ART 1189: SUSPENSIVE CONDITIONS

(lost of the thing)

ART 1191: RECISSION

OBLIGATIONS

OSMENA III VS. SSS

AYSON-SIMON VS. ADAMOS AND FERIA

Facts
Osmena III and 4 other members of the Senate and
SSS members seek for nullification of the following
issuances of Social Security Commission
1. Res. No. 428, July 124, 2004- Swiss Challenge
Method approved the sale of the entire equity
share of SSS to Equitable PCI bank
2. Res. 485, August 11, 2004 pertains to the
timetable and instruction to bidders
SSS in order to liquefy its long term investments and
diversify them into higher yielding and less volatile
investments which includes its shareholdings in
EPCIB (Reason: shares in question substantially
declined in value and SSS could no longer afford to
continue holding on them)In a purchase agreement it
was agreed in that SSS will sell all its EPCIB shares
to BDO
COA and DOJ (in its opinion) approved the
agreement
Bidding was made subject to the right of BDO
Capital to match the highest bid
BDO turned out t be the highest bidder
Petitioner alleged that BDO to buy EPCIB shares is
inconsistent with the idea of public bidding
BDO and EPCIB had a merger, all EPCIB shares
were transferred to BDO

FACTS:
Defendants, Nicolas Adamos and Vicente Feria,
purchased two lots forming part of the Piedad Estate
in Quezon City, from Juan Porciuncula. Thereafter,
the successors-in-interest of the latter filed Civil Case
for annulment of the sale and the cancellation of
TCT No. 69475, which had been issued to
defendants-appellants by virtue of the disputed sale.
The Court rendered a Decision annulling the saleThe
said judgment was affirmed by the Appellate Court
and had attained finality.

Issue
W/N in questioning the alleged resolution can still
recover the shares and subject it to a proper
bidding process
Ruling
No, petitioners can no longer recover the shares
The obligation to give a determinate thing is
extinguished if the object is lost without the fault of
the debtor
Under the Civil Code, a thing is considered lost
when it perishes or disappears on such a way that it
cannot be recovered.
In the very real sense, the interplay of the ensuing
factor: a) the BDO-EPCIB merger and b) the
cancellation of subject shares and their replacement
by totally new common shares of BDO had rendered
the erstwhile 187.84 M EPCIB shares of SSS
unrecoverable in the contemplation of Civil Code
provision

OF

RECIPROCAL

Meanwhile, during the pendency of the case above,

defendants sold the said two lots to Petitioner
Generosa Ayson-Simon for Php3,800.00 plus
Php800.00 for facilitating the issuance of the new
titles in favor of petitioner. Due to the failure of the
defendants to deliver the said lots, petitioner filed a
civil case for specific performance. The trial court
rendered judgment to petitioners favor. However,
defendants could not deliver the said lots because the
CA had already annulled the sale of the two lots in
Civil Case No. 174. Thus, petitioner filed another
civil case for the rescission of the contract.
Defendants were contending that petitioner cannot
choose to rescind the contract since petitioner chose
for specific performance of the obligation. Also,
even though petitioner can choose to rescind the
contract, it would not be possible, because it has
already prescribed.
ISSUES:
1. Can petitioner choose to rescind the contract even
after choosing for the specific performance of the
obligation?
2. Had the option to rescind the contract prescribed?
RULING:
1. Yes. The rule that the injured party can only
choose between fulfillment and rescission of the
obligation, and cannot have both, applies when the
obligation is possible of fulfillment. If, as in this case,
the fulfillment has become impossible, Article 1191
allows the injured party to seek rescission even after
he has chosen fulfillment.
2. No. Article 1191 of the Civil Code provides that
the injured party may also seek rescission, if the
fulfillment should become impossible. The cause of

