Director of Public Works vs. Sing Juco

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PHILIPPINEREPORTSANNOTATEDVOLUME053
[No. 30181. July 12, 1929]

THE DIRECTOR OF PUBLIC WORKS, plaintiff and
appellee, vs. SING JUCO ET AL., defendants. SING Juco,
SING BENGCO and PHILIPPINE NATIONAL BANK,
appellants.
1. PRINCIPAL AND AGENT POWER OF ATTORNEY
CREATION OF OBLIGATION OF GUARANTY.A
power of attorney to execute a contract of guaranty should
not be inferred from the use of vague or general words,
especially where such words have their origin and
explanation in particular powers of a different nature. In
article 1827 of the Civil Code it is declared that suretyship
(including guaranty) shall not be presumed that it must
be expressed, and cannot be extended beyond its specified
limits. By analogy a power of attorney should be construed
in harmony with the same rule, in so far as relates to the
creation of the obligation of guaranty.
2. ID. ID. ID. INTERPRETATION OF PARTICULAR
CONTRACT.Where a power of attorney is executed
primarily to enable the attorneyinfact, as manager of a
mercantile business, to conduct its affairs for and on
behalf of the principal, who is owner of the business, and
to this end the attorneyinfact is authorized to execute
contracts relating to the principal's property, such power
will not be interpreted as giving the attorneyinfact power
to bind the principal by a contract of independent
guaranty unconnected with the conduct of the mercantile
business. General words contained in such power will not
be so interpreted as to extend the power to the making of a
contract of guaranty, but will be limited, under the well
known rule of construction indicated in the expression
ejusdem generis, as applying to matters similar to those
particularly mentioned.
3. MORTGAGE PRIORITY OF MORTGAGE LIEN OVER
LIEN
FOR
REFECTION
SUBSEQUENT
TO
REGISTRATION OF MORTGAGE.An indebtedness
resulting from a contract in accordance with which low
land is improved by the deposit of material dredged f rom
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nearby waters does not enjoy priority over a mortgage

executed by the owner of the fee and duly registered prior
to the execution of the filling contract and this is true
whether the supposed preference under the filling contract
be claimed under subsection 3 of article 1923 of the Civil
Code or under a special stipulation in such contract
declaring the cost of filling to be a lien upon the property.
The lien created in such case by the filling contract can
only operate upon the equity of redemption, without
prejudice to the creditor under the prior mortgage who has
not assented to the creation of the lien.
206
206
PHILIPPINE REPORTS ANNOTATED

Director of Public Works vs. Sing Juco
APPEAL from a judgment of the Court of First Instance of

Iloilo. Salas, J.
The facts are stated in the opinion of the court.
Roman J. Lacson for appellant National Bank.
Soriano & Nepomuceno for appellants Sing Juco and
Sing Bengco.
AttorneyGeneral Jaranilla for appellee.
STREET, J.:
From Torrens certificate of title No. 1359, relating to land
in the municipality of Iloilo, it appears that on September
28, 1920, the title to the property described therein was
owned, in undivided shares, by Mariano de la Rama,
Gonzalo Mariano Tanboontien, Sing Juco and Sing Bengco.
The interest vested by said certificate in Mariano de la
Rama was subsequently transferred by sale to Enrique
Echaus. It further appears that 'on November 23, 1920, the
owners of the property covered by said certificate conveyed
it by way of mortgage to the Philippine National Bank for
the purpose of securing a credit in current account in an
amount not in excess of P170,000, with interest at the rate
of 12 per cent per annum, The indebtedness covered by this
mortgage has not been satisfied, and upon the date of the
decision of the court below it amounted to the sum of
P170,000, plus interest at 12 per cent per annum from
November 24, 1920.
The land above referred to contains an area of nearly 16
hectares, or to be exact, 158,589.44 square meters
according to the certificate. It is located on "Point Llorente"
at the mouth of Iloilo River, near the City of Iloilo, and it is
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of so low a level that, prior to the improvement to which

reference is to be made, it was subject to frequent flooding.
In 1921 the Government of the Philippine Islands was
planning extensive harbor improvements in this vicinity,
requiring extensive dredging by the Bureau of Public
Works in the mouth of said river. " The conduct of these
dredging operations made it necessary for the Director
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VOL. 53, JULY 12, 1929
207
of Public Works to find a place of deposit for the dirt and

