Asuncion v. Evangelista

PUNO, J.:

This is a petition for review of the Decision of the respondent Court of Appeals1 rescinding the Memorandum of Agreement of the parties and assessing against the petitioner damages in the amount of P32,644,420.55. These are the relevant facts. Since 1970, private respondent has been operating a piggery on his landholdings in Barangay Loma de Gato, Marilao, Bulacan.2 Until 1980, he operated the piggery under the trade name Embassy Farms as a single proprietorship.3 In October 1981, private respondent, his wife, Epifania C. Evangelista, and three (3) others, namely, Angel L. Santos, Jr., Amando C. Martin and Teofilo J. Mesina, organized Embassy Farms, Inc. and registered it with the Securities and Exchange Commission.4 Private respondent was the majority stockholder of the corporation, with ninety percent (90%) of the shares in his name.

He also served as its president and chief executive officer. Its principal office was established at the piggery facility that had been existing on the landholdings of private respondent in Barangay Loma de Gato, Marilao, Bulacan, consisting of about 104,447 sq. m.5 On September 9, 1980, private respondent borrowed five hundred thousand pesos (P500,000.00) from Paluwagan ng Bayan Savings and Loan Association to use as working capital for Embassy Farms.

He executed a real estate mortgage on three of his properties in Barangay Loma de Gato, Marilao, Bulacan as security for the loan.6 On November 4, 1981, private respondent mortgaged ten (10) titles more in favor of PAIC Savings and Mortgage Bank, formerly First Summa Savings and Mortgage Bank, as security for a loan he obtained from it in the amount of one million seven hundred twelve thousand pesos (P1,712,000.00).7 On February 16, 1982, private respondent obtained another loan in the amount of eight hundred forty four thousand six hundred twenty five and seventy eight centavos (P844,625.78) from Mercator Finance Corporation. The loan was secured by a real estate mortgage8 on five (5) other landholdings of private respondent, all situated in Bulacan. Private respondent obtained these personal loans to provide himself working capital to run the farm and sustain its operations.

His aggregate debt exposure totaled three million fifty six thousand six hundred twenty five and seventy eight centavos (P3,056,625.78). Private respondent defaulted in his loan payments. Of the PAIC loan that should have been paid on an equal quarterly amortization basis for three (3) years from October 31, 1981, eight (8) quarterly amortizations totaling one million five hundred one thousand nine hundred eighty eight and eight centavos (P1,501,988.08) fell due by January 12, 1984.

Against this overdue amount, only two hundred eighty thousand seven hundred forty eight and fifty one centavos (P280,748.51) was remitted by private respondent.9 By June 1984, private respondent's aggregate debt had ballooned to almost six million pesos (P6,000,000.00)10 in overdue principal payments, interests, penalties and other financial charges. On August 2, 1984, petitioner and private respondent executed a Memorandum of Agreement containing the following terms and conditions: MEMORANDUM OF AGREEMENT KNOW ALL MEN BY THESE PRESENTS: This Memorandum of Agreement made and executed this day of July, 1984, here in , Metro Manila, by and between - ALEXANDER G. ASUNCION, of legal age, Filipino, married to Perlita Asuncion, and resident of No. 7 A. Lake Street, San Juan, Metro Manila, hereinafter referred to as AGA; - and - EDUARDO B. EVANGELISTA, of legal age, Filipino, married to Epifania C. Evangelista, and resident of No. 113 R. Terona Street, BF Homes, Paranaque, Metro Manila, hereinafter referred to as EBE.

WITNESSETH : WHEREAS, EBE is the registered and absolute owner of nineteen (19) parcels of agricultural lands with an aggregate area of 104,447 square meters more or less, all situated in LOMA DE GATO, Marilao, Bulacan, hereinbelow enumerated by the covering certificates of title and the corresponding area as follows: x x x x x x x x x WHEREAS, EBE is likewise the controlling interest of 90% to 100% of the paid-in equity of EMBASSY FARMS, INC., which corporation is the registered owner of a piggery, situated in the above enumerated real properties, with stocks, equipment and facilities as shown in the inventory thereof as of July 4, 1984, hereto attached as Schedule "A" and made an integral part hereof; WHEREAS, EBE has personal loans with the institutions herein below enumerated correspondingly with the amount of indebtedness, inclusive of interest, up to June 30, 1984: a) PAIC BANK P2,758,968.49 b) PALUWAGAN SAVINGS BANK 1.

CB-IBRD - P558,110.44 2. Comm'l loan P835,863.76 P1,393,974.20 c) MERCATOR FINANCE CORP.