FACTS:

Petitioner William Gothong & Aboitiz, Inc. (WG&A) requested respondent Philippine Ports Authority (PPA) to lease and operate the Marine Slip Way in the North Harbor after the expiration of the lease contract of Veterans Shipping Corporation. Then President Estrada approved the request and a Contract of Lease was signed between WG&A and PPA. However, PPA sent a letter to WG&A directing them to vacate the premises, believing that the lease had already expired. WG&A filed an Injunction suit seeking to prevent their eviction and also sought damages for breach of contract. WG&A later amended its complaint, seeking the reformation of the contract and the refund of the value of improvements introduced in the leased property. The Regional Trial Court denied the admission of the second amended complaint, applying an outdated rule of the Rules of Court. The Court of Appeals granted WG&A's petition to nullify the RTC orders.

ISSUES:

1. Whether the Court of Appeals erred in ruling that the RTC committed grave abuse of discretion in denying the admission of the second amended complaint.

RULING:

1. The petition is denied for lack of merit. The Court of Appeals did not err in ruling that the RTC committed grave abuse of discretion. The RTC applied an outdated rule of the Rules of Court instead of the 1997 Rules of Civil Procedure, which allows substantial amendments that may substantially alter the cause of action or defense. The application of the old rule by the RTC constitutes grave abuse of discretion. The Court affirms the decision of the Court of Appeals, directing the RTC to admit the second amended complaint.

PRINCIPLES:

The 1997 Rules of Civil Procedure allow substantial amendments that may substantially alter the cause of action or defense. Such amendments should serve the higher interests of substantial justice, prevent delay, and promote a just, speedy, and inexpensive disposition of the case. The application of outdated rules by the court constitutes grave abuse of discretion.