Naga Telephone Co., Inc. v CA; G.R. No. 10711; February 24, 1994, Nocon, J.

FACTS:

Petitioner NATELCO is a telephone company while respondent CASURECO provides electric power service in the same city. They entered a contract letting the petitioner use the electric posts of respondent for telephone service operation. In return, petitioner agreed to install free of charge 10 telephone connections for the use of respondent. CASURECO filed a complaint saying that the contract is too one-sided and caused more damages to them, hence, they ask that the petitioner pay rental fees and damages. The RTC recognized that the contract eventually became disadvantageous for the respondent and advices for reformation of it. CA cited Article 1267 of Civil Code as a rationale for reforming the contract.

ISSUE:

Whether or not the contract be reformed by virtue of Article 1267 on the impossibility of service.

RULING:

Yes.

Article 1267 speaks of "service" which has become so difficult. Taking into consideration the rationale behind this provision, the term "service" should be understood as referring to the "performance" of the obligation. In the present case, the obligation of private respondent consists in allowing petitioners to use its posts in Naga City, which is the service contemplated in said article. Furthermore, a bare reading of this article reveals that it is not a requirement thereunder that the contract be for future service with future unusual change. According to Senator Arturo M. Tolentino, Article 1267 states in our law the doctrine of unforeseen events. This 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 exist the contract also ceases to exist. Considering practical needs and the demands of equity and good faith, the disappearance of the basis of a contract gives rise to a right to relief in favor of the party prejudiced. As the petitioner and respondent be released from the contract, they should consider that petitioner should remove the telephone connection on the posts and respondent should let go of the telephone services.