CHINA BANKING CORPORATION and TAN KIM LIONG, petitioners-appellants, vs.HON. WENCESLAO ORTEGA, as Presiding Judge of the Court of First Instance of Manila, Branch VIII, and VICENTE G. ACABAN, respondents-appellees.Sy Santos, Del Rosario and Associates for petitioners-appellants.Tagalo, Gozar and Associates for respondents-appellees. MAKALINTAL, J.:

The only issue in this petition for certiorari to review the orders dated March 4, 1972 and March 27, 1972, respectively, of the Court of First Instance of Manila in its Civil Case No. 75138, is whether or not a banking institution may validly refuse to comply with a court process garnishing the bank deposit of a judgment debtor, by invoking the provisions of Republic Act No. 1405.

Facts:

Vicente Acaban won in a civil case for sum of money against B & B Forest Development Corporation. To satisfy the judgment, the Acaban sought the garnishment of the bank deposit of the B & B Forest Development Corporation with the China Banking Corporation (CBC). Accordingly, a notice of garnishment was issued by the Deputy Sheriff of the trial court and served on said bank through its cashier, Tan Kim Liong. Liong was ordered to inform the Court whether or not there is a deposit in the CBC of B & B Forest Development Corporation, and if there is any deposit, to hold the same intact and not allow any withdrawal until further order from the Court. CBC and Liong refuse to comply with a court process garnishing the bank deposit of a judgment debtor by invoking the provisions of Republic Act No. 1405 ( Secrecy of Bank Deposits Act) which allegedly prohibits the disclosure of any information concerning to bank deposits.Issue:

Whether or not a banking institution may validly refuse to comply with a court processes garnishing the bank deposit of a judgment debtor, by invoking the provisions of Republic Act No. 1405.Held:No. The lower court did not order an examination of or inquiry into deposit of B & B Forest Development Corporation, as contemplated in the law. It merely required Tan Kim Liong to inform the court whether or not the defendant B & B Forest Development Corporation had a deposit in the China Banking Corporation only for the purposes of the garnishment issued by it, so that the bank would hold the same intact and not allow any withdrawal until further order. It is sufficiently clear that the prohibition against examination of or inquiry into bank deposit under RA 1405 does not preclude its being garnished to insure satisfaction of a judgment. Indeed there is no real inquiry in such a case, and the existence of the deposit is disclosed the disclosure is purely incidental to the execution process. It is hard to conceive that it was ever within the intention of Congress to enable debtors to evade payment of their just debts, even if ordered by the Court, through the expedient of converting their assets into cash and depositing the same in a bank. (China Banking Corporation vs Ortega, G.R. No. L-34964, 31 January 1973)

G.R. No. 71479October 18, 1990MELLON BANK, N.A vs. MAGSINO

FACTS:

Dolores Ventosa requested the transfer of $1,000 from the First National Bank of Moundsville, West Virginia, U.S.A. to Victoria Javier in Manila through the Prudential Bank.

To effect the transfer, the First National Bank requested the petitioner, Mellon Bank, which mistakenly indicated in its wire sent to Manufacturers

Hanover Bank, a correspondent of Prudential Bank the amount transferred as "US$1,000,000.00" instead of US$1,000.00.

Manufacturers Hanover Bank transferred one million dollars less bank charges of $6.30 to the Prudential Bank for the account of Victoria Javier.

Javier opened a new dollar account (No. 343) in the Prudential Bank and deposited $999,943.70. Immediately, Victoria Javier and her husband, Melchor Javier, Jr., made withdrawals from the account, deposited them in several banks only to withdraw them later in an apparent plan to conceal, "launder" and dissipate the erroneously sent amount.

Melchor Javier, requested Jose Marquez, a realtor, to look for properties for sale in the United States. Marquez offered a 160-acre lot in the Mojave Desert in California City which was owned by Honorio Poblador.

Without having seen the property, Javier agreed to buy said property. Deeds were issued and one of it was sent to the Kern County Registrar in California for registration.

The payment of the purchased property was made through six cashier's checks withdrawn from dollar account 434 while the balance of P236,000 was paid in cash by Javier who did not even ask for a receipt.

Inasmuch as Poblador had requested that the purchase price should not be paid directly to him, the payment was coursed through six companies in which he is financially related with.

Mellon Bank filed a complaint in the Superior Court of California, County of Kern, against Javier spouses’ to impose constructive trust of the property they’ve purchased from the money mistakenly and erroneously transferred to their account.

