6. G.R. No.

146726 June 16, 2006 Directors on June 14, 1979, Cinco informed the Board members of Multi-
Realty’s proposal to sell all of the unassigned parking lots at a discounted
price of P15,000.00 per lot, or some 50% lower than the then prevailing
MULTI-REALTY DEVELOPMENT CORPORATION, Petitioner,
price of P33,000.00 each. The Board agreed to hold in abeyance any
vs.
decision on the matter to enable all its members to ponder upon the matter.
CONDOMINIUM CORPORATION, Respondent.

In the meantime, the fair market value of the unallocated parking slots
DECISION
reached P250,000.00 each, or a total of P18,000,000.00 for the 72 slots.

CALLEJO, SR., J.:

In September 1989, Multi-Realty, through its President, Henry Sy, who was
also a member of the Board of Directors of MATUSCO, requested that two
Before this Court is a petition for review on certiorari of the Decision 1 of Multi-Realty executives be allowed to park their cars in two of Makati
the Court of Appeals in CA-G.R. CV No. 44696 dismissing the appeal of Tuscany’s remaining 72 unallocated parking slots. In a letter, through its
Multi-Realty Development Corporation on the ground of prescription. counsel, MATUSCO denied the request, asserting, for the first time, that
the remaining unallocated parking slots were common areas owned by it. In
another letter, MATUSCO offered, by way of goodwill gesture, to allow
Multi-Realty is a domestic corporation engaged in the real estate business, Multi-Realty to use two unallocated parking slots, which offer was rejected
and the construction and development of condominiums. It developed, by the latter.
among others, the Ritz Towers Condominium, and the former Galeria de
Magallanes, both built in the Municipality (now city) of Makati.
On April 26, 1990, Multi-Realty, as plaintiff, filed a complaint, docketed as
Civil Case No. 90-1110, against MATUSCO, as defendant, for Damages
In the 1970s, Multi-Realty constructed a 26-storey condominium at the and/or Reformation of Instrument with prayer for temporary restraining
corner of Ayala Avenue and Fonda Street in Makati City, known as the order and/or preliminary injunction. The case was raffled to Branch 59 of
Makati Tuscany Condominium Building (Makati Tuscany, for short). The the Makati RTC.
building was one of the Philippines’ first condominium projects, making it
necessary for Multi-Realty and the government agencies concerned with
the project, to improve and formulate rules and regulations governing the Multi-Realty alleged therein that it had retained ownership of the 98
project as construction progressed. unassigned parking slots. Considering, however, that Makati Tuscany was
one of its first condominium projects in the Philippines, this was not
specified in Section 7(d) of the Master Deed since the documentation and
Makati Tuscany consisted of 160 condominium units, with 156 units from the terms and conditions therein were all of first impression. It was further
the 2nd to the 25th floors, and 4 penthouse units in the 26th floor. Two alleged that the mistake was discovered for the first time when MATUSCO
hundred seventy (270) parking slots were built therein for apportionment rejected its request to allow its (Multi-Realty’s) executives to park their
among its unit owners. One hundred sixty-four (164) of the parking slots cars in two of the unassigned parking lots.
were so allotted, with each unit at the 2nd to the 25th floors being allotted
one (1) parking slot each, and each penthouse unit with two slots. Eight (8)
other parking slots, found on the ground floor of the Makati Tuscany were In its Answer with counterclaim, MATUSCO alleged that Multi-Realty had
designated as guest parking slots, while the remaining 98 were to be no cause of action against it for reformation of their contract. By its own
retained by Multi-Realty for sale to unit owners who would want to have admission, Multi-Realty sold various parking slots to third parties despite
additional slots. its knowledge that the parking areas, other than those mentioned in Sec. 5
of the Master Deed, belonged to MATUSCO. MATUSCO prayed that
judgment be rendered in its favor dismissing the complaint; and, on its
According to Multi-Realty, the intention to allocate only 8 parking slots to counterclaim, to order the plaintiff to render an accounting of the proceeds
the Makati Tuscany’s common areas was reflected in its color-coded of the sale of the parking slots other than those described in Sec. 5 of the
ground floor plan, upper basement plan and lower basement plan prepared Master Deed; to pay actual damages equivalent to the present market value
by its architect, C.D. Arguelles and Associates. These plans, which depict of the parking areas other than those described in Sec. 5 of the Master
common areas as yellow zones and areas reserved for unit owners as red Deed, amounting to no less than P250,000.00 per slot plus reasonable
zones, clearly show that, of the 270 parkings slots, 262 were designated red rentals thereon at no less than P400.00 per slot per month from date of sale
zones, and only 8 first-floor parking slots were designated yellow zones or until payment by plaintiff to defendant of the market value of these parking
common areas. areas.

