Professional Documents
Culture Documents
DECISION
PANGANIBAN, J.:
In a merger, does the surviving corporation have a right to enforce a contract
entered into by the absorbed company subsequent to the date of the merger
agreement, but prior to the issuance of a certificate of merger by the Securities and
Exchange Commission?
The Case
This is a petition for review under Rule 45 of the Rules of Court seeking to set
aside the Decision[1] of the Court of Appeals[2] in CA-GR CV No. 26465 promulgated
on January 30, 1996, which answered the above question in the negative. The
challenged Decision reversed and set aside the October 17, 1986 Decision [3] in Civil
Case No. 85-32243, promulgated by the Regional Trial Court of Manila, Branch 48,
which disposed of the controversy in favor of herein petitioner as follows: [4]
WHEREFORE, judgment is hereby rendered in favor of the plaintif
Associated Bank. The defendant Lorenzo Sarmiento, Jr. is ordered to pay
plaintif:
1.
The amount of P4,689,413.63 with interest thereon at 14% per annum until
fully paid;
2.
3.
The Facts
The undisputed factual antecedents, as narrated by the trial court and adopted
by public respondent, are as follows:[6]
x x x [O]n or about September 16, 1975 Associated Banking Corporation
and Citizens Bank and Trust Company merged to form just one banking
corporation known as Associated Citizens Bank, the surviving bank. On or
about March 10, 1981, the Associated Citizens Bank changed its corporate
name to Associated Bank by virtue of the Amended Articles of
Incorporation. On September 7, 1977, the defendant executed in favor of
1
Associated Bank a promissory note whereby the former undertook to pay the
latter the sum ofP2,500,000.00 payable on or before March 6, 1978. As per
said promissory note, the defendant agreed to pay interest at 14% per
annum, 3% per annum in the form of liquidated damages, compounded
interests, and attorneys fees, in case of litigation equivalent to 10% of the
amount due. The defendant, to date, still owes plaintif bank the amount
ofP2,250,000.00 exclusive of interest and other charges. Despite repeated
demands the defendant failed to pay the amount due.
xxx xxx
xxx
Issues
In its petition, petitioner cites the following reasons: [9]
I The Court of Appeals erred in reversing the decision of the trial court and
in declaring that petitioner has no cause of action against respondent over
the promissory note.
II The Court of Appeals also erred in declaring that, since the promissory
note was executed in favor of Citizens Bank and Trust Company two years
after the merger between Associated Banking Corporation and Citizens Bank
and Trust Company, respondent is not liable to petitioner because there is no
privity of contract between respondent and Associated Bank.
III The Court of Appeals erred when it ruled that petitioner, despite the
merger between petitioner and Citizens Bank and Trust Company, is not a
real party in interest insofar as the promissory note executed in favor of the
merger.
In a nutshell, the main issue is whether Associated Bank, the surviving
corporation, may enforce the promissory note made by private respondent in favor
of CBTC, the absorbed company, after the merger agreement had been signed.
Secondary Issues:
Prescription, Laches, Contract
Pour Autrui, Lack of Consideration
No Prescription
or Laches
Private respondents claim that the action has prescribed, pursuant to Article
1149 of the Civil Code, is legally untenable. Petitioners suit for collection of a sum
of money was based on a written contract and prescribes after ten years from the
time its right of action arose. [19] Sarmientos obligation under the promissory note
became due and demandable on March 6, 1978. Petitioners complaint was
instituted on August 22, 1985, before the lapse of the ten-year prescriptive
period. Definitely, petitioner still had every right to commence suit against the
payor/obligor, the private respondent herein.
Neither is petitioners action barred by laches. The principle of laches is a
creation of equity, which is applied not to penalize neglect or failure to assert a right
within a reasonable time, but rather to avoid recognizing a right when to do so
would result in a clearly inequitable situation [20] or in an injustice.[21] To require
private respondent to pay the remaining balance of his loan is certainly not
inequitable or unjust. What would be manifestly unjust and inequitable is his
contention that CBTC is the proper party to proceed against him despite the fact,
which he himself asserts, that CBTCs corporate personality has been dissolved by
virtue of its merger with petitioner. To hold that no payee/obligee exists and to let
private respondent enjoy the fruits of his loan without liability is surely most unfair
and unconscionable, amounting to unjust enrichment at the expense of
petitioner. Besides, this Court has held that the doctrine of laches is inapplicable
where the claim was filed within the prescriptive period set forth under the law. [22]
No Contract
Pour Autrui
Private respondent, while not denying that he executed the promissory note in
the amount of P2,500,000 in favor of CBTC, ofers the alternative defense that said
note was a contractpour autrui.
