INTELLECTUAL PROPERTY CASES OCTOBER 9, 2018 Directors of said Orient Bank and which approval the said accused
ent Bank and which approval the said accused deliberately
1. G.R. No. 178429 October 23, 2009
JOSE C. GO, Petitioner,
vs.
BANGKO SENTRAL NG PILIPINAS, Respondent.
DECISION
BRION, J.:
Through the present petition for review on certiorari,1 petitioner Jose C. Go (Go)
assails the October 26, 2006 decision2 of the Court of Appeals (CA) in CA-G.R. SP
No. 79149, as well as its June 4, 2007 resolution. 3 The CA decision and resolution
annulled and set aside the May 20, 20034 and June 30, 20035 orders of the Regional
Trial Court (RTC), Branch 26, Manila which granted Go’s motion to quash the
Information filed against him.
THE FACTS
On August 20, 1999, an Information6 for violation of Section 83 of Republic Act No.
337 (RA 337) or the General Banking Act, as amended by Presidential Decree No.
1795, was filed against Go before the RTC. The charge reads:
That on or about and during the period comprised between June 27, 1996 and
September 15, 1997, inclusive, in the City of Manila, Philippines, the said accused,
being then the Director and the President and Chief Executive Officer of the Orient
Commercial Banking Corporation (Orient Bank), a commercial banking institution
created, organized and existing under Philippines laws, with its main branch located
at C.M. Recto Avenue, this City, and taking advantage of his position as such
officer/director of the said bank, did then and there wilfully, unlawfully and
knowingly borrow, either directly or indirectly, for himself or as the representative
of his other related companies, the deposits or funds of the said banking institution
and/or become a guarantor, indorser or obligor for loans from the said bank to
others, by then and there using said borrowed deposits/funds of the said bank in
facilitating and granting and/or caused the facilitating and granting of credit
lines/loans and, among others, to the New Zealand Accounts loans in the total
amount of TWO BILLION AND SEVEN HUNDRED FIFTY-FOUR MILLION NINE
HUNDRED FIVE THOUSAND AND EIGHT HUNDRED FIFTY-SEVEN AND 0/100
PESOS, Philippine Currency, said accused knowing fully well that the same has
been done by him without the written approval of the majority of the Board of
failed to obtain and enter the same upon the records of said banking institution
and to transmit a copy of which to the supervising department of the said bank, as
required by the General Banking Act.
CONTRARY TO LAW. [Emphasis supplied.]
On May 28, 2001, Go pleaded not guilty to the offense charged.
After the arraignment, both the prosecution and accused Go took part in the pre-
trial conference where the marking of the voluminous evidence for the parties was
accomplished. After the completion of the marking, the trial court ordered the
parties to proceed to trial on the merits.
Before the trial could commence, however, Go filed on February 26, 2003 7 a motion
to quash the Information, which motion Go amended on March 1, 2003. 8 Go
claimed that the Information was defective, as the facts charged therein do not
constitute an offense under Section 83 of RA 337 which states:
No director or officer of any banking institution shall either directly or indirectly,
for himself or as the representative or agent of another, borrow any of the deposits
of funds of such banks, nor shall he become a guarantor, indorser, or surety for
loans from such bank, to others, or in any manner be an obligor for money
borrowed from the bank or loaned by it, except with the written approval of the
majority of the directors of the bank, excluding the director concerned. Any such
approval shall be entered upon the records of the corporation and a copy of such
entry shall be transmitted forthwith to the appropriate supervising department.
The office of any director or officer of a bank who violates the provisions of this
section shall immediately become vacant and the director or officer shall be
punished by imprisonment of not less than one year nor more than ten years and
by a fine of not less than one thousand nor more than ten thousand pesos.
The Monetary Board may regulate the amount of credit accommodations that may
be extended, directly or indirectly, by banking institutions to their directors,
officers, or stockholders. However, the outstanding credit accommodations which
a bank may extend to each of its stockholders owning two percent (2%) or more
of the subscribed capital stock, its directors, or its officers, shall be limited to an
amount equivalent to the respective outstanding deposits and book value of the
paid-in capital contribution in the bank. Provided, however, that loans and
advances to officers in the form of fringe benefits granted in accordance with rules
and regulations as may be prescribed by Monetary Board shall not be subject to
the preceding limitation. (As amended by PD 1795)
1
In addition to the conditions established in the preceding paragraph, no director or
a building and loan association shall engage in any of the operations mentioned in
said paragraphs, except upon the pledge of shares of the association having a total
withdrawal value greater than the amount borrowed. (As amended by PD 1795)
In support of his motion to quash, Go averred that based on the facts alleged in
the Information, he was being prosecuted for borrowing the deposits or funds of
the Orient Bank and/or acting as a guarantor, indorser or obligor for the bank’s
loans to other persons. The use of the word "and/or" meant that he was charged
for being either a borrower or a guarantor, or for being both a borrower and
guarantor. Go claimed that the charge was not only vague, but also did not
constitute an offense. He posited that Section 83 of RA 337 penalized only directors
and officers of banking institutions who acted either as borrower or as guarantor,
but not as both.
Go further pointed out that the Information failed to state that his alleged act of
borrowing and/or guarantying was not among the exceptions provided for in the
law. According to Go, the second paragraph of Section 83 allowed banks to extend
credit accommodations to their directors, officers, and stockholders, provided it is
"limited to an amount equivalent to the respective outstanding deposits and book
value of the paid-in capital contribution in the bank." Extending credit
accommodations to bank directors, officers, and stockholders is not per se
prohibited, unless the amount exceeds the legal limit. Since the Information failed
to state that the amount he purportedly borrowed and/or guarantied was beyond
the limit set by law, Go insisted that the acts so charged did not constitute an
offense.
Finding Go’s contentions persuasive, the RTC granted Go’s motion to quash the
Information on May 20, 2003. It denied on June 30, 2003 the motion for
reconsideration filed by the prosecution.
The prosecution did not accept the RTC ruling and filed a petition for certiorari to
question it before the CA. The Information, the prosecution claimed, was sufficient.
The word "and/or" did not materially affect the validity of the Information, as it
merely stated a mode of committing the crime penalized under Section 83 of RA
337. Moreover, the prosecution asserted that the second paragraph of Section 83
(referring to the credit accommodation limit) cannot be interpreted as an exception
to what the first paragraph provided. The second paragraph only sets borrowing
limits that, if violated, render the bank, not the director-borrower, liable. A violation
of the second paragraph of Section 83 – under which Go is being prosecuted – is
therefore separate and distinct from a violation of the first paragraph. Thus, the
prosecution prayed that the orders of the RTC quashing the Information be set
aside and the criminal case against Go be reinstated.
On October 26, 2006, the CA rendered the assailed decision granting the
prosecution’s petition for certiorari.9 The CA declared that the RTC misread the law
when it decided to quash the Information against Go. It explained that the
allegation that Go acted either as a borrower or a guarantor or as both borrower
and guarantor merely set forth the different modes by which the offense was
committed. It did not necessarily mean that Go acted both as borrower and
guarantor for the same loan at the same time. It agreed with the prosecution’s
stand that the second paragraph of Section 83 of RA 337 is not an exception to the
first paragraph. Thus, the failure of the Information to state that the amount of the
loan Go borrowed or guaranteed exceeded the legal limits was, to the CA, an
irrelevant issue. For these reasons, the CA annulled and set aside the RTC’s orders
and ordered the reinstatement of the criminal charge against Go. After the CA’s
denial of his motion for reconsideration,10 Go filed the present appeal by certiorari.
THE PETITION
In his petition, Go alleges that the appellate court legally erred in overturning the
trial court’s orders. He insists that the Information failed to allege the acts or
omissions complained of with sufficient particularity to enable him to know the
offense being charged; to allow him to properly prepare his defense; and likewise
to allow the court to render proper judgment.
Repeating his arguments in his motion to quash, Go reads Section 83 of RA 337 as
penalizing a director or officer of a banking institution for either borrowing the
deposits or funds of the bank, or guaranteeing or indorsing loans to others, but not
for assuming both capacities. He claimed that the prosecution’s shotgun approach
in alleging that he acted as borrower and/or guarantor rendered the Information
highly defective for failure to specify with certainty the specific act or omission
complained of. To petitioner Go, the prosecution’s approach was a clear violation
of his constitutional right to be informed of the nature and cause of the accusation
against him.
Additionally, Go reiterates his claim that credit accommodations by banks to their
directors and officers are legal and valid, provided that these are limited to their
outstanding deposits and book value of the paid-in capital contribution in the bank.
The failure to state that he borrowed deposits and/or guaranteed loans beyond this
limit rendered the Information defective. He thus asks the Court to reverse the CA
decision to reinstate the criminal charge.
2
In its Comment,11 the prosecution raises the same defenses against Go’s
contentions. It insists on the sufficiency of the allegations in the Information and
prays for the denial of Go’s petition.
THE COURT’S RULING
The Court does not find the petition meritorious and accordingly denies it.
The Accused’s Right to be Informed
Under the Constitution, a person who stands charged of a criminal offense has the
right to be informed of the nature and cause of the accusation against him.12 The
Rules of Court, in implementing the right, specifically require that the acts or
omissions complained of as constituting the offense, including the qualifying and
aggravating circumstances, must be stated in ordinary and concise language, not
necessarily in the language used in the statute, but in terms sufficient to enable a
person of common understanding to know what offense is being charged and the
attendant qualifying and aggravating circumstances present, so that the accused
can properly defend himself and the court can pronounce judgment. 13 To broaden
the scope of the right, the Rules authorize the quashal, upon motion of the accused,
of an Information that fails to allege the acts constituting the offense. 14
Jurisprudence has laid down the fundamental test in appreciating a motion to quash
an Information grounded on the insufficiency of the facts alleged therein. We stated
in People v. Romualdez15 that:
The determinative test in appreciating a motion to quash xxx is the sufficiency of
the averments in the information, that is, whether the facts alleged, if
hypothetically admitted, would establish the essential elements of the offense as
defined by law without considering matters aliunde. As Section 6, Rule 110 of the
Rules of Criminal Procedure requires, the information only needs to state the
ultimate facts; the evidentiary and other details can be provided during the trial.
To restate the rule, an Information only needs to state the ultimate facts
constituting the offense, not the finer details of why and how the illegal acts alleged
amounted to undue injury or damage – matters that are appropriate for the trial.
[Emphasis supplied]
The facts and circumstances necessary to be included in the Information are
determined by reference to the definition and elements of the specific crimes. The
Information must allege clearly and accurately the elements of the crime charged.16
Elements of Violation of
Section 83 of RA 337
Under Section 83, RA 337, the following elements must be present to constitute a
violation of its first paragraph:
1. the offender is a director or officer of any banking institution;
2. the offender, either directly or indirectly, for himself or as representative
or agent of another, performs any of the following acts:
a. he borrows any of the deposits or funds of such bank; or
b. he becomes a guarantor, indorser, or surety for loans from such
bank to others, or
c. he becomes in any manner an obligor for money borrowed from
bank or loaned by it;
3. the offender has performed any of such acts without the written approval
of the majority of the directors of the bank, excluding the offender, as the
director concerned.
A simple reading of the above elements easily rejects Go’s contention that the law
penalizes a bank director or officer only either for borrowing the bank’s deposits or
funds or for guarantying loans by the bank, but not for acting in both capacities.
The essence of the crime is becoming an obligor of the bank without securing the
necessary written approval of the majority of the bank’s directors.
The second element merely lists down the various modes of committing the
offense. The third mode, by declaring that "[no director or officer of any banking
institution shall xxx] in any manner be an obligor for money borrowed from the
bank or loaned by it," in fact serves a catch-all phrase that covers any situation
when a director or officer of the bank becomes its obligor. The prohibition is
directed against a bank director or officer who becomes in any manner an obligor
for money borrowed from or loaned by the bank without the written approval of
the majority of the bank’s board of directors. To make a distinction between the
act of borrowing and guarantying is therefore unnecessary because in either
situation, the director or officer concerned becomes an obligor of the bank against
whom the obligation is juridically demandable.
The language of the law is broad enough to encompass either act of borrowing or
guaranteeing, or both. While the first paragraph of Section 83 is penal in nature,
3
and by principle should be strictly construed in favor of the accused, the Court is
unwilling to adopt a liberal construction that would defeat the legislature’s intent
in enacting the statute. The objective of the law should allow for a reasonable
flexibility in its construction. Section 83 of RA 337, as well as other banking laws
adopting the same prohibition,17 was enacted to ensure that loans by banks and
similar financial institutions to their own directors, officers, and stockholders are
above board.18 Banks were not created for the benefit of their directors and
officers; they cannot use the assets of the bank for their own benefit, except as
may be permitted by law. Congress has thus deemed it essential to impose
restrictions on borrowings by bank directors and officers in order to protect the
public, especially the depositors.19 Hence, when the law prohibits directors and
officers of banking institutions from becoming in any manner an obligor of the bank
(unless with the approval of the board), the terms of the prohibition shall be the
standards to be applied to directors’ transactions such as those involved in the
present case.
Credit accommodation limit is not an exception nor is it an element of the offense
Contrary to Go’s claims, the second paragraph of Section 83, RA 337 does not
provide for an exception to a violation of the first paragraph thereof, nor does it
constitute as an element of the offense charged. Section 83 of RA 337 actually
imposes three restrictions: approval, reportorial, and ceiling requirements.
The approval requirement (found in the first sentence of the first paragraph of
the law) refers to the written approval of the majority of the bank’s board of
directors required before bank directors and officers can in any manner be an
obligor for money borrowed from or loaned by the bank. Failure to secure the
approval renders the bank director or officer concerned liable for prosecution and,
upon conviction, subjects him to the penalty provided in the third sentence of first
paragraph of Section 83.
The reportorial requirement, on the other hand, mandates that any such
approval should be entered upon the records of the corporation, and a copy of the
entry be transmitted to the appropriate supervising department. The reportorial
requirement is addressed to the bank itself, which, upon its failure to do so,
subjects it to quo warranto proceedings under Section 87 of RA 337. 20
The ceiling requirement under the second paragraph of Section 83 regulates the
amount of credit accommodations that banks may extend to their directors or
officers by limiting these to an amount equivalent to the respective outstanding
deposits and book value of the paid-in capital contribution in the bank. Again, this
is a requirement directed at the bank. In this light, a prosecution for violation of
the first paragraph of Section 83, such as the one involved here, does not require
an allegation that the loan exceeded the legal limit. Even if the loan involved is
below the legal limit, a written approval by the majority of the bank’s directors is
still required; otherwise, the bank director or officer who becomes an obligor of the
bank is liable. Compliance with the ceiling requirement does not dispense with the
approval requirement.
Evidently, the failure to observe the three requirements under Section 83 paves
the way for the prosecution of three different offenses, each with its own set of
elements. A successful indictment for failing to comply with the approval
requirement will not necessitate proof that the other two were likewise not
observed.
Rules of Court allow amendment of insufficient Information
Assuming that the facts charged in the Information do not constitute an offense,
we find it erroneous for the RTC to immediately order the dismissal of the
Information, without giving the prosecution a chance to amend it. Section 4 of Rule
117 states:
SEC. 4. Amendment of complaint or information.—If the motion to quash is based
on an alleged defect of the complaint or information which can be cured by
amendment, the court shall order that an amendment be made.
If it is based on the ground that the facts charged do not constitute an offense, the
prosecution shall be given by the court an opportunity to correct the defect by
amendment. The motion shall be granted if the prosecution fails to make the
amendment, or the complaint or information still suffers from the same defect
despite the amendment. [Emphasis supplied]
Although an Information may be defective because the facts charged do not
constitute an offense, the dismissal of the case will not necessarily follow. The
Rules specifically require that the prosecution should be given a chance to correct
the defect; the court can order the dismissal only upon the prosecution’s failure to
do so. The RTC’s failure to provide the prosecution this opportunity twice 21
constitutes an arbitrary exercise of power that was correctly addressed by the CA
through the certiorari petition. This defect in the RTC’s action on the case, while
not central to the issue before us, strengthens our conclusion that this criminal
case should be resolved through full-blown trial on the merits.
WHEREFORE, we DENY the petitioner’s petition for review on certiorari and
AFFIRM the decision of the Court of Appeals in CA-G.R. SP No. 79149, promulgated
4
on October 26, 2006, as well as its resolution of June 4, 2007. The Regional Trial
Court, Branch 26, Manila is directed to PROCEED with the hearing of Criminal Case
No. 99-178551. Costs against the petitioner.

SO ORDERED.

