Title
Bank of Commerce vs. Radio Philippines Network, Inc.
Case
G.R. No. 195615
Decision Date
Apr 21, 2014
TRB sold assets to Bancommerce; RPN sought execution against Bancommerce for TRB’s debts. SC ruled no merger, Bancommerce not liable, execution null.

Case Summary (G.R. No. 113375)

Petitioner

Bank of Commerce — purchaser under a Purchase and Assumption (P&A) Agreement with Traders Royal Bank; moved to quash writs of execution and sought relief from CA and this Court.

Respondents

Radio Philippines Network, Inc., Intercontinental Broadcasting Corporation, and Banahaw Broadcasting Corporation — judgment creditors of TRB under final Supreme Court judgment in G.R. No. 138510, who sought execution against assets alleged to be in Bancommerce’s possession.

Key Dates

  • P&A Agreement between TRB and Bancommerce: November 9, 2001.
  • BSP initial approval with escrow condition: November 8, 2001 (MB Res. 58).
  • TRB deposited P50 million escrow with Metrobank: December 6, 2001.
  • BSP final approval of P&A: July 3, 2002.
  • Supreme Court decision in G.R. No. 138510 (holding TRB liable): October 10, 2002 (final April 9, 2003).
  • RTC writs and orders issuing execution and alias writs: 2005–2010 (notably August 15, 2005; February 19, 2010; March 9, 2010; August 18, 2010).
  • CA decisions and resolutions: December 8, 2009 (CA affirming with modification), November 26, 2010 and February 9, 2011 (resolutions later reversed by SC).
  • Supreme Court decision in this petition: April 21, 2014 (majority judgment granting Bancommerce’s petition).

Applicable Law and Constitutional Basis

  • 1987 Constitution — due process and equal protection (Section 1, Bill of Rights) controlled analysis because the decision date is after 1990.
  • Corporation Code (Sections 40, 76–80) governing sale of assets, merger, and consolidation.
  • Rules of Court — Rule 39 (execution), Rule 65 (certiorari), Rule 3 Section 19 (transfer of interest).
  • BSP Monetary Board Resolution (MB Res. 58) and BSP Circulars governing bank P&A transactions; BIR Revenue Ruling relevant to tax characterization of transaction.

Issues Presented

  1. Whether the Court of Appeals gravely erred in dismissing Bancommerce’s petition for certiorari for failing to file a motion for reconsideration with the CA before seeking relief.
  2. Whether the CA erred in not declaring the RTC’s execution order against Bancommerce a nullity because the CA had held in an earlier decision that TRB had not merged into Bancommerce.

Facts — Core Transaction and Escrow

TRB proposed to sell specified assets and liabilities to Bancommerce for P10.4 billion. BSP approved the P&A subject to an escrow of P50 million to secure contingent judicial liabilities excluded from the P&A. TRB deposited P50 million with Metrobank as required. The P&A expressly excluded liabilities arising from judicial actions (including RPN, et al.’s claim). The Supreme Court in G.R. No. 138510 held TRB liable to RPN, et al.; RPN, et al. sought execution to satisfy that judgment.

Procedural History up to CA Decision

RPN, et al. filed motion(s) for execution against TRB after the SC decision became final. They captioned a supplemental motion as against "TRB [now Bank of Commerce]" on the premise of a merger. Bancommerce filed special appearance denying merger and contesting RTC jurisdiction. RTC issued writs of execution directing execution against TRB assets, including those allegedly in Bancommerce’s possession and against the P50 million escrow. Bancommerce filed certiorari with CA (challenging RTC orders); CA on December 8, 2009 denied the petitions, affirming the RTC orders but deleting the RTC’s characterization of the P&A as a "farce" or “mere tool to effectuate a merger.” Bancommerce subsequently sought CA relief from the RTC’s issuance of alias writs and related orders; the CA dismissed Bancommerce’s subsequent petition for certiorari for failure to file a motion for reconsideration, which led to this petition to the Supreme Court.

RTC Execution Orders and Alleged Grounds for Execution

The RTC issued orders and an alias writ authorizing execution against "any and all assets of TRB, including those subject of the Purchase and Sale Agreement with Bank of Commerce," and directed garnishments and release of funds seized by the sheriff. The RTC’s orders were premised on findings suggesting the P&A was a device effecting merger or consolidation, thereby making Bancommerce liable for TRB’s debts.

