BANKING LAW CASE DIGESTS

SIMEX INTERNATIONAL (MANILA) INC VS CA

FACTS:

Simex International is a private corporation engaged in the exportation of food products. It

buys these products from various local suppliers and then sells them abroad to the Middle East
and the United States. Most of its exports are purchased by the petitioner on credit.  Simex was a
depositor of the Far East Savings Bank and maintained a checking account in its branch in Cubao,
Quezon City which issued several checks against its deposit but was surprised to learn later that
they had been dishonored for insufficient funds.

As a consequence, several suppliers sent a letter of demand to the petitioner, threatening

prosecution if the dishonored check issued to it was not made good and also withheld delivery of
the order made by the petitioner. One supplier also cancelled the petitioner’s credit line and
demanded that future payments be made by it in cash or certified check. The petitioner
complained to the respondent bank.

Investigation disclosed that the sum of P100,000.00 deposited by the petitioner on May 25, 1981,
had not been credited to it. The error was rectified only a month after, and the dishonored checks
were paid after they were re- deposited. The petitioner then filed a complaint in the then Court of
First Instance of Rizal against the bank for its gross and wanton negligence.

TC – not entitled to moral and exemplary damages; awarded nominal damages (20k) plus 5k
atty’s fees

CA – not entitled to moral damages

ISSUE:

W/N the bank can be held liable for negligence by reason of its unjustified dishonor of a check

HELD:

YES. As to the fiduciary duty of the bank

The depositor expects the bank to treat his account with the utmost fidelity whether such
account consists only of a few hundred pesos or of millions. The bank must record every single
transaction accurately, down to the last centavo, and as promptly as possible. This has to be done
if the account is to reflect at any given time the amount of money the depositor can dispose of as
he sees fit, confident that the bank will deliver it as and to whomever he directs.

A blunder on the part of the bank, such as the dishonour of a check without good reason, can
cause the depositor not a little embarrassment if not also financial loss and perhaps even civil and
criminal litigation.

As a business affected with public interest and because of the nature of its functions, the bank
is under obligation to treat the accounts of its depositors with meticulous care, always having in
mind the fiduciary nature of their relationship. In the case at bar, it is obvious that the respondent
bank was remiss in that duty and violated that relationship.
 What is especially deplorable is that, having been informed of its error in not crediting the
deposit in question to the petitioner, the respondent bank did not immediately correct it but
did so only one week later or twenty-three days after the deposit was made. It bears repeating
that the record does not contain any satisfactory explanation of why the error was made in the
first place and why it was not corrected immediately after its discovery. Such ineptness comes
under the concept of the wanton manner contemplated in the Civil Code that calls for the
imposition of exemplary damages.

After deliberating on this particular matter, the Court, in the exercise of its discretion, hereby
imposes upon the respondent bank exemplary damages in the amount of P50,000.00, "by way of
example or correction for the public good," in the words of the law. It is expected that this ruling
will serve as a warning and deterrent against the repetition of the ineptness and indifference that
has been displayed here, lest the confidence of the public in the banking system be further
impaired. As to the award of moral damages:

Article 2205 of the Civil Code provides that actual or compensatory damages may be received
“(2) for injury to the plaintiff s business standing or commercial credit.” There is no question that the
petitioner did sustain actual injury as a result of the dishonored checks and that the existence of
the loss having been established “absolute

NATURE OF BUSINESS:

It is required to exercise utmost diligence in the handling of deposits

A bank may be held liable for damages by reason of its unjustified dishonor of a check, which
caused damage to its client’s credit standing. The bank must record every single transaction
accurately, down to the last centavo, and as promptly as possible. This has to be done if the
account is to reflect at any given time the amount of money the depositor can dispose of as he
sees fit, confident that the bank will deliver it as and to whomever he directs. The bank is a
fiduciary of the depositor’s money. Such injury should bolster all the more the demand of the
petitioner for moral damages and justifies the examination by this Court of the validity and
reasonableness of the said claim.

The negligence of the private respondent had been brushed off rather lightly as if it were a
minor infraction requiring no more than a slap on the wrist. We feel it is not enough to say that
the private respondent rectified its records and credited the deposit in less than a month as if this
were sufficient repentance. The error should not have been committed in the first place. The
respondent bank has not even explained why it was committed at all. It is true that the
dishonored checks were, as the Court of Appeals put it, "eventually" paid. However, this took
almost a month when, properly, the checks should have been paid immediately upon
presentment. As the Court sees it, the initial carelessness of the respondent bank, aggravated by
the lack of promptitude in repairing its error, justifies the grant of moral damages. This rather
lackadaisical attitude toward the complaining depositor constituted the gross negligence, if not
wanton bad faith.

Moral damages are not susceptible of pecuniary estimation. Article 2216 of the Civil Code
specifically provides that "no proof of pecuniary loss is necessary in order that moral, nominal,
temperate, liquidated or exemplary damages may be adjudicated." That is why the determination
of the amount to be awarded (except liquidated damages) is left to the sound discretion of the
court, according to "the circumstances of each case."

A corporation is not as a rule entitled to moral damages because, not being a natural person, it
cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety,
mental anguish and moral shock. The only exception to this rule is where the corporation has a
good reputation that is debased, resulting in its social humiliation

Considering all this, we feel that the award of nominal damages in the sum of P20,000.00 was not
the proper relief to which the petitioner was entitled. Under Article 2221 of the Civil Code,
"nominal damages are adjudicated in order that a right of the plaintiff, which has been violated
or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him." As we have found that the petitioner has
indeed incurred loss through the fault of the private respondent, the proper remedy is the award
to it of moral damages, which we impose, in our discretion, in the same amount of P20,000.00.

GUINGONA VS CITY FISCAL OF MANILA

FACTS:

This is a petition for prohibition and injunction with a prayer for the immediate issuance of
restraining order and/or writ of preliminary injunction filed by petitioners on March 26, 1982.

To prohibit public respondents from proceeding with the preliminary investigation of I.S. No. 81-
31938, in which petitioners were charged by respondent David, with estafa and violation of
Central Bank Circular No. 364 and related regulations regarding foreign exchange transactions
principally, on the ground of lack of jurisdiction because petitioners' obligation is civil in nature.

