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ATLANTIC ERECTORS v. HERBAL COVE REALTY CORPORATION

FACTS:

The case involves a construction contract between Herbal Cove Realty Corp. (respondent) and Atlantic Erectors, Incorporated (AEI) (petitioner) for the construction of townhouses and a single detached unit. AEI claimed that the contract period was not followed due to Herbal Cove's actions, while Herbal Cove denied these claims and accused AEI of exceeding the contract period and using defective workmanship and materials. AEI filed a complaint against Herbal Cove in the Regional Trial Court (RTC) of Makati, seeking a sum of money with damages. AEI also filed a notice of lis pendens to annotate the pendency of the case on several titles. Herbal Cove filed a motion to dismiss the complaint, citing an arbitration clause in the construction contract. The trial court dismissed the complaint, but AEI filed a motion for reconsideration. Meanwhile, Herbal Cove filed a motion to cancel the notice of lis pendens, arguing that AEI's action is purely personal and does not directly affect the property. The trial court initially granted Herbal Cove's motion but later reversed its decision and reinstated the notices of lis pendens. AEI filed a petition for review with the Court of Appeals (CA), which granted the petition and annulled the trial court's orders. Respondent Herbal Cove filed a Motion to Cancel the Notice of Lis Pendens, arguing that the notice serves only as a precautionary measure and that the case is still pending. The trial court lifted the notice but later denied the respondent's motion for reconsideration. The respondent then filed a Petition for Certiorari with the CA. The CA ruled in favor of the respondent, stating that the complaint did not claim ownership or possession rights over the property. The CA also mentioned that the petitioner could seek remedy through the Construction Industry Arbitral Commission (CIAC). The CA further stated that the principle of lis pendens was no longer applicable since the trial court declared that it had no jurisdiction over the case. The petitioner filed a petition before the Supreme Court (SC).

ISSUES:

  1. Whether or not money claims representing cost of materials and labor for construction can be a proper basis for the annotation of lis pendens on the property title.

  2. Whether or not the trial court, after declaring itself without jurisdiction, can still decide on the substantial issue of the case.

  3. Whether the contractor's lien claimed by the petitioners is applicable in this case.

  4. Whether the trial court had jurisdiction to issue the order canceling the Notice of Lis Pendens.

  5. Whether the trial court had jurisdiction to issue the July 30, 1998 Order canceling the Notice of Lis Pendens.

  6. Whether the November 4, 1998 Order setting aside the July 30, 1998 Order and reinstating the Notice of Lis Pendens is valid.

  7. Whether the annotation of the Notice of Lis Pendens on the subject property titles is proper.

  8. Whether the trial court had jurisdiction to cancel the Notice.

RULING:

  1. The Petition has no merit.

  2. First Issue:

  3. Proper Basis for a Notice of Lis Pendens

  4. The Court held that the money claim for the cost of labor and materials does not constitute a lien that justifies the annotation of lis pendens on the land titles. The Complaint did not directly affect the title, use, or possession of the property, nor did it assert ownership or any right to possess it. Furthermore, the Complaint did not allege the existence of a lien under Article 2242 of the Civil Code. Therefore, the Annotation was unjustified.

  5. The contractor's lien under Article 2242 of the Civil Code is not applicable in this case. Article 2242 only applies when there is a concurrence of credits, meaning the same specific property of the debtor is subjected to the claims of several creditors and the value of the property is insufficient to fully pay all creditors. In this case, there is no showing that the respondent's property was subject to the claims of other creditors or that it was insufficient to pay for all concurring debts. Therefore, the contractor's lien does not apply.

  6. The trial court did not have jurisdiction to issue the order canceling the Notice of Lis Pendens. Actions affecting title to or possession of real property or the assertion of any interest therein should be brought in the proper court with jurisdiction over the area where the property is situated. If the petitioner intended to assert its claim or enforce its lien or right over the respondent's properties, it should have filed the appropriate proceedings or a real action with the court that had jurisdiction over the properties. Since the trial court in Makati did not have jurisdiction over the property in Tagaytay City, its order canceling the Notice of Lis Pendens is void.

  7. The trial court had jurisdiction to issue the July 30, 1998 Order canceling the Notice of Lis Pendens since it still had jurisdiction over the case until August 31, 1998, when the appeal was filed.

  8. The November 4, 1998 Order setting aside the July 30, 1998 Order and reinstating the Notice of Lis Pendens is without force and effect since it was issued after the trial court had already lost jurisdiction.

  9. The annotation of the Notice of Lis Pendens on the subject property titles is improper due to the lack of factual and legal basis.

  10. The trial court had jurisdiction to cancel the Notice, considering that the petitioner invoked the jurisdiction of the trial court by filing a complaint and later appealed the decision dismissing the complaint.

PRINCIPLES:

  • A notice of lis pendens may be availed of in cases that involve the title, possession, or any right to a specific real property, or the enforcement of a lien, charge, or encumbrance against it.

  • The enforcement of a contractor's lien under Article 2242 of the Civil Code is not proper in a complaint for collection and damages.

  • The nature of an action is determined by the allegations of the complaint.

  • The contractor's lien under Article 2242 of the Civil Code applies when multiple creditors claim the same specific property of the debtor, and the value of the property is insufficient to fully pay all creditors.

  • Actions affecting title to or possession of real property or the assertion of any interest therein should be filed in the proper court with jurisdiction over the property in question.

  • A court still has jurisdiction over a case until an appeal is filed.

  • Parties cannot invoke the jurisdiction of a court to secure affirmative relief and then question the same jurisdiction after obtaining or failing to obtain such relief.