PNB v RITRATTO GROUP, INC.

GR No. 142616, July 31, 2001

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 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 contract entered into by PNB-IFL and respondent?
Held:
No. 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 form 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 juridical discretion, step in to prevent the abuses of
separate entity privilege and pierce the veil of corporate entity.