KAIZEN BUILDERS, INC. (FORMERLY KNOWN AS MEGALOPOLIS PROPERTIES, INC.

) AND
CECILLE F. APOSTOL, PETITIONERS, VS. COURT OF APPEALS AND THE HEIRS OF OFELIA
URSAIS, RESPONDENTS.

[G.R. No. 247647]

KAIZEN BUILDERS, INC. (FORMERLY MEGALOPOLIS PROPERTIES, INC.) AND CECILLE

APOSTOL, PETITIONERS, VS. HEIRS OF OFELIA URSAIS, NAMELY, ROGELIO A. TOMAS,
ROSLYN T. BOSING, VANESSA T. PEDEGLORIO, GUNTER U. TOMAS AND JORDAN U.
GAMALINDA, RESPONDENTS.

DECISION

ANTECEDENTS

In 2004, Ofelia Ursais (Ofelia) purchased from Kaizen Builders, Inc. (Kaizen builders) (formerly
Megalopolis Properties, Inc.) a house and lot situated in White Pine Street, Camp 7, Baguio City.3 In
2007, the parties executed a contract to sell where Kaizen Builders bought back from Ofelia the
property for P2,700,000.00 and swapped it with another house and lot in Kingstone Ville, Camp 1,
Baguio City. They deducted from the price the P300,000.00 unpaid balance of Ofelia in White Pine
property and the P2,200,000.00 value of Kingstone Ville property. The remaining P200,000.00 shall
be paid in cash. Later, the parties replaced the contract to sell with another agreement where Ofelia
invested the P2,200,000.00 in Kaizen Builders' development of the Kingstone Ville project.4 In 2008,
however, the parties rescinded the investment agreement where Ofelia received P320,000.00 from
Kaizen Builders. The parties then stipulated that the amount of P380,000.00 will be paid on
installment basis while the remaining P1,500,000.00 shall bear an interest of 1.5% or
P22,500.00 per month.5

Despite repeated demands, Kaizen Builders stopped remitting the monthly interest beginning
November 2009 and refused to deliver the P380,000.00.6 In 2011, Ofelia filed against Kaizen
Builders and its chief executive officer Cecille F. Apostol (Cecille) a complaint for sum of money
before the Regional Trial Court (RTC) docketed as Civil Case No. 7426-R.7 On May 8, 2013, the
RTC in its Decision8 ordered Kaizen Builders and Cecille solidarity liable to pay Ofelia the following
amounts, to wit:

WHEREFORE, all the foregoing premises considered, the Court rules in favor of plaintiff OFELIA
URSAIS. Defendants MEGALOPOLIS PROPERTIES INCORPORATED and CECILLE F. APOSTOL
are solidarily liable to pay the Plaintiff the following:

1. the amount of ONE MILLION FIVE HUNDRED THOUSAND PESOS (P1,500,000.00),

which is the amount invested by Plaintiff Ursais, with legal interest to be computed from June
17, 2009 until the same is fully paid; and

2. the amount of ONE HUNDRED SEVENTY-EIGHT THOUSAND SEVEN HUNDRED

FIFTY PESOS (P178,750.00), as previously computed, representing the unpaid interest of
1.5% per month or P22,500.00 from October 2009 until June 2010, with legal interest to be
computed from June 17, 2010 until the same is fully paid.

The parties bear their own cost, of suit and attorney's fees, considering the absence of bad faith and
fraud, moral and exemplary damages is [sic] not awarded.
SO ORDERED.9

Ofelia sought partial reconsideration claiming that the RTC failed to include the P3 80,000.00 and
the payment of monthly interest up to the present. Later, Ofelia died and was substituted by her
heirs. On November 15, 2013, the RTC granted the motion and amended its Decision,10 thus:

WHEREFORE, all the foregoing premises considered, the dispositive portion of the assailed
Decision of the Court is amended as follows:

Defendants MEGALOPOLIS PROPERTIES INCORPORATED and CECILLE F. APOSTOL are held

solidarity liable to pay the Plaintiff Heirs of Ofelia Ursais the following:

