Bentir and Pormida v Leanda and Leyte Gulf

BENTIR AND PORMIDA V LEANDA AND LEYTE GULF TRADERS, INC. Facts: 1. 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. 2. 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). 3. LGT also alleged that said lease was extended for four years until May 31, 1992. 4. May 5, 1989: Bentir sold the leased land to spouses Pormida. 5. LGT questioned the sale alleging that it had a right of first refusal. 6. LGT filed a civil case for the reformation of the expired contract of lease on the ground that its lawyer 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. 7. 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. 8. November 18, 1992, 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. 9. December 15, 1995: 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. 10. December 29, 1995: LGT filed a motion for reconsideration of the order dismissing the complaint. 11. January 11, 1996: 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. 12. May 10, 1996: respondent judge Leanda issued an order reversing the order of dismissal on the grounds that the action for reformation had not yet prescribed and the dismissal was “premature and precipitate”, denying respondent corporation of its right to procedural due process. 13. June 10, 1996: Judge Leanda issued an order for status quo ante, enjoining petitioners to desist from occupying the property 14. Aggrieved, petitioners herein filed a petition for certiorari to the Court of Appeals seeking the annulment of the order of respondent court with prayer for issuance of a writ of preliminary injunction and temporary restraining order to restrain respondent judge from further hearing the case and to direct respondent corporation to desist from further possessing the litigated premises and to turn over possession to petitioners. 15. January 17, 1997: the Court of Appeals, after finding no error in the questioned order nor grave abuse of discretion on the part of the trial court that would amount to lack, or in excess of jurisdiction, denied the petition and affirmed the questioned order. 16. 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 for actions based upon a written contract and for reformation of an instrument is ten (10) years under Article 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, timebarred. 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.