2 Shemberg

Petition for Review on
Certiorari under Rule 45 of the Rules of Court assailing the Decision Court of

Appeals.
Petitioner Shemberg Marketing Corporation (Shemberg) executed a real estate mortgage over a
parcel of land located in Mandaue City (Lot 1524-G-6), including all improvements, machineries, and
equipment found thereon,3 in favor of respondent Citibank, N.A. (Citibank), to secure loan
accommodations amounting to P28,242,000.00.4 The real estate mortgage was embodied in a
deed, which the parties denominated as "First Party Real Estate Mortgage.”
Citibank sent a demand letter to Shemberg wherein it required the latter to pay its outstanding
balance in the amount of US$390,000.00 under Promissory Note No. 8976267001;6 otherwise, it
would be forced to initiate foreclosure proceedings on the mortgaged properties.7
Unfortunately, Shemberg defaulted in the payment of its outstanding obligation to

Citibank.8 Consequently, Citibank commenced the extra-judicial foreclosure of the mortgaged
properties on May 10, 1999.9 A Notice of Extra-Judicial Sale of Lot 1524-G-6, including all
improvements thereon, was thereafter issued with the foreclosure sale scheduled on June 16,
1999.10
Upon learning of the foreclosure sale, Shemberg filed a Complaint11 for rescission or declaration of
nullity of the contract of real estate mortgage against Citibank before the Regional Trial Court
In its Complaint, Shemberg alleged that: (a) in 1996, Citibank required Shemberg to execute a real
estate mortgage for and in consideration of the increase and renewal of its credit line with the
bank;12 (b) relying on the representation that its credit line would be renewed, Shemberg executed
the subject real estate mortgage in Citibank's favor;13 (c) however, despite the execution of the
mortgage, Citibank refused to renew and increase Shemberg's credit line.14
The RTC declared the real estate mortagage void for lack of consideration due to Citibank's failure to
fulfill its commitment to renew Shemberg's credit line with the bank after it expired in June 1996.22
The CA reversed and set aside the RTC Decision. It declared the real estate mortgage, as well as
the extra-judicial foreclosure proceedings initiated by Citibank, valid, and imposed the stipulated
interest equivalent to 8.89% per annum on the unpaid balance of Promissory Note No. 8976267001
from the time of filing of the extra-judicial foreclosure until finality of the Decision.
Issue: whether the real estate mortgage is indeed valid and binding between the parties.
Ruling: The Petition is unmeritorious.
Section 9, Rule 130 of the Rules of Court provides:
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 successors in interest, no evidence of such terms other than the contents of the
written agreement.
xxx
Section 9, or what is commonly known as the Parol Evidence Rule, "forbids any addition to or
contradiction of the terms of a written instrument by testimony purporting to show that, at or before
the signing of the document, other terms were orally agreed on by the parties."38 Under the Parol
Evidence Rule, the terms of a written contract are deemed conclusive between the parties and
evidence aliunde is inadmissible to change the terms embodied in the document.39
This rule, however, is not absolute. Thus, a party may present evidence aliunde to modify, explain or
add to the terms of a written agreement if he puts in issue in his pleading any of the four exceptions
to the Parol Evidence Rule:
(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and agreement of the
parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their successors in interest after
the execution of the written agreement.40
"The first exception applies when the ambiguity or uncertainty is readily apparent from reading the
contract."41 The second exception pertains to instances where "the contract is so obscure that the
contractual intention of the parties cannot be understood by mere inspection of the instrument."42
Under the third exception, the Parol Evidence Rule does not apply "where the purpose of introducing
the evidence is to show the invalidity of the contract."43 And, the fourth exception involves a
situation where the parties agreed to other terms after the execution of the written agreement.
Here, the first and second exceptions obviously do not apply as the real estate mortgage contract
clearly and succinctly stated the terms of the mortgage, leaving no doubt as to the contractual
intention of the parties by a mere reading of the document. The third exception, too, is inapplicable
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since Shemberg's purpose for introducing evidence aliunde is not to invalidate the contract; rather, it
was meant to prove that Citibank had reneged on its alleged commitment to renew and increase its
credit line with the bank which was supposedly the consideration for the execution of the real estate
mortgage. Finally, the fourth exception likewise does not apply as it was never alleged that the
parties had agreed to other terms after the execution of the real estate mortgage contract.
Based on these considerations, the Court sees no cogent reason to overturn the CA's factual
findings and conclusions. Simply stated, it is clear that the terms agreed upon in the subject real
estate mortgage are binding and conclusive between the parties.

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2 Shemberg

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Petition for Review on

Certiorari under Rule 45 of the Rules of Court assailing the Decision Court of

Unfortunately, Shemberg defaulted in the payment of its outstanding obligation to

Ruling: The Petition is unmeritorious.

Section 9, Rule 130 of the Rules of Court provides:

(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;

(c) The validity of the written agreement; or

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