action to claim rescission arises when the fulfillment

of the obligation became impossible when the Court
of First Instance of Quezon City in Civil Case No.
174 declared the sale of the land to defendants by
Juan Porciuncula a complete nullity and ordered the
cancellation of Transfer Certificate of Title No.
69475 issued to them. Since the two lots sold to
plaintiff by defendants form part of the land
involved in Civil Case No. 174, it became impossible
for defendants to secure and deliver the titles to and
the possession of the lots to plaintiff. But plaintiff
had to wait for the finality of the decision in Civil
Case No. 174, According to the certification of the
clerk of the Court of First Instance of Quezon City
(Exhibit "E-2"), the decision in Civil Case No. 174
became final and executory "as per entry of
Judgment dated May 3, 1967 of the Court of
Appeals." The action for rescission must be
commenced within four years from that date, May 3,
1967. Since the complaint for rescission was filed on
August 16, 1968, the four year period within which
the action must becommenced had not expired.
NORTHWESTERN UNIVERSITY, INC. VS.
ARQUILLO
FACTS:
Ben A. Nicolas, in behalf of Northwestern University,
filed a letter-complaint to the Integrated Bar of the
Philippines allegedly reporting that Atty. Macario
Arquillo had engaged in conflicting interest by acting as
counsel for both complainant and respondent in the
very same consolidated case filed to the National Labor
Relations Commission. Respondent claims that there is
no conflict-of-interests as all parties are said to be on the
same side.
For failing to appear in scheduled hearings, Atty.
Arquillo is deemed to have waived his right to
participate in the proceedings.
ISSUE: Whether or not the respondent is guilty of
violating the conflict-of-interests rule under the Code
of Professional Responsibility.
HELD: Yes. The Court held that Atty. Arquillo is
guilty of violating the conflict-of-interests rule under
the Code of Professional Responsibility. Canon 15 of
the Code of Professional Responsibility requires
lawyers to observe candor, fairness and loyalty in all
their dealings and transactions with their clients.
Therefore, a lawyer may not represent conflicting
interests without the written consent of all parties
involved, after disclosure of the facts. The Court did
not agree with Arquillos justification of his acts for

he should have known that in representing opposing

parties, there would be an obvious conflict of
interest, regardless of his belief that both parties are
on the same side.
Atty. Macario Arquillo was found guilty of
misconduct and was hereby suspended from the
practice of law for a period of one year.
COMMUNITIES CAGAYAN, INC.,
vs.
SPOUSES ARSENIO and ANGELES NANOL
AND ANYBODY CLAIMING RIGHTS
UNDER THEM
Facts:
Sometime in 1994, respondent-spouses
Arsenio and Angeles Nanol entered into a Contract
to Sell with petitioner Communities Cagayan, Inc.,
(CCI) whereby the latter agreed to sell to
respondent-spouses a house and Lots 17 and
19 located at Block 16, Camella Homes Subdivision,
Cagayan de Oro City, for the price of P368,000.00
(P368T). They obtained a loan from Capitol
Development Bank (CDB), using the property as
collateral. To facilitate the loan, a simulated sale over
the property was executed by petitioner in favor of
respondent-spouses. Accordingly, titles (TCT Nos.
105202 and 105203) were transferred in the names of
respondent-spouses and submitted to CDB for loan
processing. The bank collapsed and closed before it
could release the loan.
On November 30, 1997, respondent-spouses
entered into another Contract to Sell with petitioner
over the same property for the same price. This time,
they availed of petitioners in-house financing thus,
undertaking to pay the loan over four years, from
1997 to 2001.
Respondent Arsenio demolished the original
house and constructed a three-story house allegedly
valued at P3.5 million, more or less. (Respondent
Arsenio died, leaving his wife, herein respondent
Angeles, to pay for the monthly amortizations.)
On September 10, 2003, petitioner sent
respondent-spouses a notarized Notice of
Delinquency and Cancellation of Contract to Sell due
to the latters failure to pay the monthly
amortizations. Petitioner filed before the Municipal
Trial Court in Cities, an action for unlawful detainer
against respondent-spouses.
In her Answer, respondent Angeles averred that
the Deed of Absolute Sale is valid.

Issues
1) Whether petitioner is obliged to refund to
respondent-spouses all the monthly installments
paid; and
2) Whether petitioner is obliged to reimburse
respondent-spouses the value of the new house
minus the cost of the original house.
Ruling
The petition is partly meritorious.
Respondent-spouses are entitled to the cash surrender
value of the payments on the property equivalent to
50% of the total payments made under the Maceda Law.
Respondent-spouses are entitled to reimbursement of
the improvements made on the property. In view of the
special circumstances obtaining in this case, we are
constrained to rely on the presumption of good faith on
the part of the respondent-spouses which the petitioner
failed to rebut. Thus, respondent-spouses being
presumed builders in good faith, we now rule on the
applicability of Article 448 of the Civil Code. Article 448
on builders in good faith does not apply where there is a
contractual relation between the parties, such as in the
instant case. We went over the records of this case and
we note that the parties failed to attach a copy of the
Contract to Sell. As such, we are constrained to apply
Article 448 of the Civil Code, which provides viz:
ART. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in Articles 546
and 548, or to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent. However, the builder or planter cannot be
obliged to buy the land if its value is considerably more than that of the building
or trees. In such case, he shall pay reasonable rent, if the owner of the land does
not choose to appropriate the building or trees after proper indemnity. The parties
shall agree upon the terms of the lease and in case of disagreement, the court shall
fix the terms thereof.

