bank secrecy digest

8/12/2019 Bank Secrecy Digest

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SPECIAL COMMERCIAL LAW: LAW ON SECRECY OF BANK DEPOSITS (RA 1405)

TERESE RAY-ANNE O. AQUINO | 3A

1

DE LA RAMA V. VILLAROSA

FACTS:

Lessor Lourdes de la Rama brought an action inthe Court of first Instance against lessee AugustoR. Villarosa and the Villarosassurety, the LuzonSurety Co., Inc. for judicial confirmation of thecancellation, rescission and annulment of acontract of lease of sugarland.

CFI rendered a partial summary judgmentdecreeing the lease rescinded, cancelled andannulled and ordering defendant Augusto R.Villarosa to surrender and deliver to De LaRama orher representatives the possession of the leasedpremises, etc. and ordering Villarosa and Surety tojointly and severally pay De La Rama for theunpaid rents etc.

Subsequently, the court issued order for the

immediate execution of the above judgment. Uponthe application of De La Rama, the lower courtissued order for the issuance of a third alias writ ofexecution directing the sheriff to satisfy thejudgment.

Accordingly, the sheriff of Manila garnished theVillarosa with the Philippine Trust Co. (PTC) to theamount of P71,533.99. and required the PTC notto deliver, transfer or otherwise dispose of the saidamount belonging to Villarosa, to any personexcept to the sheriff, or suffer the penaltiesprescribed by law.

PTC complying with such notice, set aside theamount of P71,533.99 out of the deposit of theVillarosa in its possession for the benefit of thesheriff of Manila and the De La Rama.

Luzon Surety perfected an appeal

However, the garnishee, PTC., refused to deliverto the sheriff of Manila, the said amount garnishedto satisfy the writ of execution.

The lower court, ordered PTC to pay the sheriff out

of the deposit of the Luzon Surety Co., Inc. theamount stated in the garnishment.

Before the order could be complied with by thegarnishee, the defendant Luzon Surety Co. filed apetition for certiorari with preliminary injunction withthe Court of Appeals against the Court of FirstInstance, the sheriff and the PTC.

Hence, sheriff was enjoined from enforcing the

order against PTC. So the garnishee did notdeliver to the sheriff any portion of the amountgarnished and De la Rama never received any forsatisfaction of the original judgment.

CA held Luzon Surety is hereby ordered to pay thesum of P24,864.78 solidarity with Villarosa, toLourdes de la Rama.

Villarosa, invoking the provisions of section 5 ofRule 39, Rules of Court, filed with the lower court averified motion for the restitution of the amount ofP39,998.42 (P71,533.99 minus P33,002.72 equalsP38,531.27), plus interest thereon at the rate of6% per annum from August 18, 1959 until paid.The above amount represents the balancerefundable to it after the Court of Appeals modifiedthe decision of the lower court, plus a 6% interestthereon, invoking the provision of section 5 of Rule39.

But this was opposed by De La Rama alleging thatby virtue of the writ of preliminary injunction issuedby the Court of Appeals the sheriff was never ableto collect from the Philippine Trust Company anyportion of the amount garnished.

The above order is the subject of this appeal to thisCourt.

The gist of the Villarosa's appeal is inasmuch asthe full amount of P71,533.99 was garnished butonly the sum of P31,535.57 was paid, the amountof the judgment awarded in the Court of Appeals,

plaintiff-De La Rama should pay an interest of 6%of the difference between the total sum actuallygarnished and the sum obtained by the plaintiff inthe final judgment or an interest of 6% etc. Basisfor this petition is Section 5 of Rule 39 which readsas follows:

SEC. 5. Effect of reversal of judgment executed. Where the judgment executed is reversed totally orpartially on appeal the trial court, on motion, afterthe case is remanded to it, may issue such ordersof restitution as equity and justice may warrantunder the circumstances. (Rules of Court)

ISSUE: W/N the interest on the balance ofamount garnished be granted to Villarosa.

HELD: No.There are various reasons why thepetition for interest on the balance of the amountgarnished cannot be awarded to the defendant-appellant. In the first place, the amount garnishedwas not actually taken possession of by the sheriff,even from the time of the garnishment, because


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upon the perfection of the defendant-appellant'sappeal to the Court of Appeals this Court issued aninjunction prohibiting execution of the judgment.The plaintiff-appellee was, therefore, able tosecure a full satisfaction of the judgment only uponfinal judgment of the Court on August 6, 1960. Thetotal sum garnished was not delivered to the sheriffin execution, because the order for the executionof the judgment of the lower court was suspendedin time by the appeal and the preliminary injunctionissue on appeal.

In the second place, the mere garnishment offunds belonging to the party upon order of thecourt does not have the effect of delivering themoney garnished to the sheriff or to the party inwhose favor the attachment is issued. The fund isretained by the garnishee or the person holding themoney for the defendant.

The garnishee, or one in whose hands property is

attached or garnished, is universally regarded ascharged with its legal custody pending theoutcome of the attachment of garnishment, unless,by local statute and practice, he is permitted tosurrender or pay the garnished property or fundsinto court, to the attaching officer, or to a receiveror trustee appointed to receive them. (5 Am. Jur.14)

The effect of the garnishment, therefore, was torequire the Philippine Trust Company, holder of thefunds of the Luzon Surety Co., to set aside saidamount from the funds of the Luzon Surety Co.and keep the same subject to the final orders ofthe Court. In the case at bar there was never inorder to deliver the full amount garnished to theplaintiff-appellee; all that was ordered to bedelivered after the judgment had become final wasthe amount found by the Court of Appeals to bedue. The balance of the amount garnished,therefore, remained all the time in the possessionof the bank as part of the funds of the LuzonSurety Co., although the same could not bedisposed of by the owner.

In the third place, the motion by the defendant-appellant for the payment of damages or interestwas presented when the judgment had alreadybecome final. Damages incident to the issuance ofan attachment may only be claimed before finaljudgment. (Rule 59, See. 20). In the case at barthe judgment of the Court of Appeals was issuedon January 14, 1960. But the defendant-appellant'srequest for interest or damages is dated July 22,1960. The defendant-appellant's own record onappeal shows that the decision of the Court ofAppeals had already become final and executory

time of the perfection of the appeal to this Court. Alast reason is the absence of any allegation to theeffect that the garnishment of appellant's funds inthe Philippine Trust Company caused actualdamages to defendant-appellant, for example, thatthe funds could not be utilized to pay a pendingobligation as a result of which interest was paid onsuch obligation.

2. PNB V. GANCAYCO

FACTS:.

Defendants Emilio A. Gancayco and FlorentinoFlor, as special prosecutors of the Department ofJustice, required the Philippine National Bank(PNB) to produce at a hearing the records of thebank deposits of Ernesto T. Jimenez, formeradministrator of the Agricultural Credit andCooperative Administration, who was then underinvestigation for unexplained wealth.

In declining to reveal its records, the PNB invokedRepublic Act No. 1405 which provides:

SEC. 2.All deposits of whatever nature withbanks or banking institutions in the Philippinesincluding investments in bonds issued by theGovernment of the Philippines, its politicalsubdivisions and its instrumentalities, are herebyconsidered as of an absolutely confidential natureand may not be examined, inquired or looked intoby any person, government official, bureau oroffice, except upon written permission of the

depositor, or in cases of impeachment, or uponorder of a competent court in cases of bribery ordereliction of duty of public officials, or in caseswhere the money deposited or invested is thesubject matter of the litigation.

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 anddemanded anew that plaintiff Eduardo Z.Romualdez, as bank president, produce therecords or he would be prosecuted for contempt.The law invoked by the defendant states:

SEC. 8. Dismissal due to unexplainedwealth. - If in accordance with the provisions of RA1379, a public official has been found to haveacquired during his incumbency, whether in hisname or in the name of other persons, an amountof property and/or money manifestly out ofproportion to his salary and to his other lawfulincome, that fact shall be a ground for dismissal orremoval. Properties in the name of the spouse andunmarried children of such public official may be


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taken into consideration, when their acquisitionthrough legitimate means cannot be satisfactorilyshown. Bank deposits shall be taken intoconsideration in the enforcement of this section,notwithstanding any provision of law to thecontrary.

Because of the threat of prosecution,plaintiffs filed an action for declaratory judgment inthe Court of First Instance. After trial, during whichSenator Arturo M. Tolentino, author of the Anti-Graft and Corrupt Practices Act testified, the courtrendered judgment, sustaining the power of thedefendants to compel the disclosure of bankaccounts of ACCFA Administrator Jimenez. Thecourt said that, by enacting section 8 of, the Anti-Graft and Corrupt Practices Act, Congress clearlyintended to provide an additional ground for theexamination of bank deposits. Without suchprovision, the court added prosecutors would behampered if not altogether frustrated in theprosecution of those charged with having acquired

unexplained wealth while in public office.c

From that judgment, PNB appealed to thisCourt. In brief, plaintiffs' position is that section 8 ofthe Anti-Graft Law "simply means that such bankdeposits may be included or added to the assets ofthe Government official or employee for thepurpose of computing his unexplained wealth ifand when the same are discovered or revealed inthe manner authorized by Section 2 of RepublicAct 1405, which are (1) Upon written permission ofthe 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 orinvested is the subject matter of the litigation."

