G.R. No.
L-47757 April 7, 1942 terminated upon the death of the principal, Edgar Stephenson; but that,
ANA RIVERA, Plaintiff-Appellant, vs. PEOPLES BANK AND TRUST
CO., Defendant-Appellee.
MINNIE STEPHENSON, in her capacity as administratix of the
intestate estate of EDGAR Stephenson, intervenor-appellee.
Cecilio I. Lim, Chief Public Defender, for appellant.
Antonio M. Opisso for intervenor-appellee.
No appearance for appellee Peoples Bank & Trust Co.
OZAETA, J.:
The question raised in this appeal is the validity of the survivorship
agreement made by and between Edgar Stephenson, now deceased,
and Ana Rivera, appellant herein, which read as follows:
SURVIVORSHIP AGREEMENT chanrobles virtual law library
Know All Men by These Presents:chanrobles virtual law library
That we hereby agree with each other and with the PEOPLES BANK
AND TRUST COMPANY, Manila, Philippine Islands (hereinafter called
the Bank), that all moneys now or hereafter deposited by us or either of
us with the Bank in our savings account shall be deposited in and
received by the Bank with the understanding and upon the condition
that said money be deposited without consideration of its previous
ownership, and that said money and all interest thereon, if any there
be, shall be the property of both of us joint tenants, and shall be
payable to and collectible by either of us during our joint lives, and after
the death of one of us shall belong to and be the sole property of the
survivor, and shall be payable to and collectible by such
survivor.chanroblesvirtualawlibrary chanrobles virtual law library
And we further covenant and agree with each other and the Bank, its
successors or assigns, that the receipt or check of either of us during
our joint lives, or the receipt or check of the survivor, for any payment
made from this account, and shall be valid and sufficient and discharge
to the Bank for such payment.chanroblesvirtualawlibrary chanrobles
virtual law library
The Bank is hereby authorized to accept and deposit to this account all
checks made payable to either or both of us, when endorsed by either
or both of us or one for the other.chanroblesvirtualawlibrary chanrobles
virtual law library
This is a joint and several agreement and is binding upon each of us,
our heirs, executors, administrators, and
assigns.chanroblesvirtualawlibrary chanrobles virtual law library
In witness whereof we have signed our names here to this 17th day of
October, 1931.
(Sgd.) EDGAR STEPHENSON
(Sgd.) Ana Rivera
Address: 799 Sta. Mesa, Manila
Witness:
(Sgd.) FRED W. BOHLER
(Sgd.) Y. E. Cox
S. A. #4146
Ana Rivera was employed by Edgar Stephenson as housekeeper from
the year 1920 until his death on June 8, 1939. On December 24,
Stephenson opened an account in his name with the defendant
Peoples Bank by depositing therein the sum of P1,000. On October 17,
1931, when there was a balance of P2,072 in said account, the
survivorship agreement in question was executed and the said account
was transferred to the name of "Edgar Stephenson and/or Ana Rivera."
At the time of Stephenson's death Ana Rivera held the deposit book,
and there was a balance in said account of P701. 43, which Ana
Rivera claimed but which the bank refused to pay to her upon advice of
its attorneys who gave the opinion that the survivorship agreement was
of doubtful validity. Thereupon Ana Rivera instituted the present action
against the bank, and Minnie Stephenson, administratix of the estate of
the deceased, intervened and claimed the amount for the estate,
alleging that the money deposited in said account was and is the
exclusive property of the
deceased.chanroblesvirtualawlibrary chanrobles virtual law library
The trial court held that the agreement in question, viewed from its
effect during the lives of the parties, was a mere power of attorney
authorizing Ana Rivera to withdraw the deposit, which power
viewed from its effect after the death of either of the parties, the
agreement was a donation mortis causa with reference to the balance
remaining at the death of one of them, which, not having been
executed with the formalities of a testamentary disposition as required
by article 620 of the Civil Code, was of no legal
effect.chanroblesvirtualawlibrary chanrobles virtual law library
The defendant bank did not appear in this Court. Counsel for the
intervenor-appellee in his brief contends that the survivorship
agreement was a donation mortis causa from Stephenson to Ana
Rivera of the bank account in question and that, since it was not
executed with the formalities of a will, it can have no legal
effect.chanroblesvirtualawlibrary chanrobles virtual law library
We find no basis for the conclusion that the survivorship agreement
was a mere power of attorney from Stephenson to Ana Rivera, or that
it is a gift mortis causa of the bank account in question from him to her.
Such conclusion is evidently predicated on the assumption that
Stephenson was the exclusive owner of the funds deposited in the
bank, which assumption was in turn based on the facts (1) that the
account was originally opened in the name of Stephenson alone and
(2) that Ana Rivera "served only as housemaid of the deceased." But it
not infrequently happens that a person deposits money in the bank in
the name of another; and in the instant case it also appears that Ana
Rivera served her master for about nineteen years without actually
receiving her salary from him. The fact that subsequently Stephenson
transferred the account to the name of himself and/or Ana Rivera and
executed with the latter the survivorship agreement in question
although there was no relation of kinship between them but only that of
master and servant, nullifies the assumption that Stephenson was the
exclusive owner of the bank account. In the absence, then, of clear
proof of the contrary, we must give full faith and credit to the certificate
of deposit, which recites in effect that the funds in question belonged to
Edgar Stephenson and Ana Rivera; that they were joint owners
thereof; and that either of them could withdraw any part or the whole of
said account during the lifetime of both, and the balance, if any, upon
the death of either, belonged to the
survivor.chanroblesvirtualawlibrary chanrobles virtual law library
Is the survivorship agreement valid? Prima facie, we think it is valid. It
is an aleatory contract supported by law a lawful consideration - the
mutual agreement of the joint depositors permitting either of them to
withdraw the whole deposit during their lifetime, and transferring the
balance to the survivor upon the death of one of them. The trial court
said that the Civil Code "contains no provisions sanctioning such an
agreement" We think it is covered by article 1790 of the Civil Code,
which provides as follows:
ART. 1790. By an aleatory contract one of the parties binds himself, or
both reciprocally bind themselves, to give or to do something as an
equivalent for that which the other party is to give or do in case of the
occurrence of an event which is uncertain or will happen at an
indeterminate time.
(See also article 1255.)chanrobles virtual law library
The case of Macam vs. Gatmaitan (decided March 11, 1937), 36 Off.
Gaz., 2175, is in point. Two friends Juana Gatmaitan and Leonarda
Macam, who had lived together for some time, agreed in writing that
the house of strong materials which they bought with the money
belonging to Leonarda Macam and the Buick automobile and certain
furniture which belonged to Juana Gatmaitan shall belong to the
survivor upon the death of one of them and that "this agreement shall
be equivalent to a transfer of the rights of the one who dies first and
shall be kept by the survivor." After the death of Leonarda Macam, her
executrix assailed that document on the ground that with respect to the
house the same constituted a donation mortis causa by Leonarda
Macam in favor of Juana Gatmaitan. In affirming the judgment of the
trial court absolving the defendants from the complaint this Court,
speaking through Chief Justice Avaceña, said:
This court is of the opinion that Exhibit C is an aleatory contract
whereby, according to article 1790 of the civil Code, one of the parties
or both reciprocally bind themselves to give or do something as an
equivalent for that which the other party is to give or do in case of the
occurrence of an event which is uncertain or will happen at an
indeterminate time. As already stated, Leonarda was the owner of the
house and Juana of the Buick automobile and most of the furniture. By
virtue of Exhibit C, Juana would become the owner of the house in
case Leonarda died first, and Leonarda would become the owner of
the automobile and the furniture if Juana were to die first. In this
manner Leonarda and Juana reciprocally assigned their respective
property to one another conditioned upon who might die first, the time
of death determining the event upon which the acquisition of such right
by the one or the other depended. This contract, as any other contract,
is binding upon the parties thereto. Inasmuch as Leonarda had died
before Juana, the latter thereupon acquired the ownership of the
house, in the same manner as Leonarda would have acquired the
1
ownership of the automobile of the furniture if Juana had died first. (36
Off. Gaz., 2176.)
Furthermore, "it is well established that a bank account may be so
created that two persons shall be joint owners thereof during their
mutual lives, and the survivor take the whole on the death of the other.
The right to make such joint deposits has generally been held not to be
done with by statutes abolishing joint tenancy and survivorship
generally as they existed at common law." (7 Am. Jur.,
299.)chanrobles virtual law library
But although the survivorship agreement is per se not contrary to law,
its operation or effect may be violative of the law. For instance, if it be
shown in a given case that such agreement is a mere cloak to hide an
inofficious donation, to transfer property in fraud of creditors, or to
defeat the legitime of a forced heir, it may be assailed and annulled
upon such grounds. No such vice has been imputed and established
against the agreement involved in the
case.chanroblesvirtualawlibrary chanrobles virtual law library
The agreement appealed from is reversed and another judgment will
be entered in favor of the plaintiff ordering the defendant bank to pay to
her the sum of P701.43, with legal interest thereon from the date of the
complaint, and the costs in both instances. So
ordered.chanroblesvirtualawlibrary chanrobles virtual law library
G.R. No. 82027 March 29, 1990
ROMARICO G. VITUG, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and ROWENA
FAUSTINO-CORONA, respondents.
Rufino B. Javier Law Office for petitioner.
Quisumbing, Torres & Evangelista for private respondent.
SARMIENTO, J.:
This case is a chapter in an earlier suit decided by this
Court 1 involving the probate of the two wills of the late Dolores
Luchangco Vitug, who died in New York, U. S.A., on November 10,
1980, naming private respondent Rowena Faustino-Corona executrix.
In our said decision, we upheld the appointment of Nenita Alonte as
co-special administrator of Mrs. Vitug's estate with her (Mrs. Vitug's)
widower, petitioner Romarico G. Vitug, pending probate.
On January 13, 1985, Romarico G. Vitug filed a motion asking for
authority from the probate court to sell certain shares of stock and real
properties belonging to the estate to cover allegedly his advances to
the estate in the sum of P667,731.66, plus interests, which he claimed
were personal funds. As found by the Court of Appeals, 2 the alleged
advances consisted of P58,147.40 spent for the payment of estate tax,
P518,834.27 as deficiency estate tax, and P90,749.99 as "increment
thereto." 3 According to Mr. Vitug, he withdrew the sums of
P518,834.27 and P90,749.99 from savings account No. 35342-038 of
the Bank of America, Makati, Metro Manila.
On April 12, 1985, Rowena Corona opposed the motion to sell on the
ground that the same funds withdrawn from savings account No.
35342-038 were conjugal partnership properties and part of the estate,
and hence, there was allegedly no ground for reimbursement. She also
sought his ouster for failure to include the sums in question for
inventory and for "concealment of funds belonging to the estate." 4
Vitug insists that the said funds are his exclusive property having
acquired the same through a survivorship agreement executed with his
late wife and the bank on June 19, 1970. The agreement provides:
We hereby agree with each other and with the
BANK OF AMERICAN NATIONAL TRUST AND
SAVINGS ASSOCIATION (hereinafter referred to
as the BANK), that all money now or hereafter
deposited by us or any or either of us with the
BANK in our joint savings current account shall be
the property of all or both of us and shall be
payable to and collectible or withdrawable by
either or any of us during our lifetime, and after the
death of either or any of us shall belong to and be
the sole property of the survivor or survivors, and
shall be payable to and collectible or withdrawable
by such survivor or survivors.
We further agree with each other and the BANK
that the receipt or check of either, any or all of us
during our lifetime, or the receipt or check of the
survivor or survivors, for any payment or
withdrawal made for our above-mentioned account
shall be valid and sufficient release and discharge
of the BANK for such payment or withdrawal. 5
The trial courts 6 upheld the validity of this agreement and granted "the
motion to sell some of the estate of Dolores L. Vitug, the proceeds of
which shall be used to pay the personal funds of Romarico Vitug in the
total sum of P667,731.66 ... ." 7
On the other hand, the Court of Appeals, in the petition for certiorari
filed by the herein private respondent, held that the above-quoted
survivorship agreement constitutes a conveyance mortis causa which
"did not comply with the formalities of a valid will as prescribed by
Article 805 of the Civil Code," 8 and secondly, assuming that it is a
mere donation inter vivos, it is a prohibited donation under the
provisions of Article 133 of the Civil Code. 9
The dispositive portion of the decision of the Court of Appeals states:
WHEREFORE, the order of respondent Judge
dated November 26, 1985 (Annex II, petition) is
hereby set aside insofar as it granted private
respondent's motion to sell certain properties of
the estate of Dolores L. Vitug for reimbursement of
his alleged advances to the estate, but the same
order is sustained in all other respects. In addition,
respondent Judge is directed to include
provisionally the deposits in Savings Account No.
35342-038 with the Bank of America, Makati, in
the inventory of actual properties possessed by
the spouses at the time of the decedent's death.
With costs against private respondent. 10
In his petition, Vitug, the surviving spouse, assails the appellate court's
ruling on the strength of our decisions in Rivera v. People's Bank and
Trust Co. 11 and Macam v. Gatmaitan 12 in which we sustained the
validity of "survivorship agreements" and considering them as aleatory
contracts. 13
The petition is meritorious.
The conveyance in question is not, first of all, one of mortis
causa, which should be embodied in a will. A will has been defined as
"a personal, solemn, revocable and free act by which a capacitated
person disposes of his property and rights and declares or complies
with duties to take effect after his death." 14 In other words, the bequest
or device must pertain to the testator. 15 In this case, the monies
subject of savings account No. 35342-038 were in the nature of
conjugal funds In the case relied on, Rivera v. People's Bank and Trust
Co.,  16 we rejected claims that a survivorship agreement purports to
deliver one party's separate properties in favor of the other, but simply,
their joint holdings:
xxx xxx xxx
... Such conclusion is evidently predicated on the
assumption that Stephenson was the exclusive
owner of the funds-deposited in the bank, which
assumption was in turn based on the facts (1) that
the account was originally opened in the name of
Stephenson alone and (2) that Ana Rivera "served
only as housemaid of the deceased." But it not
infrequently happens that a person deposits
money in the bank in the name of another; and in
the instant case it also appears that Ana Rivera
served her master for about nineteen years
without actually receiving her salary from him. The
fact that subsequently Stephenson transferred the
account to the name of himself and/or Ana Rivera
and executed with the latter the survivorship
agreement in question although there was no
relation of kinship between them but only that of
master and servant, nullifies the assumption that
Stephenson was the exclusive owner of the bank
account. In the absence, then, of clear proof to the
contrary, we must give full faith and credit to the
certificate of deposit which recites in effect that the
funds in question belonged to Edgar Stephenson
2
 and Ana Rivera; that they were joint (and several) case, the element of risk is present. In the case at bar, the risk was the
owners thereof; and that either of them could death of one party and survivorship of the other.
withdraw any part or the whole of said account
during the lifetime of both, and the balance, if any,
However, as we have warned:
upon the death of either, belonged to the
survivor. 17
xxx xxx xxx
xxx xxx xxx
But although the survivorship agreement is per se
not contrary to law its operation or effect may be
In Macam v. Gatmaitan, 18 it was held:
violative of the law. For instance, if it be shown in
a given case that such agreement is a mere cloak
xxx xxx xxx to hide an inofficious donation, to transfer property
in fraud of creditors, or to defeat the legitime of a
forced heir, it may be assailed and annulled upon
This Court is of the opinion that Exhibit C is an
such grounds. No such vice has been imputed and
aleatory contract whereby, according to article
established against the agreement involved in this
1790 of the Civil Code, one of the parties or both
case. 26
reciprocally bind themselves to give or do
something as an equivalent for that which the
other party is to give or do in case of the xxx xxx xxx
occurrence of an event which is uncertain or will
happen at an indeterminate time. As already
There is no demonstration here that the survivorship agreement had
stated, Leonarda was the owner of the house and
been executed for such unlawful purposes, or, as held by the
Juana of the Buick automobile and most of the
respondent court, in order to frustrate our laws on wills, donations, and
furniture. By virtue of Exhibit C, Juana would
conjugal partnership.
become the owner of the house in case Leonarda
died first, and Leonarda would become the owner
of the automobile and the furniture if Juana were The conclusion is accordingly unavoidable that Mrs. Vitug having
to die first. In this manner Leonarda and Juana predeceased her husband, the latter has acquired upon her death a
reciprocally assigned their respective property to vested right over the amounts under savings account No. 35342-038 of
one another conditioned upon who might die first, the Bank of America. Insofar as the respondent court ordered their
the time of death determining the event upon inclusion in the inventory of assets left by Mrs. Vitug, we hold that the
which the acquisition of such right by the one or court was in error. Being the separate property of petitioner, it forms no
the other depended. This contract, as any other more part of the estate of the deceased.
contract, is binding upon the parties thereto.
Inasmuch as Leonarda had died before Juana, the
WHEREFORE, the decision of the respondent appellate court, dated
latter thereupon acquired the ownership of the
June 29, 1987, and its resolution, dated February 9, 1988, are SET
house, in the same manner as Leonarda would
ASIDE.
have acquired the ownership of the automobile
and of the furniture if Juana had died first. 19
No costs.
xxx xxx xxx
SO ORDERED.
There is no showing that the funds exclusively belonged to one party,
and hence it must be presumed to be conjugal, having been acquired
during the existence of the marita. relations. 20

Neither is the survivorship agreement a donation inter vivos, for

obvious reasons, because it was to take effect after the death of one
party. Secondly, it is not a donation between the spouses because it
involved no conveyance of a spouse's own properties to the other.
It is also our opinion that the agreement involves no modification
petition of the conjugal partnership, as held by the Court of
Appeals, 21 by "mere stipulation" 22 and that it is no "cloak" 23 to
circumvent the law on conjugal property relations. Certainly, the
spouses are not prohibited by law to invest conjugal property, say, by
way of a joint and several bank account, more commonly denominated
in banking parlance as an "and/or" account. In the case at bar, when
the spouses Vitug opened savings account No. 35342-038, they
merely put what rightfully belonged to them in a money-making
venture. They did not dispose of it in favor of the other, which would
have arguably been sanctionable as a prohibited donation. And since
the funds were conjugal, it can not be said that one spouse could have
pressured the other in placing his or her deposits in the money pool.
The validity of the contract seems debatable by reason of its "survivor-
take-all" feature, but in reality, that contract imposed a mere obligation
with a term, the term being death. Such agreements are permitted by
the Civil Code. 24
Under Article 2010 of the Code:
ART. 2010. By an aleatory contract, one of the
parties or both reciprocally bind themselves to give
or to do something in consideration of what the
other shall give or do upon the happening of an
event which is uncertain, or which is to occur at an
indeterminate time.
Under the aforequoted provision, the fulfillment of an aleatory contract
depends on either the happening of an event which is (1) "uncertain,"
(2) "which is to occur at an indeterminate time." A survivorship
agreement, the sale of a sweepstake ticket, a transaction stipulating on
the value of currency, and insurance have been held to fall under the
first category, while a contract for life annuity or pension under Article
2021, et sequentia, has been categorized under the second. 25 In either
G.R. No. L-56429 May 28, 1988
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner,
vs.
HON. FIDEL PURISIMA, etc., and HON. VICENTE ERICTA and
JOSE DEL FIERO, etc., respondents.
NARVASA, J.:
The verdict in this special civil action of certiorari turns upon the
question of whether or not the "Law on Secrecy of Bank
Deposits" 1 precludes production by subpoena duces tecum of bank
records of transactions by or in the names of the wife, children and
friends of a special agent of the Bureau of Customs, accused before
the Tanodbayan of having allegedly acquired property manifestly out
of proportion to his salary and other lawful income, in violation of the
"Anti-Graft and Corrupt Practices Act." 2
The Customs special agent involved is Manuel Caturla, and the
accusation against him was filed by the Bureau of Internal
Revenue. 3 In the course of the preliminary investigation thereof,
the Tanodbayan issued a subpoena duces tecum to the Banco Filipino
Savings & Mortgage Bank, commanding its representative to appear at
a specified time at the Office of the Tanodbayan and furnish the latter
with duly certified copies of the records in all its branches and
extension offices, of the loans, savings and time deposits and other
banking transactions, dating back to 1969, appearing in the names of
Caturla, his wife, Purita Caturla, their children — Manuel, Jr., Marilyn
and Michael — and/or Pedro Escuyos. 4
Caturla moved to quash the subpoena duces tecum 5 arguing that
compliance therewith would result in a violation of Sections 2 and 3 of
the Law on Secrecy of Bank Deposits. Then Tanodbayan Vicente
Ericta not only denied the motion for lack of merit, and directed
compliance with the subpoena, 6 but also expanded its scope through
a second subpoena duces tecum,7 this time requiring production by
3
Banco Filipino of the bank records in all its branches and extension
offices, of Siargao Agro-Industrial Corporation, Pedro Escuyos or his
wife, Emeterio Escuyos, Purita Caturla, Lucia Escuyos or her husband,
Romeo Escuyos, Emerson Escuyos, Fraterno Caturla, Amparo
Montilla, Cesar Caturla, Manuel Caturla or his children, Manuel Jr.,
Marilyn and Michael, LTD Pub/Restaurant, and Jose Buo or his wife,
Evelyn. Two other subpoena of substantially the same tenor as the
second were released by the Tanodbayan's Office. 8 The last required
obedience under sanction of contempt.
The Banco Filipino Savings & Mortgage Bank, hereafter referred to
simply as BF Bank, took over from Caturla in the effort to nullify
the subpoenae. It filed a complaint for declaratory relief with the Court
of First Instance of Manila, 9 which was assigned by raffle to the sala of
respondent Judge Fidel Purisima. BF Bank prayed for a judicial
declaration as to whether its compliance with the subpoenae duces
tecum would constitute an infringement of the provisions of Sections 2
and 3 of R.A. No. 1405 in relation to Section 8 of R.A. No. 3019. It also
asked that pending final resolution of the question, the Tanodbayan be
provisionally restrained from exacting compliance with the subpoenae.
Respondent Judge Purisima issued an Order denying for lack of merit
the application by BF Bank for a preliminary injunction and/or
restraining order. 10
This Order is now impugned in the instant certiorari action instituted by
BF Bank before this Court, as having been issued with grave abuse of
discretion, amounting to lack of jurisdiction. It is the bank's theory that
the order declining to grant that remedy operated as a premature
adjudication of the very issue raised in the declaratory suit, and as
judicial sufferance of a transgression of the bank deposits statute, and
so constituted grievous error correctible by certiorari. It further argues
that subpoenae in question are in the nature of "fishing expeditions" or
"general warrants" since they authorize indiscriminate inquiry into bank
records; that, assuming that such an inquiry is allowed as regards
public officials under investigation for a violation of the Anti-Graft &
Corrupt Practices Act, it is constitutionally impermissible with respect to
private individuals or public officials not under investigation on a
charge of violating said Act; and that while prosecution of offenses
should not, as a rule, be enjoined, there are recognized exceptions to
the principle one of which is here present, i.e. to avoid multiplicity of
suits, similar subpoenae having been directed to other banks as well.
It is difficult to see how the refusal by the Court a quo to issue the
temporary restraining order applied for by the petitioner — in other
words, its disagreement with the petitioner's advocated theory — could
be deemed so whimsical, capricious, despotic or oppressive an act as
to constitute grave abuse of discretion. Obviously, the writ of certiorari
cannot issue simply on a showing of disagreement between a party
and the court upon some material factual or legal issue. There must be
a reasonable demonstration that a party's contentions are so clearly
correct, or the court's ruling thereon so clearly wrong, to justify the
issuance of a writ of certiorari. No such demonstration exists in this
case. Indeed, for aught that the record shows, the Court's refusal to
grant the application for a restraining order was, in the premises, licit
and proper, or its validity, fairly debatable, at the very least. Be this as
it may, on the merits the petitioner cannot succeed. Its declared theory
is untenable.
The provisions of R.A. No. 1405 subject of BF's declaratory action,
read as follows:
Sec. 2. 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 litigation.
Sec. 3. It shall be unlawful for any official or
employee of a banking institution to disclose to
any person other than those mentioned in Section
two hereof any information concerning said
deposits
The other provision involved in the declaratory action is Section 8 of
R.A. No. 3019. It reads:
Sec. 8. Dismissal due to unexplained wealth. — If
in accordance with the provisions of Republic Act
Numbered One thousand three hundred seventy-
nine, a public official has been found to have
acquired during his incumbency, whether in his
name or in the name of other persons, an amount
of property and/or money manifestly out of
proportion to this salary and to his other lawful
income, that fact shall be a ground for dismissal or
removal. Properties in the name of the spouse and
unmarried children of such public official may be
taken into consideration, when their acquisition
through legitimate means cannot be satisfactorily
shown. Bank deposits shall be taken into
consideration in the enforcement of this section,
notwithstanding any prohibition of law to the
contrary.
In our decision in Philippine National Bank v. Gancayco, rendered on
September 30, 1966, 11 we upheld the judgment of the Trial Court
"sustaining the power of the defendants (special prosecutors of the
Department of Justice) to compel the disclosure (by PNB) of bank
accounts of ACCFA Administrator Jimenez (then under investigation
for unexplained wealth), .. (it being ruled) that, by enacting section 8 of
the Anti-Graft and Corrupt Practices Act, Congress clearly intended to
provide an additional ground for the examination of bank deposits ..
(for) without such provision, the .. prosecutors would be hampered if
not altogether frustrated in the prosection of those charged with having
acquired unexplained wealth while in public office. 12 We ourselves
declared in said case that 13 —
.. while Republic Act No. 1405 provides that bank
deposits are "absolutely confidential .. and
[therefore] may not be examined, inquired or
looked into," except in those cases enumerated
therein, the Anti-Graft Law directs in mandatory
terms that bank deposits "shall be taken into
consideration in the enforcement of this
section, notwithstanding any provision of law to
the contrary." The only conclusion possible is that
section 8 of the Anti-Graft Law is intended to
amend section 2 of Republic Act No. 1405 by
providing an additional exception to the rule
against the disclosure of bank desposits.
xxx xxx xxx
... Cases of unexplained wealth 14 are similar to
cases of bribery or dereliction of duty 15 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.
The inquiry into illegally acquired property — or property NOT
"legitimately acquired" — extends to cases where such property is
concealed by being held by or recorded in the name of other persons.
This proposition is made clear by R.A. No. 3019 which quite
categorically states that the term, "legitimately acquired property of a
public officer or employee shall not include .. property unlawfully
acquired by the respondent, but its ownership is concealed by its being
recorded in the name of, or held by, respondent's spouse, ascendants,
descendants, relatives or any other persons." 16
To sustain the petitioner's theory, and restrict the inquiry only to
property held by or in the name of the government official or employee,
or his spouse and unmarried children is unwarranted in the light of the
provisions of the statutes in question, and would make available to
persons in government who illegally acquire property an easy and fool-
proof means of evading investigation and prosecution; all they would
have to do would be to simply place the property in the possession or
name of persons other than their spouse and unmarried children. This
is an absurdity that we will not ascribe to the lawmakers.
The power of the Tanodbayan to issue subpoenae ad
testificandcum and subpoenae duces tecum at the time in question is
not disputed, and at any rate does not admit of doubt. 17 The
subpoenae issued by him, will be sustained against the petitioner's
impugnation.
WHEREFORE, the petition for certiorari is DISMISSED, with costs
against petitioner.
4

