60 GR No. 95897 Huibonhoa v. CA Dec 14 1999

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Huibonhoa vs. Court of Appeals
*
G.R. No. 95897. December 14, 1999.
FLORENCIA T. HUIBONHOA, petitioner, vs. COURT OF

APPEALS, Spouses RUFINA G. LIM and ANTHONY LIM,
LORETA GOJOCCO CHUA and Spouses SEVERINO and
PRISCILLA GOJOCCO, respondents.
*
G.R. No. 102604. December 14, 1999.
SEVERINO GOJOCCO and LORETA GOJOCCO CHUA,

petitioners, vs. COURT OF APPEALS, HON.
HERMOGENES R. LIWAG, as Judge of the RTC of Manila
Branch 55 and FLORENCIA HUIBONHOA, respondents.
Contracts; Actions; Reformation of Contracts; Once the minds

of the contracting parties meet, a valid contract exists, whether it is
reduced to writing or not; When a written agreement fails to
express the true intent and agreement of the parties, one of the
parties may bring an action for the reformation of the instrument
to the end that their true intention may be expressed.—Article
1305 of the Civil Code defines a contract as “a meeting of the
minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.”
Once the minds of the contracting parties meet, a valid contract
exists, whether it is reduced to writing or not. When the terms of
an agreement have been reduced to writing, it is considered as
containing all the terms agreed upon. As such, 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 intent and agreement of
the parties. In such an exception, one of the parties may bring an
action for the reformation of the instrument to the end that their
true intention may be expressed.
Same; Same; Same; Words and Phrases; Reformation is that
remedy in equity by means of which a written instrument is made
or construed so as to express or conform to the real intention of the
parties.—Reformation is that remedy in equity by means of which
http://central.com.ph/sfsreader/session/000001611bc3eb404f83de61003600fb002c009e/t/?o=False 1/45
a written instrument is made or construed so as to express or

conform to the real intention of the parties. As to its nature, in
Toyota Motor
_______________
* THIRD DIVISION.
626
626 SUPREME COURT REPORTS ANNOTATED
Philippines Corporation v. Court of Appeals, the Court said: “An

action for reformation is in personam, not in rem, x x x even when
real estate is involved. x x x It is merely an equitable relief
granted to the parties where through mistake or fraud, the
instrument failed to express the real agreement or intention of
the parties. While it is a recognized remedy afforded by courts of
equity it may not be applied if it is contrary to well-settled
principles or rules. It is a longstanding 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. x x x.”
Same; Same; Same; Requisites.—Article 1359 of the Civil
Code provides that “(w)hen, there having been a meeting of the
minds of the parties to a contract, their true intention is not
expressed in the instrument purporting to embody the agreement,
by reason of mistake, fraud, inequitable conduct or accident, one
of the parties may ask for the reformation of the instrument to
the end that such intention may be expressed. x x x.” An action for
reformation of instrument under this provision of law may
prosper only upon the concurrence of the following requisites: (1)
there must have been a meeting of the minds of the parties to the
contract; (2) the instrument does not express the true intention of
the parties; and (3) the failure of the instrument to express the
true intention of the parties is due to mistake, fraud, inequitable
conduct or accident.
Same; Same; Same; In actions for reformation of contract, the
onus probandi is upon the party who insists that the contract
should be reformed.—In actions for reformation of contract, the
onus probandi is upon the party who insists that the contract
should be reformed. Huibonhoa having failed to discharge that

burden of proving that the true intention of the parties has not
been accurately expressed in the lease contract sought to be
reformed, the trial court correctly held that no clear and
convincing proof warrants the reformation thereof.
Same; Same; Same; Words and Phrases; “Reformation” and
“Interpretation” of Contracts, Distinguished.—Such contention
betrays Huibonhoa’s confusion on the distinction between
interpretation and reformation of contracts. In National
Irrigation Administration v. Gamit, the Court distinguished the
two concepts as follows: “ ‘Interpretation’ is the act of making
intelligible what was before not
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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 express or
conform to the real intention of the parties. In granting
reformation, therefore, equity is not really making a new contract
for the parties, but is confirming and perpetuating the real
contract between the parties which, under the technical rules of
law, could not be enforced but for such reformation. As aptly
observed by the Code Commission, 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 parties.” By bringing an action for the
reformation of subject lease contract, Huibonhoa chose to reform
the instrument and not the contract itself. She is thus precluded
from inserting stipulations that are not extant in the lease
contract itself lest the very agreement embodied in the
instrument is altered.
Same; Fortuitous Events; Requisites; Words and Phrases; A
fortuitous event is that which could not be foreseen, or which even
if foreseen, was inevitable.—A fortuitous event is that which could
not be foreseen, or which even if foreseen, was inevitable. To
exempt the obligor from liability for a breach of an obligation due
to an “act of God,” the following requisites must concur: (a) the
cause of the breach of the obligation must be independent of the
will of the debtor; (b) the event must be either unforeseeable or

unavoidable; (c) the event must be such as to render it impossible
for the debtor to fulfill his obligation in a normal manner; and (d)
the debtor must be free from any participation in, or aggravation
of the injury to the creditor.
Same; Same; Same; Same; Inflation is the sharp increase of
money or credit or both without a corresponding increase in
business transaction; While it is of judicial notice that there has
been a decline in the purchasing power of the Philippine peso, this
downward fall of the currency cannot be considered unforeseeable
considering that since the 1970’s we have been experiencing
inflation.—Inflation is the sharp increase of money or credit or
both without a corresponding increase in business transaction.
There is inflation when there is an increase in the volume of
money and credit relative to available
628
goods resulting in a substantial and continuing rise in the general

price level. While it is of judicial notice that there has been a
decline in the purchasing power of the Philippine peso, this
downward fall of the currency cannot be considered unforeseeable
considering that since the 1970’s we have been experiencing
inflation. It is simply a universal trend that has not spared our
country. Conformably, this Court upheld the petitioner’s view in
Occeña v. Jabson that even a worldwide increase in prices does
not constitute a sufficient cause of action for modification of an
instrument.
Same; Same; Same; Same; Extraordinary inflation exists
when there is a decrease or increase in the purchasing power of the
Philippine currency which is unusual or beyond the common
fluctuation in the value of said currency, and such decrease or
increase could not have been reasonably foreseen or was manifestly
beyond the contemplation of the parties at the time of the
establishment of the obligation.—It is only when an extraordinary
inflation supervenes that the law affords the parties a relief in
contractual obligations. In Filipino Pipe and Foundry Corporation
v. NAWASA, the Court explained extraordinary inflation thus:
“Extraordinary inflation exists when ‘there is a decrease or
increase in the purchasing power of the Philippine currency which
is unusual or beyond the common fluctuation in the value of said
currency, and such decrease or increase could not have been
reasonably foreseen or was manifestly beyond the contemplation

of the parties at the time of the establishment of the obligation.
Same; Same; Same; An extraordinary inflation cannot be
assumed.—No decrease in the peso value of such magnitude
having occurred, Huibonhoa has no valid ground to ask this Court
to intervene and modify the lease agreement to suit her purpose.
As it is, Huibonhoa even failed to prove by evidence, documentary
or testimonial, that there was an extraordinary inflation from
July 1983 to February 1984. Although she repeatedly alleged that
the cost of constructing the building doubled from P6 million to
P12 million, she failed to show by how much, for instance, the
price index of goods and services had risen during that
intervening period. An extraordinary inflation cannot be assumed.
Hence, for Huibonhoa to claim exemption from liability by reason
of fortuitous event under Art. 1174 of the Civil Code, she must
prove that inflation was the sole and proximate cause of the loss
or destruction of the contract or,
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in this case, of the delay in the construction of the building.

Having failed to do so, Huibonhoa’s contention is untenable.
Same; Actions; Reformation of Contracts; Rescission; If indeed
a fortuitous event deters the timely fulfillment of a party’s
obligation under the lease contract, he or she should avail of the
remedy of rescission of contract in order that the court could
release him or her from performing his or her obligation, instead of
filing a case for reformation of the contract.—Pathetically, if
indeed a fortuitous event deterred the timely fulfillment of
Huibonhoa’s obligation under the lease contract, she chose the
wrong remedy in filing the case for reformation of the contract.
Instead, she should have availed of the remedy of rescission of
contract in order that the court could release her from performing
her obligation under Arts. 1266 and 1267 of the Civil Code, so
that the parties could be restored to their status prior to the
execution of the lease contract.
Same; Novation; Where three lot owners simultaneously
entered into a lease contract with one lessee, novation of the
contract could only be effected by their simultaneous act of
abrogating the original contract and at the same time forging a
new one in writing.—As regards Huibonhoa’s assertion that the
lease contract was novated by Rufina G. Lim and Severino
Gojocco who entered into an agreement with her on January 31,

1985 and July 21, 1986, respectively, it bears stressing that the
lease contract they had entered into is not a simple one. It is
unique in that while there is only one lessee, Huibonhoa, and the
contract refers to a “LESSOR,” there are actually three lessors
with separate certificates of title over the three lots on which
Huibonhoa constructed the 4-storey building. As Huibonhoa
herself ironically asserts, the lease contract is an “indivisible” one
because the lessors’ interests “cannot be separated even if they
owned the lands separately under different certificates of title.”
Hence, the acts of Rufina G. Lim and Severino Gojocco in entering
into the new agreement with Huibonhoa could have affected only
their individual rights as lessors because no new agreement was
forged between Huibonhoa and all the lessors, including Loreta
Gojocco. Consequently, because the three lot owners
simultaneously entered into the lease contract with Huibonhoa,
novation of the contract could only be effected by their
simultaneous act of abrogating the original contract and at the
same time forging a new one in writing. Although as a rule no
form of words or writing is necessary to give effect to a novation, a
written agreement signed by all the
630
parties to the lease contract is required in this case. Ordinary

diligence on the part of the parties demanded that they execute a
written agreement if indeed they wanted to enter into a new one
because of the 15-year life span of the lease affecting real property
and the fact that third persons would be affected thereby on
account of the express agreement allowing the lessee to lease the
building to third parties.
Same; Same; No novation of a contract occurs when the new
agreement entered into between the parties is intended “to give life”
to the old one; Where the parties to the new obligation expressly
recognize the continuing existence and validity of the old one,
where, in other words, the parties expressly negated the lapsing of
the old obligation, there can be no novation.—Under the law,
novation is never presumed. The parties to a contract must
expressly agree that they are abrogating their old contract in
favor of a new one. Accordingly, it was held that no novation of a
contract had occurred when the new agreement entered into
between the parties was intended “to give life” to the old one.
“Giving life” to the contract was the very purpose for which
Rufina G. Lim signed the agreement on January 31, 1986 with

