Naga Telephone Co. v. CA Art.1267: When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released released therefrom, therefrom, in whole or in part.
Petitioner: Naga Telephone Co. (NATELCO) (NATELCO) and Atty. Luciano Maggay Respondent: Caarines !ur "" Electric Cooperati#e$ "nc. (CA!%RECO) FACTS
No#e&er '$ ': NATELCO NATELCO and CA!%RECO entered into a contract *or the use &y NATELCO NATELCO in the operation o* its telephone ser#ice the electric light posts o* CA!%RECO in Naga City. NATELCO NATELCO agreed to install$ *ree o* charge$ ten ('+) telephone connections *or the use &y
CA!%RECO in the *ollo,ing places: - units- Main O**ice o* CA!%RECO -/ %nits 0 The 1arehouse - ' %nit 0 The !u&-!tation - ' %nit 0 The Residence o* President - ' %nit 0 The Residence o* Acting 2eneral Manager -/ %nits 0 To &e deterined &y the 2eneral Manager. The contract also pro#ided that the term or period of this contract shall be as long as the party of the first part has need for the electric light posts of the party of o f the second part it being understood that this contract shall terminate when for any reason whatsoever, the party of the second part is forced to stop, abandoned [sic] its operation as a public service and it becomes necessary to remove the electric lightpost; 3. The contract ,as prepared ,ith the assistance o* Atty. Atty. Luciano Maggay$ Maggay$ then e&er o* 4oard o* 5irectors o* CA!%RECO and at the sae tie legal counsel o* NATELCO. NATELCO. A*ter the contract has &een en*orced o#er '+ years: CA!%RECO
NATELCO !irst "ause of Action
!irst "ause of Action "t should &e disissed &ecause:
-CA!%RECO *iled against a gainst NATELCO NATELCO *or -it does not su**iciently state a cause o* action re*oration o* contract ,ith daages on the ground *or re*oration o* contract that it is too one-sided in *a#or o* NATELCO NATELCO -&arred &y prescription ha#ing &een *iled ore - it is not in con*ority ,ith the guidelines o* than '+ years a*ter e7ecution o* contract the National Electri*ication Adinistration
(NEA) ,hich direct that the reasona&le copensation *or the use o* the posts is P'+.++ per post$ per onth onth - a*ter ele#en ('') years o* petitioners6 use o* the posts$ the telephone telephone ca&les strung strung &y the thereon ha#e &ecoe uch hea#ier ,ith the increase in the #olue o* their su&scri&ers$ ,orsened &y the *act that their lineen &ore
-&arred &y estoppel since NATELCO NATELCO see8s to en*orce contract in the sae action -that their utili9ation o* CA!%RECO6s post could not ha#e caused deterioration &ecause they ha#e already &een in use u se *or '' years and that the #alue o* their e7penses *or '+ telephone lines long enoyed &y CA!%RECO *ree o* charge are
*ar in e7cess o* aounts claied &y the *or the holes through the posts at ,hich points those posts ,ere &ro8en during typhoons; that a post use o* their posts$ so that i* there ,as ine=uity$ it no, costs as uch as P/$<+.++; so that ustice ,as su**ered &y NATELCO. and e=uity deand that the contract &e re*ored to a&olish the ine=uities thereon #econd "ause of Action -CA!%RECO alleged that starting ,ith the year o* '>'$ NATELCO ha#e used ' posts in the to,n o* Pili$ Canaan$ Magarao$ and Milaor$ Caarines !ur$ all outside Naga City ,ithout any contract ,ith it.
#econd "ause of Action
clais that CA!%RECO had as8ed *or telephone lines in areas outside Naga City *or ,hich its posts ,ere used &y the; and that i*
NATELCO had re*used to coply ,ith CA!%RECO6s deands *or payent *or the -at the rate o* P'+.++ per post$ NATELCO use o* the posts outside Naga City$ it ,as should pay CA!%RECO *or the use thereo* the pro&a&ly &ecause ,hat is due to the *ro total aount o* P/<$<+.++ *ro '>' up to CA!%RECO is ore than its clai against the *iling o* its coplaint; and that NATELCO the. had re*used to pay CA!%RECO said aount despite deands.
