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Bank Secrecy Laws

Republic v Judge Eugenio G.R. No. 174629, February 14, 2008


Sec. 2 of the Bank Secrecy Act itself prescribes exceptions whereby these bank
accounts may be examined by any person, government official, bureau or offial;
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, and there
have been other similar recognitions as well.[
Facts: Under the authority granted by the Resolution, the AMLC filed an application to
inquire into or examine the deposits or investments of Alvarez, Trinidad, Liongson and
Cheng Yong before the RTC of Makati, Branch 138, presided by Judge (now Court of
Appeals Justice) Sixto Marella, Jr. The application was docketed as AMLC No. 05-
005. The Makati RTC heard the testimony of the Deputy Director of the AMLC, Richard
David C. Funk II, and received the documentary evidence of the AMLC.[14] Thereafter,
on 4 July 2005, the Makati RTC rendered an Order (Makati RTC bank inquiry order)
granting the AMLC the authority to inquire and examine the subject bank accounts of
Alvarez, Trinidad, Liongson and Cheng Yong, the trial court being satisfied that there
existed p]robable cause [to] believe that the deposits in various bank accounts, details
of which appear in paragraph 1 of the Application, are related to the offense of
violation of Anti-Graft and Corrupt Practices Act now the subject of criminal
prosecution before the Sandiganbayan as attested to by the Informations, Exhibits C, D,
E, F, and G Pursuant to the Makati RTC bank inquiry order, the CIS proceeded to inquire
and examine the deposits, investments and related web accounts of the four.[16]
Meanwhile, the Special Prosecutor of the Office of the Ombudsman, Dennis Villa-
Ignacio, wrote a letter dated 2 November 2005, requesting the AMLC to investigate the
accounts of Alvarez, PIATCO, and several other entities involved in the nullified contract.
The letter adverted to probable cause to believe that the bank accounts were used in
the commission of unlawful activities that were committed a in relation to the criminal
cases then pending before the Sandiganbayan. Attached to the letter was a
memorandum on why the investigation of the [accounts] is necessary in the
prosecution of the above criminal cases before the Sandiganbayan. In response to the
letter of the Special Prosecutor, the AMLC promulgated on 9 December 2005 Resolution
No. 121 Series of 2005,[19] which authorized the executive director of the AMLC to
inquire into and examine the accounts named in the letter, including one maintained by
Alvarez with DBS Bank and two other accounts in the name of Cheng Yong with
Metrobank. The Resolution characterized the memorandum attached to the Special
Prosecutors letter as extensively justif[ying] the existence of probable cause that the
bank accounts of the persons and entities mentioned in the letter are related to the
unlawful activity of violation of Sections 3(g) and 3(e) of Rep. Act No. 3019, as
amended.
Issue: Whether or not the bank accounts of respondents can be examined.
Held:
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 offial; 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, and there have been other similar recognitions as well.
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. It cannot be
successfully argued the proceedings relating to the bank inquiry order under Section 11 of the AMLA is
a litigation encompassed in one of the exceptions to the Bank Secrecy Act which is when money
deposited or invested is the subject matter of the litigation. The orientation of the bank inquiry order is
simply to serve as a provisional relief or remedy. As earlier stated, the application for such does not
entail a full-blown trial. Nevertheless, just because the AMLA establishes additional exceptions to the
Bank Secrecy Act it does not mean that the later law has dispensed with the general principle
established in the older law that all 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.China Banking Corporation v Court of Appeals G.R. No.
140687 December 18, 2006
MARCH 16, 2014LEAVE A COMMENT
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.
Facts: A Complaint for recovery of sums of money and annulment of sales of real
properties and shares of stock docketed as CEB-21445 was filed by Jose “Joseph”
Gotianuy against his son-in-law, George Dee, and his daughter, Mary Margaret Dee,
before the Regional Trial Court (RTC) of Cebu City. Jose Gotianuy accused his daughter
Mary Margaret Dee of stealing, among his other properties, US dollar deposits with
Citibank N.A. amounting to not less than P35,000,000.00 and US$864,000.00. Mary
Margaret Dee received these amounts from Citibank N.A. through checks which she
allegedly deposited at China Banking Corporation (China Bank). He likewise accused his
son-in-law, George Dee, husband of his daughter, Mary Margaret, of transferring his
real properties and shares of stock in George Dee’s name without any consideration.
Jose Gotianuy, died during the pendency of the case before the trial court.1 He was
substituted by his daughter, Elizabeth Gotianuy Lo. The latter presented the US Dollar
checks withdrawn by Mary Margaret Dee from his US dollar placement with Citibank
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. Upon motion of Elizabeth Gotianuy Lo, the trial court issued a subpoena to
Cristota Labios and Isabel Yap, employees of China Bank, to testify on the case.
Issue: Whether or not the subpoena issued by the court violates PD No. 1035, and
further amended by PD No. 1246, prom. Nov. 21, 1977
Held: 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. Furthermore, it is indubitable that
the Citibank checks were drawn against the foreign currency account with Citibank, NA.
The monies subject of said checks originally came from the late Jose Gotianuy, the
owner of the account. Thus, he also has legal rights and interests in the CBC account
where said monies were deposited. More importantly, the Citibank checks readily
demonstrate (sic) that the late Jose Gotianuy is one of the payees of said checks. Being
a co-payee thereof, then he or his estate can be considered as a co-depositor of said
checks. Ergo, since the late Jose Gotianuy is a co-depositor of the CBC account, then his
request for the assailed subpoena is tantamount to an express permission of a
depositor for the disclosure of the name of the account holder. The April 16, 1999
Order perforce must be sustained.
Ejercito vs. Sandiganbayan G.R. Nos. 157294-95, 30 November 2006

RA 1405 does not provide for the application of this rule. At all events, the
Ombudsman is not barred from requiring the production of documents based solely
on information obtained by it from sources independentof its previous inquiry.
Facts: Joseph Victor G. Ejercito is the owner of Trust Account No. 858 which was
originally opened at Urban Bank but which is now maintained at Export and Industry
Bank, which is the purchaser and owner now of the former Urban Bank and Urbancorp
Investment, Inc. He is also the owner of Savings Account No. 0116-17345-9 which was
originally opened at Urban Bank but which is now maintained at Export and Industry
Bank, the purchaser and owner of the former Urban Bank and Urbancorp Investment,
Inc.
Estrada was subsequently charged with Plunder. The Sandiganbayan a Request for
Issuance of Subpoena Duces Tecum for the issuance of a subpoena directing the
President of Export and Industry Bank (EIB, formerly Urban Bank) or his/her authorized
representative to produce various document related to the investigation.
The Special Prosecution Panel also filed a Request for Issuance of Subpoena Duces
Tecum/Ad Testificandum directed to the authorized representative of Equitable-PCI
Bank to produce statements of account pertaining to certain accounts in the name of
“Jose Velarde” and to testify thereon.
The Sandiganbayan granted both requests by Resolution and subpoenas
were accordingly issued. The Special Prosecution Panel filed still another Request for
Issuance of Subpoena Duces Tecum/Ad Testificandum for the President of EIB or
his/her authorized representative to produce the same documents subject of the first
Subpoena Duces Tecum and to testify thereon on the hearings scheduled and
subsequent dates until completion of the testimony. The request was likewise granted
by the Sandiganbayan. A Subpoena Duces Tecum/Ad Testificandum was accordingly
issued. Ejercito filed various motions to quash the various Subpoenas Duces Tecum/Ad
Testificandum previously issued. In his Motion to Quash, he claimed that his bank
accounts are covered by R.A. No. 1405 (The Secrecy of Bank Deposits Law) and do not
fall under any of the exceptions stated therein. He further claimed that the specific
identification of documents in the questioned subpoenas, including details on dates
and amounts, could only have been made possible by an earlier illegal disclosure
thereof by the EIB and the Philippine Deposit Insurance Corporation (PDIC) in its
capacity as receiver of the then Urban Bank. The disclosure being illegal, he concluded,
the prosecution in the case may not be allowed to make use of the information.
Before the motion was resolved by the Sandiganbayan, the prosecution filed another
Issue: Whether or not a Trust Account is covered by the term “deposit” as used in R.A.
1405;
Held: R.A. 1405 is broad enough to cover Trust Account No. 858. However, the
protection afforded by the law is not absolute. There being recognized exceptions
thereto, as above-quoted Section 2 provides. 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. Ejercito contends that since plunder is
neither bribery nor dereliction of duty, his accounts are not excepted from the
protection of R.A. 1405.
Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no
reason is seen why these two classes of cases cannot be excepted from the rule making
bank deposits confidential. The policy as to one cannot be different from the policy as
to the other. This policy expresses the notion that a public office is a public trust and
any person who enters upon its discharge does so with the full knowledge that his life,
so far as relevant to his duty, is open to public scrutiny. Undoubtedly, cases for plunder
involve unexplained wealth. The crime of bribery and the overt acts constitutive of
plunder are crimes committed by public officers, noble idea that “a public office is a
public trust and any person who enters upon its discharge does so with the full
knowledge that his life, so far as relevant to his duty, is open to public scrutiny” applies
with equal force.
Also, the plunder case now pending with the Sandiganbayan necessarily involves an
inquiry into the whereabouts of the amount purportedly acquired illegally by former
President Joseph Estrada. Republic Act No. 1405 allows the disclosure of bank
deposits in cases where the money deposited is the subject matter of the litigation.
