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 courts 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 Lucias permitted area
in Toledo City13 at P240.00 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.

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 Kimwas 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 latters 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 P720,000.00, the value of the 30,000 cubic meters of aggregates that Kimwa did not
haul, in addition to attorneys fees and costs of suit.33

On appeal, the Court of Appeals reversed the Regional Trial Courts 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.

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.

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 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."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. "I would sooner trust the smallest
1wphi 1

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 partys 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.

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 partys 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 Kimwas] 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 Appeals 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
Agreements 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 (P240.00) 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 Kimwas 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 defendants 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 P240.00 per cubic meter.

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 Agreements 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 Kimwas 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
Plaintiffs [sic] special permit indicating that the Plaintiffs [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;

....

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 Permits 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 Agreements 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 Kimwas concomitant undertaking that it would obtain the entire amount allotted.

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
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.

SALUN-AT MARQUEZ and G.R. No. 168387

NESTOR DELA CRUZ,
Petitioners,
Present:
- versus -
CORONA, C. J., Chairperson,
ELOISA ESPEJO, ELENITA VELASCO, JR.,
ESPEJO, EMERITA ESPEJO, LEONARDO-DE CASTRO,
OPHIRRO ESPEJO, OTHNIEL DEL CASTILLO, and
ESPEJO, ORLANDO ESPEJO, PEREZ, J.
OSMUNDO ESPEJO, ODELEJO
ESPEJO and NEMI FERNANDEZ, Promulgated:
Respondents. August 25, 2010
x--------------------------------------------------------x

DECISION

DEL CASTILLO, J.

When the parties admit the contents of written documents but put in issue whether these
documents adequately and correctly express the true intention of the parties, the deciding
body is authorized to look beyond these instruments and into the contemporaneous and
subsequent actions of the parties in order to determine such intent.

Well-settled is the rule that in case of doubt, it is the intention of the contracting parties
that prevails, for the intention is the soul of a contract, not its wording which is prone to
mistakes, inadequacies, or ambiguities. To hold otherwise would give life, validity, and
precedence to mere typographical errors and defeat the very purpose of agreements.
This Petition for Review on Certiorari[1] assails the October 7, 2003 Decision,[2] as well
as the May 11, 2005 Resolution[3] of the Court of Appeals (CA) in CA G.R. SP No.
69981. The dispositive portion of the appellate courts Decision reads:

WHEREFORE, finding reversible error committed by the Department of

Agrarian Reform Adjudication Board, the instant petition for review is
GRANTED. The assailed Decision, dated 17 January 2001, rendered by the
Department of Agrarian Reform Adjudication Board is hereby ANNULLED
and SET ASIDE. The Decision of the Department of Agrarian Reform
Adjudication Board of Bayombong[,] Nueva Vizcaya, dated 17 March 1998,
is REINSTATED. Costs against respondents.

SO ORDERED.[4]

The reinstated Decision of the Department of Agrarian Reform Adjudication Board

(DARAB) of Bayombong, Nueva Vizcaya, in turn, contained the following dispositive
portion:
 Accordingly, judgment is rendered:

1. Finding [respondents] to be the owner by re-purchase from RBBI [of]

the Murong property covered by TCT No. [T-]62096 (formerly TCT No.
43258);

2. Ordering the cancellation of TCT with CLOA Nos. 395 and 396 in the
name[s] of Salun-at Marquez and Nestor de la Cruz respectively, as they
are disqualified to become tenants of the Lantap property;

3. Directing RBBI to sell through VOS the Lantap property to its rightful
beneficiary, herein tenant-farmer Nemi Fernandez under reasonable terms
and conditions;

4. Ordering RBBI to return the amount paid to it by Nestor and Salun-at;

and ordering the latter to pay 20 cavans of palay per hectare at 46 kilos per
cavan unto [respondents] plus such accrued and unpaid rentals for the past
years as may be duly accounted for with the assistance of the Municipal
Agrarian Reform Officer of Bagabag, Nueva Vizcaya who is also hereby
instructed to assist the parties execute their leasehold contracts and;

5. The order to supervise harvest dated March 11, 1998 shall be observed
until otherwise modified or dissolved by the appellate body.

