Case Citation: SPOUSES FRANCISCO ONG ET AL V. BPI FAMILY SAVINGS BANK, INC., G.R. No.

208638,

Date: January 24, 2018

Syllabus Topic: Authorized acts and powers of the corporation; standards of conduct

Doctrine: The surviving or consolidated corporation shall be responsible and liable for all
the liabilities and obligations of each of the constituent corporations in the same
manner as if such surviving or consolidated corporation had itself incurred such
liabilities or obligations;

Quick summary: Petitioners are engaged in the business of printing under the name and style "Melbros
Printing Center”. Sometime in December 1996, Bank of Southeast Asia's (BSA)
Antecedent Facts: managers visited petitioners' office and discussed the various loan and credit facilities
offered by their bank.
Lower court/s
Ruling: In view of petitioners' business expansion plans and the assurances made by BSA's
managers, they applied for the credit facilities offered by the latter. Sometime 1997,
Appellate court they executed a real estate mortgage over their property in favor of BSA as security for
Ruling: a P15M term loan and P5M credit line or a total of P20M.

Thus, with regard to the term loan, only P10,444,271.49 was released by BSA, while
with regard to the P5M credit line, only P3M was released. BSA promised to release
the remaining P2M conditioned upon the payment of the P3M initially released to
petitioners. Petitioners acceded to the condition and paid the P3M in full. However,
BSA still refused to release the P2M. Petitioners then refused to pay the amortizations
due on their term loan.

Later on, BPI Family Savings Bank (BPI) merged with BSA, thus, acquired all the
latter's rights and assumed its obligations. BPI filed a petition for extrajudicial
foreclosure of the REM for petitioners' default in the payment of their term loan.

In order to enjoin the foreclosure, petitioners instituted an action for damages with
Temporary Restraining Order and Preliminary Injunction against BPI praying for
P23,570,881.32 as actual damages; P1,000,000.00 as moral damages; P500,000.00
as attorney's fees, litigation expenses and costs of suit.

The RTC ruled in favor of the petitioners, however BPI appeal before the CA.

The CA reversed the decision of the lower court and ruled in favor of BPI

Petitioner’s
Contention:

Respondent’s • BSA claims that the release of the amount covered by the credit line was subject
Contention: to the "availability of funds" thus only a part of the proceeds of the entire
omnibus line was released.
• BPI insists that it acted in good faith when it sought extrajudicial foreclosure of
the mortgage and that it was not responsible for acts committed by its
predecessor, BSA. Good faith, however, is not an excuse to exempt BPI from
the effects of a merger or consolidation

CORPORATION LAW
PLM JD 3-3 (2021-2022)
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Issue: W/N BPI is exempt from the effects of merger and consolidation

SC Ruling: Section 80. Effects of merger or consolidation. - The merger or consolidation shall
have the following effects:

1. The constituent corporations shall become a single corporation which, in case of

merger, shall be the surviving corporation designated in the plan of merge; and, in case
of consolidation, shall be the consolidated corporation designated in the plan of
consolidation;

xxxx

4. The surviving or the consolidated corporation shall thereupon and thereafter possess
all the right, privileges, immunities and franchises of each of the constituent
corporations; and all property, real or personal, and all receivable due on whatever
account, including subscriptions to shares and other choses in action, and all and every
other interest of, or belonging to, or due to each constituent corporation, shall be
deemed transferred to and vested in such surviving or consolidated corporation without
further act or deed; and

5. The surviving or consolidated corporation shall be responsible and liable for

all the liabilities and obligations of each of the constituent corporations in the
same manner as if such surviving or consolidated corporation had itself incurred
such liabilities or obligations; and any pending claim, action, or proceeding brought
by or against any of such constituent corporations may be prosecuted by or against the
surviving or consolidated corporation. The rights of creditors or liens upon the property
of any of such constituent corporations shall not be impaired by such merger or
consolidation. Applying the pertinent provisions of the Corporation Code, BPI did not
only acquire all the rights, privileges and assets of BSA but likewise acquired the
liabilities and obligations of the latter as if BPI itself incurred it.

Moreover, Section 1(e) of the Articles of Merger dated November 21, 2001 provides
that all liabilities and obligations of BSA shall be transferred to and become the liabilities
and obligations of BPI in the same manner as if it had itself incurred such liabilities or
obligations.15

Pursuant to such merger and consolidation, BPI's right to foreclose the mortgage on
petitioner's property depends on the status of the contract and the corresponding
obligations of the parties originally involved, that is, the agreement between its
predecessor BSA and petitioner.

Since BSA incurred delay in the performance of its obligations and subsequently
cancelled the omnibus line without petitioners' consent, its successor BPI cannot be
permitted to foreclose the loan for the reason that its successor BSA violated the terms
of the contract even prior to petitioners' justified refusal to continue paying the
amortizations.

Others/Notes:

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