Vous êtes sur la page 1sur 24

SECOND DIVISION

[G.R. No. 133643. June 6, 2002]

RITA SARMING, RUFINO SARMING, MANUEL SARMING, LEONORA


VDA. DE LOY, ERLINDA DARMING, NICANDRA SARMING,
MANSUETA SARMING, ARTURO CORSAME, FELY CORSAME,
FEDERICO CORSAME, ISABELITA CORSAME, NORMA
CORSAME, CESAR CORSAME, RUDY CORSAME, ROBERTA
CORSAME, ARTEMIO CORSAME, ELPIDIO CORSAME,
ENRIQUITA
CORSAME,
and
GUADALUPE
CORSAME
TAN,petitioners, vs. CRESENCIO
DY,
LUDIVINA
DY-CHAN,
TRINIDAD FLORES, LUISA FLORES, SATURNINA ORGANISTA,
REMEDIOS
ORGANISTA,
OFELIA ORGANISTA,
LYDIA
ORGANISTA, ZOSIMO ORGANISTA, DOMISIANO FLORES,
FLORITA FLORES, EDUARDO FLORES, BENIGNA FLORES,
ANGELINA FLORES, MARCIAL FLORES, and MARIO
FLORES, respondents.
DECISION
QUISUMBING, J.:

This petition for review assails the decision[1] dated September 23, 1997 of the Court of
Appeals in CA-G.R. CV No. 39401, which affirmed the decision [2] of the Regional Trial Court,
Branch 41 in Negros Oriental, Dumaguete City and the resolution [3] dated April 21, 1998 denying
petitioners motion for reconsideration.
The facts as culled from records are as follows:
Petitioners are the successors-in-interest of original defendant Silveria Flores, while
respondents Cresencio Dy and Ludivina Dy-Chan are the successors-in-interest of the original
plaintiff Alejandra Delfino, the buyer of one of the lots subject of this case. They were joined in
this petition by the successors-in-interest of Isabel, Juan, Hilario, Ruperto, Tomasa, and Luisa
and Trinidad themselves, all surnamed Flores, who were also the original plaintiffs in the lower
court. They are the descendants of Venancio[4] and Jose[5], the brothers of the original defendant
Silveria Flores.
In their complaint for reformation of instrument against Silveria Flores, the original
plaintiffs alleged that they, with the exception of Alejandra Delfino, are the heirs of Valentina
Unto Flores, who owned, among others, Lot 5734, covered by OCT 4918-A; and Lot 4163,
covered by OCT 3129-A, both located at Dumaguete City.

After the death of Valentina Unto Flores, her three children, namely: Jose, Venancio, and
Silveria, took possession of Lot 5734 with each occupying a one-third portion. Upon their death,
their children and grandchildren took possession of their respective shares. The other parcel, Lot
4163 which is solely registered under the name of Silveria, was sub-divided between Silveria and
Jose. Two rows of coconut trees planted in the middle of this lot serves as boundary line.
In January 1956, Luisa, Trinidad, Ruperto and Tomasa, grandchildren of Jose and now
owners of one-half of Lot 4163, entered into a contract with plaintiff Alejandra Delfino, for the
sale of one-half share of Lot 4163 after offering the same to their co-owner, Silveria, who
declined for lack of money. Silveria did not object to the sale of said portion to Alejandra
Delfino.
Before preparing the document of sale, the late Atty. Deogracias Pinili, Alejandras lawyer,
called Silveria and the heirs of Venancio to a conference where Silveria declared that she owned
half of the lot while the other half belonged to the vendors; and that she was selling her three
coconut trees found in the half portion offered to Alejandra Delfino for P15. When Pinili asked
for the title of the land, Silveria Flores, through her daughter, Cristita Corsame, delivered
Original Certificate of Title No. 4918-A, covering Lot No. 5734, and not the correct title
covering Lot 4163. At that time, the parties knew the location of Lot 4163 but not the OCT
Number corresponding to said lot.
Believing that OCT No. 4918-A was the correct title corresponding to Lot 4163, Pinili
prepared a notarized Settlement of Estate and Sale (hereinafter deed) duly signed by the parties
on January 19, 1956.As a result, OCT No. 4918-A was cancelled and in lieu thereof, TCT No.
5078 was issued in the names of Silveria Flores and Alejandra Delfino, with one-half share
each. Silveria Flores was present during the preparation and signing of the deed and she stated
that the title presented covered Lot No. 4163.
Alejandra Delfino immediately took possession and introduced improvements on the
purchased lot, which was actually one-half of Lot 4163 instead of Lot 5734 as designated in the
deed.
Two years later, when Alejandra Delfino purchased the adjoining portion of the lot she had
been occupying, she discovered that what was designated in the deed, Lot 5734, was the wrong
lot. She sought the assistance of Pinili who approached Silveria and together they inquired from
the Registry of Deeds about the status of Lot 4163. They found out that OCT No. 3129-A
covering Lot 4163 was still on file.Alejandra Delfino paid the necessary fees so that the title to
Lot 4163 could be released to Silveria Flores, who promised to turn it over to Pinili for the
reformation of the deed of sale. However, despite repeated demands, Silveria did not do so,
prompting Alejandra and the vendors to file a complaint against Silveria for reformation of the
deed of sale with damages before the Regional Trial Court of Negros Oriental, Branch 41,
docketed as Civil Case No. 3457.
In her answer, Silveria Flores claimed that she was the sole owner of Lot 4163 as shown by
OCT No. 3129-A and consequently, respondents had no right to sell the lot. According to her, the
contract of sale clearly stated that the property being sold was Lot 5734, not Lot 4163. She also
claimed that respondents illegally took possession of one-half of Lot 4163. She thus prayed that
she be declared the sole owner of Lot 4163 and be immediately placed in possession thereof. She
also asked for compensatory, moral, and exemplary damages and attorneys fees.