Hence, these accounts are no longer protected by the Secrecy of Bank Deposits Law,
there being two exceptions to the said law applicable in this case, namely: (1)the
examination of bank accounts is upon order of a competent court in cases of bribery or
dereliction of duty of public officials, and (2)the money deposited or invested is the
subject matter of the litigation. Exception (1) applies since the plunder case pending
against former President Estrada is analogous to bribery or dereliction of duty, while
exception (2) applies because the money deposited in Ejercito’s bank accounts is said to
form part of the subject matter of the same plunder case. The “fruit of the poisonous
tree” doctrine or the exclusionary rule is inapplicable in cases of unlawful examination
of bank accounts.
Intengan v Court of Appeals G.R. No. 128996, February 15, 2002
When the accounts in question are U.S. dollar deposits, the applicable law is not
Republic Act No. 1405 but Republic Act (RA) No. 6426, known as the “Foreign
Currency Deposit Act of the Philippines,” However, applying Act No. 3326, the offense
prescribes in eight years, therefore, per available records, private respondents may
no longer be haled before the courts for violation of Republic Act No. 6426.
Facts: Citibank filed a complaint for violation of section 31 in relation to section 144 of
the Corporation Code against two (2) of its officers, Dante L. Santos and Marilou
Genuino. Attached to the complaint was an affidavit executed by private respondent Vic
Lim, a vice-president of Citibank. As evidence, Lim annexed bank records purporting to
establish the deception practiced by Santos and Genuino. Some of the documents
pertained to the dollar deposits of petitioners Carmen Ll. Intengan, Rosario Ll. Neri, and
Rita P. Brawner. In turn, private respondent Joven Reyes, vice-president/business
manager of the Global Consumer Banking Group of Citibank, admits to having
authorized Lim to state the names of the clients involved and to attach the pertinent
bank records, including those of petitioners’. Petitioners aver that respondents violated
RA 1405.
Issue: Whether or not Respondents are liable for violation of Secrecy of Bank Deposits
Act, RA 1405.
Held: No. The accounts in question are U.S. dollar deposits; consequently, the
applicable law is not Republic Act No. 1405 but Republic Act (RA) No. 6426, known as
the “Foreign Currency Deposit Act of the Philippines,” However, applying Act No. 3326,
the offense prescribes in eight years, therefore, per available records, private
respondents may no longer be haled before the courts for violation of Republic Act No.
6426.
Union Bank v Court of Appeals G.R. No. 134068. June 25, 2001

The bank can be compelled to disclose its accounts, as an exception under R.A. No.
1405, in a litigation involving a cause of action of one bank to the other on an
errouneously encoded check. It is not one for bribery or dereliction of duty of public
officials much less is there any showing that the subject matter thereof is the money
deposited in the account in question
Facts: A check for One Million Pesos (P1,000,000.00) was drawn against Account No.
0111-01854-8 with private respondent Allied Bank payable to the order of one Jose Ch.
Alvarez. The payee deposited the check with petitioner Union Bank who credited the
P1,000,000.00 to the account of Mr. Alvarez.
Petitioner sent the check for clearing through the Philippine Clearing House
Corporation (PCHC). When the check was presented for payment, a clearing
discrepancy was committed by Union Bank’s clearing staff when the amount of One
Million Pesos (P1,000,000.00) was erroneously “under-encoded” to One Thousand
Pesos (P1,000.00) only. Union Bank only discovered the under-encoding almost a year
later. Thus, on May 7, 1991, Union Bank Notified Allied Bank of the discrepancy by way
of a charge slip for Nine Hundred Ninety-Nine Thousand Pesos (P999,000.00) for
automatic debiting against the account of Allied Bank. The latter, however, refused to
accept the charge slip “since [the] transaction was completed per your [Union Bank’s]
original instruction and client’s account is now insufficiently funded.”. Allied Bank set
up the defense of the Bank Secrecy Act.
Issue: Whether or not Allied Bank can be compelled to disclose its accounts, as an
exception under R.A. No. 1405
Held: No. The complaint filed by herein petitioner against Allied Banking Corporation
before the Philippine Clearing House Corporation (PCHC) Arbitration Committee and
docketed therein as Arb[i]com Case No. 91-068 (Annex “A”, petition) is not one for
bribery or dereliction of duty of public officials much less is there any showing that the
subject matter thereof is the money deposited in the account in question. Petitioner’s
complaint primarily hing[e]s on the alleged deliberate violation by Allied Bank
Corporation of the provisions of the PCHC Rule Book, Sec. 25[.]3, and as principal
reliefs, it seeks for [sic] the recovery of amounts of money as a consequence of an
alleged under-coding of check amount to P1,000,000.00 and damage[s] by way of loss
of interest income.
