G.R. No. L-62741 May 29, 1987
FILIPINAS MANUFACTURERS BANK, plaintiff-appellee, vs. EASTERN RIZAL FABRICATORS, defendant-appellant.

FACTS

Filipinas Manufacturers Bank filed a complaint for collection of a sum of money against Eastern Rizal Fabricators based on a promissory note for P370,000.00 that matured on August 30, 1976. The bank alleged that despite demands, the defendant refused to pay the principal plus stipulated interest, handling fees, and attorney’s fees. In its answer, the defendant admitted the indebtedness but interposed a special affirmative defense. It claimed the bank’s president had verbally agreed to forbear from collecting the debt until after the defendant received an expected payment from its supplier, Jose Lecaros Abel, not later than 180 banking days from December 2, 1978, which amount would then be applied to the loan.
The plaintiff bank filed a motion for judgment on the pleadings, arguing the answer admitted the material allegations of the complaint and that the affirmative defense was untenable. It invoked the parol evidence rule, contending the alleged verbal agreement could not vary the terms of the written promissory note. The trial court granted the motion, rendering judgment in favor of the bank. The defendant appealed, and the case was certified to the Supreme Court on a pure question of law.

ISSUE

Whether the trial court correctly granted the motion for judgment on the pleadings.

RULING

No. The Supreme Court reversed the trial court’s order granting judgment on the pleadings. The legal logic centers on the misapplication of the parol evidence rule. The Court clarified that the parol evidence rule, which prohibits the use of oral evidence to vary or contradict the terms of a written agreement, applies only to prior or contemporaneous agreements. It does not apply to subsequent modifications of the written contract. A subsequent oral agreement, such as the alleged forbearance agreement made after the promissory note was executed and after the defendant encountered payment difficulties, constitutes a separate transaction that can be proven by parol evidence. This is because parties cannot be presumed to have intended their original written contract to be immutable and to govern all future interactions; they retain the right to orally alter their agreement post-execution.
Therefore, the defendant’s affirmative defense of a subsequent forbearance agreement raised a genuine and material issue of fact that could not be resolved without a full trial on the merits. A judgment on the pleadings was improper as it assumed the defense was legally insufficient on its face. However, given the case had been pending for nearly a decade and the claimed forbearance period had long lapsed, the Court opted for an expeditious resolution. It directed the parties to submit memoranda on the loan’s status. The appellant complied, admitting an outstanding balance of P230,000.00, while the appellee bank failed to file any memorandum despite notice. The Court construed the bank’s silence as having no objection to the admitted balance. Consequently, the Supreme Court set aside the judgment on the pleadings and, instead of remanding the case, ordered the appellant to pay the admitted balance of P230,000.00 plus the stipulated interest and fees.