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SURVIVORSHIP AGREEMENT
15. G.R. No. 82027 March 29, 1990 ROMARICO G. VITUG, vs. CA and ROWENA FAUSTINO-CORONA,

Vitug filed a motion asking for authority from the probate court to sell certain shares of stock and real properties belonging to the estate to
cover allegedly his advances to the estate. Vitug insists that the said funds are his exclusive property having acquired the same through a
survivorship agreement executed with his late wife and the bank
Rowena Corona opposed the motion because they were conjugal partnership properties and part of the estate, and hence, there was
allegedly no ground for reimbursement.

The trial courts 6 upheld the validity of this agreement and granted "the motion to sell some of the estate of Dolores L. Vitug.
CA held that the above-quoted survivorship agreement constitutes a conveyance mortis causa which "did not comply with the formalities of
a valid will. Even assuming that it is a mere donation inter vivos, it is a prohibited donation under the provisions of Article 133 of the Civil
Code. 9
The conveyance in question is not, first of all, one of mortis causa, which should be embodied in a will.
Neither is the survivorship agreement a donation inter vivos, for obvious reasons, because it was to take effect after the death of one
party. Secondly, it is not a donation between the spouses because it involved no conveyance of a spouse's own properties to the other.
The agreement is a "mere stipulation" it is no "cloak" to circumvent the law on conjugal property relations. Certainly, the spouses are not
prohibited by law to invest conjugal property, say, by way of a joint and several bank account, more commonly denominated in banking
parlance as an "and/or" account. In the case at bar, when the spouses Vitug opened savings account No. 35342-038, they merely put what
rightfully belonged to them in a money-making venture. They did not dispose of it in favor of the other, which would have arguably been
sanctionable as a prohibited donation. And since the funds were conjugal, it can not be said that one spouse could have pressured the other
in placing his or her deposits in the money pool.
The validity of the contract seems debatable by reason of its "survivor-take-all" feature, but in reality, that contract imposed a mere
obligation with a term, the term being death. Such agreements are permitted by the Civil Code.
When does the survivorship agreement contrary to law?
1.) If it be shown in a given case that such agreement is a mere cloak to hide an inofficious donation,
2.) to transfer property in fraud of creditors, or
3.) to defeat the legitime of a forced heir,
There is no demonstration here that the survivorship agreement had been executed for such unlawful purposes, or, as held by the
respondent court, in order to frustrate our laws on wills, donations, and conjugal partnership.
EXCEPTIONS TO BANK SECRECY
16. G.R. No. 168644 February 16, 2010 BSB GROUP, INC., by its President, Mr. RICARDO BANGAYAN, , vs. SALLY GO a.k.a. SALLY GO-
BANGAYAN, .
Sally Go-Bangayan, is Bangayan’s wife, a cashier, and was engaged, among others, to receive and account for the payments made by the
various customers of the company.
Bangayan filed a complaint for estafa and/or qualified theft against respondent, alleging that several checks issued by the company’s
customers in payment of their obligation were being deposited to her personal banking account with Security Bank.
The 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 Bank Metrobank.
Respondent filed a motion to quash the subpoena 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 respondent’s 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. Marasigan’s testimony sought to prove that the 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 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.
But before the testimony could be completed, respondent filed a Motion to Suppress,18 seeking the exclusion of Marasigan’s 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 Bank assailed orders striking out Marasigan’s testimony dealing with respondent’s 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 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,
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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.
The 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
₱1,534,135.50. 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 respondent’s
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 response the 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
Issue: Whether they are violative of the absolutely confidential nature of bank deposits and, hence, excluded by operation of R.A. No. 1405.?
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. The
law institutionalized this policy by characterizing as absolutely confidential in general all deposits of whatever nature with banks and other
financial institutions .
The petitioner posits that the account maintained by respondent with Security Bank contains the proceeds of the checks that she has
fraudulently appropriated to herself and, thus, falls under one of the exceptions in Section 2 of R.A. No. 1405  that the money kept in said
account is the subject matter in litigation.
In the criminal Information filed with the trial court, respondent, unqualifiedly and in plain language, is charged with qualified theft by
abusing petitioner’s trust and confidence and stealing cash in the amount of ₱1,534,135.50. 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
prosecution’s 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 ₱1,534,135.50 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.
It comes clear that the admission of testimonial and documentary evidence relative to respondent’s Security Bank account serves no other
purpose than to establish the existence of such account, its nature and the amount kept in it. It constitutes an attempt by the prosecution at
an impermissible inquiry into a bank deposit account the privacy and confidentiality of which is protected by law. On this score alone, the
objection posed by respondent in her motion to suppress should have indeed put an end to the controversy at the very first instance it was
raised before the trial court.
In sum, we hold that the testimony of Marasigan and the documentary evidence represented by the checks adduced in support thereof, are
not only incompetent for being excluded by operation of R.A. No. 1405 and irrelevant to the case, inasmuch as they do not appear to have
any logical and reasonable connection to the prosecution of respondent for qualified theft.

What constitute subject of the action?

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."

What are required for an in camera inspection to be allowed?

1. ) There must be a pending case before a court of competent jurisdiction.

2. )The account must be clearly identified,
3. ) The inspection limited to the subject matter of the pending case before the court of competent jurisdiction.
4. )The bank personnel and the account holder must be notified to be present during the inspection
17. G.R. Nos. 157294-95 November 30, 2006 JOSEPH VICTOR G. EJERCITO,vs. SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, .

The three resolutions were issued for plunder. The Special Prosecution Panel1 filed before the Sandiganbayan a Request for Issuance of
Subpoena Duces Tecum for the issuance of a subpoena directing the Export and Industry Bank to produce the documents

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.2 The "accounts" referred to by petitioner in his above-quoted letter are Trust Account No.
858 and Savings Account No. 0116-17345-9.

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
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dates and amounts, could only have been made possible by an earlier illegal disclosure thereof by the EIB and PDIC in its capacity as receiver
of the then Urban Bank.

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.

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.

The Trust Agreement between petitioner and Urban 6Bank provides that the trust account covers "deposit, placement or investment of
funds" by Urban Bank for and in behalf of petitioner. 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.

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."

R.A. 1405 is broad enough to cover Trust Account.

NOTE: Cases of unexplained wealth are similar to cases of bribery or dereliction of duty . Plunder being thus analogous to bribery, the
exception to R.A. 1405 applicable in cases of bribery must also apply to cases of plunder.

Tthe money deposited was the subject matter of the litigation when the money deposited was the very thing in dispute.

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. 0116-17345-9 in the name of petitioner fall under this description and must thus be part of the subject matter of
the litigation.

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.

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 Ombudsman’s 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.