$hird "ause of Action CA!%RECO coplained a&out the poor ser#icing &y NATELCO o* '+ telephone units ,hich caused great incon#enience and daage to the tune o* not less than P'++$+++.++
$hird "ause of Action clais that their telephone ser#ice has &een categori9ed &y NTC as ?#ery high@ and o* ?superior =uality@.
5uring trial: CA!%RECO (presented the *ollo,ing ,itnesses): -Dioscoro Ragragio (one o* the / o**icials ,ho signed the contract) declared that it ,as Atty. Maggay ,ho prepared contract; that the
NATELCO (Atty. Magay testi*ied):
-"t is true that Atty. Magay ,as a e&er o* the 4oard o* 5irectors o* CA!%RECO and at the understanding &et,een CA!%RECO and sae tie the la,yer o* NATELCO ,hen the NATELCO ,as that the latter ,ould only use contract ,as e7ecuted$ &ut Atty. 2audioso Tena the posts in Naga City &ecause at that tie$ ,ho ,as also a e&er o* the 4oard o* NATELCO6s capa&ility ,as #ery liited and they had no e7pectation o* e7pansion &ecause o* CA!%RECO ,as the one ,ho sa, to it that the contract ,as *air to &oth parties.
legal s=ua&&les ,ithin the copany; that CA!%RECO agreed to allo, NATELCO to use its posts in Naga City &ecause there ,ere any su&scri&ers therein ,ho could not &e ser#ed &y the &ecause o* lac8 o* *acilities; and that ,hile
the telephone lines strung to the posts ,ere #ery light in '$ said posts ha#e &ecoe hea#ily loaded in '>. -Engr. Antonio Borja ; declared that the posts
!irst "ause of Action
&eing used &y petitioners totalled '$+ as o* April '$ '>$ '/ o* ,hich ,ere in the to,ns (a) CA!%RECO has the right under the contract to use ten ('+) telephone units o* o* Pili$ Canaan$ and Magarao$ all outside Naga City; that petitioners6 ca&les strung to the NATELCO *or as long as it ,ishes ,ithout paying anything there*or e7cept *or long posts in '> are uch &igger than those in No#e&er$ '; that in '>$ alost '++ posts distance calls through PL5T out o* ,hich the latter get only '+ o* the charges. ,ere destroyed &y typhoon !isang: around /+ posts ,ere located &et,een Naga City and the (&) "n ost cases$ only drop ,ires and not to,n o* Pili ,hile the posts in &arangay telephone ca&les ha#e &een strung to the Concepcion$ Naga City ,ere &ro8en at the posts$ ,hich posts ha#e reained erect up to iddle ,hich had &een &ored &y petitioner6s present; lineen to ena&le the to string &igger (c) NATELCO6s lineen ha#e strung only telephone lines; that ,hile the cost per post in ' ,as only *ro P++.++ to P'$+++.++$ their sall essenger ,ires to any o* the posts and they need only sall holes to pass costs in '> ,ent up *ro P'$B++.++ to through; and P/$+++.++$ depending on the si9e; that soe lines that ,ere strung to the posts did not *ollo, (d) 5ocuents e7isting in the NTC sho, the iniu #ertical clearance re=uired &y the that the stringing o* NATELCO6s ca&les in National 4uilding Code$ so that there ,ere Naga City are according to standard and cases in '>> ,here$ &ecause o* lo, clearance copara&le to those o* PL5T. The accidents o* ca&les$ passing truc8s ,ould accidentally entioned &y CA!%RECO in#ol#ed truc8s touch said ca&les causing posts to *all and that ,ere either o#erloaded or had loads that resulting in &ro,n-outs until electric lines ,ere protruded up,ards$ causing the to hit the repaired. ca&les. LLpr
-Dario Bernardez declared that according to
NEA guidelines in '>B (E7h. 3C3)$ *or the use &y pri#ate telephone systes o* electric cooperati#es6 posts$ they should pay a iniu onthly rental o* P.++ per post$ and considering the escalation o* prices since '>B$ electric cooperati#es ha#e &een charging *ro P'+.++ to P'B.++ per post$ ,hich is ,hat petitioners should pay *or the use o* the posts.