ARTURO D. BRION
Associate Justice

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 2. G.R. No. 150318 November 22, 2010
PHILIPPINE TRUST COMPANY (also known as Philtrust Bank), Petitioner,
vs.
HON. COURT OF APPEALS and FORFOM DEVELOPMENT CORPORATION,
Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Certiorari assailing the Decision1 of the Court of Appeals dated
June 15, 2001 and the subsequent Resolution 2 denying reconsideration dated
August 21, 2001.
The facts of the case, as determined by the Court of Appeals, are as follows:
Plaintiff Forfom Development Corporation is engaged in agricultural business and
real estate development and owns several parcels of land in Pampanga. It is the
registered owner of two (2) parcels of land subject of the present controversy,
situated in Angeles City, Pampanga, under Transfer Certificate of Title Nos. 10896
and 64884 consisting of 1,126,530 and 571,014 square meters, respectively.
Sometime in 1989, plaintiff received a letter from the Department of Agrarian
Reform with the names Ma. Teresa Limcauco and Ellenora Limcauco as addressees.
Upon verification with the DAR and the Register of Deeds made by plaintiff’s Vice-
President at that time, Mr. Jose Marie L. Ramos, plaintiff discovered that the subject
properties had already been transferred in the names of said Ma. Teresa Limcauco
and Ellenora Limcauco who were never known to plaintiff or its employees.
Plaintiff’s Board of Directors decided to seek the assistance of the National Bureau
of Investigation (NBI) to conduct an investigation on the matter. On November 23,
1989, plaintiff caused the annotation of its adverse claim on TCT No. 75533 of the
Registry of Deeds of Angeles City.
The results of the NBI Investigation and plaintiff’s own inquiry revealed the
following acts through which the subject parcels of land were transferred in the
names of Ma. Teresa Limcauco and Ellenora Vda. De Limcauco, fictitious names
which were used by defendant Honorata Dizon in the questioned transactions:
(1) A "Deed of Absolute Sale" dated March 6, 1987 was executed over the
lot covered by TCT No. 64884 in favor of Ellenora Vda. De Limcauco for the
price of ₱500,000.00. A separate "Deed of Absolute Sale" dated October 5,
1987 was likewise executed over the property covered by TCT No. 10896 in
favor of Ma. Teresa Limcauco in consideration of ₱500,000.00. In both
instruments, the signature of the plaintiff’s President, Felix H. Limcauco was
forged. Likewise, a certification to the effect that plaintiff’s Board of
Directors had duly approved the sale contained the forged signature of
plaintff’s President, Felix H. Limcauco.
(2) On July 7, 1987, a petition for issuance of owner’s duplicate copy was
filed with the Regional Trial Court of Angeles City, Branch 57 by Ellenora
Limcauco who allegedly lost said owner’s duplicate copy of TCT No. 64884,
which was docketed as Cad. Case No. A-124-160. On January 10, 1989, a
separate petition for the issuance of a new owner’s duplicate copy was filed
with the same court by counsel for Ma. Teresa Limcauco who allegedly lost
the owner’s duplicate copy of TCT No. 10896, which was docketed as Cad.
Case No. A-124-280. After due hearing, the court in Cad. Case No. A-124-
280 granted the petition in an Order dated February 1, 1989 which directed
the Register of Deeds to issue another owner’s duplicate copy of TCT No.
10896 in place of the lost one.
(3) As a consequence of the court’s order in Cad. Case No. A-124-280, TCT
No. 10896 was cancelled and TCT No. 82760/T-414 was issued in the name
of Ma. Teresa Limcauco who had the property covered thereby subdivided
into different lots for which TCT Nos. 85585, 85587, 85589 and 85591 were
issued in the name of said Ma. Teresa Limcauco. As to TCT No. 64884, this
was also cancelled by the Register of Deeds of Angeles City, Honesto G.
Guarin, by virtue of a purported court order issued by Judge Eliodoro B.
Guinto of RTC-Branch 57. Also appearing as Entry No. 1127 in TCT No.
64884 is the "Secretary’s Certificate" in favor of Felix H. Limcauco and Entry
No. 1128 which is the sale in favor of Ellenora Limcauco. However, the copy
of the court order in Cad. Case No. A-124-160 presented to said Register of
Deeds was not signed by Judge Guinto who had denied before the NBI
authorities having signed such order or having conducted hearing on said
case. The copy submitted to the Register of Deeds was merely stamped
"Original Signed." Another document certifying that the Order granting the
petition in Cad. Case No. A-124-160 had become final and executory was
also submitted to the Register of Deeds in connection with the cancellation
of TCT No. 64884. However, then Branch Clerk of Court Benedicto A. Pineda
testified that he did not sign said certification and neither had he been aware
of the proceedings in Cad. Case No. A-124-160. Atty. Pineda’s signature on
said certification appears to have been falsified by one Lorenzo San Andres.
(4) Although the property covered by TCT No. 10896 has already been
subdivided into different lots and covered by separate titles in the name of
6
 Ma. Teresa Limcauco, said lots were not yet transferred or conveyed to third
parties. But as to the property covered by TCT No. 64884, said certificate
of title was cancelled and a new certificate of title, TCT No. 75436/T-378
was issued in the name of Ellenora Vda. De Limcauco. On September 23,
1987, a Deed of Absolute Sale was executed by Ellenora Vda. De Limcauco
in favor of defendant Raul P. Claveria whereby the property covered by TCT
No. 64884 was supposedly sold to said defendant for the sum of
₱5,139,126.00. On September 24, 1987, TCT No. 75436/T-378 was
cancelled and a new certificate of title, TCT No. 75533 was issued in the
name of defendant Raul P. Claveria. On October 21, 1987, defendant
spouses Raul and Elea Claveria mortgaged the property with the defendant
Philippine Trust Company to guarantee a loan in the amount of
₱8,000,000.00, which mortgage was duly registered and annotated as Entry
No. 2858 in TCT No. 75533.
On December 26, 1989, plaintiff instituted the present action against the
defendants Ma. Teresa Limcauco, Ellenora D. Limcauco, spouses Raul P. Claveria
and Elea R. Claveria, Philippine Trust Company and the Register of Deeds of
Angeles City. The Complaint alleged conspiratorial acts committed by said
defendants who succeeded in causing the fraudulent transfer of registration of
plaintiff’s properties in the names of Ma. Teresa Limcauco and Ellenora D. Limcauco
and the subdivision of the land covered by TCT No. 10896 over which separate
titles have been issued. Plaintiff prayed that the trial court render judgment (a)
declaring the deeds of sale of March 9, 1987, October 5, 1987 and September 23,
1987 as well as TCT Nos. 75436, 75533, 87269, 85585, 85587, 85589 and 85591,
all of the Registry of Deeds of Angeles City as void ab initio, (b) directing the
reconveyance of the aforesaid real property in the name of plaintiff corporation,
and (c) sentencing defendants to pay plaintiff sums of ₱1,000,000.00 as moral
damages, ₱100,000.00 plus daily appearance fee of ₱1,000.00 as attorney’s fees,
and costs of suit. Defendant Philippine Trust Bank filed a motion for bill of
particulars which was granted by the trial court, and accordingly plaintiff amended
its Complaint to specifically allege the fraudulent acts and irregularities in the
transfer of registration of its properties, in addition to those already specified in
the Complaint. Thus plaintiff alleged in addition that (1) the supposed court Order
directing the issuance of another owner’s duplicate copy actually did not exist, copy
of said Order not bearing either the signature of the judge or his branch clerk of
court as well as the court seal, and yet accepted at face value in conspiracy or at
least negligently, by defendant Register of Deeds of Angeles City, not to mention
the haste, among other signs of conspiracy, with which said new owner’s duplicate
copy of the title was issued; (2) the mortgage executed by defendant-spouses
Claveria in favor of defendant bank was characterized by irregularities, the bank
having extended a loan in the amount of ₱8 million, far in excess of the property’s
market value of ₱2,855,070.00, as well as the haste in which said loan was granted.
In its Answer, defendant Philippine Trust Company denied the allegations of the
Complaint as to the irregularities in the granting of the ₱8 million loan to defendant-
spouses Raul and Elea Claveria. According to said defendant, the Claveria spouses
have been their clients since 1986 and on October 2, 1987, all their outstanding
obligations in the amount of ₱7,300,000.00 were consolidated into one (1) account
on clean basis. Defendant bank had required the Claveria spouses to secure their
clean loan of ₱7,300,000.00 with a real estate mortgage, and hence on October
21, 1987, said spouses executed mortgage on real property covered by TCT No.
75533 for an obligation of ₱8 million after securing an advance from the defendant
bank in the amount of ₱700,000.00. It had subjected the land offered as security
to the usual bank appraisals and examined the genuineness and authenticity of
TCT No. 75533 with the Register of Deeds of Angeles City and found the same to
be in existence and in order. Thereupon, the deed of mortgage executed by the
Claveria spouses was registered by the defendant bank with the Register of Deeds
and had it annotated in the original copy of the title. Defendant bank thus prayed
that after due hearing, the complaint against it be dismissed and a decision be
rendered (a) holding as valid and legal the mortgage on the real property covered
by TCT No. 75533 of the Registry of Deeds of Angeles City, and (b) on its
counterclaim, ordering the plaintiff to pay to defendant bank the amounts of
P50,000.00 as actual damages, ₱1,000,000.00 as moral damages, ₱100,000.00 as
attorney’s fees, and the costs of suit.
On motion of plaintiff, the trial court ordered the service of summons by publication
with respect to defendants Ma. Teresa Limcauco, Ellenora Limcauco, Raul P.
Claveria and Elea Claveria, whose addresses could not be located by the Sheriff
and even by the parties.
Defendant Register of Deeds of Angeles City filed his Answer denying that he
conspired with the other defendants in effecting the transfer of registration of the
subject properties and averring that it had issued the questioned transfer
certificates of title to defendants Ma. Teresa Limcauco, Ellenora Vda. de Limcauco
and the spouses Raul and Elea Claveria on the basis of documents filed with it and
existing in the Office of the Register of Deeds of Angeles City. In his defense,
defendant Register of Deeds maintained that he had no reason or basis to question
the validity and legality of the documents presented before him for registration nor
to question the genuineness of the signatures appearing therein, as well as the
Orders of RTC-Angeles City, Branch 57, which contained a signature over and
above the typewritten name of Judge Eliodoro B. Guinto. He had the right to
assume that official functions were regularly performed. Plaintiff therefore has no
7
cause of action against the defendant Register of Deeds as the latter merely
performed his duties and functions embodied under Sec. 10 of P.D. No. 1529. By
way of counterclaim, defendant Register of Deeds alleged bad faith and malice in
plaintiff’s filing of the complaint against him, stating that (1) despite plaintiff’s
knowledge that defendant Register of Deeds has not committed any act of
malfeasance or misfeasance in the registration of the subject certificates of title,
he was subjected to an investigation by NBI authorities at the instance of plaintiff
and was compelled to give a sworn statement before said government authorities
in order to clear his name; and (2) plaintiff’s former counsel had earlier manifested
that the Register of Deeds was being impleaded merely as a nominal party;
however, in a sudden and unexplained turnabout, plaintiff impleaded defendant
Register of Deeds as a principal party in its Amended Complaint. Defendant
Register of Deeds thus prayed for the dismissal of the complaint against him for
utter lack of merit and on his counterclaim, that a decision be rendered ordering
the plaintiff to pay the defendant Register of Deeds the following sums:
₱200,000.00 by way of moral damages, ₱100,000.00 by way of exemplary
damages, ₱20,000.00 by way of attorney’s fees plus ₱500.00 per appearance, and
costs of suit.
In an Order dated October 30, 1991, the trial court declared the defendants Ma.
Teresa Limcauco, Ellenora Limcauco, Raul P. Claveria and Elea R. Claveria in default
for their failure to file the necessary responsive pleadings despite the lapse of sixty
(60) days from the last day of publication of summons, and accordingly allowed
the plaintiff to present its evidence ex parte against the said defendants. During
the pre-trial conference held on November 25, 1991, plaintiff’s counsel manifested
that it was joining the defendant Register of Deeds only as a nominal party as the
latter also waived his counterclaim against the plaintiff.
On February 4, 1992, the trial court granted plaintiff’s motion to authenticate the
signatures appearing in the Deeds of Sale of October 5, 1987 and March 6, 1987,
and that of Josefina K. Limcauco appearing in the Secretary’s Certificate containing
the supposed Board resolution of plaintiff approving the sale of the parcels of land
covered by TCT Nos. 10896 and 64884. The said documents were ordered
forwarded to the NBI for authentication. During the pre-trial conference conducted
on August 25, 1992, the parties agreed on two (2) issues for resolution during the
trial: (1) whether or not the Deeds of Absolute Sale purportedly executed by the
plaintiff covering the subject real properties, as well as the titles issued thereat,
TCT Nos. 75436, 75533, 87269, 85585, 85587, 85589 and 85591, all of the
Registry of Deeds of Angeles City are genuine and valid; and (2) whether or not
the mortgage on the real property covered by TCT No. 75533 of the Registry of
Deeds of Angeles City is valid and legal. At the trial proper, plaintiff presented as
its witnesses Jose Marie L. Ramos (Vice-President of plaintiff corporation), Alberto
Ramos (NBI officer), Eliodoro Constantino (NBI handwriting expert), Felix H.
Limcauco, Jr. (former President of plaintiff corporation) and Atty. Benedicto Pineda
(former Branch Clerk of Court of RTC- Angeles City, Branch 57). Defendant
Philippine Trust Company, on the other hand, presented the testimony of defendant
Atty. Honesto Guarin (Register of Deeds of Angeles City). After the formal offer of
the respective documentary evidence of the parties and submission of their
memoranda, the case was submitted for decision. x x x. 3
On December 29, 1993, the RTC rendered its Decision in favor of private
respondent Forfom Development Corporation (Forfom):
WHEREFORE, all the [foregoing] considered, judgment is hereby rendered in favor
of the plaintiff and against the defendants Philippine Trust Co., spouses Raul P.
Claveria and Elea R. Claveria, Ma. Teresa Limcauco @ Honorata Dizon and Ellenora
Vda. de Limcauco @ Honorata Dizon:
1. Declaring the Deeds of Sale of 9 March 1987, 23 September 1987 and 5
October 1987 as well as Transfer Certificates of Title Nos. 75436, 75533,
82760, 85585, 85587, 85589 and 85591 all of the Register of Deeds of
Angeles City as void ab initio;
2. Ordering the Register of Deeds of Angeles City to reinstate Transfer
Certificates of Title Nos. 10896 and 64884 in the name of the plaintiff or to
issue new transfer certificate of title for the same parcels of land in the
name of the plaintiff-corporation free from liens and encumbrances made
subsequent to the cancellation of the said two (2) titles;
3. Ordering the defendants Philippine Trust Co., spouses Raul P. Claveria
and Elea R. Claveria, Ma. Teresa Limcauco @ Honorata Dizon and Ellenora
Vda. de Limcauco @ Honorata Dizon to pay jointly and severally the plaintiff
the sum of ₱50,000.00 as actual damages in the form of attorney’s fees;
and
4. To pay the costs of this suit.4
On January 21, 1994, petitioner Philippine Trust Company (Philtrust) filed a Notice
of Appeal, alleging that the lower court erred in declaring Transfer Certificate of
Title No. 75533-Angeles City void and in concluding that it was a mortgagee in bad
faith. Philtrust further claims that Forfom was negligent with its property.
On June 15, 2001, the Court of Appeals rendered the assailed Decision affirming
the Decision of the RTC:
8
WHEREFORE, premises considered, the present appeal is hereby DISMISSED and
the appealed Decision of the trial court in Civil Case No. 6087 is hereby AFFIRMED
and REITERATED.5
According to the Court of Appeals, Philtrust was negligent in its credit investigation
procedures and its standards for granting of loans, as shown by (a) its previously
extending unsecured and uncollateralized loans to the spouses Raul and Elea
Claveria, and (b) its failure to discover the latter’s statement of a fictitious address
in the mortgage contract and being the subject of estafa cases. The Court of
Appeals agreed with the trial court’s finding that Philtrust acted in haste in the
execution of the mortgage and loan contracts, as the property, assessed only at
more than ₱2 million and allegedly purchased at more than ₱5 million, was made
to secure the principal loan obligation of ₱8 million.
The appellate court further took note of Philtrust’s refusal to present the records
and details of its transactions with the spouses Claveria despite being pressed to
do so by Forfom. The Court of Appeals found this circumstance cast serious doubt
on Philtrust’s allegation that it was a mortgagee in good faith.
On August 21, 2001, the Court of Appeals denied Philtrust’s Motion for
Reconsideration. Hence, this Petition for Certiorari, where Philtrust raises the
following arguments:
1. The Court of Appeals committed grave abuse of discretion amounting to
lack or excess of jurisdiction in finding there was lack of evidence that
Philtrust was a mortgagee in good faith; hence, capriciously and wantonly
ascribed bad faith to the latter;6
2. The Court of Appeals committed grave abuse of discretion amounting to
lack or excess of jurisdiction in finding that Philtrust had actual knowledge
of facts and circumstances pertaining to the fraudulent transfer of the
registration of the subject property from the name of Forfom to the name
of Ellenora Limcauco, when there was no iota of evidence to support such
factual finding; hence, capriciously and wantonly ascribed bad faith to
Philtrust as the mortgagee of the said property; 7 and
3. The Court of Appeals committed grave abuse of discretion amounting to
lack or excess of jurisdiction in completely disregarding the well-settled rule
that a forged deed may be the root of a valid title; hence, capriciously and
wantonly nullified the real estate mortgage executed by the spouses
Claveria in favor of Philtrust.8
Contrary to the allegation in the third argument presented by Philtrust, the Court
of Appeals did not seem to have disregarded the rule that a forged deed may be
the root of a valid title. The appellate court clearly specified the circumstances
allowing the application of such rule:
A forged deed may be the root of a valid title when an innocent purchaser for value
intervenes. A purchaser in good faith and for value is one who buys the property
of another without notice that some other person has a right to or interest in such
property and pays a full and fair price for the same, at the time of such purchase,
or before he has notice of the claims or interest of some other person in the
property. It has been held that where a mortgagee bank accepted the mortgage in
good faith, the land involved being registered land, it is not bound to go [beyond]
the certificate of title to look for flaws in the mortgagor’s title, the doctrine of
innocent purchaser for value being applicable to an innocent mortgagee for value.
A mortgagee in good faith and for value is entitled to protection. A bank is not
required, before accepting a mortgage, to make an investigation of the title of the
property being given as security. This is a consequence of the rule that a person
dealing with registered land has a right to rely upon the face of the Torrens
certificate of title and to dispense with the need of inquiring further, except when
the party concerned has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry.9
Indeed, the presence of anything which excites or arouses suspicion should prompt
the vendee or mortgagee to look beyond the certificate and investigate the title of
the vendor appearing on the face of said certificate. 10 If the vendee or mortgagee
failed to do so before the execution of the contract, the vendee or mortgagee is
deemed to be in bad faith and therefore cannot acquire any title under the forged
instrument.
The determination of the case at bar, therefore, hinges on the resolution of the
first two issues, which deal with whether Philtrust is a mortgagee in good or bad
faith. However, since what Philtrust filed with us is a Petition for Certiorari rather
than a Petition for Review, a finding that Philtrust is in good faith is not enough for
us to grant the Petition. A mere error in the judgment of the Court of Appeals in
affirming the RTC Decision would not be enough; nothing less than grave abuse of
discretion on the part of the Court of Appeals is required for the issuance of the
Writ of Certiorari.
Philtrust claims that the loans secured by the mortgage on the subject property
were granted to the spouses Claveria after Philtrust was satisfied regarding the
spouses’ credit worthiness and capacity to pay.11 In fact, according to Philtrust, the
spouses Claveria were able to maintain a satisfactory record of payment during the
9
early period of their transactions with the bank.12 Philtrust insists that prior to the
constitution of the mortgage, it followed the standard operating procedures in
accepting property as security, including having investigators visit the subject
property and appraise its value.13
When the Court of Appeals ruled that these claims by Philtrust were not supported
by evidence, the latter countered before us that its allegations were supported by
the following documents: (a) the Promissory Note; 14 (b) the Deed of Mortgage;15
and (c) TCT No. 75533.16 Philtrust adds that it stated in the Answer to
Interrogatories that it followed the standard operating procedures in accepting the
property as security. Since said Answer to Interrogatories is a notarized document,
Philtrust claims that it is a public document which is conclusive as to the
truthfulness of its contents.17
It is settled that banks, their business being impressed with public interest, are
expected to exercise more care and prudence than private individuals in their
dealings, even those involving registered lands.18 The rule that persons dealing
with registered lands can rely solely on the certificate of title does not apply to
banks.19 Consequently, Philtrust should prove that it exercised extraordinary
diligence required of it in approving the mortgage contract in favor of the spouses
Claveria.
It baffles us how Philtrust can argue that the promissory note and Deed of Mortgage
executed by the spouses Claveria, and the TCT of the subject property, can prove
its allegations that (a) the mortgage was granted after it was satisfied of the
spouses’ credit worthiness; (b) the latter was able to maintain a satisfactory record
of payment early on; or (c) it followed the standard operating procedures in
accepting property as security, including having investigators visit the subject
property and appraise its value. The mere fact that Philtrust accepted the subject
property as security most certainly does not prove that it followed the standard
operating procedure in doing so. As regards Philtrust’s claim that the Answer to
Interrogatories, being a notarized document, is conclusive as to the truthfulness of
its contents, we deem it necessary to clarify the doctrines cited by Philtrust on this
matter.
Section 19, Rule 132 of the Rules of Court enumerates three kinds of public
documents, to wit:
Sec. 19. Classes of Documents. — For the purpose of their presentation in
evidence, documents are either public or private.
Public documents are:
(a) The written official acts, or records of the official acts of the sovereign
authority, official bodies and tribunals, and public officers, whether of the
Philippines, or of a foreign country;
(b) Documents acknowledged before a notary public except last wills and
testaments; and
(c) Public records, kept in the Philippines, of private documents required by
law to be entered therein.
All other writings are private.
Notarized documents fall under the second classification of public documents.
However, not all types of public documents are deemed prima facie evidence of
the facts therein stated:
Sec. 23. Public documents as evidence. — Documents consisting of entries in public
records made in the performance of a duty by a public officer are prima facie
evidence of the facts therein stated. All other public documents are evidence, even
against a third person, of the fact which gave rise to their execution and of the
date of the latter.20
"Public records made in the performance of a duty by a public officer" include those
specified as public documents under Section 19(a), Rule 132 of the Rules of Court
and the acknowledgement,21 affirmation or oath,22 or jurat23 portion of public
documents under Section 19(c). Hence, under Section 23, notarized documents
are merely proof of the fact which gave rise to their execution (e.g., the notarized
Answer to Interrogatories in the case at bar is proof that Philtrust had been served
with Written Interrogatories), and of the date of the latter (e.g., the notarized
Answer to Interrogatories is proof that the same was executed on October 12,
1992, the date stated thereon),24 but is not prima facie evidence of the facts therein
stated. Additionally, under Section 30 of the same Rule, the acknowledgement in
notarized documents is prima facie evidence of the execution of the instrument or
document involved (e.g., the notarized Answer to Interrogatories is prima facie
proof that petitioner executed the same).25
The reason for the distinction lies with the respective official duties attending the
execution of the different kinds of public instruments. Official duties are disputably
presumed to have been regularly performed.26 As regards affidavits, including
Answers to Interrogatories which are required to be sworn to by the person making
them,27 the only portion thereof executed by the person authorized to take oaths
is the jurat. The presumption that official duty has been regularly performed
10
therefore applies only to the latter portion, wherein the notary public merely attests
that the affidavit was subscribed and sworn to before him or her, on the date
mentioned thereon. Thus, even though affidavits are notarized documents, we
have ruled that affidavits, being self-serving, must be received with caution.28
Philtrust, therefore, presented no evidence rebutting the following badges of bad
faith shown in the records of the case. Even though circumstantial, the following
adequately prove by preponderance of evidence that Philtrust was aware of the
fraudulent scheme perpetrated upon Forfom:
1. Within a period of less than one year, Philtrust extended unsecured loans
amounting to ₱7,300,000.00 to the spouses Claveria as shown in its Answer
wherein it declared:
Spouses Raul and Elea Claveria has been clients of the bank since 1986 and on
October 2, 1987, all their outstanding obligations in the amount of ₱7,300,000.00
were consolidated into one account on a clean basis.29
All Philtrust can give is a very general explanation for these unsecured loans:
5. Why were the Claveria spouses granted loans without collaterals at the onset? 30
[ANSWER:]
5. The Claveria spouses passed the standards set by the bank. 31
2. Although the spouses Claveria had declared their residence to be in the plush
subdivision in Ayala Alabang, Philtrust was content to receive as security a land
outside Metro Manila, which was only recently acquired by the said spouses. When
asked about this in the Request for Interrogatories, Philtrust merely responded
evasively:
7. Did the bank not request from the Claveria spouses collateral within the Metro
Manila area and if so what was the reply of the Claveria spouses? 32
[ANSWER:]
7. The bank requested for collateral on the ₱8,300,000.00 loan preferably located
in Metro Manila.33
3. It is presumed that evidence willfully suppressed would be adverse if produced. 34
When pressed in the Request for Interrogatories for details of the investigation of
the bank, and for the names of the persons who allegedly visited the subject
property and the alleged home of the spouses Claveria, and the names of the bank
officers who dealt with said spouses, Philtrust refused to do so:
10. Prior to the execution of the real estate mortgage by the Claveria spouses on
the Angeles City property subject of the above-captioned case, what investigation,
if any did the bank undertake for the physical examination of said property, what
were the results, if any, of such physical examination of the property, and the
name or names of the persons who visited the property?35
[ANSWER:]
10. The Angeles property was appraised in accordance with the usual procedure in
the appraisal of property offered as collateral. The property was visited by the
investigators of the Credit Department of the bank.36
15. Did an officer or employee of the bank actually visit the given residences of the
Claveria spouses in Angeles City and Bacolod City, the result of such visit, and the
name or names of the persons representing the bank who visited such places?
37
1avvphi1
[ANSWER:]
15. As stated above, the last known address of spouses was 406 Caliraya Street,
New Alabang, Muntinlupa, M.M.38
17. Who was the particular bank officer who dealt directly with the Claveria spouses
and handled their accounts?39
[ANSWER:]
17. The Loans and Discounts Department of the bank handled the accounts of the
spouses.40
The RTC and the Court of Appeals considered these circumstances as circumstantial
evidence of Philtrust’s awareness of the fraudulent scheme against Forfom.
Nevertheless, Philtrust up to this date persists with suppressing these details:
Petitioner humbly believes and strongly maintains its position that the presentation
of all documents pertaining to the loan transactions of Spouses Claveria is
unnecessary, irrelevant, and immaterial in its defense of good faith before the court
a quo. Nevertheless, as discussed above, Petitioner had sufficiently proved through
11
its Answer to Interrogatories and loan documents extant in the records of the case
that it prudently complied with the standard practice of banks in accepting
mortgage.41