The rule that the choice under Article 448 of the

Civil Code belongs to the owner of the land is in
accord with the principle of accession, i.e., that the
accessory follows the principal and not the other way
around. Even as the option lies with the landowner,
the grant to him, nevertheless, is preclusive. The
landowner cannot refuse to exercise either option
and compel instead the owner of the building to
remove it from the land. The raison detre for this
provision has been enunciated thus: Where the
builder, planter or sower has acted in good faith, a
conflict of rights arises between the owners, and it
becomes necessary to protect the owner of the
improvements without causing injustice to the owner
of the land. In view of the impracticability of
creating a state of forced co-ownership, the law has
provided a just solution by giving the owner of the
land the option to acquire the improvements after

payment of the proper indemnity, or to oblige the

builder or planter to pay for the land and the sower
the proper rent. He cannot refuse to exercise either
option. It is the owner of the land who is authorized
to exercise the option, because his right is older, and
because, by the principle of accession, he is entitled
to the ownership of the accessory thing.
In conformity with the foregoing
pronouncement, we hold that petitioner, as
landowner, has two options. It may appropriate the
new house by reimbursing respondent Angeles the
current market value thereof minus the cost of the
old house. Under this option, respondent Angeles
would have "a right of retention which negates the
obligation to pay rent." In the alternative, petitioner
may sell the lots to respondent Angeles at a price
equivalent to the current fair value thereof. However,
if the value of the lots is considerably more than the
value of the improvement, respondent Angeles
cannot be compelled to purchase the lots. She can
only be obliged to pay petitioner reasonable rent.
1192:
BOTH
PARTIES
GUILTY
VIOLATING THE OBLIGATION

OF

CENTRAL BANK OF THE PHILIPPINES

VS. COURT OF APPEALS
The following requisites must be present before the order of conservatorship
may be set aside by a court: (1) The appropriate pleading must be filed by
the stockholders of record representing the majority of the capital stock of the
bank in the proper court; (2) Said pleading must be filed within ten (10)
days from receipt of notice by said majority stockholders of the order placing
the bank under conservatorship; and (3) There must be convincing proof,
after hearing, that the action is plainly arbitrary and made in bad faith.

Facts:
Central Bank discovered that certain
questionable loans extended by Producers Bank of
the Philippines (PBP), totalling approximately P300
million (the paid-in capital of PBP amounting only to
P 140.544 million, were fictitious as they were
extended, without collateral, to certain interests
related to PBP owners themselves. Subsequently and
during the same year, several blind items about a
family-owned bank in Binondo which granted
fictitious loans to its stockholders appeared in major
newspapers which triggered a bank-run in PBP and
resulted in continuous over-drawings on the banks
demand deposit account with the Central Bank;
reaching to P 143.955 million. Hence, on the basis of
the report submitted by the Supervision and
Examination Sector, the Monetary Board (MB),
placed PBP under conservatorship.
PBP submitted a rehabilitation plan to the CB which
proposed the transfer to PBP of 3 buildings owned

by Producers Properties, Inc. (PPI), its principal

stockholder and the subsequent mortgage of said
properties to the CB as collateral for the banks
overdraft obligation but which was not approved due
to disagreements between the parties. Since no other
rehabilitation program was submitted by PBP for
almost 3 years its overdrafts with the CB continued
to accumulate and swelled to a staggering P1.023
billion. Consequently, the CB Monetary Board
decided to approve in principle what it considered a
viable rehabilitation program for PBP. There being
no response from both PBP and PPI on the
proposed rehabilitation plan, the MB issued a
resolution instructing Central Bank management to
advise the bank that the conservatorship may be
lifted if PBP complies with certain conditions.
Without responding to the communications of the
CB, PBP filed a complaint with the Regional Trial
Court of Makati against the CB, the MB and CB
Governor alleging that the resolutions issued were
arbitraty and made in bad faith. Respondent Judge
issued a temporary restraining order and
subsequently a writ of preliminary injunction. CB
filed a motion to dismiss but was denied and ruled
that the MB resolutions were arbitrarily issued. CB
filed a petition for certiorari before the Court of
Appeals seeking to annul the orders of the trial court
but CA affirmed the said orders. Hence this petition.
Issue: Whether or not the trial court erred in not
dismissing the case for lack of cause of action and
declaring the MB resolutions as arbitrary.
Held: The following requisites must be present
before the order of conservatorship may be set aside
by a court: (1) The appropriate pleading must be
filed by the stockholders of record representing the
majority of the capital stock of the bank in the
proper court; (2) Said pleading must be filed within
ten (10) days from receipt of notice by said majority
stockholders of the order placing the bank under
conservatorship; and (3) There must be convincing
proof, after hearing, that the action is plainly
arbitrary and made in bad faith.
In the instant case, the original complaint was filed
more than 3 years after PBP was placed under
conservator, long after the expiration of the 10-day
period deferred to above. It is also beyond question
that the complaint and the amended complaint were
not initiated by the stockholders of record
representing the majority of the capital stock.