PNB argues that to construe section 8 of theAnti-Graft Law as allowing inquiry into bankdeposits would be to negate the policy expressedin section 1 of Republic Act No. 1405 which is "togive encouragement to the people to deposit theirmoney in banking institutions and to discourageprivate hoarding so that the same may be utilizedby banks in authorized loans to assist in theeconomic development of the country."

ISSUE: W/N a bank can be compelled todisclose the records of accounts of a depositorwho is under investigation for unexplainedwealth.

HELD: YES. The truth is that these laws areso repugnant to each other than no reconciliationis possible. Thus, while Republic Act No. 1405provides that bank deposits are "absolutely

confidential ... and [therefore] may not beexamined, inquired or looked into," except in thosecases enumerated therein, the Anti-Graft Lawdirects in mandatory terms that bank deposits"shall be taken into consideration in theenforcement of this section, notwithstanding anyprovision of law to the contrary." The onlyconclusion possible is that section 8 of the Anti-Graft Law is intended to amend section 2 ofRepublic Act No. 1405 by providing additionalexception to the rule against the disclosure of bankdeposits.

With regard to the claim that disclosurewould be contrary to the policy making bankdeposits confidential, it is enough to point out thatwhile section 2 of Republic Act 1405 declares bankdeposits to be "absolutely confidential," itnevertheless allows such disclosure in thefollowing instances: (1) Upon written permission ofthe depositor; (2) In cases of impeachment; (3)Upon order of a competent court in cases ofbribery or dereliction of duty of public officials; (4)In cases where the money deposited is the subjectmatter of the litigation. Cases of unexplainedwealth are similar to cases of bribery or derelictionof duty and no reason is seen why these twoclasses of cases cannot be excepted from the rulemaking bank deposits confidential. The policy as toone cannot be different from the policy as to theother. This policy express the motion that a publicoffice is a public trust and any person who entersupon its discharge does so with the full knowledgethat his life, so far as relevant to his duty, is opento public scrutiny.

3. BANCO FILIPINO SAVINGS BANK ANDMORTGAGE V. PURISIMA

FACTS:The Bureau of Internal Revenue accused Customsspecial agent Manuel Caturla before theTanodbayan of having illegal acquired propertymanifestly out of proportion to his salary and otherlawful income. During the preliminary investigation,the Tanodbayan issued a subpoena duces tecumto the Banco Filipino Savings and Mortgage Bank,commanding its representative to appear at a

specified time at the Office of the Tanodbayan andfurnish the latter with duly certified copies of therecords in all its branches and extension offices ofthe loans, savings and time deposits and otherbanking transactions, in the names of Caturla, hiswife, Purita, their children, and/or Pedro Escuyos.Caturla moved to quash the subpoena for violatingSections 2 and 3 of RA 1405 which was denied bythe Tanodbayan. In fact, the Tanodbayan issuedanother subpoena which expanded its scope


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including the production of bank records not only ofthe persons enumerated above but of additionalpersons and entities as well.The Banco Filipino filed an action for declaratoryrelief with the CFI of Manila which was denied bythe lower court. Thus this special civil action ofcertiorari in the SC.

ISSUE: Whether or not the Law on Secrecy ofBank Deposits precludes production bysubpoena duces tecum of bank records oftransactions by or in the names of the wife,children and friends of a special agent of theBureau of Customs accused before theTanodbayan of having allegedly acquiredproperty manifestly out of proportion to hissalary and other lawful income in violation ofRA 3019?

HELD: NO.In PNB v. Gancayco, we ruled that:while Section 2 of Republic Act No. 1405 providesthat bank deposits are absolutely confidential

and, therefore, may not be examined, inquired orlooked into, except in those cases enumeratedtherein, Section 8 of Republic Act No. 3019 (Anti-graft law) directs in mandatory terms that bankdeposits shall be taken into consideration in theenforcement of this section, notwithstanding anyprovision of law to the contrary. The onlyconclusion possible is that Section 8 of the Anti-Graft Law is intended to amend Section 2 ofRepublic Act No. 1405 by providing an additionalexception to the rule against the disclosure of bankdeposits.The inquiry into illegally acquired property or

property not legitimately acquired extends tocases where such property is concealed by beingheld by or recorded in the name of other persons.This proposition is made clear by RA 3019 whichquite categorically states that the term legitimatelyacquired property of a public officer or employeeshall not include property unlawfully acquired bythe respondent, but its ownership is concealed byits being recorded in the name of, of held by,respondents spouse, ascendants, descendants,relatives or any other persons.To sustain the petitioners theory, and restrict theinquiry only to property held by or in the name of

the government official or employee, or his spouseand unmarried children is unwarranted in the lightof the provisions of the statutes in question, andwould make available to persons in governmentwho illegally acquire property an easy and fool-proof means of evading investigation andprosecution; all they have to do would be to simplyplace the property in the possession or name ofpersons other than their spouse and unmarriedchildren. This is an absurdity that we will not

ascribe to the lawmakers.

4. RCBC V. DE CASTRO

FACTS:

In a prior case of action for recovery of unpaidtobacco deliveries, the court issued an order

directing the Philippine Tobacco Industries Admin(PVTA) to pay BADOC Planters a certain amountof money.

BADOC filed an Urgent Ex-Parte Motion for a Writof Execution of the said Partial Judgment whichwas granted on the same. Accordingly, the BranchClerk of Court on the very same day, issued a Writof Execution addressed to Special Sheriff, whothen issued a Notice of Garnishment addressed tothe General Manager and/or Cashier of RizalCommercial Banking Corporation.

The respondent Judge issued an Order directingRCBC "to deliver in check the amount garnished toSheriff Faustino Rigor and Sheriff Rigor in turn isordered to cash the check and deliver the amountto the BADOCs representative. In compliance withsaid Order, RCBC delivered to Sheriff Rigor acertified check in the sum of P 206,916.76.

PVTA filed a MR, which was granted. It orderedRCBC and BADOC "to restore, jointly andseverally, the account of PVTA with the said bankin the same condition and state it was before the

issuance of the aforesaid Orders by reimbursingthe PVTA of the amount of P 206, 916.76 withinterests at the legal rate.

RCBC then filed a MR, which was denied, by thecourt.

Hence, this petition.

ISSUE: W/N the bank is liable for releasing itsdepositor's funds upon orders of the court,pursuant to a writ of garnishment.

HELD: No.It is important to stress, at this juncture,that there was nothing irregular in the delivery ofthe funds of PVTA by check to the sheriff, whosecustody is equivalent to the custody of the court,he being a court officer. The order of the courtdated January 27, 1970 was composed of twoparts, requiring: 1) RCBC to deliver in check theamount garnished to the designated sheriff and 2)the sheriff in turn to cash the check and deliver theamount to the plaintiffs representative and/or


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counsel on record. It must be noted that indelivering the garnished amount in check to thesheriff, the RCBC did not thereby make anypayment, for the law mandates that delivery of acheck does not produce the effect of payment untilit has been cashed. [Article 1249, Civil Code.]

Moreover, by virtue of the order of garnishment,

the same was placed in custodia legis andtherefore, from that time on, RCBC was holding thefunds subject to the orders of the court a quo. Thatthe sheriff, upon delivery of the check to him byRCBC encashed it and turned over the proceedsthereof to the plaintiff was no longer the concern ofRCBC as the responsibility over the garnishedfunds passed to the court. Thus, no breach of trustor dereliction of duty can be attributed to RCBC indelivering its depositor's funds pursuant to a courtorder which was merely in the exercise of its powerof control over such funds.

... The garnishment of property to satisfy a writ ofexecution operates as an attachment and fastensupon the property a lien by which the property isbrought under the jurisdiction of the court issuingthe writ. It is brought into custodia legis, under thesole control of such court [De Leon v. Salvador,G.R. Nos. L-30871 and L-31603, December28,1970, 36 SCRA 567, 574.]

The respondent judge however, censured thepetitioner for having released the funds "simply onthe strength of the Order of the court which. farfrom ordering an immediate release of the amountinvolved, merely serves as a standing authority tomake the release at the proper time as prescribedby the rules." [Rollo, p. 81.]

This argument deserves no serious consideration.As stated earlier, the order directing the bank todeliver the amount to the sheriff was distinct andseparate from the order directing the sheriff toencash the said check. The bank had no choicebut to comply with the order demanding delivery ofthe garnished amount in check. The very tenor ofthe order called for immediate compliancetherewith. On the other hand, the bank cannot beheld liable for the subsequent encashment of thecheck as this was upon order of the court in theexercise of its power of control over the fundsplaced in custodia legis by virtue of thegarnishment.