1. the amount of ONE MILLION FIVE FIUNDRED THOUSAND PESOS (P1,500,000.00),

which is the amount invested by Plaintiff Ursais, with legal interest to be computed from June
17, 2010 until the same is fully paid;

2. the amount of THREE HUNDRED EIGHTY THOUSAND PESOS (P380,000.00) as

contained in their Rescission Agreement dated July 25, 2008, with legal interest to be
computed from July 25, 2008 until the same is fully paid; and

3. the amount of ONE HUNDRED SEVENTY-EIGHT THOUSAND SEVEN HUNDRED

FIFTY PESOS (P179,750.00), as previously computed, representing the unpaid interest of
1.5% per month or P22,500.00 from October 2009 until June 2010, with legal interest to be
computed from June 17, 2010 until the same is fully paid.

The parties bear their own cost of suit and attorney's fees. No award as to moral and exemplary
damages.

SO ORDERED.11

Aggrieved, Kaizen Builders and Cecille elevated the case to the CA docketed as CA-G.R. CV No.
102330. Meantime, Kaizen Builders filed before the special commercial court a petition for corporate
rehabilitation docketed as Special Proceedings Case No. 2466-R. On August 12, 2015, the
rehabilitation court issued a Commencement Order12 which consolidated all legal proceedings by
and against Kaizen Builders and suspended all actions for the enforcement of claims against it.

Accordingly, Kaizen Builders and Cecille moved to consolidate the appealed case with the
rehabilitation proceedings. On December 8, 2015, however, the CA denied the motion and explained
that the appeal would not affect the rehabilitation case since the two proceedings involved different
parties, issues and reliefs.13 Unsuccessful at a reconsideration,14 Kaizen Builders and Cecille filed
a Petition for Certiorari and Prohibition15 under Rule 65 before this Court docketed as G.R. No.
226894. They argued that the CA acted with grave abuse of discretion in denying the motion for
consolidation and prayed that the proceedings before the CA be suspended within the duration of
the rehabilitation case.

On February 14, 2018, the CA resolved to hold in abeyance the proceedings in CA-G.R. CV No.
102330. Yet, the resolution was subsequently recalled.16 On October 1, 2018, the CA rendered a
Decision17 on the merits of the appeal, viz.:

WHEREFORE, premises considered, the instant appeal is PARTIALLY GRANTED. Accordingly, the

8 May 2013 Decision and the 15 November 2013 Order of the Regional Trial Court of Baguio City,
Branch 60, in Civil Case No. 7426-R are AFFIRMED with MODIFICATION such that the appellants
are hereby ORDERED to pay the plaintiffs-appellees the following:

1. One Million Five Hundred Thousand Pesos (Php 1,500,000.00) with legal interest of
twelve percent (12%) per annum to be computed from 1 July 2010 to 30 June 2013 and legal
interest of six percent (6%) per annum from 1 July 2013 until this Decision becomes final and
executory. The sum of the interests shall be subject to interest of twelve percent (12%) per
annum to be computed from the date of judicial demand, or from 7 May 2012, to 30 June
2013 and interest of six percent (6%) per annum from 1 July 2013 until this Decision
becomes final and executory, as interest due earning legal interest;

2. Three Hundred Seventy Five Thousand Pesos (Php 375,000.00) with legal interest of
twelve percent (12%) per annum to be computed from 7 May 2012 to 30 June 2013 and
legal interest of six percent (6%) per annum from 1 July 2013 until this Decision becomes
final and executory. The total of the interests shall be subject to interest of twelve percent
(12%) per annum to be computed from the date of judicial demand, or from 7 May 2012, to
30 June 2013 and interest of six percent (6%) per annum from 1 July 2013 until this Decision
becomes final and executory, as interest due earning legal interest;

3. One Hundred Seventy Eight Thousand Seven Hundred Fifty Pesos (Php 178,750.00) with
legal interest to be computed from 1 July 2010 to 30 June 2013 and legal interest of six
percent (6%) per annum from 1 July 2013 until this Decision becomes final and executory.
The total of the interests shall be subject to interest of twelve percent (12%) per annum to be
computed from the date of judicial demand, or from 7 May 2012, to 30 June 2013 and
interest of six percent (6%) per annum from 1 July 2013 until this Decision becomes final and
executory, as interest due earning legal interest; and

4. Interest of six percent (6%) per annum on the total of the above monetary awards from the
finality of this Decision until full payment thereof.

