- - - - - - - - - - - - - - - - NIA v.
Gamit - - - - - - - - - - - - - - -
G.R. No. 85869, November 6, 1992, Ponente: Padilla, J.
Interpretation of Contracts
FACTS
on a price certain or consideration to be
negotiated and agreed upon, by and
between the parties after the lapse of the
ten (10) year period; That it was not the
real agreement or intention of the
NIA parties, at least that of herein plaintiff, to
have the rentals paid as forming part of
the purchase price later to be negotiated
or agreed upon, much less was it their
intention at least on the part of herein
On 23 January 1985, the Plaintiff plaintiff, that the price shall not exceed
Estanislao Gamit (private P25,000.00, otherwise, there will be a
That the real agreement or intention gross inadequacy of the purchase price,
respondent herein) filed with the
RTC of Roxas, Isabela, a of the parties was only for the lease enough to shock the conscience of man
complaint against the defendant of the twenty five (25,000) thousand and that of the court; that it was not also
square meters by defendant at the the intention or agreement of the parties,
National Irrigation
at least that of herein plaintiff, that in
Administration for reformation rate of P0.10 centavos per square
case the lease contract is not renewed
of contract, recovery of meter, for a period of ten (10) years after the lapse of the ten (10) year
possession and damages, from date of execution with the right period, for failure of the parties to make
alleging, among others relating of defendant to purchase the area bilateral communication, the lessor or
to the contract of lease entered upon the termination of the lease,.. his successors or assigns are deemed to
into. have allowed continued use of the land
in suit without any additional
compensation whatsoever (see Whether or not the court of appeals has properly interpreted the contract.
stipulation no. 8, contract of
lease) and neither was it the true RULING
agreement or real intention of the
NO. A perusal of the complaint at bar and the relief prayed for therein shows that this is clearly a case
parties, at least on the part of for reformation of instrument. In order that an action for reformation of instrument as provided in
herein plaintiff, that upon Article 1359 of the Civil Code may prosper, the following requisites must concur: (1) there must have
payment of the rental amount of been a meeting of the minds of the parties to the contract; (2) the instrument does not express the true
P25,000.00, herein plaintiff shall intention of the parties; and (3) the failure of the instrument to express the true intention of the parties
be deemed to have conveyed and is due to mistake, fraud, inequitable conduct or accident. Otherwise stated, the complaint at bar alleges
ceded all his rights and interest on that the contract of lease with right to purchase does not express the true intention and agreement of
the subject property, in favor of the parties thereto due to mistake on the part of the plaintiff (private respondent) and fraud on the part
herein defendant. of the defendant (petitioner), i.e., by unlawfully inserting the stipulations contained in paragraphs 4,
8 and 9 in said contract of lease. As a general rule, parol evidence is not admissible for the purpose
of varying the terms of a contract. However, when the issue that a contract does not express the
RTC ruled in favor of plaintiff intention of the parties and the proper foundation is laid therefor — as in the present case — the court
and against herein defendant. CA should hear the evidence for the purpose of ascertaining the true intention of the parties. From the
affirmed. Hence, the present foregoing premises, we hold that the trial court erred in holding that the issue in this case is a question
petition for review. of law and not a question of fact because it merely involves the interpretation of the contract between
the parties.
CONTINUATION OF RULING
The lower court erred in not conducting a trial for the purpose of determining the true intention of the parties. It failed to appreciate
the distinction between interpretation and reformation of contracts. While the aim in interpretation of contracts is to ascertain the
true intention of the parties, interpretation is not, however, equivalent to reformation of contracts. Since the complaint in the case
at bar raises the issue that the contract of lease does not express the true intention or agreement of the parties due to mistake on the
part of the plaintiff (private respondent) and fraud on the part of the defendant (petitioner), the court a quo should have conducted
a trial and received the evidence of the parties for the purpose of ascertaining the true intention of the parties when they executed
the instrument in question.
FALLO
WHEREFORE, the decision of the trial court dated 20 March 1986 as well as the decision of the Court of
Appeals dated 14 November 1988 are hereby SET ASIDE and the case should be, as it is hereby,
REMANDED to the court of origin for further proceedings in accordance with this decision. Without costs.
