SHEMBERG CO. v. CITIBANK, G.R. No. 216029, September 04, 2019, RULE 130, SECTION 10. PAROL EVIDENCE RULE

  RULE 130, SECTION 10. PAROL EVIDENCE RULE

SHEMBERG CO. v. CITIBANK, G.R. No. 216029, September 04, 2019

INTING, J.:

FACTS: Shemberg Marketing Co. (Shemberg) executed a real estate mortgage in favor of Citibank to secure loan of P28M.  Citibank sent a demand letter to pay its outstanding balance of US$390k under Promissory Note; otherwise, it would be forced to initiate foreclosure proceedings. Shemberg defaulted. Citibank commenced the extra-judicial foreclosure of the mortgaged properties. Upon learning of the foreclosure sale, Shemberg filed a Complaint for rescission or declaration of nullity of the contract of real estate mortgage against Citibank. Shemberg alleged that Citibank required Shemberg to execute a real estate mortgage for the increase and renewal of its credit line. However, despite the execution of the mortgage, Citibank refused to renew and increase Shemberg's credit line. Shemberg asserted that the real estate mortgage was void for lack of consideration, given Citibank's failure to comply with its commitment to renew and increase its credit line with the bank. Citibank countered that it required the execution of the real estate mortgage in order to provide additional security/collateral to augment Shemberg's subsisting chattel mortgage. 

RTC declared the real estate mortgage void for lack of consideration due to Citibank's failure to fulfill its commitment to renew Shemberg's credit line with the bank after it expired. Shemberg, however is liable to pay Citibank the amount of P19M, or the peso-equivalent of its US$390k outstanding obligation.

CA reversed RTC and declared the real estate mortgage valid and imposed the stipulated interest on the unpaid balance of Promissory Note. CA found that the real estate mortgage secured Shemberg's present and future obligations with Citibank.

ISSUE: Whether or not the real estate mortgage is indeed valid and binding between the parties.

HELD: YES. The Real Estate Mortgage shows that the real estate mortgage was executed to secure loan accommodations, as well as all past, present, and future obligations, of Shemberg to Citibank. Sec. 9, or the Parol Evidence Rule, "forbids any addition to or contradiction of the terms of a written instrument by testimony purporting to show that, at or before the signing of the document, other terms were orally agreed on by the parties." The terms of a written contract are deemed conclusive between the parties and evidence aliunde is inadmissible to change the terms embodied in the document. This rule, however, is not absolute. A party may present evidence aliunde to modify, explain or add to the terms of a written agreement if he puts in issue in his pleading any of the four exceptions to the Parol Evidence Rule: a. An intrinsic ambiguity, mistake or imperfection in the written agreement; b. The failure of the written agreement to express the true intent and agreement of the parties thereto; c. The validity of the written agreement; or d. The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement.

Here, all the exceptions obviously do not apply. The 1^st and 2^nd, as the real estate mortgage contract clearly stated the terms of the mortgage, leaving no doubt as to the contractual intention of the parties by a mere reading of the document. The 3^rd, since Shemberg's purpose for introducing evidence is not to invalidate the contract but to prove that Citibank had reneged on its commitment to renew and increase its credit line. The 4^th, as it was never alleged that the parties had agreed to other terms after the execution of the real estate mortgage contract. Based on these considerations, the Court sees no cogent reason to overturn the CA's factual findings and conclusions. Simply stated, it is clear that the terms agreed upon in the subject real estate mortgage are binding and conclusive between the parties.