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CONTRACTS REFORMATION OF ANNULMENT OF CONTRACT

INSTRUMENT
CHAPTER 4 Reformation of Instruments (n)
presupposes a perfectly valid is based on a defective
contract in which there has contract in which there has
Article 1359. When, there having been a meeting already been a meeting of been no meeting of the
of the minds of the parties to a contract, their true the minds of the contracting minds because the consent
parties of one or both of the
intention is not expressed in the instrument
contracting parties has been
purporting to embody the agreement, by reason vitiated
of mistake, fraud, inequitable conduct or
accident, one of the parties may ask for the RULE: where the vendee has
been led to enter into a
reformation of the instrument to the end that such
contract of sale
true intention may be expressed.
through fraud or
If mistake, fraud, inequitable conduct, or accident mispresentation on the part
has prevented a meeting of the minds of the of the vendor

parties, the proper remedy is not reformation of


or in the mistaken belief, that,
the instrument but annulment of the contract. as stated in the deed, the
--------------------------------------------------------- property he was buying was
unregistered land,
REFORMATION OF INSTRUMENTS
it is evident that the proper
RULE: When, there having been a meeting of the remedy is not reformation of
minds the deed of sale but
annulment of the contract.7
RULE: [When]
their true intention is not expressed ---------------------------------------------------------
in the instrument purporting to embody the
Article 1360. The principles of the general law on
agreement
the reformation of instruments are hereby
- by reason of mistake, fraud, inequitable
adopted insofar as they are not in conflict with
conduct or accident the provisions of this Code.
---------------------------------------------------------
REMEDY: reformation of the instrument
- [one of the parties may ask] REFORMATION OF INSTRUMENTS
- LIMITATIONS: to the end that such true
intention may be expressed. IN CASE OF CONFLICT:
GENERAL LAW v. CIVIL CODE
REQUISITE FOR THE REMEDY OF REFORMATION OF INSTRUMENT

RULE: In case of conflict between


(1) There must be a meeting of the minds of the contracting - the Civil Code
parties; - and
- the principles of the general law
(2) Their true intention is not expressed in the instrument; - on reformation,
- the former prevails.
(3) Such failure to express their true intention - The latter will have only suppletory effect.
- is due to mistake, fraud, inequitable conduct or
accident.3 RULE: Civil Code PREVAILS

RULE: principles of the general law - only suppletory effect.


RULE: When there is NO meeting of the minds - adopted insofar as they are not in conflict
with the provisions of this Code
“prevented a meeting of the minds”
---------------------------------------------------------
RULE: If mistake, fraud, inequitable conduct, or
accident has prevented SUCH [meeting of mind]
REMEDY: annulment of the contract.
• __

Article 1361. When a mutual mistake of the parties - meaning:


- has legal
causes the failure of the instrument to disclose effect instrument
their real agreement, said instrument may be effect of discloses
reformed. mortgage - [mortgage], but the
real intention is
---------------------------------------------------------
[sale]
REFORMATION OF INSTRUMENTS
THE REMEDY IS ANNULMENT REMEDY IS REFORMATION.
MUTUAL MISTAKE ---------------------------------------------------------
failure of the instrument
Article 1362. If one party was mistaken and the
DISCLOSE [THE TRUE INTENTION]
other acted fraudulently or inequitably in such a
way that the instrument does not show their true
REQUISITES FOR THIS ARTICLE intention, the former may ask for the reformation
(1) The mistake must be of fact (see Art. 1331.),
of the instrument.
- for if it is one of law, the remedy is annulment (see ---------------------------------------------------------
Art. 1334.); REFORMATION OF INSTRUMENTS
- Article 1334. Mutual error as to the legal effect of an
agreement when the real purpose of the parties is
frustrated, may vitiate consent. (n) UNILATERAL MISTAKE

(2) Such mistake must be proved by clear and convincing [acted fraudulently or inequitably]
evidence; HIDE [THE TRUE INTENTION]
(3) The mistake must be mutual, that is,
RULE: [In this Article, the mistake is unilateral
- common to both parties to the instrument; and
- but the other party acted fraudulently or inequitably.]
- in such a way that the instrument does not
mutual mistake must cause the failure of the
(4) The
instrument to disclose their true intention. (Bank of P.I. show their true intention
vs. Fidelity & Surety Co., 51 Phil. 57 [1927]; see Alaras vs. Court -
of Appeals, 64 SCRA 671 [1975]; Cunanan vs. Antepasado, 5 - RESULT:the former may ask for the
SCRA 1028 [1962]; Dizon vs. Gaborro, 83 SCRA 688 [1978].) reformation of the instrument.
- Under Article 1362, the right to ask for
reformation is granted only to the party who
Article 1334 Article 1361 was mistaken in good faith
---------------------------------------------------------
mistake of law mistake of fact Article 1363. When one party was mistaken and
Art. 1334, the error is as to the
the other knew or believed that the instrument did
Art. 1361, the real
legal effect of the agreement is not not state their real agreement, but concealed that
agreement. disclosed; fact from the former, the instrument may be
reformed.
If on the other hand, both A and B agreed on a sale
---------------------------------------------------------
agreed on a sale [intention is [intention is sale]
sale] REFORMATION OF INSTRUMENTS