In short, petitioner is fishing for information so it can determine the culpability of
private respondent and the amount of damages it can recover from the latter. It does
not seek recovery of the very money contained in the deposit. The subject matter of
the dispute may be the amount of P999,000.00 that petitioner seeks from private
respondent as a result of the latter’s alleged failure to inform the former of the
discrepancy; but it is not the P999,000.00 deposited in the drawer’s account. By the
terms of R.A. No. 1405, the “money deposited” itself should be the subject matter of
the litigation. That petitioner feels a need for such information in order to establish its
case against private respondent does not, by itself, warrant the examination of the bank
deposits. The necessity of the inquiry, or the lack thereof, is immaterial since the case
does not come under any of the exceptions allowed by the Bank Deposits Secrecy Act.
Salvacion v Central Bank G.R. No. 94723. August 21, 1997

The application of Section 8 of Republic Act No. 6426, on bank secrecy, 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.
Facts: Greg Bartelli, an American tourist, was arrested for committing four counts of
rape and serious illegal detention against Karen Salvacion. Police recovered from him
several dollar checks and a dollar account in the China Banking Corp. He was, however,
able to escape from prison. In a civil case filed against him, the trial court awarded
Salvacion moral, exemplary and attorney’s fees amounting to almost P1,000,000.00.
Salvacion tried to execute the judgment on the dollar deposit of Bartelli with the China
Banking Corp. but the latter refused arguing that Section 11 of Central Bank Circular No.
960 exempts foreign currency deposits from attachment, garnishment, or any other
order or process of any court, legislative body, government agency or any
administrative body whatsoever. Salvacion therefore filed this action for declaratory
relief in the Supreme Court.
Issue: Whether or not Section 113 of Central Bank Circular No. 960 and Section 8 of
Republic Act No. 6426, as amended by PD 1246, be made applicable to a foreign
transient.
Held: The provisions of Section 113 of Central Bank Circular No. 960 and PD No. 1246,
insofar as it amends Section 8 of Republic Act No. 6426, are hereby held to be
INAPPLICABLE to this case because of its peculiar circumstances. Respondents are
hereby required to comply with the writ of execution issued in the civil case and to
release to petitioners the dollar deposit of Bartelli in such amount as would satisfy the
judgment.
The questioned law makes futile the favorable judgment and award of damages that
Salvacion and her parents fully deserve. It then proceeded to show that the economic
basis for the enactment of RA No. 6426 is not anymore present; and even if it still
exists, the questioned law still denies those entitled to due process of law for being
unreasonable and oppressive. The intention of the law may be good when enacted. The
law failed to anticipate the iniquitous effects producing outright injustice and inequality
such as the case before us. The Court adopted the comment of the Solicitor General
who argued that the Offshore Banking System and the Foreign Currency Deposit System
were designed to draw deposits from foreign lenders and investors and, subsequently,
to give the latter protection.
However, the foreign currency deposit made by a transient or a tourist is not the kind of
deposit encouraged by PD Nos. 1034 and 1035 and given incentives and protection by
said laws because such depositor stays only for a few days in the country and,
therefore, will maintain his deposit in the bank only for a short time. Considering that
Bartelli is just a tourist or a transient, he is not entitled to the protection of Section 113
of Central Bank Circular No. 960 and PD No. 1246 against attachment, garnishment or
other court processes.
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.”
Emmanuel Oñate and Econ Holdings Corporation v Abrogar and Sunlife Insurance
Company of Canada G.R. No. 107303 February 21, 1994

Section 10 Rule 57 is not incompatible with Republic Act No. 1405, as amended, (Bank
Deposits Secrecy Law) for Section 2 therefor provides an exception “in cases where
the money deposited or invested is the subject matter of the litigation. The
examination of the bank records is not a fishing expedition, but rather a method by
which Sun Life could trace the proceeds of the check it paid to petitioners.
Facts: Sun Life Assurance Company of Canada (Sun Life) filed a complaint for a sum of
money with a prayer for the immediate issuance of a writ of attachment against
petitioners and Noel L. Diño at Branch 150 of the RTC Makati, presided over by
respondent Judge. The following day, respondent Judge Abrogar issued an order
granting the issuance of a writ of attachment.
Upon Sun Life’s ex-parte motion, the trial court amended the writ of attachment to
reflect the alleged amount of the indebtedness. That same day, Deputy Sheriff Flores,
accompanied by a representative of Sun Life, attempted to serve summons and a copy
of the amended writ of attachment upon petitioners at their known office address in
Makati but was not able to do so since there was no responsible officer to receive the
same. Nonetheless, Sheriff Flores proceeded over a period of several days to serve
notices of garnishment upon several commercial banks and financial institutions, and
levied on attachment a condominium unit and a real property belonging to petitioner
Oñate. ECON filed an “Urgent Motion to Discharge/Dissolve Writ of Attachment.” That
same day, Sun Life filed an ex-parte motion to examine the books of accounts and
ledgers of petitioner Brunner Development Corporation (Brunner) at the Urban Bank,
Legaspi Village Branch, and to obtain copies thereof, which motion was granted by
respondent Judge. The examination of said account took place on January 23, 1992.
