Title
Metro Concast Steel Corp. vs. Allied Bank Corp.
Case
G.R. No. 177921
Decision Date
Dec 4, 2013
Metro Concast defaulted on loans from Allied Bank, citing economic downturns and Peakstar's breach of a separate asset sale agreement. SC ruled obligations remained, rejecting force majeure claim.

Case Summary (G.R. No. 177921)

Loan Transactions and Agreements

Metro Concast executed Promissory Note No. 96-21301 on December 13, 1996 for ₱2,000,000 at 15.25% p.a. with 3% monthly penalty. It also entered into twelve trust receipts between July 1995 and March 1997 totalling ₱51,064,094.28 at 14% p.a. with 1% monthly penalty.

Security Provided

Individual petitioners each executed Continuing Guaranty/Comprehensive Surety Agreements in favor of Allied Bank to secure Metro Concast’s indebtedness under the promissory note and trust receipts.

Petitioners’ Default and Extrajudicial Demand

Metro Concast and the individual guarantors failed to pay principal, interest, and penalties. On December 10, 1998, Allied Bank issued demand letters for ₱51,064,093.62. No payment was forthcoming, prompting Allied Bank to file a collection suit before the Regional Trial Court of Makati (Civil Case No. 00-1563).

Trial Court Decision

The RTC, in a January 17, 2006 decision, dismissed Allied Bank’s complaint. It held that the parties’ November 8, 2002 Memorandum of Agreement (MoA) with Peakstar Oil Corporation—negotiated and drafted by Atty. Peter Saw of Allied Bank’s legal department—constituted an effective novation. The trial court found that Allied Bank, through its agent Atty. Saw, had bound itself to accept the proceeds of the scrap-metal sale in satisfaction of the loan obligations.

Court of Appeals Decision

The Court of Appeals, in a February 12, 2007 decision, reversed. It ruled that:

  1. The MoA between Metro Concast and Peakstar did not indicate Allied Bank’s intervention or consent as principal;
  2. There was insufficient evidence that Atty. Saw was authorized to bind Allied Bank in the scrap-metal sale;
  3. The proceeds and checks under the MoA were in favor of Metro Concast, not Allied Bank;
  4. Therefore, no novation occurred, and the original loan obligations remained in full force.

Issue Before the Supreme Court

Whether Metro Concast’s and the guarantors’ loan obligations were extinguished by the MoA with Peakstar under the doctrine of novation or by force majeure.

Supreme Court Analysis

  1. Nature of Obligations: The promissory note and trust receipts are separate loan contracts, unaffected by an independent sale-of-assets agreement. Absent express modification, novation cannot be presumed.
  2. Authority of Agent: Petitioners failed to prove that Atty. Saw was duly authorized to bind Allied Bank in the sale transaction; mere participation in negotiations does not establish agency.
  3. Force Majeure Claim: Peakstar’s default does not qualify as a fortuitous event—its non-performance was

...continue reading

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster—building context before diving into full texts.

About Privacy Terms