CASE 1

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 138104 April 11, 2002

MR HOLDINGS, LTD., petitioner, vs. SHERIFF CARLOS P. BAJAR, SHERIFF FERDINAND M. JANDUSAY, SOLIDBANK CORPORATION, AND MARCOPPER MINING CORPORATION, respondents.

SANDOVAL-GUTIERREZ, J.:

In the present Petition for Review on Certiorari, petitioner MR Holdings, Ltd. assails the a) Decision1 dated January 8, 1999 of the Court of Appeals in CA-G.R. SP No. 49226 finding no grave abuse of discretion on the part of Judge Leonardo P. Ansaldo of the Regional Trial Court (RTC), Branch 94, Boac, Marinduque, in denying petitioners application for a writ of preliminary injunction;2 and b) Resolution3 dated March 29, 1999 denying petitioners motion for reconsideration.

The facts of the case are as follows:

Under a "Principal Loan Agreement"4 and "Complementary Loan Agreement,"5 both dated November 4, 1992, Asian Development Bank (ADB), a multilateral development finance institution, agreed to extend to Marcopper Mining Corporation (Marcopper) a loan in the aggregate amount of US$40,000,000.00 to finance the latters mining project at Sta. Cruz, Marinduque. The principal loan of US$ 15,000,000.00 was sourced from ADBs ordinary capital resources, while the complementary loan of US$ 25,000,000.00 was funded by the Bank of Nova Scotia, a participating finance institution.

On even date, ADB and Placer Dome, Inc., (Placer Dome), a foreign corporation which owns 40% of Marcopper, executed a "Support and Standby Credit Agreement" whereby the latter agreed to provide Marcopper with cash flow support for the payment of its obligations to ADB.

To secure the loan, Marcopper executed in favor of ADB a "Deed of Real Estate and Chattel Mortgage"6 dated November 11, 1992, covering substantially all of its (Marcoppers) properties and assets in Marinduque. It was registered with the Register of Deeds on November 12, 1992.

When Marcopper defaulted in the payment of its loan obligation, Placer Dome, in fulfillment of its undertaking under the "Support and Standby Credit Agreement," and presumably to preserve its international credit standing, agreed to have its subsidiary corporation, petitioner MR Holding, Ltd., assumed Marcoppers obligation to ADB in the amount of US$ 18,453,450.02. Consequently, in an "Assignment Agreement"7 dated March 20, 1997, ADB assigned to petitioner all its rights, interests and obligations under the principal and complementary loan agreements, ("Deed of Real Estate and Chattel Mortgage," and "Support and Standby Credit Agreement"). On December 8, 1997, Marcopper likewise executed a "Deed of Assignment"8 in favor of petitioner. Under its provisions, Marcopper assigns, transfers, cedes and conveys to petitioner, its assigns and/or successors-in-interest all of its (Marcoppers) properties, mining equipment and facilities, to wit:

Land and Mining Rights

Building and Other Structures

Other Land Improvements

Machineries & Equipment, and Warehouse Inventory

Mine/Mobile Equipment

Transportation Equipment and Furniture & Fixtures

Meanwhile, it appeared that on May 7, 1997, Solidbank Corporation (Solidbank) obtained a Partial Judgment9against Marcopper from the RTC, Branch 26, Manila, in Civil Case No. 96-80083 entitled "Solidbank Corporation vs. Marcopper Mining Corporation, John E. Loney, Jose E. Reyes and Teodulo C. Gabor, Jr.," the decretal portion of which reads:

"WHEREFORE, PREMISES CONSIDERED, partial judgment is hereby rendered ordering defendant Marcopper Mining Corporation, as follows:

1. To pay plaintiff Solidbank the sum of Fifty Two Million Nine Hundred Seventy Thousand Pesos Seven Hundred Fifty Six and 89/100 only (PHP 52,970,756.89), plus interest and charges until fully paid;

2. To pay an amount equivalent to Ten Percent (10%) of above-stated amount as attorneys fees; and

3. To pay the costs of suit.

"SO ORDERED."

Upon Solidbanks motion, the RTC of Manila issued a writ of execution pending appeal directing Carlos P. Bajar, respondent sheriff, to require Marcopper "to pay the sums of money to satisfy the Partial Judgment."10Thereafter, respondent Bajar issued two notices of levy on Marcoppers personal and real properties, and over all its stocks of scrap iron and unserviceable mining equipment.11 Together with sheriff Ferdinand M. Jandusay (also a respondent) of the RTC, Branch 94, Boac, Marinduque, respondent Bajar issued two notices setting the public auction sale of the levied properties on August 27, 1998 at the Marcopper mine site.12

Having learned of the scheduled auction sale, petitioner served an "Affidavit of Third-Party Claim"13 upon respondent sheriffs on August 26, 1998, asserting its ownership over all Marcoppers mining properties, equipment and facilities by virtue of the "Deed of Assignment."

Upon the denial of its "Affidavit of ThirdParty Claim" by the RTC of Manila,14 petitioner commenced with the RTC of Boac, Marinduque, presided by Judge Leonardo P. Ansaldo, a complaint for reivindication of properties, etc., with prayer for preliminary injunction and temporary restraining order against respondents Solidbank, Marcopper, and sheriffs Bajar and Jandusay.15 The case was docketed as Civil Case No. 98-13.