The Sandiganbayan did not commit grave abuse of discretion in issuing the challenged subpoenas for documents pertaining to petitioner’s
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 petitioner’s bank accounts is said to form part of the subject matter of the same
plunder case.

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 petitioner’s bank accounts – the investigation previously conducted by the Ombudsman – was
lawful.

18. G.R. No. 135882 June 27, 2001 LOURDES T. MARQUEZ, Branch Manager, UNION BANK, ,
vs. ANIANO A. DESIERTO, OMBUDSMAN, ANGEL C. MAYOR-ALGO, JR., MARY ANN CORPUZ-MANALAC AND JOSE T. DE JESUS, JR.,

Facts: Petitioner Marquez received an Order from the Ombudsman to produce several bank documents for purposes of inspection in
camera relative to various accounts maintained at Union Bank of the Philippines where petitioner is the branch manager. The accounts are
involved in a case pending with the Ombudsman.

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 managers checks purchased by one George
Trivinio, a respondent in OMB-097-0411, pending with the office of the Ombudsman.
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The 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 because "despite diligent efforts and from the accounts 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 petitioner together with Union Bank of the Philippines, filed a petition for declaratory relief, prohibition and injunctions 8 with the RTC
against the Ombudsman. The petition was intended to clear the rights and duties of petitioner.

Issue: 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).

The order of the Ombudsman to produce for in camera inspection the subject accounts is based on a pending investigation at the Office of
the Ombudsman against Amado Lagdameo, et. al.

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 Ombudsman. In short, what the office of the ombudsman would wish to do 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. Zone of privacy are recognized and protected in our laws.

19. G.R. No. 134699 December 23, 1999 UNION BANK OF THE PHILIPPINES,, vs. CA and ALLIED BANK CORPORATION,

The facts: A check was drawn against Account with Allied Bank payable to the order of one Jose Ch. Alvarez. The payee deposited the check
with petitioner Union Bank who credited the P1,000,000.00 to the account of Mr. Alvarez. On May 21, 1990, petitioner sent the check for
clearing through the Philippine Clearing House Corporation (PCHC). When the check was presented for payment, a clearing discrepancy was
committed by Union Bank's clearing staff when the amount of One Million Pesos (P1,000,000.00) was erroneously "under-encoded" to One
Thousand Pesos (P1,000.00) only.

Petitioner only discovered the under-encoding almost a year later. Thus, on May 7, 1991, Union Bank notified Allied Bank of the discrepancy
by way of a charge slip for Nine Hundred Ninety-Nine Thousand Pesos (P999,000.00) for automatic debiting against of Allied Bank. The latter,
however, refused to accept the charge slip "since [the] transaction was completed per your [Union Bank's] original instruction and client's
account is now insufficiently funded."

Furthermore, a reading of petitioner collecting bank's complaint in the Arbicom case shows that its thrust is directed against respondent
drawee bank's alleged failure to inform the former of the under-encoding when Sec. 25.3 of the PCHC Rule Book is clear that it is receiving
bank's (respondent drawee bank herein) duty and obligation to notify the erring bank (petitioner collecting bank herein) of any such under-
encoding of any check amount submitted for clearing within the member banks of the PCHC not later than 10:00 a.m. of the following
clearing day and prays that respondent drawee bank be held liable to petitioner collecting bank for penalties in view of the latter's violation
of the notification requirement.

Issue: Whether or not the case at bar falls under the last exception is the issue in the instant petition.

Nowhere in petitioner collecting bank's complaint filed before the PCHC does it mention of the amount it seeks to recover from Account but
speaks of P999,000.00 only as an incident of its alleged opportunity losses and interest as a result of its own employee's admitted error in
encoding the check.

The money deposited in Account is not the subject matter of the litigation in4 the Arbicom case for as clearly stated by petitioner itself, it is
the alleged violation by respondent of the rules and regulations of the PCHC.

Because the bank failed to carry out it’s duty to inform the petitioner about the discrepancy it seeks to holds the respondent directly liable
for the P999,000.00 and other damages.

To an ordinary person aggrieved already by having been taken advantage of for 620 days more or less, the proposal of defendant could not
be acceptable for the reason that aside from the interest lost already for the use of its money by another party, no assurance is made as to
the actual collection thereof from a party whose credit standing, the recipient is not at all aware of. . . . 10

Petitioner also believed that it had no privity with the depositor: 2.12. Plaintiff then replied to defendant's letter by requesting that in lieu of
the post-dated checks from defendant's client with whom plaintiff has no privity whatsoever, if the defendant could tender the full payment
of the amount of P999,000.00 in defendant's own Manager's check and that plaintiff is willing to forego its further claims for interest and
losses for a period of 620 days, more or less. . . . 11

The following argument adduced by petitioner in the Arbicom case leaves no doubt that petitioner is holding private respondent itself liable
for the discrepancy:

Defendant by its acceptance thru the clearing exchange of the check deposit from its client cannot be said to be free from any liability for the
unpaid portion of the check amount considering that defendant as the drawee bank, is remiss in its duty of verifying possible technicalities on
the face of the check.

Since the provisions of the PCHC Rule Book has so imposed upon the defendant being the Receiving Bank of a discrepant check item to give
that timely notification and defendant failing to comply with such requirement, then it can be said that defendant is guilty of negligence. He
who is guilty of negligence in the performance of its [sic] duty is liable for damages. (Art. 1170, New Civil Code.)
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Petitioner points to its prayer in its complaint to show that it sought reimbursement from the drawer's account. The prayer, however, does
not specifically state that it was seeking recovery of the amount from the depositor's account. Petitioner merely asked that "judgment be
rendered in favor of plaintiff against defendant sentencing it to pay plaintiff: 1. The sum of (P999,000.00).

On the other hand, the petition before this Court reveals that the true purpose for the examination is to aid petitioner in proving the extent
of Allied Bank's liability:

Hence, the amount actually debited from the subject account becomes very material and germane to petitioner's claim for reimbursement
as it is only upon examination of subject account can it be proved that indeed a discrepancy in the amount credited to petitioner was
committed, thereby, rendering respondent Allied Bank liable to petitioner for the deficiency. The money deposited in aforesaid account is
undeniably the subject matter of the litigation since the issue in the Arbicom case is whether respondent Bank should be held liable to
petitioner for reimbursement of the amount of moneyconstituting the difference between the amount of the check and the amount credited
to petitioner, that is, P999,000.00, which has remained deposited in aforesaid account.