SO ORDERED.[5]

Factual Antecedents

Respondents Espejos were the original registered owners of two parcels of agricultural
land, with an area of two hectares each. One is located at Barangay Lantap, Bagabag,
Nueva Vizcaya (the Lantap property) while the other is located in Barangay Murong,
Bagabag, Nueva Vizcaya (the Murong property). There is no dispute among the parties
that the Lantap property is tenanted by respondent Nemi Fernandez (Nemi)[6] (who is the
husband[7] of respondent Elenita Espejo (Elenita), while the Murong property is tenanted
by petitioners Salun-at Marquez (Marquez) and Nestor Dela Cruz (Dela Cruz).[8]
The respondents mortgaged both parcels of land to Rural Bank of Bayombong, Inc.
(RBBI) to secure certain loans. Upon their failure to pay the loans, the mortgaged
properties were foreclosed and sold to RBBI. RBBI eventually consolidated title to the
properties and transfer certificates of title (TCTs) were issued in the name of RBBI. TCT
No. T-62096 dated January 14, 1985 was issued for the Murong property. It contained
the following description:

Beginning at a point marked I on plan H-176292, S. 44034 W. 1656.31 m.

more or less from B.L.L.M. No 1, Bagabag Townsite, K-27,
thence N. 28 deg. 20 E., 200.00 m. to point 2;
thence S. 61 deg. 40 E., 100.00 m. to point 3;
thence S. 28 deg. 20 W., 200.00 m. to point 4;
thence N. 61 deg. 40 W., 100.00 m. to point 1; point of beginning;
Containing an area of 2.000 hectares. Bounded on the northeast, by Road; on
the southeast, and southwest by public land; and on the northwest by Public
Land, properties claimed by Hilario Gaudia and Santos Navarrete. Bearings
true. Declination 0131 E. Points referred to are marked on plan H-
176292. Surveyed under authority of sections 12-22 Act No. 2874 and in
accordance with existing regulations of the Bureau of Lands by H.O. Bauman
Public Land Surveyor, [in] December 1912-March 1913. Note: All corners are
Conc. Mons. 15x15x60 cm. This is Lot No. 79-A=Lot No. 159 of Bagabag
Townsite, K-27.[9]

Subsequently, TCT No. T-62836 dated June 4, 1985 was issued for the Lantap property
and contained the following description:

Beginning at a point marked 1 on plan H-105520, N. 80 deg. 32 W., 1150.21

m. from BLLM No. 122, Irrigation project,
thence N. 61 deg. 40E., 200.00 m. to point 2;
thence N. 28 deg. 20E, 100.00 m. to point 3;
thence S. 61 deg. 40E, 200.00 m. to point 4;
thence S. 28 deg. 20W, 100.00 m. to point 1; point of beginning; containing an
area of 2.0000 hectares. Bounded on the northeast, southeast, and southwest
by Public land; and on the northwest by Road and public land. Bearings
true. Declination 0 deg. 31E., points referred to are marked on plan H-
105520. Surveyed under authority of Section 12-22, Act No. 2874 and in
accordance with existing regulations of the Bureau of Lands, by H.O. Bauman
Public Land Surveyor, [in] Dec. 1912-Mar. 1913 and approved on January 6,
 1932. Note: This is Lot No. 119-A Lot No. 225 of Bagabag Townsite K-
27. All corners are B.I. Conc. Mons. 15x60 cm.[10]

Both TCTs describe their respective subjects as located in Bagabag Townsite, K-27,
without any reference to either Barangay Lantap or Barangay Murong.

On February 26, 1985, respondents Espejos bought back one of their lots from
RBBI. The Deed of Sale[11] described the property sold as follows:

x x x do hereby SELL, TRANSFER, and CONVEY, absolutely and

unconditionally x x x that certain parcel of land, situated in the Municipality of
Bagabag, Province of Nueva Vizcaya, and more particularly bounded and
described as follows, to wit:
Beginning at a point marked 1 on plan x x x x Containing an area of 2.000
hectares. Bounded on the NE., by Road; on the SE., and SW by Public
Land; and on the NW., by Public Land, properties claimed by Hilario
Gaudia and Santos Navarrete. Bearing true. Declination 013 B. Points
referred to are marked on plan H-176292.

of which the Rural Bank of Bayombong (NV) Inc., is the registered owner in
fee simple in accordance with the Land Registration Act, its title thereto
being evidenced by Transfer Certificate of Title No. T-62096 issued by the
Registry of Deeds of Nueva Vizcaya.