Pursuant to Republic Act No. 4726, otherwise known as the Condominium After trial, the RTC rendered a decision, the dispositive portion of which
Act, the Makati Tuscany Condominium Corporation (MATUSCO) was reads:
organized and established to manage the condominium units.

Premises considered, this case is dismissed. Defendant’s counterclaim is,

In 1975, Multi-Realty executed a Master Deed and Declaration of likewise, dismissed, the same not being compulsory and no filing fee
Restrictions2 (Master Deed, for short) of the Makati Tuscany. Sections 5 having been paid. Plaintiff is, however, ordered to pay defendant attorney’s
and 7 provide: fees in the amount of P50,000.00.

SEC. 5. Accessories to Units. – To be considered as part of each unit and Cost against plaintiff.
reserved for the exclusive use of its owner are the balconies adjacent
thereto and the parking lot or lots which are to be assigned to each unit.
SO ORDERED.4
xxxx
The trial court ruled that Multi-Realty failed to prove any ground for the
reformation of its agreement with MATUSCO relative to the ownership of
SEC. 7. The Common Areas. – The common elements or areas of the the common areas. There is no evidence on record to prove that the
Makati Tuscany shall comprise of all the parts of the project other than the defendant acted fraudulently or inequitably to the prejudice of the plaintiff,
units, including without limitation the following: and the latter was estopped, by deed, from claiming that it owned the
common areas. It also held that the defendant was not estopped from
xxxx assailing plaintiff’s ownership over the disputed parking slots.

(d) All driveways, playgrounds, garden areas and PARKING AREAS Multi-Realty appealed the decision to the CA via a petition under Rule 41
OTHER THAN THOSE ASSIGNED TO EACH UNIT UNDER SEC. 5 of the Rules of Court, contending that:
ABOVE;3
THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT AND
The Master Deed was filed with the Register of Deeds in 1977. Multi- DISALLOWING THE PLAINTIFF-APPELLANT FROM REFORMING
Realty executed a Deed of Transfer in favor of MATUSCO over these THE MASTER DEED BECAUSE:
common areas. However, the Master Deed and the Deed of Transfer did not
reflect or specify the ownership of the 98 parking slots. Nevertheless, I
Multi-Realty sold 26 of them in 1977 to 1986 to condominium unit buyers
who needed additional parking slots. MATUSCO did not object, and
certificates of title were later issued by the Register of Deeds in favor of the THERE IS VALID GROUND FOR REFORMATION OF THE MASTER
buyers. MATUSCO issued Certificates of Management covering the DEED SINCE THE MASTER DEED DID NOT REFLECT THE TRUE
condominium units and parking slots which Multi-Realty had sold. INTENTION OF THE PARTIES REGARDING THE OWNERSHIP OF
THE EXTRA NINETY-EIGHT PARKING [SLOTS] DUE TO MISTAKE.
At a meeting of MATUSCO’s Board of Directors on March 13, 1979, a
resolution was approved, authorizing its President, Jovencio Cinco, to II
negotiate terms under which MATUSCO would buy 36 of the unallocated
parking slots from Multi-Realty. During another meeting of the Board of
THE REGISTRATION OF THE MASTER DEED WITH THE In reply, Multi-Realty averred that MATUSCO’s counterclaim had already
REGISTER OF DEEDS DID NOT MAKE PLAINTIFF-APPELLANT prescribed because it was filed only in 1990, long after the period therefor
GUILTY OF ESTOPPEL BY DEED. had elapsed in 1981.

