SECRECY OF BANK DEPOSITS
Accordingly, a notice of garnishment was issued
A.
G.R. No. L-34964 January 31, 1973
CHINA BANKING CORPORATION and TAN KIM LIONG, petitioners-
appellants,
vs.
HON. WENCESLAO ORTEGA, as Presiding Judge of the Court of First
Instance of Manila, Branch VIII, and VICENTE G. ACABAN, respondents-
appellees.
Sy Santos, Del Rosario and Associates for petitioners-appellants.
Tagalo, Gozar and Associates for respondents-appellees.
MAKALINTAL, J.:
The only issue in this petition for certiorari to review the orders dated March
4, 1972 and March 27, 1972, respectively, of the Court of First Instance of
Manila in its Civil Case No. 75138, is whether or not a banking institution may
validly refuse to comply with a court process garnishing the bank deposit of a
judgment debtor, by invoking the provisions of Republic Act No. 1405. *
On December 17, 1968 Vicente Acaban filed a complaint in the court a
quo against Bautista Logging Co., Inc., B & B Forest Development
Corporation and Marino Bautista for the collection of a sum of money. Upon
motion of the plaintiff the trial court declared the defendants in default for
failure to answer within the reglementary period, and authorized the Branch
Clerk of Court and/or Deputy Clerk to receive the plaintiff's evidence. On
January 20, 1970 judgment by default was rendered against the defendants.
To satisfy the judgment, the plaintiff sought the garnishment of the bank
deposit of the defendant B & B Forest Development Corporation with the
BANKING LAW (18 October 2018 Cases)
China Banking Corporation.
by the Deputy Sheriff of the trial court and served on said bank through its
cashier, Tan Kim Liong. In reply, the bank' cashier invited the attention of the
Deputy Sheriff to the provisions of Republic Act No. 1405 which, it was
alleged, prohibit the disclosure of any information relative to bank deposits.
Thereupon the plaintiff filed a motion to cite Tan Kim Liong for contempt of
court.
In an order dated March 4, 1972 the trial court denied the plaintiff's motion.
However, Tan Kim Liong was ordered "to inform the Court within five days
from receipt of this order whether or not there is a deposit in the China
Banking Corporation of defendant B & B Forest Development Corporation,
and if there is any deposit, to hold the same intact and not allow any
withdrawal until further order from this Court." Tan Kim Liong moved to
reconsider but was turned down by order of March 27, 1972. In the same
order he was directed "to comply with the order of this Court dated March 4,
1972 within ten (10) days from the receipt of copy of this order, otherwise his
arrest and confinement will be ordered by the Court." Resisting the two
orders, the China Banking Corporation and Tan Kim Liong instituted the
instant petition.
The pertinent provisions of Republic Act No. 1405 relied upon by the
petitioners reads:
Sec. 2. All deposits of whatever nature with banks or
banking institutions in the Philippines including investments
in bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities, are hereby
considered as of absolutely confidential nature and may not
be examined, inquired or looked into by any person,
government official, bureau or office, except upon written
permission of the depositor, or in cases of impeachment, or
upon order of a competent court in cases of bribery or
dereliction of duty of public officials, or in cases where the
money deposited or invested is the subject matter of the
litigation.
Page 1
 Sec 3. It shall be unlawful for any official or employee of a
banking institution to disclose to any person other than those
mentioned in Section two hereof any information concerning
said deposits.
Sec. 5. Any violation of this law will subject offender upon
conviction, to an imprisonment of not more than five years or
a fine of not more than twenty thousand pesos or both, in the
discretion of the court.
The petitioners argue that the disclosure of the information required by the
court does not fall within any of the four (4) exceptions enumerated in
Section 2, and that if the questioned orders are complied with Tan Kim Liong
may be criminally liable under Section 5 and the bank exposed to a possible
damage suit by B & B Forest Development Corporation. Specifically referring
to this case, the position of the petitioners is that the bank deposit of
judgment debtor B & B Forest Development Corporation cannot be subject to
garnishment to satisfy a final judgment against it in view of the aforequoted
provisions of law.
We do not view the situation in that light. The lower court did not order an
examination of or inquiry into the deposit of B & B Forest Development
Corporation, as contemplated in the law. It merely required Tan Kim Liong to
inform the court whether or not the defendant B & B Forest Development
Corporation had a deposit in the China Banking Corporation only for
purposes of the garnishment issued by it, so that the bank would hold the
same intact and not allow any withdrawal until further order. It will be noted
from the discussion of the conference committee report on Senate Bill No.
351 and House Bill No. 3977, which later became Republic Act 1405, that it
was not the intention of the lawmakers to place bank deposits beyond the
reach of execution to satisfy a final judgment. Thus:
Mr. MARCOS. Now, for purposes of the record, I should like
the Chairman of the Committee on Ways and Means to
clarify this further. Suppose an individual has a tax case. He
is being held liable by the Bureau of Internal Revenue for,
say, P1,000.00 worth of tax liability, and because of this the
BANKING LAW (18 October 2018 Cases)
deposit of this individual is attached by the Bureau of Internal
Revenue.
Mr. RAMOS. The attachment will only apply after the court
has pronounced sentence declaring the liability of such
person. But where the primary aim is to determine whether
he has a bank deposit in order to bring about a proper
assessment by the Bureau of Internal Revenue, such inquiry
is not authorized by this proposed law.
Mr. MARCOS. But under our rules of procedure and under
the Civil Code, the attachment or garnishment of money
deposited is allowed. Let us assume, for instance, that there
is a preliminary attachment which is for garnishment or for
holding liable all moneys deposited belonging to a certain
individual, but such attachment or garnishment will bring out
into the open the value of such deposit. Is that prohibited by
this amendment or by this law?
Mr. RAMOS. It is only prohibited to the extent that the inquiry
is limited, or rather, the inquiry is made only for the purpose
of satisfying a tax liability already declared for the protection
of the right in favor of the government; but when the object is
merely to inquire whether he has a deposit or not for
purposes of taxation, then this is fully covered by the law.
Mr. MARCOS. And it protects the depositor, does it not?
Mr. RAMOS. Yes, it protects the depositor.
Mr. MARCOS. The law prohibits a mere investigation into
the existence and the amount of the deposit.
Mr. RAMOS. Into the very nature of such deposit.
Page 2
 Mr. MARCOS. So I come to my original question. Therefore,
preliminary garnishment or attachment of the deposit is not
allowed?
Mr. RAMOS. No, without judicial authorization.
Mr. MARCOS. I am glad that is clarified. So that the
established rule of procedure as well as the substantive law
on the matter is amended?
Mr. RAMOS. Yes. That is the effect.
Mr. MARCOS. I see. Suppose there has been a decision,
definitely establishing the liability of an individual for taxation
purposes and this judgment is sought to be executed ... in
the execution of that judgment, does this bill, or this
proposed law, if approved, allow the investigation or scrutiny
of the bank deposit in order to execute the judgment?
Mr. RAMOS. To satisfy a judgment which has become
executory.
Mr. MARCOS. Yes, but, as I said before, suppose the tax
liability is P1,000,000 and the deposit is half a million, will
this bill allow scrutiny into the deposit in order that the
judgment may be executed?
Mr. RAMOS. Merely to determine the amount of such money
to satisfy that obligation to the Government, but not to
determine whether a deposit has been made in evasion of
taxes.
xxx xxx xxx
Mr. MACAPAGAL. But let us suppose that in an ordinary civil
action for the recovery of a sum of money the plaintiff wishes
to attach the properties of the defendant to insure the
BANKING LAW (18 October 2018 Cases)
satisfaction of the judgment. Once the judgment is rendered,
does the gentleman mean that the plaintiff cannot attach the
bank deposit of the defendant?
Mr. RAMOS. That was the question raised by the gentleman
from Pangasinan to which I replied that outside the very
purpose of this law it could be reached by attachment.
Mr. MACAPAGAL. Therefore, in such ordinary civil cases it
can be attached?
Mr. RAMOS. That is so.
(Vol. II, Congressional Record, House of Representatives,
No. 12, pp. 3839-3840, July 27, 1955).
It is sufficiently clear from the foregoing discussion of the conference
committee report of the two houses of Congress that the prohibition against
examination of or inquiry into a bank deposit under Republic Act 1405 does
not preclude its being garnished to insure satisfaction of a judgment. Indeed
there is no real inquiry in such a case, and if the existence of the deposit is
disclosed the disclosure is purely incidental to the execution process. It is
hard to conceive that it was ever within the intention of Congress to enable
debtors to evade payment of their just debts, even if ordered by the Court,
through the expedient of converting their assets into cash and depositing the
same in a bank.
WHEREFORE, the orders of the lower court dated March 4 and 27, 1972,
respectively, are hereby affirmed, with costs against the petitioners-
appellants.
JOSEPH VICTOR G. EJERCITO, G.R. Nos. 157294-95
Petitioner, Present:
PANGANIBAN, C.J.,
PUNO,
QUISUMBING,
Page 3
 - versus - YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ, I. For Trust Account No. 858;
CARPIO, 1. Account Opening Documents;
AUSTRIA-MARTINEZ, 2. Trading Order No. 020385 dated January 29, 1999;
CORONA, 3. Confirmation Advice TA 858;
SANDIGANBAYAN (SPECIAL DIVISION) CARPIO MORALES, 4. Original/Microfilm copies, including the dorsal side, of the
AND PEOPLE OF THE PHILIPPINES, CALLEJO, SR., following:
Respondents. AZCUNA,
TINGA, a. Bank of Commerce MC # 0256254 in the
CHICO-NAZARIO, amount of P2,000,000.00;
GARCIA, and b. Urban bank Corp. MC # 34181 dated November
VELASCO, JR., JJ. 8, 1999 in the amount of P10,875,749.43;
Promulgated: c. Urban Bank MC # 34182 dated November 8,
1999 in the amount of P42,716,554.22;
November 30, 2006 d. Urban Bank Corp. MC # 37661 dated November
x--------------------------------------------------x 23, 1999 in the amount of P54,161,496.52;

DECISION 5. Trust Agreement dated January 1999:

Trustee: Joseph Victor C. Ejercito
CARPIO MORALES, J.: Nominee: URBAN BANK-TRUST DEPARTMENT
Special Private Account No. (SPAN) 858; and
The present petition for certiorari under Rule 65 assails the 6. Ledger of the SPAN # 858.
Sandiganbayan Resolutions dated February 7 and 12, 2003 denying
petitioner Joseph Victor G. Ejercitos Motions to Quash Subpoenas Duces II. For Savings Account No. 0116-17345-9
Tecum/Ad Testificandum, and Resolution dated March 11, 2003 denying his SPAN No. 858
Motion for Reconsideration of the first two resolutions.
1. Signature Cards; and
The three resolutions were issued in Criminal Case No. 2. Statement of Account/Ledger
26558, People of the Philippines v. Joseph Ejercito Estrada, et al., for
plunder, defined and penalized in R.A. 7080, AN ACT DEFINING AND III. Urban Bank Managers Check and their corresponding Urban Bank
PENALIZING THE CRIME OF PLUNDER. Managers Check Application Forms, as follows:

In above-stated case of People v. Estrada, et al., the Special 1. MC # 039975 dated January 18, 2000 in the amount
Prosecution Panel[1] filed on January 20, 2003 before the Sandiganbayan a of P70,000,000.00;
Request for Issuance of Subpoena Duces Tecum for the issuance of a 2. MC # 039976 dated January 18, 2000 in the amount
subpoena directing the President of Export and Industry Bank (EIB, formerly of P2,000,000.00;
Urban Bank) or his/her authorized representative to produce the following 3. MC # 039977 dated January 18, 2000 in the amount
documents during the hearings scheduled on January 22 and 27, 2003: of P2,000,000.00;

BANKING LAW (18 October 2018 Cases) Page 4

 4. MC # 039978 dated January 18, 2000 in the amount
of P1,000,000.00;
The Special Prosecution Panel also filed on January 20, 2003, a
Request for Issuance of Subpoena Duces Tecum/Ad Testificandum directed
to the authorized representative of Equitable-PCI Bank to produce
statements of account pertaining to certain accounts in the name of Jose
Velarde and to testify thereon.
The Sandiganbayan granted both requests by Resolution of January
21, 2003 and subpoenas were accordingly issued.
The Special Prosecution Panel filed still another Request for
Issuance of Subpoena Duces Tecum/Ad Testificandum dated January 23,
2003 for the President of EIB or his/her authorized representative to produce
the same documents subject of the Subpoena Duces Tecum dated January
21, 2003 and to testify thereon on the hearings scheduled on January 27 and
29, 2003 and subsequent dates until completion of the testimony. The
request was likewise granted by the Sandiganbayan. A Subpoena Duces
Tecum/Ad Testificandum was accordingly issued on January 24, 2003.
Petitioner, claiming to have learned from the media that the Special
Prosecution Panel had requested for the issuance of subpoenas for the
examination of bank accounts belonging to him, attended the hearing of the
case on January 27, 2003 and filed before the Sandiganbayan a letter of
even date expressing his concerns as follows, quoted verbatim:
Your Honors:
It is with much respect that I write this court relative to the
concern of subpoenaing the undersigneds bank
account which I have learned through the media.
I am sure the prosecution is aware of our banking secrecy
laws everyone supposed to observe. But, instead of
prosecuting those who may have breached such laws, it
seems it is even going to use supposed evidence which I
BANKING LAW (18 October 2018 Cases)
have reason to believe could only have been illegally
obtained.
The prosecution was not content with a general request. It
even lists and identifies specific documents meaning
someone else in the bank illegally released confidential
information.
If this can be done to me, it can happen to anyone. Not that
anything can still shock our family. Nor that I have anything
to hide. Your Honors.
But, I am not a lawyer and need time to consult one on a
situation that affects every bank depositor in the country and
should interest the bank itself, the Bangko Sentral ng
Pilipinas, and maybe the Ombudsman himself, who may
want to investigate, not exploit, the serious breach that can
only harm the economy, a consequence that may have been
overlooked. There appears to have been deplorable
connivance.
xxxx
I hope and pray, Your Honors, that I will be given time to
retain the services of a lawyer to help me protect my rights
and those of every banking depositor. But the one I have in
mind is out of the country right now.
May I, therefore, ask your Honors, that in the meantime, the
issuance of the subpoena be held in abeyance for at least
ten (10) days to enable me to take appropriate legal steps in
connection with the prosecutions request for the issuance of
subpoena concerning my accounts. (Emphasis supplied)
From the present petition, it is gathered that the accounts referred to
by petitioner in his above-quoted letter are Trust Account No.
858 and Savings Account No. 0116-17345-9.[2]
Page 5
 In open court, the Special Division of the Sandiganbayan, through
Associate Justice Edilberto Sandoval, advised petitioner that his remedy was
to file a motion to quash, for which he was given up to 12:00 noon the
following day, January 28, 2003.
Petitioner, unassisted by counsel, thus filed on January 28, 2003 a
Motion to Quash Subpoena Duces Tecum/Ad Testificandum praying that the
subpoenas previously issued to the President of the EIB dated January 21
and January 24, 2003 be quashed.[3]
In his Motion to Quash, petitioner claimed that his bank accounts are
covered by R.A. No. 1405 (The Secrecy of Bank Deposits Law) and do not
fall under any of the exceptions stated therein. He further claimed that the
specific identification of documents in the questioned subpoenas, including
details on dates and amounts, could only have been made possible by an
earlier illegal disclosure thereof by the EIB and the Philippine Deposit
Insurance Corporation (PDIC) in its capacity as receiver of the then Urban
Bank.
The disclosure being illegal, petitioner concluded, the prosecution in
the case may not be allowed to make use of the information.
Before the Motion to Quash was resolved by the Sandiganbayan, the
prosecution filed another Request for the Issuance of Subpoena Duces
Tecum/Ad Testificandum dated January 31, 2003, again to direct the
President of the EIB to produce, on the hearings scheduled on February 3
and 5, 2003, the same documents subject of the January 21 and 24, 2003
subpoenas with the exception of the Bank of Commerce MC #0256254 in the
amount of P2,000,000 as Bank of Commerce MC #0256256 in the amount
of P200,000,000 was instead requested. Moreover, the request covered the
following additional documents:
IV. For Savings Account No. 1701-00646-1:
1. Account Opening Forms;
2. Specimen Signature Card/s; and
3. Statements of Account.
BANKING LAW (18 October 2018 Cases)
The prosecution also filed a Request for the Issuance of Subpoena
Duces Tecum/Ad Testificandum bearing the same date, January 31, 2003,
directed to Aurora C. Baldoz, Vice President-CR-II of the PDIC for her to
produce the following documents on the scheduled hearings on February 3
and 5, 2003:
1. Letter of authority dated November 23, 1999 re: SPAN
[Special Private Account Number] 858;
2. Letter of authority dated January 29, 2000 re: SPAN 858;
3. Letter of authority dated April 24, 2000 re: SPAN 858;
4. Urban Bank check no. 052092 dated April 24, 2000 for the
amount of P36, 572, 315.43;
5. Urban Bank check no. 052093 dated April 24, 2000 for the
amount of P107,191,780.85; and
6. Signature Card Savings Account No. 0116-17345-
9. (Underscoring supplied)
The subpoenas prayed for in both requests were issued by the
Sandiganbayan on January 31, 2003.
On February 7, 2003, petitioner, this time assisted by counsel, filed
an Urgent Motion to Quash Subpoenae Duces Tecum/Ad Testificandum
praying that the subpoena dated January 31, 2003 directed to Aurora Baldoz
be quashed for the same reasons which he cited in the Motion to Quash [4] he
had earlier filed.
On the same day, February 7, 2003, the Sandiganbayan issued a
Resolution denying petitioners Motion to Quash Subpoenae Duces
Tecum/Ad Testificandum dated January 28, 2003.
Page 6
 Subsequently or on February 12, 2003, the Sandiganbayan issued a
Resolution denying petitioners Urgent Motion to Quash Subpoena Duces
Tecum/Ad Testificandum dated February 7, 2003.
Petitioners Motion for Reconsideration dated February 24,
2003 seeking a reconsideration of the Resolutions of February 7 and 12,
2003 having been denied by Resolution of March 11, 2003, petitioner filed
the present petition.
Raised as issues are:
1. Whether petitioners Trust Account No. 858 is covered by
the term deposit as used in R.A. 1405;
2. Whether petitioners Trust Account No. 858 and Savings
Account No. 0116-17345-9 are excepted from the protection of
R.A. 1405; and
3. Whether the extremely-detailed information contained in the
Special Prosecution Panels requests for subpoena was
obtained through a prior illegal disclosure of petitioners bank
accounts, in violation of the fruit of the poisonous tree doctrine.
Respondent People posits that Trust Account No. 858[5] may be
inquired into, not merely because it falls under the exceptions to the
coverage of R.A. 1405, but because it is not even contemplated therein. For,
to respondent People, the law applies only to deposits which strictly means
the money delivered to the bank by which a creditor-debtor relationship is
created between the depositor and the bank.
The contention that trust accounts are not covered by the term
deposits, as used in R.A. 1405, by the mere fact that they do not entail a
creditor-debtor relationship between the trustor and the bank, does not
lie. An examination of the law shows that the term deposits used therein is to
be understood broadly and not limited only to accounts which give rise to a
creditor-debtor relationship between the depositor and the bank.
BANKING LAW (18 October 2018 Cases)
The policy behind the law is laid down in Section 1:
SECTION 1. It is hereby declared to be the policy of the
Government to give encouragement to the people to deposit
their money in banking institutions and to discourage private
hoarding so that the same may be properly utilized by banks
in authorized loans to assist in the economic development of
the country. (Underscoring supplied)
If the money deposited under an account may be used by banks for
authorized loans to third persons, then such account, regardless of whether it
creates a creditor-debtor relationship between the depositor and the bank,
falls under the category of accounts which the law precisely seeks to protect
for the purpose of boosting the economic development of the country.
Trust Account No. 858 is, without doubt, one such account. The
Trust Agreement between petitioner and Urban Bank provides that the trust
account covers deposit, placement or investment of funds by Urban Bank for
and in behalf of petitioner.[6] The money deposited under Trust Account No.
858, was, therefore, intended not merely to remain with the bank but to be
invested by it elsewhere. To hold that this type of account is not protected by
R.A. 1405 would encourage private hoarding of funds that could otherwise be
invested by banks in other ventures, contrary to the policy behind the law.
Section 2 of the same law in fact even more clearly shows that the
term deposits was intended to be understood broadly:
SECTION 2. All deposits of whatever nature with banks or
banking institutions in the Philippines including investments
in bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities, are hereby
considered as of an absolutely confidential nature and may
not be examined, inquired or looked into by any person,
government official, bureau or office, except upon written
permission of the depositor, or in cases of impeachment, or
upon order of a competent court in cases of bribery or
dereliction of duty of public officials, or in cases where the
Page 7
 money deposited or invested is the subject matter of the
litigation. (Emphasis and underscoring supplied)
The phrase of whatever nature proscribes any restrictive
interpretation of deposits. Moreover, it is clear from the immediately quoted
provision that, generally, the law applies not only to money which is
deposited but also to those which are invested. This further shows that the
law was not intended to apply only to deposits in the strict sense of the
word. Otherwise, there would have been no need to add the phrase or
invested.
Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account
No. 858.
The protection afforded by the law is, however, not absolute, there
being recognized exceptions thereto, as above-quoted Section 2 provides. In
the present case, two exceptions apply, to wit: (1) the examination of bank
accounts is upon order of a competent court in cases of bribery or dereliction
of duty of public officials, and (2) the money deposited or invested is the
subject matter of the litigation.
Petitioner contends that since plunder is neither bribery nor
dereliction of duty, his accounts are not excepted from the protection of R.A.
1405. Philippine National Bank v. Gancayco[7] holds otherwise:
Cases of unexplained wealth are similar to cases of
bribery or dereliction of duty and no reason is seen why
these two classes of cases cannot be excepted from the rule
making bank deposits confidential.The policy as to one
cannot be different from the policy as to the other. This
policy expresses the notion that a public office is a
public trust and any person who enters upon its discharge
does so with the full knowledge that his life, so far as
relevant to his duty, is open to public scrutiny.
BANKING LAW (18 October 2018 Cases)
Undoubtedly, cases for plunder involve unexplained wealth. Section
2 of R.A. No. 7080 states so.
SECTION 2. Definition of the Crime of Plunder;
Penalties. Any public officer who, by himself or in
connivance with members of his family, relatives by affinity
or consanguinity, business associates, subordinates or other
persons, amasses, accumulates or acquires ill-gotten
wealth through a combination or series of overt or criminal
acts as described in Section 1(d) hereof, in the aggregate
amount or total value of at least Seventy-five million pesos
(P75,000,000.00), shall be guilty of the crime of plunder and
shall be punished by life imprisonment with perpetual
absolute disqualification from holding any public office. Any
person who participated with said public officer in the
commission of plunder shall likewise be punished. In the
imposition of penalties, the degree of participation and the
attendance of mitigating and extenuating circumstances
shall be considered by the court. The court shall declare any
and all ill-gotten wealth and their interests and other incomes
and assets including the properties and shares of stock
derived from the deposit or investment thereof forfeited in
favor of the State. (Emphasis and underscoring supplied)
An examination of the overt or criminal acts as described in Section
1(d) of R.A. No. 7080 would make the similarity between plunder and bribery
even more pronounced since bribery is essentially included among these
criminal acts. Thus Section 1(d) states:
d) Ill-gotten wealth means any asset, property,
business enterprise or material possession of any person
within the purview of Section Two (2) hereof, acquired by
him directly or indirectly through dummies, nominees,
agents, subordinates and or business associates by any
combination or series of the following means or similar
schemes.
Page 8
 1) Through misappropriation, conversion, misuse, or
malversation of public funds or raids on the public
treasury;
2) By receiving, directly or indirectly, any commission,
gift, share, percentage, kickbacks or any other
form of pecuniary benefit from any person and/or
entity in connection with any government contract
or project or by reason of the office or position of
the public officer concerned;
3) By the illegal or fraudulent conveyance or disposition of
assets belonging to the National Government or any of
its subdivisions, agencies or instrumentalities or
government-owned or -controlled corporations and
their subsidiaries;
4) By obtaining, receiving or accepting directly or indirectly
any shares of stock, equity or any other form of
interest or participation including promise of future
employment in any business enterprise or undertaking;
5) By establishing agricultural, industrial or commercial
monopolies or other combinations and/or
implementation of decrees and orders intended to
benefit particular persons or special interests; or
6) By taking undue advantage of official position, authority,
relationship, connection or influence to unjustly enrich
himself or themselves at the expense and to the
damage and prejudice of the Filipino people and the
Republic of the Philippines. (Emphasis supplied)
Indeed, all the above-enumerated overt acts are similar to bribery
such that, in each case, it may be said that no reason is seen why these two
classes of cases cannot be excepted from the rule making bank deposits
confidential.[8]
BANKING LAW (18 October 2018 Cases)
The crime of bribery and the overt acts constitutive of plunder are
crimes committed by public officers, and in either case the noble idea that a
public office is a public trust and any person who enters upon its discharge
does so with the full knowledge that his life, so far as relevant to his duty, is
open to public scrutiny applies with equal force.
Plunder being thus analogous to bribery, the exception to R.A. 1405
applicable in cases of bribery must also apply to cases of plunder.
Respecting petitioners claim that the money in his bank accounts is
not the subject matter of the litigation, the meaning of the phrase subject
matter of the litigation as used in R.A. 1405 is explained in Union Bank of the
Philippines v. Court of Appeals,[9] thus:
Petitioner contends that the Court of Appeals
confuses the cause of action with the subject of the
action. In Yusingco v. Ong Hing Lian, petitioner points out,
this Court distinguished the two concepts.
x x x The cause of action is the legal
wrong threatened or committed, while the
object of the action is to prevent or redress
the wrong by obtaining some legal relief; but
the subject of the action is neither of these
since it is not the wrong or the relief
demanded, the subject of the action is the
matter or thing with respect to which the
controversy has arisen, concerning which
the wrong has been done, and this ordinarily
is the property or the contract and its subject
matter, or the thing in dispute.
The argument is well-taken. We note with approval
the difference between the subject of the action from the
cause of action. We also find petitioners definition of the
phrase subject matter of the action is consistent with the
Page 9
 term subject matter of the litigation, as the latter is used in
the Bank Deposits Secrecy Act.
In Mellon Bank, N.A. v. Magsino, where the
petitioner bank inadvertently caused the transfer of the
amount of US$1,000,000.00 instead of only
US$1,000.00, the Court sanctioned the examination of
the bank accounts where part of the money was
subsequently caused to be deposited:
x x x Section 2 of [Republic Act No.
1405] allows the disclosure of bank deposits
in cases where the money deposited is the
subject matter of the litigation. Inasmuch as
Civil Case No. 26899 is aimed at
recovering the amount converted by the
Javiers for their own benefit, necessarily,
an inquiry into the whereabouts of the
illegally acquired amount extends to
whatever is concealed by being held or
recorded in the name of persons other
than the one responsible for the illegal
acquisition.
Clearly, Mellon Bank involved a case where the
money deposited was the subject matter of the litigation
since the money deposited was the very thing in dispute. x x
x (Emphasis and underscoring supplied)
The plunder case now pending with the Sandiganbayan necessarily
involves an inquiry into the whereabouts of the amount purportedly acquired
illegally by former President Joseph Estrada.
In light then of this Courts pronouncement in Union Bank, the subject
matter of the litigation cannot be limited to bank accounts under the name of
President Estrada alone, but must include those accounts to which the
money purportedly acquired illegally or a portion thereof was alleged to have
been transferred. Trust Account No. 858 and Savings Account No. 0116-
BANKING LAW (18 October 2018 Cases)
17345-9 in the name of petitioner fall under this description and must thus be
part of the subject matter of the litigation.
In a further attempt to show that the subpoenas issued by the
Sandiganbayan are invalid and may not be enforced, petitioner contends, as
earlier stated, that the information found therein, given their extremely
detailed character, could only have been obtained by the Special Prosecution
Panel through an illegal disclosure by the bank officials concerned. Petitioner
thus claims that, following the fruit of the poisonous tree doctrine, the
subpoenas must be quashed.
Petitioner further contends that even if, as claimed by respondent
People, the extremely-detailed information was obtained by the Ombudsman
from the bank officials concerned during a previous investigation of the
charges against President Estrada, such inquiry into his bank accounts
would itself be illegal.
Petitioner relies on Marquez v. Desierto[10] where the Court held:
We rule that before an in camera inspection may be
allowed there must be a pending case before a court of
competent jurisdiction. Further, the account must be clearly
identified, the inspection limited to the subject matter of the
pending case before the court of competent jurisdiction. The
bank personnel and the account holder must be notified to
be present during the inspection, and such inspection may
cover only the account identified in the pending case.
(Underscoring supplied)
As no plunder case against then President Estrada had yet been
filed before a court of competent jurisdiction at the time the Ombudsman
conducted an investigation, petitioner concludes that the information about
his bank accounts were acquired illegally, hence, it may not be lawfully used
to facilitate a subsequent inquiry into the same bank accounts.
Petitioners attempt to make the exclusionary rule applicable to the
instant case fails. R.A. 1405, it bears noting, nowhere provides that an
Page 10
unlawful examination of bank accounts shall render the evidence obtained
therefrom inadmissible in evidence. Section 5 of R.A. 1405 only states that
[a]ny violation of this law will subject the offender upon conviction, to an
imprisonment of not more than five years or a fine of not more than twenty
thousand pesos or both, in the discretion of the court.
The case of U.S. v. Frazin,[11] involving the Right to Financial Privacy
Act of 1978 (RFPA) of the United States, is instructive.
Because the statute, when properly construed,
excludes a suppression remedy, it would not be appropriate
for us to provide one in the exercise of our supervisory
powers over the administration of justice. Where Congress
has both established a right and provided exclusive
remedies for its violation, we would encroach upon the
prerogatives of Congress were we to authorize a remedy not
provided for by statute. United States v. Chanen, 549 F.2d
1306, 1313 (9th Cir.), cert. denied, 434 U.S. 825, 98 S.Ct.
72, 54 L.Ed.2d 83 (1977).
The same principle was reiterated in U.S. v. Thompson:[12]
x x x When Congress specifically designates a
remedy for one of its acts, courts generally presume that it
engaged in the necessary balancing of interests in
determining what the appropriate penalty should
be. See Michaelian, 803 F.2d at 1049 (citing
cases); Frazin, 780 F.2d at 1466. Absent a specific
reference to an exclusionary rule, it is not appropriate for the
courts to read such a provision into the act.
Even assuming arguendo, however, that the exclusionary rule
applies in principle to cases involving R.A. 1405, the Court finds no reason to
apply the same in this particular case.
Clearly, the fruit of the poisonous tree doctrine [13] presupposes a
violation of law. If there was no violation of R.A. 1405 in the instant case,
BANKING LAW (18 October 2018 Cases)
then there would be no poisonous tree to begin with, and, thus, no reason to
apply the doctrine.
How the Ombudsman conducted his inquiry into the bank accounts
of petitioner is recounted by respondent People of the Philippines, viz:
x x x [A]s early as February 8, 2001, long before the issuance of
the Marquez ruling, the Office of the Ombudsman, acting
under the powers granted to it by the Constitution and R.A.
No. 6770, and acting on information obtained from various
sources, including impeachment (of then Pres. Joseph
Estrada) related reports, articles and investigative journals,
issued a Subpoena Duces Tecum addressed to Urban
Bank. (Attachment 1-b) It should be noted that the
description of the documents sought to be produced at that
time included that of numbered accounts 727, 737, 747, 757,
777 and 858 and included such names as Jose Velarde,
Joseph E. Estrada, Laarni Enriquez, Guia Gomez, Joy
Melendrez, Peachy Osorio, Rowena Lopez, Kevin or Kelvin
Garcia. The subpoena did not single out account 858.
xxxx
Thus, on February 13, 2001, PDIC, as receiver of Urban Bank,
issued a certification as to the availability of bank documents
relating to A/C 858 and T/A 858 and the non-availability of
bank records as to the other accounts named in
the subpoena. (Attachments 2, 2-1 and 2-b)
Based on the certification issued by PDIC, the Office of the
Ombudsman on February 16, 2001 again issued
a Subpoena Duces Tecum directed to Ms. Corazon dela
Paz, as Interim Receiver, directing the production of
documents pertinent to account A/C 858 and T/C
858. (Attachment 3)
In compliance with the said subpoena dated February 16, 2001, Ms.
Dela Paz, as interim receiver, furnished the Office of the
Page 11
 Ombudsman certified copies of documents under cover
latter dated February 21, 2001:
1. Transaction registers dated 7-02-99, 8-16-99,
9-17-99, 10-18-99, 11-22-99, 1-07-00, 04-03-00
and 04-24-00;
2. Report of Unregularized TAFs & TDs for UR
COIN A & B Placements of Various Branches as
of February 29, 2000 and as of December 16,
1999; and
3. Trading Orders Nos. A No. 78102 and A No.
078125.
Trading Order A No. 07125 is filed in two copies a
white copy which showed set up information; and a
yellow copy which showed reversal information. Both
copies have been reproduced and are enclosed with
this letter.
We are continuing our search for other records and
documents pertinent to your request and we will
forward to you on Friday, 23 February 2001, such
additional records and documents as we might find
until then. (Attachment 4)
The Office of the Ombudsman then requested for the
mangers checks, detailed in the Subpoena Duces
Tecum dated March 7, 2001. (Attachment 5)
PDIC again complied with the said Subpoena Duces
Tecum dated March 7, 2001 and provided copies of the
managers checks thus requested under cover letter
dated March 16, 2001. (Attachment 6)[14](Emphasis in the
original)
BANKING LAW (18 October 2018 Cases)
The Sandiganbayan credited the foregoing account of respondent
People.[15] The Court finds no reason to disturb this finding of fact by the
Sandiganbayan.
The Marquez ruling notwithstanding, the above-described examination by the
Ombudsman of petitioners bank accounts, conducted before a case was filed
with a court of competent jurisdiction, was lawful.
For the Ombudsman issued the subpoenas bearing on the bank
accounts of petitioner about four months before Marquez was promulgated
on June 27, 2001.
While judicial interpretations of statutes, such as that made
in Marquez with respect to R.A. No. 6770 or the Ombudsman Act of 1989,
are deemed part of the statute as of the date it was originally passed, the rule
is not absolute.
Columbia Pictures, Inc. v. Court of Appeals[16] teaches:
It is consequently clear that a judicial interpretation becomes
a part of the law as of the date that law was originally
passed, subject only to the qualification that when a
doctrine of this Court is overruled and a different view is
adopted, and more so when there is a reversal thereof,
the new doctrine should be applied prospectively and
should not apply to parties who relied on the old doctrine and
acted in good faith. (Emphasis and underscoring supplied)
When this Court construed the Ombudsman Act of 1989, in light of the
Secrecy of Bank Deposits Law in Marquez, that before an in camera
inspection may be allowed there must be a pending case before a court of
competent jurisdiction, it was, in fact, reversing an earlier doctrine found
in Banco Filipino Savings and Mortgage Bank v. Purisima[17].
Banco Filipino involved subpoenas duces tecum issued by the Office
of the Ombudsman, then known as the Tanodbayan,[18] in the course of
Page 12
its preliminary investigation of a charge of violation of the Anti-Graft and
Corrupt Practices Act.
While the main issue in Banco Filipino was whether R.A. 1405
precluded the Tanodbayans issuance of subpoena duces tecum of bank
records in the name of persons other than the one who was charged, this
Court, citing P.D. 1630,[19] Section 10, the relevant part of which states:
(d) He may issue a subpoena to compel any person
to appear, give sworn testimony, or produce documentary or
other evidence the Tanodbayan deems relevant to a matter
under his inquiry,
held that The power of the Tanodbayan to issue subpoenae ad
testificandum and subpoenae duces tecum at the time in question is
not disputed, and at any rate does not admit of doubt.[20]
As the subpoenas subject of Banco Filipino were issued during a
preliminary investigation, in effect this Court upheld the power of the
Tandobayan under P.D. 1630 to issue subpoenas duces tecum for bank
documents prior to the filing of a case before a court of competent
jurisdiction.
Marquez, on the other hand, practically reversed this ruling in Banco
Filipino despite the fact that the subpoena power of the Ombudsman under
R.A. 6770 was essentially the same as that under P.D. 1630. Thus Section
15 of R.A. 6770 empowers the Office of the Ombudsman to
(8) Administer oaths, issue subpoena and subpoena duces
tecum, and take testimony in any investigation or inquiry,
including the power to examine and have access to bank
accounts and records;
A comparison of this provision with its counterpart in Sec. 10(d) of P.D. 1630
clearly shows that it is only more explicit in stating that the power of the
BANKING LAW (18 October 2018 Cases)
Ombudsman includes the power to examine and have access to bank
accounts and records which power was recognized with respect to the
Tanodbayan through Banco Filipino.
The Marquez ruling that there must be a pending case in order for the
Ombudsman to validly inspect bank records in camera thus reversed a
prevailing doctrine.[21] Hence, it may not be retroactively applied.
The Ombudsmans inquiry into the subject bank accounts prior to the filing of
any case before a court of competent jurisdiction was therefore valid at the
time it was conducted.
Likewise, the Marquez ruling that the account holder must be notified to be
present during the inspection may not be applied retroactively to the inquiry
of the Ombudsman subject of this case. This ruling is not a judicial
interpretation either of R.A. 6770 or R.A. 1405, but a judge-made law which,
as People v. Luvendino[22] instructs, can only be given prospective
application:
x x x The doctrine that an uncounselled waiver of the
right to counsel is not to be given legal effect was
initially a judge-made one and was first announced on
26 April 1983 in Morales v. Enrileand reiterated on 20
March 1985 in People v. Galit. x x x
While the Morales-Galit doctrine eventually became part of
Section 12(1) of the 1987 Constitution, that doctrine affords
no comfort to appellant Luvendino for the requirements and
restrictions outlined in Morales and Galit have no
retroactive effect and do not reach waivers made prior
to 26 April 1983 the date of promulgation of Morales.
(Emphasis supplied)
Page 13
 In fine, the subpoenas issued by the Ombudsman in this case were
legal, hence, invocation of the fruit of the poisonous tree doctrine is
misplaced.
AT ALL EVENTS, even if the challenged subpoenas are quashed,
the Ombudsman is not barred from requiring the production of the same
documents based solely on information obtained by it from
sources independent of its previous inquiry.
In particular, the Ombudsman, even before its inquiry, had already
possessed information giving him grounds to believe that (1) there are bank
accounts bearing the number 858, (2) that such accounts are in the custody
of Urban Bank, and (3) that the same are linked with the bank accounts of
former President Joseph Estrada who was then under investigation for
plunder.
Only with such prior independent information could it have been possible for
the Ombudsman to issue the February 8, 2001 subpoena duces
tecum addressed to the President and/or Chief Executive Officer of Urban
Bank, which described the documents subject thereof as follows:
(a) bank records and all documents relative thereto
pertaining to all bank accounts (Savings, Current, Time
Deposit, Trust, Foreign Currency Deposits, etc) under
the account names of Jose Velarde, Joseph E. Estrada,
Laarni Enriquez, Guia Gomez, Joy Melendrez, Peach
Osorio, Rowena Lopez, Kevin or Kelvin Garcia, 727, 737,
747, 757, 777 and 858. (Emphasis and underscoring
supplied)
The information on the existence of Bank Accounts bearing number 858 was,
according to respondent People of the Philippines, obtained from various
sources including the proceedings during the impeachment of President
Estrada, related reports, articles and investigative journals.[23] In the absence
of proof to the contrary, this explanation proffered by respondent must be
upheld. To presume that the information was obtained in violation of R.A.
1405 would infringe the presumption of regularity in the performance of
official functions.
BANKING LAW (18 October 2018 Cases)
Thus, with the filing of the plunder case against former President Estrada
before the Sandiganbayan, the Ombudsman, using the above independent
information, may now proceed to conduct the same investigation it earlier
conducted, through which it can eventually obtain the same information
previously disclosed to it by the PDIC, for it is an inescapable fact that the
bank records of petitioner are no longer protected by R.A. 1405 for the
reasons already explained above.
Since conducting such an inquiry would, however, only result in the
disclosure of the same documents to the Ombudsman, this Court, in
avoidance of what would be a time-wasteful and circuitous way of
administering justice,[24] upholds the challenged subpoenas.
Respecting petitioners claim that the Sandiganbayan violated his
right to due process as he was neither notified of the requests for the
issuance of the subpoenas nor of the grant thereof, suffice it to state that the
defects were cured when petitioner ventilated his arguments against the
issuance thereof through his earlier quoted letter addressed to the
Sandiganbayan and when he filed his motions to quash before the
Sandiganbayan.
IN SUM, the Court finds that the Sandiganbayan did not commit grave abuse
of discretion in issuing the challenged subpoenas for documents pertaining to
petitioners Trust Account No. 858 and Savings Account No. 0116-17345-9
for the following reasons:
1. These accounts are no longer protected by the Secrecy of Bank
Deposits Law, there being two exceptions to the said law applicable in this
case, namely: (1) the examination of bank accounts is upon order of a
competent court in cases of bribery or dereliction of duty of public officials,
and (2) the money deposited or invested is the subject matter of the
litigation.Exception (1) applies since the plunder case pending against former
President Estrada is analogous to bribery or dereliction of duty, while
exception (2) applies because the money deposited in petitioners bank
accounts is said to form part of the subject matter of the same plunder case.
Page 14
 2. The fruit of the poisonous tree principle, which states that once the
primary source (the tree) is shown to have been unlawfully obtained, any
secondary or derivative evidence (the fruit) derived from it is also
inadmissible, does not apply in this case. In the first place, R.A. 1405 does
not provide for the application of this rule. Moreover, there is no basis for
applying the same in this case since the primary source for the detailed
information regarding petitioners bank accounts the investigation previously
conducted by the Ombudsman was lawful.
3. At all events, even if the subpoenas issued by the Sandiganbayan
were quashed, the Ombudsman may conduct on its own the same inquiry
into the subject bank accounts that it earlier conducted last February-March
2001, there being a plunder case already pending against former President
Estrada. To quash the challenged subpoenas would, therefore, be pointless
since the Ombudsman may obtain the same documents by another
route. Upholding the subpoenas avoids an unnecessary delay in the
administration of justice.
WHEREFORE, the petition is DISMISSED. The Sandiganbayan
Resolutions dated February 7 and 12, 2003 and March 11, 2003 are upheld.
The Sandiganbayan is hereby directed, consistent with this Courts
ruling in Marquez v. Desierto, to notify petitioner as to the date the subject
bank documents shall be presented in court by the persons subpoenaed.
SO ORDERED.
[G.R. No. 135882. June 27, 2001]
LOURDES T. MARQUEZ, in her capacity as Branch Manager, Union
Bank of the Philippines, petitioners, vs. HON. ANIANO A.
DESIERTO, (in his capacity as OMBUDSMAN, Evaluation and
Preliminary Investigation Bureau, Office of the Ombudsman,
BANKING LAW (18 October 2018 Cases)
ANGEL C. MAYOR-ALGO, JR., MARY ANN CORPUZ-MANALAC
and JOSE T. DE JESUS, JR., in their capacities as Chairman and
Members of the Panel, respectively, respondents.
DECISION
PARDO, J.:
In the petition at bar, petitioner seeks to--
a. Annul and set aside, for having been issued without or in excess of
jurisdiction or with grave abuse of discretion amounting to lack of
jurisdiction, respondents order dated September 7, 1998 in OMB-0-97-
0411, In Re: Motion to Cite Lourdes T. Marquez for indirect contempt,
received by counsel of September 9, 1998, and their order dated
October 14, 1998, denying Marquezs motion for reconsideration dated
September 10, 1998, received by counsel on October 20, 1998.
b. Prohibit respondents from implementing their order dated October 14,
1998, in proceeding with the hearing of the motion to cite Marquez for
indirect contempt, through the issuance by this Court of a temporary
restraining order and/or preliminary injunction.[1]
The antecedent facts are as follows:
Sometime in May 1998, petitioner Marquez received an Order from the
Ombudsman Aniano A. Desierto dated April 29, 1998, to produce several
bank documents for purposes of inspection in camera relative to various
accounts maintained at Union Bank of the Philippines, Julia Vargas Branch,
where petitioner is the branch manager. The accounts to be inspected are
Account Nos. 011-37270, 240-020718, 245-30317-3 and 245-30318-1,
involved in a case pending with the Ombudsman entitled, Fact-Finding and
Intelligence Bureau (FFIB) v. Amado Lagdameo, et. al. The order further
states:
It is worth mentioning that the power of the Ombudsman to investigate and to
require the production and inspection of records and documents is
sanctioned by the 1987 Philippine Constitution, Republic Act No. 6770,
Page 15
otherwise known as the Ombudsman Act of 1989 and under existing
jurisprudence on the matter. It must be noted that R. A. 6770 especially
Section 15 thereof provides, among others, the following powers, functions
and duties of the Ombudsman, to wit:
xxx
(8) Administer oaths, issue subpoena and subpoena duces tecum and take
testimony in any investigation or inquiry, including the power to examine and
have access to bank accounts and records;
(9) Punish for contempt in accordance with the Rules of Court and under the
same procedure and with the same penalties provided therein.
Clearly, the specific provision of R.A. 6770, a later legislation, modifies the
law on the Secrecy of Bank Deposits (R.A. 1405) and places the office of the
Ombudsman in the same footing as the courts of law in this regard. [2]
The basis of the Ombudsman in ordering an in camera inspection of the
accounts is a trail of managers checks purchased by one George Trivinio, a
respondent in OMB-0-97-0411, pending with the office of the Ombudsman.
It would appear that Mr. George Trivinio, purchased fifty one (51)
Managers Checks (MCs) for a total amount of P272.1 Million at Traders
Royal Bank, United Nations Avenue branch, on May 2 and 3, 1995. Out of
the 51 MCs, eleven (11) MCs
in the amount of P70.6 million, were deposited and credited to an
account maintained at the Union Bank, Julia Vargas Branch.[3]
On May 26, 1998, the FFIB panel met in conference with petitioner
Lourdes T. Marquez and Atty. Fe B. Macalino at the banks main office, Ayala
Avenue, Makati City. The meeting was for the purpose of allowing petitioner
and Atty. Macalino to view the checks furnished by Traders Royal Bank. After
convincing themselves of the veracity of the checks, Atty. Macalino advised
Ms. Marquez to comply with the order of the Ombudsman. Petitioner agreed
to an in camera inspection set on June 3, 1998.[4]
BANKING LAW (18 October 2018 Cases)
However, on June 4, 1998, petitioner wrote the Ombudsman explaining
to him that the accounts in question cannot readily be identified and asked
for time to respond to the order. The reason forwarded by petitioner was that
despite diligent efforts and from the account numbers presented, we can not
identify these accounts since the checks are issued in cash or bearer. We
surmised that these accounts have long been dormant, hence are not
covered by the new account number generated by the Union Bank
system. We therefore have to verify from the Interbank records archives for
the whereabouts of these accounts.[5]
The Ombudsman, responding to the request of the petitioner for time to
comply with the order, stated: firstly, it must be emphasized that Union Bank,
Julia Vargas Branch was the depositary bank of the subject Traders Royal
Bank Managers Checks (MCs), as shown at its dorsal portion and as cleared
by the Philippine Clearing House, not the International Corporate Bank.
Notwithstanding the fact that the checks were payable to cash or bearer,
nonetheless, the name of the depositor(s) could easily be identified since the
account numbers x x x where said checks were deposited are identified in
the order.
Even assuming that the accounts xxx were already classified as
dormant accounts, the bank is still required to preserve the records
pertaining to the accounts within a certain period of time as required by
existing banking rules and regulations.
And finally, the in camera inspection was already extended twice
from May 13, 1998 to June 3, 1998, thereby giving the bank enough time
within which to sufficiently comply with the order.[6]
Thus, on June 16, 1998, the Ombudsman issued an order directing
petitioner to produce the bank documents relative to the accounts in
issue. The order states:
Viewed from the foregoing, your persistent refusal to comply with
Ombudsmans order is unjustified, and is merely intended to delay the
investigation of the case. Your act constitutes disobedience of or resistance
to a lawful order issued by this office and is punishable as Indirect Contempt
under Section 3(b) of R.A. 6770. The same may also constitute obstruction in
Page 16
the lawful exercise of the functions of the Ombudsman which is punishable
under Section 36 of R.A. 6770.[7]
On July 10, 1998, petitioner together with Union Bank of the Philippines,
filed a petition for declaratory relief, prohibition and injunction [8] with the
Regional Trial Court, Makati City, against the Ombudsman.
The petition was intended to clear the rights and duties of petitioner.
Thus, petitioner sought a declaration of her rights from the court due to the
clear conflict between R. A. No. 6770, Section 15 and R. A. No. 1405,
Sections 2 and 3.
Petitioner prayed for a temporary restraining order (TRO) because the
Ombudsman and other persons acting under his authority were continuously
harassing her to produce the bank documents relative to the accounts in
question. Moreover, on June 16, 1998, the Ombudsman issued another
order stating that unless petitioner appeared before the FFIB with the
documents requested, petitioner manager would be charged with indirect
contempt and obstruction of justice.
In the meantime,[9] on July 14, 1998, the lower court denied petitioners
prayer for a temporary restraining order and stated thus:
After hearing the arguments of the parties, the court finds the application for
a Temporary Restraining Order to be without merit.
Since the application prays for the restraint of the respondent, in the exercise
of his contempt powers under Section 15 (9) in relation to paragraph (8) of
R.A. 6770, known as The Ombudsman Act of 1989, there is no great or
irreparable injury from which petitioners may suffer, if respondent is not so
restrained. Respondent should he decide to exercise his contempt powers
would still have to apply with the court. x x x Anyone who, without lawful
excuse x x x refuses to produce documents for inspection, when thereunto
lawfully required shall be subject to discipline as in case of contempt of Court
and upon application of the individual or body exercising the power in
question shall be dealt with by the Judge of the First Instance (now RTC)
having jurisdiction of the case in a manner provided by law (section 580 of
the Revised Administrative Code). Under the present Constitution only
judges may issue warrants, hence, respondent should apply with the Court
BANKING LAW (18 October 2018 Cases)
for the issuance of the warrant needed for the enforcement of his contempt
orders. It is in these proceedings where petitioners may question the
propriety of respondents exercise of his contempt powers. Petitioners are not
therefore left without any adequate remedy.
The questioned orders were issued with the investigation of the case of Fact-
Finding and Intelligence Bureau vs. Amado Lagdameo, et. el., OMB-0-97-
0411, for violation of R.A. 3019. Since petitioner failed to show prima facie
evidence that the subject matter of the investigation is outside the jurisdiction
of the Office of the Ombudsman, no writ of injunction may be issued by this
Court to delay this investigation pursuant to Section 14 of the Ombudsman
Act of 1989.[10]
On July 20, 1998, petitioner filed a motion for reconsideration based on
the following grounds:
a. Petitioners application for Temporary Restraining Order is not
only to restrain the Ombudsman from exercising his contempt
powers, but to stop him from implementing his Orders dated
April 29,1998 and June 16,1998; and
b. The subject matter of the investigation being conducted by the
Ombudsman at petitioners premises is outside his
jurisdiction.[11]
On July 23, 1998, the Ombudsman filed a motion to dismiss the petition
for declaratory relief[12] on the ground that the Regional Trial Court has no
jurisdiction to hear a petition for relief from the findings and orders of the
Ombudsman, citing R. A. No. 6770, Sections 14 and 27. On August 7, 1998,
the Ombudsman filed an opposition to petitioners motion for reconsideration
dated July 20, 1998.[13]
On August 19, 1998, the lower court denied petitioners motion for
reconsideration,[14] and also the Ombudsmans motion to dismiss.[15]
On August 21, 1998, petitioner received a copy of the motion to cite her
for contempt, filed with the Office of the Ombudsman by Agapito B. Rosales,
Director, Fact Finding and Intelligence Bureau (FFIB).[16]
Page 17
 On August 31, 1998, petitioner filed with the Ombudsman an opposition
to the motion to cite her in contempt on the ground that the filing thereof was
premature due to the petition pending in the lower court.[17]Petitioner likewise
reiterated that she had no intention to disobey the orders of the Ombudsman.
However, she wanted to be clarified as to how she would comply with the
orders without her breaking any law, particularly R. A. No. 1405.[18]
Respondent Ombudsman panel set the incident for hearing on
September 7, 1998.[19] After hearing, the panel issued an order dated
September 7, 1998, ordering petitioner and counsel to appear for a
continuation of the hearing of the contempt charges against her. [20]
On September 10, 1998, petitioner filed with the Ombudsman a motion
for reconsideration of the above order.[21] Her motion was premised on the
fact that there was a pending case with the Regional Trial Court, Makati
City,[22] which would determine whether obeying the orders of the
Ombudsman to produce bank documents would not violate any law.
The FFIB opposed the motion,[23] and on October 14, 1998, the
Ombudsman denied the motion by order the dispositive portion of which
reads:
Wherefore, respondent Lourdes T. Marquezs motion for reconsideration is
hereby DENIED, for lack of merit. Let the hearing of the motion of the Fact
Finding Intelligence Bureau (FFIB) to cite her for indirect contempt be
intransferrably set to 29 October 1998 at 2:00 oclock p.m. at which date and
time she should appear personally to submit her additional evidence. Failure
to do so shall be deemed a waiver thereof.[24]
Hence, the present petition.[25]
The issue is whether petitioner may be cited for indirect contempt for her
failure to produce the documents requested by the Ombudsman. And
whether the order of the Ombudsman to have an in camera inspection of the
questioned account is allowed as an exception to the law on secrecy of bank
deposits (R. A. No. 1405).
An examination of the secrecy of bank deposits law (R. A. No. 1405)
would reveal the following exceptions:
BANKING LAW (18 October 2018 Cases)
1. Where the depositor consents in writing;
2. Impeachment case;
3. By court order in bribery or dereliction of duty cases against
public officials;
4. Deposit is subject of litigation;
5. Sec. 8, R. A. No. 3019, in cases of unexplained wealth as held in
the case of PNB vs. Gancayco[26]
The order of the Ombudsman to produce for in camera inspection the
subject accounts with the Union Bank of the Philippines, Julia Vargas
Branch, is based on a pending investigation at the Office of the Ombudsman
against Amado Lagdameo, et. al. for violation of R. A. No. 3019, Sec. 3 (e)
and (g) relative to the Joint Venture Agreement between the Public Estates
Authority and AMARI.
We rule that before an in camera inspection may be allowed, there must
be a pending case before a court of competent jurisdiction. Further, the
account must be clearly identified, the inspection limited to the subject matter
of the pending case before the court of competent jurisdiction. The bank
personnel and the account holder must be notified to be present during the
inspection, and such inspection may cover only the account identified in the
pending case.
In Union Bank of the Philippines v. Court of Appeals, we held
that Section 2 of the Law on Secrecy of Bank Deposits, as
amended, declares bank deposits to be absolutely
confidential except:
(1) In an examination made in the course of a special or general
examination of a bank that is specifically authorized by the
Monetary Board after being satisfied that there is reasonable
ground to believe that a bank fraud or serious irregularity has
been or is being committed and that it is necessary to look into
the deposit to establish such fraud or irregularity,
(2) In an examination made by an independent auditor hired by the
bank to conduct its regular audit provided that the examination
Page 18
 is for audit purposes only and the results thereof shall be for the Petitioner,
exclusive use of the bank, Present:

(3) Upon written permission of the depositor,

CORONA, J., Chairperson,
(4) In cases of impeachment, VELASCO, JR.,
-versus- NACHURA,
(5) Upon order of a competent court in cases of bribery or PERALTA, and
dereliction of duty of public officials, or MENDOZA, JJ.
(6) In cases where the money deposited or invested is the subject
matter of the litigation[27] SALLY GO a.k.a. SALLY GO-BANGAYAN,
Respondent. Promulgated:
In the case at bar, there is yet no pending litigation before any court of
competent authority. What is existing is an investigation by the office of the February 16, 2010
Ombudsman. In short, what the Office of the Ombudsman would wish to do x-----------------------------------------------------------------------------------------x
is to fish for additional evidence to formally charge Amado Lagdameo, et. al.,
with the Sandiganbayan. Clearly, there was no pending case in court which
would warrant the opening of the bank account for inspection. DECISION
Zones of privacy are recognized and protected in our laws. The Civil
Code provides that "[e]very person shall respect the dignity, personality,
privacy and peace of mind of his neighbors and other persons" and punishes PERALTA, J.:
as actionable torts several acts for meddling and prying into the privacy of
another. It also holds a public officer or employee or any private individual
liable for damages for any violation of the rights and liberties of another This is a Petition for Review under Rule 45 of the Rules of Court
person, and recognizes the privacy of letters and other private assailing the Decision of the Court of Appeals in CA-G.R. SP No.
communications. The Revised Penal Code makes a crime of the violation of 87600[1] dated April 20, 2005, which reversed and set aside the September
secrets by an officer, the revelation of trade and industrial secrets, and 13, 2004[2] and November 5, 2004[3] Orders issued by the Regional Trial
trespass to dwelling. Invasion of privacy is an offense in special laws like the Court of Manila, Branch 36[4] in Criminal Case No. 02-202158 for qualified
Anti-Wiretapping Law, the Secrecy of Bank Deposits Act, and the theft. The said orders, in turn, respectively denied the motion filed by
Intellectual Property Code.[28] herein respondent Sally Go for the suppression of the testimonial and
documentary evidence relative to a Security Bank account, and denied
IN VIEW WHEREOF, we GRANT the petition. We order the reconsideration.
Ombudsman to cease and desist from requiring Union Bank Manager
Lourdes T. Marquez, or anyone in her place to comply with the order dated The basic antecedents are no longer disputed.
October 14, 1998, and similar orders. No costs.

