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[G.R. No. 107112 February 24, 1994]
NAGA TELEPHONE CO., INC. (NATELCO) AND LUCIANO M. MAGGAY,
petitioners,
vs.
THE COURT OF APPEALS AND CAMARINES SUR II ELECTRIC
COOPERATIVE, INC. (CASURECO II), respondents.

FACTS:
1. Petitioner's/Plaintiff's claim/s
Petitioners argued in their answer to the first cause of action that it
should be dismissed because (1) it fails to state a cause of action for
contract reformation; (2) it is barred by prescription because it was filed
more than ten (10) years after the contract's execution; and (3) it is barred
by estoppel because private respondent seeks to enforce the contract in
the same action. They also claimed that their use of private respondent's
posts could not have caused deterioration because they had already been
in use for eleven (11) years; and that the value of their expenses for the ten
(10) telephone lines long enjoyed free of charge by private respondent far
outweighed the amounts claimed by the latter for the use of the posts, so
that they suffered any inequity.

Concerning the second cause of action, petitioners contended that

private respondent had asked for telephone lines in areas outside Naga
City where its posts were used; and that if petitioners refused to comply
with private respondent's demands for payment for the use of the posts
outside Naga City, it was most likely because what is owed to them by
private respondent exceeds its claim against them, while for the third cause

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of action, petitioners claimed, among other things, that their telephone
service had been classified as "very high" and of "superior quality" by the
National Telecommunications Corporation (NTC).

2. Respondent's/Defendant's claim/s
The private respondent filed a complaint with the Regional Trial Court
against petitioners for contract reformation with damages on the grounds
that it is too one-sided in favor of petitioners; that it is not in accordance
with the National Electrification Administration's (NEA) guidelines; that after
eleven (11) years of petitioners' use of the posts, the telephone cables
strung by them thereon have become much heavier with the increase in the
volume of their subscribers; that a post now costs as much as ₱2,630; and

that that justice and equity require the contract to be reformed in order to
eliminate the inequities therein.

As a second cause of action, private respondent claimed that,

beginning in 1981, petitioners used 319 posts outside Naga City without a
contract; that, at the rate of ₱10 per post, petitioners owed private
respondent ₱267,960 from 1981 until the filing of its complaint; and that,
despite demands, petitioners refused to pay private respondent said
amount.

The private respondent also filed a third cause of action in response

to the petitioners' poor service.

3. Decisions of the lower courts

After careful consideration, the Regional Trial Court said that contract
has become disadvantageous to respondent due to increase in volume of

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petitioner’s subscribers. Contract should be reformed to abolish the
inequities. It held that the petitioner should pay for the use of respondents’
posts at 10 per post while the latter should pay the monthly bills for the use
of former’s phone lines in Naga. Amount should be computed from the date
of filing of the complaint. Same has been held for the second cause of
action. While the third cause of action was not sufficiently proven.

The court of appeals, on the other hand, affirmed the RTC decisions
based on Article 1267, saying that although the contract was fair to both
parties at the time of its execution. Hence, NATELCO and Maggay
petitioned to the Supreme Court.

ISSUE/S:
4. Issue/s
1. Whether or not the Article 1267 is applicable in this case.
2. Whether or not the contract has become too one-sided in its favor
and too iniquitous, unfair, and disadvantageous to CASURECO.
HELD:
5. Disposition of the case
The petition is denied, and the Court of Appeals' decision dated May
28, 1992, as well as its resolution dated September 10, 1992, are upheld.

6. Dictum
Article 1267. When the service has become so difficult as to be
manifestly beyond the contemplation of the parties, the obligor may also be
released therefrom, in whole or in part.

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 According to NATELCO, the Article 1267 is inapplicable in this case
because the contract does not involve rendition of service/personal
prestation and is not for future service with future unusual change, and the
article was never raised by CASURECO II. The provision speaks of
service, which has become so difficult, in that it does not require that the
contract be for future service with future unusual change, but rather of
unforeseen events or the discredited theory of rebus sic stantibus in public
international law, wherein parties stipulate in light of certain prevailing
conditions, and once these conditions cease to exist, the contract also
ceases to exist. The fact that the parties did not raise this provision in their
pleadings and that it was never the subject of trial is immaterial, and the
material allegations of fact in the complaint, not the legal conclusion
reached or the prayer, determine the relief to which the plaintiff is entitled,
and the plaintiff is entitled to as much relief as the facts warrant even if that
relief is not specifically prayed for. NATELCO was given the opportunity to
present its evidence on this matter when they were given the chance to
answer the issues in the case at bar.

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