ITALIA

SECTION 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.

However, a party may present evidence to modify, explain or add to the terms of the 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;

(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.

Parol evidence literally translated means ORAL or VERBAL TESTIMONY of a witness. So, when a witness testifies in court, he says something there; the adverse party through counsel asks him a question, the witness gives his answer. That is verbal testimony. Other names by which Parol Evidence is known are: EXTRINSIC EVIDENCE (“extrinsic”, meaning, it is something not found in the written agreement itself) and EVIDENCE ALIUNDE.

EXAMPLE: A and B entered into a contract. The stipulations are the matters they have agreed upon. Subsequently, A sues B for breach of contract because B allegedly violated stipulations 2, 3 and 4. B says that he did not violate the said stipulations. Why? B claims that he cannot be considered to have violated the said stipulations because of the existence of another condition. He contends that only under the said additional condition can he be held liable. But what is that condition? It is not in the contract itself. B says that the additional condition was merely verbally agreed upon by them. So, in effect, B is trying to prove orally that an additional condition or stipulation exists, which cannot be found in the contract.

Under the Parol Evidence Rule, A’s counsel can object. What is the rule? When the agreement is in writing, the presumption is that all the terms and conditions agreed upon are written down in the contract. So, no one has the authority to qualify, alter, vary or change the terms of a completely written agreement. No one can inject other qualifications which are not in writing. Otherwise, evidence being presented with respect to anything that is not in the contract is inadmissible.

Another way of saying it is: Once a document has been executed as confirmation of the negotiations between the parties, no one may offer parol or oral evidence -- the effect of which would be to vary or to alter the terms of the contract.

The Supreme Court says that the reason for this rule is that when parties have reduced their agreement to writing, it is presumed that they have made the document the only repository and proof of the truth; and

whatever is not found in the document is understood to have been waived or abandoned. It is not logical for the parties to reduce into writing only some of the terms they have agreed upon, and to not put into writing the rest. When businessmen enter into negotiations and reduce the same into writing, the presumption is that everything has been agreed upon.

PASTOR vs. GASPAR

Facts: X borrowed from A a certain amount of money to purchase vehicles for a transportation business. As a security for the payment of the loan, he pledged certain chattels. So, they executed the corresponding document. It was either a contract of pledge or a contract of chattel mortgage. When X failed to pay on the due date, A sued X. During the trial, X tried to prove through his testimony that the real agreement between him and A was a PARTNERSHIP. Because if the contract was indeed one of partnership, whatever financial losses in the business should be shouldered by both the partners. A claims that the vehicles were pledged to him as security for the loan.

X claims that as a partner, the money borrowed by him was A’s contribution to the partnership.

Issue: Is the testimony of X admissible?

Holding: No, X’s testimony is inadmissible. The written agreement being a loan secured by a pledge, under the Parol Evidence Rule, its nature cannot be varied by oral testimony.

EVELAND vs. EASTERN MINING CO.

Facts: Eastern Mining hired the plaintiff as its mining engineer.

there was an agreement as to the amount of his salary, his entitlement to housing allowance, gasoline allowance, entertainment allowance, etc. And then it happened that plaintiff was not paid his allowances. So plaintiff sued the company.

According to the company, their agreement was that the allowances would be paid to plaintiff in full only if their business would improve. However, the business did not improve. That is why plaintiff could not get the promised allowances.

Plaintiff presents the contract in court and does not find any phase which would support the company’s contention.

Issue: Is the management allowed to prove the alleged condition that the allowances due the mining engineer would be paid him only if the business would turn out to be successful?

Holding: The oral testimony to prove the said condition is not admissible., because said oral testimony tends to vary a condition not appearing in the written contract. The rule is that conditions qualifying the operation of a clear and complete written agreement or contract cannot be proved by parol or oral evidence.

(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;

Q: What happens if there was failure to raise the objection?

A: The result is waiver. Meaning, the evidence becomes admissible because this rule is for the benefit of parties in the contract.

If one intends to present oral evidence in court under this exception, the law requires for him to raise it earlier in his pleading. Otherwise, it will be deemed waived.

EXAMPLE: There is an ambiguity or mistake in the writing or document.

How can that be corrected? By oral evidence. But in order to do that in the pleading, the complainant or defendant, as the case may be, must raise that as an issue. for example, that the agreement was a mistake. That the agreement being like this, it has an intrinsic ambiguity in it.

Q: What does “ambiguity” mean?

A: That the agreement is susceptible of two or more interpretations. And when the law is vague, one needs to resort to the rules of statutory construction. The same goes with contracts.

Based on the law, there are two types of ambiguity. INTRINSIC and EXTRINSIC. What is curable by oral, verbal or parol evidence is the INTRINSIC type. The extrinsic type is not mentioned in the law.