G.R. Nos. 157294-95             November 30, 2006
JOSEPH VICTOR G. EJERCITO, Petitioner,
vs.
SANDIGANBAYAN (Special Division) and PEOPLE OF THE
PHILIPPINES, Respondents.
DECISION
CARPIO MORALES, J.:
The present petition for certiorari under Rule 65 assails the
Sandiganbayan Resolutions dated February 7 and 12, 2003 denying
petitioner Joseph Victor G. Ejercito’s Motions to Quash Subpoenas
Duces Tecum/Ad Testificandum, and Resolution dated March 11, 2003
denying his Motion for Reconsideration of the first two resolutions.
The three resolutions were issued in Criminal Case No. 26558,
"People of the Philippines v. Joseph Ejercito Estrada, et al.," for
plunder, defined and penalized in R.A. 7080, "AN ACT DEFINING AND
PENALIZING THE CRIME OF PLUNDER."
In above-stated case of People v. Estrada, et al., the Special
Prosecution Panel1 filed on January 20, 2003 before 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 the following documents during the hearings
scheduled on January 22 and 27, 2003:
I. For Trust Account No. 858;
1. Account Opening Documents;
2. Trading Order No. 020385 dated January 29, 1999;
3. Confirmation Advice TA 858;
4. Original/Microfilm copies, including the dorsal side, of the
following:
a. Bank of Commerce MC # 0256254 in the
amount of ₱2,000,000.00;
b. Urban bank Corp. MC # 34181 dated November
8, 1999 in the amount of P10,875,749.43;
c. Urban Bank MC # 34182 dated November 8,
1999 in the amount of ₱42,716,554.22;
d. Urban Bank Corp. MC # 37661 dated
November 23, 1999 in the amount of
₱54,161,496.52;
5. Trust Agreement dated January 1999:
Trustee: Joseph Victor C. Ejercito
Nominee: URBAN BANK-TRUST DEPARTMENT
Special Private Account No. (SPAN) 858; and
6. Ledger of the SPAN # 858.
II. For Savings Account No. 0116-17345-9
SPAN No. 858
1. Signature Cards; and
2. Statement of Account/Ledger
III. Urban Bank Manager’s Check and their corresponding Urban Bank
Manager’s Check Application Forms, as follows:
1. MC # 039975 dated January 18, 2000 in the amount of
₱70,000,000.00;
2. MC # 039976 dated January 18, 2000 in the amount of
₱2,000,000.00;
3. MC # 039977 dated January 18, 2000 in the amount of
₱2,000,000.00;
4. MC # 039978 dated January 18, 2000 in the amount of
₱1,000,000.00;
The Special Prosecution Panel also filed on January 20, 2003, a
Request for Issuance of Subpoena Duces Tecum/Ad Testificandum
directed to the authorized representative of Equitable-PCI Bank to
produce statements of account pertaining to certain accounts in the
name of "Jose Velarde" and to testify thereon.
The Sandiganbayan granted both requests by Resolution of January
21, 2003 and subpoenas were accordingly issued.
The Special Prosecution Panel filed still another Request for Issuance
of Subpoena Duces Tecum/Ad Testificandum dated January 23, 2003
for the President of EIB or his/her authorized representative to produce
the same documents subject of the Subpoena Duces Tecum dated
January 21, 2003 and to testify thereon on the hearings scheduled on
January 27 and 29, 2003 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 on
January 24, 2003.
Petitioner, claiming to have learned from the media that the Special
Prosecution Panel had requested for the issuance of subpoenas for
the examination of bank accounts belonging to him, attended the
hearing of the case on January 27, 2003 and filed before the
Sandiganbayan a letter of even date expressing his concerns as
follows, quoted verbatim:
Your Honors:
It is with much respect that I write this court relative to the concern of
subpoenaing the undersigned’s bank account which I have learned
through the media.
I am sure the prosecution is aware of our banking secrecy laws
everyone supposed to observe. But, instead of prosecuting those who
may have breached such laws, it seems it is even going to use
supposed evidence which I have reason to believe could only have
been illegally obtained.
The prosecution was not content with a general request. It even lists
and identifies specific documents meaning someone else in the bank
illegally released confidential information.
If this can be done to me, it can happen to anyone. Not that anything
can still shock our family. Nor that I have anything to hide. Your
Honors.
But, I am not a lawyer and need time to consult one on a situation that
affects every bank depositor in the country and should interest the
bank itself, the Bangko Sentral ng Pilipinas, and maybe the
Ombudsman himself, who may want to investigate, not exploit, the
serious breach that can only harm the economy, a consequence that
may have been overlooked. There appears to have been deplorable
connivance.
xxxx
I hope and pray, Your Honors, that I will be given time to retain the
services of a lawyer to help me protect my rights and those of every
banking depositor. But the one I have in mind is out of the country right
now.
May I, therefore, ask your Honors, that in the meantime, the issuance
of the subpoena be held in abeyance for at least ten (10) days to
enable me to take appropriate legal steps in connection with the
prosecution’s request for the issuance of subpoena concerning my
accounts. (Emphasis supplied)
From the present petition, it is gathered that the "accounts" referred to
by petitioner in his above-quoted letter are Trust Account No.
858 and Savings Account No. 0116-17345-9.2
5
In open court, the Special Division of the Sandiganbayan, through
Associate Justice Edilberto Sandoval, advised petitioner that his
remedy was to file a motion to quash, for which he was given up to
12:00 noon the following day, January 28, 2003.
Petitioner, unassisted by counsel, thus filed on January 28, 2003 a
Motion to Quash Subpoena Duces Tecum/Ad Testificandum praying
that the subpoenas previously issued to the President of the EIB dated
January 21 and January 24, 2003 be quashed.3
In his Motion to Quash, petitioner claimed that his bank accounts are
covered by R.A. No. 1405 (The Secrecy of Bank Deposits Law) and do
not fall under any of the exceptions stated therein. He further claimed
that the specific identification of documents in the questioned
subpoenas, including details on 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, petitioner concluded, the prosecution in
the case may not be allowed to make use of the information.
Before the Motion to Quash was resolved by the Sandiganbayan, the
prosecution filed another Request for the Issuance of Subpoena Duces
Tecum/Ad Testificandum dated January 31, 2003, again to direct the
President of the EIB to produce, on the hearings scheduled on
February 3 and 5, 2003, the same documents subject of the January
21 and 24, 2003 subpoenas with the exception of the Bank of
Commerce MC #0256254 in the amount of ₱2,000,000 as Bank of
Commerce MC #0256256 in the amount of ₱200,000,000 was instead
requested. Moreover, the request covered the following additional
documents:
IV. For Savings Account No. 1701-00646-1:
1. Account Opening Forms;
2. Specimen Signature Card/s; and
3. Statements of Account.
The prosecution also filed a Request for the Issuance of Subpoena
Duces Tecum/Ad Testificandum bearing the same date, January 31,
2003, directed to Aurora C. Baldoz, Vice President-CR-II of the PDIC
for her to produce the following documents on the scheduled hearings
on February 3 and 5, 2003:
1. Letter of authority dated November 23, 1999 re: SPAN
[Special Private Account Number] 858;
2. Letter of authority dated January 29, 2000 re: SPAN 858;
3. Letter of authority dated April 24, 2000 re: SPAN 858;
4. Urban Bank check no. 052092 dated April 24, 2000 for the
amount of P36, 572, 315.43;
5. Urban Bank check no. 052093 dated April 24, 2000 for the
amount of P107,191,780.85; and
6. Signature Card Savings Account No. 0116-17345-9.
(Underscoring supplied)
The subpoenas prayed for in both requests were issued by the
Sandiganbayan on January 31, 2003.
On February 7, 2003, petitioner, this time assisted by counsel, filed an
Urgent Motion to Quash Subpoenae Duces Tecum/Ad Testificandum
praying that the subpoena dated January 31, 2003 directed to Aurora
Baldoz be quashed for the same reasons which he cited in the Motion
to Quash4 he had earlier filed.
On the same day, February 7, 2003, the Sandiganbayan issued a
Resolution denying petitioner’s Motion to Quash Subpoenae Duces
Tecum/Ad Testificandum dated January 28, 2003.
Subsequently or on February 12, 2003, the Sandiganbayan issued a
Resolution denying petitioner’s Urgent Motion to Quash Subpoena
Duces Tecum/Ad Testificandum dated February 7, 2003.
Petitioner’s Motion for Reconsideration dated February 24, 2003
seeking a reconsideration of the Resolutions of February 7 and 12,
2003 having been denied by Resolution of March 11, 2003, petitioner
filed the present petition.
Raised as issues are:
1. Whether petitioner’s Trust Account No. 858 is covered by
the term "deposit" as used in R.A. 1405;
2. Whether petitioner’s Trust Account No. 858 and Savings
Account No. 0116-17345-9 are excepted from the protection
of R.A. 1405; and
3. Whether the "extremely-detailed" information contained in
the Special Prosecution Panel’s requests for subpoena was
obtained through a prior illegal disclosure of petitioner’s bank
accounts, in violation of the "fruit of the poisonous tree"
doctrine.
Respondent People posits that Trust Account No. 8585 may be
inquired into, not merely because it falls under the exceptions to the
coverage of R.A. 1405, but because it is not even contemplated
therein. For, to respondent People, the law applies only to "deposits"
which strictly means the money delivered to the bank by which a
creditor-debtor relationship is created between the depositor and the
bank.
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. (Underscoring 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.
Trust Account No. 858 is, without doubt, one such account. The Trust
Agreement between petitioner and Urban Bank provides that the trust
account covers "deposit, placement or investment of funds" by Urban
Bank for and in behalf of petitioner.6 The money deposited under Trust
Account No. 858, was, therefore, intended not merely to remain with
the bank but to be invested by it elsewhere. To hold that this type of
account is not protected by R.A. 1405 would encourage private
hoarding of funds that could otherwise be invested by banks in other
ventures, contrary to the policy behind the law.
Section 2 of the same law in fact even more clearly shows that the
term "deposits" was intended to be understood broadly:
SECTION 2. All deposits of whatever nature with banks or banking
institutions in the Philippines including investments in bonds 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
underscoring 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.
6
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.
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. Gancayco7 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.
SECTION 2. Definition of the Crime of Plunder; Penalties.
— Any public officer who, by himself or in connivance with members
of his family, relatives by affinity or consanguinity, business associates,
subordinates or other persons, amasses, accumulates or acquires
ill-gotten wealth through a combination or series of overt or criminal
acts as described in Section 1(d) hereof, in the aggregate amount or
total value of at least Seventy-five million pesos (P75,000,000.00),
shall be guilty of the crime of plunder and shall be punished by life
imprisonment with perpetual absolute disqualification from holding any
public office. Any person who participated with said public officer in the
commission of plunder shall likewise be punished. In the imposition of
penalties, the degree of participation and the attendance of mitigating
and extenuating circumstances shall be considered by the court. The
court shall declare any and all ill-gotten wealth and their interests and
other incomes and assets including the properties and shares of stock
derived from the deposit or investment thereof forfeited in favor of the
State. (Emphasis and underscoring supplied)
An examination of the "overt or criminal acts as described in Section
1(d)" of R.A. No. 7080 would make the similarity between plunder and
bribery even more pronounced since bribery is essentially included
among these criminal acts. Thus Section 1(d) states:
d) "Ill-gotten wealth" means any asset, property, business enterprise or
material possession of any person within the purview of Section Two
(2) hereof, acquired by him directly or indirectly through dummies,
nominees, agents, subordinates and or business associates by any
combination or series of the following means or similar schemes.
1) Through misappropriation, conversion, misuse, or
malversation of public funds or raids on the public treasury;
2) By receiving, directly or indirectly, any commission,
gift, share, percentage, kickbacks or any other form of
pecuniary benefit from any person and/or entity in
connection with any government contract or project or
by reason of the office or position of the public officer
concerned;
3) By the illegal or fraudulent conveyance or disposition of
assets belonging to the National Government or any of its
subdivisions, agencies or instrumentalities or government-
owned or -controlled corporations and their subsidiaries;
4) By obtaining, receiving or accepting directly or indirectly
any shares of stock, equity or any other form of interest or
participation including promise of future employment in any
business enterprise or undertaking;
5) By establishing agricultural, industrial or commercial
monopolies or other combinations and/or implementation of
decrees and orders intended to benefit particular persons or
special interests; or
6) By taking undue advantage of official position, authority,
relationship, connection or influence to unjustly enrich
himself or themselves at the expense and to the damage
and prejudice of the Filipino people and the Republic of the
Philippines. (Emphasis supplied)
Indeed, 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."8
The crime of bribery and the overt acts constitutive of plunder are
crimes committed by public officers, and in either case the noble idea
that "a public office is a public trust and any person who enters upon its
discharge does so with the full knowledge that his life, so far as
relevant to his duty, is open to public scrutiny" applies with equal force.
Plunder being thus analogous to bribery, the exception to R.A. 1405
applicable in cases of bribery must also apply to cases of plunder.
Respecting petitioner’s claim that the money in his bank accounts is
not the "subject matter of the litigation," the meaning of the phrase
"subject matter of the litigation" as used in R.A. 1405 is explained
in Union Bank of the Philippines v. Court of Appeals,9 thus:
Petitioner contends that the Court of Appeals confuses the "cause of
action" with the "subject of the action". In Yusingco v. Ong Hing Lian,
petitioner points out, this Court distinguished the two concepts.
x x x "The cause of action is the legal wrong threatened or committed,
while the object of the action is to prevent or redress the wrong by
obtaining some legal relief; but the subject of the action is neither of
these since it is not the wrong or the relief demanded, the subject of
the action is the matter or thing with respect to which the controversy
has arisen, concerning which the wrong has been done, and this
ordinarily is the property or the contract and its subject matter, or the
thing in dispute."
The argument is well-taken. We note with approval the difference
between the ‘subject of the action’ from the ‘cause of action.’ We also
find petitioner’s definition of the phrase ‘subject matter of the action’ is
consistent with the term ‘subject matter of the litigation’, as the latter is
used in the Bank Deposits Secrecy Act.
In Mellon Bank, N.A. v. Magsino, where the petitioner bank
inadvertently caused the transfer of the amount of US$1,000,000.00
instead of only US$1,000.00, the Court sanctioned the examination of
the bank accounts where part of the money was subsequently caused
to be deposited:
‘x x x Section 2 of [Republic Act No. 1405] 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."
Clearly, Mellon Bank involved a case where the money deposited was
the subject matter of the litigation since the money deposited was the
very thing in dispute. x x x" (Emphasis and underscoring supplied)
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.
In a further attempt to show that the subpoenas issued by the
Sandiganbayan are invalid and may not be enforced, petitioner
contends, as earlier stated, that the information found therein, given
their "extremely detailed" character, could only have been obtained by
the Special Prosecution Panel through an illegal disclosure by the bank
officials concerned. Petitioner thus claims that, following the "fruit of the
poisonous tree" doctrine, the subpoenas must be quashed.
Petitioner further contends that even if, as claimed by respondent
People, the "extremely-detailed" information was obtained by the
Ombudsman from the bank officials concerned during a previous
investigation of the charges against President Estrada, such inquiry
into his bank accounts would itself be illegal.
Petitioner relies on Marquez v. Desierto10 where the Court held:
7
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. (Underscoring
supplied)
As no plunder case against then President Estrada had yet been filed
before a court of competent jurisdiction at the time the Ombudsman
conducted an investigation, petitioner concludes that the information
about his bank accounts were acquired illegally, hence, it may not be
lawfully used to facilitate a subsequent inquiry into the same bank
accounts.
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,11 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:12
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.
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" doctrine13 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.
How the Ombudsman conducted his inquiry into the bank accounts of
petitioner is recounted by respondent People of the Philippines, viz:
x x x [A]s early as February 8, 2001, long before the issuance of
the Marquez ruling, the Office of the Ombudsman, acting under the
powers granted to it by the Constitution and R.A. No. 6770, and acting
on information obtained from various sources, including impeachment
(of then Pres. Joseph Estrada) related reports, articles and
investigative journals, issued a Subpoena Duces Tecum addressed to
Urban Bank. (Attachment "1-b") It should be noted that the description
of the documents sought to be produced at that time included that of
numbered accounts 727, 737, 747, 757, 777 and 858 and included
such names as Jose Velarde, Joseph E. Estrada, Laarni Enriquez,
Guia Gomez, Joy Melendrez, Peachy Osorio, Rowena Lopez, Kevin or
Kelvin Garcia. The subpoena did not single out account 858.
xxxx
Thus, on February 13, 2001, PDIC, as receiver of Urban Bank, issued
a certification as to the availability of bank documents relating to A/C
858 and T/A 858 and the non-availability of bank records as to the
other accounts named in the subpoena. (Attachments "2", "2-1" and "2-
b)
Based on the certification issued by PDIC, the Office of the
Ombudsman on February 16, 2001 again issued a Subpoena Duces
Tecum directed to Ms. Corazon dela Paz, as Interim Receiver,
directing the production of documents pertinent to account A/C 858
and T/C 858. (Attachment "3")
In compliance with the said subpoena dated February 16, 2001, Ms.
Dela Paz, as interim receiver, furnished the Office of the Ombudsman
certified copies of documents under cover latter dated February 21,
2001:
1. Transaction registers dated 7-02-99, 8-16-99, 9-17-99, 10-
18-99, 11-22-99, 1-07-00, 04-03-00 and 04-24-00;
2. Report of Unregularized TAFs & TDs for UR COIN A & B
Placements of Various Branches as of February 29, 2000
and as of December 16, 1999; and
3. Trading Orders Nos. A No. 78102 and A No. 078125.
Trading Order A No. 07125 is filed in two copies – a white copy which
showed "set up" information; and a yellow copy which showed
"reversal" information. Both copies have been reproduced and are
enclosed with this letter.
We are continuing our search for other records and documents
pertinent to your request and we will forward to you on Friday, 23
February 2001, such additional records and documents as we might
find until then. (Attachment "4")
The Office of the Ombudsman then requested for the manger’s
checks, detailed in the Subpoena Duces Tecum dated March 7, 2001.
(Attachment "5")
PDIC again complied with the said Subpoena Duces Tecum dated
March 7, 2001 and provided copies of the manager’s checks thus
requested under cover letter dated March 16, 2001. (Attachment
"6")14 (Emphasis in the original)
The Sandiganbayan credited the foregoing account of respondent
People.15 The Court finds no reason to disturb this finding of fact by the
Sandiganbayan.
The Marquez ruling notwithstanding, the above-described examination
by the Ombudsman of petitioner’s bank accounts, conducted before a
case was filed with a court of competent jurisdiction, was lawful.
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 16 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 underscoring
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.
Purisima17.
Banco Filipino involved subpoenas duces tecum issued by the Office
of the Ombudsman, then known as the Tanodbayan,18 in the course of
its preliminary investigation of a charge of violation of the Anti-Graft
and Corrupt Practices Act.
While the main issue in Banco Filipino was whether R.A. 1405
precluded the Tanodbayan’s issuance of subpoena duces tecum of
bank records in the name of persons other than the one who was
charged, this Court, citing P.D. 1630,19 Section 10, the relevant part of
which states:
(d) He may issue a subpoena to compel any person to appear, give
sworn testimony, or produce documentary or other evidence the
Tanodbayan deems relevant to a matter under his inquiry,
8
held that "The power of the Tanodbayan to issue subpoenae ad
testificandum and subpoenae duces tecum at the time in question
is not disputed, and at any rate does not admit of doubt."20
As the subpoenas subject of Banco Filipino were issued during a
preliminary investigation, in effect this Court upheld the power of the
Tandobayan under P.D. 1630 to issue subpoenas duces tecum
for bank documents prior to the filing of a case before a court of
competent jurisdiction.
Marquez, on the other hand, practically reversed this ruling in Banco
Filipino despite the fact that the subpoena power of the Ombudsman
under R.A. 6770 was essentially the same as that under P.D. 1630.
Thus Section 15 of R.A. 6770 empowers the Office of the Ombudsman
to
(8) Administer oaths, issue subpoena and subpoena duces tecum, and
take testimony in any investigation or inquiry, including the power to
examine and have access to bank accounts and records;
A comparison of this provision with its counterpart in Sec. 10(d) of P.D.
1630 clearly shows that it is only more explicit in stating that the power
of the Ombudsman includes the power to examine and have access to
bank accounts and records which power was recognized with respect
to the Tanodbayan through Banco Filipino.
The Marquez ruling that there must be a pending case in order for the
Ombudsman to validly inspect bank records in camera thus reversed a
prevailing doctrine.21 Hence, it may not be retroactively applied.
The Ombudsman’s inquiry into the subject bank accounts prior to the
filing of any case before a court of competent jurisdiction was therefore
valid at the time it was conducted.
Likewise, 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. Luvendino22 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 judge-
made 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 restrictions 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.
In particular, the Ombudsman, even before its inquiry, had already
possessed information giving him grounds to believe that (1) there are
bank accounts bearing the number "858," (2) that such accounts are in
the custody of Urban Bank, and (3) that the same are linked with the
bank accounts of former President Joseph Estrada who was then
under investigation for plunder.
Only with such prior independent information could it have been
possible for the Ombudsman to issue the February 8, 2001 subpoena
duces tecum addressed to the President and/or Chief Executive Officer
of Urban Bank, which described the documents subject thereof as
follows:
(a) bank records and all documents relative thereto pertaining to all
bank accounts (Savings, Current, Time Deposit, Trust, Foreign
Currency Deposits, etc…) under the account names of Jose Velarde,
Joseph E. Estrada, Laarni Enriquez, Guia Gomez, Joy Melendrez,
Peach Osorio, Rowena Lopez, Kevin or Kelvin Garcia, 727, 737, 747,
757, 777 and 858. (Emphasis and underscoring supplied)
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.23 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.
Thus, with the filing of the plunder case against former President
Estrada before the Sandiganbayan, the Ombudsman, using the above
independent information, may now proceed to conduct the same
investigation it earlier conducted, through which it can eventually
obtain the same information previously disclosed to it by the PDIC, for
it is an inescapable fact that the bank records of petitioner are no
longer protected by R.A. 1405 for the reasons already explained
above.1âwphi1
Since conducting such an inquiry would, however, only result in the
disclosure of the same documents to the Ombudsman, this Court, in
avoidance of what would be a time-wasteful and circuitous way of
administering justice,24 upholds the challenged subpoenas.
Respecting petitioner’s claim that the Sandiganbayan violated his right
to due process as he was neither notified of the requests for the
issuance of the subpoenas nor of the grant thereof, suffice it to state
that the defects were cured when petitioner ventilated his arguments
against the issuance thereof through his earlier quoted letter
addressed to the Sandiganbayan and when he filed his motions to
quash before the Sandiganbayan.
IN SUM, the Court finds that the Sandiganbayan did not commit grave
abuse of discretion in issuing the challenged subpoenas for documents
pertaining to petitioner’s Trust Account No. 858 and Savings Account
No. 0116-17345-9 for the following reasons:
1. These accounts are no longer protected by the Secrecy of
Bank Deposits Law, there being two exceptions to the said
law applicable in this case, namely: (1) the examination of
bank accounts is upon order of a competent court in cases
of bribery or dereliction of duty of public officials, and (2) the
money deposited or invested is the subject matter of the
litigation. Exception (1) applies since the plunder case
pending against former President Estrada is analogous to
bribery or dereliction of duty, while exception (2) applies
because the money deposited in petitioner’s bank accounts
is said to form part of the subject matter of the same plunder
case.
2. The "fruit of the poisonous tree" principle, which states
that once the primary source (the "tree") is shown to have
been unlawfully obtained, any secondary or derivative
evidence (the "fruit") derived from it is also inadmissible,
does not apply in this case. In the first place, R.A. 1405 does
not provide for the application of this rule. Moreover, there is
no basis for applying the same in this case since the primary
source for the detailed information regarding petitioner’s
bank accounts – the investigation previously conducted by
the Ombudsman – was lawful.
3. At all events, even if the subpoenas issued by the
Sandiganbayan were quashed, the Ombudsman may
conduct on its own the same inquiry into the subject bank
accounts that it earlier conducted last February-March 2001,
there being a plunder case already pending against former
President Estrada. To quash the challenged subpoenas
would, therefore, be pointless since the Ombudsman may
obtain the same documents by another route. Upholding the
subpoenas avoids an unnecessary delay in the
administration of justice.
WHEREFORE, the petition is DISMISSED. The Sandiganbayan
Resolutions dated February 7 and 12, 2003 and March 11, 2003 are
upheld.
The Sandiganbayan is hereby directed, consistent with this Court’s
ruling in Marquez v. Desierto, to notify petitioner as to the date the
subject bank documents shall be presented in court by the persons
subpoenaed.
SO ORDERED.
G.R. No. 140687             December 18, 2006
9
CHINA BANKING CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and JOSE "JOSEPH"
GOTIANUY as substituted by ELIZABETH GOTIANUY
LO, respondents.
DECISION
CHICO-NAZARIO, J.:
A Complaint for recovery of sums of money and annulment of sales of
real properties and shares of stock docketed as CEB-21445 was filed
by Jose "Joseph" Gotianuy against his son-in-law, George Dee, and
his daughter, Mary Margaret Dee, before the Regional Trial Court
(RTC) of Cebu City, Branch 58.
Jose Gotianuy accused his daughter Mary Margaret Dee of stealing,
among his other properties, US dollar deposits with Citibank N.A.
amounting to not less than P35,000,000.00 and US$864,000.00. Mary
Margaret Dee received these amounts from Citibank N.A. through
checks which she allegedly deposited at China Banking Corporation
(China Bank). He likewise accused his son-in-law, George Dee,
husband of his daughter, Mary Margaret, of transferring his real
properties and shares of stock in George Dee's name without any
consideration. Jose Gotianuy, died during the pendency of the case
before the trial court.1 He was substituted by his daughter, Elizabeth
Gotianuy Lo. The latter presented the US Dollar checks withdrawn by
Mary Margaret Dee from his US dollar placement with Citibank. The
details of the said checks are:
1) CITIBANK CHECK NO. 69003194405412 dated
September 29 1997 in the amount of US$5,937.52 payable
to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET;
2) CITIBANK CHECK NO. 69003194405296 dated
September 29 1997 in the amount of US$7,197.59 payable
to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET;
3) CITIBANK CHECK NO. 69003194405414 dated
September 29 1997 in the amount of US$1,198.94 payable
to GOTIANUY: JOSE AND/OR DEE: MARY MARGARET;
4) CITIBANK CHECK NO. 69003194405413 dated
September 29 1997 in the amount of US$989.04 payable to
GOTIANUY: JOSE AND/OR DEE: MARY MARGARET;
5) CITIBANK CHECK NO. 69003194405297 dated October
01 1997 in the amount of US$766,011.97 payable to
GOTIANUY: JOSE AND/OR DEE: MARY MARGARET; and
6) CITIBANK CHECK NO. 69003194405339 dated October
09 1997 in the amount of US$83,053.10 payable to
GOTIANUY: JOSE AND/OR DEE: MARY MARGARET.2
Upon motion of Elizabeth Gotianuy Lo, the trial court3 issued a
subpoena to Cristota Labios and Isabel Yap, employees of China
Bank, to testify on the case. The Order of the trial court dated 23
February 1999, states:
Issue a subpoena ad testificandum requiring MS. ISABEL
YAP and CRISTOTA LABIOS of China Banking Corporation,
Cebu Main Branch, corner Magallanes and D. Jakosalem
Sts., Cebu City, to appear in person and to testify in the
hearing of the above entitled case on March 1, 1999 at 8:30
in the morning, with regards to Citibank Checks (Exhs.
"AAA" to "AAA-5") and other matters material and relevant to
the issues of this case.4
China Bank moved for a reconsideration. Resolving the motion, the
trial court issued an Order dated 16 April 1999 and held:
The Court is of the view that as the foreign currency fund
(Exhs. "AAA" to "AAA-5") is deposited with the movant China
Banking Corporation, Cebu Main Branch, Cebu City, the
disclosure only as to the name or in whose name the said
fund is deposited is not violative of the law. Justice will be
better served if the name or names of the depositor of said
fund shall be disclosed because such a disclosure is
material and important to the issues between the parties in
the case at bar.
Premises considered, the motion for reconsideration is
denied partly and granted partly, in the sense that Isabel Yap
and/or Cristuta Labios are directed to appear before this
Court and to testify at the trial of this case on April 20, 1999,
May 6 & 7, 1999 at 10:00 o'clock in the morning and only for
the purpose of disclosing in whose name or names is the
foreign currency fund (Exhs. "AAA" to "AAA-5") deposited
with the movant Bank and not to other matters material and
relevant to the issues in the case at bar.5
From this Order, China Bank filed a Petition for Certiorari6 with the
Court of Appeals. In a Decision7 dated 29 October 1999, the Court of
Appeals denied the petition of China Bank and affirmed the Order of
the RTC.
In justifying its conclusion, the Court of Appeals ratiocinated:
From the foregoing, it is pristinely clear the law specifically
encompasses only the money or funds in foreign currency
deposited in a bank. Thus, the coverage of the law extends
only to the foreign currency deposit in the CBC account
where Mary Margaret Dee deposited the Citibank checks in
question and nothing more.
It has to be pointed out that the April 16, 1999 Order of the
court of origin modified its previous February 23, 1999 Order
such that the CBC representatives are directed solely to
divulge "in whose name or names is the foreign currency
fund (Exhs. "AAA" to "AAA-5") deposited with the movant
bank." It precluded inquiry on "other materials and relevant
to the issues in the case at bar." We find that the directive of
the court below does not contravene the plain language of
RA 6426 as amended by P.D. No. 1246.
The contention of petitioner that the [prescription] on
absolute confidentiality under the law in question covers
even the name of the depositor and is beyond the
compulsive process of the courts is palpably untenable as
the law protects only the deposits itself but not the name of
the depositor. To uphold the theory of petitioner CBC is
reading into the statute "something that is not within the
manifest intention of the legislature as gathered from the
statute itself, for to depart from the meaning expressed by
the words, is to alter the statute, to legislate and not to
interpret, and judicial legislation should be
avoided. Maledicta expositio quae corrumpit textum – It is a
dangerous construction which is against the words.
Expressing the same principle is the maxim: Ubi lex non
distinguit nec nos distinguere debemos, which simply means
that where the law does not distinguish, we should not make
any distinction." (Gonzaga, Statutes and their Construction,
p. 75.)8
From the Decision of the Court of Appeals, China Bank elevated the
case to this Court based on the following issues:
I
THE HONORABLE COURT OF APPEALS HAS
INTERPRETED THE PROVISION OF SECTION 8 OF R.A.
6426, AS AMENDED, OTHERWISE KNOWN AS THE
FOREIGN CURRENCY DEPOSIT ACT, IN A MANNER
CONTRARY TO THE LEGISLATIVE PURPOSE, THAT IS,
TO PROVIDE ABSOLUTE CONFIDENTIALITY OF
WHATEVER INFORMATION RELATIVE TO THE FOREIGN
CURRENCY DEPOSIT.
II
PRIVATE RESPONDENT IS NOT THE OWNER OF THE
QUESTIONED FOREIGN CURRENCY DEPOSIT. THUS,
HE CANNOT INVOKE THE AID OF THE COURT IN
COMPELLING THE DISCLOSURE OF SOMEONE ELSE'S
FOREIGN CURRENCY DEPOSIT ON THE FLIMSY
PRETEXT THAT THE CHECKS (IN FOREIGN CURRENCY)
HE HAD ISSUED MAY HAVE ENDED UP THEREIN.
III
PETITIONER CAN RIGHTLY INVOKE THE PROVISION OF
SEC. 8, R.A. 6426, IN BEHALF OF THE FOREIGN
CURRENCY DEPOSITOR, OWING TO ITS SOLEMN
10
 OBLIGATION TO ITS CLIENT TO EXERCISE
EXTRAORDINARY DILIGENCE IN THE HANDLING OF
THE ACCOUNT.9
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,10 where it was held that the only exception to the secrecy of
foreign currency deposits is in the case of a written permission of the
depositor.
It must be remembered that under the whereas clause of Presidential
Decree No. 1246 which amended Sec. 8 of Republic Act No. 6426, the
Foreign Currency Deposit System including the Offshore Banking
System under Presidential Decree 1034 were intended to draw
deposits from foreign lenders and investors, and we quote:
Whereas, in order to assure the development and speedy
growth of the Foreign Currency Deposit System and the
Offshore Banking System in the Philippines, certain
incentives were provided for under the two Systems such as
confidentiality of deposits subject to certain exceptions and
tax exemptions on the interest income of depositors who are
nonresidents and are not engaged in trade or business in the
Philippines;
Whereas, making absolute the protective cloak of
confidentiality over such foreign currency deposits,
exempting such deposits from tax, and guaranteeing the
vested rights of depositors would better encourage the inflow
of foreign currency deposits into the banking institutions
authorized to accept such deposits in the Philippines thereby
placing such institutions more in a position to properly
channel the same to loans and investments in the
Philippines, thus directly contributing to the economic
development of the country.
As to the deposit in foreign currencies entitled to be protected under
the confidentiality rule, Presidential Decree No. 1034,11 defines
deposits to mean funds in foreign currencies which are accepted and
held by an offshore banking unit in the regular course of business, with
the obligation to return an equivalent amount to the owner thereof, with
or without interest.12
It is in this light that the court in the case of Salvacion v. Central Bank
of the Philippines,13 allowed the inquiry of the foreign currency deposit
in question mainly due to the peculiar circumstances of the case such
that a strict interpretation of the letter of the law would result to rank
injustice. Therein, Greg Bartelli y Northcott, an American tourist, was
charged with criminal cases for serious illegal detention and rape
committed against then 12 year-old Karen Salvacion. A separate civil
case for damages with preliminary attachment was filed against Greg
Bartelli. The trial court issued an Order granting the Salvacions'
application for the issuance of a writ of preliminary attachment. A
notice of garnishment was then served on China Bank where Bartelli
held a dollar account. China Bank refused, invoking the secrecy of
bank deposits. The Supreme Court ruled: "In fine, the application of the
law depends on the extent of its justice x x x It would be unthinkable,
that the questioned law exempting foreign currency deposits from
attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body
whatsoever would be used as a device by an accused x x x for
wrongdoing, and in so doing, acquitting the guilty at the expense of the
innocent.14
With the foregoing, we are now tasked to determine the single material
issue of whether or not petitioner China Bank is correct in its
submission that the Citibank dollar checks with both Jose Gotianuy
and/or Mary Margaret Dee as payees, deposited with China Bank, may
not be looked into under the law on secrecy of foreign currency
deposits. As a corollary issue, sought to be resolved is whether Jose
Gotianuy may be considered a depositor who is entitled to seek an
inquiry over the said deposits.
The Court of Appeals, in allowing the inquiry, considered Jose
Gotianuy, a co-depositor of Mary Margaret Dee. It reasoned that since
Jose Gotianuy is the named co-payee of the latter in the subject
checks, which checks were deposited in China Bank, then, Jose
Gotianuy is likewise a depositor thereof. On that basis, no written
consent from Mary Margaret Dee is necessitated.
We agree in the conclusion arrived at by the Court of Appeals.
The following facts are established: (1) Jose Gotianuy and Mary
Margaret Dee are co-payees of various Citibank checks;15 (2) Mary
Margaret Dee withdrew these checks from Citibank;16 (3) Mary
Margaret Dee admitted in her Answer to the Request for Admissions
by the Adverse Party sent to her by Jose Gotianuy17 that she withdrew
the funds from Citibank upon the instruction of her father Jose
Gotianuy and that the funds belonged exclusively to the latter; (4)
these checks were endorsed by Mary Margaret Dee at the dorsal
portion; and (5) Jose Gotianuy discovered that these checks were
deposited with China Bank as shown by the stamp of China Bank at
the dorsal side of the checks.
Thus, with this, there is no issue as to the source of the funds. Mary
Margaret Dee declared the source to be Jose Gotianuy. There is
likewise no dispute that these funds in the form of Citibank US dollar
Checks are now deposited with China Bank.
As the owner of the funds unlawfully taken and which are undisputably
now deposited with China Bank, Jose Gotianuy has the right to inquire
into the said deposits.
A depositor, in cases of bank deposits, is one who pays money into the
bank in the usual course of business, to be placed to his credit and
subject to his check or the beneficiary of the funds held by the bank as
trustee.18
On this score, the observations of the Court of Appeals are worth
reiterating:
Furthermore, it is indubitable that the Citibank checks were
drawn against the foreign currency account with Citibank,
NA. The monies subject of said checks originally came from
the late Jose Gotianuy, the owner of the account. Thus, he
also has legal rights and interests in the CBC account where
said monies were deposited. More importantly, the Citibank
checks (Exhibits "AAA" to "AAA-5") 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.19 (Emphasis supplied.)
One more point. It must be remembered that in the complaint of Jose
Gotianuy, he alleged that his US dollar deposits with Citibank were
illegally taken from him. On the other hand, China Bank employee
Cristuta Labios testified that Mary Margaret Dee came to China Bank
and deposited the money of Jose Gotianuy in Citibank US dollar
checks to the dollar account of her sister Adrienne Chu.20 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.21 Clearly it was not the intent of the
legislature when it enacted the law on secrecy on foreign currency
deposits to perpetuate injustice. This Court is of the view that the
allowance of the inquiry would be in accord with the rudiments of fair
play,22 the upholding of fairness in our judicial system and would be an
avoidance of delay and time-wasteful and circuitous way of
administering justice.23
11
WHEREFORE, premises considered, the Petition is DENIED. The
Decision of the Court of Appeals dated 29 October 1999 affirming the
Order of the RTC, Branch 58, Cebu City dated 16 April 1999
is AFFIRMED and this case is ordered REMANDED to the trial court
for continuation of hearing with utmost dispatch consistent with the
above disquisition. No costs.
SO ORDERED.
G.R. No. 149193               April 4, 2011
RICARDO B. BANGAYAN, Petitioner,
vs.
RIZAL COMMERCIAL BANKING CORPORATION AND PHILIP
SARIA, Respondents,
DECISION
SERENO, J.:
Before this Court is a Rule 45 Petition1 questioning the Court of
Appeals’ affirmance of a trial court’s dismissal of a complaint for
damages filed by a depositor against a bank for the dishonor of seven
checks and for the wrongful disclosure of information regarding the
depositor’s account contrary to the Bank Secrecy Act (Republic Act
No. 1405).2
The Facts
Petitioner Ricardo Bangayan had a savings account and a current
account with one of the branches of respondent Rizal Commercial
Banking Corporation (RCBC).3 These two accounts had an "automatic
transfer" condition wherein checks issued by the depositor may be
funded by any of the two accounts.4
On 26 June 1992, petitioner Bangayan purportedly signed a
Comprehensive Surety Agreement (the Surety Agreement)5 with
respondent RCBC in favor of nine corporations.6 Under the Surety
Agreement, the funds in petitioner Bangayan’s accounts with
respondent RCBC would be used as security to guarantee any existing
and future loan obligations, advances, credits/increases and other
obligations, including any and all expenses that these corporations
may incur with respondent bank.
Petitioner Bangayan contests the veracity and due authenticity of the
Surety Agreement on the ground that his signature thereon was not
genuine, and that the agreement was not notarized.7 Respondent
RCBC refutes this claim, although it admitted that it was exceptional for
a perfected Surety Agreement of the bank to be without a signature of
the witness and to remain unnotarized. Mr. Eli Lao, respondent bank’s
Group Head of Account Management, however, explained that the
bank was still in the process of "completing" the Surety Agreement at
that time.8
The following are the transactions of respondent RCBC in relation to
the Surety Agreement vis-à-vis the petitioner Bangayan.
On 26 June 1992 (the same day that the Surety Agreement was
allegedly signed), two of the corporations whose performance were
guaranteed therein – LBZ Commercial and Peaks Marketing – were
issued separate commercial letters of credit9 by respondent RCBC for
the importation of PVC resin from Korea. Three days later or on 29
June 1992, respondent RCBC issued a third letter of credit10 in favor of
another corporation, Final Sales Enterprise, whose obligations to
respondent bank were likewise secured by petitioner Bangayan under
the Surety Agreement. Mr. Lao claimed that respondent bank would
not have extended the letters of credit in favor of the three corporations
without petitioner Bangayan acting as surety.11
On 26 August 1992, a fourth letter of credit12 was issued by respondent
RCBC for the importation of materials from Korea, this time by Lotec
Marketing, another corporation enumerated in the Surety Agreement.
The Korea Exchange Bank was designated as the advising bank for
Lotec Marketing’s letter of credit.13
On 15 September 1992, after the arrival of the shipments of the first
three corporations from Korea, the Bureau of Customs (BOC)
demanded – via letter of the same date – from respondent RCBC,
which facilitated the three letters of credit, the remittance of import
duties in the amount of thirteen million two hundred sixty-five thousand
two hundred twenty-five pesos (PhP13,265,225).14
Mr. Lao of respondent RCBC allegedly called petitioner Bangayan and
informed him of the BOC’s demand for payment of import
duties.15 According to Mr. Lao, petitioner allegedly replied that he
understood the situation and assured Mr. Lao that he was doing
everything he could to solve the problem.16
Considering the BOC’s demand, respondent RCBC decided to put on
hold the funds in petitioner Bangayan’s accounts by virtue of the
authority given to it by petitioner under the Surety
Agreement.17 Respondent RCBC reasoned that as the collecting agent,
it had to earmark sufficient funds in the account of petitioner Bangayan
(the surety) to satisfy the tax obligations of the three corporations, in
the event that they would fail to pay the same.18 Thus, respondent bank
refused payments drawn from petitioner Bangayan’s deposits, unless
there was an order from the BOC.19 Petitioner Bangayan, however,
contests this action since respondent bank did not present any writ of
garnishment that would authorize the freezing of his funds.20
On 18 September 1992, two of the seven checks that were drawn
against petitioner Bangayan’s Current Account No. 0109-8232-5 were
presented for payment to respondent RCBC, namely:
RCBC Check No. Date of Presentment
98799 21
18 Sept 1992 United
938000 22
18 Sept 1992 United
TOTAL
On the same day, the amounts of three million six hundred fifty
thousand pesos (PhP3,650,000) and four million five hundred
thousand pesos (PhP4,500,000)23 were successively debited from the
said current account, as shown in petitioner Bangayan’s passbook for
the current account.24 Alongside these two debit entries in the
passbook was the transaction reference code "DFT," which apparently
stands for "debit fund transfer."25
On 21 September 1992, the same amounts in the two checks were
credited to petitioner Bangayan’s current account, under the
transaction reference code "CM," that stands for "credit
memo."26 Moreover, petitioner Bangayan’s Checks Nos. 93799 and
93800 issued in favor of United Pacific Enterprises were also returned
by respondent RCBC with the notation "REFER TO DRAWER."27
On the same day that the checks were referred to petitioner Bangayan
by respondent RCBC, United Pacific Enterprises, through Mr. Manuel
Dente, demanded from petitioner Bangayan the payment of eight
million one hundred fifty thousand pesos (PhP8,150,000), which
corresponded to the amounts of the two dishonored checks that were
issued to it.28 Nothing more has been alleged by petitioner on this
particular matter.
On 24 September 1992, the Korea Exchange Bank (the advising bank)
informed respondent RCBC through a telex that it had already
negotiated the fourth letter of credit for Lotec Marketing’s shipment,
which amounted to seven hundred twelve thousand eight hundred U.S.
dollars (US$712,800) and, thereafter, claimed reimbursement from
respondent RCBC.29
This particular shipment by Lotec Marketing became the subject matter
of an investigation conducted by the Customs Intelligence &
Investigation Service of the BOC, according to respondent bank.30 Both
parties agreed that the BOC likewise conducted an investigation
covering the importation of the three corporations – LBZ Commercial,
Peaks Marketing and Final Sales Enterprise - that were opened
through the letters of credit issued by respondent RCBC.31
On 09 October 1992, respondent Philip Saria, who was an Account
Officer of respondent bank’s Binondo Branch, signed and executed a
Statement before the BOC, with the assistance of Atty. Arnel Z.
Dolendo of respondent RCBC, on the bank’s letters of credit issued in
favor of the three corporations.32 Petitioner Bangayan cited this
incident as the basis for the allegation in the Complaint he
subsequently filed that respondent RCBC had disclosed to a third party
(the BOC) information concerning the identity, nature, transaction and
deposits including details of transaction related to and pertaining to his
deposits with the said bank, in violation of the Bank Secrecy Act.33 It
must be pointed out that the trial court found that "no evidence was
introduced by (petitioner Bangayan) to substantiate his claim that
(respondent RCBC) gave any classified information" in violation of the
Bank Secrecy Law.34 Thus, the trial court considered the alleged
disclosure of confidential bank information by respondent RCBC as a
non-issue.35
12
On the same date, when Lotec Marketing’s loan obligation under the
fourth letter of credit became due and demandable,36 respondent
RCBC issued an advice that it would debit the amount of twelve million
seven hundred sixty-two thousand six hundred pesos (PhP12,762,600)
from petitioner Bangayan’s current account to partially satisfy the
guaranteed corporation’s loan.37 At that time, petitioner Bangayan’s
passbook for his current account showed that it had funds of twelve
million seven hundred sixty-two thousand six hundred forty-five and
64/100 pesos (PhP12,762,645.64).38
On 12 October 1992, the amount of twelve million seven hundred sixty-
two thousand and six hundred pesos (PhP12,762,600) was debited
from petitioner Bangayan’s current account, consequently reducing the
funds to forty-five and 64/100 pesos (PhP45.64).39 Respondent RCBC
claimed that the former amount was debited from petitioner’s account
to partially pay Lotec Marketing’s outstanding obligation which stood at
eighteen million forty-seven thousand thirty-three and 60/100 pesos
(PhP18,047,033.60).40 Lotec Marketing, thereafter, paid the balance of
its obligation to respondent RCBC in the amount of five million three
hundred thirty-eight thousand eight hundred nineteen and 20/100
pesos (PhP5,338,819.20)41 under the fourth letter of credit.
On 13 October 2010, the three corporations earlier adverted to paid
the corresponding customs duties demanded by the BOC.42 Receipts
were subsequently issued by the BOC for the corporations’ payments,
copies of which were received by Atty. Nelson Loyola, counsel of
petitioner Bangayan in this case.43 The trial court considered this as
payment by petitioner of the three corporations’ obligations for custom
duties.44 Thereafter, respondent RCBC released to the corporations
the necessary papers for their PVC resin shipments which were
imported through the bank’s letters of credit.45
On 15 October 2010, five other checks of petitioner Bangayan were
presented for payment to respondent RCBC, namely:
RCBC Check No. Date of Presentment
93801146 15 Oct 1992
47
938012 15 Oct 1992
938013 48
15 Oct 1992
93801449 15 Oct 1992
50
938015 15 Oct 1992
TOTAL AMOUNT
On 16 October 1992, these five checks were also dishonored by
respondent RCBC on the ground that they had been drawn against
insufficient funds ("DAIF") and were subsequently returned.51
On 20 October 1992, Hinomoto Trading Company, one of the payees
for two of the dishonored checks,52 demanded that petitioner Bangayan
make good on his payments.53 On 21 October 1992, the other payee of
the three other dishonored checks,54 Simplex Merchandising, likewise
made a final demand on petitioner to replace the dishonored
instruments.55
On 23 October 1992, petitioner Bangayan, through counsel, demanded
that respondent bank restore all the funds to his account and indemnify
him for damages.56
On 30 October 1992, nineteen thousand four hundred twenty-seven
and 15/100 pesos (PhP19,427.15) was credited in petitioner
Bangayan’s current account, with the transaction reference code "INT"
referring to interest.57 Petitioner explains that even if the outstanding
balance at that time was reduced, this interest was earned based on
the average daily balance of the account for the quarter and not just on
the balance at that time, which was forty-five and 64/100 pesos
(PhP45.64).58
The Case in the Trial Court
On 09 November 1992, petitioner Bangayan filed a complaint for
damages against respondent RCBC.59 Subsequently, respondent
RCBC filed an Answer dated 02 December 1992 with compulsory
counter-claims.60 On 12 January 1993, respondent RCBC filed a
Motion for Leave to File Attached Amended Answer and Amended
Answer.61
Petitioner Bangayan argues that at the time the dishonored checks
were issued, there were sufficient funds in his accounts to cover
them;62 that he was informed by personnel of respondent RCBC that
his accounts were garnished, but no notice or writ of garnishment was
ever shown to him;63 and that his name and reputation were tarnished
because of the dishonor of checks that were issued in relation to his
automotive business.64
In its defense, respondent RCBC claims that petitioner Bangayan
signed a Surety Agreement in favor of several companies that
defaulted in their payment of customs duties that resulted in the
imposition of a lien over the accounts, particularly for the payment of
customs duties assessed by the Bureau of Customs.65 Respondent
bank further claimed that it had funded the letter of credit66 availed of
by Lotec Marketing to finance the latter’s importation with the account
of petitioner Bangayan, who agreed to guarantee Lotec Marketing’s
obligations under the Surety Agreement; and, that respondent bank
applied petitioner Bangayan’s deposits to satisfy part of Lotec
Marketing’s obligation in the amount of twelve million seven hundred
sixty-two thousand and six hundred pesos (PhP12,762,600), which
resulted in the depletion of the bank accounts.67
Petitioner Bangayan also alleged that respondent RCBC disclosed to a
third party (the BOC) classified information about the identity and
nature of the transactions and deposits, in violation of the Bank
Secrecy Act. Respondent RCBC counters that no confidential
information on petitioner’s bank accounts was disclosed.
Availing himself of discovery proceedings in the lower court, petitioner
Bangayan filed a Request for Admission68 and Request for Answer to
Written Interrogatories,69 to which respondent RCBC filed the
corresponding Answers and Objections to Interrogatories70 and
Response to Request for Admission.71
During the presentation of complainant’s evidence, petitioner
Bangayan, Atty. Randy Rutaquio, respondent Saria and Manuel
Dantes testified in open court. Petitioner Bangayan thereafter filed a
Formal Offer of Evidence.72
On the other hand, respondent RCBC presented Mr. Lao as its lone
defense witness. Before the termination of Mr. Lao’s direct
examination, respondent RCBC filed a Motion to Inhibit Presiding
Judge Pedro Santiago,73 who subsequently denied the motion.74 The
Order denying the Motion to Inhibit was the subject matter of petitions
filed by respondent RCBC in the Court of Appeals75 and subsequently
in this Court, which were all dismissed.
In the meantime, when respondent RCBC’s witness (Mr. Lao) failed to
appear at the hearing, Judge Santiago ordered that Mr. Lao’s
testimony be stricken off the record despite respondent bank’s motion
to have the case reset.76 After the appellate proceedings for
respondent RCBC’s Petition as regards the Motion to Inhibit, however,
Judge Santiago set aside his earlier Order and reinstated the
testimony of Mr. Lao, subject to cross-examination.77 Petitioner
Bangayan took exception to the Order reinstating Mr. Lao’s testimony,
but continued to conduct his cross examination with a reservation to
raise the Order in the appellate courts.78
Respondent RCBC thereafter filed its Formal Offer of Exhibits.79
On 17 October 1994, the trial court rendered a Decision, the
dispositive portion of which reads:
"WHEREFORE, premises above considered, plaintiff not having
proved that defendant RCBC acted wrongly, maliciously and
negligently in dishonoring his 7 checks, nor has the bank given any
confidential informations against the plaintiff in violation of R.A. 1405
and the defendant bank having established on the contrary that plaintiff
has no sufficient funds for his said checks, the instant complaint is
hereby DISMISSED."80 (Emphasis supplied)
When his omnibus motion81 to have the Decision reconsidered was
denied,82 petitioner Bangayan filed a notice of appeal.83
The Ruling of the Court of Appeals
After petitioner Bangayan84 and respondent RCBC85 filed their
respective appeal briefs, the Court of Appeals affirmed the trial court’s
decision in toto.86 The appellate court found that the dishonor of the
checks by respondent RCBC was not without good reason,
considering that petitioner Bangayan’s account had been debited
owing to his obligations as a surety in favor of several corporations.
Thus, the Court Appeals found "there was no ‘dishonest purpose,’ or
‘some moral obliquity,’ or ‘conscious doing of wrong,’ or ‘breach of a
known duty,’ or ‘some motive or interest,’ or ‘ill will’ that ‘partakes (sic)
nature of fraud’ that can be attributed" to respondent RCBC.87 It
likewise ruled that petitioner Bangayan cannot raise the question as to
the genuineness, authenticity and due execution of the Surety
Agreement for the first time on appeal.88
13
This Decision of the appellate court is the subject of the instant Petition
for Review on Certiorari filed by petitioner Bangayan under Rule 45 of
the Rules of Court.89
Assignment of Errors
Petitioner Bangayan makes the following assignment of errors:
A. THE COURT OF APPEALS ACTED WITH GROSS
ARBITRARINESS AND IN BLATANT VIOLATION OF
THE CONSTITUTIONAL RIGHTS OF THE PETITITONER TO DUE
PROCESS, AND A FAIR TRIAL:
(1) WHEN IT REINSTATED THE TESTIMONY OF
ELI LAO ALREADY STRICKEN OFF THE
RECORDS UPON PRIOR ORDER OF THE RTC
AFFIRMED BY THE COURT OFAPPEALS AND
CONFIRMED BY THE SUPREME COURT;
(2) WHEN IT SANCTIONED THE CAVALIER ACT
OF RESPONDENTS IN DEMEANING THE
RULES ON DISCOVERY PROCEDURE;
(3) WHEN IT RENDERED A DECISION WHICH
IS CONTRARY TO THE FACTS AND THE
EVIDENCE PRESENTED AT THE TRIAL; and
(4) WHEN IT REFUSED TO APPLY THE LAWS
SQUARELY IN POINT ON THE MATTER IN
CONTROVERSY.
B. THE HONORABLE COURT OF APPEALS DECIDED THIS CASE
IN A WAY NOT IN ACCORD WITH THE APPLICABLE DECISIONS
OF THE HONORABLE SUPREME COURT;
C. THERE ARE SPECIAL AND IMPORTANT REASONS THAT
REQUIRE A REVIEW OF THE CA DECISION;
D. THE DECISION OF THE COURT OF APPEALS … IS NEITHER
JUST NOR IN ACCORD WITH THE RULES OF LAW AND
JURISPRUDENCE NOR IS IT EQUITABLE AND IT IGNORES THE
PREVIOUS RULINGS OF THE SUPREME COURT IN EARLIER
PRECEDENT CASES.90
The Issues
A. Whether respondent RCBC was justified in dishonoring
the checks, and, consequently, whether petitioner Bangayan
is entitled to damages arising from the dishonor.
B. Whether there was reversible error on the part of the
lower court in allowing the testimony of Mr. Lao, despite its
earlier Order to strike off the testimony.
C. Whether respondent RCBC violated the Bank Secrecy
Act.
The Ruling of the Court
Preliminarily, petitioner Bangayan raises questions of fact91 regarding
the authenticity of the Surety Agreement and the events leading up to
the dishonor of the seven checks. However, petitions for review on
certiorari under Rule 45 are limited only to pure questions of law92 and,
generally, questions of fact are not reviewable93 since this Court is not
a trier of facts.94 Although respondent RCBC briefly treated this
procedural matter,95 the Court finds that the instant Petition is indeed
subject to dismissal because the determination of questions of fact is
improper in a Rule 45 proceeding.96 In any case, even if procedural
rules were to be relaxed at this instance, the substantial merits of
petitioner Bangayan’s cause is nonetheless insufficient to reverse the
decisions of the trial and appellate courts, as will be discussed in detail
below.
A. There was no malice or bad faith on the part of respondent RCBC in
the dishonor of the checks, since its actions were justified by petitioner
Bangayan’s obligations under the Surety Agreement.
The Court is unconvinced by petitioner Bangayan’s arguments that
respondent RCBC acted with malice or bad faith in dishonoring the
seven checks, which would entitle him to an award of damages.
At the heart of the controversy is the Surety Agreement that secured
the obligations of the nine corporations in favor of respondent RCBC.
Petitioner Bangayan denies the genuineness, authenticity and due
execution of the alleged agreement on the following grounds: (a) his
signature on the document is not genuine; (b) the Surety Agreement
was never notarized; and (c) the alleged accounts, being guaranteed,
appear in a separate piece of paper that does not bear his signature or
conformity.97
Both the trial and the appellate courts gave credence to the Surety
Agreement, which categorically guaranteed the four corporations’
obligations to respondent RCBC under the letters of credit. Petitioner
Bangayan did not provide sufficient reason for the Court to reverse
these findings. The evidence on record supports the conclusion arrived
at by the lower court and the Court of Appeals.
First, aside from his bare allegations, petitioner Bangayan failed to
establish how his signature in the Surety Agreement was forged and
therefore, not genuine.
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.98 As a rule,
forgery cannot be presumed and must be proved by clear, positive and
convincing evidence.99 The burden of proof rests on the party alleging
forgery.100 Mere allegation of forgery is not evidence.101
Mr. Lao, witness for respondent RCBC, identified the Surety
Agreement102 as well as the genuineness of petitioner Bangayan’s
signature therein using petitioner’s signature cards in his bank
accounts.103 The trial and the appellate courts gave due credence to
the identification and authentication of the Surety Agreement made by
Mr. Lao.104
In Deheza-Inamarga v. Alano,105 the Court ruled that:
The question of forgery is one of fact. It is well-settled that when
supported by substantial evidence or borne out by the records, the
findings of fact of the Court of Appeals are conclusive and binding on
the parties and are not reviewable by this Court.
It is a hornbook doctrine that the findings of fact of trial courts are
entitled to great weight on appeal and should not be disturbed except
for strong and valid reasons. It is not a function of this Court to analyze
and weigh evidence by the parties all over again. Our jurisdiction is
limited to reviewing errors of law that might have been committed by
the Court of Appeals. Where the factual findings of the trial court are
affirmed in toto by the Court of Appeals as in this case, there is great
reason for not disturbing such findings and for regarding them as not
reviewable by this Court. (Emphasis supplied)
Furthermore, petitioner Bangayan did not adduce any evidence to
support his claim of forgery, despite the opportunity to do so.
Considering that there was evidence on record of his genuine
signature and handwriting (the signature card and the dishonored
checks themselves), nothing should have prevented petitioner
Bangayan from submitting the Surety Agreement for examination or
comparison by a handwriting expert.
Even respondent RCBC did not interpose any objection when the
possibility of forwarding the signature card and Surety Agreement
forwarded to the National Bureau of Investigation for examination was
raised during the testimony of Mr. Lao:
ATTY. LOYOLA
Considering the delicate nature or the significance of the signatures in
the signature cards and the risk of my admitting the authenticity of a
mere xerox copies [sic] and considering further that it is our position
that the surety agreement as well as specimen signatures on the
signature cards must be submitted to the Court and later forwarded to
the NBI, Question Document Section, for examination, I am in no
position to admit now that the machine copies in the signature cards
are faithful reproduction. Accordingly, I am hoping at this stage that the
surety agreement and the signature cards be forwarded to the NBI
later on for examination and in the mean time, the questioned
documents be entrusted to the custody of the Honorable Court.
ATTY. POBLADOR
With respect to the manifestation of counsel that the documents with
the signatures should be submitted to the NBI, we have no objection,
14
but at this juncture, we are only asking, Your Honor, if the xerox copies
are faithful reproduction of the original.106 (Emphasis supplied)
Despite his intention to have the signatures in the Surety Agreement
compared with those in the signature cards, petitioner Bangayan did
not have the questioned document examined by a handwriting expert
in rebuttal and simply relied on his bare allegations. There is no clear,
positive and convincing evidence to show that his signature in the
Surety Agreement was indeed forged. As petitioner failed to discharge
his burden of demonstrating that his signature was forged, there is no
reason to overturn the factual findings of the lower courts with respect
to the genuineness and due execution of the Surety Agreement.
Second, the mere absence of notarization does not necessarily render
the Surety Agreement invalid.
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.107 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.108
On its face, the Surety Agreement is not notarized, even if respondent
RCBC’s standard form for that agreement makes provisions for it. The
non-completion of the notarization form, however, does not detract
from the validity of the agreement, especially in this case where the
genuineness and due authenticity of petitioner Bangayan’s signature in
the contract was not successfully assailed.
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 present109 and the notarization is not an
essential requisite for the validity of a Surety Agreement.110
Third, that the annex of the Surety Agreement does not bear petitioner
Bangayan’s signature is not a sufficient ground to invalidate the main
agreement altogether. As the records will bear out, the Surety
Agreement enumerated the names of the corporation whose
obligations petitioner Bangayan are securing. The annex to the Surety
Agreement enumerated not only the names of the corporations but
their respective addresses as well.111 The corporations enumerated in
the annex correspond to the nine corporations enumerated in the main
body of the Surety Agreement. Ordinarily, the name and address of the
principal borrower whose obligation is sought to be assured by the
surety is placed in the body of the agreement, but in this case the
addresses could not all fit in the body of the document, thus, requiring
that the address be written in an annex. The Surety Agreement itself
noted that the principal places of business and postal addresses of the
nine corporations were to be found in an "attached" document.
Fourth, petitioner Bangayan never contested the existence of the
Surety Agreement prior to the filing of the Complaint. When Mr. Lao
informed him of the letter from the BOC regarding the failure of the
three corporations to pay the customs duties under the letters of credit,
the petitioner assured respondent bank that "he is doing everything he
can to solve the problem."112 If petitioner Bangayan purportedly never
signed the Surety Agreement, he would have been surprised or at
least perplexed that respondent RCBC would contact him regarding
the three corporations’ letters of credit, when, as he claims, he never
agreed to act as their surety. Instead, he acknowledged the situation
and even offered to solve the predicament of these borrower
corporations. In fact, Atty. Loyola, petitioner’s counsel in this case,
even obtained copies of the BOC receipts after the three corporations
paid the customs duties for their importation under the letters of credit
giving a possible interpretation that petitioner was himself answering
the obligations of the three corporations for the unpaid customs duties.
It must be emphasized that petitioner Bangayan did not complain
against the four corporations which had benefitted from his bank
account. He claims to have no reasonable connection to these
borrower corporations and denies having signed the Surety
Agreement. If true, nothing should have stopped him from taking these
corporations to court and demanding compensation as well as
damages for their unauthorized use of his bank account. Yet, these
bank accounts were put on hold and/or depleted by the letters of credit
issued to the four entities. That petitioner did not include them in the
present suit strengthens the finding that he had indeed consented to
act as surety for those entities, and that there seems to be no arm’s
length relationship between petitioner and the three entities.
Whatever damage to petitioner Bangayan’s interest or reputation from
the dishonor of the seven checks was a consequence of his agreement
to act as surety for the corporations and their failure to pay their loan
obligations, advances and other expenses.
With respect to the first two dishonored checks, respondent RCBC had
already put on hold petitioner Bangayan’s account to answer for the
customs duties being demanded from the bank by the BOC. In fact, the
trial court considered the referral of these checks to petitioner
Bangayan as an effort by respondent RCBC to allow its depositor an
opportunity to "arrange his accounts and provide funds for his
checks."113 It likewise appeared to the appellate court that the funds in
petitioner’s account served as the lien of the custom duties assessed;
thus, the funds cannot be considered as sufficient to cover future
transactions.114
On the other hand, the five other checks were subsequently
dishonored because petitioner Bangayan’s account was by that time
already depleted due to the partial payment of Lotec Marketing’s loan
obligation.115 Although the lien earlier imposed on petitioner’s account
was lifted when the three corporations paid the customs duties,116 the
account was almost completely depleted when the funds were
subsequently used to partially pay Lotec Marketing’s outstanding
obligation under the fourth letter of credit.117 Respondent RCBC was
compelled to fully debit the funds to satisfy the main loan obligation of
Lotec Marketing, which petitioner had guaranteed in joint and several
capacity.
What must be underscored in respondent RCBC’s immediate action of
applying petitioner Bangayan’s account to the Lotec Marketing is the
nature of the loan instrument used in this case – a letter of credit. In a
letter of credit, the engagement of the issuing bank (respondent RCBC
in this instance) is to pay the seller or beneficiary of the credit (or the
advising bank, Korean Exchange Bank, in this instance) once the draft
and the required documents are presented to it.118 This "independence
principle" in letters of credit assures the seller or the beneficiary of
prompt payment independent of any breach of the main contract and
precludes the issuing bank from determining whether the main contract
is actually accomplished or not.119
In this case, respondent RCBC, as the issuing bank for Lotec
Marketing’s letter of credit had to make prompt payment to Korea
Exchange Bank (the advising bank) when the obligation became due
and demandable. Precisely because of the independence principle in
letters of credit and the need for prompt payment,120 respondent RCBC
required a Surety Agreement from petitioner Bangayan before issuing
the letters of credit in favor of the four corporations, including Lotec
Marketing.
Under Articles 2199121 and 2200122 of the Civil Code, actual or
compensatory damages are those awarded in satisfaction of or in
recompense for loss or injury sustained.123 They proceed from a sense
of natural justice and are designed to repair the wrong that has been
done.124
In all seven dishonored checks, respondent RCBC properly exercised
its right as a creditor under the Surety Agreement to apply the
petitioner Bangayan’s funds in his accounts as security for the
obligations of the four corporations under the letters of credit. Thus,
petitioner Bangayan cannot attribute any wrong or misconduct to
respondent RCBC since there was no malice or bad faith on the part of
respondent in dishonoring the checks. Any damage to petitioner arising
from the dishonor of those checks was brought about, not by the
bank’s actions, but by the corporations that defaulted on their
obligations that petitioner had guaranteed to pay. The trial and the
appellate courts, therefore, committed no reversible error in disallowing
the award of damages to petitioner.
B. The trial court did not commit reversible error when it reinstated the
testimony of Mr. Lao and allowed petitioner Bangayan to cross-
examine him.
Petitioner Bangayan also assails the lower court’s order that reinstated
the direct testimony of Mr. Lao, respondent RCBC’s lone witness.
Petitioner claims that Judge Santiago acted with partiality by
reinstating Mr. Lao’s testimony, because this Court in another case
had already sustained the lower court’s earlier Order striking out the
testimony. Hence, petitioner says that the judge’s reinstatement of Mr.
Lao’s testimony was in violation of petitioner’s right to due process.
Petitioner Bangayan’s arguments are unmeritorious.
Discretionary power is generally exercised by trial judges in
furtherance of the convenience of the courts and the litigants, the
expedition of business, and in the decision of interlocutory matters on
conflicting facts where one tribunal could not easily prescribe to
another the appropriate rule of procedure.125 Thus, the Court ruled:
In its very nature, the discretionary control conferred upon the trial
judge over the proceedings had before him implies the absence of any
hard-and-fast rule by which it is to be exercised, and in accordance
with which it may be reviewed. But the discretion conferred upon the
15
courts is not a willful, arbitrary, capricious and uncontrolled discretion.
It is a sound, judicial discretion which should always be exercised with
due regard to the rights of the parties and the demands of equity and
justice. As was said in the case of The Styria vs. Morgan (186 U.S., 1,
9): "The establishment of a clearly defined rule of action would be the
end of discretion, and yet discretion should not be a word for arbitrary
will or inconsiderate action." So in the case of Goodwin vs. Prime (92
Me., 355), it was said that "discretion implies that in the absence of
positive law or fixed rule the judge is to decide by his view of
expediency or by the demands of equity and justice."
There being no "positive law or fixed rule" to guide the judge in the
court below in such cases, there is no "positive law or fixed rule" to
guide a court of appeals in reviewing his action in the premises, and
such courts will not therefore attempt to control the exercise of
discretion by the court below unless it plainly appears that there was
"inconsiderate action" or the exercise of mere "arbitrary will", or in other
words that his action in the premises amounted to "an abuse of
discretion." But the right of an appellate court to review judicial acts
which lie in the discretion of inferior courts may properly be invoked
upon a showing of a strong and clear case of abuse of power to the
prejudice of the appellant, or that the ruling objected to rested on an
erroneous principle of law not vested in discretion.126 (Emphasis
supplied)
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.127
In the instant case, the trial court was within the exercise of its
discretionary and plenary control of the proceedings when it
reconsidered motu propio its earlier order striking out the testimony of
Mr. Lao128 and ordered it reinstated.129 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.
Petitioner Bangayan’s reliance130 on the Decisions of the Court of
Appeals (CA-G.R. SP No. 31865) and this Court (G.R. No. 115922)
with respect to respondent RCBC’s Petition is misplaced. Contrary to
his claim, what respondent RCBC questioned in those cases was the
denial by Judge Santiago of its Motion for Inhibition.131 As respondent
pointed out, its Petitions to the Court of Appeals and the Court simply
prayed for the reversal of the denial of the Motion for Inhibition and did
not include the Order striking out the testimony of Mr. Lao. Even the
appellate court (CA-G.R. CV No. 48479) noted that "what was resolved
by the High Court was the issue of Inhibition of the Judge and not the
striking out of the testimony of Mr. Eli Lao."132
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.133 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.134 What is proscribed by statutory norm and
jurisprudential precept is the absence of the opportunity to cross-
examine.135
In this case, petitioner Bangayan’s right to due process was not
violated, as he was given the freedom and opportunity to cross-
examine and confront Mr. Lao on the latter’s testimony. Even if
respondent RCBC had not filed any motion, it was well within the
court’s discretion to have Mr. Lao’s testimony reinstated in the "interest
of substantial justice." The proceedings in the trial court in this civil
case were adversarial in nature insofar as the parties, in the process of
attaining justice, were made to advocate their respective positions in
order to ascertain the truth.136 The truth-seeking function of the judicial
system is best served by giving an opportunity to all parties to fully
present their case, subject to procedural and evidentiary rules. Absent
any blatant neglect or willful delay, both parties should be afforded
equal latitude in presenting the evidence and the testimonies of their
witnesses in favor of their respective positions, as well as in testing the
credibility and the veracity of the opposing party’s claims through
cross-examination.
The Court finds no reversible error on the part of the trial court in
allowing the full presentation of the reinstated testimony of respondent
RCBC’s lone witness, especially since the other party was afforded the
occasion to cross-examine the witness and in fact availed himself of
the opportunity. Although he expressly reserved his right to question
the court’s reinstatement of the testimony of the witness, petitioner
Bangayan did not satisfactorily offer convincing arguments to overturn
the trial court’s order. That the court gave petitioner the opportunity to
cross-examine Mr. Lao – a remedy that petitioner even fully availed
himself of – negates the allegation of bias against the Judge.
The timing of petitioner Bangayan’s allegations of prejudice on the part
of Judge Santiago is suspect, since the latter had already rendered a
Decision unfavorable to petitioner’s cause.
A motion to inhibit shall be denied if filed after a member of the court
has already given an opinion on the merits of the case, the rationale
being that "a litigant cannot be permitted to speculate on the action of
the court . . . (only to) raise an objection of this sort after the decision
has been rendered."137
When respondent RCBC moved for Judge Santiago’s inhibition,
petitioner even interposed an objection and characterized as
unfounded respondent bank’s charge of partiality.138 It is now too late in
the day to suddenly accuse Judge Santiago of prejudice in the
proceedings below, after he has already rendered an unfavorable
judgment against petitioner. If at all, the latter’s claim that Judge
Santiago was biased in favoring respondent RCBC is a mere
afterthought that fails to support a reversal by the Court.
C. Respondent RCBC did not violate the Bank Secrecy Act.
The Court affirms the trial court’s findings which were likewise
concurred with by the Court of Appeals that the alleged violation of the
Bank Secrecy Act was not substantiated:
The Customs’s investigation with a subpoena/duces tecum sent to
witness Mr. Lao on the three companies, Final Sales Enterprises, Peak
Marketing and LBZ Commercial, guaranteed by plaintiff naturally
raised an alarm. Mr. Lao was asked to bring documents on the
questioned importations. The witness denied having given any
statement in connection therewith. No evidence was introduced by
plaintiff to substantiate his claim that defendant bank gave any
classified information in violation of Republic Act No. 1405. On this
score, plaintiff has no cause of action for damages against said
defendant RCBC.139
In his Memorandum, petitioner Bangayan argues that there was a
wrongful disclosure by respondents RCBC and Philip Saria of
confidential information regarding his bank accounts in violation of the
Bank Secrecy Act.140 However, petitioner failed to identify which
confidential information respondents divulged before the BOC that
would make them liable under the said law.
Section 2 of the Bank Secrecy Act provides:
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.
Petitioner Bangayan claims that respondent Saria divulged confidential
information through the Affidavit he submitted to the BOC.141 However,
nothing in respondent Saria’s Affidavit before the BOC showed that
details of petitioner Bangayan’s bank accounts with respondent bank
was disclosed. If at all, respondent Saria merely discussed his
functions as an account officer in respondent bank and identified
petitioner as the one who had guaranteed the payment or obligations
of the importers under the Surety Agreement.
According to petitioner Bangayan, the responses of respondent
RCBC’s officers in relation to the BOC’s actions led to unsavory news
reports that "disparaged petitioner’s good character and reputation"
and exposed him to "public ridicule and contempt."142 However, as the
appellate court correctly found, the humiliation and embarrassment
that petitioner Bangayan suffered in the business community was not
brought about by the alleged violation of the Bank Secrecy Act; it was
due to the smuggling charges filed by the Bureau of Customs which
found their way in the headlines of newspapers.143
Both the trial and appellate courts correctly found that petitioner
Bangayan did not satisfactorily introduce evidence "to substantiate his
claim that defendant bank gave any classified information" in violation
of the Bank Secrecy Act. Failing to adduce further evidence in the
instant Petition with respect to the bank’s purported disclosure of
confidential information as regards his accounts, petitioner cannot be
awarded any damages arising from an unsubstantiated and unproved
violation of the Bank Secrecy Act.
16
Rules of Discovery
The Court finds that petitioner Bangayan’s argument as regards the
bank’s purported failure to comply with the rules of discovery is not
substantive enough to warrant further discussion by this Court.
Petitioner has not alleged any different outcome that would be
generated if we were to agree with him on this point. If petitioner is
unsatisfied with respondent RCBC’s responses, then his remedy is to
expose the falsity (if any) of the bank’s responses in the various modes
of discovery during the trial proper. He could have confronted
respondent with contradictory statements, testimonies or other
countervailing evidence. The Court affirms the findings of the appellate
court that the rules of discovery were not treated lightly by respondent
RCBC.1441avvphi1
In summary, petitioner Bangayan failed to establish that the dishonor
of the seven checks by respondent RCBC entitled him to damages,
since the dishonor arose from his own voluntary agreement to act as
surety for the four corporations’ letters of credit. There was no bad faith
or malice on the part of respondent bank, as it merely acted within its
rights as a creditor under the Surety Agreement.
IN VIEW OF THE FOREGOING, the instant Petition for Review on
Certiorari filed by Ricardo B. Bangayan is DENIED. The Decisions of
the trial court and appellate court dismissing the Complaint for
damages filed by Bangayan against respondents Rizal Commercial
Banking Corporation and Philip Saria are hereby AFFIRMED.
SO ORDERED.
G.R. No. 216914, December 06, 2016
SUBIDO PAGENTE CERTEZA MENDOZA AND BINAY LAW
OFFICES, Petitioner, v. THE COURT OF APPEALS, HON. ANDRES
B. REYES, JR., IN HIS CAPACITY AS PRESIDING JUSTICE OF
THE COURT OF APPEALS, AND THE ANTI-MONEY LAUNDERING
COUNCIL, REPRESENTED BY ITS MEMBERS, HON. AMANDO M.
TETANGCO, JR., GOVERNOR OF THE BANGKO SENTRAL NG
PILIPINAS, HON. TERESITA J. HERBOSA, CHAIRPERSON OF THE
SECURITIES AND EXCHANGE COMMISSION, AND HON.
EMMANUEL F. DOOC, INSURANCE COMMISSIONER OF THE
INSURANCE COMMISSION, Respondents.
DECISION
PEREZ, J.:
Challenged in this petition for certiorari1 and prohibition under Rule 65
of the Rules of Court is the constitutionality of Section 11 of Republic
Act (R.A.) No. 9160, the Anti-Money Laundering Act, as amended,
specifically the Anti-Money Laundering Council's authority to file with
the Court of Appeals (CA) in this case, an ex-parte application for
inquiry into certain bank deposits and investments, including related
accounts based on probable cause.
In 2015, a year before the 2016 presidential elections, reports
abounded on the supposed disproportionate wealth of then Vice
President Jejomar Binay and the rest of his family, some of whom were
likewise elected public officers. The Office of the Ombudsman and the
Senate conducted investigations2 and inquiries3 thereon ostensibly
based on their respective powers delineated in the Constitution.
From various news reports announcing the inquiry into then Vice
President Binay's bank accounts, including accounts of members of his
family, petitioner Subido Pagente Certeza Mendoza & Binay Law Firm
(SPCMB) was most concerned with the article published in the Manila
Times on 25 February 2015 entitled "Inspect Binay Bank Accounts"
which read, in pertinent part:
xxx The Anti-Money Laundering Council (AMLC) asked the Court of
Appeals (CA) to allow the [C]ouncil to peek into the bank accounts of
the Binays, their corporations, and a law office where a family
member was once a partner.
xxxx
Also the bank accounts of the law office linked to the family, the
Subido Pagente Certeza Mendoza & Binay Law Firm, where the
Vice President's daughter Abigail was a former partner.4
The following day, 26 February 2015, SPCMB wrote public
respondent, Presiding Justice of the CA, Andres B. Reyes, Jr.:
The law firm of Subido Pagente Certeza Mendoza and Binay was
surprised to receive a call from Manila Times requesting for a comment
regarding a [supposed petition] filed by the Republic of the Philippines
represented by the Anti-Money Laundering Council before the Court of
Appeals seeking to examine the law office's bank accounts.
To verify the said matter, the law office is authorizing its associate Atty.
Jose Julius R. Castro to inquire on the veracity of said report with the
Court of Appeals. He is likewise authorized to secure copies of the
relevant documents of the case, such as the petition and orders
issued, if such a case exists.
As this is a matter demanding serious and immediate attention, the
Firm respectfully manifests that if no written response is received
within 24-hours from receipt of this letter, we shall be at liberty to
assume that such a case exists and we shall act accordingly.
Hoping for your immediate action.
Respectfully yours,
For the Firm  
 
CLARO F. CERTEZA5
Within twenty four (24) hours, Presiding Justice Reyes wrote SPCMB
denying its request, thus:
Anent your request for a comment on a supposed petition to inquire
into your law office's bank accounts, please be informed that a petition
of this nature is strictly confidential in that when processing the same,
not even the handling staff members of the Office of the Presiding
Justice know or have any knowledge who the subject bank account
holders are, as well as the bank accounts involved.
Please be informed further that clearly under the rules, the Office of the
Presiding Justice is strictly mandated not to disclose, divulge, or
communicate to anyone directly or indirectly, in any manner or by any
means, the fact of the filing of any petition brought before this Court by
the Anti-Money Laundering Council, its contents and even its entry in
the logbook.
Trusting that you find satisfactory the foregoing explanation.6
By 8 March 2015, the Manila Times published another article entitled,
"CA orders probe of Binay's assets" reporting that the appellate court
had issued a Resolution granting the ex-parte application of the AMLC
to examine the bank accounts of SPCMB:
The Court of Appeals (CA) has officially issued an order for
examination of Vice President Jejomar Binay's bank accounts.
In granting the petition of the Anti-Money Laundering Council (AMLC),
the CA also ordered the inspection of the bank deposits of Binay's wife,
children, and a law office connected to him.
xxx xxx xxx
The bank accounts of the law office linked to Binay - the Subido
Pagente Certeza Mendoza & Binay where Binay's daughter, Makati
City (Metro Manila) Rep. Mar-len Abigail Binay was a partner, are also
included in the probe, the sources said.7
Forestalled in the CA thus alleging that it had no ordinary, plain,
speedy, and adequate remedy to protect its rights and interests in the
purported ongoing unconstitutional examination of its bank accounts by
public respondent Anti-Money Laundering Council (AMLC), SPCMB
undertook direct resort to this Court via this petition for certiorari and
prohibition on the following grounds:
A. THE ANTI-MONEY LAUNDERING ACT IS
UNCONSTITUTIONAL INSOFAR AS IT ALLOWS THE
EXAMINATION OF A BANK ACCOUNT WITHOUT ANY
NOTICE TO THE AFFECTED PARTY:cralawlawlibrary
IT VIOLATES THE PERSON'S RIGHT TO DUE PROCESS;
1.
AND
   
IT VIOLATES THE PERSON'S RIGHT TO PRIVACY.
2.
17
 B. EVEN ASSUMING ARGUENDO THAT THE ANTI-MONEY
LAUNDERING ACT IS CONSTITUTIONAL, THE
RESPONDENTS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION CONSIDERING THAT:cralawlawlibrary
1. THE REFUSAL OF RESPONDENT PRESIDING JUSTICE TO
PROVIDE PETITIONER WITH A COPY OF THE EX-
PARTE APPLICATION FOR BANK EXAMINATION FILED BY
RESPONDENT AMLC AND ALL OTHER PLEADINGS,
MOTIONS, ORDERS, RESOLUTIONS, AND PROCESSES
ISSUED BY THE RESPONDENT COURT OF APPEALS IN
RELATION THERETO VIOLATES PETITIONER'S RIGHT TO
DUE PROCESS;
   
2. A CARTE BLANCHE AUTHORITY TO EXAMINE ANY AND
ALL TRANSACTIONS PERTAINING TO PETITIONER'S BANK
ACCOUNTS VIOLATES THE ATTORNEY-CLIENT
PRIVILEGE WHICH IS SACROSANCT IN THE LEGAL
PROFESSION;
   
3. A BLANKET AUTHORITY TO EXAMINE PETITIONER'S
BANK ACCOUNTS, INCLUDING ANY AND ALL
TRANSACTIONS THEREIN FROM ITS OPENING UP TO THE
PRESENT, PARTAKES THE NATURE OF A GENERAL
WARRANT THAT IS CLEARLY INTENDED TO AID A MERE
FISHING EXPEDITION;
   
4. THERE IS NOTHING IN THE ANTI-MONEY LAUNDERING
ACT THAT ALLOWS OR JUSTIFIES THE WITHHOLDING OF
INFORMATION AND/OR ANY COURT RECORDS OR
PROCEEDINGS PERTAINING TO AN EXAMINATION OF A
BANK ACCOUNT, ESPECIALLY IF THE COURT HAS
ALREADY GRANTED THE AUTHORITY TO CONDUCT THE
EXAMINATION;
   
5. THE PETITIONER DID NOT COMMIT, NOR HAS THE
PETITIONER BEEN IMPLEADED IN ANY COMPLAINT
INVOLVING ANY PREDICATE CRIME THAT WOULD
JUSTIFY AN INQUIRY INTO ITS BANK ACCOUNTS; AND
   