The case lasted for several years in the trial court due to several substitutions of parties. The
complaint was amended several times. Moreover, the records had to be reconstituted when the
building where they were kept was razed by fire. But, earnest efforts for the parties to amicably
settle the matters among themselves were made by the trial court to no avail.
On September 29, 1992, the trial court found in favor of herein respondents, who were the
plaintiffs below, decreeing as follows:

WHEREFORE, this Court finds the preponderance of evidence in favor of the


plaintiffs and veritably against the defendants and, as such, renders judgment
accordingly, thereby ORDERING the defendants, the heirs of the deceased-defendant
SILVERIA FLORES and her successors-in-interest the following:
1) To enter into the reformation of the subject contract or execute a mutual
conveyance of sale, by making the one-half (1/2) eastern portion of Lot 4163, the
subject of the document of sale, in favor of plaintiff, the late Alejandra Delfino or her
heirs and/or successors-in-interest;
2) To sign a document ceding to the heirs of the heirs of Maxima Flores and Venancio
Flores the excess of her one-third (1/3) share; and further ordering the heirs of the late
Alejandra Delfino to correspondingly sign a document for the return of the one-half
(1/2) portion of Lot 5734 to the original registered owners, in exchange thereby;
3) To pay to the heirs of the late plaintiff Alejandra Delfino, the sum of P5,000.00 as
actual damages and the sum of P10,000.00 as moral damages;
4) To pay P2,000.00 as attorneys fees plus the costs of this suit.
SO ORDERED.[6]
According to the trial court, the claims of herein respondents were anchored on valid
grounds. It noted that Alejandra had been occupying one-half portion of Lot 4163 since 1956 and
it was the one pointed to her by the vendors. Citing the case of Atilano vs. Atilano[7], it ruled that
when one sells or buys real property, he sells or buys the said property as is shown to her and as
he sees it, at its actual setting and by its physical metes and bounds, not by the mere lot number
assigned to it in the certificate of title. Thus, it concluded that from the facts and circumstances
of the case, it is clear that the object of the sale, as understood by the parties, was that portion Y
of Lot 4163 and that its designation as Lot 5734 in the document of sale was a simple mistake in
the drafting of the document, which mistake, however, did not vitiate the consent of the parties or
affect the validity and the binding effect of the contract between them. Hence, the remedy of
reformation of instrument is proper.[8]
Petitioners appealed the decision to the Court of Appeals, which affirmed the ruling of the
trial court as follows:

WHEREFORE, the appealed decision is hereby AFFIRMED. Costs against


defendants-appellants.
SO ORDERED.[9]
In affirming the decision of the trial court, the Court of Appeals agreed that the real intention
of the parties was for the sale of Lot 4163 which Alejandra Delfino had been occupying, and the
designation of Lot 5734 in the deed was a mistake in the preparation of the document. It noted
that Silveria Flores did not object when Alejandra Delfino took possession of one-half portion of
Lot 4163 immediately after the sale, considering that it was Silverias son, Michael Corsame, who
developed the area purchased by Alejandra.[10]
Aggrieved but undeterred, the successors-in-interest of defendant Silveria Flores seasonably
filed their petition for review under Rule 45 of the Rules of Court. They assail the decision of the
Court of Appeals on the following grounds:
1. THE COURT OF APPEALS COMMITTED AN ERROR IN LAW WHEN IT FAILED TO
ORDER THE DISMISSAL OF CIVIL CASE NO. 3457 FOR LACK OF CAUSE OF
ACTION.
2. THE COURT OF APPEALS AND THE TRIAL COURT COMMITTED A REVERSIBLE
ERROR IN LAW AND JURISPRUDENCE WHEN IT FAILED TO RULE THAT, BASED
ON THE UNDISPUTED EVIDENCE ON RECORD AND THE SETTLEMENT OF
ESTATE AND SALE ITSELF, THE PLAINTIFFS HAVE NO CAUSE OF ACTION
AGAINST SILVERIA FLORES BECAUSE SHE DID NOT SELL HER LAND TO
ALEJANDRA DELFINO. HENCE SILVERIA FLORES CANNOT BE BOUND NOR
PREJUDICED BY THE CONTRACT OF SALE ENTERED BY ALEJANDRA DELFINO
AND HER CO-PLAINTIFFS (CAPITOL INSURANCE & SURETY CO INC. V. CENTRAL
AZUCARERA DEL DAVAO, 221 SCRA 98; OZAETA V. CA, 228 SCRA 350).
3. THE COURT OF APPEALS AND THE TRIAL COURT COMMITTED A REVERSIBLE
ERROR WHEN IT FAILED TO PRONOUNCE THAT SILVERIA FLORES WHO IS NOT
A PARTY TO THE CONTRACT OF SALE INVOLVING LOT NO. 5734 COVERED BY
OCT NO. 4918-A CANNOT BE LEGALLY COMPELLED BY ALEJANDRA DELFINO
THRU AN ACTION FOR REFORMATION OF CONTRACT TO EXECUTE A
CONVEYANCE OF SALE INVOLVING LOT NO. 4163 COVERED BY OCT NO. 3129-A
OWNED AND REGISTERED SOLELY IN THE NAME OF SILVERIA FLORES.
4. THE COURT OF APPEALS AND THE TRIAL COURT GROSSLY MISAPPREHENDED
THE FACTS WHEN IT RULED THAT THE OBJECT OF THE CONTRACT OF SALE
WAS LOT NO. 4163 COVERED BY OCT NO. 3129-A, DESPITE THE UNASSAILABLE
FACT THAT THE OBJECT OF THE SETTLEMENT AND SUBJECT OF THE
CONTRACT OF SALE WAS LOT NO. 5734 COVERED BY OCT NO. 4918-A.
5. THE COURT OF APPEALS AND THE TRIAL COURT GROSSLY MISAPPREHENDED
THE FACTS IN NOT UPHOLDING THAT THERE WAS NO MISTAKE IN THE
DRAFTING OF THE DOCUMENT AS WELL AS IN THE OBJECT OF THE
SETTLEMENT OF ESTATE AND SALE BECAUSE THE DOCUMENT WAS
PREPARED BY ATTY. DEOGRACIAS PINILI, THE LAWYER OF ALEJANDRA
DELFINO.

6. THE COURT OF APPEALS AND THE TRIAL COURT GROSSLY MISAPPREHENDED


THE FACTS WHEN IT RULED THAT THE GRANDCHILDREN OF JOSE FLORES ARE
OWNERS AND COULD SELL THE ONE-HALF (1/2) PORTION OF LOT NO. 4163 TO
ALEJANDRA DELFINO DESPITE THE INCONTROVERTIBLE EVIDENCE THAT LOT
NO. 4163 COVERED BY OCT NO. 3129-A IS REGISTERED AND SOLELY OWNED
BY SILVERIA FLORES WHO IS PAYING THE REAL PROPERTY TAXES.
7. THE COURT OF APPEALS AND THE TRIAL COURT COMMITTED A REVERSIBLE
ERROR IN LAW WHEN IT DISREGARDED ARTICLE 1370 OF THE CIVIL CODE OF
THE PHILIPPINES AND PERTINENT JURISPRUDENCE RELEVANT TO THIS CASE
EVEN IF THE TERMS OF THE SETTLEMENT OF ESTATE AND SALE ARE CLEAR
AND LEAVE NO DOUBT ON THE INTENTION OF THE CONTRACTING PARTIES.
8. THE COURT OF APPEALS AND THE TRIAL COURT GRAVELY ERRED IN
DISREGARDING SETTLED JURISPRUDENCE THAT A PUBLIC DOCUMENT
EXECUTED AND ATTESTED THROUGH THE INTERVENTION OF A NOTARY
PUBLIC IS EVIDENCE OF THE FACTS IN CLEAR, UNEQUIVOCAL MANNER AND
TO CONTRADICT IT THERE MUST BE CLEAR AND CONVINCING EVIDENCE NOT
MERELY PREPONDERANT EVIDENCE (GEVERO VS. INTERMEDIATE APPELLATE
COURT, G.R. NO. 77029, AUGUST 30, 1990; ZAMBO V. COURT OF APPEALS, 224
SCRA 855; REBULDEDA V. IAC, 155 SCRA 520; CHILIANCHIN V. COQUINCO, 84
PHIL. 714; CENTENERA V. GARCIA PALICIO, 29 PHIL. 470).
9. THE COURT OF APPEALS AND THE TRIAL COURT COMMITTED A REVERSIBLE
ERROR WHEN IT SUBSTITUTED, REVISED AND MODIFIED THE AGREEMENT OF
THE PARTIES DESPITE THE ABSENCE OF FRAUD, MISTAKE, INEQUITABLE
CONDUCT OR ACCIDENT.
10. THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN LAW WHEN IT
FAILED TO RULE ON THE ISSUE OF WHETHER THE TRIAL COURT GRAVELY
ERRED IN ORDERING THE HEIRS OF SILVERIA FLORES TO PAY ACTUAL AND
MORAL DAMAGES AS WELL AS ATTORNEYS FEES TO THE HEIRS OF
ALEJANDRA DELFINO.[11]

