THIRD DIVISION
SPOUSES RAMON M. NISCE G.R. No. 167434
and A. NATIVIDAD PARAS-
NISCE,
Petitioners, Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO,
JJ.
EQUITABLE PCI BANK, INC.,
Respondent.
Promulgated:
February
19, 2007
x-----------------------------------------------------------------------------------------x
CALLEJO, SR., J.:
On P34,087,725.76 broken down as follows:
Spouses
Ramon & Natividad Nisce - - - - - P17,422,285.99
Natividad
P. Nisce (surety) - - - - - - - - - - US$57,306.59
and - - -
- - - - - - - - - P16,665,439.77[2]
On
On P9,000,000.00; they were surprised when they received a letter
from the Bank demanding payment of their loan account, and later a petition for
extrajudicial foreclosure.
The spouses
Nisce also pointed out that the petition for foreclosure filed by the Bank included
the alleged obligation of Natividad as surety for the loan of Vista Norte
Trading Corporation, a company owned and managed by their son Dino Giovanni P.
Nisce (P16,665,439.77 and US$57,306.59). They insisted, however, that the
suretyship agreement was null and void for the following reasons:
(a) x
x x [I]t was executed without the knowledge and consent of plaintiff Ramon M.
Nisce, who is by law the administrator of the conjugal partnership;
(b)
The suretyship agreement did not redound to the benefit of the conjugal
partnership and therefore did not bind the same;
(c)
Assuming, arguendo, that the
suretyship contract was valid and binding, any obligation arising therefrom is
not covered by plaintiffs’ real estate mortgages which were constituted to
secure the payment of certain specific obligations only.[8]
The
spouses Nisce likewise alleged that since they and the Bank were creditors and
debtors with respect to each other, their obligations should have been offset by
legal compensation to the extent of their account with the Bank.
To
support their plea for a writ of preliminary and prohibitory injunction, the spouses
Nisce alleged that the amount for which their property was being sold at public
auction (P34,087,725.76) was grossly excessive; the US dollar deposit of
Natividad with PCI Capital Asia Ltd. (
(1) that upon the filing of this Complaint and/or
after due notice and summary hearing, the Honorable Court immediately issue a
temporary restraining order (TRO) restraining defendants, their representatives
and/or deputies, and other persons acting for and on their behalf from
proceeding with the extrajudicial foreclosure sale of plaintiffs’ mortgaged
properties on 30 January 2003 or on any other dates subsequent thereto;
(2)
that after due notice and hearing and posting of the appropriate bond, the
Honorable Court convert the TRO to a writ of preliminary prohibitory injunction;
(3)
that after trial on the merits, the Honorable Court render judgment –
(a) making the preliminary injunction final and permanent;
(b) ordering defendant Bank to set off the present peso
value of Mrs. Nisce’s US dollar time deposit, inclusive of stipulated interest,
against plaintiffs’ loan obligations with defendant Bank;
(c) declaring the Deed of Suretyship dated 25 May 1998
null and valid and without any binding effect as to plaintiff spouses, and
ordering defendant Bank to exclude the amounts covered by said suretyship
contract from plaintiffs’ obligations with defendant Bank;
(d) ordering defendant Bank to pay plaintiffs the
following sums:
(i)
at least P3,000,000.00
as moral damages;
(ii)
at least P1,500,000.00
as exemplary damages; and
(iii)
at least P500,000.00
as attorney’s fees and for other expenses of litigation.
Plaintiffs further pray for costs of suit and such
other reliefs as may be deemed just and equitable.[9]
On same
day, the Bank filed an “Amended Petition” with the Office of the Executive
Judge for extrajudicial foreclosure of the Real Estate Mortgage to satisfy the
spouses’ loan account of P30,533,552.24, exclusive of interests,
penalties and other charges; and the amounts of P16,665,439.77 and
US$57,306.59 covered by the suretyship agreement executed by Natividad Nisce.[10]
In the meantime, the parties agreed
to have the sale at public auction reset to
In its
Answer to the complaint, the Bank alleged that the spouses had no cause of
action for legal compensation since PCI Capital was a different corporation
with a separate and distinct personality; if at all, offsetting may occur only with
respect to the spouses’ US$500.00 deposit account in its Paseo de Roxas branch.
