G.R. No. 87880 April 7, 1992
CECILIA MATA, petitioner, vs. HON. COURT OF APPEALS AND METROPOLITAN BANK & TRUST COMPANY, respondents.

FACTS

Petitioner Cecilia Mata and private respondent Metropolitan Bank and Trust Company (Metrobank) entered into a contract of lease on August 20, 1973, over Mata’s land in Cavite. The contract stipulated that Mata would construct a commercial building on the land at her own expense, with Metrobank’s approval for its portion. The lease was for twenty years, renewable at Metrobank’s option. Metrobank granted Mata a loan of P390,000.00 to finance the construction, secured by separate loan and mortgage documents, with the loan to be partially settled from the monthly rentals. The agreed monthly rentals were graduated: P800.00 (1st-5th year), P1,300.00 (6th-10th year), P1,800.00 (11th-15th year), and P2,200.00 (16th-20th year). Pursuant to the contract, Mata received from Metrobank amounts totaling P396,046.00, secured by three deeds of real estate mortgage and several promissory notes, later renewed by a promissory note for P435,200.00. Mata constructed the building, with her niece administering the construction. On November 4, 1977, Mata filed a complaint for reformation of the contracts, claiming she was induced to sign due to her ignorance, lack of skill, bad faith of Metrobank, and that she never consented to pay for the building’s construction or repay with compounded interest, arguing the contracts were one-sided. The trial court ruled in favor of Mata, ordering reformation. Metrobank appealed. The Court of Appeals reversed the trial court, ruling that reformation was not legally possible as the contract expressed the true intention of the parties and Mata understood its terms, and that the loan agreement was not inequitable. Mata elevated the case to the Supreme Court.

ISSUE

Whether the Court of Appeals erred in reversing the trial court’s order for the reformation of the contract of lease and related loan documents on the grounds that they were inequitable and there was no meeting of the minds.

RULING

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The Court held that the contract of lease and the related real estate mortgages and promissory notes were not inequitable, unconscionable, or contrary to law, morals, good customs, or public policy. The interest rate charged was the ordinary banking rate at the time and not usurious. The Court found that Mata’s computation of her liability, which showed a large debt at the end of the lease period, was misleading because it considered only the rentals from Metrobank’s portion and not the total rentals from the entire building, which Mata could lease to other tenants. The building would remain in Mata’s name after the lease. The Court emphasized that the burden of proof was on Mata to show the contract was grossly unjust and unduly oppressive, which she failed to do. Furthermore, reformation under Article 1359 of the Civil Code was not available because, first, there was a meeting of the minds (the contracts expressed the true agreement), and second, there was no mistake, fraud, inequitable conduct, or accident. The Court noted that Mata was literate, and the terms were explained to her by Metrobank officers; Metrobank had no obligation to explain the documents to her as she was presumed to know their contents. One who signs a contract is presumed to know its contents, and failure to have it read and explained constitutes negligence. Therefore, the contracts were valid and binding.