Shemberg Marketing v. Citibank
REITERATIONFacts
The Antecedents: Petitioner Shemberg Marketing Corporation (Shemberg) executed a real estate mortgage over a parcel of land in favor of respondent Citibank, N.A. (Citibank) to secure loan accommodations amounting to P28,242,000.00. Citibank sent a demand letter to Shemberg for its outstanding balance of US$390,000.00 under Promissory Note No. 8976267001, threatening foreclosure. Shemberg defaulted, and Citibank commenced extra-judicial foreclosure proceedings. Shemberg filed a complaint for rescission or declaration of nullity of the real estate mortgage, alleging it was void for lack of consideration, as Citibank failed to renew and increase its credit line as promised. Citibank countered that the mortgage was for additional security due to Shemberg's dire financial condition and that no further credit would be extended without improvement in its financial standing. The mortgage secured Shemberg's obligations up to P28,242,000.00, including Promissory Note No. 8976267001 for US$500,000.00, on which Shemberg had an outstanding balance of US$390,000.00. Procedural History: The Regional Trial Court (RTC) declared the real estate mortgage void for lack of consideration but found Shemberg liable for P19,006,197.00, payable within one year. Both parties appealed. The Court of Appeals (CA) reversed the RTC, declaring the real estate mortgage and the foreclosure proceedings valid. The CA found that the mortgage secured Shemberg's present and future obligations up to P28,242,000.00 and that Shemberg had an existing loan obligation of P58,238,200.00 at the time of execution, thus, it was not without consideration. The CA also ruled that Citibank rightfully initiated foreclosure due to Shemberg's default and that the RTC erred in granting an additional year to pay. The Petition: Shemberg filed a Petition for Review on Certiorari assailing the CA Decision and Resolution.
Issue(s)
Whether the real estate mortgage is valid and binding between the parties.
Ruling
The Petition is unmeritorious. The Decision dated October 23, 2012 and the Resolution dated October 27, 2014 of the Court of Appeals in CA-G.R. CEB-CV No. 00974 are affirmed.
Ratio Decidendi
On the validity of the real estate mortgage: The Court held that the real estate mortgage was valid and binding. The mortgage explicitly stated that it was constituted to secure loan accommodations, as well as all past, present, and future obligations of Shemberg to Citibank up to P28,242,000.00. Shemberg's admission of an outstanding obligation of P58,238,200.00 at the time of the mortgage's execution did not invalidate it; it merely meant that Citibank could enforce the mortgage up to the secured amount. The requisites for a valid mortgage—constitution to secure a principal obligation, mortgagor being the absolute owner, and free disposal of the property—were present. The Court further clarified that the parol evidence rule, as provided in Section 9, Rule 130 of the Rules of Court, prohibits the introduction of evidence aliunde to contradict the terms of a written agreement. Shemberg's attempt to introduce evidence of a supposed commitment to renew its credit line was inadmissible because none of the exceptions to the parol evidence rule applied. The mortgage contract was clear and unambiguous, and Shemberg did not allege any agreement made after its execution. Therefore, the terms of the real estate mortgage were binding and conclusive between the parties.
Main Doctrine
A real estate mortgage is valid and binding if it is constituted to secure the fulfillment of a principal obligation, the mortgagor is the absolute owner of the mortgaged property, and the mortgagor has free disposal of the property. The parol evidence rule bars evidence aliunde to contradict the terms of a written agreement, unless an exception applies, such as the validity of the written agreement.