Huibonhoa. It was intended to graft into the lease contract
provisions that would facilitate fulfillment of Huibonhoa’s
obligation therein. That the new agreement was meant to
strengthen the enforceability of the lease is further evidenced by
the fact, although its stipulations as to the period of the lease and
as to the amount of rental were altered, the agreement with
Rufina G. Lim does not even hint that the lease itself would be
abrogated. As such, even Huibonhoa’s agreement with Rufina G.
Lim cannot be considered a novation of the original lease contract.
Where the parties to the new obligation expressly recognize the
continuing existence and validity of the old one, where, in other
words, the parties expressly negated the lapsing of the old
obligation, there can be no novation.
Same; Interest Rates; The interim period from the finality of a
judgment until the monetary award is fully satisfied, is equivalent
to a forbearance of credit and therefore, during that interim
period, the applicable rate of legal interest shall be 12%.—Aside
from the monthly rental that should be paid by Huibonhoa
starting March 1984, Loreto Gojocco Chua is also entitled to
interest at the rate of 6% per annum from the accrual of the rent
in accordance with Article 2209 of the Civil Code until it is fully
paid because the monetary
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award does not partake of a loan or forbearance in money.

However, the interim period from the finality of this judgment
until the monetary award is fully satisfied, is equivalent to a
forbearance of credit and therefore, during that interim period,
the applicable rate of legal interest shall be 12%. As regards
Severino Gojocco, he shall be entitled to such interests only from
the time that Huibonhoa defaulted paying her monthly rentals to
him considering that he had already received from her the
amount of P270,825.00 as rentals.
Same; A contract duly executed is the law between the parties
who are obliged to comply with its terms, and events occurring
subsequent to the signing of an agreement may suffice to alter its
terms only if, upon failure of the parties to arrive at a valid
compromise, the court deems the same to be sufficient reasons in
law for altering the terms of the contract.—From the facts of the
case, it is clear that what Huibonhoa aimed for in filing the action
for reformation of the lease contract, is to absolve herself from her

delay in the payment of monthly rentals and to extend the term of
the lease, which under the original lease contract, expired in
1988. The ostensible reasons behind the institution of the case she
alleged were the unfavorable repercussions resulting from the
economic and political upheaval on the heels of the Aquino
assassination. However, a contract duly executed is the law
between the parties who are obliged to comply with its terms.
Events occurring subsequent to the signing of an agreement may
suffice to alter its terms only if, upon failure of the parties to
arrive at a valid compromise, the court deems the same to be
sufficient reasons in law for altering the terms of the contract.
This court once said: “It is a long established doctrine that the law
does not relieve a party from the effects of an unwise, foolish, or
disastrous contract, entered into with all the required formalities
and with full awareness of what he was doing. Courts have no
power to relieve parties from obligations voluntarily assumed,
simply because their contracts turned out to be disastrous deals
or unwise investments.”
Actions; Ejectment; Forcible Entry; Unlawful Detainer; In
forcible entry and unlawful detainer cases, jurisdiction is
determined by the nature of the action as pleaded in the complaint.
—The Court has consistently held that in forcible entry and
unlawful detainer cases, jurisdiction is determined by the nature
of the action as pleaded in the complaint. The test of the
sufficiency of the facts alleged in the complaint is whether or not
admitting the facts al-
632
leged therein, the court could render a valid judgment upon the
same in accordance with the prayer of the plaintiff. In an
ejectment case, or specifically in an action for unlawful detainer
like the present case, it suffices to allege that the defendant is
unlawfully withholding possession of the property in question. A
complaint for unlawful detainer is therefore sufficient if it alleges
that the withholding of possession or the refusal to vacate is
unlawful without necessarily employing the terminology of the
law. It is therefore in order to make an inquiry into the averments
of the complaint in Civil Case No. 90-54557.
Same; Same; Contracts; Courts; Forging contracts for parties
in a case is beyond the jurisdiction of courts.—Forging contracts
for parties in a case is beyond the jurisdiction of courts.

Otherwise, it would result in the court’s substitution of its own
volition in a contract that should express only the parties’ will.
Necessarily, the Metropolitan Trial Court could not favorably act
on the prayer for cancellation of the contract with another
containing terms suggested by the plaintiffs as the allegations
and prayer therefor are no more than superfluities that do not
affect the main cause of action averred in the complaint. The
court therefore granted only the main relief sought by the
plaintiffs—the eviction of the defendant.
Same; Same; Same; Rescission; Jurisdiction; Words and
Phrases; Rescission is not within the jurisdiction of the
Metropolitan Trial Court; To rescind is to declare a contract void
in its inception and to put an end to it as though it never were; The
termination or cancellation of a contract would necessarily entail
enforcement of its terms prior to the declaration of its cancellation.
—The Regional Trial Court incorrectly held that the complaint
was also for rescission of contract, a case that is certainly not
within the jurisdiction of the Metropolitan Trial Court. By the
allegations of the complaint, the Gojoccos’ aim was to cancel or
terminate the contract because they sought its partial
enforcement in praying for rental arrearages. There is a
distinction in law between cancellation of a contract and its
rescission. To rescind is to declare a contract void in its inception
and to put an end to it as though it never were. It is not merely to
terminate it and release parties from further obligations to each
other but to abrogate it from the beginning and restore the parties
to relative positions which they would have occupied had no
contract ever been made. Termination of a contract is congruent
with an action for unlawful detainer. The termination or
cancellation of a
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VOL. 320, DECEMBER 14, 1999 633
contract would necessarily entail enforcement of its terms prior to

the declaration of its cancellation in the same way that before a
lessee is ejected under a lease contract, he has to fulfill his
obligations thereunder that had accrued prior to his ejectment.
However, termination of a contract need not undergo judicial
intervention. The parties themselves may exercise such option.
Only upon disagreement between the parties as to how it should
be undertaken may the parties resort to courts. Hence,
notwithstanding the allegations in the complaint that are
extraneous or not essential in an action for unlawful detainer, the

Metropolitan Trial Court correctly assumed jurisdiction over Civil
Case No. 90-54557.
Same; Same; Same; Same; The prevailing doctrine is that
suits or actions for the annulment of sale, title or document do not
abate any ejectment action respecting the same property.—An
action for unlawful detainer does not preclude the lessee or
ejected party from availing of other remedies provided by law. The
prevailing doctrine is that suits or actions for the annulment of
sale, title or document do not abate any ejectment action
respecting the same property. 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.
PETITIONS for review on certiorari of the decisions of the

Court of Appeals.
The facts are stated in the opinion of the Court.
Emerito M. Salva & Associates for petitioners.
Arthur D. Lim Law Office for F.T. Huibonhua.
Ricardo M. Carballo for Sps. Severino and Priscilla
Gojocco.
PURISIMA, J.:
These two petitions for review on certiorari under Rule 45

of the Rules of Court seek the reversal of the Decisions of
the
634

Court of Appeals in CA-G.R. CV No. 16575 and CA-G.R. SP

No. 24654 which affirmed, respectively, the decision of
Branch 148 of the Regional Trial Court of Makati City,
dismissing the complaint for reformation of contract, and
the decision of Branch 55 of the Regional Trial Court of
Manila, reversing that of Branch 13 of the Metropolitan
Trial Court of Manila, which favorably acted in the
ejectment case. Both petitions involve the same parties.
Culled from the records on hand, the facts giving rise to
the two cases are as follows:
On June 8, 1983, Florencia T. Huibonhoa entered into a
memorandum of agreement with siblings Rufina Gojocco
Lim, Severino Gojocco and Loreta Gojocco Chua stipulating

that Florencia T. Huibonhoa would lease from them
(Gojoccos) three (3) adjacent commercial lots at Ilaya
Street, Binondo, Manila, described as lot nos. 26-A, 26-B
and 26-C, covered by Transfer Certificates of Title Nos.
76098, 80728 and 155450, all in their (Gojoccos’) names.
On June 30, 1983, pursuant to the said memorandum of
agreement, the parties inked a contract of lease of the same
three lots for a period of fifteen (15) years commencing on
July 1, 1983 and renewable upon agreement of the parties.
Subject contract was to enable the lessee, Florencia T.
Huibonhoa, to construct a “four-storey reinforced concrete
building with concrete roof deck, according to plans and
specifications approved by the City Engineer’s 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 belong exclusively to the lessee. The lessee
undertook to complete construction of the building “within
eight (8) months from the date of the execution of the
contract of lease.” The contract further provided as follows:
“5. Good will Money and Rate of Monthly Rental: Upon

the signing of this Contract of Lease, LESSEE shall
pay to each of the
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VOL. 320, DECEMBER 14, 1999 635

LESSOR the sum of P300,000.00 each or a total sum of

P900,000.00,as goodwill money.
LESSEE shall pay to each of the LESSOR the sum of P15,000.00

each or a total amount of P45,000.00 as monthly rental for the
leased premises, within the first five (5) days of each calendar
month, at the office of the LESSOR or their authorized agent;
Provided, however, that LESSEE’s obligation to pay the rental
shall start only upon completion of the building, but if it is not
completed within eight (8) months from date hereof as provided
for in par. 4 above, the monthly rental shall already accrue and
shall be paid by LESSEE to LESSOR. In other words, during the
period of construction, no monthly rental shall be collected from
LESSEE; Provided, Finally, that the monthly rental shall be
adjusted/increased upon the corresponding increase in the rental
of sub-leasees (sic) using the percentage increase in the totality of
rentals of the sub-leasees (sic) as basis for the percentage increase

of monthly rental that LESSEE will pay to LESSOR.”
The parties also agreed that upon the termination of the

lease, the ownership and title to the building thus
constructed on the said lots would automatically transfer to
the lessor, even without any implementing document
therefor. Real estate taxes on the land would be borne by
the lessor while that on the building, by the lessee, but the
latter was authorized to advance the money needed to meet
the lessors’ obligations such as the payment of real estate
taxes on their lots. The lessors would deduct from the
monthly rental due all such advances made by the lessee.
After the execution of the contract, the Gojoccos
executed a power of attorney granting Huibonhoa the
authority to obtain “credit facilities” in order that the three
lots could be
1
mortgaged for a limited one-year period from
July 1983. Hence, on September 12, 1983, Huibonhoa
obtained from China Banking Corporation “credit facilities”
not exceeding One Million (P1,000.000.00) Pesos.
Simultaneously,2
she mortgaged the three lots to the
creditor bank. Fifteen days later or on Sep-
________________
1 Rollo of G.R. No. 95897, p. 72.

