Yolanda Rosello-Bentir vs Hon. Mateo Leanda and Leyte Gulf Traders Inc.

G.R. No. 128991 April 12, 2000

Doctrine:
The remedy of reformation of an instrument is grounded on the principle of equity where, in
order to express the true intention of the contracting parties, an instrument already executed is
allowed by law to be reformed.A suit for reformation of an instrument may be barred by lapse of
time. The prescriptive period foractions based upon a written contract and for reformation of an
instrument is ten (10) years underArticle 1144 of the Civil Code.

Facts:
On May 15, 1992, respondent Leyte Gulf Traders, Inc. (LGT) filed a complaint for reformation of
instrument, specific performance, annulment of conditional sale and damages with prayer for
writ of injunction against petitioners Yolanda Rosello-Bentir and the spouses Samuel and
Charito Pormida. The respondent corporation alleged that it entered into a contract of lease of a
parcel of land with petitioner Bentir (period is 20 years from May 5, 1968). LGT also alleged that
said lease was extended for four years until May 31, 1992.- May 5, 1989: Bentir sold the leased
land to spouses Pormida. LGT questioned the sale alleging that it had a right of first refusal.
LGT filed a civil case for the reformation of the expired contract of lease on the ground that its
lawyers failed to state in the contract the verbal agreement between the corporation and Bentir
which says that in case the latter leases or sells the lot after the expiration of the lease, LGT has
the right to equal the highest offer. Petitioner Bentir filed an answer saying that the failure of the
lawyer to incorporate certain conditions in a contract is not a ground for reformation and that
LGT is guilty of laches for not filing an action within prescriptive period of 10 years from May 5,
1968. LGT filed a motion to admit the amended complaint; the lower court granted the motion.
Petitioner filed a motion to dismiss on the ground of prescription. The trial court through Judge
Pedro S. Espina issued an order dismissing the complaint premised on its finding that the action
for reformation had already prescribed. LGT filed a motion for reconsideration of the order
dismissing the complaint. LGT filed an urgent ex-parte motion for issuance of an order directing
the petitioners, or their representatives or agents to refrain from taking possession of the land in
question. Respondent judge Leanda issued an order reversing the order of dismissal on
thegrounds that the action for reformation had not yet prescribed and the dismissal was
"premature andprecipitate", denying respondent corporation of its right to procedural due
process. Judge Leanda issued an order for status quo ante, enjoining petitioners to desist
fromoccupying the property. Aggrieved, petitioners herein filed a petition for certiorari to the
Court of Appeals seeking theannulment of the order of respondent court with prayer for
issuance of a writ of preliminary injunctionand temporary restraining order to restrain respondent
judge from further hearing the case and todirect respondent corporation to desist from further
possessing the litigated premises and to turn overpossession to petitioners. The Court of
Appeals, after finding no error in the questioned order nor grave abuseof discretion on the part
of the trial court that would amount to lack, or in excess of jurisdiction, deniedthe petition and
affirmed the questioned order. A reconsideration of said decision was, likewise, denied on April
16, 1997.

Issue:
Whether or not the complaint for reformation filed by respondent Leyte Gulf Traders, Inc. has
prescribed and in the negative, whether or not it is entitled to the remedy of reformation sought.

Held:
The remedy of reformation of an instrument is grounded on the principle of equity where, in
order to express the true intention of the contracting parties, an instrument already executed is
allowed by law to be reformed.A suit for reformation of an instrument may be barred by lapse of
time. The prescriptive period foractions based upon a written contract and for reformation of an
instrument is ten (10) years underArticle 1144 of the Civil Code. In the case at bar, respondent
corporation had ten (10) years from 1968, the time when the contract of lease was executed, to
file an action for reformation. Sadly, it did so only on May 15, 1992 or twenty-four (24) years
after the cause of action accrued, hence, its cause of action has become stale,
hence,time-barred.In holding that the action for reformation has not prescribed, the Court of
Appeals upheld the ruling of the Regional Trial Court that the 10-year prescriptive period should
be reckoned not from the execution of the contract of lease in 1968, but from the date of the
alleged 4-year extension of the lease contract after it expired in 1988. Consequently, when the
action for reformation of instrument was filed in 1992 it was within ten (10) years from the
extended period of the lease. Private respondent theorized, and the Court of Appeals agreed,
that the extended period of lease was an "implied new lease" within the contemplation of Article
1670 of the Civil Code, under which provision, the other terms of the original contract were
deemed revived in the implied new lease.If the extended period of lease was expressly agreed
upon by the parties, then the term should be exactly what the parties stipulated, not more, not
less. Second, even if the supposed 4-year extended lease be considered as an implied new
lease under Art. 1670, "the other terms of the original contract"contemplated in said provision
are only those terms which are germane to the lessee’s right of continued enjoyment of the
property leased.The prescriptive period of ten (10) years provided for in Art. 1144 applies by
operation of law, not by the will of the parties. Therefore, the right of action for reformation
accrued from the date of execution of the contract of lease in 1968.Petition is hereby
GRANTED. The Decision of the Court of Appeals dated January 17, 1997 is REVERSED and
SET ASIDE. The Order of the Regional Trial Court of Tacloban City, Branch 7, dated December
15,1995 dismissing the action for reformation is REINSTATED.

