1 PAROLE EVIDENCE

G.R. No. L-18077             September 29, 1962
RODRIGO ENRIQUEZ, ET AL., Plaintiffs-Appellants, vs. SOCORRO A.
RAMOS, Defendant-Appellee.
Gelacio L. Dimaano for plaintiffs-appellants.
Vicente K. Aranda for defendant-appellee.
subdivision before lots therein could be sold; and that, upon the suggestion
of plaintiff's counsel, their promise to construct the roads was not included in
the contract because the ordinance was deemed part of the contract.
Defendant further claims that the true purchase price of the sale was not
P235,056.00 but only P185,000.00, the difference of P50,000.00 being the
voluntary contribution of defendant to the cost of the construction of the
roads which plaintiffs assumed to do as
abovementioned.chanroblesvirtualawlibrarychanrobles virtual law library

BAUTISTA ANGELO, J.:chanrobles virtual law library
          This is an action for foreclosure of a real estate
mortgage.chanroblesvirtualawlibrarychanrobles virtual law library
          After the reception of the evidence, the trial court sustained the
contention of defendant and dismissed the complaint on the ground that the
action of plaintiffs was premature. It found that plaintiffs really assumed the
construction of the roads as a condition precedent to the fulfillment of the
obligation stipulated in the contract on the part of defendant, and since the
same has not been undertaken, plaintiffs have no cause of action. In due
time, plaintiffs have appealed.chanroblesvirtualawlibrarychanrobles virtual
law library

          It is alleged that on November 24, 1958 defendant purchased from
plaintiffs 20 parcels of land located in Quezon City and covered by transfer
certificates of title for the amount of P235,056.00 of which only the amount of
P35,056.00 was paid on the date of sale, the balance of P200,000.00 being
payable within two years from the date of sale, with 6% interest per annum
during the first year, and the remainder to draw 12% interest per annum if
paid thereafter, provided that at least P100,000.00 should be paid during the
first year, otherwise the whole unpaid balance would become immediately
demandable; that to secure the payment of the balance of P200,000.00
defendant executed a mortgage in favor of plaintiffs upon the 20 parcels of
land sold and on a half interest over a parcel of land in Bulacan which was
embodied in the same deed of sale; that said deed of sale with mortgage
was registered in the Offices of the Registers of Deeds of Quezon City and
Pampanga; and that as defendant broke certain stipulations contained in
said deed of sale with mortgage, plaintiffs instituted the present foreclosure
proceedings.chanroblesvirtualawlibrarychanrobles virtual law library
          Defendant set up as affirmative defense that the contract mentioned in
the complaint does not express the true agreement of the parties because
certain important conditions agreed upon were not included therein by the
counsel who prepared the contract; that the stipulation that was omitted from
the contract was the promise assumed by plaintiffs that they would construct
roads in the lands which were to be subdivided for sale on or before
January, 1959; that said condition was not placed in the contract because,
according to plaintiffs' counsel, it was a superfluity, inasmuch as there is an
ordinance in Quezon City which requires the construction of roads in a
          The evidence of record discloses the following facts: On November 6,
1966, plaintiffs entered into a contract of conditional sale with one Pedro del
Rosario covering a parcel of land in Quezon City described in Transfer
Certificate of Title No. 1148 which has a total area of 77,772 square meters
in consideration of a purchase price of P10.00 per square meter. To
guarantee the performance of the conditions stipulated therein a
performance bond in the amount of P100,000.00 was executed by Pedro del
Rosario. Del Rosario was given possession of the land for development as a
subdivision at his expense. He undertook to pay for the subdivision survey,
the construction of roads, the installation of light and water, and the income
tax plaintiffs may be required to pay arising from the transaction, in
consideration of which Del Rosario was allowed to buy the property for
P600,000.00 within a period of two years from November 6, 1956 with the
condition that, upon his failure to pay said price when due, all the
improvements introduced by him would automatically become part of the
property without any right on his part to reimbursement and the conditional
sale would be rescinded.chanroblesvirtualawlibrarychanrobles virtual law
library
          Unable to pay the consideration of P600,000.00 as agreed upon, and
in order to avoid court litigation, plaintiffs and Del Rosario, together with
defendant Socorro A. Ramos, who turned out to be a partner of the latter,
entered into a contract of rescission on November 24, 1958. To release the
performance bond and to enable defendant to pay some of the lots for her
own purposes, plaintiffs allowed defendant to buy 20 of the lots herein
involved at the rate of P16.00 per square meter on condition that she will
2 PAROLE EVIDENCE
assume the payment of P50,000.00 as her share in the construction of roads
and other improvements required in the subdivision. This situation led to the
execution of the contract of sale Exhibit A subject of the present foreclosure
proceedings.chanroblesvirtualawlibrarychanrobles virtual law library
          The main issues closed in this appeal are: (1) Is the purchase price of
the 20 lots bought by defendant from plaintiffs the sum of P185,000.00, as
claimed by defendant, or P235.056.00, as claimed by plaintiffs?; and (2)
Was an oral agreement, coetaneous to the execution of the contract of sale,
entered into between the parties to the effect that plaintiffs would undertake
the construction of the roads on the lots sold before defendant could be
required to comply with her financial obligation?chanrobles virtual law library
          Defendant contends that the contract of sale Exhibit A does not
express the true agreement of the parties because certain important
conditions agreed upon were not included therein by plaintiffs' counsel
among which is the promise assumed by plaintiffs that they would undertake
to construct the roads that may be required in the subdivision subject sale of
the sale on or before January, 1959; that said condition was not placed in
the contract because plaintiffs' counsel said that it was a superfluity
inasmuch as there was then in Quezon City an ordinance which requires the
construction of road in a subdivision before the lots therein could be sold;
and that, upon the suggestion of plaintiffs' counsel, such commitment was
not included in the contract because the ordinance aforesaid was already
deemed to be part of the contract.chanroblesvirtualawlibrarychanrobles
virtual law library
          Plaintiffs, on the other hand, dispute the above contention arguing that
there was no such oral agreement or understanding because all that was
agreed upon between the parties was already expressed and included in the
contract of sale Exhibit A executed between the parties, and since defendant
failed to pay the balance of her obligation within the period stipulated the
whole obligation became due and demandable thus giving plaintiffs the right
to foreclose the mortgage in accordance with
law.chanroblesvirtualawlibrarychanrobles virtual law library
          After considering and evaluating the evidence submitted by both
parties, the court a quo found defendant's contention well-taken, thereby
concluding that the action of plaintiffs was premature. In reaching this
conclusion; the court a quo made the following comment:
          . . . The Court is of the opinion that the construction of the roads was a
condition precedent to the enforcement of the terms of Exhibit A, particularly
the foreclosure of mortgage, for the reason that the subdivision regulations
of Quezon City requires, as a matter of law, that the sellers of lands therein
to be converted into subdivision lots must construct the roads in said
subdivision before the lots could be sold. This requirement must have been
uppermost in the mind of the parties in this case which led to the execution
of the so-called 'Explanation' (Exhibit 3) wherein it is stated that the sum of
P50,000.00 was a contribution of the herein defendant for the construction of
the roads which the plaintiffs would undertake 'in accordance with the
provisions of the City Ordinance of Quezon City' (Exhibit 3). It is to be noted
that Exhibit 3 was executed on November 24, 1958, the very day when
Exhibit A was also executed. Exhibit 3 also proves that the purchase price is
not, as appearing in the deed of sale with mortgage Exhibit A, actually
P235,000.00 but only P185,000.00 which would approximately be the price
of the entire area of the land sold at the rate of P16.00 per square meter.
          We find no error in the conclusion reached by the court a quo for
indeed that is the condition to be expected by a person who desires to
purchase a big parcel of land for purposes of subdivision. In a subdivision
the main improvement to be undertaken before it could be sold to the public
is feeder roads as otherwise it would be inaccessible and valueless and
would offer no attraction to the buying public. And so it is correct to presume
was the court a quo did, that when the sale in question was being negotiated
the construction of roads in the prospective subdivision must have been
uppermost in the mind of defendant for her purpose in purchasing the
property was to develop it into a subdivision. That such requirement was
uppermost in the mind of defendant is proven by the execution by the
plaintiffs of the so-called "Explanation" (Exhibit 3) on the very day the deed
of sale was executed wherein it was stated that the sum of P50,000.00 was
advanced by defendant as her contribution to the construction of the roads
which plaintiffs assumed to undertake "in accordance with the provisions of
the City Ordinance of Quezon City." It is to be noted that said document
specifically states that the amount of P50,000.00 should be deducted from
the purchase price of P235,056.00 appearing in the deed of sale, and this is
a clear indication that the real purchase price is only P185,000.00 as
claimed by defendant, which would approximately be the price of the entire
area of the land at the rate of P16.00 per square
meter.chanroblesvirtualawlibrarychanrobles virtual law library
          A circumstance which lends cogency to defendant's claim that the
commitment of plaintiffs to construct roads was not inserted in the contract
because of the insurance made by their counsel that it would be a superfluity
is the fact that in Quezon City there was really an ordinance which requires
the construction of roads it subdivision before lots therein could be sold, and
considering that this assurance came from the very counsel who prepared
3 PAROLE EVIDENCE

the document who even intimated that ordinance was deemed part of the
contract, defendant must have agreed to the omission relying on the good
faith plaintiffs and their counsel. At any rate, the execute of the document
Exhibit 3 clarifies whatever doubt may have existed with regard to the true
terms of the agreement on the matter.chanroblesvirtualawlibrarychanrobles
virtual law library

          It is argued that the court a quo erred in allowing presentation of

parole evidence to prove that a conteporaneous oral agreement was also
reached between parties relative to the construction of the roads for same is
in violation of our rule which provides that when the terms of an agreement
had been reduced to writing it is to be considered as containing all that has
been agreed upon and that no evidence other than the terms there can be
admitted between the parties (Section 22, Rule 123). This rule, however,
only holds true if there is allegation that the agreement does not express the
intent of the parties. If there is and this claim is in issue in the pleadings, the
same may be the subject parole evidence (Idem.). The fact that such failure
has been put in issue in this case is patent in the answer wherein defendant
has specifically pleaded that the contract of sale in question does not
express the true intent of the parties with regard to the construction of the
roads.chanroblesvirtualawlibrarychanrobles virtual law library

          It appearing that plaintiffs have failed to comply with the condition

precedent relative to the construction of the roads in the subdivision in
question, it follows that their action is premature as found by the court a quo.
The failure of defendant to pay the realty and income taxes as agreed upon,
as well as to register the mortgage with respect to the Bulacan property,
aside from being minor matters, appear sufficiently explained in the brief of
defendant-appellee.chanroblesvirtualawlibrarychanrobles virtual law library

          WHEREFORE, the decision appealed from is affirmed, with costs

against appellants.

Bengzon, C.J., Padilla, Labrador, Reyes, J.B.L., Paredes, Dizon and

Makalintal, JJ., concur.
Regala, J., took no part.
4 PAROLE EVIDENCE
5 PAROLE EVIDENCE
G.R. No. L-11346            March 21, 1918
ESPIRIDIONA CANUTO, plaintiff-appellee,
vs.
JUAN MARIANO, defendant-appellant.
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant.
Alfonso E. Mendoza for appellee.
CARSON, J.:
This is an appeal from a judgment of the Court of First Instance of Manila,
providing for the execution of a deed evidencing the repurchase by the
plaintiff of a parcel of land from the defendant, upon the payment by the
former of the sum of P360.
On December 4, 1913, the plaintiff executed a deed of sale of the parcel of
land described in the complaint, to the defendant, for the sum of P360,
reserving the right to repurchase the land for that amount within one year
from the date of the deed of sale. The redemption period having elapsed,
and the plaintiff having failed to exercise her right to repurchase within that
period, the defendant set up a claim of absolute ownership to the land,
notwithstanding the insistent demand of the plaintiff that she be permitted to
exercise her reserved right of repurchase in accordance with an alleged oral
agreement for the extension of the r redemption period down to the end of
the month of December, 1914. She claims that on the second day of
December, 1914, two days before the expiration of the original redemption
period, she asked the defendant for an extension of time for the repurchase
of the land and that upon her promise to make the repurchase during the
month of December, 1914, the defendant agreed to extend the redemption
set out in the written contract, to the end of that month; that after the
expiration of the original redemption period, she thought to make the
repurchase in accordance with the agreement as to the extension of the time
therefor; but the defendant failed to appear at the time and place agreed
upon for the payment of the purchase price and has refused since that time
to execute a deed of resale, or to reserve the purchase price agreed upon,
despite the plaintiff's repeated demands and tender of the purchase price.
The plaintiff testified that on the morning of December the second, 1914,
while she was washing clothes near a well, the defendant passed by; that
she seized the opportunity to beg an extension of time in which to
repurchase the land, promising the defendant that she would borrow the
money and make payment if he would extend the redemption period until the
end of the month; that after some demur the defendant agreed to allow her
the whole of the month of December in which to redeem the land; that the
following Sunday she went to the house of the defendant and that he
promised to meet her at the house of Mercado, an attorney, at 4 o'clock of
the next day, there to receive the purchase price and execute the necessary
documents evidencing the transaction; that she took the money to the
lawyer's office at the time appointed, and waited there until dark, but that the
defendant failed to meet his engagement; that she then went to his house,
but was told that he was not at home; and that since that time defendant has
refused to carry out his oral agreement, claiming that the redemption period
set out in the original deed of sale expired on the fourth day of December,
1914, and that she had no right to repurchase the land after that date.
Severino Pascual, who was present when the oral agreement to extend the
time for the repurchase of the land was made, corroborated her testimony in
this regard, and we find nothing in the record which would justify us in
disturbing the findings of the trial judge who accepted her testimony as a
substantially true account of all that occurred, and declined to believe the
conflicting testimony of the defendant which he characterized as vague and
incredible.
The defendant having extended the time within which the plaintiff could
repurchase the land on condition that she would find the money and make
repurchase within the extended period, it is clear that he cannot be permitted
to repudiate his promise, it appearing that the plaintiff stood ready to make
the payment within the extended period, and was only prevented from doing
so by the conduct of the defendant himself. (Villegas vs. Capistrano, 9 Phil.
Rep., 416; Fructo vs. Fuentes, 15 Phil. Rep., 362; Retes vs. Suelto, 20 Phil.
Rep., 394; Rosales vs. Reyes and Ordoveza, 25 Phil. Rep., 495.)
The contention that the plaintiff should not be permitted to alter, vary, or
contradict the terms of the written instrument by the introduction of oral
evidence is manifestly untenable under the circumstances of the case, as
will readily appear from the following citation from 17 Cyc., p. 734, and
numerous cases cited in support of the doctrine:
The rule forbidding the admission of parol or extrinsic evidence to
alter, vary, or contradict a written instrument does not apply so as
to prohibit the establishment by parol of an agreement between the
parties to a writing, entered into subsequent to the time when the
written instrument was executed, notwithstanding such agreement
may have the effect of adding to, changing, modifying, or even
altogether abrogating the contract of the parties as evidenced by
the writing; for the parol evidence does not in any way deny that the
original agreement of the parties was that which the writing purports
6 PAROLE EVIDENCE

to express, but merely goes to show that the parties have exercised
their right to change or abrogate the same, or to make a new and
independent contract.

It makes no difference how soon after the execution of the written

contract the parol one was made. If it was in fact subsequent and is
otherwise unobjectionable it may be proved and enforced.

The contention that the plaintiff lost her right to redeem because she failed to
make judicial deposit of the purchase price when the defendant declined to
receive it, is not entitled to serious consideration in view of the repeated
decisions of this court to the contrary collated and discussed in the case of
Rosales vs. Reyes and Ordoveza (25 Phil. Rep., 495). In that case and in
the cases cited therein we declared that the settled rule in this jurisdiction is
that a bona fide offer or tender of the price agreed upon for the repurchase is
sufficient to preserve the rights of the party making it, without the necessity
of making judicial deposit, if the offer or tender is refused; and in the case of
Fructo vs. Fuentes (15 Phil. Rep., 362) we said that in such cases when
diligent effort is made by the vendor of the land to exercise the right to
repurchase reserved by him in his deed of sale "and fails by reason of
circumstances over which he has no control, we are of the opinion and so
hold that he does not lose his right to repurchase on the day of maturity."

We conclude that the judgment entered in the court below should be

affirmed with costs of this instance against the appellant. So ordered.

Arellano, C.J., Street, Malcolm, Avanceña, and Fisher, JJ., concur.

Torres and Araullo, JJ., concur in the result.
Johnson, J., did not sign.
7 PAROLE EVIDENCE
G.R. No. L-9935 February 1, 1915
YU TEK and CO., Plaintiff-Appellant, vs. BASILIO GONZALES, Defendant-
Appellant.
Beaumont, Tenney and Ferrier for plaintiff.
Buencamino and Lontok for defendant.
TRENT, J.:
The basis of this action is a written contract, Exhibit A, the pertinent
paragraphs of which follow:
1. That Mr. Basilio Gonzalez hereby acknowledges receipt of the sum of
P3,000 Philippine currency from Messrs. Yu Tek and Co., and that in
consideration of said sum be obligates himself to deliver to the said Yu Tek
and Co., 600 piculs of sugar of the first and second grade, according to the
result of the polarization, within the period of three months, beginning on the
1st day of January, 1912, and ending on the 31st day of March of the same
year, 1912.chanroblesvirtualawlibrary chanrobles virtual law library
2. That the said Mr. Basilio Gonzales obligates himself to deliver to the said
Messrs. Yu Tek and Co., of this city the said 600 piculs of sugar at any place
within the said municipality of Santa Rosa which the said Messrs. Yu Tek
and Co., or a representative of the same may
designate.chanroblesvirtualawlibrary chanrobles virtual law library
3. That in case the said Mr. Basilio Gonzales does not deliver to Messrs. Yu
Tek and Co. the 600 piculs of sugar within the period of three months,
referred to in the second paragraph of this document, this contract will be
rescinded and the said Mr. Basilio Gonzales will then be obligated to return
to Messrs. Yu Tek and Co. the P3,000 received and also the sum of P1,200
by way of indemnity for loss and damages.
Plaintiff proved that no sugar had been delivered to it under this contract nor
had it been able to recover the P3,000. Plaintiff prayed for judgment for the
P3,000 and, in addition, for P1,200 under paragraph 4, supra. Judgment was
rendered for P3,000 only, and from this judgment both parties
appealed.chanroblesvirtualawlibrary chanrobles virtual law library
The points raised by the defendant will be considered first. He alleges that
the court erred in refusing to permit parol evidence showing that the parties
intended that the sugar was to be secured from the crop which the
defendant raised on his plantation, and that he was unable to fulfill the
contract by reason of the almost total failure of his crop. This case appears
to be one to which the rule which excludes parol evidence to add to or vary
the terms of a written contract is decidedly applicable. There is not the
slightest intimation in the contract that the sugar was to be raised by the
defendant. Parties are presumed to have reduced to writing all the essential
conditions of their contract. While parol evidence is admissible in a variety of
ways to explain the meaning of written contracts, it cannot serve the purpose
of incorporating into the contract additional contemporaneous conditions
which are not mentioned at all in the writing, unless there has been fraud or
mistake. In an early case this court declined to allow parol evidence showing
that a party to a written contract was to become a partner in a firm instead of
a creditor of the firm. (Pastor vs. Gaspar, 2 Phil. Rep., 592.) Again, in
Eveland vs. Eastern Mining Co. (14 Phil. Rep., 509) a contract of
employment provided that the plaintiff should receive from the defendant a
stipulated salary and expenses. The defendant sought to interpose as a
defense to recovery that the payment of the salary was contingent upon the
plaintiff's employment redounding to the benefit of the defendant company.
The contract contained no such condition and the court declined to receive
parol evidence thereof.chanroblesvirtualawlibrary chanrobles virtual law
library
In the case at bar, it is sought to show that the sugar was to be obtained
exclusively from the crop raised by the defendant. There is no clause in the
written contract which even remotely suggests such a condition. The
defendant undertook to deliver a specified quantity of sugar within a
specified time. The contract placed no restriction upon the defendant in the
matter of obtaining the sugar. He was equally at liberty to purchase it on the
market or raise it himself. It may be true that defendant owned a plantation
and expected to raise the sugar himself, but he did not limit his obligation to
his own crop of sugar. Our conclusion is that the condition which the
defendant seeks to add to the contract by parol evidence cannot be
considered. The rights of the parties must be determined by the writing
itself.chanroblesvirtualawlibrary chanrobles virtual law library
The second contention of the defendant arises from the first. He assumes
that the contract was limited to the sugar he might raise upon his own
plantation; that the contract represented a perfected sale; and that by failure
of his crop he was relieved from complying with his undertaking by loss of
the thing due. (Arts. 1452, 1096, and 1182, Civil Code.) This argument is
faulty in assuming that there was a perfected sale. Article 1450 defines a
perfected sale as follows:
8 PAROLE EVIDENCE
The sale shall be perfected between vendor and vendee and shall be
binding on both of them, if they have agreed upon the thing which is the
object of the contract and upon the price, even when neither has been
delivered.
Article 1452 reads: "The injury to or the profit of the thing sold shall, after the
contract has been perfected, be governed by the provisions of articles 1096
and 1182." chanrobles virtual law library
This court has consistently held that there is a perfected sale with regard to
the "thing" whenever the article of sale has been physically segregated from
all other articles Thus, a particular tobacco factory with its contents was held
sold under a contract which did not provide for either delivery of the price or
of the thing until a future time. McCullough vs. Aenlle and Co. (3 Phil. Rep.,
295). Quite similar was the recent case of Barretto vs. Santa Marina (26
Phil. Rep., 200) where specified shares of stock in a tobacco factory were
held sold by a contract which deferred delivery of both the price and the
stock until the latter had been appraised by an inventory of the entire assets
of the company. In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a
specific house was held perfected between the vendor and vendee, although
the delivery of the price was withheld until the necessary documents of
ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8 Phil.
Rep., 531) the plaintiff had delivered a quantity of hemp into the warehouse
of the defendant. The defendant drew a bill of exchange in the sum of P800,
representing the price which had been agreed upon for the hemp thus
delivered. Prior to the presentation of the bill for payment, the hemp was
destroyed. Whereupon, the defendant suspended payment of the bill. It was
held that the hemp having been already delivered, the title had passed and
the loss was the vendee's. It is our purpose to distinguish the case at bar
from all these cases.chanroblesvirtualawlibrary chanrobles virtual law library
In the case at bar the undertaking of the defendant was to sell to the plaintiff
600 piculs of sugar of the first and second classes. Was this an agreement
upon the "thing" which was the object of the contract within the meaning of
article 1450, supra? Sugar is one of the staple commodities of this country.
For the purpose of sale its bulk is weighed, the customary unit of weight
being denominated a "picul." There was no delivery under the contract. Now,
if called upon to designate the article sold, it is clear that the defendant could
only say that it was "sugar." He could only use this generic name for the
thing sold. There was no "appropriation" of any particular lot of sugar.
Neither party could point to any specific quantity of sugar and say: "This is
the article which was the subject of our contract." How different is this from
the contracts discussed in the cases referred to above! In the McCullough
case, for instance, the tobacco factory which the parties dealt with was
specifically pointed out and distinguished from all other tobacco factories.
So, in the Barretto case, the particular shares of stock which the parties
desired to transfer were capable of designation. In the Tan Leonco case,
where a quantity of hemp was the subject of the contract, it was shown that
that quantity had been deposited in a specific warehouse, and thus set apart
and distinguished from all other hemp.chanroblesvirtualawlibrary chanrobles
virtual law library
A number of cases have been decided in the State of Louisiana, where the
civil law prevails, which confirm our position. Perhaps the latest is Witt Shoe
Co. vs. Seegars and Co. (122 La., 145; 47 Sou., 444). In this case a contract
was entered into by a traveling salesman for a quantity of shoes, the sales
having been made by sample. The court said of this contract:
But it is wholly immaterial, for the purpose of the main question, whether
Mitchell was authorized to make a definite contract of sale or not, since the
only contract that he was in a position to make was an agreement to sell or
an executory contract of sale. He says that plaintiff sends out 375 samples
of shoes, and as he was offering to sell by sample shoes, part of which had
not been manufactured and the rest of which were incorporated in plaintiff's
stock in Lynchburg, Va., it was impossible that he and Seegars and Co.
should at that time have agreed upon the specific objects, the title to which
was to pass, and hence there could have been no sale. He and Seegars and
Co. might have agreed, and did (in effect ) agree, that the identification of
the objects and their appropriation to the contract necessary to make a sale
should thereafter be made by the plaintiff, acting for itself and for Seegars
and Co., and the legend printed in red ink on plaintiff's billheads ("Our
responsibility ceases when we take transportation Co's. receipt `In good
order'" indicates plaintiff's idea of the moment at which such identification
and appropriation would become effective. The question presented was
carefully considered in the case of State vs. Shields, et al. (110 La., 547, 34
Sou., 673) (in which it was absolutely necessary that it should be decided),
and it was there held that in receiving an order for a quantity of goods, of a
kind and at a price agreed on, to be supplied from a general stock,
warehoused at another place, the agent receiving the order merely enters
into an executory contract for the sale of the goods, which does not divest or
transfer the title of any determinate object, and which becomes effective for
that purpose only when specific goods are thereafter appropriated to the
contract; and, in the absence of a more specific agreement on the subject,
that such appropriated takes place only when the goods as ordered are
delivered to the public carriers at the place from which they are to be
shipped, consigned to the person by whom the order is given, at which time
and place, therefore, the sale is perfected and the title passes.
9 PAROLE EVIDENCE

This case and State vs. Shields, referred to in the above quotation are amply
illustrative of the position taken by the Louisiana court on the question before
us. But we cannot refrain from referring to the case of Larue and
Prevost vs. Rugely, Blair and Co. (10 La. Ann., 242) which is summarized by
the court itself in the Shields case as follows:
. . . It appears that the defendants had made a contract for the sale, by
weight, of a lot of cotton, had received $3,000 on account of the price, and
had given an order for its delivery, which had been presented to the
purchaser, and recognized by the press in which the cotton was stored, but
that the cotton had been destroyed by fire before it was weighed. It was held
that it was still at the risk of the seller, and that the buyer was entitled to
recover the $3,000 paid on account of the price.
We conclude that the contract in the case at bar was merely an executory
agreement; a promise of sale and not a sale. At there was no perfected sale,
it is clear that articles 1452, 1096, and 1182 are not applicable. The
defendant having defaulted in his engagement, the plaintiff is entitled to
recover the P3,000 which it advanced to the defendant, and this portion of
the judgment appealed from must therefore be
affirmed.chanroblesvirtualawlibrary chanrobles virtual law library
We think is a clear case of liquidated damages. The contract plainly states
that if the defendant fails to deliver the 600 piculs of sugar within the time
agreed on, the contract will be rescinded and he will be obliged to return the
P3,000 and pay the sum of P1,200 by way of indemnity for loss and
damages. There cannot be the slightest doubt about the meaning of this
language or the intention of the parties. There is no room for either
interpretation or construction. Under the provisions of article 1255 of the Civil
Code contracting parties are free to execute the contracts that they may
consider suitable, provided they are not in contravention of law, morals, or
public order. In our opinion there is nothing in the contract under
consideration which is opposed to any of these
principles.chanroblesvirtualawlibrary chanrobles virtual law library
For the foregoing reasons the judgment appealed from is modified by
allowing the recovery of P1,200 under paragraph 4 of the contract. As thus
modified, the judgment appealed from is affirmed, without costs in this
instance.
Arellano, C.J., Torres, Carson and Araullo,  JJ., concur.
Johnson, J., dissents.

The plaintiff has appealed from the judgment of the trial court on the ground
that it is entitled to recover the additional sum of P1,200 under paragraph 4
of the contract. The court below held that this paragraph was simply a
limitation upon the amount of damages which could be recovered and not
liquidated damages as contemplated by the law. "It also appears," said the
lower court, "that in any event the defendant was prevented from fulfilling the
contract by the delivery of the sugar by condition over which he had no
control, but these conditions were not sufficient to absolve him from the
obligation of returning the money which he received." chanrobles virtual law
library

The above quoted portion of the trial court's opinion appears to be based
upon the proposition that the sugar which was to be delivered by the
defendant was that which he expected to obtain from his own hacienda and,
as the dry weather destroyed his growing cane, he could not comply with his
part of the contract. As we have indicated, this view is erroneous, as, under
the contract, the defendant was not limited to his growth crop in order to
make the delivery. He agreed to deliver the sugar and nothing is said in the
contract about where he was to get it.chanroblesvirtualawlibrary chanrobles
virtual law library
10 PAROLE EVIDENCE
11 PAROLE EVIDENCE
G.R. No. L-17820 April 24, 1963
LAND SETTLEMENT AND DEVELOPMENT CORPORATION, Plaintiff-
Appellant, vs. GARCIA PLANTATION CO., INC., and/or SALUD GARCIA
and VICENTE B. GARCIA, Defendants-Appellees.
Lucido A. Guinto, Alfonso O. Alindogan and Marcelino A. Yumol for plaintiff-
appellant.
Bausa and Ampil for defendants-appellees.
PAREDES, J.:chanrobles virtual law library
This is a case of specific performance of contract, instituted by the Land
Settlement and Development Corporation, against the Garcia Plantation Co.,
Inc. and/or Salud C. De Garcia and Vicente B. Garcia, for the recovery of the
sum of P5,955.30, representing the unpaid balance of the purchase price of
two tractors, bought by the defendant Garcia Plantation Co., Inc. from the
plaintiff. Salud C. de Garcia was made alternative
co-defendant because of two promissory notes executed by her, whereby
she personally assumed the account of the company with the plaintiff, and
the defendant Vicente B. Garcia was included as husband of Salud C. de
Garcia. The defendants, in their answer, admitted the execution of the two
promissory notes, but contended that the same had been novated by a
subsequent agreement contained in a letter (Exh. L) sent by Filomeno C.
Kintanar, Manager, Board of Liquidators of the LASEDECO, giving the
defendant Salud C. de Garcia an extension up to May 31, 1957, within which
to pay the account, and since the complaint was filed on  February 20, 1957,
they claimed that the action was premature and prayed that the complaint be
dismissed. The plaintiff in the reply and answer to the counterclaim, admitted
the due execution and genuineness of the letter marked Exhibit L, but
contended that the same did not express the true and intent agreement of
the parties, thereby placing the fact in issue, in the pleadings.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts
be admitted and approved by this Honorable Court, without prejudice to the
parties adducing other evidence to prove their case not covered by this
stipulation of facts.chanroblesvirtualawlibrarychanrobles virtual law library
After several postponements requested by both parties on the ground of
pending amicable settlement, trial on the merits was ordered and held on
July 25, 1957, at 1:00 o'clock in the afternoon. At the trial, the defendant
admitted all the documentary evidence adduced by the plaintiffs, showing
that they were indebted to said plaintiff. However, when the plaintiff
presented Atty. Lucido A. Guinto, Legal Officer of the Board of Liquidators,
to testify on the true agreement and the intention of the parties at the time
the letter (Exh. L for the defendants) was drafted and prepared, the lower
court presided by the Hon. B. A. Tan, upon the objection of the counsel for
defendants, ruled out said testimony and prevented the introduction of
evidence under the parol evidence rule (Sec. 22, Rule 123). Plaintiff also
intended to present Mr. Kintanar, the writer of the letter, to testify on the
same matter, but in view of the ruling of the lower court, it rested its case.
The lower court dismissed the case, stating that the action was premature.
Plaintiff appealed to the Court of Appeals, which certified the case to us,
pointing that the questions presented were purely legal in
nature.chanroblesvirtualawlibrarychanrobles virtual law library
Appellants allege that the lower court erred (1) In forcing the parties to trial
despite requests by both parties for more time to submit an amicable
settlement of the case; (2) In excluding parol evidence, tending to prove the
true intention and agreement of the parties and the existence of a condition
precedent, before the extension granted the defendants, contained in Exhibit
L, could become effective and (3) In holding that the action was premature
and in dismissing the case on this
ground.chanroblesvirtualawlibrarychanrobles virtual law library
The disposal of the second issue would render the determination of the other
issues unnecessary. The fact that the letter Exhibit L, failed "to express the
true intent and agreement of the parties", Section 22, Rule 123, had been
put in issue by the Answer of the plaintiff to defendants' counterclaim (Heirs
of Dela Rama v. Talisay-Silay Milling Co., 54 Phil., 580). The parol evidence
consisted of the testimony of Attys. Guinto and Kintanar, to the effect that in
view of the plea of defendant Vicente B. Garcia to give the defendants an
extension of time to pay their accounts, Atty. Kintanar gave the defendants
up to May 31, 1957, to coincide with their ramie harvest "provided that they
will make a substantial down payment immediately, with the understanding
that upon non-payment of the substantial amount, the extension shall be
deemed as not granted and the LASEDECO shall feel free to seek redress
in court". That there was such condition precedent is manifested by the
second paragraph of the letter Exhibit L, quoted hereunder:
November 20, 1956
Mrs. Salud de Garcia Tacurong, Cotabato
Dear Madam;chanrobles virtual law library
12 PAROLE EVIDENCE

Please be advised that the Board has granted you an extension up to May Had the trial court permitted, as it should, the plaintiff to prove the condition
31, 1957, within which to pay your precedent to the extension of the payment the said plaintiff would have been
account.chanroblesvirtualawlibrarychanrobles virtual law library able to show that because the defendants had failed to pay a substantial
down payment, the agreement was breached and the contract contained in
This matter has been the subject of agreement between your husband and Exhibit "L", never became effective and the extension should be considered
this office. as not having been given at all. So that, although the complaint was filed on
February 20, 1957, three months before the deadline of the extension on
May 31, 1957, there would be no premature institution of the case. The
Respectfully, lower court, therefore, erred in dismissing the
(Sgd.) FILOMENO C. KINTANAR case.chanroblesvirtualawlibrarychanrobles virtual law library