2 Ibid., pp. 67-68.
636

tember 27, 1983, to be precise, Huibonhoa signed a contract

amending the real estate mortgage in favor of China
Banking Corporation whereby the “credit facilities” were
increased to the principal
3
sum of Three Million
(P3,000,000.00) Pesos.
During the construction of the building which 4
later
became known as Poulex Merchandise Center, former
Senator Benigno Aquino, Jr. was assassinated. The
incident must have affected the country’s political and
economic stability. The consequent hoarding of
construction materials and increase in interest rates
allegedly affected adversely the construction of the building
such that Huibonhoa failed to complete the same within
the stipulated eight-month period from July 1, 1983.
Projected to be finished on February 29, 1984, the
construction was completed only in September 1984 or

seven (7) months later.
Under the contract, Huibonhoa was supposed to start
paying rental in March 1984 but she failed to do so.
Consequently, the Gojoccos made several verbal demands
upon Huibonhoa for the payment of rental arrearages and,
for her to vacate the leased premises. On December 19,
1984, lessors sent lessee a final letter of demand to pay the
rental arrearages and to vacate the leased premises. The
former also notified the latter 5
of their intention to
terminate the contract of lease.
However, on January 3, 1985, Huibonhoa brought an
action for reformation of contract before Branch 148 of the
Regional Trial Court in Makati. Docketed as Civil Case No.
9402, the Complaint alleged that although there was a
meeting of the minds between the parties on the lease
contract, their true intention as to when the monthly rental
would accrue was not therein expressed due to mistake or
accident. She (lessee) alleged that the Gojoccos had
erroneously considered the first accrual date of the rents to
be March 1984 when their true intention was that during
the entire period of actual construc-
________________
3 Ibid., pp. 69-71.

4 Exhs. G & G-3.
5 Rollo of G.R. No. 95897, p. 52.
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VOL. 320, DECEMBER 14, 1999 637

tion of the building, no rents would accrue. Thus, according

to Huibonhoa, the first rent would have been due only in
October 1984. Moreover, the assassination of former
Senator Benigno Aquino, Jr., an unforeseen event, caused
the country’s economy to turn from bad to worse and as a
result, the prices of commodities like construction
materials so increased that the building worth Six Million
pesos escalated to “something like 11 to 12 million pesos.”
However, she averred that by reason of mistake or
accident, the lease contract failed to provide that should an
unforeseen event dramatically increase the cost of
construction, the monthly rental would be reduced and the
term of the lease would be extended for such duration as
may be fair and equitable to both the lessors and the

lessee.
Huibonhoa then prayed that the contract of lease be
reformed so as to reflect the true intention of the parties;
that its terms be novated so that the accrual of rents
should be computed from October 1984; that the monthly
rent of P45,000.00 be equitably reduced to P30,000.00,
6
and
the term of the lease be extended by five (5) years.
Eleven days later or on January 14, 1985, to be exact,
the Gojoccos filed Civil Case No. 106097 against Huibonhoa
for “cancellation of lease, ejectment and collection” with the
Metropolitan Trial Court of Manila. They theorized that
despite the expiration of the 8-month construction period,
Huibonhoa failed to pay the rents that had accrued since
March 1, 1984, their verbal demands therefor
notwithstanding; that, in their letter of December 19, 1984,
they had notified Huibonhoa of their intention to
“terminate and cancel the lease for violation of its terms”
and that they demanded from her the “restitution of the
land in question” and the payment of all rentals due
thereunder; that Huibonhoa refused to pay the rentals in
bad faith because she had “sublet the stalls, bodegas and
offices to numerous tenants and/or stallholders” from whom
she had collected “goodwill money and exorbitant rentals
even prior to the completion of the building or as of March
_______________
6 Record of Civil Case No. 9402, pp. 1-6.
638

1984”; that she was about to sublease the vacant spaces in

the building; that she was able to finish construction of the
building “without utilizing her own capital or investment”
on account of the mortgages of their land in the amount of
P3,700,000 (sic); that because the mortgage indebtedness
with China Banking Corporation had remained
outstanding and unpaid, they had revoked the power of
attorney in Huibonhoa’s favor on December 21, 1984, and
that, because Huibonhoa was about to depart from the
Philippines, the rentals due and owing from the leased
premises should be held to answer for their claim by virtue
of a writ of attachment.
The Gojoccos prayed that Huibonhoa and all persons

claiming rights under her be ordered to vacate the leased
premises, to surrender to them actual and physical
possession thereof and to pay the rents due and unpaid at
the agreed rate of P45,000.00 a month from March 1984 to
January 1985, with legal interest thereon. They also
prayed that Huibonhua be ordered to pay the fair rental
value of P60,000.00 a month “beginning February 5, 1985
and every 5th of the month until the premises shall be
actually vacated and restored” to them and that,
“considering the nature of the action,” the Rules on
Summary Procedure be applied to prevent
7
further losses,
damages and expenses on their part.
Meanwhile, in Civil Case No. 9402, the Gojoccos
submitted an answer to the complaint for reformation of
contract; asserting that the true intention of the parties
was to obligate Huibonhoa to pay rents immediately upon
the expiration of the maximum period of eight (8) months
from the execution of the lease contract, which intention
was meant to avoid a situation wherein Huibonhoa would
deliberately delay the completion of the building within the
8-month period to elude payment of rental starting March
1984. They also claimed that Huibonhoa instituted the case
in anticipation of the ejectment suit they would file against
her; that she was estopped from questioning the
enforceability of the lease contract after having received
monetary benefits as a result of
________________
639
VOL. 320, DECEMBER 14, 1999 639

her utilization of the premises to her sole profit and

advantage; that the financial reverses she suffered after
the assassination of Senator Benigno Aquino, Jr. could not
be considered a fortuitous event that would justify the
reduction of the monthly rental and extension of the
contract of lease for five years; and that the “principle of
contract of adhesion” in interpreting the lease contract
should be strictly applied
8
to Huibonhoa because it was her
counsel who prepared it.
The Gojoccos prayed that Huibonhoa be ordered to pay
them the sum of P495,000.00 representing unpaid rents
from March 1, 1984 to January 31, 1985 and the monthly

rent of P60,000.00 from February 1, 1985 until Huibonhoa
shall have surrendered the premises to them, and that she
be ordered to pay attorney’s fees, moral and exemplary
damages and the costs of suit.
On January9 31, 1985, Rufina Gojocco Lim entered into
an agreement with Huibonhoa whereby, to put 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 agreement expressly provided
that no rents would be collected unless and until the
construction work was already completed or that during
the construction, no monthly rental should be collected. It
also provided that “in case some unforeseen event should
dramatically increase the cost of the building, then the
amount of monthly rent shall be reduced to such sum and
the term of the lease extended for such duration as may be
fair and equitable, bearing in mind the actual construction
cost of the building.” The agreement recognized the fact
that the Aquino assassination that resulted in the
“hoarding of construction materials and the skyrocketing of
the interest rates” on Huibonhoa’s loans, resulted in the
increase in actual cost of the construction from
P6,000,000.00 to between P11,000,000.00 and
P12,000,000.00.
There is no record that Rufina Gojocco Lim was dropped
as a defendant in Civil Case No. 9402 but only Loretta
Gojocco
_________________

9 Rollo of G.R. No. 95897, pp. 73-75.
640

Chua and the Spouses Severino and Priscilla Gojocco

10
filed
the memorandum for the defendants in11 that case.
On March 9, 1987, the Makati RTC rendered a decision
holding that Huibonhoa had not presented clear and
convincing evidence to justify the reformation of the lease
contract. It considered as “misplaced” her contention that
the Aquino assassination was an “accident” within the
purview of Art. 1359 of the Civil Code. It held that the act
of Rufina G. Lim in entering into an agreement with
Huibonhoa that, in effect, “reformed” the lease contract,

was not binding upon Severino and Loretta Gojocco
considering that they were separate and independent
owners of the lots subject of the lease. On this point, the
trial court cited Sec. 25, Rule 130 of the Rules of Court
which provides that the rights of a party cannot be
prejudiced by the act, declaration or omission of another. It
thus decided Civil Case No. 9402 as follows:
“WHEREFORE, judgment is hereby rendered:
a) Dismissing the plaintiff’s complaint and defendant Rufina

Lim’s counterclaim, with costs against them;
b) Ordering the plaintiff to pay to defendant Loretta Gojocco
Chua the amount of P360,000.00, representing rentals due
from March 1, 1984 to February 28, 1987, with interests
thereon at the legal rate from date of the filing of the
complaint until full payment thereof, plus the sum of
P15,000.00 per month beginning March, 1987 and for as
long as the plaintiff is in possession of the leased
premises;
c) Ordering the plaintiff to pay to defendant Severino
Gojocco Chua the amount of P360,000.00, representing
rentals due from March 1, 1984 to February 28, 1987, with
interests thereon at the legal rate from date of the filing of
the complaint until full payment thereof, plus the sum of
P15,000.00 per month beginning March, 1987 and for as
long as the plaintiff is in possession of the leased
premises;
________________
10 Record of Civil Case No. 9402, p. 93.

