Nisce vs. Equitable PCI Bank, Inc.

3/7/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 516
VOL. 516, FEBRUARY 19, 2007 231

Nisce vs. Equitable PCI Bank, Inc.
*
G.R. No. 167434. February 19, 2007.
SPOUSES RAMON M. NISCE and A. NATIVIDAD

PARASNISCE, petitioners, vs. EQUITABLE PCI BANK,
INC., respondent.
Certiorari; 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; Exceptions.—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. 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
_______________
* THIRD DIVISION.
232
232 SUPREME COURT REPORTS ANNOTATED

central.com.ph/sfsreader/session/0000017809983b5666815514003600fb002c009e/t/?o=False 1/30
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.
Injunctions; Requisites before a preliminary injunction may be
granted.—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.
Same; 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; 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.—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
233
VOL. 516, FEBRUARY 19, 2007 233
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.
Same; 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.—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; 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.
Same; To establish the essential requisites for a preliminary
injunction, the evidence to be submitted by the plaintiff need not be
conclusive and complete.—To establish the essential requisites for
a preliminary injunction, the evidence to be submitted by the
plaintiff need not be conclusive and complete. The plaintiffs are
only required to show that they have an ostensible right to the
final relief prayed for in their complaint. A writ of preliminary
injunction is generally based solely on initial or incomplete
evidence. 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.
Compensation; Obligations and Contracts; Compensation
takes place when two persons, in their own right, are creditors and
debtors of each other; Requisites in order that compensation may
be proper.—
234
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.
Same; Same; Same; Legal compensation operates even against
the will of the interested parties and even without their consent.—
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. Such
compensation takes place ipso jure; its effects arise on the very
day on which all requisites concur.
Same; Same; Same; 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.—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.
Corporation Law; Piercing the Corporate Veil; 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.—
Admittedly, PCI Capital is a subsidiary of respondent Bank. Even
then,
235
VOL. 516, FEBRUARY 19, 2007 235
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. 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. 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.
Same; Same; Test in determining the application of the
instrumentality or alter ego doctrine.—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.
Same; Same; Absence of any one of these elements prevents
“piercing the corporate veil.”—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.
PETITION for review on certiorari of a decision of the

Court of Appeals.
236

The facts are stated in the opinion of the Court.

De Borja, Medialdia, Bello, Guevarra and Gerodias
for petitioners.
Divina, Matibag, Magtubo, Banzon, Buenaventura
and Yusi for respondent EPCIB.
CALLEJO, SR., J.:

1
On November 26, 2002, Equitable PCI Bank (Bank) as
creditor-mortgagee filed a petition for extrajudicial
foreclosure before the Office of the Clerk of Court as Ex
Officio Sheriff of the Regional Trial Court (RTC) of Makati
City. It sought to foreclose the following real estate
mortgage contracts executed by the spouses Ramon and
Natividad Nisce over two parcels of land covered by
Transfer Certificate of Title (TCT) Nos. S-83466 and S-
83467 of the Registry of Deeds of Rizal: one dated February
26, 1974; two (2) sets of “Additional Real Estate Mortgage”
dated September 27, 1978 and June 3, 1996; and an
“Amendment to Real Estate Mortgage” dated February 28,
2000. The mortgage contracts were executed by the spouses
Nisce to secure their obligation under Promissory Note
Nos. 1042793 and BD-150369, including a Suretyship
Agreement executed by Natividad. The obligation of the
Nisce spouses totaled P34,087,725.76 broken down as
follows:
Spouses Ramon & Natividad Nisce P17,422,285.99

.............................................................................
Natividad P. Nisce (surety) US$57,306.59
.........................................................................................
2
and .......................................................................... P16,665,439.77
On December 2, 2002, the Ex Officio Sheriff set the

3
sale at
public auction at 10:00 a.m. on January 14, 2003, or on
_______________
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 Id., at p. 46.
237
VOL. 516, FEBRUARY 19, 2007 237

January 30, 2003 in the event the public auction would not
take place on the earlier setting.
On January 28, 2003, the Nisce spouses filed before the
RTC of Makati City a complaint for “nullity of the
Suretyship Agreement, damages and legal compensation”
with prayer for injunctive relief against the Bank and the4
Ex Officio Sheriff. They alleged the following: in a letter
dated December 7, 2000 they had requested the bank
(through their lawyer-son Atty. Rosanno P. Nisce) to setoff
the peso equivalent of their obligation against their US
dollar account with PCI Capital Asia Limited (Hong Kong),
a subsidiary
5
of the Bank, under Certificate Deposit No.6
01612 and Account No. 090-0104 (Passbook No. 83-3041);
the Bank accepted their offer and requested for an estimate
of the balance of their account; they complied with the
Bank’s request and in a letter dated February 11, 2002,
informed it that the estimated balance of their account as
of December 1991 (including 7
the 11.875% per annum
interest) was US$51,000.42, and that as of December 2002,
Natividad’s US dollar deposit with it amounted to at least
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:
_______________
4 Exhibit “K.”
5 Exhibit “H.”
6 Supra note 4.
7 Exhibit “L-1.”
238

