Civpro Case Full Text Compilation Philippine Courts

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FIRST DIVISION
G.R. No. 183794, June 13, 2016 The LESSOR shall thereupon have the right to enter
into a new contract with another party. All advanced
SPOUSES JAIME AND MATILDE rentals shall be forfeited in favor of the
POON, Petitioners, v. PRIME SAVINGS BANK LESSOR.6chanroblesvirtuallawlibrary
REPRESENTED BY THE PHILIPPINE DEPOSIT Barely three years later, however, the BSP placed
INSURANCE CORPORATION AS STATUTORY respondent under the receivership of the Philippine
LIQUIDATOR, Respondent. Deposit Insurance Corporation (PDIC) by virtue of BSP
Monetary Board Resolution No. 22,7 which
DECISION reads:ChanRoblesVirtualawlibrary
On the basis of the report of Mr. Candon B. Guerrero,
SERENO, C.J.: Director of Thrift Banks and Non-Bank Financial
Institutions (DTBNBF1), in his memorandum dated
January 3, 2000, which report showed that the Prime
Before this Court is a Petition for Review on Savings Bank, Inc. (a) is unable to pay its liabilities as
Certiorari1 assailing the Court of Appeals (CA) they became due in the ordinary course of business;
Decision2which affirmed the Decision3 issued by (b) has insufficient realizable assets as determined by
Branch 21, Regional Trial Court (RTC) of Naga City. the Bangko Sentral ng Pilipinas to meet its liabilities;
(c) cannot continue in business without involving
The RTC ordered the partial rescission of the penal probable losses to its depositors and creditors; and (d)
clause in the lease contract over the commercial has wilfully violated cease and desist orders
building of Spouses Jaime and Matilde Poon under Section 37 that has become final,
(petitioners). It directed petitioners to return to Prime involving acts or transactions which amount to
Savings Bank (respondent) the sum of P1,740,000, fraud or a dissipation of the assets of the
representing one-half of the unused portion of its institution; x x x.8 (Emphasis supplied)
advance rentals, in view of the closure of respondent's
business upon order by the Bangko Sentral ng The BSP eventually ordered respondent's liquidation
Pilipinas (BSP). under Monetary Board Resolution No.
664.9chanrobleslaw
Antecedent Facts
On 12 May 2000, respondent vacated the leased
The facts are undisputed. premises and surrendered them to
petitioners.10Subsequently, the PDIC issued petitioners
Petitioners owned a commercial building in Naga City, a demand letter11 asking for the return of the unused
which they used for their bakery business. On 3 advance rental amounting to P3,480,000 on the
November 2006, Matilde Poon and respondent ground that paragraph 24 of the lease agreement had
executed a 10-year Contract of Lease4 (Contract) over become inoperative, because respondent's closure
the building for the latter's use as its branch office in constituted force majeure. The PDIC likewise invoked
Naga City. They agreed to a fixed monthly rental of the principle of rebus sic stantibus under Article 1267
P60,000, with an advance payment of the rentals for of Republic Act No. 386 (Civil Code) as alternative legal
the first 100 months in the amount of P6,000,000. As basis for demanding the refund.
agreed, the advance payment was to be applied
immediately, while the rentals for the remaining period Petitioners, however, refused the PDIC's
of the Contract were to be paid on a monthly demand.12 They maintained that they were entitled to
basis.5chanrobleslaw retain the remainder of the advance rentals following
paragraph 24 of their Contract.
In addition, paragraph 24 of the Contract
provides:ChanRoblesVirtualawlibrary Consequently, respondent sued petitioners before the
24. Should the lease[d] premises be closed, deserted RTC of Naga City for a partial rescission of contract
or vacated by the LESSEE, the LESSOR shall have the and/or recovery of a sum of money.
right to terminate the lease without the necessity of
serving a court order and to immediately repossess the The RTC Ruling
leased premises. Thereafter the LESSOR shall open
and enter the leased premises in the presence of a After trial, the RTC ordered the partial rescission of the
representative of the LESSEE (or of the proper lease agreement, disposing as
authorities) for the purpose of taking a complete follows:ChanRoblesVirtualawlibrary
inventory of all furniture, fixtures, equipment and/or WHEREFORE, judgment is hereby entered ordering the
other materials or property found within the leased partial rescission of the Contract of Lease dated
premises. November 3, 1996 particularly the second paragraph
of Par. 24 thereof and directing the defendant-spouses may be released from its contractual obligations to
Jaime and Matilde Poon to return or refund to the petitioners on grounds of fortuitous event under Article
Plaintiff the sum of One Million Seven Hundred Forty 1174 of the Civil Code and unforeseen event under
Thousand Pesos (P1,740,000) representing one-half of Article 1267 of the Civil Code; (2) the proviso in the
the unused portion of the advance rentals. parties' Contract allowing the forfeiture of advance
rentals was a penal clause; and (3) the penalty agreed
Parties' respective claims for damages and attorney's upon by the parties may be equitably reduced under
fees are dismissed. Article 1229 of the Civil Code.
No costs.13chanroblesvirtuallawlibrary COURT RULING

The trial court ruled that the second clause in
paragraph 24 of the Contract was penal in nature, and We DENY the Petition.
that the clause was a valid contractual
agreement.14 Citing Provident Savings Bank v. CA15 as Preliminarily, we address petitioners' claim that
legal precedent, it ruled that the premature termination respondent had no cause of action for rescission,
of the lease due to the BSP's closure of respondent's because this case does not fall under any of the
business was actually involuntary. Consequently, it circumstances enumerated in Articles 138124 and
would be iniquitous for petitioners to forfeit the entire 138225cralawred of the Civil Code.
amount of P 3,480,000.16 Invoking its equity
jurisdiction under Article 1229 of the Civil Code,17 the The legal remedy of rescission, however, is by no
trial court limited the forfeiture to only one-half of that means limited to the situations covered by the above
amount to answer for respondent's unpaid utility bills provisions. The Civil Code uses rescission in two
and E-VAT, as well as petitioner's lost business different contexts, namely: (1) rescission on account of
opportunity from its former bakery breach of contract under Article 1191; and (2)
business.18chanrobleslaw rescission by reason of lesion or economic prejudice
under Article 1381.26 While the term "rescission" is
used in Article 1191, "resolution" was the original term
The CA Ruling
used in the old Civil Code, on which the article was
based. Resolution is a principal action based on a
On appeal, the CA affirmed the RTC Decision,19 but had
breach by a party, while rescission under Article 1383
a different rationale for applying Article 1229. The
is a subsidiary action limited to cases of rescission for
appellate court ruled that the closure of respondent's
lesion under Article 1381 of the New Civil
business was not a fortuitous event. Unlike Provident
Code.27chanrobleslaw
Savings Bank,20 the instant case was one in which
respondent was found to have committed fraudulent
It is clear from the allegations in paragraphs 12 and 13
acts and transactions. Lacking, therefore, was the first
of the Complaint28 that respondent's right of action
requisite of a fortuitous event, i.e, that the cause of the
rested on the alleged abuse by petitioners of their right
breach of obligation must be independent of the will of
under paragraph 24 of the Contract. Respondent's
the debtor.21chanrobleslaw
theory before the trial court was that the tenacious
enforcement by petitioners of their right to forfeit the
Still, the CA sustained the trial court's interpretation of
advance rentals was tainted with bad faith, because
the proviso on the forfeiture of advance rentals as a
they knew that respondent was already insolvent. In
penal clause and the consequent application of Article
other words, the action instituted by respondent was
1229. The appellate court found that the forfeiture
for the rescission of reciprocal obligations under Article
clause in the Contract was intended to prevent
1191. The lower courts, therefore, correctly ruled that
respondent from defaulting on the latter's obligation to
Articles 1381 and 1382 were inapposite.
finish the term of the lease. It further found that
respondent had partially performed that obligation
We now resolve the main issues.
and, therefore, the reduction of the penalty was only
proper. Similarly, it ruled that the RTC had properly
The closure of respondent's business was
denied petitioners' claims for actual and moral
neither a fortuitous nor an unforeseen event
damages for lack of basis.22chanrobleslaw
that rendered the lease agreement functus
officio.
On 10 July 2008,23 the CA denied petitioners' Motion
for Reconsideration. Hence, this Petition.
Respondent posits that it should be released from its
contract with petitioners, because the closure of its
Issues
business upon the BSP's order constituted a fortuitous
event as the Court held in Provident Savings
The issues to be resolved are whether (1) respondent
Bank.29chanrobleslaw
chanRoblesvirtualLawlibrary1. The event or change in

