Chapter 4 Reformation of Instruments1 Tuason vs. Court of Appeals, G.R. No.

119794, October 3, 2000, 135 SCAD 28, 341, SCRA 707, citing National Irrigation Administration vs. Gamit, 215 SCRA 436

And , when the terms of an agreement have reduced to writing, it is considered to be containing all the terms agreed upon and there can be, between the parties and their successors-in-interest, no evidence of such terms other than the contents of the written agreement, except when it fails to express the true intetn and agreement of the parties thereto, in which case, one of the parties may bring an action for the reformation for the reformation of the instrument to the end that such true intention may be expressed.

2 Report of the Code Commission, Pages 55-66 cited in Naga Telephone Company vs. Court of Appeals, G.R. No. 107112, February 224, 1994, 48 SCAD 539, 230 SCRA 351.

Equity Dictates that reformation of an instrument in order that the true intention of the contracting parties may be expressed. The courts by the reformation do not attempt to make a new contract for the parties, but to make the instrument express their real agreement. The rationale of the doctrine is that it would be unjust and inequitable to allow the enforcement of a written instrument which does not reflect or disclose the real meeting of the minds of the the parties. The rigor of legalistic rule that a written instrument should be the final and inflexible criterion and measure of the rights and obligations of the contractiong parties is thus tempered to forestall the effect of mistake, fraud, inequitable conduct, or accident.

3 Huibonhua vs. Court of Appeals, G.R. No. 95897, December 14, 1999, 117 SCAD 281, 320 SCRA 625

Reformation may be caused by mistake, fraud, inequitable conduct or accident of the parties. In actions for reformation, the onus probandi is upon the party who insists that the contract should be reformed.

4 Huibonhua vs. Court of Appeals, G.R. No. 95897, December 14, 1999, 117 SCAD 281, 320 SCRA 625; Toyota Motor Philippines Corporation vs. Court of Appeals, G.R. No. 102881, December 7, 1992, 216 SCRA 248

An action for reformation is in personam, not in rem, x x x even when the real estate is involved. x x x It is merely an equitable relief granted to the parties where through mistake or fraund, the instrument failed to express the real agreement or intention of the parties. While it is a recognized remedy afforded by the courts of equity , it may not be applied if it is contrary to well-settled principles or rules. It is a long-standing principle that equity follows the law. It is applied in the absence of and never against statutory law. x x x Courts are bound by rules of law and have no arbitrary discretion to disregard them. x x x Courts of equity must proceed with outmost caution especially when rights of third parties may intervene.

5 Article 1144 of the 1950 Civil Code. An action for reformation can be filed within ten (10) years from the time the cause of action accrues, since the suit is based on a written document.

6 Naga Telephone Company , Inc. vs. Court of Appeals, G.R. No. 107112, February 24, 1994 , 48 SCAD 539, 230 SCRA 351.

The cause of action acrrues upon the knowledge of the ground for reformation,

7 G.R. No. 128891, April 12, 2000, 125SCAD 322, 330 SCRA 591

or from the date of the execution of the instrument embodying the contract if the cause or causes for the reformation were already known at the tine of the execution of the said instrament embodying the contract. Thus, in Rosello-Bentir vs. Leanda

8 Rosello-Bentir vs. Leanda, G.R. No. 12891, April 12, 2000, 125 SCAD 322, 330 SCRA 591

Also, the action may be barred by laches.

9 Section 1, Rule 63 of the 1997 New Rules of Civil Procedure.

An action for reformation of instrument is instituted as a special civil action for declaratory relief under the Rules of Court.

10 Rosello-Bentir vs. Leanda, G.R. No. 12891, April 12, 2000, 125 SCAD 322, 330 SCRA 591

Section 1, Rule 63 of the 1997 New Rules of Civil Procedure.

11 Rosello-Bentir vs. Leanda, G.R. No. 12891, Thus, an action for reformation instituted after the lessor allegedly breached the contract with the lessee giving the lessee a right of first

April 12, 2000, 125 SCAD 322, 330 SCRA 591 refusal to buy the leased premises, and which right of first refusal was the subject of the action for reformation, cannot prosper.12 G.R. No. L-1724, October 12, 1950, 87 Phil.

471.In Gonzales Mondragon vs. Santos

13 G.R. No. L-22487, May 21, 1969, 28 SCRA 231.

In Atilano vs. Atilano

14 William F. Elliot, Commentaries on the Law of Contracts, Volume 3, 1913 edition, Indianapolis, the Bobbs- Merrill Company, Page 543.

will not ordinarily relieve a party from the performance of his written contract where he executed the same with full knowledge of all the facts, yet, where, on account of misplaced confidence, and because of some artifice or deception fraudulently practiced upon hiim by the other party, a material part of the contract was omitted from the writing, or he was otherwise misled, equity will decree a reformation.