ASUNCION ATILANO vs. LADISLAO ATILANO

G.R. No. L-22487 May 21, 1969

Doctrine:
The new Civil Code provides a remedy by means of reformation of the instrument. This remedy
is available 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.

Facts:
In 1916, Atilano I acquired lot No. 535 by purchase. In 1920, he had the land subdivided into
five parts, identified as lots Nos. 535-A, 535-B, 535-C, 535-D and 535-E, respectively. After the
subdivision had been effected, Atilano I executed a deed of sale covering lot No. 535-E in favor
of his brother Atilano II. Three other portions, namely, lots Nos. 535-B, 535-C, and 535-D, were
likewise sold to other persons. Atilano I retained for himself the remaining portions of the land,
presumably covered by the title to lot No. 535-A. upon his death, the title to this lot passed to
Ladislao, in whose name the corresponding certificate was issued.

On 1959, Atilano II and his children had the land resurveyed so that it could be properly
subdivided. However, they discovered that the land they were actually occupying on the
strength of the deed of sale was lot No. 353-A and not lot 535-E, while the land which remained
in the possession of Atilano I, and which was passed to Ladislao was lot No. 353-E and not lot
No. 535-A.

On 1960, the heirs of Atilano II alleging, inter alia, that they offered to surrender to the
possession of lot No. 535-A and demanded in return the possession of lot No. 535-E, but the
defendants refused to accept the exchange. The plaintiffs' insistence is quite understandable,
since lot No. 535-E has an area of 2,612 square meters as compared to the 1,808 square-meter
area of lot No. 535-A.

In their answer to the complaint, the defendants alleged that the reference to lot No. 535-E in
the deed of sale was an involuntary error; that the intention of the parties to that sale was to
convey the lot correctly identified as lot No. 535-A. On the basis of the foregoing allegations the
defendants interposed a counterclaim, praying that the plaintiffs be ordered to execute in their
favor the corresponding deed of transfer with respect to Lot No. 535-E.

The trial court rendered judgment in favor of the plaintiffs.

Issue:
Whether or not there has been a valid sale in view of the real intention of the parties.

Held:
From the facts and circumstances, the object is lot No. 535-A and its designation as lot No.
535-E in the deed of sale was a simple mistake in the drafting of the document. The mistake did
not vitiate the consent of the parties, or affect the validity and binding effect of the contract
between them. The new Civil Code provides a remedy by means of reformation of the
instrument. This remedy is available 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.
In this case, the deed of sale executed in 1920 need no longer be reformed. The parties have
retained possession of their respective properties conformably to the real intention of the parties
to that sale, and all they should do is to execute mutual deed of conveyance.

Therefore, the judgment appealed from is reversed. The plaintiffs are ordered to execute a deed
of conveyance of lot No. 535-E in favor of the defendants, and the latter, in turn, are ordered to
execute a similar document, covering lot No. 535-A, in favor of the plaintiffs. Costs against the
latter.

MAXIMINO CARANTES vs. COURT OF APPEALS

G.R. No. L-33360 April 25, 1977

Doctrine:
The present action, being one to annul the contract on the ground of fraud, its prescriptive
period is four years from the time of the discovery of the fraud.

Facts:
Mateo Carantes was the original owner of a certain parcel of land. When he died, he was
survived by his wife and six children. Subsequently, the parcel of land was subjected for
expropriation, and was later on indeed expropriated. A deed denominated as Assignment of
Right of Inheritance was executed by four of Mateo’s children assigning Maximo Carantes their
rights to inheritance over the lot. Maximo then sold the remaining lots to the government and
also registered on Mar. 16, 1940 the deed of Assignment of Right to Inheritance. The still
remaining lot was issued in the name of Maximo. A complaint was filed against Maximo alleging
that the deed be annulled on the ground of fraud. The trial court rendered a decision stating that
plaintiff’s right of action has prescribed. The CA reversed the decision.

Issue:
Whether or not the plaintiff’s right of action has prescribed.