In the
meantime, the Ex-Officio Sheriff set
the sale at public auction at
The Case
for the Spouses Nisce
Natividad frequently
traveled abroad and needed a facility with easy access to foreign
exchange. She inquired from E.P. Nery,
the Bank Manager for PCI Bank Paseo de Roxas Branch, about opening an account. He assured her that she would be able to
access it from anywhere in the world. She and Nery also agreed that any balance
of account remaining at maturity date would be rolled over until further
instructions, or until she terminated the facility.[13]
Convinced, Natividad deposited US$20,500.00 on
On P20,000,000.00 loan from the Bank under Promissory Note
No. BD-150369.[16]
The maturity date of the loan was P13,089,936.90
on March 1, 2000 (to mature on March 1, 2005) payable quarterly at 13.9869% interest
per annum; this loan agreement is evidenced by Promissory Note (PN) No. 1042793[19]
and covered by a Real Estate Mortgage[20]
executed on February 28, 2000. They made a partial payment of P13,866,666.50
on the principal of their loan account covered by PN No. BD-150369, and P5,348,239.82
on the interests.[21]
These payments are evidenced by receipts and checks.[22]
However, there were payments totaling P4,600,000.00 received by the Bank
but were not covered by checks or receipts.[23] As of September 2000, the balance of their
loan account under PN No. BD-150369 was only P4,333,333.46.[24] They also made partial payment on their loan
account under PN No. 1042793 which, as of P2,218,793.61.[25]
On
In June
1991, two sons of the Nisce spouses were stranded in
In the
meantime, in 1994, the Equitable Banking Corporation and the PCIB were merged under
the corporate name Equitable PCI Bank.
In a letter
dated
The Case
for the Bank
The Bank adduced
evidence that, as of P30,533,552.24.[37]
It had agreed to restructure their loans on P4,600,000.00.[39]
According
to the Bank, Natividad’s US$20,000.00 deposit with the PCIB Paseo de Roxas branch
was transferred to PCI Capital via cable order,[40]
and that it later issued Certificate of Deposit No. 01612 (Non-transferrable).[41]
In a letter dated
The spouses
Nisce presented rebuttal documentary evidence to show that PCI Capital was
registered in Hong Kong as a corporation under Registration No. 84555 on February
27, 1989[43]
with an authorized capital stock of 50,000,000 (with par value of HKD1.00); the
PCIB subscribed to 29,039,993 issued shares at the par value of HKD1.00 per
share;[44]
on
On P10,000,000.00. The dispositive portion of the Order reads:
WHEREFORE, in order not to render the judgment
ineffectual, upon filing by the plaintiffs and the approval thereof by the
court of a bond in the amount of Php10,000,000.00, which shall answer for any
damage should the court finally decide that plaintiffs are not entitled
thereto, let a writ of preliminary injunction issue enjoining defendants
Equitable-PCI Bank, Atty. Engracio M. Escasinas, Jr., and any person or entity
acting for and in their behalf from proceeding with the extrajudicial
foreclosure sale of TCT Nos. 437678 and 437679 registered in the names of the
plaintiffs.[48]
After weighing the parties’ arguments
along with their documentary evidence, the RTC declared that justice would be best
served if a writ of preliminary injunction would be issued to preserve the status quo. It had yet to resolve the issue
of setoff since only Natividad dealt with the Bank regarding her dollar
account. It also had to resolve the issue of whether the Bank had failed to
credit the amount of P4,600,000.00 to the spouses Nisce’s account under
PN No. BD-150369, and their claim that the Bank had effectively accelerated the
respective maturity dates of their loan.[49] The spouses Nisce posted the
requisite bond which was approved by the RTC.
