G.R. No. 154413 August 31, 2005 SPS. ALFREDO R. EDRADA and ROSELLA L. EDRADA, Petitioners, vs.

CARMENCITA RAMOS, SPS. EDUARDO RAMOS, Respondents. DECISION Tinga, J.: In this Petition1 under Rule 45, petitioner Spouses Alfredo and Rosella Edrada (petitioners) seek the reversal of the Former Second Division of the Court of Appeals Decision2 and Resolution3 in CA-G.R. CV No. 66375, which affirmed the Decision of Regional Trial Court (RTC) of Antipolo City, Branch 71,4 in Civil Case No. 96-4057, and denied the Motion for Reconsideration5 therein. Respondent spouses Eduardo and Carmencita Ramos (respondents) are the owners of two (2) fishing vessels, the "Lady Lalaine" and the "Lady Theresa." On 1 April 1996, respondents and petitioners executed an untitled handwritten document which lies at the center of the present controversy. Its full text is reproduced below: 1st April 1996 This is to acknowledge that Fishing Vessels Lady Lalaine and Lady Theresa owned by Eduardo O. Ramos are now in my possession and received in good running and serviceable order. As such, the vessels are now my responsibility. Documents pertaining to the sale and agreement of payments between me and the owner of the vessel to follow. The agreed price for the vessel is Nine Hundred Thousand Only (P900,000.00). (SGD.) (SGD.) EDUARDO O. RAMOS ALFREDO R. EDRADA (Seller) (Purchaser) CONFORME: CONFORME: (SGD.) (SGD.) CARMENCITA RAMOS ROSIE ENDRADA6

Upon the signing of the document, petitioners delivered to respondents four (4) postdated Far East Bank and Trust Company (FEBTC) checks payable to cash drawn by petitioner Rosella Edrada, in various amounts totaling One Hundred Forty Thousand Pesos (P140,000.00). The first three (3) checks were honored upon presentment to the drawee bank while the fourth check for One Hundred Thousand Pesos (P100,000.00) was dishonored because of a "stop payment" order. On 3 June 1996, respondents filed an action against petitioners for specific performance with damages before the RTC, praying that petitioners be obliged to execute the necessary deed of sale of the two fishing vessels and to pay the balance of the purchase price. In their Complaint,7 respondents alleged that petitioners contracted to buy the two fishing vessels for the agreed purchase price of Nine Hundred Thousand Pesos (P900,000.00), as evidenced by the above-quoted document, which according to them evinced a contract to buy. However, despite delivery of said vessels and repeated oral demands, petitioners failed to pay the balance, so respondents further averred. Belying the allegations of respondents, in their Answer with Counterclaim,8 petitioners averred that the document sued upon merely embodies an agreement brought about by the loans they extended to respondents. According to petitioners, respondents allowed them to manage or administer the fishing vessels as a business on the understanding that should they find the business profitable, the vessels would be sold to them for Nine Hundred Thousand Pesos (P900,000.00). But petitioners "decided to call it quits" after spending a hefty sum for the repair and maintenance of the vessels which were already in dilapidated condition. After trial, the RTC rendered a Decision9 dated 22 February 1999, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants and the latter are ordered to pay to the former the amount of Eight Hundred Sixty Thousand Pesos (P860,000.00) with legal interests thereon from June 30, 1996 until fully paid; the amount of P20,000.00 as attorneys fees and the cost of suit. The counterclaim of the defendants for moral and exemplary damages and for attorneys fees is dismissed for lack of merit. SO ORDERED.10

The RTC treated the action as one for collection of a sum of money and for damages and considered the document as a perfected contract of sale. On 19 April 1999, petitioners filed a Motion for Reconsideration which the RTC denied in an Order11 dated 2 July 1999. Both parties appealed the RTC Decision. However, finding no reversible error in the appealed decision, the Court of Appeals, in its Decision,12 affirmed the same and dismissed both appeals. Only petitioners elevated the controversy to this Court. Petitioners raised the nature of the subject document as the primary legal issue. They contend that there was no perfected contract of sale as distinguished from a contract to sell. They likewise posed as sub-issues the purpose for which the checks were issued, whether replacement of the crew was an act of ownership or administration, whether petitioners failed to protest the dilapidated condition of the vessels, and whether the instances when the vessels went out to sea proved that the vessels were not seaworthy.13 It is also alleged in the petition that the true agreement as between the parties was that of a loan. Evidently, the petition hinges on the true nature of the document dated 1 April 1996. Normally, the Court is bound by the factual findings of the lower courts, and accordingly, should affirm the conclusion that the document in question was a perfected contract of sale. However, we find that both the RTC and the Court of Appeals gravely misapprehended the nature of the said document, and a reevaluation of the document is in order.14 Even if such reevaluation would lead the court to examine issues not raised by the parties, it should be remembered that the Court has authority to review matters even if not assigned as errors in the appeal, if it is found that their consideration is necessary in arriving at a just decision of the case.15 In doing so, we acknowledge that the contending parties offer vastly differing accounts as to the true nature of the agreement. Still, we need not look beyond the document dated 1 April 1996 and the stipulations therein in order to ascertain what obligations, if any, have been contracted by the party. The parol evidence rule 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. Whatever is not found in the writing is understood to have been waived and abandoned.16 We disagree with the RTC and the Court of Appeals that the document is a perfected contract of sale. A contract of sale is defined as an agreement whereby

one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent.17 It must evince the consent on the part of the seller to transfer and deliver and on the part of the buyer to pay.18 An examination of the document reveals that there is no perfected contract of sale. The agreement may confirm the receipt by respondents of the two vessels and their purchase price. However, there is no equivocal agreement to transfer ownership of the vessel, but a mere commitment that "documents pertaining to the sale and agreement of payments[are] to follow." Evidently, the document or documents which would formalize the transfer of ownership and contain the terms of payment of the purchase price, or the period when such would become due and demandable, have yet to be executed. But no such document was executed and no such terms were stipulated upon. The fact that there is a stated total purchase price should not lead to the conclusion that a contract of sale had been perfected. In numerous cases,19 the most recent of which is Swedish Match, AB v. Court of Appeals,20 we held that before a valid and binding contract of sale can exist, the manner of payment of the purchase price must first be established, as such stands as essential to the validity of the sale. After all, such agreement on the terms of payment is integral to the element of a price certain, such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Assuming arguendo that the document evinces a perfected contract of sale, the absence of definite terms of payment therein would preclude its enforcement by the respondents through the instant Complaint. A requisite for the judicial enforcement of an obligation is that the same is due and demandable. The absence of a stipulated period by which the purchase price should be paid indicates that at the time of the filing of the complaint, the obligation to pay was not yet due and demandable. Respondents, during trial, did claim the existence of a period. Respondent Carmencita Ramos, during cross-examination, claimed that the supposed balance shall be paid on 30 June 1996.21 But how do respondents explain why the Complaint was filed on 3 June 1996? Assuming that the 30 June 1996 period was duly agreed upon by the parties, the filing of the Complaint was evidently premature, as no cause of action had accrued yet. There could not have been any breach of obligation because on the date the action was filed, the alleged maturity date for the payment of the balance had not yet arrived. In order that respondents could have a valid cause of action, it is essential that there must have been a stipulated period within which the payment would have

become due and demandable. If the parties themselves could not come into agreement, the courts may be asked to fix the period of the obligation, under Article 1197 of the Civil Code.22 The respondents did not avail of such relief prior to the filing of the instant Complaint; thus, the action should fail owing to its obvious prematurity. Returning to the true nature of the document, we neither could conclude that a "contract to sell" had been established. A contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.23 A contract is perfected when there is concurrence of the wills of the contracting parties with respect to the object and the cause of the contract. In this case, the agreement merely acknowledges that a purchase price had been agreed on by the parties. There was no mutual promise to buy on the part of petitioners and to sell on the part of respondents. Again, the aforestated proviso in the agreement that documents pertaining to the sale and agreement of payments between the parties will follow clearly manifests lack of agreement between the parties as to the terms of the contract to sell, particularly the object and cause of the contract. The agreement in question does not create any obligatory force either for the transfer of title of the vessels, or the rendition of payments as part of the purchase price. At most, this agreement bares only their intention to enter into either a contract to sell or a contract of sale. Consequently, the courts below erred in ordering the enforcement of a contract of sale that had yet to come into existence. Instead, the instant Complaint should be dismissed. It prays for three reliefs arising from the enforcement of the document: execution by the petitioners of the necessary deed of sale over the vessels, the payment of the balance of the purchase price, and damages. The lower courts have already ruled that damages are unavailing. Our finding that there is no perfected contract of sale precludes the finding of any cause of action that would warrant the granting of the first two reliefs. No cause of action arises until there is a breach or violation thereof by either party.24 Considering that the documents create no obligation to execute or even pursue a contract of sale, but only manifest an intention to eventually contract one, we find no rights breached or violated that would warrant any of the reliefs sought in the Complaint.

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals areREVERSED and SET ASIDE. The case before the Regional Trial Court is ordered dismissed. no pronouncement as to costs. SO ORDERED. G.R. No. 107372 January 23, 1997 RAFAEL S. ORTAES, 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. ORTAEZ, 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 1 assigns.

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 2 or assigns.

Private respondents received the payments for the above-mentioned lots, but failed to deliver the titles to petitioner. On April 9, 1990 the latter demanded from the former the delivery of said titles. 3 Private respondents, however, refused on

the ground that the title of the first lot is in the possession of another person, 4 and petitioner's acquisition of the title of the other lot is subject to certain conditions. Offshoot, petitioner sued private respondents for specific performance before the RTC. In their answer with counterclaim private respondents merely alleged the existence of the following oral conditions 5 which were never reflected in the deeds of sale: 6 3.3.2 Title to the other property (TCT No. 243273) remains with the defendants (private respondents) until plaintiff (petitioner) shows proof that all the following requirements have been met: (i) Plaintiff will cause the segregation of his right of way amounting to 398 sq. m.; (ii) Plaintiff will submit to the defendants the approved plan for the segregation; (iii) Plaintiff will put up a strong wall between his property and that of defendants' lot to segregate his right of way; (iv) Plaintiff will pay the capital gains tax and all other expenses that may be incurred by reason of sale. . . During trial, private respondent Oscar Inocentes, a former judge, orally testified that the sale was subject to the above conditions, 7 although such conditions were not incorporated in the deeds of sale. Despite petitioner's timely objections on the ground that the introduction of said oral conditions was barred by the parol evidence rule, the lower court nonetheless, admitted them and eventually dismissed the complaint as well as the counterclaim. On appeal, the Court of Appeals (CA) affirmed the court a quo. Hence, this petition. We are tasked to resolve the issue on the admissibility of parol evidence to establish the alleged oral conditions-precedent to a contract of sale, when the deeds of sale are silent on such conditions. The parol evidence herein introduced is inadmissible. First, private respondents' oral testimony on the alleged conditions, coming from a party who has an interest in the outcome of the case, depending exclusively on human memory, is not as reliable as written or documentary evidence. 8 Spoken words could be notoriously unreliable unlike a written contract which speaks of a uniform language. 9 Thus, under the general rule in Section 9 of Rule 130 10 of the Rules of Court, when the

terms of an agreement were reduced to writing, as in this case, it is deemed to contain all the terms agreed upon and no evidence of such terms can be admitted other than the contents thereof. 11 Considering that the written deeds of sale were the only repository of the truth, whatever is not found in said instruments must have been waived and abandoned by the parties. 12 Examining the deeds of sale, we cannot even make an inference that the sale was subject to any condition. As a contract, it is the law between the parties. 13 Secondly, to buttress their argument, private respondents rely on the case of Land Settlement Development, Co.vs. Garcia Plantation 14 where the Court 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 15 expressly stated that it is subject to an agreement containing the conditions-precedent which were proven through parol evidence. Whereas, the deeds of sale in this case, made no reference to any pre-conditions or other agreement. In fact, the sale is denominated as absolute in its own terms. Third, the parol evidence herein sought to be introduced would vary, contradict or defeat the operation of a valid instrument, 16 hence, contrary to the rule that:
The parol evidence rule forbids any addition to . . . the terms of a written instrument by testimony purporting to show that, at or before the signing of the document, other or 17 different terms were orally agreed upon by the parties.

Although parol evidence is admissible to explain the meaning of a contract, "it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing unless there has been fraud or mistake." 18 No such fraud or mistake exists in this case. Fourth, we disagree with private respondents' argument that their parol evidence is admissible under the exceptions provided by the Rules, specifically, the alleged failure of the agreement to express the true intent of the parties. Such exception obtains only in the following instance:
[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, 19 interpretation of the instrument.

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

Fifth, we are not persuaded by private respondents' contention that they "put in issue by the pleadings" the failure of the written agreement to express the true intent of the parties. Record shows 20 that private respondents did notexpressly plead that the deeds of sale were incomplete or that it did not reflect the intention 21 of the buyer (petitioner) and the seller (private respondents). Such issue must be, "squarely presented." 22 Private respondents merely alleged that the sale was subject to four (4) conditions which they tried to prove during trial by parol evidence. 23 Obviously, this cannot be done, because they did not plead any of the exceptions mentioned in the parol evidence rule. 24 Their case is covered by the general rule that the contents of the writing are the only repository of the terms of the agreement. Considering that private respondent Oscar Inocentes is a lawyer (and former judge) he was "supposed to be steeped in legal knowledge and practices" and was "expected to know the consequences" 25 of his signing a deed of absolute sale. Had he given an iota's attention to scrutinize the deeds, he would have incorporated important stipulations that the transfer of title to said lots were conditional. 26 One last thing, assuming arguendo that the parol evidence is admissible, it should nonetheless be disbelieved as no other evidence appears from the record to sustain the existence of the alleged conditions. Not even the other seller, Asuncion Inocentes, was presented to testify on such conditions. ACCORDINGLY, the appealed decision is REVERSED and the records of this case REMANDED to the trial court for proper disposition in accordance with this ruling. SO ORDERED. G.R. No. L-39972 & L-40300 August 6, 1986 VICTORIA LECHUGAS, petitioner, vs. HON. COURT OF APPEALS, MARINA LOZA, SALVADOR LOZA, ISIDRO LOZA, CARMELITA LOZA, DAVID LOZA, AMPARO LOZA, ERLINDA LOZA and ALEJANDRA LOZA, respondents. A.R. Montemayor for petitioner. Arturo L. Limoso for private respondents.