11 Presided by Judge Jesus F. Guerrero.
641
VOL. 320, DECEMBER 14, 1999 641

d) Ordering the plaintiff to pay attorney’s fees in favor of the

above-named defendants in the sum of P36,000.00, aside
from costs of suit.
SO ORDERED.”
Upon motion of the Gojocco, the trial court amended the

dispositive portion of its aforesaid decision in that
Huibonhua was ordered to pay each of Loretta Gojocco
Chua and Severino Gojocco the amount of P540,000.00

instead of P360,000.00 and that attorney’s fees of
P54,000.00, instead of P36,000.00, be paid by Huibonhoa.
On the other hand, in Civil Case No. 102604, the
Metropolitan Trial Court of Manila granted Huibonhoa’s
prayer that the case be excluded from the operation of the
Rule on Summary Procedure for the reason that 12
the unpaid
rents sued upon amounted to P495,000.00. Thereafter,
Huibonhoa presented a motion to dismiss or, in the
alternative, to suspend proceedings in the case, contending
that the pendency of the action for reformation of contract
constituted a ground of lis pendens or at the very least,
posed a prejudicial question to the ejectment case. The
Gojoccos opposed such motion, pointing out that while
there was identity of parties between the two cases, the
causes of action, subject matter and reliefs sought for
therein were different.
On May 10, 1985, after Huibonhoa had sent in her reply
to the said opposition, Rufina G. Lim, through counsel,
prayed that she be dropped as plaintiff in the case, and
counsel begged leave to withdraw as the lawyer of the
latter in the case. Subsequently, Severino Gojocco and
Loretta Gojocco Chua filed a motion praying for an order
requiring Huibonhoa to deposit the rents. On March 25,
1986, the court below issued an Omnibus Order denying
Huibonhoa’s motion to dismiss, requiring her to pay
monthly rental of P30,000.00 starting March 1984 and
every month thereafter, and denying Rufina G. Lim’s
motion that she be dropped as plaintiff in the
________________
12 Record of Civil Case No. 106097, p. 25.
642

13
case. Huibonhoa moved for reconsideration of said order
but the plaintiffs, apparently including Rufina, opposed the
motion.
On July 21, 1986, Severino Gojocco and Huibonhoa
entered into an agreement that altered certain terms of the
lease contract in the same way that the agreement between
14
Huibonhoa and Rufina G. Lim “novated” the contract.
On March 24, 1987, the Metropolitan Trial Court of
Manila issued an Order denying Huibonhoa’s motion for
reconsideration and the Gojoccos’ motion for issuance of a

writ of preliminary attachment, and allowing Huibonhoa a
period of fifteen (15) days within which to deposit
P30,000.0015a month starting March 1984 and every month
thereafter. Huibonhoa interposed a second motion for
reconsideration of the March 25, 1986 order on the ground
that she had amicably settled the case with Severino
Gojocco and Rufina G. Lim. She therein alleged that only
P15,000.00 was due Loretta G. Chua. She informed the
court of the decision of the Makati Regional Trial Court in
Civil Case No. 9402 and argued that since that court had
awarded the Gojoccos rental arrearages, it would be unjust
should she be made to pay rental arrearages, once again.
On June 30, 1987, the Metropolitan Trial Court of
Manila issued an Order reiterating its decision to assume
jurisdiction over Civil Case No. 106097 and modified its
March 24, 1987 Order by deleting the portion thereof which
required Huibonhua to deposit monthly rents. It also
required Huibonhoa to file her answer within fifteen (15)
days from receipt of the copy of the court’s order.
Accordingly, on July 21, 1987, Huibonhoa sent in her
answer alleging that the lease contract had been novated
by the agreements she had signed on January 31, 1985 and
July 21, 1986, with Rufina G. Lim and Severino Gojocco,
respectively. Huibonhoa added that she had
________________
13 Ibid., pp. 80-81.

14 Rollo of G.R. No. 95897, pp. 73-74.
15 Ibid., p. 106.
643
VOL. 320, DECEMBER 14, 1999 643

paid Severino Gojocco the amount 16

of P228,000.00 through
an Allied Bank manager’s check.
On August 27, 1987, the Metropolitan Trial Court of
Manila issued a Pre-trial Order limiting the issues in Civil
Case No. 106097 to: (a) whether or not plaintiffs had the
right to eject the defendant on the ground of violation of the
conditions of the lease contract and (b) whether or not
Severino Gojocco had the right to pursue the ejectment case
in view of the agreement he had entered into with
Huibonhoa on July 21, 1986.
On 17July 30, 1990, the Metropolitan Trial Court of

Manila came out with a decision “in favor of plaintiffs
Severino Gojocco and Loreta Gojocco Chua and against
Florencia T. Huibonhoa.” It ordered Huibonhoa to vacate
the lots owned by Severino Gojocco and Loreta Gojocco
Chua and to pay each of them the amounts P5,000.00 as
attorney’s fees and P1,000.00 as appearance fee. All three
(3) party-litigants appealed to the Regional Trial Court of
Manila.
On February 14, 1991,18
the Regional Trial Court of
Manila, Branch 55, reversed the decision of the
Metropolitan Trial Court and ordered the dismissal of the
complaint in Civil Case No. 106097. The reversal of the
inferior court’s decision was based primarily on its finding
that:
“1. The suit below is intrinsically and inherently an

action for cancellation of lease or rescission of
contract. In fact, the plaintiffs themselves
recognized this intrinsic nature of the action by
categorizing the same action as one for cancellation
of lease, ejectment and collection. The suit cannot
properly be reduced to one of simple ejectment as
rights of the parties to the still existing contracts
have yet to be determined and resolved.
Necessarily, to put an end to the parties’ relation,
the contract between them has got to be abrogated,
rescinded or resolved. The action for the purpose is
however cognizable by the Regional Trial Court as
its subject-matter is incapable of pecuniary
estimation (See Sec. 19[1], B.P. 129).”
________________
16 Ibid., pp. 158-169.

17 Presided by Judge Escolastico U. Cruz, Jr.
18 Presided by Judge Hermogenes R. Liwag.
644

Hence, Civil Case Nos. 9402 and 106097 (that was docketed
before the RTC of Manila as Civil Case No. 90-54557) were
both elevated to the Court of Appeals.
In CA-G.R.
19
CV No. 16575, the Court of Appeals rendered
a Decision on May 31, 1990, affirming the decision of the
Makati Regional Trial Court in Civil Case No. 9402.

Huibonhoa filed a motion for the reconsideration of such
Decision and on October 18, 1990, the Court of Appeals
modified the same accordingly, by ordering that the
amount of P270,825.00 paid by Huibonhoa to Severino and
Priscilla Gojocco be deducted from the total amount of
unpaid rentals due the said spouses.
In CA-G.R. SP No. 24654, the Court of Appeals also
affirmed the decision of the Regional Trial20
Court of Manila
in Civil Case No. 106097 by its Decision promulgated on
Octo-ber 29, 1991. Considering the allegations of the
complaint for cancellation of lease, ejectment and
collection, the Court of Appeals ratiocinated and concluded:
“These allegations, which are denied by private respondent,

raised issues which go beyond the simple issue of unlawful
possession in ejectment cases. While the complaint does not seek
the rescission of the lease contract, ejecting the lessee would, in
effect, deprive the lessee of the income and other beneficial fruits
of the building of which she is the owner until the end of the term
of the lease. Certainly this cannot be decreed in a summary action
for ejectment. The decision of the MTC, it is true, only ordered the
ejectment of the private respondent from the leased premises. But
what about the building which, according to petitioners
themselves, cost the private respondent P3,700,000.00 to
construct? Will it be demolished or will its ownership vest, even
before the end of the 15-year term, in the petitioners as owners of
the land? Indeed, inextricably linked to the question of physical
possession is the ownership of the building which the lessee was
permitted to put up on the land.
_______________
19 Penned by Associate Justice Bonifacio A. Cacdac, Jr. and concurred

in by Associate Justices Gloria C. Paras and Serafin V.C. Guingona.
20 Penned by Associate Justice Vicente V. Mendoza and concurred in by
Associate Justices Oscar M. Herrera and Alicia V. Sempio Diy.
645
VOL. 320, DECEMBER 14, 1999 645

To evict the lessee from the land would be to bar her not only from
entering the building which she owns but also from collecting the
rents from its tenants.”
With respect to the contention of the Gojoccos that since

Huibonhoa had submitted to the jurisdiction of the
Metropolitan Trial Court, the jurisdictional issue had been
foreclosed, the Court of Appeals opined:
“Petitioners point out that private respondent can no longer raise

the question of jurisdiction because she filed a motion to dismiss
in the MTC but she did not raise this question (Rule 15, sec. 8).
But the Omnibus motion rule does not cover two grounds which,
although not raised in a motion to dismiss, are not waived. These
are (1) failure to state a cause of action and (2) lack of jurisdiction
over the subject matter. (Rule 9, sec. 2). These grounds can be
invoked any time. Moreover, in this case it was not really private
respondent who questioned the jurisdiction over the Metropolitan
Trial Court. It was the Regional Trial Court which did so motu
propio.”
21
On February 19, 1992, the Court resolved that these two
petitions for review on certiorari be consolidated. Although
they sprang from the same factual milieu, the petitions are
to be discussed separately, however, because the issues
raised are cognate yet independent from each other.
In G.R. No. 95897
Petitioner Huibonhoa contends that:
1. THE RESPONDENT COURT OF APPEALS

COMMITTED A GRAVE AND SERIOUS ERROR,
CONSTITUTING ABUSE OF DISCRETION, IN
FINDING THE AGREEMENT BETWEEN
PETITIONER AND PRIVATE RESPONDENT
SEVERINO GOJOCCO (ANNEX “E”)
WORTHLESS AND USELESS ALTHOUGH IT
HAS RECOGNIZED THE PAYMENTS WHICH
RESPONDENT SEV
_________________
21 Rollo of G.R. No. 102604, p. 244.
646

ERINO GOJOCCO HAS RECEIVED FROM THE

PETITIONER WHICH ACTUALLY
CONSTITUTED AN ACT OF RATIFICATION;

2. THE RESPONDENT COURT FAILED TO
CONSIDER THE TRAGIC ASSASSINATION OF
FORMER SENATOR BENIGNO AQUINO AS A
FORTUITOUS EVENT OR FORCE MAJEURE
WHICH JUSTIFIES THE ADJUSTMENT22OF THE
TERMS OF THE CONTRACT OF LEASE.
Article 1305 of the Civil Code defines a contract as “a meeting of

the minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.”
Once the minds of the contracting parties meet, a valid contract
exists, whether it is reduced to writing or not. When the terms of
an agreement have been reduced to writing, it is considered as
containing all the terms agreed upon. As such, 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 23
it fails to express the true intent and agreement of
the parties. In such an exception, one of the parties may bring an
action for the reformation of the 24instrument to the end that their
true intention may be expressed.
Reformation is that remedy in equity by means of which a

written instrument is made or construed so as to
25
express or
conform to the real intention of the parties. As to its
nature, in
26
Toyota Motor Philippines Corporation v. Court of
Appeals, the Court said:
“An action for reformation is in personam, not in rem, x x x even

when real estate is involved. x x x It is merely an equitable relief
granted to the parties where through mistake or fraud, the
instrument failed to express the real agreement or intention of
the
________________
22 Petitioner’s Memorandum, p. 11; Rollo, p. 172.