III On August 21, 2000, the CA rendered its decision dismissing Multi-
Realty’s appeal on the ground that its action below had already prescribed.
The dispositive portion of the decision reads:
THE TRIAL COURT ERRED IN FINDING THAT DEFENDANT-
APPELLEE IS NOT ESTOPPED FROM QUESTIONING THE
OWNERSHIP OF PLAINTIFF-APPELLANT OVER THE DISPUTED WHEREFORE, foregoing premises considered, the appeal having no merit
PARKING LOTS.5 in fact and in law, is hereby ORDERED DISMISSED, and the judgment of
the trial court is MODIFIED by deleting the award of attorney’s fees not
having been justified but AFFIRMED as to its Order dismissing both the
In support of its appeal, Multi-Realty reiterated its contentions in the trial
main complaint of plaintiff-appellant and the counterclaim of defendant-
court, insisting that it had adduced evidence to prove all the requisites for
appellant. With costs against both parties.8
the reformation of Section 7(d) of the Master Deed under Article 1359 of
the New Civil Code. It was never its intention to designate the 98
unassigned parking slots as common areas, and, as shown by the evidence The appellate court ruled that it was justified in dismissing Multi-Realty’s
on record, this was known to MATUSCO. Under Article 1364 of the New appeal on the ground of prescription as it was clothed with ample authority
Civil Code, an instrument may be reformed if, due to lack of skill on the to review the lower court’s rulings even those not assigned as errors on
part of the drafter, the deed fails to express the true agreement or intention appeal, especially if the consideration of the matter is necessary to arrive at
of the parties therein. Since MATUSCO knew that it (Multi-Realty) owned a just decision of the case, and to avoid dispensing "piecemeal justice." The
the 98 parking slots when the Master Deed was executed, its registration CA cited the rulings of this Court in Servicewide Specialists, Inc. v. Court
did not make Multi-Realty guilty of estoppel by deed. In fact, MATUSCO of Appeals,9 and Dinio v. Laguesma.10
failed to object to the sale of some of the parking slots to third parties. It
was also pointed out that Multi-Realty remained in possession thereof.
Multi-Realty filed a motion for reconsideration of the decision, contending
that:
Multi-Realty further claimed that the trial court erred in not declaring that
MATUSCO was estopped from assailing the ownership over the parking
THIS HONORABLE COURT VIOLATED SECTION 8 OF RULE 51 OF
slots, as it not only conformed to the sale of some of the unassigned parking
THE RULES OF COURT TO MRDC’S SUBSTANTIAL AND UNFAIR
slots but likewise failed to assail the ownership thereon for a period of 11
PREJUDICE BY RESOLVING MRDC’S APPEAL ON THE GROUND
years. It insisted that the sale of the said parking slots was made in accord
OF PRESCRIPTION, EVEN THOUGH NEITHER PARTY HAD
with law, morals and public order, and that MATUSCO’s claim of
ASSIGNED OR ARGUED AS AN ERROR THE TRIAL COURT’S
ownership of the unassigned parking slots was merely an afterthought.
FAILURE TO DISMISS THE ACTION FILED BY MRDC BELOW AS
PRESCRIBED.
MATUSCO, for its part, appealed the trial court’s dismissal of its
counterclaim.
THIS HONORABLE COURT ERRED IN COUNTING THE RUNNING
OF THE PRESCRIPTIVE PERIOD FROM THE DATE OF EXECUTION
On Multi-Realty’s appeal, MATUSCO countered that the 270 parking slots OF THE MASTER DEED IN 1975, BECAUSE UNDER ARTICLE 1150
were to be apportioned as follows: OF THE CIVIL CODE, AND THE SUPREME COURT’S DECISIONS IN
TORMON VS. CUTANDA, AND VELUZ VS. VELUZ, MRDC’S
PERIOD TO FILE A SUIT FOR REFORMATION ONLY BEGAN
1 parking lot for each ordinary unit - RUNNING IN 1989, AFTER DEFENDANT-APPELLANT MAKATI
TUSCANY CONDOMINIUM CORPORATION’S REPUDIATION OF
2 parking lots for each of the 4 Penthouse Apartment Units - THE PARTIES’ TRUE AGREEMENT GAVE RISE TO MRDC’S RIGHT
OF ACTION.11
of the remaining 106 parking lots, 34 parking lots were designated and
allocated as part of "common areas" which would be allocated purely for
visitors, while the remaining 72 units would become part of the Multi-Realty further averred that the appellate court misapplied Rule 51,
Condominium Corporation’s income-earning "common areas" - Section 8 of the 1997 Rules of Court as well as the ruling of this Court in
the Servicewide Specialists case. It pointed out that, when it filed its Brief,
as appellee, Rule 51, Section 7 of the 1964 Rules of Court was still in
effect, under which an error which does not affect the jurisdiction over the
subject matter will not be considered unless stated in the assignment of
error and properly assigned in the Brief, as the court may pass upon plain
and clerical errors only. Multi-Realty insisted that the parties did not raise
It was further averred that Multi-Realty, through Henry Sy, executed the the issue of whether its action had already prescribed when it filed its
Master Deed in July 1975 and the Deed of Transfer in 1977, in which the complaint in their pleadings below and in the respondent’s Brief. It claimed
ownership of the common areas was unconditionally transferred to that it was deprived of its right to due process when the appellate court
MATUSCO; Multi-Realty sold 26 of the 34 parking slots in bad faith, denied its appeal based on a ruling of this Court under the 1997 Rules of
which had been allocated purposely for visitors of unit owners, amounting Civil Procedure. It insisted that the ruling of this Court in Servicewide
to millions of pesos; the action for reformation has no legal basis because Specialist, Inc. was promulgated when the 1997 Rules of Civil Procedure
the transfer of the 106 unassigned parking slots which form part of the was in effect.
7
common areas is contrary to Section 16 of the Condominium Act.