After careful consideration, we find the following relevant issues for our resolution: (1)
whether or not there is a cause of action for reformation of instrument against Silveria Flores,
and consequently the petitioners; (2) whether or not reformation of the subject deed is proper by
reason of mistake in designating the correct lot number; and (3) whether or not the heirs of
Alejandra Delfino are entitled to actual and moral damages including attorneys fees.
In seeking the reversal of the appellate courts decision, the heirs of Silveria Flores, herein
petitioners, ascribe to the appellate court several errors: first, the Court of Appeals committed
error in failing to appreciate that there is no cause of action against Silveria as she was never a
party to the contract of sale; second, the appellate court erred in giving probative value to the
biased testimony of Trinidad Flores to the effect that Lot No. 4163 was subdivided into two, onehalf of which is occupied by her and her siblings; and third, the appellate court erred in not
considering the fact that Silveria is the only registered owner of Lot 4163. Petitioners submit that
the evidence adduced is insufficient to sustain a decision in respondents favor.
Respondents, for their part, maintain that the present petition is pro forma as it does not raise
any new matter worth considering. They also assert that the arguments and issues raised by

petitioners have been more than adequately and exhaustively discussed by the trial court as well
as the Court of Appeals.[12]
On the first issue, petitioners contend that there is no cause of action against them and their
predecessor-in-interest, Silveria Flores, because she and they were not parties to the contract
sought to be reformed.
However, a close perusal of the deed would show that Silveria Flores was a party to the
contract. She is not only the seller of the coconut trees worth P15 but she was also one of the
heirs entitled to the estate of Venancio and Maxima, one of the heirs of Jose Flores. Her name did
not appear as one of the sellers of one-half lot to Alejandra Delfino because she never sold her
share. What was sold was the one-half share of Jose Flores, as represented by his heirs. It is also
established that it was Silveria Flores herself who delivered the subject lot to the vendee
Alejandra Delfino. Said the lower court:

The truth of the matter, is that what the plaintiffs-vendors really intended to sell and
what Alejandra Delfino intended to buy, of which both of the parties agreed to be the
subject of the transaction, was actually that parcel of land, with two rows of coconut
trees as the dividing line, and which lot is known as Lot 4163. This lot, on the western
portion, was the very portion which was pointed to and delivered to Alejandra Delfino
by the original defendant Silveria Flores and her two children, together with the
vendors on January 19, 1956. When the title to the said property was delivered to the
notary public, for the preparation of the document of sale, the title that was delivered
was for Lot 5734. So, the document, that was executed, was done by reason of
mistake, inequitable conduct and accident, because the said document did not express
the true and real agreement and intention of the contracting parties. What was made to
appear in the said document was the sale of the one-half portion of another lot. Lot
5734, when in truth and in fact, the subject property sold was Lot 4163.
[13]
(Underscoring and italics supplied.)
Through her actions, Silveria Flores had made the parties to the deed believe that the lot
intended to be the object of the contract was the same lot described in the deed. Thus, by mistake
or accident, as well as inequitable conduct, neither she nor her successors-in-interest could deny
involvement in the transaction that resulted in a deed that now ought to be reformed.
Worth stressing, the existence of a cause of action is not determined by ones involvement in
a contract. Participation in a contract is not an element to determine the existence of a cause of
action. The rule is that only the allegations in the complaint may properly be considered in
ascertaining the existence of a cause of action. Lack of cause of action must appear on the face of
the complaint and its existence may be determined only by the allegations of the
complaint. Consideration of other facts is proscribed and any attempt to prove extraneous
circumstances is not allowed.[14]
The test of sufficiency of the facts found in a complaint as constituting a cause of action is
whether or not, admitting the facts alleged, the court can render a valid judgment upon the same
in accordance with the prayer in the complaint. [15] An examination of the complaint[16] shows
herein respondents, as plaintiffs in the trial court, are entitled to the relief of reformation of

instrument if the following factual allegations of respondents are deemed admitted, to wit: (1)
that Silveria is a co-owner of Lots No. 5734 and 4163, in different shares; (2) that the heirs of
Jose, her co-owner in Lot No. 4163, offered to sell to her their one-half share but she declined for
lack of money; (3) that said share was later sold to Alejandra; (4) that Silveria was asked to
deliver the title of Lot No. 4163 but instead she delivered the title of Lot No. 5734; (5) that after
the sale, Alejandra occupied one-half portion of Lot No. 4163 while Lot No. 5734 was still in the
possession of Venancio and the heirs of Maxima and Silveria; (6) that it was only when
Alejandra was about to buy the adjacent lot that she realized that what was indicated in the
Settlement of Estate and Sale was Lot No. 5734 and not 4163. In sum, we find that the original
plaintiffs in the trial court alleged sufficient facts in the complaint that properly constituted a
cause of action against the defendants.
On the second issue, petitioners contend respondents failed to show, specifically, a cause of
action for the reformation of the instrument in question. Reformation is that remedy in equity by
means of which a written instrument is made or construed so as to express or conform to the real
intention of the parties.[17] As provided in Article 1359 of the Civil Code:

Art. 1359. When, there having been a meeting of the minds of the parties to a contract,
their true intention is not expressed in the instrument purporting to embody the
agreement by reason of mistake, fraud, inequitable conduct or accident, one of the
parties may ask for the reformation of the instrument to the end that such true
intention may be expressed.
If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the
minds of the parties, the proper remedy is not reformation of the instrument but
annulment of the contract.
An action for reformation of instrument under this provision of law may prosper only upon
the concurrence of the following requisites: (1) there must have been a meeting of the minds of
the parties to the contact; (2) the instrument does not express the true intention of the parties; and
(3) the failure of the instrument to express the true intention of the parties is due to mistake,
fraud, inequitable conduct or accident.[18]
All of these requisites, in our view, are present in this case. There was a meeting of the
minds between the parties to the contract but the deed did not express the true intention of the
parties due to mistake in the designation of the lot subject of the deed. There is no dispute as to
the intention of the parties to sell the land to Alejandra Delfino but there was a mistake as to the
designation of the lot intended to be sold as stated in the Settlement of Estate and Sale.
While intentions involve a state of mind which may sometimes be difficult to decipher,
subsequent and contemporaneous acts of the parties as well as the evidentiary facts as proved
and admitted can be reflective of ones intention. The totality of the evidence clearly indicates
that what was intended to be sold to Alejandra Delfino was Lot 4163 and not Lot 5734. As found
by both courts below, there are enough bases to support such conclusion. We particularly note
that one of the stipulated facts during the pre-trial is that one-half of Lot 4163 is in the possession
of plaintiff Alejandra Delfino since 1956 up to the present. [19] Now, why would Alejandra occupy
and possess one-half of said lot if it was not the parcel of land which was the object of the sale to

her? Besides, as found by the Court of Appeals, if it were true that Silveria Flores was the sole
owner of Lot 4163, then she should have objected when Alejandra Delfino took possession of
one-half thereof immediately after the sale. Additionally, we find no cogent reason to depart
from the conclusion of both the Court of Appeals and the trial court, based on the evidence on
record, that Silveria Flores owns only one-half of Lot 4163. The other half belongs to her brother
Jose, represented now by his grandchildren successors-in-interest. As such, the latter could
rightfully sell the land to Alejandra Delfino.
Furthermore, on record, it has been shown that a spot investigation conducted by a duly
licensed surveyor revealed that Lot 4163 is subdivided into two portions, one belonging to
Silveria Flores and the other to the heirs of Jose Flores.[20] As found by the trial court, if indeed it
was Lot 5734 that was sold, then Silveria Flores was occupying more than her share of the
inherited lot. Thus:

x x x That, with respect to Lot No. 5734 and Lot No. 4292, in an on-the-spot
investigation, made by a licensed surveyor, Mr. Rilthe Dorado, his findings thereon
show that Silveria Flores is in possession on the western portion of Lot 5734, with an
area of more than one-half and, to be exact, with an area of 2,462, in spite of the fact
that she is the registered owner only of a one-third (1/3) share; and admitting, for the
sake of argument, that it was the one-half portion, of Lot 5734, that was sold, why
should Silveria Flores possess more than 2,190 square meters, which is the 1/2 of Lot
5734, Isabel Flores, the daughter of Venancio Flores is possessing the middle portion,
with an area of only 884 square meters; and Trinidad Flores Nodado, in representation
of her aunt, Maxima Flores, is possessing an area of 1,034 sq. m. [21]
As a matter of fact, the trial court also found that in spite of her title over Lot 4163, Silveria
recognized the right of Joses grandchildren over one-half portion of the property.[22] The trial
court gave credence to the testimony of Trinidad Flores, one of the grandchildren, who testified
as follows:
Q: During the lifetime of Jose and Silveria when they were possessing Lot 4163, did they subdivide it
because they were possessing it in common?
A: They subdivided it into two halves.

xxx
Q: And after Jose and Silveria subdivided Lot 4163, they possessed their respective shares of Lot
4163?
A: Yes.

xxx
Q: Now you said that you are the heirs of Jose and Roman Flores (father and son) and so when they
died this portion of Lot 4163 devolved on you, did you ever take possession of Lot 4163?
A: Yes, we, the brothers and sisters immediately took possession of it. [23]

On cross-examination, Trinidad sufficiently explained why the title to Lot No. 4163 is in the
name of Silveria Flores alone. Thus:

Q: Now, this Lot No. 4163, do you know if this lot is also titled?
A: Yes, it was titled, only in the name of Silveria Flores because my aunt was not able to go with her;
only my aunt was alone at that time.[24]

xxx
Q: And as you have stated earlier, that what you are intending to sell was Lot 4163 to plaintiff
Alejandra Delfino, and during this time that you sold this intended lot 4163, you were not aware
this particular lot 4163 was titled exclusively in the name of Silveria Flores, is that correct?
A: I knew already that the said lot was already titled, but it was titled only in the name of Silveria
Flores because she was the only one who went there to have it titled in her name. And at the time
of the sale of the lot, we demanded for the title from Silveria Flores, and what she delivered was
the 5734 (sic).[25]

Petitioners now claim that the foregoing testimony of Trinidad Flores was biased. But we
note that the appellate court sustained the trial courts reliance on her testimony, which both found
to be credible.As consistently held, factual findings of the trial court, especially when affirmed
by the appellate court, are binding upon this Court [26] and entitled to utmost respect.
[27]
Considering these findings, we see no reason to disturb the trial courts finding, affirmed by the
Court of Appeals, that the object of the contract of sale, as intended and understood by the
parties, was Lot 4163 covered by OCT 3129-A which Alejandra, and now her heirs, have been
occupying. The designation of the lot in the deed of sale as Lot 5734, covered by OCT 4918-A,
was a mistake in the preparation of the document. Thus, we concur in the conclusion reached by
the courts a quo that reformation of the instrument is proper.
However, on the matter of damages, the award of actual damages in the amount of P5,000
lacks evidentiary support. Actual damages if not supported by the evidence on record cannot be
granted.[28]Moral damages for P10,000 was also improperly awarded, absent a specific finding
and pronouncement from the trial court that petitioners acted in bad faith or with
malice. However, the award of attorneys fees for P2,000 is justified under Article 2208(2) of the
Civil Code,[29] in view of the trial courts finding that the unjustified refusal of petitioners to
reform or to correct the document of sale compelled respondents to litigate to protect their
interest.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 39401 is
AFFIRMED with MODIFICATION. It is hereby ordered that the document entitled Settlement
of Estate and Sale be reformed by changing the phrase Lot 5734 to Lot 4163 found in the sixth
paragraph of the deed, thereby ceding in favor of respondents one-half portion of Lot 4163
instead of Lot 5734. The award to respondents of attorneys fees in the amount of P2,000 is
affirmed. However, the award of actual damages in the amount of P5,000 and of moral damages
in the amount of P10,000 are both SET ASIDE. No pronouncement as to costs.
SO ORDERED.
Bellosillo, (Acting C.J.,), (Chairman), Mendoza, De Leon, Jr., and Corona, JJ., concur.

