When Can You Rely on a Promise Not Written in a Contract? Understanding the Parol Evidence Rule

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G.R. No. 121506, October 30, 1996, MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY VS. COURT OF APPEALS, REGIONAL TRIAL COURT, BRANCH 9, CEBU CITY, MELBA LIMBACO, LINDA C. LOGARTA AND RAMON C. LOGARTA

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Imagine selling your family land decades ago based on a verbal promise that you could buy it back if it was no longer needed. Years later, the government denies your right to repurchase, pointing to the written contract that makes no mention of such an agreement. This scenario highlights the complexities of the parol evidence rule, which determines when oral agreements can be admitted to contradict or supplement a written contract.

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This case explores whether a verbal assurance given during a land sale to the National Airport Corporation (NAC) – the predecessor to the Mactan Cebu International Airport Authority (MCIAA) – allowing the original owner to repurchase the property, is enforceable despite not being written in the deed of sale. The Supreme Court’s decision clarifies the exceptions to the parol evidence rule and its implications for land transactions in the Philippines.

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The Parol Evidence Rule: Protecting Written Agreements

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The parol evidence rule, found in Section 9, Rule 130 of the Rules of Court, generally prevents parties from introducing evidence of prior or contemporaneous agreements to contradict, vary, or add to the terms of a written contract. The law presumes that when parties put their agreement in writing, the writing contains all the terms they agreed upon. This promotes stability and predictability in contractual relationships.

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However, the rule is not absolute. There are exceptions, particularly when the written agreement fails to express the true intent of the parties. Specifically, Rule 130, Section 9 states:

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“Evidence of written agreements. — When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement. However, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading:

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1. An intrinsic ambiguity, mistake or imperfection in the written agreement;

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2. The failure of the written agreement to express the true intent and agreement of the parties thereto;

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3. The validity of the written agreement; or

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4. The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement.

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For example, imagine you sign a lease agreement for an apartment. The written lease says nothing about parking. However, before signing, the landlord verbally assured you that you would have a designated parking spot. If the landlord later denies you parking, you might be able to introduce evidence of that verbal agreement, as it forms part of the consideration for entering into the lease.

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The Airport Land and the Unwritten Promise

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The case revolves around a parcel of land in Lahug, Cebu, sold by Inez Ouano to the National Airport Corporation (NAC) in 1949 for airport expansion. Ouano, like other landowners in the area, was allegedly assured by NAC officials that she could repurchase her land if it was no longer needed for airport purposes. This promise, however, was not explicitly written into the deed of sale. Decades later, when the Mactan Cebu International Airport Authority (MCIAA), NAC’s successor, refused to allow Ouano’s heirs to repurchase the property, the heirs filed a case for reconveyance. They argued that the verbal promise formed part of the agreement and should be honored.

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Here’s how the case unfolded:

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• 1949: Inez Ouano sells her land to NAC based on the verbal assurance of a right to repurchase.

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• 1991: Ouano’s heirs attempt to repurchase the land after learning of the airport’s potential relocation to Mactan.

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• MCIAA Rejection: MCIAA denies the repurchase request, citing the absence of a repurchase clause in the deed of sale.

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• RTC Decision: The Regional Trial Court rules in favor of Ouano’s heirs, allowing the reconveyance.

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• CA Affirmation: The Court of Appeals affirms the RTC’s decision.

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• Supreme Court Review: MCIAA appeals to the Supreme Court, questioning the admissibility of parol evidence and the applicability of the Statute of Frauds.

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The Supreme Court quoted the Court of Appeals’ reasoning:

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“We see no reason, however, why Inez should be considered as not similarly situated as the owners of these other lots. All these lots surround the Lahug Airport and were acquired by the government for the proposed expansion of the airport. The appellee has not presented any evidence to show that Inez’ lots were acquired for a different purpose or under different conditions. Why then should the sale of such lots be singled out as not subject to the right to repurchase when a good number of the lots around them were already repurchased by their original owners?”

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The Court also stated:

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“Where a parol contemporaneous agreement was the moving cause of the written contract, or where the parol agreement forms part of the consideration of the written contract, and it appears that the written contract was executed on the faith of the parol contract or representation, such evidence is admissible.”

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Implications: Promises and Land Deals

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The Supreme Court ultimately denied MCIAA’s petition, upholding the lower courts’ decisions. The Court emphasized that the verbal agreement allowing the right of repurchase was the