On January 18, 2001, the CA issued a Resolution denying Multi-Realty’s

MATUSCO further pointed out that the unassigned parking slots could be motion for reconsideration. The appellate court cited the ruling of this
transferred only by the affirmative votes of all the members of Multi- Court in Rosello-Bentir v. Hon. Leanda,12 to support its ruling that the
Realty, and that the Master Deed and the Deed of Transfer were prepared action of petitioner had already prescribed when it was filed with the RTC.
by the latter with the assistance of its renowned lawyers. If there was a Multi-Realty received its copy of said Order of denial on January 29, 2001.
mistake in the drafting of the Master Deed in 1975, the deed should have
been corrected in 1977 upon the execution of the Deed of Transfer. With
the social and economic status of Henry Sy, Multi-Realty’s President, it is Multi-Realty, now petitioner, filed the instant petition for review on
incredible that the Master Deed and the Deed of Transfer failed to reflect certiorari, alleging that:
the true agreement of the parties. MATUSCO went on to state that Multi-
Realty failed to adduce a preponderance of evidence to prove the essential THE HONORABLE COURT OF APPEALS DECIDED A QUESTION
requirements for reformation of the questioned documents. Even if there OF SUBSTANCE IN A MANNER INCONSISTENT WITH LAW, AND
was a mistake in drafting the deeds, reformation could not be given due DEPARTED WITH UNFAIRLY PREJUDICIAL EFFECT FROM THE
course absent evidence that defendant-appellee acted fraudulently or USUAL COURSE OF JUDICIAL PROCEEDINGS LAID DOWN IN
inequitably. SECTION 8 OF RULE 51 OF THE RULES OF COURT WHEN IT
DISMISSED MULTI-REALTY’S "APPEAL" ON THE BASIS OF
On its claim of ownership over the unassigned parking slots, MATUSCO PRESCRIPTION, EVEN THOUGH NEITHER PARTY RAISED [NOR]
averred that it is not estopped to do so because the sales thereof were DISCUSSED THE TRIAL COURT’S FAILURE TO ENFORCE THE
illegal, and it had no knowledge that Multi-Realty had been selling the ALLEGEDLY APPLICABLE TIME BAR AS AN ERROR IN THEIR
same. Having acted fraudulently and illegally, Multi-Realty cannot invoke BRIEFS.
estoppel against it.
THE HONORABLE COURT OF APPEALS DECIDED A MATTER OF
On the RTC decision dismissing its counterclaim, MATUSCO averred that SUBSTANCE IN A MANNER PROBABLY NOT IN ACCORD WITH
said decision is erroneous, as it had adduced evidence to prove its ARTICLE 1150 OF THE CIVIL CODE, WHEN IT DISREGARDED
entitlement to said counterclaim. THIS HONORABLE COURT’S RULINGS IN TORMON V. CUTANDA
AND VELUZ V. VELUZ, AND RULED THAT THE PRESCRIPTIVE
PERIOD APPLICABLE TO AN ACTION FOR REFORMATION
BEGINS TO RUN FROM THE DATE THE INSTRUMENT TO BE
REFORMED IS EXECUTED, RATHER THAN FROM THE DATE ON Nevertheless, given the factual backdrop of the case, it was inappropriate
WHICH THE TRUE AGREEMENT THE REFORMATION IS MEANT for the CA, motu proprio, to delve into and resolve the issue of whether
TO EXPRESS IS VIOLATED. petitioner’s action had already prescribed. The appellate court should have
proceeded to resolve petitioner’s appeal on its merits instead of dismissing
the same on a ground not raised by the parties in the RTC and even in their
THE HONORABLE COURT OF APPEALS OVERLOOKED
pleadings in the CA.
RELEVANT FACTS SUSTAINING A DECISION ALLOWING
REFORMATION OF THE MASTER DEED WHEN IT FAILED TO
REVERSE THE TRIAL COURT’S DECISION AND FIND THAT Even if we sustain the ruling of the CA that it acted in accordance with the
MATUSCO’S CONSISTENT RECOGNITION OF, AND Rules of Court in considering prescription in denying petitioner’s appeal,
PARTICIPATION IN, THE SALES OF UNALLOCATED PARKING we find and so rule that it erred in holding that petitioner’s action had
SLOTS MADE BY MULTI-REALTY, AND ITS EFFORTS TO BUY already prescribed when it was filed in the RTC on April 26, 1990.
THE UNALLOCATED PARKING SLOTS FROM MULTI-REALTY,
ESTOP IT FROM ASSERTING TITLE TO THE UNALLOCATED
Prescription is rightly regarded as a statute of repose whose object is to
PARKING SLOTS.13
suppress fraudulent and stale claims from springing up at great distances of
time and surprising the parties or their representatives when the facts have
The Court is to resolve two issues: (1) whether the CA erred in dismissing become obscure from the lapse of time or the defective memory or death or
petitioner’s appeal on the ground of prescription; and (2) whether removal of witnesses. The essence of the statute of limitations is to prevent
petitioner’s action had already prescribed when it was filed in 1990. fraudulent claims arising from unwarranted length of time and not to defeat
actions asserted on the honest belief that they were sufficiently submitted
for judicial determination.22 Our laws do not favor property rights hanging
On the issue of prescription, petitioner asserts that under Article 1150 in
in the air, uncertain, over a long span of time.23
relation to Article 1144 of the New Civil Code, its action for reformation of
the Master Deed accrued only in 1989, when respondent, by overt acts,
made known its intention not to abide by their true agreement; since the Article 1144 of the New Civil Code provides that an action upon a written
complaint below was filed in 1990, the action was filed within the contract must be brought within ten (10) years from the time the right of
prescriptive period therefor. Petitioner cites the rulings of this Court in action accrues:
Tormon v. Cutanda,14 Veluz v. Veluz,15 and Español v. Chairman,
Philippine Veterans Administration16 to bolster its claim.
Art. 1144. The following actions must be brought within ten years from the
time the right of action accrues:
In its comment on the petition, respondent avers that, as held by this Court
in Rosello-Bentir v. Hon. Leanda,17 the prescriptive period for the petitioner
(1) Upon a written contract;
to file its complaint commenced in 1975, upon the execution of the Master
Deed in its favor. Considering that the action was filed only in 1990, the
same, by then, had already prescribed. (2) Upon an obligation created by law;