GUTIERREZ, JR., J: This petition for review invokes the parol evidence rule as it imputes grave abuse of discretion on the part of the appellate court for admitting and giving credence to the testimony of the vendor regarding the sale of the disputed lot. The testimony is contrary to the contents of the deed of sale executed by the vendor in favor of the petitioner. The petitioner filed a complaint for forcible entry with damages against the private respondents, alleging that the latter by means of force, intimidation, strategy and stealth, unlawfully entered lots A and B, corresponding to the middle and northern portion of the property owned by the petitioner known as Lot No. 5456. She alleged that they appropriated the produce thereof for themselves, and refused to surrender the possession of the same despite demands made by the petitioner. The complaint was dismissed. Petitioner appealed to the then Court of First Instance (CFI) of Iloilo where the case was docketed as Civil Case No. 5055. While the above appeal was pending, the petitioner instituted another action before the CFI of Iloilo for recovery and possession of the same property against the private respondents. This case was docketed as Civil Case No. 5303. The two cases were tried jointly. After trial, the court rendered judgment. The dispositive portion of the decision states: Wherefore, premises considered, judgment is rendered, to wit: a. dismissing the complaints in two cases; b. declaring defendants except Salvador Anona and Jose Lozada as owners and lawful possessors of the land in question together with all the improvements thereon; c. dismissing the claim for damages of all defendants except that of Jose Lozada; d. ordering plaintiff to pay defendant Jose Lozada the sum of P500.00 as attorney's fees and the amount of P300.00 as litigation expenses; and e. ordering plaintiff to pay the costs of both proceedings.

The petitioner appealed to the Court of Appeals but the latter sustained the dismissal of the cases. Hence, this petition with the petitioner making the following assignments of errors: I THAT THE RESPONDENT COURT ERRED IN CONSIDERING PAROL EVIDENCE OVER THE OBJECTION OF THE PETITIONER IN ORDER TO VARY THE SUBJECT MATTER OF THE DEED OF DEFINITE SALE (EXHIBIT A) ALTHOUGH THE LAND THEREIN IS DESCRIBED AND DELIMITED BY METES AND BOUNDS AND IdENTIFIED AS LOT NO. 5456 OF LAMBUNAO CADASTRE. II THAT THE RESPONDENT COURT ERRED IN CONSIDERING THE THEORY OF THE DEFENDANTS-APPELLEES FOR THE FIRST TIME ON APPEAL THAT THE LAND DESCRIBED IN THE DEED OF SALE (EXHIBIT A) IS LOT NO. 5522 INSTEAD OF LOT NO. 5456 OF THE LAMBUNAO CADASTRE, THEIR 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.

G.R. No. 159417

January 25, 2007

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioner, vs. THE HON. COURT OF APPEALS and CMS CONSTRUCTION and DEVELOPMENT CORPORATION,Respondents. DECISION CHICO-NAZARIO, J.: Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, assailing the Decision1 of the Court of Appeals in CA-G.R. SP No. 66968, dated 26 August 2002, which dismissed Philippine National Construction Corporations (PNCCs) Petition for Review of the Decision2 of Sole Arbitrator Victor P. Lazatin of the Construction Industry Arbitration Commission (CIAC) awarding herein respondent CMS Construction and Development Corporation (CMS) the amount of P1,978,746.90 with interest at the rate of 6% per annum from 7 July 2000 up to the date of award and thereafter, at an interest rate of 12% per annum until fully paid. The present case arose when CMS submitted for arbitration before the CIAC a complaint for sum of money with damages against PNCC in connection with the relocation of the 450 mm diameter steel pipes along the East Service Road of the South Luzon Tollway. On 26 July 1996, PNCC entered into a Memorandum of Agreement with the Toll Regulatory Board, Citra Metro Manila Tollways Corporation and Metropolitan Waterworks Sewerage System (MWSS) involving the task of relocating MWSS utilities along the South Superhighway affected by the construction of the Manila South Skyway Project. In undertaking said task, PNCC subcontracted the relocation of the 450 mm diameter steel pipes to CMS as the winning bidder. On 13 October 1997, even before the signing of a contract, CMS proceeded to carry out the project upon request of PNCC. A Subcontract Agreement was executed between PNCC and CMS on 21 October 1997. It was stated therein that the estimated contract price was P7,990,172.61, inclusive of taxes, and that the project was to be completed within seventy-five (75) calendar days from the signing of the contract. It was further stipulated therein that the contract price was merely an estimate and that the final price shall be computed based on the actual accomplishment of the subcontractor as approved and accepted by PNCC, the Toll Regulatory Board, and the MWSS.

On 5 December 1997, PNCC informed CMS that it would provide the necessary equipment, manpower, and materials to assure the completion of the project and that all costs pertaining thereto would be charged to the latters account. In another letter dated 19 December 1997, PNCC again reiterated that it would provide manpower and equipment to CMS in order that the stated schedule for the completion of the project shall be met. On 7 January 1998, petitioner informed CMS that the seventy-five (75) days period for the relocation of the steel pipes had already elapsed; however, the said project was still far from completion. It was only sometime in April 1999 that the project was finally completed. In conformity to the letters sent by PNCC to CMS regarding the manpower and equipment supplied by the former to ensure the completion of the project, the following amounts were deducted by petitioner from CMSs billings as "accommodations": Billing No. 3 P 274,548.87 Billing No. 4 150,043.12 Billing No. 5 666, 895.54 TOTAL P1,091,487.53 Thereafter, PNCC and CMS amended the Subcontract Agreement on 23 November 1999, stating therein the final contract price in the amount of P8,872,593.74, inclusive of taxes. It was also agreed upon by the parties under the Contract Amendment that Appendix "A" thereof constituted the final Bill of Quantities for scope of works undertaken by the subcontractor (CMS) and superseded Annex "C" of the 21 October 1997 Agreement and any bill of quantities earlier agreed upon by the parties in connection with the project. Furthermore, it was expressed therein that the said amendment superseded the price stipulated in the original Subcontract Agreement dated 21 October 1997 and any other commitment or agreement on price pertaining to works covered therein. According to CMS, the amended contract price has not been fully paid by PNCC since Billing Nos. 3, 4, and 5 were only partially paid because of the deductions made by the latter in the form of "accommodations," which CMS insists must be disallowed. After the proceedings, Sole Arbitrator Lazatin issued an Award, the pertinent portions of which read:

Before resolving the specific issues raised by the parties, it would be helpful to state certain findings established at the hearings which are pivotal. Initially, there is no dispute that the retention money amounts to P887,259.37 which is exactly equal to ten percent (10%) of the Subcontract Price (TSN, 13 August 2001, pp. 7-8). Both parties confirmed that no claim for defects was made by the Respondent or the Owner/Client after April 19, 1999 to rectify what was completed by the Claimant. (TSN, 13 August 2001, p. 10). Secondly, at the initial hearing, the Claimant no longer insisted on its claim for hydrotesting works (Issue No. 4) amounting to P563,675.00 due to paragraph 3 of the Contract Amendment (Exhibit C-2) (TSN, 13 August, p. 3). Thirdly, some of the important details of Billing Nos. 3, 4 and 5 are as follows: a) Billing No. 3 was for P920,601.03. It was received by the Respondent on June 1, 1998 and approved on September 25, 1998. The deductions for asserted accommodations amounted to P274,548.87. The amount paid was P646,052.12 which was paid in three (3) tranches, to wit: (i) P400,000 on January 21, 1999 (ii) P100,000 on April 11, 2000 (iii) P146,000 on February 8, 2001 b) Billing No. 4 was for P255,334.13. It was received by the Respondent on March 15, 1999 and approved on May 31, 1999. The deductions for asserted accommodations amounted to P150,043.12. The amount paid was P105,181.00 which paid on February 10, 2000. c) Billing No. 5 was for P1,681,888.21. It was received by the Respondent on December 3, 1999 and approved on August 4, 2000. The deductions for asserted accommodations amounted to P666,895.54. The amount paid was P921,706.79 which was paid on June 7, 2001. Fourthly, on 23 November 1999 (after the Project was completed), the parties executed the Contract Amendment wherein the parties agreed, among others, to wit: (i) To constitute "Appendix A" thereof as the final Bill of Quantities for scope of works undertaken by the Claimant and superseded/replaced Annex C of the 21 October 1997 Subcontract Agreement (Exh. C-1).

(ii) P8,872,593.74 as the final Subcontract Price which "supersede(d) the price stipulated in the original Subcontract Agreement dated 21 October 1997 P7,990,172.61 and any other commitment or agreement on price pertaining to works covered herein." (iii) "no further adjustment in price shall be effected and that (Claimant) hereby waived any and all claims for price adjustments and whatsoever in connection with the work herein covered except as that stated in pa. 3 above of this Contract Amendment." (emphasis supplied). Fifthly, there is no clear documentation that Respondent sent, and the Claimant received, much more accepted, the various charges for the accommodations deducted by the Respondent. The testimony of the witnesses of both parties are diametrically opposite. Likewise in conflict are the respective verbal assertion of both sides that manpower, equipment, and/or materials were actually provided by the Respondent to the Claimant. Sixth, the documentation of the Respondent with respect to its invocation of Section 6.2 of the Subcontract Agreement (Exhibit R-5) is faulty. The seven (7) day notice was not strictly complied with. There was no specification of the items and costings of the charges now asserted in the deductions/accommodations. The Claimant is likewise remiss in failing to reply to Respondents various letters (Exhibits R-20 to R-40, except for two (2) response) and take issue with the same. The Respondent could not present proof that the Claimant received and acknowledged the accommodations, despite its verbal assertions that the Project Manager of the Claimant did. There is also assertion that Claimant refused to acknowledge receipt of the accommodations. Lastly, and more importantly, the Claimant asserts that when the parties agreed on the Contract Amendment (which is effectively a compromise agreement) on 23 November 1999, Respondents claims for deductions of the accommodations were deemed included in the compromise. The Contract Amendment states that it "accordingly supersedes the price stipulated x x x and any other commitment or agreement on price pertaining to works covered herein" and "no further adjustment in price shall be effected." It should be pointed out that on 23 November 1999, respondent had already approved Billing No. 3 (on September 25, 1998) and Billing No. 4 (on May 31, 1999) and asserted the deductions of the accommodations. Moreover, all the claim for accommodations were already in existence on 23 November 1999. x x x. xxxx

WHEREFORE, PREMISES CONSIDERED, an award is hereby rendered ordering the respondent to pay the Claimant the amount of P1,978,746.90 with interest at the rate of 6% per annum from 7 July 2000 up to the date of this Award. Thereafter, the Award shall earn interest at the rate of 12% per annum until fully paid.3 Aggrieved, PNCC sought recourse through a Petition for Review filed before the Court of Appeals maintaining that there is no basis in fact nor in law for the findings of the Sole Arbitrator that the deductions for "accommodations" for Billing Nos. 3, 4, and 5 should be disallowed as they already formed part of the compromise agreement and that the said "accommodations" were not properly documented and proved to bind CMS. On 26 August 2002, the appellate court rendered a Decision affirming the findings of Sole Arbitrator Lazatin. According to the Court of Appeals: It must be recalled that the parties initially agreed to a subcontract price of P7,990,172.61 (par. 3.1 Subcontract Agreement, Exh. "R-3", p. 80, rollo); however, the same was increased to P8,872,593.74 (par. 9.1. Terms of Reference, p. 58, rollo; Final Bill of Quantities, p. 65, rollo) subject to petitioner PNCCs outright deduction of 10% net which would answer for any and all defect/s and/or deficiency/ies in the workmanship. And all the accumulated retentions shall be released within thirty days from the date of final acceptance of subcontracted work and which could be attained only after the lapse of the warranty period stipulated. (pars. 4.4 & 4.5., Subcontract Agreement, p. 81, rollo; Contract Amendment, Exh. "R-15", p. 98, rollo). Thus, 10% of the subcontract price of P8,872,593.74 is P887,259.37, which should be automatically deducted, it being part of the Subcontract Agreement" which to Our mind should be respected, since the same was not part of the amendment of the contract. When the terms of an agreement have been reduced to writing, it is to be 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. (Sec. 9, par. 1, Rule 130 Rules on Evidence) And there being no evidence on record which showed that petitioner PNCC claimed for any defects on the completed project against respondent CMS after April 1999, the aforementioned amount of P887,259.37 should now be released/paid to the latter. Coming now to the resolutions of whether or not the deductions for accommodations made by petitioner PNCC in billing nos. 3 to 5 were part of the compromise settlement and whether the same were properly documented, We opine that the same were part of the compromise settlement and the same were not properly documented.

Petitioner PNCC contended that in view of respondent CMS delay in the execution of the project, it supplied the necessary manpower, equipment and materials in order to assure the completion of the works; however, the record of the case is bereft of any evidence which would show that indeed petitioner PNCC had supplied the necessary manpower, equipment and materials for the project, aside from petitioners letter dated December 5, 1997 which stated that it would supply the same. (p. 92, rollo). Petitioners reliance on Article VI, par. 6.2.1 of the Subcontract Agreement which states: "In the event Subcontractor fails to comply with the requirement stated therein within seven (7) days from notice/demand to comply, PNCC shall have the authority to secure the necessary manpower, equipment from other sources, to assure completion of the works. All costs and expenses, including handling of charges, transportation, rentals for machinery/equipment and other expenses incidental thereto shall be for the account of Subcontractor and may be deducted from whatever amount that may be due or become due to Subcontractor under this or in any agreement between the parties. is basically misplaced. While there was petitioner PNCCs letter dated February 16, 1998 sent to respondent CMS informing the latter that it had not coped up (sic) with the work schedule and thus requiring it to submit other requirements such as daily accomplishment reports and target weekly accomplishments; nevertheless, the same is not determinant of whether or [not] the seven day notice was strictly complied with. (Exh. "R-32" p. 95, rollo). xxxx In fine, there was no evidence on record which proved that the aforecited deductions for accommodations were sent and received by respondent CMS. Neither was there any specification of the items and costings of the charges now asserted in the deductions for accommodations. xxxx In view of the above disquisitions, We are inclined to uphold the sole arbitrators findings and conclusions, disallowing the deductions for accommodations made by petitioner PNCC against respondent CMS. Consequently, respondent CMS should be paid for the deductions made by petitioner PNCC in the amount of P1,091,487.53. It is a hornbook doctrine in our jurisdiction that findings of facts of administrative bodies charged with their specific field of expertise, are afforded great weight by the courts, and in the absence of substantial showing that such

