G.R. No. L-6799; June 29, 1955
CRISTITU BAUTISTA AND 155 OTHERS, petitioners, vs. THE AUDITOR GENERAL, respondent.

FACTS

On March 27, 1950, the Department of Public Works and Communications awarded a contract for the construction of a bridge across the Agno River in Pangasinan to the International Construction and Engineering Co. (the contractor) for P516,715.00. The contractor furnished a penal bond of P103,343, with the Philippine Surety and Insurance Co. as surety, as required by Act No. 3688. Petitioners Cristitu Bautista and 155 laborers were engaged by the contractor to work on the construction from April 13 to December 1, 1950. Due to slow progress (only 5.22% accomplished by October 16, 1950), the Undersecretary of Public Works and Communications ordered the contract resolved on November 25, 1950, and the Bureau of Public Works took over. The bridge was completed by the Poblete Construction Co. on June 30, 1952, with total costs reaching P947,858.62, exceeding the contract price by P530,806.41. The Director of Public Works demanded payment of the penal bond from the surety and the balance from the contractor. Petitioners sued the contractor in the Court of First Instance of Pangasinan for unpaid wages and obtained a judgment for P25,390.29, but only P2,825.77 was realized from execution. On March 23, 1953, petitioners filed a money claim with the Auditor General under Commonwealth Act No. 327, which was denied on May 22, 1953. Petitioners appealed, invoking Articles 1707 and 2241 of the new Civil Code, which grant laborers a lien on goods manufactured or work done.

ISSUE

Whether petitioners (laborers) have a valid claim against the Government for unpaid wages, either under the new Civil Code provisions on laborers’ liens or under Act No. 3688, given the contractor’s default and the insufficiency of the penal bond to cover government losses.

RULING

The Supreme Court affirmed the Auditor General’s denial of the claim.
1. On the Civil Code Provisions (Articles 1707 and 2241): The lien under Article 1707 applies to goods manufactured or work done, typically chattels, not immovable property like a bridge. Even if applicable, petitioners failed to specify what part of the bridge they worked on, and at the stage they were engaged, there was likely no superstructure. Moreover, Article 1729 applies when a contractor is involved, allowing laborers an action against the owner only up to the amount owed by the owner to the contractor at the time the claim is made. Here, nothing was owed by the Government to the contractor.
2. On Act No. 3688: This law governs contracts for public works and requires a penal bond to ensure payment to laborers and material suppliers. It allows such claimants to intervene in actions on the contractor’s bond, but their claims are subordinate to the Government’s priority claim. The penal bond of P103,343 was insufficient to cover the Government’s excess costs of P530,806.41, leaving no remainder for petitioners.
3. On Petitioners’ Contention Regarding Amount Due to Contractor: Petitioners argued that P432,197.25 was due to the contractor based on a final statement of work accomplished. The Court rejected this, noting the contractor only completed 5.22% of the work, valued at P27,912.42, and the Government’s claim under Act No. 3688 had priority. Since no amount was due from the Government to the contractor, petitioners had no basis for their claim.
The Court held that the liability for unpaid wages rested exclusively with the contractor, and the Auditor General’s denial was lawful. The order was affirmed without costs.