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    Reformation of Contracts - Huibonhoa v. CA (1999)

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    Lino Momongan
    1) Florencia Huibonhoa entered into a lease agreement with siblings Rufina Lim, Severino Gojocco, and Loreta Chua to lease their lots and construct a building. The agreement stated rent was to begin after 8 months if construction was incomplete, but Huibonhoa did not finish until over a year later. 2) Huibonhoa sued to reform the contract, arguing political instability delayed construction and rent should be reduced. The siblings argued the terms were clear. 3) The court dismissed the suit, finding Huibonhoa did not prove the contract failed to express the parties' intent or that political issues justified reforming the terms. Huibon

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    Reformation of Contracts - Huibonhoa v. CA (1999)

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    Lino Momongan
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    1) Florencia Huibonhoa entered into a lease agreement with siblings Rufina Lim, Severino Gojocco, and Loreta Chua to lease their lots and construct a building. The agreement stated rent was to begin after 8 months if construction was incomplete, but Huibonhoa did not finish until over a year later. 2) Huibonhoa sued to reform the contract, arguing political instability delayed construction and rent should be reduced. The siblings argued the terms were clear. 3) The court dismissed the suit, finding Huibonhoa did not prove the contract failed to express the parties' intent or that political issues justified reforming the terms. Huibon

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    Reformation of Contracts_ Huibonhoa v. CA (1999)

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    1) Florencia Huibonhoa entered into a lease agreement with siblings Rufina Lim, Severino Gojocco, and Loreta Chua to lease their lots and construct a building. The agreement stated rent was to begin after 8 months if construction was incomplete, but Huibonhoa did not finish until over a year later. 2) Huibonhoa sued to reform the contract, arguing political instability delayed construction and rent should be reduced. The siblings argued the terms were clear. 3) The court dismissed the suit, finding Huibonhoa did not prove the contract failed to express the parties' intent or that political issues justified reforming the terms. Huibon

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    99 views1 page

    Reformation of Contracts - Huibonhoa v. CA (1999)

    Uploaded by

    Lino Momongan
    1) Florencia Huibonhoa entered into a lease agreement with siblings Rufina Lim, Severino Gojocco, and Loreta Chua to lease their lots and construct a building. The agreement stated rent was to begin after 8 months if construction was incomplete, but Huibonhoa did not finish until over a year later. 2) Huibonhoa sued to reform the contract, arguing political instability delayed construction and rent should be reduced. The siblings argued the terms were clear. 3) The court dismissed the suit, finding Huibonhoa did not prove the contract failed to express the parties' intent or that political issues justified reforming the terms. Huibon

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    of 1

    320 SCRA 625 December 14, 1999

    FlorenciaHuibonhoa v. CA, Sps. Rufina and Anthony Lim, Loreta Chua and Sps. Severino and Priscilla Gojocco

