Gonzales vs.

Philippine National Bank

Facts: Ramon A. Gonzales initially instituted several cases in the Supreme Court questioning different transactions entered into by
the Bank with other parties. First among them is Civil Case 69345 filed on 27 April 1967, by Gonzales as a taxpayer versus Sec. Antonio
Raquiza of Public Works and Communications, the Commissioner of Public Highways, the Bank, Continental Ore Phil., Inc.,
Continental Ore, Huber Corporation, Allis Chalmers and General Motors Corporation. In the course of the hearing of said case on 3
August 1967, the personality of Gonzales to sue the bank and question the letters of credit it has extended for the importation by the
Republic of the Philippines of public works equipment intended for the massive development program of the President was raised.
In view thereof, he expressed and made known his intention to acquire one share of stock from Congressman Justiniano Montano
which, on the following day, 30 August 1967, was transferred in his name in the books of the Bank. Subsequent to his aforementioned
acquisition of one share of stock of the Bank, Gonzales, in his dual capacity as a taxpayer and stockholder, filed the following cases
involving the bank or the members of its Board of Directors to wit: (1) On 18 October 1967, Civil Case 71044 versus the Board of
Directors of the Bank; the National Investment and Development Corp., Marubeni Iida Co., Ltd., and Agro-Inc. Dev. Co. or Saravia;
(2) On 11 May 1968, Civil Case 72936 versus Roberto Benedicto and other Directors of the Bank, Passi (Iloilo) Sugar Central, Inc.,
Calinog-Lambunao Sugar Mill Integrated Farming, Inc., Talog sugar Milling Co., Inc., Safary Central, Inc., and Batangas Sugar Central
Inc.; and (3) On 8 May 1969, Civil Case 76427 versus Alfredo Montelibano and the Directors of both the PNB and DBP.

On 11 January 1969, however, Gonzales addressed a letter to the President of the Bank, requesting submission to look into the
records of its transactions covering the purchase of a sugar central by the Southern Negros Development Corp. to be financed by
Japanese suppliers and financiers; its financing of the Cebu-Mactan Bridge to be constructed by V.C. Ponce, Inc. and the construction
of the Passi Sugar Mills in Iloilo. On January 23, 1969, the Asst. Vice President and Legal Counsel of the Bank answered petitioner's
letter denying his request for being not germane to his interest as a one share stockholder and for the cloud of doubt as to his real
intention and purpose in acquiring said share. In view of the Bank's refusal, Gonzales instituted the petition for mandamus. The Court
of First Instance of Manila denied the prayer of Gonzales that he be allowed to examine and inspect the books and records of PNB
regarding the transactions mentioned on the grounds that the right of a stockholder to inspect the record of the business transactions
of a corporation granted under Section 51 of the former Corporation Law (Act No. 1459, as amended) is not absolute, but is limited
to purposes reasonably related to the interest of the stockholder, must be asked for in good faith for a specific and honest purpose
and not gratify curiosity or for speculative or vicious purposes; that such examination would violate the confidentiality of the records
of the bank as provided in Section 16 of its charter, RA 1300, as amended; and that Gonzales has not exhausted his administrative
remedies. Gonzales filed the petition for review.

Issue:
Whether Gonzales' can ask for an examination of the books and records of PNB, in light of his ownership of one share in the bank.
Whether the inspection sought to be exercised by Gonzales would be violative of the provisions of PNB's charter.

Held:

1. The unqualified provision on the right of inspection previously contained in Section 51, Act No. 1459, as amended, no longer holds
true under the provisions of the present law. The argument of Gonzales that the right granted to him under Section 51 of the former
Corporation Law should not be dependent on the propriety of his motive or purpose in asking for the inspection of the books of PNB
losses whatever validity it might have had before the amendment of the law. If there is any doubt in the correctness of the ruling of
the trial court that the right of inspection granted under Section 51 of the old Corporation Law must be dependent on a showing of
proper motive on the part of the stockholder demanding the same, it is now dissipated by the clear language of the pertinent
provision contained in Section 74 of Batas Pambansa Bilang 68. Although Gonzales has claimed that he has justifiable motives in
seeking the inspection of the books of the PNB, he has not set forth the reasons and the purposes for which he desires such inspection,
except to satisfy himself as to the truth of published reports regarding certain transactions entered into by the respondent bank and
to inquire into their validity. The circumstances under which he acquired one share of stock in the PNB purposely to exercise the right
of inspection do not argue in favor of his good faith and proper motivation. Admittedly he sought to be a stockholder in order to pry
into transactions entered into by the PNB even before he became a stockholder. His obvious purpose was to arm himself with
materials which he can use against the PNB for acts done by the latter when Gonzales was a total stranger to the same. He could
have been impelled by a laudable sense of civic consciousness, but it could not be said that his purpose is germane to his interest as
a stockholder.

