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LapulapuFoundationIncvsCA:126006:January29,2004:J.CallejoSr:SecondDivision:Decision

SECONDDIVISION

[G.R.No.126006.January29,2004]

LAPULAPU FOUNDATION, INC. and ELIAS Q. TAN, petitioners, vs. COURT

OF APPEALS (Seventeenth Division) and ALLIED BANKING CORP.,
respondents
DECISION
CALLEJO,SR.,J.:

Before the Court is the petition for review on certiorari filed by the Lapulapu Foundation,
Inc.andEliasQ.TanseekingtoreverseandsetasidetheDecision[1]datedJune26,1996of
the Court of Appeals (CA) in CAG.R. CV No. 37162 ordering the petitioners, jointly and
solidarily, to pay the respondentAllied Banking Corporation the amount of P493,566.61 plus
interests and other charges. Likewise, sought to be reversed and set aside is the appellate
courtsResolutiondatedAugust19,1996denyingthepetitionersmotionforreconsideration.
Thecasestemmedfromthefollowingfacts:
Sometime in 1977, petitioner Elias Q. Tan, then President of the copetitioner Lapulapu
Foundation,Inc.,obtainedfourloansfromtherespondentAlliedBankingCorporationcovered
byfourpromissorynotesintheamountsofP100,000each.Thedetailsofthepromissorynotes
areasfollows:
P/NNo.DateofP/NMaturityDateAmountasof1/23/79
BDNo.504Nov.7,1977Feb.5,1978P123,377.76
BDNo.621Nov.28,1977Mar.28,1978P123,411.10
BDNo.716Dec.12,1977Apr.11,1978P122,322.21
BDNo.839Jan.5,1978May5,1978P120,455.54[2]
As of January 23, 1979, the entire obligation amounted to P493,566.61 and despite
demandsmadeon themby the respondentBank,thepetitionersfailedtopaythesame.The
respondentBankwasconstrainedtofilewiththeRegionalTrialCourtofCebuCity,Branch15,
acomplaintseekingpaymentbythepetitioners,jointlyandsolidarily,ofthesumofP493,566.61
representing their loan obligation, exclusive of interests, penalty charges, attorneys fees and
costs.
Initsanswertothecomplaint,thepetitionerFoundationdeniedincurringindebtednessfrom
the respondent Bank alleging that the loans were obtained by petitioner Tan in his personal
capacity, for his own use and benefit and on the strength of the personal information he
furnishedtherespondentBank.ThepetitionerFoundationmaintainedthatitneverauthorized
petitioner Tan to cosign in his capacity as its President any promissory note and that the
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respondent Bank fully knew that the loans contracted were made in petitioner Tans personal
capacity and for his own use and that the petitioner Foundation never benefited, directly or
indirectly,therefrom.ThepetitionerFoundationtheninterposedacrossclaimagainstpetitioner
Tanallegingthathe,havingexceededhisauthority,shouldbesolelyliableforsaidloans,anda
counterclaimagainsttherespondentBankfordamagesandattorneysfees.
Forhispart,petitionerTanadmittedthathecontractedtheloansfromtherespondentBank
inhispersonalcapacity.Theparties,however,agreedthattheloansweretobepaidfromthe
proceedsofpetitionerTanssharesofcommonstocksintheLapulapuIndustriesCorporation,a
real estate firm. The loans were covered by promissory notes which were automatically
renewable(rolledover)everyyearatanamountincludingunpaidinterests,untilsuchtimeas
petitionerTanwasabletopaythesamefromtheproceedsofhisaforesaidshares.
According to petitioner Tan, the respondent Banks employee required him to affix two
signaturesoneverypromissorynote,assuringhimthattheloandocumentswouldbefilledout
in accordance with their agreement. However, after he signed and delivered the loan
documentstotherespondentBank,thesewerefilledoutinamannernotinaccordwiththeir
agreement,suchthatthepetitionerFoundationwasincludedaspartythereto.Further,priorto
itsfilingofthecomplaint,therespondentBankmadenodemandonhim.
Afterduetrial,thecourtaquorenderedjudgmentthedispositiveportionofwhichreads:
WHEREFORE,inviewoftheforegoingevidences[sic],argumentsandconsiderations,thiscourthereby
findsthepreponderanceofevidenceinfavoroftheplaintiffandherebyrendersjudgmentasfollows:
1.RequiringthedefendantsEliasQ.TanandLapulapuFoundation,Inc.[thepetitionersherein]topay
jointlyandsolidarilytotheplaintiffAlliedBankingCorporation[therespondentherein]theamountof
P493,566.61asprincipalobligationforthefourpromissorynotes,includingallotherchargesincludedin
thesame,withinterestat14%perannum,computedfromJanuary24,1979,untilthesamearefullypaid,
plus2%servicechargesand1%monthlypenaltycharges.
2.RequiringthedefendantsEliasQ.TanandLapulapuFoundation,Inc.,topayjointlyandsolidarily,
attorneysfeesintheequivalentamountof25%ofthetotalamountduefromthedefendantsonthe
promissorynotes,includingallcharges
3.RequiringthedefendantsEliasQ.TanandLapulapuFoundation,Inc.,topayjointlyandsolidarily
litigationexpensesofP1,000.00pluscostsofthesuit.[3]
Onappeal,theCAaffirmedwithmodificationthejudgmentofthecourt aquo by deleting
theawardofattorneysfeesinfavoroftherespondentBankforbeingwithoutbasis.
TheappellatecourtdisbelievedpetitionerTansclaimthattheloanswerehispersonalloans
asthepromissorynotesevidencingthemshowedupontheirfacesthatthesewereobligations
ofthepetitionerFoundation,ascontractedbypetitionerTanhimselfinhisofficialandpersonal
character.Applyingtheparolevidencerule,theCAlikewiserejectedpetitionerTansassertion
that there was an unwritten agreement between him and the respondent Bank that he would
paytheloansfromtheproceedsofhissharesofstocksintheLapulapuIndustriesCorp.
Further, the CA found that demand had been made by the respondent Bank on the
petitionerspriortothefilingofthecomplaintaquo.Itnotedthatthetwolettersofdemanddated
January3,1979[4]andJanuary30,1979[5]askingsettlementoftheobligationweresentbythe
respondent Bank. These were received by the petitioners as shown by the registry return
cards[6]presentedduringtrialinthecourtaquo.
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Finally, like the court a quo, the CA applied the doctrine of piercing the veil of corporate
entityinholdingthepetitionersjointlyandsolidarilyliable.Theevidenceshowedthatpetitioner
TanhadrepresentedhimselfasthePresidentofthepetitionerFoundation,openedsavingsand
currentaccountsinitsbehalf,andsignedtheloandocumentsforandinbehalfofthelatter.The
CA,likewise,foundthatthepetitionerFoundationhadallowedpetitionerTantoactasthough
hehadtheauthoritytocontracttheloansinitsbehalf.Ontheotherhand,petitionerTancould
notescapeliabilityashehadusedthepetitionerFoundationforhisbenefit.
Aggrieved,thepetitionersnowcometotheCourtallegingthat:
I.THECOURTOFAPPEALSGRAVELYERREDINHOLDINGTHATTHELOANSSUBJECT
MATTER OF THE INSTANT PETITION ARE ALREADY DUE AND DEMANDABLE
DESPITEABSENCEOFPRIORDEMAND.
II. THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE PAROL EVIDENCE
RULE AND THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE ENTITY AS
BASIS FOR ADJUDGING JOINT AND SOLIDARY LIABILITY ON THE PART OF
PETITIONERSELIASQ.TANANDLAPULAPUFOUNDATION,INC.[7]

