J.L. BERNARDO CONSTRUCTION v.

CA
January 31, 2000 | Gonzaga-Reyes, J. | Concurrence and Preference of Credits | Conejero

PETITIONERS: J.L. Bernardo Construction, represented by attorneys-in-fact Santiago R. Sugay, Edwin A. Sugay
and Fernando S.A. Erana, Santiago R. Sugay, Edwin A. Sugay and Fernando S.A. Erana
RESPONDENTS: Court of Appeals and Mayor Jose L. Salonga
SUMMARY: J.L. Bernardo Construction alleges that the San Antonio, Nueva Ecija municipal government has not
paid it for the demolition and construction of the San Antonio Public Market, filing a complaint for specific
performance and collection. Petitioners were granted WPI by the RTC and deemed to be unpaid contractors entitled
to a lien on the market. Respondent Salonga filed a motion to fix counterbond and during pendency of this motion,
filed a petition for certiorari with the CA which in turn reversed the RTC decision. The SC partly upheld the CA,
saying that the contractors lien under Article 2242 of the Civil Code finds application only in the context of
insolvency proceedings, as expressly stated in Article 2243. Even if it is conceded that plaintiffs are entitled to retain
possession of the market under its lien, such lien cannot be enforced in the present action for there is no way of
determining whether or not there exist other preferred creditors with claims over the San Antonio Public Market.
DOCTRINE: Article 2242 only finds application when there is a concurrence of credits, i.e. when the same specific
property of the debtor is subjected to the claims of several creditors and the value of such property of the debtor is
insufficient to pay in full all the creditors. In such a situation, the question of preference will arise, that is, there will
be a need to determine which of the creditors will be paid ahead of the others. Fundamental tenets of due process
will dictate that this statutory lien should then only be enforced in the context of some kind of a proceeding where
the claims of all the preferred creditors may be bindingly adjudicated, such as insolvency proceedings. This is made
explicit by Article 2243 which states that the claims and liens enumerated in articles 2241 and 2242 shall be
considered as mortgages or pledges of real or personal property, or liens within the purview of legal provisions
governing insolvency.

FACTS:
Sometime in 1990, the municipal government of San Antonio, Nueva Ecija approved the construction of
the San Antonio Public Market to be funded by the Economic Support Fund Secretariat, a government
agency working with the USAID.

On June 8, 1990, a Construction Agreement was entered into by the Municipality of San Antonio thru
respondent Salonga and petitioner J.L. Bernardo Construction after the latter won bidding.

Petitioners filed a complaint for breach of contract, specific performance, and collection of a sum of money,
with prayer for preliminary attachment and enforcement of contractors lien against the Municipality of San
Antonio, Nueva Ecija and Salonga, claiming that

o the Municipality agreed to pay the expenses for the demolition, clearing and filling of the
construction site (P1,150,000) and cash equity (P767,305.99) to be remitted directly, but then
refused to pay despite repeated demands and the fact that the market was over 98% complete

o Salonga induced them to advance the expenses by saying the Municipality would reimburse them

The RTC issued the writ of preliminary attachment and granted J.L. Bernardo Construction the right to
operate the market based on fair and reasonable guidelines to be approved by the Court, denied MR.

o TC gave credence to claims of fraud by false representation by the Municipality based on the
complaint and the affidavits of plaintiffs Santiago Sugay and Erana

o With regards to the contractors lien, TC held the plaintiffs in the position of an unpaid contractor
entitled, pursuant to Articles 2242 and 2243 CC, to a lien of P2,653,576. excluding damages
 The usual way of enforcing a lien is by a decree for the sale of the property and the
application of the proceeds to the payment of the debt secured by it

It is more practical and reasonable to permit plaintiffs to apply to their claims the income
derived from the market, in the form of rentals and goodwill from stallholders

Respondent Salonga filed a motion for the approval of his counterbond which was treated by the trial court
in its October 29, 1991 order as a motion to fix counterbond and for which it scheduled a hearing.