THIRD DIVISION

[G.R. No. 119794. October 3, 2000]

TOMAS SEE TUAZON, petitioner, vs. COURT OF APPEALS and JOHN


SIY LIM, respondents.
DECISION
PURISIMA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Decision[1] of the Court of Appeals in CA G.R. CV No. 40167, which
reinstated with modification the Decision dated December 2, 1991 of Branch 131 of the
Regional Trial Court of Kalookan City in Civil Case No. C-14542, and reversed the
Order[2] of the court a quogranting the Motion for Partial Reconsideration.
The antecedent facts are as follows:
On July 15, 1987, spouses Tomas S. Tuazon and Natividad S. Tuazon sold to John
Siy Lim (Lim) a 650 square meter conjugal lot covered by Transfer Certificate Title No.
860,[3] along A. del Mundo Street, 7 th Avenue, Kaloocan City, with a two-storey building
and Apartment Units Nos. 161 and 163 existing thereon.
Atty. Crisostomo, lawyer of the Tuazons, drafted the Absolute Deed of Sale, which
was duly registered. By virtue of the said deed, TCT No. 860 in the name of the
Tuazons was cancelled and in lieu thereof, TCT No. 152621 was issued in the name of
John Siy F. Lim.
On October 1, 1990, the Tuazons brought a Complaint for Reformation of Contract,
Quieting of Title with Damages against John Siy F. Lim, docketed as Civil Case No. C14542 before Branch 131 of Regional Trial Court of Kalookan City; the Tuazons
theorizing that the real intention of the parties was to enter into a loan accommodation.
On November 15, 1990, Lim filed his answer, theorizing that the Deed of Absolute
Sale expressed the true intention of the parties.
The case originated from a contract of mortgage constituted on the subject lot. On
December 18, 1970, Tomas See Tuazon, who was then the President and General
Manager of Universal Rubber Products, Inc., together with the spouses, See Tiong
Cheng and Eng Tang Go See, mortgaged, together with other properties, subject lot to
the Philippine Bank of Commerce (PBCom), [4] to secure a loan of Four Million Eight
Hundred Thirty Thousand Two Hundred Sixty Five and 90/100 (P4,830,265.90)
Pesos. When the mortgagors failed to pay the mortgage debt, the mortgaged property
was foreclosed and sold at public auction, with PBCom itself as the highest bidder.
During that time, Lim had amorous relations with Bernice, daughter of the Tuazons,
and the two were business partners in Powerstone International. Universal Rubber
Products, Inc., where petitioner and his family were majority stockholders, was
experiencing business reverses and its workers staged strikes.

Petitioner alleges that:

2.12 In the first week of June 1987, before the expiration of the 1 year redemption on
July 28, 1987, Bernice, the daughter of the appellee, told the appellee that her fiancee,
appellant John Lim, was willing to help them redeem the subject property by
accommodating them with P1 Million.
2.13 The next day, the appellee met with Bernice and the appellant met in their office
below [which Bernice and appellant, as business partners, were renting from appellee]
and the appellee proposed that:60% of the P1 Million, or P600,000 would be a URPI[5]loan
where machineries worth P3 Million, by way of chattel mortgage, would secure it, and 40% of
the P1 Million would be appellants personal loan.[6]
Petitioner proposed further that, to simplify matters, P20,000.00 of the P400,000.00
would be applied as private respondents advance rent of the office space he and
Bernice were renting, reducing petitioners personal loan to P380,000.00.[7] The
remaining balance was secured from other persons and petitioners personal funds.
Consequently, since the loan accommodation was only for One Million
(P1,000,000.00) Pesos and the redemption price was P1.1 Million, petitioner negotiated
with PBCom to reduce the redemption price to Eight Hundred Eighty Three Thousand
(P883,000.00) Pesos but the bank rejected such offer. Upon further negotiations, the
bank agreed to reduce the redemption price to One Million (P1,000,000.00) Pesos
subject to the condition that petitioner surrendered in favor of PBCom his (petitioner)
Producer's Bank stock certificates by way of dacion enpago.[8]
Petitioner then tendered to PBCom the redemption amount of One Million
(P1,000,000.00) Pesos and the bank issued a Certificate of Redemption.
To keep the creditors, suppliers and laborers of URPI from levying on subject
property, petitioner decided to transfer the title thereof to Lim. The new title was to serve
as security for the loan. The Deed of Absolute Sale was executed by petitioner and
signed by him and his wife, Natividad Sue Deecho. The consideration of the purported
contract of sale executed on July 15, 1987 was Three Hundred Eighty Thousand
(P380,000.00) Pesos. By virtue thereof, a new title was issued in private respondents
name but the same was delivered to petitioner. The transfer taxes and capital gains tax
were paid by petitioner. Petitioner continued residing in the place.
Thereafter, the relationship between Bernice Tuazon and private respondent began
to deteriorate. Sometime in August 1988, after petitioner returned from a trip to the
United States, he discovered that the new title and other documents were missing.
[9]
When confronted, private respondent refused to return the same. In July 1989, a
tenant, William Sze, renewed his lease but this time, with private respondent. Also in
1989, private respondent began paying real estate taxes and sending demand letters to
petitioner. The latter then filed the complaint below for reformation of contract, quieting
of title with damages.
The private respondent theorized that:

Petitioner Tuazon and his daughter persuaded him to redeem for himself the
extrajudicially foreclosed property from PBCom because Tuazon was financially
incapable. The total consideration of the sale was One Million Three Hundred Eighty
Thousand (P1,380,000.00) Pesos. He (Lim) purchased a managers check from Asian
Bank for One Million (P1,000,000.00) Pesos and tendered the check to PBCom as the
redemption price. On July 16, 1987, Three Hundred Eighty Thousand (P380,000.00)
Pesos was paid directly to the Tuazons. [10] Atty. Crisostomo, Tuazon's counsel, executed
an instrument with the nomenclature of a deed of sale [11] which by its contents, purported
to convey the subject property to private respondent.
Meanwhile, private respondent had some misunderstanding with his father so that
he temporarily resided with the Tuazons. The relation of Bernice and Lim was souring
up until finally, they broke off in July 1989. He (Lim) began documenting and claiming
ownership over the property. Because of this, the spouses Tuazon annotated a Notice
of Lis Pendens dated September 30, 1991 and a Joint Affidavit of Adverse Claim on
TCT No. 152621 in the Register of Deeds of Kalookan City.
Due to the harassment perpetuated by the Tuazon, Lim was forced to vacate the
premises. He let one William Sze of SK Enterprises lease Apartment No. 161 for Eight
Thousand (P8,000.00) Pesos a month. He also allowed Tuazon to lease Apartment 163
conditioned on the payment of Eight Thousand (P8,000.00) Pesos rental a month, for
one (1) year or from June 1987 to June 1988.
One year having expired, Lim, through, his counsel demanded that Tuazon vacate
the premises and to pay the arrearages. He was constrained to file an ejectment case
docketed as Civil Case No. 19668 before Branch 50 of the Municipal Trial Court in
Kalookan City when Tuazon deprived him for six (6) long years of his rightful ownership
and possession over the subject lot.
On December 2, 1991, the trial court of origin decided for the private respondent,
disposing thus:

WHEREFORE, judgment is hereby rendered dismissing the complaint and declaring


the Deed of Absolute Sale executed by the parties on July 15, 1987 as an absolute and
unconditional conveyance by the plaintiff in favor of the defendant of the subject
property; likewise, defendants counterclaim is hereby dismissed.
SO ORDERED.[12]
Dissatisfied therewith, on December 27, 1991, the parties filed their respective
Motions for Reconsideration.
On November 16,1992, the lower court reconsidered its Decision dated December
2, 1991, and resolved instead:

WHEREFORE, the Decision rendered on December 2, 1991 is accordingly


reconsidered, as follows:

(1) The Deed of Absolute Sale, marked as Exhibit A for the plaintiff and Exhibit 1 for
the defendant, is hereby declared an equitable mortgage and is accordingly reformed
as such;
(2) The plaintiff is hereby directed to pay the One Million (P1,000,000.00) Pesos
accommodation to the defendant; and
(3) The Transfer Certificate of Title No. 152621 is hereby cancelled, and the former
title, Transfer Certificate of Title No. 860 is revived/reinstated subject to those liens
appearing therein at the time plaintiffs adverse claim was registered.
SO ORDERED.[13]
On July 28, 1993, Lim elevated the case to the Court of Appeals. In his appellants
brief, Lim contended that he was not a party to the fraud perpetrated against the
Tuazons creditors, suppliers and laborers, and the principle of pari delicto[14] does not
apply, as the Tuazons failed to establish that the transaction between them was actually
for an illegal purpose.
In the Appellees Brief sent in on January 10, 1994, Tuazon reiterated that under
Articles 1381(3)[15] and 1383,[16] the deed of sale was executed to technically avoid
creditor's levies, and thus merely made the contract rescissible, or valid until judicially
rescinded and subsidiarily assailed at the instance of the creditor prejudiced
thereby. However, since the Deed of Sale was simulated, it was void on that score, and
may thus be reformed to conform to the real agreement, under the specific and legal
provisions applicable.[17]
On March 31, 1995, the respondent Court decided in favor of respondent Lim and
upheld the validity of the Absolute Deed of Sale, ratiocinating thus:

WHEREFORE, the appealed Order, dated November 16, 1992, is hereby REVERSED
and SET ASIDE, and the original Decision of the trial court, dated December 2, 1991,
hereby REINSTATED, with the modification that plaintiff-appellee is ordered to pay
defendant-appellant the sum of Five Thousand (P5,000.00) Pesos a month as
reasonable rental for the use and occupation of Apartment No. 161 from July 15, 1988
until the premises shall have been vacated and possession thereof peacefully turned
over to defendant-appellant.
The counterclaim for attorneys fees of defendant-appellant is DENIED. There is no
clear showing that the action taken by plaintiff-appellee was done in bad faith. There
should be no penalty on the right to litigate. [18]
On June 2, 1995, the petitioner found his way to this Court via a Petition for Review
on Certiorari, assigning as errors, that:

First.
THE RESPONDENT COURT ERRED IN HOLDING THE TRANSACTION
BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENT TO BE ONE
OF ABSOLUTE SALE AND NOT EQUITABLE MORTGAGE.
Second.
THE RESPONDENT COURT ERRED IN HOLDING THE PETITIONER LIABLE
TO THE PRIVATE RESPONDENT FOR UNPAID RENTALS.[19]
Petitioner invites attention and places reliance on the alleged inadequacy of the
purchase price and his having remained in possession of subject land.
The petition is not impressed with merit.
It has been held that:

Article 1602 of the Civil Code provides that a contact shall be presumed to be an
equitable mortgage by the presence of any of the following:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the performance of
any other obligation.[20]
Under Article 1604 of the New Civil Code, the provisions of Article 1602 shall also
apply to a contract purporting to be an absolute sale. [21] And for these provisions of law
to apply, two requisites must concur: that the parties entered into a contract
denominated as a contract of sale and that their intention was to secure an existing debt
by way of mortgage.
While the existence of any of the circumstances in Article 1602, not a concurrence
nor an overwhelming number thereof, suffices to give rise to the presumption that the
contract is an equitable mortgage; [22] the present case is entirely different. Records on
hand and the documentary evidence introduced by the parties indubitably show no

room for construction, Article 1365[23] of the New Civil Code on reformation of contracts
applies only if there is evidence, clear and convincing, that the parties did agree upon a
mortgage of subject property. Here, everything appears to be clear and unambiguous
and nothing is doubtful, within the contemplation of Article 1602. When the words of the
contract are clear and readily understandable, there is no room for construction. The
contract is the law between the parties.[24] Said this Court:

A contract, according to Article 1305 of the Civil Code, is a meeting of the minds
between two persons whereby one binds himself, with respect to the other, to give
something or to render some service. Once, the minds of the contracting parties meet,
a valid contract exists, whether it is reduced to writing or not. And, when the terms of
an agreement have been reduced to writing, it is considered as containing all the terms
agreed upon and there can be, between the parties and their successors in interest, no
evidence of such terms other than the contents of the written agreement, except when
it fails to express the true intent and agreement of the parties thereto, in which case,
one of the parties may bring an action for the reformation of the instrument to the end
that such true intention may be expressed. [25]
For an action for reformation of an instrument as provided for in Article 1359 to
prosper, the following requisites must concur, to wit: (1) there must have been a meeting
of the minds of the parties to the contract; (2) the instrument does not express the true
intention of the parties; and (3) the failure of the instrument to express the true intention
of the parties is due to mistake, fraud, inequitable conduct or accident. [26] Here, petitioner
has not shown or established the presence of the aforestated requirements for the
reformation of the deed in question.
What is more, any doubt as to the real meaning of the contract must be resolved
against the person who drafted the instrument and is responsible for the ambiguity
thereof.[27]Prepared by the lawyer of the herein petitioner, Tomas See Tuazon, subject
Deed of Absolute Sale executed on July 15, 1987 is couched in clear terms and
conditions. John Siy Lim had no hand in its preparation. Besides, the voluntary, written
and unconditional acceptance of contractual commitments negate the theory of
equitable mortgage.
Petitioner theorizes that the value of the land in dispute is more than Two Million
(P2,000,000.00) Pesos. According to him, in 1987 he offered to sell the same property
for Two Million Eight Hundred Thousand (P2,800,000.00) Pesos, should he fail to
redeem the lot. Mr. Itchon of PBCom allegedly estimated that the said property was
worth Three Million (P3,000,000.00) Pesos, even before 1987 when the laborers of the
company staged a strike. There were also two (2) alleged potential buyers, Lim Chu
Ching and William Go, who wanted to buy the property at Two Million Five Hundred
Thousand (P2,500,000.00) Pesos.
But it bears stressing that the aforementioned allegations of petitioner are
unsubstantiated. The agent of the bank and the alleged potential buyers were not
presented to prove that the value of subject property was higher or that the purchase

price thereof was inadequate. As held by the trial court in its original decision, and
affirmed by the Court of Appeals:

