Lapulapu Foundation, Inc. vs. Court of Appeals

Signatories who contract promissory notes in both official and personal capacities are jointly and solidarily bound thereby, with the written notes constituting the exclusive terms of the agreement absent fraud or mistake, and a corporation that clothes its president with apparent borrowing authority is estopped from denying that authority to a good-faith lender.

Elias Q. Tan served as President of Lapulapu Foundation, Inc., a corporation with juridical personality separate from its officers. Allied Banking Corp. was a banking institution extending credit accommodations evidenced by promissory notes and related account documents. The governing frameworks for the dispute were the rules on interpretation of written agreements, presumptions on mail and official duty, and the doctrine on corporate agency and apparent authority.

Sometime in 1977, Elias Q. Tan, then President of Lapulapu Foundation, Inc., obtained four loans of P100,000 each from Allied Banking Corp., covered by four promissory notes: BD No. 504 dated November 7, 1977 maturing February 5, 1978 with balance of P123,377.76; BD No. 621 dated November 28, 1977 maturing March 28, 1978 with balance of P123,411.10; BD No. 716 dated December 12, 1977 maturing April 11, 1978 with balance of P122,322.21; and BD No. 839 dated January 5, 1978 maturing May 5, 1978 with balance of P120,455.54, all balances computed as of January 23, 1979 for a total of P493,566.61. The notes on their faces showed the obligation of the Foundation as contracted by Tan in his official and personal capacities, accompanied by an application for credit accommodation, signature cards for two accounts in the name of the Foundation, a New Current Account Record, and a notarized Secretary's Certificate attesting Tan's authority to sign checks, drafts and orders, transact business, negotiate loans, agreements, obligations, promissory notes and other commercial documents, and to initially obtain a P100,000 loan from any bank.

According to the Foundation, the loans were obtained by Tan in his personal capacity for his own use on the strength of personal information furnished the Bank, without authorization to co-sign as President, without the Bank's lack of knowledge, and without direct or indirect benefit to the Foundation, such that Tan, having exceeded authority, should be solely liable. According to Tan, the parties agreed the loans would be paid from proceeds of his common shares in Lapulapu Industries Corporation, a real estate firm, with the notes automatically renewable or rolled-over yearly at amounts including unpaid interests until so paid; a Bank employee allegedly required two signatures on each note with assurance the documents would be filled conformably, but were later filled to include the Foundation contrary to agreement. The Bank sent a demand letter dated January 3, 1979 by its Vice-President Ben Tio Peng Seng to the Foundation through Tan, and a final demand dated January 30, 1979 by counsel to both petitioners giving five days to settle, both shown by registry return cards to have been received, which Tan disputed by claiming non-recognition of the signatures thereon.

Thereafter, demands having gone unheeded, the Bank filed suit in the Regional Trial Court of Cebu City, Branch 15, for joint and solidary payment. After trial, that court credited the documentary evidence and the presumption of receipt, found preponderance in favor of the Bank, and imposed joint and solidary liability with interest, service and penalty charges, attorney's fees and litigation expenses. On appeal, the Court of Appeals disbelieved the personal-loan claim, applied the parol evidence rule to reject the alleged unwritten roll-over agreement, sustained prior demand on the basis of the two letters and registry return cards, and applied piercing of the corporate veil in view of Tan's representation as President, account openings, loan signings, and the Foundation's apparent grant of authority.

• Due and Demandable Character and Prior Demand: Petitioner argued that the loans were not yet due and demandable for absence of prior demand, vigorously denying receipt of the January 3, 1979 and January 30, 1979 letters and maintaining that the signatures on the registry return cards were not those of petitioner Tan.
• Nature of Liability and Parol Evidence: Petitioner maintained that the loans were Tan's personal obligation for his own use and benefit, contracted without Foundation authorization, and that an unwritten agreement existed for yearly renewal or roll-over until payment from Tan's shares in Lapulapu Industries Corp., with blank documents allegedly filled contrary to agreement and the phrase IN MY OFFICIAL/PERSONAL CAPACITY superimposed despite protest.
• Separate Corporate Personality: Petitioner argued that the Foundation possessed a personality separate and distinct from Tan, never benefited from the loans, and could not be held solidarily liable for Tan's personal loans.

• Prior Demand and Due Demandability: Whether the loans were already due and demandable despite alleged absence of prior demand.
• Parol Evidence and Terms of the Notes: Whether the purported unwritten roll-over agreement payable from shares could vary the express maturity terms of the promissory notes and negate joint obligation.
• Piercing the Veil and Apparent Authority: Whether Lapulapu Foundation, Inc. and Elias Q. Tan were jointly and solidarily liable under the doctrine of piercing the veil of corporate entity and apparent authority.

• Prior Demand and Due Demandability: Yes. The matured notes were due and demandable, prior demand having been established by duly mailed letters and registry return cards under the presumption of receipt in the regular course of mail.
• Parol Evidence and Terms of the Notes: No. The unwritten roll-over agreement was inadmissible to vary the notes, which as written law between the parties fixed explicit maturity dates and showed a solidary corporate and personal obligation.
• Piercing the Veil and Apparent Authority: Yes. Joint and solidary liability was proper, the Foundation having clothed Tan with ostensible authority and Tan having used the corporate vehicle, precluding reliance on separate personality.

