Mactan Cebu International Airport Authority vs. Court of Appeals

A right of repurchase omitted from a deed of sale may be proved by parol evidence where the parol agreement was the moving cause or part of the consideration of the written contract and no objection was made to its admission; the Statute of Frauds does not bar enforcement because the deed of sale is itself the note or memorandum and the contract has been partially or totally performed.

Mactan Cebu International Airport Authority (MCIAA) is the successor-in-interest of the National Airport Corporation (NAC), which acquired lots surrounding Lahug Airport for expansion. Private respondents Melba Limbaco, Linda C. Logarta, and Ramon C. Logarta are successors-in-interest of Inez Ouano, who owned Lots 742 and 953 among the properties sold to NAC. The controversy concerns the alleged right of repurchase over those lots and the evidentiary rules governing parol evidence and the Statute of Frauds under the Civil Code and Rules of Court.

Sometime in 1949, officers of the National Airport Corporation informed the owners of various lots surrounding Lahug Airport that the government would purchase their lands for the expansion of the airport. The landowners were convinced to sell, otherwise the government would be forced to institute expropriation proceedings in courts, and they were assured that their properties would be returned to them when these were no longer being used by the airport. Inez Ouano initially did not want to sell her property because she did not have enough to bequeath to her grandchildren and the price offered by the government was very low. Nonetheless, she agreed to sell since the government was going to expropriate the land anyway, and she was reassured by the promise that the land would be returned to her when it was no longer in use.

Eufemio Vercide, one of the affected landowners, testified that in a meeting called by the NAC, the landowners were given documents to sign. He asked for a rider or certification which would indicate that the land would be returned to him should it not be used by the airport, and he signed the document of sale only after the rider was given to him. The rider dated November 8, 1949, signed by Mariano Reyes for the NAC and Vercide, stated that it would remain in full force up to whensoever and whatever Lahug Airport might happen in the future; that if Lahug Airport were left dead and of no use, or transferred to another place or locality, the parcels of land mentioned in Doc. No. 698, Page 8, Book No. XVII, Series of 1949 by Atty. Daniel Tumulak, would be returned to the same owner, Eufemio O. Vercide, at the same selling price without interest.

The sale of Inez’s property was covered by a Deed of Sale signed by her and Mariano Reyes representing the NAC. The deed indicated that Lot 742 was sold for P2,596.40 and Lot 953 for P1,125.20. The deed did not contain any provision regarding Inez’s right to repurchase the properties, nor did she have any rider such as the one given to Vercide. During her lifetime, Inez used to remind her granddaughter Melba Limbaco, who was living with her, about the assurance by NAC officials that the properties would be returned. Inez also made Melba understand that the latter could recover the land herself should Inez die before the proper time arises.

Upon learning that other landowners were able to recover their properties and that then President Aquino had ordered that the airport be transferred to Mactan, private respondents tried to repurchase the properties originally owned by their grandmother. On October 2, 1991, they wrote to Capt. Antonio Oppus, the manager of MCIAA, signifying their intention to repurchase the properties originally owned by their grandmother. Capt. Oppus replied through a letter dated October 17, 1991 denying their request because the deed of sale covering the properties did not contain any condition relating to the right to repurchase; the properties, it was explained, had become the absolute properties of the NAC.

When MCIAA denied the request, private respondents filed a case for reconveyance. The CA found no evidence that Inez’s lots were acquired for a different purpose or under different conditions from the other lots surrounding Lahug Airport, many of which had already been repurchased by their original owners.

• Absence of Rider: Petitioner argued that the CA erred in ruling that there was an agreement allowing Inez Ouano and her successors to repurchase the lots in question absent any rider in the deed of sale similar to the sales of adjacent lots which contained riders; no evidence whatsoever could be received to establish such a right.
• Statute of Frauds: Petitioner argued that the CA erred in ruling that the Statute of Frauds does not apply in the instant case as the contract has been partially executed.

• Right of Repurchase / Parol Evidence: Whether the CA erred in ruling that there was an agreement allowing Inez Ouano and her successors to repurchase the lots in question absent any rider in the deed of sale similar to the sales of adjacent lots which contained riders.
• Statute of Frauds: Whether the CA erred in ruling that the Statute of Frauds does not apply in the instant case as the contract has been partially executed.

