay that were granted.
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ANALYSIS

Cause

The conflict started when FAJ Construction and Development

Company filed a complaint against Susan Saulog. This action was caused by
the client's failure to pay the remaining balance for the construction project
and their stated want to cancel the contractual agreement. Saulog's request
for contract termination resulted from FAJ Construction's incomplete and
substandard work, which caused substantial damage to the building. Saulog
replied by bringing a counterclaim against FAJ Construction, claiming
compensation for the increased costs involved in rebuilding the structure and
correcting the damage caused by the construction company.

Code of Ethics

Fundamental Canons

1. Hold paramount the safety, health, and welfare of the public in

performance of their professional duties.

FAJ Construction and Development Company has clearly violated the

standards of the industry by delivering substandard work that does not satisfy
the necessary standards for quality. The decline in performance shows a
serious neglect of their professional responsibilities. As a contractor, FAJ
development is responsible not only for the physical development of
infrastructure, but also for their clients' safety and well-being. The defects in
their work demonstrate a failing to meet these conflicting responsibilities.
Contractors like FAJ Construction must demonstrate a high level of
attentiveness and commitment to both the structural integrity of their projects
and the safety regulations that safeguard their clients from harm
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Rule 1: The mechanical engineer shall, in the practice of his profession,

be guided by the Golden Rule, the ideals of service to man and his
environment, and the need to secure unwavering public confidence,
integrity and humanity.

Rule 2. The mechanical engineer shall maintain the proper professional

fee for his profession, observe the standards of professional practice,
safeguard the dignity, and reputation of his colleagues in the
profession, and fulfill his duties and obligations as a citizen of the
Republic of the Philippines.

The FAJ Construction and Development Company violated both rule 1

and rule 2, as proven by numerous mistakes found in their work. These flaws
indicate a major failure to keep to basic construction standards and quality
control systems. A construction company must follow the golden rule, which
emphasizes treating others as one expects to be treated. This idea
emphasizes that the service supplied should not only meet, but exceed, the
client's expectations, resulting in satisfaction and trust.

Furthermore, building companies must maintain the highest

professional standards. This entails paying close attention to detail, following
to safety standards, and consistently producing high-quality work. FAJ
Construction has a commitment to its clients to maintain these professional
standards and provide services that are both safe and dependable. Failure to
do so damages their professional credibility and the faith that their clients
have placed in them.

Rule 15. The mechanical engineer shall observe punctuality in his

appointments, perform honesty and in good faith, his contractual
obligation and his duties and obligations to his clients or employer, and
observe fair leading in his relations with his clients and employers .
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The FAJ Construction and Development Company violated Rule 15

due to the delay of the construction project. The rule requires the organization
to ensure punctuality in its operations. It is essential that FAJ Construction
keep to their scheduled schedules and carry out their tasks diligently. The
delay not only reflects negatively on their time management abilities, but it
also has an impact on the whole project timeline and clients. To avoid future
violations and for simple project execution, the organization must take
immediate action to address this issue and enforce greater adherence to its
duties.
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LESSONS

Lessons

The lesson that the student learned in the case is that it case
emphasizes the importance of meeting the terms of the contract, in which
both parties are obligated to perform their respective duties as stated in the
agreement.

Contractors must ensure the quality of their work, as demonstrated by

the inferior work detailed in this example, underlining the importance of quality
assurance in building projects. The contractor is responsible for any flaws that
develop throughout the project and should resolve them as soon as possible.
Timely performance is critical to avoiding additional expenses and losses for
the customer, as demonstrated by the respondent's expenses incurred
because of project completion delays.

Reflection

The student’s reflection on this case is that careful planning, thorough

execution, and strict compliance to contractual terms are vital in construction
projects. As a future mechanical engineer, the student understands the
necessity of delivering high-quality work, meeting all specifications, and
immediately addressing faults. Timely completion is not only a contractual
requirement, but also necessary for maintaining strong client relationships and
avoiding any legal conflicts. Furthermore, this case serves as a reminder of
the consequences of neglecting to execute contractual obligations, as the
petitioner faced massive financial responsibilities. Moving forward, the student
aim to uphold a high standard of professionalism, transparency, and honesty
in all my business transactions, putting customer satisfaction and legal
compliance first and foremost.
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Additionally, the student recognizes the necessity of proper legal

counsel and procedural compliance in the event of a disagreement, realizing
that following legal requirements is critical to protecting my interests and
reputation in the business.
Lastly, this case study provided me with valuable knowledge and
learning experiences. It taught me the proper values, morals, codes of
conduct, and duties that an engineer must have as a student of mechanical
engineering.
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REFERENCES

Code Of Ethics (mechanical Engineering In The Philippines)

[143020v19o4j]. (n.d.). Retrieved from https://idoc.pub/documents/code-
of-ethicsmechanical-engineering-in-the-philippines-143020v19o4j

G.R. No. 200759.

(n.d.).https://lawphil.net/judjuris/juri2015/mar2015/gr_200759_20
15.html

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APPENDICES