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BANKING CASE DOCTRINES

1. Go vs. Bangko Sentral ng Pilipinas, 604 SCRA 322, G.R. No. 178429 October 23,
2009

Mercantile Law; Banks and Banking; Banks were not created for the benefit of their
directors and officers; they cannot use the assets of the bank for their own benefit,
except as may be permitted by law. Congress has thus deemed it essential to impose
restrictions on borrowings by bank directors and officers in order to protect the public,
especially the depositors.—The language of the law is broad enough to encompass
either act of borrowing or guaranteeing, or both. While the first paragraph of Section 83
is penal in nature, and by principle should be strictly construed in favor of the accused,
the Court is unwilling to adopt a liberal construction that would defeat the legislature’s
intent in enacting the statute. The objective of the law should allow for a reasonable
flexibility in its construction. Section 83 of RA 337, as well as other banking laws adopting
the same prohibition, was enacted to ensure that loans by banks and similar financial
institutions to their own directors, officers, and stockholders are above board. Banks
were not created for the benefit of their directors and officers; they cannot use the
assets of the bank for their own benefit, except as may be permitted by law. Congress
has thus deemed it essential to impose restrictions on borrowings by bank directors and
officers in order to protect the public, especially the depositors. Hence, when the law
prohibits directors and officers of banking institutions from becoming in any manner an
obligor of the bank (unless with the approval of the board), the terms of the prohibition
shall be the standards to be applied to directors’ transactions such as those involved in
the present case.

Criminal Procedure; Prosecution of Offenses; Information; An Information may be


defective because the facts charged do not constitute an offense, the dismissal of the
case will not necessarily follow. The Rules specifically require that the prosecution should
be given a chance to correct the defect; the court can order the dismissal only upon
the prosecution’s failure to do so.—Although an Information may be defective because
the facts charged do not constitute an offense, the dismissal of the case will not
necessarily follow. The Rules specifically require that the prosecution should be given a
chance to correct the defect; the court can order the dismissal only upon the
prosecution’s failure to do so. The RTC’s failure to provide the prosecution this
opportunity twice constitutes an arbitrary exercise of power that was correctly
addressed by the CA through the certiorari petition. This defect in the RTC’s action on
the case, while not central to the issue before us, strengthens our conclusion that this
criminal case should be resolved through full-blown trial on the merits.
2. Soriano vs. People, 611 SCRA 191, G.R. No. 162336 February 1, 2010

Remedial Law; Principle of Stare Decisis; Once a question of law has been examined
and decided, it should be deemed settled and closed to further argument.—The BSP
letters involved in Soriano v. Hon. Casanova, 486 SCRA 431 (2006), are not the same as
the letter involved in the instant case. However, the BSP letters in Soria--no v. Hon.
Casanova and the BSP letter subject of this case are similar in the sense that they are all
signed by the OSI officers of the BSP, they were not sworn to by the said officers, they all
contained summaries of their attached affidavits, and they all requested the conduct
of a preliminary investigation and the filing of corresponding criminal charges against
petitioner Soriano. Thus, the principle of stare decisis dictates that the ruling in Soriano v.
Hon. Casanova be applied in the instant case—once a question of law has been
examined and decided, it should be deemed settled and closed to further argument.

Same; Criminal Procedure; Party-in-Interest; Since the offenses for which Soriano was
changed were public crimes, authority holds that it can be initiated by “any
competent person” with personal knowledge of the acts committed by the offender.—
We further held that since the offenses for which Soriano was charged were public
crimes, authority holds that it can be initiated by “any competent person” with personal
knowledge of the acts committed by the offender. Thus, the witnesses who executed
the affidavits clearly fell within the purview of “any competent person” who may
institute the complaint for a public crime.

Motion to Quash; It is settled that in considering a motion to quash on the ground that
the facts charged do not constitute an offense, the test is “whether the facts alleged, if
hypothetically admitted, would establish the essential elements of the offense charged
as defined by law.—The second issue was raised by petitioner in the context of his
Motion to Quash Information on the ground that the facts charged do not constitute an
offense. It is settled that in considering a motion to quash on such ground, the test is
“whether the facts alleged, if hypothetically admitted, would establish the essential
elements of the offense charged as defined by law. The trial court may not consider a
situation contrary to that set forth in the criminal complaint or information. Facts that
constitute the defense of the petitioner[s] against the charge under the information
must be proved by [him] during trial. Such facts or circumstances do not constitute
proper grounds for a motion to quash the information on the ground that the material
averments do not constitute the offense.”

Criminal Law; Estafa Through Falsification of Commercial Documents; The bank money
(amounting to Php. 8 million) which came to the possession of petitioners was money
held in trust or administration by him for the bank in his fiduciary capacity as the
President of said bank.—The bank money (amounting to P8 million) which came to the
possession of petitioner was money held in trust or administration by him for the bank, in
his fiduciary capacity as the President of said bank. It is not accurate to say that
petitioner became the owner of the P8 million because it was the proceeds of a loan.
That would have been correct if the bank knowingly extended the loan to petitioner
himself. But that is not the case here. According to the information for estafa, the loan
was supposed to be for another person, a certain “Enrico Carlos”; petitioner, through
falsification, made it appear that said “Enrico Carlos” applied for the loan when in fact
he (“Enrico Carlos”) did not. Through such fraudulent device, petitioner obtained the
loan proceeds and converted the same. Under these circumstances, it cannot be said
that petitioner became the legal owner of the P8 million. Thus, petitioner remained the
bank’s fiduciary with respect to that money, which makes it capable of
misappropriation or conversion in his hands.

Prohibition in Section 83 is broad enough to cover various modes of borrowing.—The


prohibition in Section 83 is broad enough to cover various modes of borrowing. It covers
loans by a bank director or officer (like herein petitioner) which are made either: (1)
directly, (2) indirectly, (3) for himself, (4) or as the representative or agent of others. It
applies even if the director or officer is a mere guarantor, indorser or surety for someone
else’s loan or is in any manner an obligor for money borrowed from the bank or loaned
by it. The covered transactions are prohibited unless the approval, reportorial and
ceiling requirements under Section 83 are complied with. The prohibition is intended to
protect the public, especially the depositors, from the overborrowing of bank funds by
bank officers, directors, stockholders and related interests, as such overborrowing may
lead to bank failures. It has been said that “banking institutions are not created for the
benefit of the directors [or officers]. While directors have great powers as directors, they
have no special privileges as individuals. They cannot use the assets of the bank for their
own benefit except as permitted by law. Stringent restrictions are placed about them
so that when acting both for the bank and for one of themselves at the same time, they
must keep within certain prescribed lines regarded by the legislature as essential to
safety in the banking business.”

Remedial Law; Certiorari; A special civil action for certiorari is not the proper remedy to
assail the denial of a motion to quash an information.—This issue may be speedily
resolved by adopting our ruling in Soriano v. People, 591 SCRA 244 (2009), where we
held: In fine, the Court has consistently held that a special civil action for certiorari is not
the proper remedy to assail the denial of a motion to quash an information. The proper
procedure in such a case is for the accused to enter a plea, go to trial without
prejudice on his part to present the special defenses he had invoked in his motion to
quash and if after trial on the merits, an adverse decision is rendered, to appeal
therefrom in the manner authorized by law.

Injunction; Requisites to Justify an Injunctive Relief.—The requisites to justify an injunctive


relief are: (1) the right of the complainant is clear and unmistakable; (2) the invasion of
the right sought to be protected is material and substantial; and (3) there is an urgent
and paramount necessity for the writ to prevent serious damage. A clear legal right
means one clearly founded in or granted by law or is “enforceable as a matter of law.”
Absent any clear and unquestioned legal right, the issuance of an injunctive writ would
constitute grave abuse of discretion.
3. Reynoso IV vs. Court of Appeals, 345 SCRA 335, G.R. Nos. 116124-25 November
22, 2000

Corporation Law; Securities & Exchange Commission; Fraud; When the corporate fiction
is used to perpetrate fraud or promote injustice, the law steps in to remedy the problem.
When that happens, the corporate character is not necessarily abrogated. It continues
for legitimate objective. However, it is pierced in order to remedy injustice.—It is obvious
that the use by CCC-QC of the same name of Commercial Credit Corporation was
intended to publicly identify it as a component of the CCC group of companies
engaged in one and the same business, i.e., investment and financing. Aside from
CCC-Quezon City, other franchise companies were organized such as CCC-North
Manila and CCC-Cagayan Valley. The organization of subsidiary corporations as what
was done here is usually resorted to for the aggrupation of capital, the ability to cover
more territory and population, the decentralization of activities best decentralized, and
the securing of other legitimate advantages. But when the mother corporation and its
subsidiary cease to act in good faith and honest business judgment, when the
corporate device is used by the parent to avoid its liability for legitimate obligations of
the subsidiary, and when the corporate fiction is used to perpetrate fraud or promote
injustice, the law steps in to remedy the problem. When that happens, the corporate
character is not necessarily abrogated. It continues for legitimate objectives. However,
it is pierced in order to remedy injustice, such as that inflicted in this case.

The ends of justice are not served if further litigation is encouraged when the issue is
determinable based on the records.—If the corporate fiction is sustained, it becomes a
handy deception to avoid a judgment debt and work an injustice. The decision raised
to us for review is an invitation to multiplicity of litigation. As we stated in Islamic
Directorate vs. Court of Appeals, the ends of justice are not served if further litigation is
encouraged when the issue is determinable based on the records.

Courts; Contracts; Fraud; Piercing the Veil of Corporate Fiction; Courts have been
organized to put an end to controversy. This purpose should not be negated by an
inapplicable and wrong use of the fiction of the corporate veil.—A court judgment
becomes useless and ineffective if the employer, in this case CCC as a mother
corporation, is placed beyond the legal reach of the judgment creditor who, after
protracted litigation, has been found entitled to positive relief. Courts have been
organized to put an end to controversy. This purpose should not be negated by an
inapplicable and wrong use of the fiction of the corporate veil.
4. Central Bank of the Philippines vs. Court of Appeals, 220 SCRA 536, G.R. No.
76118 March 30, 1993

Central Bank Act; Section 29, R.A 265; The Central Bank through Monetary Board is
vested exclusive authority to assess, evaluate and determine condition of any bank;
Effects.—Under Sec. 29 of R.A. 265, the Central Bank, through the Monetary Board, is
vested with exclusive authority to assess, evaluate and determine the condition of any
bank, and finding such condition to be one of insolvency, or that its continuance in
business would involve probable loss to its depositors or creditors, forbid the bank or
non-bank financial institution to do business in the Philippines; and shall designate an
official of the CB or other competent person as receiver to immediately take charge of
its assets and liabilities.

Prior notice and hearing not required before placement of bank under receivership.—
Contrary to the notion of private respondent, Sec. 29 does not contemplate prior notice
and hearing before a bank may be directed to stop operations and placed under
receivership. When par. 4 (now par. 5, as amended by E.O. 289) provides for the filing of
a case within ten (10) days after the receiver takes charge of the assets of the bank, it is
unmistakable that the assailed actions should precede the filing of the case. Plainly, the
legislature could not have intended to authorize "no prior notice and hearing" in the
closure of the bank and at the same time allow a suit to annul it on the basis of
absence thereof.

Judicial review allowed to determine the presence of arbitrariness and bad faith in
placing bank under receivership.—Admittedly, the mere filing of a case for receivership
by the Central Bank can trigger a bank run. x x x The procedure prescribed in Sec. 29 is
truly designed to protect the interest of all concerned, x x x and the summary closure
pales in comparison to the protection afforded public interest. At any rate, the bank is
given full opportunity to prove arbitrariness and bad faith in placing the bank under
receivership, in which event, the resolution may be properly nullified and the
receivership lifted as the trial court may determine.

Conditions prerequisite to action of Monetary Board placing bank under receivership;


Reiterated.—Once again We refer to Rural Bank of Buhi, Inc. v. Court of Appeals, and
reiterate Our pronouncement therein that—"x x x the law is explicit as to the conditions
prerequisite to the action of the Monetary Board to forbid the institution to do business
in the Philippines and to appoint a receiver to immediately take charge of the bank's
assets and liabilities. They are: (a) an examination made by the examining department
of the Central Bank; (b) report by said department to the Monetary Board; and (c)
prima facie showing that its continuance in business would involve probable loss to its
depositors or creditors."

Absence of prior notice of hearing as valid exercise of the police power of the State,
not constitutive of acts of arbitrariness and bad faith.—ln sum, appeal to procedural
due process cannot just outweigh the evil sought to be prevented; hence, We rule that
Sec. 29 of R.A. 265 is a sound legislation promulgated in accordance with the
Constitution in the exercise of police power of the state. Consequently, the absence of
notice and hearing is not a valid ground to annul a Monetary Board resolution placing
a bank under receivership. The absence of prior notice and hearing cannot be
deemed acts of arbitrariness and bad faith. Thus, an MB resolution placing a bank
under receivership, or conservatorship for that matter, may only be annulled after a
determination has been made by the trial court that its issuance was tainted with
arbitrariness and bad faith. Until such determination is made, the status quo shall be
maintained, i.e., the bank shall continue to be under receivership.

Only stockholders of a bank have personality to file action for annulment of Monetary
Board resolution placing bank under receivership.—To rule that only the receiver may
bring suit in behalf of the bank is, to echo the respondent appellate court, "asking for
the impossible, for it cannot be expected that the master, the CB, will allow the receiver
it has appointed to question that very appointment." Consequently, only stockholders
of a bank could file an action for annulment of a Monetary Board resolution placing the
bank under receivership and prohibiting it from continuing operations.
5. Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank of the
Philippines, 204 SCRA 767, G.R. No. 70054, G.R. No. 68878, G.R. Nos. 77255–58,
G.R. No. 78766, G.R. No. 78767, G.R. No. 78894, G.R, No. 81303, G.R. No. 81304,
G.R. No. 90473 December 11, 1991

Remedial Law; Jurisdiction; Generally, courts have no supervising power over the
proceedings and actions of the administrative departments of the government,
exceptions.—It is a well-recognized principle that administrative and discretionary
functions may not be interfered with by the courts. In general, courts have no
supervising power over the proceedings and actions of the administrative departments
of the government. This is generally true with respect to acts involving the exercise of
judgment or discretion, and findings of fact. But when there is a grave abuse of
discretion which is equivalent to a capricious and whimsical exercise of judgment or
where the power is exercised in an arbitrary or despotic manner, then there is a
justification for the courts to set aside the administrative determination reached.

Commercial Law; Banks and Banking; Section 29 of Republic Act No. 265 known as the
Central Bank Act provides the person designated as receiver to immediately take
charge of the bank’s assets and liabilities, administer the same for the benefit of its
creditors and represent the bank personally or through counsel as he may retain in all
actions or proceedings for or against the institution and to bring and foreclose
mortgages in the name of the bank.—Section 29 of the Republic Act No. 265, as
amended, known as the Central Bank Act, provides that when a bank is forbidden to
do business in the Philippines and placed under receivership, the person designated as
receiver shall immediately take charge of the bank’s assets and liabilities, as
expeditiously as possible, collect and gather all the assets and administer the same for
the benefit of its creditors, and represent the bank personally or through counsel as he
may retain in all actions or proceedings for or against the institution, exercising all the
powers necessary for these purposes including, but not limited to, bringing and
foreclosing mortgages in the name of the bank. If the Monetary Board shall later
determine and confirm that the banking institution is insolvent or cannot resume
business with safety to depositors, creditors and the general public, it shall, if public
interest requires, order its liquidation and appoint nu liquidator who shall take over and
continue the functions of the receiver previously appointed by Monetary Board. The
liquidator may, in the name of the bank 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 assets of such institution or defend any action filed against
the institution.

Pendency of G.R. No. 70054 did not diminish the powers and authority of the
designated liquidator to effectuate and carry on the administration of the bank.—
When the issue on the validity of the closure and receivership of Banco Filipino bank
was raised in G.R. No. 70054, the pendency of the case did not diminish the powers and
authority of the designated liquidator to effectuate and carry on the administration of
the bank. In fact when We adopted a resolution on August 25, 1985 and issued a
restraining order to respondents Monetary Board and Central Bank, We enjoined merely
further acts of liquidation. Such acts of liquidation, as explained in Sec. 29 of the Central
Bank Act are those which constitute the conversion of the assets of the banking
institution to money or the sale, assignment or disposition of the same to creditors and
other parties for the purpose of paying the debts of such institution. We did not prohibit
however acts such as receiving collectibles and receivables or paying off creditors’
claims and other transactions pertaining to normal operations of a bank.

In G.R. Nos. 68878, 77255–68, 78766 and 90473, the liquidator by himself or through
counsel has the authority to bring actions for foreclosure of mortgages executed by
debtors in favor of the bank.—Clearly, in G.R. Nos. 68878, 77255–68, 78766 and 90473,
the liquidator by himself or through counsel has the authority to bring actions for
foreclosure of mortgages executed by debtors in favor of the bank. In G.R. No. 81303,
the liquidator is likewise authorized to resist or defend suits instituted against the bank by
debtors and creditors of the bank and by other private persons. Similarly, in G.R. No.
81304, due to the aforestated reasons, the Central Bank cannot be compelled to fulfill
financial transactions entered into by Banco Filipino when the operations of the latter
were suspended by reason of its closure. The Central Bank possesses those powers and
functions only as provided for in Sec. 29 of the Central Bank Act.

Court held that the closure and receivership of petitioner bank which was ordered by
respondent Monetary Bank on January 25, 1985 is null and void.—While We recognize
the actual closure of Banco Filipino and the consequent legal effects thereof on its
operations, We cannot uphold the legality of its closure and thus, find the petitions in
G.R. Nos. 70054, 78767 and 78894 impressed with merit. We hold that the closure and
receivership of petitioner bank, which was ordered by respondent Monetary Board on
January 25, 1985, is null and void.

The Monetary Board may order the cessation of operation of a bank in the Philippines
and place it under receivership upon a finding of insolvency or when its continuance in
business would involve probable loss to its depositors or creditors.—Based on the
aforequoted provision, the Monetary Board may order the cessation of operations of a
bank in the Philippines and place it under receivership upon a finding of insolvency or
when its continuance in business would involve probable loss to its depositors or
creditors. If the Monetary Board shall determine and confirm within sixty (60) days that
the bank is insolvent or can no longer resume business with safety to its depositors,
creditors and the general public, it shall, if public interest will be served, order its
liquidation.