7. THE EXAMINATION OF THE PETITIONER'S BANK
ACCOUNTS IS A FORM OF POLITICAL PERSECUTION OR
HARASSMENT.8
In their Comment, the AMLC, through the Office of the Solicitor
General (OSG), points out a supposed jurisdictional defect of the
instant petition, i.e., SPCMB failed to implead the House of
Representatives which enacted the AMLA and its amendments. In all,
the OSG argues for the dismissal of the present petition, highlighting
that the AMLC's inquiry into bank deposits does not violate due
process nor the right to privacy:
1. Section 11's allowance for AMLC's ex-parte application for an
inquiry into particular bank deposits and investments is investigative,
not adjudicatory;
2. The text of Section 11 itself provides safeguards and limitations on
the allowance to the AMLC to inquire into bank deposits: (a) issued by
the CA based on probable cause; and (b) specific compliance to the
requirements of Sections 2 and 3, Article III of the Constitution;
3. The ex-parte procedure for investigating bank accounts is necessary
to achieve a legitimate state objective;
4. There is no legitimate expectation of privacy as to the bank records
of a depositor;
5. The examination of, and inquiry, into SPCMB's bank accounts does
not violate Attorney-Client Privilege; and
6. A criminal complaint is not a pre-requisite to a bank inquiry order.
In their Reply, SPCMB maintains that the ex-parte proceedings
authorizing inquiry of the AMLC into certain bank deposits and
investments is unconstitutional, violating its rights to due process and
privacy.
Before anything else, we here have an original action turning on three
crucial matters: (1) the petition reaches us from a letter of the Presiding
Justice of the CA in response to a letter written by SPCMB; (2)
SPCMB's bank account has been reported to be a related account to
Vice President Binay's investigated by the AMLC for anti-money
laundering activities; and (3) the constitutionality of Section 11 of the
AMLA at its recent amendment has not been squarely raised and
addressed.
To obviate confusion, we act on this petition given that SPCMB directly
assails the constitutionality of Section 11 of the AMLA where it has
been widely reported that Vice President Binay's bank accounts and all
related accounts therewith are subject of an investigation by the
AMLC. In fact, subsequent events from the filing of this petition have
shown that these same bank accounts (including related accounts)
were investigated by the Ombudsman and both Houses of the
Legislature. However, at the time of the filing of this petition, SPCMB
alleged that its accounts have been inquired into but not subjected to a
freeze order under Section 10 of the AMLA. Thus, as previously noted,
with its preclusion of legal remedies before the CA which under the
AMLA issues the ex-parte bank inquiry and freeze orders, Sections 10
and 11, respectively, SPCMB establishes that it has no plain, speedy
and adequate remedy in the ordinary course of law to protect its rights
and interests from the purported unconstitutional intrusion by the
AMLC into its bank accounts.
The foregoing shall be addressed specifically and bears directly on the
disposition of the decision herein.
Additionally, we note that the OSG did not question how this petition
reaches us from a letter of the appellate court's Presiding Justice, only
that, procedurally, SPCMB should have impleaded Congress.
On the sole procedural issue of whether SPCMB ought to have
impleaded Congress, the contention of the OSG though novel is
untenable. All cases questioning the constitutionality of a law does not
require that Congress be impleaded for their resolution. The requisites
of a judicial inquiry are elementary:
1. There must be an actual case or controversy; party;
2. The question of constitutionality must be raised by the proper party;
3. The constitutional question must be raised at the earliest possible
opportunity; and
4. The decision of the constitutional question must be necessary to the
determination of the case itself.9
The complexity of the issues involved herein require us to examine the
assailed provision vis-a-vis the constitutional proscription against
violation of due process. The statute reads:
SEC. 11. Authority to Inquire into Bank Deposits. - Notwithstanding the
provisions of Republic Act No. 1405, as amended; Republic Act No.
6426, as amended; Republic Act No. 8791; and other laws, the AMLC
may inquire into or examine any particular deposit or investment,
including related accounts, with any banking institution or non-bank
financial institution upon order of any competent court based on an ex
parte application in cases of violations of this Act, when it has been
established that there is probable cause that the deposits or
investments, including related accounts involved, are related to an
unlawful activity as defined in Section 3(i) hereof or a money
laundering offense under Section 4 hereof; except that no court order
shall be required in cases involving activities defined in Section 3(i)(1),
(2), and (12) hereof, and felonies or offenses of a nature similar to
those mentioned in Section 3(i)(1), (2), and (12), which are punishable
under the penal laws of other countries, and terrorism and conspiracy
to commit terrorism as defined and penalized under Republic Act No.
9372.
The Court of Appeals shall act on the application to inquire into or
examine any deposit or investment with any banking institution or non-
bank financial institution within twenty-four (24) hours from filing of the
application.
To ensure compliance with this Act, the Bangko Sentral ng Pilipinas
may, in the course of a periodic or special examination, check the
compliance of a covered institution with the requirements of the AMLA
and its implementing rules and regulations.
For purposes of this section, 'related accounts' shall refer to accounts,
the funds and sources of which originated from and/or are materially
linked to the monetary instrument(s) or property(ies) subject of the
freeze order(s).
18
A court order ex parte must first be obtained before the AMLC can
inquire into these related Accounts: Provided, That the procedure for
the ex parte application of the ex parte court order for the principal
account shall be the same with that of the related accounts.
The authority to inquire into or examine the main account and the
related accounts shall comply with the requirements of Article III,
Sections 2 and 3 of the 1987 Constitution, which are hereby
incorporated by reference.10
The due process clause of the Constitution reads:
SECTION 1. No person shall be deprived of life, liberty or property
without due process of law, nor shall any person be denied the equal
protection of the laws. 11
The right to due process has two aspects: (1) substantive which deals
with the extrinsic and intrinsic validity of the law; and (2) procedural
which delves into the rules government must follow before it deprives a
person of its life, liberty or property.12
As presently worded, Section 11 of the AMLA has three elements:
(1) ex-parte application by the AMLC; (2) determination of probable
cause by the CA; and (3) exception of court order in cases involving
unlawful activities defined in Sections 3(i)(1), (2), and (12).
As a brief backgrounder to the amendment to Section 11 of the AMLA,
the text originally did not specify for an ex-parte application by the
AMLC for authority to inquire into or examine certain bank accounts or
investments. The extent of this authority was the topic of Rep. of the
Phils. v. Hon. Judge Eugenio, Jr., et al. (Eugenio) 13 where the
petitioner therein, Republic of the Philippines, asseverated that the
application for that kind of order under the questioned section of the
AMLA did not require notice and hearing. Eugenio schooled us on the
AMLA, specifically on the provisional remedies provided therein to aid
the AMLC in enforcing the law:
It is evident that Section 11 does not specifically authorize, as a
general rule, the issuance ex-parte of the bank inquiry order. We quote
the provision in full:
SEC. 11. Authority to Inquire into Bank Deposits. —
Notwithstanding the provisions of Republic Act No. 1405, as amended,
Republic Act No. 6426, as amended, Republic Act No. 8791, and other
laws, the AMLC may inquire into or examine any particular deposit or
investment with any banking institution or non bank financial institution
upon order of any competent court in cases of violation of this
Act, when it has been established that there is probable cause
that the deposits or investments are related to an unlawful activity
as defined in Section 3(i) hereof or a money laundering offense
under Section 4 hereof, except that no court order shall be
required in cases involving unlawful activities defined in Sections
3(i)1, (2) and (12).
To ensure compliance with this Act, the Bangko Sentral ng Pilipinas
(BSP) may inquire into or examine any deposit of investment with any
banking institution or non bank financial institution when the
examination is made in the course of a periodic or special examination,
in accordance with the rules of examination of the BSP. (Emphasis
supplied)
Of course, Section 11 also allows the AMLC to inquire into bank
accounts without having to obtain a judicial order in cases where there
is probable cause that the deposits or investments are related to
kidnapping for ransom, certain violations of the Comprehensive
Dangerous Drugs Act of 2002, hijacking and other violations under
R.A. No. 6235, destructive arson and murder. Since such special
circumstances do not apply in this case, there is no need for us to pass
comment on this proviso. Suffice it to say, the proviso contemplates a
situation distinct from that which presently confronts us, and for
purposes of the succeeding discussion, our reference to Section 11 of
the AMLA excludes said proviso.
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.
SEC 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.
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.
Even more tellingly, the current language of Sections 10 and 11 of the
AMLA was crafted at the same time, through the passage of R.A. No.
9194. Prior to the amendatory law, it was the AMLC, not the Court of
Appeals, which had authority to issue a freeze order, whereas a bank
inquiry order always then required, without exception, an order from a
competent court. It was through the same enactment that ex
parte proceedings were introduced for the first time into the AMLA, in
the case of the freeze order which now can only be issued by the Court
of Appeals. It certainly would have been convenient, through the same
amendatory law, to allow a similar ex parte procedure in the case of a
bank inquiry order had Congress been so minded. Yet nothing in the
provision itself, or even the available legislative record, explicitly points
to an ex parte judicial procedure in the application for a bank inquiry
order, unlike in the case of the freeze order.
That the AMLA does not contemplate ex parte proceedings in
applications for bank inquiry orders is confirmed by the present
implementing rules and regulations of the AMLA, promulgated upon
the passage of R.A. No. 9194. With respect to freeze orders under
Section 10, the implementing rules do expressly provide 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 parte applications.
Even the Rules of Procedure adopted by this Court in A.M. No. 05-11-
04-SC to enforce the provisions of the AMLA specifically authorize ex
parte applications with respect to freeze orders under Section 10 but
make no similar authorization with respect to bank inquiry orders under
Section 11.
The Court could divine the sense in allowing ex parte proceedings
under Section 10 and in proscribing the same under Section 11. A
freeze order under Section 10 on the one hand is aimed at preserving
monetary instruments or property in any way deemed related to
unlawful activities as defined in Section 3(i) of the AMLA. The owner of
such monetary instruments or property would thus be inhibited from
utilizing the same for the duration of the freeze order. To make such
freeze order anteceded by a judicial proceeding with notice to the
account holder would allow for or lead to the dissipation of such funds
even before the order could be issued. (Citations omitted.)
Quite apparent from the foregoing is that absent a specific wording in
the AMLA allowing for ex-parte proceedings in orders authorizing
inquiry and examination by the AMLC into certain bank deposits or
investments, notice to the affected party is required.
Heeding the Court's observance in Eugenio that the remedy of the
Republic then lay with the legislative, Congress enacted Republic Act
No. 10167 amending Section 11 of the AMLA and specifically inserted
the word ex-parte appositive of the nature of this provisional remedy
available to the AMLC thereunder.
It is this current wording of Section 11 which SPCMB posits as
unconstitutional and purportedly actually proscribed in Eugenio.
We do not subscribe to SPCMB's position.
19
Succinctly, Section 11 of the AMLA providing for ex-parte application
and inquiry by the AMLC into certain bank deposits and investments
does not violate substantive due process, there being no physical
seizure of property involved at that stage. It is the preliminary and
actual seizure of the bank deposits or investments in question which
brings these within reach of the judicial process, specifically a
determination that the seizure violated due process.14 In
fact, Eugenio delineates a bank inquiry order under Section 11 from a
freeze order under Section 10 on both remedies' effect on the direct
objects, i.e. the bank deposits and investments:
On the other hand, a bank inquiry order under Section 11 does not
necessitate any form of physical seizure of property of the account
holder. What the bank inquiry order authorizes is the examination of
the particular deposits or investments in banking institutions or non-
bank financial institutions. The monetary instruments or property
deposited with such banks or financial institutions are not seized in a
physical sense, but are examined on particular details such as the
account holder's record of deposits and transactions. Unlike the assets
subject of the freeze order, the records to be inspected under a bank
inquiry order cannot be physically seized or hidden by the account
holder. Said records are in the possession of the bank and therefore
cannot be destroyed at the instance of the account holder alone as that
would require the extraordinary cooperation and devotion of the bank.15
At the stage in which the petition was filed before us, the inquiry into
certain bank deposits and investments by the AMLC still does not
contemplate any form of physical seizure of the targeted corporeal
property. From this cite, we proceed to examine whether Section 11 of
the law violates procedural due process.
As previously stated, the AMLA now specifically provides for an ex-
parte application for an order authorizing inquiry or examination into
bank deposits or investments which continues to pass constitutional
muster.
Procedural due process is essentially the opportunity to be heard.16 In
this case, at the investigation stage by the AMLC into possible money
laundering offenses, SPCMB demands that it have notice and hearing
of AMLC's investigation into its bank accounts.
We are not unaware of the obiter in Eugenio17 and cited by SPCMB,
voicing misgivings on an interpretation of the former Section 11 of the
AMLA allowing for ex-parte proceedings in bank inquiry orders, to wit:
There certainly is fertile ground to contest the issuance of an ex-
parte order. Section 11 itself requires that it be established that "there
is probable cause that the deposits or investments are related to
unlawful activities," and it obviously is the court which stands as arbiter
whether there is indeed such probable cause. The process of inquiring
into the existence of probable cause would involve the function of
determination reposed on the trial court. Determination clearly implies
a function of adjudication on the part of the trial court, and not a
mechanical application of a standard pre-determination by some other
body. The word "determination" implies deliberation and is, in normal
legal contemplation, equivalent to "the decision of a court of justice."
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. (Emphasis
supplied)
On that score, the SPCMB points out that the AMLC 's bank inquiry is
preliminary to the seizure and deprivation of its property as in a freeze
order under Section 10 of the AMLA which peculiarity lends itself to a
sui generis proceeding akin to the evaluation process in extradition
proceedings pronounced in Secretary of Justice v. Hon.
Lantion.18 Under the extradition law, the Secretary of Foreign Affairs is
bound to make a finding that the extradition request and its supporting
documents are sufficient and complete in form and substance before
delivering the same to the Secretary of Justice. We ruled:
[L]ooking at the factual milieu of the case before us, it would appear
that there was failure to abide by the provisions of Presidential Decree
No. 1069. For while it is true that the extradition request was delivered
to the Department of Foreign Affairs on June 17, 1999, the following
day or less than 24 hours later, the Department of Justice received the
request, apparently without the Department of Foreign affairs
discharging its duty thoroughly evaluating the same and its
accompanying documents. xxx.
xxxx
[T]he record cannot support the presumption of regularity that the
Department of Foreign Affairs thoroughly reviewed the extradition
request and supporting documents and that it arrived at a well-founded
judgment that the request and its annexed documents satisfy the
requirements of law. XXX.
The evaluation process, just like the extradition proceedings,
proper belongs to a class by itself. It is sui generis. It is not a
criminal investigation, but it is also erroneous to say that it is
purely an exercise of ministerial functions. At such stage, the
executive authority has the power: (a) to make a technical
assessment of the completeness and sufficiency of the
extradition papers; (b) to outrightly deny the request if on its face
and on the face of the supporting documents the crimes indicated
are not extraditable; and (c) to make a determination whether or
not the request is politically motivated, or that the offense is a
military one which is not punishable under non-military penal
legislation. Hence, said process may be characterized as an
investigative or inquisitorial process in contrast to a proceeding
conducted in the exercise of an administrative body's quasi-
judicial power.
In administrative law, a quasi-judicial proceeding involves: (a) taking
and evaluation of evidence; (b) determining facts based upon the
evidence presented; and (c) rendering an order or decision supported
by the facts proved. Inquisitorial power, which is also known as
examining or investigatory power, is one of the determinative powers
of an administrative body which better enables it to exercise its quasi-
judicial authority. This power allows the administrative body to inspect
the records and premises, and investigate the activities, of persons or
entities coming under its jurisdiction, or to require disclosure of
information by means of accounts, records, reports, testimony of
witnesses, production of documents, or otherwise.
The power of investigation consists in gathering, organizing, and
analyzing evidence, which is a useful aid or tool in an administrative
agency's performance of its rule-making or quasi-judicial functions.
Notably, investigation is indispensable to prosecution.19 (Emphasis
supplied, citations omitted)
The submission of AMLC requires a determination whether the AMLC
is an administrative body with quasi-judicial powers; corollary thereto, a
determination of the jurisdiction of the AMLC.
Lim v. Gamosa20 is enlightening on jurisdiction and the requirement of
a specific grant thereof in the enabling law. We declared that the
creation of the National Commission on Indigenous Peoples (NCIP) by
the Indigenous Peoples Rights Act (IPRA) did not confer it exclusive
and original, nor primary jurisdiction, in all claims and disputes
involving rights of IPs and ICCs where no such specific grant is
bestowed.
In this instance, the grant of jurisdiction over cases involving money
laundering offences is bestowed on the Regional Trial Courts and the
Sandiganbayan as the case may be. In fact, Rule 5 of the IRR is
entitled Jurisdiction of Money Laundering Cases and Money
Laundering Investigation Procedures:
Rule 5.a. Jurisdiction of Money Laundering Cases. The Regional
Trial Courts shall have the jurisdiction to try all cases on money
laundering. Those committed by public officers and private persons
who are in conspiracy with such public officers shall be under the
jurisdiction of the Sandiganbayan.
Rule 5.b. Investigation of Money Laundering Offenses. - The
AMLC shall investigate:
(1) suspicious transactions;
(2) covered transactions deemed suspicious after an investigation
conducted by the AMLC;
(3) money laundering activities; and
(4) other violations of the AMLA, as amended.
The confusion on the scope and parameters of the AMLC's
investigatory powers and whether such seeps into and approximates a
quasi-judicial agency's inquisitorial powers lies in the AMLC's
investigation and consequent initial determination of whether certain
activities are constitutive of anti-money laundering offenses.
20
The enabling law itself, the AMLA, specifies the jurisdiction of the trial
courts, RTC and Sandiganbayan, over money laundering cases, and
delineates the investigative powers of the AMLC.
Textually, the AMLA is the first line of defense against money
laundering in compliance with our international obligation. There are
three (3) stages of determination, two (2) levels of investigation, falling
under three (3) jurisdictions:
1. The AMLC investigates possible money laundering offences and
initially determines whether there is probable cause to charge any
person with a money laundering offence under Section 4 of the AMLA,
resulting in the filing of a complaint with the Department of Justice or
the Office of the Ombudsman;21
2. The DOJ or the Ombudsman conducts the preliminary investigation
proceeding and if after due notice and hearing finds probable cause for
money laundering offences, shall file the necessary information before
the Regional Trial Courts or the Sandiganbayan;22
3. The RTCs or the Sandiganbayan shall try all cases on money
laundering, as may be applicable.23
Nowhere from the text of the law nor its Implementing Rules and
Regulations can we glean that the AMLC exercises quasi-judicial
functions whether the actual preliminary investigation is done simply at
its behest or conducted by the Department of Justice and the
Ombudsman.
Again, we hark back to Lantion citing Ruperto v. Torres,23-a where the
Court had occasion to rule on the functions of an investigatory body
with the sole power of investigation:
[Such a body] does not exercise judicial functions and its power is
limited to investigating facts and making findings in respect thereto.
The Court laid down the test of determining whether an administrative
body is exercising judicial functions or merely investigatory functions:
Adjudication signifies the exercise of power and authority to adjudicate
upon the rights and obligations of the parties before it. Hence, if the
only purpose for investigation is to evaluate evidence submitted before
it based on the facts and Circumstances presented to it, and if the
agency is not authorized to make a final pronouncement affecting the
parties, then there is an absence of judicial discretion and judgment.
adjudicate in regard to the rights and obligations of both the
Requesting State and the prospective extraditee. Its only power is to
determine whether the papers comply with the requirements of the law
and the treaty and, therefore, sufficient to be the basis of an extradition
petition. Such finding is thus merely initial and not final. The body has
no power to determine whether or not the extradition should be
effected. That is the role of the court. The body's power is limited to an
initial finding of whether or not the extradition petition can be filed in
court.
It is to be noted, however, that in contrast to ordinary investigations,
the evaluation procedure is characterized by certain peculiarities.
Primarily, it sets into motion the wheels of the extradition process.
Ultimately, it may result in the deprivation of liberty of the prospective
extraditee. This deprivation can be effected at two stages: First, the
provisional arrest of the prospective extraditee pending the submission
of the request. This is so because the Treaty provides that in case of
urgency, a contracting party may request the provisional arrest of the
person sought pending presentation of the request (Paragraph [1],
Article 9, RP-US Extradition Treaty), but he shall be automatically
discharged after 60 days if no request is submitted (Paragraph 4).
Presidential Decree No. 1069 provides for a shorter period of 20 days
after which the arrested person could be discharged (Section 20[d]).
Logically, although the Extradition Law is silent on this respect, the
provisions only mean that once a request is forwarded to the
Requested State, the prospective extraditee may be continuously
detained, or if not, subsequently rearrested (Paragraph [5], Article 9,
RP-US Extradition Treaty), for he will only be discharged if no request
is submitted. Practically, the purpose of this detention is to prevent his
possible flight from the Requested State. Second, the temporary arrest
of the prospective extraditee during the pendency of the extradition
petition in court (Section 6, Presidential Decree No. 1069).
Clearly, there is an impending threat to a prospective extraditee's
liberty as early as during the evaluation stage. It is not only an
imagined threat to his liberty, but a very imminent one.
Because of these possible consequences, we conclude that the
evaluation process is akin to an administrative agency conducting an
investigative proceeding, the consequences of which are essentially
criminal since such technical assessment sets off or commences the
procedure for, and ultimately, the deprivation of liberty of a prospective
extraditee, As described by petitioner himself, this is a "tool" for
criminal law enforcement. In essence, therefore, the evaluation
process partakes of the nature of a criminal investigation. In a number
of cases, we had occasion to make available to a respondent in an
administrative case or investigation certain constitutional rights that are
ordinarily available only in criminal prosecutions. Further, as pointed
out by Mr. Justice Mendoza during the oral arguments, there are rights
formerly available only at the trial stage that had been advanced to an
earlier stage in the proceedings, such as the right to counsel and the
right against self-incrimination.24 (Citations omitted)
In contrast to the disposition in Lantion that the evaluation process
before the Department of Foreign Affairs is akin to an administrative
agency conducting investigative proceedings with implications on the
consequences of criminal liability, i.e., deprivation of liberty of a
prospective extraditee, the sole investigative functions of the AMLC
finds more resonance with the investigative functions of the National
Bureau of Investigation (NBI).
That the AMLC does not exercise quasi-judicial powers and is simply
an investigatory body finds support in our ruling in Shu v. Dee.25 In that
case, petitioner Shu had filed a complaint before the NBI charging
respondents therein with falsification of two (2) deeds of real estate
mortgage submitted to the Metropolitan Bank and Trust Company
(Metrobank). After its investigation, the NBI came up with a Questioned
Documents Report No. 746-1098 finding that the signatures of
petitioner therein which appear on the questioned deeds are not the
same as the standard sample signatures he submitted to the NBI.
Ruling on the specific issue raised by respondent therein that they had
been denied due process during the NBI investigation, we stressed
that the functions of this agency are merely investigatory and
informational in nature:
[The NBI] has no judicial or quasi-judicial powers and is incapable of
granting any relief to any party. It cannot even determine probable
cause. The NBI is an investigative agency whose findings are merely
recommendatory. It undertakes investigation of crimes upon its own
initiative or as public welfare may require in accordance with its
mandate. It also renders assistance when requested in the
investigation or detection of crimes in order to prosecute the persons
responsible.
Since the NBI's findings were merely recommendatory, we find that no
denial of the respondent's due process right could have taken place;
the NBI's findings were still subject to the prosecutor's and the
Secretary of Justice's actions for purposes of finding the existence of
probable cause. We find it significant that the specimen signatures in
the possession of Metrobank were submitted by the respondents for
the consideration of the city prosecutor and eventually of the Secretary
of Justice during the preliminary investigation proceedings. Thus, these
officers had the opportunity to examine these signatures.
The respondents were not likewise denied their right to due process
when the NBI issued the questioned documents report. We note that
this report merely stated that the signatures appearing on the two
deeds and in the petitioner's submitted sample signatures were not
written by one and the same person. Notably, there was no categorical
finding in the questioned documents report that the respondents
falsified the documents. This report, too, was procured during the
conduct of the NBI's investigation at the petitioner's request for
assistance in the investigation of the alleged crime of falsification. The
report is inconclusive and does not prevent the respondents from
securing a separate documents examination by handwriting experts
based on their own evidence. On its own, the NBI's questioned
documents report does not directly point to the respondents'
involvement in the crime charged. Its significance is that, taken
together with the other pieces of evidence submitted by the parties
during the preliminary investigation, these evidence could be sufficient
for purposes of finding probable cause — the action that the Secretary
of Justice undertook in the present case.
As carved out in Shu, the AMLC functions solely as an investigative
body in the instances mentioned in Rule 5.b.26 Thereafter, the next step
is for the AMLC to file a Complaint with either the DOJ or the
Ombudsman pursuant to Rule 6.b.
Even in the case of Estrada v. Office of the Ombudsman,27 where the
conflict arose at the preliminary investigation stage by the
Ombudsman, we ruled that the Ombudsman's denial of Senator
Estrada's Request to be furnished copies of the counter-affidavits of
his co-respondents did not violate Estrada's constitutional right to due
process where the sole issue is the existence of probable cause for the
purpose of determining whether an information should be filed and
does not prevent Estrada from requesting a copy of the counter-
affidavits of his co-respondents during the pre-trial or even during trial.
We expounded on the nature of preliminary investigation proceedings,
thus:
21
It should be underscored that the conduct of a preliminary investigation
is only for the determination of probable cause, and "probable cause
merely implies probability of guilt and should be determined in a
summary manner. A preliminary investigation is not a part of the trial
and it is only in a trial where an accused can demand the full exercise
of his rights, such as the right to confront and cross-examine his
accusers to establish his innocence." Thus, the rights of a respondent
in a preliminary investigation are limited to those granted by procedural
law.
A preliminary investigation is defined as an inquiry or proceeding for
the purpose of determining whether there is sufficient ground to
engender a well founded belief that a crime cognizable by the Regional
Trial Court has been committed and that the respondent is probably
guilty thereof, and should be held for trial. The quantum of evidence
now required in preliminary investigation is such evidence sufficient to
"engender a well founded belief' as to the fact of the commission of a
crime and the respondent's probable guilt thereof A preliminary
investigation is not the occasion for the full and exhaustive display of
the parties' evidence; it is for the presentation of such evidence only as
may engender a well-grounded belief that an offense has been
committed and that the accused is probably guilty thereof. We are in
accord with the state prosecutor's findings in the case at bar that there
exists prima facie evidence of petitioner's involvement in the
commission of the crime, it being sufficiently supported by the
evidence presented and the facts obtaining therein.
Likewise devoid of cogency is petitioner's argument that the
testimonies of Galarion and Hanopol are inadmissible as to him since
he was not granted the opportunity of cross-examination.
It is a fundamental principle that the accused in a preliminary
investigation has no right to cross-examine the witnesses which the
complainant may present. Section 3, Rule 112 of the Rules of Court
expressly provides that the respondent shall only have the right to
submit a counter-affidavit, to examine all other evidence submitted by
the complainant and, where the fiscal sets a hearing to propound
clarificatory questions to the parties or their witnesses, to be afforded
an opportunity to be present but without the right to examine or cross-
examine. Thus, even if petitioner was not given the opportunity to
cross-examine Galarion and Hanopol at the time they were presented
to testify during the separate trial of the case against Galarion and
Roxas, he cannot assert any legal right to cross-examine them at the
preliminary investigation precisely because such right was never
available to him. The admissibility or inadmissibility of said testimonies
should be ventilated before the trial court during the trial proper and not
in the preliminary investigation.
Furthermore, the technical rules on evidence are not binding on the
fiscal who has jurisdiction and control over the conduct of a preliminary
investigation. If by its very nature a preliminary investigation could be
waived by the accused, we find no compelling justification for a strict
application of the evidentiary rules. In addition, considering that under
Section 8, Rule 112 of the Rules of Court, the record of the preliminary
investigation does not form part of the record of the case in the
Regional Trial Court, then the testimonies of Galarion and Hanopol
may not be admitted by the trial court if not presented in evidence by
the prosecuting fiscal. And, even if the prosecution does present such
testimonies, petitioner can always object thereto and the trial court can
rule on the admissibility thereof; or the petitioner can, during the trial,
petition said court to compel the presentation of Galarion and Hanopol
for purposes of cross-examination. (Citations and emphasis omitted)
Plainly, the AMLC's investigation of money laundering offenses and its
determination of possible money laundering offenses, specifically its
inquiry into certain bank accounts allowed by court order, does not
transform it into an investigative body exercising quasi-judicial powers.
Hence, Section 11 of the AMLA, authorizing a bank inquiry court order,
cannot be said to violate SPCMB's constitutional right to procedural
due process.
We now come to a determination of whether Section 11 is violative of
the constitutional right to privacy enshrined in Section 2, Article III of
the Constitution. SPCMB is adamant that the CA's denial of its request
to be furnished copies of AMLC's ex-parte application for a bank
inquiry order and all subsequent pleadings, documents and orders filed
and issued in relation thereto, constitutes grave abuse of discretion
where the purported blanket authority under Section 11: (1) partakes of
a general warrant intended to aid a mere fishing expedition; (2) violates
the attorney-client privilege; (3) is not preceded by predicate crime
charging SPCMB of a money laundering offense; and (4) is a form of
political harassment [of SPCMB's] clientele.
We shall discuss these issues jointly since the assailed Section 11
incorporates by reference that "[t]he authority to inquire into or examine
the main and the related accounts shall comply with the requirements
of Article III, Sections 2 and 3 of the 1987 Constitution." On this point,
SPCMB asseverates that "there is nothing in the AMLA that allows or
justifies the withholding of information and/or any court records or
proceedings pertaining to an examination of a bank account, especially
if the court has already granted the authority to conduct the
examination."
The theme of playing off privacy rights and interest against that of the
state's interest in curbing money laundering offenses is recurring.28
The invoked constitutional provisions read:
SEC. 2. The right of the people to be secure in their persons, houses,
papers, and effects against unreasonable searches and seizures of
whatever nature and for any purpose shall be inviolable, and no search
warrant or warrant of arrest shall issue except upon probable cause to
be determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the person or
things to be seized.
SEC. 3. (1) The privacy of communication and correspondence shall
be inviolable except upon lawful order of the court, or when public
policy or order requires otherwise as prescribed by law.
(2) Any evidence obtained in violation of this or the preceding section
shall be inadmissible for any purpose in any proceeding.
Once again, Eugenio29 offers guidance:
The Court's construction of Section 11 of the AMLA is undoubtedly
influenced by right to privacy considerations. If sustained, petitioner's
argument that a bank account may be inspected by the government
following an ex parte proceeding about which the depositor would
know nothing would have significant implications on the right to
privacy, a right innately cherished by all notwithstanding the legally
recognized exceptions thereto. The notion that the government could
be so empowered is cause for concern of any individual who values
the right to privacy which, after all, embodies even the right to be "let
alone," the most comprehensive of rights and the right most valued by
civilized people.
One might assume that the constitutional dimension of the right to
privacy, as applied to bank deposits, warrants our present inquiry. We
decline to do so. Admittedly, that question has proved controversial in
American jurisprudence. Notably, the United States Supreme Court
in U.S. v. Miller held that there was no legitimate expectation of
privacy as to the bank records of a depositor. Moreover, the text
of our Constitution has not bothered with the triviality of
allocating specific rights peculiar to bank deposits.
However, 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, to wit:
SECTION 2. 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.
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.
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.
22
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 "the money deposited or invested is the subject matter of the
litigation." The orientation of the bank inquiry order is simply to serve
as a provisional relief or remedy. As earlier stated, the application for
such does not entail a full-blown trial.
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 "[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 government or of any party
seeking to enforce those exceptions and inquire into bank deposits. If
there are doubts in upholding the absolutely confidential nature of bank
deposits against affirming the authority to inquire into such accounts,
then such doubts must be resolved in favor of the former. Such a
stance would persist unless Congress passes a law reversing the
general state policy of preserving the absolutely confidential nature of
Philippine bank accounts. (Citations omitted, emphasis supplied)
From the foregoing disquisition, we extract the following principles:
1. The Constitution did not allocate specific rights peculiar to bank
deposits;
2. The general rule of absolute confidentiality is simply statutory,30i.e.
not specified in the Constitution, which has been affirmed in
jurisprudence;31
3. Exceptions to the general rule of absolute confidentiality have been
carved out by the Legislature which legislation have been sustained,
albeit subjected to heightened scrutiny by the courts;32 and
4. One such legislated exception is Section 11 of the AMLA.
The warning in Eugenio that an ex-parte proceeding authorizing the
government to inspect certain bank accounts or investments without
notice to the depositor would have significant implications on the right
to privacy still does not preclude such a bank inquiry order to be
allowed by specific legislation as an exception to the general rule of
absolute confidentiality of bank deposits.
We thus subjected Section 11 of the AMLA to heightened scrutiny and
found nothing arbitrary in the allowance and authorization to AMLC to
undertake an inquiry into certain bank accounts or deposits. Instead,
we found that it provides safeguards before a bank inquiry order is
issued, ensuring adherence to the general state policy of preserving
the absolutely confidential nature of Philippine bank accounts:
(1) The AMLC is required to establish probable cause as basis for
its ex-parte application for bank inquiry order;
(2) The CA, independent of the AMLC's demonstration of probable
cause, itself makes a finding of probable cause that the deposits or
investments are related to an unlawful activity under Section 3(i) or a
money laundering offense under Section 4 of the AMLA;
(3) A bank inquiry court order ex-parte for related accounts is preceded
by a bank inquiry court order ex-parte for the principal account which
court order ex-parte for related accounts is separately based on
probable cause that such related account is materially linked to the
principal account inquired into; and
(4) The authority to inquire into or examine the main or principal
account and the related accounts shall comply with the requirements of
Article III, Sections 2 and 3 of the Constitution.
The foregoing demonstrates that the inquiry and examination into the
bank account are not undertaken whimsically and solely based on the
investigative discretion of the AMLC. In particular, the requirement of
demonstration by the AMLC, and determination by the CA, of probable
cause emphasizes the limits of such governmental action. We will
revert to these safeguards under Section 11 as we specifically discuss
the CA's denial of SPCMB's letter request for information concerning
the purported issuance of a bank inquiry order involving its accounts.
First. The AMLC and the appellate court are respectively required to
demonstrate and ascertain probable cause. Ret. Lt. Gen. Ligot, et al.
v. Republic of the Philippines,33 which dealt with the adjunct provisional
remedy of freeze order under Section 10 of the AMLA, defined
probable cause, thus:
The probable cause required for the issuance of a freeze order differs
from the probable cause required for the institution of a criminal action,
xxx.
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 money laundering offence 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 exits,
the CA's statutorily-guided determination's focus is not on the probable
commissions 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 R.A. 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. xxx. (Emphasis
supplied)
Second. As regards SPCMB's contention that the bank inquiry order is
in the nature of a general warrant, Eugenio already declared that
Section 11, even with the allowance of an ex parte application therefor,
"is not a search warrant or warrant of arrest as it contemplates a direct
object but not the seizure of persons or property."34 It bears repeating
that the ''bank inquiry order" under Section 11 is a provisional remedy
to aid the AMLC in the enforcement of the AMLA.
Third. Contrary to the stance of SPCMB, the bank inquiry order does
not contemplate that SPCMB be first impleaded in a money laundering
case already filed before the courts:
We are unconvinced by this proposition, and agree instead with the
then Solicitor General who conceded that the use of the phrase "in
cases of' was unfortunate, yet submitted that it should be interpreted to
mean "in the event there are violations" of the AMLA, and not that
there are already cases pending in court concerning such violations. If
the contrary position is adopted, then the bank inquiry order would be
limited in purpose as a tool in aid of litigation of live cases, and wholly
inutile as a means for the government to ascertain whether there is
sufficient evidence to sustain an intended prosecution of the account
holder for violation of the AMLA. Should that be the situation, in all
likelihood the AMLC would be virtually deprived of its character as a
discovery tool, and thus would become less circumspect in filing
complaints against suspect account holders. After all, under such set-
up the preferred strategy would be to allow or even encourage the
indiscriminate filing of complaints under the AMLA with the hope or
expectation that the evidence of money laundering would somehow
.surface during the trial. Since the AMLC could not make use of the
bank inquiry order to determine whether there is evidentiary basis to
prosecute the suspected malefactors, not filing any case at all would
not be an alternative. Such unwholesome set-up should not come to
pass. Thus Section 11 cannot be interpreted in a way that would
emasculate the remedy it has established and encourage the
unfounded initiation of complaints for money laundering.35 (Citation
omitted)
Guided as we are by prior holdings, and bound as we are by the
requirements for issuance of a bank inquiry order under Section 11 of
the AMLA, we are hard pressed to declare that it violates SPCMB's
right to privacy.
23
Nonetheless, although the bank inquiry order ex-parte passes
constitutional muster, there is nothing in Section 11 nor the
implementing rules and regulations of the AMLA which prohibits the
owner of the bank account, as in his instance SPCMB, to ascertain
from the CA, post issuance of the bank inquiry order ex-parte, if his
account is indeed the subject of an examination. Emphasized by our
discussion of the safeguards under Section 11 preceding the issuance
of such an order, we find that there is nothing therein which precludes
the owner of the account from challenging the basis for the issuance
thereof.
The present controversy revolves around the issue of whether or not
the appellate court, through the Presiding Justice, gravely abused its
discretion when it effectively denied SPCMB's letter-request for
confirmation that the AMLC had applied (ex-parte) for, and was
granted, a bank inquiry order to examine SPCMB's bank accounts
relative to the investigation conducted on Vice-President Binay's
accounts.
We recall the Presiding Justice's letter to SPCMB categorically stating
that "under the rules, the Office of the Presiding Justice is strictly
mandated not to disclose, divulge, or communicate to anyone directly
or indirectly, in any manner or by any means, the fact of the filing of the
petition brought before [the Court of Appeals] by the [AMLC], its
contents and even its entry in the logbook." Note that the letter did not
cite the aforementioned rules that were supposedly crystal clear to
foreclose ambiguity. Note further that Rules 10.c.3 and 10.d of the IRR
on Authority to File Petitions for Freeze Order provides that:
Rule 10.c. Duty of Covered Institutions upon receipt thereof. —
Rule 10.c.1. Upon receipt of the notice of the freeze order, the covered
institution concerned shall immediately freeze the monetary instrument
or property and related accounts subject thereof.
Rule 10.c.2. The covered institution shall likewise immediately furnish
a copy of the notice of the freeze order upon the owner or holder of the
monetary instrument or property or related accounts subject thereof.
Rule 10.c.3. Within twenty-four (24) hours from receipt of the freeze
order, the covered institution concerned shall submit to the Court of
Appeals and the AMLC, by personal delivery, a detailed written return
on the freeze order, specifying all the pertinent and relevant
information which shall include the following:
(a) the account numbers;
(b) the names of the account owners or holders;
(c) the amount of the monetary instrument, property or related
accounts as of the time they were frozen;
(d) all relevant information as to the nature of the monetary instrument
or property;
(e) any information on the related accounts pertaining to the monetary
instrument or property subject of the freeze order; and
(f) the time when the freeze thereon took effect.
Rule 10.d. Upon receipt of the freeze order issued by the Court of
Appeals and upon verification by the covered institution that the related
accounts originated from and/or are materially linked to the monetary
instrument or property subject of the freeze order, the covered
institution shall freeze these related accounts wherever these may be
found.
The return of the covered institution as required under Rule 10.c.3
shall include the fact of such freezing and an explanation as to the
grounds for the identification of the related accounts.
If the related accounts cannot be determined within twenty-four (24)
hours from receipt of the freeze order due to the volume and/or
complexity of the transactions or any other justifiable factor(s), the
covered institution shall effect the freezing of the related accounts,
monetary instruments and properties as soon as practicable and shall
submit a supplemental return thereof to the Court of Appeals and the
AMLC within twenty-four (24) hours from the freezing of said related
accounts, monetary instruments and properties.
The foregoing rule, in relation to what Section 11 already provides,
signifies that ex-parte bank inquiry orders on related accounts may be
questioned alongside, albeit subsequent to, the issuance of the initial
freeze order of the subject bank accounts. The requirements and
procedure for the issuance of the order, including the return to be
made thereon lay the grounds for judicial review thereof. We expound.
An act of a court or tribunal can only be considered tainted with grave
abuse of discretion when such act is done in a capricious or whimsical
exercise of judgment as is equivalent to lack of jurisdiction. It is well-
settled that the abuse of discretion to be qualified as "grave" must be
so patent or gross as to constitute an evasion of a positive duty or a
virtual refusal to perform the duty or to act at all in contemplation of
law.36 In this relation, case law states that not every error in the
proceedings, or every erroneous conclusion of law or fact, constitutes
grave abuse of discretion.37 The degree of gravity, as above-described,
must be met.
That the propriety of the issuance of the bank inquiry order is a
justiciable issue brooks no argument. A justiciable controversy refers to
an existing case or controversy that is appropriate or ripe for judicial
determination, not one that is conjectural or merely anticipatory.38
As previously adverted to in our discussion on the right to privacy, the
clash of privacy rights and interest against that of the government's is
readily apparent. However, the statutorily enshrined general rule on
absolute confidentiality of bank accounts remains. Thus, the
safeguards instituted in Section II of the AMLA and heretofore
discussed provide for certain well defined limits, as in the language
of Baker v. Carr, "judicially discoverable standards" for determining the
validity of the exercise of such discretion by the appellate court in
denying the letter-request of SPCMB.39 In short, Section II itself
provides the basis for the judicial inquiry and which the owner of the
bank accounts subject of the AMLC inquiry may invoke.
Undeniably, there is probable and preliminary governmental action
against SPCMB geared towards implementation of the AMLA directed
at SPCMB's property, although there is none, as yet, physical seizure
thereof, as in freezing of bank accounts under Section 10 of the
AMLA.40 Note, however, that the allowance to question the bank inquiry
order we carve herein is tied to the appellate court's issuance of a
freeze order on the principal accounts. Even in Eugenio, while
declaring that the bank inquiry order under Section II then required
prior notice of such to the account owner, we recognized that the
determination of probable cause by the appellate court to issue the
bank inquiry order can be contested. As presently worded and how
AMLC functions are designed under the AMLA, the occasion for the
issuance of the freeze order upon the actual physical seizure of the
investigated and inquired into bank account, calls into motions the
opportunity for the bank account owner to then question, not just
probable cause for the issuance of the freeze order under Section I 0,
but, to begin with, the determination of probable cause for an ex-
parte bank inquiry order into a purported related account under Section
II.
In enacting the amendment to Section II of the AMLC, the legislature
saw it fit to place requirements before a bank inquiry order may be
issued. We discussed these requirements as basis for a valid
exception to the general rule on absolute confidentiality of bank
accounts. However, these very safe guards allow SPCMB, post
issuance of the ex-parte bank inquiry order, legal bases to question the
propriety of such issued order, if any. To emphasize, this allowance to
the owner of the bank account to question the bank inquiry order is
granted only after issuance of the freeze order physically seizing the
subject bank account. It cannot be undertaken prior to the issuance of
the freeze order.
While no grave abuse of discretion could be ascribed on the part of the
appellate court when it explained in its letter that petitions of such
nature "is strictly confidential in that when processing the same, not
even the handling staff members of the Office of the Presiding Justice
know or have any knowledge who the subject bank account holders
are, as well as the bank accounts involved," it was incorrect when it
declared that "under the rules, the Office of the Presiding Justice is
strictly mandated not to disclose, divulge, or communicate to anyone
directly or indirectly, in any manner or by any means, the fact of the
filing of any petition brought before [the Court of Appeals] by the Anti-
Money Laundering Council, its contents and even its entry in the
logbook." As a result, the appellate court effectively precluded and
prevented SPCMB of any recourse, amounting to a denial of SPCMB's
letter request.
We cannot overemphasize that SPCMB, as the owner of the bank
account which may be the subject of inquiry of the AMLC, ought to
have a legal remedy to question the validity and propriety of such an
order by the appellate court under Section 11 of the AMLA even if
subsequent to the issuance of a freeze order. Moreover, given the
scope of inquiry of the AMLC, reaching and including even related
accounts, which inquiry into specifies a proviso that: "[t]hat the
procedure for the ex-parte application of the ex-parte court order for
the principal account shall be the same with that of the related
accounts," SPCMB should be allowed to question the government
intrusion. Plainly, by implication, SPCMB can demonstrate the absence
of probable cause, i.e. that it is not a related account nor are its
accounts materially linked to the principal account being investigated.41
In BSB Group, Inc. v. Go,42 we recounted the objective of the absolute
confidentiality rule which is protection from unwarranted inquiry or
investigation if the purpose of such inquiry or investigation is merely to
24
determine the existence and nature, as well as the amount of the
deposit in any given bank account:
xxx. There is, in fact, much disfavor to construing these primary and
supplemental exceptions in a manner that would authorize unbridled
discretion, whether governmental or otherwise, in utilizing these
exceptions as authority for unwarranted inquiry into bank accounts. It is
then perceivable that the present legal order is obliged to conserve the
absolutely confidential nature of bank deposits.
The measure of protection afforded by the law has been explained
in China Banking Corporation v. Ortega. That case principally
addressed the issue of whether the prohibition against an examination
of bank deposits precludes garnishment in satisfaction of a judgment.
Ruling on that issue in the negative, the Court found guidance in the
relevant portions of the legislative deliberations on Senate Bill No. 351
and House Bill No. 3977, which later became the Bank Secrecy Act,
and it held that the absolute confidentiality rule in R.A. No. 1405
actually aims at protection from unwarranted inquiry or investigation if
the purpose of such inquiry or investigation is merely to determine the
existence and nature, as well as the amount of the deposit in any given
bank account. Thus,
x x x The lower court did not order an examination of or inquiry into the
deposit of B&B Forest Development Corporation, as contemplated in
the law. It merely required Tan Kim Liong to inform the court whether
or not the defendant B&B Forest Development Corporation had a
deposit in the China Banking Corporation 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. It will be noted from
the discussion of the conference committee report on Senate Bill No.
351 and House Bill No. 3977 which later became Republic Act No.
1405, that it was not the intention of the lawmakers to place banks
deposits beyond the reach of execution to satisfy a final judgment
Thus:
x x x Mr. Marcos: Now, for purposes of the record, I should like the
Chairman of the Committee on Ways and Means to clarify this further.
Suppose an individual has a tax case. He is being held liable by the
Bureau of Internal Revenue [(BIR)] or, say, P1,000.00 worth of tax
liability, and because of this the deposit of this individual [has been]
attached by the [BIR].
Mr. Ramos: The attachment will only apply after the court has
pronounced sentence declaring the liability of such person. But where
the primary aim is to determine whether he has a bank deposit in order
to bring about a proper assessment by the [BIR], such inquiry is not
allowed by this proposed law.
Mr. Marcos: But under our rules of procedure and under the Civil
Code, the attachment or garnishment of money deposited is allowed.
Let us assume for instance that there is a preliminary attachment
which is for garnishment or for holding liable all moneys deposited
belonging to a certain individual, but such attachment or garnishment
will bring out into the open the value of such deposit. Is that prohibited
by... the law?
Mr. Ramos: It is only prohibited to the extent that the inquiry... is made
only for the purpose of satisfying a tax liability already declared for the
protection of the right in favor of the government; but when the object
is merely to inquire whether he has a deposit or not for purposes of
taxation, then this is fully covered by the law. x x x
Mr. Marcos: The law prohibits a mere investigation into the existence
and the amount of the deposit.
Mr. Ramos: Into the very nature of such deposit. x x x (Citations
omitted)
What is reflected by the foregoing disquisition is that the law plainly
prohibits a mere investigation into the existence and the amount of the
deposit. We relate the principle to SPCMB's relationship to the
reported principal account under investigation, one of its clients, former
Vice President Binay. SPCMB as the owner of one of the bank
accounts reported to be investigated by the AMLC for probable money
laundering offenses should be allowed to pursue remedies therefrom
where there are legal implications on the inquiry into its accounts as a
law firm. While we do not lapse into conjecture and cannot take up the
lance for SPCMB on probable violation of the attorney-client privilege
based on pure speculation, the extent of information obtained by the
AMLC concerning the clients of SPCMB has not been fully drawn and
sufficiently demonstrated. At the same time, the owner of bank
accounts that could be potentially affected has the right to challenge
whether the requirements for issuance of the bank inquiry order were
indeed complied with given that such has implications on its property
rights. In this regard, SPCMB's obeisance to promulgated rules on the
matter could have afforded it a remedy, even post issuance of the bank
inquiry order.
Rule 10.b. of the IRR defines probable cause as "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 sought to be
frozen is in any way related to said unlawful activity and/or money
laundering offense." Evidently, the provision only refers to probable
cause for freeze orders under Section 10 of the AMLA. From this we
note that there is a glaring lacunae in our procedural rules concerning
the bank inquiry order under Section 11. Despite the advent of RA No.
10167, amending Section 11 of the AMLA, we have yet to draft
additional rules corresponding to the ex-parte bank inquiry order under
Section 11. A.M. No. 05-11-04-SC entitled "Rule of Procedure in
Cases of Civil Forfeiture, Asset Preservation, and Freezing of
Monetary Instrument, Property, or Proceeds Representing, Involving,
or Relating to an Unlawful Activity or Money Laundering Offense Under
Republic Act No. 9160, as Amended," only covers what is already
provided in the title. As we have already noted, the bank inquiry order
must likewise be governed by rules specific to its issuance where the
AMLC regularly invokes this provision and which, expectedly clashes
with the rights of bank account holders.
Apart from Section 2, Rule IV of the 2009 Internal Rules of the CA
(IRCA) reads:
SEC. 2. Action by the Presiding Justice or Executive Justice. —
When a petition involves an urgent matter, such as an application for
writ of habeas corpus, amparo or habeas data or for temporary
restraining order, and there is no way of convening the Raffle
Committee or calling any of its members, the Presiding Justice or the
Executive Justice, as the case may be, or in his/her absence, the most
senior Justice present, may conduct the raffle or act on the petition,
subject to raffle in the latter case on the next working day in
accordance with Rule III hereof.
(AMLA cases are limited to the first three most senior Justices as
stated in the law and are raffled by the Chairmen of the First,
Second and Third Divisions to the members of their Divisions
only.)
Nothing in the IRCA justifies the disallowance to SPCMB of information
and/or court records or proceedings pertaining to the possible bank
inquiry order covering its bank deposits or investment.
We note that the Presiding Justice's reply to the request for comment
of SPCMB on the existence of a petition for bank inquiry order by the
AMLC covering the latter's account only contemplates the provisions of
Section 10 of the AMLA, its IRR and the promulgated rules thereon.
Such immediate and definitive foreclosure left SPCMB with no
recourse on how to proceed from what it perceived to be violation of its
rights as owner of the bank account examined. The reply of the
Presiding Justice failed to take into consideration Section 54 of A.M.
No. 05-11-04-SC on Notice of Freeze Order which reads:
SEC. 54. Notice of freeze order.- The Court shall order that notice of
the freeze order be served personally, in the same manner provided
for the service of the asset preservation order in Section 14 of this
Rule, upon the respondent or any person acting in his behalf and such
covered institution or government agency. The court shall notify also
such party in interest as may have appeared before the
court. (Emphasis supplied)
We relate this Section 54 to the already cited Rule 10.d of the IRR
Rule 10.d. Upon receipt of the freeze order issued by the Court of
Appeals and upon verification by the covered institution that the related
accounts originated from and/or are materially linked to the monetary
instrument or property subject of the freeze order, the covered
institution shall freeze these related accounts wherever these may be
found.
The return of the covered institution as required under Rule 10.c.3
shall include the fact of such freezing and an explanation as to
the grounds for the identification of the related accounts.
If the related accounts cannot be determined within twenty-four
(24) hours from receipt of the freeze order due to the volume
and/or complexity of the transactions or any other justifiable
factor(s), the covered institution shall effect the freezing of the
related accounts, monetary instruments and properties as soon
as practicable and shall submit a supplemental return thereof to
the Court of Appeals and the AMLC within twenty-four (24) hours
from the freezing of said related accounts, monetary instruments
and properties. (Emphasis supplied)
demonstrating that the return of the Freeze Order must provide an
explanation as to the grounds for the identification of the related
25
accounts, or the requirement of notice to a party in interest affected
thereby whose bank accounts were examined. This necessarily
contemplates the procedure for a prior bank inquiry order which we
ought to provide for.
For exact reference, we cite A.M. No. 05-11-04-SC, Title VIII on
Petitions for Freeze Order in the CA which certain pertinent provisions
we adopt and apply suppletorily as a separate Title on Petitions for
Bank Inquiry Order:
TITLE VIII
PETITIONS FOR FREEZE ORDER IN THE COURT OF APPEALS
SEC. 43. Applicability. - This Rule shall apply to petitions for freeze
order in the Court of Appeals. The 2002 Internal Rules of the Court of
Appeals, as amended, shall apply suppletorily in all other aspects.
xxxx
SEC. 46. Contents of the petition. - The petition shall contain the
following allegations:
(a) The name and address of the respondent;
(b) A specific description with particularity of the monetary
instrument, property or proceeds, their location, the name of
the owner, holder, lienholder or possessor, if known;
(c) The grounds relied upon for the issuance of a freeze order;
and
(d) The supporting evidence showing that the subject monetary
instrument, property, or proceeds are in any way related to or
involved in an unlawful activity as defined under Section 3(i) of
Republic Act No. 9160, as amended by Republic Act No.
9194.
The petition shall be filed in seven clearly legible copies and
shall be accompanied by clearly legible copies of supporting
documents duly subscribed under oath.
xxxx
SEC. 49. Confidentiality; prohibited disclosure. - The logbook and the
entries therein shall be kept strictly confidential and maintained under
the responsibility of the Presiding Justice or the Executive Justices, as
the case may be. No person, including Court personnel, shall disclose,
divulge or communicate to anyone directly or indirectly, in any manner
or by any means, the fact of the filing of the petition for freeze order, its
contents and its entry in the logbook except to those authorized by the
Court. Violation shall constitute contempt of court.
xxxx
SEC. 51. Action by the Court of Appeals.- All members of the Division
of the Court to which the assigned justice belongs shall act on the
petition within twenty-four hours after its filing. However, if one member
of the Division is not available, the assigned justice and the other
justice present shall act on the petition. If only the assigned justice is
present, he shall act alone. The action of the two justices or of the
assigned justice alone, as the case may be, shall be forthwith
promulgated and thereafter submitted on the next working day to the
absent member or members of the Division for ratification, modification
or recall.
If the Court is satisfied from the verified allegations of the petition that
there exists probable cause that the monetary instrument, property, or
proceeds are in any way related to or involved in any unlawful activity
as defined in Section 3(i) of Republic Act No. 9160, as amended by
Republic Act No. 9194, it shall issue ex parte a freeze order as
hereinafter provided.
If the Court finds no substantial merit in the petition, it shall dismiss the
petition outright, stating the specific reasons for such dismissal.
When the unanimous vote of the three justices of the Division cannot
be obtained, the Presiding Justice or the Executive Justice shall
designate two justices by raffle from among the other justices of the
first three divisions to sit temporarily with them forming a special
division of five justices. The concurrence of a majority of such special
division shall be required for the pronouncement of a judgment or
resolution.
SEC. 52. Issuance, form and contents of the freeze order - The freeze
order shall:
(a) issue in the name of the Republic of the Philippines
represented by the Anti-Money Laundering Council;
(b) describe with particularity the monetary instrument, property or
proceeds frozen, as well as the names of their owner or
owners; and
(c) direct the person or covered institution to immediately freeze
the subject monetary instrument, property or proceeds or its
related web of accounts.
SEC. 53. Freeze order.
(a) Effectivity; post issuance hearing. - The freeze order shall be
effective immediately for a period of twenty days. Within the
twenty-day period, the court shall conduct a summary hearing,
with notice to the parties, to determine whether or not to
modify or lift the freeze order, or extend its effectivity as
hereinafter provided.
(b) Extension. - On motion of the petitioner filed before the
expiration of twenty days from issuance of a freeze order, the
court may for good cause extend its effectivity for a period not
exceeding six months.
SEC. 54. Notice of freeze order.- The Court shall order that notice of
the freeze order be served personally, in the same manner provided
for the service of the asset preservation order in Section 14 of this
Rule, upon the respondent or any person acting in his behalf and such
covered institution or government agency. The court shall notify also
such party in interest as may have appeared before the court.
SEC. 55. Duty of respondent, covered institution or government
agency upon receipt of freeze order. - Upon receipt of a copy of the
freeze order, the respondent, covered institution or government agency
shall immediately desist from and not allow any transaction,
withdrawal, deposit, transfer, removal, conversion, other movement or
concealment the account representing, involving or relating to the
subject monetary instrument, property, proceeds or its related web of
accounts.
SEC. 56. Consolidation with the pending civil forfeiture proceedings -
After the post-issuance hearing required in Section 53, the Court shall
forthwith remand the case and transmit the records to the regional trial
court for consolidation with the pending civil forfeiture proceeding.
SEC. 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.
A reverse situation affords us a clearer picture of the arbitrary and total
preclusion of SPCMB to question the bank inquiry order of the
appellate court. In particular, in an occasion where the appellate court
denies the AMLC's ex-parte application for a bank inquiry order under
Section 11, the AMLC can question this denial and assail such an
order by the appellate court before us on grave abuse of discretion.
Among others, the AMLC can demonstrate that it has established
probable cause for its issuance, or if the situation contemplates a
denial of an application for a bank inquiry order into a related account,
the AMLC can establish that the account targeted is indeed a related
account. The resolution on these factual and legal issues ought to be
reviewable, albeit post issuance of the Freeze Order, akin to the
provision of an Appeal to the Supreme Court under Section 57 of A.M.
No. 05-11-04-SC.
Palpably, the requirement to establish probable cause is not a useless
supposition. To establish and demonstrate the required probable
cause before issuance of the bank inquiry and the freeze orders is a
screw on which the AMLC's intrusive functions turns. We are hard
pressed to justify a disallowance to an aggrieved owner of a bank
account to avail of remedies.
That there are no specific rules governing the bank inquiry order does
not signify that the CA cannot confirm to the actual owner of the bank
account reportedly being investigated whether it had in fact issued a
bank inquiry order for covering its accounts, of course after the
issuance of the Freeze Order. Even in Ligot,43 we held that by
implication, where the law did not specify, the owner of the "frozen"
property may move to lift the freeze order issued under Section 10 of
the AMLA if he can show that no probable cause exists or the 20-day
period of the freeze order has already lapsed without any extension
being requested from and granted by the CA. Drawing a parallel, such
a showing of the absence of probable cause ought to be afforded
SPCMB.
26
Ligot clarifies that "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 the AMLA, as
amended." This same probable cause is likewise the focal point in a
bank inquiry order to further determine whether the account under
investigation is linked to unlawful activities and/or money laundering
offense. Thus, the specific applicability of Sections 52, 53, 54 and 57
Title VIII of A.M. No. 05-11-04-SC covering the following: (1) Issuance,
Form and Content of the Freeze Order; (2) Effectivity of the Freeze
Order and Post Issuance Hearing thereon; (3) Notice of the Freeze
Order; and (4) Appeal from the Freeze Order as separate Rules for
Petitions to Question the Bank Inquiry Order. And as held
in Eugenio which now applies to the present Section 11 of the AMLA:
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. xxx.44
The cited rules cover and approximate the distinction made
by Eugenio in declaring that the bank inquiry order is not a search
warrant, and yet there are instituted requirements for the issuance of
these orders given that such is now allowed ex-parte:
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.
Even as the Constitution and the Rules of Court impose a high
procedural standard for the determination of probable cause for the
issuance of search warrants which Congress chose not to prescribe for
the bank inquiry order under the AMLA, Congress nonetheless
disallowed ex parte applications for the inquiry order. We can discern
that in exchange for these procedural standards normally applied to
search warrants, Congress chose instead to legislate a right to notice
and a right to be heard — characteristics of judicial proceedings which
are not ex parte. Absent any demonstrable constitutional infirmity,
there is no reason for us to dispute such legislative policy choices.45
Thus, as an ex-parte bank inquiry order which Congress has now
specifically allowed, the owner of a bank account post issuance of the
freeze order has an opportunity under the Rules to contest the
establishment of probable cause.
Again, we cannot avoid the requirement-limitation nexus in Section 11.
As it affords the government authority to pursue a legitimate state
interest to investigate money laundering offenses, such likewise
provides the limits for the authority given. Moreover, allowance to the
owner of the bank account, post issuance of the bank inquiry order and
the corresponding freeze order, of remedies to question the order, will
not forestall and waylay the government's pursuit of money launderers.
That the bank inquiry order is a separate from the freeze order does
not denote that it cannot be questioned. The opportunity is still rife for
the owner of a bank account to question the basis for its very inclusion
into the investigation and the corresponding freezing of its account in
the process.
As noted in Eugenio, such an allowance accorded the account holder
who wants to contest the issuance of the order and the actual
investigation by the AMLC, does not cast an unreasonable burden
since the bank inquiry order has already been issued. Further, allowing
for 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. The account holder so notified
remains unable to do anything to conceal or cleanse his bank account
records of suspicious or anomalous transactions, at least not without
the whole hearted cooperation of the bank, which inherently has no
vested interest to aid the account holder in such manner. Rule
10.c.46 of the IRR provides for Duty of the Covered Institution receiving
the Freeze Order. Such can likewise be made applicable to covered
institutions notified of a bank inquiry order.
On the other hand, a scenario where SPCMB or any account holder
under examination later shows that the bank inquiry order was without
the required probable cause, the information obtained through the
account reverts to, and maintains, its confidentiality. In short, any and
all information obtained therein by the AMLC remains confidential, as if
no examination or inquiry on the bank account or investments was
undertaken. The foregoing consequence can be added as a Section in
the Rules entitled "Effect of absence of probable cause."
All told, we affirm the constitutionality of Section 11 of the AMLA
allowing the ex-parte application by the AMLC for authority to inquire
into, and examine, certain bank deposits and investments.
Section 11 of the AMLA providing for the ex-parte bank deposit inquiry
is constitutionally firm for the reasons already discussed. The ex--
parte inquiry shall be upon probable cause that the deposits or
investments are related to an unlawful activity as defined in Section 3(i)
of the law or a money laundering offense under Section 4 of the same
law. To effect the limit on the ex-parte inquiry, the petition under oath
for authority to inquire, must, akin to the requirement of a petition for
freeze order enumerated in Title VIII of A.M. No. 05-11-04-SC, contain
the name and address of the respondent; the grounds relied upon for
the issuance of the order of inquiry; and the supporting evidence that
the subject bank deposit are in any way related to or involved in an
unlawful activity.
If the CA finds no substantial merit in the petition, it shall dismiss the
petition outright stating the specific reasons for such denial. If found
meritorious and there is a subsequent petition for freeze order, the
proceedings shall be governed by the existing Rules on Petitions for
Freeze Order in the CA. From the issuance of a freeze order, the party
aggrieved by the ruling of the court may appeal to the Supreme Court
by petition for review on certiorari under Rule 45 of the Rules of Court
raising all pertinent questions of law and issues, including the propriety
of the issuance of a bank inquiry order. The appeal shall not stay the
enforcement of the subject decision or final order unless the Supreme
Court directs otherwise. The CA is directed to draft rules based on the
foregoing discussions to complement the existing A.M. No. 05-11-04-
SC Rule of Procedure in Cases of  Civil Forfeiture, Asset Preservation,
and Freezing of Monetary Instrument, Property, or Proceeds
Representing, Involving, or Relating to an Unlawful Activity or Money
Laundering Offense under Republic Act No. 9160, as Amended for
submission to the Committee on the Revision of the Rules of Court and
eventual approval and promulgation of the Court en banc.
WHEREFORE, the petition is DENIED. Section 11 of Republic Act No.
9160, as amended, is declared VALID and CONSTITUTIONAL.
SO ORDERED.
G.R. No. 209969, September 27, 2017
JOSE SANICO AND VICENTE
CASTRO, Petitioners, v. WERHERLINA P. COLIPANO, Respondent.
DECISION
CAGUIOA, J.:
Before the Court is a Petition for Review on Certiorari1 under Rule 45
of the Rules of Court filed by petitioners Jose Sanico (Sanico) and
Vicente Castro (Castro), assailing the Decision2 dated September 30,
2013 of the Court of Appeals (CA) in CA-G.R. CEB-CV No. 01889. The
CA affirmed with modification the Decision3 dated October 27, 2006 of
the Regional Trial Court, Branch 25, Danao City (RTC) which found
Sanico and Castro liable for breach of' contract of carriage and
awarded actual and compensatory damages for loss of income in favor
of respondent Werherlina P. Colipano (Colipano). The CA reduced the
compensatory damages that the RTC awarded.
Antecedents
Colipano filed a complaint on January 7, 1997 for breach of contract of
carriage and damages against Sanico and Castro.4 In her complaint,
Colipano claimed that at 4:00 P.M. more or less of December 25,
1993, Christmas Day, she and her daughter were; paying passengers
in the jeepney operated by Sanico, which was driven by
Castro.5 Colipano claimed she was made to sit on an empty beer case
at the edge of the rear entrance/exit of the jeepney with her sleeping
child on her lap.6 And, at an uphill incline in the road to Natimao-an,
Carmen, Cebu, the jeepney slid backwards because it did not have the
power to reach the top.7 Colipano pushed both her feet against the
step board to prevent herself and her child from being thrown out of the
exit, but because the step board was wet, her left foot slipped and got
crushed between the step board and a coconut tree which the jeepney
bumped, causing the jeepney to stop its backward
movement.8 Colipano's leg was badly injured and was eventually
27
amputated.9 Colipano prayed for actual damages, loss of income,
moral damages, exemplary damages, and attorney's fees.10
In their answer, Sanico and Castro admitted that Colipano's leg was
crushed and amputated but claimed that it! was Colipano's fault that
her leg was crushed.11 They admitted that the jeepney slid backwards
because the jeepney lost power.12 The conductor then instructed
everyone not to panic but Colipano tried to disembark and her foot got
caught in between the step board and the coconut tree.13 Sanico
claimed that he paid for all the hospital and medical expenses of
Colipano,14 and that Colipano eventually freely and voluntarily
executed an Affidavit of Desistance and Release of Claim.15
After trial, the RTC found that Sanico and Castro breached the contract
of carriage between them and Colipano but only awarded actual and
compensatory damages in favor of Colipano. The dispositive portion of
the RTC Decision states:
WHEREFORE, premises considered, this Court finds the
defendants LIABLE for breach of contract of carriage and are solidarily
liable to pay plaintiff:
1. Actual damages in the amount of P2,098.80; and
2. Compensatory damages for loss of income in the
amount of P360,000.00.
No costs.
SO ORDERED.16
Only Sanico and Castro appealed to the CA, which affirmed with
modification the RTC Decision. The dispositive portion of the CA
Decision states:
IN LIGHT OF ALL THE FOREGOING, the instant appeal is
PARTIALLY GRANTED. The Decision dated October 27, 2006 of the
Regional Trial Court, Branch 25, Danao City, in Civil Case No. DNA-
418, is AFFIRMED with MODIFICATION in that the award for
compensatory damages for loss of income in paragraph 2 of the
dispositive portion of the RTC's decision, is reduced to P200,000.00.
SO ORDERED.17
Without moving for the reconsideration of the CA Decision, Sanico and
Castro filed this petition before the Court assailing the CA Decision.
Issues
a. Whether the CA erred in finding that Sanico and
Castro breached the contract of carriage with
Colipano;
b. Whether the Affidavit of Desistance and Release
of Claim is binding on Colipano; and
c. Whether the CA erred in the amount of damages
awarded.
The Court's Ruling
The Court partly grants the petition.
Only Sanico breached the contract of carriage.
Here, it is beyond dispute that Colipano was injured while she
was a passenger in the jeepney owned and operated by Sanico
that was being driven by Castro. Both the CA and RTC found
Sanico and Castro jointly and severally liable. This, however, is
erroneous because only Sanico was the party to the contract of
carriage with Colipano.
Since the cause of action is based on a breach of a contract of
carriage, the liability of Sanico is direct as the contract is between
him and Colipano. Castro, being merely the driver of Sanico's
jeepney, cannot be made liable as he is not a party to the contract
of carriage.
In Soberano v. Manila Railroad Co.,18 the Court ruled that a
complaint for breach of a contract of carriage is dismissible as
against the employee who was driving the bus because the
parties to the contract of carriage are only the passenger, the bus
owner, and the operator, viz.:
The complaint against Caccam was therefore properly dismissed.
He was not a party to the contract; he was a mere employee of the
BAL. The parties to that contract are Juana Soberano, the
passenger, and the MRR and its subsidiary, the BAL, the bus
owner and operator, respectively; and consequent to the inability
of the defendant companies to carry Juana Soberano and her
baggage arid personal effects securely and safely to her
destination as imposed by law (art. 1733, in relation to arts. 1736
and 1755, N.C.C.), their liability to her becomes direct and
immediate.19
Since Castro was not a party to the contract of carriage, Colipano
had no cause of action against him and the pomplaint against him
should be dismissed. Although he was driving the jeepney, he
was a mere employee of Sanico, who was the operator and owner
of the jeepney. The obligation to carry Colipano safely to her
destination was with Sanico. In fact, the elements of a contract of
carriage existeid between Colipano and Sanico: consent, as
shown when Castro, as employee of Sanico, accepted Colipano
as a passenger when he allowed Colipano to board the jeepney,
and as to Colipano, when she boarded the jeepney; cause or
consideration, when Colipano, for her part, paid her fare;
and, object, the transportation of Colipano from the place of
departure to the place of destination.20
Having established that the contract of carriage was only between
Sanico and Colipano and that therefore Colipano had no cause of
action against Castro, the Court next determines whether Sanico
breached his obligations to Colipano under the contract.
Sanico is liable as operator and owner of a common carrier.
Specific to a contract of carriage, ithe Civil Code requires
common carriers to observe extraordinary diligence in safely
transporting their passengers. Article 1733 of the Civil Code
states:
ART. 1733. Common carriers, fijpm the nature of their business
and for reasons of public policy, are bbund to observe
extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the
circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is
further expressed in Articles 1734, 1735 and 1745, Nos. 5, 6, and
7, while the extraordinary diligence for the safety of the
passengers is further set forth in Articles 1755 and 1756.
This extraordinary diligence, following Article 1755 of the Civil
Code, means that common carriers have the obligation to carry
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons,
with due regard for all the circumstances.
In case of death of or injury to their passengers, Article 1756 of
the Civil Code provides that common carriers are presumed to
have been at fault or negligent, and this presumption can be
overcome only by proof of the extraordinary diligence exercised
to ensure the safety of the passengers.21
Being an operator and owner of a common carrier, Sanico was
required to observe extraordinary diligence in safely transporting
Colipano. When Colipano's leg was injured while she was a
passenger in Sanico's jeepney, the presumption of fault or
negligence on Sanico's part arose and he had the burden to
prove that he exercised the extraordinary diligence required of
him. He failed to do this.
In Calalas v. Court of Appeals,22 the Court found that allowing the
respondent in that case to be seated in an extension seat, which
was a wooden stool at the rear of the jeepney, "placed [the
respondent] in a peril greater than that to which the other
passengers were exposed." 23 The Court further ruled that the
petitioner in Calalas was not only "unable to overcome the
presumption of negligence imposed on him for the injury
sustained by [the respondent], but also, the evidence shows he
was actually negligent in transporting passengers."24
Calalas squarely applies here. Sanico failed to rebut the
presumption of fault or negligence under the Civil Code. More
than this, the evidence indubitably established Sanico's
negligence when Castro made Colipano sit on an empty beer
case at the edge of the rear entrance/exit of the jeepney with her
sleeping child on her lap, which put her and her child in greater
peril than the other passengers. As the CA correctly held:
For the driver, Vicente Castro, to allow a seat extension made of
an empty case of beer clearly indicates lack of prudence.
Permitting Werherlina to occupy an improvised seat in the rear
portion of the jeepney, with a child on her lap to boot, exposed
her and her child in a peril greater than that to which the other
passengers were exposed. The use of an improvised seat
extension is undeniable, in view of the testimony of plaintiffs
witness, which is consistent with Werherlina's testimonial
assertion. Werherlina and her witness's testimony were accorded
belief by the RTC. Factual findings of the trial court are entitled to
great weight on appeal and should not be disturbed except for
strong and valid reasons, because the trial court ip in a better
position to examine the demeanor of the witnesses while
testifying.25
The CA also correctly held that the!defense of engine failure,
instead of exonerating Sanico, only aggravated his already
precarious position.26 The engine failure "hinted lack of regular
check and maintenance to ensure that the engine is at its best,
considering that the jeepney regularly passes through a
28
mountainous area."27 This failure to ensure that the jeepney can
safely transport passengers through its route which required
navigation through a mountainous area is proof of fault on
Sanico's part. In the face of such evidence, there is no question
as to Sanico's fault or negligence.
Further, common carriers may also be liable for damages when
they contravene the tenor of their obligations. Article 1170 of the
Civil Code states:
ART. 1170. Those who in the performance of their obligations are
guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable for damages.
In Magat v. Medialdea,28 the Court ruled: "The phrase 'in any
manner contravene the tenor' of the obligation includes any illicit
act or omission which impairs the strict and faithful fulfillment of
the obligation and every kind of defective performance."29 There
is no question here that making Colipano sit on the empty beer
case was a clear showing of how Sanico contravened the tenor of
his obligation to safely transport Colipano from the place of
departure to the place of destination as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, and with due regard for all the circumstances.
Sanico's attempt to evade liability by arguing that he exercised
extraordinary diligence when he hired; Castro, who was allegedly
an experienced and time-tested driver, whom he had even
accompanied on a test-drive and in whom he was personally
convinced of the driving skills, 30 are not enough to exonerate him
from liability - because the liability of common carriers does not
cease upon p!roof that they exercised all the diligence of a good
father of a family irii the selection. and supervision of their
employees. This is the express mandate of Article 1759 of the
Civil Code:
ART. 1759. Common carriers are liable for the death of or injuries
to passengers through the negligence or willful acts of the
former's employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of
the common carriers.
This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family in
the selection and supervision of their employees.
The only defenses available to common carriers are (1) proof that
they observed extraordinary diligence as prescribed in Article
1756,31 and (2) following Article 1174 of the Civil Code, proof that
the injury or death was brought about by an event which "could
not be foreseen, or which, though foreseen, were inevitable," or a
fortuitous event.
The Court finds that neither of these defenses obtain. Thus,
Sanico is liable for damages to Colipano because of the injury
that Colipano suffered as a passenger of Sanico's jeepney.
The Affidavit of Desistance and Release of Claim is void.
Sanico cannot be exonerated from liability under the Affidavit of
Desistance and Release of Claim32and his payment of the hospital
and medical bills of Colipano amounting to P44,900.00. 33
The RTC ruled that "the Affidavit of Desistance and Release of
Claim is not binding on plaintiff [Colipano] in the absence of
proof that the contents thereof were sufficiently translated and
explained to her."34 The CA affirmed the findings of the RTC and
ruled that the document was not binding on Colipano, as follows:
Finally, We sustain the RTC's finding that the affidavit of
desistance and release of claim, offered by defendants-
appellants, are not binding on Werherlina, quoting with approval
its reflection on the matter, saying:
xxx this Court finds that the Affidavit of Desistance and Release
of Claim is not binding on plaintiff in the absence of proof that the
contents thereof were sufficiently explained to her. It is clear from
the plaintiffs circumstances that she is not able to understand
English, more so stipulations stated in the said Affidavit and
Release. It is understandable that in her pressing need, the
plaintiff may have been easily convinced to sign the document
with the promise that she will be compensated for her injuries. 35
The Court finds no reason to depart from these findings of the CA
and the RTC.
For there to be a valid waiver, the following requisites are
essential:
(1) that the person making the waiver possesses the right, (2) that
he has the capacity and power to dispose of the right, (3) that the
waiver must be clear and unequivocal although it may be made
expressly or impliedly, and (4) that the waiver is not contrary to
law, public policy, public order, morals, good customs or
prejudicial to a third person with a right recognized by law.36
While the first two requirements can be said to exist in this case,
the third and fourth requirements are, however, lacking.
For the waiver to be clear and unequivocal, the person waiving
the right should understand what she is waiving and the effect of
such waiver. Both the CA and RTC made the factual
deitermination that Colipano was not able to understand English
and that there was no proof that the documents and their
contents and effects were explained to her. These findings of the
RTC, affirmed by the CA, are entitled to great weight and
respect.37 As this Court held in Philippine National Railways
Corp. v. Vizcara38:
It is a well-established rule that factual fill dings by the CA are
conclusive on the parties and are not reviewable byj this Court.
They are entitled to great weight and respect, even finality,
especially when, as in this case, the CA affirmed the factual
findings arrived at by the trial court.39
Although there are exceptions to this rule,40 the exceptions are
absent here.
Colipano could not have clearly and unequivocally waived her
right to claim damages when she had no understanding of the
right she was waiving and the extent of that right. Worse, she was
made to sign a document written in a language she did not
understand.
The fourth requirement for a valid waiver is also lacking as the
waiver, based on the attendant facts, can only be construed as
contrary to public policy. The doctrine in Gatchalian v.
Delim,41 which the CA correctly cited,42 is applicable here:
Finally, because what is involved here is the liability of a common
carrier for injuries sustained by passengers in respect of whose
safety a common carrier must exercise extraordinary diligence,
we must construe any such purported waiver most strictly
against the common carrier. For a waiver to be valid and effective,
it must not be contrary to law, morals, public policy or good
customs. To uphold a supposed waiver of any right to claim
damages by an injured passenger, under circumstances like
those exhibited in this case, would be to dilute and weaken the
standard of extraordinary diligence exacted by the law from
common carriers and hence to render that standard
unenforceable. We believe such a purported waiver is offensive
to public policy.43
"[P]ublic policy refers to the aims of the state to promote the
social and general well-being of the inhabitants."44 The Civil Code
requires extraordinary diligence from common carriers because
the nature of their business requires the public to put their safety
and lives in the hands of these common carriers. The State
imposes this extraordinary diligence to promote the well-being of
the public who avail themselves of the services of common
carriers. Thus, in instances of injury or death, a waiver of the right
to claim damages is strictly construed against the common
carrier so as not to dilute or weaken the public policy behind the
required standard of extraordinary diligence.
It was for this reason that in Gatchalian, the waiver was
considered offensive to public policy because it was shown that
the passenger was still in the hospital and was dizzy when she
signed the document. It was also shown that when she saw the
other passengers signing the document, she signed it without
reading it. .
Similar to Gatchalian, Colipano testified that she did not
understand the document she signed.45 She also did not
understand the nature and extent of her waiver as the content of
the document was not explained to her.46 The waiver is therefore
void because it is contrary to public policy. 47
The Court reiterates that waivers executed under similar
circumstances are indeed contrary to public policy and are
void.48 To uphold waivers taken from injured passengers who
have no knowledge of their entitlement under the law and the
extent of liability of common carriers would indeed dilute the
extraordinary diligence required from common carriers, and
contravene a public policy reflected in the Civil Code.
Amount of compensatory damages granted is incorrect.
On the amount of damages, the RiTC awarded P2,098.80 as actual
damages and P360,000.00 as compensatoiy damages for loss of
income, as follows:
[T]his Court can only award actual damages in the amount that is
duly supported by receipts, that is, P2,098.80 mid not P7,277.80
as prayed for by plaintiff as there is no basis for the amount
prayed for. However, considering that plaintiff has suffered the
loss of one leg which has caused her to be limited in her
movement thus resulting in loss of livelihood, she is entitled to
compensatory damages for lost income at the rate of
P12,000.00/year for thirty years in the amount of P360,000.00. 49
The CA, on the other hand, modified the award of the RTC by
reducing the compensatory damages from P360,000.00 to
P200,000.00, thus:
By virtue of their negligence, defendants-appellants are liable to
pay Werheiiina compensatory damages for loss of earning
29
capacity. In arriving at the proper amount, the Supremip Court
has consistently used the following formula:
Net Earning Capacity
= and equitable to award interest from the date of the RTC decision.
Life Expectancy x [Gross Annual Income - Living Expenses (50%
of gross annual income)]
 