SO ORDERED. Petitioner, the BSB Group, Inc., is a duly organized domestic corporation
presided by its herein representative, Ricardo Bangayan
BSB GROUP, INC., represented by its President, G.R. No. 168644 (Bangayan). Respondent Sally Go, alternatively referred to as Sally Sia Go
Mr. RICARDO BANGAYAN, and Sally Go-Bangayan, is Bangayans wife, who was employed in the

BANKING LAW (18 October 2018 Cases) Page 19

company as a cashier, and was engaged, among others, to receive and
account for the payments made by the various customers of the company.
In 2002, Bangayan filed with the Manila Prosecutors Office a
complaint for estafa and/or qualified theft[5] against respondent, alleging that
several checks[6] representing the aggregate amount of P1,534,135.50
issued by the companys customers in payment of their obligation were,
instead of being turned over to the companys coffers, indorsed by
respondent who deposited the same to her personal banking account
maintained at Security Bank and Trust Company (Security Bank) in Divisoria,
Manila Branch.[7] Upon a finding that the evidence adduced was
uncontroverted, the assistant city prosecutor recommended the filing of the
Information for qualified theft against respondent.[8]
Accordingly, respondent was charged before the Regional Trial
Court of Manila, Branch 36, in an Information, the inculpatory portion of
which reads:
That in or about or sometime during the period
comprised (sic) between January 1988 [and] October 1989,
inclusive, in the City of Manila, Philippines, the said accused
did then and there willfully, unlawfully and feloniously with
intent [to] gain and without the knowledge and consent of the
owner thereof, take, steal and carry away cash money in the
total amount of P1,534,135.50 belonging to BSB GROUP
OF COMPANIES represented by RICARDO BANGAYAN, to
the damage and prejudice of said owner in the aforesaid
amount of P1,534,135.50, Philippine currency.
That in the commission of the said offense, said
accused acted with grave abuse of confidence, being then
employed as cashier by said complainant at the time of the
commission of the said offense and as such she was
entrusted with the said amount of money.
Contrary to law.[9]
BANKING LAW (18 October 2018 Cases)
Respondent entered a negative plea when arraigned.[10] The trial ensued. On
the premise that respondent had allegedly encashed the subject checks and
deposited the corresponding amounts thereof to her personal banking
account, the prosecution moved for the issuance of subpoena duces tecum
/ad testificandum against the respective managers or records custodians of
Security Banks Divisoria Branch, as well as of the Asian Savings Bank (now
Metropolitan Bank & Trust Co. [Metrobank]), in Jose Abad Santos, Tondo,
Manila Branch.[11] The trial court granted the motion and issued the
corresponding subpoena.[12]
Respondent filed a motion to quash the subpoena dated November
4, 2003, addressed to Metrobank, noting to the court that in the complaint-
affidavit filed with the prosecutor, there was no mention made of the said
bank account, to which respondent, in addition to the Security Bank account
identified as Account No. 01-14-006, allegedly deposited the proceeds of the
supposed checks. Interestingly, while respondent characterized the
Metrobank account as irrelevant to the case, she, in the same motion,
nevertheless waived her objection to the irrelevancy of the Security
Bank account mentioned in the same complaint-affidavit, inasmuch as she
was admittedly willing to address the allegations with respect thereto.[13]
Petitioner, opposing respondents move, argued for the relevancy of
the Metrobank account on the ground that the complaint-affidavit showed
that there were two checks which respondent allegedly deposited in an
account with the said bank.[14] To this, respondent filed a supplemental
motion to quash, invoking the absolutely confidential nature of the Metrobank
account under the provisions of Republic Act (R.A.) No. 1405.[15] The trial
court did not sustain respondent; hence, it denied the motion to quash for
lack of merit.[16]
Meanwhile, the prosecution was able to present in court the
testimony of Elenita Marasigan (Marasigan), the representative of Security
Bank. In a nutshell, Marasigans testimony sought to prove that between 1988
and 1989, respondent, while engaged as cashier at the BSB Group, Inc., was
able to run away with the checks issued to the company by its customers,
endorse the same, and credit the corresponding amounts to her personal
deposit account with Security Bank. In the course of the testimony, the
Page 20
subject checks were presented to Marasigan for identification and marking as
the same checks received by respondent, endorsed, and then deposited in
her personal account with Security Bank.[17] But before the testimony could
be completed, respondent filed a Motion to Suppress, [18] seeking the
exclusion of Marasigans testimony and accompanying documents thus far
received, bearing on the subject Security Bank account. This time
respondent invokes, in addition to irrelevancy, the privilege of confidentiality
under R.A. No. 1405.
The trial court, nevertheless, denied the motion in its September 13,
2004 Order.[19] A motion for reconsideration was subsequently filed, but it
was also denied in the Order dated November 5, 2004. [20] These two orders
are the subject of the instant case.
Aggrieved, and believing that the trial court gravely abused its discretion in
acting the way it did, respondent elevated the matter to the Court of Appeals
via a petition for certiorari under Rule 65. Finding merit in the petition, the
Court of Appeals reversed and set aside the assailed orders of the trial court
in its April 20, 2005 Decision.[21] The decision reads:
WHEREFORE, the petition is hereby
GRANTED. The assailed orders dated September 13, 2004
and November 5, 2004 are REVERSED and SET
ASIDE. The testimony of the SBTC representative is ordered
stricken from the records.
SO ORDERED.[22]
With the denial of its motion for reconsideration,[23] petitioner is now before
the Court pleading the same issues as those raised before the lower courts.
In this Petition[24] under Rule 45, petitioner averred in the main that
the Court of Appeals had seriously erred in reversing the assailed orders of
the trial court, and in effect striking out Marasigans testimony dealing with
respondents deposit account with Security Bank.[25] It asserted that apart
from the fact that the said evidence had a direct relation to the subject matter
of the case for qualified theft and, hence, brings the case under one of the
exceptions to the coverage of confidentiality under R.A. 1405. [26] Petitioner
BANKING LAW (18 October 2018 Cases)
believed that what constituted the subject matter in litigation was to be
determined by the allegations in the information and, in this respect, it
alluded to the assailed November 5, 2004 Order of the trial court, which
declared to be erroneous the limitation of the present inquiry merely to what
was contained in the information.[27]
For her part, respondent claimed that the money represented by the
Security Bank account was neither relevant nor material to the case,
because nothing in the criminal information suggested that the money therein
deposited was the subject matter of the case. She invited particular attention
to that portion of the criminal Information which averred that she has stolen
and carried away cash money in the total amount of P1,534,135.50. She
advanced the notion that the term cash money stated in the Information was
not synonymous with the checks she was purported to have stolen from
petitioner and deposited in her personal banking account. Thus, the checks
which the prosecution had Marasigan identify, as well as the testimony itself
of Marasigan, should be suppressed by the trial court at least for violating
respondents right to due process.[28] More in point, respondent opined that
admitting the testimony of Marasigan, as well as the evidence pertaining to
the Security Bank account, would violate the secrecy rule under R.A. No.
1405.[29]
In its reply, petitioner asserted the sufficiency of the allegations in the
criminal Information for qualified theft, as the same has sufficiently alleged
the elements of the offense charged. It posits that through Marasigans
testimony, the Court would be able to establish that the checks involved,
copies of which were attached to the complaint-affidavit filed with the
prosecutor, had indeed been received by respondent as cashier, but were,
thereafter, deposited by the latter to her personal account with Security
Bank. Petitioner held that the checks represented the cash money stolen by
respondent and, hence, the subject matter in this case is not only the cash
amount represented by the checks supposedly stolen by respondent, but
also the checks themselves.[30]
We derive from the conflicting advocacies of the parties that the issue for
resolution is whether the testimony of Marasigan and the accompanying
documents are irrelevant to the case, and whether they are also violative of
the absolutely confidential nature of bank deposits and, hence, excluded by
Page 21
operation of R.A. No. 1405. The question of admissibility of the evidence thus
comes to the fore. And the Court, after deliberative estimation, finds the
subject evidence to be indeed inadmissible.
Prefatorily, fundamental is the precept in all criminal prosecutions,
that the constitutive acts of the offense must be established with unwavering
exactitude and moral certainty because this is the critical and only requisite
to a finding of guilt. [31] Theft is present when a person, with intent to gain but
without violence against or intimidation of persons or force upon things, takes
the personal property of another without the latters consent. It is qualified
when, among others, and as alleged in the instant case, it is committed with
abuse of confidence.[32] The prosecution of this offense necessarily focuses
on the existence of the following elements: (a) there was taking of personal
property belonging to another; (b) the taking was done with intent to gain; (c)
the taking was done without the consent of the owner; (d) the taking was
done without violence against or intimidation of persons or force upon things;
and (e) it was done with abuse of confidence.[33] In turn, whether these
elements concur in a way that overcomes the presumption of guiltlessness,
is a question that must pass the test of relevancy and competency in
accordance with Section 3[34] Rule 128 of the Rules of Court.
Thus, whether these pieces of evidence sought to be suppressed in
this case the testimony of Marasigan, as well as the checks purported to
have been stolen and deposited in respondents Security Bank account
are relevant, is to be addressed by considering whether they have such
direct relation to the fact in issue as to induce belief in its existence or non-
existence; or whether they relate collaterally to a fact from which, by process
of logic, an inference may be made as to the existence or non-existence of
the fact in issue.[35]
The fact in issue appears to be that respondent has taken away cash
in the amount of P1,534,135.50 from the coffers of petitioner. In support of
this allegation, petitioner seeks to establish the existence of the elemental act
of taking by adducing evidence that respondent, at several times between
1988 and 1989, deposited some of its checks to her personal account with
Security Bank. Petitioner addresses the incongruence between the allegation
of theft of cash in the Information, on the one hand, and the evidence that
BANKING LAW (18 October 2018 Cases)
respondent had first stolen the checks and deposited the same in her
banking account, on the other hand, by impressing upon the Court that there
obtains no difference between cash and check for purposes of prosecuting
respondent for theft of cash. Petitioner is mistaken.
In theft, the act of unlawful taking connotes deprivation of personal
property of one by another with intent to gain, and it is immaterial that the
offender is able or unable to freely dispose of the property stolen because
the deprivation relative to the offended party has already ensued from such
act of execution.[36] The allegation of theft of money, hence, necessitates that
evidence presented must have a tendency to prove that the offender has
unlawfully taken money belonging to another. Interestingly, petitioner has
taken pains in attempting to draw a connection between the evidence subject
of the instant review, and the allegation of theft in the Information by claiming
that respondent had fraudulently deposited the checks in her own name. But
this line of argument works more prejudice than favor, because it in effect,
seeks to establish the commission, not of theft, but rather of some other
crime probably estafa.
Moreover, that there is no difference between cash and check is true
in other instances. In estafa by conversion, for instance, whether the thing
converted is cash or check, is immaterial in relation to the formal allegation in
an information for that offense; a check, after all, while not regarded as legal
tender, is normally accepted under commercial usage as a substitute for
cash, and the credit it represents in stated monetary value is properly
capable of appropriation. And it is in this respect that what the offender does
with the check subsequent to the act of unlawfully taking it becomes material
inasmuch as this offense is a continuing one.[37] In other words, in pursuing a
case for this offense, the prosecution may establish its cause by the
presentation of the checks involved. These checks would then constitute the
best evidence to establish their contents and to prove the elemental act of
conversion in support of the proposition that the offender has indeed
indorsed the same in his own name.[38]
Theft, however, is not of such character. Thus, for our purposes, as
the Information in this case accuses respondent of having stolen cash, proof
tending to establish that respondent has actualized her criminal intent by
Page 22
indorsing the checks and depositing the proceeds thereof in her personal
account, becomes not only irrelevant but also immaterial and, on that score,
inadmissible in evidence.
We now address the issue of whether the admission of Marasigans
testimony on the particulars of respondents account with Security Bank, as
well as of the corresponding evidence of the checks allegedly deposited in
said account, constitutes an unallowable inquiry under R.A. 1405.
It is conceded that while the fundamental law has not bothered with the
triviality of specifically addressing privacy rights relative to banking accounts,
there, nevertheless, exists in our jurisdiction a legitimate expectation of
privacy governing such accounts. The source of this right of expectation is
statutory, and it is found in R.A. No. 1405,[39] otherwise known as the Bank
Secrecy Act of 1955. [40]
R.A. No. 1405 has two allied purposes. It hopes to discourage
private hoarding and at the same time encourage the people to deposit their
money in banking institutions, so that it may be utilized by way of authorized
loans and thereby assist in economic development. [41] Owing to this piece of
legislation, the confidentiality of bank deposits remains to be a basic state
policy in the Philippines.[42] Section 2 of the law institutionalized this policy by
characterizing as absolutely confidential in general all deposits of whatever
nature with banks and other financial institutions in the country. It declares:
Section 2. All deposits of whatever nature with
banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the
Philippines, its political subdivisions and its instrumentalities,
are hereby considered as of an absolutely confidential
nature and may not be examined, inquired or looked into by
any person, government official, bureau or
office, except upon written permission of the depositor, or in
cases of impeachment, or upon order of a competent court
in cases of bribery or dereliction of duty of public officials, or
in cases where the money deposited or invested is the
subject matter of the litigation.
BANKING LAW (18 October 2018 Cases)
Subsequent statutory enactments[43] have expanded the list of
exceptions to this policy yet the secrecy of bank deposits still lies as the
general rule, falling as it does within the legally recognized zones of
privacy.[44] There is, in fact, much disfavor to construing these primary and
supplemental exceptions in a manner that would authorize unbridled
discretion, whether governmental or otherwise, in utilizing these exceptions
as authority for unwarranted inquiry into bank accounts. It is then perceivable
that the present legal order is obliged to conserve the absolutely confidential
nature of bank deposits.[45]
The measure of protection afforded by the law has been explained
in China Banking Corporation v. Ortega.[46] That case principally addressed
the issue of whether the prohibition against an examination of bank deposits
precludes garnishment in satisfaction of a judgment. Ruling on that issue in
the negative, the Court found guidance in the relevant portions of the
legislative deliberations on Senate Bill No. 351 and House Bill No. 3977,
which later became the Bank Secrecy Act, and it held that the absolute
confidentiality rule in R.A. No. 1405 actually aims at protection from
unwarranted inquiry or investigation if the purpose of such inquiry or
investigation is merely to determine the existence and nature, as well as the
amount of the deposit in any given bank account. Thus,
x x x The lower court did not order an examination of or
inquiry into the deposit of B&B Forest Development
Corporation, as contemplated in the law. It merely required
Tan Kim Liong to inform the court whether or not the
defendant B&B Forest Development Corporation had a
deposit in the China Banking Corporation only for purposes
of the garnishment issued by it, so that the bank would hold
the same intact and not allow any withdrawal until further
order. It will be noted from the discussion of the conference
committee report on Senate Bill No. 351 and House Bill No.
3977which later became Republic Act No. 1405, that it was
not the intention of the lawmakers to place banks deposits
beyond the reach of execution to satisfy a final judgment.
Thus:
Page 23
 x x x Mr. Marcos: Now, for purposes of the taxation, then this is fully covered by the
record, I should like the Chairman of the law. x x x
Committee on Ways and Means to clarify
this further. Suppose an individual has a tax Mr. Marcos: The law prohibits a
case. He is being held liable by the Bureau mere investigation into the existence and
of Internal Revenue [(BIR)] or, the amount of the deposit.
say, P1,000.00 worth of tax liability, and
because of this the deposit of this individual Mr. Ramos: Into the very nature of
[has been] attached by the [BIR]. such deposit. x x x[47]

Mr. Ramos: The attachment will only

apply after the court has pronounced In taking exclusion from the coverage of the confidentiality rule,
sentence declaring the liability of such petitioner in the instant case posits that the account maintained by
person. But where the primary aim is to respondent with Security Bank contains the proceeds of the checks that she
determine whether he has a bank deposit has fraudulently appropriated to herself and, thus, falls under one of the
in order to bring about a proper exceptions in Section 2 of R.A. No. 1405 that the money kept in said
assessment by the [BIR], such inquiry is
account is the subject matter in litigation. To highlight this thesis, petitioner
not allowed by this proposed law.
avers, citing Mathay v. Consolidated Bank and Trust Co.,[48] that the subject
matter of the action refers to the physical facts; the things real or personal;
Mr. Marcos: But under our rules of
the money, lands, chattels and the like, in relation to which the suit is
procedure and under the Civil Code, the
prosecuted, which in the instant case should refer to the money deposited in
attachment or garnishment of money
the Security Bank account.[49] On the surface, however, it seems that
deposited is allowed. Let us assume for
petitioners theory is valid to a point, yet a deeper treatment tends to show
instance that there is a preliminary
that it has argued quite off-tangentially. This, because, while Mathay did
attachment which is for garnishment or for
explain what the subject matter of an action is, it nevertheless did so only to
holding liable all moneys deposited
determine whether the class suit in that case was properly brought to the
belonging to a certain individual, but such
court.
attachment or garnishment will bring out into
the open the value of such deposit. Is that
What indeed constitutes the subject matter in litigation in relation to
prohibited by... the law?
Section 2 of R.A. No. 1405 has been pointedly and amply addressed
in Union Bank of the Philippines v. Court of Appeals,[50] in which the Court
Mr. Ramos: It is only prohibited to
noted that the inquiry into bank deposits allowable under R.A. No. 1405 must
the extent that the inquiry... is made only for
be premised on the fact that the money deposited in the account is itself the
the purpose of satisfying a tax liability
subject of the action.[51] Given this perspective, we deduce that the subject
already declared for the protection of the
matter of the action in the case at bar is to be determined from the indictment
right in favor of the government; but when
that charges respondent with the offense, and not from the evidence sought
the object is merely to inquire whether he
by the prosecution to be admitted into the records. In the criminal Information
has a deposit or not for purposes of

BANKING LAW (18 October 2018 Cases) Page 24

filed with the trial court, respondent, unqualifiedly and in plain language, is
charged with qualified theft by abusing petitioners trust and confidence and
stealing cash in the amount of P1,534,135.50. The said Information makes
no factual allegation that in some material way involves the checks subject of
the testimonial and documentary evidence sought to be suppressed. Neither
do the allegations in said Information make mention of the supposed bank
account in which the funds represented by the checks have allegedly been
kept.
In other words, it can hardly be inferred from the indictment itself that
the Security Bank account is the ostensible subject of the prosecutions
inquiry. Without needlessly expanding the scope of what is plainly alleged in
the Information, the subject matter of the action in this case is the money
amounting to P1,534,135.50 alleged to have been stolen by respondent, and
not the money equivalent of the checks which are sought to be admitted in
evidence. Thus, it is that, which the prosecution is bound to prove with its
evidence, and no other.
A final note. In any given jurisdiction where the right of privacy
extends its scope to include an individuals financial privacy rights and
personal financial matters, there is an intermediate or heightened scrutiny
given by courts and legislators to laws infringing such rights. [52] Should there
be doubts in upholding the absolutely confidential nature of bank deposits
against affirming the authority to inquire into such accounts, then such
doubts must be resolved in favor of the former. This attitude persists unless
congress lifts its finger to reverse the general state policy respecting the
absolutely confidential nature of bank deposits.[53]
WHEREFORE, the petition is DENIED. The Decision of the Court of
Appeals in CA-G.R. SP No. 87600 dated April 20, 2005, reversing the
September 13, 2004 and November 5, 2004 Orders of the Regional Trial
Court of Manila, Branch 36 in Criminal Case No. 02-202158, is AFFIRMED.
SO ORDERED.

It comes clear that the admission of testimonial and documentary B.

evidence relative to respondents Security Bank account serves no other
purpose than to establish the existence of such account, its nature and the FIRST DIVISION
amount kept in it. It constitutes an attempt by the prosecution at an
impermissible inquiry into a bank deposit account the privacy and GOVERNMENT SERVICE G.R. No. 189206
confidentiality of which is protected by law. On this score alone, the objection INSURANCE SYSTEM,
posed by respondent in her motion to suppress should have indeed put an Petitioner,
end to the controversy at the very first instance it was raised before the trial
court. Present:

In sum, we hold that the testimony of Marasigan on the particulars of CORONA, C.J.,
respondents supposed bank account with Security Bank and the -versus- Chairperson
documentary evidence represented by the checks adduced in support VELASCO, JR.,
thereof, are not only incompetent for being excluded by operation of R.A. No. LEONARDO-DE CASTRO,
1405. They are likewise irrelevant to the case, inasmuch as they do not DEL CASTILLO, and
appear to have any logical and reasonable connection to the prosecution of PEREZ, JJ.
respondent for qualified theft. We find full merit in and affirm respondents THE HONORABLE 15TH DIVISION OF
objection to the evidence of the prosecution. The Court of Appeals was, THE COURT OF APPEALS and
therefore, correct in reversing the assailed orders of the trial court. INDUSTRIAL BANK OF KOREA,

BANKING LAW (18 October 2018 Cases) Page 25

TONG YANG MERCHANT BANK, SURETYBOND
HANAREUM BANKING CORP., LAND
BANK OF THE PHILIPPINES, KNOW ALL MEN BY THESE PRESENTS:
WESTMONT BANK and DOMSAT
HOLDINGS, INC., Promulgated: That we, DOMSAT HOLDINGS, INC., represented
Respondents. by its President as PRINCIPAL, and the GOVERNMENT
June 8, 2011 SERVICE INSURANCE SYSTEM, as Administrator of the
x ----------------------------------------------------------------------------------------x GENERAL INSURANCE FUND, a corporation duly
DECISION organized and existing under and by virtue of the laws of the
Philippines, with principal office in the City of Pasay, Metro
PEREZ, J.: Manila, Philippines as SURETY, are held and firmly bound
unto the OBLIGEES: LAND BANK OF THE PHILIPPINES,
The subject of this petition for certiorari is the Decision[1] of the Court 7th Floor, Land Bank Bldg. IV. 313 Sen. Gil J. Puyat Avenue,
of Appeals in CA-G.R. SP No. 82647 allowing the quashal by the Regional Makati City; WESTMONT BANK, 411 Quintin Paredes St.,
Trial Court (RTC) of Makati of a subpoena for the production of bank Binondo, Manila: TONG YANG MERCHANT BANK, 185, 2-
ledger. This case is incident to Civil Case No. 99-1853, which is the main Ka, Ulchi-ro, Chungk-ku, Seoul, Korea; INDUSTRIAL BANK
case for collection of sum of money with damages filed by Industrial Bank of OF KOREA, 50, 2-Ga, Ulchi-ro, Chung-gu, Seoul, Korea;
Korea, Tong Yang Merchant Bank, First Merchant Banking Corporation, and FIRST MERCHANT BANKING CORPORATION, 199-
Land Bank of the Philippines, and Westmont Bank (now United Overseas 40, 2-Ga, Euliji-ro, Jung-gu, Seoul, Korea, in the sum, of US
Bank), collectively known as the Banks against Domsat Holdings, Inc. $ ELEVEN MILLION DOLLARS ($11,000,000.00) for the
(Domsat) and the Government Service Insurance System (GSIS). Said case payment of which sum, well and truly to be made, we bind
stemmed from a Loan Agreement,[2] whereby the Banks agreed to lend ourselves, our heirs, executors, administrators, successors
United States (U.S.) $11 Million to Domsat for the purpose of financing the and assigns, jointly and severally, firmly by these presents.
lease and/or purchase of a Gorizon Satellite from the International
Organization of Space Communications (Intersputnik).[3] THE CONDITIONS OF THE OBLIGATION ARE AS
FOLLOWS:
The controversy originated from a surety agreement by which
Domsat obtained a surety bond from GSIS to secure the payment of the loan WHEREAS, the above bounden PRINCIPAL, on the
from the Banks. We quote the terms of the Surety Bond in its entirety. [4] 12th day of December, 1996 entered into a contract
agreement with the aforementioned OBLIGEES to fully and
Republic of the Philippines faithfully
GOVERNMENT SERVICE INSURANCE SYSTEM
GENERAL INSURANCE FUND Guarantee the repayment of the principal
GSIS Headquarters, Financial Center and interest on the loan granted the
Roxas Boulevard, Pasay City PRINCIPAL to be used for the financing of
the two (2) year lease of a Russian Satellite
G(16) GIF Bond 027461 from INTERSPUTNIK, in accordance with

BANKING LAW (18 October 2018 Cases) Page 26

 the terms and conditions of the credit
package entered into by the parties.
This bond shall remain valid and effective
until the loan including interest has been
fully paid and liquidated,
a copy of which contract/agreement is hereto attached and
made part hereof;
WHEREAS, the aforementioned OBLIGEES require
said PRINCIPAL to give a good and sufficient bond in the
above stated sum to secure the full and faithful performance
on his part of said contract/agreement.
NOW, THEREFORE, if the PRINCIPAL shall well and truly
perform and fulfill all the undertakings, covenants, terms,
conditions, and agreements stipulated in said
contract/agreements, then this obligation shall be null and
void; otherwise, it shall remain in full force and effect.
WITNESS OUR HANDS AND SEALS this 13th day of
December 1996 at Pasay City, Philippines.
DOMSAT HOLDINGS, INC GOVERNMENT SERVICE
INSURANCE
Principal SYSTEM
General Insurance Fund
By: By:
CAPT. RODRIGO A. SILVERIO AMALIO A. MALLARI
President Senior Vice-President
General Insurance Group
When Domsat failed to pay the loan, GSIS refused to comply with its
obligation reasoning that Domsat did not use the loan proceeds for the
payment of rental for the satellite. GSIS alleged that Domsat, with Westmont
Bank as the conduit, transferred the U.S. $11 Million loan proceeds from the
BANKING LAW (18 October 2018 Cases)
Industrial Bank of Korea to Citibank New York account of Westmont Bank
and from there to the Binondo Branch of Westmont Bank.[5] The Banks filed a
complaint before the RTC of Makati against Domsat and GSIS.
In the course of the hearing, GSIS requested for the issuance of
a subpoena duces tecum to the custodian of records of Westmont Bank to
produce the following documents:
1. Ledger covering the account of DOMSAT
Holdings, Inc. with Westmont Bank (now United Overseas
Bank), any and all documents, records, files, books, deeds,
papers, notes and other data and materials relating to the
account or transactions of DOMSAT Holdings, Inc. with or
through the Westmont Bank (now United Overseas Bank) for
the period January 1997 to December 2002, in his/her direct
or indirect possession, custody or control (whether actual or
constructive), whether in his/her capacity as Custodian of
Records or otherwise;
2. All applications for cashiers/ managers checks
and bank transfers funded by the account of DOMSAT
Holdings, Inc. with or through the Westmont Bank (now
United Overseas Bank) for the period January 1997 to
December 2002, and all other data and materials covering
said applications, in his/her direct or indirect possession,
custody or control (whether actual or constructive), whether
in his/her capacity as Custodian of Records or otherwise;
3. Ledger covering the account of Philippine Agila
Satellite, Inc. with Westmont Bank (now United Overseas
Bank), any and all documents, records, files, books, deeds,
papers, notes and other data and materials relating to the
account or transactions of Philippine Agila Satellite, Inc. with
or through the Westmont bank (now United Overseas Bank)
for the period January 1997 to December 2002, in his/her
direct or indirect possession, custody or control (whether
actual or constructive), whether in his/her capacity as
Custodian of Records or otherwise;
Page 27
 4. All applications for cashiers/managers checks
funded by the account of Philippine Agila Satellite, Inc. with
or through the Westmont Bank (now United Overseas Bank)
for the period January 1997 to December 2002, and all other
data and materials covering said applications, in his/her
direct or indirect possession, custody or control (whether
actual or constructive), whether in his/her capacity as
Custodian of Records or otherwise.[6]
The RTC issued a subpoena decus tecum on 21 November
2002.[7] A motion to quash was filed by the banks on three grounds: 1)
the subpoena is unreasonable, oppressive and does not establish the
relevance of the documents sought; 2) request for the documents will violate
the Law on Secrecy of Bank Deposits; and 3) GSIS failed to advance the
reasonable cost of production of the documents.[8] Domsat also joined the
banks motion to quash through its Manifestation/Comment. [9] On 9 April
2003, the RTC issued an Order denying the motion to quash for lack of
merit. We quote the pertinent portion of the Order, thus:
After a careful consideration of the arguments of the
parties, the Court did not find merit in the motion.
The serious objection appears to be that the
subpoena is violative of the Law on Secrecy of Bank
Deposit, as amended. The law declares bank deposits to be
absolutely confidential except: x x x (6) In cases where the
money deposited or invested is the subject matter of the
litigation.
The case at bench is for the collection of a sum of
money from defendants that obtained a loan from the
plaintiff. The loan was secured by defendant GSIS which
was the surety. It is the contention of defendant GSIS that
the proceeds of the loan was deviated to purposes other
than to what the loan was extended. The quashal of the
subpoena would deny defendant GSIS its right to prove its
defenses.
BANKING LAW (18 October 2018 Cases)
WHEREFORE, for lack of merit the motion is
DENIED.[10]
On 26 June 2003, another Order was issued by the RTC denying the motion
for reconsideration filed by the banks.[11] On 1 September 2003 however,
the trial court granted the second motion for reconsideration filed by the
banks. The previous subpoenas issued were consequently quashed.[12] The
trial court invoked the ruling in Intengan v. Court of Appeals,[13] where it was
ruled that foreign currency deposits are absolutely confidential and may be
examined only when there is a written permission from the depositor. The
motion for reconsideration filed by GSIS was denied on 30 December 2003.
Hence, these assailed orders are the subject of the petition
for certiorari before the Court of Appeals. GSIS raised the following
arguments in support of its petition:
I.
Respondent Judge acted with grave abuse of discretion
when it favorably considered respondent banks (second)
Motion for Reconsideration dated July 9, 2003 despite the
fact that it did not contain a notice of hearing and was
therefore a mere scrap of paper.
II.
Respondent judge capriciously and arbitrarily ignored
Section 2 of the Foreign Currency Deposit Act (RA 6426) in
ruling in his Orders dated September 1 and December 30,
2003 that the US$11,000,000.00 deposit in the account of
respondent Domsat in Westmont Bank is covered by the
secrecy of bank deposit.
III.
Since both respondent banks and respondent Domsat have
disclosed during the trial the US$11,000,000.00 deposit, it is
no longer secret and confidential, and petitioner GSIS right
Page 28
 to inquire into what happened to such deposit can not be
suppressed.[14]
The Court of Appeals addressed these issues in seriatim.
The Court of Appeals resorted to a liberal interpretation of the rules to avoid
miscarriage of justice when it allowed the filing and acceptance of the second
motion for reconsideration. The appellate court also underscored the fact that
GSIS did not raise the defect of lack of notice in its opposition to the second
motion for reconsideration. The appellate court held that failure to timely
object to the admission of a defective motion is considered a waiver of its
right to do so.
The Court of Appeals declared that Domsats deposit in Westmont Bank is
covered by Republic Act No. 6426 or the Bank Secrecy Law. We quote the
pertinent portion of the Decision:
It is our considered opinion that Domsats deposit of
$11,000,000.00 in Westmont Bank is covered by the Bank
Secrecy Law, as such it cannot be examined, inquired or
looked into without the written consent of its owner. The
ruling in Van Twest vs. Court of Appeals was rendered
during the effectivity of CB Circular No. 960, Series of 1983,
under Sec. 102 thereof, transfer to foreign currency deposit
account or receipt from another foreign currency deposit
account, whether for payment of legitimate obligation or
otherwise, are not eligible for deposit under the System.
CB Circular No. 960 has since been superseded by CB
Circular 1318 and later by CB Circular 1389. Section 102 of
Circular 960 has not been re-enacted in the later
Circulars. What is applicable now is the decision in Intengan
vs. Court of Appeals where the Supreme Court has ruled
that the under R.A. 6426 there is only a single exception to
the secrecy of foreign currency deposits, that is, disclosure is
allowed only upon the written permission of the
depositor. Petitioner, therefore, had inappropriately invoked
the provisions of Central Bank (CB) Circular Nos. 343 which
BANKING LAW (18 October 2018 Cases)
has already been superseded by more recently issued CB
Circulars. CB Circular 343 requires the surrender to the
banking system of foreign exchange, including proceeds of
foreign borrowings. This requirement, however, can no
longer be found in later circulars.
In its Reply to respondent banks comment, petitioner
appears to have conceded that what is applicable in this
case is CB Circular 1389. Obviously, under CB 1389,
proceeds of foreign borrowings are no longer required to be
surrendered to the banking system.
Undaunted, petitioner now argues that paragraph 2, Section
27 of CB Circular 1389 is applicable because Domsats
$11,000,000.00 loan from respondent banks was intended to
be paid to a foreign supplier Intersputnik and, therefore,
should have been paid directly to Intersputnik and not
deposited into Westmont Bank. The fact that it was
deposited to the local bank Westmont Bank, petitioner
claims violates the circular and makes the deposit lose its
confidentiality status under R.A. 6426. However, a reading of
the entire Section 27 of CB Circular 1389 reveals that the
portion quoted by the petitioner refers only to the
procedure/conditions of drawdown for service of debts using
foreign exchange. The above-said provision relied upon by
the petitioner does not in any manner prescribe the
conditions before any foreign currency deposit can be
entitled to the confidentiality provisions of R.A. 6426.[15]
Anent the third issue, the Court of Appeals ruled that the testimony of
the incumbent president of Westmont Bank is not the written consent
contemplated by Republic Act No. 6426.
The Court of Appeals however upheld the issuance of subpoena praying for
the production of applications for cashiers or managers checks by Domsat
through Westmont Bank, as well as a copy of an Agreement and/or Contract
and/or Memorandum between Domsat and/or Philippine Agila Satellite and
Intersputnik for the acquisition and/or lease of a Gorizon Satellite. The
appellate court believed that the production of these documents does not
involve the examination of Domsats account since it will never be known how
Page 29
much money was deposited into it or withdrawn therefrom and how much This Court notes that GSIS filed a petition for certiorari under Rule 65
remains therein. of the Rules of Court to assail the Decision and Resolution of the Court of
Appeals. Petitioner availed of the improper remedy as the appeal from a final
On 29 February 2008, the Court of Appeals rendered the assailed Decision, disposition of the Court of Appeals is a petition for review under Rule 45 and
the decretal portion of which reads: not a special civil action under Rule 65. [18] Certiorari under Rule 65 lies only
when there is no appeal, nor plain, speedy and adequate remedy in the
WHEREFORE, the petition is partially ordinary course of law. That action is not a substitute for a lost appeal in
GRANTED. Accordingly, the assailed Order dated general; it is not allowed when a party to a case fails to appeal a judgment to
December 30, 2003 is hereby modified in that the quashal of the proper forum.[19] Where an appeal is available, certiorari will not prosper
the subpoena for the production of Domsats bank ledger in even if the ground therefor is grave abuse of discretion. Accordingly, when a
Westmont Bank is upheld while respondent court is hereby party adopts an improper remedy, his petition may be dismissed outright. [20]
ordered to issue subpoena duces tecum ad
testificandum directing the records custodian of Westmont Yet, even if this procedural infirmity is discarded for the broader
Bank to bring to court the following documents: interest of justice, the petition sorely lacks merit.

a) applications for cashiers or managers checks by
respondent Domsat through Westmont Bank from
January 1997 to December 2002;
b) bank transfers by respondent Domsat through
Westmont Bank from January 1997 to December 2002;
and
c) copy of an agreement and/or contract and/or
memorandum between respondent Domsat and/or
Philippine Agila Satellite and Intersputnik for the
acquisition and/or lease of a Gorizon satellite.
No pronouncement as to costs.[16]
GSIS filed a motion for reconsideration which the Court of Appeals
denied on 19 June 2009. Thus, the instant petition ascribing grave abuse of
discretion on the part of the Court of Appeals in ruling that Domsats deposit
with Westmont Bank cannot be examined and in finding that the banks
second motion for reconsideration in Civil Case No. 99-1853 is procedurally
acceptable.[17]
GSIS insists that Domsats deposit with Westmont Bank can be
examined and inquired into. It anchored its argument on Republic Act No.
1405 or the Law on Secrecy of Bank Deposits, which allows the disclosure of
bank deposits in cases where the money deposited is the subject matter of
the litigation. GSIS asserts that the subject matter of the litigation is the U.S.
$11 Million obtained by Domsat from the Banks to supposedly finance the
lease of a Russian satellite from Intersputnik. Whether or not it should be
held liable as a surety for the principal amount of U.S. $11 Million, GSIS
contends, is contingent upon whether Domsat indeed utilized the amount to
lease a Russian satellite as agreed in the Surety Bond Agreement.Hence,
GSIS argues that the whereabouts of the U.S. $11 Million is the subject
matter of the case and the disclosure of bank deposits relating to the U.S.
$11 Million should be allowed.
GSIS also contends that the concerted refusal of Domsat and the
banks to divulge the whereabouts of the U.S. $11 Million will greatly
prejudice and burden the GSIS pension fund considering that a substantial
portion of this fund is earmarked every year to cover the surety bond issued.
Lastly, GSIS defends the acceptance by the trial court of the second
motion for reconsideration filed by the banks on the grounds that it is pro
forma and did not conform to the notice requirements of Section 4, Rule 15 of
the Rules of Civil Procedure.[21]

BANKING LAW (18 October 2018 Cases) Page 30


Domsat denies the allegations of GSIS and reiterates that it did not give a
categorical or affirmative written consent or permission to GSIS to examine
its bank statements with Westmont Bank.
The Banks maintain that Republic Act No. 1405 is not the applicable
law in the instant case because the Domsat deposit is a foreign currency
deposit, thus covered by Republic Act No. 6426. Under said law, only the
consent of the depositor shall serve as the exception for the disclosure of
his/her deposit.
The Banks counter the arguments of GSIS as a mere rehash of its
previous arguments before the Court of Appeals. They justify the issuance of
the subpoena as an interlocutory matter which may be reconsidered anytime
and that the pro forma rule has no application to interlocutory orders.
It appears that only GSIS appealed the ruling of the Court of Appeals
pertaining to the quashal of the subpoena for the production of Domsats
bank ledger with Westmont Bank. Since neither Domsat nor the Banks
interposed an appeal from the other portions of the decision, particularly for
the production of applications for cashiers or managers checks by Domsat
through Westmont Bank, as well as a copy of an agreement and/or contract
and/or memorandum between Domsat and/or Philippine Agila Satellite and
Intersputnik for the acquisition and/or lease of a Gorizon satellite, the latter
became final and executory.
GSIS invokes Republic Act No. 1405 to justify the issuance of
the subpoena while the banks cite Republic Act No. 6426 to oppose it. The
core issue is which of the two laws should apply in the instant case.
Republic Act No. 1405 was enacted in 1955. Section 2 thereof was
first amended by Presidential Decree No. 1792 in 1981 and further amended
by Republic Act No. 7653 in 1993. It now reads:
Section 2. All deposits of whatever nature with
banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the
Philippines, its political subdivisions and its instrumentalities,
BANKING LAW (18 October 2018 Cases)
are hereby considered as of an absolutely confidential
nature and may not be examined, inquired or looked into by
any person, government official, bureau or office, except
upon written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in cases
of bribery or dereliction of duty of public officials, or in cases
where the money deposited or invested is the subject matter
of the litigation.
Section 8 of Republic Act No. 6426, which was enacted in 1974, and
amended by Presidential Decree No. 1035 and later by Presidential Decree
No. 1246, provides:
Section 8. Secrecy of Foreign Currency Deposits.
All foreign currency deposits authorized under this Act, as
amended by Presidential Decree No. 1035, as well as
foreign currency deposits authorized under Presidential
Decree No. 1034, are hereby declared as and considered of
an absolutely confidential nature and, except upon the
written permission of the depositor, in no instance shall
foreign currency deposits be examined, inquired or looked
into by any person, government official, bureau or office
whether judicial or administrative or legislative or any other
entity whether public or private; Provided, however, That
said foreign currency deposits shall be exempt from
attachment, garnishment, or any other order or process of
any court, legislative body, government agency or any
administrative body whatsoever. (As amended by PD No.
1035, and further amended by PD No. 1246, prom. Nov. 21,
1977.)
On the one hand, Republic Act No. 1405 provides for four (4)
exceptions when records of deposits may be disclosed. These are under any
of the following instances: a) upon written permission of the depositor, (b) in
cases of impeachment, (c) upon order of a competent court in the case of
bribery or dereliction of duty of public officials or, (d) when the money
deposited or invested is the subject matter of the litigation, and e) in cases of
violation of the Anti-Money Laundering Act (AMLA), the Anti-Money
Page 31
Laundering Council (AMLC) may inquire into a bank account upon order of
any competent court.[22] On the other hand, the lone exception to the non-
disclosure of foreign currency deposits, under Republic Act No. 6426, is
disclosure upon the written permission of the depositor.
These two laws both support the confidentiality of bank deposits.
There is no conflict between them. Republic Act No. 1405 was enacted for
the purpose of giving encouragement to the people to deposit their money in
banking institutions and to discourage private hoarding so that the same may
be properly utilized by banks in authorized loans to assist in the economic
development of the country.[23] It covers all bank deposits in the Philippines
and no distinction was made between domestic and foreign deposits. Thus,
Republic Act No. 1405 is considered a law of general application. On the
other hand, Republic Act No. 6426 was intended to encourage deposits from
foreign lenders and investors.[24] It is a special law designed especially for
foreign currency deposits in the Philippines. A general law does not nullify a
specific or special law. Generalia specialibus non derogant.[25] Therefore, it is
beyond cavil that Republic Act No. 6426 applies in this case.
Intengan v. Court of Appeals affirmed the above-cited principle and
categorically declared that for foreign currency deposits, such as U.S.
dollar deposits, the applicable law is Republic Act No. 6426.
In said case, Citibank filed an action against its officers for
persuading their clients to transfer their dollar deposits to competitor
banks. Bank records, including dollar deposits of petitioners, purporting to
establish the deception practiced by the officers, were annexed to the
complaint. Petitioners now complained that Citibank violated Republic Act
No. 1405. This Court ruled that since the accounts in question are U.S. dollar
deposits, the applicable law therefore is not Republic Act No.
1405 but Republic Act No. 6426.
The above pronouncement was reiterated in China Banking
Corporation v. Court of Appeals,[26] where respondent accused his daughter
of stealing his dollar deposits with Citibank.The latter allegedly received the
checks from Citibank and deposited them to her account in China Bank. The
subject checks were presented in evidence. A subpoena was issued to
employees of China Bank to testify on these checks. China Bank argued that
BANKING LAW (18 October 2018 Cases)
the Citibank dollar checks with both respondent and/or her daughter as
payees, deposited with China Bank, may not be looked into under the law on
secrecy of foreign currency deposits. This Court highlighted the exception to
the non-disclosure of foreign currency deposits, i.e., in the case of a written
permission of the depositor, and ruled that respondent, as owner of the funds
unlawfully taken and which are undisputably now deposited with China Bank,
he has the right to inquire into the said deposits.
Applying Section 8 of Republic Act No. 6426, absent the written
permission from Domsat, Westmont Bank cannot be legally compelled to
disclose the bank deposits of Domsat, otherwise, it might expose itself to
criminal liability under the same act.[27]
The basis for the application of subpoena is to prove that the loan
intended for Domsat by the Banks and guaranteed by GSIS, was diverted to
a purpose other than that stated in the surety bond. The Banks, however,
argue that GSIS is in fact liable to them for the proper applications of the loan
proceeds and not vice-versa. We are however not prepared to rule on the
merits of this case lest we pre-empt the findings of the lower courts on the
matter.
The third issue raised by GSIS was properly addressed by the
appellate court. The appellate court maintained that the judge may, in the
exercise of his sound discretion, grant the second motion for reconsideration
despite its being pro forma. The appellate court correctly relied on
precedents where this Court set aside technicality in favor of substantive
justice.Furthermore, the appellate court accurately pointed out that petitioner
did not assail the defect of lack of notice in its opposition to the second
motion of reconsideration, thus it can be considered a waiver of the defect.
WHEREFORE, the petition for certiorari is DISMISSED. The
Decision dated 29 February 2008 and 19 June 2009 Resolution of the Court
of Appeals are hereby AFFIRMED.
SO ORDERED.
Page 32
G.R. No. 94723 August 21, 1997
KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father
and Natural Guardian, and Spouses FEDERICO N. SALVACION, JR.,
and EVELINA E. SALVACION, petitioners,
vs.
CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING
CORPORATION and GREG BARTELLI y NORTHCOTT, respondents.
TORRES, JR., J.:
In our predisposition to discover the "original intent" of a statute, courts
become the unfeeling pillars of the status quo. Ligle do we realize that
statutes or even constitutions are bundles of compromises thrown our way by
their framers. Unless we exercise vigilance, the statute may already be out of
tune and irrelevant to our day.
The petition is for declaratory relief. It prays for the following reliefs:
a.) Immediately upon the filing of this petition, an Order be
issued restraining the respondents from applying and
enforcing Section 113 of Central Bank Circular No. 960;
b.) After hearing, judgment be rendered:
1.) Declaring the respective rights and duties of petitioners
and respondents;
2.) Adjudging Section 113 of Central Bank Circular No. 960
as contrary to the provisions of the Constitution, hence void;
because its provision that "Foreign currency deposits shall
be exempt from attachment, garnishment, or any other order
or process of any court, legislative body, government agency
or any administrative body whatsoever
BANKING LAW (18 October 2018 Cases)
i.) has taken away the right of petitioners to
have the bank deposit of defendant Greg
Bartelli y Northcott garnished to satisfy the
judgment rendered in petitioners' favor in
violation of substantive due process
guaranteed by the Constitution;
ii.) has given foreign currency depositors an
undue favor or a class privilege in violation
of the equal protection clause of the
Constitution;
iii.) has provided a safe haven for criminals
like the herein respondent Greg Bartelli y
Northcott since criminals could escape civil
liability for their wrongful acts by merely
converting their money to a foreign currency
and depositing it in a foreign currency
deposit account with an authorized bank.
The antecedent facts:
On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed
and lured petitioner Karen Salvacion, then 12 years old to go with him to his
apartment. Therein, Greg Bartelli detained Karen Salvacion for four days, or
up to February 7, 1989 and was able to rape the child once on February 4,
and three times each day on February 5, 6, and 7, 1989. On February 7,
1989, after policemen and people living nearby, rescued Karen, Greg Bartelli
was arrested and detained at the Makati Municipal Jail. The policemen
recovered from Bartelli the following items: 1.) Dollar Check No. 368, Control
No. 021000678-1166111303, US 3,903.20; 2.) COCOBANK Bank Book No.
104-108758-8 (Peso Acct.); 3.) Dollar Account — China Banking Corp.,
US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine Money (P234.00)
cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear) used in seducing
the complainant.
On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya filed
against Greg Bartelli, Criminal Case No. 801 for Serious Illegal Detention and
Page 33
Criminal Cases Nos. 802, 803, 804, and 805 for four (4) counts of Rape. On
the same day, petitioners filed with the Regional Trial Court of Makati Civil
Case No. 89-3214 for damages with preliminary attachment against Greg
Bartelli. On February 24, 1989, the day there was a scheduled hearing for
Bartelli's petition for bail the latter escaped from jail.
secured by way of the writ of preliminary attachment as granted to the
plaintiff under Rule 57 of the Revised Rules of Court. The Central Bank
responded as follows:
May 26, 1989

