G.R. No. 10817-18. February 28, 1958
ENRIQUE LOPEZ, PETITIONER, VS. VICENTE OROSA, JR., AND PLAZA THEATRE, INC., RESPONDENTS.
FELIX, J.:
trade name of Lopez-Castelo Sawmill. Sometime in May, 1946, Vicente Orosa, Jr.,
also a resident of the same province, dropped at Lopez’ house and invited him to
make an investment in the theatre business. It was intimated that Orosa, his
family and close friends were organizing- a corporation to be known as Plaza
Theatre, Inc., that would engage in such venture. Although Lopez expressed his
unwillingness to invest on the same, he agreed to supply the lumber necessary
for the construction of the proposed theatre, and at Orosa’s behest and
assurance that the latter would be personally liable for any account that the
said construction might incur, Lopez further agreed that payment therefor would
be on demand and not cash on delivery basis. Pursuant to said verbal agreement,
Lopez delivered the lumber which was used for the construction of the Plaza
Theatre on May 17, 1946, up to December 4 of the same year. But of the total
cost of the materials amounting to P62,255.85, Lopez was paid only P20,848.50,
thus leaving a balance of. P41,771.35.
We may state at this juncture that
the Plaza Theatre was erected on a piece of land with an area of 679.17 square
meters formerly owned by Vicente Orosa, Jr., and was acquired by the corporation
on September 25, 1946, for P6,000. As Lopez was pressing Orosa for payment of
the remaining unpaid obligation, the latter and Belarmino Rustia, the president
of the corporation, promised to obtain a bank loan by mortgaging- the properties
of the Plaza Theatre, Inc., out of which said amount of P41,771.35 would be
satisfied, to which assurance Lopez had’ to accede. Unknown to him, however, as
early as November, 1946, the corporation already got a loan for P30,000 from the
Philippine National Bank with the. Luzon Surety Company as surety, and the
corporation in turn executed a mortgage on the land and building in favor of
said company as counter-security. As the land at that time was not yet brought
under the operation of the Torrens System, the mortgage on the same was
registered on November 16, 1946, under Act No. 3344. Subsequently, when the
corporation applied for the registration of the land under Act 496, such
mortgage was not revealed and thus Original Certificate of Title No. 0-391 was
correspondingly issued on October 25, 1947, without any encumbrance appearing
thereon.
Persistent demand from Lopez for the payment of the amount due him caused
Vicente Orosa, Jr. to execute on March 17, 1947, an alleged “deed of assignment”
of his 420 shares of stock of the Plaza Theater, Inc., at P100 per share or with
a total value of P42,000 in favor of the creditor, and as the obligation still
remained unsettled, Lopez filed on November 12, 1947, a complaint with1 the
Court of First Instance of Batangas (Civil Case No. 4501 which later became
R-57) against Vicente Orosa, Jr. and Plaza Theatre, Inc., praying that
defendants be sentenced to pay him jointly and severally the sura of P41,771.35,
with legal interest from the filing of the action; that in case defendants fail
to pay the same, that the building and the land covered by OCT No.
0-391 owned by the corporation be sold at public auction and the proceeds
thereof be applied to said indebtedness; or that the 420 shares of the capital
stock of the Plaza Theatre, Inc., assigned by Vicente Orosa, Jr., to said
plaintiff be sold at public auction for the same purpose; and for such other
remedies as may be warranted by the circumstances. Plaintiff also caused the
annotation of a notice of lis pendens on said properties with the Register of
Deeds.
Defendants Vicente Orosa, Jr., and Plaza Theatre, Inc., filed separate
answers, the first denying that the materials were delivered to him as a
promoter and later treasurer of the corporation, because he had purchased and
received the same on his personal account; that the land on which the movie
house was constructed was not charged with a Hen to secure the payment of the
aforementioned unpaid obligation; and that the 420 shares of stock of the Plaza
Theatre, Inc. was not assigned to plaintiff as collaterals but as direct
security for the payment of his indebtedness. As special defense, this defendant
contended that as the 420 shares of stock assigned and conveyed by the assignor
and accepted by Lopez as direct security for the payment of the amount of
P41,771.35 were personal properties, plaintiff was barred from recovering any
deficiency if the proceeds of the sale thereof at public auction would” not be
sufficient to cover and satisfy the obligation. It was thus prayed that he be
declared exempted from the payment of any deficiency in case the proceeds from
the sale of said personal properties would not be enough to cover the amount
sought to be collected.
Defendant Plaza Theatre, Inc., on the other hand, practically set up the same
line of defense by alleging that the building materials delivered to Orosa were
on the latter’s personal account; and that there was no understanding that said
materials would be paid jointly and severally by Orosa and the corporation, nor
was a lien charged on the properties of the latter to secure payment of the same
obligation. As special defense, defendant corporation averred that while it was
true that the materials purchased by Orosa were sold by the latter to the
corporation, such transactions were in good faith and for valuable consideration
thus when plaintiff failed to claim said materials within 30 days from the time
of removal thereof from Orosa, said lumber became a different and distinct
specie and plaintiff lost whatever rights he might have in the same and
consequently had no recourse against the Plaza Theatre, Inc.; that the claim
could not have been refectionary credit, for such kind of obligation referred to
an indebtedness incurred in the repair or reconstruction of something already
existing and this concept did not include an entirely new work; and that the
Plaza Theatre, Inc., having been incorporated on October 14, 1946, it could not
have contracted any obligation prior to said date. It was, therefore, prayed
that the complaint be dismissed; that said defendant be awarded the sum of
P5,000 for damages, and such other relief as may be just and proper in the
premises.