Mandatory requirements to be complied with before a bank found to be insolvent is


ordered closed and forbidden to do business in the Philippines.—There is no question
that under Section 29 of the Central Bank Act, the following are the mandatory
requirements to be complied with before a bank found to be insolvent is ordered
closed and forbidden to do business in the Philippines: Firstly, an examination shall be
conducted by the head of the appropriate supervising or examining department or his
examiners or agents into the condition of the bank; secondly, it shall be disclosed in the
examination that the condition of the bank is one of insolvency, or that its continuance
in business would involve probable loss to its depositors or creditors; thirdly, the
department head concerned shall inform the Monetary Board in writing, of the facts;
and lastly, the Monetary Board shall find the statements of the department head to be
true.

The examination contemplated in Section 29 of the CB Act as a mandatory


requirement was not completely and fully complied with.—It is evident from the
foregoing circumstances that the examination contemplated in Sec. 29 of the CB Act
as a mandatory requirement was not completely and fully complied with. Despite the
existence of the partial list of findings in the examination of the bank, there were still
highly significant items to be weighed and determined such as the matter of valuation
reserves, before these can be considered in the financial condition of the bank. It
would be a drastic move to conclude prematurely that a bank is insolvent if the basis
for such conclusion is lacking and insufficient, especially if doubt exists as to whether
such bases or findings faithfully represent the real financial status of the bank.

The power and authority of the Monetary Board to close banks and liquidate them
thereafter when public interest so requires is an exercise of the police power of the
state.—We recognize the fact that it is the responsibility of the Central Bank of the
Philippines to administer the monetary, banking and credit system of the country and
that its powers and functions shall be exercised by the Monetary Board pursuant to Rep.
Act No. 265, known as the Central Bank Act. Consequently, the power and authority of
the Monetary Board to close banks and liquidate them thereafter when public interest
so requires is an exercise of the police power of the state. Police power, however, may
not be done arbitratrily or unreasonably and could be set aside if it is either capricious,
discriminatory, whimsical, arbitrary, unjust or is tantamount to a denial of due process
and equal protection clauses of the Constitution.

Section 29 of RA 265 does not require a previous hearing before the Monetary Board
implements the closure of a bank.—However, as to the requirement of notice and
hearing, Sec. 29 of RA 265 does not require a previous hearing before the Monetary
Board implements the closure of a bank, since its action is subject to judicial scrutiny as
provided for under the same law.

Administrative due process does not mean that the other important principles may be
dispensed with.—Notwithstanding the foregoing, administrative due process does not
mean that the other important principles may be dispensed with, namely: the decision
of the administrative body must have something to support itself and the evidence
must be substantial. Substantial evidence is more than a mere scintilla. It means such
relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.

Insolvency; Test of insolvency laid down in Section 29 of the Central Bank Act is
measured by determining whether the realizable assets of a bank are less than its
liabilities.—The test of insolvency laid down in Section 29 of the Central Bank Act is
measured by determining whether the realizable assets of a bank are less than its
liabilities. Hence, a bank is solvent if the fair cash value of all its assets, realizable within a
reasonable time by a reasonable prudent person, would equal or exceed its total
liabilities exclusive of stock liability; but if such fair cash value so realizable is not
sufficient to pay such liabilities within a reasonable time, the bank is insolvent. (Gillian v.
State, 194 N.E. 360, 363, 207 Ind. 661). Stated in other words, the insolvency of a bank
occurs when the actual cash market value of its assets is insufficient to pay its liabilities,
not considering capital stock and surplus which are not liabilities for such purpose.

Court believes that the closure of the petitioner bank was arbitrary and committed with
grave abuse of discretion.—ln view of the foregoing premises, We believe that the
closure of the petitioner bank was arbitrary and committed with grave abuse of
discretion. Granting in gratia argumenti that the closure was based on justified grounds
to protect the public, the fact that petitioner bank was suffering from serious financial
problems should not automatically lead to its liquidation. Section 29 of the Central Bank
provides that a closed bank may be reorganized or otherwise placed in such a
condition that it may be permitted to resume business with safety to its depositors,
creditors and the general public.
6. Central Bank of the Phlippines vs. Court of Appeals, 208 SCRA 652, G.R. No.
88353, G.R. No. 92943 May 8, 1992

Mercantile Law; Banks; Requisites before the order of conservatorship may be set aside
by a court.—The following requisites, therefore, must be present before the order of
conservatorship may be set aside by a court: 1. The appropriate pleading must be filed
by the stockholders of record representing the majority of the capital stock of the bank
in the proper court; 2. Said pleading must be filed within ten (10) days from receipt of
notice by said majority stockholders of the order placing the bank under
conservatorship; and 3. There must be convincing proof, after hearing, that the action is
plainly arbitrary and made in bad faith.

The order placing PBP under conservatorship had long become final and its validity
could no longer be litigated upon before the Trial Court.—In the instant case, PBP was
placed under conservatorship on 20 January 1984. The original complaint in Civil Case
No. 17692 was filed only on 27 August 1987, or three (3) years, seven (7) months and
seven (7) days later, long after the expiration of the 10-day period referred to above. It
is also beyond question that the complaint and the amended complaint were not
initiated by the stock holders of record representing the majority of the capital stock.
Accordingly, the order placing PBP under conservatorship had long become final and
its validity could no longer be litigated upon before the trial court.

A bank retains its juridical personality even if placed under conservatorship, it is neither
replaced nor substituted by the conservator.—We cannot, however, subscribe to the
petitioner’s view that: (a) once a bank is placed under conservatorship, no action may
be filed on behalf of the bank without prior approval of the conservator, and (b) since
in this case such approval was not secured prior to the filing of Civil Case No. 17692, the
latter must also be dismissed on that ground. No such approval is necessary where the
action was instituted by the majority of the bank’s stockholders. To contend otherwise
would be to defeat the rights of such stockholders under the fifth paragraph of Section
29 of the Central Bank Act. It must be stressed here that a bank retains its juridical
personality even if placed under conservatorship; it is neither replaced nor substituted
by the conservator.

Remedial Law; Docket fee; The docket fee must be paid before the lapse of the
prescriptive period.—The prescriptive period therein mentioned refers to the period
within which a specific action must be filed. It means that in every case, the docket fee
must be paid before the lapse of the prescriptive period. Chapter 3, Title V, Book III of
the Civil Code is the principal law governing prescription of actions.

There is no showing that PBP paid the correct filing fee for the claim within the
prescribed period.—There can be no question that in the instant case, PBP’s claims for
damages arise out of an injury to its rights. Pursuant to Article 1146 of the Civil Code, the
action therefor must be initiated within four (4) years from the time the cause of action
accrued. Since the damages arose out of the alleged unwarranted, ill-motivated,
illegal, unnecessary and unjustified conservatorship, the cause of action, if any, first
accrued in 1984 and continued until 27 August 1987, when the original complaint was
filed. Even if We are to assume that the four-year period should start running on 27
August 1987, that period lapsed on 27 August 1991. There is no showing that PBP paid
the correct filing fee for the claim within the prescribed period. Hence, nothing can
save Civil Case No. 17692 from being dismissed?

Injunction; Courts, notwithstanding the discretion given to them, should avoid issuing
writs of preliminary injunction which in effect dispose of the main case without a trial.—
Thus, save only for the determination of the full extent of PBP’s claim for damages, said
courts have, at the most, decided or, at the very least, prejudged the case. Courts,
notwithstanding the discretion given to them, should avoid issuing writs of preliminary
injunction which in effect dispose of the main case without a trial. We do not then
hesitate to rule that there was grave abuse of discretion in the issuance of the writ of
preliminary injunction.

It is improper to issue a writ of preliminary mandatory injunction prior to the final hearing,
exception.—The respondent Judge should not have forgotten the settled doctrine that
it is improper to issue a writ of preliminary mandatory injunction prior to the final hearing,
except in cases of extreme urgency, where the right is very clear, where considerations
of relative inconvenience bear strongly in complainant’s favor, where there is a willful
and unlawful invasion of plaintiff’s right against his protest and remonstrance, the injury
being a continuing one, and where the effect of the mandatory injunction is rather to
re-establish and maintain a pre-existing continuing relation between the parties,
recently and arbitrarily interrupted by the defendant, than to establish a new relation.
7. Miranda vs. Philippine Deposit Insurance Corporation, 501 SCRA 288, G.R. No.
169334 September 8, 2006

Jurisdictions; Banks and Banking; Regular courts do not have jurisdiction over actions
filed by claimants against an insolvent bank, unless there is a clear showing that the
action taken by the BSP, through the Monetary Board in the closure of financial
institutions was in excess of jurisdiction, or with grave abuse of discretion.—The claim
lodged by the petitioner qualifies as a disputed claim subject to the jurisdiction of the
liquidation court. Regular courts do not have jurisdiction over actions filed by claimants
against an insolvent bank, unless there is a clear showing that the action taken by the
BSP, through the Monetary Board in the closure of financial institutions was in excess of
jurisdiction, or with grave abuse of discretion.

Banks and Banking; The power and authority of the Monetary Board to close banks and
liquidate them thereafter when public interest so requires is an exercise of the police
power of the State.— The power and authority of the Monetary Board to close banks
and liquidate them thereafter when public interest so requires is an exercise of the
police power of the State. Police power, however, is subject to judicial inquiry. It may
not be exercised arbitrarily or unreasonably and could be set aside if it is either
capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial of
due process and equal protection clauses of the Constitution.

“Disputed claims” refer to all claims, whether they be against the assets of the insolvent
bank, for specific performance, breach of contract, damages, or whatever.—
“Disputed claims” refer to all claims, whether they be against the assets of the insolvent
bank, for specific performance, breach of contract, damages, or whatever. Petitioner’s
claim which involved the payment of the two cashier’s checks that were not honored
by Prime Savings Bank due to its closure falls within the ambit of a claim against the
assets of the insolvent bank. The issuance of the cashier’s checks by Prime Savings Bank
to the petitioner created a debtor/creditor relationship between them. This disputed
claim should therefore be lodged in the liquidation proceedings by the petitioner as
creditor, since the closure of Prime Savings Bank has rendered all claims subsisting at
that time moot which can best be threshed out by the liquidation court and not the
regular courts.

It is well-settled in both law and jurisprudence that the Central Monetary Authority,
through the Monetary Board, is vested with exclusive authority to assess, evaluate, and
determine the condition of any bank.—It is well-settled in both law and jurisprudence
that the Central Monetary Authority, through the Monetary Board, is vested with
exclusive authority to assess, evaluate and determine the condition of any bank, and
finding such condition to be one of insolvency, or that its continuance in business would
involve a probable loss to its depositors or creditors, forbid bank or non-bank financial
institution to do business in the Philippines; and shall designate an official of the BSP or
other competent person as receiver to immediately take charge of its assets and
liabilities.
In Central Bank of the Philippines v. Dela Cruz, 191 SCRA 346 (1990), we held that the
actions of the Monetary Board in proceedings on insolvency are explicitly declared by
the law to be “final and executory”—they may not be set aside, or restrained, or
enjoined by the courts, except upon “convincing proof that the action is plainly
arbitrary and made in bad faith.—In Central Bank of the Philippines v. De la Cruz, 191
SCRA 346 (1990), we held that the actions of the Monetary Board in proceedings on
insolvency are explicitly declared by law to be “final and executory.” They may not be
set aside, or restrained, or enjoined by the courts, except upon “convincing proof that
the action is plainly arbitrary and made in bad faith.

As clearly laid down in Ong v. Court of Appeals, 253 SCRA 105 (1996), the rationale
behind the judicial liquidation is intended to prevent multiplicity of actions against the
insolvent bank.—As clearly laid down in Ong v. Court of Appeals, 253 SCRA 105 (1996),
the rationale behind judicial liquidation is intended to prevent multiplicity of actions
against the insolvent bank. It is a pragmatic arrangement designed to establish due
process and orderliness in the liquidation of the bank, to obviate the proliferation of
litigations and to avoid injustice and arbitrariness. The lawmaking body contemplated
that for convenience, only one court, if possible, should pass upon the claims against
the insolvent bank and that the liquidation court should assist the Superintendent of
Banks and regulate his operations.

Solidary liability cannot attach to the BSP, in its capacity as government regulator of
banks, and the PDIC as statutory receiver under R.A. No. 7653, because they are the
principal government agencies mandated by law to determine the financial viability of
banks and quasi-banks, and facilitate receivership and liquidation of closed financial
institutions, upon a factual determination of the latter’s insolvency.—Regarding the third
issue, it is only Prime Savings Bank that is liable to pay for the amount of the two
cashier’s checks. Solidary liability cannot attach to the BSP, in its capacity as
government regulator of banks, and the PDIC as statutory receiver under R.A. No. 7653,
because they are the principal government agencies mandated by law to determine
the financial viability of banks and quasi-banks, and facilitate receivership and
liquidation of closed financial institutions, upon a factual determination of the latter’s
insolvency.

The BSP, through the Monetary Board was well within its discretion to exercise this power
granted by law to issue a resolution suspending the interbank clearing privileges of
Prime Savings Bank, having made a factual determination that the bank had deficient
cash reserves deposited before the BSP.—As correctly pointed out by the Court of
Appeals, the BSP should not be held liable on the crossed cashier’s checks for it was not
a party to the issuance of the same; nor can it be held liable for imposing the sanctions
on Prime Savings Bank which indirectly affected Miranda, since it is mandated under
Sec. 37 of R.A. No. 7653 to act accordingly. The BSP, through the Monetary Board was
well within its discretion to exercise this power granted by law to issue a resolution
suspending the interbank clearing privileges of Prime Savings Bank, having made a
factual determination that the bank had deficient cash reserves deposited before the
BSP. There is no showing that the BSP abused this discretionary power conferred upon it
by law.

Both BSP and PDIC cannot therefore be held directly and solidarily liable for the
payment of the two cashier’s checks.—Co-respondent PDIC was impleaded as a party-
litigant only in its representative capacity as the receiver/liquidator of Prime Savings
Bank. Both BSP and PDIC cannot therefore be held directly and solidarily liable for the
payment of the two cashier’s checks. Sole liability rests with Prime Savings Bank.

In the absence of fraud, the purchase of cashier’s check, like the purchase of a draft
on a correspondent bank, creates the relation of creditor and debtor.—In the absence
of fraud, the purchase of a cashier’s check, like the purchase of a draft on a
correspondent bank, creates the relation of creditor and debtor, not that of principal
and agent, with the result that the purchaser or holder thereof is not entitled to a
preference over general creditors in the assets of the bank issuing the check, when it
fails before payment of the check.

In a situation involving the element of fraud, where a cashier’s check is purchased from
a bank at a time when it is insolvent, as its officers know or are bound to know by the
exercise of reasonable diligence, it has been held that the purchase as entitled to a
preference in the assets of the bank on its liquidation before the check is paid.—In a
situation involving the element of fraud, where a cashier’s check is purchased from a
bank at a time when it is insolvent, as its officers know or are bound to know by the
exercise of reasonable diligence, it has been held that the purchase is entitled to a
preference in the assets of the bank on its liquidation before the check is paid.

Section 31 of the New Central Bank Act which provides that “[I]n case of liquidation of
a bank or quasi-bank, after payment of the cost of proceedings, including reasonable
expenses and fees of the receiver to be allowed by the court, the receiver shall pay the
debts of such institutions, under order of the court, in accordance with the rules on
concurrence and preference of credit as provided in the Civil Code,” should apply.—In
the distribution of assets of Prime Savings Bank, Section 31 of the New Central Bank Act
which provides that “[i]n case of liquidation of a bank or quasi-bank, after payment of
the cost of proceedings, including reasonable expenses and fees of the receiver to be
allowed by the court, the receiver shall pay the debts of such institution, under order of
the court, in accordance with the rules on concurrence and preference of credit as
provided in the Civil Code,” should apply.
8. Philippine Veterans Bank Employees Union-NUBE vs.Philippine Veterans Bank, 189
SCRA 14, G.R. No. 67125, G.R. No. 82337 August 24, 1990

Commercial Law; Central Bank Act; Lending institution, part of the banking
system,therefore covered by regulatory power of the Central Bank.—The mere fact that
the Bank was created by special law does not confer upon it extraordinary privileges
over and above those granted similar charters like the Development Bank of the
Philippines and the Land Bank of the Philippines. As a lending institution, it is part of the
banking system and therefore covered by the regulatory power exercised over such
entities by the Central Bank.

Constitutional Law; Non-impairment of a contract; A contract between the


government and stockholders of the bank does not follow that it cannot be altered
without violation of the impair ment clause;Contract maybe altered if it involves public
interest.—Even if it be conceded that the charter of the Bank constitutes a contract
between the Government and the stockholders of the Bank, it would not follow that the
relationship cannot be altered without violating the impairment clause. This is a too
simplistic conclusion that loses sight of the vulnerability of this “precious little clause,” as
it is called, to the inherent powers of the State when the public interest demands their
exercise. The clause, according to Corwin, “is lately of negligible importance, and
might well be stricken from the Constitution. For most practical purposes, in fact, it has
been.” The undeniable fact is that the notion of public interest has made such
considerable inroads into the constitutional guaranty that one could validly say now
that it has become the exception rather than the rule. The impact of the modern
society upon hitherto private agreements has left the clause in a shambles, as it were,
making practically every contract susceptible to change on behalf of the public. The
modern understanding is that the contract is protected by the guaranty only if it does
not affect public interest, but there is hardly any contract now that does not somehow
or other affect public interest as not to come under the powers of the State. Part of that
understanding therefore is that, conversely, the contract may be altered validly if it
involves the public interest, to which private interests must yield “as a postulate of the
existing social order.”