findings are made from an erroneous estimation of the evidence presented, they are conclusive, and in the interest of stability of the government structure, should not be disturbed. (Ocampo vs. Commission on Elections, 325 SCRA 636). It is likewise not for the reviewing court to weigh the conflicting evidence, determine the credibility of the witnesses, or otherwise substitute its own judgment for that of the administrative agency on the sufficiency of the evidence; that the administrative decision in matters, within the executive jurisdiction, can only be set aside on proof of grave abuse of discretion, fraud, or error of law (cited in Lo vs. Court of Appeals, 321 SCRA 190). We hold that the Sole Arbitrators findings and conclusion as aptly ratiocinated in his assailed decision are in accord with the facts and evidence on record and as such, must be respected. xxxx WHEREFORE, premises considered the PETITION FOR REVIEW is hereby Denied with modifications. Accordingly, a Decision is hereby rendered as follows: 1) Ordering petitioner Philippine National Construction Corporation to pay respondent CMS Construction and Development Corporation the total amount of P1,978,746.90 plus 6% interest per annum from date of demand which is from July 7, 2000 until fully satisfied, but before judgment becomes final. From the date of finality of the judgment until the obligation is totally paid. A TWELVE PERCENT (12%) interest, in lieu of the SIX PERCENT (6%) interest shall be imposed; and 2) Deleting the award for arbitration fees in favor of the respondent CMS Construction and Development Corporation in the amount of P29,264.51 for lack of factual and legal basis.4 Petitioners Motion for Reconsideration having been denied, PNCC filed the instant petition assailing the Decision of the appellate court on the sole ground that the Court of Appeals erred in upholding the Sole Arbitrators findings and conclusion disallowing the deductions for accommodations made by PNCC against CMS. Before we delve into the substantial issue raised by petitioner, we shall first address the procedural issue raised by respondent. According to CMS, the issue raised by petitioner is not a proper subject of an appeal under Rule 45 of the Rules of Court. CMS maintains that in assailing the findings and conclusions of the Sole Arbitrator as affirmed by the Court of Appeals, petitioner only puts into issue the findings of facts which are the bases thereof. And this Court, being not a trier of facts, is not duty-bound to probe into the accuracy of said factual

findings, in the absence of clear showing that the same were arbitrary and bereft of any rational basis. On the other hand, PNCC claims that the instant petition involves a question of law as the main issue herein is the proper interpretation of the Contract Amendment executed between the parties, and whether or not deductions for "accommodations" given by PNCC are allowed under said Contract Amendment. To be sure, questions of law are those that involve doubts or controversies on what the law is on certain state of facts; and questions of fact, on the other hand, are those in which there is doubt or difference as to the truth or falsehood of the alleged facts. One test, it has been held, is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law, otherwise it will be a question of fact.5 We agree with petitioner that the instant case involves a question of law. At the heart of this controversy before us is the issue of whether or not the "accommodations" claimed by PNCC may be properly deducted from the contract price stipulated under the Subcontract Agreement as modified by the Contract Amendment. The resolution of said issue, thus, entails an interpretation of the provisions of both agreements executed by both parties. And as correctly pointed out by petitioner, where an interpretation of the true agreement between the parties is involved in the appeal, the appeal is in effect an inquiry of the "law" between the parties and their successors in interest, its interpretation necessarily involves a question of law, properly raised in the certiorari proceedings.6 Having resolved the procedural issue raised herein, we now proceed to determine the singular substantial issue raised in the instant petition. PNCC maintains that Sole Arbitrator Lazatin acted arbitrarily or with grave abuse of discretion when he denied the deductions being claimed by petitioner. According to PNCC, the deductions or "accommodations" made in Billing Nos. 3, 4, and 5 are allowed under Article VI, Paragraph 6.2.1 of the Subcontract Agreement, which states that: 6.2.1 In the event SUBCONTRACTOR fails to comply with the above requirement stated therein within seven (7) days from notice/demand to comply, PNCC shall have the authority to secure the necessary manpower, equipment from other sources, to assure completion of the works. All costs and expenses, including handling of charges, transportation rentals for machineries/equipment and other expenses incidental thereto, shall be for the account of SUBCONTRACTOR and may be deducted from whatever amount that may be due or become due to SUBCONTRACTOR under this or in any agreement

between the parties. In such case, however, PNCC shall exert its best efforts to minimize the costs. Thus, PNCC claims that from the abovequoted provision of the Subcontract Agreement, it is evident that "accommodations" for additional manpower or equipment supplied by PNCC in the project are deductible from whatever amount due to CMS as subcontractor. There is no dispute that under the aforecited provision, deductions or "accommodations" may be made against the account of the subcontractor; however, it is pivotal at this point to underscore an important provision in the Contract Amendment signed by the parties on 23 November 1999. According to said amendment to the Subcontract Agreement, Appendix "A" thereof constitutes the final Bill of Quantities for scope of works undertaken by the subcontractor (CMS) and supersedes Annex "C" of the 21 October 1997 Agreement and any bill of quantities earlier agreed upon by the parties in connection with the project.
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It is clear from a reading of said provision of the Contract Amendment executed after the completion of said project and after PNCC had determined the alleged deductions it was to charge against CMSs account that Annex "A" thereof reflects the scope of work undertaken by CMS. Said Bill of Quantities therefore enumerates the costs borne by CMS as subcontractor in the accomplishment of the project. A careful perusal of Annex "A" of the Contract Amendment will show that the final Bill of Quantities for the scope of works undertaken by CMS for the project amounts to P8,872,593.74. There is no mention, either in the body of said Contract Amendment nor in the annex attached thereto, regarding the alleged "accommodations" which PNCC shall deduct from the amount payable to CMS. It would only be logical, therefore, to conclude that the Contract Amendment and Annex "A" attached thereto already reflect the actual amount to be paid to CMS for the scope of work it rendered regarding the relocation of the 450 mm pipe along the East Service Road of the South Luzon Tollway, said amendment having been executed after PNCC had already determined the necessary deductions to be made against the account of CMS. The agreement or contract between the parties is the formal expression of the parties rights, duties and obligations.7 It is the best evidence of the intention of the parties.8 Thus, 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.9 Furthermore, it is a cardinal

rule that if the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulation shall control.10 Petitioner miserably failed to establish that Sole Arbitrator Lazatin acted arbitrarily or with grave abuse of discretion when he denied the deductions claimed by petitioner. If ever Sole Arbitrator Lazatin may have committed any error in his interpretation of the Subcontract Agreement and the Contract Amendment, such possible error is not tantamount to grave abuse of discretion, but merely an error of judgment. An error of judgment is one which the court may commit in the exercise of its jurisdiction, and which error is reviewable only by an appeal.11 On the other hand, an error of jurisdiction is one where the act complained of was issued by the court, officer or a quasi-judicial body without or in excess of jurisdiction, or with grave abuse of discretion which is tantamount to lack or in excess of jurisdiction.12 This error is correctable only by the extraordinary writ of certiorari.13 Nonetheless, we see no reason to disregard the determinations made by Sole Arbitrator Lazatin. As has been discussed above, the contention of PNCC that it may legally deduct certain accommodations from the contract price as contained in the Bill of Quantities attached to the Contract Amendment has no leg to stand on. Furthermore, in the absence of any showing of grave abuse of discretion, this Court must sustain the factual findings of the Sole Arbitrator as sustained by the Court of Appeals, this being in accordance with the established principle that determination of certain questions of fact falling within the peculiar technical expertise of an administrative agency, must be accorded great respect, if not finality by this Court. A long line of cases establishes the basic rule that the court will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of activities coming under the special technical knowledge and training of such agencies.14 The CIAC, having been duly constituted by law as the quasi-judicial agency accorded with jurisdiction to resolve disputes arising from contracts involving construction in the Philippines,15 this Court must confer finality to its findings as they are supported by the evidence in this case. WHEREFORE, premises considered, the instant petition is hereby DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 66968 dated 26 August 2002 is hereby AFFIRMED. Costs against petitioner. SO ORDERED. G.R. No. 163011 June 7, 2007

DUVAZ CORPORATION, Petitioner, vs. EXPORT AND INDUSTRY BANK, Respondent. DECISION GARCIA, J.: Assailed and sought to be set aside in this petition for review under Rule 45 of the Rules of Court is the Decision1 dated March 26, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 75903, nullifying an earlier Order of the Regional Trial Court (RTC) of Makati City, Branch 143, which granted petitioners prayer for a writ of preliminary injunction in its Civil Case No. 02-1029, an action for reformation of instrument thereat instituted by the petitioner against the herein respondent, Export and Industry Bank (EIB). The relevant facts, pertaining to the sole issue of whether the CA gravely erred when it nullified the RTCs order granting petitioners prayer for a writ of preliminary injunction in Civil Case No. 02-1029, are as follows: During the period 1994-1995, RDR Property Holdings, Inc. (RDR), which was a subsidiary of petitioner Duvaz Corporation (Duvaz) until it was eventually absorbed by the latter, obtained various loans from the then Urban Banking Corporation (Urban Bank) to finance its real estate business. These loans were secured by real estate mortgages on seventeen (17) condominium units and thirty (30) parking slots at The Peak Condominium situated at 107 Alfaro St., Salcedo Village, Makati City. Sometime after it declared a bank holiday on April 25, 2000, Urban Bank was acquired and merged with respondent EIB. Meanwhile, as a consequence of RDR being absorbed by petitioner Duvaz, the latter acquired all the assets and liabilities of the former, more specifically RDRs loan obligations with Urban Bank, which loan obligations were later transferred to respondent EIB as a result of the corporate merger of the two banks. With the 1997 Asian financial crisis sending the Philippine economy into turmoil, petitioner Duvaz defaulted in the payment of its loan obligations with Urban Bank as they fell due. On record, petitioner and Urban Bank mutually agreed to the restructuring of the formers indebtedness. By virtue of said loan restructuring, petitioner executed in favor of Urban Bank twelve (12) promissory notes for P20 Million each and one (1) promissory note for P23 Million, or a total of P263

Million, with a uniform interest rate of 18.75% per annum, and all to mature on October 31, 2000. Respondent EIB took over the operations of Urban Bank sometime before maturity of the restructured loans. Eventually, the restructured loans matured and became due and demandable. Because the loans remained unpaid, however, respondent EIB required petitioner Duvaz to submit a mutually acceptable plan for the payment of the loan which, as of June 30, 2002, already amounted to P562,157,530.02 inclusive of interest and penalty charges. However, instead of submitting any proposal for a plan of payment, as required by respondent, petitioner protested the total amount of obligation being demanded upon. On August 8, 2002, respondent EIB sent a final demand letter to petitioner to settle its obligations. It was on account of said demand letter that on August 29, 2002, in the RTC of Makati City, petitioner Duvaz filed against respondent EIB a complaint for reformation of instrument with prayer for a temporary restraining order and/or writ of preliminary injunction to enjoin EIB, as defendant in the suit, from commencing any foreclosure proceedings on the mortgaged properties of the petitioner as plaintiff. In its complaint, docketed in the same court as Civil Case No. 02-1029 and raffled to Branch 143 thereof, Duvaz alleged that its real agreement of dacion en pago with Urban Bank (EIBs predecessor-in-interest), which true agreement was intended for the full and complete settlement of its entire obligation, was not reflected in the loan-restructuring agreement that was entered into in 1998, hence, the need to modify the terms thereof to reflect the parties true intention. Pending determination of the merit of petitioners prayer for a writ of preliminary injunction, the parties mutually agreed to maintain the status quo ante. The trial court, therefore, found no need to issue any temporary restraining order. Eventually, however, via an Order2 dated September 25, 2002, the court granted the preliminary injunction prayed for by Duvaz, to wit: WHEREFORE, in the interest of justice and equity, the Court GRANTS the injunction prayed for and accordingly orders defendant [to refrain] from initiating any foreclosure proceedings until further orders from this Court. Bond is fixed at TEN MILLION PESOS (P10,000,000.00). (Words in brackets added.) SO ORDERED.

In time, EIB moved for reconsideration but its motion was denied by the court in its subsequent order of January 8, 2003. Therefrom, EIB went to the CA on a petition for certiorari, thereat docketed as CA-G.R. SP No. 75903. As stated at the threshold hereof, the CA, in its herein assailed Decision of March 26, 2004, nullified the challenged orders of the trial court pertaining to the preliminary injunction it issued in favor of Duvaz, thus: WHEREFORE, premises considered, the instant petition for certiorari is hereby GRANTED. Accordingly, the assailed orders are ANNULLED AND SET ASIDE and a new one issued DENYING [petitioners] prayer for a writ of preliminary injunction. SO ORDERED. In granting EIBs certiorari petition and nullifying the questioned orders of the trial court, the appellate court notes Duvaz failure to show in its complaint and at the hearing of its application for preliminary injunction the indubitable existence of its right to the injunctive relief. In the precise words of the CA: In the case at bar, [petitioner] sought to enjoin [respondent] from foreclosing its mortgage properties on the ground that their alleged agreement entered into in 1998 is in reality a dacion en pago and not a loan-restructuring agreement which is the written contract. In short, [petitioners] alleged right emanates from an alleged dacion en pago which is yet to be proven in Court. This right is, therefore, contingent and future which cannot be protected by a writ of preliminary injunction. Moreover, the parol evidence rule proscribes the varying of the terms of a written agreement except in certain cases. [Petitioner] claims that its case falls under the exception, but then this is harping on the exception, not the rule, which is yet to be proven during trial. If indeed, there is such an agreement as dacion en pago, then only at that time can we say that [petitioner] possesses the right to be protected. But of course, this is merely conjectural and a future proposition, if not assumption, which is, however, insufficient to support the grant of a writ of preliminary injunction. (Words in brackets supplied.) Hence, this recourse by petitioner Duvaz, it being its submission that the CA gravely erred 1. xxx in failing to recognize that Duvaz has an actual, existing right in esse that may properly be protected by writ of preliminary injunction.