SO ORDERED.18

Dissatisfied, Kaizen Builders and Cecille filed a Petition for Review on Certiorari19 under Rule 45
docketed as G.R. No. 247647 on the ground that the CA committed reversible error in holding them
liable to pay Ofelia's heirs.

RULING

It is the policy of the courts to consolidate cases involving similar parties and affecting closely related
subject matters. The purpose of this rule is to settle the issues expeditiously and to avoid multiplicity
of suits and the possibility of conflicting decisions.20 Here, the petitions in G.R. Nos. 226894 and
247647 involve similar parties and common questions of law and fact. Hence, it is imperative upon
this Court to consolidate these cases. As will be discussed, the petitions are dependent on each
other such that the Decision in G.R. No. 226894 is determinative of the outcome in G.R. No. 247647.
Specifically, in G.R. No. 226894, Kaizen Builders and Cecille ascribed grave abuse of discretion on
the CA in not consolidating CA-G.R. CV No. 102330 with Special Proceedings Case No. 2466-R or
at least suspending the decision on the merits of the appeal pending the rehabilitation case. We find
merit in this argument.

Republic Act (RA) No. 10142 or the Financial Rehabilitation and Insolvency Act of 2010 statutorily
defined "rehabilitation" as the restoration of the debtor to a condition of successful operation and
solvency, if it is shown that its continuance of operation is economically feasible and its creditors can
recover by way of the present value of payments projected in the plan, more if the debtor continues
as a going concern than if it is immediately liquidated.21 Case law explains that rehabilitation is an
attempt to conserve and administer the assets of an insolvent corporation in the hope of its eventual
return from financial stress to solvency.22 A corporate rehabilitation case is a special proceeding in
rem23 where the basic issues concern the viability and desirability of continuing the business
operations of the distressed corporation.24 The purpose is to enable the company to gain a new
lease on life and allow its creditors to be paid their claims out of its earnings.25 The rationale is to
resuscitate businesses in financial distress because assets are often more valuable when so
maintained than they would be when liquidated.26

To achieve these objectives, Sections 16 and 17 of RA No. 10142 authorizes the rehabilitation court
to issue a Commencement Order that includes a Stay Order, which have the effects of suspending
all actions for the enforcement of claims against the debtor and consolidating the resolution of all
legal proceedings by and against it, to wit:

SECTION 16. Commencement of Proceedings and Issuance of a Commencement Order. — The

rehabilitation proceedings shall commence upon the issuance of the Commencement Order, which
shall:

xxxx

(q) include a Stay or Suspension Order which shall: 

1) suspend all actions or proceedings, in court or otherwise, for the enforcement of claims against
the debtor;

xxxx

SECTION 17. Effects of the Commencement Order. — Unless otherwise provided for in this Act, the
court's issuance of a Commencement Order shall, in addition to the effects of a Stay or Suspension
Order described in Section 16 hereof:

xxxx

(e) consolidate the resolution of all legal proceedings by and against the debtor to the
court: Provided, however, That the court may allow the continuation of cases in other courts where
the debtor had initiated the suit.

Attempts to seek legal or other recourse against the debtor outside these proceedings shall be
sufficient to support a finding of indirect contempt of court. (Emphases supplied.)

Indeed, an essential function of corporate rehabilitation is the mechanism of suspension of all

actions and claims against the distressed corporation.27 Notably, RA No. 10142 makes no
distinction as to the claims that are suspended once a Commencement Order is issued. Apropos is
Section 4(c) which provides an all-encompassing definition of the term "claim," thus:

SECTION 4. Definition of Terms. — As used in this Act, the term:

xxxx
(c) Claim shall refer to all claims or demands of whatever nature or character against the debtor or
its property, whether for money or otherwise, liquidated or unliquidated, fixed or contingent, matured
or unmatured, disputed or undisputed, including, but not limited to: (1) all claims of the government,
whether national or local, including taxes, tariffs and customs duties; and (2) claims against directors
and officers of the debtor arising from acts done in the discharge of their functions falling within the
scope of their authority: Provided, That, this inclusion does not prohibit the creditors or third parties
from filing cases against the directors and officers acting in their personal capacities. (Emphases
supplied.)