#econd "ause of Action
the intention o* the parties ,hen they entered into the contract ,as that the co#erage thereo* ,ould include the ,hole area ser#iced &y NATELCO &ecause at that tie$ they already had su&scri&ers outside Naga City. CA!%RECO$ in *act$ had as8ed *or telephone connections outside Naga City *or its o**icers and eployees residing there in addition to the ten ('+) telephone units entioned in the contract. NATELCO ha#e not &een charging CA!%RECO *or the installation$ trans*ers and re-connections o* said telephones so that naturally$ they use
the posts *or those telephone lines. $hird "ause of Action
-Engr. Antonio Macandog testi*ied on the poor
ser#ice rendered &y petitioners6 telephone lines$ li8e the telephone in their Coplaints !ection ,hich ,as usually out o* order such that they could not respond to the calls o* their custoers. "n case o* disruption o* their telephone lines$ it ,ould ta8e t,o to three hours *or petitioners to reacti#ate the not,ithstanding their calls on the eergency line.
NTC has *ound NATELCODs ca&le installations to &e in accordance ,ith engineering standards and practice and copara&le to the &est in the country.
-Atty. !is "eneral# $r. testi*ied that the 4oard
o* 5irectors as8ed hi to study the contract soetie during the latter part o* '>/ or in '>$ as it had appeared #ery disad#antageous to pri#ate respondent. Not,ithstanding his recoendation *or the *iling o* a court action to re*or the contract$ the *orer general anagers o* pri#ate respondent ,anted to adopt a so*t approach ,ith petitioners a&out the atter until the ter o* 2eneral Manager enry Pascual ,ho$ a*ter *ailing to settle the atter aica&ly ,ith petitioners$ *inally agreed *or hi to *ile the present action *or re*oration o* contract.
RTC% First Cause of Action: ,hile the contract appeared to &e *air to &oth parties ,hen it ,as entered
into &y the during the *irst year o* pri#ate respondentDs operation and ,hen its 4oard o* 5irectors did not yet ha#e any e7perience in that &usiness$ it had &ecoe disad#antageous and un*air to pri#ate respondent &ecause o* su&se=uent e#ents and conditions$ particularly the increase in the #olue o* the su&scri&ers o* petitioners *or ore than ten ('+) years ,ithout the corresponding increase in the nu&er o* telephone connections to pri#ate respondent *ree o* charge. Conclusion- ,hile in an action *or re*oration o* contract$ it cannot a8e another contract *or the parties$ it can$ ho,e#er$ *or reasons o* ustice and e=uity$ order that the contract &e re*ored to a&olish the ine=uities therein. Thus$ said court ruled that the contract should &e re*ored &y ordering petitioners to pay pri#ate respondent copensation *or the use o* their posts in Naga City$ ,hile pri#ate respondent should also &e ordered to pay the onthly &ills *or the use o* the telephones also in Naga City.