2. xxx when it reversed the lower court, because it failed to comprehend the trial courts basis and rationale in granting the injunctive writ. The appellate court committed serious error in finding that Duvazs "alleged right emanates from an alleged dacion en pago which is yet to be proven in court," and that such right, being "contingent and future, xxx cannot be protected by a writ of preliminary injunction." In fact, Duvaz has more than one clear legal right in esse to protect. 3. xxx in holding that "the parole evidence rule proscribing the varying of the terms of a written agreement, except in certain cases," applies in this instance, as to bar Duvaz from proving the existence of the agreement for dacion en pago by parole evidence. 4. xxx in granting [EIBs] petition and lifting the preliminary injunction against EIBs foreclosure of the mortgaged properties of Duvaz, because the challenged Decision effectively allows EIB to carry out extrajudicial foreclosure based on a sham and simulated agreement made in contravention of law, thereby enabling respondent bank to unjustly enrich itself at petitioners expense to the tune of hundreds of millions of pesos; this will consequently result in substantial, permanent, irreparable and irreversible damage being unjustly inflicted upon petitioner. Moreover, the challenged Decision will inequitably and inevitably result in preventing Duvaz from enforcing its just and lawful claim against respondent bank, and in denying Duvaz its day in court. 5. xxx in granting EIBs Petition, which was not only premature, but also constituted flagrant forum shopping, and should have been dismissed outright, with corresponding imposition of sanctions on account thereof. We DENY. With the recognition of the fact that the present petition only involves the propriety of the RTCs issuance of the writ of preliminary injunction and not the merit of the main action for reformation of instrument, the issues presently raised by the petitioner may be reduced to only two: first, whether there exists a right in esse on petitioners part which may rightfully be the basis for the issuance of a writ of preliminary injunction; and second, whether EIBs recourse to the CA in CA-G.R. SP No. 75903 from the orders of the trial court in the matter of preliminary injunction constitutes forum shopping. The rest of the issues raised by the petitioner may be properly argued in the main case before the trial court. Anent the first issue, the requisites for preliminary injunctive relief are: (a) the invasion of right sought to be protected is material and substantial; (b) the right of the plaintiff is clear and unmistakable; and (c) there is an urgent and paramount necessity for the writ to prevent serious damage. As such, a writ of preliminary

injunction may be issued only upon clear showing of an actual existing right to be protected during the pendency of the principal action. The twin requirements of a valid injunction are the existence of a right and its actual or threatened violation. Thus, to be entitled to an injunctive writ, the right to be protected and the violation against that right must be shown.3 In Almeida v. Court of Appeals,4 the Court stressed how important it is for the applicant for an injunctive writ to establish his right thereto by competent evidence: Thus, the petitioner, as plaintiff, was burdened to adduce testimonial and/or documentary evidence to establish her right to the injunctive writs. It must be stressed that injunction is not designed to protect contingent or future rights, and, as such, the possibility of irreparable damage without proof of actual existing right is no ground for an injunction. A clear and positive right especially calling for judicial protection must be established. Injunction is not a remedy to protect or enforce contingent, abstract, or future rights; it will not issue to protect a right not in esse and which may never arise, or to restrain an action which did not give rise to a cause of action. There must be an existence of an actual right. Hence, where the plaintiffs right or title is doubtful or disputed, injunction is not proper. An injunctive remedy may only be resorted to when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard compensation. The possibility of irreparable damage without proof of an actual existing right would not justify injunctive relief in his favor.http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/De cisions/2005.zip%3e256,df|2005/jan2005/159124.htm - _ftn#_ftn xxx xxx xxx

x x x. In the absence of a clear legal right, the issuance of the injunctive writ constitutes grave abuse of discretion. As the Court had the occasion to state in Olalia v. Hizon, 196 SCRA 665 (1991): It has been consistently held that there is no power the exercise of which is more delicate, which requires greater caution, deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of an injunction. It is the strong arm of equity that should never be extended unless to cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages. Every court should remember that an injunction is a limitation upon the freedom of action of the defendant and should not be granted lightly or precipitately. It

should be granted only when the court is fully satisfied that the law permits it and the emergency demands it. (Emphasis supplied.) We are in full accord with the CA when it struck down, for having been issued with grave abuse of discretion, the RTCs Order of September 25, 2002, granting petitioners prayer for a writ of preliminary injunction during the pendency of the main case, Civil Case No. 02-1029. The reason therefor is that the right sought to be protected by the petitioner in this case through the writ of preliminary injunction is merely contingent and not in esse. It bears stressing that the existing written contract between petitioner and respondent was admittedly one of loan restructuring; there is no mention whatsoever or even a slightest reference in that written contract to a supposed agreement of dacion en pago. In fine, it is still necessary for petitioner to establish in the main case its rights on the alleged dacion en pago before those rights become in esse or actual and existing. Only then can the injunctive writ be properly issued. It cannot be the other way around. Otherwise, it will be like putting the cart before the horse. Besides, conformably to the Parol Evidence Rule, which is the general rule, 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, as between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement. This poses another big obstacle to a favorable finding of petitioners right in esse under the alleged dacion en pago agreement. Again, petitioner must first establish that alleged agreement in the main case where it bears the burden of duly proving by competent evidence that the written loan restructuring agreement failed to express the true intent of the parties. Until and unless this has been successfully carried out, there is no right in esse to speak of. And with EIB denying petitioners allegation of a right arising from an alleged dacion en pago agreement supposedly entered into by it not with EIB itself, but with Urban Bank, petitioners burden becomes doubly cumbersome. It must be stressed that a clear and positive right especially calling for judicial protection must be shown. Injunction is not a remedy to protect or enforce contingent, abstract, or future rights; it will not issue to protect a right not in esse and which may never arise, or to restrain an act which does not give rise to a cause of action. There must exist an actual right. There must be a patent showing by the complaint that there exists a right to be protected and that the acts against which the writ is to be directed are violative of said right.5In the present case, we find no such actual and existing right in favor of the petitioner that demands protection by the office of preliminary injunction. To stress, the written contract admittedly existing between petitioner and respondents predecessor-in-interest (Urban Bank) is a loan restructuring agreement which is

completely silent about the dacion en pago arrangement being harped upon by petitioner. With the reality that EIB very much puts in issue in the main case the existence of the alleged dacion en pago contract relied upon by the petitioner in its complaint, we rule and so hold, as did the CA, that the issuance by the trial court of the writ of preliminary injunction to protect a right asserted by the petitioner under the disputed dacion en pago arrangement truly constitutes grave abuse of discretion. This brings us to the second issue of whether, in invoking the CAs jurisdiction to rectify the trial courts grave abuse of discretion, respondent EIB thereby ventured into forum shopping. We hold in that there is no forum shopping in this case. There is forum shopping when any party litigant repetitively avails of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues either pending in, or already resolved adversely by, some other court. It has also been defined as an act of a party against whom an adverse judgment has been rendered in one forum of seeking and possibly getting a favorable opinion in another forum, other than by appeal or the special civil action of certiorari, or the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition.6 Here, EIB assailed the trial courts order directing the issuance of the writ of preliminary injunction by filing a petition for certiorari with the CA. Seeking a reversal of an adverse judgment or order by appeal or certiorari does not constitute forum shopping. Such remedies are sanctioned and provided for by the rules. There will only be forum shopping when a party seeks a favorable opinion, other than by appeal or certiorari, in another forum.7 There is simply no rhyme nor reason to tag as forum shopping EIBs availment of a remedy provided under the rules in a situation where, as here, the RTC clearly gravely abused its discretion. Besides, the function of certiorari before the CA is only to annul the assailed interlocutory order of the trial court and nothing else. The CA cannot go beyond the said assailed interlocutory order and dismiss the main action which has not yet been resolved with finality.

WHEREFORE, the instant petition is DENIED and the assailed CA Decision dated 26 March 2004 is AFFIRMED in toto. Costs against petitioner. SO ORDERED.

FIRST DIVISION

[G.R. No. 141060. September 29, 2000]

PILIPINAS BANK, petitioner, vs. COURT OF APPEALS, HON. ELOY R. BELLO, In his capacity as Presiding Judge, RTC-Manila, Branch 15, And MERIDIAN ASSURANCE CORPORATION, respondents. DECISION
KAPUNAN, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing the Decision of the Court of Appeals, Sixth Division, dated July 30, 1999 in CA-G.R. S.P. No. 29749 which dismissed petitioner Pilipinas Bank's petition for certiorari, and the Resolution, dated September 17, 1999 denying petitioner's Urgent Motion for Extension of Time to file Motion for Reconsideration, Manifestation and Motion to Admit Motion for Reconsideration.
[1] [2] [3]

The facts of the case are as follows: On January 8, 1995, petitioner obtained from private respondent Meridian Assurance Corporation a Money Securities and Payroll Comprehensive Policy which was effective from January 13, 1985 to January 13, 1986. On November 25, 1985, at about 9:15 a.m., while the policy was in full force and effect, petitioner's armored vehicle bearing Plate No. NBT 379 which was on its way to deliver the payroll withdrawal of its client Luzon Development Bank ACLEM Paper Mills, was robbed by two armed men wearing police uniforms along Magsaysay Road, San Antonio, San Pedro, Laguna. Petitioner's driver, authorized teller and two private armed guards were on board the armored vehicle when the same was robbed. The loss suffered by petitioner as a result of the heist amounted to P545,301.40.

Petitioner filed a formal notice of claim under its insurance policy with private respondent on December 3, 1985, invoking Section II of the Policy which states: Section II-MONEY AND SECURITIES OUTSIDE PREMISES The Company will subject to the Limits of this Section as hereinafter provided indemnify the insured against loss by any cause whatsoever occuring (sic) outside the premises of Money and Securities in the personal charge of a Messenger in transit on a Money Route x x x.
[4]

and the warranty/rider attached to the Policy which provides thatWARRANTED that in respect of PILIPINAS BANK Head Office and all its branches, pick-up and/or deposits and withdrawals without the use of armored car, company car, or official's car shall be covered by this policy. x x x
[5]

Private respondent denied petitioner's claim and averred that the insurance does not cover the deliveries of the withdrawals to petitioner's clients. Petitioner thereafter filed a complaint against private respondent with the Regional Trial Court of Manila. Private respondent filed a motion to dismiss which was later granted by the RTC. Petitioner then moved to reconsider the trial court's order, but the same was denied. Aggrieved, petitioner filed a petition for certiorari with the Court of Appeals assailing the RTC's order dismissing the complaint. The appellate court granted the petition and remanded the case to the RTC for further proceedings. Private respondent filed with this Court a petition for review of the appellate court's decision, but the same was dismissed in a Resolution dated July 5, 1989.
[6]

After the case was remanded to the RTC and the latter set the case for pre-trial, petitioner filed its Pre-Trial Brief, stating among others, that it would present as one of its witnesses Mr. Cesar R. Tubianosa to testify on the existence and due execution of the insurance policy, particularly on the negotiations that were held prior to the execution thereof, including negotiations that led to the attachment warranties, to prove that the loss subject of petitionerss claim is covered by the Policy. Petitioner identified the issues of the case as follows:
1. Whether or not the loss due to the hold-up/robbery is covered by the Insurance Policy;

2. In the affirmative, whether or not, defendant is liable to plaintiff for said loss, inclusive of other damages prayed for in the Complaint.

On September 18, 1991, when petitioner was about to present Mr. Tubianosa to testify, private respondent objected and argued that said witness testimony regarding the negotiations on the terms and conditions of the policy would be violative of the best evidence rule. However, private respondents objection was overruled and Tubianosa was allowed to take the stand. Private respondent again objected to the questions regarding the negotiations on the terms and conditions on the policy, and the trial court sustained the objection in part and overruled it in part by allowing petitioner to adduce evidence pertaining to the negotiations other than what appears in the insurance policy. Tubianosas testimony was completed on said date. On June 18, 1992, petitioner filed a Motion to Recall Witness, praying that it be allowed to recall Tubianosa to testify on the negotiations pertaining to the terms and conditions of the policy before its issuance to determine the intention of the parties regarding the said terms and conditions. Private respondent objected thereto, on the ground that the same would violate the parol evidence rule. The RTC issued an Order dated July 24, 1999, denying petitioners motion to recall Tubianosa to the witness stand, ruling that the same would violate the parol evidence rule. Petitioners motion for reconsideration was also denied by the lower court. On December 21, 1992, petitioner filed a petition for certiorari with the Court of Appeals assailing the aforementioned Orders of the RTC. In its Decision dated July 30, 1999, the appellate court dismissed the petition and held that there was no grave abuse of discretion on the part of respondent judge. It held that there is no ambiguity in the provisions of the Policy which would necessitate the presentation of extrinsic evidence to clarify the meaning thereof. The Court of Appeals also stated that petitioner failed to set forth in its Complaint a specific allegation that there is an intrinsic ambiguity in the insurance policy which would warrant the presentation of further evidence to clarify the intent of the contracting parties. Hence, the present petition. We find no cogent reason to disturb the findings of the Court of Appeals. Petitioners Complaint merely alleged that under the provisions of the Policy, it was entitled to recover from private respondent the amount it lost during the heist. It did not allege therein that the Policys terms were ambiguous or failed to express the true agreement between itself and private

respondent. Such being the case, petitioner has no right to insist that it be allowed to present Tubianosas testimony to shed light on the alleged true agreement of the parties, notwithstanding its statement in its Pre-Trial Brief that it was presenting said witness for that purpose. Section 9, Rule 130 of the Revised Rules of Court expressly requires that for parol evidence to be admissible to vary the terms of the written agreement, the mistake or imperfection thereof or its failure to express the true agreement of the parties should be put in issue by the pleadings.
[7]

As correctly noted by the appellate court, petitioner failed to raise the issue of an intrinsic ambiguity, mistake or imperfection in the terms of the Policy, or of the failure of said contract to express the true intent and agreement of the parties thereto in its Complaint. There was therefore no error on the part of the appellate court when it affirmed the RTCs Order disallowing the recall of Tubianosa to the witness stand, for such disallowance is in accord with the rule that 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 other terms other than the contents of the written agreement.
[8]

The rationale behind the foregoing rule was explained in Ortanez vs. Court of Appeals, where we stated:
[9]

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 undesirable unlike a written contract which speaks of a uniform language. Thus, under the general rule in Section 9 of Rule 130 of the Rules of Court, when the terms of an agreement were reduced to writing, as in this case, it is deemed to contain all the terms agreed upon and no evidence of such terms can be admitted other than the contents thereof. xxx.
[10]

WHEREFORE, the instant petition is hereby DENIED. The Decision of the Court of Appeals is hereby AFFIRMED. SO ORDERED.
G.R. No. L-28498 July 14, 1986 SALVADOR DE LA RAMA, plaintiff-appellant, vs. RAFAEL LEDESMA, defendant-appellee.

