G.R. No. 123793 - Associated Bank vs. Court of Appeals

On September 16, 1975, Associated Banking Corporation (ABC) and Citizens Bank and Trust Company (CBTC) executed a merger agreement, providing that the merger would be effective upon Securities and Exchange Commission (SEC) approval and issuance of a certificate of merger.
Upon effectiveness, ABC, as the surviving corporation, would acquire all rights, privileges, assets, liabilities, debts, franchises and contracts of CBTC, and all references to CBTC in existing or future documents would be deemed references to ABC.

On September 7, 1977, Lorenzo Sarmiento Jr. executed Promissory Note No. TL-2649-77 in favor of CBTC for ₱2,500,000.00, payable on or before March 6, 1978, with 14% annual interest, 3% liquidated damages, compounded interest, and 10% attorney’s fees on default.
Partial payment of ₱1,000,000.00 was made; the remaining balance of ₱4,689,413.63 (inclusive of interest and charges) remained unpaid despite demand.

Associated Bank (ABC’s successor) filed suit on August 22, 1985 before RTC Manila, Branch 48, for collection of the unpaid balance. Sarmiento defaulted to appear at pre-trial, resulting in ex parte presentation of evidence and a judgment on October 17, 1986 in favor of the bank for ₱4,689,413.63 plus interest, attorney’s fees and costs.
On appeal, the Court of Appeals (CA) in CA-GR CV No. 26465 (January 30, 1996) held that Associated Bank lacked privity and cause of action because the promissory note was executed in favor of CBTC after the merger agreement, and thus dismissed the complaint.
ABC petitioned this Court under Rule 45, challenging the CA’s ruling that the surviving corporation could not enforce the post-merger note.

Whether the surviving corporation (Associated Bank) has the right to enforce a promissory note executed in favor of the absorbed corporation (CBTC) after the merger agreement but prior to SEC certification.
Whether Associated Bank proved privity of contract and a valid cause of action against Sarmiento.
Whether defenses of prescription, laches, contract pour autrui, and lack of consideration bar the action.