  where life expectancy
= As to the rate of interest, in Eastern Shipping Lines, Inc. v. Court
2/3 (80 - the age of the deceased).
Based on the stated formula, the damages due to Werherlina for
loss of earning capacity is:
Net Earning Capacity
=
[2/3 x (80-30)] x (P12,000.00 x (50%)
=
(2/3 x 50) x P6,000.00
=
33.33 x P6,000.00  
=
P200,000.00
The award of the sum of P200,000.00 as compensatory damages
for loss of earning capacity is in order, notwithstanding the
objections of defendants-appellants with respect to lack of
evidence on Werherlina's age and annual income.50
Sanico argues that Colipano failed to present documentary
evidence to support her age and her income, so that her
testimony is self-serving and that there was no basis for the
award of compensatory damages in her favor.51 Sanico is gravely
mistaken.
The Court has held in Heirs of Pedro Clemeña y Zurbano v. Heirs
of Irene B. Bien52 that testimonial evidence cannot be objected to
on the ground of being self-serving, thus:
"Self-serving evidence" is not to be taken literally to mean any
evidence that serves its proponent's interest. The term, if used
with any legal sense, refers only to acts or declarations made by
a party in his own interest at some place and time out of court,
and it does not include testimony that he gives as a witness in
court. Evidence of this sort is excluded on the same ground as
any hearsay evidence, that is, lack of opportunity for cross-
examination by the adverse party and on the consideration that
its admission would open the door to fraud and fabrication. In
contrast, a party's testimony in court is sworn and subject to
cross-examination by the other party, and therefore, not
susceptible to an objection on the ground that it is self-serving.53
Colipano was subjected to cross-examination and both the RTC
and CA believed her testimony on her age and annual income. In
fact, as these are questions of facts, these findings of the RTC
and CA are likewise binding on the Court.54
Further, although as a general rule, documentary evidence is
required to prove loss of earning capacity, Colipano's testimony
on her annual earnings of P12,000.00 is an allowed exception.
There are two exceptions to the general rule and Colipano's
testimonial evidence falls under the second exception, viz.:
By way of exception, damages for loss of earning capacity may
be awarded despite the absence of documentary evidence when
(1) the deceased is self-employed earning less than the minimum
wage under current labor laws, and judicial notice may be taken
of the fact that in the deceased's line of work no documentary
evidence is available; or (2) the deceased is employed as a daily
wage worker earning less than the minimum wage under current
labor laws.55
The CA applied the correct formula for computing the loss of
Colipano's earning capacity:
Net earning capacity = Life expectancy x [Gross Annual Income -
Living Expenses (50% of gross annual income)], where life
expectancy = 2/3 (80-the age of the deceased).56
However, the CA erred when it used Colipano's age at the time
she testified as basis for computing the loss of earning
capacity.57 The loss of earning capacity commenced when
Colipano's leg was crushed on December 25, 1993. Given that
Colipano was 30 years old when she testified on October 14,
1997, she was roughly 27 years old on December 25, 1993 when
the injury was sustained. Following the foregoing formula, the net
earning capacity of Colipano is P212,000.00.58
Sanico is liable to pay interest.
Interest is a form of actual or compensatory damages as it
belongs to Chapter 259 of Title XVIII on Damages  of the Civil
Code. Under Article 2210 of the Civil Code, "[i]nterest may, in the
discretion of the court, be allowed upon damages awarded for
breach of contract." Here, given the gravity of the breach of the
contract of carriage causing the serious injury to the leg of
Colipano that resulted in its amputation, the Court deems it just
Since the award of damages was given by the RTC in its Decision
dated October 27, 2006, the interest on the amount awarded shall
be deemed to run beginning October 27, 2006.
of Appeals,60 the Court ruled that "[w]hen an obligation, not
constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per
annum."61 Further, upon finality of the judgment awarding a sum
of money, the rate of interest shall be 12% per annum from such
finality until satisfaction because the interim period is considered
a forbearance of credit.62 Subsequently, in Nacar v. Gallery
Frames,63 the rate of legal interest for loans or forbearance of any
money, goods or credits and the rate allowed in judgments was
lowered from 12% to 6%. Thus, the applicable rate of interest to
the award of damages to Colipano is 6%.
WHEREFORE, premises considered, the petition for review is
hereby PARTLY GRANTED. As to petitioner Vicente Castro, the
Decision of the Court of Appeals dated September 30, 2013
is REVERSED and SET ASIDE and the complaint against him is
dismissed for lack of cause of action. As to petitioner Jose
Sanico, the Decision of the Court of Appeals is hereby AFFIRMED
with MODIFICATIONS, Petitioner Jose Sanico is liable and
ordered to pay respondent Werherlina Colipano the following
amounts:Actual damages in the amount of P2,098.80;
Compensatory damages for loss of income in the amount of
P212,000.00;
Interest on the total amount of the damages awarded in 1 and 2 at
the rate of 6% per annum reckoned from October 27, 2006 until
finality of this Decision. The total amount of the foregoing shall,
in turn, earn interest at the rate of 6% per annum from finality of
this Decision until full payment thereof.
SO ORDERED.
G.R. No. 201931               February 11, 2015
DOÑA ADELA1 EXPORT INTERNATIONAL, INC., Petitioner,
vs.
TRADE AND INVESTMENT DEVELOPMENT CORPORATION
(TIDCORP), AND THE BANK OF THE PHILIPPINE ISLANDS
(BPI), Respondents.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 of the
1997 Rules of Civil Procedure, as amended, assailing the
Decision2 dated November 15, 2011 and the Order3 dated May 14,
2012 of the Regional Trial Court (RTC) of Mandaluyong City, Branch
211 in SEC Case No. MC06-103 for Voluntary Insolvency. The RTC
approved the Joint Motion to Approve Agreement filed by respondents
Trade and Investment Development Corporation of the Philippines
(TIDCORP) and the Bank of the Philippine Islands (BPI). Respondents
stipulated in their agreement that petitioner shall waive its rights to
confidentiality under the provisions of the Law on Secrecy of Bank
Deposits and the General Banking Law of 2000.
The facts follow:
On August 23, 2006, petitioner Doña Adela Export International, Inc.,
(petitioner, for brevity) filed a Petition for Voluntary Insolvency.4 The
case was docketed as SEC Case No. MC06-103 and raffled off to the
RTC of Mandaluyong City, Branch 211.
On August 28, 2006, the RTC, after finding the petition sufficient in
form and substance, issued an order declaring petitioner as insolvent
and staying all civil proceedings against petitioner. In the same order,
the RTC set the initial hearing on October 19, 2006.5
Thereafter, Atty. Arlene Gonzales was appointed as receiver. After
taking her oath, Atty. Gonzales proceeded to make the necessary
report, engaged appraisers and required the creditors to submit proof
of their respective claims.
30
On October 22, 2010, Atty. Gonzales filed a Motion for Parties to Enter
Into Compromise Agreement6 incorporating therein her proposed terms
of compromise, the pertinent portion of which reads:
1. The remaining assets of the Petitioner Dona Adela Export
Int’l., Inc., (Dona Adela) consists of the following:
Appraised
Asset Remarks
Value
1.1 Land ₱5,616,000 w/ REM to TRC
1.2 Building 6,480,000 w/ REM to TRC
w/o chattel mortgage to
1.3 Sewing machines 942,000
TRC (sic)
1.4 Sewing machines 755,000 w/chattel mortgage
1.5 Furnitures and
w/o appraised value
Fixtures
The detailed list of the abovementioned assets and the
corresponding appraised value is attached hereto as Annex
A;
2. The claims of the creditors of Petitioner previously
submitted with their respective proofs of claim are shown
below:
NAME OF CREDITOR AMOUNT
Technology Resource Center 29,546,342.45
BPI 11,069,575.82
*TIDCORP
City of Mandaluyong as of 3/25/09 1,061,370.12
*TIDCORP has not yet submitted its peso amount of claim
xxxx
WHEREFORE, undersigned receiver respectfully proposed for the
concerned parties of this (sic) proceedings to enter into a compromise
Agreement under the following terms and conditions:
a. That the remaining assets of the Petitioner mentioned
under 1 above be assigned and applied to their respective
claims in the following manner:
a.1. The real estate property mentioned under 1.1
and 1.2 above with real estate mortgage (REM) to
Technology Resource Center (TRC) be assigned
and applied to its credit. All costs and expenses
for the transfer of the registration of the said
property, including its unpaid real estate taxes due
to the City of Mandaluyong, and cost for
cancellation of real estate mortgage shall be borne
by TRC.
a.2. For TRC to assign and waive its rights over
the sewing machines and equipments under
chattel mortgage to it mentioned under 1.3 above
as its share for the administrative costs of this
proceedings.
a.3. To assign to BPI and TIDCORP the sewing
machines and equipments mentioned under 1.3
and 1.4 above in proportion with their credits.
a.4. All other remaining assets of Petitioner under
1.5 above be assigned to the Court-appointed
receiver, Atty. Arlene T. Gonzales for payment of
receiver’s fees.
a.5. All other administrative expenses, if any, shall
be for the account of TRC, BPI and TIDCORP, in
proportion to their respective credits.
b. That for the abovementioned purpose mentioned under
3.a. above, the appraisal value of the property (as appraised
by Royal Asia Appraisers which was previously submitted to
the Honorable Court) be made as the basis in determining
the value of the properties; and the amount of the claims that
will be approved by this Honorable Court be made as the
basis in the determination of the amount of credits due to the
respective creditors.
c. Furthermore, that the Compromise Agreement being
proposed herein shall be without prejudice to rights of the
creditors to enforce actions against other debtors who are
jointly and solidarily liable with the petitioner.
d. Finally, that the petitioner, Dona Adela Int’l., Inc., be
discharged from its debts to the party-creditors by virtue of
the Compromise Agreement as being proposed herein.7
On May 26, 2011, petitioner, through its President Epifanio C. Ramos,
Jr., and Technology Resource Center (TRC) entered into a Dacion En
Pagoby Compromise Agreement8 wherein petitioner agreed to transfer
a 351-square meter parcel of land covered by TCT No. 10027 with
existing improvements situated in the Barrio of Jolo, Mandaluyong City,
in favor of TRC in full payment of petitioner’s obligation. The
agreement bears the conformity of Atty. Gonzales as receiver. TRC
filed on May 26, 2011 a Compliance, Manifestation and Motion to
Approve Dacion En Pago by Compromise Agreement.9
On August 11, 2011, creditors TIDCORP and BPI also filed a Joint
Motion to Approve Agreement10 which contained the following terms:
1. OBLIGATION OF PETITIONER.– The parties agree that
the outstanding principal obligation of petitioner to TIDCORP
shall be in the amount of NINE MILLION FORTY-FOUR
THOUSAND SEVEN HUNDRED EIGHT & 15/100 PESOS
(₱9,044,708.15), while to BPI in the amount of ELEVEN
MILLION SIXTY NINE THOUSAND FIVE
HUNDREDSEVENTY FIVE & 82/100 PESOS
(₱11,069,575.82).
2. SETTLEMENT.– TIDCORP and BPI both hereby agree to
accept all the machineries in petitioner’s inventory set aside
pursuant to the Motion for Parties to Enter Into Compromise
Agreement dated 18 October 2010 filed by the Receiver,
Atty. Arlene T. Gonzales. The said machineries valued at
THREE HUNDRED FIFTY THOUSAND PESOS
(₱350,000.00)shall be divided equally between TIDCORP
and BPI.
3. SETTLEMENT OF CLAIMS. – TIDCORP and BPI hereby
agree that acceptance of the abovementioned settlement
shall constitute payment of petitioner’s aforesaid obligation
pursuant to Act No. 1956 (Insolvency Act). However, the
benefit of payment under the said Insolvency Act shall only
be in favor of petitioner and shall not in any manner affect
the claims of TIDCORP and BPI as against its sureties
and/or guarantors.
4. EXPENSES AND TAXES.– All necessary expenses,
including but not limited to, fees of the Receiver,
documentation and notarization, as well as all fees incurred
or to be incurred in connection to the full implementation of
this Agreement shall be for the account of Mr. Epifanio C.
Ramos, Jr.
All taxes and fees incurred or to be incurred including but not
limited to gross receipts tax shall be for the account of the
petitioner.
5. WAIVER OF CONFIDENTIALITY. – The petitioner and
the members of its Board of Directors shall waive all rights to
confidentiality provided under the provisions of Republic Act
No. 1405, as amended, otherwise known as the Law on
Secrecy of Bank Deposits, and Republic Act No. 8791,
otherwise known as The General Banking Law of 2000.
Accordingly, the petitioner and the members of its Board of
Directors by these presents grant TIDCORP and BPI access
to any deposit or other accounts maintained by them with
any bank.
For this purpose, the petitioner and the members of its Board of
Directors shall authorize TIDCORP and BPI to make, sign, execute
and deliver any document of whatever kind or nature which may be
necessary or proper to allow them access to such deposits or other
accounts.
TIDCORP and BPI shall be further authorized to delegate to any
person, who may exercise in their stead, any or all of the powers and
authority herein granted to them or substitute any person in their place
to do and perform said powers and authority.
31
18. HOLD FREE AND HARMLESS. – The petitioner shall indemnify
and hold TIDCORP and BPI, their respective Board of Directors, and
officers free and harmless against any liability or claim of whatever
kind or nature which may arise from, or in connection with, or in
relation to this Agreement.11 (Underscoring supplied)
Epifanio Ramos, Jr. filed a Manifestation and Motion to the Proposed
Compromise Agreement12 of TIDCORP and BPI wherein he stated that
petitioner has a personality separate and distinct from its stockholders
and officers. He argued that he cannot be held liable for the expenses
and taxes as a consequence of the auction or distribution/payment of
said machineries to the creditors; hence, his name should be deleted
as a party to the Compromise Agreement.
Likewise, Atty. Gonzales filed a Manifestation and Comment (On
Dacion En Pago by Compromise Agreement with TRC and Joint
Motion to Approve Agreement of BPI and TIDCORP) with Motion for
Payment of Administrative Expenses and Receiver’s Fees.13 Atty.
Gonzales manifested that she is entitled to payment of administrative
expenses and receiver’s fees in the total amount of ₱740,200.00. She
further stated that it is just and fair for her to ask her due for services
rendered as officer of the Court from TRC who benefitted the most
from the insolvency proceedings; and, that she is waiving the
administrative expenses and receiver’s fees due from TIDCORP and
BPI.
In its Comment,14 TRC requested that the receiver’s fee be reduced to
₱106,000.00. In her Reply,15 Atty. Gonzales said that she will accept
the amount of ₱106,000.00 being offered by TRC.
On November 15, 2011, the RTC rendered the assailed Decision
approving the Dacion En Pagoby Compromise Agreement and the
Joint Motion to Approve Agreement, to wit: WHEREFORE, premises
considered, judgment is hereby rendered based on the foregoing
exchange of pleadings, as follows:
1. Finding the aforequoted Dacion En Pago by Compromise
Agreement dated May 26, 2011 executed by and between
Dona Adela Export International, Inc., represented by its
president Epifanio C. Ramos, Jr., and Technology Resource
Center, represented by its Director General Dennis L.
Cunanan, to be in order and not contrary to law, morals,
good customs, public order or public policy, and the fact that
the Court-Appointed Receiver in her Reply filed on October
24, 2011 intimated her conformity to the Dacion En Pago by
Compromise Agreement, the same is hereby APPROVED
and is made the basis of this judgment;
2. As regards the Joint Motion to Approve Agreement dated
July 29, 2011, filed by creditors Trade and Investment
Development Corporation of the Philippines and the Bank of
the Philippine Islands, with the exception of paragraph 4
thereof pertaining to Expenses and Taxes, the same is
likewise APPROVED, for the same is not contrary to law,
morals, good customs, public order or public policy, and the
fact that the Court-Appointed Receiver in her Reply filed on
October 24, 2011 intimated her conformity to said Joint
Motion to Approve Agreement;
3. Pursuant to its Comment filed on October 19, 2011,
Technology Resource Center is hereby ordered to pay the
Court-Appointed Receiver, Atty. Arlene T. Gonzales the sum
of ₱106,000.00, representing its proportionate share of the
administrative expenses incurred by the receiver with legal
interest from date of termination of this insolvency
proceedings.
Let a copy of this Decision be furnished to the Securities and
Exchange Commission who is directed to cause the removal of
petitioner Dona Adela Export International, Inc., from the list of
registered legal entities and to make a report to this Court of its
Compliance within fifteen (15) days from said elimination so that the
Court could terminate the instant insolvency proceedings and release
the Court-Appointed receiver from her duties and responsibilities.
SO ORDERED.16
Petitioner filed a motion for partial reconsideration17 and claimed that
TIDCORP and BPI’s agreement imposes on it several obligations such
as payment of expenses and taxes and waiver of confidentiality of its
bank deposits but it is not a party and signatory to the said agreement.
In its Order18 dated May 14, 2012, the RTC denied the motion and held
that petitioner’s silence and acquiescence to the joint motion to
approve compromise agreement while it was set for hearing by
creditors BPI and TIDCORP is tantamount to admission and
acquiescence thereto. There was no objection filed by petitioner to the
joint motion to approve compromise agreement prior to its approval,
said the RTC. The RTC also noted that petitioner’s President attended
every hearing of the case but did not interpose any objection to the
said motion when its conditions were being discussed and formulated
by the parties and Atty. Gonzales.19
Hence, this petition.
Petitioner asserts that express and written waiver from the depositor
concerned is required by law before any third person or entity is
allowed to examine bank deposits or bank records. According to
petitioner, it is not a party to the compromise agreement between BPI
and TIDCORP and its silence or acquiescence is not tantamount to an
admission that binds it to the compromise agreement of the creditors
especially the waiver of confidentiality of bank deposits. Petitioner cites
the rule on relativity of contracts which states that contracts can only
bind the parties who entered into it, and it cannot favor or prejudice a
third person, even if he is aware of such contract and has knowledge
thereof. Petitioner also maintains that waivers are not presumed, but
must be clearly and convincingly shown, either by express stipulation
or acts admitting no other reasonable explanation.
Respondent BPI counters that petitioner is estopped from questioning
the BPI-TIDCORP compromise agreement because petitioner and its
counsel participated in all the proceedings involving the subject
compromise agreement and did not object when the compromise
agreement was considered by the RTC.
Respondent TIDCORP contends that the waiver of confidentiality
under Republic Act (R.A.) Nos. 1405 and 8791 does not require the
express or written consent of the depositor. It is TIDCORP’s position
that upon declaration of insolvency, the insolvency court obtains
complete jurisdiction over the insolvent’s property which includes the
authority to issue orders to look into the insolvent’s bank deposits.
Since bank deposits are considered debts owed by the banks to the
petitioner, the receiver is empowered to recover them even without
petitioner’s express or written consent, said TIDCORP.
TIDCORP further avers that the BPI-TIDCORP compromise
agreement approved by the RTC is binding on petitioner and its Board
of Directors by reason of estoppel. The compromise agreement is not
an ordinary contract. Since it was approved by the insolvency court,
the compromise agreement has the force and effect of judgment; it is
immediately executory and not appealable, except for vices of consent
or forgery, TIDCORP concluded.
The main issue for our consideration is whether the petitioner is bound
by the provision in the BPI-TIDCORP Joint Motion to Approve
Agreement that petitioner shall waive its rights to confidentiality of its
bank deposits under R.A. No. 1405, as amended, otherwise known as
the Law on Secrecy of Bank Deposits and R.A. No. 8791, otherwise
known as The General Banking Law of 2000.
The petition is meritorious.
A judgment rendered on the basis of a compromise agreement
between the parties in a civil case is final, unappealable, and
immediately executory.20
However, if one of the parties claims that his consent was obtained
through fraud, mistake, or duress, he must file a motion with the trial
court that approved the compromise agreement to reconsider the
judgment and nullify or set aside said contract on any of the said
grounds for annulment of contract within 15 days from notice of
judgment. Under Rule 37, said party can either file a motion for new
trial or reconsideration. A party can file a motion for new trial based on
fraud, accident or mistake, excusable negligence, or newly discovered
evidence. On the other hand, a party may decide to seek the recall or
modification of the judgment by means of a motion for reconsideration
on the ground that "the decision or final order is contrary to law" if the
consent was procured through fraud, mistake, or duress. Thus, the
motion for a new trial or motion for reconsideration is the readily
available remedy for a party to challenge a judgment if the 15-day
period from receipt of judgment for taking an appeal has not yet
expired.21
In this case, petitioner sought partial reconsideration of the decision
based on compromise agreement assailing the waiver of confidentiality
provision in the Agreement between its two creditors, TIDCORP and
BPI, in which petitioner was not a party. After the trial court denied the
motion on the ground of estoppel, petitioner sought a direct recourse to
this Court.
We stress that a direct recourse to this Court from the decisions, final
resolutions and orders of the RTC may be taken where only questions
of law are raised or involved. There is a question of law when the
doubt or difference arises as to what the law is on a certain state of
32
facts, which does not call for an examination of the probative value of
the evidence presented by the parties-litigants. On the other hand,
there is a question of fact when the doubt or controversy arises as to
the truth or falsity of the alleged facts. Simply put, when there is no
dispute as to fact, the question of whether the conclusion drawn
therefrom is correct or not, is a question of law.22 Petitioner submits the
lone question of law on whether the waiver of confidentiality provision
in the Agreement between TIDCORP and BPI is valid despite
petitioner not being a party and signatory to the same. According to
petitioner, R.A. No. 1405requires the express and written consent of
the depositor to make the waiver effective.
Section 2 of R.A. No. 1405, the Law on Secrecy of Bank Deposits
enacted in 1955, was first amended by Presidential Decree No. 1792
in 1981 and further amended by R.A. No. 7653 in 1993. It now reads:
SEC. 2. 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 when the
examination is made in the course of a special or general examination
of a bank and 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, or when the examination is 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, or 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.
R.A. No. 1405 provides for 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, the Anti-Money Laundering Council may
inquire into a bank account upon order of any competent court.23
In this case, the Joint Motion to Approve Agreement was executed by
BPI and TIDCORP only. There was no written consent given by
petitioner or its representative, Epifanio Ramos, Jr., that petitioner is
waiving the confidentiality of its bank deposits. The provision on the
waiver of the confidentiality of petitioner’s bank deposits was merely
inserted in the agreement. It is clear therefore that petitioner is not
bound by the said provision since it was without the express consent of
petitioner who was not a party and signatory to the said agreement.
Neither can petitioner be deemed to have given its permission by
failure to interpose its objection during the proceedings.1âwphi1 It is an
elementary rule that the existence of a waiver must be positively
demonstrated since a waiver by implication is not normally
countenanced. The norm is that a waiver must not only be voluntary,
but must have been made knowingly, intelligently, and with sufficient
awareness of the relevant circumstances and likely consequences.
There must be persuasive evidence to show an actual intention to
relinquish the right. Mere silence on the part of the holder of the right
should not be construed as a surrender thereof; the courts must
indulge every reasonable presumption against the existence and
validity of such waiver.24
In addition, considering that petitioner was already declared insolvent
by the RTC, all its property, assets and belongings were ordered
delivered to the appointed receiver or assignee. Thus, in the order of
the RTC appointing Atty. Gonzales as receiver, petitioner was directed
to assign and convey to Atty. Gonzales all its real and personal
property, monies, estate and effects with all the deeds, books and
papers relating thereto,25 pursuant to Section 3226 of the Insolvency
Law.27 Such assignment shall operate to vest in the assignee all of the
estate of the insolvent debtor not exempt by law from
execution.28 Corollarily, the stipulation in the Joint Motion to Approve
Compromise Agreement that petitioner waives its right to confidentiality
of its bank deposits requires the approval and conformity of Atty.
Gonzales as receiver since all the property, money, estate and effects
of petitioner have been assigned and conveyed to her29 and she has
the right to recover all the estate, assets, debts and claims belonging
to or due to the insolvent debtor.30
While it was Atty. Gonzales who filed the Motion for Parties to Enter
Into Compromise Agreement, she did not sign or approve the Joint
Motion to Approve Agreement submitted by TIDCORP and BPI. In her
Manifestation and Comment (on Dacion En Pago by Compromise
Agreement with TRC and Joint Motion to Approve Agreement of BPI
and TIDCORP) there is no showing that Atty. Gonzales signified her
conformity to the waiver of confidentiality of petitioner’s bank deposits.
Atty. Gonzales stated thus:
13. COMPROMISE AGREEMENT OF TIDCORP AND BPI
The undersigned receiver is in conformity with the compromise
agreement of TIDCORP and BPI, attached hereto as Annex C, which
they submitted to this Honorable Court under the abovementioned
Joint Motion in so far as the sharing scheme of the sewing machine
inventories of Dona Adela is concerned. However, the undersigned
receiver has the following comments on the other provisions of the said
compromise agreement:
xxxx
13.2. The undersigned receiver reiterates that Dona Adela has no cash
or other assets to source payment for expenses and taxes provided
under no. 4 of the Joint Motion to Approve Agreement. In fact, except
for the amount of ₱5,000.00 she initially asked for administrative
expenses and the appraisal fees for the assets of Dona Adela
advanced by MR. EPIFANIO RAMOS, she has been shouldering all
the administrative expenses of this insolvency proceedings.
xxxx
21. As also mentioned under 13.2. above, Dona Adela has no cash to
source payment for the abovementioned administrative expenses and
receiver’s fees, and its assets, which should have been the source for
payment for administrative expenses and receiver’s fees before the
distribution to the creditors, have already been assigned to the
creditors by compromise agreement.
22. After considering its savings from foreclosure expenses, sheriff’s
fees and other related expenses had it pursued foreclosure
proceedings, it is just fair for the undersigned receiver to ask her due
for services rendered as officer of this Honorable Court from TRC who
benefitted the most from the insolvency proceedings.31 (Emphasis
ours)
Clearly, the waiver of confidentiality of petitioner’s bank deposits in the
BPI-TIDCORP Joint Motion to Approve Agreement lacks the required
written consent of petitioner and conformity of the receiver. We, thus,
hold that petitioner is not bound by the said provision.
It is basic in law that a compromise agreement, as a contract, is
binding only upon the parties to the compromise, and not upon non-
parties. This is the doctrine of relativity of contracts.32 The rule is based
on Article 1311 (1) of the Civil Code which provides that "contracts take
effect only between the parties, their assigns and heirs x x x."33 The
sound reason for the exclusion of non-parties to an agreement is the
absence of a vinculum or juridical tie which is the efficient cause for the
establishment of an obligation.34 Consistent with this principle, a
judgment based entirely on a compromise agreement is binding only
on the parties to the compromise the court approved, and not upon the
parties who did not take part in the compromise agreement and in the
proceedings leading to its submission and approval by the court.
Otherwise stated, a court judgment made solely on the basis of a
compromise agreement binds only the parties to the compromise, and
cannot bind a party litigant who did not take part in the compromise
agreement.35
WHEREFORE, premises considered, the petition is hereby
GRANTED. The second paragraph of the November 15, 2011 Decision
of the Regional Trial Court of Mandaluyong City, Branch 211, in SEC
Case No. MC06-103 is hereby MODIFIED to read as follows:
2. As regards the Joint Motion to Approve Agreement dated July 29,
2011, filed by creditors Trade and Investment Development
Corporation of the Philippines and the Bank of the Philippine Islands,
with the exception of paragraph 4 and paragraph 5 thereof pertaining
to Expenses and Taxes and Waiver of Confidentiality, the same is
likewise APPROVED, for the same is not contrary to law, morals, good
customs, public order or public policy, and the fact that the Court-
Appointed Receiver in her Reply filed on October 24, 2011 intimated
her conformity to said Joint Motion to Approve Agreement.
No costs.
SO ORDERED.
G.R. No. 135882            June 27, 2001
33
LOURDES T. MARQUEZ, in her capacity as Branch Manager, UNION
BANK OF THE PHILIPPINES, petitioner,
vs.
HONORABLE ANIANO A. DESIERTO, in his capacity as
OMBUDSMAN, ANGEL C. MAYOR-ALGO, JR., MARY ANN
CORPUZ-MANALAC AND JOSE T. DE JESUS, JR., in their capacity
as Chairman and Members of the Panel, respectively, respondents.
PARDO, J.:
In the petition at bar, petitioner seeks to --
a. Annul and set aside, for having been issued without or in
excess of jurisdiction or with grave abuse of discretion
amounting to lack of jurisdiction, respondents' order dated
September 7, 1998 in OMB-0-97-0411, In Re: Motion to Cite
Lourdes T. Marquez for indirect contempt, received by
counsel of September 9,1998, and their order dated October
14,1998, denying Marquez's motion for reconsideration
dated September 10, 1998, received by counsel on October
20, 1998.
b. Prohibit respondents from implementing their order dated
October 14, 1998, in proceeding with the hearing of the
motion to cite Marquez for indirect contempt, through the
issuance by this Court of a temporary restraining order
and/or preliminary injunction.1
The antecedent facts are as follows:
Sometime in May 1998, petitioner Marquez received an Order from the
Ombudsman Aniano A. Desierto dated April 29, 1998, to produce
several bank documents for purposes of inspection in camera relative
to various accounts maintained at Union Bank of the Philippines, Julia
Vargas Branch, where petitioner is the branch manager. The accounts
to be inspected are Account Nos. 011-37270, 240-020718, 245-30317-
3 and 245-30318-1, involved in a case pending with the Ombudsman
entitled, Fact-Finding and Intelligence Bureau (FFIB) v. Amado
Lagdameo, et al. The order further states:
"It is worth mentioning that the power of the Ombudsman to
investigate and to require the production and inspection of
records and documents is sanctioned by the 1987 Philippine
Constitution, Republic Act No. 6770, otherwise known as
Ombudsman Act of 1989 and under existing jurisprudence
on the matter. It must be noted that R.A. 6770 especially
Section 15 thereof provides, among others, the following
powers, functions and duties of the Ombudsman, to wit:
xxx
(8) Administer oaths, issue subpoena duces tecum and take
testimony in any investigation or inquiry, including the power
to examine and have access to banks accounts and records;
(9) Punish for contempt in accordance with the Rules of
Court and under the same procedure and with the same
penalties provided therein.
Clearly, the specific provision of R.A. 6770, a later
legislation, modifies the law on the Secrecy of Bank Deposits
(R.A.1405) and places the office of the Ombudsman in the
same footing as the courts of law in this regard."2
The basis of the Ombudsman in ordering an in camera inspection of
the accounts is a trail managers checks purchased by one George
Trivinio, a respondent in OMB-097-0411, pending with the office of the
Ombudsman.
It would appear that Mr. George Trivinio, purchased fifty one (51)
Managers Checks (MCs) for a total amount of P272.1 Million at
Traders Royal Bank, United Nations Avenue branch, on May 2 and 3,
1995. Out of the 51 MCs, eleven (11) MCs in the amount of P70.6
million, were deposited and credited to an account maintained at the
Union Bank, Julia Vargas Branch.3
On May 26, 1998, the FFIB panel met in conference with petitioner
Lourdes T. Marquez and Atty. Fe B. Macalino at the bank's main office,
Ayala Avenue, Makati City. The meeting was for the purpose of
allowing petitioner and Atty. Macalino to view the checks furnished by
Traders Royal Bank. After convincing themselves of the veracity of the
checks, Atty. Macalino advised Ms. Marquez to comply with the order
of the Ombudsman. Petitioner agreed to an in camera inspection set
on June 3, 1998.4
However, on June 4,1998, petitioner wrote the Ombudsman explaining
to him that the accounts in question cannot readily be identified and
asked for time to respond to the order. The reason forwarded by the
petitioner was that "despite diligent efforts and from the accounts
numbers presented, we can not identify these accounts since the
checks are issued in cash or bearer. We surmised that these accounts
have long been dormant, hence are not covered by the new account
number generated by the Union Bank system. We therefore have to
verify from the Interbank records archives for the whereabouts of these
accounts.5
The Ombudsman, responding to the request of the petitioner for time
to comply with the order, stated: "firstly, it must be emphasized that
Union Bank, Julia Vargas Branch was depositary bank of the subject
Traders Royal Bank Manager's Check (MCs), as shown at its dorsal
portion and as cleared by the Philippines Clearing House, not the
International Corporate Bank.
Notwithstanding the facts that the checks were payable to cash or
bearer, nonetheless, the name of the depositor(s) could easily be
identified since the account numbers x x x where said checks were
deposited are identified in the order.
Even assuming that the accounts xxx were already classified as
"dormant accounts," the bank is still required to preserve the records
pertaining to the accounts within a certain period of time as required by
existing banking rules and regulations.
And finally, the in camera inspection was already extended twice from
May 13, 1998 to June 3,1998 thereby giving the bank enough time
within which to sufficiently comply with the order."6
Thus, on June 16, 1998, the Ombudsman issued an order directing
petitioner to produce the bank documents relative to accounts in issue.
The order states:
Viewed from the foregoing, your persistent refusal to comply
with Ombudsman's order in unjustified, and is merely
intended to delay the investigation of the case. Your act
constitutes disobedience of or resistance to a lawful order
issued by this office and is punishable as Indirect Contempt
under Section 3(b) of R.A. 6770. The same may also
constitute obstruction in the lawful exercise of the functions
of the Ombudsman which is punishable under Section 36 of
R.A. 6770.7
On July 10,1998, petitioner together with Union Bank of the
Philippines, filed a petition for declaratory relief, prohibition and
injunctions8 with the Regional Trial Court, Makati City, against the
Ombudsman.
The petition was intended to clear the rights and duties of petitioner.
Thus, petitioner sought a declaration of her rights from the court due to
the clear conflict between RA No.6770, Section 15 and R.A. No. 1405,
Sections 2 and 3.
Petitioner prayed for a temporary restraining order (TRO) because the
Ombudsman and the other persons acting under his authority were
continuously harassing her to produce the bank documents relatives to
the accounts in question. Moreover, on June 16, 1998, the
Ombudsman issued another order stating that unless petitioner
appeared before the FFIB with the documents requested, petitioner
manager would be charged with indirect contempt and obstruction of
justice.
In the meantime,9 on July 14, 1998, the lower court denied petitioner's
prayer for a temporary restraining order and stated us:
"After hearing the arguments of the parties, the court finds
the application for a Temporary Restraining Order to be
without merit.
"Since the application prays for restraint of the respondent,
in the exercise of his contempt powers under Section 15(9)
in relation to paragraph (8) of RA. 6770, known as " The
Ombudsman Act of 1989", there is no great or irreparable
injury from which petitioners may suffer, if respondent is not
so restrained. Respondent should he decide to exercise his
contempt powers would still have to apply with the court. x x
x Anyone who, without lawful excuse x x x refuses to
produce documents for inspection, when thereunto lawfully
required shall be subject to discipline as in case of contempt
of Court and upon application of the individual or body
exercising the power in question shall be dealt with by the
Judge of the First Instance (now RTC) having jurisdiction of
the case in a manner provided by the law (section 580 of the
34
 Revised Administrative Code). Under the present
Constitution only judges may issue warrants, hence,
respondent should apply with the Court for the issuance of
the warrant needed for the enforcement of his contempt
orders. It is in these proceedings where petitioner may
question the propriety of respondent's exercise of his
contempt powers. Petitioners are not therefore left without
any adequate remedy.
"The questioned orders were issued with the investigation of
the case of Fact-Finding and Intelligence Bureau vs. Amado
Lagdameo, et. al., OMB-0-97-0411, for violation of RA. 3019.
Since petitioner failed to show prima facie evidence that the
subject matter of the investigation is outside the jurisdiction
of the Office of the Ombudsman, no writ of injunction may be
issued by this Court to delay this investigation pursuant to
section 14 of Ombudsman Act of 1989."10
On July 20,1998, petitioner filed a motion for reconsideration based on
the following grounds:
a. Petitioners' application for filed Temporary Restraining
Order is not only to restrain the Ombudsman from exercising
his contempt powers, but to stop him from implementing his
Orders dated April 29, 1998 and June 16, 1998: and
b. The subject matter of the investigation being conducted by
the Ombudsman at petitioners' premises is outside his
jurisdiction.11
On July 23, 1998, the Ombudsman filed a motion to dismiss the
petition for declaratory relief12 on the ground that the Regional Trial
Court has no jurisdiction to hear a petition for relief from the findings
and orders of the Ombudsman, citing R.A. No. 6770, Sections 14 and
27. On August 7, 1998, the Ombudsman filed an opposition to
petitioner's motion for reconsideration dated July 20, 1998.13
On August 19,1998, the lower court denied petitioner's motion for
reconsideration,14 and also the Ombudsman's motion to dismiss. 15
On August 21, 1998, petitioner received a copy of the motion to cite
her for contempt, filed with the Office of the Ombudsman by Agapito B.
Rosales, Director, Fact Finding and Intelligence Bureau (FFIB).16
On August 31, 1998, petitioner filed with the Ombudsman an
opposition to the motion to cite her in contempt on the ground that the
filing thereof was premature due to the petition pending in the lower
court.17 Petitioner likewise reiterated that she had no intention to
disobey the orders of the Ombudsman. However, she wanted to be
clarified as to how she would comply with the orders without her
breaking any law, particularly RA. No. 1405.18
Respondent Ombudsman panel set the incident for hearing on
September 7, 1998.19 After hearing, the panel issued an order dated
September 7, 1998, ordering petitioner and counsel to appear for a
continuation of the hearing of the contempt charges against her.20
On September 10, 1998, petitioner filed with the Ombudsman a motion
for reconsideration of the above order.21 Her motion was premised on
the fact that there was a pending case with the Regional Trial Court,
Makati City,22 which would determine whether obeying the orders of the
Ombudsman to produce bank documents would not violate any law.
The FFIB opposed the motion,23 and on October 14, 1998, the
Ombudsman denied the motion by order the dispositive portion of
which reads:
"Wherefore, respondent Lourdes T. Marquez's motion for
reconsideration is hereby DENIED, for lack of merit. Let the
hearing of the motion of the Fact Finding Intelligence Bureau
(FFIB) to cite her for indirect contempt to be intransferrably
set to 29 October 1998 at 2:00 o'clock p.m. at which date
and time she should appear personally to submit her
additional evidence. Failure to do so shall be deemed a
waiver thereof."24
Hence, the present petition.25
The issue is whether petitioner may be cited for indirect contempt for
her failure to produce the documents requested by the Ombudsman.
And whether the order of the Ombudsman to have an in
camera inspection of the questioned account is allowed as an
exception to the law on secrecy of bank deposits (R.A. No.1405).
An examination of the secrecy of bank deposits 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.26
The order of the Ombudsman to produce for in camera inspection the
subject accounts with the Union Bank of the Philippines, Julia Vargas
Branch, is based on a pending investigation at the Office of the
Ombudsman against Amado Lagdameo, et. al. for violation of R.A. No.
3019, Sec. 3 (e) and (g) relative to the Joint Venture Agreement
between the Public Estates Authority and AMARI.
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.
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".27
In the case at bar, there is yet no pending litigation before any court of
competent authority. What is existing is an investigation by the Office
of the Ombudsman. In short, what the office of the ombudsman would
wish to do is to fish for additional evidence to formally charge Amado
Lagdameo, et. al., with the Sandiganbayan. Clearly, there was no
pending case in court which would warrant the opening of the bank
account for inspection.
Zone of privacy are recognized and protected in our laws. 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 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, 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.28
IN VIEW WHEREOF, we GRANT the petition. We order the
Ombudsman to cease and desist from requiring Union Bank Manager
Lourdes T. Marquez, or anyone in her place to comply with the order
dated October 14,1998, and similar orders. No costs.
35
SO ORDERED . 1âwphi1.nêt
G.R. No. 134699. December 23, 1999.]
UNION BANK OF THE PHILIPPINES, Petitioner, v. COURT OF
APPEALS and ALLIED BANK CORPORATION, Respondents.
DECISION
KAPUNAN, J.:
Section 2 of the Law on Secrecy of Bank Deposits, 1 as amended,
declares bank deposits to be "absolutely confidential"
except:chanrobles virtual lawlibrary
(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.
Whether or not the case at bar falls under the last exception is the
issue in the instant petition.
The facts are not disputed.
On March 21, 1990, a check (Check No. 11669677) dated March 31,
1990 in the amount of 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. On May 21, 1990, petitioner sent the check
for clearing through the Philippine Clearing House Corporation
(PCHC). When the check was presented for payment, a clearing
discrepancy was committed by Union Bank’s clearing staff when the
amount of One Million Pesos (P1,000,000.00) was erroneously "under-
encoded" to One Thousand Pesos (P1,000.00) only.
Petitioner only discovered the under-encoding almost a year later.
Thus, on May 7, 1991, Union Bank notified Allied Bank of the
discrepancy by way of a charge slip for Nine Hundred Ninety-Nine
Thousand Pesos (P999,000.00) for automatic debiting against 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."cralaw virtua1aw library
Subsequently, Union Bank filed a complaint against Allied Bank before
the PCHC Arbitration Committee (Arbicom), praying that:chanrob1es
virtual 1aw library
. . . judgment be rendered in favor of plaintiff against defendant
sentencing it to pay plaintiff:chanrob1es virtual 1aw library
1. The sum of NINE HUNDRED NINETY-NINE THOUSAND PESOS
(P999,000.00);
2. The sum of THREE HUNDRED SIXTY-ONE AND FOUR HUNDRED
EIGHTY AND 20/XX P361,480.20 as of October 9, 1991 representing
reimbursements for opportunity losses and interest at the rate of 24%
per annum arising from actual losses sustained by plaintiff as of May
21, 1990;
3. The amount for attorney’s fees at the rate of 25% of any and all
sums due;
4. Penalty Charges at the rate of 1/8 of 1% of P999,000.00 from May
22, 1990 until payment thereof.
5. Exemplary and punitive damages against the defendant in such
amounts as may be awarded by this Tribunal in order to serve a lesson
to all member-Banks under the PCHC umbrella to strictly comply with
the provisions thereof;
6. The costs of suit which includes filing fee in addition to litigation
expenses which shall be proven in the course of arbitration.
7. Such other damages that may be awarded by this Tribunal. 2
Thereafter, Union Bank filed in the Regional Trial Court (RTC) of
Makati a petition for the examination of Account No. 111-01854-8.
Judgment on the arbitration case was held in abeyance pending the
resolution of said petition.
Upon motion of private respondent, the RTC dismissed Union Bank’s
petition. The RTC held that:chanrob1es virtual 1aw library
The case of the herein petitioner does not fall under any of the
foregoing exceptions to warrant a disclosure of or inquiry into the
ledgers/books of account of Allied Checking Account No. 111-01854-8.
Needless to say, 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. 3
The Court of Appeals affirmed the dismissal of the petition, ruling that
the case was not one where the money deposited is the subject matter
of the litigation.chanrobles law library
Petitioner collecting bank itself in its complaint filed before the PCHC,
Arbicom Case No. 91-068, clearly stated that its "cause of action
against defendant arose from defendant’s deliberate violation of the
provisions of the PCHC Rule Book, Sec. 25.3, specifically on Under-
Encoding of check amounting to P1,000,000.00 drawn upon
defendant’s Tondo Branch which was deposited with plaintiff herein on
May 20, 1990, . . . which was erroneously encoded at P1,000.00 which
defendant as the receiving bank thereof, never called nor notified the
plaintiff of the error committed thus causing actual losses to plaintiff in
the principal amount of P999,000.00 exclusive of opportunity losses
and interest."cralaw virtua1aw library
Furthermore, a reading of petitioner collecting bank’s complaint in the
Arbicom case shows that its thrust is directed against respondent
drawee bank’s alleged failure to inform the former of the under-
encoding when Sec. 25.3 of the PCHC Rule Book is clear that it is
receiving bank’s (respondent drawee bank herein) duty and obligation
to notify the erring bank (petitioner collecting bank herein) of any such
under-encoding of any check amount submitted for clearing within the
member banks of the PCHC not later than 10:00 a.m. of the following
clearing day and prays that respondent drawee bank be held liable to
petitioner collecting bank for penalties in view of the latter’s violation of
the notification requirement.
Prescinding from the above, we see no cogent reason to depart from
the time-honored general banking rule that all deposits of whatever
nature with banks are considered of absolutely confidential nature and
may not be examined, inquired or looked into by any person,
government official, bureau or office and corollarily, that it is unlawful
for any official or employee of a bank to disclose to any person any
information concerning deposits.
Nowhere in petitioner collecting bank’s complaint filed before the
PCHC does it mention of the amount it seeks to recover from Account
No. 0111-018548 itself, but speaks of P999,000.00 only as an incident
of its alleged opportunity losses and interest as a result of its own
employee’s admitted error in encoding the check.
The money deposited in Account No. 0111-018548 is not the subject
matter of the litigation in the Arbicom case for as clearly stated by
petitioner itself, it is the alleged violation by respondent of the rules and
regulations of the PCHC. 4
Union Bank is now before this Court insisting that the money deposited
in Account No. 0111-01854-8 is the subject matter of the litigation.
Petitioner cites the case of Mathay v. Consolidated Bank and Trust
Company, 5 where we defined "subject matter of the action,"
thus:chanrob1es virtual 1aw library
. . . By the phrase "subject matter of the action" is meant "the physical
facts, the things real or personal, the money, lands, chattels, and the
like, in relation to which the suit is prosecuted, and not the delict or
wrong committed by the defendant."cralaw virtua1aw library
Petitioner contends that the Court of Appeals confuses the "cause of
action" with the "subject of the action." In Yusingco v. Ong Hing Lian, 6
36
petitioner points out, this Court distinguished the two concepts.
. . . "The cause of action is the legal wrong threatened or committed,
while the object of the action is to prevent or redress the wrong by
obtaining some legal relief; but the subject of the action is neither of
these since it is not the wrong or the relief demanded, the subject of
the action is the matter or thing with respect to which the controversy
has arisen, concerning which the wrong has been done, and this
ordinarily is the property, or the contract and its subject matter, or the
thing in dispute."cralaw virtua1aw library
The argument is well taken. We note with approval the difference
between the "subject of the action" from the "cause of action." We also
find petitioner’s definition of the phrase "subject matter of the action" is
consistent with the term "subject matter of the litigation," as the latter is
used in the Bank Deposits Secrecy Act.chanrobles virtual lawlibrary
In Mellon Bank, N .A. v. Magsino, 7 where the petitioner bank
inadvertently caused the transfer of the amount of US$1,000,000.00
instead of only US$1,000.00, the Court sanctioned the examination of
the bank accounts where part of the money was subsequently caused
to be deposited:chanrob1es virtual 1aw library
. . . Section 2 of [Republic Act No. 1405] 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.
Clearly, Mellon Bank involved a case where the money deposited was
the subject matter of the litigation since the money so deposited was
the very thing in dispute. This, however, is not the case here.
Petitioner’s theory is that private respondent Allied Bank should have
informed petitioner of the under-encoding pursuant to the provisions of
Section 25.3.1 of the PCHC Handbook, which states:chanrob1es
virtual 1aw library
25.3.1. The Receiving should inform the erring Bank about the under-
encoding of amount not later than 10:00 A.M. of the following clearing
day.
Failing in that duty, petitioner holds private respondent directly liable
for the P999,000.00 and other damages. It does not appear that
petitioner is seeking reimbursement from the account of the drawer.
This much is evident in petitioner’s complaint before the Arbicom.
. . . plaintiff’s cause of action against defendant arose from defendant’s
deliberate violation of the provisions of the PCHC Rule Book, Sec.
25.3, specifically on Under-Encoding of check amounting to
P1,000,000.00 drawn upon defendant’s Tondo Branch which was
deposited with plaintiff herein sometime on May 20, 1990. From the
check amount of P1,000,000.00, it was instead erroneously encoded at
P1,000.00 which defendant as the receiving bank thereof, never called
nor notified the plaintiff of the error committed thus causing actual
losses to plaintiff in the principal amount of P999.000.00 exclusive of
opportunity losses and interest thereon whatsoever. . . . 8
Petitioner even requested private respondent’s Branch Manager for
reimbursement from private respondent’s account through the
automatic debiting system.
2.7. On May 6, 1991, plaintiff’s Senior Vice-President, Ms. ERLINDA V.
VALENTON wrote defendant’s Tondo Branch Manager, Mr.
RODOLFO JOSE on the incident and requested assistance in
facilitating correction of the erroneous coding with request for
reimbursement thru the industry’s automatic debiting of defendant’s
account . . . 9
Further, petitioner rejected private respondent’s proposal that the
drawer issue postdated checks in favor of petitioner since the identity
and credit standing of the depositor were unknown to petitioner.
2.9. On May 23, 1991, defendant’s Branch Manager, the same Mr.
Rodolfo Jose wrote plaintiff’s Ms. Erlinda Valenton again insisting on
the execution of the Quitclaim and Release in favor of defendant as the
Branch has endeavored to negotiate with its client for the collection of
such amount. Upon a reading of the terms of the Quitclaim and
Release being proposed by defendant, the unmistakable fact lies that
again defendant attempts for the second time to take advantage of
plaintiff’s plight by indicating that the terms of the payment of the
principal amount of P999,000.00 is by way of several personal
postdated checks up to March 21, 1992 from a person whose identity
is not even disclosed to plaintiff . . .
To an ordinary person aggrieved already by having been taken
advantage of for 620 days more or less, the proposal of defendant
could not be acceptable for the reason that aside from the interest lost
already for the use of its money by another party, no assurance is
made as to the actual collection thereof from a party whose credit
standing, the recipient is not at all aware of . . . 10
Petitioner also believed that it had no privity with the
depositor:chanrob1es virtual 1aw library
2.12. Plaintiff then replied to defendant’s letter by requesting that in lieu
of the post-dated checks from defendant’s client with whom plaintiff
has no privity whatsoever, if the defendant could tender the full
payment of the amount of P999,000.00 in defendant’s own Manager’s
check and that plaintiff is willing to forego its further claims for interest
and losses for a period of 620 days, more or less . . . 11
The following argument adduced by petitioner in the Arbicom case
leaves no doubt that petitioner is holding private respondent itself liable
for the discrepancy:chanrobles.com : virtual law library
Defendant by its acceptance thru the clearing exchange of the check
deposit from its client cannot be said to be free from any liability for the
unpaid portion of the check amount considering that defendant as the
drawee bank, is remiss in its duty of verifying possible technicalities on
the face of the check.
Since the provisions of the PCHC Rule Book has so imposed upon the
defendant being the Receiving Bank of a discrepant check item to give
that timely notification and defendant failing to comply with such
requirement, then it can be said that defendant is guilty of negligence.
He who is guilty of negligence in the performance of its [sic] duty is
liable for damages. (Art. 1170, New Civil Code.)
Art. 1172 of the Civil Code provides that:jgc:chanrobles.com.ph
"Responsibility arising from negligence in the performance of every
kind of obligation is also demandable, but such liability may be
regulated by the courts, according to the circumstances. [" ] 12
Petitioner points to its prayer in its complaint to show that it sought
reimbursement from the drawer’s account. The prayer, however, does
not specifically state that it was seeking recovery of the amount from
the depositor’s account. Petitioner merely asked that "judgment be
rendered in favor of plaintiff against defendant sentencing it to pay
plaintiff : 1. The sum of NINE HUNDRED NINETY-NINE THOUSAND
PESOS (P999,000.00) . . ." 13
On the other hand, the petition before this Court reveals that the true
purpose for the examination is to aid petitioner in proving the extent of
Allied Bank’s liability:chanrob1es virtual 1aw library
Hence, the amount actually debited from the subject account becomes
very material and germane to petitioner’s claim for reimbursement as it
is only upon examination of subject account can it be proved that
indeed a discrepancy in the amount credited to petitioner was
committed, thereby, rendering respondent Allied Bank liable to
petitioner for the deficiency. The money deposited in aforesaid account
is undeniably the subject matter of the litigation since the issue in the
Arbicom case is whether respondent Bank should be held liable to
petitioner for reimbursement of the amount of money constituting the
difference between the amount of the check and the amount credited
to petitioner, that is, P999,000.00, which has remained deposited in
aforesaid account.
On top of the allegations in the Complaint, which can be verified only
by examining the subject bank account, the defense of respondent
Allied Bank that the reimbursement cannot be made since client’s
account is not sufficiently funded at the time petitioner sent its Charge
Slip, bolsters petitioner’s contention that the money in subject account
is the very subject matter of the pending Arbicom case.
Indeed, to prove the allegations in its Complaint before the PCHC
Arbitration Committee, and to rebut private respondent’s defense on
the matter, petitioner needs to determine:chanrob1es virtual 1aw
library
1. how long respondent Allied Bank had wilfully or negligently allowed
the difference of P999,000.00 to be maintained in the subject account
without remitting the same to petitioner;
2. whether indeed the subject account was no longer sufficiently
funded when petitioner sent its charge slip for reimbursement to
respondent bank on May 7, 1991; and
3. whether or not respondent Allied Bank’s actuations in refusing to
immediately reimburse the discrepancy was attended by good or bad
faith.chanrobles virtual lawlibrary
In other words, only a disclosure of the pertinent details and
information relating to the transactions involving subject account will
enable petitioner to prove its allegations in the pending Arbicom case. .
. 14
In short, petitioner is fishing for information so it can determine the
culpability of private respondent and the amount of damages it can
37
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.
WHEREFORE, the petition is DENIED.
SO ORDERED.chanroblesvirtualawlibrary
G.R. No. 168644               February 16, 2010
BSB GROUP, INC., represented by its President, Mr. RICARDO
BANGAYAN, Petitioner,
vs.
SALLY GO a.k.a. SALLY GO-BANGAYAN, Respondent.
DECISION
PERALTA, J.:
This is a Petition for Review under Rule 45 of the Rules of Court
assailing the Decision of the Court of Appeals in CA-G.R. SP No.
876001 dated April 20, 2005, which reversed and set aside the
September 13, 20042 and November 5, 20043 Orders issued by the
Regional Trial Court of Manila, Branch 364 in Criminal Case No. 02-
202158 for qualified theft. The said orders, in turn, respectively denied
the motion filed by herein respondent Sally Go for the suppression of
the testimonial and documentary evidence relative to a Security Bank
account, and denied reconsideration.
The basic antecedents are no longer disputed.
Petitioner, the BSB Group, Inc., is a duly organized domestic
corporation presided by its herein representative, Ricardo Bangayan
(Bangayan). Respondent Sally Go, alternatively referred to as Sally Sia
Go and Sally Go-Bangayan, is Bangayan’s wife, who was employed in
the company as a cashier, and was engaged, among others, to receive
and account for the payments made by the various customers of the
company.
In 2002, Bangayan filed with the Manila Prosecutor’s Office a
complaint for estafa and/or qualified theft5 against respondent, alleging
that several checks6 representing the aggregate amount of
₱1,534,135.50 issued by the company’s customers in payment of their
obligation were, instead of being turned over to the company’s coffers,
indorsed by respondent who deposited the same to her personal
banking account maintained at Security Bank and Trust Company
(Security Bank) in Divisoria, Manila Branch.7 Upon a finding that the
evidence adduced was uncontroverted, the assistant city prosecutor
recommended the filing of the Information for qualified theft against
respondent.8
Accordingly, respondent was charged before the Regional Trial Court
of Manila, Branch 36, in an Information, the inculpatory portion of
which reads:
That in or about or sometime during the period comprised (sic)
between January 1988 [and] October 1989, inclusive, in the City of
Manila, Philippines, the said accused did then and there willfully,
unlawfully and feloniously with intent [to] gain and without the
knowledge and consent of the owner thereof, take, steal and carry
away cash money in the total amount of ₱1,534,135.50 belonging to
BSB GROUP OF COMPANIES represented by RICARDO
BANGAYAN, to the damage and prejudice of said owner in the
aforesaid amount of ₱1,534,135.50, Philippine currency.
That in the commission of the said offense, said accused acted with
grave abuse of confidence, being then employed as cashier by said
complainant at the time of the commission of the said offense and as
such she was entrusted with the said amount of money.
Contrary to law.9
Respondent entered a negative plea when arraigned.10 The trial
ensued. On the premise that respondent had allegedly encashed the
subject checks and deposited the corresponding amounts thereof to
her personal banking account, the prosecution moved for the issuance
of subpoena duces tecum /ad testificandum against the respective
managers or records custodians of Security Bank’s Divisoria Branch,
as well as of the Asian Savings Bank (now Metropolitan Bank & Trust
Co. [Metrobank]), in Jose Abad Santos, Tondo, Manila Branch.11 The
trial court granted the motion and issued the corresponding
subpoena.12
Respondent filed a motion to quash the subpoena dated November 4,
2003, addressed to Metrobank, noting to the court that in the
complaint-affidavit filed with the prosecutor, there was no mention
made of the said bank account, to which respondent, in addition to the
Security Bank account identified as Account No. 01-14-006, allegedly
deposited the proceeds of the supposed checks. Interestingly, while
respondent characterized the Metrobank account as irrelevant to the
case, she, in the same motion, nevertheless waived her objection to
the irrelevancy of the Security Bank account mentioned in the same
complaint-affidavit, inasmuch as she was admittedly willing to address
the allegations with respect thereto.13
Petitioner, opposing respondent’s move, argued for the relevancy of
the Metrobank account on the ground that the complaint-affidavit
showed that there were two checks which respondent allegedly
deposited in an account with the said bank.14 To this, respondent filed
a supplemental motion to quash, invoking the absolutely confidential
nature of the Metrobank account under the provisions of Republic Act
(R.A.) No. 1405.15 The trial court did not sustain respondent; hence, it
denied the motion to quash for lack of merit.16
Meanwhile, the prosecution was able to present in court the testimony
of Elenita Marasigan (Marasigan), the representative of Security Bank.
In a nutshell, Marasigan’s testimony sought to prove that between
1988 and 1989, respondent, while engaged as cashier at the BSB
Group, Inc., was able to run away with the checks issued to the
company by its customers, endorse the same, and credit the
corresponding amounts to her personal deposit account with Security
Bank. In the course of the testimony, the subject checks were
presented to Marasigan for identification and marking as the same
checks received by respondent, endorsed, and then deposited in her
personal account with Security Bank.17 But before the testimony could
be completed, respondent filed a Motion to Suppress,18 seeking the
exclusion of Marasigan’s testimony and accompanying documents
thus far received, bearing on the subject Security Bank account. This
time respondent invokes, in addition to irrelevancy, the privilege of
confidentiality under R.A. No. 1405.
The trial court, nevertheless, denied the motion in its September 13,
2004 Order.19 A motion for reconsideration was subsequently filed, but
it was also denied in the Order dated November 5, 2004.20 These two
orders are the subject of the instant case.
Aggrieved, and believing that the trial court gravely abused its
discretion in acting the way it did, respondent elevated the matter to
the Court of Appeals via a petition for certiorari under Rule 65. Finding
merit in the petition, the Court of Appeals reversed and set aside the
assailed orders of the trial court in its April 20, 2005 Decision.21 The
decision reads:
WHEREFORE, the petition is hereby GRANTED. The assailed orders
dated September 13, 2004 and November 5, 2004 are REVERSED
and SET ASIDE. The testimony of the SBTC representative is ordered
stricken from the records.
SO ORDERED.22
With the denial of its motion for reconsideration,23 petitioner is now
before the Court pleading the same issues as those raised before the
lower courts.
In this Petition24 under Rule 45, petitioner averred in the main that the
Court of Appeals had seriously erred in reversing the assailed orders
of the trial court, and in effect striking out Marasigan’s testimony
dealing with respondent’s deposit account with Security Bank.25 It
asserted that apart from the fact that the said evidence had a direct
relation to the subject matter of the case for qualified theft and, hence,
brings the case under one of the exceptions to the coverage of
confidentiality under R.A. 1405.26 Petitioner believed that what
constituted the subject matter in litigation was to be determined by the
allegations in the information and, in this respect, it alluded to the
assailed November 5, 2004 Order of the trial court, which declared to
be erroneous the limitation of the present inquiry merely to what was
contained in the information.27
38
For her part, respondent claimed that the money represented by the
Security Bank account was neither relevant nor material to the case,
because nothing in the criminal information suggested that the money
therein deposited was the subject matter of the case. She invited
particular attention to that portion of the criminal Information which
averred that she has stolen and carried away cash money in the total
amount of ₱1,534,135.50. She advanced the notion that the term "cash
money" stated in the Information was not synonymous with the checks
she was purported to have stolen from petitioner and deposited in her
personal banking account. Thus, the checks which the prosecution had
Marasigan identify, as well as the testimony itself of Marasigan, should
be suppressed by the trial court at least for violating respondent’s right
to due process.28 More in point, respondent opined that admitting the
testimony of Marasigan, as well as the evidence pertaining to the
Security Bank account, would violate the secrecy rule under R.A. No.
1405.29
In its reply, petitioner asserted the sufficiency of the allegations in the
criminal Information for qualified theft, as the same has sufficiently
alleged the elements of the offense charged. It posits that through
Marasigan’s testimony, the Court would be able to establish that the
checks involved, copies of which were attached to the complaint-
affidavit filed with the prosecutor, had indeed been received by
respondent as cashier, but were, thereafter, deposited by the latter to
her personal account with Security Bank. Petitioner held that the
checks represented the cash money stolen by respondent and, hence,
the subject matter in this case is not only the cash amount represented
by the checks supposedly stolen by respondent, but also the checks
themselves.30
We derive from the conflicting advocacies of the parties that the issue
for resolution is whether the testimony of Marasigan and the
accompanying documents are irrelevant to the case, and whether they
are also violative of the absolutely confidential nature of bank deposits
and, hence, excluded by operation of R.A. No. 1405. The question of
admissibility of the evidence thus comes to the fore. And the Court,
after deliberative estimation, finds the subject evidence to be indeed
inadmissible.
Prefatorily, 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. 31 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.32 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.33 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
334 Rule 128 of the Rules of Court.
Thus, whether these pieces of evidence sought to be suppressed in
this case  the testimony of Marasigan, as well as the checks
purported to have been stolen and deposited in respondent’s Security
Bank account  are relevant, is to be addressed by considering
whether they have such direct relation to the fact in issue as to induce
belief in its existence or non-existence; or whether they relate
collaterally to a fact from which, by process of logic, an inference may
be made as to the existence or non-existence of the fact in issue.35
The fact in issue appears to be that respondent has taken away cash
in the amount of ₱1,534,135.50 from the coffers of petitioner. In
support of this allegation, petitioner seeks to establish the existence of
the elemental act of taking by adducing evidence that respondent, at
several times between 1988 and 1989, deposited some of its checks to
her personal account with Security Bank. Petitioner addresses the
incongruence between the allegation of theft of cash in the Information,
on the one hand, and the evidence that respondent had first stolen the
checks and deposited the same in her banking account, on the other
hand, by impressing upon the Court that there obtains no difference
between cash and check for purposes of prosecuting respondent for
theft of cash. Petitioner is mistaken.
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.36 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.
Moreover, that there is no difference between cash and check is true in
other instances. In estafa by conversion, for instance, whether the
thing converted is cash or check, is immaterial in relation to the formal
allegation in an information for that offense; a check, after all, while not
regarded as legal tender, is normally accepted under commercial
usage as a substitute for cash, and the credit it represents 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.37 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.38
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.
We now address the issue of whether the admission of Marasigan’s
testimony on the particulars of respondent’s account with Security
Bank, as well as of the corresponding evidence of the checks allegedly
deposited in said account, constitutes an unallowable inquiry under
R.A. 1405.
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.
1405,39 otherwise known as the Bank Secrecy Act of 1955. 40
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.41 Owing
to this piece of legislation, the confidentiality of bank deposits remains
to be a basic state policy in the Philippines.42 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. It declares:
Section 2. 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.1avvphi1
Subsequent statutory enactments43 have expanded the list of
exceptions to this policy yet the secrecy of bank deposits still lies as
the general rule, falling as it does within the legally recognized zones
of privacy.44 There is, in fact, much disfavor to construing these primary
and supplemental exceptions in a manner that would authorize
unbridled discretion, whether governmental or otherwise, in utilizing
these exceptions as authority for unwarranted inquiry into bank
accounts. It is then perceivable that the present legal order is obliged
to conserve the absolutely confidential nature of bank deposits.45
The measure of protection afforded by the law has been explained in
China Banking Corporation v. Ortega.46 That case principally
addressed the issue of whether the prohibition against an examination
of bank deposits precludes garnishment in satisfaction of a judgment.
Ruling on that issue in the negative, the Court found guidance in the
relevant portions of the legislative deliberations on Senate Bill No. 351
and House Bill No. 3977, which later became the Bank Secrecy Act,
and it held that the absolute confidentiality rule in R.A. No. 1405
actually aims at protection from unwarranted inquiry or investigation if
the purpose of such inquiry or investigation is merely to determine the
existence and nature, as well as the amount of the deposit in any given
bank account. Thus,
x x x The lower court did not order an examination of or inquiry into the
deposit of B&B Forest Development Corporation, as contemplated in
39
the law. It merely required Tan Kim Liong to inform the court whether
or not the defendant B&B Forest Development Corporation had a
deposit in the China Banking Corporation 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. It will be noted from
the discussion of the conference committee report on Senate Bill No.
351 and House Bill No. 3977which later became Republic Act No.
1405, that it was not the intention of the lawmakers to place banks
deposits beyond the reach of execution to satisfy a final judgmentThus:
x x x Mr. Marcos: Now, for purposes of the record, I should like the
Chairman of the Committee on Ways and Means to clarify this further.
Suppose an individual has a tax case. He is being held liable by the
Bureau of Internal Revenue [(BIR)] or, say, ₱1,000.00 worth of tax
liability, and because of this the deposit of this individual [has been]
attached by the [BIR].
Mr. Ramos: The attachment will only apply after the court has
pronounced sentence declaring the liability of such person. But where
the primary aim is to determine whether he has a bank deposit in order
to bring about a proper assessment by the [BIR], such inquiry is not
allowed by this proposed law.
Mr. Marcos: But under our rules of procedure and under the Civil
Code, the attachment or garnishment of money deposited is allowed.
Let us assume for instance that there is a preliminary attachment
which is for garnishment or for holding liable all moneys deposited
belonging to a certain individual, but such attachment or garnishment
will bring out into the open the value of such deposit. Is that prohibited
by... the law?
Mr. Ramos: It is only prohibited to the extent that the inquiry... is made
only for the purpose of satisfying a tax liability already declared for the
protection of the right in favor of the government; but when the object
is merely to inquire whether he has a deposit or not for purposes of
taxation, then this is fully covered by the law. x x x
Mr. Marcos: The law prohibits a mere investigation into the existence
and the amount of the deposit.
Mr. Ramos: Into the very nature of such deposit. x x x47
In taking exclusion from the coverage of the confidentiality rule,
petitioner in the instant case posits that the account maintained by
respondent with Security Bank contains the proceeds of the checks
that she has fraudulently appropriated to herself and, thus, falls under
one of the exceptions in Section 2 of R.A. No. 1405  that the money
kept in said account is the subject matter in litigation. To highlight this
thesis, petitioner avers, citing Mathay v. Consolidated Bank and Trust
Co.,48 that the subject matter of the action refers to the physical facts;
the things real or personal; the money, lands, chattels and the like, in
relation to which the suit is prosecuted, which in the instant case
should refer to the money deposited in the Security Bank account.49 On
the surface, however, it seems that petitioner’s theory is valid to a
point, yet a deeper treatment tends to show that it has argued quite off-
tangentially. This, because, while Mathay did explain what the subject
matter of an action is, it nevertheless did so only to determine whether
the class suit in that case was properly brought to the court.
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,50 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.51 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 ₱1,534,135.50. The said Information makes no
factual allegation that in some material way involves the checks
subject of the testimonial and documentary evidence sought to be
suppressed. Neither do the allegations in said Information make
mention of the supposed bank account in which the funds represented
by the checks have allegedly been kept.
In other words, it can hardly be inferred from the indictment itself that
the Security Bank account is the ostensible subject of the prosecution’s
inquiry. Without needlessly expanding the scope of what is plainly
alleged in the Information, the subject matter of the action in this case
is the money amounting to ₱1,534,135.50 alleged to have been stolen
by respondent, and not the money equivalent of the checks which are
sought to be admitted in evidence. Thus, it is that, which the
prosecution is bound to prove with its evidence, and no other.
It comes clear that the admission of testimonial and documentary
evidence relative to respondent’s Security Bank account serves no
other purpose than to establish the existence of such account, its
nature and the amount kept in it. It constitutes an attempt by the
prosecution at an impermissible inquiry into a bank deposit account the
privacy and confidentiality of which is protected by law. On this score
alone, the objection posed by respondent in her motion to suppress
should have indeed put an end to the controversy at the very first
instance it was raised before the trial court.
In sum, we hold that the testimony of Marasigan on the particulars of
respondent’s supposed bank account with Security Bank and the
documentary evidence represented by the checks adduced in support
thereof, are not only incompetent for being excluded by operation of
R.A. No. 1405. They are likewise irrelevant to the case, inasmuch as
they do not appear to have any logical and reasonable connection to
the prosecution of respondent for qualified theft. We find full merit in
and affirm respondent’s objection to the evidence of the prosecution.
The Court of Appeals was, therefore, correct in reversing the assailed
orders of the trial court.
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.52 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.53
WHEREFORE, the petition is DENIED. The Decision of the Court of
Appeals in CA-G.R. SP No. 87600 dated April 20, 2005, reversing the
September 13, 2004 and November 5, 2004 Orders of the Regional
Trial Court of Manila, Branch 36 in Criminal Case No. 02-202158, is
AFFIRMED.
SO ORDERED.
G.R. No. L-18343             September 30, 1965
PHILIPPINE NATIONAL BANK and EDUARDO Z. ROMUALDEZ, in
his capacity as President of the Philippine National
Bank, plaintiffs-appellants,
vs.
EMILIO A. GANCAYCO and FLORENTINO FLOR, Special
Prosecutors of the Dept. of Justice, defendants-appellees.
Ramon B. de los Reyes and Zoilo P. Perlas for plaintiffs-appellants.
Villamor & Gancayco for defendants-appellees.
REGALA, J.:
The principal question presented in this case is whether a bank can be
compelled to disclose the records of accounts of a depositor who is
under investigation for unexplained wealth.
This question arose when defendants Emilio A. Gancayco and
Florentino Flor, as special prosecutors of the Department of Justice,
required the plaintiff Philippine National Bank to produce at a hearing
to be held at 10 a.m. on February 20, 1961 the records of the bank
deposits of Ernesto T. Jimenez, former administrator of the Agricultural
Credit and Cooperative Administration, who was then under
investigation for unexplained wealth. In declining to reveal its records,
the plaintiff bank invoked Republic Act No. 1405 which provides:
SEC. 2. 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.
40
The plaintiff bank also called attention to the penal provision of the law
which reads:
SEC. 5. Any 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.
On the other hand, the defendants cited the Anti-Graft and Corrupt
Practices Act (Republic Act No. 3019) in support of their claim of
authority and demanded anew that plaintiff Eduardo Z. Romualdez, as
bank president, produce the records or he would be prosecuted for
contempt. The law invoked by the defendant states:
SEC. 8. Dismissal due to unexplained wealth. — If in
accordance with the provisions of Republic Act Numbered
One thousand three hundred seventy-nine, a public official
has been found to have acquired during his incumbency,
whether in his name or in the name of other persons, an
amount of property and/or money manifestly out of
proportion to his salary and to his other lawful income, that
fact shall be a ground for dismissal or removal. Properties in
the name of the spouse and unmarried children of such
public official may be taken into consideration, when their
acquisition through legitimate means cannot be satisfactorily
shown. Bank deposits shall be taken into consideration in
the enforcement of this section, notwithstanding any
provision of law to the contrary.
Because of the threat of prosecution, plaintiffs filed an action for
declaratory judgment in the Manila Court of First Instance. After trial,
during which Senator Arturo M. Tolentino, author of the Anti-Graft and
Corrupt Practices Act testified, the court rendered judgment, sustaining
the power of the defendants to compel the disclosure of bank accounts
of ACCFA Administrator Jimenez. The court said that, by enacting
section 8 of, the Anti-Graft and Corrupt Practices Act, Congress clearly
intended to provide an additional ground for the examination of bank
deposits. Without such provision, the court added prosecutors would
be hampered if not altogether frustrated in the prosecution of those
charged with having acquired unexplained wealth while in public
office.1awphîl.nèt
From that judgment, plaintiffs appealed to this Court. In brief, plaintiffs'
position is that section 8 of the Anti-Graft Law "simply means that such
bank deposits may be included or added to the assets of the
Government official or employee for the purpose of computing his
unexplained wealth if and when the same are discovered or revealed
in the manner authorized by Section 2 of Republic Act 1405, which are
(1) Upon written permission of the depositor; (2) In cases of
impeachment; (3) Upon order of a competent court in cases of bribery
or dereliction of duty of public officials; and (4) In cases where the
money deposited or invested is the subject matter of the litigation."
In support of their position, plaintiffs contend, first, that the Anti-Graft
Law (which took effect on August 17, 1960) is a general law which
cannot be deemed to have impliedly repealed section 2 of Republic Act
No. 1405 (which took effect on Sept. 9, 1955), because of the rule that
repeals by implication are not favored. Second, they argue that to
construe section 8 of the Anti-Graft Law as allowing inquiry into bank
deposits would be to negate the policy expressed in section 1 of
Republic Act No. 1405 which is "to give encouragement to the people
to deposit their money in banking institutions and to discourage private
hoarding so that the same may be utilized by banks in authorized loans
to assist in the economic development of the country."
Contrary to their claim that their position effects a reconciliation of the
provisions of the two laws, plaintiffs are actually making the provisions
of Republic Act No. 1405 prevail over those of the Anti-Graft Law,
because even without the latter law the balance standing to the
depositor's credit can be considered provided its disclosure is made in
any of the cases provided in Republic Act No. 1405.
The truth is that these laws are so repugnant to each other than no
reconciliation is possible. Thus, while Republic Act No. 1405 provides
that bank deposits are "absolutely confidential ... and [therefore] may
not be examined, inquired or looked into," except in those cases
enumerated therein, the Anti-Graft Law directs in mandatory terms that
bank deposits "shall be taken into consideration in the enforcement of
this section, notwithstanding any provision of law to the contrary." The
only conclusion possible is that section 8 of the Anti-Graft Law is
intended to amend section 2 of Republic Act No. 1405 by providing
additional exception to the rule against the disclosure of bank deposits.
Indeed, it is said that if the new law is inconsistent with or repugnant to
the old law, the presumption against the intent to repeal by implication
is overthrown because the inconsistency or repugnancy reveals an
intent to repeal the existing law. And whether a statute, either in its
entirety or in part, has been repealed by implication is ultimately a
matter of legislative intent. (Crawford, The Construction of Statutes,
Secs. 309-310. Cf. Iloilo Palay and Corn Planters Ass'n v. Feliciano,
G.R. No. L-24022, March 3, 1965).
The recent case of People v. De Venecia, G.R. No. L-20808, July 31,
1965 invites comparison with this case. There it was held:
The result is that although sec. 54 [Rev. Election Code]
prohibits a classified civil service employee from aiding any
candidate, sec. 29 [Civil Service Act of 1959] allows such
classified employee to express his views on current political
problems or issues, or to mention the name of his candidate
for public office, even if such expression of views or mention
of names may result in aiding one particular candidate. In
other words, the last paragraph of sec. 29 is an exception to
sec. 54; at most, an amendment to sec. 54.
With regard to the claim that disclosure would be contrary to the policy
making bank deposits confidential, it is enough to point out that while
section 2 of Republic Act 1405 declares bank deposits to be
"absolutely confidential," it nevertheless allows such disclosure in the
following instances: (1) Upon written permission of the depositor; (2) In
cases of impeachment; (3) Upon order of a competent court in cases
of bribery or dereliction of duty of public officials; (4) In cases where
the money deposited is the subject matter of the litigation. 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
express the motion 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.
WHEREFORE, the decision appealed from is affirmed, without
pronouncement as to costs.
G.R. No. 128996               February 15, 2002
CARMEN LL. INTENGAN, ROSARIO LL. NERI, and RITA P.
BRAWNER, petitioners,
vs.
COURT OF APPEALS, DEPARTMENT OF JUSTICE, AZIZ
RAJKOTWALA, WILLIAM FERGUSON, JOVEN REYES, and VIC
LIM, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari, seeking the reversal of
the Decision1 dated July 8, 1996 of the former Fifteenth Division2 of the
Court of Appeals in CA-G.R. SP No. 37577 as well as its
Resolution3 dated April 16, 1997 denying petitioners’ motion for
reconsideration. The appellate court, in its Decision, sustained a
resolution of the Department of Justice ordering the withdrawal of
informations for violation of Republic Act No. 1405 against private
respondents.
The facts are:
On September 21, 1993, Citibank filed a complaint for violation of
section 31,4 in relation to section 1445 of the Corporation Code against
two (2) of its officers, Dante L. Santos and Marilou Genuino. Attached
to the complaint was an affidavit6 executed by private respondent Vic
Lim, a vice-president of Citibank. Pertinent portions of his affidavit are
quoted hereunder:
2.1 Sometime this year, the higher management of Citibank, N.A.
assigned me to assist in the investigation of certain anomalous/highly
irregular activities of the Treasurer of the Global Consumer Group of
the bank, namely, Dante L. Santos and the Asst. Vice President in the
office of Mr. Dante L. Santos, namely Ms. Marilou (also called Malou)
Genuino. Ms. Marilou Genuino apart from being an Assistant Vice
President in the office of Mr. Dante L. Santos also performed the duties
of an Account Officer. An Account Officer in the office of Mr. Dante L.
Santos personally attends to clients of the bank in the effort to
persuade clients to place and keep their monies in the products of
Citibank, NA., such as peso and dollar deposits, mortgage backed
securities and money placements, among others.
x x x           x x x          x x x
41
4.1 The investigation in which I was asked to participate was
undertaken because the bank had found records/evidence showing
that Mr. Dante L. Santos and Ms. Malou Genuino, contrary to their
disclosures and the aforementioned bank policy, appeared to have
been actively engaged in business endeavors that were in conflict with
the business of the bank. It was found that with the use of two (2)
companies in which they have personal financial interest, namely
Torrance Development Corporation and Global Pacific Corporation,
they managed or caused existing bank clients/depositors to divert their
money from Citibank, N.A., such as those placed in peso and dollar
deposits and money placements, to products offered by other
companies that were commanding higher rate of yields. This was done
by first transferring bank clients’ monies to Torrance and Global which
in turn placed the monies of the bank clients in securities, shares of
stock and other certificates of third parties. It also appeared that out of
these transactions, Mr. Dante L. Santos and Ms. Marilou Genuino
derived substantial financial gains.
5.1 In the course of the investigation, I was able to determine that the
bank clients which Mr. Santos and Ms. Genuino helped/caused to
divert their deposits/money placements with Citibank, NA. to Torrance
and Global (their family corporations) for subsequent investment in
securities, shares of stocks and debt papers in other companies were
as follows:
xxx
b) Carmen Intengan
xxx
d) Rosario Neri
xxx
i) Rita Brawner
All the above persons/parties have long standing accounts with
Citibank, N.A. in savings/dollar deposits and/or in trust accounts and/or
money placements.
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, as follows:
a) Annex "A-6"7 - an "Application for Money Transfer" in the
amount of US $140,000.00, executed by Intengan in favor of
Citibank $ S/A No. 24367796, to be debited from her
Account No. 22543341;
b) Annex "A-7"8 - a "Money Transfer Slip" in the amount of
US $45,996.30, executed by Brawner in favor of Citibank $
S/A No. 24367796, to be debited from her Account No.
22543236; and
c) Annex "A-9"9 - an "Application for Money Transfer" in the
amount of US $100,000.00, executed by Neri in favor of
Citibank $ S/A No. 24367796, to be debited from her
Account No. 24501018.
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’.10 He
states that private respondents Aziz Rajkotwala and William Ferguson,
Citibank, N.A. Global Consumer Banking Country Business Manager
and Country Corporate Officer, respectively, had no hand in the
disclosure, and that he did so upon the advice of counsel.
In his memorandum, the Solicitor General described the scheme as
having been conducted in this manner:
First step: Santos and/or Genuino would tell the bank client that they
knew of financial products of other companies that were yielding higher
rates of interests in which the bank client can place his money. Acting
on this information, the bank client would then authorize the transfer of
his funds from his Citibank account to the Citibank account of either
Torrance or Global.
The transfer of the Citibank client’s deposits was done through the
accomplishment of either an Application For Manager’s Checks or a
Term Investment Application in favor of Global or Torrance that was
prepared/filed by Genuino herself.
Upon approval of the Application for Manager’s Checks or Term
Investment Application, the funds of the bank client covered thereof
were then deposited in the Citibank accounts of Torrance and/or
Global.
Second step: Once the said fund transfers had been effected, Global
and/or Torrance would then issue its/ their checks drawn against
its/their Citibank accounts in favor of the other companies whose
financial products, such as securities, shares of stocks and other
certificates, were offering higher yields.
Third step: On maturity date(s) of the placements made by Torrance
and/or Global in the other companies, using the monies of the Citibank
client, the other companies would then. return the placements to
Global and/or Torrance with the corresponding interests earned.
Fourth step: Upon receipt by Global and/or Torrance of the remittances
from the other companies, Global and/or Torrance would then issue
its/their own checks drawn against their Citibank accounts in favor of
Santos and Genuino.
The amounts covered by the checks represent the shares of Santos
and Genuino in the margins Global and/or Torrance had realized out of
the placements [using the diverted monies of the Citibank clients]
made with the other companies.
Fifth step: At the same time, Global and/or Torrance would also issue
its/their check(s) drawn against its/their Citibank accounts in favor of
the bank client.
The check(s) cover the principal amount (or parts thereof) which the
Citibank client had previously transferred, with the help of Santos
and/or Genuino, from his Citibank account to the Citibank account(s) of
Global and/or Torrance for placement in the other companies, plus the
interests or earnings his placements in other companies had made
less the spreads made by Global, Torrance, Santos and Genuino.
The complaints which were docketed as I.S. Nos. 93-9969, 93-10058
and 94-1215 were subsequently amended to include a charge
of estafa under Article 315, paragraph 1(b)11 of the Revised Penal
Code.
As an incident to the foregoing, petitioners filed respective motions for
the exclusion and physical withdrawal of their bank records that were
attached to Lim’s affidavit.
In due time, Lim and Reyes filed their respective counter-affidavits.12 In
separate Memoranda dated March 8, 1994 and March 15, 1994 2nd
Assistant Provincial Prosecutor Hermino T. Ubana, Sr. recommended
the dismissal of petitioners’ complaints. The recommendation was
overruled by Provincial Prosecutor Mauro M. Castro who, in a
Resolution dated August 18, 1994,13 directed the filing of informations
against private respondents for alleged violation of Republic Act No.
1405, otherwise known as the Bank Secrecy Law.
Private respondents’ counsel then filed an appeal before the
Department of Justice (DOJ). On November 17, 1994, then DOJ
Secretary Franklin M. Drilon issued a Resolution14 ordering, inter
alia, the withdrawal of the aforesaid informations against private
respondents. Petitioners’ motion for reconsideration15 was denied by
DOJ Acting Secretary Demetrio G. Demetria in a Resolution dated
March 6, 1995.16
Initially, petitioners sought the reversal of the DOJ resolutions via a
petition for certiorari and mandamus filed with this Court, docketed as
G.R. No. 119999-120001. However, the former First Division of this
Court, in a Resolution dated June 5, 1995,17 referred the matter to the
Court of the Appeals, on the basis of the latter tribunal’s concurrent
jurisdiction to issue the extraordinary writs therein prayed for. The
petition was docketed as CA-G.R. SP No. 37577 in the Court of
Appeals.
On July 8, 1996, the Court of Appeals rendered judgment dismissing
the petition in CA-G.R. SP No. 37577 and declared therein, as follows:
Clearly, the disclosure of petitioners’ deposits was necessary to
establish the allegation that Santos and Genuino had violated Section
31 of the Corporation Code in acquiring "any interest adverse to the
corporation in respect of any matter which has been reposed in him in
confidence." To substantiate the alleged scheme of Santos and
Genuino, private respondents had to present the records of the monies
which were manipulated by the two officers which included the bank
records of herein petitioners.
42
Although petitioners were not the parties involved in IS. No. 93-8469,
their accounts were relevant to the complete prosecution of the case
against Santos and Genuino and the respondent DOJ properly ruled
that the disclosure of the same falls under the last exception of R.A.
No. 1405. That ruling is consistent with the principle laid down in the
case of Mellon Bank, N.A. vs. Magsino (190 SCRA 633) where the
Supreme Court allowed the testimonies on the bank deposits of
someone not a party to the case as it found that said bank deposits
were material or relevant to the allegations in the complaint.
Significantly, therefore, as long as the bank deposits are material to the
case, although not necessarily the direct subject matter thereof, a
disclosure of the same is proper and falls within the scope of the
exceptions provided for by R.A. No. 1405.
x x x           x x x          x x x
Moreover, the language of the law itself is clear and cannot be subject
to different interpretations. A reading of the provision itself would
readily reveal that the exception "or in cases where the money
deposited or invested is the subject matter of the litigation" is not
qualified by the phrase "upon order of competent Court" which refers
only to cases of bribery or dereliction of duty of public officials.
Petitioners’ motion for reconsideration was similarly denied in a
Resolution dated April 16, 1997. Appeal was made in due time to this
Court.
The instant petition was actually denied by the former Third Division of
this Court in a Resolution18 dated July 16, 1997, on the ground that
petitioners had failed to show that a reversible error had been
committed. On motion, however, the petition was reinstated19 and
eventually given due course.20
In assailing the appellate court’s findings, petitioners assert that the
disclosure of their bank records was unwarranted and illegal for the
following reasons:
I.
IN BLATANT VIOLATION OF R.A. NO. 1405, PRIVATE
RESPONDENTS ILLEGALLY MADE DISCLOSURES OF
PETITIONERS’ CONFIDENTIAL BANK DEPOSITS FOR THEIR
SELFISH ENDS IN PROSECUTING THEIR COMPLAINT IN IS. NO.
93-8469 THAT DID NOT INVOLVE PETITIONERS.
II.
PRIVATE RESPONDENTS’ DISCLOSURES DO NOT FALL UNDER
THE FOURTH EXCEPTION OF R.A. NO. 1405 (i.e., "in cases where
the money deposited or invested is the subject matter of the litigation"),
NOR UNDER ANY OTHER EXCEPTION:
(1)
PETITIONERS’ DEPOSITS ARE NOT INVOLVED
IN ANY LITIGATION BETWEEN PETITIONERS
AND RESPONDENTS. THERE IS NO
LITIGATION BETWEEN THE PARTIES, MUCH
LESS ONE INVOLVING PETITIONERS’
DEPOSITS AS THE SUBJECT MATTER
THEREOF.
(2)
EVEN ASSUMING ARGUENDO THAT THERE IS
A LITIGATION INVOLVING PETITIONERS’
DEPOSITS AS THE SUBJECT MATTER
THEREOF, PRIVATE RESPONDENTS’
DISCLOSURES OF PETITIONERS’ DEPOSITS
ARE NEVERTHELESS ILLEGAL FOR WANT OF
THE REQUISITE COURT ORDER, IN
VIOLATION OF R.A. NO. 1405.
III.
THEREFORE, PETITIONERS ARE ENTITLED TO PROSECUTE
PRIVATE RESPONDENTS FOR VIOLATIONS OF R.A. NO. 1405
FOR HAVING ILLEGALLY DISCLOSED PETITIONERS’
CONFIDENTIAL BANK DEPOSITS AND RECORDS IN IS. NO. 93-
8469.
Apart from the reversal of the decision and resolution of the appellate
court as well as the resolutions of the Department of Justice,
petitioners pray that the latter agency be directed to issue a resolution
ordering the Provincial Prosecutor of Rizal to file the corresponding
informations for violation of Republic Act No. 1405 against private
respondents.
The petition is not meritorious.
Actually, 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 (RA) 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.21 (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.
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 latter’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 xxx, 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. xxx 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 xxx:
‘It is a mistaken notion that positive, willful intent, as distinguished from
a mere intent, to violate the criminal law, is an essential ingredient in
every criminal offense, and that where there is the absence of such
intent there is no offense; this is especially so as to statutory offenses.
When the statute plainly forbids an act to be done, and it is done by
some person, the law implies conclusively the guilty intent, although
the offender was honestly mistaken as to the meaning of the law he
violates. When the language is plain and positive, and the offense is
not made to depend upon the positive, willful intent and purpose,
nothing is left to interpretation.’22
Ordinarily, the dismissal of the instant petition would have been without
prejudice to the filing of the proper charges against private
respondents. The matter would have ended here were it not for the
intervention of time, specifically the lapse thereof. So as not to unduly
prolong the settlement of the case, we are constrained to rule on a
material issue even though it was not raised by the parties. We refer to
the issue of prescription.
Republic Act No. 6426 being a special law, the provisions of Act No.
3326,23 as amended by Act No. 3763, are applicable:
SECTION 1. Violations penalized by special acts shall, unless
otherwise provided in such acts, prescribe in accordance with the
following rules: (a) after a year for offences punished only by a fine or
by imprisonment for not more than one month, or both: (b) after four
43
years for those punished by imprisonment for more than one month,
but less than two years; (c) after eight years for those punished by
imprisonment for two years or more, but less than six years; and (d)
after twelve years for any other offence punished by imprisonment for
six years or more, except the crime of treason, which shall prescribe
after twenty years: Provided, however, That all offences against any
law or part of law administered by the Bureau of Internal Revenue shall
prescribe after five years. Violations penalized by municipal ordinances
shall prescribe after two months.
Violations of the regulations or conditions of certificates of public
convenience issued by the Public Service Commission shall prescribe
after two months.
SEC. 2. Prescription shall begin to run from the day of the commission
of the violation of the law, and if the same be not known at the time,
from the discovery thereof and the institution of judicial proceedings for
its investigation and punishment.
The prescription shall be interrupted when proceedings are instituted
against the guilty person, and shall begin to run again if the
proceedings are dismissed for reasons not constituting
jeopardy.1âwphi1
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.24 Applying Act No. 3326, the offense
prescribes in eight years.25 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.26 In her complaint-affidavit,27 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, 1993.28 As to Brawner, the material date
is January 5, 1994.29 Based on any of these dates, prescription has set
in.30
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.31
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;32 on the other, ignorantia legis non
excusat.33 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.34
WHEREFORE, the petition is hereby DENIED. No pronouncement as
to costs.
SO ORDERED.
G.R. No. 84526             January 28, 1991
PHILIPPINE COMMERCIAL & INDUSTRIAL BANK and JOSE
HENARES, petitioners,
vs.
THE HON. COURT OF APPEALS and MARINDUQUE MINING AND
INDUSTRIAL CORPORATION, respondents.
Bengzon, Zarraga, Narciso, Cudala, Pecson & Bengson for petitioners.
Rexes V. Alejano for private respondent.
SARMIENTO, J.:
This is a petition for review on certiorari which assails both the
resolution1 dated June 27, 1988 of the Court of Appeals2 which
reconsidered and set aside its earlier decisions3 dated February 26,
1988 reversing the decision4 of the trial court and the subsequent
resolution5 dated August 3, 1988 which denied the petitioners' motion
for reconsideration. The dispositive portion of the resolution in question
dated June 27, 1988 reads as follows:
x x x           x x x          x x x
For the reasons above adduced, We are constrained to
reconsider Our aforesaid decision and to set it aside and in
lieu thereof hereby enter another decision AFFIRMING the
decision dated January 15, 1985 of the Regional Trial Court
of Manila, Branch 11, in Civil Case No. 103100 entitled
"Marinduque Mining and Industrial Corporation (MMIC) vs.
Philippine Commercial and Industrial Bank, et al."6
The undisputed facts7 as gathered from the findings of the trial court
are as follows:
The instant case originated from an action8 filed with the National
Labor Relations Commission (NLRC) by a group of laborers who
obtained therefrom a favorable judgment for the payment of
backwages amounting to P205,853.00 against the private respondent.
On April 26, 1976, the said Commission issued a writ of execution
directing the Deputy Sheriff of Negros Occidental, one Damian Rojas,
to enforce the aforementioned judgment. The pertinent portion of the
said writ reads as follows:
x x x           x x x          x x x
Further, you are to collect from same respondent the total
amount of P205,853.00 as their backwage (sic) for twelve
(12) months and then turn over said amount to this
commission for further disposition. In case you fail to collect
said amount in cash, you are to cause the satisfaction of the
same on the movable or immovable properties of the
respondent not exempt from execution. (Exhs. G, G-1 and
G-3, also Exh. 3; Emphasis supplied).9
Accordingly, on April 28, 1976, the aforenamed deputy sheriff went to
the mining site of the private respondent and served the writ of
execution on the persons concerned, but nothing seemed to have
happened thereat.
Thereafter, the Sheriff prepared on his own a Notice of Garnishment
dated April 29, 1976 addressed to six (6) banks, all located in Bacolod
City, one of which being the petitioner herein, directing the bank
concerned to immediately issue a check in the name of the Deputy
Provincial Sheriff of Negros Occidental in an amount equivalent to the
amount of the garnishment and that proper receipt would be issued
therefor.
Incidentally, the house lawyer of the private respondent, Atty. Rexes V.
Alejano, acting on a tip regarding the existence of the said notice of
garnishment, communicated with the bank manager, the petitioner
Jose Henares, verbally at first at around 2:00 o'clock in the afternoon
of that day, April 29, 1976, and later confirmed in a formal letter
received by the petitioner Henares at about 5:00 o'clock of that same
day, requesting the withholding of any release of the deposit of the
private respondent with the petitioner bank.
Meanwhile, at about 9:30 in the morning of April 29, 1976, the deputy
sheriff presented the Notice of Garnishment and the Writ of Execution
attached therewith to the petitioner Henares and later in the afternoon,
demanded from the latter, under pain of contempt, the release of the
deposit of the private respondent.
The petitioner Henares, upon knowing from the Acting Provincial
Sheriff that there was no restraining order from the National Labor
Relations Commission and on the favorable advice of the bank's legal
counsel, issued a debit memo for the full balance of the private
respondent's account with the petitioner bank. Thereafter, he issued a
manager's check in the name of the Deputy Provincial Sheriff of
Negros Occidental for the amount of P37,466.18, which was the exact
balance of the private respondent's account as of that day.
On the following day, April 30, 1976, at about 1:00 o'clock in the
afternoon, the deputy sheriff returned to the bank in order to encash
the check but before the actual encashment, the petitioner Henares
once again inquired about any existing restraining order from the
NLRC and upon being told that there was none, the latter allowed the
said encashment.
On July 6, 1976, the private respondent, then plaintiff, filed a complaint
before the Regional Trial Court of Manila, Branch II, against the
petitioners and Damian Rojas, the Deputy Provincial Sheriff of Negros
Occidental, then defendants, alleging that the former's current deposit
44
with the petitioner bank was levied upon, garnished, and with undue
haste unlawfully allowed to be withdrawn, and notwithstanding the
alleged unauthorized disclosure of the said current deposit and
unlawful release thereof, the latter have failed and refused to restore
the amount of P37,466.18 to the former's account despite repeated
demands.
Both the petitioners and the Deputy Sheriff filed their respective
answers denying the material averments of the said complaint and
alleged that their actuations were all in accordance with law and
likewise filed counterclaims for damages, including a cross-claim of the
former against the latter. The third-party complaint of the petitioners
against the forty-nine (49) laborers in the NLRC case was, however,
dismissed for failure of the sheriff to serve summons upon the latter.
On January 23, 1982, after several postponements, the pre-trial was
finally conducted and terminated with only the petitioners and the
private respondent participating, through their respective counsel.
On January 15, 1985, the trial court rendered its judgment in favor of
the private respondent, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the three (3) defendants by ordering the
latter to pay, jointly and severally, the plaintiff the following
amounts, to wit:
(a) the sum of P37,466.18, with interest thereon at the rate
of 12% per annum from date of first demand on April 29,
1976 until the amount shall have been fully and completely
restored and paid;
(b) the sum of P10,000.00 as attorney's fees.
Defendants are ordered to pay, jointly and severally, double
costs.10
x x x           x x x          x x x
On appeal, the respondent court in a decision dated February 26,
1988, first reversed the said judgment of the lower court, but however,
on the motion for reconsideration filed by the private respondent,
subsequently annulled and set aside its said decision in the resolution
dated June 27, 1988. On August 3, 1988, the respondent court denied
the petitioner's own motion for reconsideration.
Hence, this petition.
The petitioners raise two issues,11 to wit:
1. Whether or not petitioners had legal basis in releasing the
garnished deposit of private respondent to the sheriff.
2. Whether or not petitioners violated Republic Act No. 1405,
otherwise known as the Secrecy of Bank Deposits Act, when
they allowed the sheriff to garnish the deposit of private
respondent.
The petition is impressed with merit.
The crux of the instant controversy boils down to the question of
whether or not a bank is liable for releasing its depositor's funds on the
strength of the notice of garnishment made by the deputy sheriff
pursuant to a writ of execution issued by the National Labor Relations
Commission (NLRC).
The respondent court in its questioned resolution dated June 27, 1988,
held that the petitioners were liable, in this wise:
In the case at bar, defendant-appellant PCIB, despite
vigorous objections from plaintiff-appellee, with indecent
haste disclosed and released the deposit of plaintiff-appellee
on the strength of a mere notice of garnishment which the
Honorable Supreme Court ruled upon is no authority for the
release of the deposit, thus:
In the second place, the mere garnishment of
funds belonging to a party upon order of the court
does not have the effect of delivering the money
garnished to the sheriff or to the party in whose
favor the attachment is issued. The fund is
retained by the garnishee or the person holding
the money for the defendant.
The garnishee, or one in whose hands property is
attached or garnished, is universally regarded as
charged with its legal custody pending outcome of
the attachment or garnishment unless, by local
statute and practice, he is permitted to surrender
or pay the garnished property or funds into court,
to the attaching officer, or to a receiver or trustee
appointed to receive them. (5 Am. Jur. 14)
The effect of the garnishment, therefore, was to
require the Philippine Trust Company, holder of
the funds of the Luzon Surety Co., to set aside
said amount from the funds of the Luzon Surety
Co., and keep the same subject to the final orders
of the Court. In the case at bar there was never an
order to deliver the full amount garnished to the
plaintiff-appellee; all that was ordered to be
delivered after the judgment had become final was
the amount found by the Court of Appeals to be
due. The balance of the amount garnished,
therefore, remained all the time in the possession
of the bank as part of the funds of the Luzon
Surety Co. although the same could not be
disposed of by the owner. (De la Rama vs.
Villarosa, et al., L-17927, June 29, 1963, 8 SCRA
413, 418-419; Emphasis supplied).12
The above-mentioned contention citing De la Rama is not exactly on
all fours with the facts of the case at bar. In De la Rama, the amount
garnished was not actually taken possession of by the sheriff, even
from the time of garnishment, because the judgment debtor was able
to appeal to the Court of Appeals and obtain from the Court an
injunction prohibiting execution of the judgment.
On the other hand, nowhere in the record of the present case is there
any evidence of an appeal by the private respondent from the decision
of the NLRC or the existence of any restraining order to prevent the
release of the private respondent's deposit to the deputy sheriff at the
time of the service of the notice of garnishment and writ of execution to
the petitioners.
On the contrary, the uncontroverted statements in the deposition of the
petitioner Henares that he had previously sought the advice of the
bank's counsel and that he had checked twice with the Acting
Provincial Sheriff who had informed him of the absence of any
restraining order, belie any allegation of undue and indecent haste in
the release of the said deposit in question.
The cases more in point to the present controversy are the recent
decisions in Engineering Construction Inc. v. National Power
Corporation13 and Rizal Commercial Banking Corporation (RCBC) vs.
De Castro14 where the Court absolved both garnishees, MERALCO
and RCBC, respectively, from any liability for their prompt compliance
in the release of garnished funds,
The rationale behind Engineering Construction, Inc. and which was
quoted in Rizal Commercial Banking Corporation is persuasive
x x x           x x x          x x x
But while partial restitution is warranted in favor of NPC, we
find that the Appellate Court erred in not absolving
MERALCO, the garnishee, from its obligations to NPC with
respect to the payment to ECI of P1,114,543.23, thus in
effect subjecting MERALCO to double liability. MERALCO
should not have been faulted for its prompt obedience to a
writ of garnishment. Unless there are compelling reasons
such as: a defect on the face of the writ or actual knowledge
on the part of the garnishee of lack of entitlement on the part
of the garnisher, it is not incumbent upon the garnishee to
inquire or to judge for itself whether or not the order for the
advance execution of a judgment is valid.
Section 8, Rule 57 of the Rules of Court provides:
Effect of attachment of debts and credits. — All
persons having in their possession or under their
control any credits or other similar personal
property belonging to the party against whom
attachment is issued, or owing any debts to the
same, at the time of service upon them of a copy
of the order of attachment and notice as provided
in the last preceding section, shall be liable to the
applicant of the amount of such credits, debts or
other property, until the attachment be discharged,
or any judgment recovered by him be satisfied,
unless such property be delivered or transferred,
45
 or such debts be paid, to the clerk, sheriff or other
proper officer of the court issuing the
attachment.1âwphi1
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."
Applying the foregoing to the case at bar, MERALCO, as
garnishee, after having been judicially compelled to pay the
amount of the judgment represented by funds in its
possession belonging to the judgment debtor or NPC, should
be released from all responsibilities over such amount after
delivery thereof to the sheriff. The reason for the rule is self
evident. To expose garnishees to risks for obeying court
orders and processes would only undermine the
administration of justice. (Emphasis ours.)15
x x x           x x x          x x x
Moreover, there is no issue concerning the indebtedness of the
petitioner bank to the private respondent since the latter has never
denied the existence of its deposit with the former, the said deposit
being considered a credit in favor of the depositor against the
bank.16 We therefore see no application for Sec. 39, Rule 39 of the
Rules of Court invoked by the private respondent as to necessitate the
"examination of the debtor of the judgment debtor."17
Rather, we find the immediate release of the funds by the petitioners
on the strength of the notice of garnishment and writ of execution,
whose issuance, absent any patent defect, enjoys the presumption of
regularity, sufficiently supported by Sec. 41, Rule 39 of the Rules of
Court which reads:
x x x           x x x          x x x
After an execution against property has issued, a person
indebted to the judgment debtor, may pay to the officer
holding the execution the amount of his debt or so much
thereof as may be necessary to satisfy the execution, and
the officer's receipt shall be a sufficient discharge for the
amount so paid or directed to be credited by the judgment
creditor on the execution.
x x x           x x x          x x x
Finally, we likewise take cognizance of the subject of the judgment
sought to be enforced in the writ of execution in question, namely,
laborers' backwages. We believe that the petitioners should rather be
commended for having acted with urgent dispatch despite attempts by
the private respondent, as with so many scheming employers, to
frustrate or unjustifiably delay the prompt satisfaction of final judgments
which often result in undue prejudice to the legitimate claims of labor.
With regard to the second issue, we find no violation whatsoever by
the petitioners of Republic Act No. 1405, otherwise known as the
Secrecy of Bank Deposits Act. The Court in China Banking
Corporation vs. Ortega18 had the occasion to dispose of this issue
when it stated, thus:
It is clear from the discussion of the conference committee
report on Senate Bill No. 351 and House Bill No. 3977,
which later became Republic Act 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.
Since there is no evidence that the petitioners themselves divulged the
information that the private respondent had an account with the
petitioner bank and it is undisputed that the said account was properly
the object of the notice of garnishment and writ of execution carried out
by the deputy sheriff, a duly authorized officer of the court, we can not
therefore hold the petitioners liable under R.A. 1405.
While the general rule is that the findings of fact of the appellate court
are binding on this Court, the said rule however admits of exceptions,
such as when the Court of Appeals clearly misconstrued and
misapplied the law, drawn from the incorrect conclusions of fact
established by evidence and otherwise at certain conclusions which
are based on misapprehension of facts,19 as in the case at bar.
The petitioners are therefore absolved from any liability for the
disclosure and release of the private respondent's deposit to the
custody of the deputy sheriff in satisfaction of the final judgment for the
laborers' backwages.
WHEREFORE, the petition is GRANTED and the challenged
Resolutions dated June 27, 1988 and August 13, 1988 of the Court of
Appeals are hereby ANNULLED and SET ASIDE and its Decision
dated February 26, 1988 dismissing the complaint is hereby
REINSTATED. With costs against the private respondent.
SO ORDERED.
G.R. No. 189206               June 8, 2011
GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner,
vs.
THE HONORABLE 15th DIVISION OF THE COURT OF APPEALS
and INDUSTRIAL BANK OF KOREA, TONG YANG MERCHANT
BANK, HANAREUM BANKING CORP., LAND BANK OF THE
PHILIPPINES, WESTMONT BANK and DOMSAT HOLDINGS,
INC., Respondents.
DECISION
PEREZ, J.:
The subject of this petition for certiorari is the Decision1 of the Court of
Appeals in CA-G.R. SP No. 82647 allowing the quashal by the
Regional Trial Court (RTC) of Makati of a subpoena for the production
of bank ledger. This case is incident to Civil Case No. 99-1853, which
is the main case for collection of sum of money with damages filed by
Industrial Bank of Korea, Tong Yang Merchant Bank, First Merchant
Banking Corporation, Land Bank of the Philippines, and Westmont
Bank (now United Overseas Bank), collectively known as "the Banks"
against Domsat Holdings, Inc. (Domsat) and the Government Service
Insurance System (GSIS). Said case stemmed from a Loan
Agreement,2 whereby the Banks agreed to lend United States (U.S.)
$11 Million to Domsat for the purpose of financing the lease and/or
purchase of a Gorizon Satellite from the International Organization of
Space Communications (Intersputnik).3
The controversy originated from a surety agreement by which Domsat
obtained a surety bond from GSIS to secure the payment of the loan
from the Banks. We quote the terms of the Surety Bond in its entirety.4
Republic of the Philippines
GOVERNMENT SERVICE INSURANCE SYSTEM
GENERAL INSURANCE FUND
GSIS Headquarters, Financial Center
Roxas Boulevard, Pasay City
G(16) GIF Bond 027461
SURETYBOND
KNOW ALL MEN BY THESE PRESENTS:
That we, DOMSAT HOLDINGS, INC., represented by its President as
PRINCIPAL, and the GOVERNMENT SERVICE INSURANCE
SYSTEM, as Administrator of the GENERAL INSURANCE FUND, a
corporation duly organized and existing under and by virtue of the laws
of the Philippines, with principal office in the City of Pasay, Metro
Manila, Philippines as SURETY, are held and firmly bound unto the
OBLIGEES: LAND BANK OF THE PHILIPPINES, 7th Floor, Land
Bank Bldg. IV. 313 Sen. Gil J. Puyat Avenue, Makati City;
WESTMONT BANK, 411 Quintin Paredes St., Binondo, Manila: TONG
YANG MERCHANT BANK, 185, 2-Ka, Ulchi-ro, Chungk-ku, Seoul,
Korea; INDUSTRIAL BANK OF KOREA, 50, 2-Ga, Ulchi-ro, Chung-gu,
Seoul, Korea; and FIRST MERCHANT BANKING CORPORATION,
46
199-40, 2-Ga, Euliji-ro, Jung-gu, Seoul, Korea, in the sum, of US $
ELEVEN MILLION DOLLARS ($11,000,000.00) for the payment of
which sum, well and truly to be made, we bind ourselves, our heirs,
executors, administrators, successors and assigns, jointly and
severally, firmly by these presents.
THE CONDITIONS OF THE OBLIGATION ARE AS FOLLOWS:
WHEREAS, the above bounden PRINCIPAL, on the 12th day of
December, 1996 entered into a contract agreement with the
aforementioned OBLIGEES to fully and faithfully
Guarantee the repayment of the principal and interest on the loan
granted the PRINCIPAL to be used for the financing of the two (2) year
lease of a Russian Satellite from INTERSPUTNIK, in accordance with
the terms and conditions of the credit package entered into by the
parties.
This bond shall remain valid and effective until the loan including
interest has been fully paid and liquidated,
a copy of which contract/agreement is hereto attached and made part
hereof;
WHEREAS, the aforementioned OBLIGEES require said PRINCIPAL
to give a good and sufficient bond in the above stated sum to secure
the full and faithful performance on his part of said contract/agreement.
NOW, THEREFORE, if the PRINCIPAL shall well and truly perform
and fulfill all the undertakings, covenants, terms, conditions, and
agreements stipulated in said contract/agreements, then this obligation
shall be null and void; otherwise, it shall remain in full force and effect.
WITNESS OUR HANDS AND SEALS this 13th day of December 1996
at Pasay City, Philippines.
DOMSAT HOLDINGS, GOVERNMENT SERVICE
INC. INSURANCE SYSTEM
Principal General Insurance Fund
By: By:
CAPT. RODRIGO A. AMALIO A. MALLARI
SILVERIO Senior Vice-President
President General Insurance Group
When Domsat failed to pay the loan, GSIS refused to comply with its
obligation reasoning that Domsat did not use the loan proceeds for the
payment of rental for the satellite. GSIS alleged that Domsat, with
Westmont Bank as the conduit, transferred the U.S. $11 Million loan
proceeds from the Industrial Bank of Korea to Citibank New York
account of Westmont Bank and from there to the Binondo Branch of
Westmont Bank.5 The Banks filed a complaint before the RTC of
Makati against Domsat and GSIS.
In the course of the hearing, GSIS requested for the issuance of a
subpoena duces tecum to the custodian of records of Westmont Bank
to produce the following documents:
1. Ledger covering the account of DOMSAT Holdings, Inc.
with Westmont Bank (now United Overseas Bank), any and
all documents, records, files, books, deeds, papers, notes
and other data and materials relating to the account or
transactions of DOMSAT Holdings, Inc. with or through the
Westmont Bank (now United Overseas Bank) for the period
January 1997 to December 2002, in his/her direct or indirect
possession, custody or control (whether actual or
constructive), whether in his/her capacity as Custodian of
Records or otherwise;
2. All applications for cashier’s/ manager’s checks and bank
transfers funded by the account of DOMSAT Holdings, Inc.
with or through the Westmont Bank (now United Overseas
Bank) for the period January 1997 to December 2002, and
all other data and materials covering said applications, in
his/her direct or indirect possession, custody or control
(whether actual or constructive), whether in his/her capacity
as Custodian of Records or otherwise;
3. Ledger covering the account of Philippine Agila Satellite,
Inc. with Westmont Bank (now United Overseas Bank), any
and all documents, records, files, books, deeds, papers,
notes and other data and materials relating to the account or
transactions of Philippine Agila Satellite, Inc. with or through
the Westmont bank (now United Overseas Bank) for the
period January 1997 to December 2002, in his/her direct or
indirect possession, custody or control (whether actual or
constructive), whether in his/her capacity as Custodian of
Records or otherwise;
4. All applications for cashier’s/manager’s checks funded by
the account of Philippine Agila Satellite, Inc. with or through
the Westmont Bank (now United Overseas Bank) for the
period January 1997 to December 2002, and all other data
and materials covering said applications, in his/her direct or
indirect possession, custody or control (whether actual or
constructive), whether in his/her capacity as Custodian of
Records or otherwise.6
The RTC issued a subpoena decus tecum on 21 November 2002.7 A
motion to quash was filed by the banks on three grounds: 1) the
subpoena is unreasonable, oppressive and does not establish the
relevance of the documents sought; 2) request for the documents will
violate the Law on Secrecy of Bank Deposits; and 3) GSIS failed to
advance the reasonable cost of production of the documents.8 Domsat
also joined the banks’ motion to quash through its
Manifestation/Comment.9 On 9 April 2003, the RTC issued an Order
denying the motion to quash for lack of merit. We quote the pertinent
portion of the Order, thus:
After a careful consideration of the arguments of the parties, the Court
did not find merit in the motion.
The serious objection appears to be that the subpoena is violative of
the Law on Secrecy of Bank Deposit, as amended. The law declares
bank deposits to be "absolutely confidential" except: x x x (6) In cases
where the money deposited or invested is the subject matter of the
litigation.
The case at bench is for the collection of a sum of money from
defendants that obtained a loan from the plaintiff. The loan was
secured by defendant GSIS which was the surety. It is the contention
of defendant GSIS that the proceeds of the loan was deviated to
purposes other than to what the loan was extended. The quashal of
the subpoena would deny defendant GSIS its right to prove its
defenses.
WHEREFORE, for lack of merit the motion is DENIED.10
On 26 June 2003, another Order was issued by the RTC denying the
motion for reconsideration filed by the banks.11 On 1 September 2003
however, the trial court granted the second motion for reconsideration
filed by the banks. The previous subpoenas issued were consequently
quashed.12 The trial court invoked the ruling in Intengan v. Court of
Appeals,13 where it was ruled that foreign currency deposits are
absolutely confidential and may be examined only when there is a
written permission from the depositor. The motion for reconsideration
filed by GSIS was denied on 30 December 2003.
Hence, these assailed orders are the subject of the petition for
certiorari before the Court of Appeals. GSIS raised the following
arguments in support of its petition:
I.
Respondent Judge acted with grave abuse of discretion when it
favorably considered respondent banks’ (second) Motion for
Reconsideration dated July 9, 2003 despite the fact that it did not
contain a notice of hearing and was therefore a mere scrap of paper.
II.
Respondent judge capriciously and arbitrarily ignored Section 2 of the
Foreign Currency Deposit Act (RA 6426) in ruling in his Orders dated
September 1 and December 30, 2003 that the US$11,000,000.00
deposit in the account of respondent Domsat in Westmont Bank is
covered by the secrecy of bank deposit.
III.
Since both respondent banks and respondent Domsat have disclosed
during the trial the US$11,000,000.00 deposit, it is no longer secret
and confidential, and petitioner GSIS’ right to inquire into what
happened to such deposit can not be suppressed.14
The Court of Appeals addressed these issues in seriatim.
47
The Court of Appeals resorted to a liberal interpretation of the rules to
avoid miscarriage of justice when it allowed the filing and acceptance
of the second motion for reconsideration. The appellate court also
underscored the fact that GSIS did not raise the defect of lack of notice
in its opposition to the second motion for reconsideration. The
appellate court held that failure to timely object to the admission of a
defective motion is considered a waiver of its right to do so.
The Court of Appeals declared that Domsat’s deposit in Westmont
Bank is covered by Republic Act No. 6426 or the Bank Secrecy Law.
We quote the pertinent portion of the Decision:
It is our considered opinion that Domsat’s deposit of $11,000,000.00 in
Westmont Bank is covered by the Bank Secrecy Law, as such it
cannot be examined, inquired or looked into without the written
consent of its owner. The ruling in Van Twest vs. Court of Appeals was
rendered during the effectivity of CB Circular No. 960, Series of 1983,
under Sec. 102 thereof, transfer to foreign currency deposit account or
receipt from another foreign currency deposit account, whether for
payment of legitimate obligation or otherwise, are not eligible for
deposit under the System.
CB Circular No. 960 has since been superseded by CB Circular 1318
and later by CB Circular 1389. Section 102 of Circular 960 has not
been re-enacted in the later Circulars. What is applicable now is the
decision in Intengan vs. Court of Appeals where the Supreme Court
has ruled that the 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. Petitioner, therefore,
had inappropriately invoked the provisions of Central Bank (CB)
Circular Nos. 343 which has already been superseded by more
recently issued CB Circulars. CB Circular 343 requires the surrender to
the banking system of foreign exchange, including proceeds of foreign
borrowings. This requirement, however, can no longer be found in later
circulars.
In its Reply to respondent banks’ comment, petitioner appears to have
conceded that what is applicable in this case is CB Circular 1389.
Obviously, under CB 1389, proceeds of foreign borrowings are no
longer required to be surrendered to the banking system.
Undaunted, petitioner now argues that paragraph 2, Section 27 of CB
Circular 1389 is applicable because Domsat’s $11,000,000.00 loan
from respondent banks was intended to be paid to a foreign supplier
Intersputnik and, therefore, should have been paid directly to
Intersputnik and not deposited into Westmont Bank. The fact that it
was deposited to the local bank Westmont Bank, petitioner claims
violates the circular and makes the deposit lose its confidentiality
status under R.A. 6426. However, a reading of the entire Section 27 of
CB Circular 1389 reveals that the portion quoted by the petitioner
refers only to the procedure/conditions of drawdown for service of
debts using foreign exchange. The above-said provision relied upon by
the petitioner does not in any manner prescribe the conditions before
any foreign currency deposit can be entitled to the confidentiality
provisions of R.A. 6426.15
Anent the third issue, the Court of Appeals ruled that the testimony of
the incumbent president of Westmont Bank is not the written consent
contemplated by Republic Act No. 6426.
The Court of Appeals however upheld the issuance of subpoena
praying for the production of applications for cashier’s or manager’s
checks by Domsat through Westmont Bank, as well as a copy of an
Agreement and/or Contract and/or Memorandum between Domsat
and/or Philippine Agila Satellite and Intersputnik for the acquisition
and/or lease of a Gorizon Satellite. The appellate court believed that
the production of these documents does not involve the examination of
Domsat’s account since it will never be known how much money was
deposited into it or withdrawn therefrom and how much remains
therein.
On 29 February 2008, the Court of Appeals rendered the assailed
Decision, the decretal portion of which reads:
WHEREFORE, the petition is partially GRANTED. Accordingly, the
assailed Order dated December 30, 2003 is hereby modified in that the
quashal of the subpoena for the production of Domsat’s bank ledger in
Westmont Bank is upheld while respondent court is hereby ordered to
issue subpoena duces tecum ad testificandum directing the records
custodian of Westmont Bank to bring to court the following documents:
a) applications for cashier’s or manager’s checks by
respondent Domsat through Westmont Bank from January
1997 to December 2002;
b) bank transfers by respondent Domsat through Westmont
Bank from January 1997 to December 2002; and
c) copy of an agreement and/or contract and/or
memorandum between respondent Domsat and/or Philippine
Agila Satellite and Intersputnik for the acquisition and/or
lease of a Gorizon satellite.
No pronouncement as to costs.16
GSIS filed a motion for reconsideration which the Court of Appeals
denied on 19 June 2009. Thus, the instant petition ascribing grave
abuse of discretion on the part of the Court of Appeals in ruling that
Domsat’s deposit with Westmont Bank cannot be examined and in
finding that the banks’ second motion for reconsideration in Civil Case
No. 99-1853 is procedurally acceptable.17
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 65.18 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.19 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.20lauuphil
Yet, even if this procedural infirmity is discarded for the broader
interest of justice, the petition sorely lacks merit.
GSIS insists that Domsat’s deposit with Westmont Bank can be
examined and inquired into. It anchored its argument on Republic Act
No. 1405 or the "Law on Secrecy of Bank Deposits," which allows the
disclosure of bank deposits in cases where the money deposited is the
subject matter of the litigation. GSIS asserts that the subject matter of
the litigation is the U.S. $11 Million obtained by Domsat from the Banks
to supposedly finance the lease of a Russian satellite from
Intersputnik. Whether or not it should be held liable as a surety for the
principal amount of U.S. $11 Million, GSIS contends, is contingent
upon whether Domsat indeed utilized the amount to lease a Russian
satellite as agreed in the Surety Bond Agreement. Hence, GSIS
argues that the whereabouts of the U.S. $11 Million is the subject
matter of the case and the disclosure of bank deposits relating to the
U.S. $11 Million should be allowed.
GSIS also contends that the concerted refusal of Domsat and the
banks to divulge the whereabouts of the U.S. $11 Million will greatly
prejudice and burden the GSIS pension fund considering that a
substantial portion of this fund is earmarked every year to cover the
surety bond issued.
Lastly, GSIS defends the acceptance by the trial court of the second
motion for reconsideration filed by the banks on the grounds that it is
pro forma and did not conform to the notice requirements of Section 4,
Rule 15 of the Rules of Civil Procedure.21
Domsat denies the allegations of GSIS and reiterates that it did not
give a categorical or affirmative written consent or permission to GSIS
to examine its bank statements with Westmont Bank.
The Banks maintain that Republic Act No. 1405 is not the applicable
law in the instant case because the Domsat deposit is a foreign
currency deposit, thus covered by Republic Act No. 6426. Under said
law, only the consent of the depositor shall serve as the exception for
the disclosure of his/her deposit.
The Banks counter the arguments of GSIS as a mere rehash of its
previous arguments before the Court of Appeals. They justify the
issuance of the subpoena as an interlocutory matter which may be
reconsidered anytime and that the pro forma rule has no application to
interlocutory orders.
It appears that only GSIS appealed the ruling of the Court of Appeals
pertaining to the quashal of the subpoena for the production of
Domsat’s bank ledger with Westmont Bank. Since neither Domsat nor
the Banks interposed an appeal from the other portions of the decision,
particularly for the production of applications for cashier’s or manager’s
checks by Domsat through Westmont Bank, as well as a copy of an
agreement and/or contract and/or memorandum between Domsat
and/or Philippine Agila Satellite and Intersputnik for the acquisition
and/or lease of a Gorizon satellite, the latter became final and
executory.
GSIS invokes Republic Act No. 1405 to justify the issuance of the
subpoena while the banks cite Republic Act No. 6426 to oppose it. The
core issue is which of the two laws should apply in the instant case.
48
Republic Act No. 1405 was enacted in 1955. Section 2 thereof was first owner of the funds unlawfully taken and which are undisputably now
amended by Presidential Decree No. 1792 in 1981 and further deposited with China Bank, he has the right to inquire into the said
amended by Republic Act No. 7653 in 1993. It now reads: deposits.

