PHILIPPINE PORTS AUTHORITY, Petitioner, vs. WILLIAM GOTHONG & ABOITIZ (WG&A), INC., Respondent.

This resolves the Petition for Review on Certiorari filed by the Philippine Ports Authority (petitioner) seeking the reversal of the Decision^[1] of the Court of Appeals (CA) promulgated on October 24, 2002 and its Resolution dated May 15, 2003.

The antecedent facts are accurately narrated by the CA as follows:

Petitioner William Gothong & Aboitiz, Inc. (WG&A
for brevity), is a duly organized domestic corporation engaged in the
shipping industry. Respondent Philippine Ports Authority (PPA for
brevity), upon the other hand, is a government-owned and controlled
company created and existing by virtue of the provisions of P.D. No. 87
and mandated under its charter to operate and administer the country’s
sea port and port facilities.

After the expiration of the lease contract of Veterans Shipping
Corporation over the Marine Slip Way in the North Harbor on December
31, 2000, petitioner WG&A requested respondent PPA for it to be
allowed to lease and operate the said facility. Thereafter, then
President Estrada issued a memorandum dated December 18, 2000 addressed
to the Secretary of the Department of Transportation and Communication
(DOTC) and the General Manager of PPA, stating to the effect that in
its meeting held on December 13, 2000, the Economic Coordinating
Council (ECC) has approved the request of petitioner WG&A to lease
the Marine Slip Way from January 1 to June 30, 2001 or until such time
that respondent PPA turns over its operations to the winning bidder for
the North Harbor Modernization Project.

Pursuant to the said Memorandum, a Contract of Lease was prepared by respondent PPA containing the following terms:

1. The lease of the area shall take effect on January 1
   to June 30, 2001 or until such time that PPA turns over its operation
   to the winning bidder for the North Harbor modernization;

2. You shall pay a monthly rental rate of P12.15 per square meter or an aggregate monthly rental amount of P886,950.00;
3. All structures/improvements introduced in the leased premises shall be turned over to PPA;
4. Water, electricity, telephone and other utility expenses shall be for the account of William, Gothong & Aboitiz, Inc.;
5. Real Estate tax/insurance and other government dues and charges shall be borne by WG&A.

The said contract was eventually conformed to and signed by the
petitioner company, through its President/Chief Executive Officer
Endika Aboitiz, Jr. Thereafter, in accordance with the stipulations
made in the lease agreement, PPA surrendered possession of the Marine
Slip Way in favor of the petitioner.

However, believing that the said lease already expired on June 30,
2001, respondent PPA subsequently sent a letter to petitioner WG&A
dated November 12, 2001 directing the latter to vacate the contested
premises not later than November 30, 2001 and to turnover the
improvements made therein pursuant to the terms and conditions agreed
upon in the contract.

In response, petitioner WG&A wrote PPA on November 27, 2001 urging
the latter to reconsider its decision to eject the former. Said request
was denied by the PPA via a letter dated November 29, 2001.

On November 28, 2001, petitioner WG&A commenced an Injunction suit
before the Regional Trial Court of Manila. Petitioner claims that the
PPA unjustly, illegally and prematurely terminated the lease contract.
It likewise prayed for the issuance of a temporary restraining order to
arrest the evacuation. In its complaint, petitioner also sought
recovery of damages for breach of contract and attorney’s fees.

On December 11, 2001, petitioner WG&A amended its complaint for the
first time. The complaint was still denominated as one for Injunction
with prayer for TRO. In the said amended pleading, the petitioner
incorporated statements to the effect that PPA is already estopped from
denying that the correct period of lease is “until such time that the
North Harbor Modernization Project has been bidded out to and
operations turned over to the winning bidder. It likewise included, as
its third cause of action, the additional relief in its prayer, that
should the petitioner be forced to vacate the said facility, it should
be deemed as entitled to be refunded of the value of the improvements
it introduced in the leased property.

Following the first amendment in the petitioner’s complaint, respondent
PPA submitted its answer on January 23, 2002. Meanwhile, the TRO sought
by the former was denied by the trial court by way of an order dated
January 16, 2002.

