SC Orders Shangri-La to Pay BF Corp. PhP52M

January 14, 2020

The Supreme Court (SC), through the ponencia of now retired Chief Justice Lucas P. Bersamin, ordered Shangri-La Properties, Inc. (Shangri-La Properties) to compensate BF Corporation (BFC) the total amount of PhP52,635,679.70 in relation to the construction of Phases I and II, and the Car Parking Structure of the EDSA Plaza Project (the Project).

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 Construction Industry Arbitration Commission (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 under Rule 45 before the SC.

As a rule, the findings of facts of the arbitrators of the CIAC are deemed final and conclusive, and are accorded full respect by the SC. This is true especially since Rule 45 petitions must only raise questions of law under the Rules of Court. However, the SC decided to review the findings of facts of the CIAC considering that its findings are contrary to those of the CA.

After considering the allegations and evidence presented by the parties, the SC partially granted BFC’s petition but denied Shangri-La Properties’ petition for lack of merit.

The SC agreed with the findings of the Arbitral Tribunal when it considered the specific variation orders with the conformity of the Shangri-la Properties. It therefore reinstated the arbitral award in favor of BFC, which the CA previously disregarded. However, the SC denied BFC’s claim for fire damage and repair works as there was no proof that Shangri-La Properties received any fire insurance proceeds. Moreover, the CIAC and the CA both found that BFC assumed the sole risk for damages or losses sustained due to fire.

Both CIAC and the CA agreed that the original scope of work had been completed and performed by BFC; hence, the SC considered such finding as final and conclusive. Nevertheless, the SC had to determine Shangri-La Properties’ obligation due to BFC. In this case, the SC sustained the CA in holding that Shangri-La Properties is still liable to pay BFC the amount of PhP24,497,555.91.

The SC held that BFC is also liable for the delays in the completion of the Project suffered by Shangri-La Properties. Considering that both parties have money obligations to each other, on offsetting of obligations was in order. In the end, the SC ordered Shangri-La Properties to pay BFC the total amount of PhP52,635,679.70, plus legal interest of 6% per annum reckoned from the date of the Arbitral Tribunal’s decision.

(G.R. Nos. 187552-53 and 187608-09, Shangri-La Properties, Inc. (now known as Shang Properties, Inc.) v. BF Corporation, October 15, 2019)

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