LAND SETTLEMENT AND DEVELOPMENT CORPORATION, PLAINTIFF AND APPELLANT, VS. GARCIA PLANTATION CO., INC., AND/OR SALUD GARCIA AND VICENTE B. GARCIA, DEFENDANTS AND APPELLEES.

This is a case of specific performance of contract, instituted by
the Land Settlement and Development Corporation, against the Garcia
Plantation Co., Inc. and/or Salud C. de Garcia and Vicente B. Garcia,
for the recovery of the sum of P5,955.30, representing the unpaid
balance of the purchase price of two tractors, bought by the defendant
Garcia Plantation Co., Inc. from the plaintiff. Salud C. de Garcia was
made alternative co-defendant because of two promissory notes executed
by her, whereby she personally assumed the account of the company with
the plaintiff, and the defendant Vicente B. Garcia was included as
husband of Salud C. de Garcia. The defendants, in their Answer,
admitted the execution of the two promissory notes, but contended that
the same had been novated by a subsequent agreement contained in a
letter (Exh. L) sent by Filomeno C. Kintanar, Manager, Board of
Liquidators of the LASADECO, giving the defendant Salud C. de Garcia an
extension up to May 31, 1957, within which to pay the account, and since the complaint was filed on February 20, 1957,
they claimed that the action was premature and prayed that the
complaint be dismissed. The plaintiff in the reply and answer to the
counterclaim, admitted the due execution and genuineness of the letter
marked Exhibit L, but contended that the same did not express the true
intent and agreement of the parties, thereby placing the fact in issue,
in the pleadings.

After several postponements requested by both parties on the ground
of pending amicable settlement, trial on the merits was ordered and
held on July 25, 1957, at 1:00 o’clock in the afternoon. At the trial,
the defendant admitted all the documentary evidence adduced by the
plaintiffs, showing that they were indebted to said plaintiff. However,
when the plaintiff presented Atty. Lucido A. Guinto, Legal Officer of
the Board of Liquidators, to testify on the true agreement and the
intention of the parties at the time the letter (Exh. L for the
defendants), was drafted and prepared, the lower court presided by the
Hon. B. A. Tan, upon the objection af the counsel for defendants, ruled
out said testimony and prevented the introduction of evidence under the
parol evidence rule (See. 22, Rule 123). Plaintiff also intended to
present Mr. Kintanar, the writer of the letter, to testify on the same
matter, but in view of the ruling of the lower court, it rested its
case. The lower court dismissed the case, stating that the action was
premature. Plaintiff appealed to the Court of Appeals, which certified
the case to Us, pointing that the questions presented were purely legal
in nature.

Appellants allege that the lower court erred (1) In forcing the
parties to trial despite requests by both parties for more time to
submit an amicable settlement of the case; (2) In excluding parol
evidence, tending to prove the true intention arid agreement of the
parties and the existence of a condition precedent, before the
extension granted the defendants, contained in Exhibit L, could become
effective and (3) In holding that the action was premature and in
dismissing the case on this ground.

The disposal of the second issue would render the determination of
the other issues unnecessary. The fact that the letter, Exhibit L,
failed “to express the true intent and agreement of the parties”,
Section 22, Rule 123, had been put in issue by the Answer of the
plaintiff to defendants’ counterclaim (Heirs of De la Rama vs.
Talisay-Silay Milling Co., 54 Phil., 580). The parol evidence consisted
of the testimony of Attys. Guinto and Kintanar, to the effect that in
view of the plea of defendant Vicente B. Garcia to give the defendants
an extension of time to pay their accounts, Atty. Kintanar gave the
defendants up to May 31, 1957, to coincide with their ramie harvest
“provided that they will make a substantial down payment immediately,
with the understanding that upon non-payment of the substantial amount,
the extension shall be deemed as not granted and the LASADECO shall
feel free to seek redress in court”. That there was such condition
precedent is manifested by the second paragraph of the letter Exhibit
L, quoted hereunder:

“November 20,1956

Mrs. Salud de Garcia
Tacurong, Cotabato
Dear Madam:

Please be advised that the Board has granted you an extension up to May 31, 1957, within which to pay your account.

This matter has been the subject of agreement between your husband and this office.

	Respectfully,
	(Sgd.) FILOMENO C. KINTAHAR”

The subject of agreement alluded to in the second paragraph of the
above letter, was the condition to be complied with or the
consideration given for the extension of time, within which the Garcia
spouses pay their account. The lower court should have admitted the
parol evidence sought to be introduced to prove the failure of the
document in question to express the true intent and agreement of the
parties. It should not have improvidently and hastily excluded said
parol evidence, knowing that the subject-matter treated therein, was
one of the exceptions to the parol evidence rule. When the operation of
the contract is made to depend upon the occurrence of an event, which,
for that reason is a condition precedent, such may be established by
parol evidence. This is not varying the terms of the written contract
by extrinsic agreement, for the simple reason that there is no contract
in existence; there is nothing to which to apply the excluding rule
(Heitman vs. Commercial Bank of Savannah, 6 Ga. App. 584, 65 SE 590,
cited in Comments on the Rules of Court, 1957 Ed., 200). “* *. This
rule does not prevent the introduction of extrinsic evidence to show
that a supposed contract, never became effective by reason of the
failure of some collateral condition or stipulation, prerequisite to
liability” (Peabody & Co. vs. Bromfield and Ross, 38 Phil., 841).
The rule excluding parol evidence to vary or contradict a writing, does
not extend so far as to preclude the admission of extrinsic evidence,
to show prior or contemporaneous collateral parol agreements between
the parties, but such evidence may be received, regardless of whether
or not the written agreement contains reference to such collateral
agreement (Robles vs. Lizarraga Hnos., 50 Phil., 387). In the case at
bar, reference is made of a previous agreement, in the second paragraph
of letter Exhibit L, and although a document is usually to be
interpreted in the precise terms in which it is couched, Courts, in the
exercise of sound discretion, may admit evidence of surrounding
circumstances, in order to arrive at the true intention of the parties
(Aves & Alzona vs. Orilleneda, 70 Phil., 262). Rulings to the same
effect were also announced by the United States courts (Payne vs.
Campbell, 6 E & B, 370; Wilson vs. Powers, 131 Mass. 540; Blewitt
vs. Brown, 142 NY 357; Burke vs. Delany, 153 US 228).

Had the trial court permitted, as it should, the plaintiff to prove
the condition precedent to the extension of the payment, the said
plaintiff would have been able to show that because the defendants had
failed to pay a substantial down payment, the agreement was breached
and the contract contained in Exhibit “L”, never became effective and
the extension should be considered as not having been given at all. So
that, although the complaint was filed on February 20, 1957, three
months before the deadline of the extension on May 31, 1957, there
would be no premature institution of the case. The lower court,
therefore, erred in dismissing the case.

The decision appealed from is reversed, and case remanded to the
lower court for further proceeding’s. Costs agains the appellees.

Bengzon, C. J., Padilla, Bautista Angelo, Concepcion, Reyes, J. B. L., Barrera, Dizon, Regala and Makalintal, JJ., concur.