Petitioner later moved for the reconsideration of the said Order on
February 11, 2002. Shortly thereafter, petitioner filed a Motion to
Admit Attached Second Amended Complaint. This time, however, the
complaint was already captioned as one for Injunction with Prayer for
Temporary Restraining Order and/or Writ of Preliminary Injunction and
damages and/or for Reformation of Contract. Also, it included as its
fourth cause of action and additional relief in its prayer, the
reformation of the contract as it failed to express or embody the true
intent of the contracting parties.

The admission of the second amended complaint met strong opposition
from the respondent PPA. It postulated that the reformation sought for
by the petitioner constituted substantial amendment, which if granted,
will substantially alter the latter’s cause of action and theory of the
case.

On March 22, 2002, the respondent judge issued an Order denying the
Admission of the Second Amended Complaint. Petitioner filed a motion
for reconsideration of the aforesaid order but the same was again
denied in an order dated April 26, 2002.^[2]

Herein respondent WG&A then filed a petition for certiorari with the CA seeking the nullification of the aforementioned RTC orders.

In its Decision dated October 24, 2002, the CA granted respondent’s
petition, thereby setting aside the RTC orders and directing the RTC to
admit respondent’s second amended complaint pursuant to Section 3, Rule
10 of the 1997 Rules of Civil Procedure. Petitioner moved for
reconsideration but the same was denied per Resolution dated May 15,
2003.

Hence, the present petition where the only issue raised is whether the
CA erred in ruling that the RTC committed grave abuse of discretion
when it denied the admission of the second amended complaint.

The Court finds the petition without merit.

The CA did not err in finding that the RTC committed grave abuse of
discretion in issuing the Order dated March 22, 2002 denying the
admission of respondent’s second amended complaint.

The RTC applied the old Section 3, Rule 10 of the Rules of Court:

Section 3. Amendments by leave of court. – after the case
is set for hearing, substantial amendments may be made only upon leave
of court. But such leave may be refused if it appears to the court that
the motion was made with intent to delay the action or that the cause
of action or defense is substantially altered. Orders of the court upon
the matters provided in this section shall be made upon motion filed in
court, and after notice to the adverse party, and an opportunity to be
heard.

instead of the provisions of the 1997 Rules of Civil Procedure, amending Section 3, Rule 10, to wit:

SECTION 3. Amendments by leave of court. Except as provided in the next preceding section, substantial
amendments may be made only upon leave of court. But such leave may be
refused if it appears to the court that the motion was made with intent
to delay. Orders of the court upon the matters provided in this
section shall be made upon motion filed in court, and after notice to
the adverse party, and an opportunity to be heard.

The Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of Civil Procedure in Valenzuela v. Court of Appeals,^[3] thus:

Interestingly, Section 3, Rule 10 of the 1997 Rules of
Civil Procedure amended the former rule in such manner that the phrase
“or that the cause of action or defense is substantially altered” was
stricken-off and not retained in the new rules. The clear import of
such amendment in Section 3, Rule 10 is that under the new rules, “the
amendment may (now) substantially alter the cause of action or defense.”
This should only be true, however, when despite a substantial change or
alteration in the cause of action or defense, the amendments sought to
be made shall serve the higher interests of substantial justice, and
prevent delay and equally promote the laudable objective of the rules
which is to secure a “just, speedy and inexpensive disposition of every
action and proceeding.”^[4]

The application of the old Rules by the RTC almost five years after its
amendment by the 1997 Rules of Civil Procedure patently constitutes
grave abuse of discretion.

WHEREFORE, the petition is DENIED for lack of merit. The
Decision of the Court of Appeals promulgated on October 24, 2002 and
its Resolution dated May 15, 2003 are hereby AFFIRMED in toto.

SO ORDERED.

Ynares-Santiago, (Chairperson), Corona, Nachura, and Reyes, JJ., concur.

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^[1] Penned by CA Associate
Justice Bienvenido L. Reyes, with then Associate Justice, now COMELEC
Commissioner Romeo A. Brawner and CA Associate Justice Mario L. Guariña
III, concurring; p. 34, rollo.

^[2] Rollo, pp. 35-37.

^[3] 416 Phil. 289 (2001).

^[4] Id. at 297.