The subject of agreement alluded to in the second paragraph of the above The decision appealed from is reversed, and the case remanded to the
letter, was the condition to be complied with or the consideration given for lower court for further proceedings. Costs against the appellees.
the extension of time, within which the Garcia spouses pay their account.
The lower court should have admitted the parol evidence sought to be
introduced to prove the failure of the document in question to express the Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L.,
true intent and agreement of the parties. It should not have improvidently Barrera, Dizon, Regala and Makalintal, JJ., concur.
and hastily excluded said parol evidence, knowing that the subject-matter Labrador, J., took no part.
treated therein, was one of the exceptions to the parol evidence rule. When
the operation of the contract is made to depend upon the occurrence of an
event, which, for that reason is a condition precedent, such may be
established by parol evidence. This is not varying the terms of the written
contract by extrinsic agreement, for the simple reason that there is no
contract in existence; there is nothing to which to apply the excluding rule
(Heitman vs. Commercial Bank of Savannah, 6 Ga. App. 584, 65 SE 590,
cited in Comments on the Rules of Court, 1957 Ed., 200), "... This rule does
not prevent the introduction of extrinsic evidence to show that a supposed
contract never became effective by reason of the failure of some collateral
condition or stipulation, pre-requisite to liability" (Peabody & Co. v. Bromfield
& Ross, 38 Phil. 841).The rule excluding parol evidence to vary or contradict
a writing, does not extend so far as to preclude the admission of extrinsic
evidence, to show prior or contemporaneous collateral parol agreements
between the parties, but such evidence may be received, regardless of
whether or not the written agreement contains reference to such collateral
agreement (Robles v. Lizarraga Hnos., 50 Phil. 387). In the case at bar,
reference is made of a previous agreement, in the second paragraph of
letter Exhibit L, and although a document is usually to be interpreted in the
precise terms in which it is couched, Courts, in the exercise of sound
discretion, may admit evidence of surrounding circumstances, in order to
arrive at the true intention of the parties (Aves & Alzona v. Orilleneda, 70
Phil. 262). Rulings by the same effect were also announced by the United
States courts (Payne v. Campbell, 6 E & B, 370; Wilson v. Powers, 131
Mass. 540; Blewitt v. Brown, 142 NY 357; Burke v. Delany, 153 US
288).chanroblesvirtualawlibrarychanrobles virtual law library
13 PAROLE EVIDENCE
G.R. No. L-8844 December 16, 1914
FERNANDO MAULINI, ET AL., plaintiffs-appellees,
vs.
ANTONIO G. SERRANO, defendant-appellant.
R. M. Calvo for appellant.
Jose Arnaiz for appellees.
MORELAND, J.:
This is an appeal from a judgment of the Court of First Instance of the city of
Manila in favor of the plaintiff for the sum of P3,000, with interest thereon at
the rate of
1½ per cent month from September 5, 1912, together with the costs.
The action was brought by the plaintiff upon the contract of indorsement
alleged to have been made in his favor by the defendant upon the following
promissory note:
3,000. Due 5th of September, 1912.
We jointly and severally agree to pay to the order of Don Antonio G.
Serrano on or before the 5th day of September, 1912, the sum of
three thousand pesos (P3,000) for value received for commercial
operations. Notice and protest renounced. If the sum herein
mentioned is not completely paid on the 5th day of September,
1912, this instrument will draw interest at the rate of 1½ per cent
per month from the date when due until the date of its complete
payment. The makers hereof agree to pay the additional sum of
P500 as attorney's fees in case of failure to pay the note.
Manila, June 5, 1912.
(Sgd.) For Padern, Moreno & Co., by F. Moreno, member of the
firm. For Jose Padern, by F. Moreno. Angel Gimenez.
The note was indorsed on the back as follows:
Pay note to the order of Don Fernando Maulini, value received.
Manila, June 5, 1912. (Sgd.) A.G. Serrano.
The first question for resolution on this appeal is whether or not, under the
Negotiable Instruments Law, an indorser of a negotiable promissory note
may, in an action brought by his indorsee, show, by parol evidence, that the
indorsement was wholly without consideration and that, in making it, the
indorser acted as agent for the indorsee, as a mere vehicle of transfer of the
naked title from the maker to the indorsee, for which he received no
consideration whatever.
The learned trial court, although it received parol evidence on the subject
provisionally, held, on the final decision of the case, that such evidence was
not admissible to alter, very, modify or contradict the terms of the contract of
indorsement, and, therefore, refused to consider the evidence thus
provisionally received, which tended to show that, by verbal agreement
between the indorser and the indorsee, the indorser, in making the
indorsement, was acting as agent for the indorsee, as a mere vehicle for the
transference of naked title, and that his indorsement was wholly without
consideration. The court also held that it was immaterial whether there was a
consideration for the transfer or not, as the indorser, under the evidence
offered, was an accommodation indorser.
We are of the opinion that the trial court erred in both findings.1awphil.net
In the first place, the consideration of a negotiable promissory note, or of any
of the contracts connected therewith, like that of any other written
instrument, is, between the immediate parties to the contract, open to attack,
under proper circumstances, for the purpose of showing an absolute lack or
failure of consideration.
It seems, according to the parol evidence provisionally admitted on the trial,
that the defendant was a broker doing business in the city of Manila and that
part of his business consisted in looking up and ascertaining persons who
had money to loan as well as those who desired to borrow money and,
acting as a mediary, negotiate a loan between the two. He had done much
business with the plaintiff and the borrower, as well as with many other
people in the city of Manila, prior to the matter which is the basis of this
action, and was well known to the parties interested. According to his
custom in transactions of this kind, and the arrangement made in this
particular case, the broker obtained compensation for his services of the
borrower, the lender paying nothing therefor. Sometimes this was a certain
per cent of the sum loaned; at other times it was a part of the interest which
14 PAROLE EVIDENCE
the borrower was to pay, the latter paying 1½ per cent and the broker ½ per
cent. According to the method usually followed in these transactions, and the
procedure in this particular case, the broker delivered the money personally
to the borrower, took note in his own name and immediately transferred it by
indorsement to the lender. In the case at bar this was done at the special
request of the indorsee and simply as a favor to him, the latter stating to the
broker that he did not wish his name to appear on the books of the
borrowing company as a lender of money and that he desired that the broker
take the note in his own name, immediately transferring to him title thereto
by indorsement. This was done, the note being at once transferred to the
lender.
According to the evidence referred to, there never was a moment when
Serrano was the real owner of the note. It was always the note of the
indorsee, Maulini, he having furnished the money which was the
consideration for the note directly to the maker and being the only person
who had the slightest interest therein, Serrano, the broker, acting solely as
an agent, a vehicle by which the naked title to the note passed fro the
borrower to the lender. The only payment that the broker received was for
his services in negotiating the loan. He was paid absolutely nothing for
becoming responsible as an indorser on the paper, nor did the indorsee
lose, pay or forego anything, or alter his position thereby.
Nor was the defendant an accommodation indorser. The learned trial court
quoted that provision of the Negotiable Instruments Law which defines an
accommodation party as "one who has signed the instrument as maker,
drawer, acceptor, or indorser, without receiving value therefor, and for the
purpose of lending his name to some other person. Such a person is liable
on the instrument to a holder for value, notwithstanding such holder at the
time of taking the instrument knew the same to be only an accommodation
party." (Act No. 2031, sec. 29.)
We are of the opinion that the trial court misunderstood this definition. The
accommodation to which reference is made in the section quoted is not one
to the person who takes the note — that is, the payee or indorsee, but one to
the maker or indorser of the note. It is true that in the case at bar it was an
accommodation to the plaintiff, in a popular sense, to have the defendant
indorse the note; but it was not the accommodation described in the law, but,
rather, a mere favor to him and one which in no way bound Serrano. In
cases of accommodation indorsement the indorser makes the indorsement
for the accommodation of the maker. Such an indorsement is generally for
the purpose of better securing the payment of the note — that is, he lend his
name to the maker, not to the holder. Putting it in another way: An
accommodation note is one to which the accommodation party has put his
name, without consideration, for the purpose of accommodating some other
party who is to use it and is expected to pay it. The credit given to the
accommodation part is sufficient consideration to bind the accommodation
maker. Where, however, an indorsement is made as a favor to the indorsee,
who requests it, not the better to secure payment, but to relieve himself from
a distasteful situation, and where the only consideration for such
indorsement passes from the indorser to the indorsee, the situation does not
present one creating an accommodation indorsement, nor one where there
is a consideration sufficient to sustain an action on the indorsement.
The prohibition in section 285 of the Code of Civil Procedure does not apply
to a case like the one before us. The purpose of that prohibition is to prevent
alternation, change, modification or contradiction of the terms  of a written
instrument, admittedly existing, by the use of parol evidence, except in the
cases specifically named in the section. The case at bar is not one where
the evidence offered varies, alters, modifies or contradicts the terms  of the
contract of indorsement admittedly existing. The evidence was not offered
for that purpose. The purpose was to show that no contract of indorsement
ever existed; that the minds of the parties never met on the terms of such
contract; that they never mutually agreed to enter into such a contract; and
that there never existed a consideration upon which such an agreement
could be founded. The evidence was not offered to vary, alter, modify, or
contradict the terms of an agreement which it is admitted existed between
the parties, but to deny that there ever existed any agreement whatever; to
wipe out all apparent relations between the parties, and not to vary, alter or
contradict the terms of a relation admittedly existing; in other words, the
purpose of the parol evidence was to demonstrate, not that the indorser did
not intend to make the particular indorsement which he did make; not that he
did not intend to make the indorsement in the terms made; but, rather, to
deny the reality of any indorsement; that a relation of any kind
whatever was created or existed between him and the indorsee  by reason of
the writing on the back of the instrument; that no consideration ever passed
to sustain an indorsement of any kind whatsoever.
The contention has some of the appearances of a case in which an indorser
seeks prove forgery. Where an indorser claims that his name was forged, it
is clear that parol evidence is admissible to prove that fact, and, if he proves
it, it is a complete defense, the fact being that the indorser never made any
such contract, that no such relation ever existed between him and the
indorsee, and that there was no consideration whatever to sustain such a
contract. In the case before us we have a condition somewhat similar. While
the indorser does not claim that his name was forged, he does claim that it
was obtained from him in a manner which, between the parties themselves,
renders, the contract as completely inoperative as if it had been forged.
15 PAROLE EVIDENCE
Parol evidence was admissible for the purpose named.1awphil.net
There is no contradiction of the evidence offered by the defense and
received provisionally by the court. Accepting it as true the judgment must
be reversed.
The judgment appealed from is reversed and the complaint dismissed on the
merits; no special finding as to costs.
Arellano, C.J., Johnson and Trent, JJ., concur.
Separate Opinions
TORRES, J.,  concurring:
Act No. 2031, known as the Negotiable Instruments Law, which governs the
present case, establishes various kinds of indorsements by means of which
the liability of the indorser is in some manner limited, distinguishing it from
that of the regular or general indorser, and among those kinds is that of the
qualified indorsement which, pursuant to section 38 of the same Act,
constitutes the indorser a mere assignor of the title to the instrument, and
may be made by adding to the indorser's signature the words "without
recourse" or any words of similar import.
If the defendant, Antonio G. Serrano, intervened, as he alleged and tried to
prove that he did at the trial, only as a broker or agent between the lender
and plaintiff, Maulini, and the makers of the promissory note, Padern,
Moreno & Co. and Angel Gimenez, in order to afford an opportunity to the
former to invest the amount of the note in such manner that it might bring
him interest, the defendant could have qualified the indorsement in question
by adding to his signature the words "without recourse" or any others such
as would have made known in what capacity he intervened in that
transaction. As the defendant did not do so ad as he signed the indorsement
in favor of the plaintiff Maulini for value received from the latter, his liability,
according to section 66 of the Act aforecited, is that of a regular or general
indorser, who, this same section provides, engages that if the instrument be
dishonored, and the necessary proceedings on dishonor be duly taken, he
will pay the amount thereof to the holder, or to any subsequent indorser who
may be compelled to pay it. And the evidence which the defendant
presented, tending to show what were the conditions to which the defendant
presented, tending to show what were the conditions to which he obligated
himself and in what capacity he intervened in making that indorsement and
that this latter was absolutely without consideration, should not have been
admitted so that he might elude the aforesaid obligation, or, if admitted,
should not be taken into account, because as a regular indorser he
warranted, pursuant to the said section 66, that the instrument was genuine
and in all respects what it purported to be, that he had a good title to it, and
that it was at the time of his indorsement valid and subsisting. He cannot,
therefore, by means of any evidence, and much less of such as consists of
his own testimony, and as such interested party, alter, modify, contradict or
annul, as he virtually claimed and claims to be entitled to do, what in writing
and with a full and perfect knowledge of the meaning and import of the
words contained in the indorsement, he set forth therein over his signature.
Section 63 of the Act above cited says that a person placing his signature
upon an instrument otherwise than as maker, drawer, or acceptor is deemed
to be an indorser, unless he clearly indicates by appropriate words his
contention to be bound indicates by appropriate words his intention to be
bound in some other capacity. This provision of the law clearly indicates that
in every negotiable instrument it is absolutely necessary to specify the
capacity in which the person intervenes who is mentioned therein or takes
part in its negotiation, because only by so doing can it be determined what
liabilities arise from that intervention and from whom, how and when they
must be exacted. And if, in the vent of a failure to express the capacity in
which the person who signed the negotiable instrument intended to be
bound, he should be deemed to be an indorser, when the very words of the
instrument expressly and conclusively show that such he is, as occurs in the
present case, and when the indorsement contains no restriction,
modification, condition or qualification whatever, there cannot be attributed
to him, without violating the provisions of the said Act, any other intention
than that of being bound in the capacity in which he appears in the
instrument itself, nor can evidence be admitted or, if already admitted, taken
into consideration, for the purpose of proving such other intention, for the
simple reason that if the law has already fixed ad determined the capacity in
which it must be considered that the person who signed the negotiable
instrument intervened and the intention of his being bound in a definite
capacity, for no other purpose, undoubtedly, than that there shall be no
evidence given in the matter, when the capacity appears in the instrument
itself and the intention is determined by the very same capacity, as occurs in
this case, the admission of evidence in reference thereto is entirely
unnecessary, useless, and contrary to the purposes of the law, which is
clear and precise in its provisions and admits of no subterfuges or evasions
for escaping obligations contracted upon the basis of credit, with evident and
sure detriment to those who intervened or took part in the negotiation of the
instrument.
16 PAROLE EVIDENCE
However, it is held in the majority opinion, for the purpose of sustaining the
premises that the proofs presented by the defendant could have been
admitted without violating the provisions of section 285 of the Code of Civil
Procedure, that the evidence was not offered to vary, alter, modify, or
contradict the terms of an agreement which it is admitted existed between
the parties, but to deny that there ever existed any agreement whatever; to
wipe out all apparent relations between the parties, and not to vary, alter or
contradict the terms of a relation admittedly existing; in other words, the
purpose of the parol evidence was to demonstrate, not that the indorser did
not intend to make the particular indorsement in the terms made, but rather
to deny the reality of any  indorsement; to deny that a relation of any kind
whatsoever was created or existed between him and the indorsee  by reason
of the writing on the back of the instrument; to deny that any consideration
ever passed to sustain an indorsement of any kind whatsoever. It is stated in
the same decision that the contention has some of the appearances of a
case in which an indorser seeks to prove forgery.
First of all, we do not see that there exists any appearance or similarity
whatever between the case at bar and one where forgery is sought to be
proved. The defendant did not, either civilly or criminally, impugn the
indorsement as being false. He admitted its existence, as stated in the
majority opinion itself, and did not disown his signature written in the
indorsement. His denial to the effect that the indorsement was wholly without
consideration, aside from the fact that it is i contradiction to the statements
that he over his signature made in the instrument, does not allow the
supposition that the instrument was forged.
The meaning which the majority opinion apparently wishes to convey, in
calling attention to the difference between what, as it says, was the purpose
of the evidence presented by the defendant and what was sought to be
proved thereby, is that the defendant does not endeavor to contradict or alter
the terms of the agreement, which is contained in the instrument and is
admitted to exist between the parties; but to deny the existence of such an
agreement between them, that is, the existence of any indorsement at all,
and that any consideration ever passed to sustain the said indorsement, or,
in other words, that the defendant acknowledged the indorsement as
regards the form in which it appears to have been drawn up, but not with
respect to its essence, that is, to the truth of the particular facts set forth in
the indorsement. It cannot be denied that the practical result evidence is
other than to contradict, modify, alter or even to annul the terms of the
agreement contained in the indorsement: so that, in reality, the distinction
does not exist that is mentioned as a ground of the decision of the majority
of the court in support of the opinion that the evidence in question might
have been admitted, without violating the provisions of the aforementioned
section 285 of the Code of Civil Procedure. This section is based upon the
same principle which is taken into account in the Negotiable Instruments
Law to write into it such positive and definite provisions which purport,
without possibility of discussion or doubt, the uselessness of taking evidence
when the capacity of the person who intervened in a negotiable instrument
or his intention of being bound in a particular way appears in the instrument
itself or has been fixed by statute, if it is not shown that he did so in some
other capacity than that of maker, drawer or acceptor.
But aside from what the Code of Civil Procedure prescribes with respect to
this matter, as the present case is governed by the Negotiable Instruments
Law, we must abide by its provisions.
Section 24 of this Act, No. 2031, says that every negotiable instrument is
deemed prima facie  to have been issued for a valuable consideration; and
every person whose signature appears thereon, to have become a party
thereto for value. If the Act establishes this presumption for the case where
there might be doubt with respect to the existence of a valuable
consideration, in order to avoid the taking of evidence in the matter, when
the consideration appears from the instrument itself by the expression of the
value, the introduction of evidence is entirely unnecessary and improper.
According to section 25 of the same Act, value is any consideration sufficient
to support a simple contract, and so broad is the scope the law gives to the
meaning of "value" in this kind of instruments that it considers as such a
prior of preexistent debt, whether the instrument be payable on demand or at
some future date.
Section 26 provides that where value has at any time been given for the
instrument, the holder is deemed a holder for value, both in respect to the
maker and to the defendant indorser, it is immaterial whether he did so
directly to the person who appears in the promissory note as the maker or
whether he delivered the sum to the defendant in order that this latter might
in turn deliver it to the maker.
The defendant being the holder of the instrument, he is also unquestionably
the holder in due course. In the first place, in order to avoid doubts with
respect to this matter which might require the introduction of evidence, the
Act before mentioned has provided, in section 59, that every holder is
deemed prima facie to be a holder in due course, and such is the weight it
gives to this presumption and to the consequences derived therefrom, that it
imposes upon the holder the burden to prove that he or some person under
whom he claims acquired the title in due course, only when it is shown that
17 PAROLE EVIDENCE
the title of any person who has negotiated the instrument was defective. This
rule, however, pursuant to the said section, does not apply in favor of a party
who became bound on the instrument prior to the acquisition of such
defective title, in which case the defendant Serrano is not included, because,
in the first place, he was not bound on the instrument prior to the acquisition
of the title by the plaintiff, but it was the maker of the promissory note who
was bound on the instrument executed in favor of the defendant or indorser
prior to the acquisition of the title by the plaintiff; and, in the second place, it
does not appear, nor was it proved, as will be seen hereinafter, that the title
in question was defective.
According to section 52 of the same Act, the plaintiff is the holder in due
course of the instrument in question, that is, of the promissory note
containing the obligation compliance with which is demanded of him by the
defendant, because he took the instrument under the condition: (a) That it
was complete and regular upon its face; (b) that he became the holder of it
before it was overdue, and without notice that it had been previously
dishonored; (c) that he took it in good faith and for value; and (d) that at the
time it was negotiated to him he had no notice of any deficiency in the
instrument or defect in the title of the person negotiating it.
Pursuant to section 56 of the said Act, to constitute notice of a deficiency in
the instrument or defect in the title of the person negotiating the same, the
person to whom it is transferred must have had actual knowledge of the
deficiency or defect, or knowledge of such facts that his action in taking the
instrument amounted to bad faith.
In the present case it cannot be said, for it is not proven, that the plaintiff,
upon accepting the instrument from the defendant, had actual knowledge of
any deficiency or defect in the same, for the simple reason that it contains no
deficiency or defect. Its terms are very clear and positive. There is nothing
ambiguous, concealed, or which might give rise to any doubt whatever with
respect to its terms or to the agreement made by the parties. Furthermore,
as stated in the majority opinion, the defendant did not intend to make the
particular indorsement which he did make in the terms, form and manner in
which it was made, nor did he intend to change or alter the terms of the
agreement which is admitted to have existed between the parties. All of
which indicates that, neither as regards the plaintiff nor as regards the
defendant, was there any deficiency or defect in the title or in the instrument,
and that the plaintiff, upon taking or receiving the instrument from the
defendant, had no knowledge of any fact from which bad faith on his part
might be implied. Besides, no evidence was produced of the existence of
any such bad faith, nor of the knowledge of any deficiency or defect.
Moreover, section 55 of Act No. 2031 provides that the title of a person who
negotiates an instrument is defective within the meaning of this Act when he
obtained the instrument, or any signature thereto, by fraud, duress, or force
and fear, or other unlawful means, or for an illegal consideration, or when he
negotiates it in breach of faith, or under such circumstances as amount to a
fraud. As no evidence was taken on these points, the only ones that may be
proven as regards negotiable instruments, the defendant must be deemed to
be the holder of the instrument in due course, pursuant to the provisions of
the aforecited section 59, and he cannot be required to prove that he or his
predecessor in interest acquired the title as such holder in due course.
Now then, according to section 28 of the same Act, as against the holder of
the instrument in due course absence or failure of consideration is not a
matter of defense; and, pursuant to section 57, a holder in due course holds
the instrument free from any defect of title of prior parties, and free from
defenses available to prior parties among themselves, and may enforce
payment of the instrument for the full amount thereof against all parties liable
thereon. And the next section, No. 58 prescribes that in the hands of any
holder other than a holder in due course, a negotiable instrument is subject
to the same defenses as if it were nonnegotiable.
So it could not be clearer than that, pursuant to the provisions of the
Negotiable Instrument Law, which governs the case at bar, as the plaintiff is
the holder in due course of the instrument in question, no proof whatever
from the defendant could be admitted, nor if admitted should be taken into
account, bearing on the lack of consideration in the indorsement, as alleged
by him, and for the purpose of denying the existence of any indorsement and
that any relation whatever was created or existed between him and the
indorsee; likewise, that no defense of any kind could have been admitted
from the defendant in respect to the said instrument, and, finally, that the
defendant is obligated to pay the sum mentioned in the said indorsement, it
being immaterial whether or not he be deemed to be an accommodation
party in the instrument, in order that compliance with the said obligation may
be required of him in his capacity of indorser.
Basing our conclusions on the foregoing grounds, and regretting to dissent
from the opinion of the majority of our colleagues, we believe that the
judgment appealed from should be affirmed, with the costs against the
appellant.
Araullo, J., dissents.
#Separate Opinions
18 PAROLE EVIDENCE
TORRES, J.,  concurring:
Act No. 2031, known as the Negotiable Instruments Law, which governs the
present case, establishes various kinds of indorsements by means of which
the liability of the indorser is in some manner limited, distinguishing it from
that of the regular or general indorser, and among those kinds is that of the
qualified indorsement which, pursuant to section 38 of the same Act,
constitutes the indorser a mere assignor of the title to the instrument, and
may be made by adding to the indorser's signature the words "without
recourse" or any words of similar import.
If the defendant, Antonio G. Serrano, intervened, as he alleged and tried to
prove that he did at the trial, only as a broker or agent between the lender
and plaintiff, Maulini, and the makers of the promissory note, Padern,
Moreno & Co. and Angel Gimenez, in order to afford an opportunity to the
former to invest the amount of the note in such manner that it might bring
him interest, the defendant could have qualified the indorsement in question
by adding to his signature the words "without recourse" or any others such
as would have made known in what capacity he intervened in that
transaction. As the defendant did not do so ad as he signed the indorsement
in favor of the plaintiff Maulini for value received from the latter, his liability,
according to section 66 of the Act aforecited, is that of a regular or general
indorser, who, this same section provides, engages that if the instrument be
dishonored, and the necessary proceedings on dishonor be duly taken, he
will pay the amount thereof to the holder, or to any subsequent indorser who
may be compelled to pay it. And the evidence which the defendant
presented, tending to show what were the conditions to which the defendant
presented, tending to show what were the conditions to which he obligated
himself and in what capacity he intervened in making that indorsement and
that this latter was absolutely without consideration, should not have been
admitted so that he might elude the aforesaid obligation, or, if admitted,
should not be taken into account, because as a regular indorser he
warranted, pursuant to the said section 66, that the instrument was genuine
and in all respects what it purported to be, that he had a good title to it, and
that it was at the time of his indorsement valid and subsisting. He cannot,
therefore, by means of any evidence, and much less of such as consists of
his own testimony, and as such interested party, alter, modify, contradict or
annul, as he virtually claimed and claims to be entitled to do, what in writing
and with a full and perfect knowledge of the meaning and import of the
words contained in the indorsement, he set forth therein over his signature.
Section 63 of the Act above cited says that a person placing his signature
upon an instrument otherwise than as maker, drawer, or acceptor is deemed
to be an indorser, unless he clearly indicates by appropriate words his
contention to be bound indicates by appropriate words his intention to be
bound in some other capacity. This provision of the law clearly indicates that
in every negotiable instrument it is absolutely necessary to specify the
capacity in which the person intervenes who is mentioned therein or takes
part in its negotiation, because only by so doing can it be determined what
liabilities arise from that intervention and from whom, how and when they
must be exacted. And if, in the vent of a failure to express the capacity in
which the person who signed the negotiable instrument intended to be
bound, he should be deemed to be an indorser, when the very words of the
instrument expressly and conclusively show that such he is, as occurs in the
present case, and when the indorsement contains no restriction,
modification, condition or qualification whatever, there cannot be attributed
to him, without violating the provisions of the said Act, any other intention
than that of being bound in the capacity in which he appears in the
instrument itself, nor can evidence be admitted or, if already admitted, taken
into consideration, for the purpose of proving such other intention, for the
simple reason that if the law has already fixed ad determined the capacity in
which it must be considered that the person who signed the negotiable
instrument intervened and the intention of his being bound in a definite
capacity, for no other purpose, undoubtedly, than that there shall be no
evidence given in the matter, when the capacity appears in the instrument
itself and the intention is determined by the very same capacity, as occurs in
this case, the admission of evidence in reference thereto is entirely
unnecessary, useless, and contrary to the purposes of the law, which is
clear and precise in its provisions and admits of no subterfuges or evasions
for escaping obligations contracted upon the basis of credit, with evident and
sure detriment to those who intervened or took part in the negotiation of the
instrument.
However, it is held in the majority opinion, for the purpose of sustaining the
premises that the proofs presented by the defendant could have been
admitted without violating the provisions of section 285 of the Code of Civil
Procedure, that the evidence was not offered to vary, alter, modify, or
contradict the terms of an agreement which it is admitted existed between
the parties, but to deny that there ever existed any agreement whatever; to
wipe out all apparent relations between the parties, and not to vary, alter or
contradict the terms of a relation admittedly existing; in other words, the
purpose of the parol evidence was to demonstrate, not that the indorser did
not intend to make the particular indorsement in the terms made, but rather
to deny the reality of any  indorsement; to deny that a relation of any kind
whatsoever was created or existed between him and the indorsee  by reason
of the writing on the back of the instrument; to deny that any consideration
ever passed to sustain an indorsement of any kind whatsoever. It is stated in
19 PAROLE EVIDENCE
the same decision that the contention has some of the appearances of a
case in which an indorser seeks to prove forgery.
First of all, we do not see that there exists any appearance or similarity
whatever between the case at bar and one where forgery is sought to be
proved. The defendant did not, either civilly or criminally, impugn the
indorsement as being false. He admitted its existence, as stated in the
majority opinion itself, and did not disown his signature written in the
indorsement. His denial to the effect that the indorsement was wholly without
consideration, aside from the fact that it is i contradiction to the statements
that he over his signature made in the instrument, does not allow the
supposition that the instrument was forged.
The meaning which the majority opinion apparently wishes to convey, in
calling attention to the difference between what, as it says, was the purpose
of the evidence presented by the defendant and what was sought to be
proved thereby, is that the defendant does not endeavor to contradict or alter
the terms of the agreement, which is contained in the instrument and is
admitted to exist between the parties; but to deny the existence of such an
agreement between them, that is, the existence of any indorsement at all,
and that any consideration ever passed to sustain the said indorsement, or,
in other words, that the defendant acknowledged the indorsement as
regards the form in which it appears to have been drawn up, but not with
respect to its essence, that is, to the truth of the particular facts set forth in
the indorsement. It cannot be denied that the practical result evidence is
other than to contradict, modify, alter or even to annul the terms of the
agreement contained in the indorsement: so that, in reality, the distinction
does not exist that is mentioned as a ground of the decision of the majority
of the court in support of the opinion that the evidence in question might
have been admitted, without violating the provisions of the aforementioned
section 285 of the Code of Civil Procedure. This section is based upon the
same principle which is taken into account in the Negotiable Instruments
Law to write into it such positive and definite provisions which purport,
without possibility of discussion or doubt, the uselessness of taking evidence
when the capacity of the person who intervened in a negotiable instrument
or his intention of being bound in a particular way appears in the instrument
itself or has been fixed by statute, if it is not shown that he did so in some
other capacity than that of maker, drawer or acceptor.
But aside from what the Code of Civil Procedure prescribes with respect to
this matter, as the present case is governed by the Negotiable Instruments
Law, we must abide by its provisions.
Section 24 of this Act, No. 2031, says that every negotiable instrument is
deemed prima facie  to have been issued for a valuable consideration; and
every person whose signature appears thereon, to have become a party
thereto for value. If the Act establishes this presumption for the case where
there might be doubt with respect to the existence of a valuable
consideration, in order to avoid the taking of evidence in the matter, when
the consideration appears from the instrument itself by the expression of the
value, the introduction of evidence is entirely unnecessary and improper.
According to section 25 of the same Act, value is any consideration sufficient
to support a simple contract, and so broad is the scope the law gives to the
meaning of "value" in this kind of instruments that it considers as such a
prior of preexistent debt, whether the instrument be payable on demand or at
some future date.
Section 26 provides that where value has at any time been given for the
instrument, the holder is deemed a holder for value, both in respect to the
maker and to the defendant indorser, it is immaterial whether he did so
directly to the person who appears in the promissory note as the maker or
whether he delivered the sum to the defendant in order that this latter might
in turn deliver it to the maker.
The defendant being the holder of the instrument, he is also unquestionably
the holder in due course. In the first place, in order to avoid doubts with
respect to this matter which might require the introduction of evidence, the
Act before mentioned has provided, in section 59, that every holder is
deemed prima facie to be a holder in due course, and such is the weight it
gives to this presumption and to the consequences derived therefrom, that it
imposes upon the holder the burden to prove that he or some person under
whom he claims acquired the title in due course, only when it is shown that
the title of any person who has negotiated the instrument was defective. This
rule, however, pursuant to the said section, does not apply in favor of a party
who became bound on the instrument prior to the acquisition of such
defective title, in which case the defendant Serrano is not included, because,
in the first place, he was not bound on the instrument prior to the acquisition
of the title by the plaintiff, but it was the maker of the promissory note who
was bound on the instrument executed in favor of the defendant or indorser
prior to the acquisition of the title by the plaintiff; and, in the second place, it
does not appear, nor was it proved, as will be seen hereinafter, that the title
in question was defective.
According to section 52 of the same Act, the plaintiff is the holder in due
course of the instrument in question, that is, of the promissory note
20 PAROLE EVIDENCE
containing the obligation compliance with which is demanded of him by the
defendant, because he took the instrument under the condition: (a) That it
was complete and regular upon its face; (b) that he became the holder of it
before it was overdue, and without notice that it had been previously
dishonored; (c) that he took it in good faith and for value; and (d) that at the
time it was negotiated to him he had no notice of any deficiency in the
instrument or defect in the title of the person negotiating it.
Pursuant to section 56 of the said Act, to constitute notice of a deficiency in
the instrument or defect in the title of the person negotiating the same, the
person to whom it is transferred must have had actual knowledge of the
deficiency or defect, or knowledge of such facts that his action in taking the
instrument amounted to bad faith.
In the present case it cannot be said, for it is not proven, that the plaintiff,
upon accepting the instrument from the defendant, had actual knowledge of
any deficiency or defect in the same, for the simple reason that it contains no
deficiency or defect. Its terms are very clear and positive. There is nothing
ambiguous, concealed, or which might give rise to any doubt whatever with
respect to its terms or to the agreement made by the parties. Furthermore,
as stated in the majority opinion, the defendant did not intend to make the
particular indorsement which he did make in the terms, form and manner in
which it was made, nor did he intend to change or alter the terms of the
agreement which is admitted to have existed between the parties. All of
which indicates that, neither as regards the plaintiff nor as regards the
defendant, was there any deficiency or defect in the title or in the instrument,
and that the plaintiff, upon taking or receiving the instrument from the
defendant, had no knowledge of any fact from which bad faith on his part
might be implied. Besides, no evidence was produced of the existence of
any such bad faith, nor of the knowledge of any deficiency or defect.
Moreover, section 55 of Act No. 2031 provides that the title of a person who
negotiates an instrument is defective within the meaning of this Act when he
obtained the instrument, or any signature thereto, by fraud, duress, or force
and fear, or other unlawful means, or for an illegal consideration, or when he
negotiates it in breach of faith, or under such circumstances as amount to a
fraud. As no evidence was taken on these points, the only ones that may be
proven as regards negotiable instruments, the defendant must be deemed to
be the holder of the instrument in due course, pursuant to the provisions of
the aforecited section 59, and he cannot be required to prove that he or his
predecessor in interest acquired the title as such holder in due course.
Now then, according to section 28 of the same Act, as against the holder of
the instrument in due course absence or failure of consideration is not a
matter of defense; and, pursuant to section 57, a holder in due course holds
the instrument free from any defect of title of prior parties, and free from
defenses available to prior parties among themselves, and may enforce
payment of the instrument for the full amount thereof against all parties liable
thereon. And the next section, No. 58 prescribes that in the hands of any
holder other than a holder in due course, a negotiable instrument is subject
to the same defenses as if it were nonnegotiable.
So it could not be clearer than that, pursuant to the provisions of the
Negotiable Instrument Law, which governs the case at bar, as the plaintiff is
the holder in due course of the instrument in question, no proof whatever
from the defendant could be admitted, nor if admitted should be taken into
account, bearing on the lack of consideration in the indorsement, as alleged
by him, and for the purpose of denying the existence of any indorsement and
that any relation whatever was created or existed between him and the
indorsee; likewise, that no defense of any kind could have been admitted
from the defendant in respect to the said instrument, and, finally, that the
defendant is obligated to pay the sum mentioned in the said indorsement, it
being immaterial whether or not he be deemed to be an accommodation
party in the instrument, in order that compliance with the said obligation may
be required of him in his capacity of indorser.
Basing our conclusions on the foregoing grounds, and regretting to dissent
from the opinion of the majority of our colleagues, we believe that the
judgment appealed from should be affirmed, with the costs against the
appellant.
Araullo, J., dissents.
21 PAROLE EVIDENCE
G.R. No. L-4388             August 13, 1952
PHILIPPINE NATIONAL BANK, petitioner,
vs.
BENITO SEETO, respondent.
Ramon B. de los Reyes for petitioner.
Montano A. Ortiz for respondent.
LABRADOR, J.:
On March 13, 1948, respondent Benito Seeto called at the branch of the
Philippine National Bank, petitioner herein, at Surigao, and presented a
check, No. A-21096, in the amount of P5,000 dated at Cebu on March 10,
1948, payable to cash or bearer, and drawn by one Gan Yek Kiao against
the Cebu branch of the Philippine National Bank of Communications. After
consultation with the employees of the branch, Seeto made a general and
unqualified indorsement of the check, and petitioner's agency accepted it
and paid respondent the amount of P5,000 therefor. The check was mailed
to petitioner's Cebu branch on March 20, 1948, and was presented to the
drawee bank for payment on April 9, 1948, but the check was dishonored for
"insufficient funds." So the check was returned to petitioner's Surigao
agency, and upon receipt thereof by it on April 14, 1948, said branch
immediately sent a letter to the respondent herein demanding immediate
refund of in the value of the check. A second communication of the same
tenor was sent on April 26, 1948, to which respondent answered asking that
plaintiff's contemplated suit be deferred while he was making inquiries about
the reasons for the dishonor of the check. Thereafter, respondent refused to
make the refund demanded, claiming that at the time of the negotiation o the
check the drawer had sufficient funds in the drawee bank, and that the
petitioner's Surigao agency not delayed to forward the check until the
drawer's funds were exhausted, the same would have been paid.
Thereupon petitioner presented a complaint in the Court of First Instance of
Surigao, alleging that respondent Benito Seeto gave assurance to
petitioner's agency in Surigao that the drawer of the check had sufficient
funds with the drawee bank, and that upon these assurances petitioner's
agency delivered the P5,000 to the respondent after the latter had made a
general and unqualified indorsement thereon. Respondent denied having
made the alleged assurances. Upon this issue petitioner submitted two
witnesses at the time of the trial, who testified that it was not the practice of
petitioner's agency to cash out of town checks, and that the check was
cashed because of the assurances given by the respondent that the drawer
had sufficient funds, and that he (respondent) would refund the amount paid
by petitioner's agency in case the check is dishonored. Respondent denied
having given the assurances. The trial court found notwithstanding
respondent's denial to the contrary, that the respondent made an
undertaking to refund the amount of the checks in the event of dishonor. In
support of this finding it found that as the drawee bank is not in Cebu, it was
impossible for petitioner's agency to make an independent verification of the
drawer's solvency, and must have taken precautions to protect itself against
loss by requiring the respondent to give assurances that he would return the
amount of the check in the case of nonpayment. It also found that there was
no unreasonable delay in the presentation of the check, and, therefore,
rendered judgment sentencing respondent to refund the amount he had
received for the check.
On appeal to the Court of Appeals, this court held that petitioner was guilty
of unreasonably retaining and with-holding the check, and that the delay in
the presentment for payment was inexcusable, so that respondent was
thereby discharged from liability. It also held that parol evidence is
incompetent to show that one signing of a check as indorser is merely a
surety or guarantor, rejecting the evidence adduced at the trial court about
the respondent's assurance and promise to refund. It, therefore, reversed
the judgment of the trial court and dismissed the complaint, with costs.
Against this judgment an appeal by certiorari has been brought to this Court,
petitioner Philippine National Bank contending that the Court of Appeals
erred in applying sections 143 and 144 of the Negotiable Instruments Law
and declaring respondent Benito Seeto discharged of his liability as indorser
of the check, and in not admitting parol evidence to show that respondent
made oral assurances to refund the value of the check in case of dishonor.
In support of petitioner's first assignment of error, it is argued that inasmuch
as a check need not to be presented for acceptance, unlike a bill of
exchange as required by Section 143, Section 144 of the law is not
applicable to the case at bar but Section 84, which provides:
SEC. 84. Liability of person secondarily liable, when instrument
dishonored. — Subject to the provisions of this Act, when the
instrument is dishonored by nonpayment, as immediate right of
recourse to all parties secondarily liable thereon accrues to the
holder.
It is true that Section 143 and 144 of the law are not applicable, because
these are provisions having to do with the presentation of a bill of exchange
22 PAROLE EVIDENCE
for acceptance, and are not applicable to a check, as to which presentment
for acceptance is not required.
It is also true that Section 84 is applicable, but its application is subject to the
condition imposed by Section 186, to the effect that the check must be
presented for payment within a reasonable time after its issue.
SEC. 186. — Within what time a check must be presented. — A
check must be presented for payment within a reasonable time
after its issue or the drawer will be discharged from liability thereon
to the extent of the loss caused by the delay.
Counsel for the petitioner, however, argues that inasmuch as the above
section expressly provides for the discharge of the drawer from liability to the
extent of the loss caused by the delay, and, on the other hand, it is silent as
to the liability of the indorser, the latter may not be considered discharged
from liability by reason of the delay in the presentment of payment under the
general principle inclusio unius est exclusion alterius. We find no reason nor
merit in the argument. The silence of Section 186 as to the indorser is due to
the fact that his discharge is already expressly covered by the provision of
Section 84, the indorser being a person secondarily liable on the instrument.
The reason for the difference between the liability of the indorser and that of
the drawer in case of dishonor is that the drawer is not probably or
necessarily prejudiced thereby, while an indorser is, actually or by legal
presumption.
Innumerable decisions have already been rendered in the state courts of the
United States to the effect that although the drawer of a check is discharged
only to the extent of loss caused by unreasonable delay in presentment, an
indorser is wholly discharged thereby irrespective of any question of loss or
injury. ( Swift & Co. vs. Miller, 62 Ind. App. 312, 113 N.E. 447, cited in
Brannan's Negotiable Instruments Law, p. 1134, Nuzum vs. Sheppard, 87
W. Va. 243, 104 S.E. 587, 11 A.L.R. 1024, Ibid.)
The proposition maintained in the reported case (Nuzum vs.
Sheppard., ante. 1024) that the indorser of a check, unlike the
drawer, is relieved of liability thereon by an unreasonable delay in
presenting the same for payment, whether or not he is injured by
the delay, is supported by the great weight of authority, (Cases
cited.)
The Court, in Gough v. Staats (N.Y.) supra, says: "Upon the
question of due diligence to charge an indorser, whether he has
been prejudiced or not by the delay is perfectly immaterial. It is not
inquired into. The law presumes he has been prejudiced."
According to the Court in Caroll v. Sweet (1891) 128 N.Y. 19, 13
L.R.A. 43, 27 N.E. 763, "presentment to due time as fixed by the
law merchant was a condition upon performance of which the
liability of the defendant, as indorser, depended, and this delay was
not excused, although the drawer of the check had no funds, or
was insolvent, or because presentment would not been unavailing
as a means of procuring payment." Only where there is affirmative
proof that the indorser knew when he cashed the check that there
would be no funds in the bank to meet it can the rule be avoided.
Otherwise, the failure to present the check in due course of
payment will discharge the indorser even though such presentment
would have been unavailing. Start v. Tupper (Vt.) supra. (11 A.L.R.
Annotation, pp. 1028-1029.)
We have been unable to find any authority sustaining the proposition that an
indorser of a check is not discharged from liability for an unreasonable delay
in presentation for payment. This is contrary to the essential nature and
character of negotiable instruments — their negotiability. They are supposed
to be passed on with promptness in the ordinary course of business
transactions; not to be retained or kept for such time as the holder may want,
otherwise the smooth flow of commercial transactions would be hindered.
There seems to be an intimation in the decision appealed from that
inasmuch as the check was drawn payable elsewhere than at the place of
business of the drawer, it must be presented for acceptance or negotiable
within a reasonable time, and upon failure to do so the drawer and all
indorsers thereof are discharged pursuant to Section 144 of the law. Against
this insinuation the petitioner argues that the application of sections 143 and
144 is not proper, and that it may not be presumed that the check in
question was not drawn and executed in Cebu, the residence or place of
business of the drawer. There is no evidence at all as to the place where the
check was drawn. However, we have already pointed out above that neither
Section 143 nor Section 144 is applicable. But our ruling that respondent
was discharged upon the dishonor of the check is based on Sections 84 and
186, the latter expressly requiring that a check must be presented for
payment within a reasonable time after issue.
It is not claimed by the petitioner on this appeal that the conclusion of the
Court of Appeals that there was unreasonable delay in the presentation of
the check for payment at the drawee bank is erroneous. The petitioner
concedes the correctness of this conclusion, although for purposes of
argument merely. We find that the conclusion is correct. The fact, admitted
23 PAROLE EVIDENCE

