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Babst v. CA

In the case of Babst vs. CA, BPI, as the successor of CBTC after their merger, was found to have the right to collect debts from ELISCON and its debtors, including Babst. The court ruled that while BPI could pursue collection, Babst could not be held liable as a surety since there was no indication that DBP, which took over ELISCON, would default on the debt. The trial court's ruling in favor of BPI was affirmed by the Court of Appeals.

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67 views1 page

Babst v. CA

In the case of Babst vs. CA, BPI, as the successor of CBTC after their merger, was found to have the right to collect debts from ELISCON and its debtors, including Babst. The court ruled that while BPI could pursue collection, Babst could not be held liable as a surety since there was no indication that DBP, which took over ELISCON, would default on the debt. The trial court's ruling in favor of BPI was affirmed by the Court of Appeals.

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Co Tam Beh
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Babst vs. CA (G.R. Nos 99398, 104625, January 26, 2001).

FACTS:
ELISCON obtained a loan from Commercial Bank and Trust Company (CBTC) with an interest of 14%
per annum, as evidenced by a promissory note. When ELISCON defaulted in payments, it opened letters
of credit from CBTC using the credit facilities of MULTI with the said bank. Subsequently, Antonio
Roxas Chua and Babst executed a Continuing Suretyship, binding themselves solidarily liable to pay any
existing indebtedness of MULTI to CBTC to the extend of P8M each. Later on, BPI and CBTC entered
into a merger, wherein BPI, as the surviving corporation, acquired all the assets and assumed all liabilities
of CBTC. Subsequently, by virtue of cession, Development Bank of the Philippines (DBP) took over the
assets of ELISCON to answer for the latter’s indebtedness to the former. DBP submitted formulas to
settle the liabilities of ELISCON to its creditors which included BPI that rejected the same. BPI, as
successor-in-interest of CBTC, sued ELISCON, MULTI, and Babst for collection of sum of money. The
trial court ruled in favor of BPI, and the same was affirmed by the Court of Appeals. Hence the instant
petition. •

ISSUE:

Whether BPI can rightfully collect the amounts due of CBTC from its debtors •

HELD:

Yes. There was no question that there was a valid merger between BPI and CBTC. It is settled that in the
merger of two existing corporations, one of the corporations survives and continues the business, while
the latter is dissolved and all its rights, properties, and liabilities are acquired by the surviving
corporation. Hence, BPI had the right to institute the collection case. Nonetheless, Babst could not be
made liable for as a surety, he was an insurer of the debt, and promised only to pay the principal’s debt if
the principal will not pay. In the present case, there was no indication that DBP, which took over
ELISCON, would fail or default in payment of the debt incurred.

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