INCONGRUOUS: PAROL EVIDENCE ADMISSIBLE IN REFORMATION PROCEEDINGS (PREMIER INSURANCE v. HON. INTERMEDIATE APPELLATE COURT, G.R. No. L-64143)

‘"Ordinarily business transactions of this nature would have required strict adherence to and enforcement of verbal and written agreements, especially as to the payment of the stipulated consideration. But, because of appellant's close relationships with the officers of plaintiff appellee, appellant prevailed upon Sarmiento to accommodate plaintiff-appellee's repeated departures from the strict compliance of its obligations even without the formalities of a written amendment to a duly executed sale agreement.

"The same close relationships impelled appellant to overlook the strict formalities in the preparation, and terminologies, of the disputed Agreement.

"In retrospect, he should not have allowed sentimentalities to rule his conduct or his decision, he should have insisted on a strict literal documentation of agreements, representations and assurances made by plaintiff-appellee's officers. But, it must be appreciated that at that time, when no one had any inkling that anything was amiss or would eventually go wrong ---- at least not in appellant's mind ---- it seemed out of step and totally incongruous with the spirit of mutual trust and friendship that pervaded the transaction for appellant to doubt the verbal assurances made and to require them to be placed in writing.

"To hold appellant liable, therefore, to the strict, literal terms of the questioned Agreement would be to put undue reliance on the words employed by the parties therein to the total disregard of their true intention and agreement and it would thus be grossly unfair, iniquitous and unconscionable to enforce the same against appellant."

The petitioner cites Article 1359 of the Civil Code on reformation of instruments and the case of Bank of the Philippine Islands v. Fidelity & Surety Co. (51 Phil. 57) to show that there is no proof of the clearest and most satisfactory character of a mutual mistake as would justify a reformation of the Agreement. We agree with the private respondent that he was only introducing evidence on the true intent and meaning of the instrument as a matter of defense and that the exception to the parol evidence rule is more in point.

While it is a general rule that parol evidence is not admissible for the purpose of varying the terms of a contract, when an issue is squarely presented that a contract does not express the true intention of the parties, courts will, when a proper foundation is laid therefore, hear evidence for the purpose of ascertaining the true intention of the parties. Once the intent is clear, then it shall prevail over what on its face the document appears to be. (Labasan v. Lacuesta, 86 SCRA 16, 22). The court does not reform the instrument, It remains as it was written. However, the court receives evidence to find out how the parties really bound themselves. The second exception to the parol evidence rule enables the court to ascertain the intent of the parties.’