Associated Bank v. Court of Appeals
REITERATIONFacts
The Antecedents: Associated Banking Corporation (ABC) and Citizens Bank and Trust Company (CBTC) merged to form Associated Citizens Bank, later renamed Associated Bank (petitioner). Lorenzo Sarmiento Jr. (respondent) executed a promissory note on September 7, 1977, in favor of CBTC for P2,500,000.00, payable on or before March 6, 1978, with interest and penalties. Respondent failed to pay the outstanding balance. Procedural History: The Regional Trial Court (RTC) ruled in favor of Associated Bank, ordering respondent to pay the outstanding balance, interest, attorney's fees, and costs. The Court of Appeals (CA) reversed the RTC decision, holding that Associated Bank had no cause of action because it was not privy to the promissory note executed in favor of CBTC after the merger agreement. The CA ruled that the merger did not vest Associated Bank with rights from a note executed in favor of CBTC after the merger agreement but before the SEC certificate of merger. The Petition: Petitioner seeks to set aside the CA decision, arguing that it erred in ruling that petitioner had no cause of action and was not a real party in interest, despite the merger.
Issue(s)
Whether the surviving corporation (Associated Bank) can enforce a promissory note executed in favor of the absorbed corporation (CBTC) after the merger agreement but prior to the issuance of the certificate of merger by the Securities and Exchange Commission. Whether Associated Bank has a cause of action against Lorenzo Sarmiento Jr. for the collection of the promissory note; and whether the action is barred by prescription or laches. Whether the promissory note was a contract pour autrui. Whether there was valid consideration for the promissory note.
Ruling
The petition is GRANTED. The assailed Decision of the Court of Appeals is SET ASIDE, and the Decision of the RTC-Manila, Branch 48, in Civil Case No. 26465 is REINSTATED.
Ratio Decidendi
On the main issue of whether Associated Bank can enforce the promissory note: The Court held that the surviving corporation in a merger automatically acquires all rights and liabilities of the absorbed corporation. The merger agreement between Associated Banking Corporation (ABC) and Citizens Bank and Trust Company (CBTC) explicitly stated that upon the effective date of the merger, all references to CBTC in any document shall be deemed references to ABC, the surviving bank. This provision was intended to protect the interests of the combining banks and prevent the evasion of obligations. Therefore, even though the promissory note was executed in favor of CBTC after the merger agreement, the reference to CBTC in the note should be construed as a reference to Associated Bank. Consequently, Associated Bank has a valid cause of action against respondent for the collection of the loan. On the issue of prescription and laches: The Court found that the action was not barred by prescription. The suit for collection of a sum of money based on a written contract prescribes after ten years from the time the right of action arose. Respondent's obligation became due and demandable on March 6, 1978, and the complaint was filed on August 22, 1985, well within the ten-year prescriptive period. The Court also ruled that the action was not barred by laches, as the principle of laches is applied to avoid inequitable situations, and requiring respondent to pay his loan was not inequitable. Furthermore, the doctrine of laches is inapplicable when the claim is filed within the prescriptive period. On the issue of contract pour autrui: The Court rejected respondent's claim that the promissory note was a contract pour autrui. A stipulation pour autrui requires a clear and deliberate conferral of a favor upon a third person, which was not evident in the promissory note. The note merely outlined the terms of payment and penalties, with no mention of a third party or any intention to benefit someone other than the contracting parties. Respondent failed to present any evidence to support this claim. On the issue of consideration: The Court dismissed respondent's claim of lack of consideration. The promissory note, bearing respondent's signature, speaks for itself and constitutes proof of his undertaking to pay the P2,500,000.00 plus interest. Respondent did not question the genuineness and due execution of the note. Furthermore, the partial payment of P1,000,000.00 made by respondent served as an express acknowledgment of his obligation, precluding him from denying his liability.
Main Doctrine
The surviving corporation in a merger automatically acquires all the rights, privileges, and powers, as well as the liabilities, of the absorbed corporation. References to the absorbed corporation in any document shall be deemed references to the surviving corporation, regardless of the date of execution of such documents, as long as the merger agreement provides for such substitution.