On the first issue, we sustain petitioner’s contention that the CA erred in (3) Upon a judgment.
dismissing its appeal solely on its finding that when petitioner filed its
complaint below in 1990, the action had already prescribed. It bears
In relation thereto, Article 1150 of the New Civil Code provides that the
stressing that in respondent’s answer to petitioner’s complaint, prescription
time for prescription of all actions, when there is no special provision
was not alleged as an affirmative defense. Respondent did not raise the
which ordains otherwise, shall be counted from the day they may be
issue throughout the proceedings in the RTC. Indeed, the trial court did not
brought. It is the legal possibility of bringing the action that determines the
base its ruling on the prescription of petitioner’s action; neither was this
starting point for the computation of the period of prescription.24
matter assigned by respondent as an error of the RTC in its brief as
defendant-appellant in the CA.
The term "right of action" is the right to commence and maintain an action.
In the law of pleadings, right of action is distinguished from a cause of
Settled is the rule that no questions will be entertained on appeal unless
action in that the former is a remedial right belonging to some persons
they have been raised below. Points of law, theories, issues and arguments
while the latter is a formal statement of the operational facts that give rise
not adequately brought to the attention of the lower court need not be
to such remedial right. The former is a matter of right and depends on the
considered by the reviewing court as they cannot be raised for the first time
substantive law while the latter is a matter of statute and is governed by the
on appeal. Basic considerations of due process impel this rule. 18
law of procedure. The right of action springs from the cause of action, but
does not accrue until all the facts which constitute the cause of action have
Truly, under Section 7, Rule 51 of the 1964 Rules of Court, no error which occurred.25
does not affect the jurisdiction over the subject matter will be considered
unless stated in the assignment of errors and properly argued in the brief,
A cause of action must always consist of two elements: (1) the plaintiff’s
save as the Court, at its option, may pass upon plain errors not specified,
primary right and the defendant’s corresponding primary duty, whatever
and clerical errors. Even at that time, the appellate court was clothed with
may be the subject to which they relate – person, character, property or
ample authority to review matters even if not assigned as errors in their
contract; and (2) the delict or wrongful act or omission of the defendant, by
appeal if it finds that their consideration is necessary in arriving at a just
which the primary right and duty have been violated.26
decision of the case.19 It had ample authority to review and resolve matters
not assigned and specified as errors by either of the parties on appeal if it
found that the matter was essential and indispensable in order to arrive at a To determine when all the facts which constitute a cause of action for
just decision of the case. It has broad discretionary power, in the resolution reformation of an instrument may be brought and when the right of the
of a controversy, to take into consideration matters on record unless the petitioner to file such action accrues, the second paragraph of Section 1,
parties fail to submit to the court specific questions for determination. Rule 63, must be considered because an action for the reformation of an
Where the issues already raised also rest on other issues not specifically instrument may be brought under said Rule:
presented, as long as the latter issues bear relevance and close relation to
the former and as long as they arise from matters on record, the appellate
court has authority to include them in its discussion of the controversy as SECTION 1. Who may file petition. – Any person interested under a deed,
well as to pass upon them. In brief, in those cases wherein questions not will, contract or other written instrument, whose rights are affected by a
particularly raised by the parties surface as necessary for the complete statute, executive order or regulation, ordinance, or any other governmental
adjudication of the rights and obligations of the parties and such questions regulation may, before breach or violation thereof, bring an action in the
fall within the issues already framed by the parties, the interests of justice appropriate Regional Trial Court to determine any question of construction
dictate that the court consider and resolve them.20 or validity arising, and for a declaration of his rights or duties, thereunder.