On December 23,1981, private respondent David filed I.S. No. 81-31938 in the Office of the City
Fiscal of Manila, which case was assigned to respondent Lota for preliminary investigation

David charged petitioners (together with one Robert Marshall and the following directors of the
Nation Savings and Loan Association (NSLA) with estafa and violation of Central Bank Circular
No. 364 and related Central Bank regulations on foreign exchange transactions

From March 20, 1979 to March, 1981, David invested with NSLA P1,145,546.20 on nine deposits,
P13,531.94 on savings account deposits (jointly with his sister, Denise Kuhne), US$10,000.00 on
time deposit, US$15,000.00 under a receipt and guarantee of payment and US$50,000.00 under a
receipt dated June 8, 1980 (au jointly with Denise Kuhne),

David contends that he was induced into making the investments by Robert Marshall an
Australian national said to be a close associate of petitioner Guingona Jr., then NSLA President,
petitioner Martin, then NSLA Executive Vice-President of NSLA and petitioner Santos, then
NSLA General Manager;

March 21, 1981 NSLA was placed under receivership by the Central Bank, David filed claims for
his investments and those of his sister.

On July 22, 1981 David received a report from the Central Bank that only P305,821.92 of those
investments were entered in the records of NSLA; that the respondents in I.S. No. 81-31938 may
have misappropriated the balance at the same time violating Central Bank Circular No. 364 and
related Central Bank regulations on foreign exchange transactions;

After demands, petitioner Guingona Jr. paid only P200,000.00, thereby reducing the amounts
misappropriated to P959,078.14 and US$75,000.00.

Petitioners moved to dismiss the charges against them for lack of jurisdiction because David's
claims allegedly comprised a purely civil obligation which was itself novated. Fiscal Lota
denied the motion to dismiss

ISSUE:

Whether or not failure of the bank to return the amount deposited will constitute estafa through
misappropriation under the RPC.

HELD:

As clearly as stated in criminal complaints, the related civil complaints and the
supporting sworn statements, the sums of money that petitioners received were loans.

It can be readily noted from the above-quoted provisions that in simple loan (mutuum),
as contrasted to commodatum the borrower acquires ownership of the money, goods or personal
property borrowed Being the owner, the borrower can dispose of the thing borrowed (Article
248, Civil Code) and his act will not be considered misappropriation thereof

But even granting that the failure of the bank to pay the time and savings deposits of
private respondent, any incipient criminal liability was deemed avoided, because when the
aforesaid bank was placed under receivership by the Central Bank, petitioners Guingona and
Martin assumed the obligation of the bank to private respondent David, thereby resulting in the
novation of the original contractual obligation arising from deposit into a contract of loan and
converting the original trust relation between the bank and private respondent David into an
ordinary debtor-creditor relation between the petitioners and private respondent.

Consequently, the failure of the bank or petitioners Guingona and Martin to pay the
deposits of private respondent would not constitute a breach of trust but would merely be a
failure to pay the obligation as a debtor.

In conclusion, considering that the liability of the petitioners is purely civil in nature and
that there is no clear showing that they engaged in foreign exchange transactions, the public
respondents acted without jurisdiction when they investigated the charges against the
petitioners. Public respondents should be restrained from further proceeding with the
criminal.

Bank deposits are in the nature of irregular deposits. They are really 'loans because they
earn interest. All kinds of bank deposits, whether fixed, savings, or current are to be treated as
loans and are to be covered by the law on loans

Hence, the relationship between the private respondent and the Nation Savings and Loan
Association is that of creditor and debtor; consequently, the ownership of the amount deposited
was transmitted to the Bank upon the perfection of the contract and it can make use of the
amount deposited for its banking operations, such as to pay interests on deposits and to pay
withdrawals. While the Bank has the obligation to return the amount deposited, it has, however,
no obligation to return or use of the money deposited by the depositor. There would be no
liability for estafa under Article 315(1)(b) of the RPC even if the bank failed to return the amount
deposited

The relationship between the private respondent and the Nation Savings and Loan Association is
that of creditor and debtor; consequently, the ownership of the amount deposited was
transmitted to the Bank upon the perfection of the contract and it can make use of the amount
deposited for its banking operations, such as to pay interests on deposits and to pay withdrawals.
While the Bank has the obligation to return the amount deposited, it has, however, no obligation
to return or deliver the same money that was deposited. And, the failure of the Bank to return
the amount deposited will not constitute estafa through misappropriation punishable under of
the Revised Penal Code, but it will only give rise to civil liability over which the public
respondents have no- jurisdiction.

(a) the production of the Promisory Notes, Banker's Acceptance, Certificates of Time Deposits
and Savings Account allegedly showed that the transactions between David and NSLA were
simple loans, i.e., civil obligations of NSLA which were novated when Guingona, Jr. and Martin
assumed them;

(b) David's principal witness allegedly testified that the duplicate originals of the instruments
were all on file with NSLA, contrary to David's claim that some of his investments were not
record

The sole issue for resolution is whether public respondents acted without jurisdiction when they
investigated the charges in I.S. No. 81-31938

There is merit in the contention of the petitioners that their liability is civil in nature and
therefore, public respondents have no jurisdiction over the charge of estafa. deliver the same
money that was deposited. And, the failure of the Bank to return the amount deposited will not
constitute estafa through misappropriation punishable under of the Revised Penal Code, but it
will only give rise to civil liability over which the public respondents have no- jurisdiction.

WHEREFORE, THE PETITION IS HEREBY GRANTED; THE TEMPORARY RESTRAINING

ORDER PREVIOUSLY ISSUED IS MADE PERMANENT.

VITUG VS CA JOINT ACCOUNTS

FACTS:

The case is a chapter in an earlier suit involving the issue on two (2) wills of the late Dolores
Vitug who died in New York, USA in Nov 1980. She named therein private respondent Rowena
Corona (Executrix) while Nenita Alonte was co-special administrator together with petitioner
Romarico Vitug (widower) pending probate.

In January 1985, Romarico Vitug filed a motion asking for authorization of the probate court to
sell shares of stocks and real property of the estate as reimbursements for advances he made to
the estate. The said amount was spent for payment of estate tax from a savings account in the
Bank of America.

Rowena Corona opposed the motion to sell contending that from the said account are conjugal
funds, hence part of the estate.

