G.R. No. 214762 - People vs. Ronquillo

First Iligan Savings and Loan Association, Inc. (FISLAI) and Davao Savings and Loan Association, Inc. (DSLAI) were SEC-registered entities (Regs. Nos. 34869 and 32388) engaged in banking business.
In 1985, FISLAI and DSLAI agreed to merge, with DSLAI as survivor; the articles of merger were not SEC-registered due to incomplete documentation.
On August 12, 1985, DSLAI amended its corporate name to Mindanao Savings and Loan Association, Inc. (MSLAI), but SEC approval was only granted on April 3, 1987.
On May 26, 1986, FISLAI’s board passed Resolution No. 86-002 assigning its assets to DSLAI, which assumed FISLAI’s liabilities.

MSLAI became insolvent; the Monetary Board ordered its closure and receivership on August 31, 1990, finding probable loss to depositors and creditors.
On May 24, 1991, the Monetary Board placed MSLAI under liquidation, appointing the Philippine Deposit Insurance Corporation (PDIC) as liquidator.
PDIC, in liquidation, discovered the unregistered merger and assignment only in February 1995 while marshaling MSLAI’s assets.

Prior to receivership, Remedios Uy filed a collection suit against FISLAI in RTC Iligan (CC No. 111-697); on October 19, 1989, RTC granted summary judgment in favor of Uy for ₱136,801.70 plus interest, attorney’s fees, and costs; the decision became final on February 21, 1992.
A writ of execution issued; on April 28, 1993, Sheriff Bantuas levied six FISLAI-owned parcels in Cagayan de Oro City; auction was held May 17, 1993, with Edward Willkom as highest bidder.
Certificate of sale was registered; after redemption period, sheriff’s definite deed issued and titles re-issued to Willkom; on September 20, 1994, Willkom sold one parcel to Gilda Go.

On June 14, 1995, MSLAI (by PDIC) filed in RTC Cagayan de Oro (Br. 41) a complaint for annulment of sheriff’s sale, cancellation of title, and reconveyance, alleging lack of notice, custodia legis of MSLAI assets, and illegality under liquidation status.
Respondents argued (a) FISLAI and MSLAI were distinct – merger invalid for lack of required SEC‐issued certificate, (b) assignment of assets liabilities was not recorded, (c) sale was valid and purchaser Willkom was in good faith.
On March 13, 1997, RTC dismissed for lack of jurisdiction to annul another court’s decision; CA affirmed on March 21, 2007, on ground that no valid merger occurred, MSLAI lacked standing, and the sale was valid; motion for reconsideration denied June 1, 2007.
MSLAI (PDIC) filed Rule 45 petition before the Supreme Court, challenging (a) CA’s consideration of merger status in a non‐quo warranto context, (b) refusal to recognize the merger, (c) holding that properties were not in custodia legis.

Whether the merger between FISLAI and DSLAI (now MSLAI) was valid and effective despite non-registration of the articles of merger with the SEC.

Whether the assumption of FISLAI’s liabilities by DSLAI (now MSLAI) constituted a valid novation releasing FISLAI’s assets from execution without creditor consent.

Whether assets of an institution in liquidation are immune from garnishment, levy, attachment, or execution absent proper notice to liquidator.