(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 8
the
payment of certain specific obligations only.
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.
(Hong Kong), and the obligation covered by the suretyship
agreement had not been deducted. They insisted that their
property rights would be violated if the sale at public
auction would push through. Thus, the spouses Nisce
prayed that they be granted the following reliefs:
(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;
_______________
8 Records, p. 9.
239
VOL. 516, FEBRUARY 19, 2007 239

(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 9suit and such other reliefs as
may be deemed just and equitable.”
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 10
the
suretyship agreement executed by Natividad Nisce.
In the meantime, the parties agreed to have the sale at
public auction reset to January 30, 2003.
_______________
9 Id., at pp. 12-14.

10 Id., at pp. 67-69.
240

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 11
at
public auction at 10:00 a.m. on March 5 and 27, 2003. The
spouses Nisce then filed a Supplemental Complaint with
plea for a temporary
12
restraining order to enjoin the sale at
public auction. Thereafter, the RTC conducted hearings
on the plaintiffs’ plea for a temporary restraining order,
and the parties adduced testimonial and documentary
evidence on their respective arguments.
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 13
further instructions, or until she terminated the facility.
Convinced, Natividad deposited US$20,500.00 14on July 19,
1984, and was issued Passbook No. 83-3041. Upon her
request, the bank transferred the US$20,000.00 15
to PCI
Capital Asia Ltd. in Hong Kong via cable order.
_______________
11 Id., at p. 193.
12 Id., at pp. 186-193.
13 Exhibit “U.”
14 Exhibit “I.”
15 The cable order reads:
Philippine Commercial International Bank

CABLE ORDER
241
VOL. 516, FEBRUARY 19, 2007 241

On July 11, 1996, the spouses Nisce secured a

P20,000,000.00 loan
16
from the Bank under Promissory Note
No. BD-150369. The maturity date of the loan was July
11, 2001, payable in monthly installments at 16.731%
interest per annum. To secure the payment of the loan

account, they executed an Amendment
17
to the Real Estate
Mortgage over the properties located in 18Makati City
covered by TCT Nos. S83466 and S-83467. They later
secured another loan of 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 19
is
evidenced by Promissory Note (PN) 20
No. 1042793 and
covered by a Real Estate Mortgage executed on February
28, 2000. They made a partial payment of
_______________
FULL RATE PREPARED AUTHORIZED

TELEX BY: SIGNATURE
NIGHT LETTER Beth Mundo
TESTED BY DATE
7.19.84 (Sgd.) Illegible
SEND TO: PCI CAPITAL ASIA LIMITED HONG KONG
TEST ATTN: MR. EDUARDO CARREON/VP
MESSAGE: VALUE TODAY WE CREDITED YOUR ACCOUNT WITH

CHASE MANHATTAN BANK NEW YORK FOR US DOLLARS:
TWENTY THOUSAND ONLY (US$20,000.00) AS TIME DEPOSIT
PLACEMENT IN FAVOR OF A. NATIVIDAD PARAS NISCE FOR A
PERIOD OF 90 DAYS STOP BY ORDER OF THE SAME UNDER OUR
REF NO. PDR TT343 84-90-010 (PASEO DE ROXAS BR) STOP PLS
TELEX CONFIRMATION AS WE HAVE INSTRUCTED CHASE
MANHATTAN BANK NY TO CREDIT YOUR ACCOUNT ON EVEN
DATE STOP PLS SEND CERTIFICATE OF DEPOSIT VIA POUCH
ATTN: E.P. NERY/AVP STOP THANKS AND REGARDS FULLSTOP
PCIB PASEO DE ROXAS SUNDRIES
16 Exhibit “U-2.”
17 Exhibit “E.”
18 Exhibits “A” & “B.”
20 Exhibit “F.”
242