When the appeals of the petitioner and that of the respondent were An action for the reformation of an instrument, to quiet title to real property
submitted to the CA for decision, the 1997 Rules of Civil Procedure was or remove clouds therefrom, or to consolidate ownership under Article
already in effect. Section 8, Rule 51 of said Rules, reads: 1607 of the Civil Code, may be brought under this Rule (emphasis
supplied).

SEC. 8. Questions that may be decided. – No error which does not affect
the jurisdiction over the subject matter or the validity of the judgment Such a petition is a special civil action determinative of the rights of the
appealed from or the proceedings therein will be considered unless stated in parties to the case. It is permitted on the theory that courts should be
the assignment of errors, or closely related to or dependent on an assigned allowed to act, not only when harm is actually done and rights jeopardized
error and properly argued in the brief, save as the court may pass upon by physical wrongs or physical attack upon existing legal relations, but also
plain errors and clerical errors. when challenge, refusal, dispute or denial thereof is made amounting to a
live controversy. The uncertainty and insecurity which may thereby be
avoided may hamper or disturb the freedom of the parties to transact
This provision was taken from the former rule with the addition of errors business or to make improvements on their property rights. A situation is
affecting the validity of the judgment or closely related to or dependent on thus created when a judicial declaration may serve to prevent a dispute
an assigned error.21 The authority of the appellate court to resolve issues not from ripening into violence or destruction.27
raised in the briefs of the parties is even broader.
The concept and meaning of the term cause of action in proceedings for when the appellees executed the affidavit of consolidation of the title
declaratory relief, vis-à-vis an ordinary civil action, is broadened. It is not, allegedly acquired by appellees under the fictitious pacto de retro sale. It
as in ordinary civil action, the wrong or delict by which the plaintiff’s rights was then, and only then, that the appellant’s cause of action arose to
are violated, but it is extended to a mere denial, refusal or challenge raising enforce the true contract and have the apparent one reformed or
at least an uncertainty or insecurity which is injurious to plaintiff’s rights. 28 disregarded, and the period of extinctive prescription began to run against
her. Since the consolidation affidavit was allegedly made only in
September 1960, and the complaint was filed in Court the following
For a petition for declaratory relief to prosper, the following conditions sine
November 1960, just two months afterward, the action of appellant had not
qua non must concur: (1) there must be a justiciable controversy; (2) the
prescribed.42
controversy must be between persons whose interests are adverse; (3) the
party seeking declaratory relief must have a legal interest in the
controversy; and (4) the issue involved must be ripe for judicial The Court’s ruling in the Tormon case was reiterated in Veluz v. Veluz. 43
determination.29
In the more recent case of Naga Telephone Co., Inc. v. Court of
To controvert is to dispute; to deny, to oppose or contest; to take issue Appeals,44 the Court made the following declaration:
on.30 The controversy must be definite and concrete, touching on the legal
relations of the parties having adverse legal interests. It must be a real and
Article 1144 of the New Civil Code provides, inter alia, that an action upon
substantial controversy admitting of specific relief through a decree of a
a written contract must be brought within ten (10) years from the time the
conclusive character as distinguished from an opinion advising what the
right of action accrues. Clearly, the ten (10) years period is to be reckoned
law would be upon a hypothetical state of facts.31
from the time the right of action accrues which is not necessarily the date of
execution of the contract. As correctly ruled by respondent court, private
The fact that the plaintiff’s desires are thwarted by its own doubts, or by the respondent’s right of action arose "sometime during the latter part of 1982
fears of others, does not confer a cause of action. No defendant has or in 1983 when according to Atty. Luis General, Jr. x x x, he was asked by
wronged the plaintiff or has threatened to do so.32 However, the doubt (private respondent’s) Board of Directors to study said contract as it already
becomes a justiciable controversy when it is translated into a claim of right appeared disadvantageous to (private respondent) (p. 31, tsn, May 8, 1989).
which is actually contested.33 As explained by this Court, a dispute between Private respondent’s cause of action to ask for reformation of said contract
the parties is justiciable when there is an active antagonistic assertion of a should thus be considered to have arisen only in 1982 or 1983, and from
legal right on one side and a denial thereof on the other, concerning a real, 1982 to January 2, 1989 when the complaint in this case was filed, ten (10)
not merely a theoretical question or issue.34 years had not yet elapsed.45