Petitioners filed a motion to nullify the proceedings taken thereat since they were not
present.
ECON and their co-defendants filed a memorandum in support of the motion to
discharge attachment. Also on that same day, Sun Life filed another motion for
examination of bank accounts, this time seeking the examination of Account No. 0041-
0277-03 with the Bank of Philippine Islands (BPI) — which, incidentally, petitioners
claim not to be owned by them — and the records of Philippine National Bank (PNB)
with regard to checks payable to Brunner. Sun Life asked the court to order both banks
to comply with the notice of garnishment.
On February 6, 1992, respondent Judge issued an order (1) denying petitioners’ and the
co-defendants’ motion to discharge the amended writ of attachment, (2) approving Sun
Life’s additional attachment, (3) granting Sun Life’s motion to examine the BPI account,
and (4) denying petitioners’ motion to nullify the proceedings. Petitioners’ assail the
acts of respondent Judge in allowing the examination of Urban Banks’ records and in
ordering that the examination of the bank records of BPI and PNB as invalid since no
notice of said examinations were ever given them.
Issue:
1) Whether or not respondent Judge had acted with grave abuse of discretion in issuing
ex parte the original and amended writs of preliminary attachment and the
corresponding notices of garnishment and levy on attachment pending acquisition of
the jurisdiction of the RTC.
2) Whether or not respondent Judge had acted with grave abuse of discretion
amounting to lack or in excess of jurisdiction in allowing the examination of the bank
records though no notice was given to them.
Held:
1) Whether or not respondent Judge had acted with grave abuse of discretion in issuing
ex parte the original and amended writs of preliminary attachment and the
corresponding notices of garnishment and levy on attachment pending acquisition of
the jurisdiction of the RTC.
No. It is clear from the provision of Section 10, Rule 57 (ROC) that notice need only be
given to the garnishee, but the person who is holding property or credits belonging to
the defendant. The provision does not require that notice be furnished the defendant
himself, except when there is a need to examine said defendant “for the purpose of
giving information respecting his property. Furthermore, Section 10 Rule 57 is not
incompatible with Republic Act No. 1405, as amended, (Bank Deposits Secrecy Law) for
Section 2 therefor provides an exception “in cases where the money deposited or
invested is the subject matter of the litigation. The examination of the bank records is
not a fishing expedition, but rather a method by which Sun Life could trace the
proceeds of the check it paid to petitioners.
2) Whether or not respondent Judge had acted with grave abuse of discretion
amounting to lack or in excess of jurisdiction in allowing the examination of the bank
records though no notice was given to them.
It is well-settled that a writ of preliminary attachment may be validly applied for and
granted even before the defendant is summoned or is heard from. A preliminary
attachment may be defined as the provisional remedy in virtue of which a plaintiff or
other proper party may, at the commencement of the action or any time thereafter,
have the property of the adverse party taken into the custody of the court as security
for the satisfaction of any judgment that may be recovered. It is a remedy which is
purely statutory in respect of which the law requires a strict construction of the
provisions granting it. Withal no principle, statutory or jurisprudential, prohibits its
issuance by any court before acquisition of jurisdiction over the person of the
defendant.
PCIB v. CA G. R. Nos. 121413 and 121479 G. R. No. 128604

The mere fact that the forgery was committed by a drawer-payor’s confidential
employee or agent, who by virtue of his position had unusual facilities for
perpertrating the fraud and imposing the forged paper upon the bank, does
notentitle the bank toshift the loss to the drawer-payor, in the absence of some
circumstance raising estoppel against the drawer.
Banking business requires that the one who first cashes and negotiates the check
must take some precautions to learn whether or not it is genuine. And if the one
cashing the check through indifference or other circumstance assists the forger in
committing the fraud, he should not be permitted to retain the proceeds of the check
from the drawee whose sole fault was that it did not discover the forgery or the
defect in the title of the person negotiating the instrument before paying the check.
Facts: This case is composed of three consolidated petitions involving several checks,
payable to the Bureau of Internal Revenue, but was embezzled allegedly by an
organized syndicate. On October 19, 1977, plaintiff Ford issued a Citibank check
amounting to P4,746,114.41 in favor of the Commissioner of Internal Revenue for the
payment of manufacturer’s taxes. The check was deposited with defendant IBAA (now
PCIB), subsequently cleared the Central Bank, and paid by Citibank to IBAA.
