Nisce vs. Equitable PCI Bank, Inc.

Legal compensation cannot take place between a parent corporation and its subsidiary merely because of their affiliation, as each possesses a separate and distinct juridical personality, absent any valid ground to pierce the corporate veil.

Spouses Ramon and Natividad Nisce obtained loans from Equitable PCI Bank secured by real estate mortgages over their properties in Makati City. Natividad previously deposited US$20,500 with PCIB, which was transferred via cable order to PCI Capital Asia Ltd. in Hong Kong, a subsidiary of the Bank, which issued a Certificate of Deposit. When the Bank sought to extrajudicially foreclose the mortgages due to the spouses' default, the spouses sued to nullify the suretyship agreement, claim damages, and enforce legal compensation by offsetting the dollar deposit with PCI Capital against their loan with the Bank.

• The Loan Obligations: Spouses Nisce secured loans from the Bank (₱20,000,000.00 in 1996 and ₱13,089,936.90 in 2000) under Promissory Notes, secured by real estate mortgages. Natividad also executed a suretyship agreement for the loan of Vista Norte Trading Corporation, owned by their son. The Bank claimed total obligations of ₱34,087,725.76, later amending the foreclosure petition to ₱30,533,552.24 exclusive of interests and penalties, deleting the claim for Natividad's obligation as surety.
• The Dollar Deposit: In 1984, Natividad deposited US$20,500.00 with PCIB Paseo de Roxas Branch. Upon her request, US$20,000.00 was transferred via cable order to PCI Capital Asia Ltd. in Hong Kong, which issued Certificate of Deposit No. 01612. PCIB owned almost all the stocks of PCI Capital. In 1991, Natividad requested a partial release of the deposit but was informed the account did not exist in PCIB records. In 2000, she offered to offset the deposit against their loan obligations.
• The Foreclosure and Injunction Plea: The Bank filed for extrajudicial foreclosure. Spouses Nisce filed a complaint for nullity of suretyship, damages, and legal compensation with a prayer for injunction, claiming the Bank should offset the dollar deposit and that they had made ₱4,600,000.00 in check payments not credited to their account. The RTC granted the injunction, finding a need for a full-blown trial to resolve the offset and uncredited payment issues. The Bank elevated the matter to the CA via Rule 65 without filing a motion for reconsideration.

• Certiorari Prematurity: Petitioners argued that the CA erred in taking cognizance of the certiorari petition because the Bank failed to file a motion for reconsideration with the RTC, a condition sine qua non.
• Premature Ruling on the Merits: Petitioners maintained that the CA prematurely ruled on the merits of the main case (legal compensation) instead of merely determining grave abuse of discretion, preempting the RTC's evaluation of evidence.
• Propriety of Injunction: Petitioners insisted the RTC did not commit grave abuse of discretion because they possessed a clear legal right to offset and had made uncredited payments, and would suffer irreparable injury (loss of their conjugal home) if the foreclosure proceeded.

• Exception to Motion for Reconsideration: Respondent countered that the failure to file a motion for reconsideration is excused when the issue raised is purely legal and the same as that passed upon by the lower court.
• Absence of Legal Right: Respondent argued that petitioners failed to prove a clear legal right to injunctive relief, rendering the RTC's issuance of the injunction a grave abuse of discretion.
• Separate Corporate Personality: Respondent asserted that legal compensation cannot occur because the dollar deposit was with PCI Capital, a separate and distinct entity from the Bank.

• Certiorari Prematurity: Whether the 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.
• Propriety of Injunction: Whether the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the writ of preliminary injunction.
• Legal Compensation: Whether the spouses' loan obligations can be extinguished by legal compensation using the dollar deposit with PCI Capital.

• Certiorari Prematurity: The petition in the CA was not premature. The filing of a motion for reconsideration is subject to exceptions, including when the issue raised is purely of law, or when the assailed order is a patent nullity. The RTC order was issued with grave abuse of discretion, rendering it a nullity, and the issue of legal compensation was purely legal.
• Propriety of Injunction: The trial court committed grave abuse of discretion. A preliminary injunction requires proof of a clear legal right and actual injury. Because the right to legal compensation was not established, the petitioners' right was doubtful or disputed, precluding injunctive relief. The possibility of irreparable damage without proof of an actual existing right is insufficient.
• Legal Compensation: Legal compensation cannot take place. The requisites of Art. 1279 of the Civil Code were not met, specifically the requirement that the parties be mutually creditors and debtors of each other. The deposit was with PCI Capital, not the Bank. PCI Capital has a separate juridical personality from the Bank. The alter ego doctrine does not apply because petitioners failed to prove complete dominion, use of control to commit fraud, and proximate causation of injury. Furthermore, the claim of ₱4,600,000.00 in uncredited payments was unsupported by the checks themselves or proof of delivery and encashment.

• Legal Compensation — Takes place when two persons, in their own right, are creditors and debtors of each other. Requisites: (1) each obligor is bound principally and is a principal creditor of the other; (2) both debts consist in a sum of money or consumables of the same kind and quality; (3) both debts are due; (4) they are liquidated and demandable; (5) no retention or controversy commenced by third persons. Compensation takes effect ipso jure when all requisites concur, extinguishing both debts to the concurrent amount even without the parties' consent.
• Separate Juridical Personality and Piercing the Corporate Veil — A subsidiary has an independent and separate juridical personality from its parent company; a claim against one is not a claim against the other. The veil may be pierced under the alter ego doctrine only if: (1) complete dominion, not mere stock control, over finances and policy so the corporate entity had no separate mind, will, or existence; (2) such control was used to commit fraud, wrong, or unjust act contravening plaintiff's legal rights; (3) the control and breach of duty proximately caused the injury. The absence of any element prevents piercing.
• Preliminary Injunction — A preservative remedy to preserve the status quo pending trial. Requisites: (1) applicant is entitled to the relief demanded; (2) the act complained of would work injustice; (3) the act violates the applicant's rights rendering judgment ineffectual. The applicant must establish a present and unmistakable right; a doubtful or disputed right cannot support an injunction.

• "If the trial court issues a writ of preliminary injunction despite the absence of proof of a legal right and the injury sustained by the plaintiff, the writ is a nullity."
• "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."

• Martinez v. Court of Appeals, G.R. No. 131673 (2004) — Followed. Established the three-pronged test for the alter ego or instrumentality doctrine to pierce the corporate veil.
• Tan, Jr. v. Sandiganbayan, 354 Phil. 467 (1998) — Followed. Enumerated the exceptions to the requirement of filing a motion for reconsideration before filing a petition for certiorari.
• Medina v. Greenfield Development Corporation, G.R. No. 140228 (2004) — Followed. Held that a preliminary injunction is not proper where the plaintiff's right is doubtful or disputed.

• Article 1278, Civil Code — Provides that compensation shall take place when two persons, in their own right, are creditors and debtors of each other. Applied to determine if the Bank and the spouses were mutually creditors and debtors.
• Article 1279, Civil Code — Enumerates the requisites for legal compensation. Applied to determine that compensation was improper because the Bank was not the debtor for the dollar deposit with PCI Capital.
• Article 1980, Civil Code — Governs fixed, savings, and current deposits of money in banks as simple loans, creating a creditor-debtor relationship. Applied to establish that Natividad's deposit created a debtor-creditor relationship, but with PCI Capital, not the Bank.
• Section 3, Rule 58, Rules of Court — Provides the grounds for issuing a preliminary injunction. Applied to determine that petitioners failed to prove a clear legal right to justify the injunction.

Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez, Minita V. Chico-Nazario