Ortañes vs. Court of Appeals

Parol evidence is inadmissible to establish alleged oral conditions-precedent to a deed of absolute sale where the deed is clear and silent on such conditions, and the party seeking its admission neither expressly pleaded nor proved any exception to the parol evidence rule.

Private respondents Oscar Inocentes and Asuncion Llanes Inocentes were the sellers of two registered parcels of land in Quezon City to petitioner Rafael S. Ortañes under deeds of absolute sale. Oscar Inocentes was a former judge. The deeds contained no reference to any conditions, and the dispute implicated the parol evidence rule under Section 9, Rule 130 of the Rules of Court, which generally treats a written agreement as containing all the terms agreed upon by the parties.

On September 30, 1982, private respondents Oscar Inocentes and Asuncion Llanes Inocentes sold to petitioner Rafael S. Ortañes two parcels of registered land in Quezon City for P35,000.00 and P20,000.00, respectively. The first deed of absolute sale covered Transfer Certificate of Title (TCT) No. 258628 and conveyed Lot No. 684-G-1-B-2 in favor of Ortañes, described as of legal age, Filipino, whose marriage was under a regime of complete separation of property, and a resident of 942 Aurora Blvd., Quezon City, his heirs or assigns. The second deed of absolute sale covered TCT No. 243273 and conveyed a consolidated-subdivided portion known as Lot No. 5 in favor of Ortañes, with the same personal description, his heirs or assigns. Both deeds acknowledged receipt of the consideration in full.

Private respondents received the payments for the lots but failed to deliver the titles to petitioner. On April 9, 1990, petitioner demanded delivery of the titles. Private respondents refused, stating that the title to the first lot was in the possession of another person and that petitioner's acquisition of the title to the other lot was subject to certain conditions.

Petitioner then sued private respondents for specific performance before the Regional Trial Court. In their answer with counterclaim, private respondents alleged the existence of oral conditions that were never reflected in the deeds of sale. According to them, title to TCT No. 243273 would remain with them until petitioner showed proof that all of the following requirements had been met: (i) petitioner would cause the segregation of his right of way amounting to 398 sq. m.; (ii) petitioner would submit to them the approved plan for the segregation; (iii) petitioner would put up a strong wall between his property and their lot to segregate his right of way; and (iv) petitioner would pay the capital gains tax and all other expenses that might be incurred by reason of the sale.

During trial, private respondent Oscar Inocentes, a former judge, orally testified that the sale was subject to those conditions, although the conditions were not incorporated in the deeds of sale. Petitioner timely objected on the ground that introduction of the oral conditions was barred by the parol evidence rule. The lower court nonetheless admitted the oral conditions and eventually dismissed the complaint as well as the counterclaim. On appeal, the Court of Appeals affirmed the trial court.

• Parol Evidence Rule: Petitioner timely objected to the admission of private respondents' oral testimony on the alleged conditions-precedent, maintaining that the introduction of said oral conditions was barred by the parol evidence rule.

• Oral Conditions-Precedent: Private respondents alleged that the sale was subject to four oral conditions never reflected in the deeds: segregation of a 398-square-meter right of way, submission of an approved segregation plan, construction of a strong wall, and payment of capital gains tax and other expenses.
• Refusal to Deliver Titles: Private respondents refused delivery of the titles on the grounds that the title to the first lot was in the possession of another person and that petitioner's acquisition of the title to the other lot was subject to certain conditions.
• Parol Evidence for Condition Precedent: Private respondents relied on Land Settlement Development, Co. vs. Garcia Plantation to argue that a condition precedent to a contract may be established by parol evidence.
• Failure to Express True Intent: Private respondents argued that parol evidence was admissible under the exception for the alleged failure of the agreement to express the true intent of the parties, and contended that they put that issue in issue by the pleadings.

• Admissibility of Parol Evidence: Whether parol evidence is admissible to establish alleged oral conditions-precedent to a contract of sale when the deeds of sale are silent on such conditions.
• Exception — Failure to Express True Intent: Whether the alleged failure of the written agreement to express the true intent of the parties justifies admission of parol evidence.
• Pleading Requirement: Whether private respondents squarely pleaded an exception to the parol evidence rule.
• Sufficiency of Evidence: Whether, assuming admissibility, the parol evidence sufficiently proves the alleged conditions.

• Admissibility of Parol Evidence: No. The parol evidence was inadmissible; under Section 9, Rule 130, a written agreement is deemed to contain all terms agreed upon, and no evidence of such terms may be admitted other than its contents.
• Exception — Failure to Express True Intent: No. The exception applies only where the written contract is ambiguous or obscure; the deeds of sale were clear and contained no ambiguity, mistake, or imperfection.
• Pleading Requirement: No. Private respondents did not expressly plead that the deeds were incomplete or failed to reflect the parties' true intent; the exception must be squarely presented.
• Sufficiency of Evidence: No. Assuming admissibility, the parol evidence should be disbelieved because no other evidence sustained the alleged conditions, and the other seller was not presented to testify.