In an Order16 dated October 6, 1998, Judge Ansaldo denied petitioners application for a writ of preliminary injunction on the ground that a) petitioner has no legal capacity to sue, it being a foreign corporation doing business in the Philippines without license; b) an injunction will amount "to staying the execution of a final judgment by a court of co-equal and concurrent jurisdiction;" and c) the validity of the "Assignment Agreement" and the "Deed of Assignment" has been "put into serious question by the timing of their execution and registration."

Unsatisfied, petitioner elevated the matter to the Court of Appeals on a Petition for Certiorari, Prohibition and Mandamus, docketed therein as CA-G.R. SP No. 49226. On January 8, 1999, the Court of Appeals rendered a Decision holding that Judge Ansaldo did not commit grave abuse of discretion in denying petitioners prayer for a writ of preliminary injunction, ratiocinating as follows:

"Petitioner contends that it has the legal capacity to sue and seek redress from Philippine courts as it is a non-resident foreign corporation not doing business in the Philippines and suing on isolated transactions.

x x x x x x

"We agree with the finding of the respondent court that petitioner is not suing on an isolated transaction as it claims to be, as it is very obvious from the deed of assignment and its relationships with Marcopper and Placer Dome, Inc. that its unmistakable intention is to continue the operations of Marcopper and shield its properties/assets from the reach of legitimate creditors, even those holding valid and executory court judgments against it. There is no other way for petitioner to recover its huge financial investments which it poured into Marcoppers rehabilitation and the local situs where

the Deeds of Assignment were executed, without petitioner continuing to do business in the country.

x x x x x x

"While petitioner may just be an assignee to the Deeds of Assignment, it may still fall within the meaning of "doing business" in light of the Supreme Court ruling in the case of Far East International Import and Export Corporation vs. Nankai Kogyo Co., 6 SCRA 725, that:

Where a single act or transaction however is not merely incidental or casual but indicates the foreign corporations intention to do other business in the Philippines, said single act or transaction constitutes doing or engaging in or transacting business in the Philippines.

"Furthermore, the court went further by declaring that even a single act may constitute doing business if it is intended to be the beginning of a series of transactions. (Far East International Import and Export Corporation vs. Nankai Kogyo Co. supra).

"On the issue of whether petitioner is the bona fide owner of all the mining facilities and equipment of Marcopper, petitioner relies heavily on the Assignment Agreement allegedly executed on March 20, 1997 wherein all the rights and interest of Asian Development Bank (ADB) in a purported Loan Agreement were ceded and transferred in favor of the petitioner as assignee, in addition to a subsequent Deed of Assignment dated December 28, 1997 conveying absolutely all the properties, mining equipment and facilities of Marcopper in favor of petitioner.

"The Deeds of Assignment executed in favor of petitioner cannot be binding on the judgment creditor, private respondent Solidbank, under the general legal principle that contracts can only bind the parties who had entered into it, and it cannot favor or prejudice a third person (Quano vs. Court of Appeals, 211 SCRA 40). Moreover, by express stipulation, the said deeds shall be governed, interpreted and construed in accordance with laws of New York.1wphi1.nt

"The Deeds of Assignment executed by Marcopper, through its President, Atty. Teodulo C. Gabor, Jr., were clearly made in bad faith and in fraud of creditors, particularly private respondent Solidbank. The first Assignment Agreement purportedly executed on March 20, 1997 was entered into after Solidbank had filed on September 19, 1996 a case against Marcopper for collection of sum of money before Branch 26 of the Regional Trial Court docketed as Civil Case No. 96-80083. The second Deed of Assignment purportedly executed on December 28, 1997 was entered into by President Gabor after Solidbank had filed its Motion for Partial Summary Judgment, after the rendition by Branch 26 of the Regional Trial Court of Manila of a Partial

Summary Judgment and after the said trial court had issued a writ of execution, and which judgment was later affirmed by the Court of Appeals. While the assignments (which were not registered with the Registry of Property as required by Article 1625 of the new Civil Code) may be valid between the parties thereof, it produces no effect as against third parties. The purported execution of the Deeds of Assignment in favor of petitioner was in violation of Article 1387 of the New Civil Code x x x." (Emphasis Supplied)

Hence, the present Petition for Review on Certiorari by MR Holdings, Ltd. moored on the following grounds:

"A. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN COMPLETELY DISREGARDING AS A MATERIAL FACT OF THE CASE THE EXISTENCE OF THE PRIOR, REGISTERED 1992 DEED OF REAL ESTATE AND CHATTEL MORTGAGE CREATING A LIEN OVER THE LEVIED PROPERTIES, SUBJECT OF THE ASSIGNMENT AGREEMENT DATED MARCH 20, 1997, THUS, MATERIALLY CONTRIBUTING TO THE SAID COURTS MISPERCEPTION AND MISAPPRECIATION OF THE MERITS OF PETITIONERS CASE.

B. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN MAKING A FACTUAL FINDING THAT THE SAID ASSIGNMENT AGREEMENT IS NOT REGISTERED, THE SAME BEING CONTRARY TO THE FACTS ON RECORD, THUS, MATERIALLY CONTRIBUTING TO THE SAID COURTS MISPERCEPTION AND MISAPPRECIATION OF THE MERITS OF PETITIONERS CASE.

C. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN MAKING A FACTUAL FINDING ON THE EXISTENCE OF AN ATTACHMENT ON THE PROPERTIES SUBJECT OF INSTANT CASE, THE SAME BEING CONTRARY TO THE FACTS ON RECORD, THUS, MATERIALLY CONTRIBUTING TO THE SAID COURTS MISPERCEPTION AND MISAPPRECIATION OF THE MERITS OF PETITIONERS CASE.

D. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING THAT THE SAID ASSIGNMENT AGREEMENT AND THE DEED OF ASSIGNMENT ARE NOT BINDING ON RESPONDENT SOLIDBANK WHO IS NOT A PARTY THERETO, THE SAME BEING CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE ON PRIOR REGISTERED MORTGAGE LIENS AND ON PREFERENCE OF CREDITS.

E. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN FINDING THAT THE AFOREMENTIONED ASSIGNMENT AGREEMENT AND DEED OF ASSIGNMENT ARE SHAM, SIMULATED, OF DUBIOUS CHARACTER, AND WERE MADE IN BAD FAITH AND IN FRAUD OF CREDITORS, PARTICULARLY RESPONDENT SOLIDBANK, THE SAME BEING IN COMPLETE DISREGARD OF, VIZ: (1) THE LAW AND ESTABLISHED JURISPRUDENCE ON PRIOR, REGISTERED MORTGAGE LIENS AND ON PREFERENCE OF CREDITS, BY REASON OF WHICH THERE EXISTS NO CAUSAL CONNECTION BETWEEN

THE SAID CONTRACTS AND THE PROCEEDINGS IN CIVIL CASE NO. 96-80083; (2) THAT THE ASIAN DEVELOPMENT BANK WILL NOT OR COULD NOT HAVE AGREED TO A SHAM; SIMULATED, DUBIOUS AND FRAUDULENT TRANSACTION; AND (3) THAT RESPONDENT SOLIDBANKS BIGGEST STOCKHOLDER, THE BANK OF NOVA SCOTIA, WAS A MAJOR BENEFICIARY OF THE ASSIGNMENT AGREEMENT IN QUESTION.

F. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING THAT PETITIONER IS WITHOUT LEGAL CAPACITY TO SUE AND SEEK REDRESS FROM PHILIPPINE COURTS, IT BEING THE CASE THAT SECTION 133 OF THE CORPORATION CODE IS WITHOUT APPLICATION TO PETITIONER, AND IT BEING THE CASE THAT THE SAID COURT MERELY RELIED ON SURMISES AND CONJECTURES IN OPINING THAT PETITIONER INTENDS TO DO BUSINESS IN THE PHILIPPINES.

G. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING THAT RESPONDENT MARCOPPER, PLACER DOME, INC., AND PETITIONER ARE ONE AND THE SAME ENTITY, THE SAME BEING WITHOUT FACTUAL OR LEGAL BASIS.

H. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING PETITIONER GUILTY OF FORUM SHOPPING, IT BEING CLEAR THAT NEITHER LITIS PENDENTIANOR RES JUDICATA MAY BAR THE INSTANT REIVINDICATORY ACTION, AND IT BEING CLEAR THAT AS THIRD-PARTY CLAIMANT, THE LAW AFFORDS PETITIONER THE RIGHT TO FILE SUCH REIVINDICATORY ACTION.

I. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN RENDERING A DECISION WHICH IN EFFECT SERVES AS JUDGMENT ON THE MERITS OF THE CASE.

J. THE SHERIFFS LEVY AND SALE, THE SHERIFFS CERTIFICATE OF SALE DATED OCTOBER 12, 1998, THE RTC-MANILA ORDER DATED FEBRUARY 12, 1999, AND THE RTC-BOAC ORDER DATED NOVEMBER 25, 1998 ARE NULL AND VOID.

K. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN AFFIRMING THE DENIAL BY THE RTC-BOAC OF PETITIONERS APPLICATION FOR PRELIMINARY INJUNCTION, THE SAME BEING IN TOTAL DISREGARD OF PETITIONERS RIGHT AS ASSIGNEE OF A PRIOR, REGISTERED MORTGAGE LIEN, AND IN DISREGARD OF THE LAW AND JURISPRUDENCE ON PREFERENCE OF CREDIT."

In its petition, petitioner alleges that it is not "doing business" in the Philippines and characterizes its participation in the assignment contracts (whereby Marcoppers assets where transferred to it) as mere isolated acts that cannot foreclose its right to sue in local courts. Petitioner likewise maintains that the two assignment contracts, although executed during the pendency of Civil Case No. 96-80083 in the RTC of Manila, are not fraudulent conveyances as they were supported by valuable considerations. Moreover, they were executed in connection with prior transactions that took place as early as 1992 which involved ADB, a reputable

financial institution. Petitioner further claims that when it paid Marcoppers obligation to ADB, it stepped into the latters shoes and acquired its (ADBS) rights, titles, and interests under the "Deed of Real Estate and Chattel Mortgage." Lastly, petitioner asserts its existence as a corporation, separate and distinct from Placer Dome and Marcopper.

In its comment, Solidbank avers that: a) petitioner is "doing business" in the Philippines and this is evidenced by the "huge investment" it poured into the assignment contracts; b) granting that petitioner is not doing business in the Philippines, the nature of its transaction reveals an "intention to do business" or "to begin a series of transaction" in the country; c) petitioner, Marcopper and Placer Dome are one and the same entity, petitioner being then a wholly-owned subsidiary of Placer Dome, which, in turn, owns 40% of Marcopper; d) the timing under which the assignments contracts were executed shows that petitioners purpose was to defeat any judgment favorable to it (Solidbank); and e) petitioner violated the rule on forum shopping since the object of Civil Case No. 98-13 (at RTC, Boac, Marinduque) is similar to the other cases filed by Marcopper in order to forestall the sale of the levied properties.

