LAPULAPU FOUNDATION, INC. and ELIAS Q. TAN vs.

COURT OF APPEALS
(Seventeenth Division) and ALLIED BANKING CORP.
G.R. No. 126006. January 29, 2004
By: Dianne D. Salto

DOCTRINE:

Evidence of a prior or contemporaneous verbal agreement is generally not

admissible to vary, contradict or defeat the operation of a valid contract. While
parol evidence is admissible to explain the meaning of written contracts, it
cannot serve the purpose of incorporating into the contract additional
contemporaneous conditions which are not mentioned at all in writing, unless
there has been fraud or mistake. No such allegation had been made by the
petitioners in this case.

FACTS:

Sometime in 1977, Elias Q. Tan, then President of Lapulapu Foundation, Inc.,

obtained four loans from Allied Banking Corporation covered by four promissory
notes in the amounts of P100,000 each. As of 23 January 1979, the entire
obligation amounted to P493,566.61 and despite demands made on them by the
Bank, Tan and the foundation failed to pay the same. The Bank was constrained to
file with the Regional Trial Court of Cebu City, Branch 15, a complaint seeking
payment by Tan and the foundation, jointly and solidarily, of the sum of
P493,566.61 representing their loan obligation, exclusive of interests, penalty
charges, attorneys fees and costs. In its answer to the complaint, the Foundation
denied incurring indebtedness from the Bank alleging that the loans were
obtained by Tan in his personal capacity, for his own use and benefit and on the
strength of the personal information he furnished the Bank. The Foundation
maintained that it never authorized Tan to co-sign in his capacity as its President
any promissory note and that the Bank fully knew that the loans contracted were
made in Tans personal capacity and for his own use and that the Foundation
never benefited, directly or indirectly, therefrom.

The Foundation then interposed a cross-claim against Tan alleging that he, having
exceeded his authority, should be solely liable for said loans, and a counterclaim
against the Bank for damages and attorneys fees. For his part, Tan admitted that
he contracted the loans from the Bank in his personal capacity. The parties,
however, agreed that the loans were to be paid from the proceeds of Tans shares
of common stocks in the Lapulapu Industries Corporation, a real estate firm. The
loans were covered by promissory notes which were automatically renewable
(rolled-over) every year at an amount including unpaid interests, until such time
as Tan was able to pay the same from the proceeds of his aforesaid shares.
According to Tan, the Banks employee required him to affix two signatures on
every promissory note, assuring him that the loan documents would be filled out
in accordance with their agreement. However, after he signed and delivered the
loan documents to the Bank, these were filled out in a manner not in accord with
their agreement, such that the Foundation was included as party thereto. Further,
prior to its filing of the complaint, the Bank made no demand on him.

RTC RULING: Requiring Tan and the Foundation to pay jointly and solidarily to the
Bank the amount of P493,566.61 as principal obligation for the four promissory
notes including all other charges included in the same, with interest at 14% per
annum, computed from 24 January 1979, until the same are fully paid, plus 2%
service charges and 1% monthly penalty charges.

CA RULING: Affirmed with modification the judgment of the court a quo by

deleting the award of attorneys fees.
ISSUE/S:

a. Whether or not the Court erred in holding that the loans are already due and
demandable despite the absence of prior demand. NO
b. Whether or not the Court erred in applying the Parol Evidence Rule and the
Doctrine of Piercing the Veil of Corporate entity as basis for adjudging joint and
solidary liabilty on the part of petitioners. NO

HELD:

There is no dispute that the promissory notes had already matured. However, the
petitioners insist that the loans had not become due and demandable as they
deny receipt of the respondent Banks demand letters. When presented the
registry return cards during the trial, petitioner Tan claimed that he did not
recognize the signatures thereon. The petitioners allegation and denial are self-
serving. They cannot prevail over the registry return cards which constitute
documentary evidence and which enjoy the presumption that, absent clear and
convincing evidence to the contrary, these were regularly issued by the postal
officials in the performance of their official duty and that they acted in good faith.
Further, as the CA correctly opined, mails are presumed to have been properly
delivered and received by the addressee in the regular course of the mail. As the
CA noted, there is no showing that the addresses on the registry return cards were
wrong. It is the petitioners burden to overcome the presumptions by sufficient
evidence, and other than their barefaced denial, the petitioners failed to support
their claim that they did not receive the demand letters; therefore, no prior
demand was made on them by the respondent Bank.

The Court particularly finds as incredulous petitioner Tans allegation that he was
made to sign blank loan documents and that the phrase IN MY
OFFICIAL/PERSONAL CAPACITY was superimposed by the respondent Banks
employee despite petitioner Tans protestation. The Court is hard pressed to
believe that a businessman of petitioner Tans stature could have been so careless
as to sign blank loan documents.

In contrast, as found by the CA, the promissory notes clearly showed upon their
faces that they are the obligation of the petitioner Foundation, as contracted by
petitioner Tan in his official and personal capacity. Moreover, the application for
credit accommodation, the signature cards of the two accounts in the name of
petitioner Foundation, as well as New Current Account Record, all accompanying
the promissory notes, were signed by petitioner Tan for and in the name of the
petitioner Foundation. These documentary evidence unequivocally and
categorically establish that the loans were solidarily contracted by the petitioner
Foundation and petitioner Tan.

As a corollary, the parol evidence rule likewise constrains this Court to reject
petitioner Tans claim regarding the purported unwritten agreement between him
and the respondent Bank on the payment of the obligation.

Section 9, Rule 130 of the of the Revised Rules of Court provides that: [w]hen
the terms of an agreement have been reduced to writing, it is to be considered
as containing all the terms agreed upon and there can be, between the parties
and their successors-in-interest, no evidence of such terms other than the
contents of the written agreement.

Evidence of a prior or contemporaneous verbal agreement is generally not

admissible to vary, contradict or defeat the operation of a valid contract. While
parol evidence is admissible to explain the meaning of written contracts, it cannot
serve the purpose of incorporating into the contract additional contemporaneous
conditions which are not mentioned at all in writing, unless there has been fraud
or mistake. No such allegation had been made by the petitioners in this case.