P13,866,666.50 on the principal of their loan account

covered by21
PN No. BD-150369, and P5,348,239.82 on the
interests.
22
These payments are evidenced by receipts and
checks. However, there were payments totaling
P4,600,000.00 received23
by the Bank but were not covered
by checks or receipts. As of September 2000, the balance
of their loan account
24
under PN No. BD-150369 was only
P4,333,333.46. They also made partial payment on their
loan account under PN No. 1042793 25
which, as of May 30,
2001, amounted to P2,218,793.61.
On July 20, 1984, PCI 26
Capital issued Certificate of
Deposit No. CD-01612; proof of receipt of the
US$20,000.00 transferred to it by PCI Bank Paseo de
Roxas Branch as requested by Natividad. The deposit
account was to earn interest at the rate of 11.875% per
annum, and would mature on October 22, 1984, thereafter
to be payable at the office of the depositary in Hong Kong
upon presentation of the Certificate of Deposit. In June
1991, two sons of the Nisce spouses were stranded in Hong
Kong. Natividad called the Bank and requested for a
partial release of her dollar deposit to her sons. However,
she was informed that according to its computer records, no
such dollar account existed. Sometime in November 1991,
she submitted her US dollar passbook with a xerox copy of
the Certificate of Deposit for27
the PCIB to determine the
whereabouts of the account. 28 She reiterated her request29to
the Bank on January 27, 1992 and September 11, 2000.
_______________
22 Exhibits “U-5,” “U-5-A” to “U-5-FF.”
24 Exhibit “Q-1.”
26 Exhibit “H.”
27 Exhibit “I.”
28 Id.
29 Exhibit “J.”
243
VOL. 516, FEBRUARY 19, 2007 243

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 December 7, 2000, Natividad confirmed
to the Bank, through Ms. Shellane R. Casaysayan, her offer
to settle their loan account by offsetting the peso
equivalent of her dollar account with PCI Capital under
30
30
Account No. 0900104. Their son, Atty. Rosanno Nisce,
later wrote the Bank, declaring that the estimated balance
of the US dollar account31with PCI Capital as of December
1991 was US$51,000.42. Atty. Nisce corroborated this in
his testimony, and stated that Ms. Casaysayan had 32
declared that she would refer the matter to her superiors.
A certain Rene Esteven also told him that another offer to
setoff his parents’ account had been accepted, and he33was
assured that its implementation was being processed. On
cross examination, Atty. Nisce declared34
that there was no
response to his request for setoff, and that Esteven
assured him that the Bank would look35
for the records of his
mother’s US dollar savings deposit. He was later told 36
that
the Bank had accepted the offer to setoff the account.
The Case for the Bank
The Bank adduced evidence that, as of January 31, 2003,

the balance of the spouses’ account under the two
promissory notes,
37
including interest and penalties, was
P30,533,552.24. It had agreed to restructure their loans
on March 31, 1998, but they nevertheless failed to pay
despite repeated de-
_______________
30 Exhibit “K.”
31 Exhibits “L” & “L-1.”
32 TSN, March 4, 2003, p. 82.
33 TSN, April 4, 2003, p. 91.
34 TSN, March 4, 2003, pp. 97-98.
35 Id., at p. 98.
36 Id., at p. 99.
37 Exhibit “4-H.”
244

38
mands. The spouses had also been furnished with a
statement of their account as of June 2001. Thus, under the
terms of the Real Estate Mortgage and Promissory Notes,
it had the right to the remedy of foreclosure. It insisted
that there is no showing in its records that the
39
spouses had
delivered checks amounting to P4,600,000.00.
According to the Bank, Natividad’s US$20,000.00

deposit with the PCIB Paseo de Roxas 40 branch was
transferred to PCI Capital via cable order, and that it
later issued 41Certificate of Deposit No. 01612 (Non-
transferrable). In a letter dated May 9, 2001, it informed
Natividad that it had acted merely as a conduit in
facilitating the transfer of the funds, and that her deposit
was made with PCI Capital and not with PCIB. PCI
Capital had a separate and distinct personality from the
PCIB, and a claim against the former cannot be made
against the latter. It was later 42
advised that PCI Capital
had already ceased operations.
The spouses Nisce presented rebuttal documentary
evidence to show that PCI Capital was registered in Hong
Kong as a corporation 43
under Registration No. 84555 on
February 27, 1989 with an authorized capital stock of
50,000,000 (with par value of HKD1.00); the PCIB
subscribed to 29,039,993 44
issued shares at the par value of
HKD1.00 per share; on October 25, 2004, the corporate
name of PCI 45
Capital was changed to PCI Express Padala
(HK) Ltd.; and the 46
stockholdings of PCIB remained at
29,039,999 shares.
_______________
38 Exhibits “4-I” to “4-M.”