The Bank opted
not to file a motion for reconsideration of the order, and instead assailed the
trial court’s order before the CA via petition for certiorari under Rule 65 of the Rules of Court. The Bank alleged
that the RTC had acted without or in excess of its jurisdiction, or with grave
abuse of its discretion amounting to lack or excess of jurisdiction when it
issued the assailed order;[50]
the spouses Nisce had failed to prove the requisites for the issuance of a writ
of preliminary injunction; respondents’ claim that their account with
petitioner had been extinguished by legal compensation has no factual and legal
basis. It further asserted that according to the evidence, Natividad made the US$20,000.00
deposit with PCI Capital before it
merged with Equitable Bank – hence, the Bank was not the debtor of Natividad relative
to the dollar account. The Bank cited the ruling of this Court in Escaño v. Heirs of Escaño and Navarro[51]
to support its arguments. It insisted that the spouses Nisce had failed to
establish “irreparable injury” in case of denial of their plea for injunctive
relief.
The spouses,
for their part, pointed out that the Bank failed to file a motion for
reconsideration of the trial court’s order, a condition sine qua non to the filing of a petition for certiorari under Rule 65 of the Rules of Court. Moreover, the error
committed by the trial court is a mere error of judgment not correctible by certiorari; hence, the petition should
have been dismissed outright by the CA. They
reiterated their claim that they had made a partial payment of P4,600,000.00
on their loan account which petitioner failed to credit in their favor. The
Bank had agreed to debit their US dollar savings deposit in the PCI Capital as
payment of their loan account. They insisted that they had never deposited their
US dollar account with PCI Capital but with the Bank, and that they had never
defaulted on their loan account. Contrary to the Bank’s claim, they would have
suffered irreparable injury had the trial court not enjoined the extrajudicial
foreclosure of the real estate mortgage.
On
particularly in instances where the issue raised is one of law; where the error
is patent; the assailed order is void, or the questions raised are the same as
those already ruled upon by the lower court. According to the appellate court,
the issue raised before it was purely one of law: whether the
loan account of the spouses was extinguished by legal compensation. Thus, a
motion for the reconsideration of the assailed order was not a prerequisite to
a petition for certiorari under Rule
65.
The
appellate court further declared that the trial court committed grave abuse of
its discretion in issuing the assailed order, since no plausible reason was given by the spouses
Nisce to justify the injunction of the extrajudicial foreclosure of the real
estate mortgage. Given their admission that they had not settled the obligations
secured by the mortgage, the Bank had a clear right to seek the remedy of foreclosure.
The CA further declared as devoid of
factual basis the spouses Nisce’s argument that the Bank should have applied,
by way of legal compensation, the peso equivalent of their time deposit with
PCI Capital as partial settlement of their obligations. It held that for compensation
to take place, the requirements set forth in Articles 1278 and 1279 of the
Civil Code of the Philippines must be present; in this case, the parties are
not mutually creditors and debtors of each other. It pointed out that the time
deposit which the spouses Nisce sought to offset against their obligations to the
Bank is maintained with PCI Capital. Even if PCI Capital is a subsidiary of the
Bank, compensation cannot validly take place because the Bank and PCI Capital are
two separate and distinct corporations. It pointed out the settled principle “that
a corporation has a personality separate and distinct from its stockholders and
from other corporations to which it may be connected.”
The CA further declared that the
alleged P4,600,000.00 payment on PN No. BD-150369 was not pleaded in the
spouses’ complaint and supplemental complaint before the court a quo. What they alleged, aside from
legal compensation, was that the mortgage is not liable for the obligation of Natividad
Nisce as surety for the loans obtained by a trading firm owned and managed by
their son. The CA further pointed out that the Bank precisely amended the
petition for foreclosure sale by deleting
the claim for Natividad’s obligation as surety. The appellate court
concluded that the injunctive writ was issued by the RTC without factual and
legal basis.[53]
The spouses
Nisce moved to have the decision reconsidered, but the appellate court denied the
motion. They thus filed the instant petition for review on the following grounds:
5.1.
THE HONORABLE COURT OF APPEALS ERRED IN TAKING COGNIZANCE OF THE PETITION FOR
CERTIORARI DESPITE THE BANK’S FAILURE TO FILE A MOTION FOR RECONSIDERATION WITH
THE TRIAL COURT.