The cited case, however, must always be read in the circumstance could not have been foreseen at the time
context of the earlier Decision in Central Bank v. Court of the execution of the contract.
of Appeals.30 The Court ruled in that case that the
Monetary Board had acted arbitrarily and in bad faith 2. It makes the performance of the contract extremely
in ordering the closure of Provident Savings Bank. difficult but not impossible.
Accordingly, in the subsequent case of Provident
Savings Bank it was held that fuerza mayor had 3. It must not be due to the act of any of the parties.
interrupted the prescriptive period to file an action for
the foreclosure of the subject 4. The contract is for a future
mortgage.31chanrobleslaw prestation.38chanrobleslaw
In contrast, there is no indication or allegation that the The difficulty of performance should be such that the
BSP's action in this case was tainted with arbitrariness party seeking to be released from a contractual
or bad faith. Instead, its decision to place respondent obligation would be placed at a disadvantage by the
under receivership and liquidation proceedings was unforeseen event. Mere inconvenience, unexpected
pursuant to Section 30 of Republic Act No. impediments, increased expenses,39 or even pecuniary
7653.32 Moreover, respondent was partly accountable inability to fulfil an engagement,40 will not relieve the
for the closure of its banking business. It cannot be obligor from an undertaking that it has knowingly and
said, then, that the closure of its business was freely contracted.
independent of its will as in the case of Provident
Savings Bank. The legal effect is analogous to that The law speaks of "service." This term should be
created by contributory negligence in quasi-delict understood as referring to the performance of an
actions. obligation or a prestation.41 A prestation is the object
of the contract; i.e., it is the conduct (to give, to do or
The period during which the bank cannot do business not to do) required of the parties.42 In a reciprocal
due to insolvency is not a fortuitous event,33 unless it contract such as the lease in this case, one obligation
is shown that the government's action to place a bank of respondent as the lessee was to pay the agreed
under receivership or liquidation proceedings is tainted rents for the whole contract period.43 It would be hard-
with arbitrariness, or that the regulatory body has pressed to complete the lease term since it was already
acted without jurisdiction.34chanrobleslaw out of business only three and a half years into the 10-
year contract period. Without a doubt, the second and
As an alternative justification for its premature the fourth requisites mentioned above are present in
termination of the Contract, respondent lessee invokes this case.
the doctrine of unforeseen event under Article 1267 of
the Civil Code, which The first and the third requisites, however, are lacking.
provides:ChanRoblesVirtualawlibrary It must be noted that the lease agreement was for 10
Art. 1267. When the service has become so difficult as years. As shown by the unrebutted testimony of Jaime
to be manifestly beyond the contemplation of the Poon during trial, the parties had actually considered
parties, the obligor may also be released therefrom, in the possibility of a deterioration or loss of respondent's
whole or in part. business within that period:ChanRoblesVirtualawlibrary
The theory of rebus sic stantibus in public international ATTY. SALES
law is often cited as the basis of the above article.
Under this theory, the parties stipulate in light of Q. Now to the offer of that real estate broker for
certain prevailing conditions, and the theory can be possible lease of your property at No. 38
made to apply when these conditions cease to General Luna Street, Naga City which was
exist.35 The Court, however, has once cautioned that then the Madam Poon Bakery, what did you
Article 1267 is not an absolute application of the tell your real estate broker?
principle of rebus sic stantibus, otherwise, it would
endanger the security of contractual relations. After all,
parties to a contract are presumed to have assumed
the risks of unfavorable developments. It is only in WITNESS (JAIME POON)
absolutely exceptional changes of circumstance,
therefore, that equity demands assistance for the A. When Mrs. Lauang approached me, she told
debtor.36chanrobleslaw me that she has a client who wants to lease
a property in Naga City.
Tagaytay Realty Co., Inc. v. Gacutan37 lays down the
requisites for the application of Article 1267, as follows:
Q. Did she disclose to you the identity of her

client?
Q. So after telling Mrs. Lauang that you can be
A. Yes, Sir. amenable to lease the place for P100,000.00
monthly, what if any, did Mrs. Lauang tell
you?
Q. What was the name of her client? A. She told me it is very high. And then she
asked me if it is still negotiable, I answered,
A. That is the Prime Savings Bank. yes.
Q. After you have known that it was the Prime Q. So, what happened after your clarified to her
Savings Bank that [wanted] to lease your that [it is] still negotiable?
property located at No. 38 General Luna St.,
Naga City, what did you tell Mrs. Lauang[?] A. She asked me if there is other condition, and
I answered her, yes, if your client can give me
A. I told her that if the price is good, I am willing advances I can lease my property.
to give up the place where this bakery of mine
is situated.
xxxx
Q. So, did Mrs. Lauang give you the quotation as

to the price?
Q. So what is your answer when you were asked
A. Yes, Sir. for the amount of the advances?
A. I told her I need 7 million pesos because I

need to pay my debts.
Q. What was the amount?
A. She asked first if how much I demand for the

price. x
x
x
x
Q. What did you tell her?
A. I told her, if they can give me P100,000.00

for the rental, I will give up the place. Q. Who was with her when she came over?
A. A certain guy name Ricci and said that he is

the assistant manager of the Prime Savings
Q. What do you mean P100,000.00 rental? Bank.
A. That is only for the establishment

[concerned].
Q. What did you and Mr. Ricci talk about?
A. I told him the same story as I talked with Mrs.

Q. What was the period to be covered by the Lauang.
P100,000.00 rental?
A. That is monthly basis.

Q. Was the agreement finally reached between Q. Now, Mr. Poon, I would like to direct your
you and Mr. Ricci? attention to paragraphs 4 and 5 of the
contract of lease which I read: Inasmuch as
A. Not yet, Sir. the leased property is presently mortgaged
with the PCI Bank, the Lessor and the Lessee
hereby agree that another property with a
clean title shall serve as security for herein
Q. What happened after that? Lessee; Provided that the mortgaged
property with PCI Bank is cancelled, the
A. He said that he [will discuss] the matter with Lessee agrees that the above-mentioned
his higher officer, the branch manager in the property shall be released to herein Lessor;
person of Henry Lee. paragraph 5 says: It is hereby stipulated that
should the leased property be foreclosed by
the PCI Bank or any other banking or financial
institution, all unused rentals shall be
Q. Were you able to meet this Henry Lee? returned by the Lessor to the Lessee. Now,
my question is: Who asked or requested that
A. After a week later. paragraphs 4 and 5 be incorporated in the
contract of lease?
A. Mr. Lee himself.

Q. Who was with Henry Lee?
A. Mrs. Lauang.
Q. The representative of the plaintiff?
A. Yes, Sir.
Q. Was there a final agreement on the day when
you and Henry Lee met?
A. Not yet, he offered to reduce the rental and Q. Q. For what purpose did Mr. Lee ask these
also the advances. Finally I gave way after 2 matters to be incorporated?
or 3 negotiations.
A. Because they are worried that my
building might be foreclosed because it
is under [mortgage] with the PCI Bank,
Q. What happened after 2 or 3 negotiations? that is why I gave them protection of a
clean title. But I also asked them, what
A. We arrived at P60,000.00 for monthly rentals will happen to me, in case your bank will
and P6,000,000.00 advances for 100 months. be closed?
Q. Was the agreement between you and the Q. When you asked that question, what did
representative of the Prime Savings Bank Mr. Lee tell you?
reduced into writing?
A. He told me that I don't have to worry I
A. Yes Sir. will have P6,000,000 advances.
x Q. What was your protection as to the 6 million

x payment made by the plaintiff?
x
x A. That is the protection for me because during
that time I have my bakery and I myself
[spent] 2 million for the improvement of that
5. It is hereby stipulated that should the leased

bakery and I have sacrificed that for the sake
property be foreclosed by PCI Bank or any other
of the offer of lease.
banking or financial institution, all unused rentals shall
be returned by the LESSOR to the LESSEE; x x
x.46chanroblesvirtuallawlibrary
Q. In what manner that you are being protected In effect, the penalty for the premature termination of
for that 6 million pesos? the Contract works both ways. As the CA correctly
found, the penalty was to compel respondent to
A. They said that if in case the bank will be complete the 10-year term of the lease. Petitioners,
closed that advance of 6 million pesos too, were similarly obliged to ensure the peaceful use
will be forfeited in my favor. of their building by respondent for the entire duration
of the lease under pain of losing the remaining advance
rentals paid by the latter.
Q. And that is what is found in paragraph The forfeiture clauses of the Contract, therefore,
24 of the Contract of Lease which I served the two functions of a penal clause, i.e., (1) to
asked you to read? provide for liquidated damages and (2) to strengthen
the coercive force of the obligation by the threat of
A. That is true.44 greater responsibility in case of breach.47 As the CA
correctly found, the prestation secured by those
Clearly, the closure of respondent's business was not clauses was the parties' mutual obligation to observe
an unforeseen event. As the lease was long-term, it the fixed term of the lease. For this reason, We sustain
was not lost on the parties that such an eventuality the lower courts' finding that the forfeiture clause in
might occur, as it was in fact covered by the terms of paragraph 24 is a penal clause, even if it is not
their Contract. Besides, as We have previously expressly labelled as such.
discussed, the event was not independent of
respondent's will. A reduction of the penalty agreed upon by the
parties is warranted under Article 1129 of the
The forfeiture clause in the Contract is penal in Civil Code.
nature.
We have no reason to doubt that the forfeiture
Petitioners claim that paragraph 24 was not intended provisions of the Contract were deliberately and
as a penal clause. They add that respondent has not intelligently crafted. Under Article 1196 of the Civil
even presented any proof of that intent. It was, Code,48 the period of the lease contract is deemed to
therefore, a reversible error on the part of the CA to have been set for the benefit of both parties. Its
construe its forfeiture provision of the Contract as continuance, effectivity or fulfillment cannot be made
penal in nature. to depend exclusively upon the free and uncontrolled
choice of just one party.49 Petitioners and respondent
It is settled that a provision is a penal clause if it calls freely and knowingly committed themselves to
for the forfeiture of any remaining deposit still in the respecting the lease period, such that a breach by
possession of the lessor, without prejudice to any other either party would result in the forfeiture of the
obligation still owing, in the event of the termination or remaining advance rentals in favor of the aggrieved
cancellation of the agreement by reason of the lessee's party.
violation of any of the terms and conditions thereof.
This kind of agreement may be validly entered into by If this were an ordinary contest of rights of private
the parties. The clause is an accessory obligation contracting parties, respondent lessee would be
meant to ensure the performance of the principal obligated to abide by its commitment to petitioners.
obligation by imposing on the debtor a special The general rule is that courts have no power to ease
prestation in case of nonperformance or inadequate the burden of obligations voluntarily assumed by
performance of the principal parties, just because things did not turn out as
obligation.45chanrobleslaw expected at the inception of the
contract.50chanrobleslaw
It is evident from the above-quoted testimony of Jaime
Poon that the stipulation on the forfeiture of advance It must be noted, however, that this case was initiated
rentals under paragraph 24 is a penal clause in the by the PDIC in furtherance of its statutory role as the
sense that it provides for liquidated damages. fiduciary of Prime Savings Bank.51 As the state-
appointed receiver and liquidator, the PDIC is
Notably, paragraph 5 of the Contract also mandated to recover and conserve the assets of the
provides:ChanRoblesVirtualawlibrary foreclosed bank on behalf of the latter's depositors and
creditors.52 In other words, at stake in this case are not claimant is compelled to litigate or to incur expenses
just the rights of petitioners and the correlative where no sufficient showing of bad faith exists.58 None
liabilities of respondent lessee. Over and above those of these circumstances have been shown in this case.
rights and liabilities is the interest of innocent debtors
and creditors of a delinquent bank establishment. Finally, in line with prevailing jurisprudence,59 legal
These overriding considerations justify the 50% interest at the rate of 6% per annum is imposed on the
reduction of the penalty agreed upon by petitioners monetary award computed from the finality of this
and respondent lessee in keeping with Article 1229 of Decision until full payment.
the Civil Code, which
provides:ChanRoblesVirtualawlibrary WHEREFORE, premises considered, the Petition for
Art. 1229. The judge shall equitably reduce the penalty Review on Certiorari is DENIED. The Court of Appeals
when the principal obligation has been partly or Decision dated 29 November 2007 and its Resolution
irregularly complied with by the debtor. Even if there dated 10 July 2008 in CA-G.R. CV No. 75349 are
has been no performance, the penalty may also be hereby MODIFIED in that legal interest at the rate of
reduced by the courts if it is iniquitous or 6% per annum is imposed on the monetary award
unconscionable. computed from the finality of this Decision until full
payment.
The reasonableness of a penalty depends on the
circumstances in each case, because what is iniquitous
No costs.
and unconscionable in one may be totally just and
equitable in another.53 In resolving this issue, courts
SO ORDERED.
may consider factors including but not limited to the
type, extent and purpose of the penalty; the nature of
the obligation; the mode of the breach and its
consequences; the supervening realities; and the
standing and relationship of the
parties.54chanrobleslaw
Under the circumstances, it is neither fair nor

