Gateway mess: Court orders Araneta Center to pay contractor P114M

MANILA, Philippines - The Court of Appeals has ordered Araneta Center Inc. to pay its contractor some P114 million in damages for work done on the plush Gateway Mall in Cubao, Quezon City. In the same decision, the CA directed the construction firm CE Construction Corp or Cecon to award P31.5 million to Araneta representing liquidated damages, defective and incomplete works, bookmarking granite tiles and permit license and other advances. The 75-page decision was penned by Associate Justice Agustin Dizon and issued on April 28. In it, the CA's 16th Division also modified a ruling of the Construction Industry Arbitration Commission (CIAC). The CIAC had earlier ordered Araneta to pay respondent Cecon some P231 million. "On a practical matter, despite the extended and unauthorized delay by Cecon, Araneta cannot deny that it was able to obtain benefits from the Gateway Mall,"the CA said in its ruling. "Araneta was able to accept tenants and correspondingly start to earn rental income from the partially completed Gateway Mall," the court added. The CA noted that Araneta, to this day, continues to earn income from the mall, notwithstanding that there are many defects and some uncompleted parts left by Cecon. Records showed that Araneta and Cecon have been doing business together for more than 25 years. Sometime in the late 1980s, Araneta started conceiving a re-development plan for the Araneta Center Complex, which it formalized in June 2002 by sending invitations to different construction companies for them to bid on the project. Among those invited was Cecon. On August 30, 2002, Cecon submitted its design and construct proposal for Araneta Center Redevelopment Package for P1.44 billion. 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 alloted with Cecon submitting 15 requests for time extensions. Araneta informed Cecon that, as a cost-saving measure, Araneta would be purchasing certain equipment such as elevators/escalators, chillers, generator sets, indoor substation, cooling towers as well as pumps and tanks, for the project and that these would be charged to Cecon. Araneta deducted a total of P251.4 million representing the value and/or costs of the items 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 claimed 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 operate. 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 allowed its tenants to open on August 2004 and proceeded with its "soft blessing" on November 26, 2004. Araneta notified Cecon about a number of non-conforming and/or defective works including, among others, the unevenness of the exterior walls of the Mall, leaks in the cistern tanks and leaks in the exterior walls. The more significant of these defective work involved the extensive cracks in the cement flooring of the basement levels and parking driveways, the chalking of the cement on certain areas of these basement floors, the wrong installation of granite tiles that resulted in a mismatched appearance of the floors and the discoloration of the granite tiles. On January 29, 2004, Cecon filed a request for adjudication/complaint with the CIAC. On October 25, 2006, the arbitral tribunal rendered its decision awarding P229.22 million out of P303.63 million being claimed by the contractor and likewise awarded P11.795 to Araneta out of P180 million being claimed by the developer. Araneta then appealed the case. While the case was still pending before the CA, the CIAC issued a final award and ordered Araneta to pay Cecon P231 million. - GMANews.TV