Sps. Sabio vs International Corporate Bank | G.R. No. 132709| September 4, 2001| Ynares-Santiago, J.

Petitioners: SPOUSES CAMILO L. SABIO, and MA. MARLENE A. LEDONIO-SABIO

Respondents: THE INTERNATIONAL CORPORATE BANK, INC. (now UNION BANK OF THE PHILIPPINES),
GOLDENROD, INC., PAL EMPLOYEES SAVINGS AND LOAN ASSOCIATION, INC., AYALA CORPORATION, LAS
PIÑAS VENTURES, INC., FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE, INC.),
AYALA PROPERTY VENTURES CORPORATION, and AYALA LAND, INC

Topic: Parol Evidence Rule

Summary: Sps. Sabio and Interbank entered into a MOA where Interbank has obligation to segregate
the contiguous portion and deliver title thereto to the plaintiff spouses free from liens and
encumbrances. Petitioners claim that respondent failed to comply with this obligation, which necessarily
included ejectment of illegal squatters from the property. The Court ruled that respondent did not have
such obligation. It is a long-held cardinal rule that when the terms of an agreement are reduced to
writing, it is deemed to contain all the terms agreed upon and no evidence of such terms can be
admitted other than the contents of the agreement itself. Although there are exceptions to this rule, the
petitioners failed to allege such in the pleadings. Therefore, the stipulations of the contract being the
law between the parties, the courts have no recourse but to enforce them as they were agreed upon
and written.

Facts:

 The subject property is a portion of a vast tract of land measuring approximately 152,454 square
meters, located at Tindig na Manga, Almanza, Las Piñas City.
o This was registered in the name of Las Piñas Ventures, Incorporated (or LPVI)
o During the 1970s, the said property was the subject of several land registration, as well
as civil, cases
 In 1973, spouses Ledonio, one of the parties in an LRC case, assigned to Spouses
Sabio (petitioners) all their rights, interests, title and participation over a
contiguous portion of the subject property measuring 119,429 square meters
 Similarly, the respondent IVB acquired from the Trans-Resource Management
and Development Corporation all of the latter’s rights to the subject property by
virtue of a deed of assignment executed between them on July 12, 1984.
 The Sabios and Interbank settled their opposing claims by entering into a Memorandum of
Agreement (or MOA) whereby the Sabios assigned, conveyed and transferred all their rights
over the parcel to Interbank (for P750,000), with the express exception of a 58,000 square
meter contiguous portion of said lot
o The contract stated that Interbank has obligation to segregate the contiguous portion
and deliver title thereto to the plaintiff spouses free from liens and encumbrances.
 After subsequent assignments, this entire property became the site of what was known then as
"Ayala Las Piñas Subdivision”
 Thereafter, a dispute arose concerning the 58,000 square meter contiguous portion subject of
the MOA that was to be conveyed and transferred back to the Sabios by Interbank.
o Also in controversy was the permanent and perpetual right of way that Interbank was
obligated to constitute in favor of the Sabios’ 58,000 square meter portion
 Petitioners filed an action for Specific Performance and Damages in the RTC against Interbank
et.al
o Plaintiffs claimed that defendant Interbank was obligated to complete and perfect its
ownership and title to the parcels of land so that Interbank could transfer to plaintiffs
the absolute ownership and title over the contiguous portion
o They also claimed that one of the commitments of defendant Interbank which induced
plaintiffs to execute the agreement without which plaintiffs would not have executed
was that defendant Interbank would clear the contiguous portion of all occupants and
wall-in the same, together with the parcels of land belonging to defendants
 Defendants’ answer:
o claimed that they were not privy to the MOA, the contract from which the alleged
obligations arose
 Sometime thereafter, the defendants submitted a Notice of Confession of Judgment
o defendants signified willingness to abide by the MOA, and complete and perfect title to
the parcel of land, including that portion which was to be assigned to the plaintiff
spouses.
o With regard to that 58,000 square meter parcel, the defendants also acknowledged the
obligation to segregate that contiguous portion and deliver title thereto to the plaintiff
spouses free from liens and encumbrances.
 However, the defendants also averred that fulfillment of its obligation under the MOA became
impossible due to the plaintiff spouses’ own acts
o They claimed that they were ready to deliver the title but the petitioners refused to sign
unless the subject property was cleared of all squatters and other illegal occupants
 Respondents argue that no such obligation was imposed in the MOA
o Secondly, the defendants noted that the property in question became the subject of an
action for recovery of ownership filed by the Ledonio spouses against the Sabios.
 Consequently, the annotation of the notice of lis pendens caused to be
registered by the Ledonios on the titles hampered the delivery of the title
 The trial court ruled in favor of the defendants, finding that the MOA did not impose, whether
expressly or impliedly, on Interbank and its transferees the obligation to clear the subject 58,000
square meter portion of squatters and other illegal occupants.
o However, they also awarded actual and exemplary damages to the plaintiff spouses for
losses they incurred due to the defendants’ delay in complying with the MOA (6 years)
 Both parties appealed, but were denied.