Vitug insisted saying that the said funds are his exclusive property acquired by virtue of a
survivorship agreement executed with his late wife and the bank previously. In the said
agreement, they agreed that in the event of death of either, the funds will become the sole
property of the survivor.

The agreement provides: “We hereby agree with each other and with the BANK OF
AMERICAN NATIONAL TRUST AND SAVINGS ASSOCIATION (hereinafter referred to as the
BANK), that all money now or hereafter deposited by us or any or either of us with the BANK in
our joint savings current account shall be the property of all or both of us and shall be payable to
and collectible or withdrawable by either or any of us during our lifetime, and after the death of
either or any of us shall belong to and be the sole property of the survivor or survivors, and shall
be payable to and collectible or withdrawable by such survivor or survivors. We further agree
with each other and the BANK that the receipt or check of either, any or all of us during our
lifetime, or the receipt or check of the survivor or survivors, for any payment or withdrawal
made for our above-mentioned account shall be valid and sufficient release and discharge of the
BANK for such payment or withdrawal.”

TC - upheld the validity of the survivorship agreement and granted Romarico's motion to sell.

CA - said agreement constituted a conveyance mortis causa which did not comply with the
formalities of a valid

ISSUE:

W/N the conveyance is one of mortis causa hence should conform to the form required of wills.

HELD:

NO.

The survivorship agreement is a contract which imposed a mere obligation with a term--being
death.

The conveyance in question is not, first of all, one of mortis causa, which should be embodied in a
will.

A will has been defined as "a personal, solemn, revocable and free act by which a capacitated
person disposes of his property and rights and declares or complies with duties to take effect
after his death." In other words, the bequest or device must pertain to the testator. In this case, the
monies subject of savings account No. 35342-038 were in the nature of conjugal funds.

Such contracts are permitted under Article 2012 on aleatory contracts. When Dolores predeceased
her husband, the latter acquired upon her death a vested right over the funds in the account. The
conveyance is therefore not mortis causa.

It is also our opinion that the agreement involves no modification of the conjugal partnership,
as held by the Court of Appeals, 2 by "mere stipulation," and that 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.

ART. 2010. By an aleatory contract, one of the parties or both reciprocally bind themselves to
give or to do something in consideration of what the other shall give

Joint accounts may be the subject of survivorship agreement whereby the co-depositors agree to
permit either of them to withdraw the whole deposit during their lifetime and transferring the
balance to the survivor upon the death of one of them.

Further, assuming that it is donation inter vivos, it is a prohibited donation.- Vitug petitioned to
the Court contending that the said agreement is an aleatory contract. or do upon the happening
of an event which is uncertain, or which is to occur at an indeterminate time.

Under the aforequoted provision, the fulfillment of an aleatory contract depends on either the
happening of an event which is (1) "uncertain," (2) "which is to occur at an indeterminate time."

A survivorship agreement, the sale of a sweepstake ticket, a transaction stipulating on the value
of currency, and insurance have been held to fall under the first category, while a contract for life
annuity or pension under Article 2021, et sequentia, has been categorized under the second. In
either case, the element of risk is present. In the case at bar, the risk was the death of one party
and survivorship of the other.

E: But although the survivorship agreement is per se not contrary to law its operation or effect
may be violative of the law. For instance, if it be shown in a given case that such agreement is a
mere cloak to hide an inofficious donation, to transfer property in fraud of creditors, or to defeat
the legitime of a forced heir, it may be assailed and annulled upon such grounds. No such vice
has been imputed and established against the agreement involved in this case.

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.

The conclusion is accordingly unavoidable that Mrs. Vitug having predeceased her husband,
the latter has acquired upon her death a vested right over the amounts under savings account
No. 35342-038 of the Bank of America. Insofar as the respondent court ordered their inclusion in
the inventory of assets left by Mrs. Vitug, we hold that the court was in error. Being the separate
property of petitioner, it forms no more part of the estate of the deceased.

____________________________________________________________________________________
__

EJERCITO VS SANDIGANBAYAN RA 1405

FACTS:

Joseph Victor G. Ejercito is the owner of Trust Account No. 858 which was originally opened at
Urban Bank but which is now maintained at Export and Industry Bank, which is the purchaser
and owner now of the former Urban Bank and Urbancorp Investment, Inc.  He is also the owner
of Savings Account No. 0116-17345-9 which was originally opened at Urban Bank but which is
now maintained at Export and Industry Bank, the purchaser and owner of the former Urban
Bank and Urbancorp Investment, Inc. Estrada was subsequently charged with Plunder.

During trial, the Sandiganbayan a Request for Issuance of Subpoena Duces Tecum for the
issuance of a subpoena directing the President of Export and Industry Bank (EIB, formerly Urban
Bank) or his/her authorized representative to produce
ISSUES:

1. W/N a Trust Account is covered by the term “deposit” as used in R.A. 1405;

2. W/N petitioner’s trust account and savings account are excepted from the protection of RA
1405

HELD:

YES. COVERED BY THE TERM DEPOSIT.

Respondent People posits that Trust Account No. 8585 may be inquired into, not merely
because it falls under the exceptions to the coverage of R.A. 1405, but because it is not even
contemplated therein. For, to respondent People, the law applies only to "deposits" which strictly
means the money delivered to the bank by which a creditor-debtor relationship is created
between the depositor and the bank.

Section 2 of the RA 1405 in fact even more clearly shows that the term "deposits" was intended
to be understood broadly:

SECTION 2. All deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds

Non-disclosure without Court order of any information relative to the funds or properties of its
clients is also required. However, bank deposits shall continue to be governed by the Law on
Secrecy of Bank Deposits.

Example: A bank cannot disclose matters relating to the trust accounts of the client with the bank
both under Sect 55(b) of the GBL and RA 1405

X FRUIT OF THE POISONOUS TREE

The Special Prosecution Panel also filed a Request for Issuance of Subpoena Duces Tecum/Ad
Testificandum directed to the authorized representative of Equitable-PCI Bank to produce
statements of account pertaining to certain accounts in the name of “Jose Velarde” and to testify
thereon.

The Sandiganbayan granted both requests by Resolution and subpoenas were accordingly issued.