The proceeds never reached BIR, so plaintiff was compelled to make a second payment.
Defendant refused to reimburse plaintiff, and so the latter filed a complaint. An
investigation revealed that the check was recalled by Godofredo Rivera, the general
ledger accountant of Ford, and was replaced by a manager’s check. Alleged members of
a syndicate deposited the two manager’s checks with Pacific Banking Corporation. Ford
filed a third party complaint against Rivera and PBC. The case against PBC was
dismissed. The case against Rivera was likewise dismissed because summons could not
be served. The trial court held Citibank and PCIB jointly and severally liable to Ford, but
the Court of Appeals only held PCIB liable.
On another case, Ford drew two checks in favor of the Commissioner of Internal
Revenue, amounting to P5,851,706.37 and P6,311,591.73. Both are crossed checks
payable to payee’s account only. The checks never reached BIR, so plaintiff was
compelled to make second payments. Plaintiff instituted an action for recovery against
PCIB and Citibank. On investigation of NBI, the modus operandi was discovered.
Gorofredo Rivera made the checks but instead of delivering them to BIR, passed it to
Castro, who was the manager of PCIB San Andres. Castro opened a checking account in
the name of a fictitious person “Reynaldo Reyes”. Castro deposited a worthless Bank of
America check with the same amount as that issued by Ford. While being routed to the
Central Bank for clearing, the worthless check was replaced by the genuine one from
Ford.
Issues: 1) Whether there is contributory negligence on the part of Ford
2) Has petitioner Ford the right to recover from the collecting bank (PCIBank) and the
drawee bank (Citibank) the value of the checks intended as payment to the
Commissioner of Internal Revenue?
Held:
1) Whether there is contributory negligence on the part of Ford
The general rule is that if the master is injured by the negligence of a third person and
by the concuring contributory negligence of his own servant or agent, the latter’s
negligence is imputed to his superior and will defeat the superior’s action against the
third person, asuming, of course that the contributory negligence was the proximate
cause of the injury of which complaint is made. As defined, proximate cause is that
which, in the natural and continuous sequence, unbroken by any efficient, intervening
cause produces the injury and without the result would not have occurred. It appears
that although the employees of Ford initiated the transactions attributable to an
organized syndicate, in our view, their actions were not the proximate cause of
encashing the checks payable to the CIR. The degree of Ford’s negligence, if any, could
not be characterized as the proximate cause of the injury to the parties. The mere fact
that the forgery was committed by a drawer-payor’s confidential employee or agent,
who by virtue of his position had unusual facilities for perpertrating the fraud and
imposing the forged paper upon the bank, does notentitle the bank toshift the loss to
the drawer-payor, in the absence of some circumstance raising estoppel against the
drawer. This rule likewise applies to the checks fraudulently negotiated or diverted by
the confidential employees who hold them in their possession.

(2) We have to scrutinize, separately, PCIBank’s share of negligence when the syndicate
achieved its ultimate agenda of stealing the proceeds of these checks.
On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks.
The neglect of PCIBank employees to verify whether his letter requesting for the
replacement of the Citibank Check No. SN-04867 was duly authorized, showed lack of
care and prudence required in the circumstances. Furthermore, it was admitted that
PCIBank is authorized to collect the payment of taxpayers in behalf of the BIR. As an
agent of BIR, PCIBank is duty bound to consult its principal regarding the unwarranted
instructions given by the payor or its agent. It is a well-settled rule that the relationship
between the payee or holder of commercial paper and the bank to which it is sent for
collection is, in the absence of an argreement to the contrary, that of principal and
agent. A bank which receives such paper for collection is the agent of the payee or
holder.
Indeed, the crossing of the check with the phrase “Payee’s Account Only,” is a warning
that the check should be deposited only in the account of the CIR. Thus, it is the duty of
the collecting bank PCIBank to ascertain that the check be deposited in payee’s account
only. Therefore, it is the collecting bank (PCIBank) which is bound to scrutinize the
check and to know its depositors before it could make the clearing indorsement “all
prior indorsements and/or lack of indorsement guaranteed”.
Lastly, banking business requires that the one who first cashes and negotiates the check
must take some precautions to learn whether or not it is genuine. And if the one
cashing the check through indifference or other circumstance assists the forger in
committing the fraud, he should not be permitted to retain the proceeds of the check
from the drawee whose sole fault was that it did not discover the forgery or the defect
in the title of the person negotiating the instrument before paying the check. For this
reason, a bank which cashes a check drawn upon another bank, without requiring proof
as to the identity of persons presenting it, or making inquiries with regard to them,
cannot hold the proceeds against the drawee when the proceeds of the checks were
afterwards diverted to the hands of a third party. In such cases the drawee bank has a
right to believe that the cashing bank (or the collecting bank) had, by the usual proper
investigation, satisfied itself of the authenticity of the negotiation of the checks. Thus,
one who encashed a check which had been forged or diverted and in turn received
payment thereon from the drawee, is guilty of negligence which proximately
contributed to the success of the fraud practiced on the drawee bank. The latter may
recover from the holder the money paid on the check.