The petitioners assail the appellate courts finding that the loans had become due and
demandable in view of the two demand letters sent to them by the respondent Bank. The
petitionersinsistthattherewasnopriordemandastheyvigorouslydenyreceivingthoseletters.
AccordingtopetitionerTan,thesignaturesontheregistryreturncardswerenothis.
The petitioners denial of receipt of the demand letters was rightfully given scant
considerationbytheCAasitheld:
ExhibitsRandSaretwolettersofdemand,respectivelydatedJanuary3,1979andJanuary30,1979,
askingsettlementoftheobligationscoveredbythepromissorynotes.ThefirstletterwaswrittenbyBen
TioPengSeng,VicePresidentofthebank,andaddressedtoLapulapuFoundation,Inc.,attentionofMr.
EliasQ.Tan,President,whilethesecondwasafinaldemandwrittenbytheappelleescounsel,addressed
tobothdefendantsappellants,andgivingthemfive(5)daysfromreceiptwithinwhichtosettleor
judicialactionwouldbeinstitutedagainstthem.Bothlettersweredulyreceivedbythedefendants,as
shownbytheregistryreturncards,markedasExhibitsR2andS1,respectively.TheallegationofTan
thathedoesnotknowwhosignedthesaidregistryreturnreceiptsmeritsscantconsideration,forthereis
noshowingthattheaddressesthereonwerewrong.Hence,thedisputablepresumptionthataletterduly
directedandmailedwasreceivedintheregularcourseofmail(perpar.V,Section3,Rule131ofthe
RevisedRulesonEvidence)stillholds.[8]
There is no dispute that the promissory notes had already matured. However, the
petitionersinsistthattheloanshadnotbecomedueanddemandableastheydenyreceiptof
therespondentBanksdemandletters.Whenpresentedtheregistryreturncardsduringthetrial,
petitioner Tan claimed that he did not recognize the signatures thereon. The petitioners
allegationanddenialareselfserving.Theycannotprevailovertheregistryreturncardswhich
constitute documentary evidence and which enjoy the presumption that, absent clear and
convincing evidence to the contrary, these were regularly issued by the postal officials in the
performanceoftheirofficialdutyandthattheyactedingoodfaith.[9]Further,astheCAcorrectly
opined,mailsarepresumedtohavebeenproperlydeliveredandreceivedbytheaddresseein
theregularcourseofthemail.[10]AstheCAnoted,thereisnoshowingthattheaddresseson
theregistryreturncardswerewrong.Itisthepetitionersburdentoovercomethepresumptions
by sufficient evidence, and other than their barefaced denial, the petitioners failed to support
theirclaimthattheydidnotreceivethedemandletterstherefore,nopriordemandwasmade
onthembytherespondentBank.
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Havingestablishedthattheloanshadbecomedueanddemandable,theCourtshallnow
resolve the issue of whether the CA correctly held the petitioners jointly and solidarily liable
therefor.
Indisclaiminganyliabilityfortheloans,thepetitionerFoundationmaintainsthatthesewere
contractedbypetitionerTaninhispersonalcapacityandthatitdidnotbenefittherefrom.Onthe
otherhand,whileadmittingthattheloanswerehispersonalobligation,petitionerTanaversthat
hehadanunwrittenagreementwiththerespondentBankthattheseloanswouldberenewed
on a yeartoyear basis and paid from the proceeds of his shares of stock in the Lapulapu
IndustriesCorp.
Thesecontentionsareuntenable.
TheCourtparticularlyfindsasincredulouspetitionerTansallegationthathewasmadeto
signblankloandocumentsandthatthephraseINMYOFFICIAL/PERSONALCAPACITYwas
superimposed by the respondent Banks employee despite petitioner Tans protestation. The
CourtishardpressedtobelievethatabusinessmanofpetitionerTansstaturecouldhavebeen
socarelessastosignblankloandocuments.
In contrast, as found by the CA, the promissory notes[11] clearly showed upon their faces
thattheyaretheobligationofthepetitionerFoundation,ascontractedbypetitionerTaninhis
official and personal capacity.[12] Moreover, the application for credit accommodation,[13] the
signature cards of the two accounts in the name of petitioner Foundation,[14] as well as New
CurrentAccountRecord, [15]allaccompanyingthepromissorynotes,weresignedbypetitioner
Tan for and in the name of the petitioner Foundation.[16] These documentary evidence
