G.R. No. 171707 July 28, 2008 2.

28, 2008 2. The Lessee shall pay in advance the monthly rental for the land
in the amount of ONE HUNDRED FIFTEEN THOUSAND TWO
SPOUSES WILFREDO and ANGELA AMONCIO, Petitioners, HUNDRED PESOS (₱115,200.00) Philippines Currency
vs. equivalent to three (3) months deposit and three (3) months advance
AARON GO BENEDICTO, Respondent. rental; commencing November, 1997;

DECISION 3. The [Lessee] shall issue postdated checks for the succeeding
rentals to the Lessor;
CORONA, J.:
4. That in the event of failure to complete the term of the lease, the
At bar is an appeal by certiorari under Rule 45 of the Rules of Court assailing lessee is still liable to answer for the rentals of the remaining period;
the decision of the Court of Appeals (CA) in CA-G.R. CV No.
793411 which, in turn, affirmed the decision of the Regional Trial Court 5. That all the improvement on the land leased shall automatically
(RTC), Branch 82 of Quezon City. become the property of the Lessor after the expiration of the term
of the lease;
The facts follow.
6. That the leased parcel of land shall be devoted exclusively for the
On July 15, 1997, petitioners Wilfredo and Angela Amoncio entered into a construction supply business of the [Lessee];2
contract of lease with a certain Ernesto Garcia over a 120 sq. m. portion of
their 600 sq. m. property in Quezon City. xxx xxx xxx

On August 20, 1997, petitioners entered into another contract of lease, this 10. Design specification needs final approval by the Lessor[,] while
time with respondent Aaron Go Benedicto over a 240 sq. m. portion of the structural improvements would have to conform to local
same property. The contract read: government specification, taxes on structural improvement will be
for the account of the Lessee.3
WHEREAS, the Lessor is the absolute owner of a parcel of land with an
area of (600) [sq. m.] situated in Neopolitan, Quezon City covered by T.C. In December 1997, Garcia and respondent took possession of their
T. No. 50473 of the Register of Deeds of Quezon City, 240 [sq. m.] of which respective leased portions.
is being leased to the lessee;
In July 1999, Garcia pre-terminated his contract with petitioners.
That for and in consideration of the amount of NINETEEN THOUSAND Respondent, on the other hand, stayed on until June 8, 2000. According to
TWO HUNDRED PESOS (₱19,200.00), Philippines Currency, monthly petitioners, respondent stopped paying his monthly rentals in December
rental[,] the Lessor herein lease a portion of said parcel of land with an area 1999. Shortly thereafter, petitioners claimed they discovered respondent
of 240 sq. m. to the lessee, subject to the following terms and conditions: putting up improvements on another 120 sq. m. portion of their property
which was never leased to him nor to Garcia. They added he had also
1. That the term of the lease is for [f]ive (5) years renewable occupied Garcia’s portion immediately after the latter left.4
annually for a maximum of five (5) years from the execution of this
contract; Petitioners asked respondent to pay his arrears and desist from continuing
with his construction but he took no heed. Because of respondent’s failure

Parol Evidence Rule

to meet petitioners’ demands, they asked him to vacate the property. On On the counterclaim, [petitioners] are hereby ordered to pay [respondent] as
January 27, 2000, they rescinded the lease contract. follows:

On June 23, 2000, petitioners filed in the RTC of Quezon City a case5 for a. The sum of SIX HUNDRED THOUSAND (₱600,000) PESOS
recovery of possession of real property against respondent. In the complaint, representing the cost of the two improvements constructed on the
petitioners asked respondent to pay the following: (1) rent from January 27, remaining portion of the [petitioners’] lot.
2000 or from the time his lease contract was rescinded until he vacated the
property; (2) rent for Garcia’s portion from August 1999 until he vacated it b. The sum of THREE HUNDRED THOUSAND PESOS
and (3) rent for the remaining 120 sq. m. which was not covered by his or (₱300,000) PESOS representing the adjusted cost of the two
Garcia’s contract. Petitioners likewise insisted that respondent was liable to improvements likewise constructed by [respondent][,] possession
pay his arrears from December 1999 until the expiration of his lease contract of which was terminated two and a half years before the stipulated
in August 2002. According to them, the lease contract provided: term of five (5) years.

"in the event of [respondent’s] failure to complete the term of the lease, [he c. The sum of TEN THOUSAND (₱10,000) PESOS as and by way
would] still be liable to answer for the rentals of the remaining period."6 of attorney’s fees.

