Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-21783 November 29, 1969
PACIIC ARMS, INC., plaintiff-appellee,
vs.
SIMPLICIO G. ESGUERRA, ET AL., defendants,
CARRIE! LUM"ER COMPAN#, defendant-appellant.
Primicias, Del Castillo, Macaraeg and T. P. Regino for defendant-appellant.
Araneta and Araneta for plaintiff-appellee.
CASTRO, J.:
Before us for review, on appeal by the defendant Carried u!ber Co!pany
"hereinafter referred to as the Co!pany#, is the decision, dated May $%, &'(), of the
Court of *irst +nstance of Pan,asinan in civil case --&$&., annullin, the levy and
certificate of sale coverin, si/ buildin,s owned by the plaintiff Pacific *ar!s, +nc.,
e/ecuted by the defendant deputy provincial sheriff 0i!plicio 1. Es,uerra in favor of
the Co!pany to satisfy a !oney 2ud,!ent a,ainst the +nsular *ar!s, +nc., the plaintiff3s
predecessor-in-interest over the said buildin,s.
4he environ!ental settin, is uncontroverted.
5n several occasions fro! 5ctober &, &'6( to March ), &'6. the Co!pany sold and
delivered lu!ber and construction !aterials to the +nsular *ar!s, +nc. which the latter
used in the construction of the afore!entioned si/ buildin,s at its co!pound in
Bolinao, Pan,asinan, of the total procure!ent price of P&6,%%%, the su! of P7,.&%.&8
has not been paid by +nsular *ar!s, +nc. Conse9uently, on 5ctober &., &'68 the
Co!pany instituted civil case --..6 with the Court of *irst +nstance of Pan,asinan to
recover the said unpaid balance fro! the +nsular *ar!s, +nc. 5n Au,ust )$, &'(& the
trial court rendered 2ud,!ent sustainin, the Co!pany3s clai!. 4he 2ud,!ent debtor did
not appeal: so on -ece!ber &', &'(& the correspondin, writ of e/ecution was issued.
5n ;anuary &(, &'() the defendant sheriff levied upon the si/ buildin,s. 5n ;anuary
$%, &'() the Pacific *ar!s, +nc. filed a third-party clai!, subscribed by its corporate
president, assertin, ownership over the levied buildin,s which it had ac9uired fro! the
+nsular *ar!s, +nc. by virtue of a deed of absolute sale e/ecuted on March )&, &'68,
about seven !onths before the Co!pany filed the above-!entioned action "civil case
--..6#. 0hielded by an inde!nity bond of P.,&)% put up by the Co!pany and the
Cos!opolitan +nsurance Co!pany, +nc., the sheriff proceeded with the announced
public auction on *ebruary &), &'() and sold the levied buildin,s to the Co!pany for
P(,&&%..8.
Assertin, absolute and e/clusive ownership of the buildin,s in 9uestion, the Pacific
*ar!s, +nc. filed a co!plaint on May &7, &'() a,ainst the Co!pany and the sheriff
with the court a 9uo, prayin, that 2ud,!ent be rendered, "a# declarin, null and void the
levy and 2udicial sale of the si/ buildin,s, and "b# ad2ud,in, the defendants 2ointly and
severally liable to the plaintiff in the su! of P),%%% by way of actual da!a,es and for
such a!ount as the court !ay dee! proper and 2ust to i!pose by way of e/e!plary
da!a,es and for costs of the suit.
After due trial, the court a quo on May $%, &'($ rendered 2ud,!ent annullin, the levy
of ;anuary &(, &'() and the certificate of sale of *ebruary &), &'(). 4he court,
however, denied the plaintiff3s clai! for actual and e/e!plary da!a,es on the ,round
that it was not <prepared to find that there was ,ross ne,li,ence or bad faith on the
part of any of the defendants.<
=ence this appeal, i!putin, errors which, accordin, to the appellant3s for!ulation, are
the followin,>
&. 4he lower court erred in holdin, that the credit of the defendant-appellant,
Carried u!ber Co!pany, a,ainst the +nsular *ar!s, +nc., consistin, of the
value of lu!ber and construction !aterials used in the buildin,s which were
later ac9uired by the Pacific *ar!s, +nc., the appellee, was not a statutory lien
on those buildin,s: .
). 4he lower court, li?ewise, erred in holdin, that the doctrine laid down in -e
Barretto, et al. vs. @illanueva, et al. "1.R. No. -&7'$8, -ece!ber )', &'()#
is applicable to the facts of this case as found by said court: and .
$. 4he lower court erred, finally, in declarin, that the sale at public auction
conducted by the defendant deputy provincial sheriff of Pan,asinan, coverin,
the si/ buildin,s described in the certificate of sale dated *ebruary &), &'(),
was null and void.