On top of the allegations in the Complaint, which can be verified only by examining the subject bank account, the defense of respondent
Allied Bank that the reimbursement cannot be made since client's account is not sufficiently funded at the time petitioner sent its Charge
Slip, bolsters petitioner's contention that the money in subject account is the very subject matter of the pending Arbicom case.

only a disclosure of the pertinent details and information relating to the transactions involving subject account will enable petitioner to prove
its allegations in the pending Arbicom
case. . . . . 14

In short, petitioner is fishing for information so it can determine the culpability of private respondent and the amount of damages it can
recover from the latter. It does not seek recovery of the very money contained in the deposit. The subject matter of the dispute may be the
amount of P999,000.00 that petitioner seeks from private respondent as a result of the latter's alleged failure to inform the former of the
discrepancy; but it is not the P999,000.00 deposited in the drawer's account. By the terms of R.A. No. 1405, the "money deposited" itself
should be the subject matter of the litigation.

Who can issue freeze order?

It can only be issued by the Court of Appeals.

20. G.R. No. 174629 February 14, 2008 REP OF THE PHIL, Represented by THE ANTI-MONEY LAUNDERING COUNCIL (AMLC),vs.
HON. ANTONIO M. EUGENIO, JR., AS PRESIDING JUDGE OF RTC, MANILA, BRANCH 34, PANTALEON ALVAREZ and LILIA CHENG

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 Solicitor General (OSG) wrote the AMLC requesting the latter’s assistance "in obtaining more evidence to completely reveal the
financial trail of corruption surrounding the [NAIA 3] Project," and also noting that petitioner Republic of the Philippines was presently
defending itself in two international arbitration cases filed in relation to the NAIA 3 Project. 4 The CIS conducted an intelligence database
search on the financial transactions of certain individuals involved in the5 award, including respondent Pantaleon Alvarez (Alvarez) who had
been the Chairman of the PBAC Technical Committee, NAIA-IPT3 Project. By this time, Alvarez had already been charged by the Ombudsman
with violation of Section 3(j) of R.A. No. 3019. 6 The search revealed that Alvarez maintained eight (8) bank accounts with six (6) different
banks. 7

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 subject9 accounts once
the Regional Trial Court grants the application to inquire into and/or examine the bank accounts" of those four individuals. The resolution
enumerated the particular bank10accounts of Alvarez, Wilfredo Trinidad (Trinidad), Alfredo Liongson (Liongson) and Cheng Yong which were to
be the subject of the inquiry. 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, 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 RTC14heard the testimony of the Deputy Director of the AMLC,
Richard David C. Funk II, and received the documentary evidence of the AMLC. 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 the16Makati RTC bank inquiry order, the CIS proceeded to inquire and examine the deposits, investments and related web
accounts of the four.

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
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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 Prosecutor’s letter as "extensively justif[ying] the existence of probable cause that the bank accounts of the persons
and entities20 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."

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 ParteApplication 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 24appearance 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. 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 Alvarez’s motion.

The Republic filed an Omnibus Motion for Reconsideration 27 of the 26 January 2006 Manila RTC Order and likewise sought to strike out
Alvarez’s motion that led to the issuance of said order. For his part, Alvarez29filed a Reply and Motion to Dismiss 28 the application for bank
inquiry order. On 2 May 2006, the Manila RTC issued an Omnibus Order granting the Republic’s Motion for Reconsideration, denying
Alvarez’s 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 30the Republic stood as "the probable cause for the
investigation and examination of the bank accounts and investments of the respondents."

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
Order32 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
34
Order 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 Alvarez’s latest motion, issued an Order 36 directing the AMLC "to refrain from enforcing the order
dated January 12,37 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 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 39had began to
inquire into the bank accounts of the other persons mentioned in the application for bank inquiry order filed by the Republic. 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 AMLC’s application with the RTC;
and that the 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
Application42 until the appeal of movant Alvarez is finally resolved, otherwise, the appeal would be rendered moot and academic or even
nugatory." In addition, the AMLC was43ordered "not to disclose or publish any information or document found or obtained in [v]iolation of
the May 11, 2006 Order of this Court." The Manila RTC reasoned that the other persons mentioned in AMLC’s application were not served
with the court’s 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 Alvarez’s notice of appeal be expunged from the records since appeal from an order
of inquiry is disallowed under the (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 AMLC’s 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
 7

On 1 August 2006, the Court of Appeals, acting on Lilia Cheng’s petition, issued a Temporary Restraining Order 48enjoining 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 Cheng’s 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 ruling50 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 and53publish whatever information it might obtain thereupon even before the final orders of the Manila
RTC could become final and executory. 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 the54AMLC or any of its representatives until the appeal therefrom was finally resolved and that any
enforcement thereof would be unauthorized.

The present Consolidated Petition55 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 Motion56 dated 9 October 2006, petitioner informed the Court that on 22 September 2006, the Court of Appeals
hearing Lilia Cheng’s 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

The Court had initially granted a Temporary Restraining Order 59 dated 6 October 2006 and later on a Supplemental Temporary Restraining
Order60 dated 13 October 2006 in petitioner’s 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 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. Petitioner’s 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 Cheng’s 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 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 petitioner’s 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.

 8

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 Force’s 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 66of an unlawful activity as [defined in the law] are
transacted, thereby making them appear to have originated from legitimate sources." 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

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 interpreted69to mean "in the event there are violations" of the AMLA, and not that there
are already cases pending in court concerning such violations. 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 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:

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).

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.

AMLC to inquire into bank accounts without having71 to obtain a judicial order in cases where there is probable cause that the deposits or
investments are related to kidnapping for ransom, certain violations of the Comprehensive Dangerous Drugs Act of 2002, 72 hijacking and
other violations under R.A. No. 6235, destructive 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.

Nothing in Section 11 specifically authorizes that such court order may be issued ex parte.

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.

It was through the same enactment that ex parte proceedings were introduced for the first time into the AMLA,

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 76 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. 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
 9

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.

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 holder’s 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, petitioner’s 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 legislature’s 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 80a plan to inspect his bank account on the belief that the funds therein are involved in an unlawful activity or money laundering
offense. 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. 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 AMLC’s 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 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 Court’s construction of Section 11 of the AMLA is undoubtedly influenced by right to privacy considerations. If sustained, petitioner’s
argument that a bank account may be inspected by the government following an ex parteproceeding about which the depositor would know
 10

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 84which, after all, embodies even the right to be "let alone," the most comprehensive of rights and the right most valued by civilized
people.

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. Miller85 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.

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 that95the deposits or investments are related to kidnapping for ransom, 94 certain violations of the
Comprehensive Dangerous Drugs Act of 2002, 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.

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 97 Makati inquiry order, expressly adverts to Citibank Account No. 88576248
"owned by Cheng Yong and/or Lilia G. Cheng with Citibank N.A.," whereas Lilia Cheng’s petition before the Court of Appeals is accompanied
by a certification from Metrobank that Account Nos. 300852436-0 and98700149801-7, both of which are among the subjects of the Manila
inquiry order, are accounts in the name of "Yong Cheng or Lilia Cheng." 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 Cheng’s 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.