Intrinsic ambiguity means an ambiguity which does not appear on the face of the writing or agreement, but lies hidden in the person, or thing, or subject whereof the writing or agreement bespeaks. The ambiguity is hidden; it cannot be detected by simply reading the document. Another term for intrinsic ambiguity is LATENT AMBIGUITY.

An example of an ambiguity which is hidden: A executes his Last Will and Testament. In it, he said: “I hereby leave a legacy of one million pesos in favor of my friend, Juan de la Cruz.” In the study of Succession, that is valid and allowed. one may leave a legacy in favor of a third person. So, eventually, A died. His will was probated. But the problem now is that he has 3 friends who are all named Juan de la Cruz, and each one is claiming the legacy. Obviously, there is an ambiguity in the will.

Although there is a problem as to who among the 3 Juan de la Cruzes is referred to by A in his will, obviously, A was referring to only one

of them. But still, when you read the document, there is no ambiguity at all.

The ambiguity surfaced only later. One of the Juan de la Cruz wants to prove that he is the person being referred to in the will. So he presents oral testimony to clarify the doubt. Is that allowed? Yes. This is an example of an intrinsic ambiguity which is curable by parol evidence.

As stated in the last paragraph of Section 9, parol evidence does not apply only to contracts but also to Last Will and Testaments.

ANOTHER EXAMPLE: A sold, donated or willed to B, placing in the document the following: “I hereby sell, donate or give to B my commercial lot (Lot No. 101) consisting of 350 square meters situated at the corner of San Pedro and Legaspi Streets...” It was later discovered that A does not actually own a commercial lot consisting of 350 square meters situated at the corner of San Pedro and Legaspi Streets. But A does own a commercial lot, also 350 square meters in area but located at the corner of San Pedro and Anda Streets.

SCENARIO: By looking at the instrument or contract, there seems to be nothing wrong. But when you look at the property, the ambiguity arises.

Q: Can oral testimony be presented precisely to prove that actually there was merely an erroneous description of the property which is the subject matter of the sale or donation? That what was actually intended by A was the lot located at the corner of San Pedro and Anda Streets?

A: Yes. There is a maxim in evidence known as falsa demonstration non nocet, which was asked before in the Bar Exams, and which simply means that a false description does not vitiate a writing; provided, sufficient description remains as would identify the thing, or person intended.

Q: Is the sale or donation in the above case deemed avoided?

A: No, because there is still something in the description which would identify the subject matter -- the same lot, number, the same size of area, and it is also a commercial lot. The wrong address was just an oversight.

The other type of ambiguity is EXTRINSIC. It is defined as an ambiguity which appears on the face of the writing or agreement itself. It is sometimes called PATENT AMBIGUITY. By reading the document, the ambiguity becomes obvious.

EXAMPLE: “I hereby donate to you something.” What “something” is that?

The donee claims that the “something” is a 100 hectares of land. He will present oral evidence to prove that it was what it means. But the heirs of the donor disagree and claim that the “something” reefers to a dog only.

Q: Can that type of ambiguity be cured by parol evidence?

A: No. Since the instrument does not specify the subject matter, it is VOID. Since it is void, no amount of evidence will validate it. Conclusion:

Patent ambiguity cannot be cured by parol evidence because the instrument or contract is null and void for lack of a subject matter.

Q: Differentiate the above from falsa demonstratio non nocet.

A: In Falsa demonstratio non nocet, there is an identifiable subject matter.

Only, the description is unclear. There is something left to be identified.

But when “something” will be given to somebody -- this a vague provision which cannot really be implemented. The principle here is: If the description is totally zero, this PATENT AMBIGUITY.

To know the language of the Supreme Court in matters respecting patent ambiguity, in the case of Borillo vs. CA. It commented on the parol evidence rule: parol evidence is not admissible to identify the property where the description thereof is so vague as to amount to no description at all. Parol evidence is not permitted to supply a description, but only to apply it. Because this is intrinsic ambiguity.

BORILLO vs. COURT OF APPEALS 209 SCRA 130

Facts: On February 10, 1977, petitioner, for herself and on behalf of her children, filed before the court a complaint against private respondent and Marcos Borillo for the recovery of several parcels of land located at Abra. In this complaint, petitioner alleges that the parcel of land were originally owned by her late husband, Elpidio Borillo. Although said lands were unregistered, they were declared in 1948, in the name of Elpidio under a Tax Declaration. Elpidio had been in peaceful, public, continuos and uninterrupted possession thereof in the concept of owner even before his marriage to petitioner until his death.