5. MELLON BANK V. MAGSINO

FACTS:

This case involves the erroneous transfer of US$1,000,000 to Victoria Javier instead of US $1,000only. Dolores Ventosa requested the transfer of

$1000 from the First National Bank of WestVirginia, USA to Victoria Javier in Manila throughthe Prudential Bank. Accordingly, the First NationalBank requested the petitioner, Mellon Bank, toeffect the transfer. Unfortunately, the wire sent byMellon Bank to Manufacturers Hanover Bank, acorrespondent of Prudential Bank, indicated theamount transferred as US $1,000,000.00 insteadof US $1,000.00. Hence, Manufacturers HanoverBank transferred one million dollars less bankcharges of $6.30 to the Prudential Bank for theaccount of Victoria Javier.Javier opened a new dollar account in Prudential

Bank and deposited $999,943. Immediately,thereafter, Javier and her husband madewithdrawals from the account, deposited them inseveral banks only to withdraw them later in anapparent plan to conceal, launder and dissipatethe erroneously sent amount. One of the thingsthey bought was real property in California, USAwhich was the subject of an action for recovery byMellon Bank. Later, it filed a case in the Philippinesfor the recovery of the whole amount, including thepurchase price of the real property located in theUS.Among other things, private respondents raisedthe issue of whether or not, by virtue of the

principle of election of remedies, an action filed inCalifornia, USA, to recover real property locatedtherein and to constitute a constructive trust onsaid property precludes the filing in our jurisdictionof an action to recover the purchase price of saidreal property. SC ruled that the filing of a recoverysuit in the US does not preclude the filing of anaction in the Philippines for the recovery of thepurchase price.With regard to our subject matter, Erlinda Baylosisof the Philippine Veterans Bank and Pilologo Red,Jr. of Hongkong and Shanghai BankingCorporation were required to give testimonies with

regard to the deposits and checks issued by theprivate respondents Javier, et. al.. Thesetestimonies were questioned for being immaterialand irrelevant as well as covered by RA 1405 onconfidentiality.

HELD: Private respondents protestations that toallow the questioned testimonies to remain onrecord would be in violation of the provisions of RA


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1405 on the secrecy of bank deposits isunfounded. Section 2 of said law allows thedisclosure of bank deposits in cases where themoney deposited is the subject matter of thelitigation. Inasmuch as the civil case is aimed atrecovering the amount converted by the Javiers fortheir own benefit, necessarily, an inquiry into thewhereabouts of the illegally acquired amountextends to whatever is concealed by being held orrecorded in the name of persons other than theone responsible for the illegal acquisition.

6.PCIB V. COURT OF APPEALS

FACTS:

The case originated from an action filed with NLRCby laborers of Marinduque Mining Corporation. Thesaid laborers obtained a favorable judgmentwhereby the NLRC Commissioner issued a writ ofexecution to satisfy the award of backwages

amounting to 205K against their employer MiningCorporation.

The sheriff served the writ but nothing happened.Hence, the Sheriff prepared on his own a Notice ofGarnishment addressed to six (6) banks, includingPCIB, directing the bank concerned to immediatelyissue a check in the name of the Deputy ProvincialSheriff in an amount equivalent to the amount ofthe garnishment.

Atty. Alejano the in house counsel of the MiningCorporation learned about the execution of

Judgment. Atty. Alejano called the bank manager,Jose Hernas to withhold any claim against thedeposit account of Mining Corporation.

Subsequently, Sheriff went to the PCIB andpresented the Writ. Jose, upon knowing from theActing Provincial Sheriff that there was norestraining order from the National Labor RelationsCommission and on the favorable advice of thebank's legal counsel, issued a debit memo for thefull balance of the private respondent's accountwith the petitioner bank. Thereafter, he issued amanager's check in the name of the Deputy

Provincial Sheriff of Negros Occidental for theamount of P37,466.18, which was the exactbalance of the private respondent's account as ofthat day.

On the following day since there was no TROissued by NLRC, when sheriff asked for itsenforcement, Jose Hernas allowed the same.

Hence, Mining Corporartion, filed a complaint

before the RTC against Sheriff, PCIB, alleging thatthe former's current deposit with the petitionerbank was levied upon, garnished, and with unduehaste unlawfully allowed to be withdrawn, andnotwithstanding the alleged unauthorizeddisclosure of the said current deposit and unlawfulrelease thereof, the latter have failed and refusedto restore the amount of P37,466.18 to the former'saccount despite repeated demands.

Trial court rendered judgment in favor ofMarinduque Mining Corporation. On appeal, theCourt of Appeals initially reversed the trial courtsorder but later affirmed it. Thus, this petition to theSC.

ISSUE: Whether or not the petitioners violatedthe Secrecy of Bank Deposits Act, when theyallowed the sheriff to garnish the deposit ofMarinduque Mining Corporation?

HELD: NO. The SC first ruled that the releaseof the deposit by the bank was not done in undueand indecent haste. We find the immediate releaseof the funds by the petitioner bank on the strengthof the notice of garnishment and writ of execution,whose issuance, absent any patent defect, enjoysthe presumption of regularity.The SC likewise did not find any violationwhatsoever by the petitioners of RA 1405,otherwise known as the Secrecy of Bank DepositsAct. The Court, in China Banking Corporation v.Ortega, had the occasion to dispose of this issuewhen it stated, to wit:It is clear from the discussion of the conference

committee report on Senate Bill No. 351 andHouse Bill No. 3977, which later became RepublicAct No. 1405, that the prohibition againstexamination of or inquiry into a bank deposit underRepublic Act No. 1405 does not preclude its beinggarnished to insure satisfaction of a judgment.Indeed, there is no real inquiry in such a case, andif existence of the deposit is disclosed, thedisclosure is purely incidental to the executionprocess. It is hard to conceive that it was everwithin the intention of Congress to enable debtorsto evade payment of their just debts, even ifordered by the Court, through the expedient of

converting their assets into cash and depositingthe same in a bank.Since there is no evidence that the petitionersthemselves divulged the information that theprivate respondent had an account with thepetitioner bank and it is undisputed that the saidaccount was properly the object of the notice ofgarnishment and writ of execution carried out bythe deputy sheriff, a duly authorized officer of the


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court, we cannot therefore hold the petitionersliable under RA 1405.

7. ALEXANDER VAN TWEST V. COURT OFAPPEALS

FACTS:

Alexander Van Twest (Van Twest) and Gloria

Anacieto (Gloria) opened a joint foreign currencysavings account with International Corporate Bank(Interbank) to hold funds which "belonged entirelyand exclusively" to Van Twest, to "facilitate thefunding of certain business undertakings" of VanTwest and Gloria and which funds were to be"temporarily (held) in trust" by Gloria, who "shallturnover the same to Van Twest upon demand."

Van Twest further alleged that withdrawals fromthe account were always made through their jointsignatures; that when his business relationshipwith Gloria turned sour, Gloria unilaterally closed

their joint account, withdrew the remaining balanceof Deutschmark (DM) 269,777.37 and placed themoney in her own personal account with the samebank.

Hence, Van Twest filed a complaint against Gloriaand interbank for recovery of a sum of money.

Van Twest thus sought an injunctive writ to preventGloria from withdrawing the money at any time andthereby defeat Van Twests claim in pendingaction in the above stated case.

TRO was issued. After the hearing, the enjoinedordered Gloria and Interbank from effecting andallowing withdrawals from the Foreign CurrencyDeposit Account until further orders of the court.

But such order was questioned by Gloria by filing apetition for Certiora before CA in order to annul theRTCs order, which the CA granted. Van Twestfiled a MR but it was denied.

Hence, this present petition.

In a Resolution dated 12 August 1992, the Court

motu proprio issued an indefinite temporaryrestraining order enjoining the Court of Appealsfrom enforcing its questioned Decision andResolution. 7 The parties subsequently compliedwith the requirement of the Court to submitresponsive pleadings in amplification of theirrespective positions regarding the soundness ofthe Court of Appeals' Decision under review. 8TheCourt then resolved to give due course to thePetition and required the parties to submit their

memoranda. The parties did.9

Deliberating on the present Petition for Review, theCourt considers that the Court of Appeals was inreversible

Deliberating on the present Petition for Review, theCourt considers that the Court of Appeals was in

reversible error in annulling the writ of preliminaryinjunction issued in petitioner's favor by theRegional Trial Court.

In ruling that petitioner was not entitled to theprovisional remedy of preliminary injunction duringthe pendency of Civil Case No. 90-659, the Courtof Appeals said:

ISSUE:

HELD: On a substantive, the Court holds that theprivileges extended by the statute cited by private

respondent are actually enjoyed, and are invocableonly, by the petitioner, both because privaterespondent's transactions fall outside the ambit ofthe statute, and because petitioner is the owner ofthe foreign exchange fund subject of this case.This conclusion is anchored on the consistent andcontemporaneous administrative construction bythe Central Bank of the basic statute, asmanifested in the relevant circulars issued by it inimplementation of that law, which are entitled togreat respect by the courts.

25

Section 8 of R.A. No. 6426 (the Foreign Currency

Deposit Act), as amended by P.D. No. 1246, whichis still in force, provides:

Sec. 8. Secretary of Foreign Currency Deposits All foreign currency deposits authorized under thisAct, as amended by Presidential Decree No. 1035,as well as foreign currency deposits authorizedunder Presidential Decree No. 1034, are herebydeclared as and considered of an absolutelyconfidential nature and, except upon the writtenpermission of the depositor, in no instance shallsuch foreign currency deposits be examined,inquired or looked into by any person, government

official, bureau or office, whether judicial oradministrative or legislative or any other entitywhether public or private: Provided, however, thatsaid foreign currency shall be exempt fromattachment, garnishment, or any other order orprocess of any court, legislative body, governmentagency or any administrative body whatsoever.

