G.R. No. 87880 - Mata vs. Court of Appeals

A contract of lease was executed on August 20, 1973, between petitioner Cecilia Mata (lessor) and respondent Metropolitan Bank and Trust Company (Metrobank) as lessee for a parcel of land in Binakayan, Kawit, Cavite.
The lease provided:

That Mata, at her own expense, was to construct a reinforced concrete building on her lot, with plans and specifications prepared at her instance and with Metrobank’s approval for the portion the bank was to occupy.
A 20-year lease period, renewable at Metrobank’s option, beginning 30 days after occupancy.
A loan of P390,000 upon signing to finance the building construction, with repayments partially offset by the monthly rentals from the leased premises.
A graduated rental schedule:

During the period from October 2, 1973, to February 25, 1974, Mata received a total of P396,046.00 from Metrobank.
To secure the loan, Mata executed three deeds of real estate mortgage:

Additionally, to renew the loans, Mata executed another promissory note for P435,200.00 on September 12, 1974.
With the proceeds from these loans, Mata proceeded with the construction of the commercial building, and her niece, Concepcion Veles, managed the construction process on her behalf.

On November 4, 1977, Mata filed a complaint for reformation of the contracts before the then Court of First Instance of Cavite.
Her claims were centered on:

Being induced by ignorance, lack of proper advice, and the bad faith of Metrobank.
The contention that she had never consented to pay for the construction or to repay the bank with compounded interest.
The argument that, under the contract’s provisions, her debt would have amounted to P1,277,946.00 after 20 years, a result of a one-sided agreement.

Metrobank had failed to explain the full implications of the mortgage, promissory notes, and credit line specifics, especially given Mata’s limited education and age.
The loan agreement was inequitably one-sided and unconscionably disadvantageous to Mata.
An intervention was necessary to prevent apparent injustice by ordering the reformation of the contract terms according to justice and equity.

Reformation was not legally permissible since the contract expressed the true intention of the parties.
Mata had understood the basic terms and conditions, negating any lack of meeting of the minds.

The Court of Appeals reversed the trial court ruling on November 22, 1988, and the decision was sustained on reconsideration on April 10, 1989.
The appellate court ruled:

That the inclusion of the loan agreement did not render the overall lease unconscionable.
The mortgages and promissory notes were standard transactions entered into by banks.
That the computation of Mata’s indebtedness was flawed, as it did not take into account the full rentals from the entire building.
That Mata’s alleged lack of understanding due to her educational background or age was insufficient to annul the expressed agreement.

Whether the contract of lease, along with the attached loan, mortgage, and promissory note agreements, was unconscionable and inequitable to such a degree warranting reformation.

Did Metrobank fail in its duty to sufficiently explain the terms and the legal consequences to the petitioner, given her alleged ignorance and lack of skill?
Was the petitioner’s consent to the agreements vitiated by any mistake, fraud, inequitable conduct, or accident?

Whether there was a lack of a true meeting of the minds between the parties.

Had Mata, as a layperson with limited education, been induced or misinformed regarding the financial burden and implications of the contract?
Does the evidence show that Metrobank neglected its responsibility by not clarifying the legal effects of the documents she signed?

Whether reformation of the contract is legally available when a party later finds itself disadvantaged by an unwise bargain.

Can reformation be justified solely based on the claim that the contract’s implications were harsher than anticipated?
Does the agreement fail to reflect the true intention of the parties, thus satisfying the prerequisites under Article 1359 of the Civil Code?