To clarify, however, creditors of the distressed corporation are not without remedy as they may still
submit their claims to the rehabilitation court for proper consideration so that they may participate in
the proceedings, keeping in mind the general policy of the law to ensure or maintain certainty and
predictability in commercial affairs, preserve and maximize the value of the assets of these debtors,
recognize creditor rights and respect priority of claims, and ensure equitable treatment of creditors
who are similarly situated. In other words, the creditors must ventilate their claims before the
rehabilitation court. Any attempt to seek legal or other resource against the distressed corporation
shall be sufficient to support a finding of indirect contempt of court.28

Thus, the Commencement Order shall direct all creditors to file their claims with the rehabilitation
court at least five days before the initial hearing.29 A creditor whose claim is not listed in the
schedule of debts and liabilities and who fails to file a notice of claim in accordance with the
Commencement Order but subsequently files a belated claim shall not be entitled to participate in
the rehabilitation proceedings but shall be entitled to receive distributions arising therefrom.30 The
2013 Financial Rehabilitation Rules of Procedure or A.M. No. 12-12-11-SC echoed the manner of
filing the creditors' claims, to wit:

RULE 2
COURT-SUPERVISED REHABILITATION

xxxx

B. Provisions Common to Voluntary And Involuntary Proceedings/Action On Petition And

Commencement Proceedings

xxxx

SEC. 12. Notice of Claim. — Every creditor of the debtor or any interested party whose claim is not
yet listed in the schedule of debts and liabilities shall file his verified notice of claim not later than five
(5) days before the first initial hearing date fixed in the Commencement Order.

If a creditor files a belated claim, he shall not be entitled to participate in the proceedings but shall be
entitled to receive distributions arising therefrom if recommended and approved by the rehabilitation
receiver, and approved by the court.

xxxx

SEC. 14. Action at the Initial Hearing. — After making a determination that the jurisdictional
requirements have been complied with, the court shall: 
(A) determine the creditors who have made timely and proper filing of their notice of claims and
issue an order that the creditors not named therein shall not be entitled to participate in the
proceedings but shall be entitled to receive distributions arising from the proceedings;

xxxx

Verily, the reason behind the imperative nature of a stay order in relation to the creditors' claims
cannot be downplayed. The indiscriminate suspension of actions for claims is intended to expedite
the rehabilitation of the distressed corporation. It enables the management committee or the
rehabilitation receiver to effectively exercise its/his powers free from any judicial or extrajudicial
interference that might unduly hinder or prevent the rescue of the debtor company. To allow such
other actions to continue would only add to the burden of the management committee or
rehabilitation receiver, whose time, effort and resources would be wasted in defending claims
against the corporation.31 Corollarily, the date when the claim arose, or when the action was filed,
has no bearing at all in deciding whether the action or claim is suspended. The stay order embraces
all phases of the suit,32 except in those instances expressly mentioned in Section 18 of RA No.
10142, viz.:

SECTION 18. Exceptions to the Stay or Suspension Order. — The Stay or Suspension Order shall
not apply:

(a) to cases already pending appeal in the Supreme Court as of commencement date:
Provided, That any final and executory judgment arising from such appeal shall be referred
to the court for appropriate action;

(b) subject to the discretion of the court, to cases pending or filed at a specialized court or
quasi-judicial agency which, upon determination by the court, is capable of resolving the
claim more quickly, fairly and efficiently than the court: Provided, That any final and
executory judgment of such court or agency shall be referred to the court and shall be
treated as a non-disputed claim;

(c) to the enforcement of claims against sureties and other persons solidarity liable with the
debtor, and third party or accommodation mortgagors as well as issuers of letters of credit,
unless the property subject of the third party or accommodation mortgage is necessary for
the rehabilitation of the debtor as determined by the court upon recommendation by the
rehabilitation receiver;