On February 28, 1989, the court granted the fiscal's Urgent Ex-Parte Motion Ms. Erlinda S. Carolino
for the Issuance of Warrant of Arrest and Hold Departure Order. Pending the 12 Pres. Osmena Avenue
arrest of the accused Greg Bartelli y Northcott, the criminal cases were South Admiral Village
archived in an Order dated February 28, 1989. Paranaque, Metro Manila

Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated
February 22, 1989 granting the application of herein petitioners, for the
issuance of the writ of preliminary attachment. After petitioners gave Bond
No. JCL (4) 1981 by FGU Insurance Corporation in the amount of
P100,000.00, a Writ of Preliminary Attachment was issued by the trial court
on February 28, 1989.
On March 1, 1989, the Deputy Sheriff of Makati served a Notice of
Garnishment on China Banking Corporation. In a letter dated March 13, 1989
to the Deputy Sheriff of Makati, China Banking Corporation invoked Republic
Act No. 1405 as its answer to the notice of garnishment served on it. On
March 15, 1989, Deputy Sheriff of Makati Armando de Guzman sent his reply
to China Banking Corporation saying that the garnishment did not violate the
secrecy of bank deposits since the disclosure is merely incidental to a
garnishment properly and legally made by virtue of a court order which has
placed the subject deposits in custodia legis. In answer to this letter of the
Deputy Sheriff of Makati, China Banking Corporation, in a letter dated March
20, 1989, invoked Section 113 of Central Bank Circular No. 960 to the effect
that the dollar deposits or defendant Greg Bartelli are exempt from
attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body, whatsoever.
This prompted the counsel for petitioners to make an inquiry with the Central
Bank in a letter dated April 25, 1989 on whether Section 113 of CB Circular
No. 960 has any exception or whether said section has been repealed or
amended since said section has rendered nugatory the substantive right of
the plaintiff to have the claim sought to be enforced by the civil action
Dear Ms. Carolino:
This is in reply to your letter dated April 25, 1989 regarding
your inquiry on Section 113, CB Circular No. 960 (1983).
The cited provision is absolute in application. It does not
admit of any exception, nor has the same been repealed nor
amended.
The purpose of the law is to encourage dollar accounts
within the country's banking system which would help in the
development of the economy. There is no intention to render
futile the basic rights of a person as was suggested in your
subject letter. The law may be harsh as some perceive it, but
it is still the law. Compliance is, therefore, enjoined.
Very truly yours,
(SGD) AGAPITO S. FAJARDO
Director1
Meanwhile, on April 10, 1989, the trial court granted petitioners' motion for
leave to serve summons by publication in the Civil Case No. 89-3214 entitled
"Karen Salvacion, et al. vs. Greg Bartelli y Northcott." Summons with the
complaint was a published in the Manila Times once a week for three
consecutive weeks. Greg Bartelli failed to file his answer to the complaint and

BANKING LAW (18 October 2018 Cases) Page 34

was declared in default on August 7, 1989. After hearing the case ex-parte,
the court rendered judgment in favor of petitioners on March 29, 1990, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of
plaintiffs and against defendant, ordering the latter:
1. To pay plaintiff Karen E. Salvacion the amount of
P500,000.00 as moral damages;
2. To pay her parents, plaintiffs spouses Federico N.
Salvacion, Jr., and Evelina E. Salvacion the amount of
P150,000.00 each or a total of P300,000.00 for both of them;
3. To pay plaintiffs exemplary damages of P100,000.00; and
4. To pay attorney's fees in an amount equivalent to 25% of
the total amount of damages herein awarded;
5. To pay litigation expenses of P10,000.00; plus
6. Costs of the suit.
SO ORDERED.
The heinous acts of respondent Greg Bartelli which gave rise to the award
were related in graphic detail by the trial court in its decision as follows:
The defendant in this case was originally detained in the
municipal jail of Makati but was able to escape therefrom on
February 24, 1989 as per report of the Jail Warden of Makati
to the Presiding Judge, Honorable Manuel M. Cosico of the
Regional Trial Court of Makati, Branch 136, where he was
charged with four counts of Rape and Serious Illegal
Detention (Crim. Cases Nos. 802 to 805). Accordingly, upon
motion of plaintiffs, through counsel, summons was served
upon defendant by publication in the Manila Times, a
BANKING LAW (18 October 2018 Cases)
newspaper of general circulation as attested by the
Advertising Manager of the Metro Media Times, Inc., the
publisher of the said newspaper. Defendant, however, failed
to file his answer to the complaint despite the lapse of the
period of sixty (60) days from the last publication; hence,
upon motion of the plaintiffs, through counsel, defendant was
declared in default and plaintiffs were authorized to present
their evidence ex parte.
In support of the complaint, plaintiffs presented as witnesses
the minor Karen E. Salvacion, her father, Federico N.
Salvacion, Jr., a certain Joseph Aguilar and a certain
Liberato Madulio, who gave the following testimony:
Karen took her first year high school in St. Mary's Academy
in Pasay City but has recently transferred to Arellano
University for her second year.
In the afternoon of February 4, 1989, Karen was at the Plaza
Fair Makati Cinema Square, with her friend Edna Tangile
whiling away her free time. At about 3:30 p.m. while she was
finishing her snack on a concrete bench in front of Plaza
Fair, an American approached her. She was then alone
because Edna Tangile had already left, and she was about
to go home. (TSN, Aug. 15, 1989, pp. 2 to 5)
The American asked her name and introduced himself as
Greg Bartelli. He sat beside her when he talked to her. He
said he was a Math teacher and told her that he has a sister
who is a nurse in New York. His sister allegedly has a
daughter who is about Karen's age and who was with him in
his house along Kalayaan Avenue. (TSN, Aug. 15, 1989, pp.
4-5)
The American asked Karen what was her favorite subject
and she told him it's Pilipino. He then invited her to go with
him to his house where she could teach Pilipino to his niece.
Page 35
 He even gave her a stuffed toy to persuade her to teach his
niece. (Id., pp. 5-6)
They walked from Plaza Fair along Pasong Tamo, turning
right to reach the defendant's house along Kalayaan
Avenue. (Id., p. 6)
When they reached the apartment house, Karen noticed that
defendant's alleged niece was not outside the house but
defendant told her maybe his niece was inside. When Karen
did not see the alleged niece inside the house, defendant
told her maybe his niece was upstairs, and invited Karen to
go upstairs. (Id., p. 7)
Upon entering the bedroom defendant suddenly locked the
door. Karen became nervous because his niece was not
there. Defendant got a piece of cotton cord and tied Karen's
hands with it, and then he undressed her. Karen cried for
help but defendant strangled her. He took a packing tape
and he covered her mouth with it and he circled it around her
head. (Id., p. 7)
Then, defendant suddenly pushed Karen towards the bed
which was just near the door. He tied her feet and hands
spread apart to the bed posts. He knelt in front of her and
inserted his finger in her sex organ. She felt severe pain.
She tried to shout but no sound could come out because
there were tapes on her mouth. When defendant withdrew
his finger it was full of blood and Karen felt more pain after
the withdrawal of the finger. (Id., p. 8)
He then got a Johnson's Baby Oil and he applied it to his sex
organ as well as to her sex organ. After that he forced his
sex organ into her but he was not able to do so. While he
was doing it, Karen found it difficult to breathe and she
perspired a lot while feeling severe pain. She merely
presumed that he was able to insert his sex organ a little,
BANKING LAW (18 October 2018 Cases)
because she could not see. Karen could not recall how long
the defendant was in that position. (Id. pp. 8-9)
After that, he stood up and went to the bathroom to wash.
He also told Karen to take a shower and he untied her
hands. Karen could only hear the sound of the water while
the defendant, she presumed, was in the bathroom washing
his sex organ. When she took a shower more blood came
out from her. In the meantime, defendant changed the
mattress because it was full of blood. After the shower,
Karen was allowed by defendant to sleep. She fell asleep
because she got tired crying. The incident happened at
about 4:00 p.m. Karen had no way of determining the exact
time because defendant removed her watch. Defendant did
not care to give her food before she went to sleep. Karen
woke up at about 8:00 o'clock the following morning. (Id., pp.
9-10)
The following day, February 5, 1989, a Sunday, after a
breakfast of biscuit and coke at about 8:30 to 9:00 a.m.
defendant raped Karen while she was still bleeding. For
lunch, they also took biscuit and coke. She was raped for the
second time at about 12:00 to 2:00 p.m. In the evening, they
had rice for dinner which defendant had stored downstairs; it
was he who cooked the rice that is why it looks like "lugaw".
For the third time, Karen was raped again during the night.
During those three times defendant succeeded in inserting
his sex organ but she could not say whether the organ was
inserted wholly.
Karen did not see any firearm or any bladed weapon. The
defendant did not tie her hands and feet nor put a tape on
her mouth anymore but she did not cry for help for fear that
she might be killed; besides, all the windows and doors were
closed. And even if she shouted for help, nobody would hear
her. She was so afraid that if somebody would hear her and
would be able to call the police, it was still possible that as
she was still inside the house, defendant might kill her.
Page 36
 Besides, the defendant did not leave that Sunday, ruling out
her chance to call for help. At nighttime he slept with her
again. (TSN, Aug. 15, 1989, pp. 12-14)
On February 6, 1989, Monday, Karen was raped three times,
once in the morning for thirty minutes after a breakfast of
biscuits; again in the afternoon; and again in the evening. At
first, Karen did not know that there was a window because
everything was covered by a carpet, until defendant opened
the window for around fifteen minutes or less to let some air
in, and she found that the window was covered by styrofoam
and plywood. After that, he again closed the window with a
hammer and he put the styrofoam, plywood, and carpet
back. (Id., pp. 14-15)
That Monday evening, Karen had a chance to call for help,
although defendant left but kept the door closed. She went to
the bathroom and saw a small window covered by styrofoam
and she also spotted a small hole. She stepped on the bowl
and she cried for help through the hole. She cried: "Maawa
no po kayo so akin. Tulungan n'yo akong makalabas
dito. Kinidnap ako!" Somebody heard her. It was a woman,
probably a neighbor, but she got angry and said she was
"istorbo". Karen pleaded for help and the woman told her to
sleep and she will call the police. She finally fell asleep but
no policeman came. (TSN, Aug. 15, 1989, pp. 15-16)
She woke up at 6:00 o'clock the following morning, and she
saw defendant in bed, this time sleeping. She waited for him
to wake up. When he woke up, he again got some food but
he always kept the door locked. As usual, she was merely
fed with biscuit and coke. On that day, February 7, 1989, she
was again raped three times. The first at about 6:30 to 7:00
a.m., the second at about 8:30 — 9:00, and the third was
after lunch at 12:00 noon. After he had raped her for the
second time he left but only for a short while. Upon his
return, he caught her shouting for help but he did not
understand what she was shouting about. After she was
BANKING LAW (18 October 2018 Cases)
raped the third time, he left the house. (TSN, Aug. 15, 1989,
pp. 16-17) She again went to the bathroom and shouted for
help. After shouting for about five minutes, she heard many
voices. The voices were asking for her name and she gave
her name as Karen Salvacion. After a while, she heard a
voice of a woman saying they will just call the police. They
were also telling her to change her clothes. She went from
the bathroom to the room but she did not change her clothes
being afraid that should the neighbors call for the police and
the defendant see her in different clothes, he might kill her.
At that time she was wearing a T-shirt of the American
because the latter washed her dress. (Id., p. 16)
Afterwards, defendant arrived and he opened the door. He
asked her if she had asked for help because there were
many policemen outside and she denied it. He told her to
change her clothes, and she did change to the one she was
wearing on Saturday. He instructed her to tell the police that
she left home and willingly; then he went downstairs but he
locked the door. She could hear people conversing but she
could not understand what they were saying. (Id., p. 19)
When she heard the voices of many people who were
conversing downstairs, she knocked repeatedly at the door
as hard as she could. She heard somebody going upstairs
and when the door was opened, she saw a policeman. The
policeman asked her name and the reason why she was
there. She told him she was kidnapped. Downstairs, he saw
about five policemen in uniform and the defendant was
talking to them. "Nakikipag-areglo po sa mga pulis," Karen
added. "The policeman told him to just explain at the
precinct. (Id., p. 20)
They went out of the house and she saw some of her
neighbors in front of the house. They rode the car of a
certain person she called Kuya Boy together with defendant,
the policeman, and two of her neighbors whom she called
Kuya Bong Lacson and one Ate Nita. They were brought to
Page 37
 Sub-Station I and there she was investigated by a
policeman. At about 2:00 a.m., her father arrived, followed
by her mother together with some of their neighbors. Then
they were brought to the second floor of the police
headquarters. (Id., p. 21)
At the headquarters, she was asked several questions by
the investigator. The written statement she gave to the police
was marked as Exhibit A. Then they proceeded to the
National Bureau of Investigation together with the
investigator and her parents. At the NBI, a doctor, a medico-
legal officer, examined her private parts. It was already 3:00
in the early morning of the following day when they reached
the NBI. (TSN, Aug. 15, 1989, p. 22) The findings of the
medico-legal officer has been marked as Exhibit B.
She was studying at the St. Mary's Academy in Pasay City at
the time of the incident but she subsequently transferred to
Apolinario Mabini, Arellano University, situated along Taft
Avenue, because she was ashamed to be the subject of
conversation in the school. She first applied for transfer to
Jose Abad Santos, Arellano University along Taft Avenue
near the Light Rail Transit Station but she was denied
admission after she told the school the true reason for her
transfer. The reason for their denial was that they might be
implicated in the case. (TSN, Aug. 15, 1989, p. 46)
xxx xxx xxx
After the incident, Karen has changed a lot. She does not
play with her brother and sister anymore, and she is always
in a state of shock; she has been absent-minded and is
ashamed even to go out of the house. (TSN, Sept. 12, 1989,
p. 10) She appears to be restless or sad, (Id., p. 11) The
father prays for P500,000.00 moral damages for Karen for
this shocking experience which probably, she would always
recall until she reaches old age, and he is not sure if she
BANKING LAW (18 October 2018 Cases)
could ever recover from this experience. (TSN, Sept. 24,
1989, pp. 10-11)
Pursuant to an Order granting leave to publish notice of decision, said notice
was published in the Manila Bulletin once a week for three consecutive
weeks. After the lapse of fifteen (15) days from the date of the last
publication of the notice of judgment and the decision of the trial court had
become final, petitioners tried to execute on Bartelli's dollar deposit with
China Banking Corporation. Likewise, the bank invoked Section 113 of
Central Bank Circular No. 960.
Thus, petitioners decided to seek relief from this Court.
The issues raised and the arguments articulated by the parties boil down to
two:
May this Court entertain the instant petition despite the fact that original
jurisdiction in petitions for declaratory relief rests with the lower court? Should
Section 113 of Central Bank Circular No. 960 and Section 8 of R.A. 6426, as
amended by P.D. 1246, otherwise known as the Foreign Currency Deposit
Act be made applicable to a foreign transient?
Petitioners aver as heretofore stated that Section 113 of Central Bank
Circular No. 960 providing that "Foreign currency deposits shall be exempt
from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever."
should be adjudged as unconstitutional on the grounds that: 1.) it has taken
away the right of petitioners to have the bank deposit of defendant Greg
Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners'
favor in violation of substantive due process guaranteed by the Constitution;
2.) it has given foreign currency depositors an undue favor or a class
privilege in violation of the equal protection clause of the Constitution; 3.) it
has provided a safe haven for criminals like the herein respondent Greg
Bartelli y Northcott since criminals could escape civil liability for their wrongful
acts by merely converting their money to a foreign currency and depositing it
in a foreign currency deposit account with an authorized bank; and 4.) The
Monetary Board, in issuing Section 113 of Central Bank Circular No. 960 has
exceeded its delegated quasi-legislative power when it took away: a.) the
Page 38
plaintiffs substantive right to have the claim sought to be enforced by the civil
action secured by way of the writ of preliminary attachment as granted by
Rule 57 of the Revised Rules of Court; b.) the plaintiffs substantive right to
have the judgment credit satisfied by way of the writ of execution out of the
bank deposit of the judgment debtor as granted to the judgment creditor by
Rule 39 of the Revised Rules of Court, which is beyond its power to do so.
On the other hand, respondent Central Bank, in its Comment alleges that the
Monetary Board in issuing Section 113 of CB Circular No. 960 did not exceed
its power or authority because the subject Section is copied verbatim from a
portion of R.A. No. 6426 as amended by P.D. 1246. Hence, it was not the
Monetary Board that grants exemption from attachment or garnishment to
foreign currency deposits, but the law (R.A. 6426 as amended) itself; that it
does not violate the substantive due process guaranteed by the Constitution
because a.) it was based on a law; b.) the law seems to be reasonable; c.) it
is enforced according to regular methods of procedure; and d.) it applies to
all members of a class.
Expanding, the Central Bank said; that one reason for exempting the foreign
currency deposits from attachment, garnishment or any other order or
process of any court, is to assure the development and speedy growth of the
Foreign Currency Deposit System and the Offshore Banking System in the
Philippines; that another reason is to encourage the inflow of foreign
currency deposits into the banking institutions thereby placing such
institutions more in a position to properly channel the same to loans and
investments in the Philippines, thus directly contributing to the economic
development of the country; that the subject section is being enforced
according to the regular methods of procedure; and that it applies to all
foreign currency deposits made by any person and therefore does not violate
the equal protection clause of the Constitution.
Respondent Central Bank further avers that the questioned provision is
needed to promote the public interest and the general welfare; that the State
cannot just stand idly by while a considerable segment of the society suffers
from economic distress; that the State had to take some measures to
encourage economic development; and that in so doing persons and
property may be subjected to some kinds of restraints or burdens to secure
the general welfare or public interest. Respondent Central Bank also alleges
BANKING LAW (18 October 2018 Cases)
that Rule 39 and Rule 57 of the Revised Rules of Court provide that some
properties are exempted from execution/attachment especially provided by
law and R.A. No. 6426 as amended is such a law, in that it specifically
provides, among others, that foreign currency deposits shall be exempted
from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever.
For its part, respondent China Banking Corporation, aside from giving
reasons similar to that of respondent Central Bank, also stated that
respondent China Bank is not unmindful of the inhuman sufferings
experienced by the minor Karen E. Salvacion from the beastly hands of Greg
Bartelli; that it is only too willing to release the dollar deposit of Bartelli which
may perhaps partly mitigate the sufferings petitioner has undergone; but it is
restrained from doing so in view of R.A. No. 6426 and Section 113 of Central
Bank Circular No. 960; and that despite the harsh effect of these laws on
petitioners, CBC has no other alternative but to follow the same.
This Court finds the petition to be partly meritorious.
Petitioner deserves to receive the damages awarded to her by the court. But
this petition for declaratory relief can only be entertained and treated as a
petition for mandamus to require respondents to honor and comply with the
writ of execution in Civil Case No. 89-3214.
This Court has no original and exclusive jurisdiction over a petition for
declaratory relief.2 However, exceptions to this rule have been recognized.
Thus, where the petition has far-reaching implications and raises questions
that should be resolved, it may be treated as one for mandamus.3
Here is a child, a 12-year old girl, who in her belief that all Americans are
good and in her gesture of kindness by teaching his alleged niece the Filipino
language as requested by the American, trustingly went with said stranger to
his apartment, and there she was raped by said American tourist Greg
Bartelli. Not once, but ten times. She was detained therein for four (4) days.
This American tourist was able to escape from the jail and avoid punishment.
On the other hand, the child, having received a favorable judgment in the
Civil Case for damages in the amount of more than P1,000,000.00, which
amount could alleviate the humiliation, anxiety, and besmirched reputation
Page 39
she had suffered and may continue to suffer for a long, long time; and
knowing that this person who had wronged her has the money, could not,
however get the award of damages because of this unreasonable law. This
questioned law, therefore makes futile the favorable judgment and award of
damages that she and her parents fully deserve. As stated by the trial court
in its decision,
Indeed, after hearing the testimony of Karen, the Court
believes that it was undoubtedly a shocking and traumatic
experience she had undergone which could haunt her mind
for a long, long time, the mere recall of which could make
her feel so humiliated, as in fact she had been actually
humiliated once when she was refused admission at the
Abad Santos High School, Arellano University, where she
sought to transfer from another school, simply because the
school authorities of the said High School learned about
what happened to her and allegedly feared that they might
be implicated in the case.
xxx xxx xxx
The reason for imposing exemplary or corrective damages is
due to the wanton and bestial manner defendant had
committed the acts of rape during a period of serious illegal
detention of his hapless victim, the minor Karen Salvacion
whose only fault was in her being so naive and credulous to
believe easily that defendant, an American national, could
not have such a bestial desire on her nor capable of
committing such a heinous crime. Being only 12 years old
when that unfortunate incident happened, she has never
heard of an old Filipino adage that in every forest there is a
snake, . . . .4
If Karen's sad fate had happened to anybody's own kin, it would be difficult
for him to fathom how the incentive for foreign currency deposit could be
more important than his child's rights to said award of damages; in this case,
the victim's claim for damages from this alien who had the gall to wrong a
BANKING LAW (18 October 2018 Cases)
child of tender years of a country where he is a mere visitor. This further
illustrates the flaw in the questioned provisions.
It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time
when the country's economy was in a shambles; when foreign investments
were minimal and presumably, this was the reason why said statute was
enacted. But the realities of the present times show that the country has
recovered economically; and even if not, the questioned law still denies those
entitled to due process of law for being unreasonable and oppressive. The
intention of the questioned law may be good when enacted. The law failed to
anticipate the iniquitous effects producing outright injustice and inequality
such as the case before us.
It has thus been said that —
But I also know,5 that laws and institutions must go hand in
hand with the progress of the human mind. As that becomes
more developed, more enlightened, as new discoveries are
made, new truths are disclosed and manners and opinions
change with the change of circumstances, institutions must
advance also, and keep pace with the times. . . We might as
well require a man to wear still the coat which fitted him
when a boy, as civilized society to remain ever under the
regimen of their barbarous ancestors.
In his Comment, the Solicitor General correctly opined, thus:
The present petition has far-reaching implications on the
right of a national to obtain redress for a wrong committed by
an alien who takes refuge under a law and regulation
promulgated for a purpose which does not contemplate the
application thereof envisaged by the alien. More specifically,
the petition raises the question whether the protection
against attachment, garnishment or other court process
accorded to foreign currency deposits by PD No. 1246 and
CB Circular No. 960 applies when the deposit does not
come from a lender or investor but from a mere transient or
Page 40
 tourist who is not expected to maintain the deposit in the
bank for long.
The resolution of this question is important for the protection
of nationals who are victimized in the forum by foreigners
who are merely passing through.
xxx xxx xxx
. . . Respondents China Banking Corporation and Central
Bank of the Philippines refused to honor the writ of execution
issued in Civil Case No. 89-3214 on the strength of the
following provision of Central Bank Circular No. 960:
Sec. 113. Exemption from attachment. —
Foreign currency deposits shall be exempt
from attachment, garnishment, or any other
order or process of any court, legislative
body, government agency or any
administrative body whatsoever.
Central Bank Circular No. 960 was issued pursuant to
Section 7 of Republic Act No. 6426:
Sec. 7. Rules and Regulations. The
Monetary Board of the Central Bank shall
promulgate such rules and regulations as
may be necessary to carry out the
provisions of this Act which shall take effect
after the publication of such rules and
regulations in the Official Gazette and in a
newspaper of national circulation for at least
once a week for three consecutive weeks. In
case the Central Bank promulgates new
rules and regulations decreasing the rights
of depositors, the rules and regulations at
the time the deposit was made shall govern.
BANKING LAW (18 October 2018 Cases)
The aforecited Section 113 was copied from Section 8 of
Republic Act NO. 6426, as amended by P.D. 1246, thus:
Sec. 8. Secrecy of Foreign Currency
Deposits. — All foreign currency deposits
authorized under this Act, as amended by
Presidential Decree No. 1035, as well as
foreign currency deposits authorized under
Presidential Decree No. 1034, are hereby
declared as and considered of an absolutely
confidential nature and, except upon the
written permission of the depositor, in no
instance shall such foreign currency
deposits be examined, inquired or looked
into by any person, government official,
bureau or office whether judicial or
administrative or legislative or any other
entity whether public or private: Provided,
however, that said foreign currency deposits
shall be exempt from attachment,
garnishment, or any other order or process
of any court, legislative body, government
agency or any administrative body
whatsoever.
The purpose of PD 1246 in according protection against
attachment, garnishment and other court process to foreign
currency deposits is stated in its whereases, viz.:
WHEREAS, under Republic Act No. 6426,
as amended by Presidential Decree No.
1035, certain Philippine banking institutions
and branches of foreign banks are
authorized to accept deposits in foreign
currency;
WHEREAS, under the provisions of
Presidential Decree No. 1034 authorizing
Page 41
 the establishment of an offshore banking
system in the Philippines, offshore banking
units are also authorized to receive foreign
currency deposits in certain cases;
WHEREAS, in order to assure the
development and speedy growth of the
Foreign Currency Deposit System and the
Offshore Banking System in the Philippines,
certain incentives were provided for under
the two Systems such as confidentiality of
deposits subject to certain exceptions and
tax exemptions on the interest income of
depositors who are nonresidents and are not
engaged in trade or business in the
Philippines;
WHEREAS, making absolute the protective
cloak of confidentiality over such foreign
currency deposits, exempting such deposits
from tax, and guaranteeing the vested rights
of depositors would better encourage the
inflow of foreign currency deposits into the
banking institutions authorized to accept
such deposits in the Philippines thereby
placing such institutions more in a position
to properly channel the same to loans and
investments in the Philippines, thus directly
contributing to the economic development of
the country;
Thus, one of the principal purposes of the protection
accorded to foreign currency deposits is "to assure the
development and speedy growth of the Foreign Currency
Deposit system and the Offshore Banking in the Philippines"
(3rd Whereas).
BANKING LAW (18 October 2018 Cases)
The Offshore Banking System was established by PD No.
1034. In turn, the purposes of PD No. 1034 are as follows:
WHEREAS, conditions conducive to the
establishment of an offshore banking
system, such as political stability, a growing
economy and adequate communication
facilities, among others, exist in the
Philippines;
WHEREAS, it is in the interest of developing
countries to have as wide access as
possible to the sources of capital funds for
economic development;
WHEREAS, an offshore banking system
based in the Philippines will be
advantageous and beneficial to the country
by increasing our links with foreign lenders,
facilitating the flow of desired investments
into the Philippines, creating employment
opportunities and expertise in international
finance, and contributing to the national
development effort.
WHEREAS, the geographical location,
physical and human resources, and other
positive factors provide the Philippines with
the clear potential to develop as another
financial center in Asia;
On the other hand, the Foreign Currency Deposit system
was created by PD. No. 1035. Its purposes are as follows:
WHEREAS, the establishment of an
offshore banking system in the Philippines
has been authorized under a separate
decree;
Page 42
 WHEREAS, a number of local commercial
banks, as depository bank under the Foreign
Currency Deposit Act (RA No. 6426), have
the resources and managerial competence
to more actively engage in foreign exchange
transactions and participate in the grant of
foreign currency loans to resident
corporations and firms;
WHEREAS, it is timely to expand the foreign
currency lending authority of the said
depository banks under RA 6426 and apply
to their transactions the same taxes as
would be applicable to transaction of the
proposed offshore banking units;
It is evident from the above [Whereas clauses] that the
Offshore Banking System and the Foreign Currency Deposit
System were designed to draw deposits from
foreign lenders and investors (Vide second Whereas of PD
No. 1034; third Whereas of PD No. 1035). It is these
deposits that are induced by the two laws and given
protection and incentives by them.
Obviously, the foreign currency deposit made by a transient
or a tourist is not the kind of deposit encouraged by PD Nos.
1034 and 1035 and given incentives and protection by said
laws because such depositor stays only for a few days in the
country and, therefore, will maintain his deposit in the bank
only for a short time.
Respondent Greg Bartelli, as stated, is just a tourist or a
transient. He deposited his dollars with respondent China
Banking Corporation only for safekeeping during his
temporary stay in the Philippines.
For the reasons stated above, the Solicitor General thus
submits that the dollar deposit of respondent Greg Bartelli is
BANKING LAW (18 October 2018 Cases)
not entitled to the protection of Section 113 of Central Bank
Circular No. 960 and PD No. 1246 against attachment,
garnishment or other court processes.6
In fine, the application of the law depends on the extent of its justice.
Eventually, if we rule that the questioned Section 113 of Central Bank
Circular No. 960 which exempts from attachment, garnishment, or any other
order or process of any court, legislative body, government agency or any
administrative body whatsoever, is applicable to a foreign transient, injustice
would result especially to a citizen aggrieved by a foreign guest like accused
Greg Bartelli. This would negate Article 10 of the New Civil Code which
provides that "in case of doubt in the interpretation or application of laws, it is
presumed that the lawmaking body intended right and justice to prevail.
"Ninguno non deue enriquecerse tortizeramente con dano de otro." Simply
stated, when the statute is silent or ambiguous, this is one of those
fundamental solutions that would respond to the vehement urge of
conscience. (Padilla vs. Padilla, 74 Phil. 377).
It would be unthinkable, that the questioned Section 113 of Central Bank No.
960 would be used as a device by accused Greg Bartelli for wrongdoing, and
in so doing, acquitting the guilty at the expense of the innocent.
Call it what it may — but is there no conflict of legal policy here? Dollar
against Peso? Upholding the final and executory judgment of the lower court
against the Central Bank Circular protecting the foreign depositor? Shielding
or protecting the dollar deposit of a transient alien depositor against injustice
to a national and victim of a crime? This situation calls for fairness against
legal tyranny.
We definitely cannot have both ways and rest in the belief that we have
served the ends of justice.
IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960
and PD No. 1246, insofar as it amends Section 8 of R.A. No. 6426 are
hereby held to be INAPPLICABLE to this case because of its peculiar
circumstances. Respondents are hereby REQUIRED to COMPLY with the
writ of execution issued in Civil Case No. 89-3214, "Karen Salvacion, et al.
vs. Greg Bartelli y Northcott, by Branch CXLIV, RTC Makati and to
Page 43
RELEASE to petitioners the dollar deposit of respondent Greg Bartelli y The Rules of Court declare that a preliminary injunction may be
Northcott in such amount as would satisfy the judgment. issued when the following grounds are established:

SO ORDERED. SECTION 3. Grounds for issuance of preliminary

injunction. x x x
G.R. No. 200238 - PHILIPPINE SAVINGS BANK and PASCUAL M.
GARCIA III, as representative of Philippine Savings Bank and his (a) That the applicant is entitled to the relief
personal capacity, Petitioners, v. SENATE IMPEACHMENT demanded, and the whole or part of such relief
COURT, consisting of the Senators of the Republic of the consists in restraining the commission or
Philippines, acting as Senator Judges, namely Juan Ponce Enrile, continuance of the act or acts complained of, or in
Jinggoy Ejercito Estrada, Vicente C. Sotto III, Alan Peter S. Cayetano, requiring the performance of an act or acts, either
Edgardo J. Angara, Joker P. Arroyo, Pia S. Cayetano, Franklin M. for a limited period or perpetually;
Drilon, Francis G. Escudero, Teofisto Guingona III, Gregorio B. (b) That the commission, continuance or non-
Honasan II, Panfilo M. Lacson, Manuel M. Lapid, Loren B. Legarda, performance of the act or acts complained of during
Ferdinand R. Marcos, Jr., Sergio R. Osmea III, Kiko Pangilinan, the litigation would probably work injustice to the
Aquilino Pimentel III, Ralph G. Recto, Ramon Revilla, Jr., Antonio F. applicant; or
Trillanes IV, Manny Villar, and the Honorable Members of the (c) That a party, court, agency or a person is doing,
Prosecution Panel of the House of Representatives, Respondents. 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
Promulgated: subject of the action or proceeding, and tending to
render the judgment ineffectual.

February 9, 2012
The Rules further require that a hearing be conducted to allow an applicant
X --------------------------------------------------------------------------------------------- X the opportunity to establish any of the above grounds, and the party sought
to be enjoined (after due notice) to contest the same.[1] No preliminary
injunction may issue until a hearing is conducted. Prior to the hearing,
CONCURRING OPINION however, prevailing circumstances may require intervention by the Court to
at least preserve the status quo until the merits of the prayer for a preliminary
injunction is heard. Thus, the Rules authorize the court to issue a temporary
BRION, J.: restraining order when there is extreme urgency and the applicant will suffer
grave injustice and irreparable injury. In other words, the purpose of the
I concur with the majoritys ruling to issue a temporary restraining temporary restraining order goes no further than to preserve the status
order (TRO) in favor of petitioner Philippine Savings Bank against the Senate quo until the hearing of the application for preliminary injunction which cannot
Impeachment Court. be issued ex parte. However, the issuance of the TRO should be justified by
the existence of extreme urgency and a grave violation of the applicants right
that will cause him irreparable injury if the other party is not enjoined. A

BANKING LAW (18 October 2018 Cases) Page 44

review of the facts and the applicable law convinces me that these standards
prevail in the present case.
RA No. 6426 provides for the
absolute confidentiality of foreign
currency deposits
The subject matter of the subpoenas issued by the Senate sitting as
an Impeachment Court are five foreign deposit accounts with petitioner, all
allegedly in the name of Renato C. Corona. Republic Act (RA) No. 6426, as
amended, is the law applicable to foreign currency deposits. [2] The law
provides for the absolute confidentiality of foreign currency deposits, as
stated in Section 8:
Section 8. Secrecy of foreign currency deposits. All foreign
currency deposits authorized under this Act, as amended
by PD No. 1035, as well as foreign currency deposits
authorized under PD No. 1034, are hereby declared as and
considered of an absolutely confidential
nature and, except upon the written permission of the
depositor, in no instance shall foreign currency deposits be
examined, inquired or looked into by any person,
government official, bureau or office whether judicial or
administrative or legislative, or any other entity whether
public or private; Provided, however, That said foreign
currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any court,
legislative body, government agency or any administrative
body whatsoever. (As amended by PD No. 1035, and further
amended by PD No. 1246, prom. Nov. 21, 1977.)
RA No. 6426 guarantees a clear right to the depositors and demands an
exacting obligation from banks to maintain the absolute confidentiality of the
foreign currency deposits. The failure of a bank to fulfill its obligation
under the law subjects the bank and its officials to criminal liability
under Section 10 of RA No. 6426,[3] and its authority to accept new
BANKING LAW (18 October 2018 Cases)
foreign currency deposits may be revoked or suspended by the Bangko
Sentral ng Pilipinas under Section 87 of the Manual of Regulations on
Foreign Exchange Transactions.[4] More than this, the banks failure in its
obligation given media coverage and the non-legal slant it can give gives rise
to a real danger that the banks reputation may suffer. In a very bad situation,
the effect goes beyond the banks reputation and can adversely affect the
economy.
The only exception provided by the law is when there is a written
permission by the depositor. Jurisprudence declares that [t]here is only a
single exception to the secrecy of foreign currency deposits, that is,
disclosure is allowed only upon the written permission of the depositor. [5] This
single excepting circumstance, however, does not obtain in the present case;
hence, the banks petition.
Given that a subpoena was already issued requiring the petitioner
Bank to testify and to produce before the Senate sitting as an Impeachment
Court documents pertaining to the foreign currency deposits in the name of
Renato C. Corona (indeed, the on-going impeachment proceedings center
on this matter as petitioners president has been put on the witness stand),
there is extreme urgency for the Court to address the petitioners prayer for
TRO. The possibility of the prejudice that may result is too real and too far-
ranging for this Court to disregard.
Refutation of the Dissents
In the Courts discussion, objections have been raised as to the absolute
terms of the confidentiality that RA No. 6426 guarantees by claims that the
Court in several cases has relaxed or liberalized the application of the
rule. These cases in particular are Salvacion v. Central Bank of the
Philippines,[6] China Banking Corporation v. Court of Appeals[7] and Ejercito
v. Sandiganbayan.[8] The cited cases, however, are off-tangent and in fact,
did not relax or liberalize the rule on absolute confidentiality of foreign deposit
accounts.
The impact of the principle of stare decisis that is cited as basis is
limited; specific judicial decisions are binding only on the parties to the case
and on future parties with similar or identical factual situations.[9] As will be
Page 45
explained below, the cited cases do not share the same factual antecedents
as the present case.
First, the Court in Salvacion made it abundantly clear that because of
the peculiar circumstances[10] obtaining in the case, the rule that exempts
dollar deposits (of a transient) from attachment, garnishment, or any other
order or process of any court, legislative body, government agency or any
administrative body, cannot serve as an instrument of injustice and deprive a
Philippine national who is the victim of a heinous crime of the damages
awarded to her by the court. The peculiar circumstances in Salvacion hardly
obtains in the present case, so that the ruling cannot be applied to Chief
Justice Coronas impeachment trial.
Second, in China Bank, the Court ruled that the respondent, as
owner of the funds (dollar deposit checks) unlawfully taken and which were
deposited in China Bank, had the right to inquire into the said deposits
because his consent was deemed given. From this perspective, China
Bank is an example of the waiver done by the rightful owner of the absolute
confidentiality of foreign currency deposits. This situation does not obtain in
the present case. At any rate, the Court also admitted that due to the
distinctive circumstances attendant to the case, its ruling was on a limited pro
hac vice. This express limitation negates any application of the ruling to the
present case, save only if the facts of this ruling are similar or identical to
Chief Justice Coronas case, which they are not.
Third, Ejercito does not involve foreign currency deposits and,
therefore, should be rejected outright as a ruling applicable to the present
case. In Ejercito, the Court held that the petitioners accounts are no longer
protected by RA No. 1405 (Secrecy of Bank Deposits Law) because of the
presence of two exceptions, namely: (1) the examination of bank accounts is
upon order of a competent court in cases of bribery or dereliction of duty of
public officials (plunder case against the petitioner is analogous to bribery or
dereliction of duty) and (2) the money deposited or invested is the subject
matter of litigation. Aside from the involvement of local currency deposits and
the inapplicability of RA No. 1405 to a foreign currency deposit situation, the
two exceptions are not present in the Chief Justices present impeachment
case.
BANKING LAW (18 October 2018 Cases)
A further objection to the application of the absolute confidentiality
rule of RA No. 6426 posits that it is intended only to benefit foreign
investors. The whereas clauses in Presidential Decree No. 1246 (1977), the
amendatory law of RA No. 6426, is cited, and these clauses state:
WHEREAS, in order to assure the development and
speedy growth of the Foreign Currency Deposit System and
the Offshore Banking System in the Philippines, certain
incentives were provided for under the two Systems such as
confidentiality of deposits subject to certain exceptions and
tax exemptions on the interest income of depositors who are
nonresidents and are not engaged in trade or business in the
Philippines;
WHEREAS, making absolute the protective cloak of
confidentiality over such foreign currency deposits,
exempting such deposits from tax, and guaranteeing the
vested rights of depositors would better encourage the inflow
of foreign currency deposits into the banking institutions
authorized to accept such deposits in the Philippines thereby
placing such institutions more in a position to properly
channel the same to loans and investments in the
Philippines, thus directly contributing to the economic
development of the country;
Reference to the whereas clause to justify the non-application of the
absolute confidentiality rule, however, is unnecessary and inappropriate in
light of the clear language of RA No. 6426. Preambles, or whereas clauses x
x x are not part of the act x x x and consequently cannot enlarge or confer
powers, nor control the words of the act, unless they are doubtful or
ambiguous.[11] Stated otherwise, as a tool for statutory construction,
preambles and whereas clauses may be utilized only if an ambiguity exists in
the statute. In Echegaray v. Secretary of Justice,[12] this Court had occasion
to declare:
a preamble is not really an integral part of a law. It is merely
an introduction to show its intent or purposes. It is merely an
Page 46
 introduction to show its intent or purposes. It cannot be the
origin of rights and obligations. Where the meaning of a
statute is clear and unambiguous, the preamble can neither
expand nor restrict its operation, much less prevail over its
text.
RA No. 6426, by its plain terms, is clear that all foreign currency
deposits are considered to be absolutely confidential. The law expressly
refers to deposits not to the identity, nationality, or residence of
the depositors. Thus, to claim that the depositors must be considered is
misplaced. Also, to so claim is to read into the clear words of the law
exemptions that its literal wording does not support. To so claim may even
amount to judicial legislation.
In light of the express and clear terms of the law, the basic rule of
statutory construction should therefore apply: legislative intent is to be
determined from the language employed, and where there is no ambiguity in
the words, there is no room for construction.[13] In the absence of ambiguity,
the Court may not construe a laws provisions by taking into account
questions of expediency, good faith, practical utility and other similar reasons
so as to relax non-compliance therewith.[14]
Yet another objection cites the statutory developments, which
according to proponents, indicate that the secrecy guaranteed by the law has
steadily declined: while the general rule facially appears to be secrecy, the
voluminous exceptions have, in substance, created a rule of
exceptions.[15] This thesis is supported by Tajans Article Emerging from
Secrecy Space: From Bank Secrecy to Financial Transparency, which
discusses the recent trend in the international arena pertaining the
international tax standard on exchange of information (requiring banking
information to be made available upon request of foreign tax authorities) and
the enactment of RA No. 10021 or the Exchange of Information on Tax
Matters Act of 2009. The article surveys Philippine bank secrecy law as it has
evolved and how it relates to the present global movement towards financial
transparency.[16] From this survey, the Article argues that despite
pronouncements by the Courts, the actuations by both the Court and the
Legislature indicate that the secrecy guaranteed by the law has steadily
BANKING LAW (18 October 2018 Cases)
declined.[17] It notes that while the general rule appears to be secrecy, the
voluminous exceptions have, in substance, created a rule of exceptions.[18]
Despite this position, the article significantly recognizes that
jurisprudence of the Court points to the other direction. In short, the
article at the same time admits that bank secrecy remains the general
rule.[19] Indeed, the Court essentially debunked the Articles premises by
stating, in the 2008 case of Republic of the Philippines v. Eugenio,[20] that:
Because of the Bank Secrecy Act, the
confidentiality of bank deposits remains a basic state
policy in the Philippines. Subsequent laws, including the
AMLA, may have added exceptions to the Bank Secrecy Act,
yet the secrecy of bank deposits still lies as the general rule.
It falls within the zones of privacy recognized by our
laws. The framers of the 1987 Constitution likewise
recognized that bank accounts are not covered by either
the right to information under Section 7, Article III or
under the requirement of full public disclosure under
Section 28, Article II. Unless the Bank Secrecy Act is
repealed or amended, the legal order is obliged to
conserve the absolutely confidential nature of Philippine
bank deposits. [Emphasis supplied.]
Notably, the Court declared that bank accounts laws are not covered by
the right to information under Article III, Section 7 and the requirement
of full public disclosure under Article II, Section 28 of the Constitution,
which is statutorily implemented through RA No. 6713 (Code of Conduct and
Ethical Standards for Public Officials and Employees). The Constitution in
fact declares that the publics right to information is subject to such limitations
as may be provided by law.[21] The implied repeal of inconsistent laws that
RA No. 6713 mandates[22] cannot be interpreted as a repeal of the express
substantive right granted to confidentiality under Section 8 of RA No. 6426,
even if the latter was enacted earlier. Implied repeals are not favored; the
Page 47
presumption is against inconsistency or repugnance and, accordingly,
against implied repeals.[23]
The ruling in Republic v. Eugenio,[24] to my mind, reflects the
prevailing view under our jurisprudence pointing towards the retention and
dominance of the absolute confidential nature of bank deposits. In the
recent case of BSB Group, Inc. v. Go (a 2010 case),[25] the Court reiterated
the importance of financial privacy. As observed by Tajan, despite the
multiplication of the exceptions to bank secrecy, the Court declared that
bank secrecy, which falls within the legally-recognized zones of privacy,
remains the general rule and that the present legal order is obliged to
conserve the absolutely confidential nature of bank deposits. The Court
found disfavor in construing the exceptions in a manner that authorizes
unwarranted and unbridled inquiry into bank accounts:[26]
A final note. In any given jurisdiction where the right
of privacy extends its scope to include an individuals
financial privacy rights and personal financial matters, there
is an intermediate or heightened scrutiny given by courts and
legislators to laws infringing such rights. Should there be
doubts in upholding the absolutely confidential nature
of bank deposits against affirming the authority to
inquire into such accounts, then such doubts must be
resolved in favor of the former. This attitude persists
unless congress lifts its finger to reverse the general
state policy respecting the absolutely confidential
nature of bank deposits.
The view expressed that the majoritys TRO is a mockery of all existing laws
designed to insure transparency and good governance in public service [27] is
likewise not well taken. This view declares that the majority ruling advises all
government officials and employees that they can legally evade reporting
their actual assets in their Statement of Assets, Liabilities, and Net Worth x x
x by simply opening foreign currency deposit accounts with local banks.[28]
BANKING LAW (18 October 2018 Cases)
The majority makes no such ruling in granting the TRO. The question
the Court has resolved for now is whether the facts and the law justify the
issuance of a TRO. The object of a TRO, as earlier mentioned, is to simply
maintain the status quo. The TRO, to be sure, is not a ruling encouraging
public officials to use foreign deposits to legally evade the correct SALN
report. To so claim is to extend the import of TRO beyond its clear objective
to maintain the status quo.
In light of these considerations, I reiterate my vote for the grant of the
petitioners prayer for the issuance of the TRO.
DISSENTING OPINION
SERENO, J.:
The prayer for a temporary restraining order (TRO) by petitioner
Philippine Savings Bank (PSBank) against the Senate Impeachment Court
should not have been granted for the following reasons: (1) the protection of
absolute confidentiality under the Foreign Currency Deposits Act (FCDA) or
Republic Act (R.A.) No. 6426[1] can only be invoked by the owner, and in this
case, the five (5) Foreign Currency Deposits (FCDs) involved [2] are not being
officially claimed by Chief Justice Renato C. Corona at this time; (2) if indeed
those five accounts belong to Chief Justice Corona, there appears to be a
constitutionally-generated permission on the latters part to disclose the
FCDs; (3) even if the permission to disclose is deemed absent, the subpoena
issued by the Impeachment Court is a constitutionally-imposed exception to
the secrecy of FCDs. From all three perspectives, the requirements for the
issuance of a TRO have not been satisfied.
More important, what the people at the gut level understand to be
true is that they have, through the Constitution, enshrined the doctrine on the
accountability of public officers, on the fundamental belief that public office is
a public trust. It cannot get plainer, but truer, than that. The Constitution
wove, not only in the central motif on public accountability in Article XI of the
Constitution, but in every thread of its fabric, this legally demandable notion
of public accountability. No interpretation of law nor procedural requirement
can be viewed in any manner that negates this bedrock principle of Philippine
constitutional governance.
Page 48
 1. The FCDA bars any inquiry or examination as to the
It is disturbing to note that the majority of this Court failed to consider details of such foreign currency accounts.
the care with which the Senate Impeachment Court crafted its Resolution
directing the issuance of the assailed subpoena. The decision to lift the cloak 2. If Petitioner Garcia, the President of PSBank testifies
of absolute secrecy was categorically pronounced to apply only in the and brings the requested bank documents, he will be
context of the impeachment trial of Chief Justice Corona. There are only violating Section 8 of the FCDA and will be exposed to
thirty-one (31) impeachable officers,[3] and there have been only two (2) criminal liability for doing so.
impeachment trials since the beginning of Philippine constitutional
history. The care with which the Senate discharged its role is in sharp 3. Petitioner PSBank, on the other hand, will suffer the
contrast with the incomprehensible decision of the majority to abandon the possible revocation or suspension of its authority to accept
clear stand that the Court took in Salvacion v. Central Bank of the new foreign currency deposits by the BSP . . . Also there are
Philippines[4] that exceptions in the interest of justice can lift the absolute news reports of a possible bank run if the Respondent
secrecy of FCDs. In the scale of constitutional values, nothing can be higher Impeachment Court proceeds to require bank officials . . . to
than the requirement of public accountability.Considering that 31 public divulge details of bank accounts of the Chief Justice.
officers cannot be removed from office by any other means than
impeachment, it is extremely unwise for this Court to enjoin the conduct of 4. The Respondent Impeachment Court committed grave
the Senate Impeachment Court, especially considering as pointed out abuse of discretion, amounting to lack or excess of
above the care with which the latter approached the issuance of the jurisdiction when it issued the Assailed Subpoena for the
subpoena over the alleged FCDs of the Chief Justice. None of these 31 following reasons:
public officers can, contrary to the implication of the opinion of Justice Arturo
D. Brion, assert that their right to privacy over their foreign currency assets
should prevail over the power of the Impeachment Court to exact public I. The issuance of the Assailed Subpoena clearly
accountability. violated the prohibition under RA 6426. The
cases of Salvacion v. Central Bank of the
Philippines (the Salvacion Case), China
PSBanks Claims on the Banking Corporation v. Court of Appeals, et
Presence of al (the China Bank Case), and Ejercito v.
Rule 65 Elements and the Sandiganbayan (the Estrada Case) cited in
Requirements for a TRO the Resolution do not support an exemption
in the Assailed Action from the prohibition in the Impeachment
proceedings