Section 2. 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.
Section 8 of Republic Act No. 6426, which was enacted in 1974, and
amended by Presidential Decree No. 1035 and later by Presidential
Decree No. 1246, provides:
Section 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
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.)
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.27
The basis for the application of subpoena is to prove that the loan
intended for Domsat by the Banks and guaranteed by GSIS, was
diverted to a purpose other than that stated in the surety bond. The
Banks, however, argue that GSIS is in fact liable to them for the proper
applications of the loan proceeds and not vice-versa. We are however
not prepared to rule on the merits of this case lest we pre-empt the
findings of the lower courts on the matter.
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.
WHEREFORE, the petition for certiorari is DISMISSED. The Decision
dated 29 February 2008 and 19 June 2009 Resolution of the Court of
Appeals are hereby AFFIRMED.
SO ORDERED.

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 G.R. No. 94723 August 21, 1997
litigation, and e) in cases of violation of the Anti-Money Laundering Act
(AMLA), the Anti-Money Laundering Council (AMLC) may inquire into a
KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr.,
bank account upon order of any competent court.22 On the other hand,
father and Natural Guardian, and Spouses FEDERICO N.
the lone exception to the non-disclosure of foreign currency deposits,
SALVACION, JR., and EVELINA E. SALVACION, petitioners,
under Republic Act No. 6426, is disclosure upon the written permission
vs.
of the depositor.
CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING
CORPORATION and GREG BARTELLI y
These two laws both support the confidentiality of bank deposits. There NORTHCOTT, respondents.
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.23 It covers all bank TORRES, JR., J.:
deposits in the Philippines and no distinction was made between
domestic and foreign deposits. Thus, Republic Act No. 1405 is
In our predisposition to discover the "original intent" of a statute, courts
considered a law of general application. On the other hand, Republic
become the unfeeling pillars of the status quo. Ligle do we realize that
Act No. 6426 was intended to encourage deposits from foreign lenders
statutes or even constitutions are bundles of compromises thrown our
and investors.24 It is a special law designed especially for foreign
way by their framers. Unless we exercise vigilance, the statute may
currency deposits in the Philippines. A general law does not nullify a
already be out of tune and irrelevant to our day.
specific or special law. Generalia specialibus non
derogant.25 Therefore, it is beyond cavil that Republic Act No. 6426
applies in this case. The petition is for declaratory relief. It prays for the following reliefs:

