8/1/2016

G.R.No.95441

TodayisMonday,August01,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
FIRSTDIVISION

G.R.No.95441December16,1992
CARLOSO.ELIDO,SR.,petitioner,
vs.
COURTOFAPPEALSandTHEOVERSEASBANKOFMANILA(nowCommercialBankofManila),
respondents.

BELLOSILLO,J.:
We are catching the tailend of the string of the cases visiting this Court as a result of the Resolutions 1 of the
Central Bank of the Philippines suspending the banking operations of The Overseas Bank of Manila. However, unlike the
othercaseswhichsquarelyputatissuethevalidityofthebank'stemporaryclosure,thisisasimplecollectioncasewhere
thebankfailedtocollectfromadebtorafteritsbankingactivitieswereprovisionallysuspended.

The records disclose that from 15 October 1964 to 25 February 1965, Allied Credit Integrated Services, Inc.
(ALLIED, for brevity) obtained credit accommodations from private respondent, The Overseas Bank of Manila,
laterknownastheCommercialBankofManila,andstilllater,theBostonBank
of the Philippines. 2 On 11 January 1965, to embody the terms of their undertaking in writing, ALLIED and private
respondent entered into an Overdraft Agreement 3 allowing ALLIED to overdraw from its account deposited with The
Overseas Bank of Manila such amounts not exceeding Ten Thousand Pesos (P10,000.00) at an annual interest rate of
twelvepercent(12%)compoundedmonthly.TosecureALLIED'spromptpaymentofanyliabilityarisingfromtheOverdraft
Agreement,petitionerCarlosO.Elido,Sr.,andoneVicenteM.GomezexecutedaContinuingSuretyAgreement,4solidarily
bindingthemselvesuptotheprincipalamountofTenThousandPesos(P10,000.00),plusinterestthereonattheratestated
in the Overdraft Agreement. Like the Overdraft Agreement, the Continuing Surety Agreement stipulates that ten percent
(10%)oftheamountdueshallbepaidbythedebtorasattorney'sfeesincaseajudicialproceedingisinstitutedtoenforce
thetermsandconditionsthereof.

By 23 March 1965, ALLIED had an existing overdraft of Nine Thousand Five Hundred NinetyEight Pesos and
SeventyTwo Centavos (P9,598.72) which remained outstanding even after the Central Bank forbade it from
doingbusinesson13August1968uponfindingrespondentbank'sfinancialconditiontobeextremelyprecarious.
5On23October1974,theCourtapprovedtheProgramofRehabilitationofTheOverseasBankofManilasubmittedbyboth

privaterespondentandtheCentralBank, 6PhaseIofwhichprovides,amongothers,forthecollectionofallloansalready
dueanddemandable.7

Hence, on 23 July 1976, after sending at least four (4) demand letters and still failing to collect, private
respondentfiledacollectioncaseagainstALLIEDandpetitionerCarlosO.Elido,Sr.Bythen,privaterespondent
was already suing for P38,835.70 (P9,598.72 as principal overdraft and P29,236.98 as charges and accrued
interestfrom30October1964to30June1976).8
Meanwhile,VicenteM.Gomezdied,hence,wasnolongerimpleaded.ALLIED,whichhadceasedoperations,was
then dropped as codefendant at the instance of private respondent as it could not be properly served with
summonsandwasalreadydelayingtheproceedings.
Aftersomedelay,whichwasrationalizedbythepossibilityofanamicablesettlementandthenonappearanceof
petitioner,thetrialcourtallowedprivaterespondenttopresentitsevidenceexparte.9
Subsequently,on18April1983,whilemovingtopostponetheproceedings,petitioner"assumedandadmittedthe
entire obligation as prayed for in the complaint." He then repeated his acknowledgment of the obligation in his
http://www.lawphil.net/judjuris/juri1992/dec1992/gr_95441_1992.html