PSBank alleges in its Petition for Certiorari that it received a subpoena from
the Senate Impeachment Court on 07 February 2012 requiring the former to
testify and bring original and certified true copies of, among others, five FCDs
in the name of Chief Justice Corona. PSBank believes, however that
II. The Respondent Impeachment Court arbitrarily
ignored Petitioners Constitutional right to life
and property when it issued the Assailed
Subpoena for foreign currency deposits.
Petitioners will clearly incur criminal liability
for violation of RA 6426. Petitioner PS BANK

BANKING LAW (18 October 2018 Cases) Page 49

 will likewise risk revocation or suspension of
its authority to accept new foreign currency
deposits by the Bangko Sentral ng Pilipinas
(BSP) pursuant to Section 87 of the Manual
of Regulations on Foreign Exchange
Transactions. (Emphasis supplied.)
5. This Grave Abuse of Discretion was committed by the
Senate Impeachment Court in this manner:
30. The Respondent Impeachment Courts
grant of the request for Subpoena of the bank
records of foreign currency deposits and the
issuance of the Subpoena against Petitioner PS
BANK for such bank records contravenes the
absolute confidentiality of foreign currency deposits
under Section 8 of Republic Act No. 6426, or the
Foreign Currency Deposit Act of the Philippines (RA
6426) which provides:
Sec. 8. Secrecy of Foreign Currency
Deposits. All foreign currency
deposits authorized under this Act,
as amended by Presidential Decree
No. 1035, as well as foreign
currency deposits authorized under
Presidential Decree No. 1034, are
hereby declared as and considered
of an absolutely confidential nature
and, except upon the written
permission of the depositor, in no
instance shall such foreign
currency deposits be examined,
inquired or looked into by any
person, government official
bureau or office whether judicial
or administrative or legislative or
BANKING LAW (18 October 2018 Cases)
any other entity whether public or
private: Provided, however, that
said foreign currency deposits shall
be exempt from attachment,
garnishment, or any other order or
process of any court, legislative
body, government agency or any
administrative body
whatsoever. (Emphasis [in the
original].)
31. As admitted by the Respondent
Impeachment Court, RA 6426, which is the
recognized law that governs foreign currency
deposits, clearly provides for only one exception to
the prohibition on disclosure upon prior written
permission of the depositor.
xxx xxx xxx
33. The Respondent Impeachment Court
gravely abused its discretion when it went beyond
applying RA 6426. The Respondent Impeachment
Court did not just unlawfully reinvent RA 6426, but it
also contravened existing jurisprudence that it cited
to support its grant of the Prosecution Panels
Request for Subpoena.
33.1. The Salvacion Case does not
support the Impeachment Courts
issuance of Subpoena for the
foreign currency deposits. No less
than this Honorable Court
categorically stated that it decided
not to uphold the prohibition on
disclosure on grounds of equity and
justice. The case had very peculiar
circumstances and being an
exception to the rule, it cannot be
Page 50
 applied to the chief Justice Coronas Order granting the
impeachment trial. It is a sui Salvacions
generis case. application for the
issuance of a writ of
33.1.1. In preliminary
the Salvacion Case, attachment. A
this Honorable notice of
Court allowed, as a garnishment was
strict exception, the then served on
inquiry of the China Bank where
foreign currency Bartelli held a dollar
deposit in question account. China
mainly due to the Bank refused,
peculiar invoking the
circumstances of secrecy of bank
the case such that a deposits.This
strict interpretation Honorable Court
of the letter of the ruled:
law would result to
rank injustice. In It would be
this case, Greg unthinkable,
Bartelli, an that the
American tourist, questioned
was charged with Section 113
criminal cases for of Central
serious illegal Bank No.
detention and rape 960 would
committed against be used as
then twelve (12) a device by
year-old Karen accused
Salvacion. A Greg
separate civil case Bartelli for
for damages with wrongdoing
preliminary , and in so
attachment was doing,
filed against Greg acquitting
Bartelli. The trial the guilty at
court issued an the

BANKING LAW (18 October 2018 Cases) Page 51

 expense of situation
the calls for
innocent. fairness
against
Call it what legal
it may but is tyranny.
there no
conflict of We
legal policy definitely
here? Dolla cannot
r against have both
Peso? Uph ways and
olding the rest in the
final and belief that
executory we have
judgment of served the
the lower ends of
court justice.
against the
Central IN VIEW
Bank WHEREOF,
Circular the
protecting provisions
the foreign of Section
depositor? 113 of CB
Shielding or Circular No.
protecting 960 and
the dollar P.D. No.
deposit of a 1246,
transient insofar as it
alien amends
depositor Section 8 of
against R.A. No.
injustice to 6426 are
a national hereby held
and victim to be
of a INAPPLICA
crime? This BLE to this

BANKING LAW (18 October 2018 Cases) Page 52

 case satisfy the
because of judgment.
its peculiar
circumstanc xxx xxx xxx
es. Respon
dents are 33.2 The Respondent Impeachment Court also misconstrued
hereby the China Bank Case. The China Bank Case actually
REQUIRED highlights the fact that the only exception to the prohibition
to COMPLY on disclosure on foreign currency deposits is the prior written
with the writ permission of the depositor.
of execution
33.2.1. In the China Bank Case, respondent accused his
issued in
daughter of stealing his dollar deposits with
Civil Case
Citibank, N.A. (Citibank). His daughter
No. 89-
allegedly received the checks from Citibank
3214,
and deposited them to her account in China
Karen
Bank. The subject checks were presented in
Salvacion,
evidence. A subpoena was issued to
et al. vs.
employees of China Bank to testify on these
Greg
checks. China Bank argued that the Citibank
Bartelli y
dollar checks with both respondent and/or
Northcott,
her daughter as payees, deposited with
by Branch
China Bank, may not be looked into under
CXLIV,
the law on secrecy of foreign currency
RTC Makati
deposits. This Honorable court, relying on
and to
the exception under RA 6426, as amended,
RELEASE
ruled that respondent, as owner of the funds
to
unlawfully taken and which were deposited
petitioners
with China Bank, had the right to inquire into
the dollar
the said deposits because his consent was
deposit of
deemed given. This Honorable Court further
respondent
expressly stated that all things considered
Greg
and in view of the distinctive circumstances
Bartelli y
attendant to the present case, we are
Northcott in
constrained to render a limited pro hac
such
vice ruling, or a ruling for this one particular
amount as
occasion.
would

BANKING LAW (18 October 2018 Cases) Page 53

33.2.2. This Honorable Court emphasized the absolute deposits of Domsat Holdings, Inc. The
confidentiality of foreign currency deposits: Honorable Court ruled:

x x x the law provides that all foreign currency deposits These two laws both support the confidentiality of
authorized under Republic Act No. 6426, as bank deposits. There is no
amended by Sec. 8, Presidential Decree No. conflict between
1246, Presidential Decree No. 1035, as well them. Republic Act No.
as foreign currency deposits authorized 1405 was enacted for the
under Presidential Decree No. 1034 are purpose of giving
considered absolutely confidential in nature encouragement to the
and may not be inquired into. There is only people to deposit their
one exception to the secrecy of foreign money in banking
currency deposits, that is, disclosure is institutions and to
allowed upon the written permission of the discourage private hoarding
depositor. so that the same may be
properly utilized by banks in
33.3. The Respondent Impeachment Courts citation of the Estrada authorized loans to assist in
Case is utterly misleading, because this case does not the economic development
involve foreign currency deposit and did not mention RA of the country. It covers all
6426. bank deposits in the
Philippines and no
33.3.1. The exceptions to confidentiality provided under
distinction was made
another statute, Republic Act No. 1405, The
between domestic and
Secrecy of Bank Deposit Laws, as
foreign deposits. Thus,
amended, and related laws and
Republic Act No. 1405 is
jurisprudence, particularly in cases of
considered a law of general
impeachment, where the money deposited
application. On the other
or invested is the subject matter of the
hand, Republic Act No.
litigation and unexplained wealth, do not
6426 was intended to
apply to foreign currency deposits. In GSIS
encourage deposits from
v. Court of Appeals, this Honorable Court
foreign lenders and
explained that the applicable law for foreign
investors. It is a special law
currency deposits is RA 6426, and not RA
designed especially for
1405.
foreign currency deposits in
33.3.2. Applying Section 8 of RA 6426, as amended, this the Philippines. A general
Honorable Court held that Westmont Bank law does not nullify a
cannot be compelled to disclose the dollar specific or special
law. Generalia specialibus

BANKING LAW (18 October 2018 Cases) Page 54

 non derogant. Therefore, it
is beyond cavil that
Republic Act No. 6426
applies in this
case. (Emphasis [in the
original].)
34. Based on the foregoing, it is abundantly clear that the
Respondent Impeachment Court exercised its power to
issue the Assailed Subpoena in a capricious, whimsical,
and arbitrary manner. The abuse of discretion
demonstrated by the Respondent Impeachment Court is
both patent and gross as it clearly violated the law. On
this ground alone, there is more than enough reason for
this Honorable Court to grant this Petition. (Emphasis
supplied)
xxx xxx xxx
38. It is clear from the foregoing that Petitioners disclosure of
information related to any foreign currency deposit under
circumstances that are not covered by the exemptions
provided under RA No. 6426, even if done in good faith or
pursuant to an order of the Respondent Impeachment Court,
will expose Petitioner Garcia upon conviction to criminal
liability and Petitioner PS Bank to possible revocation or
suspension of its authority to accept new foreign currency
deposits by the BSP.
xxx xxx xxx
40. The curtailment of PS Banks right to property is also undeniable
from the fact that the revocation or suspension of PS Banks
authority to accept new foreign currency deposits by the
BSP will necessarily translate to immediate loss of income
for PS Bank. This is in addition to the chilling effect that will
be felt by the other banks, whose foreign currency
depositors may be alarmed by the Respondent
BANKING LAW (18 October 2018 Cases)
Impeachment Courts arbitrary and whimsical examination of
a foreign currency deposit supposedly protected by RA 6426
and subject to the strict requirement of disclosure under the
AMLA.[5]
The Reasoning of the
Senate for Issuing the
Assailed Subpoena
The Senate Impeachment Court laid down the legal basis for the issuance of
the assailed subpoena in its Resolution dated 02 February 2012 under the
hand of Senate President Juan Ponce Enrile, and we quote:
The Court has had to consider whether or not the issuance of the
subpoenae would violate existing laws on secrecy of bank
deposits. Under R.A. No. 1405 as amended and the Anti-
Money Laundering Act, the disclosure of information relating
to bank accounts in local currency cannot be made except in
five (5) instances, namely: a) upon written permission of the
depositor, (b) in cases of impeachment, (c) upon order of a
competent court in the case of bribery or dereliction of duty
of public officials or, (d) when the money deposited or
invested is the subject matter of the litigation, and (e) in
cases of violation of the Anti-Money Laundering Act
(AMLA). However, it appears that for foreign currency bank
accounts, the disclosure may be made only upon written
permission of the depositor pursuant to Section 8 of
Republic Act No. 6426.
However, the Court has taken due notice of the fact that the
Supreme Court has, in several decisions, relaxed the rule on
the absolute confidential nature of bank deposits, even
foreign currency deposit accounts, in the cases of Salvacion
vs. Central Bank of the Philippines, G.R. No. 94723,
August 21, 1997 and China Banking Corporation v. Court
Page 55
 of Appeals, G.R. No. 140687, December 18, 2006
and Ejercito vs. Sandiganbayan, G.R. Nos. 157294-95,
November 30, 2006. The majority is of the view that the
present impeachment proceedings present a valid exception
to the general rule on confidentiality of information on bank
accounts even for foreign currency bank accounts.
The Court would like to emphasize that the non-disclosure of
information relating to the bank accounts of individuals is still
the general rule and it has no intention of going against the
public policy on this matter.However, the Court is only
issuing the subpoena relating to the bank accounts of Chief
Justice Corona because of the pendency of the present
impeachment proceedings and for no other reason.
WHEREFORE, IN VIEW OF THE FOREGOING, the majority votes
to grant the Prosecutions Requests for Subpoenae to the
responsible officers of Philippine Savings Bank (PSBank)
and Bank of Philippine Island (BPI), for them to testify and
bring and/or produce before the Court documents on the
alleged bank accounts of Chief Justice Corona, only for the
purpose of the instant impeachment proceedings, as follows:
xxx xxx xxx
b) The Branch Manager (and/or authorized representative) of
Philippine Savings Bank, Katipunan Branch, Katipunan
Avenue, Loyola Heights, Quezon City, is commanded to
bring before the Senate at 2:00 p.m. on February 8, 2012,
the original and certified true copies of the account opening
forms/documents for the following bank accounts allegedly in
the name of Renato C. Corona, and the documents showing
the balances of the said accounts as of December 31, 2007,
December 31, 2008, December 31, 2009 and December 31,
2010:
089-19100037-3
089-13100282-6
089-121017358
BANKING LAW (18 October 2018 Cases)
089-121019593
089-121020122
089-121021681
089-141-00712-9
089-141-00746-9
089-14100814-5
089-121-01195-7[6] (Emphasis in the original.)
The Essence of PSBanks
Attack Against the
Impeachment Court
Action
PSBank is essentially arguing that the Senate Impeachment Court, in issuing
the subpoena, so grossly erred or was so whimsical and arbitrary in its
understanding and application of three (3) Decisions of the Supreme
Court[7] that its action amounted to exercising a jurisdiction it did not have; or
that it exceeded the same as to lose legitimate jurisdiction over the matter in
contention.
To succeed in such a line of reasoning, PSBank has to prove that the three
cases cited by the Senate are so categorical in their pronouncement on the
absolute confidentiality of FCDs, such that the Impeachment Court acted
whimsically and arbitrarily or was in gross negligence to such an extent that
the Impeachment Court could not justify its reasoning in issuing the
subpoena, as found in the following paragraph:
However, the Court has taken due notice of the fact that the
Supreme Court has, in several decisions, relaxed the
rule on the absolute confidential nature of bank
deposits, even foreign currency deposit accounts, in the
cases of Salvacion vs. Central Bank of the Philippines,
G.R. No. 94723, August 21, 1997 and China Banking
Corporation v. Court of Appeals, G.R. No. 140687,
December 18, 2006 and Ejercito vs. Sandiganbayan, G.R.
Page 56
 Nos. 157294-95, November 30, 2006. The majority is of the
view that the present impeachment proceedings present a
valid exception to the general rule on confidentiality of
information on bank accounts even for foreign currency bank
accounts.
In plain language, was the Senate Impeachment Court so grossly
incompetent or malicious in invoking the three Decisions of the Supreme
Court to justify the issuance of the subpoena?
Regarding Salvacion, PSBank claims that while the Supreme Court decided
not to uphold the prohibition on disclosure on grounds of equity and justice,
[t]he case had very peculiar circumstances and being an exception to the
rule, it cannot be applied to the Chief Justice Coronas impeachment
trial. Salvacion is a sui generis case.[8]
On this score, it must be emphasized that there are, in a country of 96 million
people, only thirty-one (31) people[9] as earlier mentioned, who are
removable from office by the extraordinary process of impeachment. From
the time that impeachment as a mode of removal was provided for in the
1935 Constitution, an impeachment trial has only been seen twice in the
case of former President Joseph Ejercito Estrada and now in that of Chief
Justice Corona. It will be extremely difficult to find any other very peculiar set
of circumstances or sui generis case that would exceed the present
impeachment trial in those aspects. The Senate Impeachment Court was
superbly careful in ensuring that the issuance of the assailed subpoena does
not create any legal effect beyond that of the conduct of the impeachment
trial. It thus declared:
The Court would like to emphasize that the non-disclosure of
information relating to the bank accounts of individuals is still
the general rule and it has no intention of going against the
public policy on this matter. However, the Court is only
issuing the subpoena relating to the bank accounts of Chief
Justice Corona because of the pendency of the present
impeachment proceedings and for no other reason.
BANKING LAW (18 October 2018 Cases)
WHEREFORE, IN VIEW OF THE FOREGOING, the majority votes
to grant the Prosecutions Requests for Subpoenae to the
responsible officers of Philippine Savings Bank (PSBank)
and Bank of Philippine Island (BPI), for them to testify and
bring and/or produce before the Court documents on the
alleged bank accounts of Chief Justice Corona, only for the
purpose of the instant impeachment proceedings, as
follows: xxx (Emphasis supplied.)
On the other hand, while sexual abuse at the hands of anyone, including
foreigners, is one of the most cruel experiences a minor can ever undergo as
in the Salvacion case, it is not as peculiar nor as sui generis as the ongoing
conduct of an impeachment trial. And yet, PSBank considers
the Salvacion situation sufficient to justify the disclosure of the details of a
foreign nationals FCD. Its own demand that the situation needs to be very
peculiar before the cloak of absolute confidentiality can be lifted has been
more than met in the context in which the assailed subpoena was issued.
Regarding China Bank, PSBank claims that the case actually highlights the
fact that the only exception to the prohibition on disclosure on foreign
currency deposits is the prior written permission of the depositor. It then went
to emphasize that the authority given by the Supreme Court to disclose
information on the FCD was a pro hac vice ruling, meaning, it applies only to
that case.
What PSBank failed to mention, however, was that while China
Bank reiterated the statutory privilege of the confidentiality of FCDs, the
Supreme Court was careful to balance this privilege with the following
considerations:
It is in this light that the court in the case of Salvacion v. Central
Bank of the Philippines, allowed the inquiry of the foreign
currency deposit in question mainly due to the peculiar
circumstances of the case such that a strict interpretation of
the letter of the law would result to rank injustice. Therein,
Greg Bartelli y Northcott, an American tourist, was charged
Page 57
 with criminal cases for serious illegal detention and rape
committed against then 12 year-old Karen Salvacion. A
separate civil case for damages with preliminary attachment
was filed against Greg Bartelli. The trial court issued an
Order granting the Salvacions application for the issuance of
a writ of preliminary attachment. A notice of garnishment
was then served on China Bank where Bartelli held a dollar
account. China Bank refused, invoking the secrecy of bank
deposits. The Supreme Court ruled: In fine, the application of
the law depends on the extent of its justice x x x It would be
unthinkable, that the questioned law exempting foreign
currency deposits from attachment, garnishment, or any
other order or process of any court, legislative body,
government agency or any administrative body
whatever would be used as a device by an accused x x
x for wrongdoing, and in so doing, acquitting the guilty at
the expense of the innocent. (Emphasis supplied.)
Petitioners are correct in stating that Ejercito v. Sandiganbayan[10] (which
they call the Estrada case) is inapplicable as it does not involve
FCDs. Nevertheless, another Estrada case, Estrada
Desierto,[11] categorically pronounces that the privilege under Section 8 of
R.A. 6426 applies only to depositors who are non-residents, and who are not
engaged in trade and business in the Philippines. We quote in relevant part:
Finally, with respect to the complaint for violation of Section
8 of Rep. Act No. 6426 (Foreign Currency Deposits Act of
the Philippines), public respondent ratiocinated
At this point, it is worth stressing,
that this office in its previous Order dated 20
February 2001, ruled that the absolute
confidentiality of foreign currency deposit
account provided for under R.A. 6426 does
not apply to the foreign currency deposit
accounts of herein complainant, since
the protection under the said law is
intended only for depositors who are non
BANKING LAW (18 October 2018 Cases)
residents and are not engaged in trade
and business in the Philippines. In
coming out with such ruling, this office
has as its basis one of the Whereas
clauses of P.D. 1246 which amended Sec.
8 of R.A. 6426. For emphasis, the
pertinent provision of the said law is
hereby quoted:
WHEREAS, in order to assure the
development and speedy growth of the
Foreign Currency Deposit System and
offshore Banking System in the
Philippines, certain incentives were
provided for under the two systems such
as confidentiality of deposits subject to
certain exceptions and tax exemptions
on the interest of the income
of depositors who are non-residents and
are not engaged in trade or business in
the Philippines.
v.
Considering the previous Order of
this Office, it necessarily follows that the
accusation for violation of Sec. 8 of R.A.
6426 against herein respondents has no leg
to stand on, thus, the dismissal of the
charge for violation of Sec. 8 of R.A. 6426 is
therefore in order.
And:
In Salvacion v. Central Bank and China
Bank, 278 SCRA 27 (1997), the Highest Tribunal
adopted the opinion of the Office of the Solicitor
General (OSG) that only foreign currency deposits of
foreign lenders and investors are given protection
and incentives by the law, and further ruled that the
Foreign Currency Deposits Act cannot be utilized to
perpetuate injustice. Following such
Page 58
 pronouncements, it is respectfully submitted that translate to a declaration of assent in the findings of fact and
foreign currency deposits of Filipino depositors, conclusions of law contained therein. With respect specifically to the
including herein complainant, are not covered by the resolution for violation of Section 8 of Rep. Act. No. 6426, public
Foreign Currency Deposits Act, and are thus not respondents relied on the whereas clause of P.D. No. 1246 which
exempt from the processes duly-issued by the BIR. amended Rep. Act No. 6426 and on the Salvacion case to conclude
that only non-residents who are not engaged in trade and business
We do not perceive any grave abuse of discretion on the
are under the mantle of protection of Section 8 of Rep. Act. No.
part of the public respondent when they issued the aforecited
6426. Assuming that such reliance is erroneous as contended by
rulings. We, thus, defer to the policy of non-interference in the conduct
petitioner, this Court, on petition for certiorari, cannot correct the
of preliminary investigations. We have invariably stated that it is not
same as the error is not of a degree that would amount to a clear
sound practice to depart from the policy of non-interference in the
case of abuse of discretion of the grave and malevolent kind. It is
Ombudsman's exercise of discretion to determine whether or not to file
axiomatic that not every erroneous conclusion of law or fact is
information against an accused. The rule is based not only upon
abuse of discretion. As adverted to earlier, this Court will interfere
respect for the investigatory and prosecutory powers granted by the
in the Ombudsmans findings of fact and conclusions of law only in
Constitution to the Office of the Ombudsman but upon practicality as
clear cases of grave abuse of discretion. (Emphasis supplied)
well. Otherwise, the functions of the courts will be grievously hampered
by innumerable petitions assailing the dismissal of investigatory
proceedings conducted by the Office of the Ombudsman with regard to
In other words, the Senate Impeachment Court was more than amply
complaints filed before it, in much the same way that the courts would
justified in issuing the assailed subpoena and demonstrated sufficient care to
be absolutely swamped if they could be compelled to review the
observe the law in defining the parameters of the applicability of its assailed
exercise of discretion on the part of the fiscals or prosecuting attorneys
order to PSBank. This Court is completely wrong to deny the Impeachment
each time they decided to file an information in court or dismissed a
Courts use of the Salvacion case in justifying the assailed subpoena, when
complaint by a private complainant. Thus, in the absence of a clear case
this Court in Estrada v. Desierto recognized the Ombudsmans right to rely
of abuse of discretion, this Court will not interfere with the discretion of
on Salvacion.
the Ombudsman, who, depending on his own findings and considered
evaluation of the case, either dismisses a complaint or proceeds with it.
(Emphasis and underlining supplied.)
The Requirements for the
Issuance of a TRO

Moreover, in this case, the Court en banc unanimously stated that

the Ombudsmans interpretation of R.A. 6426 and Salvacion, should it
even be shown to be erroneous, may not be the subject of a Petition for
Certiorari, since the exercise of discretion was not so grave as to give
this Court the power to interfere with the proceedings therein, thus:
A cautionary word. A declaration by this Court that the public
respondents did not gravely abuse their discretion in issuing the
resolutions dismissing petitioners complaint does not necessarily
For a preliminary injunctive relief to issue, three conditions must
obtain: (a) the invasion of right sought to be protected is material and
substantial; (b) the right of the plaintiff is clear and unmistakable; and (c)
there is an urgent and paramount necessity for the writ to prevent serious
damage.[12]
In the present case, petitioners have miserably failed to show an
actual existing right that is violated or threatened with violation. The issuance

BANKING LAW (18 October 2018 Cases) Page 59

by the Impeachment Court of a subpoena relating to the alleged FCDs of
therein respondent Chief Justice Renato C. Corona does not entitle
petitioners to a preliminary injunctive relief.
Since Anyone Has Yet to
Claim Ownership of the 5
FCDs, PSBank Cannot
Prematurely Invoke the
Privilege of Absolute
Confidentiality
Section 8 of R.A. No. 6426 provides an exception to the absolute
confidentiality nature of FCDs, in that the written permission of the depositor
may constitute a waiver of this privilege. What can be logically inferred from
this provision is that the confidentiality nature of the FCD is extended only in
favor of the owner of the account. Stated differently, it is only the depositor
who may invoke the confidentiality privilege and the exception thereto. This
was precisely the pronouncement of this Court in Van Twest v. Court of
Appeals:[13]
[T]he Court holds that the privileges extended by
the statute cited by private respondent are actually
enjoyed, and are invocable only, by the petitioner, both
because private respondent's transactions fall outside the
ambit of the statute, and because petitioner is the owner
of the foreign exchange fund subject of this case. This
conclusion is anchored on the consistent and
contemporaneous administrative construction by the Central
Bank of the basic statute, as manifested in the relevant
circulars issued by it in implementation of that law, which are
entitled to great respect by the courts.
Section 8 of R.A. No. 6426 (the Foreign Currency
Deposit Act), as amended by P.D. No. 1246, which is still in
force, provides:
BANKING LAW (18 October 2018 Cases)
Sec. 8. Secrecy of Foreign Currency
Deposits All foreign currency deposits
authorized under this Act, as amended by
Presidential Decree No. 1035, as well as
foreign currency deposits authorized under
Presidential Decree No. 1034, are hereby
declared as and considered of an absolutely
confidential nature and, except upon the
written permission of the depositor, in no
instance shall such foreign currency
deposits be examined, inquired or looked
into by any person, government official,
bureau or office, whether judicial or
administrative or legislative or any other
entity whether public or private: Provided,
however, that said foreign currency shall be
exempt from attachment, garnishment, or
any other order or process of any court,
legislative body, government agency or any
administrative body whatsoever.
xxx xxx xxx
Circular No. 960 was superseded by Circular No.
1318, Series of 1992, which did not reenact and continue the
administrative provision above-mentioned (Section 102).
Nevertheless, Section seventy-four, Chapter seven of
Circular No. 1318, which deals with the foreign currency
deposit system, provides in relevant part:
Section 74. Definition of Terms. As
used in this Chapter, the following terms
shall have the meaning indicated unless the
context clearly indicates otherwise:
xxx xxx xxx
Page 60
 The definition of such other terms
used in this Chapter shall be consistent with
the definition of terms used under the
Chapter on Offshore Banking System.
Section forty-nine, Chapter five of the same Circular,
dealing with the Offshore Banking System, stated in part:
Section 49. Definition of Terms. . . .
xxx xxx xxx
d. Deposits shall refer to funds in
foreign currencies which are accepted and
held by an OBU (offshore banking unit) in
the regular course of business, with the
obligation to return an equivalent amount to
the owner thereof, with or without interest;
xxx xxx xxx
In other words, although transfers from one foreign
currency deposit account to another foreign currency deposit
account in the Philippines are now eligible deposits under
the Central Bank's Foreign Currency Deposit
System, private respondent is still not entitled to the
confidentiality provisions of the relevant circulars. For,
as noted earlier, private respondent is not the owner of
such foreign currency funds and her personal deposit
account is not, under Section 49 of Circular No. 1318,
protected by this Circular. (Emphasis supplied.)
In the present case, the prosecution alleges that the FCD accounts
are owned by the Chief Justice, while the defense denies his ownership of
the same. The documents relating to these accounts were in fact
subpoenaed to ascertain whether the Chief Justice is the named depositor
BANKING LAW (18 October 2018 Cases)
therein. Thus, until the ownership of these FCDs is established, the
confidentiality privilege under R.A. 6426 is yet to attach.
Nowhere in the 28-page Petition of PSBank does it assert that the five FCDs
belong to Chief Justice Corona. Indeed, even under intense questioning by
the Senator-Judges, petitioner Garcia was not willing to share the slightest
information regarding these 5 FCDs.[14] Petitioners in their answer state:
x x x. On 3 February 2012, the Respondent Panel of Prosecutors
filed its Supplemental Request for Subpoena/Reply,
designating therein the particular bank accounts in PS BANK
which allegedly belonged to the Chief Justice x x x [15]
Neither does the Chief Justice categorically claim in his related
Petition for Certiorari docketed as G.R. No. 200242 that the five FCDs belong
to him.
Chief Justice Corona asserts that the documents on the five FCDs
are just alleged genuine documents, thus conveying the sense that he is
unwilling to admit that the FCDs are his. Yet, in the same breath, he
vigorously protests that without the owners permission, details on those
FCDs cannot be disclosed even to the Impeachment Court.
After a draft of this Opinion was circulated among the members of
this Court on 10 February 2011, a newspaper report came out the following
day referring to a public admission by the Chief Justice with respect to the
dollar accounts in question and a promise that he will make the disclosures in
due time.[16] This however, is not the claim of ownership contemplated in Van
Twest.
Additionally, defense counsel tells the media that they are standing
by the accuracy of the SALNs of the Chief Justice.[17] Explicitly, Tranquil
Salvador III, a defense spokesperson, said that the answer to the basic issue
of the accuracy of the details of Chief Justice Coronas SALN was the basic
Page 61
defense, and to the question Is it accurate? he responded: Yes, it is
accurate.[18]
Until therefore, there is a clear claim by the Chief Justice of
ownership of the 5 FCDs, this Court has to consider that there exists an
implied denial of ownership of any bank account containing money beyond
what is disclosed in the Chief Justices SALN.
What we have here is a situation in which a person seeks to have his
cake and eat it too. On the one hand, there is denial or at the very least, no
outright claim of ownership of the alleged FCDs; and yet, on the other, the
person seeks the absolute protection from disclosure that can only be
granted to an owner.
Considering that it is still premature for the Chief Justice to avail of
the confidentiality privilege as he continues to be vague on the ownership of
the FCDs, neither is it ripe for petitioners to invoke it on his behalf. Mere
compliance with the Impeachment Courts subpoena to bring the documents
will not engender petitioners perceived criminal liability or risk revocation of
the banks license to operate or suspension for violation of R.A. 6426,
precisely because the rule on secrecy has not yet attached. It is for the same
reason why this Court should treat as absurd petitioner Garcias contention
that the resulting exposure to imprisonment will deprive him of the right to
life.
A Constitutionally-Generated
Consent to Disclose Attaches
to the Holding of Any Public
Office
In the present case, because of the fact that the Chief Justice is a
public officer, he is constitutionally and statutorily mandated to perform a
positive duty to disclose all of his assets and liabilities. This already operates
as the consent required by law.
BANKING LAW (18 October 2018 Cases)
The Offices of the Chief Justice and of the 14 Associate Justices of
the Supreme Court are an express creation of the Constitution,[19] which
vests them with explicit powers[20]necessary for the proper functioning of a
democratic government.
Foremost is the principle that public office is by virtue of the peoples mandate
to exercise a sovereign function of the government.[21] Hence, a public office
is a public trust or agency.[22]Appended to the constitutional principle that
public office is a public trust is the tenet that public officers occupy very
delicate positions that exact certain standards generally not demanded from
or required of ordinary citizens.[23]
Those who accept a public office do so cum onere, or with a burden, and are
considered as accepting its burdens and obligations, together with its
benefits. They thereby subject themselves to all constitutional and legislative
provisions relating thereto, and undertake to perform all the duties of their
office. The public has the right to demand the performance of those duties.[24]
One of these burdens or duties is explicitly articulated in Sec. 17 of Art. XI of
the 1987 Constitution, viz:
A public officer or employee shall, upon assumption
of office and as often thereafter as may be required by
law, submit a declaration under oath of his assets,
liabilities, and net worth. In the case of the President, the
Vice-President, the Members of the Cabinet, the Congress,
the Supreme Court, the Constitutional Commissions and
other constitutional offices, and officers of the armed forces
with general or flag rank, the declaration shall be
disclosed to the public in the manner provided by
law. (Emphasis supplied.)
This provision requires all public officers and employees, regardless of rank,
to declare their assets and liabilities upon their assumption of office, as may
be required by law. However, it likewise imposes a positive duty and a
heavier onus on the President; the Vice-President; and members of the
Page 62
Cabinet, Congress, the Supreme Court, Constitutional Commissions and
other Constitutional offices and officers of the Armed Forces with general or
flag ranks to publicly disclose their assets and liabilities.[25]
Even prior to the 1987 and the 1973 Constitution, our laws have
already imposed the obligation to disclose ownership of properties and
assets. Thus, as early as 1960, R.A. 3019, otherwise known as the Anti-Graft
and Corrupt Practices Act, was promulgated, requiring from every public
officer a detailed and sworn statement of their assets and liabilities. Under
this law, failure to comply is prima facie evidence of unexplained wealth,
which may result in the dismissal from service of the public officer, viz:
SECTION 7. Statement of assets and liabilities.
Every public officer, within thirty days after assuming office
and, thereafter, on or before the fifteenth day of April
following the close of every calendar year, as well as upon
the expiration of his term of office, or upon his resignation or
separation from office, shall prepare and file with the office of
the corresponding Department Head, or in the case of a
Head of Department or Chief of an independent office, with
the Office of the President, a true, detailed and sworn
statement of assets and liabilities, including a statement of
the amounts and sources of his income, the amounts of his
personal and family expenses and the amount of income
taxes paid for the next preceding calendar year; Provided,
That public officers assuming office less than two months
before the end of the calendar year, may file their first
statement on or before the fifteenth day of April following the
close of the said calendar year.
SECTION 8. Prima facie evidence of and dismissal
due to unexplained wealth. If in accordance with the
provisions of Republic Act Numbered One thousand three
hundred seventy-nine, a public official has been found to
have acquired during his incumbency, whether in his name
or in the name of other persons, an amount of property
and/or money manifestly out of proportion to his salary and
BANKING LAW (18 October 2018 Cases)
to his other lawful income, that fact shall be a ground for
dismissal or removal. Properties in the name of the spouse
and dependents of such public official may be taken into
consideration, when their acquisition through legitimate
means cannot be satisfactorily shown. Bank deposits in the
name of or manifestly excessive expenditures incurred by
the public official, his spouse or any of their dependents
including but not limited to activities in any club or
association or any ostentatious display of wealth including
frequent travel abroad of a non-official character by any
public official when such activities entail expenses evidently
out of proportion to legitimate income, shall likewise be taken
into consideration in the enforcement of this section,
notwithstanding any provision of law to the contrary. The
circumstances hereinabove mentioned shall constitute valid
ground for the administrative suspension of the public official
concerned for an indefinite period until the investigation of
the unexplained wealth is completed.
On 13 November 1961, R.A. 3047 amended R.A. 3019 to the extent
of providing (a) the period within which a public official should make the
disclosure and (b) a specification of certain public officials who are exempted
from the said requirement.
On 20 February 1989, R.A. 6713, otherwise known as the Code of
Conduct and Ethical Standards for Public Officials and Employees, expanded
the disclosure obligation by (a) specifically enumerating the information
required to be disclosed as regards the assets, liabilities, business interests
and financial connections; (b) requiring the identification and disclosure of
relatives in government; (c) making the statements and disclosures available
and accessible to the public; and (d) prohibiting certain acts.
Even during the martial law years, all public employees were
required to declare their assets and liabilities, as mandated by Presidential
Decree (P.D.) No. 379.[26] It was later amended by P.D. 417,[27] enlarging the
Page 63
coverage of the mandatory disclosure. It was further amended by P.D.
555,[28] providing for stiffer penalties for the violation thereof.
It is clear from these laws that it has been the thrust of the State to
foster transparency and accountability of public officers through the
mandatory disclosures of their assets and liabilities. Thus, in Office of the
Court Administrator v. Usman,[29] we said:
From the foregoing, it is imperative that every public
official or government employee must make and submit a
complete disclosure of his assets, liabilities and net worth in
order to suppress any questionable accumulation of
wealth. This serves as the basis of the government and
the people in monitoring the income and lifestyle of
public officials and employees in compliance with the
constitutional policy to eradicate corruption, to promote
transparency in government, and to ensure that all
government employees and officials lead just and
modest lives, with the end in view of curtailing and
minimizing the opportunities for official corruption and
maintaining a standard of honesty in the public service.
In the present case, respondent clearly violated the
above-quoted laws when he failed to file his SALN for the
years 2004-2008. He gave no explanation either why he
failed to file his SALN for five (5) consecutive years. While
every office in the government service is a public trust,
no position exacts a greater demand on moral
righteousness and uprightness of an individual than a
seat in the Judiciary. Hence, judges are strictly
mandated to abide with the law, the Code of Judicial
Conduct and with existing administrative policies in
order to maintain the faith of our people in the
administration of justice. (Emphasis supplied.)
Additionally, all Members of the judiciary are bound by the Code of
Judicial Conduct to make a full financial disclosure, as required by law.[30]
BANKING LAW (18 October 2018 Cases)
Further, and more importantly, the Chief Justice, as any other public
officer, took a solemn oath of office, which he signed, and is couched, more
or less in the following language:
Ako ay taimtim na nanunumpa na tutuparin ko nang
buong husay at katapatan, sa abot ng aking kakayahan, ang
mga tungkulin ng aking kasalukuyang katungkulan at ng iba
pang pagkaraan nitoy gagampanan ko sa ilalim ng
Republika ng Pilipinas; na aking itataguyod at ipagtatanggol
ang Saligang Batas ng Pilipinas na tunay; na mananalig at
tatalima ako rito; na susundin ko ang mga batas, mga
kautusang legal, at mga dekretong pinaiiral ng mga sadyang
itinakdang maykapangyarihan ng Republika ng Pilipinas; at
kusa kong babalikatin ang pananagutang ito nang walang
anumang pasubali o hangaring umiwas.
Kasihan nawa ako ng Diyos.
When a public officer affixes his signature on his Oath of Office, he
embraces all his constitutional and statutory duties as a public officer, one of
which is the positive duty to disclose all of his assets and liabilities. Thus, for
all public officers, what is absolute is not the confidentiality privilege, but
the obligation of disclosure.
Public Interest must be
Held Paramount over
Private or Economic
Concerns
Even if this Court were to accept the mistaken view of petitioners that
they need to secure a written consent to disclose the alleged FCD accounts,
the circumstances of this case would nevertheless warrant their exemption
from the confidentiality rule of Sec. 8 of R.A. 6426.
Page 64
 Petitioners, as well as the assailed Resolution, maintain that this
Courts previous rulings[31] on the interpretation of Sec. 8 of R.A. 6426 are
inapplicable, and they stubbornly cling to the theory that the secrecy of FCDs
is absolute. This erroneous contention behooves a review of the subject
jurisprudence, which establishes two salient points: (a) the law was enacted
purely for economic considerations, and (b) the application of the
confidentiality privilege is not absolute.
In Salvacion v. Central Bank of the Philippines,[32] China Banking
Corporation v. Court of Appeals,[33] and Government Service Insurance
System v. Court of Appeals,[34] this Court held that R.A. 6426 was enacted in
the midst of a financial downturn as a result of the Martial Law years, when
foreign investments were minimal. Thus, the legislation sought to address
this economic trough by attracting FCDs that can, in turn, be channelled to
loans and investments in the Philippines.
More significantly, in Salvacion, this Court categorically established
that the prohibition under Sec. 8 of R.A. 6426 is not absolute. In that case,
this Court weighed the interests of a rape victim and those of the accused
foreigner by determining the hierarchy of interests in this wise:
In fine, the application of the law depends on the
extent of its justice. Eventually, if we rule that the
questioned Section 113 of Central Bank Circular No. 960
which exempts from attachment, garnishment, or any other
order or process of any court, legislative body, government
agency or any administrative body whatsoever, is applicable
to a foreign transient, injustice would result especially to a
citizen aggrieved by a foreign guest like accused Greg
Bartelli. This would negate Article 10 of the New Civil
Code which provides that "in case of doubt in the
interpretation or application of laws, it is presumed that
the lawmaking body intended right and justice to
prevail. Ninguno non deue enriquecerse tortizeramente con
dano de otro. Simply stated, when the statute is silent or
ambiguous, this is one of those fundamental solutions that
would respond to the vehement urge of conscience. (Padilla
vs. Padilla, 74 Phil. 377).
BANKING LAW (18 October 2018 Cases)
It would be unthinkable, that the questioned
Section 113 of Central Bank No. 960 would be used as a
device by accused Greg Bartelli for wrongdoing, and in
so doing, acquitting the guilty at the expense of the
innocent.
Call it what it may but is there no conflict of legal
policy here? Dollar against Peso? Upholding the final and
executory judgment of the lower court against the Central
Bank Circular protecting the foreign depositor? Shielding or
protecting the dollar deposit of a transient alien depositor
against injustice to a national and victim of a crime? This
situation calls for fairness against legal tyranny.
We definitely cannot have both ways and rest in
the belief that we have served the ends of
justice.[35] (Emphasis supplied.)
Similarly in the present case, this Court is faced with the task of
balancing two interplaying interests.
On the one hand is the opinion of petitioners that they will be held
accountable for criminal and administrative liability, should they follow the
Subpoena issued by the Impeachment Court.[36] They allege that Sec. 10 of
R.A. 6426 provides that any wilful violation of the law shall expose them to
criminal liability of imprisonment of not less than one (1) year nor more than
five (5) years or a fine of not less than five thousand pesos (₱5,000), nor
more than twenty-five thousand pesos (₱25,000), or both such fine and
imprisonment at the discretion of the court. They further allege that
the Bangko Sentral ng Pilipinas (BSP) may also revoke or suspend their
authority to accept new foreign currency deposits, pursuant to the second
paragraph of Sec. 87(1)[37] of the Manual of Regulations for Foreign
Exchange Transactions.
Page 65
 On the other hand is the interest of the public in ensuring
accountability of public officers. Without a doubt, the scale of balance must
tilt in favor of public interest.
First, the purpose of R.A. 6426 can never, even for the longest
stretch of imagination, defeat the purpose of the constitutionally established
process of impeachment.
As stated earlier, upon its passage, the purpose of R.A. 6426 was
merely to encourage foreign investments from foreign entities. It is therefore
inconceivable to sacrifice the peoples will expressed in the Constitution in
favor of a private interest.
Second, petitioners presume that liability will automatically attach
upon their production of the alleged foreign currency deposit accounts,
despite such compliance being pursuant to a lawful order of the
Impeachment Court. To say that they will inevitably become criminally liable
is to presume the filing of a Complaint for the violation of R.A. 6426. The
contention of petitioners is highly speculative and preemptive.
Also tenuous are their fears that the intrusion upon the FCD
accounts may cause a chilling effect on other banks or may cause a bank
run.
Petitioners have not denied lack of knowledge of Art. 11 of the
Revised Penal Code that enumerates the justifying circumstances that would
ultimately exculpate an accused from liability. Applicable to petitioners is
paragraph (6), to wit:
Any person who acts in obedience to an order
issued by a superior for some lawful purpose.
This provision alone renders the fears of petitioners unfounded. To
insist that they will be held criminally liable for the acts that the subpoena
ordered them to do is to say that either the Impeachment Court is not a
BANKING LAW (18 October 2018 Cases)
superior body, or that the impeachment proceedings are not a lawful
purpose, or both.
This particular rule in criminal law was brought to the attention of
petitioner Garcia by Senator Francis Pangilinan during the impeachment
proceedings on 8 February 2012.
Art. 11(6) was again explained by Senator Alan Peter Cayetano to
petitioner Garcia the following day. In the course of his questioning, Senator
Cayetano asked petitioner if the latter had read Salvacion. Petitioner Garcia
replied, Yes. Later, while he was again being questioned on this matter by
Senator Pia Cayetano, it was evident that he knew that the Court
in Salvaciondid not hold the bank employees criminally liable for following the
lawful order of the court, since he himself pointed out that the disclosure
in Salvacion was pursuant to a lawful order of the court therein. Throughout
the proceedings, petitioner Garcia repeatedly informed the Impeachment
Court that he was under advice of counsel, and that his options and the legal
ramifications of the subpoena had sufficiently been explained to him and to
petitioner PS Bank. Petitioners cannot claim innocence or ignorance of the
rules on criminal liability.
It is also noteworthy that in Estrada v. Desierto,[38] this Court did not
find any grave abuse of discretion when the bank employees of Citibank
were absolved from any criminal liability, stating thus:
In dismissing petitioners complaint for Usurpation of
Official Function against private respondents, public
respondents reasoned
xxx xxx xxx
With the establishment of
respondent Heftis authority in the issuance
of the constructive distraint, the subsequent
act of respondent Dagdag in serving the
said distraint to the Citibank, as well as the
act of respondents Equillos and Albiento in
witnessing the service of the same to the
Page 66
 said bank, can not (sic) be construed as act Granting the prayer of petitioners for injunctive relief is tantamount to
in agreement to commit the crime of endorsing their position on absolute confidentiality, so much so that higher
Usurpation of Authority in the light of the values, such as public accountability, cannot even be considered as a valid
foregoing discussion. exception to the said privilege. This contention pushes the law to an
absurdity, as the adherence to this absolutist stance invites unscrupulous
The same thing holds true to the public officers to convert their peso deposits to foreign currency accounts in
bank officers who were made order to hide from the law and evade criminal liability. As a result, R.A. 6426
respondents in this case, considering is used as a shield to conceal malfeasance and other unlawful conduct. This
that their act in informing complainant Courts Resolution has therefore created a safe haven for criminal acts and
regarding the existence of the cultivated an atmosphere of impunity. Certainly, this was never the
constructive distraint as well as in intendment of the law.
implementing the said distraint against
the latters account with the said bank,
[were] merely in compliance to an order In the end, this Courts Resolution results in an iniquitous situation,
issued by a competent where the supreme interest of the public to maintain accountability among
authority. (Emphasis supplied.) public officers is relegated to the sidelines in favor of a statutory privilege that
xxx xxx xxx arose purely out of economic considerations. Considering that petitioners
We do not perceive any grave abuse of alleged entitlement to the injunctive relief is based on mere news reports,
discretion on the part of the public respondents when exaggerated theories of a possible bank run, or stubborn fears of culpability,
they issued the aforecited rulings. xxx (Emphasis this Court has no basis to enjoin the Impeachment Court from exercising its
supplied.) constitutional mandate to require the production of documents and the
rendering of testimony before it under the assailed subpoena.

Equally speculative is petitioners fear that PSBanks authority to Accordingly, I vote to DENY the application for a temporary
operate an FCD account will be revoked. restraining order.