PARAS, J.:

This is an appeal from the decision of the defunct Court of First Instance of Negros Occidental in Civil Case No. 8284 dismissing plaintiff-appellant's money claim for lack of a cause of action. On August 18, 1967, Salvador de la Rama, one of the incorporators of the Inocentes de la Rama Inc. filed a complaint with the Court of First Instance of Negros Occidental docketed as Civil Case No. 8284, concerning a money claim against Rafael Ledesma who is his own nephew and purchaser of his shares of stock in aforesaid corporation. De la Rama alleged that the Inocentes de la Rama Inc. suffered damages during the last war and had an approved war damage claim with the Philippine War Damage Commission in the sum of P106,000.00. The first payment on said claim, in the sum of P56,000.00 which was paid by the Commission while De la Rama was still a stockholder, was, upon resolution of the majority of its stockholders, used for the reconstruction of the Iris Theater Building. On November 18, 1958, before the additional liquidation of said claim, De la Rama sold to Ledesma at par value his 140 shares in the corporation by endorsing his certificates of stock in favor of the latter with an alleged understanding that De la Rama reserved to himself his proportionate equity in the war damage benefits due on his 140 shares which Ledesma promised to deliver to him upon payment by the Foreign Claim Settlement Commission of the United States. Upon presentation of the endorsed shares of stock, new certificates of stock were issued in the name of Ledesma. On March 20, 1965, the corporation received a final payment of its war damage claim in the sum of P46,696.33. The Board of Directors passed a resolution distributing the final payment received by said corporation among its stockholders of record as of March 20, 1965, as dividend computed at P29.59 per share. When Ledesma received the dividends pertaining to his total shareholding including the 140 shares he had purchased from De la Rama, the latter demanded from the former the return and delivery to him of his corresponding share in the claim in question. Ledesma refused and De la Rama filed subject complaint alleging that he suffered moral and exemplary damages in the sum of not less than P10,000.00 and attorney's fees in the sum of P1,000.00. (Complaint, Record on Appeal, pp. 1-6; Decision of CFI Negros Occ., Record on Appeal, pp. 1820). In his answer, Ledesma admits the allegation in the complaint except: (a) the alleged verbal understanding between De la Rama and himself regarding the unpaid war damage claim; (b) the alleged equity of De la Rama in the said claim as such equity is with the corporation itself, and not with the stockholders

individually; and (c) his liability for either moral or exemplary damages, much less for attorney's fees, the same having no basis at all in law or in fact. By way of special defense, Ledesma claimed that the indorsement by De la Rama of the Stock Certificate in question without qualification or condition constituted the sole and exclusive contract between the parties and to allow De la Rama to prove any alleged simultaneous oral agreement would run counter to the Parol Evidence Rule and the Statute of Frauds. Furthermore, the unpaid balance on the said corporation's war damage claim at the time De la Rama sold his shareholdings belonged to the corporation itself and not to its stockholders and so was the final payment which was paid to the corporation itself, for its Board of Directors to do what it deemed best. (Answer, Record on Appeal, pp. 8-11.) In reply to the special defenses raised by Ledesma, De la Rama avers: (a) that the War Damage Payment made by the government of the United States to claimants in the Philippines who suffered losses during World War II is not a profit of the Corporation which can be distributed as dividends; the use and disposition of said funds as specified by the Philippine Rehabilitation Act of 1946 are reserved for those who suffered losses during the war like himself; (b) that the Statute of Frauds applies only to Executory Contracts, and not to partially or fully consummated cases; and (c) that the instant case is exempted from the Parol Evidence Rule since the writing fails to express the true intent and agreement of the parties, and this fact is pleaded. He further stated that the war damage benefits while due to the corporation redounds to the benefit of the stockholders who actually suffered the damage, which means the stockholders of record at the time the damage was inflicted; that in the disposition of such benefits the Board of Directors should be guided by the spirit and letter of the Philippine Rehabilitation Act of 1946 and that the oral agreement of the parties is consistent with the trust and confidence of the parties at the time in view of their close blood relationship. (Record on Appeal, pp. 12-16.) At the pre-trial of this case, the parties, through counsel, agreed to submit for the resolution of the Court the question as to whether or not De la Rama is allowed to present parol evidence to prove his alleged reservation to the war damage benefits in question. The parties further agreed that should the ruling of the Court be in the negative, then the Court may render judgment on the pleadings. However, should the Court rule in favor of admissibility of parol evidence, a hearing on the merits will be scheduled for the admission of the evidence of both parties. (Record on Appeal, pp. 18-19.) The lower court ruled in the negative, as follows: Under the foregoing circumstances, the Court believes that any evidence tending to establish the plaintiff's cause of action would be

inadmissible under the parol evidence rule and the provisions of the Statute of Frauds. In the light of the facts not controverted in the pleading submitted by the parties, the Court finds that the plaintiff has no cause of action against the defendant. (Record on Appeal, pp. 25-26.) From this decision, the plaintiff-appellant appealed, and raised the following assignment of errors: I The lower court erred in holding that defendant is a successor in interest of plaintiff's appellant's equitable share in the war damage benefits granted to Inocentes de la Rama, Inc. by operation of the Philippine Rehabilitation Act of 1946 and of the United States Public Law 87-616. II The lower court erred in not holding that plaintiff, as the pre-war shareholder of the Inocentes de la Rama, Inc. and registered owner of shares of stock in the said corporation up to the year 1958, is the claimant having unpaid balance due on awards as determined by the former Philippine War Damage Commission prior to its abolishment in April 1951 by operation of the above stated laws. III The lower court erred in holding that the verbal agreement of the herein parties in which plaintiff reserved and the defendant agreed to the right of plaintiff to the balance of the war damage claim at the time of plaintiff's sale of his share of stock to defendant in 1958 is barred by the Statute of Frauds and the Parol Evidence Rule. The appeal is without merit. The only issue crucial to this appeal is whether or not the alleged verbal agreement of the parties concerning plaintiff's reservation of his right to the balance of the war damage claim at the time of the sale of his shares to the defendant, can be proven by parol evidence under the Parol Evidence Rule and the Statute of Frauds.

There is merit in appellee's contention that the alleged oral reservation and the sale of the shares of stock were made simultaneously and contemporaneously, so that to allow De la Rama to prove the same would run counter to the Parol Evidence Rule. In his brief, appellant alleged that "at the time he sold his shares of stock to the defendant in 1958 he has reserved to himself the said benefits and to which defendant agreed." (Brief for Appellant, p. 3). Again, in his third assignment of error he claims that the lower court erred in holding that the disputed oral reservation, cannot be proved under the Statute of Frauds and the Parol Evidence." (Ibid., p.11.) It is a well accepted principle of law that evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict or defeat the operation of a valid instrument. (American Factors (Phil.) Inc. vs. Murphy Tire Corporation, et al. (C.A.) 49 O.G. 189.) While parol evidence is admissible in a variety of ways to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing, unless there has been fraud or mistake. (Yu Tek & Co. v. Gonzales, 29 Phil. 384.) Indeed, the exceptions to the rule do not apply in the instant case, there being no intrinsic ambiguity or fraud, mistake, or failure to express the true agreement of the parties. If indeed the alleged reservation had been intended, businessmen like the parties would have placed in writing such an important reservation. In the case at bar, nowhere in the complaint were the exceptions to the rule alleged or put in issue. (See Infante v. Cunanan, et al., 93 Phil. 691). The alleged reservation not being admissible under the Parol Evidence Rule, WE do not find it necessary to discuss the applicability or non-applicability to the present case of the Statute of Frauds. For the same reason We see no reason for resolving whether the war damage award in favor of the corporation should be regarded as capital stock or profit. Whether the award be part of one or the other the fact is that appellant is not entitled to share in the same, having already disposed of his equity in favor of the appellee. WHEREFORE, the appealed decision is hereby AFFIRMED, with costs against appellant.

SO ORDERED.

[G.R. No. 142944. April 15, 2005]

EDENBERT MADRIGAL AND VIRGILIO MALLARI, petitioners, vs. THE COURT OF APPEALS AND JOSE MALLARI, respondents. DECISION
GARCIA, J.:

Under consideration is this appeal by way of a petition for review on certiorari under Rule 45 of the Rules of Court to nullify and set aside the following issuances of the Court of Appeals inCA-G.R. CV No. 45488, to wit:
1. Decision dated 15 October 1999,[1] affirming an earlier decision of the Regional Trial Court at Olongapo City in a suit for annulment, redemption and damages with prayer for preliminary injunction and/or temporary restraining order, thereat commenced by the herein private respondent against the petitioners; and 2. Resolution dated 10 April 2000,[2] denying petitioners motion for reconsideration.

The case is cast against the following factual backdrop: Private respondent Jose Mallari and his wife Fermina Mallari are the owners of a 340-square meter residential lot with a 2-storey residential house erected thereon, situated at Olongapo City. The couple had ten (10) children, five (5) of whom are staying with them in the same house while the other five (5) are either residing abroad or elsewhere in the Philippines. In need of money for his wifes planned travel to the United States, Jose thought of mortgaging the above property with a bank. However, his son Virgilio Mallari who is residing with his own family somewhere in San Ildefonso, Bulacan convinced Jose not to proceed with the intended mortgage and to instead assign to him a portion of the same property, assuring his father that the latter could continue in occupancy of the property and that he will allow his sister Elizabeth who operates a store thereat to continue with the same. Virgilio told his father, however, that he will occupy one of the rooms in the house in case he goes to Olongapo City on vacation and that he will renovate the other room and reserve it for his mother when she comes back from the States. Virgilio assured his father that he will not dispose of the property without his fathers consent and that the latter could redeem the said property any time he acquires money.

And so, finding no reason to doubt Virgilios words, Jose did not anymore proceed with his original idea of mortgaging the property with a bank. Instead, on 22 October 1987, he and his wife Fermina executed a document denominated as Deed of Absolute Sale, whereunder the couple appeared to have conveyed to their son Virgilio Mallari the house and lot in question for a consideration of P50,000.00 although the property easily commands much more at that time. Worse, the deed of conveyance described the properties sold as a one-storey residential house and the 135-square meter lot whereon it stands even as the subject properties actually consist of a 2-storey residential house sitting on a 340-square meter parcel of land. Things turned for the worse to the unsuspecting Jose Mallari when, without his knowledge, his son Virgilio, via a document bearing date 25 June 1988 and entitled Kasulatan ng Bilihang Tuluyan, sold the same property for the same amount of P50,000.00 to Edenbert Madrigal, a longtime neighbor of the Mallaris in the area. True enough, sometime thereafter, to Joses great shock, he was demanded by Edenbert Madrigal to vacate the subject property. It was then that Jose came to know for the first time of the sale of his property by his son Virgilio in favor of Edenbert Madrigal thru the aforementioned June 25, 1988 Kasulatan ng Bilihang Tuluyan. It was against the foregoing backdrop of events when, on 7 September 1988, in the Regional Trial Court at Olongapo City, Jose Mallari filed against his son Virgilio Mallari and Edenbert Madrigal the complaint for annulment, redemption and damages with prayer for preliminary injunction/temporary restraining order in this case. In his complaint, docketed in the same court as Civil Case No. 481-0-88 and raffled to Branch 72 thereof, plaintiff Jose Mallari prayed that the Deed of Absolute Sale executed by him and his wife Fermina on 22 October 1987 in favor of their son Virgilio Mallari be declared null and void, or, in the alternative, that he be allowed to redeem the subject property at a reasonable price. He likewise prayed the court for a writ of preliminary injunction and/or to issue ex parte a temporary restraining order enjoining defendants Virgilio Mallari and Edenbert Madrigal from entering, demolishing or introducing improvements on the subject properties, plus an award of actual and moral damages and attorneys fees. After due proceedings, the trial court, in a decision dated 29 September 1993, rendered judgment for plaintiff Jose Mallari by ordering defendant Edenbert Madrigal to allow the former to redeem the subject property based on the same amount it was sold to him by his co-defendant Virgilio Mallari, and for the two (2) defendants jointly and severally to pay plaintiff Jose Mallari
[3]

moral and exemplary damages, attorneys fees and the cost of suit. More specifically, the trial courts decision dispositively reads: PREMISES CONSIDERED, this Court finds and so holds that since plaintiff has sufficiently established preponderance of evidence against the defendants, judgment is hereby rendered ordering defendant Edenbert Madrigal to allow plaintiff to redeem the subject property based on the consideration of sale marked as Exhibit B; and for defendants jointly and severally to pay plaintiff (1) moral damages in the sum of P15,000.00; (2) exemplary damages of P5,000.00; (3) P10,000.00 as attorneys fees; and (4) to pay the cost of suit. All claims of defendants are denied for lack of merit. SO ORDERED. Obviously dissatisfied, both defendants went on appeal to the Court of Appeals whereat their recourse was docketed as CA-G.R. CV No. 45488. As stated at threshold hereof, the Court of Appeals, in a decision dated 15 October 1999, affirmed en toto the appealed decision of the trial court, thus:
[4]

WHEREFORE, finding that the lower court did not err in issuing the assailed Decision, this Court hereby AFFIRMS the same in its entirety. SO ORDERED. In time, appellants Virgilio Mallari and Edenbert Madrigal moved for a reconsideration but their motion was denied by the appellate court in its Resolution of 10 April 2000.
[5]

Hence, their present recourse, submitting for our consideration the following issues:
I

WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE QUESTIONED DEED OF SALE IS A MORTGAGE
II

WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT RULING THAT PETITIONER EDENBERT MADRIGAL WAS A BUYER ON (sic) GOOD FAITH

III

WHETHER OR NOT THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS DECISION AWARDING MORAL, EXEMPLARY DAMAGES AND ATTORNEYS FEES IN FAVOR OF PRIVATE RESPONDENT We DENY. Petitioners fault the two (2) courts below for construing the Deed of Absolute Sale executed by private respondent Jose Mallari and his wife Fermina Mallari in favor of their son Virgilio Mallari as an equitable mortgage and not as an outright sale as the document itself proclaims. We rule and so hold that both courts correctly construed the aforementioned Deed of Absolute Sale as an equitable mortgage and not a sale, as it purports to be. As aptly pointed out by the Court of Appeals in its assailed decision of 15 October 1999, to which we are in full accord: xxx. Evidence clearly shows that there was indeed no intent to sell the subject property. Rather, what transpired between the parties, who were father and son, was only a mortgage involving P50,000.00 over a portion of a lot with a house in Olongapo City. Circumstances surrounding the transaction between [respondent Jose Mallari] and [petitioner] Virgilio Mallari pointed only to one thing, that [respondent Jose Mallari] was in need of money to finance the US trip of his wife and he planned to mortgage the subject property with a bank but he was prevailed by his son, herein [petitioner] Virgilio Mallari, not to proceed with his plan and he gave a tempting offer to his father which the latter cannot refuse. In dire need of money, coupled with the fact that the one who offered help was his son who agreed to all the conditions such as, the property will not be disposed without the consent of [respondent]; petitioner [Virgilio Mallari]will renovate a room which will be used by his mother upon her return from the US; [petitioner Virgilio Mallari] will allow his sister to continue using a portion of the property as a store; one room will be for [petitioner Virgilio Mallaris] use while on vacation; and [respondent Jose Mallari] would redeem the property as soon as his finances will improve and for [petitioner Virgilio Mallari] to return the same, [respondent Jose Mallari] signed a document, a Deed of Sale, although the agreement was only a mortgage. The consideration appearing in the Deed of Sale is grossly inadequate considering the location of the property, the area and the fact that it was a two-storey building or house. If the intention was really to sell, why was there a need for [petitioner Virgilio Mallari] to seek the consent of [respondent Jose Mallari] if the property will be sold to third person? Consistent with their thesis that the aforesaid Deed of Absolute Sale executed by Virgilios parents is clearly a document of sale as its very

language unmistakably states, petitioners fault the trial court for receiving parol evidence to establish that the instrument in question is actually one of equitable mortgage. Indirectly, petitioners also put the Court of Appeals to task for giving weight to those evidence instead of rejecting them, conformably with the Parol Evidence Rule under Section 9, Rule 130 of the Rules of Court. We are not persuaded. To begin with, we cannot view the Deed of Absolute Sale in question in isolation of the circumstances under which the same was executed by Virgilios parents, more so in the light of his fathers disavowal of what the document, on its face, purports to state. Then, too, there is the ruling of this Court in Lustan vs. CA to the effect that even if the document appears to be a sale, parol evidence may be resorted to if the same does not express the true intent of the parties. In the very words of Lustan:
[6]

Even when a document appears on its face to be a sale, the owner of the property may prove that the contract is really a loan with mortgage by raising as an issue the fact that the document does not express the true intent of the parties. In this case, parol evidence then becomes competent and admissible to prove that the instrument was in truth and in fact given merely as a security for the repayment of a loan. And upon proof of the truth of such allegations, the court will enforce the agreement or understanding in consonance with the true intent of the parties at the time of the execution of the contract. In any event, at bottom of petitioners first submission is their inability to accept the factual findings of the two (2) courts below that the transaction between petitioner Virgilio Mallari and his parents, albeit denominated as one of absolute sale, is in reality an equitable mortgage. In short, petitioners would want us to revisit the factual findings of both courts, scrutinize and examine those findings anew and calibrate the validity of their conclusions on the basis of our own factual assessment. The desired task cannot be done. Time and again, we have made it clear that this Court is not a trier of facts, and that in a petition for review under Rule 45, only questions of law may be raised in this Court. To reiterate what we have said in Bernardo vs. CA:
[7]

The Supreme Courts jurisdiction is limited to reviewing errors of law that may have been committed by the lower court. The Supreme Court is not a trier of facts. It leaves these matters to the lower court, which have more opportunity and facilities to examine these matters. This same Court has declared that it is the policy of the Court

to defer to the factual findings of the trial judge, who has the advantage of directly observing the witnesses on the stand and to determine their demeanor whether they are telling or distorting the truth. And again in Remalante vs. Tibe:
[8]

The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised Rules of Court. The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the errors of law imputed to it, its findings of fact being conclusive. [Chan vs. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This Court has emphatically declared that it is not the function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court [Tiongco v. De la Merced, G.R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA 865; Banigued vs. Court of Appeals, G.R. No. L-47531, February 20, 1984, 127 SCRA 596]. We do acknowledge that the rule thus stated is not casts in stone. For sure, it admits of exceptions. So it is that in Insular Life Assurance Company, Ltd. Vs. CA, we wrote:
[9]

[i]t is a settled rule that in the exercise of the Supreme Courts power of review, the Court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the CA are conclusive and binding on the Court. However, the Court had recognized several exceptions to this rule, to wit: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to 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 petitioners main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.