(d) to any form of action of customers or clients of a securities market participant to recover
or otherwise claim moneys and securities entrusted to the latter in the ordinary course of the
latter's business as well as any action of such securities market participant or the appropriate
regulatory agency or self-regulatory organization to pay or settle such claims or liabilities;

(e) to the actions of a licensed broker or dealer to sell pledged securities of a debtor
pursuant to a securities pledge or margin agreement for the settlement of securities
transactions in accordance with the provisions of the Securities Regulation Code and its
implementing rules and regulations;

(f) the clearing and settlement of financial transactions through the facilities of a clearing
agency or similar entities duly authorized, registered and/or recognized by the appropriate
regulatory agency like the Bangko Sentral ng Pilipinas (BSP) and the SEC as well as any
form of actions of such agencies or entities to reimburse themselves for any transactions
settled for the debtor; and
 (g) any criminal action against the individual debtor or owner, partner, director or officer of a
debtor shall not be affected by any proceeding commenced under this Act. (Emphasis
supplied.)

In Lingkod Manggagawa sa Rubberworld, Adidas-Anglo v. Rubberworld (Phils.) Inc.,33 this Court

affirmed the CA's finding that the Labor Arbiter and the National Labor Relations Commission
committed grave abuse of discretion when they proceeded with the unfair labor practice case that
the petitioner filed against the respondent despite the Securities and Exchange Commission's
suspension order. In that case, the decisions and orders of the labor tribunals are void and could not
have achieved a final and executory status, thus:

Given the factual milieu obtaining in this case, it cannot be said that the decision of the Labor Arbiter,
or the decision/dismissal order and writ of execution issued by the NLRC, could ever attain final and
executory status. The Labor Arbiter completely disregarded and violated Section 6(c) of Presidential
Decree 902-A, as amended, which categorically mandates the suspension of all actions for claims
against a corporation placed under a management committee by the SEC. Thus, the proceedings
before the Labor Arbiter and the order and writ subsequently issued by the NLRC are all null and
void for having been undertaken or issued in violation of the SEC suspension Order dated
December 28, 1994. As such, the Labor Arbiter's decision, including the dismissal by the NLRC of
Rubberworld's appeal, could not have achieved a final and executory status.

Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the
law itself authorizes their validity. The Labor Arbiter's decision in this case is void ab initio, and
therefore, non-existent. A void judgment is in effect no judgment at all. No rights are divested by it
nor obtained from it. Being worthless in itself, all proceedings upon which the judgment is founded
are equally worthless. It neither binds nor bars anyone. All acts performed under it and all claims
flowing out of it are void. In other words, a void judgment is regarded as a nullity, and the situation is
the same as it would be if there were no judgment. It accordingly leaves the party-litigants in the
same position they were in before the trial.34 (Emphases supplied; citations omitted.)

Likewise, in La Savoie Development Corp. v. Buenavista Properties, Inc.,35 the respondent filed a
complaint for termination of contract and recovery of property with damages against petitioner before
the RTC of Quezon City. Meantime, the petitioner filed rehabilitation proceedings before the RTC of
Makati City which issued a suspension order. The petitioner then informed the RTC of Quezon City
about the order but it had already decided the complaint. Thereafter, the judgment became final and
executory. Later, the RTC of Makati City approved a rehabilitation plan which reduced the penalty
stated in the decision of the RTC of Quezon City. Undaunted, the respondent questioned the
reduction of penalty and argued that the RTC of Makati City cannot amend the final decision of the
RTC of Quezon City. The respondent insisted that the cram down power of the rehabilitation court is
irrelevant and inapplicable. In that case, we held that a decision rendered in violation of a stay order
did not attain finality, viz.:

We see no reason not to apply the rule in Lingkod in case of violation of a stay order under the
Interim Rules.  Having been executed against the provisions of a mandatory law, the QC RTC
Ꮮαwρhi ৷

Decision did not attain finality.

xxxx

Necessarily, we reject respondent's contention that the Rehabilitation Court cannot exercise its
cram-down power to approve a rehabilitation plan over the opposition of a creditor. Since the QC
RTC Decision did not attain finality, there is no legal impediment to reduce the penalties under the
ARRP.
Further, we have already held that a court-approved rehabilitation plan may include a reduction of
liability. x x x. (Emphasis supplied.)

