Bentir v. Leanda (2000)

Bentir v. Leanda (2000)

Topic: Reformation of Instruments

PARTIES:

·      Petitioners: Yolanda Rosello-Bentir, Samuel Pormida

·      Respondents: Hon. Leanda, Leyte Gulf Traders, Inc.

FACTS:

·      Leyte Gulf Traders, Inc. filed a complaint for reformation of instrument, specific performance, annulment of conditional sale and damages with prayer for writ of injunction against Yolanda Rosello-Bentir.

·      Leyte Gulf Traders alleged that it entered into a Contract of Lease of a parcel of land with Bentir for a period of 20 years starting May 5, 1968. It was extended for another 4 years until May 31, 1992.

·      May 5, 1989 – Bentir sold the leased premises to petitioner spouses Samuel and Charito Pormida. Leyte Gulf Traders questioned the sale alleging that it had a right of first refusal.

·      They filed a case seeking the reformation of the expired Contract of Lease on the ground that its lawyer inadvertently omitted to incorporate in the contract of lease executed in 1968, the verbal agreement or understanding between the parties that in the event Bentir leases or sells the lot after the expiration of the lease, they have the right to equal the highest offer.

·      Bentir filed their answer alleging that the inadvertence of the lawyer who prepared the lease contract is not a ground for reformation. They also contended that Leyte is guilty of laches for not bringing the case for reformation of the lease contract within the prescriptive period often 10 years from its execution.

·      The trial court dismissed the complaint because the action for reformation had already prescribed.

·      The respondent judge reversed the order of dismissal on the grounds that the action for reformation had not yet prescribed and the dismissal was “premature and precipitate,” denying Leyte’s right to procedural due process.

·      The CA denied the motion for reconsideration, finding no grave abuse of discretion on the part of the respondent judge.

ISSUES/HELD: W/N the complaint for reformation of instrument has prescribed. (YES)

·      Leyte had 10 years from 1968, the time when the Contract of Lease was executed, to file an action for reformation. It did so only on May 15, 1992 or 24 years after the cause of action accrued. Hence, the cause of action has become stale and time-barred.

·      The CA, in upholding the ruling of the RTC 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 was filed in 1992, it was within 10 years from the extended period of the lease. Leyte and the CA agreed that the extended period of lease was an “implied new lease” within the contemplation of Art. 1670 under which provision, the other terms of the original contract were deemed revived in the implied new lease.

·      The SC does not agree for the ff. reasons:

1.     If the parties agreed to extend the lease contract for 4 years or after the original contract expired in 1998, then Art. 1670 would not apply as the provision speaks of an ‘implied’ new lease.

2.     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.

3.     The prescriptive period of 10 years provided in Art. 1144 applies by operation of law, not by the will of the parties.

·      Thus, the right of action for reformation accrued FROM THE DATE OF THE EXECUTION of the contract of lease in 1968.

JUDGMENT: GRANTED.

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.

·      Reformation of an instrument 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 when some error or mistake has been committed.

·      It is predicated on the equitable maxim that equity treats as done that which ought to be done. The rationale of the doctrine is that it would be unjust and unequitable to allow the enforcement of a written instrument which does not reflect or disclose the real meeting of the minds of the parties.

·      However, an action for reformation must be brought within the period prescribed by law, otherwise, it will be barred by the mere lapse of time.

·      Consequently, the courts, as the agencies authorized by law to exercise the power to reform an instrument, must necessarily exercise that power sparingly and with great caution and zealous care.

·      Moreover, the remedy, being an extraordinary one, must be subject to limitations as may be provided by law. Our law and jurisprudence set such limitations, among which is laches.

·      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.

·      Prescription is intended to suppress stale and fraudulent claims arising from transactions like the one at bar which facts had become so obscure from the lapse of time or defective memory.