In his answer with counterclaim, respondent denied petitioners’ accusations SO ORDERED.8

and alleged that it was them who owed him money. According to him, he
and petitioner Wilfredo Amoncio agreed to construct five commercial Petitioners elevated the case to the CA. There, petitioners argued that the
buildings on petitioners’ property. One of the buildings was to go to Garcia, RTC erred in (1) denying their claim for payment of rentals both for the
two to petitioners and the last two to him. They also agreed that he was to unexpired period of the lease and for the portions of the property used by
finance the construction and petitioners were to pay him for the two respondent which was not covered by his lease contract and (2) granting
buildings assigned to them. respondent’s counterclaim although they did not allow the construction of
the buildings. Petitioners likewise contended the trial court disregarded the
Respondent added he was to pay the rentals for five years and surrender the parol evidence rule9which disallowed the court from looking into any other
buildings (on his leased portion) to petitioners after the lapse of said period. evidence relating to the agreement of the parties outside the written contract
However, in June 2000, he vacated the premises after he and petitioners between them.
could no longer settle things amicably.
In its assailed decision, the CA affirmed the RTC’s decision and dismissed
Respondent asked to be paid: (1) ₱600,000 for the construction cost of the petitioners’ appeal. It held that:
two buildings that went to petitioners7; (2) ₱300,000 as adjusted cost of the
portion leased to him and (3) ₱10,000 as attorney’s fees. (1) petitioners did not adduce evidence to prove that respondent had
actually occupied portions of their property not covered by his
After trial, the RTC gave credence to respondent’s version and dismissed contract;
petitioners’ case for lack of factual and legal basis. It also granted
respondent’s counterclaim: (2) petitioners could not insist that respondent pay the remaining
period under the contract since they were the ones who demanded
WHEREFORE, premises considered. Judgment is hereby rendered in favor that respondent vacate the premises and
of [respondent] and against [petitioners] DISMISSING the latter’s
complaint for lack of factual and legal basis.

Parol Evidence Rule

 (3) the rule on parol evidence could no longer apply after they failed xxx xxx xxx
to object to respondent’s testimony (in the lower court) about their
agreement regarding the construction of the buildings.10 The so-called "parol evidence" forbids any addition to or contradiction of
the terms of a written instrument by testimony purporting to show that, at or
Petitioners filed a motion for reconsideration but it was denied.11 Hence, this before the signing of the document, other terms were orally agreed on by the
petition.12 parties.16 Under the aforecited rule, the terms of the written contract are
conclusive upon the parties and evidence aliunde is inadmissible to vary an
In support of this petition, petitioners essentially argue that the CA erred in enforceable agreement embodied in the document. However, the rule is not
ruling that: (1) they consented to the construction of the buildings by absolute and admits of exceptions:
respondent; (2) they waived their right to respondent’s assertion of facts that
were not embodied in the lease contract and (3) respondent was not a builder xxx xxx xxx
in bad faith.13
However, a party may present evidence to modify, explain or add to the
Petitioners Allowed The terms of the written agreement if he puts in issue in his pleading:
Construction Of The Buildings
(a) An intrinsic ambiguity, mistake or imperfection in the written
Petitioners’ first argument necessitates a review of the facts of the case agreement;
which, as a general rule, is not the task of this Court. Under Rule 45 of the
Rules, this Court shall not pass upon the findings of fact by lower courts (b) The failure of the written agreement to express the true intent
unless they ignored salient points that would otherwise affect the outcome and agreement of the parties thereto;
of the case.14 There is no reason for us to overturn the factual conclusions of
the lower courts. (c) The validity of the written agreement; or

Moreover, the lower courts’ findings of fact were supported by the records (d) The existence of other terms agreed to by the parties or their
of the case which indubitably showed petitioners’ acquiescence to the successors in interest after the execution of the written agreement.
construction of the buildings on their property. Petitioners’ denial cannot
negate the overwhelming proof that it was petitioner Wilfredo Amoncio
The term "agreement" shall include wills.
himself who secured the building permit for the project. He also required
that all design specifications were to be approved by him.15
The first exception applies when the ambiguity or uncertainty is readily
apparent from reading the contract. The wordings are so defective that what
Application Of The
the author of the document intended to say cannot be deciphered.17 It also
Parol Evidence Rule
covers cases where the parties commit a mutual mistake of fact,18 or where
the document is manifestly incomplete as the parties do not intend to exhibit
Rule 130, Section 9 of the Rules of Court provides: the whole agreement but only to define some of its terms.19

Section 9. Evidence of written agreements. – When the terms of the The second exception includes instances where the contract is so obscure
agreement have been reduced in writing, it is considered as containing all that the contractual intention of the parties cannot be understood by mere
the terms agreed upon and there can be, between the parties and their inspection of the instrument.20 Thus, extrinsic proof of its subject matter, of
successors, no evidence of such terms other than the contents of the written the relation of the parties and of the circumstances surrounding them when
agreement. they entered into the contract may be received as evidence.21