Marcopper, in a separate comment, states that it is merely a nominal party to the present case and that its principal concerns are being ventilated in another case.

The petition is impressed with merit.

Crucial to the outcome of this case is our resolution of the following issues: 1) Does petitioner have the legal capacity to sue? 2) Was the Deed of Assignment between Marcopper and petitioner executed in fraud of creditors? 3) Are petitioner MR Holdings, Ltd., Placer Dome, and Marcopper one and the same entity? and 4) Is petitioner guilty of forum shopping?

We shall resolve the issues in seriatim.

I

The Court of Appeals ruled that petitioner has no legal capacity to sue in the Philippine courts because it is a foreign corporation doing business here without license. A review of this ruling does not pose much complexity as the principles governing a foreign corporations right to sue in local courts have long been settled by our Corporation Law.17 These principles may be condensed in three statements, to wit: a) if a foreign corporationdoes business in the Philippines without a license, it cannot sue before the Philippine courts;18 b) if a foreign corporation is not doing business in the Philippines, it needs no license to sue before Philippine courts on an isolated transaction19 or on a cause of action entirely independent of any business transaction;20 and c) if a foreign corporation does business in the Philippines with the required license, it can sue before Philippine courts on any transaction. Apparently, it is not the absence of the prescribed license but the "doing (of) business" in the Philippines without such license which debars the foreign corporation from access to our courts.21

The task at hand requires us to weigh the facts vis--vis the established principles. The question whether or not a foreign corporation is doing business is dependent principally upon the facts and circumstances of each particular case, considered in the light of the purposes and language of the pertinent statute or statutes involved and of the general principles governing the jurisdictional authority of the state over such corporations.22

Batas Pambansa Blg. 68, otherwise known as "The Corporation Code of the Philippines," is silent as to what constitutes doing" or "transacting" business in the Philippines. Fortunately, jurisprudence has supplied the deficiency and has held that the term "implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object for which the corporation was organized."23In Mentholatum Co. Inc., vs. Mangaliman,24 this Court laid down the test to determine whether a foreign company is "doing business," thus:

" x x x The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. (Traction Cos. vs. Collectors of Int. Revenue[C.C.A., Ohio], 223 F. 984,987.) x x x."

The traditional case law definition has metamorphosed into a statutory definition, having been adopted with some qualifications in various pieces of legislation in our jurisdiction. For instance, Republic Act No. 7042, otherwise known as the "Foreign Investment Act of 1991," defines "doing business" as follows:

"d) The phrase doing business shall include soliciting orders, service contracts, opening offices, whether called liaison offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eight(y) (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity, or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works; or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization; Provided, however, That the phrase doing business shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor, nor having a nominee director or officer to represent its interests in such corporation, nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account." (Emphasis supplied)25

Likewise, Section 1 of Republic Act No. 5455,26 provides that:

"SECTION. 1. Definition and scope of this Act. - (1) x x x the phrase doing business shall include soliciting orders, purchases, service contracts, opening offices, whether called liaison offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totaling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization."

There are other statutes27 defining the term "doing business" in the same tenor as those above-quoted, and as may be observed, one common denominator among them all is the concept of "continuity."

In the case at bar, the Court of Appeals categorized as "doing business" petitioners participation under the "Assignment Agreement" and the "Deed of Assignment." This is simply untenable. The expression "doing business" should not be given such a strict and literal construction as to make it apply to any corporate dealing whatever.28 At this early stage and with petitioners acts or transactions limited to the assignment contracts, it cannot be said that it had performed acts intended to continue the business for which it was organized. It may not be amiss to point out that the purpose or business for which petitioner was organized is not discernible in the records. No effort was exerted by the Court of Appeals to establish the nexus between petitioners business and the acts supposed to constitute "doing business." Thus, whether the assignment contracts were incidental to petitioners business or were continuation thereof is beyond determination. We cannot apply the case cited by the Court of Appeals, Far East Intl Import and Export Corp. vs. Nankai Kogyo Co., Ltd.,29 which held that a single act may still constitute "doing business" if "it is not merely incidental or casual, but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other business in the state." In said case, there was an express admission from an official of the foreign corporation that he was sent to the Philippines to look into the operation of mines, thereby revealing the foreign corporations desire to continue engaging in business here. But in the case at bar, there is no evidence of similar desire or intent. Unarguably, petitioner may, as the Court of Appeals suggested, decide to operate Marcoppers mining business, but, of course, at this stage, that is a mere speculation. Or it may decide to sell the credit secured by the mining properties to an offshore investor, in which case the acts will still be isolated transactions. To see through the present facts an intention on the part of petitioner to start a series of business transaction is to rest on assumptions or probabilities falling short of actual proof. Courts should never base its judgments on a state of facts so inadequately developed that it cannot be determined where inference ends and conjecture begins.