by the witnesses for the petitioner, the checks for the drawer issued We find, however, that the supposed assurances of refund in case of
subsequent to March 13, 1948, drawn against the same bank and cashed at dishonor of the check are precisely the ordinary obligations of an indorser,
the same Surigao agency, were not dishonored positively shows that the and these obligations are, under the law, considered discharged by an
drawer had enough funds when he issued the check in question, and that unreasonable delay in the presentation of the check for payment.
had it not been for the unreasonable delay in its presentation for payment,
the petitioner herein would have been able to receive payment therefor. The SEC. 66. Liability of general indorser. — . . . .
check is dated March 10, and was cashed by the petitioner's agency on
March 13, 1948. It was not mailed until seven days thereafter, i.e., on March
20, 1948, or ten days after issue. No excuse was given for this delay. And, in addition, he engages that on due presentment, it shall be
Assuming that it took one week, or say ten days, or until March 30, for the accepted or paid, or both, as the case may be, according to its
check to reach Cebu, neither can there be any excuse for not presenting it tenor, and that if it be dishonored, and the necessary proceedings
for payment at the drawee bank until April 9, 1948, or 10 days after it on dishonor be duly taken, he will pay the amount thereof to the
reached Cebu. We, therefore, find no reason for disturbing the conclusion of holder, or to any subsequent indorser who may be compelled to
the Court of Appeals that there was unreasonable delay in the presentation pay it. (Emphasis ours.)
of the check for payment at the drawee bank, and that is a consequence
thereof, the indorser, respondent herein, was thereby discharged. There was no express obligation assumed by the respondent herein that the
drawer would always have funds, or that he (the indorser) would refund the
With respect to the second assignment of error, petitioner argues that the amount of the check even if there was delay in its presentation, so that while
verbal assurances given by the respondent to the employees of the bank the Court of Appeals may have committed an error in disregarding the
that he was ready to refund the amount if the check should be dishonored by evidence submitted by petitioner at the trial of the assurances made by
the drawee bank is a collateral agreement, separate and distinct from the respondent herein at the time of the negotiation of the check, such error was
indorsement, by virtue of which petitioner herein was induced to cash the without prejudice, because the supposed assurances given were part of his
check, and, therefore, admissible as an exception that the parol evidence obligations as an indorser, which were discharged by the unreasonable
rule. Petitioners contention in this respect is not entirely unfounded. In the delay in the presentation of the check for payment.
case of Tan Machan vs. De La Trinidad, et al., 4 Phil., 684, this court held
that parol evidence is admissible to show that parties signing as principals The judgment appealed from is, therefore, affirmed, with costs against the
merely did so as sureties. In the case of Robles vs. Lizarraga Hermanos, 50 petitioner.
Phil., 387, it was also held by this court that parol evidence is admissible to
prove "an independent thereof." (Ibid., p. 395.) In Philips vs. Preston, 5 How. Paras, C.J., Feria, Bengzon, Padilla, Tuason, Montemayor and Bautista
(U.S.) 278, 12 L. ed, 152, the Supreme Court of the United States held that Angelo, JJ., concur.
any prior or contemporaneous conversation in connection with a note or its
indorsement, may be proved by parol evidence. And Wigmore states that
"an extrinsic agreement between indorser and indorsee which cannot be
embodied in the instrument without impairing its credit is provable by parol."
(9 Wigmore 148, section 2445 [3].) If, therefore, the supposed assurances
that the drawer had funds and that the respondent herein would refund the
amount of the check if the drawer had no funds, were the considerations or
reasons that induced the branch agency of the petitioners to go out of its
ordinary practice of not cashing out of town checks and accept the check
and to pay its face value, the same would be provable by parol, provided, of
course, that the assurances or inducements offered would not vary, alter, or
destroy the obligations attached by law to the indorsement.
24 PAROLE EVIDENCE
25 PAROLE EVIDENCE
G.R. No. L-4811             July 31, 1953
CHARLES F. WOODHOUSE, plaintiff-appellant,
vs.
FORTUNATO F. HALILI, defendant-appellant.
Tañada, Pelaez & Teehankee for defendant and appellant.
Gibbs, Gibbs, Chuidian & Quasha for plaintiff and appellant.
LABRADOR, J.:
On November 29, 1947, the plaintiff entered on a written agreement, Exhibit
A, with the defendant, the most important provisions of which are (1) that
they shall organize a partnership for the bottling and distribution of Mision
soft drinks, plaintiff to act as industrial partner or manager, and the
defendant as a capitalist, furnishing the capital necessary therefor; (2) that
the defendant was to decide matters of general policy regarding the
business, while the plaintiff was to attend to the operation and development
of the bottling plant; (3) that the plaintiff was to secure the Mission Soft
Drinks franchise for and in behalf of the proposed partnership; and (4) that
the plaintiff was to receive 30 per cent of the net profits of the business. The
above agreement was arrived at after various conferences and consultations
by and between them, with the assistance of their respective attorneys. Prior
to entering into this agreement, plaintiff had informed the Mission Dry
Corporation of Los Angeles, California, U.S.A., manufacturers of the bases
and ingridients of the beverages bearing its name, that he had interested a
prominent financier (defendant herein) in the business, who was willing to
invest half a million dollars in the bottling and distribution of the said
beverages, and requested, in order that he may close the deal with him, that
the right to bottle and distribute be granted him for a limited time under the
condition that it will finally be transferred to the corporation (Exhibit H).
Pursuant for this request, plaintiff was given "a thirty-days" option on
exclusive bottling and distribution rights for the Philippines" (Exhibit J).
Formal negotiations between plaintiff and defendant began at a meeting on
November 27, 1947, at the Manila Hotel, with their lawyers attending. Before
this meeting plaintiff's lawyer had prepared the draft of the agreement,
Exhibit II or OO, but this was not satisfactory because a partnership, instead
of a corporation, was desired. Defendant's lawyer prepared after the meeting
his own draft, Exhibit HH. This last draft appears to be the main basis of the
agreement, Exhibit A.
The contract was finally signed by plaintiff on December 3, 1947. Plaintiff did
not like to go to the United States without the agreement being not first
signed. On that day plaintiff and defendant went to the United States, and on
December 10, 1947, a franchise agreement (Exhibit V) was entered into the
Mission Dry Corporation and Fortunato F. Halili and/or Charles F.
Woodhouse, granted defendant the exclusive right, license, and authority to
produce, bottle, distribute, and sell Mision beverages in the Philippines. The
plaintiff and the defendant thereafter returned to the Philippines. Plaintiff
reported for duty in January, 1948, but operations were not begun until the
first week of February, 1948. In January plaintiff was given as advance, on
account of profits, the sum of P2,000, besides the use of a car; in February,
1948, also P2,000, and in March only P1,000. The car was withdrawn from
plaintiff on March 9, 1948.
When the bottling plant was already on operation, plaintiff demanded of
defendant that the partnership papers be executed. At first defendant
executed himself, saying there was no hurry. Then he promised to do so
after the sales of the product had been increased to P50,000. As nothing
definite was forthcoming, after this condition was attained, and as defendant
refused to give further allowances to plaintiff, the latter caused his attorneys
to take up the matter with the defendant with a view to a possible settlement.
as none could be arrived at, the present action was instituted.
In his complaint plaintiff asks for the execution of the contract of partnership,
an accounting of the profits, and a share thereof of 30 per cent, as well as
damages in the amount of P200,000. In his answer defendant alleges by
way of defense (1) that defendant's consent to the agreement, Exhibit A,
was secured by the representation of plaintiff that he was the owner, or was
about to become owner of an exclusive bottling franchise, which
representation was false, and plaintiff did not secure the franchise, but was
given to defendant himself; (2) that defendant did not fail to carry out his
undertakings, but that it was plaintiff who failed; (3) that plaintiff agreed to
contribute the exclusive franchise to the partnership, but plaintiff failed to do
so. He also presented a counter-claim for P200,000 as damages. On these
issues the parties went to trial, and thereafter the Court of First Instance
rendered judgment ordering defendant to render an accounting of the profits
of the bottling and distribution business, subject of the action, and to pay
plaintiff 15 percent thereof. it held that the execution of the contract of
partnership could not be enforced upon the parties, but it also held that the
defense of fraud was not proved. Against this judgment both parties have
appealed.
The most important question of fact to be determined is whether defendant
had falsely represented that he had an exclusive franchise to bottle Mission
beverages, and whether this false representation or fraud, if it existed,
annuls the agreement to form the partnership. The trial court found that it is
26 PAROLE EVIDENCE
improbable that defendant was never shown the letter, Exhibit J, granting
plaintiff had; that the drafts of the contract prior to the final one can not be
considered for the purpose of determining the issue, as they are presumed
to have been already integrated into the final agreement; that fraud is never
presumed and must be proved; that the parties were represented by
attorneys, and that if any party thereto got the worse part of the bargain, this
fact alone would not invalidate the agreement. On this appeal the defendant,
as appellant, insists that plaintiff did represent to the defendant that he had
an exclusive franchise, when as a matter of fact, at the time of its execution,
he no longer had it as the same had expired, and that, therefore, the consent
of the defendant to the contract was vitiated by fraud and it is, consequently,
null and void.
Our study of the record and a consideration of all the surrounding
circumstances lead us to believe that defendant's contention is not without
merit. Plaintiff's attorney, Mr. Laurea, testified that Woodhouse presented
himself as being the exclusive grantee of a franchise, thus:
A. I don't recall any discussion about that matter. I took along with
me the file of the office with regards to this matter. I notice from the
first draft of the document which I prepared which calls for the
organization of a corporation, that the manager, that is, Mr.
Woodhouse, is represented as being the exclusive grantee of a
franchise from the Mission Dry Corporation. . . . (t.s.n., p.518)
As a matter of fact, the first draft that Mr. Laurea prepared, which was made
before the Manila Hotel conference on November 27th, expressly states that
plaintiff had the exclusive franchise. Thus, the first paragraph states:
Whereas, the manager is the exclusive grantee of a franchise from
the Mission Dry Corporation San Francisco, California, for the
bottling of Mission products and their sale to the public throughout
the Philippines; . . . .
3. The manager, upon the organization of the said corporation,
shall forthwith transfer to the said corporation his exclusive right to
bottle Mission products and to sell them throughout the
Philippines. . . . .
(Exhibit II; emphasis ours)
The trial court did not consider this draft on the principle of integration of jural
acts. We find that the principle invoked is inapplicable, since the purpose of
considering the prior draft is not to vary, alter, or modify the agreement, but
to discover the intent of the parties thereto and the circumstances
surrounding the execution of the contract. The issue of fact is: Did plaintiff
represent to defendant that he had an exclusive franchise? Certainly, his
acts or statements prior to the agreement are essential and relevant to the
determination of said issue. The act or statement of the plaintiff was not
sought to be introduced to change or alter the terms of the agreement, but to
prove how he induced the defendant to enter into it — to prove the
representations or inducements, or fraud, with which or by which he secured
the other party's consent thereto. These are expressly excluded from the
parol evidence rule. (Bough and Bough vs. Cantiveros and Hanopol, 40
Phil., 209; port Banga Lumber Co. vs. Export & Import Lumber Co., 26 Phil.,
602; III Moran 221,1952 rev. ed.) Fraud and false representation are an
incident to the creation of a jural act, not to its integration, and are not
governed by the rules on integration. Were parties prohibited from proving
said representations or inducements, on the ground that the agreement had
already been entered into, it would be impossible to prove misrepresentation
or fraud. Furthermore, the parol evidence rule expressly allows the evidence
to be introduced when the validity of an instrument is put in issue by the
pleadings (section 22, par. (a), Rule 123, Rules of Court),as in this case.
That plaintiff did make the representation can also be easily gleaned from
his own letters and his own testimony. In his letter to Mission Dry
Corporation, Exhibit H, he said:.
. . . He told me to come back to him when I was able to speak with
authority so that we could come to terms as far as he and I were
concerned. That is the reason why the cable was sent. Without this
authority, I am in a poor bargaining position. . .
I would propose that you grant me the exclusive bottling and
distributing rights for a limited period of time, during which I may
consummate my plants. . . .
By virtue of this letter the option on exclusive bottling was given to the
plaintiff on October 14, 1947. (See Exhibit J.) If this option for an exclusive
franchise was intended by plaintiff as an instrument with which to bargain
with defendant and close the deal with him, he must have used his said
option for the above-indicated purpose, especially as it appears that he was
able to secure, through its use, what he wanted.
27 PAROLE EVIDENCE
Plaintiff's own version of the preliminary conversation he had with defendant
is to the effect that when plaintiff called on the latter, the latter answered,
"Well, come back to me when you have the authority to operate. I am
definitely interested in the bottling business." (t. s. n., pp. 60-61.) When after
the elections of 1949 plaintiff went to see the defendant (and at that time he
had already the option), he must have exultantly told defendant that he had
the authority already. It is improbable and incredible for him to have
disclosed the fact that he had only an option to the exclusive franchise,
which was to last thirty days only, and still more improbable for him to have
disclosed that, at the time of the signing of the formal agreement, his option
had already expired. Had he done so, he would have destroyed all his
bargaining power and authority, and in all probability lost the deal itself.
The trial court reasoned, and the plaintiff on this appeal argues, that plaintiff
only undertook in the agreement "to secure the Mission Dry franchise for and
in behalf of the proposed partnership." The existence of this provision in the
final agreement does not militate against plaintiff having represented that he
had the exclusive franchise; it rather strengthens belief that he did actually
make the representation. How could plaintiff assure defendant that he would
get the franchise for the latter if he had not actually obtained it for himself?
Defendant would not have gone into the business unless the franchise was
raised in his name, or at least in the name of the partnership. Plaintiff
assured defendant he could get the franchise. Thus, in the draft prepared by
defendant's attorney, Exhibit HH, the above provision is inserted, with the
difference that instead of securing the franchise for the defendant, plaintiff
was to secure it for the partnership. To show that the insertion of the above
provision does not eliminate the probability of plaintiff representing himself
as the exclusive grantee of the franchise, the final agreement contains in its
third paragraph the following:
. . . and the manager is ready and willing to allow the capitalists to
use the exclusive franchise . . .
and in paragraph 11 it also expressly states:
1. In the event of the dissolution or termination of the partnership, . .
. the franchise from Mission Dry Corporation shall be reassigned to
the manager.
These statements confirm the conclusion that defendant believed, or was
made to believe, that plaintiff was the grantee of an exclusive franchise.
Thus it is that it was also agreed upon that the franchise was to be
transferred to the name of the partnership, and that, upon its dissolution or
termination, the same shall be reassigned to the plaintiff.
Again, the immediate reaction of defendant, when in California he learned
that plaintiff did not have the exclusive franchise, was to reduce, as he
himself testified, plaintiff's participation in the net profits to one half of that
agreed upon. He could not have had such a feeling had not plaintiff actually
made him believe that he (plaintiff) was the exclusive grantee of the
franchise.
The learned trial judge reasons in his decision that the assistance of counsel
in the making of the contract made fraud improbable. Not necessarily,
because the alleged representation took place before the conferences were
had, in other words, plaintiff had already represented to defendant, and the
latter had already believed in, the existence of plaintiff's exclusive franchise
before the formal negotiations, and they were assisted by their lawyers only
when said formal negotiations actually took place. Furthermore, plaintiff's
attorney testified that plaintiff had said that he had the exclusive franchise;
and defendant's lawyer testified that plaintiff explained to him, upon being
asked for the franchise, that he had left the papers evidencing it.(t.s.n., p.
266.)
We conclude from all the foregoing that plaintiff did actually represent to
defendant that he was the holder of the exclusive franchise. The defendant
was made to believe, and he actually believed, that plaintiff had the
exclusive franchise. Defendant would not perhaps have gone to California
and incurred expenses for the trip, unless he believed that plaintiff did have
that exclusive privilege, and that the latter would be able to get the same
from the Mission Dry Corporation itself. Plaintiff knew what defendant
believed about his (plaintiff's) exclusive franchise, as he induced him to that
belief, and he may not be allowed to deny that defendant was induced by
that belief. (IX Wigmore, sec. 2423; Sec. 65, Rule 123, Rules of Court.)
We now come to the legal aspect of the false representation. Does it amount
to a fraud that would vitiate the contract? It must be noted that fraud is
manifested in illimitable number of degrees or gradations, from the innocent
praises of a salesman about the excellence of his wares to those malicious
machinations and representations that the law punishes as a crime. In
consequence, article 1270 of the Spanish Civil Code distinguishes two kinds
of (civil) fraud, the causal fraud, which may be a ground for the annulment of
a contract, and the incidental deceit, which only renders the party who
employs it liable for damages. This Court had held that in order that fraud
may vitiate consent, it must be the causal (dolo causante), not merely the
28 PAROLE EVIDENCE
incidental (dolo causante), inducement to the making of the contract. (Article
1270, Spanish Civil Code; Hill vs. Veloso, 31 Phil. 160.) The record abounds
with circumstances indicative that the fact that the principal consideration,
the main cause that induced defendant to enter into the partnership
agreement with plaintiff, was the ability of plaintiff to get the exclusive
franchise to bottle and distribute for the defendant or for the partnership. The
original draft prepared by defendant's counsel was to the effect that plaintiff
obligated himself to secure a franchise for the defendant. Correction appears
in this same original draft, but the change is made not as to the said
obligation but as to the grantee. In the corrected draft the word
"capitalist"(grantee) is changed to "partnership." The contract in its final form
retains the substituted term "partnership." The defendant was, therefore, led
to the belief that plaintiff had the exclusive franchise, but that the same was
to be secured for or transferred to the partnership. The plaintiff no longer had
the exclusive franchise, or the option thereto, at the time the contract was
perfected. But while he had already lost his option thereto (when the contract
was entered into), the principal obligation that he assumed or undertook was
to secure said franchise for the partnership, as the bottler and distributor for
the Mission Dry Corporation. We declare, therefore, that if he was guilty of a
false representation, this was not the causal consideration, or the principal
inducement, that led plaintiff to enter into the partnership agreement.
But, on the other hand, this supposed ownership of an exclusive franchise
was actually the consideration or price plaintiff gave in exchange for the
share of 30 percent granted him in the net profits of the partnership
business. Defendant agreed to give plaintiff 30 per cent share in the net
profits because he was transferring his exclusive franchise to the
partnership. Thus, in the draft prepared by plaintiff's lawyer, Exhibit II, the
following provision exists:
3. That the MANAGER, upon the organization of the said
corporation, shall forthwith transfer to the said corporation his
exclusive right to bottle Mission products and to sell them
throughout the Philippines. As a consideration for such transfer, the
CAPITALIST shall transfer to the Manager fully paid non
assessable shares of  the said corporation . . . twenty-five per
centum of the capital stock of the said corporation. (Par. 3, Exhibit
II; emphasis ours.)
Plaintiff had never been a bottler or a chemist; he never had experience in
the production or distribution of beverages. As a matter of fact, when the
bottling plant being built, all that he suggested was about the toilet facilities
for the laborers.
We conclude from the above that while the representation that plaintiff had
the exclusive franchise did not vitiate defendant's consent to the contract, it
was used by plaintiff to get from defendant a share of 30 per cent of the net
profits; in other words, by pretending that he had the exclusive franchise and
promising to transfer it to defendant, he obtained the consent of the latter to
give him (plaintiff) a big slice in the net profits. This is the dolo
incidente defined in article 1270 of the Spanish Civil Code, because it was
used to get the other party's consent to a big share in the profits, an
incidental matter in the agreement.
El dolo incidental no es el que puede producirse en el cumplimiento
del contrato sino que significa aqui, el que concurriendoen el
consentimiento, o precediendolo, no influyo para arrancar porsi
solo el consentimiento ni en la totalidad de la obligacion, sinoen
algun extremo o accidente de esta, dando lugar tan solo a una
accion para reclamar indemnizacion de perjuicios. (8 Manresa
602.)
Having arrived at the conclusion that the agreement may not be declared
null and void, the question that next comes before us is, May the agreement
be carried out or executed? We find no merit in the claim of plaintiff that the
partnership was already a  fait accompli  from the time of the operation of the
plant, as it is evident from the very language of the agreement that the
parties intended that the execution of the agreement to form a partnership
was to be carried out at a later date. They expressly agreed that they shall
form a partnership. (Par. No. 1, Exhibit A.) As a matter of fact, from the time
that the franchise from the Mission Dry Corporation was obtained in
California, plaintiff himself had been demanding that defendant comply with
the agreement. And plaintiff's present action seeks the enforcement of this
agreement. Plaintiff's claim, therefore, is both inconsistent with their intention
and incompatible with his own conduct and suit.
As the trial court correctly concluded, the defendant may not be compelled
against his will to carry out the agreement nor execute the partnership
papers. Under the Spanish Civil Code, the defendant has an obligation to
do, not to give. The law recognizes the individual's freedom or liberty to do
an act he has promised to do, or not to do it, as he pleases. It falls within
what Spanish commentators call a very personal act (acto personalismo), of
which courts may not compel compliance, as it is considered an act of
violence to do so.
Efectos de las obligaciones consistentes en hechos personalismo.
—Tratamos de la ejecucion de las obligaciones de hacer en el
29 PAROLE EVIDENCE
solocaso de su incumplimiento por parte del deudor, ya sean los
hechos personalisimos, ya se hallen en la facultad de un tercero;
porque el complimiento espontaneo de las mismas esta regido por
los preceptos relativos al pago, y en nada les afectan las
disposiciones del art. 1.098.
Esto supuesto, la primera dificultad del asunto consiste en resolver
si el deudor puede ser precisado a realizar el hecho y porque
medios.
Se tiene por corriente entre los autores, y se traslada generalmente
sin observacion el principio romano nemo potest precise cogi ad
factum. Nadie puede ser obligado violentamente a haceruna cosa.
Los que perciben la posibilidad de la destruccion deeste principio,
añaden que, aun cuando se pudiera obligar al deudor, no deberia
hacerse, porque esto constituiria una violencia, y noes la
violenciamodo propio de cumplir las obligaciones (Bigot, Rolland,
etc.). El maestro Antonio Gomez opinaba lo mismo cuandodecia
que obligar por la violencia seria infrigir la libertad eimponer una
especie de esclavitud.
xxx     xxx     xxx
En efecto; las obligaciones contractuales no se acomodan biencon
el empleo de la fuerza fisica, no ya precisamente porque
seconstituya de este modo una especie de esclavitud, segun el
dichode Antonio Gomez, sino porque se supone que el acreedor
tuvo encuenta el caracter personalisimo del hecho ofrecido, y
calculo sobre laposibilidad de que por alguna razon no se
realizase. Repugna,ademas, a la conciencia social el empleo de la
fuerza publica, mediante coaccion sobre las personas, en las
relaciones puramente particulares; porque la evolucion de las ideas
ha ido poniendo masde relieve cada dia el respeto a la
personalidad humana, y nose admite bien la violencia sobre el
individuo la cual tiene caracter visiblemente penal, sino por motivos
que interesen a la colectividad de ciudadanos. Es, pues, posible y
licita esta violencia cuando setrata de las obligaciones que hemos
llamado ex lege, que afectanal orden social y a la entidad de
Estado, y aparecen impuestas sinconsideracion a las
conveniencias particulares, y sin que por estemotivo puedan
tampoco ser modificadas; pero no debe serlo cuandola obligacion
reviste un interes puramente particular, como sucedeen las
contractuales, y cuando, por consecuencia, paraceria salirseel
Estado de su esfera propia, entrado a dirimir, con apoyo dela
fuerza colectiva, las diferencias producidas entre los ciudadanos.
(19 Scaevola 428, 431-432.)
The last question for us to decide is that of damages,damages that plaintiff is
entitled to receive because of defendant's refusal to form the partnership,
and damages that defendant is also entitled to collect because of the falsity
of plaintiff's representation. (Article 1101, Spanish Civil Code.) Under article
1106 of the Spanish Civil Code the measure of damages is the actual loss
suffered and the profits reasonably expected to be received, embraced in
the terms daño emergente and lucro cesante. Plaintiff is entitled under the
terms of the agreement to 30 per cent of the net profits of the business.
Against this amount of damages, we must set off the damage defendant
suffered by plaintiff's misrepresentation that he had obtained a very high
percentage of share in the profits. We can do no better than follow the
appraisal that the parties themselves had adopted.
When defendant learned in Los Angeles that plaintiff did not have the
exclusive franchise which he pretended he had and which he had agreed to
transfer to the partnership, his spontaneous reaction was to reduce plaintiff's
share form 30 per cent to 15 per cent only, to which reduction defendant
appears to have readily given his assent. It was under this understanding,
which amounts to a virtual modification of the contract, that the bottling plant
was established and plaintiff worked as Manager for the first three months. If
the contract may not be considered modified as to plaintiff's share in the
profits, by the decision of defendant to reduce the same to one-half and the
assent thereto of plaintiff, then we may consider the said amount as a fair
estimate of the damages plaintiff is entitled to under the principle enunciated
in the case of Varadero de Manila vs. Insular Lumber Co., 46 Phil. 176.
Defendant's decision to reduce plaintiff's share and plaintiff's consent thereto
amount to an admission on the part of each of the reasonableness of this
amount as plaintiff's share. This same amount was fixed by the trial court.
The agreement contains the stipulation that upon the termination of the
partnership, defendant was to convey the franchise back to plaintiff (Par. 11,
Exhibit A). The judgment of the trial court does not fix the period within which
these damages shall be paid to plaintiff. In view of paragraph 11 of Exhibit A,
we declare that plaintiff's share of 15 per cent of the net profits shall continue
to be paid while defendant uses the franchise from the Mission Dry
Corporation.
With the modification above indicated, the judgment appealed from is hereby
affirmed. Without costs.
30 PAROLE EVIDENCE

