ECOND DIVISION

[ G.R. No. 62741, May 29, 1987 ]

FILIPINAS MANUFACTURERS BANK, PLAINTIFF-APPELLEE, VS.

EASTERN RIZAL FABRICATORS, DEFENDANT-APPELLANT.

DECISION

FERNAN, J.:
This appeal was certified by the Appellate Court to this Court, the question
involved being purely legal. That question concerned the propriety of a
judgment on the pleadings.
On March 2, 1979, Filipinas Manufacturers Bank [the surviving bank after a
merger with the Filipinas Bank and Trust Co.] filed in the Court of First
Instance of Rizal, Pasig branch, a complaint against
Eastern RizalFabricators. It alleged inter alia that defendant
Eastern Rizal Fabricators had executed on July 30, 1976, a promissory note
for P370,000 evidencing a money market loan, with interest thereon at the
rate of 14% plus 2% handling fee per annum until paid; that among the
terms and conditions of said promissory note was that the interest not paid
when due would be added to and become part of the principal, the same to
be computed monthly and would bear the same rate of interest as the
principal and an additional sum equivalent to 10% of the amount due as
and for attorney's fees; that the note matured on August 30, 1976; and that
despite repeated demands, defendant refused to pay without any valid and
legal grounds.[1]
In its answer, defendant admitted its indebtedness but interposed the
special and affirmative defense that the action by plaintiff bank
was premature because the latter had agreed to forbear collection of the
note at least "until arrival of the aforesaid date [not later than 180 banking
days from December 2, 1978] when defendant will be receiving payment
which will be applied to the satisfaction of defendant's indebtedness to
plaintiff".[2] Defendant expected to recover about P300,000.00 from
Jose Lecaros Abel, its supplier of scrap metals.
Thereupon, plaintiff filed a motion for judgment on the pleadings on the
grounds that defendant's answer admitted the material allegations of the
complaint and that it failed to tender an issue. Amplifying on its motion,
plaintiff maintained that the affirmative defense that plaintiff, through its
president, had agreed to postpone the enforcement of the note is
untenable. It is contrary to the parol evidence rule which provides that
when the termsof an agreement had been reduced to writing, it is to be
considered as containing all such terms and therefore there can be, as
between the parties and their successors-in-interest, no evidence of the
terms of the agreement other than the contents of the writing itself.[3]
Plaintiff also noted that it is "unthinkable" for the bank to have agreed to
defer collection of the obligation until after 180 banking days
from December 2, 1978 which is "two years and four months after the pro-
missory note has matured".
Plaintiff stressed that it is not privy to any alleged compromise agreement
between defendant and its supplier. Its main concern is the settlement of
defendant's money market loan which is long overdue.
On July 23, 1979, despite defendant's opposition, the trial court issued the
challenged order granting plaintiff's motion for judgment on the
pleadings. It ordered defendant Eastern Rizal Fabricators to pay to plaintiff
Filipinas Manufacturers Bank the sum of P370,000.00 plus interest at 14%
per annum and 2% as handling damages with additional 10% of the
principal obligation as attorney's fees and to pay the costs of the suit.[4]
As earlier stated, defendant Eastern Rizal Fabricators appealed the
judgment to the Appellate Court which in turn certified the case to this
Court on a pure question of law.[5]
In its brief, defendant-appellant Eastern Rizal Fabricators argues that the
lower court erred in rendering a judgment on the pleadings because the
question of whether or not appellee bank had agreed to forbear collection
on the note was an issue which required a hearing.
Appellant avers that it had borrowed P370,000.00 from plaintiff-
appellee bank to make an advance payment for scrap metals purchased
from Jose Lecaros Abel. Abel failed to deliver the entire
merchandise. Appellant sued Abel for the return of the advance
payment. They subsequently entered into a compromise agreement which
the court approved. In that agreement, Abel promised to pay appellant the
amount due not later than 180 banking days from December 2,
1978. Appellee bank had been made aware of that compromise and in fact
it agreed to forbear collection of the promissory note until such time when
appellant would receive payment which would turn be applied to the
satisfaction of appellant's in debtedness to appellee bank.[6]
On its part, appellee bank belies the existence of any agreement to defer
enforcement of the loan transaction and argues that even assuming there
was such an agreement, it did not constitute a genuine defense sufficient to
defeat the complaint.
The lower court, in rendering judgment on the pleadings,
upheld appellee's contention that it would be a mistake to receive evidence
as to the alleged verbal understanding because it would be
permitting parol evidence to alteror vary a written contract. It will be borne
in mind that appellant's claimed understanding with the appellee was
purportedly entitled into after the appellant had encountered financial
difficulties in paying the loan.
The lower court is in error. The parol evidence rule which prohibits the
admission of oral evidence to vary or contradict a written contract does not
apply to or prohibit a subsequent modification by parol evidence.[7] In other
words, subsequent agreements to written contracts may be made orally and
evidence in reference thereto does not violate the parol evidence rule.[8]
Wigmore illustrates: Where a document, for example, is executed on July 1,
it may be held to embody the final and exclusive result of negotiations
before and up to the time of execution; but a transaction on August 1 must
be a separate one and therefore can never be excluded, so far as the effect of
the document of July 1 is concerned. It may be that some rule or form may
make that transaction of August 1 invalid but the present rule can interpose
no obstacle.[9]
The reason for the rule is fundamental. The parties cannot be presumed to
have intended the written instrument to cover all their possible subsequent
agreements. Moreover, parol evidence does not in any way deny that the
original agreement was that which the writing purports to express, but
merely shows that the parties have exercised their right to change or
abrogate their original understanding or to make a new and independent
one. It makes no difference how soon after the execution of the written
contract the parol one was made. If it was in fact subsequent and is
otherwise unobjectionable, it may be proved and enforced.[10]
The inescapable conclusion therefore is that the judgment on the pleadings
was improper. Appellant's defense of forbearance indubitably raised a
material issue which could not be simply brushed aside without the
presentation of evidence. Reversal of the judgment and remand of the
case to the court of origin for hearing on the merits should follow as a
matter of course.
Considering however that this case has remained pending for almost a
decade now, so that even the claimed forbearance has long lapsed, there
was marked reluctance among the members of the Court to remand the
case to the court below. A consensus was therefore reached to seek a more
expeditious manner to resolve the case. The parties were required to
inform the Court whether or not the loan of P370,000.00, which is
the subject matter of the present dispute, was still outstanding and if no full
payment has been made, to submit memoranda substantiating their
respective allegations concerning the defense of forbearance. The appellant
complied and submitted its memorandum, stating in part that it still had
"an outstanding balance of P230,000.00 on its aforesaid account" with
the appellee bank. It reiterated its prayer that the judgment complained of
be reversed. The appellee bank did no title its memorandum despite notices
sent to its counsel of record.
Appellee bank's unexplained inaction has left us with no other recourse but
to order the appellant to discharge its debt to the admitted amount of
P230,000.00. Remanding the case to the court of origin merely to
ascertain whether there was in fact a prior agreement to defer payment on
the promissory note will serve no useful purpose and will only delay the
termination of this case. By its silence we can assume that
the appellee bank has no objections to the amount owing, as acknowledged
by the appellant.
WHEREFORE, the assailed judgment is hereby set aside for being
inappropriate. Appellant Eastern RizalFabricators is ordered to
pay appellee Filipinas Manufacturers Bank the sum of P230,000.00 plus
interest at 14% per annum computed from July 30, 1976, 2% of the
principal obligation as handling damages and 10% of the total amount due
as attorney's fees in full settlement of the loan in question.
This decision is immediately executory.
SO ORDERED.