Duty of the Central Bank to step in and salvage the remaining resources of the bank.—
The need in the case at bar is no less compelling, to wit, the preservation of the integrity
and stability of our banking system. Unless adequate and determined efforts are taken
by the government against distressed and mismanaged banks, public faith in the
banking system is certain to deteriorate to the prejudice of the national economy itself,
not to mention the losses suffered by the bank depositors, creditors, and stockholders,
who all deserve the protection of the government. The government cannot simply cross
its arms while the assets of a bank are being depleted through mismanagement or
irregularities. It is the duty of the Central Bank in such an event to step in and salvage
the remaining resources of the bank so that they may not continue to be dissipated or
plundered by those entrusted with their management. The petitioners’ argument that
by accepting the stocks granted to them by the law, the same have become their
inalienable and irrevocable property is clearly untenable. These stockholdings do not
enjoy any special immunity over and above shares of stock in any other corporation,
which are always subject to the vicissitudes of business. Their value may appreciate or
decline or the stocks may become worthless altogether. Like any other property, they
do not have a fixed but a fluctuating price. Certainly, the mere acceptance of these
shares of stock by the petitioners did not create any legal assurance from the
Government that their original value would be preserved and that the owners could
not be deprived of such property under any circumstance no matter how justified.

Bank ceases to exist after fifty years unless life is extended by legislature.—Nor is the
charter subject to revocation only by the legislature, as the petitioners also erroneously
contend. The mere circumstance that the charter was granted directly by Congress
does not signify that only Congress can modify or abrogate it by another enactment. In
fact, the charter itself says that the Bank shall be subject to regulation by the Central
Bank which is empoweredinteralia, by express provision of law, to order its liquidation.
Also, by its own terms, the charter will automatically become functus officio after fifty
years and the Bank itself will cease to exist unless its life is extended by positive act of
the legislature. It may also be noted that quowarranto proceedings may be filed
against the Bank by the Solicitor General on behalf of the Republic of the Philippines
pursuant to the Rules of Court on any of the grounds enumerated in Rule 66 thereof. All
these can be done without the necessity of direct legislative action and, no less
importantly, without violation of the legislative will.

Liquidation of a bank by the Central Bank in accordance with the procedure


prescribed by RA No. 265.—The Court reiterates its hope that the administrative
authorities may still find a way to rehabilitate the Bank even at this late hour. This is still
possible even with this decision, for all we are saying here is that the Central Bank has
the power to liquidate the Bank under existing laws and that, in the present
circumstances, its liquidation may be undertaken under the control of the liquidator
court in accordance with the procedure prescribed by R.A. No. 265 and the guidelines
herein laid down. Such rehabilitation may still be ordered by the President of the
Philippines if she sees fit, without violation of the import of this decision or of the
pertinent laws here interpreted and applied.
9. Rural Bank of San Miguel, Inc. vs. Monetary Board, Bangko Sentral ng Pilipinas,
516 SCRA 154, G.R. No. 150886 February 16, 2007

Banks and Banking; Statutory Construction; It is well-settled that the closure of a bank
may be considered as an exercise of police power; Action of the Monetary Board (MB)
on this matter is final and executory.—It is well-settled that the closure of a bank may be
considered as an exercise of police power. The action of the MB on this matter is final
and executory. Such exercise may nonetheless be subject to judicial inquiry and can
be set aside if found to be in excess of jurisdiction or with such grave abuse of discretion
as to amount to lack or excess of jurisdiction.

Petitioner’s reliance on Banco Filipino which was decided under RA 265 was misplaced;
In RA 7653, only a “report of the head of the supervising or examining department” is
necessary.—Thus in Banco Filipino, we ruled that an “examination [conducted] by the
head of the appropriate supervising or examining department or his examiners or
agents into the condition of the bank” is necessary before the MB can order its closure.
However, RA 265, including Section 29 thereof, was expressly repealed by RA 7653
which took effect in 1993. Resolution No. 105 was issued on January 21, 2000. Hence,
petitioners’ reliance on Banco Filipino which was decided under RA 265 was misplaced.
In RA 7653, only a “report of the head of the supervising or examining department” is
necessary. It is an established rule in statutory construction that where the words of a
statute are clear, plain and free from ambiguity, it must be given its literal meaning and
applied without attempted interpretation.

Court cannot look for or impose another meaning on the term “report” or to construe it
as synonymous with “examination”; It is clear from the words used in Section 30 that RA
7653 no longer requires that an examination be made before the Monetary Board (MB)
can issue a closure order.—This Court cannot look for or impose another meaning on
the term “report” or to construe it as synonymous with “examination.” From the words
used in Section 30, it is clear that RA 7653 no longer requires that an examination be
made before the MB can issue a closure order. We cannot make it a requirement in the
absence of legal basis.

The purpose of the law is to make the closure of a bank summary and expeditious in
order to protect public interest; Prior notice and hearing are no longer required before
a bank can be closed.—Using the literal meaning of “report” does not lead to
absurdity, contradiction or injustice. Neither does it defeat the intent of the legislators.
The purpose of the law is to make the closure of a bank summary and expeditious in
order to protect public interest. This is also why prior notice and hearing are no longer
required before a bank can be closed.
10. Koruga vs. Arcenas, Jr., 590 SCRA 49, G.R. No. 168332 June 19, 2009

Banks and Banking; General Banking Law of 2000 (R.A. No. 8971); New Central Bank
Act; Bangko Sentral ng Pilipinas (BSP); Jurisdiction; The law vests in the Bangko Sentral
ng Pilipinas (BSP) the supervision over operations and activities of banks.—The law vests
in the BSP the supervision over operations and activities of banks. The New Central Bank
Act provides: Section 25. Supervision and Examination.—The Bangko Sentral shall have
supervision over, and conduct periodic or special examinations of, banking institutions
and quasi-banks, including their subsidiaries and affiliates engaged in allied activities.

Allegations regarding the questionable loans are not ordinary intra-corporate matters;
rather, they involve banking activities which are, by law, regulated and supervised by
the Bangko Sentral ng Pilipinas (BSP).—Koruga alleges that “the dispute in the trial court
involves the manner with which the Directors’ (sic) have handled the Bank’s affairs,
specifically the fraudulent loans and dacion en pago authorized by the Directors in
favor of several dummy corporations known to have close ties and are indirectly
controlled by the Directors.” Her allegations, then, call for the examination of the
allegedly questionable loans. Whether these loans are covered by the prohibition on
self-dealing is a matter for the BSP to determine. These are not ordinary intra-corporate
matters; rather, they involve banking activities which are, by law, regulated and
supervised by the BSP.

The authority to determine whether a bank is conducting business in an unsafe or


unsound manner is also vested in the Monetary Board.—The authority to determine
whether a bank is conducting business in an unsafe or unsound manner is also vested in
the Monetary Board.

Receivership; The appointment of a receiver under Section 30 shall be vested


exclusively with the Monetary Board.—Crystal clear in Section 30 is the provision that
says the “appointment of a receiver under this section shall be vested exclusively with
the Monetary Board.” The term “exclusively” connotes that only the Monetary Board
can resolve the issue of whether a bank is to be placed under receivership and, upon
an affirmative finding, it also has authority to appoint a receiver. This is further affirmed
by the fact that the law allows the Monetary Board to take action “summarily and
without need for prior hearing.”

There is no doubt that the Regional Trial Court (RTC) has no jurisdiction to hear and
decide a suit that seeks to place Banco Filipino under receivership.—There is no doubt
that the RTC has no jurisdiction to hear and decide a suit that seeks to place Banco
Filipino under receivership.

Court’s jurisdiction could only have been invoked after the Monetary Board had taken
action on the matter and only on the ground that the action taken was in excess of
jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction.—The court’s jurisdiction could only have been invoked after the Monetary
Board had taken action on the matter and only on the ground that the action taken
was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack
or excess of jurisdiction.
11. First Philippine International Bank vs. Court of Appeals, 252 SCRA 259, G.R. No.
115849 January 24, 1996

Actions; Pleadings and Practice; Forum-Shopping; Conflict of Laws; Principle of Forum


Non Conveniens; Forum-shopping originated as a concept in private international law,
where non-resident litigants are given the option to choose the forum or place wherein
to bring their suit for various reasons or excuses, including to secure procedural
advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to
select a more friendly venue.—To begin with, forum-shopping originated as a concept
in private international law, where non-resident litigants are given the option to choose
the forum or place wherein to bring their suit for various reasons or excuses, including to
secure procedural advantages, to annoy and harass the defendant, to avoid
overcrowded dockets, or to select a more friendly venue. To combat these less than
honorable excuses, the principle of forum non conveniens was developed whereby a
court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not
the most “convenient” or available forum and the parties are not precluded from
seeking remedies elsewhere.

Words and Phrases; Forum Shopping, Explained.—In this light, Black’s Law Dictionary
says that forum shopping “occurs when a party attempts to have his action tried in a
particular court or jurisdiction where he feels he will receive the most favorable
judgment or verdict.” Hence, according to Words and Phrases, “a litigant is open to the
charge of ‘forum shopping’ whenever he chooses a forum with slight connection to
factual circumstances surrounding his suit, and litigants should be encouraged to
attempt to settle their differences without imposing undue expense and vexatious
situations on the courts.”

In the Philippines, forum shopping has acquired a connotation encompassing not only
a choice of venues, as it was originally understood in conflict of laws, but also to a
choice of remedies.—In the Philippines, forum shopping has acquired a connotation
encompassing not only a choice of venues, as it was originally understood in conflicts of
laws, but also to a choice of remedies. As to the first (choice of venues), the Rules of
Court, for example, allow a plaintiff to commence personal actions “where the
defendant or any of the defendants resides or may be found, or where the plaintiff or
any of the plaintiffs resides, at the election of the plaintiff” (Rule 4, Sec. 2[b]). As to
remedies, aggrieved parties, for example, are given a choice of pursuing civil liabilities
independently of the criminal, arising from the same set of facts.

To avoid or minimize this unethical practice of subverting justice, the Supreme Court
promulgated Circular 28-91.—What therefore originally started both in conflicts of laws
and in our domestic law as a legitimate device for solving problems has been abused
and misused to assure scheming litigants of dubious reliefs. To avoid or minimize this
unethical practice of subverting justice, the Supreme Court, as already mentioned,
promulgated Circular 28-91. And even before that, the Court had proscribed it in the
Interim Rules and Guidelines issued on January 11, 1983 and had struck down in several
cases the inveterate use of this insidious malpractice.
Words and Phrases; There is forum-shopping whenever, as a result of an adverse opinion
in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in
another.—When does forum-shopping take place? “There is forum-shopping whenever,
as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other
than by appeal or certiorari) in another. The principle applies not only with respect to
suits filed in the courts but also in connection with litigations commenced in the courts
while an administrative proceeding is pending, as in this case, in order to defeat
administrative processes and in anticipation of an unfavorable administrative ruling and
a favorable court ruling. This is specially so, as in this case, where the court in which the
second suit was brought, has no jurisdiction.”

Test to determine whether a party violated the rule against forum shopping; Forum
shopping exists where the elements of litis pendentia are present or where a final
judgment in one case will amount to res judicata in the other.—The test for determining
whether a party violated the rule against forum shopping has been laid down in the
1986 case of Buan vs. Lopez, also by Chief Justice Narvasa, and that is, forum shopping
exists where the elements of litis pendentia are present or where a final judgment in one
case will amount to res judicata in the other.

Where a litigant (or one representing the same interest or person) sues the same party
against whom another action or actions for the alleged violation of the same right and
the enforcement of the same relief is/are still pending, the defense of litis pendentia in
one case is a bar to the others, and a final judgment in one would constitute res
judicata and thus would cause the dismissal of the rest—in either case forum shopping
could be cited by the other party as a ground to ask for summary dismissal of the two
(or more) complaints or petitions.—Consequently, where a litigant (or one representing
the same interest or person) sues the same party against whom another action or
actions for the alleged violation of the same right and the enforcement of the same
relief is/are still pending, the defense of litis pendentia in one case is a bar to the others;
and, a final judgment in one would constitute res judicata and thus would cause the
dismissal of the rest. In either case, forum shopping could be cited by the other party as
a ground to ask for summary dismissal of the two (or more) complaints or petitions, and
for the imposition of the other sanctions, which are direct contempt of court, criminal
prosecution, and disciplinary action against the erring lawyer.

There is forum shopping where the stockholders, in a second case, and in


representation of the Bank, seek to accomplish what the Bank itself failed to do in the
original case—the filing by a party of two apparently different actions, but with the
same objective, constitute forum shopping.—Very simply stated, the original complaint
in the court a quo which gave rise to the instant petition was filed by the buyer (herein
private respondent and his predecessors-in-interest) against the seller (herein
petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the
complaint in the Second Case seeks to declare such purported sale involving the same
real property “as unenforceable as against the Bank,” which is the petitioner herein. In
other words, in the Second Case, the majority stockholders, in representation of the
Bank, are seeking to accomplish what the Bank itself failed to do in the original case in
the trial court. In brief, the objective or the relief being sought, though worded
differently, is the same, namely, to enable the petitioner Bank to escape from the
obligation to sell the property to respondent. In Danville Maritime, Inc. vs. Commission
on Audit, this Court ruled that the filing by a party of two apparently different actions,
but with the same objective, constituted forum shopping.

Corporations; Words and Phrases; “Derivative Suits,” Explained.—The allegations of the


complaint in the Second Case show that the stockholders are bringing a “derivative
suit.” In the caption itself, petitioners claim to have brought suit “for and in behalf of the
Producers Bank of the Philippines.” Indeed, this is the very essence of a derivative suit:
“An individual stockholder is permitted to institute a derivative suit on behalf of the
corporation wherein he holds stock in order to protect or vindicate corporate rights,
whenever the officials of the corporation refuse to sue, or are the ones to be sued or
hold the control of the corporation. In such actions, the suing stockholder is regarded as
a nominal party, with the corporation as the real party in interest. (Gamboa v.
Victoriano, 90 SCRA 40, 47 [1979]; italics supplied).

“Piercing the Veil of Corporate Fiction”; When the fiction is urged as a means of
perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing
obligation, the circumvention of statutes, the achievement or perfection of a monopoly
or generally the perpetration of knavery or crime, the veil with which the law covers
and isolates the corporation from the members or stockholders who compose it will be
lifted to allow for its consideration merely as an aggregation of individuals.—Petitioner
also tried to seek refuge in the corporate fiction that the personality of the Bank is
separate and distinct from its shareholders. But the rulings of this Court are consistent:
“When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a
vehicle for the evasion of an existing obligation, the circumvention of statutes, the
achievement or perfection of a monopoly or generally the perpetration of knavery or
crime, the veil with which the law covers and isolates the corporation from the
members or stockholders who compose it will be lifted to allow for its consideration
merely as an aggregation of individuals.”

The corporate veil cannot be used to shield an otherwise blatant violation of the
prohibition against forum-shopping—shareholders, whether suing as the majority in
direct actions or as the minority in a derivative suit, cannot be allowed to trifle with
court processes.—In addition to the many cases where the corporate fiction has been
disregarded, we now add the instant case, and declare herewith that the corporate
veil cannot be used to shield an otherwise blatant violation of the prohibition against
forum-shopping. Shareholders, whether suing as the majority in direct actions or as the
minority in a derivative suit, cannot be allowed to trifle with court processes, particularly
where, as in this case, the corporation itself has not been remiss in vigorously
prosecuting or defending corporate causes and in using and applying remedies
available to it. To rule otherwise would be to encourage corporate litigants to use their
shareholders as fronts to circumvent the stringent rules against forum shopping.
Ultimately, what is truly important to consider in determining whether forum-shopping
exists or not is the vexation caused the courts and parties-litigant by a party who asks
different courts and/or administrative agencies to rule on the same or related causes
and/or to grant the same or substantially the same reliefs, in the process creating the
possibility of conflicting decisions being rendered by the different fora upon the same
issue.—Ultimately, what is truly important to consider in determining whether forum-
shopping exists or not is the vexation caused the courts and parties-litigant by a party
who asks different courts and/or administrative agencies to rule on the same or related
causes and/or to grant the same or substantially the same reliefs, in the process
creating the possibility of conflicting decisions being rendered by the different fora
upon the same issue. In this case, this is exactly the problem: a decision recognizing the
perfection and directing the enforcement of the contract of sale will directly conflict
with a possible decision in the Second Case barring the parties from enforcing or
implementing the said sale. Indeed, a final decision in one would constitute res judicata
in the other.

Contracts; Requisites of a Valid and Perfected Contract.—Article 1318 of the Civil Code
enumerates the requisites of a valid and perfected contract as follows: “(1) Consent of
the contracting parties; (2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.”

Actions; Appeals; Petition for Review on Certiorari; In a petition under Rule 45, errors of
fact are, as a rule, not reviewable.—Petitioners allege that “there is no counter-offer
made by the Bank, and any supposed counter-offer which Rivera (or Co) may have
made is unauthorized. Since there was no counter-offer by the Bank, there was nothing
for Ejercito (in substitution of Demetria and Janolo) to accept.” They disputed the
factual basis of the respondent Court’s findings that there was an offer made by Janolo
for P3.5 million, to which the Bank counter-offered P5.5 million. We have perused the
evidence but cannot find fault with the said Court’s findings of fact. Verily, in a petition
under Rule 45 such as this, errors of fact—if there be any—are, as a rule, not reviewable.
The mere fact that respondent Court (and the trial court as well) chose to believe the
evidence presented by respondent more than that presented by petitioners is not by
itself a reversible error. In fact, such findings merit serious consideration by this Court,
particularly where, as in this case, said courts carefully and meticulously discussed their
findings. This is basic.

Corporations; Banks; Agency; Doctrine of “Apparent Authority”; A banking corporation


is liable to innocent third persons where the representation is made in the course of its
business by an agent acting within the general scope of his authority even though, in
the particular case, the agent is secretly abusing his authority and attempting to
perpetrate a fraud upon his principal or some other person, for his own ultimate
benefit.—The authority of a corporate officer in dealing with third persons may be
actual or apparent. The doctrine of “apparent authority,” with special reference to
banks, was laid out in Prudential Bank vs. Court of Appeals, where it was held that:
“Conformably, we have declared in countless decisions that the principal is liable for
obligations contracted by the agent. The agent’s apparent representation yields to the
principal’s true representation and the contract is considered as entered into between
the principal and the third person (citing National Food Authority vs. Intermediate
Appellate Court, 184 SCRA 166). “A bank is liable for wrongful acts of its officers done in
the interests of the bank or in the course of dealings of the officers in their
representative capacity but not for acts outside the scope of their authority (9 C.J.S., p.
417). A bank holding out its officers and agents as worthy of confidence will not be
permitted to profit by the frauds they may thus be enabled to perpetrate in the
apparent scope of their employment; nor will it be permitted to shirk its responsibility for
such frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d,
p. 114). Accordingly, a banking corporation is liable to innocent third persons where the
representation is made in the course of its business by an agent acting within the
general scope of his authority even though, in the particular case, the agent is secretly
abusing his authority and attempting to perpetrate a fraud upon his principal or some
other person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204
NW 818, 40 ALR 1021).