reasonable to deprive depositors and creditors of what
could be their last chance to recoup whatever bank
assets or receivables the PDIC can still legally recover.
Besides, nothing has prevented petitioners from
putting their building to other profitable uses, since
respondent surrendered the premises immediately
after the closure of its business. Strict adherence to the
doctrine of freedom of contracts, at the expense of the
rights of innocent creditors and investors, will only
work injustice rather than promote justice in this
case.55 Such adherence may even be misconstrued as
condoning profligate bank operations. We cannot allow
this to happen. We are a Court of both law and equity;
We cannot sanction grossly unfair results without doing
violence to Our solemn obligation to administer justice
fairly and equally to all who might be affected by our
decisions.56chanrobleslaw
Neither do We find any error in the trial court's denial

of the damages and attorney's fees claimed by
petitioners. No proof of the supposed expenses they
have incurred for the improvement of the leased
premises and the payment of respondent's unpaid
utility bills can be found in the records. Actual and
compensatory damages must be duly proven with a
reasonable degree of certainty.57chanrobleslaw
To recover moral and exemplary damages where there

is a breach of contract, the breach must be palpably
wanton, reckless, malicious, in bad faith, oppressive,
or abusive. Attorney's fees are not awarded even if a
plans and specifications approved by the City

Engineers Office. The parties agreed that the lessee
could let/sublease the building and/or its spaces to
interested parties under such terms and conditions as
the lessee would determine and that all amounts
collected as rents or income from the property would
[G.R. No. 95897. December 14, 1999]
belong exclusively to the lessee. The lessee undertook
to complete construction of the building within eight
FLORENCIA T. HUIBONHOA, petitioner,
(8) months from the date of the execution of the
vs. COURT OF APPEALS, Spouses Rufina G. Lim
contract of lease. The contract further provided as
and ANTHONY LIM, LORETA GOJOCCO CHUA
follows:
and Spouses SEVERINO and PRISCILLA
GOJOCCO, respondents.
5. Good will Money and Rate of Monthly Rental: Upon
the signing of this Contract of Lease, LESSEE shall pay
[G.R. No. 102604. December 14, 1999] to each of the LESSOR the sum of P300,000.00 each
SEVERINO GOJOCCO and LORETA GOJOCCO or a total sum of P900,000.00, as goodwill money.
CHUA, petitioners, vs. COURT OF
APPEALS, HON. HERMOGENES R. LESSEE shall pay to each of the LESSOR the sum of
LIWAG, as Judge of the RTC of Manila P15,000.00 each or a total amount of P45,000.00 as
Branch 55 and FLORENCIA monthly rental for the leased premises, within the first
HUIBONHOA, respondents. five (5) days of each calendar month, at the office of
the LESSOR or their authorized agent; Provided,
DECISION however, that LESSEEs obligation to pay the rental
shall start only upon completion of the building, but if
PURISIMA, J.: it is not completed within eight (8) months from date
hereof as provided for in par. 4 above, the monthly
These two petitions for review on certiorari under rental shall already accrue and shall be paid by LESSEE
Rule 45 of the Rules of Court seek the reversal of the to LESSOR. In other words, during the period of
Decisions of the Court of Appeals in CA-G.R. CV No. construction, no monthly rental shall be collected from
16575 and CA-G.R. SP No. 24654 which affirmed, LESSEE; Provided, Finally, that the monthly rental shall
respectively, the decision of Branch 148 of the Regional be adjusted/increased upon the corresponding
Trial Court of Makati City, dismissing the complaint for increase in the rental of sub-leasees (sic) using the
reformation of contract, and the decision of Branch 55 percentage increase in the totality of rentals of the sub-
of the Regional Trial Court of Manila, reversing that of leasees (sic) as basis for the percentage increase of
Branch 13 of the Metropolitan Trial Court of Manila, monthly rental that LESSEE will pay to LESSOR.
which favorably acted in the ejectment case. Both
petitions involve the same parties. The parties also agreed that upon the termination
of the lease, the ownership and title to the building
Culled from the records on hand, the facts giving
thus constructed on the said lots would automatically
rise to the two cases are as follows:
transfer to the lessor, even without any implementing
On June 8, 1983, Florencia T. Huibonhoa entered document therefor. Real estate taxes on the land
into a memorandum of agreement with siblings Rufina would be borne by the lessor while that on the building,
Gojocco Lim, Severino Gojocco and Loreta Gojocco by the lessee, but the latter was authorized to advance
Chua stipulating that Florencia T. Huibonhoa would the money needed to meet the lessors obligations such
lease from them (Gojoccos) three (3) adjacent as the payment of real estate taxes on their lots. The
commercial lots at Ilaya Street, Binondo, Manila, lessors would deduct from the monthly rental due all
described as lot nos. 26-A, 26-B and 26-C, covered by such advances made by the lessee.
Transfer Certificates of Title Nos. 76098, 80728 and
After the execution of the contract, the Gojoccos
155450, all in their (Gojoccos) names.
executed a power of attorney granting Huibonhoa the
On June 30, 1983, pursuant to the said authority to obtain credit facilities in order that the
memorandum of agreement, the parties inked a three lots could be mortgaged for a limited one-year
contract of lease of the same three lots for a period of period from July 1983.[1] Hence, on September 12,
fifteen (15) years commencing on July 1, 1983 and 1983, Huibonhoa obtained from China Banking
renewable upon agreement of the parties. Subject Corporation credit facilities not exceeding One Million
contract was to enable the lessee, Florencia T. (P1,000.000.00) Pesos. Simultaneously, she
Huibonhoa, to construct a four-storey reinforced mortgaged the three lots to the creditor
concrete building with concrete roof deck, according to bank.[2] Fifteen days later or on September 27, 1983,
to be precise, Huibonhoa signed a contract amending
the real estate mortgage in favor of China Banking parties; that its terms be novated so that the accrual
Corporation whereby the credit facilities were of rents should be computed from October 1984; that
increased to the principal sum of Three Million the monthly rent of P45,000.00 be equitably reduced
(P3,000,000.00) Pesos.[3] to P30,000.00, and the term of the lease be extended
by five (5) years.[6]
During the construction of the building which
later became known as Poulex Merchandise Eleven days later or on January 14, 1985, to be
Center,[4] former Senator Benigno Aquino, Jr. was exact, the Gojoccos filed Civil Case No. 106097 against
assassinated. The incident must have affected the Huibonhoa for cancellation of lease, ejectment and
countrys political and economic stability. The collection with the Metropolitan Trial Court of
consequent hoarding of construction materials and Manila. They theorized that despite the expiration of
increase in interest rates allegedly affected adversely the 8-month construction period, Huibonhoa failed to
the construction of the building such that Huibonhoa pay the rents that had accrued since March 1, 1984,
failed to complete the same within the stipulated eight- their verbal demands therefor notwithstanding; that, in
month period from July 1, 1983. Projected to be their letter of December 19, 1984, they had notified
finished on February 29, 1984, the construction was Huibonhoa of their intention to terminate and cancel
completed only in September 1984 or seven (7) the lease for violation of its terms and that they
months later. demanded from her the restitution of the land in
question and the payment of all rentals due
Under the contract, Huibonhoa was supposed to thereunder; that Huibonhoa refused to pay the rentals
start paying rental in March 1984 but she failed to do in bad faith because she had sublet the stalls, bodegas
so. Consequently, the Gojoccos made several verbal and offices to numerous tenants and/or stallholders
demands upon Huibonhoa for the payment of rental from whom she had collected goodwill money and
arrearages and, for her to vacate the leased exorbitant rentals even prior to the completion of the
premises. On December 19, 1984, lessors sent lessee building or as of March 1984; that she was about to
a final letter of demand to pay the rental arrearages sublease the vacant spaces in the building; that she
and to vacate the leased premises. The former also was able to finish construction of the building without
notified the latter of their intention to terminate the utilizing her own capital or investment on account of
contract of lease.[5] the mortgages of their land in the amount
However, on January 3, 1985, Huibonhoa of P3,700,000 (sic); that because the mortgage
brought an action for reformation of contract before indebtedness with China Banking Corporation had
Branch 148 of the Regional Trial Court in remained outstanding and unpaid, they had revoked
Makati. Docketed as Civil Case No. 9402, the Complaint the power of attorney in Huibonhoas favor on
alleged that although there was a meeting of the minds December 21, 1984, and that, because Huibonhoa was
between the parties on the lease contract, their true about to depart from the Philippines, the rentals due
intention as to when the monthly rental would accrue and owing from the leased premises should be held to
was not therein expressed due to mistake or answer for their claim by virtue of a writ of attachment.
accident.She (lessee) alleged that the Gojoccos had The Gojoccos prayed that Huibonhoa and all
erroneously considered the first accrual date of the persons claiming rights under her be ordered to vacate
rents to be March 1984 when their true intention was the leased premises, to surrender to them actual and
that during the entire period of actual construction of physical possession thereof and to pay the rents due
the building, no rents would accrue. Thus, according to and unpaid at the agreed rate of P45,000.00 a month
Huibonhoa, the first rent would have been due only in from March 1984 to January 1985, with legal interest
October 1984. Moreover, the assassination of former thereon. They also prayed that Huibonhua be ordered
Senator Benigno Aquino, Jr., an unforeseen event, to pay the fair rental value of P60,000.00 a month
caused the countrys economy to turn from bad to beginning February 5, 1985 and every 5th of the month
worse and as a result, the prices of commodities like until the premises shall be actually vacated and
construction materials so increased that the building restored to them and that, considering the nature of
worth Six Million pesos escalated to "something like 11 the action, the Rules on Summary Procedure be
to 12 million pesos. However, she averred that by applied to prevent further losses, damages and
reason of mistake or accident, the lease contract failed expenses on their part.[7]
to provide that should an unforeseen event
dramatically increase the cost of construction, the Meanwhile, in Civil Case No. 9402, the Gojoccos
monthly rental would be reduced and the term of the submitted an answer to the complaint for reformation
lease would be extended for such duration as may be of contract; asserting that the true intention of the
fair and equitable to both the lessors and the lessee. parties was to obligate Huibonhoa to pay rents
immediately upon the expiration of the maximum
Huibonhoa then prayed that the contract of lease period of eight (8) months from the execution of the
be reformed so as to reflect the true intention of the lease contract, which intention was meant to avoid a
situation wherein Huibonhoa would deliberately delay contention that the Aquino assassination was an
the completion of the building within the 8-month accident within the purview of Art. 1359 of the Civil
period to elude payment of rental starting March Code. It held that the act of Rufina G. Lim in entering
1984. They also claimed that Huibonhoa instituted the into an agreement with Huibonhoa that, in effect,
case in anticipation of the ejectment suit they would reformed the lease contract, was not binding upon
file against her; that she was estopped from Severino and Loretta Gojocco considering that they
questioning the enforceability of the lease contract were separate and independent owners of the lots