2. Section 15 of the PNB's Charter (RA 1300, as amended) provides that "Inspection by Department of Supervision and Examination
of the Central Bank. — The National Bank shall be subject to inspection by the Department of Supervision and Examination of the
Central Bank." Section 16 thereof provides that "Confidential information. — The Superintendent of Banks and the Auditor General,
or other officers designated by law to inspect or investigate the condition of the National Bank, shall not reveal to any person other
than the President of the Philippines, the Secretary of Finance, and the Board of Directors the details of the inspection or
investigation, nor shall they give any information relative to the funds in its custody, its current accounts or deposits belonging to
private individuals, corporations, or any other entity, except by order of a Court of competent jurisdiction." On the other hand,
Section 30 of the same provides that "Penalties for violation of the provisions of this Act. — Any director, officer, employee, or agent
of the Bank, who violates or permits the violation of any of the provisions of this Act, or any person aiding or abetting the violations
of any of the provisions of this Act, shall be punished by a fine not to exceed ten thousand pesos or by imprisonment of not more than
five years, or both such fine and imprisonment." The Philippine National Bank is not an ordinary corporation. Having a charter of its
own, it is not governed, as a rule, by the Corporation Code of the Philippines. The provision of Section 74 of Batas Pambansa Blg. 68
of the new Corporation Code with respect to the right of a stockholder to demand an inspection or examination of the books of the
corporation may not be reconciled with the above quoted provisions of the charter of the PNB. It is not correct to claim, therefore,
that the right of inspection under Section 74 of the new Corporation Code may apply in a supplementary capacity to the charter of
the PNB.

Associated Bank vs. Court of Appeals

FACTS:

Associated Banking Corporation and Citizens Bank and Trust Company (CBTC) merged to form just one banking corporation known
as Associated Citizens Bank (later renamed Associated Bank), the surviving bank. After the merger agreement had been signed, but
before a certificate of merger was issued, respondent Lorenzo Sarmiento, Jr. executed in favor of Associated Bank a promissory note,
promising to pay the bank P2.5 million on or before due date at 14% interest per annum, among other accessory dues. For failure to
pay the amount due, Sarmiento was sued by Associated Bank.

Respondent argued that the plaintiff is not the proper party in interest because the promissory note was executed in favor of CBTC.
Also, while respondent executed the promissory note in favor of CBTC, said note was a contract pour autrui, one in favor of a third
person who may demand its fulfillment. Also, respondent claimed that he received no consideration for the promissory note and, in
support thereof, cites petitioner's failure to submit any proof of his loan application and of his actual receipt of the amount loaned.

ISSUE:

1.) Whether or not Associated Bank, the surviving corporation, may enforce the promissory note made by private respondent in favor
of CBTC, the absorbed company, after the merger agreement had been signed, but before a certificate of merger was issued?

2.) Whether or not the promissory note was a contract pour autrui and was issued without consideration?

HELD:

The petition is impressed with merit.

Associated Bank assumed all the rights of CBTC. Although absorbed corporations are dissolved, there is no winding up of their affairs
or liquidation of their assets, because the surviving corporation automatically acquires all their rights, privileges and powers, as well
as their liabilities. The merger, however, does not become effective upon the mere agreement of the constituent corporations. The
Securities and Exchange Commission (SEC) and majority of the respective stockholders of the constituent corporations must have
approved the merger. (Section 79, Corporation Code) It will be effective only upon the issuance by the SEC of a certificate of merger.
Records do not show when the SEC approved the merger.

But assuming that the effectivity date of the merger was the date of its execution, we still cannot agree that petitioner no longer has
any interest in the promissory note. The agreement itself clearly provides that all contracts — irrespective of the date of execution —
entered into in the name of CBTC shall be understood as pertaining to the surviving bank, herein petitioner. Such must have been
deliberately included in the agreement in order to avoid giving the merger agreement a farcical interpretation aimed at evading
fulfillment of a due obligation. Thus, although the subject promissory note names CBTC as the payee, the reference to CBTC in the
note shall be construed, under the very provisions of the merger agreement, as a reference to petitioner bank.

On the issue that the promissory note was a contract pour autrui and was issued without consideration, the Supreme Court held it
was not. In a contract pour autrui, an incidental benefit or interest, which another person gains, is not sufficient. The contracting
parties must have clearly and deliberately conferred a favor upon a third person. The "fairest test" in determining whether the third
person's interest in a contract is a stipulation pour autrui or merely an incidental interest is to examine the intention of the parties as
disclosed by their contract. It did not indicate that a benefit or interest was created in favor of a third person. The instrument itself
says nothing on the purpose of the loan, only the terms of payment and the penalties in case of failure to pay.

