NATELCO VS.

CA
G.R. No. 107112 February 24, 1994
FACTS:
1. NATELCO: telephone company rendering local and long distance services in Naga.
1. Entered into contract with Camarines Sur II Electric Cooperative (electrice power service):
i. For the use in operation of its telephone service, electric light posts of CASURECO II.
ii. In return, free use of 10 telephone connections.
iii. Period: as long as NATELCO needs electric light posts, CASURECO understands that
contract will terminate when they are forced to stop, abandon operation and remove
lightposts.
2. CASURECO after 10 years: filed for reformation of contract with damages, not conforming to
guidelines of National Electrification Administration (NEA)- reasonable compensation for use of
posts.
i. Compensation is P10/posts but consumption of telephone cables costs P2630.
ii. NATELCO used 319 posts without any contract at P10.00; refused to pay.
iii. Poor servicing- damage not less than P100,000.
3. NATELCO
1. Compensation:
i. No cause of action for reformation of contract.
ii. Barred by prescription (10 years execution of contract)
iii. Barred by estoppel.
iv. Utilization could not have cause deterioration because already used for 11 years.
v. Value of expenses been equal to use of telephone lines.
4. TRIAL COURT
1. ORDERED REFORMATION OF AGREEMENT:
i. NATELCO to pay for electric polls sum of P10/pole from January 1989.
1. Contract eventually became unfair due to increase in volume of subscribers without increase of
telephone connections which are free of charge to CASURECO.
2. REFORMATION OF CONTACT: cannot make another contract but abolish inequities.
3. Contract does not mention use of posts outside Naga City. Contract should be reformed
including provision that for the use posts outside Naga.
5. CA: agreed to TRIAL COURT but for different reasons:
1. Article 1267 applicable
2. Contract POTESTATIVE CONDITION, THUS VOID.
Issue: Has the filing of reformation of contract prescribed? NO.
Held:
PRESCRIPTION HAS NOT YET LAPSED.

1. What is reformed is not the contract itself, but the instrument embodying the contract. It
follows that whether the contract is disadvantageous or not is irrelevant to reformation and
therefore, cannot be an element in the determination of the period for prescription of the
action to reform.
2. Article 1144: Action upon a written contract must be brought within 10 years from the time the
right of action accrues.
i. From the time the right of action accrues not necessarily the date of execution of the
contract.
ii. As correctly ruled by respondent court, private respondent's right of action arose
"sometime during the latter part of 1982 or in 1983 when according to Atty. Luis General, Jr. . .
., he was asked by (private respondent's) Board of Directors to study said contract as it already
appeared disadvantageous to (private respondent) in 1989.
iii. 10 years had not yet elapsed.

Leyson vs Bontuyan
GR No. 156357
Feb 18, 2005
Facts:
Calixto Gabud was the owner of a parcel of land located in Brgy. Adlawon, Mabolo City. The
said property was divided into two parcels of land because of a construction of a provincial
road. He later on executed a Deed of Absolute Sale in favor of spouses Protacio Tabal and
Vivencia Bontuyan, the spouses then sold the two lots to Lourdes V. Leyson as evidenced by a
Deed of Absolute Sale.
Despite the knowledge of Gregorio Bontuyan that said property has been sold to his son-in-law
and daughter, spouses Noval, he filed an application with the Bureau of Lands over Lot no
17,150 alleging that the property was public land and was neither claimed nor occupied by any
person and that he first entered upon and began cultivating the same in his favor. Thus, he has
obtained a Free Patent on the said lot and another parcel of land, lot no 13,272, was also
registered under his name.
Meanwhile, Gregorio again executed a Deed of Absolute Sale over the two lots in favor of
Naciansino Bontuyan. He then executed a Real Estate Mortgage over lot no 17,150 in favor of
Development Bank of the Philippines (DBP) as a security for a loan. Shortly thereafter,
Naciansino and spouse has left the Philippines and resided in the US.
When the spouses arrived in the Philippines to redeem their property from DBP, they later on
discovered that it was tenanted by Engr. Leyson, on of the late Lourdes Leysons children.
Issue:
Whether or not Gregorio Bontuyan acted in bad faith when he applied for free patent for the
same parcels of land.
Ruling:
Yes, record show that at the time when Gregorio applied for free patent, he was living with his
daughter, Vivencia. Thus, Gregorio must have known that at the time when he applied, the
subject lots were already sold by his daughter. Furthermore, records also show that he sold
twice the lot no 17,150 to plaintiff appellants. The first was in 1976 and the other was in 1980.
Plaintiff-appellants offered no reasonable explanation why Gregorio have to sell it twice. These
are badges of bad faith which affect the validity of the title of Gregorio over the subject lots.
Considering that Lourdes Leyson was in actual possession of the property, the respondents
cannot claim that they were in good faith when Gregorio allegedly sold the property to them.