after having received monetary benefits as a result of subject of the lease. On this point, the trial court cited
her utilization of the premises to her sole profit and Sec. 25, Rule 130 of the Rules of Court which provides
advantage; that the financial reverses she suffered that the rights of a party cannot be prejudiced by the
after the assassination of Senator Benigno Aquino, Jr. act, declaration or omission of another. It thus decided
could not be considered a fortuitous event that would Civil Case No. 9402 as follows:
justify the reduction of the monthly rental and
extension of the contract of lease for five years; and WHEREFORE, judgment is hereby rendered:
that the principle of contract of adhesion in interpreting
the lease contract should be strictly applied to
a) Dismissing the plaintiffs complaint and
Huibonhoa because it was her counsel who prepared
defendant Rufina Lims counterclaim, with
it.[8]
costs against them;
The Gojoccos prayed that Huibonhoa be ordered
to pay them the sum of P495,000.00 representing b) Ordering the plaintiff to pay to defendant
unpaid rents from March 1, 1984 to January 31, 1985 Loretta Gojocco Chua the amount
and the monthly rent of P60,000.00 from February 1, of P360,000.00, representing rentals due
1985 until Huibonhoa shall have surrendered the from March 1, 1984 to February 28, 1987,
premises to them, and that she be ordered to pay with interests thereon at the legal rate from
attorneys fees, moral and exemplary damages and the date of the filing of the complaint until full
costs of suit. payment thereof, plus the sum
of P15,000.00 per month beginning March,
On January 31, 1985, Rufina Gojocco Lim entered
1987 and for as long as the plaintiff is in
into an agreement[9] with Huibonhoa whereby, to put
possession of the leased premises;
an end to Civil Case No. 9402, the former agreed to
extend the term of the lease by three (3) more years
or for eighteen (18) years from July 1, 1983. The c) Ordering the plaintiff to pay to defendant
agreement expressly provided that no rents would be Severino Gojocco Chua the amount
collected unless and until the construction work was of P360,000.00, representing rentals due
already completed or that during the construction, no from March 1, 1984 to February 28, 1987,
monthly rental should be collected. It also provided with interests thereon at the legal rate from
that in case some unforeseen event should date of the filing of the complaint until full
dramatically increase the cost of the building, then the payment thereof, plus the sum
amount of monthly rent shall be reduced to such sum of P15,000.00 per month beginning March,
and the term of the lease extended for such duration 1987 and for as long as the plaintiff is in
as may be fair and equitable, bearing in mind the actual possession of the leased premises;
construction cost of the building. The agreement
recognized the fact that the Aquino assassination that d) Ordering the plaintiff to pay attorneys fees in
resulted in the hoarding of construction materials and favor of the above-named defendants in
the skyrocketing of the interest rates on Huibonhoas the sum of P36,000.00, aside from costs of
loans, resulted in the increase in actual cost of the suit.
construction from P6,000,000.00 to
between P11,000,000.00 and P12,000,000.00. SO ORDERED.
There is no record that Rufina Gojocco Lim was
dropped as a defendant in Civil Case No. 9402 but only Upon motion of the Gojocco, the trial court
Loretta Gojocco Chua and the Spouses Severino and amended the dispositive portion of its aforesaid
Priscilla Gojocco filed the memorandum for the decision in that Huibonhua was ordered to pay each of
defendants in that case.[10] Loretta Gojocco Chua and Severino Gojocco the
amount of P540,000.00 instead of P360,000.00 and
On March 9, 1987, the Makati RTC[11] rendered a that attorneys fees of P54,000.00, instead
decision holding that Huibonhoa had not presented of P36,000.00, be paid by Huibonhoa.
clear and convincing evidence to justify the reformation
of the lease contract. It considered as misplaced her
On the other hand, in Civil Case No. 102604, the portion thereof which required Huibonhua to deposit
Metropolitan Trial Court of Manila granted Huibonhoas monthly rents. It also required Huibonhoa to file her
prayer that the case be excluded from the operation of answer within fifteen (15) days from receipt of the copy
the Rule on Summary Procedure for the reason that of the courts order. Accordingly, on July 21, 1987,
the unpaid rents sued upon amounted Huibonhoa sent in her answer alleging that the lease
to P495,000.00.[12] Thereafter, Huibonhoa presented a contract had been novated by the agreements she had
motion to dismiss or, in the alternative, to suspend signed on January 31, 1985 and July 21, 1986, with
proceedings in the case, contending that the pendency Rufina G. Lim and Severino Gojocco,
of the action for reformation of contract constituted a respectively. Huibonhoa added that she had paid
ground of lis pendens or at the very least, posed a Severino Gojocco the amount of P228,000.00 through
prejudicial question to the ejectment case. The an Allied Bank managers check.[16]
Gojoccos opposed such motion, pointing out that while
there was identity of parties between the two cases, On August 27, 1987, the Metropolitan Trial Court
the causes of action, subject matter and reliefs sought of Manila issued a Pre-trial Order limiting the issues in
for therein were different. Civil Case No. 106097 to: (a) whether or not plaintiffs
had the right to eject the defendant on the ground of
On May 10, 1985, after Huibonhoa had sent in violation of the conditions of the lease contract and (b)
her reply to the said opposition, Rufina G. Lim, through whether or not Severino Gojocco had the right to
counsel, prayed that she be dropped as plaintiff in the pursue the ejectment case in view of the agreement he
case, and counsel begged leave to withdraw as the had entered into with Huibonhoa on July 21, 1986.
lawyer of the latter in the case. Subsequently, Severino
Gojocco and Loretta Gojocco Chua filed a motion On July 30, 1990, the Metropolitan Trial Court of
praying for an order requiring Huibonhoa to deposit the Manila[17] came out with a decision in favor of plaintiffs
rents. On March 25, 1986, the court below issued an Severino Gojocco and Loreta Gojocco Chua and against
Omnibus Order denying Huibonhoas motion to dismiss, Florencia T. Huibonhoa. It ordered Huibonhoa to
requiring her to pay monthly rental of P30,000.00 vacate the lots owned by Severino Gojocco and Loreta
starting March 1984 and every month thereafter, and Gojocco Chua and to pay each of them the
denying Rufina G. Lims motion that she be dropped as amounts P5,000.00 as attorneys fees and P1,000.00 as
plaintiff in the case.[13] Huibonhoa moved appearance fee. All three (3) party-litigants appealed
for reconsideration of said order but the plaintiffs, to the Regional Trial Court of Manila.
apparently including Rufina, opposed the motion. On February 14, 1991, the Regional Trial Court of
On July 21, 1986, Severino Gojocco and Manila, Branch 55,[18] reversed the decision of the
Huibonhoa entered into an agreement that altered Metropolitan Trial Court and ordered the dismissal of
certain terms of the lease contract in the same way the complaint in Civil Case No. 106097. The reversal of
that the agreement between Huibonhoa and Rufina G. the inferior courts decision was based primarily on its
Lim novated the contract.[14] finding that:
On March 24, 1987, the Metropolitan Trial Court 1. The suit below is intrinsically and inherently an
of Manila issued an Order denying Huibonhoas motion action for cancellation of lease or rescission of
for reconsideration and the Gojoccos motion for contract. In fact, the plaintiffs themselves recognized
issuance of a writ of preliminary attachment, and this intrinsic nature of the action by categorizing the
allowing Huibonhoa a period of fifteen (15) days within same action as one for cancellation of lease, ejectment
which to deposit P30,000.00 a month starting March and collection. The suit cannot properly be reduced to
1984 and every month thereafter.[15] Huibonhoa one of simple ejectment as rights of the parties to the
interposed a second motion for reconsideration of the still existing contracts have yet to be determined and
March 25, 1986 order on the ground that she had resolved. Necessarily, to put an end to the parties
amicably settled the case with Severino Gojocco and relation, the contract between them has got to be
Rufina G. Lim. She therein alleged that abrogated, rescinded or resolved. The action for the
only P15,000.00 was due Loretta G. Chua. She purpose is however cognizable by the Regional Trial
informed the court of the decision of the Makati Court as its subject-matter is incapable of pecuniary
Regional Trial Court in Civil Case No. 9402 and argued estimation (See Sec. 19(1), B.P. 129).
that since that court had awarded the Gojoccos rental
arrearages, it would be unjust should she be made to
Hence, Civil Case Nos. 9402 and 106097 (that
pay rental arrearages, once again.
was docketed before the RTC of Manila as Civil Case
On June 30, 1987, the Metropolitan Trial Court of No. 90-54557) were both elevated to the Court of
Manila issued an Order reiterating its decision to Appeals.
assume jurisdiction over Civil Case No. 106097 and
In CA-G.R. CV No. 16575, the Court of Appeals
modified its March 24, 1987 Order by deleting the
rendered a Decision[19] on May 31, 1990, affirming the
decision of the Makati Regional Trial Court in Civil Case On February 19, 1992, [21] the Court resolved that
No. 9402. Huibonhoa filed a motion for the these two petitions for review on certiorari be
reconsideration of such Decision and on October 18, consolidated. Although they sprang from the same
1990, the Court of Appeals modified the same factual milieu, the petitions are to be discussed
accordingly, by ordering that the amount separately, however, because the issues raised are
of P270,825.00 paid by Huibonhoa to Severino and cognate yet independent from each other.
Priscilla Gojocco be deducted from the total amount of
unpaid rentals due the said spouses.
In G.R. No. 95897
In CA-G.R. SP No. 24654, the Court of Appeals
also affirmed the decision of the Regional Trial Court
of Manila in Civil Case No. 106097 by its
Decision[20] promulgated on October 29, 1991. Petitioner Huibonhoa contends that:
Considering the allegations of the complaint for
cancellation of lease, ejectment and collection, the 1. THE RESPONDENT COURT OF APPEALS
Court of Appeals ratiocinated and concluded: COMMITTED A GRAVE AND SERIOUS
ERROR, CONSTITUTING ABUSE OF
These allegations, which are denied by private DISCRETION, IN FINDING THE
respondent, raised issues which go beyond the simple AGREEMENT BETWEEN PETITIONER AND
issue of unlawful possession in ejectment cases. While PRIVATE RESPONDENT SEVERINO
the complaint does not seek the rescission of the lease GOJOCCO (ANNEX E) WORTHLESS AND
contract, ejecting the lessee would, in effect, deprive USELESS ALTHOUGH IT HAS RECOGNIZED
the lessee of the income and other beneficial fruits of THE PAYMENTS WHICH RESPONDENT
the building of which she is the owner until the end SEVERINO GOJOCCO HAS RECEIVED FROM
of the term of the lease. Certainly this cannot be THE PETITIONER WHICH ACTUALLY
decreed in a summary action for ejectment. The CONSTITUTED AN ACT OF RATIFICATION;
decision of the MTC, it is true, only ordered the
ejectment of the private respondent from the leased 2. THE RESPONDENT COURT FAILED TO
premises. But what about the building which, CONSIDER THE TRAGIC ASSASSINATION
according to petitioners themselves, cost the private OF FORMER SENATOR BENIGNO AQUINO
respondent P3,700,000.00 to construct? Will it be AS A FORTUITOUS EVENT OR FORCE
demolished or will its ownership vest, even before the MAJEUREWHICH JUSTIFIES THE
end of the 15-year term, in the petitioners as owners ADJUSTMENT OF THE TERMS OF THE
of the land? Indeed, inextricably linked to the question CONTRACT OF LEASE.[22]
of physical possession is the ownership of the building
which the lessee was permitted to put up on the
Article 1305 of the Civil Code defines a contract
land. To evict the lessee from the land would be to bar
as a meeting of the minds between two persons
her not only from entering the building which she owns
whereby one binds himself, with respect to the other,
but also from collecting the rents from its tenants.
to give something or to render some service. Once the
minds of the contacting parties meet, a valid contract
