University of the Philippines College of Law

3D

Topic Parol Evidence Rule

Case No. G.R. No. 171601 April 8, 2015
Case Name Sps Paras v Kimwa Construction and Development Corporation
Ponente LEONEN, j.

RELEVANT FACTS
Petitioner Lucia Paras (Lucia) was a concessionaire of sand and gravel permit. Kimwa Construction and Dev’t Corp
(Kimwa) is a construction firm selling concrete aggregates to contractors and haulers in Cebu. Lucia and Kimwa
entered into a contract deemed as. “Agreement for Supply of Aggregates” (Agreement) where 40k cubic meters of
aggregates were allotted by Lucia as supplier to Kimwa and Kimwa was to pick them up at Lucia’s permitted area
at P240/truckload (see notes on Agreement). Based on the Agreement, Kimwa hauled 10k cubic meters of
aggregates but eventually stopped doing so.

Thus, Lucia, joined by her husband, filed for complaint for breach of contract with damages.

In their Complaint, Sps Paras alleged they were approached by Kimwa expressing interest to buy gravel and sand
from Lucia. Kimwa allegedly asked it be assured of 40k cubic meters of aggregates. Lucia said that her concession
was due for rechanneling on May 15, 1995, when her Special Permit expires. She emphasized that she is willing to
contract with Kimwa “provided the 40k cubic meters would be completely extracted and hauled before May
15, 1995.” Kimwa assured her it would only take 2-3 months to finish the hauling of 40k cubic meters. Convinced,
Lucia and Kimwa entered the Agreement. Sps Paras added that Kimwa hauled 10k cubic meters of aggregates but
after that it allegedly transferred to the concession area of one Mrs. dela Torre in violation of the Agreement.

In its Answer, Kimwa claimed that it never committed to get 40k cubic meters from Lucia; that the 40k cubic meters
represented only a maximum quantity that it could haul. It alleged that it neither committed to haul 40k cubic meters
before May 15, 1995 nor that it could complete it in 2-3months. It denied the hauling of 10k cubic meters and the
transferring to another concession area.

Kimwa claimed that the Agreement expressed the parties’ true intent that 40k cubic metere was a maximum limit
and that ay 15, 1995 was never the deadline. Invoking the Parol Evidence Rule, it insisted that Sps Paras were
barred from introducing evidence which would show that the parties had agreed differently.

RTC Ruling: in favor of Sps Paras. The Agreement stipulated that the allotted aggregates were set aside exclusively
for Kimwa; that it was contrary to human experience for Kimwa to enter the same without confirming Lucia’s authority
as a concessionaire. It considered the Special Permit of Lucia that it clearly showed her authority was good for only
6 months. Kimwa must have been aware that 40k cubic meters allotted to it must necessarily be hauled by May 15,
1995. It failed to do so and is liable to Sps Paras for the value of the remaining 30k cubic meters of aggregates
Kimwa did not haul.

CA Ruling: reversed RTC’s decision. It faulted RTC for basing its findings on evidence presented which were in
violation of the Parol Evidence Rule. Agreement was clear that Kimwa was not obliged to deliver 40k cubic meters
by May 15, 1995.

Evidence for Petitioners Sps Paras Evidence for Kimwa Construction

1) Testimony of petitioners 1) invoked parol evidence rule
2) The Agreement 2) Admitted and denied certain allegations of
3) Special Permit as concessionaire petitioners

RATIO DECIDENDI

Issue Ratio
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w/n Sps Paras were able Kimwa is liable for failing to haul the remainder of the quantity which it was obliged to
to establish that Kimwa acquire from Lucia Paras.
was obliged to haul 40k
cubic meters of SC on Parol Evidence Rule
aggregates on or before
May 15, 1995, thus Rule 130, Section 9 of the Revised Rules on Evidence provides for the Parol Evidence
making Kimwa liable to Rule, the rule on admissibility of documentary evidence when the terms of an
Sps Paras for failing to agreement have been reduced into writing (notes).
haul the remaining 30k
within said period - yes Genereal Rule: reduction to written form, regardless of the formalities
observed,36 "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.

This is based on a perceived wisdom in deferring to the contracting parties’ articulated

intent. In choosing to reduce their agreement into writing, they are deemed to have
done so meticulously and carefully, employing specific language as are appropriate to
their context. This is also because "oral testimony . . . 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.

Exception: Provided that a party puts in issue in its pleading any of the 4 items
enumerated in the 2nd paragraph of Rule 130, Section 9, "a party may present evidence
to modify, explain or add to the terms of the agreement. Raising any of these items as
an issue in a pleading is not limited to the party initiating an action. if the defendant set
up the affirmative defense that the contract mentioned in the complaint does not
express the true agreement of the parties, then parol evidence is admissible to prove
the true agreement of the parties. Moreover, as with all possible objections to the
admission of evidence, a party’s failure to timely object is deemed a waiver, and parol
evidence may then be entertained.

