Metrobank v Gerona| G.R. No. 159097 |July 5, 2010 |BRION, J.

Petitioners: METROPOLITAN BANK AND TRUST COMPANY

Respondents: RURAL BANK OF GERONA, INC

FACTS:
 Rural Bank of Gerona (RBG) is a rural bank located in Tarlac.
 In the 1970s - the Central Bank and RBG entered into agreement where RBG shall facilitate the loan applications
of farmers under the “Reconstruction and Development Rural Credit Project (IBRD Project).”
o The agreement required RBG to open a separate bank account where IBRD loan proceeds shall be
deposited.
 RBG accordingly opened a special savings account with Metrobank.
 As depository bank of RBG, Metrobank was designated to receive credit advice released by Central Bank
representing the proceeds of the IBRD loan of farmers; Metrobank, in turn, credited the amounts to RBG’s
special savings account for RBG’s release to farmers.

 In 1978 - Central Bank released a credit advice, and accordingly credited Metrobank with the ff amounts for the
savings account of RBG ---
o P178,652, represented approved loan application of farmer de Jesus.
o P189,052, for farmer Panopio
o P220,000, for farmer Lagman

o RBG withdrew the first two amounts.

o For the 3rd amount, RBG only withdrew P75,375 out of the P220,000.
 Now, more than a month after RBG had made the above withdrawals, the Central Bank issued debit advices,
reversing all the approved loans. Central Bank debited from Metrobank’s demand deposit account the
amount corresponding to all three loans.
 Metrobank, in turn, debited the following amounts from RBG’s special savings account: P189,052, P115,000,
and P8,000.
Metrobank, however, claimed that these amounts were insufficient to cover all the credit advices that were
reversed by Central Bank. It demanded payment from RBG. Metrobank claimed that RBG still had an
outstanding balance of P334,220.

 To collect this amount, Metrobank filed complaint for collection of money against RBG.
 RTC: ruled for Metrobank, finding that legal subrogation had ensued; ordered RBG to pay Metrobank the sum
of P334,200, plus interest at 14% per annum.
Metrobank’s demand deposit reserves diminished correspondingly, Metrobank suffers prejudice in which
case legal subrogation has ensued.
 CA: noted that this was not a case of legal subrogation under Art 1302 of Civil Code. Nevertheless, CA
recognized that Metrobank had right to be reimbursed of what it paid and failed to recover. It clarified,
however, that a determination still had to be made on who should reimburse Metrobank. CA declared that
the Central Bank should be impleaded as a necessary party so it could shed light on the IBRD loan
reversals; remanded case to RTC after the Central Bank is impleaded as a necessary party.
 Metrobank elevated case with SC thru petition for review under Rule 45 ---
1 - Metrobank disagrees with the CA’s ruling to implead the Central Bank. It argues that inclusion of the
Central Bank as party to the case is unnecessary since RBG has already admitted its liability for the
amount Metrobank failed to recover.
2 - Metrobank contends that a remand would delay proceedings. Transactions took place in 1978, and case
was commenced more than 20 years ago.

ISSUE: WON Metrobank was subrogated to the rights of Central Bank after Central Bank pulled from its demand
deposit account. –YES
(IMPT ISSUE: W/N it was necessary to implead CB)NO
 who are the liable parties on the IBRD loans that Central Bank extended.
o the farmers to whom credits have been extended, are primarily liable for payment of borrowed
amounts. The loans were extended through RBG which handles collection and remittance. While
the farmers were the principal debtors, RBG assumed liability under the Project Terms and
Conditions by solidarily binding itself with principal debtors to fulfill obligation.
 As per the Terms and Conditions, if RBG delays in remitting, Central Bank imposed a 14% per annum penalty
on RBG until amount is actually remitted. Central Bank was further authorized to deduct the amount due from
RBG’s demand deposit reserve should the latter become delinquent in payment. This are reflected in Par5 and
6 of the Project Terms and Conditions read:

 Based on these arrangements, Central Bank’s immediate recourse, therefore should have been
against the farmers-borrowers and RBG; thus, it erred when it deducted the amounts from
Metrobank’s demand deposit account.
 Metrobank had no responsibility over proceeds of IBRD loans other than serving as a conduit for their
transfer from the Central Bank to RBG once credit advice has been issued. (ELAM: Central Bank is such
a bitch!)
o Metrobank was an outsider to the agreement.

 However, Court disagrees with CA in its conclusion that no legal subrogation took place. The present
case, in fact, exemplifies the legal subrogation as contemplated in Par 2 of Art 1302 of Civil Code which
provides:
Art. 1302. It is presumed that there is legal subrogation:
(2) When a third person, not interested in the obligation, pays with the express or tacit
approval of the debtor;
o In this case, Metrobank was a 3rd party to Central Bank-RBG agreement, had no interest except as a
conduit, and was not legally answerable for loans.
o Was there express or tacit approval by RBG of payment enforced against Metrobank? YES--- After
Metrobank received the Central Bank’s debit advices, Metrobank accordingly debited the amounts from
RBG’s special savings account W/O OBJECTION from RBG. RBG’s Pres and Mngr even wrote Metrobank
regarding possible means of settling amounts debited by Central Bank from Metrobank’s demand deposit
account. These are indicative of RBG’s approval of Metrobank’s payment of the IBRD loans.
o Also, fact that RBG’s tacit approval came after payment does not completely negate the legal subrogation
that had taken place.
 Art 1303 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, plus 14% per annum interest.
 (IMPT) Therefore, because of the subgrogation impleading the Central Bank as a party is completely unnecessary.
o CA erroneously believed that the Central Banks presence is necessary in order x x x to shed light on the
matter of reversals made by it concerning the loan applications of the end users and to have a complete
determination or settlement of the claim.
o In so far as Metrobank is concerned, however, the Central Banks presence and the reasons for its
reversals of the IBRD loans are immaterial after subrogation has taken place; Metrobanks interest is
simply to collect the amounts it paid the Central Bank. Whatever cause of action RBG may have against
the Central Bank for the unexplained reversals and any undue deductions is for RBG to ventilate as a
third-party claim; if it has not done so at this point, then the matter should be dealt with in a separate
case that should not in any way further delay the disposition of the present case that had been pending
before the courts since 1980.

 As this Court is not a trier of facts, we deem it proper to remand the factual issue to RTC for computation of
actual amount RBG owes to Metrobank.

DISPOSITION:Petition Granted