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    Associated Bank Vs Court of Appeals

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    This case discusses whether Associated Bank, as the surviving corporation of a merger with Citizens Bank and Trust Company, can enforce a promissory note executed in favor of Citizens Bank before the merger was finalized. The Supreme Court ruled that Associated Bank assumed all rights and obligations of Citizens Bank as part of the merger agreement. While the merger was not yet effective due to regulatory approvals pending, the agreement stated that contracts entered into with the absorbed bank would be understood as pertaining to the surviving bank. Therefore, Associated Bank could enforce the promissory note against the respondent. The Court also rejected the respondent's arguments that the note was a contract for the benefit of a third party or lacked consideration, finding the respondent's signature and partial

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    Associated Bank Vs Court of Appeals

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    mysch
    353 views2 pages
    This case discusses whether Associated Bank, as the surviving corporation of a merger with Citizens Bank and Trust Company, can enforce a promissory note executed in favor of Citizens Bank before the merger was finalized. The Supreme Court ruled that Associated Bank assumed all rights and obligations of Citizens Bank as part of the merger agreement. While the merger was not yet effective due to regulatory approvals pending, the agreement stated that contracts entered into with the absorbed bank would be understood as pertaining to the surviving bank. Therefore, Associated Bank could enforce the promissory note against the respondent. The Court also rejected the respondent's arguments that the note was a contract for the benefit of a third party or lacked consideration, finding the respondent's signature and partial

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    23. Associated Bank vs Court of Appeals

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    This case discusses whether Associated Bank, as the surviving corporation of a merger with Citizens Bank and Trust Company, can enforce a promissory note executed in favor of Citizens Bank before the merger was finalized. The Supreme Court ruled that Associated Bank assumed all rights and obligations of Citizens Bank as part of the merger agreement. While the merger was not yet effective due to regulatory approvals pending, the agreement stated that contracts entered into with the absorbed bank would be understood as pertaining to the surviving bank. Therefore, Associated Bank could enforce the promissory note against the respondent. The Court also rejected the respondent's arguments that the note was a contract for the benefit of a third party or lacked consideration, finding the respondent's signature and partial

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    353 views2 pages

    Associated Bank Vs Court of Appeals

    Uploaded by

    mysch
    This case discusses whether Associated Bank, as the surviving corporation of a merger with Citizens Bank and Trust Company, can enforce a promissory note executed in favor of Citizens Bank before the merger was finalized. The Supreme Court ruled that Associated Bank assumed all rights and obligations of Citizens Bank as part of the merger agreement. While the merger was not yet effective due to regulatory approvals pending, the agreement stated that contracts entered into with the absorbed bank would be understood as pertaining to the surviving bank. Therefore, Associated Bank could enforce the promissory note against the respondent. The Court also rejected the respondent's arguments that the note was a contract for the benefit of a third party or lacked consideration, finding the respondent's signature and partial

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Associated Bank vs Court of Appeals

    CASE DIGEST: G. R. No. 123793, June 29, 1998

    FACTS:

    Associated Banking Corporation and Citizens Bank and Trust Company (CBTC) merged to form just one banking
    corporation known as Associated Citizens Bank (later renamed Associated Bank), the surviving bank. After the
    merger agreement had been signed, but before a certificate of merger was issued, respondent Lorenzo Sarmiento,
    Jr. executed in favor of Associated Bank a promissory note, promising to pay the bank P2.5 million on or before
    due date at 14% interest per annum, among other accessory dues. For failure to pay the amount due, Sarmiento
    was sued by Associated Bank.

    Respondent argued that the plaintiff is not the proper party in interest because the promissory note was executed
    in favor of CBTC. Also, while respondent executed the promissory note in favor of CBTC, said note was a contract
    pour autrui, one in favor of a third person who may demand its fulfillment. Also, respondent claimed that he
    received no consideration for the promissory note and, in support thereof, cites petitioner's failure to submit any
    proof of his loan application and of his actual receipt of the amount loaned.

    ISSUE:

    1.) Whether or not Associated Bank, the surviving corporation, may enforce the promissory note made by private
    respondent in favor of CBTC, the absorbed company, after the merger agreement had been signed, but before a
    certificate of merger was issued?

    2.) Whether or not the promissory note was a contract pour autrui and was issued without consideration?

    HELD:

    The petition is impressed with merit.

    Associated Bank assumed all the rights of CBTC. Although absorbed corporations are dissolved, there is no winding
    up of their affairs or liquidation of their assets, because the surviving corporation automatically acquires all their
    rights, privileges and powers, as well as their liabilities. The merger, however, does not become effective upon the
    mere agreement of the constituent corporations. The Securities and Exchange Commission (SEC) and majority of
    the respective stockholders of the constituent corporations must have approved the merger. (Section 79,
    Corporation Code) It will be effective only upon the issuance by the SEC of a certificate of merger. Records do not
    show when the SEC approved the merger.

    But assuming that the effectivity date of the merger was the date of its execution, we still cannot agree that
    petitioner no longer has any interest in the promissory note. The agreement itself clearly provides that all
    contracts — irrespective of the date of execution — entered into in the name of CBTC shall be understood as
    pertaining to the surviving bank, herein petitioner. Such must have been deliberately included in the agreement in
    order to avoid giving the merger agreement a farcical interpretation aimed at evading fulfillment of a due
    obligation. Thus, although the subject promissory note names CBTC as the payee, the reference to CBTC in the
    note shall be construed, under the very provisions of the merger agreement, as a reference to petitioner bank.

    On the issue that the promissory note was a contract pour autrui and was issued without consideration, the
    Supreme Court held it was not. In a contract pour autrui, an incidental benefit or interest, which another person
    gains, is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third
    person. The "fairest test" in determining whether the third person's interest in a contract is a stipulation pour
    autrui or merely an incidental interest is to examine the intention of the parties as disclosed by their contract. It
    did not indicate that a benefit or interest was created in favor of a third person. The instrument itself says nothing
    on the purpose of the loan, only the terms of payment and the penalties in case of failure to pay.

    Private respondent also claims that he received no consideration for the promissory note, citing petitioner's failure
    to submit any proof of his loan application and of his actual receipt of the amount loaned. These arguments
    deserve no merit. Res ipsa loquitur. The instrument, bearing the signature of private respondent, speaks for itself.
    Respondent Sarmiento has not questioned the genuineness and due execution thereof. That he partially paid his
    obligation is itself an express acknowledgment of his obligation.

    WHEREFORE, the petition is GRANTED

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