It is equally imperative that parol evidence sought to be introduced points to the

conclusion proposed by the party presenting it; that it must be relevant, tending to
induce belief in the existence of the flaw or true intent averred by the party introducing
parol evidence.

In sum, 2 things must be established for parol evidence to be admitted: 1) (re:

competence) that the existence of the 4 exceptions has been put in issue in a pleading
or has not been objected to by the adverse part and 2) (re: relevance) parol evidence
sought to be introduced serves to form the basis of the conclusion proposed by the
presenting party.

The Testimonial and Documentary Parol Evidence Sought to Be Introduced by

Petitioners May Be Admitted and Considered

CA is in serious error. 2 flaws in CA’s reasoning must be emphasized. First, it is

inconsistent to say on one hand, that RTC erred on the basis of “evidence presented
and on the other, that petitioners showed no “no proof.” Second, without even
accounting for the exceptions in Rule 130, section 9, CA immediately concluded that
whatever evidence petitioners presented violated the Parol Evidence Rule.

On the contrary, petitioners pleaded in the Complaint before RTC a mistake or

imperfection in the Agreement as well as its failure to express the true intent of the
parties. Further, Kimwa, thru its Answer (see notes for Copy of Answer), responded to
petitioners’ pleading of these issues. This is thus an exceptional case allowing
admission of parol evidence. (see notes for Copy of Complaint). Although petitioners
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did not expressly state the words “mistake”,”imperfection”,or “failure to express the true
intent of parties”, it is still evident that the crux of petitioners Spouses Paras’ Complaint
is their assertion that the Agreement was founded on the parties’ supposed
understanding that the quantity of aggregates allotted in favor of respondent Kimwa
must be hauled by May 15, 1995. This assertion is the very foundation of
petitioners’ having come to court for relief.

Proof of how petitioners susccessfuly pleaded and put this in issue is how Kimwa felt
the need to respond to it (see notes on Kimwa’s Answer).

SC Gave Probative Weight to the Parol Evidence Adduced by Petitioners

Of course, the admissibility and availability of such parol evidence do not guarantee
the probative value given by a court. But in any case, SC found that petitioners have
established that Kimwa was obliged to haul 40k cubic meters by May 15, 1995.
Considering it admitted that it did not haul the remaining 30k cubic meters, Kimwa is
liable to petitioners.

The Pre-Trial Order issued by RTC shows Kimwa’s admission to acknowledging

Petitioner’s Special Permit and that it was only good for 6 months (see notes re: Pre
Trial Order). Thus, by admitting of getting a copy of said permit, Kimwa is made aware
that Lucis’d operations cannot extend beyond said period. The Special Permit’s
condition was in consideration of its corresponding commitment to haul all 40,000 cubic meters.
The Agreement even expressed that the aggregates is for exclusive use of Kimwa. Lucia then
bound her whole business to Kimwa. Rational human behavior dictates that she has done so
with the corresponding assurance from Kimwa.

Likewise, the permit being valid for only 6 months, lends credence to petitioner’s claim
that Lucia entered the contract because of Kimwa’s promise to complete hauling by
May 15, 1995. SC proceeds from the position that people act as rational human beings.
Hence, Kimwa’s awareness of the conditions, and the Agreement’s own text
expressing exclusive allotment for Kimwa supports petitioner’s position that Kimwas
was indeed obliged to haul 40k cubic meters by May 15, 1995.

RULING

2006 of the Court of Appeals Special 20th Division in CA-G.R. CV No. 74682 are REVERSED and SET ASIDE. The Decision
of Branch 55 of the Regional Trial Court, Mandaue City dated May 16, 2001 in Civil Case No. MAN-2412 is REINSTATED.

NOTES

1) AGREEMENT FOR SUPPLY OF AGGREGATES

KNOW ALL MEN BY THESE PRESENTS:

This Agreement made and entered into by and between:

LUCIA PARAS, of legal age, Filipino, married and resident of Poblacion, Toledo City, Province of Cebu, hereinafter referred to as the SUPPLIER:
-and-
KIMWA CONSTRUCTION AND DEVELOPMENT CORP., a corporation duly organized and existing under the laws of the Philippines with office
address at Subangdaku, Mandaue City, hereinafter represented by its President MRS. CORAZON Y. LUA, of legal age, Filipino and a resident
of Subangdaku, Mandaue City[,] hereinafter referred to as the CONTRACTOR;
W I T N E S S E T H:

That the SUPPLIER is [sic] Special Permittee of (Rechanelling Block # VI of Sapang Daco River along Barangay Ilihan) located at Toledo City
under the terms and conditions:
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1. That the aggregates is [sic] to be picked-up by the CONTRACTOR at the SUPPLIER [sic] permitted area at the rate of
TWO HUNDRED FORTY (P 240.00) PESOS per truck load;
2. That the volume allotted by the SUPPLIER to the CONTRACTOR is limited to 40,000 cu.m.; 3. That the said Aggregates
is [sic] for the exclusive use of the Contractor;
4. That the terms of payment is Fifteen (15) days after the receipt of billing;
5. That there is [sic] no modification, amendment, assignment or transfer of this Agreement after acceptance shall be binding
upon the SUPPLIER unless agreed to in writing by and between the CONTRACTOR and SUPPLIER.
IN WITNESS WHEREOF, we have hereunto affixed our signatures this 6th day of December, 1994 at Mandaue City, Cebu, Philippines.
LUCIA PARAS(sgd.) CORAZON Y. LUA(sgd.)
Supplier Contractor
(Emphasis supplied)

2) Rule 130 Sec 9

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 written 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; or
(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.

3) Paragraphs 6 to 10 of petitioners’ Complaint read:

6. Sensing that the buyers-contractors and haulers alike could easily consumed [sic] the deposits defendant proposed to the plaintiff-
wife that it be assured of a forty thousand (40,000) cubic meter [sic];
7. Plaintiff countered that the area is scheduled to be rechanneled on 15 May 1995 and by that time she will be prohibited to sell the
aggregates;
8. She further told the defendant that she would be willing to enter into a contract provided the forty thousand cubic meter [sic] will be
withdrawn or completely extracted and hauled before 15 May 1995, the scheduled rechanneling;
9. Defendant assured her that it will take them only two to three months to haul completely the desired volume as defendant has all
the trucks needed;
10. Convinced of the assurances, plaintiff-wife and the defendant entered into a contract for the supply of the aggregates sometime
on 6 December 1994 or thereabouts, at a cost of Two Hundred Forty (₱240.00) Pesos per truckload[.] 50

4) Paragraphs 2 to 5 of respondent Kimwa’s Answer read:

2. The allegation in paragraph six of the complaint is admitted subject to the qualification that when defendant offered to buy
aggregates from the concession of the plaintiffs, it simply asked the plaintiff concessionaire if she could sell a sufficient supply of
aggregates to be used in defendant’s construction business and plaintiff concessionaire agreed to sell to the defendant aggregates
from her concession up to a limit of 40,000 cubic meters at the price of ₱240.00 per cubic meter.

3. The allegations in paragraph seven and eight of the complaint are vehemently denied by the defendant. The contract which was
entered into by the plaintiffs and the defendant provides only that the former supply the latter the volume of 40,000.00 cubic meters
of aggregates. There is no truth to the allegation that the plaintiff wife entered into the contract under the condition that the aggregates
must be quarried and hauled by defendant completely before May 15, 1995, otherwise this would have been unequivocally stipulated
in the contract.

4. The allegation in paragraph nine of the complaint is hereby denied. The defendant never made any assurance to the plaintiff wife
that it will take only two to three months to haul the aforesaid volume of aggregates. Likewise, the contract is silent on this aspect for
in fact there is no definite time frame agreed upon by the parties within which defendant is to quarry and haul aggregates from the
concession of the plaintiffs.

5. The allegation in paragraph ten of the complaint is admitted insofar as the execution of the contract is concerned. However, the
contract was executed, not by reason of the alleged assurances of the defendant to the plaintiffs, as claimed by the latter, but because
of the intent and willingness of the plaintiffs to supply and sell aggregates to it. It was upon the instance of the plaintiff that the defendant
sign the subject contract to express in writing their agreement that the latter would haul aggregates from plaintiffs’ concession up to
such point in time that the maximum limit of 40,000 cubic meters would be quarried and hauled without a definite deadline being set.
Moreover, the contract does not obligate the defendant to consume the allotted volume of 40,000 cubic meters. 52

5) The Pre-Trial Order issued by the Regional Trial Court in Civil Case No. MAN-2412 attests to respondent Kimwa’s admission
that:

6) Prior to or during the execution of the contract[,] the Plaintiffs furnished the Defendant all the documents and requisite papers
in connection with the contract, one of which was a copy of the Plaintiff’s [sic] special permit indicating that the Plaintiff’s
[sic] authority was only good for (6) months from November 14, 1994.53
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This Special Permit was, in turn, introduced by petitioners in evidence as their Exhibit "A," 54 with its date of issuance and
effectivity being specifically identified as their Exhibit "A-1."55 Relevant portions of this Special Permit read:

To All Whom It May Concern:

PERMISSION is hereby granted to:

Name Address

LUCIA PARAS Poblacion, Toledo City

to undertake the rechannelling of Block No. VI of Sapang Daco River along Barangay Ilihan, Toledo City, subject to following
terms and conditions:

1. That the volume to be extracted from the area is approximately 40,000 cubic meters;

....

This permit which is valid for six (6) months from the date hereof is revocable anytime upon violation of any of the foregoing
conditions or in the interest of public peace and order.

Cebu Capitol, Cebu City, November 14, 1994.56