Benito Legarda y Tuason v. Mariano B. Zarate

Summary

This 1917 Supreme Court case involved a lease contract interpretation dispute over rental calculation methods. Defendant Zarate claimed an oral agreement limiting assessed valuation to P1 per square meter for rental computation, while plaintiff Legarda's estate insisted on contractual terms requiring 10% of current assessed valuation. The Court applied Civil Code contract interpretation principles, particularly Article 1281 requiring literal observance of clear terms. The Court found the lease contract unambiguously specified 10% annual rent based on assessed valuation without limitation, and defendant's prior payment pattern evidenced acceptance of fluctuating valuations. The decision established that clear contractual language cannot be modified by parol evidence of alleged side agreements, reinforcing fundamental contract law principles in Philippine jurisprudence.