Intengan v. Court of Appeals affirmed the above-cited principle and a.) Immediately upon the filing of this petition, an
categorically declared that for foreign currency deposits, such as U.S. Order be issued restraining the respondents from
dollar deposits, the applicable law is Republic Act No. 6426. applying and enforcing Section 113 of Central
Bank Circular No. 960;
In said case, Citibank filed an action against its officers for persuading
their clients to transfer their dollar deposits to competitor banks. Bank b.) After hearing, judgment be rendered:
records, including dollar deposits of petitioners, purporting to establish
the deception practiced by the officers, were annexed to the complaint.
1.) Declaring the respective rights and duties of
Petitioners now complained that Citibank violated Republic Act No.
petitioners and respondents;
1405. This Court ruled that since the accounts in question are U.S.
dollar deposits, the applicable law therefore is not Republic Act No.
1405 but Republic Act No. 6426. 2.) Adjudging Section 113 of Central Bank Circular
No. 960 as contrary to the provisions of the
Constitution, hence void; because its provision
The above pronouncement was reiterated in China Banking
that "Foreign currency deposits shall be exempt
Corporation v. Court of Appeals,26 where respondent accused his
from attachment, garnishment, or any other order
daughter of stealing his dollar deposits with Citibank. The latter
or process of any court, legislative body,
allegedly received the checks from Citibank and deposited them to her
government agency or any administrative body
account in China Bank. The subject checks were presented in
whatsoever
evidence. A subpoena was issued to employees of China Bank to
testify on these checks. China Bank argued that the Citibank dollar
checks with both respondent and/or her daughter as payees, deposited i.) has taken away the right of
with China Bank, may not be looked into under the law on secrecy of petitioners to have the bank
foreign currency deposits. This Court highlighted the exception to the deposit of defendant Greg
non-disclosure of foreign currency deposits, i.e., in the case of a Bartelli y Northcott garnished
written permission of the depositor, and ruled that respondent, as to satisfy the judgment
49
 rendered in petitioners' favor
in violation of substantive due
process guaranteed by the
Constitution;
ii.) has given foreign currency
depositors an undue favor or
a class privilege in violation of
the equal protection clause of
the Constitution;
iii.) has provided a safe haven
for criminals like the herein
respondent Greg Bartelli y
Northcott since criminals
could escape civil liability for
their wrongful acts by merely
converting their money to a
foreign currency and
depositing it in a foreign
currency deposit account with
an authorized bank.
The antecedent facts:
On February 4, 1989, Greg Bartelli y Northcott, an American tourist,
coaxed and lured petitioner Karen Salvacion, then 12 years old to go
with him to his apartment. Therein, Greg Bartelli detained Karen
Salvacion for four days, or up to February 7, 1989 and was able to
rape the child once on February 4, and three times each day on
February 5, 6, and 7, 1989. On February 7, 1989, after policemen and
people living nearby, rescued Karen, Greg Bartelli was arrested and
detained at the Makati Municipal Jail. The policemen recovered from
Bartelli the following items: 1.) Dollar Check No. 368, Control No.
021000678-1166111303, US 3,903.20; 2.) COCOBANK Bank Book
No. 104-108758-8 (Peso Acct.); 3.) Dollar Account — China Banking
Corp., US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine Money
(P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear)
used in seducing the complainant.
On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya
filed against Greg Bartelli, Criminal Case No. 801 for Serious Illegal
Detention and Criminal Cases Nos. 802, 803, 804, and 805 for four (4)
counts of Rape. On the same day, petitioners filed with the Regional
Trial Court of Makati Civil Case No. 89-3214 for damages with
preliminary attachment against Greg Bartelli. On February 24, 1989,
the day there was a scheduled hearing for Bartelli's petition for bail the
latter escaped from jail.
On February 28, 1989, the court granted the fiscal's Urgent Ex-Parte
Motion for the Issuance of Warrant of Arrest and Hold Departure
Order. Pending the arrest of the accused Greg Bartelli y Northcott, the
criminal cases were archived in an Order dated February 28, 1989.
Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order
dated February 22, 1989 granting the application of herein petitioners,
for the issuance of the writ of preliminary attachment. After petitioners
gave Bond No. JCL (4) 1981 by FGU Insurance Corporation in the
amount of P100,000.00, a Writ of Preliminary Attachment was issued
by the trial court on February 28, 1989.
On March 1, 1989, the Deputy Sheriff of Makati served a Notice of
Garnishment on China Banking Corporation. In a letter dated March
13, 1989 to the Deputy Sheriff of Makati, China Banking Corporation
invoked Republic Act No. 1405 as its answer to the notice of
garnishment served on it. On March 15, 1989, Deputy Sheriff of Makati
Armando de Guzman sent his reply to China Banking Corporation
saying that the garnishment did not violate the secrecy of bank
deposits since the disclosure is merely incidental to a garnishment
properly and legally made by virtue of a court order which has placed
the subject deposits in custodia legis. In answer to this letter of the
Deputy Sheriff of Makati, China Banking Corporation, in a letter dated
March 20, 1989, invoked Section 113 of Central Bank Circular No. 960
to the effect that the dollar deposits or defendant Greg Bartelli are
exempt from attachment, garnishment, or any other order or process of
any court, legislative body, government agency or any administrative
body, whatsoever.
This prompted the counsel for petitioners to make an inquiry with the
Central Bank in a letter dated April 25, 1989 on whether Section 113 of
CB Circular No. 960 has any exception or whether said section has
been repealed or amended since said section has rendered nugatory
the substantive right of the plaintiff to have the claim sought to be
enforced by the civil action secured by way of the writ of preliminary
attachment as granted to the plaintiff under Rule 57 of the Revised
Rules of Court. The Central Bank responded as follows:
May 26, 1989
Ms. Erlinda S. Carolino
12 Pres. Osmena Avenue
South Admiral Village
Paranaque, Metro Manila
Dear Ms. Carolino:
This is in reply to your letter dated April 25, 1989
regarding your inquiry on Section 113, CB Circular
No. 960 (1983).
The cited provision is absolute in application. It
does not admit of any exception, nor has the same
been repealed nor amended.
The purpose of the law is to encourage dollar
accounts within the country's banking system
which would help in the development of the
economy. There is no intention to render futile the
basic rights of a person as was suggested in your
subject letter. The law may be harsh as some
perceive it, but it is still the law. Compliance is,
therefore, enjoined.
Very truly yours,
(SGD) AGAPITO S. FAJARDO
Director1
Meanwhile, on April 10, 1989, the trial court granted petitioners' motion
for leave to serve summons by publication in the Civil Case No. 89-
3214 entitled "Karen Salvacion, et al. vs. Greg Bartelli y Northcott."
Summons with the complaint was a published in the Manila Times
once a week for three consecutive weeks. Greg Bartelli failed to file his
answer to the complaint and was declared in default on August 7,
1989. After hearing the case ex-parte, the court rendered judgment in
favor of petitioners on March 29, 1990, the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered in
favor of plaintiffs and against defendant, ordering
the latter:
1. To pay plaintiff Karen E. Salvacion the amount
of P500,000.00 as moral damages;
2. To pay her parents, plaintiffs spouses Federico
N. Salvacion, Jr., and Evelina E. Salvacion the
amount of P150,000.00 each or a total of
P300,000.00 for both of them;
3. To pay plaintiffs exemplary damages of
P100,000.00; and
4. To pay attorney's fees in an amount equivalent
to 25% of the total amount of damages herein
awarded;
5. To pay litigation expenses of P10,000.00; plus
6. Costs of the suit.
SO ORDERED.
The heinous acts of respondent Greg Bartelli which gave rise to the
award were related in graphic detail by the trial court in its decision as
follows:
The defendant in this case was originally detained
in the municipal jail of Makati but was able to
escape therefrom on February 24, 1989 as per
report of the Jail Warden of Makati to the
Presiding Judge, Honorable Manuel M. Cosico of
the Regional Trial Court of Makati, Branch 136,
where he was charged with four counts of Rape
and Serious Illegal Detention (Crim. Cases Nos.
802 to 805). Accordingly, upon motion of plaintiffs,
through counsel, summons was served upon
defendant by publication in the Manila Times, a
newspaper of general circulation as attested by
the Advertising Manager of the Metro Media
50
Times, Inc., the publisher of the said newspaper.
Defendant, however, failed to file his answer to the
complaint despite the lapse of the period of sixty
(60) days from the last publication; hence, upon
motion of the plaintiffs, through counsel, defendant
was declared in default and plaintiffs were
authorized to present their evidence ex parte.
In support of the complaint, plaintiffs presented as
witnesses the minor Karen E. Salvacion, her
father, Federico N. Salvacion, Jr., a certain Joseph
Aguilar and a certain Liberato Madulio, who gave
the following testimony:
Karen took her first year high school in St. Mary's
Academy in Pasay City but has recently
transferred to Arellano University for her second
year.
In the afternoon of February 4, 1989, Karen was at
the Plaza Fair Makati Cinema Square, with her
friend Edna Tangile whiling away her free time. At
about 3:30 p.m. while she was finishing her snack
on a concrete bench in front of Plaza Fair, an
American approached her. She was then alone
because Edna Tangile had already left, and she
was about to go home. (TSN, Aug. 15, 1989, pp. 2
to 5)
The American asked her name and introduced
himself as Greg Bartelli. He sat beside her when
he talked to her. He said he was a Math teacher
and told her that he has a sister who is a nurse in
New York. His sister allegedly has a daughter who
is about Karen's age and who was with him in his
house along Kalayaan Avenue. (TSN, Aug. 15,
1989, pp. 4-5)
The American asked Karen what was her favorite
subject and she told him it's Pilipino. He then
invited her to go with him to his house where she
could teach Pilipino to his niece. He even gave her
a stuffed toy to persuade her to teach his niece.
(Id., pp. 5-6)
They walked from Plaza Fair along Pasong Tamo,
turning right to reach the defendant's house along
Kalayaan Avenue. (Id., p. 6)
When they reached the apartment house, Karen
noticed that defendant's alleged niece was not
outside the house but defendant told her maybe
his niece was inside. When Karen did not see the
alleged niece inside the house, defendant told her
maybe his niece was upstairs, and invited Karen
to go upstairs. (Id., p. 7)
Upon entering the bedroom defendant suddenly
locked the door. Karen became nervous because
his niece was not there. Defendant got a piece of
cotton cord and tied Karen's hands with it, and
then he undressed her. Karen cried for help but
defendant strangled her. He took a packing tape
and he covered her mouth with it and he circled it
around her head. (Id., p. 7)
Then, defendant suddenly pushed Karen towards
the bed which was just near the door. He tied her
feet and hands spread apart to the bed posts. He
knelt in front of her and inserted his finger in her
sex organ. She felt severe pain. She tried to shout
but no sound could come out because there were
tapes on her mouth. When defendant withdrew his
finger it was full of blood and Karen felt more pain
after the withdrawal of the finger. (Id., p. 8)
He then got a Johnson's Baby Oil and he applied it
to his sex organ as well as to her sex organ. After
that he forced his sex organ into her but he was
not able to do so. While he was doing it, Karen
found it difficult to breathe and she perspired a lot
while feeling severe pain. She merely presumed
that he was able to insert his sex organ a little,
because she could not see. Karen could not recall
how long the defendant was in that position. (Id.
pp. 8-9)
After that, he stood up and went to the bathroom
to wash. He also told Karen to take a shower and
he untied her hands. Karen could only hear the
sound of the water while the defendant, she
presumed, was in the bathroom washing his sex
organ. When she took a shower more blood came
out from her. In the meantime, defendant changed
the mattress because it was full of blood. After the
shower, Karen was allowed by defendant to sleep.
She fell asleep because she got tired crying. The
incident happened at about 4:00 p.m. Karen had
no way of determining the exact time because
defendant removed her watch. Defendant did not
care to give her food before she went to sleep.
Karen woke up at about 8:00 o'clock the following
morning. (Id., pp. 9-10)
The following day, February 5, 1989, a Sunday,
after a breakfast of biscuit and coke at about 8:30
to 9:00 a.m. defendant raped Karen while she was
still bleeding. For lunch, they also took biscuit and
coke. She was raped for the second time at about
12:00 to 2:00 p.m. In the evening, they had rice for
dinner which defendant had stored downstairs; it
was he who cooked the rice that is why it looks
like "lugaw". For the third time, Karen was raped
again during the night. During those three times
defendant succeeded in inserting his sex organ
but she could not say whether the organ was
inserted wholly.
Karen did not see any firearm or any bladed
weapon. The defendant did not tie her hands and
feet nor put a tape on her mouth anymore but she
did not cry for help for fear that she might be killed;
besides, all the windows and doors were closed.
And even if she shouted for help, nobody would
hear her. She was so afraid that if somebody
would hear her and would be able to call the
police, it was still possible that as she was still
inside the house, defendant might kill her.
Besides, the defendant did not leave that Sunday,
ruling out her chance to call for help. At nighttime
he slept with her again. (TSN, Aug. 15, 1989, pp.
12-14)
On February 6, 1989, Monday, Karen was raped
three times, once in the morning for thirty minutes
after a breakfast of biscuits; again in the afternoon;
and again in the evening. At first, Karen did not
know that there was a window because everything
was covered by a carpet, until defendant opened
the window for around fifteen minutes or less to let
some air in, and she found that the window was
covered by styrofoam and plywood. After that, he
again closed the window with a hammer and he
put the styrofoam, plywood, and carpet back. (Id.,
pp. 14-15)
That Monday evening, Karen had a chance to call
for help, although defendant left but kept the door
closed. She went to the bathroom and saw a small
window covered by styrofoam and she also
spotted a small hole. She stepped on the bowl and
she cried for help through the hole. She cried:
"Maawa no po kayo so akin. Tulungan n'yo akong
makalabas dito. Kinidnap ako!" Somebody heard
her. It was a woman, probably a neighbor, but she
got angry and said she was "istorbo". Karen
pleaded for help and the woman told her to sleep
and she will call the police. She finally fell asleep
but no policeman came. (TSN, Aug. 15, 1989, pp.
15-16)
She woke up at 6:00 o'clock the following morning,
and she saw defendant in bed, this time sleeping.
She waited for him to wake up. When he woke up,
he again got some food but he always kept the
door locked. As usual, she was merely fed with
biscuit and coke. On that day, February 7, 1989,
she was again raped three times. The first at
about 6:30 to 7:00 a.m., the second at about 8:30
— 9:00, and the third was after lunch at 12:00
noon. After he had raped her for the second time
he left but only for a short while. Upon his return,
he caught her shouting for help but he did not
understand what she was shouting about. After
she was raped the third time, he left the house.
(TSN, Aug. 15, 1989, pp. 16-17) She again went
to the bathroom and shouted for help. After
51
shouting for about five minutes, she heard many
voices. The voices were asking for her name and
she gave her name as Karen Salvacion. After a
while, she heard a voice of a woman saying they
will just call the police. They were also telling her
to change her clothes. She went from the
bathroom to the room but she did not change her
clothes being afraid that should the neighbors call
for the police and the defendant see her in
different clothes, he might kill her. At that time she
was wearing a T-shirt of the American because
the latter washed her dress. (Id., p. 16)
Afterwards, defendant arrived and he opened the
door. He asked her if she had asked for help
because there were many policemen outside and
she denied it. He told her to change her clothes,
and she did change to the one she was wearing
on Saturday. He instructed her to tell the police
that she left home and willingly; then he went
downstairs but he locked the door. She could hear
people conversing but she could not understand
what they were saying. (Id., p. 19)
When she heard the voices of many people who
were conversing downstairs, she knocked
repeatedly at the door as hard as she could. She
heard somebody going upstairs and when the
door was opened, she saw a policeman. The
policeman asked her name and the reason why
she was there. She told him she was kidnapped.
Downstairs, he saw about five policemen in
uniform and the defendant was talking to them.
"Nakikipag-areglo po sa mga pulis," Karen added.
"The policeman told him to just explain at the
precinct. (Id., p. 20)
They went out of the house and she saw some of
her neighbors in front of the house. They rode the
car of a certain person she called Kuya Boy
together with defendant, the policeman, and two of
her neighbors whom she called Kuya Bong
Lacson and one Ate Nita. They were brought to
Sub-Station I and there she was investigated by a
policeman. At about 2:00 a.m., her father arrived,
followed by her mother together with some of their
neighbors. Then they were brought to the second
floor of the police headquarters. (Id., p. 21)
At the headquarters, she was asked several
questions by the investigator. The written
statement she gave to the police was marked as
Exhibit A. Then they proceeded to the National
Bureau of Investigation together with the
investigator and her parents. At the NBI, a doctor,
a medico-legal officer, examined her private parts.
It was already 3:00 in the early morning of the
following day when they reached the NBI. (TSN,
Aug. 15, 1989, p. 22) The findings of the medico-
legal officer has been marked as Exhibit B.
She was studying at the St. Mary's Academy in
Pasay City at the time of the incident but she
subsequently transferred to Apolinario Mabini,
Arellano University, situated along Taft Avenue,
because she was ashamed to be the subject of
conversation in the school. She first applied for
transfer to Jose Abad Santos, Arellano University
along Taft Avenue near the Light Rail Transit
Station but she was denied admission after she
told the school the true reason for her transfer.
The reason for their denial was that they might be
implicated in the case. (TSN, Aug. 15, 1989, p. 46)
xxx xxx xxx
After the incident, Karen has changed a lot. She
does not play with her brother and sister anymore,
and she is always in a state of shock; she has
been absent-minded and is ashamed even to go
out of the house. (TSN, Sept. 12, 1989, p. 10) She
appears to be restless or sad, (Id., p. 11) The
father prays for P500,000.00 moral damages for
Karen for this shocking experience which
probably, she would always recall until she
reaches old age, and he is not sure if she could
ever recover from this experience. (TSN, Sept. 24,
1989, pp. 10-11)
Pursuant to an Order granting leave to publish notice of decision, said
notice was published in the Manila Bulletin once a week for three
consecutive weeks. After the lapse of fifteen (15) days from the date of
the last publication of the notice of judgment and the decision of the
trial court had become final, petitioners tried to execute on Bartelli's
dollar deposit with China Banking Corporation. Likewise, the bank
invoked Section 113 of Central Bank Circular No. 960.
Thus, petitioners decided to seek relief from this Court.
The issues raised and the arguments articulated by the parties boil
down to two:
May this Court entertain the instant petition despite the fact that
original jurisdiction in petitions for declaratory relief rests with the lower
court? Should Section 113 of Central Bank Circular No. 960 and
Section 8 of R.A. 6426, as amended by P.D. 1246, otherwise known as
the Foreign Currency Deposit Act be made applicable to a foreign
transient?
Petitioners aver as heretofore stated that Section 113 of Central Bank
Circular No. 960 providing that "Foreign currency deposits shall be
exempt from attachment, garnishment, or any other order or process of
any court, legislative body, government agency or any administrative
body whatsoever." should be adjudged as unconstitutional on the
grounds that: 1.) it has taken away the right of petitioners to have the
bank deposit of defendant Greg Bartelli y Northcott garnished to satisfy
the judgment rendered in petitioners' favor in violation of substantive
due process guaranteed by the Constitution; 2.) it has given foreign
currency depositors an undue favor or a class privilege in violation of
the equal protection clause of the Constitution; 3.) it has provided a
safe haven for criminals like the herein respondent Greg Bartelli y
Northcott since criminals could escape civil liability for their wrongful
acts by merely converting their money to a foreign currency and
depositing it in a foreign currency deposit account with an authorized
bank; and 4.) The Monetary Board, in issuing Section 113 of Central
Bank Circular No. 960 has exceeded its delegated quasi-legislative
power when it took away: a.) the plaintiffs substantive right to have the
claim sought to be enforced by the civil action secured by way of the
writ of preliminary attachment as granted by Rule 57 of the Revised
Rules of Court; b.) the plaintiffs substantive right to have the judgment
credit satisfied by way of the writ of execution out of the bank deposit
of the judgment debtor as granted to the judgment creditor by Rule 39
of the Revised Rules of Court, which is beyond its power to do so.
On the other hand, respondent Central Bank, in its Comment alleges
that the Monetary Board in issuing Section 113 of CB Circular No. 960
did not exceed its power or authority because the subject Section is
copied verbatim from a portion of R.A. No. 6426 as amended by P.D.
1246. Hence, it was not the Monetary Board that grants exemption
from attachment or garnishment to foreign currency deposits, but the
law (R.A. 6426 as amended) itself; that it does not violate the
substantive due process guaranteed by the Constitution because a.) it
was based on a law; b.) the law seems to be reasonable; c.) it is
enforced according to regular methods of procedure; and d.) it applies
to all members of a class.
Expanding, the Central Bank said; that one reason for exempting the
foreign currency deposits from attachment, garnishment or any other
order or process of any court, is to assure the development and
speedy growth of the Foreign Currency Deposit System and the
Offshore Banking System in the Philippines; that another reason is to
encourage the inflow of foreign currency deposits into the banking
institutions thereby placing such institutions more in a position to
properly channel the same to loans and investments in the Philippines,
thus directly contributing to the economic development of the country;
that the subject section is being enforced according to the regular
methods of procedure; and that it applies to all foreign currency
deposits made by any person and therefore does not violate the equal
protection clause of the Constitution.
Respondent Central Bank further avers that the questioned provision is
needed to promote the public interest and the general welfare; that the
State cannot just stand idly by while a considerable segment of the
society suffers from economic distress; that the State had to take some
measures to encourage economic development; and that in so doing
persons and property may be subjected to some kinds of restraints or
burdens to secure the general welfare or public interest. Respondent
Central Bank also alleges that Rule 39 and Rule 57 of the Revised
Rules of Court provide that some properties are exempted from
execution/attachment especially provided by law and R.A. No. 6426 as
amended is such a law, in that it specifically provides, among others,
that foreign currency deposits shall be exempted from attachment,
garnishment, or any other order or process of any court, legislative
body, government agency or any administrative body whatsoever.
For its part, respondent China Banking Corporation, aside from giving
reasons similar to that of respondent Central Bank, also stated that
52
respondent China Bank is not unmindful of the inhuman sufferings It has thus been said that —
experienced by the minor Karen E. Salvacion from the beastly hands
of Greg Bartelli; that it is only too willing to release the dollar deposit of
But I also know,5 that laws and institutions must go
Bartelli which may perhaps partly mitigate the sufferings petitioner has
hand in hand with the progress of the human
undergone; but it is restrained from doing so in view of R.A. No. 6426
mind. As that becomes more developed, more
and Section 113 of Central Bank Circular No. 960; and that despite the
enlightened, as new discoveries are made, new
harsh effect of these laws on petitioners, CBC has no other alternative
truths are disclosed and manners and opinions
but to follow the same.
change with the change of circumstances,
institutions must advance also, and keep pace
This Court finds the petition to be partly meritorious. with the times. . . We might as well require a man
to wear still the coat which fitted him when a boy,
as civilized society to remain ever under the
Petitioner deserves to receive the damages awarded to her by the
regimen of their barbarous ancestors.
court. But this petition for declaratory relief can only be entertained and
treated as a petition for mandamus to require respondents to honor
and comply with the writ of execution in Civil Case No. 89-3214. In his Comment, the Solicitor General correctly opined, thus:

This Court has no original and exclusive jurisdiction over a petition for The present petition has far-reaching implications
declaratory relief.2 However, exceptions to this rule have been on the right of a national to obtain redress for a
recognized. Thus, where the petition has far-reaching implications and wrong committed by an alien who takes refuge
raises questions that should be resolved, it may be treated as one under a law and regulation promulgated for a
for mandamus.3 purpose which does not contemplate the
application thereof envisaged by the alien. More
specifically, the petition raises the question
Here is a child, a 12-year old girl, who in her belief that all Americans
whether the protection against attachment,
are good and in her gesture of kindness by teaching his alleged niece
garnishment or other court process accorded to
the Filipino language as requested by the American, trustingly went
foreign currency deposits by PD No. 1246 and CB
with said stranger to his apartment, and there she was raped by said
Circular No. 960 applies when the deposit does
American tourist Greg Bartelli. Not once, but ten times. She was
not come from a lender or investor but from a
detained therein for four (4) days. This American tourist was able to
mere transient or tourist who is not expected to
escape from the jail and avoid punishment. On the other hand, the
maintain the deposit in the bank for long.
child, having received a favorable judgment in the Civil Case for
damages in the amount of more than P1,000,000.00, which amount
could alleviate the humiliation, anxiety, and besmirched reputation she The resolution of this question is important for the
had suffered and may continue to suffer for a long, long time; and protection of nationals who are victimized in the
knowing that this person who had wronged her has the money, could forum by foreigners who are merely passing
not, however get the award of damages because of this unreasonable through.
law. This questioned law, therefore makes futile the favorable
judgment and award of damages that she and her parents fully
xxx xxx xxx
deserve. As stated by the trial court in its decision,

. . . Respondents China Banking Corporation and

Indeed, after hearing the testimony of Karen, the
Central Bank of the Philippines refused to honor
Court believes that it was undoubtedly a shocking
the writ of execution issued in Civil Case No. 89-
and traumatic experience she had undergone
3214 on the strength of the following provision of
which could haunt her mind for a long, long time,
Central Bank Circular No. 960:
the mere recall of which could make her feel so
humiliated, as in fact she had been actually
humiliated once when she was refused admission Sec. 113. Exemption from
at the Abad Santos High School, Arellano attachment. — Foreign
University, where she sought to transfer from currency deposits shall be
another school, simply because the school exempt from attachment,
authorities of the said High School learned about garnishment, or any other
what happened to her and allegedly feared that order or process of any court,
they might be implicated in the case. legislative body, government
agency or any administrative
body whatsoever.
xxx xxx xxx

Central Bank Circular No. 960 was issued

The reason for imposing exemplary or corrective
pursuant to Section 7 of Republic Act No. 6426:
damages is due to the wanton and bestial manner
defendant had committed the acts of rape during a
period of serious illegal detention of his hapless Sec. 7. Rules and
victim, the minor Karen Salvacion whose only fault Regulations. The Monetary
was in her being so naive and credulous to believe Board of the Central Bank
easily that defendant, an American national, could shall promulgate such rules
not have such a bestial desire on her nor capable and regulations as may be
of committing such a heinous crime. Being only 12 necessary to carry out the
years old when that unfortunate incident provisions of this Act which
happened, she has never heard of an old Filipino shall take effect after the
adage that in every forest there is a publication of such rules and
snake, . . . .4 regulations in the Official
Gazette and in a newspaper
of national circulation for at
If Karen's sad fate had happened to anybody's own kin, it would be
least once a week for three
difficult for him to fathom how the incentive for foreign currency deposit
consecutive weeks. In case
could be more important than his child's rights to said award of
the Central Bank promulgates
damages; in this case, the victim's claim for damages from this alien
new rules and regulations
who had the gall to wrong a child of tender years of a country where he
decreasing the rights of
is a mere visitor. This further illustrates the flaw in the questioned
depositors, the rules and
provisions.
regulations at the time the
deposit was made shall
It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a govern.
time when the country's economy was in a shambles; when foreign
investments were minimal and presumably, this was the reason why
The aforecited Section 113 was copied from
said statute was enacted. But the realities of the present times show
Section 8 of Republic Act NO. 6426, as amended
that the country has recovered economically; and even if not, the
by P.D. 1246, thus:
questioned law still denies those entitled to due process of law for
being unreasonable and oppressive. The intention of the questioned
law may be good when enacted. The law failed to anticipate the Sec. 8. Secrecy of Foreign
iniquitous effects producing outright injustice and inequality such as the Currency Deposits. — All
case before us. foreign currency deposits
authorized under this Act, as
53
 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.
The purpose of PD 1246 in according protection
against attachment, garnishment and other court
process to foreign currency deposits is stated in its
whereases, viz.:
WHEREAS, under Republic
Act No. 6426, as amended by
Presidential Decree No. 1035,
certain Philippine banking
institutions and branches of
foreign banks are authorized
to accept deposits in foreign
currency;
WHEREAS, under the
provisions of Presidential
Decree No. 1034 authorizing
the establishment of an
offshore banking system in
the Philippines, offshore
banking units are also
authorized to receive foreign
currency deposits in certain
cases;
WHEREAS, in order to assure
the development and speedy
growth of the Foreign
Currency Deposit System and
the Offshore Banking System
in the Philippines, certain
incentives were provided for
under the two Systems such
as confidentiality of deposits
subject to certain exceptions
and tax exemptions on the
interest income of depositors
who are nonresidents and are
not engaged in trade or
business in the Philippines;
WHEREAS, making absolute
the protective cloak of
confidentiality over such
foreign currency deposits,
exempting such deposits from
tax, and guaranteeing the
vested rights of depositors
would better encourage the
inflow of foreign currency
deposits into the banking
institutions authorized to
accept such deposits in the
Philippines thereby placing
such institutions more in a
position to properly channel
the same to loans and
investments in the Philippines,
thus directly contributing to
the economic development of
the country;
Thus, one of the principal purposes of the
protection accorded to foreign currency deposits is
"to assure the development and speedy growth of
the Foreign Currency Deposit system and the
Offshore Banking in the Philippines" (3rd
Whereas).
The Offshore Banking System was established by
PD No. 1034. In turn, the purposes of PD No.
1034 are as follows:
WHEREAS, conditions
conducive to the
establishment of an offshore
banking system, such as
political stability, a growing
economy and adequate
communication facilities,
among others, exist in the
Philippines;
WHEREAS, it is in the interest
of developing countries to
have as wide access as
possible to the sources of
capital funds for economic
development;
WHEREAS, an offshore
banking system based in the
Philippines will be
advantageous and beneficial
to the country by increasing
our links with foreign lenders,
facilitating the flow of desired
investments into the
Philippines, creating
employment opportunities and
expertise in international
finance, and contributing to
the national development
effort.
WHEREAS, the geographical
location, physical and human
resources, and other positive
factors provide the Philippines
with the clear potential to
develop as another financial
center in Asia;
On the other hand, the Foreign Currency Deposit
system was created by PD. No. 1035. Its purposes
are as follows:
WHEREAS, the establishment
of an offshore banking system
in the Philippines has been
authorized under a separate
decree;
WHEREAS, a number of local
commercial banks, as
depository bank under the
Foreign Currency Deposit Act
(RA No. 6426), have the
resources and managerial
competence to more actively
engage in foreign exchange
transactions and participate in
the grant of foreign currency
loans to resident corporations
and firms;
WHEREAS, it is timely to
expand the foreign currency
lending authority of the said
depository banks under RA
6426 and apply to their
transactions the same taxes
as would be applicable to
transaction of the proposed
offshore banking units;
It is evident from the above [Whereas clauses] that
the Offshore Banking System and the Foreign
Currency Deposit System were designed to draw
54
 deposits from foreign lenders and investors (Vide
second Whereas of PD No. 1034; third Whereas
of PD No. 1035). It is these deposits that are
induced by the two laws and given protection and
incentives by them.
Obviously, 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.
Respondent Greg Bartelli, as stated, is just a
tourist or a transient. He deposited his dollars with
respondent China Banking Corporation only for
safekeeping during his temporary stay in the
Philippines.
For the reasons stated above, the Solicitor
General thus submits that the dollar deposit of
respondent Greg Bartelli 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.6
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.
(Padilla vs. Padilla, 74 Phil. 377).
It would be unthinkable, that the questioned Section 113 of Central
Bank No. 960 would be used as a device by accused Greg Bartelli for
wrongdoing, and in so doing, acquitting the guilty at the expense of the
innocent.
Call it what it may — but is there no conflict of legal policy here? Dollar
against Peso? Upholding the final and executory judgment of the lower
court against the Central Bank Circular protecting the foreign
depositor? Shielding or protecting the dollar deposit of a transient alien
depositor against injustice to a national and victim of a crime? This
situation calls for fairness against legal tyranny.
We definitely cannot have both ways and rest in the belief that we have
served the ends of justice.
IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No.
960 and PD No. 1246, insofar as it amends Section 8 of R.A. No. 6426
are hereby held to be INAPPLICABLE to this case because of its
peculiar circumstances. Respondents are hereby REQUIRED to
COMPLY with the writ of execution issued in Civil Case No. 89-3214,
"Karen Salvacion, et al. vs. Greg Bartelli y Northcott, by Branch CXLIV,
RTC Makati and to RELEASE to petitioners the dollar deposit of
respondent Greg Bartelli y Northcott in such amount as would satisfy
the judgment.
SO ORDERED.
G.R. No. 73882 October 22, 1987
ROSA CANCIO, petitioner,
vs.
HON. COURT OF TAX APPEALS and HON. COMMISSIONER OF
CUSTOMS, respondents.
MELENCIO-HERRERA, J.:
Before us is petitioner's Motion for Reconsideration of this Court's
Resolution of August 11, 1986, which denied for lack of merit her
Petition for Review on certiorari of respondent Court of Tax Appeals'
(CTA) Decision in C.T.A. Case No. 3398.
During the pendency of this case, or on April 23, 1986, petitioner had
passed away and her legal heirs were ordered substituted in her stead
and Jose Cancio, Jr., was appointed guardian ad-litem for the minors
Ma. Irene and Roberto, both surnamed Cancio, in this Court's
Resolution of August 11, 1986.
There is no substantial dispute on the background facts and the
evidentiary aspects Vol the controversy, summarized in said
Decision as follows:
The records show that claimant Mrs. Rosa Cancio
bearing Philippine Passport No. 11797799 while
clearing through the Pre-Boarding (AVSECOM)
Area of MIA with her husband and three (3)
children to board PR 306 for Hongkong in the
morning of June 12, 1981, was apprehended with
One Hundred Two Thousand Nine Hundred
Dollars (US$102,900.00) in cash, six hundred
dollars (US$600.00) in two travelers checks, and
one thousand five hundred (Pl,500.00) Pesos; that
such apprehension was effected only thru an
alarm sounded by the scanner (metal detecting
device) of the AVSECOM men, when Mrs. Cancio
who did not declare her currency had already
passed the Customs inspection area; that subject
currencies were placed and concealed inside the
two fairly-sized carton boxes for local chocolates,
securely wrapped and taped with tin foil-back
paper; and, that in view of claimant's failure, upon
being required, to present the Central Bank
Authority, the said currencies were accordingly
confiscated and a seizure Receipt No. 013 was
issued to her; hence, this seizure proceedings.
At the hearing of this case, claimant, thru counsel,
presented certified xerox copy of her Bank Book
(Exhibit "I") for foreign currency deposit with the
Philippine Commercial and Industrial Bank under
Account FCDU No. 0265, dollar remittances in
telegraphic transfers from abroad for deposits in
her account from May 13, 1981 to May 21, 1981,
and withdrawal cards (Exhibit "l-A" to "1-E",
inclusive), attesting to the fact that claimant Rosa
Cancio had withdrawn from her FCDU Account a
certain amount of United States currency which
tended to show that claimant herein was a foreign
currency depositor pursuant to the provisions of
Republic Act No. 6426, as implemented by Central
Bank Circular No. 343. And herein claimant
testified that because her foreign currency deposit
could not be withdrawn at one time, she made her
withdrawal on several occasions starting from May
14, 1981 up to May 27, 1981 when she closed her
account preparatory to her departure which was
scheduled in the morning of June 12, 1981 for
Hongkong; that from Hongkong, she and her
family intended to proceed to the United States for
medical treatment of her heart ailment as advised
by her two attending physicians from the UST
Hospital; that the US currency that they were
carrying and confiscated from them on June 12,
1981 was intended principally for such medical
purpose and for other miscellaneous and
necessary expenses, and, that the subject
currencies were concealed and hidden by them
inside the two chocolate boxes solely for security
reasons. 1
By reason of the forfeiture decreed by respondent Commissioner of
Customs of both the foreign and local currencies due to petitioner's
failure to present a Central Bank (CB) authority to bring said currencies
out of the country, petitioner appealed to respondent Court of Tax
Appeals. The latter Court affirmed the forfeiture of the US$102,900.00
in cash, and US$600.00 in travellers' checks for having been in
violation of Central Bank Circulars Nos. 265 and 534, in relation to
Section 2530(f) of the Tariff and Customs Code, as amended. It
reversed, however, the forfeiture of P1,500.00 on the ground that since
petitioner was travelling with her husband and three (3) children, the
said amount did not exceed the P500.00 at that each traveller is
allowed to bring out of the country without a CB permit pursuant to
paragraph 4 of CB Circular No. 383.
Petitioner's unimpugned evidence shows that she was a foreign
currency depositor at the Philippine Commercial and Industrial Bank at
Makati, Metro Manila, and that the subject foreign currency was part of
the total amount of US$116,000.00 she had withdrawn from said bank
from May 14 to 27, 1981 for her travel and medical expenses in the
United States via Hongkong. 2 Admitted, too, is the fact that petitioner
55
failed to present to the apprehending customs authorities a Central dated August 3, 1978, issued by the Central Bank reads in explicit
Bank authority to bring out of the country the said currencies while at terms:
the pre-boarding area of the Manila International Airport on June 12,
1981 on her scheduled flight to Hongkong together with her husband
TO: ALL BANKS AUTHORIZED TO ACCEPT FOREIGN CURRENCY
and three children.
DEPOSITS UNDER THE PROVISIONS OF RA 6426, AS AMENDED
AND PRESIDENTIAL DECREE NO. 1035.
The primordial issue for resolution is whether or not respondent Court
had committed reversible error in upholding the forfeiture of the foreign
Effective immediately, the banks authorized to
currencies in question.
accept foreign currency deposits under the
provisions of RA 6426, as amended, and PD 1035
A second look at the facts and the equity of the case, the pertinent and as implemented by Central Bank Circular 343
laws, and the CB Circulars involved constrains us to rule in the and 547, are hereby instructed to advise their
affirmative and, accordingly, to grant reconsideration of our Resolution foreign currency depositors who are withdrawing
of August 11, 1986 denying review. funds for travel purposes to carry with them the
certificate of withdrawal that the banks shall issue.
The travellers shall present the certifications to the
It is true that in so far as the exportation or taking out of foreign
Customs and Central Bank personnel at the MIA,
currency from the country is concerned, Central Bank Circular No. 265,
if requested.
issued on November 20, 1968, particularly paragraph 3 thereof,
mandates:
The banks shall issue a uniform certification, as
follows:
3. No person shall take out or export from the
Philippines foreign currency or any other foreign
exchange except as otherwise authorized by the _________
Central Bank.
Date
Similarly, Central bank Circular No. 534, issued on July 19, 1976,
reiterates and provides in Sec. 3 thereof as follows:
TO WHOM IT MAY CONCERN:

Sec. 3. Unless specifically authorized by the

This certifies that
Central Bank or allowed under existing
________________________whose signature
international agreements or Central Bank
appears below has withdrawn today, the amount
regulations, no person shall take or transmit or
of ____________in cash (US$ _______________)
attempt to take or transmit foreign exchange, in
and Travellers Check
any form out of the Philippines only, through other
(US$___________________________) against
persons, through the mails, or through
his/her foreign currency account maintained with
international carriers.
us.

The provisions of this Section shall not apply to

The funds herein withdrawn are represented to be
tourists and non-resident temporary visitors who
used in connection with the depositor's foreign
are taking or sending out of the Philippines their
travel scheduled on or about
own foreign exchange brought in by them.
____________________197_________.

However, peculiar to the present controversy is the fact that, as stated

_________
previously, petitioner is a foreign currency depositor. Relevant and
___
applicable to her is the following provision of the "Foreign Currency
Deposit Act of the Philip pines" (Republic Act No. 6426, as amended),
which took effect upon its approval on April 4,1972: (Signature

SEC. 5. Withdrawability and transferability of Official Ove

deposits. — There shall be no restriction on the
withdrawal by the depositor of his deposit or on
_______________________
the transferability of the same abroad except those
arising from the contract between the depositor
and the bank.11 (Emphasis Ours). (Signature of Depositor)

Under the foregoing provision, the transferability abroad of foreign
currency deposits is unrestricted. Only one exception is provided for
therein, which is, any restriction " from the contract between the
depositor and the bank." Neither is a Central Bank authority required
for the transferability abroad of foreign currency deposits.
Attention is called, however, to the implementing rules and regulations
to said Republic Act 6426, as embodied in CB Circular No. 343 issued
on April 24, 1972, which provides:
SEC. 11. Withdrawability and Liquidity of Deposits.
a. x x x x x x x x x
b. Subject only to the terms of the contract
between the bank and the depositor, the latter
shall have a general license to withdraw his
deposit, notwithstanding any change in policy or
regulations.
xxx xxx xxx
(Emphaisis supplied)
Respondent Court has taken the position that the foregoing provision
its the right of the depositor to that of withdrawal and withholds from
him the right of transferability abroad. That is not so. Circular-Letter,
Please be guided accordingly.
(SGD.) R.D
Director
It is a fact that petitioner could not present a certificate of withdrawal at
the Manila International Airport when she was about to depart. As she
had explained, however, she was unaware of this requirement. And if
she had wrapped her dollar currency inside a chocolate box it was for
"security reasons." Besides, as instructed in the Circular-Letter
abovequoted, it is the authorized depository bank which should advise
its depositors to carry with them the certificate of withdrawal. At any
rate, respondent Court has found that petitioner has presented in
evidence her foreign currency bank book3 and her withdrawal
cards.4 These may be considered as substantial compliance for
purposes of this case.
Indeed, given the underlying objective of the Foreign Currency Deposit
Act, as amended, which is to attract and invite the deposit of foreign
currencies which are acceptable as part of the international reserve in
duly authorized banks in order that they may be put into the stream of
the banking system, it would be to defeat the very purpose of the law
to place undue restrictions on the transferability of such funds. The
countervailing effect would be to discourage prospective foreign
currency depositors to the detriment of the banking system.
In fine, Central Bank Circulars Nos. 265 and 534 requiring prior Central
Bank authority for the taking out of the country of foreign currency