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?

Yes. “ deprives
conviction a personoraccused
or acquittal, of a crime
a proclamation of some lawful
of amnesty. ” protection to which he has become entitled, such as the protection of a former

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 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 are101
inhibited from such a construction by the cardinal rule
that "a law should be interpreted with a view to upholding rather than destroying it."

Besides, nowhere in the legislative record cited by Lilia Cheng does it appear that there was an unequivocal intent to exempt from the bank
inquiry order all bank accounts opened prior to the passage of the AMLA. There is a cited exchange between Representatives Ronaldo
Zamora and Jaime Lopez where the latter confirmed to the former that "deposits are 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
 11

AMLA was passed are indeed exempt 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 Cheng’s thesis, there is no cause for us to sustain her interpretation of the AMLA, fatal as
it is to the anima of that law.

What is the purpos of the protection accorded to foreign currency deposits?

To assure the development and speedy growth of the Foreign Currency Deposit system and the Offshore Banking in the Philippines

What is Offshore Banking System and the Foreign Currency Deposit System designed for?

To draw deposits from foreign lenders and investors.

Is the protection to foreign currency deposit afforded to deposits made by a transient or a tourist?

No. Foreign currency deposit made by a transient or a tourist is not the kind of deposit encouraged 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.

22. 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, vs. CB, CHINA BANKING CORPORATION and GREG BARTELLI y
NORTHCOTT,

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 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.

On February 28, 1989, the court granted the fiscal's Urgent Ex-Parte Motion for the Issuance of Warrant of Arrest and Hold Departure Order.
Pending the arrest of the accused Greg Bartelli y Northcott, the criminal cases were archived in an Order dated February 28, 1989.

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 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:

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 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:

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 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
 12

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. 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. 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, because she could not see. Karen could not recall
how long the defendant was in that position.

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. Besides, the defendant did not leave that Sunday, ruling out her chance to call for
help. At nighttime he slept with her again.

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 raped the third time, he left the house. (TSN, Aug.
 13

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 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.

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.

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 could ever recover from this experience.

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: 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 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
 14

restraints or burdens to secure the general welfare or public interest. Respondent Central Bank also alleges 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 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.

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

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 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 tourist who is not expected to maintain the deposit in the bank for long.

The dollar deposit of respondent Greg Bartelli is not entitled to the protection against attachment, garnishment or other court processes. 6

G.R. No. 140687Dec 18, 2006 CHINA BANKING CORP vs. CA and JOSE" GOTIANUY as substituted by ELIZABETH GOTIANUY LO,

A Complaint for recovery of sums of money and annulment of sales of real properties and shares of stock docketed as CEB-21445 was filed by
Jose "Joseph" Gotianuy against his son-in-law, George Dee, and his daughter, Mary Margaret Dee, before the Regional Trial Court (RTC) of
Cebu City, Branch 58.
 15

Jose Gotianuy accused his daughter Mary Margaret Dee of stealing, among his other properties, US dollar deposits with Citibank N.A.
amounting to not less than P35,000,000.00 and US$864,000.00. Mary Margaret Dee received these amounts from Citibank N.A. through
checks which she allegedly deposited at China Banking Corporation (China Bank). He likewise accused his son-in-law, George Dee, husband of
his daughter, Mary Margaret, of transferring his real properties and shares of stock in George Dee's name without any consideration. Jose
Gotianuy, died during the pendency of the case before the trial court. 1 He was substituted by his daughter, Elizabeth Gotianuy Lo. The latter
presented the US Dollar checks withdrawn by Mary Margaret Dee from his US dollar placement with Citibank. The details of the said checks
are:

Upon motion of Elizabeth Gotianuy Lo, the trial court 3 issued a subpoena to Cristota Labios and Isabel Yap, employees of China Bank, to
testify on the case. The Order of the trial court dated 23 February 1999, states:

Issue a subpoena ad testificandum requiring MS. ISABEL YAP and CRISTOTA LABIOS of China Banking Corporation, Cebu Main Branch, corner
Magallanes and D. Jakosalem Sts., Cebu City, to appear in person and to testify in the hearing of the above entitled case on March 1, 1999 at
8:30 4in the morning, with regards to Citibank Checks (Exhs. "AAA" to "AAA-5") and other matters material and relevant to the issues of this
case.

China Bank moved for a reconsideration. Resolving the motion, the trial court issued an Order dated 16 April 1999 and held:

The Court is of the view that as the foreign currency fund (Exhs. "AAA" to "AAA-5") is deposited with the movant China Banking Corporation,
Cebu Main Branch, Cebu City, the disclosure only as to the name or in whose name the said fund is deposited is not violative of the law.
Justice will be better served if the name or names of the depositor of said fund shall be disclosed because such a disclosure is material and
important to the issues between the parties in the case at bar.

Premises considered, the motion for reconsideration is denied partly and granted partly, in the sense that Isabel Yap and/or Cristuta Labios
are directed to appear before this Court and to testify at the trial of this case on April 20, 1999, May 6 & 7, 1999 at 10:00 o'clock in the
morning and only for the purpose of disclosing in whose name or names is the foreign currency fund (Exhs. "AAA" to "AAA-5") deposited
with the movant Bank and not to other matters material and relevant to the issues in the case at bar. 5

From this Order, China Bank filed a Petition for Certiorari6 with the Court of Appeals. In a Decision 7 dated 29 October 1999, the Court of
Appeals denied the petition of China Bank and affirmed the Order of the RTC.

In justifying its conclusion, the Court of Appeals ratiocinated:

From the foregoing, it is pristinely clear the law specifically encompasses only the money or funds in foreign currency deposited in a bank.
Thus, the coverage of the law extends only to the foreign currency deposit in the CBC account where Mary Margaret Dee deposited the
Citibank checks in question and nothing more.

It has to be pointed out that the April 16, 1999 Order of the court of origin modified its previous February 23, 1999 Order such that the CBC
representatives are directed solely to divulge "in whose name or names is the foreign currency fund (Exhs. "AAA" to "AAA-5") deposited with
the movant bank." It precluded inquiry on "other materials and relevant to the issues in the case at bar." We find that the directive of the
court below does not contravene the plain language of RA 6426 as amended by P.D. No. 1246.