Paras, C.J., Pablo, Bengzon, Tuason, Montemayor, Reyes, Jugo and

Bautista Angelo, JJ., concur.
31 PAROLE EVIDENCE
[G.R. No. 26173. July 13, 1927.]
ZACARIAS ROBLES, Plaintiff-Appellee, v. LIZARRAGA
HERMANOS, Defendant-Appellant.
J. Arroyo, Jose Lopez Vito, and Francisco, Lualhati & Lopez
for Appellant.
Paredes, Buencamino & Yulo for Appellee.
SYLLABUS
1. CONTRACTS; EVIDENCE; ORAL CONTRACT INCONSISTENT WITH
WRITTEN CONTRACT; COLLATERAL AGREEMENT. — The rule
excluding parol evidence to vary or contradict a writing does not extend so
far as to preclude the admission of extrinsic evidence to show prior or
contemporaneous collateral parol agreements between the parties, but such
evidence may be received, regardless of whether or not the written
agreement contains reference to such collateral agreement.
2. ID.; STATUTE OF FRAUDS; CONTRACT FOR SALE OF GOODS AND
CHATTELS. — The rule requiring a writing to prove a contract for the sale of
goods and chattels at a price of not less than P100 is not applicable where
the buyer receives part of the goods and chattels.
3. ID.; ID.; SUSPENSIVE CONDITION. — An agreement to buy certain
things at a valuation to be determined by an appraisal to be effected jointly
by buyer and seller obligates the buyer to proceed with the appraisal in good
faith, and he cannot escape liability on the contract by frustrating the
appraisal. The making of the appraisal in such case is not a condition
prerequisite to the liability of the buyer, and if he fails to join in the appraisal,
he is liable for the true value of the things contracted about, as the same
may be established in the usual course of proof.
4. EVIDENCE; JUDICIAL NOTICE. — A court may take judicial notice of the
fact that protracted delay in the milling of sugar cane results in loss, and it
may have recourse to scientific treatises dealing with the cultivation of cane
for the purpose of obtaining information on this point.
DECISION
STREET, J.:
This action was instituted in the Court of First Instance of Occidental Negros
by Zacarias Robles against Lizarraga Hermanos, a mercantile partnership
organized under the laws of the Philippine Islands, for the purpose of
recovering compensation for improvements made by the plaintiff upon the
hacienda "Nahalinan" and the value of implements and farming equipment
supplied to the hacienda by the plaintiff, as well as damages for breach of
contract. Upon hearing the cause the trial court gave judgment for the
plaintiff to recover of the defendant the sum of P14,194.42, with costs. From
this judgment the defendant appealed.
It appears that the hacienda "Nahalinan," situated in the municipality of
Pontevedra, Occidental Negros, belonged originally to the spouses Zacarias
Robles and Anastacia de la Rama, parents of the present plaintiff, Zacarias
Robles. Upon the death of Zacarias Robles, sr., several years ago, his
widow Anastacia de la Rama was appointed administratrix of his estate; and
on May 20, 1913, as widow and administratrix, she leased the hacienda to
the plain- tiff, Zacarias Robles, for the period of six years beginning at the
end of the milling season in May, 1915, and terminating at the end of the
milling season in May, 1920. It was stipulated that any permanent
improvements necessary to the cultivation and exploitation of the hacienda
should be made at the expense of the lessee without right to indemnity at
the end of the term. As the place was in a run-down state, and it was
foreseen that the lessee would be put to much expense in bringing the
property to its productive capacity, the annual rent was fixed at the moderate
amount of P2,000 per annum.
The plaintiff accordingly entered upon the property, in the character of
lessee; and, in order to put the farm in good condition, he found it necessary
to make various improvements and additions to the plant. Briefly stated, the
changes and additions thus effected were these: Substitution of a new
hydraulic press; reconstruction of dwelling house; construction of new
houses for workmen; building of camarins; construction of chimney;
reconstruction of ovens; installment of new coolers; purchase of farming
tools and many head of carabao, with other repairs and improvements. All
this expense was borne exclusively by the lessee, with the exception that his
mother and coheirs contributed P1,500 towards the expense of the
reconstruction of the dwelling house, which was one-half the outlay for that
item. The firm of Lizarraga Hermanos was well aware of the nature and
extent of these improvements, for the reason that the lessee was a customer
of the firm and had purchased from it many of the things that went into the
improvements.
32 PAROLE EVIDENCE
In 1916, or three years before the lease was to expire, Anastacia de la
Rama died, leaving as heirs Zacarias Robles (the plaintiff), Jose Robles,
Evarista Robles, Magdalena Robles, Felix Robles, and the children of a
deceased daughter, Purificacion Robles. Shortly thereafter Zacarias Robles,
Jose Robles, and Evarista Robles acquired by purchase the shares of their
coheirs in the entire inheritance; and at this juncture Lizarraga Hermanos
came forward with a proposal to buy from these three all of the property
belonging to the Robles estate (which included other properties in addition to
the hacienda "Nahalinan").
In course of the negotiations an obstacle was encountered in the fact that
the lease of Zacarias Robles still had over two years to run. It was
accordingly proposed that he should surrender the last two years of his
lease and permit Lizarraga Hermanos to take possession as purchaser in
June, 1918. A surrender of the two years of the lease would naturally involve
a heavy sacrifice on the part of Zacarias Robles not only because the rent
which he was bound to pay was low, but because he had already made
most of the expenditures in outfitting the farm which would be necessary for
farming operations during the entire period of the lease.
The plaintiff alleges and the trial court found, upon what we believe to be
sufficient proof, that, in consideration that the plaintiff should shorten the
term of his lease to the extent stated, the defendant agreed to pay him the
value of all betterments that he had made on the hacienda and furthermore
to purchase from him all that belonged to him personally on the hacienda,
including the crop of 1917-18, the cattle, farming implements and equipment,
according to a valuation to be made after the harvest. The plaintiff agreed to
this; and the instrument of conveyance by which the three owners, Zacarias,
Jose and Evarista Robles, conveyed the property to Lizarraga Hermanos
was accordingly executed on November 16, 1917.
The effective clauses of conveyance by which each of the three owners
transferred their respective interest to the purchaser read as
follows:jgc:chanrobles.com.ph
"(a) Por la presente, Don Jose Robles, en consideracion a la cantidad de
P25,266.37 que declara haber ya recibido de la casa comercial Lizarraga
Hermanos, vende, cede y traspasa a la mencionada casa comercial
Lizarraga Hermanos, representada en este acto por D. Severiano Lizarraga,
como gerente de la misma, sus sucesores y causa-habientes, todos sus
derechos, interes y participacion en la testamentaria de la difunta Da.
Anastacia de la Rama, como uno de los herederos forzosos de la misma y
todos los derechos, interes y participacion adquiridos conjuntamente por el y
sus hermanos Da. Evarista Robles y D. Zacarias Robles de D. Rafael
Campos y Hurtado y de Da. Magdalena Robles.
"(b) Y Da Evarista Robles, con la debida licencia marital de su esposo D.
Enrique Martin, quien concurre al otorgamiento de este documento, en
consideracion a la cantidad de P23,036.43, que declara haber ya recibido
de la casa comercial Lizarraga Hermanos, representada en este acto por D.
Severiano Lizarraga, como gerente de la misma, sus sucesores y
causahabientes, vende, cede y traspasa todos sus derechos, intereses y
participacion en la testamentaria de la difunta Da. Anastacia de la Rama,
como una de las herederas forzosas de la misma, y todos los derechos,
interes y participacion adquiridos por ella juntamente con sus hermanos D.
Jose Robles y D. Zacarias Robles de D. Rafael Campos y Hurtado y de Da.
Magdalena Robles.
"(c) Y, finalmente, D. Zacarias Robles, en consideracion a la cantidad de
P32,589.59 que la casa Lizarraga Hermanos, representada en este acto por
D. Severiano Lizarraga, por la presente promete pagarle en o antes del 30
de mayo de 1917. con los intereses a razon de 8 por ciento anual, vende,
cede y traspasa a favor de la mencionada casa comercial Lizarraga
Hermanos, sus sucesores y causahabientes, todos sus derechos, interes y
participacion en la testamentaria de la difunta Da. Anastacia de la Rama,
como uno de los herederos forzosos de la misma, y todos los derechos,
interes y participacion adquiridos por el, juntamente con sus hermanos, Da.
Evarista Robles y D. Jose Robles, de D. Rafael Campos y Hurtado y de Da.
Magdalena Robles."cralaw virtua1aw library
It will be seen from the clauses quoted that the plaintiff received some
thousands of pesos of the purchase money more than his brother and sister.
This is explained by the fact that the plaintiff was a creditor of his mother’s
estate while the other two were debtors to it; and the difference in the
amounts paid to each resulted from the adjustments of their respective
rights. Furthermore, it will be noted that the three grantors in the deed
conveyed only their several rights, interest, and share in the estate of their
deceased mother; and precisely the same words are used in defining what
was conveyed by Zacarias Robles as in defining what was conveyed by the
other two. These words are noteworthy, and in the original Spanish they run
as follows: "Sus derechos, interes y participacion en la testamentaria de la
difunta Da. Anastasia de la Rama, como uno de los heredenos forzosos de
la misma." What was conveyed by the plaintiff is not defined as being, in
part, the hacienda "Nahalinan," nor as including any of his rights in or to the
property conveyed other than those which he possessed in the character of
heir.
No reference is made in this conveyance to the surrender of the plaintiff’s
rights as lessee, except in fixing the date when the lease should end; nor is
anything said concerning the improvements or the property of a personal
33 PAROLE EVIDENCE
nature which the plaintiff had placed on the hacienda. The plaintiff says that,
when the instrument was presented to him, he saw that in the sixth
paragraph it was declared that the plaintiff’s lease should subsist only until
June 30, 1918, instead of in May, 1920, which was the original term, while at
the same time the promise of the defendant to compensate for him for the
improvements and to purchase the existing crop, together with the cattle and
other things, was wanting; and he says that upon his calling attention to this,
the representative of the defendant explained that this was unnecessary in
view of the confidence existing between the parties, at the same time calling
the attention of the plaintiff to the fact that the plaintiff was already debtor to
the house of Lizarraga Hermanos in the amount of P49,000, for which the
firm had no security. Upon this manifestation the plaintiff subsided; and,
believing that the agreement with respect to compensation would be carried
out in good faith, he did not further insist upon the incorporation of said
agreement into this document. Nor was the supposed agreement otherwise
reduced to writing.
On the part of the defendant it is claimed that the agreement with respect to
compensating the plaintiff for improvements and other things was never in
fact made. What really happened, according to the defendant’s answer, is
that, after the sale of the hacienda had been effected, the plaintiff offered to
sell the defendant firm the crop of cane then existing uncut on the hacienda,
together with the carabao then in use on the place. This proposition was
favorably received by the defendant; and it is admitted that an agreement
was arrived at with respect to the value of the carabao, which were taken
over for the agreed price, but it is claimed with respect to the crop that the
parties did not come into accord.
Upon the issue of fact thus made we are of the opinion that the
preponderance of the evidence supports the contention of the plaintiff — and
the finding of the trial court — to the effect that, in consideration of the
shortening of the period of the lease by nearly two years, the defendant
undertook to pay for the improvements which the plaintiff had placed on the
hacienda and take over at a fair valuation, to be made by appraisers, the
personal property, such as carabao, tools, and farming implements, which
the plaintiff had placed upon the hacienda at his own personal expense. The
plaintiff introduced in evidence a letter (Exhibit D), written on March 1, 1917,
by Severiano Lizarraga to the plaintiff, in which reference is made to an
appraisal and liquidation. This letter is relied upon by the plaintiff as
constituting written evidence of the agreement; but it seems to us so vague
that, if it stood alone, and a written contract were really necessary, it could
not be taken as sufficient proof of the agreement in question. But we believe
that the contract is otherwise proved by oral testimony.
When testifying as a witness for the defense Carmelo Lizarraga himself
admitted— contrary to the statement of defendant’s answer — that a few
days before the conveyance was executed the plaintiff proposed that the
defendant should buy all the things that the plaintiff then had on the
hacienda, whereupon the Lizarragas informed him that they would buy those
things if an agreement should be arrived at as to the price. We note that as
regards the improvements the position of the defendant is that they
pertained to the hacienda, at the time the purchase was effected and
necessarily passed with it to the defendant.
As against the denials of the Lizarragas we have the direct testimony of the
plaintiff and his brother Jose to the effect that the agreement was as claimed
by the plaintiff; and this is supported by the natural probabilities of the case
in connection with a subsequent appraisal of the property, which was
rendered futile by the course pursued by the defendants. It is, however,
unnecessary to enter into details with respect to this, because, upon
examining the assignments of error of the appellant in this court, it will be
found that no exception has been taken to the finding of the trial court to the
effect that a verbal contract was made in the sense claimed by the plaintiff.
We now proceed to discuss seriatim the errors assigned by the appellant.
Under the first, exception is taken to the action of the trial court in admitting
oral evidence of a contract different from that expressed in the contract of
sale (Exhibit B); and it is insisted that the written contract must be taken as
expressing all of the pacts, agreements and stipulations entered into
between the parties with respect to the acquisition of the hacienda. In this
connection stress is placed upon the fact that there is no allegation in the
complaint that the written contract fails to express the agreement of the
parties. This criticism is in our opinion not well directed. The case is not one
for the reformation of a document on the ground of mistake or fraud in its
execution, as is permitted under section 285 of the Code of Civil Procedure.
The purpose is to enforce an independent or collateral agreement which
constituted an inducement to the making of the sale, or part of the
consideration therefor. There is no rule of evidence of wider application than
that which declares extrinsic evidence inadmissible either to contradict or
vary the terms of a written contract. The execution of a contract in writing is
deemed to supersede all oral negotiations or stipulations concerning its
terms and the subject-matter which preceded the execution of the
instrument, in the absence of accident, fraud or mistake of fact (10 R. C. L.,
p. 1016). But it is recognized that this rule is to be taken with proper
qualifications; and all the authorities are agreed that proof is admissible of
any collateral, parol agreement that is not inconsistent with the terms of the
written contract, though it may relate to the same subject-matter (10 R. C. L.,
p. 1036). As expressed in a standard legal encyclopedia, the doctrine here
referred to is as follows: "The rule excluding parol evidence to vary or
contradict a writing does not extend so far as to preclude the admission of
34 PAROLE EVIDENCE
extrinsic evidence to show prior or contemporaneous collateral parol
agreements between the parties, but such evidence may be received,
regardless of whether or not the written agree- ment contains any reference
to such collateral agreement, and whether the action is at law or in equity."
(22 C. J., p. 1245.) It has accordingly been held that, in case of a written
contract of lease, the lessee may prove an independent verbal agreement
on the part of the landlord to put the leased premises in a safe condition; and
a vendor of realty may show by parol evidence that crops growing on the
land were reserved, though no such reservation was made in the deed of
conveyance (10 R. C. L., p. 1037). In the case before us the deed of
conveyance purports to transfer to the defendant only such interests in
certain properties as had come to the conveyors by inheritance. Nothing is
said concerning the rights in the hacienda which the plaintiff had acquired by
lease or concerning the things that he had placed thereon by way of
improvement or had acquired by purchase. The verbal contract which the
plaintiff has established in this case is therefore clearly independent of the
main contract of conveyance, and evidence of such verbal contract is
admissible under the doctrine above stated. The rule that a preliminary or
contemporaneous oral agreement is not admissible to vary a written contract
appears to have more particular reference to the obligation expressed in the
written agreement, and the rule has never been interpreted as being
applicable to matters of consideration or inducement. In the case before us
the written contract is complete in itself; the oral agreement is also complete
in itself, and it is a collateral to the written contract, notwithstanding the fact
that it deals with related matters.
Under the second assignment of error the appellant directs attention to
subsection 4 of article 335 of the Code f Civil Procedure wherein it is
declared that a contract for the sale of goods, chattels or things in action, at
a price of not less than P100, shall be unenforceable unless the contract, or
some note or memorandum thereof shall be in writing and subscribed by the
party charged, or by his agent; and it is insisted that the court erred in
admitting proof of a verbal contract over the objection of the defendant’s
attorney. But it will be noted that the same subsection contains a
qualification, which is stated in these words, "unless the buyer accept and
receive part of such goods and chattels." In the case before us the trial court
found that the personal property, consisting of farming implements and other
movables placed on the farm by the plaintiff, have been utilized by the
defendant in the cultivation of the hacienda, and that the defendant is
benefiting by those things. No effort was made in the court below by the
defendant to controvert the proof submitted on this point in behalf of the
plaintiff, and no error is assigned in this court to the finding of fact with
reference thereto made by the trial judge. It is evident therefore that proof of
the oral agreement with respect to the movables was properly received by
the trial judge, even over the objection of the defendant’s attorney.
The appellant’s third assignment of error has reference to the alleged
suspensive condition annexed to the oral agreement. In this connection it is
claimed that the true meaning of the proven verbal agreement is that, in
case the parties should fail to agree upon the price, after an appraisal of the
property, the agreement would not be binding; in other words, that the
stipulation for appraisal and agreement as to the price was a suspensive
condition in the contract: and since the parties have never arrived at any
agreement on the price (except as to the carabao), it is contended that the
obligation of the defendant has never become effective. We are of the
opinion that the stipulation with respect to the appraisal of the property did
not create a suspensive condition. The true sense of the contract evidently
was that the defendant would take over the movables and the improvements
at an appraised valuation, and the defendant obligated itself to promote the
appraisal in good faith. As the defendant partially frustrated the appraisal, it
violated a term of the contract and made itself liable for the true value of the
things contracted about, as such value may be established in the usual
course of proof. Furthermore, it must occur to any one, as the trial judge
pointed out, that an unjust enrichment of the defendant would result from
allowing it to appropriate the movables without compensating the plaintiff
therefor.
The fourth assignment of error is concerned with the improvements.
Attention is here directed to the fact that the improvements placed on the
hacienda by the plaintiff became a part of the realty and as such passed to
the defendant by virtue of the transfer effected by the three owners in the
deed of conveyance (Exhibit B). It is therefore insisted that, the defendant
having thus acquired the improvements, the plaintiff should not be permitted
to recover their value again from the defendant. This criticism misses the
point. There can be no doubt that the defendant acquired the fixed
improvements when it acquired the land, but the question is whether the
defendant is obligated to indemnify the plaintiff for his outlay in making the
improvements. It was upon the consideration of the defendant’s promise so
to indemnify the plaintiff that the latter agreed to surrender the lease nearly
two years before it was destined to terminate. There can be no doubt as to
the validity of the promise made under these circumstances to the plaintiff.
The fifth assignment of error is directed towards the action of the trial court in
awarding to the plaintiff the sum of P1,142 as compensation for the damage
caused by the failure of the defendant to take the existing crop of cane from
the hacienda at the proper time. In this connection it appears that it- was
only in November, 1917, that the defendant finally notified the plaintiff that he
would not take the cane off the plaintiff’s hands. Having relied upon the
promise of the defendant with respect to this matter, the plaintiff had made
no prior arrangements to have the cane ground himself, and he had failed to
35 PAROLE EVIDENCE

contract ahead for the necessary laborers to harvest the crop. Due to this
lack of hands the milling of the cane was delayed, and things that ought to
have been done in December, 1917, were only accomplished in February,
1918. It resulted also that the milling of the cane was not completed until
July, 1918. The trial court took judicial notice of the fact that protracted delay
in the milling of sugar-cane results in loss; and his Honor estimated the
damage to the plaintiff’s crop upon this account in the amount above stated.
As fortifying his position on this point his Honor quoted extensively in his
opinion from scientific treatises on the subject of the sugar industry in this
and other countries. That there must have been damage attributable to the
cause above stated is manifest; and although the estimate made by the
court was based upon what may be considered matter of judicial notice
without any specific estimate from farmers, we see no reason to conclude
that any injustice was done to the plaintiff in said estimate.

Upon the whole we find no reason to modify the conclusions of the trial court
upon any point, and the judgment appealed from must be affirmed. It is so
ordered, with costs against the Appellant.

Avanceña, C.J., Johnson, Malcolm, Villamor, and Villa-Real, JJ., concur.

36 PAROLE EVIDENCE
37 PAROLE EVIDENCE
[G.R. No. 79962 :  December 10, 1990.]
192 SCRA 209
LUCIO R. CRUZ, Petitioner, vs. COURT OF APPEALS AND CONRADO
Q. SALONGA, Respondents.
 
DECISION
CRUZ, J.:
The private respondent Conrado Salonga filed a complaint for collection and
damages against petitioner Lucio Cruz ** in the Regional Trial Court of
Lucena City alleging that in the course of their business transactions of
buying and selling fish, the petitioner borrowed from him an amount of
P35,000.00, evidenced by a receipt dated May 4, 1982, marked as Exhibit
D, reading as follows:
5/4/82
Received the amount of Thirty Five Thousand Cash from Rodrigo Quiambao
and Conrado Salonga on the day of May 4, 1982.
Sgd. Lucio Cruz
The plaintiff claimed that of this amount, only P20,000.00 had been paid,
leaving a balance of P10,000.00; that in August 1982, he and the defendant
agreed that the latter would grant him an exclusive right to purchase the
harvest of certain fishponds leased by Cruz in exchange for certain loan
accommodations; that pursuant thereto, Salonga delivered to Cruz various
loans totaling P15,250.00, evidenced by four receipts and an additional
P4,000.00, the receipt of which had been lost; and that Cruz failed to comply
with his part of the agreement by refusing to deliver the alleged harvest of
the fishpond and the amount of his indebtedness.
Cruz denied having contracted any loan from Salonga. By way of special
defense, he alleged that he was a lessee of several hectares of a fishpond
owned by Nemesio Yabut and that sometime in May 1982, he entered into
an agreement with Salonga whereby the latter would purchase (pakyaw) fish
in certain areas of the fishpond from May 1982 to August 15, 1982. They
also agreed that immediately thereafter, Salonga would sublease
(bubuwisan) the same fishpond for a period of one year. Cruz admitted
having received on May 4, 1982, the amount of P35,000.00 and on several
occasions from August 15, 1982, to September 30, 1982, an aggregate
amount of P15,250.00. He contended however, that these amounts were
received by him not as loans but as consideration for their "pakyaw"
agreement and payment for the sublease of the fishpond. He added that it
was the private respondent who owed him money since Salonga still had
unpaid rentals for the 10-month period that he actually occupied the
fishpond. Cruz also claimed that Salonga owed him an additional P4,000.00
arising from another purchase of fish from other areas of his leased
fishpond.
In a pre-trial conference held on August 24, 1984, petitioner and private
respondent entered into the following partial stipulation of facts.
COURT:
Plaintiff and defendant, through their respective counsel, during the pre-trial
conference, agreed on the following stipulation of facts:
1) That plaintiff Conrado Salonga entered into a contract of what is
commonly called as 'pakyawan' with defendant Lucio Cruz on the
fishes contained in a fishpond which defendant Lucio Cruz was
taking care of as lessee from the owner Mr. Nemesio Yabut, with a
verbal contract for the sum of P28,000.00 sometime in May 1982.
2) That because of the necessity, defendant Lucio Cruz at that time
needed money, he requested plaintiff Conrado Salonga to advance
the money of not only P28,000.00 but P35,000.00 in order that
Lucio Cruz could meet his obligation with the owner of the fishpond
in question, Mr. Nemesio Yabut;
3) That the amount of P35,000.00 as requested by defendant Lucio
Cruz was in fact delivered by plaintiff Conrado Salonga duly
received by the defendant Lucio Cruz, as evidenced by a receipt
dated May 4, 1982, duly signed by defendant Lucio Cruz
4) That pursuant to said contract of "pakyaw," plaintiff Conrado
Salonga was able to harvest the fishes contained in the fishpond
administered by Lucio Cruz in August 1982.
5) Immediately thereafter the aforesaid harvest thereon, they
entered again on a verbal agreement whereby plaintiff Conrado
Salonga and defendant Lucio Cruz had agreed that defendant
Lucio Cruz will sublease and had in fact subleased the fishpond of
Nemesio Yabut to the herein plaintiff for the amount of P28,000.00
for a period of one year beginning August 15, 1982.
38 PAROLE EVIDENCE
6) That sometime on June 15, 1983, Mayor Nemesio Yabut, who is
the owner of the fishpond, took back the subject matter of this case
from the defendant Lucio Cruz.
7) That defendant Lucio Cruz in compliance with their verbal
sublease agreement had received from the plaintiff Conrado
Salonga the following sums of money:
a) P8,000.00 on August 15, 1982 as evidenced by Annex
"B" of the Complaint. (Exh. E);
b) The sum of P500.00 on September 4, 1982, as
evidenced by Annex "C" of the complaint (Exh. F);
c) The sum of P3,000.00 on September 19, 1982 as
evidenced by Annex "D" of the complaint (Exh. G); and
d) The sum of P3,750.00 on September 30, 1982 as
Annex "E" of the complaint (Exh. H).
At the trial, the private respondent claimed that aside from the amounts of
P35,000.00 (Exh. D), P8,000.00 (Exh. E), P500.00 (Exh. F), P3,000.00 (Exh.
G) and P3,750.00 (Exh. H) mentioned in the partial stipulation of facts, he
also delivered to the petitioner P28,000.00, which constituted the
consideration for their "pakyaw" agreement. This was evidenced by a receipt
dated May 14, 1982 marked as Exhibit I and reading as follows:
May 14, 1982
Tinatanggap ko ang halagang dalawampu't walong libong piso
(P28,000.00) bilang halaga sa pakyaw nila sa akin sa sangla sa
kahong bilang #8 maliit at sa kaputol na sapa sa gawing may
bomba. Ito ay tatagal hanggang Agosto 1982.
SGD. LUCIO CRUZ
Salonga also claimed that he had paid Cruz the amount of P4,000 but the
receipt of which had been lost and denied being indebted to the petitioner for
P4,000 for the lease of other portions of the fishpond.
For his part, the petitioner testified that he entered into a "pakyaw" and
sublease agreement with the private respondent for a consideration of
P28,000 for each transaction. Out of the P35,000 he received from the
private respondent on May 4, 1982, P28,000 covered full payment of their
"pakyaw" agreement while the remaining P7,000 constituted the advance
payment for their sublease agreement. The petitioner denied having
received another amount of P28,000 from Salonga on May 14, 1982. He
contended that the instrument dated May 14, 1982 (Exh. I) was executed to
evidence their "pakyaw" agreement and to fix its duration. He was
corroborated by Sonny Viray, who testified that it was he who prepared the
May 4, 1982, receipt of P35,000.00, P28,000 of which was payment for the
"pakyaw" and the excess of P7,000.00 as advance for the sublease.
The trial court ruled in favor of the petitioner and ordered the private
respondent to pay the former the sum of P3,054.00 plus P1,000.00 as
litigation expenses and attorney's fees, and the costs. Judge Eriberto U.
Rosario, Jr. found that the transactions between the petitioner and the
private respondent were indeed "pakyaw" and sublease agreements, each
having a consideration of P28,000.00, for a total of P56,000.00. Pursuant to
these agreements, Salonga paid Cruz P35,000.00 on May 4, 1982 (Exh. D);
P8,000.00 on August 15, 1982 (Exh. E); P500.00 on September 4, 1982
(Exh. F); P3,000 on September 19, 1982; P3,750 on September 30, 1982
(Exh. H) and P4,000.00 on an unspecified date. The trial court noted an
earlier admission of the private respondent that on an unspecified date he
received the sum of P6,000.00 from the petitioner. This amount was credited
to the petitioner and deducted from the total amount paid by the private
respondent. As the one-year contract of sublease was pre-terminated two
months short of the stipulated period, the rentals were correspondingly
reduced.
On appeal, the decision of the trial court was reversed. The respondent court
instead ordered the petitioner to pay the private respondent the sum of
P24,916.00 plus P1,500.00 as litigation expenses and attorney's fees, on the
following justification:
Exhibit "I" is very clear in its non-reference to the transaction behind Exhibit
"D." What only gives the semblance that Exhibit "I" is an explanation of the
transaction behind Exhibit "D" are the oral testimonies given by the
defendant and his two witnesses. On the other hand, Exhibit "I" is very clear
in its language. Thus, its tenor must not be clouded by any parol evidence
introduced by the defendant. And with the tenor of Exhibit "I" remaining
unembellished, the conclusion that Exhibit "D" is a mere tentative receipt
becomes untenable.
The trial court erred when it relied on the self-serving testimonies of the
defendant and his witness as against the receipts both parties presented
and adopted as their own exhibits. As said before, Exhibit "I" is very clear in
its tenor. And if it is really the intention of Exhibit "I" to explain the contents of
Exhibit "D", such manifestation or intention is not found in the four corners of
the former document.
The respondent court also found that the amounts of P35,000.00,
P8,000.00, P500.00, P3,000.00, P3,750.00 and P4,000.00 were not
payments for the "pakyaw" and sublease agreement but for loans extended
by Salonga to Cruz. It also accepted Salonga's claim that the amount of
P28,000.00 was delivered to the petitioner on May 14, 1982, as payment on
39 PAROLE EVIDENCE
the "pakyaw" agreement apart from the P35,000.00 (Exh. D) that was paid
on May 4, 1982. However, it agreed that the amount of P6,000.00 received
by the private respondent from the petitioner should be credited in favor of
the latter.
The petitioner is now before this Court, raising the following issues:
1. The public respondent Court of Appeals gravely erred in (1)
disregarding parol evidence to Exhibits "D" and "I" despite the fact
that these documents fall under the exceptions provided for in Sec.
7, Rule 130 of the Rules of Court and thereby in (2) making a
sweeping conclusion that the transaction effected between the
private respondent and petitioner is one of contract of loan and not
a contract of lease.
2. Assuming for the sake of argument that exhibits "D" and "I"
evidence separate transactions, the latter document should be
disregarded, the same not having been pleaded as a cause of
action.
3. Whether or not the Stipulation of Facts entered into by the
parties herein relative to their executed transactions during the
hearing of their case a quo, are binding upon them and as well as,
upon the public respondent?
Our ruling follows:
Rule 130, Sec. 7, of the Revised Rules of Court provides:  1
Sec. 7. Evidence of Written Agreements. — When the terms of an
agreement have been reduced to writing, it is to be considered as containing
all such terms, and therefore, there can be, between the parties and their
successors in interest, no evidence of the terms of the agreement other than
the contents of the writing, except in the following cases:
a) When a mistake or imperfection of the writing or its failure to express the
true intent and agreement of the parties, or the validity of the agreement is
put in issue by the pleadings;
b) When there is an intrinsic ambiguity in the writing. The term "agreement"
includes wills.
The reason for the rule is the presumption that when the parties have
reduced their agreement to writing they have made such writing the only
repository and memorial of the truth, and whatever is not found in the writing
must be understood to have been waived or abandoned.  2
The rule, however, is not applicable in the case at bar, Section 7, Rule 130 is
predicated on the existence of a document embodying the terms of an
agreement, but Exhibit D does not contain such an agreement. It is only a
receipt attesting to the fact that on May 4, 1982, the petitioner received from
the private respondent the amount of P35,000. It is not and could have not
been intended by the parties to be the sole memorial of their agreement. As
a matter of fact, Exhibit D does not even mention the transaction that gave
rise to its issuance. At most, Exhibit D can only be considered a casual
memorandum of a transaction between the parties and an acknowledgment
of the receipt of money executed by the petitioner for the private
respondent's satisfaction. A writing of this nature, as Wigmore observed is
not covered by the parol evidence rule.
A receipt — i.e. a written acknowledgment, handed by one party to the other,
of the manual custody of money or other personality — will in general fall
without the line of the rule; i.e. it is not intended to be an exclusive memorial,
and the facts may be shown irrespective of the terms of the receipt. This is
because usually a receipt is merely a written admission of a transaction
independently existing, and, like other admissions, is not conclusive.  3
The "pakyaw" was mentioned only in Exhibit I, which also declared the
petitioner's receipt of the amount of P28,000.00 as consideration for the
agreement. The petitioner and his witnesses testified to show when and
under what circumstances the amount of P28,000.00 was received. Their
testimonies do not in any way vary or contradict the terms of Exhibit I. While
Exhibit I is dated May 14, 1982, it does not make any categorical declaration
that the amount of P28,000.00 stated therein was received by the petitioner
on that same date. That date may not therefore be considered conclusive as
to when the amount of P28,000.00 was actually received.
A deed is not conclusive evidence of everything it may contain. For instance,
it is not the only evidence of the date of its execution, nor its omission of a
consideration conclusive evidence that none passed, nor is its
acknowledgment of a particular consideration an objection to other proof of
other and consistent considerations; and, by analogy, the acknowledgment
in a deed is not conclusive of the fact.  4
A distinction should be made between a statement of fact expressed in the
instrument and the terms of the contractual act. The former may be varied by
parol evidence but not the latter.  5 Section 7 of Rule 130 clearly refers to
the terms of an agreement and provides that "there can be, between the
parties and their successors in interest, no evidence of the terms of the
agreement other than the contents of the writing."
The statement in Exhibit I of the petitioner's receipt of the P28,000.00 is just
a statement of fact. It is a mere acknowledgment of the distinct act of
payment made by the private respondent. Its reference to the amount of
P28,000.00 as consideration of the "pakyaw" contract does not make it part
of the terms of their agreement. Parol evidence may therefore be introduced
40 PAROLE EVIDENCE
to explain Exhibit I, particularly with respect to the petitioner's receipt of the
amount of P28,000.00 and of the date when the said amount was received.
Even if it were assumed that Exhibits D and I are covered by the parol
evidence rule, its application by the Court of Appeals was improper. The
record shows that no objection was made by the private respondent when
the petitioner introduced evidence to explain the circumstances behind the
execution and issuance of the said instruments. The rule is that objections to
evidence must be made as soon as the grounds therefor become
reasonably apparent.  6 In the case of testimonial evidence, the objection
must be made when the objectionable question is asked or after the answer
is given if the objectionable features become apparent only by reason of
such answer.  7
For failure of the private respondent to object to the evidence introduced by
the petitioner, he is deemed to have waived the benefit of the parol evidence
rule. Thus, in Abrenica v. Gonda,  8 this Court held:
. . . it has been repeatedly laid down as a rule of evidence that a protest or
objection against the admission of any evidence must be made at the proper
time, and that if not so made it will be understood to have been waived. The
proper time to make a protest or objection is when, from the question
addressed to the witness, or from the answer thereto, or from the
presentation of proof, the inadmissibility of evidence is, or may be inferred.
It is also settled that the court cannot disregard evidence which would
ordinarily be incompetent under the rules but has been rendered admissible
by the failure of a party to object thereto. Thus:
. . . The acceptance of an incompetent witness to testify in a civil suit, as well
as the allowance of improper questions that may be put to him while on the
stand is a matter resting in the discretion of the litigant. He may assert his
right by timely objection or he may waive it, expressly or by silence. In any
case the option rests with him. Once admitted, the testimony is in the case
for what it is worth and the judge has no power to disregard it for the sole
reason that it could have been excluded, if it had been objected to, nor to
strike it out on its own motion. (Emphasis supplied.)  9
We find that it was error for the Court of Appeals to disregard the parol
evidence introduced by the petitioner and to conclude that the amount of
P35,000.00 received on May 4, 1982 by the petitioner was in the nature of a
loan accommodation. The Court of Appeals should have considered the
partial stipulation of facts and the testimonies of the witnesses which sought
to explain the circumstances surrounding the execution of Exhibits D and I
and their relation to one another.
We are satisfied that the amount of P35,000.00 was received by the
petitioner as full payment of their "pakyaw" agreement for P28,000.00 and
the remaining P7,000.00 as advance rentals for their sublease agreement.
The claim that the excess of P7,000.00 was advance payment of the
sublease agreement is bolstered by the testimony of the private respondent
himself when during the cross examination he testified that:
ATTY. CRUZ:
Q And during the time you were leasing the fishpond, is it not a fact that you
pay lease rental to the defendant?
SALONGA:
A No sir, because I have already advanced him money.
Q What advance money are you referring to?
A Thirty-Five Thousand Pesos (P35,000.00), sir. 10
It was also error to treat the amounts received by the petitioner from August
15, 1982, to September 30, 1982, from the private respondent as loan
accommodations when the partial stipulation of facts clearly stated that
these were payments for the sublease agreement. The pertinent portions
read:
7) That defendant Lucio Cruz in compliance with their verbal sublease
agreement had received from the plaintiff Conrado Salonga the following
sums of money: (Emphasis Supplied.)
(a) P8,000.00 on August 15, 1982, as evidenced by Annex "B" of the
complaint;
(b) the sum of P500.00 on September 4, 1982, as evidenced by Annex "C"
of the complaint;
(c) the sum of P3,000.00 on September 19, 1982, as evidenced by Annex
"D" of the complaint;
(d) the sum of P3,750.00 on September 30, 1982, as Annex "E" of the
complaint; 11
These admissions bind not only the parties but also the court, unless
modified upon request before the trial to prevent manifest injustice.
We find, however, that the Court of Appeals did not act in excess of its
jurisdiction when it appreciated Exhibit I despite the fact that it was not
pleaded as a cause of action and was objected to by the petitioner.
According to Rule 10 of the Rules of Court:
Sec. 5. Amendment to conform to or authorize presentation of evidence. —
When issues not raised by the pleadings are tried by express or implied
consent of the parties, they shall be treated in all respects, as if they had
41 PAROLE EVIDENCE