As may be seen from the foregoing, the Deed of Sale did not mention
the barangay where the property was located but mentioned the title of the property
(TCT No. T-62096), which title corresponds to the Murong property.There is no
evidence, however, that respondents took possession of the Murong property, or
demanded lease rentals from the petitioners (who continued to be the tenants of the
Murong property), or otherwise exercised acts of ownership over the Murong
property. On the other hand, respondent Nemi (husband of respondent Elenita and
brother-in-law of the other respondents), continued working on the other property -- the
Lantap property -- without any evidence that he ever paid rentals to RBBI or to any
landowner. The Deed of Sale was annotated on TCT No. T-62096 almost a decade later,
on July 1, 1994.[12]
Meanwhile, on June 20, 1990, RBBI, pursuant to Sections 20[13] and 21[14] of Republic
Act (RA) No. 6657,[15] executed separate Deeds of Voluntary Land Transfer (VLTs) in
favor of petitioners Marquez and Dela Cruz, the tenants of the Murong property. Both
VLTs described the subject thereof as an agricultural land located
in Barangay Murong and covered by TCT No. T-62836 (which, however, is the title
corresponding to the Lantap property).[16]

After the petitioners completed the payment of the purchase price of P90,000.00 to
RBBI, the DAR issued the corresponding Certificates of Land Ownership Award
(CLOAs) to petitioners Marquez[17] and Dela Cruz[18] on September 5, 1991. Both
CLOAs stated that their subjects were parcels of agricultural land situated
in Barangay Murong.[19] The CLOAs were registered in the Registry of Deeds of Nueva
Vizcaya on September 5, 1991.

On February 10, 1997 (more than 10 years after the Deed of Sale in favor of the
respondents and almost seven years after the execution of VLTs in favor of the
petitioners), respondents filed a Complaint[20] before the Regional Agrarian Reform
Adjudicator (RARAD) of Bayombong, Nueva Vizcaya for the cancellation of petitioners
CLOAs, the deposit of leasehold rentals by petitioners in favor of respondents, and the
execution of a deed of voluntary land transfer by RBBI in favor of respondent Nemi. The
complaint was based on respondents theory that the Murong property, occupied by the
petitioners, was owned by the respondents by virtue of the 1985 buy-back, as
documented in the Deed of Sale. They based their claim on the fact that their Deed of
Sale refers to TCT No. 62096, which pertains to the Murong property.

Petitioners filed their Answer[21] and insisted that they bought the Murong property as
farmer-beneficiaries thereof. They maintained that they have always displayed good
faith, paid lease rentals to RBBI when it became the owner of the Murong property,
bought the same from RBBI upon the honest belief that they were buying the Murong
property, and occupied and exercised acts of ownership over the Murong
property. Petitioners also argued that what respondents Espejos repurchased from RBBI
in 1985 was actually the Lantap property, as evidenced by their continued occupation and
possession of the Lantap property through respondent Nemi.

RBBI answered[22] that it was the Lantap property which was the subject of the buy-back
transaction with respondents Espejos. It denied committing a grave mistake in the
transaction and maintained its good faith in the disposition of its acquired assets in
conformity with the rural banking rules and regulations.

OIC-RARAD Decision[23]

The OIC-RARAD gave precedence to the TCT numbers appearing on the Deed of Sale
and the VLTs. Since TCT No. T-62096 appeared on respondents Deed of Sale and the
said title refers to the Murong property, the OIC-RARAD concluded that the subject of
sale was indeed the Murong property. On the other hand, since the petitioners VLTs
referred to TCT No. T-62836, which corresponds to the Lantap property, the OIC-
RARAD ruled that petitioners CLOAs necessarily refer to the Lantap property. As for the
particular description contained in the VLTs that the subject thereof is the Murong
property, the OIC-RARAD ruled that it was a mere typographical error.
Further, since the VLTs covered the Lantap property and petitioners are not the actual
tillers thereof, the OIC-RARAD declared that they were disqualified to become tenants
of the Lantap property and ordered the cancellation of their CLOAs. It then ordered
RBBI to execute a leasehold contract with the real tenant of the Lantap property, Nemi.

The OIC-RARAD recognized that petitioners only right as the actual tillers of the
Murong property is to remain as the tenants thereof after the execution of leasehold
contracts with and payment of rentals in arrears to respondents.

DARAB Decision[24]

Upon appeal filed by petitioners, the DARAB reversed the OIC-RARAD Decision. It
ruled that in assailing the validity of the CLOAs issued to petitioners as bona fide tenant-
farmers, the burden of proof rests on the respondents. There being no evidence that the
DAR field personnel were remiss in the performance of their official duties when they
issued the corresponding CLOAs in favor of petitioners, the presumption of regular
performance of duty prevails. This conclusion is made more imperative by the
respondents admission that petitioners are the actual tillers of the Murong property, hence
qualified beneficiaries thereof.