With respect to the contention of the Gojoccos exists, whether it is reduced to writing or not. When
that since Huibonhoa had submitted to the jurisdiction the terms of an agreement have been reduced to
of the Metropolitan Trial Court, the jurisdictional issue writing, it is considered as containing all the terms
had been foreclosed, the Court of Appeals opined: agreed upon. As such, there can be, between the
parties and their successors in interest, no evidence of
Petitioners point out that private respondent can no such terms other than the contents of the written
longer raise the question of jurisdiction because she agreement, except when it fails to express the true
filed a motion to dismiss in the MTC but she did not intent and agreement of the parties.[23] In such an
raise this question (Rule 15, sec. 8). But the Omnibus exception, one of the parties may bring an action for
motion rule does not cover two grounds which, the reformation of the instrument to the end that their
although not raised in a motion to dismiss, are not true intention may be expressed.[24]
waived. These are (1) failure to state a cause of action
and (2) lack of jurisdiction over the subject matter. Reformation is that remedy in equity by means of
(Rule 9, sec. 2). These grounds can be invoked any which a written instrument is made or construed so as
time. Moreover, in this case it was not really private to express or conform to the real intention of the
respondent who questioned the jurisdiction over the parties.[25] As to its nature, in Toyota Motor Philippines
Metropolitan Trial Court. It was the Regional Trial Corporation v. Court of Appeals,[26] the Court said:
Court which did so motu propio.
An action for reformation is in personam, not in rem, monthly rental due each of the three lessors shall be
xxx even when real estate is involved. xxx It is merely collected in advance within the first five (5) days of
an equitable relief granted to the parties where each month upon completion of the building, the same
through mistake or fraud, the instrument failed to memorandum of agreement also provides as follows:
express the real agreement or intention of the
parties. While it is a recognized remedy afforded by 8. This Memorandum of Agreement shall bind the
courts of equity it may not be applied if it is contrary SECOND PARTY only after the signing of the Contact
to well-settled principles or rules. It is a long-standing of Lease by both parties which shall not be later than
principle that equity follows the law. It is applied in the June 30, 1983, provided, however, that should the
absence of and never against statutory law. xxx Courts SECOND PARTY decide not to proceed with the signing
are bound by rules of law and have no arbitrary on the deadline aforestated, the FIRST PARTY shall not
discretion to disregard them. xxx Courts of equity must hold her liable therefor.
proceed with outmost caution especially when rights of
third parties may intervene. xxx.
In view thereof, reliance on the provisions of the
Memorandum of Agreement is misplaced considering
Article 1359 of the Civil Code provides that that its provisions would bind the parties only upon the
(w)hen, there having been a meeting of the minds of signing of the lease contract. However, the lease
the parties to a contract, their true intention is not contract that was later entered into by the parties
expressed in the instrument purporting to embody the qualified the time when the lessee should start paying
agreement, by reason of mistake, fraud, inequitable the monthly rentals. Paragraph 5 of the lease contract
conduct or accident, one of the parties may ask for the states that the LESSEEs obligation to pay the rental
reformation of the instrument to the end that such shall start only upon the completion of the building, but
intention may be expressed. xxx. An action for if it is not completed within eight (8) months from date
reformation of instrument under this provision of law hereof as provided for in par. 5 (sic) above, the
may prosper only upon the concurrence of the monthly rental shall already accrue and shall be paid
following requisites: (1) there must have been a by LESSEE to LESSOR. That qualification applies even
meeting of the minds of the parties to the contact; (2) though the next sentence states that (I)n other words,
the instrument does not express the true intention of during the period of construction, no monthly rentals
the parties; and (3) the failure of the instrument to shall be collected from LESSEE. Otherwise, there was
express the true intention of the parties is due to no reason for the insertion of that qualification on the
mistake, fraud, inequitable conduct or accident.[27] period of construction of the building the termination
The meeting of the minds between Huibonhoa, of which would signal the accrual of the monthly
on the one hand, and the Gojoccos, on the other, is rentals. Non-inclusion of that qualification would also
manifest in the written lease contract duly executed by give the lessee the unbridled discretion as to the period
them. The success of the action for reformation of the of construction of the building to the detriment of the
contract of lease at bar should therefore, depend on lessors right to exercise ownership thereover upon the
the presence of the two other requisites expiration of the 15-year lease period.
aforementioned. In actions for reformation of contact, the onus
To prove that the lease contract does not evince probandi is upon the party who insists that the contract
the true intention of the parties, specifically as regards should be reformed.[30] Huibonhoa having failed to
the time when Huibonhoa should start paying rents, discharge that burden of proving that the true intention
she presented as a witness one of the lessors, Rufina of the parties has not been accurately expressed in the
G. Lim, who testified that prior to the execution of the lease contract sought to be reformed, the trial court
lease contract on June 30, 1983, the parties had correctly held that no clear and convincing proof
entered into a Memorandum of Agreement on June 8, warrants the reformation thereof.
1983; that on December 21, 1984, the lessors revoked In the complaint, Huibonhoa alleged:
the special power of attorney in favor of Huibonhoa;
that on January 31, 1985, she entered into an
agreement with Huibonhoa whereby the amount of the 5.9 By reason of mistake or accident, the contract
(Annex A) fails to state the true intention and real
rent was reduced to P10,000 a month and the term of
agreement of the parties to the effect that in case some
the lease was extended by three (3) years, and that
unforeseen event should dramatically increase the cost
Huibonhoa started paying rental in September 1984.[28]
of the building, then the amount of monthly rent shall
There is no statement in such testimony that be reduced to such sum and the term of the lease
categorically points to the fact that the contract of extended for such duration as may be fair and
lease has failed to express the true intention of the equitable to both parties, bearing in mind the actual
parties. While it is true that paragraph 4 of the construction cost of the building.
Memorandum of Agreement[29] states that the P15,000
5.10. As a direct result of the tragic Aquino intention of the parties. In granting reformation,
assassination on 21 August 1983, which the parties did therefore, equity is not really making a new contract
not foresee and coming as it did barely two (2) months for the parties, but is confirming and perpetuating the
after the contract (Annex A) had been signed, the real contract between the parties which, under the
countrys economy dramatically turned from bad to technical rules of law, could not be enforced but for
worse, and the resulting ill effects thereof specifically such reformation. As aptly observed by the Code
the hoarding of construction materials adversely Commission, the rationale of the doctrine is that it
affected the plaintiff resulting, among others, in would be unjust and inequitable to allow the
delaying the construction work and the skyrocketing of enforcement of a written instrument which does not
the interest rates on plaintiffs loans, such that instead reflect or disclose the real meeting of the minds of the
of roughly P6 Million as originally budgeted the building parties.
in question now actually cost the plaintiff something
like 11 to 12 million pesos, more or less. By bringing an action for the reformation of subject
lease contract, Huibonhoa chose to reform the
In the present petition, Huibonhoa asserts that: instrument and not the contract itself.[35] She is thus
by reason of oversight or mistake, the true intention of precluded from inserting stipulations that are not
the parties that should some unforeseen event extant in the lease contract itself lest the very
dramatically increase the cost of the building, then the agreement embodied in the instrument is altered.
amount of monthly rent shall be reduced to such sum
and the term of the lease extended to such period as Neither does the Court find merit in her
would be fair and equitable to both sides, bearing in submission that the assassination of the late Senator
mind always that petitioner was ordinary LESSEE but Benigno Aquino, Jr. was a fortuitous event that justified
was an investor-developer. She insists that (i)n truth, a modification of the terms of the lease contract.
the contract, while that of lease, really amounted to a A fortuitous event is that which could not be
common business venture of the parties.[31] foreseen, or which even if foreseen, was inevitable. To
On account of her failure to prove what costly exempt the obligor from liability for a breach of an
mistake allegedly suppressed the true intention of the obligation due to an act of God, the following requisites
parties, Huibonhoa honestly admitted that there was must concur: (a) the cause of the breach of the
an oversight in the drafting of the contract by her own obligation must be independent of the will of the
counsel. By such admission, oversight may not be debtor; (b) the event must be either unforeseeable or
attributed to all the parties to the contract and unavoidable; (c) the event must be such as to render
therefore, it cannot be considered a valid reason for it impossible for the debtor to fulfill his obligation in a
the reformation of the same contract. In fact, because normal manner; and (d) the debtor must be free from
it was Huibonhoas counsel himself who drafted the any participation in, or aggravation of the injury to the
contract, any obscurity therein should be construed creditor.[36]
against her.[32] Unable to substantiate her stance that In the case under scrutiny, the assassination of
the true intention of the parties is not expressed in the Senator Aquino may indeed be considered a fortuitous
lease contract in question, Huibonhoa nonetheless event. However, the said incident per se could not
contends that paragraph 5 thereof should be have caused the delay in the construction of the
interpreted in such a way that she should only begin building. What might have caused the delay was the
paying monthly rent in October 1984 and not in March resulting escalation of prices of commodities including
1984.[33] construction materials. Be that as it may, there is no
Such contention betrays Huibonhoas confusion merit in Huibonhoas argument that the inflation borne
on the distinction between interpretation and by the Filipinos in 1983 justified the delayed accrual of
reformation of contracts. In National Irrigation monthly rental, the reduction of its amount and the
Administration v. Gamit,[34] the Court distinguished the extension of the lease by three (3) years.
two concepts as follows: Inflation is the sharp increase of money or credit
or both without a corresponding increase in business
Interpretation is the act of making intelligible what was transaction.[37] There is inflation when there is an
before not understood, ambiguous, or not obvious. It increase in the volume of money and credit relative to
is a method by which the meaning of language is available goods resulting in a substantial and
ascertained. The interpretation of a contract is the continuing rise in the general price level.[38] While it is
determination of the meaning attached to the words of judicial notice that there has been a decline in the
written or spoken which make the contract. On the purchasing power of the Philippine peso, this
other hand, reformation is that remedy in equity by downward fall of the currency cannot be considered
