J.L. BERNARDO CONSTRUCTION v.

COURT OF APPEALS and MAYOR JOSE SALONGA

G.R. No. 105827. January 31, 2000

FACTS:

The municipal government of San Antonio, Nueva Ecija authorized the construction of
the San Antonio Public market, contracting petitioner J.L. Bernardo Construction, who won the
bid to contract. As part of the agreement, the Municipality agreed to pay a cash equity to
petitioner. However, when it became due, the Municipality refused to pay the equity, while
also refusing to reimburse petitioner for the demolition and site clearing work, which the
Municipality initially promised to do. Petitioner then filed a complaint for specific performance
and collection of a sum, with a prayer for preliminary attachment and enforcement of
contractors’ lien. The RTC ruled that the contractor’s lien was proper due to the failure of the
Municipality to reimburse petitioner for the demolition and site clearing work, as well as the
non payment of the cash equity. The CA reversed the decision, arguing that the contractors’
lien only applies in insolvency situations.

ISSUE:

Whether or not the petitioner is entitled to the contractors’ lien on the San Antonio
Public Market.

RATIO:

No. The CA was correct in stating that the grant of contractors’ lien to petitioner was
improper. Art. 2241 and 2242 of the Civil Code enumerate credits which enjoy preference with
respect to the debtor. While the contractor’s lien is provided under Art. 2242(3), the provision
only applies in cases of concurrence of credits, where a specific property of the debtor is
subjected to claims from several creditors, and the value of the property is not enough to pay
all the creditors, hence the application of preference. As such, the provision can only be applied
in cases where the claims of all preferred creditors can be bindingly adjudicated, such as
insolvency. Art. 2243 supports this view, as it states that claims under the preceding 2 Arts. are
considered mortgages or pledges of real/personal property, or liens within the purview of
provisions regarding insolvency. This case is not an insolvency proceeding, but for specific
performance and damages. There is no way for the Court to determine if there are other
creditors who also have claims on the property that exist. There is also no showing in the
records that there are other creditors over the property, essentially showing that petitioner is
the only creditor over the property. As a result, petitioner cannot make use of the contractors’
lien over the subject property.