5.2. THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT PREMATURELY RULED ON THE MERITS OF THE MAIN CASE.
5.3. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
THAT RESPONDENT JUDGE HAD COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION IN ISSUING A TEMPORARY RESTRAINING ORDER AND A WRIT
OF PRELIMINARY INJUNCTION IN FAVOR OF THE SPOUSES NISCE.[54]
Petitioners aver that the CA erred in
not dismissing respondent Bank’s petition for certiorari outright because of the absence of a condition precedent:
the filing of a motion for reconsideration of the assailed Order of the RTC
before filing the petition for certiorari
in the CA. They insist that respondent bank’s failure to file a motion for
reconsideration of the assailed Order deprived the RTC of its option to resolve
the issue of whether it erred in issuing the writ of preliminary injunction in
their favor.
Petitioners insist that in resolving
whether a petition for a writ of preliminary injunction should be granted, the
trial court and the appellate court are not to resolve the merits of the main
case. In this case, however, the CA
resolved the bone of contention of the parties in the trial court: whether the
loan account of petitioners with respondent bank had been extinguished by legal
compensation against petitioner Natividad Nisce’s US dollar savings account with
PCI Capital in P4,600,000.00 under PN No. BD-150369 and whether
respondent as mortgagee-creditor accelerated the maturities of the two (2)
promissory notes executed by petitioner, there was a need for a full-blown
trial and an exhaustive consideration of the evidence of the parties.
Petitioners further insist that a petition
for a writ of certiorari is designed solely
to correct errors of jurisdiction and not errors of judgment, such as errors in
the findings and conclusions of the trial court. Petitioners maintain that the trial court’s erroneous
findings and conclusions (according to respondent bank) are not the proper
subjects for a petition for certiorari.
Contrary to the findings of the CA, they did not admit in the trial court that
they were in default in the payment of their loan obligations. They had always
maintained that they had no outstanding obligation to respondent bank precisely
because their loan account had been offset by the US dollar deposit of
petitioner Natividad Nisce, and that they had made check payments of P4,600,000.00
which respondent bank had not credited in their favor. Likewise erroneous is the
CA ruling that they would not suffer irreparable damage or injury if their
properties would be sold at public auction following the extrajudicial
foreclosure of the mortgage. Petitioners point out that their conjugal home
stands on the subject properties and would be lost if sold at public
auction. Besides, petitioners aver, the
injury to respondent bank resulting from the issuance of a writ of preliminary
injunction is amply secured by the P10,000,000.00 injunction bond which
they had posted.
For its part, respondent avers that,
as held by the CA, the requirement of the filing of a motion for
reconsideration of the assailed Order admits of exceptions, such as where the
issue presented in the appellate court is the same issue presented and resolved
by the trial court. It insists that petitioners failed to prove a clear legal
right to injunctive relief; hence, the trial court committed grave abuse of
discretion in issuing a writ of preliminary injunction.
Respondent maintains that the sole
issue involved in the petition for certiorari
of respondent in the CA was whether or not the trial court committed grave
abuse of its discretion in issuing the writ of preliminary injunction.
Necessarily, the CA would have to delve into the circumstances behind such
issuance. In so doing, the CA had to
consider and calibrate the testimonial and documentary evidence adduced by the
parties. However, the RTC and the CA did not resolve with finality the
threshold factual and legal issue of whether the loan account of petitioners had
been paid in full before it filed its petition for extrajudicial foreclosure of
the real estate mortgage.