39 TSN, February 8, 2005, p. 7.
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.
245
VOL. 516, FEBRUARY 19, 2007 245

47
On March 24, 2003, the RTC issued an Order granting the
spouses Nisce’s plea for a writ of preliminary injunction on
a bond of 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. 48437678 and 437679 registered in the names of the
plaintiffs.”
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 49accelerated the respective maturity dates of
their loan. 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
_______________
47 Records, pp. 412-416.

48 Id.
49 Id., at p. 416.
246

50
assailed order; 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
51
of this Court in Escaño v. Heirs of Escaño and
Navarro 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 December 22, 2004, the CA rendered judgment
granting the petition and nullifying the assailed Order of
the
_______________
50 Rollo, p. 112.
51 28 Phil. 73 (1914).
247
VOL. 516, FEBRUARY 19, 2007 247

52
RTC. The appellate court declared that a petition for
certiorari under Rule 65 of the Rules of Court may be filed
despite the failure to file a motion for reconsideration,
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 stock-
_______________
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.
248

holders 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

53
was issued by the
RTC without factual and legal basis.
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
54
IN FAVOR OF
THE SPOUSES NISCE.
Petitioners aver that the CA erred in not dismissing

respondent Bank’s petition for certiorari outright because
of the
_______________
53 Id., at pp. 41-43.

54 Id., at p. 16.
249
VOL. 516, FEBRUARY 19, 2007 249

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 Hong Kong. The CA reversed the assailed order
of the trial court by resolving the main issue in the trial
court on its merits, and declaring that the US dollar
savings deposit of the petitioner Natividad Nisce with the
PCI Capital cannot be used to offset the loan account of
petitioners with respondent bank. In fine, according to
petitioners, the CA preempted the ruling of the RTC on the
main issue even before the parties could be given an
opportunity to complete the presentation of their respective
evidences. Petitioners point out that in the assailed Order,
the RTC declared that to determine whether respondent
had credited petitioners for the amount of 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
250

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.
251
VOL. 516, FEBRUARY 19, 2007 251

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
55
by way of re-examination of the legal
and factual issues. 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 56the issue raised is one purely
of law or public interest is involved.”
_______________
55 Sevillana v. I.T. (International) Corporation, G.R. No. 99047, April

16, 2001, 356 SCRA 451, 462.
56 Tan, Jr. v. Sandiganbayan, 354 Phil. 467, 469-470; 292 SCRA 452,
457-458 (1998).
252

As will be shown later, the March 24, 2003 Order of the

trial court granting petitioner’s plea for a writ of
preliminary injunction was issued with grave abuse of
discretion amounting to excess or lack of jurisdiction and
thus a nullity. If the trial court issues a writ of preliminary
injunction despite the absence of proof of a legal right and 57
the injury sustained by the plaintiff, the writ is a nullity.
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:
That the applicant is entitled to the relief

(a) 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
_______________
57 Ong Ching Kian Chuan v. Court of Appeals, 415 Phil. 365, 374-375;
363 SCRA 145, 154 (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; 263 SCRA 408 (1996).
253
VOL. 516, FEBRUARY 19, 2007 253

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 58
plaintiff
before a judgment can be rendered on the claim.
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
59
against
which injunction is directed violate such right; 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 actual60
existing right is not a ground for a preliminary injunction.
_______________
58 Del Rosario v. Court of Appeals, 325 Phil. 424, 431-432; 255 SCRA
152, 157-158 (1996).
59 Searth Commodities Corporation v. Court of Appeals, G.R. No. 64220,
March 31, 1992, 207 SCRA 622, 628.
60 Medina v. Greenfield Development Corporation, G.R. No. 140228,
November 19, 2004, 443 SCRA 150, 159.
254

However, to establish the essential requisites for a

preliminary injunction, the evidence to be submitted61by the
plaintiff need not be conclusive and complete. The
plaintiffs are only required to show that they have an
ostensible 62right to the final relief prayed for in their
complaint. A writ of preliminary injunction is generally
63
based solely on initial or incomplete evidence. 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
64
of the principal action which has yet
to be decided.
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 the65 trial on the merits of the case

shall have been concluded.
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 in-
_______________
61 Olalia, et al. v. Hizon, et al., 274 Phil. 66, 74; 196 SCRA 665, 672
(1991).
62 Los Baños Rural Bank, Inc. v. Africa, 433 Phil. 930, 940; 384 SCRA
535, 543 (2002).
63 La Vista Association, Inc. v. Court of Appeals, 344 Phil. 30, 44; 278
SCRA 499, 509 (1997).
64 Saulog v. Court of Appeals, 330 Phil. 590, 602; 262 SCRA 51, 60
(1996).
65 Tambaoan v. Court of Appeals, 417 Phil. 638, 694; 365 SCRA 359,
371 (2001).
255
VOL. 516, FEBRUARY 19, 2007 255