means of which a written instrument is made or unforeseeable considering that since the 1970s we
construed so as to express or conform to the real have been experiencing inflation. It is simply a
universal trend that has not spared our million to P12 million, she failed to show by how much,
country.[39]Conformably, this Court upheld the for instance, the price index of goods and services had
petitioners view in Occea v. Jabson[40] that even a risen during that intervening period. An extraordinary
worldwide increase in prices does not constitute a inflation cannot be assumed.[43] Hence, for Huibonhoa
sufficient cause of action for modification of an to claim exemption from liability by reason of fortuitous
instrument. event under Art. 1174 of the Civil Code, she must prove
that inflation was the sole and proximate cause of the
It is only when an extraordinary inflation loss or destruction of the contract[44]or, in this case, of
supervenes that the law affords the parties a relief in the delay in the construction of the building. Having
contractual obligations.[41] In Filipino Pipe and Foundry failed to do so, Huibonhoas contention is untenable.
Corporation v. NAWASA,[42] the Court explained
extraordinary inflation thus: Pathetically, if indeed a fortuitous event deterred
the timely fulfillment of Huibonhoas obligation under
Extraordinary inflation exists when there is a decrease the lease contract, she chose the wrong remedy in
or increase in the purchasing power of the Philippine filing the case for reformation of the contract.Instead,
currency which is unusual or beyond the common she should have availed of the remedy of recission of
fluctuation in the value of said currency, and such contract in order that the court could release her from
decrease or increase could not have been reasonably performing her obligation under Arts. 1266[45] and
foreseen or was manifestly beyond the contemplation 1267[46] of the Civil Code, so that the parties could be
of the parties at the time of the establishment of the restored to their status prior to the execution of the
obligation. (Tolentino, Commentaries and lease contract.
Jurisprudence on the Civil Code, Vol. IV, p. 284.) As regards Huibonhoas assertion that the lease
contract was novated by Rufina G. Lim and Severino
An example of extraordinary inflation is the following Gojocco who entered into an agreement with her on
description of what happened to the Deutschmark in January 31, 1985 and July 21, 1986, respectively, it
1920: bears stressing that the lease contract they had
entered into is not a simple one. It is unique in that
More recently, in the 1920s Germany experienced a while there is only one lessee, Huibonhoa, and the
case of hyperinflation. In early 1921, the value of the contract refers to a LESSOR, there are actually three
German mark was 4.2 to the U.S. dollar. By May of the lessors with separate certificates of title over the three
same year, it had stumbled to 62 to the U.S. dollar. And lots on which Huibonhoa constructed the 4-storey
as prices went up rapidly, so that by October 1923, it building. As Huibonhoa herself ironically asserts, the
had reached 4.2 trillion to the U.S. dollar! (Bernardo M. lease contract is an indivisible one because the lessors
Villegas & Victor R. Abola, Economics, An Introduction interests cannot be separated even if they owned the
[Third Edition]). lands separately under different certificates of
title.[47] Hence, the acts of Rufina G. Lim and Severino
Gojocco in entering into the new agreement with
As reported, prices were going up every week, then
Huibonhoa could have affected only their individual
every day, then every hour. Women were paid several
rights as lessors because no new agreement was
times a days so that they could rush out and exchange
forged between Huibonhoa and all the lessors,
their money for something of value before what little
including Loreta Gojocco.
purchasing power was left dissolved in their
hands. Some workers tried to beat the constantly rising Consequently, because the three lot owners
prices by throwing their money out of the windows to simultaneously entered into the lease contract with
their waiting wives, who would rush to unload the Huibonhoa, novation of the contract could only be
nearly worthless paper. A postage stamp cost millions effected by their simultaneous act of abrogating the
of marks and a loaf of bread, billions. (Sidney Rutberg, original contract and at the same time forging a new
The Money Balloon New York: Simon and Schuster, one in writing. Although as a rule no form of words or
1975, p. 19, cited in Economics, An Introduction by writing is necessary to give effect to a novation,[48] a
Villegas & Abola, 3rd Ed.) written agreement signed by all the parties to the lease
contract is required in this case. Ordinary diligence on
No decrease in the peso value of such magnitude the part of the parties demanded that they execute a
having occurred, Huibonhoa has no valid ground to ask written agreement if indeed they wanted to enter into
this Court to intervene and modify the lease agreement a new one because of the 15-year life span of the lease
to suit her purpose. As it is, Huibonhoa even failed to affecting real property and the fact that third persons
prove by evidence, documentary or testimonial, that would be affected thereby on account of the express
there was an extraordinary inflation from July 1983 to agreement allowing the lessee to lease the building to
February 1984. Although she repeatedly alleged that third parties.[49]
the cost of constructing the building doubled from P6
Under the law, novation is never presumed. The Chua is also entitled to interest at the rate of 6% per
parties to a contract must expressly agree that they are annum from the accrual of the rent in accordance with
abrogating their old contract in favor of a new Article 2209[57] of the Civil Code until it is fully paid
one.[50] Accordingly, it was held that no novation of a because the monetary award does not partake of a
contract had occurred when the new agreement loan or forbearance in money. However, the interim
entered into between the parties was intended to give period from the finality of this judgment until the
life to the old one.[51] Giving life to the contract was the monetary award is fully satisfied, is equivalent to a
very purpose for which Rufina G. Lim signed the forbearance of credit and therefore, during that interim
agreement on January 31, 1986 with Huibonhoa. It period, the applicable rate of legal interest shall be
was intended to graft into the lease contract provisions 12%.[58] As regards Severino Gojocco, he shall be
that would facilitate fulfillment of Huibonhoas entitled to such interests only from the time that
obligation therein.[52] That the new agreement was Huibonhoa defaulted paying her monthly rentals to him
meant to strengthen the enforceability of the lease is considering that he had already received from her the
further evidenced by the fact, although its stipulations amount of P270,825.00 as rentals.
as to the period of the lease and as to the amount of
rental were altered, the agreement with Rufina G. Lim The amount of monthly rentals upon which
does not even hint that the lease itself would be interest shall be charged shall be that stipulated in
abrogated. As such, even Huibonhoas agreement with paragraph 5 of the lease contract or P15,000.00 to
Rufina G. Lim cannot be considered a novation of the each lessor. That amount, however, shall be subject to
original lease contract. Where the parties to the new the provision therein that the amount of rentals shall
obligation expressly recognize the continuing existence be adjusted/increased upon the corresponding
and validity of the old one, where, in other words, the increase in the rental of subleases using the
parties expressly negated the lapsing of the old percentage increase in the totality of rentals of the sub-
obligation, there can be no novation.[53] lessees as basis for the percentage increase of monthly
rental that LESSEE will pay to LESSOR. Upon remand
As regards the new agreement with Severino of this case therefore, the trial court shall determine
Gojocco, it should be noted that he only disclaimed its the total monetary award in favor of Loreta Gojocco
existence when the check issued by Huibonhoa to him, Chua and of Severino Gojocco.
allegedly in accordance with the new agreement, was
dishonored. That unfortunate fact might have led From the facts of the case, it is clear that what
Severino Gojocco to refuse acceptance of rents paid by Huibonhoa aimed for in filing the action for reformation
Huibonhoa subsequent to the dishonor of the of the lease contract, is to absolve herself from her
check. However, the non-existence of the new delay in the payment of monthly rentals and to extend
agreement with Severino Gojocco is a question of fact the term of the lease, which under the original lease
that the courts below had properly determined. The contract, expired in 1988. The ostensible reasons
Court of Appeals has affirmed the trial courts finding behind the institution of the case she alleged were the
that not only was Gojoccos consent vitiated by fraud unfavorable repercussions resulting from the economic
and false representation there likewise was failure of and political upheaval on the heels of the Aquino
consideration in the execution of Exhibit C, (and assassination. However, a contract duly executed is
therefore) the said agreement is legally the law between the parties who are obliged to comply
inefficacious.[54] In the Resolution of October 18, 1990, with its terms. Events occurring subsequent to the
the Court of Appeals considered the amount signing of an agreement may suffice to alter its terms
of P270,825.00 represented by the check handed by only if, upon failure of the parties to arrive at a valid
Huibonhoa to Severino Gojocco as partial settlement or compromise, the court deems the same to be sufficient
partial payment[55] clearly under the terms of the reasons in law for altering the terms of the
original lease contract. There is no reason to depart contract. This court once said:
from the findings and conclusions of the appellate court
on this matter. It is a long established doctrine that the law does not
relieve a party from the effects of an unwise, foolish,
Nevertheless, because Severino Gojocco or disastrous contract, entered into with all the
repudiates the new agreement even before this Court required formalities and with full awareness of what he
as his consent thereto had allegedly been vitiated by was doing. Courts have no power to relieve parties
fraud and false representation,[56] Huibonhoa may not from obligations voluntarily assumed, simply because
escape complete fulfillment of her obligation under the their contracts turned out to be disastrous deals or
original lease contract as far as Severino Gojocco is unwise investments.[59]
concerned. She is thus contractually bound to pay him
the unpaid rents.
Aside from the monthly rental that should be paid In G.R. No. 102604
by Huibonhoa starting March 1984, Loreto Gojocco
Petitioners Severino Gojocco and Loreta G. Chua of ownership-such issue being inutile in an ejectment
assail the Decision of the Court of Appeals on the suit except to throw light on the question of
following grounds; possession. This is why the issue of ownership or title
is generally immaterial and foreign to an ejectment
a) RESPONDENT COURT HAS DECIDED suit.
QUESTIONS OF SUBSTANCE NOT
HERETOFORE DETERMINED BY THIS Detainer, being a mere quieting process, questions
HONORABLE COURT OR HAS DECIDED THEM raised on real property are incidentally discussed. In
IN A WAY CLEARLY CONTRARY TO LAW OR fact, any evidence of ownership is expressly banned by
THE APPLICABLE DECISIONS OF THIS Sec. 4, Rule 70 except to resolve the question of
HONORABLE COURT; possession. Thus, all that the court may do, is to make
an initial determination of who is the owner of the
b) RESPONDENT COURT HAS SO FAR DEPARTED property so that it can resolve who is entitled to its
FROM THE ACCEPTED AND USUAL COURSE possession absent other evidence to resolve the
OF JUDICIAL PROCEEDINGS AS TO CALL FOR latter. But such determination of ownership is not
AN EXERCISE OF THE POWERS OF clothed with finality. Neither will it affect ownership of
SUPERVISION BY THE HONORABLE the property nor constitute a binding and conclusive
COURT.[60] adjudication on the merits with respect to the issue of
ownership. x x x.
The contentions of petitioners relate to the basic
issue raised in the petition - whether or not the Court The Court has consistently held that in forcible