23 Sec. 9, Rule 130, Revised Rules on Evidence.
24 National Irrigation Administration v. Gamit, G.R. No. 85869,
November 6, 1992, 215 SCRA 436, 450.
25 Ibid., p. 454 citing Conde v. Cuenca, 99 Phil. 1056.
26 G.R. No. 102881, December 7, 1992, 216 SCRA 236, 248.
647
VOL. 320, DECEMBER 14, 1999 647

parties. While it is a recognized remedy afforded by 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. x x x.”
Article 1359 of the Civil Code provides that “(w)hen, there

having been a meeting of the minds of the parties to a
contract, their true intention is not expressed in the
instrument purporting to embody the agreement, by reason
of mistake, fraud, inequitable conduct or accident, one of
the parties may ask for the reformation of the instrument
to the end that such intention may be expressed. x x x.” An
action for reformation of instrument under this provision of
law may prosper only upon the concurrence of the following
requisites: (1) there must have been a meeting of the minds
of the parties to the contract; (2) the instrument does not
express the true intention of the parties; and (3) the failure
of the instrument to express the true intention of the
parties is27 due to mistake, fraud, inequitable conduct or
accident.
The meeting of the minds between Huibonhoa, on the
one hand, and the Gojoccos, on the other, is manifest in the
written lease contract duly executed by them. The success
of the action for reformation of the contract of lease at bar
should therefore, depend on the presence of the two other
requisites aforementioned.
To prove that the lease contract does not evince the true
intention of the parties, specifically as regards the time
when Huibonhoa should start paying rents, she presented
as a witness one of the lessors, Rufina G. Lim, who testified
that prior to the execution of the lease contract on June 30,
1983, the parties had entered into a Memorandum of
Agreement on June 8, 1983; that on December 21, 1984,
the lessors revoked the special power of attorney in favor of
Huibonhoa; that on
________________
27 National Irrigation Administration v. Gamit, supra at p. 451.
648

January 31, 1985, she entered into an agreement with

Huibonhoa whereby the amount of the rent was reduced to
P10,000 a month and the term of the lease was extended by
three (3) years, and28 that Huibonhoa started paying rental
in September 1984.
There is no statement in such testimony that
categorically points to the fact that the contract of lease has
failed to express the true intention of the parties. While it
is true that29
paragraph 4 of the Memorandum of
Agreement states that the P15,000 monthly rental due
each of the three lessors shall be collected in advance
within the first five (5) days of each month “upon
completion of the building,” the same memorandum of
agreement also provides as follows:
“8. This Memorandum of Agreement shall bind the SECOND

PARTY only after the signing of the Contact of Lease by both
parties which shall not be later than June 30, 1983, provided,
however, that should the SECOND PARTY decide not to proceed
with the signing on the deadline aforestated, the FIRST PARTY
shall not hold her liable therefor.”
In view thereof, reliance on the provisions of the

Memorandum of Agreement is misplaced considering that
its provisions would bind the parties only upon the signing
of the lease contract. However, the lease contract that was
later entered into by the parties qualified the time when
the lessee should start paying the monthly rentals.
Paragraph 5 of the lease contract states that the
“LESSEE’s” obligation to pay the rental shall start only
upon the completion of the building, but if it is not
completed within eight (8) months from date hereof as
provided for in par. 5 (sic) above, the monthly rental shall
already accrue and shall be paid by LESSEE to LESSOR.”
That qualification applies even though the next sentence
states that “(I)n other words, during the period of
construction, no monthly rentals shall be collected from
LESSEE.” Otherwise, there was no reason for the insertion
of that
_______________
28 TSN, May 9, 1985, pp. 1-49.

29 Rollo in G.R. No. 95897, pp. 41-44.
649
VOL. 320, DECEMBER 14, 1999 649

qualification on the period of construction of the building

the termination of which would signal the accrual of the
monthly rentals. Non-inclusion of that qualification would
also give the lessee the unbridled discretion as to the period
of construction of the building to the detriment of the
lessor’s right to exercise ownership thereover upon the
expiration of the 15-year lease period.
In actions for reformation of contract, the onus probandi
is upon the
30
party who insists that the contract should be
reformed. Huibonhoa having failed to discharge that
burden of proving that the true intention of the parties has
not been accurately expressed in the lease contract sought
to be reformed, the trial court correctly held that no clear
and convincing proof warrants the reformation thereof. In
the complaint, Huibonhoa alleged:
“5.9 By reason of mistake or accident, the contract (Annex ‘A’)

fails to state the true intention and real agreement of the parties
to the effect that in case some unforeseen event should
dramatically increase the cost of the building, then the amount of
monthly rent shall be reduced to such sum and the term of the
lease extended for such duration as may be fair and equitable to
both parties, bearing in mind the actual construction cost of the
building.
5.10. As a direct result of the tragic Aquino assassination on 21
August 1983, which the parties did not foresee and coming as it
did barely two (2) months after the contract (Annex ‘A’) had been
signed, the country’s economy dramatically turned from bad to
worse, and the resulting ill effects thereof specifically the
hoarding of construction materials adversely affected the plaintiff
resulting, among others, in delaying the construction work and
the skyrocketing of the interest rates on plaintiff’s loans, such
that instead of roughly P6 Million as originally budgeted the
building in question now actually cost the plaintiff something like
11 to 12 million pesos, more or less.”
_______________
30 Mata v. Court of Appeals, G.R. No. 87880, April 7, 1992, 207 SCRA
753, 758.
650

In the present petition, Huibonhoa asserts that: by reason

of oversight or mistake, the true intention of the parties
that should some unforeseen event dramatically increase
the cost of the building, then the amount of monthly rent
shall be reduced to such sum and the term of the lease
extended to such period as would be fair and equitable to
both sides, bearing in mind always that petitioner was
ordinary LESSEE but was an investor-developer.” She
insists that “(i)n truth, the contract, while that of lease,
really amounted
31
to a common business venture of the
parties.”
On account of her failure to prove what costly mistake
allegedly suppressed the true intention of the parties,
Huibonhoa honestly admitted that there was an oversight
in the drafting of the contract by her own counsel. By such
admission, oversight may not be attributed to all the
parties to the contract and therefore, it cannot be
considered a valid reason for the reformation of the same
contract. In fact, because it was Huibonhoa’s counsel
himself who drafted the contract, 32
any obscurity therein
should be construed against her. Unable to substantiate
her stance that the true intention of the parties is not
expressed in the lease contract in question, Huibonhoa
nonetheless contends that paragraph 5 thereof should be
interpreted in such a way that she should only begin
paying33
monthly rent in October 1984 and not in March
1984.
Such contention betrays Huibonhoa’s confusion on the
distinction between interpretation and reformation of 34
contracts. In National Irrigation Administration v. Gamit,
the Court distinguished the two concepts as follows:
_______________
31 Petition in G.R. No. 95897, p. 4.

32 Power Commercial & Industrial Corporation v. Court of Appeals,
G.R. No. 119745, June 20, 1997, 274 SCRA 597, 607.
33 Petition in G.R. No. 95897, p. 5; Complaint for Reformation of
Contract, pp. 2-3.
34 Supra, at pp. 453-454.
651
VOL. 320, DECEMBER 14, 1999 651

“ ‘Interpretation’ 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 express or
conform to the real intention of the parties. In granting
reformation, therefore, equity is not really making a new contract
for the parties, but is confirming and perpetuating the real
contract between the parties which, under the technical rules of
law, could not be enforced but for such reformation. As aptly
observed by the Code Commission, 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 parties.”
By bringing an action for the reformation of subject lease

contract, Huibonhoa chose 35
to reform the instrument and
not the contract itself. She is thus precluded from
inserting stipulations that are not extant in the lease
contract itself lest the very agreement embodied in the
instrument is altered.
Neither does the Court find merit in her submission that
the assassination of the late Senator Benigno Aquino, Jr.
was a fortuitous event that justified a modification of the
terms of the lease contract.
A fortuitous event is that which could not be foreseen, or
which even if foreseen, was inevitable. To exempt the
obligor from liability for a breach of an obligation due to an
“act of God,” the following requisites must concur: (a) the
cause of the breach of the obligation must be independent
of the will of the debtor; (b) the event must be either
unforeseeable or unavoidable; (c) the event must be such as
to render it impossible for the debtor to fulfill his obligation
in a normal manner;
________________
35 Naga Telephone Co., Inc. v. Court of Appeals, G.R. No. 107112,

February 24, 1994, 230 SCRA 351, 368.
652

and (d) the debtor must be free from any 36participation in,
or aggravation of the injury to the creditor.
In the case under scrutiny, the assassination of Senator

Aquino may indeed be considered a fortuitous event.
However, the said incident per se could not have caused the
delay in the construction of the building. What might have
caused the delay was the resulting escalation of prices of
commodities including construction materials. Be that as it
may, there is no merit in Huibonhoa’s argument that the
inflation borne by the Filipinos in 1983 justified the
delayed accrual of monthly rental, the reduction of its
amount and the extension of the lease by three (3) years.
Inflation is the sharp increase of money or credit or both
37
without a corresponding increase in business transaction.
There is inflation when there is an increase in the volume
of money and credit relative to available goods resulting in
a substantial
38
and continuing rise in the general price
level. While it is of judicial notice that there has been a
decline in the purchasing power of the Philippine peso, this
downward fall of the currency cannot be considered
unforeseeable considering that since the 1970’s we have
been experiencing inflation. It is39simply a universal trend
that has not spared our country. Conformably,40this Court
upheld the petitioner’s view in Occeña v. Jabson that even
a worldwide increase in prices does not constitute a
sufficient cause of action for modification of an instrument.
_______________
36 Tanguilig v. Court of Appeals, 334 Phil. 68, 75, 266 SCRA 78 (1997)
citing Nakpil v. Court of Appeals, L-47851, October 3, 1986, 144 SCRA
596.
37 PARAS, CIVIL CODE OF THE PHILIPPINES, ANNOTATED, 13th
ed. (1994), Vol. IV, p. 394.
38 WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY, p.
1159.
39 Filipino Pipe and Foundry Corporation v. NAWASA, L-43446, May 3,
1988, 161 SCRA 32, 36.
40 L-44349, October 29, 1976, 73 SCRA 637, 640.
653
VOL. 320, DECEMBER 14, 1999 653