As for respondents allegation that they bought back the Murong property from RBBI, the
DARAB ruled that they failed to support their allegation with substantial evidence. It
gave more credence to RBBIs claim that respondents repurchased the Lantap property,
not the Murong property. Respondents, as owners of the Lantap property, were ordered
to enter into an agricultural leasehold contract with their brother-in-law Nemi, who is the
actual tenant of the Lantap property.

The DARAB ended its January 17, 2001 Decision in this wise:

We find no basis or justification to question the authenticity and validity of the

CLOAs issued to appellants as they are by operation of law qualified
beneficiaries over the landholdings; there is nothing to quiet as these titles
were awarded in conformity with the CARP program implementation; and
finally, the Board declares that all controverted claims to or against the subject
landholding must be completely and finally laid to rest.

WHEREFORE, premises considered and finding reversible errors[,] the

assailed decision is ANNULLED and a new judgment is hereby rendered,
declaring:

1. Appellants Salun-at Marquez and Nestor Dela Cruz as the bona

fide tenant-tillers over the Murong property and therefore they are the
qualified beneficiaries thereof;

2. Declaring Transfer Certificate of Title (TCT) Nos. 395 and 396

issued in the name of [farmer-beneficiaries] Salun-at Marquez and Nestor
Dela Cruz respectively, covered formerly by TCT No. 62096 (TCT No.
43258) of the Murong property as valid and legal;

3. Ordering the co-[respondents] to firm-up an agricultural leasehold

contract with bona fide tenant-tiller Nemi Fernandez over the Lantap property,
[the latter] being the subject matter of the buy back arrangement entered into
between [respondents] and Rural Bank of Bayombong, Incorporated, and
other incidental matters are deemed resolved.

SO ORDERED.[25]

Ruling of the Court of Appeals

In appealing to the CA, the respondents insisted that the DARAB erred in ruling that they
repurchased the Lantap property, while the petitioners were awarded the Murong
property. They were adamant that the title numbers indicated in their respective deeds of
conveyance should control in determining the subjects thereof. Since respondents Deed
of Sale expressed that its subject is the property with TCT No. T-62096, then what was
sold to them was the Murong property. On the other hand, petitioners VLTs and CLOAs
say that they cover the property with TCT No. T-62836; thus it should be understood that
they were awarded the Lantap property. Respondents added that since petitioners are not
the actual tillers of the Lantap property, their CLOAs should be cancelled due to their
lack of qualification.

The CA agreed with the respondents. Using the Best Evidence Rule embodied in Rule
130, Section 3, the CA held that the Deed of Sale is the best evidence as to its contents,
particularly the description of the land which was the object of the sale. Since the Deed of
Sale expressed that its subject is the land covered by TCT No. T-62096 the Murong
property then that is the property that the respondents repurchased.
The CA further ruled that as for petitioners VLTs, the same refer to the property with
TCT No. T-62836; thus, the subject of their CLOAs is the Lantap property. The
additional description in the VLTs that the subject thereof is located in Barangay Murong
was considered to be a mere typographical error. The CA ruled that the technical
description contained in the TCT is more accurate in identifying the subject property
since the same particularly describes the properties metes and bounds.

Both the RBBI[26] and petitioners[27] filed their respective motions for reconsideration,
which were separately denied.[28]

On June 22, 2004, RBBI filed a separate Petition for Review on Certiorari, docketed as
G.R. No. 163320, with this Court.[29] RBBI raised the issue that the CA failed to
appreciate that respondents did not come to court with clean hands because they misled
RBBI to believe at the time of the sale that the two lots were not tenanted. RBBI also
asked that they be declared free from any liability to the parties as it did not enrich itself
at anyones expense. RBBIs petition was dismissed on July 26, 2004 for lack of
merit. The said Resolution reads:

Considering the allegations, issues[,] and arguments adduced in the petition for
review on certiorari, the Court Resolves to DENY the petition for lack of
sufficient showing that the Court of Appeals had committed any reversible
 error in the questioned judgment to warrant the exercise by this Court of its
discretionary appellate jurisdiction in this case.[30]

Their Motion for Reconsideration was likewise denied with finality.[31] Entry of judgment
was made in that case on December 15, 2004.[32]

On July 27, 2005,[33] petitioners filed the instant petition.