The Ruling of the Court
The Petition in the
Court of Appeals
Not
Premature
The general rule is that before filing
a petition for certiorari under Rule
65 of the Rules of Court, the petitioner is mandated to comply with a condition
precedent: the filing of a motion for reconsideration of the assailed order,
and the subsequent denial of the court a
quo. It must be stressed that a petition
for certiorari is an extraordinary
remedy and should be filed only as a last resort. The filing of a motion for
reconsideration is intended to afford the public respondent an opportunity to
correct any actual error attributed to it by way of re-examination of the legal
and factual issues.[55] However,
the rule is subject to the following recognized exceptions:
(a) where the order is a patent nullity, as where the
court a quo has no jurisdiction; (b)
where the questions raised in the certiorari
proceeding have been duly raised and passed upon by the lower court, or are
the same as those raised and passed upon in the lower court; (c) where there is
an urgent necessity for the resolution of the question and any further delay
would prejudice the interests of the Government or of the petitioner or the
subject matter of the action is perishable; (d) where, under the circumstances,
a motion for reconsideration would be useless; (e) where petitioner was
deprived of due process and there is extreme urgency for relief; (f) where, in
a criminal case, relief from an order of arrest is urgent and the granting of
such relief by the trial court is improbable; (g) where the proceedings in the
lower court are a nullity for lack of due process; (h) where the proceedings
was ex parte or in which the
petitioner had no opportunity to object; and (i) where the issue raised is one
purely of law or public interest is involved.[56]
As
will be shown later, the
Petitioners Are Not
Entitled to a Writ of
Preliminary Prohibitory
Injunction
Section 3, Rule 58 of the Rules of
Court provides that a preliminary injunction may be granted when the following
have been established:
(a) That the applicant is entitled to the relief
demanded, and the whole or part of such relief consists in restraining the
commission or continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;
(b) That the commission, continuance or nonperformance
of the act or acts complained of during the litigation would probably work
injustice to the applicant; or
(c) That a party, court, agency or a person is doing,
threatening, or is attempting to do, or is procuring or suffering to be done,
some act or acts probably in violation of the rights of the applicant
respecting the subject of the action or proceeding, and tendering to render the
judgment ineffectual.
The
grant of a preliminary injunction in a case rests on the sound discretion of
the court with the caveat that it should be made with great caution. The exercise of sound judicial discretion by
the lower court should not be interfered with except in cases of manifest
abuse. Injunction is a preservative remedy for the protection of the parties’ substantive
rights and interests. The sole aim of a
preliminary injunction is to preserve the status
quo within the last actual status that preceded the pending controversy
until the merits of the case can be heard fully. Moreover, a petition for a
preliminary injunction is an equitable remedy, and one who comes to claim for
equity must do so with clean hands. It is to be resorted to by a litigant to
prevent or preserve a right or interest where there is a pressing necessity to
avoid injurious consequences which cannot be remedied under any standard of
compensation. A petition for a writ of preliminary injunction rests upon an alleged
existence of an emergency or of a special reason for such a writ before the
case can be regularly tried. By issuing
a writ of preliminary injunction, the court can thereby prevent a threatened or
continued irreparable injury to the plaintiff before a judgment can be rendered
on the claim.[58]
The
plaintiff praying for a writ of preliminary injunction must further establish
that he or she has a present and unmistakable right to be protected; that the
facts against which injunction is directed violate such right;[59] and
there is a special and paramount necessity for the writ to prevent serious
damages. In the absence of proof of a
legal right and the injury sustained by the plaintiff, an order for the
issuance of a writ of preliminary injunction will be nullified. Thus, where the
plaintiff’s right is doubtful or disputed, a preliminary injunction is not
proper. The possibility of irreparable damage without proof of an actual
existing right is not a ground for a preliminary injunction.[60]
However, to establish the essential
requisites for a preliminary injunction, the evidence to be submitted by the
plaintiff need not be conclusive and complete.[61]
The plaintiffs are only required to show that they have an ostensible right to
the final relief prayed for in their complaint.[62] A
writ of preliminary injunction is generally based solely on initial or
incomplete evidence.[63] Such evidence need only be a sampling intended
merely to give the court an evidence of justification for a preliminary injunction
pending the decision on the merits of the case, and is not conclusive of the principal
action which has yet to be decided.[64]
It bears stressing that findings of
the trial court granting or denying a petition for a writ of preliminary
injunction based on the evidence on record are merely provisional until after
the trial on the merits of the case shall have been concluded.[65]
The trial court, in granting or
dismissing an application for a writ of preliminary injunction based on the
pleadings of the parties and their respective evidence must state in its order the
findings and conclusions based on the evidence and the law. This is to enable
the appellate court to determine whether the trial court committed grave abuse
of its discretion amounting to excess or lack of jurisdiction in resolving, one
way or the other, the plea for injunctive relief. The trial court’s exercise of
its judicial discretion whether to grant or deny an application for a writ of
preliminary injunction involves the assessment and evaluation of the evidence,
and its findings of facts are ordinarily binding and conclusive on the
appellate court and this Court.[66]
We agree with respondent’s contention
that as creditor-mortgagee, it has the right under the real estate mortgage
contract and the amendment thereto to foreclose extrajudicially, the real
estate mortgage and sell the property at public auction, considering that petitioners
had failed to pay their loans, plus interests and other incremental amounts as
provided for in the deeds. Petitioners contend, however, that if respondent bank
extrajudicially forecloses the real estate mortgage and has petitioners’ property
sold at public auction for an amount in excess of the balance of their loan
account, petitioner’s contractual and substantive rights under the real estate
mortgage would be violated; in such a case, the extrajudicial foreclosure sale may
be enjoined by a writ of preliminary injunction.