volves the assessment and evaluation of the evidence, and

its findings of facts are ordinarily binding
66
and conclusive
on the appellate court and this Court.
We agree with respondent’s contention that as
creditormortgagee, 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 January 31,
2003, exclusive of all interests, penalties, other
67
charges,
and foreclosure costs accruing thereafter. Petitioners
asserted before the trial court that respondents sought the
extrajudicial foreclosure of the mortgaged deed for an
amount far in excess of what they owed, because the latter
failed to credit 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 July 23, 1984. Petitioners maintain that
the US$20,000.00 dollar deposit should be setoff against
_______________
66 Golangco v. Court of Appeals, G.R. No. 124724, December 22, 1997,

283 SCRA 293.
67 Records, pp. 67-69.
256

their account with respondent against their loan account,

on their claim that respondent is their debtor insofar as
said deposit is concerned.
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 Hong Kong, a subsidiary of
respondent Bank. Petitioners, however, failed to discharge
their burden.
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 68
and
communicated in due time to the debtor.”
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
_______________
68 Article 1279, NEW CIVIL CODE.
257
VOL. 516, FEBRUARY 19, 2007 257

69
their consent. Such compensation takes place ipso jure; its
effects 70arise on the very day on which all requisites
concur.
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
71
from one and the same contract or
transaction.
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 July 19, 1984, PCIB
became the debtor of petitioner. However, when upon
petitioner’s request, the amount of US$20,000.00 was
transferred to PCI Capital (which forthwith issued
Certificate of Deposit No. 01612), PCI Capital, in turn,
became the debtor of Natividad Nisce. Indeed, a certificate
of deposit is a written acknowledgment by a bank or
borrower of the receipt of a sum of
_______________
69 Bank of the Philippine Island v. Court of Appeals, 325 Phil. 930. 938;
255 SCRA 571, 577 (1996).
70 Republic v. Court of Appeals, G.R. No. 25012, July 22, 1975, 65 SCRA
186, 190.
71 Mavest (U.S.A.) Inc. v. Sampaguita Garment Corporation, G.R. No.
127454, September 21, 2005, 470 SCRA 440, 449.
258

money or deposit which the Bank or borrower promises to

pay to the depositor, to the order of the depositor; or to
some other person; or to his order whereby the relation of
debtor and
72
creditor between the bank and the depositor is
created. The issuance of a certificate of deposit in
exchange for 73
currency creates a debtor-creditor
relationship.
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 74
not a claim
against the parent company and vice versa. 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 shall75 be confined to
those arising in their respective business. 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. 76
This Court, in Martinez v. Court of Appeals 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
_______________
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, January 14, 2004, 419 SCRA
422, 431.
75 MR Holdings, Ltd. v. Bajar, G.R. No. 138104, April 11, 2002, 380
SCRA 617, 641.
76 G.R. No. 131673, September 10, 2004, 438 SCRA 130.
259
VOL. 516, FEBRUARY 19, 2007 259

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 77
of persons. The liability will directly
attach to them.
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 78the individual defendant’s
relationship to that operation.
_______________
77 Id., at pp. 150-151.

78 Id., at p. 151.
260

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. Dec. 29, 1997 - EBC-0000039462 - P2,000,000.00
2. Jan. 22, 1998 - EBC-213016118C - 1,000,000.00
3. Feb. 24, 1998 - UB -0000074619 - 800,000.00
4. Mar. 23, 1998 - EBC-213016121C - 800,000.00
79
P4,600,000.00
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.
Ynares-Santiago (Chairperson), Austria-Martinez

and Chico-Nazario, JJ., concur.
Petition denied, judgment affirmed.
_______________
261
VOL. 516, FEBRUARY 19, 2007 261

Adasa vs. Abalos
Note.—It is well-settled that the filing of a motion for

reconsideration is a prerequisite to the filing of a special
civil action for certiorari. (Republic vs. Express
Telecommunication, Inc., 373 SCRA 316 [2002])
——o0o——
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3/7/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 516

VOL. 516, FEBRUARY 19, 2007 231

SPOUSES RAMON M. NISCE and A. NATIVIDAD

Certiorari; The general rule is that before filing a petition for

232 SUPREME COURT REPORTS ANNOTATED