Evidence; Where the issue is apparent authority, the existence of which is borne out by
the Court of Appeals’ findings, the evidence of actual authority is immaterial insofar as
the liability of a corporation is concerned.—To be sure, petitioners attempted to
repudiate Rivera’s apparent authority through documents and testimony which seek to
establish Rivera’s actual authority. These pieces of evidence, however, are inherently
weak as they consist of Rivera’s self-serving testimony and various inter-office
memoranda that purport to show his limited actual authority, of which private
respondent cannot be charged with knowledge. In any event, since the issue is
apparent authority, the existence of which is borne out by the respondent Court’s
findings, the evidence of actual authority is immaterial insofar as the liability of a
corporation is concerned.

There is a meeting of the minds where the acceptance of a revived offer is absolute
and unqualified.—Hence, assuming arguendo that the counter-offer of P4.25 million
extinguished the offer of P5.5 million, Luis Co’s reiteration of the said P5.5 million price
during the September 28, 1987 meeting revived the said offer. And by virtue of the
September 30, 1987 letter accepting this revived offer, there was a meeting of the
minds, as the acceptance in said letter was absolute and unqualified.

Pleadings and Practice; Appeals; Points of law, theories, issues of fact and arguments
not adequately brought to the attention of the trial court need not be, and ordinarily
will not be, considered by a reviewing court, as they cannot be raised for the first time
on appeal.—It also bears noting that this issue of extinguishment of the Bank’s offer of
P5.5 million was raised for the first time on appeal and should thus be disregarded. “This
Court in several decisions has repeatedly adhered to the principle that points of law,
theories, is sues of fact and arguments not adequately brought to the attention of the
trial court need not be, and ordinarily will not be, considered by a reviewing court, as
they cannot be raised for the first time on appeal (Santos vs. IAC, No. 74243, November
14, 1986, 145 SCRA 592).”

Statute of Frauds; Evidence; Contracts infringing the Statute of Frauds are ratified by the
failure to object to the presentation of oral evidence to prove the same.—But let it be
assumed arguendo that the counter-offer during the meeting on September 28, 1987
did constitute a “new” offer which was accepted by Janolo on September 30, 1987.
Still, the statute of frauds will not apply by reason of the failure of petitioners to object to
oral testimony proving petitioner Bank’s counter-offer of P5.5 million. Hence,
petitioners—by such utter failure to object—are deemed to have waived any defects
of the contract under the statute of frauds, pursuant to Article 1405 of the Civil Code:
“Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403,
are ratified by the failure to object to the presentation of oral evidence to prove the
same, or by the acceptance of benefits under them.”

Banks; Bank Conservator; Constitutional Law; Non-Impairment Clause; The powers


granted to the conservator of a bank, enormous and extensive as they are, cannot
extend to the post-facto repudiation of perfected transactions, otherwise they would
infringe against the non-impairment clause of the Constitution.—In the third place, while
admittedly, the Central Bank law gives vast and farreaching powers to the conservator
of a bank, it must be pointed out that such powers must be related to the
“(preservation of) the assets of the bank, (the reorganization of) the management
thereof and (the restoration of) its viability.” Such powers, enormous and extensive as
they are, cannot extend to the post-facto repudiation of perfected transactions,
otherwise they would infringe against the non-impairment clause of the Constitution. If
the legislature itself cannot revoke an existing valid contract, how can it delegate such
nonexistent powers to the conservator under Section 28-A of said law?

Central Bank Law (R.A. 265); Section 28-A of R.A. 265 merely gives the conservator
power to revoke contracts that are, under existing law, deemed to be defective—the
conservator merely takes the place of a bank’s board of directors, and what the said
board cannot do, the conservator cannot do either.—Obviously, therefore, Section 28-
A merely gives the conservator power to revoke contracts that are, under existing law,
deemed to be defective—i.e., void, voidable, unenforceable or rescissible. Hence, the
conservator merely takes the place of a bank’s board of directors. What the said board
cannot do—such as repudiating a contract validly entered into under the doctrine of
implied authority—the conservator cannot do either. Ineluctably, his power is not
unilateral and he cannot simply repudiate valid obligations of the Bank. His authority
would be only to bring court actions to assail such contracts—as he has already done
so in the instant case. A contrary understanding of the law would simply not be
permitted by the Constitution. Neither by common sense. To rule otherwise would be to
enable a failing bank to become solvent, at the expense of third parties, by simply
getting the conservator to unilaterally revoke all previous dealings which had one way
or another come to be considered unfavorable to the Bank, yielding nothing to
perfected contractual rights nor vested interests of the third parties who had dealt with
the Bank.

Actions; Appeals; Petitions for Review on Certiorari; In petitions for review under Rule 45,
findings of fact by the Court of Appeals are not reviewable by the Supreme Court.—
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court,
findings of fact by the Court of Appeals are not reviewable by the Supreme Court.

Evidence; Witnesses; Presumptions; Failure to present a witness who would have been in
the best position to establish a party’s thesis gives rise to the presumption that his
testimony would have been adverse if produced.—To become credible and
unequivocal, petitioners should have presented then Conservator Rodolfo Romey to
testify on their behalf, as he would have been in the best position to establish their
thesis. Under the rules on evidence, such suppression gives rise to the presumption that
his testimony would have been adverse, if produced.

Conclusions of fact of a trial judge—as affirmed by the Court of Appeals—are


conclusive upon the Supreme Court, absent any serious abuse or evident lack of basis
of capriciousness of any kind.—The best that can be said in favor of petitioners on this
point is that the factual findings of respondent Court did not correspond to petitioners’
claims, but were closer to the evidence as presented in the trial court by private
respondent. But this alone is no reason to reverse or ignore such factual findings,
particularly where, as in this case, the trial court and the appellate court were in
common agreement thereon. Indeed, conclusions of fact of a trial judge—as affirmed
by the Court of Appeals—are conclusive upon this Court, absent any serious abuse or
evident lack of basis or capriciousness of any kind, because the trial court is in a better
position to observe the demeanor of the witnesses and their court-room manner as well
as to examine the real evidence presented.
12. Central Bank vs. De la Cruz, 191 SCRA 346, G.R. No. 59957 November 12, 1990

Corporation Law; Banks and Banking; Actions of the Monetary Board in proceedings on
insolvency are explicitly declared by law to be final and executory.—It is noteworthy
that the actions of the Board in proceedings on insolvency are explicitly declared by
law to be “final and executory.” They may not be set aside, or restrained, or enjoined
by the courts, except upon “convincing proof that the action is plainly arbitrary and
made in bad faith.”

Respondent Judge acted in plain disregard of the fourth paragraph of Section 29 of the
Central Bank Act.—Respondent Judge acted in plain disregard of the fourth paragraph
of Section 29 of the Central Bank Act, when he restrained the petitioners from closing
and liquidating the Rural Bank of Libmanan, prevented them from performing their
functions, and ordered them to return the management and control of the rural bank
to its board of directors (p. 51, Rollo) without receiving convincing proof that the action
of the CB was plainly arbitrary and made in bad faith.

Remedial Law; Injunction; For issuing a restraining order against the Central Bank,
respondent Judge committed a grave abuse of discretion tantamount to excess or
lack of jurisdiction.—By issuing his own standards, instead of the standards set forth in
Section 29 of the law, as basis for issuing a restraining order against the CB, respondent
Judge committed a grave abuse of discretion tantamount to excess, or lack of
jurisdiction.

It is a basic procedural postulate that a preliminary injunction should never be used to


transfer the possession or control of a thing to a party who did not have such possession
or control at the inception of the case.—Respondent Judge acted with grave abuse of
discretion in issuing the contested order dated January 15, 1982 enjoining the CB
liquidator from closing the rural bank and requiring it to restore the management and
control of the bank to its board of directors. It is a basic procedural postulate that a
preliminary injunction should never be used to transfer the possession or control of a
thing to a party who did not have such possession or control at the inception of the
case (Lasala vs. Fernandez, 5 SCRA 79; Emilia vs. Bado, 28 SCRA 183). Its proper function
is simply to maintain the status quo at the commencement of the action. The status quo
at the time of filing Civil Case No. 1309 was that Libmanan Bank was under the control
of the DRBSLA Director, with Consolacion V. Odra, as liquidator appointed by the
Central Bank.

Counterclaim; A bank’s claim that the resolution of the Monetary Board under Section
29 is plainly arbitrary and done in bad faith should be asserted as an affirmative
defense or counterclaim in the proceedings for assistance in liquidation.—Respondent
Judge erred in denying the Central Bank’s motion to dismiss the complaint for
prohibition and mandamus (Civil Case No. 1309) filed by Libmanan Bank (Annex C, p.
71, Rollo). This Court in the case of Rural Bank of Buhi, Inc. vs. Court of Appeals (162
SCRA 288) and Salud vs. Central Bank of the Phils. (142 SCRA 590), ruled that a bank’s
claim that the resolution of the Monetary Board under Section 29 is plainly arbitrary and
done in bad faith should be asserted as an affirmative defense or counter-claim in the
proceedings for assistance in liquidation. It may be filed as a separate action if no
petition for assistance in liquidation has been instituted yet.
13. Advocates for Truth in Lending, Inc. vs. Bangko Sentral Monetary Board, 688 SCRA
530, G.R. No. 192986 January 15, 2013

Remedial Law; Special Civil Actions; Certiorari; A petition for certiorari being an
extraordinary remedy, the party seeking to avail of the same must strictly observe the
procedural rules laid down by law, and non-observance thereof may not be brushed
aside as mere technicality.—The decision on whether or not to accept a petition for
certiorari, as well as to grant due course thereto, is addressed to the sound discretion of
the court. A petition for certiorari being an extraordinary remedy, the party seeking to
avail of the same must strictly observe the procedural rules laid down by law, and non-
observance thereof may not be brushed aside as mere technicality. As provided in
Section 1 of Rule 65, a writ of certiorari is directed against a tribunal exercising judicial or
quasi-judicial functions. Judicial functions are exercised by a body or officer clothed
with authority to determine what the law is and what the legal rights of the parties are
with respect to the matter in controversy. Quasi-judicial function is a term that applies to
the action or discretion of public administrative officers or bodies given the authority to
investigate facts or ascertain the existence of facts, hold hearings, and draw
conclusions from them as a basis for their official action using discretion of a judicial
nature.

Civil Procedure; Locus Standi; Words and Phrases; Locus standi is defined as a right of
appearance in a court of justice on a given question.—Locus standi is defined as “a
right of appearance in a court of justice on a given question.” In private suits, Section 2,
Rule 3 of the 1997 Rules of Civil Procedure provides that “every action must be
prosecuted or defended in the name of the real party in interest,” who is “the party
who stands to be benefited or injured by the judgment in the suit or the party entitled to
the avails of the suit.” Succinctly put, a party’s standing is based on his own right to the
relief sought.

In Prof. David v. Pres. Macapagal-Arroyo, 489 SCRA 160 (2006), the Supreme Court
summarized the requirements before taxpayers, voters, concerned citizens, and
legislators can be accorded a standing to sue.—In Prof. David v. Pres. Macapagal-
Arroyo, 489 SCRA 160 (2006), the Court summarized the requirements before taxpayers,
voters, concerned citizens, and legislators can be accorded a standing to sue, viz.: (1)
the cases involve constitutional issues; (2) for taxpayers, there must be a claim of illegal
disbursement of public funds or that the tax measure is unconstitutional; (3) for voters,
there must be a showing of obvious interest in the validity of the election law in
question; (4) for concerned citizens, there must be a showing that the issues raised are
of transcendental importance which must be settled early; and (5) for legislators, there
must be a claim that the official action complained of infringes upon their prerogatives
as legislators.

Usury Law; Central Bank (CB) Circular No. 905; Central Bank (CB) Circular No. 905 did
not repeal nor in anyway amend the Usury Law but simply suspended the latter’s
effectivity; that a Central Bank (CB) Circular cannot repeal a law, for only a law can
repeal another law; that by virtue of CB Circular No. 905, the Usury Law has been
rendered ineffective; and Usury Law has been legally non-existent in our jurisdiction.—
The power of the CB to effectively suspend the Usury Law pursuant to P.D. No. 1684 has
long been recognized and upheld in many cases. As the Court explained in the
landmark case of Medel v. CA, 299 SCRA 481 (1998), citing several cases, CB Circular
No. 905 “did not repeal nor in anyway amend the Usury Law but simply suspended the
latter’s effectivity”; that “a [CB] Circular cannot repeal a law, [for] only a law can
repeal another law”; that “by virtue of CB Circular No. 905, the Usury Law has been
rendered ineffective”; and “Usury has been legally non-existent in our jurisdiction.
Interest can now be charged as lender and borrower may agree upon.”

Section 109 of R.A. No. 265 covered only loans extended by banks, whereas under
Section 1-a of the Usury Law, as amended, the Bangko Sentral ng Pilipinas Monetary
Board (BSP-MB) may Advocates for by the judgment in the suit or the party entitled to
the avails of the suit.” Succinctly put, a party’s standing is based on his own right to the
relief sought.

Section 109 of R.A. No. 265 covered only loans extended by banks, whereas under
Section 1-a of the Usury Law, as amended, the Bangko Sentral ng Pilipinas Monetary
Board (BSP-MB) may Advocates for prescribe the maximum rate or rates of interest for
all loans or renewals thereof or the forebearance of any money, goods or credits,
including those for loans of low priority such as consumer loans, as well as such loans
made by pawnshops, finance companies and similar credit institutions.—A closer
perusal shows that Section 109 of R.A. No. 265 covered only loans extended by banks,
whereas under Section 1-a of the Usury Law, as amended, the BSP-MB may prescribe
the maximum rate or rates of interest for all loans or renewals thereof or the
forbearance of any money, goods or credits, including those for loans of low priority
such as consumer loans, as well as such loans made by pawnshops, finance companies
and similar credit institutions. It even authorizes the BSP-MB to prescribe different
maximum rate or rates for different types of borrowings, including deposits and deposit
substitutes, or loans of financial intermediaries. Act No. 2655, an earlier law, is much
broader in scope, whereas R.A. No. 265, now R.A. No. 7653, merely supplemented it as it
concerns loans by banks and other financial institutions. Had R.A. No. 7653 been
intended to repeal Section 1-a of Act No. 2655, it would have so stated in unequivocal
terms.

Statutes; Implied Repeals; Repeals by implication are not favored, because laws are
presumed to be passed with deliberation and full knowledge of all laws existing
pertaining to the subject.—The rule is settled that repeals by implication are not
favored, because laws are presumed to be passed with deliberation and full
knowledge of all laws existing pertaining to the subject. An implied repeal is predicated
upon the condition that a substantial conflict or repugnancy is found between the new
and prior laws. Thus, in the absence of an express repeal, a subsequent law cannot be
construed as repealing a prior law unless an irreconcilable inconsistency and
repugnancy exists in the terms of the new and old laws. We find no such conflict
between the provisions of Act 2655 and R.A. No. 7653.
Usury Law; Interest Rates; Stipulations authorizing iniquitous or unconscionable interests
have been invariably struck down for being contrary to morals, if not against the law; In
a usurious loan with mortgage, the right to foreclose the mortgage subsists, and this
right can be exercised by the creditor upon failure by the debtor to pay the debt due.
The debt due is considered as without the stipulated excessive interest, and the legal
interest of 12% per annum will be added in place of the excessive interest formerly
imposed.—It is settled that nothing in CB Circular No. 905 grants lenders a carte
blanche authority to raise interest rates to levels which will either enslave their borrowers
or lead to a hemorrhaging of their assets. As held in Castro v. Tan, 605 SCRA 231 (2009):
The imposition of an unconscionable rate of interest on a money debt, even if
knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a
repugnant spoliation and an iniquitous deprivation of property, repulsive to the
common sense of man. It has no support in law, in principles of justice, or in the human
conscience nor is there any reason whatsoever which may justify such imposition as
righteous and as one that may be sustained within the sphere of public or private
morals. Stipulations authorizing iniquitous or unconscionable interests have been
invariably struck down for being contrary to morals, if not against the law. Indeed,
under Article 1409 of the Civil Code, these contracts are deemed inexistent and void
ab initio, and therefore cannot be ratified, nor may the right to set up their illegality as a
defense be waived. Nonetheless, the nullity of the stipulation of usurious interest does
not affect the lender’s right to recover the principal of a loan, nor affect the other terms
thereof. Thus, in a usurious loan with mortgage, the right to foreclose the mortgage
subsists, and this right can be exercised by the creditor upon failure by the debtor to
pay the debt due. The debt due is considered as without the stipulated excessive
interest, and a legal interest of 12% per annum will be added in place of the excessive
interest formerly imposed.
14. Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central Bank of the
Philippines, 204 SCRA 767, G.R. No. 70054, G.R. No. 68878, G.R. Nos. 77255–58,
G.R. No. 78766, G.R. No. 78767, G.R. No. 78894, G.R, No. 81303, G.R. No. 81304,
G.R. No. 90473 December 11, 1991 (SUPRA 5 and 19)
15. Miranda vs. Philippine Deposit Insurance Corporation, 501 SCRA 288, G.R. No.
169334 September 8, 2006 (SUPRA 7)
16. Central Bank of the Philippines vs. Court of Appeals, 220 SCRA 536, G.R. No.
76118 March 30, 1993 (SUPRA 4)
17. Bangko Sentral ng Pilipinas Monetary Board vs. Antonio-Valenzuela, 602 SCRA
698, G.R. No. 184778 October 2, 2009

Injunction; Preliminary Injunction; Requisites.—In Lim v. Court of Appeals, 482 SCRA 326,
331 (2006), it was stated: The requisites for preliminary injunctive relief are: (a) the
invasion of right sought to be protected is material and substantial; (b) the right of the
complainant is clear and unmistakable; and (c) there is an urgent and paramount
necessity for the writ to prevent serious damage. As such, a writ of preliminary injunction
may be issued only upon clear showing of an actual existing right to be protected
during the pendency of the principal action. The twin requirements of a valid injunction
are the existence of a right and its actual or threatened violations. Thus, to be entitled
to an injunctive writ, the right to be protected and the violation against that right must
be shown.