unequivocally and categorically establish that the loans were solidarily contracted by the
petitionerFoundationandpetitionerTan.
Asacorollary,theparolevidencerulelikewiseconstrainsthisCourttorejectpetitionerTans
claimregardingthepurportedunwrittenagreementbetweenhimandtherespondentBankon
thepaymentoftheobligation.Section9,Rule130oftheoftheRevisedRulesofCourtprovides
that[w]henthetermsofanagreementhavebeenreducedtowriting,itistobeconsideredas
containing all the terms agreed upon and there can be, between the parties and their
successorsininterest, no evidence of such terms other than the contents of the written
agreement.[17]
Inthiscase,thepromissorynotesarethelawbetweenthepetitionersandtherespondent
Bank. These promissory notes contained maturity dates as follows: February 5, 1978, March
28, 1978,April 11, 1978 and May 5, 1978, respectively.That these notes were to be paid on
thesedatesisclearandexplicit.Nowherewasitstatedthereinthattheywouldberenewedon
a yeartoyear basis or rolledover annually until paid from the proceeds of petitioner Tans
sharesintheLapulapuIndustriesCorp.Accordingly,thispurportedunwrittenagreementcould
notbemadetovaryorcontradictthetermsandconditionsinthepromissorynotes.
Evidence of a prior or contemporaneous verbal agreement is generally not admissible to
vary,contradictordefeattheoperationofavalidcontract.[18]Whileparolevidenceisadmissible
toexplainthemeaningofwrittencontracts,itcannotservethepurposeofincorporatingintothe
contract additional contemporaneous conditions which are not mentioned at all in writing,
unless there has been fraud or mistake.[19] No such allegation had been made by the
petitionersinthiscase.
Finally,theappellatecourtdidnoterrinholdingthepetitionersjointlyandsolidarilyliableas
itappliedthedoctrineofpiercingtheveilofcorporateentity.ThepetitionerFoundationasserts
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thatithasapersonalityseparateanddistinctfromthatofitsPresident,petitionerTan,andthat
itcannotbeheldsolidarilyliablefortheloansofthelatter.
The Court agrees with the CA that the petitioners cannot hide behind the corporate veil
underthefollowingcircumstances:
TheevidenceshowsthatTanhasbeenrepresentinghimselfasthePresidentofLapulapuFoundation,Inc.
Heopenedasavingsaccountandacurrentaccountinthenamesofthecorporation,andsignedthe
applicationformaswellasthenecessaryspecimensignaturecards(ExhibitsA,BandC)twice,for
himselfandforthefoundation.HesubmittedanotarizedSecretarysCertificate(ExhibitG)fromthe
corporation,attestingthathehasbeenauthorized,interalia,tosignforandinbehalfoftheLapulapu
Foundationanyandallchecks,draftsorotherorderswithrespecttothebanktotransactbusinesswith
theBank,negotiateloans,agreements,obligations,promissorynotesandothercommercialdocuments
andtoinitiallyobtainaloanforP100,000.00fromanybank(ExhibitsG1andG2).Underthese
circumstances,thedefendantcorporationisliableforthetransactionsenteredintobyTanonitsbehalf.[20]
Per its Secretarys Certificate, the petitioner Foundation had given its President, petitioner
Tan,ostensibleandapparentauthoritytointeraliadealwiththerespondentBank.Accordingly,
the petitioner Foundation is estopped from questioning petitioner Tans authority to obtain the
subjectloansfromtherespondentBank.Itisafamiliardoctrinethatifacorporationknowingly
permitsoneofitsofficers,oranyotheragent,toactwithinthescopeofanapparentauthority,it
holdshimouttothepublicaspossessingthepowertodothoseactsandthus,thecorporation
will,asagainstanyonewhohasingoodfaithdealtwithitthroughsuchagent,beestoppedfrom
denyingtheagentsauthority.[21]
In fine, there is no cogent reason to deviate from the CAs ruling that the petitioners are
jointlyandsolidarilyliablefortheloanscontractedwiththerespondentBank.
WHEREFORE,premisesconsidered,thepetitionisDENIEDandtheDecisiondatedJune
26, 1996 and Resolution datedAugust 19, 1996 of the Court ofAppeals in CAG.R. CV No.
37162areAFFIRMEDintoto.
SOORDERED.
Puno,(Chairman)Quisumbing,AustriaMartinez,andTinga,JJ.,concur.
[1] Penned by Associate Justice Delilah VidallonMagtolis with Associate Justices Quirino D. Abad Santos and

