G.R. No. 148568 - Atlantic Erectors Inc. vs. Herbal Cove Realty Corp.

On June 20, 1996, petitioner Atlantic Erectors, Inc. and respondent Herbal Cove Realty Corporation entered into a Construction Contract.

The contract involved the construction of four townhouses (units 16-A, 16-B, 17-A, and 17-B) and one single detached unit.
The original contract price was P15,726,745.19, later adjusted to P16,726,745.19 due to additional works.
The contract period was 180 days, commencing on July 7, 1996 and ending on January 7, 1997.

Dispute arose as petitioner alleged that delays in the contract period were attributable to respondent’s suspension orders, additional works, force majeure, and other acts of omission or delay.

Respondent, however, countered that petitioner exceeded the contract period, aggravated by defective workmanship and the use of substandard materials.

On November 21, 1997, petitioner filed a complaint for the collection of money and damages (Civil Case No. 97-2707) before the RTC of Makati.

The complaint sought multiple forms of relief, including unpaid amounts for construction services (P4,854,229.94), construction materials (P1,595,551.00), loss of expected income (P2,250,000.00), rental cost of equipment (P800,000.00), as well as moral and exemplary damages (each P5,000,000.00).
Additional sums included a fee based on a percentage of the total money claim along with fixed fees per court appearance and the costs of suit.

Simultaneously, petitioner filed a notice of lis pendens on November 21, 1997 for annotation on several titles (initially TCT Nos. T-30228 to T-30232) which later carried over to subdivided lots (TCT Nos. T-36179 to T-36226 and T-36245 to T-36246) in Tagaytay City.

On January 30, 1998, respondent and co-defendant Ernest L. Escaler filed a Motion to Dismiss the complaint on the ground of lack of jurisdiction and failure to state a cause of action.

They contended that the construction contract contained an arbitration clause, rendering the Makati RTC without jurisdiction.

On March 17, 1998, RTC Judge Ranada dismissed the complaint as against respondent for noncompliance with the condition precedent (prior resort to arbitration) and against Escaler for failure to state a cause of action.
Petitioner then filed a Motion for Reconsideration of the dismissal order.
On April 24, 1998, respondent filed a Motion to Cancel the Notice of Lis Pendens arguing that the relief sought was a purely personal money collection action not affecting title, use, or possession of the property.
On July 30, 1998, Judge Ranada granted respondent’s motion and canceled the notice of lis pendens.
On November 4, 1998, Judge Ranada reversed his July 30, 1998 Order through a motion for reconsideration, reinstating the notices of lis pendens.
On October 22, 1999, Judge Ranada issued an order denying respondent’s further Motion for Reconsideration of the November 4, 1998 reinstatement order.
Subsequent to these orders, respondent filed a Petition for Certiorari with the Court of Appeals challenging the actions on the ground that the re-annotation of lis pendens was without lawful basis.

The CA set aside the November 4, 1998 and October 22, 1999 orders, effectively reinstating the July 30, 1998 Order which canceled the lis pendens.
The appellate court reasoned that the re-annotation of the notice of lis pendens was improper, citing the applicable provision in Section 76 of Presidential Decree No. 1529.
The CA emphasized that petitioner’s complaint was a purely personal action for the collection of money and damages and did not assert any claim of ownership or right to the property.
The CA observed that petitioner’s action failed to create any enforceable lien over the real property under Article 2242 of the Civil Code.

Whether money claims representing the cost of materials and labor for the construction constitute a proper lien justifying the annotation of a notice of lis pendens on a property title.
Whether petitioner's assertion that the money claim equates to an enforcement of a contractor’s lien validates the use of lis pendens, given that the complaint did not allege ownership, right of possession, or an encumbrance.

Whether the trial court, after declaring itself without jurisdiction to try the substantively personal collection case, had the competence to decide on collateral matters such as the cancellation or reinstatement of the notice of lis pendens.
Whether orders issued by the RTC before and after the filing of the notice of appeal (which alters its jurisdiction) are valid and binding.