Indeed, the Court of Appeals holding that petitioner was determined to be "doing business" in the Philippines is based mainly on conjectures and speculation. In concluding that the

"unmistakable intention" of petitioner is to continue Marcoppers business, the Court of Appeals hangs on the wobbly premise that "there is no other way for petitioner to recover its huge financial investments which it poured into Marcoppers rehabilitation without it (petitioner) continuing Marcoppers business in the country."30 This is a mere presumption. Absent overt acts of petitioner from which we may directly infer its intention to continue Marcoppers business, we cannot give our concurrence. Significantly, a view subscribed upon by many authorities is that the mere ownership by a foreign corporation of a property in a certain state, unaccompanied by its active use in furtherance of the business for which it was formed, is insufficient in itself to constitute doing business.31 In Chittim vs. Belle Fourche Bentonite Products Co.,32 it was held that even if a foreign corporation purchased and took conveyances of a mining claim, did some assessment work thereon, and endeavored to sell it, its acts will not constitute the doing of business so as to subject the corporation to the statutory requirements for the transacting of business. On the same vein, petitioner, a foreign corporation, which becomes the assignee of mining properties, facilities and equipment cannot be automatically considered as doing business, nor presumed to have the intention of engaging in mining business.

One important point. Long before petitioner assumed Marcoppers debt to ADB and became their assignee under the two assignment contracts, there already existed a "Support and Standby Credit Agreement" between ADB and Placer Dome whereby the latter bound itself to provide cash flow support for Marcoppers payment of its obligations to ADB. Plainly, petitioners payment of US$ 18,453,450.12 to ADB was more of a fulfillment of an obligation under the "Support and Standby Credit Agreement" rather than an investment. That petitioner had to step into the shoes of ADB as Marcoppers creditor was just a necessary legal consequence of the transactions that transpired. Also, we must hasten to add that the "Support and Standby Credit Agreement" was executed four (4) years prior to Marcoppers insovency, hence, the alleged "intention of petitioner to continue Marcoppers business" could have no basis for at that time, Marcoppers fate cannot yet be determined.

In the final analysis, we are convinced that petitioner was engaged only in isolated acts or transactions. Single or isolated acts, contracts, or transactions of foreign corporations are not regarded as a doing or carrying on of business. Typical examples of these are the making of a single contract, sale, sale with the taking of a note and mortgage in the state to secure payment therefor, purchase, or note, or the mere commission of a tort.33 In these instances, there is no purpose to do any other business within the country.

II

Solidbank contends that from the chronology and timing of events, it is evident that there existed a pre-set pattern of response on the part of Marcopper to defeat whatever court ruling that may be rendered in favor of Solidbank.

We are not convinced.

While it may appear, at initial glance, that the assignment contracts are in the nature of fraudulent conveyances, however, a closer look at the events that transpired prior to the execution of those contracts gives rise to a different conclusion. The obvious flaw in the Court of Appeals Decision lies in its constricted view of the facts obtaining in the case. In its factual narration, the Court of Appeals definitely left out some events. We shall see later the significance of those events.

Article 1387 of the Civil Code of the Philippines provides:

"Art. 1387. All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors, when the donor did not reserve sufficient property to pay all debts contracted before the donation.

Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been rendered in any instance or some writ of attachment has been issued. The decision or attachment need not refer to the property alienated, and need not have been obtained by the party seeking rescission.

In addition to these presumptions, the design to defraud creditors may be proved in any other manner recognized by law and of evidence.

This article presumes the existence of fraud made by a debtor. Thus, in the absence of satisfactory evidence to the contrary, an alienation of a property will be held fraudulent if it is made after a judgment has been rendered against the debtor making the alienation.34 This presumption of fraud is not conclusive and may be rebutted by satisfactory and convincing evidence. All that is necessary is to establish affirmatively that the conveyance is made in good faith and for a sufficient and valuable consideration.35

The "Assignment Agreement" and the "Deed of Assignment" were executed for valuable considerations. Patent from the "Assignment Agreement" is the fact that petitioner assumed the payment of US$ 18,453,450.12 to ADB in satisfaction of Marcoppers remaining debt as of March 20, 1997.36 Solidbank cannot deny this fact considering that a substantial portion of the said payment, in the sum of US$ 13,886,791.06, was remitted in favor of the Bank of Nova Scotia, its major stockholder.37

The facts of the case so far show that the assignment contracts were executed in good faith. The execution of the "Assignment Agreement" on March 20, 1997 and the "Deed of Assignment" on December 8,1997 is not the alphaof this case. While the execution of these assignment contracts almost coincided with the rendition on May 7, 1997 of the Partial Judgment in Civil Case No. 96-80083 by the Manila RTC, however, there was no intention on the part of petitioner to defeat Solidbanks claim. It bears reiterating that as early as November 4, 1992, Placer Dome had already bound itself under a "Support and Standby Credit Agreement" to provide Marcopper with cash flow support for the payment to ADB of its obligations. When Marcopper ceased operations on account of disastrous mine tailings spill into the Boac River

and ADB pressed for payment of the loan, Placer Dome agreed to have its subsidiary, herein petitioner, paid ADB the amount of US $18,453,450.12. Thereupon, ADB and Marcopper executed, respectively, in favor of petitioner an "Assignment Agreement" and a "Deed of Assignment." Obviously, the assignment contracts were connected with transactions that happened long before the rendition in 1997 of the Partial Judgment in Civil Case No. 96-80083 by the Manila RTC. Those contracts cannot be viewed in isolation. If we may add, it is highly inconceivable that ADB, a reputable international financial organization, will connive with Marcopper to feign or simulate a contract in 1992 just to defraud Solidbank for its claim four years thereafter. And it is equally incredible for petitioner to be paying the huge sum of US $ 18,453,450.12 to ADB only for the purpose of defrauding Solidbank of the sum of P52,970,756.89.

