**Facts:**
1. **Business Transaction Initiation**: Lucio Cruz and Conrado Salonga were involved in business dealings concerning the buying and selling of fish. On May 4, 1982, Cruz received P35,000.00 from Salonga and Rodrigo Quiambao, acknowledged by a receipt.
2. **Disputed Balances**: Salonga asserted Cruz repaid only P20,000.00, leaving P15,000.00 unpaid. Furthermore, an agreement supposedly granted Salonga exclusive rights to purchase fishpond harvests leased by Cruz, in return for further loan accommodations totaling P19,250.00.
3. **Cruz’s Defense**: Denying the claim of loans, Cruz stated the funds were payments for a “pakyaw” arrangement (bulk purchase) of fish and advance payments for a fishpond sublease. Cruz, in return, alleged Salonga was the debtor, having utilized the fishpond without paying the entire rental due.
4. **Partial Stipulated Facts**: Several facts were stipulated by both parties in pre-trial, including the acknowledgment that the P35,000.00 was received, and Salonga harvested fish per a verbal contract.
5. **Judgment at the Regional Trial Court**: The RTC sided with Cruz, finding the amounts paid were indeed linked to “pakyaw” and sublease arrangements, and ordered Salonga to pay sums owed to Cruz, considering sublease termination and payments made.
6. **Court of Appeals Decision**: The Court of Appeals reversed the RTC ruling, viewing the transaction as loans based on Exhibit “I” indicating another independent P28,000.00 transaction concerning the “pakyaw”.
**Issues:**
1. **Nature of Transactions**: Whether the funds transferred were loans or payments towards “pakyaw” and sublease agreements.
2. **Application of Parol Evidence Rule**: Was it correct to reject additional evidence explaining the relations and substantive intent of Exhibit “D” and “I”?
3. **Consideration of Evidence Outside Pleadings**: Should Exhibit “I”, unpleaded but introduced, alter the legal standings and requirements of transactional acknowledgments between the parties?
4. **Bind of Stipulated Facts**: The validity and binding nature of stipulated facts entered into during pre-trial on court decisions.
**Court’s Decision:**
1. **Transactions Nature**: The Supreme Court found for Cruz, ruling the funds amounted to payments for “pakyaw” and sublease obligations, not loans. The evidence including partial stipulations supports the original “pakyaw” (bulk selling) and leasing agreements, not a borrower-lender relation.
2. **Parol Evidence Rule**: The Court held that the transactions were not fully captured in the written receipts, thus open to explanations through parol evidence. Exhibit D being merely a receipt rather than a contractual document allowed for additional elucidation of the transaction’s context.
3. **Acknowledgment of Further Un-plead Cause of Action**: The Supreme Court considered that while exhibit “I” lacked pleading as a separate transactional cause, its treatment in appeal was procedurally permissible as no substantial rights appeared to be impaired. Thus, the appellate court should have fully considered factual context yet upheld the stipulated acknowledgment from the trial.
4. **Binding Nature of Stipulations**: The Court asserted that stipulated facts, unless altered for manifest injustice avoidance, hold binding authority contingent upon resultant fairness.
**Doctrine:**
The case emphasizes the permissibility of parol evidence to explain contexts when receipts are not intended as the exclusive agreement memorial. It clarifies that unobjected evidence can modify perceived written agreements.
**Class Notes:**
– **Key Element – Parol Evidence Rule**: Revisiting the rule’s exceptions particularly in non-agreement document interpretation (Rule 130, Sec. 7).
– **Concept – Stipulations of Fact**: Recognized as binding unless actively challenged for fairness and justice in trial proceedings.
– **Evidence Approach**: Accepting additional evidence into record if no objection was raised enhances understanding over legal formalism continuity.
**Historical Background:**
This decision belongs to a context where transactional clarity in business-related litigations involved agricultural leases, practices like “pakyaw,” and disputes pivotally based on evidence acceptance, reflective of economic transactions in rural Philippine settings in the 1980s. The dispute resolution revealed procedural influence over substance due diligence and representation.
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