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Digests 10

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Published by Sui

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Published by: Sui on Aug 10, 2008
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XVII.CORPORATE COMBINATIONSReyes et al. v. Blouse et al.
(1952)1)Plaintiffs, as minority stockholders of the LAGUNA TAYABAS BUS CO.,sued to restrain its BOD (defendants) from carrying out a resolution approved byapproximately 92.5 of the stockholders:authorizing the BOD to take the necessary steps to consolidate theproperties and franchises of the LAGUNA TAYABAS BUS CO. w/ those of the BATANGAS TRANSPORTATION CO.2)The grounds on which plaintiffs predicate their action are:a)the proposed consolidation or merger of the two companies wouldbe prejudicial to the L.T.B. Co. and to them in particular who do notown shares of stock of B. T. Co. in that:-During the last 10 years prior to the last war, thedividends declared by L. T. B. Co. were increasing, whereasthe dividends declared by B. T. Co. were decreasing inamount.-In 1941, the shares of L. T. B. Co. cost P250 each inthe market, whereas the shares of B. T. Co. cost only P150each.-A comparative study of the net gains of eachcompany for the first six months of 1947 showed that theprofits of the L. T. B. Co. exceeded B. T. Co. byapproximately P67,000. As a-consequence, the shares of L.T. B. Co. were costing P360 a share, while the shares of theB. T. Co. were quoted at only P200.'b)the proposed consolidation or merger was illegal because theunanimous vote of the stockholders was not secured and that thesame was contrary to the spirit of our laws.3)On appeal, Plaintiffs contend that:its real purpose is to effect a merger or consolidation, and as such there isno law in the Philippines under which it may properly be carried out4)Defendants Comment:that it is merely an exchange of properties sanctioned by our corporationlaw, as amended, and that even if it be considered as a consolidation, the
same can still he carried out under Commonwealth Act No. 146, section20, otherwise known as the Public Service Law.ISSUE 1:W the real purpose of the disputed resolution is the merger or consolidation of the properties and franchises of the LAGUNA TAYABAS BUSCO. w/ those of the BATANGAS TRANSPORTATION CO. w/n the meaning of thelaw?HELD 1:It is apparent that the purpose of the resolution is not to dissolvethe Laguna Tayabas Bus Co. but merely to transfer its assets to a newcorporation in exchange for its corporation stock.This intent is clearly deducible from the provision that the Laguna TayabasBus Co. will not be dissolved but will continue existing until its stockholdersdecide to dissolve the same.ISSUE 2:(In the affirmative case) W said merger or consolidation can becarried out under the law now existing and in force in the Philippines?HELD 2:This comes squarely within the purview of section 281/2 of thecorporation law which provides, among others, that a corporation may sell,exchange, lease or otherwise dispose of all its property and assets, including itsgood will, upon such terms and conditions as its Board of Directors may deemexpedient when authorized by the affirmative vote of the shareholders holding atleast 2/3 of the voting power. The words "or otherwise disposed of" is very broadand in a sense covers a merger or consolidation. The action of the corporationwas taken having in view this provision of our corporation law and in our opinionthe corporation has acted correctly.
(1965)1)EDWARD J. NELL COMPANY is the judgment creditor of INSULARFARMS INC. (representing the unpaid balance of the price of a pump sold by it toINSULAR FARMS).2)The writ of execution was returned unsatisfied stating that Insular Farmshad no leviable property.3)EDWARD J. NELL COMPANY filed the present action against PACIFICFARMS INC. (appellee) for the collection of the judgment aforementioned:upon the theory that PACIFIC FARMS INC. (appellee) is the alter ego of INSULAR FARMS because the former had purchased all or substantiallyall of the shares of stock, as well as the real and personal properties of thelatter, including the pumping equipment sold by appellant to INSULARFARMS
4)The record shows that:a)(21 March ’58) PACIFIC FARMS INC. purchased 1,000 shares of stock of INSULARthat,b)thereupon, PACIFIC FARMS INC. sold said shares of stock tocertain individuals, who forthwith reorganized said corporation, andc)that the BOD thereof, as reorganized, then caused its assets,including its lease-hold rights over a public land in Bolinao,Pangasinan, to be sold to herein PACIFIC FARMS INC.P10,000.00.HELD:These facts do not prove that PACIFIC FARMS INC. is the alter egoof INSULAR FARMS, or is liable for its debts.There is neither proof nor allegation that:a)PACIFIC FARMS INC. had expressly or impliedly agreed to assumethe debt of INSULAR FARMS in favor of appellant herein, or 
that PACIFIC FARMS INC. is a continuation of INSULAR FARMS,or 
that the sale of either the shares of stock or the assets of INSULARFARMS to PACIFIC FARMS INC. had been entered intofraudulently, in order to escape liability for the debt of the Insular Farms in favor of appellant herein.In fact, these sales took place (March, 1958) not only over (6) monthsbefore the rendition of the judgment (October 9, 1958) sought to be collected inthe present action, but, also, over a month before the filing of the case (May 29,1958) in which said judgment was rendered.Moreover, PACIFIC FARMS INC. purchased the shares of stock of Insular Farms as the highest bidder at an auction sale held at the instance of a bank towhich said shares had been pledged as security for an obligation of Insular Farms in favor of said bank.It has also been established that the PACIFIC FARMS INC. had paidP285,126.99 for said shares of stock, apart from the sum of P10,000.00 it,likewise, paid for other assets of Insular Farms.

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