G.R. No. L-62741 May 29, 1987
FILIPINAS MANUFACTURERS BANK, plaintiff-appellee,
vs.
EASTERN RIZAL FABRICATORS, defendant-appellant.
Emerito M. Salva & Associates for plaintiff-appellee.
Eulogio E. Gatdula for 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
P370,000.00 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 that 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
successor-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 judgement 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
in turn be applied to the satisfaction of appellant's indebtedness 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 entered 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 not file 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.
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. 1. Hirst Enterprises, Inc., 267 F2d 414.
9 Wigmore at P. 131.
10 Canuto v. Mariano, supra, at p. 843.
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