A stipulation pour autrui is one in favor of a third person who may demand its
fulfillment, provided he communicated his acceptance to the obligor before its
revocation. An incidental benefit or interest, which another person gains, is not
sufficient. The contracting parties must have clearly and deliberately conferred a
favor upon a third person.[23]
Florentino vs. Encarnacion Sr.[24] enumerates the requisites for such
contract: (1) the stipulation in favor of a third person must be a part of the
contract, and not the contract itself; (2) the favorable stipulation should not be
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Consideration
Private respondent also claims that he received no consideration for the
promissory note and, in support thereof, cites petitioners failure to submit any
proof of his loan application and of his actual receipt of the amount loaned. These
arguments deserve no merit. Res ipsa loquitur. The instrument, bearing the
signature of private respondent, speaks for itself. Respondent Sarmiento has not
questioned the genuineness and due execution thereof. No further proof is
necessary to show that he undertook to pay P2,500,000, plus interest, to petitioner
bank on or before March 6, 1978. This he failed to do, as testified to by petitioners
accountant. The latter presented before the trial court private respondents
statement of account[27] as of September 30, 1986, showing an outstanding balance
of P4,689,413.63
after
deducting P1,000,000.00
paid
seven
months
earlier. Furthermore, such partial payment is equivalent to an express
acknowledgment of his obligation. Private respondent can no longer backtrack and
deny his liability to petitioner bank. A person cannot accept and reject the same
instrument.[28]
WHEREFORE, the petition is GRANTED. The assailed Decision is SET ASIDE and
the Decision of RTC-Manila, Branch 48, in Civil Case No. 26465 is
hereby REINSTATED.
SO ORDERED.
Davide Jr. (Chairman), Bellosillo, Vitug, and Quisumbing, JJ., concur.
[1]
[2]
[6]
RTC Decision, pp. 1-2; assailed Decision, pp. 2-3; Petition for Review, pp. 1-4.
[7]
[8]
This case was deemed submitted for decision upon receipt by this Court of private
respondents Memorandum on October 10, 1997.
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[9]
[10]
[12]
Commission in quadruplicate for its approval: Provided, That in the case of merger
or consolidation of banks or banking institutions, building and loan associations,
trust companies, insurance companies, public utilities, educational institutions and
other special corporations governed by special laws, the favorable recommendation
of the appropriate government agency shall first be obtained. Where the
commission is satisfied that the merger or consolidation of the corporations
concerned is not inconsistent with the provisions of this Code and existing laws, it
shall issue a certificate of merger or of consolidation, as the case may be, at which
time the merger or consolidation shall be efective.
If, upon investigation, the Securities and Exchange Commission has reason
to believe that the proposed merger or consolidation is contrary to or inconsistent
with the provisions of this Code or existing laws, it shall set a hearing to give the
corporations concerned the opportunity to be heard. Written notice of the date,
time and place of said hearing shall be given to each constituent corporations at
least two (2) weeks before said hearing. The Commission shall thereafter proceed
as provided in this Code.
SEC. 80. Efects of merger or consolidation. -- The merger or
consolidation, as provided in the preceding sections, shall have the following
efects:
1.
The constituent corporations shall become a single corporation
which, in case of merger, shall be the surviving corporation designated in the plan
of merger; and, in case of consolidation, shall be the consolidated corporation
designated in the plan of consolidation;
2.
The separate existence of the constituent corporations shall
cease, except that of the surviving or the consolidated corporation;
3.
The surviving or the consolidated corporation shall possess all the
rights, privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under this Code;
4.