Issues

Rephrased and consolidated, the parties present the following issues for the Courts
determination:

I
What is the effect of the final judgment dismissing RBBIs Petition for Review
on Certiorari, which assailed the same CA Decision

II
Whether the CA erred in utilizing the Best Evidence Rule to determine the subject of the
contracts

III
What are the subject properties of the parties respective contracts with RBBI

Our Ruling

Propriety of the Petition

Respondents maintain that the instant petition for review raises factual issues which are
beyond the province of Rule 45.[34]

The issues involved herein are not entirely factual. Petitioners assail the appellate courts
rejection of their evidence (as to the contractual intent) as inadmissible under the Best
Evidence Rule. The question involving the admissibility of evidence is a legal question
that is within the Courts authority to review.[35]
Besides, even if it were a factual question, the Court is not precluded to review the
same. The rule that a petition for review should raise only questions of law admits of
exceptions, among which are (1) when the findings are grounded entirely on
speculations, surmises, or conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the
judgment is based on a misappreciation of facts; (5) when the findings of fact
are conflicting; (6) when, in making its findings, the same are contrary to the admissions
of both appellant and appellee; (7) when the findings are contrary to those of the trial
court; (8) when the findings are conclusions without citation of specific evidence on
which they are based; (9) when the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the respondent; and (10) when the
findings of fact are premised on the supposed absence of evidence and contradicted by
the evidence on record.[36]

In the instant case, we find sufficient basis to apply the exceptions to the general rule
because the appellate court misappreciated the facts of the case through its erroneous
application of the Best Evidence Rule, as will be discussed below. Moreover, the
disparate rulings of the three reviewing bodies below are sufficient for the Court to
exercise its jurisdiction under Rule 45.

First Issue
Dismissal of RBBIs appeal

Respondents maintain that the Courts earlier dismissal of RBBIs petition

for review of the same CA Decision is eloquent proof that there is no reversible error in
the appellate courts decision in favor of the respondents.[37]

We are not persuaded. This Court dismissed RBBIs earlier petition in G.R. No. 163320
because it failed to convincingly demonstrate the alleged errors in the CA Decision. The
bank did not point out the inadequacies and errors in the appellate courts decision but
simply placed the responsibility for the confusion on the respondents for allegedly
misleading the bank as to the identity of the properties and for misrepresenting that the
two lots were not tenanted. Thus, RBBI argued that respondents did not come to court
with clean hands.
These arguments were ineffectual in convincing the Court to review the appellate courts
Decision. It is the appellants responsibility to point out the perceived errors in the
appealed decision. When a party merely raises equitable considerations such as the clean
hands doctrine without a clear-cut legal basis and cogent arguments to support his claim,
there should be no surprise if the Court is not swayed to exercise its appellate jurisdiction
and the appeal is dismissed outright. The dismissal of an appeal does not always and
necessarily mean that the appealed decision is correct, for it could simply be the result of
the appellants inadequate discussion, ineffectual arguments, or even procedural lapses.

RBBIs failure to convince the Court of the merits of its appeal should not prejudice
petitioners who were not parties to RBBIs appeal, especially because petitioners duly
filed a separate appeal and were able to articulately and effectively present their
arguments. A party cannot be deprived of his right to appeal an adverse decision just
because another party had already appealed ahead of him,[38] or just because the other
partys separate appeal had already been dismissed.[39]

There is another reason not to bind the petitioners to the final judgment against
RBBI. RBBI executed the transfer (VLTs) in favor of petitioners prior to the
commencement of the action. Thus, when the action for cancellation of CLOA was filed,
RBBI had already divested itself of its title to the two properties involved. Under the rule
on res judicata, a judgment (in personam) is conclusive only between the parties and
their successors-in-interest by title subsequent to the commencement of the
action.[40] Thus, when the vendor (in this case RBBI) has already transferred his title to
third persons (petitioners), the said transferees are not bound by any judgment which may
be rendered against the vendor.[41]

Second Issue
Is it correct to apply the Best Evidence Rule?

Citing the Best Evidence Rule in Rule 130, Section 3, the CA held that the Deed of Sale
between respondents and RBBI is the best evidence as to the property that was sold by
RBBI to the respondents. Since the Deed of Sale stated that its subject is the land covered
by TCT No. T-62096 the title for the Murong property then the property repurchased by
the respondents was the Murong property. Likewise, the CA held that since the VLTs
between petitioners and RBBI refer to TCT No. T-62836 the title for the Lantap property
then the property transferred to petitioners was the Lantap property.

Petitioners argue that the appellate court erred in using the best evidence rule to
determine the subject of the Deed of Sale and the Deeds of Voluntary Land
Transfer. They maintain that the issue in the case is not the contents of the contracts but
the intention of the parties that was not adequately expressed in their contracts. Petitioners
then argue that it is the Parol Evidence Rule that should be applied in order to adequately
resolve the dispute.

