G.R. No. 62741. May 29, 1987
FILIPINAS MANUFACTURERS BANK, PLAINTIFF-APPELLEE, VS. EASTERN RIZAL FABRICATORS, DEFENDANT-APPELLANT.
FERNAN, J.:
This appeal was certified
by the Appellate Court to this Court, the question involved being purely
legal. That question concerned the propriety of a judgment on the
pleadings.
On March 2, 1979,
Filipinas Manufacturers Bank [the surviving bank after a merger with the
Filipinas Bank and Trust Co.] filed in the Court of First Instance of Rizal, Pasig branch, a complaint against Eastern Rizal Fabricators.
It alleged inter alia that
defendant Eastern Rizal Fabricators had executed on
July 30, 1976, a promissory note
for P370,000 evidencing a money market loan, with interest thereon at the rate
of 14% plus 2% handling fee per annum until paid; that among the terms and
conditions of said promissory note was that the interest not paid when due
would be added to and become part of the principal, the same to be computed
monthly and would bear the same rate of interest as the principal and an
additional sum equivalent to 10% of the amount due as and for attorney’s fees;
that the note matured on August 30, 1976; and that despite repeated demands,
defendant refused to pay without any valid and legal grounds.[1]
In its answer, defendant
admitted its indebtedness but interposed the special and affirmative defense
that the action by plaintiff bank was premature because the latter had
agreed to forbear collection of the note at least “until arrival of the
aforesaid date [not later than 180 banking days from December 2, 1978] when
defendant will be receiving payment which will be applied to the satisfaction
of defendant’s indebtedness to plaintiff”.[2]
Defendant expected to recover about P300,000.00 from Jose Lecaros
Abel, its supplier of scrap metals.
Thereupon, plaintiff
filed a motion for judgment on the pleadings on the grounds that defendant’s
answer admitted the material allegations of the complaint and that it failed to
tender an issue. Amplifying on its
motion, plaintiff maintained that the affirmative defense that plaintiff,
through its president, had agreed to postpone the enforcement of the note is
untenable. It is contrary to the parol evidence rule which provides that when the terms of
an agreement had been reduced to
writing, it is to be considered
as containing all such terms and therefore there can be, as between the parties
and their successors-in-interest, no evidence of the terms of the agreement
other than the contents of the writing itself.[3]
Plaintiff also noted that
it is “unthinkable” for the bank to have agreed to defer collection
of the obligation until after 180 banking days from December 2, 1978 which is “two years and four months
after the promissory note has matured”.
Plaintiff stressed that
it is not privy to any alleged compromise agreement between defendant and its
supplier. Its main concern is the
settlement of defendant’s money market loan which is long overdue.
On July 23, 1979,
despite defendant’s opposition, the trial court issued the challenged order
granting plaintiff’s motion for judgment on
the pleadings. It ordered defendant
Eastern Rizal Fabricators to pay to plaintiff
Filipinas Manufacturers Bank the sum of P370,000.00 plus interest at 14% per
annum and 2% as handling damages with additional 10% of the principal
obligation as attorney’s fees and to pay the costs of the suit.[4]
As earlier stated, defendant Eastern Rizal
Fabricators appealed the judgment to the Appellate Court which in turn
certified the case to this Court on a pure question of law.[5]
In its brief, defendant-appellant Eastern Rizal
Fabricators argues that the lower court erred in rendering a judgment on the
pleadings because the question of whether or not appellee
bank had agreed to forbear collection on the note was an issue which required a
hearing.
Appellant avers that it had borrowed P370,000.00 from plaintiff-appellee bank to make an advance payment for scrap metals
purchased from Jose Lecaros Abel. Abel failed to deliver the entire
merchandise. Appellant sued Abel for the
return of the advance payment. They subsequently entered into a compromise
agreement which the court approved. In
that agreement, Abel promised to pay appellant the amount due not later than
180 banking days from December 2, 1978. Appellee bank had been made aware of that compromise and in
fact it agreed to forbear collection of the promissory note until such time
when appellant would receive payment which would turn be applied to the
satisfaction of appellant’s in debtedness to appellee bank.[6]
On its part, appellee bank belies the existence of any agreement to
defer enforcement of the loan transaction and argues that even assuming there
was such an agreement, it did not constitute a genuine defense sufficient to defeat
the complaint.