The surviving or the consolidated corporation shall thereupon and
thereafter possess all the rights, privileges, immunities and franchises of each of the
constituent corporations; and all property, real or personal, and all receivables 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 taken and deemed to be 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 claim, action or proceeding pending by or against
any of such constituent corporations may be prosecuted by or against the surviving
or consolidated corporation, as the case may be. The rights of creditors or any lien
upon the property of any of such constituent corporation shall not be impaired by
such merger or consolidation.
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
Catholic Bishop of Balanga vs. Court of Appeals, 264 SCRA 181, 193, November
14, 1996.
[21]
Olizon vs. Court of Appeals, 236 SCRA 148, 157, September 1, 1994.
[22]
[23]
[24]
[25]
Ibid., p. 202.
11, Rule 6, Rules of Court.
[27]
Exh. B; records, p. 130.
[26]
[28]
Ducasse v. American Yellow Taxi Operators, Inc., 224 App. Div. 516, 231 NY Supp.
51 (1928), citing Chipman v. Montgomery, 63 NY 211; in Campos and
Campos, supra.
VASQUEZ, J.:
Petitioner Ramon A. Gonzales instituted in the erstwhile Court of First Instance of
Manila a special civil action for mandamus against the herein respondent praying
that the latter be ordered to allow him to look into the books and records of the
respondent bank in order to satisfy himself as to the truth of the published reports
that the respondent has guaranteed the obligation of Southern Negros Development
Corporation in the purchase of a US$ 23 million sugar-mill to be financed by
Japanese suppliers and financiers; that the respondent is financing the construction
of the P 21 million Cebu-Mactan Bridge to be constructed by V.C. Ponce, Inc., and
the construction of Passi Sugar Mill at Iloilo by the Honiron Philippines, Inc., as well
as to inquire into the validity of Id transactions. The petitioner has alleged hat his
written request for such examination was denied by the respondent. The trial court
having dismissed the petition for mandamus, the instant appeal to review the said
dismissal was filed.
The facts that gave rise to the subject controversy have been set forth by the trial
court in the decision herein sought to be reviewed, as follows:
Briefly stated, the following facts gathered from the stipulation of the
parties served as the backdrop of this proceeding.
Previous to the present action, the petitioner instituted several cases in
this Court questioning diferent transactions entered into by the Bark
with other parties. First among them is Civil Case No. 69345 filed on
April 27, 1967, by petitioner as a taxpayer versus Sec. Antonio Raquiza
of Public Works and Communications, the Commissioner of Public
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Highways, the Bank, Continental Ore Phil., Inc., Continental Ore, Huber
Corporation, Allis Chalmers and General Motors Corporation In the
course of the hearing of said case on August 3, 1967, the personality of
herein petitioner to sue the bank and question the letters of credit it
has extended for the importation by the Republic of the Philippines of
public works equipment intended for the massive development
program of the President was raised. In view thereof, he expressed and
made known his intention to acquire one share of stock from
Congressman Justiniano Montano which, on the following day, August
30, 1967, was transferred in his name in the books of the Bank.
Subsequent to his aforementioned acquisition of one share of stock of
the Bank, petitioner, in his dual capacity as a taxpayer and
stockholder, filed the following cases involving the bank or the
members of its Board of Directors to wit:
l. On October l8,1967, Civil Case No. 71044 versus the Board of
Directors of the Bank; the National Investment and Development Corp.,
Marubeni Iida Co., Ltd., and Agro-Inc. Dev. Co. or Saravia;
2. On May 11, 1968, Civil Case No. 72936 versus Roberto Benedicto
and other Directors of the Bank, Passi (Iloilo) Sugar Central, Inc.,
Calinog-Lambunao Sugar Mill Integrated Farming, Inc., Talog sugar
Milling Co., Inc., Safary Central, Inc., and Batangas Sugar Central Inc.;
3. On May 8, 1969, Civil Case No. 76427 versus Alfredo Montelibano
and the Directors of both the PNB and DBP;
On January 11, 1969, however, petitioner addressed a letter to the
President of the Bank (Annex A, Pet.), requesting submission to look
into the records of its transactions covering the purchase of a sugar
central by the Southern Negros Development Corp. to be financed by
Japanese suppliers and financiers; its financing of the Cebu-Mactan
Bridge to be constructed by V.C. Ponce, Inc. and the construction of the
Passi Sugar Mills in Iloilo. On January 23, 1969, the Asst. Vice-President
and Legal Counsel of the Bank answered petitioner's letter denying his
request for being not germane to his interest as a one-share
stockholder and for the cloud of doubt as to his real intention and
purpose in acquiring said share. (Annex B, Pet.) In view of the Bank's
refusal the petitioner instituted this action.' (Rollo, pp. 16-18.)
