ART 1189: SUSPENSIVE CONDITIONS (lost of the thing) OSMENA III VS. SSS 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 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

ART 1191: RECISSION OF RECIPROCAL OBLIGATIONS

AYSON-SIMON VS. ADAMOS AND FERIA 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. 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 petitioner’s 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 Arquillo’s 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 petitioner’s 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 latter’s 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 d’etre 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 OF VIOLATING THE OBLIGATION 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 Producer’s 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 bank’s 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 bank’s 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.