1/5

8/1/2016

G.R.No.95441

motionsforpostponementfiled16June1983,22July1983,24August1983,and14September1983.Finally,on
19October1983,thecasewassubmittedfordecisionwhenpetitionercouldnotwaitforthejudgetoarriveatthe
scheduledhearinginstead,petitionersubmittedawrittenmanifestation10
Ihaveadmittedtheobligationasprayedforinthecomplaint&assumedtheloan&is(sic) waiving
presentationofevidenceforthedefendantssinceIfiledthepostponementonSeptember13,1983,
statingthatIwillsubmitthecasefordecisionintheeventthiscaseisnotsettled.Moreover,plaintiff
hadalreadypresentedandrestedhiscase.
Thus,on21April1983,afteralmosttenyearsfromthetimethecasewasinstituted,theRegionalTrialCourtof
Manila,Br.7,11rendereditsDecisionpertinentportionsofwhichreads
Notwithstandingdevelopmentsandcircumstancesaforestated,thiscasemaynowbedecidedonthe
basis of the virtual confession of judgment by defendant Atty. Carlos Elido, Sr., and the partial
stipulationoffactsfiledbytheparties.
WHEREFORE, judgment is hereby rendered ordering defendant Carlos O. Elido, Sr. to pay plaintiff
thesumofP38,835.70,withinterestat12%p.a.fromJuly1,1976,compoundedmonthly,untilsaid
amount is fully paid, and 10% of the total amount due by virtue hereof as attorney's fee, and the
costs.
From the foregoing judgment, petitioner appealed to the Court of Appeals. However, on 21 September 1990,
respondentappellatecourt,12findingnoreversibleerror,affirmedintototheDecisionappealedfrom.
In this petition for review on certiorari of the decision of respondent Court of Appeals, petitioner imputes the
following errors to respondent appellate court: (a) in not declaring that private respondent's complaint instituted
23 July 1976 was filed more than eleven (11) years from the time the agreement was executed on 11 January
1965,hence,alreadybarredbythestatuteoflimitationsand/orlacheswhichprovidesforaprescriptiveperiodof
onlyten(10)years(b)indeclaringhimliabletoprivaterespondentinthesumofP38,835.70withannualinterest
oftwelvepercent(12%)compoundedmonthlyfrom1July1976untilfullypaid,contrarytotheirContinuingSurety
Agreement specifically limiting his liability to Ten Thousand Pesos (P10,000.00) only and, (c) in ordering
petitionertopayprivaterespondenttenpercent(10%)forattorney'sfeesdespitethefactthatitscounselmerely
presenteditsevidenceexparte.
In his Reply, petitioner questions for the first time the nonjoinder of the real parties in interest, i.e., the
CommercialBankofManilaand/ortheBostonBankofthePhilippinesassuccessivetransfereesoftherightsof
private respondent, while the case was before respondent appellate court which, as a consequence, divested
respondentappellatecourtofjurisdictionoverthecase.
Private respondent bank, on the other hand, counters that the unequivocal admission and assumption of the
obligation by petitioner totally negates the latter's claim of prescription and/or laches hence, petitioner is
estoppedfromquestioningtheproprietyofthedecisionofthelowercourt.Privaterespondentfurtherarguesthat
the period during which its banking operations were suspended should not be taken against it as it was then
practicallypreventedfromenforcingitsrightsundertheirOverdraftAgreementandContinuingSuretyAgreement,
andthatthedemandlettersof7June1966,1March1976,12March1976,and19March1976senttoALLIED
causedthefullperiodofprescriptiontorunanew.
Onpetitioner'scontentionthathisliabilityislimitedonlytoTenThousandPesos(P10,000.00),privaterespondent
submitsthatthetwelvepercent(12%)interestontheprincipaloverdraftandtheadditionaltenpercent(10%)of
theamountdueasattorney'sfees,bothgrantedbythetrialcourt,wereexpresslystipulatedinbothagreements.
Finally, in response to the Reply of petitioner that respondent court has lost jurisdiction over the case on the
ground of nonjoinder of real parties in interest, private respondent maintains that respondent appellate court
never lost jurisdiction as there was no transfer of interest to speak of, and that private respondent merely
changeditsnamefromTheOverseasBankofManilatoCommercialBankofthePhilippines,andthentoBoston
Bank of the Philippines. It was never dissolved. Besides, petitioner was well aware of the change of name of
private respondent, as evidenced by the various pleadings he filed in the appellate court wherein he never
assailed the change. Verily, he cannot at this late stage raise the matter for the first time. Jurisprudence has
settledagainstpetitionertheissuesraisedbyhimconsequently,hispetitionmustfail.
Petitioner's defense of prescription is untenable. He seeks refuge in Art. 1144 (1) 13 of the Civil Code, which
howeverprovidesthatthecauseofactionmustbebroughtwithinten(10)yearsfromthetimethecauseofactionaccrues.
Thus,inanumberofcases,14Weheld

Sincea"causeofaction"requiresasessentialelements,notonlyalegalrightoftheplaintiffanda
correlative obligation of the defendant but also "an act or omission of the defendant in violation of
http://www.lawphil.net/judjuris/juri1992/dec1992/gr_95441_1992.html