Indeed, the appellate court erred in its application of the Best Evidence Rule. The Best
Evidence Rule states that when the subject of inquiry is the contents of a document, the
best evidence is the original document itself and no other evidence (such as a
reproduction, photocopy or oral evidence) is admissible as a general rule. The original is
preferred because it reduces the chance of undetected tampering with the document.[42]

In the instant case, there is no room for the application of the Best Evidence Rule because
there is no dispute regarding the contents of the documents. It is admitted by the parties
that the respondents Deed of Sale referred to TCT No. T-62096 as its subject; while the
petitioners Deeds of Voluntary Land Transfer referred to TCT No. T-62836 as its subject,
which is further described as located in Barangay Murong.

The real issue is whether the admitted contents of these documents adequately and
correctly express the true intention of the parties. As to the Deed of Sale, petitioners (and
RBBI) maintain that while it refers to TCT No. T-62096, the parties actually intended the
sale of the Lantap property (covered by TCT No. T-62836).

As to the VLTs, respondents contend that the reference to TCT No. T-62836
(corresponding to the Lantap property) reflects the true intention of RBBI and the
petitioners, and the reference to Barangay Murong was a typographical error. On the
other hand, petitioners claim that the reference to Barangay Murong reflects their true
intention, while the reference to TCT No. T-62836 was a mere error. This dispute reflects
an intrinsic ambiguity in the contracts, arising from an apparent failure of the instruments
to adequately express the true intention of the parties. To resolve the ambiguity, resort
must be had to evidence outside of the instruments.
The CA, however, refused to look beyond the literal wording of the documents and
rejected any other evidence that could shed light on the actual intention of the contracting
parties. Though the CA cited the Best Evidence Rule, it appears that what it actually
applied was the Parol Evidence Rule instead, which provides:

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.[43]

The Parol Evidence Rule excludes parol or extrinsic evidence by which a party seeks to
contradict, vary, add to or subtract from the terms of a valid agreement or
instrument. Thus, it appears that what the CA actually applied in its assailed Decision
when it refused to look beyond the words of the contracts was the Parol Evidence Rule,
not the Best Evidence Rule. The appellate court gave primacy to the literal terms of the
two contracts and refused to admit any other evidence that would contradict such terms.

However, even the application of the Parol Evidence Rule is improper in the case at
bar. In the first place, respondents are not parties to the VLTs executed between RBBI
and petitioners; they are strangers to the written contracts. Rule 130, Section 9
specifically provides that parol evidence rule is exclusive only as between the parties and
their successors-in-interest. The parol evidence rule may not be invoked where at least
one of the parties to the suit is not a party or a privy of a party to the written document in
question, and does not base his claim on the instrument or assert a right originating in the
instrument.[44]

Moreover, the instant case falls under the exceptions to the Parol Evidence Rule, as
provided in the second paragraph of Rule 130, Section 9:

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:

(1) An intrinsic ambiguity, mistake or imperfection in the written

agreement;

(2) The failure of the written agreement to express the true intent
and agreement of the parties thereto;
x x x x (Emphasis supplied)

Here, the petitioners VLTs suffer from intrinsic ambiguity. The VLTs described the
subject property as covered by TCT No. T-62836 (Lantap property), but they also
describe the subject property as being located in Barangay Murong. Even the
respondents Deed of Sale falls under the exception to the Parol Evidence Rule. It refers to
TCT No. T-62096 (Murong property), but RBBI contended that the true intent was to sell
the Lantap property. In short, it was squarely put in issue that the written agreement failed
to express the true intent of the parties.

Based on the foregoing, the resolution of the instant case necessitates an examination of
the parties respective parol evidence, in order to determine the true intent of the
parties. Well-settled is the rule that in case of doubt, it is the intention of the contracting
parties that prevails, for the intention is the soul of a contract,[45] not its wording which is
prone to mistakes, inadequacies, or ambiguities. To hold otherwise would give life,
validity, and precedence to mere typographical errors and defeat the very purpose of
agreements.

In this regard, guidance is provided by the following articles of the Civil Code involving
the interpretation of contracts:

Article 1370. If the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall
control.

If the words appear to be contrary to the evident intention of the parties, the
latter shall prevail over the former.

Article 1371. In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered.

Rule 130, Section 13 which provides for the rules on the interpretation of documents is
likewise enlightening:
 Section 13. Interpretation according to circumstances. For the proper
construction of an instrument, the circumstances under which it was made,
including the situation of the subject thereof and of the parties to it, may be
shown, so that the judge may be placed in the position of those whose
language he is to interpret.