Plaintiff alleges that the price was below the fair market value which he claims to
be P2.5 million. He was not able to prove this allegation. In fact, such is even belied
by the evidence presented by plaintiff himself which was the confirmation receipt of
his payment of capital gains tax in the amount of P44,175.00 ( Exh. S). The said
amount is 5% of P883,500.00 which is the fair market value and which was used as
the tax base being higher than the P380,000.00 selling price as per Deed of Absolute
Sale. Plaintiffs contention that the stated selling price was the only consideration for
the sale is further controverted by defendants evidence that the subject property was
redeemed by defendant from PBCom for P1 million (Exh. 4). xxx[28]
Anent the claim that petitioner continued to occupy the premises under controversy
in concept of owner, suffice to repeat the finding of the Court of Appeals, to wit:

The Tuazon family remained in the premises sold to Lim. But not in the concept of
owner. The first year of Tuazons continued occupancy of Apt. No. 163 was at Lims
graciousness with the understanding that after one year, the Tuazons will pay the
appropriate rentals for the continued use and occupation of the property. In the
exercise of his right as owner of the property, Lim leased Apartment No. 161 to a
William Sze where Lim signed the contract of lease as the lessor.[29]
Private respondents payment of realty taxes after the consummation of the sale,
though not conclusive evidence of ownership, bolsters his right over the property in
dispute. He religiously paid the taxes thereon, as evidenced by Tax Declaration
Receipts Nos. 007-0202188 and Tax Receipts Nos. 7161749, 7161798, 1010764,
1010814, 3437277, 3437327, 5117314, 5117364, 8680601, 8680651, 1392311,
1392361, 4690025, 4690075.[30]
In light of the foregoing, the Court deems it unnecessary to still pass upon the other
issues raised by petitioner.
WHEREFORE, the Petition is DENIED; and the Decision of the Court of Appeals in
CA-G.R. CV No. 40167, dated March 31, 1995, AFFIRMED. No pronouncement as to
costs.
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.

[1]

Penned by J. Antonio P. Solano and concurred in by JJ. Alfredo L. Benipayo and Ricardo P. Galvez.

[2]

Annex D, Rollo, p. 69.

[3]

a parcel of land (Lot No. 6, Block No. 85 of the conolidation (sic) and subdivision plan PCS-764, being a
portion of Block No. 85 of the Subdivision plan Psd-2895, G.L.R.O. Record No. 11267) situated in the
Barrio of Calaanan, Municipality of Caloocan, Province of Rizal; xxx Containing an area of SIX
HUNDRED FIFTY SQUARE METERS (650), more or less.
[4]

Sometimes referred to as Philippine Bank of Communications.

[5]

Where Tuazon was one of the principal stockholders.

[6]

Rollo, p. 136.

[7]

Rollo, p. 10.

[8]

Appellee's Brief, p. 25, Rollo, p. 155.

[9]

Rollo, p. 142.

[10]

Answer, p. 3, Rollo, p. 51.

[11]

DEED OF ABSOLUTE SALE

KNOW ALL MEN BY THESE PRESENTS:


This DEED OF ABSOLUTE SALE, made and executed this 30th day of June 1987, by and between:
TOMAS S. TUAZON, of legal age, Filipino, married to NATIVIDAD SUE DEECHO, and a resident of No.
163 A. del Mundo Street, Caloocan City, Metro Manila, now and hereinafter referred to as the VENDOR,
-in favor of-

FIRST DIVISION
FRABELLE
CORPORATION,

FISHING

G.R. No. 158560

Petitioner,
Present:
-

versus -

THE PHILIPPINE AMERICAN


LIFE INSURANCE COMPANY,
PHILAM
PROPERTIES
CORPORATION
and
PERF
REALTY CORPORATION,
Respondents.

PUNO, C.J., Chairperson,


SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.
Promulgated:
August 17, 2007

x --------------------------------------------------------------------------------------x

DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is the instant Petition for Review on Certiorari under Rule 45 of the
1997 Rules of Civil Procedure, as amended, assailing the Decision [1] and
Resolution of the Court of Appeals dated December 2, 2002 and May 30, 2003,
respectively, in CA-G.R. SP No. 71389.
The facts are:
Philam Properties Corporation, Philippine American Life Insurance Company, and
PERF Realty Corporation, herein respondents, are all corporations duly organized
and existing under Philippine laws.
On May 8, 1996, respondents entered into a Memorandum of Agreement
(1996 MOA)[2] whereby each agreed to contribute cash, property, and services for
the construction and development of Philamlife Tower, a 45-storey office
condominium along Paseo de Roxas, Makati City.
On December 6, 1996, respondents executed a Deed of Assignment (1996 DOA)
[3]
wherein they assigned to Frabelle Properties Corporation (Frabelle) their rights
and obligations under the 1996 MOA with respect to the construction,
development, and subsequent ownership of Unit No. 38-B located at the 38 th floor
of Philamlife Tower. The parties also stipulated that the assignee shall be deemed
as a co-developer of the construction project with respect to Unit No. 38-B.[4]
Frabelle, in turn, assigned to Frabelle Fishing Corporation (Frabelle Fishing),
petitioner herein, its rights, obligations and interests over Unit No. 38-B.

On March 9, 1998, petitioner Frabelle Fishing and respondents executed a


Memorandum of Agreement (1998 MOA)[5] to fund the construction of designated
office floors inPhilamlife Tower.
The dispute between the parties started when petitioner found material
concealment on the part of respondents regarding certain details in the 1996 DOA
and 1998 MOA and their gross violation of their contractual obligations as
condominium developers. These violations are: (a) the non-construction of a
partition wall between Unit No. 38-B and the rest of the floor area; and (b) the
reduction of the net usable floor area from four hundred sixty eight (468) square
meters to only three hundred fifteen (315) square meters.
Dissatisfied with its existing arrangement with respondents, petitioner,
on October 22, 2001, referred the matter to the Philippine Dispute Resolution
Center, Inc. (PDRCI) for arbitration.[6] However, in a letter[7] dated November 7,
2001, respondents manifested their refusal to submit to PDRCIs jurisdiction.
On February 11, 2002, petitioner filed with the Housing and Land Use
Regulatory Board (HLURB), Expanded National Capital Region Field Office a
complaint[8] for reformation of instrument, specific performance and damages
against respondents, docketed as HLURB Case No. REM-02110211791. Petitioner alleged, among others, that the contracts do not reflect the true
intention of the parties; and that it is a mere buyer and not co-developer and/or coowner of the condominium unit.
After considering their respective memoranda, HLURB Arbiter Atty.
Dunstan T. San Vicente, with the approval of HLURB Regional Director Jesse A.
Obligacion, issued an Order[9] dated May 14, 2002, the dispositive portion of which
reads:
Accordingly, respondents plea for the outright dismissal of the
present case is denied. Set the initial preliminary hearing of this case
on June 25, 2002 at 10:00 A.M.

