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G.k. No. L-28498 Iu|y 14, 1986

DL LA kAMA v. LLDLSMA

lalnLlffs: SALVADCk DL LA kAMA

uefendanL: kAIALL LLDLSMA

CASL: Salvador de la 8ama was a sLockholder of lnocenLes de la 8ama
lnc. uurlng World War ll, Lhe company suffered damages and had an
approved war damage clalm wlLh Lhe hlllpplne War uamage
Commlsslon. 1he sLockholders of Lhe company declded LhaL Lhe flrsL
paymenL would be used for Lhe repalr of Lhe lrls 1heaLer 8ulldlng. rlor
Lo Lhe second paymenL, de la 8ama sold hls shares Lo hls nephew 8afael
Ledesma. Allegedly, Lhere ls an agreemenL wlLh beLween de la 8ama
and Ledesma LhaL Lhe former reserved Lo hlmself hls proporLlonaLe
equlLy ln Lhe war damage beneflLs due on Lhe shares he sold whlch
Ledesma would dellver Lo de la 8ama upon paymenL by Lhe lorelgn
Clalm SeLLlemenL Commlsslon of Lhe unlLed SLaLes. new cerLlflcaLes of
sLock were lssued ln Lhe name of Ledesma. SubsequenLly, Lhe
corporaLlon recelved Lhe flnal paymenL of lLs war damage clalm and Lhe
8oard of ulrecLors dlsLrlbuLed Lhese as dlvldends Lo lLs currenL rosLer of
sLockholders. ue la 8ama Lhen demanded paymenL from Ledesma ln
accordance wlLh Lhelr alleged agreemenL, buL Lhe laLLer refused. ue la
8ama Lhen flled a clvll case agalnsL Ledesma where de la 8ama alms Lo
prove Lhelr alleged verbal agreemenL. Ledesma avers LhaL Lo allow de la
8ama Lo prove Lhelr alleged slmulLaneous oral agreemenL would run
counLer Lo Lhe arol Lvldence 8ule whlch prohlblLs Lhe admlsslon of
evldence concernlng a prlor or conLemporaneous verbal agreemenL
whlch would have Lhe effecL of varylng, conLradlcLlng or defeaLlng Lhe
operaLlon of a valld lnsLrumenL LhaL ls whole ln lLself. 1he only
excepLlon Lo Lhls rule, ls when fraud or mlsLake accompanled Lhe
execuLlon of such lnsLrumenL.

1he Supreme CourL ruled LhaL whlle parol evldence ls admlsslble ln a
varleLy of ways Lo explaln Lhe meanlng of wrlLLen conLracLs, lL cannoL
serve Lhe purpose of lncorporaLlng lnLo Lhe conLracL addlLlonal
conLemporaneous condlLlons whlch are noL menLloned aL all ln Lhe
wrlLlng, unless Lhere has been fraud or mlsLake." ln Lhls case, Lhere was
no lnLrlnslc amblgulLy or fraud, mlsLake, or fallure Lo express Lhe Lrue
agreemenL of Lhe parLles. lf lndeed Lhe alleged reservaLlon had been
lnLended, buslnessmen llke Lhe parLles would have placed ln wrlLlng
such an lmporLanL reservaLlon"

uCC18lnL: lL ls a well accepLed prlnclple of law LhaL evldence of a prlor
or conLemporaneous verbal agreemenL ls generally noL admlsslble Lo
vary, conLradlcL or defeaL Lhe operaLlon of a valld lnsLrumenL. (Amerlcan
lacLors (hll.) lnc. vs. Murphy 1lre CorporaLlon, eL al. (C.A.) 49 C.C. 189.)

8ACkGkCUND:
! ue la 8ama alleged LhaL Lhe lnocenLes de la 8ama lnc. suffered
damages durlng Lhe lasL war and had an approved war damage
clalm wlLh Lhe hlllpplne War uamage Commlsslon ln Lhe sum
of 106,000.00.
! 1he flrsL paymenL on sald clalm, ln Lhe sum of 36,000.00 whlch
was pald by Lhe Commlsslon whlle ue la 8ama was sLlll a
sLockholder, was, upon resoluLlon of Lhe sLockholders, used for
Lhe reconsLrucLlon of Lhe lrls 1heaLer 8ulldlng.
! november 18, 1938 ! before Lhe addlLlonal llquldaLlon of sald
clalm, ue la 8ama sold Lo Ledesma aL par value hls 140 shares ln
Lhe corporaLlon by endorslng hls cerLlflcaLes of sLock ln favor of
Lhe laLLer wlLh an alleged undersLandlng LhaL ue la 8ama
reserved Lo hlmself hls proporLlonaLe equlLy ln Lhe war damage
beneflLs due on hls 140 shares whlch Ledesma promlsed Lo
dellver Lo hlm upon paymenL by Lhe lorelgn Clalm SeLLlemenL
Commlsslon of Lhe unlLed SLaLes. new cerLlflcaLes of sLock were
lssued ln Lhe name of Ledesma.
! March 20, 1963 ! Lhe corporaLlon recelved a flnal paymenL of
lLs war damage clalm, and Lhe 8oard of ulrecLors passed a
resoluLlon dlsLrlbuLlng Lhe flnal paymenL recelved by sald
corporaLlon among lLs sLockholders.