Banks and Banking; Due Process; There is no provision of law, no section in the
procedures of the Bangko Sentral ng Pilipinas (BSP) that shows that the BSP is required to
give banks copies of the Reports of Examination; Sec. 28 of Republic Act 7653, or the
New Central Bank Act, which governs examinations of banking institutions, provides
that the Report of Examination (ROE) shall be submitted to the Monetary Board (MB) —
the bank examined is not mentioned as a recipient of the ROE.—The respondent banks
have failed to show that they are entitled to copies of the ROEs. They can point to no
provision of law, no section in the procedures of the BSP that shows that the BSP is
required to give them copies of the ROEs. Sec. 28 of RA 7653, or the New Central Bank
Act, which governs examinations of banking institutions, provides that the ROE shall be
submitted to the MB; the bank examined is not mentioned as a recipient of the ROE.
The respondent banks cannot claim a violation of their right to due process if they are
not provided with copies of the ROEs. The same ROEs are based on the lists of
findings/exceptions containing the deficiencies found by the SED examiners when they
examined the books of the respondent banks. As found by the RTC, these lists of
findings/exceptions were furnished to the officers or representatives of the respondent
banks, and the respondent banks were required to comment and to undertake
remedial measures stated in said lists. Despite these instructions, respondent banks
failed to comply with the SED’s directive.

The actions of the Monetary Board (MB) under Secs. 29 and 30 of Republic Act 7653
“may not be restrained or set aside by the court except on petition for certiorari on the
ground that the action taken was in excess of jurisdiction or with such grave abuse of
discretion as to amount to lack or excess of jurisdiction.”—The issuance by the RTC of
writs of preliminary injunction is an unwarranted interference with the powers of the MB.
Secs. 29 and 30 of RA 7653 refer to the appointment of a conservator or a receiver for a
bank, which is a power of the MB for which they need the ROEs done by the supervising
or examining department. The writs of preliminary injunction issued by the trial court
hinder the MB from fulfilling its function under the law. The actions of the MB under Secs.
29 and 30 of RA 7653 “may not be restrained or set aside by the court except on
petition for certiorari on the ground that the action taken was in excess of jurisdiction or
with such grave abuse of discretion as to amount to lack or excess of jurisdiction.” The
writs of preliminary injunction order are precisely what cannot be done under the law
by preventing the MB from taking action under either Sec. 29 or Sec. 30 of RA 7653.

“Close Now, Hear Later” Doctrine; Under the law, the sanction of closure could be
imposed upon a bank by the Bangko Sentral ng Pilipinas (BSP) even without notice and
hearing — this “close now, hear later” scheme is grounded on practical and legal
considerations to prevent unwarranted dissipation of the bank’s assets and as a valid
exercise of police power to protect the depositors, creditors, stockholders, and the
general public.—As to the third requirement, the respondent banks have shown no
necessity for the writ of preliminary injunction to prevent serious damage. The serious
damage contemplated by the trial court was the possibility of the imposition of
sanctions upon respondent banks, even the sanction of closure. Under the law, the
sanction of closure could be imposed upon a bank by the BSP even without notice and
hearing. The apparent lack of procedural due process would not result in the invalidity
of action by the MB. This was the ruling in Central Bank of the Philippines v. Court of
Appeals, 220 SCRA 536 (1993). This “close now, hear later” scheme is grounded on
practical and legal considerations to prevent unwarranted dissipation of the bank’s
assets and as a valid exercise of police power to protect the depositors, creditors,
stockholders, and the general public. The writ of preliminary injunction cannot, thus,
prevent the MB from taking action, by preventing the submission of the ROEs and
worse, by preventing the MB from acting on such ROEs.

Police Power; It is well-settled that the closure of a bank may be considered as an


exercise of police power.—The trial court required the MB to respect the respondent
banks’ right to due process by allowing the respondent banks to view the ROEs and act
upon them to forestall any sanctions the MB might impose. Such procedure has no basis
in law and does in fact violate the “close now, hear later” doctrine. We held in Rural
Bank of San Miguel, Inc. v. Monetary Board, Sentral ng Pilipinas, 516 SCRA 154 (2007): “It
is well-settled that the closure of a bank may be considered as an exercise of police
power. The action of the MB on this matter is final and executory. Such exercise may
nonetheless be subject to judicial inquiry and can be set aside if found to be in excess
of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction.”

Judicial Review; Judicial review enters the picture only after the Monetary Board (MB)
has taken action — it cannot prevent such action by the MB; The threat of the
imposition of sanctions, even that of closure, does not violate their right to due process,
and cannot be the basis for a writ of preliminary injunction.—The respondent banks
cannot—through seeking a writ of preliminary injunction by appealing to lack of due
process, in a roundabout manner—prevent their closure by the MB. Their remedy, as
stated, is a subsequent one, which will determine whether the closure of the bank was
attended by grave abuse of discretion. Judicial review enters the picture only after the
MB has taken action; it cannot prevent such action by the MB. The threat of the
imposition of sanctions, even that of closure, does not violate their right to due process,
and cannot be the basis for a writ of preliminary injunction.

“Close Now, Hear Later” Doctrine; The “close now, hear later” doctrine has already
been justified as a measure for the protection of the public interest.—The “close now,
hear later” doctrine has already been justified as a measure for the protection of the
public interest. Swift action is called for on the part of the BSP when it finds that a bank is
in dire straits. Unless adequate and determined efforts are taken by the government
against distressed and mismanaged banks, public faith in the banking system is certain
to deteriorate to the prejudice of the national economy itself, not to mention the losses
suffered by the bank depositors, creditors, and stockholders, who all deserve the
protection of the government.

In the absence of a clear legal right, the issuance of the injunctive writ constitutes grave
abuse of discretion.—The respondent banks have failed to show their entitlement to the
writ of preliminary injunction. It must be emphasized that an application for injunctive
relief is construed strictly against the pleader. The respondent banks cannot rely on a
simple appeal to procedural due process to prove entitlement. The requirements for the
issuance of the writ have not been proved. No invasion of the rights of respondent
banks has been shown, nor is their right to copies of the ROEs clear and unmistakable.
There is also no necessity for the writ to prevent serious damage. Indeed the issuance of
the writ of preliminary injunction tramples upon the powers of the MB and prevents it
from fulfilling its functions. There is no right that the writ of preliminary injunction would
protect in this particular case. In the absence of a clear legal right, the issuance of the
injunctive writ constitutes grave abuse of discretion. In the absence of proof of a legal
right and the injury sustained by the plaintiff, an order for the issuance of a writ of
preliminary injunction will be nullified.
18. Barrameda Vda. de Ballesteros vs. Rural Bank of Canaman, Inc., 636 SCRA 119,
G.R. No. 176260 November 24, 2010

Remedial Law; Courts; Jurisdiction; Doctrine on Adherence of Jurisdiction; Court


recognizes the doctrine on adherence of jurisdiction; Principle is not without
exceptions.—The Court recognizes the doctrine on adherence of jurisdiction. Lucia,
however, must be reminded that such principle is not without exceptions. It is well to
quote the ruling of the CA on this matter, thus: This Court is not unmindful nor unaware
of the doctrine on the adherence of jurisdiction. However, the rule on adherence of
jurisdiction is not absolute and has exceptions. One of the exceptions is that when the
change in jurisdiction is curative in character.

After the Monetary Board has declared that a bank is insolvent and has ordered it to
cease operations, the Board becomes the trustee of its assets for the equal benefit of all
the creditors, including depositors.—The cited Morfe case held that “after the Monetary
Board has declared that a bank is insolvent and has ordered it to cease operations, the
Board becomes the trustee of its assets for the equal benefit of all the creditors,
including depositors. The assets of the insolvent banking institution are held in trust for
the equal benefit of all creditors, and after its insolvency, one cannot obtain an
advantage or a preference over another by an attachment, execution or otherwise.”

Same; Same; Same; Same; Lucia’s complaint involving annulment of deed of mortgage
and damages falls within the purview of a disputed claim in contemplation of Section
30 of R.A. 7653 (The New Central Bank Act); the jurisdiction should be lodged with the
liquidation court.—Anent the second issue, Lucia faults the CA in directing the
consolidation of Civil Case No. IR-3128 with Special Proceedings No. M-5290. The CA
committed no error. Lucia’s complaint involving annulment of deed of mortgage and
damages falls within the purview of a disputed claim in contemplation of Section 30 of
R.A. 7653 (The New Central Bank Act). The jurisdiction should be lodged with the
liquidation court.

Disputed Claims; “Disputed claims” refers to all claims, whether they be against the
assets of the insolvent bank, for specific performance, breach of contract, damages, or
whatever.—“Disputed claims” refers to all claims, whether they be against the assets of
the insolvent bank, for specific performance, breach of contract, damages, or
whatever. Lucia’s action being a claim against RBCI can properly be consolidated with
the liquidation proceedings before the RTC-Makati.

Liquidation; Liquidation proceeding has been explained in the case of In Re: Petition for
Assistance in the Liquidation of the Rural Bank of BOKOD (Benguet), Inc. v. Bureau of
Internal Revenue, 511 SCRA 123 (2006).—A liquidation proceeding has been explained
in the case of In Re: Petition for Assistance in the Liquidation of the Rural Bank of BOKOD
(Benguet), Inc. v. Bureau of Internal Revenue, 511 SCRA 123 (2006), as follows: A
liquidation proceeding is a single proceeding which consists of a number of cases
properly classified as “claims.” It is basically a two-phased proceeding. The first phase is
concerned with the approval and disapproval of claims. Upon the approval of the
petition seeking the assistance of the proper court in the liquidation of a closed entity,
all money claims against the bank are required to be filed with the liquidation court. This
phase may end with the declaration by the liquidation court that the claim is not
proper or without basis. On the other hand, it may also end with the liquidation court
allowing the claim. In the latter case, the claim shall be classified whether it is ordinary
or preferred, and thereafter included Liquidator. In either case, the order allowing or
disallowing a particular claim is final order, and may be appealed by the party
aggrieved thereby. The second phase involves the approval by the Court of the
distribution plan prepared by the duly appointed liquidator. The distribution plan
specifies in detail the total amount available for distribution to creditors whose claim
were earlier allowed. The Order finally disposes of the issue of how much property is
available for disposal. Moreover, it ushers in the final phase of the liquidation
proceeding—payment of all allowed claims in accordance with the order of legal
priority and the approved distribution plan.

Regular courts do not have jurisdiction over actions filed by claimants against an
insolvent bank, unless there is a clear showing that the action taken by the BSP, through
the Monetary Board, in the closure of financial institutions was in excess of jurisdiction, or
with grave abuse of discretion.—It is clear, therefore, that the liquidation court has
jurisdiction over all claims, including that of Lucia against the insolvent bank. As
declared in Miranda v. Philippine Deposit Insurance Corporation, 501 SCRA 288 (2006),
regular courts do not have jurisdiction over actions filed by claimants against an
insolvent bank, unless there is a clear showing that the action taken by the BSP, through
the Monetary Board, in the closure of financial institutions was in excess of jurisdiction, or
with grave abuse of discretion. The same is not obtaining in this present case.
19. Miranda vs. Philippine Deposit Insurance Corporation, 501 SCRA 288, G.R. No.
169334 September 8, 2006 (SUPRA 7 and 15)
20. Philippine Deposit Insurance Corporation vs. Bureau of Internal Revenue, 698
SCRA 311, G.R. No. 172892 June 13, 2013

Taxation; Banks and Banking; In Re: Petition for Assistance in the Liquidation of the Rural
Bank of Bokod (Benguet), Inc., Philippine Deposit Insurance Corporation v. Bureau of
Internal Revenue, 511 SCRA 123 (2006), ruled that Section 52(C) of the Tax Code of 1997
is not applicable to banks ordered placed under liquidation by the Monetary Board,
and a tax clearance is not a prerequisite to the approval of the project of distribution of
the assets of a bank under liquidation by the Philippine Deposit Insurance
Corporation.―This Court has already resolved the issue of whether Section 52(C) of the
Tax Code of 1997 applies to banks ordered placed under liquidation by the Monetary
Board, that is, whether a bank placed under liquidation has to secure a tax clearance
from the BIR before the project of distribution of the assets of the bank can be
approved by the liquidation court. In Re: Petition for Assistance in the Liquidation of the
Rural Bank of Bokod (Benguet), Inc., Philippine Deposit Insurance Corporation v. Bureau
of Internal Revenue, 511 SCRA 123 (2006), ruled that Section 52(C) of the Tax Code of
1997 is not applicable to banks ordered placed under liquidation by the Monetary
Board, and a tax clearance is not a prerequisite to the approval of the project of
distribution of the assets of a bank under liquidation by the PDIC.

Civil Law; Concurrence and Preference of Credit; Banks and Banking; The law expressly
provides that debts and liabilities of the bank under liquidation are to be paid in
accordance with the rules on concurrence and preference of credit under the Civil
Code.―The law expressly provides that debts and liabilities of the bank under liquidation
are to be paid in accordance with the rules on concurrence and preference of credit
under the Civil Code. Duties, taxes, and fees due the Government enjoy priority only
when they are with reference to a specific movable property, under Article 2241(1) of
the Civil Code, or immovable property, under Article 2242(1) of the same Code.
However, with reference to the other real and personal property of the debtor,
sometimes referred to as “free property,” the taxes and assessments due the National
Government, other than those in Articles 2241(1) and 2242(1) of the Civil Code, such as
the corporate income tax, will come only in ninth place in the order of preference.

If the Bureau of Internal Revenue’s contention that a tax clearance be secured first
before the project of distribution of the assets of a bank under liquidation may be
approved, then the tax liabilities will be given absolute preference in all instances,
including those that do not fall under Articles 2241(1) and 2242(1) of the Civil Code.―If
the BIR’s contention that a tax clearance be secured first before the project of
distribution of the assets of a bank under liquidation may be approved, then the tax
liabilities will be given absolute preference in all instances, including those that do not
fall under Articles 2241(1) and 2242(1) of the Civil Code. In order to secure a tax
clearance which will serve as proof that the taxpayer had completely paid off his tax
liabilities, PDIC will be compelled to settle and pay first all tax liabilities and deficiencies
of the bank, regardless of the order of preference under the pertinent provisions of the
Civil Code. Following the BIR’s stance, therefore, only then may the project of
distribution of the bank’s assets be approved and the other debts and claims thereafter
settled, even though under Article 2244 of the Civil Code such debts and claims enjoy
preference over taxes and assessments due the National Government. The BIR
effectively wants this Court to ignore Section 30 of the New Central Bank Act and
disregard Article 2244 of the Civil Code. However, as a court of law, this Court has the
solemn duty to apply the law. It cannot and will not give its imprimatur to a violation of
the laws.
21. Government Service Insurance System vs. 15th Division of the Court of Appeals,
651 SCRA 661, G.R. No. 189206 June 8, 2011

Appeals; Pleadings, Practice and Procedure; Appeal from a final disposition of the
Court of Appeals is a petition for review under Rule 45 and not a special civil action
under Rule 65.—This Court notes that GSIS filed a petition for certiorari under Rule 65 of
the Rules of Court to assail the Decision and Resolution of the Court of Appeals.
Petitioner availed of the improper remedy as the appeal from a final disposition of the
Court of Appeals is a petition for review under Rule 45 and not a special civil action
under Rule 65. Certiorari under Rule 65 lies only when there is no appeal, nor plain,
speedy and adequate remedy in the ordinary course of law. That action is not a
substitute for a lost appeal in general; it is not allowed when a party to a case fails to
appeal a judgment to the proper forum. Where an appeal is available, certiorari will
not prosper even if the ground therefor is grave abuse of discretion. Accordingly, when
a party adopts an improper remedy, his petition may be dismissed outright.

Banks and Banking; Secrecy of Bank Deposits; Bank Secrecy Act of 1955 (R.A. No. 1405);
Foreign Currency Deposit Act (R.A. No. 6426); R.A. No. 1405 provides for four (4)
exceptions when records of deposits may be disclosed while under R.A. No. 6246, the
lone exception to the non-disclosure of foreign currency deposits is the disclosure upon
the written permission of the depositor.—On the one hand, Republic Act No. 1405
provides for four (4) exceptions when records of deposits may be disclosed. These are
under any of the following instances: (a) upon written permission of the depositor, (b) in
cases of impeachment, (c) upon order of a competent court in the case of bribery or
dereliction of duty of public officials or, (d) when the money deposited or invested is the
subject matter of the litigation, and (e) in cases of violation of the Anti-Money
Laundering Act (AMLA), the Anti-Money Laundering Council (AMLC) may inquire into a
bank account upon order of any competent court. On the other hand, the lone
exception to the non-disclosure of foreign currency deposits, under Republic Act No.
6426, is disclosure upon the written permission of the depositor.

Statutory Construction; R.A. No. 1405 was enacted for the purpose of giving
encouragement to the people to deposit their money in banking institutions and to
discourage private hoarding so that the same may be properly utilized by banks in
authorized loans to assist in the economic development of the country—it is a law of
general application; R.A. No. 6426 was intended to encourage deposits from foreign
lenders and investors—a special law designed especially for foreign currency deposits
in the Philippines; A general law does not nullify a specific or special law.—These two
laws both support the confidentiality of bank deposits. There is no conflict between
them. Republic Act No. 1405 was enacted for the purpose of giving encouragement to
the people to deposit their money in banking institutions and to discourage private
hoarding so that the same may be properly utilized by banks in authorized loans to
assist in the economic development of the country. It covers all bank deposits in the
Philippines and no distinction was made between domestic and foreign deposits. Thus,
Republic Act No. 1405 is considered a law of general application. On the other hand,
Republic Act No. 6426 was intended to encourage deposits from foreign lenders and
investors. It is a special law designed especially for foreign currency deposits in the
Philippines. A general law does not nullify a specific or special law. Generalia
specialibus non derogant. Therefore, it is beyond cavil that Republic Act No. 6426
applies in this case. Intengan v. Court of Appeals, affirmed the above-cited principle
and categorically declared that for foreign currency deposits, such as U.S. dollar
deposits, the applicable law is Republic Act No. 6426.