The Special Prosecution Panel filed still another Request for Issuance of Subpoena Duces
Tecum/Ad Testificandum for the President of EIB or his/her authorized representative to
produce the same documents subject of the first Subpoena Duces Tecum and to testify thereon on
the hearings scheduled and subsequent dates until completion of the testimony. The request was
likewise granted by the Sandiganbayan. A Subpoena Duces Tecum/Ad Testificandum was
accordingly issued.

Ejercito filed various motions to quash the various Subpoenas Duces Tecum/Ad
Testificandum previously issued. In his Motion to Quash, he claimed that his bank accounts are
covered by R.A. No. 1405 (The Secrecy of Bank Deposits Law) and do not fall under any of the
exceptions stated therein. He further claimed that the specific identification of documents in the
questioned subpoenas, including details on dates and amounts, could only have been made
possible by an earlier illegal disclosure thereof by the EIB and the Philippine Deposit Insurance
Corporation (PDIC) in its capacity as receiver of the then Urban Bank.
 The disclosure being illegal, he concluded, the prosecution in the case may not be allowed to
make use of the information.

Special Prosecution Panel’s request for subpoena was obtained through prior illegal disclosure of
petitioner’s bank account, in violation of the fruit of the poisonous tree doctrine issued by the
Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as
of an absolutely confidential nature and may not be examined, inquired or looked into by any person,
government official, bureau or office, except upon written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public
officials, or in cases where the money deposited or invested is the subject matter of the litigation. (

The phrase "of whatever nature" proscribes any restrictive interpretation of "deposits."
Moreover, it is clear from the immediately quoted provision that, generally, the law applies not
only to money which is deposited but also to those which are invested. This further shows that
the law was not intended to apply only to "deposits" in the strict sense of the word. Otherwise,
there would have been no need to add the phrase "or invested."

Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858.

2. YES. X COVERED BY RA 1405. CASE AT BAR IS AN EXCEPTION TO THE PROTECTION.

R.A. 1405 is broad enough to cover Trust Account No. 858. However, the protection afforded
by the law is not absolute. There being recognized exceptions thereto, as above-quoted Section 2
provides.

(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. Ejercito contends that
since plunder is neither bribery nor dereliction of duty, his accounts are not excepted from the
protection of R.A. 1405.

Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason
is seen why these two classes of cases cannot be excepted from the rule making bank deposits
confidential. The policy as to one cannot be different from the policy as to the other. This policy
expresses the notion that a public office is a public trust and any person who enters upon its
discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to
public scrutiny.

Undoubtedly, cases for plunder involve unexplained wealth. The crime of bribery and the overt
acts constitutive of plunder are crimes committed by public officers, noble idea that “a public
office is a public trust and any person who enters upon its discharge does so.

RA 1405 does not provide for the application of this rule. At all events, the Ombudsman is not
barred from requiring the production of documents based solely on information obtained by it
from sources independent of its previous inquiry.

Also, the plunder case now pending with the Sandiganbayan necessarily involves an inquiry
into the whereabouts of the amount purportedly acquired illegally by former President Joseph
Estrada.

Republic Act No. 1405 allows the disclosure of bank deposits in cases where the money
deposited is the subject matter of the litigation. Hence, 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: o (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 o (2) the money deposited or invested is
the subject matter of the litigation.

Application of the exceptionso (1) applies since the plunder case pending against former
President Estrada is analogous to bribery or dereliction of duty, whileo exception (2) applies
because the money deposited in Ejercito’s bank accounts is said to form part of the subject
matter of the same plunder case.

The crime of bribery and the overt acts constitutive of plunder are crimes committed by public
officers, and in either case the noble idea that "a public office is a public trust and any person who
enters upon its discharge does so with the full knowledge that his life, so far as relevant to his
duty, is open to public scrutiny" applies with equal force.Plunder being thus analogous to
bribery, the exception to R.A. 1405 applicable in cases of bribery must also apply to cases of
plunder.

Respecting petitioner's claim that the money in his bank accounts is not the "subject matter of
the litigation," the meaning of the phrase "subject matter of the litigation" as used in R.A. 1405 is
explained in Union Bank of the Philippines v. Court of Appeals, thus:

The cause of action is the legal wrong threatened or committed, while the object of the action is to
prevent or redress the wrong by obtaining some legal relief; but the subject of the action is neither
of these since it is not the wrong or the relief demanded, the subject of the action is the matter or
thing with respect to which the controversy has arisen, concerning which the wrong has been
done, and this ordinarily is the property or the contract and its subject matter, or the thing in
dispute

In light then of this Court's pronouncement in Union Bank, the subject matter of the litigation
cannot be limited to bank accounts under the name of President Estrada alone, but must include
those accounts to which the money purportedly acquired illegally or a portion thereof was
alleged to have been transferred. Trust Account No. 858 and Savings Account No. 0116-17345- 9
in the name of petitioner fall under this description and must thus be part of the subject matter of
the litigation.

3. NO! X FRUIT OF THE POISONOUS TREE

The “fruit of the poisonous tree” doctrine or the exclusionary rule is inapplicable in cases of
unlawful examination of bank accounts.

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

At all events, even if the subpoenas issued by the Sandiganbayan were quashed, the Ombudsman
may conduct on its own the same inquiry into the subject bank accounts that it earlier conducted
last February- March 2001, there being a plunder case already pending against former President
Estrada. To quash the challenged subpoenas would, therefore, be pointless since the Ombudsman
may obtain the same documents by another route. Upholding the subpoenas avoids an
unnecessary delay.

BSB GROUP INC VS SALLY GO

FACTS:

Petitioner, the BSB Group, Inc., is a duly organized domestic corporation presided by its
herein representative, Ricardo Bangayan (Bangayan).

Respondent Sally Go, alternatively referred to as Sally Sia Go and Sally Go-Bangayan, is
Bangayan's wife, who was employed in the company as a cashier, and was engaged, among
others, to receive and account for the payments made by the various customers of the company.

In 2002, Bangayan filed with the Manila Prosecutor's Office a complaint for estafa and/or
qualified theft against respondent, alleging that several checks representing the aggregate
amount of P1,534,135.50 issued by the company's customers in payment of their obligation were,
instead of being turned over to the company's coffers, indorsed by respondent who deposited
the same to her personal banking account maintained at Security Bank and Trust Company
(Security Bank) in Divisoria, Manila Branch. -

W/N there is a difference between theft and estafa

ISSUE:

1. W/N the admission of Marasigan’s testimony on the particulars of respondent’s account with
SB, as well as the corresponding evidence of the checks allegedy deposited in said account,
constitutes unallowable inquiry under RA 1405.