IT IS SO ORDERED.

Respondents then filed with the Court of Appeals a petition for prohibition
with prayer for the issuance of a temporary restraining order and/or writ of
preliminary injunction,[10] docketed as CA-G.R. SP No. 71389. Petitioner claimed,
among others, that the HLURB has no jurisdiction over the subject matter of the
controversy and that the contracts between the parties provide for compulsory
arbitration.
On December 2, 2002, the
Decision[11] granting the petition, thus:

Court

of

Appeals

rendered

its

WHEREFORE, premises considered, the petition is GRANTED.


Public respondents Atty. Dunstan San Vicente and Jesse A. Obligacion of
the Housing and Land Use Regulatory Board, Expanded National
Capital Region Field Office are hereby permanently ENJOINED and
PROHIBITED from further proceeding with and acting on HLURB Case
No. REM-021102-11791. The order of May 14, 2002 is hereby
SETASIDE and the complaint is DISMISSED.
SO ORDERED.

In dismissing petitioners complaint, the Court of Appeals held that the


HLURB has no jurisdiction over an action for reformation of contracts. The
jurisdiction lies with the Regional Trial Court.
Forthwith, petitioner filed a motion for reconsideration[12] but it was denied
by the appellate court in its Resolution[13] dated May 30, 2003.
Hence, the instant petition for review on certiorari.

The issues for our resolution are: (1) whether the HLURB has jurisdiction
over the complaint for reformation of instruments, specific performance and
damages; and (2) whether the parties should initially resort to arbitration.
The petition lacks merit.
As the records show, the complaint filed by petitioner with the HLURB is
one for reformation of instruments. Petitioner claimed that the terms of the
contract are not clear and prayed that they should be reformed to reflect the true
stipulations of the parties. Petitioner prayed:
WHEREFORE, in view of all the foregoing, it is respectfully
prayed of this Honorable Office that after due notice and hearing, a
judgment be please rendered:
1. Declaring that the instruments executed by the complainant
FRABELLE and respondent PHILAM to have been in fact a
Contract to Sell. The parties are thereby governed by the provisions of
P.D. 957 entitled, Regulating the Sale of Subdivision Lots and
Condominiums, Providing Penalties for Violations Thereof as buyer and
developer, respectively, of a condominium unit and not as co-developer
and/or co-owner of the same;
x x x (Emphasis supplied)

We hold that being an action for reformation of instruments, petitioners


complaint necessarily falls under the jurisdiction of the Regional Trial Court
pursuant to Section 1, Rule 63 of the 1997 Rules of Civil Procedure, as amended,
which provides:
SECTION 1. Who may file petition. Any person interested under a
deed, will, contract or other written instrument, whose rights are affected
by a statute, executive order or regulation, ordinance, or any other
governmental regulation may, before breach or violation thereof, bring
an action in the appropriate Regional Trial Court to determine any

question of construction or validity arising, and for a declaration of his


rights or duties thereunder.
An action for the reformation of an instrument, to quiet title to
real property or remove clouds therefrom, or to consolidate ownership
under Article 1607 of the Civil Code, may be brought under this Rule.
(Emphasis ours)

As correctly held by the Court of Appeals, any disagreement as to the nature


of the parties relationship which would require first an amendment or
reformation of their contract is an issue which the courts may and can resolve
without the need of the expertise and specialized knowledge of the HLURB.
With regard to the second and last issue, paragraph 4.2 of the 1998 MOA
mandates that any dispute between or among the parties shall finally be settled
by arbitration conducted in accordance with the Rules of Conciliation and
Arbitration of the International Chamber of Commerce. [14] Petitioner referred
the dispute to the PDRCI but respondents refused to submit to its jurisdiction.
It bears stressing that such arbitration agreement is the law between the
parties. They are, therefore, expected to abide by it in good faith.[15]
This Court has previously held that arbitration is one of the alternative
methods of dispute resolution that is now rightfully vaunted as the wave of the
future in international relations, and is recognized worldwide. To brush aside a
contractual agreement calling for arbitration in case of disagreement between the
parties would therefore be a step backward.[16]
WHEREFORE, we DENY the petition. The challenged Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 71389 are AFFIRMED.

PROCESO QUIROS and LEONARDA VILLEGAS vs. MARCELO ARJONA, TERESITA


BALARBAR,

JOSEPHINE

G.R.
Petition

No.
for

ARJONA,
158901.

review

of

and
9

the

CONCHITA

ARJONA

March
decision

of

Ynares-Santiago,

2004.
the

CA
J.:

Facts: In Dec 1996, petitioners Proceso Quiros and Leonarda Villegas filed with the office of the barangay
captain of Labney, San Jacinto, Pangasinan, a complaint for recovery of ownership and possession of a
parcel of land located at Labney, San Jacinto, Pangasinan. Petitioners sought to recover from their uncle
Marcelo Arjona, one of the respondents herein, their lawful share of the inheritance from their late
grandmother Rosa Arjona Quiros alias Doza. In 1997, an amicable settlement was reached between the
parties. By reason thereof, respondent Arjona executed a document denominated as "PAKNAAN"
("Agreement",

in

Pangasinan

dialect).

Petitioners filed a complaint with the MCTC with prayer for the issuance of a writ of execution of the
compromise agreement which was denied because the subject property cannot be determined with
certainty. The RTC reversed the decision of the municipal court on appeal and ordered the issuance of the
writ of execution. Respondents appealed to the CA, which reversed the decision of the RTC and reinstated
the

decision

of

the

MCTC.

Issue: WON CA erred in reversing the decision of the RTC and reinstating that of the MCTC.
Ruling: Petition

denied.

Generally, the rule is that where no repudiation was made during the 10-day period, the amicable
settlement attains the status of finality and it becomes the ministerial duty of the court to implement and
enforce it. However, such rule is not inflexible for it admits of certain exceptions. In the case at bar, the
ends of justice would be frustrated if a writ of execution is issued considering the uncertainty of the object
of the agreement. To do so would open the possibility of error and future litigations.
Both parties acknowledge that petitioners are entitled to their inheritance, hence, the remedy of
nullification, which invalidates the Paknaan, would prejudice petitioners and deprive them of their just
share of the inheritance. Respondent cannot, as an afterthought, be allowed to renege on his legal
obligation to transfer the property to its rightful heirs. A refusal to reform the Paknaan under such
circumstances would have the effect of penalizing one party for negligent conduct, and at the same time
permitting the other party to escape the consequences of his negligence and profit thereby. No person
shall be unjustly enriched at the expense of another.

Costs against petitioner.


SO ORDERED.