Held:
The present action, being one to annul the contract on the ground of fraud, its prescriptive
period is four years from the time of the discovery of the fraud. The weight of authorities is to
effect that the registration of an instrument in the Office of the Register of Deeds constitutes
constructive notice to the whole world, and therefore, discovery of the fraud is deemed to have
taken place at the time of the registration. In this case the deed of assignment was registered on
Mar. 16, 1940. The four year period within which the private respondents could have filed the
present action consequently commenced on Mar. 16, 1940; and since they filed it only on Sept.
4, 1958, it follows that the same is barred by the statute of limitations.
 RITA SARMING vs. CRESENCIO DY
G.R. No. 133643 June 6, 2002

Doctrine:
Reformation is that remedy in equity by means of which a written instrument is made or
construed so as to express or inform to the real intention of the parties.

Facts:
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 and Jose, the brothers of the original defendant
Silveria Flores.
A controversy arose regarding the sale of Lot 4163 which was half-owned by the original
defendant, Silveria Flores, although it was solely registered under her name. The other half was
originally owned by Silveria’s brother, Jose. On January 1956, the heirs of Jose entered into a
contract with plaintiff Alejandra Delfino, for the sale of their 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. Atty. Deogracias Pinili, Alejandra’s lawyer then
prepared the document of sale. In the preparation of the document however, OCT no. 4918-A,
covering Lot 5734, and not the correct title covering Lot 4163 was the one delivered to Pinili.
Unaware of the mistake committed, Alejandra immediately took possession of Lot 4163 and
introduced improvements on the said lot.
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.
Thus, Alejandra and the vendors filed for the reformation of the Deed of Sale.

Issue:
Whether or not reformation is proper in this case.

Ruling:
YES. Reformation is that remedy in equity by means of which a written instrument is made or
construed so as to express or inform to the real intention of the parties.
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 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.
All of these requisites 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 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.

PILAR N. BORROMEO vs. COURT OF APPEALS

G.R. No. L-22962 September 28, 1972

Doctrine:
It is a fundamental principle in the interpretation of contracts that while ordinarily the literal
sense of the words employed is to be followed, such is not the case where they appear to be
contrary to the evident intention of the contracting parties.

FACTS:

Defendant Jose A. Villamor borrowed a large sum of money from his friend and former
classmate, Canuto O. Borromeo, the herein plaintiff, in order to settle a pressing obligation with
Mr. Miller. Defendant mortgaged his land and house in Cebu City to Borromeo to secure the
payment of such debt, but it was found out later that the mortgage was not properly drawn up.
However, Mr. Miller filed a civil action against Villamor and attached his properties including
those that were mortgaged to Borromeo, so that Borromeo, consequently,
pressed Villamor for settlement of his obligation But defendant Villamor instead, executed a
promissory note on No. 29, 1933 in favor
of Borromeo, in the amount of P7,220.00 with 12% PA, agreeing to pay `as soon as I have
money' and further stipulating therein that he
is relinquishing, renouncing or otherwise waiving his right to prescription which means that
Borromeo may collect from such indebtedness even after the lapse of 10 years. After the last
war, Borromeo made various oral demands but Villamor failed to settle his
account, hence, the former instituted an action for collection.

CFI Cebu rendered a decision ordering defendant to pay plaintiff the sum of P7, 220.00 within
90 days from receipt thereof with 12% PA
after the lapse of the 90-day period. Defendant Villamor as well as plaintiff Borromeo died later,
so that later, the parties are then represented by their heirs, the herein petitioners and
respondents.
CA however reversed the decision rendered by the CFI on the ground that the stipulation
amounting to waiver lacks validity in line with the principle that "a person cannot renounce future
prescription"

ISSUE:
What interpretation should be accorded to that stipulation in the promissory note?

HELD:
It is a fundamental principle in the interpretation of contracts that while ordinarily the literal
sense of the words employed is to be followed, such is not the case where they appear to be
contrary to the evident intention of the contracting parties. Such language renouncing the
debtor's rights to prescription should be given the meaning that the debtor could be trusted to
pay even after the termination of the 10-year prescriptive period, considering the relations
between the parties, being friends and former classmates, and the fact that Villamor had already
used to borrow from Borromeo from time to time. The obscurity of the wordings of such
stipulation is illuminated when the light arising from relationship of close friendship between the
parties, as well as the unsuccessful effort to execute a mortgage, taken in connection with the
various oral demands.

Therefore, the 1st 10 years after Nov. 29, 1933 should not be counted in determining when the
action of the creditor, now represented by the herein petitioners, could be filed. From the joint
record on appeal, it is undoubted that the complaint was filed on Jan 7, 1953. If the 1st 10-year
period was to be excluded, the creditor had until Nov. 29, 1953 to start judicial proceedings.