HELD:

YES- In theft, the act of unlawful taking connotes deprivation of personal property of one by
another with intent to gain, and it is immaterial that the offender is able or unable to freely
dispose of the property stolen because the deprivation relative to the offended party has already
ensued from such act of execution. The allegation of theft of money, hence, necessitates that
evidence presented must have a tendency to prove that the offender has unlawfully taken money
belonging to another. Interestingly, petitioner has taken pains in attempting to draw a connection
between the evidence subject of the instant review, and the allegation of theft in the Information
by claiming that respondent had fraudulently deposited the checks in her own name. But this line
of argument works more prejudice than favor, because it in effect, seeks to establish the
commission, not of theft, but rather of some other crime probably estafa.

Subject matter of litigation. The inquiry into bank deposits allowable under RA 1405 must be
premised on the fact that the money deposited in the account is itself the subject of the action.

Example: The criminal information filed with the TC charged the accused with qualified theft by
abusing his employer’s trust and confidence in stealing cash in the amount of P1,534,135.50. On
the premise that the accused had deposited the stolen amounts to her personal banking account
the prosecution moved for the issuance of subpoena duces tecum/ad uncontroverted, the
assistant city prosecutor recommended the filing of the Information for qualified theft against
respondent.

Accordingly, respondent was charged before the Regional Trial Court of Manila.
 She was found guilty; that in the commission of the said offense, said accused acted with
grave abuse of confidence, being then employed as cashier by said complainant at the time of the
commission of the said offense and as such she was entrusted with the said amount of money.

Respondent entered a negative plea when arraigned. The trial ensued. On the premise that
respondent had allegedly enchased the subject checks and deposited the corresponding amounts
thereof to her personal banking account.

Petitioner, opposing respondent's move, argued for the relevancy of the Metro bank 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.

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.

TC - did not sustain respondent; hence, it denied the motion to quash for lack of merit.

Meanwhile, the prosecution was able to present in court the testimony of Elenita Marasigan
(Marasigan), the representative of Security Bank. In a nutshell, Marasigan’s testimony sought to
prove that between 1988 and 1989, respondent, while engaged as cashier at the BSB Group, Inc.,
was able to run away with the checks issued to the company by its customers, endorse the same,
and credit the corresponding amounts to her personal deposit account with Security Bank.

In the course of the testimony, the 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. CA affirmed RTC’s decision.

Moreover, that there is no difference between cash and check is true in other instances. In
estafa by conversion, for instance, whether the thing converted is cash or check, is immaterial in
relation to the formal allegation in an information for that offense; a check, after all, while not
regarded as legal tender, is normally accepted under commercial usage as a substitute for cash,
and the credit it represents instated monetary value is properly capable of appropriation. And it
is in this respect that what the offender does with the check subsequent to the act of unlawfully
taking it becomes material inasmuch as this offense is a continuing one.

In other words, in pursuing a case for this offense, the prosecution may establish its cause by
the presentation of the checks involved. These checks would then constitute the best evidence to
establish their contents and to prove the elemental act of conversion in support of the proposition
that the offender has indeed indorsed the same in his own name.

Theft, however, is not of such character. Thus, for our purposes, as the Information in this
case accuses respondent of having stolen cash, proof tending to establish that respondent has
actualized her criminal intent by indorsing the checks and depositing the proceeds thereof in
her personal account, becomes not only irrelevant but also immaterial and, on that score,
inadmissible in evidence.
2. YES

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.

Owing to this piece of legislation, the confidentiality of bank deposits remains to be a basic
state policy in the Philippines.

Section 2 of the law institutionalized this policy by characterizing as absolutely confidential in

general all deposits of whatever nature with banks and other financial institutions in the country

Contention of petitioner: In taking exclusion from the coverage of the confidentiality rule,
petitioner in the instant case 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.

BUT THIS EXCEPTION IS NOT APPLICABLE IN THE CASE AT BAR (MEANING IT IS

COVERED BY RA 1405, testificandum against the respective managers or records
custodians of the bank. The TC granted the motion and issued the corresponding subpoena. The
SC ruled that there is VIOLATION OF THE LAW ON SECRECY OF BANK DEPOSITS. The
high court explained 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.

Should there be doubts in upholding the absolutely confidential nature of bank deposits against
affirming the authority to inquire into such accounts, then such doubts must be resolved in favor
of the former. This attitude persists unless congress lifts its finger to reverse the general state
policy respecting the absolutely confidential nature of bank deposits.

SALVACION VS CENTRAL BANK OF THE PHILIPPINES

FOREIGN CURRENCY DEPOSIT IN THIS CASE IS SUBJECT TO GARNISHMENT

FACTS:

Respondent Greg Bartelli, an American tourist, coaxed and lured the 12-year old petitioner
Karen Salvacion to go with him in his apartment where the former detained her for 4 days and
repeatedly raped the latter a total of 10 times .After the rescue of Salvation and the arrest of
Bartelli, policemen recovered dollar and peso checks including a foreign currency deposit from
China Banking Corporation (CBC) as well as the teddy bear used to seduce Salvation

Fiscal Condaya filed against Bartelli criminal cases for Serious Illegal Detention and 4 counts of
rape. on the same day, Petitioners filed with the RTC civil case for damages praying for a Writ of
preliminary attachment. The court granted the application. Notice of Garnishment was served
by the Deputy Sheriff to CBC which later invoked R.A. No. 1405 as its answer to it.

Deputy Sheriff sent his reply to CBC 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.

CBC replied andinvoked Section 113 of Central Bank Circular No. 960 to the effect that the dollar
deposits of 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.
Central Bank of the Philippines affirmed the defense of CBC.

Petitioner made an inquiry to the Central Bank as to whether or not Sec. 113 has an exception or if
it has been repealed or amended. The Central Bank responded in saying: “The cited provision is
absolute in application. It does not admit of any exception, nor has the same been repealed nor
amended. The purpose of the law is to encourage dollar accounts within the countrys banking
system which would help in the development of the economy. There is no intention to render
futile the basic rights of a person as was suggested in your subject letter. The law may be harsh as
some perceive it, but it is still the law. Compliance is, therefore, enjoined.”