15 12 Am Jur 631, citing Columbian Nat. L. Ins. Co. Vs. Black (C.C.A. 10th ) 35 F. (2d) 571, 71 A.L.R. 128, quoting 3 Willston, Contracts, p. 2745

Knowledge by one party of the other's mistake regarding the expression of the agreement is equivalent to mutual mistake.

16 William F. Elliott, Commentaries on the Law of Contracts, Volume 1, 1913 edition, Indianapolis, The Bobbs- Merill Company, Page 188.

If the person drafting or typing the instrument is not able to come up with a correct written document embodying the contract of the parties because of failure to follow instructions or because of ignoranc, lack of skill, negligence or bad faith, the mistake will be deemed, to be mutual.

17 G.R. No. 95897, December 14, 1999, 117 SCAD 281, 320 SCRA 625.

In Huibonhoa vs. Court of Appeals

18 51 O.G. 6181 at 6184; also see Cosio vs. Palileo, G.R. No. L-18452, May 31, 1965, 14 SCRA 170

In Palileo vs. Cosio.

19 Section 1, Rule 63 of the 1997 New Rules of Civil Procedure; Rosello-Bentir vs. Leanda, G.R. No. 128891, April 12, 2000, 125 SCAD 322, 330, SCRA 591

An action for reformation of instrument may be brought in accordance with the rules on filing a special civil action for declaratory relief.

20 Section 1, Rule 63 of the 1997 New Rules of Civil Procedure.

This is in accordance with Rule 63 of the 1997 New Rules of Civil Procedure specifically promulgated by the Supreme Court which provides that, in an action for declaratory relief, any person interested under a deed, will, contract or other written instrument, or whose rights are affected by a statute, executive order or regulation, ordinance or any other governmental regulation may, before breach or violation tereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for the declaration of his rights and duties, thereunder.

21 Section 6, Rule 63 of the 1997 New Rules of Civil Procedure.

If before the final termination of the case, a breach or violation of an instrument should take place, the action may thereupon be converted into an ordinary action, and the parties shall be allowed to file such pleadings as may be necessary or proper.

Chapter 5 Interpretation of Contracts1 Huibonhoa vs. Court Appeals, G.R. No.

95897, December 14, 1999, 117 SCAD 281, 320 SCRA 625; National Irrigation Administration vs. Gamit, G.R. No. 85869, November 6, 1992, 215 SCRA 436.

Interpretaion is the act of making intelligible what was before not understood, ambiguous, or not obvious. It is a method by which the meaning of language is ascertained. The interpretation of a contract is the determination of the meaning attached to the words written or spoken which make the contract. On the other hand, reformation is that remedy in equity by means of which a written instrument is made or construed so as to exprees or conform to the real intention of the parties.

2 Oil & Natural Gas Commission vs. CA, G.R. No. 114323, July 23, 1998, 96 SCAD 480, 293 SCRA 26.

The rules in statutory construction can likewise be applied as a guide in interpreting ambiguous provisions in a contract.

3 G.R. No. 100970, September 2, 1992 Finman General Assurance Corporation vs. Court of Appeals.4 Hanil Development Company vs. Court of

Appeals, G.R. No. 113176, July 30, 2001, 152 SCAD 47; Capital Insurance vs, Central Azucarera, G.R. No. 30770, April 7, 1993, 221 SCRA 98; Gonzales vs. Court of Appeals, 124 SCRA 630.

Generally, the intention of the parties is reflected from the wordings of the contract and therefore as a general rule, the literal meaning of its stipulations shall control.

5 G.R. No. L-111238, January 25, 1995, 58 SCAD 462, 240 SCRA 565.

Adelfa Properties, Inc. Vs. Court of Appeals.

6 G.R. No. 70451, March 24, 1993, 220 SCRA 405.

Gaw vs. Intermediate Appellate Court

7 G.R. No. L-40242, December 15, 1982, 119 SCRA 245.

Conde vs. Court of Appeals.

8 G.R. No. 93625, November 8, 1993, 227 SCRA 541.

Santi vs. Court of Appeals.

9 G.R. No. L-80231, October 18, 1990, 166 SCRA 577.

Fernandez vs. Court of Appeals.

10 G.R. No. 136913, May 12, 2000, 126 SCAD 492, 332 SCRA 151

Buce vs. Court of Appeals.

11 G.R. No. L-87245, April 6, 1990, 184 SCRA 273.

Universal Textile Mills, Inc. Vs. National Labor Relations Commission.