26

(Emphasis supplied)

Section one hundred-two of Circular No. 960,


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Series of 1983, provides in relevant part:

xxx xxx xxx

Sec. 102. Foreign currency funds ineligible fordeposits.

a. Foreign exchange purchased from authorized

agent banks in accordance with existingregulations such as excess travel funds; unspentfinancial assistance of dependents abroad ofPhilippine residents; foreign exchange acquiredfrom any resident persons, firm, association andcorporation; and transfers to foreign currencydeposit account or receipt from another foreigncurrency deposit account, whether for payment oflegitimate obligation or otherwise, are not eligiblefor deposit under the System.

xxx xxx xxx27

(Emphasis supplied)

This Circular was in force at the time privaterespondent undertook her questioned transactions;thus, such local transfer from the original jointforeign currency account to another (personal)foreign currency account, was not an eligibleforeign currency deposit within the coverage ofR.A. No. 6426 and not entitled to the benefit of theconfidentiality provisions of R.A. No. 6426.

Circular No. 960 was superseded by Circular No.1318, Series of 1992, which did not reenact andcontinue the administrative provision above-mentioned (Section 102). Nevertheless, Sectionseventy-four, Chapter seven of Circular No. 1318,which deals with the foreign currency depositsystem, provides in relevant part;

Section 74. Definition of Terms. As used in thisChapter, the following terms shall have themeaning indicated unless the context clearlyindicates otherwise:

xxx xxx xxx

The definition of such other terms used in thisChapter shall be consistent with the definition ofterms used under the Chapter on Offshore BankingSystem.

28(Emphasis supplied)

Section forty-nine, Chapter five of the sameCircular, dealing with the Offshore BankingSystem, stated in part:

Section 49. Definition of Terms. . . .

xxx xxx xxx

d. "Deposit" shall refer to funds in foreigncurrencies which are accepted and held by anOBU business, with the obligation to return anequivalent amount to the owner thereof, with or

without interest;

xxx xxx xxx29

(Emphasis supplied)

In other words, although transfers from one foreigncurrency deposit account to another foreigncurrency deposit account in the Philippines arenow eligible deposits under the Central Bank'sForeign Currency Deposit System, privaterespondent is still not entitled to the confidentialityprovisions of the relevant circulars. For, as noted

earlier, private respondent is not the owner of suchforeign currency funds and her personal depositaccount is not, under Section 49 of Circular No.1318, protected

8. ONATE V. ABROGAR

FACTS:Sun Life Assurance Company of Canada(Sun Life) filed a complaint for a sum of moneywith a prayer for the immediate issuance of a writof attachment against Brunner Corporation, Onate,and Noel L. Dio. The following day the Judge

issued an order granting the issuance of a writ ofattachment.

Upon Sun Life's ex-parte motion, the trial courtamended the writ of attachment to reflect thealleged amount of the indebtedness. That sameday, the Sheriff, accompanied by a representativeof Sun Life, attempted to serve summons and acopy of the amended writ of attachment uponBrunner corporation but was not able to do sosince there was no responsible officer to receivethe same.Nonetheless, Sheriff proceeded, over aperiod of several days, to serve notices ofgarnishment upon several commercial banks andfinancial institutions, and levied on attachment acondominium unit and a real property belonging topetitioner Oate.

Aggrieved party filed an "Urgent Motion toDischarge/Dissolve Writ of Attachment." Thatsame day, Sun Life filed an ex-parte motion toexamine the books of accounts and ledgers ofpetitioner Brunner Development Corporation(Brunner, for brevity) at the Urban Bank and to


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obtain copies thereof, which motion was grantedby respondent Judge. The examination of saidaccount was made. Hence, Brunner filed a petitionto nullify the proceeding.

Sun Life filed another motion for examination ofbank accounts, this time seeking the examinationof Account No. 0041-0277-03 with the Bank of

Philippine Islands (BPI) which, incidentally,Brunner claim not to be owned by them and therecords of Philippine National Bank (PNB) withregard to checks payable to Brunner. Sun Lifeasked the court to order both banks to comply withthe notice of garnishment.

Brunner filed a petition to discharge theattachment. But the judge denied it. Hence,Brunners basic argument is that Judge acted withgrave abuse of discretion in issuing ex parte theoriginal and amended writs of preliminaryattachment and the corresponding notices ofgarnishment and levy on attachment since the trialcourt had not yet acquired jurisdiction over them;and allowing the examination of the bank recordsthough no notice was given to them.

ISSUE: W/N Judge acted in excess of itsJurisdiction in ordering the examination ofbank records despite no notice of theexamination were ever given to them.

HELD: The records show that, on January 21,1992, respondent judge ordered the examinationof the books of accounts and ledgers of Brunner atthe Urban Bank, Legaspi Village branch, and onJanuary 30, 199 the records of account ofpetitioner Oate at the BPI, even as he ordered thePNB to produce the records regarding certainchecks deposited in it.

First. Sun Life defends these court orders on theground that the money paid by it to Brunner wassubsequently withdrawn from the Urban Bank afterit had been deposited by Brunner and thentransferred to BPI and to the unnamed account inthe petitioner Oate's account in the BPI and to theunnamed account in the PNB.

The issue before the trial court, however, concernsthe nature of the transaction between petitionerBrunner and Sun Life. In its complaint, Sun Lifealleges that Oate, in his personal capacity and aspresident of Econ, offered to sell to Sun LifeP46,990,000.00 worth of treasury bills owned byEcon and Brunner at the discounted price ofP39,526,500.82; that on November 27, 1991, SunLife paid the price by means of a check payable toBrunner; that Brunner, through its president Noel L.

Dio, issued to it a receipt with undertaking todeliver the treasury bills to Sun Life; and that onDecember 4, 1991, Brunner and Dio deliveredinstead a promissory note, dated November 27,1991, in which it was made to appear that thetransaction was a money placement instead of saleof treasury bills.

Thus the issue is whether the money paid toBrunner was the consideration for the sale oftreasury bills, as Sun Life claims, or whether it wasmoney intended for placement, as petitionersallege. Petitioners do not deny receipt ofP39,526,500.82 from Sun Life. Hence, whether thetransaction is considered a sale or moneyplacement does not make the money the "subjectmatter of litigation" within the meaning of 2 ofRepublic Act No. 1405 which prohibits thedisclosure or inquiry into bank deposits except "incases where the money deposited or invested isthe subject matter of litigation." Nor will it matterwhether the money was "swindled" as Sun Lifecontends.

Second. The examination of bank books andrecords cannot be justified under Rule 57, 10.This provision states:

Sec. 10. Examination of party whose property isattached and persons indebted to him orcontrolling his property; delivery of property toofficer. Any person owing debts to the partywhose property is attached or having in hispossession or under his control any credit or otherpersonal property belonging to such party, may berequired to attend before the court in which theaction is pending, or before a commissionerappointed by the court, and be examined on oathrespecting the same. The party whose property isattached may also be required to attend for thepurpose of giving information respecting hisproperty, and may be examined on oath. The courtmay, after such examination, order personalproperty capable of manual delivery belonging tohim, in the possession of the person so required toattend before the court, to be delivered to the clerkof the court, sheriff, or other proper officer on suchterms as may be just, having reference to any lien

thereon or claims against the same, to await thejudgment in the action.

Since, as already stated, the attachment ofpetitioners' properties was invalid, the examinationordered in connection with such attachment mustlikewise be considered invalid. Under Rule 57, 10, as quoted above, such examination is onlyproper where the property of the person examinedhas been validly attached.


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9. SALVACION V. CENTRAL BANK

Facts: Greg Bartelli, an American tourist, wasarrested for committing four counts of rape andserious illegal detention against Karen Salvacion.Police recovered from him several dollar checksand a dollar account in the China Banking Corp.He was, however, able to escape from prison. In a

civil case filed against him, the trial court awardedSalvacion moral, exemplary and attorneys feesamounting to almost P1,000,000.00.Salvacion tried to execute the judgment on thedollar deposit of Bartelli with the China BankingCorp. but the latter refused arguing that Section 11of Central Bank Circular No. 960 exempts foreigncurrency deposits from attachment, garnishment,or any other order or process of any court,legislative body, government agency or anyadministrative body whatsoever.Salvacion therefore filed this action for declaratoryrelief in the Supreme Court.ISSUE: Should Section 113 of Central BankCircular No. 960 and Section 8 of Republic ActNo. 6426, as amended by PD 1246, otherwiseknown as the Foreign Currency Deposit Act bemade applicable to a foreign transient?

HELD: The provisions of Section 113 of CentralBank Circular No. 960 and PD No. 1246, insofar asit amends Section 8 of Republic Act No. 6426, arehereby held to be INAPPLICABLE to this casebecause of its peculiar circumstances.Respondents are hereby required to comply withthe writ of execution issued in the civil case and torelease to petitioners the dollar deposit of Bartelli in

such amount as would satisfy the judgment.

