J.L. Bernardo Construction v. Court of Appeals
REITERATIONFacts
1. The Antecedents: Petitioners J.L. Bernardo Construction, represented by its attorneys-in-fact, and the individuals Santiago R. Sugay, Edwin A. Sugay, and Fernando S.A. Erana, entered into a business venture to bid for the construction of the San Antonio Public Market. The Municipality of San Antonio, Nueva Ecija, awarded the contract to J.L. Bernardo Construction. Petitioners allege that the Municipality, through Mayor Jose L. Salonga, failed to pay the agreed cash equity and reimburse expenses for demolition, clearing, and site filling, despite the project being nearly complete. This led to petitioners filing a complaint for breach of contract, specific performance, and collection of a sum of money, with a prayer for preliminary attachment and contractor's lien against the Municipality and Mayor Salonga. 2. Procedural History: The Regional Trial Court (RTC) of Cabanatuan City granted petitioners' prayer for a writ of preliminary attachment and authorized them to take possession and operate the San Antonio Public Market, reasoning that the defendants were guilty of fraud in incurring their obligations and that petitioners, as unpaid contractors, were entitled to a lien. The RTC denied the defendants' motion for reconsideration. Respondent Mayor Salonga then filed a petition for certiorari with the Court of Appeals (CA), arguing that the RTC's orders were issued with grave abuse of discretion. Petitioners opposed, asserting that Salonga had a plain, speedy, and adequate remedy in the form of a motion to approve a counterbond pending before the RTC. The CA reversed the RTC's decision, nullifying the writ of attachment and the contractor's lien, finding that the petitioners had not proven inceptive fraud and that the contractor's lien was only applicable in insolvency proceedings. The CA also ruled that the issue of real parties-in-interest should be raised later. Petitioners are now before the Supreme Court. 3. The Petition: This petition for certiorari under Rule 65 of the Rules of Court seeks to annul the decision of the Court of Appeals. Petitioners argue that the CA erred in taking cognizance of Salonga's petition for certiorari, as it was premature because Salonga had a plain, speedy, and adequate remedy in the form of a pending motion to approve a counterbond with the RTC. They also contend that the CA disregarded established jurisprudence by entertaining a petition assailing interlocutory orders and that the CA's findings of fact and conclusions were erroneous and contradicted by the evidence. Petitioners further claim the CA misappreciated their causes of action, skirted issues of agency coupled with interest, and made findings beyond the scope of the certiorari case. They assert that the CA disregarded the weight due to the RTC's factual findings and that the CA's decision was known prior to its promulgation. The core issues presented are whether the CA correctly assumed jurisdiction over the certiorari petition assailing interlocutory orders and whether the CA committed reversible errors of law.
Issue(s)
Whether the Court of Appeals correctly assumed jurisdiction over the petition for certiorari assailing the trial court's interlocutory orders. Whether the Court of Appeals committed reversible errors of law in its decision, particularly regarding the issuance of the writ of attachment and the enforcement of the contractor's lien, including the possession and operation of the market and the real party in interest.
Ruling
The Supreme Court upheld the Court of Appeals' decision in nullifying the contractor's lien and the order approving the market's operation guidelines. However, it reversed the Court of Appeals' order nullifying the writ of attachment granted by the trial court. Dispositive Portion: WHEREFORE, we UPHOLD the Court of Appeal's Decision dated February 6, 1992 in CA-G.R. SP No. 26336 insofar as it nullifies the contractor's lien granted by the trial court in favor of petitioners in its September 5, 1991 Order. Consequently, we also UPHOLD the appellate court's nullification of the trial court's October 11, 1991 Order approving the guidelines for the operation of the San Antonio Public Market. However, we REVERSE the appellate court's order nullifying the writ of attachment granted by the trial court.
Ratio Decidendi
On the propriety of the certiorari petition: The Supreme Court held that the Court of Appeals should not have given due course to the petition for certiorari filed by Salonga and the Municipality questioning the writ of attachment. This is because they still had recourse to a plain, speedy, and adequate remedy, namely, the filing of a motion to fix the counter-bond, which they had already filed with the trial court. The grant of such a motion would have effectively prevented the issuance of the writ of attachment. Furthermore, they could have also filed a motion to discharge the attachment for having been improperly or irregularly issued or enforced, or for being insufficient or excessive, as provided under Rule 57, Section 13 of the Rules of Court. With these remedies still available, the filing of a petition for certiorari with the Court of Appeals was clearly premature. On the contractor's lien, possession and operation of the market, and the issue of real party in interest: The Supreme Court upheld the appellate court's ruling reversing the trial court's grant of a contractor's lien in favor of the petitioners. The Court reiterated that Articles 2241 and 2242 of the Civil Code enumerate credits that enjoy preference with respect to specific property. Specifically, the contractor's lien claimed by petitioners is granted under Article 2242, which gives preference to claims of contractors for construction, reconstruction, or repair of buildings or other works with respect to the specific immovable property constructed. However, Article 2242 only finds application when there is a concurrence of credits, meaning when the same specific property of the debtor is subjected to the claims of several creditors and the property's value is insufficient to pay all of them. In such a situation, the question of preference arises, requiring a determination of which creditor will be paid first. Fundamental tenets of due process dictate that this statutory lien should only be enforced in the context of proceedings where the claims of all preferred creditors can be bindingly adjudicated, such as insolvency proceedings. This is explicitly stated in Article 2243, which states that the claims and liens enumerated in Articles 2241 and 2242 shall be considered as mortgages, pledges, or liens within the purview of legal provisions governing insolvency. The action filed by petitioners was for specific performance and damages, not an insolvency proceeding. Therefore, even if they were unpaid contractors entitled to the lien, it could not be enforced in the present action because there was no way to determine if other preferred creditors existed with claims over the San Antonio Public Market. The records did not contain any allegation that petitioners were the sole creditors with respect to such property. The fact that no third-party claims were filed in the trial court does not preclude other creditors from subsequently bringing actions and claiming preferred liens against the property. The Supreme Court found that the trial court's order of September 5, 1991, granting possession and use of the public market to petitioners, did not adhere to the procedure for attachment laid out in the Rules of Court. Under the Rules of Court, a writ of attachment over registered real property is enforced by the sheriff filing with the registry of deeds a copy of the order of attachment, a description of the property, and a notice of attachment, and by leaving a copy with the occupant. If judgment is recovered by the attaching party and execution issues, the sheriff may sell the property to satisfy the judgment. Only in the event that petitioners purchase the property would they acquire possession and use of it. Therefore, in issuing the order for possession and use, the trial court gravely abused its discretion, and the appellate court's nullification of the same was sustained. The Supreme Court stated that at that stage of the case, there was no need to pass upon the question of whether or not petitioners were the real parties-in-interest. This issue could be assigned as an error in their appeal from the judgment if it were rendered against Salonga and the Municipality.
Main Doctrine
A petition for certiorari is not a plain, speedy, and adequate remedy when other remedies, such as a motion to fix counter-bond or a motion to discharge attachment, are still available with the trial court. Furthermore, a contractor's lien under Article 2242 of the Civil Code can only be enforced in insolvency proceedings where all preferred creditors can be adjudicated.