12 17 Am Jur 2d 627-629. It is a fundamental principle that a court may not make a new contract for the parties or rewrite their contract under the guise of construction. In other words, the interpretation or construction of a contract does not include its midifcation or the creation of a new or different one. It must be construed and enforced according to the terms employed, and a court has no right to interpret the agreement as meaning something different from what the parties intended as expressed by the language they saw fit to employ. A court is not at liberty

to revise, modify, or distort an agreement while professing to construe it, and has no right to make a different contract from that actually entered into by the parties. Courts cannot make for the parties better or more equitable agreements than they themselves have venn satisfied to make, or rewrite contracts because they operate harshly or inequitably as to one of the parties, or tho alter them for the benefit of one party and to the detriment of the other, or, by constructiom relieve one of the parties from terms which he voluntarily consented to, or impose on him those which he did not.

13 Gonzales vs. Court of Appeals, G.R. No. 122611, March 8, 2001, 145 SCAD 384l; Ridjo Tape & Chemical Corp. Vs. Court of Appeals, 91 SCAD 892, 286 SCRA 544.

The reasons and surrounding circumstances behind a contract's execution are of paramount importance to place the interpreter in the situation occupied by the parties concerned at the time of the writing.

14 G.R. No 102909, September 6, 1993, 44 SCAD 498, 226 SCRA 118.

Pingol vs. Court of Appeals

15 G.R. No. 109680, July 14, 1995, 62 SCAD 801, 246 SCRA 323.

Rapanut vs. Court of Appeals

16 G.R. No. 72703, November 13, 1992, 215 SCRA 580.

Caltex vs. Intermediate Appellate Court

17 G.R. No. 48194, March 5, 1990, 183 SCRA 17118 G.R. No. 124791, February 10, 1999, 103

SCAD 258.Carceller vs. Court of Appeals.

19 Gonzales vs. Previsora Filipina, 74 Phil. 165. The Import of the word ultimately depends upon a consideration of the entire provision, its nature, object and the consequences that would follow from construing it one way or the other. Thus, if a provision demands a mandatory application, the word "may" can be construed as "shall."

20 Cebu Institute of Technology, et al. Vs. Ople, G.R. No L-58870, December 18, 1987.

Within the purview of this article are the maxims noscitur a sociis and ejusdem generis. Noscitur a sociis means that general and unlimited terms are restrained and limited by a particular terms that follow.

21 John H. Jackson and Lee C. Bollinger, Contract Law in Modern Society, 1980 edition, St. Paul Minn., West Publishing Company, Page 1025; See also Go Tiaco vs. Hermanos vs. Union Insurance Society of Canton, 40 Phil. 40.

Ejusdem generis means that "a general term joined with a specific one will be deemed to include only things that are like, of the same genus as, the specific one.

22 17 Am Jur 2d 639. However broad may be the terms of a contract, it extends only to those things concerning which it appears the parties intended to contract. The terms employed are servants, and not masters, of an intent; they are to be interpreted so as to subserve, and not to subvert, such intent. Words which admit of a more extensive or more restrictive signification must be taken in that sense which will best effectuate what it is reasonable to suppose was the real intention of the parties. Words are not to be taken in their broadest sense if they are equally appropriate in a sense limited to the object and the intent of the contract. The courts are sometimes required to restrict the

meaning of the words, and to that end a word in the plural may be restricted to the singular.23 G.R. No. 87047, October 31, 1990, 191 SCRA

150.Lao Lim vs. Court of Appeals.

24 G.R. No. 72703, November 13, 1992, 215 SCRA 580.

Caltex vs. Intermediate Appellate Court

25 G.R. No. 126074, February 24, 1998, 91 SCAD 892, 286 SCRA 544.

Ridjo Tape & Chemical Corporation vs. Court of Appeals.

26 De Leon vs. Court of Appeals, G.R. No. 95511, January 30, 1992.

Just like in statutory construction, the various provisions of a contract must be read as a whole and not in isolation. Each provision must be related to each other in order to clearly know the total import and application of the law and so that a harmonious whole will be attained.

27 G.R. No. L-24016, July 31, 1960, 34 SCRA 83. Ruiz vs. Sheriff of Manila.28 G.R. No. L-10231, October 18, 1988, 166

SCRA 577.Fernandez vs. Court of Appeals.

29 G.R. No. 121158, December 5, 1996, 77 SCAD 125.

China Banking Corp. Vs. Court of Appeals.

30 G.R. No. 118972, April 3, 1998, 93 SCAD 378, 288 SCRA 617.

Home Development Mutual Fund vs. Court of Appeals.

31 G.R. No. L-32162, September 28, 1984, 132 SCRA 156.

Pasay City Government vs. Court of First Instance of Manila.

32 William F. Elliott, Commentaries on the Law of Contracts, Volume 2, 1913 Edition, Indianapolis, the Bobbs-Merill Company, Pages 1055-1059.