Supreme Court ruled that the questioned lawmakes futile the favorable judgment and award ofdamages that Salvacion and her parents fullydeserve. It then proceeded to show that theeconomic basis for the enactment of RA No. 6426is not anymore present; and even if it still exists,the questioned law still denies those entitled to dueprocess of law for being unreasonable andoppressive. The intention of the law may be goodwhen enacted. The law failed to anticipate theiniquitous effects producing outright injustice and

inequality such as the case before us.The SC adopted the comment of the SolicitorGeneral who argued that the Offshore BankingSystem and the Foreign Currency Deposit Systemwere designed to draw deposits from foreignlenders and investors and, subsequently, to givethe latter protection. However, the foreign currencydeposit made by a transient or a tourist is not thekind of deposit encouraged by PD Nos. 1034 and1035 and given incentives and protection by said

laws because such depositor stays only for a fewdays in the country and, therefore, will maintain hisdeposit in the bank only for a short time.Considering that Bartelli is just a tourist or atransient, he is not entitled to the protection ofSection 113 of Central Bank Circular No. 960 andPD No. 1246 against attachment, garnishment orother court processes.Further, the SC said: In fine, the application of thelaw depends on the extent of its justice. Eventually,if we rule that the questioned Section 113 ofCentral Bank Circular No. 960 which exempts fromattachment, garnishment, or any other order orprocess of any court, legislative body, governmentagency or any administrative body whatsoever, isapplicable to a foreign transient, injustice wouldresult especially to a citizen aggrieved by a foreignguest like accused Greg Bartelli. This wouldnegate Article 10 of the New Civil Code whichprovides that in case of doubt in the interpretationor application of laws, it is presumed that thelawmaking body intended right and justice to

prevail.

10. UNION BANK V. COURT OF APPEALS

FACTS: An amount amounting 1M was drawnagainst an account with Allied Banking payable tothe order of Alvarez. Mr. Alvarez deposited thecheck with Union Bank who credited 1M to theaccount of Mr. Alvarez.

Unionbank sent the check for clearing.

When the check was presented for payment, aclearing discrepancy was committed by UnionBanks clearing staff when the amount of OneMillion Pesos (P1,000,000.00) was erroneouslyunder-encoded to One Thousand Pesos(P1,000.00) only.

Unionbank only discovered the under-encoding almost a year later. Thus, Union BankNotified Allied Bank of the discrepancy by way of acharge slip for Nine Hundred Ninety-NineThousand Pesos (P999,000.00) for automaticdebiting against the account of Allied Bank. AlliedBanking, however, refused to accept the charge

slip since [the] transaction was completed peryour [Union Banks] original instruction and clientsaccount is now insufficiently funded.

Subsequently, Union Bank filed a complaintagainst Allied Bank before the PCHC ArbitrationCommittee (Arbicom).

Unionbank filed in RCT a petition for theexamination of the said account. The RTC held


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that the case involve does not fall under any of theforegoing exceptions to warrant a disclosure of orinquiry into the ledgers/books of account of AlliedChecking Account No. 111-01854-8. UNionbankscomplaint primarily hing[e]s on the allegeddeliberate violation by Allied Bank Corporation ofthe provisions of the Clearing House Rules and asprincipal reliefs, it seeks for the recovery ofamounts of money as a consequence of an allegedunder-coding.

On appeal to CA, the same affirmed RTCsdecision, ruling that the case was not one wherethe money deposited is the subject matter of thelitigation. We see no cogent reason to depart fromthe time-honored general banking rule that alldeposits of whatever nature with banks areconsidered of absolutely confidential nature andmay not be examined, inquired or looked into byany person, government official, bureau or officeand corollarily, that it is unlawful for any official oremployee of a bank to disclose to any person any

information concerning deposits.

Nowhere in petitioner collecting banks complaintfiled before the PCHC does it mention of theamount it seeks to recover from Account No. 0111-018548 itself, but speaks of P999,000.00 only asan incident of its alleged opportunity losses andinterest as a result of its own employees admittederror in encoding the check.

ISSUE: W/N The subject matter involves moneydeposited.

HELD:Failing in that duty, petitioner holds privaterespondent directly liable for the P999,000.00 andother damages. It does not appear that petitioneris seeking reimbursement from the account of thedrawer. This much is evident in petitionerscomplaint before the Arbicom.

xxx plaintiffs cause of action against defendantarose from defendants deliberate violation of theprovisions of the PCHC Rule Book, Sec. 25.3,specifically on Under-Encoding of check amountingto P1,000,000.00 drawn upon defendants TondoBranch which was deposited with plaintiff hereinsometime on May 20, 1990. From the check

amount of P1,000,000.00, it was insteaderroneously encoded at P1,000.00 whichdefendant as the receiving bank thereof, nevercalled nor notified the plaintiff of the errorcommitted thus causing actual losses to plaintiff inthe principal amount of P999,000.00 exclusive ofopportunity losses and interest thereonwhatsoever. xxx[8]

Petitioner even requested private respondents

Branch Manager for reimbursement from privaterespondents account through the automaticdebiting system.

Hence, the amount actually debited from thesubject account becomes very material andgermane to petitioners claim for reimbursement asit is only upon examination of subject account canit be proved that indeed a discrepancy in the

amount credited to petitioner was committed,thereby, rendering respondent Allied Bank liable topetitioner for the deficiency. The money depositedin aforesaid account is undeniably the subjectmatter of the litigation since the issue in theArbicom case is whether respondent Bank shouldbe held liable to petitioner for reimbursement of theamount of money constituting the differencebetween the amount of the check and the amountcredited to petitioner, that is, P999,000.00, whichhas remained deposited in aforesaid account.

On top of the allegations in the complaint, whichcan be verified only by examining the subject bankaccount, the defense of respondent Allied Bankthat the reimbursement cannot be made sinceclients account is not sufficiently funded at thetime petitioner sent its Charge Slip, bolsterspetitioners contention that the money in subjectaccount is the very subject matter of the pendingArbicom case.

Indeed, to prove the allegations in its Complaintbefore the PCHC Arbitration Committee, and torebut private respondents defense on the matter,petitioner needs to determine:

1. how long respondent Allied Bank had willfully ornegligently allowed the difference of P999,000.00to be maintained in the subject account withoutremitting the same to petitioner;

2. whether indeed the subject account was nolonger sufficiently funded when petitioner sent itscharge slip for reimbursement to respondent bankon May 7, 1991; and

3. whether or not respondent Allied Banksactuations in refusing to immediately reimburse thediscrepancy was attended by good or bad faith.

In other words, only a disclosure of the pertinentdetails and information relating to the transactionsinvolving subject account will enable petitioner toprove its allegations in the pending Arbicomcase. xxx[14]


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In short, petitioner is fishing for informationso it can determine the culpability of privaterespondent and the amount of damages it canrecover from the latter. It does not seek recoveryof the very money contained in the deposit. Thesubject matter of the dispute may be the amount ofP999,000.00 that petitioner seeks from privaterespondent as a result of the latters alleged failureto inform the former of the discrepancy; but it is notthe P999,000.00 deposited in the drawersaccount. By the terms of R.A. No. 1405, themoney deposited itself should be the subjectmatter of the litigation.

That petitioner feels a need for such information inorder to establish its case against privaterespondent does not, by itself, warrant theexamination of the bank deposits. The necessityof the inquiry, or the lack thereof, is immaterialsince the case does not come under any of theexceptions allowed by the Bank Deposits SecrecyAct.

11. MARQUEZ V. DESIERTO

FACTS: Marquez received an order fromOmbudsman Desierto, ordering Marquez toproduce several bank documents for purposed ofinspection in CAMERA relative to various accountsmaintained at Union Bank of the Philippines(UBP). The accounts to be inspected wereinvolved in a case pending with the Ombudsmanwhich involves violation of RA 3019 Sec. 3 (e) and(g) relative to the Joint Venture Agreement

between the Public Estates Authority and AMARI.The Order was grounded onOmbudsman Act of1989) which provides that OMBs power includesthe power to examine and have access to bankaccounts and records; and to punish contempt whowill not obey the orders.

Petitioner agreed to an in camera inspection seton June 3, 1998. However, on June 4, 1998,Marquez wrote the Ombudsman that the accountsin question could not readily be identified since thechecks were issued in cash or bearer, and askedfor time to respond to the order. Marquez surmisedthat these accounts had long been dormant, hencewere not covered by the new account numbergenerated by the UB system, thus sought to verifyfrom the Interbank records archives for thewhereabouts of these accounts.

Marquez together with UBP filed a petition fordeclaratory relief, prohibition and injunction withthe Makati RTC against the Ombudsman allegedly

because the Ombudsman and other personsacting under his authority were continuouslyharassing her to produce the bank documentsrelative to the accounts in question and threateningher to cite in contempt. But it was denied by RTC.An order of contempt was issued. Marquezreiterated that she had no intention to disobey theorders of the Ombudsman. However, she wantedto be clarified as to how she would comply with theorders without her breaking any law, particularlyRA 1405.

ISSUE: Whether or not the order of theOmbudsman to have an in camera inspection ofthe questioned account is allowed as an exceptionto the law on secrecy of bank deposits (RA 1405).

HELD: An examination of the secrecy of bankdeposits law (RA 1405) would reveal the followingexceptions:

1. Where the depositor consents in writing;

2. Impeachment case;

3. By court order in bribery or dereliction of dutycases 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

We rule that before an in camera inspection maybe allowed, there must be a pending case before acourt of competent jurisdiction. Further, theaccount must be clearly identified, the inspectionlimited to the subject matter of the pending casebefore the court of competent jurisdiction. Thebank personnel and the account holder must benotified to be present during the inspection, andsuch inspection may cover only the accountidentified in the pending case.