4. Philtrust persistently refused to cooperate with the National Bureau of

Investigation (NBI) in its investigation of the fraudulent scheme perpetrated
against Forfom, as testified by NBI agents Alberto V. Ramos and Pastor T.
Pangan,42 and as shown in NBI Investigation Report NBI-NCR 10-11-90 90-2-
5507.43

5. Had Philtrust properly conducted a credit investigation of the spouses Claveria,

it would have easily discovered that they did not reside and never resided in the
address declared by them, as revealed in the investigation by the NBI44 and
declared by the association of homeowners in the New Alabang subdivision. 45

All the foregoing considered, we find that the Court of Appeals did not even err in
finding that Philtrust was in bad faith in the execution of the mortgage contract
with the spouses Claveria. Consequently, Philtrust miserably failed to prove that
the Court of Appeals committed grave abuse of discretion amounting to lack or
excess of jurisdiction in rendering the assailed Decision and Resolution.

WHEREFORE, the instant Petition for Certiorari is DISMISSED. The Decision of

the Court of Appeals dated June 15, 2001 and the subsequent Resolution denying
reconsideration dated August 21, 2001 are AFFIRMED.

Costs against petitioner Philippine Trust Company.

SO ORDERED.

12
 3. G.R. No. 114286 April 19, 2001
THE COSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK),
petitioner
vs.
THE COURT OF APPEALS, CONTINENTAL CEMENT CORPORATION,
GREGORY T. LIM and SPOUSE, respondents.
YNARES-SANTIAGO, J.:
The instant petition for review seeks to partially set aside the July 26, 1993
Decision1 of respondent Court of Appeals in CA-GR. CV No. 29950, insofar as it
orders petitioner to reimburse respondent Continental Cement Corporation the
amount of P490, 228.90 with interest thereon at the legal rate from July 26, 1988
until fully paid. The petition also seeks to set aside the March 8, 1994 Resolution2
of respondent Court of Appeals denying its Motion for Reconsideration.
The facts are as follows:
On July 13, 1982, respondents Continental Cement Corporation (hereinafter,
respondent Corporation) and Gregory T. Lim (hereinafter, respondent Lim)
obtained from petitioner Consolidated Bank and Trust Corporation Letter of Credit
No. DOM-23277 in the amount of P 1,068,150.00 On the same date, respondent
Corporation paid a marginal deposit of P320,445.00 to petitioner. The letter of
credit was used to purchase around five hundred thousand liters of bunker fuel oil
from Petrophil Corporation, which the latter delivered directly to respondent
Corporation in its Bulacan plant. In relation to the same transaction, a trust receipt
for the amount of P 1,001,520.93 was executed by respondent Corporation, with
respondent Lim as signatory.
Claiming that respondents failed to turn over the goods covered by the trust receipt
or the proceeds thereof, petitioner filed a complaint for sum of money with
application for preliminary attachment3 before the Regional Trial Court of Manila.
In answer to the complaint, respondents averred that the transaction between
them was a simple loan and not a trust receipt transaction, and that the amount
claimed by petitioner did not take into account payments already made by them.
Respondent Lim also denied any personal liability in the subject transactions. In a
Supplemental Answer, respondents prayed for reimbursement of alleged
overpayment to petitioner of the amount of P490,228.90.
At the pre-trial conference, the parties agreed on the following issues:
1) Whether or not the transaction involved is a loan transaction or a trust
receipt transaction;
2) Whether or not the interest rates charged against the defendants by the
plaintiff are proper under the letter of credit, trust receipt and under existing
rules or regulations of the Central Bank;
3) Whether or not the plaintiff properly applied the previous payment of
P300,456.27 by the defendant corporation on July 13, 1982 as payment for
the latter’s account; and
4) Whether or not the defendants are personally liable under the transaction
sued for in this case.4
On September 17, 1990, the trial court rendered its Decision,5 dismissing the
Complaint and ordering petitioner to pay respondents the following amounts under
their counterclaim: P490,228.90 representing overpayment of respondent
Corporation, with interest thereon at the legal rate from July 26, 1988 until fully
paid; P10,000.00 as attorney's fees; and costs.
Both parties appealed to the Court of Appeals, which partially modified the Decision
by deleting the award of attorney's fees in favor of respondents and, instead,
ordering respondent Corporation to pay petitioner P37,469.22 as and for attorney's
fees and litigation expenses.
Hence, the instant petition raising the following issues:
1. WHETHER OR NOT THE RESPONDENT APPELLATE COURT ACTED
INCORRECTLY OR COMMITTED REVERSIBLE ERROR IN HOLDING THAT
THERE WAS OVERPAYMENT BY PRIVATE RESPONDENTS TO THE
PETITIONER IN THE AMOUNT OF P490,228.90 DESPITE THE ABSENCE OF
ANY COMPUTATION MADE IN THE DECISION AND THE ERRONEOUS
APPLICATION OF PAYMENTS WHICH IS IN VIOLATION OF THE NEW CIVIL
CODE.
2. WHETHER OR NOT THE MANNER OF COMPUTATION OF THE MARGINAL
DEPOSIT BY THE RESPONDENT APPELLATE COURT IS IN ACCORDANCE
WITH BANKING PRACTICE.
3. WHETHER OR NOT THE AGREEMENT AMONG THE PARTIES AS TO THE
FLOATING OF INTEREST RATE IS VALID UNDER APPLICABLE
13
 JURISPRUDENCE AND THE RULES AND REGULATIONS OF THE CENTRAL
BANK.
4. WHETHER OR NO THE RESPONDENT APPELLATE COUR GRIEVOUSLY
ERRED IN NOT CONSIDERING THE TRANSACTION AT BAR AS A TRUST
RECEIPT TRANSACTION ON THE BASIS OF THE JUDICIAL ADMISSIONS OF
THE PRIVATE RESPONDENTS AND FOR WHICH RESPONDENTS ARE LIABLE
THEREFOR.
5. WHETHER OR NOT THE RESPONDENT APPELLATE COURT GRIEVOUSLY
ERRED IN NOT HOLDING PRIVATE RESPONDENT SPOUSES LIABLE UNDER
THE TRUST RECEIPT TRANSACTION.6
The petition must be denied.
On the first issue respecting the fact of overpayment found by both the lower court
and respondent Court of Appeals, we stress the time-honored rule that findings of
fact by the Court of Appeals especially if they affirm factual findings of the trial
court will not be disturbed by this Court, unless these findings are not supported
by evidence.7
Petitioner decries the lack of computation by the lower court as basis for its ruling
that there was an overpayment made. While such a computation may not have
appeared in the Decision itself, we note that the trial court's finding of overpayment
is supported by evidence presented before it. At any rate, we painstakingly
reviewed and computed the payments together with the interest and penalty
charges due thereon and found that the amount of overpayment made by
respondent Bank to petitioner, i.e., P263,070.13, was more than what was ordered
reimbursed by the lower court. However, since respondents did not file an appeal
in this case, the amount ordered reimbursed by the lower court should stand.
Moreover, petitioner's contention that the marginal deposit made by respondent
Corporation should not be deducted outright from the amount of the letter of credit
is untenable. Petitioner argues that the marginal deposit should be considered only
after computing the principal plus accrued interest and other charges. However, to
sustain petitioner on this score would be to countenance a clear case of unjust
enrichment, for while a marginal deposit earns no interest in favour of the debtor-
depositor, the bank is not only able to use the same for its own purposes, interest-
free, but is also able to earn interest on the money loaned to respondent
Corporation. Indeed, it would be onerous to compute interest and other charges
on the face value of the letter of credit which the petitioner issued, without first
crediting or setting off the marginal deposit which the respondent Corporation paid
to it. Compensation is proper and should take effect by operation of law because
the requisites in Article 1279 of the Civil Code are present and should extinguish
both debts to the concurrent amount.8
Hence, the interests and other charges on the subject letter of credit should be
computed only on the balance of P681,075.93, which was the portion actually
loaned by the bank to respondent Corporation.
Neither do we find error when the lower court and the Court of Appeals set aside
as invalid the floating rate of interest exhorted by petitioner to be applicable. The
pertinent provision in the trust receipt agreement of the parties fixing the interest
rate states:
I, WE jointly and severally agree to any increase or decrease in the interest
rate which may occur after July 1, 1981, when the Central Bank floated the
interest rate, and to pay additionally the penalty of 1% per month until the
amount/s or instalments/s due and unpaid under the trust receipt on the
reverse side hereof is/are fully paid.9
We agree with respondent Court of Appeals that the foregoing stipulation is invalid,
there being no reference rate set either by it or by the Central Bank, leaving the
determination thereof at the sole will and control of petitioner. 1âwphi1.nêt
While it may be acceptable, for practical reasons given the fluctuating economic
conditions, for banks to stipulate that interest rates on a loan not be fixed and
instead be made dependent upon prevailing market conditions, there should always
be a reference rate upon which to peg such variable interest rates. An example of
such a valid variable interest rate was found in Polotan, Sr. v. Court of Appeals. 10
In that case, the contractual provision stating that "if there occurs any change in
the prevailing market rates, the new interest rate shall be the guiding rate in
computing the interest due on the outstanding obligation without need of serving
notice to the Cardholder other than the required posting on the monthly statement
served to the Cardholder"11 was considered valid. The aforequoted provision was
upheld notwithstanding that it may partake of the nature of an escalation clause,
because at the same time it provides for the decrease in the interest rate in case
the prevailing market rates dictate its reduction. In other words, unlike the
stipulation subject of the instant case, the interest rate involved in the Polotan case
is designed to be based on the prevailing market rate. On the other hand, a
stipulation ostensibly signifying an agreement to "any increase or decrease in the
interest rate," without more, cannot be accepted by this Court as valid for it leaves
solely to the creditor the determination of what interest rate to charge against an
outstanding loan.
14
Petitioner has also failed to convince us that its transaction with respondent
Corporation is really a trust receipt transaction instead of merely a simple loan, as
found by the lower court and the Court of Appeals.
The recent case of Colinares v. Court of Appeals 12 appears to be foursquare with
the facts obtaining in the case at bar. There, we found that inasmuch as the debtor
received the goods subject of the trust receipt before the trust receipt itself was
entered into, the transaction in question was a simple loan and not a trust receipt
agreement. Prior to the date of execution of the trust receipt, ownership over the
goods was already transferred to the debtor. This situation is inconsistent with
what normally obtains in a pure trust receipt transaction, wherein the goods belong
in ownership to the bank and are only released to the importer in trust after the
loan is granted.
In the case at bar, as in Colinares, the delivery to respondent Corporation of the
goods subject of the trust receipt occurred long before the trust receipt itself was
executed. More specifically, delivery of the bunker fuel oil to respondent
Corporation's Bulacan plant commenced on July 7, 1982 and was completed by
July 19, 1982.13 Further, the oil was used up by respondent Corporation in its
normal operations by August, 1982.14 On the other hand, the subject trust receipt
was only executed nearly two months after full delivery of the oil was made to
respondent Corporation, or on September 2, 1982.
The danger in characterizing a simple loan as a trust receipt transaction was
explained in Colinares, to wit:
The Trust Receipts Law does not seek to enforce payment of the loan, rather
it punishes the dishonesty and abuse of confidence in the handling of money
or goods to the prejudice of another regardless of whether the latter is the
owner. Here, it is crystal clear that on the part of Petitioners there was
neither dishonesty nor abuse of confidence in the handling of money to the
prejudice of PBC. Petitioners continually endeavored to meet their
obligations, as shown by several receipts issued by PBC acknowledging
payment of the loan.
The Information charges Petitioners with intent to defraud and
misappropriating the money for their personal use. The mala prohibita
nature of the alleged offense notwithstanding, intent as a state of mind was
not proved to be present in Petitioners' situation. Petitioners employed no
artifice in dealing with PBC and never did they evade payment of their
obligation nor attempt to abscond. Instead, Petitioners sought favorable
terms precisely to meet their obligation.
Also noteworthy is the fact that Petitioners are not importers acquiring the
goods for re-sale, contrary to the express provision embodied in the trust
receipt. They are contractors who obtained the fungible goods for their
construction project. At no time did title over the construction materials
pass to the bank, but directly to the Petitioners from CM Builders Centre.
This impresses upon the trust receipt in question vagueness and ambiguity,
which should not be the basis for criminal prosecution in the event of
violation of its provisions.
The practice of banks of making borrowers sign trust receipts to facilitate
collection of loans and place them under the threats of criminal prosecution
should they be unable to pay it may be unjust and inequitable if not
reprehensible. Such agreements are contracts of adhesion which borrowers
have no option but to sign lest their loan be disapproved. The resort to this
scheme leaves poor and hapless borrowers at the mercy of banks, and is
prone to misinterpretation, as had happened in this case. Eventually, PBC
showed its true colors and admitted that it was only after collection of the
money, as manifested by its Affidavit of Desistance.
Similarly, respondent Corporation cannot be said to have been dishonest in its
dealings with petitioner. Neither has it been shown that it has evaded payment of
its obligations. Indeed, it continually endeavored to meet the same, as shown by
the various receipts issued by petitioner acknowledging payment on the loan.
Certainly, the payment of the sum of P1,832,158.38 on a loan with a principal
amount of only P681,075.93 negates any badge of dishonesty , abuse of confidence
or mishandling of funds on the part of respondent Corporation, which are the
gravamen of a trust receipt violation. Furthermore, Respondent Corporation is not
an importer, which acquired the bunker fuel oil for re-sale; it needed the oil for its
own operations. More importantly, at no time did title over the oil pass to petitioner,
but directly to respondent Corporation to which the oil was directly delivered long
before the trust receipt was executed. The fact that ownership of the oil belonged
to respondent Corporation, through its President, Gregory Lim, was acknowledged
by petitioner's own account officer on the witness stand, to wit:
Q -After the bank opened a letter of credit in favor of Petrophil Corp. for the
account of the defendants thereby paying the value of the bunker fuel oil
what transpired next after that?
A -Upon purchase of the bunker fuel oil and upon the requests of the
defendant possession of the bunker fuel oil were transferred to them.
Q -You mentioned them to whom are you referring to?
15
 A -To the Continental Cement Corp. upon the execution of the trust receipt
acknowledging the ownership of the bunker fuel oil this should be
acceptable for whatever disposition he may make.
Q - You mentioned about acknowledging ownership of the bunker fuel oil to
whom by whom?
A - By the Continental Cement Corp.
Q – So by your statement who really owns the bunker fuel oil?
A TTY. RACHON:
Objection already answered,
the trust receipt simply to facilitate collection by petitioner of the loan it had
extended to the former.
Finally, we are not convinced that respondent Gregory T. Lim and his spouse should
be personally liable under the subject trust receipt. Petitioner's argument that
respondent Corporation and respondent Lim and his spouse are one and the same
cannot be sustained. The transactions sued upon were clearly entered into by
respondent Lim in his capacity as Executive Vice President of respondent
Corporation. We stress the hornbook law that corporate personality is a shield
against personal liability of its officers. Thus, we agree that respondents Gregory
T. Lim and his spouse cannot be made personally liable since respondent Lim
entered into and signed the contract clearly in his official capacity as Executive Vice
President. The personality of the corporation is separate and distinct from the
persons composing it.16