2/5

8/1/2016

G.R.No.95441

said legal right," the cause of action does not accrue until the party obligated refuses, expressly or
impliedly,tocomplywithitsduty.
Also,intwo(2)othercases,15Weruled
Acauseofactionhasthreeelements,namely:(1)arightinfavoroftheplaintiffbywhatevermeans
andunderwhateverlawitarisesoriscreated(2)anobligationonthepartofthenameddefendant
to respect or not to violate such right and (3) an act or omission on the part of such defendant
violativeoftherightoftheplaintifforconstitutingabreachoftheobligationofthedefendanttothe
plaintiff.Itisonlywhenthelastelementoccursortakesplacethatitcanbesaidinlawthatacause
of action has arisen. Translated in terms of hypothetical situation regarding a written contract, no
causeofactionarisesuntilthereisbreachorviolationthereofbyeitherparty.Itisnot,therefore,from
thedateoftheinstrumentbutfromthedateofthebreachthattheperiodofprescriptionoftheaction
starts.
In the case before Us, private respondent attached to its appellee's brief filed with the court below copies of its
demand letter of 7 June 1966, 1, 12 and 19 March 1976 all addressed to petitioner, apparently to show the
interruption of the tenyear prescriptive period. Petitioner however prays that We disregard the demand letters
becauseoftheirdubiousauthenticityastheywerenotallegedlypresentedinthecourtbelow.
Butthisdoesnotputpetitionerinabetterposition.For,evenifWedisregardthevariousdemands(anyway,no
evidence was adduced as to when they were received), this could only mean that the prescriptive period never
commenced to run since there was no point in time when petitioner could have refused to pay, or committed a
breach,untilthejudicialdemandon23July1976which,incidentally,alsosuspendedtherunningoftheperiod.
ThismustbesoastheOverdraftAgreementstipulatesthattheobligationshallbepayableupondemand,while
the Continuing Surety Agreement, being a supplemental agreement, merely provides that the obligation shall
becomedueuponmaturity,withorwithoutdemand.Hence,itisonlyfromthisjudicialdemandthatthecauseof
action accrued, and not from 11 January 1966, the date the Overdraft Agreement and the Continuing Surety
Agreementwereexecuted.Besides,evenassumingthattheactiononthedebtisalreadybarredbythestatuteof
limitations, this cannot prevent the debtor from recognizing and confessing judgment upon it, which was what
petitionerdidinfact.
ThecontentionofpetitionerthathisobligationislimitedonlytoTenThousandPesos(P10,000.00)isuntenable.
TheContinuingSuretyAgreementexpresslyprovides
[t]he liability of the SURETY shall not at anytime exceed the sum of TEN THOUSAND ONLY . . .
(P10,000.00) Philippine Currency, plus the interest thereon at the rate or rates stated in the
obligations secured hereby, and the cost and expenses the CREDITOR incurred in the granting of
thecredits,loans,overdrafts...(emphasissupplied),16
whiletheOverdraftAgreement,whichinfactistheprincipalagreement,
reads
AnyandalladvancesandpaymentsmadebytheBANKtotheCLIENThereunder,inwhateverform
madeorallowedshallbear interest at the rate of twelve per centum (12%) per annum, upon daily
balancesasshownbythebooksoftheBANK,whichinterestshallbepayablemonthlyonthedayof
eachmonth,orattheoptionoftheBANK,theamountthereofshallbedebitedtotheaccountofthe
CLIENT.InterestdebitedtotheaccountoftheCLIENTshallthereuponbecomepartoftheprincipal
duefromtheCLIENTandshalldrawinterestatthesamerate(emphasissupplied).17
Bothagreementslikewiseexpresslystatethatintheeventjudicialproceedingsareinstitutedfortherecoveryof
anyamountduethereunder,theclientand/orthesurety,asthecasemaybe,shallpaythebankattorney'sfees
and the costs of collection which shall not be less than ten percent (10%) of the total amount due. 18 From the
provisions of the agreements, it is thus crystal clear that while the liability of the surety may be limited to the principal
overdraft of Ten Thousand Pesos (P10,000.00), his obligation extends to the interests borne by the principal loan and the
attorney'sfeeshemaybeliablefor.Thesearetheprovisionsofthecontractbetweenthepartieswhichmustberespected
asthecontractisthelawbetweenthem.19

Petitioner'ssubmissionthatrespondentappellatecourtlostjurisdictionoverthecasebyreasonofnonjoinderof
realpartiesininterestdeservesscantconsideration.WehavealreadysaidinJocsonv.CourtofAppeals 20 that

ThisCourthasdeclaredinanumberofdecisionsthatatransfereependentelitestandsinexactlythe
samepositionasitspredecessorininterest,theoriginaldefendant,andisboundbytheproceedings
hadinthecasebeforethepropertywastransferredtoit.Itisaproperbutnotanindispensableparty
asitwouldinanyeventbeboundbythejudgmentagainsthispredecessor.Thiswouldfollowevenif
http://www.lawphil.net/judjuris/juri1992/dec1992/gr_95441_1992.html

3/5

8/1/2016

G.R.No.95441

itisnotformallyincludedasadefendantthroughanamendmentofthecomplaint.
Moreover,thisargumentmustoutrightlyberejectedasitwasneverbroughttotheattentionofthetrialcourtnor
averredbeforerespondentappellatecourt.Wellsettledistherulethatissuesnotraisedinthetrialcourt,letalone
intheCourtofAppeals,cannotberaisedforthefirsttimebeforethisCourt.21
Upontheotherhand,petitionerseriouslyjeopardizedhiscausewhenhemadeavirtualconfessionofjudgment.
In fine, had We opted to, We could have easily disposed of this petition on this ground, and immediately upon
filingatthat,foritiselementarythatjudgmentmayberenderedforeithertheplaintifforthedefendantonaclear
andunequivocaladmissionofliabilityinthepleadingsoftheopposingparty. 22 Hence, where the defendant in his
pleadings admits and assumes the entire obligation as prayed for in the complaint, plaintiff is entitled to have judgment
enteredinaccordancewithsuchadmission,providedtheadmissionisdistinct,unequivocalandunconditional.

We realize the implications of Our decision, considering that respondent bank will be allowed to collect accrued
interests corresponding to the period when its operations were suspended by the Central Bank. But, this is
inevitable.WecannotstampOurimprimaturonpetitioner'senjoymentofaninterestfreeloaninderogationofthe
express provisions of the Continuing Surety Agreement he freely and voluntarily entered into with private
respondent. To rule otherwise would be violative of the clear terms of the agreement of the parties, and would
onlyexacerbatethealreadycriticalfinancialplightofrespondentbank.
WHEREFORE, finding no reversible error committed by respondent Court of Appeals, the instant petition is
DISMISSED.Costsagainstpetitioner.
SOORDERED.
Cruz,PadillaandGrioAquino,JJ.,concur.

Footnotes
1MonetaryBoardResolutionNo.1263issued31July1968excludingTheOverseasBankofManila
frominterbankingclearingCentralBankResolutionNo.1290issued1August1968suspendingthe
operationsofTheOverseasBankofManilaand,CentralBankResolutionNo.1333issued13
August1968completelyforbiddingTheOverseasBankofManilafromdoingbusinesspreparatoryto
itsforcibleliquidation.
2Asof25July1991.
3Complaint,Annex"A".
4Complaint,Annex"B".
5SeeRamosv.CentralBankofthePhil.,No.L29352,4October1971,41SCRA565,forthe
chronologyofevents.
6Ramosv.CentralBankofthePhil.,No.L29352,23October197460SCRA276.
7RehabilitationPlanofTheOverseasBankofManila,PhaseI,1.1.
8SeeComplaint,Annex"C".
9Order,28October1982.
10Records,RegionalTrialCourt,p.190.
11PennedbyJudgeAmanteP.Purisima.
12FourteenthDivisionDecisionpennedbyJusticeArturoB.Buena,Chairman,concurredinby
JusticesNicolasP.Lapea,Jr.,FortunatoA.Vailoces.
13Art.1144.Thefollowingactionsmustbebroughtwithintenyearsfromthetimethecauseof
actionaccrues:(1)Uponawrittencontract(2)Uponanobligationcreatedbylaw(3)Upona
judgment.
14MaaoSugarCentralCo.v.Barrios,79Phil.666(1947)ACCFAv.AlphaInsuranceandSurety
Co.,Inc.,No.L24566,29July1968,24SCRA151SummitGuarantyandInsuranceCo.,Inc.,v.De
Guzman,G.R.No.50997,30June1987,151SCRA389Youngv.CA,G.R.No.83271,8May1991,
http://www.lawphil.net/judjuris/juri1992/dec1992/gr_95441_1992.html

4/5

8/1/2016

G.R.No.95441

196
SCRA795.
15Colev.Vda.deGregorio,G.R.No.55315,21September1982,116SCRA670,andNabusv.CA,
G.R.No.91670,7February1991,193SCRA732.
16ContinuingSuretyAgreement,par.3.
17OverdraftAgreement,par.4(D).
18ContinuingSuretyAgreement,par.9,andOverdraftAgreement,par.4(I).
19Samhwav.IAC,G.R.No.74305,31January1992,205SCRA632.
20G.R.No.88297,22March1990183SCRA589,592.
21Rosalesv.CA,G.R.No.95697,5August1991,200SCRA300BAFinancev.CA,G.R.No.
82040,27August1991,201SCRA157RepublicResourcesandDevelopmentCorp.v.CA,G.R.No.
33438,28October1991,203SCRA164andotherrelatedcases.
2249C.J.S.321.
TheLawphilProjectArellanoLawFoundation

http://www.lawphil.net/judjuris/juri1992/dec1992/gr_95441_1992.html

5/5