In Union Bank of the Philippines v. Court ofAppeals, we held that Section 2 of the Law onSecrecy of Bank Deposits, as amended, declaresbank deposits to be absolutely confidentialexcept:

(1) In an examination made in the course of aspecial or general examination of a bank that isspecifically authorized by the Monetary Board after


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being satisfied that there is reasonable ground tobelieve that a bank fraud or serious irregularity hasbeen or is being committed and that it is necessaryto look into the deposit to establish such fraud orirregularity,

(2) In an examination made by an independentauditor hired by the bank to conduct its regular

audit provided that the examination is for auditpurposes only and the results thereof shall be forthe 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 ofbribery or dereliction of duty of public officials, or

(6) In cases where the money deposited orinvested is the subject matter of the litigation

In the case at bar, there is yet no pending litigationbefore any court of competent authority. What isexisting is an investigation by the office of theOmbudsman. In short, what the Office of theOmbudsman would wish to do is to fish foradditional evidence to formally charge AmadoLagdameo, et. al., with the Sandiganbayan.Clearly, there was no pending case in court whichwould warrant the opening of the bank account forinspection.

Zones of privacy are recognized and protected inour laws. The Civil Code provides that everyperson shall respect the dignity, personality,privacy and peace of mind of his neighbors andother persons and punishes as actionable tortsseveral acts for meddling and prying into theprivacy of another. It also holds a public officer oremployee or any private individual liable fordamages for any violation of the rights and libertiesof another person, and recognizes the privacy ofletters and other private communications. TheRevised Penal Code makes a crime of the violationof secrets by an officer, the revelation of trade andindustrial secrets, and trespass to dwelling.Invasion of privacy is an offense in special lawslike the Anti-Wiretapping Law, the Secrecy ofBank Deposits Act, and the Intellectual PropertyCode.

Ombudsman is ordered to cease and desist fromrequiring Union Bank Manager Lourdes T.

Marquez, or anyone in her place to comply with theorder dated October 14, 1998, and similar orders.

12. OFFICE OF THEOMBUDSMAN V. IBAY

FACTS:

OMB conducted an investigation on the alleged"scam" on the Public Estates Authority-AmariCoastal Bay Development Corporation. Initial resultof the investigation revealed that the allegedanomaly was committed through the issuance ofchecks which were subsequently deposited inseveral financial institutions. OMB issued an Orderdirecting Lourdes Marquez, branch manager ofUnion Bank of the Philippines to produce severalbank documents for inspection relative to certainAccount maintained in the said branch.

The documents referred to include bank accountapplication forms, signature cards, transactionshistory, bank statements, bank ledgers, debit andcredit memos, deposit and withdrawal slips,application for purchase of manager's checks,used manager's checks and check microfilms.

The inspection would be done " in camera" whereinthe bank records would be examined withoutbringing the documents outside the bank premises.Its purpose was to identify the specific bankrecords prior to the issuance of the requiredinformation not in any manner needed in or

relevant to the investigation.

Marquez failed to comply with OMB's order. Sheexplained that the subject accounts pertain toInternational Corporate Bank (Interbank) whichmerged with Union Bank in 1994.

Marquez then filed a petition for declaratory reliefwith an application for temporary restraining orderand/or preliminary injunction before the RegionalTrial Court . In her petition, private respondentaverred that under Sections 2 and 3 of R.A. 1405(Law on Secrecy of Bank Deposits), she had the

legal obligation not to divulge any informationrelative to all deposits of whatever nature withbanks in the Philippines.

ISSUE: W/N OMB can inquire into thequestioned accounts

HELD: In any event, the relief being sought byprivate respondent in her action for declaratory


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relief before the RTC of Makati City has beensquarely addressed by our decision in Marquez vs.Desierto.

8 In that case, we ruled that before an incamera inspection of bank accounts may beallowed, there must be a pending case before acourt of competent jurisdiction. Further, theaccount must be clearly identified, and theinspection limited to the subject matter of thepending case before the court of competentjurisdiction. The bank personnel and the accountholder must be notified to be present during theinspection, and such inspection may cover only theaccount identified in the pending case. In thepresent case, since there is no pending litigationyet before a court of competent authority, but onlyan investigation by the Ombudsman on the so-called "scam", any order for the opening of thebank account for inspection is clearly prematureand legally unjustified.

13. INTENGAN V. COURT OF APPEALS

FACTS:

Citibank filed a complaint for violation ofcorporation code against its 2 officers namelySantos and Genuino.

Citibank Vice-president Lim, he alleges that he wasassigned by the management of the Citibank toinvestigate certain anomalous and highly irregularactivities of Treasurer of the Global ConsumerGroup of the bank, wherein Santos was the VPand Genuino was the Asst. VP and also performs

the function of Account Officer.

It appeared that Santos and Genuino have beenactively engaged in business endeavors that werein conflict with the business of the bank.

It was found that with the use of two (2) companiesin which they have personal financial interest,namely Torrance Development Corporation andGlobal Pacific Corporation, they managed orcaused existing bank clients/depositors to diverttheir money from Citibank, N.A., such as thoseplaced in peso and dollar deposits and moneyplacements, to products offered by othercompanies that were commanding higher rate ofyields.

This was done by first transferring bank clientsmonies to Torrance and Global which in turnplaced the monies of the bank clients in securities,shares of stock and other certificates of thirdparties.

It also appeared that out of these transactions, Mr.Dante L. Santos and Ms. Marilou Genuino derivedsubstantial financial gains.

In the course of the investigation, it was found thatthe bank clients among of them is Intengan, whichMr. Santos and Ms. Genuino helped/caused todivert their Dollar deposits/money placements withCitibank, NA. to Torrance and Global (their familycorporations) for subsequent investment insecurities, shares of stocks and debt papers.

It appears that Intengan have long standingaccounts with Citibank, N.A. in savings/dollardeposits and/or in trust accounts and/or moneyplacements. Hence, a complaint was filed againstSantos and Genuino for violation of Section 31 ofthe Corporation Code in acquiring any interestadverse to the corporation in respect of any matterwhich has been reposed in him in confidence.

The complaint was supported by bank recordspresented by Lim, which revealed the deposits ofherein petitioner.

As an incident to the foregoing, Intengan and otherdepositors filed their respective motions for theexclusions and physical withdrawal of their bankrecords that were attached in the complaint.

Thereafter, the provincial Prosecutor directed thefiling of information against Lim et. Al, for thealleged violation of Bank Secrecy Law.

ISSUE: Whether or not Lim et. Al. are liable forviolation of Secrecy of Bank Deposits Act, RA1405.

HELD:The finest legal minds in the country - fromthe parties respective counsel, the ProvincialProsecutor, the Department of Justice, the SolicitorGeneral, and the Court of Appeals - all appear tohave overlooked a singl e fact which dictates theoutcome of the entire controversy. A circumspectreview of the record shows us the reason. Theaccounts in question are U.S. dollar deposits;

consequently, the applicable law is not RepublicAct No. 1405 but Republic Act (RA) No. 6426,known as the Foreign Currency Deposit Act of thePhilippines, section 8 of which provides:

Sec. 8.Secrecy of Foreign Currency Deposits.-Allforeign currency deposits authorized under thisAct, as amended by Presidential Decree No. 1035,as well as foreign currency deposits authorizedunder Presidential Decree No. 1034, are hereby


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declared as and considered of an absolutelyconfidential nature and, except upon the writtenpermission of the depositor, in no instance shallsuch foreign currency deposits be examined,inquired or looked into by any person, governmentofficial bureau or office whether judicial oradministrative or legislative or any other entitywhether public or private: Provided, however, thatsaid foreign currency deposits shall be exemptfrom attachment, garnishment, or any other orderor process of any court, legislative body,government agency or any administrative bodywhatsoever.[21 (italics supplied)

Thus, under R.A. No. 6426 there is only a singleexception to the secrecy of foreign currencydeposits, that is, disclosure is allowed only uponthe written permission of the depositor.Incidentally, the acts of private respondentscomplained of happened before the enactment onSeptember 29, 2001 of R.A. No. 9160 otherwiseknown as the Anti-Money Laundering Act of 2001.

A case for violation of Republic Act No. 6426should have been the proper case brought againstprivate respondents. Private respondents Lim andReyes admitted that they had disclosed details ofpetitioners dollar deposits without the latters writtenpermission. It does not matter if that suchdisclosure was necessary to establish Citibankscase against Dante L. Santos and MarilouGenuino. Lims act of disclosing details ofpetitioners bank records regarding their foreigncurrency deposits, with the authority of Reyes,would appear to belong to that species of criminal

acts punishable by special laws, called malumprohibitum.

A violation of Republic Act No. 6426 shall subjectthe offender to imprisonment of not less than oneyear nor more than five years, or by a fine of notless than five thousand pesos nor more thantwenty-five thousand pesos, or both.[24 ApplyingAct No. 3326, the offense prescribes in eightyears.[25 Per available records, privaterespondents may no longer be haled before thecourts for violation of Republic Act No. 6426.Private respondent Vic Lim made the disclosure in

September of 1993 in his affidavit submitted beforethe Provincial Fiscal.[26 In her complaint-affidavit,[27 Intengan stated that she learned of therevelation of the details of her foreign currencybank account on October 14, 1993. On the otherhand, Neri asserts that she discovered thedisclosure on October 24, 1993.[28 As to Brawner,the material date is January 5, 1994.[29 Based onany of these dates, prescription has set in.[30

The filing of the complaint or information in thecase at bar for alleged violation of Republic Act No.1405 did not have the effect of tolling theprescriptive period. For it is the filing of thecomplaint or information corresponding to thecorrect offense which produces that effect.[31

It may well be argued that the foregoingdisquisition would leave petitioners with no remedyin law. We point out, however, that theconfidentiality of foreign currency depositsmandated by Republic Act No. 6426, as amendedby Presidential Decree No. 1246, came into effectas far back as 1977. Hence, ignorance thereofcannot be pretended. On one hand, the existenceof laws is a matter of mandatory judicial notice;[32on the other, ignorantia legis non excusat.[33Evenduring the pendency of this appeal, nothingprevented the petitioners from filing a complaintcharging the correct offense against privaterespondents. This was not done, as everyoneinvolved was content to submit the case on the

basis of an alleged violation of Republic Act No.1405 (Bank Secrecy Law), however, incorrectlyinvoked.