&. +n rulin, a,ainst the appellant below, the trial court relied !ainly on the resolution
"on the !otion for reconsideration# pro!ul,ated on -ece!ber )', &'() by this Court
in De Barretto, et al. vs. Villanueva, et al., -&7'$8 "( 0CRA ')8#. 4he said case,
however, is inapplicable because it concerned not one but two or !ore preferred
creditors who, pursuant to articles ))7) and ))7' of the Civil Code, !ust necessarily
be convened and the nature and e/tent of their respective clai!s ascertained. 4hus,
we held that before there can be a pro rata pay!ent of credits entitled to preference as
to the sa!e specific real property, there !ust first be so!e proceedin, where the
clai!s of all the preferred creditors !ay be bindin,ly ad2udicated, such as insolvency,
the settle!ent of a decedent3s estate under Rule 8. of the Rules of Court, or
li9uidation proceedin,s of si!ilar i!port.
But the case before us does not involve a 9uestion of preference of credits, and is not
one where two or !ore creditors have separate and distinct clai!s a,ainst the sa!e
debtor who has insufficient property. +ndeed, it is a !atter of necessity and lo,ic that
1
the 9uestion of preference should arise only where the debtor cannot pay his debts in
full. *or, if debtor A is able in full to pay all his three creditors, B, C, and -, how can the
need arise for deter!inin, which of the three creditors shall be paid first or whether
they shall be paid out of the proceeds of a specific propertyA
). +t is undenied and undeniable that the appellant furnished lu!ber and construction
!aterials to the +nsular *ar!s, +nc. "the appellee3s predecessor-in-interest# which the
latter used in the construction of the si/ buildin,s. i?ewise unchallen,ed is the lower
court3s factual findin, that out of the total procure!ent price of P&6,%%%, the a!ount of
P7,.&%.&8 re!ains outstandin, and unpaid by the +nsular *ar!s, +nc. 4he appellant is
therefore an unpaid furnisher of !aterials.
Bhether there e/ists a !aterial!an3s lien over the si/ buildin,s in favor of the
appellant, is a 9uestion we do not here decide. 4o our !ind the application by analo,y
of the rules of accession would suffice for a 2ust ad2udication.
Article 77. of the Civil Code
&
provides>
4he owner of the land who !a?es thereon personally or throu,h another,
plantin,s, constructions or wor?s with the !aterials of another, shall pay their
value: and, if he acted in bad faith, he shall also be obli,ed to the reparation
of da!a,es. 4he owner of the !aterials shall have the ri,ht to re!ove the!
only in case he can do so without in2ury to the wor? constructed, or without
the plantin,s, constructions or wor?s bein, destroyed. =owever, if the
landowner acted in bad faith, the owner of the !aterials !ay re!ove the! in
any event with a ri,ht to be inde!nified for da!a,es.
4he above9uoted le,al provision conte!plates a principal and an accessory, the land
bein, considered the principal, and the plantin,s, constructions or wor?s, the
accessory. 4he owner of the land who in ,ood faith C whether personally or throu,h
another C !a?es constructions or wor?s thereon, usin, !aterials belon,in, to
so!ebody else, beco!es the owner of the said !aterials with the obli,ation however
of prayin, for their value.
)
4he owner of the !aterials, on the other hand, is entitled to
re!ove the!, provided no substantial in2ury is caused to the landowner. 5therwise, he
has the ri,ht to rei!burse!ent for the value of his !aterials.
Althou,h it does not appear fro! the records of this case that the land upon which the
si/ buildin,s were built is owned by the appellee, nevertheless, that the appellee
clai!s that it owns the si/ buildin,s constructed out of the lu!ber and construction
!aterials furnished by the appellant, is indubitable. 4herefore, applyin, article 77. by
analo,y, we perforce consider the buildin,s as the principal and the lu!ber and
construction !aterials that went into their construction as the accessory. 4hus the
appellee, if it does own the si/ buildin,s, !ust bear the obli,ation to pay for the value
of the said !aterials: the appellant C which apparently has no desire to re!ove the
!aterials, and, even if it were !inded to do so, cannot re!ove the! without
necessarily da!a,in, the buildin,s C has the correspondin, ri,ht to recover the value
of the unpaid lu!ber and construction !aterials.
Bell-established in 2urisprudence is the rule that co!pensation should be borne by the
person who has been benefited by the accession.
$
No doubt, the appellee benefited
fro! the accession, i.e., fro! the lu!ber and !aterials that went into the construction
of the si/ buildin,s. +t should therefore shoulder the co!pensation due to the appellant
as unpaid furnisher of !aterials.
5f course, the character of a buyer in ,ood faith and for value, if really possessed by
the appellee, could possibly e/onerate it fro! !a?in, co!pensation.
But the appellee3s stance that it is an innocent purchaser for value and in ,ood faith is
open to ,rave doubt because of certain facts of substantial i!port "evident fro! the
records# that cannot escape notice.
+n the deed of absolute sale, e/hibit &, the +nsular *ar!s, +nc. "vendor# was
represented in the contract by its president, ;. Antonio Araneta. 4he latter was a
director of the appellee "Pacific *ar!s, +nc.# and was the counsel who si,ned the
co!plaint filed by the appellee in the court below. ;. Antonio Araneta was, therefore,
not only the president of the +nsular *ar!s, +nc. but also a director and counsel of the
appellee.