Gutierrez, Jr., Paras, Padilla, Bidin, and Cortes, JJ., concur.

 [G.R. No. 107372. January 23, 1997]

RAFAEL S. ORTAEZ, petitioner, vs. THE COURT OF APPEALS,

OSCAR INOCENTES, AND ASUNCION LLANES
INOCENTES, respondents.

RESOLUTION
FRANCISCO, J.:

On September 30, 1982, private respondents sold to petitioner two (2)

parcels of registered land in Quezon City for a consideration of P35,000.00
and P20,000.00, respectively. The first deed of absolute sale covering
Transfer Certificate of Title (TCT) No. 258628 provides in part:

"That for and in consideration of the sum of THIRTY FIVE THOUSAND

(P35,000.00) PESOS, receipt of which in full is hereby acknowledged, we have sold,
transferred and conveyed, as we hereby sell, transfer and convey, that subdivided
portion of the property covered by TCT No. 258628 known as Lot No. 684-G-1-B-2
in favor of RAFAEL S. ORTANEZ, of legal age, Filipino. whose marriage is under a
regime of complete separation of property, and a resident of 942 Aurora Blvd.,
Quezon City, his heirs or assigns." [1]

while the second deed of absolute sale covering TCT No. 243273 provides:

"That for and in consideration of the sum of TWENTY THOUSAND (P20,000.00)

PESOS receipt of which in full is hereby acknowledged, we have sold, transferred
and conveyed, as we hereby sell, transfer and convey, that consolidated-subdivided
portion of the property covered by TCT No. 243273 known as Lot No. 5 in favor of
RAFAEL S. ORTANEZ, of legal age, Filipino, whose marriage is under a regime of
complete separation of property, and a resident of 942 Aurora Blvd., Cubao, Quezon
City his heirs or assigns. [2]

Private respondents received the payments for the above-mentioned lots,

but failed to deliver the titles to petitioner. On April 9, 1990 the latter
demanded from the former the delivery of said titles. Private respondents,
[3]

however, refused on the ground that the title of the first lot is in the possession
of another person, and petitioner's acquisition of the title of the other lot is
[4]

subject to certain conditions.

Offshoot, petitioner sued private respondents for specific performance
before the RTC. In their answer with counterclaim private respondents merely
alleged the existence of the following oral conditions which were never
[5]

reflected in the deeds of sale: [6]

"3.3.2 Title to the other property (TCT No. 243273) remains with the defendants
(private respondents) until plaintiff (petitioner) shows proof that all the following
requirements have been met:

(i) Plaintiff will cause the segregation of his right of way amounting to 398 sq. m.;

(ii) Plaintiff will submit to the defendants the approved plan for the segregation;

(iii) Plaintiff will put up a strong wall between his property and that of defendants' lot
to segregate his right of way;

(iv) Plaintiff will pay the capital gains tax and all other expenses that may be incurred
by reason of sale. x x x."

During trial, private respondent Oscar Inocentes, a former judge, orally

testified that the sale was subject to the above conditions, although such
[7]

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 as well as the counterclaim. On
appeal, the Court of Appeals (CA) affirmed the court a quo. Hence, this
petition.
We are tasked to resolve the issue on the admissibility of parol evidence
to establish the alleged oral conditions-precedent to a contract of sale, when
the deeds of sale are silent on such conditions.
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. Spoken words could be notoriously unreliable unlike a written
[8]

contract which speaks of a uniform language. Thus, under the general rule in
[9]

Section 9 of Rule 130 of the Rules of Court, when the terms of an agreement
[10]

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. Considering that the written deeds of sale were the only
[11]

repository of the truth, whatever is not found in said instruments must have
been waived and abandoned by the parties. Examining the deeds of sale,
[12]
we cannot even make an inference that the sale was subject to any condition.
As a contract, it is the law between the parties. [13]

Secondly, to buttress their argument, private respondents rely on the case

of Land Settlement Development, Co. vs. Garcia Plantation where the Court [14]

ruled that a condition precedent to a contract may be established by parol

evidence. However, the material facts of that case are different from this
case. In the former, the contract sought to be enforced expressly stated that
[15]

it is subject to an agreement containing the conditions-precedent which were

proven through parol evidence. Whereas, the deeds of sale in this case, made
no reference to any pre- conditions or other agreement. In fact, the sale is
denominated as absolute in its own terms.
Third, the parol evidence herein sought to be introduced would vary,
contradict or defeat the operation of a valid instrument, hence, contrary to[16]

the rule that:

The parol evidence rule forbids any addition to x x x 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. [17]