14. REPUBLIC OF THE PHILS V. CABRINIGREEN and ROSS

In the exercise of its power under Section 10 ofRA 9160, the Anti-Money Laundering Council(AMLC) issued freeze orders against various bankaccounts of respondents. The frozen bankaccounts were previously found prima facie to berelated to the unlawful activities of respondents.

Under RA 9160, a freeze order issued by theAMLC is effective for a period not exceeding 15days unless extended upon order of the court.Accordingly, before the lapse of the period ofeffectivity of its freeze orders, the AMLC[filed withthe Court of Appeals (CA) various petitions forextension of effectivity of its freeze orders.

The AMLC invoked the jurisdiction ofthe CA in the belief that the power given to the CAto issue a temporary restraining order (TRO) or writof injunction against any freeze order issued by the

AMLC carried with it the power to extend theeffectivity of a freeze order. In other words, theAMLC interpreted the phrase upon order of thecourt to refer to the CA.

However, the CA disagreed with theAMLC and dismissed the petitions. It uniformlyruled that it was not vested by RA 9160 with thepower to extend a freeze order issued by theAMLC.


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Hence, these consolidated petitionswhich present a common issue: which court hasjurisdiction to extend the effectivity of a freezeorder?

ISSUE: Who has jurisdiction over the case?

HELD:During the pendency of these petitions, oron March 3, 2003, Congress enacted RA 9194 (AnAct Amending Republic Act No. 9160, OtherwiseKnown as the Anti-Money Laundering Act of2001).[6] It amended Section 10 of RA 9160 asfollows:

SEC. 7. Section 10 of [RA 9160]is hereby amended to read asfollows:

SEC. 10. Freezing of MonetaryInstrument or Property. TheCourt of Appeals, upon

application ex parte by theAMLC and after determinationthat probable cause exists thatany monetary instrument orproperty is in any way relatedto an unlawful activity asdefined in Sec. 3(i) hereof,may issue a freeze orderwhich shall be effectiveimmediately. The freeze ordershall be for a period of twenty(20) days unless extended bythe court.[7] (emphasis

supplied)

Section 12 of RA 9194 further provides:

SEC 12. TransitoryProvision. Existing freezeorders issued by the AMLCshall remain in force for aperiod of thirty (30) daysafter the effectivity of thisAct, unless extended by theCourt of Appeals.

(emphasis supplied)

On April 3, 2003, the Office of theSolicitor General (OSG) filed a Very UrgentMotion to Remand Cases to the Honorable Courtof Appeals (with Prayer for Issuance of TemporaryRestraining Order and/or Writ of PreliminaryInjunction).[8]The OSG prayed for the remand ofthese cases to the CA pursuant to RA 9194. It alsoasked for the issuance of a TRO on the ground

that the freeze orders would be automatically liftedon April 22, 2003 by operation of law and themoney or deposits in the concerned bank accountsmay be taken out of the reach of law enforcementauthorities. The OSG further manifested thatpending in the CA were 29 other cases involvingthe same issue. It requested that these cases beincluded in the coverage of the TRO prayed for.

On April 21, 2003, the Court issued aTRO in these cases and in all other similar casespending before all courts in the Philippines.Respondents, the concerned banks, and allpersons acting in their behalf were directed to givefull force and effect to existing freeze orders untilfurther orders from this Court.

On May 5, 2003, the OSG informed theCourt that on April 22, 2003 the CA issued aresolution in CA-G.R. SP No. 69371 (the subject ofG.R. No. 154694) granting the petition forextension of freeze orders.[9] Hence, the OSG

prayed for the dismissal of G.R. No. 154694 forbeing moot. It also reiterated its earlier prayer forthe remand of G.R. Nos. 154522, 155554 and155711 to the CA.

The amendment by RA 9194 of RA 9160 erasedany doubt on the jurisdiction of the CA over theextension of freeze orders. As the law now stands,it is solely the CA which has the authority to issuea freeze order as well as to extend its effectivity. Italso has the exclusive jurisdiction to extendexisting freeze orders previously issued by theAMLC vis--vis accounts and deposits related to

money-laundering activities.

16. EJERCITO V. SANDIGANBAYAN

FACTS:In connection with the plunder case filed

against Estrada, Special Prosecutor filed beforethe Sandiganbayan a Request for Issuance ofSubpoena Duces Tecum for the issuance of asubpoena directing the President of Export andIndustry Bank (EIB, formerly Urban Bank) orhis/her authorized representative to produce thefollowing documents during the hearings:

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 P2,000,000.00;


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b. Urban bank Corp. MC # 34181 datedNovember 8, 1999 in the amount

of P10,875,749.43;c. Urban Bank MC # 34182 dated

November 8, 1999 in the amountof P42,716,554.22;

d. Urban Bank Corp. MC # 37661 datedNovember 23, 1999 in the amount

of P54,161,496.52;5. Trust Agreement dated January 1999: Trustee:

Joseph Victor C. Ejercito

Nominee:URBAN BANK-TRUST DEPARTMENTSpecial Private Account No. (SPAN) 858;and

6. Ledger of the SPAN # 858.II. For Savings Account No. 0116-17345-91. Signature Cards; and2. Statement of Account/Ledger

The special prosecution panel also filed a requestfor the issuance of Subpoena Duces Tecum/Ad

tesificandum directed to the authorizedrepresentatives of Equitable PCI to producestatements of account pertaining to certainaccounts in the name of JOSE VELARDE and totestify. All requests were granted accordingly.

Upon learning of the said requests, Estrada wrotea letter to Sandiganbayn asking that the issuanceof the subpoena be held in abeyance for at leastten (10) days to enable him to take appropriatelegal steps in connection with the prosecutions

request for the issuance of subpoena concerninghis (my) accounts.

Then, Estrada filed a Motion to Quash SubpoenaDuces Tecum/Ad Testificandum praying that thesubpoenas previously issued to the President ofthe EIB be quashed. In his Motion to Quash,petitioner claimed that his bank accounts arecovered by R.A. No. 1405 (The Secrecy of BankDeposits Law) and do not fall under any of theexceptions stated therein. He further claimed thatthe specific identification of documents in thequestioned subpoenas, including details on datesand amounts, could only have been made possibleby an earlier illegal disclosure thereof by the EIB

and the Philippine Deposit Insurance Corporation(PDIC) in its capacity as receiver of the then UrbanBank.

Before the motion was resolved by theSandiganbayan, the prosecution filed anotherRequest for the Issuance of Subpoena DucesTecum/Ad Testificandum, again to direct thePresident of the EIB to produce, on the hearingsscheduled, additional documents for SavingsAccount No. 1701-00646-1. The prosecution also

filed a Request for the Issuance of SubpoenaDuces Tecum/Ad Testificandum, directed to AuroraC. Baldoz, Vice President-CR-II of the PDIC for herto produce certain

The subpoena prayed for in both requests wereissued by the Sandiganbayan.

Consequently, Ejercito filed an Urgent Motion toQuash Subpoenae Duces Tecum/AdTestificandum praying that the subpoena directedto the bank be quashed for the same reasonswhich he cited in the motion to quash he hadearlier filed, which the Sandiganbayan, in aResolution, denied. Ejercito filed the presentpetition for certiorari under Rule 65 assailing theSandiganbayan

Resolutions denying his Motions to QuashSubpoenas Duces Tecum/Ad Testificandum, andResolution denying his Motion for Reconsiderationof the first two resolutions.

People posits that Trust Account No. 858 may beinquired into, not merely because it falls under theexceptions to the coverage of R.A. 1405, butbecause it is not even contemplated therein. ToPeople, the law applies only to deposits whichstrictly means the money delivered to the bank bywhich a creditor-debtor relationship is createdbetween the depositor and the bank.

ISSUE: Whether petitioners Trust AccountNo. 858 is covered by the term deposit asused in R.A. 1405;

Whether petitioners Trust Account No. 858 andSavings Account No. 0116-17345-9 areexcepted from the protection of R.A. 1405; and

Whether the extremely-detailed informationcontained in the Special Prosecution Panelsrequests for subpoena was obtained through aprior illegal disclosure of petitioners bankaccounts, in violation of the fruit of thepoisonous tree doctrine.