It is said that the test as to whether or not a conveyance is fraudulent is -- does it prejudice the rights of creditors?38 We cannot see how Solidbanks right was prejudiced by the assignment contracts considering that substantially all of Marcoppers properties were already covered by the registered "Deed of Real Estate and Chattel Mortgage" executed by Marcopper in favor of ADB as early as November 11, 1992. As such, Solidbank cannot assert a better right than ADB, the latter being a preferred creditor. It is basic that mortgaged properties answer primarily for the mortgaged credit, not for the judgment credit of the mortgagors unsecured creditor. Considering that petitioner assumed Marcoppers debt to ADB, it follows that Solidbanks right as judgment creditor over the subject properties must give way to that of the former.1wphi1.nt

III

The record is lacking in circumstances that would suggest that petitioner corporation, Placer Dome and Marcopper are one and the same entity. While admittedly, petitioner is a wholly-owned subsidiary of Placer Dome, which in turn, which, in turn, was then a minority stockholder of Marcopper, however, the mere 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 subsidiarys separate existence shall be respected, and the liability of the parent corporation as well as the subsidiary will be confined to those arising in their respective business.39

The recent case of Philippine National Bank vs. Ritratto Group Inc.,40 outlines the circumstances which are useful in the determination of whether a subsidiary is but a mere instrumentality of the parent-corporation, to wit:

(a) The parent corporation owns all or most of the capital stock of the subsidiary.

(b) The parent and subsidiary corporations have common directors or officers.

(c) The parent corporation finances the subsidiary.

(d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation.

(e) The subsidiary has grossly inadequate capital.

(f) The parent corporation pays the salaries and other expenses or losses of the subsidiary.

(g) The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to or by the parent corporation.

(h) In the papers of the parent corporation or in the statements of its officers, the subsidiary is described as a department or division of the parent corporation, or its business or financial responsibility is referred to as the parent corporations own.

(i) The parent corporation uses the property of the subsidiary as its own.

(j) The directors or executives of the subsidiary do not act independently in the interest of the subsidiary, but take their orders from the parent corporation.

(k) The formal legal requirements of the subsidiary are not observed.

In this catena of circumstances, what is only extant in the records is the matter of stock ownership. There are no other factors indicative that petitioner is a mere instrumentality of Marcopper or Placer Dome. The mere fact that Placer Dome agreed, under the terms of the "Support and Standby Credit Agreement" to provide Marcopper with cash flow support in paying its obligations to ADB, does not mean that its personality has merged with that of Marcopper. This singular undertaking, performed by Placer Dome with its own stockholders in Canada and elsewhere, is not a sufficient ground to merge its corporate personality with Marcopper which has its own set of shareholders, dominated mostly by Filipino citizens. The same view applies to petitioners payment of Marcoppers remaining debt to ADB.

With the foregoing considerations and the absence of fraud in the transaction of the three foreign corporations, we find it improper to pierce the veil of corporate fiction that equitable doctrine developed to address situations where the corporate personality of a corporation is abused or used for wrongful purposes.

IV

On the issue of forum shopping, there could have been a violation of the rules thereon if petitioner and Marcopper were indeed one and the same entity. But since petitioner has a separate personality, it has the right to pursue its third-party claim by filing the independent reivindicatory action with the RTC of Boac, Marinduque, pursuant to Rule 39, Section 16 of the

1997 Rules of Civil Procedures. This remedy has been recognized in a long line of cases decided by this Court.41 In Rodriguez vs. Court of Appeals,42 we held:

". . . It has long been settled in this jurisdiction that the claim of ownership of a third party over properties levied for execution of a judgment presents no issue for determination by the court issuing the writ of execution.

. . .Thus, when a property levied upon by the sheriff pursuant to a writ of execution is claimed by third person in a sworn statement of ownership thereof, as prescribed by the rules, an entirely different matter calling for a new adjudication arises. And dealing as it does with the all important question of title, it is reasonable to require the filing of proper pleadings and the holding of a trial on the matter in view of the requirements of due process.

. . . In other words, construing Section 17 of Rule 39 of the Revised Rules of Court (now Section 16 of the 1997 Rules of Civil Procedure), the rights of third-party claimants over certain properties levied upon by the sheriff to satisfy the judgment may not be taken up in the case where such claims are presented but in a separate and independent action instituted by the claimants." (Emphasis supplied)

This "reivindicatory action" has for its object the recovery of ownership or possession of the property seized by the sheriff, despite the third party claim, as well as damages resulting therefrom, and it may be brought against the sheriff and such other parties as may be alleged to have connived with him in the supposedly wrongful execution proceedings, such as the judgment creditor himself. Such action is an entirely separate and distinct action from that in which execution has been issued. Thus, there being no identity of parties and cause of action between Civil Case No. 98-13 (RTC, Boac) and those cases filed by Marcopper, including Civil Case No. 96-80083 (RTC, Manila) as to give rise to res judicata or litis pendentia, Solidbanks allegation of forum-shopping cannot prosper.43

All considered, we find petitioner to be entitled to the issuance of a writ of preliminary injunction. Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides:

"SEC. 3 Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it is 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 non-performance of the acts 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 tending to render the judgment ineffectual."