• Right of Repurchase / Parol Evidence: No. The CA did not err; the right of repurchase can be sufficiently established by parol evidence where the parol agreement was the moving cause or part of the consideration of the written contract, and no objection was made to its admission.
• Statute of Frauds: No. The CA did not err; the Statute of Frauds does not apply because the deed of sale is itself the note or memorandum and the principle applies only to executory contracts, not to partially or totally performed contracts.

• Right of Repurchase / Parol Evidence: The CA’s finding that there was an agreement allowing the right of repurchase was established after admitting the parol evidence presented by private respondents. Petitioner’s argument that in the absence of any rider providing for such right of repurchase no evidence whatsoever can be received to establish that such a right exists was rejected. Both the RTC and the CA correctly ruled that the right of repurchase granted by the NAC to Inez Ouano can be sufficiently established by parol evidence. Under the parol evidence rule, when the terms of an agreement have been reduced into writing, it is considered as containing all the terms agreed upon, and there can be, between the parties and their successors-in-interest, no evidence of such terms other than the contents of the written agreement. However, a party may present evidence to modify, explain, or add to the terms of the written agreement if he puts in issue in his pleading the failure of the written agreement to express the true intent of the parties thereto. Here, the fact which private respondents sought to establish by parol evidence consists of the agreement or representation made by the NAC that induced Inez Ouano to execute the deed of sale; that the vendors and their heirs are given the right of repurchase should the government no longer need the property. Where a parol contemporaneous agreement was the moving cause of the written contract, or where the parol agreement forms part of the consideration of the written contract, and it appears that the written contract was executed on the faith of the parol contract or representation, such evidence is admissible. Proof is also admissible of any collateral parol agreement that is not inconsistent with the terms of the written contract though it may relate to the same subject matter; the rule excluding parol evidence to vary or contradict a writing does not extend so far as to preclude the admission of existing evidence to show prior or contemporaneous collateral parol agreements between the parties, 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. More importantly, no objection was made by petitioner when private respondents introduced evidence to show the right of repurchase granted by the NAC to Inez Ouano; a protest or objection against the admission of any evidence must be made at the proper time, and if not so made, it will be understood to have been waived. The CA also found no reason to consider Inez as not similarly situated as the owners of other lots surrounding Lahug Airport, which were acquired for the proposed expansion, and no evidence showed that her lots were acquired for a different purpose or under different conditions.
• Statute of Frauds: The CA correctly held that the Statute of Frauds does not apply to the case. The right to repurchase is part of the contract of sale, albeit not incorporated in the deed of sale; it is not an independent agreement or contract. It was therefore correct for the trial court to hold that the contract has been partially executed by the sale of the properties to the appellant. Under Article 1403 of the Civil Code, a contract for the sale of real property shall be unenforceable unless the same or some note or memorandum thereof be in writing and subscribed by the party charged or his agent, and evidence of the agreement cannot be received without the writing or secondary evidence of its contents. Here, the deed of sale and the verbal agreement allowing the right of repurchase should be considered as an integral whole. The deed of sale relied upon by petitioner is in itself the note or memorandum evidencing the contract; thus, the requirement of the Statute of Frauds has been sufficiently complied with. Moreover, the principle of the Statute of Frauds only applies to executory contracts and not to contracts either partially or totally performed, as in this case, where the sale has been consummated; hence, the same is taken out of the scope of the Statute of Frauds. As the deed of sale has been consummated, by virtue of which petitioner accepted some benefits thereunder, it cannot now deny the existence of the agreement. The Statute of Frauds was enacted for the purpose of preventing fraud; it should not be made the instrument to further them.