"#$%&''& #((& )* +,-.&"&/
o When Ledesma recelved Lhe dlvldends perLalnlng Lo hls
LoLal shareholdlng lncludlng Lhe 140 shares he had
purchased from ue la 8ama, Lhe laLLer demanded from
Lhe former Lhe reLurn and dellvery Lo hlm of hls
correspondlng share ln Lhe clalm ln quesLlon.
! Ledesma refused and ue la 8ama flled sub[ecL complalnL
! Ledesma avers:
o 1haL Lhe lndorsemenL by ue la 8ama of Lhe SLock
CerLlflcaLe ln quesLlon wlLhouL quallflcaLlon or condlLlon
consLlLuLed Lhe sole and excluslve conLracL beLween Lhe
parLles
o 1o allow ue la 8ama Lo prove any alleged slmulLaneous
oral agreemenL would run counLer Lo Lhe arol Lvldence
8ule and Lhe SLaLuLe of lrauds.
o 1he unpald balance on Lhe sald corporaLlon's war
damage clalm aL Lhe Llme ue la 8ama sold hls
shareholdlngs belonged Lo Lhe corporaLlon lLself and
noL Lo lLs sLockholders and so was Lhe flnal paymenL
whlch was pald Lo Lhe corporaLlon lLself, for lLs 8oard of
ulrecLors Lo do whaL lL deemed besL.
! ue La 8ama avers:
o 1he War uamage aymenL made by Lhe governmenL of
Lhe unlLed SLaLes Lo clalmanLs ln Lhe hlllpplnes who
suffered losses durlng World War ll ls noL a proflL of Lhe
CorporaLlon whlch can be dlsLrlbuLed as dlvldends, Lhe
use and dlsposlLlon of sald funds as speclfled by Lhe
hlllpplne 8ehablllLaLlon AcL of 1946 are reserved for
Lhose who suffered losses durlng Lhe war llke hlmself.
o 1he SLaLuLe of lrauds applles only Lo LxecuLory
ConLracLs, and noL Lo parLlally or fully consummaLed.
o 1he lnsLanL case ls exempLed from Lhe arol Lvldence
8ule slnce Lhe wrlLlng falls Lo express Lhe Lrue lnLenL
and agreemenL of Lhe parLles.

ISSULS 1C 8L kLSCLVLD:
1. WheLher or noL Lhe alleged verbal agreemenL of Lhe parLles
concernlng plalnLlff's reservaLlon of hls rlghL Lo Lhe balance of
Lhe war damage clalm aL Lhe Llme of Lhe sale of hls shares Lo Lhe
defendanL, can be proven by parol evldence under Lhe arol
Lvldence 8ule and Lhe SLaLuLe of lrauds.

kLSCLU1ICNS AND AkGUMLN1S
ISSUL 1 ! nC.

Ma[or o|nt 1: lL ls a well accepLed prlnclple of law LhaL evldence of a
prlor or conLemporaneous verbal agreemenL ls generally noL admlsslble
Lo vary, conLradlcL or defeaL Lhe operaLlon of a valld lnsLrumenL.
(Amerlcan lacLors (hll.) lnc. vs. Murphy 1lre CorporaLlon, eL al. (C.A.)
49 C.C. 189.)
Whlle parol evldence ls admlsslble ln a varleLy of ways Lo
explaln Lhe meanlng of wrlLLen conLracLs, lL cannoL serve Lhe
purpose of lncorporaLlng lnLo Lhe conLracL addlLlonal
conLemporaneous condlLlons whlch are noL menLloned aL all ln
Lhe wrlLlng, unless Lhere has been fraud or mlsLake. (?u 1ek &
Co. v. Conzales, 29 hll. 384.)
lndeed, Lhe excepLlons Lo Lhe rule do noL apply ln Lhe lnsLanL
case, Lhere belng no lnLrlnslc amblgulLy or fraud, mlsLake, or
fallure Lo express Lhe Lrue agreemenL of Lhe parLles.
o lf lndeed Lhe alleged reservaLlon had been lnLended,
buslnessmen llke Lhe parLles would have placed ln
wrlLlng such an lmporLanL reservaLlon.

IINAL VLkDIC1: Appeal denled.

NC SLAkA1L CINICNS