Mellon Bank also filed in the Court of First Instance

of Rizal, Branch X, a complaint against the Javier spouses, Honorio Poblador, etc to recover the amount they received for the sale of the 160-acre lot in California City.

In due course, it was found out that the checks originally issued by Javier spouses were already negotiated and now were deposited to Account 2825-1 of the Philippine Veterans Bank in the name of Cipriano Azada, Poblador's law partner and counsel to the Javiers.

Mellon Bank then subpoenaed Erlinda Baylosis of Veterans Bank to show that Azada deposited HSBC checks No. 339736 and 339737 amounting to P874,490.75 in his personal current account with said bank and Pilologo Red, Jr. of HSBC to prove that said amount was returned by Azada to Hagedorn one of the companies connected with Poblador.

The testimonies of these witnesses were objected to by the defense on the grounds of res inter alios acta, immateriality, irrelevancy and confidentiality and then moved to strike off the testimonies from the record of the case in violation of Republic Act No. 1405 the Secrecy of Bank Deposits.

ISSUE:

Whether or not disclosure of bank deposits in cases where the money is the subject matter of litigation violates RA 1405.

HELD:

Private respondents' protestations that to allow the questioned testimonies to remain on record would be in violation of the provisions of Republic Act No. 1405 on the secrecy of bank deposits, is unfounded.

Section 2 of said law allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the litigation. Inasmuch as Civil Case is aimed at recovering the amount converted by the Javiers for their own benefit, necessarily, an inquiry into the whereabouts of the illegally acquired

amount extends to whatever is concealed by being held or recorded in the name of persons other than the one responsible for the illegal acquisition.

G.R. No. 135882June 27, 2001

MARQUEZ VS. DESIERTO

FACTS:

Petitioner Marquez received an Order from the Ombudsman Aniano A. Desierto to produce several bank documents for purposes of inspection in camera relative to various accounts maintained at Union Bank of the Philippines, Julia Vargas Branch, where she is the branch manager. The accounts to be inspected were involved in a case pending with the Ombudsman entitled, Fact-Finding and Intelligence Bureau (FFIB) v. Amado Lagdameo, et al.

The basis of the Ombudsman ordering an in camera inspection of the accounts is a trail managers checks purchased by one George Trivinio, a respondent in OMB-097-0411, pending with the office of the Ombudsman by virtue of its power to investigate and to require the production and inspection of records and documents granted to it by RA No.6770.

The Ombudsman issued an order directing petitioner to produce the bank documents relative to accounts in issue in line of her persistent refusal to comply with Ombudsman's order which they sais as an unjustified, and is merely intended to delay the investigation of the case; constitutes disobedience of or resistance to a lawful order issued by this office punishable as Indirect under R.A. 6770.

Petitioner together with Union Bank of the Philippines filed a petition for declaratory relief, prohibition and injunctions8 with the Regional Trial Court, Makati City, against the Ombudsman.

The lower court denied petitioner's petition.

On August 21, 1998, petitioner received a copy of the motion to cite her for contempt, filed with the Office of the Ombudsman by Agapito B. Rosales, Director, Fact Finding and Intelligence Bureau (FFIB).

Petitioner filed with the Ombudsman an opposition to the motion to cite her in contempt on the ground that compliance with the Ombudsman’s orders would be in violation of RA. No. 1405. But petitioner’s motion for reconsideration was dismissed. Hence, the present petition.

ISSUE:

Whether or not an in camera inspection of the questioned account is allowed as an exception to the law on secrecy of bank deposits (R.A. No.1405)

HELD:

The order of the Ombudsman to produce for in camera inspection the subject accounts with the Union Bank of the Philippines, Julia Vargas Branch, is based on a pending investigation at the Office of the Ombudsman against Amado Lagdameo, et. al. for violation of R.A. No. 3019, Sec. 3 (e) and (g) relative to the Joint Venture Agreement between the Public Estates Authority and AMARI.

We rule that before an in camera inspection may be allowed, there must be a pending case before a court of competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject matter of the pending case before the court of competent jurisdiction. The bank personnel and the account holder must be notified to be present during the inspection, and such inspection may cover only the account identified in the pending case.

