Bank of Commerce

v.
Radio Philippines Network
G.R. No. 195615
April 21, 2014

Facts:

In 2001, the Royal Trader’s Bank (RTB) and Bank of Commerce (BOC) entered into a
Purchase and Assumption (P&A) Agreement where the former sold its banking business
consisting of specified assets and liabilities, excluding liabilities arising from judicial actions to the
latter for P10.4 Billion, which was approved by the Bangko Sentral ng Pilipinas subject to the
establishment of an escrow account. The said escrow account shall contain P50 Million to answer
for RTB’s liabilities for contingent claims that may be adjudged against it. Subsequently, a judicial
action was held against RTB, awarding Radio Philippines Network damages. RPN, instead of
enforcing such claim against the escrow account, it moved for an execution against BOC, on the
ground that TRB and BOC has been merged into one corporate entity. RTC allowed the said
execution, which was likewise affirmed by the CA. Hence, this petition.

Issue: Whether or not the P & A Agreement between RTB and BOC a mere tool to effectuate a
merger and/or consolidation.

Ruling: No, because the requirements and procedures for a merger were absent.

Merger is a re-organization of two or more corporations that results in their consolidating

into a single corporation, which is one of the constituent corporations, one disappearing or
dissolving and the other surviving. There are likewise steps to be followed for a valid merger or
consolidation to take place, which include the following: (1) The board of each corporation draws
up a plan of merger or consolidation; (2) Submission of plan to stockholders or members of each
corporation for approval; (3) Execution of the formal agreement, referred to as the articles of
merger o[r] consolidation, by the corporate officers of each constituent corporation; (4)
Submission of said articles of merger or consolidation to the SEC for approval; (5) If necessary, a
SEC hearing; and (6) Issuance of certificate of merger or consolidation. Indubitably, it is clear that
no merger took place between BOC 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.