G.R. No. L-45866 April 19, 1989
OVERSEAS BANK OF MANILA, petitioner, vs. COURT OF APPEALS and NATIONAL WATERWORKS AND SEWERAGE AUTHORITY, respondents.

FACTS

The National Waterworks and Sewerage Authority (NAWASA) placed two time deposits with the Overseas Bank of Manila. The first, for P327,257.20, matured on April 6, 1966. The second, for P2,945,314.80, matured on December 19, 1966. Upon and after maturity, NAWASA repeatedly demanded payment through several letters. The bank ignored all demands, though it paid accrued interest of P212,338.27 in December 1966. NAWASA even sought the Central Bank’s intervention, but the Overseas Bank remained unresponsive. Consequently, NAWASA filed a collection suit.
The Manila Court of First Instance declared the Overseas Bank in default for failure to file an answer. It rendered a judgment by default, ordering the bank to pay the principal amounts with stipulated interest, legal interest, attorney’s fees, and costs. The Court of Appeals affirmed the trial court’s decision with a minor modification on the interest rate. The petitioner bank now seeks a reversal via certiorari, arguing that the Central Bank’s suspension of its operations and a subsequent Supreme Court-approved rehabilitation plan excused its non-payment.

ISSUE

Whether the Overseas Bank of Manila is liable to pay its matured time deposit obligations to NAWASA despite claims of operational suspension and an existing rehabilitation plan.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The bank’s obligations, which matured in 1966, are clear and demandable. Its first argument—that the Central Bank’s punitive actions prevented it from generating funds—is unavailing. There is no evidence in the record to support this, as the bank did not participate in the trial. Moreover, this claim cannot excuse non-compliance with obligations that matured before the alleged suspension in 1968.
The petitioner’s invocation of a rehabilitation program approved in a 1971 Supreme Court case is also futile. The Appellate Court’s judgment preceded this program, and its failure to apply it was not error. Crucially, such a rehabilitation plan does not negate or diminish the existence of the debt; it merely prescribes a procedure for payment. The bank’s liability for the principal and lawful interest remains. Finally, the award of attorney’s fees is justified under Article 2208 of the Civil Code, as the bank acted in bad faith by deliberately ignoring all demands, compelling NAWASA to litigate. The determination that 10% of the recovery is reasonable was sustained.