G.R. No. 30181 , July 12, 1929
THE DIRECTOR OF PUBLIC WORKS, plaintiff-appellee, vs. SING JUCO, ET AL., defendants. SING JUCO, SING BENGCO and PHILIPPINE NATIONAL BANK, appellants.

FACTS

The owners of a parcel of land in Iloilo (Sing Juco, Sing Bengco, Mariano de la Rama, and Gonzalo Mariano Tanboontien) mortgaged the property to the Philippine National Bank (PNB) on November 23, 1920. Subsequently, on March 14, 1921, they entered into a contract with the Director of Public Works, whereby the government agreed to deposit dredged material from the Iloilo River onto their land to raise its level, with the owners to pay the cost in installments. This contract was annotated on the Torrens certificate of title on January 8, 1924. The owners also executed a surety bond, which included the signature “Casa Viuda de Tan Toco” by Mariano de la Rama. After the government completed the filling operations and demanded payment, the owners defaulted. The Director of Public Works filed an action to recover the amount due and to enforce a lien on the property, joining PNB (as mortgagee) and Tan Ong Sze (Viuda de Tan Toco, as purported surety) as defendants. The trial court ruled in favor of the government, declaring its lien superior to PNB’s mortgage and holding Tan Ong Sze liable on the surety bond.

ISSUE

1. Whether the government’s lien for the cost of the filling improvements is superior to PNB’s prior mortgage.
2. Whether Tan Ong Sze (Viuda de Tan Toco) is liable on the surety bond.

RULING

1. No, the government’s lien is not superior to PNB’s mortgage. The Supreme Court held that PNB’s mortgage, registered on November 23, 1920, created a prior lien on the land. The subsequent filling contract and its annotation in 1924 did not elevate the government’s claim to a superior status. The dredged material, once deposited, became an irremovable fixture that augmented the mortgaged property’s value, to which the mortgage lien attached. The government’s claim is akin to a voluntary improvement, which does not take precedence over a prior mortgage.
2. No, Tan Ong Sze is not liable on the surety bond. The Court found that Mariano de la Rama signed the name “Casa Viuda de Tan Toco” without authority, and there was no evidence that Tan Ong Sze ratified the act. Thus, she cannot be held personally liable.

DISPOSITIVE PORTION:
The trial court’s judgment was:
– Affirmed in dismissing the defendants’ cross-complaint against the government and in holding the owners jointly and severally liable for the cost of the filling.
– Reversed in declaring the government’s lien superior to PNB’s mortgage; instead, PNB’s mortgage credit is prioritized in any foreclosure sale.
– Reversed in holding Tan Ong Sze liable on the surety bond; she is absolved from the complaint.
The case was remanded for further proceedings.