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SPS. RAMON M. NISCE v. EQUITABLE PCI BANK

FACTS:

The case involves a petition for extrajudicial foreclosure filed by Equitable PCI Bank (Bank) against the spouses Ramon and Natividad Nisce. The Bank sought to foreclose real estate mortgage contracts executed by the spouses over two parcels of land to secure their obligations under promissory notes and a suretyship agreement. The total obligation amounted to P34,087,725.76. On January 28, 2003, the spouses Nisce filed a complaint before the RTC of Makati City, seeking nullity of the suretyship agreement, damages, and legal compensation. They alleged that the Bank had accepted their offer to set off their obligation against their US dollar account with a subsidiary of the Bank. They argued that the suretyship agreement was null and void and that their obligations should be offset by legal compensation. The spouses also sought injunctive relief to prevent the public auction of their mortgaged properties.

The spouses Nisce secured a P20,000,000.00 loan from the Bank on July 11, 1996. To secure the loan, they executed an Amendment to the Real Estate Mortgage. They later secured another loan amounting to P13,089,936.90 on March 1, 2000. They made partial payments on their loan accounts but there were also payments received by the Bank that were not covered by checks or receipts. The balance of their loan accounts as of September 2000 was only P4,333,333.46 and P2,218,793.61, respectively. Additionally, Natividad had a US$20,000.00 deposit with PCI Bank Paseo de Roxas Branch. In June 1991, Natividad requested a partial release of her dollar deposit, but the bank stated that no such account existed. Natividad submitted her passbook and a copy of the Certificate of Deposit to the bank in order to determine the whereabouts of her account. The Equitable Banking Corporation and the PCIB were later merged under the corporate name Equitable PCI Bank. Natividad offered to settle their loan account by offsetting the peso equivalent of her dollar account with PCI Capital, and their son also confirmed the estimated balance of the US dollar account. The bank, however, argued that the spouses failed to pay their loans and there is no showing in their records of the check payments made by the spouses.

The spouses Nisce had a loan account with Equitable-PCI Bank (Bank) secured by a real estate mortgage. They also had a US dollar account with the Bank. Natividad Nisce deposited US$20,000 in her dollar account, which was later transferred to PCI Capital via cable order. The Bank informed Natividad that her deposit was made with PCI Capital and not with the Bank. The Bank later advised that PCI Capital had already ceased operations.

The spouses Nisce presented documentary evidence showing that PCI Capital was registered in Hong Kong and that the Bank subscribed to its issued shares. They claimed that their US dollar account should have been credited with P4,600,000, and that the Bank had effectively accelerated the maturity dates of their loan.

The Regional Trial Court (RTC) granted the spouses Nisce's plea for a writ of preliminary injunction to enjoin the Bank from proceeding with the extrajudicial foreclosure of the mortgaged property. The Bank did not file a motion for reconsideration and instead assailed the RTC's order before the Court of Appeals (CA).

The CA granted the Bank's petition, nullifying the RTC's order. The CA held that the loan account was not extinguished by legal compensation, and the Bank had the right to seek foreclosure since the spouses had not settled their obligations.

In this case, the spouses Nisce sought to offset their obligations to the Bank of the Philippine Islands (BPI) by using the peso equivalent of their time deposit with PCI Capital (a subsidiary of the Bank) as partial settlement. The trial court ruled in favor of the spouses Nisce, allowing the offsetting of their obligations through compensation. However, the Court of Appeals (CA) reversed the trial court's decision. The CA stated that for compensation to be valid, the requirements set forth in Articles 1278 and 1279 of the Civil Code must be present, which includes being mutually creditors and debtors of each other. In this case, the Bank and the spouses Nisce are not mutually creditors and debtors as the time deposit is maintained with PCI Capital, a separate and distinct corporation from the Bank. The CA emphasized the principle that a corporation has separate and distinct personality from its stockholders and other connected corporations.

ISSUES:

  1. Whether a petition for certiorari under Rule 65 can be filed despite the failure to file a motion for reconsideration.

  2. Whether the trial court committed grave abuse of discretion in issuing the writ of preliminary injunction.

  3. Whether the alleged payment made by the spouses Nisce was pleaded in their complaint.

  4. Whether the Court of Appeals erred in ruling on the merits of the main case prematurely.

  5. Whether the filing of a motion for reconsideration is a condition precedent for the filing of a petition for certiorari

  6. Whether petitioners are entitled to a writ of preliminary prohibitory injunction

  7. Whether the petitioner has a present and unmistakable right to be protected.

  8. Whether the facts against which the injunction is directed violate the petitioner's right.

  9. Whether there is a special and paramount necessity for the writ of preliminary injunction.

  10. Whether legal compensation applies in this case.

  11. Whether the subsidiary company can be held liable for the deposit made by the petitioner.

  12. Whether or not the petitioner's contention of setoff is valid.

  13. Whether or not the petitioner's claim of payment through checks was adequately proven.

RULING:

  1. A petition for certiorari under Rule 65 can be filed despite the failure to file a motion for reconsideration if the issue raised is one of law, 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.

  2. The trial court did not commit grave abuse of discretion in issuing the writ of preliminary injunction, as no plausible reason was given by the spouses Nisce to justify the injunction of the extrajudicial foreclosure of the real estate mortgage.

  3. The alleged payment made by the spouses Nisce was not pleaded in their complaint, and therefore, the trial court did not err in not considering it.

  4. The Court of Appeals erred in prematurely ruling on the merits of the main case, as the determination of whether the loan account of the spouses Nisce was extinguished by legal compensation required a full-blown trial and an exhaustive consideration of the evidence of the parties.