The court rendered judgment in favor of petitioners, awarding 1 million pesos in damages.

Thus, petitioner filed the present petition for declaratory relief

ISSUES:

1. W/N the SC can entertain the instant petition despite the fact that original jurisdiction in
petitions for declaratory relief rests with the lower court

2. W/N Sec. 113 of Central Bank Circular 960 and Sec. 8 of RA 6426 amended by PD 1246
otherwise known as the “Foreign Currency Deposit Act” be made applicable to a foreign
transient.

HELD:

1. YES.- The Court has no original and exclusive jurisdiction over a petition for declaratory relief.
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.

2. NO. The provisions of Section 113 of CB Circular No. 960 and PD No. 1246, insofar as it
amends Section 8 of R.A. No. 6426 are hereby held to be INAPPLICABLE to this case because of
its peculiar circumstances.

 If Karen’s sad fate had happened to anybodys own kin, it would be difficult for him to fathom
how the incentive for foreign currency deposit could be more important than his childs right to
said award of damages; in this case, the victims claim for damages from this alien who had the
gall to wrong a child of tender years of a country where he is 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 countrys
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 inquitous effects
producing outright injustice and inequality such as as the case before us.

The application of the law depends on the extent of its justice. Eventually, if we rule that the
questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment,
garnishment, or any other order or process of any court, legislative body, government agency or
any administrative body whatsoever, is applicable to a foreign transient, injustice would result
especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli.

 This would negate Article 10 of the New Civil Code which provides that “in case of doubt in the
interpretation or application of laws, it is presumed that the lawmaking body intended right and
justice to prevail.

GR: Deposits that are exempt from garnishment:1. Foreign currency deposits

E: By way of exception, foreign currency deposits of an American tourist who was found guilt of
repeatedly raping a 12 year old chil is subject to garnishment

“Ninguno non deue enriquecerse tortizeramente con dano de otro.” Simply stated, when the
statute is silent or ambiguous, this is one of those fundamental solutions that would respond to
the vehement urge of conscience. It would be unthinkable, that the questioned Section 113 of
Central Bank No. 960 would be used as a device by accused Greg Bartelli for wrongdoing, and in
so doing, acquitting the guilty at the expense of the innocent.

Call it what it may — but is there no conflict of legal policy here? Dollar against Peso? Upholding
the final and executory judgment of the lower court against the Central Bank Circular protecting
the foreign depositor? Shielding or protecting the dollar deposit of a transient alien depositor
against injustice to a national and victim of a crime? This situation calls for fairness against legal
tyranny.

 We definitely cannot have both ways and rest in the belief that we have served the ends of
justice.

PHILIPPINES DEPOSIT INSURANCE CORP VS CA GOLDEN TIME DEPOSITS

RESOLUTION OF RECEIVERSHIP WAS ISSUED BANK HAD NO NOTICE.

TRANSACTIONS ARE NOT NULLIFIED

Prior to May 22, 1997, respondents had 71 certificates of time deposits denominated as "Golden
Time Deposits" (GTD) with an aggregate face value of P1,115,889.96.

FACTS:

On May 22, 1997, a Friday, the Monetary Board (MB) of the Central Bank of the Philippines, now
Bangko Sentral ng Pilipinas, issued Resolution 505 prohibiting Manila Banking Corporation to do
business in the Philippines, and placing its assets and affairs under receivership The Resolution,
however, was not served on MBC until Tuesday the following week, or on May 26, 1987, when
the designated Receiver took over.

On May 25, 1987 - the next banking day following the issuance of the MB Resolution, respondent
Jose Abad was at the MBC at 9:00 a.m. for the purpose of pre-terminating the 71 aforementioned
GTDs and re-depositing the fund represented thereby into 28 new GTDs in denominations of
P40,000.00 or less under the names of herein respondents individually or jointly with each others.
Of the 28 new GTDs, Jose Abad pre-terminated 8 and withdrew the value thereof in the total
amount of P320,000.00.

Respondents thereafter filed their claims with the PDIC for the payment of the remaining 20
insured GTDs.

PDIC paid respondents the value of 3 claims in the total amount of P120,000.00. PDIC, however,
withheld payment of the 17 remaining claims after Washington Solidum, Deputy Receiver of
MBC-Iloilo, submitted a report to the PDIC that there was massive conversion and substitution of
trust and deposit accounts at MBC-Iloilo.
Because of the report, PDIC entertained serious reservation in recognizing respondents' GTDs as
deposit liabilities of MBC-Iloilo. Thus, PDIC filed a petition for declaratory relief against
respondents with the RTC of Iloilo City, for a judicial declaration determination of the
insurability of respondents' GTD sat MBC-Iloilo.

In their Answer respondents set up a counterclaim against PDIC whereby they asked for
payment of their insured

ISSUE:

W/N PDIC validly reject the claim

HELD:

NO.

While the MB issued Resolution 505 on May 22, 1987, a copy thereof was served on MBC only on
May 26, 1987. MBC and its clients could be given the benefit of the doubt that they were not
aware that the MB resolution had been passed, given the necessity of confidentiality of placing a
banking institution under receivership.

The evident implication of the law, therefore, is that the appointment of a receiver may be made
by the Monetary Board without notice and hearing but its action is subject to judicial inquiry to
insure the protection of the banking institution. Stated otherwise, due process does not
necessarily require a prior hearing; a hearing or an opportunity to be heard may be subsequent to
the closure. One can just imagine the dire consequences of a prior hearing: bank runs would be
the order of the day, resulting in panic and hysteria. In the process, fortunes may be wiped out,
and disillusionment will run the gamut of the entire banking community.

Mere conjectures that MBC had actual knowledge of its impending closure do not suffice. The
MB resolution could not thus have nullified respondents transactions which occurred prior to
May 26, 1987.

That no actual money in bills and/or coins was handed by respondents to MBC does not mean
that the transactions on the new GTDs did not involve money and that there was no
consideration therefor. For the outstanding balance of respondents 71 GTDs in MBC prior to May
26, 1987 in the amount of P1,115,889.15 as earlier mentioned was re-deposited by respondents
under 28 new GTDs. Admittedly, MBC had P2,841,711.90 cash on hand more than double the
outstanding balance of respondents 71 GTDs at the start of the banking day on May 25, 1987.

