G.R. No. 187552-53 - Shangri-La Properties, Inc. vs. BF Corp.

The dispute arose between Shangri-La Properties, Inc. (SLPI), later known as Shang Properties, Inc. (and then EDSA Properties Holdings, Inc.), and BF Corporation (BFC) regarding a construction contract for Phases I and II and the Car Parking Structure of the EDSA Plaza Project in Mandaluyong City.
SLPI acted as the project owner while BFC was the trade contractor responsible for executing the builder’s work under the agreed contract documents.
BFC initiated legal action in the Regional Trial Court of Pasig City for the collection of a large monetary claim amounting to over P228 million, which was later stayed pending the mandatory arbitration as required by the contract.

BFC filed a request for arbitration with the Construction Industry Arbitration Commission (CIAC); however, the arbitration was initially dismissed on technical grounds related to the applicable law.
The trial court later revived the case, directing that the arbitration be pursued in accordance with Republic Act No. 876.
The CIAC arbitral tribunal—composed of Engr. Eliseo Evangelista, Ms. Alicia Tiongson, and Atty. Mario Eugenio Lim—was tasked to resolve several issues arising from the construction agreement.

Awarded BFC several sums for unpaid progress billings (segregated into contract bills derived from the original scope and those for change orders/variations), fixed and provisional attendances, retention money, legal interest, and arbitration costs.
Granted SLPI an award for liquidated damages due to delays and for other counterclaims, with the net computation resulting in SLPI’s obligation to pay BFC a net amount plus legal interest.

The Court of Appeals (CA) later reviewed the arbitration award, partially modifying it by:

Increasing the award for unpaid progress billings on the original scope and reducing that on variation works.
Adjusting the legal interest award and recalculating arbitration costs, with some awards (such as those for fixed and provisional attendances and retention money) confirmed initially but later deleted or reduced upon evidence that SLPI had already paid these amounts with interest.

Subsequent motions for reconsideration resulted in further modifications, particularly deleting certain awards on the basis that they had been previously satisfied, and recalculating the net amount due based on offsets.

Both parties separately appealed the modifications by the CA.
BFC’s appeal focused on claims such as entitlement to recover costs for variation works, damages caused by nominated sub-contractors, fire damage and repair works, re-computation of interest, and the proper computation of unpaid progress billings on the original scope of work.
SLPI contested the CA’s increase of the award for unpaid progress billings and the reduction in liquidated damages, arguing that the CA had erred in its factual and mathematical findings.

Whether the Court of Appeals erred in reversing the arbitral tribunal’s findings regarding the written instructions and authority to perform variation works as required under Article 1724 of the Civil Code.

Whether a letter dated May 9, 1991, along with SLPI-approved variation orders, sufficiently constituted the written authorization for undertaking additional works.

Whether BFC was entitled to reimbursement for damages caused by SLPI’s nominated sub-contractors, given that SLPI had allegedly merely acted as an agent in facilitating the claims.
Whether BFC’s claim for damages or reimbursement for fire damage and repair works was properly denied on the ground that no evidence showed SLPI received fire insurance proceeds.
Whether the CA erred in restricting the computation of interest on the fixed and provisional attendances and unpaid progress billings based on the original scope of work to commence only from the date of the arbitral tribunal’s decision (July 31, 2007).

Whether the CA erred in awarding and modifying the unpaid progress billings based on the original scope of work by significantly increasing BFC’s claim compared to what the arbitral tribunal originally computed.
Whether the reduction of liquidated damages—from P7,590,000.00 awarded by the arbitral tribunal to P780,000.00—was proper, considering the contractual stipulations on delay penalties.