Mellon Bank vs. Magsino G.R. No. 71479 October 18, 1990

Section 2 of said law allows the disclosure of bank deposits in cases where the money
deposited is the subject matter of the litigation. Inasmuch as Civil Case No. 26899 is
aimed at recovering the amount converted by the Javiers for their own benefit,
necessarily, an inquiry into the whereabouts of the illegally acquired amount extends
to whatever is concealed by being held or recorded in the name of persons other than
the one responsible for the illegal acquisition.
Facts: On May 27, 1977, Dolores Ventosa requested the transfer of $1,000 from the
First National Bank of Moundsville, West Virginia, U.S.A. to Victoria Javier in Manila
through the Prudential Bank. Accordingly, the First National Bank requested the
petitioner, Mellon Bank, to effect the transfer. Unfortunately the wire sent by Mellon
Bank to Manufacturers Hanover Bank, a correspondent of Prudential Bank, indicated
the amount transferred as “US$1,000,000.00” instead of US$1,000.00. Hence
Manufacturers Hanover Bank transferred one million dollars less bank charges of $6.30
to the Prudential Bank for the account of Victoria Javier.
Javier withdrew $475,000 from account No. 343 and converted it into eight cashier’s
checks made out to the following: (a) F.C. Hagedorn & Co., Inc., two cheeks for the total
amount of P1,000,000; (b) Elnor Investment Co., Inc., two checks for P1,000,000; (c)
Paramount Finance Corporation, two checks for P1,000,000; and (d) M. Javier, Jr., two
checks for P496,000. Javier also brought several properties in the United States
including the one of his lawyer, Poblador.
Mellon Bank filed a complaint docketed as No. 148056 in the Superior Court of
California, County of Kern, against Melchor Javier, Jane Doe Javier, Honorio Poblador,
Jrn, and Does I through V. In its first amended complaint to impose constructive trust.
The testimonies of these witnesses were objected to by the defense on the grounds
of res inter alios acta, immateriality, irrelevancy and confidentiality due to RA 1405. The
Javier spouses also contend that inasmuch as the Mellon Bank had filed in California an
action to impose constructive trust on the California property and to recover the same.
Issue:1) Whether or not an account deposit which is relevant and material to the
resolution of the case may be covered under R.A. No. 1405.
2) Whether or not the principle of election of remedies bars recovery of Mellon Bank
Held:
1) Whether or not an account deposit which is relevant and material to the resolution
of the case may be covered under R.A. No. 1405.
Yes. Section 2 of said law allows the disclosure of bank deposits in cases where the
money deposited is the subject matter of the litigation. 24 Inasmuch as Civil Case No.
26899 is aimed at recovering the amount converted by the Javiers for their own benefit,
necessarily, an inquiry into the whereabouts of the illegally acquired amount extends to
whatever is concealed by being held or recorded in the name of persons other than the
one responsible for the illegal acquisition.
2) Whether or not the principle of election of remedies bars recovery of Mellon Bank
The spouses Javier’s reliance on the procedural principle of election of remedies as part
of their ploy to terminate Civil Case No. 26899 prematurely. With the exception of the
Javiers, respondents failed to raise it as a defense in their answers and therefore, by
virtue of Section 2, Rule 9 of the Rules of Court, such defense is deemed
waived. 26 Notwithstanding its lengthy and thorough discussion during the hearing and
in pleadings subsequent to the answers, the issue of election of remedies has not,
contrary to the lower court’s assertion, been elevated to a “substantive one.” Having
been waived as a defense, it cannot be treated as if it has been raised in a motion to
dismiss based on the nonexistence of a cause of action.

Moreover, granting that the defense was properly raised, it is inapplicable in this case.
In its broad sense, election of remedies refers to the choice by a party to an action of
one of two or more coexisting remedial rights, where several such rights arise out of
the same facts, but the term has been generally limited to a choice by a party between
inconsistent remedial rights, the assertion of one being necessarily repugnant to, or a
repudiation of, the other. In its technical and more restricted sense, election of
remedies is the adoption of one of two or more coexisting remedies, with the effect of
precluding a resort to the others.