been raised in the pleadings. Such amendment of the pleadings as may be  Less: (amount received by the
necessary to cause them to conform to the evidence and to raise these
issues may be made upon motion of any party at any time, even after  private respondent from the
judgment; but failure to amend does not affect the result of the trial of these  petitioner)    (6,000.00)
issues. If evidence is objected to at the trial on the ground that it is not within
the issues made by the pleadings, the court may allow the pleadings to be       ————
amended and shall do so freely when the presentation of the merits of the  Total amount paid by the
action will be subserved thereby and the objecting party fails to satisfy the
court that the admission of such evidence would prejudice him in maintaining  private respondent to
his action or defense upon the merits. The court may grant a continuance to
 the petitioner    48,250.00
enable the objecting party to meet such evidence.
Amount to be paid by the private respondent to the petitioner:
In Co Tiamco v. Diaz, 12 the Supreme Court held:
 1. Pakyaw  P28,000.00
. . . When evidence is offered on a matter not alleged in the pleadings, the
court may admit it even against the objection of the adverse party, when the  2. Sublease   — 28,000 per annum
latter fails to satisfy the court that the admission of the evidence would
prejudice him in maintaining his defense upon the merits, and the court may  Less: 2 months: 4,666 23,334.00
grant him continuance to enable him to meet the situation created by the      ————
evidence . . .
 Total amount to be paid by
While it is true that the private respondent did not even file a motion to
amend his complaint in order that it could conform to the evidence  the private respondent to
presented, this did not prevent the court from rendering a valid judgment on  the petitioner P51,334.00
the issues proved. As we held in the Co Tiamco case:
 Total amount to be paid
. . . where the failure to order an amendment does not appear to have
caused a surprise or prejudice to the objecting party, it may be allowed as a  by the private respondent P51,334.00
harmless error. Well-known is the rule that departures from procedure may
 Total amount paid by
be forgiven when they do not appear to have impaired the substantial rights
of the parties.  the private respondent 48,250.00
The following computation indicates the accountability of the private      ————
respondent to the petitioner:
 Deficiency in the amount
 Exh. D, May 4, 1982  — P35,000.00
 paid by the private respondent P3,084.00
 Exh. E, Aug. 15, 1982 — 8,000.00
ACCORDINGLY, the decision of the respondent Court of Appeals is
 Exh. F, Sept. 4, 1982  — 500.00 REVERSED and that of the Regional Trial Court of Laguna AFFIRMED, with
the modification that the private respondent shall pay the petitioner the sum
 Exh. G, Sept. 19, 1982 — 3,000.00
of P3,084.00 instead of P3,054.00, plus costs. It is so ordered.
 Exh. H, Sept. 30, 1982 — 3,750.00
Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur.
 Lost receipt    4,000.00
      ————
      P54,250.00
42 PAROLE EVIDENCE
43 PAROLE EVIDENCE
G.R. No. L-39972 & L-40300 August 6, 1986
VICTORIA LECHUGAS, petitioner,
vs.
HON. COURT OF APPEALS, MARINA LOZA, SALVADOR LOZA, ISIDRO
LOZA, CARMELITA LOZA, DAVID LOZA, AMPARO LOZA, ERLINDA
LOZA and ALEJANDRA LOZA, respondents.
A.R. Montemayor for petitioner.
Arturo L. Limoso for private respondents.
GUTIERREZ, JR., J:
This petition for review invokes the parol evidence rule as it imputes grave
abuse of discretion on the part of the appellate court for admitting and giving
credence to the testimony of the vendor regarding the sale of the disputed
lot. The testimony is contrary to the contents of the deed of sale executed by
the vendor in favor of the petitioner.
The petitioner filed a complaint for forcible entry with damages against the
private respondents, alleging that the latter by means of force, intimidation,
strategy and stealth, unlawfully entered lots A and B, corresponding to the
middle and northern portion of the property owned by the petitioner known
as Lot No. 5456. She alleged that they appropriated the produce thereof for
themselves, and refused to surrender the possession of the same despite
demands made by the petitioner. The complaint was dismissed. Petitioner
appealed to the then Court of First Instance (CFI) of Iloilo where the case
was docketed as Civil Case No. 5055.
While the above appeal was pending, the petitioner instituted another action
before the CFI of Iloilo for recovery and possession of the same property
against the private respondents.
This case was docketed as Civil Case No. 5303. The two cases were tried
jointly. After trial, the court rendered judgment. The dispositive portion of the
decision states:
Wherefore, premises considered, judgment is rendered, to
wit:
a. dismissing the complaints in two cases;
b. declaring defendants except Salvador Anona and Jose
Lozada as owners and lawful possessors of the land in
question together with all the improvements thereon;
c. dismissing the claim for damages of all defendants
except that of Jose Lozada;
d. ordering plaintiff to pay defendant Jose Lozada the sum
of P500.00 as attorney's fees and the amount of P300.00
as litigation expenses; and
e. ordering plaintiff to pay the costs of both proceedings.
The petitioner appealed to the Court of Appeals but the latter sustained the
dismissal of the cases. Hence, this petition with the petitioner making the
following assignments of errors:
I
THAT THE RESPONDENT COURT ERRED IN
CONSIDERING PAROL EVIDENCE OVER THE
OBJECTION OF THE PETITIONER IN ORDER TO VARY
THE SUBJECT MATTER OF THE DEED OF DEFINITE
SALE (EXHIBIT A) ALTHOUGH THE LAND THEREIN IS
DESCRIBED AND DELIMITED BY METES AND
BOUNDS AND IdENTIFIED AS LOT NO. 5456 OF
LAMBUNAO CADASTRE.
II
THAT THE RESPONDENT COURT ERRED IN
CONSIDERING THE THEORY OF THE DEFENDANTS-
APPELLEES FOR THE FIRST TIME ON APPEAL THAT
THE LAND DESCRIBED IN THE DEED OF SALE
(EXHIBIT A) IS LOT NO. 5522 INSTEAD OF LOT NO.
5456 OF THE LAMBUNAO CADASTRE, THEIR
44 PAROLE EVIDENCE
ORIGINAL THEORY BEING THAT THE DEED OF SALE
(EXHIBIT A) IS NULL AND VOID AB INITIO BECAUSE
LEONCIA LASANGUE CAN NOT SELL THE LAND IN
QUESTION IN 1950 SINCE IT WAS ALLEGEDLY SOLD
IN 1941 BY HER FATHER EMETERIO LASANGUE.
III
THAT THE RESPONDENT COURT CANNOT REFORM
THE DEED OF DEFINITE SALE BY CHANGING ITS
SUBJECT MATTER IN THE ABSENCE OF STRONG,
CLEAR AND CONVINCING EVIDENCE AND ON THE
STRENGTH OF LONG TESTIMONY OF THE VENDOR
AND ALTHOUGH NO DIRECT ACTION FOR
REFORMATION WAS FILED IN THE COURT OF
ORIGIN.
A summary of the facts which brought about the controversy is contained in
the findings of the appellate court:
Plaintiff (petitioner) Victoria Lechugas testified that she
bought the land now subject of this litigation from Leoncia
Lasangue as evidenced by a public "Deed of Absolute
Sale" which plaintiff had caused to be registered in the
Office of the Register of Deeds; preparatory to the
execution of the deed Exhibit "A", plaintiff had the land
segregated from the bigger portion of 12 hectares owned
by Leoncia Lasangue by contracting a private land
surveyor, the Sirilan Surveying Office, to survey the land
on December 3, 1950 and establish its boundaries, shape,
form and area in accordance with the said plan which was
attached to exhibit A as Annex A thereof. She also states
that she caused the declaration of the said portion of six
hectares subject of Exhibit A in her name beginning the
year 1951 under tax declaration No. 7912, paid taxes on
the same land, and has taken possession of the land
through her tenants Jesus Leoncio, Roberta Losarita and
Simeon Guinta, who shared one-half of the produce of the
riceland with her, while she shouldered some of the
expenses in cultivation and seeds, and one-third share in
other crops, like coffee beans, bamboos, coconuts, corn
and the like.
x x x           x x x          x x x
Plaintiff's declaration is corroborated by her tenant Simeon
Guinta who testifies that the land subject of the complaint
was worked on by him 1954 when its former tenant,
Roberto Lazarita, now deceased, left the land. As tenant
thereof, he planted rice, corn peanuts, coffee, and other
minor products, sharing the same with the owner, plaintiff
Victoria Lechugas; that on June 14, 1958, while witness
was plowing Lot A preparatory to rice planting, defendants
entered the land and forced him to stop his work. Salvador
Anona and Carmelita Losa, particularly, told witness that if
he (witness) would sign an affidavit recognizing them as
his landlords, they would allow him to continue plowing the
land. On that occasion, Salvador Anona, David Loza and
Jose Loza were carrying unsheathed bolos, which made
this witness very afraid, so much so that he left the land
and reported the matter to Victoria Lechugas who
reportedly went to the Chief of Police of Lambunao to ask
the latter to intervene. The advise however of the chief of
police, who responded to the call of plaintiff, was not
heeded by the defendants who stayed adamantly on Lot A
and refused to surrender the possession thereof to plaintiff
appropriating the harvest to themselves. This witness
further declares that on June 24, 1958, defendants
entered Lot B of the land in question, situated on the
northern portion, and cut the bamboo poles growing
thereof counted by plaintiff's brother and overseer in the
land, Bienvenido Laranja, to be 620 bamboo poles all in
all. Despite the warning of the overseer Laranja,
defendants did not stop cutting the bamboos, and they
remained on the land, refusing to leave the same. To top it
all, in June of 1959, defendants, not contended with just
occupying the middle and northern portions of the land
(Lots A and B), grabbed the whole parcel containing six
hectares to the damage and prejudice of herein plaintiff,
so that plaintiff was left with no other recourse but to file
Civil Case No. 5303 for ownership, recovery of possession
and damages.
Defendants, on the other hand, maintain that the land
which plaintiff bought from Leoncia Lasangue in 1950 as
evidenced by the deed exhibit A, is different from the land
now subject of this action, and described in paragraph 2 of
45 PAROLE EVIDENCE
plaintiff's complaint. To prove this point, defendants called
as their first witness plaintiff herself (pp. 6167, t.s.n.,
Tuble), to elicit from her the reason why it was that
although her vendor Leoncia Lasangue was also residing
at the municipality of Lambunao, Iloilo, plaintiff did not care
to call her to the witness stand to testify regarding the
Identity of the land which she (plaintiff) bought from said
vendor Leoncia Lasangue; to which query witness
Lechugas countered that she had tried to call her vendor,
but the latter refused, saying that she (Lasangue) had
already testified in plaintiff's favor in the forcible entry case
in the Justice of the Peace Court. In connection with her
testimony regarding the true Identity of the land plaintiff, as
witness of defendants, stated that before the execution of
Exhibit "A" on December 8, 1950 the lot in question was
surveyed (on December 3, 1950) by the Sirilan Surveyor
Company after due notice to the boundary owners
including Leoncia Lasangue.
Defendant's evidence in chief, as testified to by Carmelita
Lozada (pp. 100-130, t.s.n., Trespeces; pp. 131-192,
t.s.n., Tuble) shows that on April 6, 1931 Hugo Loza father
of Carmelita Loza and predecessor-in-interest of the rest
of the heirs of herein defendants, (with the exception of
Jose Loza and Salvador Anona) purchased a parcel of
land from one Victorina Limor as evidenced by the deed
"Venta Definitiva" (exhibit 3, pp. 49-50, folder of exhibits).
This land, containing 53,327 square meters is bounded on
the north by Ramon Lasangue, on the south by Emeterio
Lasangue and covered by tax declaration No. 7346
(exhibit 3-9, p. 67, Id.) in vendor's name; that immediately
after the sale, Hugo Loza took possession of the said
parcel of land and declared the same in his name (exhibit
3-10, p. 67, folder of exhibits) starting the year 1935. On
March 17, 1941, Hugo Loza bought from Emeterio
Lasangue a parcel of land with an area of four hectares
more or less, adjoining the land he (Loza) had earlier
bought from Victoria Limor, and which sale was duly
evidenced by a public instrument (exhibit 2, pp. 35-36,
folder of exhibits). This property had the following
boundaries, to wit: on the north by Eladio Luno, on the
south, by Simeon Lasangue, on the west, by Gregorio
Militar and Emeterio Lasangue and on the east, by
Maximo Lasangue and Hipolito Lastica (exhibit 2, exhibit
2-B, p. 37, Id). After the execution of the deed of sale,
Exhibit 2, Hugo Loza cause the transfer of the declaration
in his own name (tax declaration No. 8832, exh. 2-C, p.
38, Id.) beginning 1945, and started paying the taxes on
the land (exhibits 2-d to 2-i, pp. 39-44, Id.). These two
parcels of land (that purchased by Hugo Loza in 1941
from Emeterio Lasangue, and a portion of that bought by
him from Victoria Limor sometime in 1931) were
consolidated and designated, during the cadastral survey
of Lambunao, Iloilo in 1959 as Lot No. 5456; while the
remaining portion of the lot bought from Victorina Limor,
adjoining Lot 5456 on the east, was designated as Lot No.
5515 in the name of the Heirs of Hugo Loza. Defendants
claim that the lot bought by plaintiff from Leoncia
Lasangue as evidenced by exhibit A, is situated south of
the land now subject of this action and designated during
cadastral survey of Lambunao as Lot No. 5522, in the
name of Victoria Lechugas.
x x x           x x x          x x x
Leoncia Lasangue, plaintiff's vendor in exhibit A, testifying
for defendants (pp. 182-115, t.s.n., Tambagan; pp. 69-88,
t.s.n., Tuble) declared that during his lifetime her father,
Emeterio Lasangue, owned a parcel of land in Lambunao,
Iloilo, containing an area of 36 hectares; that said
Emeterio Lasangue sold a slice of 4 hectares of this
property to Hugo Loza evidenced by a deed of sale (Exh.
2) dated March 17, 1941; that other sales were made to
other persons, leaving only some twelve hectares out of
the original 36; that these 12 hectares were transferred by
her parents in her (witness) name, being the only child and
heir; that on December 8, 1950, she (Leoncia Lasangue)
sold six hectares of her inherited property to Victoria
Lechugas under a public instrument (exhibit A) which was
prepared at the instance of Victoria Lechugas and
thumbmarked by herself (the vendor).
Refuting plaintiff's contention that the land sold to her is
the very land under question, vendor Leoncia Lasangue
testifies that:
46 PAROLE EVIDENCE
Q. But Victoria Lechugas declared here
that, by means of this document, exhibit
'A', you sold to her this very land in
litigation; while you declared here now
that this land in litigation was not
included in the sale you made of
another parcel of land in her favor. What
do you say about that?
A. I only sold six (6) hectares to her.
Q. And that was included in this land in
litigation?
A. No.
xxx xxx xxx
Q. Did you tell her where that land you
were selling to her was situated?
xxx xxx xxx
A. On the South.
Q. South side of what land, of the land
in litigation?
A. The land I sold to her is south of the
land in litigation.
xxx xxx xxx
Q. What portion of these thirty-six (36)
hectares of land did you sell actually,
according to your agreement with
Victoria Lechugas, and was it inside the
thirty-six (36) hectares of land or a
portion on one of the sides of thirty-six
(36) hectares?
A. It is on the edge of the whole land.
Q. Where is that edge? on the north,
east, west or south?
A . This edge. (witness indicating the
lower edge of the piece of paper shown
into her)
Q. Do you know what is east, that is, the
direction where the sun rises?
A. I know what is east.
Q. Do you know where the sun sets ?
A. The sun sets on the west.
Q. If you are standing in the middle of
your land containing thirty-six (36)
hectares and facing the east, that is, the
direction where the sun rises, where is
that portion of land sold to Victoria
Lechugas, on your left, on your right,
front of you or behind you?
A. On my right side. (Witness indicating
south). (Testimony of Leoncia
Lasangue, pp. 209-211, rollo) (emphasis
supplied).
On the basis of the above findings and the testimony of vendor Leoncia
Lasangue herself, who although illiterate was able to specifically point out
the land which she sold to the petitioner, the appellate court upheld the trial
court's decision except that the deed of sale (Exhibit A) was declared as not
null and void ab initio insofar as Leoncia Lasangue was concerned because
it could pass ownership of the lot in the south known as Lot No. 5522 of the
Lambunao Cadastre which Leoncia Lasangue intended to sell and actually
sold to her vendee, petitioner Victoria Lechugas.
47 PAROLE EVIDENCE
In her first assignment of error, the petitioner contends that the respondent
Court had no legal justification when it subjected the true intent and
agreement to parol evidence over the objection of petitioner and that to
impugn a written agreement, the evidence must be conclusive. Petitioner
maintains, moreover, that the respondent Court relied so much on the
testimony of the vendor who did not even file a case for the reformation of
Exhibit A.
The contentions are without merit.
The appellate court acted correctly in upholding the trial court's action in
admitting the testimony of Leoncia Lasangue. The petitioner claims that
Leoncia Lasangue was the vendor of the disputed land. The petitioner
denies that Leoncia Lasangue sold Lot No. 5522 to her. She alleges that this
lot was sold to her by one Leonora Lasangue, who, however, was never
presented as witness in any of the proceedings below by herein petitioner.
As explained by a leading commentator on our Rules of Court, the parol
evidence rule does not apply, and may not properly be invoked by either
party to the litigation against the other, where at least one of the parties to
the suit is not party or a privy of a party to the written instrument in question
and does not base a claim on the instrument or assert a right originating in
the instrument or the relation established thereby. (Francisco on Evidence,
Vol. VII, part I of the Rules of Court, p. 155 citing 32 C.J.S. 79.)
In Horn v. Hansen (57 N.W. 315), the court ruled:
...and the rule therefore applies, that as between parties to
a written agreement, or their privies, parol evidence
cannot be received to contradict or vary its terms.
Strangers to a contract are, of course, not bound by it, and
the rule excluding extrinsic evidence in the construction of
writings is inapplicable in such cases; and it is relaxed
where either one of the parties between whom the
question arises is a stranger to the written agreement, and
does not claim under or through one who is party to it. In
such case the rule is binding upon neither. ...
In the case of Camacho v. Municipality of Baliuag, 28 Phil. 466, this Court
held that parol evidence which was introduced by the municipality was
competent to defeat the terms of the plaintiff's deed which the latter
executed with the Insular Government. In his concurring opinion, Justice
Moreland stated:
It should be noted in the first place, that there is no written
instrument between the plaintiff and the municipality, that
is, between the parties to the action; and there is,
therefore, no possibility of the question arising as to the
admissibility of parol evidence to vary or contradict the
terms of an instrument. The written instrument that is, the
conveyance on which plaintiff bases his action was
between the Insular Government and the plaintiff, and not
between the municipality and the plaintiff; and therefore,
there can arise, as between the plaintiff and defendant no
question relative to the varying or contradicting the terms
of a written instrument between them ...
The petitioner's reliance on the parol evidence rule is misplaced. The rule is
not applicable where the controversy is between one of the parties to the
document and third persons. The deed of sale was executed by Leoncia
Lasangue in favor of Victoria Lechugas. The dispute over what was actually
sold is between petitioner and the private respondents. In the case at bar,
through the testimony of Leoncia Lasangue, it was shown that what she
really intended to sell and to be the subject of Exhibit A was Lot No. 5522
but not being able to read and write and fully relying on the good faith of her
first cousin, the petitioner, she just placed her thumbmark on a piece of
paper which petitioner told her was the document evidencing the sale of
land. The deed of sale described the disputed lot instead.
This fact was clearly shown in Lasangue's testimony:
Q. And how did you know that that was
the description of the land that you
wanted to sell to Victoria Lechugas?
R. I know that because that land came
from me.
S. But how were you able to read the
description or do you know the
description?
A. Because, since I do not know how to
read and write and after the document
was prepared, she made me sign it. So I
just signed because I do not know how
to read.
48 PAROLE EVIDENCE
xxx xxx xxx
Q. What explanation did she make to
you?
A. She said to me, 'Manang, let us have
a document prepared for you to sign on
the land you sold to me.' So, after the
document was prepared, I signed.
Q. Did you tell her where that land you
were selling to her was situated?
xxx xxx xxx
A. On the South.
Q. South side of what land, of the land
in litigation?
A. The land I sold to her is south of the
land in litigation.
Q. Did you tell her that before preparing
the document you signed?
A. Yes, I told her so because I had
confidence in her because she is my
first cousin. (pp. 198-207, rollo)
From the foregoing, there can be no other conclusion but that Lasangue did
not intend to sell as she could not have sold, a piece of land already sold by
her father to the predecessor-in-interest of the respondents.
The fact that vendor Lasangue did not bring an action for the reformation of
Exhibit "A" is of no moment. The undisputed fact is that the respondents
have timely questioned the validity of the instrument and have proven that,
indeed Exhibit "A" does not reflect the true intention of the vendor.
There is likewise no merit in the contention of the petitioner that the
respondents changed their theory on appeal.
Respondents, from the very start, had questioned and denied Leoncia
Lasangue's capacity to sell the disputed lot to petitioner. It was their
contention that the lot was sold by Leoncia's father Emeterio Lasangue to
their father, Hugo Loza wayback in 1941 while the alleged sale by Leoncia to
the petitioner took place only in 1950. In essence, therefore, the respondents
were already attacking the validity of Exhibit "A". Moreover, although the
prior sale of the lot to their father may have been emphasized in their
defenses in the civil cases filed against them by the petitioner in the lower
court, nevertheless in their affirmative defense, the respondents already
raised doubt on the true intention of Leoncia Lasangue in signing Exhibit "A"
when they alleged that..." Leoncia Lasangue, publicly, and in writing
repudiated said allegation and pretension of the plaintiff, to the effect that the
parcel of land now in litigation in the present case "WAS NOT INCLUDED in
the sale she executed in favor of the plaintiff ... .
Consequently, petitioner cannot impute grave abuse on the part of the
appellate court and state that it allowed a change of theory by the
respondents for the first time on appeal for in reality, there was no such
change.
The third issue raised by the petitioner has no merit. There is strong, clear,
and convincing evidence as to which lot was actually sold to her. We see no
reason to reverse the factual findings of both the Court of First Instance and
the Court of Appeals on this point. The "reformation" which the petitioner
questions was, in fact, intended to favor her. Instead of declaring the deed of
sale null and void for all purposes, the Court upheld its having passed
ownership of Lot No. 5522 to the petitioner.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby
DISMISSED for lack of merit with costs against the petitioner.
49 PAROLE EVIDENCE
G.R. No. 96405 June 26, 1996
BALDOMERO INCIONG, JR., petitioner,
vs.
COURT OF APPEALS and PHILIPPINE BANK OF
COMMUNICATIONS, respondents.
 
ROMERO, J.:p
This is a petition for review on certiorari of the decision of the Court of
Appeals affirming that of the Regional Trial Court of Misamis Oriental,
Branch 18,1 which disposed of Civil Case No. 10507 for collection of a sum
of money and damages, as follows:
WHEREFORE, defendant BALDOMERO L. INCIONG, JR.
is adjudged solidarily liable and ordered to pay to the
plaintiff Philippine Bank of Communications, Cagayan de
Oro City, the amount of FIFTY THOUSAND PESOS
(P50,000.00), with interest thereon from May 5, 1983 at
16%  per annum until fully paid; and 6%  per annum on the
total amount due, as liquidated damages or penalty from
May 5, 1983 until fully paid; plus 10% of the total amount
due for expenses of litigation and attorney's fees; and to
pay the costs.
The counterclaim, as well as the cross claim, are
dismissed for lack of merit.
SO ORDERED.
Petitioner's liability resulted from the promissory note in the amount of
P50,000.00 which he signed with Rene C. Naybe and Gregorio D.
Pantanosas on February 3, 1983, holding themselves jointly and severally
liable to private respondent Philippine Bank of Communications, Cagayan de
Oro City branch. The promissory note was due on May 5, 1983.
Said due date expired without the promissors having paid their obligation.
Consequently, on November 14, 1983 and on June 8, 1984, private
respondent sent petitioner telegrams demanding payment thereof.2 On
December 11, 1984 private respondent also sent by registered mail a final
letter of demand to Rene C. Naybe. Since both obligors did not respond to
the demands made, private respondent filed on January 24, 1986 a
complaint for collection of the sum of P50,000.00 against the three obligors.
On November 25, 1986, the complaint was dismissed for failure of the
plaintiff to prosecute the case. However, on January 9, 1987, the lower court
reconsidered the dismissal order and required the sheriff to serve the
summonses. On January 27, 1987, the lower court dismissed the case
against defendant Pantanosas as prayed for by the private respondent
herein. Meanwhile, only the summons addressed to petitioner was served as
the sheriff learned that defendant Naybe had gone to Saudi Arabia.
In his answer, petitioner alleged that sometime in January 1983, he was
approached by his friend, Rudy Campos, who told him that he was a partner
of Pio Tio, the branch manager of private respondent in Cagayan de Oro
City, in the falcata logs operation business. Campos also intimated to him
that Rene C. Naybe was interested in the business and would contribute a
chainsaw to the venture. He added that, although Naybe had no money to
buy the equipment, Pio Tio had assured Naybe of the approval of a loan he
would make with private respondent. Campos then persuaded petitioner to
act as a "co-maker" in the said loan. Petitioner allegedly acceded but with
the understanding that he would only be a co-maker for the loan of
P50,000.00.
Petitioner alleged further that five (5) copies of a blank promissory note were
brought to him by Campos at his office. He affixed his signature thereto but
in one copy, he indicated that he bound himself only for the amount of
P5,000.00. Thus, it was by trickery, fraud and misrepresentation that he was
made liable for the amount of P50,000.00.
In the aforementioned decision of the lower court, it noted that the
typewritten figure "-- 50,000 --" clearly appears directly below the admitted
signature of the petitioner in the promissory note. 3 Hence, the latter's
uncorroborated testimony on his limited liability cannot prevail over the
presumed regularity and fairness of the transaction, under Sec. 5 (q) of Rule
131. The lower court added that it was "rather odd" for petitioner to have
indicated in a copy and not in the original, of the promissory note, his
supposed obligation in the amount of P5,000.00 only. Finally, the lower court
held that, even granting that said limited amount had actually been agreed
upon, the same would have been merely collateral between him and Naybe
and, therefore, not binding upon the private respondent as creditor-bank.
50 PAROLE EVIDENCE
The lower court also noted that petitioner was a holder of a Bachelor of Laws
degree and a labor consultant who was supposed to take due care of his
concerns, and that, on the witness stand, Pio Tio denied having participated
in the alleged business venture although he knew for a fact that the falcata
logs operation was encouraged by the bank for its export potential.
Petitioner appealed the said decision to the Court of Appeals which, in its
decision of August 31, 1990, affirmed that of the lower court. His motion for
reconsideration of the said decision having been denied, he filed the instant
petition for review on certiorari.
On February 6, 1991, the Court denied the petition for failure of petitioner to
comply with the Rules of Court and paragraph 2 of Circular
No. 1-88, and to sufficiently show that respondent court had committed any
reversible error in its questioned decision.4 His motion for the
reconsideration of the denial of his petition was likewise denied with finality
in the Resolution of April 24, 1991.5 Thereafter, petitioner filed a motion for
leave to file a second motion for reconsideration which, in the Resolution of
May 27, 1991, the Court denied. In the same Resolution, the Court ordered
the entry of judgment in this case.6
Unfazed, petitioner filed a notion for leave to file a motion for clarification. In
the latter motion, he asserted that he had attached Registry Receipt No.
3268 to page 14 of the petition in compliance with Circular No. 1-88. Thus,
on August 7, 1991, the Court granted his prayer that his petition be given
due course and reinstated the same.7
Nonetheless, we find the petition unmeritorious.
Annexed to the petition is a copy of an affidavit executed on May 3, 1988, or
after the rendition of the decision of the lower court, by Gregorio
Pantanosas, Jr., an MTCC judge and petitioner's co-maker in the promissory
note. It supports petitioner's allegation that they were induced to sign the
promissory note on the belief that it was only for P5,000.00, adding that it
was Campos who caused the amount of the loan to be increased to
P50,000.00.
The affidavit is clearly intended to buttress petitioner's contention in the
instant petition that the Court of Appeals should have declared the
promissory note null and void on the following grounds: (a) the promissory
note was signed in the office of Judge Pantanosas, outside the premises of
the bank; (b) the loan was incurred for the purpose of buying a second-hand
chainsaw which cost only P5,000.00; (c) even a new chainsaw would cost
only P27,500.00; (d) the loan was not approved by the board or credit
committee which was the practice, as it exceeded P5,000.00; (e) the loan
had no collateral; (f) petitioner and Judge Pantanosas were not present at
the time the loan was released in contravention of the bank practice, and (g)
notices of default are sent simultaneously and separately but no notice was
validly sent to him.8 Finally, petitioner contends that in signing the
promissory note, his consent was vitiated by fraud as, contrary to their
agreement that the loan was only for the amount of P5,000.00, the
promissory note stated the amount of P50,000.00.
The above-stated points are clearly factual. Petitioner is to be reminded of
the basic rule that this Court is not a trier of facts. Having lost the chance to
fully ventilate his factual claims below, petitioner may no longer be accorded
the same opportunity in the absence of grave abuse of discretion on the part
of the court below. Had he presented Judge Pantanosas affidavit before the
lower court, it would have strengthened his claim that the promissory note
did not reflect the correct amount of the loan.
Nor is there merit in petitioner's assertion that since the promissory note "is
not a public deed with the formalities prescribed by law but . . . a mere
commercial paper which does not bear the signature of . . . attesting
witnesses," parol evidence may "overcome" the contents of the promissory
note.9 The first paragraph of the parol evidence rule 10 states:
When the terms of an agreement have been reduced to
writing, it is considered as containing all the terms agreed
upon and there can be, between the parties and their
successors in interest, no evidence of such terms other
than the contents of the written agreement.
Clearly, the rule does not specify that the written agreement be a
public document.
What is required is that the agreement be in writing as the rule is in fact
founded on "long experience that written evidence is so much more certain
and accurate than that which rests in fleeting memory only, that it would be
unsafe, when parties have expressed the terms of their contract in writing, to
admit weaker evidence to control and vary the stronger and to show that the
parties intended a different contract from that expressed in the writing signed
by them." 11 Thus, for the parol evidence rule to apply, a written contract
need not be in any particular form, or be signed by both parties. 12 As a
general rule, bills, notes and other instruments of a similar nature are not
subject to be varied or contradicted by parol or extrinsic evidence. 13
51 PAROLE EVIDENCE
By alleging fraud in his answer, 14 petitioner was actually in the right direction
towards proving that he and his co-makers agreed to a loan of P5,000.00
only considering that, where a parol contemporaneous agreement was the
inducing and moving cause of the written contract, it may be shown by parol
evidence. 15 However, fraud must be established by clear and convincing
evidence, mere preponderance of evidence, not even being
adequate. 16 Petitioner's attempt to prove fraud must, therefore, fail as it was
evidenced only by his own uncorroborated and, expectedly, self-serving
testimony.
Petitioner also argues that the dismissal of the complaint against Naybe, the
principal debtor, and against Pantanosas, his co-maker, constituted a
release of his obligation, especially because the dismissal of the case
against Pantanosas was upon the motion of private respondent itself. He
cites as basis for his argument, Article 2080 of the Civil Code which provides
that:
The guarantors, even though they be solidary, are
released from their obligation whenever by some act of the
creditor, they cannot be subrogated to the rights,
mortgages, and preferences of the latter.
It is to be noted, however, that petitioner signed the promissory note as a
solidary co-maker and not as a guarantor. This is patent even from the first
sentence of the promissory note which states as follows:
Ninety one (91) days after date, for value received, I/we,
JOINTLY and SEVERALLY promise to pay to the
PHILIPPINE BANK OF COMMUNICATIONS at its office in
the City of Cagayan de Oro, Philippines the sum of FIFTY
THOUSAND ONLY (P50,000.00) Pesos, Philippine
Currency, together with interest . . . at the rate of
SIXTEEN (16) per cent per annum until fully paid.
A solidary or joint and several obligation is one in which each debtor is liable
for the entire obligation, and each creditor is entitled to demand the whole
obligation. 17 on the other hand, Article 2047 of the Civil Code states:
By guaranty a person, called the guarantor, binds himself
to the creditor to fulfill the obligation of the principal
debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal
debtor, the provisions of Section 4, Chapter 3, Title I of
this Book shall be observed. In such a case the contract is
called a suretyship. (Emphasis supplied.)
While a guarantor may bind himself solidarily with the principal
debtor, the liability of a guarantor is different from that of a solidary
debtor. Thus, Tolentino explains:
A guarantor who binds himself in solidum with the principal
debtor under the provisions of the second paragraph does
not become a solidary co-debtor to all intents and
purposes. There is a difference between a solidary co-
debtor and a fiador in solidum (surety). The latter, outside
of the liability he assumes to pay the debt before the
property of the principal debtor has been exhausted,
retains all the other rights, actions and benefits which
pertain to him by reason of the  fiansa; while a solidary co-
debtor has no other rights than those bestowed upon him
in Section 4, Chapter 3, Title I, Book IV of the Civil
Code. 18
Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on joint
and several obligations. Under Art. 1207 thereof, when there are two or
more debtors in one and the same obligation, the presumption is that the
obligation is joint so that each of the debtors is liable only for a proportionate
part of the debt. There is a solidary liability only when the obligation
expressly so states, when the law so provides or when the nature of the
obligation so requires. 19
Because the promissory note involved in this case expressly states that the
three signatories therein are  jointly and severally liable, any one, some or all
of them may be proceeded against for the entire obligation. 20 The choice is
left to the solidary creditor to determine against whom he will enforce
collection. 21 Consequently, the dismissal of the case against Judge
Pontanosas may not be deemed as having discharged petitioner from
liability as well. As regards Naybe, suffice it to say that the court never
acquired jurisdiction over him. Petitioner, therefore, may only have recourse
against his co-makers, as provided by law.
WHEREFORE, the instant petition for review on certiorari is hereby DENIED
and the questioned decision of the Court of Appeals is AFFIRMED. Costs
against petitioner.
52 PAROLE EVIDENCE

SO ORDERED.