COURT: WHEREFORE, in view of all the foregoing, the instant Petition for Review is
DENIED. The Decision of the Court of Appeals dated July 26, 1993 in CA-G.R. CY
Give time to the other counsel to object. No.29950 is AFFIRMED.

A TTY. RACHON : SO ORDERED.

He has testified that ownership was acknowledged in favor of Continental

Cement Corp. so that question has already been answered.

A TTY. BANAGA:

That is why I made a follow up question asking ownership of the bunker

fuel oil.

COURT:

Proceed.

A TTY .BANAGA:

Q - Who owns the bunker fuel oil after purchase from Petrophil Corp. ?

A - Gregory Lim.15

By all indications, then, it is apparent that there was really no trust receipt
transaction that took place. Evidently, respondent Corporation was required to sign

16
 4. G.R. No. 97218 May 17, 1993
PROVIDENT SAVINGS BANK, petitioner,
vs.
COURT OF APPEALS, Former SPECIAL EIGHTH DIVISION and WILSON
CHUA, respondents.
Gonzales, Batiller, Bilog & Associates for petitioner.
Resty R. Villanueva for private respondent.
MELO, J.:
The error, if error it be, of respondent Court of Appeals which petitioner seeks to
rectify via the petitioner for certiorari before us refers to respondent court's major
conclusion arrived at in CA-G.R. CV No. 21312 (Javellana (P), Kalalo, Dayrit, JJ)
barring petitioner from foreclosing the subject realty on account of prescription.
Petitioner begs to differ, insisting that the period during which it was placed under
receivership by the Central Bank is akin to a caso fortuito and should not thus be
reckoned against it.
Both petitioner and private respondent accepted the synthesized factual backdrop
formulated by respondent court, to wit:
This an appeal by both plaintiff and defendant from the decision of
the Regional Trial Court of the National Capital Judicial 29 September
1988, in Civil Case No. 977-NW, which directed plaintiff-appellant to
pay defendant-appellant the personal obligation of the spouses
Guarin to defendant-appellant in the amount of P62,500.00,
together with the interest, penalties, and bank charges due thereon,
and ordering defendant-appellant thereafter to: (1) release the real
estate mortgage executed by the spouses Lorenzo K. Guarin and
Liwayway J. Guarin in favor of defendant bank on 16 February 1967;
(2) return to surrender to plaintiff-appellant, as successor-in-
interest of the spouses Guarin, the latter's Owner's Duplicate of Title
No. 177014; (3) pay plaintiff-appellant P20,000.00 as and for
attorney's fees; and, (4) pay the costs of suit.
The established fact are:
On 16 February 1967, the spouses Lorenzo K. Guarin and Liwayway
J. Guarin (Guarins) obtained a loan from defendant-appellant in the
amount of P62,500.00 payable on or before 20 June 1967. As
security for the loan, they executed a real estate mortgage in favor
of defendant-appellant over a parcel of land covered by TCT No.
177014. (Exhs. C and D).
In September, 1972, defendant-appellant was placed under
receivership by the Central Bank of the Philippines until 27 July 1981
when the receivership was set aside by the Honorable Supreme
Court.
On 11 December 1984, Lorenzo K. Guarin, in reply to the letter of
latter's counsel informing that the mortgaged property would be sold
at public auction on 27 December 1984, assured he and his wife had
every intention of paying their obligation and requesting for a
recomputation of their account and a postponement of the
foreclosure sale. (Exh. 1).
On 10 February 1986, the Guarins received a Statement of Account
from defendant-appellant showing two outstanding accounts as of
15 February 1986. One was account of Lorenzo K. Guarin in the
amount of P591,088.80, and the other was the account of L.K.
Guarin Manufacturing Co., Inc. in the amount of P6,287,380.27
(Attachment to Exh. 2)
On 26 February 1986, Lorenzo K. Guarin wrote defendant-appellant
stating that he was ready and willing to pay his obligation in the total
amount of P591,088.80 as recomputed by defendant-appellant
whenever defendant-appellant was already to receive the payment
and inquiring as to when his mortgaged title would be available for
him to pick up. (Exh. 2)
Defendant-appellant replied on 27 February 1986 that Lorenzo K.
Guarin may make payment at its office in Makati, Metro Manila, but
that the mortgaged title could not be released to him even after the
payment of the obligation of P591,088.80 as it also served as
security for the indebtedness of L.Y. Guarin Manufacturing Co., Inc.,
to defendant-appellant which was undertaken by Lorenzo K. Guarin
in his personal capacity and as president of the corporation. (Exh. 3)
17
On 20 May 1986, plaintiff-appellant wrote defendant-appellant
saying that the mortgaged property of the Guarins had been offered
to him as payment of the judgment he obtained against the Guarins
in Civil Case No. Q-47465 entitled, "Wilson Chua vs. Lorenzo K.
Guarin", and requesting for defendant-appellant's conformity to the
assignment and expressing his willingness to pay for the obligation
of Mr. Guarin so that the title could be released by defendant-
appellant. (Exh. 4)
On 10 July 1986, the Guarins and plaintiff-appellant executed a Deed
of Absolute Sale With Assumption of Mortgaged whereby the Guarins
sold the mortgaged property to Guarins sold the appellant for the
sum of P250,000.00 and plaintiff-appellant undertook to assume the
mortgaged obligation of the Guarins with defendant-appellant which
as of 15 February 1985 amounted to P591,088.80.(Exh. B).
On 5 August 1986, plaintiff-appellant informed defendant-appellant
that as a result of the judgment in Civil Case No. Q-47645, the
mortgaged property had been sold to him by the Guarins, as
evidenced by the Deed of Sale enclosed for guidance and information
of defendant-appellant. He requested that he be allowed to pay the
loan secured by the mortgaged, otherwise, he would be constrained
to bring the matter to court. (Exh. 5) In reply, defendant-appellant,
on 11 August 1986, informed plaintiff-appellant that his request
could be granted if he would settle the obligation of L.K. Guarin
Manufacturing Co., Inc., as well and defendant-appellant's letter to
Mr. Guarin dated 27 February 1986. (Exh. 6)
On 3 August 1987, counsel for plaintiff-appellant addressed a letter
to defendant-appellant informing that plaintiff-appellant had
purchased the mortgaged property from the Guarin's and requesting
that the owner's copy of TCT No. 177014 in the possession of
defendant-appellant be released to him so that he can register the
sale and have the title to the property transferred in his name. He
likewise, informed defendant-appellant that it had lost whatever
right or action had against the Guarins because of prescription. (Exh.
E) Defendant-appellant replied on 10 August 1987 stating the
reasons why they could not comply with plaintiff-appellant's
demands. (Exh. F)
On 21 August 1986, plaintiff-appellant filed a complaint against
defendant-appellant to compel the latter to: (1) release the real
estate mortgaged executed by the Guarins in favor of defendant-
appellant on 16 February 1967; (2) return or surrender to plaintiff-
appellant, as successor-in-interest of the Guarins, the latter's
owner's duplicate of TCT No. 177014; and (3) pay plaintiff-appellant
P2,750,000.00 as actual and/or consequential damages, moral
damages as may be proved during the trial, exemplary damages as
may be reasonably assessed by the court, and attorney's fees of
P50,00.00. Defendant-appellant answered the complaint thereof and
setting up special and affirmative defenses. After trial, judgment was
rendered as stated in the opening paragraph hereof from which both
parties appealed . . . . (pp. 35-37, Rollo.)
Concerning the challenge posed by Provident Saving Bank against the personality
of Wilson Chua to initiate the action to compel the release of the real estate
mortgage and the delivery of the owner's duplicate copy of the certificate of title,
respondent court noted that Wilson Chua can be considered a real-property-in-
interest because he is the successor-in-interest of the Guarins who is naturally
entitled to the realty as against the so-called right of Provident Savings Bank, as
mortgagee, to foreclose the mortgage which had become stale through sheer lapse
of time. The matter of novation in the form of substitution of the debtor without
corresponding acquiesence of the mortgagee was viewed by respondent court to
be legally inconsequential due to the demeanor of the mortgagee-bank in requiring
Wilson Chua to pay the indebtedness of Lorenzo Guarin, posterior to the change of
obligors, which act was construed as equivalent to consent.
To the question of whether petitioner can still foreclose the subject realty,
respondent court gave a negative response on account of the absence of proof to
indicate that the bank was precluded from collecting indebtedness while it was
under receivership from September, 1972 until July 20,1981. Thus, there was no
legal interruption of the pres-criptive period to speak of, said respondent court,
which intervened between June 20, 1967, the date the mortgage matured, and
June 20, 1977 the last day within which petitioner could have foreclosed the
mortgage.
Respondent court did not also heed the suggestion of the petitioner bank to
interpret Wilson Chua's assumption of the mortgage on July 10, 1986 as
tantamount to an explicit acknowledgement that the obligation was outstanding
and had not yet prescribed.
As a result of these observations, respondent court reversed the decision of the
trial court insofar as it ordered Wilson Chua to pay the sum of P591,088.80 to the
bank and affirmed the other dispositions made the court of origin (p. 42, Rollo).
18
Following the unfavorable judgment, the bank filed a motion for reconsideration
and a motion for new trial premised on newly discovered evidence relative to a
statement of account unearthed by the bank's liaison officer from the loose folders
on October 18, 1990 which it believed to be of legal significance to the case. But
respondent court was unperturbed, observing that the vital piece of document
could have been located in the course of trial had the slightest degree of prudence
been exercised, considering that the statement of account sprouted the same day
the liaison officer was advised to take an inventory of the records ( p. 45, Rollo).
Hence, the petitioner at bar.
Consistent with its theory premised on fuerza major, petitioner insists that it can
not be blamed for not lifting a finger, so speak, during the period when it was
enjoined by the Central Bank on September 15, 1972 from transacting business
until this Court affirmed on July 27,1981 the decision of the Court of Appeals
annulling the proscription against petitioner in Central Bank vs. Court of Appeals
(106 SCRA 143 [1981]. We are not unaware of the rule laid down in Teal Motor
Co. vs. Court of First Instance of Manila (51 Phil. 549 [1928]; Martin,
Commentaries and Jurisprudence on the Philippine Commercial Laws, 1986 Revised
ed., p.125) that the appointment of a receiver does not dissolve the corporation
nor does it interfere with the exercise of its corporate rights. But this principles is,
of course, applicable to a situation where there is no restraint imposed on the
corporation, unlike in the case at bar where petitioner Provident Savings Bank was
specifically forbidden and immobilized from doing business in the Philippines on
September 15, 1972 through Monetary Board Resolution No. 1766 until 1981 when
the decision in Central Bank vs. Court of Appeals (supra, at p. 150) was rendered.
The question which immediately crops up is whether a foreclose proceeding falls
within the purview of the phrase "doing business". In Mentholatum Co., Inc., et al.
vs. Mangaliman, et al. (72 Phil. 524 [1941]; Moreno, Philippine Law Dictionary,
Second ed., 1972, p. 186), the term was construed by Justice Laurel to refer to:
. . . a continuity of commercial dealings and arrangements, and
contemplates to that extent, the exercise of some of the words or
the normally incident to, and in progressive prosecution of, the
purpose ands object of its organizations. (p. 528; emphasis
supplied.)
Withal, we believe that a foreclose is deemed embraced by the phrase "doing
business" as a preparatory measure to acquiring or holding property for petitioner
as a saving bank under Section 34 of the General Banking Act. Like any other
banking institution, petitioner is vested with the usual attributes and powers of a
corporation under Section 36 of the Corporation Code (Vitug, Pandect of
Commercial Law and Jurisprudence, 1990 ed., p. 475). The prerogative of a bank
to foreclose is implicit from and is even necessary to enforce collection of secured
debts under Section 36(11) and 45 of the Corporation Code, in conjunction with
Section 29 of the General Banking Act (6 Fletcher, 206; Agbayani, Commentaries
and Jurisprudence on the Commercial Laws of the Philippines, 1990 ed., p. 325).
When a bank is prohibited to do business by the Central Bank and a receiver is
appointed for such bank, that bank would not be able to do new business, i.e., to
grant new loans or to accept new deposits. However, the receiver of the bank is
obliged to collect debts owing to the bank, which debts form part of the assets of
the bank. The receiver must assemble the assets and pay the obligation of the
bank under receivership, and take steps to prevent dissipation of such assets.
Accordingly, the the receiver of the bank is obliged to collect pre-existing debts
due to the bank, and in connection therewith, to foreclose mortgages securing
debts. This is not to ignore The Philippine Trust Co. vs. HSBC (67 Phil. 204 [1939],
for in that case, the Court simply rejected the objections of certain creditors to the
report of a receiver, that is, objections that the receiver did not report the collection
made before the beginning of his receivership. It would follow that the bank is
bound by the acts, or failure to act, of the receiver. At the same time, the receiver
is liable to the bank for culpable or negligent failure to collect the assets of such
bank and to safeguard said assets.
Having arrived at the conclusion that the foreclosure is part of bank's business
activity which could not have been pursued by the receiver then because of the
circumstances discussed in the Central Bank case, we are thus convinced that the
prescriptive period was legally interrupted by fuerza mayor in 1972 on account on
the prohibition imposed by the Monetary Board against petitioner from transacting
business, until the directive of the board was nullified in 1981. Indeed, the period
during which the obligee was prevented by a caso fortuito from enforcing his right
is not reckoned against him (Article 1154, New Civil Code). When prescription is
interrupted, all the benefits acquired so far from the possession cease and when
prescription starts anew, it will be entirely a new one. This concept should not be
equated with suspension where the past period is included in the computation
being added to the period after prescription is resumed (4 Tolentino, Commentaries
and Jurisprudence on the Civil Code of the Philippines, 1991 ed., pp. 18-19).
Consequently, when the closure of was set aside in 1981, the period of ten years
within which to foreclose under Article 1142 of the New Civil Code began to run
again and, therefore, the action filed on August 21, 1986 to compel petitioner to
release the mortgage carried with it the mistaken notion that petitioner's own suit
foreclosure had prescribed. What exacerbates the situation is the letter of private
respondent requesting petitioner on August 6, 1986 that private respondent be
allowed to pay the loan secured by the mortgage as the result of the Deed of Sale
19
executed by the Guarins in his favor on July 10, 1986 (pp. 36-37, Rollo). In point
of law, this written communication is synonymous to an express acknowledgment
of the obligation and had the effect of interrupting the prescription for the second
time (Article 1155, New Civil Code; Osmeña vs. Rama, 14 Phil. 99 [1909]; 4
Tolentino, supra at p. 50). And this piece of document necessarily estops private
respondent from setting up prescription vis-a-vis his unfounded supposition that
acknowledgment of the debt is of no moment because the right of the petitioner to
foreclose had long prescribed in 1977 (p. 13, Petition; p. 7, Comment; pp. 19 and
58, Rollo).

Contrary to respondent court's prescription of the existence of novation, the

evidence at hand does not buttress a finding along this line from the mere fact that
petitioner supposedly did not question the substitution when the bank reacted to
private respondent's offer to pay the loan (p. 39, Rollo). What seems to have
escaped respondent court's attention was the condition imposed by the petitioner
that it will grant private respondent's request if the latter will also shoulder the
obligation incurred by Lorenzo Guarin in his capacity as president of the corporation
(p.37, Rollo). The consent of the petitioner to the substitution, as creditor, was
thus erroneously appreciated.

With the conclusions reached, we need not discuss the other issues raised in the
petition.

WHEREFORE, the petition is hereby GRANTED. The decision dated August 31, 1990,
including the resolution dated February 6, 1991 of respondent court are hereby set
aside and another one entered dismissing Wilson Chua's complaint. No special
pronouncement is made to costs.

