G.R. No. 195615, April 21, 2014
Bank of Commerce, Petitioner, vs. Radio Philippines Network, Inc., Intercontinental Broadcasting Corporation, and Banahaw Broadcasting Corporation, THRU BOARD OF ADMINISTRATOR, and Sheriff Bienvenido S. Reyes, Jr., Sheriff, Regional Trial Court of Quezon City, Branch 98, Respondents.

FACTS

In late 2001, Traders Royal Bank (TRB) proposed to sell its banking business to petitioner Bank of Commerce (Bancommerce) for ₱10.4 billion, subject to Bangko Sentral ng Pilipinas (BSP) approval. The BSP approved their Purchase and Assumption (P & A) Agreement on November 8, 2001, on the condition that an escrow fund of ₱50 million be set up to cover TRB’s excluded contingent liabilities. On November 9, 2001, Bancommerce entered into the P & A Agreement, acquiring TRB’s specified assets and liabilities, excluding liabilities from judicial actions. On December 6, 2001, TRB placed ₱50 million in escrow with Metropolitan Bank and Trust Co. (Metrobank) to cover the excluded claims, and the BSP gave final approval on July 3, 2002.
Subsequently, on October 10, 2002, the Supreme Court ordered TRB to pay respondents (collectively, RPN, et al.) actual damages. Based on this, RPN, et al. filed a motion for execution. They later filed a Supplemental Motion for Execution, describing TRB as “now Bank of Commerce,” assuming a merger. Bancommerce filed a Special Appearance with Opposition, denying a merger and questioning the RTC’s jurisdiction. On August 15, 2005, the RTC issued an Order granting a writ of execution against TRB’s assets, including those under the P & A Agreement and the escrow fund.
Bancommerce filed a petition for certiorari with the Court of Appeals (CA). On December 8, 2009, the CA denied the petition but modified the RTC Order by deleting the finding that the P & A Agreement was a “mere tool to effectuate a merger.” The CA stated there was no conclusive evidence of a merger. On January 8, 2010, RPN, et al. filed a motion for an alias writ of execution against Bancommerce based on the CA Decision. The RTC granted this on February 19, 2010, and issued an alias writ on March 9, 2010. Bancommerce filed motions to quash, which the RTC denied in an Order dated August 18, 2010, directing the release of garnished assets and payment of attorney’s fees.
Bancommerce elevated the RTC Orders to the CA via a petition for certiorari under Rule 65. On November 26, 2010, the CA dismissed the petition outright for failure to file a motion for reconsideration of the assailed RTC Order. The CA denied Bancommerce’s motion for reconsideration on February 9, 2011.

ISSUE

1. Whether the CA gravely erred in holding that Bancommerce had no valid excuse for failing to file a motion for reconsideration before filing the petition for certiorari.
2. Whether the CA gravely erred in failing to rule that the RTC’s Order of execution against Bancommerce was a nullity, given the CA’s prior Decision that no merger existed between TRB and Bancommerce.

RULING

The Supreme Court granted the petition.
1. On the procedural issue, the Court held that Bancommerce’s direct filing of the petition for certiorari fell within recognized exceptions to the requirement of a prior motion for reconsideration. First, filing such a motion would have been redundant, as the RTC’s August 18, 2010 Order already denied Bancommerce’s earlier motions. Second, an urgent necessity existed because the Sheriff had begun garnishing Bancommerce’s deposits and levying its assets, causing prejudice and risk to its banking operations.
2. On the substantive issue, the Court ruled that the RTC’s Order of execution against Bancommerce was a nullity. The Court affirmed that no merger or consolidation, whether de jure or de facto, occurred between TRB and Bancommerce. The transaction was a valid Purchase and Assumption Agreement approved by the BSP, where Bancommerce acquired only specified assets and liabilities, expressly excluding TRB’s contingent judicial liabilities, which were covered by the separate ₱50 million escrow fund. The prior CA Decision explicitly found no evidence of a merger and deleted the RTC’s finding to that effect. Consequently, Bancommerce could not be held liable for TRB’s judgment debt to RPN, et al. The execution should have been pursued against the escrow fund or TRB’s remaining assets, not against Bancommerce.
The Supreme Court annulled and set aside the CA’s November 26, 2010 and February 9, 2011 Resolutions, as well as the RTC’s Orders dated February 19, 2010 and August 18, 2010, the Alias Writ of Execution dated March 9, 2010, and all related garnishment/levy orders. The Temporary Restraining Order was made permanent.