It must be emphasized that the Impeachment Court is a special

accountability mechanism reserved for the highest officials of the State: the *PSBank vs Senate case (PDF)
President, the Vice-President, the Members of the Supreme Court, the
Members of the Constitutional Commissions and the Ombudsman. It is * People vs Estrada repeated case
the only process by which the public, represented by the House of
Representatives, demand from the Senate the prosecution of public officials
for culpable violation of the Constitution, treason, bribery, graft and C.
corruption, other high crimes, or betrayal of public trust. Thus, it is a method
of national inquest into the conduct of public officers.[39] REPUBLIC OF THE PHILIPPINES, G.R. No. 174629
Represented by THE ANTI-MONEY
LAUNDERING COUNCIL (AMLC), Present:
Petitioner,

BANKING LAW (18 October 2018 Cases) Page 67

 Solicitor General (OSG) wrote the AMLC requesting the lattersassistance in
QUISUMBING, J., obtaining more evidence to completely reveal the financial trail of corruption
Chairperson, surrounding the [NAIA 3] Project, and also noting that petitioner Republic of
- versus - AUSTRIA MARTINEZ,* the Philippines was presently defending itself in two international arbitration
CARPIO MORALES, cases filed in relation to the NAIA 3 Project.[4] The CIS conducted an
TINGA, and intelligence database search on the financial transactions of certain
HON. ANTONIO M. EUGENIO, VELASCO, JR., JJ. individuals involved in the award, including respondent Pantaleon Alvarez
JR., AS PRESIDING JUDGE OF (Alvarez) who had been the Chairman of the PBAC Technical Committee,
RTC, MANILA, BRANCH 34, NAIA-IPT3 Project.[5] By this time, Alvarez had already been charged by the
PANTALEON ALVAREZ and Promulgated: Ombudsman with violation of Section 3(j) of R.A. No. 3019. [6] The search
LILIA CHENG, revealed that Alvarez maintained eight (8) bank accounts with six (6) different
Respondents. February 14, 2008 banks.[7]

x ---------------------------------------------------------------------------------------x
DECISION
TINGA, J.:
The present petition for certiorari and prohibition under Rule 65 assails the
orders and resolutions issued by two different courts in two different cases.
The courts and cases in question are the Regional Trial Court of Manila,
Branch 24, which heard SP Case No. 06-114200[1] and the Court of Appeals,
Tenth Division, which heared CA-G.R. SP No. 95198.[2] Both cases arose as
part of the aftermath of the ruling of this Court in Agan v. PIATCO[3] nullifying
the concession agreement awarded to the Philippine International Airport
Terminal Corporation (PIATCO) over
the Ninoy Aquino International Airport International Passenger Terminal 3
(NAIA 3) Project.
I.
Following the promulgation of Agan, a series of investigations concerning the
award of the NAIA 3 contracts to PIATCO were undertaken by the
Ombudsman and the Compliance and Investigation Staff (CIS) of petitioner
Anti-Money Laundering Council (AMLC). On 24 May 2005, the Office of the
On 27 June 2005, the AMLC issued Resolution No. 75, Series of
2005,[8] whereby the Council resolved to authorize the Executive Director of
the AMLC to sign and verify an application to inquire into and/or examine the
[deposits] or investments of Pantaleon Alvarez, Wilfredo Trinidad, Alfredo
Liongson, and Cheng Yong, and their related web of accounts wherever
these may be found, as defined under Rule 10.4 of the Revised
Implementing Rules and Regulations; and to authorize the AMLC Secretariat
to conduct an inquiry into subject accounts once the Regional Trial Court
grants the application to inquire into and/or examine the bank accounts of
those four individuals.[9] The resolution enumerated the particular bank
accounts of Alvarez, Wilfredo Trinidad (Trinidad), Alfredo Liongson
(Liongson) and Cheng Yong which were to be the subject of the
inquiry.[10] The rationale for the said resolution was founded on the cited
findings of the CIS that amounts were transferred from a Hong Kong bank
account owned by Jetstream Pacific Ltd. Account to bank accounts in
the Philippines maintained by Liongson and Cheng Yong.[11] The Resolution
also noted that [b]y awarding the contract to PIATCO despite its lack of
financial capacity, Pantaleon Alvarez caused undue injury to the government
by giving PIATCO unwarranted benefits, advantage, or preference in the
discharge of his official administrative functions through manifest partiality,
evident bad faith, or gross inexcusable negligence, in violation of Section
3(e) of Republic Act No. 3019.[12]
Under the authority granted by the Resolution, the AMLC filed an application
to inquire into or examine the deposits or investments of Alvarez, Trinidad,

BANKING LAW (18 October 2018 Cases) Page 68

Liongson and Cheng Yong before the RTC of Makati, Branch 138, presided
by Judge (now Court of Appeals Justice) Sixto Marella, Jr. The application
was docketed as AMLC No. 05-005.[13] The Makati RTC heard the testimony
of the Deputy Director of the AMLC, Richard David C. Funk II, and received
the documentary evidence of the AMLC.[14] Thereafter, on 4 July 2005, the
Makati RTC rendered an Order (Makati RTC bank inquiry order) granting the
AMLC the authority to inquire and examine the subject bank accounts of
Alvarez, Trinidad, Liongson and Cheng Yong, the trial court being satisfied
that there existed [p]robable cause [to] believe that the deposits in various
bank accounts, details of which appear in paragraph 1 of the Application, are
related to the offense of violation of Anti-Graft and Corrupt Practices Act now
the subject of criminal prosecution before the Sandiganbayan as attested to
by the Informations, Exhibits C, D, E, F, and G.[15]Pursuant to the Makati
RTC bank inquiry order, the CIS proceeded to inquire and examine the
deposits, investments and related web accounts of the four.[16]
Meanwhile, the Special Prosecutor of the Office of the Ombudsman, Dennis
Villa-Ignacio, wrote a letter dated 2 November 2005, requesting the AMLC to
investigate the accounts of Alvarez, PIATCO, and several other entities
involved in the nullified contract. The letter adverted to probable cause to
believe that the bank accounts were used in the commission of unlawful
activities that were committed in relation to the criminal cases then pending
before the Sandiganbayan.[17] Attached to the letter was a memorandum on
why the investigation of the [accounts] is necessary in the prosecution of the
above criminal cases before the Sandiganbayan.[18]
In response to the letter of the Special Prosecutor, the AMLC promulgated on
9 December 2005 Resolution No. 121 Series of 2005,[19] which authorized
the executive director of the AMLC to inquire into and examine the accounts
named in the letter, including one maintained by Alvarez with DBS Bank and
two other accounts in the name of Cheng Yong with Metrobank. The
Resolution characterized the memorandum attached to the Special
Prosecutors letter as extensively justif[ying] the existence of probable cause
that the bank accounts of the persons and entities mentioned in the letter are
related to the unlawful activity of violation of Sections 3(g) and 3(e) of Rep.
Act No. 3019, as amended.[20]
BANKING LAW (18 October 2018 Cases)
Following the December 2005 AMLC Resolution, the Republic, through the
AMLC, filed an application[21] before the Manila RTC to inquire into and/or
examine thirteen (13) accounts and two (2) related web of accounts alleged
as having been used to facilitate corruption in the NAIA 3 Project. Among
said accounts were the DBS Bank account of Alvarez and the Metrobank
accounts of Cheng Yong. The case was raffled to Manila RTC, Branch 24,
presided by respondent Judge Antonio Eugenio, Jr., and docketed as SP
Case No. 06-114200.
On 12 January 2006, the Manila RTC issued an Order (Manila RTC bank
inquiry order) granting the Ex Parte Application expressing therein [that] the
allegations in said application to be impressed with merit, and in conformity
with Section 11 of R.A. No. 9160, as amended, otherwise known as the Anti-
Money Laundering Act (AMLA) of 2001 and Rules 11.1 and 11.2 of the
Revised Implementing Rules and Regulations.[22] Authority was thus granted
to the AMLC to inquire into the bank accounts listed therein.
On 25 January 2006, Alvarez, through counsel, entered his
appearance[23] before the Manila RTC in SP Case No. 06-114200 and filed
an Urgent Motion to Stay Enforcement of Order of January 12,
2006.[24] Alvarez alleged that he fortuitously learned of the bank inquiry order,
which was issued following an ex parte application, and he argued that
nothing in R.A. No. 9160 authorized the AMLC to seek the authority to
inquire into bank accounts ex parte.[25] The day after Alvarez filed his
motion, 26 January 2006, the Manila RTC issued an Order [26] staying the
enforcement of its bank inquiry order and giving the Republic five (5) days to
respond to Alvarezs motion.
The Republic filed an Omnibus Motion for Reconsideration[27] of the 26
January 2006 Manila RTC Order and likewise sought to strike out Alvarezs
motion that led to the issuance of said order. For his part, Alvarez filed a
Reply and Motion to Dismiss[28] the application for bank inquiry order. On 2
May 2006, the Manila RTC issued an Omnibus Order [29] granting the
Republics Motion for Reconsideration, denying Alvarezs motion to dismiss
and reinstating in full force and effect the Order dated 12 January 2006. In
the omnibus order, the Manila RTC reiterated that the material allegations in
the application for bank inquiry order filed by the Republic stood as the
Page 69
probable cause for the investigation and examination of the bank accounts
and investments of the respondents.[30]
Alvarez filed on 10 May 2006 an Urgent Motion[31] expressing his
apprehension that the AMLC would immediately enforce the omnibus order
and would thereby render the motion for reconsideration he intended to file
as moot and academic; thus he sought that the Republic be refrained from
enforcing the omnibus order in the meantime. Acting on this motion, the
Manila RTC, on 11 May 2006, issued an Order[32] requiring the OSG to file a
comment/opposition and reminding the parties that judgments and orders
become final and executory upon the expiration of fifteen (15) days from
receipt thereof, as it is the period within which a motion for reconsideration
could be filed. Alvarez filed his Motion for Reconsideration [33] of the omnibus
order on 15 May 2006, but the motion was denied by the Manila RTC in an
Order[34] dated 5 July 2006.
On 11 July 2006, Alvarez filed an Urgent Motion and
Manifestation[35] wherein he manifested having received reliable information
that the AMLC was about to implement the Manila RTC bank inquiry order
even though he was intending to appeal from it. On the premise that only a
final and executory judgment or order could be executed or implemented,
Alvarez sought that the AMLC be immediately ordered to refrain from
enforcing the Manila RTC bank inquiry order.
On 12 July 2006, the Manila RTC, acting on Alvarezs latest motion,
issued an Order[36] directing the AMLC to refrain from enforcing the order
dated January 12, 2006 until the expiration of the period to appeal, without
any appeal having been filed. On the same day, Alvarez filed a Notice of
Appeal[37] with the Manila RTC.
On 24 July 2006, Alvarez filed an Urgent Ex Parte Motion for
Clarification.[38] Therein, he alleged having learned that the AMLC had began
to inquire into the bank accounts of the other persons mentioned in the
application for bank inquiry order filed by the Republic. [39] Considering that
the Manila RTC bank inquiry order was issued ex parte, without notice to
those other persons, Alvarez prayed that the AMLC be ordered to refrain
from inquiring into any of the other bank deposits and alleged web of
accounts enumerated in AMLCs application with the RTC; and that the
BANKING LAW (18 October 2018 Cases)
AMLC be directed to refrain from using, disclosing or publishing in any
proceeding or venue any information or document obtained in violation of the
11 May 2006 RTC Order.[40]
On 25 July 2006, or one day after Alvarez filed his motion, the Manila
RTC issued an Order[41] wherein it clarified that the Ex Parte Order of this
Court dated January 12, 2006 can not be implemented against the deposits
or accounts of any of the persons enumerated in the AMLC Application until
the appeal of movant Alvarez is finally resolved, otherwise, the appeal would
be rendered moot and academic or even nugatory.[42] In addition, the AMLC
was ordered not to disclose or publish any information or document found or
obtained in [v]iolation of the May 11, 2006 Order of this Court.[43] The Manila
RTC reasoned that the other persons mentioned in AMLCs application were
not served with the courts 12 January 2006 Order. This 25 July 2006 Manila
RTC Order is the first of the four rulings being assailed through this petition.
In response, the Republic filed an Urgent Omnibus Motion for
Reconsideration[44] dated 27 July 2006, urging that it be allowed to
immediately enforce the bank inquiry order against Alvarez and that Alvarezs
notice of appeal be expunged from the records since appeal from an order of
inquiry is disallowed under the Anti money Laundering Act (AMLA).
Meanwhile, respondent Lilia Cheng filed with the Court of Appeals a
Petition for Certiorari, Prohibition and Mandamus with Application for TRO
and/or Writ of Preliminary Injunction[45] dated 10 July 2006, directed against
the Republic of the Philippines through the AMLC, Manila RTC Judge
Eugenio, Jr. and Makati RTC Judge Marella, Jr.. She identified herself as the
wife of Cheng Yong[46] with whom she jointly owns a conjugal bank account
with Citibank that is covered by the Makati RTC bank inquiry order, and two
conjugal bank accounts with Metrobank that are covered by the Manila RTC
bank inquiry order. Lilia Cheng imputed grave abuse of discretion on the part
of the Makati and Manila RTCs in granting AMLCs ex parte applications for a
bank inquiry order, arguing among others that the ex parte applications
violated her constitutional right to due process, that the bank inquiry order
under the AMLA can only be granted in connection with violations of the
AMLA and that the AMLA can not apply to bank accounts opened and
transactions entered into prior to the effectivity of the AMLA or to bank
accounts located outside the Philippines.[47]
Page 70

On 1 August 2006, the Court of Appeals, acting on Lilia Chengs
petition, issued a Temporary Restraining Order[48] enjoining
the Manila and Makati trial courts from implementing, enforcing or executing
the respective bank inquiry orders previously issued, and the AMLC from
enforcing and implementing such orders. On even date, the Manila RTC
issued an Order[49]resolving to hold in abeyance the resolution of the urgent
omnibus motion for reconsideration then pending before it until the resolution
of Lilia Chengs petition for certiorari with the Court of Appeals. The Court of
Appeals Resolution directing the issuance of the temporary restraining order
is the second of the four rulings assailed in the present petition.
The third assailed ruling[50]
was issued on 15 August 2006 by the
Manila RTC, acting on the Urgent Motion for Clarification[51] dated 14 August
2006 filed by Alvarez. It appears that the 1 August 2006 Manila RTC Order
had amended its previous 25 July 2006 Order by deleting the last paragraph
which stated that the AMLC should not disclose or publish any information or
document found or obtained in violation of the May 11, 2006 Order of this
Court.[52] In this new motion, Alvarez argued that the deletion of that
paragraph would allow the AMLC to implement the bank inquiry orders and
publish whatever information it might obtain thereupon even before the final
orders of the Manila RTC could become final and executory.[53] In the 15
August 2006 Order, the Manila RTC reiterated that the bank inquiry order it
had issued could not be implemented or enforced by the AMLC or any of its
representatives until the appeal therefrom was finally resolved and that any
enforcement thereof would be unauthorized.[54]
The present Consolidated Petition[55] for certiorari and prohibition
under Rule 65 was filed on 2 October 2006, assailing the two Orders of the
Manila RTC dated 25 July and 15 August 2006 and the Temporary
Restraining Order dated 1 August 2006 of the Court of Appeals. Through an
Urgent Manifestation and Motion[56] dated 9 October 2006, petitioner
informed the Court that on 22 September 2006, the Court of Appeals hearing
Lilia Chengs petition had granted a writ of preliminary injunction in her
favor.[57] Thereafter, petitioner sought as well the nullification of the 22
September 2006 Resolution of the Court of Appeals, thereby constituting the
fourth ruling assailed in the instant petition.[58]
BANKING LAW (18 October 2018 Cases)
The Court had initially granted a Temporary Restraining
Order[59] dated 6 October 2006 and later on a Supplemental Temporary
Restraining Order[60] dated 13 October 2006 in petitioners favor, enjoining the
implementation of the assailed rulings of the Manila RTC and the Court of
Appeals. However, on respondents motion, the Court, through a
Resolution[61]dated 11 December 2006, suspended the implementation of the
restraining orders it had earlier issued.
Oral arguments were held on 17 January 2007. The Court
consolidated the issues for argument as follows:
1. Did the RTC-Manila, in issuing the Orders
dated 25 July 2006 and 15 August 2006 which deferred
the implementation of its Order dated 12 January 2006,
and the Court of Appeals, in issuing its Resolution dated 1
August 2006, which ordered the status quo in relation to
the 1 July 2005 Order of the RTC-Makati and the 12
January 2006 Order of the RTC-Manila, both of which
authorized the examination of bank accounts under
Section 11 of Rep. Act No. 9160 (AMLA), commit grave
abuse of discretion?
(a) Is an application for an order
authorizing inquiry into or examination of
bank accounts or investments under Section
11 of the AMLA ex-parte in nature or one
which requires notice and hearing?
(b) What legal procedures and
standards should be observed in the
conduct of the proceedings for the issuance
of said order?
(c) Is such order susceptible to legal
challenges and judicial review?
2. Is it proper for this Court at this time and in this
case to inquire into and pass upon the validity of the 1
July 2005 Order of the RTC-Makati and the 12 January
Page 71
 2006 Order of the RTC-Manila, considering the pendency
of CA G.R. SP No. 95-198 (Lilia Cheng v. Republic)
wherein the validity of both orders was challenged?[62]
After the oral arguments, the parties were directed to file their
respective memoranda, which they did,[63] and the petition was thereafter
deemed submitted for resolution.
II.
Petitioners general advocacy is that the bank inquiry orders issued
by the Manila and Makati RTCs are valid and immediately enforceable
whereas the assailed rulings, which effectively stayed the enforcement of
the Manila and Makati RTCs bank inquiry orders, are sullied with grave
abuse of discretion. These conclusions flow from the posture that a bank
inquiry order, issued upon a finding of probable cause, may be issued ex
parte and, once issued, is immediately executory. Petitioner further argues
that the information obtained following the bank inquiry is necessarily
beneficial, if not indispensable, to the AMLC in discharging its awesome
responsibility regarding the effective implementation of the AMLA and that
any restraint in the disclosure of such information to appropriate agencies or
other judicial fora would render meaningless the relief supplied by the bank
inquiry order.
Petitioner raises particular arguments questioning Lilia Chengs right
to seek injunctive relief before the Court of Appeals, noting that not one of
the bank inquiry orders is directed against her. Her cryptic assertion that she
is the wife of Cheng Yong cannot, according to petitioner, metamorphose into
the requisite legal standing to seek redress for an imagined injury or to
maintain an action in behalf of another. In the same breath, petitioner argues
that Alvarez cannot assert any violation of the right to financial privacy in
behalf of other persons whose bank accounts are being inquired into,
particularly those other persons named in the Makati RTC bank inquiry order
who did not take any step to oppose such orders before the courts.
Ostensibly, the proximate question before the Court is whether a
bank inquiry order issued in accordance with Section 10 of the AMLA may be
BANKING LAW (18 October 2018 Cases)
stayed by injunction. Yet in arguing that it does, petitioner relies on what it
posits as the final and immediately executory character of the bank inquiry
orders issued by the Manila and Makati RTCs. Implicit in that position is the
notion that the inquiry orders are valid, and such notion is susceptible to
review and validation based on what appears on the face of the orders and
the applications which triggered their issuance, as well as the provisions of
the AMLA governing the issuance of such orders. Indeed, to test the viability
of petitioners argument, the Court will have to be satisfied that the subject
inquiry orders are valid in the first place. However, even from a cursory
examination of the applications for inquiry order and the orders themselves, it
is evident that the orders are not in accordance with law.
III.
A brief overview of the AMLA is called for.
Money laundering has been generally defined by the International
Criminal Police Organization (Interpol) `as any act or attempted act to
conceal or disguise the identity of illegally obtained proceeds so that they
appear to have originated from legitimate sources.[64] Even before the
passage of the AMLA, the problem was addressed by the Philippine
government through the issuance of various circulars by the Bangko Sentral
ng Pilipinas. Yet ultimately, legislative proscription was necessary, especially
with the inclusion of the Philippines in the Financial Action Task Forces list of
non-cooperative countries and territories in the fight against money
laundering.[65] The original AMLA, Republic Act (R.A.) No. 9160, was passed
in 2001. It was amended by R.A. No. 9194 in 2003.
Section 4 of the AMLA states that [m]oney laundering is a crime
whereby the proceeds of an unlawful activity as [defined in the law] are
transacted, thereby making them appear to have originated from legitimate
sources.[66] The section further provides the three modes through which the
crime of money laundering is committed. Section 7 creates the AMLC and
defines its powers, which generally relate to the enforcement of the AMLA
provisions and the initiation of legal actions authorized in the AMLA such as
civil forefeiture proceedings and complaints for the prosecution of money
laundering offenses.[67]
Page 72
 In addition to providing for the definition and penalties for the crime
of money laundering, the AMLA also authorizes certain provisional remedies
that would aid the AMLC in the enforcement of the AMLA. These are the
freeze order authorized under Section 10, and the bank inquiry order
authorized under Section 11.
Respondents posit that a bank inquiry order under Section 11 may be
obtained only upon the pre-existence of a money laundering offense case
already filed before the courts.[68] The conclusion is based on the phrase
upon order of any competent court in cases of violation of this Act, the word
cases generally understood as referring to actual cases pending with the
courts.
We are unconvinced by this proposition, and agree instead with the
then Solicitor General who conceded that the use of the phrase in cases of
was unfortunate, yet submitted that it should be interpreted to mean in the
event there are violations of the AMLA, and not that there are already cases
pending in court concerning such violations.[69] If the contrary position is
adopted, then the bank inquiry order would be limited in purpose as a tool in
aid of litigation of live cases, and wholly inutile as a means for the
government to ascertain whether there is sufficient evidence to sustain an
intended prosecution of the account holder for violation of the AMLA. Should
that be the situation, in all likelihood the AMLC would be virtually deprived of
its character as a discovery tool, and thus would become less circumspect in
filing complaints against suspect account holders. After all, under such set-
up the preferred strategy would be to allow or even encourage the
indiscriminate filing of complaints under the AMLA with the hope or
expectation that the evidence of money laundering would somehow surface
during the trial. Since the AMLC could not make use of the bank inquiry
order to determine whether there is evidentiary basis to prosecute the
suspected malefactors, not filing any case at all would not be an
alternative. Such unwholesome set-up should not come to pass. Thus
Section 11 cannot be interpreted in a way that would emasculate the remedy
it has established and encourage the unfounded initiation of complaints for
money laundering.
Still, even if the bank inquiry order may be availed of without need of a pre-
existing case under the AMLA, it does not follow that such order may be
BANKING LAW (18 October 2018 Cases)
availed of ex parte. There are several reasons why the AMLA does not
generally sanction ex parte applications and issuances of the bank inquiry
order.
IV.
It is evident that Section 11 does not specifically authorize, as a general rule,
the issuance ex parte of the bank inquiry order. We quote the provision in
full:
SEC. 11. Authority to Inquire into Bank
Deposits. ― Notwithstanding the provisions of Republic Act
No. 1405, as amended, Republic Act No. 6426, as amended,
Republic Act No. 8791, and other laws, the AMLC may
inquire into or examine any particular deposit or investment
with any banking institution or non bank financial institution
upon order of any competent court in cases of violation of
this Act, when it has been established that there is
probable cause that the deposits or investments are
related to an unlawful activity as defined in Section 3(i)
hereof or a money laundering offense under Section 4
hereof, except that no court order shall be required in
cases involving unlawful activities defined in Sections
3(i)1, (2) and (12).
To ensure compliance with this Act, the Bangko
Sentral ng Pilipinas (BSP) may inquire into or examine any
deposit of investment with any banking institution or non
bank financial institution when the examination is made in
the course of a periodic or special examination, in
accordance with the rules of examination of the
BSP.[70] (Emphasis supplied)
Of course, Section 11 also allows the AMLC to inquire into bank
accounts without having to obtain a judicial order in cases where there is
probable cause that the deposits or investments are related to kidnapping for
ransom,[71] certain violations of the Comprehensive Dangerous Drugs Act of
2002,[72] hijacking and other violations under R.A. No. 6235, destructive
Page 73
arson and murder. Since such special circumstances do not apply in this
case, there is no need for us to pass comment on this proviso. Suffice it to
say, the proviso contemplates a situation distinct from that which presently
confronts us, and for purposes of the succeeding discussion, our reference to
Section 11 of the AMLA excludes said proviso.
In the instances where a court order is required for the issuance of the bank
inquiry order, nothing in Section 11 specifically authorizes that such court
order may be issued ex parte. It might be argued that this silence does not
preclude the ex parte issuance of the bank inquiry order since the same is
not prohibited under Section 11. Yet this argument falls when the
immediately preceding provision, Section 10, is examined.
SEC. 10. Freezing of Monetary Instrument or
Property. ― The Court of Appeals, upon application ex
parte by the AMLC and after determination that probable
cause exists that any monetary instrument or property is in
any way related to an unlawful activity as defined in Section
3(i) hereof, may issue a freeze order which shall be
effective immediately. The freeze order shall be for a
period of twenty (20) days unless extended by the court. [73]
Although oriented towards different purposes, the freeze order under Section
10 and the bank inquiry order under Section 11 are similar in that they are
extraordinary provisional reliefs which the AMLC may avail of to effectively
combat and prosecute money laundering offenses. Crucially, Section 10
uses specific language to authorize an ex parte application for the
provisional relief therein, a circumstance absent in Section 11. If indeed the
legislature had intended to authorize ex parte proceedings for the issuance
of the bank inquiry order, then it could have easily expressed such intent in
the law, as it did with the freeze order under Section 10.
Even more tellingly, the current language of Sections 10 and 11 of
the AMLA was crafted at the same time, through the passage of R.A. No.
9194. Prior to the amendatory law, it was the AMLC, not the Court of
Appeals, which had authority to issue a freeze order, whereas a bank inquiry
order always then required, without exception, an order from a competent
court.[74]It was through the same enactment that ex parte proceedings were
BANKING LAW (18 October 2018 Cases)
introduced for the first time into the AMLA, in the case of the freeze order
which now can only be issued by the Court of Appeals. It certainly would
have been convenient, through the same amendatory law, to allow a
similar ex parte procedure in the case of a bank inquiry order had Congress
been so minded. Yet nothing in the provision itself, or even the available
legislative record, explicitly points to an ex parte judicial procedure in the
application for a bank inquiry order, unlike in the case of the freeze order.
That the AMLA does not contemplate ex parte proceedings in applications
for bank inquiry orders is confirmed by the present implementing rules and
regulations of the AMLA, promulgated upon the passage of R.A. No. 9194.
With respect to freeze orders under Section 10, the implementing rules do
expressly provide that the applications for freeze orders be filed ex
parte,[75] but no similar clearance is granted in the case of inquiry orders
under Section 11.[76] These implementing rules were promulgated by the
Bangko Sentral ng Pilipinas, the Insurance Commission and the Securities
and Exchange Commission,[77] and if it was the true belief of these
institutions that inquiry orders could be issued ex parte similar to freeze
orders, language to that effect would have been incorporated in the said
Rules. This is stressed not because the implementing rules could
authorize ex parte applications for inquiry orders despite the absence of
statutory basis, but rather because the framers of the law had no intention to
allow such ex parte applications.
Even the Rules of Procedure adopted by this Court in A.M. No. 05-11-04-
SC[78] to enforce the provisions of the AMLA specifically authorize ex
parte applications with respect to freeze orders under Section 10[79] but make
no similar authorization with respect to bank inquiry orders under Section 11.
The Court could divine the sense in allowing ex parte proceedings
under Section 10 and in proscribing the same under Section 11. A freeze
order under Section 10 on the one hand is aimed at preserving monetary
instruments or property in any way deemed related to unlawful activities as
defined in Section 3(i) of the AMLA. The owner of such monetary
instruments or property would thus be inhibited from utilizing the same for
the duration of the freeze order. To make such freeze order anteceded by a
judicial proceeding with notice to the account holder would allow for or lead
to the dissipation of such funds even before the order could be issued.
Page 74

On the other hand, a bank inquiry order under Section 11 does not
necessitate any form of physical seizure of property of the account holder.
What the bank inquiry order authorizes is the examination of the particular
deposits or investments in banking institutions or non-bank financial
institutions. The monetary instruments or property deposited with such banks
or financial institutions are not seized in a physical sense, but are examined
on particular details such as the account holders record of deposits and
transactions. Unlike the assets subject of the freeze order, the records to be
inspected under a bank inquiry order cannot be physically seized or hidden
by the account holder. Said records are in the possession of the bank and
therefore cannot be destroyed at the instance of the account holder alone as
that would require the extraordinary cooperation and devotion of the bank.
Interestingly, petitioners memorandum does not attempt to demonstrate
before the Court that the bank inquiry order under Section 11 may be
issued ex parte, although the petition itself did devote some space for that
argument. The petition argues that the bank inquiry order is a special and
peculiar remedy, drastic in its name, and made necessary because of a
public necessity [t]hus, by its very nature, the application for an order or
inquiry must necessarily, be ex parte. This argument is insufficient
justification in light of the clear disinclination of Congress to allow the
issuance ex parte of bank inquiry orders under Section 11, in contrast to the
legislatures clear inclination to allow the ex parte grant of freeze orders
under Section 10.
Without doubt, a requirement that the application for a bank inquiry
order be done with notice to the account holder will alert the latter that there
is a plan to inspect his bank account on the belief that the funds therein are
involved in an unlawful activity or money laundering offense.[80] Still, the
account holder so alerted will in fact be unable to do anything to conceal or
cleanse his bank account records of suspicious or anomalous transactions,
at least not without the whole-hearted cooperation of the bank, which
inherently has no vested interest to aid the account holder in such manner.
V.
BANKING LAW (18 October 2018 Cases)
The necessary implication of this finding that Section 11 of the AMLA
does not generally authorize the issuance ex parte of the bank inquiry order
would be that such orders cannot be issued unless notice is given to the
owners of the account, allowing them the opportunity to contest the issuance
of the order. Without such a consequence, the legislated distinction
between ex parte proceedings under Section 10 and those which are not ex
parte under Section 11 would be lost and rendered useless.
There certainly is fertile ground to contest the issuance of an ex
parte order. Section 11 itself requires that it be established that there is
probable cause that the deposits or investments are related to unlawful
activities, and it obviously is the court which stands as arbiter whether there
is indeed such probable cause. The process of inquiring into the existence of
probable cause would involve the function of determination reposed on the
trial court. Determination clearly implies a function of adjudication on the part
of the trial court, and not a mechanical application of a standard pre-
determination by some other body. The word "determination" implies
deliberation and is, in normal legal contemplation, equivalent to "the decision
of a court of justice."[81]
The court receiving the application for inquiry order cannot simply
take the AMLCs word that probable cause exists that the deposits or
investments are related to an unlawful activity. It will have to exercise its
own determinative function in order to be convinced of such fact. The
account holder would be certainly capable of contesting such probable cause
if given the opportunity to be apprised of the pending application to inquire
into his account; hence a notice requirement would not be an empty
spectacle. It may be so that the process of obtaining the inquiry order may
become more cumbersome or prolonged because of the notice requirement,
yet we fail to see any unreasonable burden cast by such circumstance. After
all, as earlier stated, requiring notice to the account holder should not, in any
way, compromise the integrity of the bank records subject of the inquiry
which remain in the possession and control of the bank.
Petitioner argues that a bank inquiry order necessitates a finding of
probable cause, a characteristic similar to a search warrant which is applied
to and heard ex parte. We have examined the supposed analogy between a
Page 75
search warrant and a bank inquiry order yet we remain to be unconvinced by
petitioner.
The Constitution and the Rules of Court prescribe particular
requirements attaching to search warrants that are not imposed by the AMLA
with respect to bank inquiry orders. A constitutional warrant requires that the
judge personally examine under oath or affirmation the complainant and the
witnesses he may produce,[82] such examination being in the form of
searching questions and answers.[83] Those are impositions which the
legislative did not specifically prescribe as to the bank inquiry order under the
AMLA, and we cannot find sufficient legal basis to apply them to Section 11
of the AMLA. Simply put, a bank inquiry order is not a search warrant or
warrant of arrest as it contemplates a direct object but not the seizure of
persons or property.
Even as the Constitution and the Rules of Court impose a high
procedural standard for the determination of probable cause for the issuance
of search warrants which Congress chose not to prescribe for the bank
inquiry order under the AMLA, Congress nonetheless disallowed ex
parte applications for the inquiry order. We can discern that in exchange for
these procedural standards normally applied to search warrants, Congress
chose instead to legislate a right to notice and a right to be heard
characteristics of judicial proceedings which are not ex parte. Absent any
demonstrable constitutional infirmity, there is no reason for us to dispute
such legislative policy choices.
VI.
The Courts construction of Section 11 of the AMLA is undoubtedly
influenced by right to privacy considerations. If sustained, petitioners
argument that a bank account may be inspected by the government following
an ex parte proceeding about which the depositor would know nothing would
have significant implications on the right to privacy, a right innately cherished
by all notwithstanding the legally recognized exceptions thereto. The notion
that the government could be so empowered is cause for concern of any
individual who values the
right to privacy which, after all, embodies even the right to be let
BANKING LAW (18 October 2018 Cases)
alone, the most comprehensive of rights and the right most valued by
civilized people.[84]
One might assume that the constitutional dimension of the right to
privacy, as applied to bank deposits, warrants our present inquiry. We
decline to do so. Admittedly, that question has proved controversial in
American jurisprudence. Notably, the United States Supreme Court in U.S. v.
Miller[85] held that there was no legitimate expectation of privacy as to the
bank records of a depositor.[86] Moreover, the text of our Constitution has not
bothered with the triviality of allocating specific rights peculiar to bank
deposits.
However, sufficient for our purposes, we can assert there is a right to
privacy governing bank accounts in the Philippines, and that such right finds
application to the case at bar. The source of such right is statutory,
expressed as it is in R.A. No. 1405 otherwise known as the Bank Secrecy
Act of 1955. The right to privacy is enshrined in Section 2 of that law, to wit:
SECTION 2. All deposits of whatever nature
with banks or banking institutions in the Philippines
including investments in bonds issued by the
Government of the Philippines, its political
subdivisions and its instrumentalities, are hereby
considered as of an absolutely confidential
nature and may not be examined, inquired or looked into
by any person, government official, bureau or office,
except upon written permission of the depositor, or in
cases of impeachment, or upon order of a competent
court in cases of bribery or dereliction of duty of public
officials, or in cases where the money deposited or
invested is the subject matter of the litigation. (Emphasis
supplied)
Because of the Bank Secrecy Act, the confidentiality of bank
deposits remains a basic state policy in the Philippines.[87] Subsequent laws,
Page 76
including the AMLA, may have added exceptions to the Bank Secrecy Act,
yet the secrecy of bank deposits still lies as the general rule. It falls within the
zones of privacy recognized by our laws.[88] The framers of the 1987
Constitution likewise recognized that bank accounts are not covered by
either the right to information[89] under Section 7, Article
III or under the requirement of full public disclosure[90]under
Section 28, Article II.[91] Unless the Bank Secrecy Act is repealed or
amended, the legal order is obliged to conserve the absolutely confidential
nature of Philippine bank deposits.
Any exception to the rule of absolute confidentiality must be
specifically legislated. Section 2 of the Bank Secrecy Act itself prescribes
exceptions whereby these bank accounts may be examined by any person,
government official, bureau or office; namely when: (1) upon written
permission of the depositor; (2) in cases of impeachment; (3) the
examination of bank accounts is upon order of a competent court in cases of
bribery or dereliction of duty of public officials; and (4) the money deposited
or invested is the subject matter of the litigation. Section 8 of R.A. Act No.
3019, the Anti-Graft and Corrupt Practices Act, has been recognized by this
Court as constituting an additional exception to the rule of absolute
confidentiality,[92] and there have been other similar recognitions as well.[93]
The AMLA also provides exceptions to the Bank Secrecy Act. Under
Section 11, the AMLC may inquire into a bank account upon order of any
competent court in cases of violation of the AMLA, it having been established
that there is probable cause that the deposits or investments are related to
unlawful activities as defined in Section 3(i) of the law, or a money laundering
offense under Section 4 thereof. Further, in instances where there is
probable cause that the deposits or investments are related to kidnapping for
BANKING LAW (18 October 2018 Cases)
ransom,[94] certain violations of the Comprehensive Dangerous Drugs Act of
2002,[95] hijacking and other violations under R.A. No. 6235, destructive
arson and murder, then there is no need for the AMLC to obtain a court order
before it could inquire into such accounts.
It cannot be successfully argued the proceedings relating to the bank
inquiry order under Section 11 of the AMLA is a litigation encompassed in
one of the exceptions to the Bank Secrecy Act which is when the money
deposited or invested is the subject matter of the litigation. The orientation of
the bank inquiry order is simply to serve as a provisional relief or remedy. As
earlier stated, the application for such does not entail a full-blown trial.
Nevertheless, just because the AMLA establishes additional
exceptions to the Bank Secrecy Act it does not mean that the later law has
dispensed with the general principle established in the older law that [a]ll
deposits of whatever nature with banks or banking institutions in the
Philippines x x x are hereby considered as of an absolutely confidential
nature.[96] Indeed, by force of statute, all bank deposits are absolutely
confidential, and that nature is unaltered even by the legislated exceptions
referred to above. There is disfavor towards construing these exceptions in
such a manner that would authorize unlimited discretion on the part of the
government or of any party seeking to enforce those exceptions and inquire
into bank deposits. If there are doubts in upholding the absolutely confidential
nature of bank deposits against affirming the authority to inquire into such
accounts, then such doubts must be resolved in favor of the former. Such a
stance would persist unless Congress passes a law reversing the general
state policy of preserving the absolutely confidential nature of Philippine bank
accounts.
The presence of this statutory right to privacy addresses at least one
of the arguments raised by petitioner, that Lilia Cheng had no personality to
assail the inquiry orders before the Court of Appeals because she was not
the subject of said orders. AMLC Resolution No. 75, which served as the
basis in the successful application for the Makati inquiry order, expressly
adverts to Citibank Account No. 88576248 owned by Cheng Yong and/or
Lilia G. Cheng with Citibank N.A.,[97] whereas Lilia Chengs petition before the
Court of Appeals is accompanied by a certification from Metrobank that
Account Nos. 300852436-0 and 700149801-7, both of which are among the
Page 77
subjects of the Manila inquiry order, are accounts in the name of Yong
Cheng or Lilia Cheng.[98] Petitioner does not specifically deny that Lilia Cheng
holds rights of ownership over the three said accounts, laying focus instead
on the fact that she was not named as a subject of either the Makati or
Manila RTC inquiry orders. We are reasonably convinced that Lilia Cheng
has sufficiently demonstrated her joint ownership of the three accounts, and
such conclusion leads us to acknowledge that she has the standing to assail
via certiorari the inquiry orders authorizing the examination of her bank
accounts as the orders interfere with her statutory right to maintain the
secrecy of said accounts.
While petitioner would premise that the inquiry into Lilia Chengs
accounts finds root in Section 11 of the AMLA, it cannot be denied that the
authority to inquire under Section 11 is only exceptional in character, contrary
as it is to the general rule preserving the secrecy of bank deposits. Even
though she may not have been the subject of the inquiry orders, her bank
accounts nevertheless were, and she thus has the standing to vindicate the
right to secrecy that attaches to said accounts and their owners. This
statutory right to privacy will not prevent the courts from authorizing the
inquiry anyway upon the fulfillment of the requirements set forth under
Section 11 of the AMLA or Section 2 of the Bank Secrecy Act; at the same
time, the owner of the accounts have the right to challenge whether the
requirements were indeed complied with.
VII.
There is a final point of concern which needs to be addressed. Lilia
Cheng argues that the AMLA, being a substantive penal statute, has no
retroactive effect and the bank inquiry order could not apply to deposits or
investments opened prior to the effectivity of Rep. Act No. 9164, or on 17
October 2001. Thus, she concludes, her subject bank accounts, opened
between 1989 to 1990, could not be the subject of the bank inquiry order lest
there be a violation of the constitutional prohibition against ex post
facto laws.
No ex post facto law may be enacted,[99] and no law may be
construed in such fashion as to permit a criminal prosecution offensive to
the ex post facto clause. As applied to the AMLA, it is plain that no person
BANKING LAW (18 October 2018 Cases)
may be prosecuted under the penal provisions of the AMLA for acts
committed prior to the enactment of the law on 17 October 2001. As much
was understood by the lawmakers since they deliberated upon the AMLA,
and indeed there is no serious dispute on that point.
Does the proscription against ex post facto laws apply to the
interpretation of Section 11, a provision which does not provide for a penal
sanction but which merely authorizes the inspection of suspect accounts and
deposits? The answer is in the affirmative. In this jurisdiction, we have
defined an ex post facto law as one which either:
(1) makes criminal an act done before the
passage of the law and which was innocent when done,
and punishes such an act;
(2) aggravates a crime, or makes it greater than it
was, when committed;
(3) changes the punishment and inflicts a greater
punishment than the law annexed to the crime when
committed;
(4) alters the legal rules of evidence, and
authorizes conviction upon less or different testimony than
the law required at the time of the commission of the
offense;
(5) assuming to regulate civil rights and remedies
only, in effect imposes penalty or deprivation of a right for
something which when done was lawful; and
(6) deprives a person accused of a crime of
some lawful protection to which he has become
entitled, such as the protection of a former conviction
or acquittal, or a proclamation of amnesty. (Emphasis
supplied)[100]
Prior to the enactment of the AMLA, the fact that bank accounts or
deposits were involved in activities later on enumerated in Section 3 of the
Page 78
law did not, by itself, remove such accounts from the shelter of absolute
confidentiality. Prior to the AMLA, in order that bank accounts could be
examined, there was need to secure either the written permission of the
depositor or a court order authorizing such examination, assuming that they
were involved in cases of bribery or dereliction of duty of public officials, or in
a case where the money deposited or invested was itself the subject matter
of the litigation. The passage of the AMLA stripped another layer off the rule
on absolute confidentiality that provided a measure of lawful protection to the
account holder. For that reason, the application of the bank inquiry order as a
means of inquiring into records of transactions entered into prior to the
passage of the AMLA would be constitutionally infirm, offensive as it is to
the ex post facto clause.
Still, we must note that the position submitted by Lilia Cheng is much
broader than what we are willing to affirm. She argues that the proscription
against ex post facto laws goes as far as to prohibit any inquiry into deposits
or investments included in bank accounts opened prior to the effectivity of the
AMLA even if the suspect transactions were entered into when the law had
already taken effect. The Court recognizes that if this argument were to be
affirmed, it would create a horrible loophole in the AMLA that would in turn
supply the means to fearlessly engage in money laundering in the
Philippines; all that the criminal has to do is to make sure that the money
laundering activity is facilitated through a bank account opened prior to 2001.
Lilia Cheng admits that actual money launderers could utilize the ex post
facto provision of the Constitution as a shield but that the remedy lay with
Congress to amend the law. We can hardly presume that Congress intended
to enact a self-defeating law in the first place, and the courts are inhibited
from such a construction by the cardinal rule that a law should be interpreted
with a view to upholding rather than destroying it. [101]
from scrutiny through a bank inquiry order, but it cannot yield any
interpretation that records of transactions undertaken after the enactment of
the AMLA are similarly exempt. Due to the absence of cited authority from
the legislative record that unqualifiedly supports respondent Lilia Chengs
thesis, there is no cause for us to sustain her interpretation of the AMLA, fatal
as it is to the anima of that law.
IX.
We are well aware that Lilia Chengs petition presently pending
before the Court of Appeals likewise assails the validity of the subject bank
inquiry orders and precisely seeks the annulment of said orders. Our current
declarations may indeed have the effect of preempting that0 petition. Still, in
order for this Court to rule on the petition at bar which insists on the
enforceability of the said bank inquiry orders, it is necessary for us to
consider and rule on the same question which after all is a pure question of
law.
WHEREFORE, the PETITION is DISMISSED. No pronouncement as
to costs.
SO ORDERED.
D.

Besides, nowhere in the legislative record cited by Lilia Cheng does PHILIPPINE DEPOSIT INSURANCE G.R. No. 170290
it appear that there was an unequivocal intent to exempt from the bank CORPORATION,
inquiry order all bank accounts opened prior to the passage of the AMLA.
There is a cited exchange between Representatives Ronaldo Zamora and Petitioner,
Jaime Lopez where the latter confirmed to the former that deposits are Present:
supposed to be exempted from scrutiny or monitoring if they are already in
place as of the time the law is enacted.[102] That statement does indicate that
transactions already in place when the AMLA was passed are indeed exempt

BANKING LAW (18 October 2018 Cases) Page 79

 Appeals (CA) in CA-G.R. CV No. 61316, entitled Citibank, N.A. and Bank of
- versus America, S.T. & N.A. v. Philippine Deposit Insurance Corporation.
VELASCO, JR., J., Chairperson,

PERALTA,

ABAD,
The Facts
MENDOZA, and
REYES,* JJ.
CITIBANK, N.A. and BANK OF AMERICA, Petitioner Philippine Deposit Insurance Corporation (PDIC) is a
S.T. & N.A., government instrumentality created by virtue of Republic Act (R.A.) No. 3591,
as amended by R.A. No. 9302.[2]
Respondents.
Respondent Citibank, N.A. (Citibank) is a banking corporation while
respondent Bank of America, S.T. & N.A. (BA) is a national banking
Promulgated:
association, both of which are duly organized and existing under the laws of
the United States of America and duly licensed to do business in
the Philippines, with offices in Makati City.[3]
April 11, 2012

In 1977, PDIC conducted an examination of the books of account of

Citibank. It discovered that Citibank, in the course of its banking business,
from September 30, 1974 to June 30, 1977, received from its head office and
x --------------------------------------------------------------------------------------- x
other foreign branches a total of P11,923,163,908.00 in dollars, covered by
Certificates of Dollar Time Deposit that were interest-bearing with
corresponding maturity dates.[4] These funds, which were lodged in the books
of Citibank under the account Their Account-Head Office/Branches-Foreign
DECISION Currency, were not reported to PDIC as deposit liabilities that were subject to
assessment for insurance.[5] As such, in a letter dated March 16, 1978, PDIC
assessed Citibank for deficiency in the sum of P1,595,081.96.[6]

Similarly, sometime in 1979, PDIC examined the books of accounts

MENDOZA, J.:
This is a petition for review under Rule 45 of the 1997 Revised Rules
of Civil Procedure, assailing the October 27, 2005 Decision[1] of the Court of
of BA which revealed that from September 30, 1976 to June 30, 1978, BA
received from its head office and its other foreign branches a total
of P629,311,869.10 in dollars, covered by Certificates of Dollar Time Deposit
that were interest-bearing with corresponding maturity dates and lodged in
their books under the account Due to Head Office/Branches. [7] Because BA
also excluded these from its deposit liabilities, PDIC wrote to BA on October