Parol Evidence Rule

Under the third exception, the parol evidence rule does not apply where the Moreover, petitioners also failed to make a timely objection against
purpose of introducing the evidence is to show the invalidity of the respondent’s assertion of their prior agreement on the construction of the
contract.22 This includes cases where a party alleges that no written contract buildings. Where a party entitled to the benefit of the parol evidence rule
ever existed, or the parties fail to agree on the terms of the contract, or there allows such evidence to be received without objection, he cannot, after the
is no consideration for such agreement.23 trial has closed and the case has been decided against him, invoke the rule
in order to secure a reversal of the judgment.28 Hence, by failing to object to
The fourth exception involves a situation where the due execution of the respondent’s testimony in the trial court, petitioners waived the protection
contract or document is in issue.24 of the parol evidence rule.29

The present case does not appear to fall under any of the given Payment Of Rental
exceptions. However, a party to a contract may prove the existence of any
separate oral agreement as to any matter which is not inconsistent with its Petitioners demand the payment of the following: (1) rent from December
terms.25 This may be done if, from the circumstances of the case, the court 19, 1999 to June 8, 2000;30 (2) rent for the unexpired period of the lease or
believes that the document does not convey entirely the whole of the parties’ until August 200231 and (3) rent corresponding to the portions of the
transaction.26 property used by respondent which, according to petitioners, were not
covered by his lease contract.32
In this case, there are tell-tale signs that petitioners and respondent had other
agreements aside from those established by the lease contract. And we find Pursuant to the lease agreement, respondent paid three months advance and
it difficult to ignore them. We agree with the trial court: three months deposit (at the inception of the lease contract), in effect already
settling his rentals for six months from December 1999 to June 8, 2000. The
… [T]hat [respondent], indeed, undertook the construction subject hereof, is CA correctly ruled:
not disputed by [petitioners]. [Respondent] testified that two units thereof
were intended for [petitioners], another two units for him and one for … While [respondent] stopped paying rentals in December 1999 and left before
Garcia at the cost of ₱300,000.00 per unit or for a total budget of ₱1.5 June 8, 2000, a period covering six (6) months, [respondent], nonetheless,
million. had already paid [petitioners] the amount equivalent to six (6) months rentals
[advance payment equivalent to three (3) monthly rentals
Evidence further disclosed that the [b]uilding [p]ermit issued therefor by the plus deposit equivalent to [another] three (3) monthly
Building Official bore the signature of [petitioner] Wilfredo Amoncio… rentals]…33 (emphasis supplied)

…the Court cannot be unmindful of [petitioner Wilfredo Amoncio’s denial Regarding petitioners’ second claim (rent for the unexpired period of lease),
by any knowledge of the whole construction undertaken by herein we agree with the lower courts that they (petitioners) are not entitled to it.
[respondent.] But it is evident that [petitioners] have chosen to adopt
inconsistent positions which, by applicable jurisprudence, [are] barred. Said Without doubt, petitioners already benefited immensely from the
the Court in this regard: construction of the five buildings on their property. The amount of their
claim is a pittance compared to the increase in value of their property over
The doctrine of estoppel prohibits a party from assuming inconsistent the years. It would unjustly enrich them if we were to rule in their favor
position based on the principle of election, and precludes him from considering that they did not spend a single centavo for the construction of
repudiating an obligation voluntarily assumed after having accepted benefits the buildings. It was respondent who financed the entire project which,
therefrom. To countenance such repudiation would be contrary to equity and however, was taken over completely by petitioners.
would put a premium on fraud and misrepresentation…27

Parol Evidence Rule

As a rule, the contract is the law between the parties that must be enforced
in sensu strictione. However, it cannot be done under the circumstances of
this case. To do so would result in a patently unjust juridical situation. We,
as a court not only of justice but of equity as well, may exercise our equitas
jurisdictio to refine the rough edges of the rule and avoid injustice.34

Lastly, petitioners’ claim for rental payment for the portions (not covered by
respondent’s lease contract) must be dismissed. This claim was never
substantiated.

Petitioners’ Liability To Respondent

What remains to be resolved is petitioners’ liability to respondent, as held

by both the RTC and the CA. Were petitioners indeed liable to respondent
for the cost of the buildings constructed on their property? Yes.

Since the trial court allowed respondent’s testimony as evidence of the

parties’ prior agreement (regarding the construction of the buildings and the
cost thereof), petitioners should pay respondent. Petitioners never disputed
the construction of the two buildings given to them. If one of the contracting
parties derived some benefit but did not give anything for it to the other, it
is only fair that he should return the amount by which he was unjustly
enriched.35Equity dictates that petitioners be held liable for the expenses
incurred by respondent in constructing the buildings that went to them. No
man ought to be enriched by another’s injury.36 Nemo ex alterius
incommonde debet lecupletari.

Finally, following our ruling that petitioners knew of the construction of the
buildings, any discussion on the issue of whether respondent was a builder
in bad faith is no longer necessary.

WHEREFORE, the assailed decision of the Court of Appeals in CA-G.R.

CV No. 79341 is hereby AFFIRMED.

Treble costs against petitioners.

SO ORDERED.

RENATO C. CORONA
Associate Justice

Parol Evidence Rule