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." No such fraud or mistake exists in
[18]

this case.
Fourth, we disagree with private respondents' argument that their parol
evidence is admissible under the exceptions provided by the Rules,
specifically, the alleged failure of the agreement to express the true intent of
the parties. Such exception obtains only in the following instance:

"[W]here the written contract is so ambiguous or obscure in 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 of the contract, of the relations of
the parties to each other, and of the facts and circumstances surrounding them when
they entered into the contract may be received to enable the court to make a proper
interpretation of the instrument."[19]

In this case, the deeds of sale are clear, without any ambiguity, mistake or
imperfection, much less obscurity or doubt in the terms thereof.
Fifth, we are not persuaded by private respondents contention that they
"put in issue by the pleadings" the failure of the written agreement to express
the true intent of the parties. Record shows that private respondents did
[20]

not expressly plead that the deeds of sale were incomplete or that it did not
reflect the intention of the buyer (petitioner) and the seller (private
[21]

respondents). Such issue must be "squarely presented." Private respondents [22]

merely alleged that the sale was subject to four (4) conditions which they tried
to prove during trial by parol evidence. Obviously, this cannot be done,
[23]

because they did not plead any of the exceptions mentioned in the parol
evidence rule. Their case is covered by the general rule that the contents of
[24]

the writing are the only repository of the terms of the agreement. Considering
that private respondent Oscar Inocentes is a lawyer (and former judge) he
was "supposed to be steeped in legal knowledge and practices" and was
"expected to know the consequences" of his signing a deed of absolute sale.
[25]

Had he given an iota's attention to scrutinize the deeds, he would have

incorporated important stipulations that the transfer of title to said lots were
conditional.
[26]

One last thing, assuming arguendo that the parol evidence is admissible, it
should nonetheless be disbelieved as no other evidence appears from the
record to sustain the existence of the alleged conditions. Not even the other
seller, Asuncion Inocentes, was presented to testify on such conditions.
ACCORDINGLY, the appealed decision is REVERSED and the records of
this case REMANDED to the trial court for proper disposition in accordance
with this ruling.
SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Panganiban,
JJ., concur.

THIRD DIVISION
[G.R. No. 79962 : December 10, 1990.]
192 SCRA 209
LUCIO R. CRUZ, Petitioner, vs. COURT OF APPEALS AND CONRADO Q.
SALONGA, Respondents.