During the pendency of his motion, respondent Salonga filed with the Court of Appeals a petition
for certiorari under Rule 65 with prayer for a WPI and TRO. Petitioners opposed , claiming that respondent
had in fact a plain, speedy and adequate remedy: filing a motion to approve counter-bond with the TC

On February 6, 1992, the Court of Appeals reversed the TC decision and ruled in favor of Salonga.

o The respondent judges orders for the issuance of WPI, enforcement of a contractors lien, and
approving the public market operation guidelines were nullified and set aside

o Since the Construction Agreement was only between Juanito Bernardo and the Municipality, and
since there is no sworn statement that the former was deceived by the latter, the applicant has not
proven inceptive fraud under Rule 57 ROC, and is not entitled to a WPA

o The filing of a motion for approval of counter-bond by did not, according to the Court of Appeals,
render the petition for certiorari premature as it could not cure the defect in the WPIs issuance

ISSUES/HELD:

1. Whether the petition for certiorari assailing the TCs interlocutory orders granting the writ of
attachment and the contractors lien was properNO, the filing of the petition was premature as they
still had recourse to a plain, speedy and adequate remedy - the filing of a motion to fix the counter-bond,
which they filed with the trial court, the grant of which would effectively prevent the issuance of the writ of
attachment. They could also have filed a motion to discharge the attachment for having been improperly or
irregularly issued or enforced, or that the bond is insufficient, or that the attachment is excessive.

2. Whether the petitioners can enforce a contractors lien granted under Article 2242NO, even if they
are really unpaid contractors entitled to invoke the contractors lien granted under Article 2242. Such lien
cannot be enforced in the present action for there is no way of determining whether or not there exist other
preferred creditors with claims over the San Antonio Public Market. Article 2242 only finds application
when there is a concurrence of credits, i.e. when the same specific property of the debtor is subjected to the
claims of several creditors and the value of such property of the debtor is insufficient to pay in full all the
creditors. The records do not contain any allegation that petitioners are the only creditors with respect to
such property. The fact that no third party claims have been filed in the trial court will not bar other
creditors from subsequently bringing actions and claiming that they also have preferred liens against the
property involved.

DISPOSITIVE: CA upheld insofar as it nullifies the contractors lien granted by the trial court in favor of petitioners
in its September 5, 1991, as well as its nullification of the trial courts October 11, 1991 Order approving the
guidelines for the operation of the San Antonio Public Market. The CA order nullifying the writ of attachment
granted by the trial court is reversed.

NOTES/RATIO:
1. A petition for certiorari may be filed in case a tribunal, board or officer exercising judicial or quasi-judicial
functions has acted WOIEOJ, or with GAD amounting to lack or excess of jurisdiction, and there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary course of law

a. The office of the petition is restricted to truly extraordinary cases wherein the act of the lower
court or quasi-judicial body is wholly void; there must be patent and gross abuse of discretion

b. Certiorari is an appropriate remedy to assail an interlocutory order (1) when the tribunal issued
such order without or in excess of jurisdiction or with grave abuse of discretion and (2) when the
assailed interlocutory order is patently erroneous and the remedy of appeal would not afford
adequate and expeditious relief.

2. The contractors lien cannot be enforced in the present action for there is no way of determining whether or
not there exist other preferred creditors with claims over the San Antonio Public Market. The records do not
contain any allegation that petitioners are the only creditors with respect to such property. The fact that no
third party claims have been filed in the trial court will not bar other creditors from subsequently bringing
actions and claiming that they also have preferred liens against the property involved.

a. Our decision herein is consistent with our ruling in Philippine Savings Bank v. Lantin wherein we
also disallowed the contractor from enforcing his lien pursuant to Article 2242 of the Civil Code in
an action filed by him for the collection of unpaid construction costs.

b. It not having been alleged in their pleadings that they have any rights as a mortgagee under the
contracts, petitioners may only obtain possession and use of the public market by means of a
preliminary attachment upon such property, in the event that they obtain a favorable judgment in
the trial court. Under our rules of procedure, a writ of attachment over registered real property is
enforced by the sheriff by filing with the registry of deeds a copy of the order of attachment,
together with a description of the property attached, and a notice that it is attached, and by leaving
a copy of such order, description, and notice with the occupant of the property, if any. If judgment
be recovered by the attaching party and execution issue thereon, the sheriff may cause the
judgment to be satisfied by selling so much of the property as may be necessary to satisfy the
judgment. Only in the event that petitioners are able to purchase the property will they then
acquire possession and use of the same.