G.R. No.

L-66394 February 5, 1990

PARADISE SAUNA, MASSAGE CORPORATION and JUANITO UY, plaintiff-appellee,
vs. ALEJANDRO NG AND THE INTERMEDIATE APPELLATE COURT, defendantsappellants.
FACTS:
On December 30, 1975, petitioners and private respondent entered into a lettercontract (Exhibit A) signed by petitioner Juanito Uy, President of Paradise Sauna which
provides that:
Alejandro Ng is appointed to manage and administer the Paradise Sauna
and Massage Corporation effective January 1, 1976, under a commission
basis over and above the amount of P8,000 which should be remitted to
the petitioner not later than the first 5 days of each month starting January
1, 1976;
You are to remit the amount of P16,000 immediately after accepting the
appointment as a guarantee bond for the faithful performance of your
duties and responsibilities;
All government licenses, permits, utilities and services in the premises
shall be your account;
The sole control and management of the premises shall belong to you and
your are not responsible to Any Board of Directors except to me alone;
You are empowered to make any renovation, repairs and improvements
but expenses shall be for your account as well as to change or add
personnel therein;
Please take all good care of all the equipment and facilities presently
existing therein and see to it that they are always in good working
condition.
This case arose from the petitioners act of allegedly terminating the respondents
appointment as manager-administrator as a result of his alleged failure to comply with
the terms and conditions of his appointment. Private Respondent filed with the CFI of
Manila a case for specific performance and damages with prayer for writ of preliminary
mandatory injunction and attorneys fees against petitioner. Private Respondent
amended his complaint for breach of contract with damages with the same prayer.
After the trial, the lower court rendered a judgment in favor of private respondent,
declaring the letter-contract as a contract of lease covering the paradise sauna bath and
massage clinic.
On appeal, the then Intermediate Appellate Court affirmed the decision of the trial
court. In its petition for review, petitioner contends that IAC sanctioned a legal error
made by the trial court which is a reformation of Exhibit A from a management contract
to a lease contract contrary to Art. 1367 of the New Civil Code. In support of their
contention, they averred that when respondent filed an action for specific performance
then for breach of contract, he should have been presumed to have admitted the due
execution and contents of the letter-contract marked as Exhibit A whereby he was
appointed as manager-administrator of the petitioner corporation and he should never
have been allowed to deny the contents thereof for purposes of reforming the said
instrument.
ISSUE: W/N the contract between the petitioners and the private respondent is a lease
or a management contract.
HELD:
SC held that the contract is a lease contact. Article 1367 of the New Civil Code
invoked by the petitioners cannot apply to respondent Ng's case. When Ng amended his
original complaint for specific performance which calls for an enforcement of Exhibit A to
one for breach of contract, he did so as a matter of right since no responsive pleading
had been filed yet by the petitioners. The original complaint was filed on January 21,
1977 and was amended on January 28, 1977. The answer of the petitioners to the
original complaint was filed only on February 4, 1977. Under Section 2, Rule 10 of the
Revised Rules of Court, "a party may amend his pleading once as a matter of course at
any time before a responsive pleading is served . . . ." When a pleading is amended, the
original one is deemed abandoned. Hence, the amended pleading replaces the original

one which no longer forms part of the record and the trial of the case is made on the
basis of the amended pleading only (see Ruymann and Farris v. Director of Lands et al.,
34 Phil. 428 [1916]). In the case at bar, respondent Ng, in his amended complaint
brought an action for breach of contract not to enforce his rights as manageradministrator but as lessee of the petitioner corporation. In the course of the trial, parol
evidence was introduced to prove that the contract in question was not a management
contract as it appeared on its face but a lease contract.
Rule 130, Sec. 7 of the Revised Rules of Court provides that:
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) Where 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. (Emphasis supplied)
In the instant case, the failure of a contract to express the true intent and
agreement of the parties is raised. The fact that the allegations of respondent Ng with
respect to his rights as lessee of the petitioner corporation were made on the basis of'
Exhibit A which was marked as Annex "A" in the amended complaint meets the
procedural requirement that said failure be put in issue by the pleadings.
In ruling that the subject contract is a lease contract and not a management
contract, we adopt the findings of fact made by the trial court and affirmed by the
respondent court.
G.R. No. L-39972 & L-40300
August 6, 1986
VICTORIA LECHUGAS, petitioner, vs. HON. COURT OF APPEALS, MARINA LOZA,
SALVADOR LOZA, ISIDRO LOZA, CARMELITA LOZA, DAVID LOZA, AMPARO LOZA,
ERLINDA LOZA and ALEJANDRA LOZA, respondents.
FACTS:
Petitioner filed a complaint for forcible entry with damages against respondents,
alleging that the latter by means of force, intimidation, strategy and stealth, unlawfully
entered lots A and B corresponding to the middle and northern portion of the property
owned by petitioner known as Lot 5456. She allegedly appropriated the produce thereof
for themselves, and refused to surrendered the possession of the same despite demands
made by petitioner.
Petitioner bought the land now subject of dispute from Leoncia Lasangue as
evidenced by a public Deed of Absolute Sale registered with the Office of the Register
of Deeds. Defendants on the other hand, maintain that the land which petitioner bought
from Leoncia Lasangue in 1950 was different from the land now subject of this action.
The complaint was dismissed. Petitioner appealed to the CFI of Iloilo. While the
case was pending, petitioner instituted another action before the CFI of Iloilo for recovery
and possession of the same property against private respondents. The two cases were
tried jointly. After trial, CFI dismissed the two cases. Upon appeal, the Court of Appeals
sustained the dismissal of the cases. Hence, this petition.
ISSUE: W/N the CA had no legal justification when it subjected the true intent and
agreement to parol evidence over the objection of petitioner.
HELD:
The appellate court acted correctly in upholding the trial court's action in
admitting the testimony of Leoncia Lasangue. The petitioner claims that Leoncia
Lasangue was the vendor of the disputed land. The petitioner denies that Leoncia
Lasangue sold Lot No. 5522 to her. She alleges that this lot was sold to her by one
Leonora Lasangue, who, however, was never presented as witness in any of the
proceedings below by herein petitioner.