It is only when an extraordinary inflation supervenes that

the law affords
41
the parties a relief in contractual
obligations.
42
In Filipino Pipe and Foundry Corporation v.
NAWASA, the Court explained extraordinary inflation
thus:
“Extraordinary inflation exists when ‘there is a decrease or

increase in the purchasing power of the Philippine currency which
is unusual or beyond the common fluctuation in the value of said
currency, and such decrease or increase could not have been
reasonably foreseen or was manifestly beyond the contemplation
of the parties at the time of the establishment of the obligation.
(Tolentino, Commentaries and Jurisprudence on the Civil Code,
Vol. IV, p. 284.)
An example of extraordinary inflation is the following
description of what happened to the Deutschmark in 1920:
‘More recently, in the 1920’s Germany experienced a case of

hyperinflation. In early 1921, the value of the German mark was 4.2 to
the U.S. dollar. By May of the same year, it had stumbled to 62 to the
U.S. dollar. And as prices went up rapidly, so that by October 1923, it
had reached 4.2 trillion to the U.S. dollar!’ (Bernardo M. Villegas &
Victor R. Abola, Economics, An Introduction [Third Edition]).
As reported, ‘prices were going up every week, then every day,

then every hour. Women were paid several times a days so that
they could rush out and exchange their money for something of
value before what little purchasing power was left dissolved in
their hands. Some workers tried to beat the constantly rising
prices by throwing their money out of the windows to their
waiting wives, who would rush to unload the nearly worthless
paper. A postage stamp cost millions of marks and a loaf of bread,
billions.’ (Sidney Rutberg, ‘The Money Balloon’ New York: Simon
and Schuster, 1975, p. 19, cited in ‘Economics, An Introduction’ by
Villegas & Abola, 3rd Ed.)”
_______________
41 Art. 1250 of the Civil Code provides that “(i)n case an extraordinary
inflation or deflation of the currency stipulated should supervene, the
value of the currency at the time of the establishment of the obligation
shall be the basis of the payment, unless there is an agreement to the
contrary.”
42 Supra, at pp. 35-36.
654

No decrease in the peso value of such magnitude having

occurred, Huibonhoa has no valid ground to ask this Court
to intervene and modify the lease agreement to suit her
purpose. As it is, Huibonhoa even failed to prove by
evidence, documentary or testimonial, that there was an
extraordinary inflation from July 1983 to February 1984.

Although she repeatedly alleged that the cost of
constructing the building doubled from P6 million to P12
million, she failed to show by how much, for instance, the
price index of goods and services had risen during that
intervening43
period. An extraordinary inflation cannot be
assumed. Hence, for Huibonhoa to claim exemption from
liability by reason of fortuitous event under Art. 1174 of the
Civil Code, she must prove that inflation was the sole and 44
proximate cause of the loss or destruction of the contract
or, in this case, of the delay in the construction of the
building. Having failed to do so, Huibonhoa’s contention is
untenable.
Pathetically, if indeed a fortuitous event deterred the
timely fulfillment of Huibonhoa’s obligation under the lease
contract, she chose the wrong remedy in filing the case for
reformation of the contract. Instead, she should have
availed of the remedy of rescission of contract in order that
the court could release
45
her from
46
performing her obligation
under Arts. 1266 and 1267 of the Civil Code, so that the
parties could be restored to their status prior to the
execution of the lease contract.
As regards Huibonhoa’s assertion that the lease contract
was novated by Rufina G. Lim and Severino Gojocco who
entered into an agreement with her on January 31, 1985
and
_______________
43 Sangrador v. Valderama, G.R. No. 79552, November 29, 1988, 168

SCRA 215, 229.
44 Tanguilig v. Court of Appeals, supra.
45 ART. 1266. The debtor in obligations to do shall also be released
when the presentation becomes legally or physically impossible without
the fault of the obligor.
46 ART. 1267. When the service has become so difficult as to be
manifestly beyond the contemplation of the parties, the obligor may also
be released therefrom, in whole or in part.
655
VOL. 320, DECEMBER 14, 1999 655

July 21, 1986, respectively, it bears stressing that the lease

contract they had entered into is not a simple one. It is
unique in that while there is only one lessee, Huibonhoa,
and the contract refers to a “LESSOR,” there are actually
three lessors with separate certificates of title over the

three lots on which Huibonhoa constructed the 4-storey
building. As Huibonhoa herself ironically asserts, the lease
contract is an “indivisible” one because the lessors’
interests “cannot be separated even if they owned 47
the lands
separately under different certificates of title.” Hence, the
acts of Rufina G. Lim and Severino Gojocco in entering into
the new agreement with Huibonhoa could have affected
only their individual rights as lessors because no new
agreement was forged between Huibonhoa and all the
lessors, including Loreta Gojocco.
Consequently, because the three lot owners
simultaneously entered into the lease contract with
Huibonhoa, novation of the contract could only be effected
by their simultaneous act of abrogating the original
contract and at the same time forging a new one in writing.
Although as a rule no form48of words or writing is necessary
to give effect to a novation, a written agreement signed by
all the parties to the lease contract is required in this case.
Ordinary diligence on the part of the parties demanded
that they execute a written agreement if indeed they
wanted to enter into a new one because of the 15-year life
span of the lease affecting real property and the fact that
third persons would be affected thereby on account of the
express agreement 49
allowing the lessee to lease the building
to third parties.
Under the law, novation is never presumed. The parties
to a contract must expressly agree that they are abrogating
their
________________
47 Petitioner’s Memorandum in G.R. No. 95897, pp. 23-24.

48 Garcia, Jr. v. Court of Appeals, G.R. No. 80201, November 30, 1990,
191 SCRA 493, 500.
49 Art. 1648 of the Civil Code provides as follows: “Every lease of real
estate may be recorded in the Registry of Property. Unless a lease is
recorded, it shall not be binding upon third persons.”
656

50
old contract in favor of a new one. Accordingly, it was held
that no novation of a contract had occurred when the new
agreement entered into between51
the parties was intended
“to give life” to the old one. “Giving life” to the contract
was the very purpose for which Rufina G. Lim signed the
agreement on January 31, 1986 with Huibonhoa. It was
intended to graft into the lease contract provisions that
would 52facilitate fulfillment of Huibonhoa’s obligation
therein. That the new agreement was meant to
strengthen the enforceability of the lease is further
evidenced by the fact, although its stipulations as to the
period of the lease and as to the amount of rental were
altered, the agreement with Rufina G. Lim does not even
hint that the lease itself would be abrogated. As such, even
Huibonhoa’s agreement with Rufina G. Lim cannot be
considered a novation of the original lease contract. Where
the parties to the new obligation expressly recognize the
continuing existence and validity of the old one, where, in
other words, the parties expressly negated53 the lapsing of
the old obligation, there can be no novation.
As regards the new agreement with Severino Gojocco, it
should be noted that he only disclaimed its existence when
the check issued by Huibonhoa to him, allegedly in
accordance with the new agreement, was dishonored. That
unfortunate fact might have led Severino Gojocco to refuse
acceptance of rents paid by Huibonhoa subsequent to the
dishonor of the check. However, the non-existence of the
new agreement with
__________________
50 Rillo v. Court of Appeals, G.R. No. 125347, June 19, 1997, 274 SCRA
461, 469 citing Pacific Mills, Inc. v. Court of Appeals, G.R. No. 87182,
February 17, 1992, 206 SCRA 317 and Ajax Marketing & Development
Corporation v. Court of Appeals, G.R. No. 118585, September 14, 1995,
248 SCRA 222.
51 Rillo v. Court of Appeals, supra.
52 Ibid., where the Court held that a compromise agreement clarifying
the total sum owned by a buyer with a view that he would find it easier to
comply with his obligations under the contract to sell does not novate the
contract.
53 Cochingyan, Jr. v. R & B Surety and Insurance Co., Inc., L-47369,
June 30, 1987, 151 SCRA 339, 350.
657
VOL. 320, DECEMBER 14, 1999 657

Severino Gojocco is a question of fact that the courts below

had properly determined. The Court of Appeals has
affirmed the trial court’s finding that “not only was
Gojocco’s consent vitiated by fraud and false representation

there likewise was failure of consideration in the execution
of Exhibit C, 54
(and therefore) the said agreement is legally
inefficacious.” In the Resolution of October 18, 1990, the
Court of Appeals considered the amount of P270,825.00
represented by the check handed by Huibonhoa to Severino55
Gojocco as “partial settlement” or “partial payment”
clearly under the terms of the original lease contract. There
is no reason to depart from the findings and conclusions of
the appellate court on this matter.
Nevertheless, because Severino Gojocco repudiates the
new agreement even before this Court as his consent
thereto had allegedly
56
been “vitiated by fraud and false
representation,” Huibonhoa may not escape complete
fulfillment of her obligation under the original lease
contract as far as Severino Gojocco is concerned. She is
thus contractually bound to pay him the unpaid rents.
Aside from the monthly rental that should be paid by
Huibonhoa starting March 1984, Loreto Gojocco Chua is
also entitled to interest at the rate of 6% per annum from57
the accrual of the rent in accordance with Article 2209 of
the Civil Code until it is fully paid because the monetary
award does not partake of a loan or forbearance in money.
However, the interim period from the finality of this
judgment until the monetary award is fully satisfied, is
equivalent to a forbearance of credit and therefore, during
that interim period, the
________________
54 Decision in CA-G.R. CV No. 16575, p. 6.

