Banks: Secrecy of Bank Deposits; Garnishment (2004)

CDC maintained a savings account with CBank. On orders

of the MM Regional Trial Court, the Sheriff garnished
P50,000 of his account, to satisfy the judgment in favor of
his creditor, MO. CDC complained that the garnishment
violated the Law on the Secrecy of Bank Deposits because
the existence of his savings account was disclosed to the
public. (5%) Is CDC's complaint meritorious or not?
Reason briefly.
SUGGESTED ANSWER:
No. CDC's complaint is not meritorious. It was held in
China Banking Corporation v. Ortega, 49 SCRA 355 (1973)
that peso deposits may be garnished and the depositary
bank can comply with the order of garnishment without
violating the Law on the Secrecy of Bank Deposits.
Execution is the goal of litigation as it is its fruit.
Garnishment is part of the execution process. Upon
service of the notice of garnishment on the bank where the
defendant deposited funds, such funds become part of the
subject matter of litigation.
Distinguish between the role of a conservator and that of
a receiver of a bank. (2.5%)
SUGGESTED ANSWER:
The Conservator is appointed for a period not exceeding
one (1) year, to take charge of the assets, liabilities, and the
management of a bank or a quasi-bank in a state of
continuing inability, or unwillingness to maintain a
condition of liquidity deemed adequate to protect the
interest of depositors and creditors. On the other hand, the
Receiver is appointed to manage a bank or quasi-bank that
is unable to pay its liabilities in
Mercantile Law Bar Examination Q & A (1990-2006)
the ordinary course of business, or has insufficient
realizable assets to meet its liabilities, or cannot continue in
business without probable losses to its depositors or
creditors; or has willfully violated a final cease and desist
order, involving acts or transactions amounting to fraud or
a dissipation of the assets of the institution. The main
purpose of the Receiver is to recommend the rehabilitation
or liquidation of the bank.
Rudy is jobless but is reputed to be a jueteng operator. He
has never been charged or convicted of any crime. He
maintains several bank accounts and has purchased 5

houses and lots for his children from the Luansing Realty,
Inc. Since he does not have any visible job, the company
reported his purchases to the Anti-Money Laundering
Council (AMLC). Thereafter, AMLC charged him with
violation of the Anti-Money Laundering Law. Upon
request of the AMLC, the bank disclosed to it Rudy's bank
deposits amounting to P100 Million. Subsequently, he was
charged in court for violation of the Anti-Money
Laundering Law.
1. Can Rudy move to dismiss the case on the ground that
he has no criminal record? (2.5%)
SUGGESTED ANSWER:
No. Under the Anti-Money Laundering Law, Rudy would
be guilty of a "money laundering crime" committed when
the proceeds of an "unlawful activity," like jueteng
operations, are made to appear as having originated from
legitimate sources. The money laundering crime is separate
from the unlawful activity of being a jueteng operator, and
requires no previous conviction for the unlawful activity
(See also Sec. 3, Anti-Money Laundering Act of 2001).
ABC Pigger Inc is engaged in raising and selling hogs in
the local market. Mr. De Dios, one of its directors while
traveling abroad, met a leather goods manufacturer who
was interested in buying pig skins from the Philippines. Mr
De Dios set up a separate company and started exporting
pig skins to his foreign contact but the pig skins exported
were not sourced from ABC. His fellow directors in ABC
complained that he should have given this business to
ABC. How would you decide on this matter?
SUGGESTED ANSWER:
I would decide in favor of Mr De Dios. ABC is engaged in
raising and selling hogs in the local market. The company
that Mr De Dios had set up was to engage, as it did, in the
export of pigs skins. There is thus no conflict of interest
between Mr. De Dios and ABC Pigger Inc so as to make
the case fall within the conflict of interest situation under
the law (Sec 34 Corp Code)
Observation: The term
Because of disagreement with the BOD and a threat by the
BOD to expel her for misconduct and inefficiency, Carissa
offered in writing to resign as President and member of the
BOD, and to sell to the company all her shares therein for
P300,000.00 Her offer to resign was effective as soon as
my shares are fully paid. At its meeting, the BOD accepted

Carissas resignation, approved her offer to sell back her

shares of stock to the company, and promised to buy the
stocks on a staggered basis. Carissa was informed of the
BOD Resolution in a letter-agreement to which she affixed
her consent. The Companys new President singed the
promissory note. After payment P100,000 the company
defaulted in paying the balance of P200,000.
Carissa wants to sue the Company to collect the balance.
If you were retained by Carissa as her lawyer, where will
you file the suit? A) Labor Arbiter; b) RTC; or c) SEC?
SUGGESTED ANSWER:
The RTC has jurisdiction over this case which involves
intra-corporate controversy. As of 2006, the applicable
rule is that there is a TRANSFERRED JURISDICTION
under Sec. 5.2 of the SRC, the Commissions jurisdiction
over all cases enumerated under PD 902-A sec. 5 has been
transferred to the Courts of general jurisdiction or the
appropriate Regional Trial Court.