Private respondent also claims that he received no consideration for the promissory note, citing petitioner's failure to submit any
proof of his loan application and of his actual receipt of the amount loaned. These arguments deserve no merit. Res ipsa loquitur. The
instrument, bearing the signature of private respondent, speaks for itself. Respondent Sarmiento has not questioned the
genuineness and due execution thereof. That he partially paid his obligation is itself an express acknowledgment of his obligation.

WHEREFORE, the petition is GRANTED.

MINDANAO SAVINGS AND LOAN ASSOCIATION, INC., represented by its Liquidator, THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION v. EDWARD WILLKOM; GILDA GO; REMEDIOS UY; MALAYO BANTUAS, in his capacity as the Deputy Sheriff
of RTC, Branch 3, Iligan City; and the REGISTER OF DEEDS of Cagayan de Oro City, Respondent
2010 Oct 20 2nd Division G.R. No. 178618 NACHURA, J.:

FACTS

First Iligan Savings and Loan Association, Inc. (FISLAI) and Davao Savings and Loan Association, Inc. (DSLAI) are entities duly
registered with the SEC primarily engaged in the business of granting loans and receiving deposits from the general public, and
treated as banks. In 1985, FISLAI and DSLAI entered into a merger, with DSLAI as the surviving corporation but their articles of merger
were not registered with the SEC due to incomplete documentation. DSLAI changed its corporate name to MSLAI by way of an
amendment to its Articles of Incorporation which was approved by the SEC. In 1986, the Board of Directors of FISLAI passed and
approved Board Resolution assigning its assets in favor of DSLAI which in turn assumed the former’s liabilities. The business of MSLAI,
however, failed. Hence, the Monetary Board of the Central Bank of the Philippines ordered its liquidation with PDIC as its liquidator.
Prior to the closure of MSLAI, Uy filed with the RTC of Iligan City, an action for collection of sum of money against FISLAI. The RTC
issued a summary decision in favor of Uy, directing FISLAI to pay. As a consequence, 6 parcels of land owned by FISLAI were levied
and sold to Willkom. In 1995, MSLAI, represented by PDIC, filed before the RTC a complaint for the annulment of the Sheriff’s Sale
alleging that the sale on execution of the subject properties was conducted without notice to it and PDIC. Respondents, in its answer,
averred that MSLAI had no cause of action because MSLAI is a separate and distinct entity from FISLAI on the ground that the
“unofficial merger” between FISLAI and DSLAI (now MSLAI) did not take effect considering that the merging companies did not
comply with the formalities and procedure for merger or consolidation as prescribed by the Corporation Code of the Philippines. RTC
dismissed the case for lack of jurisdiction. CA affirmed but ruled that there was no merger between FISLAI and MSLAI (formerly
DSLAI) for their failure to follow the procedure laid down by the Corporation Code for a valid merger or consolidation.

ISSUE
Was the merger between FISLAI and DSLAI (now MSLAI) valid and effective?

HELD
NO. In merger, one of the corporations survives while the rest are dissolved and all their rights, properties, and liabilities are acquired
by the surviving corporation. Although there is a dissolution of the absorbed or merged corporations, there is no winding up of their
affairs or liquidation of their assets because the surviving corporation automatically acquires all their rights, privileges, and powers,
as well as their liabilities.

The merger, however, does not become effective upon the mere agreement of the constituent corporations. Since a merger or
consolidation involves fundamental changes in the corporation, as well as in the rights of stockholders and creditors, there must be
an express provision of law authorizing them. The steps necessary to accomplish a merger or consolidation, as provided for in
Sections 76,[24] 77,[25] 78,[26] and 79[27] of the Corporation Code, are:
(1) The board of each corporation draws up a plan of merger or consolidation. Such plan must include any amendment, if necessary,
to the articles of incorporation of the surviving corporation, or in case of consolidation, all the statements required in the articles of
incorporation of a corporation;
(2) Submission of plan to stockholders or members of each corporation for approval. A meeting must be called and at least two (2)
weeks’ notice must be sent to all stockholders or members, personally or by registered mail. A summary of the plan must be attached
to the notice. Vote of two-thirds of the members or of stockholders representing two-thirds of the outstanding capital stock will be
needed. Appraisal rights, when proper, must be respected;
(3) Execution of the formal agreement, referred to as the articles of merger or consolidation, by the corporate officers of each
constituent corporation. These take the place of the articles of incorporation of the consolidated corporation, or amend the articles
of incorporation of the surviving corporation;
(4) Submission of said articles of merger or consolidation to the SEC for approval;
(5) If necessary, the SEC shall set a hearing, notifying all corporations concerned at least two weeks before;
(6) Issuance of certificate of merger or consolidation.