RCBC VS HI-TRI - DEV CORP

UNCLAIMED - BALANCES NOTICE - REQUIREMENT TO DEPOSITORS

FACTS:

Luz Bakunawa (private respondent) and her husband W/N issuance of Manuel, now deceased
(Spouses Bakunawa) are registered individual notices is a - owners of six 6 parcels of land in
Quezon City jurisdictionalThese lots were sequestered by the Presidential requirement in escheat
- Commission on Good Government (PCGG). proceeding, the absence Sometime in 1990, a
certain Teresita Millan (Millan), of which will render the through her representative, Jerry
Montemayor, offered to decision of the RTC void
buy said lots for ₱6,724,085.71, with the promise that shewill take care of clearing whatever
preliminary obstacles W/N the funds allocated there may be to effect a completion of the sale. for
the payment of the

Unclaimed Balances

Initially, there should be notice to the depositor of the unclaimed balance

From the case:

Act. 3936 provides for the rule on service of processes in escheat proceedings.- Insofar as to
depositors or other claimants of the unclaimed balances, service is made by PUBLICATION of a
copy of the summons in a newspaper of general circulation in the locality where the institution is
situated.

Act No. 3936, as amended, outlines the proper procedure to be followed by banks in filing a
sworn statement with the Treasurer concerning dormant accounts. Accordingly, before filing a
sworn statement, Banks and other similar institutions are under obligation to communicate
with owners of dormant accounts.

The purpose of this initial notice is for a bank to determine whether an inactive account has
indeed been unclaimed, abandoned, forgotten, or left without an owner.

The RTC ordered petitioners to pay the balance of the deposit insurance to respondents. -

The Court of Appeals affirmed the decision of the lower no cash to cover the new GTDs of
respondents and conclude that there was no consideration for said GTDs. Petitioner having failed
to overcome the presumption that the ordinary course of business was followed, this Court finds
that the 28 new GTDs were deposited in the usual course of business of MBC.

HELD:

1. NOAct. 3936 provides for the rule on service of processes in escheat proceedings.Insofar as
banks are concerned, service of processes is made by delivery of a copy of the complaint and
summons upon the president, cashier, or managing officer of the defendant bank. On the other
hand, as to depositors or other claimants of the unclaimed balances, service is made by
publication of a copy of the summons in a newspaper of general circulation in the locality where
the institution is situated.CA committed reversible error when it ruled that the issuance of
individual notices upon respondents was a jurisdictional requirement, and that failure to effect
personal service on them rendered the Decision and the Order of the RTC void for want of
jurisdiction.

The Spouses Bakunawa gave to Millan the Owners’ Copies Managers Check shouldof said TCTs
and in turn, Millan made a downpayment of be included in the - ₱1,019,514.29 for the intended
purchase. escheat proceedings

However, for one reason or another, Millan was not able to clear said obstacles. As a result, the
Spouses Bakunawa rescinded the sale and offered to return to Millan her downpayment of
₱1,019,514.29.

However, Millan refused to accept back the ₱1,019,514.29 downpayment. Consequently, the
Spouses Bakunawa, through their company, the Hi-Tri Development Corporation (Hi-Tri) took
out a Managers Check from RCBC-Ermita in the amount of ₱1,019,514.29, payable to Millan’s
company Rosmil Realty and Development Corporation (Rosmil) c/o Teresita Millan and used
this as one of their basis for a complaint against Millan and Montemayor which they filed with
the RTC of Quezon City.

During the pendency of the above mentioned case and without the knowledge of [Hi-Tri and
Spouses Bakunawa], RCBC reported the ₱1,019,514.29-credit existing in favor of Rosmil to the
Bureau of Treasury as among its unclaimed balances. Allegedly, a copy of the Sworn Statement
executed by Florentino N. Mendoza, Manager and Head of RCBCs Asset Management,
Disbursement & Sundry Department (AMDSD) was posted within the premises of RCBC-Ermita.

The Republic of the Philippines, through the [Office of the Solicitor General (OSG)], filed with the
RTC the action below for Escheat. Spouses Bakunawa settled amicably their dispute with Rosmil
and Millan. Instead of only the amount of ₱1,019,514.29, [Spouses Bakunawa] agreed to pay
Rosmil and Millan the amount of ₱3,000,000.00, [which is] inclusive [of] the amount of
₱1,019,514.29.

But during negotiations and evidently prior to said settlement, [Manuel Bakunawa, through Hi-
Tri] inquired from RCBC-Ermita the availability of the ₱1,019,514.29 under RCBC Managers
Check. Hi-Tri and Spouses Bakunawa were however dismayed when they were informed that
the amount was already subject of the

Escheat proceedings are actions in rem, whereby an action is brought against the thing itself
instead of the person. Thus, an action may be instituted and carried to judgment without
personal service upon the depositors or other claimants.

Judgment of escheat is conclusive upon persons notified by advertisement, as publication is

considered a general and constructive notice to all persons interested

2. NO. The funds represented by the Manager’s Check should not be included in the escheat
proceedings because the owners thereof were not properly informed of the escheat proceedings.

Escheat is not a proceeding to penalize depositors for failing to deposit to or withdraw from their
accounts. It is a proceeding whereby the state compels the surrender to it of unclaimed deposit
balances when there is substantial ground for a belief that they have been abandoned, forgotten,
or without an owner

 
Act No. 3936, as amended, outlines the proper procedure to be followed by banks in filing a
sworn statement with the Treasurer concerning dormant accounts.

The law sets a detailed system for notifying depositors of unclaimed balances. This notification is
meant to inform them that their deposit could be escheated if left unclaimed. Accordingly, before
filing a sworn statement, banks and other similar institutions are under obligation to
communicate with owners of dormant accounts. The purpose of this initial notice is for a bank to
determine whether an inactive account has indeed been unclaimed, abandoned, forgotten, or left
without an owner.

