[ G.R. No. 7992. March 04, 1915 ] 30 Phil. 27
[ G.R. No. 7992. March 04, 1915 ]
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, PLAINTIFF AND APPELLANT, VS. THE PHILIPPINE SUGAR ESTATES DEVELOPMENT COMPANY, LTD., ET AL., DEFENDANTS AND APPELLEES. D E C I S I O N
MORELAND, J.:
This is an action begun by the Government of the Philippine Islands against the Philippine Sugar Estates Development Company, Limited, and the Order of the Dominicans to recover the sum of P50,000, the value of a railroad and various sugar mills which, according to the complaint, formed a part of the real estate, consisting of a certain hacienda, sold by the defendants to the plaintiff and which, after such sale, were illegally removed from said hacienda by the defendants and converted to their own use. The defendants answered the complaint admitting the sale of the hacienda, also substantially admitting the removal of the railroad and sugar mills, but denied that the latter were included in the hacienda, the sale of which is the basis of the action. As a special defense the defendants alleged “that on the execution of the conveyance to the Insular Government, which is annexed to plaintiff’s complaint and marked Exhibit B, it was understood by the parties to the conveyance that such conveyance did not include the said railroad or sugar mills and their accessories, for which suit has been brought, and although such conveyance contains the words and all other improvements and accessories at the present time on said hacienda’ as having been included in the sale, it was understood by the parties that the said railroad and sugar mills and accessories were not included in that general description, nor was it the intention of the parties to include them,” and for this reason the defendants “impugn the contract annexed to the complaint in so far as it may be construed in a sense contrary to this position, on the ground that it does not express the real intention of the parties.” The plaintiff demurred to the portion of the answer above quoted on the ground that it was not a defense, “as the evidence which would have to be offered in support thereof was incompetent, irrelevant, and immaterial in that such evidence, if offered, would be parol evidence and would vary the terms of a written instrument.” The demurrer was overruled and the cause went to trial. The court found in favor of the defendants, dismissing the complaint on the merits. This appeal is from that judgment. The question before us for decision is whether the conveyance from the defendants to the plaintiff includes, as matter of law, the railroad and the sugar mills, with their accessories, the subject of this dispute, and whether, in case they are included in the conveyance, parol evidence is admissible to exclude them. On the 22d day of December, 1903, the parties in this action entered into a contract for the sale of certain lands and premises therein described, among others lands known as the Calamba Sugar Estate. In that contract appears the following:
“This sale and conveyance shall include all the dwelling houses, farm houses, warehouses, camarines, and other buildings, irrigation works, dams, tunnels, ditches, and all other improvements, together with all water and other rights of hereditament belonging to the company on every part of the estates hereby agreed to be conveyed, * * *.”
In the final conveyance, made in pursuance of this contract and which is the basis of this action, the following clause appears relative to the Calamba hacienda:
“And, furthermore, I declare that there is included in this sale and is hereby ceded and conveyed to the Government of these Islands, all the rights and interests which the company which I represent has or may legally exercise in the buildings, irrigation works, water rights, improved lands, and all other improvements and accessories which exist in the hacienda or lands sold and conveyed by this instrument * * *.”
We held in the case of Fernandez vs. Shearer (19 Phil. Rep., 75), that sugar mills constitute an improvement of the lands upon which they are built and are subject to taxation as real estate. We also held in the case of Bischoff vs. Pomar (12 Phil. Rep., 690), that a mortgage given on real estate includes, and constitutes a lien upon, sugar mills and other improvements affixed to and forming part of the land at the time the mortgage was given. Under these holdings, the sale of the land would carry with it, without further words, all the improvements existing thereon at the time of the sale and forming part thereof. Certainly such improvements, whether railroads or sugar mills, would be included in the phrase “all other improvements and accessories.” Section 285 of the Code of Civil Procedure is as follows:
“Written agreement presumed to contain all the terms of the agreement.—When the terms of an agreement have been reduced to writing by the parties, it is to be considered as containing all those terms, and therefore there can be, between the parties and their representatives or successors in interest, no evidence of the terms of agreement other than the contents of the writing, except in the following cases: “1. Where a mistake or imperfection of the writing, or its failure to express the true intent and agreement of the parties, is put in issue by the pleadings; “2. Where the validity of the agreement is the fact in dispute; but this section does not exclude other evidence of the circumstances under which the agreement was made, or to which it relates, or to explain an intrinsic ambiguity, or to establish its illegality or fraud. The term “agreement” includes deeds and instruments conveying real estate, and wills as well as contracts between parties.”