Unfortunately for the petitioners, however, we have made a close hard look into this case and found none of the foregoing exceptions as obtaining herein to warrant our departure from the established norm. Nor are we inclined to disturb the findings of the two (2) courts below that petitioner Edenbert Madrigal is not buyer in good faith. Again, a reversal of such finding would impose upon us a reevaluation of the same set of facts appreciated by said courts in arriving at their common conclusion that Madrigal, contrary to what he proclaims himself to be, is not a buyer in good faith. At any rate, we nonetheless took the pains of reviewing the factors taken into account by both courts in rejecting Madrigals claim of being a buyer in good faith and found no reason to disagree with their rejection thereof. With the view we take of this case, petitioners lament against the award of moral and exemplary damages and attorneys fees in favor of respondent Jose Mallari, based as their lament is on their contention that respondent has no cause of action against them, must simply fall. WHEREFORE, the instant petition is hereby DENIED and the assailed decision and resolution of the Court of Appeals AFFIRMED. Costs against petitioners. SO ORDERED.
G.R. No. 103959 August 21, 1997 SPOUSES REGALADO SANTIAGO and ROSITA PALABYAB, JOSEFINA ARCEGA, petitioners, vs. THE HON. COURT OF APPEALS; THE HON. CAMILO C. MONTESA, JR., Presiding Judge of the RTC of Malolos, Bulacan, Branch 19, and QUIRICO ARCEGA, respondents.

HERMOSISIMA, JR., J.: Assailed in this petition for review under Rule 45 is the November 8, 1991 Decision of respondent Court of Appeals in CA-G.R. CV No. 25069. It affirmed in toto the judgment of Branch 19, Regional Trial Court of Malolos, Bulacan, in Civil Case No. 8470-M. The action therein sought to declare null and void the "Kasulatan Ng Bilihang Tuluyan Ng Lupa" executed on July 18, 1971 by the late Paula Arcega, sister of private respondent, in favor of herein petitioners over a

parcel of land consisting of 927 square meters, situated in Barangay Tabing Ilog, Marilao, Bulacan. Paula Arcega was the registered owner of that certain parcel of land covered by Transfer Certificate of Title No. T-115510. Her residential house stood there until 1970 when it was destroyed by a strong typhoon. On December 9, 1970, Paula Arcega executed what purported to be a deed of conditional sale over the land in favor of Josefina Arcega and the spouses Regalado Santiago and Rosita Palabyab, the petitioners herein, for and in consideration of P20,000.00. The vendees were supposed to pay P7,000.00 as downpayment. It was expressly provided that the vendor would execute and deliver to the vendees an absolute deed of sale upon full payment by the vendees of the unpaid balance of the purchase price of P13,000.00. Subsequently, on July 18, 1971, supposedly upon payment of the remaining balance, Paula Arcega executed a deed of absolute sale of the same parcel of land in favor of petitioners. Thereupon, on July 20, 1971, TCT No. T-115510, in the name of Paula Arcega, was cancelled and a new title, TCT No. T-148989 was issued in the name of petitioners. On April 10, 1985, Paula Arcega died single and without issue, leaving as heirs his two brothers, Narciso Arcega 1and private respondent Quirico Arcega. Incidentally, before Paula Arcega died, a house of four bedrooms with a total floor area of 225 square meters was built over the parcel of land in question. Significantly, the master's bedroom, with toilet and bath, was occupied by Paula Arcega until her death despite the execution of the alleged deed of absolute sale. The three other bedrooms, smaller than the master's bedroom, were occupied by the petitioners who were the supposed vendees in the sale. Private respondent Quirico Arcega, as heir of his deceased sister, filed on October 24, 1985 Civil Case No. 8470-M before the RTC of Malolos, Bulacan, seeing to declare null ad void the deed of sale executed by his sister during her lifetime in favor of the petitioners on the ground that said deed was fictitious since the purported consideration therefor of P20,000.00 was not actually paid by the vendees to his sister. Answering the complaint before the RTC, petitioner spouses averred that private respondent's cause of action was already barred by the statute of limitations considering that the disputed deed of absolute sale was executed in their favor on July 18, 1971, by which TCT No. 148989 was issued on July 20, 1971, while private respondent's complaint was filed in court only on October 24, 1985 or

more than fourteen (14) years from the time the cause of action accrued. Petitioners also deny that the sale was fictitious. They maintain that the purchase price was actually paid to Paula Arcega and that said amount was spent by the deceased in the construction of her three-door apartment on the parcel of land in question. Josefina Arcega, the other petitioner, was declared in default for failure to file her answer within the reglementary period. After trial, the RTC rendered judgment in favor of private respondent Quirico Arcega, viz.: (a) Declaring as null and void and without legal force and effect the "Kasulatan Ng Bilihang Tuluyan Ng Lupa" dated July 18, 1971 executed by the deceased Paula Arcega covering a parcel of land embraced under TCT No. T-115510 in favor of the defendants; (b) Declaring TCT No. T-148989 issued and registered in the names of defendants Josefina Arcega and spouses Regalado Santiago and Rosita Palabyab as null and void; (c) Ordering the reconveyance of the property including all improvements thereon covered by TCT No. T-115510 now TCT No. T-148989, to the plaintiff, subject to real estate mortgage with the Social Security System; and (d) To pay jointly and severally the amount of P10,000.00 as attorney's fees.
On the counterclaim, the same is hereby dismissed for lack of legal and/or factual basis 2 (p. 6, decision, pp. 295-300, rec.).

In ruling for private respondent, the trial court, as affirmed in toto by the public respondent Court of Appeals, found that:
On the basis of the evidence adduced, it appears that plaintiff Quirico Arcega and his brother Narciso Arcega are the only surviving heirs of the deceased Paula Arcega who on April 10, 1985 died single and without issue. Sometime in 1970, a strong typhoon destroyed the house of Paula Arcega and the latter together with the defendants decided to construct a new house. All the defendants 3 being members of the SSS, Paula Arcega deemed it wise to lend her title to them for purposes of loan with the SSS . She executed a deed of sale to effect the transfer of the property in the name of defendants and thereafter the later mortgaged the same for P30,000.00 but the amount actually released was only P25,000.00. Paula Arcega spent the initial amount of P30,000.000 out of her savings for the construction of the house sometime in 1971 and after the same and the proceeds of the loan were exhausted, the same was not as yet completed. Paula Arcega and her brothers sold the property which they inherited for P45,000.00 and the same all

went to the additional construction of the house, however, the said amount is not sufficient. Thereafter, Paula Arcega and her brothers sold another property which they inherited for P805,950.00 and one third (1/3) thereof went to Paula Arcega which she spent a portion of which for the finishing touches of the house. The house as finally finished in 1983 is worth more than P100,000.00 with a floor area of 225 square meters consisting of four bedrooms. A big master's bedroom complete with a bath and toilet was occupied by Paula Arcega up to the time of her death on April 10, 1985 and the other three smaller bedrooms are occupied by spouses, defendants Regalado Santiago and Rosita Palabyab, and Josefina Arcega . After the death of Paula Arcega defendant Josefina Arcega and Narciso Arcega constructed their own house at back portion of the lot in question.

There is a clear indication that the deed of sale which is unconscionably low for 937 square meters in favor of the defendants sometime on July 18, 1971 who are all members of the SSS, is merely designed as an accommodation for purposes of loan with the SSS. Paula Arcega cognizant of the shortage of funds in her possession in the amount of P30,000.00, deemed it wise to augment her funds for construction purposes by way of a mortgage with the SSS which only defendants could possibly effect they being members of the SSS. Since the SSS requires the collateral to be in the name of the mortgagors, Paula Arcega executed a simulated deed of sale (Kasulatan ng Bilihang Tuluyan ng Lupa) for P20,000.00 dated July 18, 1971 in favor of the defendants and the same was notarized by Atty. Luis Cuvin who emphatically claimed that no money was involved in the transaction as the parties have other agreement. The allegations of the defendants that the property was given to them (Kaloob) by the deceased has no evidentiary value. While it is true that Rosita Palabyab stayed with the deceased since childhood, the same cannot be said with respect to defendant Josefina Arcega, distant relative and a niece of the wife of Narciso Arcega, who stayed with the deceased sometime in 1966 at the age of 19 years and already working as a saleslady in Manila. Did the deceased indeed give defendant Josefina Arcega half of her property out of love and gratitude? Such circumstance appears illogical if not highly improbable. As a matter of fact defendant Josefna Arcega in her unguarded moment unwittingly told the truth that the couple (Regalado Santiago and Rosita Palabyab) had indeed borrowed the title and then mortgaged the same with the SSS as shown in her direct testimony which reads: Atty. Villanueva: Q Why did you say that the house is owned by the spouses Santiago but the lot is bought by you and Rosita?

A Because at that time, the couple borrowed the title and then mortgaged the property with the SSS. There is only one title but both of 5 us owned it. (TSN dtd. 19 Oct '88, p. 5)

On appeal, the public respondent Court of Appeals dismissed the same, affirming in all respects the RTC judgment. Hence, this petition. The petition is unmeritorious. Verily, this case is on all fours with Suntay v. Court of Appeals. 6 There, a certain Federico Suntay was the registered owner of a parcel of land in Sto. Nio, Hagonoy, Bulacan. A rice miller, Federico applied on September 30, 1960 as a miller-contractor of the then National Rice and Corn Corporation (NARIC), but his application was disapproved because he was tied up with several unpaid loans. For purposes of circumvention, he thought of allowing his nephew-lawyer, Rafael Suntay, to make the application for him. To achieve this, Rafael prepared a notarized Absolute Deed of Sale whereby Federico, for and in consideration of P20,000.00, conveyed to Rafael said parcel of land with all its existing structures. Upon the execution and registration of said deed, Certificate of Title No. 0-2015 in the name of Federico was cancelled and, in lieu thereof, TCT No. T-36714 was issued in the name of Rafael. Sometime in the months of June to August, 1969, 7 Federico requested Rafael to deliver back to him the owner's duplicate of the transfer certificate of title over the properties in question for he intended to use the property as collateral in securing a bank loan to finance the expansion of his rice mill. Rafael, however, without just cause, refused to deliver the title insisting that said property was "absolutely sold and conveyed [to him] . . . for a consideration of P20,000.00, Philippine currency, and for other valuable consideration." We therein ruled in favor of Federico Suntay and found that the deed of sale in question was merely an absolutely simulated contract for the purpose of accommodation and therefore void. In retrospect, we observed in that case: Indeed the most protuberant index of simulation is the complete absence of an attempt in any manner on the part of the late Rafael to assert his rights of ownership over the land and rice mill in question. After the sale, he should have entered the land and occupied the premises thereof. He did not even attempt to. If he stood as owner, he would have collected rentals from Federico for the use and occupation of the land and its improvements. All that the late Rafael had was a title in his name. xxx xxx xxx

. . . The fact that, notwithstanding the title transfer, Federico remained in actual possession, cultivation and occupation of the disputed lot from the time the deed of sale was executed until the present, is a circumstance which is unmistakably added proof of the fictitiousness of the said transfer, the same being contrary to the principle of 8 ownership.

In the case before us, while petitioners were able to occupy the property in question, they were relegated to a small bedroom without bath and toilet, 9 while Paula Arcega remained virtually in full possession of the completed house and lot using the big master's bedroom with bath and toilet up to the time of her death on April 10, 1985. 10If, indeed, the transaction entered into by the petitioners and the late Paula Arcega on July 18, 1971 was a veritable deed of absolute sale, as it was purported to be, then Ms. Arcega had no business whatsoever remaining in the property and, worse, to still occupy the big master's bedroom with all its amenities until her death on April 10, 1985. Definitely, and legitimate vendee of real property who paid for the property with good money will not accede to an arrangement whereby the vendor continues occupying the most favored room in the house while he or she, as new owner, endures the disgrace and absurdity of having to sleep in a small bedroom without bath and toilet as if he or she is a guest or a tenant in the house. In any case, if petitioners really stood as legitimate owners of the property, they would have collected rentals from Paula Arcega for the use and occupation of the master's bedroom as she would then be a mere lessee of the property in question. However, not a single piece of evidence was presented to show that this was the case. All told, the failure of petitioners to take exclusive possession of the property allegedly sold to them, or in the alternative, to collect rentals from the alleged vendee Paula Arcega, is contrary to the principle of ownership and a clear badge of simulation that renders the whole transaction void and without force and effect, pursuant to Article 1409 of the New Civil Code: The following contracts are inexistent and void from the beginning: xxx xxx xxx (2) Those which are absolutely simulated or fictitious; xxx xxx xxx The conceded fact that subject deed of absolute sale executed by Paula Arcega in favor of petitioners is a notarized document does not justify the petitioners' desired conclusion that said sale is undoubtedly a true conveyance to which the parties thereto are irrevocably and undeniably bound. To be considered with great significance is the fact that Atty. Luis Cuvin who notarized the deed disclaimed the truthfulness of the document when he testified that "NO MONEY

