Case Summary (G.R. No. 164443)
Petitioner and Respondent Roles
Petitioner Lucia Paras was the permittee of a sand and gravel permit (rechanneling Block No. VI of Sapang Daco River, Barangay Ilihan) with an approximate extractable volume of 40,000 cubic meters and a Special Permit valid for six months from November 14, 1994. Respondent Kimwa is a construction firm that purchases concrete aggregates and agreed under the written Agreement to pick up aggregates at P240.00 per truckload.
Key Dates and Procedural Posture
Agreement executed December 6, 1994. Special Permit effective November 14, 1994 and valid for six months (expiration effectively May 15, 1995). Regional Trial Court (Branch 55, Mandaue City) rendered a decision on May 16, 2001 favoring petitioners; Court of Appeals reversed on July 4, 2005 and denied reconsideration on February 9, 2006. This Supreme Court decision was rendered April 8, 2015. Applicable constitutional framework: 1987 Philippine Constitution.
Applicable Law and Evidentiary Rule
The court applied the parol evidence rule as codified in Rule 130, Section 9 of the Revised Rules on Evidence, which presumes that a written agreement contains all agreed terms and generally excludes extrinsic evidence except when a party pleads and puts in issue: (a) intrinsic ambiguity, mistake or imperfection; (b) failure of the written agreement to express the true intent of the parties; (c) validity of the written agreement; or (d) existence of subsequent terms.
Factual Background
Under the Agreement, 40,000 cubic meters were “allotted” to Kimwa for exclusive use, to be picked up at Lucia’s permitted area at P240.00 per truckload. Kimwa hauled 10,000 cubic meters but thereafter ceased hauling. Petitioners allege that they agreed to the contract only because Kimwa assured them the entire 40,000 cubic meters would be hauled before the Special Permit’s expiration on May 15, 1995; Kimwa allegedly warranted it could complete hauling in two to three months.
Express Terms of the Written Agreement
The Agreement, as memorialized in writing, specified the allotment of 40,000 cu.m., exclusivity of use by Kimwa, rate per truckload, payment terms, and a clause requiring written modification for any amendment, assignment, or transfer. The Agreement itself did not expressly state a deadline of May 15, 1995 for completion of hauling.
Parties’ Contentions
Petitioners contended the parties’ true understanding included a requirement that Kimwa haul all 40,000 cu.m. before May 15, 1995 because the Special Permit limited extraction to approximately 40,000 cu.m. and expired six months after issuance. Kimwa contended the 40,000 cu.m. represented merely a maximum limit, not a commitment to remove the full quantity by any particular date, and asserted the parol evidence rule barred admission of extrinsic evidence of any contrary oral agreement.
Trial Court Findings
The Regional Trial Court found that the allotment of 40,000 cu.m. exclusively to Kimwa, together with the Special Permit’s six-month duration, established that Kimwa must have known the allotted volume had to be hauled by May 15, 1995. The trial court concluded Kimwa stopped hauling in breach of the Agreement and awarded petitioners P720,000.00 (value of 30,000 cu.m.) plus attorney’s fees and costs.
Court of Appeals’ Decision and Error Identified
The Court of Appeals reversed the RTC, holding the written Agreement left “no room for interpretation” and that petitioners had shown “no proof” of an obligation to haul 40,000 cu.m. by May 15, 1995. The Supreme Court identified two principal errors: (1) the CA’s inconsistent assertion that the trial court based findings on evidence barred by the parol evidence rule while simultaneously concluding petitioners presented no proof; and (2) the CA’s failure to consider whether the exceptions to the parol evidence rule had been properly pleaded and thereby rendered applicable.
Issue Presented
Whether Kimwa was obliged to haul the full 40,000 cubic meters of aggregates on or before May 15, 1995, and thus liable for failing to haul the remaining 30,000 cu.m.
Application of the Parol Evidence Rule and Its Exceptions
The Supreme Court analyzed Rule 130, Section 9 and emphasized that parol evidence is admissible when a party puts in issue one of the enumerated exceptions in its pleading. The Court found petitioners’ Complaint sufficiently alleged that the Agreement failed to express the true intent of the parties and contained an imperfection — namely, that the parties had agreed Kimwa would haul the entire allotted volume before the permit’s expiration. Kimwa’s Answer specifically addressed and denied those allegations, which further placed the alleged exception squarely in issue. Accordingly, parol evidence was admissible to prove the parties’ true intent.
Evidence Establishing Parties’ True Intent
The pre-trial order recorded Kimwa’s admission that plaintiffs furnished the defendant with the Special Permit showing the six-month validity and the approximate extractable volume of 40,000 cu.m. The Special Permit (introduced as petitioners’ Exhibit A and A-1) stated that the volume to be extracted was approximately 40,000 cu.m. and that the permit was valid for six months from November 14, 1994. The Agreement’s text stating the aggregates were “for the exclusive use of” Kimwa an
...continue readingCase Syllabus (G.R. No. 164443)
Citation and Court
- Reported at 757 Phil. 582, Second Division.
- G.R. No. 171601.
- Decision dated April 08, 2015.
- Decision authored by Justice Leonen; concurrence by Carpio (Chairperson), Brion, Del Castillo, and Mendoza, JJ.
Nature of the Case and Relief Sought
- Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure.
- Petitioners seek reversal and setting aside of the Court of Appeals Decision dated July 4, 2005 and Resolution dated February 9, 2006 in CA-G.R. CV No. 74682.
- Petitioners pray for reinstatement of the Regional Trial Court, Branch 55, Mandaue City Decision dated May 16, 2001 in Civil Case No. MAN-2412.