DECISION

CRUZ, J.:
The private respondent Conrado Salonga filed a complaint for collection and
damages against petitioner Lucio Cruz ** in the Regional Trial Court of Lucena City
alleging that in the course of their business transactions of buying and selling fish,
the petitioner borrowed from him an amount of P35,000.00, evidenced by a receipt
dated May 4, 1982, marked as Exhibit D, reading as follows:
5/4/82
Received the amount of Thirty Five Thousand Cash from Rodrigo Quiambao and
Conrado Salonga on the day of May 4, 1982.
Sgd. Lucio Cruz
The plaintiff claimed that of this amount, only P20,000.00 had been paid, leaving a
balance of P10,000.00; that in August 1982, he and the defendant agreed that the
latter would grant him an exclusive right to purchase the harvest of certain
fishponds leased by Cruz in exchange for certain loan accommodations; that
pursuant thereto, Salonga delivered to Cruz various loans totaling P15,250.00,
evidenced by four receipts and an additional P4,000.00, the receipt of which had
been lost; and that Cruz failed to comply with his part of the agreement by refusing
to deliver the alleged harvest of the fishpond and the amount of his indebtedness.
Cruz denied having contracted any loan from Salonga. By way of special defense,
he alleged that he was a lessee of several hectares of a fishpond owned by Nemesio
Yabut and that sometime in May 1982, he entered into an agreement with Salonga
whereby the latter would purchase (pakyaw) fish in certain areas of the fishpond
from May 1982 to August 15, 1982. They also agreed that immediately thereafter,
Salonga would sublease (bubuwisan) the same fishpond for a period of one year.
Cruz admitted having received on May 4, 1982, the amount of P35,000.00 and on
several occasions from August 15, 1982, to September 30, 1982, an aggregate
amount of P15,250.00. He contended however, that these amounts were received
by him not as loans but as consideration for their "pakyaw" agreement and
payment for the sublease of the fishpond. He added that it was the private
respondent who owed him money since Salonga still had unpaid rentals for the 10-
month period that he actually occupied the fishpond. Cruz also claimed that Salonga
owed him an additional P4,000.00 arising from another purchase of fish from other
areas of his leased fishpond.
In a pre-trial conference held on August 24, 1984, petitioner and private
respondent entered into the following partial stipulation of facts.
COURT:
Plaintiff and defendant, through their respective counsel, during the pre-trial
conference, agreed on the following stipulation of facts:
1) That plaintiff Conrado Salonga entered into a contract of what is
commonly called as 'pakyawan' with defendant Lucio Cruz on the fishes
contained in a fishpond which defendant Lucio Cruz was taking care of as
lessee from the owner Mr. Nemesio Yabut, with a verbal contract for the sum
of P28,000.00 sometime in May 1982.
2) That because of the necessity, defendant Lucio Cruz at that time needed
money, he requested plaintiff Conrado Salonga to advance the money of not
only P28,000.00 but P35,000.00 in order that Lucio Cruz could meet his
obligation with the owner of the fishpond in question, Mr. Nemesio Yabut;
 3) That the amount of P35,000.00 as requested by defendant Lucio Cruz was
in fact delivered by plaintiff Conrado Salonga duly received by the defendant
Lucio Cruz, as evidenced by a receipt dated May 4, 1982, duly signed by
defendant Lucio Cruz
4) That pursuant to said contract of "pakyaw," plaintiff Conrado Salonga was
able to harvest the fishes contained in the fishpond administered by Lucio
Cruz in August 1982.
5) Immediately thereafter the aforesaid harvest thereon, they entered again
on a verbal agreement whereby plaintiff Conrado Salonga and defendant
Lucio Cruz had agreed that defendant Lucio Cruz will sublease and had in
fact subleased the fishpond of Nemesio Yabut to the herein plaintiff for the
amount of P28,000.00 for a period of one year beginning August 15, 1982.
6) That sometime on June 15, 1983, Mayor Nemesio Yabut, who is the
owner of the fishpond, took back the subject matter of this case from the
defendant Lucio Cruz.
7) That defendant Lucio Cruz in compliance with their verbal sublease
agreement had received from the plaintiff Conrado Salonga the following
sums of money:
a) P8,000.00 on August 15, 1982 as evidenced by Annex "B" of the
Complaint. (Exh. E);
b) The sum of P500.00 on September 4, 1982, as evidenced by
Annex "C" of the complaint (Exh. F);
c) The sum of P3,000.00 on September 19, 1982 as evidenced by
Annex "D" of the complaint (Exh. G); and
d) The sum of P3,750.00 on September 30, 1982 as Annex "E" of the
complaint (Exh. H).
At the trial, the private respondent claimed that aside from the amounts of
P35,000.00 (Exh. D), P8,000.00 (Exh. E), P500.00 (Exh. F), P3,000.00 (Exh. G)
and P3,750.00 (Exh. H) mentioned in the partial stipulation of facts, he also
delivered to the petitioner P28,000.00, which constituted the consideration for their
"pakyaw" agreement. This was evidenced by a receipt dated May 14, 1982 marked
as Exhibit I and reading as follows:
May 14, 1982
Tinatanggap ko ang halagang dalawampu't walong libong piso (P28,000.00)
bilang halaga sa pakyaw nila sa akin sa sangla sa kahong bilang #8 maliit at
sa kaputol na sapa sa gawing may bomba. Ito ay tatagal hanggang Agosto
1982.
SGD. LUCIO CRUZ
Salonga also claimed that he had paid Cruz the amount of P4,000 but the receipt of
which had been lost and denied being indebted to the petitioner for P4,000 for the
lease of other portions of the fishpond.
For his part, the petitioner testified that he entered into a "pakyaw" and sublease
agreement with the private respondent for a consideration of P28,000 for each
transaction. Out of the P35,000 he received from the private respondent on May 4,
1982, P28,000 covered full payment of their "pakyaw" agreement while the
remaining P7,000 constituted the advance payment for their sublease agreement.
The petitioner denied having received another amount of P28,000 from Salonga on
May 14, 1982. He contended that the instrument dated May 14, 1982 (Exh. I) was
executed to evidence their "pakyaw" agreement and to fix its duration. He was
corroborated by Sonny Viray, who testified that it was he who prepared the May 4,
1982, receipt of P35,000.00, P28,000 of which was payment for the "pakyaw" and
the excess of P7,000.00 as advance for the sublease.
The trial court ruled in favor of the petitioner and ordered the private respondent to
pay the former the sum of P3,054.00 plus P1,000.00 as litigation expenses and
attorney's fees, and the costs. Judge Eriberto U. Rosario, Jr. found that the
transactions between the petitioner and the private respondent were indeed
"pakyaw" and sublease agreements, each having a consideration of P28,000.00, for
a total of P56,000.00. Pursuant to these agreements, Salonga paid Cruz P35,000.00
on May 4, 1982 (Exh. D); P8,000.00 on August 15, 1982 (Exh. E); P500.00 on
September 4, 1982 (Exh. F); P3,000 on September 19, 1982; P3,750 on September
30, 1982 (Exh. H) and P4,000.00 on an unspecified date. The trial court noted an
earlier admission of the private respondent that on an unspecified date he received
the sum of P6,000.00 from the petitioner. This amount was credited to the
petitioner and deducted from the total amount paid by the private respondent. As
the one-year contract of sublease was pre-terminated two months short of the
stipulated period, the rentals were correspondingly reduced.
On appeal, the decision of the trial court was reversed. The respondent court
instead ordered the petitioner to pay the private respondent the sum of P24,916.00
plus P1,500.00 as litigation expenses and attorney's fees, on the following
justification:
Exhibit "I" is very clear in its non-reference to the transaction behind Exhibit "D."
What only gives the semblance that Exhibit "I" is an explanation of the transaction
behind Exhibit "D" are the oral testimonies given by the defendant and his two
witnesses. On the other hand, Exhibit "I" is very clear in its language. Thus, its
tenor must not be clouded by any parol evidence introduced by the defendant. And
with the tenor of Exhibit "I" remaining unembellished, the conclusion that Exhibit
"D" is a mere tentative receipt becomes untenable.
The trial court erred when it relied on the self-serving testimonies of the defendant
and his witness as against the receipts both parties presented and adopted as their
own exhibits. As said before, Exhibit "I" is very clear in its tenor. And if it is really
the intention of Exhibit "I" to explain the contents of Exhibit "D", such manifestation
or intention is not found in the four corners of the former document.
The respondent court also found that the amounts of P35,000.00, P8,000.00,
P500.00, P3,000.00, P3,750.00 and P4,000.00 were not payments for the "pakyaw"
and sublease agreement but for loans extended by Salonga to Cruz. It also
accepted Salonga's claim that the amount of P28,000.00 was delivered to the
petitioner on May 14, 1982, as payment on the "pakyaw" agreement apart from the
P35,000.00 (Exh. D) that was paid on May 4, 1982. However, it agreed that the
amount of P6,000.00 received by the private respondent from the petitioner should
be credited in favor of the latter.
The petitioner is now before this Court, raising the following issues:
1. The public respondent Court of Appeals gravely erred in (1) disregarding
parol evidence to Exhibits "D" and "I" despite the fact that these documents
fall under the exceptions provided for in Sec. 7, Rule 130 of the Rules of
Court and thereby in (2) making a sweeping conclusion that the transaction
 effected between the private respondent and petitioner is one of contract of
loan and not a contract of lease.
2. Assuming for the sake of argument that exhibits "D" and "I" evidence
separate transactions, the latter document should be disregarded, the same
not having been pleaded as a cause of action.
3. Whether or not the Stipulation of Facts entered into by the parties herein
relative to their executed transactions during the hearing of their case a quo,
are binding upon them and as well as, upon the public respondent?
Our ruling follows:
Rule 130, Sec. 7, of the Revised Rules of Court provides: 1
Sec. 7. Evidence of Written Agreements. — When the terms of an agreement have
been reduced to writing, it is to be considered as containing all such terms, and
therefore, there can be, between the parties and their successors in interest, no
evidence of the terms of the agreement other than the contents of the writing,
except in the following cases:
a) When a mistake or imperfection of the writing or its failure to express the true
intent and agreement of the parties, or the validity of the agreement is put in issue
by the pleadings;
b) When there is an intrinsic ambiguity in the writing. The term "agreement"
includes wills.
The reason for the 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. 2
