Rosello-Bentir v. Leanda
REITERATIONFacts
The Antecedents: Respondent Leyte Gulf Traders, Inc. (respondent corporation) entered into a twenty-year lease agreement with petitioner Yolanda Rosello-Bentir for a parcel of land, commencing May 5, 1968. The lease was allegedly extended for an additional four years. On May 5, 1989, petitioner Bentir sold the leased premises to petitioners Samuel and Charito Pormida. Respondent corporation claimed this sale violated a verbal agreement for a right of first refusal, which it sought to have incorporated into the lease contract through reformation. Procedural History: Respondent corporation filed a complaint for reformation of instrument, specific performance, annulment of sale, and damages on May 15, 1992. The case was initially dismissed by the Regional Trial Court (RTC), Branch 7, on December 15, 1995, on the grounds that the action for reformation had prescribed. This dismissal was reconsidered and set aside by RTC, Branch 8, on May 10, 1996, which found the dismissal premature and reinstated the case. Petitioners then filed a petition for certiorari with the Court of Appeals, seeking to annul the RTC's order. The Court of Appeals denied the petition on January 17, 1997, and subsequently denied a motion for reconsideration on April 16, 1997. The Petition: Petitioners seek review of the Court of Appeals' decision, assigning four errors. Primarily, they argue that the Court of Appeals erred in holding that the action for reformation was proper and had not prescribed. They contend that the prescriptive period for reformation of a written contract is ten years, which should have been counted from the execution of the lease in 1968, not from an alleged extension. Petitioners also challenge the revival of an option to buy from an implied renewal of the lease and question the nature of a status quo ante order.
Issue(s)
Whether the Court of Appeals erred in holding that an action for reformation is proper and justified under the circumstances, and whether the action for reformation has not yet prescribed. Whether the Court of Appeals erred in holding that an option to buy in a contract of lease is revived from the implied renewal of such lease. Whether the Court of Appeals erred in holding that a status quo ante order is not an injunctive relief that should comply with the provisions of Rule 58 of the Rules of Court.
Ruling
The petition is granted. The Decision of the Court of Appeals is reversed and set aside. The Order of the Regional Trial Court of Tacloban City, Branch 7, dated December 15, 1995, dismissing the action for reformation is reinstated.
Ratio Decidendi
On the issue of prescription of the action for reformation and the availability of reformation after breach: The Supreme Court held that the action for reformation of instrument prescribes within ten (10) years from the execution of the contract, as provided by Article 1144 of the Civil Code. In this case, the contract of lease was executed in 1968, and the action for reformation was filed on May 15, 1992, which is twenty-four (24) years later. This clearly exceeds the ten-year prescriptive period, rendering the action time-barred. The Court emphasized that prescription is intended to suppress stale and fraudulent claims arising from transactions where facts have become obscure due to the lapse of time or defective memory. The Court rejected the argument that the prescriptive period should be reckoned from the alleged four-year extension of the lease, stating that if the extension was expressly agreed upon, Article 1670 (implied new lease) would not apply. Even if it were an implied new lease, the terms revived are only those germane to the lessee's continued enjoyment of the property, not the prescriptive period for reformation, which applies by operation of law. Therefore, the cause of action for reformation accrued from the date of execution of the contract in 1968. Even assuming, for the sake of argument, that the action for reformation was not time-barred, the Supreme Court ruled that the remedy of reformation would no longer lie because respondent corporation filed the action after an alleged breach or violation of the contract had already been committed by petitioner Bentir. The Court cited Section 1, Rule 64 of the New Rules of Court (now Rule 63 of the 1997 Rules of Civil Procedure), which states that an action for reformation, being akin to declaratory relief, may only be entertained before a breach or violation of the law or contract occurs. Since the alleged breach (sale of the property) had already happened, the remedy of reformation was no longer available. On the revival of the option to buy from an implied new lease: The Court found no merit in the argument that the right of first refusal was revived by an implied new lease under Article 1670 of the Civil Code. The Court clarified that Article 1670 applies to implied new leases where the lessee continues to enjoy the property after the original contract's expiration with the lessor's acquiescence, and the duration is determined by Articles 1682 and 1687. If the extension was expressly agreed upon, the term should be as stipulated. Furthermore, even if an implied new lease existed, the terms revived are only those essential for the continued enjoyment of the leased premises, not contractual rights like a right of first refusal which is a substantive right that should have been incorporated in the written contract or pursued within the prescriptive period. The prescriptive period for reformation is a matter of law and cannot be revived by an implied renewal of the lease. On the status quo ante order: The Court deemed it unnecessary to discuss the issue regarding the status quo ante order as it was predicated on the affirmative resolution of the issue of prescription of the action for reformation. Since the primary issue of prescription was resolved against the respondent corporation, the subsequent procedural issues related to the injunctive relief became moot.
Main Doctrine
An action for reformation of instrument prescribes within ten (10) years from the execution of the contract, and the prescriptive period cannot be extended by the concept of an implied new lease under Article 1670 of the Civil Code, nor can reformation be availed of after a breach of the contract has already occurred.