The surety company, in the meantime, upon discovery that the land was already
registered under the Torrens System and that there was a notice of lis pendens
thereon, filed on August 17, 1948, or within the 1-year period after the
issuance of the certificate of title, a petition for review of the decree of the
land registration court dated October 18, 1947, which was made the basis of OCT
No. 0-319, In order to annotate the rights and interests of the surety company
over said properties (Land Registration Case No. 17 GLRO Rec. No. 296).
Opposition thereto was offered by Enrique Lopez, asserting that the amount
demanded by him constituted a preferred lien over the properties of the
obligors; that the surety company was guilty of negligence when it failed to
present an opposition “to the application for registration of the property; and
if any annotation of the rights and interest of said surety would ever be made,
same must be subject to the Hen in his favor.
The two cases were heard jointly and in a decision dated October 30, 1952,
the lower Court, after making an exhaustive and detailed analysis of the
respective stands of the parties and the evidence adduced at the trial, held
that defendants Vicente Orosa, Jr., and the Plaza Theatre, Inc., were jointly
liable for the unpaid balance of the cost of lumber used in the construction of
the building and the plaintiff thus acquired the materialman’s lien over the
same. In making the pronouncement that the lien was merely confined to the
building and did not extend to the land on which the construction was made, the
trial judge took into consideration the fact that when plaintiff started the
delivery of lumber in May, 1946, the land was not yet owned by the corporation;
that the mortgage in favor , of Luzon Surety Company was previously registered
under Act No. 3344; that the codal provision (Art. 1923 of the old Spanish Civil
Code) specifying that refection credits are preferred could refer only to
buildings, which are also classified as real properties, upon which said
refection was made. It was, however, declared that plaintiff’s lien on the
building was superior to the right of the surety company. And finding that the
Plaza Theatre, Inc., had no objection to the review of the decree issued in its
favor by the land registration court and the inclusion in the title of the
encumbrance in favor of the surety company, the court a quo granted the petition
filed by the latter company. Defendants Orosa and the Plaza Theatre, Inc., were
thus required to pay jointly the amount of P41,771.35 with legal interest and
costs within 90 days from notice of said decision; that in case of default, the
420 shares of stock assigned by Orosa to plaintiff be sold at public auction and
the proceeds thereof be applied to the payment of the amount due the plaintiff,
plus interest and costs; and that the encumbrance in favor of the surety company
be endorsed at the back of OCT No. 0-391, with the notation that with respect to
the building, said mortgage was subject to the material man’s lien in favor of
Enrique Lopez.
Plaintiff tried to secure a modification of the decision in so far as it
declared that the obligation of therein defendants was joint instead of solidary
and that the lien did not extend to the land, but same was denied by order of
the court of December 23, 1952. The matter was thus appealed to the Court of
Appeals, which affirmed the lower court’s ruling, and then to this Tribunal. In
this instance, plaintiff-appellant raises 2 issues: (1) whether a materialman’s
lien for the value of the materials used in the construction of a building
attaches to said structure alone and does not extend to the land on which the
building is adhered to; and (2) whether the lower court and the Court of
Appeals erred in not providing that the materialman’s lien is superior to the
mortgage executed in favor of the surety company not only on the building but
also on the land.
It is to be noted in this appeal that Enrique Lopez has not raised any
question against the part of the decision sentencing defendants Orosa and Plaza
Theatre, Inc., to pay jointly the sum of P41,771.35, so We will not take up or
consider anything on that point. Appellant, however, contends that the lien
created in favor of the furnisher of the materials used for the construction,
repair or refection of a building, is also extended to the land on which the
construction was made, and in support thereof he relies on Article 1923 of the
Spanish Civil Code, the pertinent law on the matter, which reads as follows:
ART. 1923. With, respect to determinate real property and real rights of the
debtor, the following’ are preferred:
* * * * * * *
5. Credits for refection, not entered or recorded, with respect to the real
estate upon which the refection was made, and only with respect to other credits
different from those mentioned in four next preceding paragraphs.
It is
argued that in view of the employment of the phrase real estate or immovable
property, and inasmuch as said provision does not contain any specification
delimiting the lien to the building, said article must be construed as to
embrace both the land and the building or structure adhering thereto. We cannot
subscribe to this view, for while it is true that generally, real estate
connotes the land and the building constructed thereon, it is obvious that the
inclusion of the building, separate and distinct from the land, in the
enumeration of what may constitute real properties,[1] could mean only one
thing-that a building is by itself an immovable property, a doctrine already
pronounced by this Court in the case of Leung Yee vs. Strong Machinery Co., 37
Phil., 644. Cc Moreover, and in view of the absence of any specific provision of
law to the contrary, a building is an immovable property, irrespective of
whether or not said m structure and the land on which it is adhered to belong 2
to the same owner.
A close examination of the provision of the Civil Code invoked by appellant
reveals that the law gives preference to unregistered refectionary credits only
with respect to the real estate upon which the refection or work was made. This
being so, the inevitable conclusion must be that the lien so created attaches
merely to the immovable property for the construction or repair of which the
obligation was incurred. Evidently, therefore, the lien in favor of appellant
for the unpaid value of the lumber used in the construction of the building
attaches only to said structure and to no other property of the obligors.
Considering the conclusion thus arrived at, i.e., that the materialman’s lien
could be charged only to the building for which the credit was made or which
received the benefit of refection, the lower court was right in holding that the
interest of the mortgagee over the land is superior and cannot be made subject
to the said materialman’s lien. Wherefore, and on the strength of the foregoing
considerations, the decision appealed from is hereby affirmed, with costs
against appellant. It is so ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo,
Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ., concur.
[1]Article 415 of the new Civil Code (Art.
334 of the old) enumerates what are considered immovable property, among which
are land, buildings, roads and constructions of all kinds adhered to the soil.