G.R. No. 170782 - Siain Enterprises, Inc. vs. Cupertino Realty Corp.

On April 10, 1995, petitioner Siain Enterprises, Inc. (Siain) obtained a loan of ₱37,000,000.00 from respondent Cupertino Realty Corporation (Cupertino), evidenced by a promissory note signed by Siain’s and Cupertino’s respective presidents.
The loan was arranged with an escrow agreement whereby the proceeds were deposited with Metropolitan Bank & Trust Company to settle Siain’s obligation to Development Bank of the Philippines (DBP).
To secure the loan, Siain executed a real estate mortgage covering two parcels of land and other immovable properties, including equipment and machineries.

Two days later, on April 12, 1995, the parties executed an amendment to the promissory note, which provided for a 17% per annum interest rate on the ₱37,000,000.00 loan.
On August 16, 1995, a second promissory note was executed in favor of Cupertino for ₱160,000,000.00.

This note was signed by Siain’s president on behalf of the corporation and in her personal capacity as co-maker.
The note provided for a compounding interest rate of 30% per annum, conditions for acceleration in default, a penalty of 3% per month on the unpaid balance, and an additional attorney’s fee provision.
It required supplementary collateral documentation, including a pledge of shares.

Concurrently with the second promissory note, an amendment to the real estate mortgage was executed.

The amendment increased the secured loan amount from ₱37,000,000.00 to ₱197,000,000.00.
It was designed to reflect the total indebtedness which incorporated the additional ₱160,000,000.00 loan increase.
All other terms and conditions of the original mortgage were confirmed, ratified, and remained in full force.

On March 11, 1996, petitioner, through counsel, demanded that Cupertino release the ₱160,000,000.00 loan proceeds, contending non-receipt.
A subsequent demand was made on May 17, 1996; however, Cupertino denied any failure on its part, asserting that petitioner had received the loan amount.
Cupertino then initiated extrajudicial foreclosure proceedings over the mortgaged properties.
Petitioner filed a complaint seeking an injunction to stop the notarial auction sale scheduled on October 11, 1996, conducted by Notary Public Edwin R. Catacutan.

At the RTC, both parties presented conflicting claims and documentary evidence regarding the receipt or non‑receipt of the ₱160,000,000.00 loan proceeds.
Petitioner argued that it never actually received the additional proceeds and maintained that the amended mortgage did not accurately reflect the agreed terms.
Conversely, Cupertino produced evidence of partial payments, checks, debit memos, and other documents which indicated that petitioner had indeed received the loan proceeds through its affiliated companies.
The parties also discussed the application of the parol evidence rule and the potential for piercing the corporate veil in order to account for the transactions between petitioner and its affiliate corporations.

Whether petitioner’s claim that it did not receive the additional ₱160,000,000.00 (and hence the amended real estate mortgage was void) is supported by sufficient evidence.
Whether there was a valid and effective consideration underlying the amendment to the real estate mortgage and the issuance of the second promissory note.
Whether the extrajudicial foreclosure, as instituted by Cupertino, was legally justified given the parties’ conflicting evidence regarding receipt of the proceeds.
Whether the lower courts erred in applying the doctrine of “piercing the veil of corporate fiction” to hold petitioner accountable for the transaction, despite its attempt to disavow receipt of funds through its corporate affiliates.