In the case at bar, there is yet no pending litigation before any court of competent authority. What’s existing is an investigation by the Office of the Ombudsman. In short, what the office of the ombudsman would wish to do is to fish for additional evidence to formally charge Amado Lagdameo, et. al., with the Sandiganbayan. Clearly, there was no

pending case in court which would warrant the opening of the bank account for inspection.

Zone of privacy are recognized and protected in our laws. Invasion of privacy is an offense in special laws

like the Anti-Wiretapping Law, the Secrecy of Bank Deposits Act, and the Intellectual Property Code.

IN VIEW WHEREOF, we GRANT the petition. We order the Ombudsman to cease and desist from

requiring Union Bank Manager Lourdes T. Marquez, or anyone in her place to comply with the order dated October 14, 1998, and similar orders. No costs

Salvacion vs. Central Bank of the Philippines, China Banking Corporationand Greg Bartelli y NorthcottG.R. No. 94723 August 21, 1997

Torres,Jr., J,:

Facts:On February 4-7, 1989, Greg Bartelli y Northcott, an American tourist, detained and repeatedly raped Karen Salvacion, a 12-year old the victim, in the apartment of

the accused in Makati City. That, on the 4th day of detention, Karen was finally found by the policemen after a neighbor heard her crying and screaming for help. The accused was immediately arrested within the premises of the building, and eventually brought to Makati Municipal Jail.

After thorough investigation and medical examination, the victim, as represented by her parents, together with the Fiscal filed criminal cases against Greg Bartelli y Northcott for Serious Illegal Detention and for Four (4) counts of Rape. The petitioners also filed a separate civil action for damages with preliminary attachment against the accused that had several dollar accounts in COCOBANK and China Banking Corporation. On February 24, 1989, the day there was a hearing for Bartelli’s petition for bail the latter escaped from jail.

The deputy sheriff served Notice of Garnishment on China Banking Corporation but the latter declined to furnish a copy as it invoked R.A. No. 1405. The sheriff again sent a letter stating that the garnishment did not violate the bank secrecy law as it was legally made by virtue of a court order but China Banking Corporation invoked Section 113 of Central Bank Circular No. 960, that dollar accounts are exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body, whatsoever. The Central Bank sent a reply after a demand from the court asking if the Section 113 of Central Bank Circular No.960 is absolute in nature of which it replied in affirmative.

After the accused was declared in default, the court rendered a judgment in favor of the petitioners based on the heinous acts of the accused and the grave effects on social, moral and psychological aspects on the part of the petitioners. China Banking Corporation refused the Writ of Execution of the court. Thus;

Petitioners file a Petition for Relief in the Supreme Court.Issues:

Whether the dollar accounts of the Accused is absolutely exempt from attachment, garnishment or any other order or process of any court? Held:

While it is true that the protective cloak of confidentiality over foreign deposit accounts would better encourage the inflow of foreign currency deposits, lending capacity of the government and would help financial stability and the national development, what would be the relief of someone claiming damages against a person with foreign deposit accounts? More so against a person who heinously and feloniously committed an offense in the territory of the Philippines? As in this case, the accused deemed liable for the damages based of the heinous acts according to the testimonies of the victim and the witnesses.

It is the duty of the government to encourage foreign currency deposits and to comply by giving confidentiality but in the correct argument of the Solicitor General, foreign currency deposits of a tourist or transient is not the one encouraged by PD Nos. 1034 and 1305 on the ground that said accounts is temporary and only for a short period of time.The application of the law depends on the extent of its justice. If we rule 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 foreign transient , injustice would result especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli. Article 10 of the New Civil Code 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”. Simply stated, when the statute is ambiguous, this is one of those fundamental solutions that would respond to vehement urge of conscience. It would be unthinkable that Section 113 of CB circular 960 would be used as a device by the accused for wrongdoing, and in so doing, acquitting the guilty as the expense of the innocent. The 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 RA 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 RTC Makati, and to RELEASE to petitioners the dollar deposit of respondent Greg Bartelli y Nothcott in such amount as would satisfy the judgment.