The contention of petitioner that the [prescription] on absolute confidentiality under the law in question covers even the name of the
depositor and is beyond the compulsive process of the courts is palpably untenable as the law protects only the deposits itself but not the
name of the depositor. To uphold the theory of petitioner CBC is reading into the statute "something that is not within the manifest intention
of the legislature as gathered from the statute itself, for to depart from the meaning expressed by the words, is to alter the statute, to
legislate and not to interpret, and judicial legislation should be avoided. Maledicta expositio quae corrumpit textum – It is a dangerous
construction which is against the words. Expressing the same principle is the maxim: Ubi lex non distinguit nec nos distinguere debemos,
which simply means that where the law does not distinguish, we should not make any distinction."

From the Decision of the Court of Appeals, China Bank elevated the case to this Court based on the following issues:

ITHE HONORABLE COURT OF APPEALS HAS INTERPRETED THE PROVISION OF SECTION 8 OF R.A. 6426, AS AMENDED, OTHERWISE KNOWN AS
THE FOREIGN CURRENCY DEPOSIT ACT, IN A MANNER CONTRARY TO THE LEGISLATIVE PURPOSE, THAT IS, TO PROVIDE ABSOLUTE
CONFIDENTIALITY OF WHATEVER INFORMATION RELATIVE TO THE FOREIGN CURRENCY DEPOSIT.

II PRIVATE RESPONDENT IS NOT THE OWNER OF THE QUESTIONED FOREIGN CURRENCY DEPOSIT. THUS, HE CANNOT INVOKE THE AID OF THE
COURT IN COMPELLING THE DISCLOSURE OF SOMEONE ELSE'S FOREIGN CURRENCY DEPOSIT ON THE FLIMSY PRETEXT THAT THE CHECKS (IN
FOREIGN CURRENCY) HE HAD ISSUED MAY HAVE ENDED UP THEREIN.

III PETITIONER CAN RIGHTLY INVOKE THE PROVISION OF SEC. 8, R.A. 6426, IN BEHALF OF THE FOREIGN CURRENCY DEPOSITOR, OWING TO
ITS SOLEMN OBLIGATION TO ITS CLIENT TO EXERCISE EXTRAORDINARY DILIGENCE IN THE HANDLING OF THE ACCOUNT. 9

As amended by PD No. 1246, 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. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21, 1977)

Under the above provision, the law provides that all foreign currency deposits authorized under Republic Act No. 6426, as amended by Sec.
8, Presidential Decree No. 1246, Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No.
 16

1034 are considered absolutely confidential in nature and may not be inquired into. There is only one exception to the secrecy of foreign
currency deposits, that is, disclosure is allowed upon the written permission of the depositor.

This much was pronounced in the case of Intengan v. Court of Appeals,10 where it was held that the only exception to the secrecy of foreign
currency deposits is in the case of a written permission of the depositor.

It must be remembered that under the whereas clause of Presidential Decree No. 1246 which amended Sec. 8 of Republic Act No. 6426, the
Foreign Currency Deposit System including the Offshore Banking System under Presidential Decree 1034 were intended to draw deposits
from foreign lenders and investors, and we quote:

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.

As to the deposit in foreign currencies entitled to be protected under the confidentiality rule, Presidential Decree No. 1034, 11 defines
deposits to mean funds in foreign currencies which are accepted and held by an 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. 12

It is in this light that the court in the case of Salvacion v. Central Bank of the Philippines,13 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 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 whatsoever 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.14

With the foregoing, we are now tasked to determine the single material issue of whether or not petitioner China Bank is correct in its
submission that the Citibank dollar checks with both Jose Gotianuy and/or Mary Margaret Dee as payees, deposited with China Bank, may
not be looked into under the law on secrecy of foreign currency deposits. As a corollary issue, sought to be resolved is whether Jose Gotianuy
may be considered a depositor who is entitled to seek an inquiry over the said deposits.

The Court of Appeals, in allowing the inquiry, considered Jose Gotianuy, a co-depositor of Mary Margaret Dee. It reasoned that since Jose
Gotianuy is the named co-payee of the latter in the subject checks, which checks were deposited in China Bank, then, Jose Gotianuy is
likewise a depositor thereof. On that basis, no written consent from Mary Margaret Dee is necessitated.

We agree in the conclusion arrived at by the Court of Appeals.

The following facts are established: (1) Jose16Gotianuy and Mary Margaret Dee are co-payees of various Citibank checks; 15 (2) Mary Margaret
Dee withdrew these checks from Citibank; (3) Mary Margaret Dee admitted in her Answer to the Request for Admissions by the Adverse
Party sent to her by Jose Gotianuy 17 that she withdrew the funds from Citibank upon the instruction of her father Jose Gotianuy and that the
funds belonged exclusively to the latter; (4) these checks were endorsed by Mary Margaret Dee at the dorsal portion; and (5) Jose Gotianuy
discovered that these checks were deposited with China Bank as shown by the stamp of China Bank at the dorsal side of the checks.

Thus, with this, there is no issue as to the source of the funds. Mary Margaret Dee declared the source to be Jose Gotianuy. There is likewise
no dispute that these funds in the form of Citibank US dollar Checks are now deposited with China Bank.

As the owner of the funds unlawfully taken and which are undisputably now deposited with China Bank, Jose Gotianuy has the right to
inquire into the said deposits.

A depositor, in cases of bank deposits, is one who pays money into the bank in the usual course of business, to be placed to his credit and
subject to his check or the beneficiary of the funds held by the bank as trustee. 18

On this score, the observations of the Court of Appeals are worth reiterating:

Furthermore, it is indubitable that the Citibank checks were drawn against the foreign currency account with Citibank, NA. The monies
subject of said checks originally came from the late Jose Gotianuy, the owner of the account. Thus, he also has legal rights and interests in
the CBC account where said monies were deposited. More importantly, the Citibank checks readily demonstrate that the late Jose Gotianuy is
one of the payees of said checks. Being a co-payee thereof, then he or his estate can be considered as a co-depositor of said checks. Ergo,
since the late Jose Gotianuy is a co-depositor of the CBC account, then his request for the assailed subpoena is tantamount to an express
permission of a depositor for the disclosure of the name of the account holder.

One more point. It must be remembered that in the complaint of Jose Gotianuy, he alleged that his US dollar deposits with Citibank were
illegally taken from him. On the other hand, China Bank employee Cristuta Labios testified that Mary Margaret Dee came 20to China Bank and
deposited the money of Jose Gotianuy in Citibank US dollar checks to the dollar account of her sister Adrienne Chu. This fortifies our
 17

conclusion that an inquiry into the said deposit at China Bank is justified. At the very least, Jose Gotianuy as the owner of these funds is
entitled to a hearing on the whereabouts of these funds.