MANALO VS CA

A BANK WHICH IS CLOSED RETAINS ITS PERSONALITY TO SUE AND BE SUED THRU
LIQUIDATOR

FACTS:
Villanueva Enterprises, represented by its president, Therese Villanueva Vargas, obtained a loan
of 3 million pesos and 1 million pesos from the respondent PAIC Savings and Mortgage Bank
and the Philippine American Investments Corporation (PAIC), respectively.

To secure payment of both debts, Vargas executed in favor of the respondent and PAIC a joint
first mortgage over two parcels of land registered under her name. One of the lots is the subject of
the present case.

S. Villanueva Enterprises failed to settle its loan obligation.

Accordingly, respondent instituted extrajudicial foreclosure proceedings over the mortgaged lots
and acquired the same as the highest bidder. After the lapse of one year, title was consolidated in
respondent’s name for failure of Vargas to redeem.

The Central Bank of the Philippines filed a petition for assistance in the liquidation of the
respondent PAIC with the RTC

After a few years, respondent petitioned the RTC of Pasay City for the issuance of a writ of
possession for the subject property. However, during the pendency of civil case for the issuance
of a writ of possession, Vargas executed a deed of absolute sale selling, transferring, and
conveying ownership of the disputed lot in favor of a certain Armando Angsico.

Notwithstanding this sale, Vargas, still representing herself to be the lawful owner of the
property, leased the same to petitioner Domingo R. Manalo.

Later, Armando Angsico, as buyer of the property, assigned his rights therein to petitioner. The
court subsequently issued the writ of possession but Villanueva Enterprises and Vargas moved
for its quashal.

Petitioner, on the strength of the lease contract and deed of assignment made in his favor,
submitted a permission to file an ex-parte motion to intervene. Both motions were denied by the
court. Court of Appeals upheld the order of the lower court. Hence this petition.

ISSUE:

W/N the respondent PAIC has capacity to sue notwithstanding that it is already under
liquidation

Petitioner next casts doubt on the capacity of the respondent to continue litigating the petition for
the issuance of the writ. He asserts that, being under liquidation, respondent bank is already a
dead corporation that cannot maintain the suit in the RTC. Hence, no writ may be issued in its
favor.

HELD:

YES.

The argument of petitioner is devoid of merit. A bank which had been ordered closed by the
monetary board retains its juridical personality which can sue and be sued through its liquidator.
The only limitation being that the prosecution or defense of the action must be done through
the liquidator. Otherwise, no suit for or against an insolvent entity would prosper. In such
situation, banks in liquidation would lose what justly belongs to them through a mere
technicality.
That the law allows a bank under liquidation to participate in an action can be clearly inferred
from the third paragraph of the same Section 29 of The Central Bank Act earlier quoted, which
authorizes or empowers a liquidator to institute actions, thus

x x x and he (liquidator) may in the name of the bank or non-bank financial intermediary
performing quasi- banking functions and with the assistance of counsel as he may retain,
institute such actions as may be necessary in the appropriate court to collect and recover
accounts and assests of such institution or defend any action filed against the institution.

It is therefore beyond dispute that respondent was legally capacitated to petition the court a quo
for the issuance of the writ.

REPUBLIC VS EUGENIO

NAIA CASE CORRUPTION

FACTS:

Following the promulgation of Agan case, 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).

ISSUE:

W/N a bank inquiry order under Section 11 may be obtained only upon the pre-existence of a
money laundering

HELD:

NO. A brief overview of the AMLA is called for.

Money laundering has been generally defined by the International Criminal Police Organization
(Interpol) as "any act or attempted act to conceal or disguise the

Authority of AMLC to inquire into and examine bank deposits- Inquiry into deposits under
Sec.

AMLA – NO NEED PRE-EXISTING CRIMINAL CASE

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,"

The CIS conducted an intelligence database search on the financial transactions of certain
individuals involved in the 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. The
search revealed that Alvarez maintained eight (8) bank accounts with six (6) different banks

The AMLC issued Resolution No. 75, Series of 2005, whereby the Council resolved to authorize
the Executive Director of the AMLC "to sign and verify an application to inquire into and/or
examine the [deposits] or investments of Pantaleon Alvarez, Wilfredo Trinidad, Alfredo
Liongson, and Cheng Yong, and their related web of accounts wherever these may be found, as
defined under Rule 10.4 of the Revised Implementing Rules and Regulations;" and to authorize
the AMLC Secretariat "to conduct an inquiry into subject accounts once the Regional Trial Court
grants the application to inquire into and/or examine the bank accounts" of those four
individuals.

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 Makati RTC heard the testimony of the Deputy Director of the AMLC, Richard David C.
Funk II, and received the documentary evidence of the AMLC.

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 Pursuant to the Makati RTC bank inquiry order, the
CIS proceeded to inquire and examine the deposits, investments and related web accounts of the
four.

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 a in relation to the criminal offense case
already filed before the court

2. W/N the bank accounts of respondents can be examined.

Identity of illegally obtained proceeds so that they appear to have originated from legitimate
sources."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.

Section 4 of the AMLA states that "[m]oney laundering is a crime whereby the proceeds of an
unlawful activity as [defined in the law] are transacted, thereby making them appear to have
originated from legitimate sources." 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 forfeiture proceedings and complaints for the
prosecution of money laundering offenses.

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. The conclusion
is based on the phrase "upon order of any competent court in cases of violation of this Act," the
word "cases" generally understood as referring to actual cases pending with the courts.

We are unconvinced by this proposition, and agree instead with the then Solicitor General who
conceded that the use of the phrase "in cases of" was unfortunate, yet submitted that it should
be interpreted to mean "in the event there are violations" of the AMLA, and not that there are
already cases pending in court concerning such violations.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 does not require a pre-existing
criminal case cases then pending before the Sandiganbayan.

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.

In response to the letter of the Special Prosecutor, the AMLC promulgated on 9 December 2005
Resolution No. 121 Series of 2005,[19] which authorized the executive director of the AMLC to
inquire into and examine the accounts named in the letter, including one maintained by Alvarez
with DBS Bank and two other accounts in the name of Cheng Yong with Metrobank. The
Resolution characterized the memorandum attached to the Special Prosecutors letter as
extensively justif[ying] the existence of probable cause that the bank accounts of the persons and
entities mentioned in the letter are related to the unlawful activity of violation of Sections 3(g)
and 3(e) of Rep. Act No. 3019, as amended.

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.