Clearly, the merger shall only be effective upon the issuance of a certificate of merger by the SEC, subject to its prior determination
that the merger is not inconsistent with the Corporation Code or existing laws. In this case, it is undisputed that the articles of merger
between FISLAI and DSLAI were not registered with the SEC due to incomplete documentation. Consequently, the SEC did not issue
the required certificate of merger. Even if it is true that the Monetary Board of the Central Bank of the Philippines recognized such
merger, the fact remains that no certificate was issued by the SEC. Such merger is still incomplete without the certification. The
issuance of the certificate of merger is crucial because not only does it bear out SEC’s approval but it also marks the moment when
the consequences of a merger take place. By operation of law, upon the effectivity of the merger, the absorbed corporation ceases
to exist but its rights and properties, as well as liabilities, shall be taken and deemed transferred to and vested in the surviving
corporation. There being no merger between FISLAI and DSLAI (now MSLAI), for third parties such as respondents, the two
corporations shall not be considered as one but two separate corporations. Being separate entities, the property of one cannot be
considered the property of the other.

Thus, in the instant case, as far as third parties are concerned, the assets of FISLAI remain as its assets and cannot be considered as
belonging to DSLAI and MSLAI, notwithstanding the Deed of Assignment wherein FISLAI assigned its assets and properties to DSLAI,
and the latter assumed all the liabilities of the former. As provided in Article 1625 of the Civil Code, “an assignment of credit, right or
action shall produce no effect as against third persons, unless it appears in a public instrument, or the instrument is recorded in the
Registry of Property in case the assignment involves real property.” The certificates of title of the subject properties were clean and
contained no annotation of the fact of assignment. Respondents cannot, therefore, be faulted for enforcing their claim against FISLAI
on the properties registered under its name. Accordingly, MSLAI, as the successor-in-interest of DSLAI, has no legal standing to annul
the execution sale over the properties of FISLAI. With more reason can it not cause the cancellation of the title to the subject
properties of Willkom and Go.

Babst v CA
Date of Promulgation: Jan. 26, 2001
Ponente: J. Ynares-Santiago

Facts:
Elizalde Steel Consolidated, Inc. (ELISCON) obtained a loan from Commercial Bank and Trust Company (CBTC) in the amount of
P8,015,900.84, evidenced by a promissory note. ELISCON defaulted on its payments, leaving an outstanding balance of
P2,795,240.67.

The letters of credit, on the other hand, were opened for ELISCON by CBTC using the credit facilities of Pacific Multi-Commercial
Corporation (MULTI) with the said bank. Subsequently, Antonio Roxas Chua and Chester Babst executed a Continuing Suretyship,
whereby they bound themselves jointly and severally liable to pay any existing indebtedness of MULTI to CBTC.

The Bank of the Philippine Islands (BPI) and CBTC entered into a merger, wherein BPI, as the surviving corporation, acquired all the
assets and assumed all the liabilities of CBTC. Meanwhile, ELISCON became heavily indebted to DBP as it suffered financial
difficulties.

ELISCON called its creditors to a meeting to announce the take-over by DBP of its assets, including its indebtedness to BPI.
Thereafter, DBP proposed formulas for the settlement of all of ELISCON’s obligations to its creditors, but BPI rejected the formula.

BPI then filed a complaint for sum of money against ELISCON, MULTI, and Babst. ELISCON argued that the complaint was premature
since DBP had made serious efforts to settle its obligations with BPI. Babst, on the other hand, asserted that his suretyship covers
only obligations which MULTI incurred solely for its benefit and not for any third party liability. MULTI denied knowledge of the BPI-
CBTC merger.

BPI argued that it did not give consent to the DBP take-over of ELISCON. Hence, no valid novation has been effected.

Issue:
WON BPI consented to the assumption by DBP of the obligations of ELISCON. YES. The original obligation having been extinguished,
the contracts of suretyship executed by Babst and MULTI are also extinguished.

Ratio:
BPI contends that there must be an express consent of the creditor. However, the rule that it must be “express” is not absolute for
the existence of the consent may well be inferred from the acts of the creditor, since volition may as well be expressed by deeds as
by words. In short, there can be implied consent of the creditor to the substitution of debtors.

In the instant case, the failure of BPI to register its objection to the take-over by DBP of ELISCON’s assets at the creditors’ meeting
is deemed to be a form of implied consent on the part of BPI. BPI merely objected to the payment formula, not the substitution of
debtors.

BPI’s conduct evinced a clear and unmistakable consent to the substitution of DBP for ELISCON as debtor. Hence, there was a valid
novation which resulted in the release of ELISCON from its obligation to BPI, whose cause of action should be directed against DBP
as the new debtor.