G.R. No. 200370 - Veridiano y Sapi vs. People

Petitioner CE Construction Corporation (CECON), a contractor with over 25 years of experience, and respondent Araneta Center, Inc. (ACI), developer of Araneta Center in Cubao, Quezon City.
In June 2002, ACI invited bids for “Package #4 Structure/Mechanical, Electrical, and Plumbing/Finishes (excluding Part A Substructure)” of the Gateway Mall redevelopment, furnishing Volume I and II Tender Documents and four addenda. The contract was described as a “Lump Sum Fixed Price,” not subject to adjustment except for cost-bearing changes under the Schedule of Rates and Value Engineering Proposals.

CECON submitted the lowest bid of ₱1,449,089,174 on August 30, 2002, valid for ninety days, proposing 400 days for completion. ACI delayed formal award, verbally instructed CECON on December 7, 2002 to commence excavation, but delivered only half the site initially.
Parties renegotiated scope and price: inclusion of an office tower increased cost to ₱1,582,810,525; later adjusted to ₱1,613,615,244; CECON extended a ₱73,615,244 discount to arrive at ₱1,540,000,000. ACI unilaterally removed the design component and later issued some 1,675 construction drawings, 600+ of which arrived after the original January 10, 2004 completion date.

Despite a June 2, 2003 letter “accepting” CECON’s ₱1.54 billion offer and promising formal documents, no contract was executed. ACI issued Change Order No. 11 shifting structural framing from concrete to steel and claimed “take-out costs” of equipment (elevators, chillers, etc.) totaling ₱251,443,749, which CECON contested.
CECON filed a Request for Adjudication with the CIAC on January 29, 2004, seeking ₱183,910,176.92 for cost adjustments and related claims. After attempted settlement and mediation, an arbitral tribunal was constituted March 16, 2005.

On October 25, 2006, the CIAC Arbitral Tribunal awarded CECON ₱217,428,155.75 net, covering unit cost adjustments, change orders, time extensions, attendance fees, differential take-out costs, and arbitration expenses, and denied ACI’s liquidated damages claim.
The Court of Appeals, in its April 28, 2008 Decision, reduced CECON’s net award to ₱114,324,605.00 and awarded ACI ₱31,566,246.20, characterizing the contract as an inviolable lump-sum. An amended decision on July 1, 2010 adjusted figures to a ₱93,896,335.71 balance payable to CECON. CECON filed a Rule 45 Petition for Review on Certiorari.

Did the Court of Appeals err in treating the parties’ agreement as an immutable lump-sum fixed-price contract and thus deprive the CIAC of jurisdiction to adjust the contract sum?
Did the CIAC Arbitral Tribunal act in excess of its jurisdiction by employing aids in interpretation (Civil Code Arts. 1370–1379) and awarding cost adjustments, change orders, extensions, overhead, attendance fees, and arbitration costs?
Are the CA’s reductions of the CIAC award—based on an alleged inviolable Lump Sum arrangement—legally sustainable?