mud taken from the place, or places, dredged. As the land
already referred to was low and easily accessible to the spot
where dredging was to be conducted, it was obviously to the
interest both of the Government and the owners of said
land that the material taken out by the dredges should be
deposited on said property. Accordingly, after preliminary
negotiations to this effect had been conducted, a contract
was made between the Director of Public Works,
representing the Government of the Philippine Islands,
and the four owners, M. de la Rama, Sing Juco, G. M.
Tanboontien and Sing Bengco, of which, as modified in
some respects by subsequent agreement, the following
features are noteworthy.
(1) The Bureau of Public Works agreed to deposit the
material to be dredged by it from the Iloilo River, in
connection with the contemplated improvement, upon the
lot of land, already described as covered by certificate No.
1359, at a price to be determined by actual cost of the
filling, with certain surcharges to be determined by the
Bureau of Public Works. It was contemplated in the
original draft of the contract that the bureau would be able
to furnish some 250,000 cubic meters of dredged material
for filling in the land, but in the course of the negotiations
the liability of the bureau, with respect to the amount of
dredged material to be placed upon the land, was limited to
the material which should be dredged from the river as the
result of the proposed improvement. To this stipulation the
four owners of the property assented on March 14, 1921.
(2) With respect to the compensation it was agreed that
the amount due should be determined by the Director of
Public Works, under certain conditions mentioned in the
contract, at an amount of not less than 20 nor more than 75
centavos per cubic meter. It was further agreed that, when
the work should be finished, the cost thereof should be paid
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by the owners in five annual instalments and that for

failure to pay any such instalment the whole of the
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amount thereafter to accrue should become at once due.

This contract was noted on the Torrens certificate of title
on January 8, 1924.
In connection with the making of the contract
abovementioned, the Director of Public Works required a
bond to be supplied by the owners in the penal amount of
P150,000, approximately twice the estimated cost of the
filling, conditioned for the payment of the amount due from
the owners. This bond was executed contemporaneously
with the main contract and in connection therewith it
should be noted that one of the names appearing upon said
contract was that of "Casa Viuda de Tan Toco," purporting
to be signed by M. de la Rama.
The dredging operations were conducted by the Bureau
of Public Works in substantial compliance, we find, with
the terms of said agreement and after the account with the
owners had been liquidated and the amount due from them
determined, demand was made upon them for the payment
of the first installment. No such payment was, however,
made, and as a consequence this action was instituted by
the Director of Public Works on October 14, 1926, for the
purpose of recovering the amount due the Government
under the contract from the original owners of the property
and from the sureties whose names were signed to the
contract of suretyship, and to enforce the obligation as a
real lien upon the property. In said action the Philippine
National Bank was made a party defendant, as having an
interest under its prior mortgage upon the property, while
Enrique Echaus was made defendant as successor in
interest of M. de la Rama, and Tan Ong Sze widow of Tan
Toco, was also made a def endant by reason of her supposed
liability derived from the act of De la Rama in signing the
firm name "Casa Viuda de Tan Toco," as a surety on the
bond. It is noteworthy that in the complaint it was asked
that, in the enf orcement of the Government's lien, the
property should be sold "subject to the first mortgage in
favor of the Philippine National Bank."
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VOL. 53, JULY 12, 1929
209
To this complaint different defenses were set up, as follows:

On behalf of the owners of the property, it was contended
that the Government had not complied with its contract, in
that the dredged material deposited on the land had not
been sufficient in quantity to raise the level of the land
above high water, and that, as a consequence, the land had
not been much benefited. It is therefore asserted that the
owners of the property are not obligated to pay for the
filling operation. These defendants further sought to
recover damages by way of crosscomplaint for the same
supposed breach of contract on the part of the Government.
On the part of Viuda de Tan Toco the defense was
interposed that the name "Casa Viuda de Tan Toco," signed
to the contract of suretyship by Mariano de la Rama, was
signed without authority while on the part of the
Philippine National Bank it was asserted that the
mortgage credit pertaining to the bank is superior to the
Government's lien for improvement, and by way of
counterclaim the bank asked that its mortgage be
foreclosed for the amount of its mortgage credit, and that
the four mortgagors, Sing Juco, Sing Bengco, M. de la
Rama and G. M. Tanboontien, be required to pay the
amount due the bank, and that in case of their f ailure to
do so the mortgaged property should be sold and the
proceeds paid preferentially to the bank upon its mortgage.
Upon hearing the cause the trial court, ignoring that
part of the original complaint wherein the Government
seeks to enf orce its lien in subordination to the first
mortgage, made pronouncements:
"(1) Declaring Sing Juco, Sing Bengco, G. M.
Tanboontien, and Mariano de la Rama indebted to
the Government in the amount of P70,938, with
interest f rom the date of the filing of the complaint,
and requiring them to pay said sum to the plaintiff
"(2) Declaring, in effect, that the lien of the Government
for the filling improvement was superior to the
mortgage of the Philippine National Bank and
finally
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"(3) Declaring the defendant Tan Ong Sze, Viuda de

Tan Toco, personally liable upon the contract of
suretyship, in case the four principal obligors
should not satisfy their indebtedness to the
Government, or if the land should not sell for
enough to satisfy the same."
From this judgment various parties defendant appealed, as
follows: All of the defendants, except the Philippine
National Bank, appealed from so much of the decision as
held that the defendant owners and signatories to the
contract of suretyship had not been released by non
performance of the contract on the part of the Bureau of
Public Works, and from the refusal of the court to give to
the defendant owners damages for breach of contract on
the part of the Government. On the part of Tan Ong Sze,
Viuda de Tan Toco, error is assigned to the action of the
court in holding said defendant liable upon the contract of
suretyship. Finally, the Philippine National Bank appealed
from so much of the decision as gave the lien of the
Government for improvements priority over the mortgage
executed in favor of the bank.
Dealing with these contentions in the order indicated,
we find that the contention of the appellants (except the
Philippine National Bank), to the effect that the Director of
Public Works has failed to comply with the obligations
imposed upon the Government by the contract, is wholly
untenable. By said contract the Government was not
obligated to raise the land on which the dredged material
was deposited to any specified level. The Government only
obligated itself to place upon said land the material which
should be dredged from the mouth of the Iloilo River in the
course of the improvement undertaken by the Government
in and near that place. Under the original contract as
originally drafted, the Government agreed to furnish
250,000 cubic meters, more or less, of dredged material but
on March 14,1921, the owners of the property indicated
their acceptance of a modification of the contract, effected
by the Director of Public Works and the Secretary of Com
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VOL. 53, JULY 12, 1929
211
merce and Communications, in which it was made clear

that the material to be supplied would be such only as
should be dredged from the river as a result of the proposed
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improvement. In the indorsement of the Director of Public

Works, thus accepted by the owners, it was made clear that
the Bureau of Public Works did not undertake to furnish
material 'to complete the filling of the land to any specified
level. Proof submitted on the part of the owners tends to
show that parts of the filled land are still subject to
inundation in rainy weather and it is contended that the
owners have, for this reason, been unable to sell the
property in lots to individual occupants. The sum of
P15,000, which is claimed upon this account, as damages,
by the owners, is the amount of interest alleged to have
accrued upon their investment, owing to their inability to
place the land advantageously upon the market. The claim
is, as already suggested, untenable. There has been no
breach on the part of the Government in fulfilling the
contract. In fact it appears that the Government deposited
in the period covered by the contract 236, 460 cubic meters,
and after the amount thus' deposited had been reduced by
21,840 cubic meters, owing to the natural process of drying,
the Bureau of Public Works further deposited 53,000 cubic
meters on the same land. In this connection the district
engineer testified that the filling which has been charged to
the owners at P70,938 actually cost the Government the
amount of P88,297.85. The charge made for the work was
evidently computed on a very moderate basis and the
owners of the property have no just ground of complaint
whatever.
The contention of Tan Ong Sze, widow of Tan Toco, to
the effect that she was not, and is not, bound by the
contract of suretyship, is, in our opinion, well founded. It
will be remembered that said contract purports to have
been signed by Mariano de la Rama, acting for this
defendant under power of attorney. But the Government
has exhibited no power of attorney which would authorize
the
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212

creation, by the attorneyinfact, of an obligation in the

nature of suretyship binding upon his principal.
It is true that the Government introduced in evidence
two documents exhibiting powers of attorney, conferred by
Tan Ong Sze, upon Mariano de la Rama. In the first of
these documents (Exhibit K, identical with Exhibit 6)
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Mariana de la Rama is given a power which reads as

follows:
" * * * and also for me and in my name to sign, seal and execute,
and as my act and deed deliver, any lease, any other deed for the
conveying any real or personal property or other matter or thing
wherein I am or may be personally interested or concerned. And I
do hereby further authorize and empower my said attorney to
substitute and appoint any other attorney or attorneys under him
for the purposes aforesaid, and the same again and pleasure to
revoke and generally for me and in my name to do, perform and
execute all and every other lawful and reasonable acts and things
whatsoever as fully and effectually as I, the said Tan Ong Sze
might or could do if personally present."
In another document (Exhibits L and M), executed in favor

of the same Mariano de la Rama by his uncle Tan Lien Co,
attorneyinfact of Tan Ong Sze, with power of substitution,
there appears the following:
"* * * and also for her and in her name to sign, seal and execute,
and as her act and deed deliver, any lease, release, bargain, sale,
assignment, conveyance or assurance, or any other deed for the
conveying any real or personal property or other matter or thing
wherein she or may be personally interested or concerned."
Neither of these powers specifically confers upon Mariano

de la Rama the power to bind the principal by a contract of
suretyship. The clauses quoted relate more specifically to
the execution of contracts relating to property and the
more general words at the close of the quoted clauses
should be interpreted, under the rule ejusdem generis, as
referring to contracts of like character. Power
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VOL. 53, JULY 12, 1929
213
to execute a contract of so exceptional a nature as a

contract of suretyship or guaranty cannot be inferred f rom
the general words contained in these powers.
In article 1827 of the Civil Code it is declared that
guaranty shall not be presumed it must be expressed and
cannot be extended beyond its specified limits. By analogy
a power of attorney to execute a contract of guaranty
should not be inferred from vague or general words,
especially when such words have their origin and
explanation in particular powers of a wholly different
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nature. It results that the trial court was in error in giving

personal judgment against Tan Ong Sze upon the bond
upon which she was sued in this case.
We now proceed to consider the last important disputed
question involved in the case, which is, whether the
indebtedness owing to the Government under the contract
for filling the parcel of land already mentioned is entitled
to preference over the mortgage credit due to the Philippine
National Bank, as the trial judge held, or whether, on the
contrary, the latter claim is entitled to priority over the
claim of the Government. Upon entering into the discussion
of this feature of the case it is well to recall the fact that
the bank's mortgage was registered in the office of the
register of deeds of the Province of Iloilo on November 26,
1920, while the filling contract was registered on January
8, 1924, that is to say, there is a priority of more than
three years, in point of time, in the inscription of the
mortgage credit over the filling contract. It should also be
noted that the Government's credit under the filling
contract was made an express lien upon the property which
was the subject of the improvement.
In the brief submitted in behalf of the bank it appears to
be assumed that the Government's credit under the filling
contract is a true refectionary credit (crdito refaccionario)
under subsection 2 of article 1923 of the Civil Code. It may
be observed, however, that in a precise and technical sense,
this credit is not exactly of the nature of
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214

the refectionary credit as known to the civil law. In the civil

law the refectionary credit is primarily an indebtedness
incurred in the repair or reconstruction of something
previously made, such repair or reconstruction being made
necessary by the deterioration or destruction of the thing
as it formerly existed. The conception does not ordinarily
include an entirely new work, though Spanish
jurisprudence appears to have sanctioned this broader
conception in certain cases, as may be gathered from the
discussion in Enciclopedia Jurdica Espaola (vol. 26, pp.
888890), s. v. Refaccionario. The question whether the
credit we are considering falls precisely under the
conception of refectionary credit in the civil law is in this
case academic rather than practical, for the reason that by
the express terms of the filling contract the credit was
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constituted a lien upon the improved property. But

assuming, as might be tenable in the state of the
jurisprudence, that said credit is a refectionary credit
enjoying preference under subsection 3 of article 1923 of
the Civil Code, then the mortgage credit must be given
priority under subsection 2 of article 1927 of the same
Code, for the reason that the mortgage was registered first.
Possibly the simpler view of the situation is to consider
the Government's right under the stipulation expressly
making the credit a lien upon the property, for it was
certainly lawful for the parties to the filling contract to
declare the credit a lien upon the property to be improved
to the extent hereinafter definedwhether the credit
precisely fulfills the conception of refectionary credit or not.
In this aspect we have before us a competition between the
real lien created by the registered mortgage and the real
lien created by the filling contract, of later registration. The
true solution to this problem is, in our opinion, not open to
doubt and again the result is that priority must be
conceded to the mortgage. The mortgage was created by the
lawful owners at a time when no other competing interest
existed in the property. The lien of the mortgage therefore
attached to the fee, or unlimited interest of the
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VOL. 53, JULY 12, 1929
215
owners in the property. On the other hand, the lien created