The petitioner has adopted the above finding of facts made by the trial court in its
brief which he characterized as having been "correctly stated." (PetitionerAppellant"s Brief, pp. 57.)
The court a quo denied the prayer of the petitioner that he be allowed to examine
and inspect the books and records of the respondent bank regarding the
transactions mentioned on the grounds that the right of a stockholder to inspect the
record of the business transactions of a corporation granted under Section 51 of the
former Corporation Law (Act No. 1459, as amended) is not absolute, but is limited to
purposes reasonably related to the interest of the stockholder, must be asked for in
good faith for a specific and honest purpose and not gratify curiosity or for
speculative or vicious purposes; that such examination would violate the
confidentiality of the records of the respondent bank as provided in Section 16 of its
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charter, Republic Act No. 1300, as amended; and that the petitioner has not
exhausted his administrative remedies.
Assailing the conclusions of the lower court, the petitioner has assigned the single
error to the lower court of having ruled that his alleged improper motive in asking
for an examination of the books and records of the respondent bank disqualifies him
to exercise the right of a stockholder to such inspection under Section 51 of Act No.
1459, as amended. Said provision reads in part as follows:
Sec. 51. ... The record of all business transactions of the corporation
and the minutes of any meeting shall be open to the inspection of any
director, member or stockholder of the corporation at reasonable
hours.
Petitioner maintains that the above-quoted provision does not justify the
qualification made by the lower court that the inspection of corporate records may
be denied on the ground that it is intended for an improper motive or purpose, the
law having granted such right to a stockholder in clear and unconditional terms. He
further argues that, assuming that a proper motive or purpose for the desired
examination is necessary for its exercise, there is nothing improper in his purpose
for asking for the examination and inspection herein involved.
Petitioner may no longer insist on his interpretation of Section 51 of Act No. 1459,
as amended, regarding the right of a stockholder to inspect and examine the books
and records of a corporation. The former Corporation Law (Act No. 1459, as
amended) has been replaced by Batas Pambansa Blg. 68, otherwise known as the
"Corporation Code of the Philippines."
The right of inspection granted to a stockholder under Section 51 of Act No. 1459
has been retained, but with some modifications. The second and third paragraphs of
Section 74 of Batas Pambansa Blg. 68 provide the following:
The records of all business transactions of the corporation and the
minutes of any meeting shag be open to inspection by any director,
trustee, stockholder or member of the corporation at reasonable hours
on business days and he may demand, in writing, for a copy of
excerpts from said records or minutes, at his expense.
Any officer or agent of the corporation who shall refuse to allow any
director, trustee, stockholder or member of the corporation to examine
and copy excerpts from its records or minutes, in accordance with the
provisions of this Code, shall be liable to such director, trustee,
stockholder or member for damages, and in addition, shall be guilty of
an ofense which shall be punishable under Section 144 of this Code:
Provided, That if such refusal is made pursuant to a resolution or order
of the board of directors or trustees, the liability under this section for
such action shall be imposed upon the directors or trustees who voted
for such refusal; and Provided, further, That it shall be a defense to any
action under this section that the person demanding to examine and
copy excerpts from the corporation's records and minutes has
improperly used any information secured through any prior
examination of the records or minutes of such corporation or of any
other corporation, or was not acting in good faith or for a legitimate
purpose in making his demand.
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As may be noted from the above-quoted provisions, among the changes introduced
in the new Code with respect to the right of inspection granted to a stockholder are
the following the records must be kept at the principal office of the corporation; the
inspection must be made on business days; the stockholder may demand a copy of
the excerpts of the records or minutes; and the refusal to allow such inspection shall
subject the erring officer or agent of the corporation to civil and criminal liabilities.