WAS INVOLVED IN THE TRANSACTION." 11 Furthermore, though the notarization of the deed of sale in question vests in its favor the presumption of regularity, it is not the intention nor the function of the notary public to validate and make binding an instrument never, in the first place, intended to have any binding legal effect upon the parties thereto. The intention of the parties still is and always will be the primary consideration in determining the true nature of a contract. Here, the parties to the "Kasulatan ng Bilihang Tuluyan ng Lupa," as shown by the evidence and accompanying circumstances, never intended to convey the property thereto from one party to the other for valuable consideration. Rather, the transaction was merely used to facilitate a loan with the SSS with petitioners-mortgagors using the property in question, the title to which they were able to register in their names through the simulated sale, as collateral. The fact that petitioners were able to secure a title in their names, TCT No. 148989, did not operate to vest upon petitioners ownership over Paula Arcega's property. That act has never been recognized as a mode of acquiring ownership. As a matter of fact, even the original registration of immovable property does not vest title thereto. 12The Torrens system does not create or vest title. It only confirms and records title already existing and vested. It does not protect a usurper from the true owner. It cannot be a shield for the commission of fraud. It does not permit one to enrich himself at the expense of another. 13 Where one does not have any rightful claim over a real property, the Torrens system of registration can confirm or record nothing. Petitioners, nevertheless, insist that both the trial court and the respondent court should have followed the Parole Evidence Rule and prevented evidence, like the testimony of Notary Public, Atty. Luis Cuvin, private respondent Quirico Arcega, among others, which impugned the two notarized deeds of sale. The rule on parole evidence under Section 9, Rule 130 is qualified by the following exceptions: However, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading: (a) An intrinsic ambiguity, mistake or imperfection in the written agreement; (b) The failure of the written agreement to express the true intent and agreement of the parties thereto; (c) The validity of the written agreement; or

(d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement. The term "agreement" includes wills." In this case, private respondent Quirico Arcega was able to put in issue in his complaint before the Regional Trial Court the validity of the subject deeds of sale for being a simulated transaction: 6. That in 1971, the defendants, who by then were already employed in private firms and had become members of the Social Security System by virtue of their respective employments, decided among themselves to build a new house on the property of PAULA ARCEGA above described and to borrow money from the Social Security System to finance the proposed construction. 7. That in order to secure the loan from the Social Security System it was necessary that the lot on which the proposed house would be erected should be registered and titled in the names of the defendants. xxx xxx xxx 9. That in conformity with the above plans and schemes of the defendants, they made PAULA ARCEGA execute and sign a fictitious, hence null and void "KASULATAN NG BILIHANG TULUYAN NG LUPA" on July 18, 1971, before Notary Public LUIS CUVIN, of Bulacan and entered in his register as Doc. No. 253, Page No. 52, Book No. XIX, Series of 1971, by which PAULA ARCEGA purportedly conveyed(sic) in favor of the defendants JOSEFINA ARCEGA and the spouse REGALADO SANTIAGO and ROSITA PALABYAB, the whole parcel of land above described for the sum of TWENTY THOUSAND (P20,000.00), as consideration which was not actually, then or thereafter paid either wholly or partially. A copy of said document is hereto attached as Annex "B" and made integral part hereof. 10. That defendants pursuing their unlawful scheme registered the said void and inexistent "KASULATAN NG BILIHANG TULUYAN NG LUPA" with the office of the Register of Deeds of Bulacan, procured the cancellation of Transfer Certificate of Title No. 115510, in the name of PAULA ARCEGA and the issuance of Transfer Certificate

of Title No. 148989, in their names, a xeroxed copy of which is hereto attached as Annex "C" and made integral part hereof.
11. That still in furtherance of their unjust and unlawful schemes, defendants secured a loan from the Social Security System in the amount of P30,000.00, securing the payment thereof with a Real Estate Mortgage on the above-described property then already titled 14 in their names as aforestated (pp. 2-3, complaint, pp. 1-5, rec.).

Moreover, the parol evidence rule may be waived by failure to invoke it, as by failure to object to the introduction of parol evidence. And, where a party who is entitled to the benefit of the rule waives the benefit thereof by allowing such evidence to be received without objection and without any effort to have it stricken from the minutes or disregarded by the trial court, he cannot, after the trial has closed and the case has been decided against him, invoke the rule in order to secure a reversal of the judgment by an appellate court. 15 Here, the records are devoid of any indication that petitioners ever objected to the admissibility of parole evidence introduced by the private respondent in open court. 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. 16 Petitioners have no one to blame but themselves in this regard. Finally, petitioners argue that private respondent's complaint filed before the trial court on October 24, 1985 is already barred by the statute of limitations and laches considering that the deed of absolute sale was executed in their favor by the deceased Paula Arcega on July 20, 1971. Indeed, more than fourteen (14) years had elapsed from the time his cause of action accrued to the time that the complaint was filed. Articles 1144 and 1391 of the New Civil Code provide: Art. 1141. The following actions must be brought within ten years from the time the right of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment. Art. 1391. The action for annulment shall be brought within four years. This period shall begin:

In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases. In cases of mistake or fraud, from the time of the discovery of the same. And when the action refers to contracts entered into by minors or other incapacitated persons, from the time the guardianship ceases. This submission is utterly without merit, the pertinent provision being Article 1410 of the New Civil Code which provides unequivocably that "[T]he action or defense for the declaration of the inexistence of a contract does not prescribe." 17 As for laches, its essence is the failure or neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier; it is the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. 18 But there is, to be sure, no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances. The question of laches is addressed to the sound discretion of the court, and since laches is an equitable doctrine, its application is controlled by equitable considerations. It cannot be worked to defeat justice or to perpetrate fraud and injustice.19 In the case under consideration, it would not only be impractical but well-nigh unjust and patently inequitous to apply laches against private respondent and vest ownership over a valuable piece of real property in favor of petitioners by virtue of an absolutely simulated deed of sale never, in the first place, meant to convey any right over the subject property. It is the better rule that courts, under the principle of equity, will not be guided or bound strictly by the statute of limitations or the doctrine of laches when to do so, manifest wrong or injustice would result.20 WHEREFORE, premises considered, the petition is hereby DENIED with costs against petitioners. SO ORDERED. G.R. No. 94563 March 5, 1991 MEYNARDO C. POLICARPIO and LOURDES POLICARPIO, petitioners, vs. HONORABLE COURT OF APPEALS, EVELYN Q. CATABAS, ROMULO Q. CATABAS and CLEMENTE CATABAS, respondents.

Julian S. Yap for petitioners. Manuel S. Fonacier, Jr. for private respondents.

GUTIERREZ, JR., J.:p This petition asks for the setting aside of the April 30, 1990 decision of the Court of Appeals in CA-G.R. Civil Case No. 16069 the dispositive portion of which reads: WHEREFORE, the appealed decision is SET ASIDE and in lieu thereof another one is hereby entered. (1) Ordering appellees, (1) to authorize Philippine Commercial International Bank (PCIB) to release their mortgaged TCT No. 501812 upon payment by Urban Development Bank (URBAN Bank) of their mortgage loan obligation with said PCIB; and thereafter (2) to transfer the title in appellant's name; (2) Ordering appellants, (1) to pay appellees a monthly rent of P2,500.00 for their use of the subject property during the period from December 18, 1983 to the filing of the complaint a quo on January 5, 1985 when the judicial demand was made on appellees, or P31,250 for 125 months at 12% interestper annum; (2) to reimburse appellees P2,812.60 for the capital gains tax, stamps and other related expenses paid for by appellees; and (3) to pay and/or authorize Urban Bank to pay to appellees the proceeds of the loan granted to appellants to the extent of P145,000.00 (unpaid balance of the purchase price) less whatever amount is to be paid to PCIB for the outstanding mortgage loan obligation of appellees with said bank. (Rollo, p. 54) On November 25,1983, petitioners-spouses Meynardo C. Policarpio and Lourdes Policarpio and private respondents Evelyn Romulo and Clemente, all surnamed Catabas executed a "Contract to Sell" whereby the private respondents agreed to buy and the petitioners-spouses to sell a residential lot of about 300 square meters with a house and other improvements located at Servillana Street, UE Village, Cainta, Rizal. The property is covered by Transfer Certificate of Title No. 501812 Registry of Deeds, Province of Rizal. The agreed purchase price was the amount of P270,000 payable as follows: (1) P10,000.00 upon signing of the Contract to Sell; and (2) the balance of P260,000.00 to be paid from the

proceeds of the private respondents' PAG-IBIG loan thru its designated bank, the Urban Bank and which they guarantee and warrant to be approved and thereafter release on or before the first week of December 1983; and to deliver to the petitioners-spouses the whole amount of P260,000.00 on or before the first week of December 1983. The "Contract to Sell" also provides that failure on the part of the vendees to pay the balance on the first week of December, 1983 will automatically annul the contract and the vendors shall immediately return the downpayment and that after full payment of the purchase price the vendors shall execute a deed of absolute sale in favor of the vendee. The private respondents were not able to pay the balance price on the first week of December 1983. However, the petitioners-spouses did not return the P10,000 downpayment. The private respondents continued to make partial payments which were received by the petitioners-spouses. All in all, the private respondents made partial payments of P75,000.00 broken down as follows: (1) P10,000.00 at the time of the execution of the Contract to Sell; (2) P50,000.00 on May 9, 1984; (3) Pl0,000.00 on June 4, 1984 and (4) P5,000.00 on June 7, 1984. On April 9, 1984, the parties executed a deed of absolute sale over the subject property. Thereafter, the petitioners-spouses delivered physical possession of the property to the private respondents. On March 1, 1985, the private respondents filed with the Regional Trial Court of Pasig, Metro Manila a case for specific performance and damages against the petitioners-spouses. They claimed that in view of the fact that their PAG-IBIG loan was not processed on time without fault on their part, the parties executed a Deed of Absolute Sale over the same property. They also claimed that the balance of P195,000.00 which is to be paid out of the proceeds of the PAG-IBIG loan was already processed, approved and ready for availment provided all the required documents and title to the property in the names of the private respondents are delivered to the Urban Bank. However, the petitioners-spouses motivated by a desire to increase the contract price refused to deliver and transfer the title of the property to the private respondents. They, therefore, prayed that the petitioners- spouses be ordered to confirm the transfer to the private respondents of Transfer Certificate of Title No. 501812 covering the property, subject matter of the "Deed of Absolute Sale" in order that the same may be used as collateral for the approved PAG-IBIG loan; to execute all other documents and furnish the private respondents certificate of clearance pursuant to existing laws so as to secure TCT No. 501812 in the name of the private respondents. In addition, the private respondents asked for damages.

On the other hand, the petitioners-spouses averred that the Contract to Sell was automatically cancelled when the private respondents violated the terms of the contract: (1) the balance of the purchase price was not paid on or before the first week of December 1983; (2) the capital gains tax and documentary stamps for the sale of the property were not paid by the private respondents. They, however, allowed the private respondents to occupy the property when the latter agreed to the following terms: a) The purchase price of the property shad be adjusted to P330,000.00 to cope with the adverse effects of devaluation and full payment of the remaining balance shall be on or before May 30, 1984. b) That within one (1) month plaintiffs (private respondents) would secure from other private sources at least P90,000.00 so that defendants (petitioners) could pay their loan with the PCIB where the subject property is mortgaged to enable the plaintiffs to pursue their PAG-IBIG loan, if they still so desire with the defendants' title as security. (page 35, Rollo) In accordance with the new terms, the parties allegedly executed the simulated Absolute Deed of Sale dated April 9, 1984 and the petitioners-spouses accepted additional partial payment of P50,000.00. The consideration stated in the deed of sale was undervalued to only P230,000.00 upon request of the private respondents in order to save on expenses related to the transactions and also upon the private respondents' representation that P230,000.00 was the maximum amount of loan they could obtain. However, the private respondents failed to pay the remaining balance on or before May 30, 1984. Nevertheless, the private respondents paid on two separate occasions the amount of P15,000.00 which the petitioners-spouses accepted when the former promised that full payment would be made within July 1984, regardless of the outcome of their PAG-IBIG loan. The petitioners-spouses asserted that the private respondents' failure to obtain their PAG-IBIG loan was their own fault and that the private respondents have never acquired title or ownership of the subject property despite the Deed of Absolute Sale. They averred that the Deed is subject to the terms and conditions of the Contract to Sell and/or the additional agreement of the parties. They also filed a counterclaim for damages. After due trial, the trial court found for the petitioners-spouses. The complaint was dismissed. The dispositive portion of the decision reads: WHEREFORE, and in view of the foregoing considerations, decision is hereby rendered dismissing plaintiffs' Complaint and rendering

judgment in favor of defendants on their compulsory counterclaim, as follows: 1) The Contract to Sell which has been superseded by a simulated Deed of Absolute Sale entered into by and between the parties are (sic) hereby declared of no further legal force and effect, provided that the P75,000.00 which the plaintiffs paid as downpayment for subject property shall, up to that amount, be applied to the pecuniary awards in favor of defendants, to wit: 2) Plaintiffs are directed to vacate defendants' house and lot No. 22, Block 5 Servillana St., UE Village, Cainta, Rizal, and to pay to defendants P2,500.00 monthly as reasonable value for the use and occupation of the same since December 18, 1983 until possession thereof shall have been restored to the defendants; 3) Plaintiffs shall reimburse defendants the sum of P6,500.00 paid by the latter as downpayment for a lot in Mandaluyong, which was, however, forfeited, with 12% interest thereon per annum from date said downpayment was made until the same shall have been fully reimbursed; 4) Plaintiffs shall pay to defendants P30,000.00 as moral damages; P20,000.00 as exemplary damages; P30,000.00 for and as attorney's fees; and 5) Costs of suit. (Rollo, pp. 91-92) As stated earlier, the trial court's decision was reversed and set aside by the Court of Appeals. A motion for reconsideration was denied. Hence, this petition. In view of the conflicting findings of facts of the trial court and the appellate court we have decided to review the evidence on record in order to arrive at the correct findings based on the record. (Robleza v. Court of Appeals, 174 SCRA 354 [1989]). It is to be observed that the parties' conflicting evidence centers on the Contract to Sell and Deed of Absolute Sale executed by the parties on April 9, 1984. The parties introduced conflicting testimonies regarding the true nature of the subject documents. This, in effect results in the non-application of the Parol Evidence Rule under Section 9, Rule 130 of the Rules of Court, to wit:

Sec. 9. Evidence of written agreements.When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement. The record shows that neither of the parties objected to the different testimonies. Hence, the trial court had no option but to admit these conflicting testimonies. The issue was, therefore, reduced to the credibility of witnesses. After a thorough examination of the record we are constrained to reverse the findings of the appellate court. The appellate court's conclusion that the petitioners-spouses were at fault in the non-release of the private respondents' PAG-IBIG loan thru Urban Bank, has no factual basis. The subject property was mortgaged to the Philippine Commercial and Industrial Bank (PCIB). This fact was known to the private respondents. In such a case, it may be assumed that the PCIB would not release the title of the land without first getting paid. Consequently, the petitioners-spouses' contention that payment of the balance price of the subject parcel of land was not dependent upon the release of their title from the PCIB which would be used as collateral by the private respondents to secure their PAG-IBIG loan thru Urban Bank, is more credible. Moreover, the Urban Bank letter signed by Assistant Manager Ms. Liza M. de los Reyes to PCIB dated July 2, 1984 (Exhibits G and G-1) shows that there is no basis for the conclusion that the petitioner-spouses " . . . reneged on their agreement that Urban Bank would pay their mortgage loan obligation with PCIB so that their TCT No. 501812 over the subject property could be released free of encumbrance and transferred in appellants' name as the latter intended to use the title as collateral for their loan from Urban Bank." (page 45, Rollo) The pertinent portion of the letter reads: This is with reference to the real estate property of Meynardo C. Policarpio located at Servillana St., U.E. Employees Village, Cainta, Rizal more particularly described as Lot 22, Block 5 covered by TCT No. 501812, which is presently mortgaged in your favor to secure his loan with you. Please be advised that Miss Evelyn Q. Catabas, who is purchasing the above-mentioned property has an approved Pag-Ibig loan with

us, part of which shall be used to settle Mr. Policarpio's loan with you. Per the request of our client, with the conformity of Mr. Policarpio herein given, we shall release to you the amount of NINETY SIX THOUSAND THREE HUNDRED THIRTY SEVEN & 94/100 (P96,337.94) PESOS upon transfer of title under the borrower's name, registration of mortgage in our favor and upon loan approval and takeout of National Home Mortgage Finance Corporation. Any difference between the above-mentioned amount and the outstanding obligation shall be for the account of Miss Catabas and shall be transacted directly with you. This letter supersedes our letter of Guaranty to Mr. Policarpio on February 01, 1984. We trust that this is satisfactory to you. Thank you. Very truly yours, URBAN DEVELOPMENT BANK. (Rollo, pp. 45-46) We find no relation between the supposed agreement on the part of the petitioners-spouses to have the payment of the balance price dependent on the release of the PAG-IBIG loan and their alleged obligation to have the title released by PCIB. On the contrary, this letter enhances the stand of the petitioners-spouses that they signified their conformity to the letter upon the request of the private respondents to facilitate the release of the PAG-IBIG loan. According to the appellate court, the letter also disproves petitioners-spouses' "claim that the appellants (private respondents) failed or refused to pay the defendants (petitioners-spouses) the P90,000.00 on time with which to pay the latter's PCIB loan resulting in the plaintiffs' (private respondents') failure to secure the release of their PAG-IBIG loan of P260,000.00 which is due the defendants (petitioner-spouses) on or before the first week of December, 1983 as stipulated in the Contract to Sell" (Paragraph 15, Answer, Record, p. 35). (Page 46, Rollo) We find the appellate court's conclusion unwarranted. The evidence on record shows that the private respondents themselves did not blame the petitionersspouses for the non-release of the PAG-IBIG loan on December 1983 and that it was "due to time constraint the loan was not approved and released before the deadline to pay the balance which expired the first week of December 1983." (page 82, Rollo) In fact in their Memorandum the private respondents stated that: "private respondents failed to meet the "First Week of December 1983" deadline

so that the "Contract to Sell" would have been cancelled as therein provided were it not for the fact that petitioners still pursued the sale and private respondents were still willing to buy." (pp. 145-146, Rollo) Moreover, the appellate court gave credence to the private respondents' contention that the petitioners-spouses' main reason for reneging on the interbank arrangement between Urban Bank and PCIB was due to the latter's insistence that the price of the subject property shall be increased to P330,000.00. On the other hand, the petitioners-spouses maintain that there was an oral agreement between them and the private respondents as regards the increased price. On this matter, we are inclined to give more credence to the trial court's findings as they are borne by the evidence on record, to wit: The Court finds credence in the defendants' claim that the parties verbally agreed to increase the consideration to P330,000.00. The price under the Contract to Sell which precluded transfer of possession to the plaintiffs until after full payment in effect, was P270,000.00. The default of the plaintiffs under the said contract, the non-availment by the defendants of the automatic cancellation clause when the plaintiffs defaulted; the moving of the plaintiffs into the premises on December 18, 1983 invariably necessitating the defendants to transfer elsewhere, the devaluation of the peso, the longer waiting period imposed upon the defendants, their conformity to the letter from Urban Bank (Exh. "G") to PCIB and, finally, the execution of the Deed of Absolute Sale even without plaintiffs paying for the price in full all taken together in their entirety, swing the pendulum of credibility towards the fact of agreement of the parties to increase the price. Besides, it is highly improbable that after all the rigors and the hassles the defendants had been exposed to, before and after the execution of the simulated Deed of Absolute Sale, the defendants would agree to lower the price of P270,000.00 in the Contract to sell to P230,000.00 in the Deed of Absolute Sale. (Rollo, p. 89) xxx xxx xxx Furthermore the mere fact that the plaintiffs offered in their letter (Exh. "L") dated November 23, 1984 to pay P312,000.00 which the defendants rejectedreinforces the truth of defendants' claim

that the parties, indeed, verbally agreed to increase the pace to P330,000.00. This intention must prevail and the eleventh-hour repudiation by the plaintiffs, who under the present situation would continue enriching themselves at the expense of the defendants cannot prevent its enforcement. At any rate, the Deed of Absolute Sale executed by and between the parties is admittedly simulated, whereupon it cannot be a valid basis as in this case, for an action for Specific Performance. (Rollo, p. 90) It is to be noted that the appellate court questions the existence of Exhibit "L". The appellate court states: The trial court revealed the pivotal factor upon which it based its choice in reposing greater belief in appellee Meynardo Policarpio's testimony. It is this factor, the trial court said, that reinforced the truth of appellee's claim regarding the existence of an oral agreement to increase the purchase price. Said the trial court: xxx xxx xxx Unfortunately, no such 'Exh. "L" exists in the record. The actual 'Exh. "L" included among the documentary evidence on record is a letter dated November 7, 1985 signed jointly by Urban Bank's Assistant Vice-President Prudeno L. Natividad and Mortgage Supervisor Marie Celine R. Gorres and addressed to appellee Evelyn Catabas. (Rollo, pp. 48-49) The record, however, reveals the existence of Exhibit L. In fact, the private respondents themselves confirm the existence of the November 23, 1984 letter which they reproduced in their Memorandum, to wit: We are aware of our mutual endeavor to exhaust all possible means to find a solution to our problem of finalizing our purchase of your house and lot here at Servillana Street, U.E. Village, Cainta, Rizal, more particularly described as Lot 22 Block 5, covered by TCT No. 501812, towards maintaining our friendly relation and avoiding a possible litigation for our mutual benefit. For our part therefore, to assuage your feeling which obviously is influenced by the present economic situation and for a higher price on said property, notwithstanding the agreed contract price of P270,000.00, we are offering our hand in friendship and propose to increase the price to a grand total of P312,000.00, no matter our difficulties, I have to confess, to be paid as follows: (Rollo, p. 147)

The tone of the letter gives credence to the petitioners-spouses' contention that the Absolute Deed of Sale was only simulated, its execution only to facilitate the release of the private respondents' PAG-IBIG loan from Urban Bank. It also gives credence to the petitioners-spouses' contention that they agreed to push thru with the sale provided the price would be raised to P330,000.00. For, why then, did the respondents refer to ". . . our problem of finalizing our purchase . . ." and offer P312,000.00 which was beyond the initial price of the subject property of P270,000.00. We rule that the findings of facts of the trial court which are at variance with those of the appellate court are more in consonance with the evidence on record. The trial court stated: The parties have common interests on the property. The defendants were interested to sell it in order to settle their obligation with PCIB and to be able to buy another property. The plaintiffs were interested to buy the property but were not ready to pay immediately the agreed consideration. Plaintiffs were depending on the loan that they jointly applied for with PAG-IBIG. In fact, if only to augment their resources for its purpose, plaintiff Clemente Catabas who used to work with the Philippine Long Distance Telephone Company had to prematurely retire in order to collect his retirement benefits. Obviously, the defendants knew and took into consideration this financial handicap of the plaintiffs in the execution of the Contract to Sell. Hence, the grace period to pay the balance of P260,000.00 up to the first week of December 1983. By then, the plaintiffs were expecting the release of the loan they applied for which was being followed up by their acquaintance at Urban Bank. The deadline came and passed but no payment was made. The contract provided that failure to pay the balance will "automatically cancel this contract and the vendor shall immediately return the downpayment of P10,000.00, to the Vendees" but the transaction was not called off nor the Pl0,000.00 returned. Evidently, the parties wanted the sale to go through. Defendant Meynardo Policarpio testified, and it was not denied, that the plaintiffs requested the defendants to wait a little longer as the person supposed to help hasten the release of the loan was busy since it was Christmas time then, and to that request, the defendants acceded. This is the logical explanation of the plaintiffs moving into the premises on December 18, 1983. It is at this point that the Court is impressed with the defendants' gesture of good faith and accommodation. For although the Contract to Sell provided: "Vendees shallnot take possession of the property until

aforesaid balance of P260,000.00 shall have been paid" (emphasis supplied), the defendants, barely two (2) weeks after the contract should have been automatically cancelled for the non-payment of the balance, allowed the plaintiffs to move in even if they have to rent another place to stay. Against this backdrop, there was no difficulty for the plaintiffs insuring the defendants' cooperation to accelerate the release of the loan. Hence, when defendants were told it was necessary for them to signify their conformity to the letter (Exhs. "G", "6") sent by Urban Bank to PCIB, they readily obliged. The same alacrity was displayed regarding the Deed of Absolute Sale without which Urban Bank would not release the loan. Again, at this point, the defendants' good faith and implicit trust in the plaintiffs were generously portrayed. Although the consideration of P230,000.00 stated in the Deed of Absolute Sale was not fully paid (the plaintiffs had paid only P75,000.00, with the amounts of P10,000.00 and P5,000.00, being paid after April 9, 1984) the defendants executed the document. True, there was the motivation for the defendants to sign because of the plaintiffs' verbal conformity that the selling price would be increased to P330,000.00; but this was still a contingency wholly dependent on plaintiff s word of honor, while the defendants' leverage had become a fait accompliupon affixing their signatures due to the absolute nature of the sale and physical possession of the premises delivered to the plaintiffs. Up to this stage, the defendants have done everything within their capability to help the plaintiffs effect the release of their loan. At this point, too, the only impediment to Urban Bank's release of the loan was the non-delivery of the title. It was a hitch that was later to spell the non-release of the loan which plaintiffs impute, was due to the fault of the defendants. In the institution of the Complaint, the plaintiffs were of the impression that the delivery of the title to Urban Bank was the duty of the defendants which they failed to discharge and for which, consequently, they should be held accountable. This frame of mind while impressive at first blush, cannot be countenanced and finds no support from the evidence adduced. The plaintiffs fully knew from the inception of the transaction that the defendants' title was mortgaged with PCIB (Romulo Catabas, TSN, March 10, 1984 p. 20). Much as they would want to, the defendants

could not just get the title from PCIB without the mortgage balance being paid. Precisely, the letter (Exh. "G", also Exh. "6") itself of the Urban Bank bearing defendants' signatures affixed thereon, at the behest of the plaintiffs themselves, was directed to PCIB requesting the latter for the delivery of the title, among other things, before the former pays off the mortgage balance thereat as a pre-condition for the release of the loan. The plaintiffs are now in estoppel to assumejust because it is expedient to do so a posture inconsistent with this clear narration of facts. To hold the defendants responsible for an act that PCIB alone could do is decidedly illogical and puerile (Rollo, pp. 85-87) Moreover, under the contract to sell, it is provided therein that failure on the part of the vendees (private respondents) to pay the balance of the price on the first week of December 1983 will automatically cancel the contract. The private respondents' obligation to pay was a suspensive condition to the obligation of the petitioners-spouses to sell and deliver the subject property. Since, admittedly, the private respondents failed on their obligation to pay, this rendered the contract to sell ineffective and without force and effect. (See Spouses Eduardo and Ann Agustin v. Court of Appeals G.R. No. 84751, June 6, 1990) The subsequent execution of the deed of sale did not in any manner transfer ownership of the property to the private respondents. It is clear that the deed of sale was executed merely to facilitate the release of the private respondents' PAG-IBIG loan from the Urban Bank and not for the purpose of actually transferring ownership. With these findings, we rule that the private respondents are not entitled to specific performance. The obligation in a contract of sale is reciprocal. (Cortez v. Bibao and Borromeo 41 Phil. 298 [1920]). Since, the vendees admittedly had not paid the full price of the property which was their obligation under the subject contract they cannot now compel performance of the said contract. Under the facts of the case, we agree with the trial court that the petitionersspouses are entitled to moral damages, to wit: The defendants' claim of the trauma they suffered upon being sued by the plaintiffs inspires belief. After doing everything in good faith within their capability to help accelerate the release of plaintiffs' loan, their shock was understandable when the plaintiffs, in brazen disregard of their failure to comply with their contractual obligation, suddenly filed the instant complaint. Rather than being commended, as should have been expected, for walking the Biblical second mile

in generous accommodation of the plaintiffs, the defendants were instead unceremoniously brought to Court. (Rollo, p. 90) However, we find the award of P30,000.00 as moral damages excessive. In the case of Prudenciado v. Alliance Transport System, Inc. (148 SCRA 440 [1987]) cited in Radio Communications of the Philippines, Inc. (RCPI), et al. v. Rodriguez, G.R. No. 83768 February 28,1990 we held that ". . . moral damages are emphatically not intended to enrich a complainant at the expense of a defendant. They are accorded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone by reason of the defendants' culpable action. The award of moral damages must be proportionate to the suffering inflicted." We rule that the amount of P15,000.00 as moral damages in favor of the petitioners-spouses would be reasonable considering the facts and circumstances of the case. The award of P20,000.00 exemplary damages is not proper considering that there is no showing that the private respondents acted in "a wanton, fraudulent, reckless, oppressive, or malevolent manner." (Article 2232, Civil Code).

Finally, we find the award of attorney's fees in favor of the petitioners-spouses unwarranted. In the case of Radio Communications of the Philippines, Inc. v. Rodriguez, supra, citing the case of Stronghold Insurance Company, Inc. v. Court of Appeals, 173 SCRA 619 [1989] we ruled: In Abrogar v. Intermediate Appellate Court (G.R. No. 67970, January 15, 1988, 157 SCRA 57) the Court had occasion to state that '[t]he reason for the award of attorney's fees must be stated in the text of the court's decision, otherwise, if it is stated only in the dispositive portion of the decision, the same shall be disallowed on appeal. (at p. 61, citing Mirasol v. dela Cruz, G.R. No. L-32552, July 31, 1978, 84 SCRA 337). Nowhere does the text of the decision of the trial court mention the reason for the award of attorney's fees. The trial court's decision failed to justify the award of P30,000.00 as attorney's fees. The award of attorney's fees must, therefore, be deleted. (See also Spouses Eduardo and Ann Agustin v. Court of Appeals, supra). WHEREFORE, the questioned decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE. The decision of the Regional Trial Court Pasig, Metro Manila is hereby REINSTATED except that the award for moral damages

is reduced to P15,000.00 and the awards for exemplary damages in the amount of P20,000.00 and attorney's fees in the amount of P30,000.00 are deleted. SO ORDERED.