Case Summary (G.R. No. 126006)
Key Dates and Loan Instruments
Four loans were obtained by Elias Q. Tan in 1977, each evidenced by promissory notes originally for P100,000. The promissory notes and corresponding maturity dates and amounts as of January 23, 1979, were: BD No. 504 (Nov. 7, 1977; mature Feb. 5, 1978) — P123,377.76; BD No. 621 (Nov. 28, 1977; mature Mar. 28, 1978) — P123,411.10; BD No. 716 (Dec. 12, 1977; mature Apr. 11, 1978) — P122,322.21; BD No. 839 (Jan. 5, 1978; mature May 5, 1978) — P120,455.54. Aggregate obligation as of January 23, 1979: P493,566.61.
Factual Background
Petitioner Tan executed the loan documents and, according to the parties’ trial submissions, the loans were to be repaid from proceeds of Tan’s shares in Lapulapu Industries Corporation. The promissory notes were described as automatically renewable (“rolled-over”) annually until paid from those proceeds. The Foundation denied incurring the indebtedness and alleged Tan acted in his personal capacity without authority from the Foundation; Tan admitted the loans but claimed they were personal and that there was an unwritten arrangement for renewal and payment from his stock proceeds. Allied Banking asserted default and mailed two demand letters dated January 3 and January 30, 1979.
Procedural Posture and Pleadings
Allied Banking filed suit in the RTC for payment of P493,566.61, exclusive of interest and other charges. Lapulapu Foundation denied liability and interposed a cross-claim against Tan for exceeding authority and a counterclaim against the Bank for damages and attorneys’ fees. Tan admitted personal contracting but maintained the unwritten repayment arrangement. Allied Banking relied on the promissory notes and demand letters. Registry return cards purporting to show receipt of the demand letters were introduced at trial.
Trial Court Ruling
The RTC found in favor of Allied Banking and ordered Tan and Lapulapu Foundation jointly and solidarily to pay P493,566.61 as principal, plus interest at 14% per annum from January 24, 1979, 2% service charges, 1% monthly penalty charges, attorney’s fees equal to 25% of the total amount due, litigation expenses of P1,000, and costs.
Court of Appeals Ruling
The Court of Appeals affirmed the RTC with modification: it deleted the award of attorney’s fees for lack of basis. The CA disbelieved Tan’s claim that the loans were strictly personal because the promissory notes and accompanying documents on their faces showed obligations of the Foundation “as contracted by [Tan] in his official and personal character.” The CA applied the parol evidence rule to reject any alleged unwritten renewal/payment agreement and relied on registry return cards—and Rule 131 presumption—to conclude that demand was made prior to suit. The CA also pierced the corporate veil, finding Tan had represented himself as president, opened accounts and signed documents for the Foundation, and that the Foundation had allowed him to act as if he had authority; hence both Tan and the Foundation were solidarily liable.
Issues Raised in the Petition for Review
Petitioners argued that (1) the CA erred in holding the loans already due and demandable because there was no prior demand (they denied receiving the demand letters); and (2) the CA improperly applied the parol evidence rule and the doctrine of piercing the veil of corporate entity to impose joint and solidary liability.
Analysis — Demandability and Presumption of Receipt by Mail
The Court accepted the CA’s treatment of the registry return cards as documentary evidence entitled to the rebuttable presumption that registered mail duly directed and mailed was received in the regular course of the mail (Rule 131, Sec. 3[V]). Petitioners’ bare denial and Tan’s claim of non-recognition of signatures were held insufficient to overcome that presumption. The Court emphasized the absence of any showing that the addresses were incorrect or any clear and convincing evidence negating receipt. Consequently, the demand letters—Exhibits R and S—and their registry return cards established prior demand and supported the conclusion that the matured promissory notes were due and demandable before suit.
Analysis — Parol Evidence Rule and Written Promissory Notes
The Court applied Section 9, Rule 130 (parol evidence rule) of the Revised Rules of Court: when terms of an agreement are reduced to writing, the written instrument contains all agreed terms, and extrinsic contemporaneous oral agreements cannot vary the written terms except under limited circumstances (intrinsic ambiguity, mistake, failure to express true intent, validity, or subsequent terms). The promissory notes explicitly stated maturity dates (Feb. 5, 1978; Mar. 28, 1978; Apr. 11, 1978; May 5, 1978) and contained no provision for annual renewal or payment from Tan’s stock proceeds. Because petitioners did not allege fraud or mistake or any of the specified exceptions, the alleged unwritten renewal/payment agreement could not be admitted to vary the clear terms of the written promissory notes.
Analysis — Corporate Veil, Apparent Authority, and Estoppel
The Cou
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Citation, Panel, and Relief Sought
- Reported in 466 Phil. 53, Second Division, G.R. No. 126006; decision rendered January 29, 2004.
- Petitioners: Lapulapu Foundation, Inc. and Elias Q. Tan.
- Respondents: Court of Appeals (Seventeenth Division) and Allied Banking Corporation.