BANKING LAW (18 October 2018 Cases) Page 80

9, 1979, seeking the remittance of P109,264.83 representing deficiency
premium assessments for dollar deposits.[8]
Believing that litigation would inevitably arise from this dispute,
Citibank and BA each filed a petition for declaratory relief before the Court of
First Instance (now the Regional Trial Court) of Rizal on July 19,
1979 and December 11, 1979, respectively.[9] In their petitions, Citibank and
BA sought a declaratory judgment stating that the money placements they
received from their head office and other foreign branches were not deposits
and did not give rise to insurable deposit liabilities under Sections 3 and 4 of
R.A. No. 3591 (the PDIC Charter) and, as a consequence, the deficiency
assessments made by PDIC were improper and erroneous.[10] The cases
were then consolidated.[11]
On June 29, 1998, the Regional Trial Court, Branch 163, Pasig
City (RTC) promulgated its Decision[12] in favor of Citibank and BA, ruling that
the subject money placements were not deposits and did not give rise to
insurable deposit liabilities, and that the deficiency assessments issued by
PDIC were improper and erroneous. Therefore, Citibank and BA were not
liable to pay the same. The RTC reasoned out that the money placements
subject of the petitions were not assessable for insurance purposes under
the PDIC Charter because said placements were deposits made outside of
the Philippines and, under Section 3.05(b) of the PDIC Rules and
Regulations,[13] such deposits are excluded from the computation of deposit
liabilities.Section 3(f) of the PDIC Charter likewise excludes from the
definition of the term deposit any obligation of a bank payable at the office of
the bank located outside the Philippines. The RTC further stated that there
was no depositor-depository relationship between the respondents and their
head office or other branches. As a result, such deposits were not included
as third-party deposits that must be insured. Rather, they were considered
inter-branch deposits which were excluded from the assessment base, in
accordance with the practice of the United States Federal Deposit Insurance
Corporation (FDIC) after which PDIC was patterned.
Aggrieved, PDIC appealed to the CA which affirmed the ruling of the
RTC in its October 27, 2005 Decision. In so ruling, the CA found that the
money placements were received as part of the banks internal dealings by
Citibank and BA as agents of their respective head offices. This showed that
BANKING LAW (18 October 2018 Cases)
the head office and the Philippine branch were considered as the same
entity. Thus, no bank deposit could have arisen from the transactions
between the Philippine branch and the head office because there did not
exist two separate contracting parties to act as depositor and
depositary.[14] Secondly, the CA called attention to the purpose for the
creation of PDIC which was to protect the deposits of depositors in
the Philippines and not the deposits of the same bank through its head office
or foreign branches.[15] Thirdly, because there was no law or jurisprudence
on the treatment of inter-branch deposits between the Philippine branch of a
foreign bank and its head office and other branches for purposes of
insurance, the CA was guided by the procedure observed by the FDIC which
considered inter-branch deposits as non-assessable.[16] Finally, the CA cited
Section 3(f) of R.A. No. 3591, which specifically excludes obligations payable
at the office of the bank located outside the Philippines from the definition of
a deposit or an insured deposit. Since the subject money placements were
made in the respective head offices of Citibank and BA located outside
the Philippines, then such placements could not be subject to assessment
under the PDIC Charter.[17]
Hence, this petition.
The Issues
PDIC raises the issue of whether or not the subject dollar deposits are
assessable for insurance purposes under the PDIC Charter with the following
assigned errors:
A.
The appellate court erred in ruling that the subject
dollar deposits are money placements, thus, they are
not subject to the provisions of Republic Act No. 6426
otherwise known as the Foreign Currency Deposit Act
of the Philippines.
B.
Page 81
 The appellate court erred in ruling that the subject
dollar deposits are not covered by the PDIC
insurance.[18]
Respondents similarly identify only one issue in this case:
Whether or not the money placements subject matter of
these petitions are assessable for insurance purposes
under the PDIC Act.[19]
The sole question to be resolved in this case is whether the funds placed in
the Philippine branch by the head office and foreign branches of Citibank and
BA are insurable deposits under the PDIC Charter and, as such, are subject
to assessment for insurance premiums.
The Courts Ruling
The Court rules in the negative.
A branch has no separate legal personality;
Purpose of the PDIC
PDIC argues that the head offices of Citibank and BA and their individual
foreign branches are separate and independent entities. It insists that under
American jurisprudence, a banks head office and its branches have a
principal-agent relationship only if they operate in the same jurisdiction. In the
case of foreign branches, however, no such relationship exists because the
head office and said foreign branches are deemed to be two distinct
entities.[20] Under Philippine law, specifically, Section 3(b) of R.A. No. 3591,
which defines the terms bank and banking institutions, PDIC contends that
the law treats a branch of a foreign bank as a separate and independent
banking unit.[21]
The respondents, on the other hand, initially point out that the factual findings
of the RTC and the CA, with regard to the nature of the money placements,
the capacity in which the same were received by the respondents and the
exclusion of inter-branch deposits from assessment, can no longer be
BANKING LAW (18 October 2018 Cases)
disturbed and should be accorded great weight by this Court. [22] They also
argue that the money placements are not deposits. They postulate that for a
deposit to exist, there must be at least two parties a depositor and a
depository each with a legal personality distinct from the other. Because the
respondents respective head offices and their branches form only a single
legal entity, there is no creditor-debtor relationship and the funds placed in
the Philippine branch belong to one and the same bank. A bank cannot have
a deposit with itself.[23]
This Court is of the opinion that the key to the resolution of this
controversy is the relationship of the Philippine branches of Citibank and BA
to their respective head offices and their other foreign branches.
The Court begins by examining the manner by which a foreign corporation
can establish its presence in the Philippines. It may choose to incorporate its
own subsidiary as a domestic corporation, in which case such subsidiary
would have its own separate and independent legal personality to conduct
business in the country. In the alternative, it may create a branch in
the Philippines, which would not be a legally independent unit, and simply
obtain a license to do business in the Philippines.[24]
In the case of Citibank and BA, it is apparent that they both did not
incorporate a separate domestic corporation to represent its business
interests in the Philippines. Their Philippine branches are, as the name
implies, merely branches, without a separate legal personality from their
parent company, Citibank and BA. Thus, being one and the same entity, the
funds placed by the respondents in their respective branches in
the Philippines should not be treated as deposits made by third parties
subject to deposit insurance under the PDIC Charter.
For lack of judicial precedents on this issue, the Court seeks guidance from
American jurisprudence. In the leading case of Sokoloff v. The National City
Bank of New York,[25] where the Supreme Court of New York held:
Where a bank maintains branches, each branch
becomes a separate business entity with separate
books of account. A depositor in one branch cannot issue
checks or drafts upon another branch or demand payment
Page 82
 from such other branch, and in many other respects the
branches are considered separate corporate entities and as
distinct from one another as any other bank. Nevertheless,
when considered with relation to the parent bank they
are not independent agencies; they are, what their name
imports, merely branches, and are subject to the
supervision and control of the parent bank, and are
instrumentalities whereby the parent bank carries on its
business, and are established for its own particular
purposes, and their business conduct and policies are
controlled by the parent bank and their property and assets
belong to the parent bank, although nominally held in the
names of the particular branches. Ultimate liability for a
debt of a branch would rest upon the parent
bank. [Emphases supplied]
This ruling was later reiterated in the more recent case of United
States v. BCCI Holdings Luxembourg[26] where the United States Court of
Appeals, District of Columbia Circuit, emphasized that while individual bank
branches may be treated as independent of one another, each branch,
unless separately incorporated, must be viewed as a part of the parent bank
rather than as an independent entity.
In addition, Philippine banking laws also support the conclusion that the head
office of a foreign bank and its branches are considered as one legal
entity. Section 75 of R.A. No. 8791 (The General Banking Law of 2000) and
Section 5 of R.A. No. 7221 (An Act Liberalizing the Entry of Foreign Banks)
both require the head office of a foreign bank to guarantee the prompt
payment of all the liabilities of its Philippine branch, to wit:
Republic Act No. 8791:
Sec. 75. Head Office Guarantee. In order to provide
effective protection of the interests of the depositors and
other creditors of Philippine branches of a foreign bank, the
head office of such branches shall fully guarantee the
prompt payment of all liabilities of its Philippine branch.
BANKING LAW (18 October 2018 Cases)
Residents and citizens of the Philippines who are
creditors of a branch in the Philippines of foreign bank shall
have preferential rights to the assets of such branch in
accordance with the existing laws.
Republic Act No. 7721:
Sec. 5. Head Office Guarantee. The head office of foreign
bank branches shall guarantee prompt payment of all
liabilities of its Philippine branches.
Moreover, PDIC must be reminded of the purpose for its creation, as
espoused in Section 1 of R.A. No. 3591 (The PDIC Charter) which provides:
Section 1. There is hereby created a Philippine Deposit
Insurance Corporation hereinafter referred to as the
Corporation which shall insure, as herein provided, the
deposits of all banks which are entitled to the benefits of
insurance under this Act, and which shall have the powers
hereinafter granted.
The Corporation shall, as a basic policy, promote and
safeguard the interests of the depositing public by way of
providing permanent and continuing insurance coverage on
all insured deposits.
R.A. No. 9576, which amended the PDIC Charter, reaffirmed the
rationale for the establishment of the PDIC:
Section 1. Statement of State Policy and Objectives. - It is
hereby declared to be the policy of the State to strengthen
the mandatory deposit insurance coverage system to
generate, preserve, maintain faith and confidence in the
Page 83
 country's banking system, and protect it from illegal
schemes and machinations.
Towards this end, the government must extend all means
and mechanisms necessary for the Philippine Deposit
Insurance Corporation to effectively fulfill its vital task of
promoting and safeguarding the interests of the depositing
public by way of providing permanent and continuing
insurance coverage on all insured deposits, and in helping
develop a sound and stable banking system at all times.
The purpose of the PDIC is to protect the depositing public in the
event of a bank closure. It has already been sufficiently established
by US jurisprudence and Philippine statutes that the head office shall answer
for the liabilities of its branch. Now, suppose the Philippine branch of Citibank
suddenly closes for some reason. Citibank N.A. would then be required to
answer for the deposit liabilities of Citibank Philippines. If the Court were to
adopt the posture of PDIC that the head office and the branch are two
separate entities and that the funds placed by the head office and its foreign
branches with the Philippine branch are considered deposits within the
meaning of the PDIC Charter, it would result to the incongruous situation
where Citibank, as the head office, would be placed in the ridiculous position
of having to reimburse itself, as depositor, for the losses it may incur
occasioned by the closure of Citibank Philippines. Surely our law makers
could not have envisioned such a preposterous circumstance when they
created PDIC.
Finally, the Court agrees with the CA ruling that there is nothing in the
definition of a bank and a banking institution in Section 3(b) of the PDIC
Charter[27] which explicitly states that the head office of a foreign bank and its
other branches are separate and distinct from their Philippine branches.
There is no need to complicate the matter when it can be solved by simple
logic bolstered by law and jurisprudence. Based on the foregoing, it is clear
that the head office of a bank and its branches are considered as one under
the eyes of the law. While branches are treated as separate business units
for commercial and financial reporting purposes, in the end, the head office
remains responsible and answerable for the liabilities of its branches which
are under its supervision and control. As such, it is unreasonable for PDIC to
BANKING LAW (18 October 2018 Cases)
require the respondents, Citibank and BA, to insure the money placements
made by their home office and other branches. Deposit insurance is
superfluous and entirely unnecessary when, as in this case, the institution
holding the funds and the one which made the placements are one and the
same legal entity.
Funds not a deposit under the definition
of the PDIC Charter;
Excluded from assessment
PDIC avers that the funds are dollar deposits and not money
placements. Citing R.A. No. 6848, it defines money placement as a deposit
which is received with authority to invest.Because there is no evidence to
indicate that the respondents were authorized to invest the subject dollar
deposits, it argues that the same cannot be considered money
placements.[28] PDIC then goes on to assert that the funds received by
Citibank and BA are deposits, as contemplated by Section 3(f) of R.A. No.
3591, for the following reasons: (1) the dollar deposits were received by
Citibank and BA in the course of their banking operations from their
respective head office and foreign branches and were recorded in their
books as Account-Head Office/Branches-Time Deposits pursuant to Central
Bank Circular No. 343 which implements R.A. No. 6426; (2) the dollar
deposits were credited as dollar time accounts and were covered by
Certificates of Dollar Time Deposit which were interest-bearing and payable
upon maturity, and (3) the respondents maintain 100% foreign currency
cover for their deposit liability arising from the dollar time deposits as
required by Section 4 of R.A. No. 6426.[29]
To refute PDICs allegations, the respondents explain the inter-
branch transactions which necessitate the creation of the accounts or
placements subject of this case. When the Philippine branch needs to
procure foreign currencies, it will coordinate with a branch in another country
which handles foreign currency purchases. Both branches have existing
accounts with their head office and when a money placement is made in
relation to the acquisition of foreign currency from the international market,
the amount is credited to the account of the Philippine branch with its head
office while the same is debited from the account of the branch which
facilitated the purchase. This is further documented by the issuance of a
Page 84
certificate of time deposit with a stated interest rate and maturity date. The
interest rate represents the cost of obtaining the funds while the maturity date
represents the date on which the placement must be returned.On the
maturity date, the amount previously credited to the account of the Philippine
branch is debited, together with the cost for obtaining the funds, and credited
to the account of the other branch. The respondents insist that the interest
rate and maturity date are simply the basis for the debit and credit entries
made by the head office in the accounts of its branches to reflect the inter-
branch accommodation.[30] As regards the maintenance of currency cover
over the subject money placements, the respondents point out that they
maintain foreign currency cover in excess of what is required by law as a
matter of prudent banking practice.[31]
PDIC attempts to define money placement in order to impugn the
respondents claim that the funds received from their head office and other
branches are money placements and not deposits, as defined under the
PDIC Charter. In the process, it loses sight of the important issue in this
case, which is the determination of whether the funds in question are subject
to assessment for deposit insurance as required by the PDIC Charter. In its
struggle to find an adequate definition of money placement, PDIC
desperately cites R.A. No. 6848, The Charter of the Al-Amanah Islamic
Investment Bank of the Philippines. Reliance on the said law is unfounded
because nowhere in the law is the term money placement
defined. Additionally, R.A. No. 6848 refers to the establishment of an Islamic
bank subject to the rulings of Islamic Sharia to assist in the development of
the Autonomous Region of Muslim Mindanao (ARMM),[32] making it utterly
irrelevant to the case at bench. Since Citibank and BA are neither Islamic
banks nor are they located anywhere near the ARMM, then it should be
painfully obvious that R.A. No. 6848 cannot aid us in deciding this case.
Furthermore, PDIC heavily relies on the fact that the respondents
documented the money placements with certificates of time deposit to simply
conclude that the funds involved are deposits, as contemplated by the PDIC
Charter, and are consequently subject to assessment for deposit
insurance. It is this kind of reasoning that creates non-existent obscurities in
the law and obstructs the prompt resolution of what is essentially a
straightforward issue, thereby causing this case to drag on for more than
three decades.
BANKING LAW (18 October 2018 Cases)
Noticeably, PDIC does not dispute the veracity of the internal
transactions of the respondents which gave rise to the issuance of the
certificates of time deposit for the funds the subject of the present
dispute. Neither does it question the findings of the RTC and the CA that the
money placements were made, and were payable, outside of the Philippines,
thus, making them fall under the exclusions to deposit liabilities. PDIC also
fails to impugn the truth of the testimony of John David Shaffer, then a Fiscal
Agent and Head of the Assessment Section of the FDIC, that inter-branch
deposits were excluded from the assessment base. Therefore, the
determination of facts of the lower courts shall be accepted at face value by
this Court, following the well-established principle that factual findings of the
trial court, when adopted and confirmed by the CA, are binding and
conclusive on this Court, and will generally not be reviewed on appeal.[33]
As explained by the respondents, the transfer of funds, which
resulted from the inter-branch transactions, took place in the books of
account of the respective branches in their head office located in the United
States. Hence, because it is payable outside of the Philippines, it is not
considered a deposit pursuant to Section 3(f) of the PDIC Charter:
Sec. 3(f) The term deposit means the unpaid balance of
money or its equivalent received by a bank in the usual
course of business and for which it has given or is obliged to
give credit to a commercial, checking, savings, time or thrift
account or which is evidenced by its certificate of deposit,
and trust funds held by such bank whether retained or
deposited in any department of said bank or deposit in
another bank, together with such other obligations of a bank
as the Board of Directors shall find and shall prescribe by
regulations to be deposit liabilities of the Bank; Provided,
that any obligation of a bank which is payable at the
office of the bank located outside of the Philippines
shall not be a deposit for any of the purposes of this
Act or included as part of the total deposits or of the
insured deposits; Provided further, that any insured bank
which is incorporated under the laws of the Philippines may
Page 85
 elect to include for insurance its deposit obligation payable
only at such branch. [Emphasis supplied]
The testimony of Mr. Shaffer as to the treatment of such inter-branch
deposits by the FDIC, after which PDIC was modelled, is also
persuasive. Inter-branch deposits refer to funds of one branch deposited in
another branch and both branches are part of the same parent company and
it is the practice of the FDIC to exclude such inter-branch deposits from a
banks total deposit liabilities subject to assessment.[34]
All things considered, the Court finds that the funds in question are not
deposits within the definition of the PDIC Charter and are, thus, excluded
from assessment.
WHEREFORE, the petition is DENIED. The October 27, 2005 Decision of the
Court of Appeals in CA-G.R. CV No. 61316 is AFFIRMED.
[G.R. No. 126911. April 30, 2003]
PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner, vs. THE
HONORABLE COURT OF APPEALS and JOSE ABAD, LEONOR
ABAD, SABINA ABAD, JOSEPHINE JOSIE BEATA ABAD-
ORLINA, CECILIA ABAD, PIO ABAD, DOMINIC ABAD,
TEODORA ABAD, respondents.
DECISION
CARPIO-MORALES, J.:
The present petition for review assails the decision of the Court of
Appeals affirming that of the Regional Trial Court of Iloilo City, Branch 30,
finding petitioner Philippine Deposit Insurance Corporation (PDIC) liable, as
statutory insurer, for the value of 20 Golden Time Deposits belonging to
BANKING LAW (18 October 2018 Cases)
respondents Jose Abad, Leonor Abad, Sabina Abad, Josephine Josie Beata
Abad-Orlina, Cecilia Abad, Pio Abad, Dominic Abad, and Teodora Abad at
the Manila Banking Corporation (MBC), Iloilo Branch.
Prior to May 22, 1997, respondents had, individually or jointly with each
other, 71 certificates of time deposits denominated as Golden Time Deposits
(GTD) with an aggregate face value of P1,115,889.96.[1]
On May 22, 1987, a Friday, the Monetary Board (MB) of the Central
Bank of the Philippines, now Bangko Sentral ng Pilipinas, issued Resolution
505[2] prohibiting MBC to do business in the Philippines, and placing its
assets and affairs under receivership. The Resolution, however, was not
served on MBC until Tuesday the following week, or on May 26, 1987, when
the designated Receiver took over.[3]
On May 25, 1987, the next banking day following the issuance of the
MB Resolution, respondent Jose Abad was at the MBC at 9:00 a.m. for the
purpose of pre-terminating the 71 aforementioned GTDs and re-depositing
the fund represented thereby into 28 new GTDs in denominations
of P40,000.00 or less under the names of herein respondents individually or
jointly with each other.[4] Of the 28 new GTDs, Jose Abad pre-terminated 8
and withdrew the value thereof in the total amount of P320,000.00.[5]
Respondents thereafter filed their claims with the PDIC for the payment
of the remaining 20 insured GTDs.[6]
On February 11, 1988, PDIC paid respondents the value of 3 claims in
the total amount of P120,000.00. PDIC, however, withheld payment of the 17
remaining claims after Washington Solidum, Deputy Receiver of MBC-Iloilo,
submitted a report to the PDIC[7] that there was massive conversion and
substitution of trust and deposit accounts on May 25, 1987 at MBC-
Iloilo.[8] The pertinent portions of the report stated:
xxx
On May 25, 1987 (Monday) or a day prior to the official announcement and
take-over by CB of the assets and liabilities of The Manila Banking
Corporation, the Iloilo Branch was found to have recorded an unusually
heavy movements in terms of volume and amount for all types of deposits
and trust accounts. It appears that the impending receivership of TMBC was
Page 86
somehow already known to many depositors on account of the massive 3. Ordering PDIC to pay the Abads the value of said 20 GTDs less the value
withdrawals paid on this day which practically wiped out the branchs entire of 3 GTDs it paid on February 11, 1988, and the amounts it may have paid
cash position. . . . the Abads pursuant to the Order of this Court dated September 8, 1992;

xxx 4. Ordering PDIC to pay immediately the Abads the balance of its admitted
liability as contained in the aforesaid Order of September 8, 1992, should
. . . The intention was to maximize the availment of PDIC coverage limited there be any, subject to liquidation when this case shall have been finally
to P40,000 by spreading out big accounts to as many certificates under decide; and
various nominees. . . .[9]
5. Ordering PDIC to pay legal interest on the remaining insured deposits of
xxx the Abads from February 11, 1988 until they are fully paid.

Because of the report, PDIC entertained serious reservation in SO ORDERED.

recognizing respondents GTDs as deposit liabilities of MBC-Iloilo. Thus, on
August 30, 1991, it filed a petition for declaratory relief against respondents On appeal, the Court of Appeals, by the assailed Decision of October
with the Regional Trial Court (RTC) of Iloilo City, for a judicial declaration 21, 1996,[14] affirmed the trial courts decision except as to the award of legal
determination of the insurability of respondents GTDs at MBC-Iloilo.[10] interest which it deleted.

In their Answer filed on October 24, 1991 and Amended Answer[11] filed Hence, PDICs present Petition for Review which sets forth this lone
on January 9, 1992, respondents set up a counterclaim against assignment of error:
PDIC whereby they asked for payment of their insured deposits.[12]
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE
In its Decision of February 22, 1994,[13] Branch 30 of the Iloilo RTC
HOLDING OF THE TRIAL COURT THAT THE AMOUNT REPRESENTED
declared the 20 GTDs of respondents to be deposit liabilities of MBC, hence,
IN THE FACES OF THE SO CALLED GOLDEN TIME DEPOSITS WERE
are liabilities of PDIC as statutory insurer. It accordingly disposed as follows:
INSURED DEPOSITS EVEN AS THEY WERE MERE DERIVATIVES OF
RESPONDENTS PREVIOUS ACCOUNT BALANCES WHICH WERE PRE-
WHEREFORE, premises considered, judgment is hereby rendered:
TERMINATED/TERMINATED AT THE TIME THE MANILA BANKING
CORPORATION WAS ALREADY IN SERIOUS FINANCIAL DISTRESS.
1. Declaring the 28 GTDs of the Abads which were issued by the TMBC-Iloilo
on May 25, 1987 as deposits or deposit liabilities of the bank as the term is
In its supplement to the petition, PDIC adds the following assignment of
defined under Section 3 (f) of R.A. No. 3591, as amended;
error:

2. Declaring PDIC, being the statutory insurer of bank deposits, liable to the
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE
Abads for the value of the remaining 20 GTDs, the other 8 having been paid
HOLDING OF THE TRIAL COURT ORDERING PETITIONER TO PAY
already by TMBC-Iloilo on May 25, 1987;
RESPONDENTS CLAIMS FOR PAYMENT OF INSURED DEPOSITS FOR
THE REASON THAT AN ACTION FOR DECLARATORY RELIEF DOES
NOT ESSENTIALLY ENTAIL AN EXECUTORY PROCESS AS THE ONLY
RELIEF THAT SHOULD HAVE BEEN GRANTED BY THE TRIAL COURT IS

BANKING LAW (18 October 2018 Cases) Page 87

A DECLARATION OF THE RIGHTS AND DUTIES OF PETITIONER UNDER
R.A. 3591, AS AMENDED, PARTICULARLY SECTION 3(F) THEREOF AS
CONSIDERED AGAINST THE SURROUNDING CIRCUMSTANCES OF
THE MATTER IN ISSUE SOUGHT TO BE CONSTRUED WITHOUT
PREJUDICE TO OTHER MATTERS THAT NEED TO BE CONSIDERED BY
PETITIONER IN THE PROCESSING OF RESPONDENTS CLAIMS.
Under its charter,[15] PDIC (hereafter petitioner) is liable only for deposits
received by a bank in the usual course of business. [16] Being of the firm
conviction that, as the reported May 25, 1987 bank transactions were so
massive, hence, irregular, petitioner essentially seeks a judicial declaration
that such transactions were not made in the usual course of business and,
therefore, it cannot be made liable for deposits subject thereof.[17]
Petitioner points that as MBC was prohibited from doing further
business by MB Resolution 505 as of May 22, 1987, all transactions
subsequent to such date were not done in the usual course of business.
Petitioner further posits that there was no consideration for the 20 GTDs
subject of respondents claim. In support of this submission, it states that prior
to March 25, 1987, when the 20 GTDs were made, MBC had been
experiencing liquidity problems, e.g., at the start of banking operations on
March 25, 1987, it had only P2,841,711.90 cash on hand and at the end of
the day it was left withP27,805.81 consisting mostly of mutilated bills and
coins.[18] Hence, even if respondents had wanted to convert the face
amounts of the GTDs to cash, MBC could not have complied with it.
Petitioner theorizes that after MBC had exhausted its cash and could no
longer sustain further withdrawal transactions, it instead issued new GTDs as
payment for the pre-terminated GTDs of respondents to make sure that all
the newly-issued GTDs have face amounts which are within the statutory
coverage of deposit insurance.
Petitioner concludes that since no cash was given by respondents and
none was received by MBC when the new GTDs were transacted, there was
no consideration therefor and, thus, they were not validly transacted in the
usual course of business and no liability for deposit insurance was
created.[19]
Petitioners position does not persuade.
BANKING LAW (18 October 2018 Cases)
While the MB issued Resolution 505 on May 22, 1987, a copy thereof
was served on MBC only on May 26, 1987. MBC and its clients could be
given the benefit of the doubt that they were not aware that the MB resolution
had been passed, given the necessity of confidentiality of placing a banking
institution under receivership.[20]
The evident implication of the law, therefore, is that the appointment of a
receiver may be made by the Monetary Board without notice and hearing but
its action is subject to judicial inquiry to insure the protection of the banking
institution. Stated otherwise, due process does not necessarily require a prior
hearing; a hearing or an opportunity to be heard may be subsequent to the
closure. One can just imagine the dire consequences of a prior hearing: bank
runs would be the order of the day, resulting in panic and hysteria. In the
process, fortunes may be wiped out, and disillusionment will run the gamut of
the entire banking community. (Underlining supplied).[21]
Mere conjectures that MBC had actual knowledge of its impending
closure do not suffice. The MB resolution could not thus have nullified
respondents transactions which occurred prior to May 26, 1987.
That no actual money in bills and/or coins was handed by respondents
to MBC does not mean that the transactions on the new GTDs did not
involve money and that there was no consideration therefor. For the
outstanding balance of respondents 71 GTDs in MBC prior to May 26,
1987[22] in the amount of P1,115,889.15 as earlier mentioned was re-
deposited by respondents under 28 new GTDs. Admittedly, MBC
had P2,841,711.90 cash on hand more than double the outstanding balance
of respondents 71 GTDs at the start of the banking day on May 25,
1987. Since respondent Jose Abad was at MBC soon after it opened at 9:00
a.m. of that day, petitioner should not presume that MBC had no cash to
cover the new GTDs of respondents and conclude that there was no
consideration for said GTDs.
Petitioner having failed to overcome the presumption that the ordinary
course of business was followed,[23]this Court finds that the 28 new GTDs
were deposited in the usual course of business of MBC.
In its second assignment of error, petitioner posits that the trial court
erred in ordering it to pay the balance of the deposit insurance to
Page 88
respondents, maintaining that the instant petition stemmed from a petition for
declaratory relief which does not essentially entail an executory process, and
the only relief that should have been granted by the trial court is a declaration
of the parties rights and duties. As such, petitioner continues, no order of
payment may arise from the case as this is beyond the office of declaratory
relief proceedings.[24]
Without doubt, a petition for declaratory relief does not essentially entail
an executory process. There is nothing in its nature, however, that prohibits a
counterclaim from being set-up in the same action.[25]
Now, there is nothing in thee nature of a special civil action for declaratory
relief that proscribes the filing of a counterclaim based on the same
transaction, deed or contract subject of the complaint. A special civil action is
after all not essentially different from an ordinary civil action, which is
generally governed by Rules 1 to 56 of the Rules of Court, except that the
former deals with a special subject matter which makes necessary some
special regulation. But the identity between their fundamental nature is such
that the same rules governing ordinary civil suits may and do apply to special
civil actions if not inconsistent with or if they may serve to supplement the
provisions of the peculiar rules governing special civil actions.[26]
Petitioner additionally submits that the issue of determining the amount
of deposit insurance due respondents was never tried on the merits since the
trial dwelt only on the determination of the viability or validity of the deposits
and no evidence on record sustains the holding that the amount of deposit
due respondents had been finally determined.[27] This issue was not raised in
the court a quo, however, hence, it cannot be raised for the first time in the
petition at bar.[28]
Finally, petitioner faults respondents for availing of the statutory limits of
the PDIC law, presupposing that, based on the conduct of respondent Jose
Abad on March 25, 1987, he and his co-respondents somehow knew of the
impending closure of MBC. Petitioner ascribes bad faith to respondent Jose
Abad in transacting the questioned deposits, and seeks to disqualify him
from availing the benefits under the law.[29]
Good faith is presumed. This, petitioner failed to overcome since it
offered mere presumptions as evidence of bad faith.
BANKING LAW (18 October 2018 Cases)
WHEREFORE, the assailed decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
[G.R. No. 118917. December 22, 1997]
PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner, vs.
COURT OF APPEALS, ROSA AQUERO, GERARD YU, ERIC YU,
MINA YU, ELIZABETH NGKAION, MERLY CUESCANO, LETICIA
TAN, FELY RUMBANA, LORNA ACUB, represented by their
Attorney-in-Fact, JOHN FRANCIS COTAACO, respondents.
DECISION
KAPUNAN, J.:
Petitioner Philippine Deposit Insurance Corporation (PDIC) seeks the
reversal of the decision of the Court of Appeals affirming with modification
the decision of the Regional Trial Court holding petitioner liable for the value
of thirteen (13) certificates of time deposit (CTDs) in the possession of
private respondents.
The facts, as found by the Court of Appeals, are as follows:
On September 22, 1983, plaintiffs-appellees invested in money market
placements with the Premiere Financing Corporation (PFC) in the sum
of P10,000.00 each for which they were issued by the PFC corresponding
promissory notes and checks. On the same date (September 22, 1983), John
Francis Cotaoco, for and in behalf of plaintiffs-appellees, went to the PFC to
encash the promissory notes and checks, but the PFC referred him to the
Regent Saving Bank (RSB). Instead of paying the promissory notes and
checks, the RSB, upon agreement of Cotaoco, issued the subject 13
certificates of time deposit with Nos. 09648 to 09660, inclusive, each stating,
among others, that the same certifies that the bearer thereof has deposited
Page 89
with the RSB the sum of P10,000.00; that the certificate shall bear 14%
interest per annum; that the certificate is insured up to P15,000.00 with the
PDIC; and that the maturity date thereof is on November 3, 1983 (Exhs. B, B-
1 to B-12).
On the aforesaid maturity dated (November 3, 1983), Cotaoco went to the
RSB to encash the said certificates. Thereat, RSB Executive Vice President
Jose M. Damian requested Cotaoco for a deferment or an extension of a few
days to enable the RSB to raise the amount to pay for the same (Exh.
D). Cotaoco agreed. Despite said extension, the RSB still failed to pay the
value of the certificates. Instead, RSB advised Cotaoco to file a claim with
the PDIC.
Meanwhile, on June 15, 1984, the Monetary Board of the Central Bank
issued Resolution No. 788 (Exh. 2, Records, p. 159) suspending the
operations of the RSB. Eventually, the records of RSB were secured and its
deposit liabilities were eventually determined. On December 7, 1984, the
Monetary Board issued Resolution No. 1496 (Exh. 1) liquidating the
RSB. Subsequently, a masterlist or inventory of the RSB assets and liabilities
was prepared. However, the certificates of time deposit of plaintiffs-appellees
were not included in the list on the ground that the certificates were not
funded by the PFC or duly recorded as liabilities of RSB.
On September 4, 1984, plaintiffs-appellees filed with the PDIC their
respective claims for the amount of the certificates (Exhs. C, C-1, to C-
12). Sabina Yu, James Ngkaion, Elaine Ngkaion and Jeffrey Ngkaion, who
have similar claims on their certificates of time deposit with the RSB, likewise
filed their claims with the PDIC. To their dismay, PDIC refused the aforesaid
claims on the ground that the Traders Royal Bank Check No. 299255 dated
September 22, 1983 for the amount of P125,846.07 (Exh. B) issued by PFC
for the aforementioned certificates was returned by the drawee bank for
having been drawn against insufficient funds; and said check was not
replaced by the PFC, resulting in the cancellation of the certificates as
indebtedness or liabilities of RSB.[1]
Consequently, on March 31, 1987, private respondents filed an action
for collection against PDIC, RSB and the Central Bank.
BANKING LAW (18 October 2018 Cases)
On September 14, 1987, the trial court, declared the Central Bank in
default for failing to file an answer.
On May 29, 1989, the trial court rendered its decision ordering the
defendants therein to pay plaintiffs, jointly and severally, the amount
corresponding to the latters certificates of time deposit.
Both PDIC and RSB appealed. The Central Bank, on the other hand,
filed a petition for certiorari, prohibition and mandamus before the Court of
Appeals praying that the writ of execution issued by the trial court against it
be set aside.
On February 8, 1995, the Court of Appeals rendered its decision
granting the Central Banks petition but dismissing the appeals of PDIC and
RSB. Hence, this petition by PDIC assigning the following errors:
I
THE CA ERRED IN HOLDING THAT THE SUBJECT CTDS ARE
NEGOTIABLE INSTRUMENTS
II
THE CA ERRED INHOLDING THAT THE CTDS WERE ACQUIRED FOR
VALUE AND CONSIDERATION
III
THE CA ERRED WHEN IT HELD THAT BECAUSE THE CTDS STATE
THAT THESE WERE INSURED, PETITIONER SHOULD BE HELD LIABLE
FOR THE SAME.
We deal jointly with petitioners first and third assigned errors.
Relying on this Courts ruling in Caltex (Philippines), Inc. v. Court of
Appeals and Security Bank and Trust Company,[2] the Court of Appeals
concluded that the subject CTDs are negotiable.Petitioner, on the other
hand, contends that the CTDs are non-negotiable since they do not contain
an unconditional promise or order to pay a sum in money are they made
Page 90
payable to order or bearer, as required by Section 1 of the Negotiable
Instruments Law.
Whether the CTDs in question are negotiable or not is, however,
immaterial in the present case. The Philippine Deposit Insurance Corporation
was created by law and, as such, is governed primarily by the provisions of
the special law creating it.[3] The liability of the PDIC for insured deposits
therefore is statutory and, under Republic Act No. 3591,[4] as amended,
such liability rests upon the existence of deposits with the insured bank, not
on the negotiability or non-negotiability of the certificates evidencing these
deposits.
The authority for this conclusion finds support in decisions by American
state courts applying their respective bank guaranty laws. Invariably, the
plaintiffs in these cases argued that the negotiability of the certificates of
deposits in their possession entitled them to be paid out of the bank guaranty
fund, a contention that the courts uniformly rejected.
Thus, the plaintiffs in Fourth Nat. Bank of Wichita v. Wilson[5] argued
that:
x x x Whatever the status of the plaintiffs may be as holders in due course
under the Negotiable Instruments Law, they cannot be assignees of a
deposit which was not made, and cannot be entitled to the benefit of a
guaranty which did not come into existence. x x x
In arriving at the above decision, the Kansas Supreme Court relied on
its earlier ruling in American State Bank v. Foster, [6] which arose from the
same facts as the Fourth National Bank case.There, the Court held:
x x x Even if the plaintiff were to be regarded as an innocent purchaser of the
certificates as negotiable instruments, its situation would be in no wise
bettered so far as relate to a claim against the guaranty fund. The fund
protects deposits only. And if no deposit is made, or no deposit within the
protection of the guaranty law, the transfer of a certificate cannot impose a
liability on the fund. xxx where a certificate of deposit is given under such
circumstances that it is not protected by the guaranty fund, although that fact
is not indicated by anything on its face, its indorsement to an innocent holder
cannot confer that qualify upon it.

In like fashion did the Supreme Court of Nebraska brush aside a similar
x x x the court should hold the certificates to be guaranteed because they are
contention in State v. Farmers State Bank:[7]
negotiable instruments, and were acquired by the present holders in due
course; otherwise it is said certificates of deposit will be deprived of the
In this contention we think the appellants fail to distinguish between the
quality of commercial paper. Certificates of deposit have been regarded as
liability of the maker of a negotiable instrument, which rests upon the law
the highest form of collateral. They are of wide currency in the banking and
pertaining to negotiable paper, and the liability of the guaranty fund, which is
business worlds, and are particularly useful to persons of small means,
purely statutory. The circumstances under which the guaranty fund may be
because they bear interest, and may be readily cashed; therefore to deprive
liable are entirely apart from the law pertaining to negotiable paper. A holder
them of the benefit of the guaranty fund would be a calamity. x x x
of a certificate of deposit in a bank who seeks to hold the guaranty fund liable
for its payment must show that the transaction leading up to the issuance of
The Supreme Court of Kansas, however, found the plaintiffs contention
the certificate was such that the law holds the guaranty fund liable for its
to be without merit, ruling thus:
payment. x x x

x x x The argument confuses negotiability of commercial paper with statutory

The Farmers State Bank ruling was reiterated by the Nebraska
guaranty of deposits. The guaranty is something extrinsic to all forms of
Supreme Court in State v. Home State Bank of Dunning[8] and in State v.
evidence of bank obligation; and negotiability of instruments has no
Kilgore State Bank.[9] The same ruling was adopted by the Supreme Court of
dependence on existence or nonexistence of the guaranty.
South Dakota in Mildenstein v. Hirning.[10]

BANKING LAW (18 October 2018 Cases) Page 91

 In the case at bar, the Court of Appeals initially found the subject CTDs
to be negotiable. Subsequently, however, respondent court deemed the
issue immaterial, albeit for entirely different reasons.
x x x Besides, whether the certificates are negotiable or not is of no
moment. The fact remains that the certificates categorically state that their
bearer [sic] have a deposit in the RSB; that the same will mature on
November 3, 1993; and that the certificates are insured by PDIC.[11]
We disagree with respondent courts rationale. The fact that the
certificates state that the certificates are insured by PDIC does not ipso
facto make the latter liable for the same should the contingency insured
against arise. As stated earlier, the deposit liability of PDIC is determined by
the provisions of R.A. No. 3519, and statements in the certificates that the
same are insured by PDIC are not binding upon the latter.
x x x The mere fact that a certificate recites on its face that a certain sum has
been deposited, or that officers of the bank may have stated that the deposit
is protected by the guaranty law, does not make the guaranty fund liable for
payment, if in fact a deposit has not been made xxx. The banks have nothing
to do with the guaranty fund as such. It is a fund raised by assessments
against all state banks, administered by officers of the state to protect
deposits in banks. x x x[12]
We come now to petitioners second assigned error.
In order that a claim for deposit insurance with the PDIC may prosper,
the law requires that a corresponding deposit be placed in the insured
bank. This is implicit from a reading of the following provisions of R.A. 3519:
SECTION 1. There is hereby created a Philippine Deposit Insurance
Corporation. xxx which shall insure, as provided, the deposits of all banks
which are entitled to the benefits of insurance under this Act xxx. (Italics
supplied).
xxx
SEC. 10 (a) xxx
BANKING LAW (18 October 2018 Cases)
xxx
( c) Whenever an insured bank shall have been closed on account of
insolvency, payment of the insured deposits in such bank shall be made by
the Corporation as soon as possible xxx. (Italics supplied.)
A deposit as defined in Section 3(f) of R.A. No. 3591, may be
constituted only if money or the equivalent of money is received by a bank:
SEC. 3. As used in this Act-
(f) The term deposit means the unpaid balance of money or its
equivalent received by a bank in the usual course of business and for which
it has given or is obliged to give credit to a commercial, checking, savings,
time or thrift account or which is evidence by passbook, check and/or
certificate of deposit printed or issued in accordance with Central Bank rules
and regulations and other applicable laws, together with such other
obligations of a bank which, consistent with banking usage and practices, the
Board of Directors shall determine and prescribe by regulations to be deposit
liabilities of the Bank xxx. (Italics ours.)
Did RSB receive money or its equivalent when it issued the certificates
of time deposit? The Court of Appeals, in resolving who between RSB and
PFC issued the certificates to private respondents, answered this question in
the negative. A perusal of the impugned decision, however, reveals that such
finding is grounded entirely on speculation, and thus, cannot bind this
Court: [13]
Equally unimpressive is the contention of PDIC and RSB that the certificates
were issued to PFC which did not acquire the same for value because the
check issued by the latter for the certificates bounced for insufficiency of
funds. First, granting arguendo that the certificates were originally issued in
favor of PFC, such issuance could only give rise to the presumption that the
amount stated in the certificates have been deposited to RSB. Had not PFC
deposited the amount stated therein, then RSB would have surely refused to
issue the certificates certifying to such fact. Second, why did not RSB
demand that PFC pay the certificates or file a claim against PFC on the
ground that the latter failed to pay for the value of the certificates? It could
Page 92
very well be that the reason why RSB did not run after PFC for payment of These pieces of evidence convincingly show that the subject CTDs were
the value of the certificates was because the instruments were issued to the indeed issued without RSB receiving any money therefor. No deposit, as
latter by RSB for value or were already paid to RSB by plaintiffs- defined in Section 3 (f) of R.A. No. 3591, therefore came into
appellees. Third, if it is true at the time RSB issued the certificates to PFC, existence. Accordingly, petitioner PDIC cannot be held liable for value of the
the instruments were paid for with checks still to be encashed, then why did certificates of time deposit held by private respondents.
not RSB specifically state in the certificates that the validity thereof hinges on
ACCORDINGLY, the instant petition is hereby GRANTED and the
the encashment of said check? Fourth, even if it is true that PFC did not
decision of the Court of Appeals REVERSED. Petitioner is absolved from any
deposit with or pay the RSB the amount stated in the certificates, the latter is
liability to private respondents.
not be such reason freed from civil liability to plaintiffs-appellees. For, by
issuing the certificates, RSB bound itself to pay the amount stated therein to SO ORDERED.
whoever is the bearer upon its presentment for encashment. Truly, there is
no reason to depart from the established principle that were a bank issues a
certificate of deposit acknowledging a deposit made with a third person or an
officer of the bank, or with another bank representing it to be the certificate of
PHILIPPINE DEPOSIT G.R. No. 176438
the bank, upon which assurance the depositor accepts it, the bank is liable
INSURANCE CORPORATION
for the amount of the deposit (Michis, Banks and Banking, Vol. 5A, pp. 48-49,
(PDIC), Present:
as cited in the Decision on p. 3 thereof).[14]
Petitioner,
CARPIO, J., Chairperson,
Moreover, such finding totally ignores the evidence presented by
NACHURA,
defendants. Cardola de Jesus, RSB Deputy Liquidator, testified that RSB
PERALTA,
received three (3) checks in consideration for the issuance of several CTDs,
- versus - ABAD, and
including the ones in dispute. The first check amounted to P159,153.93, the
MENDOZA, JJ.
second, P121,665.95, and the third, P125,846.07. In consideration of the
third check, private respondents received thirteen (13) certificates of deposit
with Nos. 09648 to 09660, inclusive, with a value of P10,000.00 each or a
PHILIPPINE COUNTRYSIDE
total of P130,000.00. To conform with the value of the third check, CTD No.
RURAL BANK, INC., RURAL
09648 was chopped, and only the sum of P5,846.07 was credited in favor of
BANK OF CARMEN (CEBU),
private respondents. The first two checks made good in the clearing while the
INC., BANK OF EAST
third was returned for being drawn against insufficient funds.
ASIA(MINGLANILLA, CEBU), INC.,
The check in question appears on the records as Exhibit 3 (for and PILIPINO RURAL BANK (CEBU), Promulgated:
Regent),[15] and is described in RSBs offer of evidence as Traders Royal INC.,
Bank Check No. 292555 dated September 22, 1983 covering the amount Respondents. January 24, 2011
or P125,846.07 xxx issued by Premiere Financing Corporation.[16] At the
back of said check are the words Refer to Drawer, [17] indicating that the x ----------------------------------------------------------------------------------------x
drawee bank (Traders Royal Bank) refused to pay the value represented by
said check. By reason of the checks dishonor, RSB cancelled the DECISION
corresponding as evidenced by an RSB ticket dated November 4, 1983. [18]

BANKING LAW (18 October 2018 Cases) Page 93

MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court
filed by the Philippine Deposit Insurance Corporation (PDIC) assailing the
September 18, 2006 Decision of the Court of Appeals-Cebu (CA-Cebu),
which granted the petition for injunction filed by respondents Philippine
Countryside Rural Bank, Inc. (PCRBI), Rural Bank of Carmen (Cebu),
Inc. (RBCI), Bank of East Asia (Minglanilla, Cebu), Inc. (BEAI), and Pilipino
Rural Bank (Cebu), Inc. (PRBI), all collectively referred to as Banks. The
dispositive portion of the CA-Cebu decision reads:
WHEREFORE, in view of all the foregoing premises,
the petition for injunction is hereby GRANTED. The
respondent PDIC is restrained from further conducting
investigations or examination on petitioners-banks without
the requisite approval from the Monetary Board.
SO ORDERED.[1]
In a resolution dated January 25, 2007, the CA-Cebu denied petitioners
motion for reconsideration for lack of merit.[2]
THE FACTS
On March 9, 2005, the Board of Directors of the PDIC (PDIC Board) adopted
Resolution No. 2005-03-032[3] approving the conduct of an investigation, in
accordance with Section 9(b-1) of Republic Act (R.A.) No. 3591, as
amended, on the basis of the Reports of Examination of the Bangko Sentral
ng Pilipinas (BSP) on ten (10) banks, four (4) of which are respondents in
this petition for review. The said resolution also created a Special
Investigation Team to conduct the said investigation, with the authority to
administer oaths, to examine, take and preserve testimony of any person
relating to the subject of the investigation, and to examine pertinent bank
records.
BANKING LAW (18 October 2018 Cases)
On May 25, 2005, the PDIC Board adopted another resolution,
Resolution No. 2005-05-056,[4] approving the conduct of an investigation on
PCRBI based on a Complaint-Affidavit filed by a corporate depositor, the
Philippine School of Entrepreneurship and Management (PSEMI) through its
president, Jacinto L. Jamero.
On June 3, 2005, in accordance with the two PDIC Board resolutions, then
PDIC President and Chief Executive Officer Ricardo M. Tan issued the
Notice of Investigation[5] to the President or The Highest Ranking Officer of
PCRBI.
On June 7, 2005, the PDIC Investigation Team personally served the Notice
of Investigation on PCRBI at its Head Office in Pajo, Lapu-Lapu City.[6]
According to PDIC, in the course of its investigation, PCRBI was found to
have granted loans to certain individuals, which were settled by way
of dacion of properties. These properties, however, had already been
previously foreclosed and consolidated under the names of PRBI, BEAI and
RBCI.[7]
On June 15, 2005, PDIC issued similar notices of investigation to PRBI [8] and
BEAI.[9]
The notices stated that the investigation was to be conducted pursuant to
Section 9 (b-1) of the PDIC Charter and upon authority of PDIC Board
Resolution No. 2005-03-032 authorizing the twelve (12) named
representatives of PDIC to conduct the investigation.[10]
The investigation was sought because the Banks were found to be among
the ten (10) banks collectively known as Legacy Banks. The Reports of
General and Special Examinations of the BSP as of June 30, 2004,
disclosed, among others, that the Legacy Banks were commonly owned
Page 94
and/or controlled by Legacy Plans Inc. (now Legacy Consolidated Plans,
Inc.), and Celso Gancayco delos Angles, Jr. and his family.[11]
The notice of investigation was served on PRBI the next day, June 16,
2005.[12]
On June 25, 2005, a separate notice of investigation[13] was served on
RBCI. The latter provided the PDIC Investigation Team with certified copies
of the loan documents they had requested, until its president received an
order directing him not to allow the investigation.[14]
Subsequently, PRBI and BEAI refused entry to their bank premises and
access to their records and documents by the PDIC Investigation Team,
upon advice of their respective counsels.[15]
On June 16 and 17, 2005, Atty. Victoria G. Noel (Atty. Noel) of the Tiongson
& Antenor Cruz Law Office sent letters to the PDIC[16] informing it of her legal
advice to PCRBI and BEAI not to submit to PDIC investigation on the ground
that its investigatory power pursuant to Section 9(b-1) of R.A. No. 3591, as
amended (An Act Establishing The Philippine Deposit Insurance Corporation,
Defining Its Powers And Duties And For Other Purposes), cannot be
differentiated from the examination powers accorded to PDIC under Section
8, paragraph 8 of the same law, under which, prior approval from the
Monetary Board is required.
On June 17, 2005, PDIC General Counsel Romeo M. Mendoza sent a reply
to Atty. Noel stating that PDICs investigation power, as distinguished from
the examination power of the PDIC under Section 8 of the same law, does
not need prior approval of the Monetary Board.[17] PDIC then urged PRBI and
BEAI not to impede the conduct of PDICs investigation as the same
constitutes a violation of the PDIC Charter for which PRBI and BEAI may be
held criminally and/or administratively liable.[18]
BANKING LAW (18 October 2018 Cases)
On June 27 and 28, 2005, the Banks, through counsel, sought further
clarification from PDIC on its source of authority to conduct the impending
investigations and requested that PDIC refrain from proceeding with the
investigations.[19]
Simultaneously, the Banks wrote to the Monetary Board requesting a
clarification on the parameters of PDICs power of investigation/examination
over the Banks and for an issuance of a directive to PDIC not to pursue the
investigations pending the requested clarification.[20]
On June 28, 2005, PRBI and BEAI again received letters from PDIC,
dated June 24, 2005, which appeared to be final demands on them to allow
its investigation.[21] PRBI and BEAI replied that letters of clarification had
been sent to PDIC and the Monetary Board.[22] Pending action on such
requests, PDIC was requested to refrain from proceeding with the
investigation.[23]
Notwithstanding, on July 11, 2005, the Banks received a letter, dated July 8,
2005, from the PDIC General Counsel reiterating its position that prior
Monetary Board approval was not a pre-requisite to PDICs exercise of its
investigative power.[24]
Not in conformity, on July 28, 2005, the Banks filed a Petition for Declaratory
Relief with a Prayer for the Issuance of a TRO and/or Writ of Preliminary
Injunction (RTC Petition) before the Regional Trial Court of Makati (RTC-
Makati) which was docketed as Civil Case No. 05-697.[25]
In the RTC Petition, the Banks prayed for a judgment interpreting Section
9(b-1) of the PDIC Charter, as amended, to require prior Monetary Board
approval before PDIC could exercise its investigation/examination power
over the Banks.[26]
PDIC filed a motion to dismiss alleging that the RTC had no jurisdiction over
the said petition since a breach had already been committed by the Banks
when they received the notices of investigation, and because PDIC need not
Page 95
secure prior Monetary Board approval since examination and investigation
are two different terms.[27]
Later, the Banks withdrew their application for a temporary restraining
order (TRO) reasoning that lower courts cannot issue injunctions against
PDIC. Thus, the Banks instituted a petition for injunction with application for
TRO and/or Preliminary Injunction (CA-Manila petition) before the Court of
Appeals-Manila (CA-Manila). The case was docketed as CA-G.R. SP No.
91038.[28]
Even before the CA-Manila could rule on the application for a TRO and/or
writ of preliminary injunction, the RTC-Makati dismissed the petition on the
ground that there already existed a breach of law that isolated the case from
the jurisdiction of the trial court.[29]
The Banks filed a motion for reconsideration but it was denied by the RTC for
lack of merit.[30] On February 10, 2006, the Banks filed a notice of
appeal[31] which they later withdrew on February 28, 2006.[32]
In view of the dismissal of the RTC-Makati petition, the CA-Manila dismissed
the petition for injunction for being moot and academic. In its Decision,
dated February 1, 2006,[33] the CA-Manila wrote:
What remained for the petitioners to do was to litigate over
the breach or violation by ordinary action, as the
circumstances ensuing from the breach or violation
warrant. The ordinary action may either be in the same
case, if the RTC permitted the conversion, in which event the
RTC may allow the parties to file such pleadings as may be
necessary or proper, pursuant to Sec. 5, Rule 63; or the
petitioners may file another action in the proper court (e.g.
including the Court of Appeals, should injunction be among
the reliefs to be sought) upon some cause of action that has
arisen from the breach or violation.[34]
BANKING LAW (18 October 2018 Cases)
Thereafter, on March 14, 2006, the Banks filed their Petition for
Injunction with Prayer for Preliminary Injunction[35] (CA-Cebu Petition) with
the CA-Cebu (CA-Cebu).
On March 15, 2006, the CA-Cebu issued a resolution granting the
Banks application for a TRO. This enjoined the PDIC, its representatives or
agents or any other persons or agency assisting them or acting for and in
their behalf from conducting examinations/investigations on the Banks head
and branch offices without securing the requisite approval from the Monetary
Board of BSP.[36]
During the pendency of the CA-Cebu petition, PDIC filed with this
Court a Petition for Certiorari, Prohibition and Mandamus with Prayer for
Issuance of Temporary Restraining Order and/or Writ of Preliminary
Injunction under Rule 65 docketed as G.R. No. 173370.[37] It alleged that the
CA-Cebu committed grave abuse of discretion amounting to lack or excess
of jurisdiction in taking cognizance of the Banks petition, and in issuing a
TRO and a writ of preliminary injunction.[38]
On July 31, 2006, this Court issued a resolution dismissing the
petition for certiorari in G.R. No. 173370. The Resolution reads:
Considering the allegations, issues and arguments adduced
in the petition for certiorari, prohibition and mandamus with
prayer for preliminary injunction and/or restraining order
dated 19 July 2006, the Court resolves to DISMISS the
petition for failure to sufficiently show that the questioned
resolution of the Court of Appeals is tainted with grave abuse
of discretion. Moreover, the petition failed to conform with
Rule 65 and other related provisions of the 1997 Rules of
Civil Procedure, as amended, governing petitions for
certiorari, prohibition and mandamus filed with the Supreme
Court, since petitioner failed to submit a verified statement of
material date of receipt of the assailed resolution dated 16
May 2006 in accordance with Section 4, Rule 65 in relation
to the second paragraph of Section 3, Rule 46. In any event,
the petition is premature since no motion for reconsideration
of the questioned resolution of the Court of Appeals was filed
Page 96
 prior to the availment of this special civil action and there are
no sufficient allegations to bring the case within the
recognized exceptions to this rule.[39]
On September 18, 2006, after both parties had submitted their
respective memoranda, the CA-Cebu rendered a decision granting the writ of
preliminary injuction,[40] pertinent portions of which read:
[A]fter undergoing a series of amendments, the controlling
law with respect to PDICs power to conduct examination of
banks is-prior approval of the Monetary Board is a
condition sine qua non for PDIC to exercise its power of
examination. To rule otherwise would disregard the
amendatory law of the PDICs charter.
The Court is not also swayed by the contention of
respondent that what it seeks to conduct is an investigation
and not an examination of petitioners transactions, hence
prior approval of the Monetary Board is a mere surplusage.
The ordinary definition of the words examination and
investigation would lead one to conclude that both pertain to
the same thing and there seems to be no fine line
differentiating one from the other. Blacks Law Dictionary
defines the word investigate as to examine and inquire into
with care and accuracy; to find out by careful inquisition;
examination and the word examination as an
investigation. In Collins Dictionary of Banking and Finance,
the word investigation is defined as an examination to find
out what is wrong.
In the case of Anti-Graft League of the Philippines, Inc. vs.
Hon. Ortega, et al.,[41] the Supreme Court using Ballentines
Law Dictionary defines an investigation as an inquiry, judicial
or otherwise, for the discovery or collection of facts
concerning the matter or matters involved. Such common
definitions would show that there is really nothing to
BANKING LAW (18 October 2018 Cases)
distinguish between these two (2) terms as to support the
PDIC view differentiating Section 9 (b-1) from paragraph 8,
Section 8 of the PDIC Charter.
In the realm of the PDIC rules, specifically under Section 3 of
PDIC Regulatory Issuance No. 2205-02[42] investigation is
defined as: Investigation shall refer to fact-
finding examination, study, inquiry, for determining whether
the allegations in a complaint or findings in a final report of
examination may properly be the subject of an
administrative, criminal or civil action.
From the foregoing definition alone, it can be easily
deduced that investigation and examination are synonymous
terms. Simply stated, investigation encompasses a fact-
finding examination. Thus, it is inconsistent with the rules if
respondent PDIC be (sic) allowed to conduct an
investigation without the approval of the Monetary Board.
Moreover, the Court sees that the rationale of the
law in requiring a (sic) prior approval from the Monetary
Board whenever an examination or in this case an
investigation needs to be conducted by the PDIC is
obviously to ensure that there is no overlapping of efforts,
duplication of functions and more importantly to provide a
check and balance to the otherwise unrestricted power of
respondent PDIC to conduct investigations on banks insured
by it.
With the foregoing premises, this Court rules that a
prior approval from the Monetary Board is necessary before
respondent PDIC can proceed with its investigations on
petitioners-banks.[43]
Page 97
 WHETHER THE COURT OF APPEALS ERRED IN
PDIC moved for reconsideration but it was denied in a resolution FINDING THAT PRIOR APPROVAL OF THE MONETARY
dated January 25, 2007.[44] BOARD OF THE BANGKO SENTRAL NG PILIPINAS IS
NECESSARY BEFORE THE PDIC MAY CONDUCT AN
Hence, this petition. INVESTIGATION OF RESPONDENT BANKS.

