G.R. No. 232825 , September 16, 2020
Ulysses Rudi V. Banico, Petitioner, vs. Lydia Bernadette M. Stager a.k.a. Bernadette D. Miguel (Substituted by her compulsory heirs), Respondents.

FACTS

Lydia Stager owned a 6,100-square meter lot in Boracay. In 1991, she offered to sell the entire lot to Ulysses Banico, who agreed only to purchase an 800-square meter portion suitable for a beach resort. Banico’s lawyer drafted a Deed of Absolute Sale dated February 8, 1992, describing the sold portion as located on the northern part of the lot adjoining the Sibuyan Sea. Upon payment and taking possession, Banico occupied and developed a flat, central area. A subsequent survey, however, revealed the deed’s technical description actually pertained to a different, elevated, and rocky northern portion, not the flat area he occupied and intended to buy.
Banico confronted Stager, who promised to correct the deed. Stager also convinced Banico to buy an adjacent 400-square meter lot on installment, conditional on the amendment of the first deed. Despite partial payments and Banico’s construction on the flat area, Stager later refused to amend the deed, citing an unpaid balance on the second lot. In 2001, Stager presented a new deed with a corrected property description but an erroneous purchase price, which Banico rejected. Banico filed an action for specific performance to compel the execution of a corrected deed.

ISSUE

Whether the Deed of Absolute Sale dated February 8, 1992, may be reformed to reflect the true intention of the parties regarding the identity of the 800-square meter parcel of land sold.

RULING

Yes, the deed is subject to reformation. The Supreme Court reinstated the Regional Trial Court’s decision, granting reformation. The legal logic is grounded in Article 1359 of the Civil Code, which allows the reformation of an instrument when it does not express the true agreement of the parties due to mistake, fraud, inequitable conduct, or accident. Reformation presupposes a meeting of the minds and a valid, enforceable contract, but the written evidence fails to reflect the true agreement.
Here, the parties’ contemporaneous and subsequent acts unequivocally demonstrated a mutual mistake in reducing their agreement to writing. Banico immediately occupied, developed, and built on the flat central area, not the rocky portion described. Stager’s own conduct confirmed this: she never disputed his occupation, suggested he buy the adjacent lot so she could relocate to the rocky area he supposedly bought, and later executed a 2001 deed attempting to correct the property’s location (though erring on the price). These acts proved their true intention was to sell the flat area Banico possessed. The mistake was mutual, originating from the lawyer’s erroneous drafting, and did not go to the essence of the contract (the sale of an 800-sq.m. portion). The Court thus ordered the reformation of the 1992 deed to accurately describe the intended parcel. The Court also modified the ruling, ordering Banico to pay a small unpaid balance for the adjacent lot with interest.