No principle of the law is better settled than the one that an express contract embodying in clear and positive terms the intention of the parties cannot be varied nor contradicted by evidence of usage or custom or usage is to explain the meaning of words is to explain the meaning of words and phrases used in a written contract and to annex thereto certain incidents which circumstances indicated the parties intended when the words used do not necessarily exclude the operation of such custom or usage but they may not be used to contradict nor vary the plain meaning of the cotract. "Usage may be admissible to explain what is doubtful; it is never admissible to contradict what is plain". "This rule," says Mr. Justice Harlan, "is based upon the theory that the parties, if aware of any usage or custom relating to the custom relationg to the subject-matter of their negotiations, have so expressed their intention as to take the contract out of the operation of any rules established by mere usage or custom." "The proper office of a custom or usage in trade," says Mr.Justice Davis, "is to ascertain and explain the meaning and intention of the parties to a contract, whether written or in parol, which could not be done without the aid of this extrinsic evidence. It does not go beyond this, and is used as a mode of interpretation on the theory that the parties knew of its existence, and contracted with reference to it. It is often employed to explain words or phrases in a contract of doubtful signification, or which may be understood in different senses, according to the subject-matter to which they are applied. But if it is inconsistent with the contract, or expressly or by necessary implication contradicts it, it cannot be received in evidence to affect it." On the question of the right of one to invole a custom or usage to vary or contradict an express contract it was said by Mr. Justice Story: "The true and appropriate office of usage or custom is to interpret the otherwise indeteminate intentions of the parties and to ascertain the

nature and extent of their contracts, arising not froom express stipulations, but from mere implications and presumptions, and acts of a doubtful or equivocal character. * * * But I apprehend, that it can never be proper to resort to any usage or custom to control or vary the positive stipulations in a written contract, and , a fortiori not in order to contradict them. An express contract of the parties is always admissible to supersede or vary, or control, a usage or custom; for the latter may always be waived at the will of the parties. but a written and express contract cannot be controlled, not only be to admit parol evidence to control, vary, or contradict written contracts; but it would be to allow mere presumptions and implications, properly arising in the absence of any positive expressions of intention, to control, vary or contradict the most formal and deliberate declarations of the parties.

33 Tuason vs. Court of Appeals, G.R. No. 119794, October 3, 2000, 135 SCAD 28, 341, SCRA 707; Villamil vs. Court of Appeals, 208 SCRA 643

Words or stipulations that are susceptible to different interpretations causing ambiguity in their application shall be construed against the person who chose to use such ambiguous words or phrases.

34 Keating in Building Contracts, by The Hon. Sir Anthony May, M.A., Sweet and Maxwell, London, 1995 Page 47.

The Expression means "against the profferer," i.e., against the person who drafted or tendered the documents. If there is an ambiguity in a document which all the other methods of construction have failed to resolve so that there are two alternative meanings to certain words, the court may construe the words against the party who put forward the document and give effet to the meaning more favourable to the other party.

35 G.R. No. L-18857, December 11, 1967, 21 SCRA 1183; see also Nacu vs. Court of Appeals, G.R. No. L-108683, March 11, 1994, 49 SCAD 598, 231 SCRA 237; Coscolluela vs. Valderrama, L-13757, August 31, 1961, 2 SCRA 1095; Solis vs. Salvador, G.R. No. L-17022, August 14, 1965; Halili vs. Llore, 95 Phil. 78.

Capital Insurance vs. Sadang.

36 G.R. No. L- 108638, March 11, 1994, 49 SCAD 598, 231 SCRA 1994.

Nacu vs. Court of Appeals.

37 G.R. No. 112127, July 17 , 1995, 63 SCAD 72, 246 SCRA 511.

Central Philippine University vs. Court of Appeals.

38 G.R. No. 96372, May 22, 1995, 61 SCAD, 175, 244 SCRA 180.

Castelo vs. Court of Appeals.

39 G.R. No. L-11827, July 31, 1961, 2 SCRA 830.40 G.R. No. L-60174, February 16, 1983, 120

SCRA 628.Felipe vs. Heirs of Maximo Aldon.

Chapter 6 Rescissible Contracts1 G.R. No. L-72727, July 30, 1987, 152 SCRA

459Dilag vs. Court of Appeals.

2 Article 381 of the 1950 Civil Code. When a person disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property, the judge, at the instance of an interested party, a relative, or a friend, may appoint a person to represent him in all that may be necessary.

3 Articles 383 and 387 of the 1950 Civil Code. Two years having elapsed without any news about the absentee or since the receipt of the last news, and five years in case the absentee has left a person in charge of the administration of his property, his absence may be declared by the court. The court may appoint an administrator or a representative to manage the properties of the absentee.

4 G.R. No. L- 19160, December 26, 1963, 9 SCRA 783.