SAMPAGUITA BUILDERS v PNBMini digest: Sampaguita loaned money from PNB. PNB unilaterally increased rates of interest in the loan w/o informing Sampaguita. PNB claimed they were authorized to do it as there was a clause in the agreement that they may do so. Besides, Usury law was no longer in force = SC said NO! PNB cannot do so; it will violate mutuality of contracts under 1308. Besides, SC may intervene when amount of interest is unconscionable.Facts:Sampaguita secured a loan from PNB in an aggregate amount of 8M pesos, mortgaging the properties of Sampaguita’s president and chairman of the board. Sampaguita also executed several promissory notes due on different dates (payment dates). The first promissory note had 19.5% interest rate. The 2nd and 3rd had 21.5%. a uniform clause therein permitted PNB to increase the rate “within the limits allowed by law at any time depending on whatever policy it may adopt in the future x x x,” without even giving prior notice to petitioners. There was also a clause in the promissory note that stated that if the same is not paid 2 years after release then it shall be converted to a medium term loan – and the interest rate for such loan would apply.

Later on, Sampaguita defaulted on its payments and failed to comply with obligations on promissory notes. Sampaguita thus requested for a 90 day extension to pay the loan. Again they defaulted, so they asked for loan restructuring. It partly paid the loan and promised to pay the balance later on. AGAIN they failed to pay so PNB extrajudicially foreclosed the mortgaged properties. It was sold for 10M. PNB claimed that Sampaguita owed it 12M so they filed a case in court asking sampaguita to pay for deficiency.

RTC found that Sampaguita was automatically entitled to the debt relief package of PNB and ruled that the latter had no cause of action against the former. CA reversed, saying Sampaguita was not entitled, thus ordered them to pay the deficiency – Appeal = Went to SC. Sampaguita claims the loan was bloated so they don’t really owe PNB anymore, but it just overcharged them!

Issues/Ruling:W/N the loan accounts are bloated: YES. There is no deficiency; there is actually an overpayment of more than 3M based on the computation of the SC.Whether PNB could unilaterally increase interest rates: NO

Ratio:Sampaguita’s accessory duty to pay interest did not give PNB unrestrained freedom to charge any rate other than that which was agreed upon. No interest shall be due, unless expressly stipulated in writing. It would be the zenith of farcicality to specify and agree upon rates that could be subsequently upgraded at whim by only one party to the agreement.

The “unilateral determination and imposition” of increased rates is “violative of the principle of mutuality of contracts ordained in Article 1308 of the Civil Code.” One-sided impositions do not have the force of law between the parties, because such impositions are not based on the parties’ essential equality.

Although escalation clauses are valid in maintaining fiscal stability and retaining the value of money on long-term contracts, giving respondent an unbridled right to adjust the interest independently and upwardly would completely take away from petitioners the “right to assent to an important modification in their agreement” and would also negate the element of mutuality in their contracts. The clause cited earlier made the fulfillment of the contracts “dependent exclusively upon the uncontrolled will” of respondent and was therefore void. Besides, the pro forma promissory notes have the character of a contract d’adhésion, “where the parties do not bargain on equal footing, the weaker party’s [the debtor’s] participation being reduced to the alternative ‘to take it or leave it.’”

Circular that lifted the ceiling of interest rates of usury law did not authorize either party to unilaterally raise the interest rate without the other’s consent.

the interest ranging from 26 percent to 35 percent in the statements of account -- “must be equitably reduced for being iniquitous, unconscionable and exorbitant.” Rates found to be iniquitous or unconscionable are void, as if it there were no express contract thereon. Above all, it is undoubtedly against public policy to charge excessively for the use of money.

It cannot be argued that assent to the increases can be implied either from the June 18, 1991 request of petitioners for loan restructuring or from their lack of response to the statements of account sent by respondent. Such request does not indicate any agreement to an interest increase; there can be no implied waiver of a right when there is no clear, unequivocal and decisive act showing such purpose. Besides, the statements were not letters of information sent to secure their conformity; and even if we were to presume these as an offer, there was no acceptance. No one receiving a proposal to modify a loan contract, especially interest -- a vital component -- is “obliged to answer the proposal.”

Besides, PNB did not comply with its own stipulation that should the loan not be paid 2 years after release of money then it shall be converted to a medium term loan.

*Court applied 12% interest rate instead for being a forbearance of money

(there were some pieces of evidence presented by PNB in court that sampaguita objected to. Lower courts overruled the objections but SC said the objections were correct and the evidence should not have been admitted. i.e. contract wasn’t signed by the parties, a part of the contract wasn’t properly annexed/no reference was made in the main contract.)

