G.R. No. 159057, 5 July 2010

FACTS:

The Central Bank and the RBG entered into an agreement providing that RBG shall facilitate the loan applications of farmers-borrowers. The agreement required RBG to open a separate bank account where the IBRD loan proceeds shall be deposited. The RBG accordingly opened a special savings account with Metrobanks Tarlac Branch. As the depository bank of RBG, Metrobank was designated to receive the credit advice released by the Central Bank representing the proceeds of the IBRD loan of the farmers-borrowers; Metrobank, in turn, credited the proceeds to RBGs special savings account for the latter’s release to the farmers-borrowers.

The Central Bank released a credit advice in Metrobanks favor and accordingly credited Metrobanks demand deposit account in the amount of P178,652.00, for the account of RBG. The Central Bank approved the loan application of another farmer-borrower and credited the amount to Metrobanks demand deposit account. Metrobank, in turn, credited RBGs special savings account. Metrobank claims that the RBG also withdrew the entire credited amount from its account. The Central Bank approved another loan application. As with the two other IBRD loans, the amount was credited to Metrobanks demand deposit account, which amount Metrobank later credited in favor of RBGs special savings account.

More than a month after RBG had made the above withdrawals from its account with Metrobank, the Central Bank issued debit advices, reversing all the approved IBRD loans. The Central Bank implemented the reversal by debiting from Metrobanks demand deposit account the amount corresponding to all three IBRD loans.Upon receipt of debit advices, Metrobank, in turn, debited the amounts from RBGs special savings account but however, Metrobank claimed that these amounts were insufficient to cover all the credit advices that were reversed by the Central Bank. It demanded payment from RBG which could make partial payments. To collect this amount, it filed a complaint for collection of sum of money against RBG before the RTC.

ISSUE:

Whether or not there was legal subrogation that took place in the case.

RULING:

Yes. The Terms and Conditions of the IBRD 4th Rural Credit Project executed by the Central Bank and the RBG shows that the farmers-borrowers to whom credits have been extended, are primarily liable for the payment of the borrowed amounts. The loans were extended through the RBG which also took care of the collection and of the remittance of the collection to the Central Bank. RBG, however, was not a mere conduit and collector. While the farmers-borrowers were the principal debtors, RBG assumed liability under the Project Terms and Conditions by solidarily binding itself with the principal debtors to fulfill the obligation.

The Central Bank was further authorized to deduct the amount due from RBGs demand deposit reserve should the latter become delinquent in payment. Based on these arrangements, the Central Banks immediate recourse, therefore should have been against the farmers-borrowers and the RBG; thus, it erred when it deducted the amounts covered by the debit advices from Metrobanks demand deposit account. Metrobank had no responsibility over the proceeds of the IBRD loans other than serving as a conduit for their transfer from the Central Bank to the RBG once credit advice has been issued. The agreement governed only the parties involved the Central Bank and the RBG. Metrobank was simply an outsider to the agreement. Our disagreement with the appellate court is in its conclusion that no legal subrogation took place; the present case, in fact, exemplifies the circumstance contemplated under paragraph 2, of Article 1302 of the Civil Code which provides:

Art. 1302. It is presumed that there is legal subrogation:

(1)   When a creditor pays another creditor who is preferred, even without the debtors knowledge;

(2)   When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;

(3)   When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter’s share.

Metrobank was a third party to the Central Bank-RBG agreement, had no interest except as a conduit, and was not legally answerable for the IBRD loans. Despite this, it was Metrobanks demand deposit account, instead of RBGs, which the Central Bank proceeded against, on the assumption perhaps that this was the most convenient means of recovering the cancelled loans. That Metrobanks payment was involuntarily made does not change the reality that it was Metrobank which effectively answered for RBGs obligations.

After Metrobank received the Central Banks debit advices, it (Metrobank) accordingly debited the amounts it could from RBGs special savings account without any objection from RBG. RBGs President and Manager, Dr. Aquiles Abellar, even wrote Metrobank with proposals regarding possible means of settling the amounts debited by Central Bank from Metrobank’s demand deposit account. These instances are all indicative of RBGs approval of Metrobank’s payment of the IBRD loans. That RBGs tacit approval came after payment had been made does not completely negate the legal subrogation that had taken place.

Article 1303 of the Civil Code states that subrogation transfers to the person subrogated the credit with all the rights thereto appertaining, either against the debtor or against third persons. As the entity against which the collection was enforced, Metrobank was subrogated to the rights of Central Bank and has a cause of action to recover from RBG the amounts it paid to the Central Bank.

 * Case digest by Paula Bianca B. Eguia, LLB-1, Andres Bonifacio Law School, SY 2017-2018