And ta8ing into consideration the guidelines o* the NEA on the rental o* posts &y telephone copanies and the increase in the costs o* such posts$ RTC opined that a onthly rental o* P'+.++ *or each post o* CA!%RECO used &y NATELCO is reasona&le$ ,hich rental it should pay *ro the *iling o* the coplaint in the case and in li8e anner$ CA!%RECO should pay NATELCO *ro the sae date its onthly &ills *or the use and trans*ers o* its telephones in Naga City at the sae rate pu&lic are paying. Second Cause of Action: the contract does not ention anything a&out the use &y NATELCO o* CA!%RECO6s posts outside Naga City. There*ore$ the trial court held that *or reason o* e=uity$ the contract should &e re*ored &y including therein the pro#ision that *or the use o* CA!%RECO6s posts outside Naga City$ NATELCO should pay a onthly rental o* P'+.++ per post payent to start on the date this case ,as *iled$ or
on Fanuary /$ '>$ and CA!%RECO should also pay NATELCO the onthly dues on its telephone connections located outside Naga City &eginning Fanuary$ '>. hird Cause of Action:
RTC *inds the clai not su**iciently pro#en. S!&&ary o' RTC R!ling% decision is here&y rendered ordering the re*oration o* the agreeent (E7h. A); ordering the de*endants to pay plainti**6s electric poles in Naga City and in the to,ns o* Milaor$ Canaan$ Maragao and Pili$ Caarines !ur and in other places ,here de*endant NATELCO uses plainti**6s electric poles$ the su o* TEN (P'+.++) PE!O! per plainti**6s pole$ per onth and ordering also the plainti** to pay de*endant NATELCO the onthly dues o* all its telephones including those installed at the residence o* its o**icers. Plainti**6s clai *or attorney6s *ees and e7penses o* litigation and de*endants6 counterclai are &oth here&y ordered disissed.
5isagreeing ,ith the udgent o* RTC$ NATELCO appealed to CA CA ho,e#er a**ired RTC decision &ut &ased on di**erent grounds:
(') that Article '/< o* the Ne, Ci#il Code is applica&le and (/) that the contract ,as su&ect to a potestati#e condition ,hich rendered said condition #oid. The otion *or reconsideration ,as denied in the resolution ence$ present petition.
(SS)ES
-1hether or not CA coitted error in a8ing a contract *or parties &y in#o8ing Article '/< o* Ne, Ci#il Code
-1hether or not CA in ruling that prescription o* the action *or re*oration o* the contract in this case coenced *ro the tie it &ecae disad#antageous to pri#ate respondent; -1hether or not in ruling the contract ,as su&ect to a potestati#e condition
*ED
1. ARTICLE 1267, EVEN THOUGH NEVER RAISED BEFORE, IS APPLICABLE. a. ARTICLE 1267: Art. '/<. 1hen the ser#ice has &ecoe so di**icult as to &e ani*estly &eyond the conteplation o* the parties$ the o&ligor ay also &e released there*ro$ in ,hole or in part.
Article 1267 spea%s of service which has become so difficult. $a%ing into consideration the rationale behind this provision, term service should be understood as referring to the performance of the obligation. &n the present case, the obligation of "A#'()"* consists in allowing +A$)"* to use its posts in +aga "ity, which is the service contemplated in said article. a bare reading of this article reveals that it is not a re-uirement thereunder that the contract be for future service with future unusual change. According to #enator Arturo . $olentino, '+ Article 1267 states in our law the doctrine of unforeseen events. $his is said to be based on the discredited theory of rebus sic stantibus in public international law/ under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to e0ist the contract also ceases to e0ist. "onsidering practical needs and the demands of e-uity and good faith, the disappearance of the basis of a contract gives rise to a right to relief in favor of the party preudiced . &. Contrat !a" on#$"%&#& 'n(a%r, an& &%"a&)anta*#o'" to +a%nt%((.
$he peculiar circumstances of the present case, necessitates e0ercise of our e-uity urisdiction. ' y way of emphasis, we reiterate the rationali3ation of respondent court that: cdll
. . . &n affirming said ruling, we are not ma%ing a new contract for the parties herein, but we find it necessary to do so in order not to disrupt the basic and essential services being rendered by both parties herein to the public and to avoid unust enrichment by appellant at the e0pense of plaintiff...4 /. PRESCRIPTION HAS NOT -ET LAPSED. a. /at %" r#(or0#& %" not t/# ontrat %t"#(, 't t/# %n"tr'0#nt #0o&%n* t/#
ontrat. It (oo!" t/at !/#t/#r t/# ontrat %" &%"a&)anta*#o'" or not %" %rr##)ant to r#(or0at%on an& t/#r#(or#, annot # an ##0#nt %n t/# &#t#r0%nat%on o( t/# +#r%o& (or +r#"r%+t%on o( t/# at%on to r#(or0.
