G.R. No. 105419 September 27, 1993.
PIONEER SAVINGS & LOAN BANK, petitioner, vs. THE HONORABLE COURT OF APPEALS and MANUEL P. SANTOS, respondents.

FACTS

Petitioner Pioneer Savings & Loan Bank acquired ownership of a Toyota Corolla vehicle. Private respondent Manuel P. Santos, as manager of the bank’s General Services Department, was allowed to use it coterminous with his employment. The bank’s Board passed Resolution No. 26, authorizing specified officers to sign deeds for the sale of bank assets. Pursuant to this authority, the bank, through its President Arturo Eudela and First Vice President Francisco Pangilinan, executed a notarized Deed of Sale over the vehicle in favor of Santos for a consideration of P40,000.00 cash, which was allegedly received in the presence of a bank employee. Santos ceased employment in August 1984 and took the car. In April 1985, the bank filed a complaint for recovery of the vehicle with a writ of replevin, and the car was seized and delivered to the bank. The bank alleged the Deed of Sale was without consideration and served merely as security for the time deposit placements of Santos’s relatives, with an “underlying agreement” that Santos could keep the car only if his relatives failed to recover their deposits. The bank claimed that since the relatives recovered their deposits through the PDIC after the bank was placed under receivership, Santos had no right to keep the vehicle. The bank also assailed the deed’s notarization. The Regional Trial Court ruled in favor of Santos, ordering the bank to deliver the vehicle and pay damages, which the Court of Appeals affirmed in toto.

ISSUE

Whether the Deed of Sale of the vehicle to respondent Santos may be proved or altered by parol evidence under the Parol Evidence Rule.

RULING

No. The petition is devoid of merit. The Supreme Court affirmed the decision of the Court of Appeals. The Parol Evidence Rule prohibits the introduction of evidence of a prior or contemporaneous verbal agreement to vary, contradict, or defeat the operation of a valid written instrument, unless there is fraud or mistake. The bank failed to produce any written instrument proving that the deed was merely security for the time deposits. The bank officers who signed the deed were expected to know the legal consequences of their act and could have incorporated any conditional stipulation into the written deed if such was the intention, but they did not. The deed was an outright and unconditional transfer of ownership. The question regarding the validity of the notarization was raised for the first time on appeal and cannot be entertained, as issues not raised in the lower court cannot be raised for the first time on appeal.