and as written, but as written, UNILATERAL MISTAKE


- the document is - the document CONCEAL [THE TRUE INTENTION]
one of sale, shows a mortgage.
[knew or believed] [but concealed that fact]
, Here,
RULE: [In this Article, [In this Article, the mistake is unilateral
there is no meeting of the there was a meeting of the
- but the other party is guilty of concealment.
minds, minds (mutual consent?)
- Under Article 1362, The concealment of the
mistake by the other party constitutes fraud.
- the other knew or believed that the
mutual mistake as to the mutual mistake on the use
legal effect of the of “instrument” instrument did not state their real
instrument] agreement
- mistakenly - the instrument does
interpreted that an not disclose the real - RESULT: the instrument may be reformed.
instrument of [sale] intention of [sale]

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- may be availed of only by the party who - instrument states that the property
acted in good faith - is sold absolutely or
--------------------------------------------------------- - with a right of repurchase,
---------------------------------------------------------

Article 1364. When through the ignorance, lack of


skill, negligence or bad faith on the part of the
Article 1366. There shall be no reformation in the
person drafting the instrument or of the clerk or
following cases:
typist, the instrument does not express the true
(1) Simple donations inter vivos wherein no
intention of the parties, the courts may order that
condition is imposed;
the instrument be reformed.
(2) Wills;
--------------------------------------------------------- (3) When the real agreement is void.
REFORMATION OF INSTRUMENTS ---------------------------------------------------------
REFORMATION OF INSTRUMENTS
[THE TRUE INTENTION] IS NOT
EXPRESS/SHOWN IN THE INSTRUMENT
WHEN REFORMATION IS NOT ALLOWED
ignorance, lack of skill, negligence or bad faith on
the part of the person drafting the instrument RULE: REFORMATION IS NOT ALLOWED:

(1) Simple donations inter vivos wherein no


RULE:courts may order that the instrument be condition is imposed;
reformed. RULE: Donations are essentially acts of pure liberality.
- EXCEPTION: However, if the donation is conditional,
(a) ignorance of
- reformation may be resorted to
- 1) the drafter of the instrument
- so that the real or true conditions intended
- 2) or the clerk
by the donor might be brought out.
- 3) or the typist.

(2) Wills;
(b) lack of skill of
RULE: The making of a will is strictly a personal act (Art. 784,
- 1) the drafter of the instrument
Civil Code) which is free. (Art. 839, Civil Code). Moreover, a
- 2) or the clerk
will may be revoked at any time. (Art. 828, Civil Code)
- 3) or the typist.
- (NOTE: However, after the death of the testator,
errors or imperfections in descriptions may be
(c) bad faith of
corrected under Art. 789 of the Civil Code, but not
- 1) the drafter of the instrument
the manner of property disposal.)
- 2) or the clerk
- 3) or the typist.
(3) When the real agreement is void.
--------------------------------------------------------- RULE: In case the real agreement is void
Article 1365. If two parties agree upon the - because such a procedure would be useless.
- Once reformation is made, the new instrument
mortgage or pledge of real or personal property,
would be void precisely because the true
but the instrument states that the property is sold agreement and intention are void.
absolutely or with a right of repurchase,
reformation of the instrument is proper. ---------------------------------------------------------
--------------------------------------------------------- Article 1367. When one of the parties has brought
an action to enforce the instrument, he cannot
REFORMATION OF INSTRUMENTS
subsequently ask for its reformation.
---------------------------------------------------------
MISTAKE IN INSTRUMENT
MORTGATE OR PLEDGE REFORMATION OF INSTRUMENTS

RULE: reformation of the instrument is proper. WHEN REFORMATION IS NOT ALLOWED


- MORTGATE OR PLEDGE of real or personal
property,

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assert rights under them as reformed. (23 RCL, par. 2).]


