c. Parol Evidence

PAROL EVIDENCE RULE

PAROL EVIDENCE: any evidence aliunde (extraneous evidence), whether oral or written, which is intended or tends to vary or contradict a complete and enforceable agreement embodied in a document.

EVIDENCE ALIUNDE: extrinsic evidence that may refer to testimonial, real or documentary evidence

General Rule: 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.

The term “agreement” includes wills.

An express trust concerning an immovable or any interest therein may not be proved by parol evidence. (Civil Code of the Philippines, Art. 1443)

Exception: A party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in a verified pleading any of the following:

• An intrinsic ambiguity, mistake or imperfection in the written agreement;
• The failure of the written agreement to express the true intent and agreement of the parties thereto;
• The validity of the written agreement; or
• The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement. (Rule 130, Sec. 10)

Basis for the Rule

The parol evidence rule is based upon the consideration that when the parties have reduced their agreement on a particular matter into writing, all their previous and contemporaneous agreements on the matter are merged therein, hence evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict, or defeat the operation of a valid document.

The reason for the parol evidence rule is the presumption that when the parties have reduced their agreement to writing, they have made such writing the only repository and memorial of the truth, and whatever is not found in the writing must be understood to have been waived or abandoned. (Cruz v. CA, G.R. No. 79962, 1990)

The rule forbidding the admission of parol or extrinsic evidence to alter, vary, or contradict a written instrument does not apply so as to prohibit the establishment by parol of an agreement between the parties to a writing entered into subsequent to the time when the written instrument was executed, notwithstanding such agreement may have the effect of adding to, changing, modifying, or even altogether abrogating the contract of the parties as evidenced by the writing; for the parol evidence does not in any way deny that the original agreement of the parties was that which the writing purports to express, but merely goes to show that the parties have exercised their right to change or abrogate the same, or to make a new and independent contract. (Canuto v. Mariano, G.R. No. L-11346, 1918)

Application of the parol evidence rule

When Parol Evidence Rule Applies

• Existence of a valid contract;
• The terms of the agreement must be in writing. This may refer to either public or private writing;
• The dispute is between parties and their successors in interest; and/or
• There is dispute as to the terms of the agreement with the party basing his claim or asserting a right originating in the instrument or the relation established thereby.

The parol evidence rule becomes operative when the issues in litigation are the terms of a written agreement. (Riano, p. 176)

No express trust concerning an immovable or any interest therein may be proved by parol evidence (Civil Code, Art. 1443)

The parol evidence rule is predicated on the existence of a document embodying the terms of an agreement. A receipt is not such a document as it merely attests to the receipt of money and it is not and could have not been intended by the parties to be the sole memorial of their agreement. (Cruz v. CA, G.R. No. 79962, 1990)

For purposes of the parol evidence rule, a person who claims to be the beneficiary of an alleged stipulation pour autrui in a contract (such as petitioners) may be considered a party to that contract. It has been held that a third party who avails himself of a stipulation pour autrui under a contract becomes a party to that contract. This is why under Article 1311, a beneficiary of a stipulation pour autrui is required to communicate his acceptance to the obligor before its revocation. Moreover, to preclude the application of Parol Evidence Rule, it must be shown that “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.” A beneficiary of a stipulation pour autrui obviously bases his claim on the contract. He therefore cannot claim to be a stranger to the contract and resist the application of the Parol Evidence Rule. (Heirs of Mario Pacres v. Heirs of Cecilla Ygoña, G.R. No. 174719, 2010)

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. (Lechugas v. CA, G.R. Nos. L-39972 & L-40300, 1986)

The parol evidence rule does not apply to persons who are not parties to a deed and do not base their claim on it. (Eagleridge Development Corporation v. Cameron Granville, G.R. No. 204700, 2014)

For the parol evidence rule to apply, a written contract need not be in any particular form, or be signed by both parties. What is required is that the agreement be in writing since written evidence is so much more certain and accurate than that which rests in fleeting memory only. (Inciong, Jr. v. CA, G.R. No. 96405, 1996)

