The Supreme Court, in Fernando Mancol, Jr. v. Development Bank of the Philippines, reiterates the paramount importance of written agreements over alleged verbal understandings, especially when the written contract is clear and unambiguous. The Court underscored that while exceptions to the parol evidence rule exist, the admissibility of evidence does not automatically guarantee its weight or credibility. This case serves as a reminder that in contractual disputes, the written terms generally prevail unless compelling evidence demonstrates a clear deviation or exception recognized under the law.

Unwritten Promises: Can They Overturn a Signed Deal?

This case revolves around a property sale between Fernando Mancol, Jr. (petitioner) and the Development Bank of the Philippines (DBP). Mancol Jr. claimed that DBP had verbally agreed to facilitate the transfer of the property’s title and remove its occupants, despite the written Deed of Absolute Sale not including these conditions. When DBP allegedly reneged on these promises, Mancol, Jr. sued for breach of contract. The central legal question is whether these alleged verbal agreements could be admitted as evidence to alter or add to the terms of the written contract.

The factual backdrop begins with DBP’s invitation to bid on a residential lot in Calbayog City. Mancol, Jr., through his father, Mancol, Sr. as his attorney-in-fact, participated and eventually purchased the property. The subsequent dispute arose from the alleged oral agreement made during negotiations, where DBP officials purportedly committed to handling the title transfer, including tax payments, and evicting the property’s occupants. However, these commitments were not explicitly stated in the Deed of Absolute Sale.

The petitioner argues that testimonies from witnesses, including his father, should be considered as evidence of the verbal agreement. He claims these testimonies fall under an exception to the parol evidence rule, which generally prohibits the use of external evidence to contradict or alter the terms of a written contract. The petitioner’s case hinges on the premise that a subsequent oral agreement modified the obligations outlined in the Deed of Absolute Sale. To fully understand, it is essential to know the specifics of the Parol Evidence Rule.

The parol evidence rule is enshrined in Section 9, Rule 130 of the Revised Rules on Evidence, which states:

Sec. 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.

This rule promotes stability and predictability in contractual relations. However, the law also recognizes exceptions, allowing parties to introduce evidence to modify, explain, or add to the terms of a written agreement under specific circumstances, such as:

1. An intrinsic ambiguity, mistake, or imperfection in the written agreement;
2. The failure of the written agreement to express the true intent and agreement of the parties thereto;
3. The validity of the written agreement; or
4. The existence of other terms agreed to by the parties or their successors-in-interest after the execution of the written agreement.

Building on this legal framework, the Court considered whether the petitioner successfully demonstrated an applicable exception to the parol evidence rule. The Court emphasized that even if the testimonies were admitted, their probative value must be carefully evaluated. This means the evidence must not only be relevant and competent but also convincing and persuasive.

In analyzing the testimonies presented, the Supreme Court found them to be lacking in probative value. The Court noted that one witness, Villanueva, had no personal knowledge of the alleged verbal agreement. His testimony pertained to tasks he performed related to tax payments, but he was not privy to the discussions or agreements between Mancol, Sr. and DBP officials.

Regarding the testimony of Mancol, Sr., the Court found it insufficient to establish the verbal agreement convincingly. The Court highlighted that the Special Power of Attorney (SPA) granted to Mancol, Sr. only authorized him to represent and negotiate the sale, not to enter into subsequent verbal agreements modifying the written contract. The Court also emphasized that the power of attorney must be strictly construed, limiting the agent’s authority to the powers expressly granted.

The Court cited the case of Mercado v. Allied Banking Corporation, 555 Phil. 411, 423 (2007), stating that:

[W]here powers and duties are specified and defined in an instrument, all such powers and duties are limited and are confined to those which are specified and defined, and all other powers and duties are excluded.