It is contended that parol evidence is admissible in the case at bar to show that it was understood between the parties at the time the sale was made that neither the sale of the real estate itself nor the additional words “all other improvements and accessories” were intended to include the railroad and the sugar mills—indeed, that it was expressly agreed at the time the conveyance was executed that they should be excluded. The authority for this contention is to be found, it is alleged, in that part of paragraph 1 of the section just quoted which makes an exception to the general rule that parol evidence cannot be introduced to contradict or vary the terms of a written instrument, and permits its introduction when the writing “fails to express the true intent and agreement of the parties,” which failure “is put in issue by the pleadings.” The defendants claim that, if the sale of the real estate, without further words, or if the words “all other improvements and accessories” are held, as matter of law, to include the railroad and sugar mills then on the land and forming part thereof, then the agreement “fails to express the true intent and agreement of the parties,” and that, accordingly, authority is found in the section referred to for the introduction of parol evidence showing what the true agreement of the parties was. We regard this contention as too broad. We do not believe it to have been the intention of the Legislature to authorize the introduction of parol evidence respecting the terms of a written instrument under the circumstances set forth in the contention. Such a theory would prevent written instruments, to a considerable extent, from serving the purpose they were designed to serve and would leave them of little more value than parol agreements. If, against the objection of the vendee, properly interposed, one may, in the absence of fraud or mistake, successfully maintain, after he has executed a conveyance of real estate, that he intended, and it was verbally agreed, that certain buildings on the premises, forming part of the freehold, should be excepted or reserved from the operation of the conveyance, or that only half of the premises described in the conveyance was intended to be conveyed, or that certain improvements forming a part of the real estate conveyed were excepted from the terms of the conveyance, and thereby materially modify the meaning and effect of the document, written instruments cease to have substantial value as such. (Jones, Commentaries on Evidence, Horwitz, secs. 485, 486, vol. 3; Yu Tek & Co. vs. Gonzalez, 29 Phil. Rep., 384.) Under our Code of Civil Procedure parol evidence may be introduced to relieve from an imperfection or to correct a mistake which has prevented any real agreement from being reached, or which has occasioned the expression of that which was not the true agreement; or to attack the validity of the agreement, and for the other purposes named in the second paragraph of section 285. Where there is an imperfection or mistake in an instrument, it either does not express any agreement at all between the parties or it does not express their real agreement. Where there is no mistake or imperfection, it expresses both; and the reference in paragraph 1 of said section to the failure of the instrument “to express the true intent and agreement of the parties,” refers to a mistake or imperfection by which that failure is produced. In many cases mistake, as such, has no legal effect. It neither adds anything to nor takes anything from the legal consequences of an act, either as regards the rights of other persons or the liability of the person performing the act. Nor does mistake of itself necessarily affect the validity of contracts. A mistake, as we have already said, may prevent any real agreement from being reached or may occasion the expression of that which was not the true agreement; but if the minds of the parties actually met on all the essentials of a contract, and the instrument which purports to evidence it is in fact a true exposition of that contract, no amount of mistake in respect to the legal effect of the contract will induce a court, either of law or equity, to interfere. Courts in exercising the powers of rescission and reformation do not operate upon contracts at all but merely upon what erroneously purports to be contracts. Courts will not reform a writing so as to give an agreement a different effect from that which the parties intentionally entered into simply because the contract as executed does not effect the purpose of its execution, nor insert in the instrument a part of an antecedent verbal agreement which was designedly left out of the written contract, either through ignorance of the necessity for its insertion, or because its performance was entrusted to the honor of the defendant. The inquiry is not what contract the parties intended to enter into, but what is the contract they did enter into. Their intention may have been one thing, their agreement quite another. For the same reason a court of equity will