• Prior Demand and Due Demandability: The notes had undisputedly matured, leaving only receipt of demand in issue. Bare denial could not overcome documentary registry return cards, which enjoy the presumption of regular issuance by postal officials in good faith, nor the presumption that duly directed and mailed matter is received in the regular course of mail where addresses were not shown to be wrong. The burden to rebut by sufficient evidence was not discharged, the denial being self-serving.
• Parol Evidence and Terms of the Notes: Documentary evidence unequivocally established solidary contracting: the notes showed the Foundation's obligation contracted by Tan in official and personal character, corroborated by the credit application, signature cards, and account record signed for the Foundation. Under Section 9, Rule 130 of the Revised Rules of Court, a writing is deemed to contain all agreed terms, and prior or contemporaneous verbal agreements are generally inadmissible to vary, contradict or defeat a valid contract or to add unwritten contemporaneous conditions absent fraud or mistake, none having been alleged. The claim of signing blank documents was deemed incredulous for a businessman of Tan's stature, and nowhere did the notes provide for yearly renewal until payment from shares.
• Piercing the Veil and Apparent Authority: Tan represented himself as President, opened savings and current accounts for the corporation, signed application and specimen cards twice for himself and the Foundation, and submitted a notarized Secretary's Certificate authorizing him to sign banking instruments, transact business, negotiate loans and promissory notes, and obtain an initial P100,000 loan. Having knowingly permitted Tan to act within apparent authority, the corporation was estopped as against a good-faith lender from denying that authority, while Tan could not escape liability after using the Foundation for his benefit.

• Presumption of receipt in the regular course of mail — A letter duly directed and mailed is presumed received in the regular course of mail under Section 3(V), Rule 131 of the Revised Rules of Court. Applied to sustain prior demand where two demand letters were shown by registry return cards to have been received and addresses were not shown to be wrong, with bare denial held insufficient to rebut.
• Presumption of regularity of official duty — Official acts, including issuance of registry return cards by postal officials, are presumed regularly performed in good faith absent clear and convincing evidence to the contrary. Applied to prefer documentary registry return cards over self-serving non-recognition of signatures.
• Parol evidence rule — When terms have been reduced to writing, the writing is considered to contain all terms agreed upon, and no evidence of such terms other than the contents of the agreement is admissible between parties and successors, except where intrinsic ambiguity, mistake, failure to express true intent, invalidity, or subsequent agreed terms is put in issue; prior or contemporaneous verbal agreements cannot vary, contradict, defeat, or add unwritten conditions absent fraud or mistake. Applied to reject the alleged yearly roll-over payable from shares because the notes expressly fixed maturity dates of February 5, 1978, March 28, 1978, April 11, 1978 and May 5, 1978.
• Piercing the veil through apparent authority and estoppel — If a corporation knowingly permits an officer or agent to act within apparent authority, it holds that person out as possessing such power and is estopped from denying authority as against one who in good faith dealt through that agent; the officer who uses the corporate vehicle may likewise be held liable and cannot hide behind separate personality. Applied where the Secretary's Certificate and course of dealing clothed the president with ostensible borrowing power, resulting in joint and solidary liability on notes signed in official and personal capacities, consistent with Soler vs. Court of Appeals.

• "that a letter duly directed and mailed was received in the regular course of mail" — States the disputable presumption sustaining prior demand where registry return cards showed receipt and no wrong address was demonstrated.
• "When the terms of an agreement have been reduced to writing, it is to be considered as containing all the terms agreed upon and there can be, between the parties and their successors-in-interest, no evidence of such terms other than the contents of the written agreement." — Canonical formulation of the parol evidence rule used to reject the alleged unwritten roll-over agreement contradicting express maturity dates.
• "Evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict or defeat the operation of a valid contract." — Defines the exclusionary effect applied to Tan's claim of a contemporaneous payment-from-shares arrangement, following MC Engineering vs. CA.
• "if a corporation knowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority, it holds him out to the public as possessing the power to do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent's authority." — States the estoppel basis for piercing the veil and holding the Foundation bound by its president's borrowings, following Soler vs. Court of Appeals.

• Gold Line Transit, Inc. vs. Ramos, 363 SCRA 262 (2001) — Cited as authority that registry return cards enjoy the presumption of regular issuance by postal officials in good faith, supporting preference for documentary proof over bare denial of receipt.
• MC Engineering vs. CA, 380 SCRA 116 (2002) — Cited as controlling on parol evidence: prior or contemporaneous verbal agreements cannot vary a valid written contract nor add unwritten contemporaneous conditions absent fraud or mistake.
• Soler vs. Court of Appeals, 358 SCRA 57 (2001) — Cited as authority for apparent-authority estoppel, binding a corporation that knowingly permits an officer to act with ostensible power as against a good-faith third person.

• Section 3(V), Rule 131, Revised Rules of Court — Creates the disputable presumption that a duly directed and mailed letter was received in the regular course of mail; applied to establish receipt of the January 3 and January 30, 1979 demands where registry return cards so showed.
• Section 9, Rule 130, Revised Rules of Court — Provides that a written agreement contains all agreed terms and bars extrinsic evidence thereof except for ambiguity, mistake, failure to express true intent, invalidity, or subsequent terms put in issue; applied to confine enforceable terms to the promissory notes' express maturities and parties.

Puno (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur.