Elido v. Court of Appeals
REITERATIONFacts
1. The Antecedents: This case stems from a collection action initiated by The Overseas Bank of Manila (now Commercial Bank of Manila) against Allied Credit Integrated Services, Inc. (ALLIED) and petitioner Carlos O. Elido, Sr. The dispute arises from credit accommodations, specifically an overdraft facility, extended by the bank to ALLIED between October 15, 1964, and February 25, 1965. Petitioner Elido, along with Vicente M. Gomez, executed a Continuing Surety Agreement, solidarily binding themselves to pay any liability arising from the Overdraft Agreement, up to P10,000.00 plus interest and attorney's fees. ALLIED's overdraft reached P9,598.72 by March 23, 1965, and remained outstanding even after the Central Bank suspended the bank's operations on August 13, 1968. A rehabilitation program approved in 1974 included the collection of due loans. 2. Procedural History: The Overseas Bank of Manila filed its collection case against ALLIED and petitioner Elido on July 23, 1976, seeking P38,835.70, which included the principal overdraft and accrued interest. Vicente M. Gomez had died, and ALLIED was dropped as a defendant due to difficulties in service and delays. After several delays, the trial court allowed the bank to present its evidence ex parte. Petitioner Elido repeatedly acknowledged and assumed the entire obligation in various motions filed between April 1983 and October 1983, eventually submitting the case for decision. The Regional Trial Court rendered a decision on April 21, 1983, ordering Elido to pay the full amount plus interest and attorney's fees, based on his virtual confession of judgment. Elido appealed to the Court of Appeals, which affirmed the trial court's decision in toto on September 21, 1990. 3. The Petition: Petitioner Carlos O. Elido, Sr. seeks review on certiorari of the Court of Appeals' decision. He argues that the complaint was filed beyond the ten-year prescriptive period, that his liability is limited to P10,000.00 as per the Continuing Surety Agreement, and that attorney's fees should not have been awarded as the counsel merely presented evidence ex parte. He also raises for the first time the issue of non-joinder of real parties in interest (successive transferees of the bank's rights). The private respondent counters that Elido's admission of the obligation negates prescription and estops him from questioning the decision, that the suspension of banking operations should not prejudice their claim, and that the demand letters interrupted the prescriptive period. They also assert that the interest and attorney's fees are stipulated in the agreements, and that the bank's name changes did not divest the appellate court of jurisdiction, especially since the issue was not raised earlier.
Issue(s)
Whether the collection case filed by the respondent bank was barred by the statute of limitations and/or laches. Whether the petitioner's liability as a surety is limited to the principal amount of P10,000.00, excluding accrued interests and attorney's fees. Whether the Court of Appeals lost jurisdiction over the case due to the alleged non-joinder of real parties in interest. Whether the petitioner's admission of the obligation constituted a confession of judgment that negates his defenses.
Ruling
The petition is DISMISSED. The Supreme Court affirmed the decision of the Court of Appeals, holding petitioner Carlos O. Elido, Sr. liable for the full amount of P38,835.70, with 12% annual interest compounded monthly from July 1, 1976, and 10% attorney's fees.
Ratio Decidendi
On the issue of prescription and laches: The Court held that the petitioner's defense of prescription is untenable. The cause of action accrues not from the date of the instrument but from the date of the breach or violation thereof. In this case, even if the demand letters were disregarded, there was no point in time when petitioner could have refused to pay or committed a breach until the judicial demand on July 23, 1976, which is when the cause of action accrued. Furthermore, even if the action were barred by the statute of limitations, a debtor can still recognize and confess judgment upon the debt, which is precisely what the petitioner did. His admission of the obligation, as evidenced by his repeated motions for postponement and written manifestation, constituted a virtual confession of judgment, estopping him from raising the defense of prescription or laches. The Court reiterated that a confession of judgment is a clear and unequivocal admission of liability, entitling the plaintiff to judgment in accordance with such admission. On the extent of the surety's liability: The Court found the petitioner's contention that his obligation is limited to P10,000.00 to be untenable. The Continuing Surety Agreement expressly stated that the surety's liability shall not exceed P10,000.00 "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 the credits, loans, overdrafts." The Overdraft Agreement, the principal agreement, stipulated for 12% annual interest on advances, compounded monthly, with interest debited to the client's account becoming part of the principal. Both agreements also stipulated for attorney's fees of not less than 10% of the total amount due in case of judicial proceedings. Therefore, while the principal liability of the surety might be limited to P10,000.00, his obligation clearly extends to the interests borne by the principal loan and the attorney's fees, as expressly provided in the contracts, which are the law between the parties. On the alleged loss of jurisdiction due to non-joinder of real parties in interest: The Court dismissed this argument, stating that a transferee pendente lite stands in the same position as its predecessor-in-interest and is bound by the proceedings. Such a transferee is a proper but not an indispensable party. Moreover, the Court emphasized that this argument was never raised in the trial court nor averred before the Court of Appeals, and well-settled is the rule that issues not raised in the trial court cannot be raised for the first time before the Supreme Court. The respondent bank merely changed its name and was never dissolved, and the petitioner was aware of these changes, thus he cannot raise this matter at a late stage. On the effect of the confession of judgment: The Court highlighted that the petitioner seriously jeopardized his cause by making a virtual confession of judgment. It reiterated that judgment may be rendered based on a clear and unequivocal admission of liability in the pleadings of the opposing party. Where the defendant admits and assumes the entire obligation as prayed for, the plaintiff is entitled to judgment in accordance with such admission, provided it is distinct, unequivocal, and unconditional. The petitioner's actions constituted such an admission, making his defenses of prescription and limited liability moot.
Main Doctrine
A confession of judgment, being a virtual admission of liability, negates claims of prescription and laches, and estops the defendant from questioning the propriety of the judgment rendered based on such admission. The liability of a surety under a continuing surety agreement extends to accrued interests and attorney's fees as expressly stipulated in the principal and surety agreements, even if the principal amount is limited.