Applying the foregoing guiding rules, it is clear that the Deed of Sale was intended to
transfer the Lantap property to the respondents, while the VLTs were intended to convey
the Murong property to the petitioners. This may be seen from the contemporaneous and
subsequent acts of the parties.

Third issue
Determining the intention of the parties
regarding the subjects of their contracts

We are convinced that the subject of the Deed of Sale between RBBI and the respondents
was the Lantap property, and not the Murong property. After the execution in 1985 of the
Deed of Sale, the respondents did not exercise acts of ownership that could show that
they indeed knew and believed that they repurchased the Murong property. They did not
take possession of the Murong property. As admitted by the parties, the Murong property
was in the possession of the petitioners, who occupied and tilled the same without any
objection from the respondents. Moreover, petitioners paid leasehold rentals for using the
Murong property to RBBI, not to the respondents.

Aside from respondents neglect of their alleged ownership rights over the Murong
property, there is one other circumstance that convinces us that what respondents really
repurchased was the Lantap property. Respondent Nemi (husband of respondent Elenita)
is the farmer actually tilling the Lantap property, without turning over the supposed
landowners share to RBBI. This strongly indicates that the respondents considered
themselves (and not RBBI) as the owners of the Lantap property. For if respondents
(particularly spouses Elenita and Nemi) truly believed that RBBI retained ownership of
the Lantap property, how come they never complied with their obligations as supposed
tenants of RBBIs land? The factual circumstances of the case simply do not support the
theory propounded by the respondents.
We are likewise convinced that the subject of the Deeds of Voluntary Land Transfer
(VLTs) in favor of petitioners was the Murong property, and not the Lantap
property. When the VLTs were executed in 1990, petitioners were already the tenant-
farmers of the Murong property, and had been paying rentals to RBBI accordingly. It is
therefore natural that the Murong property and no other was the one that they had
intended to acquire from RBBI with the execution of the VLTs. Moreover, after the
execution of the VLTs, petitioners remained in possession of the Murong property,
enjoying and tilling it without any opposition from anybody. Subsequently, after the
petitioners completed their payment of the total purchase price of P90,000.00 to RBBI,
the Department of Agrarian Reform (DAR) officials conducted their investigation of the
Murong property which, with the presumption of regularity in the performance of official
duty, did not reveal any anomaly. Petitioners were found to be in actual possession of the
Murong property and were the qualified beneficiaries thereof. Thus, the DAR officials
issued CLOAs in petitioners favor; and these CLOAs explicitly refer to the land
in Barangay Murong. All this time, petitioners were in possession of the Murong
property, undisturbed by anyone for several long years, until respondents started the
controversy in 1997.

All of these contemporaneous and subsequent actions of RBBI and petitioners support
their position that the subject of their contract (VLTs) is the Murong property, not the
Lantap property. Conversely, there has been no contrary evidence of the parties
actuations to indicate that they intended the sale of the Lantap property. Thus, it appears
that the reference in their VLT to TCT No. T-62836 (Lantap property) was due to their
honest but mistaken belief that the said title covers the Murong property. Such a mistake
is not farfetched considering that TCT No. T-62836 only refers to the Municipality of
Bayombong, Nueva Vizcaya, and does not indicate the particular barangay where the
property is located. Moreover, both properties are bounded by a road and public
land. Hence, were it not for the detailed technical description, the titles for the two
properties are very similar.
The respondents attempt to discredit petitioners argument that their VLTs were
intrinsically ambiguous and failed to express their true intention by asking why
petitioners never filed an action for the reformation of their contract.[46] A cause of action
for the reformation of a contract only arises when one of the contracting parties manifests
an intention, by overt acts, not to abide by the true agreement of the parties.[47] It seems
fairly obvious that petitioners had no cause to reform their VLTs because the parties
thereto (RBBI and petitioners) never had any dispute as to the interpretation and
application thereof. They both understood the VLTs to cover the Murong property (and
not the Lantap property). It was only much later, when strangers to the contracts argued
for a different interpretation, that the issue became relevant for the first time.

