CORPORATION LAW

Myra M. Barannda III-E October 6, 2017

--- CASE DIGESTS ---

BANK OF THE PHILIPPINE ISLANDS

versus
BPI EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OF UNIONS IN BPI UNIBANK

G.R. No. 164301

August 10, 2010

Facts:

Bangko Sentral ng Pilipinas approved the Articles of Merger executed by and between BPI,
herein petitioner, and Far East Bank and Trust Company (FEBTC) and was approved by the Securities
and Exchange Commission. The Articles of Merger and Plan of Merger did not contain any specific
stipulation with respect to the employment contracts of existing personnel of the non-surviving entity
which is FEBTC. Pursuant to the said Article and Plan of Merger, all the assets and liabilities of FEBTC
were transferred to and absorbed by BPI as the surviving corporation. FEBTC employees, including those
in its different branches across the country, were hired by petitioner as its own employees, with their
status and tenure recognized and salaries and benefits maintained.

Issue:

Whether or not employees are ipso jure absorbed in a merger of the two corporations.

Held:

NO. Human beings are never embraced in the term assets and liabilities.Moreover, BPIs
absorption of former FEBTC employees was neither by operation of law nor by legal consequence of
contract. There was no government regulation or law that compelled the merger of the two banks or the
absorption of the employees of the dissolved corporation by the surviving corporation. Had there been
such law or regulation, the absorption of employees of the non-surviving entities of the merger would
have been mandatory on the surviving corporation. In the present case, the merger was voluntarily entered
into by both banks presumably for some mutually acceptable consideration. In fact, the Corporation Code
does not also mandate the absorption of the employees of the non-surviving corporation by the surviving
corporation in the case of a merger.

The Court cannot uphold the reasoning that the general stipulation regarding transfer of FEBTC
assets and liabilities to BPI as set forth in the Articles of Merger necessarily includes the transfer of all
FEBTC employees into the employ of BPI and neither BPI nor the FEBTC employees allegedly could do
anything about it. Even if it is so, it does not follow that the absorbed employees should not be subject to
the terms and conditions of employment obtaining in the surviving corporation.

Furthermore, the Court believes that it is contrary to public policy to declare the former FEBTC
employees as forming part of the assets or liabilities of FEBTC that were transferred and absorbed by BPI
in the Articles of Merger. Assets and liabilities, in this instance, should be deemed to refer only to
property rights and obligations of FEBTC and do not include the employment contracts of its personnel.
A corporation cannot unilaterally transfer its employees to another employer like chattel. Certainly, if
BPI as an employer had the right to choose who to retain among FEBTCs employees, FEBTC employees
had the concomitant right to choose not to be absorbed by BPI. Even though FEBTC employees had no
choice or control over the merger of their employer with BPI, they had a choice whether or not they
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Myra M. Barannda III-E October 6, 2017

would allow themselves to be absorbed by BPI. Certainly nothing prevented the FEBTCs employees
from resigning or retiring and seeking employment elsewhere instead of going along with the proposed
absorption.

Employment is a personal consensual contract and absorption by BPI of a former FEBTC

employee without the consent of the employee is in violation of an individuals freedom to contract. It
would have been a different matter if there was an express provision in the articles of merger that as a
condition for the merger, BPI was being required to assume all the employment contracts of all existing
FEBTC employees with the conformity of the employees. In the absence of such a provision in the
articles of merger, then BPI clearly had the business management decision as to whether or not employ
FEBTCs employees. FEBTC employees likewise retained the prerogative to allow themselves to be
absorbed or not; otherwise, that would be tantamount to involuntary servitude.

METROPOLITAN BANK & TRUST COMPANY, INC. (formerly Philbank)

versus
THE BOARD OF TRUSTEES OF RIVERSIDE MILLS CORPORATION PROVIDENT AND
RETIREMENT FUND, represented by ERNESTO TANCHI, JR., CESAR SALIGUMBA, AMELITA
SIMON, EVELINA OCAMPO and CARLITOS Y. LIM, RMC UNPAID EMPLOYEES ASSOCIATION,
INC., and THE INDIVIDUAL BENEFICIARIES OF THE PROVIDENT AND RETIREMENT FUND OF
RMC

G.R. No. 176959

September 8, 2010

Facts:

The Riverside Mills Corporation (RMC) established a Plan for its regular employees. The
contributions to the plan shall form part of the Fund which shall be held, invested and distributed by the
Commercial Bank and Trust Company. The BOT of the fund entered into an agreement with Philbank to
act as an agent of the BOT and to hold, manage, invest and reinvest the Fund in Trust Account No. 1797
in its behalf. When RMC ceased its business operations, the BOD of Philbank decided to apply the
remaining trust assets held by it in the name of the Fund against part of the RMCs outstanding
obligations.

When the unpaid employees of RMC learned of the trust account, they demanded the payment of
their share, which went unheeded. They, together with the members of the Fund, filed a complaint for
accounting against the BOD of Philbank and its officers. The trial court ruled in favor of the BOT of
RMC and was affirmed on appeal. The BOD on petition for review on certiorari under Rule 45 of the
Rules of Court contends that without known claimants of the Fund for eleven (11) years since RMC
closed shop, it was justifiable for petitioner to consider the Fund to have technically reverted to, and
formed part of RMCs assets. Hence, it could be applied to satisfy RMCs debts to Philbank.

