177_Central Bank v.

Morfe

Syllabus Topic: Requisites of a valid Keywords: Identification of victims

warrant; general pattern of business.

DOCTRINE:
Identification of victims in applications for search warrants may be more justified if the acts
impugned consisted of isolated transactions, distinct and detached from the type of business
in which it is generally engaged

FACTS
 The main purpose of respondent, First Mutual Savings and Loan Organization, Inc.
(Organization) according to its Articles of Incorporation is to encourage and implement
savings and thrift among its members, and to extend financial assistance in the form of
loans. They have 3 classes of members:
o Founder members – originally joined the organization and have signed the pre-
incorporation papers.
o Participating members – possess "no right to vote or be voted for" — to which
category all other members belong.
o Honorary members – made by the exclusive discretion of the BOT due to
assistance extended in the Organization.
 Thereafter, the Central Bank released an opinion that the Organization and other similar
institutions are banking institutions and fall within the purview of the Central Bank Act.
 The Central Bank also published an announcement in newspapers which claims that the
Organization has never been authorized to accept deposits of funds from the public nor
engage in the banking business. This supposedly violates Section 2 of the General
Banking Act (RA 337).
 The Governor of the Bank directed an investigation into the activities of these
associations. Then, a deponant filed with the Municipal Court an application for a search
warrant against the Organization.
 Hon. Roman Cancino issued the warrant commanding the search of the Organization’s
premises and the seizure of its articles. The warrant states the seizure of:
o Books of Original Entry
o Books of Final Entry
o Other Accounting Records
o Financial Statements
o Others (i.e., Articles of Incorporation and By-laws)
 On the same day, the Organization filed a writ of preliminary injunction alleging the
following:
o The search warrant is a roving commission, general in its terms;
o The use of the word 'and others' in the search warrant permits the
unreasonable search and seizure of documents which have no relation
whatsoever to any specific criminal act; and
o No court in the Philippines has any jurisdiction to try a criminal case against a
corporation.
  Hon. Morfe issued the injunction in favor of the Organization based on the following
grounds:
o “To authorize and seize all the records listed in the application for search
warrant, without reference to specific alleged victims of the purported illegal
banking transactions, would be to harass the Organization, and its officers with a
roving commission of fishing expedition for evidence which could be discovered
by normal intelligence operations or inspection (not seizure) of books and
records pursuant to Section 4 of Republic Act No. 337."
 Hence, this petition.

ISSUE

W/N the search and seizure of the Organization’s premises were unreasonable? – NO.

RATIO

Identification of victims in applications for search warrants may be more justified if the
acts impugned consisted of isolated transactions, distinct and detached from the type of
business in which it is generally engaged.
 ✅ The ruling of Judge Morfe may be justified if the acts imputed to the Organization
consisted of isolated transactions which are distinct from its general business.
 In such case, it may be necessary to specify or identify the parties involved in said
isolated transactions, so that the search and seizure be limited to the records pertinent
thereto. Such, however, is not the situation here.
 The records suggest clearly that the transactions objected to by the Bank constitute the
general pattern of the business of the Organization. Indeed, the main purpose thereof,
according to its By-laws, is "to extend financial assistance in the form of loans, to its
members," with funds deposited by them.

The Constitutional injunction against unreasonable searches and seizures seeks to

forestall, not purely abstract or imaginary evils, but specific and concrete ones.
 Unreasonableness is, in the very nature of things, a condition dependent upon the
circumstances surrounding each case, in much the same way as the question of whether
or not "probable cause" exists is one which must be decided in the light of the conditions
obtaining in given situations.
 In this case, a mere disagreement with Judge Cancino who issued the warrant, on the
credibility of the application for a warrant, would not justify the conclusion that Cancino
committed grave abuse of discretion in issuing the warrant.
 The failure of the deponent to mention particular individuals does not necessarily prove
that he had no personal knowledge of specific illegal transactions of the Organization.
The deponent might be acquainted with such specific transactions, even if the names of
the individuals were unknown to him.
 The law requiring compliance with certain requirements before anybody can engage in
banking obviously seeks to protect the public against actual, as well as potential, injury.
 Similarly, we are not aware of any rule limiting the use of search warrants to papers or
effects which cannot be secured otherwise.
The Organization is engaged in “banking” as used in RA 337. Thus, Hon. Casino correctly
found probable cause for its violation of RA 337.
 Even a cursory examination of the Organization’s documents will readily show that
anybody can be a depositor and thus be a "participating member."
 The Organization is, in effect, open to the "public" for deposit accounts, and the funds so
raised may be lent by the Organization.
 As a consequence, the "membership" of the "participating members" is purely nominal
in nature.