G.R. No. 142616; July 31, 2001
PHILIPPINE NATIONAL BANK, petitioner, vs. RITRATTO GROUP INC., RIATTO INTERNATIONAL, INC., and DADASAN GENERAL MERCHANDISE, respondents.

FACTS

Petitioner Philippine National Bank (PNB) is a domestic corporation. Respondents Ritratto Group, Inc., Riatto International, Inc., and Dadasan General Merchandise are also domestic corporations. On May 29, 1996, PNB International Finance Ltd. (PNB-IFL), a subsidiary company of PNB organized and doing business in Hong Kong, extended a letter of credit in favor of respondents secured by real estate mortgages over four parcels of land in Makati City. This credit facility was later increased and decreased at various times, with respondents making repayments to their loan account with PNB-IFL in Hong Kong. As of April 30, 1998, their outstanding obligations stood at US$1,497,274.70. Pursuant to the terms of the real estate mortgages, PNB-IFL, through its attorney-in-fact PNB, notified respondents of the foreclosure of the mortgages, setting a public auction for May 27, 1999. On May 25, 1999, respondents filed a complaint for injunction with a prayer for a writ of preliminary injunction and/or temporary restraining order before the Regional Trial Court (RTC) of Makati against PNB. The RTC issued a 72-hour TRO, and later, on June 30, 1999, an Order for the issuance of a writ of preliminary injunction, which was issued on July 14, 1999. PNB filed a motion to dismiss on the grounds of failure to state a cause of action and absence of privity between PNB and respondents, which was denied by the RTC on October 4, 1999. PNB assailed the issuance of the writ before the Court of Appeals via a petition for certiorari and prohibition. The appellate court dismissed the petition. PNB thus filed this petition for review on certiorari.

ISSUE

1. Whether the Court of Appeals erred in not dismissing the complaint for failure to state a cause of action against petitioner PNB, which is not a real party in interest being a mere attorney-in-fact authorized to enforce an ancillary contract.
2. Whether the Court of Appeals erred in allowing the trial court to issue a writ of preliminary injunction over and beyond what was prayed for in the complaint.

RULING

The Supreme Court GRANTED the petition. The assailed decision of the Court of Appeals was REVERSED. The Orders dated June 30, 1999 and October 4, 1999 of the RTC of Makati, Branch 147 were ANNULLED and SET ASIDE and the complaint was DISMISSED.
1. On the lack of cause of action: The contract questioned (the loan agreement) was entered into between respondents and PNB-IFL, not PNB. In their complaint, respondents admitted that petitioner PNB is a mere attorney-in-fact for PNB-IFL with full power and authority to, inter alia, foreclose the mortgaged properties. PNB is an agent with limited authority under a special power of attorney incorporated in the real estate mortgage and is not privy to the loan contracts. The issue of the validity of the loan contracts is a matter between PNB-IFL (the principal and party to the contracts) and the respondents. Therefore, respondents do not have any cause of action against petitioner PNB. The trial court’s application of the doctrine of piercing the corporate veil was erroneous. The mere fact that a corporation owns all the stocks of another corporation is not sufficient to justify treating them as one entity. Respondents failed to show any cogent reason why the separate entities of PNB and PNB-IFL should be disregarded. The ruling in Koppel was inapplicable as it involved a subsidiary formed to evade taxes, which was not shown here.
2. On the preliminary injunction: Having ruled that the complaint should be dismissed for lack of cause of action against PNB, the writ of preliminary injunction issued in connection therewith must be lifted. Respondents committed the error of filing the case against the wrong party and must suffer the consequences. Accordingly, the case before the RTC must be dismissed.