All told, we rule that the Deed of Sale dated February 26, 1985 between respondents and
RBBI covers the Lantap property under TCT No. T-62836, while the Deeds of
Voluntary Land Transfer and TCT Nos. CLOA-395 and CLOA-396 of the petitioners
cover the Murong property under TCT No. T-62096. In consequence, the CAs ruling
against RBBI should not be executed as such execution would be inconsistent with our
ruling herein.Although the CAs decision had already become final and executory as
against RBBI with the dismissal of RBBIs petition in G.R. No. 163320, our ruling herein
in favor of petitioners is a supervening cause which renders the execution of the
CA decision against RBBI unjust and inequitable.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The assailed

October 7, 2003 Decision, as well as the May 11, 2005 Resolution of the Court of
Appeals in CA-G.R. SP No. 69981 are REVERSEDand SET ASIDE. The January 17,
2001 Decision of the DARAB Central Office is REINSTATED. The Deed of Sale dated
February 26, 1985 between respondents and Rural Bank of Bayombong, Inc. covers the
Lantap property under TCT No. T-62836, while the Deeds of Voluntary Land Transfer
and TCT Nos. CLOA-395 and CLOA-396 of the petitioners cover the Murong property
under TCT No. T-62096. The Register of Deeds of Nueva Vizcaya is directed to make
the necessary corrections to the titles of the said properties in accordance with this
Decision. Costs against respondents.
SO ORDERED.

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:

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 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.

xxx xxx xxx

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 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.

xxx xxx xxx

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:

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.

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.
 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.

SO ORDERED.

THIRD DIVISION
[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.
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
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 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 been raised in the pleadings. Such amendment of the
pleadings as may be 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 judgment; but failure
to amend does not affect the result of the trial of these 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 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 his action or
defense upon the merits. The court may grant a continuance to enable the objecting party
to meet such evidence.
In Co Tiamco v. Diaz, 12 the Supreme Court held:
. . . 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 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 grant him continuance to enable him to meet the situation
created by the evidence . . .
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 presented, this did not prevent the
court from rendering a valid judgment on the issues proved. As we held in the Co Tiamco
case:
. . . 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 harmless error. Well-known is the
rule that departures from procedure may be forgiven when they do not appear to have
impaired the substantial rights of the parties.
The following computation indicates the accountability of the private respondent to the
petitioner:
Exh. D, May 4, 1982 P35,000.00
Exh. E, Aug. 15, 1982 8,000.00
Exh. F, Sept. 4, 1982 500.00
Exh. G, Sept. 19, 1982 3,000.00
Exh. H, Sept. 30, 1982 3,750.00
Lost receipt 4,000.00

P54,250.00
Less: (amount received by the
private respondent from the
petitioner) (6,000.00)

Total amount paid by the
private respondent to
the petitioner 48,250.00
Amount to be paid by the private respondent to the petitioner:
1. Pakyaw P28,000.00
2. Sublease 28,000 per annum
Less: 2 months: 4,666 23,334.00

Total amount to be paid by
the private respondent to
the petitioner P51,334.00
Total amount to be paid
by the private respondent P51,334.00
Total amount paid by
the private respondent 48,250.00

Deficiency in the amount
paid by the private respondent P3,084.00
ACCORDINGLY, the decision of the respondent Court of Appeals is REVERSED and that of
the Regional Trial Court of Laguna AFFIRMED, with the modification that the private
respondent shall pay the petitioner the sum of P3,084.00 instead of P3,054.00, plus costs.
It is so ordered.

[G.R. No. 107372. January 23, 1997]

RAFAEL S. ORTAEZ, petitioner, vs. THE COURT OF APPEALS,

OSCAR INOCENTES, AND ASUNCION LLANES
INOCENTES, respondents.

RESOLUTION
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:

"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:

"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. ORTANEZ, 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. Private respondents,
[3]

however, refused on the ground that the title of the first lot is in the possession
of another person, and petitioner's acquisition of the title of the other lot is
[4]

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 which were never
[5]

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:

(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. x x x."

During trial, private respondent Oscar Inocentes, a former judge, orally

testified that the sale was subject to the above conditions, although such [7]

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. Spoken words could be notoriously unreliable unlike a written
[8]

contract which speaks of a uniform language. Thus, under the general rule in
[9]

Section 9 of Rule 130 of the Rules of Court, when the terms of an agreement
[10]

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
[11]

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,
[12]

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. vs. Garcia Plantation where the Court [14]

ruled that a condition precedent to a contract may be established by parol

evidence. However, the material facts of that case are different from this
case. In the former, the contract sought to be enforced expressly stated that
[15]

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.
Third, the parol evidence herein sought to be introduced would vary,
contradict or defeat the operation of a valid instrument, hence, contrary to
[16]

the rule that:

The parol evidence rule forbids any addition to x x x 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." No such fraud or mistake exists in
[18]

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:

"[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 that private respondents did
[20]

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
[21]

respondents). Such issue must be "squarely presented." Private respondents

[22]

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,
[23]

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
[24]

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.
[25]

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.