Respondent bank sought the
extrajudicial foreclosure of the real estate mortgage and was to sell the
property at public auction for P30,533,552.24. The amount is based on
Promissory Notes No. 1042793 and BD-150369, interests, penalty charges, and
attorney’s fees, as of P4,600,000.00 paid in checks but
without any receipts having been issued therefor; and the P9,000,000.00 peso
equivalent of the US$20,000.00 deposit of petitioner Natividad Nisce with PCIB under
Passbook No. 83-3041 and Certificate of Deposit No. CD-01612 issued by PCI
Capital on
It was the burden of petitioners, as
plaintiffs below, to adduce preponderant evidence to prove their claim that
respondent bank was the debtor of petitioner Natividad Nisce relative to her
dollar deposit with PCIB, and later transferred to PCI Capital in
Under Article 1278 of the New Civil
Code, compensation shall take place when two persons, in their own right, are
creditors and debtors of each other. In
order that compensation may be proper, petitioners were burdened to establish
the following:
(1) That each one of the obligors be bound
principally, and that he be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if
the things due are consumable, they be of the same kind, and also of the same
quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention
or controversy, commenced by third persons and communicated in due time to the
debtor.[68]
Compensation takes effect by
operation of law when all the requisites mentioned in Article 1279 of the New
Civil Code are present and extinguishes both debts to the concurrent amount
even though the creditors and debtors are not aware of the compensation. Legal
compensation operates even against the will of the interested parties and even
without their consent.[69] Such
compensation takes place ipso jure; its effects arise on the very day on
which all requisites concur.[70]
As its minimum, compensation
presupposes two persons who, in their own right and as principals, are mutually
indebted to each other respecting equally demandable and liquidated obligations
over any of which no retention or controversy commenced and communicated in due
time to the debtor exists. Compensation, be it legal or conventional, requires
confluence in the parties of the characters of mutual debtors and creditors,
although their rights as such creditors or their obligations as such
debtors need not spring from one and the
same contract or transaction.[71]
Article 1980 of the New Civil Code
provides that fixed, savings and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loans. Under
Article 1953, of the same Code, a person who secures a loan of money or any
other fungible thing acquires the ownership thereof, and is bound to pay the
creditor an equal amount of the same kind and quality. The relationship of the
depositors and the Bank or similar institution is that of creditor-debtor. Such
deposit may be setoff against the obligation of the depositor with the bank or
similar institution.
When petitioner Natividad Nisce
deposited her US$20,500.00 with the PCIB on
Admittedly, PCI Capital is a
subsidiary of respondent Bank. Even then, PCI Capital [PCI Express Padala (HK) Ltd.] has an independent and
separate juridical personality from that of the respondent Bank, its
parent company; hence, any claim against
the subsidiary is not a claim against the parent company and vice versa.[74]
The evidence on record shows that PCIB, which had been merged with Equitable
Bank, owns almost all of the stocks of PCI Capital. However, the fact that a corporation owns all
of the stocks of another corporation, taken alone, is not sufficient to justify
their being treated as one entity. If used to perform legitimate functions, a
subsidiary’s separate existence shall be respected, and the liability of the
parent corporation, as well as the subsidiary shall be confined to those arising
in their respective business.[75] A
corporation has a separate personality distinct from its stockholders and from
other corporations to which it may be conducted. This separate and distinct
personality of a corporation is a fiction created by law for convenience and to
prevent injustice.