Furthermore, the Court determined that the alleged verbal agreement was not proven to have been entered into by Mancol, Sr. on behalf of the petitioner. The evidence did not clearly show that Mancol, Sr. personally participated in the verbal agreement with DBP or witnessed its perfection. The Court, therefore, categorized Mancol, Sr.’s statements as hearsay because they were not based on his direct, personal knowledge.

To summarize the Court’s rationale, we may present it in a table:

Issue	Court’s Finding
Admissibility of Testimonies	Admissible due to DBP’s default, but admissibility does not guarantee weight.
Probative Value of Villanueva’s Testimony	Hearsay; lacked personal knowledge of the verbal agreement.
Probative Value of Mancol, Sr.’s Testimony	Hearsay; SPA did not authorize him to enter into verbal agreements.
Enforceability of Verbal Agreement	Unenforceable; beyond the scope of authority granted in the SPA.

The Court ultimately upheld the sanctity of the written agreement, reinforcing the principle that parties are bound by the terms they mutually agreed upon and documented in writing. The Court reiterated that it is not a trier of facts and will generally not overturn the factual findings of lower courts, especially when those findings are consistent.

This case underscores the importance of ensuring that all terms and conditions are clearly and explicitly stated in written contracts to avoid future disputes. Parties should be diligent in documenting all agreements to prevent misunderstandings and potential legal challenges. Failure to include specific terms in the written contract can lead to those terms being deemed unenforceable.

FAQs

What was the key issue in this case?	The central issue was whether alleged verbal agreements could override the terms of a written Deed of Absolute Sale. The petitioner argued that DBP made oral promises to facilitate the transfer of title and remove occupants, which were not included in the written contract.
What is the parol evidence rule?	The parol evidence rule generally prohibits the introduction of evidence of prior or contemporaneous agreements to contradict, vary, add to, or subtract from the terms of a written agreement. This rule aims to preserve the integrity and stability of written contracts.
What are the exceptions to the parol evidence rule?	Exceptions include situations where there is an ambiguity in the written contract, a mistake, failure to express the true intent of the parties, or a subsequent agreement modifying the original terms. These exceptions allow for the introduction of external evidence to clarify or alter the written agreement.
Why was Villanueva’s testimony considered hearsay?	Villanueva’s testimony was considered hearsay because he lacked personal knowledge of the alleged verbal agreement between Mancol, Sr. and DBP. His statements were based on what he was told by others, not on his direct involvement or observation of the agreement.
What was the scope of Mancol, Sr.’s authority under the SPA?	The Special Power of Attorney (SPA) granted to Mancol, Sr. authorized him to represent and negotiate the sale of the property. However, it did not explicitly authorize him to enter into subsequent verbal agreements that would modify the terms of the written Deed of Absolute Sale.
What is the significance of a Special Power of Attorney?	A Special Power of Attorney (SPA) is a legal document that authorizes a person (the agent or attorney-in-fact) to act on behalf of another person (the principal) in specific matters. The scope of authority granted in the SPA is strictly construed, and the agent cannot exceed the powers expressly conferred.
What is the probative value of evidence?	Probative value refers to the tendency of evidence to prove a fact in issue. It is the quality of evidence that makes it relevant, reliable, and capable of convincing the court of the truth of a particular assertion or claim.
What was the final ruling in the case?	The Supreme Court denied Mancol, Jr.’s petition, affirming the Court of Appeals’ decision. The Court upheld the validity of the written Deed of Absolute Sale and rejected the alleged verbal agreements as unenforceable.

This ruling underscores the importance of clearly documenting all contractual terms in writing. Oral agreements, while potentially valid, face significant hurdles in enforceability, especially when they contradict or modify written contracts. The Mancol v. DBP case serves as a critical reminder for parties to ensure that all understandings are reflected in the final written agreement to avoid future disputes and legal uncertainties.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: FERNANDO MANCOL, JR. VS. DEVELOPMENT BANK OF THE PHILIPPINES, G.R. No. 204289, November 22, 2017