WON respondents had an obligation to clear the property of illegal squatters? NO

 Petitioners claim that under the circumstances, any conveyance of the subject parcel by the
respondents would not be "free from all liens and encumbrances" as stipulated in paragraph
2.c of said MOA. Their premise is that the presence of squatters and unauthorized
improvements should be considered a lien or encumbrance on the property.
 If the terms of a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of the stipulations shall control. If the words appear contrary to
the evident intention of the parties, the latter shall prevail over the former." (Art. 1370, Civil
Code of the Philippines)
 o In this case, the occupants were already in the contiguous portion of the property
when the MOA was executed and if plaintiffs had wanted to ensure that defendant
Interbank would take responsibility for clearing the property of occupants, they
could have specifically provided for it.
o Plaintiffs claimed that the obligation to clear and wall-in the occupants was implied
in the provisions of the MOA, "to complete and perfect ownership and title to the
land and to (transfer) to plaintiffs the contiguous portion with all improvements"
and "to deliver the new TCT free from all liens and encumbrances." This court finds
that there is no implication of that sort.
o The evidence does not show that the parties had intentions other than those
commonly understood from the aforementioned terms in the MOA. The plaintiffs
have failed to prove that the intention of the parties was other than that expressed
by the literal meaning of the terms of the MOA.
 Words which may have different significations shall be understood in that which is most in
keeping with the nature and object of the contract" (Art. 1375, Civil Code of the Philippines),
otherwise, it is presumed the words were used in their primary and general acceptation.
o Occupation by the occupants of the contiguous portion of the property is not an
encumbrance which defendant Interbank is obligated to clear the property from.
o The meaning of the words, "free from all encumbrance" does not include adverse
possession of a third person
o Moreover, it is highly inconceivable and illogical that the plaintiffs did not insist on
expressly providing the necessary stipulations and in words that leave nothing to
further interpretation. Plaintiff Sabio, a lawyer, took part personally and with the
assistance of another lawyer, in the drafting of the MOA, and the negotiations took
about a year, and no reason is suggested why he refrained from including therein
specific language containing what he considers the principal commitment of the
second party to remove the squatters and wall-in the 58,000 portion to be conveyed
to him.
 (Parol Evidence Rule)It is a long-held cardinal rule that when the terms of an agreement are
reduced to writing, it is deemed to contain all the terms agreed upon and no evidence of
such terms can be admitted other than the contents of the agreement itself
o The lower courts found that nowhere in the MOA did Interbank commit to clear the
subject parcel of squatters or illegal occupants. Neither was Interbank obliged to
remove whatever unauthorized improvements were introduced in the said
property.
 Exceptions: There are exceptions to said rule, however, such as when:
o 1. There is an intrinsic ambiguity, mistake or imperfection in the writing;
o 2. The written agreement fails to express the true agreement and intent of the
parties thereto;
o 3. The validity of the written agreement is in question; and
o 4. There exists other terms agreed by the parties or their successors-in-interest after
the execution of the written agreement
 In the instant case, the MOA between the Sabios and Interbank was never assailed for any
intrinsic ambiguity, mistake or imperfection in the writing by any of the parties. More
 importantly, petitioners never alleged in any of their pleadings that the MOA failed to
express the true agreement and intent of the parties thereto.
o Even if he would belatedly complain that the MOA did not state the true intentions
of the parties, he is estopped from doing so
o It is highly inconceivable and illogical that petitioner Camilo Sabio, an experienced
lawyer who personally took part in the preparation of the MOA with the assistance
of another lawyer, in the course of negotiations that lasted about a year, "did not
insist on expressly providing the necessary stipulations and in words that leave
nothing to further interpretation
 Since none of these exceptions was ever put in issue in the pleadings, in accordance with
Rule 130, Section 9 of the Rules of Court, the parol evidence rule must be strictly adhered to
in this instant case. Therefore, the stipulations of the contract being the law between the
parties, the courts have no recourse but to enforce them as they were agreed upon and
written
 Indeed, it is not the province of the courts to amend a contract by construction, or to make
a new contract for the parties by interjecting material stipulations, or even to read into the
contract words which it does not contain
o Since the MOA of the parties was reduced to writing, such agreement is deemed to
contain all its terms and there cannot be, between the parties and their successors-
in- interest, any evidence of the terms of the written agreement other than the
contents of the agreement itself.
 Nevertheless, petitioners invoke the "whereas" clauses of the MOA as well as other
documents preceding the execution of the MOA, arguing that these will provide proof of the
real intention of the parties when they executed the MOA
o However, petitioners never put in issue the allegation that the MOA failed to
express the true intent of the parties thereto.
o Instead, they adopt inconsistent positions in regard to the MOA, that by itself, it is
valid and binding on the parties and their successors-in-interest on the one hand,
while they also seek the court’s cognizance of extraneous documents to radically
modify or add to the terms of the written agreement on the other hand.
o The Court also studied these documents and found that there is no factual or legal
basis for petitioners’ claim that the respondents are obligated to rid the subject
property of squatters and unauthorized structures.

Petition denied. CA affirmed.