The parol evidence rule provides that “when the terms of an agreement have been reduced into writing, it is considered 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.” In this case, the parties entered into a compromise agreement to put an end to the litigation between them. Nothing in the quitclaim, however, indicates that the compromise amount respectively paid to petitioners included separation pay. Since there is no evidence that the compromise amount included separation pay, the services of petitioners are presumed continuous, reckoned from the date they first came under the employ of respondent. (Cuadra v. San Miguel Corp., G.R. No. 194467, 2020)

When parol evidence can be introduced

In order that the parol evidence may be admissible, the mistake or imperfection of the document, or its failure to express the true intent and agreement of the parties, or the validity of the agreement, or the existence of other terms agreed to after the execution of the written agreement must be put in issue in the pleadings. Where the plaintiff failed to allege any such fact in his complaint, he cannot introduce parol evidence thereon.

If the defendant invoked such fact in his answer, parol evidence may be introduced as such fact is now put in issue.

While parol evidence is admissible in a variety of ways to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the writing, unless there has been fraud or mistake. In the case at bar, it is sought to show that the sugar was to be obtained exclusively from the crop raised by the defendant; however, there is no clause in the written contract which even remotely suggests such a condition. (Yu Tek v. Gonzales, G.R. No. L-9935, 1915)

Serrano introduced parol evidence to prove that he was merely acting as an agent without any consideration. The Court held that Serrano can introduce such parol evidence because the case at bar is not one where the evidence offered varies, alters, modifies, or contradicts the terms of indorsement admittedly existing. (Maulini v. Serrano, G.R. No. L-8844, 1914)

The act or statement of Woodhouse was not sought to be introduced to change or alter the terms of the agreement, but to prove how he induced Halili to enter into it — to prove the representations or inducements, or fraud, with which or by which he secured the other party's consent thereto. These are expressly excluded from the parol evidence rule. (Woodhouse v. Halili, G.R. No. L-4811, 1953)

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. (Ortañez v. CA, G.R. No. 107372, 1997)

An intrinsic ambiguity, mistake or imperfection in the written agreement

Purpose: The purpose of this exception is to enable the court to ascertain the true intention of the parties or the true nature of the transaction between the parties.

INTRINSIC AMBIGUITY: Is one which is not apparent on the face of the document but which lies in the person or thing that is subject of the document or deed. The language of the writing is clear and intelligible and suggests but a single meaning, but some matter extraneous to the writing creates the ambiguity. The document is clear on its face but matters outside the agreement create the ambiguity. (Riano, p.161, 2016)

Example of intrinsic ambiguity is when the documents refer to a particular person but such name pertains to many persons with same name.

PATENT OR EXTRINSIC AMBIGUITY: is such ambiguity which is apparent on the face of the writing itself and requires something to be added in order to ascertain the meaning of the words used. In this case, parol evidence is not admissible, otherwise the court would be creating a contract between the parties.

INTERMEDIATE AMBIGUITY: A situation where an ambiguity partakes of the nature of both patent and latent ambiguity. In this case, while the words are seemingly clear and with a settled meaning, they are actually equivocal and admit of two interpretations. Here, parol evidence is admissible to clarify the ambiguity provided that the matter is put in issue by the pleader. (Regalado, p. 734 citing 20 Am. Jur. 1011)

Example: Dollars, tons and ounces.

Thus, intrinsic and intermediate ambiguities are curable by extraneous evidence.

NOTE: False description does not vitiate a document if the subject is sufficiently identified. The incorrect description shall be rejected as surplusage while the correct and complete description standing alone shall sustain the validity of the writing.

MISTAKE: A mistake of fact which is mutual to the parties or where the innocent party was imposed upon by unfair dealing of the other. The pleading does not need to specifically state words and phrases such as “mistake,” “imperfection,” or “failure to express the true intent of the parties.” When the other party responds to the allegations by making the proper denial, such matters have already been put in issue. (see Sps. Paras v. Kimwa Construction, G.R. No. 171601, 2015)

To justify the reformation of a written instrument upon the ground of mistake, the concurrence of three things is necessary:

• Mistake should be of FACT;
• Mistake should be MUTUAL or common to both parties to the instrument,
• The mistake should be ALLEGED and PROVED by clear and convincing evidence

The concurrence of these three things are necessary; and the parties must have come to an actual oral agreement before they have attempted to reduce it to writing.

