G.R. No. 95897 - Huibonhoa vs. Court of Appeals

On June 8, 1983, Florencia T. Huibonhoa (lessee) entered into a memorandum of agreement with siblings Rufina Gojocco Lim, Severino Gojocco, and Loreta Gojocco Chua (lessors) to lease three adjacent commercial lots (TCT Nos. 76098, 80728, and 155450) in Binondo, Manila.
On June 30, 1983, a 15-year contract of lease was executed, renewable upon mutual agreement, for the same lots, allowing Huibonhoa to construct a four-storey reinforced concrete building.
The contract permitted subleasing of spaces with Huibonhoa entitled to all rental incomes, required completion of construction within eight months (by February 29, 1984), and stipulated payment of goodwill money of P900,000 and monthly rent of P45,000 (P15,000 each to the three lessors).
Rent obligation was to commence upon building completion, but if not completed within eight months, rent would accrue starting March 1984.
Upon lease termination, ownership of the building automatically transferred to lessors. Real estate taxes on land were lessors’ responsibility, on the building by lessee, with reimbursement mechanics for advances.
The lessors granted Huibonhoa a power of attorney to secure credit facilities on the lots, which she used to mortgage the properties to China Banking Corporation, initially for P1,000,000, later increased to P3,000,000.

Political-economic upheaval post-assassination of Senator Benigno Aquino, Jr. allegedly delayed construction; the building was completed in September 1984, seven months late.
Huibonhoa failed to pay rent starting March 1984 despite the lease terms; lessors made verbal demands and sent a final demand letter on December 19, 1984.
On January 3, 1985, Huibonhoa filed a suit for reformation of contract, alleging a mistake in rent accrual date and seeking reduction of rent, extension of lease term, and novation of terms due to unforeseen inflation and political events.
On January 14, 1985, the Gojoccos filed an ejectment suit and claim for cancellation of lease for non-payment and breach, alleging bad faith and unauthorized subleasing by Huibonhoa, and revocation of power of attorney (December 21, 1984).
The Gojoccos also sought payment of rental arrears from March 1984, fair rental value during detention, payment of attorney's fees, and prayed for summary procedure application.
Huibonhoa countered, claiming the true intention was rent to begin only upon actual completion (October 1984), and the economic difficulties post-Aquino assassination justified adjustment of lease terms.

On January 31, 1985, Rufina Gojocco Lim and Huibonhoa entered an agreement amending the lease, reducing rent and extending the term by three years, explicitly recognizing no rent during construction and unforeseen cost increases.
However, this new agreement did not include all lessors; Severino and Loreta Gojocco were not parties to this modification.
Severino and Loreta Gojocco filed a memorandum in the ongoing litigation, evidencing their lack of consent to such unilateral modification agreements.
The Makati RTC (Branch 148) dismissed Huibonhoa’s complaint for reformation citing absence of clear and convincing evidence and noting that the agreements with Rufina and Severino individually could not novate the indivisible lease involving all three lessors.
Meanwhile, the Metropolitan Trial Court (MTC) of Manila handled the ejectment case (Civil Case No. 106097), initially granting ejectment and ordering deposit of rents, but subsequently denying Huibonhoa’s motion to dismiss and ordering deposits to continue.
The parties entered into another agreement on July 21, 1986, between Huibonhoa and Severino altering lease terms similarly to the earlier Rufina agreement, which Severino later repudiated.

The RTC Manila (Branch 55) reversed the MTC’s ejectment order, ruling the case involved cancellation of lease or rescission of contract which fell outside MTC jurisdiction.
Both cases (reformation and ejectment) were elevated to the Court of Appeals where:

The CA affirmed the dismissal of the reformation case (CA-G.R. CV No. 16575), modifying only the rental amounts and payments.
The CA affirmed the RTC’s dismissal of the ejectment case (CA-G.R. SP No. 24654), holding that ejectment would effectively deprive Huibonhoa of the building she owns, therefore beyond the summary ejectment process.

Huibonhoa petitioned (G.R. No. 95897) to reverse the CA ruling dismissing the reformation complaint, arguing the rent adjustment and extension should be granted citing the Aquino assassination as a fortuitous event affecting performance.
Severino and Loreta Gojocco petitioned (G.R. No. 102604) to reverse the CA ruling that dismissed their ejectment suit for lack of jurisdiction, asserting the MTC did have jurisdiction and that ejectment is appropriate.

Whether the Court erred in dismissing the complaint for reformation of contract and disregarding the agreements entered into by Huibonhoa with individual lessors as novations.
Whether the assassination of Senator Aquino constitutes a fortuitous event justifying the modification of lease terms (delay in rent accrual, reduction of rent, extension of lease).

Whether the Metropolitan Trial Court has jurisdiction over the complaint for cancellation of lease, ejectment, and collection given that the action involves issues going beyond possession to ownership and contract enforcement.
Whether the dismissal of ejectment case by RTC for lack of jurisdiction was proper.