Regalado, Puno, Mendoza and Torres, Jr., JJ., concur.

53 PAROLE EVIDENCE
THIRD DIVISION
[G.R. No. 107372. January 23, 1997.]
RAFAEL S. ORTAÑEZ, Petitioner, v. THE COURT OF APPEALS, OSCAR
INOCENTES, and ASUNCION LLANES INOCENTES, Respondents.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; PAROL EVIDENCE RULE; WHEN THE
TERMS OF A CONTRACT WERE REDUCED TO WRITING, IT IS DEEMED
TO CONTAIN ALL THE TERMS AGREED UPON. — Private respondents’
oral testimony on the alleged conditions, coming from a party who has an
interest in the outcome of the case, depending exclusively on human
memory, is not as reliable as written or documentary evidence. Spoken
words could be notoriously unreliable unlike a written contract which speaks
of a uniform language. Thus, under the general rule in Section 9 of Rule 130
of the Rules of Court, when the terms of an agreement were reduced to
writing, as in this case, it is deemed to contain all the terms agreed upon and
no evidence of such terms can be admitted other than the contents thereof.
Considering that the written deeds of sale were the only repository of the
truth, whatever is not found in said instruments must have been waived and
abandoned by the parties. Examining the deeds of sale, we cannot even
make an inference that the sale was subject to any condition. As a contract,
it is the law between the parties.
2. ID.; ID.; ID.; LAND SETTLEMENT AND DEVELOPMENT CORP. CASE
(117 PHIL. [1963], NOT APPLICABLE TO CASE AT BAR. — To buttress
their argument, private respondents rely on the case of Land Settlement and
Development Corp. v. Garcia Plantation where the Court ruled that a
condition precedent to a contract may be established by parol evidence.
However, the material facts of the case are different from this case. In the
former, the contract sought to be enforced expressly stated that it is subject
to an agreement containing the conditions-precedent which were proven
through parol evidence. Whereas, the deeds of sale in this case, made no
reference to any preconditions or other agreement. In fact, the sale is
denominated as absolute in its own terms.
3. ID.; ID.; ID.; CANNOT VARY, CONTRADICT OR DEFEAT THE
OPERATION OF A VALID INSTRUMENT. — The parol evidence herein
sought to be introduced would vary, contradict or defeat the operation of a
valid instrument, hence, contrary to the rule that: "The parol evidence rule
forbids any addition . . . the terms of a written instrument by testimony
purporting to show that, at or before the signing of the document, other or
different terms were orally agreed upon by the parties."cralaw virtua1aw
library
4. ID.; ID.; ID.; CANNOT INCORPORATE ADDITIONAL
CONTEMPORANEOUS CONDITIONS. — Although parol evidence is
admissible to explain the meaning of a contract, "it cannot serve the purpose
of incorporating into the contract additional contemporaneous conditions
which are not mentioned at all in the writing unless there has been fraud or
mistake." No such fraud or mistake exists in this case.
5. ID.; ID.; ID.; INADMISSIBLE WHERE THE CONTRACTS ARE CLEAR
AND UNAMBIGUOUS. — We disagree with private respondents’ argument
that their parol evidence is admissible under the exceptions provided by the
Rules, specifically, the alleged failure of the agreement to express the true
intent of the parties. In this case, the deeds of sale are clear, without any
ambiguity, mistake or imperfection, much less obscurity or doubt in the terms
thereof.
6. ID.; ID.; ID.; GROUND THEREFOR MUST BE EXPRESSLY PLEADED.
— We are not persuaded by private respondents’ contention that they "put in
issue by the pleadings" the failure of the written agreement to express the
true intent of the parties. Record shows that private respondents did not
expressly plead that the deeds of sale were incomplete or that it did not
reflect the intention of the buyer (petitioner) and the seller (private
respondents). Such issue must be "squarely presented." Private
respondents merely alleged that the sale was subject to four (4) conditions
which they tried to prove during trial by parol evidence. Obviously, this
cannot be done, because they did not plead any of the exceptions
mentioned in the parol evidence rule. Their case is covered by the general
rule that the contents of the writing are the only repository of the terms of the
agreement. Considering that private respondent Oscar Inocentes is a lawyer
(and former Judge) he was "supposed to be steeped in legal knowledge and
practices" and was "expected to know the consequences" of his signing a
deed of absolute sale. Had he given an iota’s attention to scrutinize the
deeds, he would have incorporated important stipulations that the transfer of
title to said lots were conditional.
RESOLUTION
54 PAROLE EVIDENCE
FRANCISCO, J.:
On September 30, 1982, private respondents sold to petitioner two (2)
parcels of registered land in Quezon City for a consideration of P35,000.00
and P20,000.00, respectively. The first deed of absolute sale covering
Transfer Certificate of Title (TCT) No. 258628 provides in
part:jgc:chanrobles.com.ph
"That for and in consideration of the sum of THIRTY FIVE THOUSAND
(P35,000.00) PESOS, receipt of which in full is hereby acknowledged, we
have sold, transferred and conveyed, as we hereby sell, transfer and
convey, that subdivided portion of the property covered by TCT No. 258628
known as Lot No. 684-G-1-B-2 in favor of RAFAEL S. ORTANEZ, of legal
age, Filipino, whose marriage is under a regime of complete separation of
property, and a resident of 942 Aurora Blvd., Quezon City, his heirs or
assigns." 1
while the second deed of absolute sale covering TCT No. 243273
provides:chanrob1es virtual 1aw library
That for and in consideration of the sum of TWENTY THOUSAND
(P20,000.00) PESOS receipt of which in full is hereby acknowledged, we
have sold, transferred and conveyed, as we hereby sell, transfer and
convey, that consolidated-subdivided portion of the property covered by TCT
No. 243273 known as Lot No. 5 in favor of RAFAEL S. ORTAÑEZ, of legal
age, Filipino, whose marriage is under a regime of complete separation of
property, and a resident of 942 Aurora Blvd., Cubao, Quezon City his heirs
or assigns. 2
Private respondents received the payments for the above-mentioned lots,
but failed to deliver the titles to petitioner. On April 9, 1990 the latter
demanded from the former the delivery of said titles. 3 Private respondents,
however, refused on the ground that the title of the first lot is in the
possession of another person, 4 and petitioner’s acquisition of the title of the
other lot is subject to certain conditions.
Offshoot, petitioner sued private respondents for specific performance
before the RTC. In their answer with counterclaim private respondents
merely alleged the existence of the following oral conditions 5 which were
never reflected in the deeds of sale: 6
"3.3.2 Title to the other property (TCT No. 243273) remains with the
defendants (private respondents) until plaintiff (petitioner) shows proof that
all the following requirements have been met:chanrob1es virtual 1aw library
(i) Plaintiff will cause the segregation of his right of way amounting to 398 sq.
m.;
(ii) Plaintiff will submit to the defendants the approved plan for the
segregation;
(iii) Plaintiff will put up a strong wall between his property and that of
defendants’ lot to segregate his right of way;
(iv) Plaintiff will pay the capital gains tax and all other expenses that may be
incurred by reason of sale. . . .
During trial, private respondent Oscar Inocentes, a former judge, orally
testified that the sale was subject to the above conditions, 7 although such
conditions were not incorporated in the deeds of sale. Despite petitioner’s
timely objections on the ground that the introduction of said oral conditions
was barred by the parol evidence rule, the lower court nonetheless, admitted
them and eventually dismissed the complaint as well as the counterclaim.
On appeal, the Court of Appeals (CA) affirmed the court a quo. Hence, this
petition.
We are tasked to resolve the issue on the admissibility of parol evidence to
establish the alleged oral conditions-precedent to a contract of sale, when
the deeds of sale are silent on such conditions.
The parol evidence herein introduced is inadmissible. First, private
respondents’ oral testimony on the alleged conditions, coming from a party
who has an interest in the outcome of the case, depending exclusively on
human memory, is not as reliable as written or documentary evidence. 8
Spoken words could be notoriously unreliable unlike a written contract which
speaks of a uniform language. 9 Thus, under the general rule in Section 9 of
Rule 130 10 of the Rules of Court, when the terms of an agreement were
reduced to writing, as in this case, it is deemed to contain all the terms
agreed upon and no evidence of such terms can be admitted other than the
contents thereof. 11 Considering that the written deeds of sale were the only
repository of the truth, whatever is not found in said instruments must have
been waived and abandoned by the parties. 12 Examining the deeds of sale,
we cannot even make an inference that the sale was subject to any
condition. As a contract, it is the law between the parties. 13
Secondly, to buttress their argument, private respondents rely on the case of
Land Settlement Development, Co. v. Garcia Plantation 14 where the Court
ruled that a condition precedent to a contract may be established by parol
55 PAROLE EVIDENCE

evidence. However, the material facts of that case are different from this
case. In the former, the contract sought to be enforced 15 expressly stated
that it is subject to an agreement containing the conditions-precedent which
were proven through parol evidence. Whereas, the deeds of sale in this
case, made no reference to any pre-conditions or other agreement. In fact,
the sale is denominated as absolute in its own
terms. chanroblesvirtuallawlibrary
Third, the parol evidence herein sought to be introduced would vary,
contradict or defeat the operation of a valid instrument, 16 hence, contrary to
the rule that:chanrob1es virtual 1aw library
The parol evidence rule forbids any addition to . . . the terms of a written
instrument by testimony purporting to show that, at or before the signing of
the document, other or different terms were orally agreed upon by the
parties. 17
Although parol evidence is admissible to explain the meaning of a contract,
"it cannot serve the purpose of incorporating into the contract additional
contemporaneous conditions which are not mentioned at all in the writing
unless there has been fraud or mistake." 18 No such fraud or mistake exists
in this case.
Fourth, we disagree with private respondents’ argument that their parol
evidence is admissible under the exceptions provided by the Rules,
specifically, the alleged failure of the agreement to express the true intent of
the parties. Such exception obtains only in the following
instance:chanrob1es virtual 1aw library
respondents). Such issue must be "squarely presented." 22 Private
respondents merely alleged that the sale was subject to four (4) conditions
which they tried to prove during trial by parol evidence. 23 Obviously, this
cannot be done, because they did not plead any of the exceptions
mentioned in the parol evidence rule. 24 Their case is covered by the
general rule that the contents of the writing are the only repository of the
terms of the agreement. Considering that private respondent Oscar
Inocentes is a lawyer (and former judge) he was "supposed to be steeped in
legal knowledge and practices" and was expected to know the
consequences" 25 of his signing a deed of absolute sale. Had he given an
iota’s attention to scrutinize the deeds, he would have incorporated
important stipulations that the transfer of title to said lots were conditional. 26
One last thing, assuming arguendo that the parol evidence is admissible, it
should nonetheless be disbelieved as no other evidence appears from the
record to sustain the existence of the alleged conditions. Not even the other
seller, Asuncion Inocentes, was presented to testify on such conditions.
ACCORDINGLY, the appealed decision is REVERSED and the records of
this case REMANDED to the trial court for proper disposition in accordance
with this ruling.
SO ORDERED.

[W]here the written contract is so ambiguous or obscure in terms that the

contractual intention of the parties cannot be understood from a mere
reading of the instrument. In such a case, extrinsic evidence of the subject
matter of the contract, of the relations of the parties to each other, and of the
facts and circumstances surrounding them when they entered into the
contract may be received to enable the court to make a proper interpretation
of the instrument. 19

In this case, the deeds of sale are clear, without any ambiguity, mistake or
imperfection, much less obscurity or doubt in the terms thereof.

Fifth, we are not persuaded by private respondents contention that they "put
in issue by the pleadings" the failure of the written agreement to express the
true intent of the parties. Record shows 20 that private respondents did not
expressly plead that the deeds of sale were incomplete or that it did not
reflect the intention 21 of the buyer (petitioner) and the seller (private
56 PAROLE EVIDENCE
57 PAROLE EVIDENCE
G.R. No. 196023               April 21, 2014
JOSE JUAN TONG, ET AL., Petitioners,
vs.
GO TIAT KUN, ET AL., Respondents.
DECISION
REYES, J.:
This appeal by petition for review seeks to annul and set aside the
Decision1 dated October 28, 2010 and the Resolution2 dated March 3, 2011
of the Court of Appeals (CA) in CA-G.R. CV No. 03078, which reversed the
Decision3 dated May 21, 2009 of the Regional Trial Court of Iloilo City,
Branch 37, in Civil Case No. 05-28626.
The Facts
The instant petition stemmed from an action for Nullification of Titles and
Deeds of Extra-Judicial Settlement and Sale and Damages instituted by the
petitioners against the respondents over a parcel of land known as Lot 998-
A of the Cadastral Survey of Iloilo, having an area of 2,525 square meters
and now covered by Transfer Certificate of Title (TCT) No. 134082.
The petitioners are nine of the ten children of Spouses Juan Tong (Juan
Tong) and Sy Un (Spouses Juan Tong), namely: Jose Juan Tong, Lucio
Juan Tong, Simeon Juan Tong, Felisa Juan Tong Cheng, Luisa Juan Tong
Tan, Julia Juan Tong Dihiansan, Ana Juan Tong Dy, Elena Juan Tong Yng
Choan, and Vicente Juan Tong, who being already deceased, is survived by
his widow, Rosita So and their children, Chanto Juan Tong and Alfonso So-
Chanto Juan Tong.
Completing the ten children of Spouses Juan Tong is the deceased Luis
Juan Tong, Sr. (Luis, Sr.) whose surviving heirs are: his spouse Go Tiat Kun,
and their children, Leon, Mary, Lilia, Tomas, Luis, Jr., and Jaime, who being
already dead, is survived by his wife, Roma Cokee Juan Tong
(respondents).
Sometime in 1957, Juan Tong had a meeting with all his children to inform
them of his intention to purchase Lot 998 to be used for the family’s lumber
business called "Juan Tong Lumber". However, since he was a Chinese
citizen and was disqualified from acquiring the said lot, the title to the
property will be registered in the name of his eldest son, Luis, Sr., who at
that time was already of age and was the only Filipino citizen among his
children. On May 11, 1957, Juan Tong bought Lot 998 from the heirs of Jose
Ascencio. Accordingly, on May 16, 1957, TCT No. 10346 was issued by the
Register of Deeds in the name of Luis, Sr.
On December 8, 1978, the single proprietorship of Juan Tong Lumber was
incorporated into a corporation known as the Juan Tong Lumber,
Inc.4 However, Sy Un and Juan Tong both died intestate on October 31,
1984, and November 13, 1990, respectively.
Meanwhile, on May 30, 1981, Luis, Sr. died and the respondents, being his
surviving heirs, claimed ownership over Lot 998 by succession, alleging that
no trust agreement exists and it was Luis, Sr. who bought Lot 998. On July
2, 1982, the respondents executed a Deed of Extra-Judicial Settlement of
Estate of Luis, Sr., adjudicating unto themselves Lot 998 and claiming that
the said lot is the conjugal property of Luis, Sr., and his wife, which the
Juvenile and Domestic Relations Court of Iloilo City approved on June 28,
1982. On July 19, 1982, the said deed was registered causing the
cancellation of TCT No. 10346 and the issuance of TCT No. T-60231 in the
name of the respondents.
Subsequently, the respondents agreed to subdivide Lot 998, thus, on
October 12, 1992, two new titles were issued: (1) TCT No. 97068 over Lot
998-A in the name of Go Tiat Kun and her children; and (2) TCT No. T-
96216 over Lot 998-B in the name of Luis, Jr.
After Lot 998 was subdivided, Luis, Jr. sold Lot 998-B to Fine Rock
Development Corporation (FRDC), which in turn sold the same to Visayas
Goodwill Credit Corporation (VGCC). It was only after the petitioners
received a letter from VGCC, on August 31, 1995, that they discovered
about the breach of the trust agreement committed by the respondents.
To protect their rights, the petitioners filed an action for Annulment of Sales,
Titles, Reconveyance and Damages of Lot 998-B docketed as Civil Case
No. 22730 against Luis, Jr., FRDC and VGCC. On March 6, 1997, the trial
court ruled5 in favor of the petitioners which were later affirmed by the
CA6 and this Court7 on appeal. Consequently, Lot 998-B was reconveyed to
58 PAROLE EVIDENCE
the petitioners and TCT No. T-14839 was issued under their names
including the late Luis, Sr.
Then, on February 24, 2001, Go Tiat Kun executed a Deed of Sale of
Undivided Interest over Lot 998-A in favor of her children, Leon, Mary, Lilia,
Tomas, and the late Jaime, resulting in the issuance of TCT No. T-134082
over Lot 998-A.
Hence, on August 2, 2005, the petitioners filed the instant case for
Nullification of Titles, and Deeds of Extra-judicial Settlement and Sale and
Damages claiming as owners of Lot 998-A.8
After trial, the court a quo rendered its judgment in favor of the petitioners,
ruling that there was an implied resulting trust between Juan Tong, Luis, Sr.,
the petitioners and the respondents, over Lot 998. The trial court found that
Luis Sr. was a mere trustee, and not the owner of Lot 998, and the beneficial
interest over said property remained in Juan Tong and subsequently in the
Juan Tong Lumber, Inc. The trust is further established by the fact that Luis
Sr., during his lifetime: (1) did not build a house or any structure thereon or
make use of the property in any manner; (2) resided with his family together
with his parents, brothers and sisters in Juan Tong building in front of the
said lot; (3) have acquired a residential property at Ledesco Village, La Paz,
Iloilo City and other places, where his heirs now reside; and (4) did not
exercised any other act of ownership over the said lot.
The trial court further claimed that any right that the respondents may have
over Lot 998-A would have been merely derived from that of their
predecessor-in-interest, Luis Sr. Since the respondents were not the owners
of Lot 998-A, they could not appropriate the property unto themselves, much
less convey the same unto third persons. Thus, any document executed by
them adjudicating unto themselves or conveying in favor of each other Lot
998-A, as well as the titles issued in their favor as a consequence of those
documents, are invalid. Since the petitioners were deprived of Lot 998-A
through the surreptitious and fraudulent acts of the respondents, the
petitioners are entitled to the reconveyance of the properties, and the validity
of TCT No. T-134082 which covers Lot 998-A as well as the previous titles
and documents of conveyance covering the said lot were null and void.
Thus:
WHEREFORE, in view of the foregoing considerations, judgment is hereby
rendered in favor of the plaintiffs and against the defendants:
1. Declaring null and void the following:
a. Deed of Extrajudicial Settlement of Estate of Deceased
Person executed by the Defendants on July 2, 1982
executed by defendants Go Tiat Kun, Leon Juan Tong,
Mary Juan Tong, Lilia Juan Tong, and Tomas Juan Tong,
and the late Jaime Juan Tong;
b. Transfer Certificate of Title No. T-60231 in the name of
defendants Go Tiat Kun, Leon Juan Tong, Mary Juan
Tong, Lilia Juan Tong, and Tomas Juan Tong and the late
Jaime Juan Tong;
c. Transfer Certificate of Title No. T-97068 in the name of
defendants Go Tiat Kun, Leon Juan Tong, Mary Juan
Tong, Lilia Juan Tong, and Tomas Juan Tong and the late
Jaime Juan Tong;
d. Deed of Sale of Undivided Interest over Real Property
executed by defendant Go Tiat Kun on February 24, 2001
in favor of defendants Leon Juan Tong, Mary Juan Tong,
Lilia Juan Tong, and Tomas Juan Tong and the late Jaime
Juan Tong; [and]
e. Transfer Certificate of Title No. T-134082, and all titles
issued subsequent thereto, covering Lot 998-A, in the
names of defendants Leon Juan Tong, Mary Juan Tong,
Lilia Juan Tong, and Tomas Juan Tong and the late Jaime
Juan Tong[.]
2. Ordering defendants to jointly and severally pay Jose Juan Tong
Moral Damages of Php200,000.00, and the plaintiffs Litigation
Expenses of Php100,000.00 and Attorney’s Fees of
Php200,000.00.
3. Ordering the Register of Deeds of the City of Iloilo to issue a new
transfer certificate of title covering Lot 998-A in the name of the
plaintiffs and Luis Juan Tong, in equal shares.
4. The Counterclaim is hereby ordered dismissed for lack of merit.
SO ORDERED.9
59 PAROLE EVIDENCE
On appeal, the CA rendered the herein assailed decision, which reversed
and set aside the trial court’s decision, and dismissed the complaint for lack
of merit.
The appellate court, more particularly ruled that an express trust was
created because there was a direct and positive act from Juan Tong to
create a trust. And when an express trust concerns an immovable property
or any interest therein, it may not be proved by parol or oral evidence, but
must be proven by some writing or deed.10 The CA also ruled that even
granting that an implied resulting trust was created; the petitioners are still
barred by prescription because the said resulting trust was terminated upon
the death of Luis, Sr. and was then converted into a constructive
trust.11 Since in an action for reconveyance based on a constructive trust
prescribes in ten years from the issuance of the Torrens title over the
property, counting from the death of Luis, Sr. in 1981, the action has already
prescribed.
The CA went on to rule that there is a presumption of donation in this case
pursuant to Article 1448 of the Civil Code that if the person to whom the title
is conveyed is a child, legitimate or illegitimate, of the one paying the price of
the sale, no trust is implied by law, it being disputably presumed that there is
a gift in favor of the child. Thus, even though the respondents did not
present evidence to prove a donation, the petitioners likewise did not also try
to dispute it. The CA also held that the petitioners were already barred by
estoppel and laches.
Aggrieved by the foregoing disquisition, the petitioners moved for
reconsideration but it was denied by the appellate court,12 hence, they filed
this petition for review.
The Issue
Briefly stated, the issues to be resolved in this petition are: (1) Was there an
implied resulting trust constituted over Lot 998 when Juan Tong purchased
the property and registered it in the name of Luis, Sr.? (2) May parol
evidence be used as proof of the establishment of the trust? (3) Were the
petitioners’ action barred by prescription, estoppel and laches?
The Court’s Ruling
The petition is impressed with merit.
As a general rule, in petitions for review under Rule 45 of the Rules of Court,
the jurisdiction of this Court in cases brought before it from the CA is limited
to the review and revision of errors of law allegedly committed by the
appellate court. The question of the existence of an implied trust is factual,
hence, ordinarily outside the purview of Rule 45. Nevertheless, the Court’s
review is justified by the need to make a definitive finding on this factual
issue in light of the conflicting rulings rendered by the courts below.13
At the outset, it is worthy to note that the issues posited in this case are not
novel because in Civil Case No. 22730 involving Lot 998-B which forms part
of Lot 998, the trial court already found that said lot was held in trust by Luis
Sr. in favor of his siblings by virtue of an implied resulting trust. The trial
court’s decision was then affirmed by the CA in CA-G.R. CV No. 56602, and
this Court in G.R. No. 156068. Thus, Lot 998-A, the subject of this instant
case, and Lot 998-B, are similarly situated as they comprise the subdivided
Lot 998, the property which in its entirety was held in trust by Luis Sr. in
favor of his siblings.
A review of the records shows an intention to create a trust between the
parties. Although Lot 998 was titled in the name of Luis, Sr., the
circumstances surrounding the acquisition of the subject property eloquently
speak of the intent that the equitable or beneficial ownership of the property
should belong to the Juan Tong family.
First, Juan Tong had the financial means to purchase the property for
₱55,000.00. On the other hand, respondents failed to present a single
witness to corroborate their claim that Luis, Sr. bought the property with his
own money since at that time, Luis Sr., was merely working for his father
where he received a monthly salary of ₱200.00 with free board and lodging.
Second, the possession of Lot 998 had always been with the petitioners.
The property was physically possessed by Juan Tong and was used as
stockyard for their lumber business before it was acquired, and even after it
was acquired. In fact, the lot remains to be the stockyard of the family
lumber business until this very day.
Third, from the time it was registered in the name of Luis, Sr. in 1957, Lot
998 remained undivided and untouched by the respondents. It was only after
the death of Luis, Sr. that the respondents claimed ownership over Lot 998
and subdivided it into two lots, Lot 998-A and Lot 998-B.
Fourth, respondent Leon admitted that up to the time of his father’s death,
(1) Lot 998 is in the possession of the petitioners, (2) they resided in the
60 PAROLE EVIDENCE
tenement in the front part of Juan Tong’s compound, (3) Luis Sr. never sent
any letter or communication to the petitioners claiming ownership of Lot 998,
and (4) he and his mother have a residence at Ledesco Village, La Paz,
Iloilo City while his brother and sisters also have their own residences.
Fifth, the real property taxes on Lot 998 were paid not by Luis Sr. but by his
father Juan Tong and the Juan Tong Lumber, Inc., from 1966 up to early
2008 as evidenced by the following: a) the letter of assessment sent by the
City Treasurer of Iloilo, naming Juan Tong as the owner of Lot 998; and b)
the receipts of real property taxes paid by Juan Tong Lumber, and later by
Juan Tong Lumber, Inc., from 1997 to 2008. While some of the tax receipts
were in the name of Luis Sr., the fact that the petitioners were in possession
of the originals thereof established that the petitioners, the Juan Tong
Lumber, Inc., or the late Juan Tong paid for the taxes. The respondents did
not try to explain the petitioners’ possession of the realty property tax
receipts in the name of Luis Sr.
The appellate court’s conclusion that an express trust was created because
there was a direct and positive act by Juan Tong to create a trust must
inevitably yield to the clear and positive evidence on record which showed
that what was truly created was an implied resulting trust. As what has been
fully established, in view of the mutual trust and confidence existing between
said parties who are family members, the only reason why Lot 998 was
registered in the name of Luis, Sr. was to facilitate the purchase of the said
property to be used in the family’s lumber business since Luis, Sr. is the only
Filipino Citizen in the Juan Tong family at that time. As the registered owner
of Lot 998, it is only natural that tax declarations and the corresponding tax
payment receipts be in the name of Luis, Sr. so as to effect payment thereof.
The principle of a resulting trust is based on the equitable doctrine that
valuable consideration and not legal title determines the equitable title or
interest and are presumed always to have been contemplated by the parties.
They arise from the nature or circumstances of the consideration involved in
a transaction whereby one person thereby becomes invested with legal title
but is obligated in equity to hold his legal title for the benefit of another. On
the other hand, a constructive trust, unlike an express trust, does not
emanate from, or generate a fiduciary relation. Constructive trusts are
created by the construction of equity in order to satisfy the demands of
justice and prevent unjust enrichment. They arise contrary to intention
against one who, by fraud, duress or abuse of confidence, obtains or holds
the legal right to property which he ought not, in equity and good
conscience, to hold.14
Guided by the foregoing definitions, the Court is in conformity with the
finding of the trial court that an implied resulting trust was created as
provided under the first sentence of Article 144815 which is sometimes
referred to as a purchase money resulting trust, the elements of which are:
(a) an actual payment of money, property or services, or an equivalent,
constituting valuable consideration; and (b) such consideration must be
furnished by the alleged beneficiary of a resulting trust.16 Here, the
petitioners have shown that the two elements are present in the instant case.
Luis, Sr. was merely a trustee of Juan Tong and the petitioners in relation to
the subject property, and it was Juan Tong who provided the money for the
purchase of Lot 998 but the corresponding transfer certificate of title was
placed in the name of Luis, Sr.
The principle that a trustee who puts a certificate of registration in his name
cannot repudiate the trust by relying on the registration is one of the well-
known limitations upon a title. A trust, which derives its strength from the
confidence one reposes on another especially between families, does not
lose that character simply because of what appears in a legal document.17
Contrary to the claim of the respondents, it is not error for the trial court to
rely on parol evidence, i.e., the oral testimonies of witnesses Simeon Juan
Tong and Jose Juan Tong, to arrive at the conclusion that an implied
resulting trust exists. What is crucial is the intention to create a trust.
"Intention—although only presumed, implied or supposed by law from the
nature of the transaction or from the facts and circumstances accompanying
the transaction, particularly the source of the consideration—is always an
element of a resulting trust and may be inferred from the acts or conduct of
the parties rather than from direct expression of conduct. Certainly, intent as
an indispensable element is a matter that necessarily lies in the evidence,
that is, by evidence, even circumstantial, of statements made by the parties
at or before the time title passes. Because an implied trust is neither
dependent upon an express agreement nor required to be evidenced by
writing, Article 1457 of our Civil Code authorizes the admission of parol
evidence to prove their existence. Parol evidence that is required to
establish the existence of an implied trust necessarily has to be trustworthy
and it cannot rest on loose, equivocal or indefinite declarations."18
Lastly, the respondents’ assertion that the petitioners’ action is barred by
prescription, laches and estoppel is erroneous.
As a rule, implied resulting trusts do not prescribe except when the trustee
repudiates the trust.1âwphi1 Further, the action to reconvey does not
61 PAROLE EVIDENCE

prescribe so long as the property stands in the name of the trustee.19 To to the present, that they have been in possession of the subject property or
allow prescription would be tantamount to allowing a trustee to acquire title that they had it surveyed and subdivided openly with notice to all concerned.
against his principal and true owner. It should be noted that the title of Lot
998 was still registered in the name of Luis Sr. even when he predeceased WHEREFORE, in consideration of the foregoing premises, the instant
Juan Tong. Considering that the implied trust has been repudiated through petition is hereby GRANTED. The Decision dated October 28, 2010 and
such death, Lot 998 cannot be included in his estate except only insofar as Resolution dated March 3, 2011 of the Court of Appeals in CA-G.R. CV No.
his undivided share thereof is concerned. It is well-settled that title to 03078 are REVERSED and SET ASIDE. The Decision dated May 21, 2009
property does not vest ownership but it is a mere proof that such property of the Regional Trial Court of Iloilo City, Branch 37 in Civil Case No. 05-
has been registered. And, the fact that the petitioners are in possession of all 28626 is REINSTATED.
the tax receipts and tax declarations of Lot 998 all the more amplify their
claim of ownership over Lot 998-A. Although these tax declarations or realty
tax payments of property are not conclusive evidence of ownership, SO ORDERED.
nevertheless, they are good indicia of possession in the concept of owner,
for no one in his right mind would be paying taxes for a property that is not in
his actual or at least constructive possession. Such realty tax payments
constitute proof that the holder has a claim of title over the
property.20 Therefore, the action for reconveyance of Lot 998-A, which forms
part of Lot 998, is imprescriptible and the petitioners are not estopped from
claiming ownership thereof.

Moreso, when the petitioners received a letter from VGCC, and discovered
about the breach of the trust agreement committed by the heirs of Luis, Sr.,
they immediately instituted an action to protect their rights, as well as upon
learning that respondent Go Tiat Kun executed a Deed of Sale of Undivided
Interest over Lot 998-A in favor of her children. Clearly, no delay may be
attributed to them. The doctrine of laches is not strictly applied between near
relatives, and the fact that the parties are connected by ties of blood or
marriage tends to excuse an otherwise unreasonable delay.

On the question of whether or not Juan Tong intended a donation to Luis,

Sr., this is merely a disputable presumption which in this case was clearly
disputed by the petitioners and supported by the pieces of evidence on
record.

