G.R. No. 211519, 14 August 2017

FACTS:

Plaintiff Dela Cruz is the sole owner and proprietor of the Mamertha General Merchandising (Mamertha), an entity engaged in sugar trading since 1970. He maintained a bank account with defendant Panasia Banking, Inc. (Panasia). Dela Cruz discovered that Panasia allowed his son to withdraw money from the said bank account/deposit without his consent and/or authority. Upon discovery, he immediately instructed Panasia not to allow his son to make any withdrawals from his bank account but Panasia still allowed and continued to allow Dela Cruz’s son to withdraw from the said bank account/deposit without his knowledge and consent which amounted to P56,223,066.07. Dela Cruz made a formal demand from Panasia to pay and/or re-deposit the amount to his bank account/deposit within five (5) days from receipt hereof which the latter failed to do.

Dela Cruz instituted a suit for collection of sum of money. In the meantime, the Bank of Commerce (BOC) demanded payment from Dela Cruz the amount of P27,150,000.00 for the loan he obtained from Panasia and that pursuant to a Purchase and Sale Agreement entered into between Panasia and BOC, Panasia has been acquired by BOC transferring to the latter the former’s assets and liabilities on bank deposits.

Dela Cruz demanded from the BOC to pay the liability of Panasia to him and offered to compensate/set off his secured loan obligation. RTC declared the petitioner and Panasia jointly and severally liable to the late Rodolfo dela Cruz. CA concurred with the RTC’s conclusion.

ISSUE:

Whether or not the petitioner was properly held to be solidarily liable with Panasia for the latter’s negligence.

RULING:

The appeal has merit.The CA and the RTC were in unison in declaring that the petitioner’s failure to formally offer the Purchase and Sale Agreement and Deed of Assignment was fatal to its defense. The CA and the RTC are upheld in this regard.

Nonetheless, the exclusion of the Sale and Purchase Agreement from the body of evidence for consideration in the resolution of the case caused a void in the link between the petitioner and Panasia necessary to support the pronouncement of the personal liability of the petitioner for the negligence on the part of Panasia. Verily, without the Sale and Purchase Agreement being admitted in evidence, implicating the petitioner in the negligence of Panasia had no factual basis for the simple reason that there was no showing at all of the petitioner having specifically merged with Panasia and thereby assumed the latter’s liabilities.

With the petitioner having specifically denied having merged with Panasia, averring instead that its purchase had concerned only selected assets and liabilities of Panasia, it became the burden of dela Cruz to prove the merger with Panasia, and the petitioner’s becoming the surviving corporation. His failure in this respect left his cause of action against the petitioner unproved.

Contrary to the findings and conclusions of the RTC, the merger of the petitioner and Panasia was not of common knowledge. It was overly presumptuous for the RTC to thereby assume the merger because the element of notoriety as basis for taking judicial notice of the merger was loudly lacking. A merger is the union of two or more existing corporations in which the surviving corporation absorbs the others and continues the combined business. The merger dissolves the non-surviving corporations, and the surviving corporation acquires all the rights, properties and liabilities of the dissolved corporations. Considering that the merger involves fundamental changes in the corporation, as well as in the rights of the stockholders and the creditors, there must be an express provision of law authorizing the merger. The merger does not become effective upon the mere agreement of the constituent corporations, but upon the approval of the articles of merger by the Securities and Exchange Commission issuing the certificate of merger as required by Section 79 of the Corporation Code. Should any party in the merger be a special corporation governed by its own charter, the Corporation Code particularly mandates that a favorable recommendation of the appropriate government agency should first be obtained.

It is plain enough, therefore, that there were several specific facts whose existence must be shown (not assumed) before the merger of two or more corporations can be declared as established. Among such facts are the plan of merger that includes the terms and mode of carrying out the merger and the statement of the changes, if any, of the present articles of the surviving corporation; the approval of the plan of merger by majority vote of each of the boards of directors of the concerned corporations at separate meetings; the submission of the plan of merger for the approval of the stockholders or members of each of the corporations at separate corporate meetings duly called for the purpose; the affirmative vote of 2/3 of the outstanding capital in case of stock corporations, or 2/3 of the members in case of non-stock corporations; the submission of the approved articles of merger executed by each of the constituent corporations to the SEC; and the issuance of the certificate by the SEC on the approval of the merger.

In this case, because dela Cruz’s allegation of the merger was specifically denied by the petitioner, the RTC had absolutely no factual and legal bases to take constructive notice of any of the foregoing circumstances.

*Case Digest by Legine S. Ramayla, JD-IV, Andres Bonifacio College, SY: 2019-2020