-urin, the trial of civil case --..6 the +nsular *ar!s, +nc. was represented by Attorney
A!ado 0antia,o, ;r. of the law fir! of ;. Antonio Araneta. 4he latter was one of the
counsels of the Pacific *ar!s, +nc. 4he appellee cannot clai! i,norance of the
pendency of civil case --..6 because the +nsular *ar!s, +nc. was defended by the
sa!e lawyer fro! the sa!e law fir! that co!!enced the present action. ;. Antonio
Araneta, as counsel for the Pacific *ar!s, +nc., cannot close his eyes to facts of which
he as president of the +nsular *ar!s, +nc. had actual ?nowled,e. 0i,nificantly, e/hibit &
"supra# itself shows that the +nsular *ar!s, +nc. and the Pacific *ar!s, +nc. were
housed in ad2acent roo!s "nos. $%7 and $%$, respectively#, of the sa!e buildin,, the
+nsular ife Buildin,, as early as March )&, &'68.
+t is reasonable therefore to conclude that the appellee, throu,h its director and
counsel, ;. Antonio Araneta, ?new about the unpaid balance of the purchase price of
the lu!ber and construction !aterials supplied or furnished by the appellant to the
+nsular *ar!s, +nc.
Parenthetically, it is li?ewise worth our attention that despite the appellee3s ?nowled,e
of the suit instituted by the appellant a,ainst the +nsular *ar!s, +nc. "the appellee3s
predecessor-in-interest# for the recovery of the unpaid balance of the purchase price of
the lu!ber and !aterials used in the construction of its si/ buildin,s, it !erely folded
its ar!s in disinterest and waited, so to spea?. Not until a decision was rendered
therein in favor of the appellant, a writ of e/ecution issued, and the si/ buildin,s levied
upon by the sheriff, did it file a third-party clai! over the levied buildin,s. +n the face of
the ?nowled,e that its predecessor-in-interest had not fully paid for the lu!ber and
construction !aterials used in the si/ buildin,s it had purchased, its natural and
e/pected reaction should have been to intervene in the suit filed by the appellant
a,ainst the +nsular *ar!s, +nc. and hold the latter to account for breach of the
warranties dee!ed included in the deed of absolute sale conveyin, said buildin, to it.
2
Curiously enou,h, althou,h the si/ buildin,s in 9uestion were supposedly sold by the
+nsular *ar!s to the appellee on March )&, &'68, as evidenced by the deed of
absolute sale "e/hibit &#, about seven !onths before the appellant filed civil case --
..6, the +nsular *ar!s, +nc. never !oved to i!plead the appellee therein as a
necessary party-defendant, and re!ained co!pletely and stran,ely silent about the
sale. +t is not a!iss to sur!ise that it is entirely possible that the +nsular *ar!s, +nc.
and the appellee chose to re!ain silent in the hope that the appellant3s clai! a,ainst
the +nsular *ar!s, +nc. in civil case --..6 would be dis!issed or non-suited.
Moreover, the appellee was in a better position to protect its interest. +t ?new that the
+nsular *ar!s, +nc., its predecessor-in-interest, was a !ere lessee of the pre!ises on
which the buildin,s were located. 4his should have placed it on ,uard and co!pelled it
to ascertain the circu!stances surroundin, the construction of the said buildin,s on
the pre!ises.
5n the other hand, the appellant was not as advanta,eously situated as the appellee.
4here bein, no separate re,istry of property for buildin,s and no procedure provided
by law for re,isterin, or annotatin, the clai! of an unpaid furnisher of !aterials, it was
helpless to prevent the sale of the property built fro! lu!ber and construction
!aterials it furnished. But certainly, because it has a ri,ht, pursuant to article
77., supra, to rei!burse!ent for the value of its unpaid !aterials, the appellant could
pursue any re!edy available to it under the law in order to enforce the said ri,ht. 4hus,
the appellant acted correctly in brin,in, an action "--..6# a,ainst the +nsular *ar!s,
+nc. and enforcin, its ri,ht of rei!burse!ent throu,h the e/ecution of the final
2ud,!ent it obtained in the said case a,ainst the si/ buildin,s in the possession of the
appellee who now stands to benefit therefro!. +t follows, as a necessary corollary, that
the sale at public auction conducted by the defendant sheriff of the si/ buildin,s
described in the certificate of sale dated *ebruary &), &'(), e/hibit ., was valid and
effective.
ACC5R-+N1D, the 2ud,!ent a quo is reversed, and the co!plaint is hereby
dis!issed.
+n view, however, of the e9uities clearly attendant in this case, it is the sense of this
Court that the plaintiff-appellee Pacific *ar!s, +nc. should be, as it is hereby, ,ranted a
period of thirty "$%# days fro! the date this 2ud,!ent beco!es final, within which it
!ay e/ercise the option of redee!in, the si/ buildin,s, by payin, to the defendant-
appellant Carried u!ber Co!pany the su! of P7,.&%.&8, with le,al interest fro!
0epte!ber )$, &'(& "the date the 2ud,!ent in civil case --..6 beca!e final#, until the
said a!ount shall have been fully paid.
No pronounce!ent as to costs.
3