The lower court, in rendering
judgment on the pleadings, upheld appellee’s
contention that it would be a mistake to receive evidence as to the alleged
verbal understanding because it would be permitting parol
evidence to alter or vary a written contract. It
will be borne in mind that appellant’s
claimed understanding with the appellee was
purportedly entitled into after the appellant had encountered financial
difficulties in paying the loan.
The lower court is in
error. The parol
evidence rule which prohibits the admission of oral evidence to vary or
contradict a written contract does not apply to or prohibit a subsequent
modification by parol evidence.[7] In other words, subsequent agreements to
written contracts may be made orally and evidence in reference thereto does not
violate the parol evidence rule.[8]
Wigmore illustrates: Where a document,
for example, is executed on July 1, it may be held to embody the final and
exclusive result of negotiations before and up to the time of execution; but a
transaction on August 1 must be a separate one and therefore can never be excluded,
so far as the effect of the document of July 1 is concerned. It may be that some rule or form may make
that transaction of August 1 invalid but the present rule can interpose no
obstacle.[9]
The reason for the rule
is fundamental. The parties cannot be
presumed to have intended the written instrument to cover all their possible
subsequent agreements. Moreover, parol evidence does not in any way deny that the original
agreement was that which the writing purports to express, but merely shows that
the parties have exercised their right to change or abrogate their original
understanding or to make a new and independent one. It makes no difference how soon after the
execution of the written contract the parol one was
made. If it was in fact subsequent and
is otherwise unobjectionable, it may be proved and enforced.[10]
The inescapable
conclusion therefore is that the judgment on the pleadings was improper.
Appellant’s defense of forbearance
indubitably raised a material issue
which could not be simply
brushed aside without the presentation of evidence. Reversal of the judgment and remand of the
case to the court of origin for hearing on the merits
should follow as a matter of course.
Considering however that
this case has remained pending for almost a decade now, so that even the
claimed forbearance has long lapsed, there was marked reluctance among the
members of the Court to remand the case to the court below. A consensus was therefore reached to seek a
more expeditious manner to resolve the case.
The parties were required to inform the Court whether or not the loan
of P370,000.00, which is the subject
matter of the present dispute,
was still outstanding and if no full payment has been made, to submit memoranda
substantiating their respective allegations concerning the defense of
forbearance. The appellant complied and
submitted its memorandum, stating in part that it still had “an outstanding
balance of P230,000.00 on its aforesaid account” with the appellee bank. It
reiterated its prayer that the judgment complained of be reversed. The appellee
bank did no title its memorandum despite notices sent to its counsel of record.
Appellee bank’s unexplained inaction has left us with
no other recourse but to order the appellant to discharge its debt to the
admitted amount of P230,000.00.
Remanding the case to the court of origin merely to ascertain whether
there was in fact a prior agreement to defer payment on the promissory note
will serve no useful purpose and will only delay the termination of this
case. By its silence we can assume that
the appellee bank has no objections to the amount owing,
as acknowledged by the appellant.
WHEREFORE, the assailed judgment is hereby set aside for
being inappropriate. Appellant Eastern Rizal Fabricators is ordered to pay appellee
Filipinas Manufacturers Bank the sum
of P230,000.00 plus interest at
14% per annum computed from July 30, 1976, 2% of the principal obligation as
handling damages and 10% of the total amount due as attorney’s fees in full
settlement of the loan in question.
This decision is
immediately executory.
SO ORDERED.
Gutierrez, Jr., Paras, Padilla, Bidin, and Cortes,
JJ., concur.
[1]
pp. 3 and 25, Record on Appeal.
[2]
p. 6, Record on Appeal.
[3]
Rule 130, Section 7, Rules of Court.
[4]
p, 19, Record on Appeal.
[5]
p. 20, Record.
[6]
pp. 5-6, Appellant’s Brief.
[7]
Elliott-Lewis Corp. v. York-Shipley, Inc., 372 P. 346, 94 Atl. 2d 47;
Marx v. King, 162 Mich,
258, 127 N.W. 341; Canuto v. Mariano, 37 Phil.
840.
[8]
Morrison v. Kaufman, 156 P2d 473; Burlesque Artists Assoc. v. I. Hirst Enterprises, Inc., 267 F2d 414.
[9]
Wigmore at p. 131
[10]
Canuto v. Mariano; supra, at p. 843