Here, it is undisputed that Kaizen Builders filed a petition for corporate rehabilitation. Finding the
petition sufficient in form and substance, the rehabilitation court issued a Commencement Order on
August 12, 2015 or during the pendency of the appeal in CA-G.R. CV No. 102330. Yet, the CA
proceeded with the case and rendered judgment. On this point we find grave abuse of discretion. To
reiterate, the Commencement Order ipso jure suspended the proceedings in the CA at whatever
stage it may be, considering that the appeal emanated from a money claim against a distressed
corporation which is deemed stayed pending the rehabilitation case. Moreover, the appeal before
the CA is not one of the instances where a suspension order is inapplicable. The CA should have
abstained from resolving the appeal.36 Taken together, the CA clearly defied the effects of a
Commencement Order and disregarded the state policy to encourage debtors and their creditors to
collectively and realistically resolve and adjust competing claims and property rights.37 Applying the
pronouncements in Lingkod Manggagawa sa Rubberworld and La Savoie Development Corp., the
CA's Resolution dated December 8, 2015 and Decision dated October 1, 2018 in CA-G.R. CV No.
102330 are void for having been rendered with grave abuse of discretion and against the provisions
of a mandatory law. With findings warranting the grant of the petition for certiorari and prohibition in
G.R. No. 226894, there is no more reason for this Court to decide the petition for review in G.R. No.
247647 sans a valid judgment.

FOR THESE REASONS, the Petition for Certiorari and Prohibition in G.R. No. 226894
is GRANTED. The Court of Appeals' Resolution dated December 8, 2015 and Decision dated
October 1, 2018 in CA-G.R. CV No. 102330 are declared VOID. The proceedings in the Court of
Appeals are SUSPENDED during the pendency of the corporate rehabilitation case. Accordingly,
Kaizen Builders, Inc. is DIRECTED to quarterly update the Court of Appeals as to the status of its
ongoing rehabilitation. The petition for review in G.R. No. 247647 is DISMISSED.

SO ORDERED.

Peralta, C. J., (Chairperson), Caguioa, J. Reyes, Jr., and Lazaro-Javier, JJ., concur.

G.R. No. 94723 August 21, 1997

KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural Guardian,
and Spouses FEDERICO N. SALVACION, JR., and EVELINA E. SALVACION, petitioners,
vs.
CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and GREG
BARTELLI y NORTHCOTT, respondents.

TORRES, JR., J.:

In our predisposition to discover the "original intent" of a statute, courts become the unfeeling pillars
of the status quo. Ligle do we realize that statutes or even constitutions are bundles of compromises
thrown our way by their framers. Unless we exercise vigilance, the statute may already be out of
tune and irrelevant to our day.

The petition is for declaratory relief. It prays for the following reliefs:
 a.) Immediately upon the filing of this petition, an Order be issued restraining the
respondents from applying and enforcing Section 113 of Central Bank Circular No.
960;

b.) After hearing, judgment be rendered:

1.) Declaring the respective rights and duties of petitioners and respondents;

2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary to the
provisions of the Constitution, hence void; because its provision 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

i.) 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;

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 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 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 respondent China Bank is not unmindful of the inhuman
sufferings 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 Bartelli which may perhaps partly mitigate the
sufferings petitioner has undergone; but it is restrained from doing so in view of R.A. No. 6426 and
Section 113 of Central Bank Circular No. 960; and that despite the harsh effect of these laws on
petitioners, CBC has no other alternative but to follow the same.

This Court finds the petition to be partly meritorious.

Petitioner deserves to receive the damages awarded to her by the 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.