  5. The general rule is that a motion for reconsideration must be filed before the filing of a petition for certiorari. However, there are recognized exceptions to this rule. In this case, the Court finds that the trial court issued a writ of preliminary injunction with grave abuse of discretion amounting to excess or lack of jurisdiction. Thus, the March 24, 2003 Order of the trial court is a nullity, and the filing of a petition for certiorari in the Court of Appeals was not premature.

  6. To be entitled to a writ of preliminary prohibitory injunction, the applicant must establish that it is entitled to the relief demanded and that the commission, continuance, or nonperformance of the act complained of would probably work injustice to the applicant. In this case, the Court finds that petitioners failed to prove their clear legal right to injunctive relief. The trial court granted the writ of preliminary injunction without the presence of proof of a legal right and the injury sustained by the petitioner. Therefore, petitioners are not entitled to a writ of preliminary prohibitory injunction.

  7. The court ruled that the petitioner failed to establish the essential requisites for a preliminary injunction. The petitioner did not provide conclusive and complete evidence to show that they have an ostensible right to the final relief prayed for in their complaint. The court also found that the petitioner's right was doubtful and disputed. It was also noted that the possibility of irreparable damage without proof of an actual existing right is not a ground for a preliminary injunction.

  8. Yes, legal compensation applies in this case. Compensation takes effect by operation of law when all the requisites mentioned in Article 1279 of the New Civil Code are present. It 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.

  9. No, the subsidiary company cannot be held liable for the deposit made by the petitioner. The subsidiary has an independent and separate juridical personality from the parent company. The fact that a corporation owns all of the stocks of another corporation is not sufficient to justify their being treated as one entity. A subsidiary's separate existence shall be respected if it performs legitimate functions, and the liability of the parent corporation shall be confined to the business of the parent corporation.

  10. The contention of setoff made by the petitioners is not valid. They could have withdrawn their deposit from the PCI Capital and remitted it to the respondent instead of insisting on setoff.

  11. The petitioner's claim of payment through checks was not adequately proven. They failed to present evidence of the actual checks and their delivery to the respondent.

PRINCIPLES:

  • A petition for certiorari under Rule 65 can be filed without the filing of a motion for reconsideration if certain exceptions apply.

  • The trial court may issue a writ of preliminary injunction if there is a clear right to seek the remedy of foreclosure and no plausible reason is given to justify the injunction.

  • To take place, compensation requires the presence of the requirements set forth in Articles 1278 and 1279 of the Civil Code of the Philippines, and the parties must be mutually creditors and debtors of each other.

  • A corporation has a personality separate and distinct from its stockholders and from other corporations to which it may be connected.

  • Filing a motion for reconsideration is a condition precedent for the filing of a petition for certiorari, except for recognized exceptions.

  • A writ of preliminary injunction should only be granted when the applicant is entitled to the relief demanded and the commission, continuance, or nonperformance of the act complained of would probably work injustice to the applicant.

  • The grant of a preliminary injunction rests on the sound discretion of the court and should be made with great caution. It is an equitable remedy to preserve the status quo until the merits of the case can be heard fully.

  • A preliminary injunction is a provisional remedy that may be availed of by a litigant to prevent or preserve a right or interest where there is a pressing necessity to avoid injurious consequences that cannot be remedied under any standard of compensation.

  • The petitioner praying for a writ of preliminary injunction must establish that they have a present and unmistakable right to be protected, that the facts against which the injunction is directed violate such right, and there is a special and paramount necessity for the writ to prevent serious damages.

  • The evidence submitted by the petitioner to establish the requisites for a preliminary injunction need not be conclusive and complete. They only need to show that they have an ostensible right to the final relief prayed for in their complaint. A preliminary injunction is generally based solely on initial or incomplete evidence.

  • Findings of the trial court granting or denying a petition for a writ of preliminary injunction are provisional until after the trial on the merits of the case has concluded.

  • The trial court, in granting or dismissing an application for a writ of preliminary injunction, must state in its order the findings and conclusions based on the evidence and the law. This enables the appellate court to determine whether the trial court committed grave abuse of discretion in resolving the plea for injunctive relief.

  • Compensation takes effect by operation of law and occurs when two persons, in their own right, are creditors and debtors of each other. The requisites for compensation are (1) both obligors must be bound principally, and be principal creditors of each other; (2) the debts must consist of a sum of money or consumable things of the same kind and quality; (3) the debts must be due; (4) the debts must be liquidated and demandable; and (5) there must be no retention or controversy commenced by third parties over either debt.

  • Compensation takes effect by operation of law when all the requisites mentioned in Article 1279 of the New Civil Code are present.

  • Legal compensation operates even against the will of the interested parties and even without their consent.

  • A subsidiary has an independent and separate juridical personality from its parent company, and any claim against the subsidiary is not a claim against the parent company.

  • The separate and distinct personality of a corporation is a fiction created by law for convenience and to prevent injustice.

  • The veil of separate corporate personality may be lifted when the corporation is merely an adjunct, a business conduit, or an alter ego of another corporation, or when necessary to achieve equity or for the protection of the creditors. The control, breach of duty, and proximate cause must be present for the veil to be pierced.

  • In determining the application of 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.

  • The court may deny a petition for lack of merit if the petitioner's contentions are found to be invalid and unsupported by evidence.

  • The burden of proof lies with the party making a claim. In this case, the petitioners failed to present sufficient evidence to support their claim of payment through checks.