In sum, one has a right of action to file a complaint/petition for reformation This ruling was reiterated in Pilipinas Shell Petroleum Corporation v. John
of an instrument when his legal right is denied, challenged or refused by Bordman Ltd. of Iloilo, Inc., 46 where the Court declared that the cause of
another; or when there is an antagonistic assertion of his legal right and the action of respondent therein arose upon its discovery of the short deliveries
denial thereof by another concerning a real question or issue; when there is with certainty, since prior thereto, it had no indication that it was not
a real, definitive and substantive controversy between the parties touching getting what it was paying for. The Court declared that before then, there
on their legal relations having adverse legal interests. This may occur was yet no issue to speak of, and as such, respondent could not have
shortly after the execution of the instrument or much later.35 brought an action against petitioner. It was stressed that "it was only after
the discovery of the short deliveries that respondent got into position to
bring an action for specific performance." Thus, the Court declared that the
A party to an instrument is under no obligation to seek a reformation of an
action was brought within the prescriptive period.47
instrument while he is unaware that any opposition will be made to carry
out the actual agreement.36 The statute of limitations does not begin to run
against an equitable cause of action for the reformation of an instrument In the present case, petitioner executed the Master Deed in 1975. However,
because of mistake until the mistake has been discovered or ought to have petitioner had no doubt about its ownership of the unassigned parking lots,
been discovered.37 The mere recording of a deed does not charge the and even sold some of them. Respondent did not even object to these sales,
grantor with constructive notice of a mistake therein, but is to be considered and even offered to buy some of the parking slots. Respondent assailed
with other facts and circumstances in determining whether the grantor be petitioner’s ownership only in 1989 and claimed ownership of the
charged with notice actual or constructive.38 unassigned parking slots, and it was then that petitioner discovered the error
in the Master Deed; the dispute over the ownership of the parking slots
thereafter ensued. It was only then that petitioner’s cause of action for a
In State ex rel. Pierce County v. King County,39 the appellate court ruled
reformation of the Master Deed accrued. Since petitioner filed its complaint
that:
in 1990, the prescriptive period had not yet elapsed.