The rule, however, is not applicable in the case at bar, Section 7, Rule 130 is
predicated on the existence of a document embodying the terms of an agreement,
but Exhibit D does not contain such an agreement. It is only a receipt attesting to
the fact that on May 4, 1982, the petitioner received from the private respondent
the amount of P35,000. It is not and could have not been intended by the parties to
be the sole memorial of their agreement. As a matter of fact, Exhibit D does not
even mention the transaction that gave rise to its issuance. At most, Exhibit D can
only be considered a casual memorandum of a transaction between the parties and
an acknowledgment of the receipt of money executed by the petitioner for the
private respondent's satisfaction. A writing of this nature, as Wigmore observed is
not covered by the parol evidence rule.
A receipt — i.e. a written acknowledgment, handed by one party to the other, of the
manual custody of money or other personality — will in general fall without the line
of the rule; i.e. it is not intended to be an exclusive memorial, and the facts may be
shown irrespective of the terms of the receipt. This is because usually a receipt is
merely a written admission of a transaction independently existing, and, like other
admissions, is not conclusive. 3
The "pakyaw" was mentioned only in Exhibit I, which also declared the petitioner's
receipt of the amount of P28,000.00 as consideration for the agreement. The
petitioner and his witnesses testified to show when and under what circumstances
the amount of P28,000.00 was received. Their testimonies do not in any way vary
or contradict the terms of Exhibit I. While Exhibit I is dated May 14, 1982, it does
not make any categorical declaration that the amount of P28,000.00 stated therein
was received by the petitioner on that same date. That date may not therefore be
considered conclusive as to when the amount of P28,000.00 was actually received.
A deed is not conclusive evidence of everything it may contain. For instance, it is
not the only evidence of the date of its execution, nor its omission of a
consideration conclusive evidence that none passed, nor is its acknowledgment of a
particular consideration an objection to other proof of other and consistent
considerations; and, by analogy, the acknowledgment in a deed is not conclusive of
the fact. 4
A distinction should be made between a statement of fact expressed in the
instrument and the terms of the contractual act. The former may be varied by parol
evidence but not the latter. 5 Section 7 of Rule 130 clearly refers to the terms of
an agreement and provides that "there can be, between the parties and their
successors in interest, no evidence of the terms of the agreement other than the
contents of the writing."
The statement in Exhibit I of the petitioner's receipt of the P28,000.00 is just a
statement of fact. It is a mere acknowledgment of the distinct act of payment made
by the private respondent. Its reference to the amount of P28,000.00 as
consideration of the "pakyaw" contract does not make it part of the terms of their
agreement. Parol evidence may therefore be introduced to explain Exhibit I,
particularly with respect to the petitioner's receipt of the amount of P28,000.00 and
of the date when the said amount was received.
Even if it were assumed that Exhibits D and I are covered by the parol evidence
rule, its application by the Court of Appeals was improper. The record shows that no
objection was made by the private respondent when the petitioner introduced
evidence to explain the circumstances behind the execution and issuance of the
said instruments. The rule is that objections to evidence must be made as soon as
the grounds therefor become reasonably apparent. 6 In the case of testimonial
evidence, the objection must be made when the objectionable question is asked or
after the answer is given if the objectionable features become apparent only by
reason of such answer. 7
For failure of the private respondent to object to the evidence introduced by the
petitioner, he is deemed to have waived the benefit of the parol evidence rule.
Thus, in Abrenica v. Gonda, 8 this Court held:
. . . 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 that if not so made it will be understood to have been waived. The proper time
to make a protest or objection is when, from the question addressed to the witness,
or from the answer thereto, or from the presentation of proof, the inadmissibility of
evidence is, or may be inferred.
It is also settled that the court cannot disregard evidence which would ordinarily be
incompetent under the rules but has been rendered admissible by the failure of a
party to object thereto. Thus:
. . . The acceptance of an incompetent witness to testify in a civil suit, as well as
the allowance of improper questions that may be put to him while on the stand is a
matter resting in the discretion of the litigant. He may assert his right by timely
objection or he may waive it, expressly or by silence. In any case the option rests
with him. Once admitted, the testimony is in the case for what it is worth and the
judge has no power to disregard it for the sole reason that it could have been
excluded, if it had been objected to, nor to strike it out on its own motion.
(Emphasis supplied.) 9
We find that it was error for the Court of Appeals to disregard the parol evidence
introduced by the petitioner and to conclude that the amount of P35,000.00
received on May 4, 1982 by the petitioner was in the nature of a loan
accommodation. The Court of Appeals should have considered the partial stipulation
of facts and the testimonies of the witnesses which sought to explain the
circumstances surrounding the execution of Exhibits D and I and their relation to
one another.
We are satisfied that the amount of P35,000.00 was received by the petitioner as
full payment of their "pakyaw" agreement for P28,000.00 and the remaining
P7,000.00 as advance rentals for their sublease agreement. The claim that the
excess of P7,000.00 was advance payment of the sublease agreement is bolstered
by the testimony of the private respondent himself when during the cross
examination he testified that:
ATTY. CRUZ:
Q And during the time you were leasing the fishpond, is it not a fact that you pay
lease rental to the defendant?
SALONGA:
A No sir, because I have already advanced him money.
Q What advance money are you referring to?
A Thirty-Five Thousand Pesos (P35,000.00), sir. 10
It was also error to treat the amounts received by the petitioner from August 15,
1982, to September 30, 1982, from the private respondent as loan
accommodations when the partial stipulation of facts clearly stated that these were
payments for the sublease agreement. The pertinent portions read:
7) That defendant Lucio Cruz in compliance with their verbal sublease agreement
had received from the plaintiff Conrado Salonga the following sums of money:
(Emphasis Supplied.)
(a) P8,000.00 on August 15, 1982, as evidenced by Annex "B" of the complaint;
(b) the sum of P500.00 on September 4, 1982, as evidenced by Annex "C" of the
complaint;
(c) the sum of P3,000.00 on September 19, 1982, as evidenced by Annex "D" of
the complaint;
(d) the sum of P3,750.00 on September 30, 1982, as Annex "E" of the complaint;
11
These admissions bind not only the parties but also the court, unless modified upon
request before the trial to prevent manifest injustice.
We find, however, that the Court of Appeals did not act in excess of its jurisdiction
when it appreciated Exhibit I despite the fact that it was not pleaded as a cause of
action and was objected to by the petitioner. According to Rule 10 of the Rules of
Court:
Sec. 5. Amendment to conform to or authorize presentation of evidence. — When
issues not raised by the pleadings are tried by express or implied consent of the
parties, they shall be treated in all respects, as if they had been raised in the
pleadings. Such amendment of the pleadings as may be necessary to cause them to
conform to the evidence and to raise these issues may be made upon motion of any
party at any time, even after judgment; but failure to amend does not affect the
result of the trial of these issues. If evidence is objected to at the trial on the
ground that it is not within the issues made by the pleadings, the court may allow
the pleadings to be amended and shall do so freely when the presentation of the
merits of the action will be subserved thereby and the objecting party fails to satisfy
the court that the admission of such evidence would prejudice him in maintaining
his action or defense upon the merits. The court may grant a continuance to enable
the objecting party to meet such evidence.
In Co Tiamco v. Diaz, 12 the Supreme Court held:
. . . When evidence is offered on a matter not alleged in the pleadings, the court
may admit it even against the objection of the adverse party, when the latter fails
to satisfy the court that the admission of the evidence would prejudice him in
maintaining his defense upon the merits, and the court may grant him continuance
to enable him to meet the situation created by the evidence . . .
While it is true that the private respondent did not even file a motion to amend his
complaint in order that it could conform to the evidence presented, this did not
prevent the court from rendering a valid judgment on the issues proved. As we held
in the Co Tiamco case:
. . . where the failure to order an amendment does not appear to have caused a
surprise or prejudice to the objecting party, it may be allowed as a harmless error.
Well-known is the rule that departures from procedure may be forgiven when they
do not appear to have impaired the substantial rights of the parties.
The following computation indicates the accountability of the private respondent to
the petitioner:
Exh. D, May 4, 1982 — P35,000.00
Exh. E, Aug. 15, 1982 — 8,000.00
Exh. F, Sept. 4, 1982 — 500.00
Exh. G, Sept. 19, 1982 — 3,000.00
Exh. H, Sept. 30, 1982 — 3,750.00
Lost receipt 4,000.00
————
P54,250.00
Less: (amount received by the
private respondent from the
petitioner) (6,000.00)
————
Total amount paid by the
private respondent to
the petitioner 48,250.00
Amount to be paid by the private respondent to the petitioner:
 1. Pakyaw P28,000.00
2. Sublease — 28,000 per annum
Less: 2 months: 4,666 23,334.00
————
Total amount to be paid by
the private respondent to
the petitioner P51,334.00
Total amount to be paid
by the private respondent P51,334.00
Total amount paid by
the private respondent 48,250.00
————
Deficiency in the amount
paid by the private respondent P3,084.00
ACCORDINGLY, the decision of the respondent Court of Appeals is REVERSED and
that of the Regional Trial Court of Laguna AFFIRMED, with the modification that the
private respondent shall pay the petitioner the sum of P3,084.00 instead of
P3,054.00, plus costs. It is so ordered.
Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