20
 5. G.R. No. 90027 March 3, 1993
CA AGRO-INDUSTRIAL DEVELOPMENT CORP., petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SECURITY BANK AND TRUST
COMPANY, respondents.
Dolorfino & Dominguez Law Offices for petitioner.
Danilo B. Banares for private respondent.
DAVIDE, JR., J.:
Is the contractual relation between a commercial bank and another party in a
contract of rent of a safety deposit box with respect to its contents placed by the
latter one of bailor and bailee or one of lessor and lessee?
This is the crux of the present controversy.
On 3 July 1979, petitioner (through its President, Sergio Aguirre) and the spouses
Ramon and Paula Pugao entered into an agreement whereby the former purchased
from the latter two (2) parcels of land for a consideration of P350,625.00. Of this
amount, P75,725.00 was paid as downpayment while the balance was covered by
three (3) postdated checks. Among the terms and conditions of the agreement
embodied in a Memorandum of True and Actual Agreement of Sale of Land were
that the titles to the lots shall be transferred to the petitioner upon full payment of
the purchase price and that the owner's copies of the certificates of titles thereto,
Transfer Certificates of Title (TCT) Nos. 284655 and 292434, shall be deposited in
a safety deposit box of any bank. The same could be withdrawn only upon the joint
signatures of a representative of the petitioner and the Pugaos upon full payment
of the purchase price. Petitioner, through Sergio Aguirre, and the Pugaos then
rented Safety Deposit Box No. 1448 of private respondent Security Bank and Trust
Company, a domestic banking corporation hereinafter referred to as the
respondent Bank. For this purpose, both signed a contract of lease (Exhibit "2")
which contains, inter alia, the following conditions:
13. The bank is not a depositary of the contents of the safe and it
has neither the possession nor control of the same.
14. The bank has no interest whatsoever in said contents, except
herein expressly provided, and it assumes absolutely no liability in
connection therewith.1
After the execution of the contract, two (2) renter's keys were given to the renters
— one to Aguirre (for the petitioner) and the other to the Pugaos. A guard key
remained in the possession of the respondent Bank. The safety deposit box has
two (2) keyholes, one for the guard key and the other for the renter's key, and can
be opened only with the use of both keys. Petitioner claims that the certificates of
title were placed inside the said box.
Thereafter, a certain Mrs. Margarita Ramos offered to buy from the petitioner the
two (2) lots at a price of P225.00 per square meter which, as petitioner alleged in
its complaint, translates to a profit of P100.00 per square meter or a total of
P280,500.00 for the entire property. Mrs. Ramos demanded the execution of a
deed of sale which necessarily entailed the production of the certificates of title. In
view thereof, Aguirre, accompanied by the Pugaos, then proceeded to the
respondent Bank on 4 October 1979 to open the safety deposit box and get the
certificates of title. However, when opened in the presence of the Bank's
representative, the box yielded no such certificates. Because of the delay in the
reconstitution of the title, Mrs. Ramos withdrew her earlier offer to purchase the
lots; as a consequence thereof, the petitioner allegedly failed to realize the
expected profit of P280,500.00. Hence, the latter filed on 1 September 1980 a
complaint2 for damages against the respondent Bank with the Court of First
Instance (now Regional Trial Court) of Pasig, Metro Manila which docketed the
same as Civil Case No. 38382.
In its Answer with Counterclaim,3 respondent Bank alleged that the petitioner has
no cause of action because of paragraphs 13 and 14 of the contract of lease (Exhibit
"2"); corollarily, loss of any of the items or articles contained in the box could not
give rise to an action against it. It then interposed a counterclaim for exemplary
damages as well as attorney's fees in the amount of P20,000.00. Petitioner
subsequently filed an answer to the counterclaim.4
In due course, the trial court, now designated as Branch 161 of the Regional Trial
Court (RTC) of Pasig, Metro Manila, rendered a decision5 adverse to the petitioner
on 8 December 1986, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered
dismissing plaintiff's complaint.
21
 On defendant's counterclaim, judgment is hereby rendered ordering
plaintiff to pay defendant the amount of FIVE THOUSAND
(P5,000.00) PESOS as attorney's fees.
With costs against plaintiff.6
The unfavorable verdict is based on the trial court's conclusion that under
paragraphs 13 and 14 of the contract of lease, the Bank has no liability for the loss
of the certificates of title. The court declared that the said provisions are binding
on the parties.
Its motion for reconsideration7 having been denied, petitioner appealed from the
adverse decision to the respondent Court of Appeals which docketed the appeal as
CA-G.R. CV No. 15150. Petitioner urged the respondent Court to reverse the
challenged decision because the trial court erred in (a) absolving the respondent
Bank from liability from the loss, (b) not declaring as null and void, for being
contrary to law, public order and public policy, the provisions in the contract for
lease of the safety deposit box absolving the Bank from any liability for loss, (c)
not concluding that in this jurisdiction, as well as under American jurisprudence,
the liability of the Bank is settled and (d) awarding attorney's fees to the Bank and
denying the petitioner's prayer for nominal and exemplary damages and attorney's
fees.8
In its Decision promulgated on 4 July 1989,9 respondent Court affirmed the
appealed decision principally on the theory that the contract (Exhibit "2") executed
by the petitioner and respondent Bank is in the nature of a contract of lease by
virtue of which the petitioner and its co-renter were given control over the safety
deposit box and its contents while the Bank retained no right to open the said box
because it had neither the possession nor control over it and its contents. As such,
the contract is governed by Article 1643 of the Civil Code 10 which provides:
Art. 1643. In the lease of things, one of the parties binds himself to
give to another the enjoyment or use of a thing for a price certain,
and for a period which may be definite or indefinite. However, no
lease for more than ninety-nine years shall be valid.
It invoked Tolentino vs. Gonzales 11 — which held that the owner of the
property loses his control over the property leased during the period of the
contract — and Article 1975 of the Civil Code which provides:
Art. 1975. The depositary holding certificates, bonds, securities or
instruments which earn interest shall be bound to collect the latter
when it becomes due, and to take such steps as may be necessary
in order that the securities may preserve their value and the rights
corresponding to them according to law.
The above provision shall not apply to contracts for the rent of safety
deposit boxes.
and then concluded that "[c]learly, the defendant-appellee is not under any
duty to maintain the contents of the box. The stipulation absolving the
defendant-appellee from liability is in accordance with the nature of the
contract of lease and cannot be regarded as contrary to law, public order
and public policy." 12 The appellate court was quick to add, however, that
under the contract of lease of the safety deposit box, respondent Bank is
not completely free from liability as it may still be made answerable in case
unauthorized persons enter into the vault area or when the rented box is
forced open. Thus, as expressly provided for in stipulation number 8 of the
contract in question:
8. The Bank shall use due diligence that no unauthorized person shall
be admitted to any rented safe and beyond this, the Bank will not
be responsible for the contents of any safe rented from it. 13
Its motion for reconsideration 14 having been denied in the respondent Court's
Resolution of 28 August 1989, 15 petitioner took this recourse under Rule 45 of
the Rules of Court and urges Us to review and set aside the respondent Court's
ruling. Petitioner avers that both the respondent Court and the trial court (a) did
not properly and legally apply the correct law in this case, (b) acted with grave
abuse of discretion or in excess of jurisdiction amounting to lack thereof and (c)
set a precedent that is contrary to, or is a departure from precedents adhered to
and affirmed by decisions of this Court and precepts in American jurisprudence
adopted in the Philippines. It reiterates the arguments it had raised in its motion
to reconsider the trial court's decision, the brief submitted to the respondent Court
and the motion to reconsider the latter's decision. In a nutshell, petitioner
maintains that regardless of nomenclature, the contract for the rent of the safety
deposit box (Exhibit "2") is actually a contract of deposit governed by Title XII,
Book IV of the Civil Code of the
Philippines. 16 Accordingly, it is claimed that the respondent Bank is liable for the
loss of the certificates of title pursuant to Article 1972 of the said Code which
provides:
Art. 1972. The depositary is obliged to keep the thing safely and to
return it, when required, to the depositor, or to his heirs and
22
 successors, or to the person who may have been designated in the
contract. His responsibility, with regard to the safekeeping and the
loss of the thing, shall be governed by the provisions of Title I of this
Book.
If the deposit is gratuitous, this fact shall be taken into account in
determining the degree of care that the depositary must observe.
Petitioner then quotes a passage from American Jurisprudence 17 which is
supposed to expound on the prevailing rule in the United States, to wit:
The prevailing rule appears to be that where a safe-deposit company
leases a safe-deposit box or safe and the lessee takes possession of
the box or safe and places therein his securities or other valuables,
the relation of bailee and bail or is created between the parties to
the transaction as to such securities or other valuables; the fact that
the
safe-deposit company does not know, and that it is not expected
that it shall know, the character or description of the property which
is deposited in such safe-deposit box or safe does not change that
relation. That access to the contents of the safe-deposit box can be
had only by the use of a key retained by the lessee ( whether it is
the sole key or one to be used in connection with one retained by
the lessor) does not operate to alter the foregoing rule. The
argument that there is not, in such a case, a delivery of exclusive
possession and control to the deposit company, and that therefore
the situation is entirely different from that of ordinary bailment, has
been generally rejected by the courts, usually on the ground that as
possession must be either in the depositor or in the company, it
should reasonably be considered as in the latter rather than in the
former, since the company is, by the nature of the contract, given
absolute control of access to the property, and the depositor cannot
gain access thereto without the consent and active participation of
the company. . . . (citations omitted).
and a segment from Words and Phrases 18 which states that a contract for
the rental of a bank safety deposit box in consideration of a fixed amount
at stated periods is a bailment for hire.
Petitioner further argues that conditions 13 and 14 of the questioned contract are
contrary to law and public policy and should be declared null and void. In support
thereof, it cites Article 1306 of the Civil Code which provides that parties to a
contract may establish such stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not contrary to law, morals, good
customs, public order or public policy.
After the respondent Bank filed its comment, this Court gave due course to the
petition and required the parties to simultaneously submit their respective
Memoranda.
The petition is partly meritorious.
We agree with the petitioner's contention that the contract for the rent of the safety
deposit box is not an ordinary contract of lease as defined in Article 1643 of the
Civil Code. However, We do not fully subscribe to its view that the same is a
contract of deposit that is to be strictly governed by the provisions in the Civil Code
on deposit; 19 the contract in the case at bar is a special kind of deposit. It cannot
be characterized as an ordinary contract of lease under Article 1643 because the
full and absolute possession and control of the safety deposit box was not given to
the joint renters — the petitioner and the Pugaos. The guard key of the box
remained with the respondent Bank; without this key, neither of the renters could
open the box. On the other hand, the respondent Bank could not likewise open the
box without the renter's key. In this case, the said key had a duplicate which was
made so that both renters could have access to the box.
Hence, the authorities cited by the respondent Court 20 on this point do not apply.
Neither could Article 1975, also relied upon by the respondent Court, be invoked
as an argument against the deposit theory. Obviously, the first paragraph of such
provision cannot apply to a depositary of certificates, bonds, securities or
instruments which earn interest if such documents are kept in a rented safety
deposit box. It is clear that the depositary cannot open the box without the renter
being present.
We observe, however, that the deposit theory itself does not altogether find
unanimous support even in American jurisprudence. We agree with the petitioner
that under the latter, the prevailing rule is that the relation between a bank renting
out safe-deposit boxes and its customer with respect to the contents of the box is
that of a bail or and bailee, the bailment being for hire and mutual benefit. 21 This
is just the prevailing view because:
There is, however, some support for the view that the relationship
in question might be more properly characterized as that of landlord
and tenant, or lessor and lessee. It has also been suggested that it
should be characterized as that of licensor and licensee. The relation
23
 between a bank, safe-deposit company, or storage company, and
the renter of a safe-deposit box therein, is often described as
contractual, express or implied, oral or written, in whole or in part.
But there is apparently no jurisdiction in which any rule other than
that applicable to bailments governs questions of the liability and
rights of the parties in respect of loss of the contents of safe-deposit
boxes. 22 (citations omitted)
In the context of our laws which authorize banking institutions to rent out safety
deposit boxes, it is clear that in this jurisdiction, the prevailing rule in the United
States has been adopted. Section 72 of the General Banking Act 23 pertinently
provides:
Sec. 72. In addition to the operations specifically authorized
elsewhere in this Act, banking institutions other than building and
loan associations may perform the following services:
(a) Receive in custody funds, documents, and
valuable objects, and rent safety deposit boxes for the
safeguarding of such effects.
xxx xxx xxx
The banks shall perform the services permitted under subsections
(a), (b) and (c) of this section as depositories or as agents. . . . 24
(emphasis supplied)
Note that the primary function is still found within the parameters of a contract of
deposit, i.e., the receiving in custody of funds, documents and other valuable
objects for safekeeping. The renting out of the safety deposit boxes is not
independent from, but related to or in conjunction with, this principal function. A
contract of deposit may be entered into orally or in writing 25 and, pursuant to
Article 1306 of the Civil Code, the parties thereto may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order or public policy. The
depositary's responsibility for the safekeeping of the objects deposited in the case
at bar is governed by Title I, Book IV of the Civil Code. Accordingly, the depositary
would be liable if, in performing its obligation, it is found guilty of fraud, negligence,
delay or contravention of the tenor of the agreement. 26 In the absence of any
stipulation prescribing the degree of diligence required, that of a good father of a
family is to be observed. 27 Hence, any stipulation exempting the depositary from
any liability arising from the loss of the thing deposited on account of fraud,
negligence or delay would be void for being contrary to law and public policy. In
the instant case, petitioner maintains that conditions 13 and 14 of the questioned
contract of lease of the safety deposit box, which read:
13. The bank is not a depositary of the contents of the safe and it
has neither the possession nor control of the same.
14. The bank has no interest whatsoever in said contents, except
herein expressly provided, and it assumes absolutely no liability in
connection therewith. 28
are void as they are contrary to law and public policy. We find Ourselves in
agreement with this proposition for indeed, said provisions are inconsistent
with the respondent Bank's responsibility as a depositary under Section
72(a) of the General Banking Act. Both exempt the latter from any liability
except as contemplated in condition 8 thereof which limits its duty to
exercise reasonable diligence only with respect to who shall be admitted to
any rented safe, to wit:
8. The Bank shall use due diligence that no unauthorized person shall
be admitted to any rented safe and beyond this, the Bank will not
be responsible for the contents of any safe rented from it. 29
Furthermore, condition 13 stands on a wrong premise and is contrary to the
actual practice of the Bank. It is not correct to assert that the Bank has
neither the possession nor control of the contents of the box since in fact,
the safety deposit box itself is located in its premises and is under its
absolute control; moreover, the respondent Bank keeps the guard key to
the said box. As stated earlier, renters cannot open their respective boxes
unless the Bank cooperates by presenting and using this guard key. Clearly
then, to the extent above stated, the foregoing conditions in the contract in
question are void and ineffective. It has been said:
With respect to property deposited in a safe-deposit box by a
customer of a safe-deposit company, the parties, since the relation
is a contractual one, may by special contract define their respective
duties or provide for increasing or limiting the liability of the deposit
company, provided such contract is not in violation of law or public
policy. It must clearly appear that there actually was such a special
contract, however, in order to vary the ordinary obligations implied
by law from the relationship of the parties; liability of the deposit
company will not be enlarged or restricted by words of doubtful
24
 meaning. The company, in renting SO ORDERED
safe-deposit boxes, cannot exempt itself from liability for loss of the
contents by its own fraud or negligence or that of its agents or
servants, and if a provision of the contract may be construed as an
attempt to do so, it will be held ineffective for the purpose. Although
it has been held that the lessor of a safe-deposit box cannot limit its
liability for loss of the contents thereof through its own negligence,
the view has been taken that such a lessor may limits its liability to
some extent by agreement or stipulation. 30 (citations omitted)

Thus, we reach the same conclusion which the Court of Appeals arrived at, that is,
that the petition should be dismissed, but on grounds quite different from those
relied upon by the Court of Appeals. In the instant case, the respondent Bank's
exoneration cannot, contrary to the holding of the Court of Appeals, be based on
or proceed from a characterization of the impugned contract as a contract of lease,
but rather on the fact that no competent proof was presented to show that
respondent Bank was aware of the agreement between the petitioner and the
Pugaos to the effect that the certificates of title were withdrawable from the safety
deposit box only upon both parties' joint signatures, and that no evidence was
submitted to reveal that the loss of the certificates of title was due to the fraud or
negligence of the respondent Bank. This in turn flows from this Court's
determination that the contract involved was one of deposit. Since both the
petitioner and the Pugaos agreed that each should have one (1) renter's key, it
was obvious that either of them could ask the Bank for access to the safety deposit
box and, with the use of such key and the Bank's own guard key, could open the
said box, without the other renter being present.

Since, however, the petitioner cannot be blamed for the filing of the complaint and
no bad faith on its part had been established, the trial court erred in condemning
the petitioner to pay the respondent Bank attorney's fees. To this extent, the
Decision (dispositive portion) of public respondent Court of Appeals must be
modified.

WHEREFORE, the Petition for Review is partially GRANTED by deleting the award
for attorney's fees from the 4 July 1989 Decision of the respondent Court of Appeals
in CA-G.R. CV No. 15150. As modified, and subject to the pronouncement We made
above on the nature of the relationship between the parties in a contract of lease
of safety deposit boxes, the dispositive portion of the said Decision is hereby
AFFIRMED and the instant Petition for Review is otherwise DENIED for lack of merit.

No pronouncement as to costs.