of Appeals erred in affirming the decision of the entry and unlawful detainer cases, jurisdiction is
Regional Trial Court that dismissed for lack of determined by the nature of the action as pleaded in
jurisdiction the complaint for ejectment brought by the complaint.[63] The test of the sufficiency of the facts
petitioners before the Metropolitan Trial Court of alleged in the complaint is whether or not admitting the
Manila. In other words, the issue for determination facts alleged therein, the court could render a valid
here is: whether or not the Metropolitan Trial Court judgment upon the same in accordance with the prayer
had jurisdiction over the complaint for cancellation of of the plaintiff.[64]
lease, ejectment and collection in Civil Case No. 90- In an ejectment case, or specifically in an action
54557. for unlawful detainer like the present case, it suffices
The governing law on jurisdiction when the to allege that the defendant is unlawfully withholding
complaint was filed on January 14, 1985 was Sec. 33 possession of the property in question.[65] A complaint
(2) of Batas Pambansa Blg. 129 vesting municipal for unlawful detainer is therefore sufficient if it alleges
courts with: that the withholding of possession or the refusal to
vacate is unlawful without necessarily employing the
terminology of the law.[66] It is therefore in order to
Exclusive original jurisdiction over cases of forcible
make an inquiry into the averments of the complaint in
entry and unlawful detainer. Provided, That when, in
Civil Case No. 90-54557.[67] The complaint, that was
such cases, the defendant raises the question of
called one for cancellation of lease, ejectment and
ownership in his pleadings and the question of
collection, alleged the following facts:
possession cannot be resolved without deciding the
issue of ownership, the issue of ownership should be 1. The parties are residents of different
resolved only to determine the issue of possession. barangays and therefore the provisions
of P.D. No. 1508 (the law on the
Thereunder, when the issue of ownership is katarungang pambarangay) are
indispensable to the resolution of the issue of inapplicable;
possession, the Metropolitan Trial Court is empowered
2. The plaintiffs, Rufina G. Lim, Severino
to decide it as well.[61] Explaining this jurisdictional
Gojocco and Loreta Gojocco Chua are
matter, in Dizon v. Court of Appeals,[62] the Court said:
the registered owners of three parcels of
commercial land in Ilaya Street,
x x x. Well-settled is the rule that in an ejectment suit, Binondo, Manila.
the only issue is possession de facto or physical or
material possession and not possession de jure. So 3. On June 30, 1983, they entered into a
that, even if the question of ownership is raised in the lease contract with defendant
pleadings, as in this case, the court may pass upon Huibonhoa whereby the latter would
such issue but only to determine the question of construct a 4-storey building on the
possession especially if the former is inseparably linked three lots that, after the expiration of
with the latter. It cannot dispose with finality the issue the 15-year period of the lease, would
be owned by the lessors, and that, upon 12. The rentals should be made to answer
completion of construction of the for plaintiffs monetary claims on account
building within eight (8) months from of defendants impending departure
signing of the lease contract, the lessee from the Philippines.
would start paying monthly rentals;
After praying for the issuance of a preliminary
4. After the expiration of the 8-months writ of attachment, the plaintiffs prayed as follows:
period or in March 1984, the rentals
of P45,000.00 a month accrued. WHEREFORE, premises considered, it is most
5. Despite verbal demands, meetings and respectfully prayed that judgment be rendered in favor
conferences by which the plaintiffs of plaintiffs and against the defendant as follows:
demanded from defendant payment of
the total amount due on account of the 1. Ordering defendant and all persons
lease contract, defendant failed to pay; claiming rights under her to forthwith
vacate the leased premises described in
6. On December 19, 1984, the plaintiffs, this Complaint and to surrender actual
through counsel, wrote defendant letter and physical possession to herein
informing her of their intention to plaintiffs and/or their duly authorized
terminate and cancel the lease for representatives;
violation of its terms by the defendant at
the same time demanding restitution of 2. Ordering defendant to pay plaintiff all
the lots in question and payment of all rentals due and unpaid at the agreed
rentals due; rate of P45,000.00 per month from
March, 1984 to January, 1985 or for a
7. Despite such verbal and written period of 11 months with legal interests
demands, the defendant refused to thereon until fully paid;
comply therewith to the damage and
prejudice of the plaintiffs considering 3. Ordering the defendant to deposit past
that defendant was subleasing the and future rentals with this Honorable
stalls, bodegas and offices to tenants Court, or in a bank acceptable to both
who had paid her goodwill money and parties, the Passbook to be turned over
exorbitant rentals since March 1984 or and submitted to this Honorable Court
prior to the completion of the building for further disposition;
until the filing of the complaint in
4. Sentencing defendant to pay the fair
amounts totaling millions of pesos;
rental value of, and/or reasonable
8. Defendant continued to sublease vacant compensation for, the use and
spaces while depriving plaintiffs of occupancy of the leased premises at the
reasonable compensation for the use rate of P60,000 per month beginning
and occupation of the premises; February 5, 1985 and every 5th of the
succeeding month thereafter until the
9. Defendant did not utilize her own capital premises is actually vacated and
in the construction of the building as she restored to herein plaintiffs;
was able to mortgage the lots to the
China Banking Corporation in the total 5. To pay plaintiffs a sum equivalent to 20%
amount of P3,700,000.00 as well as of the total amount claimed in this
collect goodwill money from tenants; action for and as attorneys fees
exclusive of appearance fees and costs
10. Plaintiffs revoked the authority given to of this action;
defendant to encumber the property
because of her failure of pay and 6. That pending hearing of this case, a writ
liquidate the real estate loan within the of preliminary attachment be issued
one-year period which expired on against the credits due defendant from
September 30, 1984; the tenants or sublessees of the
premises in question to serve as security
11. That plaintiffs were forced to file the for the satisfaction of any judgment that
action by reason of defendants bad faith may be recovered in this case;
and unwarranted refusal to satisfy their
claims; and 7. For such other and further relief as this
Honorable Court may deem proper, just
and equitable;
8. Plaintiffs further respectfully pray that for no more than superfluities that do not affect the main
expediency, considering the nature of cause of action averred in the complaint. The court
this action and to protect plaintiffs from therefore granted only the main relief sought by the
incurring further losses, damages and plaintiffs-the eviction of the defendant.
expenses concomittant to the
deprivation or loss of their possession, The Regional Trial Court incorrectly held that the
that notwithstanding the amount of complaint was also for rescission of contract, a case
claim involved, they hereby respectfully that is certainly not within the jurisdiction of the
invoke the applicability of the rules on Metropolitan Trial Court. By the allegations of the
Summary Procedure in the interest of complaint, the Gojoccos aim was to cancel or terminate
justice. the contract because they sought its partial
enforcement in praying for rental arrearages. There is
Undoubtedly, the complaint avers ultimate facts a distinction in law between cancellation of a contract
required for a cause of action in an unlawful detainer and its rescission. To rescind is to declare a contract
case. It alleges possession of the properties by the void in its inception and to put an end to it as though
lessee, verbal and written demands to pay rental it never were. It is not merely to terminate it and
arrearages and to vacate the leased premises, release parties from further obligations to each other
continued refusal of the lessees to surrender but to abrogate it from the beginning and restore the
possession of the premises, and the fact that the action parties to relative positions which they would have
was filed within one year from demand to vacate. occupied had no contract ever been made.[68]
A reading of the allegations of the complaint and Termination of a contract is congruent with an
the reliefs prayed for indeed reveals facts that appear action for unlawful detainer. The termination or
to be extraneous to the primary aim of recovering cancellation of a contract would necessarily entail
possession of property in an action for unlawful enforcement of its terms prior to the declaration of its
detainer although these facts do not involve issue of cancellation in the same way that before a lessee is
ownership of the premises. Thus, consonant with the ejected under a lease contract, he has to fulfill his
allegation that defendant was leasing the spaces in the obligations thereunder that had accrued prior to his
building to the tune of millions of peso, plaintiffs pray ejectment. However, termination of a contract need
for an increase in monthly rentals to P60,000.00 a not undergo judicial intervention. The parties
month starting February 5, 1985 or after construction themselves may exercise such option. Only upon
of the building had been completed. The disagreement between the parties as to how it should
prayer likewise speaks of past and future rentals that be undertaken may the parties resort to courts. Hence,
should be deposited with the court or in an acceptable notwithstanding the allegations in the complaint that
bank. In other words, the complaint seeks relief that are extraneous or not essential in an action for
are not limited to payment of the rent arrearages and unlawful detainer, the Metropolitan Trial Court
the eviction of defendant from the leased premises. correctly assumed jurisdiction over Civil Case No. 90-
54557.
Although for reasons of their own the Gojoccos
opted not to express in the complaint their intention to The Court finds sustainable basis for the
terminate the lease, such intention could be gleaned observation of the Court of Appeals that execution of
from their prayer that the court should sentence the judgment ejecting Huibonhoa would cause
Huibonhoa to pay the higher rent of P60,000.00 a complications that are anathema to a peaceful
month. That explains why the complaint is captioned resolution of the controversy between the
as one for cancellation of the lease aside from its being parties. Thus, while Huibonhoa would be ejected from
one for ejectment and collection. In praying that the the lots owned by Severino Gojocco and Loreta
court directs the defendant to pay the increased rental Gojocco Chua, she would be bound by her agreement
of P60,000.00 a month, plaintiffs, in effect, would want with Rufina G. Lim to continue with the lease. The
the existing contract terminated in order that the court result would be disadvantageous to both Huibonhoa
could substitute it with another providing for an and Severino Gojocco and Loreta G. Chua. The said
increased monthly rental. owners would be unable to exercise rights of
ownership over their lots upon which the building was
However, forging contracts for parties in a case is constructed unless they remove or buy two-thirds of
beyond the jurisdiction of courts. Otherwise, it would the building.
result in the courts substitution of its own volition in a
contract that should express only the parties However, an action for unlawful detainer does not
will. Necessarily, the Metropolitan Trial Court could not preclude the lessee or ejected party from availing of
favorably act on the prayer for cancellation of the other remedies provided by law. The prevailing
contract with another containing terms suggested by doctrine is that suits or actions for the annulment of
the plaintiffs as the allegations and prayer therefor are sale, title or document do not abate any ejectment
action respecting the same property.[69] In fact, in this