Thus, contrary to the CA' s finding that there was no evidence on record
showing that an implied resulting trust relation arose between Juan Tong
and Luis, Sr., the Court finds that the petitioners before the trial court, had
actually adduced sufficient evidence to prove the intention of Juan Tong to
transfer to Luis, Sr. only the legal title of Lot 998, with attendant expectation
that Luis, Sr. would hold the property in trust for the family. The evidence of
course is not documentary, but rather testimonial. Furthermore, the
respondents never proffered any proof that could tend to establish that they
were the ones who have been paying taxes from the time of its purchase up
62 PAROLE EVIDENCE
63 PAROLE EVIDENCE
G.R. No. 204029               June 4, 2014
AVELINA ABARIENTOS REBUSQUILLO [substituted by her heirs,
except Emelinda R. Gualvez] and SALVADOR A. OROSCO, Petitioners,
vs.
SPS. DOMINGO and EMELINDA REBUSQUILLO GUALVEZ and the
CITY ASSESSOR OF LEGAZPI CITY, Respondents.
DECISION
VELASCO, JR., J.:
Before Us is a Petition for Review on Certiorari under Rule 45 assailing the
Decision1 and Resolution2 dated March 30, 2012 and September 25, 2012,
respectively, of the Court of Appeals (CA) in CA-G.R. CV No. 93035, which
reversed and set aside the Decision dated January 20, 2009 of the Regional
Trial Court (RTC), Branch 4 in Legazpi City, in Civil Case No. 10407.
The antecedent facts may be summarized as follows:
On October 26, 2004, petitioners Avelina Abarientos Rebusquillo (Avelina)
and Salvador Orosco (Salvador) filed a Complaint for annulment and
revocation of an Affidavit of Self-Adjudication dated December 4, 2001 and a
Deed of Absolute Sale dated February 6, 2002 before the court a quo. In it,
petitioners alleged that Avelina was one of the children of Eulalio Abarientos
(Eulalio) and Victoria Villareal (Victoria). Eulalio died intestate on July 3,
1964, survived by his wife Victoria, six legitimate children, and one
illegitimate child, namely: (1) Avelina Abarientos-Rebusquillo, petitioner in
this case; (2) Fortunata Abarientos-Orosco, the mother of petitioner
Salvador; (3) Rosalino Abarientos; (4) Juan Abarientos; (5) Feliciano
Abarientos; (6) Abraham Abarientos; and (7) Carlos Abarientos. His wife
Victoria eventually died intestate on June 30, 1983.
On his death, Eulalio left behind an untitled parcel of land in Legazpi City
consisting of two thousand eight hundred sixty-nine(2,869) square meters,
more or less, which was covered by Tax Declaration ARP No. (TD) 0141.
In 2001, Avelina was supposedly made to sign two (2) documents by her
daughter Emelinda Rebusquillo-Gualvez (Emelinda) and her son-in-law
Domingo Gualvez (Domingo), respondents in this case, on the pretext that
the documents were needed to facilitate the titling of the lot. It was only in
2003, so petitioners claim, that Avelina realized that what she signed was an
Affidavit of Self-Adjudication and a Deed of Absolute Sale in favor of
respondents.
As respondents purportedly ignored her when she tried to talk to them,
Avelina sought the intervention of the RTC to declare null and void the two
(2) documents in order to reinstate TD0141 and so correct the injustice done
to the other heirs of Eulalio.
In their answer, respondents admitted that the execution of the Affidavit of
Self-Adjudication and the Deed of Sale was intended to facilitate the titling of
the subject property. Paragraph 9 of their Answer reads:
Sometime in the year 2001, [petitioner] Avelina together with the other heirs
of Eulalio Abarientos brought out the idea to [respondent] Emelinda
Rebusquillo-Gualvez to have the property described in paragraph 8 of the
complaint registered under the Torrens System of Registration. To facilitate
the titling of the property, so that the same could be attractive to prospective
buyers, it was agreed that the property’s tax declaration could be transferred
to [respondents] Spouses [Emelinda] R. Gualvez and Domingo Gualvez who
will spend all the cost of titling subject to reimbursement by all other heirs in
case the property is sold; That it was agreed that all the heirs will be given
their corresponding shares on the property; That pursuant to said purpose
Avelina Abarientos-Rebusquillo with the knowledge and consent of the other
heirs signed and executed an Affidavit of Self-Adjudication and a Deed of
Absolute Sale in favor of [respondents] Gualvez. In fact, [petitioner] Avelina
Rebusquillo was given an advance sum of FIFTY THOUSAND PESOS
(₱50,000.00) by [respondent] spouses and all the delinquent taxes paid by
[respondents].3
After trial, the RTC rendered its Decision dated January 20, 2009 annulling
the Affidavit of Self-Adjudication and the Deed of Absolute Sale executed by
Avelina on the grounds that (1) with regard to the Affidavit of Self-
Adjudication, she was not the sole heir of her parents and was not therefore
solely entitled to their estate; and (2) in the case of the Deed of Absolute
Sale, Avelina did not really intend to sell her share in the property as it was
only executed to facilitate the titling of such property. The dispositive portion
of the RTC Decision reads:
64 PAROLE EVIDENCE
WHEREFORE, premises considered, judgment is hereby rendered, as
follows:
1. The subject Affidavit of Self-Adjudication of the Estate of the
Deceased Spouses Eulalio Abarientos and Victoria Villareal, dated
December 4, 2001 as well as the subject Deed of Absolute Sale,
notarized on February 6, 2002, covering the property described in
par. 8 of the Amended Complaint are hereby ordered ANNULLED;
2. That defendant City Assessor’s Officer of Legazpi City is hereby
ordered to CANCEL the Tax Declaration in the name of private
[respondents] spouses Gualvez under ARP No. 4143 and to
REINSTATE the Tax Declaration under ARP No. 0141 in the name
of Eulalio Abarientos;
3. By way of restitution, [petitioner] Avelina Abarientos Rebusquillo
is hereby ordered to return or refund to [respondents] spouses
Domingo Gualvez and Emelinda Gualvez, the ₱50,000.00 given by
the latter spouses to the former.4
Assailing the trial court’s decision, respondents interposed an appeal with
the CA arguing that the Deed of Sale cannot be annulled being a public
document that has for its object the creation and transmission of real rights
over the immovable subject property. The fact that Avelina’s testimony was
not offered in evidence, so respondents argued, the signature on the
adverted deed remains as concrete proof of her agreement to its terms.
Lastly, respondents contended that the Complaint filed by petitioners Avelina
and Salvador before the RTC is not the proper remedy provided by law for
those compulsory heirs unlawfully deprived of their inheritance.
Pending the resolution of respondents’ appeal, Avelina died intestate on
September 1, 2009 leaving behind several living heirs5 including respondent
Emelinda.
In its Decision dated March 30, 2012, the appellate court granted the appeal
and reversed and set aside the Decision of the RTC. The CA held that the
RTC erred in annulling the Affidavit of Self-Adjudication simply on
petitioners’ allegation of the existence of the heirs of Eulalio, considering that
issues on heirship must be made in administration or intestate proceedings,
not in an ordinary civil action. Further, the appellate court observed that the
Deed of Absolute Sale cannot be nullified as it is a notarized document that
has in its favor the presumption of regularity and is entitled to full faith and
credit upon its face.
Aggrieved by the CA’s Decision, petitioner Avelina, as substituted by her
heirs except respondent Emelinda, and petitioner Salvador are now before
this Court ascribing reversible error on the part of the appellate court.
We find merit in the instant petition.
It has indeed been ruled that the declaration of heirship must be made in a
special proceeding, not in an independent civil action. However, this Court
had likewise held that recourse to administration proceedings to determine
who heirs are is sanctioned only if there is a good and compelling reason for
such recourse.6 Hence, the Court had allowed exceptions to the rule
requiring administration proceedings as when the parties in the civil case
already presented their evidence regarding the issue of heirship, and the
RTC had consequently rendered judgment upon the issues it defined during
the pre-trial.7 In Portugal v. Portugal-Beltran,8 this Court held:
In the case at bar, respondent, believing rightly or wrongly that she was the
sole heir to Portugal’s estate, executed on February 15, 1988 the questioned
Affidavit of Adjudication under the second sentence of Rule 74, Section 1 of
the Revised Rules of Court. Said rule is an exception to the general rule that
when a person dies leaving a property, it should be judicially administered
and the competent court should appoint a qualified administrator, in the
order established in Sec. 6, Rule 78 in case the deceased left no will, or in
case he did, he failed to name an executor therein.
Petitioners claim, however, to be the exclusive heirs of Portugal. A probate
or intestate court, no doubt, has jurisdiction to declare who are the heirs of a
deceased.
It appearing, however, that in the present case the only property of the
intestate estate of Portugal is the Caloocan parcel of land to still subject it,
under the circumstances of the case, to a special proceeding which could be
long, hence, not expeditious, just to establish the status of petitioners as
heirs is not only impractical; it is burdensome to the estate with the costs and
expenses of an administration proceeding. And it is superfluous in light of
the fact that the parties to the civil case - subject of the present case, could
and had already in fact presented evidence before the trial court which
assumed jurisdiction over the case upon the issues it defined during pre-trial.
In fine, under the circumstances of the present case, there being no
compelling reason to still subject Portugal’s estate to administration
proceedings since a determination of petitioners’ status as heirs could be
achieved in the civil case filed by petitioners, the trial court should proceed to
65 PAROLE EVIDENCE
evaluate the evidence presented by the parties during the trial and render a
decision thereon upon the issues it defined during pre-trial x x x. (emphasis
supplied)
Similar to Portugal, in the present case, there appears to be only one parcel
of land being claimed by the contending parties as the inheritance from
Eulalio. It would be more practical, as Portugal teaches, to dispense with a
separate special proceeding for the determination of the status of petitioner
Avelina as sole heir of Eulalio, especially in light of the fact that respondents
spouses Gualvez admitted in court that they knew for a fact that petitioner
Avelina was not the sole heir of Eulalio and that petitioner Salvador was one
of the other living heirs with rights over the subject land. As confirmed by the
RTC in its Decision, respondents have stipulated and have thereby admitted
the veracity of the following facts during the pre-trial:
IV – UNCONTROVERTED FACTS: (Based on the stipulation of facts in the
Pre-Trial Order)
A. x x x
B. [Petitioners] and private [respondents] spouses Gualvez admitted the
following facts:
1. Identity of the parties;
2. Capacity of the [petitioners] and private [respondents] to sue and
be sued;
3. [Petitioner] Avelina Abarientos-Rebusquilllo is not the only
surviving heir of deceased spouses Eulalio and Victoria Abarientos;
4. Petitioner Salvador Orosco is a co-owner/possessor of a portion
of the subject property;
5. Fortunata Abarientos-Orosco is the sister of Avelina Abarientos;
6. [Respondent] Emelinda Rebusquillo-Gualves is a daughter of
[petitioner] Avelina A. Rebusquillo;
7. [Petitioner] Avelina Rebusquillo was born on Nov. 10, 1923;
8. The existence of Affidavit of Self-Adjudication of Estate of the
Deceased and Deed of Absolute Sale executed by [petitioner]
Avelina A. Rebusquillo on the subject property.9 (emphasis
supplied)
In light of the admission of respondents spouses Gualvez, it is with more
reason that a resort to special proceeding will be but an unnecessary
superfluity. Accordingly, the court a quo had properly rendered judgment on
the validity of the Affidavit of Self-Adjudication executed by Avelina. As
pointed out by the trial court, an Affidavit of Self-Adjudication is only proper
when the affiant is the sole heir of the decedent. The second sentence of
Section 1, Rule 74 of the Rules of Court is patently clear that self-
adjudication is only warranted when there is only one heir:
Section 1. Extrajudicial settlement by agreement between heirs. –– x x x If
there is only one heir, he may adjudicate to himself the entire estate by
means of an affidavit filed in the office of the register of deeds. x x x
(emphasis supplied)
As admitted by respondents, Avelina was not the sole heir of Eulalio. In fact,
as admitted by respondents, petitioner Salvador is one of the co-heirs by
right of representation of his mother. Without a doubt, Avelina had perjured
herself when she declared in the affidavit that she is "the only daughter and
sole heir of spouses EULALIO ABARIENTOS AND VICTORIA
VILLAREAL."10 The falsity of this claim renders her act of adjudicating to
herself the inheritance left by her father invalid. The RTC did not, therefore,
err in granting Avelina’s prayer to declare the affidavit null and void and so
correct the wrong she has committed.
In like manner, the Deed of Absolute Sale executed by Avelina in favor of
respondents was correctly nullified and voided by the RTC. Avelina was not
in the right position to sell and transfer the absolute ownership of the subject
property to respondents. As she was not the sole heir of Eulalio and her
Affidavit of Self-Adjudication is void, the subject property is still subject to
partition. Avelina, in fine, did not have the absolute ownership of the subject
property but only an aliquot portion. What she could have transferred to
respondents was only the ownership of such aliquot portion. It is apparent
from the admissions of respondents and the records of this case that Avelina
had no intention to transfer the ownership, of whatever extent, over the
property to respondents. Hence, the Deed of Absolute Sale is nothing more
than a simulated contract.
The Civil Code provides:
66 PAROLE EVIDENCE
Art. 1345. Simulation of a contract may be absolute or relative. The former
takes place when the parties do not intend to be bound at all; the latter,
when the parties conceal their true agreement. (emphasis supplied)
Art. 1346. An absolutely simulated or fictitious contract is void. A relative
simulation, when it does not prejudice a third person and is not intended for
any purpose contrary to law, morals, good customs, public order or public
policy binds the parties to their real agreement.
In Heirs of Policronio Ureta Sr. v. Heirs of Liberato Ureta,11 this Court
explained the concept of the simulation of contracts:
In absolute simulation, there is a colorable contract but it has no substance
as the parties have no intention to be bound by it. The main characteristic of
an absolute simulation is that the apparent contract is not really desired or
intended to produce legal effect or in any way alter the juridical situation of
the parties. As a result, an absolutely simulated or fictitious contract is void,
and the parties may recover from each other what they may have given
under the contract. However, if the parties state a false cause in the contract
to conceal their real agreement, the contract is relatively simulated and the
parties are still bound by their real agreement. Hence, where the essential
requisites of a contract are present and the simulation refers only to the
content or terms of the contract, the agreement is absolutely binding and
enforceable between the parties and their successors in interest. (emphasis
supplied)
In the present case, the true intention of the parties in the execution of the
Deed of Absolute Sale is immediately apparent from respondents’ very own
Answer to petitioners’ Complaint. As respondents themselves acknowledge,
the purpose of the Deed of Absolute Sale was simply to "facilitate the titling
of the [subject] property," not to transfer the ownership of the lot to them.
Furthermore, respondents concede that petitioner Salvador remains in
possession of the property and that there is no indication that respondents
ever took possession of the subject property after its supposed purchase.
Such failure to take exclusive possession of the subject property or, in the
alternative, to collect rentals from its possessor, is contrary to the principle of
ownership and is a clear badge of simulation that renders the whole
transaction void.12
Contrary to the appellate court’s opinion, the fact that the questioned Deed
of Absolute Sale was reduced to writing and notarized does not accord it the
quality of incontrovertibility otherwise provided by the parole evidence rule.
The form of a contract does not make an otherwise simulated and invalid act
valid. The rule on parole evidence is not, as it were, ironclad. Sec. 9, Rule
130 of the Rules of Court provides the exceptions:
Section 9. Evidence of written agreements. – x x x
However, a party may present evidence to modify, explain or add to the
terms of written agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written
agreement;
(b) The failure of the written agreement to express the true intent
and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their
successors in interest after the execution of the written agreement.
The term "agreement" includes wills. (emphasis supplied)
The failure of the Deed of Absolute Sale to express the true intent and
agreement of the contracting parties was clearly put in issue in the present
case. Again, respondents themselves admit in their Answer that the Affidavit
of Self-Adjudication and the Deed of Absolute Sale were only executed to
facilitate the titling of the property. The RTC is, therefore, justified to apply
the exceptions provided in the second paragraph of Sec. 9, Rule 130 to
ascertain the true intent of the parties, which shall prevail over the letter of
the document. That said, considering that the Deed of Absolute Sale has
been shown to be void for being absolutely simulated, petitioners are not
precluded from presenting evidence to modify, explain or add to the terms of
the written agreement.13
WHEREFORE, the instant petition is GRANTED. The Decision dated March
30, 2012 and the Resolution dated September 25, 2012 of the Court of
Appeals in CA-G.R. CV No. 93035 are hereby REVERSED and SET ASIDE.
The Decision dated January 20, 2009 in Civil Case No. 10407 of the
Regional Trial Court (RTC),Branch 4 in Legazpi City is REINSTATED.
SO ORDERED.
67 PAROLE EVIDENCE
PRESBITERO J. VELASCO, JR.
Associate Justice
G.R. No. 204700               November 24, 2014
EAGLERIDGE DEVELOPMENT CORPORATION, MARCELO N. NAVAL
and CRISPIN I. OBEN, Petitioners,
vs.
CAMERON GRANVILLE 3 ASSET MANAGEMENT, INC., Respondent.
RESOLUTION
LEONEN, J.:
For resolution is respondent Cameron Granville 3 Asset Management, Inc. 's
motion for reconsideration1 of our April 10, 2013 decision,2 which reversed
and set aside the Court of Appeals' resolutions3 and ordered respondent to
produce the Loan Sale and Purchase Agreement (LSPA) dated April 7,
2006, including its annexes and/or attachments, if any, in order that
petitioners may inspect or photocopy the same.
Petitioners Eagleridge Development Corporation, Marcelo N. Naval, and
Crispin I. Oben filed on June 7, 2013 their motion to ad.mit attached
opposition.4 Subsequently, respondent filed its reply5 and petitioners their
motion to admit attached rejoinder.6
The motion for reconsideration raises the following points:
(1) The motion for production was filed out of time;7
(2) The production of the LSPA would violate the parol evidence
rule; and8
(3) The LSPA is a privileged and confidential document.9
Respondent asserts that there was no "insistent refusal" on its part to
present the LSPA, but that petitioners filed their motion for production way
out of time, even beyond the protracted pre-trial period from September
2005 to 2011.10 Hence, petitioners had no oneto blame but themselves when
the trial court denied their motion as it was filed only during the trial proper.11
Respondent further submits that "Article 1634 [of the] Civil Code had been
inappropriately cited by [p]etitioners"12 inasmuch as it is Republic Act No.
9182 (Special Purpose Vehicle Act) that is applicable.13 Nonetheless, even
assuming that Article 1634 is applicable, respondent argued that petitioners
are: 1) still liable to pay the whole of petitioner Eagleridge Development
Corporation’s (EDC) loanobligation, i.e., ₱10,232,998.00 exclusive of
interests and/or damages;14 and 2) seven (7) years late in extinguishing
petitioner EDC’s loan obligation because pursuant to Article 1634, they
should have exercised their right of extinguishment within 30 days from the
substitution of Export and Industry Bank or EIB (the original creditor) by
respondent in December 2006.15 According to respondent, the trial court
order "granting the substitution constituted sufficient judicial demand as
contemplated under Article 1634."16 Also, maintaining that the LSPA is
immaterial or irrelevant to the case, respondent contends that the "[o]rder of
substitution settled the issue of [respondent’s] standing before the [c]ourt
and its right to fill in the shoes of [EIB]."17 It argues that the production of the
LSPA will neither prevent respondent from pursuing its claim of
10,232,998.00, exclusive of interests and penalties, from petitioner EDC, nor
write off petitioner EDC’s liability to respondent.18 The primordial issue of
whether petitioners owe respondent a sum of money via the deed of
assignment can allegedly "be readily resolved by application of Civil Code
provisions and/or applicable jurisprudence and not by the
production/inspection of the LSPA[.]"19 Respondent also argues that "a
consideration is not always a requisite [in assignment of credits, and] an
assignee may maintain an action based on his title and it is immaterial
whether ornot he paid any consideration [therefor][.]"20
Respondent also contends that: (1) the production of the LSPA will violate
the parol evidence rule21 under Rule 130, Section 9 of the Rules of Court; (2)
the LSPA is a privileged/confidential bank document;22 and (3) under the
Special Purpose Vehicle Act, "the only obligation of both the assignor (bank)
and the assignee (the SPV; respondent Cameron) is to give notice to the
debtor (Eagleridge, Naval,and Oben) that its account has been
assigned/transferred to a special purpose vehicle (Sec. 12, R.A. 9182) [and]
[i]t does not require of the special purpose vehicle or the bank to disclose all
financial documents included in the assignment/sale/transfer[.]"23
Finally, respondent points out that the deed of assignment is a contested
document. "Fair play would be violated if the LSPA is produced without
[p]etitioners acknowledging that respondent Cameron Granville 3 Asset
Management, Inc. is the real party-in-interest because petitioners . . . would
68 PAROLE EVIDENCE
[thereafter] use . . . the contents of a document (LSPA) to its benefit while at
the same time"24 refuting the integrity of the deed and the legal personality of
respondent to sue petitioners.25
For their part, petitioners counter that their motion for production was not
filed out of time, and "[t]here is no proscription, under Rule 27 or any
provision of the Rules of Court, from filing motions for production, beyond
the pre-trial."26
Further, assuming that there was a valid transfer of the loan obligation of
petitioner EDC, Article 1634 is applicable and, therefore, petitioners must be
informed of the actual transfer price, which information may only be supplied
by the LSPA.27 Petitioners argue that the substitution of respondent in the
case a quowas "not sufficient ‘demand’as contemplated under Article 1634
of the Civil Code inasmuch asrespondent Cameron failed . . . to inform
petitioner EDC of the price it paid for the [transfer of the] loan
obligation,"28 which made it "impossible for petitioners to reimburse what was
paid for the acquisition of the . . . loan obligation [of EDC]."29 Additionally,
petitioners contend that respondent was not a party to the deed of
assignment, but Cameron Granville Asset Management (SPV-AMC), Inc.,
hence, "as [to] the actual parties to the Deed of Assignment are concerned,
no such demand has yet been made."30
Petitioners add that the amount of their liability to respondent is one of the
factual issues to be resolved as stated in the November 21, 2011 pretrial
order of the Regional Trial Court, which makes the LSPA clearly relevant
and material to the disposition of the case.31
Petitioners next argue that the parol evidence rule is not applicable to them
because they were not parties tothe deed of assignment, and "they cannot
be prevented from seeking evidence to determine the complete terms of the
Deed of Assignment."32 Besides, the deedof assignment made express
reference to the LSPA, hence,the latter cannot be considered as extrinsic to
it.33
As to respondent’s invocation that the LSPA is privileged/confidential,
petitioners counter that "it has not been shown that the parties fall under . . .
or, at the very least . . . analogous to [any of the relationships enumerated in
Rule 130, Section 124] that would exempt [respondent] from disclosing
information as to their transaction."34
In reply, respondent argues that "[petitioners] cannot accept and reject the
same instrument at the same time."35 According to respondent, by allegedly
"uphold[ing] the truth of the contents as well as the validity of [the] Deed of
Assignment [in] seeking the production of the [LSPA],"36 petitioners could no
longer be allowed to impugn the validity of the same deed.37
In their rejoinder, petitioners clarified that their consistent position was
always to assail the validity of the deed of assignment; that alternatively,
they invoked the application of Article 1634 should the court uphold the
validity of the transfer of their alleged loan obligation; and that Rule 8,
Section 2 of the Rules of Court "permits parties to set forth alternative
causes of action or defenses."38
We deny the motion for reconsideration.
Discovery mode of
production/inspection of
document may be availed of
even beyond pre-trial upon a
showing of good cause
The availment of a motion for production, as one of the modes of discovery,
is not limited to the pre-trial stage. Rule 27 does not provide for any time
frame within which the discovery mode of production or inspection of
documents can be utilized. The rule only requires leave of court "upon due
application and a showing of due cause."39 Rule 27, Section 1 of the 1997
Rules of Court, states:
SECTION 1. Motion for production or inspection order — Upon motion of
any party showing good cause therefor the court in which an action is
pending may (a) order any party to produce and permit the inspection and
copying or photographing, by or on behalf of the moving party, of any
designated documents, papers, books, accounts, letters, photographs,
objects or tangible things, not privileged, which constitute or contain
evidence material to any matter involved in the action and which are in his
possession, custody or control[.] (Emphasis supplied)
In Producers Bank of the Philippines v. Court of Appeals,40 this court held
that since the rules are silent asto the period within which modes of
discovery (in that case, written interrogatories) may still be requested, it is
necessary to determine: (1) the purposeof discovery; (2) whether, based on
the stage of the proceedings and evidence presented thus far, allowing it is
proper and would facilitate the disposition of the case; and (3) whether
substantial rights of parties would be unduly prejudiced.41 This court further
held that "[t]he use of discovery is encouraged, for it operates with desirable
flexibility under the discretionary control of the trial court."42
69 PAROLE EVIDENCE
In Dasmariñas Garments, Inc. v. Reyes,43 this court declared that
depositions, as a mode ofdiscovery, "may be taken at any time after the
institution of any action [as there is] no prohibition against the taking of
depositions after pre-trial."44 Thus:
Dasmariñas also contends that the "taking of deposition is a mode of pretrial
discovery to be availed of before the action comes to trial." Not so.
Depositions may be taken at any time after the institution of any action,
whenever necessary or convenient. There is no rule that limits deposition-
taking only to the period of pre-trial or before it; no prohibition against the
taking of depositions after pre-trial. Indeed, the law authorizes the taking of
depositions of witnesses before or after an appeal is taken from the
judgment of a Regional Trial Court "to perpetuate their testimony for use in
the event of further proceedings in the said court" (Rule 134, Rules of Court),
and even during the process of execution of a final and executory judgment
(East Asiatic Co. v. C.I.R., 40 SCRA 521, 544).45
"The modes of discovery are accorded a broad and liberal treatment."46 The
evident purpose of discovery procedures is "to enable the parties, consistent
with recognized privileges, to obtain the fullest possible knowledge of the
issues and facts before civil trials"47 and, thus, facilitating an amicable
settlement or expediting the trial of the case.48
Technicalities in pleading should be avoided in order to obtain substantial
justice. In Mutuc v. Judge Agloro,49 this court directed the bank to give Mutuc
a complete statement asto how his debt was computed, and should he be
dissatisfied with that statement, pursuant to Rule 27 of the Rules of Court, to
allow him to inspect and copy bank records supporting the items in that
statement.50 This was held to be "in consonance with the rules on discovery
and the avowed policy of the Rules of Court . . . to require the parties to lay
their cards on the table to facilitate a settlement of the case before the
trial."51
We have determined that the LSPA isrelevant and material to the issue on
the validity of the deed of assignment raised by petitioners in the court a
quo, and allowing its production and inspection by petitioners would be more
in keeping with the objectives of the discovery rules. We find no great
practical difficulty, and respondent continuously fails to allege any, in
presenting the document for inspection and copying of petitioners. On the
other hand, to deny petitioners the opportunity to inquire into the LSPA
would bar their access to relevant evidence and impair their fundamental
right to due process.52
Article 1634 of the New Civil Code is applicable
Contrary to respondent’s stance, Article 1634 of the Civil Code on
assignment of credit in litigation is applicable.
Section 13 of the Special Purpose Vehicle Act clearly provides that in the
transfer of the non-performing loans to a special purpose vehicle, "the
provisions on subrogation and assignment of credits under the New Civil
Code shall apply." Thus:
Sec. 13. Nature of Transfer. – All sales or transfers of NPAs to an SPV shall
be in the nature of a true sale after proper notice in accordance with the
procedures asprovided for in Section 12: Provided, That GFIs and GOCCs
shall be subject to existing law on the disposition of assets: Provided,
further, That in the transfer of the NPLs, the provisions on subrogation and
assignment of credits under the New Civil Code shall apply.
Furthermore, Section 19 of the Special Purpose Vehicle Act expressly states
that redemption periods allowed to borrowers under the banking law, the
Rules of Court, and/or other laws are applicable. Hence, the right of
redemption allowed to a debtor under Article 1634 of the Civil Code is
applicable to the case a quo.
Accordingly, petitioners may extinguish their debt by paying the assignee-
special purpose vehicle the transfer price plus the cost of money up to the
time of redemption and the judicial costs.
Petitioners’ right to
extinguish their debt has not
yet lapsed
Petitioners’ right to extinguish their debt under Article 1634 on assignment of
credits has not yet lapsed. The pertinent provision is reproduced here:
Art. 1634. When a credit or other incorporeal right in litigation is sold, the
debtor shall have a right to extinguish it by reimbursing the assignee for the
price the latter paid therefor, the judicial costs incurred by him, and the
interest on the price from the day on which the same was paid. A credit or
other incorporeal right shall be considered in litigation from the time the
complaint concerning the same is answered.
70 PAROLE EVIDENCE
The debtor may exercise his right within thirty days from the date the
assignee demands payment from him. (Emphasis supplied)
Under the last paragraph of Article 1634, the debtor may extinguish his or
her debt within 30 days from the date the assignee demands payment. In
this case, insofar as the actual parties to the deed of assignment are
concerned, no demand has yet been made, and the 30-day period did not
begin to run. Indeed, petitioners assailed before the trial court the validity of
the deed of assignment on the groundsthat it did not comply with the
mandatory requirements of the Special Purpose Vehicle Act,53 and it referred
to Cameron Granville Asset Management (SPV-AMC), Inc., as the assignee,
and not respondent Cameron Granville 3 Asset Management, Inc.54 The law
requires that payment should be made only "to the person in whose favor
the obligation has been constituted, or his [or her] successor in interest, or
any person authorized to receive it."55 It was held that payment made to a
person who is not the creditor, his or her successor-in-interest, or a person
who is authorized to receive payment, even through error or good faith, is
not effective payment which will bind the creditor or release the debtor from
the obligation to pay.56 Therefore, it was important for petitioners to
determine for sure the proper assignee of the EIB credit or who to pay, in
order to effectively extinguish their debt.
Moreover, even assuming that respondent is the proper assignee of the EIB
credit, petitioners could not exercise their right of extinguishment because
they were not informed of the consideration paid for the assignment.57
Respondent must, pursuant to Article 1634 of the Civil Code, disclose how
much it paid to acquire the EIB credit, so that petitioners could make the
corresponding offer to pay, by way of redemption, the same amount in final
settlement of their obligation.
Respondent insists that the transfer price of the EIB credit is ₱10,232,998.00
(the actual amount and value of the credit), and that petitioners should have
paid the said amount within 30 days from the December 8, 2006 order of the
Regional Trial Court approving its substitution of EIB.58 Petitioners believe
otherwise, and as the deed of assignment was silent on the matter, it
becomes necessary to verify the amount of the consideration from the
LSPA.
Assuming indeed that respondent acquired the EIB credit for a lesser
consideration, it cannot compel petitioners to pay or answer for the entire
original EIB credit, or more thanwhat it paid for the assignment.
Under the circumstances of this case, the 30-day period under Article 1634
within which petitioners could exercise their right to extinguish their debt
should begin to run only from the time they were informed of the actual price
paid by the assignee for the transfer of their debt. Parol evidence rule is not
applicable
Claiming further the impropriety of allowing the production of the LSPA,
respondent contends that the presentation of the document and its annexes
would violate the parol evidence rule in Rule 130, Section 9:
SEC. 9. Evidence of written agreements.—When the terms of an agreement
have been reduced to writing, it is considered as containing all the terms
agreed upon and there can be, between the parties and their successors in
interest, no evidence of such terms other than the contents of the written
agreement.
However, a party may present evidence to modify, explain or add to the
terms of the written agreement ifhe puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written
agreement;
(b) The failure of the written agreement to express the true intent
and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their
successors in interest after the execution of the written agreement.
The term "agreement" includes wills.
We disagree.
The parol evidence rule does notapply to petitioners who are not parties to
the deed of assignment and do not base a claim on it.59 Hence, they cannot
be prevented from seeking evidence to determine the complete terms of the
deed of assignment.
71 PAROLE EVIDENCE
Even assuming that Rule 130, Section 9 is applicable, an exception to the
rule under the second paragraph iswhen the party puts in issue the validity
of the written agreement, as in the case a quo.
Besides, what is forbidden under the parol evidence rule is the presentation
of oral or extrinsic evidence, not those expressly referred to in the written
agreement. "[D]ocuments canbe read together when one refers to the
other."60 By the express terms of the deed of assignment, it is clear that the
deed of assignment was meant to be read in conjunction with the LSPA.
As we have stated in our decision, Rule 132, Section 1761 of the Rules of
Court allows a party to inquire into the whole of the writing or record when a
part of it is given in evidence by the other party. Since the deed of
assignment was produced in court by respondent and marked as one of its
documentary exhibits, the LSPA which was made a part thereof by explicit
reference and which is necessary for its understanding may also be inquired
into by petitioners.
The LSPA is not privileged
and confidential in nature
Respondent’s contention that the LSPAis privileged and confidential is
likewise untenable.
Indeed, Rule 27 contains the proviso that the documents sought to be
produced and inspected must not be privileged against disclosure. Rule 130,
Section 24 describes the types of privileged communication. These are
communication between or involving the following: (a) between husband and
wife; (b) between attorney and client; (c) between physician and patient; (d)
between priest and penitent; and (e) public officers and public interest.
Privileged communications under the rules of evidence is premised on an
accepted need to protect a trust relationship. It has not been shown that the
parties to the deed of assignment fall under any of the foregoing categories.
This court has previously cited other privileged matters such as the
following: "(a) editors may not be compelled to disclose the source of
published news; (b) voters may not be compelled to disclose for whom they
voted; (c) trade secrets; (d) information contained in tax census returns; . . .
(d) bank deposits"62 (pursuant to the Secrecy of Bank Deposits Act); (e)
national security matters and intelligence information;63 and (f) criminal
matters.64 Nonetheless, the LSPA does not fall within any of these classes of
information. Moreover, the privilegeis not absolute, and the court may
compel disclosure where it is indispensable for doing justice.
At any rate, respondent failed to discharge the burden of showing that the
LSPA is a privileged document.1âwphi1 Respondent did not present any law
or regulation that considers bank documents such as the LSPA as classified
information. Its contention that the Special Purpose Vehicle Act65 only
requires the creditor-bank to give notice to the debtor of the transfer of his or
her account to a special purpose vehicle, and that the assignee-special
purpose vehicle has no obligation to disclose other financial documents
related to the sale, is untenable. The Special Purpose Vehicle Act does not
explicitly declare these financial documents as privileged matters. Further,
as discussed, petitioners are not precluded from inquiring as to the true
consideration of the assignment, precisely because the same law in relation
to Article 1634 allows the debtor to extinguish its debt by reimbursing the
assignee-special purpose vehicle of the actual price the latter paid for the
assignment.
An assignment of a credit "produce[s] no effect as against third persons,
unless it appears ina public instrument[.]"66 It strains reason why the LSPA,
which by law must be a publicinstrument to be binding against third persons
such as petitioners-debtors, is privileged and confidential.
Alternative defenses are
allowed under the Rules
Finally, respondent’s contention that petitioners cannot claim the validity and
invalidity of the deed ofassignment at the same time is untenable.
The invocation by petitioners of Article 1634, which presupposes the validity
of the deed of assignment orthe transfer of the EIB credit to respondent,
even if it would run counter to their defense on the invalidity of the deed of
assignment, is proper and sanctioned by Rule 8, Section 2 of the Rules of
Court, which reads:
SEC. 2. Alternative causes of action or defenses. — A party may set forth
two or more statements of a claim or defense alternatively or hypothetically,
either in one causeof action or defense or in separate causes of action or
defenses. When two or more statements are made in the alternative and one
of them if made independently would be sufficient, the pleading is not made
insufficient by the insufficiency of one or more of the alternative statements.
(Emphasis supplied)
72 PAROLE EVIDENCE

All told, respondent failed to allege sufficient reasons for us to reconsider our
decision. Verily, the production and inspection of the LSPA and its annexes
fulfill the discovery-procedures objective of making the trial "less a game of
blind man’s buff and morea fair contest with the basic issues and facts
disclosed to the fullest practicable extent."67

WHEREFORE, the motion for reconsideration is DENIED WITH FINALITY.

