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    Babst v. CA

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    1) Elizalde Steel Consolidated, Inc. (ELISCON) obtained a loan from Commercial Bank and Trust Company (CBTC) and defaulted, leaving an outstanding balance that was assumed by the Bank of the Philippine Islands (BPI) when it merged with CBTC. 2) ELISCON called its creditors, including BPI, to a meeting announcing that the Development Bank of the Philippines (DBP) would take over ELISCON's assets and debts. BPI objected only to the payment formula, not the substitution of DBP as the new debtor. 3) The Supreme Court ruled that BPI's failure to object to DBP assuming

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    Babst v. CA

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    1) Elizalde Steel Consolidated, Inc. (ELISCON) obtained a loan from Commercial Bank and Trust Company (CBTC) and defaulted, leaving an outstanding balance that was assumed by the Bank of the Philippine Islands (BPI) when it merged with CBTC. 2) ELISCON called its creditors, including BPI, to a meeting announcing that the Development Bank of the Philippines (DBP) would take over ELISCON's assets and debts. BPI objected only to the payment formula, not the substitution of DBP as the new debtor. 3) The Supreme Court ruled that BPI's failure to object to DBP assuming

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    case novation

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    1) Elizalde Steel Consolidated, Inc. (ELISCON) obtained a loan from Commercial Bank and Trust Company (CBTC) and defaulted, leaving an outstanding balance that was assumed by the Bank of the Philippine Islands (BPI) when it merged with CBTC. 2) ELISCON called its creditors, including BPI, to a meeting announcing that the Development Bank of the Philippines (DBP) would take over ELISCON's assets and debts. BPI objected only to the payment formula, not the substitution of DBP as the new debtor. 3) The Supreme Court ruled that BPI's failure to object to DBP assuming

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    1K views1 page

    Babst v. CA

    Uploaded by

    Admin Division
    1) Elizalde Steel Consolidated, Inc. (ELISCON) obtained a loan from Commercial Bank and Trust Company (CBTC) and defaulted, leaving an outstanding balance that was assumed by the Bank of the Philippine Islands (BPI) when it merged with CBTC. 2) ELISCON called its creditors, including BPI, to a meeting announcing that the Development Bank of the Philippines (DBP) would take over ELISCON's assets and debts. BPI objected only to the payment formula, not the substitution of DBP as the new debtor. 3) The Supreme Court ruled that BPI's failure to object to DBP assuming

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    of 1

    ObliCon

    UP LAW A-2015 DIGEST SYSTEM A-2015 | AY 2011-2012


    [Obligations and Contracts| Prof. JJ Disini] 2nd

    Novation BPI argued that it did not give consent to the


    Art. 1291 DBP take-over of ELISCON. Hence, no valid
    --- novation has been effected.

    Babst v CA Issue:
    WON BPI consented to the assumption by
    Date of Promulgation: Jan. 26, 2001
    DBP of the obligations of ELISCON. YES. The
    Ponente: J. Ynares-Santiago original obligation having been extinguished,
    the contracts of suretyship executed by
    Facts: Babst and MULTI are also extinguished.
    Elizalde Steel Consolidated, Inc. (ELISCON)
    obtained a loan from Commercial Bank and Ratio:
    Trust Company (CBTC) in the amount of BPI contends that there must be an express
    P8,015,900.84, evidenced by a promissory consent of the creditor. However, the rule
    note. ELISCON defaulted on its payments, that it must be express is not absolute
    leaving an outstanding balance of for the existence of the consent may well be
    P2,795,240.67. inferred from the acts of the creditor, since
    volition may as well be expressed by deeds
    The letters of credit, on the other hand, were as by words. In short, there can be implied
    opened for ELISCON by CBTC using the consent of the creditor to the
    credit facilities of Pacific Multi-Commercial substitution of debtors.
    Corporation (MULTI) with the said bank.
    Subsequently, Antonio Roxas Chua and In the instant case, the failure of BPI to
    Chester Babst executed a Continuing register its objection to the take-over by DBP
    Suretyship, whereby they bound themselves of ELISCONs assets at the creditors
    jointly and severally liable to pay any meeting is deemed to be a form of implied
    existing indebtedness of MULTI to CBTC. consent on the part of BPI. BPI merely
    objected to the payment formula, not the
    The Bank of the Philippine Islands (BPI) and substitution of debtors.
    CBTC entered into a merger, wherein BPI, as
    the surviving corporation, acquired all the BPIs conduct evinced a clear and
    assets and assumed all the liabilities of unmistakable consent to the substitution of
    CBTC. Meanwhile, ELISCON became heavily DBP for ELISCON as debtor. Hence, there
    indebted to DBP as it suffered financial was a valid novation which resulted in the
    difficulties. release of ELISCON from its obligation to BPI,
    whose cause of action should be directed
    ELISCON called its creditors to a meeting to against DBP as the new debtor.
    announce the take-over by DBP of its assets,
    including its indebtedness to BPI. Thereafter,
    DBP proposed formulas for the settlement of
    all of ELISCONs obligations to its creditors, Vina Villarroya
    but BPI rejected the formula.

    BPI then filed a complaint for sum of money


    against ELISCON, MULTI, and Babst. ELISCON
    argued that the complaint was premature
    since DBP had made serious efforts to settle
    its obligations with BPI. Babst, on the other
    hand, asserted that his suretyship covers
    only obligations which MULTI incurred solely
    for its benefit and not for any third party
    liability. MULTI denied knowledge of the BPI-
    CBTC merger.

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