Mancol, Jr. vs. Development Bank of the Philippines

Testimonial evidence offered to prove a contemporaneous verbal agreement that varies the terms of a written contract is inadmissible hearsay if the witnesses lack personal knowledge of the perfection of such agreement, and an attorney-in-fact cannot enter into agreements beyond the strict confines of the Special Power of Attorney.

Petitioner Fernando Mancol, Jr. purchased a residential lot with a two-storey building from the Development Bank of the Philippines (DBP) through a negotiated sale. Petitioner executed a Special Power of Attorney (SPA) appointing his father, Fernando Mancol, Sr., to represent and negotiate the sale on his behalf. After the sale, petitioner claimed that DBP verbally agreed to facilitate the transfer of title and evict the occupants, which DBP subsequently refused to do.

Development Bank of the Philippines (DBP) scheduled an Invitation to Bid for Negotiated Sale on October 13, 2004, over a residential lot with a two-storey building covered by TCT No. 2041 located at Navarro Street, Calbayog City, with a purchase price of ₱1,326,000. Fernando Mancol, Jr. (petitioner) executed a Special Power of Attorney (SPA) appointing his father, Fernando Mancol, Sr. (Mancol, Sr.), to represent and negotiate the sale on his behalf. Pursuant to the SPA, Mancol, Sr. signed the Negotiated Offer to Purchase and the Negotiated Sale Rules and Procedures, and paid the initial amount of ₱265,200. Petitioner later paid the balance of ₱1,060,800, after which DBP executed a Deed of Absolute Sale in petitioner's favor. Petitioner also deposited ₱99,450 with DBP for the payment of capital gains tax (CGT) and documentary stamp tax (DST).

During the negotiations, DBP officials allegedly agreed, albeit verbally, to arrange the transfer of the title in petitioner's name, including the payment of CGT, and to get rid of the occupants of the subject property. Sometime in 2006, DBP reneged on this alleged oral agreement, returned the pertinent documents of the sale, and issued a Manager's Check for ₱99,450. Petitioner demanded DBP to comply with the verbal undertaking, but DBP refused, stating it had no obligation to eject the occupants or cause the transfer of title.

Petitioner filed a complaint for damages for breach of contract against DBP before the RTC of Calbayog City. DBP was declared in default for failure to appear during pre-trial. During the trial, petitioner presented Rodel Villanueva and Mancol, Sr. as witnesses. Villanueva testified that he was ordered by DBP's lawyer to bring documents to the BIR, while Mancol, Sr. testified that DBP verbally agreed to facilitate the transfer of title and oust the occupants, although he admitted this contradicted the negotiated rules. The RTC initially ruled in favor of petitioner but, upon DBP's motion for reconsideration, dismissed the complaint, finding the testimonies hearsay. The RTC, however, ordered DBP to return the ₱99,450 deposit with 6% interest. Both parties appealed to the CA, which affirmed the RTC's orders.

• Hearsay Evidence: Petitioner argued that the testimonies of his witnesses, Villanueva and Mancol, Sr., were based on personal knowledge and not hearsay, and that they sufficiently established the existence and validity of a subsequent oral agreement with DBP.
• Due Process: Petitioner maintained that undisputed evidence on record established the existence and validity of the subsequent oral agreement, and that ignoring them would sanction a violation of his due process rights.
• Damages: Petitioner argued that he was entitled to the payment of moral and exemplary damages, attorney's fees, and costs of suit.

• Terms of Sale: Respondent countered that the terms of the Deed of Absolute Sale stated no condition that DBP would work on the transfer of documents and eject the occupants.
• Bank Policy: Respondent argued that it was not the bank's policy to work for the registration of the instrument of sale of properties, and that petitioner's unilateral act of issuing a check did not prove DBP assumed the responsibility of registering the instrument.
• Counterclaim: Respondent claimed that petitioner grossly violated the terms and conditions of the agreement of sale by failing to pay, reimburse, or assume the financial obligation consequent to the initiation of the writ of possession against the occupants.