25
 6. G.R. No. 168644 February 16, 2010
BSB GROUP, INC., represented by its President, Mr. RICARDO BANGAYAN,
Petitioner,
vs.
SALLY GO a.k.a. SALLY GO-BANGAYAN, Respondent.
DECISION
PERALTA, J.:
This is a Petition for Review under Rule 45 of the Rules of Court assailing the
Decision of the Court of Appeals in CA-G.R. SP No. 876001 dated April 20, 2005,
which reversed and set aside the September 13, 2004 2 and November 5, 20043
Orders issued by the Regional Trial Court of Manila, Branch 36 4 in Criminal Case
No. 02-202158 for qualified theft. The said orders, in turn, respectively denied the
motion filed by herein respondent Sally Go for the suppression of the testimonial
and documentary evidence relative to a Security Bank account, and denied
reconsideration.
The basic antecedents are no longer disputed.
Petitioner, the BSB Group, Inc., is a duly organized domestic corporation presided
by its herein representative, Ricardo Bangayan (Bangayan). Respondent Sally Go,
alternatively referred to as Sally Sia Go and Sally Go-Bangayan, is Bangayan’s
wife, who was employed in the company as a cashier, and was engaged, among
others, to receive and account for the payments made by the various customers of
the company.
In 2002, Bangayan filed with the Manila Prosecutor’s Office a complaint for estafa
and/or qualified theft5 against respondent, alleging that several checks6
representing the aggregate amount of ₱1,534,135.50 issued by the company’s
customers in payment of their obligation were, instead of being turned over to the
company’s coffers, indorsed by respondent who deposited the same to her personal
banking account maintained at Security Bank and Trust Company (Security Bank)
in Divisoria, Manila Branch.7 Upon a finding that the evidence adduced was
uncontroverted, the assistant city prosecutor recommended the filing of the
Information for qualified theft against respondent.8
Accordingly, respondent was charged before the Regional Trial Court of Manila,
Branch 36, in an Information, the inculpatory portion of which reads:
That in or about or sometime during the period comprised (sic) between January
1988 [and] October 1989, inclusive, in the City of Manila, Philippines, the said
accused did then and there willfully, unlawfully and feloniously with intent [to] gain
and without the knowledge and consent of the owner thereof, take, steal and carry
away cash money in the total amount of ₱1,534,135.50 belonging to BSB GROUP
OF COMPANIES represented by RICARDO BANGAYAN, to the damage and prejudice
of said owner in the aforesaid amount of ₱1,534,135.50, Philippine currency.
That in the commission of the said offense, said accused acted with grave abuse
of confidence, being then employed as cashier by said complainant at the time of
the commission of the said offense and as such she was entrusted with the said
amount of money.
Contrary to law.9
Respondent entered a negative plea when arraigned.10 The trial ensued. On the
premise that respondent had allegedly encashed the subject checks and deposited
the corresponding amounts thereof to her personal banking account, the
prosecution moved for the issuance of subpoena duces tecum /ad testificandum
against the respective managers or records custodians of Security Bank’s Divisoria
Branch, as well as of the Asian Savings Bank (now Metropolitan Bank & Trust Co.
[Metrobank]), in Jose Abad Santos, Tondo, Manila Branch.11 The trial court granted
the motion and issued the corresponding subpoena.12
Respondent filed a motion to quash the subpoena dated November 4, 2003,
addressed to Metrobank, noting to the court that in the complaint-affidavit filed
with the prosecutor, there was no mention made of the said bank account, to which
respondent, in addition to the Security Bank account identified as Account No. 01-
14-006, allegedly deposited the proceeds of the supposed checks. Interestingly,
while respondent characterized the Metrobank account as irrelevant to the case,
she, in the same motion, nevertheless waived her objection to the irrelevancy of
the Security Bank account mentioned in the same complaint-affidavit, inasmuch as
she was admittedly willing to address the allegations with respect thereto. 13
Petitioner, opposing respondent’s move, argued for the relevancy of the Metrobank
account on the ground that the complaint-affidavit showed that there were two
checks which respondent allegedly deposited in an account with the said bank.14
To this, respondent filed a supplemental motion to quash, invoking the absolutely
confidential nature of the Metrobank account under the provisions of Republic Act
(R.A.) No. 1405.15 The trial court did not sustain respondent; hence, it denied the
motion to quash for lack of merit.16
26
Meanwhile, the prosecution was able to present in court the testimony of Elenita
Marasigan (Marasigan), the representative of Security Bank. In a nutshell,
Marasigan’s testimony sought to prove that between 1988 and 1989, respondent,
while engaged as cashier at the BSB Group, Inc., was able to run away with the
checks issued to the company by its customers, endorse the same, and credit the
corresponding amounts to her personal deposit account with Security Bank. In the
course of the testimony, the subject checks were presented to Marasigan for
identification and marking as the same checks received by respondent, endorsed,
and then deposited in her personal account with Security Bank.17 But before the
testimony could be completed, respondent filed a Motion to Suppress, 18 seeking
the exclusion of Marasigan’s testimony and accompanying documents thus far
received, bearing on the subject Security Bank account. This time respondent
invokes, in addition to irrelevancy, the privilege of confidentiality under R.A. No.
1405.
The trial court, nevertheless, denied the motion in its September 13, 2004 Order. 19
A motion for reconsideration was subsequently filed, but it was also denied in the
Order dated November 5, 2004.20 These two orders are the subject of the instant
case.
Aggrieved, and believing that the trial court gravely abused its discretion in acting
the way it did, respondent elevated the matter to the Court of Appeals via a petition
for certiorari under Rule 65. Finding merit in the petition, the Court of Appeals
reversed and set aside the assailed orders of the trial court in its April 20, 2005
Decision.21 The decision reads:
WHEREFORE, the petition is hereby GRANTED. The assailed orders dated
September 13, 2004 and November 5, 2004 are REVERSED and SET ASIDE. The
testimony of the SBTC representative is ordered stricken from the records.
SO ORDERED.22
With the denial of its motion for reconsideration,23 petitioner is now before the
Court pleading the same issues as those raised before the lower courts.
In this Petition24 under Rule 45, petitioner averred in the main that the Court of
Appeals had seriously erred in reversing the assailed orders of the trial court, and
in effect striking out Marasigan’s testimony dealing with respondent’s deposit
account with Security Bank.25 It asserted that apart from the fact that the said
evidence had a direct relation to the subject matter of the case for qualified theft
and, hence, brings the case under one of the exceptions to the coverage of
confidentiality under R.A. 1405.26 Petitioner believed that what constituted the
subject matter in litigation was to be determined by the allegations in the
information and, in this respect, it alluded to the assailed November 5, 2004 Order
of the trial court, which declared to be erroneous the limitation of the present
inquiry merely to what was contained in the information.27
For her part, respondent claimed that the money represented by the Security Bank
account was neither relevant nor material to the case, because nothing in the
criminal information suggested that the money therein deposited was the subject
matter of the case. She invited particular attention to that portion of the criminal
Information which averred that she has stolen and carried away cash money in the
total amount of ₱1,534,135.50. She advanced the notion that the term "cash
money" stated in the Information was not synonymous with the checks she was
purported to have stolen from petitioner and deposited in her personal banking
account. Thus, the checks which the prosecution had Marasigan identify, as well as
the testimony itself of Marasigan, should be suppressed by the trial court at least
for violating respondent’s right to due process.28 More in point, respondent opined
that admitting the testimony of Marasigan, as well as the evidence pertaining to
the Security Bank account, would violate the secrecy rule under R.A. No. 1405. 29
In its reply, petitioner asserted the sufficiency of the allegations in the criminal
Information for qualified theft, as the same has sufficiently alleged the elements of
the offense charged. It posits that through Marasigan’s testimony, the Court would
be able to establish that the checks involved, copies of which were attached to the
complaint-affidavit filed with the prosecutor, had indeed been received by
respondent as cashier, but were, thereafter, deposited by the latter to her personal
account with Security Bank. Petitioner held that the checks represented the cash
money stolen by respondent and, hence, the subject matter in this case is not only
the cash amount represented by the checks supposedly stolen by respondent, but
also the checks themselves.30
We derive from the conflicting advocacies of the parties that the issue for resolution
is whether the testimony of Marasigan and the accompanying documents are
irrelevant to the case, and whether they are also violative of the absolutely
confidential nature of bank deposits and, hence, excluded by operation of R.A. No.
1405. The question of admissibility of the evidence thus comes to the fore. And the
Court, after deliberative estimation, finds the subject evidence to be indeed
inadmissible.
Prefatorily, fundamental is the precept in all criminal prosecutions, that the
constitutive acts of the offense must be established with unwavering exactitude
and moral certainty because this is the critical and only requisite to a finding of
guilt. 31 Theft is present when a person, with intent to gain but without violence
27
against or intimidation of persons or force upon things, takes the personal property
of another without the latter’s consent. It is qualified when, among others, and as
alleged in the instant case, it is committed with abuse of confidence. 32 The
prosecution of this offense necessarily focuses on the existence of the following
elements: (a) there was taking of personal property belonging to another; (b) the
taking was done with intent to gain; (c) the taking was done without the consent
of the owner; (d) the taking was done without violence against or intimidation of
persons or force upon things; and (e) it was done with abuse of confidence. 33 In
turn, whether these elements concur in a way that overcomes the presumption of
guiltlessness, is a question that must pass the test of relevancy and competency
in accordance with Section 334 Rule 128 of the Rules of Court.
Thus, whether these pieces of evidence sought to be suppressed in this case the
testimony of Marasigan, as well as the checks purported to have been stolen and
deposited in respondent’s Security Bank account are relevant, is to be addressed
by considering whether they have such direct relation to the fact in issue as to
induce belief in its existence or non-existence; or whether they relate collaterally
to a fact from which, by process of logic, an inference may be made as to the
existence or non-existence of the fact in issue.35
The fact in issue appears to be that respondent has taken away cash in the amount
of ₱1,534,135.50 from the coffers of petitioner. In support of this allegation,
petitioner seeks to establish the existence of the elemental act of taking by
adducing evidence that respondent, at several times between 1988 and 1989,
deposited some of its checks to her personal account with Security Bank. Petitioner
addresses the incongruence between the allegation of theft of cash in the
Information, on the one hand, and the evidence that respondent had first stolen
the checks and deposited the same in her banking account, on the other hand, by
impressing upon the Court that there obtains no difference between cash and check
for purposes of prosecuting respondent for theft of cash. Petitioner is mistaken.
In theft, the act of unlawful taking connotes deprivation of personal property of
one by another with intent to gain, and it is immaterial that the offender is able or
unable to freely dispose of the property stolen because the deprivation relative to
the offended party has already ensued from such act of execution.36 The allegation
of theft of money, hence, necessitates that evidence presented must have a
tendency to prove that the offender has unlawfully taken money belonging to
another. Interestingly, petitioner has taken pains in attempting to draw a
connection between the evidence subject of the instant review, and the allegation
of theft in the Information by claiming that respondent had fraudulently deposited
the checks in her own name. But this line of argument works more prejudice than
favor, because it in effect, seeks to establish the commission, not of theft, but
rather of some other crime probably estafa.
Moreover, that there is no difference between cash and check is true in other
instances. In estafa by conversion, for instance, whether the thing converted is
cash or check, is immaterial in relation to the formal allegation in an information
for that offense; a check, after all, while not regarded as legal tender, is normally
accepted under commercial usage as a substitute for cash, and the credit it
represents in stated monetary value is properly capable of appropriation. And it is
in this respect that what the offender does with the check subsequent to the act of
unlawfully taking it becomes material inasmuch as this offense is a continuing
one.37 In other words, in pursuing a case for this offense, the prosecution may
establish its cause by the presentation of the checks involved. These checks would
then constitute the best evidence to establish their contents and to prove the
elemental act of conversion in support of the proposition that the offender has
indeed indorsed the same in his own name.38
Theft, however, is not of such character. Thus, for our purposes, as the Information
in this case accuses respondent of having stolen cash, proof tending to establish
that respondent has actualized her criminal intent by indorsing the checks and
depositing the proceeds thereof in her personal account, becomes not only
irrelevant but also immaterial and, on that score, inadmissible in evidence.
We now address the issue of whether the admission of Marasigan’s testimony on
the particulars of respondent’s account with Security Bank, as well as of the
corresponding evidence of the checks allegedly deposited in said account,
constitutes an unallowable inquiry under R.A. 1405.
It is conceded that while the fundamental law has not bothered with the triviality
of specifically addressing privacy rights relative to banking accounts, there,
nevertheless, exists in our jurisdiction a legitimate expectation of privacy
governing such accounts. The source of this right of expectation is statutory, and
it is found in R.A. No. 1405,39 otherwise known as the Bank Secrecy Act of 1955.
40
R.A. No. 1405 has two allied purposes. It hopes to discourage private hoarding and
at the same time encourage the people to deposit their money in banking
institutions, so that it may be utilized by way of authorized loans and thereby assist
in economic development.41 Owing to this piece of legislation, the confidentiality of
bank deposits remains to be a basic state policy in the Philippines. 42 Section 2 of
the law institutionalized this policy by characterizing as absolutely confidential in
28
general all deposits of whatever nature with banks and other financial institutions
in the country. It declares:
Section 2. All deposits of whatever nature with banks or banking institutions in
the Philippines including investments in bonds issued by the Government of the
Philippines, its political subdivisions and its instrumentalities, are hereby
considered as of an absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or office, except
upon written permission of the depositor, or in cases of impeachment, or upon
order of a competent court in cases of bribery or dereliction of duty of public
officials, or in cases where the money deposited or invested is the subject matter
of the litigation.1avvphi1
Subsequent statutory enactments43 have expanded the list of exceptions to this
policy yet the secrecy of bank deposits still lies as the general rule, falling as it
does within the legally recognized zones of privacy. 44 There is, in fact, much
disfavor to construing these primary and supplemental exceptions in a manner that
would authorize unbridled discretion, whether governmental or otherwise, in
utilizing these exceptions as authority for unwarranted inquiry into bank accounts.
It is then perceivable that the present legal order is obliged to conserve the
absolutely confidential nature of bank deposits.45
The measure of protection afforded by the law has been explained in China Banking
Corporation v. Ortega.46 That case principally addressed the issue of whether the
prohibition against an examination of bank deposits precludes garnishment in
satisfaction of a judgment. Ruling on that issue in the negative, the Court found
guidance in the relevant portions of the legislative deliberations on Senate Bill No.
351 and House Bill No. 3977, which later became the Bank Secrecy Act, and it held
that the absolute confidentiality rule in R.A. No. 1405 actually aims at protection
from unwarranted inquiry or investigation if the purpose of such inquiry or
investigation is merely to determine the existence and nature, as well as the
amount of the deposit in any given bank account. Thus,
x x x The lower court did not order an examination of or inquiry into the 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 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 will be noted from
the discussion of the conference committee report on Senate Bill No. 351 and
House Bill No. 3977which later became Republic Act No. 1405, that it was not the
intention of the lawmakers to place banks deposits beyond the reach of execution
to satisfy a final judgmentThus:
x x x Mr. Marcos: Now, for purposes of the record, I should like the Chairman of
the Committee on Ways and Means to clarify this further. Suppose an individual
has a tax case. He is being held liable by the Bureau of Internal Revenue [(BIR)]
or, say, ₱1,000.00 worth of tax liability, and because of this the deposit of this
individual [has been] attached by the [BIR].
Mr. Ramos: The attachment will only apply after the court has pronounced
sentence declaring the liability of such person. But where the primary aim is to
determine whether he has a bank deposit in order to bring about a proper
assessment by the [BIR], such inquiry is not allowed by this proposed law.
Mr. Marcos: But under our rules of procedure and under the Civil Code, the
attachment or garnishment of money deposited is allowed. Let us assume for
instance that there is a preliminary attachment which is for garnishment or for
holding liable all moneys deposited belonging to a certain individual, but such
attachment or garnishment will bring out into the open the value of such deposit.
Is that prohibited by... the law?
Mr. Ramos: It is only prohibited to the extent that the inquiry... is made only for
the purpose of satisfying a tax liability already declared for the protection of the
right in favor of the government; but when the object is merely to inquire whether
he has a deposit or not for purposes of taxation, then this is fully covered by the
law. x x x
Mr. Marcos: The law prohibits a mere investigation into the existence and the
amount of the deposit.
Mr. Ramos: Into the very nature of such deposit. x x x 47
In taking exclusion from the coverage of the confidentiality rule, petitioner in the
instant case posits that the account maintained by respondent with Security Bank
contains the proceeds of the checks that she has fraudulently appropriated to
herself and, thus, falls under one of the exceptions in Section 2 of R.A. No. 1405
that the money kept in said account is the subject matter in litigation. To
highlight this thesis, petitioner avers, citing Mathay v. Consolidated Bank and Trust
Co.,48 that the subject matter of the action refers to the physical facts; the things
real or personal; the money, lands, chattels and the like, in relation to which the
suit is prosecuted, which in the instant case should refer to the money deposited
in the Security Bank account.49 On the surface, however, it seems that petitioner’s
29
theory is valid to a point, yet a deeper treatment tends to show that it has argued
quite off-tangentially. This, because, while Mathay did explain what the subject
matter of an action is, it nevertheless did so only to determine whether the class
suit in that case was properly brought to the court.
What indeed constitutes the subject matter in litigation in relation to Section 2 of
R.A. No. 1405 has been pointedly and amply addressed in Union Bank of the
Philippines v. Court of Appeals,50 in which the Court noted that the inquiry into
bank deposits allowable under R.A. No. 1405 must be premised on the fact that
the money deposited in the account is itself the subject of the action.51 Given this
perspective, we deduce that the subject matter of the action in the case at bar is
to be determined from the indictment that charges respondent with the offense,
and not from the evidence sought by the prosecution to be admitted into the
records. In the criminal Information filed with the trial court, respondent,
unqualifiedly and in plain language, is charged with qualified theft by abusing
petitioner’s trust and confidence and stealing cash in the amount of ₱1,534,135.50.
The said Information makes no factual allegation that in some material way
involves the checks subject of the testimonial and documentary evidence sought
to be suppressed. Neither do the allegations in said Information make mention of
the supposed bank account in which the funds represented by the checks have
allegedly been kept.
for being excluded by operation of R.A. No. 1405. They are likewise irrelevant to
the case, inasmuch as they do not appear to have any logical and reasonable
connection to the prosecution of respondent for qualified theft. We find full merit
in and affirm respondent’s objection to the evidence of the prosecution. The Court
of Appeals was, therefore, correct in reversing the assailed orders of the trial court.
A final note. In any given jurisdiction where the right of privacy extends its scope
to include an individual’s financial privacy rights and personal financial matters,
there is an intermediate or heightened scrutiny given by courts and legislators to
laws infringing such rights.52 Should there be doubts in upholding the absolutely
confidential nature of bank deposits against affirming the authority to inquire into
such accounts, then such doubts must be resolved in favor of the former. This
attitude persists unless congress lifts its finger to reverse the general state policy
respecting the absolutely confidential nature of bank deposits.53
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-
G.R. SP No. 87600 dated April 20, 2005, reversing the September 13, 2004 and
November 5, 2004 Orders of the Regional Trial Court of Manila, Branch 36 in
Criminal Case No. 02-202158, is AFFIRMED.
SO ORDERED.

In other words, it can hardly be inferred from the indictment itself that the Security
Bank account is the ostensible subject of the prosecution’s inquiry. Without
needlessly expanding the scope of what is plainly alleged in the Information, the
subject matter of the action in this case is the money amounting to ₱1,534,135.50
alleged to have been stolen by respondent, and not the money equivalent of the
checks which are sought to be admitted in evidence. Thus, it is that, which the
prosecution is bound to prove with its evidence, and no other.

It comes clear that the admission of testimonial and documentary evidence relative
to respondent’s Security Bank account serves no other purpose than to establish
the existence of such account, its nature and the amount kept in it. It constitutes
an attempt by the prosecution at an impermissible inquiry into a bank deposit
account the privacy and confidentiality of which is protected by law. On this score
alone, the objection posed by respondent in her motion to suppress should have
indeed put an end to the controversy at the very first instance it was raised before
the trial court.