HELD:

The Sandiganbayan did not commit grave abuse ofdiscretion in issuing the challenged subpoena fordocuments pertaining to Ejercitos Trust AccountNo. 858 and Savings Account No. 0116-17345-9for the following reasons:

1. Plunder is excepted from the protection of RA1405 otherwise known as The Secrecy of BankDeposits Law.


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R.A. 1405 is broad enough to cover Trust AccountNo. 858. However, the protection afforded by thelaw is not absolute. There being recognizedexceptions thereto, as above-quoted Section 2provides. In the present case, two exceptionsapply, to wit: (1) the examination of bank accountsis upon order of a competent court in cases ofbribery or dereliction of duty of public officials, and(2) the money deposited or invested is the subjectmatter of the litigation.

Ejercito contends that since plunder is neitherbribery nor dereliction of duty, his accounts are notexcepted from the protection of R.A. 1405.Philippine National Bank v. Gancayco holdsotherwise:

Cases of unexplained wealth are similar to casesof bribery or dereliction of duty and no reason isseen why these two classes of cases cannot beexcepted from the rule making bank depositsconfidential. The policy as to one cannot be

different from the policy as to the other. This policyexpresses the notion that a public office is a publictrust and any person who enters upon itsdischarge does so with the full knowledge that hislife, so far as relevant to his duty, is open to publicscrutiny.

Undoubtedly, cases for plunder involveunexplained wealth. The crime of bribery and theovert acts constitutive of plunder are crimescommitted by public officers, and in either case the

The petition is DISMISSED.

Noble idea that a public office is a public trust andany person who enters upon its discharge does sowith the full knowledge that his life, so far asrelevant to his duty, is open to public scrutinyapplies with equal force.

Also, the plunder case now pending with theSandiganbayan necessarily involves an inquiry intothe whereabouts of the amount purportedlyacquired illegally by former President JosephEstrada. The meaning of the phrase subjectmatter of the litigation as used in R.A. 1405 is

explained in Union Bank of the Philippines v. Courtof Appeals, thus:

In Mellon Bank, N.A. v. Magsino, where thepetitioner bank inadvertently caused the transfer ofthe amount of US$1,000,000.00 instead of onlyUS$1,000.00, the Court sanctioned theexamination of the bank accounts where part ofthe money was subsequently caused to bedeposited:

x x x Section 2 of [Republic Act No. 1405] allowsthe disclosure of bank deposits in cases where themoney deposited is the subject matter of thelitigation. Inasmuch as Civil Case No. 26899 isaimed at recovering the amount converted by theJaviers for their own benefit, necessarily, an inquiryinto the whereabouts of the illegally acquiredamount extends to whatever is concealed by beingheld or recorded in the name of persons other thanthe one responsible for the illegal acquisition.

Clearly, Mellon Bank involved a case where themoney deposited was the subject matter of thelitigation since the money deposited was the verything in dispute. x x x

In light then of the Courts pronouncement in UnionBank, the subject matter of the litigation cannot belimited to bank accounts under the name ofPresident Estrada alone, but must include thoseaccounts to which the money purportedly acquiredillegally or a portion thereof was alleged to have

been transferred. Trust Account No. 858 andSavings Account No. 0116-17345-9 in the name ofEjercito fall under this description and must thus bepart of the subject matter of the litigation.

Hence, these accounts are no longer protected bythe Secrecy of Bank Deposits Law, there being twoexceptions to the said law applicable in this case,namely: (1)the examination of bank accounts isupon order of a competent court in cases of briberyor dereliction of duty of public officials, and (2)themoney deposited or invested is the subject matterof the litigation. Exception (1) applies since the

plunder case pending against former PresidentEstrada is analogous to bribery or dereliction ofduty, while exception (2) applies because themoney deposited in Ejercitos bank accounts issaid to form part of the subject matter of the sameplunder case.

2. The fruit of the poisonous tree doctrine or theexclusionary rule is inapplicable in cases ofunlawful examination of bank accounts.

Ejercitos attempt to make the exclusionary ruleapplicable to the instant case fails. R.A. 1405, it

bears noting, nowhere provides that an unlawfulexamination of bank accounts shall render theevidence obtained therefrom inadmissible inevidence. Section 5 of R.A. 1405 only states that[a]ny violation of this law will subject the offenderupon conviction, to an imprisonment of not morethan five years or a fine of not more than twentythousand pesos or both, in the discretion of thecourt.


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Even assuming arguendo, however, that theexclusionary rule applies in principle to casesinvolving R.A. 1405, the Court finds no reason toapply the same in this particular case. The fruit ofthe poisonous tree doctrine presupposes aviolation of law. If there was no violation of R.A.1405 in the instant case, then there would be nopoisonous tree to begin with, and, thus, noreason to apply the doctrine.

Hence, the fruit of the poisonous tree principle,which states that once the primary source (thetree) is shown to have been unlawfully obtained,any secondary or derivative evidence (the fruit)derived from it is also inadmissible, does not applyin this case. In the first place, R.A. 1405 does notprovide for the application of this rule. Moreover,there is no basis for applying the same in this casesince the primary source for the detailedinformation regarding Joseph Victor G. Ejercitosbank accounts the investigation previouslyconducted by the Ombudsmanwas lawful.

3. The extremely-detailed information wasobtained by the Ombudsman from sourcesindependent of its previous inquiry.

In a further attempt to show that the subpoenasissued by the Sandiganbayan are invalid and maynot be enforced, Ejercito contends that theinformation found therein, given their extremelydetailed character, could only have been obtainedby the Special Prosecution Panel through an illegaldisclosure by the bank officials concerned. He thusclaims that, following the fruit of the poisonous

tree doctrine, the subpoenas must be quashed.

He further contends that even if, as claimed byPeople, the extremely-detailed information wasobtained by the Ombudsman from the bankofficials concerned during a previous investigationof the charges against President Estrada, suchinquiry into his bank accounts would itself beillegal.

How the Ombudsman conducted his inquiry intothe bank accounts of Ejercito is recounted by thePeople of the Philippines. At all events, even if the

challenged subpoenas are quashed, theOmbudsman is not barred from requiring theproduction of the same documents based solely oninformation obtained by it from sourcesindependent of its previous inquiry. TheOmbudsman may conduct on its own the sameinquiry into the subject bank accounts that it earlierconducted last February-March 2001, there beinga plunder case already pending against formerPresident Estrada. To quash the challenged

subpoenas would, therefore, be pointless since theOmbudsman may obtain the same documents byanother route. Upholding the subpoenas avoids anunnecessary delay in the administration of justice.

17. CHINA BANK CORPORATION V. COURT OFAPPEALS

FACTS:A Complaint for recovery of sums of money andannulment of sales of real properties and shares ofstock was filed by Jose Joseph Gotianuy againsthis son-in-law, George Dee, and his daughter,Mary Margaret Dee, before the Regional TrialCourt.Jose Gotianuy accused his daughter MaryMargaret Dee of stealing his US dollar depositswith Citibank N.A. amounting to not less thanP35,000,000.00 and US$864,000.00.Mary Margaret Dee received these amounts fromCitibank N.A. through checks which she allegedlydeposited at China Bank. He likewise accused his

son-in-law, George Dee, husband Mary Margaret,of transferring his real properties and shares ofstock in George Dees name without anyconsideration.Jose Gotianuy, died during the pendency of thecase before the trial court.He was substituted by his daughter, ElizabethGotianuy Lo.Elizabeth presented the US Dollar checkswithdrawn by Mary Margaret Dee from his USdollar placement with Citibank.Elizabeth filed a motion with trial court for theissuance of subpoena to employees of China Bank

to testify on the case. The court granted this. ChinaBank moved for a reconsideration. The courtpartially granted the motion however allowed theemployees to testify. Hence, China Bank filed acertiorari before the CA. But CA affirmed RTCsdecision.ISSUE: W/N a foreign Currency Deposit may belook into?

HELD: With the foregoing, we are now tasked todetermine the single material issue of whether ornot petitioner China Bank is correct in itssubmission that the Citibank dollar checks with

both Jose Gotianuy and/or Mary Margaret Dee aspayees, deposited with China Bank, may not belooked into under the law on secrecy of foreigncurrency deposits. As a corollary issue, sought tobe resolved is whether Jose Gotianuy may beconsidered a depositor who is entitled to seek aninquiry over the said deposits.

The Court of Appeals, in allowing theinquiry, considered Jose Gotianuy, a co-depositor


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of Mary Margaret Dee. It reasoned that since JoseGotianuy is the named co-payee of the latter in thesubject checks, which checks were deposited inChina Bank, then, Jose Gotianuy is likewise adepositor thereof. On that basis, no writtenconsent from Mary Margaret Dee is necessitated.

We agree in the conclusion arrived at by theCourt of Appeals.

The following facts are established: (1) JoseGotianuy and Mary Margaret Dee are co-payees ofvarious Citibank checks;[15] (2) Mary MargaretDee withdrew these checks from Citibank;[16] (3)Mary Margaret Dee admitted in her Answer to theRequest for Admissions by the Adverse Party sentto her by Jose Gotianuy[17]that she withdrew thefunds from Citibank upon the instruction of herfather Jose Gotianuy and that the funds belongedexclusively to the latter; (4) these checks wereendorsed by Mary Margaret Dee at the dorsalportion; and (5) Jose Gotianuy discovered that

these checks were deposited with China Bank asshown by the stamp of China Bank at the dorsalside of the checks.

Thus, with this, there is no issue as to thesource of the funds. Mary Margaret Dee declaredthe source to be Jose Gotianuy. There is likewiseno dispute that these funds in the form of CitibankUS dollar Checks are now deposited with ChinaBank.

As the