The Parol Evidence Rule excludes parol or extrinsic evidence by which a party seeks to contradict, vary, add to or subtract from the terms of a valid agreement or instrument.  Thus, it appears that what the CA actually applied in its assailed Decision when it refused to look beyond the words of the contracts was the Parol Evidence Rule, not the BestEvidence Rule.  The appellate court gave primacy to the literal terms of the two contracts and refused to admit any other evidence that would contradict such terms.

However, even the application of the Parol Evidence Rule is improper in the case at bar.  In the first place, respondents are not parties to the VLTs executed between RBBI and petitioners; they are strangers to the written contracts.  Rule 130, Section 9 specifically provides that parol evidence rule is exclusive only as "between the parties and their successors-in-interest."  The parol evidence rule may not be invoked where at least one of the parties to the suit is not a party or a privy of a party to the written document in question, and does not base his claim on the instrument or assert a right originating in the instrument.^[44]

Moreover, the instant case falls under the exceptions to the Parol Evidence Rule, as provided in the second paragraph of Rule 130, Section 9:

However, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading:

(1) An intrinsic ambiguity, mistake or imperfection in the written agreement;

(2) The failure of the written agreement to express the true intent and agreement of the parties thereto;

x x x x (Emphasis supplied)

Here, the petitioners' VLTs suffer from intrinsic ambiguity.  The VLTs described the subject property as covered by TCT No. T-62836 (Lantap property), but they also describe the subject property as being located in "Barangay Murong."  Even the respondents' Deed of Sale falls under the exception to the Parol Evidence Rule. It refers to "TCT No. T-62096" (Murong property), but RBBI contended that the true intent was to sell the Lantap property.  In short, it was squarely put in issue that the written agreement failed to express the true intent of the parties.

Indeed, the appellate court erred in its application of the Best Evidence Rule. The BestEvidence Rule states that when the subject of inquiry is the contents of a document, the best evidence is the original document itself and no other evidence (such as a reproduction, photocopy or oral evidence) is admissible as a general rule. The original is preferred because it reduces the chance of undetected tampering with the document.^[42]

In the instant case, there is no room for the application of the Best Evidence Rule because there is no dispute regarding the contents of the documents.  It is admitted by the parties that the respondents' Deed of Sale referred to TCT No. T-62096 as its subject; while the petitioners' Deeds of Voluntary Land Transfer referred to TCT No. T-62836 as its subject, which is further described as located in Barangay Murong.

The real issue is whether the admitted contents of these documents adequately and correctly express the true intention of the parties.  As to the Deed of Sale, petitioners (and RBBI) maintain that while it refers to TCT No. T-62096, the parties actually intended the sale of the Lantap property (covered by TCT No. T-62836).

“Secondary evidence of the contents of a document refers to evidence other than the original document itself. A party may introduce secondary evidence of the contents of a written instrument not only when the original is lost or destroyed, but also when it cannot be produced in court, provided there is no bad faith on the part of the offeror. However, a party must first satisfactorily explain the loss of the best or primary evidence before he can resort to secondary evidence. A party must first present to the court proof of loss or other satisfactory explanation for non-production of the original instrument. The correct order of proof is as follows: existence, execution, loss, contents, although the court in its discretion may change this order if necessary.”

It is clear, therefore, that before secondary evidence as to the contents of a document may be admitted in evidence, the existence of [the] document must first be proved, likewise, its execution and its subsequent loss.

The Best Evidence Rule applies only when the terms of a written document are the subject of the inquiry. In an action for quieting of title based on the inexistence of a deed of sale with right to repurchase that purportedly cast a cloud on the title of a property, therefore, the Best Evidence Rule does not apply, and the defendant is not precluded from presenting evidence other than the original document.

The appellate court is correct in declaring that under the parole evidence rule, when the parties have reduced their agreement into writing, they are deemed to have intended such written agreement to be the sole repository and memorial of everything that they have agreed upon. All their prior and contemporaneous agreements are deemed to be merged in the written document so that, as between them and their successors-in-interest, such writing becomes exclusive evidence of the terms thereof and any verbal agreement which tends to vary, alter or modify the same is not admissible.^[11]

Here, the terms of the subject promissory note and the deed of chattel mortgage are clear and explicit and devoid of any conditionality upon which its validity depends. To be sure, Allied Bank was not a party to SEC Case No. 2042 where the management committee was ordered created; hence, it would not be correct to presume that it had notice of the existence of the management committee which, incidentally, was still to be created when the subject promissory note was executed on 12 August 1981. Notably, while the parties in SEC Case No. 2042 agreed to form the management committee on 27 July 1981, it was only on 14 August 1981 when the committee was actually created and its members appointed. Clearly then, the subject promissory note was outside the realm of authority of the management committee. Corollarily, the chattel mortgage accessory to it is likewise valid.

These facts lead us to hold that the present case falls within one of the recognized exceptions to the parole evidence rule.  Under the Rules of Court, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading, among others, its failure to express the true intent and agreement of the parties thereto.^[15] Here, the contractual intention of the parties cannot be understood from a mere reading of the instrument.  Thus, while the contract explicitly stipulated that it was for the insurance of the new oil mill, the boundary description written on the policy concededly pertains to the first oil mill.  This irreconcilable difference can only be clarified by admitting evidence aliunde, which will explain the imperfection and clarify the intent of the parties.

Anent petitioner's argument that the respondent is barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong, we find that the same proceeds from a wrong assumption.  Evidence on record reveals that respondent's operating manager, Mr. Edison Tantuco, notified Mr. Borja (the petitioner's agent with whom respondent negotiated for the contract) about the inaccurate description in the policy.  However, Mr. Borja assured Mr. Tantuco that the use of the adjective new will distinguish the insured property.  The assurance convinced respondent that, despite the impreciseness in the specification of the boundaries, the insurance will cover the new oil mill

It is true that the subject Deed of Assignment and Transfer of Rights and Deed of Absolute Sale are notarized. It is well settled that a document acknowledged before a notary public is a public document that enjoys the presumption of regularity.^[19] It is a prima facieevidence of the truth of the facts stated therein and a conclusive presumption of its existence and due execution.^[20] However, the CA correctly held that the existence and due execution of these documents are not in issue. Moreover, the presumption of truth of the facts stated in notarized documents is merely prima facie, which means that this presumption can be overcome by clear and convincing evidence.^[21] Hence, the truth of the facts stated in the disputed Deed of Assignment and Transfer of Rights as well as the Deed of Absolute Sale may be rebutted by evidence.