THE ISSUES

I.
WHETHER RESPONDENT BANKS VIOLATED THE RULE THE COURTS RULING
AGAINST FORUM SHOPPING WHEN THEY FILED THE
PETITION FOR INJUNCTION BEFORE THE COURT OF
APPEALS-CEBU. I - Whether respondent
banks violated the rule
II. against forum shopping
when they filed the petition
WHETHER THE PRONOUNCEMENT OF THE REGIONAL for injunction before the
TRIAL COURT OF MAKATI IN THE PETITION FOR Court of Appeals-Cebu.
DECLARATORY RELIEF CONSTITUTES RES
JUDICATA TO THE PETITION FOR INJUNCTION IN THE
COURT OF APPEALS-CEBU. II - Whether the
pronouncement of the
III. Regional Trial Court of
Makati in the petition for
WHETHER PETITIONER WAS DEPRIVED OF declaratory relief
ITS OPPORTUNITY TO BE HEARD WHEN THE COURT constitutes res judicata to
OF APPEALS-CEBU ISSUED THE WRIT OF the petition for injunction
INJUNCTION. in the Court of Appeals-
Cebu.
IV.

WHETHER THE ISSUES RAISED BY PETITIONERS ARE
THE SAME ISSUES RAISED IN G.R. NO. 173370 WHICH
WAS EARLIER DISMISSED BY THIS COURT.
V.
In the recent case of Sameer Oversees Placement Agency, Inc. v. Mildred
R. Santos,[45] the Court discussed the matter of forum shopping:
Forum shopping is defined as an act of a party, against
whom an adverse judgment or order has been rendered in
one forum, of seeking and possibly getting a favorable
opinion in another forum, other than by appeal or special civil

BANKING LAW (18 October 2018 Cases) Page 98

 action for certiorari. It may also be the institution of two or
more actions or proceedings grounded on the same cause
on the supposition that one or the other court would make a
favorable disposition. There is forum shopping where the
elements of litis pendentia are present, namely: (a) there is
identity of parties, or at least such parties as represent the
same interest in both actions; (b) there is identity of rights
asserted and relief prayed for, the relief being founded on
the same set of facts; and (c) the identity of the two
preceding particulars is such that any judgment rendered in
the pending case, regardless of which party is successful,
would amount to res judicata in the other. It is expressly
prohibited by this Court because it trifles with and abuses
court processes, degrades the
administration of justice, and congests court dockets. A
willful and deliberate violation of the rule against forum
shopping is a ground for summary dismissal of the case, and
may also constitute direct contempt.[46]
Juxtaposing the RTC-Makati, CA-Manila and CA-Cebu petitions,
what must be determined here, is whether the elements of litis pendentia are
present between and among these petitions, i.e. whether (a) there is identity
of parties, or at least such parties as represent the same interest in both
actions; (b) there is identity of rights asserted and relief prayed for, the relief
being founded on the same set of facts; and (c) the identity of the two
preceding particulars is such that any judgment rendered in the
pending case, regardless of which party is successful, would amount to res
judicata in the other.
The first element is clearly present as between the RTC-Makati
petition and the CA-Cebu petition. Both involved the Banks on one hand, and
the PDIC on the other.
The second and third elements of litis pendentia, however, are
patently wanting. The rights asserted and reliefs prayed for were different,
though founded on the same set of facts.The RTC-Makati Petition was one
BANKING LAW (18 October 2018 Cases)
for declaratory relief while the CA-Manila Petition was one for injunction with
a prayer for preliminary injunction.
A petition for declaratory relief is filed by any person interested under
a deed, will, contract or other written instrument, or whose rights are affected
by a statute, executive order or regulation, ordinance, or any other
governmental regulation, before breach or violation, thereof, to determine
any question of construction or validity arising, and for a declaration of his
rights or duties thereunder.[47]
Injunction, on the other hand, is a judicial writ, process or proceeding
whereby a party is directed either to do a particular act, in which case it is
called a mandatory injunction, or to refrain from doing a particular act, in
which case it is called a prohibitory injunction. As a main action, injunction
seeks to permanently enjoin the defendant through a final injunction issued
by the court and contained in the judgment.[48]
Clearly, there is a marked difference between the reliefs sought
under an action for declaratory relief and an action for injunction. While an
action for declaratory relief seeks a declaration of rights or duties, or the
determination of any question or validity arising under a statute, executive
order or regulation, ordinance, or any other governmental regulation, or
under a deed, will, contract or other written instrument, under which his rights
are affected, and before breach or violation, an action for injunction ultimately
seeks to enjoin or to compel a party to perform certain acts.
Moreover, as stated in the RTC-Makati Decision, because the Banks
had already breached the provisions of law on which declaratory judgment
was being sought, it was without jurisdiction to take cognizance of the
same. Any judgment rendered in the RTC-Makati petition would not amount
to res judicata in the CA-Manila Petition. Thus, the RTC was correct in
dismissing the case, having been bereft of jurisdiction to take cognizance of
the action for declaratory judgment.
Page 99
 As between the CA-Manila and the CA-Cebu petitions, the second
and third elements of litis pendentia are absent. The rights asserted and
reliefs prayed for were different, although founded on the same set of facts.
The CA-Manila Petition is a petition for injunction wherein the Banks
prayed that:
1) Immediately upon filing of this Petition, a Writ of
Preliminary Injunction and/or Temporary Restraining Order
be issued commanding the respondent and all its officers,
employees and agents to cease and desist from proceeding
with the investigations sought to be conducted on the
petitioners head and branch offices while the Petition for
Declaratory Relief before Branch 58 of the Makati Regional
Trial Court is pending.
2) After due proceedings, judgment be rendered
declaring as permanent the Writ of Preliminary Injunction
and/or Temporary Restraining Order prayed for above.
Other equitable reliefs are likewise prayed for.[49]
[Underscoring supplied]
The CA-Cebu Petition, on the other hand, is denominated as a
Petition for Injunction With Prayer for Writ of Preliminary Injunction and/or
Restraining Order. The Banks prayed therein that:
1) Upon filing of this Petition, a Writ of Preliminary Injunction
and/or Temporary Restraining Order be issued forthwith,
enjoining Respondent PDIC and all its officers, employees
and agents to cease and desist from conducting
examinations/investigations on Petitioner Banks head and
branch offices without securing the requisite approval from
the Monetary Board of the Bangko Sentral ng Pilipinas, as
required by Sec. 8, Paragraph 8 of the PDIC Charter, as
amended;
BANKING LAW (18 October 2018 Cases)
2) After due proceedings, judgment be rendered declaring as
permanent the Writ of Preliminary Injunction and/or
Temporary Restraining Order prayed for above.
Other equitable reliefs are likewise prayed for.[50]
As can be gleaned from the above-cited portions of the CA-Manila
and CA-Cebu petitions, the petitions seek different reliefs.
Therefore, as between and among the RTC Makati, and the CA-
Manila and CA-Cebu petitions, there is no forum shopping.
III - Whether petitioner
was deprived of its
opportunity to be heard
when the Court of
Appeals-Cebu issued the
writ of injunction.
PDIC alleges that the CA-Cebu, in issuing the TRO in its March 15, 2006
Resolution, and subsequently, the preliminary injunction in its May 16, 2006
Resolution, violated the fundamental rule that courts should avoid issuing
injunctive relief which would in effect dispose of the main case without
trial.[51] PDIC argues that a TRO is intended only as a restraint until the
propriety of granting a temporary injunction can be determined, and it
goes no further than to preserve
the status until that determination.[52] Moreover, its purpose is merely to
suspend proceedings until such time when there may be an opportunity to
inquire whether any injunction should be granted, and it is not intended to
operate as an injunction pendente lite, and should not, in effect, determine
the issues involved before the parties can have their day in court, or give an
advantage to either party by proceeding in the acquisition or alteration of the
property the right to which is disputed while the hands of the other party are
tied.[53]
Page 100

On the other hand, the Banks claim that PDIC was given every
opportunity to present its arguments against the issuance of the
injunction.[54] Its active participation in the proceedings negates its assertion
that it was denied procedural due process in the issuance of the writ of
injunction.[55] Citing Salonga v. Court of Appeals,[56] the Banks state that the
essence of due process is the reasonable opportunity to be heard and to
submit evidence one may have in support of ones defense, [57] and PDIC was
able to do so.
On March 15, 2006, the CA-Cebu issued a resolution granting their
prayer for a 60-day TRO, and requiring PDIC to file its comment.[58] The
latter thereafter filed its Comment ad Cautelam dated March 30,
[59]
2006. [Underscoring ours]
On May 16, 2006, the CA-Cebu issued another resolution, this time
granting the prayer for a preliminary injunction and requiring the parties to file
their respective memoranda.PDIC thereafter filed its memorandum
dated July 31, 2006.[60]
On September 18, 2006, the CA-Cebu promulgated its Decision
granting the Petition for Injunction.[61] PDIC filed a motion for reconsideration
dated October 10, 2006,[62] which was subsequently denied.
The essence of procedural due process is found in the reasonable
opportunity to be heard and submit ones evidence in support of his
defense.[63] The Court finds that procedural due process was observed by the
CA-Cebu. The parties were afforded equal opportunity to present their
arguments. In the absence of any indication to the contrary, the CA-Cebu
must be accorded the presumption of regularity in the performance of their
functions. However, as discussed herein, the matter of whether it erred in its
BANKING LAW (18 October 2018 Cases)
conclusion and issuance of the TRO, preliminary injunction and final
injunction is another matter altogether.
IV Whether the issues
raised by petitioner are
the same issues raised in
G.R. No. 173370 which
was earlier dismissed by
this Court.
In G.R. 173370, a petition for certiorari under Rule 65 of the Rules of
Court, PDIC alleged that the CA-Cebu committed grave abuse of discretion
amounting to lack or excess of jurisdiction in taking cognizance of the Banks
petition, and in issuing a TRO and a writ of preliminary injunction.[64]
In the case at bench, a petition for review under Rule 45, PDICs core
contention is that the CA-Cebu erred in finding that prior approval of the
Monetary Board of the BSP is necessary before it may conduct an
investigation of the Banks.
Clearly then, the two petitions were of different nature raising
different issues.
G.R. 173370 challenged the CA-Cebus having taken cognizance of
the Banks petition and interlocutory orders on the issuance of a TRO and a
writ of preliminary injunction. This case, however, strikes at the core of the
final decision on the merits of the CA-Cebu, and not merely the interlocutory
orders. While both G.R. 173370 and the present case may have been
anchored on the same set of facts, that is, the refusal of the Banks to allow
PDIC to conduct an investigation without the prior consent of the Monetary
Board, the issues raised in the two petitions are not identical. Moreover, the
disposal of the first case does not amount to res judicata in this case.
V Whether the Court of
Appeals-Cebu erred in
finding that prior approval
of the Monetary Board of
the Bangko Sentral ng
Page 101
Pilipinas is necessary
before the PDIC may
conduct an investigation
of respondent banks.
PDIC is of the position that in order for it to exercise its power of
investigation, the law requires that:
(a) The investigation is based on a complaint of a depositor
or any other government agency, or on the report of
examination of [the] Bangko Sentral ng Pilipinas (BSP)
and/or PDIC; and,
(b) The complaint alleges, or the BSP and/or PDIC Report of
Examination contains adverse findings of, fraud,
irregularities or anomalies committed by the Bank and/or its
directors, officers, employees or agents; and,
(c) The investigation is upon the authority of the PDIC Board
of Directors.[65]
It argues that when it commenced its investigation on the Banks, all of the
aforementioned requirements were met. PDIC stresses that its power of
examination is different from its power of investigation, in such that the
former requires prior approval of the Monetary Board while the latter requires
merely the approval of the PDIC Board.[66] It further claims that the power of
examination cannot be exercised within twelve (12) months from the last
examination conducted, whereas the power of investigation is without
limitation as to the frequency of its conduct. It states that the purpose of the
PDICs power of examination is merely to look into the condition of the bank,
whereas the power of investigation aims to address fraud, irregularities and
anomalies based on complaints from depositors and other government
BANKING LAW (18 October 2018 Cases)
agencies or upon reports of examinations conducted by the PDIC itself or by
the BSP.[67]
The Banks, on the other hand, are of the opinion that a holistic reading of the
PDIC charter shows that petitioners power of examination is synonymous
with its power of investigation.[68]They cite, as bases, the law
dictionary definitions, Section 8, Eighth paragraph[69] and Section 9(b-1)[70] of
the PDIC Charter, and Rule 1, Section 3(1) of PDIC Regulatory Issuance No.
2005-02, which defines investigation as follows:
(l) Investigation shall refer to fact-finding
examination, study or inquiry for determining whether the
allegations in a complaint or findings in a final report of
examination may properly be the subject of an
administrative, criminal or civil action.
The Banks further cite Section X658 of the Manual of Regulations for Banks,
which states:
Sec. X658 - Examination by the BSP. The term examination
shall, henceforth, refer to an investigation of an institution
under the supervisory authority of the BSP to determine
compliance with laws and regulations. It shall include
determination that the institution is conducting its business
on a safe and sound basis. Examination requires full and
comprehensive looking into the operations and books of
institutions, and shall include, but need not be limited to the
following:
a. Determination of the banks
solvency and liquidity position;
b. Evaluation of asset quality as well
as determination of sufficiency of valuation
reserves on loans and other risk assets;
Page 102
 c. Review of all aspects of bank
operations;
d. Assessment of risk management
system, including the evaluation of the
effectiveness of the bank managements
oversight functions, policies, procedures,
internal control and audit;
e. Appraisal of overall management
of the bank;
f. Review of compliance and
applicable laws, rules and regulations; and
any other activities relevant to the above.
After an evaluation of the respective positions of the parties, the Court is of
the view that the Monetary Board approval is not required for PDIC to
conduct an investigation on the Banks.
The disagreement stems from the interpretation of these two key provisions
of the PDIC Charter. The confusion can be attributed to the fact that although
investigation and examination are two separate and
distinct procedures under the charter of the PDIC and the BSP, the words
seem to be used loosely and interchangeably.
It does not help that indeed these terms are very closely related in a generic
sense. However, while examination connotes a mere generic perusal or
inspection, investigation refers to a more intensive scrutiny for a more
specific fact-finding purpose. The latter term is also usually associated with
proceedings conducted prior to criminal prosecution.
The PDIC was created by R.A. No. 3591 on June 22, 1963 as an insurer of
deposits in all banks entitled to the benefits of insurance under the PDIC
Charter to promote and safeguard the interests of the depositing public by
way of providing permanent and continuing insurance coverage of all insured
deposits. It is a government instrumentality that operates under the
BANKING LAW (18 October 2018 Cases)
Department of Finance. Its primary purpose is to act as deposit insurer, as a
co-regulator of banks, and as receiver and liquidator of closed banks.[71]
Section 1 of the PDIC Charter states:
SECTION 1. There is hereby created a Philippine Deposit
Insurance Corporation hereinafter referred to as the
Corporation which shall insure, as herein provided, the
deposits of all banks which are entitled to the benefits of
insurance under this Act, and which shall have the powers
hereinafter granted.
The Corporation shall, as a basic policy, promote and
safeguard the interests of the depositing public by way of
providing permanent and continuing insurance coverage on
all insured deposits.
Section 1 of R.A. No. 9576 further provides: An Act Increasing the Maximum
Deposit Insurance Coverage, and in connection therewith, to Strengthen the
Regulatory and Administrative Authority, and Financial Capability of the
Philippine Deposit Insurance Corporation (PDIC), amending for this purpose
R.A. No. 3591, as Amended, otherwise known as the PDIC Charter.
SECTION 1. Statement of State Policy and Objectives. - It
is hereby declared to be the policy of the State to strengthen
the mandatory deposit insurance coverage system to
generate, preserve, maintain faith and confidence in the
countrys banking system, and protect it from illegal schemes
and machinations.
Towards this end, the government must extend all means
and mechanisms necessary for the Philippine Deposit
Insurance Corporation to effectively fulfill its vital task of
promoting and safeguarding the interests of the depositing
public by way of providing permanent and continuing
insurance coverage on all insured deposits, and in helping
develop a sound and stable banking system at all times.
Page 103
 Under its charter, the PDIC is empowered to conduct examination of
banks with prior approval of the Monetary Board:
Eighth To conduct examination of banks with prior approval
of the Monetary Board: Provided, That no examination can
be conducted within twelve (12) months from the
last examination date: Provided, however, That the
Corporation may, in coordination with the Bangko Sentral,
conduct a special examination as the Board of Directors, by
an affirmative vote of a majority of all its members, if there is
a threatened or impending closure of a bank; Provided,
further, That, notwithstanding the provisions of Republic Act
No. 1405, as amended, Republic Act No. 6426, as amended,
Republic Act No. 8791, and other laws, the Corporation
and/or the Bangko Sentral, may inquire into or examine
deposit accounts and all information related thereto in case
there is a finding of unsafe or unsound banking
practice; Provided, That to avoid overlapping of efforts, the
examination shall maximize the efficient use of the relevant
reports, information, and findings of the Bangko Sentral,
which it shall make available to the Corporation; (As
amended by R.A. 9302, 12 August 2004, R.A. 9576, 1 June
2009)
xxx. [Underlining supplied]
Section 9(b-1) of the PDIC Charter further provides that the PDIC
Board shall have the power to:
POWERS AND RESPONSIBILITIES AND PROHIBITIONS
SECTION 9. xxx
BANKING LAW (18 October 2018 Cases)
(b) The Board of Directors shall appoint examiners who shall
have power, on behalf of the Corporation to examine any
insured bank. Each such examiner shall have the power to
make a thorough examination of all the affairs of the bank
and in doing so, he shall have the power to administer oaths,
to examine and take and preserve the testimony of any of
the officers and agents thereof, and, to compel the
presentation of books, documents, papers, or records
necessary in his judgment to ascertain the facts relative to
the condition of the bank; and shall make a full and detailed
report of the condition of the bank to the Corporation. The
Board of Directors in like manner shall appoint claim agents
who shall have the power to investigate and examine all
claims for insured deposits and transferred deposits. Each
claim agent shall have the power to administer oaths and to
examine under oath and take and preserve testimony of any
person relating to such claim. (As amended by E.O. 890, 08
April 1983; R.A. 7400, 13 April 1992)
(b-1) The investigators appointed by the Board of Directors
shall have the power on behalf of the Corporation to conduct
investigations on frauds, irregularities and anomalies
committed in banks, based on reports of
examination conducted by the Corporation and Bangko
Sentral ng Pilipinas or complaints from depositors or from
other government agency. Each such investigator shall have
the power to administer oaths, and to examine and take and
preserve the testimony of any person relating to the subject
of investigation. (As added by R.A. 9302, 12 August 2004)
xxx. [Underscoring supplied]
As stated above, the charter empowers the PDIC to conduct an
investigation of a bank and to appoint examiners who shall have the power to
examine any insured bank. Such investigators are authorized to conduct
investigations on frauds, irregularities and anomalies committed in
banks, based on an examination conducted by the PDIC and the BSP or on
complaints from depositors or from other government agencies.
Page 104

The distinction between the power to investigate and the power to
examine is emphasized by the existence of two separate sets of rules
governing the procedure in the conduct of investigation and
examination. Regulatory Issuance (RI) No. 2005-02 or the PDIC Rules on
Fact-Finding Investigation of Fraud, Irregularities and Anomalies Committed
in Banks covers the procedural requirements of the exercise of the PDICs
power of investigation. On the other hand, RI No. 2009-05 sets forth the
guidelines for the conduct of the power of examination.
The definitions provided under the two aforementioned regulatory
issuances elucidate on the distinction between the power of examination and
the power of investigation.
Section 2 of RI No. 2005-02 states that its coverage shall be
applicable to all fact-finding investigations on fraud, irregularities and/or
anomalies committed in banks that are conducted by PDIC based on: [a]
complaints from depositors or other government agencies; and/or [b] final
reports of examinations of banks conducted by the Bangko Sentral ng
Pilipinas and/or PDIC.
The same issuance states that the Final Report of Examination[72] is
one of the three pre-requisites to the conduct of an investigation, in addition
to the authorization of the PDIC Board[73] and a complaint.[74] Juxtaposing this
provision with Section 9(b-1) of the PDIC Charter, since an examination is
explicitly made the basis of a fact-finding examination, then clearly
examination and investigation are two different proceedings. It would
obviously defy logic to make the result of an investigation the basis of the
same proceeding. Thus, RI No. 2005-02 defines an investigation as a fact-
finding examination, study or inquiry for determining whether the allegations
in a complaint or findings in a final report of examination may properly be the
subject of an administrative, criminal or civil action.[75]
The Banks cite the dictionary definitions of examination and
investigation to justify their conclusion that these terms refer to one and the
same proceeding. It is tempting to use these two terms interchangeably,
which practice may be perfectly justified in a purely literary sense. Indeed, a
reading of the PDIC Charter shows that the two terms have been used
BANKING LAW (18 October 2018 Cases)
interchangeably at some point. However, based on the provisions aforecited,
the intention of the laws is clearly to differentiate between the process of
investigation and that of examination.
In 2009, to clarify procedural matters, PDIC released RI No. 2009-05
or the Rules and Regulations on Examination of Banks. Section 2 thereof
differentiated between the two types of examination as follows:
Section 2. Types of Examination
a. Regular Examination - An examination conducted
independently or jointly with the BSP. It requires the prior
approval of the PDIC Board of Directors and the Monetary
Board (MB).It may be conducted only after an interval of at
least twelve (12) months from the closing date of the last
Regular Examination.
b. Special Examination An examination conducted at any
time in coordination with the BSP, by an affirmative vote of a
majority of all the members of the PDIC Board of
Directors, without need of prior MB approval, if there is a
threatened or impending bank closure as determined by the
PDIC Board of Directors. [Underscoring supplied]
Section 3 of RI No. 2009-05 provides for the general scope of the
PDIC examination:
Section 3. Scope of Examination
The examination shall include, but need not be limited to, the
following:
a. Determination of the banks solvency and
liquidity position;
Page 105
 b. Evaluation of asset quality as well as
determination of sufficiency of valuation
reserves on loans and other risk assets;
c. Review of all aspects of bank
operations;
d. Assessment of risk management
system, including the evaluation of the
effectiveness of the bank managements
oversight functions, policies, procedures,
internal control and audit;
e. Appraisal of overall management
of the bank;
f. Review of compliance with
applicable banking laws, and rules and
regulations, including PDIC issuances;
g. Follow-through of specific
exceptions/ violations noted during a
previous examination; and
h. Any other activity relevant to
the above.
Rule 2, Section 1 of PDIC RI No. 2005-02 or the PDIC Rules on
Fact-Finding Investigation of Fraud, Irregularities and Anomalies Committed
in Banks provides for the scope of fact-finding investigations as follows:
SECTION 1. Scope of the Investigation.
Fact-finding Investigations shall be limited to the
particular acts or omissions subject of a complaint or a Final
Report of Examination.
BANKING LAW (18 October 2018 Cases)
From the above-cited provisions, it is clear that the process of
examination covers a wider scope than that of investigation.
Examination involves an evaluation of the current status of a bank
and determines its compliance with the set standards regarding solvency,
liquidity, asset valuation, operations, systems, management, and compliance
with banking laws, rules and regulations.
Investigation, on the other hand, is conducted based on specific
findings of certain acts or omissions which are subject of a complaint or a
Final Report of Examination.
Clearly, investigation does not involve a general evaluation of the
status of a bank. An investigation zeroes in on specific acts and omissions
uncovered via an examination, or which are cited in a complaint.
An examination entails a review of essentially all the functions and
facets of a bank and its operation. It necessitates poring through voluminous
documents, and requires a detailed evaluation thereof. Such a process then
involves an intrusion into a banks records.
In contrast, although it also involves a detailed evaluation, an
investigation centers on specific acts of omissions and, thus, requires a less
invasive assessment.
The practical justification for not requiring the Monetary Board
approval to conduct an investigation of banks is the administrative hurdles
and paperwork it entails, and the correspondent time to complete those
additional steps or requirements. As in other types of investigation, time is
always of essence, and it is prudent to expedite the proceedings if an
accurate conclusion is to be arrived at, as an investigation is only as precise
as the evidence on which it is based. The promptness with which such
evidence is gathered is always of utmost importance because evidence,
Page 106
documentary evidence in particular, is remarkably fungible. A PDIC AUSTRIA-
investigation is conducted to determine[e] whether the allegations in a MARTINEZ, CALLEJO, SR.,
complaint or findings in a final report of examination may properly be the TINGA, and
subject of an administrative, criminal or civil action. [76] In other words, an DEVELOPMENT BANK OF CHICO-NAZARIO, JJ.
investigation is based on reports of examination and an examination is THE PHILIPPINES,
conducted with prior Monetary Board approval. Therefore, it would be Respondent.
unnecessary to secure a separate approval for the conduct of Promulgated:
an investigation. Such would merely prolong the process and provide June 30,
unscrupulous individuals the opportunity to cover their tracks. 2005
x-------------------------------------------------x
Indeed, while in a literary sense, the two terms may be used
interchangeably, under the PDIC Charter, examination and investigation refer DECISION
to two different processes. To reiterate, an examination of banks requires the
prior consent of the Monetary Board, whereas an investigation based on an
examination report, does not. CALLEJO, SR., J.:

WHEREFORE, the petition is GRANTED. The Decision and

Resolution of the Court of Appeals in CA G.R. CEB SP. No. 01550, Atty. Felipe P. Arcilla, Jr. was employed by the Development Bank of the
dated September 18, 2006 and January 25, 2007are REVERSED and SET Philippines (DBP) in October 1981. About five or six months thereafter, he
ASIDE. was assigned to the legal department, and thereafter, decided to avail of a
loan under the Individual Housing Project (IHP) of the bank.[1] On September
SO ORDERED. 12, 1983, DBP and Arcilla executed a Deed of Conditional Sale[2] over a
parcel of land, as well as the house to be constructed thereon, for the price
of P160,000.00. Arcilla borrowed the said amount from DBP for the purchase
IV. TRUTH IN LENDING ACT of the lot and the construction of a residential building thereon. He obliged
himself to pay the loan in 25 years, with a monthly amortization of P1,417.91,
with 9% interest per annum, to be deducted from his monthly salary.[3]
DEVELOPMENT BANK OF G.R. No. 161397
THE PHILIPPINES, DBP obliged itself to transfer the title of the property upon the
Petitioner, payment of the loan, including any increments thereof. It was also agreed
- versus - therein that if Arcilla availed of optional retirement, he could elect to continue
FELIPE P. ARCILLA, JR., paying the loan, provided that the loan/amount would be converted into a
Respondent. regular real estate loan account with the prevailing interest assigned on real
x - - - - - - - - -- - - - - - - - - - - - - - -x estate loans, payable within the remaining term of the loan account. [4]
FELIPE P. ARCILLA, JR., G.R. No. 161426
Petitioner, Arcilla was notified of the periodic release of his loan. [5] During the
Present: period of July 1984 to December 31, 1986, the monthly amortizations for the
- versus - PUNO, J., Chairman,

BANKING LAW (18 October 2018 Cases) Page 107

said account were deducted from his monthly salary, for which he was issued
receipts.[6]
The monthly amortization was increased to P1,468.92 in November 1984,
and to P1,691.51 beginning January 1985. However, Arcilla opted to resign
from the bank in December 1986. Conformably with the Deed of Conditional
Sale, the bank informed him, on June 11, 1987, that the balance of his loan
account with the bank had been converted to a regular housing loan, thus:
ii. One time 2% service charge ]-- To be computed
from
iii. Interest on the service charge ] the start of the 30-
day
iv. 8% penalty charge on the balances ] period
of the advances and service charge.[9]
Arcilla also agreed to pay to DBP the following:

Amount converted Interest Rate Remaining Term Monthly

toPH Loan Amortization
P 155,218.79 - 1 9% 22 yrs. & P1,342.72
6 mos *Insurance Premiums - 30-day period to be computed from
6,802.45 - 2 9% 21 yrs. & 59.41 date of
10 mos. advances
24,342.91 - 3 9% 22 yrs. 212.07 Other Advances - 30-day period to be computed from date of
notification
Plus: MRI at PC. 41/thousand P1,614.20
76.41
P186,364.15 Total P1,690.61[7] ======== b. Taxes
b.1 One time service charge 2% of the amount advanced
b.2 Interest and penalty charge Interest 7% p.a. over
borrowing
On July 24, 1987, Arcilla signed three Promissory Notes [8] for the total
amount of P186,364.15. He was also obliged to pay service charge and cost
interests, as follows: Penalty charge 8% p.a. if unpaid
after 30 days from date of advance
a.1 On the amount advanced or balance thereof that
i. Interest of the advance at ]
remains unpaid for 30 days* or less:
7% p.a. over DBPs ]
i. Interest on advances at 7% p.a. over DBPs borrowing cost: borrowing costs; ]-- To be computed from start
ii One time 2% service charge ] of 30-day period
ii. No 2% service charge
iii Interest on the service charge]
iii. No 8% penalty charge
iv. 8% penalty charge on the ]
a.2 On the amount advanced or balance thereof that balances of the advance and ]
remains unpaid for more than 30 days: service charge. ]

*Insurance Premiums - 30-day period to be computed from

i. Interest on the advance at 7% p.a. ]
date of
over DBPs borrowing cost; ]
BANKING LAW (18 October 2018 Cases) Page 108
 advances.
Other Advances - 30-day period to be computed from date of
notification.
b. Taxes
b.1 One time service charge 2% of the amount advanced
b.2 Interest and penalty charge Interest 7% p.a. over borrowing
cost
Penalty charge 8% p.a. if unpaid
after 30 days from date of advance
However, Arcilla also agreed to the reservation by the DBP of its
right to increase (with notice to him) the rate of interest on the loan, as well
as all other fees and charges on loans and advances pursuant to such policy
as it may adopt from time to time during the period of the loan; Provided, that
the rate of interest on the loan shall be reduced by law or by the Monetary
Board; Provided, further, that the adjustment in the rate of interest shall take
effect on or after the effectivity of the increase or decrease in the maximum
rate of interest.[10]
Upon his request, DBP agreed to grant Arcilla an additional cash
advance of P32,000.00. Thereafter, on May 23, 1984, a Supplement to the
Conditional Sale Agreement was executed in which DBP and Arcilla agreed
on the following terms of the loan:
Amount Interest Rate Per Annum Terms Amortization
P32,000.00 Nine (9%) per cent MRI 24 years P271.57
for P32,000.00 at P0.40/
1,000.00 12.80
P32,000.00 same to be consolidated with the (Est. P 284.37
original advance in accordance Amort.) =======
with Condition No. 8 hereof.[11]
The additional advance was, thus, consolidated to the outstanding balance of
Arcillas original advance, payable within the remaining term thereof at 9%
per annum. However, he failed to pay his loan account, advances, penalty
BANKING LAW (18 October 2018 Cases)
charges and interests which, as of October 31, 1990, amounted
to P241,940.93.[12] DBP rescinded the Deed of Conditional Sale by notarial
act on November 27, 1990.[13] Nevertheless, it wrote Arcilla, on January 3,
1992, giving him until October 24, 1992, within which to repurchase the
property upon full payment of the current appraisal or updated total,
whichever is lesser; in case of failure to do so, the property would be
advertised for bidding.[14] DBP reiterated the said offer on October 7,
1992.[15] Arcilla failed to respond. Consequently, the property was advertised
for sale at public bidding on February 14, 1994.[16]
Arcilla filed a complaint against DBP with the Regional Trial Court
(RTC) of Antipolo, Rizal, on February 21, 1994. He alleged that DBP failed to
furnish him with the disclosure statement required by Republic Act (R.A.) No.
3765 and Central Bank (CB) Circular No. 158 prior to the execution of the
deed of conditional sale and the conversion of his loan account with the bank
into a regular housing loan account. Despite this, DBP immediately deducted
the account from his salary as early as 1984. Moreover, the bank applied its
own formula and imposed its usurious interests, penalties and charges on his
loan account and advances. He further alleged, thus:
13. That when plaintiff could no longer cope-up with
defendants illegal and usurious impositions, the DBP
unilaterally increased further the rate of interest, without
notice to the latter, and heaped-up usurious interests,
penalties and charges;
14. That to further bend the back of the plaintiff, defendant
rescinded the subject deed of conditional sale on 4
December 1990 without giving due notice to plaintiff;
15. That much later, on 10 October 1993, plaintiff
received a letter from defendant dated 19 September 1993,
informing plaintiff that the subject deed of conditional sale
was already rescinded on 4 December 1990 (xerox copy of
the same is hereto attached and made an integral part
hereof as Annex C;[17]
Page 109
In its answer to the complaint, the DBP alleged that it substantially complied
with R.A. No. 3765 and CB Circular No. 158 because the details required in
said statements were particularly disclosed in the promissory notes, deed of
conditional sale and the required notices sent to Arcilla. In any event, its
failure to comply strictly with R.A. No. 3765 did not affect the validity and
enforceability of the subject contracts or transactions. DBP interposed a
counterclaim for the possession of the property.
On April 27, 2001, the trial court rendered judgment in favor of Arcilla
and nullified the notarial rescission of the deeds executed by the parties.
The fallo of the decision reads:
WHEREFORE, premises considered, judgment is
hereby rendered in favor of the plaintiff and against the
defendant. Defendant is hereby directed to furnish the
disclosure statement to the plaintiff within five (5) days upon
receipt hereof in the manner and form provided by R.A. No.
3765 and submit to this Court for approval the total
obligation of the plaintiff as of this date, within ten (10) days
from receipt of this order. The Notarial Rescission (Exh. 16)
dated November 27, 1990 is hereby declared null and void.
Costs against the defendant.
SO ORDERED.[18]
DBP appealed the decision to the Court of Appeals (CA) wherein it
made the following assignment of errors:
4.1. The trial court erred in ruling that the provision of the
details of the loan without the issuance of a Disclosure
Statement is not compliance with the Truth in Lending Act;
4.2. The trial court erred in declaring the Notarial Rescission
null and void; and
4.3. The trial court erred in denying DBPs counterclaims for
recovery of possession, back rentals and litigation
expenses.[19]
BANKING LAW (18 October 2018 Cases)
On May 29, 2003, the CA rendered judgment setting aside and reversing the
decision of the RTC. In ordering the dismissal of the complaint, the appellate
court ruled that DBP substantially complied with R.A. No. 3765 and CB
Circular No. 158. Arcilla filed a motion for reconsideration of the decision. For
its part, DBP filed a motion for partial reconsideration of the decision, praying
that Arcilla be ordered to vacate the property. However, the appellate court
denied both motions.
The parties filed separate petitions for review on certiorari with this Court.
The first petition, entitled Development Bank of the Philippines v. Court of
Appeals, was docketed as G.R. No. 161397; the second petition,
entitled Felipe Arcilla, Jr. v. Court of Appeals, was docketed as G.R. No.
161426. The Court resolved to consolidate the two cases.
The issues raised in the two petitions are the following: a) whether or not
petitioner DBP complied with the disclosure requirement of R.A. No. 3765
and CB Circular No. 158, Series of 1978, in the execution of the deed of
conditional sale, the supplemental deed of conditional sale, as well as the
promissory notes; and b) whether or not respondent Felipe Arcilla, Jr. is
mandated to vacate the property and pay rentals for his occupation thereof
after the notarial rescission of the deed of conditional sale was rescinded by
notarial act, as well as the supplement executed by DBP.
On the first issue, Arcilla avers that under R.A. No. 3765 and CB
Circular No. 158, the DBP, as the creditor bank, was mandated to furnish him
with the requisite information in such form prescribed by the Central Bank
before the commutation of the loan transaction. He avers that the disclosure
of the details of the loan contained in the deed of conditional sale and the
supplement thereto, the promissory notes and release sheet, do
not constitute substantial compliance with the law and the CB Circular. He
avers that the required disclosure did not include the following:
[T]he percentage of Finance Charges to Total Amount
Financed (Computed in accordance with Sec. 2(i) of CB
Circular 158; the Additional Charges in case certain
stipulations in the contract are not met by the debtor; Total
Non-Finance Charges; Total Finance Charges, Effective
Interest Rate, etc. [20]
Page 110

Arcilla further posits that the failure of DBP to comply with its obligation under
R.A. No. 3765 and CB Circular No. 158 forecloses its right to rescind the
transaction between them, and to demand compliance of his obligation
arising from said transaction. Moreover, the bank had no right to deduct the
monthly amortizations from his salary without first complying with the
mandate of R.A. No. 3765.
DBP, on the other hand, avers that all the information required by
R.A. No. 3765 was already contained in the loan transaction documents. It
posits that even if it failed to comply strictly with the disclosure requirement of
R.A. No. 3765, nevertheless, under Section 6(b) of the law, the validity and
enforceability of any action or transaction is not affected. It asserts that
Arcilla was estopped from invoking R.A. No. 3765 because he failed to
demand compliance with R.A. No. 3765 from the bank before the
consummation of the loan transaction, until the time his complaint was filed
with the trial court.
In its petition in G.R. No. 161397, DBP asserts that the RTC erred in not
rendering judgment on its counterclaim for the possession of the subject
property, and the liability of Arcilla for rentals while in the possession of the
property after the notarial rescission of the deeds of conditional sale. For his
part, Arcilla (in G.R. No. 161426) insists that the respondent failed to comply
with its obligation under R.A. No. 3765; hence, the notarial rescission of the
deed of conditional sale and the supplement thereof was null and void. Until
DBP complies with its obligation, he is not obliged to comply with his.
The petition of Arcilla has no merit.
Section 1 of R.A. No. 3765 provides that prior to the consummation of a loan
transaction, the bank, as creditor, is obliged to furnish a client with a clear
statement, in writing, setting forth, to the extent applicable and in accordance
with the rules and regulations prescribed by the Monetary Board of the
Central Bank of the Philippines, the following information:
(1) the cash price or delivered price of the property
or service to be acquired;
BANKING LAW (18 October 2018 Cases)
(2) the amounts, if any, to be credited as down payment
and/or trade-in;
(3) the difference between the amounts set forth under
clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be
paid by such person in connection with the transaction but
which are not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charges expressed in terms of pesos and
centavos; and
(7) the percentage that the finance charge bears to the total
amount to be financed expressed as a simple annual rate on
the outstanding unpaid balance of the obligation.
Under Circular No. 158 of the Central Bank, the information required
by R.A. No. 3765 shall be included in the contract covering the credit
transaction or any other document to be acknowledged and signed by the
debtor, thus:
The contract covering the credit transaction, or any
other document to be acknowledged and signed by the
debtor, shall indicate the above seven items of information.
In addition, the contract or document shall specify additional
charges, if any, which will be collected in case certain
stipulations in the contract are not met by the debtor.
Furthermore, the contract or document shall specify additional
charges, if any, which will be collected in case certain stipulations in the
contract are not met by the debtor.[21]
If the borrower is not duly informed of the data required by the law
prior to the consummation of the availment or drawdown, the lender will have
no right to collect such charge or increases thereof, even if stipulated in the
Page 111
promissory note.[22] However, such failure shall not affect the validity or
enforceability of any contract or transaction.[23]
In the present case, DBP failed to disclose the requisite information
in the disclosure statement form authorized by the Central Bank, but did so in
the loan transaction documents between it and Arcilla. There is no evidence
on record that DBP sought to collect or collected any interest, penalty or
other charges, from Arcilla other than those disclosed in the said
deeds/documents.
The Court is convinced that Arcillas claim of not having been
furnished the data/information required by R.A. No. 3765 and CB Circular
No. 158 was but an afterthought. Despite the notarial rescission of the
conditional sale in 1990, and DBPs subsequent repeated offers to
repurchase the property, the latter maintained his silence. Arcilla filed his
complaint only on February 21, 1994, or four years after the said notarial
rescission. The Court finds and so holds that the following findings and
ratiocinations of the CA are correct:
After a careful perusal of the records, We find that the
appellee had been sufficiently informed of the terms and the
requisite charges necessarily included in the subject loan. It
must be stressed that the Truth in Lending Act (R.A. No.
3765), was enacted primarily to protect its citizens from a
lack of awareness of the true cost of credit to the user
by using a full disclosure of such cost with a view of
preventing the uninformed use of credit to the detriment of
the national economy (Emata vs. Intermediate Appellate
Court, 174, SCRA 464 [1989]; Sec. 2, R.A. No.
3765). Contrary to appellees claim that he was not
sufficiently informed of the details of the loan, the records
disclose that the required informations were readily available
in the three (3) promissory notes he executed. Precisely, the
said promissory notes were executed to apprise appellee of
the remaining balance on his loan when the same was
converted into a regular housing loan. And on its face, the
BANKING LAW (18 October 2018 Cases)
promissory notes signed by no less than the appellee readily
shows all the data required by the Truth in Lending Act (R.A.
No. 3765).
Apropos, We agree with the appellant that appellee, a
lawyer, would not be so gullible or negligent as to sign
documents without knowing fully well the legal implications
and consequences of his actions, and that appellee was a
former employee of appellant. As such employee, he is as
well presumed knowledgeable with matters relating to
appellants business and fully cognizant of the terms of the
loan he applied for, including the charges that had to be
paid.
It might have been different if the borrower was, say,
an ordinary employee eager to buy his first house and is
easily lured into accepting onerous terms so long as the
same is payable on installments. In such cases, the Court
would be disposed to be stricter in the application of the
Truth in Lending Act, insisting that the borrower be fully
informed of what he is entering into. But in the case at bar,
considering appellees education and training, We must hold,
in the light of the evidence at hand, that he was duly
informed of the necessary charges and fully understood their
implications and effects. Consequently, the trial courts
annulment of the rescission anchored on this ground was
unjustified.[24]
Anent the prayer of DBP to order Arcilla to vacate the property and
pay rentals therefor from 1990, a review of the records has shown that it
failed to adduce evidence on the reasonable amount of rentals for Arcillas
occupancy of the property. Hence, the Court orders a remand of the case to
the court of origin, for the parties to adduce their respective evidence on the
banks counterclaim.
IN LIGHT OF ALL THE FOREGOING, the petition in G.R. No.
161426 is DENIED for lack of merit. The petition in G.R. No. 161397 is
Page 112
PARTIALLY GRANTED. The case is hereby REMANDED to the Regional
Trial Court of Antipolo, Rizal, Branch 73, for it to resolve the counterclaim of
the Development Bank of the Philippines for possession of the property, and
for the reasonable rentals for Felipe P. Arcilla, Jr.s occupancy thereof after
the notarial rescission of the Deed of Conditional Sale in 1990.
Costs against petitioner Felipe P. Arcilla, Jr.
SO ORDERED.
This is a Petition for Review on Certiorari under Rule 45 of the Rules
of Court, which seeks to annul the Court of Appeals Decision [1] dated 21
January 2003 and its Resolution[2]dated 9 September 2003 in CA-G.R. CV
No. 67318. The assailed Court of Appeals Decision and Resolution affirmed
in turn the Decision[3] dated 23 March 2000 and Order[4] dated 8 May 2000 of
the Regional Trial Court (RTC), Branch 65 of Makati City, in Civil Case No.
99-314, declaring void the interest rate provided in the promissory notes
executed by the respondents Spouses Samuel and Odette Beluso (spouses
Beluso) in favor of petitioner United Coconut Planters Bank (UCPB).

The procedural and factual antecedents of this case are as follows:

UNITED COCONUT PLANTERS G.R. No. 159912 On 16 April 1996, UCPB granted the spouses Beluso a Promissory
BANK, Notes Line under a Credit Agreement whereby the latter could avail from the
Petitioner, Present: former credit of up to a maximum amount of P1.2 Million pesos for a term
ending on 30 April 1997. The spouses Beluso constituted, other than their
YNARES-SANTIAGO, J., promissory notes, a real estate mortgage over parcels of land in RoxasCity,
Chairperson, covered by Transfer Certificates of Title No. T-31539 and T-27828, as
AUSTRIA-MARTINEZ, additional security for the obligation. The Credit Agreement was
- versus - CHICO-NAZARIO, subsequently amended to increase the amount of the Promissory Notes Line
NACHURA, and to a maximum of P2.35 Million pesos and to extend the term thereof to 28
REYES, JJ. February 1998.

The spouses Beluso availed themselves of the credit line under the
SPOUSES SAMUEL and ODETTE Promulgated: following Promissory Notes:
BELUSO,
Respondents. August 17, 2007 PN # Date of PN Maturity Date Amount Secured
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x 8314-96-00083-3 29 April 1996 27 August 1996 P 700,000
8314-96-00085-0 2 May 1996 30 August 1996 P 500,000
8314-96-000292-2 20 November 1996 20 March 1997 P 800,000

DECISION
The three promissory notes were renewed several times. On 30 April
1997, the payment of the principal and interest of the latter two promissory
CHICO-NAZARIO, J.: notes were debited from the spouses Belusos account with UCPB; yet, a
consolidated loan for P1.3 Million was again released to the spouses Beluso
under one promissory note with a due date of 28 February 1998.

