G.R. No. 171707 ; July 28, 2008
SPOUSES WILFREDO and ANGELA AMONCIO, Petitioners, vs. AARON GO BENEDICTO, Respondent.

FACTS

Petitioners leased a 240 sq. m. portion of their property to respondent under a five-year contract. The contract stipulated that all improvements on the land would become the property of the lessor upon lease expiration and that the lessee would be liable for rentals for the entire term even if he failed to complete it. In December 1999, petitioners alleged respondent stopped paying rent and occupied an additional 120 sq. m. not covered by the lease. They rescinded the contract in January 2000. Respondent vacated in June 2000. Petitioners filed for recovery of possession, demanding rent for the unexpired lease term until August 2002 and for the allegedly encroached areas.
Respondent countered with a different factual narrative. He claimed there was a separate oral agreement with petitioner Wilfredo Amoncio to construct five commercial buildings on the entire property, with respondent financing the construction. Under this agreement, two buildings would belong to petitioners, who were to reimburse him. He argued he vacated due to a dispute and sought payment for the construction costs of the two buildings allegedly for petitioners’ benefit.

ISSUE

Whether the Court of Appeals erred in affirming the trial court’s decision which dismissed the complaint for unpaid rentals and granted respondent’s counterclaim based on an alleged oral agreement, notwithstanding the written lease contract’s terms.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ decisions. The legal logic rests on the proper application of the parol evidence rule and the evaluation of factual findings. The parol evidence rule (Rule 130, Section 9) bars evidence outside a written agreement to contradict its terms, but it admits such evidence to prove a subsequent agreement or to show that the written instrument does not express the true intent of the parties. Here, respondent properly invoked in his pleadings the failure of the written lease to express the true agreement, thereby allowing the presentation of evidence on the separate oral agreement for the construction of buildings.
The trial court and the Court of Appeals, after evaluating the evidence, found respondent’s version more credible. They determined that the parties’ true agreement encompassed not merely a lease but a joint construction venture, which explained the possession and construction activities beyond the leased area. As the Supreme Court’s role in a Rule 45 petition is limited to reviewing questions of law, it deferred to these factual findings, which are generally conclusive and binding. The claim for rentals for the unexpired term was thus unfounded, as the rescission and respondent’s liability were viewed in the context of the broader, proven oral agreement that had broken down. Consequently, the award for construction costs under the counterclaim was upheld.