case, the lessee, as it was, jumped the gun over the
lessors in filing the action for reformation of the lease
contract. That it proved unfavorable to her does not
detract from the fact that the controversy between her
and the lessors has been resolved in accordance with
law albeit not in consonance with the wishes of all the
parties.
Be that as it may, the problem of ejecting

Huibonhoa has been rendered moot and academic by
the expiration of the lease contract litigated upon in
June 1998. The parties might have availed of the
provision of paragraph 1 of the lease contract whereby
the parties agreed to renew it for a similar or shorter
period upon terms and conditions mutually agreeable
to them. If they opted to brush aside that provision,
with more reason, Huibonhoas eviction should ensue
as a matter of enforcement of the lease contract.
WHEREFORE, judgment is hereby rendered as

follows:
a.) In G.R. No. 95897, the decision of the Court of

Appeals in CA-G.R. CV No. 16575, dismissing
petitioners complaint for reformation of contract,
is AFFIRMED with the modifications that:
1] Private respondent Loreta Gojocco Chua is adjudged

entitled to legal interest of 6% per annum from March,
1984, the time the rents became due;
2] Private respondent Severino Gojocco shall receive

6% legal interest only from the time Florencia T.
Huibonhoa defaulted in the payment of her monthly
rents; and
3] Legal interest of 12% per annum shall accrue from

the finality of this decision until the amount due is fully
paid.
b) In G.R. No. 102604, the decision of the Court of

Appeals in CA-G.R. SP No. 24654, affirming the
decision of the Regional Trial Court of origin which
dismissed the ejectment case instituted by the
petitioners against the private respondent is SET
ASIDE; the order of ejectment issued by the
Metropolitan Trial Court a quo on July 30, 1980
is UPHELD; and the private respondent and all
persons claiming authority under her are ordered to
vacate the land and portion of the building
corresponding to Lot No. 26-B covered by TCT No.
80728 of petitioner Severino Gojocco, and the portion
corresponding to Lot No. 26-C covered by TCT No.
155450 of petitioner Loreta Chua. No pronouncement
as to costs.
SO ORDERED.

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No costs.13chanroblesvirtuallawlibrary COURT RULING

chanRoblesvirtualLawlibrary1. The event or change in

Q. Did she disclose to you the identity of her

Q. So, did Mrs. Lauang give you the quotation as

A. I told her I need 7 million pesos because I

A. She asked first if how much I demand for the

A. I told her, if they can give me P100,000.00

A. A certain guy name Ricci and said that he is

A. That is only for the establishment

A. I told him the same story as I talked with Mrs.

A. That is monthly basis.

A. Mr. Lee himself.

x Q. What was your protection as to the 6 million

5. It is hereby stipulated that should the leased

Under the circumstances, it is neither fair nor

Neither do We find any error in the trial court's denial

To recover moral and exemplary damages where there

plans and specifications approved by the City

action respecting the same property.[69] In fact, in this

Be that as it may, the problem of ejecting

WHEREFORE, judgment is hereby rendered as

a.) In G.R. No. 95897, the decision of the Court of

1] Private respondent Loreta Gojocco Chua is adjudged

2] Private respondent Severino Gojocco shall receive

3] Legal interest of 12% per annum shall accrue from

b) In G.R. No. 102604, the decision of the Court of

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