56
should not be made to encompass foreign currency depositors whose
rights are expressly defined and guaranteed in a special law, the
Foreign Currency Deposit Act (RA 6426, as amended). As a foreign
currency depositor, therefore, petitioner cannot be adjudged to have
violated the aforestated Central Bank Circulars. It follows that neither is
there room for the application of Section 2530(f) of the Tariff and
Customs Code, as amended, which provides for the forfeiture of any
article and other objects, the exportation of which is effected or
attempted contrary to law.
This is not to condone petitioner's failure to declare the foreign
currency she was carrying out of the country but just to stress that the
Foreign Currency Deposit Act grants petitioner the right of
transferability of her funds abroad except that she was not advised by
her bank to secure, and consequently was unable to present, the
necessary certificate of withdrawal from said bank.
ACCORDINGLY, the Decision of respondent Court of Tax Appeals is
hereby SET ASIDE in so far as it upheld the forfeiture by respondent
Commissioner of Customs of the sums of US$102,900.00 in cash, and
US$600.00 in traveller's checks, which amounts should now be
returned to petitioner's heirs, but AFFIRMED in so far as it reversed the
forfeiture by the same official of the sum of P1,500.00. No costs.
SO ORDERED.
G.R. No. 170290               April 11, 2012
PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner,
vs.
CITIBANK, N.A. and BANK OF AMERICA, S.T. &
N.A., Respondents.
DECISION
MENDOZA, J.:
This is a petition for review under Rule 45 of the 1997 Revised Rules
of Civil Procedure, assailing the October 27, 2005 Decision1 of the
Court of Appeals (CA) in CA-G.R. CV No. 61316, entitled "Citibank,
N.A. and Bank of America, S.T. & N.A. v. Philippine Deposit Insurance
Corporation."
The Facts
Petitioner Philippine Deposit Insurance Corporation (PDIC) is a
government instrumentality created by virtue of Republic Act (R.A.) No.
3591, as amended by R.A. No. 9302.2
Respondent Citibank, N.A. (Citibank) is a banking corporation while
respondent Bank of America, S.T. & N.A. (BA) is a national banking
association, both of which are duly organized and existing under the
laws of the United States of America and duly licensed to do business
in the Philippines, with offices in Makati City.3
In 1977, PDIC conducted an examination of the books of account of
Citibank. It discovered that Citibank, in the course of its banking
business, from September 30, 1974 to June 30, 1977, received from its
head office and other foreign branches a total of ₱11,923,163,908.00
in dollars, covered by Certificates of Dollar Time Deposit that were
interest-bearing with corresponding maturity dates.4 These funds,
which were lodged in the books of Citibank under the account "Their
Account-Head Office/Branches-Foreign Currency," were not reported
to PDIC as deposit liabilities that were subject to assessment for
insurance.5 As such, in a letter dated March 16, 1978, PDIC assessed
Citibank for deficiency in the sum of ₱1,595,081.96.6
Similarly, sometime in 1979, PDIC examined the books of accounts of
BA which revealed that from September 30, 1976 to June 30, 1978, BA
received from its head office and its other foreign branches a total of
₱629,311,869.10 in dollars, covered by Certificates of Dollar Time
Deposit that were interest-bearing with corresponding maturity dates
and lodged in their books under the account "Due to Head
Office/Branches."7 Because BA also excluded these from its deposit
liabilities, PDIC wrote to BA on October 9, 1979, seeking the
remittance of ₱109,264.83 representing deficiency premium
assessments for dollar deposits.8
Believing that litigation would inevitably arise from this dispute,
Citibank and BA each filed a petition for declaratory relief before the
Court of First Instance (now the Regional Trial Court) of Rizal on July
19, 1979 and December 11, 1979, respectively.9 In their petitions,
Citibank and BA sought a declaratory judgment stating that the money
placements they received from their head office and other foreign
branches were not deposits and did not give rise to insurable deposit
liabilities under Sections 3 and 4 of R.A. No. 3591 (the PDIC
Charter) and, as a consequence, the deficiency assessments made by
PDIC were improper and erroneous.10 The cases were then
consolidated.11
On June 29, 1998, the Regional Trial Court, Branch 163, Pasig
City (RTC) promulgated its Decision12 in favor of Citibank and BA,
ruling that the subject money placements were not deposits and did
not give rise to insurable deposit liabilities, and that the deficiency
assessments issued by PDIC were improper and erroneous.
Therefore, Citibank and BA were not liable to pay the same. The RTC
reasoned out that the money placements subject of the petitions were
not assessable for insurance purposes under the PDIC Charter
because said placements were deposits made outside of the
Philippines and, under Section 3.05(b) of the PDIC Rules and
Regulations,13 such deposits are excluded from the computation of
deposit liabilities. Section 3(f) of the PDIC Charter likewise excludes
from the definition of the term "deposit" any obligation of a bank
payable at the office of the bank located outside the Philippines. The
RTC further stated that there was no depositor-depository relationship
between the respondents and their head office or other branches. As a
result, such deposits were not included as third-party deposits that
must be insured. Rather, they were considered inter-branch deposits
which were excluded from the assessment base, in accordance with
the practice of the United States Federal Deposit Insurance
Corporation (FDIC) after which PDIC was patterned.
Aggrieved, PDIC appealed to the CA which affirmed the ruling of the
RTC in its October 27, 2005 Decision. In so ruling, the CA found that
the money placements were received as part of the bank’s internal
dealings by Citibank and BA as agents of their respective head offices.
This showed that the head office and the Philippine branch were
considered as the same entity. Thus, no bank deposit could have
arisen from the transactions between the Philippine branch and the
head office because there did not exist two separate contracting
parties to act as depositor and depositary.14 Secondly, the CA called
attention to the purpose for the creation of PDIC which was to protect
the deposits of depositors in the Philippines and not the deposits of the
same bank through its head office or foreign branches.15 Thirdly,
because there was no law or jurisprudence on the treatment of inter-
branch deposits between the Philippine branch of a foreign bank and
its head office and other branches for purposes of insurance, the CA
was guided by the procedure observed by the FDIC which considered
inter-branch deposits as non-assessable.16 Finally, the CA cited
Section 3(f) of R.A. No. 3591, which specifically excludes obligations
payable at the office of the bank located outside the Philippines from
the definition of a deposit or an insured deposit. Since the subject
money placements were made in the respective head offices of
Citibank and BA located outside the Philippines, then such placements
could not be subject to assessment under the PDIC Charter.17
Hence, this petition.
The Issues
PDIC raises the issue of whether or not the subject dollar deposits are
assessable for insurance purposes under the PDIC Charter with the
following assigned errors:
A.
The appellate court erred in ruling that the subject dollar deposits
are money placements, thus, they are not subject to the
provisions of Republic Act No. 6426 otherwise known as the
"Foreign Currency Deposit Act of the Philippines."
B.
The appellate court erred in ruling that the subject dollar deposits
are not covered by the PDIC insurance. 18
Respondents similarly identify only one issue in this case:
Whether or not the money placements subject matter of these
petitions are assessable for insurance purposes under the PDIC
Act.19
The sole question to be resolved in this case is whether the funds
placed in the Philippine branch by the head office and foreign branches
of Citibank and BA are insurable deposits under the PDIC Charter and,
as such, are subject to assessment for insurance premiums.
The Court’s Ruling
57
The Court rules in the negative.
A branch has no separate legal personality;
Purpose of the PDIC
PDIC argues that the head offices of Citibank and BA and their
individual foreign branches are separate and independent entities. It
insists that under American jurisprudence, a bank’s head office and its
branches have a principal-agent relationship only if they operate in the
same jurisdiction. In the case of foreign branches, however, no such
relationship exists because the head office and said foreign branches
are deemed to be two distinct entities.20 Under Philippine law,
specifically, Section 3(b) of R.A. No. 3591, which defines the terms
"bank" and "banking institutions," PDIC contends that the law treats a
branch of a foreign bank as a separate and independent banking unit.21
The respondents, on the other hand, initially point out that the factual
findings of the RTC and the CA, with regard to the nature of the money
placements, the capacity in which the same were received by the
respondents and the exclusion of inter-branch deposits from
assessment, can no longer be disturbed and should be accorded great
weight by this Court.22 They also argue that the money placements are
not deposits. They postulate that for a deposit to exist, there must be at
least two parties – a depositor and a depository – each with a legal
personality distinct from the other. Because the respondents’
respective head offices and their branches form only a single legal
entity, there is no creditor-debtor relationship and the funds placed in
the Philippine branch belong to one and the same bank. A bank cannot
have a deposit with itself.23
This Court is of the opinion that the key to the resolution of this
controversy is the relationship of the Philippine branches of Citibank
and BA to their respective head offices and their other foreign
branches.
The Court begins by examining the manner by which a foreign
corporation can establish its presence in the Philippines. It may choose
to incorporate its own subsidiary as a domestic corporation, in which
case such subsidiary would have its own separate and independent
legal personality to conduct business in the country. In the alternative,
it may create a branch in the Philippines, which would not be a legally
independent unit, and simply obtain a license to do business in the
Philippines.24
In the case of Citibank and BA, it is apparent that they both did not
incorporate a separate domestic corporation to represent its business
interests in the Philippines. Their Philippine branches are, as the name
implies, merely branches, without a separate legal personality from
their parent company, Citibank and BA. Thus, being one and the same
entity, the funds placed by the respondents in their respective
branches in the Philippines should not be treated as deposits made by
third parties subject to deposit insurance under the PDIC Charter.
For lack of judicial precedents on this issue, the Court seeks guidance
from American jurisprudence.1âwphi1 In the leading case of Sokoloff
v. The National City Bank of New York,25 where the Supreme Court of
New York held:
Where a bank maintains branches, each branch becomes a
separate business entity with separate books of account. A
depositor in one branch cannot issue checks or drafts upon another
branch or demand payment from such other branch, and in many other
respects the branches are considered separate corporate entities and
as distinct from one another as any other bank. Nevertheless, when
considered with relation to the parent bank they are not
independent agencies; they are, what their name imports, merely
branches, and are subject to the supervision and control of the
parent bank, and are instrumentalities whereby the parent bank
carries on its business, and are established for its own particular
purposes, and their business conduct and policies are controlled by the
parent bank and their property and assets belong to the parent bank,
although nominally held in the names of the particular
branches. Ultimate liability for a debt of a branch would rest upon
the parent bank. [Emphases supplied]
This ruling was later reiterated in the more recent case of United
States v. BCCI Holdings Luxembourg26 where the United States Court
of Appeals, District of Columbia Circuit, emphasized that "while
individual bank branches may be treated as independent of one
another, each branch, unless separately incorporated, must be viewed
as a part of the parent bank rather than as an independent entity."
In addition, Philippine banking laws also support the conclusion that
the head office of a foreign bank and its branches are considered as
one legal entity. Section 75 of R.A. No. 8791 (The General Banking
Law of 2000) and Section 5 of R.A. No. 7221 (An Act Liberalizing the
Entry of Foreign Banks) both require the head office of a foreign bank
to guarantee the prompt payment of all the liabilities of its Philippine
branch, to wit:
Republic Act No. 8791:
Sec. 75. Head Office Guarantee. – In order to provide effective
protection of the interests of the depositors and other creditors of
Philippine branches of a foreign bank, the head office of such branches
shall fully guarantee the prompt payment of all liabilities of its
Philippine branch.
Residents and citizens of the Philippines who are creditors of a branch
in the Philippines of foreign bank shall have preferential rights to the
assets of such branch in accordance with the existing laws.
Republic Act No. 7721:
Sec. 5. Head Office Guarantee. – The head office of foreign bank
branches shall guarantee prompt payment of all liabilities of its
Philippine branches.
Moreover, PDIC must be reminded of the purpose for its creation, as
espoused in Section 1 of R.A. No. 3591 (The PDIC Charter) which
provides:
Section 1. There is hereby created a Philippine Deposit Insurance
Corporation hereinafter referred to as the "Corporation" which shall
insure, as herein provided, the deposits of all banks which are entitled
to the benefits of insurance under this Act, and which shall have the
powers hereinafter granted.
The Corporation shall, as a basic policy, promote and safeguard the
interests of the depositing public by way of providing permanent and
continuing insurance coverage on all insured deposits.
R.A. No. 9576, which amended the PDIC Charter, reaffirmed the
rationale for the establishment of the PDIC:
Section 1. Statement of State Policy and Objectives. - It is hereby
declared to be the policy of the State to strengthen the mandatory
deposit insurance coverage system to generate, preserve, maintain
faith and confidence in the country's banking system, and protect it
from illegal schemes and machinations.
Towards this end, the government must extend all means and
mechanisms necessary for the Philippine Deposit Insurance
Corporation to effectively fulfill its vital task of promoting and
safeguarding the interests of the depositing public by way of providing
permanent and continuing insurance coverage on all insured deposits,
and in helping develop a sound and stable banking system at all times.
The purpose of the PDIC is to protect the depositing public in the event
of a bank closure. It has already been sufficiently established by US
jurisprudence and Philippine statutes that the head office shall answer
for the liabilities of its branch. Now, suppose the Philippine branch of
Citibank suddenly closes for some reason. Citibank N.A. would then be
required to answer for the deposit liabilities of Citibank Philippines. If
the Court were to adopt the posture of PDIC that the head office and
the branch are two separate entities and that the funds placed by the
head office and its foreign branches with the Philippine branch are
considered deposits within the meaning of the PDIC Charter, it would
result to the incongruous situation where Citibank, as the head office,
would be placed in the ridiculous position of having to reimburse itself,
as depositor, for the losses it may incur occasioned by the closure of
Citibank Philippines. Surely our law makers could not have envisioned
such a preposterous circumstance when they created PDIC.
Finally, the Court agrees with the CA ruling that there is nothing in the
definition of a "bank" and a "banking institution" in Section 3(b) of the
PDIC Charter27 which explicitly states that the head office of a foreign
bank and its other branches are separate and distinct from their
Philippine branches.
There is no need to complicate the matter when it can be solved by
simple logic bolstered by law and jurisprudence. Based on the
foregoing, it is clear that the head office of a bank and its branches are
considered as one under the eyes of the law. While branches are
treated as separate business units for commercial and financial
reporting purposes, in the end, the head office remains responsible
and answerable for the liabilities of its branches which are under its
supervision and control. As such, it is unreasonable for PDIC to require
the respondents, Citibank and BA, to insure the money placements
made by their home office and other branches. Deposit insurance is
superfluous and entirely unnecessary when, as in this case, the
58
institution holding the funds and the one which made the placements
are one and the same legal entity.
Funds not a deposit under the definition
of the PDIC Charter;
Excluded from assessment
PDIC avers that the funds are dollar deposits and not money
placements. Citing R.A. No. 6848, it defines money placement as a
deposit which is received with authority to invest. Because there is no
evidence to indicate that the respondents were authorized to invest the
subject dollar deposits, it argues that the same cannot be considered
money placements.28 PDIC then goes on to assert that the funds
received by Citibank and BA are deposits, as contemplated by Section
3(f) of R.A. No. 3591, for the following reasons: (1) the dollar deposits
were received by Citibank and BA in the course of their banking
operations from their respective head office and foreign branches and
were recorded in their books as "Account-Head Office/Branches-Time
Deposits" pursuant to Central Bank Circular No. 343 which implements
R.A. No. 6426; (2) the dollar deposits were credited as dollar time
accounts and were covered by Certificates of Dollar Time Deposit
which were interest-bearing and payable upon maturity, and (3) the
respondents maintain 100% foreign currency cover for their deposit
liability arising from the dollar time deposits as required by Section 4 of
R.A. No. 6426.29
To refute PDIC’s allegations, the respondents explain the inter-branch
transactions which necessitate the creation of the accounts or
placements subject of this case. When the Philippine branch needs to
procure foreign currencies, it will coordinate with a branch in another
country which handles foreign currency purchases. Both branches
have existing accounts with their head office and when a money
placement is made in relation to the acquisition of foreign currency
from the international market, the amount is credited to the account of
the Philippine branch with its head office while the same is debited
from the account of the branch which facilitated the purchase. This is
further documented by the issuance of a certificate of time deposit with
a stated interest rate and maturity date. The interest rate represents
the cost of obtaining the funds while the maturity date represents the
date on which the placement must be returned. On the maturity date,
the amount previously credited to the account of the Philippine branch
is debited, together with the cost for obtaining the funds, and credited
to the account of the other branch. The respondents insist that the
interest rate and maturity date are simply the basis for the debit and
credit entries made by the head office in the accounts of its branches
to reflect the inter-branch accommodation.30 As regards the
maintenance of currency cover over the subject money placements,
the respondents point out that they maintain foreign currency cover in
excess of what is required by law as a matter of prudent banking
practice.31
PDIC attempts to define money placement in order to impugn the
respondents’ claim that the funds received from their head office and
other branches are money placements and not deposits, as defined
under the PDIC Charter. In the process, it loses sight of the important
issue in this case, which is the determination of whether the funds in
question are subject to assessment for deposit insurance as required
by the PDIC Charter. In its struggle to find an adequate definition of
"money placement," PDIC desperately cites R.A. No. 6848, The
Charter of the Al-Amanah Islamic Investment Bank of the Philippines.
Reliance on the said law is unfounded because nowhere in the law is
the term "money placement" defined. Additionally, R.A. No. 6848 refers
to the establishment of an Islamic bank subject to the rulings of Islamic
Shari’a to assist in the development of the Autonomous Region of
Muslim Mindanao (ARMM),32 making it utterly irrelevant to the case at
bench. Since Citibank and BA are neither Islamic banks nor are they
located anywhere near the ARMM, then it should be painfully obvious
that R.A. No. 6848 cannot aid us in deciding this case.
Furthermore, PDIC heavily relies on the fact that the respondents
documented the money placements with certificates of time deposit to
simply conclude that the funds involved are deposits, as contemplated
by the PDIC Charter, and are consequently subject to assessment for
deposit insurance. It is this kind of reasoning that creates non-existent
obscurities in the law and obstructs the prompt resolution of what is
essentially a straightforward issue, thereby causing this case to drag
on for more than three decades.1âwphi1
Noticeably, PDIC does not dispute the veracity of the internal
transactions of the respondents which gave rise to the issuance of the
certificates of time deposit for the funds the subject of the present
dispute. Neither does it question the findings of the RTC and the CA
that the money placements were made, and were payable, outside of
the Philippines, thus, making them fall under the exclusions to deposit
liabilities. PDIC also fails to impugn the truth of the testimony of John
David Shaffer, then a Fiscal Agent and Head of the Assessment
Section of the FDIC, that inter-branch deposits were excluded from the
assessment base. Therefore, the determination of facts of the lower
courts shall be accepted at face value by this Court, following the well-
established principle that factual findings of the trial court, when
adopted and confirmed by the CA, are binding and conclusive on this
Court, and will generally not be reviewed on appeal.33
As explained by the respondents, the transfer of funds, which resulted
from the inter-branch transactions, took place in the books of account
of the respective branches in their head office located in the United
States. Hence, because it is payable outside of the Philippines, it is not
considered a deposit pursuant to Section 3(f) of the PDIC Charter:
Sec. 3(f) The term "deposit" means the unpaid balance of money or its
equivalent received by a bank in the usual course of business and for
which it has given or is obliged to give credit to a commercial,
checking, savings, time or thrift account or which is evidenced by its
certificate of deposit, and trust funds held by such bank whether
retained or deposited in any department of said bank or deposit in
another bank, together with such other obligations of a bank as the
Board of Directors shall find and shall prescribe by regulations to be
deposit liabilities of the Bank; Provided, that any obligation of a
bank which is payable at the office of the bank located outside of
the Philippines shall not be a deposit for any of the purposes of
this Act or included as part of the total deposits or of the insured
deposits; Provided further, that any insured bank which is
incorporated under the laws of the Philippines may elect to include for
insurance its deposit obligation payable only at such branch.
[Emphasis supplied]
The testimony of Mr. Shaffer as to the treatment of such inter-branch
deposits by the FDIC, after which PDIC was modelled, is also
persuasive. Inter-branch deposits refer to funds of one branch
deposited in another branch and both branches are part of the same
parent company and it is the practice of the FDIC to exclude such
inter-branch deposits from a bank’s total deposit liabilities subject to
assessment.34
All things considered, the Court finds that the funds in question are not
deposits within the definition of the PDIC Charter and are, thus,
excluded from assessment.
WHEREFORE, the petition is DENIED. The October 27, 2005 Decision
of the Court of Appeals in CA-G.R. CV No. 61316 is AFFIRMED.
G.R. No. 176438               January 24, 2011
PHILIPPINE DEPOSIT INSURANCE CORPORATION
(PDIC), Petitioner,
vs.
PHILIPPINE COUNTRYSIDE RURAL BANK, INC., RURAL BANK OF
CARMEN (CEBU), INC., BANK OF EAST ASIA (MINGLANILLA,
CEBU), INC., and PILIPINO RURAL BANK (CEBU),
INC., Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Court filed by the Philippine Deposit Insurance
Corporation (PDIC) assailing the September 18, 2006 Decision of the
Court of Appeals-Cebu (CA-Cebu), which granted the petition for
injunction filed by respondents Philippine Countryside Rural Bank,
Inc. (PCRBI), Rural Bank of Carmen (Cebu), Inc. (RBCI), Bank of East
Asia (Minglanilla, Cebu), Inc. (BEAI), and Pilipino Rural Bank (Cebu),
Inc. (PRBI), all collectively referred to as "Banks." The dispositive
portion of the CA-Cebu decision reads:
WHEREFORE, in view of all the foregoing premises, the petition for
injunction is hereby GRANTED. The respondent PDIC is restrained
from further conducting investigations or examination on petitioners-
banks without the requisite approval from the Monetary Board.
SO ORDERED.1
In a resolution dated January 25, 2007, the CA-Cebu denied
petitioner’s motion for reconsideration for "lack of merit."2
THE FACTS
On March 9, 2005, the Board of Directors of the PDIC (PDIC
Board) adopted Resolution No. 2005-03-0323 approving the conduct of
59
an investigation, in accordance with Section 9(b-1) of Republic
Act (R.A.) No. 3591, as amended, on the basis of the Reports of
Examination of the Bangko Sentral ng Pilipinas (BSP) on ten (10)
banks, four (4) of which are respondents in this petition for review. The
said resolution also created a Special Investigation Team to conduct
the said investigation, with the authority to administer oaths, to
examine, take and preserve testimony of any person relating to the
subject of the investigation, and to examine pertinent bank records.
On May 25, 2005, the PDIC Board adopted another resolution,
Resolution No. 2005-05-056,4 approving the conduct of an
investigation on PCRBI based on a Complaint-Affidavit filed by a
corporate depositor, the Philippine School of Entrepreneurship and
Management (PSEMI) through its president, Jacinto L. Jamero.
On June 3, 2005, in accordance with the two PDIC Board resolutions,
then PDIC President and Chief Executive Officer Ricardo M. Tan
issued the Notice of Investigation5 to the President or The Highest
Ranking Officer of PCRBI.
On June 7, 2005, the PDIC Investigation Team personally served the
Notice of Investigation on PCRBI at its Head Office in Pajo, Lapu-Lapu
City.6
According to PDIC, in the course of its investigation, PCRBI was found
to have granted loans to certain individuals, which were settled by way
of dacion of properties. These properties, however, had already been
previously foreclosed and consolidated under the names of PRBI,
BEAI and RBCI.7
On June 15, 2005, PDIC issued similar notices of investigation to
PRBI8 and BEAI.9
The notices stated that the investigation was to be conducted pursuant
to Section 9 (b-1) of the PDIC Charter and upon authority of PDIC
Board Resolution No. 2005-03-032 authorizing the twelve (12) named
representatives of PDIC to conduct the investigation.10
The investigation was sought because the Banks were found to be
among the ten (10) banks collectively known as "Legacy Banks." The
Reports of General and Special Examinations of the BSP as of June
30, 2004, disclosed, among others, that the Legacy Banks were
commonly owned and/or controlled by Legacy Plans Inc. (now Legacy
Consolidated Plans, Inc.), and Celso Gancayco delos Angles, Jr. and
his family.11
The notice of investigation was served on PRBI the next day, June 16,
2005.12
On June 25, 2005, a separate notice of investigation13 was served on
RBCI. The latter provided the PDIC Investigation Team with certified
copies of the loan documents they had requested, until its president
received an order directing him not to allow the investigation.14
Subsequently, PRBI and BEAI refused entry to their bank premises
and access to their records and documents by the PDIC Investigation
Team, upon advice of their respective counsels.15
On June 16 and 17, 2005, Atty. Victoria G. Noel (Atty. Noel) of the
Tiongson & Antenor Cruz Law Office sent letters to the
PDIC16 informing it of her legal advice to PCRBI and BEAI not to
submit to PDIC investigation on the ground that its investigatory power
pursuant to Section 9(b-1) of R.A. No. 3591, as amended (An Act
Establishing The Philippine Deposit Insurance Corporation, Defining
Its Powers And Duties And For Other Purposes), cannot be
differentiated from the examination powers accorded to PDIC under
Section 8, paragraph 8 of the same law, under which, prior approval
from the Monetary Board is required.
On June 17, 2005, PDIC General Counsel Romeo M. Mendoza sent a
reply to Atty. Noel stating that "PDIC’s investigation power, as
distinguished from the examination power of the PDIC under Section 8
of the same law, does not need prior approval of the Monetary
Board."17 PDIC then urged PRBI and BEAI "not to impede the conduct
of PDIC’s investigation" as the same "constitutes a violation of the
PDIC Charter for which PRBI and BEAI may be held criminally and/or
administratively liable."18
On June 27 and 28, 2005, the Banks, through counsel, sought further
clarification from PDIC on its source of authority to conduct the
impending investigations and requested that PDIC refrain from
proceeding with the investigations.19
Simultaneously, the Banks wrote to the Monetary Board requesting a
clarification on the parameters of PDIC’s power of
investigation/examination over the Banks and for an issuance of a
directive to PDIC not to pursue the investigations pending the
requested clarification.20
On June 28, 2005, PRBI and BEAI again received letters from PDIC,
dated June 24, 2005, which appeared to be final demands on them to
allow its investigation.21 PRBI and BEAI replied that letters of
clarification had been sent to PDIC and the Monetary Board.22 Pending
action on such requests, PDIC was requested to refrain from
proceeding with the investigation.23
Notwithstanding, on July 11, 2005, the Banks received a letter, dated
July 8, 2005, from the PDIC General Counsel reiterating its position
that prior Monetary Board approval was not a pre-requisite to PDIC’s
exercise of its investigative power.24
Not in conformity, on July 28, 2005, the Banks filed a Petition for
Declaratory Relief with a Prayer for the Issuance of a TRO and/or Writ
of Preliminary Injunction (RTC Petition) before the Regional Trial Court
of Makati (RTC-Makati) which was docketed as Civil Case No. 05-
697.25
In the RTC Petition, the Banks prayed for a judgment interpreting
Section 9(b-1) of the PDIC Charter, as amended, to require prior
Monetary Board approval before PDIC could exercise its
investigation/examination power over the Banks.26
PDIC filed a motion to dismiss alleging that the RTC had no jurisdiction
over the said petition since a breach had already been committed by
the Banks when they received the notices of investigation, and
because PDIC need not secure prior Monetary Board approval since
"examination" and "investigation" are two different terms.27
Later, the Banks withdrew their application for a temporary restraining
order (TRO) reasoning that lower courts cannot issue injunctions
against PDIC. Thus, the Banks instituted a petition for injunction with
application for TRO and/or Preliminary Injunction (CA-Manila
petition) before the Court of Appeals-Manila (CA-Manila). The case
was docketed as CA-G.R. SP No. 91038.28
Even before the CA-Manila could rule on the application for a TRO
and/or writ of preliminary injunction, the RTC-Makati dismissed the
petition on the ground that there already existed a breach of law that
isolated the case from the jurisdiction of the trial court.29
The Banks filed a motion for reconsideration but it was denied by the
RTC for lack of merit.30 On February 10, 2006, the Banks filed a notice
of appeal31 which they later withdrew on February 28, 2006.32
In view of the dismissal of the RTC-Makati petition, the CA-Manila
dismissed the petition for injunction for being moot and academic. In its
Decision, dated February 1, 2006,33 the CA-Manila wrote:
What remained for the petitioners to do was to litigate over the breach
or violation by ordinary action, as the circumstances ensuing from the
breach or violation warrant. The ordinary action may either be in the
same case, if the RTC permitted the conversion, in which event the
RTC may allow the parties to file such pleadings as may be necessary
or proper, pursuant to Sec. 5, Rule 63; or the petitioners may file
another action in the proper court (e.g. including the Court of Appeals,
should injunction be among the reliefs to be sought) upon some cause
of action that has arisen from the breach or violation.34
Thereafter, on March 14, 2006, the Banks filed their Petition for
Injunction with Prayer for Preliminary Injunction 35 (CA-Cebu
Petition) with the CA-Cebu (CA-Cebu).
On March 15, 2006, the CA-Cebu issued a resolution granting the
Bank’s application for a TRO. This enjoined the PDIC, its
representatives or agents or any other persons or agency assisting
them or acting for and in their behalf from conducting
examinations/investigations on the Banks’ head and branch offices
without securing the requisite approval from the Monetary Board of
BSP.36
During the pendency of the CA-Cebu petition, PDIC filed with this
Court a Petition for Certiorari, Prohibition and Mandamus with Prayer
for Issuance of Temporary Restraining Order and/or Writ of
Preliminary Injunction under Rule 65 docketed as G.R. No. 173370.37 It
alleged that the CA-Cebu committed grave abuse of discretion
amounting to lack or excess of jurisdiction in taking cognizance of the
Banks’ petition, and in issuing a TRO and a writ of preliminary
injunction.38
60
On July 31, 2006, this Court issued a resolution dismissing the petition
for certiorari in G.R. No. 173370. The Resolution reads:
Considering the allegations, issues and arguments adduced in the
petition for certiorari, prohibition and mandamus with prayer for
preliminary injunction and/or restraining order dated 19 July 2006, the
Court resolves to DISMISS the petition for failure to sufficiently show
that the questioned resolution of the Court of Appeals is tainted with
grave abuse of discretion. Moreover, the petition failed to conform with
Rule 65 and other related provisions of the 1997 Rules of Civil
Procedure, as amended, governing petitions for certiorari, prohibition
and mandamus filed with the Supreme Court, since petitioner failed to
submit a verified statement of material date of receipt of the assailed
resolution dated 16 May 2006 in accordance with Section 4, Rule 65 in
relation to the second paragraph of Section 3, Rule 46. In any event,
the petition is premature since no motion for reconsideration of the
questioned resolution of the Court of Appeals was filed prior to the
availment of this special civil action and there are no sufficient
allegations to bring the case within the recognized exceptions to this
rule.39
On September 18, 2006, after both parties had submitted their
respective memoranda, the CA-Cebu rendered a decision granting the
writ of preliminary injuction,40 pertinent portions of which read:
[A]fter undergoing a series of amendments, the controlling law with
respect to PDIC’s power to conduct examination of banks is-prior
approval of the Monetary Board is a condition sine qua non for PDIC to
exercise its power of examination. To rule otherwise would disregard
the amendatory law of the PDIC’s charter.
The Court is not also swayed by the contention of respondent that
what it seeks to conduct is an investigation and not an examination of
petitioners’ transactions, hence prior approval of the Monetary Board is
a mere surplusage.
The ordinary definition of the words "examination" and "investigation"
would lead one to conclude that both pertain to the same thing and
there seems to be no fine line differentiating one from the other.
Black’s Law Dictionary defines the word "investigate" as "to examine
and inquire into with care and accuracy; to find out by careful
inquisition; examination and the word "examination" as an
investigation. In Collin’s Dictionary of Banking and Finance, the word
"investigation" is defined as an "examination to find out what is wrong."
In the case of Anti-Graft League of the Philippines, Inc. vs. Hon.
Ortega, et al.,41 the Supreme Court using Ballentine’s Law Dictionary
defines an "investigation" as an inquiry, judicial or otherwise, for the
discovery or collection of facts concerning the matter or matters
involved. Such common definitions would show that there is really
nothing to distinguish between these two (2) terms as to support the
PDIC view differentiating Section 9 (b-1) from paragraph 8, Section 8
of the PDIC Charter.
In the realm of the PDIC rules, specifically under Section 3 of PDIC
Regulatory Issuance No. 2205-0242 "investigation" is defined as:
Investigation shall refer to fact-finding examination, study, inquiry, for
determining whether the allegations in a complaint or findings in a final
report of examination may properly be the subject of an administrative,
criminal or civil action.
From the foregoing definition alone, it can be easily deduced that
investigation and examination are synonymous terms. Simply stated,
investigation encompasses a fact-finding examination. Thus, it is
inconsistent with the rules if respondent PDIC be (sic) allowed to
conduct an investigation without the approval of the Monetary Board.
Moreover, the Court sees that the rationale of the law in requiring a
(sic) prior approval from the Monetary Board whenever an examination
or in this case an investigation needs to be conducted by the PDIC is
obviously to ensure that there is no overlapping of efforts, duplication
of functions and more importantly to provide a check and balance to
the otherwise unrestricted power of respondent PDIC to conduct
investigations on banks insured by it.
With the foregoing premises, this Court rules that a prior approval from
the Monetary Board is necessary before respondent PDIC can proceed
with its investigations on petitioners-banks.43
PDIC moved for reconsideration but it was denied in a resolution dated
January 25, 2007.44
Hence, this petition.
THE ISSUES
I.
WHETHER RESPONDENT BANKS VIOLATED THE RULE AGAINST
FORUM SHOPPING WHEN THEY FILED THE PETITION FOR
INJUNCTION BEFORE THE COURT OF APPEALS-CEBU.
II.
WHETHER THE PRONOUNCEMENT OF THE REGIONAL TRIAL
COURT OF MAKATI IN THE PETITION FOR DECLARATORY
RELIEF CONSTITUTES RES JUDICATA TO THE PETITION FOR
INJUNCTION IN THE COURT OF APPEALS-CEBU.
III.
WHETHER PETITIONER WAS DEPRIVED OF ITS OPPORTUNITY
TO BE HEARD WHEN THE COURT OF APPEALS-CEBU ISSUED
THE WRIT OF INJUNCTION.
IV.
WHETHER THE ISSUES RAISED BY PETITIONERS ARE THE
SAME ISSUES RAISED IN G.R. NO. 173370 WHICH WAS EARLIER
DISMISSED BY THIS COURT.
V.
WHETHER THE COURT OF APPEALS ERRED IN FINDING THAT
PRIOR APPROVAL OF THE MONETARY BOARD OF THE
BANGKO SENTRAL NG PILIPINAS IS NECESSARY BEFORE THE
PDIC MAY CONDUCT AN INVESTIGATION OF RESPONDENT
BANKS.
THE COURT’S RULING
I - Whether respondent banks violated the rule against forum
shopping when they filed the petition for injunction before the
Court of Appeals-Cebu.
II - Whether the pronouncement of the Regional Trial Court of
Makati in the petition for declaratory relief constitutes res judicata
to the petition for injunction in the Court of Appeals-Cebu.
In the recent case of Sameer Oversees Placement Agency, Inc. v.
Mildred R. Santos,45 the Court discussed the matter of forum shopping:
Forum shopping is defined as an act of a party, against whom an
adverse judgment or order has been rendered in one forum, of seeking
and possibly getting a favorable opinion in another forum, other than
by appeal or special civil action for certiorari. It may also be the
institution of two or more actions or proceedings grounded on the
same cause on the supposition that one or the other court would make
a favorable disposition. There is forum shopping where the elements
of litis pendentia are present, namely: (a) there is identity of parties, or
at least such parties as represent the same interest in both actions; (b)
there is identity of rights asserted and relief prayed for, the relief being
founded on the same set of facts; and (c) the identity of the two
preceding particulars is such that any judgment rendered in the
pending case, regardless of which party is successful, would amount
to res judicata in the other. It is expressly prohibited by this Court
because it trifles with and abuses court processes, degrades the
administration of justice, and congests court dockets. A willful and
deliberate violation of the rule against forum shopping is a ground for
summary dismissal of the case, and may also constitute direct
contempt.46
Juxtaposing the RTC-Makati, CA-Manila and CA-Cebu petitions, what
must be determined here, is whether the elements of litis pendentia are
present between and among these petitions, i.e. whether (a) there is
identity of parties, or at least such parties as represent the same
interest in both actions; (b) there is identity of rights asserted and relief
prayed for, the relief being founded on the same set of facts; and (c)
the identity of the two preceding particulars is such that any judgment
rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other.
The first element is clearly present as between the RTC-Makati petition
and the CA-Cebu petition. Both involved the Banks on one hand, and
the PDIC on the other.
The second and third elements of litis pendentia, however, are patently
wanting. The rights asserted and reliefs prayed for were different,
though founded on the same set of facts. The RTC-Makati Petition was
61
one for declaratory relief while the CA-Manila Petition was one for
injunction with a prayer for preliminary injunction.
A petition for declaratory relief is filed by any person interested under a
deed, will, contract or other written instrument, or whose rights are
affected by a statute, executive order or regulation, ordinance, or any
other governmental regulation, before breach or violation, thereof, to
determine any question of construction or validity arising, and for a
declaration of his rights or duties thereunder.47
Injunction, on the other hand, is "a judicial writ, process or proceeding
whereby a party is directed either to do a particular act, in which case it
is called a mandatory injunction, or to refrain from doing a particular
act, in which case it is called a prohibitory injunction. As a main action,
injunction seeks to permanently enjoin the defendant through a final
injunction issued by the court and contained in the judgment."48
Clearly, there is a marked difference between the reliefs sought under
an action for declaratory relief and an action for injunction. While an
action for declaratory relief seeks a declaration of rights or duties, or
the determination of any question or validity arising under a statute,
executive order or regulation, ordinance, or any other governmental
regulation, or under a deed, will, contract or other written instrument,
under which his rights are affected, and before breach or violation, an
action for injunction ultimately seeks to enjoin or to compel a party to
perform certain acts.
Moreover, as stated in the RTC-Makati Decision, because the Banks
had already breached the provisions of law on which declaratory
judgment was being sought, it was without jurisdiction to take
cognizance of the same. Any judgment rendered in the RTC-Makati
petition would not amount to res judicata in the CA-Manila Petition.
Thus, the RTC was correct in dismissing the case, having been bereft
of jurisdiction to take cognizance of the action for declaratory
judgment.
As between the CA-Manila and the CA-Cebu petitions, the second and
third elements of litis pendentia are absent. The rights asserted and
reliefs prayed for were different, although founded on the same set of
facts.
The CA-Manila Petition is a petition for injunction wherein the Banks
prayed that:
1) Immediately upon filing of this Petition, a Writ of
Preliminary Injunction and/or Temporary
Restraining Order be issued commanding the
respondent and all its officers, employees and
agents to cease and desist from proceeding with
the investigations sought to be conducted on the
petitioners’ head and branch offices while the
Petition for Declaratory Relief before Branch 58 of
the Makati Regional Trial Court is pending.
2) After due proceedings, judgment be rendered
declaring as permanent the Writ of Preliminary
Injunction and/or Temporary Restraining Order
prayed for above.
Other equitable reliefs are likewise prayed for.49
[Underscoring supplied]
The CA-Cebu Petition, on the other hand, is denominated as a Petition
for Injunction With Prayer for Writ of Preliminary Injunction and/or
Restraining Order. The Banks prayed therein that:
1) Upon filing of this Petition, a Writ of Preliminary
Injunction and/or Temporary Restraining Order be
issued forthwith, enjoining Respondent PDIC and
all its officers, employees and agents to cease and
desist from conducting
examinations/investigations on Petitioner Banks’
head and branch offices without securing the
requisite approval from the Monetary Board of the
Bangko Sentral ng Pilipinas, as required by Sec.
8, Paragraph 8 of the PDIC Charter, as amended;
2) After due proceedings, judgment be rendered
declaring as permanent the Writ of Preliminary
Injunction and/or Temporary Restraining Order
prayed for above.
Other equitable reliefs are likewise prayed for.50
As can be gleaned from the above-cited portions of the CA-Manila and
CA-Cebu petitions, the petitions seek different reliefs.
Therefore, as between and among the RTC Makati, and the CA-Manila
and CA-Cebu petitions, there is no forum shopping.
III - Whether petitioner was deprived of its opportunity to be heard
when the Court of Appeals-Cebu issued the writ of injunction.
PDIC alleges that the CA-Cebu, in issuing the TRO in its March 15,
2006 Resolution, and subsequently, the preliminary injunction in its
May 16, 2006 Resolution, violated the fundamental rule that courts
should avoid issuing injunctive relief which would in effect dispose of
the main case without trial.51 PDIC argues that a TRO is intended only
as a restraint until the propriety of granting a temporary injunction can
be determined, and it goes no further than to preserve the status until
that determination.52 Moreover, its purpose is merely to suspend
proceedings until such time when there may be an opportunity to
inquire whether any injunction should be granted, and it is not intended
to operate as an injunction pendente lite, and should not, in effect,
determine the issues involved before the parties can have their day in
court, or give an advantage to either party by proceeding in the
acquisition or alteration of the property the right to which is disputed
while the hands of the other party are tied.53
On the other hand, the Banks claim that PDIC was given every
opportunity to present its arguments against the issuance of the
injunction.54 Its active participation in the proceedings negates its
assertion that it was denied procedural due process in the issuance of
the writ of injunction.55 Citing Salonga v. Court of Appeals,56 the Banks
state that the essence of due process is the reasonable opportunity to
be heard and to submit evidence one may have in support of one’s
defense,57 and PDIC was able to do so.
On March 15, 2006, the CA-Cebu issued a resolution granting their
prayer for a 60-day TRO, and requiring PDIC to file its comment.58 The
latter thereafter filed its Comment ad Cautelam dated March 30,
2006.59 [Underscoring ours]
On May 16, 2006, the CA-Cebu issued another resolution, this time
granting the prayer for a preliminary injunction and requiring the parties
to file their respective memoranda. PDIC thereafter filed its
memorandum dated July 31, 2006.60
On September 18, 2006, the CA-Cebu promulgated its Decision
granting the Petition for Injunction.61 PDIC filed a motion for
reconsideration dated October 10, 2006,62 which was subsequently
denied.
The essence of procedural due process is found in the reasonable
opportunity to be heard and submit one’s evidence in support of his
defense.63 The Court finds that procedural due process was observed
by the CA-Cebu. The parties were afforded equal opportunity to
present their arguments. In the absence of any indication to the
contrary, the CA-Cebu must be accorded the presumption of regularity
in the performance of their functions. However, as discussed herein,
the matter of whether it erred in its conclusion and issuance of the
TRO, preliminary injunction and final injunction is another matter
altogether.
IV – Whether the issues raised by petitioner are the same issues
raised in G.R. No. 173370 which was earlier dismissed by this
Court.
In G.R. 173370, a petition for certiorari under Rule 65 of the Rules of
Court, PDIC alleged that the CA-Cebu committed grave abuse of
discretion amounting to lack or excess of jurisdiction in taking
cognizance of the Bank’s petition, and in issuing a TRO and a writ of
preliminary injunction.64
In the case at bench, a petition for review under Rule 45, PDIC’s core
contention is that the CA-Cebu erred in finding that prior approval of
the Monetary Board of the BSP is necessary before it may conduct an
investigation of the Banks.
Clearly then, the two petitions were of different nature raising different
issues.
G.R. 173370 challenged the CA-Cebu’s having taken cognizance of
the Bank’s petition and interlocutory orders on the issuance of a TRO
and a writ of preliminary injunction. This case, however, strikes at the
core of the final decision on the merits of the CA-Cebu, and not merely
the interlocutory orders. While both G.R. 173370 and the present case
may have been anchored on the same set of facts, that is, the refusal
of the Banks to allow PDIC to conduct an investigation without the prior
consent of the Monetary Board, the issues raised in the two petitions
62
are not identical. Moreover, the disposal of the first case does not
amount to res judicata in this case.
V – Whether the Court of Appeals-Cebu erred in finding that prior
approval of the Monetary Board of the Bangko Sentral ng
Pilipinas is necessary before the PDIC may conduct an
investigation of respondent banks.
PDIC is of the position that in order for it to exercise its power of
investigation, the law requires that:
(a) The investigation is based on a complaint of a
depositor or any other government agency, or on
the report of examination of [the] Bangko Sentral
ng Pilipinas (BSP) and/or PDIC; and,
(b) The complaint alleges, or the BSP and/or PDIC
Report of Examination contains adverse findings
of, fraud, irregularities or anomalies committed by
the Bank and/or its directors, officers, employees
or agents; and,
(c) The investigation is upon the authority of the
PDIC Board of Directors.65
It argues that when it commenced its investigation on the Banks, all of
the aforementioned requirements were met. PDIC stresses that its
power of examination is different from its power of investigation, in
such that the former requires prior approval of the Monetary Board
while the latter requires merely the approval of the PDIC Board.66 It
further claims that the power of examination cannot be exercised within
twelve (12) months from the last examination conducted, whereas the
power of investigation is without limitation as to the frequency of its
conduct. It states that the purpose of the PDIC’s power of examination
is merely to look into the condition of the bank, whereas the power of
investigation aims to address fraud, irregularities and anomalies based
on complaints from depositors and other government agencies or upon
reports of examinations conducted by the PDIC itself or by the BSP.67
The Banks, on the other hand, are of the opinion that a holistic reading
of the PDIC charter shows that petitioner’s power of examination is
synonymous with its power of investigation.68 They cite, as bases, the
law dictionary definitions, Section 8, Eighth paragraph69 and Section
9(b-1)70 of the PDIC Charter, and Rule 1, Section 3(1) of PDIC
Regulatory Issuance No. 2005-02, which defines "investigation" as
follows:
(l) ‘Investigation’ shall refer to fact-finding examination, study or inquiry
for determining whether the allegations in a complaint or findings in a
final report of examination may properly be the subject of an
administrative, criminal or civil action.
The Banks further cite Section X658 of the Manual of Regulations for
Banks, which states:
Sec. X658 - Examination by the BSP. The term ‘examination’ shall,
henceforth, refer to an investigation of an institution under the
supervisory authority of the BSP to determine compliance with laws
and regulations. It shall include determination that the institution is
conducting its business on a safe and sound basis. Examination
requires full and comprehensive looking into the operations and books
of institutions, and shall include, but need not be limited to the
following:
a. Determination of the bank’s solvency and liquidity
position;
b. Evaluation of asset quality as well as determination of
sufficiency of valuation reserves on loans and other risk
assets;
c. Review of all aspects of bank operations;
d. Assessment of risk management system, including the
evaluation of the effectiveness of the bank management’s
oversight functions, policies, procedures, internal control and
audit;
e. Appraisal of overall management of the bank;
f. Review of compliance and applicable laws, rules and
regulations; and any other activities relevant to the above."
After an evaluation of the respective positions of the parties, the Court
is of the view that the Monetary Board approval is not required for
PDIC to conduct an investigation on the Banks.
The disagreement stems from the interpretation of these two key
provisions of the PDIC Charter. The confusion can be attributed to the
fact that although "investigation" and "examination" are two separate
and distinct procedures under the charter of the PDIC and the BSP,
the words seem to be used loosely and interchangeably.
It does not help that indeed these terms are very closely related in a
generic sense. However, while "examination" connotes a mere generic
perusal or inspection, "investigation" refers to a more intensive scrutiny
for a more specific fact-finding purpose. The latter term is also usually
associated with proceedings conducted prior to criminal prosecution.
The PDIC was created by R.A. No. 3591 on June 22, 1963 as an
insurer of deposits in all banks entitled to the benefits of insurance
under the PDIC Charter to promote and safeguard the interests of the
depositing public by way of providing permanent and continuing
insurance coverage of all insured deposits. It is a government
instrumentality that operates under the Department of Finance. Its
primary purpose is to act as deposit insurer, as a co-regulator of
banks, and as receiver and liquidator of closed banks.71
Section 1 of the PDIC Charter states:
SECTION 1. There is hereby created a Philippine Deposit Insurance
Corporation hereinafter referred to as the "Corporation" which shall
insure, as herein provided, the deposits of all banks which are entitled
to the benefits of insurance under this Act, and which shall have the
powers hereinafter granted.
The Corporation shall, as a basic policy, promote and safeguard the
interests of the depositing public by way of providing permanent and
continuing insurance coverage on all insured deposits.
Section 1 of R.A. No. 9576 further provides: An Act Increasing the
Maximum Deposit Insurance Coverage, and in connection therewith, to
Strengthen the Regulatory and Administrative Authority, and Financial
Capability of the Philippine Deposit Insurance Corporation (PDIC),
amending for this purpose R.A. No. 3591, as Amended, otherwise
known as the PDIC Charter.
SECTION 1. Statement of State Policy and Objectives. - It is hereby
declared to be the policy of the State to strengthen the mandatory
deposit insurance coverage system to generate, preserve, maintain
faith and confidence in the country’s banking system, and protect it
from illegal schemes and machinations.
Towards this end, the government must extend all means and
mechanisms necessary for the Philippine Deposit Insurance
Corporation to effectively fulfill its vital task of promoting and
safeguarding the interests of the depositing public by way of providing
permanent and continuing insurance coverage on all insured deposits,
and in helping develop a sound and stable banking system at all
times.1âwphi1
Under its charter, the PDIC is empowered to conduct examination of
banks with prior approval of the Monetary Board:
Eighth – To conduct examination of banks with prior approval of the
Monetary Board: Provided, That no examination can be conducted
within twelve (12) months from the last examination date: Provided,
however, That the Corporation may, in coordination with the Bangko
Sentral, conduct a special examination as the Board of Directors, by an
affirmative vote of a majority of all its members, if there is a threatened
or impending closure of a bank; Provided, further, That,
notwithstanding the provisions of Republic Act No. 1405, as amended,
Republic Act No. 6426, as amended, Republic Act No. 8791, and other
laws, the Corporation and/or the Bangko Sentral, may inquire into or
examine deposit accounts and all information related thereto in case
there is a finding of unsafe or unsound banking practice; Provided,
That to avoid overlapping of efforts, the examination shall maximize
the efficient use of the relevant reports, information, and findings of the
Bangko Sentral, which it shall make available to the Corporation; (As
amended by R.A. 9302, 12 August 2004, R.A. 9576, 1 June 2009)
xxx. [Underlining supplied]
Section 9(b-1) of the PDIC Charter further provides that the PDIC
Board shall have the power to:
POWERS AND RESPONSIBILITIES AND PROHIBITIONS
63
 SECTION 9. xxx
(b) The Board of Directors shall appoint examiners who shall have
power, on behalf of the Corporation to examine any insured bank.
Each such examiner shall have the power to make a thorough
examination of all the affairs of the bank and in doing so, he shall have
the power to administer oaths, to examine and take and preserve the
testimony of any of the officers and agents thereof, and, to compel the
presentation of books, documents, papers, or records necessary in his
judgment to ascertain the facts relative to the condition of the bank;
and shall make a full and detailed report of the condition of the bank to
the Corporation. The Board of Directors in like manner shall appoint
claim agents who shall have the power to investigate and examine all
claims for insured deposits and transferred deposits. Each claim agent
shall have the power to administer oaths and to examine under oath
and take and preserve testimony of any person relating to such
claim. (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April
1992)
(b-1) The investigators appointed by the Board of Directors shall have
the power on behalf of the Corporation to conduct investigations on
frauds, irregularities and anomalies committed in banks, based on
reports of examination conducted by the Corporation and Bangko
Sentral ng Pilipinas or complaints from depositors or from other
government agency. Each such investigator shall have the power to
administer oaths, and to examine and take and preserve the testimony
of any person relating to the subject of investigation. (As added by
R.A. 9302, 12 August 2004)
xxx. [Underscoring supplied]
As stated above, the charter empowers the PDIC to conduct an
investigation of a bank and to appoint examiners who shall have the
power to examine any insured bank. Such investigators are authorized
to conduct investigations on frauds, irregularities and anomalies
committed in banks, based on an examination conducted by the PDIC
and the BSP or on complaints from depositors or from other
government agencies.
The distinction between the power to investigate and the power to
examine is emphasized by the existence of two separate sets of rules
governing the procedure in the conduct of investigation and
examination. Regulatory Issuance (RI) No. 2005-02 or the PDIC Rules
on Fact-Finding Investigation of Fraud, Irregularities and Anomalies
Committed in Banks covers the procedural requirements of the
exercise of the PDIC’s power of investigation. On the other hand, RI
No. 2009-05 sets forth the guidelines for the conduct of the power of
examination.
The definitions provided under the two aforementioned regulatory
issuances elucidate on the distinction between the power of
examination and the power of investigation.
Section 2 of RI No. 2005-02 states that its coverage shall be applicable
to "all fact-finding investigations on fraud, irregularities and/or
anomalies committed in banks that are conducted by PDIC based on:
[a] complaints from depositors or other government agencies; and/or
[b] final reports of examinations of banks conducted by the Bangko
Sentral ng Pilipinas and/or PDIC."
72
The same issuance states that the Final Report of Examination  is one
of the three pre-requisites to the conduct of an investigation, in addition
to the authorization of the PDIC Board73 and a complaint.74 Juxtaposing
this provision with Section 9(b-1) of the PDIC Charter, since an
examination is explicitly made the basis of a fact-finding examination,
then clearly examination and investigation are two different
proceedings. It would obviously defy logic to make the result of an
"investigation" the basis of the same proceeding. Thus, RI No. 2005-02
defines an "investigation" as a "fact-finding examination, study or
inquiry for determining whether the allegations in a complaint or
findings in a final report of examination may properly be the subject of
an administrative, criminal or civil action."75
The Banks cite the dictionary definitions of "examination" and
"investigation" to justify their conclusion that these terms refer to one
and the same proceeding. It is tempting to use these two terms
interchangeably, which practice may be perfectly justified in a purely
literary sense. Indeed, a reading of the PDIC Charter shows that the
two terms have been used interchangeably at some point. However,
based on the provisions aforecited, the intention of the laws is clearly
to differentiate between the process of investigation and that of
examination.
In 2009, to clarify procedural matters, PDIC released RI No. 2009-05
or the Rules and Regulations on Examination of Banks. Section 2
thereof differentiated between the two types of examination as follows:
Section 2. Types of Examination
a. Regular Examination - An examination conducted
independently or jointly with the BSP. It requires the prior
approval of the PDIC Board of Directors and the Monetary
Board (MB). It may be conducted only after an interval of at
least twelve (12) months from the closing date of the last
Regular Examination.
b. Special Examination – An examination conducted at any
time in coordination with the BSP, by an affirmative vote of a
majority of all the members of the PDIC Board of
Directors, without need of prior MB approval, if there is a
threatened or impending bank closure as determined by the
PDIC Board of Directors. [Underscoring supplied]
Section 3 of RI No. 2009-05 provides for the general scope of the
PDIC examination:
Section 3. Scope of Examination
The examination shall include, but need not be limited to, the following:
a. Determination of the bank’s solvency and liquidity
position;
b. Evaluation of asset quality as well as determination of
sufficiency of valuation reserves on loans and other risk
assets;
c. Review of all aspects of bank operations;
d. Assessment of risk management system, including the
evaluation of the effectiveness of the bank management’s
oversight functions, policies, procedures, internal control and
audit;
e. Appraisal of overall management of the bank;
f. Review of compliance with applicable banking laws, and
rules and regulations, including PDIC issuances;
g. Follow-through of specific exceptions/ violations noted
during a previous examination; and
h. Any other activity relevant to the above.
Rule 2, Section 1 of PDIC RI No. 2005-02 or the PDIC Rules on Fact-
Finding Investigation of Fraud, Irregularities and Anomalies Committed
in Banks provides for the scope of fact-finding investigations as
follows:
SECTION 1. Scope of the Investigation.
Fact-finding Investigations shall be limited to the particular acts or
omissions subject of a complaint or a Final Report of Examination.
From the above-cited provisions, it is clear that the process of
examination covers a wider scope than that of investigation.
Examination involves an evaluation of the current status of a bank and
determines its compliance with the set standards regarding solvency,
liquidity, asset valuation, operations, systems, management, and
compliance with banking laws, rules and regulations.
Investigation, on the other hand, is conducted based on specific
findings of certain acts or omissions which are subject of a complaint
or a Final Report of Examination.
Clearly, investigation does not involve a general evaluation of the
status of a bank.1âwphi1 An investigation zeroes in on specific acts
and omissions uncovered via an examination, or which are cited in a
complaint.
An examination entails a review of essentially all the functions and
facets of a bank and its operation. It necessitates poring through
voluminous documents, and requires a detailed evaluation thereof.
Such a process then involves an intrusion into a bank’s records.
64
In contrast, although it also involves a detailed evaluation, an
investigation centers on specific acts of omissions and, thus, requires a
less invasive assessment.
The practical justification for not requiring the Monetary Board approval
to conduct an investigation of banks is the administrative hurdles and
paperwork it entails, and the correspondent time to complete those
additional steps or requirements. As in other types of investigation,
time is always of essence, and it is prudent to expedite the
proceedings if an accurate conclusion is to be arrived at, as an
investigation is only as precise as the evidence on which it is based.
The promptness with which such evidence is gathered is always of
utmost importance because evidence, documentary evidence in
particular, is remarkably fungible. A PDIC investigation is conducted to
"determine[e] whether the allegations in a complaint or findings in a
final report of examination may properly be the subject of an
administrative, criminal or civil action."76 In other words, an
investigation is based on reports of examination and an examination is
conducted with prior Monetary Board approval. Therefore, it would be
unnecessary to secure a separate approval for the conduct of an
investigation. Such would merely prolong the process and provide
unscrupulous individuals the opportunity to cover their tracks.
Indeed, while in a literary sense, the two terms may be used
interchangeably, under the PDIC Charter, examination and
investigation refer to two different processes. To reiterate, an
examination of banks requires the prior consent of the Monetary
Board, whereas an investigation based on an examination report, does
not.
WHEREFORE, the petition is GRANTED. The Decision and
Resolution of the Court of Appeals in CA G.R. CEB SP. No. 01550,
dated September 18, 2006 and January 25, 2007
are REVERSED and SET ASIDE.
SO ORDERED.
G.R. No. 230037, March 19, 2018
SPOUSES KISHORE LADHO CHUGANI AND PRISHA KISHORE
CHUGANI, ET AL., Petitioners, v. PHILIPPINE DEPOSIT
INSURANCE CORPORATION, Respondent.
DECISION
TIJAM, J.:
Before Us is a Petition for Review on Certiorari filed by the petitioners
assailing the Decision1 dated June 29, 2016 of the Court of Appeals
(CA) in CA-G.R. SP No. 141770 dismissing the appeal of the
petitioners and affirming the Consolidated Order2 dated December 27,
2013 of the Regional Trial Court (RTC), Branch 62 of Makati City in
SCA Nos. 13-763, 13-764, 13-765, 13-801, 13-802, 13-803, 13-807,
13-1049, and 13-1050, which dismissed the Petition for Certiorari for
lack of jurisdiction.
The factual antecedents of the case are as follows:
Petitioners, upon the invitation of Raymundo Garan (Garan), the
President of Rural Bank of Mawab (Davao), Inc., (RBMI), signified their
intention to open Time Deposits with RBMI.3
RBMI then sent to petitioners, through courier, the Time Deposit
Specimen Signature Cards and Personal Information Sheet with the
instruction that petitioners send them back, through mail, to RBMI.4
Petitioners then opened Time Deposit Accounts with RBMI through
inter-branch deposits to the accounts of RBMI maintained in
Metrobank and China Bank- Tagum, Davao Branches. Thereafter,
Certificates of Time Deposits (CTDs) and Official Receipts were issued
to petitioners.5
Sometime in September 2011, petitioners came to know that the
Monetary Board of the Bangko Sentral ng Pilipinas placed RBMI under
receivership and thereafter closed the latter. Petitioners, then filed
claims for insurance of their time deposits.6
Respondent Philippine Deposit Insurance Corporation (PDIC) denied
the claims on the following grounds: 1.) based on bank records
submitted by RBMI, petitioners' deposit accounts are not part of
RBMI's outstanding deposit liabilities; 2.) the time deposits of
petitioners are fraudulent and their CTDs were not duly issued by
RBMI, but were mere replicas of unissued CTD's in the inventory
submitted by RBMI to PDIC; and 3.) the amounts purportedly
deposited by the petitioners were credited to the personal account of
Garan, hence, they could not be construed as valid liabilities of RBMI.7
Petitioners filed a request for reconsideration of PDIC's denial of their
claim. PDIC however rejected the same in its Letter8 dated May 22,
2013.
Hence, petitioners filed a Petition for Certiorari under Rule 65 of the
Rules of Court with the Regional Trial Court (RTC).
On December 27, 2013, the RTC issued a Consolidated
Order9 dismissing the Petition for Certiorari filed by the petitioners, to
wit:
WHEREFORE, the instant petitions docketed as SCA Nos. 13-763, 13-
764, 13-765, 13-801, 13-802, 13-803, 13-807, 13-1049, and 13-1050
are all DISMISSED for lack of jurisdiction
SO ORDERED.
Aggrieved, the petitioners appealed the RTC's Decision to the CA.
The CA in its Decision10 dated June 29, 2016, denied the appeal of the
petitioners, thus:
WHEREFORE, premises considered, the appeal is hereby
DISMISSED, and the Consolidated Order dated December 27, 2013 of
the Regional Trial Court of Makati City, Branch 62 in SCA Nos. 13-763,
13-764, 13-765, 13-801, 13-802, 13-803, 13-807, 13-1049, and 13-
1050 is AFFIRMED.
SO ORDERED.11
Petitioners now come before Us raising the issues of 1) Whether the
CA is correct in ruling that the RTC has no jurisdiction over the
Petitions for Certiorari filed by the petitioners; and 2) Whether the PDIC
committed grave abuse of discretion in denying petitioners claim for
deposit insurance.
The petition has no merit.
The PDIC was created by Republic Act (R.A.) No. 359112 on June 22,
1963 as an insurer of deposits in all banks entitled to the benefits of
insurance under the PDIC Charter to promote and safeguard the
interests of the depositing public by way of providing permanent and
continuing insurance coverage of all insured deposits.13
Based on its charter, the PDIC has the duty to grant or deny claims for
deposit insurance. Specifically, under Section 4(f) of R.A. No. 3591, as
amended by R.A. No. 9576,14 provides that:
"(f) The term "deposit" means the unpaid balance of money or its
equivalent received by a bank in the usual course of business and for
which it has given or is obliged to give credit to a commercial,
checking, savings, time or thrift account, or issued in accordance with
Bangko Sentral rules and regulations and other applicable laws,
together with such other obligations of a bank, which, consistent with
banking usage and practices, the Board of Directors shall determine
and prescribe by regulations to be deposit liabilities of the
bank: Provided, That any obligation of a bank which is payable at the
office of the bank located outside of the Philippines shall not be a
deposit for any of the purposes of this Act or included as part of the
total deposits or of insured deposits: Provided, further, That, subject to
the approval of the Board of Directors, any insured bank which is
incorporated under the laws of the Philippines which maintains a
branch outside the Philippines may elect to include for insurance its
deposit obligations payable only at such branch.
The corporation shall not pay deposit insurance for the following
accounts or transactions, whether denominated, documented,
recorded or booked as deposit by the bank:
"(1) investment products such as bonds and securities, trust accounts,
and other similar instruments;
"(2) Deposit accounts or transactions which are unfunded, or that are
fictitious or fraudulent;
"(3) Deposits accounts or transactions constituting, and/or emanating
from, unsage and unsound banking practice/s, as determined by the
Corporation, in consultation with the BSP, after due notice and hearing,
and publication of a cease and desist order issued by the Corporation
65
against such deposit accounts or transactions; and
"(4) Deposits that are determined to be the proceeds of an unlawful
activity as defined under republic act 9160, as amended.
"The actions of the Corporation taken under this section shall be final
and executory, and may not be restrained or set aside by the court,
except on appropriate petition for certiorari on the ground that the
action was taken in excess of jurisdiction or with such grave abuse of
discretion as to amount to a lack or excess of jurisdiction. The petition
for certiorari may only be filed within thirty (30) days from notice of
denial of claim for deposit insurance."
As held in the case of Monetary Board, et. al., v. Philippine Veterans
Bank,15 this Court defined a quasi-judicial agency, to wit:
A quasi-judicial agency or body is an organ of government other
than a court and other than a legislature, which affects the rights
of private parties through either adjudication or rule-making. The
very definition of an administrative agency includes its being vested
with quasi-judicial powers. The ever increasing variety of powers and
functions given to administrative agencies recognizes the need for the
active intervention of administrative agencies in matters calling for
technical knowledge and speed in countless controversies which
cannot possibly be handled by regular courts. A "quasi-judicial
function" is a term which applies to the action, discretion, etc. of
public administrative officers or bodies, who are required to
investigate facts, or ascertain the existence of facts, hold
hearings, and draw conclusions from them, as a basis for their
official action and to exercise discretion of a judicial nature.16
books of the bank as such; 3) opened in accordance with established
forms and requirements of the BSP and/or the PDIC.
Further, in Phil. Deposit Insurance Corp. v. CA,22 this Court held that in
order for the claim for deposit insurance with the PDIC may prosper, it
is necessary that the corresponding deposit must be placed in the
insured bank.
Here, upon investigation by the PDIC, it was discovered that 1) the
money allegedly placed by the petitioners in RBMI was in fact credited
to the personal account of Garan, hence, they could not be construed
as valid liabilities of RBMI to petitioners; 2) based on bank records and
the certified list of the bank's outstanding deposit liabilities, the alleged
deposits of petitioners are not part of RBMI's outstanding liabilities; and
3) the CTDs are not validly issued by RBMI, but were mere replicas of
the unissued and unused CTDs still included in the inventory of RBMI.
Further, the act of petitioners in opening Time Deposits and thereafter
depositing several amounts of money through inter-branch deposits
with Metrobank and China Bank for the account of RBMI can hardly be
considered as in the ordinary course of business.
Considering the above disquisitions, it is sufficiently established that
the PDIC, did not commit any grave abuse of discretion in denying
petitioners' claim for deposit insurance as the same were validly
grounded on the facts, law and regulations issued by the PDIC.
WHEREFORE, the petition is DENIED. The Decision dated June 29,
2016 of the Court of Appeals in CA-G.R. SP No. 141770 is
hereby AFFIRMED.

In the instant case, the PDIC has the power to prepare and issue rules
SO ORDERED.
and regulations to effectively discharge its responsibilities.17 The power
of the PDIC as to whether it will deny or grant the claim for deposit
insurance based on its rules and regulations partakes of a quasi-
judicial function. Also, the fact that decisions of the PDIC as to deposit
insurance shall be final and executory, such that it can only be set
aside by a petition for certiorari evinces the intention of the Congress
to make PDIC as a quasi-judicial agency.
G.R. No. 230020, March 19, 2018
18
Consistent with Section 4,  Rule 65, the CA has the jurisdiction to rule
on the alleged grave abuse of discretion of the PDIC. Therefore, the PETER L. SO, Petitioner, v. PHILIPPINE DEPOSIT INSURANCE
CA is correct when it held that the RTC has no jurisdiction over the CORPORATION, Respondent.
Petitions for Certiorari filed by the petitioners questioning the PDIC's
denial of their claim for deposit insurance. Nevertheless, any question
DECISION
as to where the petition for certiorari should be filed to question PDIC's
decision on claims for deposit insurance has been put to rest by R.A.
No. 10846.19 Section 7 therein provides: TIJAM, J.:

xxxx This is a Petition for Review on Certiorari1 under Rule 45 of the Rules

of Court, assailing the Decision2 dated November 7, 2016 and
Order3 dated February 17, 2017 of the Regional Trial Court (RTC) of
"The actions of the Corporation taken under Section 5(g) shall be final
Makati, Branch 138, in Special Civil Case No. 16-031, which dismissed
and executory, and may only be restrained or set aside by the
Peter L. So's (petitioner's) Petition for Certiorari4 on the ground of lack
Court of Appeals, upon appropriate petition for certiorari on the
of jurisdiction.
ground that the action was taken in excess of jurisdiction or with such
grave abuse of discretion as to amount to a lack or excess of
jurisdiction. The petition for certiorari may only be filed within thirty (30) Factual Antecedents
days from notice of denial of claim for deposit insurance. (Emphasis
ours)
Petitioner opened an account with the Cooperative Rural Bank
Bulacan (CRBB) on April 17, 2013, amounting to P300,000, for which
As it now stands, the remedy to question the decisions of the PDIC is he was assigned the Special Incentive Savings Account (SISA) No. 05-
through a Petition for Certiorari under Rule 65 and filed before the CA. 15712-1.5

Nevertheless, even if We treat the appeal filed by the petitioners to the
CA as a Petition for Certiorari, the same is still without merit.
Grave abuse of discretion is the capricious and whimsical exercise of
the judgment of a court, tribunal or quasi-judicial agency that is
equivalent to lack of jurisdiction. It must be so grave such that the
power was exercised in an arbitrary or despotic manner by reason of
passion or personal hostility.20
In this case, it cannot be said that PDIC committed grave abuse of
discretion in denying petitioners claim for deposit insurance.
Section 4(f) of R.A. No. 3591, as amended by R.A. No. 9576 states
that deposit means the unpaid balance of money or its equivalent
received by a bank in the usual course of business and for which it has
given or is obliged to give credit to a commercial, checking, savings,
time or thrift account, or issued in accordance with Bangko Sentral
rules and regulations and other applicable laws, together with such
other obligations of a bank, which, consistent with banking usage and
practices.
Section 2(d) of PDIC Regulatory Issuance No. 2011-0221 states that for
deposit to be considered as legitimate, it should be 1) received by a
bank as a deposit in the usual course of business; 2) recorded in the
On the same year, however, petitioner learned that CRBB closed its
operations and was placed under Philippine Deposit Insurance
Corporation's (PDIC's) receivership. This prompted petitioner, together
with other depositors, to file an insurance claim with the PDIC on
November 8, 2013.6
Acting upon such claim, PDIC sent a letter/notice dated November 22,
2013, requiring petitioner to submit additional documents, which
petitioner averred of having complied with.7
Upon investigation, the PDIC found that petitioner's account originated
from and was funded by the proceeds of a terminated SISA (mother
account), jointly owned by a certain Reyes family.8 Thus, based on the
determination that petitioner's account was among the product of the
splitting of the said mother account which is prohibited by law, PDIC
denied petitioner's claim for payment of deposit insurance.9 Petitioner
filed a Request for Reconsideration, which was likewise denied by the
PDIC on January 6, 2016.10
Aggrieved, petitioner filed a Petition for Certiorari11 under Rule 65
before the RTC.
RTC Ruling
66
In its November 7, 2016 assailed Decision, the RTC upheld the factual
findings and conclusions of the PDIC. According to the RTC, based on
the records, the PDIC correctly denied petitioner's claim for insurance
on the ground of splitting of deposits which is prohibited by law.12
It also declared that, pursuant to its Charter (RA 3591), PDIC is
empowered to determine and pass upon the validity of the insurance
deposits claims, it being the deposit insurer. As such, when it rules on
such claims, it is exercising a quasi-judicial function. Thus, it was held
that petitioner's remedy to the dismissal of his claim is to file a petition
for certiorari with the Court of Appeals under Section 4,13 Rule 65,
stating that if the petition involves the acts or omissions of a quasi-
judicial agency, unless otherwise provided by law or the rules, it shall
be filed in and cognizable only by the Court of Appeals (CA).14
In addition, the RTC also cited Section 2215 of Republic Act (RA) No.
3591, as amended, which essentially states that only the CA shall
issue temporary restraining orders, preliminary injunctions or
preliminary mandatory injunctions against the PDIC for any action
under the said Act.
The RTC disposed, thus:
WHEREFORE, in view of the foregoing, for lack of jurisdiction, the
petition for certiorari filed by the petitioner is hereby DISMISSED.
SO ORDERED.16
In its February 17, 2017 Order, the RTC denied petitioner's motion for
reconsideration.
Hence, this petition, filed directly to this Court on pure question of law.
Issue
Does the RTC have jurisdiction over a petition for certiorari filed under
Rule 65, assailing the PDIC's denial of a deposit insurance claim?
Our Ruling
The petition lacks merit.
There is no controversy as to the proper remedy to question the
PDIC's denial of petitioner's deposit insurance claim. Section 4(f) of its
Charter, as amended, clearly provides that:
xxx
The actions of the Corporation taken under this section shall be
final and executory, and may not be restrained or set aside by the
court, except on appropriate petition for certiorari on the ground
that the action was taken in excess of jurisdiction or with such
grave abuse of discretion as to amount to a lack or excess of
jurisdiction. The petition for certiorari may only be filed within thirty
(30) days from notice of denial of claim for deposit insurance.
(emphasis supplied)
The issue, however, is which court has jurisdiction over such petition.
Petitioner's stance is that the petition for certiorari, questioning PDIC's
action, denying a deposit insurance claim should be filed with the RTC,
arguing in this manner: PDIC is not a quasi-judicial agency and it does
not possess any quasi-judicial power under its Charter; It merely
performs fact-finding functions based on its regulatory power. As such,
applying Section 4, Rule 65 of the Rules of Court, as amended by A.M.
07-7-12-SC, which in part states that if the petition relates to an act or
omission of a corporation, such as the PDIC, it shall be filed with the
RTC exercising jurisdiction over the territorial area as defined by this
Court; Also, Batas Pambansa Blg. 129 or the Judiciary Reorganization
Act provides that this Court, the CA, and the RTC have original
concurrent jurisdiction over petitions for certiorari, prohibition, and
mandamus. Applying the principle of hierarchy of courts, the RTC
indeed has jurisdiction over such petition for certiorari.
We do not agree.
On June 22, 1963, PDIC was created under RA 3591 as an insurer of
deposits in all banks entitled to the benefits of insurance under the said
Act to promote and safeguard the interests of the depositing
public.17 As such, PDIC has the duty and authority to determine the
validity of and grant or deny deposit insurance claims. Section 16(a) of
its Charter, as amended, provides that PDIC shall commence the
determination of insured deposits due the depositors of a closed bank
upon its actual take over of the closed bank. Also, Section 1 of PDIC's
Regulatory Issuance No. 2011-03, provides that as it is tasked to
promote and safeguard the interests of the depositing public by way of
providing permanent and continuing insurance coverage on all insured
deposits, and in helping develop a sound and stable banking system at
all times, PDIC shall pay all legitimate deposits held by bona fide
depositors and provide a mechanism by which depositors may seek
reconsideration from its decision, denying a deposit insurance claim.
Further, it bears stressing that as stated in Section 4(f) of its Charter,
as amended, PDIC's action, such as denying a deposit insurance
claim, is considered as final and executory and may be reviewed by
the court only through a petition for certiorari on the ground of grave
abuse of discretion.
Considering the foregoing, the legislative intent in creating the PDIC as
a quasi-judicial agency is clearly manifest.
In the case of Lintang Bedol v. Commission on Elections,18 cited
in Carlito C. Encinas v. PO1 Alfredo P. Agustin, Jr. and PO1 Joel S.
Caubang,19 this Court explained the nature of a quasi-judicial
agency, viz.:
Quasi-judicial or administrative adjudicatory power on the other hand is
the power of the administrative agency to adjudicate the rights of
persons before it. It is the power to hear and determine questions of
fact to which the legislative policy is to apply and to decide in
accordance with the standards laid down by the law itself in enforcing
and administering the same law. The administrative body exercises its
quasi-judicial power when it performs in a judicial manner an act which
is essentially of an executive or administrative nature, where the power
to act in such manner is incidental to or reasonably necessary for the
performance of the executive or administrative duty entrusted to it. In
carrying out their quasi-judicial functions the administrative
officers or bodies are required to investigate facts or ascertain
the existence of facts, hold hearings, weigh evidence, and draw
conclusions from them as basis for their official action and
exercise of discretion in a judicial nature.
The Court has laid down the test for determining whether an
administrative body is exercising judicial or merely investigatory
functions: adjudication signifies the exercise of the power and
authority to adjudicate upon the rights and obligations of the
parties. Hence, if the only purpose of an investigation is to evaluate
the evidence submitted to an agency based on the facts and
circumstances presented to it, and if the agency is not authorized to
make a final pronouncement affecting the parties, then there is an
absence of judicial discretion and judgment. (emphasis supplied)
Thus, the legislative intent in creating PDIC as a quasi-judicial agency
is clearly manifest. Indeed, PDIC exercises judicial discretion and
judgment in determining whether a claimant is entitled to a deposit
insurance claim, which determination results from its investigation of
facts and weighing of evidence presented before it. Noteworthy also is
the fact that the law considers PDIC's action as final and executory and
may be reviewed only on the ground of grave abuse of discretion.
That being established, We proceed to determine where such petition
for certiorari should be filed. In this matter, We cite the very provision
invoked by the petitioner, i.e., Section 4, Rule 65 of the Rules, as
amended by A.M. No. 07-7-12-SC:
Sec. 4. When and where to file the petition. - The petition shall be filed
not later than sixty (60) days from notice of the judgment, order or
resolution. In case a motion for reconsideration or new trial is timely
filed, whether such motion is required or not, the petition shall be filed
not later than sixty (60) days counted from the notice of the denial of
the motion.
If the petition relates to an act or an omission of a municipal trial court
or of a corporation, a board, an officer or a person, it shall be filed with
the Regional Trial Court exercising jurisdiction over the territorial area
as defined by the Supreme Court. It may also be filed with the Court of
Appeals or with the Sandiganbayan, whether or not the same is in aid
of the court's appellate jurisdiction. If the petition involves an act or
an omission of a quasi-judicial agency, unless otherwise provided
by law or these rules, the petition shall be filed with and be
cognizable only by the Court of Appeals. (emphasis supplied)
Clearly, a petition for certiorari, questioning the PDIC's denial of a
deposit insurance claim should be filed before the CA, not the RTC.
This further finds support in Section 22 of the PDIC's Charter, as
amended, which states that:
Section 22. No court, except the Court of Appeals, shall issue any
temporary restraining order, preliminary injunction or preliminary
mandatory injunction against the Corporation for any action under this
Act. xxx.
67
This prohibition shall apply in all cases, disputes or controversies
instituted by a private party, the insured bank, or any shareholder of
the insured bank. xxx.
xxxx
Finally, the new amendment in PDIC's Charter under RA 10846,
specifically Section 5(g) thereof, confirms such conclusion, viz.:
The actions of the Corporation taken under Section 5(g) shall be final
and executory, and may only be restrained or set aside by the
Court of Appeals, upon appropriate petition for certiorari on the
ground that the action was taken in excess of jurisdiction or with such
grave abuse of discretion as to amount to a lack or excess of
jurisdiction. The petition for certiorari may only be filed within thirty (30)
days from notice of denial of claim for deposit insurance. (Emphasis
Ours)
As it stands, the controversy as to which court has jurisdiction over a
petition for certiorari filed to question the PDIC's action is already
settled. Therefore, We find no reversible error from the findings and
conclusion of the court a quo.
WHEREFORE, the instant petition is DENIED for lack of merit. SO
ORDERED.
FIRST DIVISION
April 17, 2017
G.R. No. 186717
REPUBLIC OF THE PHILIPPINES, represented by the ANTI-
MONEY LAUNDERING COUNCIL, Petitioners
vs.
JOCELYN I. BOLANTE, OWEN VINCENT D. BOLANTE, MA.
CAROL D. BOLANTE, ALEJO LAMERA, CARMEN LAMERA, EDNA
CONSTANTINO, ARIEL C. PANGANIBAN, KATHERINE G.
BOMBEO, SAMUEL S. BOMBEO, MOLUGAN FOUNDATION,
SAMUEL G. BOMBEO, JR., and NATIONAL LIVELIHOOD
DEVELOPMENT CORPORATION (Formerly Livelihood
Corporation), Respondents
x-----------------------x
G.R. No. 190357
REPUBLIC OF THE PHILIPPINES, represented by the ANTI-
MONEY LAUNDERING COUNCIL, Petitioner,
vs.
HON. WINLOVE M. DUMAYAS, Presiding Judge of Branch 59,
Regional Trial Court in Makati City, JOCELYN I. BOLANTE, ARIEL
C. PANGANIBAN, DONNIE RAY G. PANGANIBAN, EARL WALTER
G. PANGANIBAN, DARRYL G. PANGANIBAN, GAVINA G.
PANGANIBAN, JAYPEE G. PANGANIBAN, SAMUEL S. BOMBEO,
KA THERINE G. BOMBEO, SAMUEL G. BOMBEO, JR., NATIONAL
LIVELIHOOD DEVELOPMENT CORPORATION (FORMERLY
LIVELIHOOD CORPORATION), MOLUGAN FOUNDATION,
ASSEMBLY OF GRACIOUS SAMARITANS FOUNDATION, INC.,
ONE ACCORD CHRISTIAN COMMUNITY ENDEAVOR FOR
SALVATION & SUCCESS THROUGH POVERTY ALLEVIATION,
INC., SOCIETY'S MULTI-PURPOSE FOUNDATION, INC.,
ALLIANCE FOR THE CONSERVATION OF ENVIRONMENT OF
PANGASINAN, INC., AND STA. LUCIA EDUCATIONAL
ASSOCIATION OF BULACAN, INC., Respondents.
DECISION
SERENO, J.:
G.R. No. 186717 is a petition for review on certiorari under Rule 45 of
the Rules of Court, with an urgent prayer for the issuance of a
temporary restraining order and/or writ of preliminary
injunction.1âwphi1 The petition seeks to nullify the Court of Appeals
(CA) Resolution 1 in CA-G.R. AMLC No. 00024. The CA Resolution
denied petitioner's application to extend the freeze order issued on 4
Fehruary 20092 over the bank deposits and investments of
respondents.
G.R. No. 190357 is a petition for certiorari under Rule 65 of the Rules
of Court challenging the Resolution 3 and the Order4 issued by the
Regional Trial Court of Makati, Branch 59 (RTC), in AMLC Case No.
07-001. The RTC Resolution denied petitioner's application for an
order allowing an inquiry into the bank deposits and investments of
respondents. The R TC Order denied petitioner's motion for
reconsideration.
FACTS
In April 2005, the Philippine National Bank (PNB) submitted to the Anti-
Money Laundering Council (AMLC) a series of suspicious transaction
reports involving the accounts of Livelihood Corporation (LIVECOR),
Molugan Foundation (Molugan), and Assembly of Gracious
Samaritans, Inc.
(AGS).5 According to the reports, LIVECOR transferred to Molugan a
total amount of' ₱172.6 million in a span of 15 months from 2004 to
2005.6 On 30 April 2004, LIVECOR transferred ₱40 million to AGS,
which received another P38 million from Molugan on the same
day. 7 Curiously, AGS returned the P38 million to Molugan also on the
same day.8
The transactions were reported '"suspicious" because they had no
underlying legal or trade obligation, purpose or economic justification;
nor were they commensurate to the business or financial capacity of
Molugan and AGS, which were both lowly capitalized at P50,000
each.9 In the case of Molugan, Samuel S. Bombeo, who holds the
position of president, secretary and treasurer, is the lone signatory to
the account. 10 In the case of AGS, Samuel S. Bombeo shares this
responsibility with Ariel Panganiban. 11
On 7 March 2006, the Senate furnished the AMLC a copy of its
Committee Report No. 54 12 prepared by the Committee on Agriculture
and Food and the Committee on Accountability of Public Officers and
Investigations. 13
Committee Report No. 54 14 narrated that former Undersecretary of
Agriculture Jocelyn I. Bolante (Bolante) requested the Department of
Budget and Management to release to the Department of Agriculture
the amount of ₱728 million for the purchase of farm inputs under
the Ginintuang Masaganang Ani Program. This amount was used to
purchase liquid fertilizers from Freshan Philippines, Inc., which were
then distributed to local government units and congressional districts
beginning January 2004. Based on the Audit Report prepared by the
Commission on Audit (COA), 15 the use of the funds was characterized
by massive irregularities, overpricing, violations of the procurement law
and wanton wastage of scarce government resources.
Committee Report No. 54 also stated that at the time that he served as
Undersecretary of Agriculture, Bolante was also appointed by
President Gloria Macapagal Arroyo as acting Chairman of LIVECOR.
The AMLC issued Resolution No. 75 16 finding probable cause to
believe that the accounts of LIVECOR, Molugan and AGS - the
subjects of the suspicious transaction reports submitted by PNB - were
related to what became known as the "fertilizer fund scam." The
pertinent portion of Resolution No. 75 provides:
Under the foregoing circumstances, there is probable cause to believe
that the accounts of the foundations and its officers are related to the
fertilizer fund scam. The release of the amount of ₱728 million for the
purchase of farm inputs to the Department of Agriculture was made by
Undersecretary Bolante. Undersecretary Bolante was the Acting
Chairman of LIVECOR. LIVECOR transferred huge amounts of money
to Molugan and AGS, while the latter foundations transferred money to
each other. Mr. [Samuel S.] Bombeo was the President, Secretary, and
Treasurer of Molugan. He, therefore, played a key role in these
transactions. On the other hand, Mr. [Ariel] Panganiban was the
signatory to the account or AGS. Without his participation, these
transactions could not have been possible.
The acts involved in the "fertilizer scam" may constitute violation of
Section 3(e) of Republic Act No. 3019, x x x as well as violation or
Republic Act No. 7080 (Plunder). 17
Thus, the AMLC authorized the filing of a petition for the issuance of an
order allowing an inquiry into the six accounts 18 of LIVECOR,
Molugan, AGS, Samuel S. Bombeo and Ariel Panganiban. The AMLC
also required all covered institutions to submit reports of covered
transactions and/or suspicious transactions of these entities and
individuals, including all the related web of accounts.
The petition was filed ex parte before the R TC and docketed as AMLC
SP Case No. 06-003. On 17 November 2006, the trial court found
probable cause and issued the Order prayed for. 19 It allowed the
68
AMLC to inquire into and examine the six bank deposits or investments In the Resolution dated 4 February 2009,43 the CA issued a freeze
and the related web of accounts. order effective for 20 days. The freeze order required the covered
institutions of the 24 accounts to desist from and not allow any
transaction involving the identified monetary instruments. It also asked
Meanwhile, based on the investigation of the Compliance and
the covered institutions to submit a detailed written return to the CA
Investigation Group of the AMLC Secretariat, a total of 70 bank
within 24 hours from receipt of the freeze order.
accounts or investments were found to be part of the related web of
accounts involved in the fertilizer fund scam.20
A summary hearing was conducted by the CA for the purpose of
determining whether to modify, lift or extend the freeze
Accordingly, the AMLC issued Resolution No. 9021 finding probable
order. 44 Thereafter, the parties were required to submit memoranda.
cause to believe that these 70 accounts were related to the fertilizer
fund scam. It said that the scam may constitute violations of Section
3(e)22 of Republic Act No. (R.A.) 3019 (Anti-Graft and Corrupt Practices THE CHALLENGED RESOLUTIONS
Act) and R.A. 7080 (An Act Defining and Penalizing the Crime of
Plunder). The AMLC therefore authorized the filing of a petition for the
The assailed CA Resolution dated 27 February 200945 denied the
issuance of an order allowing an inquiry into these 70 accounts.23
application to extend the freeze order issued on 4 February 2009.

On 14 February 2008, this Court promulgated Republic v. Eugenio.24

The CA found that the Republic had committed forum
We ruled that when the legislature crafted Section 11 25 of R.A. 9160
shopping.46 Specifically, the appellate court found that the parties in
(Anti Money Laundering Act of 2001), as amended, it did not intend to
CA-G.R. AMLC No. 00024 were the same as those in CA-G.R. AMLC
authorize ex parte proceedings for the issuance of a bank inquiry order
No. 00014. The petition in CA-G.R. AMLC No. 00024 sought the
by the CA. Thus, a bank inquiry order cannot be issued unless notice
issuance of a freeze order against the same accounts covered by CA-
is given to the account holders.26 That notice would allow them the
G.R. AMLC No. 00014. Finally, the rights asserted and reliefs prayed
opportunity to contest the issuance of the order.
for in both petitions were substantially founded on the same facts,
thereby raising identical causes of action and issues.
In view of this development, the AMLC issued Resolution No. 40.27 It
authorized the filing of a petition for the issuance of a freeze order
The CA found no merit in the assertion of the Republic that the ruling
against the 70 accounts found to be related to the fertilizer fund scam.
in Eugenio was a supervening event that prevented the latter from
concluding its financial investigation into the accounts covered by the
Hence, the Republic filed an Ex Parte Petition28 docketed as CA-G.R. freeze order in CA-G.R. AMLC No. 00014.47 The CA noted
AMLC No. 00014 before the CA, seeking the issuance of a freeze that Eugenio was promulgated on 14 February 2008, or almost five
order against the 70 accounts. months before the Republic filed CA-G.R. AMLC No. 00014 before the
CA and AMLC Case No. 07-001 before the RTC. According to the
appellate court, since the Republic was faced with the imminent finality
The CA issued a freeze order effective for 20 days.29 The freeze order
of Eugenio, it should have taken steps to expedite the conduct of the
required the covered institutions of the 70 accounts to desist from and
inquiry and the examination of the bank deposits or investments and
not allow any transaction involving the identified monetary instruments.
the related web of accounts.
It also asked the covered institutions to submit a detailed written return
to the CA within 24 hours from receipt of the freeze order.
At any rate, the CA found that the petition in CA-G.R. AMLC No. 00024
was effectively a prayer for the further extension of the 5-month, 20-
The CA conducted a summary hearing of the application, 30 after which
day freeze order already issued in CA-G.R. AMLC No. 00014.48 The
the parties were ordered to submit their memoranda, manifestations
extension sought is proscribed under Section 53 of Administrative
and comments/oppositions. 31 The freeze order was later extended for
Circular No. 05-11-04-SC.49 According to this provision, the effectivity
a period of 30 days until 19 August 2008. 32
of a freeze order may be extended for good cause shown for a period
not exceeding six months.
Finding that there existed probable cause that the funds transferred to
and juggled by LIVECOR, Molugan, and AGS formed pati of the ₱728
Aggrieved, the Republic filed the instant petition for review
million fertilizer fund, the CA extended the effectivity of the freeze order
on certiorari with an urgent prayer for the issuance of a temporary
for another four months, or until 20 December 2008. 33 The extension
restraining order and/or writ of preliminary injunction docketed as G.R.
covered only 31 accounts, 34 which showed an existing balance based
No. 186717.
on the returns of the covered institutions.

On 25 March 2009, this Court issued a Status Quo

In the meantime, the Republic filed an Ex Parte Application 35 docketed
Ante Order50 enjoining the implementation of the assailed CA
as AMLC Case No. 07-001 before the RTC. Drawing on the authority
Resolution.
provided by the AMLC through Resolution No. 90, the ex
parte application sought the issuance of an order allowing an inquiry
into the 70 accounts. At the time of the submission of respondents' Comment 51 and
petitioner's Consolidated Reply52 in G.R. No. 186717, the RTC issued
the challenged Resolution dated 3 July 200953 in AMLC Case No. 07-
The RTC found probable cause and issued the Order prayed for. 36 It
001. The trial court denied the Republic's application for an order
allowed the AMLC to inquire into and examine the 70 bank deposits or
allowing an inquiry into the total of 76 bank deposits and investments
investments and the related web of accounts.
of respondents.

