ATLANTIC vs. HERBAL

 

ATLANTIC vs. HERBAL

FACTS

1996 - Respondent and petitioner entered into a Construction Contract whereby the former agreed to construct four (4) units of townhouses. The contract period is 180 days commencing [on] July 7, 1996 and to terminate on January 7, 1997.

●      [Petitioner] claimed that the said period was not followed due to reasons attributable to [respondent], namely: suspension orders, additional works, force majeure, and unjustifiable acts of omission or delay on the part of said [respondent].

●      [Respondent], however, denied such claim and instead pointed to [petitioner] as having exceeded the 180 day contract period aggravated by defective workmanship and utilization of materials which are not in compliance with specifications.

 

1997 - Petitioner filed a complaint for sum of money with damages. Petitioner also filed a notice of LIS PENDENS for annotation of the pendency of Civil Case No. 97-707 on titles TCTs nos. T-30228, 30229, 30230, 30231 and 30232. When the lots covered by said titles were subsequently subdivided into 50 lots, the notices of lis pendens were carried over to the titles of the subdivided lots, i.e., TCT Nos. T-36179 to T-36226 and T-36245 to T-36246 of the Register of Deeds of Tagaytay City.

RTC dismissed the complaint for petitioner's failure to comply with a condition i.e. the prior resort to arbitration.

1998 - Respondent filed a MOTION TO CANCEL NOTICE OF LIS PENDENS . It argued that the notices of lis pendens are without basis because petitioner's action is a purely personal action to collect a sum of money and recover damages and . . . does not directly affect title to, use or possession of real property.

RTC initially granted motion to cancel notice of lis pendens, but later reinstated it upon petitioners Motion for Reconsideration even if the judge found no merit in the grounds raised by petitioner.

“The Rules provide that prior to the transmittal of the original record on appeal, the court may issue orders for the protection and preservation of the rights of the parties which do not involve any matter litigated by the appeal. Even as it declared itself without jurisdiction, this Court still has power to act on incidents in this case, such as acting on motions for reconsideration, for correction, for lifting of lis pendens, or approving appeals, etc.

 

CA set aside the orders of RTC and granted respondent’s Motion to Cancel the Notice of Lis Pendens.

“the re-annotation of those notices was improper for want of any legal basis. It specifically cited Section 76 of Presidential Decree No. 1529 (the Property Registration Decree). The decree provides that the registration of such notices is allowed only when court proceedings directly affect the title to, or the use or the occupation of, the land or any building thereon.

 

The Complaint led by petitioner in Civil Case No. 97-2707 was intended purely to collect a sum of money and to recover damages. The appellate court ruled that the Complaint did not aver any ownership claim to the subject land or any right of possession over the buildings constructed thereon.

ISSUES

1. Whether or not money claims representing cost of materials for and labor on the houses constructed on a property are a proper lien for annotation of lis pendens on the property title
2. Whether or not the RTC had jurisdiction to reinstate the notice of lis pendens considering that it already lost its jurisdiction after the petitioner had filed its notice of appeal

RULING

1.  No, a money claim representing cost of materials for and labor on the houses constructed on a property is not a proper lien for annotation of lis pendens on the property title.

As a general rule, the only instances in which a notice of lis pendens may be availed of are as follows:

1. an action to recover possession of real estate;
2. an action for partition; and
3. any other court proceedings that directly affect the title to the land or the building thereon or the use or the occupation thereof.

Additionally, this Court has held that resorting to lis pendens is not necessarily confined to cases that involve title to or possession of real property. This annotation also applies to suits seeking to establish a right to, or an equitable estate or interest in, a specific real property; or to enforce a lien, a charge or an encumbrance against it.

 

Apparently, petitioner proceeds on the premise that its money claim involves the enforcement of a lien. Since the money claim is for the nonpayment of materials and labor used in the construction of townhouses, the lien referred to would have to be that provided under Article 2242 of the Civil Code:

"Art. 2242. With reference to specic immovable property and real rights of the debtor, the following claims, mortgages and liens shall be preferred, and shall constitute an encumbrance on the immovable or real right: xxx xxx xxx

(3) Claims of laborers, masons, mechanics and other workmen, as well as of architects, engineers and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other works;

(4) Claims of furnishers of materials used in the construction, reconstruction, or repair of buildings, canals or other works, upon said buildings, canals or other works. (Italics supplied)

However, a careful examination of petitioner's Complaint, as well as the reliefs it seeks, reveals that no such lien or interest over the property was ever alleged. The Complaint merely asked for the payment of construction services and materials plus damages, without mentioning — much less asserting — a lien or an encumbrance over the property. Verily, it was a purely personal action and a simple collection case. It did not contain any material averment of any enforceable right, interest or lien in connection with the subject property.

