Validez y confiabilidad de los instrumentos

Subsequently, P & A Agreement was approved by BSP. To comply with a BSP mandate, TRB placed P50 million in escrow with Metropolitan Bank and Trust Co. (Metrobank) to answer for those claims and liabilities that were excluded from the P & A Agreement and remained with TRB.

Shortly after acting in G.R. 138510, Traders Royal Bank v. Radio Philippines Network (RPN), Inc., this Court ordered TRB to pay respondents RPN, Intercontinental Broadcasting Corporation, and Banahaw Broadcasting Corporation (collectively, RPN, et al.) actual damages plus 12% legal interest and some amounts. Based on this decision, RPN, et al.filed a motion for execution against TRB before the Regional Trial Court (RTC). But rather than pursue a levy in execution of the corresponding amounts on escrow with Metrobank, RPN, et al. filed a Supplemental Motion for Execution where they described TRB as "now Bank of Commerce" based on the assumption that TRB had been merged into Bancommerce.

Subsequently, the RTC issued the assailed Order directing the release to the Sheriff of Bancommerce’s "garnished monies and shares of stock or their monetary equivalent" and for the sheriff to pay 25% of the amount "to the respondents’ counsel representing his attorney’s fees and appearance fees and litigation expenses" and the balance to be paid to the respondents after deducting court dues.

Issue:

Whether or not there was a merger or de facto merger between TRB and Bancommerce thereby considering the latter as judgment debtor.

Ruling: None.

Indubitably, it is clear that no merger took place between Bancommerce and TRB as the requirements and procedures for a merger were absent. A merger does not become effective upon the mere agreement of the constituent corporations. All the requirements specified in the law must be complied with in order for merger to take effect. Section 79 of the Corporation Code further provides that the merger shall be effective only upon the issuance by the Securities and Exchange Commission (SEC) of a certificate of merger. Here, Bancommerce and TRB remained separate corporations with distinct corporate personalities. What happened is that TRB sold and Bancommerce purchased identified recorded assets of TRB in consideration of Bancommerce’s assumption of identified recorded liabilities of TRB including booked contingent accounts. There is no law that prohibits this kind of transaction especially when it is done openly and with appropriate government approval.

In his book, Philippine Corporate Law, Dean Cesar Villanueva explained that under the Corporation Code, "a de facto merger can be pursued by one corporation acquiring all or substantially all of the properties of another corporation in exchange

of shares of stock of the acquiring corporation. The acquiring corporation would end up with the business enterprise of the target corporation; whereas, the target corporation would end up with basically its only remaining assets being the shares of stock of the acquiring corporation."

No de facto merger took place in the present case simply because the TRB owners did not get in exchange for the bank’s assets and liabilities an equivalent value in Bancommerce shares of stock. Moreover, Bancommerce and TRB agreed with BSP approval to exclude from the sale the TRB’s contingent judicial liabilities, including those owing to RPN, et al. The Bureau of Internal Revenue (BIR) treated the transaction between the two banks purely as a sale of specified assets and liabilities when it rendered its opinion on the tax consequences of the transaction given that there is a difference in tax treatment between a sale and a merger or consolidation. Furthermore, what was "consolidated" was the banking activities and transactions of Bancommerce and TRB, not their corporate existence. The BSP did not remotely suggest a merger of the two corporations.

To end, since there had been no merger, Bancommerce cannot be considered as TRB’s successor-in-interest and against which the Court’s Decision of October 10, 2002 in G.R. 138510 may be enforced. Bancommerce did not hold the former TRBs assets in trust for it as to subject them to garnishment for the satisfaction of the latter’s liabilities to RPN, et al. Bancommerce bought and acquired those assets and thus, became their absolute owner.

PROXY

SOLICITATION

SECURITIES AND EXCHANGE COMMISSION, vs. THE HONORABLE COURT OF APPEALS, OMICO CORPORATION, EMILIO S. TENG AND TOMMY KIN HING

TIA

ASTRA SECURITIES CORPORATION, vs. OMICO CORPORATION, EMILIO S. TENG AND TOMMY KIN HING TIA,

G.R. No. 187702, October 22, 2014,

CJ.

The power of the SEC to investigate violations of its rules on proxy solicitation is unquestioned when proxies are obtained to vote on matters unrelated to the cases enumerated under Section 5 of Presidential Decree No. 902-A. However, when proxies are solicited in relation to the election of corporate directors, the resulting controversy, even if it ostensibly raised the violation of the SEC rules on proxy solicitation, should be properly seen as an election controversy within the original and exclusive jurisdiction of the trial courts by virtue of Section 5.2 of the SRC in relation to Section 5 (c) of Presidential Decree No. 902-A

Indeed, the validation of proxies in this case relates to the determination of the existence of a quorum. Nonetheless, it is a quorum for the election of the directors, and, as such, which requires the presence – in person or by proxy – of the owners of the majority of the outstanding capital stock of Omico. Also, the fact that there was no actual voting did not make the election any less so, especially since Astra had never denied that an election of directors took place.