# 8 NAGA TELEPHONE CO. VS.
CA - (SECOND) that since 1981, Natelco used 319 post without any
GR # 107112
Date: February 24, 1994
By: Julpha Policina
Topic:
Petitioner: Naga Telephone Co. Inc (NATELCO), Luciano Maggay
Respondent: CA, Camarines Sur II Electric Cooperative, Inc. (CASURECO II)
Ponente: Nocon, J.
Summary: Natelco and Casureco entered into a contract that Natelco will be using
posts of Casureco for its telephone lines for free. But after 11 years, Casureco
wanted a reformation of the contract since it was too one-sided favoring only
Natelco and that Natelco has been growing and wire lines are excessive already.
Casureco wants Natelco to pay but Natelco refused. RTC ordered Natelco to pay
the monthly compensation for use of posts and Casureco to pay monthly billings of
telephone to Natelco. CA affirmed in pursuant with Art. 1267 which is the issue in
this case. SC also affirmed, contract be reformed due to peculiar circumstances
which may affect public service and Casureco’s business as well.
Doctrine:
- Although Article 1267 does not grant the courts to remake, revise or
modify contracts, peculiar circumstances necessitates exercise of the
Court’s equity jurisdiction.
- ● For Natelco, Atty. Maggay testified (one of the petitioners herein). He is a
Facts:
● NATELCO: telephone company rendering local and long distance
telephone service in Naga
● CASURECO II: operates an electric power service in the same city
● 1977: They entered into a contract – Natelco will use the electric light
posts of Casureco, free of charge, 10 telephone connections in different
places
● It is stated in the contract that the term of the contract shall be
terminated for any reason that Casureco is forced to stop, abandoned its
operation as public service and becomes necessary to remove the electric
lightpost
● After 11 years, Casureco filed for reformation of the contract on the
grounds:
- (FIRST CAUSE OF ACTION) That it is too one-sided, most favorable
only for the Natelco
- that it is not in conformity with guidelines of National Electrification
Administration (NEA) [compensation for use of posts
P10/post/month]
- that the wires installed by Natelco through the years became too
heavy due to volume of its subscribers
contract with Casureco so it must be paid of P10/post from 1981 up
to time of filing of complaint [total of P267k] and Natelco refused to
pay
- (THIRD) that Natelco has poor servicing that caused great
inconvenience and damages to the tune of Casureco [not less than
P100k]
● In Natelco’s defense:
- (FIRST) that it must be dismissed because reasons are insufficient for
action of reformation of contract
- That it is barred by prescription since it was filed more than 10 years
after the contract
- Barred by estoppel since Casureco seeks to enforce contract in same
action
- (SECOND) Natelco claimed that Casureco had asked telephone lines
in areas outside Naga which Casureco’s posts were used and they
refused to pay since what is due is more than its claims against them
- (THIRD) that they were categorized as “very high” and “superior
quality” by NTC
● Casureco presented numerous witnesses (5 to be exact) to support claims
on those 3 cause of action
member of Board of Directions of Casureco and at the same time the
lawyer of Natelco
- Claimed that when the contract was executed. Atty. Tena (member
of BoD of Casureco) said that contract was fair to both parties
- Intention of the parties upon entering the contract was that
coverage would include whole area serviced by Natelco and that
when Casureco asked for telephone connections outside Naga and
they did not charge Casureco for the installation and reconnections
so it’s naturally in return by use of Casureco’s posts
● RTC ruling: reformation of the contract to abolish inequities, that
petitioner pay P10/post/month from the date of complaint, that
respondent pay monthly billings of petitioner from date of complaint
● Petitioners appealed with CA. CA affirmed in pursuant to Art. 1267 of
NCC.
● Natelco asserts that said article is not applicable because the contract
does not involve the rendition of service or personal prestation and it is
not for future service with future unusual change and insist that in a
previous case (Occeña case) be followed
Issue: Whether or not the CA erred in using Art. 1267 to affirm the lower court’s
decision - NO
Ruling:
● Art. 1267 speaks of “service” but may be understood as referring to
“performance” as well which in this case is allowing the petitioners to use
respondent’s posts.
● In this article, it is not a requirement that the contract be for future
service with future unusual change.
● Sen. Tolentino states that this article observes doctrine of unforeseen
events in where the parties stipulate in the light of certain prevailing
conditions, and once these conditions cease to exist, the contract also
ceases to exist BUT exception to this case.
● In Occeña case, the parties were released in pursuant with Article 1267
but in this case, SC took into account possible consequences if both
parties would be released from the contract – that Natelco will be
disrupted of their service in public while Casureco will return all
telephone units to Natelco causing prejudice to its own business. This
necessitates exercise of equity jurisdiction.
● Although Article 1267 does not grant the court the authority to remake,
modify or revise a contract, SC held that in reformation of contracts,
what is reformed is not the contract itself, but the instrument embodying
the contract.
● CA decision AFFIRMED.