G.R. No. 105827 ; January 31, 2000
J.L. BERNARDO CONSTRUCTION, SANTIAGO R. SUGAY, EDWIN A. SUGAY and FERNANDO S. A. ERANA, petitioners, vs. COURT OF APPEALS and MAYOR JOSE L. SALONGA, respondents.

FACTS

Petitioners entered into a Construction Agreement with the Municipality of San Antonio, Nueva Ecija, for the building of a public market. The agreement stipulated that the Municipality would provide cash equity and assume expenses for site preparation. Petitioners allege that despite the project being 98% complete, the Municipality refused to pay the due cash equity and failed to reimburse them for the site preparation expenses which they had advanced based on the Mayor’s representations of the Municipality’s financial capability. Consequently, petitioners filed a complaint for breach of contract and collection of a sum of money against the Municipality and Mayor Salonga, with prayers for a writ of preliminary attachment and enforcement of a contractor’s lien on the market.
The Regional Trial Court granted both the writ of attachment and the contractor’s lien, allowing petitioners to possess and operate the market. The Court of Appeals, however, nullified both orders. It ruled that the allegations of fraud against the Municipality were insufficient to justify attachment against a public corporation and that a contractor’s lien under Articles 2242 and 2243 of the Civil Code cannot be enforced via a mere motion in a pending suit but must be pursued in an insolvency proceeding or upon execution of a final judgment.

ISSUE

The core issues were: (1) whether the writ of preliminary attachment was properly issued against the Municipality and its Mayor, and (2) whether the trial court correctly granted a contractor’s lien via an ancillary order in the pending collection case.

RULING

The Supreme Court partially granted the petition. On the first issue, the Court upheld the writ of preliminary attachment but only against Mayor Salonga in his personal capacity. The allegations that he induced petitioners to advance expenses by falsely representing the Municipality’s financial capability constituted a claim for fraud in incurring the obligation, a valid ground for attachment under the Rules of Court. However, the writ could not lie against the Municipality itself, as a municipal corporation is immune from preliminary attachment unless expressly allowed by statute, which was not the case here.
On the second issue, the Court affirmed the Court of Appeals’ nullification of the contractor’s lien. The legal logic is that the preferences enumerated in Article 2242 of the Civil Code, including claims of contractors, do not constitute an independent right that can be enforced by a mere motion during trial. These liens are considered “conventional subrogation” or “legal mortgage” which must be claimed and enforced in a separate civil action or, as indicated by Article 2243, in accordance with the procedure laid out in the Insolvency Law. They cannot be adjudicated summarily as an ancillary remedy in a collection suit. Therefore, the trial court acted without jurisdiction in granting the lien through its interlocutory order.