A deed's operative clause conveys the grantor's 'entire interest,' while a separately attached inventory initialed by both parties expressly lists and excludes Lot A. In a specific-performance action, the grantor testifies that the inventory was accidentally prepared by a third party. Should the inventory be treated as part of the deed or as extrinsic evidence, and may parol testimony override the exclusion?

Summary

The inventory will ordinarily be treated as incorporated into and operative upon the deed if the deed identifies it as an attached schedule, especially because both parties initialed it. In that case, “the grantor’s entire interest” means the grantor’s entire interest only in the properties covered by the schedule, with Lot A excluded as a specific limitation.

The grantor’s testimony that a third party accidentally prepared the inventory does not, by itself, override that exclusion. Oral or parol evidence may be received upon a substantial showing of ambiguity, mutual mistake, or material drafting error, but proving merely that a drafter was careless is insufficient. The proper remedy would ordinarily be reformation or rescission, not judicial rewriting of the deed in a mere specific-performance case.

Backgrounder and governing principles

1. An attached inventory may be incorporated by reference

The technical question is not simply whether the inventory is physically separate. It is whether it was intended by the parties to form part of the written conveyance. Relevant indicators include:

1. Whether the deed expressly refers to the inventory—e.g., “the properties listed in the attached inventory, made integral part hereof”;
2. Whether the inventory is identified with reasonable certainty;
3. Whether it existed when the deed was executed;
4. Whether both parties signed or initialed it; and
5. Whether the deed cannot be understood properly without it.

An attached and bilaterally initialled inventory, particularly when the deed uses it to identify the covered properties, will usually satisfy these requirements. Although physically separate, it becomes legally part of the operative instrument.

If, however, the deed independently and completely identifies the property and makes no reference to the inventory, the inventory may remain merely extrinsic or explanatory. Physical attachment and initials are persuasive, but they do not conclusively establish incorporation if the deed’s words demonstrate a contrary intention.

2. “Entire interest” does not necessarily mean all property owned by the grantor

“Entire interest” ordinarily describes the quantum of the estate or interest transferred, not the geographical scope of the conveyance. Thus:

“Entire interest in the properties listed in the inventory, expressly excluding Lot A”

is reasonably harmonized as:

“The grantor’s whole interest in every listed property, but not Lot A.”

A specific exclusion ordinarily qualifies a general grant. Under Article 1157, Civil Code of the Philippines, apparently inconsistent terms should be harmonized so that each term retains meaning. Here, “entire interest” and the exclusion can coexist.

Effect of the parol-evidence rule

Under Section 21 of the Revised Evidence Act (RA No. 3049), a written agreement is ordinarily the entirety of its contents and cannot be contradicted by previous or contemporaneous oral statements. Likewise:

• Civil Code Article 1156 directs courts not to add, omit, or modify terms that have a plain meaning;
• Article 1159 gives primacy to the written contents of an agreement; and
• Section 23 of RA No. 3049 permits evidence of an evident intention different from the literal wording when the instrument is ambiguous on its face or the apparent meaning resulted from mistake or accident.

Therefore, the inventory’s exclusion cannot be displaced merely by the grantor’s assertion that a third person prepared it carelessly. The grantor’s initials or signature create a strong presumption that he adopted the schedule as part of the conveyance.

There is an important distinction between admissibility and effect:

• Testimony may be admissible to show that the instrument does not reflect the parties’ actual agreement.
• But once admitted, it does not automatically prevail over the writing.
• The party asserting mistake ordinarily must demonstrate the shared intention or another legally sufficient basis for reformation, and courts require clear and convincing evidence for reformation.

Could mutual mistake nevertheless justify relief?

Yes, but only on a substantially stronger evidentiary showing. Article 1159 allows oral evidence concerning:

• an omitted essential term;
• a mistake by both parties;
• a material mistake by one party; or
• mistake regarding the instrument’s legal effect.

A third party’s accidental preparation is not, without more, a mistake by the contracting parties. The evidence must establish that the parties actually intended to include Lot A, or that the parties agreed to a different property identification and the written schedule inaccurately stated it.

Relevant corroborating evidence may include:

• the original sale negotiations or closing instructions;
• drafts and revisions of the inventory;
• correspondence concerning the parcels;
• payment and price-allocation records;
• prior tax declarations, titles, or subdivision documents;
• testimony of the drafter and the person who supplied the list;
• whether the grantor separately valued, mortgaged, or retained Lot A; and
• whether the grantee knew of and relied on the exclusion before closing.

A unilateral mistake is less likely to support reformation where the grantor was negligent in reviewing the schedule, or where the grantee knew, should have known, or relied on the exclusion. Article 1160—construction against the party who caused or furnished an ambiguity—might be considered only if genuine ambiguity remains; a self-serving claim that a drafter erred does not automatically establish such ambiguity.

Result in a specific-performance action

A court ordinarily should not reform or add Lot A merely because the grantor now says the inventory was accidentally prepared. It must follow the property legally conveyed by the deed.

Accordingly:

1. If the inventory was incorporated into the deed: Lot A is excluded, and a claim for specific performance of its conveyance should ordinarily be denied.
2. If the inventory was not incorporated: it may be received as extrinsic evidence only if “entire interest” is ambiguous or the deed otherwise requires explanation. Even then, it cannot simply contradict a definite property description.
3. If mutual mistake is clearly proven: the grantee may plead reformation of the deed or, where appropriate, rescission under Article 1335, Civil Code. Specific performance would ordinarily follow the corrected instrument after reformation.
4. If the parties treated Lot A as excluded in the price, closing, possession, and title proceedings, the buyer may face an inconsistency or election problem in later demanding it.

Critical questions

The legal result would materially change if further facts showed that:

• the deed expressly states that the annexed inventory is “part and parcel” of the conveyance;
• Lot A appears in the deed’s own property description despite being excluded from the inventory;
• both parties affirmatively testify that Lot A was supposed to be included;
• the grantee did not know of or rely on the exclusion; or
• the grantor and grantee divide the price among the listed parcels and Lot A was retained deliberately.

Would those facts establish mutual mistake, or merely a unilateral error attributable to the grantor? Could a reformation remedy be imposed without unfairly prejudicing the grantee or third persons who relied on the recorded deed?

Practical recommendation

Counsel should examine the complete deed, its incorporation clause, the notarization, payment records, and closing correspondence. If reformation is contemplated, the pleading should expressly allege mutual or material mistake, explain why the instrument fails to express the true agreement, and present corroborating evidence; it should not rest on the grantor’s unsupported testimony.

As a drafting safeguard, future conveyances should identify the inventory as “Annex A, attached, incorporated by reference, and made part of this Deed,” initial every page, and specify which instrument controls in case of discrepancy.