BANKING LAW (18 October 2018 Cases) Page 113

 To completely avail themselves of the P2.35 Million credit line foreclosed the properties mortgaged by the spouses Beluso to secure their
extended to them by UCPB, the spouses Beluso executed two more credit line, which, by that time, already ballooned to P3,784,603.00.
promissory notes for a total of P350,000.00:
On 9 February 1999, the spouses Beluso filed a Petition for
PN # Date of PN Maturity Date Amount Secured Annulment, Accounting and Damages against UCPB with the RTC of Makati
97-00363-1 11 December 1997 28 February 1998 P 200,000 City.
98-00002-4 2 January 1998 28 February 1998 P 150,000
On 23 March 2000, the RTC ruled in favor of the spouses Beluso,
disposing of the case as follows:
However, the spouses Beluso alleged that the amounts covered by these last
two promissory notes were never released or credited to their account and, PREMISES CONSIDERED, judgment is hereby
thus, claimed that the principal indebtedness was only P2 Million. rendered declaring the interest rate used by [UCPB] void
and the foreclosure and Sheriffs Certificate
In any case, UCPB applied interest rates on the different promissory of Sale void. [UCPB] is hereby ordered to return to [the
notes ranging from 18% to 34%. From 1996 to February 1998 the spouses spouses Beluso] the properties subject of the foreclosure; to
Beluso were able to pay the total sum of P763,692.03. pay [the spouses Beluso] the amount of P50,000.00 by way
of attorneys fees; and to pay the costs of suit. [The spouses
From 28 February 1998 to 10 June 1998, UCPB continued to charge Beluso] are hereby ordered to pay [UCPB] the sum
interest and penalty on the obligations of the spouses Beluso, as follows: of P1,560,308.00.[5]

On 8 May 2000, the RTC denied UCPBs Motion for

PN # Amount Secured Interest Penalty Total
Reconsideration,[6] prompting UCPB to appeal the RTC Decision with the
97-00363-1 P 200,000 31% 36% P 225,313.24
Court of Appeals. The Court of Appeals affirmed the RTC Decision, to wit:
97-00366-6 P 700,000 30.17% 32.786% P 795,294.72
(7 days) (102 days)
WHEREFORE, premises considered, the decision
97-00368-2 P 1,300,000 28% 30.41% P 1,462,124.54
dated March 23, 2000 of the Regional Trial Court, Branch
(2 days) (102 days)
65, Makati City in Civil Case No. 99-314 is hereby
98-00002-4 P 150,000 33% 36% P 170,034.71 AFFIRMED subject to the modification that defendant-
(102 days) appellant UCPB is not liable for attorneys fees or the costs of
suit.[7]

The spouses Beluso, however, failed to make any payment of the
foregoing amounts.
On 2 September 1998, UCPB demanded that the spouses Beluso
pay their total obligation of P2,932,543.00 plus 25% attorneys fees, but the
spouses Beluso failed to comply therewith. On 28 December 1998, UCPB
On 9 September 2003, the Court of Appeals denied UCPBs Motion
for Reconsideration for lack of merit. UCPB thus filed the present petition,
submitting the following issues for our resolution:
I

BANKING LAW (18 October 2018 Cases) Page 114

 WHETHER OR NOT THE HONORABLE COURT OF
APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR WHEN IT AFFIRMED THE DECISION OF THE
TRIAL COURT WHICH DECLARED VOID THE PROVISION
ON INTEREST RATE AGREED UPON BETWEEN
PETITIONER AND RESPONDENTS
II
WHETHER OR NOT THE HONORABLE COURT OF
APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR WHEN IT AFFIRMED THE COMPUTATION BY THE
TRIAL COURT OF RESPONDENTS INDEBTEDNESS AND
ORDERED RESPONDENTS TO PAY PETITIONER THE
AMOUNT OF ONLY ONE MILLION FIVE HUNDRED SIXTY
THOUSAND THREE HUNDRED EIGHT PESOS
(P1,560,308.00)
III
WHETHER OR NOT THE HONORABLE COURT OF
APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR WHEN IT AFFIRMED THE DECISION OF THE
TRIAL COURT WHICH ANNULLED THE FORECLOSURE
BY PETITIONER OF THE SUBJECT PROPERTIES DUE TO
AN ALLEGED INCORRECT COMPUTATION OF
RESPONDENTS INDEBTEDNESS
IV
WHETHER OR NOT THE HONORABLE COURT OF
APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR WHEN IT AFFIRMED THE DECISION OF THE
TRIAL COURT WHICH FOUND PETITIONER LIABLE FOR
VIOLATION OF THE TRUTH IN LENDING ACT
V
BANKING LAW (18 October 2018 Cases)
WHETHER OR NOT THE HONORABLE COURT OF
APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR WHEN IT FAILED TO ORDER THE DISMISSAL OF
THE CASE BECAUSE THE RESPONDENTS ARE GUILTY
OF FORUM SHOPPING[8]
Validity of the Interest Rates
The Court of Appeals held that the imposition of interest in the
following provision found in the promissory notes of the spouses Beluso is
void, as the interest rates and the bases therefor were determined solely by
petitioner UCPB:
FOR VALUE RECEIVED, I, and/or We, on or before
due date, SPS. SAMUEL AND ODETTE BELUSO
(BORROWER), jointly and severally promise to pay to
UNITED COCONUT PLANTERS BANK (LENDER) or order
at UCPB Bldg., Makati Avenue, Makati City, Philippines, the
sum of ______________ PESOS, (P_____), Philippine
Currency, with interest thereon at the rate indicative of DBD
retail rate or as determined by the Branch Head.[9]
UCPB asserts that this is a reversible error, and claims that while the
interest rate was not numerically quantified in the face of the promissory
notes, it was nonetheless categorically fixed, at the time of execution thereof,
at the rate indicative of the DBD retail rate. UCPB contends that said
provision must be read with another stipulation in the promissory notes
subjecting to review the interest rate as fixed:
The interest rate shall be subject to review and may
be increased or decreased by the LENDER considering
among others the prevailing financial and monetary
conditions; or the rate of interest and charges which other
banks or financial institutions charge or offer to charge for
similar accommodations; and/or the resulting profitability to
Page 115
 the LENDER after due consideration of all dealings with the
BORROWER.[10]
In this regard, UCPB avers that these are valid reference rates akin
to a prevailing rate or prime rate allowed by this Court in Polotan v. Court of
Appeals.[11] Furthermore, UCPB argues that even if the proviso as
determined by the branch head is considered void, such a declaration would
not ipso facto render the connecting clause indicative of DBD retail rate void
in view of the separability clause of the Credit Agreement, which reads:
Section 9.08 Separability Clause. If any one or more
of the provisions contained in this AGREEMENT, or
documents executed in connection herewith shall be
declared invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining
provisions hereof shall not in any way be affected or
impaired.[12]
According to UCPB, the imposition of the questioned interest rates
did not infringe on the principle of mutuality of contracts, because the
spouses Beluso had the liberty to choose whether or not to renew their credit
line at the new interest rates pegged by petitioner. [13] UCPB also claims that
assuming there was any defect in the mutuality of the contract at the time of
its inception, such defect was cured by the subsequent conduct of the
spouses Beluso in availing themselves of the credit line from April 1996 to
February 1998 without airing any protest with respect to the interest rates
imposed by UCPB. According to UCPB, therefore, the spouses Beluso are in
estoppel.[14]
We agree with the Court of Appeals, and find no merit in the
contentions of UCPB.
Article 1308 of the Civil Code provides:
Art. 1308. The contract must bind both contracting
parties; its validity or compliance cannot be left to the will of
one of them.
BANKING LAW (18 October 2018 Cases)
We applied this provision in Philippine National Bank v. Court of
Appeals,[15] where we held:
In order that obligations arising from contracts may
have the force of law between the parties, there must be
mutuality between the parties based on their essential
equality. A contract containing a condition which makes its
fulfillment dependent exclusively upon the uncontrolled will of
one of the contracting parties, is void (Garcia vs. Rita
Legarda, Inc., 21 SCRA 555). Hence, even assuming that the
P1.8 million loan agreement between the PNB and the private
respondent gave the PNB a license (although in fact there
was none) to increase the interest rate at will during the term
of the loan, that license would have been null and void for
being violative of the principle of mutuality essential in
contracts. It would have invested the loan agreement with the
character of a contract of adhesion, where the parties do not
bargain on equal footing, the weaker party's (the debtor)
participation being reduced to the alternative "to take it or
leave it" (Qua vs. Law Union & Rock Insurance Co., 95 Phil.
85). Such a contract is a veritable trap for the weaker party
whom the courts of justice must protect against abuse and
imposition.
The provision stating that the interest shall be at the rate indicative
of DBD retail rate or as determined by the Branch Head is indeed dependent
solely on the will of petitioner UCPB. Under such provision, petitioner UCPB
has two choices on what the interest rate shall be: (1) a rate indicative of the
DBD retail rate; or (2) a rate as determined by the Branch Head. As UCPB is
given this choice, the rate should be categorically determinable
in both choices. If either of these two choices presents an opportunity for
UCPB to fix the rate at will, the bank can easily choose such an option, thus
making the entire interest rate provision violative of the principle of mutuality
of contracts.
Not just one, but rather both, of these choices are dependent solely
on the will of UCPB. Clearly, a rate as determined by the Branch Head gives
Page 116
the latter unfettered discretion on what the rate may be. The Branch Head
may choose any rate he or she desires. As regards the rate indicative of the
DBD retail rate, the same cannot be considered as valid for being akin to a
prevailing rate or prime rate allowed by this Court in Polotan. The interest
rate in Polotan reads:
The Cardholder agrees to pay interest per annum at 3% plus
the prime rate of Security Bank and Trust Company. x x x.[16]
In this provision in Polotan, there is a fixed margin over the reference rate:
3%. Thus, the parties can easily determine the interest rate by applying
simple arithmetic. On the other hand, the provision in the case at bar does
not specify any margin above or below the DBD retail rate. UCPB can peg
the interest at any percentage above or below the DBD retail rate, again
giving it unfettered discretion in determining the interest rate.
The stipulation in the promissory notes subjecting the interest rate to review
does not render the imposition by UCPB of interest rates on the obligations
of the spouses Beluso valid.According to said stipulation:
The interest rate shall be subject to review and may
be increased or decreased by the LENDER considering
among others the prevailing financial and monetary
conditions; or the rate of interest and charges which other
banks or financial institutions charge or offer to charge for
similar accommodations; and/or the resulting profitability to
the LENDER after due consideration of all dealings with the
BORROWER.[17]
It should be pointed out that the authority to review the interest rate was
given UCPB alone as the lender. Moreover, UCPB may apply the
considerations enumerated in this provision as it wishes. As worded in the
above provision, UCPB may give as much weight as it desires to each of the
following considerations: (1) the prevailing financial and monetary condition;
(2) the rate of interest and charges which other banks or financial institutions
charge or offer to charge for similar accommodations; and/or (3) the resulting
profitability to the LENDER (UCPB) after due consideration of all dealings
BANKING LAW (18 October 2018 Cases)
with the BORROWER (the spouses Beluso). Again, as in the case of the
interest rate provision, there is no fixed margin above or below these
considerations.
In view of the foregoing, the Separability Clause cannot save either
of the two options of UCPB as to the interest to be imposed, as both options
violate the principle of mutuality of contracts.
UCPB likewise failed to convince us that the spouses Beluso were in
estoppel.
Estoppel cannot be predicated on an illegal act. As between the
parties to a contract, validity cannot be given to it by estoppel if it is
prohibited by law or is against public policy. [18]
The interest rate provisions in the case at bar are illegal not only
because of the provisions of the Civil Code on mutuality of contracts, but
also, as shall be discussed later, because they violate the Truth in Lending
Act. Not disclosing the true finance charges in connection with the extensions
of credit is, furthermore, a form of deception which we cannot countenance. It
is against the policy of the State as stated in the Truth in Lending Act:
Sec. 2. Declaration of Policy. It is hereby declared to
be the policy of the State to protect its citizens from a lack of
awareness of the true cost of credit to the user by assuring a
full disclosure of such cost with a view of preventing the
uninformed use of credit to the detriment of the national
economy.[19]
Moreover, while the spouses Beluso indeed agreed to renew the
credit line, the offending provisions are found in the promissory notes
themselves, not in the credit line. In fixing the interest rates in the promissory
notes to cover the renewed credit line, UCPB still reserved to itself the same
two options (1) a rate indicative of the DBD retail rate; or (2) a rate as
determined by the Branch Head.
Error in Computation
Page 117
 UCPB asserts that while both the RTC and the Court of Appeals
voided the interest rates imposed by UCPB, both failed to include in their
computation of the outstanding obligation of the spouses Beluso the legal
rate of interest of 12% per annum. Furthermore, the penalty charges were
also deleted in the decisions of the RTC and the Court of Appeals. Section
2.04, Article II on Interest and other Bank Charges of the subject Credit
Agreement, provides:
Section 2.04 Penalty Charges. In addition to the
interest provided for in Section 2.01 of this ARTICLE, any
principal obligation of the CLIENT hereunder which is not
paid when due shall be subject to a penalty charge of one
percent (1%) of the amount of such obligation per month
computed from due date until the obligation is paid in full. If
the bank accelerates teh (sic) payment of availments
hereunder pursuant to ARTICLE VIII hereof, the penalty
charge shall be used on the total principal amount
outstanding and unpaid computed from the date of
acceleration until the obligation is paid in full.[20]
Paragraph 4 of the promissory notes also states:
In case of non-payment of this Promissory Note
(Note) at maturity, I/We, jointly and severally, agree to pay
an additional sum equivalent to twenty-five percent (25%) of
the total due on the Note as attorneys fee, aside from the
expenses and costs of collection whether actually incurred or
not, and a penalty charge of one percent (1%) per month on
the total amount due and unpaid from date of default until
fully paid.[21]
Petitioner further claims that it is likewise entitled to attorneys fees,
pursuant to Section 9.06 of the Credit Agreement, thus:
If the BANK shall require the services of counsel for
the enforcement of its rights under this AGREEMENT, the
BANKING LAW (18 October 2018 Cases)
Note(s), the collaterals and other related documents, the
BANK shall be entitled to recover attorneys fees equivalent
to not less than twenty-five percent (25%) of the total
amounts due and outstanding exclusive of costs and other
expenses.[22]
Another alleged computational error pointed out by UCPB is the
negation of the Compounding Interest agreed upon by the parties under
Section 2.02 of the Credit Agreement:
Section 2.02 Compounding Interest. Interest not paid when
due shall form part of the principal and shall be subject to the
same interest rate as herein stipulated.[23]
and paragraph 3 of the subject promissory notes:
Interest not paid when due shall be added to, and become
part of the principal and shall likewise bear interest at the
same rate.[24]
UCPB lastly avers that the application of the spouses Belusos
payments in the disputed computation does not reflect the parties
agreement. The RTC deducted the payment made by the spouses Beluso
amounting to P763,693.00 from the principal of P2,350,000.00. This was
allegedly inconsistent with the Credit Agreement, as well as with the
agreement of the parties as to the facts of the case. In paragraph 7 of the
spouses Belusos Manifestation and Motion on Proposed Stipulation of Facts
and Issues vis--vis UCPBs Manifestation, the parties agreed that the amount
of P763,693.00 was applied to the interest and not to the principal, in accord
with Section 3.03, Article II of the Credit Agreement on Order of the
Application of Payments, which provides:
Section 3.03 Application of Payment. Payments
made by the CLIENT shall be applied in accordance with the
following order of preference:
Page 118
 1. Accounts receivable and other out-of-pocket
expenses
2. Front-end Fee, Origination Fee, Attorneys Fee
and other expenses of collection;
3. Penalty charges;
4. Past due interest;
5. Principal amortization/Payment in arrears;
6. Advance interest;
7. Outstanding balance; and
8. All other obligations of CLIENT to the BANK, if
any.[25]
Thus, according to UCPB, the interest charges, penalty charges,
and attorneys fees had been erroneously excluded by the RTC and the Court
of Appeals from the computation of the total amount due and demandable
from spouses Beluso.
The spouses Belusos defense as to all these issues is that the
demand made by UCPB is for a considerably bigger amount and, therefore,
the demand should be considered void.There being no valid demand,
according to the spouses Beluso, there would be no default, and therefore
the interests and penalties would not commence to run. As it was likewise
improper to foreclose the mortgaged properties or file a case against the
spouses Beluso, attorneys fees were not warranted.
We agree with UCPB on this score. Default commences upon
judicial or extrajudicial demand.[26] The excess amount in such a demand
does not nullify the demand itself, which is valid with respect to the proper
amount. A contrary ruling would put commercial transactions in disarray, as
validity of demands would be dependent on the exactness of the
computations thereof, which are too often contested.
There being a valid demand on the part of UCPB, albeit excessive,
the spouses Beluso are considered in default with respect to the proper
amount and, therefore, the interests and the penalties began to run at that
point.
BANKING LAW (18 October 2018 Cases)
As regards the award of 12% legal interest in favor of petitioner, the
RTC actually recognized that said legal interest should be imposed, thus:
There being no valid stipulation as to interest, the legal rate of interest shall
be charged.[27] It seems that the RTC inadvertently overlooked its non-
inclusion in its computation.
The spouses Beluso had even originally asked for the RTC to
impose this legal rate of interest in both the body and the prayer of its petition
with the RTC:
12. Since the provision on the fixing of the rate of
interest by the sole will of the respondent Bank is null and
void, only the legal rate of interest which is 12% per annum
can be legally charged and imposed by the bank, which
would amount to only about P599,000.00 since 1996 up
to August 31, 1998.
xxxx
WHEREFORE, in view of the foregoing, petiitoners
pray for judgment or order:
xxxx
2. By way of example for the public good against the
Banks taking unfair advantage of the weaker party to their
contract, declaring the legal rate of 12% per annum, as the
imposable rate of interest up to February 28, 1999 on the
loan of 2.350 million.[28]
All these show that the spouses Beluso had acknowledged before the RTC
their obligation to pay a 12% legal interest on their loans. When the RTC
failed to include the 12% legal interest in its computation, however, the
spouses Beluso merely defended in the appellate courts this non-inclusion,
as the same was beneficial to them. We see, however, sufficient basis to
impose a 12% legal interest in favor of petitioner in the case at bar, as what
we have voided is merely the stipulated rate of interest and not the stipulation
that the loan shall earn interest.
Page 119

We must likewise uphold the contract stipulation providing the
compounding of interest. The provisions in the Credit Agreement and in the
promissory notes providing for the compounding of interest were neither
nullified by the RTC or the Court of Appeals, nor assailed by the spouses
Beluso in their petition with the RTC. The compounding of interests has
furthermore been declared by this Court to be legal. We have held in Tan v.
Court of Appeals,[29] that:
Without prejudice to the provisions of Article 2212,
interest due and unpaid shall not earn interest. However,
the contracting parties may by stipulation capitalize the
interest due and unpaid, which as added principal, shall
earn new interest.
As regards the imposition of penalties, however, although we are
likewise upholding the imposition thereof in the contract, we find the rate
iniquitous. Like in the case of grossly excessive interests, the penalty
stipulated in the contract may also be reduced by the courts if it is iniquitous
or unconscionable.[30]
We find the penalty imposed by UCPB, ranging from 30.41% to
36%, to be iniquitous considering the fact that this penalty is already over
and above the compounded interest likewise imposed in the contract. If a
36% interest in itself has been declared unconscionable by this
Court,[31] what more a 30.41% to 36% penalty, over and above the payment
of compounded interest? UCPB itself must have realized this, as it gave us a
sample computation of the spouses Belusos obligation if both the interest
and the penalty charge are reduced to 12%.
As regards the attorneys fees, the spouses Beluso can actually be
liable therefor even if there had been no demand. Filing a case in court
is the judicial demand referred to in Article 1169[32] of the Civil Code, which
would put the obligor in delay.
The RTC, however, also held UCPB liable for attorneys fees in this
case, as the spouses Beluso were forced to litigate the issue on the illegality
BANKING LAW (18 October 2018 Cases)
of the interest rate provision of the promissory notes. The award of attorneys
fees, it must be recalled, falls under the sound discretion of the
court.[33] Since both parties were forced to litigate to protect their respective
rights, and both are entitled to the award of attorneys fees from the other,
practical reasons dictate that we set off or compensate both parties liabilities
for attorneys fees. Therefore, instead of awarding attorneys fees in favor of
petitioner, we shall merely affirm the deletion of the award of attorneys fees
to the spouses Beluso.
In sum, we hold that spouses Beluso should still be held liable for a
compounded legal interest of 12% per annum and a penalty charge of 12%
per annum. We also hold that, instead of awarding attorneys fees in favor of
petitioner, we shall merely affirm the deletion of the award of attorneys fees
to the spouses Beluso.
Annulment of the Foreclosure Sale
Properties of spouses Beluso had been foreclosed, titles to which
had already been consolidated on 19 February 2001 and 20 March 2001 in
the name of UCPB, as the spouses Beluso failed to exercise their right of
redemption which expired on 25 March 2000. The RTC, however, annulled
the foreclosure of mortgage based on an alleged incorrect computation of the
spouses Belusos indebtedness.
UCPB alleges that none of the grounds for the annulment of a
foreclosure sale are present in the case at bar. Furthermore, the annulment of
the foreclosure proceedings and the certificates of sale were mooted by the
subsequent issuance of new certificates of title in the name of said
bank. UCPB claims that the spouses Belusos action for annulment of
foreclosure constitutes a collateral attack on its certificates of title, an act
proscribed by Section 48 of Presidential Decree No. 1529, otherwise known
as the Property Registration Decree, which provides:
Section 48. Certificate not subject to collateral
attack. A certificate of title shall not be subject to collateral
attack. It cannot be altered, modified or cancelled except in a
direct proceeding in accordance with law.
Page 120

The spouses Beluso retort that since they had the right to refuse
payment of an excessive demand on their account, they cannot be said to be
in default for refusing to pay the same.Consequently, according to the
spouses Beluso, the enforcement of such illegal and overcharged demand
through foreclosure of mortgage should be voided.
We agree with UCPB and affirm the validity of the foreclosure
proceedings. Since we already found that a valid demand was made by
UCPB upon the spouses Beluso, despite being excessive, the spouses
Beluso are considered in default with respect to the proper amount of their
obligation to UCPB and, thus, the property they mortgaged to secure such
amounts may be foreclosed. Consequently, proceeds of the foreclosure sale
should be applied to the extent of the amounts to which UCPB is rightfully
entitled.
As argued by UCPB, none of the grounds for the annulment of a
foreclosure sale are present in this case. The grounds for the proper
annulment of the foreclosure sale are the following: (1) that there was fraud,
collusion, accident, mutual mistake, breach of trust or misconduct by the
purchaser; (2) that the sale had not been fairly and regularly conducted; or
(3)that the price was inadequate and the inadequacy was so great as to
shock the conscience of the court.[34]
Liability for Violation of Truth in Lending Act
The RTC, affirmed by the Court of Appeals, imposed a fine
of P26,000.00 for UCPBs alleged violation of Republic Act No. 3765,
otherwise known as the Truth in Lending Act.
UCPB challenges this imposition, on the argument that Section 6(a)
of the Truth in Lending Act which mandates the filing of an action to recover
such penalty must be made under the following circumstances:
Section 6. (a) Any creditor who in connection with
any credit transaction fails to disclose to any person any
BANKING LAW (18 October 2018 Cases)
information in violation of this Act or any regulation issued
thereunder shall be liable to such person in the amount
of P100 or in an amount equal to twice the finance charge
required by such creditor in connection with such
transaction, whichever is greater, except that such liability
shall not exceed P2,000 on any credit transaction. Action to
recover such penalty may be brought by such person
within one year from the date of the occurrence of the
violation, in any court of competent jurisdiction. x x
x (Emphasis ours.)
According to UCPB, the Court of Appeals even stated that
[a]dmittedly the original complaint did not explicitly allege a violation of the
Truth in Lending Act and no action to formally admit the amended petition
[which expressly alleges violation of the Truth in Lending Act] was made
either by [respondents] spouses Beluso and the lower court. x x x.[35]
UCPB further claims that the action to recover the penalty for the
violation of the Truth in Lending Act had been barred by the one-year
prescriptive period provided for in the Act.UCPB asserts that per the records
of the case, the latest of the subject promissory notes had been executed
on 2 January 1998, but the original petition of the spouses Beluso was filed
before the RTC on 9 February 1999, which was after the expiration of the
period to file the same on 2 January 1999.
On the matter of allegation of the violation of the Truth in Lending
Act, the Court of Appeals ruled:
Admittedly the original complaint did not explicitly allege a
violation of the Truth in Lending Act and no action to formally
admit the amended petition was made either by
[respondents] spouses Beluso and the lower court. In such
transactions, the debtor and the lending institutions do not
deal on an equal footing and this law was intended to protect
the public from hidden or undisclosed charges on their loan
obligations, requiring a full disclosure thereof by the
lender. We find that its infringement may be inferred or
implied from allegations that when [respondents] spouses
Page 121
 Beluso executed the promissory notes, the interest rate
chargeable thereon were left blank. Thus, [petitioner] UCPB
failed to discharge its duty to disclose in full to [respondents]
Spouses Beluso the charges applicable on their loans.[36]
We agree with the Court of Appeals. The allegations in the
complaint, much more than the title thereof, are controlling. Other than that
stated by the Court of Appeals, we find that the allegation of violation of the
Truth in Lending Act can also be inferred from the same allegation in the
complaint we discussed earlier:
b.) In unilaterally imposing an increased interest
rates (sic) respondent bank has relied on the provision of
their promissory note granting respondent bank the power to
unilaterally fix the interest rates, which rate was not
determined in the promissory note but was left solely to the
will of the Branch Head of the respondent Bank, x x x.[37]
The allegation that the promissory notes grant UCPB the power to
unilaterally fix the interest rates certainly also means that the promissory
notes do not contain a clear statement in writing of (6) the finance charge
expressed in terms of pesos and centavos; and (7) the percentage that the
finance charge bears to the amount to be financed expressed as a simple
annual rate on the outstanding unpaid balance of the
obligation.[38] Furthermore, the spouses Belusos prayer for such other reliefs
just and equitable in the premises should be deemed to include the civil
penalty provided for in Section 6(a) of the Truth in Lending Act.
UCPBs contention that this action to recover the penalty for the
violation of the Truth in Lending Act has already prescribed is likewise
without merit. The penalty for the violation of the act is P100 or an amount
equal to twice the finance charge required by such creditor in connection with
such transaction, whichever is greater, except that such liability shall not
exceed P2,000.00 on any credit transaction.[39] As this penalty depends on
the finance charge required of the borrower, the borrowers cause of action
would only accrue when such finance charge is required. In the case at bar,
BANKING LAW (18 October 2018 Cases)
the date of the demand for payment of the finance charge is 2 September
1998, while the foreclosure was made on 28 December 1998. The filing of
the case on 9 February 1999 is therefore within the one-year prescriptive
period.
UCPB argues that a violation of the Truth in Lending Act, being a
criminal offense, cannot be inferred nor implied from the allegations made in
the complaint.[40] Pertinent provisions of the Act read:
Sec. 6. (a) Any creditor who in connection with any
credit transaction fails to disclose to any person any
information in violation of this Act or any regulation issued
thereunder shall be liable to such person in the amount
of P100 or in an amount equal to twice the finance charge
required by such creditor in connection with such
transaction, whichever is the greater, except that such
liability shall not exceed P2,000 on any credit
transaction. Action to recover such penalty may be brought
by such person within one year from the date of the
occurrence of the violation, in any court of competent
jurisdiction. In any action under this subsection in which any
person is entitled to a recovery, the creditor shall be liable for
reasonable attorneys fees and court costs as determined by
the court.
xxxx
(c) Any person who willfully violates any
provision of this Act or any regulation issued thereunder shall
be fined by not less than P1,000 or more than P5,000 or
imprisonment for not less than 6 months, nor more than one
year or both.
As can be gleaned from Section 6(a) and (c) of the Truth in Lending Act, the
violation of the said Act gives rise to both criminal and civil liabilities. Section
6(c) considers a criminal offense the willful violation of the Act, imposing the
penalty therefor of fine, imprisonment or both. Section 6(a), on the other
Page 122
hand, clearly provides for a civil cause of action for failure to disclose any
information of the required information to any person in violation of the
Act. The penalty therefor is an amount of P100 or in an amount equal to
twice the finance charge required by the creditor in connection with such
transaction, whichever is greater, except that the liability shall not
exceed P2,000.00 on any credit transaction. The action to recover such
penalty may be instituted by the aggrieved private person separately and
independently from the criminal case for the same offense.
In the case at bar, therefore, the civil action to recover the penalty
under Section 6(a) of the Truth in Lending Act had been jointly instituted with
(1) the action to declare the interests in the promissory notes void, and (2)
the action to declare the foreclosure void. This joinder is allowed under Rule
2, Section 5 of the Rules of Court, which provides:
SEC. 5. Joinder of causes of action.A party may in
one pleading assert, in the alternative or otherwise, as many
causes of action as he may have against an opposing party,
subject to the following conditions:
(a) The party joining the causes of action shall
comply with the rules on joinder of parties;
(b) The joinder shall not include special civil actions
or actions governed by special rules;
(c) Where the causes of action are between the
same parties but pertain to different venues or jurisdictions,
the joinder may be allowed in the Regional Trial Court
provided one of the causes of action falls within the
jurisdiction of said court and the venue lies therein; and
(d) Where the claims in all the causes of action are
principally for recovery of money, the aggregate amount
claimed shall be the test of jurisdiction.
In attacking the RTCs disposition on the violation of the Truth in
Lending Act since the same was not alleged in the complaint, UCPB is
BANKING LAW (18 October 2018 Cases)
actually asserting a violation of due process.Indeed, due process mandates
that a defendant should be sufficiently apprised of the matters he or she
would be defending himself or herself against. However, in the 1 July
1999 pre-trial brief filed by the spouses Beluso before the RTC, the claim for
civil sanctions for violation of the Truth in Lending Act was expressly alleged,
thus:
Moreover, since from the start, respondent bank violated the
Truth in Lending Act in not informing the borrower in writing
before the execution of the Promissory Notes of the interest
rate expressed as a percentage of the total loan, the
respondent bank instead is liable to pay petitioners double
the amount the bank is charging petitioners by way of
sanction for its violation.[41]
In the same pre-trial brief, the spouses Beluso also expressly raised
the following issue:
b.) Does the expression indicative rate of DBD retail
(sic) comply with the Truth in Lending Act provision to
express the interest rate as a simple annual percentage of
the loan?[42]
These assertions are so clear and unequivocal that any attempt of
UCPB to feign ignorance of the assertion of this issue in this case as to
prevent it from putting up a defense thereto is plainly hogwash.
Petitioner further posits that it is the Metropolitan Trial Court which
has jurisdiction to try and adjudicate the alleged violation of the Truth in
Lending Act, considering that the present action allegedly involved a single
credit transaction as there was only one Promissory Note Line.
We disagree. We have already ruled that the action to recover the
penalty under Section 6(a) of the Truth in Lending Act had been jointly
instituted with (1) the action to declare the interests in the promissory notes
void, and (2) the action to declare the foreclosure void. There had been no
Page 123
question that the above actions belong to the jurisdiction of the
RTC.Subsection (c) of the above-quoted Section 5 of the Rules of Court on
Joinder of Causes of Action provides:
(c) Where the causes of action are between the
same parties but pertain to different venues or jurisdictions,
the joinder may be allowed in the Regional Trial Court
provided one of the causes of action falls within the
jurisdiction of said court and the venue lies therein.
Furthermore, opening a credit line does not create a credit
transaction of loan or mutuum, since the former is merely a preparatory
contract to the contract of loan or mutuum. Under such credit line, the bank is
merely obliged, for the considerations specified therefor, to lend to the other
party amounts not exceeding the limit provided. The credit transaction thus
occurred not when the credit line was opened, but rather when the credit line
was availed of. In the case at bar, the violation of the Truth in Lending Act
allegedly occurred not when the parties executed the Credit Agreement,
where no interest rate was mentioned, but when the parties executed the
promissory notes, where the allegedly offending interest rate was stipulated.
UCPB further argues that since the spouses Beluso were duly given
copies of the subject promissory notes after their execution, then they were
duly notified of the terms thereof, in substantial compliance with the Truth in
Lending Act.
Once more, we disagree. Section 4 of the Truth in Lending Act
clearly provides that the disclosure statement must be furnished prior to the
consummation of the transaction:
SEC. 4. Any creditor shall furnish to each person to
whom credit is extended, prior to the consummation of
the transaction, a clear statement in writing setting forth, to
the extent applicable and in accordance with rules and
regulations prescribed by the Board, the following
information:
BANKING LAW (18 October 2018 Cases)
(1) the cash price or delivered price of the property
or service to be acquired;
(2) the amounts, if any, to be credited as down
payment and/or trade-in;
(3) the difference between the amounts set forth
under clauses (1) and (2)
(4) the charges, individually itemized, which are
paid or to be paid by such person in connection
with the transaction but which are not incident to
the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos
and centavos; and
(7) the percentage that the finance bears to the
total amount to be financed expressed as a
simple annual rate on the outstanding unpaid
balance of the obligation.
The rationale of this provision is to protect users of credit from a lack
of awareness of the true cost thereof, proceeding from the experience that
banks are able to conceal such true cost by hidden charges, uncertainty of
interest rates, deduction of interests from the loaned amount, and the
like. The law thereby seeks to protect debtors by permitting them to fully
appreciate the true cost of their loan, to enable them to give full consent to
the contract, and to properly evaluate their options in arriving at business
decisions. Upholding UCPBs claim of substantial compliance would defeat
these purposes of the Truth in Lending Act. The belated discovery of the true
cost of credit will too often not be able to reverse the ill effects of an already
consummated business decision.
Page 124
 In addition, the promissory notes, the copies of which were
presented to the spouses Beluso after execution, are not sufficient
notification from UCPB. As earlier discussed, the interest rate provision
therein does not sufficiently indicate with particularity the interest rate to be
applied to the loan covered by said promissory notes.
Forum Shopping
UCPB had earlier moved to dismiss the petition (originally Case No.
99-314 in RTC, Makati City) on the ground that the spouses Beluso instituted
another case (Civil Case No. V-7227) before the RTC of Roxas City,
involving the same parties and issues. UCPB claims that while Civil Case No.
V-7227 initially appears to be a different action, as it prayed for the issuance
of a temporary restraining order and/or injunction to stop foreclosure of
spouses Belusos properties, it poses issues which are similar to those of the
present case.[43] To prove its point, UCPB cited the spouses Belusos
Amended Petition in Civil Case No. V-7227, which contains similar
allegations as those in the present case. The RTC of Makati denied UCPBs
Motion to Dismiss Case No. 99-314 for lack of merit. Petitioner UCPB raised
the same issue with the Court of Appeals, and is raising the same issue with
us now.
The spouses Beluso claim that the issue in Civil Case No. V-7227
before the RTC of Roxas City, a Petition for Injunction Against Foreclosure,
is the propriety of the foreclosure before the true account of spouses Beluso
is determined. On the other hand, the issue in Case No. 99-314 before the
RTC of Makati City is the validity of the interest rate provision. The spouses
Beluso claim that Civil Case No. V-7227 has become moot because, before
the RTC of Roxas City could act on the restraining order, UCPB proceeded
with the foreclosure and auction sale. As the act sought to be restrained by
Civil Case No. V-7227 has already been accomplished, the spouses Beluso
had to file a different action, that of Annulment of the Foreclosure Sale, Case
No. 99-314 with the RTC, Makati City.
Even if we assume for the sake of argument, however, that only one
cause of action is involved in the two civil actions, namely, the violation of the
right of the spouses Beluso not to have their property foreclosed for an
amount they do not owe, the Rules of Court nevertheless allows the filing of
the second action. Civil Case No. V-7227 was dismissed by the RTC of
BANKING LAW (18 October 2018 Cases)
Roxas City before the filing of Case No. 99-314 with the RTC of Makati City,
since the venue of litigation as provided for in the Credit Agreement is
in Makati City.
Rule 16, Section 5 bars the refiling of an action previously dismissed
only in the following instances:
SEC. 5. Effect of dismissal.Subject to the right of
appeal, an order granting a motion to dismiss based on
paragraphs (f), (h) and (i) of section 1 hereof shall bar the
refiling of the same action or claim. (n)
Improper venue as a ground for the dismissal of an action is found in
paragraph (c) of Section 1, not in paragraphs (f), (h) and (i):
SECTION 1. Grounds.Within the time for but before
filing the answer to the complaint or pleading asserting a
claim, a motion to dismiss may be made on any of the
following grounds:
(a) That the court has no jurisdiction over the person
of the defending party;
(b) That the court has no jurisdiction over the
subject matter of the claim;
(c) That venue is improperly laid;
(d) That the plaintiff has no legal capacity to sue;
(e) That there is another action pending between the
same parties for the same cause;
(f) That the cause of action is barred by a prior
judgment or by the statute of limitations;
Page 125
 (g) That the pleading asserting the claim states no
cause of action;
(h) That the claim or demand set forth in the
plaintiffs pleading has been paid, waived, abandoned,
or otherwise extinguished;
(i) That the claim on which the action is founded
is unenforceable under the provisions of the statute of
frauds; and
(j) That a condition precedent for filing the claim has
not been complied with.[44] (Emphases supplied.)
When an action is dismissed on the motion of the other party, it is
only when the ground for the dismissal of an action is found in paragraphs (f),
(h) and (i) that the action cannot be refiled. As regards all the other grounds,
the complainant is allowed to file same action, but should take care that, this
time, it is filed with the proper court or after the accomplishment of the
erstwhile absent condition precedent, as the case may be.
UCPB, however, brings to the attention of this Court a Motion for
Reconsideration filed by the spouses Beluso on 15 January 1999 with the
RTC of Roxas City, which Motion had not yet been ruled upon when the
spouses Beluso filed Civil Case No. 99-314 with the RTC of Makati. Hence,
there were allegedly two pending actions between the same parties on the
same issue at the time of the filing of Civil Case No. 99-314 on 9 February
1999 with the RTC of Makati. This will still not change our findings. It is
indeed the general rule that in cases where there are two pending actions
between the same parties on the same issue, it should be the later case that
should be dismissed. However, this rule is not absolute. According to this
Court in Allied Banking Corporation v. Court of Appeals [45]:
In these cases, it is evident that the first action was
filed in anticipation of the filing of the later action and the
purpose is to preempt the later suit or provide a basis for
seeking the dismissal of the second action.
BANKING LAW (18 October 2018 Cases)
Even if this is not the purpose for the filing of the
first action, it may nevertheless be dismissed if the later
action is the more appropriate vehicle for the ventilation
of the issues between the parties. Thus, in Ramos v.
Peralta, it was held:
[T]he rule on litis pendentia does not
require that the later case should yield to the
earlier case. What is required merely is that
there be another pending action, not a prior
pending action. Considering the broader
scope of inquiry involved in Civil Case No.
4102 and the location of the property
involved, no error was committed by the
lower court in deferring to the Bataan court's
jurisdiction.
Given, therefore, the pendency of two actions, the
following are the relevant considerations in determining
which action should be dismissed: (1) the date of filing, with
preference generally given to the first action filed to be
retained; (2) whether the action sought to be dismissed was
filed merely to preempt the later action or to anticipate its
filing and lay the basis for its dismissal; and (3) whether the
action is the appropriate vehicle for litigating the issues
between the parties.
In the case at bar, Civil Case No. V-7227 before the RTC of Roxas
City was an action for injunction against a foreclosure sale that has already
been held, while Civil Case No. 99-314 before the RTC of Makati City
includes an action for the annulment of said foreclosure, an action certainly
more proper in view of the execution of the foreclosure sale. The former case
was improperly filed in Roxas City, while the latter was filed in Makati City,
the proper venue of the action as mandated by the Credit Agreement. It is
evident, therefore, that Civil Case No. 99-314 is the more appropriate vehicle
for litigating the issues between the parties, as compared to Civil Case No.
Page 126
V-7227. Thus, we rule that the RTC of Makati City was not in error in not iii. principal
dismissing Civil Case No. 99-314. amortization/payment in arrears as of the time
of payment;
WHEREFORE, the Decision of the Court of Appeals is iv. outstanding balance.
hereby AFFIRMED with the following MODIFICATIONS: 3. The foreclosure of mortgage is hereby declared
VALID. Consequently, the amounts which the Regional Trial
1. In addition to the sum of P2,350,000.00 as determined Court and the Court of Appeals ordered respondents to pay,
by the courts a quo, respondent spouses Samuel and Odette as modified in this Decision, shall be deducted from the
Beluso are also liable for the following amounts: proceeds of the foreclosure sale.
a. Penalty of 12% per annum on the amount due[46] from the
date of demand; and
b. Compounded legal interest of 12% per annum on the SO ORDERED.
amount due[47] from date of demand;
2. The following amounts shall be deducted from the
liability of the spouses Samuel and Odette Beluso: V. ACCESS DEVICES REGULATION ACT
a. Payments made by the spouses in the amount
of P763,692.00. These payments shall be applied to the MARK SOLEDAD y CRISTOBAL, G.R. No. 184274
date of actual payment of the following in the order Petitioner,
that they are listed, to wit: Present:
i. penalty charges due and
demandable as of the time of payment; CARPIO, J.,
ii. interest due and Chairperson,
demandable as of the time of payment; - versus - VELASCO, JR.,*
iii. principal NACHURA,
amortization/payment in arrears as of the time ABAD, and
of payment; MENDOZA, JJ.
iv. outstanding balance.
b. Penalty under Republic Act No. 3765 in the amount Promulgated:
of P26,000.00. This amount shall be deducted from the PEOPLE OF THE PHILIPPINES,
liability of the spouses Samuel and Odette Beluso on 9 Respondent. February 23, 2011
February 1999 to the following in the order that they are
listed, to wit:
i. penalty charges due and
demandable as of time of payment;
ii. interest due and x------------------------------------------------------------------------------------x
demandable as of the time of payment;
DECISION

BANKING LAW (18 October 2018 Cases) Page 127

NACHURA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, seeking to reverse and set aside the Court of Appeals (CA)
Decision[1] dated June 18, 2008 and Resolution[2] dated August 22, 2008 in
CA-G.R. CR. No. 30603. The assailed Decision affirmed with modification
the September 27, 2006 decision[3] of the Regional Trial Court (RTC), Branch
202, Las Pias City, finding petitioner Mark C. Soledad guilty beyond
reasonable doubt of Violation of Section 9(e), Republic Act (R.A.) No. 8484,
or the Access Devices Regulations Act of 1998; while the assailed
Resolution denied petitioners motion for reconsideration.
The facts of the case, as narrated by the CA, are as follows:
Sometime in June 2004, private complainant Henry C. Yu
received a call on his mobile phone from a certain Tess or
Juliet Villar (later identified as Rochelle Bagaporo), a credit
card agent, who offered a Citifinancing loan assistance at a
low interest rate. Enticed by the offer, private complainant
invited Rochelle Bagaporo to go to his office in Quezon City.
While in his office, Rochelle Bagaporo indorsed private
complainant to her immediate boss, a certain Arthur [later
identified as petitioner]. In their telephone conversation,
[petitioner] told private complainant to submit documents to a
certain Carlo (later identified as Ronald Gobenchiong).
Private complainant submitted various documents, such as
his Globe handyphone original platinum gold card,
identification cards and statements of accounts.
Subsequently, private complainant followed up his loan
status but he failed to get in touch with either [petitioner] or
Ronald Gobenchiong.
During the first week of August 2004, private complainant
received his Globe handyphone statement of account
wherein he was charged for two (2) mobile phone numbers
which were not his. Upon verification with the phone
company, private complainant learned that he had additional
five (5) mobile numbers in his name, and the application for
said cellular phone lines bore the picture of [petitioner] and
BANKING LAW (18 October 2018 Cases)
his forged signature. Private complainant also checked with
credit card companies and learned that his Citibank Credit
Card database information was altered and he had a credit
card application with Metrobank Card Corporation
(Metrobank).
Thereafter, private complainant and Metrobanks junior
assistant manager Jefferson Devilleres lodged a complaint
with the National Bureau of Investigation (NBI) which
conducted an entrapment operation.
During the entrapment operation, NBIs Special Investigator
(SI) Salvador Arteche [Arteche], together with some other
NBI operatives, arrived in Las Pias around 5:00 P.M.
[Arteche] posed as the delivery boy of the Metrobank credit
card. Upon reaching the address written on the delivery
receipt, [Arteche] asked for Henry Yu. [Petitioner] responded
that he was Henry Yu and presented to [Arteche] two (2)
identification cards which bore the name and signature of
private complainant, while the picture showed the face of
[petitioner]. [Petitioner] signed the delivery receipt.
Thereupon, [Arteche] introduced himself as an NBI operative
and apprehended [petitioner]. [Arteche] recovered from
[petitioner] the two (2) identification cards he presented to
[Arteche] earlier.[4]
Petitioner was thus charged with Violation of Section 9(e), R.A. No. 8484 for
possessing a counterfeit access device or access device fraudulently applied
for. The accusatory portion of the Information reads:
That on or about the 13th day of August 2004, or prior
thereto, in the City of Las Pias, and within the jurisdiction of
this Honorable Court, the above-named accused, conspiring
and confederating with certain Rochelle Bagaporo a.k.a.
Juliet Villar/Tess and a certain Ronald Gobenciong a.k.a.
Carlo and all of them mutually helping and aiding each other,
did then and there willfully, unlawfully and feloniously
Page 128
 defraud complainant HENRY YU by applying a credit card,
an access device defined under R.A. 8484, from
METROBANK CARD CORPORATION, using the name of
complainant Henry C. Yu and his personal documents
fraudulently obtained from him, and which credit card in the
name of Henry Yu was successfully issued and delivered to
said accused using a fictitious identity and addresses of
Henry Yu, to the damage and prejudice of the real Henry Yu.
CONTRARY TO LAW.[5]
Upon arraignment, petitioner pleaded not guilty. Trial on the merits
ensued. After the presentation of the evidence for the prosecution, petitioner
filed a Demurrer to Evidence, alleging that he was not in physical and legal
possession of the credit card presented and marked in evidence by the
prosecution. In an Order dated May 2, 2006, the RTC denied the Demurrer to
Evidence as it preferred to rule on the merits of the case.[6]
On September 27, 2006, the RTC rendered a decision finding
petitioner guilty as charged, the dispositive portion of which reads:
In the light of the foregoing, the Court
finds accused Mark Soledad y Cristobal a.k.a. Henry Yu,
Arthur GUILTY beyond reasonable doubt of violation of
Section 9(e), Republic Act 8484 (Access Device Regulation
Act of 1998). Accordingly, pursuant to Section 10 of Republic
Act 8484 and applying the Indeterminate Sentence Law, said
accused is hereby sentenced to suffer an imprisonment
penalty of six (6) years of prision correccional,
as minimum, to not more than ten (10) years of prision
mayor, as maximum. Further, accused is also ordered to pay
a fine of Ten Thousand Pesos (P10,000.00) for the offense
committed.
SO ORDERED.[7]
BANKING LAW (18 October 2018 Cases)
On appeal, the CA affirmed petitioners conviction, but modified the penalty
imposed by the RTC by deleting the terms prision correccional and prision
mayor.
Hence, this petition raising the following issues:
(1) Whether or not the Information is valid;
(2) Whether or not the Information charges an offense, or
the offense petitioner was found guilty of;
(3) Whether or not petitioner was sufficiently informed of
the nature of the accusations against him;
(4) Whether or not petitioner was legally in possession of
the credit card subject of the case.[8]
The petition is without merit.
Petitioner was charged with Violation of R.A. No. 8484, specifically
Section 9(e), which reads as follows:
Section 9. Prohibited Acts. The following acts shall
constitute access device fraud and are hereby declared to
be unlawful:
xxxx
(e) possessing one or more counterfeit access
devices or access devices fraudulently applied for.
Petitioner assails the validity of the Information and claims that he
was not informed of the accusation against him. He explains that though he
was charged with possession of an access device fraudulently applied for,
the act of possession, which is the gravamen of the offense, was not alleged
in the Information.
We do not agree.
Page 129
 Section 6, Rule 110 of the Rules of Criminal Procedure lays down
the guidelines in determining the sufficiency of a complaint or information. It
states:
SEC. 6. Sufficiency of complaint or information. A
complaint or information is sufficient if it states the name of
the accused; the designation of the offense given by the
statute; the acts or omissions complained of as constituting
the offense; the name of the offended party; the approximate
date of the commission of the offense; and the place where
the offense was committed.
In the Information filed before the RTC, it was clearly stated that the accused
is petitioner Mark Soledad y Cristobal a.k.a. Henry Yu/Arthur. It was also
specified in the preamble of the Information that he was being charged with
Violation of R.A. No. 8484, Section 9(e) for possessing a counterfeit access
device or access device fraudulently applied for. In the accusatory portion
thereof, the acts constituting the offense were clearly narrated in that
[petitioner], together with other persons[,] willfully, unlawfully and feloniously
defrauded private complainant by applying [for] a credit card, an access
device defined under R.A. [No.] 8484, from Metrobank Card Corporation,
using the name of complainant Henry C. Yu and his personal documents
fraudulently obtained from him, and which credit card in the name of Henry
Yu was successfully issued, and delivered to said accused using a fictitious
identity and addresses of Henry Yu, to the damage and prejudice of the real
Henry Yu. Moreover, it was identified that the offended party was private
complainant Henry Yu and the crime was committed on or about the 13 th day
of August 2004 in the City of Las Pias. Undoubtedly, the Information
contained all the necessary details of the offense committed, sufficient to
apprise petitioner of the nature and cause of the accusation against him. As
aptly argued by respondent People of the Philippines, through the Office of
the Solicitor General, although the word possession was not used in the
accusatory portion of the Information, the word possessing appeared in its
preamble or the first paragraph thereof. Thus, contrary to petitioners
contention, he was apprised that he was being charged with violation of R.A.
No. 8484, specifically section 9(e) thereof, for possession of the credit card
fraudulently applied for.
BANKING LAW (18 October 2018 Cases)
The Courts discussion in People v. Villanueva[9] on the relationship
between the preamble and the accusatory portion of the Information is
noteworthy, and we quote:
The preamble or opening paragraph should not be
treated as a mere aggroupment of descriptive words and
phrases. It is as much an essential part [of] the Information
as the accusatory paragraph itself. The preamble in fact
complements the accusatory paragraph which draws its
strength from the preamble. It lays down the predicate for
the charge in general terms; while the accusatory portion
only provides the necessary details. The preamble and the
accusatory paragraph, together, form a complete whole that
gives sense and meaning to the indictment. x x x.
xxxx
Moreover, the opening paragraph bears the
operative word accuses, which sets in motion the
constitutional process of notification, and formally makes the
person being charged with the commission of the offense an
accused. Verily, without the opening paragraph, the
accusatory portion would be nothing but a useless and
miserably incomplete narration of facts, and the entire
Information would be a functionally sterile charge sheet; thus
making it impossible for the state to prove its case.
The Information sheet must be considered, not by
sections or parts, but as one whole document serving one
purpose, i.e., to inform the accused why the full panoply of
state authority is being marshaled against him. Our task is
not to determine whether allegations in an indictment could
have been more artfully and exactly written, but solely to
ensure that the constitutional requirement of notice has been
fulfilled x x x.[10]
Besides, even if the word possession was not repeated in the accusatory
portion of the Information, the acts constituting it were clearly described in
Page 130
the statement [that the] credit card in the name of Henry Yu was successfully
issued, and delivered to said accused using a fictitious identity and
addresses of Henry Yu, to the damage and prejudice of the real Henry
Yu. Without a doubt, petitioner was given the necessary data as to why he
was being prosecuted.
Now on the sufficiency of evidence leading to his conviction.
Petitioner avers that he was never in possession of the subject credit
card because he was arrested immediately after signing the
acknowledgement receipt. Thus, he did not yet know the contents of the
envelope delivered and had no control over the subject credit card.[11]
Again, we find no value in petitioners argument.
The trial court convicted petitioner of possession of the credit card
fraudulently applied for, penalized by R.A. No. 8484. The law, however, does
not define the word possession. Thus, we use the term as defined in Article
523 of the Civil Code, that is, possession is the holding of a thing or the
enjoyment of a right. The acquisition of possession involves two elements:
the corpus or the material holding of the thing, and the animus possidendi or
the intent to possess it.[12] Animus possidendi is a state of mind, the presence
or determination of which is largely dependent on attendant events in each
case. It may be inferred from the prior or contemporaneous acts of the
accused, as well as the surrounding circumstances.[13]
In this case, prior to the commission of the crime, petitioner
fraudulently obtained from private complainant various documents showing
the latters identity. He, thereafter, obtained cellular phones using private
complainants identity. Undaunted, he fraudulently applied for a credit card
under the name and personal circumstances of private complainant. Upon
the delivery of the credit card applied for, the messenger (an NBI agent)
required two valid identification cards. Petitioner thus showed two
identification cards with his picture on them, but bearing the name and forged
signature of private complainant. As evidence of the receipt of the envelope
delivered, petitioner signed the acknowledgment receipt shown by the
messenger, indicating therein that the content of the envelope was the
Metrobank credit card.
BANKING LAW (18 October 2018 Cases)
Petitioner materially held the envelope containing the credit card with
the intent to possess. Contrary to petitioners contention that the credit card
never came into his possession because it was only delivered to him, the
above narration shows that he, in fact, did an active part in acquiring
possession by presenting the identification cards purportedly showing his
identity as Henry Yu. Certainly, he had the intention to possess the same.
Had he not actively participated, the envelope would not have been given to
him. Moreover, his signature on the acknowledgment receipt indicates that
there was delivery and that possession was transferred to him as the
recipient. Undoubtedly, petitioner knew that the envelope contained the
Metrobank credit card, as clearly indicated in the acknowledgment receipt,
coupled with the fact that he applied for it using the identity of private
complainant.
Lastly, we find no reason to alter the penalty imposed by the RTC as
modified by the CA. Section 10 of R.A. No. 8484 prescribes the penalty of
imprisonment for not less than six (6) years and not more than ten (10)
years, and a fine of P10,000.00 or twice the value of the access device
obtained, whichever is greater. Thus, the CA aptly affirmed the imposition of
the indeterminate penalty of six years to not more than ten years
imprisonment, and a fine of P10,000.00.
WHEREFORE, premises considered, the petition is DENIED for lack
of merit. The Court of Appeals Decision dated June 18, 2008 and Resolution
dated August 22, 2008 in CA-G.R. CR. No. 30603 are AFFIRMED.
SO ORDERED.
Page 131
BANKING LAW (18 October 2018 Cases) Page 132