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THE
Court of Appeals (CA) has directed property developer
Araneta Center Inc. to pay a construction company the
amount of P114 million, representing its unpaid billings
for the construction of the Gateway Mall in Cubao,
Quezon City.
In a
75-page decision penned by Associate Justice Agustin
Dizon, the CA’s Sixteenth Division modified the December
28, 2006, decision of the Construction Industry
Arbitration Commission (Ciac) awarding the amount of
P231.3 million to CE Construction Corp. (Cecon).
The
appellate court, likewise, required Cecon to compensate
Araneta in the amount of P31.56 million, representing
liquidated damages, defective and incomplete works and
permits, licenses and other advances.
Araneta
and Cecon have been doing business together for more
than 25 years.
Based on
the records, Araneta started conceiving a redevelopment
plan for the Araneta Center Complex. In June 2002
Araneta formalized the project and sent invitations to
different construction companies inviting them to bid on
the project.
Cecon
was among the contractors invited by Araneta to
participate in the bidding for the project. On August
30, 2002, Araneta formally accepted Cecon’s offer to do
the project in the amount of P1.54 billion.
Araneta
subsequently released to Cecon the down payment of P200
million.
The
contract period for the project was for 400 calendar
days with a completion date of January 9, 2004.
The project was not completed in the original time
allotted and Cecon submitted several requests for time
extensions.
Araneta
informed Cecon that, as a cost-saving measure, Araneta
would be personally purchasing certain equipment and
materials, such as elevators, escalators, chillers,
generator sets, indoor substation, cooling towers as
well as pumps and tanks, for the project and the amounts
would be taken out of Cecon’s contract.
Araneta
deducted a total of P251.4 million representing the
value or costs or both of the items deleted or taken out
from Cecon’s scope of work.
As of
May 30, 2005, Araneta had a balance of P1.186 billion for Cecon’s
supply and installation of the subject equipment.
Araneta claims that it was unable to settle this balance
because Cecon did not furnish Araneta with copies of the
purchase orders-sales invoices for certain equipment it
supplied and installed.
Following delays, Cecon claimed that Araneta’s refusal
to pay Cecon the amounts due it as billed, was affecting
its ability to continue the project.
While
the last undisputed completion date before the
commencement of the arbitration before the Ciac was
March 15, 2004, Cecon’s percentage of completion of the
project was only 81.92 percent as of April 5, 2004.
On June
30, 2004, Araneta reminded Cecon that the 400 day
completion date had long since passed and that it was
reserving all its rights arising from such lapse.
Despite
the uncompleted state of the Gateway Mall, Araneta also
allowed its tenants to come in on August 2004.
Araneta
also proceeded with its scheduled soft blessing of the
mall on November 26, 2004.
Araneta
notified Cecon about a number of non-conforming or
defective works or both including, among others, the
unevenness of the exterior walls of the mall, leaks in
the cistern tanks and leaks in the exterior walls.
Concurring with the ruling were Associate Justices
Regalado Maambong and Celia Librea-Leagogo. |