[G.R. No. 96405. June 26, 1996]

BALDOMERO INCIONG, JR., petitioner, vs. COURT OF APPEALS and

PHILIPPINE BANK OF COMMUNICATIONS, respondents.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; PAROL EVIDENCE RULE; DOES NOT
SPECIFY THAT THE WRITTEN AGREEMENT BE A PUBLIC
INSTRUMENT.- Clearly, the rule does not specify that the written
agreement be a public document. What is required is that the agreement
be in writing as the rule is in fact founded on "long experience that written
evidence is so much more certain and accurate than that which rests in
fleeting memory only, that it would be unsafe, when parties have
expressed the terms of their contract in writing, to admit weaker evidence
 to control and vary the stronger and to show that the parties intended a
different contract from that expressed in the writing signed by them"
[FRANCISCO, THE RULES OF COURT OF THE PHILIPPINES, Vol. VII,
Part I, 1990 ed., p. 179] Thus, for the parol evidence rule to apply, a
written contract need not be in any particular form, or be signed by both
parties. As a general rule, bills, notes and other instruments of a similar
nature are not subject to be varied or contradicted by parol or extrinsic
evidence.
2. CIVIL LAW; OBLIGATIONS; SOLIDARY OR JOINT AND SEVERAL
OBLIGATION, DEFINED.- A solidary or joint and several obligation is one
in which each debtor is liable for the entire obligation, and each creditor is
entitled to demand the whole obligation. [TOLENTINO, CIVIL CODE OF
THE PHILIPPINES, Vol. IV, 1991 ed., p. 217] Section 4, Chapter 3, Title 1,
Book IV of the Civil Code states the law on joint and several
obligations.Under Art. 1207 thereof, when there are two or more debtors in
one and the same obligation, the presumption is that the obligation is joint
so that each of the debtors is liable only for the proportionate part of the
debt. There is a solidary liability only when the obligation expressly so
states, when the law so provides or when the nature of the obligation so
requires. [Sesbreo v. Court of Appeals, G.R. No. 89252, May 24, 1993,
222 SCRA 466, 481.]
3. ID.; GUARANTY; GUARANTOR AS DISTINGUISHED FROM SOLIDARY
DEBTOR.- While a guarantor may bind himself solidarily with the principal
debtor, the liability of a guarantor is different from that of a solidary
debtor. Thus, Tolentino explains: "A guarantor who binds himself in
solidum with the principal debtor under the provisions of the second
paragraph does not become a solidary co-debtor to all intents and
purposes. There is a difference between a solidary co-debtor, and a fiador
in solidum (surety). The latter, outside of the liability he assumes to pay
the debt before the property of the principal debtor has been exhausted,
retains all the other rights, actions and benefits which pertain to him by
reason of the fiansa; while a solidary co-debtor has no other rights than
those bestowed upon him in Section 4, Chapter 3, Title 1, Book IV of the
Civil Code." [Tolentino, Civil Code of the Philippines, Vol. V, 1992 ed., p.
502]
APPEARANCES OF COUNSEL
Emilio G. Abrogena for petitioner.
Teogenes X. Velez for private respondent.
 DECISION
ROMERO, J.:

This is a petition for review on certiorari of the decision of the Court of

Appeals affirming that of the Regional Trial Court of Misamis Oriental, Branch
18,[1] which disposed of Civil Case No. 10507 for collection of a sum of money
and damages, as follows:

"WHEREFORE, defendant BALDOMERO L. INCIONG, JR. is adjudged solidarily

liable and ordered to pay to the plaintiff Philippine Bank of Communications,
Cagayan de Oro City, the amount of FIFTY THOUSAND PESOS (P50,000.00),with
interest thereon from May 5, 1983 at 16% per annum until fully paid; and 6% per
annum on the total amount due, as liquidated damages or penalty from May 5, 1983
until fully paid; plus 10% of the total amount due for expenses of litigation and
attorney's fees; and to pay the costs.

The counterclaim, as well as the cross claim, are dismissed for lack of merit.

SO ORDERED."

Petitioner's liability resulted from the promissory note in the amount of

P50,000.00 which he signed with Rene C. Naybe and Gregorio D.
Pantanosas on February 3, 1983, holding themselves jointly and severally
liable to private respondent Philippine Bank of Communications, Cagayan de
Oro City branch. The promissory note was due on May 5, 1983.
Said due date expired without the promissors having paid their
obligation. Consequently, on November 14, 1983 and on June 8, 1984, private
respondent sent petitioner telegrams demanding payment thereof.[2] On
December 11, 1984 private respondent also sent by registered mail a final
letter of demand to Rene C. Naybe. Since both obligors did not respond to the
demands made, private respondent filed on January 24, 1986 a complaint for
collection of the sum of P50,000.00 against the three obligors.
On November 25, 1986, the complaint was dismissed for failure of the
plaintiff to prosecute the case. However, on January 9, 1987, the lower court
reconsidered the dismissal order and required the sheriff to serve the
summonses. On January 27, 1987, the lower court dismissed the case
against defendant Pantanosas as prayed for by the private respondent
herein. Meanwhile, only the summons addressed to petitioner was served as
the sheriff learned that defendant Naybe had gone to Saudi Arabia.
 In his answer, petitioner alleged that sometime in January 1983, he was
approached by his friend, Rudy Campos, who told him that he was a partner
of Pio Tio, the branch manager of private respondent in Cagayan de Oro City,
in the falcata logs operation business. Campos also intimated to him that
Rene C. Naybe was interested in the business and would contribute a
chainsaw to the venture. He added that, although Naybe had no money to buy
the equipment Pio Tio had assured Naybe of the approval of a loan he would
make with private respondent. Campos then persuaded petitioner to act as a
"co-maker" in the said loan. Petitioner allegedly acceded but with the
understanding that he would only be a co-maker for the loan of P5,000.00.
Petitioner alleged further that five (5) copies of a blank promissory note
were brought to him by Campos at his office. He affixed his signature thereto
but in one copy, he indicated that he bound himself only for the amount of
P5,000.00. Thus, it was by trickery, fraud and misrepresentation that he was
made liable for the amount of P50,000.00.
In the aforementioned decision of the lower court, it noted that the
typewritten figure "P50,000-" clearly appears directly below the admitted
signature of the petitioner in the promissory note.[3] Hence, the latter's
uncorroborated testimony on his limited liability cannot prevail over the
presumed regularity and fairness of the transaction, under Sec. 5 (q) of Rule
131. The lower court added that it was "rather odd" for petitioner to have
indicated in a copy and not in the original, of the promissory note, his
supposed obligation in the amount of P5,000.00 only. Finally, the lower court
held that even granting that said limited amount had actually been agreed
upon, the same would have been merely collateral between him and Naybe
and, therefore, not binding upon the private respondent as creditor-bank.
The lower court also noted that petitioner was a holder of a Bachelor of
Laws degree and a labor consultant who was supposed to take due care of
his concerns, and that, on the witness stand, Pio Tio denied having
participated in the alleged business venture although he knew for a fact that
the falcata logs operation was encouraged by the bank for its export potential.
Petitioner appealed the said decision to the Court of Appeals which, in its
decision of August 31, 1990, affirmed that of the lower court. His motion for
reconsideration of the said decision having been denied, he filed the instant
petition for review on certiorari.
On February 6,1991, the Court denied the petition for failure of petitioner
to comply with the Rules of Court and paragraph 2 of Circular No. 1-88, and to
sufficiently show that respondent court had committed any reversible error in
its questioned decision.[4] His motion for the reconsideration of the denial of
his petition was likewise denied with finality in the Resolution of April 24,
1991.[5] Thereafter, petitioner filed a motion for leave to file a second motion
for reconsideration which, in the Resolution of May 27, 1991, the Court
denied. In the same Resolution, the Court ordered the entry of judgment in
this case.[6]
Unfazed, petitioner filed a motion for leave to file a motion for
clarification. In the latter motion, he asserted that he had attached Registry
Receipt No. 3268 to page 14 of the petition in compliance with Circular No. 1-
88. Thus, on August 7,1991, the Court granted his prayer that his petition be
given due course and reinstated the same.[7]
Nonetheless, we find the petition unmeritorious.
Annexed to the petition is a copy of an affidavit executed on May 3, 1988,
or after the rendition of the decision of the lower court, by Gregorio
Pantanosas, Jr., an MTCC judge and petitioner's co-maker in the promissory
note. It supports petitioner's allegation that they were induced to sign the
promissory note on the belief that it was only for P5,000.00, adding that it was
Campos who caused the amount of the loan to be increased to P50,000.00.
The affidavit is clearly intended to buttress petitioner's contention in the
instant petition that the Court of Appeals should have declared the promissory
note null and void on the following grounds: (a) the promissory note was
signed in the office of Judge Pantanosas, outside the premises of the bank;
(b) the loan was incurred for the purpose of buying a second-hand chainsaw
which cost only P5,000.00; (c) even a new chainsaw would cost only
P27,500.00; (d) the loan was not approved by the board or credit committee
which was the practice, at it exceeded P5,000.00; (e) the loan had no
collateral; (f) petitioner and Judge Pantanosas were not present at the time
the loan was released in contravention of the bank practice, and (g) notices of
default are sent simultaneously and separately but no notice was validly sent
to him.[8] Finally, petitioner contends that in signing the promissory note, his
consent was vitiated by fraud as, contrary to their agreement that the loan was
only for the amount of P5,000. 00, the promissory note stated the amount of
P50,000.00.
The above-stated points are clearly factual. Petitioner is to be reminded of
the basic rule that this Court is not a trier of facts. Having lost the chance to
fully ventilate his factual claims below, petitioner may no longer be accorded
the same opportunity in the absence of grave abuse of discretion on the part
of the court below. Had he presented Judge Pantanosas' affidavit before the
lower court, it would have strengthened his claim that the promissory note did
not reflect the correct amount of the loan.
 Nor is there merit in petitioner's assertion that since the promissory note
"is not a public deed with the formalities prescribed by law but x x x a mere
commercial paper which does not bear the signature of x x x attesting
witnesses," parol evidence may "overcome" the contents of the promissory
note.[9] The first paragraph of the parol evidence rule[10] states:

"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."

Clearly, the rule does not specify that the written agreement be a public
document.
What is required is that agreement be in writing as the rule is in fact
founded on "long experience that written evidence is so much more certain
and accurate than that which rests in fleeting memory only, that it would be
unsafe, when parties have expressed the terms of their contract in writing, to
admit weaker evidence to control and vary the stronger and to show that the
parties intended a different contract from that expressed in the writing signed
by them."[11] Thus, for the parol evidence rule to apply, a written contract need
not be in any particular form, or be signed by both parties.[12] As a general
rule, bills, notes and other instruments of a similar nature are not subject to be
varied or contradicted by parol or extrinsic evidence.[13]
By alleging fraud in his answer,[14] petitioner was actually in the right
direction towards proving that he and his co-makers agreed to a loan of
P5,000.00 only considering that, where a parol contemporaneous agreement
was the inducing and moving cause of the written contract, it may be shown
by parol evidence.[15] However, fraud must be established by clear and
convincing evidence, mere preponderance of evidence, not even being
adequate.[16] Petitioner's attempt to prove fraud must, therefore, fail as it was
evidenced only by his own uncorroborated and, expectedly, self-serving
testimony.
Petitioner also argues that the dismissal of the complaint against Naybe,
the principal debtor, and against Pantanosas, his co-maker, constituted a
release of his obligation, especially because the dismissal of the case against
Pantanosas was upon the motion of private respondent itself. He cites as
basis for his argument, Article 2080 of the Civil Code which provides that:
"The guarantors, even though they be solidary, are released from their obligation
whenever by some act of the creditor, they cannot be subrogated to the rights,
mortgages, and preferences of the latter."

It is to be noted, however, that petitioner signed the promissory note as a

solidary co-maker and not as a guarantor. This is patent even from the first
sentence of the promissory note which states as follows:

"Ninety one (91) days after date, for value received, I/we, JOINTLY and
SEVERALLY promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS
at its office in the City of Cagayan de Oro, Philippines the sum of FIFTY
THOUSAND ONLY (P50,000. 00) Pesos, Philippine Currency, together with interest
x x x at the rate of SIXTEEN (16) per cent per annum until fully paid."

A solidary or joint and several obligation is one in which each debtor is

liable for the entire obligation, and each creditor is entitled to demand the
whole obligation.[17] On the other hand, Article 2047 of the Civil Code states:

"By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so.

If a person binds himself solidarily with the principal debtor, the provisions of Section
4, Chapter 3, Title I of this Book shall be observed, In such a case the contract is
called a suretyship." (Italics supplied.)

While a guarantor may bind himself solidarily with the principal debtor, the
liability of a guarantor is different from that of a solidary debtor. Thus,
Tolentino explains:

"A guarantor who binds himself in solidum with the principal debtor under the provisions of the
second paragraph does not become a solidary co-debtor to all intents and purposes. There is a
difference between a solidary co-debtor, and a fiador in solidum (surety). The later, outside of
the liability he assumes to pay the debt before the property of the principal debtor has been
exhausted, retains all the other rights, actions and benefits which pertain to him by reason of
the fiansa; while a solidary co-debtor has no other rights than those bestowed upon him in
Section 4, Chapter 3, title I, Book IV of the Civil Code."[18]

Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on
joint and several obligations. Under Art. 1207 thereof, when there are two or
more debtors in one and the same obligation, the presumption is that the
obligation is joint so that each of the debtors is liable only for a proportionate
part of the debt. There is a solidarity liability only when the obligation
expressly so states, when the law so provides or when the nature of the
obligation so requires.[19]
Because the promissory note involved in this case expressly states that
the three signatories therein are jointly and severally liable, any one, some or
all of them may be proceeded against for the entire obligation.[20] The choice
is left to the solidary creditor to determine against whom he will enforce
collection.[21] Consequently, the dismissal of the case against Judge
Pontanosas may not be deemed as having discharged petitioner from liability
as well. As regards Naybe, suffice it to say that the court never acquired
jurisdiction over him. Petitioner, therefore, may only have recourse against his
co-makers, as provided by law.
WHEREFORE, the instant petition for review on certiorari is hereby
DENIED and the questioned decision of the Court of Appeals is
AFFIRMED.Costs against petitioner.
SO ORDERED.