Majority’s Analysis — Motion for Reconsideration Exception

The majority accepted Bancommerce’s invocation of recognized exceptions to the mandatory requirement to file a motion for reconsideration before petitioning for certiorari, noting:

  • Bancommerce reasonably regarded a further motion for reconsideration as redundant because the RTC’s August 18, 2010 order was effectively a denial of reconsideration of the February 19, 2010 order which already issued the alias writ; repeated motions would have been futile.
  • There was urgent necessity: active sheriffs’ levies and garnishments had already begun, causing prejudice and practicable injury (garnishments, forced seizure of branch cash and equipment, risk of deposit runs).
  • Under the circumstances a motion for reconsideration would have been useless and Bancommerce was deprived of due process by ex parte actions and urgency; issues raised were largely questions of law. Therefore direct recourse to certiorari was justified.

Majority’s Analysis — Merger vs. Sale; Statutory Requirements for Merger

The majority held that the P&A was a sale of identified assets with assumption of specific recorded liabilities, not a merger or consolidation. Key points:

  • Corporation Code prescribes specific procedures (board plans, stockholder approval, execution of articles of merger/consolidation, SEC approval, issuance of a certificate of merger) for merger/consolidation; these were not followed or present.
  • No articles of merger or consolidation, no stock exchange for TRB shareholders, no SEC certificate of merger. Accordingly, no de jure merger or consolidation occurred.
  • The P&A expressly excluded contingent judicial liabilities, including the claims of RPN, et al.; the agreement’s Article II limited assumed liabilities, and Article III preserved separate corporate personalities.
  • BSP’s approval of the P&A (MB Res. 58) mandated the escrow for excluded contingent liabilities; that supports the P&A as a purchase-and-assumption transaction, not a merger.
  • The BIR treated the transaction as a sale for tax purposes, which is consistent with the contractual terms and relevant to tax characterization (not determinative of all legal consequences but supportive of the sale character).

Majority’s Analysis — De Facto Merger and Successor Liability

The majority rejected the argument that a de facto merger or continuation existed, explaining:

  • De facto merger requires evidence the seller disappeared and the purchaser continued the enterprise in such a way that corporate identities were effectively merged; mere sale of all or substantially all assets is not conclusive of de facto merger under local law absent other indicia (e.g., exchange of shares, common control, holding of transferred business as if same entity).
  • TRB retained corporate existence (renamed Royal Traders Holding Co., Inc.); the P&A and subsequent corporate amendments reflect TRB’s survival as a separate entity outside BSP supervision.
  • No evidence showed Bancommerce was a mere continuation of TRB or that the transaction was designed fraudulently to escape liabilities; in fact Bancommerce assumed a greater amount of liabilities than assets, demonstrating an arm’s-length transaction.
  • The exceptions under common law (express or implied assumption, consolidation/merger, continuation, fraud) did not apply.

Majority’s Conclusion and Disposition

Because (a) Bancommerce’s direct petition was justified under recognized exceptions to the motion-for-reconsideration rule, and (b) the P&A was a valid sale with limited assumption of liabilities and not a merger or de facto merger making Bancommerce liable for TRB’s judicially established debts, the majority granted Bancommerce’s petition. The CA resolutions dismissing Bancommerce’s petition were reversed and set aside; the RTC orders (February 19, 2010 and August 18, 2010), the alias writ of execution (March 9, 2010), and all related garnishment/levy orders were annulled and set aside. The temporary restraining order previously issued by the Supreme Court was made permanent.

Concurring Opinion (Justice Velasco, Jr.) — Key Points

Justice Velasco concurred, emphasizing procedural and substantive concerns: Bancommerce had properly objected by special appearance to RTC jurisdiction, the P&A demonstrated the parties’ intent for separate corporate existence and the BSP-mandated escrow scheme, and execution against a stranger to the case was improper absent the recognized exceptions. He also stressed due process and immutability of final judgments: execution must conform to the judgment’s terms and cannot be broadened to include non-parties absent applicable exceptions.

Dissenting Opinion (Justice Mendoza) — Key Points

Justice Mendoza dissented in part, concluding that enforcement of the writ against Bancommerce was proper. His analysis emphasized:

  • Although no de jure merger strictly complied with Corporation Code formalities, the substance of the P&A and surrounding circumstances produced a de facto merger or effective consolidation of banking activities: the P&A involved substantially all TRB assets and liabilities; Bancommerce characterized TRB as “now Bank of Commerce” in filings; BSP circulars describ
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