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SPS. EDUARDO B. EVANGELISTA v. MERCATOR FINANCE CORP.

FACTS:

The petitioners, Spouses Evangelista, filed a complaint for annulment of titles against respondents, Mercator Finance Corporation, Lydia P. Salazar, Lamecs Realty and Development Corporation, and the Register of Deeds of Bulacan. The petitioners claimed that they executed a Real Estate Mortgage as officers of Embassy Farms, Inc. in favor of Mercator Finance Corporation, but they did not personally receive any loan proceeds as it all went to Embassy Farms. They argued that since they did not personally obtain any loan or credit accommodations, the mortgage was without consideration and therefore void. They challenged the validity of the foreclosure proceedings conducted by Mercator, the subsequent sale, and the transfer of the titles to Salazar and Lamecs.

Mercator admitted that the petitioners were the owners of the subject parcels of land but argued that the petitioners are jointly and severally liable with Embassy Farms for the loan. Respondents Salazar and Lamecs asserted that they are innocent purchasers for value and in good faith, relying on the validity of Mercator's title.

The parties agreed on the issues during pre-trial, and Mercator filed a motion for summary judgment, which was granted by the RTC. The RTC held that the petitioners, by signing the promissory note in their personal capacity and as officers of Embassy Farms, are solidarily liable with Embassy Farms for the loan. The motion for reconsideration was denied, and the petitioners appealed to the Court of Appeals, which upheld the RTC's decision.

ISSUES:

  1. Whether or not the Real Estate Mortgage executed by the plaintiffs in favor of defendant Mercator Finance Corp. is null and void.

  2. Whether or not the extra-judicial foreclosure proceedings undertaken on subject parcels of land to satisfy the indebtedness of Embassy Farms, Inc. are null and void.

  3. Whether or not the sale made by defendant Mercator Finance Corp. in favor of Lydia Salazar and that executed by the latter in favor of defendant Lamecs Realty and Development Corp. are null and void.

  4. Whether or not the parties are entitled to damages.

RULING:

The petition is dismissed. The Supreme Court affirmed the rulings of the lower courts. It held that there are no genuine issues raised by petitioners that require a full-blown trial. The documentary evidence shows that petitioners are solidary obligors with Embassy Farms, through the promissory note and the continuing suretyship agreement. Thus, their personal liability cannot be denied. The parol evidence rule does not apply, and any attempt to introduce evidence contrary to the written agreements was disallowed. Treble costs were awarded against the petitioners.

PRINCIPLES:

  • Solidary Obligation: Co-makers of a promissory note and suretyship agreement are solidary obligors.

  • Summary Judgment: Appropriate when there are no genuine issues of material fact requiring a trial.

  • Parol Evidence Rule: When parties have entered into a written contract, they cannot introduce evidence of terms other than those contained in the writing.

  • Consideration for Suretyship: The consideration need not pass directly to the surety; a consideration moving to the principal alone suffices.

  • Estoppel and Laches: Parties who delay an unreasonable length of time before asserting a claim may be barred by estoppel or laches.

  • Construction of Ambiguous Instruments: Joint signatories on a promissory note are deemed jointly and severally liable per Section 17 of the Negotiable Instruments Law.