by the filling contract was created after the mortgage had
been made and registered, and, therefore, after the owners
of the property had parted with the interest created by the
mortgage. The Government's lien owes its origin to the
contract, and derives its efficacy from the volition of the
contracting parties. But no party can by contract create a
right in another intrinsically greater than that which he
himself possesses. The owners, at the time this contract
was made, were owners of the equity of redemption only
and not of the entire interest in the property, and the lien
created by the contract could only operate upon the equity
of redemption.
In this connection we observe that, as the new material
was deposited from the Government dredges upon the
property in question, it became an integral part of the soil
and an irremovable fixture and the deposit having been
made under contract between the Government and the
owners of the equity of redemption, without the
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concurrence of the mortgage creditor in said contract, the

latter could not be prejudiced thereby. The trial court, in
declaring that the Government's lien should have
preference over the mortgage, seems to have proceeded
upon the idea that, at the time the mortgage was created,
the new soil had not yet been deposited under the filling
contract and that as a consequence the mortgage lien
should not be considered as attaching to the value added by
deposit of the additional material. This proposition,
however, overlooks the fact that the deposited material
became an irremovable fixture, by the act and intention of
the parties to the filling contract, and the lien of the
mortgage undoubtedly attached to the increment thus
spread over and affixed to the mortgaged land. If the idea
which prevailed in the trial court should be accepted as law
upon this point, the result would be that a mortgage
creditor could, by the act of strangers, be entirely improved
out of his property by the making of improvements to
which he had not assented. This cannot be accepted as good
law.
216
216

We may add that the case cannot, on this point, be resolved

favorably to the contention of the Director of Public Works,
upon the authority of Unson vs. Urquijo, Zuloaga & Escubi
(50 Phil., 160), for the reason that upon the deposit of the
dredged material on the land such material lost its
identity. In the case cited the machinery in respect to
which the vendor's preference was upheld by this court
retained its separate existence and remained perfectly
capable of identification at all times.
From what has been said it results that them appealed
judgment must be affirmed, and the same is hereby
affirmed, in dismissing, in effect, the crosscomplaint filed
by some of the defendants against the plaintiff, Director of
Public Works. Said judgment is further affirmed in its
findings, which are not in dispute, with respect to the
amount of the Government's claim under the filling
contract and the amount of the mortgage credit of the
bank, as it is also affirmed in respect to the joint and
several judgment entered in favor of the plaintiff against
Sing Juco, Sing Bengco, Tanboontien and Mariano de la
Rama Tanbunco, (alias Mariano de la Rama) for the
amount found due to the Government.
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Said judgment, however, must be reversed, and the

same is hereby reversed, in so far as it holds that Tan Ong
Sze, Viuda de Tan Toco, is liable upon the contract of
suretyship, and she is hereby absolved from the complaint.
The judgment must also be reversed in so far as it declares
that the Government's lien under the filling contract is
entitled to priority over the bank's mortgage. On the
contrary it is hereby declared that the bank's credit is
entitled to priority out of the proceeds of the foreclosure
sale, the residue, if any, to be applied to the Government's
lien created by the filling contract, and otherwise in
accordance with law. For further proceedings in conformity
with this opinion, the cause is hereby remanded to the
court of origin, without pronouncement as to costs. So
ordered.
Johnson, Villamor, Johns, Romualdez, and VillaReal,
JJ., concur.
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VOL. 53, JULY 16, 1929
217
People vs. Mangantilao
Malcolm and Ostrand, JJ., also voted as indicated in

the dispositive part of this decision, but their names are
not signed to the opinion owing to their absence on leave at
the time of promulgation.
Judgment affirmed in part and reversed in part.
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10/19/2016

[No. 30181. July 12, 1929]

nearby waters does not enjoy priority over a mortgage

PHILIPPINE REPORTS ANNOTATED

APPEAL from a judgment of the Court of First Instance of

of so low a level that, prior to the improvement to which

VOL. 53, JULY 12, 1929