This Court, in Martinez v. Court of Appeals[76] held that, being a mere fiction of law,
peculiar situations or valid grounds can exist to warrant, albeit sparingly,
the disregard of its independent being and the piercing of the corporate veil.
The veil of separate corporate personality may be lifted when, inter alia, the corporation is merely an
adjunct, a business conduit or an alter ego of another corporation or where the
corporation is so organized and controlled and its affairs are so conducted as
to make it merely an instrumentality, agency, conduit or adjunct of another
corporation; or when the corporation is used as a cloak or cover for fraud or
illegality; or to work injustice; or where necessary to achieve equity or for
the protection of the creditors. In those cases where valid grounds exist for
piercing the veil of corporate entity, the corporation will be considered as a
mere association of persons. The liability will directly attach to them.[77]
The
Court likewise declared in the same case that the test in determining the
application of the instrumentality or alter ego doctrine is as follows:
1.
Control, not mere majority or complete stock control, but complete dominion,
not only of finances but of policy and business practice in respect to the
transaction attacked so that the corporate entity as to this transaction had at
the time no separate mind, will or existence of its own;
2.
Such control must have been used by the defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other positive legal duty, or
dishonest and unjust act in contravention of plaintiff’s legal rights; and
3.
The aforesaid control and breach of duty must proximately cause the injury or
unjust loss complaint of.
The Court emphasized that the absence
of any one of these elements prevents “piercing the corporate veil.” In
applying the “instrumentality” or “alter ego” doctrine, the courts are
concerned with reality and not form, with how the corporation operated and the
individual defendant’s relationship to that operation.[78]
Petitioners failed to adduce
sufficient evidence to justify the piercing of the veil of corporate entity and
render respondent Bank liable for the US$20,000.00 deposit of petitioner
Natividad Nisce as debtor.
On hindsight, petitioners could have
spared themselves the expenses and tribulation of a litigation had they just
withdrawn their deposit from the PCI Capital and remitted the same to
respondent. However, petitioner insisted
on their contention of setoff.
On the P4,600,000.00 paid in checks
allegedly remitted by petitioners to respondent in partial payment of their
loan account, petitioners failed to adduce in evidence the checks to show that,
indeed, the checks were drawn by petitioners and delivered to respondent, and
that respondent was able to cash the checks. The only evidence adduced by petitioners
is a piece of paper listing the serial numbers of the checks and the amount of
each check:
PAYMENTS MADE & RECEIVED BY EBC BUT W/O RECEIPTS
1. P2,000,000.00
2.
3. Feb. 24, 1998 - UB -0000074619 - 800,000.00
4. Mar. 23, 1998 - EBC-213016121C - 800,000.00
-----------------
P4,600,000.00[79]
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED
for lack of merit. The Decision of the Court of Appeals is AFFIRMED. Costs against petitioners.
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
WE
CONCUR:
Associate Justice
MA. ALICIA AUSTRIA-MARTINEZ MINITA V. CHICO-NAZARIO
Associate
Justice Associate
Justice
ATTESTATION
I attest that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate
Justice
Chairperson
Pursuant to Section 13, Article VIII of the
Constitution and the Division Chairperson’s Attestation, it is hereby certified
that the conclusions in the above decision were reached in consultation before
the case was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
[1] Formerly the Philippine Commercial and International Bank and the Equitable Banking Corporation. The two banks were later merged under the corporate name “Equitable PCI Bank.”
[2] Records, pp. 47-50.
[3]
[4] Exhibit “K.”
[5] Exhibit “H.”
[6] Supra note 4.
[7] Exhibit “L-1.”