In addition to the preceding discussion, it is then useless to labor the point that the increase in rates violates the impairment clause of the Constitution, because the sole purpose of this provision is to safeguard the integrity of valid contractual agreements against unwarranted interference by the State in the form of laws. Private individuals’ intrusions on interest rates is governed by statutory enactments like the Civil Code

DBP v. Arcilla Jr.Facts:Atty. Felipe Arcilla Jr. was employed by the DBP. After he was assigned to the legal department, he decided to avail of a loan under the Individual Housing Project (IHP) of the bank for the payment of the parcel of land purchased by him and for its construction. When Arcilla resigned grom DBP, the bank notified him that his loan has been converted to a regular housing loan. Arcilla agreed to the reservation by the DBP of its right to increase the rate of interest on the loan, as well as all other fees and charges on loans and advances pursuant to such policy as it may adopt from time to time during the period of the loan.Issue:Whether or not DBP violated RA 3765 otherwise known as “The Truth in Lending Act”.

Ruling:Section 1 of R.A. No. 3765 provides that prior to the consummation of a loan transaction, the bank, as creditor, is obliged to furnish a client with a clear statement, in writing, setting forth, to the extent applicable and in accordance with the rules and regulations prescribed by the Monetary Board of the Central Bank of the Philippines, the following information:

1. the cash price or delivered price of the property or service to be acquired;2. the amounts, if any, to be credited as down payment and/or trade-in; 3. the difference between the amounts set forth under clauses (1) and (2); 4. the charges, individually itemized, which are paid or to be paid by such person in connection with

the transaction but which are not incident to the extension of credit;5. the total amount to be financed;6. the finance charges expressed in terms of pesos and centavos; and7. the percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.

If the borrower is not duly informed of the data required by the law prior to the consummation of the availment or drawdown, the lender will have no right to collect such charge or increases thereof, even if stipulated in the promissory note. However, such failure shall not affect the validity or enforceability of any contract or transaction.

People v. Nitafan G.R. No. 75954 October 22, 1992Facts:

On January 20, 1985, aid accused did then and there wilfully, unlawfully and feloniously make or draw and issue to Fatima Cortez

Sasaki Philippine Trust Company Check No. 117383 in the amount of P143,000.00

He knew that at the time of issue he did not have sufficient funds in or credit with the drawee bank.

The check was subsequently dishonored by the drawee bank for insufficiency of funds, and despite receipt of notice of such dishonor, said accused failed to pay Sasaki the amount of said check or to make arrangement for full payment of the same within five banking days after receiving said notice.

Private respondent, Mariano Lim moved to quash the Information of the ground that the facts charged did not constitute a felony as B.P. 22 was unconstitutional and that the check he issued was a memorandum check which was in the nature of a promissory note in thus, is civil in nature.

On 1 September 1986, respondent judge, ruling that B.P. 22 on which the Information was based was unconstitutional, issued the questioned Order quashing the Information. Hence, this petition for review on certiorari filed by the Solicitor General in behalf of the government.

Issues:

W/N B.P. 22 is unconstitutional W/N a memorandum check issued postdated

in partial payment of a pre-existing obligation is within the coverage of B.P. 22.

Ratio: The constitutionality of the Bouncing Check

Law has already been sustained by the SC through jurisprudence in Lozano v. Martinez, and the seven other cases decided jointly with it.

A memorandum check is in the form of an ordinary check, with the word "memorandum", "memo" or "mem" written across its face, signifying that the maker or drawer engages to pay the bona fide holder absolutely, without any condition concerning its presentment.

Such a check is an evidence of debt against the drawer, and although may not be intended to be presented has the same effect as an ordinary check and if passed to the third person will be valid in his hands like any other check.

A memorandum check comes within the meaning of Sec. 185 of the Negotiable Instruments Law which defines a check as "a

bill of exchange drawn on a bank payable on demand."

A memorandum check must therefore fall within the ambit of B.P. 22 which does not distinguish but merely provides that "any person who makes or draws and issues any check knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank which check is subsequently dishonored shall be punished by imprisonment"

A memorandum check, upon presentment, is generally accepted by the bank. Hence it does not matter whether the check issued is in the nature of a memorandum as evidence of indebtedness or whether it was issued is partial fulfillment of a pre-existing obligation, for what the law punishes is the issuance itself of a bouncing check 15 and not the purpose for which it was issuance.

The mere act of issuing a worthless check, whether as a deposit, as a guarantee, or even as an evidence of a pre-existing debt, is malum prohibitum.