GREGORIO IGNACIO, PETITIONER, VS. PHILIPPINE NATIONAL RAILWAYS, REPRESENTED BY ITS GENERAL MANAGER, HON. SEBASTIAN B. ARRASTIA, RESPONDENTS.

The herein petitioner Gregorio Ignacio appealed from an order of
the Regional Trial Court of Manila which dismissed his complaint for
reformation of contract.  The appeal was
brought to the Court of Appeals.  In its
decision dated August 4, 1987,
the appellate court referred the case to this Court inasmuch as only questions
of law are involved.^[1]
Accordingly, this Court resolved to treat the case as a petition for review on certiorari
under Rule 45 of the Rules of Court.^[2]

The facts are not disputed.

On May 11, 1982
the Board of Directors of the respondent Philippine National Railways (PNR)
passed a resolution approving the application of petitioner for the lease of
the PNR station building at Sampaloc, Manila.  The pertinent provisions of the said
resolution are as follows:

“Res. No. 108-82

x      x      x

BE IT RESOLVED, as it is hereby RESOLVED, that the application of
retired Station Agent Gregorio Ignacio, to lease the PNR Station Building with
a floor area of 66.65 sq. m. at the rental rate of P36.00/sq. m. per annum or a
total of P2,399.40 and the station premises with an area of 524.04 sq. m. at a
rental rate of P12.00/sq. m. per annum or a total of P6,288.36, subject to the
terms and conditions stipulated in the proposed contract, be, as it hereby is
APPROVED, provided that the rental rate shall be P1,000.00 per month for both
he Station building and Station premises, that the lessee shall pay in advance
the sum equivalent to one-year rentals upon execution of the lease contract,
and that any subleasing of the property or portions thereof shall be with the
prior approval of the General Manager or his duly authorized representative.^[3]

Pursuant thereto,
a contract of lease was entered into between
petitioner and the PNR on May 24, 1982 for the lease of the said building for a period of
one (1) year commencing on June
1, 1982 and ending May 31, 1983
at a monthly rental of P1,000.00.^[4] Thereafter on September 6, 1983, another contract was entered
into by the same parties for the rental of the same building for a period of
another year computed from June 1, 1983
to May 31, 1984 at
P1,250.00 per month.^[5]
Upon the expiration of the aforesaid
second contract, the PNR proposed an increase in the monthly rental to
P1,750.00 which the petitioner refused. 
On March 21, 1985,
the PNR asked him to vacate the premises on account of his failure to renew the
contract.  Thus, on June 7, 1985, petitioner filed a complaint for
reformation of the proposed contract with the Regional Trial Court of Manila.

During, the pre-trial, the legal issue submitted for the
consideration of the trial court was the validity
of the contract of lease.  In an
Order dated November 27, 1985,
the trial court ruled that as there was no such proposed contract before it
there was no contract to reform.

Hence, this petition.  The
petitioner assails the order of the trial court on the following grounds:

“I

THE LOWER COURT ERRED IN HOLDING THAT APPELLANT IS ESTOPPED IN CLAIMING THE ILLEGALITY OF THE
PROPOSED AGREEMENT IN INCREASING THE ANNUAL RENTAL OF THE PREMISES LEASED FROM P1,250.00 to
P1,750.00 and –

II

THE COURT A QUO ERRED IN
FINALLY DISMISSING THE COMPLAINT FOR LACK OF CAUSE OF ACTION AGAINST DEFENDANT-APPELLEE.”^[6]

The appeal is devoid of merit.

The petitioner claims that the second contract of lease is
illegal inasmuch as the P1,250.00 monthly rental stipulated therein is in
violation of the terms of aforesaid Resolution No. 108-82 of the Board of
Directors of the PNR which fixed the monthly rental at only P1,000.00 per
month.  For the same reason, petitioner
assails the proposed contract for 1984 which increased the monthly rental to
P1,750.00.

Suffice it to state that a mere reading of the said resolution
clearly shows that the rental
therein provided for is P1,000.00 per month without stating the period of the lease.  It remained for the parties to stipulate on
the period.  Thus, the parties agreed
that the period of the lease at P1,000.00 monthly rental was to be for one (1)
year only under the first contract.  In
the second contract, the parties agreed to an additional period of one (1) year
but the monthly rental was increased to P1,250.00.  Petitioner had no objections to the same and faithfully complied with the
second contract.

As correctly observed by the trial court petitioner is now estopped
from questioning the validity of the said contracts.

In the prayer of the
complaint petitioner sought a reformation of the first and second contracts in
accordance with the aforesaid
resolution.  Such a prayer comes much too
late as petitioner voluntarily entered into the same and the said contracts had
already expired.  Moreover, there is no
claim of mistake, fraud, inequitable conduct or accident warranting a
reformation thereof.^[7]

This Court also notes that there is no third contract to be reformed.  The parties failed to agree upon it.  In order that an action for reformation may
prosper, there must be a meeting of the minds of the parties to a contract, but
their true intention is not expressed therein by reason of mistake, fraud,
inequitable conduct or accident.^[8]

In the same complaint petitioner seeks a reimbursement of
one-half (1/2) of the actual amount spent by him on the improvements he
introduced in the property as a builder in good faith.  However, an examination of the first and
second contracts of lease show that both contracts stipulate that any repairs or improvements introduced
by the lessee becomes the exclusive
property of the lessor, and that when the lessee vacates the premises, all improvements not so removed shall become the exclusive property of the lessor and the lessee
shall lose all rights and interests
over the same.^[9] Such agreements have the force of law
between the parties and they should comply with the same in good faith.^[10]

From the foregoing observations, it is obvious that petitioner
has no right at all to claim for reimbursement or the improvements he introduced in the leased premises.

WHEREFORE, the petition is DISMISSED for lack of merit,
with costs against petitioner.

SO ORDERED.

Narvasa, (Chairman), Cruz, Griño-Aquino, and Medialdea, JJ., concur.

^[1]
Penned by Madam Justice Leonor Ines
Luciano and concurred in by Justices Oscar Herrera and Justo V.
Torres, Jr.

^[2]
E. Razon, Inc. v. Moya,
103 SCRA 41 (1981).

^[3]
Page 13, Rollo.

^[4]
Annex B to the Petition, pages 14 to 16, Rollo.

^[5]
Annex D to the Petition, pages 17 to 19, Rollo.

^[6]
Page 7, Rollo.

^[7]
Article 1359, Civil Code.

^[8]
Id.

^[9]
See paragraphs 8 and 13 of the first contract dated May 24, 1982 and paragraphs 7 and 12 of the
second contract dated September 6, 1983.

^[10]
Article 1159, Civil Code.