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PNB v. Ritratto - G.R. No. 142616 - 362 SCRA 216

PNB-IFL, a subsidiary of PNB, extended credit to Ritratto secured by mortgages on land. When Ritratto defaulted, PNB foreclosed and auctioned the property, prompting Ritratto to file an injunction. The court ruled that while PNB acted as an agent of PNB-IFL in the foreclosure, they were not privy to the loan contracts between Ritratto and PNB-IFL as their subsidiary status alone does not make them one entity, and each is only liable for their own business dealings. The separate existence of a subsidiary will be respected if used for legitimate functions.

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452 views1 page

PNB v. Ritratto - G.R. No. 142616 - 362 SCRA 216

PNB-IFL, a subsidiary of PNB, extended credit to Ritratto secured by mortgages on land. When Ritratto defaulted, PNB foreclosed and auctioned the property, prompting Ritratto to file an injunction. The court ruled that while PNB acted as an agent of PNB-IFL in the foreclosure, they were not privy to the loan contracts between Ritratto and PNB-IFL as their subsidiary status alone does not make them one entity, and each is only liable for their own business dealings. The separate existence of a subsidiary will be respected if used for legitimate functions.

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PNB v. Ritratto G.R. No.

142616 362 SCRA 216


Facts:
PNB-IFL, a subsidiary company of PNB extended credit to Ritratto and secured by the real estate
mortgages on four parcels of land. Since there was default, PNB-IFL thru PNB, foreclosed the
property and were subject to public auction. Ritratto Group filed a complaint for injunction. PNB
filed a motion to dismiss on the grounds of failure to state a cause of action and the absence of
any privity between respondents and petitioner.
Issue:
Is PNB privy to the loan contracts entered into by respondent & PNB-IFL being that PNB-IFL is
owned by PNB?
Held:
No. The contract questioned is one entered into between Ritratto and PNB-IFL. PNB was
admittedly an agent of the latter who acted as an agent with limited authority and specific duties
under a special power of attorney incorporated in the real estate mortgage.
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 may be respected, and the liability of the parent corporation as
well as the subsidiary will be confined to those arising in their respective business. The courts
may, in the exercise of judicial discretion, step in to prevent the abuses of separate entity
privilege and pierce the veil of corporate entity.

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