• Probative Value of Evidence: Whether the testimonies of petitioner's witnesses, Villanueva and Mancol, Sr., should be given probative value to establish the alleged contemporaneous verbal agreement in the sale contract.
• Authority of Attorney-in-Fact: Whether Mancol, Sr. had the authority to enter into the alleged verbal agreement on behalf of the petitioner.

• Probative Value of Evidence: No. The testimonies of Villanueva and Mancol, Sr. were hearsay and lacked probative value to establish the alleged contemporaneous verbal agreement because the witnesses had no personal knowledge of the perfection of such agreement.
• Authority of Attorney-in-Fact: No. The SPA executed by petitioner did not authorize Mancol, Sr. to enter into a verbal agreement with DBP; the authority was strictly limited to representing and negotiating the bid and signing necessary documents.

• Probative Value of Evidence: While DBP waived the protection of the parol evidence rule by failing to timely object to the testimonies (having been declared in default), the admissibility of evidence does not necessarily equate to its probative value. A witness can only testify on facts within his personal knowledge. Villanueva had no personal knowledge of the verbal agreement; he merely relayed that DBP's lawyer ordered him to bring documents to the BIR. Mancol, Sr. testified that "the bank agreed" but did not specify who personally appeared before DBP to forge the agreement. Thus, his testimony was also hearsay regarding the perfection of the agreement.
• Authority of Attorney-in-Fact: Assuming Mancol, Sr. did enter into a verbal agreement, it would be unenforceable because the act was not stipulated in the SPA. The SPA strictly limited Mancol, Sr.'s authority to representing and negotiating the invitation to bid and signing necessary documents. A power of attorney must be strictly construed, granting only those powers specified, and the agent may not go beyond or deviate from it. The power to enter into a verbal agreement was conspicuously absent.

• 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. However, a party may present evidence to modify, explain or add to the terms if an exception under Rule 130, Section 9 is put in issue, and failure to timely object constitutes a waiver. The Court applied this by noting that while DBP waived the objection, the admitted evidence still lacked probative value.
• Personal Knowledge of Witnesses — A witness can testify only on facts derived from his own perception. Testimony on what a witness learned, read, or heard from others is hearsay and may not be received as proof of the truth of the matter asserted. The Court applied this to exclude the testimonies of Villanueva and Mancol, Sr. regarding the alleged verbal agreement.
• Strict Construction of Power of Attorney — A power of attorney must be strictly construed and pursued; the instrument grants only those powers specified, and the agent may neither go beyond nor deviate from it. The Court applied this to hold that Mancol, Sr.'s authority under the SPA did not include entering into a verbal agreement with DBP.

• "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." — Defines the parol evidence rule, which is central to the admissibility of the testimonies regarding the alleged verbal agreement.
• "The admissibility of evidence depends on its relevance and competence, while the weight of evidence pertains to evidence already admitted and its tendency to convince and persuade." — Distinguishes between admissibility and probative value, which the Court used to justify disregarding the testimonies despite their admissibility due to DBP's waiver.
• "Where powers and duties are specified and defined in an instrument, all such powers and duties are limited and are confined to those which are specified and defined, and all other powers and duties are excluded." — States the rule on strict construction of powers of attorney, applied to limit Mancol, Sr.'s authority under the SPA.

• Maunlad Savings & Loan Assoc., Inc. vs. CA, 399 Phil. 590 (2000) — Cited for the rule that objections to evidence must be made as soon as grounds become apparent, otherwise waived.
• Mercado vs. Allied Banking Corporation, 555 Phil. 411 (2007) — Cited for the principle that a power of attorney must be strictly construed and pursued, and the agent may not go beyond the specified powers.

• Section 9, Rule 130 of the Revised Rules on Evidence — Governs the parol evidence rule and its exceptions, particularly the exception allowing evidence of other terms agreed to by the parties after the execution of the written agreement.
• Section 36, Rule 130 of the Rules of Court — Requires that a witness can testify only on facts within his personal knowledge.

Maria Lourdes P.A. Sereno (Chief Justice, Chairperson), Teresita J. Leonardo-De Castro, Mariano C. Del Castillo, Francis H. Jardeleza.