Upon merger, surviving company inherits dissolved firm’s liabilities

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Persida Acosta

Dear PAO,
The court found that the company I work with has merged with another company. It declared that I was illegally dismissed by my company, which was dissolved upon the merger. The court ruled that I should be given a monetary award. Is it a proper defense for the merger that it is not the one liable for the monetary judgment made in my favor? It said the monetary award should have been sought from the dissolved company.
Sincerely yours,
Tristan

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Dear Tristan,
The case of Sumifru (Philipines) Corp., et al. vs. Bernabe Baya (G.R. No. 188269, April 17, 2017) penned by
Associate Justice Estela Perlas-Bernabe can enlighten you in your situation. It stated:

“[…] Section 80 of the Corporation Code of the Philippines clearly states that one of the effects of a merger is that the surviving company shall inherit not only the assets, but also the liabilities of the corporation it merged with, to wit.

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

2. The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation;

3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and powers and shall be subject to all the duties and liabilities of a corporation organized under this Code;

4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights, privileges, immunities and franchises of each of the constituent corporations; and all property, real or personal, and all receivables due on whatever account, including subscriptions to shares and other choices 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.

In this case, both AMSFC and DFC are guilty of acts constitutive of constructive dismissal performed against Baya. As such, they should be deemed as solidarily liable for the monetary awards in favor of Baya. Meanwhile, Sumifru, as the surviving entity in its merger with DFC, must be held answerable for the latter’s liabilities, including its solidary liability with AMSFC arising herein. Verily, jurisprudence states that ‘in the merger of two existing corporations, one of the corporations survives and continues the business, while the other is dissolved and all its rights, properties and liabilities are acquired by the surviving corporation,’ as in this case.” (Emphasis supplied)

Succinctly, as stated in the above-quoted case, the surviving corporation inherited the liabilities of the dissolved corporation, as a consequence of the merger. Hence, the surviving company of your employer is incorrect in declaring that they are not liable to your monetary awards since, actually and based on law, they have assumed the said liability upon the merger and the dissolution of your employer company.

Again, we find it necessary to mention that this opinion is solely based on the facts you have narrated and our appreciation of the same. The opinion may vary when the facts are changed or elaborated.

We hope that we were able to enlighten you on the matter.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net

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