RCBC v Pacifico de Castro and PVTA G.R. No. L-34548 November 29, 1988

The funds of the PVTA can be garnished since “funds of public corporation which can
sue and be sued were not exempt from garnishment. Inasmuch as the Tobacco Fund,
a special fund, was by law, earmarked specifically to answer obligations incurred by
PVTA in connection with its proprietary and commercial operations authorized under
the law, it follows that said funds may be proceeded against by ordinary judicial
processes such as execution and garnishment. Garnishment is considered as a specie
of attachment for reaching credits belonging to the judgment debtor and owing to
him from a stranger to the litigation. Under the above-cited rule, the garnishee [the
third person] is obliged to deliver the credits, etc. to the proper officer issuing the writ
and “the law exempts from liability the person having in his possession or under his
control any credits or other personal property belonging to the defendant, …, if such
property be delivered or transferred, …, to the clerk, sheriff, or other officer of the
court in which the action is pending.
Facts: Badoc Planters, Inc. filed an action for recovery of unpaid tobacco deliveries
against PVTA. Hon. Lourdes P. San Diego, then Presiding Judge, ordering the defendants
therein to pay jointly and severally, the plaintiff Badoc Planters, Inc. (hereinafter
referred to as “BADOC”) within 48 hours the aggregate amount of P206,916.76, with
legal interests thereon. Accordingly, the Branch Clerk of Court on the very same day,
issued a Writ of Execution addressed to Special Sheriff Faustino Rigor, who then issued
a Notice of Garnishment addressed to the General Manager and/or Cashier of Rizal
Commercial Banking Corporation (hereinafter referred to as RCBC). However, PVTA
filed a Motion for Reconsideration. The Judge set aside the Orders of Execution and of
Payment and the Writ of Execution and ordering petitioner and BADOC “to restore,
jointly and severally, the account of PVTA with the said bank in the same condition and
state it was before.
Issues:
1) Whether or not PVTA funds are public funds not subject to garnishment;
2) Whether or not the respondent Judge correctly ordered the herein petitioner to
reimburse the amount paid to the Special Sheriff by virtue of the execution issued
pursuant to the Order/Partial Judgment dated January 15, 1970.
1) Whether or not PVTA funds are public funds not subject to garnishment;
Republic Act No. 2265 created the PVTA as an ordinary corporation with all the
attributes of a corporate entity subject to the provisions of the Corporation Law. Hence,
it possesses the power “to sue and be sued” and “to acquire and hold such assets and
incur such liabilities resulting directly from operations authorized by the provisions of
this Act or as essential to the proper conduct of such operations.” Among the specific
powers vested in the PVTA are: 1) to buy Virginia tobacco grown in the Philippines for
resale to local bona fide tobacco manufacturers and leaf tobacco dealers [Section 4(b),
R.A. No. 2265]; 2) to contracts of any kind as may be necessary or incidental to the
attainment of its purpose with any person, firm or corporation, with the Government of
the Philippines or with any foreign government, subject to existing laws [Section 4(h),
R.A. No. 22651; and 3) generally, to exercise all the powers of a corporation under the
Corporation Law, insofar as they are not inconsistent with the provisions of this Act
[Section 4(k), R.A. No. 2265.]
From the foregoing, it is clear that PVTA has been endowed with a personality distinct
and separate from the government which owns and controls it. Accordingly, this Court
has heretofore declared that the funds of the PVTA can be garnished since “funds of
public corporation which can sue and be sued were not exempt from garnishment.
Inasmuch as the Tobacco Fund, a special fund, was by law, earmarked specifically to
answer obligations incurred by PVTA in connection with its proprietary and commercial
operations authorized under the law, it follows that said funds may be proceeded
against by ordinary judicial processes such as execution and garnishment. Garnishment
is considered as a specie of attachment for reaching credits belonging to the judgment
debtor and owing to him from a stranger to the litigation. Under the above-cited rule,
the garnishee [the third person] is obliged to deliver the credits, etc. to the proper
officer issuing the writ and “the law exempts from liability the person having in his
possession or under his control any credits or other personal property belonging to the
defendant, …, if such property be delivered or transferred, …, to the clerk, sheriff, or
other officer of the court in which the action is pending.
2) Whether or not the respondent Judge correctly ordered the herein petitioner to
reimburse the amount paid to the Special Sheriff
No. The bank was in no position to question the legality of the garnishment since it was
not even a party to the case. As correctly pointed out by the petitioner, it had neither
the personality nor the interest to assail or controvert the orders of respondent Judge.
It had no choice but to obey the same inasmuch as it had no standing at all to impugn
the validity of the partial judgment rendered in favor of the plaintiff or of the processes
issued in execution of such judgment. RCBC cannot therefore be compelled to make
restitution solidarily with the plaintiff BADOC. Plaintiff BADOC alone was responsible for
the issuance of the Writ of Execution and Order of Payment and so, the plaintiff alone
should bear the consequences of a subsequent annulment of such court orders; hence,
only the plaintiff can be ordered to restore the account of the PVTA.