Petitioners right to stop the further execution of the properties covered by the assignment contracts is clear under the facts so far established. An execution can be issued only against a party and not against one who did not have his day in court.44 The duty of the sheriff is to levy the property of the judgment debtor not that of a third person. For, as the saying goes, one mans goods shall not be sold for another man's debts.45 To allow the execution of petitioners properties would surely work injustice to it and render the judgment on the reivindicatory action, should it be favorable, ineffectual. In Arabay, Inc., vs. Salvador,46 this Court held that an injunction is a proper remedy to prevent a sheriff from selling the property of one person for the purpose of paying the debts of another; and that while the general rule is that no court has authority to interfere by injunction with the judgments or decrees of another court of equal or concurrent or coordinate jurisdiction, however, it is not so when a third-party claimant is involved. We quote the instructive words of Justice Querube C. Makalintal in Abiera vs. Court of Appeals,47 thus:

"The rationale of the decision in the Herald Publishing Company case48 is peculiarly applicable to the one before Us, and removes it from the general doctrine enunciated in the decisions cited by the respondents and quoted earlier herein.

1. Under Section 17 of Rule 39 a third person who claims property levied upon on execution may vindicate such claim by action. Obviously a judgment rendered in his favor, that is, declaring him to be the owner of the property, would not constitute interference with the powers or processes of the court which rendered the judgment to enforce which the execution was levied. If that be so and it is so because the property, being that of a stranger, is not subject to levy then an interlocutory order such as injunction, upon a claim and prima facie showing of ownership by the claimant, cannot be considered as such interference either."

WHEREFORE, the petition is GRANTED. The assailed Decision dated January 8, 1999 and the Resolution dated March 29, 1999 of the Court of Appeals in CA G.R. No. 49226 are set aside. Upon filing of a bond ofP1,000,000.00, respondent sheriffs are restrained from further implementing the writ of execution issued in Civil Case No. 96-80083 by the RTC, Branch 26, Manila, until further orders from this Court. The RTC, Branch 94, Boac, Marinduque, is directed to dispose of Civil Case No. 98-13 with dispatch.

SO ORDERED.

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 167434 February 19, 2007

SPOUSES RAMON M. NISCE and A. NATIVIDAD PARAS-NISCE, Petitioners, vs. EQUITABLE PCI BANK, INC., Respondent.

D E C I S I O N

CALLEJO, SR., J.:

On November 26, 2002, Equitable PCI Bank1 (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

and - - - - - - - - - - - - P16,665,439.772

On December 2, 2002, the Ex-Officio Sheriff set the sale at public auction at 10:00 a.m. on January 14, 2003,3 or on 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 the Ex-Officio Sheriff. They alleged the following: in a letter4 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 of the Bank, under Certificate Deposit No. 016125 and Account No. 090-0104 (Passbook No. 83-3041);6 the Bank accepted their offer and requested for an estimate of the balance of their account; they complied with the Banks request and in a letter dated February 11, 2002, informed it that the estimated balance of their account as of December 1991 (including the 11.875% per annum interest) was US$51,000.42,7 and that as of December 2002, Natividads 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:

(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. (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;

(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. Nisces 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 attorneys 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 January 30, 2003.

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 10:00 a.m. on March 5 and 27, 2003.11The spouses Nisce then filed a Supplemental Complaint with plea for a

temporary restraining order to enjoin the sale at public auction.12 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 further instructions, or until she terminated the facility.13 Convinced, Natividad deposited US$20,500.00 on July 19, 1984, and was issued Passbook No. 83-3041.14 Upon her request, the bank transferred the US$20,000.00 to PCI Capital Asia Ltd. in Hong Kong via cable order.15

On July 11, 1996, the spouses Nisce secured a P20,000,000.00 loan from the Bank under Promissory Note No. BD-150369.16 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 to the Real Estate Mortgage over the properties17 located in Makati City covered by TCT Nos. S-83466 and S-83467.18 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 is evidenced by Promissory Note (PN) No. 104279319 and covered by a Real Estate Mortgage20 executed on February 28, 2000. They made a partial payment ofP13,866,666.50 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 totalingP4,600,000.00 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 May 30, 2001, amounted to P2,218,793.61.25

On July 20, 1984, PCI Capital issued Certificate of Deposit No. CD-01612;26 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 for the PCIB to determine the whereabouts of the account.27 She reiterated her request to the Bank on January 27, 199228 and September 11, 2000.29

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 Account No. 090-0104.30 Their son, Atty. Rosanno Nisce, later wrote the Bank, declaring that the estimated balance of the US dollar account with PCI Capital as of December 1991 was US$51,000.42.31 Atty. Nisce corroborated this in his testimony, and stated that Ms. Casaysayan had declared that she would refer the matter to her superiors.32 A certain Rene Esteven also told him that another offer to setoff his parents account had been accepted, and he was assured that its implementation was being processed.33 On cross examination, Atty. Nisce declared that there was no response to his request for setoff,34 and that Esteven assured him that the Bank would look for the records of his mothers US dollar savings deposit.35 He was later told that the Bank had accepted the offer to setoff the account.36

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, including interest and penalties, was P30,533,552.24.37 It had agreed to restructure their loans on March 31, 1998, but they nevertheless failed to pay despite repeated demands.38 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 spouses had delivered checks amounting to P4,600,000.00.39

According to the Bank, Natividads 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 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 advised that PCI Capital had already ceased operations.42

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, 198943 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 October 25, 2004, the corporate name of PCI Capital was changed to PCI Express Padala (HK) Ltd.;45 and the stockholdings of PCIB remained at 29,039,999 shares.46

