Bank of Commerce vs. Heirs of Rodolfo Dela Cruz

The terms of merger between two corporations, when determinative of their joint or respective liabilities towards third parties, cannot be assumed. The party alleging the corporations' joint liabilities must establish the allegation with competent evidence. Otherwise, the liabilities of each corporation remain separate and distinct.

The case arises from a banking relationship where a depositor discovered unauthorized withdrawals from his account due to a bank's negligence. Concurrently, the acquiring bank (Bank of Commerce) sought to collect on loans obtained by the depositor from the original bank (Panasia), leading to a dispute over whether the acquiring bank assumed all liabilities of the original bank or only selected assets and obligations.

• Rodolfo Dela Cruz, sole proprietor of Mamertha General Merchandising, maintained a savings account with Panasia Banking, Inc., Grace Park Branch, Caloocan City under Account No. 002-004-00008-1.
• In October 1998, Dela Cruz discovered that Panasia allowed his son, Allan Dela Cruz, to withdraw funds without his consent or authority. On October 5, 1998, Dela Cruz sent a letter to Panasia instructing them not to allow his son to withdraw or sign checks without his written consent, which was received by Panasia's branch manager on October 16, 1998.
• Despite this instruction, Panasia continued to allow Allan Dela Cruz to withdraw funds, amounting to P56,223,066.07 as evidenced by banking counter checks.
• Dela Cruz demanded restoration of the amount, but Panasia refused, claiming transactions were pursuant to banking policies.
• On August 7, 2000, Dela Cruz filed suit against Panasia. In September 2000, Bank of Commerce demanded payment from Dela Cruz of P27,150,000.00 representing loans obtained from Panasia.
• Dela Cruz discovered that Panasia and Bank of Commerce entered into a Purchase and Sale Agreement dated July 27, 2000, and a Deed of Assignment dated September 18, 2000, whereby Bank of Commerce acquired selected assets and liabilities of Panasia.
• Dela Cruz amended his complaint to include Bank of Commerce, arguing that it assumed Panasia's liabilities and claiming entitlement to legal compensation/set-off by deducting his loan obligation from his claim for unauthorized withdrawals.
• Bank of Commerce defended that it only purchased selected accounts and liabilities, not all liabilities of Panasia, and that Dela Cruz's loan account was among those acquired but not the liability for the unauthorized withdrawals.

• The failure to formally offer the Purchase and Sale Agreement and Deed of Assignment was not fatal to the defense because Dela Cruz admitted their existence and due execution in his amended complaint and pre-trial brief.
• There was no evidence to support the solidary liability of Bank of Commerce for the negligence of Panasia, as the specific terms of the acquisition must be proven and cannot be assumed.
• Panasia was not negligent because the withdrawals were authorized by Dela Cruz (raising a question of fact).

• The mere mention of documents in pleadings does not dispense with the requirement of formal offer of evidence under Section 34, Rule 132 of the Rules of Court.
• Bank of Commerce, by taking over Panasia, absorbed all its assets and liabilities, making it jointly and severally liable for the unauthorized withdrawals.
• The merger transferred all liabilities to Bank of Commerce, and common sense dictates that an acquiring bank cannot selectively assume only favorable obligations.

• Procedural Issues:
  • Whether the failure of Bank of Commerce to formally offer the Purchase and Sale Agreement and Deed of Assignment was fatal to its defense that it did not assume Panasia's liabilities.
• Substantive Issues:
  • Whether Bank of Commerce is solidarily liable with Panasia for the latter's negligence in handling Dela Cruz's account.
  • Whether a merger occurred between Bank of Commerce and Panasia, thereby transferring all liabilities to the former.