55 Rollo of G.R. No. 95897, pp. 120-121.
56 Comment on the Petition, p. 9.
57 This article provides: “if the obligation consists in the payment of a
sum of money, and the debtor incurs in delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of the
interest agreed upon, and in the absence of stipulation, the legal interest,
which is six per cent per annum.”
658

58
applicable rate of legal interest shall be 12%. As regards
Severino Gojocco, he shall be entitled to such interests only
from the time that Huibonhoa defaulted paying her
monthly rentals to him considering that he had already

received from her the amount of P270,825.00 as rentals.
The amount of monthly rentals upon which interest
shall be charged shall be that stipulated in paragraph 5 of
the lease contract or P15,000.00 to each lessor. That
amount, however, shall be subject to the provision therein
that the amount of rentals shall be “adjusted/increased
upon the corresponding increase in the rental of subleases
using the percentage increase in the totality of rentals of
the sub-lessees as basis for the percentage increase of
monthly rental that LESSEE will pay to LESSOR.” Upon
remand of this case therefore, the trial court shall
determine the total monetary award in favor of Loreta
Gojocco Chua and of Severino Gojocco.
From the facts of the case, it is clear that what
Huibonhoa aimed for in filing the action for reformation of
the lease contract, is to absolve herself from her delay in
the payment of monthly rentals and to extend the term of
the lease, which under the original lease contract, expired
in 1988. The ostensible reasons behind the institution of
the case she alleged were the unfavorable repercussions
resulting from the economic and political upheaval on the
heels of the Aquino assassination. However, a contract duly
executed is the law between the parties who are obliged to
comply with its terms. Events occurring subsequent to the
signing of an agreement may suffice to alter its terms only
if, upon failure of the parties to arrive at a valid
compromise, the court deems the same to be sufficient
reasons in law for altering the terms of the contract. This
court once said:
“It is a long established doctrine that the law does not relieve a
party from the effects of an unwise, foolish, or disastrous contract,
_______________
58 Food Terminal, Inc. v. Court of Appeals, 330 Phil. 903, 908; 262
SCRA 339, 344 (1996) citing Eastern Shipping Lines, Inc. vs. Court of
Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78.
659
VOL. 320, DECEMBER 14, 1999 659

entered into with all the required formalities and with full
awareness of what he was doing. Courts have no power to relieve
parties from obligations voluntarily assumed, simply because
their contracts
59
turned out to be disastrous deals or unwise
investments.”
In G.R. No. 102604
Petitioners Severino Gojocco and Loreta G. Chua assail the

Decision of the Court of Appeals on the following grounds:
a) RESPONDENT COURT HAS DECIDED

QUESTIONS OF SUBSTANCE NOT
HERETOFORE DETERMINED BY THIS
HONORABLE COURT OR HAS DECIDED THEM
IN A WAY CLEARLY CONTRARY TO LAW OR
THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT;
b) RESPONDENT COURT HAS SO FAR DEPARTED
FROM THE ACCEPTED AND USUAL COURSE
OF JUDICIAL PROCEEDINGS AS TO CALL FOR
AN EXERCISE OF THE POWERS OF
60
SUPERVISION BY THE HONORABLE COURT.
The contentions of petitioners relate to the basic issue

raised in the petition—whether or not the Court of Appeals
erred in affirming the decision of the Regional Trial Court
that dismissed for lack of jurisdiction the complaint for
ejectment brought by petitioners before the Metropolitan
Trial Court of Manila. In other words, the issue for
determination here is: whether or not the Metropolitan
Trial Court had jurisdiction over the complaint for
“cancellation of lease, ejectment and collection” in Civil
Case No. 90-54557.
The governing law on jurisdiction when the complaint
was filed on January 14, 1985 was Sec. 33 (2) of Batas
Pambansa Blg. 129 vesting municipal courts with:
_________________
59 Esguerra v. Court of Appeals, 335 Phil. 58, 69; 267 SCRA 380, 393
(1997) quoting Republic vs. Sandiganbayan, G.R. No. 108292, September
10, 1993, 226 SCRA 314, 328; Tanda vs. Aldaya, 89 Phil. 497 (1951); and
Villacorte vs. Mariano, 89 Phil. 342 (1951).
60 Petition in G.R. No. 102604, p. 16.
660

“Exclusive original jurisdiction over cases of forcible entry and

unlawful detainer. Provided, That when, in such cases, the
defendant raises the question of ownership in his pleadings and
the question of possession cannot be resolved without deciding the
issue of ownership, the issue of ownership should be resolved only
to determine the issue of possession.”
Thereunder, when the issue of ownership is indispensable

to the resolution of the issue of possession, the
Metropolitan
61
Trial Court is empowered to decide it as
well. Explaining62 this jurisdictional matter, in Dizon v.
Court of Appeals, the Court said:
“x x x. Well-settled is the rule that in an ejectment suit, the only

issue is possession de facto or physical or material possession and
not possession de jure. So that, even if the question of ownership
is raised in the pleadings, as in this case, the court may pass upon
such issue but only to determine the question of possession
especially if the former is inseparably linked with the latter. It
cannot dispose with finality the issue of ownership—such issue
being inutile in an ejectment suit except to throw light on the
question of possession. This is why the issue of ownership or title
is generally immaterial and foreign to an ejectment suit.
Detainer, being a mere quieting process, questions raised on
real property are incidentally discussed. In fact, any evidence of
ownership is expressly banned by Sec. 4, Rule 70 except to resolve
the question of possession. Thus, all that the court may do, is to
make an initial determination of who is the owner of the property
so that it can resolve who is entitled to its possession absent other
evidence to resolve the latter. But such determination of
ownership is not clothed with finality. Neither will it affect
ownership of the property nor constitute a binding and conclusive
adjudication on the merits with respect to the issue of ownership.
x x x.”
The Court has consistently held that in forcible entry and

unlawful detainer cases, jurisdiction is determined by the
______________
61 Del Mundo v. Court of Appeals, 322 Phil. 463, 473; 252 SCRA 432
(1996).
62 332 Phil. 429, 432-433; 264 SCRA 391 (1996).
661
VOL. 320, DECEMBER 14, 1999 661

63
63
nature of the action as pleaded in the complaint. The test
of the sufficiency of the facts alleged in the complaint is
whether or not admitting the facts alleged therein, the
court could render a valid judgment upon 64
the same in
accordance with the prayer of the plaintiff.
In an ejectment case, or specifically in an action for
unlawful detainer like the present case, it suffices to allege
that the defendant is unlawfully
65
withholding possession of
the property in question. A complaint for unlawful
detainer is therefore sufficient if it alleges that the
withholding of possession or the refusal to vacate is
unlawful66 without necessarily employing the terminology of
the law. It is therefore in order to make an inquiry into
the averments
67
of the complaint in Civil Case No. 90-
54557. The complaint, that was called one for
“cancellation of lease, ejectment and collection,” alleged the
following facts:
1. The parties are residents of different barangays and

therefore the provisions of P.D. No. 1508 (the law
on the katarungang pambarangay) are inapplicable;
2. The plaintiffs, Rufina G. Lim, Severino Gojocco and
Loreta Gojocco Chua are the registered owners of
three parcels of commercial land in Ilaya Street,
Binondo, Manila;
3. On June 30, 1983, they entered into a lease contract
with defendant Huibonhoa whereby the latter
would construct a 4-storey building on the three
lots that, after the expiration of the 15-year
________________
63 Vencilao v. Camarenta, 140 Phil. 99, 105 (1969) citing Mediran v.

Villanueva, 37 Phil. 752 (1918).
64 Del Bros. Hotel Corporation v. Court of Appeals, G.R. No. 87678,
June 16, 1992, 210 SCRA 33, 38.
65 Cañiza v. Court of Appeals, 335 Phil. 1107, 1115; 268 SCRA 640
(1997) citing Sumulong v. Court of Appeals, G.R. No. 108817, May 10,
1994, 232 SCRA 372.
66 Ibid., citing also Co Tiamco v. Diaz, 75 Phil. 672 (1946); Valderama
Lumber Manufacturer’s Co., Inc. v. L.S. Sarmiento Co., Inc., 115 Phil. 274
(1962) and Pangilinan v. Aguilar, 150 Phil. 166 (1972).
67 Ibid., at p. 1113 citing Sarmiento v. Court of Appeals, 320 Phil. 146;
250 SCRA 108 (1995).
662

period of the lease, would be owned by the lessors,

and that, upon completion of construction of the
building within eight (8) months from signing of the
lease contract, the lessee would start paying
monthly rentals;
4. After the expiration of the 8-months period or in
March 1984, the rentals of P45,000.00 a month
accrued;
5. Despite “verbal demands, meetings and
conferences” by which the plaintiffs demanded from
defendant payment of the total amount due on
account of the lease contract, defendant failed to
pay;
6. On December 19, 1984, the plaintiffs, through
counsel, wrote defendant letter informing her of
their intention to “terminate and cancel the lease
for violation of its terms by the defendant” at the
same time demanding restitution of the lots in
question and payment of all rentals due;
7. Despite such verbal and written demands, the
defendant refused to comply therewith to the
damage and prejudice of the plaintiffs considering
that defendant was subleasing the stalls, bodegas
and offices to tenants who had paid her goodwill
money and “exorbitant rentals” since March 1984 or
prior to the completion of the building until the
filing of the complaint in amounts totaling millions
of pesos;
8. Defendant continued to sublease vacant spaces
while depriving plaintiffs of reasonable
compensation for the use and occupation of the
premises;
9. Defendant did not utilize her own capital in the
construction of the building as she was able to
mortgage the lots to the China Banking
Corporation in the total amount of P3,700,000.00 as
well as collect goodwill money from tenants;
10. Plaintiffs revoked the authority given to defendant
to encumber the property because of her failure of
pay and liquidate the real estate loan within the
one-year period which expired on September 30,
1984;
11. That plaintiffs were forced to file the action by
reason of defendant’s bad faith and unwarranted
refusal to satisfy their claims; and
12. The rentals should be made to answer for plaintiffs’

monetary claims on account of defendant’s
impending departure from the Philippines.
663
VOL. 320, DECEMBER 14, 1999 663