- Relief sought: Petition for review on certiorari to reverse and set aside the Court of Appeals Decision dated June 26, 1996 in CA‑G.R. CV No. 37162 ordering petitioners jointly and solidarily to pay Allied Banking Corporation P493,566.61 plus interest and other charges; and to set aside the Court of Appeals Resolution dated August 19, 1996 denying the petitioners’ motion for reconsideration.
- Decision below penned by Associate Justice Delilah Vidallon‑Magtolis with Associate Justices Quirino D. Abad Santos and Artemio G. Tuquero concurring; Supreme Court opinion authored by Justice Callejo, Sr.; concurrence by Puno (Chairman), Quisumbing, Austria‑Martinez, and Tinga, JJ.
Relevant Chronology and Procedural Posture
- Loans obtained: beginning in 1977; promissory notes dated November 7, 1977; November 28, 1977; December 12, 1977; and January 5, 1978, with maturity dates in 1978 (February 5; March 28; April 11; and May 5, respectively).
- As of January 23, 1979, aggregate outstanding obligation: P493,566.61.
- Allied Banking Corporation filed complaint in the Regional Trial Court (RTC) of Cebu City, Branch 15, for payment of P493,566.61 (exclusive of interests, penalty charges, attorney’s fees and costs).
- RTC rendered judgment in favor of plaintiff; CA affirmed with modification (deleted award of attorney’s fees); petitioners filed petition for review on certiorari to the Supreme Court; petition denied and CA decision and resolution affirmed in toto by the Supreme Court on January 29, 2004.
Factual Background — Loans, Documents, and Purported Agreement
- Petitioner Elias Q. Tan, then President of Lapulapu Foundation, Inc., obtained four loans from Allied Banking Corporation, each in amount of P100,000, evidenced by four promissory notes.
- Promissory notes showed maturity dates and amounts as of January 23, 1979:
- BD No. 504 — P/N dated Nov. 7, 1977, maturing Feb. 5, 1978 — P123,377.76.
- BD No. 621 — P/N dated Nov. 28, 1977, maturing Mar. 28, 1978 — P123,411.10.
- BD No. 716 — P/N dated Dec. 12, 1977, maturing Apr. 11, 1978 — P122,322.21.
- BD No. 839 — P/N dated Jan. 5, 1978, maturing May 5, 1978 — P120,455.54.
- Parties agreed that the loans were to be paid from proceeds of petitioner Tan’s shares of common stock in Lapulapu Industries Corporation; loans were documented as automatically renewable (rolled‑over) annually at amounts including unpaid interest until paid from those proceeds — this alleged unwritten arrangement was asserted by petitioner Tan.
- Petitioner Tan alleged bank employee required two signatures on promissory notes and assured him the loan documents would reflect their agreement; after signing, Tan claimed documents were filled out to include Lapulapu Foundation despite his protest.
- Petitioners allegedly received two letters of demand dated January 3, 1979 and January 30, 1979; registry return cards were presented at trial.
Parties’ Pleadings and Claims at Trial
- Plaintiff (Allied Banking Corporation): sought payment by petitioners jointly and solidarily of P493,566.61 representing loan obligation (exclusive of interests, penalties, attorney’s fees, costs).
- Lapulapu Foundation (defendant): denied incurring indebtedness; maintained loans were obtained by Tan personally, for his own use and benefit; alleged no authorization for Tan to co‑sign in his capacity as President; asserted Bank knew loans were personal to Tan and that Foundation did not benefit.
- Lapulapu Foundation filed cross‑claim against Tan alleging he exceeded his authority and should be solely liable; counterclaimed against the Bank for damages and attorney’s fees.
- Elias Q. Tan admitted contracting the loans personally but asserted they were to be paid from sale proceeds of his stock and that an unwritten agreement existed for annual roll‑over until payment.
- Tan also claimed he had signed purportedly blank documents which the bank filled in contrary to their oral agreement and asserted no prior demand had been made before suit.
Documentary and Other Evidence Adduced
- Promissory notes (Exhibits H–L) showing Foundation as party and noting Tan’s contract “in his official and personal capacity.”
- Application for credit accommodation (Exhibit D).
- Signature cards for two accounts in the name of Lapulapu Foundation (Exhibits A and B).
- New Current Account Record (Exhibit C).
- Notarized Secretary’s Certificate (Exhibit G and sub‑exhibits G‑1, G‑2) from the corporation authorizing Tan, inter alia, to sign for and in behalf of Lapulapu Foundation, to transact with the bank, negotiate loans and obtain an initial loan of P100,000.
- Two letters of demand: January 3, 1979 (Exhibit R) and January 30, 1979 (Exhibit S).
- Registry return cards evidencing receipt of those letters (Exhibits R‑2 and S‑1).
Trial Court Ruling (RTC Dispositive Findings and Awards)
- Trial court found preponderance of evidence in favor of plaintiff Allied Banking Corporation and rendered judgment:
- Defendants Elias Q. Tan and Lapulapu Foundation, Inc. to pay jointly and solidarily P493,566.61 as principal obligation for the four promissory notes, including all other charges contained therein.
- Interest at 14% per annum computed from January 24, 1979 until fully paid.
- Plus 2% service char