On 20 October 2008, this Court denied with finality the motion for
reconsideration filed by the Republic in Eugenio.  37 The Court
reiterated that Section 11 38 of R.A. 9160, as then worded, did not allow
a bank inquiry order to be issued ex parte; and that the concerns of the
Republic about the consequences of this ruling could be more properly
lodged in the legislature.
Thus, in order to comply with the ruling in Eugenio, the Republic filed
an Amended and Supplemental Application 39 in AMLC Case No. 07-
001 before the RTC. The Republic sought, after notice to the account
holders, the issuance of an order allowing an inquiry into the original
70 accounts plus the six bank accounts that were the subject of AMLC
SP Case No. 06-003. A summary hearing thereon ensued.
On the belief that the finality of Eugenio constituted a supervening
event that might justify the filing of another petition for a freeze order,
the AMLC issued Resolution No. 5.40 The resolution authorized the
filing of a new petition for the issuance of a freeze order against
24 41 of the 31 accounts previously frozen by the CA.
Hence, the Republic filed an Urgent Ex Parte Petition42 docketed as
CA-G.R. AMLC No. 00024 before the CA seeking the issuance of a
freeze order against the 24 accounts.
The RTC found no probable cause to believe that the deposits and
investments of respondents were related to an unlawful activity. 54 It
pointed out that the Republic, in support of the latter's application,
relied merely on two pieces of evidence: Senate Committee Report No.
54 and the court testimony of witness Thelma Espina of the AMLC
Secretariat. According to the RTC, Senate Committee Report No. 54
cannot be taken "hook, line and sinker, "55 because the Senate only
conducts inquiries in aid of legislation.
Citing Neri v. Senate Committee on Accountability of Public Officers
and Investigations,  56 the trial court pronounced that the Senate cannot
assume the power reposed in prosecutorial bodies and the courts - the
power to determine who are liable for a crime or an illegal
activity. 57 On the other hand, the trial court noted that the testimony of
the witness merely relied on Senate Committee Report No. 54. The
latter "admitted that the AMLC did not bother to confirm the veracity of
the statements contained therein." 58
The RTC instead gave credence to the Audit Report prepared by COA.
While outlining the irregularities that attended the use of the fertilizer
fund, COA also showed that none of the funds were channeled or
released to LIVECOR, Molugan or AGS.59 The trial court also took note
of the evidence presented by Bolante that he had ceased to be a
member of the board of trustees of LIVECOR on 1 February 2003, or
more than 14 months before the transfers were made by LIVECOR to
69
Molugan as indicated in the suspicious transaction reports submitted
by PNB.60 Furthermore, the RTC found that the transfers made by
LIVECOR to Molugan and AGS came from the P60 million Priority
Development Assistance Fund of Senator Joker Arroyo.61
The Republic moved for reconsideration, but the motion was denied by
the RTC in the challenged Order dated 13 November 2009. 62
Hence, the Republic filed the instant petition for certiorari docketed as
G.R. No. 190357.
The Court resolved to consolidate G.R. No. 190357 with G.R. No.
186717, considering that the issues raised in the petitions were closely
intertwined and related.63 On 6 December 2010, these petitions were
given due course, and all parties were required to submit
memoranda.64
Amid reports that the Office of the Ombudsman (Ombudsman) had
filed plunder cases against those involved in the fertilizer fund scam,
the Court issued the Resolution dated 16 November 2011.65 We
required the AMLC and the Ombudsman to move in the premises and
jointly manifest whether the accounts, subject of the instant petitions,
were in any way related to the plunder cases already filed.
In their compliance dated 14 March 2012,66 the AMLC and the
Ombudsman manifested that the plunder case filed in connection with
the fertilizer fund scam included Bolante, but not the other persons and
entities whose bank accounts are now the subject of the instant
petitions. That plunder case was docketed as SB-l 1-CRM-0260 before
the Second Division of the Sandiganbayan.
ISSUES
The following are the issues for our resolution:
1. Whether the Republic committed forum shopping in filing
CA-G.R. AMLC No. 00024 before the CA
2. Whether the RTC committed grave abuse of discretion in
ruling that there exists no probable cause to ailow an inquiry
into the total of 76 deposits and investments of respondents
OUR RULING
I.
The Republic committed forum shopping.
As we ruled in Chua v. Metropolitan Bank and Trust Co.,  67 forum
shopping is committed in three ways: (1) filing multiple cases based on
the same cause of action and with the same prayer, where the
previous case has not yet been resolved (the ground for dismissal
is litis pendentia); (2) filing multiple cases based on the same cause of
action and with the same prayer, where the previous case has finally
been resolved (the ground for dismissal is res judicata); and (3) filing
multiple cases based on the same cause of action, but with different
prayers (splitting of causes of action, where the ground for dismissal is
also either litis pendentia or res judicata).
In the instant petitions, the Republic focused its energies on discussing
why it did not commit forum shopping on the ground of litis pendentia.
In its Memorandum, it argued:
While it is true that a previous freeze order was issued in CA-G.R.
AMLC No. 00014 covering some of the accounts subject of CA-G.R.
AMLC No. 00024, CA-G.R. AAILC No. 00014 had already attained
finality when the second petition was filed, neither petitioner nor any of
the respondents interposed an appeal therefrom, pursuant to Section
57 of the Rule of Procedure in Cases of Civil F01feiture, etc .. The
principle of lit is pendentia presupposes the pendency of at least one
case when a second case is filed. Such situation does not exist in the
present controversy since CA-G.R. AMLC No. 00014 was no longer
pending but has attained finality when the second petition was filed. 68
In a clear illustration of the phrase, out of the frying pan and into the
fire, the Republic vigorously resisted the application of forum shopping
on the ground of litis pendentia, only to unwittingly admit that it had
possibly committed forum shopping on the ground of res judicata.
We are not even sure where the Republic got the notion that the CA
found "that the filing of the second petition for freeze order constitutes
forum shopping on the ground of litis pendentia."69 In its assailed
Resolution, the appellate court aptly cited Quinsay v. CA,70 stating that
"forum shopping concurs not only when a final judgment in one case
will amount to res judicata in another, but also where the elements
of litis pendentia are present."71 It then went on to enumerate the
aforecited elements of litis pendentia, namely: (I) identity of parties, or
those that represent the same interests in both actions; (2) identity of
rights asserted and relief sought, with the relief founded on the same
facts; and (3) identity of the two preceding particulars, such that any
judgment rendered in one proceeding will, regardless of which party is
successful, amount to res judicata in the other. The CA only discussed
how these elements were present in CA-G.R. AMLC No. 00024 and
CA-G.R. AMLC No. 00014 in relation to each other. Nowhere did the
CA make any categorical pronouncement that the Republic had
committed forum shopping on the ground of litis pendentia.
With this clarification, we discuss how all the elements of litis
pendentia are present in the two petitions for the issuance of a freeze
order.
First, there is identity of parties. In both petitions, the Republic is the
petitioner seeking the issuance of a freeze order against the bank
deposits and investments. The 24 accounts sought to be frozen in CA-
G.R. AMLC No. 00024 were part of the 31 accounts previously frozen
in CA-G.R. AMLC No. 00014,72 and the holders of these accounts were
once again named as respondents.
Second, there is an identity of rights asserted and relief sought based
on the same facts. The AMLC filed both petitions in pursuance of its
function to investigate suspicious transactions, money laundering
activities, and other violations of R.A. 9160 as amended. 73 The law
also granted the AMLC the authority to make an ex parte application
before the CA for the freezing of any monetary instrument or property
alleged to be the proceeds of any unlawful activity, as defined in
Section 3(i) thereof.74
Both petitions sought the issuance of a freeze order against bank
deposits and investments believed to be related to the fertilizer fund
scam. Notably, while the petition in CA-G.R. AMLC No. 00014 narrated
the facts smTounding the issuance of AMLC Resolution Nos. 75 and
40,75 the petition in CA-G.R. AMLC No. 00024 used as its foundation
the previous grant of the freeze order in CA-G.R. AMLC No. 00014 and
the extensions of its effectivity.76 Nevertheless, both petitions
highlighted the role of Senate Committee Report No. 54 in providing
AMLC with the alleged link between the fertilizer fund scam and the
bank deposits and investments sought to be frozen. 77
Third, the judgment in CA-G.R. AMLC No. 00014 barred the
proceedings in CA-G.R. AMLC No. 00024 by resjudicata.
Res judicata is defined as a matter adjudged, a thing judicially acted
upon or decided, or a thing or matter settled by judgment. 78 It operates
as a bar to subsequent proceedings by prior judgment when the
following requisites concur: (1) the former judgment is final; (2) it is
rendered by a court having jurisdiction over the subject matter and the
parties; (3) it is a judgment or an order on the merits; and (4) there is -
between the first and the second actions - identity of parties, subject
matter, and causes of action. 79
Clearly, the resolution in CA-G.R. AMLC No. 00014 extending the
effectivity of the freeze order until 20 December 2008 attained finality
upon the failure of the parties to assail it within 15 days from notice.
The
Resolution was rendered by the CA, which had jurisdiction over
applications for the issuance of a freeze order under Section 1080 of
R.A. 9160 as amended. It was a judgment on the merits by the
appellate court, which made a determination of the rights and
obligations of the parties with respect to the causes of action and the
subject matter. 81 The determination was based on the pleadings and
evidence presented by the parties during the summary hearing and
their respective memoranda. Finally, there was - between CAG. R.
AMLC No. 00014 and CA-G.R. AMLC No. 00024 - identity of parties,
subject matter and causes of action.
The Republic's commission of forum shopping is further illustrated by
its awareness that the effectivity of the freeze order in CA-G.R. AMLC
No. 00014 had already been extended to 5 months and 20 days.
Under
Section 5382 of A.M. No. 05-11-04-SC,83 the original 20-day effectivity
period of a freeze order may only be extended by the CA for good
cause for a period not exceeding six months. Because of this
predicament, the Republic sought to avoid seeking a further extension
that is clearly prohibited by the rules by allowing the extended freeze
order in CA-G.R. AMLC No. 00014 to lapse on 20 December 2008.
Instead, it filed the petition in CA-G.R. AMLC No. 00024 alluding to the
exact same facts and arguments but citing a special factual
70
circumstance that allegedly distinguished it from CA-G.R. AMLC No.
00014.
The Republic argued that CA-G.R. AMLC No. 00024 was filed at the
advent of Eugenio. The ruling was a supervening event that prevented
the Republic from concluding its exhaustive financial investigation
within the auspices of the bank inquiry order granted by the RTC in
AMLC Case No. 07-001 and the freeze order granted by the CA in CA-
G.R. AMLC No. 00014.84
We find no merit in this argument. The promulgation of Eugenio was
not a supervening event under the circumstances. "Supervening
events refer to facts which transpire after judgment has become final
and executory or to new circumstances which developed after the
judgment has acquired finality, including matters which the parties
were not aware of prior to or during the trial as they were not yet in
existence at that time."85
As aptly pointed out by the appellate court, Eugenio was promulgated
five months before the filing of the petition in CA-G .R. AMLC No.
00014.
Indeed the Decision therein only attained finality upon the denial of the
motion for reconsideration on 20 October 2008, or before the filing of
the petition in CA-G.R. AMLC No. 0002. The ruling, however, cannot
be regarded as a matter that the parties were not aware of prior to or
during the trial of CA-G.R. AMLC No. 00014.
In fact, it was because of Eugenio that CA-G.R. AMLC No. 00014 was
filed in the first place.
We have not painstakingly narrated all the relevant facts of these
cases for nothing. It should be noted that before the ruling
in Eugenio, the AMLC commenced its investigations into the fertilizer
fund scam by filing petitions for bank inquiry orders. Thus, it issued
Resolutions No. 75 and 90, both authorizing the filing of petitions for
the issuance of orders allowing an inquiry into the pertinent bank
deposits and investments.
According to the Court in Eugenio, "a requirement that the application
for a bank inquiry order be done with notice to the account holder will
alert the latter that there is a plan to inspect his bank account on the
belief that the funds therein are involved in an unlawful activity or
money laundering offense."86 Alarmed by the implications of this ruling,
the AMLC changed tack and decided to pursue the only other remedy
within its power to obtain ex parte at the time. Hence, it issued
Resolution No. 40 authorizing the filing of CA-G.R. AMLC No. 00014
for the issuance of a freeze order to preserve the 70 bank deposits and
investments and prevent the account holders from withdrawing them.
The pertinent portion of AMLC Resolution No. 40 provides:
In the Resolution No. 90, dated October 26, 2007, the Council found
probable cause that the accounts of the subject individuals and entities
are related to the fertilizer fund scam and resolved to authorize the
tiling of a petition for the issuance of a freeze order allowing inquiry into
the following accounts:
xxxx
However, in Republic vs. Eugenio (G.R. No. 174629, February 14,
2008), the Supreme Court ruled that proceedings in applications for
issuance of an order allowing inquiry should be conducted after due
notice to the respondents/account holders.
In the light of the aforesaid ruling of the Supreme Court, the Council
resolved to:
1. Authorize the AMLC Secretariat to file with the Court of Appeals,
through the Office of the Solicitor General, a petition for freeze order
against the following bank accounts and all related web of accounts
wherever these may be found: 87
Notably, it was only after the freeze order had been issued that AMLC
Case No. 07-001 was filed before the RTC to obtain a bank inquiry
order covering the same 70 accounts.
Presently, while Eugenio still provides much needed guidance in the
resolution of issues relating to the freeze and bank inquiry orders, the
Decision in that case no longer applies insofar as it requires that notice
be given to the account holders before a bank inquiry order may be
issued. Upon the enactment of R.A. 10167 on 18 June 2012, Section
11 of R.A. 9160 was further amended to allow the AMLC to file an ex
parte application for an order allowing an inquiry into bank deposits
and investments. Section 11 of R.A. 9160 now reads:
Section 11. Authority to Inquire into Bank Deposits. - Notwithstanding
the provisions of Republic Act No. 1405, as amended, Republic Act
No. 6426, as amended, Republic Act No. 8791, and other laws, the
AMLC may inquire into or examine any particular deposit or
investment, including related accounts, with any banking institution or
non-bank financial institution upon order of any competent court based
on an ex parte application in cases of violations of this Act, when it
has been established that there is probable cause that the deposits or
investments, including related accounts involved, are related to an
unlawful activity as defined in Section 3(i) hereof or a money
laundering offense under Section 4 hereof; except that no court order
shall be required in cases involving activities defined in Section 3(i)(1 ),
(2 ), and (12) hereof and felonies or offenses of a nature similar to
those mentioned in Section 3(i)(l ), (2), and (12), which are Punishable
under the penal laws of other countries, and terrorism and conspiracy
to commit terrorism as defined and penalized under Republic Act No.
9372.
The Court of Appeals shall act on the application to inquire in lo or
examine any depositor or investment with any banking institution or
nonbank financial institution within twenty-four (24) hours from filing of
the application.
To ensure compliance with this Act, the Bangko Sentral ng Pilipinas
may, in the course of a periodic or special examination, check the
compliance of a Covered institution with the requirements of the AMLA
and its implementing rules and regulations.
For purposes of this section, related accounts' shall refer to accounts,
the funds and sources of which originated from and/or are materially
linked to the monetary instrument(s) or property(ies) subject of the
freeze order(s).
A court order ex parte must first be obtained before the AMLC can
inquire into these related Accounts: Provided, That the procedure for
the ex parte application of the ex parte court order for the principal
account shall be the same with that of the related accounts.
The authority to inquire into or examine the main account and the
related accounts shall comply with the requirements of Article III,
Sections 2 and 3 of the 1987 Constitution, which are hereby
incorporated by reference. (Emphasis supplied)
The constitutionality of Section 11 of R.A. 9160, as presently worded,
was upheld by the Court En Banc in the recently promulgated Subido
Pagente Certeza Mendoza and Binay Law Offices v. CA.  88 The Court
therein ruled that the AMLC's ex parte application for a bank inquiry,
which is allowed under Section 11 of R.A. 9160, does not violate
substantive due process. There is no such violation, because the
physical seizure of the targeted corporeal property is not contemplated
in any form by the law.89 The AMLC may indeed be authorized to
apply ex parte for an inquiry into bank accounts, but only in pursuance
of its investigative functions akin to those of the National Bureau of
Investigation.90 As the AMLC does not exercise quasi-judicial functions,
its inquiry by court order into bank deposits or investments cannot be
said to violate any person's constitutional right to procedural due
process.91
As regards the purported violation of the right to privacy, the Court
recalled the pronouncement in Eugenio that the source of the right to
privacy governing bank deposits is statutory, not constitutional.92 The
legislature may validly carve out exceptions to the rule on the secrecy
of bank deposits, and one such legislation is Section 11 of R.A. 9160.93
The Comi in Subido emphasized that the holder of a bank account that
is the subject of a bank inquiry order issued ex parte has the
opportunity to question the issuance of such an order after a freeze
order has been issued against the account. 94 The account holder can
then question not only the finding of probable cause for the issuance of
the freeze order, but also the finding of probable cause for the
issuance of the bank inquiry order. 95
II.
The RTC's finding that there was no
probable cause for the issuance of a
bank inquiry order was not tainted
with grave abuse of discretion.
 
Rule 10.2 of the Revised Rules and Regulations Implementing
Republic Act No. 9160, as Amended by Republic Act No. 9194,
defined probable cause as "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
71
related to said unlawful activity and/or money laundering offense." As
we observed in Subido,96 this definition refers to probable cause for the
issuance of a freeze order against an account or any monetary
instrument or property subject thereof. Nevertheless, we shall likewise
be guided by the pronouncement in Ligot v. Republic97 that "probable
cause refers to the sufficiency of the relation between an unlawful
activity and the property or monetary instrument."
In the issuance of a bank inquiry order, the power to determine the
existence of probable cause is lodged in the trial court. As we ruled
in Eugenio:
Section 11 itself requires that it be established that "there is probable
cause that the deposits or investments are related to unlawful
activities," and it obviously is the court which stands as arbiter whether
there is indeed such probable cause. The process of inquiring into the
existence of probable cause would involve the function of
determination reposed on the trial court. Determination clearly implies
a function of adjudication on the part of the trial court, and not a
mechanical application of a standard predetermination by some other
body. The word "determination'' implies deliberation and is, in normal
legal contemplation, equivalent to ''the decision of a court of justice."
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.98
For the trial court to issue a bank inquiry order, it is necessary for the
AMLC to be able to show specific facts and circumstances that provide
a link between an unlawful activity or a money laundering offense, on
the one hand, and the account or monetary instrument or property
sought to be examined on the other hand. In this case, the R TC found
the evidence presented by the AMLC wanting. For its part, the latter
insists that the RTC's determination was tainted with grave abuse of
discretion for ignoring the glaring existence of probable cause that the
subject bank deposits and investments were related to an unlawful
activity.
Grave abuse of discretion is present where power is exercised in an
arbitrary or despotic manner by reason of passion, prejudice or
personal hostility, that is so patent and gross as to amount to an
evasion of a positive duty or to a virtual refusal to perform a duty
enjoined or to act at all in contemplation of law.99 For certiorari to lie, it
must be shown that there was a capricious, arbitrary and whimsical
exercise of power - the very antithesis of the judicial prerogative. 100
We find no reason to conclude that the R TC determined the existence
of probable cause, or lack thereof, in an arbitrary and whimsical
manner.1âwphi1
To repeat, the application for the issuance of a bank inquiry order was
supported by only two pieces of evidence: Senate Committee Report
No. 54 and the testimony of witness Thelma Espina.
We have had occasion to rule that reports of the Senate stand on the
same level as other pieces of evidence submitted by the parties, and
that the facts and arguments presented therein should undergo the
same level of judicial scrutiny and analysis. 101 As courts have the
discretion to accept or reject them, 102 no grave error can be ascribed
to the RTC for rejecting and refusing to give probative value to Senate
Committee Report No. 54.
At any rate, Senate Committee Report No. 54 only provided the AMLC
with a description of the alleged unlawful activity, which is the fertilizer
fund scam. It also named the alleged mastermind of the scam, who
was respondent Bolante. The entire case of the AMLC, however,
hinged on the following excerpt of Senate Committee Report No. 54:
But Undersecretary Bolante's power over the agriculture department
was widely known. And it encompasses more than what the
Administrative Code provided.
In fact, at the time that he was Undersecretary, Jocelyn
Bolante was concurrently appointed by the President in other powerful
positions: as Acting Chairman of the National Irrigation Administration,
as Acting Chairman of the Livelihood Corporation x x
x. 103 (Emphasis supplied)
It was this excerpt that led the AMLC to connect the fertilizer fund
scam to the suspicious transaction reports earlier submitted to it by
PNB.
However, the R TC found during trial that respondent Bolante had
ceased to be a member of the board of trustees of LIVECOR for 14
months before the latter even made the initial transaction, which was
the subject of the suspicious transaction reports. Furthermore, the RTC
took note that according to the Audit Report submitted by the
Commission on Audit, no part of the P728 million fertilizer fund was
ever released to LIVECOR.
We note that in the RTC Order dated 17 November 2006 in AMLC SP
Case No. 06-003, the AMLC was already allowed ex parte to inquire
into and examine the six bank deposits or investments and the related
web of accounts of LIVECOR, Molugan, AGS, Samuel S. Bombeo and
Ariel Panganiban. With the resources available to the AMLC, coupled
with a bank inquiry order granted 15 months before Eugenio was even
pro mu I gated, the AMLC should have been able to obtain more
evidence establishing a more substantive link tying Bolante and the
fertilizer fund scam to LIVECOR. It did not help that the AMLC failed to
include in its application for a bank inquiry order in AMLC SP Case No.
06-003 LIVECOR's PNB account as indicated in the suspicious
transaction reports. This PNB account was included only in the
application for a bank inquiry order in AMLC Case No. 07-001.
As it stands, the evidence relied upon by the AMLC in 2006 was still
the same evidence it used to apply for a bank inquiry order in 2008.
Regrettably, this evidence proved to be insufficient when weighed
against that presented by the respondents, who were given notice and
the opportunity to contest the issuance of the bank inquiry order
pursuant to Eugenio. In fine, the RTC did not commit grave abuse of
discretion in denying the application.
WHEREFORE, the petition in G.R. No. 186717 is DENIED. The Court
of Appeals Resolution dated 27 February 2009 in CA-G.R. AMLC No.
00024 is AFFIRMED.
The petition in G.R. No. 190357 is DISMISSED. The Resolution dated
3 July 2009 and Order dated 13 November 2009 issued by the
Regional Trial Court of Makati, Branch 59, in AMLC Case No. 07-001
are AFFIRMED.
The Status Quo Ante Order issued by this Court on 25 March 2009 is
hereby LIFTED.
SO ORDERED.
G.R. No. 176944               March 6, 2013
RET. LT. GEN. JACINTO C. LIGOT, ERLINDA Y. LIGOT, PAULO Y.
LIGOT, RIZA Y. LIGOT, and MIGUEL Y. LIGOT, Petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, represented by the ANTI-
MONEY LAUNDERING COUNCIL, Respondent.
DECISION
BRION, J.:
In this petition for certiorari,1 retired Lieutenant General (Lt. Gen.)
Jacinto C. Ligot, Erlinda Y. Ligot (Mrs. Ligot), Paulo Y. Ligot, Riza Y.
Ligot, and Miguel Y. Ligot (petitioners) claim that the Court of Appeals
(CA) acted with grave abuse of discretion amounting to lack or excess
of jurisdiction when it issued its January 12, 2007 resolution2 in CA
G.R. SP No. 90238. This assailed resolution affirmed in toto the CA’s
earlier January 4, 2006 resolution3 extending the freeze order issued
against the Ligot’s properties for an indefinite period of time.
BACKGROUND FACTS
On June 27, 2005, the Republic of the Philippines (Republic),
represented by the Anti-Money Laundering Council (AMLC), filed an
Urgent Ex-Parte Application for the issuance of a freeze order with the
CA against certain monetary instruments and properties of the
petitioners, pursuant to Section 104 of Republic Act (RA) No. 9160, as
amended (otherwise known as the Anti-Money Laundering Act of
2001). This application was based on the February 1, 2005 letter of the
Office of the Ombudsman to the AMLC, recommending that the latter
conduct an investigation on Lt. Gen. Ligot and his family for possible
violation of RA No. 9160.5
In support of this recommendation, the Ombudsman attached the
Complaint6 it filed against the Ligots for perjury under Article 183 of the
Revised Penal Code, and for violations of Section 87 of RA No.
67138 and RA No. 3019 (Anti-Graft and Corrupt Practices Act).
72
The Ombudsman’s Complaint
a. Lt. Gen. Ligot and immediate family
The Ombudsman’s complaint alleges that Lt. Gen. Ligot served in the
Armed Forces of the Philippines (AFP) for 33 years and 2 months,
from April 1, 1966 as a cadet until his retirement on August 17,
2004.9 He and Mrs. Ligot have four children, namely: Paulo Y. Ligot,
Riza Y. Ligot,
George Y. Ligot and Miguel Y. Ligot, who have all reached the age of
majority at the time of the filing of the complaint.10
Lt. Gen. Ligot declared in his Statement of Assets, Liabilities, and Net
Worth (SALN) that as of December 31, 2003, he had assets in the total
amount of Three Million Eight Hundred Forty-Eight Thousand and
Three Pesos (₱3,848,003.00).11 In contrast, his declared assets in his
1982 SALN amounted to only One Hundred Five Thousand Pesos
(₱105,000.00).12
Aside from these declared assets, the Ombudsman’s investigation
revealed that Lt. Gen. Ligot and his family had other properties and
bank accounts, not declared in his SALN, amounting to at least Fifty
Four Million One Thousand Two Hundred Seventeen Pesos
(₱54,001,217.00). These undeclared assets consisted of the following:
Undeclared Assets Amount
Jacinto Ligot’s undeclared assets P
41,185,583.5313
14
Jacinto Ligot’s children’s assets 1,744,035.60
15
Tuition fees and travel expenses P 2,308,047.87
Edgardo Yambao’s assets relative to the real P 8,763,550.0016
properties
Total P 54,001,217.00
Bearing in mind that Lt. Gen. Ligot’s main source of income was his
salary as an officer of the AFP,17 and given his wife and children’s lack
of any other substantial sources of income,18 the Ombudsman declared
the assets registered in Lt. Gen. Ligot’s name, as well as those in his
wife’s and children’s names, to be illegally obtained and unexplained
wealth, pursuant to the provisions of RA No. 1379 (An Act Declaring
Forfeiture in Favor of the State Any Property Found to Have Been
Unlawfully Acquired by Any Public Officer or Employee and Providing
for the Proceedings Therefor).
b. Edgardo Tecson Yambao
The Ombudsman’s investigation also looked into Mrs. Ligot’s younger
brother, Edgardo Tecson Yambao. The records of the Social Security
System (SSS) revealed that Yambao had been employed in the private
sector from 1977 to 1994. Based on his contributions to the SSS,
Yambao did not have a substantial salary during his employment.
While Yambao had an investment with Mabelline Foods, Inc., the
Ombudsman noted that this company only had a net income of
₱5,062.96 in 2002 and ₱693.67 in 2003.19 Moreover, the certification
from the Bureau of Internal Revenue stated that Yambao had no
record of any annual Individual Income
Tax Return filed for the calendar year 1999 up to the date of the
investigation.
Despite Yambao’s lack of substantial income, the records show that he
has real properties and vehicles registered in his name, amounting to
Eight Million Seven Hundred Sixty Three Thousand Five Hundred Fifty
Pesos (₱8,763,550.00), which he acquired from 1993 onwards. The
Office of the Ombudsman further observed that in the documents it
examined, Yambao declared three of the Ligots’ addresses as his own.
From these circumstances, the Ombudsman concluded that Yambao
acted as a dummy and/or nominee of the Ligot spouses, and all the
properties registered in Yambao’s name actually belong to the Ligot
family.
Urgent Ex-Parte Freeze Order Application
As a result of the Ombudsman’s complaint, the Compliance and
Investigation staff (CIS) of the AMLC conducted a financial
investigation, which revealed the existence of the Ligots’ various bank
accounts with several financial institutions.20 On April 5, 2005, the
Ombudsman for the Military and Other Law Enforcement Officers
issued a resolution holding that probable cause exists that Lt. Gen.
Ligot violated Section 8, in relation to Section 11, of RA No. 6713, as
well as Article 18321 of the Revised Penal Code.
On May 25, 2005, the AMLC issued Resolution No. 52, Series of 2005,
directing the Executive Director of the AMLC Secretariat to file an
application for a freeze order against the properties of Lt. Gen. Ligot
and the members of his family with the CA.22 Subsequently, on June
27, 2005, the Republic filed an Urgent Ex-Parte Application with the
appellate court for the issuance of a Freeze Order against the
properties of the Ligots and Yambao.
The appellate court granted the application in its July 5, 2005
resolution, ruling that probable cause existed that an unlawful activity
and/or money laundering offense had been committed by Lt. Gen.
Ligot and his family, including Yambao, and that the properties sought
to be frozen are related to the unlawful activity or money laundering
offense. Accordingly, the CA issued a freeze order against the Ligots’
and Yambao’s various bank accounts, web accounts and vehicles,
valid for a period of 20 days from the date of issuance.
On July 26, 2005, the Republic filed an Urgent Motion for Extension of
Effectivity of Freeze Order, arguing that if the bank accounts, web
accounts and vehicles were not continuously frozen, they could be
placed beyond the reach of law enforcement authorities and the
government’s efforts to recover the proceeds of the Ligots’ unlawful
activities would be frustrated. In support of its motion, it informed the
CA that the Ombudsman was presently investigating the following
cases involving the Ligots:
Complainant(s) Nature
Wilfredo Garrido Plunder
AGIO Gina Villamor, et al. Perjury
Field Investigation Office Violation of RA No. 3019, Sectio
under Article 183, Revised Pena
relation to Section 11 of RA No.
Proceedings in Relation to RA N
David Odilao Malicious Mischief; Violation of S
No. 7856
Finding merit in the Republic’s arguments, the CA granted the motion
in its September 20, 2005 resolution, extending the freeze order until
after all the appropriate proceedings and/or investigations have been
terminated.
On September 28, 2005, the Ligots filed a motion to lift the extended
freeze order, principally arguing that there was no evidence to support
the extension of the freeze order. They further argued that the
extension not only deprived them of their property without due process;
it also punished them before their guilt could be proven. The appellate
court subsequently denied this motion in its January 4, 2006 resolution.
Meanwhile, on November 15, 2005, the "Rule of Procedure in Cases of
Civil Forfeiture, Asset Preservation, and Freezing of Monetary
Instrument, Property, or Proceeds Representing, Involving, or Relating
to an Unlawful Activity or Money Laundering Offense under Republic
Act No. 9160, as Amended"23 (Rule in Civil Forfeiture Cases) took
effect. Under this rule, a freeze order could be extended for a
maximum period of six months.
On January 31, 2006, the Ligots filed a motion for reconsideration of
the CA’s January 4, 2006 resolution, insisting that the freeze order
should be lifted considering: (a) no predicate crime has been proven to
support the freeze order’s issuance; (b) the freeze order expired six
months after it was issued on July 5, 2005; and (c) the freeze order is
provisional in character and not intended to supplant a case for money
laundering. When the CA denied this motion in its resolution dated
January 12, 2007, the Ligots filed the present petition.
THE PETITIONERS’ ARGUMENTS
Lt. Gen. Ligot argues that the appellate court committed grave abuse
of discretion amounting to lack or excess of jurisdiction when it
extended the freeze order issued against him and his family even
though no predicate crime had been duly proven or established to
support the allegation of money laundering. He also maintains that the
freeze order issued against them ceased to be effective in view of the
6-month extension limit of freeze orders provided under the Rule in
Civil Forfeiture Cases. The CA, in extending the freeze order, not only
unduly deprived him and his family of their property, in violation of due
process, but also penalized them before they had been convicted of
the crimes they stand accused of.
73
 THE REPUBLIC’S ARGUMENTS
In opposition, the Republic claims that the CA can issue a freeze order
upon a determination that probable cause exists, showing that the
monetary instruments or properties subject of the freeze order are
related to the unlawful activity enumerated in RA No. 9160. Contrary to
the petitioners’ claims, it is not necessary that a formal criminal charge
must have been previously filed against them before the freeze order
can be issued.
The Republic further claims that the CA’s September 20, 2005
resolution, granting the Republic’s motion to extend the effectivity of
the freeze order, had already become final and executory, and could
no longer be challenged. The Republic notes that the Ligots erred
when they filed what is effectively a second motion for reconsideration
in response to the CA’s January 4, 2006 resolution, instead of filing a
petition for review on certiorari via Rule 45 with this Court. Under these
circumstances, the assailed January 4, 2006 resolution granting the
freeze order had already attained finality when the Ligots filed the
present petition before this Court.
THE COURT’S RULING
We find merit in the petition.
I. Procedural aspect
a. Certiorari not proper remedy to assail freeze order; exception
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. As
held in People v. Court of Appeals:24
In a petition for certiorari, the jurisdiction of the court is narrow in
scope. It is limited to resolving only errors of jurisdiction. It is not to
stray at will and resolve questions or issues beyond its competence
such as errors of judgment. Errors of judgment of the trial court are to
be resolved by the appellate court in the appeal by and of error or via a
petition for review on certiorari in this Court under Rule 45 of the Rules
of Court. Certiorari will issue only to correct errors of jurisdiction. It is
not a remedy to correct errors of judgment. An error of judgment is one
in which the court may commit in the exercise of its jurisdiction, and
which error is reversible only by an appeal. Error of jurisdiction is one
where the act complained of was issued by the court without or in
excess of jurisdiction and which error is correctible only by the
extraordinary writ of certiorari. Certiorari will not be issued to cure
errors by the trial court in its appreciation of the evidence of the parties,
and its conclusions anchored on the said findings and its conclusions
of law. As long as the court acts within its jurisdiction, any alleged
errors committed in the exercise of its discretion will amount to nothing
more than mere errors of judgment, correctible by an appeal or a
petition for review under Rule 45 of the Rules of Court.25 (citations
omitted; italics supplied)
Clearly, the Ligots should have filed a petition for review on certiorari,
and not what is effectively a second motion for reconsideration (nor an
original action of certiorari after this second motion was denied), within
fifteen days from receipt of the CA’s January 4, 2006 resolution. To
recall, this resolution denied the petitioners’ motion to lift the extended
freeze order which is effectively a motion for reconsideration of the CA
ruling extending the freeze order indefinitely.26
However, considering the issue of due process squarely brought
before us in the face of an apparent conflict between Section 10 of RA
No. 9160, as amended, and Section 53(b) of the Rule in Civil Forfeiture
Cases, this Court finds it imperative to relax the application of the rules
of procedure and resolve this case on the merits in the interest of
justice.27
b. Applicability of 6-month extension period under the Rule in Civil
Forfeiture Cases
Without challenging the validity of the fixed 6-month extension period,
the Republic nonetheless asserts that the Rule in Civil Forfeiture
Cases does not apply to the present case because the CA had already
resolved the issues regarding the extension of the freeze order before
the
Rule in Civil Forfeiture Cases came into effect.
This reasoning fails to convince us.
Notably, the Rule in Civil Forfeiture Cases came into effect on
December 15, 2005. Section 59 provides that it shall "apply to all
pending civil forfeiture cases or petitions for freeze order" at the time of
its effectivity.
A review of the record reveals that after the CA issued its September
20, 2005 resolution extending the freeze order, the Ligots filed a
motion to lift the extended freeze order on September 28, 2005.
Significantly, the CA only acted upon this motion on January 4, 2006,
when it issued a resolution denying it.
While denominated as a Motion to Lift Extended Freeze Order, this
motion was actually a motion for reconsideration, as it sought the
reversal of the assailed CA resolution. Since the Ligots’ motion for
reconsideration was still pending resolution at the time the Rule in Civil
Forfeiture Cases came into effect on December 15, 2005, the Rule
unquestionably applies to the present case.
c. Subsequent events
During the pendency of this case, the Republic manifested that on
September 26, 2011, it filed a Petition for Civil Forfeiture with the
Regional Trial Court (RTC) of Manila. On September 28, 2011, the
RTC, Branch 22, Manila, issued a Provisional Asset Preservation
Order and on October 5, 2011, after due hearing, it issued an Asset
Preservation Order.
On the other hand, the petitioners manifested that as of October 29,
2012, the only case filed in connection with the frozen bank accounts is
Civil Case No. 0197, for forfeiture of unlawfully acquired properties
under RA No. 1379 (entitled "Republic of the Philippines v. Lt. Gen.
Jacinto Ligot, et. al."), pending before the Sandiganbayan.
These subsequent developments and their dates are significant in our
consideration of the present case, particularly the procedural aspect.
Under Section 56 of the Rule in Civil Forfeiture Cases which provides
that after the post-issuance hearing on whether to modify, lift or extend
the freeze order, the CA shall remand the case and transmit the
records to the RTC for consolidation with the pending civil forfeiture
proceeding. This provision gives the impression that the filing of the
appropriate cases in courts in 2011 and 2012 rendered this case 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."28 However, the moot and academic principle is not an iron-
clad rule and is subject to four settled exceptions,29 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.
The apparent conflict presented by the limiting provision of the Rule in
Civil Forfeiture Cases, on one hand, and the very broad judicial
discretion under RA No. 9160, as amended, on the other hand, and the
uncertainty it casts on an individual’s guaranteed right to due process
indubitably call for the Court’s exercise of its discretion to decide the
case, otherwise moot and academic, under those two exceptions, for
the future guidance of those affected and involved in the
implementation of RA No. 9160, as amended.
Additionally, we would be giving premium to the government’s failure to
file an appropriate case until only after six years (despite the clear
provision of the Rule in Civil Forfeiture Cases) were we to dismiss the
petition because of the filing of the forfeiture case during the pendency
of the case before the Court. The sheer length of time and the
constitutional violation involved, as will be discussed below, strongly
74
dissuade us from dismissing the petition on the basis of the "moot and
academic" principle. The Court should not allow the seeds of future
violations to sprout by hiding under this principle even when directly
confronted with the glaring issue of the respondent’s violation of the
petitioners’ due process right30 - an issue that the respondent itself
chooses to ignore.
We shall discuss the substantive relevance of the subsequent
developments and their dates at length below.
II. Substantive aspect
a. Probable cause exists to support the issuance of a freeze order
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 proceeding31 or freeze order application.32
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.33 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."34
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.35 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. To differentiate
this from any criminal case that may thereafter be instituted against the
same respondent, the Rule in Civil Forfeiture Cases expressly provides
–
SEC. 28. Precedence of proceedings. - Any criminal case relating to
an unlawful activity shall be given precedence over the prosecution of
any offense or violation under Republic Act No. 9160, as amended,
without prejudice to the filing of a separate petition for civil forfeiture or
the issuance of an asset preservation order or a freeze order. Such
civil action shall proceed independently of the criminal prosecution.
[italics supplied; emphases ours]
Section 10 of RA No. 9160 (allowing the extension of the freeze order)
and Section 28 (allowing a separate petition for the issuance of a
freeze order to proceed independently) of the Rule in Civil Forfeiture
Cases are only consistent with the very purpose of the freeze order,
which specifically is to give the government the necessary time to
prepare its case and to file the appropriate charges without having to
worry about the possible dissipation of the assets that are in any way
related to the suspected illegal activity. Thus, contrary to the Ligots’
claim, a freeze order is not dependent on a separate criminal charge,
much less does it depend on a conviction.
That a freeze order can be issued upon the AMLC’s ex parte
application further emphasizes the law’s consideration of how critical
time is in these proceedings. As we previously noted in Republic v.
Eugenio, Jr.,36 "to make such freeze order anteceded by a judicial
proceeding with notice to the account holder would allow for or lead to
the dissipation of such funds even before the order could be issued."
It should be noted that the existence of an unlawful activity that would
justify the issuance and the extension of the freeze order has likewise
been established in this case.
From the ex parte application and the Ombudsman’s complaint, we
glean that Lt. Gen. Ligot himself admitted that his income came from
his salary as an officer of the AFP. Yet, the Ombudsman’s
investigation revealed that the bank accounts, investments and
properties in the name of Lt. Gen. Ligot and his family amount to more
than Fifty-Four Million Pesos (₱54,000,000.00). Since these assets are
grossly disproportionate to Lt. Gen. Ligot’s income, as well as the lack
of any evidence that the Ligots have other sources of income, the CA
properly found that probable cause exists that these funds have been
illegally acquired. On the other hand, the AMLC’s verified allegations in
its ex parte application, based on the complaint filed by the
Ombudsman against Ligot and his family for violations of the Anti-Graft
and Corrupt Practices Act, clearly sustain the CA’s finding that
probable cause exists that the monetary instruments subject of the
freeze order are related to, or are the product of, an unlawful activity.
b. A freeze order, however, cannot be issued for an indefinite period
Assuming that the freeze order is substantively in legal order, the
Ligots now assert that its effectiveness ceased after January 25, 2006
(or six months after July 25, 2005 when the original freeze order first
expired), pursuant to Section 53(b) of the Rule in Civil Forfeiture Cases
(A.M. No. 05-11-04-SC). This section states:
Section 53. Freeze order. –
xxxx
(b) Extension. – On motion of the petitioner filed before the expiration
of twenty days from issuance of a freeze order, the court may for good
cause extend its effectivity for a period not exceeding six months.
[italics supplied; emphasis ours]
We find merit in this claim.
A freeze order is an extraordinary and interim relief37 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.38 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.39 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.
Our examination of the Anti-Money Laundering Act of 2001, as
amended, from the point of view of the freeze order that it authorizes,
shows that the law is silent on the maximum period of time that the
freeze order can be extended by the CA. The final sentence of Section
10 of the Anti-Money Laundering Act of 2001 provides, "the freeze
order shall be for a period of twenty (20) days unless extended by the
court." In contrast, Section 55 of the Rule in Civil Forfeiture Cases
qualifies the grant of extension "for a period not exceeding six months"
"for good cause" shown.
We observe on this point that nothing in the law grants the owner of
the "frozen" property any substantive right to demand that the freeze
order be lifted, except by implication, i.e., if he can show that no
probable cause exists or if the 20-day period has already lapsed
without any extension being requested from and granted by the CA.
Notably, the Senate deliberations on RA No. 9160 even suggest the
intent on the part of our legislators to make the freeze order effective
until the termination of the case, when necessary.40
The silence of the law, however, does not in any way affect the Court’s
own power under the Constitution to "promulgate rules concerning the
protection and enforcement of constitutional rights xxx and procedure
in all courts."41 Pursuant to this power, the Court issued A.M. No. 05-
11-04-SC, limiting the effectivity of an extended freeze order to six
months – to otherwise leave the grant of the extension to the sole
discretion of the CA, which may extend a freeze order indefinitely or to
an unreasonable amount of time – carries serious implications on an
individual’s substantive right to due process.42 This right demands that
75
no person be denied his right to property or be subjected to any
governmental action that amounts to a denial.43 The right to due
process, under these terms, requires a limitation or at least an inquiry
on whether sufficient justification for the governmental action.44
In this case, the law has left to the CA the authority to resolve the issue
of extending the freeze order it issued. Without doubt, the CA followed
the law to the letter, but it did so by avoiding the fundamental law’s
command under its Section 1, Article III. This command, the Court –
under its constitutional rule-making power – sought to implement
through Section 53(b) of the Rule in Civil Forfeiture Cases which the
CA erroneously assumed does not apply.
The Ligots’ case perfectly illustrates the inequity that would result from
giving the CA the power to extend freeze orders without limitations. As
narrated above, the CA, via its September 20, 2005 resolution,
extended the freeze order over the Ligots’ various bank accounts and
personal properties "until after all the appropriate proceedings and/or
investigations being conducted are terminated."45 By its very terms, the
CA resolution effectively bars the Ligots from using any of the property
covered by the freeze order until after an eventual civil forfeiture
proceeding is concluded in their favor and after they shall have been
adjudged not guilty of the crimes they are suspected of committing.
These periods of extension are way beyond the intent and purposes of
a freeze order which is intended solely as an interim relief; the civil and
criminal trial courts can very well handle the disposition of properties
related to a forfeiture case or to a crime charged and need not rely on
the interim relief that the appellate court issued as a guarantee against
loss of property while the government is preparing its full case. The
term of the CA’s extension, too, borders on inflicting a punishment to
the Ligots, in violation of their constitutionally protected right to be
presumed innocent, because the unreasonable denial of their property
comes before final conviction.
In more concrete terms, the freeze order over the Ligots’ properties
has been in effect since 2005, while the civil forfeiture case – per the
Republic’s manifestation – was filed only in 2011 and the forfeiture
case under RA No. 1379 – per the petitioners’ manifestation – was
filed only in 2012. This means that the Ligots have not been able to
access the properties subject of the freeze order for six years or so
simply on the basis of the existence of probable cause to issue a
freeze order, which was intended mainly as an interim preemptive
remedy.
As correctly noted by the petitioners, a freeze order is meant to have a
temporary effect; it was never intended to supplant or replace the
actual forfeiture cases where the provisional remedy - which means,
the remedy is an adjunct of or an incident to the main action – of
asking for the issuance of an asset preservation order from the court
where the petition is filed is precisely available. For emphasis, a freeze
order is both a preservatory and preemptive remedy.
To stress, the evils caused by the law’s silence on the freeze order’s
period of effectivity46 compelled this Court to issue the Rule in Civil
Forfeiture Cases. Specifically, the Court fixed the maximum allowable
extension on the freeze order’s effectivity at six months. In doing so,
the Court sought to balance the State’s interest in going after
suspected money launderers with an individual’s constitutionally-
protected right not to be deprived of his property without due process
of law, as well as to be presumed innocent until proven guilty.
To our mind, the six-month extension period is ordinarily sufficient for
the government to act against the suspected money launderer and to
file the appropriate forfeiture case against him, and is a reasonable
period as well that recognizes the property owner’s right to due
process. In this case, the period of inaction of six years, under the
circumstances, already far exceeded what is reasonable.
We are not unmindful that the State itself is entitled to due
process.1âwphi1 As a due process concern, we do not say that the
six-month period is an inflexible rule that would result in the automatic
lifting of the freeze order upon its expiration in all instances. An
inflexible rule may lend itself to abuse - to the prejudice of the State’s
legitimate interests - where the property owner would simply file
numerous suits, questioning the freeze order during the six-month
extension period, to prevent the timely filing of a money laundering or
civil forfeiture case within this period. With the limited resources that
our government prosecutors and investigators have at their disposal,
the end-result of an inflexible rule is not difficult to see.
We observe, too, that the factual complexities and intricacies of the
case and other matters that may be beyond the government’s
prosecutory agencies’ control may contribute to their inability to file the
corresponding civil forfeiture case before the lapse of six months.
Given these considerations, it is only proper to strike a balance
between the individual’s right to due process and the government’s
interest in curbing criminality, particularly money laundering and the
predicate crimes underlying it.
Thus, 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.47 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.
In the present case, we note that the Republic has not offered any
explanation why it took six years (from the time it secured a freeze
order) before a civil forfeiture case was filed in court, despite the clear
tenor of the Rule in Civil Forfeiture Cases allowing the extension of a
freeze order for only a period of six months. All the Republic could
proffer is its temporal argument on the inapplicability of the Rule in Civil
Forfeiture Cases; in effect, it glossed over the squarely-raised issue of
due process. Under these circumstances, we cannot but conclude that
the continued extension of the freeze order beyond the six-month
period violated the Ligot’s right to due process; thus, the CA decision
should be reversed.
We clarify that our conclusion applies only to the CA ruling and does
not affect the proceedings and whatever order or resolution the RTC
may have issued in the presently pending civil cases for forfeiture. We
make this clarification to ensure that we can now fully conclude and
terminate this CA aspect of the case.
As our last point, we commend the fervor of the CA in assisting the
State’s efforts to prosecute corrupt public officials. We remind the
appellate court though that the government’s anti-corruption drive
cannot be done at the expense of cherished fundamental rights
enshrined in our Constitution. So long as we continue to be guided by
the Constitution and the rule of law, the Court cannot allow the
justification of governmental action on the basis of the noblest
objectives alone. As so oft-repeated, the end does not justify the
means. Of primordial importance is that the means employed must be
in keeping with the Constitution. Mere expediency will certainly not
excuse constitutional shortcuts.48
WHEREFORE, premises considered, we GRANT the petition and LIFT
the freeze order issued by the Court of Appeals in CA G.R. SP No.
90238. This lifting is without prejudice to, and shall not affect, the
preservation orders that the lower courts have ordered on the same
properties in the cases pending before them. Pursuant to Section 56 of
A.M. No. 05-11-04-SC, the Court of Appeals is hereby ordered to
remand the case and to transmit the records to the Regional Trial
Court of Manila, Branch 22, where the civil forfeiture proceeding is
pending, for consolidation therewith as may be appropriate.
SO ORDERED.
G.R. No. 170281             January 18, 2008
REPUBLIC OF THE PHILIPPINES, represented by the ANTI-
MONEY LAUNDERING COUNCIL, petitioner,
vs.
GLASGOW CREDIT AND COLLECTION SERVICES, INC. and
CITYSTATE SAVINGS BANK, INC., respondents.
DECISION
CORONA, J.:
This is a petition for review1 of the order2 dated October 27, 2005 of the
Regional Trial Court (RTC) of Manila, Branch 47, dismissing the
complaint for forfeiture3 filed by the Republic of the Philippines,
represented by the Anti-Money Laundering Council (AMLC) against
respondents Glasgow Credit and Collection Services, Inc. (Glasgow)
and Citystate Savings Bank, Inc. (CSBI).
On July 18, 2003, the Republic filed a complaint in the RTC Manila for
civil forfeiture of assets (with urgent plea for issuance of temporary
restraining order [TRO] and/or writ of preliminary injunction) against the
bank deposits in account number CA-005-10-000121-5 maintained by
Glasgow in CSBI. The case, filed pursuant to RA 9160 (the Anti-Money
76
Laundering Act of 2001), as amended, was docketed as Civil Case No. The petition essentially presents the following issue: whether the
03-107319. complaint for civil forfeiture was correctly dismissed on grounds of
improper venue, insufficiency in form and substance and failure to
prosecute.
Acting on the Republic’s urgent plea for the issuance of a TRO, the
executive judge4 of RTC Manila issued a 72-hour TRO dated July 21,
2003. The case was thereafter raffled to Branch 47 and the hearing on The Court agrees with the Republic.
the application for issuance of a writ of preliminary injunction was set
on August 4, 2003.
The Complaint Was Filed
In The Proper Venue
After hearing, the trial court (through then Presiding Judge Marivic T.
Balisi-Umali) issued an order granting the issuance of a writ of
In its assailed order, the trial court cited the grounds raised by Glasgow
preliminary injunction. The injunctive writ was issued on August 8,
in support of its motion to dismiss:
2003.

1. That this [c]ourt has no jurisdiction over the person of

Meanwhile, summons to Glasgow was returned "unserved" as it could
Glasgow considering that no [s]ummons has been served
no longer be found at its last known address.
upon it, and it has not entered its appearance voluntarily;

On October 8, 2003, the Republic filed a verified omnibus motion for

2. That the [c]omplaint for forfeiture is premature because of
(a) issuance of alias summons and (b) leave of court to serve
the absence of a prior finding by any tribunal that Glasgow
summons by publication. In an order dated October 15, 2003, the trial
was engaged in unlawful activity: [i]n connection therewith[,]
court directed the issuance of alias summons. However, no mention
Glasgow argues that the [c]omplaint states no cause of
was made of the motion for leave of court to serve summons by
action; and
publication.

3. That there is failure to prosecute, in that, up to now,

In an order dated January 30, 2004, the trial court archived the case
allegedly for failure of the Republic to serve the alias summons. The
Republic filed an ex parte omnibus motion to (a) reinstate the case and
(b) resolve its pending motion for leave of court to serve summons by
publication.
In an order dated May 31, 2004, the trial court ordered the
reinstatement of the case and directed the Republic to serve
the alias summons on Glasgow and CSBI within 15 days. However, it
did not resolve the Republic’s motion for leave of court to serve
summons by publication declaring:
Until and unless a return is made on the alias summons, any
action on [the Republic’s] motion for leave of court to serve
summons by publication would be untenable if not
premature.
On July 12, 2004, the Republic (through the Office of the Solicitor
General [OSG]) received a copy of the sheriff’s return dated June 30,
2004 stating that the alias summons was returned "unserved" as
Glasgow was no longer holding office at the given address since July
2002 and left no forwarding address.
Meanwhile, the Republic’s motion for leave of court to serve summons
by publication remained unresolved. Thus, on August 11, 2005, the
Republic filed a manifestation and ex parte motion to resolve its motion
for leave of court to serve summons by publication.
summons has yet to be served upon Glasgow.5
But 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 Court6 (reiterated in Rudolf Lietz Holdings,
Inc. v. Registry of Deeds of Parañaque City),7 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)
At any rate, the trial court was a proper venue.
On November 15, 2005, this Court issued A.M. No. 05-11-04-SC, the
Rule of Procedure in Cases of Civil Forfeiture, Asset Preservation, and
Freezing of Monetary Instrument, Property, or Proceeds Representing,
Involving, or Relating to an Unlawful Activity or Money Laundering
Offense under RA 9160, as amended (Rule of Procedure in Cases of
Civil Forfeiture). The order dismissing the Republic’s complaint for civil
forfeiture of Glasgow’s account in CSBI has not yet attained finality on
account of the pendency of this appeal. Thus, the Rule of Procedure in
Cases of Civil Forfeiture applies to the Republic’s
complaint.8 Moreover, Glasgow itself judicially admitted that the Rule of
Procedure in Cases of Civil Forfeiture is "applicable to the instant
case."9

Section 3, Title II (Civil Forfeiture in the Regional Trial Court) of the

On August 12, 2005, the OSG received a copy of Glasgow’s "Motion to
Rule of Procedure in Cases of Civil Forfeiture provides:
Dismiss (By Way of Special Appearance)" dated August 11, 2005. It
alleged that (1) the court had no jurisdiction over its person as
summons had not yet been served on it; (2) the complaint was Sec. 3. Venue of cases cognizable by the regional trial court.
premature and stated no cause of action as there was still no – A petition for civil forfeiture shall be filed in any regional
conviction for estafa or other criminal violations implicating Glasgow trial court of the judicial region where the monetary
and (3) there was failure to prosecute on the part of the Republic. instrument, property or proceeds representing,
involving, or relating to an unlawful activity or to a
money laundering offense are located; provided,
The Republic opposed Glasgow’s motion to dismiss. It contended that
however, that where all or any portion of the monetary
its suit was an action quasi in rem where jurisdiction over the person of
instrument, property or proceeds is located outside the
the defendant was not a prerequisite to confer jurisdiction on the court.
Philippines, the petition may be filed in the regional trial court
It asserted that prior conviction for unlawful activity was not a
in Manila or of the judicial region where any portion of the
precondition to the filing of a civil forfeiture case and that its complaint
monetary instrument, property, or proceeds is located, at the
alleged ultimate facts sufficient to establish a cause of action. It denied
option of the petitioner. (emphasis supplied)
that it failed to prosecute the case.

Under Section 3, Title II of the Rule of Procedure in Cases of Civil

On October 27, 2005, the trial court issued the assailed order. It
Forfeiture, therefore, the venue of civil forfeiture cases is any RTC of
dismissed the case on the following grounds: (1) improper venue as it
the judicial region where the monetary instrument, property or
should have been filed in the RTC of Pasig where CSBI, the depository
proceeds representing, involving, or relating to an unlawful activity or to
bank of the account sought to be forfeited, was located; (2)
a money laundering offense are located. Pasig City, where the account
insufficiency of the complaint in form and substance and (3) failure to
sought to be forfeited in this case is situated, is within the National
prosecute. It lifted the writ of preliminary injunction and directed CSBI
Capital Judicial Region (NCJR). Clearly, the complaint for civil
to release to Glasgow or its authorized representative the funds in CA-
forfeiture of the account may be filed in any RTC of the NCJR. Since
005-10-000121-5.
the RTC Manila is one of the RTCs of the NCJR,10 it was a proper
venue of the Republic’s complaint for civil forfeiture of Glasgow’s
Raising questions of law, the Republic filed this petition. account.

On November 23, 2005, this Court issued a TRO restraining Glasgow The Complaint Was Sufficient In Form And Substance
and CSBI, their agents, representatives and/or persons acting upon
their orders from implementing the assailed October 27, 2005 order. It
In the assailed order, the trial court evaluated the Republic’s complaint
restrained Glasgow from removing, dissipating or disposing of the
to determine its sufficiency in form and substance:
funds in account no. CA-005-10-000121-5 and CSBI from allowing any
transaction on the said account.
77
 At the outset, this [c]ourt, before it proceeds, takes the
opportunity to examine the [c]omplaint and determine
whether it is sufficient in form and substance.
Before this [c]ourt is a [c]omplaint for Civil Forfeiture of
Assets filed by the [AMLC], represented by the Office of the
Solicitor General[,] against Glasgow and [CSBI] as
necessary party. The [c]omplaint principally alleges the
following:
(a) Glasgow is a corporation existing under the laws of the
Philippines, with principal office address at Unit 703,
7th Floor, Citystate Center [Building], No. 709 Shaw
Boulevard[,] Pasig City;
(b) [CSBI] is a corporation existing under the laws of the
Philippines, with principal office at Citystate Center Building,
No. 709 Shaw Boulevard, Pasig City;
(c) Glasgow has funds in the amount of P21,301,430.28
deposited with [CSBI], under CA 005-10-000121-5;
(d) As events have proved, aforestated bank account is
related to the unlawful activities of Estafa and violation of
Securities Regulation Code;
(e) The deposit has been subject of Suspicious Transaction
Reports;
(f) After appropriate investigation, the AMLC issued
Resolutions No. 094 (dated July 10, 2002), 096 (dated July
12, 2002), 101 (dated July 23, 2002), and 108 (dated August
2, 2002), directing the issuance of freeze orders against the
bank accounts of Glasgow;
(g) Pursuant to said AMLC Resolutions, Freeze Orders Nos.
008-010, 011 and 013 were issued on different dates,
addressed to the concerned banks;
(h) The facts and circumstances plainly showing that
defendant Glasgow’s bank account and deposit are related
to the unlawful activities of Estafa and violation of Securities
Regulation Code, as well as to a money laundering offense
[which] [has] been summarized by the AMLC in its
Resolution No. 094; and
(i) Because defendant Glasgow’s bank account and deposits
are related to the unlawful activities of Estafa and violation of
Securities Regulation Code, as well as [to] money laundering
offense as aforestated, and being the subject of covered
transaction reports and eventual freeze orders, the same
should properly be forfeited in favor of the government in
accordance with Section 12, R.A. 9160, as amended.11
In a motion to dismiss for failure to state a cause of action, the focus is
on the sufficiency, not the veracity, of the material allegations.12 The
determination is confined to the four corners of the complaint and
nowhere else.13
In a motion to dismiss a complaint based on lack of cause of
action, the question submitted to the court for determination
is the sufficiency of the allegations made in the complaint to
constitute a cause of action and not whether those
allegations of fact are true, for said motion must
hypothetically admit the truth of the facts alleged in the
complaint.
The test of the sufficiency of the facts alleged in the
complaint is whether or not, admitting the facts alleged,
the court could render a valid judgment upon the same
in accordance with the prayer of the
complaint.14 (emphasis ours)
In this connection, Section 4, Title II of the Rule of Procedure in Cases
of Civil Forfeiture provides:
Sec. 4. Contents of the petition for civil forfeiture. - The
petition for civil forfeiture shall be verified and contain the
following allegations:
(a) The name and address of the respondent;
(b) A description with reasonable particularity of
the monetary instrument, property, or proceeds,
and their location; and
(c) The acts or omissions prohibited by and the
specific provisions of the Anti-Money Laundering
Act, as amended, which are alleged to be the
grounds relied upon for the forfeiture of the
monetary instrument, property, or proceeds; and
[(d)] The reliefs prayed for.
Here, the verified complaint of the Republic contained the following
allegations:
(a) the name and address of the primary defendant therein,
Glasgow;15
(b) a description of the proceeds of Glasgow’s unlawful
activities with particularity, as well as the location thereof,
account no. CA-005-10-000121-5 in the amount
of P21,301,430.28 maintained with CSBI;
(c) the acts prohibited by and the specific provisions of RA
9160, as amended, constituting the grounds for the forfeiture
of the said proceeds. In particular, suspicious transaction
reports showed that Glasgow engaged in unlawful activities
of estafa and violation of the Securities Regulation Code
(under Section 3(i)(9) and (13), RA 9160, as amended); the
proceeds of the unlawful activities were transacted and
deposited with CSBI in account no. CA-005-10-000121-5
thereby making them appear to have originated from
legitimate sources; as such, Glasgow engaged in money
laundering (under Section 4, RA 9160, as amended); and
the AMLC subjected the account to freeze order and
(d) the reliefs prayed for, namely, the issuance of a TRO or
writ of preliminary injunction and the forfeiture of the account
in favor of the government as well as other reliefs just and
equitable under the premises.
The form and substance of the Republic’s complaint substantially
conformed with Section 4, Title II of the Rule of Procedure in Cases of
Civil Forfeiture.
Moreover, Section 12(a) of RA 9160, as amended, provides:
SEC. 12. Forfeiture Provisions. –
(a) Civil Forfeiture. – When there is a covered transaction
report made, and the court has, in a petition filed for the
purpose ordered seizure of any monetary instrument or
property, in whole or in part, directly or indirectly, related to
said report, the Revised Rules of Court on civil forfeiture
shall apply.
In relation thereto, Rule 12.2 of the Revised Implementing Rules and
Regulations of RA 9160, as amended, states:
RULE 12
Forfeiture Provisions
xxx xxx xxx
Rule 12.2. When Civil Forfeiture May be Applied. – When
there is a SUSPICIOUS TRANSACTION REPORT OR A
COVERED TRANSACTION REPORT DEEMED
SUSPICIOUS AFTER INVESTIGATION BY THE AMLC, and
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, the
Revised Rules of Court on civil forfeiture shall apply.
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.
78
It is the preliminary seizure of the property in question which brings it
within the reach of the judicial process.16 It is actually within the court’s
possession when it is submitted to the process of the court.17 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.
Since account no. CA-005-10-000121-5 of Glasgow in CSBI was (1)
covered by several suspicious transaction reports and (2) placed under
the control of the trial court upon the issuance of the writ of preliminary
injunction, the conditions provided in Section 12(a) of RA 9160, as
amended, were satisfied. Hence, the Republic, represented by the
AMLC, properly instituted the complaint for 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.
Section 6 of RA 9160, as amended, provides:
SEC. 6. Prosecution of Money Laundering. –
(a) Any person may be charged with and convicted of both
the offense of money laundering and the unlawful activity as
herein defined.
(b) Any proceeding relating to the unlawful activity shall be
given precedence over the prosecution of any offense or
violation under this Act without prejudice to the freezing
and other remedies provided. (emphasis supplied)
Rule 6.1 of the Revised Implementing Rules and Regulations of RA
9160, as amended, states:
Rule 6.1. Prosecution of Money Laundering –
(a) Any person may be charged with and convicted of both
the offense of money laundering and the unlawful activity as
defined under Rule 3(i) of the AMLA.
(b) Any proceeding relating to the unlawful activity shall be
given precedence over the prosecution of any offense or
violation under the AMLA without prejudice to
the application ex-parte by the AMLC to the Court of
Appeals for a freeze order with respect to the monetary
instrument or property involved therein and resort to other
remedies provided under the AMLA, the Rules of Court
and other pertinent laws and rules. (emphasis supplied)
Finally, Section 27 of the Rule of Procedure in Cases of Civil Forfeiture
provides:
Sec. 27. No prior charge, pendency or conviction necessary.
– No prior criminal charge, pendency of or conviction
for an unlawful activity or money laundering offense is
necessary for the commencement or the resolution of a
petition for civil forfeiture. (emphasis supplied)
Thus, regardless of the absence, pendency or outcome of a criminal
prosecution for the unlawful activity or for money laundering, an action
for civil forfeiture may be separately and independently prosecuted and
resolved.
There Was No Failure
To Prosecute
The trial court faulted the Republic for its alleged failure to prosecute
the case. Nothing could be more erroneous.
Immediately after the complaint was filed, the trial court ordered its
deputy sheriff/process server to serve summons and notice of the
hearing on the application for issuance of TRO and/or writ of
preliminary injunction. The subpoena to Glasgow was, however,
returned unserved as Glasgow "could no longer be found at its given
address" and had moved out of the building since August 1, 2002.
Meanwhile, after due hearing, the trial court issued a writ of preliminary
injunction enjoining Glasgow from removing, dissipating or disposing of
the subject bank deposits and CSBI from allowing any transaction on,
withdrawal, transfer, removal, dissipation or disposition thereof.
As the summons on Glasgow was returned "unserved," and
considering that its whereabouts could not be ascertained despite
diligent inquiry, the Republic filed a verified omnibus motion for (a)
issuance of alias summons and (b) leave of court to serve summons
by publication on October 8, 2003. While the trial court issued
an alias summons in its order dated October 15, 2003, it kept quiet on
the prayer for leave of court to serve summons by publication.
Subsequently, in an order dated January 30, 2004, the trial court
archived the case for failure of the Republic to cause the service
of alias summons. The Republic filed an ex parte omnibus motion to
(a) reinstate the case and (b) resolve its pending motion for leave of
court to serve summons by publication.
In an order dated May 31, 2004, the trial court ordered the
reinstatement of the case and directed the Republic to cause the
service of the alias summons on Glasgow and CSBI within 15 days.
However, it deferred its action on the Republic’s motion for leave of
court to serve summons by publication until a return was made on
the alias summons.
Meanwhile, the Republic continued to exert efforts to obtain
information from other government agencies on the whereabouts or
current status of respondent Glasgow if only to save on expenses of
publication of summons. Its efforts, however, proved futile. The records
on file with the Securities and Exchange Commission provided no
information. Other inquiries yielded negative results.
On July 12, 2004, the Republic received a copy of the sheriff’s return
dated June 30, 2004 stating that the alias summons had been returned
"unserved" as Glasgow was no longer holding office at the given
address since July 2002 and left no forwarding address. Still, no action
was taken by the trial court on the Republic’s motion for leave of court
to serve summons by publication. Thus, on August 11, 2005, the
Republic filed a manifestation and ex parte motion to resolve its motion
for leave of court to serve summons by publication.
It was at that point that Glasgow filed a motion to dismiss by way of
special appearance which the Republic vigorously opposed. Strangely,
to say the least, the trial court issued the assailed order granting
Glasgow’s motion.
Given these circumstances, how could the Republic be faulted for
failure to prosecute the complaint for civil forfeiture? While there was
admittedly a delay in the proceeding, it could not be entirely or
primarily ascribed to the Republic. That Glasgow’s whereabouts could
not be ascertained was not only beyond the Republic’s control, it was
also attributable to Glasgow which left its principal office address
without informing the Securities and Exchange Commission or any
official regulatory body (like the Bureau of Internal Revenue or the
Department of Trade and Industry) of its new address. Moreover, as
early as October 8, 2003, the Republic was already seeking leave of
court to serve summons by publication.
In Marahay v. Melicor,18 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)
We see no pattern or scheme on the part of the Republic to delay the
disposition of the case or a wanton failure to observe the mandatory
requirement of the rules. The trial court should not have so eagerly
wielded its power to dismiss the Republic’s complaint.
Service Of Summons
May Be By Publication
In Republic v. Sandiganbayan,19 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
79
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.20 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.21 Nonetheless, summons must be served upon the
defendant in order to satisfy the requirements of due process.22 For
this purpose, service may be made by publication as such mode of
service is allowed in actions in rem and quasi in rem.23

In this connection, Section 8, Title II of the Rule of Procedure in Cases

of Civil Forfeiture provides:

Sec. 8. Notice and manner of service. - (a) The respondent shall be

given notice of the petition in the same manner as service of summons
under Rule 14 of the Rules of Court and the following rules:

1. The notice shall be served on respondent personally, or

by any other means prescribed in Rule 14 of the Rules of
Court;

2. The notice shall contain: (i) the title of the case; (ii) the
docket number; (iii) the cause of action; and (iv) the relief
prayed for; and

3. The notice shall likewise contain a proviso that, if no

comment or opposition is filed within the reglementary
period, the court shall hear the case ex parte and render
such judgment as may be warranted by the facts alleged in
the petition and its supporting evidence.

(b) Where the respondent is designated as an

unknown owner or whenever his whereabouts
are unknown and cannot be ascertained by
diligent inquiry, service may, by leave of court,
be effected upon him by publication of the
notice of the petition in a newspaper of general
circulation in such places and for such time as
the court may order. In the event that the cost of
publication exceeds the value or amount of the
property to be forfeited by ten percent, publication
shall not be required. (emphasis supplied)

WHEREFORE, the petition is hereby GRANTED. The October 27,

2005 order of the Regional Trial Court of Manila, Branch 47, in Civil
Case No. 03-107319 is SET ASIDE. The August 11, 2005 motion to
dismiss of Glasgow Credit and Collection Services, Inc.
is DENIED. And the complaint for forfeiture of the Republic of the
Philippines, represented by the Anti-Money Laundering Council,
is REINSTATED.

The case is hereby REMANDED to the Regional Trial Court of Manila,

Branch 47 which shall forthwith proceed with the case pursuant to the
provisions of A.M. No. 05-11-04-SC. Pending final determination of the
case, the November 23, 2005 temporary restraining order issued by
this Court is hereby MAINTAINED.

SO ORDERED.

80