After praying for the issuance of a preliminary writ of

attachment, the plaintiffs prayed as follows:
“WHEREFORE, premises considered, it is most respectfully

prayed that judgment be rendered in favor of plaintiffs and
against the defendant as follows:
1. Ordering defendant and all persons claiming rights under

her to forthwith vacate the leased premises described in
this Complaint and to surrender actual and physical
possession to herein plaintiffs and/or their duly authorized
representatives;
2. Ordering defendant to pay plaintiff all rentals due and
unpaid at the agreed rate of P45,000.00 per month from
March, 1984 to January, 1985 or for a period of 11 months
with legal interests thereon until fully paid;
3. Ordering the defendant to deposit past and future rentals
with this Honorable Court, or in a bank acceptable to both
parties, the Passbook to be turned over and submitted to
this Honorable Court for further disposition;
4. Sentencing defendant to pay the fair rental value of,
and/or reasonable compensation for, the use and
occupancy of the leased premises at the rate of P60,000
per month beginning February 5, 1985 and every 5th of
the succeeding month thereafter until the premises is
actually vacated and restored to herein plaintiffs;
5. To pay plaintiffs a sum equivalent to 20% of the total
amount claimed in this action for and as attorney’s fees
exclusive of appearance fees and costs of this action;
6. That pending hearing of this case, a writ of preliminary
attachment be issued against the credits due defendant
from the tenants or sublessees of the premises in question
to serve as security for the satisfaction of any judgment
that may be recovered in this case;
7. For such other and further relief as this Honorable Court
may deem proper, just and equitable;
8. Plaintiffs further respectfully pray that for expediency,
considering the nature of this action and to protect
plaintiffs from incurring further losses, damages and

expenses concomitant to the deprivation or loss of their
possession, that notwithstanding the amount of claim
involved, they hereby re
664

spectfully invoke the applicability of the rules on

Summary Procedure in the interest of justice.”
Undoubtedly, the complaint avers ultimate facts required

for a cause of action in an unlawful detainer case. It alleges
possession of the properties by the lessee, verbal and
written demands to pay rental arrearages and to vacate the
leased premises, continued refusal of the lessees to
surrender possession of the premises, and the fact that the
action was filed within one year from demand to vacate.
A reading of the allegations of the complaint and the
reliefs prayed for indeed reveals facts that appear to be
extraneous to the primary aim of recovering possession of
property in an action for unlawful detainer although these
facts do not involve issue of ownership of the premises.
Thus, consonant with the allegation that defendant was
leasing the spaces in the building to the tune of millions of
peso, plaintiffs pray for an increase in monthly rentals to
P60,000.00 a month starting February 5, 1985 or after
construction of the building had been completed. The
prayer likewise speaks of “past and future rentals” that
should be deposited with the court or in an acceptable
bank. In other words, the complaint seeks relief that are
not limited to payment of the rent arrearages and the
eviction of defendant from the leased premises.
Although for reasons of their own the Gojoccos opted not
to express in the complaint their intention to terminate the
lease, such intention could be gleaned from their prayer
that the court should “sentence” Huibonhoa to pay the
higher rent of P60,000.00 a month. That explains why the
complaint is captioned as one for “cancellation of the lease”
aside from its being one for ejectment and “collection.” In
praying that the court directs the defendant to pay the
increased rental of P60,000.00 a month, plaintiffs, in effect,
would want the existing contract terminated in order that
the court could substitute it with another providing for an
increased monthly rental.
However, forging contracts for parties in a case is

beyond the jurisdiction of courts. Otherwise, it would result
in the
665
VOL. 320, DECEMBER 14, 1999 665

court’s substitution of its own volition in a contract that

should express only the parties’ will. Necessarily, the
Metropolitan Trial Court could not favorably act on the
prayer for cancellation of the contract with another
containing terms suggested by the plaintiffs as the
allegations and prayer therefor are no more than
superfluities that do not affect the main cause of action
averred in the complaint. The court therefore granted only
the main relief sought by the plaintiffs—the eviction of the
defendant.
The Regional Trial Court incorrectly held that the
complaint was also for rescission of contract, a case that is
certainly not within the jurisdiction of the Metropolitan
Trial Court. By the allegations of the complaint, the
Gojoccos’ aim was to cancel or terminate the contract
because they sought its partial enforcement in praying for
rental arrearages. There is a distinction in law between
cancellation of a contract and its rescission. To rescind is to
declare a contract void in its inception and to put an end to
it as though it never were. It is not merely to terminate it
and release parties from further obligations to each other
but to abrogate it from the beginning and restore the
parties to relative positions which they 68
would have
occupied had no contract ever been made.
Termination of a contract is congruent with an action for
unlawful detainer. The termination or cancellation of a
contract would necessarily entail enforcement of its terms
prior to the declaration of its cancellation in the same way
that before a lessee is ejected under a lease contract, he has
to fulfill his obligations thereunder that had accrued prior
to his ejectment. However, termination of a contract need
not undergo judicial intervention. The parties themselves
may exercise such option. Only upon disagreement between
the parties as to how it should be undertaken may the
parties resort to courts. Hence, notwithstanding the
allegations in the complaint that are extraneous or not
essential in an action for
_______________
68 Ocampo v. Court of Appeals, G.R. No. 97442, June 30, 1994, 233
SCRA 551, 561.
666

unlawful detainer, the Metropolitan Trial Court correctly

assumed jurisdiction over Civil Case No. 90-54557.
The Court finds sustainable basis for the observation of
the Court of Appeals that execution of the judgment
ejecting Huibonhoa would cause complications that are
anathema to a peaceful resolution of the controversy
between the parties. Thus, while Huibonhoa would be
ejected from the lots owned by Severino Gojocco and Loreta
Gojocco Chua, she would be bound by her agreement with
Rufina G. Lim to continue with the lease. The result would
be disadvantageous to both Huibonhoa and Severino
Gojocco and Loreta G. Chua. The said owners would be
unable to exercise rights of ownership over their lots upon
which the building was constructed unless they remove or
buy two-thirds of the building.
However, an action for unlawful detainer does not
preclude the lessee or ejected party from availing of other
remedies provided by law. The prevailing doctrine is that
suits or actions for the annulment of sale, title or document
do not abate
69
any ejectment action respecting the same
property. 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, Huibonhoa’s eviction
should ensue as a matter of enforcement of the lease
contract.
_________________
69 Corpuz v. Court of Appeals, G.R. No. 117005, June 19, 1997, 274
SCRA 275, 280.
667
VOL. 320, DECEMBER 14, 1999 667

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
petitioner’s 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.
Melo, (Chairman), Panganiban and Gonzaga-Reyes,

JJ., concur.
Vitug, J., In the result.
Judgment affirmed with modifications in G.R. No.

95897; while judgment is set aside in G.R. No. 102604,
order of the court a quo for ejectment upheld.
668

People vs. Macosta
Notes.—Novation by substitution of creditor requires an

agreement among the three parties concerned—the original
creditor, the debtor and the new creditor. (Reyes vs. Court
of Appeals, 264 SCRA 35 [1996])
The “novation theory” does not apply where the offer to
pay by the debtor, which was accepted by the creditor,
turned out to be only an empty promise which effectively
delayed the aggrieved party’s filing of a case for violation of
BP 22. (Llamado vs. Court of Appeals, 270 SCRA 423
[1997])
The consent of the lessor to the assignment of a lease is
necessary because the assignment involves the transfer not
only of rights but also of obligations, constituting novation
by substitution of one of the parties, i.e., the lessee.
(Sadhwani vs. Court of Appeals, 281 SCRA 75 [1997])
——o0o——
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1/22/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 320

VOL. 320, DECEMBER 14, 1999 625

FLORENCIA T. HUIBONHOA, petitioner, vs. COURT OF

SEVERINO GOJOCCO and LORETA GOJOCCO CHUA,

Contracts; Actions; Reformation of Contracts; Once the minds

a written instrument is made or construed so as to express or

626 SUPREME COURT REPORTS ANNOTATED

Huibonhoa vs. Court of Appeals

Philippines Corporation v. Court of Appeals, the Court said: “An

should be reformed. Huibonhoa having failed to discharge that

VOL. 320, DECEMBER 14, 1999 627

Huibonhoa vs. Court of Appeals

understood, ambiguous, or not obvious. It is a method by which

will of the debtor; (b) the event must be either unforeseeable or

628 SUPREME COURT REPORTS ANNOTATED

Huibonhoa vs. Court of Appeals

goods resulting in a substantial and continuing rise in the general

reasonably foreseen or was manifestly beyond the contemplation

VOL. 320, DECEMBER 14, 1999 629

Huibonhoa vs. Court of Appeals

in this case, of the delay in the construction of the building.

Gojocco who entered into an agreement with her on January 31,

630 SUPREME COURT REPORTS ANNOTATED

Huibonhoa vs. Court of Appeals

parties to the lease contract is required in this case. Ordinary

Rufina G. Lim signed the agreement on January 31, 1986 with

VOL. 320, DECEMBER 14, 1999 631

Huibonhoa vs. Court of Appeals

award does not partake of a loan or forbearance in money.

for reformation of the lease contract, is to absolve herself from her

632 SUPREME COURT REPORTS ANNOTATED

Huibonhoa vs. Court of Appeals

for parties in a case is beyond the jurisdiction of courts.

VOL. 320, DECEMBER 14, 1999 633

Huibonhoa vs. Court of Appeals

contract would necessarily entail enforcement of its terms prior to

extraneous or not essential in an action for unlawful detainer, the

PETITIONS for review on certiorari of the decisions of the

These two petitions for review on certiorari under Rule 45

634 SUPREME COURT REPORTS ANNOTATED

Court of Appeals in CA-G.R. CV No. 16575 and CA-G.R. SP

Lim, Severino Gojocco and Loreta Gojocco Chua stipulating

“5. Good will Money and Rate of Monthly Rental: Upon

VOL. 320, DECEMBER 14, 1999 635

LESSOR the sum of P300,000.00 each or a total sum of

LESSEE shall pay to each of the LESSOR the sum of P15,000.00

rentals of the sub-leasees (sic) as basis for the percentage increase

The parties also agreed that upon the termination of the

1 Rollo of G.R. No. 95897, p. 72.

636 SUPREME COURT REPORTS ANNOTATED

tember 27, 1983, to be precise, Huibonhoa signed a contract

construction was completed only in September 1984 or

3 Ibid., pp. 69-71.

VOL. 320, DECEMBER 14, 1999 637

tion of the building, no rents would accrue. Thus, according

may be fair and equitable to both the lessors and the

6 Record of Civil Case No. 9402, pp. 1-6.

638 SUPREME COURT REPORTS ANNOTATED

1984”; that she was about to sublease the vacant spaces in

The Gojoccos prayed that Huibonhoa and all persons