Absent written permission from the depositor, a bank cannot be legally compelled to
disclose the foreign currency bank deposits of the depositor.—Applying Section 8 of
Republic Act No. 6426, absent the written permission from Domsat, Westmont Bank
cannot be legally compelled to disclose the bank deposits of Domsat, otherwise, it
might expose itself to criminal liability under the same act.

Motions for Reconsideration; Pleadings, Practice and Procedure; The Court of Appeals
correctly relied on precedents in holding that the trial judge may, in the exercise of his
sound discretion, grant the second motion for reconsideration despite its being pro
forma.—The third issue raised by GSIS was properly addressed by the appellate court.
The appellate court maintained that the judge may, in the exercise of his sound
discretion, grant the second motion for reconsideration despite its being pro forma. The
appellate court correctly relied on precedents where this Court set aside technicality in
favor of substantive justice. Furthermore, the appellate court accurately pointed out
that petitioner did not assail the defect of lack of notice in its opposition to the second
motion of reconsideration, thus it can be considered a waiver of the defect.
22. China Banking Corporation vs. Court of Appeals, 511 SCRA 110, G.R. No. 140687
December 18, 2006

Banks and Banking; Foreign Currency Deposit System (R.A. No. 6426); The only
exception to the secrecy of foreign currency deposits is in the case of a written
permission of the depositor.—As amended by Presidential Decree No. 1246, the law
reads: 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) (Emphasis supplied.)
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. 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,
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.

The co-payee of a foreign currency depositor in checks deposited in the account of


the latter may be deemed a depositor thereof for purposes of allowing inquiry into said
foreign currency account upon consent of such co-payee.—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 owner of the funds unlawfully taken and which are undisputably deposited with a
bank has the right to inquire into said deposits.—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.

Clearly it was not the intent of the legislature when it enacted the law on secrecy of
foreign currency deposits to perpetuate injustice.—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 to 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 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. 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, the upholding of fairness in our judicial system and would be an
avoidance of delay and time-wasteful and circuitous way of administering justice.
23. Intengan vs. Court of Appeals, 377 SCRA 63, G.R. No. 128996 February 15, 2002

Banks and Banking; Bank Secrecy Law (R.A. No. 1405); Foreign Currency Deposit Act of
the Philippines (R.A. No. 6426); Where the accounts in question are U.S. dollar deposits,
the applicable law is R.A. No. 6426, not R.A. No. 1405; Under R.A. 6426 there is only a
single exception to the secrecy of foreign currency deposits, that is, disclosure is
allowed only upon the written permission of the depositor.—This case should have been
studied more carefully by all concerned. The finest legal minds in the country—from the
parties’ respective counsel, the Provincial Prosecutor, the Department of Justice, the
Solicitor General, and the Court of Appeals—all appear to have overlooked a single
fact which dictates the outcome of the entire controversy. A circumspect review of the
record shows us the reason. The accounts in question are U.S. dollar deposits;
consequently, the applicable law is not Republic Act No. 1405, but Republic Act (R.A.)
No. 6426, known as the “Foreign Currency Deposit Act of the Philippines,” section 8 of
which provides: Sec. 8. Secrecy of Foreign Currency Deposits.—All foreign currency
deposits authorized under this Act, as amended by Presidential Decree No. 1035, as
well as foreign currency deposits authorized under Presidential Decree No. 1034, are
hereby declared as and considered of an absolutely confidential nature and, except
upon the written permission of the depositor, in no instance shall such foreign currency
deposits be examined, inquired or looked into by any person, government official
bureau or office whether judicial or administrative or legislative or 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. (italics
supplied) Thus, under R.A. No. 6426 there is only a single exception to the secrecy of
foreign currency deposits, that is, disclosure is allowed only upon the written permission
of the depositor. Incidentally, the acts of private respondents complained of happened
before the enactment on September 29, 2001 of R.A. No. 9160 otherwise known as the
Anti-Money Laundering Act of 2001.

Acts Mala in Se and Mala Prohibita; While it is true that, as a rule and on principles of
abstract justice, men are not and should not be held criminally responsible for acts
committed by them without guilty knowledge and criminal or at least evil intent, the
courts have always recognized the power of the legislature, on grounds of public policy
and compelled by necessity, “the great master of things,” to forbid in a limited class of
cases the doing of certain acts, and to make their commission criminal without regard
to the intent of the doer.—A case for violation of Republic Act No. 6426 should have
been the proper case brought against private respondents. Private respondents Lim
and Reyes admitted that they had disclosed details of petitioners’ dollar deposits
without the letter’s written permission. It does not matter if that such disclosure was
necessary to establish Citibank’s case against Dante L. Santos and Marilou Genuino.
Lim’s act of disclosing details of petitioners’ bank records regarding their foreign
currency deposits, with the authority of Reyes, would appear to belong to that species
of criminal acts punishable by special laws, called malum prohibitum. In this regard, it
has been held that: While it is true that, as a rule and on principles of abstract justice,
men are not and should not be held criminally responsible for acts committed by them
without guilty knowledge and criminal or at least evil intent x x x, the courts have always
recognized the power of the legislature, on grounds of public policy and compelled by
necessity, “the great master of things,” to forbid in a limited class of cases the doing of
certain acts, and to make their commission criminal without regard to the intent of the
doer. x x x In such cases no judicial authority has the power to require, in the
enforcement of the law, such knowledge or motive to be shown. As was said in the
case of State vs. McBrayer x x x: Same; Same; Same; Prescription; Criminal Procedure; A
violation of R.A. No. 6426 prescribes in eight years; Filing of the complaint or information
for alleged violation of R.A. No. 1405 does not have the effect of tolling the prescriptive
period for violation of R.A. No. 6426.—A violation of Republic Act No. 6426 shall subject
the offender to imprisonment of not less than one year nor more than five years, or by a
fine of not less than five thousand pesos nor more than twenty-five thousand pesos, or
both. Applying Act No. 3326, the offense prescribes in eight years. Per available records,
private respondents may no longer be haled before the courts for violation of Republic
Act No. 6426. Private respondent Vic Lim made the disclosure in September of 1993 in
his affidavit submitted before the Provincial Fiscal. In her complaint-affidavit, Intengan
stated that she learned of the revelation of the details of her foreign currency bank
account on October 14, 1993. On the other hand, Neri asserts that she discovered the
disclosure on October 24, 1993. As to Brawner, the material date is January 5, 1994.
Based on any of these dates, prescription has set in. The filing of the complaint or
information in the case at bar for alleged violation of Republic Act No. 1405 did not
have the effect of tolling the prescriptive period. For it is the filing of the complaint or
information corresponding to the correct offense which produces that effect.

Judicial Notice; The existence of laws is a matter of mandatory judicial notice; The
confidentiality of foreign currency deposits mandated by Republic Act No. 6426, as
amended by Presidential Decree No. 1246, came into effect as far back as 1977,
hence, ignorance thereof cannot be pretended.—It may well be argued that the
foregoing disquisition would leave petitioners with no remedy in law. We point out,
however, that the confidentiality of foreign currency deposits mandated by Republic
Act No. 6426, as amended by Presidential Decree No. 1246, came into effect as far
back as 1977. Hence, ignorance thereof cannot be pretended. On one hand, the
existence of laws is a matter of mandatory judicial notice; on the other, ignorantia legis
non excusat. Even during the pendency of this appeal, nothing prevented the
petitioners from filing a complaint charging the correct offense against private
respondents. This was not done, as everyone involved was content to submit the case
on the basis of an alleged violation of Republic Act No. 1405 (Bank Secrecy Law),
however, incorrectly invoked.
24. China Banking Corporation vs. Ortega, 49 SCRA 355, No. L-34964 January 31,
1973

Remedial law; Execution of judgment; Garnishment of bank deposit of judgment


debtor not violative of Republic Act 1405; Case at bar.—–The lower court did not order
an examination of or inquiry into the deposit of the defendant, as contemplated in the
law. It merely required the cashier of the bank to inform the court whether or not the
defendant had a deposit in the said bank only for purposes of the garnishment issued
by it, so that the bank would hold the same intact and not allow any withdrawal until
further order.

In passing Republic Act 1405, no intention of the Legislature to place bank deposits
beyond the reach of execution to satisfy a final judgment.—–It is clear from the
discussion of the conference committee report on Senate Bill No. 351 and House. Bill No.
3977, which later became RepublicAct 1405, that the prohibition against examination
of or inquiry into a bank deposit under Republic Act 1405 does not preclude its being
garnished to insure satisfaction of a judgment. Indeed there is no real inquiry in such a
case, and if existence of the deposit is disclosed the disclosure is purely incidental to the
execution process. It is hard to conceive that it was ever within the intention of
Congress to enable debtors to evade payment of their just debts, even if ordered by
the Court, through the expedient of converting their assets into cash and depositing the
same in a bank.
25. Marquez vs. Desierto, 359 SCRA 772, G.R. No. 135882 June 27, 2001

Banks and Banking; Secrecy of Bank Deposits Law (Republic Act [RA] No. 1405);
Exceptions.—An examination of the secrecy of bank de posits law (R.A. No. 1405) would
reveal the following exceptions: 1. Where the depositor consents in writing; 2.
Impeachment case; 3. By court order in bribery or dereliction of duty cases against
public officials; 4. Deposit is subject of litigation; 5. Sec 8, R.A. No. 3019, in cases of
unexplained wealth as held in the case of PNB vs. Gancayco.

Before an in camera inspection by the Ombudsman may be allowed, there must be a


pending case before a court of competent jurisdiction.—We rule that before an in
camera inspection may be allowed, there must be a pending case before a court of
competent jurisdiction. Further, the account must be clearly identified, the inspection
limited to the subject matter of the pending case before the court of competent
jurisdiction. The bank personnel and the account holder must be notified to be present
during the inspection, and such inspection may cover only the account identified in the
pending case.

Exceptions to the Absolute Confidentiality of Bank Deposits.—In Union Bank of the


Philippines v. Court of Appeals, we held that “Section 2 of the Law on Secrecy of Bank
Deposits, as amended, declares bank deposits to be ‘absolutely confidential’ except:
(1) In an examination made in the course of a special or general examination of a bank
that is specifically authorized by the Monetary Board after being satisfied that there is
reasonable ground to believe that a bank fraud or serious irregularity has been or is
being committed and that it is necessary to look into the deposit to establish such fraud
or irregularity; (2) In an examination made by an independent auditor hired by the
bank to conduct its regular audit provided that the examination is for audit purposes
only and the results thereof shall be for the exclusive use of the bank; (3) Upon written
permission of the depositor; (4) In cases of impeachment; (5) Upon order of a
competent court in cases of bribery or dereliction of duty of public officials; or (6) In
cases where the money deposited or invested is the subject matter of the litigation.”

Right to Privacy; Zones of privacy are recognized and protected in our laws.—Zones of
privacy are recognized and protected in our laws. The Civil Code provides that “[e]very
person shall respect the dignity, personality, privacy and peace of mind of his neighbors
and other persons” and punishes as actionable torts several acts for meddling and
prying into the privacy of another. It also holds a public officer or employee or any
private individual liable for damages for any violation of the rights and liberties of
another person, and recognizes the privacy of letters and other private
communications. The Revised Penal Code makes a crime of the violation of secrets by
an officer, the revelation of trade and industrial secrets, and trespass to dwelling.
Invasion of privacy is an offense in special laws like the Anti-Wiretapping Law, the
Secrecy of Bank Deposits Act, and the Intellectual Property Code.
26. Salvacion vs. Central Bank of the Philippines, 278 SCRA 27, G.R. No. 94723 August
21, 1997

Remedial Law; Jurisdiction; Declaratory Relief; Court has no original and exclusive
jurisdiction over a petition for declaratory relief.—This 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.

Statutory Construction; Statutes; In case of doubt in the interpretation or application of


laws, it is presumed that the lawmaking body intended right and justice to prevail.—In
fine, the application of the law depends on the extent of its justice. Eventually, if we rule
that the questioned Section 113 of Central Bank Circular No. 960 which exempts from
attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever, is applicable to a foreign
transient, injustice would result especially to a citizen aggrieved by a foreign guest like
accused Greg Bartelli. This would negate Article 10 of the New Civil Code which
provides that “in case of doubt in the interpretation or application of laws, it is
presumed that the lawmaking body intended right and justice to prevail. “Ninguno non
deue enriquecerse tortizeramente con dano de otro.” Simply stated, when the statute
is silent or ambiguous, this is one of those fundamental solutions that would respond to
the vehement urge of conscience.
27. Bangayan vs. Rizal Commercial Banking Corporation, 647 SCRA 8, G.R. No.
149193 April 4, 2011

Criminal Law; Forgery; Evidence; Requisites before a Private Document is Offered as


Authentic; As a rule, forgery cannot be presumed and must be proved by clear,
positive and convincing evidence; Burden of proof rests on the party alleging forgery;
Mere allegation of forgery is not evidence.—Before a private document is offered as
authentic, its due execution and authenticity must be proved: (a) either by anyone
who has seen the document executed or written; or (b) by evidence of the
genuineness of the signature or handwriting of the maker. As a rule, forgery cannot be
presumed and must be proved by clear, positive and convincing evidence. The burden
of proof rests on the party alleging forgery. Mere allegation of forgery is not evidence.

Notarial Law; Notarization of a private document converts the document into a public
one, renders it admissible in court without further proof of its authenticity, and is entitled
to full faith and credit upon its face; The irregular notarization—or, for that matter, the
lack of notarization—does not necessarily affect the validity of the contract reflected in
the document.—Notarization of a private document converts the document into a
public one, renders it admissible in court without further proof of its authenticity, and is
entitled to full faith and credit upon its face. However, the irregular notarization—or, for
that matter, the lack of notarization—does not necessarily affect the validity of the
contract reflected in the document.

Contracts; Contracts are obligatory in whatever form they may have been entered
into, provided all essential requisites are present and the notarization is not an essential
requisite for the validity of a Surety Agreement.—The failure to notarize the Surety
Agreement does not invalidate petitioner Bangayan’s consent to act as surety for the
nine corporations’ obligations to respondent RCBC. Contracts are obligatory in
whatever form they may have been entered into, provided all essential requisites are
present and the notarization is not an essential requisite for the validity of a Surety
Agreement.

Civil Procedure; Prior to a final judgment, trial courts have plenary control over the
proceedings including the judgment, and in the exercise of a sound judicial discretion,
may take such proper action in this regard as truth and justice may require.—Prior to a
final judgment, trial courts have plenary control over the proceedings including the
judgment, and in the exercise of a sound judicial discretion, may take such proper
action in this regard as truth and justice may require. In the instant case, the trial court
was within the exercise of its discretionary and plenary control of the proceedings when
it reconsidered motu proprio its earlier order striking out the testimony of Mr. Lao and
ordered it reinstated. The order of the judge cannot be considered as “willful, arbitrary,
capricious and uncontrolled discretion,” since his action allowed respondent bank to
present its case fully, especially considering that Mr. Lao was the sole witness for the
defense.
Constitutional Law; Right to Cross-Examination; The right of a party to confront and
cross-examine opposing witnesses in a judicial litigation, be it criminal or civil in nature,
or in proceedings before administrative tribunals with quasi-judicial powers, is a
fundamental right which is part of due process; This right, however, has always been
understood as requiring not necessarily an actual cross-examination but merely an
opportunity to exercise the right to cross-examine if desired.—Neither can petitioner
Bangayan claim any deprivation of due process when the trial court ordered the
reinstatement of Mr. Lao’s testimony without any motion or prayer from respondent
RCBC. The right of a party to confront and cross-examine opposing witnesses in a
judicial litigation, be it criminal or civil in nature, or in proceedings before administrative
tribunals with quasi-judicial powers, is a fundamental right which is part of due process.
This right, however, has always been understood as requiring not necessarily an actual
cross-examination but merely an opportunity to exercise the right to cross-examine if
desired. What is proscribed by statutory norm and jurisprudential precept is the absence
of the opportunity to cross-examine.
28. BSB Group, Inc. vs. Go, 612 SCRA 596, G.R. No. 168644 February 16, 2010

Criminal Law; Theft; Qualified Theft; Elements; Theft is present when a person, with intent
to gain but without violence against or intimidation of persons or force upon things,
takes the personal property of another without the latter’s consent—it is qualified when,
among others, and as alleged in the instant case, it is committed with abuse of
confidence.—Fundamental is the precept in all criminal prosecutions, that the
constitutive acts of the offense must be established with unwavering exactitude and
moral certainty because this is the critical and only requisite to a finding of guilt. Theft is
present when a person, with intent to gain but without violence against or intimidation
of persons or force upon things, takes the personal property of another without the
latter’s consent. It is qualified when, among others, and as alleged in the instant case, it
is committed with abuse of confidence. The prosecution of this offense necessarily
focuses on the existence of the following elements: (a) there was taking of personal
property belonging to another; (b) the taking was done with intent to gain; (c) the
taking was done without the consent of the owner; (d) the taking was done without
violence against or intimidation of persons or force upon things; and (e) it was done
with abuse of confidence. In turn, whether these elements concur in a way that
overcomes the presumption of guiltlessness, is a question that must pass the test of
relevancy and competency in accordance with Section 3 Rule 128 of the Rules of
Court.

Estafa; Checks; The allegation of theft of money necessitates that evidence presented
must have a tendency to prove that the offender has unlawfully taken money
belonging to another; Where the complainant tries to draw a connection between the
evidence subject of the instant review, and the allegation of theft in the Information by
claiming that the respondent had fraudulently deposited the checks in her own name,
it in effect seeks to establish the commission, not of theft, but rather of some other
crime—probably estafa.—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.