In sum, we hold that the testimony of Marasigan on the particulars of respondent’s

supposed bank account with Security Bank and the documentary evidence
represented by the checks adduced in support thereof, are not only incompetent
30
 7. G.R. No. L-34964 January 31, 1973
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. *
On December 17, 1968 Vicente Acaban filed a complaint in the court a quo against
Bautista Logging Co., Inc., B & B Forest Development Corporation and Marino
Bautista for the collection of a sum of money. Upon motion of the plaintiff the trial
court declared the defendants in default for failure to answer within the
reglementary period, and authorized the Branch Clerk of Court and/or Deputy Clerk
to receive the plaintiff's evidence. On January 20, 1970 judgment by default was
rendered against the defendants.
To satisfy the judgment, the plaintiff sought the garnishment of the bank deposit
of the defendant B & B Forest Development Corporation with the China Banking
Corporation. 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. In
reply, the bank' cashier invited the attention of the Deputy Sheriff to the provisions
of Republic Act No. 1405 which, it was alleged, prohibit the disclosure of any
information relative to bank deposits. Thereupon the plaintiff filed a motion to cite
Tan Kim Liong for contempt of court.
In an order dated March 4, 1972 the trial court denied the plaintiff's motion.
However, Tan Kim Liong was ordered "to inform the Court within five days from
receipt of this order whether or not there is a deposit in the China Banking
Corporation of defendant 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 this Court." Tan Kim Liong moved to reconsider but was turned down
by order of March 27, 1972. In the same order he was directed "to comply with
the order of this Court dated March 4, 1972 within ten (10) days from the receipt
of copy of this order, otherwise his arrest and confinement will be ordered by the
Court." Resisting the two orders, the China Banking Corporation and Tan Kim Liong
instituted the instant petition.
The pertinent provisions of Republic Act No. 1405 relied upon by the petitioners
reads:
Sec. 2. All deposits of whatever nature with banks or banking
institutions in the Philippines including investments in bonds issued
by the Government of the Philippines, its political subdivisions and
its instrumentalities, are hereby considered as of absolutely
confidential nature and may not be examined, inquired or looked
into by any person, government official, bureau or office, except
upon written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in cases of bribery
or dereliction of duty of public officials, or in cases where the money
deposited or invested is the subject matter of the litigation.
Sec 3. It shall be unlawful for any official or employee of a banking
institution to disclose to any person other than those mentioned in
Section two hereof any information concerning said deposits.
Sec. 5. Any violation of this law will subject offender upon conviction,
to an imprisonment of not more than five years or a fine of not more
than twenty thousand pesos or both, in the discretion of the court.
The petitioners argue that the disclosure of the information required by the court
does not fall within any of the four (4) exceptions enumerated in Section 2, and
that if the questioned orders are complied with Tan Kim Liong may be criminally
liable under Section 5 and the bank exposed to a possible damage suit by B & B
Forest Development Corporation. Specifically referring to this case, the position of
the petitioners is that the bank deposit of judgment debtor B & B Forest
Development Corporation cannot be subject to garnishment to satisfy a final
judgment against it in view of the aforequoted provisions of law.
We do not view the situation in that light. The lower court did not order an
examination of or inquiry into the deposit of B & B Forest Development Corporation,
31
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 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 will be noted from the discussion of the conference committee
report on Senate Bill No. 351 and House Bill No. 3977, which later became Republic
Act 1405, that it was not the intention of the lawmakers to place bank deposits
beyond the reach of execution to satisfy a final judgment. Thus:
Mr. MARCOS. Now, for purposes of the record, I should like the
Chairman of the Committee on Ways and Means to clarify this
further. Suppose an individual has a tax case. He is being held liable
by the Bureau of Internal Revenue for, say, P1,000.00 worth of tax
liability, and because of this the deposit of this individual is attached
by the Bureau of Internal Revenue.
Mr. RAMOS. The attachment will only apply after the court has
pronounced sentence declaring the liability of such person. But
where the primary aim is to determine whether he has a bank
deposit in order to bring about a proper assessment by the Bureau
of Internal Revenue, such inquiry is not authorized by this proposed
law.
Mr. MARCOS. But under our rules of procedure and under the Civil
Code, the attachment or garnishment of money deposited is allowed.
Let us assume, for instance, that there is a preliminary attachment
which is for garnishment or for holding liable all moneys deposited
belonging to a certain individual, but such attachment or
garnishment will bring out into the open the value of such deposit.
Is that prohibited by this amendment or by this law?
Mr. RAMOS. It is only prohibited to the extent that the inquiry is
limited, or rather, the inquiry is made only for the purpose of
satisfying a tax liability already declared for the protection of the
right in favor of the government; but when the object is merely to
inquire whether he has a deposit or not for purposes of taxation,
then this is fully covered by the law.
Mr. MARCOS. And it protects the depositor, does it not?
Mr. RAMOS. Yes, it protects the depositor.
Mr. MARCOS. The law prohibits a mere investigation into the
existence and the amount of the deposit.
Mr. RAMOS. Into the very nature of such deposit.
Mr. MARCOS. So I come to my original question. Therefore,
preliminary garnishment or attachment of the deposit is not allowed?
Mr. RAMOS. No, without judicial authorization.
Mr. MARCOS. I am glad that is clarified. So that the established rule
of procedure as well as the substantive law on the matter is
amended?
Mr. RAMOS. Yes. That is the effect.
Mr. MARCOS. I see. Suppose there has been a decision, definitely
establishing the liability of an individual for taxation purposes and
this judgment is sought to be executed ... in the execution of that
judgment, does this bill, or this proposed law, if approved, allow the
investigation or scrutiny of the bank deposit in order to execute the
judgment?
Mr. RAMOS. To satisfy a judgment which has become executory.
Mr. MARCOS. Yes, but, as I said before, suppose the tax liability is
P1,000,000 and the deposit is half a million, will this bill allow
scrutiny into the deposit in order that the judgment may be
executed?
Mr. RAMOS. Merely to determine the amount of such money to
satisfy that obligation to the Government, but not to determine
whether a deposit has been made in evasion of taxes.
xxx xxx xxx
Mr. MACAPAGAL. But let us suppose that in an ordinary civil action
for the recovery of a sum of money the plaintiff wishes to attach the
properties of the defendant to insure the satisfaction of the
judgment. Once the judgment is rendered, does the gentleman
mean that the plaintiff cannot attach the bank deposit of the
defendant?
32
 Mr. RAMOS. That was the question raised by the gentleman from
Pangasinan to which I replied that outside the very purpose of this
law it could be reached by attachment.

Mr. MACAPAGAL. Therefore, in such ordinary civil cases it can be

attached?

Mr. RAMOS. That is so.

(Vol. II, Congressional Record, House of Representatives, No. 12,

pp. 3839-3840, July 27, 1955).

It is sufficiently clear from the foregoing discussion of the conference committee

report of the two houses of Congress that the prohibition against examination of
or inquiry into a bank deposit under Republic Act 1405 does not preclude its being
garnished to insure satisfaction of a judgment. Indeed there is no real inquiry in
such a case, and if 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.

WHEREFORE, the orders of the lower court dated March 4 and 27, 1972,
respectively, are hereby affirmed, with costs against the petitioners-appellants.

33
 8. G.R. No. 128996 February 15, 2002
CARMEN LL. INTENGAN, ROSARIO LL. NERI, and RITA P. BRAWNER,
petitioners,
vs.
COURT OF APPEALS, DEPARTMENT OF JUSTICE, AZIZ RAJKOTWALA,
WILLIAM FERGUSON, JOVEN REYES, and VIC LIM, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari, seeking the reversal of the Decision1
dated July 8, 1996 of the former Fifteenth Division2 of the Court of Appeals in CA-
G.R. SP No. 37577 as well as its Resolution3 dated April 16, 1997 denying
petitioners’ motion for reconsideration. The appellate court, in its Decision,
sustained a resolution of the Department of Justice ordering the withdrawal of
informations for violation of Republic Act No. 1405 against private respondents.
The facts are:
On September 21, 1993, Citibank filed a complaint for violation of section 31,4 in
relation to section 1445 of the Corporation Code against two (2) of its officers,
Dante L. Santos and Marilou Genuino. Attached to the complaint was an affidavit6
executed by private respondent Vic Lim, a vice-president of Citibank. Pertinent
portions of his affidavit are quoted hereunder:
2.1 Sometime this year, the higher management of Citibank, N.A. assigned me to
assist in the investigation of certain anomalous/highly irregular activities of the
Treasurer of the Global Consumer Group of the bank, namely, Dante L. Santos and
the Asst. Vice President in the office of Mr. Dante L. Santos, namely Ms. Marilou
(also called Malou) Genuino. Ms. Marilou Genuino apart from being an Assistant
Vice President in the office of Mr. Dante L. Santos also performed the duties of an
Account Officer. An Account Officer in the office of Mr. Dante L. Santos personally
attends to clients of the bank in the effort to persuade clients to place and keep
their monies in the products of Citibank, NA., such as peso and dollar deposits,
mortgage backed securities and money placements, among others.
xxx xxx xxx
4.1 The investigation in which I was asked to participate was undertaken because
the bank had found records/evidence showing that Mr. Dante L. Santos and Ms.
Malou Genuino, contrary to their disclosures and the aforementioned bank policy,
appeared to have been actively engaged in business endeavors that were in conflict
with the business of the bank. It was found that with the use of two (2) companies
in which they have personal financial interest, namely Torrance Development
Corporation and Global Pacific Corporation, they managed or caused existing bank
clients/depositors to divert their money from Citibank, N.A., such as those placed
in peso and dollar deposits and money placements, to products offered by other
companies that were commanding higher rate of yields. This was done by first
transferring bank clients’ monies to Torrance and Global which in turn placed the
monies of the bank clients in securities, shares of stock and other certificates of
third parties. It also appeared that out of these transactions, Mr. Dante L. Santos
and Ms. Marilou Genuino derived substantial financial gains.
5.1 In the course of the investigation, I was able to determine that the bank clients
which Mr. Santos and Ms. Genuino helped/caused to divert their deposits/money
placements with Citibank, NA. to Torrance and Global (their family corporations)
for subsequent investment in securities, shares of stocks and debt papers in other
companies were as follows:
xxx
b) Carmen Intengan
xxx
d) Rosario Neri
xxx
i) Rita Brawner
All the above persons/parties have long standing accounts with Citibank, N.A. in
savings/dollar deposits and/or in trust accounts and/or money placements.
As evidence, Lim annexed bank records purporting to establish the deception
practiced by Santos and Genuino. Some of the documents pertained to the dollar
deposits of petitioners Carmen Ll. Intengan, Rosario Ll. Neri, and Rita P. Brawner,
as follows:
a) Annex "A-6"7 - an "Application for Money Transfer" in the amount of US
$140,000.00, executed by Intengan in favor of Citibank $ S/A No.
24367796, to be debited from her Account No. 22543341;
34
 b) Annex "A-7"8 - a "Money Transfer Slip" in the amount of US $45,996.30,
executed by Brawner in favor of Citibank $ S/A No. 24367796, to be debited
from her Account No. 22543236; and
c) Annex "A-9"9 - an "Application for Money Transfer" in the amount of US
$100,000.00, executed by Neri in favor of Citibank $ S/A No. 24367796, to
be debited from her Account No. 24501018.
In turn, private respondent Joven Reyes, vice-president/business manager of the
Global Consumer Banking Group of Citibank, admits to having authorized Lim to
state the names of the clients involved and to attach the pertinent bank records,
including those of petitioners’.10 He states that private respondents Aziz
Rajkotwala and William Ferguson, Citibank, N.A. Global Consumer Banking Country
Business Manager and Country Corporate Officer, respectively, had no hand in the
disclosure, and that he did so upon the advice of counsel.
In his memorandum, the Solicitor General described the scheme as having been
conducted in this manner:
First step: Santos and/or Genuino would tell the bank client that they knew of
financial products of other companies that were yielding higher rates of interests
in which the bank client can place his money. Acting on this information, the bank
client would then authorize the transfer of his funds from his Citibank account to
the Citibank account of either Torrance or Global.
The transfer of the Citibank client’s deposits was done through the accomplishment
of either an Application For Manager’s Checks or a Term Investment Application in
favor of Global or Torrance that was prepared/filed by Genuino herself.
Upon approval of the Application for Manager’s Checks or Term Investment
Application, the funds of the bank client covered thereof were then deposited in
the Citibank accounts of Torrance and/or Global.
Second step: Once the said fund transfers had been effected, Global and/or
Torrance would then issue its/ their checks drawn against its/their Citibank
accounts in favor of the other companies whose financial products, such as
securities, shares of stocks and other certificates, were offering higher yields.
Third step: On maturity date(s) of the placements made by Torrance and/or Global
in the other companies, using the monies of the Citibank client, the other
companies would then. return the placements to Global and/or Torrance with the
corresponding interests earned.
Fourth step: Upon receipt by Global and/or Torrance of the remittances from the
other companies, Global and/or Torrance would then issue its/their own checks
drawn against their Citibank accounts in favor of Santos and Genuino.
The amounts covered by the checks represent the shares of Santos and Genuino
in the margins Global and/or Torrance had realized out of the placements [using
the diverted monies of the Citibank clients] made with the other companies.
Fifth step: At the same time, Global and/or Torrance would also issue its/their
check(s) drawn against its/their Citibank accounts in favor of the bank client.
The check(s) cover the principal amount (or parts thereof) which the Citibank client
had previously transferred, with the help of Santos and/or Genuino, from his
Citibank account to the Citibank account(s) of Global and/or Torrance for
placement in the other companies, plus the interests or earnings his placements in
other companies had made less the spreads made by Global, Torrance, Santos and
Genuino.
The complaints which were docketed as I.S. Nos. 93-9969, 93-10058 and 94-1215
were subsequently amended to include a charge of estafa under Article 315,
paragraph 1(b)11 of the Revised Penal Code.
As an incident to the foregoing, petitioners filed respective motions for the
exclusion and physical withdrawal of their bank records that were attached to Lim’s
affidavit.
In due time, Lim and Reyes filed their respective counter-affidavits.12 In separate
Memoranda dated March 8, 1994 and March 15, 1994 2nd Assistant Provincial
Prosecutor Hermino T. Ubana, Sr. recommended the dismissal of petitioners’
complaints. The recommendation was overruled by Provincial Prosecutor Mauro M.
Castro who, in a Resolution dated August 18, 1994,13 directed the filing of
informations against private respondents for alleged violation of Republic Act No.
1405, otherwise known as the Bank Secrecy Law.
Private respondents’ counsel then filed an appeal before the Department of Justice
(DOJ). On November 17, 1994, then DOJ Secretary Franklin M. Drilon issued a
Resolution14 ordering, inter alia, the withdrawal of the aforesaid informations
against private respondents. Petitioners’ motion for reconsideration15 was denied
by DOJ Acting Secretary Demetrio G. Demetria in a Resolution dated March 6,
1995.16
35
Initially, petitioners sought the reversal of the DOJ resolutions via a petition for
certiorari and mandamus filed with this Court, docketed as G.R. No. 119999-
120001. However, the former First Division of this Court, in a Resolution dated
June 5, 1995,17 referred the matter to the Court of the Appeals, on the basis of
the latter tribunal’s concurrent jurisdiction to issue the extraordinary writs therein
prayed for. The petition was docketed as CA-G.R. SP No. 37577 in the Court of
Appeals.
On July 8, 1996, the Court of Appeals rendered judgment dismissing the petition
in CA-G.R. SP No. 37577 and declared therein, as follows:
Clearly, the disclosure of petitioners’ deposits was necessary to establish the
allegation that Santos and Genuino had violated Section 31 of the Corporation Code
in acquiring "any interest adverse to the corporation in respect of any matter which
has been reposed in him in confidence." To substantiate the alleged scheme of
Santos and Genuino, private respondents had to present the records of the monies
which were manipulated by the two officers which included the bank records of
herein petitioners.
Although petitioners were not the parties involved in IS. No. 93-8469, their
accounts were relevant to the complete prosecution of the case against Santos and
Genuino and the respondent DOJ properly ruled that the disclosure of the same
falls under the last exception of R.A. No. 1405. That ruling is consistent with the
principle laid down in the case of Mellon Bank, N.A. vs. Magsino (190 SCRA 633)
where the Supreme Court allowed the testimonies on the bank deposits of someone
not a party to the case as it found that said bank deposits were material or relevant
to the allegations in the complaint. Significantly, therefore, as long as the bank
deposits are material to the case, although not necessarily the direct subject matter
thereof, a disclosure of the same is proper and falls within the scope of the
exceptions provided for by R.A. No. 1405.
xxx xxx xxx
Moreover, the language of the law itself is clear and cannot be subject to different
interpretations. A reading of the provision itself would readily reveal that the
exception "or in cases where the money deposited or invested is the subject matter
of the litigation" is not qualified by the phrase "upon order of competent Court"
which refers only to cases of bribery or dereliction of duty of public officials.
Petitioners’ motion for reconsideration was similarly denied in a Resolution dated
April 16, 1997. Appeal was made in due time to this Court.
The instant petition was actually denied by the former Third Division of this Court
in a Resolution18 dated July 16, 1997, on the ground that petitioners had failed to
show that a reversible error had been committed. On motion, however, the petition
was reinstated19 and eventually given due course.20
In assailing the appellate court’s findings, petitioners assert that the disclosure of
their bank records was unwarranted and illegal for the following reasons:
I.
IN BLATANT VIOLATION OF R.A. NO. 1405, PRIVATE RESPONDENTS ILLEGALLY
MADE DISCLOSURES OF PETITIONERS’ CONFIDENTIAL BANK DEPOSITS FOR
THEIR SELFISH ENDS IN PROSECUTING THEIR COMPLAINT IN IS. NO. 93-8469
THAT DID NOT INVOLVE PETITIONERS.
II.
PRIVATE RESPONDENTS’ DISCLOSURES DO NOT FALL UNDER THE FOURTH
EXCEPTION OF R.A. NO. 1405 (i.e., "in cases where the money deposited or
invested is the subject matter of the litigation"), NOR UNDER ANY OTHER
EXCEPTION:
(1)
PETITIONERS’ DEPOSITS ARE NOT INVOLVED IN ANY LITIGATION
BETWEEN PETITIONERS AND RESPONDENTS. THERE IS NO LITIGATION
BETWEEN THE PARTIES, MUCH LESS ONE INVOLVING PETITIONERS’
DEPOSITS AS THE SUBJECT MATTER THEREOF.
(2)
EVEN ASSUMING ARGUENDO THAT THERE IS A LITIGATION INVOLVING
PETITIONERS’ DEPOSITS AS THE SUBJECT MATTER THEREOF, PRIVATE
RESPONDENTS’ DISCLOSURES OF PETITIONERS’ DEPOSITS ARE
NEVERTHELESS ILLEGAL FOR WANT OF THE REQUISITE COURT ORDER, IN
VIOLATION OF R.A. NO. 1405.
III.
THEREFORE, PETITIONERS ARE ENTITLED TO PROSECUTE PRIVATE
RESPONDENTS FOR VIOLATIONS OF R.A. NO. 1405 FOR HAVING ILLEGALLY
36
DISCLOSED PETITIONERS’ CONFIDENTIAL BANK DEPOSITS AND RECORDS IN IS.
NO. 93-8469.
Apart from the reversal of the decision and resolution of the appellate court as well
as the resolutions of the Department of Justice, petitioners pray that the latter
agency be directed to issue a resolution ordering the Provincial Prosecutor of Rizal
to file the corresponding informations for violation of Republic Act No. 1405 against
private respondents.
The petition is not meritorious.
Actually, this case should have been studied more carefully by all concerned. The
finest legal minds in the country - from the parties’ respective counsel, the
Provincial Prosecutor, the Department of Justice, the Solicitor General, and the
Court of Appeals - all appear to have overlooked a single fact which dictates the
outcome of the entire controversy. A circumspect review of the record shows us
the reason. The accounts in question are U.S. dollar deposits; consequently, the
applicable law is not Republic Act No. 1405 but Republic Act (RA) No. 6426, known
as the "Foreign Currency Deposit Act of the Philippines," section 8 of which
provides:
Sec. 8. Secrecy of Foreign Currency Deposits.- All foreign currency deposits
authorized under this Act, as amended by Presidential Decree No. 1035, as well as
foreign currency deposits authorized under Presidential Decree No. 1034, are
hereby declared as and considered of an absolutely confidential nature and, except
upon the written permission of the depositor, in no instance shall such foreign
currency deposits be examined, inquired or looked into by any person, government
official bureau or office whether judicial or administrative or legislative or any other
entity whether public or private: Provided, however, that said foreign currency
deposits shall be exempt from attachment, garnishment, or any other order or
process of any court, legislative body, government agency or any administrative
body whatsoever.21 (italics supplied)
Thus, under R.A. No. 6426 there is only a single exception to the secrecy of foreign
currency deposits, that is, disclosure is allowed only upon the written permission
of the depositor. Incidentally, the acts of private respondents complained of
happened before the enactment on September 29, 2001 of R.A. No. 9160 otherwise
known as the Anti-Money Laundering Act of 2001.
A case for violation of Republic Act No. 6426 should have been the proper case
brought against private respondents. Private respondents Lim and Reyes admitted
that they had disclosed details of petitioners’ dollar deposits without the latter’s
written permission. It does not matter if that such disclosure was necessary to
establish Citibank’s case against Dante L. Santos and Marilou Genuino. Lim’s act
of disclosing details of petitioners’ bank records regarding their foreign currency
deposits, with the authority of Reyes, would appear to belong to that species of
criminal acts punishable by special laws, called malum prohibitum. In this regard,
it has been held that:
While it is true that, as a rule and on principles of abstract justice, men are not and
should not be held criminally responsible for acts committed by them without guilty
knowledge and criminal or at least evil intent xxx, the courts have always
recognized the power of the legislature, on grounds of public policy and compelled
by necessity, "the great master of things," to forbid in a limited class of cases the
doing of certain acts, and to make their commission criminal without regard to the
intent of the doer. xxx In such cases no judicial authority has the power to require,
in the enforcement of the law, such knowledge or motive to be shown. As was said
in the case of State vs. McBrayer xxx:
‘It is a mistaken notion that positive, willful intent, as distinguished from a mere
intent, to violate the criminal law, is an essential ingredient in every criminal
offense, and that where there is the absence of such intent there is no offense;
this is especially so as to statutory offenses. When the statute plainly forbids an
act to be done, and it is done by some person, the law implies conclusively the
guilty intent, although the offender was honestly mistaken as to the meaning of
the law he violates. When the language is plain and positive, and the offense is not
made to depend upon the positive, willful intent and purpose, nothing is left to
interpretation.’22
Ordinarily, the dismissal of the instant petition would have been without prejudice
to the filing of the proper charges against private respondents. The matter would
have ended here were it not for the intervention of time, specifically the lapse
thereof. So as not to unduly prolong the settlement of the case, we are constrained
to rule on a material issue even though it was not raised by the parties. We refer
to the issue of prescription.
Republic Act No. 6426 being a special law, the provisions of Act No. 3326,23 as
amended by Act No. 3763, are applicable:
SECTION 1. Violations penalized by special acts shall, unless otherwise provided
in such acts, prescribe in accordance with the following rules: (a) after a year for
offences punished only by a fine or by imprisonment for not more than one month,
or both: (b) after four years for those punished by imprisonment for more than
one month, but less than two years; (c) after eight years for those punished by
37
imprisonment for two years or more, but less than six years; and (d) after twelve
years for any other offence punished by imprisonment for six years or more, except
the crime of treason, which shall prescribe after twenty years: Provided, however,
That all offences against any law or part of law administered by the Bureau of
Internal Revenue shall prescribe after five years. Violations penalized by municipal
ordinances shall prescribe after two months.
judicial notice;32 on the other, ignorantia legis non excusat.33 Even during the
pendency of this appeal, nothing prevented the petitioners from filing a complaint
charging the correct offense against private respondents. This was not done, as
everyone involved was content to submit the case on the basis of an alleged
violation of Republic Act No. 1405 (Bank Secrecy Law), however, incorrectly
invoked.34