All things considered and in view of the distinctive circumstances attendant to the present case, we are constrained to render a limited pro
hac vice ruling.21 Clearly it was not the intent of the legislature when it enacted the law on secrecy on foreign currency deposits to
perpetuate injustice. This Court is of the view that the allowance of the inquiry would be in accord with the rudiments of fair play, 22 the
upholding of fairness in our judicial system and would be an avoidance of delay and time-wasteful and circuitous way of administering
justice.23WHEREFORE, premises considered, the Petition is DENIED.

Development Corp vs Asiatrust Bank, Gr. No. 180036

To finance the construction of the COMPLEX, SITUS, COLOR and Tony Chua and his wife, Siok Lu Chua, obtained several loans from (1) ALLIED
secured by REM (2) ASIATRUST secured by a REM and (3) METROBANK, secured by a REM. The COMPLEX was built on said four (4) lots, all of
which are registered in the names of Tony Chua and his wife, Siok Lu Chua. Chua Family expanded into retail merchandising and organized
Daily Supermarket, Inc. (DAILY). All three (3) corporations have interlocking directors and are all housed in the COMPLEX. SITUS, COLOR and
DAILY obtained additional loans from ALLIED, ASIATRUST and METROBANK and their REM were updated and/or amended. Spouses Chua
likewise executed five (5) Continuing Guarantee/Comprehensive Surety in favor of ALLIED to guarantee the payment of the loans of SITUS
and DAILY. SITUS, COLOR, DAILY and the spouses Chua failed to pay their obligations as they fell due, despite demands.

SITUS, COLOR and spouses Chua filed a complaint for nullification of foreclosure proceedings, with prayer for TRO but was not nothign was
issued so the scheduled auction sale proceeded wherein ALLIED emerged as the highest bidder. The same thing happened with Metrobank.
ASIATRUST sent a demand letter to DAILY and COLOR for the payment of their outstanding obligations.

SITUS, DAILY and COLOR, petitioners, filed a petition for the declaration of state of suspension of payments with approval of proposed
rehabilitation plan. Reason: due to the 1997 Asian financial crisis, peso devaluation and high interest rate, their loan obligations ballooned
and they foresee their inability to meet their obligations as they fall due; that their loan obligations are secured by the real properties of their
major stockholder, Tony Chua; that ALLIED has already initiated foreclosure proceedings; that Global Banking Corporation, now METROBANK,
and ASIATRUST made final demands for payment of their obligations; that they foresee a very good future ahead of them if they would be
given a "breathing spell" from their obligations as they fall due; and that their assets are more than sufficient to pay off their debts.
Petitioners submitted a program of rehabilitation for the approval of creditors and the court a quo.

ASIATRUST prayed for the dismissal of the petition Reason: not in due form and lacks substantial allegations on its debt obligations with its
various creditors; that petitioners do not have a viable rehabilitation plan; and that petitioners do not have a clear source of repayment of
their obligations.

METROBANK was participating in the proceedings as a mere observer inasmuch as the mortgage executed in its favor by spouses Chua on
the property covered by TCT No. 79916 was foreclosed by it on September 18, 2001, so that it ceased to be a creditor of COLOR as its claim
was already fully satisfied.

Petitioners filed a motion for the cancellation of the certificate of sale and annotated on TCT ; It was a violation of the Stay Order.ALLIED
argued that the foreclosure proceedings cannot be considered as a "claim", as understood under Section 1, Rule 2 of the Interim Rules of
Procedure on Corporate Rehabilitation, since the issuance of the Certificate of Sale and annotation thereof on the certificates of titles do not
constitute demands for payment of debt or enforcement of pecuniary liabilities; that the auction sale was conducted more than one year
before the filing of the petition for rehabilitation; and that TCT Nos. RT-13620 and RT-13621 are registered in the names of "Cua Yong
Hu/Tony Chua and Siok Lu Chua", hence, should not have been included in the Inventory of Assets of petitioners.

ASIATRUST filed an urgent manifestation praying for the outright dismissal of the petition inasmuch as METROBANK and ALLIED had already
foreclosed the mortgages on the properties that stood as securities for petitioners' obligations, as well as the lifting of the Stay Order.

The Rehabilitation Receiver submitted his Report on petitioners' proposed Rehabilitation Plan, to which oppositions were filed by ALLIED and
METROBANK.

Situs will convert all its debts to equity;

Situs will lease the properties from the new owners at P50.00 per square meter for a period of 25 years or at P555,200.00 a month, with a
yearly escalation of 5%;

The annual lease income will be distributed among the new owners according to their percentage ownership and, in the event that the
property is sold, any profit will be shared accordingly;

The new owners are Asiatrust with 21% ownership, Metrobank with 17% ownership, Allied with 30% ownership, and Tony Chua with 32%
ownership;

The two properties in Cavite which were mortgaged to ASIATRUST will be returned to its registered owner since the properties where the
Complex sits is enough to cover the loan obligations; and

All unpaid interests, penalties and other charges are waived.

Comments on and oppositions to the Second Amended Rehabilitation Plan were filed by ALLIED, ASIATRUST and METROBANK.
 18

ALLIED filed a motion praying for the dismissal of the petition as no Rehabilitation Plan was approved upon the lapse of 180 days from the
date of the initial hearing on August 2, 2002, as mandated in Section 11 of the Interim Rules of Procedure on Corporate Rehabilitation.

The rehabilitation receiver, petitioner and creditors/new owners to file written reports on the sixth month of implementation and to
seasonably prompt the court to set up the matter for a monitoring hearing thereon;

At the end of one year from and after the initial implementation of the plan, the court shall undertake a review of the entire rehabilitation
program for the purpose of determining the desirability of terminating or continuing with the rehabilitation;

The rehabilitation receiver, petitioner and creditors/new owners to file written reports conformably with condition no. 4 above and to
seasonably prompt the court accordingly.

In approving the Second Amended Rehabilitation Program, the court a quo held:

From the original rehabilitation proposal which simply involved a condoning and restructuring of the loan obligations, the petitioners came
out with an amended rehabilitation plan that calls for, among others, a concentration into the business of commercial leasing coupled with
the consolidation of the debts of Daily and Color with that of Situs; a conversion of debt to equity in proportionate terms; a reduction of the
principal stockholder's control of Situs Development; a proportionate share in the monthly rental income of Situs by creditors/new owners.

The creditor banks have consistently opposed the rehabilitation plans submitted by the petitioners. To the creditor banks, they would be
[better-off] if the businesses of the petitioners would be simply liquidated. A most simple view indeed, except that such a view totally ignores
the susceptibility of petitioner Situs to rehabilitation. The creditor banks are fully aware that the real property on which the building
structure of Situs Development [sits] is more than sufficient to answer for all the outstanding obligations of petitioners. This fact alone should
be enough to afford the petitioners a sporting chance at business resuscitation. That the realties are titled in the name of Mr. Tony Chua is of
no moment insofar as the rehabilitation is concerned, after all, the creditor banks were fully aware of the real facts when they willingly
extended loans to the petitioners.