In estafa by conversion, whether the thing converted is cash or check is immaterial in


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

Banks and Banking; Bank Secrecy Act (R.A. No. 1405); While the fundamental law has
not bothered with the triviality of specifically addressing privacy rights relative to
banking accounts, there, nevertheless, exists in our jurisdiction a legitimate expectation
of privacy governing such accounts—the source of this right of expectation is statutory,
and it is found in the Bank Secrecy Act of 1955.—It is conceded that while the
fundamental law has not bothered with the triviality of specifically addressing privacy
rights relative to banking accounts, there, nevertheless, exists in our jurisdiction a
legitimate expectation of privacy governing such accounts. The source of this right of
expectation is statutory, and it is found in R.A. No. 1405, otherwise known as the Bank
Secrecy Act of 1955. 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.

The inquiry into bank deposits allowable under Republic Act No. 1405 must be premised
on the fact that the money deposited in the account is itself the subject of the action.—
What indeed constitutes the subject matter in litigation in relation to Section 2 of R.A.
No. 1405 has been pointedly and amply addressed in Union Bank of the Philippines v.
Court of Appeals, 321 SCRA 563 (1999) in which the Court noted that the inquiry into
bank deposits allowable under R.A. No. 1405 must be premised on the fact that the
money deposited in the account is itself the subject of the action. Given this
perspective, we deduce that the subject matter of the action in the case at bar is to
be determined from the indictment that charges respondent with the offense, and not
from the evidence sought by the prosecution to be admitted into the records. 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 P1,534,135.50. The said Information makes no
factual allegation that in some material way involves the checks subject of the
testimonial and documentary evidence sought to be suppressed. Neither do the
allegations in said Information make mention of the supposed bank account in which
the funds represented by the checks have allegedly been kept. In other words, it can
hardly be inferred from the indictment itself that the Security Bank account is the
ostensible subject of the 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 P1,534,135.50 alleged to have been stolen by respondent,
and not the money equivalent of the checks which are sought to be admitted in
evidence. Thus, it is that, which the prosecution is bound to prove with its evidence, and
no other.

In any given jurisdiction where the right of privacy extends its scope to include an
individual’s financial privacy rights and personal financial matters, there is an
intermediate or heightened scrutiny given by courts and legislators to laws infringing
such rights.—A final note. In any given jurisdiction where the right of privacy extends its
scope to include an individual’s financial privacy rights and personal financial matters,
there is an intermediate or heightened scrutiny given by courts and legislators to laws
infringing such rights. Should there be doubts in upholding the absolutely confidential
nature of bank deposits against affirming the authority to inquire into such accounts,
then such doubts must be resolved in favor of the former. This attitude persists unless
congress lifts its finger to reverse the general state policy respecting the absolutely
confidential nature of bank deposits.
29. Ejercito vs. Sandiganbayan (Special Division), 509 SCRA 190, G.R. Nos. 157294-95
November 30, 2006

Banks and Banking; Secrecy of Bank Deposits Act (Republic Act No. 1405); An
examination of Republic Act No. 1405 shows that the term “deposits” used therein is to
be understood broadly and not limited only to accounts which give rise to a creditor-
debtor relationship between the depositor and the bank; 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 contention that trust accounts are not covered by the term “deposits,”
as used in R.A. 1405, by the mere fact that they do not entail a creditor-debtor
relationship between the trustor and the bank, does not lie. An examination of the law
shows that the term “deposits” used therein is to be understood broadly and not limited
only to accounts which give rise to a creditor-debtor relationship between the
depositor and the bank. The policy behind the law is laid down in Section 1: SECTION 1.
It is hereby declared to be the policy of the Government to give encouragement to the
people to deposit their money in banking institutions and to discourage private
hoarding so that the same may be properly utilized by banks in authorized loans to
assist in the economic development of the country. (Italics supplied) If the money
deposited under an account may be used by banks for authorized loans to third
persons, then such account, regardless of whether it creates a creditor-debtor
relationship between the depositor and the bank, falls under the category of accounts
which the law precisely seeks to protect for the purpose of boosting the economic
development of the country.

Statutory Construction; Words and Phrases; The phrase “of whatever nature” proscribes
any restrictive interpretation of “deposits”—Republic Act No. 1405 applies not only to
money which is deposited but also to those which are invested, such as those placed in
a trust account.—Section 2 of the same law in fact even more clearly shows that the
term “deposits” was intended to be understood broadly: SECTION2.All deposits of
whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political
subdivisions and its instrumentalities, are hereby considered as of an absolutely
confidential nature and may not be examined, inquired or looked into by any person,
government official, bureau or office, except upon written permission of the depositor,
or in cases of impeachment, or upon order of a competent court in cases of bribery or
dereliction of duty of public officials, or in cases where the money deposited or invested
is the subject matter of the litigation. (Emphasis and italics supplied) The phrase “of
whatever nature” proscribes any restrictive interpretation of “deposits.” Moreover, it is
clear from the immediately quoted provision that, generally, the law applies not only to
money which is deposited but also to those which are invested. This further shows that
the law was not intended to apply only to “deposits” in the strict sense of the word.
Otherwise, there would have been no need to add the phrase “or invested.” Clearly,
therefore, R.A. 1405 is broad enough to cover Trust Account No. 858.

The protection afforded by the Secrecy of Bank Deposits Act law is, however, not
absolute, there being recognized exceptions thereto, as provided for in Section 2 of
said law.—The protection afforded by the law is, however, not absolute, there being
recognized exceptions thereto, as above-quoted Section 2 provides. In the present
case, two exceptions apply, to wit: (1) the examination of bank accounts is upon order
of a competent court in cases of bribery or dereliction of duty of public officials, and (2)
the money deposited or invested is the subject matter of the litigation.

Public Officers; Plunder; Criminal Law; Bribery; Cases of unexplained wealth are similar
to cases of bribery or dereliction of duty and no reason why these two classes of cases
cannot be excepted from the rule making bank deposits confidential—and,
undoubtedly, cases for plunder involve unexplained wealth.— Petitioner contends that
since plunder is neither bribery nor dereliction of duty, his accounts are not excepted
from the protection of R.A. 1405. Philippine National Bank v. Gancayco, 15 SCRA 91, 96
(1965), holds otherwise: Cases of unexplained wealth are similar to cases of bribery or
dereliction of duty and no reason is seen why these two classes of cases cannot be
excepted from the rule making bank deposits confidential. The policy as to one cannot
be different from the policy as to the other. This policy expresses the notion that a public
office is a public trust and any person who enters upon its discharge does so with the full
knowledge that his life, so far as relevant to his duty, is open to public scrutiny.
Undoubtedly, cases for plunder involve unexplained wealth. Section 2 of R.A. No. 7080
states so.

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.—
All the above-enumerated overt acts are similar to bribery such that, in each case, it
may be said that “no reason is seen why these two classes of cases cannot be
excepted from the rule making bank deposits confidential.” 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.

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, and the subject matter of the litigation cannot be limited to bank
accounts under his name alone, but must include those accounts to which the money
purportedly acquired illegally or a portion thereof was alleged to have been
transferred.— The plunder case now pending with the Sandiganbayan necessarily
involves an inquiry into the whereabouts of the amount purportedly acquired illegally
by former President Joseph Estrada. In light then of this 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.

Searches and Seizures; Exclusionary Rule; Fruit of the Poisonous Tree Doctrine; Where
Congress has both established a right and provided exclusive remedies for its violation,
the courts would be encroaching upon the prerogatives of Congress were they to
authorize a remedy not provided for by statute—absent a specific reference to an
exclusionary rule, it is not appropriate for the courts to read such a provision into the
act; R.A. No. 1405 nowhere provides that an unlawful examination of bank accounts
shall render the evidence obtained therefrom inadmissible in evidence.—Petitioner’s
attempt to make the exclusionary rule applicable to the instant case fails. R.A. 1405, it
bears noting, nowhere provides that an unlawful examination of bank accounts shall
render the evidence obtained therefrom inadmissible in evidence. Section 5 of R.A.
1405 only states that “[a]ny violation of this law will subject the offender upon
conviction, to an imprisonment of not more than five years or a fine of not more than
twenty thousand pesos or both, in the discretion of the court.” The case of U.S. v. Frazin,
780 F.2d 1461 (1986), involving the Right to Financial Privacy Act of 1978 (RFPA) of the
United States, is instructive. Because the statute, when properly construed, excludes a
suppression remedy, it would not be appropriate for us to provide one in the exercise of
our supervisory powers over the administration of justice. Where Congress has both
established a right and provided exclusive remedies for its violation, we would
“encroach upon the prerogatives” of Congress were we to authorize a remedy not
provided for by statute. United States v. Chanen, 549 F.2d 1306, 1313 (9th Cir.), cert.
denied, 434 U.S. 825, 98 S.Ct. 72, 54 L.Ed.2d 83 (1977). The same principle was reiterated
in U.S. v. Thompson, 936 F.2d 1249 (1991): x x x When Congress specifically designates a
remedy for one of its acts, courts generally presume that it engaged in the necessary
balancing of interests in determining what the appropriate penalty should be. See
Michaelian, 803 F.2d at 1049 (citing cases); Frazin, 780 F.2d at 1466. Absent a specific
reference to an exclusionary rule, it is not appropriate for the courts to read such a
provision into the act.

Words and Phrases; The “fruit of the poisonous tree” doctrine presupposes a violation of
law—if there is no violation of R.A. No. 1405, then there would be no “poisonous tree” to
begin with, and, thus, no reason to apply the doctrine.—Even assuming arguendo,
however, that the exclusionary rule applies in principle to cases involving R.A. 1405, the
Court finds no reason to apply the same in this particular case. Clearly, the “fruit of the
poisonous tree” doctrine presupposes a violation of law. If there was no violation of R.A.
1405 in the instant case, then there would be no “poisonous tree” to begin with, and,
thus, no reason to apply the doctrine.
Judgments; When a doctrine of the Supreme Court is overruled and a different view is
adopted, and more so when there is a reversal thereof, the new doctrine should be
applied prospectively and should not apply to parties who relied on the old doctrine
and acted in good faith.—For the Ombudsman issued the subpoenas bearing on the
bank accounts of petitioner about four months before Marquez was promulgated on
June 27, 2001. While judicial interpretations of statutes, such as that made in Marquez
with respect to R.A. No. 6770 or the Ombudsman Act of 1989, are deemed part of the
statute as of the date it was originally passed, the rule is not absolute. Columbia
Pictures, Inc. v. Court of Appeals, 261 SCRA 144 (1996), teaches: It is consequently clear
that a judicial interpretation becomes a part of the law as of the date that law was
originally passed, subject only to the qualification that when a doctrine of this Court is
overruled and a different view is adopted, and more so when there is a reversal
thereof, the new doctrine should be applied prospectively and should not apply to
parties who relied on the old doctrine and acted in good faith. (Emphasis and italics
supplied) When this Court construed the Ombudsman Act of 1989, in light of the
Secrecy of Bank Deposits Law in Marquez, that “before an in camera inspection may
be allowed there must be a pending case before a court of competent jurisdiction,” it
was, in fact, reversing an earlier doctrine found in Banco Filipino Savings and Mortgage
Bank v. Purisima, 161 SCRA 576 (1988).

The Marquez v. Desierto, 359 SCRA 772 (2001), ruling that “the account holder must be
notified to be present during the inspection” may not be applied retroactively to the
inquiry of the Ombudsman subject of this case since said ruling is not a judicial
interpretation either of R.A. 6770 or R.A. 1405, but a “judge-made” law which can only
be given prospective application.—The Marquez ruling that “the account holder must
be notified to be present during the inspection” may not be applied retroactively to the
inquiry of the Ombudsman subject of this case. This ruling is not a judicial interpretation
either of R.A. 6770 or R.A. 1405, but a “judge-made” law which, as People v. Luvendino,
211 SCRA 36 (1992), instructs, can only be given prospective application: x x x The
doctrine that an uncounselled waiver of the right to counsel is not to be given legal
effect was initially a judgemade one and was first announced on 26 April 1983 in
Morales v. Enrile and reiterated on 20 March 1985 in People v. Galit. x x x While the
Morales-Galit doctrine eventually became part of Section 12(1) of the 1987
Constitution, that doctrine affords no comfort to appellant Luvendino for the
requirements and restric tions outlined in Morales and Galit have no retroactive effect
and do not reach waivers made prior to 26 April 1983 the date of promulgation of
Morales. (Emphasis supplied) In fine, the subpoenas issued by the Ombudsman in this
case were legal, hence, invocation of the “fruit of the poisonous tree” doctrine is
misplaced. AT ALL EVENTS, even if the challenged subpoenas are quashed, the
Ombudsman is not barred from requiring the production of the same documents based
solely on information obtained by it from sources independent of its previous inquiry.

Presumption of Regularity; To presume that the information was obtained in violation of


R.A. No. 1405 would infringe the presumption of regularity in the performance of official
functions.—The information on the existence of Bank Accounts bearing number “858”
was, according to respondent People of the Philippines, obtained from various sources
including the proceedings during the impeachment of President Estrada, related
reports, articles and investigative journals. In the absence of proof to the contrary, this
explanation proffered by respondent must be upheld. To presume that the information
was obtained in violation of R.A. 1405 would infringe the presumption of regularity in the
performance of official functions.
30. People vs. Estrada, 583 SCRA 302, G.R. Nos. 164368-69 April 2, 2009

Criminal Law; Illegal Use of Alias; Definition of an Alias; There must be a sign or indication
that the user intends to be known by this name (the alias) in addition to his real name
from that day forth for the use of alias to fall within the prohibition contained in
Commonwealth Act (C.A.) No. 142 as amended.—How this law is violated has been
answered by the Ursua definition of an alias—“a name or names used by a person or
intended to be used by him publicly and habitually usually in business transactions in
addition to his real name by which he is registered at birth or baptized the first time or
substitute name authorized by a competent authority.” There must be, in the words of
Ursua, a “sign or indication that the user intends to be known by this name (the alias) in
addition to his real name from that day forth… [for the use of alias to] fall within the
prohibition contained in C.A. No. 142 as amended.”

The repeated use of an alias within a single day cannot be deemed “habitual” as it
does not amount to a customary practice or use.—Separately from the constitutional
dimension of the allegation of time in the Information, another issue that the allegation
of time and our above conclusion raise relates to what act or acts, constituting a
violation of the offense charged, were actually alleged in the Information. The
conclusion we arrived at necessarily impacts on the People’s case, as it deals a fatal
blow on the People’s claim that Estrada habitually used the Jose Velarde alias. For, to
our mind, the repeated use of an alias within a single day cannot be deemed
“habitual,” as it does not amount to a customary practice or use. This reason alone
dictates the dismissal of the petition under CA No. 142 and the terms of Ursua.

In order to be held liable for a violation of Commonwealth Act (C.A.) No. 142, the user
of the alias must have held himself out as a person who shall publicly be known under
that other name.—Albeit for a different reason, with the Sandiganbayan position that
the rule in the law of libel—that mere communication to a third person is publicity—
does not apply to violations of CA No. 142. Our close reading of Ursua—particularly, the
requirement that there be intention by the user to be culpable and the historical
reasons we cited above—tells us that the required publicity in the use of alias is more
than mere communication to a third person; the use of the alias, to be considered
public, must be made openly, or in an open manner or place, or to cause it to become
generally known. In order to be held liable for a violation of CA No. 142, the user of the
alias must have held himself out as a person who shall publicly be known under that
other name. In other words, the intent to publicly use the alias must be manifest.

Estrada could not be said to have intended his signing as Jose Velarde to be for public
consumption by the fact alone that Lacquian and Chua were also inside the room at
that time.—The presence of Lacquian and Chua when Estrada signed as Jose Velarde
and opened Trust Account No. C-163 does not necessarily indicate his intention to be
publicly known henceforth as Jose Velarde. In relation to Estrada, Lacquian and Chua
were not part of the public who had no access to Estrada’s privacy and to the
confidential matters that transpired in Malacañan where he sat as President; Lacquian
was the Chief of Staff with whom he shared matters of the highest and strictest
confidence, while Chua was a lawyer-friend bound by his oath of office and ties of
friendship to keep and maintain the privacy and secrecy of his affairs. Thus, Estrada
could not be said to have intended his signing as Jose Velarde to be for public
consumption by the fact alone that Lacquian and Chua were also inside the room at
that time. The same holds true for Estrada’s alleged representations with Ortaliza and
Dichavez, assuming the evidence for these representations to be admissible. All of
Estrada’s representations to these people were made in privacy and in secrecy, with no
iota of intention of publicity.

Given the private nature of Estrada’s act of signing the documents as “Jose Velarde”
related to the opening of the trust account, the People cannot claim that there was
already a public use of alias when Ocampo and Curato witnessed the signing.—We
have consistently ruled that bank deposits under R.A. No. 1405 (the Secrecy of Bank
Deposits Law) are statutorily protected or recognized zones of privacy. Given the
private nature of Estrada’s act of signing the documents as “Jose Velarde” related to
the opening of the trust account, the People cannot claim that there was already a
public use of alias when Ocampo and Curato witnessed the signing. We need not even
consider here the impact of the obligations imposed by R.A. No. 1405 on the bank
officers; what is essentially significant is the privacy situation that is necessarily implied in
these kinds of transactions. This statutorily guaranteed privacy and secrecy effectively
negate a conclusion that the transaction was done publicly or with the intent to use the
alias publicly.
31. Republic vs. Eugenio, Jr., 545 SCRA 384, G.R. No. 174629 February 14, 2008

Banks and Banking; Anti-Money Laundering Act; Even if the bank inquiry order may be
availed of without need of a pre-existing case under the Anti-Money Laundering Act
(AMLA), it does not follow that such order may be availed of ex parte.—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 any
case at all would not be an alternative. Such unwholesome setup 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.

In the instances where a court order is required for the issuance of the bank inquiry
order, nothing in Section 11 specifically authorizes that such order may be issued ex
parte.—In the instances where a court order is required for the issuance of the bank
inquiry order, nothing in Section 11 specifically authorizes that such court order may be
issued ex parte. It might be argued that this silence does not preclude the ex parte
issuance of the bank inquiry order since the same is not prohibited under Section 11. Yet
this argument falls when the immediately preceding provision, Section 10, is examined.