[8] Records, p. 9.
[9]
[10]
[11]
[12]
[13] Exhibit “U.”
[14] Exhibit “I.”
[15] The cable order reads:
Philippine Commercial International Bank
CABLE ORDER
FULL RATE
TELEX PREPARED BY: AUTHORIZED SIGNATURE
NIGHT LETTER Beth Mundo
TESTED BY DATE
7.19.84
(Sgd.) Illegible
SEND TO: PCI CAPITAL ASIA LIMITED
TEST ATTN: MR. EDUARDO CARREON/VP
MESSAGE: VALUE TODAY WE
CREDITED YOUR ACCOUNT WITH CHASE MANHATTAN BANK
PCIB PASEO DE ROXAS SUNDRIES
[16] Exhibit “U-2.”
[17] Exhibit “E.”
[18] Exhibit “A” & “B.”
[19] Exhibit “U-3.”
[20] Exhibit “F.”
[21] Exhibit “U-5.”
[22] Exhibits “U-5,” “U-5-A” to “U-5-FF.”
[23] Exhibit “U-6.”
[24] Exhibit “Q-1.”
[25] Exhibit “U-7.”
[26] Exhibit “H.”
[27] Exhibit “I.”
[28]
[29] Exhibit “J.”
[30] Exhibit “K.”
[31] Exhibits “L” & “L-1.”
[32] TSN,
[33] TSN,
[34] TSN,
[35]
[36]
[37] Exhibit “4-H.”
[38] Exhibits “4-I” to “4-M.”
[39] TSN,
[40] Exhibit “8.”
[41] Exhibit “7.”
[42] Records, p. 170.
[43] Exhibit “B-1”-rebuttal.
[44] Exhibit “B-2-A”-rebuttal.
[45] Exhibit “C-1”-rebuttal.
[46] Exhibit “D-3–A”-rebuttal.
[47] Records, pp. 412-416.
[48]
[49]
[50] Rollo, p. 112.
[51] 28 Phil. 73 (1914).
[52] Penned by Associate Justice Edgardo P. Cruz, with Associate Justices Godardo A. Jacinto and Jose C. Mendoza (both retired), concurring; rollo, pp. 35-43.
[53]
[54]
[55] Sevillana v. I.T. (International)
Corporation, G.R. No. 99047,
[56] Tan, Jr. v. Sandiganbayan, 354 Phil. 467, 469-470
(1998).
[57] Ong Ching Kian Chuan v. Court of Appeals, 415 Phil. 365, 374-375 (2001), citing Developers Group of Companies, Inc. v. Court of Appeals, 219 SCRA 715 (1993); Inter-Asia Services Corporation v. Court of Appeals, 331 Phil. 708 (1996).
[58] Del Rosario v. Court of Appeals, 325
Phil. 424, 431-432 (1996).
[59] Searth Commodities Corporation v. Court of
Appeals, G.R. No. 64220, March 31, 1992, 207 SCRA 622, 628.
[60]
[61] Olalia, et al. v. Hizon, et al., 274 Phil. 66, 74
(1991).
[62] Los Baños Rural Bank, Inc. v.
[63] La Vista Association, Inc. v. Court of
Appeals, 344 Phil. 30, 44 (1997).
[64] Saulog v. Court of
Appeals, 330 Phil. 590, 602 (1996).
[65] Tambaoan v. Court of Appeals, 417 Phil.
638, 694 (2001).
[66] Golangco v. Court of Appeals, G.R. No.
124724,
[67] Records, pp. 67-69.
[68] Article 1279, New Civil Code.
[69] Bank of the Philippine
[70] Republic v. Court of Appeals, G.R. No. 25012,
[71] Mavest (
[72] Ma v. Community Bank, 494 F. Supplement 252.
[73] Gendrickson v. Buchbinder, 465 F.
Supplement 1250.
[74] Velarde v. Lopez, Inc., G.R. No. 153886,
[75] MR Holdings, Ltd. v. Bajar, G.R. No. 138104,
[76] G.R.
No. 131673,
[77]
[78]
[79] Exhibit “U-6.”