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Topic: Agency in General contract.

One of the names appearing upon said


contract was that of Casa Viuda de Tan Toco,
Case Title: Director of Public Works v Sing Juco et purporting to be signed by M. de la Rama x x x as
al. the formers attorney-in-fact.

Date: 1929 July 12 The Bureau, having completed the dredging,


demanded payment for the dredged material. The co-
Ponente: STREET, J.
owners failed to pay, prompting the Director of the
Legal Doctrine: In article 1827 of the Civil Code it Burea to file an action to recover the amount due
is declared that guaranty shall not be presumed; it from the parties of the suretyship and to enforce the
must be expressed and cannot be extended beyond its obligation as a lien upon the property. The PNB was
specified limits. By analogy a power of attorney to impleaded as having an interest in the property under
execute a contract of guaranty should not be inferred its prior mortgage. Tan Ong Sze, the widow (viuda)
from vague or general words, especially when such of Tan Toco was also impleaded by reason of her
words have their origin and explanation in particular supposed liability derived from the act of De la Rama
powers of a wholly different nature. in signing the firm Casa Viuda de Tan Toco as a
surety on bond. In its complaint, the government
Facts: conceded to the primacy of PNBs encumbrance.

Sing Juco, Sing Bengco, Gonzales Tanboontien, and In their defense, the co-owners averred that the land
Mariano de la Rama (Sing Juco et al.) are co-owners had not been benefited, since the Bureau had not
of a parcel of land located at the mouth of Iloilo river. appreciably raised the level of the land above high
Said land is so low that it is frequently flooded. In water. Tan Ong Sze avers that she should be released
1920 the co-owners conveyed the property by way of from the bond since de la Rama signed Casa Viuda
mortgage to the Philippine National Bank to secure a de Tan Toco on the surety without authority. PNB
credit of Php170,000. asserts that the mortgage was superior to
governments lien.
In 1921, the government was planning extensive
harbor improvements in the vicinity which required The trial court ordered: (1) the co-owners to pay the
dredging to be carried out by the Bureau of Public government Php70,938; (2) that the governments
Work (the Bureau). The dredging activity made it lien was superior to PNBs mortgage; and (3) that
necessary to secure an area where the dirt and mud Tan Ong Sze was personally liable in case the co-
from the areas dredged could be deposited. The owners fail to satisfy their debt to the government.
aforementioned land was a prime candidate, being
accessible and low. The Bureau contracted with the The defendants appeal as follows: (1) The co-owners
co-owners Sing Juco et al. for this purpose, where the and sureties argue to be released from their respective
co-owners would pay the Bureau 20 to 75 centavos obligations on the basis of the Bureaus breach of
per cubic meter of material deposited on the property. contract; (2) Tan Ong Sze reasserts the same
It was contemplated in the contract that the Bureau argument of want of authority of de la Rama to bind
would furnish only the material dredged from the her in the suretyship; and (3) PNB reasserts that its
river as a result of the government improvements, mortgage had be constituted first is therefore superior
which was expected to be 250,000 cubic meters. to the governments lien.

In connection with the contract mentioned, the Issue(s): (1) Is the Bureau in breach of its contract
Bureau required that the co-owners provide a bond in with the co-owners? (2) Is Tan Ong Sze bound as a
the amount of Php150,000, approximately twice the surety by virtue of de la Ramas act of signing as her
estimated cost of the filling, conditioned for the attorney-in-fact? (3) Is PNBs mortgage superior to
payment of the amount due from the owners. This the governments lien?
bond was executed contemporaneously with the main
Held: (1) No; (2) No; (3) Yes
Ratio: property, and the lien created by the contract could
only operate upon the equity of redemption.
(1) The government is not in breach. The Bureau is
not obligated to raise the co-owners land to any
specified level. The obligation is merely to furnish
only the material dredged from the river as a result of
the proposed improvements. The mention of 250,000
cubic meters of material in the contract, although not
binding on the government as it was merely an
estimate of the amount of material to be deposited,
was duly satisfied. In fact, the Bureau deposited more
than the mentioned 250,000 cubic meters.

(2) Tan Ong Sze is not bound as surety. The power-


of-attorney conferred to de la Rama relate more
specifically to the execution of contracts relating to
property x x x. Power to execute a contract so
exceptional a nature as a contract of suretyship or
guaranty cannot be inferred from 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 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.

(3) PNBs mortgage is superior to the governments


lien. 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 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 possess. 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