• Admissibility of Parol Evidence: The general rule in Section 9, Rule 130 provides that when the terms of an agreement are reduced to writing, the writing is deemed to contain all terms agreed upon, and no evidence of such terms may be admitted other than the contents of the writing. The Court found the deeds of sale to be the only repository of the truth, so any term not found in them was waived or abandoned. The deeds did not even permit an inference that the sale was subject to any condition; as contracts, they were the law between the parties. The oral testimony of private respondent Oscar Inocentes, an interested party, depended exclusively on human memory and was less reliable than written or documentary evidence. The Court also distinguished Land Settlement Development, Co. vs. Garcia Plantation: there, the contract expressly stated that it was subject to an agreement containing the conditions-precedent proven by parol evidence, whereas the deeds here made no reference to any pre-conditions or other agreement and were denominated absolute in their own terms. Finally, the parol evidence would vary, contradict, or defeat the operation of a valid instrument, contrary to the rule that parol evidence cannot add to the terms of a written instrument by showing other or different terms orally agreed upon at or before signing.
• Exception — Failure to Express True Intent: The exception invoked by private respondents applies only where the written contract is so ambiguous or obscure in its 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, the relations of the parties, and the surrounding facts and circumstances may be received to enable proper interpretation. The deeds of sale here were clear, without ambiguity, mistake, imperfection, obscurity, or doubt in their terms. Parol evidence may explain the meaning of a contract, but it cannot incorporate additional contemporaneous conditions not mentioned in the writing unless there has been fraud or mistake; no fraud or mistake existed.
• Pleading Requirement: The issue of the failure of the written agreement to express the true intent of the parties must be squarely presented. The record showed that private respondents did not expressly plead that the deeds of sale were incomplete or that they did not reflect the intention of the buyer and sellers. They merely alleged that the sale was subject to four conditions, which they tried to prove during trial by parol evidence. Because they did not plead any exception to the parol evidence rule, the general rule applied. The Court also noted that Oscar Inocentes, a lawyer and former judge, was supposed to be steeped in legal knowledge and expected to know the consequences of signing a deed of absolute sale; had he scrutinized the deeds, he would have incorporated any important stipulations that the transfer of title was conditional.
• Sufficiency of Evidence: Assuming arguendo that the parol evidence was admissible, it should nonetheless be disbelieved because no other evidence appeared from the record to sustain the existence of the alleged conditions. The other seller, Asuncion Inocentes, was not presented to testify on such conditions.

• Parol Evidence Rule — When the terms of an agreement have been reduced to writing, the writing is deemed to contain all the terms agreed upon, and no evidence of such terms can be admitted other than the contents of the writing. The 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 different terms were orally agreed upon. It applies here because the deeds of absolute sale were clear and silent on the alleged oral conditions; the oral conditions could not be admitted to vary, contradict, or defeat the deeds.
• Exceptions to the Parol Evidence Rule — Parol evidence may be admitted to explain the meaning of a contract, but it cannot incorporate additional contemporaneous conditions not mentioned in the writing unless there has been fraud or mistake. The exception for failure of the written agreement to express the true intent of the parties obtains only where the written contract is so ambiguous or obscure that the contractual intention cannot be understood from a mere reading of the instrument. The deeds here were clear, and no fraud or mistake was shown.
• Condition Precedent and Parol Evidence — A condition precedent to a contract may be established by parol evidence only where the contract itself expressly states that it is subject to an agreement containing the conditions-precedent. Where the deed of sale makes no reference to any pre-conditions or other agreement and is denominated absolute, parol evidence cannot be used to establish such conditions.
• Pleading Requirement for Parol Evidence Exception — A party seeking to invoke an exception to the parol evidence rule must expressly and squarely plead that exception. Mere allegation of oral conditions, without pleading that the written agreement was incomplete or failed to express the true intent of the parties, is insufficient.
• Written Contract as Law Between Parties — A contract reduced to writing is the law between the parties, and the written instrument is the only repository of the terms of the agreement. Terms not found in the writing are deemed waived and abandoned.

• "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." — This states the core evidentiary ruling and the reason for preferring the written deeds over the interested party's oral testimony.
• "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." — This is the Court's canonical statement of the parol evidence rule applied to the deeds of sale.
• "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 different terms were orally agreed upon by the parties." — This defines the prohibition against adding orally agreed terms to a written instrument.
• "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." — This explains why the deeds could not be read as conditional and why their terms controlled the parties' obligations.

• Land Settlement Development, Co. vs. Garcia Plantation, 117 Phil. 761 (1963) — Distinguished. The Court ruled that a condition precedent may be established by parol evidence only where the contract expressly states that it is subject to an agreement containing the conditions-precedent; the deeds in this case made no such reference and were absolute.
• Pioneer Savings and Loan Bank vs. CA, 226 SCRA 740, 744 (1993) — Cited for the rule that parol evidence cannot incorporate additional contemporaneous conditions not mentioned in the writing unless there has been fraud or mistake, and for the expectation that a lawyer and former judge knows the consequences of signing a deed of absolute sale.
• Heirs of del Rosario vs. Santos, 194 Phil. 671; 108 SCRA 43 — Cited for the parol evidence rule's prohibition against adding to a written instrument and for the exception requiring an ambiguous or obscure written contract.
• Cu vs. CA, 195 SCRA 647 — Cited for the principle that the written deeds were the only repository of the truth and that terms not found therein were waived and abandoned.
• Abella vs. CA, G.R. No. 107606, June 20, 1996 and De Leon vs. CA, 204 SCRA 612 — Cited to support the greater reliability of written or documentary evidence over oral testimony depending on human memory.
• Phil. National Railways vs. CIR of Albay, Br. 1, 83 SCRA 569 and Tolentino vs. Gonzales, 50 Phil. 558, 567 (1927) — Cited for the requirement that the issue of failure of the written agreement to express the true intent of the parties must be squarely presented or pleaded.

• Section 9, Rule 130, Rules of Court (formerly Section 7, Rule 130) — The parol evidence rule. It provides that when the terms of an agreement have been reduced to writing, the writing is deemed to contain all the terms agreed upon, and no evidence of such terms can be admitted other than the contents of the writing. The Court applied it to exclude private respondents' oral testimony on alleged conditions-precedent not found in the deeds of absolute sale.

Narvasa, C.J.; Davide, Jr.; Melo; and Panganiban, JJ.