SHEMBERG CORPORATION VS.

CITIBANK

FACTS: On December 10, 1996, the petitioner executed a real estate mortgage over a parcel of
land located in Mandaue City in favor of the respondent as a security for a loan in the amount of
P28M. The mortgage was embodied in a deed. On February 13, 1998, the respondent sent a
demand letter to the petitioner to settle its balance of $390k under a promissory note. However,
Shemberg defaulted, and an extra-judicial foreclosure was commenced by Citibank.

Shemberg filed a complaint for recission or declaration of nullity of the real estate mortgage
before the RTC. It argued that the real estate mortgage was executed in consideration of an
increase and renewal of its credit line with the respondent; that upon the execution of the
mortgage, the respondent refused to increase and renew its credit line. Thus, Shemberg raised the
defense of lack of consideration.

The RTC declared the mortgage void for lack of consideration due to the respondent’s failure to
fulfill its commitment. However, it also found Shemberg liable to pay Citibank $390k based on
the promissory note. On appeal, the CA reversed the decision of the RTC. It found the mortgage
as well as the extra-judicial foreclosure valid.

ISSUE: WON the real estate mortgage executed by Shemberg is valid?

RULING: YES. The mortgage was executed to secure loan accommodations, as well as past,
present, and future obligations to the extent of P28M. At the time the mortgage was executed,
Shemberg had an outstanding obligation of P58M with Citibank. The “Parol Evidence Rule”
forbids any addition to or contradictions 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
upon by the parties.

Here, none of the exceptions to the Parol Evidence Rule are present. The terms agreed upon in
the instrument are clear and thus binding upon the parties. The CA decision was affirmed.