one of the parties has brought
SCENARIO [ESTOPPEL?]:
an action to enforce the instrument

EFFECT: cannot subsequently ask for its Prescriptive Period for Reformation of a Contract
reformation.
10 YEARS
EXAMPLE A sold B a house.
- A fraudulently made the contract one of mortgage The period of prescription for the reformation of a contract is
instead of sale. ten (10) years.
- Both signed the contract of mortgage, - (such as one ostensibly an absolute sale but actually
- with B believing all the time that it was a contract of a mortgage)
sale.
- B, therefore, has the right to bring an action for the (Antonio Jayme, et al. v. Hon. Nestor Alampay L-39592, Jan.
reformation of the instrument; 28, 1975 )
- but if B brings an action to foreclose the mortgage,
- he is by said DOING action to enforce ---------------------------------------------------------
the instrument, Article 1369. The procedure for the reformation of
- He cannot, therefore,
instrument shall be governed by rules of court to
- cannot subsequently ask for its
be promulgated by the Supreme Court.
reformation of the instrument to make it
one of sale ---------------------------------------------------------
--------------------------------------------------------- REFORMATION OF INSTRUMENTS
Article 1368. Reformation may be ordered at the
instance of either party or his successors in GOVERNING RULES
interest, if the mistake was mutual; otherwise,
upon petition of the injured party, or his heirs and GENERAL RULE:
assigns.
--------------------------------------------------------- GOVERNED BY: rulesof court
- to be promulgated by the Supreme
REFORMATION OF INSTRUMENTS
Court.

Plaintiffs in Action for Reformation IN CASE OF CONFLICT:


GENERAL LAW v. CIVIL CODE
if the mistake was mutual
RULE: In case of conflict between
either party - the Civil Code
- and
or his successors in interest; - the principles of the general law
- on reformation,
- the former prevails.
IN ALL OTHER CASES: - The latter will have only suppletory effect.
[When mistake is not mutual?]
RULE: Civil Code PREVAILS
injured party
RULE: principles of the general law - only suppletory effect.
his heirs - adopted insofar as they are not in
conflict with the provisions of this Code
his assigns

RULE 63
Declaratory Relief and Similar Remedies
What Complaint Must Allege
Section 1. Who may file petition. — Any person
1) It is not the function of the remedy of reformation to make interested under a deed, will, contract or other
a new agreement, but to establish and perpetuate the true
written instrument, or whose rights are affected by
existing one. (23 RCL, par. 4, p. 311).
a statute, executive order or regulation, ordinance,
or any other governmental regulation may, before
2) Moreover, courts do not reform instruments merely for the
sake of reforming them, but only to enable some party to
breach or violation thereof bring an action in the
appropriate Regional Trial Court to determine any

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question of construction or validity arising, and for a


declaration of his rights or duties, thereunder. (Bar
Matter No. 803, 17 February 1998)

An action for the reformation of an instrument, to


quiet title to real property or remove clouds
therefrom, or to consolidate ownership under Article
1607 of the Civil Code, may be brought under this
Rule. (1a, R64)

Section 2. Parties. — All persons who have or


claim any interest which would be affected by the
declaration shall be made parties; and no
declaration shall, except as otherwise provided in
these Rules, prejudice the rights of persons not
parties to the action. (2a, R64)

Section 3. Notice on Solicitor General. — In any


action which involves the validity of a statute,
executive order or regulation, or any other
governmental regulation, the Solicitor General shall
be notified by the party assailing the same and
shall be entitled to be heard upon such question.
(3a, R64)

Section 4. Local government ordinances. — In any


action involving the validity of a local government
ordinance, the corresponding prosecutor or
attorney of the local governmental unit involved
shall be similarly notified and entitled to be heard. If
such ordinance is alleged to be unconstitutional,
the Solicitor General shall also be notified and
entitled to be heard. (4a, R64)

Section 5. Court action discretionary. — Except in


actions falling under the second paragraph of
section 1 of this Rule, the court, motu proprio or
upon motion, may refuse to exercise the power to
declare rights and to construe instruments in any
case where a decision would not terminate the
uncertainty or controversy which gave rise to the
action, or in any case where the declaration or
construction is not necessary and proper under the
circumstances. (5a, R64)

Section 6. Conversion into ordinary action. — If


before the final termination of the case, a breach or
violation of an instrument or a statute, executive
order or regulation, ordinance, or any other
governmental regulation should take place, the
action may thereupon be converted into an ordinary
action, and the parties shall be allowed to file such
pleadings as may be necessary or proper. (6a,
R64)
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