Section 10 uses specific language to authorize an ex parte application for the


provisional relief therein, a circumstance absent in Section 11.—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.

With respect to freeze orders under Section 10, the implementing rules do expressly
provide that the applications for freeze orders be filed ex parte but no similar clearance
is granted in the case of inquiry orders under Section 11.—That the AMLA does not
contemplate ex parte proceedings in applications for bank inquiry orders is confirmed
by the present implementing rules and regulations of the AMLA, promulgated upon the
passage of R.A. No. 9194. With respect to freeze orders under Section 10, the
implementing rules do expressly provide that the applications for freeze orders be filed
ex parte, 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, and if it was the
true belief of these institutions that inquiry orders could be issued ex parte similar to
freeze orders, language to that effect would have been incorporated in the said Rules.
This is stressed not because the implementing rules could authorize ex parte
applications for inquiry orders despite the absence of statutory basis, but rather
because the framers of the law had no intention to allow such ex parteapplications.

Court receiving the application for inquiry order cannot simply take the Anti-Money
Laundering Council’s (AMLC’s) word that probable cause exists that the deposits or
investments are related to an unlawful activity.—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.

Search Warrants; The supposed analogy between a search warrant and a bank inquiry
order is unconvincing.—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 re main 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, such examination
being in the form of searching questions and answers. 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.

Bank Secrecy Act of 1955; There is a right to privacy governing bank accounts in the
Philippines and that such right finds application to the case at bar.—Sufficient for our
purposes, we can assert there is a right to privacy governing bank accounts in the
Philippines, and that such right finds application to the case at bar. The source of such
right is statutory, expressed as it is in R.A. No. 1405 otherwise known as the Bank Secrecy
Act of 1955. The right to privacy is enshrined in Section 2 of that law.

Unless the Bank Secrecy Act is repealed or amended, the legal order is obliged to
conserve the absolutely confidential nature of Philippine bank deposits.—Because of
the Bank Secrecy Act, the confidentiality of bank deposits remains a basic state policy
in the Philippines. Subsequent laws, including the AMLA, may have added exceptions
to the Bank Secrecy Act, yet the secrecy of bank deposits still lies as the general rule. It
falls within the zones of privacy recognized by our laws. The framers of the 1987
Constitution likewise recognized that bank accounts are not covered by either the right
to information under Section 7, Article III or under the requirement of full public
disclosure under Section 28, Article II. Unless the Bank Secrecy Act is repealed or
amended, the legal order is obliged to conserve the absolutely confidential nature of
Philippine bank deposits.

Exceptions prescribed in Section 2 of the Bank Secrecy Act whereby bank accounts
may be examined by “any person, government official, bureau or office”; The
Ombudsman Act of 1989 contains a provision relating to “access to bank accounts
and records.”—Any exception to the rule of absolute confidentiality must be
specifically legislated. Section 2 of the Bank Secrecy Act itself prescribes exceptions
whereby these bank accounts may be examined by “any person, government official,
bureau or office”; namely when: (1) upon written permission of the depositor; (2) in
cases of impeachment; (3) the examination of bank accounts is upon order of a
competent court in cases of bribery or dereliction of duty of public officials; and (4) the
money deposited or invested is the subject matter of the litigation. Section 8 of R.A. Act
No. 3019, the Anti-Graft and Corrupt Practices Act, has been recognized by this Court
as constituting an additional exception to the rule of absolute confidentiality. A
subsequent law, the Ombudsman Act of 1989 contains a provision relating to “access
to bank accounts and records.”

The Anti-Money Laundering Act (AMLA) also provides exceptions to the Bank Secrecy
Act.—The AMLA also provides exceptions to the Bank Secrecy Act. Under Section 11,
the AMLC may inquire into a bank account upon order of any competent court in
cases of violation of the AMLA, it having been established that there is probable cause
that the deposits or investments are related to unlawful activities as defined in Section
3(i) of the law, or a money laundering offense under Section 4 thereof. Further, in
instances where there is probable cause that the deposits or investments are related to
kidnapping for ransom, 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.

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.—Just because the AMLA establishes additional
exceptions to the Bank Secrecy Act it does not mean that the later law has dispensed
with the general principle established in the older law that “[a]ll deposits of whatever
nature with banks or banking institutions in the Philippines x x x are hereby considered as
of an absolutely confidential nature.” 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 govern ment 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.

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 Anti-Money Laundering Act (AMLA).—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.” That statement does indicate that transactions already in
place when the 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.
32. Republic vs. Glasgow Credit and Collection Services, Inc., 542 SCRA 95, G.R. No.
170281 January 18, 2008

Anti-Money Laundering Act of 2001 (R.A. No. 9160); Civil Forfeiture; Actions; Venue;
Motions to Dismiss; The motu proprio dismissal of a complaint by the trial court on the
ground of improper venue is plain error.—Inasmuch as Glasgow never questioned the
venue of the Republic’s complaint for civil forfeiture against it, how could the trial court
have dismissed the complaint for improper venue? In Dacoycoy v. Intermediate
Appellate Court, 195 SCRA 641 (1991), (reiterated in Rudolf Lietz Holdings, Inc. v. Registry
of Deeds of Parañaque City, 344 SCRA 680 (2000)], this Court ruled: The motu proprio
dismissal of petitioner’s complaint by [the] trial court on the ground of improper venue is
plain error… . (emphasis supplied)

The venue of civil forfeiture cases is any Regional Trial Court of the judicial region where
the monetary instrument, property or proceeds representing, involving, or relating to an
unlawful activity or to a money laundering offense are located.—Under Section 3, Title II
of the Rule of Procedure in Cases of Civil Forfeiture, therefore, the venue of civil
forfeiture cases is any RTC of the judicial region where the monetary instrument,
property or proceeds representing, involving, or relating to an unlawful activity or to a
money laundering offense are located. Pasig City, where the account sought to be
forfeited in this case is situated, is within the National Capital Judicial Region (NCJR).
Clearly, the complaint for civil forfeiture of the account may be filed in any RTC of the
NCJR. Since the RTC Manila is one of the RTCs of the NCJR, it was a proper venue of the
Republic’s complaint for civil forfeiture of Glasgow’s account.

Two Conditions When Applying for Civil Forfeiture; It is the preliminary seizure of the
property in question which brings it within the reach of judicial process.—RA 9160, as
amended, and its implementing rules and regulations lay down two conditions when
applying for civil forfeiture: (1) when there is a suspicious transaction report or a
covered transaction report deemed suspicious after investigation by the AMLC and (2)
the court has, in a petition filed for the purpose, ordered the seizure of any monetary
instrument or property, in whole or in part, directly or indirectly, related to said report. It
is the preliminary seizure of the property in question which brings it within the reach of
the judicial process. It is actually within the court’s possession when it is submitted to the
process of the court. The injunctive writ issued on August 8, 2003 removed account no.
CA-005-10-000121-5 from the effective control of either Glasgow or CSBI or their
representatives or agents and subjected it to the process of the court.

A criminal conviction for an unlawful activity is not a prerequisite for the institution of a
civil forfeiture proceeding—a finding of guilt for an unlawful activity is not an essential
element of civil forfeiture.—Whether or not there is truth in the allegation that account
no. CA-005-10-000121-5 contains the proceeds of unlawful activities is an evidentiary
matter that may be proven during trial. The complaint, however, did not even have to
show or allege that Glasgow had been implicated in a conviction for, or the
commission of, the unlawful activities of estafa and violation of the Securities Regulation
Code. A criminal conviction for an unlawful activity is not a prerequisite for the
institution of a civil forfeiture proceeding. Stated otherwise, a finding of guilt for an
unlawful activity is not an essential element of civil forfeiture.

Dismissal of Cases; While a court can dismiss a case on the ground of non prosequitur,
the real test for the exercise of such power is whether, under the circumstances, plaintiff
is chargeable with want of due diligence in failing to proceed with reasonable
promptitude.—In Marahay v. Melicor, 181 SCRA 811 (1990), this Court ruled: While a
court can dismiss a case on the ground of non prosequitur, the real test for the exercise
of such power is whether, under the circumstances, plaintiff is chargeable with want of
due diligence in failing to proceed with reasonable promptitude. In the absence of a
pattern or scheme to delay the disposition of the case or a wanton failure to observe
the mandatory requirement of the rules on the part of the plaintiff, as in the case at bar,
courts should decide to dispense with rather than wield their authority to dismiss.
(emphasis supplied)

Forfeiture proceedings are actions in rem—service may be made by publication; The


same principle in forfeiture proceedings under RA 1379 applies in cases for civil
forfeiture under RA 9160, as amended, since both cases do not terminate in the
imposition of a penalty but merely in the forfeiture of the properties either acquired
illegally or related to unlawful activities in favor of the State.—In Republic v.
Sandiganbayan, 406 SCRA 190 (2003), this Court declared that the rule is settled that
forfeiture proceedings are actions in rem. While that case involved forfeiture
proceedings under RA 1379, the same principle applies in cases for civil forfeiture under
RA 9160, as amended, since both cases do not terminate in the imposition of a penalty
but merely in the forfeiture of the properties either acquired illegally or related to
unlawful activities in favor of the State. As an action in rem, it is a proceeding against
the thing itself instead of against the person. In actions in rem or quasi in rem, jurisdiction
over the person of the defendant is not a prerequisite to conferring jurisdiction on the
court, provided that the court acquires jurisdiction over the res. Nonetheless, summons
must be served upon the defendant in order to satisfy the requirements of due process.
For this purpose, service may be made by publication as such mode of service is
allowed in actions in rem and quasi in rem.
33. Republic vs. Cabrini, Green & Ross, Inc., 489 SCRA 644, G.R. No. 154522, G.R. No.
154694, G.R. No. 155554, G.R. No. 155711 May 5, 2006

Anti-Money Laundering Act of 2001 (RA 9160); Freeze Orders; As the law now stands, it is
solely the Court of Appeals, which has the authority to issue a freeze order as well as to
extend its effectivity. It also has the exclusive jurisdiction to extend freeze orders
previously issued by the Anti-Money Laundering Council (AMLC) vis-à-vis accounts and
deposits related to money laundering activities.—The amendment by RA 9194 of RA
9160 erased any doubt on the jurisdiction of the CA over the extension of freeze orders.
As the law now stands, it is solely the CA which has the authority to issue a freeze order
as well as to extend its effectivity. It also has the exclusive jurisdiction to extend existing
freeze orders previously issued by the AMLC vis-à-vis accounts and deposits related to
money-laundering activities.
34. Ligot vs. Republic, 692 SCRA 509, G.R. No. 176944 March 6, 2013

Remedial Law; Certiorari; Special Civil Actions; Even assuming that a petition for
certiorari is available to the petitioners, a review of their petition shows that the issues
they raise (i.e., existence of probable cause to support the freeze order; the
applicability of the 6-month limit to the extension of freeze orders embodied in the Rule
of Procedure in Cases of Civil Forfeiture) pertain to errors of judgment allegedly
committed by the Court of Appeals, which fall outside the Supreme Court’s limited
jurisdiction when resolving certiorari petitions.—Section 57 of the Rule in Civil Forfeiture
Cases explicitly provides the remedy available in cases involving freeze orders issued by
the CA: Section 57. Appeal.―Any party aggrieved by the decision or ruling of the court
may appeal to the Supreme Court by petition for review on certiorari under Rule 45 of
the Rules of Court. The appeal shall not stay the enforcement of the subject decision or
final order unless the Supreme Court directs otherwise. [italics supplied] From this
provision, it is apparent that the petitioners should have filed a petition for review on
certiorari, and not a petition for certiorari, to assail the CA resolution which extended
the effectivity period of the freeze order over their properties. Even assuming that a
petition for certiorari is available to the petitioners, a review of their petition shows that
the issues they raise (i.e., existence of probable cause to support the freeze order; the
applicability of the 6-month limit to the extension of freeze orders embodied in the Rule
of Procedure in Cases of Civil Forfeiture) pertain to errors of judgment allegedly
committed by the CA, which fall outside the Court’s limited jurisdiction when resolving
certiorari petitions.

Moot and Academic; A case is considered moot and academic when it ceases to
present a justiciable controversy by virtue of supervening events, so that a declaration
thereon would be of no practical use or value. Generally, courts decline jurisdiction
over such case or dismiss it on ground of mootness.—A case is considered moot and
academic when it “ceases to present a justiciable controversy by virtue of supervening
events, so that a declaration thereon would be of no practical use or value. Generally,
courts decline jurisdiction over such case or dismiss it on ground of mootness.” However,
the moot and academic principle is not an iron-clad rule and is subject to four settled
exceptions, two of which are present in this case, namely: when the constitutional issue
raised requires the formulation of controlling principles to guide the bench, the bar, and
the public, and when the case is capable of repetition, yet evading review.

Freeze Orders; Republic Act No. 9160; Money Laundering; Based on Section 10 of R.A.
No. 9160, as amended by R.A. No. 9194, there are only two requisites for the issuance of
a freeze order: (1) the application ex parte by the Anti-Money Laundering Council, and
(2) the determination of probable cause by the Court of Appeals.—The legal basis for
the issuance of a freeze order is Section 10 of RA No. 9160, as amended by RA No. 9194,
which states: Section 10. Freezing of Monetary Instrument or Property.―The Court of
Appeals, upon application ex parte by the AMLC and after determination that
probable cause exists that any monetary instrument or property is in any way related to
an unlawful activity as defined in Section 3(i) hereof, may issue a freeze order which
shall be effective immediately. The freeze order shall be for a period of twenty (20) days
unless extended by the court. [italics supplied] The Ligots claim that the CA erred in
extending the effectivity period of the freeze order against them, given that they have
not yet been convicted of committing any of the offenses enumerated under RA No.
9160 that would support the AMLC’s accusation of money-laundering activity. We do
not see any merit in this claim. The Ligots’ argument is founded on a flawed
understanding of probable cause in the context of a civil forfeiture proceeding or
freeze order application. Based on Section 10 quoted above, there are only two
requisites for the issuance of a freeze order: (1) the application ex parte by the AMLC
and (2) the determination of probable cause by the CA. The probable cause required
for the issuance of a freeze order differs from the probable cause required for the
institution of a criminal action, and the latter was not an issue before the CA nor is it an
issue before us in this case.

As defined in the law, the probable cause required for the issuance of a freeze order
refers to “such facts and circumstances which would lead a reasonably discreet,
prudent or cautious man to believe that an unlawful activity and/or a money
laundering offense is about to be, is being or has been committed and that the
account or any monetary instrument or property subject thereof sought to be frozen is
in any way related to said unlawful activity and/or money laundering offense.”—As
defined in the law, the probable cause required for the issuance of a freeze order refers
to “such facts and circumstances which would lead a reasonably discreet, prudent or
cautious man to believe that an unlawful activity and/or a money laundering offense is
about to be, is being or has been committed and that the account or any monetary
instrument or property subject thereof sought to be frozen is in any way related to said
unlawful activity and/or money laundering offense.” In other words, in resolving the
issue of whether probable cause exists, the CA’s statutorily-guided determination’s
focus is not on the probable commission of an unlawful activity (or money laundering)
that the Office of the Ombudsman has already determined to exist, but on whether the
bank accounts, assets, or other monetary instruments sought to be frozen are in any
way related to any of the illegal activities enumerated under RA No. 9160, as
amended. Otherwise stated, probable cause refers to the sufficiency of the relation
between an unlawful activity and the property or monetary instrument which is the
focal point of Section 10 of RA No. 9160, as amended.

A freeze order is an extraordinary and interim relief issued by the Court of Appeals to
prevent the dissipation, removal, or disposal of properties that are suspected to be the
proceeds of, or related to, unlawful activities as defined in Section 3(i) of RA No. 9160,
as amended. The primary objective of a freeze order is to temporarily preserve
monetary instruments or property that are in any way related to an unlawful activity or
money laundering, by preventing the owner from utilizing them during the duration of
the freeze order.—A freeze order is an extraordinary and interim relief issued by the CA
to prevent the dissipation, removal, or disposal of properties that are suspected to be
the proceeds of, or related to, unlawful activities as defined in Section 3(i) of RA No.
9160, as amended. The primary objective of a freeze order is to temporarily preserve
monetary instruments or property that are in any way related to an unlawful activity or
money laundering, by preventing the owner from utilizing them during the duration of
the freeze order. The relief is pre-emptive in character, meant to prevent the owner
from disposing his property and thwarting the State’s effort in building its case and
eventually filing civil forfeiture proceedings and/or prosecuting the owner.

As a rule, the effectivity of a freeze order may be extended by the Court of Appeals for
a period not exceeding six months; However, should it become completely necessary
for the Republic to further extend the duration of the freeze order, it should file the
necessary motion before the expiration of the six-month period and explain the reason
or reasons for its failure to file an appropriate case and justify the period of extension
sought.—As a rule, the effectivity of a freeze order may be extended by the CA for a
period not exceeding six months. Before or upon the lapse of this period, ideally, the
Republic should have already filed a case for civil forfeiture against the property owner
with the proper courts and accordingly secure an asset preservation order or it should
have filed the necessary information. Otherwise, the property owner should already be
able to fully enjoy his property without any legal process affecting it. However, should it
become completely necessary for the Republic to further extend the duration of the
freeze order, it should file the necessary motion before the expiration of the six-month
period and explain the reason or reasons for its failure to file an appropriate case and
justify the period of extension sought. The freeze order should remain effective prior to
the resolution by the CA, which is hereby directed to resolve this kind of motion for
extension with reasonable dispatch.
35. Republic of the Phils., et. al. vs. First Pacific Network Inc. G.R. No. 156646 Nov. 19,
2014 (NO ESCRA) (Doctrines from Case Digest)

It is clear from the foregoing amendments of Republic Act No. 9160 that, at present, the
Court of Appeals has been given sole authority and discretion to issue a freeze order as
well as extend its effectivity. It is likewise apparent that a freeze order is meant to be a
temporary legal remedy in order to facilitate the attainment of the purpose of the Anti-
Money Laundering Law.