To the court the 2nd Amended Rehabilitation Program of Situs Development Corporation Inc., a copy of which is enclosed and made an
integral part of this adjudication, deserves due consideration. Although said plan is opposed by the creditor banks, the court notes that it
bears the approval of the rehabilitation receiver who had the opportunity to peruse it. Moreover, under the plan, the shareholders of Situs
Development will lose controlling interest in the corporation. There is also no clear showing that the properties of the debtor will be readily
sold by a liquidator within a three-month period from termination of the herein proceedings and that the creditors would get more from said
sale than what they would get under the plan. The court thus considers the creditors' opposition to be unreasonable.

In an Order dated August 25, 2003, the court a quo declared that the motion to dismiss filed by ALLIED was mooted with the issuance of the
Adjudication.

Aggrieved, ALLIED, ASIATRUST and METROBANK filed their separate notices of appeal.

On November 10, 2003, petitioners filed with the court a quo a motion for declaration of nullity of the certificate of sale in favor of ALLIED
alleging that the issuance thereof was in violation of the Stay Order, as well as a motion to direct the Register of Deeds to annotate the
Adjudication on TCT Nos. RT-13620, RT-13621, TCT Nos. 79915 and 79916. Said motions were opposed by ALLIED on the grounds that the
properties foreclosed by it belonged to spouses Chua and not to petitioners; that the auction sale was conducted on February 6, 2001, or
more than a year prior to the filing of the petition for rehabilitation; and that the issuance of the Certificate of Sale and its annotation on the
certificates of title are merely incidental to the foreclosure proceedings; and that the Stay Order does not cover the issuance of the
Certificate of Sale and the registration thereof on the certificates of title as they do not in any way refer to its enforcement of a monetary
claim against petitioners.

In Separate Orders dated January 9, 2004, the court a quo granted both motions of petitioners. The court a quo held that while the
foreclosure was conducted prior to the issuance of the Stay Order, however, the foreclosure does not fully and effectively terminate until
after the issuance of the title in the name of the creditor, such that until a new title is issued, any action in the interregnum, judicial or not, is
deemed an enforcement of the claim arising from such foreclosure, which in this case will be in patent violation of the Stay Order.[4]

The twin Orders dated January 9, 2004 declaring the Certificate of Sale issued in favor of Allied Banking Corporation null and void, with
respect to the properties covered by TCT No. RT-13620 and RT-13621, and directing the Register of Deeds of Quezon City to cancel the
annotation of the Certificate of Sale on said titles, as well as to annotate said ADJUDICATION thereon, are likewise REVERSED and SET ASIDE.

In so concluding, the CA reasoned that the Stay Order did not affect the claims of Allied Bank and Metrobank, because these claims were not
directed against the properties of petitioners, but against those of spouses Chua.

The CA also reasoned that when the Stay Order was issued, Allied Bank and Metrobank were already the owners of the foreclosed
properties, subject only to the right of redemption of Spouses Tony and Siok Lu Chua (spouses Chua), because the extrajudicial foreclosure
proceedings had taken place prior to the filing of the Petition for Rehabilitation and the issuance of the Stay Order.
 19

Furthermore, the CA agreed with the contention of respondents that the Petition was insufficient in form and in substance. Among the
reasons cited by the appellate court was the fact that the inventory of assets of petitioner corporations included properties that were not
owned by them, but registered in the names of spouses Chua and already acquired by Allied Bank and Metrobank; and that the financial
statements submitted by petitioner corporations showed that their total liabilities exceeded their total assets.

CA ruled that the Petition for Rehabilitation should be dismissed, because the rehabilitation plan was approved by the court more than 180
days from the date of the initial hearing, contrary to the directive of Section 11, Rule 4 of the Interim Rules on Corporate Rehabilitation.
[6]

Issue: Whether the dismissal of the Petition for Rehabilitation is in order;

Held: No. The dismissal of the Petition for Rehabilitation is proper.

The Rules provide that "[t]he petition shall be dismissed if no rehabilitation plan is approved by the court upon the lapse of one hundred
eighty (180) days from the date of the initial hearing."[8] While the Rules expressly provide that the 180-day period may be extended, such
extension may be granted only "if it appears by convincing and compelling evidence that the debtor may successfully be rehabilitated."[9]

In this case, the Second Amended Rehabilitation Program was approved by the trial court beyond the 180-day period counted from the date
of the initial hearing. However, the evidence on record does not support the lower court's finding that the debtor corporations may still be
successfully rehabilitated.

The trial court's only justification for approving the Second Amended Rehabilitation Program is that "[t]he creditor banks are fully aware that
the real property on which the building structure of Situs Development [sits] is more than sufficient to answer for all the outstanding
obligations of the petitioners."[10] It then went on to conclude that "[t]his fact alone should be enough to afford the petitioners a sporting
chance at business resuscitation."[11]

We do not agree.

It is a fundamental principle in corporate law that a corporation is a juridical entity with a legal personality separate and distinct from the
people comprising it.[12] Hence, the rule is that assets of stockholders may not be considered as assets of the corporation, and vice-versa.
The mere fact that one is a majority stockholder of a corporation does not make one's property that of the corporation, since the stockholder
and the corporation are separate entities.[13]

In this case, the parcels of land mortgaged to respondent banks are owned not by petitioners, but by spouses Chua.[14] Applying the
doctrine of separate juridical personality, these properties cannot be considered as part of the corporate assets. Even if spouses Chua are the
majority stockholders in petitioner corporations, they own these properties in their individual capacities. Thus, the parcels of land in question
cannot be included in the inventory of assets of petitioner corporations.

The fact that these properties were mortgaged to secure corporate debts is of no moment. A mortgage is an accessory undertaking to secure
the fulfillment of a principal obligation.[15] In a third-party mortgage, the mortgaged property stands as security for the loan obtained by the
principal debtor; but until the mortgaged property is foreclosed, ownership thereof remains with the third-party mortgagor.

Here, the properties owned by spouses Chua were mortgaged as security for the debts contracted by petitioner corporations. However,
ownership of these properties remained with the spouses notwithstanding the fact that these were mortgaged to secure corporate debts.
We have ruled that "when a debtor mortgages his property, he merely subjects it to a lien but ownership thereof is not parted with."[16] This
leads to no other conclusion than that, notwithstanding the mortgage, the real properties in question belong to spouses Chua; hence, these
properties should not be considered as assets of petitioner corporations.