SO ORDERED.
73 PAROLE EVIDENCE
G.R. No. 171601               April 8, 2015
SPOUSES BONIFACIO AND LUCIA PARAS, Petitioners,
vs.
KIMWA CONSTRUCTION AND DEVELOPMENT
CORPORATION, Respondent.
DECISION
LEONEN, J.:
This resolves the Petition for Review on Certiorari1 under Rule 45 of the
1997 Rules of Civil Procedure praying that the assailed Decision2 dated July
4, 2005 and Resolution3 dated February 9, 2006 of the Court of Appeals
Special 20th Division in CA-G.R. CV No. 74682 be reversed and set aside,
and that the Decision4 of Branch 55 of the Regional Trial Court, Mandaue
City dated May 16, 2001 in Civil Case No. MAN-2412 be reinstated.5
The trial court's May 16, 2001 Decision ruled in favor of petitioners Spouses
Bonifacio and Lucia Paras (plaintiffs before the Regional Trial Court) in their
action for breach of contract with damages against respondent Kimwa
Construction and Development Corporation (Kimwa).6 The assailed Decision
of the Court of Appeals reversed and set aside the trial court’s May 16, 2001
Decision and dismissed Spouses Paras’ Complaint.7 The Court of Appeals’
assailed Resolution denied Spouses Paras’ Motion for Reconsideration.8
Lucia Paras (Lucia) was a "concessionaire of a sand and gravel permit at
Kabulihan, Toledo City[.]"9 Kimwa is a "construction firm that sells concrete
aggregates to contractors and haulers in . . . Cebu."10
On December 6, 1994, Lucia and Kimwa entered into a contract
denominated "Agreement for Supply of Aggregates" (Agreement) where
40,000 cubic meters of aggregates were "allotted"11 by Lucia as supplier to
Kimwa.12 Kimwa was to pick up the allotted aggregates at Lucia’s permitted
area in Toledo City13 at ₱240.00 per truckload.14
The entirety of this Agreement reads:
AGREEMENT FOR SUPPLY OF AGGREGATES
KNOW ALL MEN BY THESE PRESENTS:
This Agreement made and entered into by and between:
LUCIA PARAS, of legal age, Filipino, married and resident of Poblacion,
Toledo City, Province of Cebu, hereinafter referred to as the SUPPLIER:
-and-
KIMWA CONSTRUCTION AND DEVELOPMENT CORP., a corporation
duly organized and existing under the laws of the Philippines with office
address at Subangdaku, Mandaue City, hereinafter represented by its
President MRS. CORAZON Y. LUA, of legal age, Filipino and a resident of
Subangdaku, Mandaue City[,] hereinafter referred to as the CONTRACTOR;
W I T N E S S E T H:
That the SUPPLIER is [sic] Special Permittee of (Rechanelling Block # VI of
Sapang Daco River along Barangay Ilihan) located at Toledo City under the
terms and conditions:
1. That the aggregates is [sic] to be picked-up by the
CONTRACTOR at the SUPPLIER [sic] permitted area at
the rate of TWO HUNDRED FORTY (P 240.00) PESOS
per truck load;
2. That the volume allotted by the SUPPLIER to the
CONTRACTOR is limited to 40,000 cu.m.; 3. That the said
Aggregates is [sic] for the exclusive use of the Contractor;
4. That the terms of payment is Fifteen (15) days after the
receipt of billing;
5. That there is [sic] no modification, amendment,
assignment or transfer of this Agreement after acceptance
shall be binding upon the SUPPLIER unless agreed to in
writing by and between the CONTRACTOR and
SUPPLIER.
74 PAROLE EVIDENCE
IN WITNESS WHEREOF, we have hereunto affixed our signatures this 6th
day of December, 1994 at Mandaue City, Cebu, Philippines.
LUCIA PARAS(sgd.) CORAZON Y. LUA(sgd.)
Supplier Contractor
(Emphasis supplied)
Pursuant to the Agreement, Kimwa hauled 10,000 cubic meters of
aggregates. Sometime after this, however, Kimwa stopped hauling
aggregates.16
Claiming that in so doing, Kimwa violated the Agreement, Lucia, joined by
her husband, Bonifacio, filed the Complaint17 for breach of contract with
damages that is now subject of this Petition.
In their Complaint, Spouses Paras alleged that sometime in December 1994,
Lucia was approached by Kimwa expressing its interest to purchase gravel
and sand from her.18 Kimwa allegedly asked that it be "assured"19 of 40,000
cubic meters worth of aggregates.20 Lucia countered that her concession
area was due to be rechanneled on May 15,1995, when her Special Permit
expires.21 Thus, she emphasized that she would be willing to enter into a
contract with Kimwa "provided the forty thousand cubic meter[s] w[ould] be
withdrawn or completely extracted and hauled before 15 May
1995[.]"22 Kimwa then assured Lucia that it would take only two to three
months for it to completely haul the 40,000 cubic meters of
aggregates.23 Convinced of Kimwa’s assurances, Lucia and Kimwa entered
into the Agreement.24
Spouses Paras added that within a few days, Kimwa was able to extract and
haul 10,000 cubic meters of aggregates. However, after extracting and
hauling this quantity, Kimwa allegedly transferred to the concession area of
a certain Mrs. Remedios dela Torre in violation of their Agreement. They
then addressed demand letters to Kimwa. As these went unheeded,
Spouses Paras filed their Complaint.25
In its Answer,26 Kimwa alleged that it never committed to obtain 40,000 cubic
meters of aggregates from Lucia. It argued that the controversial quantity of
40,000 cubic meters represented only an upper limit or the maximum
quantity that it could haul.27 It likewise claimed that it neither made any
commitment to haul 40,000 cubic meters of aggregates before May 15, 1995
nor represented that the hauling of this quantity could be completed in two to
three months.28 It denied that the hauling of 10,000 cubic meters of
aggregates was completed in a matter of days and countered that it took
weeks to do so. It also denied transferring to the concession area of a
certain Mrs. Remedios dela Torre.29
Kimwa asserted that the Agreement articulated the parties’ true intent that
40,000 cubic meters was a maximum limit and that May 15, 1995 was never
set as a deadline. Invoking the Parol Evidence Rule, it insisted that Spouses
Paras were barred from introducing evidence which would show that the
parties had agreed differently.30
On May 16, 2001, the Regional Trial Court rendered the Decision in favor of
Spouses Paras. The trial court noted that the Agreement stipulated that the
allotted aggregates were set aside exclusively for Kimwa. It reasoned that it
was contrary to human experience for Kimwa to have entered into an
Agreement with Lucia without verifying the latter’s authority as a
concessionaire.31 Considering that the Special Permit32 granted to Lucia
(petitioners’ Exhibit "A" before the trial court) clearly indicated that her
authority was good for only six (6) months from November 14, 1994, the trial
court noted that Kimwa must have been aware that the 40,000 cubic meters
of aggregates allotted to it must necessarily be hauled by May 15, 1995. As
it failed to do so, it was liable to Spouses Paras for the total sum of
₱720,000.00, the value of the 30,000 cubic meters of aggregates that Kimwa
did not haul, in addition to attorney’s fees and costs of suit.33
On appeal, the Court of Appeals reversed the Regional Trial Court’s
Decision. It faulted the trial court for basing its findings on evidence
presented which were supposedly in violation of the Parol Evidence Rule. It
noted that the Agreement was clear that Kimwa was under no obligation to
haul 40,000 cubic meters of aggregates by May 15, 1995.34
In a subsequent Resolution, the Court of Appeals denied reconsideration to
Spouses Paras.35
Hence, this Petition was filed.
The issue for resolution is whether respondent Kimwa Construction and
Development Corporation is liable to petitioners Spouses Paras for
(admittedly) failing to haul 30,000 cubic meters of aggregates from petitioner
Lucia Paras’ permitted area by May 15, 1995.
75 PAROLE EVIDENCE
To resolve this, it is necessary to determine whether petitioners Spouses
Paras were able to establish that respondent Kimwa was obliged to haul a
total of 40,000 cubic meters of aggregates on or before May 15, 1995.
We reverse the Decision of the Court of Appeals and reinstate that of the
Regional Trial Court. Respondent Kimwa is liable for failing to haul the
remainder of the quantity which it was obliged to acquire from petitioner
Lucia Paras.
I case, depending exclusively on human memory, is not as reliable as written
Rule 130, Section 9 of the Revised Rules on Evidence provides for the Parol
Evidence Rule, the rule on admissibility of documentary evidence when the
terms of an agreement have been reduced into writing:
Section 9. Evidence of written agreements. — When the terms of an
agreement have been reduced to writing, it is considered as containing all
the terms agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of
the written agreement.
However, a party may present evidence to modify, explain or add to the
terms of written agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written
agreement;
(b) The failure of the written agreement to express the true intent
and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their
successors in interest after the execution of the written agreement.
The term "agreement" includes wills.
Per this rule, reduction to written form, regardless of the formalities
observed,36 "forbids any addition to, or contradiction of, the terms of a written
agreement by testimony or other evidence purporting to show that different
terms were agreed upon by the parties, varying the purport of the written
contract."37
This rule is animated by a perceived wisdom in deferring to the contracting
parties’ articulated intent. In choosing to reduce their agreement into writing,
they are deemed to have done so meticulously and carefully, employing
specific — frequently, even technical — language as are appropriate to their
context. From an evidentiary standpoint, this is also because "oral
testimony . . . coming from a party who has an interest in the outcome of the
or documentary evidence. Spoken words could be notoriously unreliable
unlike a written contract which speaks of a uniform language."38 As
illustrated in Abella v. Court of Appeals:39
Without any doubt, oral testimony as to a certain fact, depending as it does
exclusively on human memory, is not as reliable as written or documentary
evidence.1âwphi1 "I would sooner trust the smallest slip of paper for truth,"
said Judge Limpkin of Georgia, "than the strongest and most retentive
memory ever bestowed on mortal man." This is especially true in this case
where such oral testimony is given by . . . a party to the case who has an
interest in its outcome, and by . . . a witness who claimed to have received a
commission from the petitioner.40
This, however, is merely a general rule. Provided that a party puts in issue in
its pleading any of the four(4) items enumerated in the second paragraph of
Rule 130, Section 9, "a party may present evidence to modify, explain or add
to the terms of the agreement[.]"41 Raising any of these items as an issue in
a pleading such that it falls under the exception is not limited to the party
initiating an action. In Philippine National Railways v. Court of First Instance
of Albay,42 this court noted that "if the defendant set up the affirmative
defense that the contract mentioned in the complaint does not express the
true agreement of the parties, then parol evidence is admissible to prove the
true agreement of the parties[.]"43 Moreover, as with all possible objections to
the admission of evidence, a party’s failure to timely object is deemed a
waiver, and parol evidence may then be entertained.
Apart from pleading these exceptions, it is equally imperative that the parol
evidence sought to be introduced points to the conclusion proposed by the
party presenting it. That is, it must be relevant, tending to "induce belief in
[the] existence"44 of the flaw, true intent, or subsequent extraneous terms
averred by the party seeking to introduce parol evidence.
76 PAROLE EVIDENCE
In sum, two (2) things must be established for parol evidence to be admitted:
first, that the existence of any of the four (4) exceptions has been put in
issue in a party’s pleading or has not been objected to by the adverse party;
and second, that the parol evidence sought to be presented serves to form
the basis of the conclusion proposed by the presenting party.
II
Here, the Court of Appeals found fault in the Regional Trial Court for basing
its findings "on the basis of evidence presented in violation of the parol
evidence rule."45 It proceeded to fault petitioners Spouses Paras for showing
"no proof . . . of [respondent Kimwa’s] obligation."46 Then, it stated that "[t]he
stipulations in the agreement between the parties leave no room for
interpretation."47
The Court of Appeals is in serious error.
At the onset, two (2) flaws in the Court of Appeals’ reasoning must be
emphasized. First, it is inconsistent to say, on one hand, that the trial court
erred on the basis of "evidence presented"48 (albeit supposedly in violation of
the Parol Evidence Rule),and, on the other, that petitioners Spouses Paras
showed "no proof."49 Second, without even accounting for the exceptions
provided by Rule 130, Section 9, the Court of Appeals immediately
concluded that whatever evidence petitioners Spouses Paras presented was
in violation of the Parol Evidence Rule.
Contrary to the Court of Appeal’s conclusion, petitioners Spouses Paras
pleaded in the Complaint they filed before the trial court a mistake or
imperfection in the Agreement, as well as the Agreement’s failure to express
the true intent of the parties. Further, respondent Kimwa, through its Answer,
also responded to petitioners Spouses Paras’ pleading of these issues. This
is, thus, an exceptional case allowing admission of parol evidence.
Paragraphs 6 to 10 of petitioners’ Complaint read:
6. Sensing that the buyers-contractors and haulers alike could
easily consumed [sic] the deposits defendant proposed to the
plaintiff-wife that it be assured of a forty thousand (40,000) cubic
meter [sic];
7. Plaintiff countered that the area is scheduled to be rechanneled
on 15 May 1995 and by that time she will be prohibited to sell the
aggregates;
8. She further told the defendant that she would be willing to enter
into a contract provided the forty thousand cubic meter [sic] will be
withdrawn or completely extracted and hauled before 15 May 1995,
the scheduled rechanneling;
9. Defendant assured her that it will take them only two to three
months to haul completely the desired volume as defendant has all
the trucks needed;
10. Convinced of the assurances, plaintiff-wife and the defendant
entered into a contract for the supply of the aggregates sometime
on 6 December 1994 or thereabouts, at a cost of Two Hundred
Forty (₱240.00) Pesos per truckload[.]50
It is true that petitioners Spouses Paras’ Complaint does not specifically
state words and phrases such as "mistake," "imperfection," or "failure to
express the true intent of the parties." Nevertheless, it is evident that the
crux of petitioners Spouses Paras’ Complaint is their assertion that the
Agreement "entered into . . . on 6 December 1994 or thereabouts"51 was
founded on the parties’ supposed understanding that the quantity of
aggregates allotted in favor of respondent Kimwa must be hauled by May
15, 1995, lest such hauling be rendered impossible by the rechanneling of
petitioner Lucia Paras’ permitted area. This assertion is the very foundation
of petitioners’ having come to court for relief.
Proof of how petitioners Spouses Paras successfully pleaded and put this in
issue in their Complaint is how respondent Kimwa felt it necessary to
respond to it or address it in its Answer. Paragraphs 2 to 5 of respondent
Kimwa’s Answer read:
2. The allegation in paragraph six of the complaint is admitted
subject to the qualification that when defendant offered to buy
aggregates from the concession of the plaintiffs, it simply asked the
plaintiff concessionaire if she could sell a sufficient supply of
aggregates to be used in defendant’s construction business and
plaintiff concessionaire agreed to sell to the defendant aggregates
from her concession up to a limit of 40,000 cubic meters at the
price of ₱240.00 per cubic meter.
77 PAROLE EVIDENCE
3. The allegations in paragraph seven and eight of the complaint
are vehemently denied by the defendant. The contract which was
entered into by the plaintiffs and the defendant provides only that
the former supply the latter the volume of 40,000.00 cubic meters of
aggregates. There is no truth to the allegation that the plaintiff wife
entered into the contract under the condition that the aggregates
must be quarried and hauled by defendant completely before May
15, 1995, otherwise this would have been unequivocally stipulated
in the contract.
4. The allegation in paragraph nine of the complaint is hereby
denied. The defendant never made any assurance to the plaintiff
wife that it will take only two to three months to haul the aforesaid
volume of aggregates. Likewise, the contract is silent on this aspect
for in fact there is no definite time frame agreed upon by the parties
within which defendant is to quarry and haul aggregates from the
concession of the plaintiffs.
5. The allegation in paragraph ten of the complaint is admitted
insofar as the execution of the contract is concerned. However, the
contract was executed, not by reason of the alleged assurances of
the defendant to the plaintiffs, as claimed by the latter, but because
of the intent and willingness of the plaintiffs to supply and sell
aggregates to it. It was upon the instance of the plaintiff that the
defendant sign the subject contract to express in writing their
agreement that the latter would haul aggregates from plaintiffs’
concession up to such point in time that the maximum limit of
40,000 cubic meters would be quarried and hauled without a
definite deadline being set. Moreover, the contract does not
obligate the defendant to consume the allotted volume of 40,000
cubic meters.52
Considering how the Agreement’s mistake, imperfection, or supposed failure
to express the parties’ true intent was successfully put in issue in petitioners
Spouses Paras’ Complaint (and even responded to by respondent Kimwa in
its Answer), this case falls under the exceptions provided by Rule 130,
Section 9 of the Revised Rules on Evidence. Accordingly, the testimonial
and documentary parol evidence sought to be introduced by petitioners
Spouses Paras, which attest to these supposed flaws and what they aver to
have been the parties’ true intent, may be admitted and considered.
III
Of course, this admission and availability for consideration is no guarantee
of how exactly the parol evidence adduced shall be appreciated by a court.
That is, they do not guarantee the probative value, if any, that shall be
attached to them. In any case, we find that petitioners have established that
respondent Kimwa was obliged to haul 40,000 cubic meters of aggregates
on or before May 15, 1995. Considering its admission that it did not haul
30,000 cubic meters of aggregates, respondent Kimwa is liable to
petitioners.
The Pre-Trial Order issued by the Regional Trial Court in Civil Case No.
MAN-2412 attests to respondent Kimwa’s admission that:
6) Prior to or during the execution of the contract[,] the Plaintiffs furnished
the Defendant all the documents and requisite papers in connection with the
contract, one of which was a copy of the Plaintiff’s [sic] special permit
indicating that the Plaintiff’s [sic] authority was only good for (6) months from
November 14, 1994.53
This Special Permit was, in turn, introduced by petitioners in evidence as
their Exhibit "A,"54 with its date of issuance and effectivity being specifically
identified as their Exhibit "A-1."55 Relevant portions of this Special Permit
read:
To All Whom It May Concern:
PERMISSION is hereby granted to:
Name Address
LUCIA PARAS Poblacion, Toledo City
to undertake the rechannelling of Block No. VI of Sapang Daco River along
Barangay Ilihan, Toledo City, subject to following terms and conditions:
1. That the volume to be extracted from the area is approximately 40,000
cubic meters;
....
78 PAROLE EVIDENCE

This permit which is valid for six (6) months from the date hereof is
revocable anytime upon violation of any of the foregoing conditions or in the
interest of public peace and order.
Cebu Capitol, Cebu City, November 14, 1994.56
Having been admittedly furnished a copy of this Special Permit, respondent
Kimwa was well aware that a total of only about 40,000 cubic meters of
aggregates may be extracted by petitioner Lucia from the permitted area,
and that petitioner Lucia Paras’ operations cannot extend beyond May 15,
1995, when the Special Permit expires.
The Special Permit’s condition that a total of only about 40,000 cubic meters
of aggregates may be extracted by petitioner Lucia Paras from the permitted
area lends credence to the position that the aggregates "allotted" to
respondent Kimwa was in consideration of its corresponding commitment to
haul all 40,000 cubic meters. This is so, especially in light of the
Agreement’s own statement that "the said Aggregates is for the exclusive
use of [respondent Kimwa.]"57 By allotting the entire 40,000 cubic meters,
petitioner Lucia Paras bound her entire business to respondent Kimwa.
Rational human behavior dictates that she must have done so with the
corresponding assurances from it. It would have been irrational, if not
ridiculous, of her to oblige herself to make this allotment without respondent
Kimwa’s concomitant undertaking that it would obtain the entire amount
allotted.
Paras adduced, respondent Kimwa's awareness of the conditions under
which petitioner Lucia Paras was bound, and the Agreement's own text
specifying exclusive allotment for respondent Kimwa, supports petitioners
Spouses Paras' position that respondent Kimwa was obliged to haul 40,000
cubic meters of aggregates on or before May 15, 1995. As it admittedly
hauled only 10,000 cubic meters, respondent Kimwa is liable for breach of
contract in respect of the remaining 30,000 cubic meters.
WHEREFORE, the Petition is GRANTED. The assailed Decision dated July
4, 2005 and Resolution dated February 9, 2006 of the Court of Appeals
Special 20th Division in CA-G.R. CV No. 74682 are REVERSED and SET
ASIDE. The Decision of Branch 55 of the Regional Trial Court, Mandaue
City dated May 16, 2001 in Civil Case No. MAN-2412 is REINSTATED.
A legal interest of 6% per annum shall likewise be imposed on the total
judgment award from the finality of this Decision until full satisfaction.
SO ORDERED.
MARVIC M.V.F. LEONEN
Associate Justice

Likewise, the condition that the Special Permit shall be valid for only six (6)
months from November 14,1994 lends credence to petitioners Spouses
Paras’ assertion that, in entering into the Agreement with respondent Kimwa,
petitioner Lucia Paras did so because of respondent Kimwa's promise that
hauling can be completed by May 15, 1995. Bound as she was by the
Special Permit, petitioner Lucia Paras needed to make it eminently clear to
any party she was transacting with that she could supply aggregates only up
to May 15, 1995 and that the other party's hauling must be completed by
May 15, 1995. She was merely acting with due diligence, for otherwise, any
contract she would enter into would be negated; any commitment she would
make beyond May 15, 1995 would make her guilty of misrepresentation, and
any prospective income for her would be rendered illusory.

Our evidentiary rules impel us to proceed from the position (unless

convincingly shown otherwise) that individuals act as rational human beings,
i.e, "[t]hat a person takes ordinary care of his concerns[.]"58 This basic
evidentiary stance, taken with the. supporting evidence petitioners Spouses
79 PAROLE EVIDENCE
G.R. No. 182409, March 20, 2017
FELIX PLAZO URBAN POOR SETTLERS COMMUNITY ASSOCIATION,
INC., Petitioner, v. ALFREDO LIPAT, SR. AND ALFREDO LIPAT,
JR., Respondents.
DECISION
REYES, J.:
This is a petition for review on certiorari1 under Rule 45 of the Rules of Court
assailing the Decision2 dated April 30, 2007 and Resolution3 dated March
17, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 85684 which
granted the appeal of Alfredo Lipat, Sr. (Lipat Sr.) and Alfredo Lipat, Jr.
(Lipat Jr.) (respondents) and accordingly dismissed the action for Specific
Performance and Damages with Prayer for Preliminary Injunction filed by
Felix Plazo Urban Poor Settlers Community Association, Inc. (petitioner) for
lack of cause of action.
The Facts
On December 13, 1991, Lipat Sr., as represented by Lipat Jr., executed a
Contract to Sell (CTS) in favor of the petitioner, as represented by its
President, Manuel Tubao (Tubao), whereby the former agreed to sell to the
latter two parcels of land in Naga City covered by Transfer Certificates of
Title Nos. 12236 and 12237 (subject properties) for a consideration of
P200.00 per square meter.4
As stipulated in the CTS, the petitioner had 90 days to pay in full the
purchase price of the subject properties; otherwise, the CTS shall
automatically expire. The period, however, elapsed without payment of the
full consideration by the petitioner.5
According to the petitioner, the 90-day period provided in the CTS was
subject to the condition that the subject properties be cleared of all claims
from third persons considering that there were pending litigations involving
the same.6
Upon the expiry of the 90-day period, and despite the failure to clear the
subject properties from the claims of third persons, the petitioner contributed
financial assistance for the expenses of litigation involving the subject
properties with the assurance that the CTS will still be enforced once the
cases are settled.7
In the meantime, the petitioner agreed to pay rental fees for their occupation
of the subject properties from 1992 to 1996.8
After the termination of the cases involving the subject properties, however,
the respondents refused to enforce the CTS on the ground that the same
had expired and averred that there was no agreement to extend its term.9
Consequently, the petitioner filed a case for Specific Performance and
Damages with Prayer for the Issuance of Preliminary Injunction against the
respondents on June 10, 1997 before the Regional Trial Court (RTC) of
Naga City.10
For their defense, the respondents alleged that the CTS was not enforced
due to the petitioner's failure to pay the P200.00 per sq m selling price
before the expiration of its term.11 As a result, the members of the petitioner
were required to pay rental fees corresponding to the area they occupy.12
Moreover, the respondents claimed that the so called "financial assistance"
they received from the petitioner's members was in the nature of a loan and
that it has nothing to do with the alleged extension of their CTS.13
Considering that the CTS already expired, Lipat Jr. suggested an individual
contract for each member of the petitioner. Only four members, however,
were able to buy individual lots, namely, Consuelo Gomez, Edna Estioko,
Gina Villar, and Pablo Calubad.14 Also, Rosemarie Buenaventura, who is not
a member of the petitioner, was able to buy two lots on the subject
properties. Consequently, she filed an urgent Motion for Leave to Intervene
which was granted by the trial court on August 4, 1997.15
Ruling of the RTC
On August 9, 2004, the RTC of Naga City, Branch 22, in Civil Case No. RTC
'97-3777, rendered a Decision16 in favor of the petitioner directing the
respondent to enforce the CTS after payment by the petitioner of the selling
80 PAROLE EVIDENCE

price in the amount of P200.00 per sq m. The dispositive portion thereof
provides:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the [petitioner] having proved by
preponderance of evidence the enforceability of the [CTS], dated December
13, 1991, judgment is hereby rendered ordering the [respondents], to sell to
[the petitioner] the properties] subject of this case, previously covered by
TCT No. 12236 and 12237, upon payment by the [petitioner] of the selling
price of P200.00 per square meter.
SO ORDERED.17
Aggrieved, the respondents filed an appeal to the CA to assail the RTC
decision in holding that the CTS dated December 13, 1991 they entered into
with the petitioner is still in force and effect.18
1. WHETHER OR NOT THE CA ERRED IN REVERSING THE TRIAL
COURT'S DECISION THAT THE PETITIONER CAN OBLIGE THE
RESPONDENTS TO SELL THE PROPERTIES COVERED BY
THE CTS, THE CONTRACT BEING STILL EFFECTIVE;
2. WHETHER OR NOT THE CA ERRED IN DECLARING THAT THE
CAUSE OF ACTION IS PREMATURE AND IN DISREGARDING
THE PAYMENTS AND EXPENSES MADE BY THE PETITIONER
OVER THE PROPERTIES IN QUESTION; and
3. WHETHER OR NOT THE CA ERRED IN NOT GRANTING THE
MOTION FOR RECONSIDERATION DESPITE THE FACT THAT
THE PETITIONER SHOWED PROOF OF READINESS TO PAY.24

Ruling of the CA
Ruling of the Court
In a Decision19 dated April 30, 2007, the CA granted the appeal of the
To begin with, it bears stressing that the scope of the Court's judicial review
respondents. Accordingly, it dismissed the action for Specific Performance
under Rule 45 of the Rules of Court is confined only to errors of law. It does
and Damages with Prayer for Preliminary Injunction filed by the petitioner for
not extend to questions of fact.25 This rule, however, admits of exceptions,
being premature. The dispositive portion thereof
such as in the present case, where the factual findings of the CA and the
states:chanRoblesvirtualLawlibrary
trial court are contradictory.26
WHEREFORE, the instant appeal is GRANTED. The assailed decision in
CIVIL CASE No. RTC '97-3777 is REVERSED and SET ASIDE. The action
After a careful review of the records of the case, however, the Court upholds
for Specific Performance and Damages with Prayer for Preliminary
the findings of the CA in dismissing the complaint for specific performance
Injunction filed by the [petitioner] against the [respondents] with the court a
filed by the petitioner against the respondents for lack of merit.
quo is hereby DISMISSED for lack of cause of action. No pronouncement as
to costs.
The parties are bound to the stipulations they mutually agreed upon in
the CTS
SO ORDERED.20
The CA held that the petitioner cannot exact fulfillment from the respondents
Indeed, the contract executed by the parties is the law between them.
without itself having first complied with what is incumbent upon it under the
Consequently, from the time the contract is perfected, all parties privy to it
CTS. As shown in the records, the petitioner failed to make full payment of
are bound not only to the fulfillment of what has been expressly stipulated
the purchase price. Further, records do not show that the petitioner ever
but likewise to all consequences which, according to their nature, may be in
attempted to at least, make the proper consignation of the amounts due to
keeping with good faith, usage and law.27
the court.21
Here, the pertinent provisions of the CTS, denominated as
A Motion for Reconsideration22 was filed by the petitioner, but the same was
Contract/Agreement, between the parties read:
denied in a Resolution23 dated March 17, 2008.

Issues
Hence, the instant petition for review on certiorari based on the following
assignment of errors:chanRoblesvirtualLawlibrary
1. The Parties hereby agree that for and in consideration of the
amount of TWO HUNDRED (P200.00) Pesos, [Philippine] Currency
per square meter, the VENDOR shall sell, cede, convey and
transfer unto the VENDEE, its assigns, or representative the above
mentioned property;
81 PAROLE EVIDENCE
xxxx
3. The registration fee for the mortgage to secure the loan to be
obtained by the vendee to finance the acquisition of the land shall
be for the account of the VENDEE; [and]
4. This Contract/Agreement shall automatically expire on the Ninetyth
[sic] (90) th [sic] day commencing from the aforesaid date.28
Concededly, it is undisputed that the abovementioned contract is in the
nature of a CTS. As such, the obligation of the seller to sell becomes
demandable only upon the occurrence of the suspensive condition.29 In the
present case, as correctly observed by the CA, the suspensive condition is
the payment in full of the purchase price by the petitioner prior to the
expiration of the 90-day period stipulated in their CTS, which the latter failed
to do so. The relevant portion of the CA's decision
reads:chanRoblesvirtualLawlibrary
As shown in the case at bar, the [petitioner] did not pay the full purchase
price which is its obligation under the [CTS]. As the payment of the full
purchase price is a positive suspensive condition the non-fulfillment of which
prevents the perfection of a [CTS], it is indubitable that the subject [CTS] is
ineffective and without force and effect. x x x.30
In Spouses Garcia, et al. v. Court of Appeals, et al.,31 the Court emphasized
that in a CTS, payment of the full purchase price is a positive suspensive
condition, failure of which is not considered a breach of the same but an
occurrence that prevents the obligation of the seller to transfer title from
becoming effective.32 Here, there is no dispute that the petitioner failed to
pay the full purchase price stipulated in the CTS on the date fixed therein.
Thus, the respondents are within their rights to refuse to enforce the same.
As a rule, proof of verbal agreement that tends to vary the terms of a
written agreement, is inadmissible under theparol evidence rule
Rule 130, Section 9 of the Revised Rules on Evidence embodies the parol
evidence rule which states:chanRoblesvirtualLawlibrary
SEC. 9. Evidence of written agreements. When the terms of an agreement
have been reduced to writing, it is considered as containing all the terms
agreed upon and there can be, between the parties and their successors-in-
interest, no evidence of such terms other than the contents of the written
agreement.
However, a party may present evidence to modify, explain or add to the
terms of the written agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and
agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their
successors-in-interest after the execution of the written agreement.
The term "agreement" includes wills.
In Norton Resources and Development Corporation v. All Asia Bank
Corporation,33 the Court discussed the parol evidence rule in this
manner:chanRoblesvirtualLawlibrary
The "parol evidence rule" forbids any addition to or contradiction of the terms
of a written instrument by testimony or other evidence purporting to show
that, at or before the execution of the parties' written agreement, other or
different terms were agreed upon by the parties, varying the purport of the
written contract. When an agreement has been reduced to writing, the
parties cannot be permitted to adduce evidence to prove alleged practices
which, to all purposes, would alter the terms of the written agreement.
Whatever is not found in the writing is understood to have been waived and
abandoned. x x x.34 (Citation omitted)
These rule and principle notwithstanding, the petitioner would have the Court
rule that the CTS it executed with the respondents falls within the
exceptions, more specifically that the written agreement failed to express the
true intent and agreement of the parties considering that the same is also
subject to the condition that all pending litigations relative to the subject
properties are settled. This argument is untenable.
It is well settled that parol evidence can serve the purpose of incorporating
into the contract additional contemporaneous conditions, which are not
mentioned at all in writing, only if there is fraud or mistake.35 Here, the
petitioner's claim that the reason for their failure to pay the full purchase
price was due to the failure of the respondents to settle the pending litigation
involving the subject properties is not tenable. Clearly, a perusal of the CTS
executed by the parties does not show any provision pertaining to such
condition. Also, the petitioner failed to present sufficient evidence to show
that such failure was due to fraud or mistake.
Moreover, the petitioner likewise failed to prove by preponderant evidence
their claim that an extension was given to them to pay the full purchase price
indicated in the CTS. In main, they presented documents showing that they
paid for the expenses and attorney's fees to settle the pending litigations of
the subject properties. According to them, in exchange for their financial
assistance, the respondents agreed to extend the period of payment until
after the conclusion of the pending litigations.
82 PAROLE EVIDENCE

The allegation of the petitioner, however, was successfully rebutted by the rate of six percent (6%) per annum pursuant to the Court's ruling in Nacar v.
respondents when they presented a purported new contract pre-signed by Gallery Frames, et al..41
Tubao, the petitioner's former president, and two of its members as
witnesses. Clearly, the petitioner itself recognized the expiration of the 90- WHEREFORE, the petition is DENIED. The Decision dated April 30, 2007
day period provided in their CTS and instead offered a new contract to Lipat and Resolution dated March 17, 2008 of the Court of Appeals in CA-G.R. CV
Jr., who, however, refused to sign the same. Unfortunately, this has not No. 85684 are hereby AFFIRMED with the MODIFICATION that the case
been controverted by the petitioner.36 is REMANDED to the Regional Trial Court of Naga City, Branch 22, for the
computation of all payments previously made by petitioner Felix Plazo Urban
At any rate, assuming without conceding that the 90-day period was Poor Settlers Community Association, Inc. to respondents Alfredo Lipat, Sr.
extended by the parties, the obligation of the respondents based on the CTS and Alfredo Lipat, Jr. in connection with the Contract to Sell they executed
did not arise as a result of the continued failure of the petitioner to pay the which the respondents should refund without delay. Also, the Regional Trial
full purchase price. As the Court held in Ursal v. Court of Appeals,37 the Court is directed to include the imposition of an interest at the rate of six
perfected CTS imposed on the buyer the obligation to pay the balance of the percent (6%) per annum pursuant to prevailing jurisprudence.
purchase price. As such, the buyer should have made the proper tender of
payment and consignation of the price in court as required by law. It is
essential that consignation be made in court in order to extinguish the
obligation of the buyer to pay the balance of the purchase price.38 Here,
records are bereft of any showing that the petitioner even attempted to make
the proper consignation of the amounts due, as a result, the obligation on
the part of the respondents never acquired obligatory force, thus, the seller
is released from his obligation to sell.

Payments made by the petitioner for the subject properties, however,

must be refunded

In Pilipino Telephone Corporation v. Radiomarine Network (Smartnet)

Philippines, Inc.,39 the Court ordered the refund to the buyer of all sums
previously made, after terminating the CTS for failure to pay the purchase
price, based on the principle against unjust enrichment. The Court in part
stated:chanRoblesvirtualLawlibrary
Likewise, a cause of action for specific performance does not arise where
the [CTS] has been cancelled due to nonpayment of the purchase price.
Smartnet obviously cannot demand title to the Valgoson Property because it
did not pay the purchase price in full. For its part, Piltel also cannot insist on
full payment since Smartnet's failure to pay resulted in the cancellation of the
[CTS]. Indeed, in the case of Ayala Life Assurance, Inc. v. Ray Burton Devt.
Corp., the Court rejected the seller's demand for full payment and instead
ordered it to refund to the buyer all sums previously paid. The order to
refund is correct based on the principle that no one should unjustly enrich
himself at the expense of another.40 (Citations omitted)
In the present case, however, since the records are insufficient to use as
bases to properly compute all payments previously made by the petitioner to
the respondents in connection with the CTS they executed dated December
13, 1991, the case should be remanded to the RTC for a detailed
computation of the refund and to include the imposition of an interest at the