ArtemioG.Tuqueroconcurring.
[2]Rollo,p.24.
[3]Id.at25.
[4]ExhibitR.
[5]ExhibitS.
[6]ExhibitsR2andS1.
[7]Rollo,p.14.
[8]Id.at30.
[9]GoldLineTransit,Inc.v.Ramos,363SCRA262(2001).
[10]Section3(V),Rule131oftheRevisedRulesofCourt.
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[11]ExhibitsHtoL.
[12]Rollo,p.26.
[13]ExhibitD.
[14]ExhibitsAandB.
[15]ExhibitC.
[16]Ibid.
[17]Theprovisionreadsinfull:

Sec. 9. Evidence of written agreements. When the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there can be, between the parties and their
successorsininterest,noevidenceofsuchtermsotherthanthecontentsofthewrittenagreement.
However,apartymaypresentevidencetomodify,explainoraddtothetermsofthewrittenagreementifheputsin
issueinhispleadings:
(a)Anintrinsicambiguity,mistakeorimperfectioninthewrittenagreement
(b)Thefailureofthewrittenagreementtoexpressthetrueintentandagreementofthepartiesthereto
(C)Thevalidityofthewrittenagreementor
(d)The existence of other terms agreed to by the parties or their successorsininterest after the execution of the
writtenagreement.
Thetermagreementincludeswills.
[18]MCEngineeringv.CA,380SCRA116(2002).
[19]Ibid.
[20]Rollo,p.31.(Underscoringours.)
[21]Solerv.CourtofAppeals,358SCRA57(2001).

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