Since the real properties in question cannot be considered as corporate assets, the trial court's pronouncement that petitioners were
susceptible of rehabilitation was bereft of any basis. Based on the rehabilitation court's narration of facts, Situs Development Corporation has
total assets of P54,176,149.22 with total liabilities of P74,304,188.01; Daily Supermarket, Inc. has total assets of P43,986,412.33 with total
liabilities of P114,219,462.00; and Color Lithographic Press, Inc. has total assets of P7,618,006.69 and total liabilities of P6,588,534.99.[17]
Clearly, the aggregate total liabilities of petitioner corporations far exceed their aggregate total assets.

We take this opportunity to point out that rehabilitation contemplates a continuance of corporate life and activities in an effort to restore
and reinstate the corporation to its former position of successful operation and solvency.[18] However, if the continued existence of the
corporation is no longer viable, rehabilitation can no longer be an option.

What is the purpose of rehabilitation proceedings?

It is to enable the company to gain a new lease on life, and not to prolong its inevitable demise.

II The Stay Order does not suspend the foreclosure

of a mortgage constituted over the property of

a third-party mortgagor

Petitioners insist that the Stay Order covers the mortgaged properties, citing the Interim Rules on Corporate Rehabilitation (the Rules). Under
the Rules, one of the effects of a Stay Order is the stay of the "enforcement of all claims, whether for money or otherwise and whether such
enforcement is by court action or otherwise, against the debtor, its guarantors and sureties not solidarily liable with the debtor."[20]
 20

Based on a reading of the Rules, we rule that the Stay Order cannot suspend foreclosure proceedings already commenced over properties
belonging to spouses Chua. The Stay Order can only cover those claims directed against petitioner corporations or their properties, against
petitioners' guarantors, or against petitioners' sureties who are not solidarily liable with them.

Spouses Chua may not be considered as "debtors." The Interim Rules on Corporate Rehabilitation (the Rules) define the term "debtor" as
follows:

Who is a "Debtor" ?

It shall mean any corporation, partnership, or association, whether supervised or regulated by the Securities and Exchange Commission or
other government agencies, on whose behalf a petition for rehabilitation has been filed under these Rules.

Likewise, the enforcement of the mortgage lien cannot be considered as a claim against a guarantor or a surety not solidarily liable with the
debtor corporations. While spouses Chua executed Continuing Guaranty and Comprehensive Surety undertakings in favor of Allied Bank, the
bank did not proceed against them as individual guarantors or sureties. Rather, by initiating extrajudicial foreclosure proceedings, the bank
was directly proceeding against the property mortgaged to them by the spouses as security. The Civil Code provides that the property upon
which a mortgage is imposed directly and immediately subjected to the fulfillment of the obligation for whose security the mortgage was
constituted.[21] As such, a real estate mortgage is a lien on the property itself, inseparable from the property upon which it was constituted.

In this case, we find that the undertaking of spouses Chua with respect to the loans of petitioner corporations is the sale at public auction of
certain real properties belonging to them to satisfy the indebtedness of petitioner corporations in case of a default by the latter. This
undertaking is properly that of a third-party mortgagor or an accommodation mortgagor, whereby one mortgages one's property to stand as
security for the indebtedness of another.[22]

In Pacific Wide Realty and Development Corporation v. Puerto Azul Land, Inc.,[23] we ruled that the issuance of a Stay Order cannot suspend
the foreclosure of accommodation mortgages, because the Stay Order may only cover the suspension of the enforcement of all claims
against the debtor, its guarantors, and sureties not solidarily liable with the debtor.[24] Thus, the suspension of enforcement of claims does
not extend to the foreclosure of accommodation mortgages.

Moreover, the intent of the Rules is to exclude from the scope of the Stay Order the foreclosure of properties owned by accommodation
mortgagors. The newly adopted Rules of Procedure on Corporate Rehabilitation provides for one of the effects of a Stay Order:

SEC. 7. Stay Order.

(b) staying enforcement of all claims, whether for money or otherwise and whether such enforcement is by court action or otherwise,
against the debtor, its guarantors and persons not solidarily liable with the debtor; provided, that the stay order shall not cover claims against
letters of credit and similar security arrangements issued by a third party to secure the payment of the debtor's obligations; provided,
further, that the stay order shall not cover foreclosure by a creditor of property not belonging to a debtor under corporate rehabilitation;
provided, however, that where the owner of such property sought to be foreclosed is also a guarantor or one who is not solidarily liable, said
owner shall be entitled to the benefit of excussion as such guarantor[.][25] (Emphasis supplied) From the foregoing, we therefore hold that
foreclosure proceedings over the properties in question are not suspended by the trial court's issuance of the Stay Order.

Furthermore, even assuming that the properties in question fall under the ambit of the Stay Order, the issuance thereof should not affect the
execution of the Certificate of Sale.

In Rizal Commercial Banking Corporation v. Intermediate Appellate Court and BF Homes, Inc.,[26] the debtor corporation filed a Petition for
Rehabilitation and Declaration of Suspension of Payments before the Securities and Exchange Commission (SEC). Prior to the SEC's
appointment of a management committee and during the pendency of the case, the mortgagee-bank foreclosed on the real estate mortgage
over some of the corporation's mortgaged properties. An auction sale was conducted, and the mortgagee-bank emerged as the highest
bidder. However, because of the pendency of the rehabilitation case before the SEC, the Sheriff withheld the delivery of the Certificate of
Sale. Ruling on the validity of the foreclosure proceedings, we held that the conduct of the foreclosure sale was valid, because it was carried
out prior to the issuance of the SEC's order appointing a management committee. We held that the appointment of a management
committee, rehabilitation receiver, board or body pursuant to Presidential Decree No. 902-A is the operative act that suspends all actions or
claims against a distressed corporation.

In the case at bar, the auction sale for the parcels of land covered by TCT Nos. RT-13620 and RT-13621 and mortgaged to respondent Allied
Bank was conducted on 6 February 2001, while the foreclosure sale for the parcel of land covered by TCT No. 79916 and mortgaged to
Metrobank was conducted on 18 September 2001. Clearly, the foreclosure proceedings commenced and the auction sale was conducted
before the issuance of the Stay Order and the appointment of the Rehabilitation Receiver on 17 June 2002. In fact, the public auctions took
place almost a year before petitioner corporations filed the Petition for Rehabilitation with the court a quo on 11 June 2002. Therefore, the
execution of the Certificate of Sale may no longer be suspended by the trial court's issuance of the Stay Order, even if the questioned
properties are assumed to fall under the ambit of the Stay Order, since the foreclosure proceedings and the auction sale were conducted
prior to the appointment of the Rehabilitation Receiver.

WHEREFORE, in view of the foregoing, the instant Rule 45 Petition for Review is DENIED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 80223 are AFFIRMED. The Status Quo Order issued by this Court on 10 December 2007 is LIFTED.