IMPERFECTION: includes an inaccurate statement in the agreement, or incompleteness in the writing, or the presence of inconsistent provisions therein. As a matter of substantive law, when one party was mistaken and the other knew that the instrument did not state their real agreement but concealed the fact from the former, the instrument may be reformed.

Failure of the written agreement to express the true intent and agreement of the parties thereto

The failure of the writing to express the true agreement of the parties must be put in issue in the verified pleading by the party who wants to prove the defect in the writing.

Although parol evidence is admissible to explain the meaning of the 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. Due execution of a writing may be proved by parol evidence because what the rule prohibits is varying the terms of the writing by parol evidence.

Ramos set up as affirmative defense that the contract does not express the true agreement of the parties because certain important conditions agreed upon were not included therein by the counsel who prepared the contract. The Court held that the parol evidence is admissible when there is allegation that the agreement does not express the intent of the parties. (Enriquez v. Ramos, G.R. No. L-18077, 1962)

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. The true understanding in this case is that the portion of the property will not be disposed of. (Madrigal v. Court of Appeals, G.R. No. 142944, 2005)

Validity of the written agreement

Parol evidence is admissible to show that the contract never existed on the ground of fraud, illegality or incapacity of one of the parties.

The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement

Canuto claimed that two days before the expiration of the original redemption period, she asked Mariano for an extension of time for the repurchase of the land and Mariano agreed. The Court held that the rule forbidding the admission of parol or extrinsic evidence to alter, vary, or contradict a written instrument does not apply so as to prohibit the establishment by parol of an agreement between the parties to a writing, entered into subsequent to the time when the written instrument was executed. (Canuto v. Mariano, G.R. No. L-11346, 1918)

Rule on Conditional Agreements

When the operation of the contract is made to depend upon the occurrence of an event, which for that reason is a condition precedent, such may be established by parol evidence. This is not varying the terms of the written contract by extrinsic agreement for the simple reason that there is no contract in existence; there is nothing to which to apply the excluding rule.

The second paragraph contained in the letter is a condition precedent, which states: “This matter has been the subject of agreement between your husband and this office.” When the operation of the contract is made to depend upon the occurrence of an event, which, for that reason is a condition precedent, such may be established by parole evidence. (Land Settlement and Development Corporation v. Garcia Plantation, G.R. No. L-17820, 1963)

Rule on Collateral Oral Agreements

A contract made prior to or contemporaneous with another agreement and if oral and not inconsistent with the written contract is admissible within the exception to the parol evidence rule. The parol evidence rule will not apply when the collateral oral agreement refers to separate and distinct subjects.

The verbal assurance given by Seeto is a collateral agreement, separate and distinct from the indorsement, by virtue of which PNB was induced to cash the check, and therefore, admissible as an exception to the parol evidence rule. An extrinsic agreement between indorser and indorsee which cannot be embodied in the instrument without impairing its credit is provable by parol. (PNB v. Seeto, G.R. No. L-4388, 1952)

The only proof of the payment was Robles' testimony regarding it. The Court held that The rule against the admission of parol evidence does not extend so far as to preclude the admission of extrinsic evidence to show prior or contemporaneous collateral parole agreements between the parties, but such evidence may be received, regardless of whether or not the written agreement contains any reference to such collateral agreement, and whether the action is at law or in equity. (Robles v. Lizarraga, G.R. No. L-26173, 1927)

Waiver of the Parol Evidence Rule

The parol evidence rule can be waived by failure to invoke the benefits of the rule. This waiver may be made by failure to object to the introduction of evidence aliunde. (Riano, p. 164, 2016)

Distinguish: parol evidence rule and original document rule