However, while seemingly enlarging the right of inspection, the new Code has
prescribed limitations to the same. It is now expressly required as a condition for
such examination that the one requesting it must not have been guilty of using
improperly any information through a prior examination, and that the person asking
for such examination must be "acting in good faith and for a legitimate purpose in
making his demand."
The unqualified provision on the right of inspection previously contained in Section
51, Act No. 1459, as amended, no longer holds true under the provisions of the
present law. The argument of the petitioner that the right granted to him under
Section 51 of the former Corporation Law should not be dependent on the propriety
of his motive or purpose in asking for the inspection of the books of the respondent
bank loses whatever validity it might have had before the amendment of the law. If
there is any doubt in the correctness of the ruling of the trial court that the right of
inspection granted under Section 51 of the old Corporation Law must be dependent
on a showing of proper motive on the part of the stockholder demanding the same,
it is now dissipated by the clear language of the pertinent provision contained in
Section 74 of Batas Pambansa Blg. 68.
Although the petitioner has claimed that he has justifiable motives in seeking the
inspection of the books of the respondent bank, he has not set forth the reasons
and the purposes for which he desires such inspection, except to satisfy himself as
to the truth of published reports regarding certain transactions entered into by the
respondent bank and to inquire into their validity. The circumstances under which
he acquired one share of stock in the respondent bank purposely to exercise the
right of inspection do not argue in favor of his good faith and proper motivation.
Admittedly he sought to be a stockholder in order to pry into transactions entered
into by the respondent bank even before he became a stockholder. His obvious
purpose was to arm himself with materials which he can use against the respondent
bank for acts done by the latter when the petitioner was a total stranger to the
same. He could have been impelled by a laudable sense of civic consciousness, but
it could not be said that his purpose is germane to his interest as a stockholder.
We also find merit in the contention of the respondent bank that the inspection
sought to be exercised by the petitioner would be violative of the provisions of its
charter. (Republic Act No. 1300, as amended.) Sections 15, 16 and 30 of the said
charter provide respectively as follows:
Sec. 15. Inspection by Department of Supervision and Examination of
the Central Bank. The National Bank shall be subject to inspection
by the Department of Supervision and Examination of the Central
Bank'
Sec. 16. Confidential information. The Superintendent of Banks and
the Auditor General, or other officers designated by law to inspect or
investigate the condition of the National Bank, shall not reveal to any
person other than the President of the Philippines, the Secretary of
Finance, and the Board of Directors the details of the inspection or
13
investigation, nor shall they give any information relative to the funds
in its custody, its current accounts or deposits belonging to private
individuals, corporations, or any other entity, except by order of a
Court of competent jurisdiction,'
Sec. 30. Penalties for violation of the provisions of this Act. Any
director, officer, employee, or agent of the Bank, who violates or
permits the violation of any of the provisions of this Act, or any person
aiding or abetting the violations of any of the provisions of this Act,
shall be punished by a fine not to exceed ten thousand pesos or by
imprisonment of not more than five years, or both such fine and
imprisonment.
The Philippine National Bank is not an ordinary corporation. Having a charter of its
own, it is not governed, as a rule, by the Corporation Code of the Philippines.
Section 4 of the said Code provides:
SEC. 4. Corporations created by special laws or charters.
Corporations created by special laws or charters shall be governed
primarily by the provisions of the special law or charter creating them
or applicable to them. supplemented by the provisions of this Code,
insofar as they are applicable.
The provision of Section 74 of Batas Pambansa Blg. 68 of the new Corporation Code
with respect to the right of a stockholder to demand an inspection or examination of
the books of the corporation may not be reconciled with the abovequoted provisions
of the charter of the respondent bank. It is not correct to claim, therefore, that the
right of inspection under Section 74 of the new Corporation Code may apply in a
supplementary capacity to the charter of the respondent bank.
WHEREFORE, the petition is hereby DISMISSED, without costs.
Melencio-Herrera, Plana and Gutierrez, Jr., JJ., concur.
Teehankee (Chairman), concurs in the result.
Relova, J., is on leave.
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