This Court has no original and exclusive jurisdiction over a petition for declaratory relief.  However,
2

exceptions to this rule have been recognized. Thus, where the petition has far-reaching implications
and raises questions that should be resolved, it may be treated as one for mandamus. 3

Here is a child, a 12-year old girl, who in her belief that all Americans are good and in her gesture of
kindness by teaching his alleged niece the Filipino language as requested by the American,
trustingly went with said stranger to his apartment, and there she was raped by said American tourist
Greg Bartelli. Not once, but ten times. She was detained therein for four (4) days. This American
tourist was able to escape from the jail and avoid punishment. On the other hand, the 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 had suffered and may continue to suffer for a long, long time; and knowing that this person who
had wronged her has the money, could not, however get the award of damages because of this
unreasonable law. This questioned law, therefore makes futile the favorable judgment and award of
damages that she and her parents fully deserve. As stated by the trial court in its decision,

Indeed, after hearing the testimony of Karen, the Court believes that it was
undoubtedly a shocking and traumatic experience she had undergone which could
haunt her mind for a long, long time, 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 at the Abad Santos High School, Arellano University, where she sought to
transfer from another school, simply because the school authorities of the said High
School learned about what happened to her and allegedly feared that they might be
implicated in the case.
 xxx xxx xxx

The reason for imposing exemplary or corrective 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 victim, the minor Karen Salvacion whose only fault
was in her being so naive and credulous to believe easily that defendant, an
American national, could not have such a bestial desire on her nor capable of
committing such a heinous crime. Being only 12 years old when that unfortunate
incident happened, she has never heard of an old Filipino adage that in every forest
there is a
snake, . . . .
4

If Karen's sad fate had happened to anybody's own kin, it would be difficult for him to fathom how the
incentive for foreign currency deposit could be more important than his child's rights to said award of
damages; in this case, the victim's claim for damages from this alien who had the gall to wrong a
child of tender years of a country where he is a mere visitor. This further illustrates the flaw in the
questioned provisions.

It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the country's
economy was in a shambles; when foreign investments were minimal and presumably, this was the
reason why said statute was enacted. But the realities of the present times show that the country
has recovered economically; and even if not, the questioned law still denies those entitled to due
process of law for being unreasonable and oppressive. The intention of the questioned law may be
good when enacted. The law failed to anticipate the iniquitous effects producing outright injustice
and inequality such as the case before us.

It has thus been said that —

But I also know,  that laws and institutions must go hand in hand with the progress of
5

the human mind. As that becomes more developed, more enlightened, as new
discoveries are made, new truths are disclosed and manners and opinions change
with the change of circumstances, institutions must advance also, and keep pace
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 regimen of their
barbarous ancestors.

In his Comment, the Solicitor General correctly opined, thus:

The present petition has far-reaching implications on the right of a national to obtain
redress for a wrong committed by an alien who takes refuge under a law and
regulation promulgated for a purpose which does not contemplate the application
thereof envisaged by the alien. More specifically, the petition raises the question
whether the protection against attachment, garnishment or other court process
accorded to foreign currency deposits by PD No. 1246 and CB Circular No. 960
applies when the deposit does not come from a lender or investor but from a mere
transient or tourist who is not expected to maintain the deposit in the bank for long.

The resolution of this question is important for the protection of nationals who are
victimized in the forum by foreigners who are merely passing through.

xxx xxx xxx

. . . Respondents China Banking Corporation and Central Bank of the Philippines
refused to honor the writ of execution issued in Civil Case No. 89-3214 on the
strength of the following provision of Central Bank Circular No. 960:

Sec. 113. Exemption from attachment. — 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.

Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic Act No.
6426:

Sec. 7. Rules and Regulations. The Monetary Board of the Central

Bank shall promulgate such rules and regulations as may be
necessary to carry out the provisions of this Act which shall take
effect after the publication of such rules and regulations in the Official
Gazette and in a newspaper of national circulation for at least once a
week for three consecutive weeks. In case the Central Bank
promulgates new rules and regulations decreasing the rights of
depositors, the rules and regulations at the time the deposit was
made shall govern.

The aforecited Section 113 was copied from Section 8 of Republic Act NO. 6426, as
amended by P.D. 1246, thus:

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.

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 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.