Petitioner's money claim cannot be characterized as an action that involves the enforcement of a lien or an encumbrance, one that would thus warrant the annotation of the Notice of Lis Pendens . Indeed, the nature of an action is determined by the allegations of the complaint.

Even assuming that petitioner had sufficiently alleged such lien or encumbrance in its Complaint, the annotation of the Notice of Lis Pendens would still be unjustified, because a complaint for collection and damages is not the proper mode for the enforcement of a contractor’s lien.

In J.L. Bernardo Construction v. Court of Appeals,13 the Court explained the concept of a contractor's lien under Article 2242 of the Civil Code and the proper mode for its enforcement as follows:

Articles 2241 and 2242 of the Civil Code enumerates certain credits which enjoy preference with respect to specific personal or real property of the debtor. Specifically, the contractor's lien claimed by the petitioners is granted under the third paragraph of Article 2242 which provides that the claims of contractors engaged in the construction, reconstruction or repair of buildings or other works shall be preferred with respect to the specific building or other immovable property constructed.

 

"However, Article 2242 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."

Clearly then, neither Article 2242 of the Civil Code nor the enforcement of the lien thereunder is applicable here, because petitioner's Complaint failed to satisfy the foregoing requirements. Nowhere does it show that respondent's property was subject to the claims of other creditors or was insufficient to pay for all concurring debts. Moreover, the Complaint did not pertain to insolvency proceedings or to any other action in which the adjudication of claims of preferred creditors could be ascertained.

Another factor negates the argument of petitioner that its money claim involves the enforcement of a lien or the assertion of title to or possession of the subject property: the fact that it filed its action with the RTC of Makati, which is undisputedly bereft of any jurisdiction over respondent's property in Tagaytay City. Certainly, actions affecting title to or possession of real property or the assertion of any interest therein should be commenced and tried in the proper court that has jurisdiction over the area, where the real property involved or a portion thereof is situated. If petitioner really intended to assert its claim or enforce its supposed lien, interest or right over respondent's subject properties, it would have instituted the proper proceedings or filed a real action with the RTC of Tagaytay City, which clearly had jurisdiction over those properties.

Narciso Peña, a leading authority on the subject of land titles and registration, gives an explicit exposition on the inapplicability of the doctrine of lis pendens to certain actions and proceedings that specifically include money claims. He explains in this wise:

Also, it is held generally that the doctrine of lis pendens has no application to a proceeding in which the only object sought is the recovery of a money judgment, though the title or right of possession to property be incidentally affected. It is essential that the property be directly affected, as where the relief sought in the action or suit includes the recovery of possession, or the enforcement of a lien, or an adjudication between conflicting claims of title, possession, or the right of possession to specific property, or requiring its transfer or sale"

Peña adds that even if a party initially avails itself of a notice of lis pendens upon the filing of a case in court, such notice is rendered nugatory if the case turns out to be a purely personal action. In such event, the notice of lis pendens has become functus officio.

Thus, when a complaint or an action is determined by the courts to be in personam, the rationale for or purpose of the notice of lis pendens ceases to exist. To be sure, this Court has expressly and categorically declared that the annotation of a notice of lis pendens on titles to properties is not proper in cases wherein the proceedings instituted are actions in personam.

2. NO, RTC had no jurisdiction to reinstate the notice of lis pendens because it already lost its jurisdiction after the petitioner had filed its notice of appeal.

Rule 41 of the 1997 RulesonCivil Procedure, which governs appeals from RTCs, expressly provides that RTCs lose jurisdiction over a case when an appeal is filed.

SEC. 9. Perfection of Appeal— A party's appeal by notice of appeal is deemed perfected as to him upon the ling of the notice of appeal in due time.

Xxx xxx xxx

In appeals by notice of appeal, the court loses jurisdiction over the case upon the perfection of the appeals filed in due time and the expiration of the time to appeal of the other parties.

On the basis of the foregoing rule, the trial court lost jurisdiction over the case only on August 31, 1998, when petitioner filed its Notice of Appeal.  Thus, any order issued by the RTC prior to that date should be considered valid, because the court still had jurisdiction over the case.

On the other hand, the November 4, 1998 Order that set aside the July 30, 1998 Order and reinstated that Notice should be considered without force and effect, because it was issued by the trial court after it had already lost jurisdiction.

In any case, even if we were to adopt petitioner's theory that both the July 30, 1998 and the November 4, 1998 Orders were void for having been issued without jurisdiction, the annotation is still improper for lack of factual and legal bases.