not rescind a contract or reform an instrument merely because the parties may have been mistaken as to its legal interpretation and effect, nor will such a mistake be recognized as any defense to a suit upon the contract or instrument. The section under discussion cannot be construed to mean that a party may contradict or modify the terms of a written agreement which he voluntarily signed with full knowledge of its provisions. As we have intimated, however, there are mistakes as to which courts will give relief. Those are the mistakes that are referred to in section 285—a mistake or imperfection. Such a mistake is one which prevents any contract at all from being formed or which prevents a contract actually entered into from being properly expressed. Where the instrument contains what the parties intended it should and understood that it did, it is presumed to express their true intention. At least parol evidence will not be admitted to contradict or vary the terms of the instrument under such circumstances. The only uses to which parol evidence may be put with respect to a written instrument, aside from the cases referred to, are those mentioned in the second paragraph of section 285. In the case before us it is not alleged that there was a mistake of the parties in the formulation of the conveyance or that the conveyance is imperfect, invalid, or ambiguous. It is claimed, simply, that the vendors did not understand that the conveyance itself and the words used therein meant what in law they do mean and, therefore, ask that they be permitted to contradict or vary their plain meaning and effect by showing, by parol evidence, that they did not include the particular improvements which are the subject matter of this guilt. We do not believe that parol evidence is admissible under such circumstances. We do not discuss the general rule relative to the admissibility of parol evidence in connection with written instruments, or the varied exceptions to that rule, as laid down by the courts of the United States. It is unnecessary here. The statute, with reasonable clearness, states the rule and gives the exceptions. It is not our province to do more than apply it. In the case of Pastor vs. Gaspar (2 Phil. Rep., 592), the court said, page 599:
“(2) The parties made a verbal agreement which they afterwards reduced to writing. Section 285 of the Code of Civil Procedure prohibits any parol evidence as to other terms not contained in the writing. Under this section, even if there had been agreements other than those contained in the instrument and inconsistent therewith, the plaintiff could not testify to them. The plaintiff claims that this section does not prohibit evidence as to the surrounding circumstances. This is true, and the plaintiff was at the trial allowed to testify that he bought the lorchas himself in lloilo; that he was paid $500 for so doing; that $20,000 was borrowed from the Banco Español-Filipino for the purpose of paying for them; and as to other details. There was no intrinsic ambiguity in the contract which required explanation. When a written contract is vague and indefinite, it can be explained by showing what the surrounding circumstances were (sec. 289), but not by showing by parol what the prior agreement in fact was.”
See also De Icaza vs. Perez (5 Phil. Rep., 166); Sanz vs. Lavin Brothers (6 Phil. Rep., 299) ; Testagorda vs. Commanding General (6 Phil. Rep., 573); Muguruza vs. International Bank (10 Phil. Rep., 346); De Guzman vs. Balarag (11 Phil. Rep., 503); U. S. vs. Macaspac (12 Phil. Rep., 26); Jose vs. Damian (14 Phil. Rep., 104) ; Sy Joe Lieng vs. Sy Quia (16 Phil. Rep., 137); Lozano vs. Tan Suico (23 Phil. Rep., 16). The evidence offered on the trial to sustain the special defense should have been excluded under the objection of the plaintiff. Evidence was introduced by the parties showing the value of the property removed by the defendant from the premises after the sale to the plaintiff. That evidence fully supports the contention of the appellant that the value was that alleged in the complaint, viz., P50,000. In the case of Hicks vs. Manila Hotel Co. (28 Phil. Rep., 325), we said:
“It is the practice of this court, in case of reversal of a judgment dismissing the complaint on the merits, to examine the evidence and render, or order rendered, the judgment which the inferior court should have rendered; and, where the action is for a sum of money or damages, to find from the evidence the amount due or the damages suffered and to render, or order the trial court to render, judgment for that amount.”
The question of damages and the amount thereof were fully ventilated in the trial court and here. We are, therefore, of the opinion that the case should be finally determined in this court. The judgment is reversed and the cause remanded to the Court of First Instance with instructions to enter judgment in favor of the plaintiff and against the defendant in the sum of P50,000, with interest from the commencement of the action. So ordered. Torres and Johnson, JJ., concur.