TALATALA, ANGELO CARLO T.ROSELLO-BENTIR vs. LEANDA

G.R. No. 128991

April 12, 2000

KAPUNAN, J.:

TOPIC: RESTITUTION OF A CONTRACT; PRESCRIPTION

ISSUE: Whether or not the complaint for reformation of instrument has prescribed.HELD: The remedy of reformation of an instrument is grounded on the principle of equity where, in order to express the true intention of the contracting parties, an instrument already executed is allowed by law to be reformed.Moreover, the remedy, being an extraordinary one, must be subject to limitations as may be provided by law. Our law and jurisprudence set such limitations, among which is laches. A suit for reformation of an instrument may be barred by lapse of time. The prescriptive period for actions based upon a written contract and for reformation of an instrument is ten (10) years under Article 1144 of the Civil Code.

Prescription is intended to suppress stale and fraudulent claims arising from transactions like the one at bar which facts had become so obscure from the lapse of time or defective memory. In the case at bar, respondent corporation had ten (10) years from 1968, the time when the contract of lease was executed, to file an action for reformation. Sadly, it did so only on May 15, 1992 or twenty-four (24) years after the cause of action accrued, hence, its cause of action has become stale, hence, time-barred. The prescriptive period of ten (10) years provided for in Art. 1144 applies by operation of law, not by the will of the parties. Therefore, the right of action for reformation accrued from the date of execution of the contract of lease in 1968.ATILANO vs. ATILANO

G.R. No. L-22487

May 21, 1969

MAKALINTAL, J.:

TOPIC: REFORMATION; INTENT OF THE PARTIES; VITIATION OF CONSENT

ISSUE: Whether or not the real intention of the parties to the sale of the contract is effectively expressed

HELD: From all the facts and circumstances we are convinced that the object thereof, as intended and understood by the parties, was that specific portion where the vendee was then already residing, where he reconstructed his house at the end of the war, and where his heirs, the plaintiffs herein, continued to reside thereafter: namely, lot No. 535-A; and that its designation as lot No. 535-E in the deed of sale was simple mistake in the drafting of the document.The mistake did not vitiate the consent of the parties, or affect the validity and binding effect of the contract between them. The new Civil Code provides a remedy for such a situation by means of reformation of the instrument. This remedy is available when, there having been a meeting of the funds 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 on accident (Art. 1359, et seq.)

In this case, the deed of sale executed in 1920 need no longer reformed. The parties have retained possession of their respective properties conformably to the real intention of the parties to that sale, and all they should do is to execute mutual deeds of conveyance.CARANTES vs. COURT OF APPEALSG.R. No. L-33360

April 25, 1977

CASTRO, C.J:

TOPIC: VOID AND INEXISTENT CONTRACTS

ISSUE: Whether or not the contract entered into is to be considered as void or inexistent for lack of considerationHELD: Article 1409 (2) of the new Civil Code relied upon by the respondent court provides that contracts "which are absolutely simulated or fictitious" are inexistent and void from the beginning. The basic characteristic of simulation is the fact that the apparent contract is not really desired or intended to produce legal effects or in any way alter the juridical situation of the parties.

The respondents' action may not be considered as one to declare the inexistence of a contract for lack of consideration. It is total absence of cause or consideration that renders a contract absolutely void and inexistent. In the case at bar consideration was not absent. The sum of P1.00 appears in the document as one of the considerations for the assignment of inheritance. In addition and this of great legal import the document recites that the decedent Mateo Carantes had, during his lifetime, expressed to the signatories to the contract that the property subject-matter thereof rightly and exclusively belonged to the petitioner Maximino Carantes. This acknowledgment by the signatories definitely constitutes valuable consideration for the contract.

The present action being one to annul a contract on the ground of fraud, its prescriptive period is four years from the time of the discovery of the fraud.In connection with the payment ofreal estatetaxes, it is to be noted that the respondent court also found that all the receipts were issued in the name of the petitioner. The circumstances mentioned above do not make out a case of a continuing and subsisting trust.UY SOO LIM vs. TAN UNCHUAN

G.R. No. 12605

September 6, 1918

FISHER, J.:

TOPIC: MINORS; RESCISSION; RESTITUTIONISSUE: Whether or not the deed executed by by Uy Soo Lim is VOIDABLE on the grounds of fraud and undue influence, taking into consideration that the said deed was entered into while Uy Soo Lim was still a minor

HELD: The right of a minor to rescind, upon attaining his majority, a contract entered into during his minority is subject to the conditions (1) that the election to rescind must be made within a reasonable time after majority and (2) that all of the consideration which was in the minor's possession upon his reaching majority must be returned. The disposal of any part of the consideration after the attainment of majority imports an affirmance of the contract.Positive statutory law, no less than uniform court decisions, require, as a condition precedent to rescission of a contract on account of minority that the consideration received be refunded. We cite and quote as follows:

ART. 1295 (Civil Code). Rescission obliges the return of the things which were the objects of the contract, with their fruits and the sum with interest; therefore it can only be carried into effect when the person who may have claimed it can return that which, on his part, he is bound to do.

ART. 1304 (Civil Code). When the nullity arises fromthe incapacityof one of the contracting parties, the incapacitated person is not obliged to make restitution,except to the extent he has profited by the thing or by the sum he may have received.

ART. 1308 (Civil Code). While one of the contracting parties does not return that which he is obliged to deliver by virtue of the declaration of nullity, the other cannot be compelled to fulfill, on his part, what is incumbent on him.

Not only should plaintiff have refunded all moneys in his possession upon filing his action to rescind, but, by insisting upon receiving and spending such considerationafterreaching majority, knowing the rights conferred upon him by law, he must be held to have forfeited any right to bring such action.

Article 1314, Civil Code, provides as follows:

The action for nullity of a contract shall also be extinguished when the thing which is the object thereof should be lostby fraud or faultof the person having the right to bring the action.

If the cause of the action should be the incapacity of any of the contracting parties, the loss of the thing shall be no obstacle for the action to prevail, unless it has occurred by fraudor faulton the part of the plaintiffafter having acquired capacity.