On March 24, 2003, the RTC issued an Order47 granting the spouses Nisces 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. 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 Nisces 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.1awphi1.net

The Bank opted not to file a motion for reconsideration of the order, and instead assailed the trial courts 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 Escao v. Heirs of Escao and Navarro51 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 courts 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 Banks 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 RTC.52 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 Nisces 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 Natividads 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 BANKS 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 Banks 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 banks 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 Nisces 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 courts 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 March 24, 2003 Order of the trial court granting petitioners 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 the injury sustained by the plaintiff, the writ is a nullity.57

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 plaintiffs 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 courts 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 respondents 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, petitioners 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 attorneys fees, as of January 31, 2003, exclusive of all interests, penalties, other charges, and foreclosure costs accruing thereafter.67 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 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 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 July 19, 1984, PCIB became the debtor of petitioner. However, when upon petitioners 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 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 creditor between the bank and the depositor is created.72 The issuance of a certificate of deposit in exchange for currency creates a debtor-creditor relationship.73

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 subsidiarys 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 Appeals76 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 plaintiffs 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 defendants 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. Dec. 29, 1997 - EBC-0000039462 - P2,000,000.0

0

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

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.

CASE 2

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 134068 December 25, 2001

UNION BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS, APOLONIA DE JESUS GREGORIO, LUCIANA DE JESUS GREGORIO, GONZALO VINCOY, married to TRINIDAD GREGORIO VINCOY, respondents.

R E S O L U T I O N

DE LEON, JR., J.:

This is a motion for reconsideration of the resolution of this Court dated July 12, 1999 dismissing the petition for review on certiorari filed by petitioner Union Bank of the Philippines which assailed the decision of the Court of Appeals (a) upholding the validity of the real estate mortgage executed by respondents Gonzalo and Trinidad Vincoy in favor of petitioner as security for a loan in the principal amount of Two Million Pesos (P2,000,000.00), and (b) fixing the redemption price of the property mortgaged at Three Million Two Hundred Ninety Thousand Pesos (P3,290,000.00) representing the purchase price of the said property at the foreclosure sale plus one percent (1%) monthly interest from April 19, 1991, the date of the foreclosure sale, until its redemption pursuant to Section 30, Rule 39 of the Rules of Court.

The following are the factual antecedents.

On March 2, 1990, respondents-spouses Gonzalo and Trinidad Vincoy mortgaged their residence in favor of petitioner to secure the payment of a loan to Delco Industries (Phils.), Incorporated1 in the amount of Two Million Pesos (P2,000,000.00). For failure of the respondents to pay the loan at its date of maturity, petitioner extrajudicially foreclosured the mortgage and scheduled the foreclosure sale on April 10, 1991. The petitioner submitted the highest bid of Three Million Two Hundred Ninety Thousand Pesos (P3,290,000.00) at the foreclosure sale. Accordingly, a certificate of sale was issued to petitioner and duly annotated at the back of the Transfer Certificate of Title covering the property on May 8, 1991.2

Prior to the expiration of the redemption period on May 8, 1992, the respondents filed a complaint for annulment of mortgage with the lower court. In their complaint, respondents

alleged that the subject property mortgaged to petitioner had in fact been constituted as a family home as early as October 27, 1989. Among the beneficiaries of the said family home are the sisters of respondent Trinidad Vincoy, namely Apolonia and Luciana De Jesus Gregorio whose consent to the mortgage was not obtained.3 Respondents thus assailed the validity of the mortgage on the ground that Article 158 of the Family Code4 prohibits the execution, forced sale, attachment or any other encumbrance of a family home without the written consent of majority of the beneficiaries thereof of legal age.5 On the hand, petitioner maintained that the mortgaged property of respondents could not be legally constituted as a family home because its actual value exceeded Three Hundred Thousand Pesos (P300,000.00), the maximum value for a family home in urban areas as stipulated in Article 157 of the Family Code.6

The lower court rendered judgment declaring the constitution of the family home void and the mortgage executed in favor of the petitioner valid. It held, among others, that Article 158 of the Family Code was not applicable to respondents' family home as the value of the latter at the time of its alleged constitution exceeded Three Hundred Thousand Pesos (P300,000.00).7 It also ordered respondent Gonzalo Vincoy and/or Delco Industries (Phils.), Inc. to pay petitioner his and/or its outstanding obligation as of February 15, 1993 in the amount of Four Million Eight Hundred Sixteen Thousand One Hundred Ninety-Four Pesos and Forty-Four Centavos (P4,816,194.44) including such sums that may accrue by way of interests and penalties.8

Aggrieved, respondents appealed to the Court of Appeals contending that the lower court erred in finding that their family home was not duly constituted, and that the mortgage in favor of petitioner is valid. Respondents also claimed that the correct amount sufficient for the redemption of their property as of February 15, 1993 is Two Million Seven Hundred Seventy-Three Thousand Seven Hundred Twelve Pesos and Eighty-Seven Centavos (P2,773,712.87)9 and not Four Million Eight Hundred Sixteen Thousand One Hundred Ninety-Four Pesos and forty-four Centavos (P4,816,194.44) as found by the lower court.

In a decision promulgated on June 4, 1997, the Court of Appeals sustained the finding of the lower court that the alleged family home of the respondents did not fall within the purview of Article 157 of the Family Code as its value at the time of its constitution was more than the maximum value of Three Hundred Thousand Pesos (P300,000). Hence, the Court of Appeals upheld the validity of the mortgage executed over t