As explained by a leading commentator on our Rules of Court, the parol evidence

rule does not apply, and may not properly be invoked by either party to the litigation
against the other, where at least one of the parties to the suit is not party or a privy of a
party to the written instrument in question and does not base a claim on the instrument
or assert a right originating in the instrument or the relation established thereby.
(Francisco on Evidence, Vol. VII, part I of the Rules of Court, p. 155 citing 32 C.J.S. 79.)
The petitioner's reliance on the parol evidence rule is misplaced. The rule is not
applicable where the controversy is between one of the parties to the document and
third persons. The deed of sale was executed by Leoncia Lasangue in favor of Victoria
Lechugas. The dispute over what was actually sold is between petitioner and the private
respondents.
In the case at bar, through the testimony of Leoncia Lasangue, it was shown that
what she really intended to sell and to be the subject of Exhibit A was Lot No. 5522 but
not being able to read and write and fully relying on the good faith of her first cousin, the
petitioner, she just placed her thumbmark on a piece of paper which petitioner told her
was the document evidencing the sale of land. The deed of sale described the disputed
lot instead.
From the foregoing, there can be no other conclusion but that Lasangue did not
intend to sell as she could not have sold, a piece of land already sold by her father to the
predecessor-in-interest of the respondents.
[ G.R. No. 141060, September 29, 2000 ]
PILIPINAS BANK, PETITIONER, VS. COURT OF APPEALS, HON. ELOY R. BELLO, IN
HIS CAPACITY AS PRESIDING JUDGE, RTC-MANILA, BRANCH 15, AND MERIDIAN
ASSURANCE CORPORATION, RESPONDENTS.
FACTS:
On January 8, 1995, petitioner obtained from private respondent a Money
Securities and Payroll Comprehensive Policy. On November 25, 1985, while the policy was
in full force and effect, petitioners armored car was robbed. They then filed a formal
notice of claim under its insurance policy with private respondent invoking Section II of
the Policy. Respondent denied petitioners claim and averred that the insurance does not
cover the deliveries of the withdrawals to petitioners client. This prompted the
petitioner to file a complaint with the RTC.
During the trial, petitioner presented its witness Cesar Tubianosa to testify on the
existence and due execution of the insurance policy, particularly on the negotiations on
the terms and conditions of the policy.
On June 18, 1992, petitioner filed a Motion to Recall Witness, praying that it be
allowed to recall Tubianosa to testify on the negotiations pertaining to the terms and
conditions of the policy before its issuance to determine the intention of the parties
regarding the said terms and conditions. Private respondent objected thereto, on the
ground that the same would violate the parol evidence rule.
RTC issued an order denying petitioners Motion to Recall Tubianosa to the witness
stand, ruling that the same would violate the parol evidence rule.
On appeal, the appellate court dismissed the petition and held that there was no
grave abuse of discretion on the part of respondent judge. Hence, this petition.
ISSUE: W/N the CA committed grave abuse of discretion when it upheld the decision of
the trial court.
HELD:
SC held in the NEGATIVE. Petitioners Complaint merely alleged that under the
provisions of the Policy, it was entitled to recover from private respondent the amount it
lost during the heist. It did not allege therein that the Policys terms were ambiguous or
failed to express the true agreement between itself and private respondent. Such being
the case, petitioner has no right to insist that it be allowed to present Tubianosas
testimony to shed light on the alleged true agreement of the parties, notwithstanding its
statement in its Pre-Trial Brief that it was presenting said witness for that purpose.
Section 9, Rule 130 of the Revised Rules of Court expressly requires that for parol
evidence to be admissible to vary the terms of the written agreement, the mistake or
imperfection thereof or its failure to express the true agreement of the parties should be
put in issue by the pleadings.

As correctly noted by the appellate court, petitioner failed to raise the issue of an
intrinsic ambiguity, mistake or imperfection in the terms of the Policy, or of the failure of
said contract to express the true intent and agreement of the parties thereto in its
Complaint. There was therefore no error on the part of the appellate court when it
affirmed the RTCs Order disallowing the recall of Tubianosa to the witness stand, for such
disallowance is in accord with the rule that 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 other terms
other than the contents of the written agreement.
The rationale behind the foregoing rule was explained in Ortanez vs. Court of
Appeals, where we stated: 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
undesirable unlike a written contract which speaks of a uniform language. Thus, under
the general rule in Section 9 of Rule 130 of the Rules of Court, when the terms of an
agreement were reduced to writing, as in this case, it is deemed to contain all the terms
agreed upon and no evidence of such terms can be admitted other than the contents
thereof. xxx.