SC orders Shangri-La to pay its contractor

The Supreme Court has ordered Shangri-La Properties Inc. (Shangri-La Properties) to compensate BF Corp., almost P100 million representing the latter’s claims plus interests for the construction of EDSA Plaza Project.

In an en banc decision, the SC through then Chief Justice Lucas Bersamin—he has since retired—resolved to reinstate the decision of the Arbitral Tribunal of the  Construction Industry Arbitration Commission granting BFC’s claim for variation of works.

The high court held that the Court of Appeals wrongly disregarded the specific variation orders that  carried the conformity of SLPI, which, when coupled with the letter dated May 9, 1991, satisfied the requisites under Article 1724 of the Civil Code.

Art. 1724 provides that “the  contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with plans and specifications agreed upon with the land-owner, can neither withdraw from the contract nor demand an increase in the price on account of the higher cost of labor or materials, save when there has been a change in the plans and specifications, provided such change has been authorized by the proprietor in writing; and the additional price to be paid to the contractor has been determined in writing by both parties.” 

“Accordingly, SLPI was liable to pay BFC for the latter’s completed works. As concluded by the Arbitral Tribunal and affirmed by the CA, the completion of the works was conclusively established.,” the high tribunal ruled.

With the ruling, the SC upheld the increase in the award for BFC’s unpaid progress billings for contract bills and change orders  in the amount of P35,372,005.57; reinstate the award for accomplished but unpaid change orders  in the amount of P6,201,278.50; reinstate the award for legal interest in the amount of P12,382,710.73; and the equal sharing of arbitration costs amounting to P857,229.88.

The SC said BFC is entitled to the award totaling to P54.81 million.

But the tribunal denied BFC’s claim for damages caused by the nominated sub-contractors of SLPI .

It held that it would be wrong and unjust to hold SLPI liable for damages it did not cause.

The SC also sustained the award issued by the Arbitral Tribunal in favor of SLPI which include the award for liquidated damages amounting to P780,000; award for other counterclaims amounting to P540,315; and equal arbitration costs amounting to P857,229.88.

The high court said both parties are liable to pay the awards plus legal interest of six percent per year from July 31, 2007, the date of the Arbitral Tribunal decision, until the decision becomes final and executory.

After which, the SC said the principal amount due, plus the interest of six percent per annum will likewise earn interest six percent per annum until full satisfaction.

The case arose from the contract executed between Shangri-La Properties and BFC concerning the Project. The trial court directed the parties to pursue the case with the CIAC.

An Arbitral Tribunal was created to receive the varying claims of the parties. 

In its July 31, 2007 decision, the Arbitral Tribunal recognized BFC’s right to recover its claims for unpaid progress billings. It likewise acknowledged Shangri-La Properties’ entitlement to liquidated damages for the delays incurred in finishing the Project.

Both parties appealed the case before the Court of Appeals (CA).

The CA partially granted the petitions based on its appreciation of the facts and evidence presented.

As both parties were dissatisfied by the CA decision, they each filed a petition for review before the SC.

Topics: Supreme Court , Shangri-La Properties Inc , EDSA Plaza Project , Lucas Bersamin , Court of Appeals
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