• Procedural:
  • The Court upheld the CA and RTC regarding the necessity of formal offer of evidence under Section 34, Rule 132 of the Rules of Court, which generally renders documents not formally offered as mere scraps of paper barren of probative weight.
  • The Court noted exceptions where evidence may be considered even if not formally offered if identified by testimony and incorporated in the records, but found these inapplicable because the documents were not marked as exhibits and their contents were not revealed in the records.
  • However, the Court ruled that the exclusion of these documents created a void in the evidentiary link necessary to support the personal liability of Bank of Commerce for Panasia's negligence.
• Substantive:
  • The Court reversed the CA and RTC decisions regarding Bank of Commerce's liability, holding that merger cannot be assumed but must be proven by the party alleging it.
  • Judicial notice of merger is improper because merger requires specific factual determinations (board approval, stockholder approval, SEC certificate) and is not a matter of common knowledge or notoriety under Rule 129 of the Rules of Court.
  • Since Dela Cruz failed to prove that Bank of Commerce merged with Panasia or specifically assumed the latter's liability for the unauthorized withdrawals, and Bank of Commerce specifically denied such assumption, the complaint against Bank of Commerce must be dismissed for lack of cause of action.
  • The Court modified the CA decision to dismiss Civil Case No. C-19332 insofar as Bank of Commerce is concerned.

• Effects of Merger or Consolidation — In a true merger, the surviving corporation absorbs the other corporation and acquires all its rights, properties, and liabilities, while the absorbed corporation is dissolved. However, this effect is not automatic or presumed; the party claiming merger must prove compliance with Section 79 of the Corporation Code (plan of merger, board and stockholder approval, SEC certificate of merger). The specific terms of the transaction determine whether liabilities were assumed, and courts cannot assume that all liabilities were transferred based on "common sense" alone.
• Judicial Notice — Courts may take judicial notice only of matters of common and general knowledge, well and authoritatively settled, and capable of unquestionable demonstration. Merger is not subject to judicial notice because it depends on the existence of specific facts (regulatory approvals, corporate resolutions) that must be proven by evidence.
• Formal Offer of Evidence — Section 34, Rule 132 of the Rules of Court mandates that courts shall consider no evidence which has not been formally offered, with the purpose specified, to enable the court to know the purpose of the evidence and allow opposing parties to object.

• "The terms of merger between two corporations, when determinative of their joint or respective liabilities towards third parties, cannot be assumed. The party alleging the corporations' joint liabilities should establish the allegation. Otherwise, the liabilities of each of them shall be separate."
• "Merger was an act that could not be assumed; its details must be shown, and its effects must be based on the terms adopted by the parties concerned (through their respective boards of directors) and approved by the proper government office or agency regulating the merging parties."
• "Any document is merely a scrap of paper barren of probative weight unless and until admitted by the trial court as evidence for the purpose or purposes for which it is offered."
• "Simply stated, judicial notice of the terms of merger and the consequences of merger, which the trial and the appellate courts took in adjudging the petitioner jointly and severally liable with Panasia, could not be justified."

• Latip v. Chua (G.R. No. 177809) — Cited for the instances when judicial notice may be properly taken of facts that would normally take the place of evidence.
• State Prosecutors v. Muro — Cited for the requisites of judicial notice: matter must be of common knowledge, well and authoritatively settled, and known within the jurisdiction of the court.
• Expertravel & Tours, Inc. v. Court of Appeals — Cited for the principle that judicial notice is limited to facts evidenced by public records and facts of general notoriety.
• Poliand Industrial Limited v. National Development Company — Cited for the requirements of merger under Section 79 of the Corporation Code, including SEC approval and issuance of certificate of merger.
• Republic v. Vega — Cited for the distinction between questions of law and questions of fact in appeals by certiorari under Rule 45.
• Cosmos Bottling Corporation v. Nagrama, Jr. — Cited for the recognized exceptions where the Supreme Court may settle factual disputes in Rule 45 appeals.

• Section 79, Corporation Code — Governs the requirements for merger or consolidation, including the plan of merger, approval by boards and stockholders, and issuance of a certificate of merger by the SEC.
• Section 34, Rule 132, Rules of Court — Mandates that courts shall consider no evidence which has not been formally offered, specifying the purpose for which the evidence is offered.
• Section 1, Rule 129, Rules of Court — Defines when judicial notice is mandatory (existence of states, political history, laws of nature, etc.).
• Section 2, Rule 129, Rules of Court — Defines when judicial notice is discretionary (matters of public knowledge, capable of unquestionable demonstration).
• Section 1, Rule 8, Rules of Court — Distinguishes ultimate facts (principal, determinative facts upon which cause of action rests) from evidentiary facts (particulars of evidence), noting that pleadings must contain only ultimate facts.