. Art%# 1133: At%on '+on a !r%tt#n ontrat 0'"t # ro'*/t !%t/%n 14 #ar" (ro0 t/# t%0# t/# r%*/t o( at%on ar'#". %.
? From the time the right of action accrues” not n##""ar% t/# &at# o(
#5#'t%on o( t/# ontrat. %%.
A" orr#t r'#& r#"+on&#nt o'rt, +r%)at# r#"+on&#nt" r%*/t o(
at%on aro"# "o0#t%0# &'r%n* t/# att#r +art o( 1892 or %n 189 !/#n aor&%n* to Att. L'%" G#n#ra, ;r. . . ., /# !a" a"<#& =+r%)at# r#"+on&#nt"> Boar& o( D%r#tor" to "t'& "a%& ontrat a" %t ar#a& a++#ar#& &%"a&)anta*#o'" to =+r%)at# r#"+on&#nt> %n 1898. %%%.
14 #ar" /a& not #t #a+"#&.
*n the issue of prescription of "A#'()"*5s action for reformation of contract, +A$)"* allege that respondent court5s ruling that the right of action arose only after said contract had already become disadvantageous and unfair to it due to subse-uent events and conditions is erroneous. &n
reformation of contracts, what is reformed is not the contract itself, but the instrument embodying the contract. &t follows that whether the contract is disadvantageous or not irrelevant to reformation and therefore, cannot be an element in the determination of the period for prescription of the action to reform. Article 11 of the +ew "ivil "ode provides, inter alia, that an action upon a written contract must be brought within ten 189 years from the time the right of the action accrues. "learly, the ten 189 year period is to be rec%oned from the time the right of action accrues which is not necessarily the date of e0ecution of the contract. As correctly ruled by respondent court, "A#'()"*5s right of action arose sometime during the latter part of 1;2 or in 1;< when according to Atty. uis =eneral, >r. . . ., he was as%ed by "A#'()"*5s9 oard of ?irectors to study said contract as it already appeared disadvantageous to private respondent9. @rivate respondent5s9 cause of action to as% for reformation of said contract should thus be considered to have arisen only in 1;2 or 1;<, and from 1;2 to >anuary 2, 1; when the complaint in this case was filed, ten 189 years had not yet elapsed. . PERIOD OF CONTRACT IS POTESTATIVE, THUS INVALID. a.
L#a)#" t/# ont%n'#& #((#t%)%t o( t/# a(or#"a%& a*r##0#nt to t/# att#r" "o# an& #5'"%)# !% a" on* a" +a%nt%(( %" %n o+#rat%on
. L#a)#" #a)#" t/# #((#t%)%t an& #n?o0#nt o( #a"#/o& r%*/t" to t/# "o# an& #5'"%)# !% o( t/# #""##.
@etitioners5 allegations must be upheld in this regard. A potestative condition is a condition, the fulfillment of which depends upon the sole will of the debtor, in which case, the conditional
obligation is void. 1 ased on this definition, respondent court5s finding that the provision in the contract, to wit: a9 $hat the term or period of this contract shall be as long as the party of the first part petitioner9 has need for the electric light posts of the party of the second part private respondent9 . . . ur
is a potestative condition, is correct. owever, it must have overloo%ed the other conditions in the same provision, to wit: . . . it being understood that this contract shall terminate when for any reason whatsoever, the party of the second part private respondent9 is forced to stop, abandoned sic9 its operation as a public service and it becomes necessary to remove the electric light post sic9/
which are casual conditions since they depend on chance, ha3ard, or the will of a third person. 28 &n sum, the contract is subect to mi0ed conditions, that is, they depend partly on the will of the debtor and partly on chance, ha3ard or the will of a third person, which do not invalidate the aforementioned provision.
F(NA D(S+,S(T(-E +,RT(,N: Petition is here&y denied. 5ecision o* CA and its resolution are AGG"RME5.
(" hope na&asa ni ninyo despite sa 8a-late na8o pag post T.T)