In equitable actions for reformation on the ground of mistake the rule on

The CA erred in relying on the ruling of this Court in Rosello-Bentir v.
the question of when the period of limitation or laches commences to run is
Hon. Leanda.48 In that case, the Leyte Gulf Traders, Inc. leased a parcel of
as stated by this Court in State v. Lorenz, 22 Wash. 289, 60 P. 644, 647:
land owned by Yolando Rosello-Bentir. The lease agreement was entered
into on May 5, 1968 and was for a period of 20 years. The parties therein
* * * that the statute did not begin to run against the right of appellant to agreed, inter alia, that:
reform the deed [because of a mistake therein] until the assertion on the
part of respondents of their adverse claim.
"4. IMPROVEMENT. The lessee shall have the right to erect on the leased
premises any building or structure that it may desire without the consent or
In Chebalgoity v. Branum, 16 Wash.2d 251, 133 P.2d 288, 290, we said: approval of the Lessor x x x provided that any improvements existing at the
termination of the lease shall remain as the property of the Lessor without
right to reimbursement to the Lessee of the cost or value thereof."49
‘Nor is his right to maintain it [an action for reformation grounded on
mistake] impaired by lapse of time, for the bar of the statue of limitations
does not begin to run until the assertion of an adverse claim against the On May 5, 1989, the lessor Rosello-Bentir sold the property and the
party seeking reformation.’ corporation questioned the sale, alleging that they had a verbal agreement
that the lessor has the right to equal the offers of prospective buyers of the
property. It insisted, however, that the said agreement was inadvertently
The rule is also stated in 53 C.J. 1003, reformation of instruments, as omitted in the contract. On May 15, 1992, the corporation filed a complaint
follows: for reformation of instrument, specific performance, annulment of
conditional sale and damages with a prayer for a writ of preliminary
‘[§ 155] C. Time for Bringing Action. An action to reform an instrument injunction, alleging that the contract of lease failed to reflect the true
may be brought as soon as the cause of action accrues. * * * On the other agreement of the parties.
hand, a party to an instrument is under no obligation to seek its correction
before his cause of action is finally vested or while he is unaware that any In his answer to the complaint, the lessor alleged that the corporation was
opposition will be made in carrying out the actual agreement, where for a guilty of laches for not bringing the case for reformation of the lease
long time the rights and duties of the parties are the same under the writing contract within the prescriptive period of 10 years from its execution. On
and under the terms which it is alleged were intended, and the failure to December 15, 1995, the trial court issued an Order dismissing the
take any action toward reformation until his right vests or opposition is complaint on the ground that the action had already prescribed. Plaintiff
manifest does not prejudice his suit.’40 filed a motion for the reconsideration of the Order and, on May 10, 1996,
the trial court granted the motion and set aside its Order, this time,
In this case, before petitioner became aware of respondent’s denial of its declaring that its Order dated December 15, 1995 dismissing the complaint
right under their true contract, petitioner could not be expected to file an was "premature and precipitate" and denied the corporation its right to due
action for the reformation of the Master Deed. As Justice Jose BL Reyes, process. The trial court declared that, aside from plaintiff’s cause of action
ratiocinated in Tormon v. Cutanda:41 for reformation of lease contract, plaintiff had other causes of action such
as specific performance, annulment of conditional sale and damages, which
must first be resolved before the trial on the merits of its case.
It follows that appellant’s cause of action arose only when the appellees
made known their intention, by overt acts, not to abide by the true
agreement; and the allegations of the complaint establish that this happened
On appeal to the CA, the lessor alleged that the RTC committed grave
abuse of discretion amounting to excess or lack of jurisdiction in setting
aside the December 15, 1995 Order of the RTC. For its part, the CA
rendered judgment dismissing the petition for certiorari on its finding that
the complaint had not yet prescribed when it was filed in the court below.
The CA declared that the prescriptive period for the action for reformation
of the lease contract should be reckoned not from the execution of the
contract of lease in 1968, but from the date of the four-year extension of the
lease contract after it expired in 1988. According to the CA, the extended
period of the lease was an "implied new lease" within the contemplation of
Article 1670 of the New Civil Code under which provision, the other terms
of the original contract were deemed revived in the implied new lease.

However, we reversed this CA decision and declared that the action for
reformation of the lease contract was inappropriate because petitioner had
already breached the deed.50 Even supposing that the four-year extended
lease could be considered as an implied new lease under Article 1670 of the
New Civil Code, the "other terms" contemplated therein were only those
terms which are germane to the lessee’s right of continued enjoyment of the
leased property. We concluded that the prescriptive period of 10 years, as
provided for in Article 1144 of the Civil Code, applies by operation of law
and not by the will of the parties, and that, therefore, the right of action for
reformation accrues from the date of the execution of the contract of lease
in 1968.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The

Decision of the Court of Appeals in CA-G.R. CV No. 44696 is SET
ASIDE. The Court of Appeals is directed to resolve petitioner’s appeal with
reasonable dispatch. No costs.

ORDERED.