    FACTS: On June 8, 1983, FlorenciaHuibonhoa entered into a Memorandum of Agreement (MOA) with siblings Rufina Lim,
    SeverinoGojocco and Loreta Chua for the lease of 3 lots owned and titled separately by each of the 3 siblings. On June 30 1983, the
    parties inked a contract of lease for a period of 15 years. The contract enables the lessee to construct a 4-storey building and to
    sublease the building and/or spaces therein. The contract further provides that lessee shall pay each lessor monthly rental of
    ₱15,000.00 which will start upon completion of the building BUT if it is not completed within 8 months from date of contract, the
    monthly rental shall already accrue and be paid; the same shall be increased upon corresponding increase in the rental of sub-leases.
    Also, parties agreed that title and ownership to the building shall automatically transfer to the lessors upon termination of the lease.
    During the construction, former Senator Benigno Aquino was assassinated, affecting the country’s economic stability. Consequently,
    hoarding of construction materials and increase in the interest rates were alleged to have adversely affected the construction of the
    building. Under the contract, the building was supposed to be completed within the 8-month period (July 1, 1983 to February 29,
    1984) and the payment of rental shall commence on March 1984, but the construction was only completed in September
    1984.Huibonhoa failed to pay rentals from March 1984 despite several verbal demands. On December 1984, Gojoccossent a final
    letter of demand for Huibonhoa to pay the rental arrearages and to vacate the leased premises.
    Huibonhoa brought an action for reformation of contract on January 3, 1985, alleging that: (1) the true intention as to when
    monthly rental would accrue was not therein expresseddue to mistake or accident, that the Gojoccos erred in considering March 1984
    to be the first accrual date when their true intention was that during the entire period of actual construction of the building – no rents
    would accrue; and (2) the contract failed to provide that should an unforeseen event would dramatically increase the cost of
    construction, the rent would be reduced and the lease term be extended. She then prayed that terms be novated so that accrual of rents
    is computed from October 1984, rent be equitably reduced to ₱30,000.00 and term be extended by 5 years. The Gojoccos submitted an
    answer asserting that the true intention was to obligate Huibonhoa to pay rents immediately upon the expiration of 8 months to avoid a
    situation where she would deliberately delay the completion to elude payment of rental starting March 1984, and that the assassination
    of Senator Aquino could not be considered fortuitous event to justify reduction of rent and extension of the lease term.
    On January 31, 1985 Rufina Lim entered into an agreement with Huibonhoa extending the term of the lease by 3 years and
    that no monthly rental shall be collected until construction was completed. It also provided that in case of some unforeseen event, rent
    shall be reduced and term be extended for such fair and equitable duration. On July 21, 1986, SeverinoGojocco entered into an
    agreement with Huibonhoa that altered the terms of the lease in the same way the agreement with Rufina Lim novated the contract.
    Makati RTC decided that Huibonhoa had not presented clear and convincing evidence to justify the reformation of the lease
    contract. The agreement with Rufina Lim that in effect reformed the contract was not binding with respect to the other lessors
    considering that they were separate and independent owners of the lots subject of the lease. Court of Appeals affirmed the decision of
    RTC.

    ISSUE: Whether or not the reformation of contract on the grounds allegedby Huibonhoa is proper.

    HELD: For an action for reformation to prosper, the following requisites must concur: (1) there must have been a meeting of minds
    of the parties to the contract; (2) instrument does not express the true intention of the parties; and (3) failure to express the true
    intention is due to mistake, fraud, inequitable conduct or accident. The only question for the case at bar is with regard to the
    concurrence of the 2ndand 3rdrequisite.To prove the 2nd requisite, she presented Rufina Lim as witness, but there was no statement in
    her testimony that categorically points to the fact that the contract of lease failed to express their true intention. The MOA provided
    that the contract shall bind the parties only upon signing of the lease contract, and lease contract qualified the time when the lessee
    should start paying the monthly rental – upon completion of the building, but if it is not completed within 8 months, monthly rental
    shall already accrue. Non-inclusion of such qualification would give the lessee unbridled discretion as to the period of construction to
    the detriment of the lessor’s right to exercise ownership thereof.Lessee asserted that by reason of oversight or mistake, the true
    intention regarding unforeseen events, terms should be adjusted as would be fair and equitable to both sides; contract really was a
    common business venture. The same constitutes an admission that there was an oversight in the drafting of the contract BY HER
    OWN COUNSEL. It cannot be attributed to all the parties and it cannot be considered a valid reason for the reformation of the
    contract. Since it was her counsel who drafted the contract, any obscurity should be construed against her.
    The assassination of Senator Aquino cannot be considered a fortuitous event that would justify the modification of the term
    of the lease. The cause of the delay was the escalation of prices of construction materials, and it is only when an extraordinary
    inflationsupervenes that the parties may be given relief in contractual obligations.
    The separate contract entered into with Rufina Lim did not novate the original contract. Parties must expressly agree to the
    abrogation of the old contract in favor of a new one. The very purpose of the second contract was to strengthen the enforceability of
    the lease contract, recognizing its continuing existence and validity. Severino Gojocco repudiates the new agreement as his consent
    was vitiated by fraud and false representation when the check issued in his favor was dishonored.

    FALLO: Petition is dismissed and CA decision is affirmed with modification.Petitioner is ordered to pay rent due from March 1, 1984
    with legal interest from time when rent became due (Loreta Chua) or from the time when she defaulted payment (SeverinoGojocco).

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