A Collection of Case Digests

Spouses Ong v. BPI Family Savings Bank – Liability of Surviving Corporation for Acts Committed by Absorbed Corporation

G.R. No. 208638; 24 January 2018

54

Facts:

Sometime in December 1996, Bank of Southeast Asia’s (BSA) managers, Ronnie Denila and Rommel Nayve, visited petitioners’ office and discussed the various loan and credit facilities offered by their bank. In view of petitioners’ business expansion plans and the assurances made by BSA’s managers, they applied for the credit facilities offered by the latter.

Sometime in April 1997, they executed a real estate mortgage (REM) over their property situated in Paco, Manila, covered by Transfer Certificate of Title No. 143457, in favor of BSA as security for a ₱15,000,000.00 term loan and ₱5,000,000.00 credit line or a total of ₱20,000,000.00.

With regard to the term loan, only ₱10,444,271.49 was released by BSA (the amount needed by the petitioners to pay out their loan with Ayala life assurance, the balance was credited to their account with BSA).

With regard to the ₱5,000,000.00 credit line, only ₱3,000,000.00 was released. BSA promised to release the remaining ₱2,000,000.00 conditioned upon the payment of the ₱3,000,000.00 initially released to petitioners.

Petitioners acceded to the condition and paid the ₱3,000,000.00 in full. However, BSA still refused to release the ₱2,000,000.00. Petitioners then refused to pay the amortizations due on their term loan.

Later on, BPI Family Savings Bank (BPI) merged with BSA, thus, acquired all the latter’s rights and assumed its obligations. BPI filed a petition for extrajudicial foreclosure of the REM for petitioners’ default in the payment of their term loan.

In order to enjoin the foreclosure, petitioners instituted an action for damages with Temporary Restraining Order and Preliminary Injunction against BPI praying for ₱23,570,881.32 as actual damages; ₱1,000,000.00 as moral damages; ₱500,000.00 as attorney’s fees, litigation expenses and costs of suit.

On 10 November 2010, the trial court rendered its decision in favor of petitioners ordering BPI to pay the Petitioners actual damages and attorney’s fees.

On appeal, the Court of Appeals reversed the decision of the  trial court and ruled in favor of BPI.

Issue:

Whether BPI Family Savings Bank is liable for damages on account of acts committed by the absorbed corporation, BSA, prior to the merger.

Ruling:

Yes.

BPI insists that it acted in good faith when it sought extrajudicial foreclosure of the mortgage and that it was not responsible for acts committed by its predecessor, BSA. Good faith, however, is not an excuse to exempt BPI from the effects of a merger or consolidation, viz.:

Section 80. Effects of merger or consolidation. – The merger or consolidation shall have the following effects:

1. The constituent corporations shall become a single corporation which, in case of merger, shall be the surviving corporation designated in the plan of merge; and, in case of consolidation, shall be the consolidated corporation designated in the plan of consolidation;

x x x x x

4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the right, privileges, immunities and franchises of each of the constituent corporations; and all property, real or personal, and all receivable due on whatever account, including subscriptions to shares and other choses in action, and all and every other interest of, or belonging to, or due to each constituent corporation, shall be deemed transferred to and vested in such surviving or consolidated corporation without further act or deed; and

5. The surviving or consolidated corporation shall be responsible and liable for all the liabilities and obligations of each of the constituent corporations in the same manner as if such surviving or consolidated corporation had itself incurred such liabilities or obligations; and any pending claim, action, or proceeding brought by or against any of such constituent corporations may be prosecuted by or against the surviving or consolidated corporation. The rights of creditors or liens upon the property of any of such constituent corporations shall not be impaired by such merger or consolidation.

Applying the pertinent provisions of the Corporation Code, BPI did not only acquire all the rights, privileges and assets of BSA but likewise acquired the liabilities and obligations of the latter as if BPI itself incurred it.