LUCIO R. CRUZ v.
CA May 14, 1982
[ GR No. 79962, Dec 10, 1990 ]
Keywords: lease-sublease of fishpond; contract of loan or
contract of lease;
One Liner: Parol Evidence rule does not apply when the
document does NOT amount to a written contract.
FACTS:
The private respondent Conrado Salonga filed a complaint for
collection and damages against petitioner Lucio Cruz in the RTC
of Lucena City alleging that in the course of their business
transactions of buying and selling fish, the petitioner (Cruz)
borrowed from him an amount of P35,000.00, evidenced by a
receipt dated May 4, 1982, marked as Exhibit D, reading as
follows:
5/4/82
Received the amount of Thirty Five Thousand Cash from
Rodrigo Quiambao and Conrado Salonga on the day of May 4,
1982.
Sgd. Lucio Cruz
Cruz denied having contracted any loan from Salonga. By way
of special defense, he alleged that he was a lessee of several
hectares of a fishpond owned by Mayor Nemesio Yabut and
that sometime in May 1982, he entered into an agreement
with Salonga whereby the latter would purchase (pakyaw) fish
in certain areas of the fishpond from May 1982 to August 15,
1982.
They also agreed that immediately thereafter, Salonga would
sublease (bubuwisan) the same fishpond for a period of one
year. Cruz admitted having received on May 4, 1982, the
amount of P35,000.00 and on several occasions from August
15, 1982, to September 30, 1982, an aggregate amount of
P15,250.00. He contended however, that these amounts were
received by him not as loans but as consideration for their
"pakyaw" agreement and payment for the sublease of the
fishpond.
He (Cruz) added that it was the private respondent (Salonga)
who owed him money since Salonga still had unpaid rentals for
the 10-month period that he actually occupied the fishpond.
Cruz also claimed that Salonga owed him an additional
P4,000.00 arising from another purchase of fish from other
areas of his leased fishpond.
At the trial, the private respondent (Salonga) claimed that he
also delivered to the petitioner P28,000.00, which constituted
the consideration for their "pakyaw" agreement. This was
evidenced by a receipt dated May 14, 1982 marked as Exhibit
I and reading as follows:
Tinatanggap ko ang halagang dalawampu't walong libong
piso (P28,000.00) bilang halaga sa pakyaw nila sa akin sa
sangla sa kahong bilang #8 maliit at sa kaputol na sapa sa
gawing may bomba. Ito ay tatagal hanggang Agosto 1982.
SGD. LUCIO CRUZ
Decision of RTC:
Ruled in favor of the Cruz. The Judge found that the
transactions between the petitioner and the private
respondent were indeed "pakyaw" and sublease agreements.
It took into consideration the testimony of other witnesses
saying that the receipts were payment for the transaction of
the purchase of fish.
Decision of CA:
Reversed the decision of the trial court. It found that the
transactions between Cruz and Salonga was a contract of loan
and no testimonies of the witnesses were needed to explain
the receipts evidencing the series of amounts. It applied the
Parol Evidence Rule wherein parties are bound by their
contract and no other evidence may be presented to modify
such agreement.
On appeal, the petitioner (Cruz) contested that the public
respondent Court of Appeals gravely erred in disregarding
parol evidence to Exhibits "D" and "I" despite the fact that
these documents fall under the exceptions provided for in
Sec. 7, Rule 130 of the Rules of Court and thereby in making a
sweeping conclusion that the transaction effected between
the private respondent and petitioner is one of contract of
loan and not a contract of lease. They alleged that their oral
arguments can be received to clear their agreement stated in
the receipt exhibited as “I”.
ISSUE:
WON the court can receive oral evidence to alter or modify
the contents of the receipt without violating the parol
evidence rule? YES.
HELD:
Rule 130, Sec. 7, of the Revised Rules of Court provides:
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 xxx.
The reason for the rule is the presumption that when the
parties have reduced their agreement to writing they have
made such writing the only repository and memorial of the
truth, and whatever is not found in the writing must be amount of P28,000.00 and of the date when the said amount
understood to have been waived or abandoned. was received.

The rule, however, is NOT applicable in the case at bar, Therefore, the SC reversed the CA’s decision and reinstated
Section 7, Rule 130 is predicated on the existence of a the RTC decision. The parol evidence rule was not applied in
document embodying the terms of an agreement, but this case.
Exhibit D does not contain such an agreement. It is only a
receipt attesting to the fact that on May 4, 1982, the
petitioner received from the private respondent the amount
of P35,000. It is not and could have not been intended by the
parties to be the sole memorial of their agreement. As a
matter of fact, Exhibit D does not even mention the
transaction that gave rise to its issuance. At most, Exhibit D
can only be considered a casual memorandum of a
transaction between the parties and an acknowledgment of
the receipt of money executed by the petitioner for the
private respondent's satisfaction.

The "pakyaw" was mentioned only in Exhibit I, which also

declared the petitioner's receipt of the amount of P28,000.00
as consideration for the agreement. The petitioner and his
witnesses testified to show when and under what
circumstances the amount of P28,000.00 was received. Their
testimonies do not in any way vary or contradict the terms of
Exhibit I. While Exhibit I is dated May 14, 1982, it does not
make any categorical declaration that the amount of
P28,000.00 stated therein was received by the petitioner on
that same date. That date may not therefore be considered
conclusive as to when the amount of P28,000.00 was actually
received.

A deed is not conclusive evidence of everything it may

contain. For instance, it is not the only evidence of the date of
its execution, nor its omission of a consideration conclusive
evidence that none passed, nor is its acknowledgment of a
particular consideration an objection to other proof of other
and consistent considerations; and, by analogy, the
acknowledgment in a deed is not conclusive of the fact.

A distinction should be made between a statement of fact

expressed in the instrument and the terms of the contractual
act. The former may be varied by parol evidence but not the
latter. Section 7 of Rule 130 clearly refers to the terms of an
agreement and provides that "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."

The statement in Exhibit I of the petitioner's receipt of the

P28,000.00 is just a statement of fact. It is a mere
acknowledgment of the distinct act of payment made by the
private respondent. Its reference to the amount of
P28,000.00 as consideration of the "pakyaw" contract does
not make it part of the terms of their agreement. Parol
evidence may therefore be introduced to explain Exhibit I,
particularly with respect to the petitioner's receipt of the