Issue:

Whether or not the functions of the Board of Trustees ceased upon with RMCs closure.

Held:

NO. This contention is untenable. Under Section 122 of the Corporation Code, a dissolved
corporation shall nevertheless continue as a body corporate for three (3) years for the purpose of
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Myra M. Barannda III-E October 6, 2017

prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose
and convey its property and to distribute its assets, but not for the purpose of continuing the business for
which it was established. Within those three (3) years, the corporation may appoint a trustee or receiver
who shall carry out the said purposes beyond the three (3)-year winding-up period. Thus, a trustee of a
dissolved corporation may commence a suit which can proceed to final judgment even beyond the three
(3)-year period of liquidation.

In the same manner, during and beyond the three (3)-year winding-up period of RMC, the Board
of Trustees of RMCPRF may do no more than settle and close the affairs of the Fund. The Board retains
its authority to act on behalf of its members, albeit, in a limited capacity. It may commence suits on behalf
of its members but not continue managing the Fund for purposes of maximizing profits. Here, the Boards
act of issuing the Resolution authorizing petitioner to release the Fund to its beneficiaries is still part of
the liquidation process, that is, satisfaction of the liabilities of the Plan, and does not amount to doing
business. Hence, it was properly within the Boards power to promulgate.

GEORG GROTJAHN GMBH & CO.,

vs.
HON. LUCIA VIOLAGO ISNANI, Presiding Judge, Regional Trial Court, Makati, Br. 59;
ROMANA R. LANCHINEBRE; and TEOFILO A. LANCHINEBRE

G.R. No. 109272

August 10, 1994

Facts:

The records show that petitioner is a multinational company organized and existing under the laws of the
Federal Republic of Germany. Petitioner filed an application with the Securities and Exchange
Commission (SEC) for the establishment of a regional or area headquarters in the Philippines, pursuant to
Presidential Decree No. 218. The application was approved by the Board of Investments (BOI).
Consequently, the SEC issued a Certificate of Registration and License to petitioner.

Private respondent Romana R. Lanchinebre was a sales representative of petitioner from 1983 to mid-
1992. She secured a loan of twenty-five thousand pesos (P25,000.00) from petitioner. She made
additional cash advances in the sum of ten thousand pesos (P10,000.00). Of the total amount, twelve
thousand one hundred seventy pesos and thirty-seven centavos (P12,170.37) remained unpaid. Despite
demand, private respondent Romana failed to settle her obligation with petitioner.

On July 22, 1992, private respondent Romana Lanchinebre filed with the Arbitration Branch of the
National Labor Relations Commission (NLRC) in Manila, a Complaint for illegal suspension, dismissal
and non-payment of commissions against petitioner. On August 18, 1992, petitioner in turn filed against
private respondent a Complaint for damages amounting to one hundred twenty thousand pesos
(P120,000.00) also with the NLRC Arbitration Branch (Manila). The two cases were consolidated.

On September 2, 1992, petitioner filed another Complaint for collection of sum of money against private
respondents spouses Romana and Teofilo Lanchinebre which was docketed as Civil Case No. 92-2486
and raffled to the sala of respondent judge. Instead of filing their Answer, private respondents moved to
dismiss the Complaint. This was opposed by petitioner.
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Myra M. Barannda III-E October 6, 2017

Issue:

Whether or not the petitioner have capacity to sue in the Philippines.

Held:

YES. It is clear that petitioner is a foreign corporation doing business in the Philippines. Petitioner is
covered by the Omnibus Investment Code of 1987. Said law defines "doing business," as follows:

. . . shall include soliciting orders, purchases, service contracts, opening offices, whether called
"liaison" offices or branches; appointing representatives or distributors who are domiciled in the
Philippines or who in any calendar year stay in the Philippines for a period or periods totalling
one hundred eighty (180) days or more; participating in the management, supervision or control
of any domestic business firm, entity or corporation in the Philippines, and any other act or acts
that imply a continuity of commercial dealings or arrangements and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions normally incident to, and
in progressive prosecution of, commercial gain or of the purpose and object of the business
organization.

There is no general rule or governing principle as to what constitutes "doing" or "engaging in" or
"transacting" business in the Philippines. Each case must be judged in the light of its peculiar
circumstances. In the case at bench, petitioner does not engage in commercial dealings or activities in the
country because it is precluded from doing so by P.D. No. 218, under which it was established.
Nonetheless, it has been continuously, since 1983, acting as a supervision, communications and
coordination center for its home office's affiliates in Singapore, and in the process has named its local
agent and has employed Philippine nationals like private respondent Romana Lanchinebre. From this
uninterrupted performance by petitioner of acts pursuant to its primary purposes and functions as a
regional/area headquarters for its home office, it is clear that petitioner is doing business in the country.
Moreover, private respondents are estopped from assailing the personality of petitioner. So we held
in Merrill Lynch Futures, Inc. vs. Court of Appeals, 211 SCRA 824, 837 (1992):

The rule is that a party is estopped to challenge the personality of a corporation after having
acknowledged the same by entering into a contract with it. And the "doctrine of estoppel to deny
corporate existence applies to foreign as well as to domestic corporations;" "one who has dealth
with a corporation of foreign origin as a corporate entity is estopped to deny its corporate
existence and capacity." The principle "will be applied to prevent a person contracting with a
foreign corporation from later taking advantage of its noncompliance with the statutes chiefly in
cases where such person has received the benefits of the contract.