Cu v. Court of Appeals
REITERATIONFacts
The Antecedents: Vicente Cu, doing business as Camaro Enterprises, registered the trademark "McGill's & Devices." On February 9, 1971, Cu sold his business, including the trademark, to Braulio Abad for P150,000.00. The contract stipulated that Cu would receive a 1% royalty on gross sales of paints and allied products. Abad later organized Camaro Paint Manufacturing Enterprises, Inc. (Camaro) and transferred his rights to it. Camaro used the "McGill's" trademark, with inscriptions indicating a formula provided by John Meek & Associates and a license from Camaro Enterprises. Due to a requirement to prove foreign tie-ups, Abad requested Cu for documentation of the tie-up with Meek & Associates, threatening to withhold royalty payments. Cu did not reply, but Camaro's financial statements showed provisions for Cu's royalties. Abad then assigned his rights to Camaro. Cu, through a special power of attorney, demanded payment of royalties. Abad responded, stating the royalty was for Cu's services in securing registration papers and licenses from Meek & Associates, which was a verbal agreement not included in the written contract. Cu's representative and Abad failed to reach an agreement, leading Cu to file a complaint for accounting and payment of royalties. Procedural History: The Court of First Instance of Rizal ruled in favor of Cu, ordering defendants (Abad and Camaro) to pay P33,000.62 in royalties, render accountings, and pay P10,000.00 for attorney's fees. The Intermediate Appellate Court (IAC) initially affirmed this decision. However, upon motion for reconsideration by Abad and Camaro, the IAC reversed its decision, dismissing Cu's complaint and ordering Cu to refund P80,000.00 to Abad and Camaro, plus attorney's fees and costs, finding that Cu employed fraud and misrepresentation. Cu filed a motion for reconsideration, which the IAC denied. Cu then filed a petition for review on certiorari with the Supreme Court. The Petition: Vicente Cu sought the reversal of the IAC's resolution, raising two issues: (a) whether the IAC's May 31, 1984 decision had become final and executory, and (b) whether the IAC erred in concluding that Cu employed fraud and misrepresentation that vitiated the contract.
Issue(s)
Whether the Intermediate Appellate Court's decision dated May 31, 1984, had become final and executory. Whether the Intermediate Appellate Court erred in finding that the consent of respondent Abad to the contract of February 11, 1971, was vitiated by fraud and misrepresentation.
Ruling
The Supreme Court reversed and set aside the resolutions of the respondent court dated September 18, 1985, and July 30, 1986, and reinstated the decision of May 31, 1984. Costs were against the private respondents.
Ratio Decidendi
On the issue of the finality of the May 31, 1984 decision: The Court found it unnecessary to delve deeply into the first issue regarding the finality of the decision. It noted that the ruling in Habaluyas vs. Japson, which held that the 15-day period to file a motion for reconsideration cannot be extended, was given prospective application. Therefore, it would only apply after June 30, 1986. Since the motions for extension of time in the present case were filed before this date, the strict enforcement of the Habaluyas ruling had not yet commenced. The Court deemed it more in the interest of justice to proceed to the second issue, which it found to be meritorious, rather than to be detained by the procedural technicality of the finality of the earlier decision. On the issue of fraud and misrepresentation: The Court held that the private respondents failed to establish their allegations of fraud by clear and convincing evidence, which is the required quantum of proof for such claims. The written contract of sale, dated February 11, 1971, is the law between the parties and is presumed to contain all their agreements. The parol evidence rule, as embodied in Section 7, Rule 130 of the Rules of Court, prohibits the introduction of evidence of terms not found in the writing, unless the validity of the agreement is put in issue or there is an intrinsic ambiguity. The respondents' claim that the contract did not express the true intent of the parties due to alleged unincorporated stipulations regarding a tie-up with Meek & Associates was not supported by convincing evidence. The evidence presented, such as the indorsement from the Philippine Vice-Consul and a certification from the Quezon City Mayor's Office, did not bolster their claim. Furthermore, Abad's admission that the "necessity" of the contract with Meek & Associates only became apparent after the issuance of Presidential Decree No. 49, and the contradictory testimonies regarding the value of "goodwill," indicated that the allegations of fraud and non-inclusion of true intent were likely afterthoughts to evade the royalty obligation. The Court concluded that the 1% royalty was the consideration for the continued use of the trademark and formula, as stated in the written contract, and that the respondents' attempt to nullify this stipulation by alleging fraud was unsubstantiated.
Main Doctrine
The parol evidence rule prohibits the introduction of evidence of prior or contemporaneous agreements that contradict the terms of a written contract, unless the validity of the agreement is put in issue by the pleadings or there is an intrinsic ambiguity. Allegations of fraud must be established by clear and convincing evidence, and mere preponderance of evidence is insufficient.