JESUSA LAUREANO, PLAINTIFF-APPELLANT VS.

EUGENIO KILAYCO, DEFENDANT-APPELLEE

GR no. L-10437 March 7, 1916 Moreland, J. SV: Laureano conveyed a parcel of land to Kilayco allegedly with an agreement of reconveyance. Kilayco didnt pay any of the agreed upon consideration for the parcel of land which prompted Laureano to ask him to execute a reconveyance. Kilayco didnt. During trial, Laureano was prevented from introducing parol evidence that there was an agreement to reconvey the property. SC: such parol evidence was not introduced for the purpose of changing the terms of a written instrument and hence, was not prohibited. It only tended to prove that there was an agreement to reconvey and that the conveyance could be defeated and terminated. Laureano alleges in the complaint that she delivered to Kilayco a conveyance of certain lands together with shares of common stock of the corporation as El Hogar Filipino. The consideration stated was P49,550. Laureano also alleged that she did not receive anything as part of the supposed consideration. Also as part of the transaction, Kilayco allegedly agreed to hold and administer the property, to make certain payments for and on behalf of Laureano out of the rents and profits of the property(at the time, she owed money to El Hogar Filipino) and to reconvey the property on demand. She alleged as well that she demanded of defendant a reconveyance of property to which he agreed to execute but he instead sent a document entirely different from that which he had agreed to execute (reconveyance, he made more promises to reconvey but did not comply with them). She also alleged that instead of paying to El Hogar, he converted the rents and profits of the property for his own use. At the trial court, Laureano was asked questions tending to bring out the facts alleged in the complaint but there was an objection on the ground that the evidence offered was incompetent as it would tend to vary or modify the terms of a written instrument. The objection was sustained and Laureano duly excepted.

Issue: Whether or not Laureano had the right to prove the parol agreement existing between the 2? YES in this case, what was involved does not involve the law relating to the introduction of parol evidence for the purpose of changing or modifying the terms of a written instrument and that it doesnt fall within the prohibitive provisions of sec. 285 of the Code of Civil Procedure. The evidence was not offered for the purpose of varying the terms of the conveyance between the 2, but to show a contemporaneous collateral agreement where it is stated that the conveyance could be defeated and terminated. Oral evidence is admissible to show that a conveyance absolute in form was in fact a mortgage. the right to establish by parol evidence the defeasible character of an absolute written conveyance is too well fixed in our jurisprudence to be questioned ( Reeves v. Abercrombie) extraneous evidence is admissible to inform the court of every material fact known to the parties when the deed and memorandum were executed (Russell v. Southard) the true consideraton of a deed may be proved by parol evidence, and that a deed absolute on its face may be shown to have been executed in fact as a security. The right is a substantial one, not to be varied or defeated by any form of expression or character of recitals in the instrument.

Parol evidence is admissible in equity to show that a deed of conveyance was in fact a mortgage. The court looks beyong the instrument and looks at the real transaction, any evidence whether written or oral, tending to show this is admisisble. This does not violate of the rule which precludes such admission for the purspose of changing or contradicting the terms of the agreement. In this case the parol evidence was offerred to reinforce the claim that there was an agreement to reconvey. If the transfer was without consideration, it would lend more color to the contention of Laureano that there was an agreement to reconvey. Held: appealed decision REVERSED. Remanded for further proceedings.