GSIS v. CA and Industrial Bank of Korea et. al.

Facts:
Domsat Holdings Incorporated obtained a surety from GSIS to secure payments for loans
coming from a collection of banks. The banks that are part of this collection are Industrial
Bank of Korea, Tong Yang Merchant Bank, First Merchant Banking Corporation, Landbank of
the Philippines, and Westmont bank, all of which lent certain sums to Domstat. The loan
proceeds were to be used for a satellite to be rented by Domsat

Domsat defaulted on the loans and so GSIS refused to comply with its obligation of surety,
alleging that Domsat did not use the loan proceeds for the payment of the rental of the
satellite. Further, GSIS stated that the loan proceeds, 11 million dollars in total, were
transferred from the Bank of Korea to the accounts of Westmont Bank in New York and
finally to the Binondo branch of Westmont Bank.

The collection of banks filed the complaint before the RTC of Makati against Domsat and
GSIS as surety. A subpoena duces tecum was filed or requested by GSIS so that Westmont
Bank would produce ledgers, cashier's checks, or managers checks which revolve around
the transactions between Domsat and Westmont Bank for the years 1997-2002.

The subpoena duces tecum was issued by the RTC but was met by a motion to quash filed
by the collection of banks. The reason for this motion to quash is threefold, but our interest
falls upon the first two: 1. the subpoena is unreasonable and oppressive and does not
establish the relevance of the documents sought; 2. to allow the documents to be inspected
would violate RA No. 1405. The RTC denied this motion and so the GSIS elevated the
issues via petition for certiorari before the CA.

The CA upheld the subpoena duces tecum which prayed for the production of cashiers or
managers’ checks made by Domsat through Westmont Bank. The CA was of the opinion
that the production of the requested documents does not involve examining Domsat’s
account since it will never be known how much money was deposited into it, or withdrawn
from it, and what the net amount is. The CA denied the motion for reconsideration by GSIS
on this ruling.

GSIS assailed the ruling of the CA by elevating the case to the SC via a petition for certiorari
under Rule 65, although incorrect, was nonetheless discarded as a procedural infirmity to
address the substantial issues.

Issue:
After the arguments of GSIS and the collection of banks, the SC set forth to resolve the
issue of which law was applicable to this case: RA No. 1405 or RA No. 6426.

Ruling:
The court in this case ruled that the applicable law in this case is RA No. 6426, particularly
section 8 of the law.

The SC compared the two laws in this case, where on one hand, RA No. 1405 provides for
five exceptions when records of deposit may be disclosed:
 1. upon written permission of the depositor
2. in case of impeachment
3. upon order of a competent court in case of bribery or dereliction of duty of
public officials
4. when the money deposited or invested is the subject matter of the litigation
5. in cases of violation of the AMLA

On the other hand RA No. 6426 only has one exception to the non disclosure of foreign
currency deposits and that is only upon the written permission of the depositor.

There is no conflict between these laws and they both support the confidentiality of bank
deposits. RA No. 1405 discourages private hoarding so that these may be properly utilized
by banks in authorized loans to assist economic development while RA No. 6426
encourages deposit from foreign lenders and investors.

The court also supported its ruling that RA No. 6426 must apply since it is a special law
while RA No. 1405 is a general law, and so the special law must take precedence over the
general law.