SPOUSES RAMON M. NISCE and A. NATIVIDAD PARAS-NISCE, Petitioners, vs.

EQUITABLE PCI BANK,

G.R. No. 167434 February 19, 2007

Revised Corpo Code| D. Corporate Juridical Personality | 1. Doctrine of Separate Juridical Personality

Summary:

Natividad Nisce deposited money in a PCI Bank account. She and her husband obtained loans from
another bank: Equitable Banking Corporation, secured by a REM. They did not pay their loans. The 2
banks merged in 1994. Spouses now claim they have no existing obligation with the Bank (newly
merged) because their loan accounts were set off by their US dollar deposit. SC held that the 2 banks,
though merged, or a parent and subsidiary, must be treated as separate juridical personalities. The debt
with one bank therefore cannot be set off with dollar accounts held in another bank, though the two
have merged

RELEVANT FACTS

• Natividad Nisce obtained an account with PCI Bank Paseo de Roxas branch and deposited US$20,500,
and was issued a Passbook. Upon her request, the bank transferred US$20,000 to PCI Capital Asia Ltd. in
Hong Kong via cable order.

• Natividad and spouse Ramon secured a P20,000,000 loan from Equitable Banking Corporation (another
bank), under a Promissory Note. To secure the loan, they executed an Amendment to Real Estate
Mortgage over properties in Makati. Another loan of P13,089,936.90 was secured, with another
Promissory note, covered by another Real Estate Mortgage. Partial payment was made on both loans.
The remaining unpaid loans were respectively: P4,333,333 and P2,218,793.61. No payment was made
after, according to the bank.

• PCI Capital issued a Certificate of Deposit as proof of the receipt of the transfer of US$20,000 to it by
PCI Bank Paseo de Roxas.

• In 1991, her 2 sons became stranded in Hong Kong, so Natividad asked Equitable Banking Corporation
for partial release of her dollar account to her sons. She was informed that no dollar account existed.

• In 1994, the Equitable Banking Corporation and PCIB were merged under the corporate name
'Equitable PCI Bank.'

• Natividad sent a letter to the newly merged Equitable PCI Bank offering to settle her loan account with
the balance of her US dollar account. According to the spouses Nisce, there was no reply.

• Bank foreclosed over the REM and filed to have a public auction for the properties.

ISSUE AND RATIO DECIDENDI

Ruling:

Compensation takes place when two persons, in their own right, are creditors and debtors of each other.
• Article 1278: Compensation shall take place when and if debtors establish the following: o (1) that each
one of the obligors are bound principally, and that he be at the same time a principal creditor of the
other; o (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; o (3) that the two debts be due;
o (4) that they be liquidated and demandable; o (5) that over neither of them be any retention or
controversy, commenced by third persons and communicated in due time to the debtor.

• Compensation requires confluence in the parties of the characters of mutual debtors and creditors
although their rights as such creditors or obligations as such debtors need not spring from one and the
same contract or transaction.

• When Natividad Nisce deposited her US$20,500 with PCI Bank, PCI Bank became a debtor of Natividad.
When US$20,000 were transferred as per her request, to PCI Capital, then PCI Capital became her
debtor. While PCI Capital is a subsidiary of Equitable PCI Bank, PCI Capital has an independent and
separate juridical personality from that of Equitable PCI Bank, its parent company. Hence, any claim
against the subsidiary is not a claim against the parent company, and vice versa. PCI Bank, which was
merged with Equitable Banking Corporation, 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. A subsidiary's separate existence shall be respected. This
separate and distint personality of a corporation is a fiction created by law for convenience and to
prevent injustice.

• Test in determining application of alter ego doctrine: control/complete dominion; control must have
been used to commit fraud or wrong; and control must proximately cause the injury complained of.

RULING

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.
SHORT DIGEST

Doctrine: 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.

Nisce vs Equitable PCI Bank

G.R. No. 167434

February 19, 2007

Facts: Spouses Ramon and Natividad Nisce contracted loans evidenced by promissory notes with herein
respondent Equitable PCI Bank, Inc secured by a real mortgage on the former’s parcel of land. Having
defaulted, respondent as creditor-mortgagee filed a petition for extrajudicial foreclosure. Petitioners
alleged, among others, that the bank should have compensated their debt with their dollar account
which they maintain with PCI Capital Asia Ltd. (Hong Kong), a subsidiary of Equitable. The Bank, for its
part, contends that although the spouses’ debt was restructured, they nevertheless failed to pay.
Moreover, it alleged that there cannot be legal compensation because PCI Capital had a separate and
distinct personality from the PCIB, and a claim against the former cannot be made against the latter.

Issue: Whether or not legal compensation may operate to extinguish the petitioner’s obligation?

Ruling: No. 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. 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.