Despite repeated demands, Marcos and private respondent Catalina Borillo refused to return the property to petitioner. In their answer, private respondent claims that the parcels of land were sold to her by her late brother, Elpidio, in 1835, while Marcos claims sale of one of the parcels of land by Elpidio in 1937, long before the marriage of Elpidio to petitioner.

At the trial, private respondent relied heavily on a private document purportedly showing that Elpidio sold to her all his property for P40.00. Marcos claimed that the deed of sale evidencing the sale to him was lost during the war.

The lower court awarded the properties to petitioner herein. Catalina Borillo appealed and was sustained by the CA.

Issue: whether or not parol evidence is admissible to prove the description of the subject matter of a deed or other writing.

Holding: The petition is meritorious.

In reversing the findings of the trial court, the CA justifies the deficiencies and discrepancies saying that the absence of specifications as to what property was sold is understandable because they were brothers and sisters. It added that this defect was cured by testimonial evidence.

However, before parol evidence to aid the description of the subject matter of a deed of other writing, there must be a description that will serve as a foundation for such evidence.

Parol evidence is not permitted to supply a description but only to apply it. Parol evidence is not admissible to identify the property where the description thereof is so vague as to amount to no description at all.

According to Wigmore, aside from extrinsic and intrinsic ambiguity, there is a third type, a middle-ground. He calls it intermediate ambiguity.

This is an ambiguity arising from the use of words susceptible of different interpretations. This is curable by parol evidence. Sections 10 to 19 on the interpretation of documents will be useful here. So, when the document is vague, one does not declare the contract or document as void, but subjects the same to the rules on interpretation. These rules allow the presentation of parol evidence.

EXAMPLE: In the case of Palanca vs. Wilson, an apparatus or machine used to convert alcohol to wine or rhum is the subject of a deed of sale. In the contract, the machine is described as “of 6000 liters capacity.” It turned out that the word “capacity” can have two meanings -- working or producing. Which could have been intended by the parties? Because if you would look at the contract, it is unclear. Thus, the Supreme Court said:

Parol evidence may be admitted to explain the ambiguity and to determine the intention of the parties.

Q: Cite at least five (5) rules on the interpretation of contracts. (bar question)

A: Aside from Sections 10 to 19 of Rule 130 of the Rules on Evidence, see also Articles 1370 to 1379 of the New Civil Code.

Under paragraph (a) of Section 9, aside from intrinsic ambiguity, there can also be a MISTAKE in the document or agreement. A mistake can be cured. But what kind of mistake? A mistake of fact; not a mistake of law.

The latter is not curable since everybody is presumed to know the law anyway. For parol evidence to apply, the following are the requisites:

(1) there is a factual mistake;

(2) the mistake is common to both parties to the instrument; and, (3) the mistake is proved by clear and convincing evidence.

Another exception to the Parol Evidence Rule under paragraph (a) is when there is an IMPERFECTION in the written agreement. this imperfection may be explained or cured by parol evidence.

Q: What does “imperfection” mean?

A: It simply means that the writing is incomplete, and does not show the whole agreement of the parties but defines only some of its terms.

Q: How does one convince the court that the agreement is imperfect or incomplete?

A: According to the Supreme Court, the best evidence is the document, contract or writing itself. By reading it, one would find out if there are terms agreed upon that were omitted. So, in order to supply the deficiency, parol evidence may be allowed; provided that it is raised in the pleading.

(b) The failure of the written agreement to express the true intent and agreement of the parties thereto;

The perfect example here is an action for the reformation of a contract. You raise in your complaint that the agreement actually does not express the true intent of the parties. You put that in issue. In effect, you are asking that the written contract be changed to reflect what was actually agreed upon.

A more specific example: An agreement which appears to be a deed of sale but is in reality an equitable mortgage. This is an agreement which does not reflect the true intention of the parties. Oral evidence is allowed to prove the real nature of the agreement. Acording to the Supreme Court, courts of equity go through and beyond that which appears in a contract, in order to determine the real agreement of the parties. And toward that end, oral and written evidence are admissible to determine the real agreement.

ORTAÑEZ vs. CA 266 SCRA 561

Facts: Private respondents sold to petitioner two parcels of registered land for a consideration of P35,000.00. However, private respondents failed to deliver the titles to petitioner. They refused on the ground that petitioner’s acquisition of the titles is subject to certain conditions. Offshoot, petitioner sued private respondents for specific performance.

During trial, private respondents orally testified that the sale was subject to conditions, 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.

Issue: admissibility of parol evidence to establish alleged oral condition precedent to a contract to sale, when the deeds of sale are silent on such conditions.

Holding: The parol evidence herein introduced is inadmissible.

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 unreliable, unlike a written contract which speaks of a uniform language. 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

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 unreliable, unlike a written contract which speaks of a uniform language. 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