• Parol Evidence Rule — When the terms of an agreement have been reduced into writing, the writing 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. 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 the failure of the written agreement to express the true intent of the parties. The Court applied the exception: the parol agreement granting the right of repurchase was the moving cause or part of the consideration of the deed of sale, and no objection was made to its admission.
• Collateral Parol Agreement — Proof is admissible of any collateral parol agreement that is not inconsistent with the terms of the written contract though it may relate to the same subject matter. The rule excluding parol evidence to vary or contradict a writing does not preclude admission of existing evidence to show prior or contemporaneous collateral parol agreements, regardless of whether the written agreement contains any reference to such collateral agreement and whether the action is at law or in equity. The Court used this to admit evidence of the right of repurchase despite its absence from the deed.
• Waiver of Objection to Evidence — A protest or objection against the admission of any evidence must be made at the proper time; if not so made, it is understood to have been waived. Because petitioner did not object when private respondents introduced evidence of the right of repurchase, any objection was waived.
• Statute of Frauds — Under Article 1403 of the Civil Code, a contract for the sale of real property shall be unenforceable unless the same or some note or memorandum thereof be in writing and subscribed by the party charged or his agent; evidence of the agreement cannot be received without the writing or secondary evidence of its contents. The principle applies only to executory contracts and not to contracts either partially or totally performed. The Court held the deed of sale was itself the note or memorandum, and the sale having been consummated, the Statute of Frauds did not bar enforcement.
• Right of Repurchase as Part of Contract of Sale — The right to repurchase is part of the contract of sale, albeit not incorporated in the deed of sale; it is not an independent agreement or contract. The Court treated the deed of sale and the verbal agreement allowing the right of repurchase as an integral whole.
• Statute of Frauds as Anti-Fraud Measure — The Statute of Frauds was enacted for the purpose of preventing fraud; it should not be made the instrument to further them. The Court refused to allow petitioner to use the Statute to defeat the proven agreement.

• "Where a parol contemporaneous agreement was the moving cause of the written contract, or where the parol agreement forms part of the consideration of the written contract, and it appears that the written contract was executed on the faith of the parol contract or representation, such evidence is admissible." — This states the principal exception to the parol evidence rule relied upon to admit proof of the right of repurchase despite its absence from the deed of sale.
• "It is recognized that proof is admissible of any collateral parol agreement that is not inconsistent with the terms of the written contract though it may relate to the same subject matter." — This defines the collateral parol agreement doctrine applied by the Court to uphold the admission of evidence on the right of repurchase.
• "It has been repeatedly laid down as a rule of evidence that a protest or objection against the admission of any evidence must be made at the proper time, and if not so made, it will be understood to have been waived." — This supports the Court’s ruling that petitioner waived any objection to the parol evidence by failing to object at the proper time.
• "The Statute of Frauds was enacted for the purpose of preventing fraud. It should not be made the instrument to further them." — This articulates the rationale for refusing to apply the Statute of Frauds to defeat the proven right of repurchase.

• Woodhouse vs. Halili, 49 O.G. 3374 — Cited in support of the rule that a parol contemporaneous agreement is admissible where it was the moving cause or formed part of the consideration of the written contract.
• Robles vs. Lizarraga Hermanos, 50 SCRA 387 — Cited for the rule that proof is admissible of a collateral parol agreement not inconsistent with the terms of the written contract.
• Cruz vs. CA, 192 SCRA 209 — Cited for the rule that an objection to the admission of evidence must be made at the proper time or is waived.
• Victoriano vs. CA, 194 SCRA 19 — Cited for the rule that the Statute of Frauds applies only to executory contracts and not to contracts partially or totally performed.
• National Bank vs. Philippine Vegetable Oil, Co., 49 Phil. 857 — Cited for the principle that the Statute of Frauds was enacted to prevent fraud and should not be made an instrument to further them.

• Rule 130, Section 9, paragraph 2(b), Rules of Court — Provides that a party may present evidence to modify, explain, or add to the terms of a written agreement if he puts in issue in his pleading the failure of the written agreement to express the true intent of the parties. The Court applied this exception to admit parol evidence of the right of repurchase.
• Article 1403, Civil Code — Provides that a contract for the sale of real property shall be unenforceable unless the same or some note or memorandum thereof be in writing and subscribed by the party charged or his agent, and that evidence of the agreement cannot be received without the writing or secondary evidence of its contents. The Court held the deed of sale satisfied the writing requirement and that the Statute of Frauds does not apply to partially or totally performed contracts.
• Article 1405, Civil Code — Cited in footnote 13 in relation to the consummated deed of sale; the Court reasoned that because the deed had been consummated and petitioner accepted benefits thereunder, it cannot now deny the existence of the agreement.

Chief Justice Narvasa, Justices Davide, Jr., Melo, and Panganiban concurred.