Parties
- Petitioners: Spouses Bonifacio and Lucia Paras (plaintiffs before the Regional Trial Court). Lucia identified as concessionaire of a sand and gravel permit at Kabulihan, Toledo City.
- Respondent: Kimwa Construction and Development Corporation (defendant before the Regional Trial Court), a construction firm that sells concrete aggregates to contractors and haulers in Cebu, represented by President Corazon Y. Lua in the Agreement.
Underlying Contract (Agreement for Supply of Aggregates)
- Date of Agreement: December 6, 1994.
- Parties: LUCIA PARAS (SUPPLIER) and KIMWA CONSTRUCTION AND DEVELOPMENT CORP. (CONTRACTOR), represented by MRS. CORAZON Y. LUA.
- Material terms set out in the Agreement:
- Supplier is Special Permittee of Rechanneling Block # VI of Sapang Daco River along Barangay Ilihan, Toledo City.
- Aggregates to be picked up by the Contractor at the Supplier's permitted area at the rate of P240.00 per truckload.
- The volume allotted by the Supplier to the Contractor is limited to 40,000 cu.m.
- The said Aggregates is for the exclusive use of the Contractor.
- Terms of payment: fifteen (15) days after receipt of billing.
- No modification, amendment, assignment or transfer of the Agreement after acceptance shall be binding upon the Supplier unless agreed to in writing by both parties.
- Agreement signed on December 6, 1994 at Mandaue City by LUCIA PARAS and CORAZON Y. LUA.
Factual Background
- Prior to or during execution of the contract, petitioners furnished the defendant all documents and requisite papers, including a copy of the Supplier’s special permit indicating authority was only good for six (6) months from November 14, 1994.
- Petitioners allege: Kimwa expressed interest to purchase sand and gravel and asked to be assured of 40,000 cu.m.; Lucia countered that her concession area was scheduled to be rechanneled on May 15, 1995 (when Special Permit expires) and agreed to contract only if the 40,000 cu.m. would be completely extracted and hauled before May 15, 1995; Kimwa allegedly assured that hauling would take only two to three months and thus entered into the Agreement.
- Pursuant to the Agreement, Kimwa hauled 10,000 cu.m. of aggregates.
- Sometime after hauling 10,000 cu.m., Kimwa stopped hauling; petitioners allege Kimwa transferred operations to the concession area of a Mrs. Remedios dela Torre in violation of the Agreement.
- Petitioners sent demand letters which were unheeded, then filed Complaint for breach of contract with damages.
Procedural History
- Complaint filed in Regional Trial Court, Civil Case No. MAN-2412.
- Trial court (Branch 55, Mandaue City) Decision dated May 16, 2001 ruled in favor of petitioners.
- Trial court found Kimwa liable for failing to haul the remaining 30,000 cu.m. and awarded P720,000.00 (value of 30,000 cu.m.), attorney's fees and costs of suit.
- On appeal, the Court of Appeals, Special 20th Division, reversed and set aside the trial court Decision in a Decision dated July 4, 2005 and denied reconsideration in a Resolution dated February 9, 2006.
- Petition for Review on Certiorari filed before the Supreme Court.
Defendant’s (Kimwa’s) Contentions in Answer
- Denied commitment to obtain 40,000 cu.m.; contended that 40,000 cu.m. represented only an upper limit or maximum quantity that it could haul.
- Claimed no commitment to haul 40,000 cu.m. before May 15, 1995 and denied representing hauling could be completed in two to three months.
- Denied that 10,000 cu.m. was hauled in a matter of days, asserting it took weeks.
- Denied transferring to Mrs. Remedios dela Torre’s concession.
- Invoked Parol Evidence Rule to bar extrinsic evidence allegedly contradicting the written Agreement.
- Argued Agreement provided that 40,000 cu.m. was a maximum limit and that no deadline was set.
Trial Court Findings and Reasoning
- Trial court noted Agreement stipulated allotted aggregates were set aside exclusively for Kimwa.
- Observed it was contrary to human experience for Kimwa to enter the Agreement without verifying Lucia’s authority as concessionaire.
- Special Permit showed Lucia’s authority was valid only for six months from November 14, 1994; trial court held Kimwa must have been aware that allotted 40,000 cu.m. must be hauled by May 15, 1995.
- As Kimwa failed to haul the remaining 30,000 cu.m., trial court held it liable for P720,000.00 plus attorney’s fees and costs.
Court of Appeals Decision and Reasoning
- Reversed the trial court.
- Faulted the trial court for basing findings on evidence allegedly in violation of the Parol Evidence Rule.
- Held the Agreement was clear that Kimwa was under no obligation to haul 40,000 cu.m. by May 15, 1995.
- Denied petitioners’ Motion for Reconsideration in a subsequent Resolution.
Issue Presented to the Supreme Court
- Whether respondent Kimwa is liable to petitioners for failing to haul 30,000 cu.m. of aggregates from petitioner Lucia Paras’ permitted area by May 15, 1995.
- Whether petitioners established that Kimwa was obliged to haul a total of 40,000 cu.m. on or before May 15, 1995.
Relevant Evidentiary Rule Cited (Parol Evidence Rule)
- Rule 130, Section 9 of the Revised Rules on Evidence quoted in full as applicable:
- When terms of an agreement are reduced to writing, the writing is considered to contain all terms agreed upon; no evidence of such terms other than the writing, except that a party may present evidence to modify, explain or add to the written agreement if pu
- When terms of an agreement are reduced to writing, the writing is considered to contain all terms agreed upon; no evidence of such terms other than the writing, except that a party may present evidence to modify, explain or add to the written agreement if pu