Violations of the regulations or conditions of certificates of public convenience WHEREFORE, the petition is hereby DENIED. No pronouncement as to costs.
issued by the Public Service Commission shall prescribe after two months.
SO ORDERED.
SEC. 2. Prescription shall begin to run from the day of the commission of the
violation of the law, and if the same be not known at the time, from the discovery
thereof and the institution of judicial proceedings for its investigation and
punishment.

The prescription shall be interrupted when proceedings are instituted against the
guilty person, and shall begin to run again if the proceedings are dismissed for
reasons not constituting jeopardy.1âwphi1

A violation of Republic Act No. 6426 shall subject the offender to imprisonment of
not less than one year nor more than five years, or by a fine of not less than five
thousand pesos nor more than twenty-five thousand pesos, or both.24 Applying
Act No. 3326, the offense prescribes in eight years.25 Per available records, private
respondents may no longer be haled before the courts for violation of Republic Act
No. 6426. Private respondent Vic Lim made the disclosure in September of 1993
in his affidavit submitted before the Provincial Fiscal.26 In her complaint-
affidavit,27 Intengan stated that she learned of the revelation of the details of her
foreign currency bank account on October 14, 1993. On the other hand, Neri
asserts that she discovered the disclosure on October 24, 1993.28 As to Brawner,
the material date is January 5, 1994.29 Based on any of these dates, prescription
has set in.30

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

It may well be argued that the foregoing disquisition would leave petitioners with
no remedy in law. We point out, however, that the confidentiality of foreign
currency deposits mandated by Republic Act No. 6426, as amended by Presidential
Decree No. 1246, came into effect as far back as 1977. Hence, ignorance thereof
cannot be pretended. On one hand, the existence of laws is a matter of mandatory
38
 9. G.R. No. 135882 June 27, 2001
LOURDES T. MARQUEZ, in her capacity as Branch Manager, UNION BANK OF
THE PHILIPPINES, petitioner,
vs.
HONORABLE ANIANO A. DESIERTO, in his capacity as OMBUDSMAN, ANGEL
C. MAYOR-ALGO, JR., MARY ANN CORPUZ-MANALAC AND JOSE T. DE
JESUS, JR., in their capacity as Chairman and Members of the Panel, respectively,
respondents.
PARDO, J.:
In the petition at bar, petitioner seeks to --
a. Annul and set aside, for having been issued without or in excess of
jurisdiction or with grave abuse of discretion amounting to lack of
jurisdiction, respondents' order dated September 7, 1998 in OMB-0-97-
0411, In Re: Motion to Cite Lourdes T. Marquez for indirect contempt,
received by counsel of September 9,1998, and their order dated October
14,1998, denying Marquez's motion for reconsideration dated September
10, 1998, received by counsel on October 20, 1998.
b. Prohibit respondents from implementing their order dated October 14,
1998, in proceeding with the hearing of the motion to cite Marquez for
indirect contempt, through the issuance by this Court of a temporary
restraining order and/or preliminary injunction.1
The antecedent facts are as follows:
Sometime in May 1998, petitioner Marquez received an Order from the
Ombudsman Aniano A. Desierto dated April 29, 1998, 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 petitioner
is the branch manager. The accounts to be inspected are Account Nos. 011-37270,
240-020718, 245-30317-3 and 245-30318-1, involved in a case pending with the
Ombudsman entitled, Fact-Finding and Intelligence Bureau (FFIB) v. Amado
Lagdameo, et al. The order further states:
"It is worth mentioning that the power of the Ombudsman to investigate
and to require the production and inspection of records and documents is
sanctioned by the 1987 Philippine Constitution, Republic Act No. 6770,
otherwise known as Ombudsman Act of 1989 and under existing
jurisprudence on the matter. It must be noted that R.A. 6770 especially
Section 15 thereof provides, among others, the following powers, functions
and duties of the Ombudsman, to wit:
xxx
(8) Administer oaths, issue subpoena duces tecum and take testimony in
any investigation or inquiry, including the power to examine and have
access to banks accounts and records;
(9) Punish for contempt in accordance with the Rules of Court and under
the same procedure and with the same penalties provided therein.
Clearly, the specific provision of R.A. 6770, a later legislation, modifies the
law on the Secrecy of Bank Deposits (R.A.1405) and places the office of the
Ombudsman in the same footing as the courts of law in this regard."2
The basis of the Ombudsman in 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.
It would appear that Mr. George Trivinio, purchased fifty one (51) Managers Checks
(MCs) for a total amount of P272.1 Million at Traders Royal Bank, United Nations
Avenue branch, on May 2 and 3, 1995. Out of the 51 MCs, eleven (11) MCs in the
amount of P70.6 million, were deposited and credited to an account maintained at
the Union Bank, Julia Vargas Branch.3
On May 26, 1998, the FFIB panel met in conference with petitioner Lourdes T.
Marquez and Atty. Fe B. Macalino at the bank's main office, Ayala Avenue, Makati
City. The meeting was for the purpose of allowing petitioner and Atty. Macalino to
view the checks furnished by Traders Royal Bank. After convincing themselves of
the veracity of the checks, Atty. Macalino advised Ms. Marquez to comply with the
order of the Ombudsman. Petitioner agreed to an in camera inspection set on
June 3, 1998.4
However, on June 4,1998, petitioner wrote the Ombudsman explaining to him that
the accounts in question cannot readily be identified and asked for time to respond
to the order. The reason forwarded by the petitioner was that "despite diligent
efforts and from the accounts numbers presented, we can not identify these
accounts since the checks are issued in cash or bearer. We surmised that these
accounts have long been dormant, hence are not covered by the new account
39
number generated by the Union Bank system. We therefore have to verify from
the Interbank records archives for the whereabouts of these accounts. 5
The Ombudsman, responding to the request of the petitioner for time to comply
with the order, stated: "firstly, it must be emphasized that Union Bank, Julia Vargas
Branch was depositary bank of the subject Traders Royal Bank Manager's Check
(MCs), as shown at its dorsal portion and as cleared by the Philippines Clearing
House, not the International Corporate Bank.
Notwithstanding the facts that the checks were payable to cash or bearer,
nonetheless, the name of the depositor(s) could easily be identified since the
account numbers x x x where said checks were deposited are identified in the
order.
Even assuming that the accounts xxx were already classified as "dormant
accounts," the bank is still required to preserve the records pertaining to the
accounts within a certain period of time as required by existing banking rules and
regulations.
And finally, the in camera inspection was already extended twice from May 13,
1998 to June 3,1998 thereby giving the bank enough time within which to
sufficiently comply with the order."6
Thus, on June 16, 1998, the Ombudsman issued an order directing petitioner to
produce the bank documents relative to accounts in issue. The order states:
Viewed from the foregoing, your persistent refusal to comply with
Ombudsman's order in unjustified, and is merely intended to delay the
investigation of the case. Your act constitutes disobedience of or resistance
to a lawful order issued by this office and is punishable as Indirect Contempt
under Section 3(b) of R.A. 6770. The same may also constitute obstruction
in the lawful exercise of the functions of the Ombudsman which is
punishable under Section 36 of R.A. 6770.7
On July 10,1998, 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 petition was intended to clear the rights and duties of petitioner. Thus,
petitioner sought a declaration of her rights from the court due to the clear conflict
between RA No.6770, Section 15 and R.A. No. 1405, Sections 2 and 3.
Petitioner prayed for a temporary restraining order (TRO) because the Ombudsman
and the other persons acting under his authority were continuously harassing her
to produce the bank documents relatives to the accounts in question. Moreover,
on June 16, 1998, the Ombudsman issued another order stating that unless
petitioner appeared before the FFIB with the documents requested, petitioner
manager would be charged with indirect contempt and obstruction of justice.
In the meantime,9 on July 14, 1998, the lower court denied petitioner's prayer for
a temporary restraining order and stated us:
"After hearing the arguments of the parties, the court finds the application
for a Temporary Restraining Order to be without merit.
"Since the application prays for restraint of the respondent, in the exercise
of his contempt powers under Section 15(9) in relation to paragraph (8) of
RA. 6770, known as " The Ombudsman Act of 1989", there is no great or
irreparable injury from which petitioners may suffer, if respondent is not so
restrained. Respondent should he decide to exercise his contempt powers
would still have to apply with the court. x x x Anyone who, without lawful
excuse x x x refuses to produce documents for inspection, when thereunto
lawfully required shall be subject to discipline as in case of contempt of
Court and upon application of the individual or body exercising the power
in question shall be dealt with by the Judge of the First Instance (now RTC)
having jurisdiction of the case in a manner provided by the law (section 580
of the Revised Administrative Code). Under the present Constitution only
judges may issue warrants, hence, respondent should apply with the Court
for the issuance of the warrant needed for the enforcement of his contempt
orders. It is in these proceedings where petitioner may question the
propriety of respondent's exercise of his contempt powers. Petitioners are
not therefore left without any adequate remedy.
"The questioned orders were issued with the investigation of the case of
Fact-Finding and Intelligence Bureau vs. Amado Lagdameo, et. al., OMB-0-
97-0411, for violation of RA. 3019. Since petitioner failed to show prima
facie evidence that the subject matter of the investigation is outside the
jurisdiction of the Office of the Ombudsman, no writ of injunction may be
issued by this Court to delay this investigation pursuant to section 14 of
Ombudsman Act of 1989."10
On July 20,1998, petitioner filed a motion for reconsideration based on the
following grounds:
40
 a. Petitioners' application for filed Temporary Restraining Order is not only
to restrain the Ombudsman from exercising his contempt powers, but to
stop him from implementing his Orders dated April 29, 1998 and June 16,
1998: and
b. The subject matter of the investigation being conducted by the
Ombudsman at petitioners' premises is outside his jurisdiction.11
On July 23, 1998, the Ombudsman filed a motion to dismiss the petition for
declaratory relief12 on the ground that the Regional Trial Court has no jurisdiction
to hear a petition for relief from the findings and orders of the Ombudsman, citing
R.A. No. 6770, Sections 14 and 27. On August 7, 1998, the Ombudsman filed an
opposition to petitioner's motion for reconsideration dated July 20, 1998.13
On August 19,1998, the lower court denied petitioner's motion for
reconsideration,14 and also the Ombudsman's motion to dismiss. 15
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).16
On August 31, 1998, petitioner filed with the Ombudsman an opposition to the
motion to cite her in contempt on the ground that the filing thereof was premature
due to the petition pending in the lower court. 17 Petitioner likewise reiterated that
she had no intention to disobey the orders of the Ombudsman. However, she
wanted to be clarified as to how she would comply with the orders without her
breaking any law, particularly RA. No. 1405.18
Respondent Ombudsman panel set the incident for hearing on September 7,
1998.19 After hearing, the panel issued an order dated September 7, 1998, ordering
petitioner and counsel to appear for a continuation of the hearing of the contempt
charges against her.20
On September 10, 1998, petitioner filed with the Ombudsman a motion for
reconsideration of the above order. 21 Her motion was premised on the fact that
there was a pending case with the Regional Trial Court, Makati City,22 which would
determine whether obeying the orders of the Ombudsman to produce bank
documents would not violate any law.
The FFIB opposed the motion,23 and on October 14, 1998, the Ombudsman denied
the motion by order the dispositive portion of which reads:
"Wherefore, respondent Lourdes T. Marquez's motion for reconsideration is
hereby DENIED, for lack of merit. Let the hearing of the motion of the Fact
Finding Intelligence Bureau (FFIB) to cite her for indirect contempt to be
intransferrably set to 29 October 1998 at 2:00 o'clock p.m. at which date
and time she should appear personally to submit her additional evidence.
Failure to do so shall be deemed a waiver thereof." 24
Hence, the present petition.25
The issue is whether petitioner may be cited for indirect contempt for her failure
to produce the documents requested by the Ombudsman. And whether the order
of the Ombudsman to have 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).
An examination of the secrecy of bank deposits law (R.A. No.1405) would reveal
the following exceptions:
1. Where the depositor consents in writing;
2. Impeachment case;
3. By court order in bribery or dereliction of duty cases 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.26
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.
41
In Union Bank of the Philippines v. Court of Appeals, we held that "Section 2 of the
Law on Secrecy of Bank Deposits, as amended, declares bank deposits to be
"absolutely confidential" except:
(1) In an examination made in the course of a special or general
examination of a bank that is specifically authorized by the Monetary Board
after being satisfied that there is reasonable ground to believe that a bank
fraud or serious irregularity has been or is being committed and that it is
necessary to look into the deposit to establish such fraud or irregularity,
Wiretapping Law, the Secrecy of Bank Deposits Act, and the Intellectual
Property Code.28
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.
SO ORDERED.

(2) In an examination made by an independent auditor hired by the bank

to conduct its regular audit provided that the examination is for audit
purposes only and the results thereof shall be for the 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 of bribery or dereliction of

duty of public officials, or

(6) In cases where the money deposited or invested is the subject matter
of the litigation".27

In the case at bar, there is yet no pending litigation before any court of competent
authority. What is 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. The Civil Code provides
that" [e]very person shall respect the dignity, personality, privacy and peace of
mind of his neighbors and other persons" and punishes as actionable torts several
acts for meddling and prying into the privacy of another. It also holds public officer
or employee or any private individual liable for damages for any violation of the
rights and liberties of another person, and recognizes the privacy of letters and
other private communications. The Revised Penal Code makes a crime of the
violation of secrets by an officer, revelation of trade and industrial secrets, and
trespass to dwelling. Invasion of privacy is an offense in special laws like the Anti-

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